Finance (No. 2) Bill

Stephen Kerr Excerpts

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

[Stephen Kerr (Stirling) (Con)]

Does my hon. Friend think that the banks’ lack of willingness to lend to small and medium-sized businesses—there are several in my constituency that suffer from chronic lack of availability of capital from banks—is killing the nursery of burgeoning businesses that we need in this country?

[Kit Malthouse]

Small-ticket debt definitely has its place in starting businesses, but they need—the Government are trying to propel this into the economy—patient capital: money that will be invested and sit as a shareholder in the company for some years. In truth, while it is wonderful to build a company like Instagram—I think it was built in 14 months, went from zero to a valuation of more than $1 billion and then was sold—such things happen rarely. Most businesses are built over a much longer period, often over many generations. That is why, certainly in my youth, all those businesses had family names—Marks and Spencer, Reckitt Benckiser. They were family businesses that had come together over two, three, four or five generations to take on the world. We need to create an atmosphere in which people do exactly that—invest for the long term.

I hope that Ministers will monitor the scheme carefully and, if we are not getting the kind of capital flowing through that we need, we can tweak it. If we see an overall reduction, as we may, as capital that was previously going into protection schemes now does not immediately transfer to risky schemes, we might need to look at this on an emergency basis.

My second, related point is on the general availability of shares and assets. The Government are doing a lot in the Bill to help the housing market and have rightly identified that home ownership has fallen relatively significantly over the last few years. They should be commended for the action that they are taking, certainly with regard to young people, but housing is not the only asset class available. The solution to the housing market will be a long-term one. We are trying to build as many houses as we possibly can—we need 250,000 to 300,000 houses a year to bridge the demand and supply problem—but that will take some time to do. It is possible, however, to get assets into the hands of people, particularly young people, much sooner than that, through employee share ownership plans.

I have said before in the House that it is my view that as well as creating a pool of dynamic private capital, we must democratise capital. That means spreading the ownership of British business as far and wide as we can. I urge the Government, as part of the patient capital review, to look at how they can improve the employee share ownership options for companies, to make it easier and even favourable through the tax system for employees to be gifted shares in their businesses. We know that employees who own part of their business are much more productive, and companies that have employees as shareholders are much more stable and tend to be much more successful in the longer term. It creates a much better environment and relationship between management and the employed. Just ask the postal worker wandering up the front path to deliver Christmas cards what the price is of their shares; I bet that they can tell you, with a big, broad grin. British Steel recently rewarded its workers for the company’s turnaround by giving away 5% or 10% of the equity in the business to them. The way forward is for everybody, young and old, to participate in the balance sheet of UK plc.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I am really pleased to have the opportunity to stand here on behalf of the Scottish National party for the Second Reading debate of this year’s third Finance Bill.

First, I would like to tackle the issue of the amendment of the law motion, which I have already raised with the Financial Secretary. I am particularly concerned that the Government are doing their best to use the rules of the House to dodge proper scrutiny and transparency. It is not the normal state of play to have no amendment of the law motion after a substantive Budget. I get that it is not easy for Ministers to try to hold a minority Government together when their Members are simultaneously pointing in about 300 different directions. Even so, they should be keen to come before the House, stand up for what they believe in, and allow proper scrutiny.

I would like to take the opportunity again to highlight deficiencies in the Budget process. The “Better Budgets” report, published by the Chartered Institute of Taxation, the IFS and the Institute for Government, pointed out several ways in which scrutiny could be improved. One suggestion is for the Finance Public Bill Committee to take evidence in public. I am firmly of the opinion that such a change would improve scrutiny and increase Committee members’ understanding of a Budget’s measures. This will be my third Finance Bill Committee, so I feel that I can now speak with some expertise on the subject. I urge the Minister to consider this request once more, given that the previous two Finance Bill Committees I served on sat for only six sittings each. We have extra time in the legislative timetable before us, and two hearings on the first day, for example, would not stretch that. That has been the Government’s main objection, so I push the Minister to consider the proposal again.

Let me turn to economic impact assessments on particular tax measures. The Minister will be pleased to know that my point is not about Brexit, but the fact that the Government failed to carry out impact assessments on Brexit is not particularly surprising given that the tax measures that come forward in Budgets do not have economic impact assessments attached to them either. Whenever Ministers are asked about reviewing tax reliefs, we are told that they are regularly kept under review and that reviews consistently happen. Last year, however, I asked parliamentary questions on this matter, and the answers I received on the Government’s scrutiny of the tax reliefs that they had put in place were not very satisfactory. The Government were not particularly clear about whether the tax reliefs had achieved their aims. They were also not able to tell me how much money they had cost or gained for the Exchequer. If the Government are going to put forward tax reliefs—I agree that they should in certain circumstances, as they can be a good thing to encourage investment—they need to explain to the House whether they have worked. What is the point of having an absolutely massive tax code with a huge number of tax reliefs if we do not know whether they are incentivising people to do good things?

[Stephen Kerr]

Will the hon. Lady share with the House the economic and revenue impact of the SNP Scottish Government’s land and buildings transaction tax?

[Kirsty Blackman]

The hon. Gentleman has spoken to me before about the land and buildings transaction tax. I refer him to my earlier answer: 93% of people who have paid the tax in Scotland on properties over £40,000 paid either less than they would have done in England, or no tax at all.

[Stephen Kerr]

Will the hon. Lady give way?

[Kirsty Blackman]

I will not let the hon. Gentleman intervene again. He is becoming one of my more regular commentators. I appreciate his interest, but I am going to make some progress.

On scrutiny and the amendment of the law motion, the SNP and the Labour party have been clear that the Government have not gone far enough on tax avoidance, so we would like the opportunity to table amendments. I am sure the Minister does not imagine that he and his team have a monopoly on good ideas. An amendment of the law resolution would have allowed the Opposition to put forward what the Government might consider to be good ideas to reduce the amount of tax avoidance. That would be a better situation for everybody. There are 650 Members of the House, many of whom have a lot of expertise and do not sit on the Government Benches. An amendment of the law resolution would allow better amendments to come forward to make better law.

The Budget and the Bill can be criticised for what they do not include, as well as for what they do. First, there is still no acceptance of the economic impact of Brexit and there are no taxation measures to fix that. In the 12 months to June, real household disposable income shrank by 1.1%. That is the longest period of falling living standards in six years. The increase in the price of food means that families are £7.74 a week worse off, and that is before we leave the European Union, the single market and the customs union. Coupled with what the IFS says about there now being two decades of wage stagnation instead of one, and the threat of 80,000 jobs being lost in Scotland, things are looking pretty bleak. The Minister and various Members have already spoken about the public sector pay cap. That does no good for increasing incomes. I would like the Government to change their mind on the public sector pay cap and to fund changes to it.

I have already called for the Chancellor to bring forward an emergency Budget and I have no hesitation in doing so again. Given that the UK and the EU have now come up with a deal on the payment of billions of pounds by the UK to the EU, the Chancellor needs to tell us how that will be paid for. We have already had two Budgets this year, but I would have no aversion to seeing another one to take that payment into account and explain where the money will come from.

We cannot continue to have the Chancellor pulling rabbits out of hats on Budget day. I believe firmly that there must be more openness and transparency, and better scrutiny. I would welcome it if the Opposition parties could move meaningful amendments on the Floor of this House, if nothing else to show how much better we could do things. Every time that the shadow Minister took an intervention from Conservative Members, they asked how his party would pay for things. If he had the opportunity to move meaningful amendments, he would be able to set out tax measures that he and his party thought appropriate. That would avoid the accusation about the magic money tree. The Government have chosen their route so that they can avoid scrutiny, but they then criticise the Opposition for not carrying out proper scrutiny. That is not a good way to run things.

I welcome the UK Government’s change to VAT liabilities for the Scottish police and fire services. My colleagues and I have raised this matter inside and outside the House over 140 times. It is particularly convenient that the Chancellor should suddenly U-turn and fix this inconsistency for Scotland’s services at exactly the same time as he should need to do so for combined authorities, police and crime commissioners and the London fire commissioner. If he now agrees that these liabilities should not apply, surely they should not have applied in the first place. Our police and fire services would very much like the £140 million in VAT that they have paid so far to be returned. I eagerly await Scottish Tory Members, using all the power they apparently have, joining us to convince the Chancellor to pay back that £140 million. If they do not do so, they will have to explain why to police and fire services in Scotland.

[Stephen Kerr]

Will the hon. Lady give way?

[Kirsty Blackman]

I will not.

On transferable tax history, I am pleased that the UK Government have committed to changing the tax regime for late-life oil and gas assets. The Minister nods, because he has heard me go on about this on a number of occasions. I welcome the change. I ask him to work with stakeholder groups on a deal for the oil and gas sector. Given the changes to the oil price, there is still a feeling of pessimism around Aberdeen on some days. I would like the UK Government to commit to supporting the Oil and Gas Authority’s “Vision 2035” for the sector, which I think has cross-party support. This is incredibly important. It is critical to the future of the north-east of Scotland in particular, but also that of the United Kingdom as a whole, for the oil and gas sector to be supported and for our supply chain to be anchored in the UK so that it can continue to pay taxes even when North sea oil has run out. “Vision 2035” is key, and it is part of the sector deal that Oil & Gas UK and other stakeholder groups are seeking. I hope very much that the Minister will sit at the table with those groups and ensure that what they need for the future—what they need to ensure that they continue to pay tax—is realised in a sector deal.

As we have heard, the Bill makes changes to allow first-time buyers to get on to the housing ladder. I have already made clear my concerns about the changes to land and buildings taxation that are proposed, which echo concerns that have been raised by the Office for Budget Responsibility, as well as a number of experts. To improve access to the housing market, the UK Government should follow Scotland’s lead and commit themselves to more social housing.

I spent eight years as a local authority councillor. By far the biggest part of my casework was presented by people who came through the door and said that they were unable to obtain a secure tenancy in a social house in the knowledge that the landlord would not chuck them out in a year provided that they continued to pay rent. The fact that that problem still exists, in Scotland and throughout England, is due to Margaret Thatcher’s right to buy. Unlike us in Scotland, the UK Government have not made any reductions in the scheme, and council housing stock has been decimated as a result. We in Scotland are trying to right the damage that has been done. We are focusing on social housing and will continue to do so, and I urge the UK Government to do the same.

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[Mr Jack]

This House made it clear at the time that if the Scottish Government went ahead with the centralisation, they would not be able to reclaim the VAT. It is no good the SNP having a grievance and looking back to claim that £140 million when Budgets are clearly forward-looking and we have to be responsible for the public finances. However, we have now sorted that problem out.

[Stephen Kerr]

Does my hon. Friend agree that this was all designed in order to create a grievance—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I do not like to interrupt the hon. Gentleman, and I let him do this earlier, but if he faces away from the Chair, no one can hear him. I certainly cannot hear him. He has to speak to the Chair, and not to the Member upon whom he is intervening. But I am sorry—I interrupted him, so I will allow him to finish his intervention.

[Stephen Kerr]

Thank you, Madam Deputy Speaker. I had in fact finished my intervention, in which I asked my hon. Friend whether he felt that this was a designed grievance-manufacturing moment for the SNP.

[Mr Jack]

Clearly I agree. I would like my hon. Friend the Member for Stirling (Stephen Kerr) not to make too many more interventions, however. He is very keen on them, but we have to crack on.

That centralising dogma cost those services £140 million. The hon. Member for Kilmarnock and Loudoun (Alan Brown) referred to that money as having been stolen, but I can assure him that it was not stolen by anybody. It was, however, wasted by his party and his fellow nationalists in the Scottish Government, who cost the police and the fire services the option to reclaim that VAT. As I have said, the Conservatives have acted to clear up the Scottish Government’s mess. That is one of many cases in the Budget that prove that 13 Scottish Conservative MPs can deliver much more for the Scottish people in six months than 56 nationalist MPs could deliver in two whole years.

The Scots are used to the SNP putting confrontation and grievance ahead of public services, as my hon. Friend the Member for Stirling has just said, and we in Scotland are sick and tired of it. If the SNP would like to turn over a new leaf this evening and take a more collaborative approach, I suggest they join us in voting for the Bill. It would be the height of pettiness for the nationalists to vote against a Bill that rectifies their own mistake and ensures that Scotland’s police and fire services finally get the funding that they deserve.

On a wider note, the Bill brings into effect many of the positive measures that were announced in last month’s excellent Budget, such as the additional measures to tackle aggressive tax avoidance. When someone does not pay their fair share of tax, the rest of us have to pay instead through higher taxes, less funding for public services or higher borrowing. I am therefore pleased that this Government have such a strong record on reducing tax evasion and aggressive tax avoidance. The UK tax gap is now just 6%—down from 6.7% in the final year of the last Labour Government—and the measures that this Government have put in place to reduce the gap have saved £12.5 billion in the past year alone, meaning billions of pounds of extra funding for public services, billions of pounds in lower taxes, and billions of pounds in less borrowing.

The Budget is good for Scotland and specifically for Dumfries and Galloway with the Borderlands growth deal. In fact, it is a good Budget for the entire United Kingdom, with provisions that lay the groundwork for future growth and a fairer country. I will therefore be proud to vote for this Bill, which is an integral and positive step in putting the Budget into effect.

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[Luke Graham]

Not just now. I wish to make more progress.

That decision was made in the face of warnings. It was an entirely political decision, fuelled by the SNP’s central belt bias and obsessive power-grabbing in Edinburgh. It therefore fell to the Scottish Conservative group to fight for Scotland and to the Conservative Chancellor to rectify those extremely damaging errors inflicted on Scotland by the SNP.

Having been shown who is truly “stronger for Scotland”, the SNP has made it its mission to undermine the hard-won successes for Scotland and to dismiss the efforts of the Conservative group here in Westminster and the Conservative Government, who have helped to deliver so much for Scotland. We all know why it has done so: it does not fit in with its narrative of grievance for the Conservatives not only to act in the best interests of their constituents and to have them at heart, but to deliver on those interests.

Ahead of Thursday’s Scottish Budget, we can all safely expect the SNP Administration in Edinburgh to carry on with their shameless Westminster finger-pointing, blaming Westminster for giving them the exemption on VAT; chastising Westminster for giving them the “wrong” money; and demanding even more from the Scottish people in the form of tax increases imposed by Holyrood.

Those are all significant broad-brush statements, but I wish to go into some detail about what the measures in the Budget mean for our constituencies in Scotland. For those who are not familiar with the hugely beneficial impact of the Barnett formula in Scotland, let me explain that Scotland benefits to the tune of £1,750 per head by remaining a part of the United Kingdom. It is also worth reminding Members that, in practice, that represents a higher rate of spending per head than England and Wales. Before we get into a dispute about figures, let me tell the House that those statistics are from the SNP’s own Government expenditure and Revenue Scotland figures. In addition, we very much welcome the £600 million more that will be spent on rail, which is an increase on the last spending period.

[Stephen Kerr]

Does my hon. Friend agree that those are indeed the dividends of the Union?

[Luke Graham]

I could not agree more, and I will go further into those dividends shortly.

The Government have delivered an additional £2 billion to Scotland in the Budget, which should be a reason to rejoice. However, they are being criticised by SNP Members. [Interruption.] The House can hear them trying to talk me down now, which is not a surprise, because no matter how high the price or how good the deal, the SNP is not satisfied. It reminds me of the Roald Dahl story, “Charlie and the Chocolate Factory”. We have the political manifestation of Veruca Salt sat just across from us; SNP Members go from room to room, shouting what they want and demanding more and more, yet they are never satisfied. Conservative Members have heard the interests of our constituents and we have delivered for them.

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[Dr Johnson]

I thank the hon. Gentleman for his intervention.

Finally, I welcome the £668,000 the Government have given through LIBOR grant to the International Bomber Command Centre in my constituency. Bomber Command No. 166 Squadron suffered the highest losses of any allied forces unit during world war two, with an attrition rate of 44%. The centre will open next year, the year of RAF100, which is a good time for it to open in terms of remembrance. It will serve as a point for the recognition and remembrance of the sacrifice of people from 62 nations around the globe, 57,861 of whom lost their lives saving the future for us and our children and grandchildren.

The International Bomber Command Centre will record for the future the memories of those who served in Bomber Command. They include people such as 92-year-old William Leslie Anderson, my constituent and relative through marriage. He served as a flight engineer in No. 166 Squadron. A flight engineer works not only on the planes on the ground to ensure that they are fit for take-off, but with the pilot throughout the flight and then again preparing the aeroplane once it is back on the ground. People such as Mr Anderson worked hard to secure our future, and it is important that we think about the future of those who will go ahead. That is why I reject completely the Labour party’s plans to spend, spend, spend. It is our children, our children’s children, and our children’s children’s children who would pay the debt interest on such ever-increasing spending plans.

We have asked Labour Members so many times today—perhaps 25 or 26 times—how much their plans would cost, but still we have had no answer—[Interruption.] I appreciate that we have had an answer. We have been told that we can look it up on the internet, but I would like to know which page and document to look at, please, because I have not been able to find it.

[Stephen Kerr]

My hon. Friend will be aware that the Opposition’s position is that it will cost what it will cost. Sounds horrific, doesn’t it?

[Dr Johnson]

It certainly does sound horrific. Spending money might sound lovely now, but we would be spending the money of our children, and it is they who would suffer for it.

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[Rachel Maclean]

I thank my hon. Friend for his characteristically direct and pertinent intervention. In my previous career I was a member of the Chartered Institute of Personnel and Development, the industry expert on the world of work. The CIPD has carried out many studies on zero-hours contracts, and it recognises that the vast majority of people on such contracts have taken them by choice.

[Stephen Kerr]

Is my hon. Friend aware that, in their report on employment practices in the modern economy, Matthew Taylor and his distinguished group of independent thinkers came out firmly against the Labour party’s policy of outlawing zero-hours contracts?

[Rachel Maclean]

My hon. Friend is absolutely correct. Matthew Taylor has clearly stated that banning zero-hours contracts is completely the wrong thing to do. The Conservative party wants everybody to have good work in a decent job with secure working conditions, which is why we commissioned Matthew Taylor to carry out his report. As my hon. Friend, a fellow member of the Business, Energy and Industrial Strategy Committee, says, this is an incredibly important issue. The Taylor report is a detailed piece of work that looks at the rights of employees, the self-employed and workers to make sure that everybody’s rights are protected, because no business should be afraid of treating people well and giving people a decent job. That is what this Government are doing.

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[Alex Chalk]

Does my hon. Friend, like me, welcome the fact that at the same time as the economy has been growing the tax system has been made more progressive so that the top 1% now pay 27% of the entire tax revenue—

[Stephen Kerr]

Twenty-eight per cent.

[Alex Chalk]

I am corrected: they pay 28%, which is a higher proportion than ever before.

[Robert Courts]

My hon. Friend makes an extremely good point that we have not heard often enough. We should absolutely keep making the point that although we hear talk of a progressive tax system from the Opposition, we see action from the Government. The 1% of highest earners now pay 28% of tax. That proportion is higher than it ever was under Labour. That is a record to be proud of. It is real progressive, practical politics from the Conservative Government.

[Stephen Kerr]

My hon. Friend quite rightly talks about the progressive nature of the tax regime that has been very carefully fostered by this Conservative Government. Is he aware that, for the Scottish Budget this Thursday, the Liberal Democrats in Scotland are proposing to increase income tax on people who earn £18,000 a year? Can he tell me what he thinks about the progressive nature of such a suggestion from the Liberal Democrats in Scotland?

[Robert Courts]

That is a horrifying suggestion. I am not surprised that that is the attitude of the Liberal Democrats in Scotland, because it is one that we see in many parts of this House—from those who do not understand that when we raise taxation on the lowest paid, it means that those people have less money in their pockets, which reduces their ability to make the decisions that they need to make with regard to themselves, their family and their life chances. When we take money away from people, we remove their freedom of action, their freedom of manoeuvre and the investment choices that they may make for their children. It is a totally unprogressive attitude.

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[Stephen Kerr (Stirling) (Con)]

I rise to make a few remarks in support of the Bill, which addresses fundamental issues on which the Government are doing the right things. The public finances are not in a state where we can take them for granted. Although much progress has been made on the deficit, there is still much to be done and there is certainly no room for complacency.

I turn briefly to the subject that I mentioned in an intervention a little earlier: the need to keep taxes low. By doing so, we allow people to spend more of their hard-earned money as they wish. That is something that the Scottish Government should learn as they put the final touches to their Budget on Thursday. If they raise taxes, they hurt people’s ability to make decisions for themselves, and we all know that people are capable of making decisions for themselves. The Scottish Chambers of Commerce as recently as last Thursday told the First Minister to her face that the last thing that Scotland’s businesses and economy need is a reputation for being the highest taxed part of the United Kingdom. She will ignore the voice of Scotland’s businesses at her peril and at the peril of Scotland’s economic future.