Green GB Week and Clean Growth

Craig Mackinlay Excerpts

Monday 15th October 2018 Commons Chamber

[Claire Perry]

The hon. Gentleman will know that we have spent tens of millions of pounds looking at wave energy—we have Wave Hub off the coast of Cornwall and we have invested substantially in many of the trial sites. As we debated at the time, the problem with the Swansea lagoon was not the source of power per se, but the fact that it was the most expensive power station proposal we had ever had in the UK, and it is right that we care about taxpayers’ money. That said, we are always interested in looking at tidal: several other proposals have been brought forward, and the door is always open. I, like him, know the power of the Bristol channel, having grown up on the other side; the problem is delivering it in the most cost-effective way.

[Craig Mackinlay (South Thanet) (Con)]

My right hon. Friend will be aware that businesses that do the right thing and install solar panels for electricity generation for their own use face a revaluation of business rates, which results in a higher charge, but that they do not face such a revaluation if the energy generation is for provision into the standard domestic grid. Will she commit to working with the Treasury to solve this somewhat unintelligible inequity?

[Claire Perry]

The short answer is yes. I would point out, however, that there are companies making substantial investments in solar—Rolls-Royce, for example—that absolutely see its value and see it as part of their whole energy-balancing process. So this is happening, but my hon. Friend makes a good point.

Retail Sector

Craig Mackinlay Excerpts

Wednesday 6th June 2018 Commons Chamber

[Craig Mackinlay (South Thanet) (Con)]

The motion before us today is somewhat rambling, dare I say. It has three parts. It is about squeezing wage growth, the condition of the retail sector, and there is a bit of Brexit put in as well—but we will have 12 hours next week to discuss that. Generally, however, what the Opposition are putting forward is that the Government should do more. They should spend more, subvert reality and revert this country to a command and control economy.

Let us look at wage growth, because we have had so much misdirection and ignorance of the truth regarding that. I think that the Opposition hope that if they say it often enough, people might believe it, but I recommend that they look at the facts. Let us look at a hypothetical, lower-paid employee. In 2010, the national minimum wage for those over 21 was just £5.80. Today, in 2018, it is £7.83; that is a 35% rise. Let us look at the income tax personal allowance. When we came into Government in 2010—we were left to pick up a lot of mess by Labour—the tax-free allowance was just £6,475. Today, in 2018-19, it is £11,850; that is an 83% rise in the tax-free band. Let us put those together. A 35-hour-a-week lower-paid employee at minimum wage in 2010 would have had take-home pay, after tax, of just £9,740, but today, the minimum wage and that huge increase in the tax-free allowance means that their take-home pay is £13,768. That is over £4,000 in real cash in the pockets of the lower paid under this Government. That represents a 41.4% increase in take-home pay.

[Wera Hobhouse]

It is, however, about the balance between the two. In relatively successful towns or very successful cities such as Bath, which I represent, shops are still doing fine but life is more expensive, so the balance of what people take home as pay and what they have to spend to live in an expensive city is much higher, too. The balance of the two, even in good, successful town centres such as Bath—and it is not that successful—is not right.

[Craig Mackinlay]

I thank the hon. Lady. Today’s debate is about the retail sector and wages. I was going to say that 41.4% over eight years is 5% a year, which is greater than any measure of inflation, no matter which one people care to mention, so there has been a real cash increase to all those working. We have the lowest unemployment since the 1970s and more people in work today than we have ever had in the history of this nation. I am afraid that we must stop listening to the misinformation from the Opposition. Their statements are simply not true. Real wages are rising.

In the retail sector, as we have heard, we have had business rates relief and changes from RPI to CPI, which will mean a reduction of over £2 billion to those who have retail stores. During this Parliament over 600,000 businesses will pay no business rates whatsoever, and in the first half of 2017, more retail units were opened than closed. There are 300,000 more in employment in the retail sector than in 2016.

That does not mean that everything is rosy on the high street, but when we consider what the Government did in 2008, when they took this country into probably the worst recession that it has ever known, in the third quarter of 2008 alone, there was a 4.2% decrease compared with the year before. That happened in just one quarter under Labour; that is what they condemned this country to.

The real debate here is the changing face of retail, and the internet is the reason for that. With spending now at £1.2 billion per week, 17% of all spending is now on internet purchases, and that is a 12% year-on-year increase. That is not unique to Britain, but is happening across the entire world.

That is the reality of life, and we are all guilty of fuelling it. If I want a shirt like the one I am wearing but in blue with a 34 inch arm and a 15½ inch collar and I want it delivered tomorrow, ordering that will take me three minutes, and it will be delivered. We are all purchasing in that way now; unfortunately, we are all fuelling the changes to the high street.

We have had debates about banking in the House, and I have taken part. Our banking landscape is changing, sadly, because we are all being encouraged on to mobile apps and mobile banking. Also, when did anyone in this House last book their flights in a high street travel agent?

[Martin Vickers (Cleethorpes) (Con)]

I used a travel agent in the centre of Grimsby in April.

[Craig Mackinlay]

Well done to my hon. Friend; I am afraid I am not as reliable in buying my travel tickets on the high street as he obviously is.

When did Members last browse property prices on the internet? We do not do that so much in a high street shop any longer; it is likely to be on the internet now. The reality is that in current retail there is a far higher spend per staff member on new internet retailing such as Amazon than on the high street. It is also likely that there are higher costs on high street stores per square foot than on warehouse-style retailing.

Things are changing. We have a 20th-century tax system that looks at bricks and mortar and taxing things. Part of the formula for addressing this issue must be that we tax more appropriately the abstract activities of internet retailers and warehousing. When I go on the high street in Ramsgate the retailers say they do not feel that the big online retailers are paying their fair share.

[Wera Hobhouse]

Will the hon. Gentleman give way?

[Craig Mackinlay]

No, as we are nearly at the end of the debate.

The high street simply needs to redefine itself. High streets need to create themselves as places to go for a pleasurable afternoon—to do some browsing and shopping, but to enjoy the experience as well. That means there is a duty on councils and the retailers themselves to make the high streets clean, attractive and somewhere good to go.

My answers to this conundrum are that we should revise taxation of retail more towards the internet and warehousing-style operations, focus on making high streets places to go for an experience, and in many cases, such as in Ramsgate, high streets are too spread out and too big, and they need to be smaller to become the vibrant heart of the town. We all need to shop locally, too; that will help.

Draft Renewable Heat Incentive Scheme Regulations 2018 Draft Domestic Renewable Heat Incentive Scheme (Amendment) Regulations 2018

Craig Mackinlay Excerpts

Monday 23rd April 2018 General Committees

[Craig Mackinlay (South Thanet) (Con)]

It is a pleasure to serve under your chairmanship, Mr Hanson. I just have a couple of points for my right hon. Friend. She will probably be aware that South Thanet is unique in having offshore wind, solar parks and biogas, and from this September we will have a £160 million, 27 MW biomass scheme that burns sweet chestnut. That is an interesting project on the old Pfizer site, which is an enterprise zone. We are pleased about that, and I certainly hope my right hon. Friend will cut the ribbon when it opens.

On the assignment of rights, I see within the guidance that third parties that offer the financing for householders will need to be registered with Ofgem, the Chartered Trading Standards Institute and the Consumer Codes Approval Scheme. Can she offer any help as to what registering with Ofgem means? My concern is that the less-than-sophisticated householder could be caught in a financing trap that they would not go into with proper assessment and guidance.

What will Ofgem do in terms of registering those third parties? If it is quasi-financing, which it obviously is, I imagine that the Financial Conduct Authority might be interested in those third parties. It might be that, in practice, it will be traditional financiers that are already FCA-registered, and not new, vanilla schemes. That is just a query that comes into my mind to assist the unsophisticated householder.

Queen’s Speech

Craig Mackinlay Excerpts

Monday 26th June 2017 Lords Chamber

[Lord Colgrain (Con) (Maiden Speech)]

In this, my maiden speech, I should like first to pay tribute to my predecessor Lord Lyell, a Peer much loved and respected in this House. It is a great privilege for me to have taken his place. I also thank all those noble Lords who so generously elected me as a hereditary Peer, and who have greeted me warmly and with much encouragement, including those whom I had not had the previous pleasure of meeting. In particular, I should like to thank my noble friend Lady Chisholm, who has been mentoring me, for her guidance and counsel, as well as the officers and staff of the House, who have been generous and patient with their time, not least when, in my early confusion in attempting to navigate the byways and corridors, I have found myself having to ask them the same question more than once.

As a hereditary, I owe a debt to a forebear, in my case my great-grandfather, who was president of the British Bankers’ Association and chairman of the committee of London clearing banks, positions he retained throughout the Second World War at the request of the coalition War Government. He was on the honours list of Churchill’s caretaker Ministry, and his nomination was endorsed by the incoming Labour Government.

I have frequently been asked the same two questions since I first swore the oath. The first, “Have you been here before?”, made me ask myself whether reincarnation was the subliminal message. I have understood subsequently that it was a reference to those hereditaries who had sat prior to 1999, and no, I am not of their number. But in one sense I have been here before: it was in 1972, with my grandfather, when I sat on the steps of the Throne. On that very day, the other place was debating Common Market membership, and it is a strange coincidence of timing that I shall now be privileged to bear witness to our withdrawal from the same.

The second question I have been asked is, “On what will you speak?”. Here I feel on dangerous ground. When asked the same when embarking on my year as High Sheriff of Kent, I replied with unwarranted confidence and, diverted by the number and variety of interests put before me during that year, I singularly failed to stay on script.

I know that in your Lordships’ House, there are a meaningful number of noble Lords who are experts on those subjects where I have a passing knowledge, but there are two areas where I hope to be able to make a contribution. I have spent the last 30 years recruiting in the financial services sector. Much of this has been in and for City of London-based institutions, and it has included a variety of firms located in other major global financial centres. I have been fortunate enough to bear witness to the great successes that were born from deregulation at the time of the big bang, as well as the self-destructive powers that were born from the same. As we move towards Brexit, passporting rights and other employment issues relating to the competitive position of the City, with its meaningful balance of payment contribution, will be an important part of the negotiation, and there will be much sparring with continental financial centres. I have negotiated with them happily over the years on employment matters, and I look forward to helping maintain the City’s pre-eminence in whatever way I can.

The second area where I have been engaged is the rural sector, which presents a Rubik’s cube of issues as we approach Brexit. I must here declare an interest, as president of Kent County Agricultural Society, the chairman of a working agricultural charity and a partner in a family farming enterprise. We have allowed an extraordinary situation to develop, which would not have been allowed in any other commercial sector, whereby many rural business models are viable only as a result of subsidy payments. The rationale has been that subsidies protect those disadvantaged geographical areas that we wish to continue to be populated and farmed, and in addition farmers can be paid to support conservation and environmental initiatives.

As we move towards Brexit, the quantity of and qualification for these payments will no doubt be questioned, but I suggest that the discussion should take place against another background. The New Zealand model is referred to as a demonstration of how its farming industry, and its dairy sector in particular, coped with the abrupt closure of the UK market to it. But the opportunity for us, and indeed our responsibility, is to ensure a smoother transition over the next two years than New Zealand experienced, which will minimise the stress and tribulations to which our farming communities will be exposed.

There is always a sense when engaged on the land that you are battling with the divine as well as mankind. I say this with feeling as, having been in the eye of the 1987 hurricane and as a hands-on farmer who has recently suffered losses to Schmallenberg disease, as well as seeing the immediate landscape changing as a result of ash Chalara, I have experienced it all too immediately. But we should be able to address some of the bigger questions over which we have control, such as: does it matter that as an island we are now only 60% self-sufficient in food, and can we ensure that our farmers do not suffer the double blow of export markets closing at the same time as our domestic market is subject to increased imports from competitor countries with lower welfare and hygiene standards?

Twenty percent of our population live in rural areas, very few of them are directly employed in the rural sector, and those who are are ageing fast and their numbers are falling annually. Automation is not a panacea—nor should it be—and those dependent on seasonal labour, and the current uncertainties associated with their temporary work permits, which is a very real current concern for the vegetable and fruit growers of Kent, will tell you that the development of suitable machinery is some years away anyway. We must not take for granted an industry that is now extremely vulnerable.

To summarise, I bring two parallel careers, in financial recruitment and farming. There have been times in each when I have been unsure which is the sublime and which the ridiculous, but I feel privileged to have participated in both at times of exciting change, just as I feel privileged now to be a Member of your Lordships’ House.

Small Shops Regulation

Craig Mackinlay Excerpts

Wednesday 2nd November 2016 Westminster Hall

[Craig Mackinlay (South Thanet) (Con)]

I beg to move,

That this House has considered small shops regulation.

It is an absolute pleasure to serve under your chairmanship, Mr Gray. This is not a great new philosophical argument or something from Shakespeare, but it is far easier to regulate than to deregulate. Whether the regulation starts via EU institutions or is domestically derived, one need only look at the daily Order Paper of this place to see the direction of travel. For every perceived problem, the first call is for more government. This debate is perhaps a little unusual. It is an appeal for less government in order to free up our small businesses, which are so often at the heart of our communities, so that they can do what they are good at: serving the public, making a profit, operating efficiently, employing staff and, yes, paying taxes.

I refer to the 2016 “Local Shop Report” by the Association of Convenience Stores, which represents just a small part of the entire small shops sector. There are more than 50,000 convenience stores across the UK, with Scotland strangely having the highest density, with one shop per 995 people. Some 74% of these shops are owner-managed, and they have taken up many services that have been abandoned by state agencies or the more traditional post office, including mobile phone top-ups and bill payment services, such as PayPoint, that accept payments for a wide range of services that are important to Government, including council tax; they even accept payment of court fines and utility bills. Other valuable services are provided, such as sales of lottery tickets, newspapers, stationery, stamps, tobacco and alcohol, snacks and sandwiches and, of course, more traditional groceries.

More than half of customers walk to their local shop, with one in five visiting every day. Twenty-two per cent. of shop owners take no holiday at all, and 24% work more than 70 hours a week. Fully 70% of these shops open for more than 85 hours a week. The total value of sales is £38 billion a year, representing a fifth of the total grocery market, and the sector accounts for 390,000 jobs.

More than that, small shops are the heart of their community. Some 84% of these independent retailers take part in community activity every single year. By way of context, I am working with local traders and boat owners in Ramsgate in my constituency of South Thanet to make the Christmas lighting in and around Ramsgate’s royal harbour even bigger this year than last year. There are no prizes for guessing who are offering the prizes for the best-dressed shops and boats. Yes, it is the local shops. Whether the local hair salon, the coffee shops or the restaurants, small shops are very much at the heart of every single community in this country.

Small shops are often the birthplace of enterprise, where entrepreneurs’ dreams can become a reality. I come from a small shop background. My father had a small chain of greengrocers in north Kent from the 1950s until the 1990s. The rise of supermarkets caused a degree of suffering for such small shops, but who looks out for the elderly customer who comes in every day but has not been seen for a few days? It is often the independent retailer. Such retailers now face new competition from the new giants of online sales such as Amazon.

Unfortunately, many of the regulatory hindrances are driven by increasing compliance demand, often from Her Majesty’s Revenue and Customs and the ever-changing tax code. Currently at 22,000 pages, the tax code is simply out of control. Just one part of the tax code, the annual investment allowance, started in 2008 at £50,000 a year before going up to £100,000 a year from April 2010; it then dropped to £50,000 a year from 6 April 2012; from January 2013, it went up to £250,000 a year, and then up to £500,000; and now, since 1 January 2016, it is back down to £200,000. How can a small shopkeeper or a small business keep track of that background of uncertainty when trying to make long-term investment decisions?

VAT thresholds have very hard edges, which can be a disincentive to grow lest the business gain a new administrative burden and, depending on the type of trade, face the potential loss of margin and profitability. I hope that Brexit will allow us to rethink the structure of VAT, with simplification at its heart.

[Mr David Nuttall (Bury North) (Con)]

I am extremely grateful to my hon. Friend for giving way. Does he agree that, although each individual new regulation may seem fairly reasonable in itself, the cumulative effect of all these new rules and regulations, such as the tobacco display ban and the plain packaging of cigarettes, is a problem for small shops?

[Craig Mackinlay]

There is a ratchet effect. One at a time does not seem too bad, and individually these regulations are often imposed for good reasons, but when they are put together as a framework for how small businesses and retailers have to operate, they become a true minefield of problems.

Adding to that minefield, small retailers face the new burden of pension auto-enrolment for their staff. I have no criticism of the Government’s great ambition: auto-enrolment is essential so that people can build their own retirement funds in excess of the state pension. The roll-out thus far for larger business has been successful—I am a member of the Select Committee on Work and Pensions, which has looked at that—but for the smaller employer, and notably the smaller retailer, I have asked for a free software tool that overlays the freely available real-time information software for payroll management, and HMRC has steadfastly refused.

It is good to note that the latest figures, published just last week, show the greatest ever increase in the salaries of the lowest paid due to the rise in the minimum wage. However, for smaller shops there are concerns that as hourly rates increase ahead of inflation in the years to come, the owners of these businesses might earn less than the staff they employ.

Of all tax and regulatory reforms, business rates relief has been the most welcome among smaller businesses. There has been small business rate relief, charitable rate relief, rural rate relief and enterprise zone relief. However, because of the high value of business premises in London and the south-east, new valuation assessments are in some cases creating huge increases to the business rates of businesses that are already paying higher salaries.

A real problem on the horizon that is causing much concern to the Institute of Chartered Accountants in England and Wales, the Chartered Institute of Taxation—I am a member of both—and, I am sure, the other accountancy institutes is the proposed roll-out of Making Tax Digital. If the underlying desire is to advance tax cash flows to quarterly, the Government should simply say so. People go into small business to run a business and earn a profit. They do so for aspiration and lifestyle reasons, not to spend time complying with additional administrative burdens. The Making Tax Digital programme should simply be scrapped until HMRC can prove itself capable of dealing with existing workloads to an acceptable standard. It should at least start with bigger businesses—those above the VAT threshold—that are more able to cope.

Adding together the last few years of real-time information, in which businesses have to provide monthly returns for payroll, and the software costs of auto-enrolment, and now Making Tax Digital, the Federation of Small Businesses estimates the compliance cost in software and professional support to be £3,600 per business per year. That is some way in excess of the well received employment allowance of £3,000 a year that every business can claim against its national insurance contributions.

Finance raising continues to cause difficulties. We have seen the welcome expansion of new forms of lending driven by the internet, such as peer-to-peer, but banks remain cautious, requiring guarantees and often over-zealous security coverage requirements. The reality is that family and friends are still often the primary source of seed financing. In February I obtained a written answer from the then Financial Secretary to the Treasury, my right hon. Friend the Member for South West Hertfordshire (Mr Gauke), about the take-up of the seed enterprise investment scheme. I learned that the amounts raised nationwide were extremely and worryingly low: just £168 million for 2013-14. I will not go into the flaws in the seed EIS application process or HMRC’s labyrinthine rules on getting such applications approved, but it is clear to me as a chartered accountant and chartered tax adviser that we need a lighter-touch regime to encourage more of the “friends and family” type of investment.

For many of our shops, which are often located in historic town centres, planning regulations can prove a barrier to sensible growth and plans for the future. We have the rather daft situation in which a conservation officer in one local authority will have an entirely different view from a conservation officer in the authority next door. That adds to uncertainty and costs.

Government Departments and local authorities have large procurement budgets, but bureaucratic rules still exist, particularly on contracts over a certain size and when EU procurement rules come into play. Those rules make it close to impossible for smaller retailers and businesses to even consider facing the cost and complexity of applying for lucrative bids.

My hon. Friend the Member for Bury North (Mr Nuttall) mentioned cigarettes. I have been working closely with the Tobacco Retailers Alliance and the National Federation of Retail Newsagents on the issue of illicit tobacco. For many shops, tobacco sales drive footfall and lead to other sales, but the Tobacco Manufacturers Association suggests that because of the increasingly draconian rules on tobacco sales, plain packaging, hidden counters and the tobacco taxation escalator, 30% of UK smokers now buy from illicit sources. That is hardly surprising when a packet of cigarettes costs 50p in the Ukraine and still hovers around the £2.50 mark in much of eastern Europe. Local retailers are losing not only turnover from tobacco sales, despite the low margins, but other turnover through lost footfall.

[Mr Andrew Smith (Oxford East) (Lab)]

I congratulate the hon. Gentleman on securing this important debate. I agree with the thrust of his argument and with his specific point on illicit tobacco sales. Is he aware that his debate is well timed because it coincides with the excellent “Freedom from Fear” campaign by the Union of Shop, Distributive and Allied Workers, which is aimed at protecting shop workers from abuse and assault? Does he agree that small shopkeepers and their staff are all too often in the frontline of such attacks and that stronger deterrent sentences are needed to protect them?

[Craig Mackinlay]

Just last week in Ramsgate, I invited the Kent police and crime commissioner to a retail crime forum to address that very point. It was quite worrying how many small shopkeepers in the room had suffered attacks in the last year or burglaries of what is often very high-value stock. Consideration could be given to tax incentives to encourage small shopkeepers to beef up their security, not only for themselves but for their stock. The right hon. Gentleman’s point is very well made.

A Ramsgate newsagent who came to my crime forum last week estimated that his turnover is down £150,000 per year because of illicit tobacco sales. That is happening on every shop on every high street. It means less taxation on what is an entirely legally derived profit, and it means a vast cash windfall for illicit tobacco traders. HMRC estimates that the loss to the Exchequer is £1.8 billion per year; the TMA estimates that it is closer to £2.4 billion. We need a grown-up debate about the taxation of tobacco, because we have reached a tipping point that is promoting unregulated, potentially dangerous purchases of unknown tobacco products. That completely flies in the face of what are sensible anti-smoking public health measures.

I will finish a little off-key, on the issue of insolvency, on which I have listened to many smaller businesses, including retailers. Hon. Members may have to listen carefully, because the chain is quite complex. When a primary contractor in a supply chain fails, having not been paid by the head client, the insolvency practitioner who is appointed will seek to recover the contract value from the head client, but that usually comes with a negotiated settlement of contracted amounts. That leaves the smaller participants down the supply chain unpaid, and we often see a domino effect of failure and insolvency through that supply chain.

There is a sizeable business in Broadstairs called Blaze Signs. Members can guess what it makes: yes, signs. It is a substantial local employer with a substantial local workforce. It makes 20-foot high signs for Marks and Spencer, Sainsbury’s and McDonald’s—huge signs that can be seen from a few hundred yards away. On the failure of the primary contractor in the chain, Blaze Signs has been left completely unpaid, despite its signs having being delivered and erected, because the insolvency practitioner has sought payment from Sainsbury’s, M&S or whichever company is at the top of the chain.

We need to give some consideration to a technical change to Insolvency Act 1986 rules. In the instance of unpaid bills at the top of a supply chain, where there are identifiable elements further down the supply chain supplied by participants who have been part of that final unpaid contract, the rules should be changed so that the payment bypasses the failed company in the chain and the smaller participants receive their money for goods properly supplied. That would almost be akin to putting a Romalpa-type clause on a statutory footing.

I am confident that the Government fully understand the challenges that smaller retailers and businesses face. I seek the Minister’s reassurance that the commitment to deregulation will continue and that the old mantra of “one in, two out” is realised. I will be pleased to hear from her how we can improve the business environment in this country still further.