House of Commons

Wednesday 11th October 2017 Commons Chamber

Wednesday 11 October 2017

The House met at half-past Eleven o’clock

Prayers

Wednesday 11th October 2017 Commons Chamber

[Mr Speaker in the Chair]

Business Before Questions

New Southgate Cemetery Bill [Lords]

Third Reading opposed and deferred until Tuesday 17 October (Standing Order No. 20).

Oral Answers to Questions

Wednesday 11th October 2017 Commons Chamber

The Minister for the Cabinet Office was asked—

[Chris Davies (Brecon and Radnorshire) (Con)]

1. What steps he has taken to engage with the devolved Administrations on the matter of the UK leaving the EU.

[Mrs Sheryll Murray (South East Cornwall) (Con)]

14. What steps he has taken to engage with the devolved Administrations on the matter of the UK leaving the EU.

[The First Secretary of State and Minister for the Cabinet Office (Damian Green)]

I met the Deputy First Minister of Scotland and the First Minister of Wales to initiate a full programme of engagement with their respective Administrations. Engagement continues at official level with the Northern Ireland civil service. I look forward to reviewing cross-departmental progress at the forthcoming Joint Ministerial Committee on EU negotiations.

[Chris Davies]

I thank my right hon. Friend for his answer and I welcome the recent announcement of the new civil service hub in Cardiff, which will bring 4,000 civil service jobs from across Wales into one hub. Llandrindod Wells in my constituency was named this morning as the happiest place to live in Wales. Will my right hon. Friend give a commitment to continuing to see the whole of Wales as a target for future civil service collaboration?

[Damian Green]

I add my congratulations to the people of Llandrindod Wells on selecting an MP who will make them happy, too. My hon. Friend is quite right about the civil service hub in Cardiff. The UK Government have a significant footprint in Wales and the hub will deliver a range of benefits not just to people in Cardiff but across Wales, demonstrating the impact we can make through greater collaboration.

[Mr Speaker]

It has to be said that the hon. Member for Brecon and Radnorshire (Chris Davies) always looks a very happy chappie and we are delighted to know it.

[Chris Davies]

indicated assent.

[Mrs Murray]

Will my right hon. Friend confirm that once we leave the EU we will have total control over our internationally recognised fisheries limits, that fishermen from Scotland, Wales, Northern Ireland and England will benefit from any new management regime, and that this will not be bargained away during any negotiations?

[Damian Green]

I am happy to assure my hon. Friend that when we leave the EU we will be fully responsible under international law for controlling UK waters and the sustainable management of our fisheries. Through the negotiations we will of course work to achieve the best possible deal for the UK fishing industry as a whole.

[Chris Elmore (Ogmore) (Lab)]

Will the First Secretary of State please explain what consultation there was with the Welsh and Scottish Governments before the publication of UK Government papers on Brexit issues, including customs, Northern Ireland and research and development?

[Damian Green]

The position papers we have published over the past couple of months go to the devolved Administrations before they are published. As I said in my answer to the original question, we have regular consultation—indeed, later today I will be meeting the First Minister of Wales.

[Ben Lake (Ceredigion) (PC)]

We are told that the UK Government are preparing for a no-deal Brexit scenario. Will the First Secretary of State detail the preparations his Government have made for a scenario in which the European Union (Withdrawal) Bill fails to gain the legislative consent of the devolved Administrations?

[Damian Green]

The Government are, as the hon. Gentleman and the House would expect, preparing for all eventualities. That is the only responsible thing for a Government to do and that is what we are doing. The House will have a considerable amount of time during the Committee stage, which is coming up shortly, to debate the EU (Withdrawal) Bill. I hope, partly through the re-institution of the Joint Ministerial Committee, to make sure that the legislative consent motion will be agreed.

[Mr Philip Hollobone (Kettering) (Con)]

Given that there is no devolved Executive in Northern Ireland at present, how are views from Northern Ireland being fed into this process?

[Damian Green]

As I said in reply to the original question from my hon. Friend the Member for Brecon and Radnorshire (Chris Davies), at the moment views from Northern Ireland are being fed in through the Northern Ireland civil service, which is currently doing administrative tasks. I am sure my hon. Friend will join me in hoping that we will soon have a Northern Ireland Executive back doing their job.

[Tommy Sheppard (Edinburgh East) (SNP)]

A lot of us are concerned about the shenanigans going on here and would prefer it if the Government gave a straightforward commitment to transferring relevant powers to the devolved Administrations instead of foutering around. Will the right hon. Gentleman confirm that, when referring to UK-wide arrangements after Brexit, he is talking about co-decision between the UK Government and the devolved Governments—or does he mean that this Government will tell the others what to do?

[Damian Green]

No, the spirit and letter of the devolution settlement is that there are areas of responsibility for this Parliament and the Westminster Government, and areas of responsibility for the Scottish Parliament, the Welsh Assembly and the Northern Ireland Assembly. We have said that these have to be UK-wide frameworks. I think the hon. Gentleman’s colleagues in the Scottish Government accept that we do not want to break up the UK single market, but that there are responsibilities that will remain with Scotland.

[Jon Trickett (Hemsworth) (Lab)]

The Chancellor has written today that the Government must be prepared for every outcome from Brexit, but that he will not make resources available for a no-deal scenario. As well as managing the civil service, the Cabinet Office is responsible for co-ordinating Government policy. Whatever the Chancellor’s views, will the Minister now indicate that there is sufficient civil service resource currently working on the potentially disastrous no-deal Brexit scenario and its impact on the devolved Administrations?

[Damian Green]

I commend to the hon. Gentleman what the Chancellor actually said. I am happy to reassure the hon. Gentleman and the House that, yes, the Government are preparing for all eventualities, as any responsible Government would.

[Jon Trickett]

The truth is there is no contingency planning for a no-deal Brexit, and that explains the breakdown of policy co-ordination, for which the Minister is supposedly responsible, right at the heart of Government. The Government are a shambles and wholly divided. We have a Prime Minister who said that no deal was better than a bad deal, a Chancellor who now says he will not fund a no-deal scenario and a Foreign Secretary who seems perfectly happy with a no-deal arrangement. The stakes could not be higher, but the Government are a shambles. Is it not time they either got their act together—it is the Minister’s job to make sure that they do so—or stood aside and prepared the way for a Government who will act in the national interest?

[Damian Green]

I am happy again to assure the hon. Gentleman that the appropriate arrangements for all eventualities are being prepared, and of course the Government are working hard to make sure we get the best Brexit deal for this country—one that will ensure the future prosperity of this country for decades to come.

[Eddie Hughes (Walsall North) (Con)]

2. What steps the Government are taking to support the integrity of the electoral registration process.

[Simon Hoare (North Dorset) (Con)]

3. What steps the Government are taking to support the integrity of the electoral registration process.

[The Parliamentary Secretary, Cabinet Office (Chris Skidmore)]

According to the Electoral Commission, the register used for June’s general election was the most accurate for years. The identity of applicants is verified by electoral registration officers using digital services provided by the Cabinet Office and the Department for Work and Pensions, and we have seen record levels of engagement. Recommendations in Sir Eric Pickles’ report have been accepted by the Government and will be used to improve the integrity of electoral processes further.

[Eddie Hughes]

Given concerns about students having the opportunity to vote twice, will my right hon. Friend consider joining me in supporting the private Member’s Bill presented by my hon. Friend the Member for Wellingborough (Mr Bone)?

[Chris Skidmore]

Although being registered at more than one address is perfectly legal, voting more than once at a general election is a crime that currently carries an unlimited financial penalty. The Government are reviewing a range of measures to prevent people from voting twice at general elections, and I also understand that the police are investigating allegations in several local authorities on this issue. I remind hon. Members that any evidence that individuals might have voted twice must be reported to the police.

[Simon Hoare]

I recognise the fines that my hon. Friend has drawn to the House’s attention, but is it not time to consider custodial sentences for election fraud?

[Chris Skidmore]

My hon. Friend makes a very good point. At the moment, there is an unlimited fine, but the Government are considering a range of other measures, including in relation to criminal proceedings, in order to move forwards.

[John Spellar (Warley) (Lab)]

11. Rather than focusing on the very few cases of fraud and the limited number of convictions—the same issue the Trump Administration have raised to discredit the democratic process—why does the Minister not worry about the millions who are not registered and consider using national insurance numbers and automatic registration in order to ensure both an accurate and a complete register?

[Chris Skidmore]

The Government are committed to ensuring individual voter registration. A complete register means nothing unless it is underpinned by accuracy, and we have the most accurate register. On electoral fraud, I make the point, as I have done repeatedly before, that it is the perception of fraud that is so corrosive to our democracy. The Electoral Commission’s report published today shows that 38% of people recognise that electoral fraud is an issue at general elections.

[Chris Ruane (Vale of Clwyd) (Lab)]

The integrity of the electoral register suffers while millions of British citizens are unregistered. What specific measures is the Minister taking to register the millions of young people who remain off the register, and what specific funds has he allocated to that worthy cause?

[Chris Skidmore]

I am sure the hon. Gentleman will welcome the fact that at the last general election there were more people on the electoral register, and more people voting, than there have been since 1992. We should bear in mind the state of the Labour Government between 2001 and 2005, when there were far more people off the register. We are determined to have a democracy that works for everyone, and we are introducing a range of measures to that end. They include the publication of a democratic engagement strategy later this year, which I hope the hon. Gentleman will read.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Is the Minister aware of the massive change in Northern Ireland constituencies in terms of proxy votes between the 2015 general election and this year’s election, when thousands of people applied for and received proxy votes, which, in some constituencies, resulted in a virtual usurping of the election result? What plans has the Minister to address that?

[Chris Skidmore]

As the hon. Gentleman will know, electoral policy in Northern Ireland is dealt with by the Northern Ireland Office, but the Cabinet Office is working closely on how individual electoral registration can be introduced in Northern Ireland. I will refer the hon. Gentleman’s point to the Northern Ireland Office, but proof of identity has been required in polling stations in Northern Ireland since 1985, and the Labour Government introduced photo ID in 2003. Northern Ireland has led the way when it comes to ensuring that we can crack down on electoral fraud.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

4. What steps the Government are taking to tackle electoral fraud.

[The First Secretary of State and Minister for the Cabinet Office (Damian Green)]

We are committed to providing a clear and secure democracy. Following our manifesto commitment, we are working with four local authorities to pilot voter ID in polling stations, and working with Tower Hamlets to pilot changes in postal voting in 2018, as part of a developing programme to strengthen electoral integrity.

[Michael Tomlinson]

I welcome the fact that the Government are piloting voter ID. I had the privilege of being in Iraqi Kurdistan for the recent independence referendum, when voter ID was used with apparently few difficulties. Which local authority areas are involved in the Government’s pilot, and how can the system be rolled out to further authorities in due course?

[Damian Green]

I am pleased to be able to confirm that the four local authorities that have agreed to take part in the voter ID pilot are Woking, Gosport, Bromley and Watford; and, as I have said, Tower Hamlets is involved in the postal vote pilot. We had an agreement with Slough as well, but at the last minute Labour councillors voted against joining the pilot, against the advice of their own officials. As we have heard this morning, the Labour party does not seem to take electoral fraud very seriously.

[Christian Matheson (City of Chester) (Lab)]

Is it not a fact that in 2015, when more than 50 million votes were cast, the number of convictions for electoral fraud was in the low double figures? Is not the truth that this is a Trojan horse, introducing voter suppression methods to enhance the electoral prospects of the Conservative party?

[Damian Green]

If the hon. Gentleman wants to be taken seriously on this issue, he should listen to the Electoral Commission, which in 2014 urged the Government to adopt the kind of measures that we are adopting now. He should also persuade Labour councillors, in Slough and elsewhere, to take it seriously. If Labour is seen as the party that is soft on electoral fraud, that will not be a very good look for Labour.

[Mary Glindon (North Tyneside) (Lab)]

5. What assessment he has made of recent trends in the level of Government procurement from small and medium-sized enterprises.

[The Parliamentary Under-Secretary of State for the Cabinet Office (Caroline Nokes)]

We will shortly publish the latest small and medium-sized enterprises’ spending performance figures. The Government remain committed to a challenging target to ensure that a third of their procurement spending is with small businesses by 2022, and we are continuing to take action to achieve that.

[Mary Glindon]

Following a recent report by the Federation of Small Businesses, will the Minister tell the House whether she intends to issue guidance requiring local authorities to increase their use of dynamic purchasing systems so that small businesses are not locked out from lists of potential suppliers to those authorities?

[Caroline Nokes]

The hon. Lady has always been a doughty champion of the spreading down of procurement practices to local government so that it, too, encourages more SMEs to take part in the process. We have issued guidance to local authorities on how local government can support SMEs, and have legislated to ban burdensome pre-qualification questionnaires for low-value contracts.

[Ms Karen Lee (Lincoln) (Lab)]

6. What steps he is taking to ensure that the lobbying of Government is carried out in a transparent and fair manner.

[The Parliamentary Secretary, Cabinet Office (Chris Skidmore)]

The Government are committed to transparency in lobbying. In 2014 we created a statutory register of consultant lobbyists to increase transparency among those seeking to lobby Ministers and permanent secretaries on behalf of third parties. That legislation complements the existing framework of industry-led regulation.

[Ms Lee]

The Minister has restricted trade unions and charities with regard to lobbying; can he tell us when he will properly regulate big business lobbying to Government?

[Chris Skidmore]

The Government are of the view that the Transparency of Lobbying, Non-Party Campaigning and Trade Union Administration Act 2014 increased transparency around the work of consultants and lobbyists and therefore we will not be undertaking any future review. The Act confers powers on the register of lobbyists to remove an organisation from the register if that organisation seeks to undertake any work in future.

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

7. What recent assessment he has made of the potential merits of reducing the voting age to 16.

[The Parliamentary Secretary, Cabinet Office (Chris Skidmore)]

The Government have stated in their manifesto a clear commitment to maintain the voting age of 18, so the Government have no plans to lower the voting age in elections.

[Gerald Jones]

The Labour Welsh Government are currently making provision in Wales for 16 and 17-year-olds to vote in local and Welsh Government elections. Will the Minister urge his Government and other Conservative Members to support the Bill of my hon. Friend the Member for Oldham West and Royton (Jim McMahon) on 3 November, to prove that this Government do not disregard the views of young people?

[Chris Skidmore]

As the hon. Gentleman has made clear, this Government have given powers to the devolved Assemblies to make decisions in respect of their local government and regional elections, but the position of the Government remains clear: on the parliamentary franchise, the age will remain at 18. Of course, I look forward to the many contributions that will be made in the debate on that.

[Tom Pursglove (Corby) (Con)]

The voting age is one thing, but has my hon. Friend given any consideration to the issue of education in schools around electoral fraud—for example, double voting?

[Chris Skidmore]

The Government are of course determined to engage the many young people in schools in the democratic processes. Recently I established a national democracy week, in which I hope all Members will take part. It is vital for democratic participation that we encourage young people to get involved as early as possible, and to be educated in our democratic processes.

[Cat Smith (Lancaster and Fleetwood) (Lab)]

Does the Minister agree that sometimes young people make mistakes, and that it cannot be right that a teenager at the age of 16 can make the mistake of joining the Conservative party and voting in the inevitably upcoming leadership election, yet would be denied a vote at the forthcoming general election?

[Chris Skidmore]

We have had many debates on the franchise, and I have sat as a Back Bencher through several debates in my parliamentary career so far; I think Parliament has voted three times on the issue and has consistently decided not to introduce votes at 16. We will be having future debates, and I look forward to engaging with the hon. Lady in them in due course.

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

8. What progress the Government are making on relocating outside London central Government functions.

[Kevin Foster (Torbay) (Con)]

12. What plans he has to relocate civil service jobs to cities, towns and regions outside London.

[The Parliamentary Under-Secretary of State for the Cabinet Office (Caroline Nokes)]

The Government’s industrial strategy will help to create a more balanced economy by moving arm’s length public bodies out of London and the surrounding areas, and into clusters in the regions and devolved nations of the UK. Our hubs programme is also expected to save £1.78 billion over 20 years, as well as providing state of the art buildings from which civil servants can deliver world-class services to our citizens.

[Kevin Hollinrake]

I am delighted at the announcement of 6,000 more jobs at a Government hub in Leeds, but does the Minister agree that infrastructure spending is also critical to delivering greater prosperity for the north?

[Caroline Nokes]

The Leeds hub will be a catalyst for growth in the surrounding region. We continue to do more to connect our communities and drive productivity. The Chancellor recently announced a further £300 million investment for HS2 and £100 million for the road network—significant investments for the northern powerhouse. That will be crucial for driving growth and regeneration in the north and midlands.

[Kevin Foster]

Torbay has not only beautiful beaches, but direct rail connections to London, Manchester and Birmingham, improved road links, and sites ready for regeneration. Which of the plans the Minister listed does she believe present the greatest opportunity for relocating jobs to Torbay?

[Caroline Nokes]

My hon. Friend has, as ever, emphasised the stunning attributes of his constituency. Our commitment to the public bodies relocation programme seeks to move significant numbers of public servants out of London. I assure my hon. Friend that I have heard his advertisement for the English riviera and the potential it certainly brings.

[James Cleverly (Braintree) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The First Secretary of State and Minister for the Cabinet Office (Damian Green)]

This month we celebrate the first year of our world-leading national cyber security strategy. A major milestone has been successfully establishing the National Cyber Security Centre. [Interruption.] It has shown that it plays a vital role in providing cyber security to keep our country safe. The NCSC responded to 590 significant incidents, more than 30 of which were sufficiently serious to require a cross-government response. Our five-year national cyber strategy is working to defend our people, businesses and assets, deter our adversaries, and develop the skills and capabilities we need. [Interruption.]

[Mr Speaker]

Order. There is a very large number of intense private conversations taking place in the Chamber, but the voice of Braintree must be heard. I call Mr James Cleverly.

[James Cleverly]

The vast majority of private sector employment in my constituency of Braintree is in small to medium-sized enterprises. What steps are the Government taking to make it easier for SMEs to bid for and successfully win Government contracts?

[Damian Green]

My hon. Friend is completely right about the importance of SMEs, which is why we have taken a number of steps to enable them to access Government contracts more easily, including by putting in place the Contracts Finder website and a requirement for all public sector buyers to have 30-day payment terms in their contracts.

[Faisal Rashid (Warrington South) (Lab)]

T2. Yesterday’s race audit made clear the barriers that exist to black people and other ethnic minority groups in our society today. We all want to see those barriers broken down. Can the Minister explain why, in the civil service fast stream recruitment process for which his office is responsible, black men and women represent one in 20 of the total applicants but only one in 100 of those offered a job? When is he going to put his own house in order?

[Damian Green]

That is a perfectly reasonable challenge, and the hon. Gentleman asked about that when I made my statement yesterday. One area where we absolutely need to do better is inside the civil service, and specifically in fast stream recruitment, and we will certainly do that.

[Alberto Costa (South Leicestershire) (Con)]

T3. What assessments have the Government made of the east midlands, and specifically Leicestershire, as a place to relocate Government services outside of London?

[The Parliamentary Under-Secretary of State for the Cabinet Office (Caroline Nokes)]

We will ensure that Government functions are increasingly spread throughout the UK and not just in the capital. The Government are reviewing the location of all arm’s length bodies to help to drive growth across the nation, and we will ensure that the east midlands is fully considered as a possible location.

[Diana Johnson (Kingston upon Hull North) (Lab)]

T4. Next week, the Government’s consultation on the contaminated blood scandal will close. As the Department of Health is an implicated party, many people are refusing to take part in the consultation. Will the Cabinet Office now take immediate control of the consultation, because otherwise the rules of natural justice will be offended?

[Damian Green]

I am aware that the hon. Lady—[Interruption.]

[Mr Speaker]

Order. I remind the House that we are discussing the contaminated blood scandal, upon which, despite very heavy noise, the hon. Member for Kingston upon Hull North (Diana Johnson) has made her thoughts very clear. We must now hear the Minister. I ask the House to think of the people affected by this scandal, who would expect the House to treat respectfully of it.

[Damian Green]

Thank you, Mr Speaker.

I am aware that the hon. Lady has played a significant role in the investigation of this terrible scandal. As she said, the consultation on how we proceed ends on 18 October. I know that she and the all-party parliamentary group that she co-chairs have written to my right hon. Friend the Prime Minister on the matter. When we have all the responses to the consultation, we will obviously take a decision as soon as possible.

[Mr Speaker]

I call Jeremy Quin. [Hon. Members: “ Hear, hear!”] Order. I am so glad that the hon. Gentleman, who until recently was my constituent, is quite so popular.

[Jeremy Quin (Horsham) (Con)]

T5. I, too, am delighted to hear it. Does my right hon. Friend agree that the race disparity audit provides invaluable data to not only the Government, but charities, in focusing their resources for maximum impact?

[Damian Green]

I agree that it is an extremely important development. It is a world first to provide this amount of information in that form. It is true that it holds a mirror up to the whole of society, and not just central or indeed local government and public bodies, but all other bodies, including charities, will need to respond positively to some of the disturbing findings exposed in the race disparity audit.

[Bridget Phillipson (Houghton and Sunderland South) (Lab)]

T6. The recent Public Accounts Committee report on cyber-security emphasised the considerable skills gap that the Government and wider society face in tackling the issue. Is it still the case that there is no minimum standard of competence for civil servants entrusted with a cyber-security role? What steps are the Government taking to increase the number of suitably qualified experts?

[Caroline Nokes]

We are working hard with the National Cyber Security Centre to improve competency not only within the civil service and across Government, but among our young people. Our CyberFirst programme, which I visited in Portsmouth this summer, shows that there is a massive range of really enthusiastic young people who are determined to learn the skills that they will need to help us.

[Huw Merriman (Bexhill and Battle) (Con)]

T7. The young people with whom I engage in schools are increasingly aware of the world around them. They are economically and socially liberal, and they do not expect the state to pay for everything because they will have the longest repayment terms if it does. Given the Conservative party’s proud record on extending the franchise, I again ask the Minister to consider votes for 16 and 17-year-olds.

[The Parliamentary Secretary, Cabinet Office (Chris Skidmore)]

I am afraid that my hon. Friend and I will have to agree to disagree on that point. The Government’s position remains as it was in our manifesto: the franchise will be retained at 18. However, I am sure that my hon. Friend will want to participate in future debates on this issue through private Members’ Bills on Fridays.

The Prime Minister was asked—

[Ian Mearns (Gateshead) (Lab)]

Q1. If she will list her official engagements for Wednesday 11 October.

[The Prime Minister (Mrs Theresa May)]

This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.

[Ian Mearns]

The Prime Minister will know that yesterday was World Mental Health Day. Mental health problems affect one in four people, but only £1 out of every £8 in clinical commissioning group budgets is spent on mental health services. Newcastle Gateshead CCG is set to cut its budget by a further 1.1% next year, bringing the total spend for mental health to less than 10% of its entire budget. If parity of esteem for mental health is to be achieved, the Government will have to match their words with more strong and stable, ring-fenced funding. With those cuts and with increasing demand, when will the Prime Minister end the talking and promise to increase and ring fence funding for mental health and specialist psychological services?

[The Prime Minister]

The hon. Gentleman is right about the importance that we should attach to mental health. Giving that parity of esteem is an important step that this Government have taken, but we are also doing much more on mental health. In fact, more money overall is going into mental health. More people are able to access NHS talking therapies and receive treatment for their mental ill health, but we also need to look at the issue more widely. That is precisely why I have set up a scheme to train staff in schools to ensure better awareness of mental health problems and to enable them to know how to deal with individuals in schools who are suffering from mental health problems. There is more for us to do, but this Government are putting more money in and are taking more action on mental health than any previous Government.

[Robert Neill (Bromley and Chislehurst) (Con)]

Q2. The Prime Minister will know that financial and professional services are the UK’s largest source of tax revenue and our largest driver of trade surpluses. Yesterday I met representatives of that sector, who wanted me to pass on to the Prime Minister their warm support for the pragmatic, sensible arrangement that she has made to ensure the critical legal and contractual continuity that the sector needs as we leave the European Union. As well as recognising that, will she perhaps build on that positive approach by considering issuing a White Paper on our future vision for trade in services, as we have done for other sectors?

[The Prime Minister]

My hon. Friend raises an important point. He is right that we need to build a bridge from our existing partnership to our future partnership to allow time for practical adjustments to be made. That is exactly what we are doing when we talk about the implementation period, which I set out in my speech in Florence, together with our vision for our future partnership. I am sure that my hon. Friend will know that we published a White Paper on our future trade policy earlier this week, and we will continue to publish papers in the coming months.

[Jeremy Corbyn (Islington North) (Lab)]

I hope that the whole House will join me in paying tribute to the late Rodney Bickerstaffe, the former general secretary of Unison who died last week. He will be remembered for his warmth and the esteem in which he was held throughout the Labour movement and throughout the community. More than that, he, almost more than anyone else, made sure that the national minimum wage happened in this country. Millions of workers are better off due to the great work that Rodney did during his life. Can we say, “Thank you, Rodney, for everything you did in your life”?

The roll-out of universal credit is already causing debt, poverty and homelessness. Does the Prime Minister accept that it would be irresponsible to press on regardless?

[The Prime Minister]

Of course we offer our condolences to Rodney Bickerstaffe’s friends and family on his death. He and I would probably never have agreed on very much in politics, but obviously he played his role with commitment and dedication through his life.

The right hon. Gentleman asks about universal credit. It is perhaps worth our recognising why we brought in universal credit in the first place. What we want is a welfare system that provides a safety net for those who need it, and that helps people to get into the workplace, earn more and provide for their families. The system that we inherited from Labour did not do that. It was far too complicated, there were far too many different sorts of payment and, crucially, too many of those who earned more found themselves with less money in their pockets. Under Labour, too many people were better off on benefits. That is not the system that we want. We want universal credit, which is simpler and more straightforward, and makes sure that work always pays.

[Jeremy Corbyn]

I wonder which planet the Prime Minister is on. Citizens Advice describes universal credit as

“a disaster waiting to happen”.

It has made that conclusion based on its work assisting tens of thousands of claimants with debt. Housing associations report an increase of up to 50% in the eviction of tenants in rent arrears due to universal credit. Can the Prime Minister and Department for Work and Pensions not wake up to reality and halt this process?

[The Prime Minister]

As I have explained, we have very good reasons for changing the system. Yes, the DWP has been—[Interruption.] We have been listening to concerns raised about the way in which universal credit has operated. Changes have been made; performance has improved, for example. At the beginning of this year, only 55% of people were getting their first payment on time. Now that is more than 80%. Of course there is more for us to do, and that is why the Secretary of State and the Department for Work and Pensions continue to monitor this and to ensure that performance improves. Underlying this is a need to ensure that we have a system that ensures that work pays and that people are not better off on benefits.

[Jeremy Corbyn]

The Halton Housing Trust reports a 100% year-on-year increase in the number of evictions. Half of all council tenants on universal credit are at least a month in arrears in their rent. This weekend, the former Prime Minister, Sir John Major, described universal credit as

“operationally messy, socially unfair and unforgiving.”

He is right, isn’t he? It is years behind schedule. It is forcing people to food banks, driving up evictions and leaving families in debt. Can the Prime Minister not see it? If the former Prime Minister can understand it, why can’t this one?

[The Prime Minister]

In fact, research shows that after four months the number of people on universal credit in rent arrears had fallen by a third. As I said in my previous answer to the right hon. Gentleman, of course we recognise that there have been some issues to address in the rolling out of this benefit, and that is why we have been taking our time doing it. The underlying reason for moving to universal credit is still the right one. We see more people getting into work on universal credit than on jobseeker’s allowance, and there is the possibility for those people who cannot wait for their first payment to ask for an advance if they are in need, and the number of people getting an advance has increased.

[Jeremy Corbyn]

At last the Prime Minister recognises that there are problems. The Institute for Public Policy Research and the Child Poverty Action Group estimate that universal credit is going to put another 200,000 children into poverty. Last month, apparently, a dozen Conservative MPs wrote to the Work and Pensions Secretary calling for a pause. Perhaps they should have listened to people like Georgina, who contacted me this week. She says:

“All summer we were left with no money to survive as it just stopped abruptly. We would have lost everything if it weren’t for my family.”

Others cannot rely on family and are facing eviction. I urge the Prime Minister: show some leadership, pause universal credit, and stop driving up poverty, debt and homelessness, because that is what this does.

[The Prime Minister]

First, may I say to the right hon. Gentleman that I would be happy to look at the case of Georgina if he would like to send me those details?

As I have just said—once again, I referred to this in my previous answer, had the right hon. Gentleman listened to it—it is possible for those who are in need to get advance payments. The number of those getting advance payments has increased from 35% to just over 50%—the majority. So we are seeing the system being improved and performance improving. But let us just think about the Labour party’s record on this whole issue of welfare. Under the Labour party, 1.4 million people spent most of the last decade trapped on out-of-work benefits. Under the Labour party, the number of households where no—[Interruption.]

[Mr Speaker]

Order. The Prime Minister’s response must be heard.

[The Prime Minister]

Under the Labour Government, the number of households in which no member had ever worked nearly doubled. The welfare bill went up by 60% in real terms, which cost every household an extra £3,000 a year. That is not the way to run a system; that is the way to have a system that is failing ordinary working people.

[Jeremy Corbyn]

The last Labour Government lifted a million children out of poverty. Gloucester City Homes has evicted one in eight of all of its tenants because of universal credit. The Prime Minister talks about helping the poorest, but the reality is a very, very different story. Not only are people being driven into poverty but, absurdly, the universal credit helpline costs claimants 55p per minute for the privilege of trying to get someone to help them claim what they believe they are entitled to. Will the Prime Minister today show some humanity, intervene and make at least the helpline free?

[The Prime Minister]

I have made it very clear that we continue to look at how we are dealing with this and ensuring that we get this system out in a way that is actually working for people. The performance is increasing, and it is working because more people are getting into work on universal credit than were doing so on jobseeker’s allowance. [Interruption.] I do want people to be able to find work. I want people to be able to get better jobs, to earn more and to get on without Government support. That is why it is so important that we help businesses to create jobs. Perhaps when the right hon. Gentleman stands up he would like to welcome the fact that 3 million more jobs have been created due to a strong economy under a Conservative Government.

[Jeremy Corbyn]

Sadly, universal credit is only one of a string of failures of this Government. Everywhere we look we see a Government in chaos. On the most important issues facing this country it is a shambles: Brexit negotiations that have made no progress; Bombardier and other workers facing redundancy; most working people worse off; young people pushed into record levels of debt; 1 million elderly people not getting essential care; and our NHS at breaking point. This Government are more interested in fighting among themselves than in solving these problems. Is it not the case that if the Prime Minister cannot lead, she should leave?

[The Prime Minister]

Let me tell the right hon. Gentleman what the record of this Government is: the deficit is down by more than two thirds; 3 million more people are in jobs; 1.8 million more children are in good or outstanding schools; more people are visiting A&E; more people are getting operations than ever before; there are record levels of funding into the NHS; and there are record levels of funding into our schools. What did we see about the Labour party from its conference? [Interruption.] Wait for it.

[Mr Speaker]

Order. Members are becoming very overexcited. The Prime Minister’s response will be heard.

[The Prime Minister]

What did we hear from Labour’s conference? What happened at Labour’s conference? First, Shelter said that the Labour party’s housing policy would end up harming people on low incomes; Labour’s flagship Haringey Council rejected another of Labour’s policies; the Equality and Human Rights Commission said that Labour

“needs to…establish that it is not a racist party”;

and the Labour leader of Brighton Council threatened to ban Labour conferences because of freely expressed anti-Semitism. That was all before the shadow Chancellor admitted that a Labour Government would bring a run on the pound and ordinary working people would pay the price.

Hon. Members: “More!”

[Heidi Allen (South Cambridgeshire) (Con)]

Q3. I fear that that “more” was not for me. I am afraid I must return to the subject of universal credit, but perhaps the difference between Government Members and Opposition Members is that we believe in universal credit’s transformative properties and want it to work. And work it will, but we have to get it right. I thank the Secretary of State for Work and Pensions for promising on Monday to advertise more widely that advances are available to claimants, but many of us on the Government Benches feel that more people taking up those advances must surely mean that the in-built six-week wait just does not work. Will the Prime Minister please consider meeting me so that I can explain to her why, if we reduce that six-week wait, we will do a better job of supporting those just about managing families who are struggling to make ends meet and who have no savings to cover them over that period?

[The Prime Minister]

My hon. Friend makes the important point about the fundamental benefits of universal credit, but she is of course right, and that is why the DWP is continuing to look at the performance of universal credit and how it is operating. I am happy to meet her to look into the issue. She mentioned the advance payments; as she said, it is important that those who need those payments are aware of them, so it is about not only advertising but making sure that jobcentre staff are trained and are being retrained to ensure that they are aware of what they can do to help people. The advance payments can be with people within five days or, in an emergency, on the very same day. I am happy to meet my hon. Friend to discuss them.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

If there was another European Union referendum now, I know that I would vote to remain. Why has the Prime Minister not been straightforward about how she would vote?

[The Prime Minister]

There is no second referendum. The people of the United Kingdom voted and we will be leaving the European Union in March 2019.

[Ian Blackford]

The Prime Minister cannot answer a simple question. [Interruption.] I am quite happy to wait. The reason why the Prime Minister cannot answer a simple question is that she is hamstrung by the parliamentary majority and a divided party of right-wing Brexiteers. This morning—[Interruption.]

[Mr Speaker]

Order. Mr Kerr, we are not having any pranksters here.

[Ian Blackford]

This morning, Chancellor Philip Hammond admitted that a cloud of uncertainty hangs over the UK economy. The Scottish National party is the only party in this House that is united on the issue. We know that crashing out of the single market and the customs union will cost 80,000 jobs in Scotland and £2,000 per person. Now is the time for leadership. Will the Prime Minister come off the fence and recognise that, if we are to save this economy, we need to stay in the single market and the customs union?

[The Prime Minister]

Now is the time for the SNP leadership to accept that, to save jobs in Scotland, it needs Scotland to remain part of the United Kingdom.

[Mark Menzies (Fylde) (Con)]

Q7. Following yesterday’s announcement of almost 2,000 job losses at BAE Systems, many hundreds of which are in Warton in my constituency where very dedicated and highly skilled people work, can the Prime Minister assure me that she and her Government will continue to do everything they can to support export orders to Saudi Arabia and Qatar as well as supporting those dedicated workers in finding alternative employment and the wider Lancashire economy?

[The Prime Minister]

My hon. Friend is absolutely right: this is obviously a very worrying time for workers at BAE Systems, including those at Warton in his constituency. He raises two issues. I can reassure him that the Department for Work and Pensions will ensure that people have all the support they need to look for new jobs. That will include the rapid response service, which will help with CVs, training and information about benefits. We will also continue to promote our world-leading defence industry right across the globe, so that companies like BAE Systems can secure contracts for UK-made equipment. Just last month, my right hon. Friend the Defence Secretary signed a statement of intent with Qatar, committing the country to the purchase of 24 Typhoons and six Hawks from BAE. We will continue to promote these first-class products from first-class manufacturers such as those in my hon. Friend’s constituency. We will also ensure that support is given to those who lose their jobs.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

Q4. Prime Minister, last week you announced that you would fund 25,000 extra socially rented homes over five years. The waiting list in Brighton is already that. Along with Brighton, my other local authority, Lewes District Council, is wanting to build more council houses, but your policies will not help them, because they are limited not by the open market, but by the Government’s arbitrary cap on borrowing and financing against housing stock. Will the Prime Minister agree with me, the Conservative-led Lewes District Council and the Labour-led Brighton that the cap on the housing revenue account must be lifted to get councils building for Britain again?

[Mr Speaker]

I just point out to the hon. Gentleman that I have made no announcement and have no policy on this matter.

[The Prime Minister]

The hon. Gentleman is referring to our announcement that we are putting £2 billion extra into our successful affordable housing programme, bringing the amount dedicated entirely to creating affordable homes to more than £9 billion. For every pound the Government put in, housing associations raise a further £6, which means that thousands more families get the homes that they need and can afford every single year over the next five years. This is a good announcement from the Government. It means that more people will get the homes that they need. I would have expected him to welcome it.

[David T. C. Davies (Monmouth) (Con)]

Q13. In my constituency of Monmouth, children as young as 12 have been labelled as transgender and prescribed potentially life-altering sex change drugs. Does the Prime Minister agree that the law needs to be tightened to prevent this potential mistreatment of vulnerable young people?

[The Prime Minister]

My hon. Friend raises a very sensitive issue. As he will be aware, health is a devolved matter in Wales. The NHS in England has strict guidelines regarding the prescriptions of these sorts of medications to young people. They can be prescribed only with the agreement of a specialist team after a careful assessment of the individual, and generally only to patients who are 15 or older. I recognise the concern raised by my hon. Friend.

[Ms Karen Buck (Westminster North) (Lab)]

Q5. In her radio interview yesterday, the Prime Minister was pressed three times on the position of EU nationals in the UK in the event of no deal. She was unable to answer, suggesting that this was a “technical” issue. But people do not live technical lives. Their lives involve relationships, jobs and their children’s schools. With the clock ticking and the possibility of a no-deal Brexit looming nearer, will she reassure my 10,000 plus constituents who are EU residents exactly what their rights will be if there is no deal?

[The Prime Minister]

First, let me re-emphasise—I have said this before in this House—that we value the contribution that EU citizens have made in this country and we want them to stay. That is why we made citizens’ rights one of the key issues, and one of the early issues that is being discussed in the negotiations that are currently taking place. We are working to ensure that we get a good deal. If there is no deal, we will obviously have to have arrangements with other member states regarding not just EU citizens here, but UK citizens in those member states. But we are working for the best deal for the United Kingdom. We are very close to agreement on citizens’ rights. We want EU citizens to stay here in the UK because we value the contribution they are making.

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

On Monday, my right hon. Friend was clear about her negotiations, saying that it remains the Government’s priority to get a very good free trade arrangement with our European friends and partners before we leave. She also made it clear that, alongside that, we would make plans and all necessary arrangements to depart under World Trade Organisation terms should no such agreement be available. Will she confirm, then, that all moneys necessary will be allocated to this project as and when required?

[The Prime Minister]

I am happy to give my right hon. Friend that confirmation. We are preparing for every eventuality. We are committing money to prepare for Brexit, including a no-deal scenario. It might be helpful if I update the House. The Treasury has committed over £250 million of new money to Departments such as the Department for Environment, Food and Rural Affairs, the Home Office, Her Majesty’s Revenue and Customs and the Department for Transport in this financial year for Brexit preparations. In some cases, Departments will need to spend money before the relevant legislation has gone through the House. The Treasury will write to Departments and to the Public Accounts Committee explaining this process shortly. Where money needs to be spent, it will be spent.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

Q6. My constituent, Mr Geoffrey Ellwell, was transitioned from disability living allowance to personal independence payment in October 2016. He previously had the higher rate mobility and the standard rate for care. His PIP assessment gave him zero points. He appealed that decision in January 2017. Six months later, on 21 June, he passed away without his appeal being heard. The appeal that took place two days after his death posthumously awarded him the higher rate for both elements, backdated to January. What message would the Prime Minister like me to take back to Geoffrey’s partner, Carol, about the way in which this Government treated Geoffrey when he most needed help, compassion and support?

[The Prime Minister]

The message that I would like the hon. Gentleman to take back to his constituent’s partner is that we offer our condolences at the death of her partner. We are working to ensure that there is greater consistency in the judgments that are originally given on PIP assessments. We introduced PIP in order to ensure that we are able to focus payments on the most vulnerable. I completely understand how she feels about the position she is in. We offer her our deepest condolences.

[Maggie Throup (Erewash) (Con)]

HS2 Ltd continues to fail my constituents living along the line of route for HS2, with some being offered tens of thousands of pounds less than the true value of their homes. Will the Prime Minister now personally intervene to ensure that my residents living in the affected areas of Erewash do not lose out as a result of this major national infrastructure project?

[The Prime Minister]

My hon. Friend has raised an important point, and it is right that she is speaking up on behalf of her constituents. I know that the Department for Transport is looking carefully at these issues and that my hon. Friend the rail Minister is determined to see that fair and comprehensive compensation for those directly affected by the route is paid, and it will be paid as if HS2 did not exist, plus the 10% and reasonable moving costs. We are committed, as ever, to infrastructure investment—we are investing in infrastructure—but it is important with a major infrastructure change such as HS2 that we do ensure that those compensation payments for people are being paid properly. As I say, my hon. Friend the rail Minister is focusing on this issue.

[Heidi Alexander (Lewisham East) (Lab)]

Q8. This week, the public have witnessed the most extraordinary spectacle: the Prime Minister ramping up the no-deal rhetoric on Brexit and backtracking on her commitment to stay in the single market and customs union for transition, all because she is afraid of the most right-wing, rabid elements in her own party. When prices are going up in our shops, when the country’s credit rating has been cut and when businesses are actively considering moving jobs overseas, do the British people not deserve better than a Prime Minister simply running scared?

[The Prime Minister]

The hon. Lady could not be more wrong. First of all, we are not ramping up a no-deal scenario; we are actively working in negotiations with the European Union to ensure that we get a good deal—the right deal for Britain—for a brighter future for this country, which is what I believe we can and will achieve. It is what I set out in my Florence speech. I recommend the speech to the hon. Lady.

On the second point, I made very clear—perhaps I need just to explain it again to members of the Opposition—that when we leave the European Union in March 2019, we will cease to be full members of the single market and the customs union. That will happen because you cannot be full members of the single market and the customs union without accepting all four pillars—free movement; continued, in perpetuity, European Court of Justice jurisdiction. During the implementation period, we will be looking to get an agreement that we can operate on much the same basis as we operate at the moment—under the same rules and regulations—but that will not be the same as full membership of the customs union and the single market.

[Mr Gary Streeter (South West Devon) (Con)]

Does my right hon. Friend agree that the Royal Marines, supported by a specialist amphibious fleet, have served our country with great distinction for many, many years? Does she share my concern that one of the proposals currently being considered by the Royal Navy is to downsize the amphibious fleet? In an uncertain world, is this not both short-sighted and dangerous, and will she please intervene?

[The Prime Minister]

First, I absolutely agree that we can commend and applaud the contribution that the Royal Marines and our amphibious fleet have made to the defence of this country and, indeed, the defence of others. It is absolutely right that, as we look at how threats are changing, we look at how we should best spend the rising defence budget to support our national security. We have committed to spending 2% of GDP on defence every year of this Parliament. We are spending £178 billion between 2016 and 2026 on equipment for our armed forces. Naturally, we do not always discuss the specific operational details, but if I might just say to my hon. Friend, I understand that the claims he has referred to are pure speculation at this stage.

[Kerry McCarthy (Bristol East) (Lab)]

Q9. In the past 18 months, two students from St Brendan’s Sixth Form College in my constituency, Izzy Gentry and George Zographou, tragically died from meningitis B, and only this week we heard reports of the death from suspected meningitis of another Bristol pupil, from Orchard School. The free vaccinations for babies, introduced two years ago, are of course very welcome, but they came far too late to save Izzy and George, so will the Prime Minister do more to raise awareness of meningitis and extend free vaccinations to today’s teenagers, which is the group, after babies, that is most at risk?

[The Prime Minister]

First, of course we send our deep condolences to the families and friends of all those students in the hon. Lady’s constituency who have died as a result of contracting meningitis. The point she raises about raising awareness of meningitis is a very valuable one, and it is something that we do need to continue to do. Very often, when decisions are taken by the Government, such as on the vaccination that is already in place, it is very easy to think that that is a job done, but, actually, we need to continue to look at see how we can ensure that we do not see these deaths from meningitis in the future.

[Wendy Morton (Aldridge-Brownhills) (Con)]

I was shocked the other week to hear the shadow Chancellor predicting a run on the pound if Labour took office. For my constituents that would mean an increase in their household bills and in the cost of their weekly shopping. Does my right hon. Friend agree that the biggest risk to this country would be letting the shadow Chancellor into No. 11 Downing Street?

[The Prime Minister]

I absolutely agree; my hon. Friend is right that a run on the pound would mean higher prices and that it would make life much more difficult. It would mean job losses, businesses leaving the country and people being poorer. The one thing that we absolutely must do is ensure that the shadow Chancellor gets nowhere near the Treasury. The Leader of the Opposition asked me earlier what planet I was on. Well, we all know what planet he and his shadow Chancellor are on: Planet Venezuela.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

Q10. Is it the Prime Minister’s intention that the United Kingdom should remain part of the common fisheries policy during any transitional period after we leave the European Union?

[The Prime Minister]

When we leave the European Union, we will be leaving the common fisheries policy. As part of the agreement that we need to enter into for the implementation period, obviously that and other issues will be part of that agreement. But when we leave the European Union, we will leave the common fisheries policy.

[Mr Peter Bone (Wellingborough) (Con)]

It has been assumed that triggering article 50 means that on 29 March 2019 we will come out of the EU if there is no agreement, but is it not the case that the negotiations can be extended if the Government and the EU agree to do that? Will the Prime Minister assure the House that under no circumstances will the negotiations be extended?

[The Prime Minister]

My hon. Friend is accurate in his interpretation of the treaty, which does allow for an extension of negotiations. I have been very clear that by March 2019 we want not only for those negotiations to have ended but to have an agreement on the future relationship and on our withdrawal, and we will leave the EU in March 2019.

[Chris Elmore (Ogmore) (Lab)]

Q11. The Prime Minister will be aware that last month Jaguar Land Rover announced that it was ending its contract early, putting 640 jobs at risk. She has scrapped rail electrification and is flip-flopping on delivering the tidal lagoon, so will she now step up, work with the Welsh Government, Ford and the trade unions, help to save the jobs, and help to ensure a positive future for the south Wales economy?

[The Prime Minister]

Of course we want to work to see a positive future for the south Wales economy. That is what the United Kingdom Government are doing across the whole United Kingdom: working for that brighter and more positive future. With regard to the tidal lagoon, we will publish our response to the Hendry review in due course.

[Will Quince (Colchester) (Con)]

I recently visited the Rohingya refugee camps in Bangladesh, which was truly harrowing. It can only be described as a humanitarian disaster. I am immensely proud of the work that the United Kingdom Government are doing through UK aid, but what pressure can my right hon. Friend put on the Myanmar Government to end the persecution, so that the Rohingya people can go home?

[The Prime Minister]

My hon. Friend raises a very important point. We remain deeply concerned by what is happening to the Rohingya. We know that there are now over 500,000 refugees in Bangladesh. It is a major humanitarian crisis. We have been providing support through our international development and aid, and we have provided money to the Red Cross in Burma and bilateral donations to support the refugees who have crossed into Bangladesh. We have raised the matter three times at the UN Security Council. The international community has delivered a clear message that the Burmese authorities must stop the violence, allow the safe return of refugees and allow full humanitarian access. We have also suspended any practical defence engagement that we had with Burma because of our concerns.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

Q12. I make no apologies for the fact that my question is similar to that asked by my hon. Friend the Member for Bristol East (Kerry McCarthy). Layla-Rose Ermenekli, from Oldham, was just six years old when she contracted meningitis and later died in hospital. There were failings by the Royal Oldham Hospital, which did not spot important signs of meningitis, and those failings will be addressed. But, fundamentally, Layla would be alive today if she had received the MenB vaccination. Will the Prime Minister meet Layla’s parents, Ricky and Kirsty, and campaigners to discuss expanding the meningitis B vaccination programme to cover all children?

[The Prime Minister]

The hon. Gentleman again raises a very serious case, and our condolences go to the family of his constituent. This is an issue on which, as I have said, we need to raise awareness. He raises the question of the response by medical professionals. This is not just about individuals—about parents—recognising the symptoms, but about ensuring that healthcare professionals are identifying them. I will ask the Health Secretary to meet the hon. Gentleman and people who are anxious about this to hear directly from them their concerns regarding vaccinations.

[Antoinette Sandbach (Eddisbury) (Con)]

On Monday, at the start of Baby Loss Awareness Week, this Conservative Government launched 11 pilot projects for a national bereavement care pathway. This groundbreaking pathway will look at support for parents who have lost a child from conception to the age of one. May I ask the Prime Minister to congratulate the parents, the charities and the health professionals who have worked so hard to develop this project, and to make sure that it is rolled out more widely once the lessons from the pilots have been learned?

[The Prime Minister]

I am happy to join my hon. Friend in congratulating all who have worked so hard on this issue, which, sadly, brings such distress to too many people—including, I know, Members of this House. I am sure that everybody will want to join me in marking Baby Loss Awareness Week. There was a debate on the matter yesterday, and I pay tribute to Members from across the House who spoke very movingly about their own experiences.

I am happy to welcome, as my hon. Friend has done, the pilot of the national bereavement care pathway this week. The Department of Health is also providing funding to Sands, the stillbirth and neonatal death charity, to work with other baby loss charities and royal colleges to improve the quality of bereavement care in the NHS. We expect the pathway to be rolled out nationally in October 2018. As my hon. Friend says, it is important to conduct a pilot, so that we can learn from it as we come to the national roll-out.

[Vicky Foxcroft (Lewisham, Deptford) (Lab)]

Q14. A woman came to my office fleeing domestic violence. We rang round every women’s refuge in London, but we were unable to find her a place because of Government budget cuts. What advice would the Prime Minister give to my constituent?

[The Prime Minister]

I fully understand the hon. Lady’s concern about her constituent, who is fleeing domestic violence. We do not want anybody in this country to be subjected to domestic violence and abuse. That is why the Government have actually been putting more money into supporting refuges across the country. It is why we have ring-fenced money for domestic violence support across the country, and it is why we have introduced new legislation. But we are also going to look at what more we can do, through a domestic violence Act, to provide the support that is necessary to ensure that we deal with the perpetrators, support survivors and, as all of us across the House should want to do, end domestic violence.

[Mr Ranil Jayawardena (North East Hampshire) (Con)]

May I commend my right hon. Friend for her pledge to build hundreds of new free schools? Does she agree that they are critical to drive up standards and increase parental choice, and is it not true that we are committed to creating a school system that works for everyone, while the Opposition want to hold everyone back?

[The Prime Minister]

My hon. Friend is absolutely right. Free schools have performed a very important function in raising standards in education in this country, and I am pleased that we have so many more children now in good or outstanding schools. Free schools have done something else as well, as I see in my own constituency, where one of the free schools is specifically for children who are on the autistic spectrum. That is very important, and it is a service that was not available previously. Free schools have enabled that to happen. They are providing for people up and down the country, and we should welcome them.

[Hywel Williams (Arfon) (PC)]

Q15. Vascular services in my constituency are to be moved to an as yet untested centre, while in Bangor we already have a facility with an international reputation. Does the Prime Minister share my concern that, due to bungling over health by the Labour Government in Cardiff, seriously ill Welsh patients will have to travel further and even, like the late Irfon Williams, have to move to live in England just to access proper treatment?

[The Prime Minister]

The hon. Gentleman raises an important point. I am obviously not aware of the details of the particular services and of the transfer that he has referred to, but the overall point he makes is that people living in Wales are often seeing that they are getting a less good service from the Labour Government NHS in Wales—[Interruption.] Oh, yes. Yes, this is the case. As the hon. Gentleman says, there are people who will travel from Wales to England to get the service that is available in the NHS in England, and the Labour Government in Wales need to take a hard look at what they are doing to the NHS in Wales.

Higher Education Funding

Wednesday 11th October 2017 Commons Chamber

12:45

[Angela Rayner (Ashton-under-Lyne) (Lab)]

(Urgent Question): To ask the Secretary of State for Education if she will make a statement on higher education funding.

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

On 9 October, I made a written ministerial statement to the House setting out changes to the repayment threshold for student loans from April 2018 and confirming the maximum tuition fees for the 2018-19 academic year. The Government’s reforms to higher education funding since 2012 have delivered a 25% increase in university funding per student per degree. University funding per student is today at the highest level it has been at any time in the past 30 years.

As the House is aware, the Government have decided to maintain tuition fees at their current level for the 2018-19 academic year. This means that the maximum level of tuition fees will be £9,250 for the next academic year, 2018-19, which is about £300 less than if the maximum fee had been uprated in line with inflation.

We will also increase the repayment threshold for student loans from its current level of £21,000 to £25,000 for the 2018-19 financial year. Thereafter, we will adjust it annually in line with average earnings. This change applies to those who have taken out or will take out loans for full-time and part-time undergraduate courses in the post-2012 system. It also applies to those who have taken out or will take out an advanced learner loan for a further education course. Increasing the repayment threshold will put more money in the pockets of graduates by lowering their monthly repayments. They will benefit by up to £360 in the 2018-19 financial year. The overall lifetime benefit is greatest for graduates on middle incomes; low earners of course continue to be exempt from repayments.

We have world-class universities, accessed by a record number of young people from disadvantaged backgrounds, and a progressive funding system. We are building on those strengths through our planned reforms, including reforming technical education to provide new routes to skilled employment and strengthening how we hold universities to account for the teaching and outcomes they deliver through the teaching excellence framework.

The changes we are making are considered proposals that reinforce the principles of our student loan system and ensure that costs continue to be split fairly between graduates and the taxpayer. However, we recognise that there is more to do. We have further work under way to offer more choice to students and ensure they get value for money. We want more competition and innovation, including through many two-year courses. As the Prime Minister made clear last week, we will continue to keep the system under careful review to ensure it remains fair and effective. The Government will set out further steps on higher education student financing in due course.

[Angela Rayner]

Let me welcome Members back from conference season. We sang “The Red Flag”; the Conservatives waved the white flag. I told our conference that the Government should get on with sorting out student finance. Then the Prime Minister told her conference that they would. I suppose I am cheaper than Lynton Crosby, but the Government’s announcement begs just a few questions: what, who, when, why, how and how much? Apart from that, it is completely clear. What are the details of the review of higher education that the Prime Minister promised? Who will sit on it? When will it start and finish? Who decided that policy, how and when? Is it true that the Minister was unaware until the Prime Minister announced it? Surely he cannot be the least favoured Minister in the Johnson household.

Can the Minister tell us how much these policy changes will cost? How much more will taxpayers contribute and how much interest receivable is lost? Will the reduced income be replaced by additional funding? Can the Government explain why they have changed their mind since we last asked for these measures to be taken and they refused? Are they still considering capping interest rates below the 6% some graduates are being charged? What is their policy on grants? “Senior sources” have briefed that the Education Secretary wants them back. Will the Minister now match our commitment to restore maintenance support?

Just what is the Government’s policy on tuition fees? They boast about freezing fees for one year, but we all know that that is simply because they do not have a majority in this House for any rise, so what will they do after that? Will they finally accept that this House voted against their most recent rise, and revoke that too?

The Prime Minister said that the Government have listened and learned. Will they listen to this House, and when will they learn that actions mean more than words?

[Joseph Johnson]

I will answer some of the hon. Lady’s questions—in fact, all the questions. The normal, cross-Government processes were followed in the run-up to the announcements. The Department for Education worked closely with the Prime Minister’s team to develop those announcements. We are delighted to be able to announce the changes that she set out. I set out in the ministerial statement that I published on Monday the full details that the hon. Lady has just asked for. However, to recap, the threshold will rise to £25,000 from £21,000. That will put a further £360 in the pockets of graduates. We have taken stock of the views of parents, students and Parliament itself in coming to our decision to freeze tuition fees for the coming academic year. Therefore, we are listening and, where appropriate, we are taking action to ensure that our student finance system is getting the balance of interests right between those of students and those of the general taxpayer.

That is the core principle of our student finance system, which must achieve three goals. First, it must support access for the most disadvantaged, and it is achieving that with great success. Someone from a disadvantaged background is more than 50% more likely to go to a highly selective university than when the Labour party left office, and more than 43% more likely to go to university overall. Students are less likely to drop out, whether they are from BME, disadvantaged, mature or part-time backgrounds, than they were when the Labour party left office. This system is delivering participation and access in a way that alternative student finance systems never have.

Secondly, the system is working for universities. Our universities are 25% better funded per student and per degree than they were under the old student finance system, before the 2011 reforms. That is of fundamental importance. Does the Labour party really want our universities not to have the resources they need to do excellent teaching and to deliver great research? That is what it is proposing. It is proposing a return to the system that we saw in the run-up to the Dearing report in 1998, a system that saw a real-terms decline in university funding of almost 50%. Those are the changes that the Labour party will deliver if it has a chance to get into office.

Thirdly, our system is fair to the taxpayer. We keep the balance of funding under careful review. As the Prime Minister made clear in her party conference speech and in announcements in Manchester last week, we will announce further steps in that regard in due course.

[Robert Halfon (Harlow) (Con)]

I strongly welcome the measures that my hon. Friend has set out because we have to be fair to students and fair to the taxpayer, too. In the review, will he look at the high interest rate and at lowering the interest rate for students? On a wider issue, the Government announced a big boost to degree apprenticeships. Does he agree that we should be incentivising and putting all financial incentives into degree apprenticeships because the students earn while they learn, there is no debt, they get a job at the end and such apprenticeships help to meet our country’s skills deficit?

[Joseph Johnson]

We continue to keep all aspects of our student funding system under careful review to ensure that it remains fair and effective, and that we are getting the balance right between the interests of individual students, who go on to have far higher lifetime earnings, and the interests of general taxpayers, whose voices must also be heard in this debate. The interest rate that my right hon. Friend mentioned will be among the things that we will continue to keep under careful watch in the weeks and months to come. Degree apprenticeships are a very promising way of combining the best of higher education and further education. We want them to develop and grow, and we want more providers in the system to offer them. They have huge potential.

[Carol Monaghan (Glasgow North West) (SNP)]

Raising the repayment threshold is a positive step and I am delighted that the UK Government are following the Scottish Government’s lead on that matter, but we have to be clear: it is not the panacea that this Government would have us believe. Average student debt on graduation is now more than £50,000, so the announcement needs to be part of a wider reform of student support and funding, which must include bursaries, grants and the abolition of tuition fees—indeed, everything we are doing in Scotland, which is ensuring that our students have the lowest student debt and the best level of support in the UK. We also have more students from deprived backgrounds accessing HE than ever before.

What further steps will this Government take both to increase student support and to reduce student debt? Will the Minister now commit to reducing or better still abolishing fees and reinstating the maintenance grant for those in most need as part of a realistic student support package? Will he guarantee that he will look at reducing the interest on student loans in England, which is keeping young people locked into long-term debt?

[Joseph Johnson]

No, I certainly will not commit to abolishing tuition fees. They are a strong policy success in many ways and an unsung one. They have enabled us to allow more people from disadvantaged backgrounds to go to university than at any point before. They have enabled us to lift student number controls. That is a critical argument for holding on to a system that shares the cost of funding fairly between the individual student, who goes on to have far higher lifetime earnings, and the general taxpayer.

We keep the system under careful review. As the Prime Minister set out in Manchester, we will make further announcements in due course about the rest of the student funding system.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

I congratulate the Minister on the steps he has taken to try to get the balance right and welcome what he said about keeping this rather startling interest rate under review. I urge him to continue to resist the inevitable populist pressures to sweep away the whole system, which play very well to today’s students but would create great problems. In hindsight, I was lucky enough to have people in low-paid jobs paying taxes to maintain me to meet my living costs when I was studying and being trained to be a reasonably successful barrister when I emerged from university. Therefore, will he resist claims that taxpayers at all levels of income should pay for the costs, which would never be repaid by some of the students, although others will go on to achieve very considerable incomes?

[Joseph Johnson]

I can certainly assure my right hon. and learned Friend that we will continue to bear in mind carefully the taxpayer interest. It is critical to remember that the Labour party’s proposals, were they to be funded out of income taxation, would add about 2.5p to the basic rate of income tax, so it is vital that we bear taxpayers’ interests in mind and we will continue to do so. He mentioned the interest rate, which we of course keep under careful review. It is worth remembering that this is a heavily subsidised loan product overall. The Government write off about 30% to 40% of the student loan book. That is a deliberate investment in the skills base of this country, not a symptom of a broken student finance system. The interest rate cannot be looked at in isolation.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

Surely the Minister needs to go back to the Dearing principles. Dearing believed that the expansion of higher education should be based on the student who benefits paying the community through the taxpayer, society and the employer. Can we go back to those principles? I am worried that the Minister and the Prime Minister have already made up their minds about the review they are suggesting. The fact of the matter is that we cannot have a higher education system that is created entirely on a pile of student debt. It is time, cross-party, to think about a radical alternative to what we have at the moment.

[Joseph Johnson]

The Labour party helped to introduce the system we have today and this Government have been building on it since 2010. It is extraordinarily successful at enabling more people from disadvantaged backgrounds to get a chance to benefit from higher education. I am startled that the Labour party wants to roll back all that progress. Why would they want to reverse the changes that have enabled more than 50% more students from disadvantaged backgrounds to get into higher education? That is what the hon. Gentleman’s proposals would end up achieving.

[Nicky Morgan (Loughborough) (Con)]

I congratulate the shadow Secretary of State on continuing the fine tradition of women carrying on with speeches in the face of adversity. As someone who represents a university, was it not the case, when we made the decision in 2010 to put up fees, that it was a very simple calculation that if fees were not raised, we would have had to cut the number of young people able to go to university, because otherwise the public purse would not have been able to afford the system we have now? Universities are now well financed: we are not having the debate about university financing that we are having about other areas of public spending.

[Joseph Johnson]

My right hon. Friend is absolutely right. It was the increase in tuition fees that enabled us to take the limit off student numbers and release student number controls. That change is what has driven the sharp increase in participation in higher education by people from lower socioeconomic deciles. It has driven a huge expansion of people from disadvantaged backgrounds getting a chance to go through university and higher education. The Labour party’s policies would reverse all that progress.

[Dr Roberta Blackman-Woods (City of Durham) (Lab)]

It is right that the Government have frozen tuition fees, but I wonder whether I could nudge the Minister to go a bit further and get rid of this unsustainable fees system altogether. When is he going to guarantee that universities and their funding will not be adversely affected in any way by the changes the Government are proposing?

[Joseph Johnson]

Universities are well funded. As I said in my opening remarks, funding per student per degree is up by 25% since the reforms the Government introduced in the previous Parliament. We are confident, having assessed the financial position of our institutions, that they can sustain a freeze in the level of fees for this coming financial year and that is the policy the Government set out.

[Justin Tomlinson (North Swindon) (Con)]

Value for money is key and far too many degrees are unnecessarily long. What efforts are being made to offer shorter, more intensive degrees to reduce the final tuition fee bill?

[Joseph Johnson]

There are excellent examples of two-year programmes across our higher education system, such as those offered by the University of Buckingham. It is not alone—there are others. We want many more providers, including high-tariff, highly selective institutions, to start to offer two-year programmes. They have huge potential to access students who have been hard to reach by the higher education system. We will come forward with proposals very shortly to enable the rapid expansion of two-year degrees throughout our system.

[Wes Streeting (Ilford North) (Lab)]

The Minister’s replies this afternoon reveal the utter shambles at the heart of the Government’s higher education policy. We told them not to lift the cap on tuition fees. They did not listen and now they have had to U-turn. We told them not to freeze the repayment threshold. They did not listen and now they have had to U-turn. We now find that the Prime Minister has announced a review of student finance and higher education funding with absolutely no idea who is going to lead it, what the scope will be, or what the desired outcome will be. They are making it up as they go along.

I urge the Minister, given that he has not listened to advice in the past year or two, to look at the biggest issue facing students as part of the review, which is not so much the tuition fee system itself, but student finance and the money in their pockets when they are at university, so that, finally, we can have a higher education student finance system that means that, wherever students are from and whatever their background, they have the money they need to succeed throughout the lifetime of their course and beyond.

[Joseph Johnson]

We look carefully at the student finance system all the time. It is constantly under review and we have taken account of the views of colleagues in Parliament, parents and students in coming to the conclusion that we wanted to make the changes we announced last week in Manchester, so it would be unfair to say we are not listening and not responding appropriately. We always keep the system under review to ensure it remains fair and effective, and balances the interests of students and taxpayers appropriately. We will continue to do so in the weeks ahead.

[James Cartlidge (South Suffolk) (Con)]

I very much welcome the increase in the threshold, but in all this focus on finance is there a danger that we forget the whole purpose of going to university, which is to obtain a high-quality education? Will my hon. Friend assure me that whatever reforms he undertakes will not undermine the ability of universities to provide the highest-quality education possible, but that, on the contrary, they will drive universities on to deliver even higher standards?

[Joseph Johnson]

My hon. Friend is absolutely right. The more interesting part of this debate is about ensuring universities deliver value for money, great teaching and fantastic research with the resources the Government make available to them. In the autumn statement, we increased research spending in our system by the largest amount in 40 years. We should celebrate that fact. We have increased per student per degree funding by 25% since 2010-11. We should be celebrating that fact, because it is enabling our universities to do the great job we need them to do. Through the teaching excellence framework, we are holding them to account more tightly than ever before for the value for money we need them to deliver.

[Layla Moran (Oxford West and Abingdon) (LD)]

It is true that universities are better funded, but the Campaign for Science and Engineering, as well as universities, tell me that the definition of which subjects receive the top-up payment from the Government are out of date and too narrow. To ensure that we maintain funding, especially in science, technology, engineering and maths subjects, can the Minister confirm that the list will be looked at again as part of the review to help universities to fill the skills gap that his own Department is trying fill?

[Joseph Johnson]

I thank the hon. Lady for her suggestion. We continue to keep that aspect of the system under watch. Clearly, it is important that courses that are more expensive to deliver receive appropriate support from the Government. Obviously funds are not unlimited and we have to be careful in terms of promising further resources to all subjects, but we keep it under review.

[Sir Desmond Swayne (New Forest West) (Con)]

The right hon. Member for Twickenham (Sir Vince Cable) described the current regime as having all the advantages of a graduate tax with none of the disadvantages. Is that not still the case, and would we not want to avoid the ridiculous situation at the University of St Andrews, where Scottish student numbers are capped at 20%?

[Joseph Johnson]

My right hon. Friend puts it very well. Our system has enabled us to release student number controls, an option that has not been available to the Scottish Government precisely because they have not got the balance right between the individual student and the general taxpayer. I entirely agree with him.

[Liz McInnes (Heywood and Middleton) (Lab)]

May I urge the Minister to remember that most students become taxpayers, so it is completely pointless to try to set up a false divide between students and taxpayers? May I also urge him to look at the interest rate repayment? The retail prices index, which is used for student loans, is an outdated measure. It is not the Government’s measure of choice and it makes our students’ debts even more extortionate. We should be looking at the consumer prices index, not the RPI.

[Joseph Johnson]

As I said to my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), we keep interest rates under view, along with other aspects of the system. RPI has historically been the measure of inflation for the student finance system and in some ways is more appropriate than CPI, as it takes account of, among other things, mortgage interest payments and council tax, which are typical expenses for graduates not included in the calculation of CPI.

[Mr Philip Hollobone (Kettering) (Con)]

It is exciting that record funding is now going into higher education, and it is absolutely right, of course, as the Minister said, that we get value for money from our universities. Does he share my concern, therefore, that the number of senior university figures being paid salaries in excess of that of the Prime Minister seems to be spiralling out of control?

[Joseph Johnson]

My hon. Friend is right that there are examples of institutions where senior pay has accelerated very rapidly. It is a matter of concern and great public interest. The new regulator, the Office for Students, will take steps to ensure much greater transparency and accountability in how pay is set, particularly the very high salaries we have seen in parts of the sector.

[Margaret Greenwood (Wirral West) (Lab)]

The Minister will be aware that students are leaving university with debts on average of over £50,000. How on earth can this burden be a sensible way to equip the next generation to meet the challenges they and society will face?

[Joseph Johnson]

I say to the hon. Lady what I should also have said to my right hon. Friend the Member for New Forest West (Sir Desmond Swayne): this should best be seen as a graduate contribution, rather than a debt pile. Graduates do not have to repay until they are earning over £25,000, which is a world away from the world of commercial debts, and their debts are written off after 30 years. No commercial loan offers such terms. This is a time-limited and income-linked graduate contribution. We should start to move away from this conception of it as a debt and loan.

[Alex Burghart (Brentwood and Ongar) (Con)]

I am grateful to my hon. Friend for reminding the House that we now have record numbers of disadvantaged pupils going to university.

[Gordon Marsden (Blackpool South) (Lab)]

It’s not true.

[Alex Burghart]

Is it not unacceptable that the shadow Education Secretary went on Question Time the other night and claimed the opposite?

[Joseph Johnson]

I agree with my hon. Friend, and I find it alarming that the hon. Member for Blackpool South (Gordon Marsden) is chuntering away saying, “It’s not true.” It is true. The proportion of people from disadvantage backgrounds now going to university has increased. It is undeniably true. It is in the statistics from the Higher Education Statistics Agency and the Office for Fair Access. The number is 43% higher than it was in 2009-10. A young person is 52% more likely to go to a highly selective university than they were in 2009-10. It is extraordinary that the hon. Gentleman wants to deny it.

[Mr Speaker]

Order. I was happy to indulge the Minister and to listen to his mellifluous tones, but as he will quickly discover as part of his apprenticeship in this place, the Minister is not responsible for the observations on “Question Time” or elsewhere of the shadow Secretary of State on this or any other matter.

[Kerry McCarthy (Bristol East) (Lab)]

The Minister talks about the expansion in student numbers. How often does he have conversations with the local government and housing Ministers about the impact on housing pressures in cities such as Bristol and on council finances, given that students do not pay council tax and developers do not pay the community infrastructure levy? Although those students are welcome, it does come at a cost.

[Joseph Johnson]

The hon. Lady makes an important point. Our university students bring enormous economic benefits to cities up and down the country, which is why our universities are such important economic actors across the country. Clearly, local authorities have an important role to play in managing the pressures that students bodies can sometimes put on the provision of public services, and I work closely with colleagues in the Department for Communities and Local Government to keep abreast of the pressures she mentioned, but there is no doubt that our towns and cities are immeasurably the better for having universities within them. They are anchor institutions that are steadfast and have longevity in a way that many other economic entities do not, and we should wholeheartedly welcome their presence.

[Michelle Donelan (Chippenham) (Con)]

Building on the point from my hon. Friend the Member for Kettering (Mr Hollobone), will the Minister explore making university finances much more transparent to ensure not only value for money for students but that the money is spent effectively and efficiently to enhance our fantastic institutions?

[Joseph Johnson]

Yes, we feel it is important that there is greater transparency in the sources and uses of university income. In the regulatory framework consultation in the coming weeks, we expect the Office for Students to make great progress in this area, so that we can boost student confidence that their tuition fee income will be spent clearly, well and for the purposes they want.

[Stephen Lloyd (Eastbourne) (LD)]

The Minister has said a few times now that he wishes to keep the system fair and effective. I remind him and the Government that further education is also a part of higher education and that, while additional sums have been going into HE, FE has been cut and restricted remorselessly. Would he say that what the Government do with FE is equally fair and effective? I can tell him it is not.

[Joseph Johnson]

Of course, excellent higher education is being delivered in our further education system, and the teaching excellence framework results in June highlighted the excellence in HE found in FE providers. On the hon. Gentleman’s question about funding, the Government made available an additional £500 million to support the evolution and development of T-levels, a transformational qualification that will help us to achieve parity of esteem for technical and further education in our system.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

I apologise for being late, Mr Speaker.

The Minister has said two or three times now that student debt should not be considered real debt because it will be written off in 25 to 30 years. Will he or his colleagues in the Treasury publish their forecast of the cost to the public purse in 25 to 30 years of the loans written off as a result of students not meeting their repayments in their entirety? Given that he is raising the threshold for repayments, and so potentially increasing the level of debt, presumably that figure will grow, so he is actually stacking up a burden for a future Chancellor.

[Joseph Johnson]

As the hon. Gentleman probably knows, we regularly publish assessments of the amount the Government write off at the end of a 30-year period to reflect the fact that they want to make higher education free at the point of access to students. It is called the resource and accounting budgetary charge. Prior to the changes we announced at the party conference, the proportion of the loan book to be written off over that period was approximately 30%, but it will have risen as a result of the changes announced, and we will make the new amount public in due course.

[Ben Lake (Ceredigion) (PC)]

I sympathise with the Labour Front-Bench team’s position on this matter. Basing higher education funding on billions of pounds of student debt that might never be repaid is neither morally right nor operationally pragmatic, so I urge the Minister to commit to a wide-ranging review of higher education funding that encompasses not only tuition fees but maintenance grants and the sustainability of funding for higher education students.

If I may be so bold, Mr Speaker, I also urge the Labour Front-Bench team to enter into a discussion on this matter with their colleagues in Wales. The only Administration now committed to raising tuition fees is the Labour Welsh Government—

[Mr Speaker]

Order. I am inordinately grateful to the hon. Gentleman, but it is procedurally improper for him to veer off the centre of the fairway, which he previously inhabited. Questions must be to the Government about the policy of the Government, not general exhortations to other Opposition parties, but I am sure if he wants to have a cup of tea in the Tea Room with the Labour Front-Bench spokesperson, there might be such an opportunity.

[Joseph Johnson]

I am grateful to the hon. Gentleman for making that point. It is true, of course, that the Labour Government in Wales have recently increased fees beyond the fee cap in England.

Bill Presented

Nuclear Safeguards Bill

Presentation and First Reading (Standing Order No. 57)

Secretary Greg Clark, supported by the Prime Minister, the Chancellor of the Exchequer, Secretary David Gauke, Secretary Boris Johnson, Secretary Liam Fox and Secretary David Davis, presented a Bill to make provision about nuclear safeguards; and for connected purposes.

Bill read the First time; to be read a Second time tomorrow, and to be printed (Bill 109) with explanatory notes (Bill 109-EN).

Fetal Dopplers (Regulation)

1st reading: House of Commons
Wednesday 11th October 2017 Commons Chamber

Motion for leave to bring in a Bill (Standing Order No. 23)

13:19

[Antoinette Sandbach (Eddisbury) (Con)]

I beg to move,

That leave be given to bring in a Bill to regulate the sale and use of fetal dopplers; and for connected purposes.

It is an honour to introduce the Bill, which aims to improve standards of monitoring babies’ health as we look to reduce significantly our country’s relatively high neonatal and stillborn death rate. The United Kingdom is ranked 114th out of 164 countries in terms of progress made in reducing the number of stillbirths, and serious concerns have been raised about the use of foetal dopplers. In the next few minutes, I will outline those concerns and the case for regulating the sale of such devices.

Since being elected in 2015, I have looked closely at policies relating to baby health, particularly through the all-party parliamentary group on baby loss, which I set up alongside my hon. Friend the Member for Colchester (Will Quince). Discussion of the issue is timely, as this is Baby Loss Awareness Week. I pay tribute to all Members for their contributions to yesterday’s debate on baby loss; I also thank the Government for their energy and determination in reducing baby loss, and especially for their target of halving the number of stillbirths and neonatal deaths by 2030. We must continue to work on a cross-party basis, as a great deal of progress has been made and a great deal is still to be made. It is in that spirit that I thank the Members on both sides of the House who have sponsored the Bill.

As I said during yesterday’s debate, the Government’s support in reducing baby loss has meant that progress has been made. That includes funding for the raising of standards in, for instance, perinatal mental health services, and for improvements in equipment and the physical environment of maternity units. However, we are languishing behind other developed countries when it comes to our stillbirth rates, and that must change.

It is in this context that I hope to secure the House’s support for regulation of the sale of home dopplers, devices that allow pregnant mothers to listen to the heartbeat of their babies. There are serious concerns about the use of those devices. I have heard some consumers speak in favour of dopplers, and I am not suggesting that they have no use, but there is evidence that they can falsely reassure people about the health of their babies. We must place that responsibility in the hands of medical professionals, and encourage mothers to respond to changes in the movements of their babies rather than using devices that can be bought over the counter for £30.

Foetal dopplers send ultrasound waves into the womb, and then simulate a sound. That sound may or may not be the baby’s heartbeat; it is a simulation of the ultrasound waves bouncing off moving blood vessels. While I absolutely understand the attraction for parents wanting to hear their baby’s heartbeat, the sale of the devices is on the rise despite warnings from medical professionals. Even if home dopplers could flawlessly detect a baby’s heartbeat, that would still not be a sufficient measure of the baby’s health. A heart can continue beating despite other serious issues being present.

There is already a wealth of advice online—including advice from the NHS and expert organisations—warning against the use of home dopplers, and comprehensive advice is also provided with the instructions on the box. However, that advice is not deterring people from purchasing the devices, and their use is on the rise. Kicks Count, a campaign group that is calling for the banning of home dopplers, has been trying to raise awareness of their dangers for five years, but has not been able to change public attitudes and preconceptions. Its petition has attracted more than 12,000 signatures.

The NHS Choices website says that home foetal heart monitors

“are potentially dangerous to the mother and baby’s health”.

The Royal College of Midwives has also urged mothers not to use home dopplers. Its website says:

“Expectant mothers have been warned against the use of home fetal Doppler devices over fears that they may give false reassurances to mothers about the health of their baby.”

Guidelines issued by the National Institute for Health and Care Excellence state that dopplers are

“unlikely to have any predictive value and routine listening is therefore not recommended.”

The problem with these devices is that anything that moves inside the abdomen, whether it be the baby kicking, air moving in the mother’s intestines or blood flowing in the arteries, is translated into a sound. It requires training to be able to detect a baby’s heartbeat, yet the sale of dopplers is not restricted to medical professionals; they are available over the counter. Given that the expert medical advice that I have mentioned highlights their dangers, I suggest to the Minister that the Department of Health needs to consider how regulation could improve the monitoring of babies’ health and restrict the sale of the devices.

The question that we must ask ourselves is this: if midwives are not using dopplers to identify foetal wellbeing, why are we allowing pregnant women to reassure themselves at home, when seeking medical advice would be the sensible and safe option? According to the instruction manual for a home doppler kit,

“It is intended to be used by care professionals, including practical nurses, midwives, relative technicians and physician assistants”.

Dopplers were never originally intended for such widespread sale on the open market.

I understand that people may feel that regulation is not necessary, and that as long as people know the risks we do not need to legislate. However, Kicks Count has been raising awareness of the issue for years through, for instance, a national media campaign. The guidelines tucked away in the doppler information booklet are often ignored. We cannot have a situation in which a product that can falsely reassure mothers about their babies’ health is being sold at an expanding rate.

I praise Mothercare for its welcome announcement earlier this year that once current stocks ran out, they would not sell any more foetal dopplers. That company recognises the concerns of healthcare professionals, and I hope that other businesses will follow suit, but in this age of Amazon, we cannot rely on the replication of such responsible behaviour by every single seller of dopplers. That is why there is a case for regulation.

The BBC spoke to the manufacturers of the product, and was told that dopplers should not be used as a substitute for professional medical care; nor should they be relied upon as an indicator of foetal health. It is potentially fatal to do so. In practice, the Bill would introduce a licensing system in England and Wales to ensure that medical professionals were responsible for monitoring foetal health. With such verification, we could remove dopplers from high street shelves and encourage more responsible practice and use of the devices. It would be for the Department of Health to oversee the process as part of our wider ambition to reduce stillbirth rates.

Baby loss is an issue that is thankfully gaining much more attention in Parliament, and we must improve the outcomes for mothers and babies in the UK. The current figures show that our standards are below those of other developed countries, and I know that the Department of Health is working hard in trying to change that. I am not suggesting that the Bill will solve all our problems, but I believe that it will go some way towards improving the monitoring of babies’ health.

Let me end by paying tribute to Kicks Count, and in particular to Elizabeth Hutton, who has put an enormous amount of energy into this campaign and who is here today. Babies and mothers deserve the very best care, and foetal dopplers pose a risk to the high standards for which we strive.

Question put and agreed to.

Ordered,

That Antoinette Sandbach, Stephen Hammond, Maria Caulfield, John Howell, Tulip Siddiq, Tim Loughton, Diana Johnson, Sir David Amess, Vernon Coaker, David Hanson, Mr Clive Betts and Kelvin Hopkins present the Bill.

Antoinette Sandbach accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 19 January 2018, and to be printed (Bill 110).

Finance Bill

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

(Clauses 5, 15 and 25, and related new clauses)

Considered in Committee

[Dame Rosie Winterton in the Chair]

Clause 5

Termination payments etc: amounts chargeable on employment income

13:30

[Peter Dowd (Bootle) (Lab)]

I beg to move amendment 1, page 12, leave out lines 8 to 12.

This amendment removes the power for the Treasury to amend the meaning of “basic pay” for the purposes of calculating “post-employment notice pay” by regulations.

[The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 12, page 13, line 27, at end insert—

“402F  Review of impact of termination payments on low income workers

(1) Within two months of Royal Assent being given to the Finance (No. 2) Act 2017, the Chancellor of the Exchequer shall commission a review of the impact of the provisions of sections 402A to 402E on low income workers.

(2) A report of this review must be laid before the House of Commons before the start of the tax year 2018–19.”

This amendment requires the Chancellor of the Exchequer to carry out a review of how the changes to termination payments will affect low income workers before these provisions come into effect.

Amendment 2, page 14, line 15, leave out “different” and insert “higher”.

This amendment removes the power for the Treasury to reduce the £30,000 threshold in connection with the taxation of termination payments by regulations.

Amendment 3, page 14, leave out lines 20 to 23.

This amendment is consequential upon Amendment 2.

Amendment 4, page 14, leave out lines 27 and 28 and insert—

‘(2) “Injury” in subsection (1) includes—

(a) psychiatric injury, and

(b) injured feelings.””

This amendment explicitly includes (rather than excludes) injured feelings within the definition of “injury” for the purposes of payments which are excluded from the provisions of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (payments and benefits on termination of employment).

Clause stand part.

[Peter Dowd]

To be fired from a job is perhaps one of the most difficult experiences for an employee. There are very few people in this Chamber, let alone in the country, who have never had to go through the awkward, bitterly disappointing and scary experience of losing, or potentially losing, a job. This is the daily reality for thousands of people, and it goes to the heart of clause 5.

I ask the Committee to imagine how thousands of people across the country at BAE are feeling at this moment after yesterday’s announcement of job losses. How are those workers feeling in Warton, Samlesbury, Portsmouth, Guildford and RAF Leeming, and in the Chief Secretary’s own county of Norfolk at RAF Marham? Added to the worry, concern, anxiety and hopelessness of redundancy now comes a potential tax bill to pay for the Government’s hapless management of the economy. Will the writ of clause 5 stretch across the Irish sea? What about the threat to the jobs of those at Bombardier in Northern Ireland, and the thousands of other associated jobs over there?

[Lucy Frazer (South East Cambridgeshire) (Con)]

The hon. Gentleman rightly points out the devastating consequences for people who lose their jobs—he refers to particular instances at the moment—but does he also recognise that this Government have created 3 million more jobs, which is helping our economy and those people?

[Peter Dowd]

This is not relevant to the debate, but a significant number of those jobs are incredibly low paid, and people have not had pay rises for many years. What the hon. and learned Lady says might well be the case, but the reality is that it is not about the quantity; it is about the quality—[Interruption.] Of course it is.

How insensitive and out of touch must this Government be to put clause 5 before Members today of all days? The Prime Minister has vowed that she will do anything and everything she can to help those affected at Bombardier and BAE, so perhaps the Minister would like to withdraw this provision here and now and put the Prime Minister’s warm words into action.

[Mr Mark Harper (Forest of Dean) (Con)]

I agree with the hon. Gentleman about the concerns that those workers will be facing, but he knows perfectly well that the Government’s proposals in this Bill are designed to deal with abuse. He knows that there are no plans to change the rules in a way that would affect people on lower incomes who are not doing anything wrong, and the Minister made that clear on Second Reading. The hon. Gentleman’s scaremongering is making the concerns of those workers worse, rather than reassuring them, which is what he ought to be doing in this House of Commons.

[Peter Dowd]

The only people who are scaremongering are this Government who are threatening to tax people’s redundancy payments—that is the scaremongering in this House.

Perhaps the Minister would like to withdraw this proposal. I will happily give way to him if he wants to reconsider his decision—he might have discussed it with the Prime Minister. In some instances, a job loss can be even worse if individuals lose their employment because of base and nasty discrimination, whether because of their age, gender, race, religion or sexuality.

The amendments speak directly to the question of how much money an employee who has lost their job should receive in tax-free redundancy pay, and how much an employee who is discriminated against should receive in tax-free compensation from an employment tribunal.

[The Financial Secretary to the Treasury (Mel Stride)]

Is the hon. Gentleman not aware that when a tribunal has granted an award on the grounds of discrimination, that is automatically exempt from tax, despite what this clause may or may not be doing?

[Peter Dowd]

I agree with that particular point.

We know the Government’s overall stated aim is to crack down on what they say is significant avoidance related to non-contractual payments in lieu of notice. To do this, there is a complex set of formulas to mandate what will be considered as notice pay, even when that is not actually given in lieu of notice. Amendment 1 addresses our concern that the Government are giving themselves the power to change the meaning of basic pay for the purpose of calculating notice pay. That could significantly change the basis of the calculations, so the Minister should set out more clearly the intention of this measure.

[Kelvin Hopkins (Luton North) (Lab)]

I agree with everything my hon. Friend says, of course. Does he agree that a lump sum on termination of employment could be considered as potential income over a period of years, and should not be considered just as a lump sum to be taxed within one year?

[Peter Dowd]

Again, that goes to the heart of the issue. The Government are trying to focus on a particular moment in time, rather than taking into account the fact that a person might be out of employment for a long time.

We see a running theme of this Government in this Bill and so many of their other actions: they are removing powers from Parliament and giving them to Ministers. But other elements have been tacked on to the clause that are seemingly unconnected to the stated aims about payments in lieu of notice. It is clear that the Government are laying the ground so that workers who have already lost their jobs should pay tax on more of their termination payments. Is that the message that the Government are now sending to the likes of the BAE workers? Is it the message they want to send to the victims of redundancy? There can be no other explanation for this clause. It gives the Treasury powers through delegated legislation to raise or lower the tax-free threshold.

Changes to the tax-free allowance for termination payments were first mooted by the Office of Tax Simplification in 2013 when it cited such payments as an employee benefit that would merit further study. I find it rather peculiar that a payment to an employee who has just lost their job is considered as an employee benefit—how bizarre. It is as though a termination payment were some sort of added extra and a huge inconvenience for employers, when in fact that worker has just lost their job and this may well be the last payslip they receive for a long time. The Government have promised not to reduce the threshold, so it comes as a bitter pill that the Bill will allow them to do just that.

If there is no intention to reduce the threshold, Conservative Members should have no hesitation in voting for amendment 2, which would allow the threshold only to be increased through delegated legislation, removing the power to decrease the amount. I wait with bated breath for the Minister to keep the Government’s word and accept our amendment.

In the previous debate, the Minister went to great lengths to claim that the Government’s plans to give themselves the power to water down the tax-free threshold on termination payments, and to exclude injury to feelings from tax-free compensation payments, had nothing to do with attacks on those who have just lost their jobs. No, instead that is apparently part of some ambitious strategy that the Government have to tackle tax avoidance.

The Minister is so concerned about tax avoidance that he has claimed that

“when the Government find tax avoidance, we will clamp down on it.”—[Official Report, 6 September 2017; Vol. 628, c. 253.]

Such a bold assertion makes me wonder if the Minister has even read his own Finance Bill. Has he read clause 15, which we will debate later, through which his Government are loosening the rules to allow more non-doms to receive tax breaks if they use money from offshore tax havens to invest in the UK?

[Alex Burghart (Brentwood and Ongar) (Con)]

Is the hon. Gentleman not aware that clause 15 will bring more money into this country, which is presumably a good thing, and something we can all agree on?

[Peter Dowd]

We will deal with that a little later. The hon. Gentleman may want to pay attention to my hon. Friend the Member for Oxford East (Anneliese Dodds), who will expose that fallacy.

[Kelvin Hopkins]

Is it not the case that the Government are squeezing money out of people who cannot escape from taxation—namely, less well-off people who lose their jobs—rather than chasing the big money people who evade and avoid taxes?

[Peter Dowd]

My hon. Friend, as ever, puts it in a nutshell. That is the case.

Has the Minister read clauses 29 to 32 and schedules 8 and 9? With those measures, the Government are deliberately signposting a loophole to ensure that non-doms can set up offshore trusts that are exempt from planned changes to non-domiciled status. That exemption completely undermines the Government’s planned changes. The fact is that this Government are not interested in tackling the scourge of tax avoidance and evasion, which costs the UK economy billions every year. They have no interest in ensuring that those who invest foreign money in the UK do so in a transparent and open manner.

[Rachel Maclean (Redditch) (Con)]

Does the hon. Gentleman accept that under this Government we have made the largest strides to close the tax gap that we have seen in recent years, which means that we are collecting more from rich people and tax avoiders than ever before?

[Peter Dowd]

That will be dealt with later, but it is not the case for many multinationals. The papers are strewn with examples of the Government’s sweetheart deals with multinationals, so the hon. Lady cannot tell me that that is the case.

[Mel Stride]

I thank the hon. Gentleman for generously giving way. The latest figure for the tax gap is 6.5%, which he will know is lower than that in any year under the last Labour Government. It was over 8% in the financial year 2005. He will also know that our record on avoidance and evasion is that we have raised £160 billion since 2010. What amount did his party achieve by clamping down on avoidance, evasion and non-compliance when it was in office?

[Peter Dowd]

It does not include profit shifting from multinationals. I am quite happy to defend the record of the last Labour Government, but I am more interested in this Government and what the next Labour Government will do in this regard.

The Government are only interested in doing what they have always been interested in since the party was founded: dramatically curbing the rights of workers and transferring their money to those who least need it. That is, outrageously, what clause 5 will do. Why else would the Government give themselves the power to lower the tax-free threshold for statutory redundancy payment? Why else would the Government feel the need to further harm discrimination victims? If, as they say, there is a need for clarity in the definition of “injury”, why do they not accept amendment 4, which would make it clear that victims of discrimination should not have compensation for harm taxed as if it were earnings? We only need to look at the comments of the Chief Secretary to the Treasury, who wrote an astounding report in 2012 comparing the work practices of Germany and the United Kingdom.

[Lucy Frazer]

The hon. Gentleman is being very generous in taking interventions. He suggests that the Conservative party is not looking after those on lower incomes. Does he not accept that it was our party that increased the tax threshold for lower income workers and also introduced the living wage?

[Peter Dowd]

When we take into account cuts to working tax credits and changes to benefits, that does not stack up, I am afraid. The hon. and learned Lady should know that.

In 2012, the Chief Secretary set out how some employers in Germany were exempt from pesky regulations, such as on unfair dismissal, or social security contributions, and opined that the UK Government should follow suit. She argued that the best way to fight unemployment, particularly among the over-60s and the under-20s, was by encouraging more shift work, work on Sundays and late-night work and, yet again, getting rid of protection against unfair dismissal. Is it any wonder that this Government are hellbent on giving themselves the power to cut the amount that a worker can receive tax-free after they are dismissed?

[Rachel Maclean]

Why is the hon. Gentleman discussing removing the power of unfair dismissal when that is neither covered by the Bill nor proposed by the Government?

[Peter Dowd]

Because it goes to the heart of this Government’s attitude—[Interruption.] Narrative; that is a very good word. Should anyone in the Chamber be surprised that the same Government brought in the illegal and deeply unfair employment tribunal fees? It is part of the theme and the narrative. They are now set, once again, to try to limit the amount that workers who are discriminated against in the workplace can receive. The clause is simply another step that this Government have taken in the past seven years to distort and debase hard-won employment rights. If it remains in the Bill unamended, it will give the Government even more power to wreak havoc and misery on the lives of some of the most vulnerable people in our society.

11:30

In the light of yesterday’s announcement of BAE job losses, what message does the clause send to workers such as those at BAE? It says, “You’ve lost your job—a well-skilled job at the forefront of our defence industry—and you may lose your tax-free redundancy sum or have it reduced.”

The Prime Minister was handed a fake P45 last week. That was a joke. Many sacked workers get a real P45, and now, under these proposals, they may also get a big tax bill to accompany it. That is no joke—[Interruption.] Conservative Members may snigger and laugh, but it is no laughing matter. I ask the Minister once again to withdraw this proposal.

[Mr Harper]

I will deal with the amendments and some of the issues introduced by the hon. Member for Bootle (Peter Dowd).

Let me cover first the jobs position. The only criticism I have of my hon. and learned Friend the Member for South East Cambridgeshire (Lucy Frazer), who raised this matter, is that, of course, jobs are created not by the Government but by businesses operating under the conditions that are created by the Government. It is important we remember that, because we should not take it for granted. The jobs performance of many countries in the European Union has been pitiful by comparison. Not that long ago, this country created more jobs than the rest of the European Union put together. That is not a trivial point; it makes a difference to millions of people across the country.

The hon. Member for Bootle ought not to sneer at the number of jobs. He is also wrong about the quality of those jobs. Figures from the Office for National Statistics clearly show that most of the jobs that have been created are permanent, full-time and skilled managerial or professional jobs. They are not rubbish jobs, as he calls them in that slightly sneering way. They are good-quality jobs and are providing good livelihoods for people across our country.

[Kelvin Hopkins]

The right hon. Gentleman suggests that Governments effectively have no role in creating jobs. The reality is that macroeconomic policies have an enormous effect on the creation of jobs. Those countries that have chosen foolishly to join the euro and now have a massively overvalued currency, in effect, have lost millions of jobs in some cases. We have fortunately not been part of the euro, and currency flexibility is a crucial part of that; that is Government policy.

[Mr Harper]

I completely agree, but the hon. Gentleman misquotes me. I did not say that Government have no role. I said that Government do not create the jobs, but I explicitly said that Government create the conditions within which businesses operate and can create jobs. He is absolutely right about that, and I do not necessarily demur from what he said. The euro and the straitjacket of monetary policy across Europe has led to appalling situations in some countries where unemployment rates are very high, which I do not think is sustainable. That is why our economic performance is incredibly strong. We should not throw that away.

[Catherine West (Hornsey and Wood Green) (Lab)]

Could the right hon. Gentleman explain how, when he was Chief Whip, Thames Water failed to pay taxation between 2010 and 2014?

[Mr Harper]

I have not got any idea. I was not Chief Whip between 2010 and 2014. Individual taxpayer matters are for Her Majesty’s Revenue and Customs, and Ministers do not get involved in individual taxpayer decisions. As the Financial Secretary to the Treasury and several other hon. Members have pointed out, we have reduced the scope for businesses to avoid and evade paying taxes. We have closed that gap and are collecting more revenue that we can spend on our important public services, which I want to turn to.

The hon. Member for Bootle mentioned multinationals. He will know that there is nothing we can do unilaterally to collect money from multinationals that operate in different countries. That has to be part of an international process. He will know that David Cameron’s Conservative Government led that process and set up the initiatives. It is not very exciting, Mrs Winterton, but we are part of what I think is called the base erosion and profit-shifting programme. I am a non-practising chartered accountant, and I am afraid that we talk about such exciting things over coffee, but it is important because it relates to a set of international rules for treating where companies earn income consistently so that we tax them where they are genuinely doing their economic work. This Government cannot do that unilaterally; we have to co-operate. This Government have been leading and shaping that work across the world, not following others or trying to avoid it. Not only do we not have anything to be ashamed of, we have a lot to be proud of, which is shown in the revenue that we have been collecting.

Moving on to the substance of clause 5 and the amendments, I want to return to the point I made when intervening on the hon. Member for Bootle. There is nothing in the proposals that should alarm anybody—particularly those on lower incomes—who is playing by the rules. That issue came up when there were votes on the Ways and Means motions, and the Minister made the Government’s intentions clear and they are not what the hon. Gentleman suggested. Anybody worrying about their job at Bombardier, BAE Systems, about which we heard yesterday, or any other company should know that the Government have not proposed to alter the £30,000 tax-free limit at all. If the Government were to bring forward such a proposal, it would be governed by a statutory instrument under the affirmative procedure, meaning that the matter would come to the House and that Ministers would have to make the case at the Dispatch Box and persuade the House to back a change. There is no such proposal. The hon. Gentleman knows that it is not true and in saying that it is he is scaremongering and worrying people when they have no reason to be worried. He should be ashamed of himself.

As the Minister set out on Second Reading, clause 5 is necessary because the rules are unclear and complex and there is some abuse. Some 85% of termination payments are below the £30,000 threshold and will not be affected, but we must make sure that people do not abuse rules that are there for a good reason: to ensure that employees who lose their jobs are properly compensated and have some money to help them as they look for another job. There is no proposal to change that; this is about dealing with abuse.

On amendment 4 and “injured feelings”, there is a clear reason why it is foolish. Were it agreed to, it would introduce a large loophole into the process that would absolutely be abused. If someone wanted to offer some tax-free payments on loss of office, the payment could be labelled as “injured feelings”, rather than as something in the contract, and they could avoid paying tax and national insurance on it. The Minister should be congratulated on thinking things through and ensuring that people cannot dream up loopholes. Dealing with tax evasion is not just about acting after it has happened; it is about smartly drafting legislation so that loopholes are not left open in the first place.

[Charlie Elphicke (Dover) (Con)]

My right hon. Friend is making an incredibly powerful argument. I was just considering his remarks on tax avoidance, loopholes and, indeed, Thames Water, which was mentioned by the hon. Member for Hornsey and Wood Green (Catherine West), and it is important to remember that industrial-scale tax avoidance arose under the previous Labour Government, who did nothing at all to stop this egregious practice. This Government have been passionate, trenchant and active in righting that wrong.

[Mr Harper]

My hon. Friend is right. We hear a lot from the Opposition about clamping down on evasion and aggressive tax avoidance, and I give them credit for talking about it a lot. Unfortunately, they did not do anything about it when they were in government. The Minister and this Government talk about it a little bit, but we spend most of our time dealing with it and collecting the money, which is the right balance.

[Catherine West]

The list definitely dates from 2010—if I am not mistaken, that was when the Tory Government came to power—and includes Google, the Vodafone sweetheart deal, and Amazon. Government Members should concede that, despite some gradual improvements, we are still not where we ought to be and that this group of amendments includes things that taxpayers would like to see this House take much more seriously.

[Mr Harper]

There are a couple of things in what the hon. Lady says. She is absolutely right that we need to do more to ensure that multinational companies pay tax in the appropriate jurisdiction, but we cannot do that unilaterally. We have to work with other countries, because we need international agreement on where a company’s profits are earned. The media sometimes does not understand this, but companies pay tax on profits, not revenues, so the whole argument is about where the profits land and that has to be addressed internationally. This Government are leading that international work, not following it—[Interruption.] It is no good the hon. Member for Oxford East (Anneliese Dodds) shaking her head. UK tax professionals have been leading this work and continue to drive it forward. We have a proud record.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I have seen some of this from the inside, within the European Union. For example, I have seen measures against trusts and measures to introduce country-by-country reporting blocked by Conservative MEPs, and I frequently saw measures to attempt to introduce international co-ordination blocked by Conservative-related politicians.

[Mr Harper]

No. First, it cannot just be done at European Union level—[Interruption.] No, we have to do it globally, because many of the companies involved are US companies. The base erosion—[Interruption.] I do not know why the Opposition Front-Bench team are laughing. The base erosion and profit sharing programme comes from the OECD.

[Catherine West]

Will the right hon. Gentleman give way?

[Mr Harper]

I cannot take an intervention when I am still dealing with the first one. The base erosion and profit sharing programme is a global initiative, and we are leading on that work.

As for the point of the hon. Member for Oxford East about the EU, if I remember rightly, the reason why the Government blocked the French-driven proposals for country-by-country reporting was that they were part of an EU plan to try to drive up the total amount of tax that we take from business, not to ensure that companies pay tax in the right way. We are not an anti-tax country. That move was part of an EU plan to avoid countries being able to have competitive tax regimes and to avoid businesses locating in the United Kingdom. The French wanted to stop that because many of their businesses and smartest people now work in London or other parts of the UK, but the change was not in our national interest and I believe that that was why we blocked it. However, we need to continue the international work, and I am pleased that we have been leading on it.

My final point is about workers’ rights. I understand that the hon. Member for Bootle has to do this stuff to please people on his side, but he is absolutely wrong. This Government have absolutely no agenda of the sort that he mentioned. When talking about our leaving the European Union, my right hon. Friend the Prime Minister has made it clear that we want to protect workers’ rights. We stand four-square behind the rights that are in place, and we will be legislating for them in the European Union (Withdrawal) Bill, which I am sure will provide many hours of joy and fun in Committee. You may even be in the Chair, Dame Rosie, to listen to some of those exciting debates. We are going to protect workers’ rights, and there is nothing at all in the proposals to concern somebody who is worried about losing their job. This is about cracking down on people who have been abusing the provisions that protect legitimate workers who lose their jobs, using them as an excuse to get tax-free cash out of the system and cheat the taxpayer. That is what the proposals are about and that is why I hope that the Committee rejects all the amendments and supports clause 5.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is good to be back in the House after a bit of a recess and to be here again talking about the Finance Bill. It is our second such Bill this year—our second of three—so we are here for the long haul. I want to discuss termination payments and the relevant amendments tabled by the Scottish National party and Labour. The Government have been clear that they are just closing a loophole, but the Budget suggested that the measure will generate an extra £430 million a year. That is £430 million a year that these workers will not be getting when they receive their termination payments. However the Government want to dress it up, this is additional tax on these people who are losing their jobs and receiving termination payments. These people are in a vulnerable situation, as they are receiving a termination payment and are no longer in employment and they will be taxed more as a result.

14:00

Like the Labour party, the Scottish National party has concerns about the impact of that measure on low-income workers, and we have made that clear in our amendments. I understand that the Government are saying that 85% of those who get these termination payments and will be affected by this change are not low-income workers, but the other 15% are, and my concern is for them. If someone finds themselves out of a job, an amount of money is needed to allow them to get back on their feet and to ensure that they do not have a significant knock to their confidence, so that they can get back to the workplace after a relatively short time.

The right hon. Member for Forest of Dean (Mr Harper) used the phrase “we have closed the gap”. I am not sure that it is quite closed yet. There is still a gap as regards non-payment of tax. Fair enough, measures have been taken to move towards ensuring that tax is paid by the rich in the way it should be, but the gap has not yet closed.

[Kelvin Hopkins]

The hon. Lady may remember that the tax expert Richard Murphy calculated at one point that the genuine tax gap—not the one that the Government give us—was £119 billion a year. That has no doubt come down slightly, but there is a long way to go before we collect that tax. That figure overwhelms the amount of money that the Government will squeeze out of workers who are losing their jobs.

[Kirsty Blackman]

I absolutely agree and I think that the tax gap is probably significantly larger than the Government are suggesting. On that note, small countries are very good at having a very small tax gap—a wee plug for Scottish independence there.

We have a couple of other specific concerns about termination payments. We are still not clear about people who have faced termination as a result of injury, injury to feelings or psychiatric injury. We do not want them to receive less as a result of this change. I heard what the Minister said about those people who have been involved in discrimination cases when the decision has been in their favour, but we want to ensure that people who are trying to move on from a situation after termination but who have been injured or have suffered an injury to feelings or a psychiatric injury are not disadvantaged by this change in the rules.

I will not speak for much longer, but let me say one more thing. The Government’s explanatory notes say that the Government are looking to ensure that all payments in lieu of notice, not just contractual payments in lieu of notice, are taxable earnings. That way of putting it is what most concerns me, because it is clear that workers will be impacted by this change when it comes in. I expect that this change will be proposed by the Government and accepted, so I would very much like a commitment from the Minister that, if it comes in in the next tax year, the Treasury will do an impact assessment one or two years in to see the specific impact on that group of low-income workers who the Government suggest are in the minority. I would like to see its impact, and if it proves to be particularly negative, I want the Treasury to take mitigating steps to change it.

[James Cleverly (Braintree) (Con)]

“The narrative”—those were the words used by the Opposition Front-Bench spokesman in response to the measure. We should remind ourselves that the narrative is that we are discussing employment-related tax treatments against a backdrop of a significant increase in employment and a significant decrease in unemployment. That goes to the heart of this whole debate. Employment is something that we all want to see expanding through the UK economy. Having started and run a small business and having recruited people to that business, I know that no employer recruits someone with the intention of kicking them out. I hope that that goes without saying, but I have said it nevertheless.

[Rachel Maclean]

Does my hon. Friend agree that a small business owner with just a couple of staff has to go through a lot of stress in the whole process of making someone redundant? We should not forget that small business owners are people as well, often quite low paid because they are sacrificing salary. That can lead to mental health issues, stress and anxiety.

[James Cleverly]

My hon. Friend is absolutely right. I will respond to her point in a few moments, but it is a very important one and we must not overlook it.

We have had a jobs boom over the past few years, in stark contrast to many other developed economies around the world and across Europe, which has struggled. In particular, in the UK, which is dominated by small and medium-sized enterprises and, indeed, microbusinesses, which often have only one or two principals and one or two employees, it is important that we continue to give confidence to those businesses, many of which do not have a large administrative back-office function. That is often the case, as it was in the business that I started. I was doing the client interaction and sales, and a colleague of mine was doing the journalism side of the business, but we were also the accountants and the HR department. To give confidence to small and microbusinesses that they can employ people, it is incredibly important that everything to do with employment is as simple and transparent as possible.

At the moment, the tax treatments around severance payments are very competitive. Depending on the combination of events, the payment can be taxed any one of a number of ways. Although I did not speak about this set of clauses on Second Reading, I did welcome the Bill, and I welcome this general move to simplify, to clarify and to give small businesses in particular—although of course this affects businesses of all kinds—the confidence to employ people, knowing that the HR and financial treatment around that employment will be as simple as possible.

The Opposition spokesman kept talking as though severance payments were not taxed at the moment, and of course they are. They are taxed—

[Anneliese Dodds]

indicated dissent.

[James Cleverly]

Above the £30,000 threshold, there are tax treatments. Through the Bill, the Government are seeking to make the treatment of the figure above £30,000 most important and straightforward—[Interruption.] I absolutely welcome that.

[Anneliese Dodds]

The threshold.

[James Cleverly]

Yes, but at the moment it is £30,000, and that is what it says here—[Interruption.]

[The Second Deputy Chairman of Ways and Means (Dame Rosie Winterton)]

Order. There are too many sedentary interventions, and it makes it rather difficult for the Hansard writers, as well as everyone else.

[James Cleverly]

I am happy to take interventions, but I have never been a particularly good lip reader, so the Opposition will have to help me out on that one.

The Opposition suggested that somehow there would be some terrible Government sleight of hand to try to diddle people out of their money at a point at which they have lost their job, but it has been made absolutely clear by the Minister and in the speech made by my right hon. Friend the Member for Forest of Dean (Mr Harper) that there will be transparency in any changes. None are proposed, but if they were, they would follow the affirmative procedure, which would mean a Minister at the Dispatch Box, in front of the House, being quizzed and questioned by the House. They would have to be voted on by the House. So the idea that there would be some sort of back-office sleight of hand in this is inaccurate.

At a time when we have, unfortunately, heard news of proposed job losses in one of our key businesses, the Opposition’s approach is unwise. I understand why their Front Benchers have done this—they want to attack the Bill—and I am sure that if I were in their shoes, I would find whatever means I could to try to criticise the Bill. The simple truth is that there are no such proposals and nothing in the Bill to imply that there would be, but it is right that the Government maintain the opportunity to be flexible in the future.

[Peter Dowd]

Does the hon. Gentleman agree that in the light of the shake-up in these organisations and the dreadful stress that these people are under, introducing this clause at this time is completely inappropriate and heartless? The Government can bring it back another time if they wish.

[James Cleverly]

The hon. Gentleman will be unsurprised to hear that I do not agree with him. The Bill is where the proposal is and the passage of the Bill has been timetabled in the way that it has. The idea that we delay changing the tax treatments of severance payments to a point in time when no one in British society is in the process of losing their job is farcical, as I am sure that, on reflection, he will recognise.

As has been said, the £30,000 threshold means that 85% of termination payments are completely unaffected. I am sure we have all heard anecdotes about businesses seeking to manipulate the definitions of the various elements of severance payments specifically to avoid the tax that is owed. Surely, Opposition Members would wish to make sure, as Government Members would, that tax is applied fairly, dispassionately and transparently, and that it affects all people equally. Once again, a disproportionate burden would otherwise fall on small businesses, which do not have that administrative back-office function and cannot play manipulative games to avoid tax. They are the ones that have to pay the full tax, as is right.

Some companies may have clever back-office accountants looking at ways in which to massage the definitions of the various elements of a severance payment to minimise the tax—tax that is due to the Treasury and that we want and need to fund public services. Surely, the Labour party is not suggesting we should turn a blind eye when a clever set of accountants can massage figures, making sure that the burden falls wholly and solely on small businesses, which do not have the opportunity to employ people to do that kind of smoke-and-mirrors work? I cannot imagine that is what Labour would want to do.

Amendment 4 proposes including the words “injured feelings”. Again, I am sure that this is being proposed with the best intentions, but the Labour party must realise that putting into a Bill a definition that is so vague and open to abuse is just inviting unscrupulous businesses to use it as a means of avoiding the tax that should be fairly paid upon a severance.

[Kirsty Blackman]

I am guessing that the hon. Gentleman is unaware—perhaps he is not—that “injury to feelings” is a legal term. It is used within that profession, and it is recognised and understood. Therefore, it is completely reasonable to include it in an amendment.

14:19

[James Cleverly]

I thank the hon. Lady for informing me of that. I am more than happy to look in more detail at that definition, because I do not have it at my fingertips, but putting it in the Bill would present to unscrupulous employers something that looks like an invitation to use this as a back-door route to avoid the tax that should rightly be paid upon severance. It would be unwise for that to go through, because it would send exactly the opposite signal to what we are trying to achieve with the relevant clauses elsewhere in the Bill, which is to say, “If you play by the rules, fine.” The vast majority of people who receive severance pay have no need to concern themselves and neither do the vast majority of businesses. The only individuals who should be a little distressed by what is going through in the Bill are the very small number of companies that have abused the severance payment structures to avoid paying the tax that is fair. I have little sympathy for those companies. If they play by the rules, we are on their side. If they seek to bend or break the rules, I have no sympathy whatsoever.

[Kit Malthouse (North West Hampshire) (Con)]

I am seeking to ensure my hon. Friend understands that this does not benefit the companies; this is of benefit to individuals who take advantage. There is no tax benefit to the companies because it is income tax that is payable. [Interruption.] Well, there is national insurance—employers’ NI.

[James Cleverly]

I thank my hon. Friend for that intervention. There is little direct financial benefit to the company—

[Chris Philp (Croydon South) (Con)]

NI.

[James Cleverly]

Although, as I am reminded, there is an NI implication. Again, I have heard a number of anecdotes about conversations with departing employees from not the most honourable of companies in which things have been said such as, “If this complaint were to gently disappear, I am sure we can squeeze a little more money into your severance payment, using this route or that one.” This is one of the areas where simplicity and clarity are important, because companies may be using massaging methods to try to get a bit more money into the pocket of a departing employee, so that employee does not to have recourse to the law where inappropriate behaviour has taken place. Dangling some cash in front of them may be being used as an enticement not to take a constructive dismissal case, for example, and that is exactly the kind of thing we want to avoid.

In conclusion, I will be generous in spirit and assume that these amendments are just poorly thought through, rather than anything that is attempting to be more damaging. They would undermine the core direction of travel of the Bill, so I will not support them.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

I am grateful for the opportunity to speak in this debate. Before entering this place, I was an employment rights lawyer for more than a decade, so this issue is very important to me. I represented dismissed and discriminated against employees for many years, and saw at first hand the devastating effect that the way they had been treated had on their lives. The Bill clearly seeks to narrow the scope of termination payments. Of course tax avoidance should be clamped down on, but the Government’s own consultation did not reveal evidence of widespread abuse. The hon. Member for Dover (Charlie Elphicke) said that there was tax avoidance on an industrial scale in this area, but that simply is not borne out by the evidence or indeed my experiences as an employment rights lawyer.

[Charlie Elphicke]

The hon. Lady is a making a strong and passionate case. My concern was industrial-scale tax avoidance, because big corporates were allowed to game the tax system without any action being taken to stop them doing that, largely because of the Brownite prawn cocktail circuit that was pursued in the early 2000s. In the last Parliament, I fought a campaign to get a lot of the law in this area tightened, and I am glad to say that a lot of that was taken forward.

[Ellie Reeves]

This is not about big corporates; I am talking about adequately compensating people who have been sacked or discriminated against at work. In my experience, a sacked worker’s priority is to receive a fair settlement, not to avoid tax. It seems to me to be another example of the Government hounding people when they are at their most vulnerable, when instead they should be helping and supporting them.

The introduction of measures that will allow the Government to reduce the £30,000 tax-free threshold via the backdoor of delegated legislation could lead to profound effects on people’s lives without there being any proper scrutiny in Parliament. That is even more important given the fact that the threshold has not been increased since 1988; had it risen in line with prices, it would be £71,000 today. Amendment 2 would mean the threshold could only be increased, not decreased.

[Catherine West]

Does my hon. Friend agree that it is curious that, between 2010 and 2014, such a large company as Thames Water paid zero corporation tax, yet here we are talking about sums of £30,000? It is estimated that there is £6 trillion in tax havens, yet we are quibbling the amounts that go to individuals who have had a difficult time in the workplace.

[Ellie Reeves]

I absolutely agree. The clause will penalise people who have lost their jobs and people who have been discriminated against—

[Rachel Maclean]

Will the hon. Lady give way?

[Ellie Reeves]

May I deal with the intervention I am currently dealing with first?

People who have lost their jobs and been discriminated against often get small amounts of money in the wider scheme of things, but it makes a huge difference to their lives while they are looking for another job, getting back on their feet and getting their confidence back after the treatment they have been through.

[Rachel Maclean]

The hon. Lady is talking about people who have lost their jobs who have been discriminated against. All our hearts would go out to someone in that situation, but is she aware that the tax-free threshold for people who have been discriminated against is not affected by the provisions in the Bill? Such awards will be wholly tax-free under the Bill, so does she agree that discrimination is not relevant to the debate?

[Ellie Reeves]

Discrimination is relevant to the debate, because the Bill would introduce legislation that would tax injury-to-feeling awards on termination. Discrimination can of course have a devastating effect on a worker’s life and career, yet the Government seem to treat victims of discrimination as a way to top up the Government coffers.

[Rachel Maclean]

Will the hon. Lady give way?

[Ellie Reeves]

I have already given way several times; I wish to make some progress.

Consider the example of a mother who has been discriminated against and dismissed for taking maternity leave. Rather than enjoying her time at home with her baby, she feels stressed and anxious about the future and her capacity to provide for her family.

[Rachel Maclean]

The hon. Lady is being extremely generous in giving way. I just wish to put on the record that discrimination awards will not be affected by the Bill. I have a copy of the Bill here: there is full exemption for compensation awarded by an employment tribunal relating to discrimination awards. She is talking about a case of a mother who is discriminated against, and none of us would wish to see that—I am a mother myself and I have employed mothers—but that is not what the Bill is about.

[Ellie Reeves]

The hon. Lady is talking about discrimination awards in employment tribunals; I am talking about discrimination awards as part of termination payments. They are two distinct things. As I understand it, the Bill would tax as earnings discrimination awards as part of termination settlements. For example, were someone to settle with their employer rather than go to tribunal, any injury-to-feelings element of the settlement that was above the £30,000 threshold would be taxed. That is a significant change for people who suffer discrimination. It might affect the mum who settles with her employer following her dismissal after having a child, or the disabled worker whose employer would rather sack them and make a termination payment than make adjustments for them. Such people will be worse off because that element of their award will be taxable.

It cannot be right that, rather than supporting victims of discrimination, the Government seem to want to use them as a source of revenue. These people need protections, not to be used to provide a revenue stream, so I urge all Members to vote for the Labour amendments.

[Neil O'Brien (Harborough) (Con)]

The shadow Minister said that the measures in the Bill are part of a wider pattern of Government behaviour. Indeed they are: they follow in the footsteps of the 75 different measures we have already taken to clamp down on tax avoidance and the £160 billion we have already raised for our public services by doing so. They follow in the footsteps of the changes we have made to capital gains tax, which have increased the amount we have raised and ended the disgraceful situation in which hedge fund bosses were famously paying less tax than their cleaners. They follow in the footsteps of the changes we have made to corporation tax to prevent international avoidance—the so-called Google tax. They follow the changes we have made to the taxation of non-doms to create more balance and end the situation whereby people could be here for 25 years and still claim to be non-doms. So the Bill is part of a wider pattern of behaviour: it is part of an ongoing war on tax avoidance that the Government are waging.

On the specifics of the amendments, it seems to me that the Opposition are incredibly well intentioned. We all want the same things—we all want to drive down tax avoidance—but the problem with amendment 1 is that, in the real world, the Treasury is constantly engaged in a war of attrition with people who are constantly trying to create new loopholes and ways to avoid tax. As quickly as the Treasury closes one loophole, there are people trying to create others.

[Catherine West]

rose—

[Neil O'Brien]

I shall make some progress.

Realistically, we cannot will the end of reducing tax avoidance without willing the means. The idea that, every time the Treasury needs to make a small change to a definition to clamp down on a new form of avoidance, we should have to come back with not just new statutory instruments but new primary legislation would really put sand in the wheels of the war on tax evasion and slow down our ability to tackle this serious problem.

Amendment 4 brings a more serious problem. If it is accepted, there will be people in the tax-avoidance industry rubbing their little hands together because the Opposition will have created, completely unwittingly, a huge new loophole, which will be used to abuse the system and avoid tax.

[Catherine West]

rose—

[Neil O'Brien]

I am just about to conclude.

The measures in clause 5 are good, and they are part of a wider pattern of behaviour: a war on tax avoidance that we have waged in order to get more money for schools, hospitals and police in my constituency and others. They are part of a wider economic policy that has delivered not just record employment—the highest since 1975—and record tax cuts for those at the bottom end, but a record increase in the national living wage that will give us one of the highest living wages in the entire developed world. It is a pattern of behaviour that sees us making those who need to pay their tax pay it, so that we can have an economy that works for everybody.

[Kelvin Hopkins]

I will speak only very briefly in support of the Labour amendments as most of what I would say has been said by my hon. Friends. The reality is that, in this country, we have a revenue problem, not an expenditure problem. The Government are constantly imposing austerity measures on ordinary people and on public services, and we see the result of that in the health service, local government and education. We need to get more money into the Treasury, which means dealing with tax avoidance and tax evasion among the corporates—the big money people—not squeezing the relatively small amounts of income given to people who lose their jobs.

14:30

[Catherine West]

Does my hon. Friend agree that it is a pity that, since the start of the new Government, Mr Pickles, who was formerly a Member in this House and is now in the other place—[Interruption.] To the best of my knowledge, he has not been replaced as the anti-corruption tsar. Indeed, unless the House has been informed otherwise, that particular thread of Government policy seems to be lost.

[Kelvin Hopkins]

My hon. Friend makes an interesting point.

The reality is that many Government Members have close associations with the City and with big money. I do not want to accuse anyone individually, but that is the reality. Many have been in hedge funds and wherever. The biggest scandal of all took place within Her Majesty’s Revenue and Customs. A few years ago, Dave Hartnett, who was the boss of HMRC, was involved in sweetheart deals with the corporates, losing countless billions for the Treasury. He was not doing anything illegal, but cosy deals with corporates is not exactly public service. When he finally left HMRC, he set himself up as a consultant, advising the same corporates on how to avoid taxes. That is an absolute scandal. We should be stopping such practices.

Tax officers should be public servants who are driven by the public service ethos. At the grassroots level, the ordinary members of staff are driven in that way. Many of them are members of the Public and Commercial Services Union, with which I am associated. The PCS has argued for many years that we should have more tax officers, and that they should be better paid and better appreciated for the work that they do. I would like to think that, instead of closing tax offices and squeezing the number of tax officials, this Government would increase their number. PCS has told me on many occasions that every tax officer collects many times their own salary, so every time we appoint another tax officer, we get more than their salary coming back. That is what we should be doing. It has been a scandal for many years. Even before this dreadful Conservative Government, we were not collecting sufficient tax. We were allowing tax evasion and tax avoidance to go unchallenged. I want to see a world in which people, particularly those with plenty of money, pay their taxes at the highest level. I am not talking about ordinary working people.

Finally, it was recently suggested that quantitative easing, which is not strictly relevant to this amendment, is benefiting the better-off and not the ordinary people. It would be good if some of that QE could find its way into the Treasury coffers and help the spend on public services. That would be a better way of generating more jobs, more demand and better services in our economy.

[Rachel Maclean]

This is indeed an important Bill. I look forward to serving on the Public Bill Committee and to helping it to become law.

We have heard a number of things about narrative and the tone from the Opposition. I say to the hon. Member for Luton North (Kelvin Hopkins) that I have nothing to do with hedge funds or with rich people in the City—unless we are talking about the city of Birmingham and about my friends who are rich in happiness and goodwill, if not money.

There is always a fine balance to strike when seeking to legislate on these matters. Generally speaking, we have a good regime of employment law in this country, notwithstanding some of the questions about the gig economy, which we are currently examining in the Business, Energy and Industrial Strategy Committee. Although the gig economy is outside the scope of this debate, it does need further scrutiny.

I am worried about Labour’s amendments. This Bill provides protections. It protects the public purse against those who seek to avoid and evade tax. The Opposition have raised some examples, and they were right to do so. This Bill does not condone those people or support their actions at all.

We know that, in most cases, the British taxpayer agrees with the system of taxation, but when that system is seen as unfair, it does lose the consent of ordinary workers. It is usually people with deep pockets and the resources to take advantage of the loopholes who cause deep anxiety among the British public. Therefore, I welcome the measures that we have set out in the Bill as they will end such practice.

The Opposition’s answer to the issue of taxation and revenue is to raise taxes on everyone. That is not the Conservative view. We prefer to keep taxes on the low paid and on small businesses low—that is what we have done already—and, at the same time, to crack down on the tax avoiders. Ultimately, that brings in more tax, and underpins a thriving economy.

There are measures in this Bill that will end some exploitative practices of big businesses and of a minority of individuals in this country. That will help the Government to collect the tax that is due to them from big businesses as well as from overseas investors and rich non-doms. We cannot allow a minority of businesses to tarnish the reputation of UK plc and our small and medium-sized businesses. However, we must remember that 99% of businesses in this country are SMEs. They are not this caricature of rich, greedy hedge fund people which, frankly, I do not recognise, but we hear about from the Opposition. They are ordinary men and women up and down this country, advancing their dream of a better life by setting up a small business. In so doing, they are creating jobs for other people. I worry about the tone of this debate as it sends out a message from this Chamber. We need to send out a message that encourages people to take that risk and start businesses. That is why we need to strike the right balance.

I speak from experience. Before I entered this House, I spent 25 years working in small businesses. I ran my own business and I was a human resources director in other businesses. I have worked for some small midlands manufacturing companies, advising them on employment issues. I have seen the stress and worry that employers go through when they are dealing with a termination. Of course, termination has an impact on the employee, but let us not forget that these employers are trying to do their best under difficult circumstances. Without doubt, there are some unscrupulous employers, but I have seen small business owners lose sleep and suffer from stress and anxiety. Sometimes, despite the best efforts of management, a job does not work out. We are dealing with a trust relationship after all. We are talking about the vagaries of human nature, and, as my hon. Friend the Member for Braintree (James Cleverly) observed, small businesses often do not have access to qualified HR advice and employment lawyers as they are too expensive and beyond their budget.

Some of Labour’s amendments, particularly those on the injury-to-feelings issue, cloud the whole legislative landscape for small business owners, making it extremely difficult for them to know what to do in a stressful situation. That is why I do not support these amendments. The provisions are purely about preventing the manipulation of the rules.

[Kelvin Hopkins]

Just on that point about small businesses, I agree with the hon. Lady that they are immensely valuable to the economy and we must support them. However, would the Government not do better to stop banks such as RBS squeezing the life out of small businesses by very, very unfair financial practices, which has certainly happened to businesses in my constituency?

[Rachel Maclean]

I thank the hon. Gentleman for his intervention. I am sure that members of the Treasury team are doing everything they can on those points, and I welcome the work that they are doing in that regard. I have also seen small businesses in my constituency being affected by such practices. I do not condone them at all. We all want a country where good work is rewarded, and where employers and employees can work together. No system of legislation is perfect, but this Bill does strike the right balance. It is sensible and well thought out and we will continue to scrutinise it in Committee. Therefore, I will not vote for Labour’s amendments.

[Eddie Hughes (Walsall North) (Con)]

I often think, when I get to my feet in the Chamber, that my job is not really to talk to the people in the Chamber. I am sure that there are many clever people in here—far better educated than me—who know all the complex details of the Bill and the nuances of the financial implications. But my job is to represent the people of Willenhall and Bloxwich in Walsall North. If they were to tune into the Parliament channel at the moment, they might be slightly perplexed as to what was going on, so I thought I would try to assist them by considering amendment 1 particularly.

I would tell my constituents that £30,000 of a termination payment is currently untaxed and this Government have no plans to change that. Opposition Members might say, “Come on—what are you playing at? You’re putting something in here so you can do something sneaky in the future.” My answer is that there is actually a statutory instrument that requires an affirmative procedure. The people of Walsall would say, “What the hell is that?” And I would tell them it means that if the Minister wants to do something in future, he needs to come back to the Chamber to get the approval of this House and he also needs the approval of the House of Lords.

My constituents would then say, “That sounds pretty reasonable, but can we trust you? Surely you’re looking to take more tax off us in the future.” I would say, “Are you kidding? Look at this party. What have we done for you? We have increased the level above which you will pay tax from £6,500 to £11,500—almost doubling it. This country has the highest level of employment it has ever had and there are more women in jobs than ever before. And which party gave you the minimum wage? Not only was it the Conservative party”—[Interruption.] My apologies—small technical problem. Okay, I would say, “Which party subsequently increased the minimum wage to the level that we are at now—a massive increase on the original introduction level?” [Hon. Members: “Ah!”] And I would tell my constituents that this party has the aspiration to increase the minimum wage even further in the future.

[Peter Dowd]

Was it not the hon. Gentleman’s party that voted against the minimum wage?

[Eddie Hughes]

I think I remember the hon. Gentleman saying, “Let’s not talk about the past. Let’s talk about what this Labour Government might do for you in the future.” Well, there is not going to be a Labour Government. There is going to be a Conservative Government who will continue to increase the minimum wage. If my constituents are going to trust anybody in the House, it should be the Conservatives. We have no intention of taking more tax off people. If we did, we would have to come back to the House to get approval anyway.

[Ms Nusrat Ghani (Wealden) (Con)]

Thank you Madam Deputy Speaker—sorry, I mean Dame Rosie. I have just been thrown by that magnificent speech by my hon. Friend the Member for Walsall North (Eddie Hughes). His constituents must be very proud of him.

Let us ground ourselves for a moment. I am proud of this Government’s record on tax avoidance. Since 2010, our policies clamping down on tax avoidance and evasion have collected more than £140 billion, ensuring that our tax system is just and that everyone pays their fair share. Clause 5 makes the tax system fairer, which should be the ambition of all responsible political parties. A fairer tax system means that we can fund our vital public services without increasing taxes or passing more debt on to future generations. It is not rocket science; these are the basic rules for responsible government. To that end, I welcome the clauses we are discussing today, especially clause 5. They tighten the rules and close loopholes that have been exploited for too long, denying the Treasury what it is owed and short-changing the vast majority of individuals and small and medium-sized enterprises that pay their fair share.

I cannot be the only Member of Parliament who represents a constituency whose jobs, prosperity and opportunities are dependent on small businesses thriving, and I take every opportunity to stand up in the Chamber and back small businesses across Wealden. But back to clause 5. The tax rules on termination payments are currently unclear and confusing. Clause 5 tightens and clarifies the rules governing the tax due on these payments. The changes make the rules fairer, minimising the potential for manipulation by some larger employers, which often give the most generous pay-offs.

[Colin Clark (Gordon) (Con)]

The oil downturn has had an enormous effect in my constituency and that of the hon. Member for Aberdeen North (Kirsty Blackman). Like my hon. Friend the Member for Redditch (Rachel Maclean), I am a business owner. There are already too many barriers to employment. The Bill seeks to give clarity and the amendment would add to the complexity of employment. We do not want further barriers to employment. Does my hon. Friend the Member for Wealden (Ms Ghani) agree that we want clarity, which will ultimately help employment and small businesses?

[Ms Ghani]

My hon. Friend is spot on. We want absolute clarity. As I continue with my speech, the Committee will realise that the changes in clause 5 will barely have an impact on most people in our constituencies.

The changes are not asking someone who has been made redundant to pay more tax. The first £30,000 of the termination payment remains exempt from tax as well as national insurance contributions. As a result, the changes in clause 5 will not have an impact on 85% of people who receive termination payments. If we have constituencies where 90% of businesses are SMEs, our figure will probably be even higher than 85%. On average, 25% receive a payment of more than £54,000, so they are not exactly the least well-off in society. Those who are not following the rules and are not manipulating the loopholes will pay no additional tax. It is simply about clarifying the fine details.

14:45

I was disappointed that Labour tabled amendment 4. The whole point of clause 5 is to close loopholes, preventing tax avoidance and ensuring that everyone pays their way. Amendment 4 will open up more wriggle room. If we accept it, what is to stop larger companies routinely reclassifying termination payments on account of injury to feelings with the sole aim of paying less tax? It is a naive amendment that would create new loopholes. The public will see this as political point scoring by the Opposition. Not only did Labour not close loopholes when it was in power; it is trying to open new ones when it is in opposition.

The changes in clause 5 will bring in £430 million a year by 2022. They clarify and tighten the regulations, but I urge the Committee to reject all Opposition amendments to ensure that the changes are as effective as they can be. The Finance Bill is about addressing imbalances in the system and making important changes to the tax regime system to ensure that the rules do not unfairly benefit large companies. It will build on the hard work of the Government since 2010 that has seen tax payments increase by £1 billion. The tax gap, which has been mentioned so often this afternoon, has fallen to one of the lowest in the world at just 6.5%, down from 10% under Labour, so let us just stick with the facts. I welcome clause 5, which will add to that record and ensure the tax system works for everyone.

[Mel Stride]

What a pleasure it is to serve under your chairmanship, Dame Rosie, and to respond to the first of what I am sure will be a series of lively and exciting debates on the Finance Bill. Before I respond to some of the more detailed points raised, as well as the amendments, let me remind the Committee of the overall purpose of clause 5.

The clause is designed to tighten and clarify the tax treatment of termination payments to make the rules fairer and to prevent manipulation. Our tax treatment of termination payments is one of the most generous in the world. That is something of which we can be proud and something that this clause does not change, but the current rules can also be unclear and complicated, as many hon. Members have suggested. Some payments are taxed as earnings, others are taxed only above £30,000 and others are completely exempt from income tax and national insurance contributions. Most employers use the rules as intended, but the complexity in the system leaves it open to manipulation. Indeed, a small minority of individuals and employers, particularly those with the most generous pay-offs—this is an important point—have thought to manipulate the rules by categorising large pay-offs as termination payments, rather than earnings.

[Kelvin Hopkins]

My hon. Friend the Member for Lewisham West and Penge (Ellie Reeves) made the point that the tax-free amount has not been indexed for many years. Had it been indexed properly, it would now be £71,000, not £30,000. Would not that be a way of avoiding any of these difficulties, as the lump sum would be so much bigger?

[Mel Stride]

This is one of the most generous thresholds in the world. In fact, there is no threshold at all in Germany and the United States of America, because none of these payments is treated as being tax-exempt.

Such categorisation means that payments qualify for the £30,000 tax exemption and an unlimited employer national insurance contributions exemption. The situation is clearly unfair for the vast majority of employees, who are unable to manipulate their payments in this way. Clause 5 makes changes to prevent such manipulation in the future, while still ensuring that the vast majority pay no income tax on their payment. The first £30,000 of all termination payments will remain exempt from tax.

The hon. Member for Bootle (Peter Dowd) made a general point about the Conservative party’s treatment of workers, and I make no apologies for the way this Government have stood up for workers up and down our country. We are committed to enhancing workers’ rights. We introduced the national living wage, and we doubled fines for firms that break the rules in that respect. We appointed the first director of labour market enforcement, and we are committed, as we have constantly said, and as our Prime Minister has made clear, to protecting workers’ rights as we leave the European Union.

Nearly 85% of payments are below £30,000, so retaining the threshold will ensure that the vast majority of people going through the difficult experience of being made redundant will still pay no tax whatever. That means that the UK continues to have one of the most generous tax exemptions for termination payments, and I have mentioned Germany and the United States having no tax exemption at all.

Clause 5 tightens the tax rules for termination payments to prevent manipulation—a point made by my right hon. Friend the Member for Forest of Dean (Mr Harper) in an excellent contribution. He highlighted our overall record on bringing in taxes where attempts are made to avoid tax, and I referred to the £160 billion raised since 2010. He referred to our being at the forefront of the OECD base erosion and profit shifting project, and we have also brought in the diverted profits tax to clamp down on the kind of behaviour he referred to.

Let us not lose sight of the purpose of bringing in tax, which is to raise public finances so that we can employ doctors, nurses, paramedics, police and soldiers and pay for all those great public services that all of us hold so dear. That is why I am so proud of this Government’s record on clamping down on tax avoidance more generally.

The Office of Tax Simplification has said:

“the well-advised can often end up better off than the unadvised, as they are more able to structure their employment contract (or, indeed, their termination payment) to achieve the better tax treatment.”

The hon. Member for Bootle said in this House only last month:

“If there is genuine evidence of the abuse of payments in lieu of notice, that needs to be acted on”—[Official Report, 6 September 2017; Vol. 628, c. 206.]

It is fair to say that, while the hon. Gentleman is a very amiable fellow, he is not right about everything, but on this point he is actually very right. This clause is to deal with the very abuse about which he has previously expressed concern. We will prevent employers from categorising large pay-offs as tax-free payments, rather than earnings. Instead, employers will now be required to tax what the employee would have earned if they had worked their notice period in full. All payments in lieu of notice will now also be taxable as earnings to equalise the treatment of those with and without a contractual right to such a payment.

Finally, clause 5 clarifies that there is a total tax exemption for payments on account of injury or disability of an employee. In 2014, the Office of Tax Simplification raised the possibility of removing this exemption. It recognised that that would be a draconian approach, but it noted that interpretation is

“often a problem area for employers and their advisers.”

However, we have not pursued that approach. Instead, we have provided certainty by confirming the current position established by case law in statute. The total exemption relates to termination payments provided on account of a physical or psychiatric injury that prevents the employee from carrying on the duties of the employment, which hopefully addresses the point raised by the hon. Member for Aberdeen North (Kirsty Blackman). Therefore, employees with evidence of an identified medical condition will pay no tax on related termination payments.

Some Members raised concerns in previous debates that the Government would be taxing compensation paid to employees where it is proven that they have been discriminated against. Once again, I am happy to reassure them. All compensation for awards for proven discrimination during work will continue to remain completely exempt from tax. There was an interesting interaction between my hon. Friend the Member for Reddich (Rachel Maclean) and the hon. Member for Lewisham West and Penge (Ellie Reeves) on this point. We accept that, where there is a tribunal award in respect of injury to feelings, it is treated in exactly the same way as when an employer accepts that discrimination has actually occurred. All the clause seeks is to confirm the long-standing position that genuine compensation payments are tax exempt, while ensuring there is no loophole that can be used to reduce the tax that is owed.

Let me now turn to the amendments. As the hon. Member for Bootle set out, amendment 1 would remove the power to amend the meaning of basic pay for the purposes of calculating post-employment notice pay by regulation. When we consulted on this measure, we listened to responses that asked us to make the basic pay definition more simple. It now excludes overtime, bonuses, commission and tips. However, we introduced this power to allow the Government to act quickly and to remain flexible if there is manipulation in the future. Any amendment to the meaning of basic pay would be subject to a statutory instrument under the affirmative procedure, so the House would have to expressly approve any change to the meaning. I therefore urge the House to resist the amendment.

Amendment 2 and consequential amendment 3, also tabled by the Labour party, would remove the power to reduce the £30,000 threshold by regulation. Some Members have raised concerns during the debate that the Government intend to reduce this tax-free amount. We have no intention to do so. If we were to do so, we would, as my hon. Friend the Member for Braintree (James Cleverly) pointed out in his excellent speech, be required to do so by an affirmative statutory instrument. However, I repeat that we have no intention of reducing this tax-free amount. I therefore urge the House to resist the amendment.

Amendment 4 would include injured feelings within the definition of injury. As I outlined earlier, clause 5 confirms that termination payments provided on account of physical or psychiatric injury will be completely tax exempt—an important point raised by the hon. Member for Aberdeen North. However, the clause also confirms the established position that injury to feelings is not covered by this definition. The reason for this restriction is clear: without it, there would be a large loophole—as identified by my hon. Friend the Member for Braintree and my right hon. Friend the Member for Forest of Dean—allowing payments to be routinely reclassified on account of injury to feelings, and without medical evidence, simply in order for people to pay no tax. These things are hard to prove or disprove, and would be difficult for HMRC to police. However, it remains the case that payments on account of an injury to feelings, like any normal termination payment, will qualify for the £30,000 tax exemption. I therefore likewise urge the House to resist the amendment.

[Kirsty Blackman]

The Minister is concerned that some people might be exploiting a loophole, but as a result he has decided to disadvantage everybody who is subject to termination as a result of injury to feelings, rather than giving them the benefit of the doubt, which seems pretty unfair to me.

[Mel Stride]

The problem is that one cannot escape the possibility that the employer and the employee, who could both gain from reduced tax, will work together to suggest that there has been an injury to feelings, even when in fact there has not been. How does one prove whether or not there has been an injury to feelings? That is why there is a loophole.

Amendment 12, tabled by the hon. Member for Aberdeen North, would require a review of how these changes will affect low-income workers. That is unnecessary because only 85% of the payments are below £30,000. As I have explained, the provisions do not affect awards for discrimination at work, for example. We have also maintained the £30,000 income tax exemption. We have considered the impact on low-income workers throughout, and we will continue to do so.

In conclusion, the Government recognise that losing a job is a challenging time, but we must remain vigilant to opportunities for the tax rules to be manipulated. That is why clause 5 sets out a fair and proportionate set of changes that will continue to protect the vast majority of employees. The first £30,000 of a termination payment will remain tax-free, as will the whole of the compensation payment for discrimination during employment. However, where there were opportunities for manipulation, the loopholes must be closed, and they now will be. I therefore urge hon. Members to reject the amendments and agree to clause 5.

[Peter Dowd]

The Government seem to have taken a scattergun rather than forensic approach to this matter, affecting everyone regardless of the circumstances. Time after time they go for easy targets. If they have no intention of revising thresholds downwards, what is the point? Why are they wasting the Committee’s time? The key point is whether people who have been made redundant should have further worries about their financial future vis-à-vis redundancy, and that sets a hare running, whether the Government like it or not.

15:00

As for the consultation, the bottom line is that it was at best inconclusive. Many non-vested respondents suggested that it would be appropriate to uprate the threshold, rather than reduce it—I do not necessarily agree, but that was the case—but there is absolutely no evidence of that, which in the current climate will unnerve many people. Therefore, once again, at the last minute, I ask the Minister to withdraw this iniquitous proposal.

Question put, That the amendment be made.

15:00

Division 19

Ayes: 269

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Labour: 228
Scottish National Party: 33
Plaid Cymru: 4
Liberal Democrat: 1
Green Party: 1

Noes: 311

---

Conservative: 299
Democratic Unionist Party: 10
Independent: 2

Amendment proposed: 2, page 14, line 15, leave out “different” and insert “higher”.—(Peter Dowd.)

This amendment removes the power for the Treasury to reduce the £30,000 threshold in connection with the taxation of termination payments by regulations.

Question put, That the amendment be made.

15:20

Division 20

Ayes: 272

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Labour: 231
Scottish National Party: 33
Plaid Cymru: 4
Liberal Democrat: 1
Green Party: 1

Noes: 312

---

Conservative: 300
Democratic Unionist Party: 10
Independent: 2

15:35

More than two hours having elapsed since the commencement of proceedings, the proceedings were interrupted (Programme Order, 12 September).

The Chair put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83D).

Amendment proposed: 4, in clause 5, page 14, leave out lines 27 and 28 and insert—

‘(2) “Injury” in subsection (1) includes—

(a) psychiatric injury, and

(b) injured feelings.””—(Peter Dowd.)

This amendment explicitly includes (rather than excludes) injured feelings within the definition of “injury” for the purposes of payments which are excluded from the provisions of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (payments and benefits on termination of employment).

Question put, That the amendment be made.

15:36

Division 21

Ayes: 281

---

Labour: 232
Scottish National Party: 33
Liberal Democrat: 10
Plaid Cymru: 4
Green Party: 1

Noes: 312

---

Conservative: 300
Democratic Unionist Party: 10
Independent: 2

Clause 5 ordered to stand part of the Bill.

Clause 15

Business Investment Relief

[Kirsty Blackman]

I beg to move amendment 13, page 22, line 21, leave out

“on or after 6 April 2017”

and insert

“on or after the date on which the Chancellor of the Exchequer lays before the House of Commons a report of the review undertaken under section 809VP of ITA 2007”.

This amendment would provide that the changes in Clause 15 do not have effect until after the Chancellor of the Exchequer has laid before the House of Commons the review provided for in NC3.

[The Temporary Chair (Mr George Howarth)]

With this it will be convenient to discuss the following:

Clause stand part.

New clause 1—Review of conditions under which business investment relief is available—

‘(1) Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

(2) After section 809VO (investments made from mixed funds), insert—

“809VP  Review of conditions under which business investment relief is available 

(1) Within six months of the coming into force of section 15 of the Finance (No. 2) Act 2017, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review of the conditions under which business investment relief is available.

(2) For the purposes of this section “the conditions” means—

(a) Condition A as defined in section 809VD,

(b) Condition B as defined in section 809VF.

(3) The review shall make an estimate of the value of the reliefs granted as a result of the conditions in respect of each tax year for which the relief has been available.

(4) The review shall make an estimate of the change in the value of the reliefs granted as a result of—

(a) changes to the conditions relating to eligible hybrid companies,

(b) changes to the periods specified in sections 809VD and 809VH,

(c) changes to the grace period in section 809VJ.

(5) The review shall make an assessment of the effectiveness of the conditions in relation to the stated policy aims of the Government in relation to business investment relief.

(6) The review shall prepare an analysis of the characteristics of beneficiaries of reliefs having particular regard to—

(a) income distribution,

(b) gender and other protected characteristics under the Equality Act 2010,

(c) domicile (including deemed domicile).

(7) A report of the review under this section shall be laid before the House of Commons within one calendar month of its completion.””.

This new clause requires HMRC to carry out a review of the conditions under which business investment relief is available, including estimates of the value of the reliefs (before and after the changes proposed in this Bill) and an analysis of the characteristics of those using the relief, including their domicile status.

New clause 3—Review of the efficacy of the conditions for business investment relief—

‘(1) Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

(2) After section 809VO (investments made from mixed funds), insert—

“809VP  Review of efficacy of the conditions for business investment relief

(1) Within two months of Royal Assent to the Finance (No. 2) Act 2017, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review of the impact of the conditions for business investment relief in encouraging investment in the UK.

(2) The review shall make an estimate of additional investment as a result of the condition for business investment relief—

(a) prior to Royal Assent being given to the Finance (No. 2) Act 2017, and

(b) if the changes to those conditions in section 15 of the Finance (No. 2) Act were brought into force.

(3) The Chancellor of the Exchequer shall lay the report of this review before the House of Commons.””.

This new clause requires HMRC to carry out a review of efficacy of the conditions under which business investment relief is available and the Chancellor to lay it before the House of Commons.

[Kirsty Blackman]

I appreciate having the opportunity to speak in this second part of our debate on the Finance Bill.

The matter in hand now has been discussed a number of times over the past few months, specifically around business investment relief. Some aspects of it were discussed while tackling the Ways and Means resolutions and on Second Reading. We are still not clear what impact this will have; the Government have still not told us. An overview of tax legislation was produced at the tail end of last year, when the Bill was first in draft form. It said there was likely to be a negligible impact on the public finances, but that does not explain what is actually going to happen. It also says that between 200 and 400 individuals a year benefit from business investment relief, but again that does not really explain the impact of this relief.

We do know, however, that everybody who benefits from the relief is a non-dom. The Government claim that they are changing the way non-doms are considered and are making it less easy for them to get away with dodging taxes, but this serves to increase the ability of non-doms to get away with not paying tax. The Government suggest this is about increasing investment, but they have not been able to produce any evidence of how much investment has been created as a result of business investment relief.

I am concerned about the amount of time and energy that the House is spending on this matter. It is spending a significant amount of time: we put this measure in place, presumably, at some point in the past few years, yet only 200 to 400 individuals have taken it up. Despite the fact that the numbers are so small, however, we are again debating the matter; this is the third time that we have done so this year, when there are many very important other items on the agenda.

[Craig Mackinlay (South Thanet) (Con)]

The amount of investment that has come to the UK from non-doms is £1.6 billion since 2012. I hope that is of some assistance to the hon. Lady.

[Kirsty Blackman]

Is that through business investment relief or from non-doms in general? We asked for those figures before, at the last stage of this discussion, and they were not forthcoming from the Front Bench. It would be nice to have those figures in writing from the ministerial team.

The hon. Member for Walsall North (Eddie Hughes) talked about why we should trust the Tories and what he would tell his constituents about that. He included things such as the living wage and increasing employment, both of which have happened, but the living wage is not a living wage, because people cannot actually live on the current living wage. If he made that proposition to his constituents, what he would actually have to say is that their wages have not gone up in a decade, that household debt is spiralling and that their savings are going down. If the Tories are doing such a good job, why are people poorer as a result?

One of our concerns is that we are facing a hard Brexit that will significantly damage the economy, but measures such as this one, which is projected to bring in only a small amount of investment from non-doms, will not undo the damage created by a hard Brexit; this will not undo the 5% reduction in GDP that Scotland is set to experience as a result of Brexit.

[Vicky Ford (Chelmsford) (Con)]

As I understand it, business investment relief ensures that overseas funds can be invested in the UK. It has resulted in £1.6 billion being invested in the UK—not a small amount of money. Of course it affects overseas people because it is overseas money that we want to be invested here. I do not understand the hon. Lady’s complaint about the relief only affecting overseas people—of course it does, because it is to introduce them.

[Kirsty Blackman]

My complaint was about the fact that people are being allowed to not pay tax on stuff they are doing in this country. My complaint is that the background note provided by the Treasury does not mention anything to do with £1.6 billion and that the overview of tax legislation put forward in December last year does not mention £1.6 billion. Despite our asking the Government for that figure on a number of occasions, this is the first time it has been forthcoming. I am very pleased that it is and that we can have a reasonable discussion about whether we should increase the ability of people from other countries to come under this.

I did not want to talk for a very long time, because we have already had a number of votes and two hours of debate on the Bill. As I said, the House has spent an incredible amount of time on this, and it probably should not have. The Labour party has tabled a new clause along similar lines to the new clause tabled by the Scottish National party.

[Ms Ghani]

I am concerned that we must not put inaccuracies on record. The HMRC figures published in August 2017 show that over £1.6 billion has been invested in UK businesses under the BIR scheme. We must not say that figures are not available when they are; we just have to go to the right place to find them.

[Kirsty Blackman]

I am very glad that those figures are there, but sadly, when we asked about them in September during our discussion on the Bill, after their production, they were not mentioned. I appreciate that they are being brought up now—that is great—but they were not brought up then.

As I said, I do not want to take up much of the Committee’s time discussing this matter. We have asked the Government to provide us with more data. We have also asked them to provide data on what effect they think this change will have on the amount of investment coming in. We would very much like to see that.

[Anneliese Dodds]

I will get straight to the point. Members will not be surprised to hear that many of my concerns have already been raised by the hon. Member for Aberdeen North (Kirsty Blackman). Labour Members have expressed a number of concerns many times about the extension and scope of business investment relief, to no avail. We find it very concerning that in a context where the current Government have borrowed more than any Labour Government ever have, our Treasury is intentionally depriving itself of revenue. That might be acceptable if the deprivation served to boost our economy, but we have no evidence of any positive impact from business investment relief.

Government Members have stated that they know the raw figure for how much has been invested through this relief. That is correct. We kept calling for that, and finally, at the last minute before we started debating the Bill after the summer recess, we got some figures. They were rounded up to the nearest hundred, and when we are talking of only about 400 people, it is rather strange not to have more granularity.

That is just the figure for the overall amount that has gone through this relief. We have not been told which sectors the investment directed through this relief goes into. We have no clarity about whether, for example, funds invested through this relief might have contributed to the overheating of the British property market in high-cost areas, and we have not received any assurances that the funds going through this relief will help to promote the increase in business and human capital formation that we so desperately need, given Britain’s falling productivity.

The Government’s impact assessment published when this relief was brought in said that it would have a negligible impact on economic development. This is not a relief that has a proven beneficial impact. Until the Government accept our proposals and agree at least to review the operation of the relief, I will remain unpersuaded that its extension does anything other than offer yet another concession to non-doms and provide even greater scope for tax advisers to indicate how UK taxes can be avoided. That is why the new clauses call for a review.

16:00

From the Opposition’s perspective, the changes form part of a piece that, along with the other patchwork of measures in the Bill, could lead to pinching from sacked workers instead of root-and-branch reform of the non-dom system. They will fuel a race to the bottom on corporation tax, rather than boost skills, education and investment. The measures against tax avoidance are insipid and weak, not the decisive action we need to ensure a level playing field for small companies and the biggest multinationals, and for British taxpayers and those who benefit from non-dom status.

Much has been said this afternoon about the size of the tax gap, and there has been some confusion over the figures. Members who have looked into the matter will know that the Government’s tax gap calculation contains a growing element of error, which is a concern given the forthcoming closure of HMRC offices. The figure does not cover tax avoidance resulting from profit shifting, on which the Opposition have a strong record.

To return to our previous discussion and the points made by the right hon. Member for Forest of Dean (Mr Harper) and the hon. Member for Dover (Charlie Elphicke), measures to deliver change on an international level have been blocked by the Government.

[Mr Harper]

The hon. Lady made a relevant point in the previous debate that I did not mention at the time. Some of the things that we had to deal with early in the last but one Parliament involved multinational tax arrangements that were put in place under the previous Labour Government. We did our best to get at least some money from those multinationals. It was not enough, but we did at least move things in the right direction. Profit shifting can only be dealt with internationally by agreement. If we do not do that, we will not make any progress. As I said in the previous debate, we are leading that international effort, which did not happen under the Labour Government.

[Anneliese Dodds]

I am sorry, but it is not the case that Governments are completely unable to do anything unilaterally to prevent profit shifting. They can, for example, decide whether to execute secret sweetheart deals with large multinationals through their tax authorities, or they can decide to be transparent.

[James Cartlidge (South Suffolk) (Con)]

Is the hon. Lady seriously suggesting that, under a Labour Government, HMRC would never negotiate with a company over its tax bill?

[Anneliese Dodds]

I referred to secret sweetheart deals, of which the experience in this country has been negative. The problem is with transparency. It is important to have an open tax system that allows for discussion, but many commentators would suggest that the relationship between some of the tax authorities and some of the companies they deal with is too cosy. The problems here are not to the same extent as those in many other countries, but we need to do something when the revenue from companies, particularly those focusing on intangibles, is going down.

One way to do that is to work with other nations, but we have again seen many negative developments in that area. The right hon. Member for Forest of Dean suggested that that was uniquely down to measures promoting a particular rate of tax, but that does not bear witness to what occurred. For example, the Government pushed strongly to prevent trusts from being included in registers of beneficial ownership. That is not about tax rates; it is about transparency. Again, when Conservative MEPs voted against country-by-country reporting, that was not about tax rates; it was about transparency.

Many of the most significant developments to remove harmful tax arrangements, particularly those exploited by multinational companies, occurred under Dawn Primarolo, who was a Labour representative when she chaired the multinational code of conduct group in which dozens of harmful tax practices were identified and removed. Labour therefore has a clear and strong record in dealing with these matters.

The Opposition will do everything we can to remove the gaping loopholes that still exist in the Bill, to toughen measures against aggressive tax avoidance and to prevent the burden being placed on some of the biggest casualties of austerity: those workers who have been made redundant. I hope that the Government will pay heed. In the interests of the British economy, they need to.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

One of the strange anomalies in our tax system over the years has been the framework constructed to enable non-doms to avoid paying tax in the United Kingdom. The outdated concept of tax exemption for non-doms, which I understand dates back to 1799, is not fit for purpose in the 21st century. It takes no account of the mobility of the rich and their ability to shift wealth across jurisdictions at the click of a button and of the fact that some non-doms can use tax havens to channel their income overseas so that they can avoid paying tax.

Let us be clear that the idea that the place of birth of a wealthy individual’s parents should affect how much tax they pay in the United Kingdom is nonsensical. The fact that the UK Government should play along with that by setting various inducements in the form of remittance charges of between £30,000 and £90,000 or via business investment relief is also very concerning, as is the potential lack of scrutiny into the non-doms’ affairs and background.

In 2014-15, 84,500 non-doms living in the UK paid the UK Government £9 billion in tax, or a total of £105,000 each. Considering the size of the wealth of some non-doms this is very good business indeed, as some offshore money is brought in to the UK for investment purposes and taxed at these knockdown rates but much of it will remain outside UK jurisdiction. The generous tax breaks given to non-doms do not apply to other UK residents and take for granted the many benefits of life in the UK and of London as a financial capital. Why would nom-doms who have lived in the UK for more than a decade, who perhaps send their kids to schools in the UK, carry out business in the UK and own property here, need further incentives via tax breaks to invest here? There would be an outcry if we gave non-doms a reduced rate of income tax or capital gains tax that was not available to ordinary UK tax payers, so why are we carrying on with this charade right now? The USA makes sure that residents pay tax on their worldwide income and seems to have little problem attracting people to New York.

A good business investment is a good business investment whether it gets tax relief or not, and let us not kid ourselves that the sweetener of business interest relief is anything more than a sugar-coated inducement for non-doms who have already made their money. It is clear that stringent tests are not even done to assess whether someone applying for non-dom status meets the right criteria.

People who are temporarily resident in the UK pay tax on what they earn in the UK, as do permanent UK residents. Everyone else should pay tax on their worldwide income. It cannot be fair to be giving better treatment to some people who have lived in the UK for most if not all their lives but who, because of some convenient accident, can elect how much tax they can be liable for. Any changes to this loophole are of course welcome.

I am sceptical about how much investment into the real economy any changes to the business investment relief scheme will bring to the UK. If the Government do not decide to abolish the whole concept of non-doms, they should not allow non-doms to keep their assets outside the jurisdiction if the overseas trusts were created before they were deemed domiciled, and the Government should clamp down on any tax avoidance from mixed funds brought in to the UK.

[Mel Stride]

Clause 15 expands the scope of the business investment relief scheme because it supports economic growth and investment by encouraging foreign individuals to invest in UK businesses. Business investment relief was introduced in April 2012 and is aimed at individuals who are taxed on the remittance basis. As Members will be aware, a remittance basis taxpayer is subject to UK tax on their overseas income or gains only if they bring them to the UK. That can discourage them from bringing their overseas money into the country, even when doing so would benefit the UK economy by investing in UK business. The business investment relief scheme seeks to address this by allowing those who are taxed on the remittance basis to bring their income and gains to the UK without incurring a tax charge, provided those funds are invested in a qualifying UK business. In other words, the scheme enables overseas funds that would otherwise remain outside the UK to be invested in UK businesses.

The independent Office for Budget Responsibility has confirmed in the costings that, without this scheme, this money would simply be left offshore, and so the UK would not benefit from it. Any UK gains and income arising from the investment will be fully taxable in the UK. It is worth noting that elsewhere in the Finance Bill—contrary to the views expressed by the hon. Member for Enfield, Southgate (Bambos Charalambous)—the Government have introduced the most fundamental change to non-dom taxation in history, ending permanent non-dom status. That is more than the Labour party managed the last time it was in government. This clause supports these wider reforms by ensuring that the UK remains attractive to those people who want to live here and use their foreign income and gains to invest in Britain.

Clause 15 expands the types of businesses in which investment can be made. The new rules widen the relief so that it can be used to purchase existing shares, not just new shares. The changes also lengthen the time before a new start-up company has to become a trading business from two to five years. That will enable investment in large infrastructure projects, which can take a long time to complete. Finally, clause 15 updates the anti-avoidance rules to ensure that genuine investment is not discouraged.

Let me turn to the amendment and new clause tabled by the Scottish National party. As the hon. Member for Aberdeen North (Kirsty Blackman) outlined, amendment 13 and new clause 3 would delay the commencement of these provisions until the Government had laid before the House a review of the efficacy of the conditions for BIR. I can be clear that the Government are confident of the effectiveness of this scheme. Investment using BIR increased from £197 million in 2012-13 to £837 million in 2014-15. In only three years, that has meant total investments of more than £1.6 billion in our economy since the scheme was first introduced.

[Kirsty Blackman]

I would very much appreciate it if the Treasury would commit to publishing that information and details of the sectors in which the money has been invested. If it does that, we will all be much happier, across the House.

[Mel Stride]

I thank the hon. Lady for her intervention, and I will come on to deal with the information that the Treasury is already publishing, which is very comprehensive.

As I was saying, that includes investment in the hospitality and energy sectors, and in many different types of businesses, including small and medium-sized ones. It includes investment in manufacturing and pharmaceutical science businesses in the midlands and north of England, and a £3 million investment in aerospace businesses in the north-west of England. As I outlined earlier, the independent OBR has certified that these changes do not have any cost to the Exchequer. In other words, this is money coming to this country which would not otherwise have done so. I am sure that these are investments in our country that the whole House wants to see—investment in British businesses right across the country. I therefore urge Members to reject new clause 3 and amendment 13.

Let me also address new clause 1, tabled by the official Opposition. In a similar vein to new clause 3, it would require the Government to review the conditions under which BIR is available, including estimates of the value of the relief and an analysis of the characteristics of those using it. Such a review is wholly unnecessary, as Her Majesty’s Revenue and Customs publishes much of this information already. As my hon. Friend the Member for Wealden (Ms Ghani) pointed out, in August HMRC published official statistics on non-domiciled taxpayers in the UK, which includes a commentary document and tables. This publication contains statistics on the number of individuals who are non-domiciled, and on the total income tax, capital gains tax and national insurance contributions of the non-domiciled population. Moreover, it includes information on the current number of investments and the amount invested in the UK by non-domiciled individuals using business investment relief.

To provide the report, HMRC uses information provided by taxpayers through the self-assessment process. It is impossible to determine from an individual’s tax return whether or not they have characteristics that are protected under the Equality Act. HMRC does not have the capacity or the resource to acquire such information, so it would be unduly burdensome to place on HMRC a statutory obligation that it would be incapable of meeting. For those reasons, I urge Members to reject the new clause.

16:14

To conclude, the clause builds on the notable success of the business investment relief scheme by expanding its scope, and it will bring more money into our country. I therefore call on Members to reject the new clauses and the amendment and to agree to clause 15.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.

New Clause 1

Review of conditions under which business investment relief is available

‘(1) Chapter A1 of Part 14 of ITA 2007 (remittance basis) is amended as follows.

(2) After section 809VO (investments made from mixed funds), insert—

“809VP  Review of conditions under which business investment relief is available 

(1) Within six months of the coming into force of section 15 of the Finance (No. 2) Act 2017, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review of the conditions under which business investment relief is available.

(2) For the purposes of this section “the conditions” means—

(a) Condition A as defined in section 809VD,

(b) Condition B as defined in section 809VF.

(3) The review shall make an estimate of the value of the reliefs granted as a result of the conditions in respect of each tax year for which the relief has been available.

(4) The review shall make an estimate of the change in the value of the reliefs granted as a result of—

(a) changes to the conditions relating to eligible hybrid companies,

(b) changes to the periods specified in sections 809VD and 809VH,

(c) changes to the grace period in section 809VJ.

(5) The review shall make an assessment of the effectiveness of the conditions in relation to the stated policy aims of the Government in relation to business investment relief.

(6) The review shall prepare an analysis of the characteristics of beneficiaries of reliefs having particular regard to—

(a) income distribution,

(b) gender and other protected characteristics under the Equality Act 2010,

(c) domicile (including deemed domicile).

(7) A report of the review under this section shall be laid before the House of Commons within one calendar month of its completion.”’—(Anneliese Dodds.)

This new clause requires HMRC to carry out a review of the conditions under which business investment relief is available, including estimates of the value of the reliefs (before and after the changes proposed in this Bill) and an analysis of the characteristics of those using the relief, including their domicile status.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

16:16

Division 22

Ayes: 274

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Labour: 227
Scottish National Party: 32
Liberal Democrat: 9
Plaid Cymru: 4
Green Party: 1

Noes: 309

---

Conservative: 298
Democratic Unionist Party: 10
Independent: 2

Clause 25

Trading profits taxable at the Northern Ireland rate

Question proposed, That the clause stand part of the Bill.

[The Temporary Chair (Mr George Howarth)]

With this it will be convenient to discuss new clause 2—Review of changes to chargeability of trading profits to corporation tax at Northern Ireland rate—

“(1) CTA 2010 is amended as follows.

(2) After section 357WH (Allocation of Northern Ireland profits etc of firm to company), insert—

‘357WI  Review of changes to chargeability of trading profits to corporation tax at Northern Ireland rate

(1) As soon as practicable after the completion of the first financial year in respect of which the Northern Ireland rate is set by the Northern Ireland Assembly in accordance with the provisions of section 357IA, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review of the effects of the changes to chargeability of trading profits to corporation tax at the Northern Ireland rate made in Schedule 7 to the Finance (No. 2) Act 2017.

(2) A review under this section shall consider in particular the effect of those changes on the extent to which companies are based in—

(a) Northern Ireland, and

(b) Great Britain.

(3) A review under this section shall also consider the effect of those changes on the extent to which the profits or losses of companies and firms are Northern Ireland profits or losses.

(4) A review under this section shall also consider the effect on employment in—

(a) Northern Ireland, and

(b) Great Britain.

(5) A report of the review under this section shall be laid before the House of Commons within one calendar month of its completion.’”

This new clause requires HMRC to carry out a review after the first year of operation of the Northern Ireland rate of the effect of the changes in Schedule 7 on the location of companies in Northern Ireland and in Great Britain, the extent to which trading profits and losses are treated as subject to the Northern Ireland rate and on employment in Northern Ireland and in Great Britain.

16:30

[Mel Stride]

As with my contributions earlier this afternoon, I will set out why the Government have included this measure in the Bill, before turning to new clause 2.

Clause 25 and schedule 7 make amendments to the Northern Ireland corporation tax regime. The Government are committed to supporting growth across all parts of the UK. Creating a stronger Northern Ireland economy will benefit the entire United Kingdom.

Northern Ireland faces a unique set of circumstances and challenges. That was why, in 2015, this House legislated to devolve corporation tax rate-setting powers to the Northern Ireland Assembly, subject to commencement regulations. The introduction of the regime received nearly unanimous support from Northern Ireland’s political leaders and business community. The rate-setting powers given to the Northern Ireland Assembly are another tool to help to rebalance the Northern Ireland economy by revitalising private enterprise and attracting new investment.

This clause and schedule amend the regime to allow all small companies with trading activity in Northern Ireland the opportunity to benefit from future changes in the Northern Ireland corporation tax rate. They also make changes to ensure that the regime is robust against abuse and ready for commencement once a restored Northern Ireland Executive demonstrate that their finances are on a sustainable footing.

It may help the House if I set out how the devolved rate regime has been designed to focus on incentivising genuine investment in Northern Ireland. The regime was set out in the Corporation Tax (Northern Ireland) Act 2015.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

The Minister is making a powerful case as to why the devolution of corporation tax is a good thing for the Northern Ireland economy, but should the same case not apply to Wales and Scotland, because it creates an imbalance if one devolved Government have a set of fiscal powers that the other devolved Governments do not have?

[Mel Stride]

I thank the hon. Gentleman for his intervention, but there is, of course, one key distinction between Wales and Northern Ireland, and that is that Northern Ireland has a land border with the Republic of Ireland, which has a corporation tax rate of just 12.5%. It is particularly important in that context that we make these provisions.

[Jonathan Edwards]

The Minister makes a fair point about the land border, but large parts of Wales, including my part of Wales—the west of Wales—have a sea border with the Republic of Ireland.

[Mel Stride]

I do not think it is within the scope of this particular clause to start getting too much into the devolutionary settlement for Wales.

The regime was set out in the 2015 Act, which, subject to commencement regulations, will devolve corporation tax rate-setting powers to the Northern Ireland Assembly. The Government have committed to working with an incoming Northern Ireland Executive on options for commencement, including on timing and adjustments to the Northern Ireland Executive block grant to reflect tax revenues forgone by the UK Government.

There are two key features to the regime’s design. First, the devolved rate will apply only to a company’s trading profits; investment activities, which are highly mobile, are not in scope. Secondly, the Act requires large companies with a substantial trading presence in Northern Ireland to calculate their Northern Ireland profits separately from the rest of their profits. That calculation must follow internationally accepted principles for attributing cross-border profits. Broadly, that means that companies with profits generated in different tax jurisdictions must calculate their branch profits as though each branch were an independent entity. These profit attribution rules are important to make sure the regime works as intended.

An SME with 75% or more of employment time and costs in Northern Ireland would have all its trading profit taxed at the Northern Ireland corporation tax rate. An SME below the 75% threshold would have all its trading profits, including those generated in Northern Ireland, taxed at the UK corporation tax rate.

[Ian Paisley (North Antrim) (DUP)]

Does the Minister accept that the introduction of this will allow for the rebalancing of the Northern Ireland economy in a very beneficial way? It will allow us to generate more investment and, potentially, more private sector jobs. Of course, this corporation tax will not apply to the financial service sector, so it will not wrongly attract businesses away to Northern Ireland.

[Mel Stride]

My hon. Friend makes the very powerful point that this is not about brass-plating and shifting profits; it is about generating growth in a very important part of the United Kingdom.

Since we legislated in 2015, we have heard that some small businesses want the option to benefit from the Northern Ireland corporation tax rate on the proportion of their profits generated by trading activity in Northern Ireland. The changes made by clause 25 will give all SMEs trading in Northern Ireland the potential to benefit from the devolved rate, should they choose to do so. That will be done without watering down the rules, and it will ensure that the regime is focused on incentivising genuine economic activity in Northern Ireland. Like large companies, those SMEs that opt to take advantage of this measure will be required to calculate their Northern Ireland profits according to well-established principles. These changes deliver a fair outcome for small companies.

Let me be clear that under these rules a company’s trading profits will be taxed at the Northern Ireland rate only if the company has a substantial physical presence in Northern Ireland and if that is where the economic activity that generates the profit takes place.

New clause 2 would require HMRC to conduct a review of the impact of the changes in schedule 7 on the corporation tax system, the location of companies and the levels of employment across Northern Ireland and Great Britain. A mandated formal review is not an appropriate response to a regime that has been carefully designed to be robust in relation to avoidance and abuse, and one that, as I have said, builds on tried and tested rules when doing so. As with all policies, the Government will monitor the regime closely once it is commenced to ensure that it operates as intended. I urge the Opposition not to press the new clause.

[Ian Paisley]

Does the Minister accept that those who espouse the peace process also want to see an economic dividend post that process? Therefore, why would anyone want to vote against something that allows that economic dividend, building upon the peace in Northern Ireland?

[Mel Stride]

My hon. Friend makes a powerful point. This is about strengthening Northern Ireland’s economy, society and infrastructure, to the end that we all seek, which is a stronger and more united Northern Ireland.

In conclusion, these provisions include changes that will ensure that the regime is robust against abuse, in order to maintain the regime’s focus on encouraging genuine additional economic activity in Northern Ireland.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I thank the Financial Secretary for introducing this group. This is an important debate, not only for the future of Northern Ireland, but for this country’s overall approach to taxation and devolution.

We know—we have discussed it frequently throughout this process—that our country faces a substantial tax gap. The official estimate of the UK’s tax gap is at least £36 billion, up from £33 billion in 2010, but that is at best a conservative estimate, given that the Government’s definition of the tax gap excludes convoluted corporate structures, which we know are used by multinationals to minimise their tax liabilities. The view that the tax gap is underestimated is shared by the Institute for Fiscal Studies and the Public Accounts Committee. I think that we all agree that that £36 billion, and possibly more, is money that should be used to fund our public services, and that everybody should pay their fair share.

Corporation tax is an important part of the UK’s tax revenue. In 2016-17, HMRC collected £56 billion in corporation tax receipts. Although it is important that we keep the rate competitive, particularly in the light of the UK’s exit from the European Union, it is worth noting that we face a law of diminishing returns in this regard. At 19%, the UK’s corporation tax rate is already one of the lowest in Europe. We should be confident that we do not need to plunge the rate to rock bottom in order to encourage businesses to invest and domicile here. The UK plays host to a wealth of resources that enable it to be globally competitive, including our legal system, our language, our time zone, our infrastructure, our regulatory bodies and, most of all, our people.

It is equally important that Northern Ireland is equipped with the tools to compete in that international landscape, as has been brought to the fore recently with the punitive tariffs aimed at Bombardier in the United States. As the Financial Secretary has explained, the corporation tax rate has already been devolved to the Northern Ireland Assembly, through the Corporation Tax (Northern Ireland) Act 2015. Now that that legislation has been decided, it is for Northern Ireland’s politicians to work together and use those powers to see where the line lies between a lower tax rate and the broader appeal of Northern Ireland as a business destination. At present, the decision has been that 12.5% best achieves those ends. It is not my intention to revisit those arguments today, and nor would it be appropriate to do so, given the reasons already outlined.

What is relevant, and the reason Labour has proposed new clause 2, is the relationship between that rate and the rest of the UK. The gap between 12.5% and 19% represents a significant potential for arbitrage between Northern Ireland and the rest of the UK. Some businesses might base their decisions on where to domicile purely with regard to taxation, and that is a risk that we accept—indeed, we already compete with the rest of Europe on that basis. Our concern is that the Government are introducing measures that could be exploited by companies that will seek to abuse the proximity between Northern Ireland and the UK simply to divert profits and benefit from a lower tax regime, which would benefit neither the UK nor Northern Ireland.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The hon. Gentleman spoke a few moments ago about the importance of competitiveness throughout Europe. Does he agree that the argument that he is making runs counter to the attempts to make Northern Ireland’s private sector business more competitive, when we have a difficult relationship with the Irish Republic and its very low corporation tax, which he has alluded to?

[Jonathan Reynolds]

I take the hon. Gentleman’s point, but I would not agree with his characterisation of the situation. We are making the case that our amendment will really benefit Northern Ireland, because if the relationship was abused and firms sought to benefit from the lower rate without investing in Northern Irish jobs or business production, that would surely defeat the purpose of having a lower corporation tax rate—that is the sole point of trying to devolve the rate to Northern Ireland. Our concern is that loosening the rules could lead to brass-plating, where UK businesses are given a loophole that allows them to domicile their businesses in lower-tax jurisdictions while they continue, in reality, to operate in the UK.

[Ian Paisley]

The hon. Gentleman recognises that the one sector in which the proposals might be abused, the financial services sector, is specifically precluded from taking advantage of them. Could he provide the House with an example of a sector that he thinks would abuse the rules?

[Jonathan Reynolds]

I do not agree with the hon. Gentleman’s assertion that only the financial services sector will seek to do that. We are proposing a very reasonable review of the measure after one year, and he has nothing to fear from such an amendment.

Labour, more than any other party in this House, has consistently made the case for a level playing field between larger and smaller businesses, but a level playing field cannot be simply an equal race to the bottom in which smaller businesses are given the same tax avoidance opportunities as larger ones. That is not to say that the rule changes will necessarily lead to a flight of small and medium-sized enterprises rushing to domicile in Northern Ireland. We note that the majority of enterprises operating in the UK are honest and committed to paying their fair share. We should be vocal in praise of that contribution and its role in making the UK economy a success. However, opening what could become a loophole is significant, and it is critical that we protect against unforeseen consequences.

At this stage we have little indication of the potential impact of this measure, because behavioural effects are notoriously unpredictable to model. For that reason, we have tabled an amendment that calls on the Government to review the measure as soon as is practicable after the completion of the first financial year in which it has been fully in force. The report of that review would be presented to the House within one month. That would allow us to understand fully the impact of chargeability, see how companies are responding and react accordingly if the measure is being treated as a loophole. In turn, if evidence shows that the measure is forging stronger business links between Northern Ireland and the rest of the UK, and that the impact to the Exchequer is minimal, at least a proper assessment will have been made.

We are at a critical time when the UK economy simply cannot afford to lose revenue to tax avoidance. We have heard in the Chamber many times the arguments about why it makes little sense to drop corporation tax rates to below European averages. To do so betrays a lack of confidence in the many attractions of the UK as a domicile for ambitious companies that seek to grow their businesses. We should not be compounding revenue loss by opening a back door to even lower corporation tax rates without a framework in place to assess the impact properly.

[Jonathan Edwards]

I am sure that the hon. Gentleman agrees that one of the biggest economic challenges that we face is the huge and gross geographical wealth inequality within the British state. Is the Labour position that fiscal devolution has no part to play in the strategy for dealing with geographical wealth inequalities?

[Jonathan Reynolds]

The hon. Gentleman is not correct in that assessment. I certainly agree with him that regional disparity in the UK is one of the principal economic challenges that we face, but I do not agree that the solution is a race to the bottom in corporation tax rates between different parts of the UK. That would be neither effective nor the right way forward, and it would almost certainly fail to address the problems that he raises.

I put it to the House that new clause 2 is a sensible, pragmatic and effective proposal to deliver objectives that are widely shared by Members from all parts of the House: a prosperous Northern Ireland, an effective partnership across the nations of this country and a competitive UK with strong public finances supporting quality public services.

16:44

[Sammy Wilson (East Antrim) (DUP)]

First, I welcome the proposal in the Finance Bill, which adds to the previous decision about devolving corporation tax to Northern Ireland and giving us autonomy to make decisions about what the appropriate level may be.

I am a bit bemused by new clause 2. The argument is that devolving corporation tax to Northern Ireland and our having a different rate will somehow or other open the door to abuse. That objection could of course have been made, and more appropriately made, when the decision was made to devolve the tax in the first place. If it is open to abuse, it will create the kind of problems described by the shadow Minister, but if that were the case, I cannot understand why these issues were not raised at the time we voted on the principle of devolution. I suspect this is more to do with the fact that the Labour party is opposed to any reduction in corporation tax.

Let me address a couple of the points that have been made about extending this to small and medium-sized enterprises. The Minister made it quite clear that the criteria are, first, that they have to have a physical presence in Northern Ireland; and, secondly, that they have to register profits commensurate with the activities they engage in in Northern Ireland. That of course will have to be shown—by accounts, by employment, by the physical infrastructure that such a business would have in Northern Ireland—so there are already safeguards anyway. It can be measured whether an SME is simply moving paper money to register profits in Northern Ireland, or whether it is creating genuine jobs.

The biggest safeguard will be the decisions made by the Executive in Northern Ireland—if, indeed, an Executive is ever up and running again in Northern Ireland. We hope there will be, but that is one of the problems at the moment. It is not in the interests of the Northern Ireland Government to allow the situation that has been described by the Labour spokesman, for the simple reason that the payment for the devolution of corporation tax comes from the block grant. If we allow companies simply to migrate their business to Northern Ireland, register their accounts in Northern Ireland and declare their profits in Northern Ireland, but they do not actually create any physical activity in Northern Ireland, we will have to pay the amount of tax lost from the block grant. There will be no better policeman or policewoman of this than the Northern Ireland Executive themselves.

The review asked for—if there is any point in a review after a year—is therefore superfluous. First, there is the evidence that the company has to produce, and then there will be the scrutiny of HMRC. When we negotiated the devolution of corporation tax, compliance costs were built in, because of the additional scrutiny. It will also be in the interests of the Northern Ireland Executive to ensure that the system is not abused. For all those reasons, I believe that the new clause is superfluous. It is not needed, and we will therefore vote against it.

[Emma Little Pengelly (Belfast South) (DUP)]

I want to raise one additional point. My hon. Friend the Member for East Antrim (Sammy Wilson) has set out very well a number of our concerns about the proposed new clause. We have looked at this issue in the Northern Ireland Assembly, and I had the privilege of being the Chairperson of the Finance Committee when we considered the detail of it. We listened to concerns from small business and to those outlined by the Opposition spokesperson, but the key objective is to attract new business and jobs to the UK. We do not necessarily want movement from the rest of the UK to Northern Ireland. This is about foreign direct investment, trying to create new jobs and contributing positively to the economy of Northern Ireland and of the UK.

In Northern Ireland, we have looked at this issue for many years. It has been scrutinised by committees. We have had a range of consultants and others look at the detail of the proposal because we want it to work. As my hon. Friend the Member for East Antrim said, we do not want it to be simply an exercise in brass-plating or anything like that. We want jobs, employment and further investment in Northern Ireland.

One of the big issues in terms of the movement and type of jobs we want is certainty. Certainty is essential if we are to get commitment from companies—hopefully, big companies—to move into the UK for the first time and to invest in plant and staff recruitment. The proposal in new clause 2 to have a review after 12 months will create uncertainty. What international business would look at the UK and invest in plant, employees and recruitment when one of the big incentives to moving—the lower corporation tax rate—could be removed following a review after just 12 months? It is essential that we remain positive about the measure and have certainty about it. I reiterate: we want new jobs for the UK, and we want them in Northern Ireland.

Question put and agreed to.

Clause 25 accordingly ordered to stand part of the Bill.

New Clause 2

Review of changes to chargeability of trading profits to corporation tax at Northern Ireland rate

‘(1) CTA 2010 is amended as follows.

(2) After section 357WH (Allocation of Northern Ireland profits etc of firm to company), insert—

“357WI  Review of changes to chargeability of trading profits to corporation tax at Northern Ireland rate

(1) As soon as practicable after the completion of the first financial year in respect of which the Northern Ireland rate is set by the Northern Ireland Assembly in accordance with the provisions of section 357IA, the Commissioners for Her Majesty’s Revenue and Customs shall complete a review of the effects of the changes to chargeability of trading profits to corporation tax at the Northern Ireland rate made in Schedule 7 to the Finance (No. 2) Act 2017.

(2) A review under this section shall consider in particular the effect of those changes on the extent to which companies are based in—

(a) Northern Ireland, and

(b) Great Britain.

(3) A review under this section shall also consider the effect of those changes on the extent to which the profits or losses of companies and firms are Northern Ireland profits or losses.

(4) A review under this section shall also consider the effect on employment in—

(a) Northern Ireland, and

(b) Great Britain.

(5) A report of the review under this section shall be laid before the House of Commons within one calendar month of its completion.”” —(Jonathan Reynolds.)

This new clause requires HMRC to carry out a review after the first year of operation of the Northern Ireland rate of the effect of the changes in Schedule 7 on the location of companies in Northern Ireland and in Great Britain, the extent to which trading profits and losses are treated as subject to the Northern Ireland rate and on employment in Northern Ireland and in Great Britain.

Brought up, and read the First time.

Question put, That the clause be read a Second time.

16:51

Division 23

Ayes: 231

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Labour: 225
Liberal Democrat: 5

Noes: 308

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Conservative: 297
Democratic Unionist Party: 10
Independent: 2

The Deputy Speaker resumed the Chair.

Bill (Clauses 5, 15 and 25) reported, without amendment, and ordered to lie on the Table.

Petitions

Wednesday 11th October 2017 Commons Chamber

17:07

[Martyn Day (Linlithgow and East Falkirk) (SNP)]

I rise to present a petition relating to consumer rights. The petition stems from a problem that a constituent of mine—[Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. I ask Members to leave the Chamber quietly. I am struggling to hear what the hon. Gentleman is saying.

[Martyn Day]

Thank you, Mr Deputy Speaker.

As I was saying, the petition arises from a problem experienced by my constituent Mrs Johnston with a firm called R & J Leather, of Uddingston, in purchasing a three-piece suite. The terms of the petition are fairly self-explanatory. It states:

The petition of residents of Linlithgow and East Falkirk,

Declares that the Consumer Rights Act of 2015 does not do enough to protect consumers against rogue traders who do not comply with the terms of the Act; further that the change to the Act in 2015, which gives consumers the right to reject goods within 30 days, which are not as described or faulty, is unenforceable; and further that currently, consumers cannot take any action against companies who do not participate in the Consumer Ombudsman scheme, and this leaves the consumer with the laborious task, if the company will not co-operate, of having to take a small claims action in court.

The petitioners therefore request that the House of Commons urges the Government to review the Consumer Rights Act (2015) to ensure better protection for consumers; further asks the Government to review the terms of the Act, to make membership of a professional body for traders compulsory; and further that this action would allow consumers the ability to pursue a complaint with the Consumer Ombudsman.

And the petitioners remain, etc.

[P002063]

17:09

[Nic Dakin (Scunthorpe) (Lab)]

I want to praise the work that the Bangladesh Welfare Association in North Lincolnshire does in the community, and also to thank the association for co-ordinating the petition and bringing it to me. The petition states:

The petition of residents of Scunthorpe County Constituency,

Declares that urgent action should be taken to stop the violence against Myanmar’s Muslim ethnic minority, the Rohingya including genocide, ethnic cleansing and crimes against humanity; and further declares that the petitioners believe Rohingya Muslims are not recognised as citizens in Myanmar.

The petitioners therefore request that the House of Commons urges the Government to issue an urgent statement calling for an immediate end to all violence in Myanmar; further calling for immediate entry aid into Myanmar; and further requests that the House of Commons urge the Government to reach out to State Counsellor Aung San Suu Kyi to recognise the Rohingya Muslim community as citizens and grant legal status.

And the petitioners remain, etc.

[P002064]

University Vice-Chancellors: Pay

Wednesday 11th October 2017 Commons Chamber

Motion made, and Question proposed, That this House do now adjourn.—(Graham Stuart.)

17:10

[Dr Andrew Murrison (South West Wiltshire) (Con)]

It is a pleasure to have the opportunity to introduce this Adjournment debate and to have two hours and 20 minutes in which to discuss this important matter.

I would like to set out a bit of the context around my request for this debate. During the summer, a league table of vice-chancellors’ pay was published, showing that the average pay of a university vice-chancellor was somewhere in the region of £280,000 a year. That struck me as a large sum of money, particularly in the current atmosphere of relative austerity. I was particularly upset to notice that the vice-chancellor of my own local university, the University of Bath, a non-Russell Group, middle-ranking university, should be right at the top of that league table, in pole position at No. 1, on £451,000 a year, plus a very generous package.

Since being elected in 2001, I have been an ex officio member of Bath University’s court. I confess that it does not involve me in a great deal of hard work, but nevertheless I have been very pleased to be associated with Bath University, which—let me be absolutely clear—is a good institute of higher education that has done exceptionally well over the past several years. However, it seemed to me that I could no longer be part of the governance of Bath university, in however much a titular capacity, while its remuneration committee showed such an error of judgment as it displayed on this occasion, hence my action over the summer.

Since then, I have been inundated with correspondence from all sorts of people—not only constituents, but young people who are burdened with debt, and university lecturers, particularly those working at the University of Bath—in support of the action I took, and in some cases providing me with very long accounts about why it was right that we should look at restraining this part of public sector expenditure. I found those arguments to be compelling.

I very much welcome recent Government interventions on higher education funding, as announced by the Prime Minister recently in Manchester and reiterated by the Minister in his statement earlier today. They are absolutely right, and that will have given a great deal of comfort to those going through higher education, as well as to universities themselves. As the Minister rightly pointed out earlier, the quality of British higher education is of vital importance, and the changes made—to be fair, by the Labour party when in government, and then continued by the coalition and then Conservative Governments—were necessary to safeguard the quality of British universities and higher education in the UK. They are to be wholly welcomed and are absolutely right, but we do need to address the fundamental issue of student debt, which is causing so much grief to young people and, by extension, to the party of government. I hope that in the review the Minister alluded to earlier today we can find a solution that goes some way towards satisfying the concerns of young people in this respect and of course their families, who are usually co-contributors to higher education costs.

Mounting student debt is one of the problems of our time. Currently, young people are leaving university with an average debt of £42,000. Although, theoretically, that debt may never be repaid, and in lots of cases never will be, it is a burden that young people feel acutely. The Minister understands that and is doing what he can to look at that issue. I wish him well in his quest.

This is not simply about tuition fees; it is also about housing costs and the high rates that young people have to pay for university-related accommodation, which is often of an inferior or distinctly mediocre standard. It seems to me that that is sometimes a covert way of universities raising yet more money.

Given that universities are relatively well off, I think we all would agree that they need to be particularly careful about spending money. That comes to the crux of what I want to discuss. This debate is at a time of relative restraint in pay across the public and quasi-public sectors. We have seen, as Members of Parliament, the results of that, with the concerns expressed in our mailbags and the bow wave of pressure to relax restraint that has been in place for some years now. People see that and examples of where it has not applied, and they make adverse comparisons. When people see very high pay leaping up and up, they are entitled to feel aggrieved, particularly when they feel they have some direct involvement in paying for what they see as excess. That certainly is the case here, as my mailbag has demonstrated.

In the past five years, vice-chancellors’ pay has increased by 17.4%. It now averages £278,000 a year. At Bath, it is £451,000 a year. By comparison, the chief executive of the Royal United Hospitals Bath NHS Foundation Trust receives £185,000 a year, which most people would think is pretty good. He runs an organisation that is just as complex as, if not more so than, the University of Bath; the university employs 4,800 people against the Royal United’s 3,015.

It is right to compare those salaries with that paid to the Prime Minister, and the reason is that people generally feel it is inappropriate for people in the quasi-public sector and public sector to be paid multiples of the income of the Prime Minister unless there is a very good reason.

[Dr David Drew (Stroud) (Lab/Co-op)]

I was happy to join the hon. Gentleman in resigning from the University of Bath’s court. I never quite understood why I was on the court. I resigned in a previous incarnation, so it was only right and proper that I resigned on this occasion. Does he agree that one problem with university vice-chancellors is that they have other ways in which to supplement their income, such as where they live and their expenses, and that that information should be in the public domain? The University of Bath was very hesitant to share that information.

[Dr Murrison]

I absolutely agree with the hon. Gentleman. I will come on to some of the benefits later on in my remarks, and it will not surprise him to know—I suspect he has read the report, as I have—that the University of Bath features large in the University and College Union’s report on this subject, regrettably, as one of the arguably worst examples of what I certainly represent as excess at the top of higher education in this country, which is the matter we are seeking to resolve.

The Prime Minister is paid £152,000 a year. The Prime Minister, of course, heads the Government, and it is extraordinary therefore that the vice-chancellor of Bath University should be paid £451,000, which is pretty much three times the salary of the Prime Minister. I think most people in this country would have a general sense that that is odd, to put it mildly, and needs quite considerable justification.

[Robert Halfon (Harlow) (Con)]

I thank my hon. Friend for securing the debate and congratulate him and the hon. Member for Stroud (Dr Drew) on the principled way in which they resigned because of what I and many other people see as an outrageous amount of money. Does he agree that the pay of vice-chancellors should be clearly linked to performance measures? One performance measure must be successful job destinations, with highly skilled and highly paid jobs for students.

[Dr Murrison]

Yes, up to a point. If my right hon. Friend will allow me, I will come on to performance-related pay later in my remarks, which I have a little over two hours to make.

[Jim Shannon (Strangford) (DUP)]

I spoke to the hon. Gentleman about this matter earlier today at the Northern Ireland Affairs Committee. The Government have advised that they will deal with fat cats in the boardroom, but little has been done on this issue, which is why this debate is appropriate and necessary. At Queen’s University in Belfast, the vice-chancellor’s wage rose from £230,000 to £249,000 in 2014, but the university does excellent work and has partnerships involving medical research and discovering new drugs. That figure pales into insignificance when one discovers that the vice-chancellor of the University of Huddersfield earned £364,564 in the financial year to 2016. Is it not time to address that?

[Dr Murrison]

The hon. Gentleman is obviously correct. That is why I am bringing this matter to the Floor of the House. There is an issue with Governments seeking to control pay in that way in the private sector, but not in the public and quasi-public sectors, where things are quite different due to the large sums of public money. It is perfectly legitimate for this place and for Ministers to be involved in some of that, certainly in setting the right environment for the determination of pay settlements. We will be in an unhappy, uncomfortable place if we continue to see the escalation of recent years.

[Wera Hobhouse (Bath) (LD)]

The University of Bath is in my constituency, so I take a great interest in this. A motion raising concerns over the vice-chancellor’s pay was discussed during a meeting of the university court in February this year. The motion was defeated by the votes of the very people who had benefited from decisions on pay, despite the clear conflict of interest, which raises grave concerns about the governance of our universities.

[Dr Murrison]

I absolutely agree. The functioning of remuneration committees in universities needs to be addressed. Ministers have recently set out a vehicle for doing so, and I will come on to discuss the Office for Students and how it might be used to increase transparency about remuneration.

Remuneration committees are, to put it mildly, opaque. How they are constituted and how they operate varies, and their willingness to be open also varies greatly between institutions, as the University and College Union has made clear. Bath is probably not an exceptional example of transparency in the setting of vice-chancellors’ pay, and that lack of transparency means that the quality of those settlements is likely to be diminished. We know that well in this place, because we have been through some of this in our not-too-distant past. Sunlight is the best disinfectant, and the public getting to see what is going on often acts as a restraint on pay and benefits. Any transparency that can be linked to the process and to this part of the quasi-public sector has to be a good thing.

We also need to discuss what has happened to pay more generally within higher education. Much of the disaffection that has been expressed to me since the early summer has come from the academic staff of our universities. They have expressed some frustration that the rewards for institutions achieving great things appear to be accruing to higher management staff and vice-chancellors, whereas they have seen little benefit. They have seen their salaries increase by 3.8% over five years, which is in contrast to the average 17.4% increase for vice-chancellors, and the average pay for a tenured academic is a little over £49,000.

That seems rather strange, particularly in the context of performance-related pay. If we seriously believe in performance-related pay in the public and quasi-public sectors, we cannot simply except the majority of the workforce from that form of remuneration. That makes no sense, particularly since the drivers of quality in universities are clearly those at the chalk face—those at the laboratory bench. They are the drivers of the good-quality student experience and quality research for which this country is renowned and which we must maintain. Those people are being alienated by the egregious awards that they see coming out of remuneration committees to senior people in universities. The demoralising effect must be fully understood. When remuneration committees consider top-level pay and their legitimate need to attract high-quality people to the top of their institution, they must also understand more clearly the effect of such rewards on those who do the work.

[Wera Hobhouse]

Less than a week ago, a group of students came to my surgery telling me that rents on campus are going up by 8%. Is there any wonder that people think that students who are already under huge financial pressure will pay the high salaries of some of the management of the university? The public perception is there and it reflects badly on the reputation of our universities.

[Dr Murrison]

I am particularly concerned about university accommodation, as I said earlier. As I understand it, the position at the University of Bath is that accommodation is ring-fenced, in the sense that receipts from halls of residence are ploughed back into more halls of residence. The position in Bath is slightly unusual and it would certainly not be right, from what I have seen, to suggest that the University of Bath is using accommodation directly as a cash cow. However, it is certainly the case that the university is making a significant profit year on year from the accommodation it provides to its captive audience on the fringes of the city of Bath.

[Robert Halfon]

My hon. Friend is being incredibly generous in giving way, and that is typical of him. Does he agree that it is not just an issue of vice-chancellor pay but of senior management pay and the random way in which professors are paid from university to university, sometimes using significant amounts of funds? There is also an issue of pay disparity in senior management between men and women. There is some suggestion that BBC-type problems might be affecting our universities.

[Dr Murrison]

I am at a slight disadvantage on my right hon. Friend’s latter point, because my interest in this matter was sparked by Dame Glynis Breakwell, the vice-chancellor of the University of Bath. She is right at the top of the pay league table, so my local experience clearly does not bear his point out. I would not be surprised, however, if that was the case. The trouble is that the lack of transparency around a lot of this material in the university sector means that it is quite difficult to make that comparison. Were it to be the case—and I suspect he is right—I would clearly want the universities to address it, as it is simply not acceptable.

I was interested in my right hon. Friend’s earlier point about performance-related pay, and in preparing for the debate I did look at those universities that had significantly increased the level of vice-chancellor pay in the recent past and compared that with improvements as judged by the Complete University Guide set of metrics, which is used by most pundits and commentators to compare universities. The students certainly look at those figures very closely when deciding where to go.

I stared at the figures and compared and contrasted them for some time, and I could not see any correlation between improved pay for vice-chancellors and improved metrics. Indeed, there is some suggestion that there is an inverse correlation, which rather bears down on the point about performance-related pay. I can see very little evidence of it operating here. We need to be careful about performance-related pay, because it is set by remuneration committees and, unless its terms are available for scrutiny, the goals could be eminently achievable. That would make a mockery of the whole thing, which comes back to my central point: we must have transparency in how pay is set if we are to have any confidence in our current system.

I absolutely accept that vice-chancellor pay and benefit packages are a tiny part of a multi-billion-pound consideration in higher education. That point was made clearly by Lord Willetts when he was the universities Minister. He rightly sought to put the whole thing into perspective, but my worry is that in the remuneration of vice-chancellors and senior people in higher education we have a window into what might be going on more generally in the universities sector. If we are seeing such egregious examples of the misuse of public funds and student indebtedness, as I believe we are in this case, we wonder what is happening more generally in this sector.

Universities have charitable status. The Higher Education Funding Council governs that, with this subcontracted by the Charities Commission, which has written to me on this subject. It is important that we emphasise that charities—universities, in this case—have charitable purposes; they are meant to use their moneys for charitable purposes, to demonstrate charitable good. They should not be using money unless they can demonstrate that that expenditure in some way satisfies their charitable purposes.

The University and College Union’s report of February 2016, for which I am in its debt, sheds interesting light on this subject, because it discusses not only pay, but other benefits. Although many universities did not respond to the UCU’s request for information, and so we need to be slightly guarded about its conclusions, this report nevertheless gives us some useful data. For example, it shows that Bath’s vice-chancellor spends an average of £313 a night for hotel accommodation and that Middlesex University’s vice-chancellor spends an average of £448 a night, whereas the Independent Parliamentary Standards Authority will allow MPs £150 a night in London and £120 a night outside it. I make no comparison between MPs and vice-chancellors; what I would say is that £150 a night seems reasonable. People will not often hear a Member of Parliament being nice about IPSA, but I am nice about it; for the record, I think it does a good job in general and it has pitched that about right, because we can certainly get accommodation in London for £150 a night or outside London for £120 a night and we will not be living underneath the arches. How someone can spend £448 or £313 a night, inside or outside London, is a little beyond me—it is probably beyond my experience. That is an example of what I mean about the use of funds for charitable purposes. In what way does that expenditure advance the charitable purposes of these institutions?

It gets worse, however, because the report goes on to consider air fares. Twenty-one universities that responded to the request for information—there may well be more that decided not to respond, because they do not want to share their information, for obvious reasons—ranging from high-end Bristol to the frankly obscure, send their principals only by first-class or business-class air travel. That is a remarkable thing. The vice-chancellor of the University of Bath spent £23,000 in 2014-15 on air fares and, according to the report, flew exclusively by first or business class. Members of Parliament will know full well that IPSA will take a dim view of any Member seeking to claim for anything other than economy. The Minister may well be familiar with the ability of Ministers to fly long haul by business class if they have a meeting the next day—most Departments would allow that for Ministers, and I certainly recall it—but for short-haul flights of less than three hours most certainly that particular benefit would not be got. It seems excessive for universities—remember the point about their charitable status—to have their principals and senior staff fly first or business class habitually. In this day and age, that seems wholly excessive.

It gets worse still. Many universities provide accommodation for their vice-chancellors. The report lists accommodation occupied by vice-chancellors, and some of it looks rather attractive, particularly that in Bath. At No. 2 in the catalogue is the vice-chancellor of the University of Bath, who in 2014-15 occupied accommodation worth nearly £3 million, which I think would seem excessive to most. It would probably seem excessive to the parents who have recently delivered their children to university halls of residence, many of which are distinctly shabby.

My chief concern about all this is the lack of transparency. The University and College Union makes transparency the crux of its survey and report, and it is right to do so. In seeking the information it has sought, it has found that universities have in many cases been reluctant to engage, and we are beginning to see why. It found that 71% of those universities that responded had their vice-chancellors as members of their remuneration committees. In most walks of life, that would be considered a strange feature of a remuneration committee, even if the individual who was the subject of a particular discussion absented him or herself from the room while their issue was being discussed, because pay for an individual is not seen in isolation; it is seen against the backdrop of other senior pay within the institution and senior pay in other institutions.

I perceive a cartel operating in higher education, with vice-chancellors, and senior university staff generally, sharing each other’s remuneration processes to their mutual benefit. I am of course not in any way suggesting that there is some deliberate attempt to do that, but that seems to me to be how it might work in practice. In short, remuneration committees appear to be unsatisfactorily shadowy for organisations operating in the public or quasi-public sectors. We see instances of minutes not being published, and of redacted minutes being published. When we are dealing with public funds and student indebtedness, that is unacceptable.

My other concern is about leadership. Vice-chancellors are quintessential leaders; leading is what they do. If they are not leaders, they are nothing at all. Yet some of the most senior, such as the vice-chancellor of the University of Oxford, have been bleating about being paid less than footballers and bankers. That does not strike me as leadership. At a time of pay restraint in the university sector, as well as in others, it seems to me wholly inappropriate for the leaders of these organisations to be complicit in a system that gives them a pay rise that is way out of kilter with that being awarded to their staff. That is wholly wrong and I hope that, going forward, we will see the same sort of restraint among the senior echelons of higher education as we have seen further down the pay scale.

I shall finish by being nice about the vice-chancellor of the University of Bath, because Dame Glynis Breakwell has done a grand job, over many years, and the University of Bath is a fine institution. Dame Glynis deserves warm thanks and praise for all the hard work she has put in. I do not blame her for her extraordinarily generous remuneration package; I do blame the system that has allowed it. I am pleased that a lot of the things the Government have been talking about recently—particularly the Office for Students, which I know my hon. Friend the Minister will talk about in a moment—will help in that respect. In particular, the OfS will add transparency to the way in which senior people in higher education are paid, bearing in mind the charitable status of those institutions, and the fact that they are in receipt of large sums of public money and the proceeds of student indebtedness. If it manages to achieve that through reforming not only remuneration committees, but the general atmosphere and ethos around this, it will have done a good job and that will be an early indication that it will be a worthy successor to the Higher Education Funding Council.

The purpose of this debate was simply to discuss how we might restore some balance and confidence to this particular element of university finances. I fear that I have hardly ingratiated myself with senior university administrators. I hope very much that we will continue to remunerate appropriately these heads of our wonderful national institutions, but most can agree that pay for university vice-chancellors has become excessive and that, in the months and years ahead, we need to do something about it.

17:40

[The Minister for Universities, Science, Research and Innovation (Joseph Johnson)]

I congratulate my hon. Friend the Member for South West Wiltshire (Dr Murrison) on securing this important debate on university vice-chancellors’ pay. I am grateful for the opportunity to set out how the Government have prioritised value for money in the higher education sector, and to touch on our plans to address the issue of senior staff pay.

With students and taxpayers heavily invested in our world-class higher education system, the Government are determined that value for money should be a key priority. To that end, the Higher Education and Research Act 2017 introduced reforms to increase competition between providers and to promote greater choice for students.

The Act introduced a new regulator for the higher education sector, the Office for Students. Once it comes into being next year, the OfS will develop a new risk-based approach to regulation. For the first time, all registered higher education providers in England will be part of the same system. This new regulatory framework will promote diversity and innovation in the higher education sector in the interests of students. It will drive up quality and standards, incentivise better teaching and learning, and inspire the growth of sector-relevant skills to increase employability.

Under the Act, one of the duties of the OfS is to have regard to the need to promote value for money in the provision of higher education by English providers. It will ensure more transparency for students so that they can have greater confidence that their money is being well spent.

We introduced the Teaching Excellence Framework with the intention of raising the standard of teaching in higher education and giving students clear information about where they are likely to receive good teaching and to get great outcomes from their time at university. Almost 300 providers took part in the first trial year of the TEF, including all but two English universities and more than 100 colleges and private providers. Excluding those with provisional ratings, roughly 75% of entrants received either a gold or silver award.

We are making it a priority for students to know their rights and to have fair contracts that enable them to take action if the reality of their experience does not match what was advertised. With a view to ensuring students obtain value for money, the OfS will use its powers, including setting a regulatory condition for providers to create an environment in which providers fully meet their obligations to students as consumers, and students will be able to build an understanding of their corresponding rights.

If a student is not satisfied with their course or provider, they may wish to switch to a different one. That has been difficult for many students up until now. The Act places a duty on the OfS to monitor and report on arrangements for students to transfer, and empowers the OfS to facilitate, encourage and promote such arrangements.

The Department for Education will shortly be launching a consultation on behalf of the OfS. That will include a proposed condition of registration requiring providers to publish information on their student transfer arrangements.

Many universities are large and complex organisations. Highly skilled and talented individuals are needed to run these organisations effectively. In some cases, universities may be competing internationally to secure the right managerial expertise. Higher education providers are rightly private, autonomous and independent institutions—they are not in the public sector and they are not really in the quasi-public sector—and they are solely responsible for setting the salaries of their staff. Nevertheless, these providers also have a public service mission, as my hon. Friend mentioned. With public funding providing the sector’s most significant single source of income, there is a legitimate public interest in promoting the efficiency of providers. This must include senior staff pay.

There is a risk that increasing salaries diverts money away from a provider’s core mission of teaching and research. Exceptional pay can only be justified by exceptional performance. The Government have consistently used their annual grant letter to HEFCE to call on universities and their remuneration committees to exercise restraint on senior staff pay. In my most recent letter, I made it clear that efficiency must include demonstrating restraint in setting senior pay. The Department’s consultation will contain proposals reflecting my requests that the OfS introduces a new condition of registration requiring the governing bodies of providers with access to student support to publish the number of staff paid more than £100,000 a year. For staff paid more than £150,000, providers will be required to publish their justification for these salaries. In the event that a provider fails to meet the requirements of this condition of registration, the OfS will be able to use its powers, which include monetary penalties, to take action.

The OfS will also issue guidance to help providers to meet the requirements of the condition of registration, and use its power to investigate the governance of an institution through assessments of management effectiveness, economy and efficiency where there are substantiated concerns.

[Robert Halfon]

I thank my hon. Friend for his work on this. Will the consultation also look at potential gender-related pay disparities?

[Joseph Johnson]

I am grateful to my right hon. Friend for mentioning that because we do indeed plan to ensure that such issues are considered by the OfS.

Arrangements will also be made to compile and publish data on the levels of HE senior staff remuneration beyond what is required by the registration condition, with a particular focus on protected characteristics such as gender and ethnicity. Further to this, I have called on the sector to work through the Committee of University Chairs to develop and introduce its own remuneration code. Such a code should encourage greater independence of remuneration committees, the publication of the pay ratio of top to median staff pay and explanations of top pay increases that are greater than increases in average pay in an institution as a whole. I am pleased that the CUC has confirmed that it plans to take forward the development of this code.

I am confident that these actions, in addition to our wider reforms to the higher education sector as a whole, will deliver much greater transparency and accountability, as well as improved value for money for taxpayers and for students. We have legislated to facilitate greater competition within the sector and choice for students. We have successfully promoted measures such as the TEF to help to students to make better informed decisions that affect their futures and enhance teaching quality, and we have acted to address escalating senior staff pay.

Let me be absolutely clear, for the avoidance of all doubt, that I want to see the relentless upwards ratchet in senior staff pay come to a halt, and I am confident that the measures the Government have put forward through the OfS will achieve that. I hope that my hon. Friend the Member for South West Wiltshire is reassured by the Government’s strong action and, once again, I congratulate him on securing this important debate.

Question put and agreed to.

11:30

House adjourned.