Corporate Tax Avoidance

Caroline Lucas Excerpts

Monday 7th January 2013 Commons Chamber

[Ian Swales]

I thank the hon. Gentleman for that intervention. I totally agree with him. The idea that large companies see their tax payments as voluntary, or as some kind of contribution they feel like making, is completely out of order. I will discuss the competition aspects later.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The hon. Gentleman is making a compelling argument about how tax avoidance has grown in recent years. By 2015, the number of staff employed by Her Majesty’s Revenue and Customs will have fallen by 40,000 since 2005. Does he agree that this apparent bid to save money is entirely counter-productive, given that if we had those members of staff at HMRC we would be much more likely to be able to crack down on avoidance?

[Ian Swales]

The hon. Lady makes a powerful point. I will say more about that later, but I agree with her that we need more resource in the whole area of enforcement.

I was talking about my experience and how we would never have set up legal entities in countries just to avoid tax. Now, News International has more than 150 companies in tax havens. Transfer pricing, management fees, royalties, patent, copyright and interest payments are all ways to move money. The moving of whole businesses and headquarters to new jurisdictions is also becoming much more common.

Let us remember that companies that are prepared to go to elaborate lengths to avoid corporation tax may seek to avoid other taxes, too. If the BBC was making wide use of tax-avoiding personal service contracts for staff, we can be sure that some private sector companies are doing so, too. At a recent Public Accounts Committee hearing, Amazon told me that it raises UK VAT and pays it to the taxman, but it is a Luxembourg company; it also claimed that it did not even know the value of its sales to the UK. Someone wrote to me after the hearing confirming that they could not get a VAT invoice for their new iPad, bought for business purposes. Amazon said that

“we are unable to provide a VAT number as we are registered overseas”.

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[Ian Swales]

I thank my hon. Friend for the intervention. I am not familiar enough with how such a rule would be structured, but the idea would certainly be helpful.

[Caroline Lucas]

May I suggest that all Members look at the private Member’s Bill introduced by the right hon. Member for Oldham West and Royton (Mr Meacher)? The Bill refers to the importance of a general avoidance principle rather than rules. The problem with rules is that people can bend them and get round them. A general avoidance principle is much harder to get round and has much wider scope. That is the route the Government should be taking.

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[Jim Sheridan (Paisley and Renfrewshire North) (Lab)]

I rise as a sponsor of early-day motion 867, which deals with the behaviour of Google and its tax avoidance statements. As the sad person I am, over the festive period I took the opportunity to catch up with the work of some of our Select Committees, particularly the excellent work of the Public Accounts Committee, chaired by my right hon. Friend the Member for Barking (Margaret Hodge). Having watching Committee members try to get reasonable answers out of some of the big corporations, I can understand their frustration. In my view, they treated the Committee with contempt, simply smirking when asked any serious question. Likewise, when Google representatives appeared before the Culture, Media and Sport Committee, of which I am a member, the public affairs spokesperson, whom I am reliably informed is a former No. 10 adviser, when asked any serious question, replied, “That’s above my pay grade.”

It seems to me that those large corporations are treating Parliament, and indeed politicians, with utter contempt. We are well aware of the statement by Google, but there is also the statement from the chief executive of WPP, who said that corporation tax paid was largely “a question of judgment” and that it paid it more out of a sense of corporate social responsibility. Experience tells me that we should not hold our breath if we are waiting for corporate social responsibility.

There is a serious problem, and in order to solve a problem we must first look at its size. General corporation tax receipts from big businesses have dropped from £26 billion in 2000-01 to £21 billion in 2011-12, a 20% decline but a 65% increase in profits. In October 2012 companies paid £7.8 billion, down from £8.7 billion in October 2011. The Office for Budget Responsibility predicted that corporate tax receipts would grow by 4% this financial year, but they are actually down by 10%. HMRC estimates that the tax gap—the difference between what should be received and what is received—is £4.1 billion. That would pay the salaries of 153,000 nurses or 164,000 police officers, or for 430,000 nursery places. Indeed, if the Treasury closed the tax gap, it would cover almost a third of the expected deficit for 2012-13. As has already been alluded to, 98% of FTSE 100 firms have at least one subsidiary in a tax haven. The cost of tax havens is estimated at £160 billion annually. That is in excess of all the aid flowing now.

There is hope, hopefully. The Chancellor has pledged more resources for the Organisation for Economic Co-operation and Development to create a levy catching earnings of multinational firms. Indeed, he has announced an extra £77 million a year for two years to fund more HMRC staff to pursue companies that are not paying their taxes. However, his close friend the Chief Secretary to the Treasury, the right hon. Member for Inverness, Nairn, Badenoch and Strathspey (Danny Alexander), said that we should not name and shame firms that avoid tax as that would breach taxpayers’ confidentiality. To return to a point made earlier, I think that we should be looking at fair tax in the same way we looked at fair trade.

The well-respected organisation Christian Aid has put out a briefing highlighting the headlines of tax avoidance and some statistics to go with it. A recent study has shown that in excess of £13 trillion might be hidden in tax havens beyond the reach of tax authorities. The cost to developing countries is estimated to be £160 billion annually, which is far in excess of the global aid flowing at the moment. A recent UK survey showed that 56% of adults polled believed that tax avoidance was morally wrong and 74% felt that the Prime Minister should be demanding international action to tackle tax evasion and avoidance. We look forward to the G8 summit in Ireland, where the Prime Minister and the Chancellor have promised to take the whole question of tax extremely seriously.

[Caroline Lucas]

I am grateful to the hon. Gentleman for giving way and for his words on fair taxation. Does he agree that transparency is an absolutely fundamental principle at the heart of fair taxation and, in that respect, does he agree that the Government should be supporting country-by-country reporting, as set out in my private Member’s Bill, the Tax and Financial Transparency Bill, in the previous Session? Is that the kind of measure he would support?

[Jim Sheridan]

We need transparency in the system, because if we do not have transparency we will not be able to find out where the problem is, so I would fully support such a private Member’s Bill.

I will move on to what is commonly known as the people’s game: football. The Independent on Sunday has conducted an investigation into “Football’s tax shame”. It states:

“Britain’s Premier League football clubs are awash with money. They pay star players £250,000 a week, and turn over £2.2bn a year. Yet records show they paid only £3m in corporation tax last year… according to analysis of their most recent accounts.”

That money comes from the spectators, the hard-working men and women who buy the products and go to the games. The article continues:

“This is an effective tax rate of 2 per cent. Equally startling is that a profit of £150m made by eight clubs is all that the Premier League has to show for a turnover of about £2.2bn a year. Five clubs, including Manchester United, Newcastle United and Tottenham Hotspur, paid no tax at all, despite a combined surplus of more than £70m. Blackpool, relegated from the Premier League last year, paid just over £100,000 on profits of £21m—a rate of 0.5 per cent. The club was able to pay minimal tax on its substantial profits because of the effects of a £6.7m loss the year before. The club also donated just over £5,000 to charities. Of the other profitable elite clubs, Arsenal had the biggest potential tax bill—£7m on group profits of £36.6m—but paid less than half a million pounds while deferring more than £6m. West Bromwich Albion topped the company tax table, paying £1.8m on £18.9m profits. The club accounts of those that made a profit cover the financial year 2010-11, with the exception of Manchester United and Arsenal, which have both recently published their 2011-12 accounts. None of the clubs has acted illegally and all of them pay big sums in PAYE and other taxes.”

We should not buy the argument about the complexities of the tax system being the reason people do not pay their taxes. There is nothing complicated about saying to big corporations, “If you make and sell your products in this country, you pay the appropriate tax.” That is not too complex, and that is the road we should be going down.

Autumn Statement

Caroline Lucas Excerpts

Wednesday 5th December 2012 Commons Chamber

[Mr Osborne]

My hon. Friend speaks very powerfully about the way in which we have helped people. We have helped basic rate taxpayers by increasing the personal allowance, we have taken 2 million of the lowest paid out of work, and we have halved the income tax bill for people on the minimum wage; but, above all, we have helped working families throughout the country with a further income tax cut today.

[Caroline Lucas (Brighton, Pavilion) (Green)]

One glimmer of good news was the announcement of ultra-fast broadband for Brighton, and I thank the Chancellor for that, but there is plenty of bad news about the dash for gas. Not only will it bust our climate targets, but it simply is not cheap. Deutsche Bank, the CBI and the International Energy Agency all say that gas prices will rise. This is the Government who say that they like to make evidence-based policy, so why will the Chancellor not look at the evidence in this instance?

Fuel Duty

Caroline Lucas Excerpts

Monday 12th November 2012 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

On the day that the International Energy Agency has warned that two thirds of fossil fuels need to remain under the ground if we are to avoid catastrophic climate change, does the hon. Lady not see a contradiction in arguing for lower fuel prices, especially since the cost of motoring has fallen in the past 10 years while the cost of public transport has risen? Would a more consistent position not be to seek to support struggling households directly, using the money—

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Order. The hon. Lady is testing the patience of the House. It is unfair. We are going to have to introduce a time limit already. If she wishes to speak, would she please put her name down? She cannot make a speech now. Short interventions are needed on both sides

Tax Avoidance and Evasion

Caroline Lucas Excerpts

Thursday 13th September 2012 Commons Chamber

[Mr Meacher]

I thank the Minister for that helpful intervention. Once again, I find myself at one with the hon. Member for Wycombe (Steve Baker).

The haemorrhaging of tax revenues on the scale that I have described matters a great deal. First, and obviously, it is deeply unjust because tax avoidance and evasion are heavily concentrated among the big corporations and the mega-rich. If they pay hugely less than their real liabilities, that must mean that, for any given expenditure, those on average and low incomes have to pay more. That is always unjust, but it is particularly unjust at a time of prolonged austerity.

Secondly, there is the obvious point that if tax avoidance were cut sharply, many of the Government’s cuts in public spending and benefits would not be necessary and, I think, could not be justified. Thirdly, the tax avoidance industry—I do not exaggerate in saying that it is a parasite on the body politic—would be rendered largely obsolete.

The fact that City lawyers and accountants are paid vast sums to get round and neutralise what Parliament plainly intended in its Finance Bills is an open sore that would infect any democratic and fair society. The fact that they are allowed to do it makes monkeys of the Government. The fourth, and very important, point is that if most tax avoidance were stopped—I realise that it will never stop completely—companies would be forced to compete not on the basis of who was best at abusing tax law but on the quality of their goods and services. The benefit for the British economy would be substantial.

What has been the Government’s response? Tomorrow is the last day of the Government’s consultation on what they call their general anti-abuse rule, or GAAR, for tax. The background to that repays some examination. The Government commissioned the Aaronson group—Graham Aaronson is a prominent lawyer—to advise on the construction of such a rule. The group reported last November, I think. Extraordinarily, the report states right at the start that a broad anti-tax-avoidance rule is not necessary or desirable; it should apply only in the most extreme cases, so that for the overwhelming majority of cases circumventing taxes should continue as before.

I should point out that Aaronson has only ever represented companies or persons against HMRC; he has always acted pro the tax avoidance industry and never pro tax. Appointing him is rather like putting a poacher in charge of the grouse moors. Aaronson chose as his adviser Lord Hoffman, the man who killed the Ramsay principle—the general anti-tax-avoidance principle, or GANTIP—in the Westmoreland Investments case in 2001. The Government’s two key advisers on anti-tax-avoidance measures were carefully chosen in the sure knowledge that they would never recommend any such action. Thus, of course, it has proved. The Aaronson report recommended that if a general anti-abuse rule were accepted at all, Her Majesty’s Revenue and Customs should be obliged to consult and get the approval of a tribunal before it could be used against any particular person or company. In other words, the Government’s official tax collection agency should have to get permission from an external body before it could exercise its legal powers. That is an extraordinary proposal. However, it gets worse. The Aaronson group proposed that the tribunal should have three members—fair enough—of whom two should be from the tax avoidance industry. That makes it an open and shut case: the general anti-abuse rule will certainly gather dust on the shelf.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The right hon. Gentleman is making a compelling case to suggest that the Government are not fully enthused about this kind of idea. Will he give me a sense of where his Front Benchers stand on the matter? I absolutely support his views, but I would love to know whether they are behind him.

[Mr Meacher]

We have our representative on the Front Bench who will speak about that, but I will come to what I think should be done.

The Government have said that they will accept the Aaronson proposals in full—what a surprise! So the Prime Minister’s boast that he was cracking down on aggressive tax avoidance turns out to be nothing more than a paper aeroplane job devised in the certain knowledge that it will never fly.

After this tragic-comic charade, what will Government’s Bill, scheduled for next year, achieve? If it is used at all, other than as a fig leaf to cover the Chancellor’s nakedness on this issue, I think that it will be drawn extremely narrowly to include only the most egregious and extreme cases of tax abuse. It will exclude national insurance and VAT, which are a pretty large part of the tax system, and will not even regard the shifting of income, profit or gain from one tax category to another in order to gain a tax advantage as being within the definition of tax avoidance. I ask you, Mr Deputy Speaker! Indeed, the fact that the Government’s own economic impact assessment for the proposed general anti-abuse rule states that it will have little or no measurable impact makes it absolutely clear that the anti-abuse rule is just a massive white elephant.

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[Steve Baker (Wycombe) (Con)]

I congratulate the right hon. Member for Oldham West and Royton (Mr Meacher) on securing this debate. He has introduced it with the highest standards and in the finest traditions of the House. I know that he feels he is on the moral high ground, and in many ways he is. I hope that the whole House will join me in wishing him the speediest of recoveries from his injuries.

On evasion, Parliament is absolutely entitled to expect the law to be obeyed and its will must be expressed in law. If people are able to behave lawfully but other than in accordance with the spirit of the House, the law should be changed, which is a point that my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) has made on numerous occasions. I am prepared to accept the possibility that I am the only Member who does not know the tax code from one end to the other. I see that you are nodding, Mr Deputy Speaker, so perhaps I am alone in that regard.

About 12 years ago, when I worked as a software engineer servicing HMRC, I recall setting up electronic checking for certain pay-as-you-earn, end-of-year returns. It simply was not possible to submit a valid expenses and benefits return in 2001. We had to go to some lengths to persuade HMRC that it had to change its rules if it was to have an internally valid submission. Since then, the tax code has lengthened infamously. I may be alone in not understanding the tax code, but it appears that in some instances, HMRC has not understood it either.

My first point is that Parliament’s will must be expressed clearly in the law and that people should obey it. I object to the most complex tax avoidance schemes for two reasons. First, as was set out by the right hon. Member for Oldham West and Royton, if people are setting up sophisticated schemes to avoid the clearly expressed will of Parliament, they are shifting the tax burden on to others who are less able to pay. I agree with him about that.

My second reason was not given by the right hon. Gentleman. My most profound objection is that people quit the moral high ground when they engage in such schemes. They make it more difficult for those of us who believe that low taxes are in the general interest to make our case. They open the door to another industry—not merely the tax avoidance industry—that uses the complexity in our tax system, its opaqueness and its openness to various interpretations to construct a case that discredits not only our tax system, but the rule of law. For those two reasons, I object to the sophisticated schemes that we all know so well.

I will move on to the scale and the breakdown of the tax gap. We had an exchange earlier about the figures. The total tax gap in 2009-10 was £35 billion. Of that, £5 billion or 14% was due to avoidance and £2 billion due to error. The remaining categories were broadly equal. Criminal attacks, evasion and the hidden economy all involve breaches of the law and ought to be pursued in the usual way. I am grateful to the Minister for acknowledging that. The other three categories were a failure to take reasonable care at £4 billion; non-payment, which includes insolvency, at £4 billion; and legal interpretation at £5 billion. Although those figures sound large, we need to bear it in mind that avoidance and legal interpretation, which is a potential source of avoidance, make up £10 billion of the total of £35 billion stated by HMRC.

[Caroline Lucas]

I share the hon. Gentleman’s opposition to the level of tax evasion and avoidance. Does he agree that it is therefore regrettable that his Government are cutting the number of people working at HMRC by about 7,000? The very people who could be chasing after tax avoidance and evasion are being sacked by his Government and we therefore do not have the resources to go after it. Is that not the worst kind of false economy?

[Steve Baker]

To return to my earlier remarks, having serviced HMRC as a technical consultant on and off for a very long time, I could give the hon. Lady lengthy examples of enormous waste, partly through people not being given adequate skills. I will not bore her with the technical details, but a job that I could have done in about two days with software was going to be done over the course of six months by a team of 20. That kind of nonsense has to stop. They were doing something by hand that ought to have been done using software. The level of work that people were doing was almost degrading. People must be upskilled so that such nonsense can be brought to an end. I therefore support the Government in their drive to increase efficiency at HMRC.

We all know why tax avoidance happens: people desire to pay less tax. The Government know that. Through forms of tax avoidance that are barely worthy of the name, such as individual savings accounts and pensions, the Government have always deliberately incentivised certain behaviours by creating tax breaks. That is not really the subject of the debate. I mention it only to demonstrate that we all understand that everybody would like to pay less tax. I would be grateful if the Minister confirmed for anybody who is watching, listening to or reading this debate by what mechanism they can make voluntary payments to the Treasury, not because I wish to make one, but because I think that it ought to be established how one could make a voluntary payment if one so wished.

The heart of this debate is the question of altruism. My feeling is that Members of all parties often feel that people constructing sophisticated avoidance schemes are insufficiently altruistic. There is a wide range of perspectives on that. Rarely in this country do we hear the cry, “All tax is theft”, but at one extreme there is the rather childish hysteria of objectivism, which totally rejects all altruism, and at the other there is the altruism of the state collective.

As it happens, I believe that having the state collective as the basis of all altruism is extremely dangerous. I am a great believer in individual altruism, so I say to the wealthy that they should not only pay their taxes as Parliament intends but be altruistic and engage in philanthropy wherever they can. Let us win the moral high ground for lower taxes so that people can give more voluntarily and demonstrate that voluntary individual altruism is a better basis for society than coercion. I believe that liberty is the proper context for all virtue. There is very little virtue in obedience to an inescapable authority or in simply submitting to the pay-as-you-earn tax system, but there is a great deal of virtue in someone making their fortune and choosing to give it away.

There seems to be a suggestion inherent in the debate that people who are wealthy have in some sense done something wrong. If somebody in business has at every step created value for other people without force or fraud, they are justly wealthy. If people believe that wealth has been obtained by criminal acts of force or fraud, criminal prosecutions should be pursued. If people are wealthy because they have made a just profit and created value for society, they should be applauded. If we are to have a free, just and prosperous society, we must reconcile ourselves to the notion that profit is a social good.

An enormous amount of damage is done by misinformation. The Tax Justice Network, which was mentioned earlier, has been discredited in another report, and we could go to and fro arguing about who is right and who is wrong, but it is important that people do not discredit the tax system unnecessarily.

My next point is about the rule of law and the general anti-avoidance rule. I initially ranted about that to the Attorney-General, and he related a case—I cannot recall which right now—indicating that there is a long-standing tradition of HMRC being able to interpret the law in a particular way in order to apply Parliament’s will. I am extremely sceptical of anything that allows the law to be applied retrospectively so that people cannot predict how their actions will be interpreted.

Having visited sub-Saharan Africa, Egypt and Pakistan since my election, I am absolutely convinced that the primary reason for poverty in those places is that they lack the rule of law. We interfere with the rule of law at our peril, and if we are really serious about the prosperity of the poorest, we must ensure that it continues to be possible in our country to invest capital productively to raise real wages. That requires certainty and the rule of law.

What, then, is to be done? I will not even be able to attempt in one minute and 50 seconds to enter into evidence the 2020 Tax Commission’s report on the single income tax, but I encourage the Minister to proceed with radical tax simplification. I believe that much of what we are discussing could be dealt with if taxes were both simpler and lower. At this stage, with the mess that we have been handed, it seems to me that there is no chance of low taxes before the election. I would be astonished if the Government were able to deliver them. However, I encourage them to do everything possible to simplify taxes so that they can be applied equally to all and we can end the discrediting of the law and Parliament that happens when people engage in schemes that are obviously mendacious. I am grateful to the right hon. Member for Oldham West and Royton for securing the debate and hope that we will have a productive exchange of views.

LIBOR (FSA Investigation)

Caroline Lucas Excerpts

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

I can tell my hon. Friend that we are absolutely committed to a vibrant banking sector. I have gone out of my way in these exchanges to draw attention to the fact that this is an incredibly important sector to the British economy. The fact that an American bank employs 4,000 people in Bournemouth reminds us that this sector is not just in the square mile of the City of London or in Canary Wharf. This industry employs many hundreds of thousands of people around the country. It is the largest private sector employer in the country, and of course it has a huge impact on the rest of the economy, which is why it must now be properly regulated.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The Chancellor keeps repeating his intention to follow the Vickers recommendation of ring-fencing retail and investment banking, but in the light of this scandal will he not accept that simple ring-fencing is not enough because any firewalls will soon be circumvented, which is why we need nothing less than the full legal separation of retail and investment banking?

[Mr George Osborne]

There are people who share the hon. Lady’s view, but we specifically asked John Vickers and his commission, whose membership was drawn from people who had expertise in the consumer industry, banking and elsewhere, to consider whether we should physically separate the banks as she suggests. They explicitly addressed that issue and came to the conclusion that ring-fencing was a better approach, and one of the reasons why they did so is that ring-fencing might provide more stability for the retail arm, as it would be able to draw on the resources of the investment bank. They specifically looked at that and came to the conclusion that having a retail ring fence was better than separating the banks.

Green Economy

Caroline Lucas Excerpts

Thursday 28th June 2012 Commons Chamber

[Laura Sandys]

I do not think that the Foreign Secretary has needed much persuasion or that there is any lack of will or determination in the Government. As I will continue to iterate, it is absolutely crucial that the policies we have put in place are sustained consistently into the future to attract the significant investment we need in the energy sector and the green economy.

If we look internationally, we will see that the so-called tiger economies are combining economic policies, subsidies, industrial focus and energy efficiency solutions to build their stronger economies. It is that co-ordinated model that I propose to the Minister today. Globally, there will be a race for resources, including energy, water and food. Energy consumption will grow by 33% over the next 20 years, with 50% of that growth coming from China and India. Even the Governor of the Bank of England has acknowledged that we must be cautious about our exposure to fossil fuels and that they could be considered a risk to financial security. Any country that is serious about future economic competitiveness, not least this one, will ensure that it limits its reliance on fluctuating and politicised energy inputs. Energy security, domestic production and low-input process re-engineering are not, in my view, things that it would be nice to have; they are a total necessity.

In many ways that creates a challenge for politicians. We need to come clean with the public and the private sector. We cannot con them that energy prices will come down today, tomorrow or even any time soon. The increase in global consumption is so marked that even the great shale gas discoveries in the US will not have a long-term impact on global costs. From the domestic perspective, Ofgem has calculated that domestic energy prices will rise by 60% by 2016.

It is the Government who will need to take an important role in the development of a long-term, secure and resilient energy supply. Frankly, there are some of us in the Energy and Climate Change Committee who believe that, whatever energy solution we adopt in the next few years, the Government will have to stump up a lot more money than they thought to keep the lights on, but that is a debate for another day. We need to deliver a strong and sustainable energy sector that delivers as much value as possible to the energy consumer and jobs and economic growth at the same time. To do that, we must look at energies in similar terms, whether tax incentives on fossil fuels or subsidies for the renewables sector.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Does the hon. Lady agree that the £3 billion earmarked in the Budget to support the fossil fuel industry—oil and gas drilling—undermines precisely the green agenda she is setting out?

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[Laura Sandys]

I know that my hon. Friend the Member Sittingbourne and Sheppey (Gordon Henderson), whose main port is Sheerness, is very keen to ensure that in the south-east we secure an important manufacturer of wind turbines.

I know that Treasury officials are totally committed, as they were to the oil and gas sector in the ’70s and ’80s, to attracting the new jobs and growth that are emerging from the fastest-growing business sector in the UK; and I am sure that all in government are focused on securing the £200 billion of funds to rebuild our energy sector in a highly competitive capital investment market, where policy certainty is fundamental to investment decision making.

All that the Government need to do to unlock those industrial opportunities is to sustain and reiterate their consistent and constant policies, with subsidies based only on proper evidence and with investment messages that resonate among the largest industrial companies in the world, such as Siemens and GE, and the large energy generators.

[Caroline Lucas]

I am grateful to the hon. Lady for giving way to me for a second time, but I cannot let pass what she has just said about the Government’s “consistent and constant” green energy policies, because they have been the exact opposite. Whether on solar or on wind, they have chopped and changed, and that is exactly why so many solar companies and wind companies are so furious—because they cannot plan for the future.

[Laura Sandys]

I totally disagree. On solar power and feed-in tariffs, in particular, we inherited a totally unsustainable policy and system, which needed to be addressed, and unfortunately we have spent the past couple of years recalibrating in order to ensure that we have in place sustainable, consistent and long-term policies that will provide investment certainty to such companies.

The UK is a great place to invest, and it has a strong vision for a modern, green and forward-looking economy. On the impact of our fiscal measures and support, we have a choice: to build that modern economy and compete with the forward-looking, future-proofing countries, such as South Korea, China and Japan; or to hold on to an outdated energy model that will not cost us any less but will leave us and our businesses stranded in the past.

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[Caroline Lucas (Brighton, Pavilion) (Green)]

I congratulate the hon. Member for South Thanet (Laura Sandys) on securing this important debate.

I am genuinely pleased to observe a fight-back from many Tory Back Benchers who are now trying to make the Government see the huge economic and employment benefits of a green economy, as well as the obvious environmental benefits. The scale of the challenge that they face was amply demonstrated by the speech of the right hon. Member for Hitchin and Harpenden (Mr Lilley), who sounded as though he was still living in the dark ages.

I do not know where the right hon. Gentleman has been for the past few decades, but when I last looked, Germany did not seem to be an economy that was struggling. Germany is doing incredibly well, and it is being built on an economy that is light years ahead of ours in terms of the use of the green economy. Let me remind the right hon. Gentleman that we ended the stone age not because we ran out of stones, but because we found a cleaner, more efficient way of behaving. In the same way, we will leave the fossil fuel economy behind because we now see cleaner, more efficient ways of behaving.

As for subsidies, there is a world of difference between subsidies that are time-bound until new technologies reach, in this instance, grid parity, and subsidies that have been going on for decades—as they have in the case of nuclear and fossil fuels—and are driving us ever closer to climate catastrophe.

Much of the debate has rightly focused on fiscal measures. Three years ago, the green fiscal commission revealed that a “polluter pays” tax shift would provide a significant boost for UK low-carbon jobs, as well as increasing competitiveness. It suggested that such a measure would reduce emissions by more than 30% by 2020, that it would create about 455,000 jobs, and that it would receive a great deal of public support.

It is important to bear in mind how widespread that support potentially is. Let me quote these words:

“I don’t underestimate how difficult it will be to rebuild public confidence that green taxes are genuine environmental policy… not just stealth taxes… I am… determined to rebuild this trust… As leading green… Professor Paul Ekins has rightly pointed out, this type of green tax switch might be termed a ‘win-win-win’ outcome… The time for action is now. Future generations will not forgive us if we fail.”

Those are all words with which I agree, but if a week in politics is a long time, four years is evidently an eternity. Those words were spoken by the present Chancellor to a Green Alliance conference back in 2008. I agree with all his words from 2008, but unfortunately they have not been matched by any real action since he has been in a position to put them into action.

I hope that today’s debate will enable us to remind the Chancellor of his words of four years ago, and help to convince him that he should throw his weight behind the UK’s aim of becoming a world leader in low-carbon industries. If he does not believe in the environmental reasons for such action, he certainly ought to believe in the economic and employment benefits. I also hope that we shall be able to persuade him to convince the Treasury that its flagship “green bank” ought to be given the power to borrow as soon as possible.

More broadly, I should like the Chancellor to consider measures such as “green quantitative easing”. I was interested to note that even the former Government chief scientist Sir David King has echoed my calls for green conditions to be attached to the billions of pounds that are currently being poured into our banks. I think that the money should be going directly into the economy rather than into private banks, but wherever it is going, the Government should at the very least ensure that green conditionality is involved, so that we can ensure that it goes into low-carbon infrastructure. Crucially, they should also recognise that the low-carbon economy is far more labour-intensive than the fossil fuel economy that it will replace, so it makes good employment sense to invest the funds in green rather than fossil fuel measures.

The one thing businesses are united in calling for is certainty. The CBI says about low-carbon investment:

“Businesses need, above all else, policy certainty, consistency and clarity over the long-term”,

yet that has been conspicuous by its absence under this Government—demonstrating a failure of leadership by them. The sad news about Vestas reversing its previous decision to invest in the wind turbine manufacturing plant at Sheerness is just the latest casualty of the Government’s failure to provide that most basic condition.

[Nigel Adams (Selby and Ainsty) (Con)]

Is the hon. Lady aware that in the last three days Vestas has also decided to close a manufacturing plant in China?

[Caroline Lucas]

It does not make me feel any better to know it is also closing plants in other parts of the world. It has clearly said one of the reasons why it did not go ahead in Sheerness was that it did not have enough orders for turbines on the order book. If that is a problem here in the UK, we should be addressing that, rather than worrying about what is happening in China.

One measure that would provide huge and tangible benefits both in my constituency and the rest of the UK is a massive investment in making the UK housing stock super-energy efficient. As others have said, that would not only be good in terms of getting our emissions down and creating lots of jobs; crucially, it would help tackle fuel poverty as well. This measure should be funded not through more levies on energy bills—as the Government plan, and which is inherently regressive—but from using funds such as the revenue from the carbon price floor and auctions of carbon emissions permits through the EU emissions trading scheme. That would have benefits in job creation, tackling high energy bills and achieving rapid emissions cuts. Some 118 Members have now signed the early-day motion on the Energy Bill Revolution campaign, which calls for precisely this step.

Members support that EDM because they know that, sadly, as it is currently designed, the green deal policy instrument is extraordinarily weak and the energy company obligation part of it—the bit that is supposed to be tackling fuel poverty—looks set to fail miserably both against the Government’s own objectives and in terms of doing what is needed to cut carbon emissions and end fuel poverty. The truth is that the final shape of that fuel poverty package could result in a 50% drop in the funding targeted at low-income and financially deprived households. There will be far less money in the ECO than there is in the measures that are being phased out—the carbon emissions reduction target, the community energy saving programme and Warm Front.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

I think the hon. Lady is being disingenuous, to say the very least, in respect of this Government. It is because of the policies of this Government that we are seeing investment in increasing numbers of offshore wind farms, not only off the Kent coast, but, as I am sure my hon. Friend the Member for Waveney (Peter Aldous) will point out in his speech, off our coast in Suffolk. Will the hon. Lady at least accept that there have been many good advances in green energy—some of which are being delivered right now in Suffolk?

[Caroline Lucas]

That has probably happened in spite of Government policy, not because of Government policy. [Interruption.] I hear the muttering on the Government Benches, but what I say is true. The measures of investment figures show that under this Government investment in green technologies has decreased.

[Dr Poulter]

rose—

[Caroline Lucas]

I apologise, but I will not give way again, as I do not have much time left.

For many low-income households the green deal financial mechanism simply does not stack up. [Interruption.] The mechanism is based on loans with interest rates of between 6% and 7%. That creates the risk that these loans will be taken up by middle-class and well-off households, which might be able to afford to take them up without needing any support, rather than by less-affluent families with next-to-nothing in their pockets. Although there are limitations in respect of this market mechanism, if we are going to use it, we will at least need support to bring interest rates down to a more realistic level—as Germany has done through the development bank, KfW.

Renewable energy enjoys massive public support. That is true even of wind—although judging by the outcry from some Tory Back Benchers, we would be forgiven for assuming otherwise. In November, a YouGov survey found strong support for renewables, with 60% of people supporting wind power subsidies. The Prime Minister said in his half-speech at the clean energy ministerial meeting in April that he passionately believed that the rapid growth of renewable energy was vital to the UK’s future, but, sadly, his Government’s policies do not reflect those warm words. Instead, we hear rumours that he and his Chancellor are seeking backroom deals for a 25% cut in subsidies to onshore wind. Any reduction beyond the proposed 10% cut to wind subsidies would fly in the face of environmental and economic common sense, jeopardising the future of both onshore wind and investment in other renewables across the country, as well as the thousands of jobs they could bring.

The solar feed-in tariff fiasco provides another example of coalition Ministers creating harmful uncertainty. As one solar company in my constituency described it, the industry has had to endure a series of “unsettling knee-jerk changes” that have undermined not only investor confidence, but public confidence in the solar industry. Solar energy has huge potential in the UK and it is a tragedy that we are not supporting it more.

Marine energy also has massive potential. With the right support the UK industry could seize almost a quarter of the world’s potential market, according to the Carbon Trust. That would be worth an estimated £29 billion per annum to the UK economy by 2050 and would support more than 68,000 jobs. Sadly, that potential looks hugely unlikely to be realised, given that we have a Government Budget with a £3 billion tax break for more offshore oil and gas drilling—

[Mr Lilley]

rose—

[Caroline Lucas]

I will not give way, because I am running out of time. I am sorry. I was going to say that we also have a draft Energy Bill that threatens to usher in a new dash for gas.

Finally, in my last 40 seconds, I wish to pick up on the way in which “accelerate green growth” is being used in the motion, as we need to be a little clearer about that. Of course we need faster growth in some sectors of our economy, including in renewable energy and energy efficiency, but we must stop pretending that we can have infinite growth on a planet of finite resources. The current economic crisis gives us the opportunity to change direction and get on the path to a very different kind of economy, one that it is not measured solely by GDP. The problem with GDP is that it measures everything in cash terms; it does not measure what is growing, and it does not give us any sense of the quality of the economy and whether it is delivering true well-being.

[Several hon. Members]

rose—

Interest Rate Swap Products

Caroline Lucas Excerpts

Thursday 21st June 2012 Commons Chamber

[Karen Bradley (Staffordshire Moorlands) (Con)]

I join colleagues in congratulating my hon. Friend the Member for Aberconwy (Guto Bebb) on securing this important debate. The many case studies that we have heard this afternoon are very familiar to us and I am sure that other colleagues have faced similar situations. I have, which is why I am taking part in this debate.

Before I come on to my constituent’s circumstances, it is probably worth setting out why I think that swap arrangements are not suitable to be sold to unsophisticated small business men. I do not mean that small business men are unsophisticated, but that they do not have an army of lawyers and accountants to advise them. At a basic level, a swap agreement is a gamble. Mr Deputy Speaker, the two of us could enter into a swap agreement this afternoon. I will happily buy you a cup of tea on the condition that you will buy me a cup of tea in three months’ time. I am gambling that a cup of tea will go up in price so that when you buy me the cup of tea, it will cost you more than the cup of tea that I buy you today. However, we could have a glut of tea and the cost could go down significantly. If so, I will have lost in that gamble. That is ultimately what a swap arrangement is.

Swaps can be very useful to businesses. As Wimbledon is coming up, let us take the example of a strawberry grower. The strawberry grower needs sun at the right time and could probably take out an insurance policy that the sun will shine, or they could find someone who thinks the sun will shine and is willing to take out a bet with them that it will. If the sun does not shine, and it rains, that individual would pay the strawberry grower for the rain and the strawberry grower would have money although he would have no strawberries to sell at Wimbledon. Alternatively, if the sun did shine he would have his strawberries to sell and he would pay the bet because the sun had shone. That is what swap arrangements are. Because they are a gamble, it has to be made extremely clear to individuals that that is what they are entering into. What I and colleagues have seen is that it has not been explained to people that they are taking a gamble.

That brings me to the case of my constituent, Mr Doug Wardle. Mr Wardle is a very successful local businessman who runs a number of businesses in my constituency. He has a very successful coach transport business and his name will be very familiar to people in Staffordshire Moorlands who see Wardle Transport vehicles going around. He also has Wardle Property and a number of other businesses. Back in 2006, he understandably wanted to expand his businesses and wanted a loan. He therefore went to his bank and entered into a loan arrangement whereby he borrowed £2.2 million, secured, he thought, against £3.1 million-worth of property. But there was a condition on this loan to expand his business, the travel part of which at one point employed 120 people. The condition was that he would enter into two interest rate swap arrangements—one each against two of his businesses. He was told that this would guarantee him a fixed interest rate and that he would be safe from interest rate fluctuations.

Mr Wardle was told that he would be paying 1.57% over base, which he thought was a very good deal. Even back in July 2006, that seemed like a very good deal. However, circumstances change and the financial climate changed. Unfortunately, by 2010, although his businesses were successful, Mr Wardle was having difficulty negotiating with his bank. He got to the point at which he had repaid his loan down to £1.25 million, so he had significantly reduced it, but the bank was not willing to move on the interest rate swap arrangements. That has caused Mr Wardle an incredible amount of stress and anguish, and he faces losing his home. He told me today that it has cost him £300,000 just to deal with the fees to the bank.

I have here the figures for the interest rate swap arrangements. The cost of buying out the swap arrangement is £180,000. Mr Wardle has been told that he will be paying 3.25% over three-month LIBOR—London interbank offered rate—not the 1.57% over base he thought he had, on a £1.25 million loan. I apologise for all the numbers. The amount he has to pay in interest a year is £111,752 with an additional £71,780 just to service the interest rate swap arrangement. I calculate that to be an interest rate per year of 14.7%. I do not think that when Mr Wardle entered into this arrangement he thought he was going to be paying 14.7% when the base rate is 0.5%. That is the problem. Mr Wardle is a very successful small business man. He has built up a number of highly successful businesses and he employs a lot of people, but how was he expected to understand that under this arrangement he could lose his home, having paid hundreds of thousands of pounds in fees, all because he was told by his bank, which he trusted, that he would be safe from interest rate fluctuations?

[Caroline Lucas (Brighton, Pavilion) (Green)]

I am almost reluctant to interrupt the hon. Lady because she is making such an eloquent case and is giving a very useful economics lesson at the same time. I have been contacted by a number of my constituents who have been badly burned by these toxic products. Does she agree that the experience she describes of the small business person in her constituency, Mr Wardle, is being repeated right across the country? Indeed, there will be many cases that we do not know about because many people are loth to speak out against their bank for fear that they will have problems with their business reputation. Does she agree that the issues we are discussing are probably the tip of the iceberg, which makes action even more urgent?

[Karen Bradley]

I absolutely agree with the hon. Lady. I called Mr Wardle this morning, before mentioning his name. I was happy to speak about him anonymously, because I understand that he is in a difficult position. Hon. Members in all parts of the House have expressed concerns about their constituents, and I agree that there must be many other cases of small business people who do not want to come forward and might not even realise that they could approach their MP. They do not want to raise the topic, although they are, frankly, being bullied by the banks in such situations.

I again congratulate my hon. Friend the Member for Aberconwy. I support the motion and I hope that we shall see some action very soon.

Finance (No. 4) Bill

Caroline Lucas Excerpts

Thursday 19th April 2012 Commons Chamber

[Mr Gauke]

The only benefit received by those in the top 10% of earners, which includes all of us, is child benefit, if they have children. That is the only benefit that we receive, so it is the only one that can be reduced or withdrawn. That is why we have this approach. It is perfectly fair that steps are taken to remove child benefit from those households that contain people in the top 10%.

[Caroline Lucas (Brighton, Pavilion) (Green)]

Has the Minister heard of progressive taxation? That would be a concrete way of clawing back money from those who can afford it. The danger of the Government’s approach arises when everyone has a service and everyone stands up to defend it. As soon as one starts to chip away at it, it is undermined, and the poorest lose out most.

[Mr Gauke]

We do have progressive taxation, and under this Government the top 1% of earners pay 27.7% of all income tax at a higher rate than at any point in our history. While considering the universality of child benefit, what is being done was not our first choice, but given the position that we were left in it was necessary. When a Government need to raise revenue it makes sense to turn to a measure with a broad base where a significant number of recipients are not reliant on the additional payments they receive, and child benefit is just that sort of payment. That is why my right hon. Friend the Chancellor said that we would seek to withdraw child benefit from higher rate taxpayers. We always said that we would consider how to implement the measure, and we have been clear that a complicated new means test is not a sensible way forward. Instead, we should look to the existing systems and processes to ensure that we can achieve this goal.

Amendment of the Law

Caroline Lucas Excerpts

Wednesday 21st March 2012 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

Would the right hon. Gentleman add a fourth test to the three that he has set out, which is whether or not this Budget takes us in a more sustainable direction? On that measure, the Chancellor started by saying that oil prices are of great concern, but what he has now done is to give a huge tax break for more oil drilling.

[Mr Denham]

I am happy to include that test. One of the missed opportunities will turn out to be in the low-carbon economy that will dominate the global economy in the 21st century.

Things have turned out so much worse than in the heady days of the new Chancellor’s optimism when he told us in his first speech that the economy was set to grow steadily; that unemployment would fall year on year; that the deficit would drop like a stone, yet front-line services would be protected; that the private sector would expand magically, more than filling the space left by public services; that the banks would lend; and that the whole tiresome infrastructure of regional investment, job guarantees for young people and a coherent planning system could simply be swept away. Well, the Chancellor, the Deputy Prime Minister, the Prime Minister and the whole coalition were wrong.

The spending cuts, drawing billions out of the economy, were too far and too fast. The Government’s gloomy talk first unnerved and depressed consumers; then the VAT hike took money from them when we needed them to spend. Now the cuts are really beginning to bite. The Government were so cocksure and complacent that they strung together, purely for cynical political purposes, a series of half-baked, ineffective measures that were more or less abandoned as soon as the last press release had been issued: the national insurance holiday; the regional growth fund that does not pay out any money for months or years; the business growth fund with few investments; the special support for exporters with a handful of users; the Work programme that does not work; Project Merlin; and the youth contract that has not even started two years after the future jobs fund was scrapped. Any right hon. or hon. Member who gets excited by any measures announced in a press release for this Budget should remember what happened to the last lot.

Opportunities were missed—to tax bank bonuses, to fund real jobs for young people, to cut VAT for families, to cut national insurance contributions for small businesses taking on staff, to bring forward infrastructure spending. But what did we get? Just a feasibility study on Monday of this week, two years after the need was first identified. No, the short-term measures have failed, and we have seen no change.

Fairness has been well debated today. Let us remember one point—in April, families with children, taking into account the personal allowances and all the other changes, will be £530 worse off on average. When we look at next year’s personal allowances, I am sure it will also be clear, when the dust has settled and the IFS has done the figures that take into account all the other changes, that those families will still be worse off. Hon. Members should look at the Red Book and see which families are going to pay a higher proportion of their income, and it is those on low incomes.

This Government have been mired in unfairness from the beginning. We should remember that one of their first actions was to cancel changes to pension tax relief, which would have brought in £1.6 billion from the very highest earners in this country. We did not hear the Chancellor reminding us of the things he has already done to tilt the system to those best able to get through the next few years. I believe that the Government will pay the price for that.

The truth is that it is not a matter of whether stamp duty brings in more money or whether the anti-avoidance measures—the Government should tackle avoidance in any case—bring in more money. The challenge for this Government and this Budget was to devote every single available penny to raising the incomes of hard-pressed low and middle-income families and to get the economy growing. There was no justification for singling out the highest rate of income tax on earnings over £150,000 a year. The average person in work in my constituency will have to work for seven and a half years to earn £150,000. To single out that higher-earning group and to cut their tax was wrong.

This was not the fairness in tough times that the country needed, but the other failure in the Budget was the failure to lay the foundations for the economy that we need in the future. The truth is that despite the pressure on the public finances, there is no shortage of money to rebuild the economy. UK companies are cash-rich. Sovereign wealth funds are out there. There are pension funds, closer to home, with money to invest.

Banking (Responsibility and Reform)

Caroline Lucas Excerpts

Tuesday 7th February 2012 Commons Chamber

[Caroline Lucas (Brighton, Pavilion) (Green)]

I welcome this important debate, the ramifications of which stretch far beyond the banking sector in particular and economic policy in general. The issue of high pay and bonuses is central to the kind of society that we want to live in. I share the disgust and outrage of my constituents at the fact that successive Governments have allowed the incomes of the wealthiest 10% of the population to rise by 37% in the past 10 years while those of the poorest 10% have fallen by 12%, and that the earnings of top executives at Barclays have increased by a stratospheric 4,899% since 1980, while wages for the average worker at the bank have increased only threefold.

We have heard much about a more responsible economic system in recent weeks, and I welcome that debate, but unless that fine rhetoric is backed up with concrete and far-reaching action, I fear that we will merely see more of the same bankrupt business as usual. The first thing we must do to address properly the concerns raised today is ask one important prior question: what purpose do we actually want the banks to serve?

I believe that banks ought to be useful servants of a productive economy and of the new economic, social and environmental challenges that we face. Introducing a statement of purpose requirement for banks and banking activities, in order to allow regulators and customers to assess how much or how little those activities contribute to a productive economy that serves and protects the environment, would be a useful starting point. It has already been done by the German Sparkassen network of community banks, and would go some way towards giving power back to people and allowing them a say in the future of our banks.

The bottom line is that markets alone cannot deliver the kind of banking system that we need—one that is safe and fit for purpose. Governments must step in, and not just when bail-outs are required. Tackling pay at the top end of the sector is an important first step. I support a special tax on bankers’ bonuses, but we should make it permanent. At the top rate of 50%, Labour’s one-off tax raised about £3.5 billion for the Exchequer, but did not do anything like enough to curb the excessive bonus culture, as we now see. Curbing Stephen Hester’s bonus and stripping Fred Goodwin of his knighthood are a start, but let us not pretend that throwing some red meat to the tabloids is a substitute for urgently needed thoroughgoing reform of the banking system. In the absence of major re-regulation, our financial system remains dangerously dysfunctional.

If we are intent on curbing excessively high pay, as we should be, we must recognise that it is not a problem in the finance sector only, and match any action with measures to improve wages at the opposite end of the scale. That means supporting a genuine living wage and considering policies such as a 10:1 ratio between the highest and lowest-paid staff of a company, or a guarantee that no member of staff should receive an annual bonus exceeding the annual wage of the lowest-paid worker in that business or organisation.

I have said that tackling pay was just one part of the challenge. There are many others: 3 million people in the UK do not even have a bank account, and 9 million lack access to affordable credit. Banking reform must address that urgently as well. A universal banking obligation could ensure a taxpayer quid pro quo for future bank support. It would have to cover where banks lend and include a banking code to ensure that everyone has access to essential financial services. A people’s bank could operate via the post office network to address financial exclusion and provide real, fairly priced competition in local communities. A UK community reinvestment Act would ensure that banks lend money where they are prepared to take deposits. We also need to separate banks’ retail and commercial arms properly, not just ring-fence them as the Government plan to do.

Ecological theory suggests that a system is most resilient when it is divided into compartments to protect it from external danger. In order for banks to be resilient, they too should be modular, without excessive connections between them that can transmit shocks rapidly through the system. For that reason, serious restrictions on inter-bank lending and derivatives trading and the reintroduction of exchange controls designed, among other things, to reduce sharply international flows of money between banks should be explored in much more detail.

The next round of quantitative easing may well be announced on Thursday. Recently, I met the man credited with inventing the term. He explained that he was in Japan at the time and wanted to talk about credit creation, but that those words in Japanese meant something different. Credit creation goes to the heart of how the banks operate. The current economic system enables commercial banks and other financial institutions to exert an unacceptably large influence on the economy. Now is surely the moment for us to challenge the virtual monopoly that we have allowed the private banking sector to exercise over credit creation.

One step towards achieving that might be to introduce green quantitative easing. We know that during the last round of QE, the Bank of England purchased £275 billion in Government bonds, yet that money did not find its way into the real economy or help small businesses get loans. Green quantitative easing would inject money directly into the economy, circumventing the paralysed banking system. By purchasing green assets such as solar photovoltaic assets for a nationwide roll-out, for example, we could create far more jobs, stabilise the economy, reinvigorate our local businesses and reduce our emissions.

There are many other things to be said, and I have only 20 seconds left in which to say them. We need diversity on our high streets. We need more community banks and credit unions. We will not get the banking system that we need if we leave it to a monopoly of four or five main high street banks. We need a diversity that we can learn from ecology. If we bring that into our banking system, we might just have a chance at a banking system fit for purpose.