The Economy and Living Standards

Anne McGuire Excerpts

Thursday 12th June 2014 Commons Chamber

[Mrs Anne McGuire (Stirling) (Lab)]

It is a privilege to speak in this debate. This is the last opportunity I will have to speak in a Queen’s Speech debate as a Member of this House. I have to say, however, that the Queen’s Speech we heard last week was not nearly as exciting as the first Queen’s Speech I heard in this House in 1997.

I want to pick up on a few of the comments that have been bandied around by those on the Government Benches, not least the hon. Member for Aldershot (Sir Gerald Howarth), whom I have the pleasure, of course, of following. “Tax and spend” is one comment they throw about, but they do not say what that actually means. We can look around our country and our individual constituencies and see what the spend was all about. It was about replacing schools that had not been looked after for tens of years. Many of our schools were Victorian-built, and many of our hospitals had been built at the end of the 19th century, never mind the 20th century.

[Robert Flello (Stoke-on-Trent South) (Lab)]

Will my hon. Friend give way?

[Mrs McGuire]

Very briefly, as I want to take Mr Speaker’s advice.

[Robert Flello]

I agree with everything my right hon. Friend has said, but she will also remember, as I do, Conservative Members standing up time and again and calling for schools and hospitals in their constituencies; and how they have the shameless gall to say otherwise is beyond me.

--- Later in debate ---

[Mrs McGuire]

I remember it well, and there is now the mirror image of that: they are in government now, and they are calling for even more expenditure in their individual constituencies. That certainly puts a whole new slant on “Think nationally—or globally—and act locally.” It is almost as though there is no connect between the two.

I first want to welcome two elements of the Queen’s Speech, however. One is the commitment to continue to implement new powers for the Scottish Parliament, which I hope will be done within the context of a United Kingdom—the “No” badge I am wearing today has absolutely nothing to do with me not wanting anybody here to speak to me.

I also welcome the increased penalties for those not paying the national minimum wage, but I say to the Government that it is one thing to increase penalties, but it is another thing actually to enforce the law. There is absolutely no point in increasing the penalties if there is not going to be the enforcement welly behind the national minimum wage to tackle employers who are behaving illegally.

I want to concentrate on a couple of areas. One is zero-hours contracts, which the Chancellor blithely dismissed. Yes, zero-hours contracts have, of course, been with us for a long time, and, yes, they can in some circumstances be a useful resource in managing a work force, but the difference between what happened in the past and what is happening now is that zero-hours contracts have effectively become part of the mainstream in how our employment market is operating.

Let us consider a couple of companies that have a presence in most of our areas. Sports Direct has 23,000 workers, and 20,000 of them are on zero-hours contracts. That is 86% of its work force. That is not about Sports Direct having flexibility. Some 80% of Wetherspoon staff are on zero-hours contracts, too. That is not just about managing the bulges in customer numbers at certain times of the day or at the weekend, but is a policy decision by those companies to use zero-hours contracts as an employment tool. What is even worse is that having 1 million or so workers on zero-hours contracts helps to disguise the unemployment figures—[Interruption.] Is the hon. Member for Burton (Andrew Griffiths) talking to himself or does he want to intervene on me?

[Andrew Griffiths (Burton) (Con)]

The right hon. Lady condemns companies that employ people on zero-hours contracts, but will she condemn the more than 60 Labour MPs who also do so?

[Mrs McGuire]

The hon. Gentleman was obviously so busy talking to himself that he did not hear what I was saying, which was that there are instances in which zero-hours contracts might well be suitable. However, a zero-hours contract approach is now being embedded in our mainstream way of employing people. That stokes up people’s uncertainty about their income, creates instability in their lives and leaves them unable to get finance, even for rented accommodation. Those who think that these contracts provide numerous hours’ work each week should note that, according to the Office for National Statistics, an individual who worked for just one hour within its survey period was considered to be employed. The attractive mirror image to this situation for the Government is that they can describe those people as having come off the unemployment register, creating a false figure for the unemployment in our constituencies. The previous Tory Government used to shunt people on to incapacity benefit. The present Government are using zero-hours contracts in much the same way.

The second issue that I want to address is how people can afford housing in the present environment. According to the Scottish Parliament information unit, the average pay in Scotland is £26,472. The average price for a semi-detached house in my constituency is £140,000. I know that Members who represent constituencies in the south of England might think that that is not a high price, but we must ask ourselves how on earth people are going to get a mortgage or other finance for such a house on a salary of around £26,000 a year. It just does not compute. In my area, we have strong tourist accommodation and food industries, in which the average wages have actually dropped. They now average £10,558 a year.

Taking all those factors together, we find a situation in which many people in this country do not feel that they are benefiting from the rosy picture painted by the Chancellor earlier. We do not have to move far from this Chamber to find evidence of that. I wonder how many of us think about how our low-paid workers in the House of Commons dining rooms or in the Tea Room are even managing to get into work. Some of them are on zero-hours contracts. We need to look at the long-term implications for those people.

This Queen’s Speech is, I hope, the last under this Government. I also hope that it predates a new Queen’s Speech after the general election under a Labour Government led by my right hon. Friend the Member for Doncaster North (Edward Miliband). I can find no better description of the Conservatives than that used by Disraeli. He said of Conservatism that it

“offers no redress for the present, and makes no preparation for the future.”

This Queen’s Speech fulfils both those criteria.

Charter for Budget Responsibility

Anne McGuire Excerpts

Wednesday 26th March 2014 Commons Chamber

[Stephen Phillips]

I do not know what the shadow Chancellor and his Treasury shadow team say in private. I do know that when I talk to people in my constituency, they have not forgotten that the authors of the troubles that we found ourselves in and that we are still recovering from and will be for a considerable time are those who again want to hold the reins of power.

[Mrs Anne McGuire (Stirling) (Lab)]

In the hon. and learned Gentleman’s historical and economic analysis, when is he going to factor in a little thing such as an international financial crisis that did not start in Britain?

[Stephen Phillips]

He is going to factor it in right now, and he is going to tell the right hon. Lady the truth. The truth is that this country was in a much worse place to weather that financial crisis because of the fact that we had borrowed more money than any other developed economy. Indeed, we had borrowed just about as far as we could possibly go. The truth of the matter is that we would have weathered the financial crisis, which I quite accept was an international crisis, if the last Government had done their job properly, fixed the roof while the sun was shining and had not over-borrowed—if they had not done all the things that led to the difficulties that this coalition Government have had to pick up.

It is quite apparent that the hubris of Opposition Members knows no bounds. There is no plan. They have no plan for the British economy other than the plan that they had during their time in office: spend, spend, spend. That is one reason why it is important that this measure comes before the House today.

Let us recall precisely what we are talking about. This is a prudent measure from this Government, and it updates the charter that was previously laid before the House, and which the House approved. When history comes to look at the record of this Government and the things that they have done, it will see not just that the Government have taken steps to cure the British economy of the malaise from which it was suffering in 2010; they have in addition taken the necessary measures to address the structural changes that were required so that we can go forward. The establishment of the Office for Budget Responsibility—obviously, four years ago—means that we can never again see economic and fiscal forecasts of the type that enabled the previous Government to spend so foolishly the money that we simply did not have.

The charter comes before us again today, and in part it does so because of the announcement, quite correctly, by my right hon. Friend the Chancellor of the Exchequer that we need to take action. We need to take action to stop benefits running out of control as they ran out of control under the previous Government. The figures have been quite startling, and they have been given in this debate. The simple fact of the matter is that this charter, with its cap on benefits, is something that the House should support. I am pleased that the Opposition are going to support it; they should all be supporting it, because it is the right thing to do.

Currency in Scotland after 2014

Anne McGuire Excerpts

Wednesday 12th February 2014 Westminster Hall

[Katy Clark]

I suggest to the hon. Gentleman that perhaps the first step would be for his colleagues to put in requests to speak.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my hon. Friend accept that yesterday, we had a six-hour-and-four-minute Opposition day debate, promoted by the Scottish National party and Plaid Cymru, in which all these issues could have been aired?

[Katy Clark]

Indeed, and we had a debate last Thursday on Scotland’s place in the Union. Those were the kind of events that we should use to explore these issues.

There is a great deal of debate on the subject in Scotland, but the decision taken there in September will have massive implications for the whole United Kingdom. I regret that in the two and a half years that we have been having this debate in Scotland, the quality of debate has not been higher. I hope that getting more people involved in the discussion, and getting more information and facts on the table, will improve the debate’s quality. I hope that today the UK Government will give their perspective on some of the questions, because that is part of what is required to continue the debate, which should be taking place here, in the Scottish Parliament, and communities up and down Scotland.

One of the most important decisions that an independent Scotland would take, if we voted for independence in September, would be on the currency, so I strongly congratulate my hon. Friend the Member for Edinburgh South (Ian Murray) on his choice of subject for debate, but currency is only one of the many economic issues that will be central to people’s decision making. To be honest, I never believed that I would see a referendum on Scottish independence in my political lifetime. It was not something that many people in Scotland argued for, historically. It is really only as a result of the electoral success of the Scottish National party—we can perhaps discuss the reasons for that on another occasion—that we are in this position. I also honestly do not believe that colleagues from the Scottish National party in this room ever believed that they would have a referendum on independence in their political lifetime.

Many people in Scotland are in the same position: when we go from door to door and speak to people, many genuinely have not finally made their mind up on the issue—particularly, I think, because of the economic turbulence that we have been living through in the past few years. It will not be simply an emotional choice that people make in September. Historically, many people who are sympathetic to independence have made that choice on emotional grounds, and grounds to do with identity and culture, but in the coming months, economic issues will be central to people’s decision-making processes.

I welcome the debate and some of the statements that have come forward in the past few weeks from people at UK level. I am a member of the Select Committee on Business, Innovation and Skills; we had the Secretary of State for Business, Innovation and Skills before us last week, and he gave some of his views on the issue. We still need to get a lot more information to make decisions.

I have always looked at things from an economic point of view, and considered decisions on the basis of how I think we can improve the democratic accountability of our economy. I have always considered how we can take economic decisions that are more central to how we run our economy in the interests of ordinary people, rather than elites. That will be central as we go forward.

Blanefield (Landfill Tax Liability)

Anne McGuire Excerpts

Tuesday 10th September 2013 Commons Chamber

[Mrs Anne McGuire (Stirling) (Lab)]

I am grateful for the opportunity to raise my concerns about the application of the landfill tax across the UK to cases in which, due to time elapsed and the lack of any responsible polluter, the burden of liability for contaminated land remediation costs, plus landfill tax and value added tax, falls on the occupier of that land. The incidence of contaminated land across the UK is apparently wide scale with limited public funds available to assist businesses and residential occupiers who find themselves bearing the considerable burden of such costs where they are at no fault in the creation of the contamination.

My understanding is that the landfill tax was introduced in the 1996 Budget as one of a series of measures aimed at reducing waste placed in landfill sites. Part of the aim of the tax—a laudable aim—was to tackle polluters of land that required remediation to make it safe, with a tax on top that could be used to penalise and discourage polluters. For recent instances of such contamination it may be, and often is, possible to identify and penalise the polluters, but as many sites are a legacy from this country's industrial past, the polluter has often disappeared into the mists of time.

I initiated this debate to raise the plight of 13 residents and their families who are the unfortunate victims of the landfill tax legislation. Blanefield is a village in the Stirling constituency to the north-west of Glasgow. In the 19th century it was home to a large calico printing works, which I understand at its peak may have employed 500 men, women and, given the historical time, children. With the demise of the calico printing trade at the end of that century there was overcapacity and factories like the Blanefield printworks closed down. By 1910 the last of the buildings had been demolished and the site lay dormant until the late 1950s, when a residential housing development was built on it.

Rolling forward, in 2012 a random soil analysis was carried out by the local authority and it found traces of lead and arsenic left as a legacy of the printing process. Under the Environment Act 1990 there is a responsibility on the local authority to ascertain whether land is deemed “contaminated land”. The local authority in Stirling believes, based on the scientific outcomes of its investigation of the ground and the risk assessment, that there is evidence that the land is in such a condition that it presents a “significant possibility of…harm” to human health.

In this case we are talking about a printworks demolished more than 100 years ago, and unfortunately, as you can imagine, Madam Deputy Speaker, the council has been unable to identify any party who “caused or knowingly permitted” the presence of the substances in question, because the owners of the printing works went out of business over a century ago and there is no indication of a successor company. Also, the council has no evidence that any of the developers who built the current dwelling houses on the site knew about the contamination. Part IIA of the Act provides that in the absence of a causer or knowing permitter, the liability falls on the owners or occupiers of the affected land.

Here we come to the nub of the problem for the owners of a group of 13 homes identified as owning land affected by lead and arsenic contamination. The latest estimate of the cost of remediation to these 13 gardens is over £600,000, including value added tax. Liability for the individual proprietors of the 13 gardens varies from £14,000 to £100,000.

Under the 1990 Act, statutory guidance provides that where an appropriate person of this kind owns and occupies a dwelling on the contaminated land in question, the enforcing authority should consider waiving or reducing its cost recovery where that person satisfies the authority that at the time he or she purchased the dwelling they did not know, and could not reasonably be expected to have known, that the land was adversely affected by the presence of a pollutant. It further provides that any such waiver or reduction should be to the extent needed to ensure that the person in question bears no more of the cost of remediation than it appears reasonable to impose having regard to their income, capital and outgoings.

The Library has clarified for me that although the 1990 Act regulates contaminated land remediation, environmental issues, as the Minister will no doubt tell me, are devolved to the Scottish Government. I am advised, though, that contaminated land soil was originally exempt from the landfill tax. However, that exemption was phased out in 1998 due to concerns that soil was not being cleaned, but simply landfilled. I understand that until 2008 land remediation specialist companies did not have to pay landfill tax when they disposed of contaminated soils. But the Government argued that this exemption encouraged remediators to take the easy “dig and dump” route, rather than follow a more sustainable option, cleaning and reusing soil. They then announced that they would end the exemption for the contaminated sites, although the Government promised that any money they received would be reinvested through an expansion of existing rebates for remediation. These arrangements appear to apply only to companies and not to individuals who find themselves liable to pay the landfill tax for remediation of contaminated soil.

Given that the implementation of land remediation is now a devolved issue—I am sure the Minister will expect me to recognise that, but his time will come after my contribution—I am aware that the funding to mitigate the remediation costs of individuals and residents such as those on the Blanefield site in Scotland is available via Scottish budgets. In 2008 the previous Scottish Executive set up a contaminated land grant fund of £17 million available to Scottish local authorities. The new Scottish Government did not continue this fund but instead, under their single outcome agreements with local authorities, included a sum to allow them to take responsibility for funding in such situations. In the Blanefield case Stirling council has made available a sum of £125,000 towards the remedial works needed.

Aside from this substantial liability for residents, matters are exacerbated by their liability for landfill tax and value added tax levied on residents. These taxes remain reserved to the Treasury. Although they will be devolved to the Scottish Parliament, that devolution will not take place until 2015, so this is very much an issue for those currently on the Treasury Bench. I hope the Minister will agree that it could not have been the intention of Government when introducing the landfill tax in 1996 or in 2000, when some changes were brought in, to impose such a draconian burden on residents who inherited a remediation bill.

In the Blanefield case the local authority has come forward with the likely costs of the remediation work plus landfill tax and VAT. This works out to a total of £633,000 for the 13 affected residents. We do not need a calculator to work out what the burden on individual residents would be. Even taking into account the council grant of £125,000, this leaves the residents liable for £483,000. Individual liability ranges from £11,000 up to £79,000. Astonishingly—I hope the Minister will accept this—the landfill tax element of these bills forms up to 61% of the remediation costs for some individuals. With the addition of VAT that element rises to 79% of the total burden being placed on my 13 constituents.

At this point I feel it is relevant to show the impact of the imposition of landfill tax on the 13 residents affected. Many of the residents are approaching retirement, have retired or have families, and the spectre of this potential burden on them is the cause of a range of stress-related deteriorating health problems. One resident commented to me that

“everyday major financial decisions cannot be made without the spectre of this financial liability hanging over us”.

Another commented that his wife is a keen gardener and knowing that the garden that she has tended and cared for will be destroyed in the near future is hard to take. So it is not just a financial issue for some of those involved.

A repeated concern expressed by residents is that their properties are worth considerably less or nothing due to these remediation costs, a situation that is particularly galling as the landfill tax and VAT elements are such a major component of their bills. So that the Minister does not think that I am exaggerating, I want to give him just a couple of examples. At one house the works cost £6,158 and the total cost without the council grant is £14, 855. The landfill tax plus VAT represents 59% of that. If we take into account the Stirling council grant, the same house will have a reduced burden of £10,996, but the percentage of the landfill tax and VAT will be 73% of the total bill. In another case, at the other end of the spectrum, a bill that starts out at around £42,000 rises to £79,319, 78% of which is for the landfill tax and VAT. Therefore, there is a significant financial burden.

Another resident told me that they used all their savings to buy their property in Blanefield. Given the blight that the contamination places on the properties, that means real difficulties for them and anyone who might wish to purchase their house in future, because mortgage companies will not lend funds against the property.

What comes over strongly in the representations I have received from residents is that they are innocent victims of a polluter that existed over 100 years ago. Although the remediation costs alone, less the assistance offered by the local authority, could possibly be managed, the additional burden of the landfill tax and VAT takes it beyond their means. For that reason, I ask the Minister to look again at my previous request, outlined in my letter of 24 June, for the landfill tax and possibly the VAT elements in this case to be waived.

The Minister will know that I wrote to him subsequently in August seeking a meeting to discuss the situation. I am still awaiting a response to that request, but the burden on my constituents is so great that I thought it appropriate to raise the matter on the Floor of the House in an Adjournment debate. In his reply of 19 July, he pointed out the involvement of Stirling council and stated that

“he hopes they will consider any additional hardship in accordance with the Statutory Guidance”.

I trust that, in taking on the concerns I have raised in this short debate, he will acknowledge that the burden on my constituents, which I am seeking to ameliorate, is a substantial landfill tax and the associated VAT, which is not, and should not be, the responsibility of either the local authority or the Scottish Parliament; it is quite firmly the responsibility of Her Majesty’s Treasury.

In the meantime, as well as reconsidering a waiver—I hope that he will—perhaps the Minister will look at the option of working with the local authority to mitigate the costs of the landfill tax and the VAT. That way, the Treasury would need to deal with only one agency, rather than 13 individual residents. Alternatively, it could be managed through the links with the Scottish Government. I hope that he will be flexible enough in looking at ways that this could be managed. I hope he will not give me a message tonight about precedent and how difficult it is, because I think that he might be able to find ways of dealing with it.

My constituents have been in limbo since they discovered that their land was affected, with their properties and their lives effectively blighted. As I stated earlier, I cannot believe that any Government, either of my party or the Minister’s, ever intended the landfill tax to impact on individuals in the way it has for the 13 Blanefield residents in my constituency. I hope that he will look at the case again and take action in whatever way he deems appropriate to help them by raising the burden of the landfill tax and VAT, which create the bulk of their liability. I look forward to his response, but I say to him that where there is a will there is a way, and the Treasury is expert in finding a way. I hope that he will be able to find a way tonight to help my 13 constituents who are facing a burden that they never expected.

[The Economic Secretary to the Treasury (Sajid Javid)]

I congratulate the right hon. Member for Stirling (Mrs McGuire) on securing the debate and representing her constituents with such passion and eloquence. The households she has referred to have come into very difficult circumstances though no fault of their own, as she has said. I am sure that every Member present can appreciate the pressures and stress that the situation is causing everyone involved. It is absolutely right that the right hon. Lady has brought this issue to the Chamber’s attention and allowed us to give it the consideration it deserves.

I will begin by reiterating some of the facts of the case. I will then provide some further background about the current legislation in this area. Finally, I will suggest what I believe is the best course of action for the right hon. Lady and her constituents.

As the right hon. Lady has explained, the residents under discussion live in properties that were built on the grounds of a former Victorian printworks. Following a recent inspection by the Scottish Environment Protection Agency, the land on which those properties were built has been deemed contaminated. The law now requires that this land be remediated.

As the right hon. Lady has explained, the liability for that remediation is laid out in the contaminated land regime. In the first instance, it is right that the polluter will be held liable to cover the cost of remediation. However, as we have heard, in this instance the original polluter—namely the Victorian printworks—is no longer in existence. In the absence of the original polluter, the responsibility for carrying out the remediation works, under the Environmental Protection Act 1990, falls to the current landowner.

It is worth making it clear that in about 90% of cases involving contaminated land, the land will be remediated when the site is redeveloped for future use, as stipulated under planning policy. In most instances, the liability will fall on a company or business, which will be better placed to cover the costs of remediation. In the small percentage of remaining cases, however, the costs of remediating the land will fall on owner-occupiers.

Of course, in most circumstances the value of the land will rise once it has been decontaminated. In this respect, the logic of the law is to ensure that the landowner, who will be set to gain from the increase in the value of the land, should also be the person liable for the costs of the clean-up. Unfortunately, in the instance under discussion, this means that the liability is set to fall on 13 households, to which absolutely no blame can be attached.

As the right hon. Lady will be aware, the landfill tax aims to reduce the environmental damage caused by sending waste to landfill. In increasing the cost of landfill, the tax also aims to encourage more sustainable waste technologies, such as recycling. At a national level the tax has been successful in achieving those goals. Waste material is increasingly being diverted away from landfill towards reuse or recycling. The tax has also been successful in ensuring that the environmental damage associated with the disposal of such waste is properly reflected in the landfill price.

As the right hon. Lady acknowledges, the tax is designed to ensure that the polluter pays, and she is right to point out that in this particular instance the original polluter will not be paying. I am sympathetic to the argument. However, it will not be possible for the contaminated waste in this instance to be exempt from landfill tax, as the right hon. Lady proposes. It may be useful, in explaining why such action is not possible, to set out how the landfill tax currently operates.

Under the current system, the tax liability falls on the landfill operator, not the person delivering the waste. Those landfill operators must check the content of the waste to determine what rate of tax to apply. There is, however, no requirement on the site operator to satisfy themselves as to the origin of the waste or the type of business, local authority or private individual that has delivered it to them. Therefore, introducing an exemption, as requested, would require a fundamental change to the structure of the tax. It would also place an excessive future burden on all landfill operators, who would be forced to check and verify the origin of each item of waste that had been sent for disposal at their site.

It is also worth remembering that a change such as that suggested by the right hon. Lady would be legislatively complex. It would require amendments to primary legislation. That would mean, first, that it could not be made with the haste required for the right hon. Lady’s constituents to benefit; and secondly, that it could create a more complex law on landfill. As hon. Members will unfortunately be only too well aware, complexity in any tax can increase the opportunity for evasion. While she has suggested changes to the current legislation, for wholly the right reasons, certain unscrupulous individuals or businesses may well seek to use such an exemption for wholly the wrong reasons to reduce their own tax liabilities. So while I acknowledge and sympathise with the real difficulties that these households, in particular, are facing, it would be extremely difficult for the Government to alter national policy to benefit her constituents without creating unintended issues for landfill policy as a whole.

I therefore believe that this is an issue that would be best resolved at a local level. As the right hon. Lady may know, the national legislation sets out the framework that explains how responsibility for covering the costs of remediation should work and how they are determined. As she said, it is the local authority’s responsibility to apportion the liability. It is my understanding that in this instance the issue of determining who should bear responsibility for remediation of the land was performed by Stirling council’s legal services department.

[Mrs McGuire]

I do not think that anybody is disputing the role of the local authority in this. It has carried out that role and within its responsibilities it has made a substantial and significant contribution to the costs. The issue that I wish to raise with the Minister lies directly within his jurisdiction. It is about the liability of individuals to bear the responsibility of this—an unintended consequence of previous legislation. I would have hoped that he would be able to be creative in thinking of ways in which these individuals would not have to be liable.

Finance (No. 4) Bill

Anne McGuire Excerpts

Monday 16th April 2012 Commons Chamber

[Rachel Reeves]

The hon. Gentleman said that investment is coming to Britain, but business investment fell by 2% last year, whereas a year ago the OBR predicted that it would grow by 8%. The reality is that the economic data show that investment is falling and the OBR says that nothing in the Budget will materially affect the economic forecast. The proof of the pudding is in the eating and the numbers show that things are moving in the wrong direction. I find it incredibly out of touch for Government Members to try to speak about the economy as if it is booming and creating jobs and as if businesses are investing when all the economic data show just the opposite. Jobs are being shed and investment is falling, rather than rising.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my hon. Friend recognise that although the investments mentioned by the hon. Member for Skipton and Ripon (Julian Smith) are welcome, increased growth in jobs will come from the small and medium-sized enterprise sector, where there is a complete depression in confidence and job growth? It is all very well to comment on the large investments, but the stimulation should come from those small and medium-sized enterprises, and they do not feel at all confident.

[Rachel Reeves]

I thank my right hon. Friend for that intervention. It is good to hear from a Member who is a little more in touch with the realities facing businesses up and down the country. As she points out, many small businesses are being starved of cash because the Project Merlin agreements for bank lending were not worth the paper they were written on, and at the same time the Government have done nothing in this Budget to help small businesses. The Opposition have proposed a national insurance holiday for all small businesses taking on new workers. That would go a long way towards trying to relieve some of the pressure on the small businesses that are struggling so much right now. The Opposition hope to see measures in the Finance Bill and the Budget to get the economy moving again, to give hard-pressed businesses and hard-working families a break and to give young people who are looking for work some hope for the future. We would be cutting national insurance contributions for small businesses taking on new workers, we would be cutting bills for hard-pressed families by reversing the Chancellor’s badly timed VAT increase, and we would be funding new jobs for young people and new investment in affordable house building by taxing excessive bank bonuses.

Hon. Members do not have to take our word for it—the damning judgment of the Government’s own Office for Budget Responsibility should really worry Members on the Government Benches. Box 3.1 on page 46 of its latest economic and fiscal outlook, headed “The economic effects of policy measures”, says that the only policy measure with a measurable economic effect is the cut in corporation tax, which it says will lead to an

“increase in the level of GDP of 0.1 per cent by the end of the forecast period.”

So in the whole Budget there is just one measure that will have any impact on growth whatever, and that is an impact of 0.1% in around five years’ time. Beyond that, the OBR says in its policy costings document:

“We have made no other material adjustments to the economy forecast as a result of Budget 2012 policy announcements.”

When it comes down to it, the measures in the Bill will do nothing to change the gloomy growth forecasts, nothing to ease the squeeze on living standards and family budgets, nothing to get businesses investing at the rate required to regain our place in the global economy, and nothing to create the new job opportunities that are so desperately needed by today’s younger generation. No, instead of taking serious steps that might help to make up the ground our economy is losing, the Chancellor and his Chief Secretary have turned from their failed experiment in expansionary fiscal contraction and resorted to the notorious Laffer curve as their latest excuse for an economic policy which hits hard-working families and rewards those who are already very wealthy. It is the last refuge of a Government who have lost any sense of purpose beyond the protection of privilege.

Those who are unfamiliar with the obscure corner of esoteric economic theory that is the Laffer curve might like to take a lesson from the Business Secretary who recently explained it. He said it was

“an all purpose, but weak, rationale for cutting the taxes of rich people”

which has

“been correctly dubbed ‘voodoo economics’.”

Indeed, he told his party conference—perhaps some hon. Members on the Government Benches remember this—that some people believe

“that if taxes on the wealthy are cut, new revenue will miraculously appear. I think their reasoning is this: all those British billionaires who demonstrate their patriotism by hiding from the taxman in Monaco or some Caribbean bolt hole will rush back to pay more tax but at a lower rate.”

As he said to his conference, “Pull the other one!”

Perhaps we should instead take a lesson from the Secretary of State for Energy and Climate Change, who warned:

“We should remember that in 1981, President Reagan based most of his policies on the drawing of the Laffer curve done on a serviette…President Reagan used that as the basis for his policy of slashing taxes, and the United States Treasury went into huge deficit…The evidence to support the Laffer curve is weak.”—[Official Report, Standing Committee B, 4 May 1999; c. 66.]

I agree, but those lessons are now being forgotten and we have the same old Tories dusting down the same old trickle-down economic theories. It did not work in the 1980s and it will not work today either. People will see it for what it is: out of touch and the same old Tories.

--- Later in debate ---

[Rachel Reeves]

In Budget 2011, there was £1.1 billion-worth of tax avoidance measures, which is less than half the amount spent on such measures in Labour Budgets. We want more wealthy people to pay their fair share, but nothing in the Budget ensures that. The Government need to tackle tax avoidance, but they should not compensate for that by giving a tax cut to the wealthiest in society.

The Chief Secretary to the Treasury said about the 50p rate:

“The idea that we are going to shift our focus to the wealthiest in the country at a time when everyone is under pressure is just in cloud cuckoo land”,

but it turns out that the Liberal Democrats have joined their Conservative coalition partners in cloud cuckoo land. I hope that the Chief Secretary is enjoying himself there, but I am sure he had hoped to cover his humiliating climbdown by pointing to the benefits to lower and middle-income earners from the increase in the personal allowance. However, as I said in my intervention on him, the Institute for Fiscal Studies has made it clear that the gains from the policy are cancelled out many times over by the losses suffered by ordinary families as a result of the Government’s tax hikes, benefit cuts and tax credit changes. The Government are giving with one hand and taking much, much, more from ordinary families, pensioners and young people with the other.

The cover story that the wealthy will pay more in other ways is unravelling day by day. We have already seen that in the House this afternoon. The cost of the cut to the top rate of income tax is 10 times higher than the amount of money raised by the cap on tax reliefs. I hope we all agree that more must be done to reduce genuine tax avoidance, but that should be a standard feature of every Budget and every Finance Bill. I direct the Chief Secretary to slide 9 of the assessment that the Institute for Fiscal Studies has made of the Budget. It shows that between 2002 and 2009, the Labour Government reduced tax avoidance by over £12 billion, while this Budget reduces tax avoidance by a mere £800 million—less than Labour’s annual average, and less than all but two other Budgets in the past decade. That is before one takes into account the fact that included in the Government’s definition of tax avoidance is tax relief for donations to charities including UNICEF, Macmillan Cancer Support, the Royal National Lifeboat Institution, Oxfam and many others. The fact that the Government cannot tell the difference between that and real tax avoidance shows how incompetent and out of touch they are.

[Mrs McGuire]

Does my hon. Friend agree that it might have been more appropriate for the Chancellor to discuss with the charity commissioners whether bogus charities were taking part in tax evasion schemes than to have come up with an ill-considered tax proposal?

--- Later in debate ---

[Mark Field]

I am not sure I can, to be honest, but suffice it to say it is a significant amount. I can appreciate, though, that in these difficult times it is hard to make the case for the huge bonuses in the banking sector, other than to say that it is a globally competitive industry. Financial services will be a big industry going forward. Growth in Asia is adding 20 million or 25 million people a year to the ranks of the global middle class in India, China and South Korea. These will be the customers and consumers, not least because of the cultural reasons for saving, of the financial services industry in the future. That is one reason, in the midst of trying to rebalance our economy, as the Chief Secretary mentioned, we should not lose sight of our global competitive advantage. In the financial services industry, in particular, our global advantage is looked upon jealously in France, Germany and other European countries. They often feel that some of the anti-banking rhetoric coming through will be entirely self-defeating.

[Mrs McGuire]

Will the hon. Gentleman give way?

[Mark Field]

If the right hon. Lady will forgive me, I would like to make some progress because others want to get in.

The provisions in clause 8 on the high-income child benefit change to income tax will doubtless be the subject of extensive controversy. In spite of the misgivings I have expressed since the scheme was proposed in October 2010—in particular, that it seems to act as a penalty on aspiration and families in which one parent stays at home to rear children—I accept the overriding need to reduce the vast fiscal deficit. However, the tapering of the change to income tax for those earning between £50,000 and £60,000 a year will result in marginal tax rates of 65% for families with three or more children. Conservatives such as me believe in promoting incentives, but it is difficult to reconcile the proposition that those earning more than £150,000 are deemed to require a highest marginal rate of 45%—a proposition that, I hasten to add, I fully support—with the proposal that earners with several children at the level affected by clause 8 must apparently settle for paying marginal rates of up to 20 percentage points higher. I fear that the controversy in middle Britain about these child benefit changes will continue to resonate strongly in the months ahead.

--- Later in debate ---

[Mrs Anne McGuire (Stirling) (Lab)]

It is a pleasure to follow the hon. Member for Dover (Charlie Elphicke). I am always interested to hear people say that they are a poacher turned gamekeeper, because I always want to know what they did when they were a poacher. The hon. Gentleman laudably admitted that he was a tax lawyer, and it would be interesting to know whether, in giving people professional advice, he ever recommended that they set up tax-efficient systems for managing their taxes. I point out to him that, in more than 15 years in this House, I never once heard a Conservative Member ask the Labour Government to do anything about tax avoidance rules. There is too much piety among Government Members as they try to suggest that we wilfully ignored the matter of tax avoidance. I hope the hon. Gentleman will reflect on what his party was doing during those 15 years, while he was being a poacher, not a gamekeeper.

[Barry Gardiner]

If my right hon. Friend looks at all the Budget measures put through by the Labour Government, she will see that the average figure achieved by each measure to clamp down on tax avoidance was £1.8 billion. The most that this Government have managed is £0.8 billion.

[Mrs McGuire]

My hon. Friend the Member for Leeds West (Rachel Reeves) dealt ably with that point earlier today, and I am delighted that my hon. Friend the Member for Brent North (Barry Gardiner) has echoed her comments.

[Lorely Burt]

Will the right hon. Lady give way?

[Mrs McGuire]

I want to make some progress.

The test of a Budget is not the easy headlines on the day of the announcements, but how quickly and radically it unravels in the days and weeks after the initial statement. In the case of the 2012 Budget, we did not have to wait long. It was full of political symbolism but it had little substance. The Chancellor said:

“We will…consult on the introduction of a large annual charge on…£2 million residential properties”.—[Official Report, 21 March 2012; Vol. 542, c. 804.]

That was no doubt a sop to the Business Secretary, but the reality is that only 3,000 houses a year, at most, will be covered by the charge, and it will be easy to avoid. A property valued at £2,000,010 might be made available at a bargain price of £1,999,999.99. A gentleman such as the hon. Member for Dover could drive a coach and horses through such an arrangement. It was a policy that sounded good on the day but it will be no more than warm words when it comes to raising revenue or catching those who seek to avoid paying tax.

[Mark Reckless (Rochester and Strood) (Con)]

The right hon. Lady accuses Conservative Members of not saying anything about tax avoidance, yet I have been going on about the issue of high-value houses for several years. My right hon. Friend the Chancellor also mentioned it before the election. Yes, perhaps we should go further than the figure of £2 million and, yes, perhaps the measures on capital gains should go further than just covering companies, but the Labour Government did absolutely nothing on those issues.

[Mrs McGuire]

The problem is that the measure was paraded as a bit of camouflage for the reduction in tax for those earning more than £150,000 a year. On the one hand, the Chancellor was reducing tax for the wealthiest, but he was also going to attempt to clobber them. This policy did not come from the heart; it was part of the camouflage being used in the Budget.

There has also been a general sleight of hand over taxation. The Chancellor recently stated that he was “shocked” by how little the wealthy paid in taxes, yet this Budget gives a tax cut to the 14,000 people who earn £1 million a year or more. That will give them about £40,000 each year, while the average family with children earning just £20,000 will lose £253 a year from this April. That is on top of the VAT rise, which is costing the average family £450 a year. Furthermore, another 678,000 people of all ages who are currently paying the basic rate of income tax might feel pretty aggrieved when they wake up to discover that they have been catapulted into the 40p income tax rate, not because they are earning massively more but because the Chancellor has not raised the threshold in line with inflation—[Interruption.] I do not know whether I am interrupting a kind of confab of the horizontal speaking to the vertical on the other side of the Chamber, but I will continue, having drawn attention to the significant noise coming from the other side.

The Treasury forecasts suggest that there will be 5.7 million higher rate taxpayers by the end of this Parliament. That is nearly double the 3.1 million at the time of the last general election and treble the number when Labour came to power in 1997. Of course the whole increase in personal allowance that has been paraded here today is outweighed by the VAT rises, the changes to tax credits and the higher petrol duties. As my hon. Friend the shadow Chief Secretary demonstrated earlier, the average family with children will be worse off—not on the basis of our figures, but on the basis of those of the Institute for Fiscal Studies. The Chief Secretary’s answer to my hon. Friend was both evasive and complacent.

According to Citizens Advice, poorer families that get housing and council tax benefits will be just £33 a year better off when the tax threshold rises because as their income goes up, their benefits go down. For every person eligible to pay tax who also receives housing or council tax benefit, the Department for Work and Pensions will claw back some £187 of the £220 notional annual gain. The Citizens Advice chief executive, Gillian Guy, said:

“Raising the personal tax allowance is an empty gesture for struggling families on low wages who get housing and council tax benefits. For these families, the weekly gain is less than the price of a loaf of bread”.

In the name of simplification, the Chancellor launched his £3 billion tax raid on pensioners over the next four years. The freeze in the personal allowance for pensioners will see 4.4 million pensioners who pay income tax losing an average of £83 a year from next April. People who turn 65 after next year will, of course, lose most—up to £322 a year. The additional age allowance was introduced in the 1920s in recognition of the fact that those who have retired do not have the same capacity to increase their income. It is to the undying shame of the current Chief Secretary—a man for whom I once had some respect when he was a Liberal spokesperson on welfare issues—that he came forward today to try to justify taking money from those pensioners who have no other means of increasing their income, telling them that he was doing it in the interest of simplification.

[Charlie Elphicke]

Will the right hon. Lady give way?

[Mrs McGuire]

I would love to give way to the hon. Gentleman.

[Charlie Elphicke]

I do hope the right hon. Lady will forgive me for breaking into her ad hominem attacks on just about every Government Member, but I point out to her that no pensioner loses any money whatever under these proposals because of the increase in the basic state pension that the Government have put in place.

[Mrs McGuire]

Frankly, the increase in the state pension came about because inflation was at 5.2% in September and the Government could not get out of it. I do not know whether the hon. Gentleman worked for Grant Thornton when he was a tax accountant, but Mike Warburton of Grant Thornton said:

“The Chancellor is allowing age allowances to wither on the vine. He is effectively phasing them out but there is always a price to pay for simplicity.”

The burden will fall on pensioners with below average incomes. Those are not our words, but those of an eminent firm of chartered accountants.

[Charlie Elphicke]

Will the right hon. Lady give way?

[Mrs McGuire]

No, I have been generous enough with the hon. Gentleman.

Also hidden in the statement was the announcement that there would be a further cut in the DWP’s welfare budget. I do not know how many people heard the Chancellor slide over the fact that there was going to be a £10 billion cut in the DWP budget. He did not say where it was coming from; it was left hanging in the air. He made a passing reference to his colleague, the Secretary of State for Work and Pensions, and to what a wonderful job he would do in cutting £10 billion. Where is that £10 billion going to come from? Will Ministers cut the carer’s allowance? Will they make further reductions in housing benefit for those in work as well as those who are out of work? Will there be a further erosion of support for disabled people, including disabled children? Will the Treasury freeze state pensions? Ten billion pounds will not come out of thin air. It will have to be paid for, but so far we have been given no details, or even a broad-brush indication of where it will come from.

My hon. Friend the Member for Llanelli (Nia Griffith) made some valuable points about the stimulation of growth. It is worth comparing what the present Government have done with some of the steps taken by our Government when we were faced with a recession—a global recession, not a recession manufactured in this country. [Interruption.] Did I hear a voice from somewhere?

[Lorely Burt]

I was reflecting, perhaps a little more vocally than I should have from a sedentary position, on the suggestion that the recession was not of the right hon. Lady’s making, and was not fuelled by debt or anything else of that kind. She seemed to be entirely confident that her party had played no part in the creation of the circumstances in which we now find ourselves, although the former Chief Secretary left the message “There is no money.”

[Mrs McGuire]

I almost wish that I had not heard the comment that the hon. Lady made from a sedentary position. What I said was that it was a global recession that we faced in 2007-08, not—as the Government would have us believe—a recession that had been manufactured in this country. It spread across the whole of the western world, and I hope that the hon. Lady will reflect on her comments.

As my hon. Friend the Member for Llanelli pointed out, during that dire time the car industry was helped by the scrappage scheme, there were changes in stamp duty and reductions in VAT, there was a future jobs fund, payment of tax was deferred for small businesses, and there were changes in mortgage support for those who became unemployed. The purpose of all that was to ensure that people stayed in their jobs, or, if they faced unemployment, were given the support that would enable them to obtain other jobs. This, however, was a Budget of ill-considered consequences. We have a granny tax that will make some pensioners poorer. We have a charities tax that is so badly thought out that Conservative Back Benchers are holding up their hands in horror. We now have a panicked consultation. We have tax proposals that may ruin the caravan industry, which involves manufacturers in the north of England. Hairdressers face paying VAT on their chairs that they hire for their salons. We have tax proposals that cannot be implemented.

One of the Treasury Ministers must explain to me what an “ambient temperature” is when it comes to assessing the imposition of VAT on savouries, which is almost impossible to implement. Is a pasty or a steak bake or a pie cooling down after it has been baked liable for VAT, or is one warmed up so that it can be sold also liable for VAT? That is a nonsense of a policy, and I hope that Ministers will reflect on it as well.

The Budget on 21 March was a weak attempt to highlight the coalition’s mantra that “we’re all in this together”, but has shown that nothing could be further from the truth. It was the Budget of a complacent and cynical Chancellor who feels that he has nothing more to do to stimulate growth. A Budget worked out by an out-of-touch Chancellor is now being finessed daily as it unravels in the light of scrutiny and analysis. In other words, this Budget was a lost opportunity.

Amendment of the Law

Anne McGuire Excerpts

Monday 26th March 2012 Commons Chamber

[Mr Vaizey]

Oh, it was the Budget book. It looked like an iPad cover. Forgive me; I keep mistaking the hon. Gentleman for somebody who is on top of new technology. We have not yet decided where the aviation centre will be sited, and it may not even be in one place. It may be sited in two or three different areas.

To become Europe’s technology hub, we need world-leading digital infrastructure. The average broadband speed in the UK is already 7.5 megabits a second. In Northern Ireland, almost all the population have superfast broadband, and in England almost two thirds of the population do. In England, Northern Ireland and Wales, roughly three quarters of the population now have broadband. UK broadband coverage is in fact almost universal, with 91% of the country having access to speeds above 2 megabits a second, putting us in the top 20 countries worldwide. We are far ahead of many countries, including Morocco, where only one in 10 of the population have access to fixed-line broadband.

We have come a long way, but we need to go further. We are already investing £530 million in rural broadband, which will deliver superfast broadband to 90% of the country by 2015, two years earlier than Labour planned. More than half of our local broadband projects have been approved, and all will be approved by the end of this year. Procurement for some projects will proceed in the next few months.

[Mrs Anne McGuire (Stirling) (Lab)]

Would the Minister like to come to the village of Balquhidder in my constituency and tell people that they might be better off living in Morocco? I see that the Chief Secretary is trying to tell him where Balquhidder is. In that village people still have dial-up, not even slow broadband, never mind fast or superfast broadband.

[Mr Vaizey]

First, that is why we are spending the money that we are, and secondly, we are working in partnership with the Scottish Government, so the right hon. Lady should have a word with them if she wants to put her constituency at the forefront of broadband roll-out in Scotland.

We will have provided universal coverage by 2015 without Labour’s telephone tax, which in any event would not have raised sufficient money to do the job. Not only do we have the most ambitious rural broadband programme, but the Chancellor announced in the Budget new measures to upgrade the coverage in our cities. The UK’s four capitals, Manchester, Birmingham, Bristol, Newcastle, Leeds and Bradford will share a £100 million pot to ensure that they are among the best-connected cities in the world.

--- Later in debate ---

[Mrs Anne McGuire (Stirling) (Lab)]

During the Minister’s opening speech, I asked him about a community, running along one of the spiral routes in my constituency, which still has dial-up—or wind-up—broadband. If I did not mistake him, I think he advised me to speak to the Scottish Parliament, but I find that a somewhat strange response, because the Red Book mentions a Scottish trunk road, the A82. Coincidentally, that happens to run through the constituency of the Chief Secretary to the Treasury, the right hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander). It is interesting that, if someone is the apologist in Scotland for this Government, they need to get their trunk roads mentioned in the Red Book.

Prior to the Budget and against the background in my constituency of unemployment among women and young people that was falling in 2010, and a dramatic increase in the claimant count of 35% in young people and of about 22% in women in 2012, I conducted a survey to see whether there was any advice that the Government could take on board. It suggests that my constituents are completely out of tune with the Budget, because 93% said that it was a good idea to have a tax on bankers’ bonuses to fund employment for young people in Stirling and throughout the UK; 85% agreed with a temporary reduction in VAT on the tourism and hospitality sector, an important industry in my constituency; and 87% supported a one-year reduction in national insurance contributions to give every small firm on my patch the incentive to take on extra workers. There was no mention of the reduction of the 50p rate for those earning £150,000, no mention of a raid on the age allowance for those of state pension age—a measure that has been in place since the 1920s—and certainly no mention of the so-called pie tax.

The latter proposal crystallises the chaotic thinking at the centre of the Government’s financial strategy. It must have sounded like a jolly wheeze—“We’ll tax pies and rotisserie chickens and so on”—but I have an image of us all wandering round Tesco doing our shopping with thermometers in our hands to check the ambient temperature of the chicken from the rotisserie. Will the VAT be put on to the chicken when I take it out of the hot cupboard, or will I find when I get to the checkout, having wheeled my trolley around the supermarket, cooling the chicken with the soft winds of Tesco or Sainsbury’s, that it has become a cold chicken, which means that the VAT will not be charged? This does not apply only to supermarkets. My hon. Friend the Member for Rutherglen and Hamilton West (Tom Greatrex) tells me that yesterday or the day before he went into a bakery shop in Callander in my constituency and got bread rolls. It is a very good bakery shop called Mhor Bread. In future, he might have to ask the person behind the counter, “Can you wait until the bread rolls cool down because I don’t want to pay 20% more for them?”

It is a mish-mash of a policy. However, I will try to give the Government some comfort and save Her Majesty’s Revenue and Customs tens of thousands of pounds on the consultation by pointing out that the European Court has already ruled on this issue by saying that where the level of service is minimal, the purchase should be considered as a simple food sale and not be subject to extra tax. I ask the Minister and the Government to abandon this foolish, mish-mash piece of financial thinking. It did not make sense when the Chancellor said it last Wednesday, it does not make sense tonight, and it will not make sense when hundreds and thousands of us roll our trolleys around supermarkets to cool down the chickens.

Banking (Responsibility and Reform)

Anne McGuire Excerpts

Tuesday 7th February 2012 Commons Chamber

[Mr Umunna]

I am glad that the hon. Gentleman brought up that point, because I anticipated it. First, I think it is good that Members of this House have experience in working for business. Secondly, my experience of advising different companies and financial institutions on such arrangements has convinced me that we must reform the way in which the system works—[Interruption.] I would also say to Ministers, who are crowing, that they might wish to reflect on the fact that my ultimate boss at the time when I was more deeply involved in drafting such arrangements was the senior partner of Herbert Smith, whom the Prime Minister ennobled in the first tranche of peers at the beginning of this Parliament—no doubt because of his services to the legal profession and the City of London.

As the Leader of the Opposition said last week, we are still dealing with the aftermath of the moment to which I have referred and the recession it caused. Many thousands of people lost their jobs and now face the biggest squeeze on their living standards in a generation. Thousands of robust, profitable businesses have struggled to access finance or have gone under. At this juncture, I want to tackle head on the accusation that to raise those issues and criticise the financial services sector is to be anti-business—some have even referred to it as indiscriminate business bashing. That is an utterly absurd notion given that among the most vociferous critics of our banks are the small and medium-sized businesses that make up the overwhelming majority of businesses in this country. The people making those outlandish claims of anti-business sentiment talk as though large financial institutions are the only businesses in this country. Yes, those institutions are an important part of our business community, but there is so much more to British business than big finance. Indeed, we need to rebalance our economy not to diminish our competitive edge in financial services but to grow other sectors so that we are not so reliant on that one sector.

Businesses in other sectors are struggling right now. The most recent Bank of England trends in lending show that net lending to businesses has fallen in nine out of the past 12 months and lending has fallen by more than £10 billion in the past year. A report published by the Department for Business, Innovation and Skills last week states that the stock of lending to small and medium-sized businesses declined by 6.1% in November 2011 compared with a year earlier.

It is not just that the banks are failing to get the money out of the door to successful, profitable businesses with robust business models. There has been a move away from relationship banking, where banks saw it as their duty to get to know and understand their business customers properly. Yesterday, I met a number of successful export businesses in the home counties—businesses that help us pay our way in the world. I was told by the overwhelming majority that when it came to getting help from their banks to export and expand, their banks simply did not want to know.

Some have suggested that that is all the result of increased capital requirements on the banks, but Robert Jenkins, a member of the Bank of England’s interim Financial Policy Committee, told the Treasury Committee last month:

“Making the banks safer through greater resilience in their balance sheets and more capital does not, in and of itself, prevent additional lending.”

Despite all that, people and businesses have had to watch as billions in bonuses have been paid to bankers since 2008-09. It is worth stating that we are not talking about the sums earned by the average bank employee—the cashier, say, in a local branch—but about the enormous sums paid to investment bankers and a select few senior executives in the sector. Those bonuses have continued to be paid as a matter of course, regardless of the fact that many of the institutions, all of which directly or indirectly benefited from the interventions of the Government over the past five years and continue to benefit from an implicit subsidy, have been making thousands redundant, have seen their share prices and profits falling and have been found guilty of mis-selling payment protection insurance on a grand scale. To add insult to injury, Robert Jenkins, commenting on bank balance sheets, told the Treasury Committee:

“Every £1 billion of less bonus would support £20 billion of additional small business lending.”

It is no wonder that Sir Philip Hampton, the chair of RBS, himself said last week:

“Pay has been high for too long, particularly in the banks, particularly in the investment banks".

[Mrs Anne McGuire (Stirling) (Lab)]

Does my hon. Friend also accept that lower-paid staff in banks often took much of their bonuses in the form of shares? Not only have they lost their jobs, many have lost out in their pension savings.

[Mr Umunna]

My right hon. Friend makes a good point. We should, of course, spare a thought for the employees whom she mentions.

It matters because, as the Governor of the Bank of England said last month, people have seen an extraordinary squeeze in their living standards, but the institutions and bankers at the centre of the crisis that created those problems are not only not suffering a gigantic squeeze on their living standards but continue to get very high remuneration, in part because the taxpayer has been forced to step in and bail them out.

Oral Answers to Questions

Anne McGuire Excerpts

Tuesday 6th September 2011 Commons Chamber

[Mr Osborne]

Of course, the Government want economic growth and prosperity. We want a stable international situation in which we can trade. We have to take account of the fact that major trading partners, such as Germany, France and the United States, have seen either no growth or very limited growth as well. That is the challenge we face. As the right hon. Member for Edinburgh South West (Mr Darling) reminded us at the weekend, we can either have a credible economic policy that takes note of what is going on in the world or, as he put it, we cannot even be at the races.

[Mrs Anne McGuire (Stirling) (Lab)]

7. What recent assessment he has made of the potential effects on consumer confidence of the change in the basic rate of VAT.

[The Exchequer Secretary to the Treasury (Mr David Gauke)]

Sustainable public finances will support confidence in the medium term. Decisive action taken by the Government in the spending review and the June Budget, including the increase in VAT, will put the public finances and spending on a sustainable footing.

[Mrs McGuire]

The Stirling constituency has a large number of jobs tied up in tourism and hospitality. On 1 July, the Irish Government introduced a temporary reduction in the rate of VAT on goods and services related to the hospitality sector, realising that such a reduction has the potential to kick-start economic growth; indeed, the rate is now 11% less than the VAT rate in the UK. Given stalling UK economic growth figures, does the Minister not accept that he, too, should consider a temporary change in the rate for the sector, and if not, why not?

[Mr Gauke]

I have had meetings with representatives from the tourism industry at which they have made their case. We will of course keep all taxes under review, but we have to bear in mind the state of the public finances, our limited room for manoeuvre and concerns about adding complexity to our VAT system. None the less, we will look at those arguments.

Scotland Bill

Anne McGuire Excerpts

Tuesday 21st June 2011 Commons Chamber

[Ann McKechin]

What I would say to the hon. Gentleman is that we are aware that the McCluskey review is ongoing, and we will wish to consider its conclusions carefully when it reports. We will return to further analysis of the report in the Lords, which I hope will be available by the time this Bill reaches the other place.

We cannot continue this evening without mentioning the extraordinary attack that the First Minister and his Secretary for Justice made on both the Supreme Court and individual Scottish judges who sit in it, when they stated that the UK courts should have no jurisdiction in Scottish criminal cases. Let us be clear: no one is attacking the right for Scotland to retain its unique criminal legal system—I declare an interest, as a non-practising member of the Law Society of Scotland. However, on the other hand, those attacks smack of a political establishment that is too ready to attack anyone who dares to contradict its mantra, rather than one that is prepared robustly to tackle institutional complacency. It is entirely demeaning to Scotland’s international reputation when Scotland’s leading politician uses the language of the playground bully when describing the key relationship between the Executive and the judiciary. Mr MacAskill has referred to the UK Supreme Court as an “ambulance-chasing court”, despite it hearing on average only one Scottish case a year since devolution, and he has ignored the fact—or perhaps he was totally ignorant of it—that his own Scottish Crown Office is making referrals to the very same court.

[Mrs Anne McGuire (Stirling) (Lab)]

Does my hon. Friend agree that the furore about the Supreme Court over the past few weeks smacks of opportunism, when what she describes has been the situation since the Scotland Act 1998 was passed by this House more than 12 years ago?

Scotland Bill

Anne McGuire Excerpts

Monday 14th March 2011 Commons Chamber

[Mr Gauke]

The Scottish Parliament has made it clear that it supports the proposals. We are setting them out some years in advance. My understanding is that there is a consensus on the proposals, and it is for the Scottish Government to ensure that there is no gap after 2015. We have made it clear that we will work closely with the Scottish Government as we move towards full implementation of the measures set out in the Bill. This engagement will ensure that the Scottish Government can keep the Scottish Parliament apprised of implementation work in good time. I consider the additional requirements to be unnecessary, and I therefore urge the hon. Member for Dundee East to withdraw the amendments.

I shall deal briefly with Government amendments 61 to 66, and new clause 18. These are minor and technical and ensure that we have a proper parliamentary process attached to the provisions that bring into effect the provisions of the Bill. Government amendments 61 to 64 amend the existing provisions in the Bill to bring into effect the provisions in clauses 26, 29 and 31. The amendments make it explicit that the days or tax years appointed by the Treasury under these clauses will be appointed in orders made by the Treasury. New clause 18 ensures that these Treasury orders are classed as statutory instruments and are therefore printed and published.

Government amendments 65 and 66 both amend the existing provisions in clause 38 relating to commencement. These should be read in conjunction with new clause 18, which ensures that the order-making powers provided for by the Bill are all statutory instruments and therefore subject to the applicable parliamentary process. The amendments do not have any substantial effect on the provisions in the Bill, and are simply drafting amendments. I commend them to the Committee.

A number of hon. Members asked about the definition of a Scottish taxpayer. Let me say at the outset that the Bill sets out a definition of Scottish taxpayers, as opposed to Scottish residents, and can therefore apply, notwithstanding the absence of a statutory residence test. It might be of help if I set out how that will work. The definition of a Scottish taxpayer will determine which individuals are liable to pay income tax at the rate set by the Scottish Parliament. It is based on the definition included in the Scotland Act 1998 for introducing legislation on the Scottish variable rate, a point made by my hon. Friend the Member for Carlisle (John Stevenson). However, we have taken the opportunity to review the definition to make it easier to administer and simpler to apply, and to remove some of the potential unfairness that could arise from the application of the definition provided for the purposes of the Scottish variable rate.

Following the recommendation of the Scottish Parliament Committee that examined the Bill, which was endorsed by the Scottish Parliament on 10 March, we also intend to table a new clause on Report to apply the new definition of a Scottish taxpayer for the purposes of the Scottish variable rate. The new definition is structured as a series of conditions that will enable an individual to see whether they are a Scottish taxpayer. Where they meet any one of these conditions, they can simply disregard the remainder. As I will explain in a moment, this means that relatively few people will need to consider every condition. In other words, the definition will produce an answer in only a few steps, avoiding the need for the majority of people to record and count the number of days spent in Scotland.

A Scottish taxpayer will be someone who meets two tests in a tax year. The first test is that the individual in question is UK resident for tax purposes. It is important to emphasise that the definition does not disturb those rules or increase their complexity, but merely sits on top of them. We are not replacing the underlying rules of UK tax residence with an entirely new concept of Scottish tax residence. The second test is whether the individual meets any one of three conditions—A, B or C.

Condition A is that the individual has a “close connection” with Scotland, which is defined in proposed new section 80E. For the majority of people, it will be a straightforward question of whether they have a close connection with Scotland. If they have one place of residence in the UK and it is in Scotland, they will have a close connection with Scotland and will therefore be a Scottish taxpayer, provided that they live there for at least part of the year. This last condition—that the individual lives in the place of residence—is a crucial part of the definition and ensures that it is simple to operate. Someone may stay in a place of residence which is not their home, perhaps while on holiday or as part of their work, but such nights away are disregarded because those are not places where the person lives, but merely places where they stay.

Let us consider the example of sales reps who have one home in England in which they live with their family at weekends, but who spend their working week in Scotland. While they are away, they stay in a variety of hotels. Because the family home in England is the only place in which they live, they will not have a close connection with Scotland and will therefore not be a Scottish taxpayer, even though they physically spend more nights in Scotland than they do in England. That is all they need to do; there is no requirement for them to keep a detailed record of the number of nights they spend in each part of the UK. This is one way in which we have sought to improve on the definition of a Scottish taxpayer set out in the 1998 Act, which would have required people in such a position to keep records of the days they spend in each part of the UK.

[Mrs Anne McGuire (Stirling) (Lab)]

I want to offer the Minister a note of caution, as the understanding of where a person lives and where they stay is slightly different in Scotland. I hope he will come up with something that is legally a little more robust than the simple distinction between staying and living. The nods from Scottish Members, who understand the vernacular, verify the advice that I am trying to give him.

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This debate has shown up the complexities regarding residency. My right hon. Friend the Member for Stirling (Mrs McGuire) was right to point out how the interpretation of where someone stays or lives can have different connotations. Those of us who have represented a constituency for a number of years will recognise the complex personal lives that some of our constituents have. They may sometimes be a bit reluctant to tell people where they are staying or living at any particular time of the week or month of the year.

[Mrs McGuire]

Does my hon. Friend recognise that the situation can be further complicated if one asks where they come from?

[Ann McKechin]

Yes, indeed.

That brings us to how the questions are phrased on any self-assessment form and the guidance that is provided to individual taxpayers and to their employers. Obviously, employers will have a high level of responsibility in advising their staff about whether they will be covered. The Minister cited the example of a travelling salesman, but there are many other examples of staff who travel the country from time to time. Some people’s lives are entirely peripatetic—entertainers, for instance. I remember many years ago, when I was a lawyer, acting for entertainers who spent the summer season living down in Blackpool and then came back up to Scotland for the winter season.