UK Economy

Stewart Hosie Excerpts

Monday 19th February 2024 Commons Chamber

[Mr Speaker]

I call the Scottish National party spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

The Minister spoke about resilience, but the fourth quarter contraction in the economy was the biggest quarterly fall since early 2021 at the height of the covid pandemic, so I am not sure he is quite right about resilience. He also spoke about growth, but the Government told us in November that growth is not forecast to exceed 2% in any year in the forecast period. How modest the Minister’s ambitions are.

National debt is still approaching 100% of GDP—£3 trillion. The consequences of Brexit are suppressing growth, and that poses a challenge to the UK Government’s fiscal targets. Although it is welcome that inflation has fallen, prices remain high. Prices are not falling; they are simply going up slightly less steeply than they were a month or two ago. It is obvious that what the economy needs is growth, and the investment to generate that growth, but given that business investment, according to the Government, is forecast down this year by 5.6%, private dwelling investment is forecast down this year by 6%, and flat at 0% next year, and general Government investment is forecast down in ’25, ’26, ’27 and ’28, where will the investment for growth come from?

[Bim Afolami]

I deeply respect the right hon. Gentleman, and I will take his points one by one. On resilience, the way we get resilience for ordinary people and for households is to ensure that real household incomes increase. Since 2010, they are up 12%. We are trying to increase business resilience with our full expensing regime, which is revolutionary in the advanced world. Full expensing will enable more businesses to invest and will deal with the chronic weakness of the British economy, which is weak investment. That is why we are doing that.

The right hon. Gentleman mentioned growth. Growth is not as high as we would like, and that is the case across the whole of Europe and the whole of the industrialised world. That is why the Chancellor in the last fiscal event put in place 110 growth measures. We have a plan for growth over the long term, and we will deliver it. The right hon. Gentleman mentioned debt. To repeat the point I made to the shadow Chancellor, debt is falling in the fifth year of the forecast according to our fiscal rule, which excludes the Bank of England. That is not just the fiscal rule now; it has always been the fiscal rule.

The right hon. Gentleman makes the fair point that lower inflation does not mean that prices are falling. Indeed, lower inflation is a lower rate of increase. We all know that in this House. That is why bringing down inflation is so important, and the Opposition, with their plan to recklessly jack up borrowing and taxes to the extent of £28 billion, will increase inflation.

I repeat that investment has been a long-term weakness of the British economy. We are taking long-term measures to deal with it, and I hope that in the next fiscal event—the Budget—we will continue in that vein.

Financial Services Reforms

Stewart Hosie Excerpts

Tuesday 11th July 2023 Commons Chamber

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Economic Secretary for his statement. I agree with him on regulation, where he said that regulators would be required to facilitate growth and competitiveness alongside their other objectives. However, as he knows, unless the central bank is obliged to do the same, we might end up in the rather odd and undesirable position of regulators and the central bank taking contradictory actions. I want to ask mainly about pension reform: under the Mansion House compact, potentially 5% of the DC funds are to go towards unlisted equities. There is huge potential in that for growth, for innovation, for jobs, for global competitiveness and for scaling up to compete, but that comes with a commensurate risk, which is presumably up to 5% of the value of the DC fund, should the value of that unlisted equity be wiped out.

While I hope the scheme succeeds, what liability would fall on the Pension Protection Fund should it fail? What liability might there be on the taxpayer? If the scheme works and the value of the funds increases, what guarantee is there that the pension holder will receive the entire value of that increase and it will not be gobbled up by unnecessary and excessive fees?

[Andrew Griffith]

I thank the right hon. Gentleman for his support for growth and competitiveness. We have talked regularly about the need for regulators to improve their performance and deliver better outcomes for those whom they regulate. He talked about the 5%, and I emphasise that, ultimately, it is a voluntary pact; it is for the individual trustees to make those decisions, and the Government continue to have in place a strong programme of regulation. However, I hope he respects the fact that there is risk in inaction as well—the risk that our pension beneficiaries do not receive the pensions that they deserve or the sort of performance from their pension that other international long-term savers benefit from. He raises the issue of defined contribution and the liability for the taxpayer. Of course, that does not attach to defined-contribution schemes, which is why it is so important that they continue to benefit from the highest-quality regulation. I and my colleague the pensions Minister remain very committed to that and will continue to work with TPR and the FCA to ensure that that remains the case.

Business Banking Resolution Service

Stewart Hosie Excerpts

Tuesday 11th July 2023 Westminster Hall

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I congratulate the hon. Member for Hazel Grove (Mr Wragg) on bringing this debate before us. He is absolutely right: businesses need access to a proper, functioning dispute resolution service, but I fear that the BBRS is not it. He was also absolutely correct that redress cannot be left only to those with the time, money and patience—or, as he said, the bravery—to sue the banks. The hon. Lady the Member for Rutherglen and Hamilton West (Margaret Ferrier) made the most salient point that barely a few dozen of the 60,000 legacy cases that were potentially liable to be investigated or taken up by the service have been resolved. That is a problem.

[Andy McDonald]

Are we assuming that those legacy cases fit the criteria set out by the hon. Member for Hazel Grove (Mr Wragg)? Many of our constituents will be nowhere near those criteria, but their lives and businesses lie in tatters. Are they not included? Are they not in anybody’s thinking, in terms of the resolution that they deserve?

[Stewart Hosie]

They ought to be in people’s thinking. The figure of 60,000 is commonly used. Of course, the eligibility criteria include that they must not be eligible for the FOS scheme, as was very properly referred to by the hon. Member for Hazel Grove. However, let us assume that it is a big number, in the tens of thousands, and let us hope that, at the very least, businesses do not fall through the cracks between this service and the FOS. It would be a different problem entirely if people were not eligible for any kind of access to at least one of the redress systems.

The hon. Member for Hazelgrove laid out a bit of the background. I want to go through some of that again briefly, given that it is quite important in terms of what the Government may choose to do next. The BBRS was set up in 2018 to help SMEs resolve disputes with their banks free of charge. Many high street banks, including Lloyds, NatWest and HSBC, took part in the scheme, and it has been operating—although I use that word loosely—since 2021. It was created after a spate of banking scandals involving the mistreatment of thousands of companies, including, as we know, the Royal Bank of Scotland’s GRG, and similar operations at other banks in the aftermath of the 2009-10 financial crash.

The eligibility criteria, which have been mentioned, are that the dispute must have occurred after 1 April 2019, and that the SME must have an annual turnover of up to £10 million per annum and a balance sheet of up to £7.5 million, and must not be eligible to take the complaint to the Financial Ombudsman Service. Many stakeholders have noted that the scheme has not been successful in helping SMEs to resolve their disputes, despite costing—as we have heard—tens of millions of pounds to set up, which was paid for by the industry. One of the main issues with the scheme is the narrow eligibility criteria for SMEs to use the service. The recent figure was only 35, but even 50 or 60 would still represent a tiny fraction of the number that could be resolved.

[Margaret Ferrier]

When the Business Banking Resolution Service was introduced, it was marketed as an accessible service. However, data shows that, by March last year, only 776 businesses had registered with the BBRS. Does the right hon. Member agree that this suggests that either the Business Banking Resolution Service was difficult to use or, alternatively, the service was not publicised effectively?

[Stewart Hosie]

It could be a combination of both, although it is instructive that Andy Agathangelou, the founder of the Transparency Task Force, called the BBRS an “abysmal failure” that is not “fit for purpose”, so I certainly think that the opaqueness and lack of advertising might be significant factors in how few businesses have sought to use it and what happened to those that did. He also said that some small businesses are “convinced” that the BBRS is

“a mechanism through which banks have found justification for not making payments”.

Even if that is not true, if the perception among the SME community is that the service, which was put in place to resolve their disputes, is being used for contrary purposes, that alone would be a huge problem for the BBRS.

[Kirsten Oswald]

My right hon. Friend is making a very helpful speech. The point he is making feeds into the wider point about the huge imbalance in power, influence and resources that exists between the banks and those seeking redress. On his point, the behaviour of some banks has been quite shameful—I am speaking from my own casework here—so whatever happens from here on in, it is imperative that new arrangements are fair, genuinely independent and transparent, so that businesses can be confident that they really are going to work.

[Stewart Hosie]

My hon. Friend is absolutely right, and that imbalance in power and resources was writ large in the BBRS executive’s unilateral decision in March to dissolve the SME liaison panel, after rejecting its numerous proposals to expand the eligibility criteria. It is a law unto itself. The liaison panel came forward with ideas to make things work better, but instead of them being taken on board and actioned—if they were appropriate—the panel was unilaterally shut down. The voice of SMEs to the panel has effectively disappeared, and that was after the SME liaison panel’s chair resigned because it was “difficult to make progress”.

That short list should be cause for concern enough for the Government, but let us take a look—I give great thanks to the all-party parliamentary group on fair business banking for this—at the list of headlines that this shambles has generated: “Business Banking Resolution Service a ‘real failure’”; “‘Cynical’ closure of bank redress adviser panel prompts anger”; “New £23m Business Banking Resolution Service has yet to pay any compensation”; “Bank redress scheme ‘is completely defective’”; “Lawyer Cat Maclean quits ‘completely defective’ banking compensation scheme”; “Business Banking Resolution Service ‘done on the cheap’”, with £40 million invested and it does not work; and “Banking redress chief earns £1m despite paying only five claims”—at that point.

If I were the Economic Secretary to the Treasury, I would be deeply concerned. The process has failed. Businesses are not getting the service or the redress that they need and deserve. The headlines are absolutely diabolical. It appears that few lessons have been learned from the financial crash, or if they have, they have been forgotten. I will ask the Minister two questions and then make one final brief observation. How will the Government ensure that we widen the criteria for businesses to be able to use the service, and what mechanisms will they put in place to allow SMEs to properly, fairly and quickly settle disputes with the banks?

My final observation goes back to the financial crash. We remember the actions of RBS, GRG and a variety of comparable outfits. Instead of restructuring those businesses to allow them to thrive, prosper, trade and grow again in the future, there was a perception—backed by some fact—that the banks were looking at asset-rich, cash-poor businesses to raid and pillage. From my time on the Treasury Committee, I am happy and confident to say that. The perception among the business community is that businesses were there to be raided by the banks, rather than helped. Trust between businesses, particularly small ones, and the mainstream banks broke down entirely. If I were the Government, I would be deeply concerned, looking at the headlines that have already been generated and the self-evident failure and lack of transparency within the BBRS, that it may not take an awful lot more for businesses to once again lose trust in the high street banks. I hope that the Minister will comment on that in his response.

--- Later in debate ---

[Andrew Griffith]

I want to be a listening Minister and am of course very happy to do that, but in so doing I do not want to hold out a false expectation. These matters are not directly the subject of ministerial interventions, so while I am very happy to meet the hon. Lady, and, again, use those examples to inform the wider policy area, in fairness it is important for people in the Public Gallery or who might be following the debate that I do not raise false expectations, because some of these matters have involved great trauma to individuals and have been going on for a long period of time. I would be grateful if the hon. Lady could frame things in that important context, but of course I would be happy to meet her and, lest I receive more interventions, that is a general point for Members of this House. It is right that I approach my responsibility diligently as we try to formulate policy.

As we go forward, whatever past decisions have been made in this respect, I am very keen to understand—the hon. Member for Hampstead and Kilburn (Tulip Siddiq) talked about this—the role of the Financial Ombudsman Service, which successfully deals with tens of thousands of complaints each year now, including SMEs up to the threshold of £6.5 million. The Financial Conduct Authority—whose decision it must be, but with the support of Ministers—has looked to extend that upper threshold, and it is consulting; perhaps Members have responded, like the APPG has.

I spoke to the chief executive of the FCA and gave him great encouragement that, the consultation having been closed in April of this year, we will shortly hear the response. I hope the House will await that, because it is my belief that one should look again at the merits of this versus a statutory tribunal, which I believe still has some of the disadvantages that the hon. Member for Hampstead and Kilburn outlined, particularly in terms of the need for primary legislation but also the non-material differences between an ombudsman service which exists, is seen to work generally in practice—although I am always open to representations—versus yet another novel intervention in the form of a new statutory tribunal.

[Stewart Hosie]

Can I just get a guarantee that there will be no gap between the removal of the BBRS and the decision taken on the thresholds that can be reached and potentially another body, statutory or voluntary—that there will be no gaps or black hole that businesses might fall into at some point in the near future, whether in months or years?

Mortgage and Rental Costs

Stewart Hosie Excerpts

Tuesday 27th June 2023 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

The right hon. Member for Leeds West (Rachel Reeves) raised the spectre of those commentators who are suggesting that we crash the economy into recession as a way of tackling inflation. Others have commented on that over the past week or so. The more that I think about it as a serious proposal, the more hideously grotesque it appears that, in the midst of all this, there are people out there, swarming around with daft ideas, suggesting that poverty and penury are actually an economic tool.

The Minister spoke in support of his Government’s amendment (a), which starts by welcoming

“the Government’s drive to halve inflation, grow the economy and reduce debt”.

Inflation is not halving; it has stayed at 8.7%. Core inflation has gone up to 7.1%, real gross inflation is at 18%, and the debt to GDP ratio has hit 100%. I know that politics is politics and that there are things Ministers will have to say, but if they bear little resemblance to reality, they are unlikely to believed.

I am thinking of some of the very early contributions to debate. The hon. Member for Eastleigh (Paul Holmes), who is no longer in his place, referred to other people’s plans. I think it is just extraordinary to listen to Tories being critical of anyone who simply thinks that people having a warm, dry and affordable house for themselves and their family is anything other than a rather sensible ambition.

According to Moneyfacts, the average two-year fixed-term mortgage is now sitting at 6.23%, not far off the post-mini-Budget peak of 6.6%. Although it is true that, on Friday, the UK’s biggest lenders signed a deal that included, as part of this new mortgage charter, a commitment to give homeowners a 12-month grace period before their home is repossessed—I welcome that and the other measures—the deal actually forms a rather limited relief package that certainly will not offer help to everyone who needs it. That came after the Bank of England raised interest rates to 5%—the 13th consecutive rise, and a larger-than-expected increase—meaning that we now have the highest interest rates in 15 years.

I support 100% the operational independence of the central bank, but I wonder whether that was the right approach. We all know that there is a lag between interest rates going up and the impact of driving inflation down being demonstrated. I wonder whether we are repeating a mistake that we have seen many times in this country: interest rates not rising quickly enough at the beginning, and continuing to rise too late at the end, turning a bad situation into a recession, or making a recessionary situation worse than it need be.

The pledge on forbearance is one of the main measures in the agreement struck with lenders. The lenders that have agreed the pledge include NatWest, Lloyds, Santander and Barclays, which, as the Chief Secretary to the Treasury said, control 75% of the market—that figure has increased to 85%. As we have heard today, as well as in yesterday’s statement, that agreement does not cover all the lenders, nor does it cover all mortgage-holders, some of whom are in very specific circumstances. We heard from a colleague yesterday about people who have residual Northern Rock mortgages and are tied into specific deals. It would be helpful to find out, for example, whether they will be able to take advantage of the opportunities that the charter allows for. The SNP welcomes what has been said so far, but it is clear that the mortgage charter will offer limited relief to the millions of households across the UK who are facing soaring mortgage costs.

Let us look at the detail. As I said, the average two-year fixed-term mortgage is now sitting at 6.23%, not far off the 6.65% peak. The average five-year fixed-term mortgage is at 5.86%. Those rises mean that, at the two-year rate, repayments on a £150,000 mortgage—not far off the £184,000 average price of a house in Scotland—are now £990 a month, compared with £660 a month on the average rate available in December 2021, before the hike in borrowing costs began. From £660 a month to £990 a month is a 50% rise in two years. That is a huge amount of money: it amounts to an increase of £3,900 a year compared with December 2021. We know that wages have not kept pace with inflationary costs, and that the people who are struggling with this have also been struggling with soaring energy bills over the past 18 months. People are really hurting.

I feel for people who have done the right things: those who are earning reasonable wages but are not rich, who managed to save a 5%, 10% or 15% deposit, and who capped their mortgage at maybe three times their earnings and did not borrow excessively. I do not know anyone in the real world who has a spare £3,000, £4,000 or £5,000 a year to sling at the increase in their mortgage costs after facing all the other inflationary pressures over the past year.

For many, the measures announced will be of limited relief. We know, for example, that lenders will be quite selective about who they allow to take the interest- only option. David Hollingworth, associate director at L&C Mortgages, noted:

“Going interest-only can work but only for the right kind of borrower, someone with a good financial history of repayments, someone with plenty of equity in their home who is just looking for some breathing space.”

That does not cover a lot of our constituents, who may not have a lot of equity at all and may, for one reason or another, have found themselves missing a payment here or there because of other pressures.

The president of the Resolution Foundation highlighted that the approach of consecutive UK Governments to managing the economy and the housing market has led to lower levels of home ownership, with those who own their homes feeling “intense pain” as a result of rising interest rates. He said:

“There is a group of several million people who could be seeing their mortgage costs rise by about £3,000 in a year and that is a lot for a middle-income household to bear. So it is going to be tough for them. Conservatives believe in the property-owning democracy”—

although they are doing rather a good impression of trying to destroy it. He went on:

“We’ve seen tragically a narrowing of homeownership over the last decades. That in turn means that if you’re trying to use interest rates, mortgage rates to drive disinflation, you’ve got a smaller group to operate on and they feel more intense pain.”

The Resolution Foundation also noted that more than four in 10 low-income households are spending more than 40% of their income on mortgage repayments. That is extraordinarily stark. When one considers that something in the order of 116,000 households are coming off fixed-term deals every month—perhaps the Chief Secretary to the Treasury can confirm that number—those people who are already spending more than 40% of their income on housing costs will find things extremely tough indeed if they are hit with a 10%, 15%, 20%, 30% or 40% rise in their mortgages this coming year.

The Resolution Foundation also warned that 31% of low-income mortgage holders say that their fixed-rate mortgage will come to an end between now and the end of the year, and that a large number of that group are already spending more than 40% of their income on their mortgage, as I said. It was critical of the fact that the Bank of England does not have a duty to consider the implications that its actions might have on the housing market or mortgage holders. I have asked the Government a number of times recently about reviewing whether an inflation target is the right primary target for the central bank, and whether the tools that the Bank has are appropriate. I wonder whether we should have a growth target, for example.

In New Zealand, considering the impact of rising rates on the housing market is part of the central bank’s remit. The housing market is such a big part of Britain’s economy that I am sure the Bank of England will have considered the impact of rate rises, but it is also clear that its job when setting interest rates is to focus entirely on getting inflation back to 2%, and it has no obligation to look at the impact on the housing market. I wonder whether we should review the targets that the central bank has and the tools it is given.

We know that soaring mortgage costs do not just impact on mortgage holders; the costs of increased mortgage payments are also passed on to renters. In Scotland, we have offered some protection through the rent cap, but such a measure has not been introduced down here. It is interesting that Matt Downie, the chief executive of the homelessness charity Crisis, has said that hundreds of thousands of people could be left unable to cover their rent and at risk of losing their homes:

“Low income renters face a catastrophe—they can’t rely on housing benefit as it’s been frozen since March 2020 and is completely inadequate. There isn’t nearly enough social housing to go round and over a million households are on waiting lists for the few genuinely affordable homes we do have.”

The mortgage crisis and the inflationary crisis have thrown into stark relief the absence of a proper housing policy, particularly from this Tory Government, the size of waiting lists and the costs associated, even now, with getting a rental. Official figures this week showed that private rental costs rose at an annual rate of 5% in April—the sharpest pace on records dating back to January 2016—while rents outside London surged at the fastest rate on records going back to 2006. The Institute for Fiscal Studies also warned that interest rates hitting landlords’ borrowing costs were part of the reason for the very large increases in rents.

The pain is being felt across the board—well, almost across the board—for renters and mortgage holders, on top of all the other inflationary pressures we have seen. The message should be clear to the Government: whether you are a mortgage holder or a renter, holding your nerve will not pay the bills; holding your nerve is not a policy to fix these problems.

--- Later in debate ---

[Andrew Griffith]

All households are impacted by the higher cost of money that we face. That is why we are focused on supporting all households, supporting those who are the most vulnerable and bringing forward at pace our measures to support the mortgage market. That is also why, since taking power, this Government have restored the overall health of our financial system. It is important that the House understands that mortgage arrears and defaults are today at historically low levels. Less than 1% of residential mortgages are in arrears, a level below that which we saw during the pandemic and significantly lower than under the last Labour Government.

[Stewart Hosie]

In the last hour it has been reported that two-year UK gilts are at 5.24%, a 15-year high, above the post-mini Budget peak, and markets now see a 70% chance of those rates going over 6% by the end of the year. If it is all going so well, why do the markets not believe the Tories?

[Andrew Griffith]

I always make a point of not commenting on the markets, in whichever direction they move. The responsibility of Government is to act and the responsibility of this Government is to deliver. We will control what we can control and the markets will do what they do.

The mortgage charter lays out that there will be a minimum 12-month period—I believe that is double the Opposition proposal, but I am happy to take an intervention on that—from any first missed payments before any repossession action is taken. It is important that our constituents understand that these measures offer comfort to those who are understandably anxious about the impact of higher rates on their mortgages and provide support for those who would get into financial difficulties. More broadly, the mortgage market itself remains robust and, because of the actions the Government have taken over the past 13 years, the average homeowner remortgaging in the past year had close to 50% loan to value, indicating that most have considerable equity in their homes.

Help for mortgage holders, but help for savers too: this Government are committed to ensuring that people are supported to save and can access a wide range of competitive savings products. The current range of options available to savers includes some of the highest rates that we have seen in recent years on both instant access accounts and the more relevant fixed-term products, which represent a better apples-to-apples comparison with fixed-term mortgage rates. The top instant access savings rates currently on the market offer around 4.2% and the top one-year fixed rate is much closer to the mortgage rate at about 5.8% annual equivalent rate.

Tackling inflation remains the Prime Minister’s and this Government’s No. 1 priority, and it will remain so until it is tamed. Allowing inflation to go on at the current rate or to grow higher would be the biggest threat to our collective economic security. While we continue on our fight to fight inflation, we will also do what British public expect; we will look at how we can grow the economy over the long term, improve productivity and ensure that no communities are left behind. We continue to take forward supply-side policies to increase the productive capacity of this economy and encourage workers back into work, including rolling out the largest ever expansion of free childcare. All that will set us up for greater productivity.

Let us contrast that with the Lib Dem plan to pile on to inflationary pressures an unfunded £3 billion a year. That is eclipsed only by Labour’s £28 billion a year—Interruption.] Labour Members do not want to hear it; they are talking among themselves. The IFS said that Labour’s £28 billion plan would cause interest rates and inflation to rise. Paul Johnson said that

“additional borrowing both pumps more money into the economy, potentially increasing inflation, and also drives up interest rates.”

That really would be a Labour mortgage bombshell.

In this barmy weather, those thinking of taking a summer holiday should remember that Labour’s economic policy has more flip-flops than the average surf shop: national insurance, corporation tax, the pensions cap, North sea gas, and, yesterday, shelving reform of high street business rates. The fact is that no Labour Government have ever left office with unemployment lower than when they came to power. As my hon. Friend the Member for Stourbridge (Suzanne Webb) reminded us, the note left by Labour’s Chief Secretary to the Treasury in 2010 said, correctly: “I’m afraid to tell you there is no money left.”

This Government are taking action on the economy. We are taking the tough decisions to bear down on inflation, we are supporting the vulnerable, we are helping the economy to grow, and, as the amendment states, we are helping mortgage holders with our new mortgage charter.

Mortgage Charter

Stewart Hosie Excerpts

Monday 26th June 2023 Commons Chamber

[Mr Speaker]

I call Scottish National party spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

With a debt to GDP ratio of 100%, the Chancellor was rather brave to talk about sound money. However, I welcome the statement and early sight of it. Notwithstanding the fact that it was described by Reuters as a package of limited relief measures, it is none the less necessary and welcome, with support from lenders, no repossession within 12 months of a missed payment, the chance to lock in a deal six months early, a temporary move to interest-only, and no impact on customer credit scores. The Chancellor’s words about anxiety and concern struck the right tone, unlike his Prime Minister yesterday.

However, that that does not begin to answer some of the fundamental questions. Given that the base rate drives the mortgage rate, and the base rate, as the Chancellor knows, is the primary tool that the Bank has to tackle rising inflation, is this now not the time to review the Bank of England’s targets and tools? Secondly, are the Government genuinely convinced that using a rising base rate to tackle input inflation caused by external shocks is the best approach we have, other than to tip the economy into recession, as some people are suggesting? I hope the Chancellor would agree that that would be an idiotic and catastrophic thing to do. Thirdly and finally, should we now not revert to forward guidance on base rates from the Bank of England, as we had under Mark Carney during the financial crisis? It may not affect the trajectory of interest rates and mortgage rates initially, although it might, but it would certainly provide certainty to business, retail and mortgage borrowers.

[Jeremy Hunt]

I often do not agree with what the right hon. Gentleman says, but I thank him for the constructive tone of his comments this afternoon, because he is absolutely right to talk about external shocks. He will know, as we do, that interest rates have gone up by similar amounts in the United States, Canada, Australia and New Zealand and that core inflation is higher in 14 EU countries. We need to look at all the tools at our disposal. Whether the Bank of England Governor issues forward guidance is a matter for the Governor, but I am sure he will have heard the right hon. Gentleman’s comments. It is important, because we respect and support the independence of the Bank of England, that I allow the Governor to make those judgments. I disagree with the right hon. Gentleman’s suggestion of reviewing the target for inflation. That target is the right target, and it is important that we give everyone confidence of our total commitment to hitting that target, which we will.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 20th June 2023 Commons Chamber

[Mr Speaker]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

The cost of a two-year fixed mortgage in March 2021 was 2.57%; this week, it reached 6%. The Chancellor and the Economic Secretary have said there are no plans to change the Bank of England inflation target, meaning that the base rate that drives the mortgage rate will continue to rise as inflation stays stubbornly high, and mortgages will go up. In the absence of such a change, what do the Government plan to do to actually tackle the mortgage pain people are suffering?

[Jeremy Hunt]

First, I would say to the right hon. Member that he is talking about something that is being experienced across the world. In fact, interest rates have risen faster in the United States and Canada than they have here. The answer is that we will look at doing everything we can to help people under pressure, but we will not do things that would prolong the inflationary agony that people are going through. We have to be very careful, because a lot of the schemes that are being proposed would actually make inflation worse, not better.

[Stewart Hosie]

On the issue of inflation, the Office for Budget Responsibility said in March that inflation was due to peak at 2.9% at the end of this year. By May, the Bank of England had forecast that it would be 5% at the end of this year, so it had almost doubled in the space of two months. Given that headline inflation is still 8.7% and food inflation is 16.5%, will the Chancellor guarantee today that inflation will be halved to 5%, as promised by the Prime Minister in January of this year?

[Jeremy Hunt]

The IMF, the OBR and the Bank of England all predict that we will hit our target to halve inflation, and I give the right hon. Member this guarantee: we will stick to the plan to do so.

Finance (No. 2) Bill

Stewart Hosie Excerpts

Report stage
Tuesday 20th June 2023 Commons Chamber

New clause 5 makes technical changes to ensure HMRC’s civil information powers work as Parliament intended, to support its tax collection functions. The new clause will clarify the law to put beyond doubt that HMRC may continue to collect what is termed “communications data”, including essential information such as names, addresses and dates of birth from businesses and third parties. Following a recent change by the Home Office to its interpretation of communications data under the Investigatory Powers Act 2016, the clause will simply ensure that existing legislation continues to function exactly as Parliament originally intended, including the important safeguards already in place for the protection of citizens’ data.

[Stewart Hosie (Dundee East) (SNP)]

The subparagraphs that new clause 5 intends to delete were not in the original Finance Act 2008 but were added by the Investigatory Powers Act. I am at a loss as to why it is necessary to remove them from that Act to make it work in the way intended.

[Victoria Atkins]

That gives me the opportunity to declare that I sat not only on the Joint Committee for that Bill but on the Select Committee. There was a great deal of concentration and discussion, as I recall—the House will have to forgive me as I am rolodexing back several years in my memory—about the meaning of communications data, because of the sensitivities in relation to some of the powers rightly given to our security services in order to safeguard national security and for other purposes.

There has been some debate about how the General Data Protection Regulation and the Data Protection Act apply in the years that have fallen since. The clarification has been made because the Home Office wanted to ensure that it defines that accurately, protects citizens’ rights and permits Government agencies, law enforcement agencies and other agencies to collect and review the data necessary to protect us all. We are tabling this amendment now at the first opportunity we have had, to ensure that that phrasing still permits HMRC to collect the vital data that we need to ensure that our taxes are collected properly. To sum up my point on new clause 5, the civil information powers allow HMRC to continue to collect vital revenue to fund our public services.

In conclusion, the Government’s proposed amendments will ensure that the legislation works as it should and that HMRC has the powers it needs to continue collecting tax revenue that is vital to fund our public services that so many in our country rely on. I will, of course, address all amendments tabled by other Members when I wind up later. I very much want to listen closely to the debate that will now follow. In the meantime, I commend amendments 9 to 19 and new clauses 4 and 5 to the House. I urge hon. Members to accept them in due course.

--- Later in debate ---

[Madam Deputy Speaker (Dame Rosie Winterton)]

I gently remind colleagues that if they want to intervene on a speaker, it is important that they are in the Chamber at the beginning of the speech, just in case the point that they wish to raise has already been made. It is also important to stay until the end. I call the SNP spokesperson.

[Stewart Hosie]

Before I turn to the new clauses and amendments before us, it is worth reminding ourselves briefly about the debate so far, not least that the Bill was derived from a Budget that had the stated intention of seeing the debt, borrowing and inflation all fall. As the Financial Secretary has said previously, debt servicing costs are down, and indeed they are—they are down from last November, but massively up from the previous year. She said that the fiscal targets are to be met. Again, indeed they are. The debt target in particular is forecast to be met in five years’ time measured against the fiscal charter, but it will be at 0.2% of GDP. That is £6 billion out of a GDP approaching £3 trillion. As I have said before, these are very fine margins.

Although it is true that having a weather eye on debt and deficit—the big macro-economic indicators—is important, so too is immediate help for families suffering from high inflation, high energy prices and spiralling mortgage costs. Those things, however, are all sadly absent from the Bill. That is important because the OBR has told us that living standards will fall by 6% over this fiscal year. That will be the largest two-year fall since Office for National Statistics records began in the 1950s. It is important because inflation is still at 8.7%, and it is far worse for certain essentials such as sugar, at nearly 50%. Remember that inflation was forecast to fall to 2.9% by the end of this year. Since then, it has been revised up to 5% by the end of this year. That means that the forecasts and the pain keep rising.

We know that real pay is not keeping pace with inflation. Troublingly, the Government are keeping their head in the sand regarding the inflationary impact of Brexit, ignoring even the former Bank of England Governor, Mark Carney, who could not have been clearer about the contribution Brexit has made to the soaring inflation we face.

I turn to the amendments and new clauses we are considering on Report. New clause 1 calls for a review of alternatives to the abolition of the lifetime allowance, and amendments 1 to 6 delete clauses associated with the abolition. On Second Reading, I suggested the need to probe this matter in Committee. The decision to remove the cap on lifetime pension allowances, which will cost around £3 billion, will benefit a tiny number of already pretty comfortably off or very well-off people. I also suggested that, if the measure was genuinely designed to lift certain categories of worker—doctors in particular—out of a pension and employment trap, the Government should, to be brutally honest, have come up with a much better and far narrower solution.

My hon. Friend the Member for Aberdeen North (Kirsty Blackman) also raised the matter in the Committee upstairs. She made the point that a significant number of questions have been raised in the House and elsewhere about the lifetime allowance and the problem it has caused, particularly for NHS doctors, but went on to quote Torsten Bell of the Resolution Foundation, who noted that 20% of those who will benefit from the change in the lifetime allowance work in the finance industry, meaning that nearly as many bankers as doctors will benefit. That surely cannot have been the intention. We are pleased to support new clause 1, because it seeks not simply a review, but a review that will make recommendations about how a more focused alternative could be delivered.

Amendment 7 seeks to remove entirely the abolition of the Office of Tax Simplification, and new clause 2 seeks reports based on metrics to measure the performance of tax simplification. We will support both if they are voted upon. My hon. Friend the Member for Dunfermline and West Fife (Douglas Chapman) provided some excellent context in Committee, arguing that

“the OTS achieved a significant amount during its 12 years of existence and, with greater ministerial support for its proposals, could have achieved much more.”—[Official Report, Finance (No. 2) Public Bill Committee, 18 May 2023; c. 136.]

He also quoted George Crozier of the Chartered Institute of Taxation, as many have done over many years, who said that there had been

“useful reforms to employee expenses and inheritance tax reporting,”

and that

“every Finance Act of the last decade has had measures in it which owe their genesis to the OTS, and which have made navigating the tax system easier for one group or another.”

My hon. Friend also made the rather important point that it was the independence of the Office of Tax Simplification that made it stand out from anything that can be provided in-house. We will back amendment 7 and new clause 2 if they are pressed to a Division.

If I may say a few words about Government new clause 4 and Government amendments 9 to 13, they appear to come under the category of tidying up and clarification. New clause 4 in particular ensures that both domestic and international top-up taxes commence at the same time, and the other amendments ensure that reliefs and charges operate as intended.

However, I am rather less sanguine about Government new clause 5. Ostensibly, it is required to deal with the situation where

“financial institutions are regarded as telecommunications or postal operators”.

For example, subsection (5) of Government new clause 5 suggests that paragraph 19(4) and (5) of schedule 36 to the Finance Act 2008 be removed, but paragraph (19)(4) says:

“An information notice does not require a telecommunications operator or postal operator to provide or produce communications data.”

That is a protection against the requirement to produce data in certain circumstances. Paragraph 19(5) defines “communications data”, “postal operator” and “telecommunications operator” as per the Investigatory Powers Act 2016—the very legislation that inserted those protections into schedule 36 to the Finance Act 2008 in the first place. Government new clause 5 not only affects the financial institutions regarded as telecoms or postal operators but, it would appear on my reading, removes protections in the Act for all telecommunications and postal operators not to be required to provide certain information in certain circumstances.

The Financial Secretary said she would answer questions at the end in her summing-up, and my questions are rather simple. What problem is Government new clause 5 designed to address? Why has a potentially significant amendment such as this come so late in the day? Is it even remotely appropriate that a criminal justice measure, the Investigatory Powers Act, should be amended in a potentially significant way through a late-delivered new clause on Report of a Finance Bill?

New clauses 3 and 8 to 14 call for reviews or reports of one form or another on the public health and poverty effects of the Bill, the oil and gas profits levy allowance, the impact of those with non-dom status, the bands and rates of air passenger duty, the impact of tax changes on households, and the effect of the Bill on the affordability of food and on small businesses. We are happy to look on those positively, although I am not certain that new clause 12 should really be opening the door to reducing the electricity generator levy. The Lib Dems have disappeared, but I would have said to the hon. Member for Tiverton and Honiton (Richard Foord), had he been in this place, that if one opens the door to a tax cut to the Tories, they by and large take it.

We will also support new clause 7, which requires a statement of progress on the pillar 2 reforms, seeking

“to extend and strengthen the global minimum corporate tax framework”.

It is important that we have a global minimum corporate tax framework, and I am not convinced by the arguments made by the right hon. Member for Witham (Priti Patel) about offering the opportunity for implementation to be delayed.

Again, the Lib Dems are not in their place, but I am also not yet convinced by new clause 15 because, while there are issues with the Government’s research and development framework, which I have raised before—namely, the stated intention to limit attributable expenditure for data and cloud computing licences—the new clause seeks to make the regime more restrictive and introduces the extraordinarily subjective viability clause in subsection (2)(a).

It is, however, true that none or few of the amendments and new clauses tabled substantially alter the Bill. It is also sadly true that none of the Government changes offer any hope of substantial help for the cost of living crisis any time soon. I fear that the Bill, and the Budget it derived from, will go down in the missed opportunity category.

[Alun Cairns]

I will speak to part 2 of the Bill, clauses 46 to 60, to which Government amendments 15 and 16 refer. In general, they relate to duty rates and any exemptions that apply thereafter. The Government’s objectives have been to simplify the system, to have an emphasis on health and healthy consumption, and, of course, to support pubs. In general, these are significant changes that have a positive impact on the hospitality sector.

When the Exchequer Secretary’s predecessor, my hon. Friend the Member for South Suffolk (James Cartlidge), said at the Dispatch Box that the Bill delivers the Brexit pub guarantee, there was significant enthusiasm within the sector to recognise and interpret a long-term commitment. There are two elements that immediately stem from that. The first is that these are changes that can be delivered as a result of Brexit; there were difficulties, challenges and nonsensical structures in the sector that could not be amended while we were a member of the EU. That is a major positive impact. However, the significance of the Brexit pub guarantee is that it will be long-term and we look for it to be ever extended.

I pay tribute to the Exchequer Secretary, who has engaged with me on some of the points that I have already made, but also to his predecessor, to the Chancellor, and to the Prime Minister when he was Chancellor, for recognising the opportunities to amend duty rates. That can genuinely help the hospitality sector, particularly pubs.

The original draft duty relief, which was in the Budget two years ago, was set to be 5% and to come into force this year. This year’s Budget and the Bill increased that to 9.1%, which will make a real difference. It follows the theme, all being well, of a continuing differential between rates that apply to the off-licence trade and those that apply to pubs and the general hospitality sector. The Government have therefore taken important, positive steps, which are welcomed far and wide.

--- Later in debate ---

[Stewart Hosie]

Loth as I am to disagree with the Minister, there was little by way of substantial growth in the Budget and there is almost nothing by way of immediate cost of living support in this Bill. We can only hope—although it is hope over expectation—that the Bill at least delivers some of the growth and some of the investment that the Government’s rhetoric would suggest they expect to see. I hope that happens, even though I doubt it will, and that the forecasts we see at the next fiscal event will be rather better than the ones we have seen over the past three or four years.

[Madam Deputy Speaker (Dame Eleanor Laing)]

I am pausing in case there is a speech about to erupt, but there is not. Therefore, I will put the Question.

Question put and agreed to.

Bill accordingly read the Third time and passed.

Mortgage Market

Stewart Hosie Excerpts

Tuesday 13th June 2023 Commons Chamber

[Mr Speaker]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

Millions of households are now struggling as their fixed-rate mortgages end and they are moved to much higher variable rates. We also know that only a third of the households that are expected to move from cheap fixed-rate deals have done so, so there is a great deal of pain to go, with 116,000 households a month coming off fixed-rate deals.

Some in the City are suggesting that what we are seeing is a complete reset of the mortgage market, which would imply that there should be a complete reset of the Government’s approach. Given that changes to mortgage rates are driven by changes to the base rate, and that the base rate is the central bank’s primary tool to meet the 2% inflation target handed to it by the Government, what discussions have the Government had with the Governor of the central bank about the effectiveness, or the appropriateness, of an inflation target being the primary target that the central bank works towards?

[Andrew Griffith]

At his spring statement, the Chancellor was very clear about the Bank of England’s continued remit, beyond which it remains operationally independent. It has been a long-standing feature of this House that Treasury Ministers do not tell the Bank of England how to run monetary policy. Three of the Prime Minister’s five priorities are getting the economy growing, reducing debt and halving inflation.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 9th May 2023 Commons Chamber

[Mr Speaker]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

The incentives offered by investment zones include 100% business rates relief and enhanced capital allowances. With the exception of reduced national insurance contributions, it is hard to see the difference between an investment zone and an enterprise zone. What additional fiscal support are the Government providing to differentiate these investment zones from enterprise zones?

[John Glen]

The key distinction is that we have identified areas that have clusters, often relating to a university, and that have potential in a key sector. The investment zones will be worth £80 million over five years, and we are obviously working very closely with partners. It is difficult to be precise about the numbers, because there will be bespoke collaborations depending on which sectors are involved.

[Stewart Hosie]

I thank the Minister for his answer but, of course, enterprise zones and, indeed, their near cousin, the freeport, also spoke about clusters in the same kind of language. What steps are the Government taking to ensure that investment zones do not suffer from the same problem as enterprise zones and freeports, which was a woeful failure to deliver the number of permanent, good-quality jobs that was initially promised?

Cost of Living Increases

Stewart Hosie Excerpts

Tuesday 25th April 2023 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I was intrigued by the Chief Secretary’s answer to the right hon. Member for Wokingham (John Redwood) about forecasts: I think he said something along the lines of “For every fiscal event there’s a forecast, and on many occasions it turns out to be wrong.” That may be correct. Is it not passing strange, then, that the Government’s own fiscal charter, which they announced only six months ago, is based on precisely such a forward-looking view, with forecasts on a five-year rolling basis? I think the Government and the Chief Secretary might want to sort their lines out on that one.

I agree with what the Chief Secretary said towards the end of his speech about boosting productivity, which is a perennial problem. He is absolutely right about that, of course, but he will recall from the OBR forecast and the Red Book that productivity growth does not exceed 1.5% in any year of the forecast period. Whatever plan the Government thought they had, they will need to do a little better.

The Chief Secretary quite rightly mentioned the requirement to get more people into the workforce; I think he mentioned having an extra 110,000 people by the end of the forecast period. That is welcome, but it would be a fraction of 1% of the workforce of 33 million. Again, I think it is a case of “Five out of 10—must do better.”

There is much to agree with in the Opposition motion: the condemnation of the Tory Government and their mismanagement of the economy; the regret that the UK is the only G7 country whose economy has not returned to pre-pandemic levels; and the ambition, which I am sure is shared across the House, to secure sustained growth and good jobs. However, I will focus not on macroeconomics, but on the impact on real people of inflation and the cost of living crisis that many of them face, not least because energy price hikes, inflation, and mortgage and rent increases are continuing to erode people’s standard of living. We certainly know from the November OBR forecast that inflation was set to peak at a 40-year high, and that wages and living standards were set to be squeezed by 7%, wiping out all the growth of the past eight years. By March, the OBR was telling us that real disposable income would fall by nearly 6%. We now know that telecoms prices will rise as well: BT confirmed that its costs would rise by 15% on 31 March, O2 is increasing prices for SIM-only customers by 17%, and TalkTalk will increase its prices for landline and broadband customers by 14%.

Grocery prices also continue to climb. In February the increase reached a new record high of 17.1%, and more recently the prices of some goods have risen by 19.1%, which represents the best part of £1,000 per year per household for the average weekly shop. The prices of essential food items have also risen in recent months. The price of two pints of semi-skimmed milk is up from 92p to £1.37, a 49% increase; a litre of olive oil now costs £7.28, which is a 65% increase over the past year, and the price of vegetables has risen by 31% over the same period. However, inflation does not hit all households equally. It has a particularly dire impact on lower-income households, which spend a much higher proportion of their incomes on necessities such as food and energy. For some people, it is even worse than that: those with allergies or special dietary requirements are hit even harder. According to analysis carried out by the Allergy Team, people with specific dietary requirements are now paying up to 73% more for food than those who do not need to buy “free from” products at their local stores.

The Joseph Rowntree Foundation has warned that low-income families simply do not have the resources to go on bearing the cost of soaring inflation. It noted that

“nine in ten families on Universal Credit said they couldn’t afford the essentials in October last year. Since then, inflation has been in double digits”.

Even the Office for National Statistics told us in April that about half the adult population—49%—were worried about the cost of energy or the cost of food. I think that some of the comments we have heard from Tory Members today spoke volumes. It is almost as if they thought that Tory voters would not be affected by these prices, when half the adult population are worried about the cost of energy or food. I think that they should take notice.

We also know that families are beginning to feel the pain of increased mortgage costs, which, while they may have fallen back a little from the high point last October, are still much higher than they were a year ago; and of course, the central bank has increased the base rate for the 11th consecutive time. Let me put that in context. Nationwide has reported that its standard mortgage rate will rise to nearly 8%—7.74%—on 1 May.

It is rather obvious that, when it comes to the cost of living, the Government should have three urgent tasks. The first is continuing to help families with high energy costs, not by simply freezing the cap—although it is not really a cap at all—but by reducing it from £2,500 to £2,000, as well as maintaining the energy bills support scheme. The second is to bear down on inflation; forcing down energy prices would help with that, as it did last year. Thirdly, as this was mentioned earlier, when it comes to the elements that are under the Government’s control—the next round of public sector pay awards, benefits, the minimum wage and pension settlements—they should ensure that no one falls further behind, and should introduce fairness into the system to pay for it. As the motion says, it could be paid for by a meaningful windfall tax, the ending of non-dom status, the taxing of share buy-backs, and the scrapping of costly vanity nuclear projects.

That is not to say that there is no support from the UK Government—the Chief Secretary referred to some of it, which he rightly described as targeted—but it would be helpful for them to look at the efforts made in Scotland and the range of additional measures that have been put in place there. The Scottish child payment has been further expanded to all eligible six to 15-year-olds. It has increased to £25 a week, and 387,000 children are now forecast to be eligible this year. The various family payments, including the Scottish child payment, could be worth around £10,000 by the time an eligible child turns six, compared with around £1,800 for comparable families in England and Wales. There are more free school lunches during term time for all pupils in primaries 1 to 5, which is the most generous free school meals offer in the UK, saving families on average £400 a year per child.

We have doubled the fuel insecurity fund to support people at risk of self-disconnection or self-rationing of energy. The new winter heating payment that replaces the Department for Work and Pensions system will provide a stable, reliable annual payment, helping 400,000 people. We are maintaining investment in the Scottish welfare fund at £41 million this year, and continuing to invest in discretionary housing payments, with £84 million this year. We are also continuing to provide funding to deliver the council tax reduction scheme. So it is obvious that this Government can, and now should, do more.

Of course, the inflationary pressures that have driven the cost of living crisis are not there by chance. They are not all a consequence of external shocks, and they are not all a result of covid or of Ukraine. The inflationary elephant in the room is Brexit. The London School of Economics has said that

“by the end of 2021, Brexit had already cost UK households a total of £5.8 billion in higher food bills”.

Last year, as prices were rising steeply, the former Bank of England policymaker Adam Posen insisted that 80% of the reason why the UK has the highest inflation of any G7 country was the impact of Brexit on immigration and the labour market. Even the Harvard Economics Review has stated that Brexit

“can be seen as the guilty culprit in Britain’s inflationary crisis.”

I agree with this criticism of the Government. I agree that we should seek higher sustainable growth, but until the inflationary impact of Brexit is even recognised, it will be impossible to fully address the cost of living crisis that so many of our constituents are facing.

[Mr Deputy Speaker (Mr Nigel Evans)]

We will, I am afraid, have to start with a four-minute time limit. We will see where we go from there.