Finance (No. 2) Bill

Stewart Hosie Excerpts

2nd reading
Wednesday 29th March 2023 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

That was a fascinating and wide-ranging speech from the hon. Member for South Thanet (Craig Mackinlay). Twice he used the analogy of being a Betamax waiting for the VHS video to arrive. I am sure I have heard that speech from the Conservative Benches so many times that it was like a worn-out Philips Video 2000—another plan that never quite made it.

The Financial Secretary made a number of remarks at the beginning of her address. She said debt servicing costs were down, and indeed they are—down from last November, but still massively up from one year ago. She said the fiscal targets were to be met, and indeed they are. The debt target in particular will be met in five years—it will be down by 0.2% of GDP. That is £6.5 billion out of a GDP of, at that point, £3 trillion. The margin for error is very small. She also said that employment will go up—that is to be welcomed—and the OBR certainly suggests that it will. It will go, over the next five years, from 60% to 60.4% of the available workforce. That is helpful, but it does not begin to touch the edges of the labour shortage and skills problems that we have.

The OBR has told us that living standards will fall by 6% or so over this fiscal year—the largest two-year fall since Office for National Statistics records began in the ’50s. We know that there is a combination of reasons for that, particularly inflation, which was at 10.4% in February. I am sure that we have all seen in the last day or so the 17.5% inflation rate in groceries, which is really affecting people and was reported from February. We also know that the Government could have done more to ease people’s cost of living pain. They should not simply have frozen the energy price cap at £2,500 but reduced it to £2,000. They could and should have maintained the £400 energy support payment, but they chose not to. Those measures would have borne down even more on inflation, which would have been helpful.

In a sense, what is more disturbing than the lack of immediate help is that the Government seem relatively content with the modest progress made towards tackling the long-term underlying issues in the UK economy. Productivity in particular remains a huge problem. The OBR forecast from the Budget said that productivity per hour would not even reach 1.5% growth in any year during the forecast period—that is below the 2% norm.

Of course, some aspects of the Budget and the Bill are to be welcomed and may well help with productivity issues. I am thinking particularly of the full expensing of capital allowance until March 2026, but as the hon. Member for Ealing North (James Murray) pointed out, that is temporary—it is only for three years—and the impact on business investment over the forecast period is not particularly clever. At the same time, the failure to increase the annual investment allowance means that businesses planning to benefit from £1 million of investment allowance will find that that £1 million of planned investment has been badly eroded by inflation.

Likewise, the intention to deliver £20 billion of research and development spending by 2024-25, which could certainly help with productivity, was not mentioned in the Budget, as I said on Budget day. I have done some digging about because there seems to be a lack of clarity on that. Is it because that £20 billion was actually meant to be £22 billion but that figure was quietly dropped? And was the 2024-25 goal pushed back to 2026-27? In either event—whether we get £20 billion or £22 billion of total R&D spend, and whether that is in in two, three or four years—the investment will not be of the same value as when it was first announced because of inflation.

Although references to R&D credits are certainly there in the Bill, part 2 of schedule 1 seeks to limit attributable expenditure on data licences or cloud computing in some circumstances. There may be good reasons for that, but I suspect, given that a large amount of future R&D work will be on cloud technologies, that we will have to probe very carefully indeed in Committee to find out whether the Government are justified in removing from R&D credits the attribution of such costs.

Likewise, we will also need to probe in Committee the decision to remove the cap on lifetime pension allowances, which will cost around £3 billion but benefit a tiny number of already pretty comfortably well-off—or, indeed, very wealthy—people. If that measure is genuinely designed to lift certain categories of worker—doctors in particular—out of a pension and employment trap, the Government will, to be brutally honest, have to come up with a much better and narrower solution.

We also saw the decision to impose a huge 10.1% rise in the duty on Scotch whisky. The Scotch Whisky Association could not have been more stark in its response, saying:

“We have been clear with the UK Government that increasing duty would be the wrong decision at the wrong time”—

I agree with that—

“so it is deeply disappointing that one of Scotland’s largest and longest-standing industries has been treated in this way.”

It also said:

“This is an historic blow to the Scotch Whisky industry. The largest tax increase for decades means that 75% of the average priced bottle of Scotch Whisky will be collected in tax”.

I welcome and support sensible duty measures—the Government know that I would welcome a duty regime based on alcohol content, with no other criteria—but the decision to put such a significant and substantial increase on Scotch tells me that the UK Treasury views this totemic industry as, frankly, no more than a cash cow.

The Financial Secretary spoke earlier about enhancing the environment. In the Budget debate I laid out the huge cost and almost unlimited financial risk to the taxpayer of nuclear energy. The reasoned amendment that SNP Members tabled was critical of not just the decision to invest in nuclear but the failure to invest fully in real green, renewable technologies. Nowhere was that more obvious, and more starkly demonstrated, than in the next contracts for difference auction, which will be allocation round 5, the budget for which has been reduced by 30%, from £285 million to £205 million. The tidal stream ringfencing has been halved to £10 million.

This all comes at a time when inflation in the price of materials and construction is in the order of 30% for established renewables and closer to 50% for projects such as the MeyGen tidal stream, which is the largest tidal stream project in the world. Although the budgets are now annual rather than biannual, the allocation means that fewer projects can be successful when they bid, which means we are likely to see reduced pipelines of orders in the UK and reduced investor confidence. We saw that in onshore and offshore wind projects, which became reliant on foreign manufacturing. By contrast, UK-based supply chains account for 80%-plus of tidal stream content. For example, Orbital Marine Power’s O2 device was delivered with an over 80% UK supply chain spend. It was designed in Orkney and built in Dundee with steel from Motherwell, blades from the Solent, anchors from Anglesey and hydraulics from the midlands

With a bigger ringfenced pot for tidal, we have the opportunity to scale up the MeyGen site in particular; otherwise, we will end up cutting costs and being dependent on foreign manufacturing, and the technology will lose out, as did the wind technology when Denmark provided Government support for its sector and the UK lost out. At this point, if the UK Government do not increase the overall budget, the whole process could fail, like the most recent Spanish auctions, and all against a backdrop of massive investment through the Inflation Reduction Act in the United States.

[Kirsty Blackman (Aberdeen North) (SNP)]

On investment in renewables, does my right hon. Friend feel, as I do, that the Government are missing out on an opportunity? This is the opportunity to capitalise on the move towards a just transition to renewable energy, and the Government are putting down exactly the wrong markers. When we want to build up investor confidence and the industry and to take advantage of it, the UK Government are choosing not to give confidence to those who are keen to invest.

[Stewart Hosie]

This is absolutely the opportunity to invest properly, to deliver the just transition that we all speak about and want to see, and to protect the jobs, abilities and skills of the hundreds of thousands of people in the oil and gas sector across the UK as they transition into renewables, so that Scotland is no longer the oil and gas capital of Europe but becomes the Saudi Arabia of renewables—what a thing we could achieve. However, some of the decisions that are being taken, including the obsession with nuclear and the reduction in funding for real green renewables, are deeply problematic.

I also want to address the lack of action on, and support for, trade. The OBR said that while it is true that

“additional trade with other countries could offset some of the decline in trade with the EU, none of the agreements concluded to date are of a sufficient scale to have a material impact on our forecast. The Government’s own estimate of the economic impact of the free-trade agreement with Australia, the first to be concluded with a country that does not have a similar arrangement with the EU, is that it would raise total UK exports by 0.4 per cent, imports by 0.4 per cent and the level of GDP by only 0.1 per cent over 15 years.”

As an aside, if this is the much-vaunted benefit of Brexit, it is very, very thin. What that means is that the OBR estimates the economic impact of the free trade agreement with Australia, for example, will raise the level of GDP by 0.1% over the next 15 years, while estimating that Brexit will cause a drop in GDP of 4%.

With families still burdened by high inflation, and also feeling the pinch from rising mortgage and rental costs; with energy costs still way higher than they should be; with the long-term problems of the economy, particularly poor productivity, inadequately addressed; and with the self-inflicted economic harm of Brexit hampering trade and GDP growth, I am afraid that this Budget and this Finance Bill simply are not enough.

Amendments of the Law (Resolution of Silicon Valley Bank UK Limited) Order 2023

Stewart Hosie Excerpts

Monday 27th March 2023 General Committees

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Hollobone. The Minister certainly explained why the exemption is necessary, and what it was for: it allows HSBC to make £2 billion of liquidity funding available at below market rates. So far, so good. I will put on record that all involved did an extraordinary job over a weekend to resolve this difficulty, and that was absolutely the right thing to do.

The explanatory memorandum and the Minister have both mentioned a subsequent SI that will extend the exemption from ringfencing beyond four years. I have a similar question to that asked by the Labour Front Bencher, the hon. Member for Hampstead and Kilburn. The ringfence was introduced—I am sure that many remember the circumstances—to stop investment banks using retail deposits as a piggy bank, and then losing all those deposits at the casino. While it may be necessary to extend the exemption beyond four years, will it be possible to shrink that period? Could there be a return to ringfencing within four years? What supervision or action is there by the PRA, the Treasury and others to ensure that SVB UK maintains its capital, and its ongoing work in the area of retail deposits and commercial and investment lending, and to ensure that it does not seek to extend its risky investment lending, and to use retail deposits for that, beyond these four years?

UK Infrastructure Bank Bill [Lords]

Stewart Hosie Excerpts

Consideration of Lords message
Wednesday 22nd March 2023 Commons Chamber

[Madam Deputy Speaker (Dame Eleanor Laing)]

The question is that this House agrees with the Lords in their amendment 3B. I am going very slowly in case anybody appears on the Opposition Front Bench—or, indeed, in case anybody currently on the Opposition Front Bench wishes to address the matter. No? Then we will move to the SNP spokesman.

[Stewart Hosie (Dundee East) (SNP)]

I just have a small point. The SNP supports this Bill and the intention to create the UK Infrastructure Bank, with its objective to help tackle climate change. However, it is worth putting on record very briefly that both the original Government amendment 3 and amendment 3B in lieu from the other place—while the latter does keep “nature-based solutions” in the wording of the Bill—seek to remove

“structures underpinning the circular economy”

from the infrastructure that the Bill is designed to support in its objectives of tackling climate change and meeting the target for 2050.

I am sure people interested in such matters will look rather askance at that. How on earth can we have a UK Infrastructure Bank Bill, with highly laudable objectives to tackle climate change and meet the Government’s own targets, only then to have both the Government and the other place actively remove investment in infra-structure to support the circular economy—which, for goodness sake, must be part of the solution—from the Bill? We are not going to oppose the amendment, because the Lords amendment is marginally better than the original Government amendment, but it is worth putting on record that the removal of the words

“structures underpinning the circular economy”

from the Bill strikes me as somewhat perverse.

[Richard Fuller (North East Bedfordshire) (Con)]

I find myself in the unusual and extremely uncomfortable position of agreeing with what the SNP spokesperson has just said. It is a condition that I hope will be quickly removed so that I can assert my usual sound Conservative principles.

There is an important point here, which I know the Minister is aware of, and which is not specific to this Bill. It seems a little odd, if we are looking at the next 10 or 20 years of our investment in infrastructure under the terms of the new Infrastructure Bank, to omit explicitly one of the foundational aspects of infrastructure from the Bill. I know my hon. Friend the Minister will have already reviewed that and he will say, I think correctly, that there is nothing in this Bill to stop support for investment in the circular economy infrastructure. However, I think it is important to have voices at this stage of the debate who can say that clearly, so that those who will now take forward the Infrastructure Bank know that, even if it is not in the Bill, the importance of creating the foundation of the circular economy is explicitly one of the things we anticipate and hope that the bank will do.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 21st March 2023 Commons Chamber

[Mr Speaker]

I call the Scottish National party spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

Last August, there were 75,000 mortgage approvals. That number halved by December. We are all aware of the reports from late last year of the number of mortgage products that were removed and the troubling reports of mortgage offers being withdrawn. Before we even get to the issue of support for mortgage holders, what is the Treasury doing to ensure the availability of mortgages, a good range of mortgage products and an end to offers being withdrawn unless there is a very, very good reason to do so?

[Andrew Griffith]

We have recently renewed the mortgage guarantee scheme, which helps the availability of high loan to value ratio mortgages. We are looking very clearly at the mortgage market and at things that we can do to help first-time buyers. The right hon. Member should also know that mortgage arrears, which we monitor very closely, remain low. In fact, they are lower now than they were prior to the pandemic.

[Stewart Hosie]

Of course, 18 months ago a two-year fixed-rate mortgage with a 5% deposit was under 3%. It is now north of 6%. A two-year fixed-interest mortgage with a 25% deposit, which was 1.25%, is now also north of 6%. How can it possibly be fair that somebody buying an average-priced house in Scotland worth around £190,000, putting down a £50,000 deposit, could face an interest rate that has gone up by 500% in that time?

[Andrew Griffith]

Interest rates are now falling, something the right hon. Gentleman declined to mention. The best thing we can do to help with those interest rates is to deliver on the Prime Minister’s objective of halving inflation, and I am encouraged that we are on track to do so.

Silicon Valley Bank

Stewart Hosie Excerpts

Monday 13th March 2023 Commons Chamber

[Mr Speaker]

I call the SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

One of the key lessons of the 2008-09 financial crash was that the conduct of business and liquidity issues could very quickly morph into systemic risk with contagion across a variety of transmission channels, so I very much welcome the speedy way in which the SVB UK issue was resolved over the weekend. However, that bank’s business model—and it is not alone—involved it holding a large number of low-interest-bearing bonds at a time of rising bond yields. It was required to sell those at a loss, which exacerbated the liquidity problems that it had. Would it not be prudent now to ensure that our regulators have another look at UK banks to ensure that comparable low-interest-bearing assets are stringently priced and marked to market to ensure that tier 1 capital is just that, and of sufficient quantity and quality that any liquidity problem does not morph into an insolvency and system risk problem?

[Andrew Griffith]

I thank the right hon. Gentleman for his recognition of the speed and decisiveness with which the whole Government have come together, worked together and acted to deliver this outcome—that is kind of him and it is appreciated. If I may, we should not conflate some of what we read about the balance sheet in the US with the regulated balance sheet in the UK, which was a separately regulated balance sheet. Again, on the business model in the UK and the backing, and the bonds and collateral that were being held, I am not aware that their forced sale, and the losses on it, were a contributory factor. The reality is that we saw a withdrawal of deposits. The Bank had the ability, because of the relatively ringfenced balance sheet, to protect the bank and take the necessary action. Had the Bank not done so, we could have been in a very different situation, so we were right to act as we did.

Digital Pound

Stewart Hosie Excerpts

Tuesday 7th February 2023 Commons Chamber

[Andrew Griffith]

I thank my hon. Friend for her, as ever, wise points, as well as her wise chairmanship of the Treasury Committee. It is absolutely imperative that savers get the interest rates that they are entitled to. I commend my colleagues in National Savings and Investments, who have significantly increased the rates offered to savers. Of course, she also raises one potential opportunity, in that, although a digital pound would sit alongside our existing financial services infrastructure, it potentially offers consumers and citizens a different choice, which could involve the ability to hold currency through intermediaries other than the current banks.

[Stewart Hosie (Dundee East) (SNP)]

When I was in the US with the Treasury Committee some years ago, we were given two choices: either 95% of all crypto was fraud and froth, or 100% of all crypto was fraud and froth. Clearly, a central bank-backed asset is a different beast; but nevertheless, I have three questions. First, what problem is this idea designed to solve? Secondly, what happens if this digital asset becomes volatile? If it stops behaving like a currency and starts to behave like a bond or equity, or debt, or something speculative like a non-fungible token, how will it be regulated? Thirdly, the Minister said the digital pound, in this new form, will always be worth the same as a traditional pound. What if the market determines that that is not true and there is a divergence between the fiat currency value and this new non-fungible, Bank-backed token? Who picks up the tab when people potentially start to lose money?

[Andrew Griffith]

The right hon. Gentleman runs the risk, if I may say so, of confusing a particular attribute of what is a very large sector. This is not a cryptoasset; the digital pound would not have those speculative attributes. The fact that £10 in digital pounds would be fully exchangeable for £10 in His Majesty’s finest banknotes would prevent that divergence—if it did not, that would present the right hon. Gentleman with a profitable opportunity that he could use to supplement his other activities. He raises other questions, which are rightly the subject of the consultation. I extend the invitation to all parts of the United Kingdom, and we look forward to his constituents and compatriots being able to contribute.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 7th February 2023 Commons Chamber

[Mr Speaker]

I call SNP spokesperson.

[Stewart Hosie (Dundee East) (SNP)]

I have a constituent with a number of shops. He has seen his four-weekly energy costs rise from £12,000 last October to £27,000 today. Moving on to lower tariffs, but with the reduced energy support, he will still see that £12,000 every four weeks doubled, to £24,000. What advice would the Minister give to my constituent? How would he find the £140,000 off the bottom line in a business already operating on tight margins?

[James Cartlidge]

With great respect to the right hon. Gentleman, he was there when I gave the statement about the new scheme. I was clear with him about the fiscal position overall. He is welcome to write to me on that specific case. Obviously, I cannot comment on the detail of that individual case. What I can say is that we continue to put in place up to £5.5 billion of support with the energy bills discount scheme. That is a significant intervention and it remains a universal scheme with targeted support for the most energy and trade-intensive sectors.

[Stewart Hosie]

Therein lies the problem: this will go to high energy users. The Federation of Small Businesses described the changes as “catastrophic” and

the beginning of the end for tens of thousands of small businesses”,

the British Chambers of Commerce said that

“an 85% drop in the financial envelope of support will fall short for thousands of UK businesses who are seriously struggling”,

and UKHospitality criticised the sudden and sharp drop in support, estimating the move would cost that sector £4.5 billion in the next 12 months. Why does the Minister think they were all wrong and he is right?

[James Cartlidge]

As I said to the hon. Member for Airdrie and Shotts (Ms Qaisar), we were clear when we created the scheme to support businesses with their energy bills that it had to be time limited because of the generosity of the support—£18 billion over six months. We were absolutely transparent about that. But we have maintained a universal scheme covering businesses, charities and the public sector. Yes, it is less generous, but it remains significant. As I said, he is welcome to write to me with the specific case he raised.

Charter for Budget Responsibility

Stewart Hosie Excerpts

Monday 6th February 2023 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

May I also offer my condolences to Robert Key’s family at this terribly sad news?

I say to the Chair of the Select Committee, the hon. Member for West Worcestershire (Harriett Baldwin), that I was a big supporter of the creation of the OBR, and I very much agree with her that an independent look at Government economic plans, when it is in full possession of all the information, remains a very sensible thing to do.

I start by thanking Richard Hughes, David Miles and Andy King at the OBR for their autumn 2022 “Economic and fiscal outlook”. However, it is worth noting, as they did, that this particular forecast, with its seven forecast rounds, was under three Prime Ministers, three Chancellors and three official forecast dates. I suspect that at least part of the reason why the numbers and forecasts in the report are so gloomy is the sclerotic and, one could argue, rather shambolic way in which the Government—the last set and the one before that; Prime Minister and Chancellor—have played fast and loose with the UK’s economic health over the past year.

What does the OBR tell us about the health or otherwise of the UK economy as measured against the new fiscal rules? Before I say a little about that, I point out that there are many ways in which one can have fiscal rules: forward-looking ones against forecasts, like this one, will tell us something; backward-looking ones measured against outturns will tell us something else; measing over a fixed timescale, or in this case a five-year rolling timescale, also is useful, as of course is a measurement over an economic cycle. Unfortunately, however, that tends to be a moveable feast, as it is not always clear when the cycle actually starts and ends. I am sure those on the Labour Front Bench will remember many happy debates over that particular set of circumstances in the past.

The OBR tells us that inflation is set to peak at a 40-year high and that wages and living standards are set to be squeezed by 7%, wiping out all of the growth for the past eight years. So the combination of external shocks, inflation, poor economic management and a series of policy decisions—some good, like the energy price support that the Minister mentioned; some bad, like the medium-term fiscal loosening, almost all of which has been reversed; and some modest, like the medium-term fiscal tightening, most of which was necessary—have led to an increase in borrowing of over £100 billion this year and next, and an additional £420 billion in debt by ’26-’27. The consequence for the economy is likely to be the central bank rate being higher than the March forecast, the exchange rate lower than the March forecast, and gilt yields, which are the real driver of the cost of borrowing, higher than the March forecast.

The good news from the OBR is that inflation is due to fall steadily until the end of 2024, but with mortgage rates on average still close to double where they were less than a year ago, constant vigilance from the central bank, the Financial Policy Committee and the Treasury is still required.

However, even with that it will be a long, hard road to recovery. The OBR reports that real household disposable income has seen the largest fall since ONS records began in 1956. As to what needs to be done to grow the economy, again the OBR tells us that it expects capital deepening to contribute only 0.3% to potential output growth over the next two or three years, lower than in the March forecast. It says that that reflects weaker business investment, which it expects to persist over the coming years.

So while, for example, the maintenance of the annual investment allowance at £1 million was welcome, there is still much more to do to attract big investment into the economy. This is one the most troubling things that the OBR reports. The output gap is not even expected to return to the March 2022 levels until 2027, towards the end of the forecast period. It is equally troubling that the trade current account balance is forecast to “widen sharply” from 2.2% of GDP in 2021 to 5.8% in 2022. That is the highest full-year deficit since ONS records began, and is mainly driven by a widening trade deficit.

Yet the Government appear to be in denial about the self-inflicted economic harm of Brexit, and it is against that backdrop that the Government have introduced the new fiscal charter: net debt falling as a share of GDP in 2027-28, the fifth year of the rolling programme, and public sector net borrowing not to exceed 3% of GDP in the same year. While the OBR reports that both of those are to be met, the truth is that both are only just met: public sector net debt by 0.3% of GDP; and public sector net borrowing by 0.6% of GDP—from memory, £9.5 billion and £18.6 billion. At the end of the forecast period GDP will be almost £3 trillion—that is 12 zeros.

There is no fiscal headroom; the margins are absolutely tiny. So one missed step, one missed calculation, one policy error—my goodness, we saw plenty of those two Prime Ministers and two Chancellors ago—or one external shock, and that either renders the targets unmet again or requires new targets to be put in place, or, frankly, means that the brutal cycle of cuts and austerity starts all over again simply in order for the Government, to meet a target irrespective of the consequences for the real economy.

I will end with this, which is said in sadness more than anger because I like the OBR and I like the idea of fiscal rules: we have no target for growth, for job numbers, for increased living standards, or for a boost in exports; rather, success will be measured by a Government avoiding a debt target by 0.3% of GDP. That is not, as the Minister said earlier, charting a path to growth; that simply demonstrates a crushing lack of ambition.

UK Infrastructure Bank Bill [Lords]

Stewart Hosie Excerpts

Report stage
Wednesday 1st February 2023 Commons Chamber

[Richard Fuller]

I shall go through the amendments thoroughly and therefore I shall not detain the House long.

New clause 1 on the future of the UK Infrastructure Bank would have the effect of not permitting a sale of the bank until the duty set out in the Climate Change Act 2008 and the targets of the net zero commitment by 2050 had been met. That puts significant strictures on the maintenance of one bank and its objectives. I think the hon. Member for Tiverton and Honiton (Richard Foord) probably acknowledges that. He wants us to reflect on the sale of the green bank that was set up under the coalition Government. He talked about the profits that it made last year—about £180 million, perhaps a little less. However, I hope that he recognises a couple of things.

First, when the sale was made, the taxpayer benefited to the tune of £2.3 billion. That included a surplus of £186 million on taxpayer-invested funds and a commitment from the successful acquirer, Macquarie bank, to invest a further £3 billion. In the round, I do not think that was a bad transaction to make, because it enabled the attraction of more third-party capital—private capital—to try to achieve some of the objectives of that green bank under its new owners, and indeed that has taken place. Part of the balance with this Infrastructure Bank is: how are we going to evaluate its abilities and success in attracting third-party capital? If the hon. Member for Tiverton and Honiton reflects, he will see that his broad point in new clause 1 is a fair one, but I hope that he will not press it to a vote, because there are strong arguments on the other side and I would not support the points that he would be trying to make.

Again, I can understand some of the import of Labour’s new clause 2 and amendment 5. Labour is saying, “Here is an opportunity, with a major institution, with which we are going to look at and try to expand the infrastructure of the country, to make sure it has a full focus on the round of public interest in the things it is doing in our name.” That is a good intention but, as the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) knows—we have talked about this in Committee—there are trade-offs to be made within those sets of objectives. As we add objectives to our institutions, those trade-offs make it more obscure to parliamentarians and to the public what the intention of the bank will be.

The objectives that the Government have set out in the Bill are already clear. They have the benefit of clarity, as we know what they are. They also cover a wide range of sectors and intentions, but with the underlying core objective of helping us to meet our green net zero and climate change objectives.

So if the Opposition wish us to support their amendments, where do they see the trade-offs being made between achieving those objectives and having the duties to reduce economic inequalities between regions, to improve productivity, pay, jobs and living standards, and to support supply chain resilience? Very few of us would disagree with some of those objectives—indeed, the Government are making great strides on some of them with their levelling-up initiatives—but we have to accept that as we give directions to some of these institutions with a broad range of objectives, we are, as democrats, losing some control over how public money can be directed; we are giving more discretion to the chief executives of those organisations to do as they see fit and not perhaps to do as we were laying down in statute. I encourage the Opposition to think again, and to consider that perhaps having the clarity and precision of objectives set out in the Bill is precisely what will enable this and future Parliaments to exercise control over the Infrastructure Bank.

The hon. Member for Tiverton and Honiton, who is speaking for all the Liberal Democrats today, as he has graced us with his presence in a number of the debates, talked a little about the water companies again. I hope that he will have been listening today and will be reflecting back to his party’s leadership that some of the publicity the Liberal Democrats have put out has been substantially misleading about the intentions and actions of this Government. Obviously, parties make political statements all the time, this way and that. However, particularly as he has now followed up with his proposal for how water company discharge can be managed, I hope he will see that it is a serious issue and therefore we should treat it seriously.

Amendment 4 seeks to provide that the support the bank can give can happen only after the water companies have produced a “costed, time limited plan”. I think the water companies would say, “We have already done that.” They have a plan, but not one that can be implemented just like that, in the flash of an eye—I mix my metaphors there. I am not sure that the amendment will have the intention that the hon. Member for Tiverton and Honiton wishes it to have, given what the water companies are already doing and what the Government are already doing with the monitoring and the objectives being set to reduce sewage discharge.

I will step over what the SNP spokesperson, the right hon. Member for Dundee East (Stewart Hosie), put forward, because I am sure he will be able to elucidate that point clearly—I believe we have heard it here a number of times, although we are never bored by the repetition. Finally, I thank the Minister for listening to the points that were made in Committee and coming forward with the Government’s amendment.

Finally, I thank the Minister for listening to the points that were made in Committee and coming forward with the Government’s amendment. I can see that the Opposition have not put down a further amendment on that matter, which is a sign that he has got that judgment call right.

[Stewart Hosie (Dundee East) (SNP)]

I will speak to amendment 2 in my name, but before I address that fully, I will say a little about the other Opposition amendments and new clauses.

New clause 1 seeks to stop the bank being sold prior to net zero targets being met, which is sensible in principle, given the fate of the old green investment bank, as I described on Second Reading. New clause 2 seeks a report on the geographical spread of investments, which, again, is sensible given the Government’s recent track record on allocating money from the levelling-up fund. It still strikes me as rather absurd that the Prime Minister’s wealthy Richmond constituency should have been allocated £90 million, while the entire city of Glasgow received nothing in the second round of funding. I think we would all want to ensure that the UK Infrastructure Bank was far more equitable in its disbursements.

Amendment 5 seeks to reduce inequality and improve productivity. Amendments 3 and 4 seek to ensure that investment in water supply quality is permitted, but with conditions on the private companies receiving it. Each of these amendments and new clauses have merit, and we will be happy to support any if they are pressed to a Division.

Government amendment 1 seeks to reduce the gap between reporting from a maximum of seven to a maximum of five years. That is progress of a sort, but five years is still too long. I would be looking for a commitment from the Dispatch Box that the Government anticipate the review and reporting frequency to be within the proposed five-year maximum.

Let me briefly reprise what I said about my own amendment on Second Reading, when I gave the UK Infrastructure Bank and the Bill a broad welcome. Taking it at face value, there was nothing to criticise in its objectives of helping to tackle climate change and supporting the efforts to meet the UK Government’s 2050 target. Nor was there anything to criticise in the objective to support regional or local economic growth.

What I pointed out, though, is that—the Minister on Second Reading alluded to this in his speech—the delivery of support to facilitate local and regional growth in Scotland is provided by the Scottish Government, local government and other agencies, and that the green targets in Scotland, such as the earlier net zero target, are also set independently. It is therefore important that the UK Infrastructure Bank actually supports the devolved Governments’ objectives and does not, even inadvertently, end up working against them. That remains important because we have our own infrastructure investment plan, our own global capital investment plan and our own national strategy for economic transformation that provides the framework for the Scottish Government’s policy priorities.

In giving the Bill a broad welcome, I also made the point that while there is clearly an overlap between the strategic objectives of the UK Infrastructure Bank and the Scottish National Investment Bank—the wording of the aims of both the UKIB and the Scottish National Investment Bank are broadly similar—it is vital to ensure that both banks meet their goals and deliver the maximum impact for the people of Scotland. In line with the objectives set in the Bill, it is essential that the two banks are able to work together to identify and support appropriate infrastructure projects in Scotland. It is also vital that Scottish interests are appropriately represented and that there is an awareness of the Scottish economic context and the Scottish Government’s policy goals.

To ensure that there is alignment between both banks’ aims, I have argued that there should be an administrative mechanism, such as a memorandum of understanding, between the UKIB and the Scottish National Investment Bank to ensure that policy alignment is maintained. I fear that unless we have a firm mechanism, the UKIB’s aims might also be undermined, and there will ultimately be a risk that it will not deliver fully on its objectives. However, the Bill merely suggests in line 9 of clause 2(7) that the Treasury must only

“consult the appropriate national authority before making provision in regulations…that would be within the legislative competence of”

one of the devolved Administrations.

Non-domicile Tax Status

Stewart Hosie Excerpts

Tuesday 31st January 2023 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I will happily bear that in mind, Madam Deputy Speaker. The Minister said that she wanted talent and investment to come to the UK. I think that sorting out the inordinate visa costs and upfront health costs to allow talented people to come here would be rather more effective than allowing a tiny number of very wealthy people to shelter earnings offshore. She also prayed in aid the Budget to justify the arguments she was making, but at the time of the Budget, the Office for Budget Responsibility assessed that by 2027-28 the Government would barely meet its own new public sector net debt target—I think it was by 0.3% of GDP, or £9.2 billion, which is hardly a ringing endorsement.

The issue of those who are non-domiciled, or non-doms, is of long standing. It turns out that the system has been with us since the 18th century—1799—and was designed to allow people with foreign property to shelter that property, and the income from it, from wartime taxes. Instead of being unwound over the years, the system spiralled to the point that by about 2007-08, 140,000 people were using it. Even in 2021, close to 70,000 people in the UK still had non-dom status. Of course being a non-dom isn’t for everybody. It would be great to have the Prime Minister explain, on behalf of all the other near billionaires, the burdens that must be borne when sheltering so much income overseas and away from the prying eyes of the taxman.

So who is the system for? The enlightening report from Warwick University in April 2022 told us that 30% of all people earning more than £5 million a year claimed non-dom status, compared with 0.3% of the population earning less than £100,000. Most non-doms live in and around London. Indeed, more than one in 10 adults in Kensington and the Cities of London and Westminster are or were non-doms. That presumably explains why, in 2015, when changes were proposed, the then Mayor of London—now the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) and discredited former Prime Minister—described them as being part of an “anti-London agenda”. I would describe them as part of a tax fairness agenda, but, for Tories, paying tax without a fight is not really to be countenanced. I do wonder if there is not a recently retired Tory chairman who might like to give a TED talk to explain how easy it is to be careless when one owes the taxman some money.

I suppose the questions that we should be grappling with are: how much would abolition generate, and how much is currently being lost in tax yield by the Treasury? Those questions have also been around for some time. In an assessment made by Richard Murphy in 2007, it was about £4 billion. In an assessment made in 2015, it was also about £4 billion. It is true that they said that behavioural changes such as becoming non-resident could cut that yield to about £1 billion. Last year, the London School of Economics suggested that the figure could be about £3 billion. Those variances alone justify supporting the motion to ask for the data to be published.

Before I move on, it is worth noting that the politics surrounding this issue have also never been far from the surface. In the run-up to the 2015 election, the then Chancellor, George Osborne, claimed Labour’s plans were merely “tinkering round the edges”. At the same time, it was suggested that Labour’s modest plans were designed to win back SNP voters. Given that the SNP-Labour result in 2015 was 56-1, that was not a very successful plan. However, that spat did illuminate the then Labour leader, the right hon. Member for Doncaster North (Edward Miliband), suggesting that the reforms could still raise

“hundreds of millions pounds”.

While dismissing fears of an exodus of wealth—that seemed to be confirmed by the last LSE report—he suggested that it was morally right to stop the UK operating as a “tax haven”. On that, he was absolutely right. What is odd, though, is that after the election, that same George Osborne did abolish permanent non-dom status. As I think he said, it was preposterous that some families had seen that tax perk handed down through three generations. On that, he was absolutely right.

Let me bring the story up to date. On 18 November last year, the current Chancellor said that axing non-dom status would be the “wrong thing to do”. Again siding with the London based mega-wealthy, he defended resisting the moves to force the super-rich in the UK who pay no tax on their offshore income to shoulder more of the burden. Bizarrely, he actually said that

“non-doms are good for the economy”.

However, by 23 November—less than a week later—it was reported that the door was open and the Chancellor had looked again at the possible abolition of non-dom status.

It is pretty clear that the Government’s policy on non-doms is at best confused. If one were a cynic, given how many very wealthy people have benefited from such an arrangement, one might suggest that it is deliberately opaque. That is another reason to publish the data requested in the motion. If, however, I was being generous, I would concede that the number of non-doms is falling and that the anticipated yield from abolition is genuinely unclear: it is anywhere from £3 billion to £4 billion down to £1 billion, or possibly even the hundreds of millions suggested by the right hon. Member for Doncaster North. We also know that there would have to be exemptions. No one would expect to see foreign students taxed on their overseas earnings while they studied here for a small number of years.

But that is not really the issue, is it? It is about tax fairness. Why should ordinary taxpayers in the UK, even very wealthy ones, who pay their tax through pay-as-you-earn or after an annual return, or who are taxed on their dividends or their pensions, and, with I am sure a few exceptions, pay their dues on time and in full, while the super-rich, the euphemistically titled “economically mobile”, are allowed to dodge tax on the basis of a claimed association with another tax regime when they could have lived permanently in the UK for 15 out of the last 20 years?

Whether the yield is hundreds of millions of pounds, £1 billion, £3 billion, £3.2 billion, £4 billion or more, finally abolishing non-dom status is simply the right thing to do, particularly for those people who for all intents and purposes permanently reside here.