Draft Civil Liability (Information Requirements) and Risk Transformation (Amendment) Regulations 2020

Anneliese Dodds Excerpts

Tuesday 10th March 2020 General Committees

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

It is a real pleasure to serve under you in the Chair, Ms Nokes. This is my first time on a Committee that you are chairing, so thank you very much. I am also grateful, as always, to the Minister for explaining the regulations. As he mentioned, insurance is of course incredibly important for the City and the whole country. I understand that the UK insurance market is the fourth largest in the world; it is the largest in Europe by some way. We account for an estimated premium volume of just under £220 billion, according to the latest figures, which are from 2017. It is therefore essential that we get regulation right. In that regard, I am pleased that the Government seem to have listened to concerns set out by hon. Members and others, including consumer groups, and chosen to amend the Civil Liability Act 2018 to try to ensure that insurers pass on to consumers any savings generated from the changing calculation of the personal discount rate.

As the Minister mentioned, part 2 of this statutory instrument establishes that insurers should provide the FCA with figures on their premiums, as well as the total value of all claims. That information would then be crunched by the Treasury to work out whether savings are indeed being passed on to consumers. I have two quick questions on that. The regulations do not set out any penalties for non-compliance, so it might be interesting to understand what would happen if that reporting did not occur. I suppose the converse of that is this. Sometimes I sit in these rooms and wonder whether legislation is always the right way to deal with an issue. Has this matter come before the Committee because attempts to informally gather that information have not met with support from the insurance industry? It would be interesting to hear about that.

As the Minister also described, the third part of the instrument amends the Risk Transformation Regulations 2017. Those of course implement a comprehensive UK regime for insurance-linked securities business, in line with the requirements of directive 2009/138/EC—the Solvency II directive. As hon. Members will be aware, there have been various regulations relating to Solvency II. The directive was designed to codify and harmonise the EU insurance regulatory landscape. Part of that approach was the so-called protected cell company, which enables many separate insurance-linked securities deals to be managed by one company, with the cell structure ensuring that the assets and liabilities of each deal remain strictly segregated.

Given the complexity of these investments, it is critical that they are not offered to retail investors, as indeed was stipulated in the 2017 regulations. As the Minister explained, today’s amendment arguably corrects a defect in the initial instrument by allowing qualified investors to participate, without any concerns about legal ramifications, in this market. Obviously, this regulation introduces the concept of qualified investors and defines them more clearly.

Finally, it would be helpful to know from the Minister what kind of oversight is going to be undertaken to ensure that this concept is not gamed by any of those offering these securities. It is a complex market. Yes, it is growing, but equally it is important that we ensure that there is investor protection. I would be happy to have some more detail on that.

Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020

Anneliese Dodds Excerpts

Monday 9th March 2020 General Committees

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

It is an honour to serve with you in the Chair, Mr Hosie. I am grateful to the Minister for his explanation of the draft regulations.

First, I want to make clear that we will not contest this measure. Anything that puts more money into struggling people’s pockets is to be welcomed. However, we are concerned about the lack of targeting of the measure and the lack of cost-benefit analysis in relation to other measures. We are concerned about the lack of a forward plan for changes to national insurance thresholds, and about the overall coverage—or otherwise—of the national insurance system in the absence of other support for the provision of social security.

I am sure that the Minister is well aware that the policy will cost about £2 billion a year, but that only 3% of the gains from raising the threshold will accrue to the poorest fifth of households. He referred to an average gain of £104, and that is correct, but on average the highest-income 30% of working households will gain much more than that—£150 per annum—and the poorest tenth of households will gain only about £30.

The reasons are fairly obvious; I am sure that they are obvious to everyone in the Committee. First, many of the worst-off working households did not earn enough to pay contributions to NI in the first place. Secondly, two-earner households tend to be further up in the income distribution anyway, but they will benefit twice over from the policy. Thirdly, many forms of social security are tested on after-tax rather than before-tax incomes. Some interesting analysis has been done by, for example, the Women’s Budget Group, indicating that almost two thirds of those in employment who will not benefit significantly from the change are women. The impact is therefore disproportionate.

There are particular issues for workers and families who need to claim universal credit. As I am sure Committee members are aware, universal credit is means-tested based on net earnings—so, after tax. Such employees, including, incidentally, the majority of national insurance-paying single parents, would have their universal credit reduced by £54 as a result of the policy, which would leave them only £32 a year better off. Have the Government conducted any cost-benefit analysis of the change compared with other income-boosting measures? For example, did they consider increasing the work allowance within universal credit? That would benefit the poorest tenth of working households 15 times as much as the policy in question.

I understand that the Government want eventually to move further—towards increasing the class 1 and class 4 NICs threshold to £12,500. Is there a timeframe for that change yet, or indeed an indication of what will plug the gap resulting from it? I understand that moving up to a threshold of £12,500 by 2023-24 would cost £9 billion and that, unlike the change we are considering, it is not yet funded; there is no indication of how it would be covered. It would be helpful if the Minister could inform us whether he intends to go ahead with that change, and if so how it will be compensated for, or whether it will be paid for through further reductions in public services, beyond those we have already experienced.

Finally, attention has rightly been focused this week on eligibility for statutory sick pay. I welcome the changes that the Government are making, so that there is eligibility for sick pay from day one, but it has been concerning to learn that large numbers of people—about 2 million of them—do not qualify for statutory sick pay anyway. The cut-off is identical, from what I can see, to the lower earnings limit— £118 a week.

I am, of course, just speaking about employees, and not the self-employed. Does the Minister intend to continue raising the lower earnings limit in line with inflation? Does he feel that that is sufficient, given the slow upturn in wages since the financial crisis, and are additional measures needed to ensure that people can contribute towards the social security that they might need—such as the state pension or bereavement support allowance, and so on—which all depend on the lower earnings limit?

[Jesse Norman]

I thank the shadow Minister for her remarks. She raised a range of issues, and touched first on what she described as lack of targeting. Of course it is the nature of the legislation that it is universal in its applicability. It is not designed to be a targeted benefit, and that is not its function. Its job is to improve the national insurance situation of 31 million people, which it does. The question of targeting is better addressed to many other aspects; it is not actually relevant to national insurance contributions, which for years have been legislated for on a universal basis.

I do not think that the hon. Lady is correct that this change is regressive in the way that it will operate. It is certainly not a tax cut for higher earners. All employees earning above £9,500 will benefit by the same amount, and some 1.1 million people will no longer pay NICs as a result. Those are important properties.

[Anneliese Dodds]

I am grateful to the Minister for his generosity in giving way. I do not believe that I used the word “regressive”. I made clear that the impact on those at the higher level of the income distribution will be larger, in terms of the absolute amount that they will not pay, compared with those at the bottom of the income distribution. Surely he is not contesting that.

[Jesse Norman]

If we look in full at the 31 million people affected, we will see that those in employment and earning above £9,500 will receive the same amount. The hon. Lady rightly mentions universal credit, and she understands that its effect is to smooth, via tapering, various cliff edges. That is a helpful and good property—I am sure she does not regret it—and it interacts with this measure. The broad picture, however, is the one I describe.

As the hon. Lady has acknowledged, the measure has elements of a contributory scheme, so it will have effects on people who do not have a full contributions record. On the Government’s future ambitions, she will understand that a statutory instrument debate is not the place to unveil such a strategy, and certainly not in the lee of a Budget two days away. It is the Government’s ambition to increase the threshold to £12,500, and decisions will be taken at future fiscal events. Increasing the NICs threshold to £9,500 this year is a first step towards that ambition. The hon. Lady also mentioned additional measures and statutory sick pay. It would be foolish in the extreme for me to comment on that matter two days before a fiscal event, and I therefore think we should leave it for a future discussion in the House.

Question put and agreed to.

VAT (Listed Properties)

Anneliese Dodds Excerpts

Wednesday 4th March 2020 Westminster Hall

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

I thank the hon. Member for South Thanet (Craig Mackinlay) for securing today’s debate, and for his work in the all-party parliamentary group on listed properties to highlight the issues faced by people who own such homes. This interesting and well-informed debate has made it clear that the treatment of construction work is one of the most complicated areas of VAT law, where there is a lot of confusion that produces, no question, a lot of transaction cost and issues for people interested in trying to repair their homes.

It has cropped up a little in the debate that there are still certain circumstances in which the 5% VAT rate applies to construction work on listed properties. VAT relief may be possible for VAT-registered contractors on a conversion of a non-residential property into a dwelling; where a domestic property has been empty for two years prior to the work; for conversions where the number of residential units changes and becomes more intensive; where there are changes to introduce mobility aids for the over-60s; and for changes linked to a social purpose, for example if social housing is put in listed properties. Zero per cent. VAT also applies to certain kinds of work for disabled people. All those reliefs are targeted; they ensure that properties do not go unused and can be properly adapted for elderly and disabled people.

The debate has been about whether we need a targeted change in relation to repairs to listed properties. On a bit of a tangent, there was a little discussion about VAT on the installation of energy-saving technologies. I agree with the comments of the hon. Member for Glasgow Central (Alison Thewliss) in that regard—she was spot on. The comments by the hon. Member for Bath (Wera Hobhouse) about the listing system in Bath and what it has achieved were very interesting, but I question whether a high cost for introducing energy efficiency and renewable energy is unique to the listed sector.

Others mentioned their personal circumstances; I live in an ex-council property that cannot have cavity wall insulation because it does not have cavity walls. The only thing that could be done would be to clad it in brick, which would be pretty expensive. I will not say that that is of the same complexity as many of the changes that might be needed in listed properties, but we need to look at energy saving overall.

[Wera Hobhouse]

rose—

[Anneliese Dodds]

I am not implying at all that the hon. Lady would be against broader changes for other housing, if that is why she wants to intervene. I know that she is a champion of those schemes in Parliament.

When it comes to this specific relief, I share the concerns of the hon. Members for Arfon (Hywel Williams) and for Glasgow Central about the impact of the changes on low-income areas—also picked up on by the hon. Member for South Thanet—and the lack of a level playing field between new build and existing listed buildings. Again, because of the existing relief system, if they have been lying unused for a couple of years, or if they are conversions from industrial use, they would already be covered by reductions.

I have a question for the Minister about another aspect of the current regime: I understand that there is a zero VAT rate for substantial reconstructions of listed properties if they proceed from a shell. I would like him to tell me whether HMRC has done any work to consider whether that might have led to the kinds of activities that, sadly, are too well known to us as MPs, whereby a listed property ends up having a strange fire at some point and its insides are gutted. It would be interesting to find out whether HMRC has done any work on that.

There have been a lot of changes to VAT over recent years. Any further changes need to be extremely well evidenced and justified. VAT is the third biggest revenue raiser of the different kinds of tax. We need to consider the dead-weight from proposals of this sort and whether they are appropriately targeted. I accept that reducing VAT probably would be an incentive for additional repair work, but we need to consider whether that is the right mechanism. I was pleased to hear the hon. Member for South Thanet compare this proposal with the system for churches, which does seem to be appropriately targeted. We would need to look at that in relation to questions about, for example, repairs in low-income areas or among people who do not have the means to make such changes.

On the hon. Gentleman’s comment about the reduction in the number of firms that can carry out specialised repairs to listed properties, we have seen a reduction in the number of small building firms generally. It could be that that is correlated with what has happened more broadly in the economy. That is a worrying development whatever part of the building trade it occurs in, but we may need to parse the reasons for that reduction, which may be tied to the general state of the property market and the recovery from the financial crisis.

Finally, I am sure the Minister is sick of me saying this, but we need a better evidence base generally for whether tax reliefs perform what they were set out to do. We have figures for about only 111 of the around 326 tax expenditures that are set out by the Government; it is likely there are more that are not covered. Bodies such as the International Monetary Fund state that we should have as much scrutiny of tax reliefs as we have of spending proposals. I think that is sensible. Although I accept that applying for a grant scheme requires bureaucracy, claiming many of those tax reliefs requires an accountant, which is an additional cost for people. We must consider carefully whether the proposed relief would be appropriately targeted.

Again, I congratulate not just the hon. Member for South Thanet but all Members who participated in the debate. I found it illuminating, and I hope that the Minister provides answers to some of the questions that were posed.

--- Later in debate ---

[Craig Mackinlay]

I thank all Members who took part in the debate. I want to clarify one area: the Minister said that a lower rate of VAT applies to certain energy-saving measures, but, according to my understanding of the types of properties under discussion, that is available only to those in receipt of a broad range of benefits. I understand that the lower rate is not available to those not in receipt of benefit.

[Anneliese Dodds]

My understanding is that there is still a reduction but it relates to the labour-materials ratio in the cost of the overall installation. There is a question about how many schemes fit within that, and the answer is possibly not very many.

[Craig Mackinlay]

I thank the hon. Member, who has clarified that it is a complicated area. I thank the Minister for his comments. Dare I say it, but I think I will be disappointed next week.

Question put and agreed to.

Resolved,

That this House has considered VAT on listed properties.

Tax Avoidance and Evasion

Anneliese Dodds Excerpts

Tuesday 25th February 2020 Commons Chamber

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

It is a real privilege to be winding up today’s important debate. We have a heard a number of excellent speeches, including two maiden speeches. I found the comments from the new hon. Member for West Bromwich East (Nicola Richards) very interesting, and we all enjoyed her warm and affectionate portrayal of her constituency. She joins many people in Parliament, certainly on the Opposition side of the House, who have been committed to levelling up for many decades, as well as people who have been very committed to beer. I welcome her to the House. I also welcome the new hon. Member for Stourbridge (Suzanne Webb), who also gave an accomplished speech. I am very pleased to welcome a fellow rail enthusiast to the Chamber, but I have to say—I am very sorry—that I am sure that my granny, not her nan, made the best lemon meringue pie. It is very nice to welcome them both.

This debate comes at a very important time, after last week’s news that the UK has shot up the ranks of the Tax Justice Network’s financial secrecy index. The UK rose 11 places and we stand as the 12th worst jurisdiction for financial secrecy, so rather than moving forward in the fight against tax avoidance and financial crime, we are moving backwards. I very much agree with the comments from my hon. Friend the Member for Warwick and Leamington (Matt Western) in that regard.

My right hon. Friend the Member for Hayes and Harlington (John McDonnell) quite rightly talked about the impact of the failure to tackle tax dodging on the availability of funds for public services, as did my hon. Friend the Member for Coventry South (Zarah Sultana). We should focus on the impact of the failure to deal with these measures because they restrict overall the funds available for public services. The hon. Member for Orpington (Mr Bacon) talked about honesty in the debate. Surely he must be aware that the reason why the Opposition have opposed some of his Government’s measures is precisely that they have not gone far enough, as we saw from last week’s news. In the time I have left, I will talk about some areas in which they have not gone far enough.

Many colleagues have focused on the lack of tax compliance and the creative compliance from multi- nationals. Research suggests that the UK is losing £25 billion each year in tax revenue as a result of profit shifting by multinational companies. A number of Members referred to research produced recently that suggested that just five tech giants were costing the Exchequer about £1.3 billion a year. We were told that the digital services tax would deal with these issues, but as Opposition Members repeatedly mentioned, that tax will generate, at most, £440 million each year—less than half of what is being dodged by just those five firms. That does not even take into account the amount lost as a result of avoidance by other tech giants such as Amazon and a plethora of other less well-known firms.

My right hon. Friend the Member for Barking (Dame Margaret Hodge) quite rightly referred to the case of Netflix. Her pressure on that, as on so many other issues, has been incredibly important in advancing this debate. She rightly pointed out that that firm has benefited from tax relief at the same time as it has not been making the contribution that we would expect. I also mention the case of Rockstar Games, which has not paid corporation tax for 10 years while it has benefited from tax breaks.

We also need to seriously consider our relationship with our overseas territories and Crown dependencies. I found the discussion about this in the House today quite peculiar. Some welcomed the fact that there will be a public register of beneficial ownership, but the timetable for that has slipped enormously since what was initially suggested. It must be accelerated. I also found it strange that we heard nothing from the Chief Secretary to the Treasury, in introducing the debate, about the UK’s approach to current OECD-level discussions about the future for formula apportionment for corporate tax. That is an absolutely enormous gap and we need to know what the UK Government are promoting at that level. A big discussion is going on between the US and the EU. What are the UK Government calling for? Sadly, we have no indication of that at the moment and we really need it. Otherwise, we are not going to deal with the fundamental issues that the hon. Member for Amber Valley (Nigel Mills) quite rightly highlighted.



We also need to focus on enablers, which have been mentioned frequently on the Opposition Benches during this debate. An HMRC study in 2005—I think it needs to do another one—concluded that the big four accountancy companies alone were responsible for about half of all known avoidance schemes. I share the concerns of my right hon. Friend the Member for Barking about the lack of action, including on the loan charge process.

We also need to look at corporate criminal liability. I found the exchange on this quite interesting. The hon. Member for Thirsk and Malton (Kevin Hollinrake) asked the Government whether they had thought about putting a failure to prevent economic crime on the statute book, and the Secretary of State seemed to intimate he might think about it, but in 2016 a Conservative Government actually said they would look to introduce this—perhaps he is not aware of that. The Government ran a consultation, and many of us have been asking what has happened to it. Well, it has been kicked into the long grass, never to be seen again, which is not acceptable.

We also need more transparency. We need a genuinely publicly accessible register of trusts, with an appropriate definition of “legitimate interest”. The Government have chosen to adopt the most restrictive definition they could. As has been repeatedly mentioned, we need proper country- by-country reporting, and we need it to be public. It only needs to be switched on. The House passed it back in 2016. What are the Government waiting for? They need to put it into action.

We also need action on shell companies. I was pleased to hear the comments from SNP speakers in this regard. Labour has said that the Government could have raised £8.4 million each day in fines on Scottish limited partnerships if they had done what they said they would do, which was to force the publication of persons with significant control of those companies. They did not levy those fines and have not taken action, and we are seeing the same things happening with other limited partnerships that we saw with SLPs.

We have not had the reform of Companies House that we need, and we have delays with the introduction of the property register. We need proper enforcement in this area. Conservative Members have trumpeted the fact that the maximum prison term will be doubled, which is right, but when the Secretary of State was talking about convictions, he talked about all convictions in the area of duty as well. He mentioned the figure of 650. Let’s have a reality check on how many of those relate to complex tax crime. In 2017-18, only 88 criminal investigations were opened into serious and complex tax crime, and the number of criminal convictions since 2015 is 22, which is rather different from that 600-plus figure trumpeted earlier.

We also need an appropriately funded HMRC. I am rather less blasé about the reductions in headcount in HMRC than Government Members appear to be. That those numbers are falling faster in this country than in any other European country aside from Greece is something we should be worried about, particularly in relation to the size of the wealthy unit, as was appropriately mentioned by the hon. Member for Glasgow South West (Chris Stephens). Even aside from those numbers, the staff turnover at HMRC is one of the highest worldwide and morale has dropped precipitously. I encourage those on the Government Front Bench to get a grip of the contract that is driving the changing nature of the HMRC estate and see whether it is delivering value for money. It is not; all the upheaval is costing money. HMRC has lost 17,000 years of staff experience in the last year alone through redundancies and departures.

We are told continually that the tax gap has been dropping, but as many speakers have said, the definition of “tax gap” is highly contested and does not include many different aspects of profit shifting. Groups such as Tax Watch UK have adopted a much more sensible approach that looks at overall profits, and of course if we had CBCR, we could assess that even better. We also need to interrogate the 100 additional measures mentioned by the Government. I encourage Conservative Members to look at the difference in those measures between what the Government initially proposed and what happened after consultation. The kinds of processes rightly mentioned by my hon. Friend the Member for Coventry South were evident. Measures are being watered down time and again.

Overall, we know from the evidence that people feel that the Government are not doing enough to tackle tax avoidance and evasion. We know that from the figures, and also from people’s experience of the tax system. If we took the money that is owed by some of those tech companies alone, we would have the funds that we need to, for example, almost double school funding in the north-east.

The Government have a decision to make. They can keep cutting services, or they can generate the funds that are needed from a fair tax system. I hope that they will finally step up to the plate.

Rating and Valuation

Anneliese Dodds Excerpts

Tuesday 4th February 2020 Commons Chamber

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

I am grateful to the Minister for his explanation of the order, and broadly supportive of its contents. It does, however, raise some significant questions about the Government’s continued use of the retail price index as against the consumer prices index, and about their approach to business rate reform and local government funding more widely.

Members will be aware that there has been continued argument about the use of RPI as an inflation indicator, as against CPI and CPIH. RPI was de-designated as a national statistic back in 2013, yet it is still often used in areas such as the regulation of train fares, student loan debt, and many occupational pension schemes. CPI has been adopted in this case, but we have no clear explanation why the use of RPI continues in other areas. The Royal Statistical Society has been highly critical of that approach.

After many years of confusion, the Chancellor has now agreed not to cease the production of RPI statistics, but to slowly align them with CPIH, thus ending the situation of, as The Financial Times put it,

“the Office for National Statistics and UK Statistics Authority publishing a key economy measure every month which they accept is wrong, but doing nothing to improve it.”

That is what has been happening over the past few years. I therefore find it quite revealing that, rather than amending the Local Government Finance Act 1988 through primary legislation to make that change permanent, the Government choose to make it yet again, year on year, through secondary legislation. Is this use of orders, rather than primary legislation to designate the relevant inflation measure, to retain flexibility for the Government, or for some other unexplained reason? Either way, it creates a potentially unstable environment for businesses and local authorities, perhaps up to 2025 or beyond.

We have seen no uprating in the existing thresholds at which discounts on business rates apply. I accept that the retail discount has increased from one third to 50%, and been extended to some additional categories of economic operator. I am probing, through parliamentary questions, what proportion of rateable businesses are actually covered, given the low thresholds at which those discounts apply, especially in areas of high property costs.

The Conservative manifesto said that the Government would go further and fundamentally review the business rate system, so it was disappointing that the Minister said—twice—that this would happen “in due course”. Will he please tell us once when that review will at least begin, and what its scope will be? According to the British Retail Consortium, 2019 was the worst year for retail in 25 years. We need some urgency from the Government in dealing with this issue. We also need to deal with the impact of the business rate system on preventing the investment that is required to ensure environmentally friendly business and manufacturing.

Finally, we need to put rating in the context of the overall local government funding settlement. It was disappointing that the Minister did not talk about that at all, but merely about compensation for this measure in the settlement. All Labour Members realise that the Government are suggesting a real-terms cut to local government. Even worse, the alleged increase they are putting into local government is predicated on all councils increasing council tax by the full amount, which they blatantly will not do—smoke and mirrors yet again. We have seen a concerning trend where funding from local authorities in less affluent areas is stripped back at a far faster rate than it is in more affluent areas. The Government’s laughably named fair funding approach would see almost three-quarters of the so-called red wall seats losing out even further. There is great concern among those in local government that reforms to business rates could make this even worse, with 77% of councils saying that they lack confidence in 100% business rate retention.

I hope the Minister will address these concerns, outline a timetable for the review of business rates, indicate whether that review will include considerations of local government, and, above all, let us know whether we will see an end to the current uncertainties around CPI adoption.

[Madam Deputy Speaker (Dame Rosie Winterton)]

It is with great pleasure that I call Paula Barker to make her maiden speech.

Growth Strategy

Anneliese Dodds Excerpts

Tuesday 21st January 2020 Westminster Hall

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

It has been a pleasure to listen to this interesting debate. I was encouraged by some of the comments of the right hon. Member for Wokingham (John Redwood), whose position is perhaps more similar to that of the Labour party than he might be delighted to hear, but I disagreed with his conclusions in some areas.

When preparing for the debate, I anticipated that the right hon. Member’s take would follow his comments before Christmas, when he welcomed what he described as the “turning around” of the mood in relation to the economy by the Prime Minister, which will

“take some cash…and now is the time to spend a bit of that…That will show that the country has made wise decisions up to this point, and that Brexit will not be damaging to our economy”.—[Official Report, 19 December 2019; Vol. 669, c. 65.]

Of course, that is a bit of a change from some of the advice that we have heard he gave to investors not to continue to invest in the UK.

[John Redwood]

I wish that those completely untrue statements were not constantly repeated. I have never said anything negative about our prospects because of Brexit—never, never. I have always been positive about Brexit.

[Anneliese Dodds]

I am sure that anybody listening to the debate will be delighted to look back at the article in the Financial Times. I hope that they will agree with the right hon. Gentlemen’s statement; some commentators have disagreed.

[John Redwood]

It does not mention Brexit. Brexit is not in the article.

--- Later in debate ---

[Anneliese Dodds]

I believe it was about the factors of uncertainty, which is a point that I will come back to, because they very much bear on the debate.

I welcome, however, the recognition that it is necessary to return some public spending to its previous levels. It is not correct to state that public spending was maintained in real terms. When we compare it with the size of the economy, there was an increase, but that is because our economy was not recovering at the rate that we would have expected, particularly in relation to other similar-sized economies—another point that I will come back to. Surely, however, we should not view public spending only in relation to economic growth, or as a way to promote economic growth, although that is an interesting move towards a Keynesian approach, which I cheekily welcome.

The choke-off in spending in many areas has had a number of unintended consequences that have been economically damaging and financially expensive. Paul Johnson from the Institute for Fiscal Studies has described the cuts in the number of police officers as

“Boom, bust, boom…Not a terribly efficient way to manage things”.

It is obvious that it is pretty expensive to take more police officers on to the books again after a number of them have been relieved of their duties.

Similarly, in many other areas, austerity has led to a significant increase in the demand and need for other forms of public services. The cuts to Sure Start and other early intervention and support services have been linked to the steady rise in the number of looked-after children. It is incredibly expensive to look after those children, as well as the fact that that has a terrible impact on their future lives in many cases. The lack of access to primary and other forms of healthcare has been linked to an increased demand for A&E services. The lack of action on air pollution has been linked to increased demand for asthma-related healthcare. Austerity has been self-defeating on its own terms. It is good that we have seen the light now, but it is rather late.

We also need to acknowledge that the Government have removed themselves from some areas of activity. A case has been taken up by criminal justice campaigners, who state that in the UK, rape has “effectively been decriminalised” because only 1.4% of reports of rape are prosecuted in the UK. That has been linked to a lack of resources; it has been stated that the state has a different scope in our country since austerity.

Arguably, all those cuts to public spending have had a significant impact on growth. I enjoyed the comments of the hon. Member for Derby North (Amanda Solloway) about growth. She is right that the economy has been growing every year, but surely that is a rather low bar. Traditionally, since the 1950s, the UK economy has grown on average by about 2.45% a year, but we have been well below that in recent years. If we look across the time from 2008, we have had the slowest recovery from an economic depression since the 1930s. Very recently, we have had more rapid growth than some of those comparable economies, but across the time, particularly in the first few years after the financial crisis when there was that change in Government, we had slower growth than the trend in comparable nations.

[Kevin Hollinrake]

The hon. Lady makes a fair point, but she must understand the starting position. The great financial crash was much more severe in the UK in relative terms than in any other developed country.

[Anneliese Dodds]

It was more severe, for reasons that I will come back to later that relate to some of the hon. Member’s work on the balance of investment in our economy and the impact that the slowdown had particularly on our property industry, which is such a significant part of our economy and which led to that particularly severe impact. We should not forget about that.

The very slow recovery has also been in evidence when it comes to living standards. Real wages are still not, on average, at the levels they were back in 2008. That is another significant difference between the UK and many comparable nations and one that we should not forget.

I welcome some of the discussion that we have had on productivity, which underlies some of the brakes on the growth rates that we would have liked to have seen in recent years. On the drivers of our productivity issues, other nations that are highly dependent on oil revenue, for example, have not necessarily seen the same kind of slowdown in productivity growth. Norway, for example, has much lower working hours than the UK and some people have linked issues of work-life balance to productivity as well—but that is just an aside.

It is critical that we look at the points about skills that the hon. Members for Strangford (Jim Shannon) and for Glenrothes (Peter Grant) rightly made. We have seen significant change to further education in recent years; major cuts have been made to colleges and sixth forms. I welcome the fact that the Government seem to be changing tack in that regard; it is absolutely critical that they do so, because when I talk to firms, the biggest issue they tend to mention is the lack of a skilled workforce, so we really need to focus on that.

We also need to talk about investment, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) rightly mentioned—both public and private investment. We have seen some negative developments in that regard, particularly in areas that are critical to future growth. Clean energy investments have plummeted since 2015. In 2018, annual clean energy investment was at its lowest level since 2008. There are a range of factors, but I would include the regulatory uncertainty in the sector. We have seen some big changes over time, and we need certainty.

We need to have an appropriate environment for small businesses and to encourage entrepreneurship; I agree with some of what the right hon. Member for Wokingham said about threshold effects. We need to learn from other countries. It is possible to calibrate the tax system far more closely to profits and to not have big cut-offs, such as those we have, for example, in relation to VAT. I would encourage Her Majesty’s Revenue and Customs to look at that as the tax collection authority—if it has the resource to do so, which is a significant issue.

On IR35, the elephant in the room is that our unemployment regulations are not calibrated with tax regulations; definitions are not the same in the two systems. I have not seen the kind of grasp of that issue that I had hoped for from the Government. IR35 and other measures are trying to plaster over some of the issues caused by the lack of consistency in definitions, but we need a longer term approach from Government.

The right hon. Member for Wokingham spoke in some detail about tax cuts. On corporation tax, some of the changes we have seen in the US have resulted from funds being moved out of tax havens—let us call a spade a spade here—but they have also resulted from much more aggressive pursuance of corporation tax equivalents by the US authorities. When it comes to the UK case—this seems to be a debate that we have just about every day in this House; I suspect that it is getting slightly boring for people reading Hansard—the evidence indicates, and commentators have said time and again, that the reduced rate of corporation tax has not led to increased growth in investment in the UK and that it has coincided with a reduction in the growth of investment and, above all, with a significant reduction in revenue, which has a knock-on impact on the possibility of boosting skills and so forth, and other drivers of productivity.

I think the UK population is very aware of that situation. The recent British Social Attitudes survey indicated that 60% of people want to see taxes boosted, if that could lead to more sustainable public finances and spending. Only 4% of people want to see them fall.

On the issue of free ports, which was mentioned by the hon. Member for Derby North, we need to tread with care and look at the research and the international evidence, much of which indicates that those kinds of structures can be very good at moving economic activity around but they are not always as good at promoting new economic activity—it tends to be the factor endowment in different areas that will promote development sustainably, the level of skills in the workforce and the level of investment in plant and so on. I very much enjoyed the hon. Member’s speech, particularly her focus on regional disparities; the hon. Member for Thirsk and Malton also concentrated on that. We need to go much further. It is a shame that we have not seen a commitment from the Government to shift economic activity that is under their control to other areas. Labour said during the election that we would like to see part of the Bank of England being moved up to Birmingham. I hope that we might see some more bold measures coming from the UK Government in that regard.

In relation to the claims that tax cuts will necessarily promote investment in economic activity, when it comes to the drivers of entrepreneurship among less well-off people, it is actually regulatory measures that can really make the difference—for example, minimum wages and rights at work.

Finally, on the comments by the right hon. Member for Wokingham about the drivers of risks in the world economy and the activities of the Bank, I was surprised that he did not make any mention of the impact of tariffs and so on in China and the US on the automotive industry. Most commentators would say that they played a significant part, and they would also talk about the fact that the wiggle room for policy activity by the Bank is of course reduced by the very low interest rates that we have. That is a significant issue for the UK, where we have that rather unbalanced situation with so much economic activity tied up in property.

Oral Answers to Questions

Anneliese Dodds Excerpts

Tuesday 7th January 2020 Commons Chamber

[Rishi Sunak]

I think the hon. Lady is referring to the Government’s plans to review all our frameworks, processes and mechanisms to allocate investment spending. That work is under way, and the Chancellor and other Ministers will update the House, as required, as more details emerge.

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

A very happy new year to you and everyone in the House, Mr Speaker.

The regional investment gap of £63 billion in transport alone is compounded by deindustrialisation. Yesterday, a senior Minister—anonymously—dismissed concerns over customs and rules of origin barriers as

“lobbying from industries that are in secular decline”,

but they are felt by all advanced manufacturers. What will the Chancellor do about his colleagues who seem to blithely accept further regional job losses in manufacturing?

[Rishi Sunak]

I was in the Tees valley earlier this week, and what I heard there from manufacturers was incredible support for this Government’s agenda of spreading opportunity, driving investment in regional infrastructure and sensible taxation of manufacturing companies, all of which will lead to higher growth, more jobs and better investment for their community.