Finance Bill

Damian Hinds Excerpts

Monday 27th June 2016 Commons Chamber

[The Temporary Chair (Sir Roger Gale)]

With this it will be convenient to discuss clauses 133 and 134 stand part.

Amendment 183.

Clauses 135 and 136 stand part.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

Clauses 132 to 136 set out changes to the climate change levy, or CCL, which is a tax levied on the supply of energy to businesses and the public sector. It was introduced in 2001 to incentivise industrial and commercial energy efficiency. The Finance Act 2015 removed the climate change levy exemption for renewable electricity generated on or after 1 August 2015. A consultation was then held to seek views from industry on the appropriate length of time for the transitional period.

Clause 132 sets the length of the transitional period during which electricity suppliers can continue to exempt from the climate change levy renewably sourced energy generated before 1 August 2015. The clause provides for an end date for the transitional period of 31 March 2018. Setting a transitional period will minimise the administrative impact on electricity suppliers by giving them time to retain the benefit of renewably sourced electricity acquired before the date of the change.

Following a review of the business energy tax landscape and consultation with industry, it was announced at Budget 2016 that the Government would abolish the complex and unduly burdensome carbon reduction commitment energy efficiency scheme and move to a single tax—the existing climate chance levy—from 2019. Moving to one tax will provide a clearer price signal for business energy use, incentivising energy efficiency while reducing administrative burdens.

Clauses 133 and 134 set the main rates of the CCL from 1 April 2017 and 1 April 2018 to increase by the retail prices index. Legislating for those increases now provides certainty for businesses before the wider business energy market reforms take place.

Clause 135 will increase the climate change levy rates above RPI from 1 April 2019, to recover the revenue that will be lost from abolishing the CRC. Increasing climate change levy rates will strengthen the incentive for businesses with the greatest potential to save energy. At the same time, rebalancing the rates for different taxable commodities from 1 April 2019 will update an outdated ratio and more closely reflect the carbon content of the energy used. That will help to deliver on our commitment to achieve greater carbon savings.

Clause 136 will increase the levy discount for energy intensive sectors with climate change agreements. That will ensure that businesses in those sectors will pay no more in the climate change levy than the expected RPI increase in April 2019, thereby enabling them to maintain their international competitiveness. Those reforms will take place in 2019, providing a three-year lead-in time for businesses to adjust to the new business energy tax landscape.

Several hon. Members have in the past voiced concern over the impact of the clause to remove the climate change levy exemption from renewably sourced electricity, so allow me, if you will, Sir Roger, to repeat the reasoning for the removal of that exemption. There is no doubt that the exemption was increasingly providing poor value for money for British taxpayers. Without action, the exemption would have cost almost £4 billion over the course of this Parliament, providing only indirect support to renewable generators.

Other Government support for UK low-carbon generators demonstrates this Government’s commitment to renewable energy. Since 2010, nearly £52 billion has been invested in renewables, and that has led to a trebling of the UK’s renewable electricity capacity. There was another record year in 2015, with £13 billion invested in renewable electricity. Removing the exemption will provide better value for money for UK taxpayers, contribute to fiscal consolidation and maintain the climate change levy price signal necessary to incentivise business energy efficiency.

The Government’s consultation with industry showed that the current business energy tax landscape was too burdensome and complex. Clauses 132 to 136 demonstrate the Government’s commitment to simplify and improve the effectiveness of business energy taxes in order to meet our environmental targets.

Amendment 183 stands in the name of the hon. Member for Salford and Eccles (Rebecca Long Bailey) on behalf of the Opposition. If I may pause for a moment, I want to take this opportunity to congratulate her on her elevation today. It is an extremely well-deserved promotion and we wish her all the best in her new role. On this occasion, however, I am afraid that her amendment has slightly less merit. It would require the Chancellor to publish a report detailing the impact of the climate change levy in reducing carbon emissions within 12 months from the passing of the Finance Bill, but such a review is unnecessary.

Following a hearing on the 2015 summer Budget, the Chancellor wrote to the Treasury Committee on the impact of the removal of the CCL exemption. He made it clear that the exemption would not directly affect our commitment to reduce carbon emissions. In addition, the Department of Energy and Climate Change already intends to publish a consultation on a simplified energy and carbon reporting framework later this year. That will be accompanied by an impact assessment, which will examine the removal of the carbon reduction commitment and propose adjustments to reporting requirements.

The impact of ending the exemption from the climate change levy for renewable electricity has been discussed at length over the course of debates. It has been confirmed to Parliament in writing by the Chancellor that removal of the exemption will not impact on the UK’s ability to meet its carbon budget targets. I therefore urge the hon. Lady to withdraw the amendment, but should she be minded not to do so, I urge the Committee to reject it.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I thank the Minister for his kind comments and for being a fantastic duelling partner in these debates. He has been nothing less than respectful and I have enjoyed debating with him.

I rise to speak to clauses 132 to 136, which make various changes to the climate change levy, and to amendment 183, which stands in my name and those of my hon. Friends the Members for Hayes and Harlington (John McDonnell), for Feltham and Heston (Seema Malhotra), for Wolverhampton South West (Rob Marris) and for Leeds East (Richard Burgon).

Clause 132 relates to the removal of the exemption for electricity from renewable sources. Since the climate change levy’s inception in 2001, electricity from renewable sources has been exempt when supplied under a renewable source contract agreed between an energy supplier and its customer. In Budget 2015, the Chancellor announced that that exemption for renewable electricity would be removed from 1 August 2015 and that there would be a

“transitional period for suppliers...to claim the CCL exemption on any renewable electricity that was generated before that date.”

Following an informal consultation, which received 18 responses, the Government announced that the transitional period would end on 31 March 2018, legislated for in this Finance Bill.

The House will be aware that we, along with several Government Members, opposed the removal of that exemption in the Finance Act 2015, and we maintain that position. We will therefore abstain on the clause, but I would like the Minister to address one particular point. In answer to written questions, the Government have refused to publish a summary of responses to the informal consultation, as they contained “commercially sensitive information”, and they refuse to publish an average of suggested timescales. Will the Minister give us an assurance that the length of the transitional period was, in fact, in line with the recommendations of the respondents?

Clauses 133 and 134 will increase the main rates of the climate change levy in line with inflation in April 2017 and again in April 2018. It has been standard practice to increase the rates in line with inflation in each year’s Finance Bill since 2007 and, as the explanatory notes set out, wider changes to the CCL from 2019 are being legislated for in this Bill, so it makes sense to make provision for the next two years at the same time.

Those wider changes are the subject of clause 135, which significantly increases the main rates of the climate change levy to recover Exchequer revenue lost from the abolition of the carbon reduction commitment. In doing so, the ratio of electricity to gas is rebalanced somewhat to 2.5:1, and it is the Government’s intention to rebalance the ratio further to 1:1 by 2025, to reflect the fall in gas prices and the expected increase in consumption as a result.

The following clause increases the CCL discount available to energy intensive businesses subject to climate change agreements, to compensate equivalently for the increase to the main rates. The CCL discount for electricity will increase from 90% to 93%, and the discount for gas will increase from 65% to 78% from 1 April 2019. That provision mitigates a knock-on effect from clause 135.

Our amendment to clause 135 would require the Government to conduct a review of the impact of the climate change levy on carbon emissions. The review will have particular reference to the removal of the exemption for electricity generated from renewable sources, the abolition of the carbon reduction commitment and the reporting requirements for companies and public sector bodies.

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[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I will focus on clauses 132 to 136, in part 9, and amendment 183, which pertain to the climate change levy. Both the hon. Member for Salford and Eccles (Rebecca Long Bailey) and my hon. Friend the Member for Aberdeen North (Kirsty Blackman) have spoken comprehensively on this subject, so I will keep my speech relatively short.

I have particular concerns about the removal of the exemption for electricity generated from renewable sources. I believe that this counterproductive decision will grossly undermine the development of the UK’s energy sector. The long-term future of our energy market is in renewables. The UK, and Scotland in particular, has extraordinary potential in the renewables sector

Scotland has 25% of the wind and tidal potential in all of Europe, and 10% of the wave potential in Europe. For a small country—in both landmass and population, although it none the less represents a third of the UK landmass—these figures represent enormous potential not just for leading the world in renewable energy production, but in creating tens of thousands of jobs and ushering in substantial economic growth.

However, this Conservative UK Government seem determined to tear down any progressive policies that are designed to encourage and incentivise the production of green energy. Just this year, the Government have begun the process of privatising the Green Investment Bank, as the hon. Lady said. In addition, this Government have cut subsidies for small-scale solar panels by 65%, which is a massively damaging blow to the industry that can save households a few pounds.

As the hon. Lady and my hon. Friend the Member for Aberdeen North did, I will mention the scrapping of support for onshore wind, the removal of the biomass renewables obligation subsidy level guarantee, the killing of the flagship green homes scheme and the cancellation of the carbon capture initiative, which I was heavily involved in. What about the future? What hope is there for the Swansea Bay tidal programme, given the track record of this Government?

The climate change levy was a positive step in the right direction. It was a policy designed to provide a disincentive for polluting technologies. It is perverse that the climate change levy has been applied to green, clean energies. That is not what it was intended for. This change will have a disproportionate impact on Scotland, which despite having under 10% of the UK population, as my hon. Friend said, produces a third of the UK’s renewable energy.

Despite the austerity implemented by this UK Government, Scotland has continued to drive forward in reducing its carbon footprint and increasing the use of green electricity. As my hon. Friend also said, earlier this month it was announced that we in Scotland had reached our target of making a 42% reduction in carbon emissions by 2020, which is six years earlier than expected. The SNP Scottish Government have now set a more ambitious target of a 50% reduction in carbon emissions by 2020. However, I fear that despite our progress, unfortunate choices by the Conservative UK Government —both their ill-advised and counterproductive austerity obsession and the mishandling of the EU referendum, leading to a vote for Brexit—will mean regression, rather than progress on climate change and the promotion of renewable energy.

For those reasons, I wholeheartedly support amendment 183, in the name of the hon. Member for Salford and Eccles.

[Damian Hinds]

The climate change levy makes a significant contribution to the Exchequer’s revenues. It had been on a declining path, but with the changes that have come in, its path has been stabilised. It had been providing increasingly poor value for money, partly because a third of its value was going to generators overseas: that generation does not contribute to UK targets, and quite often benefits from subsidies and other benefits at home.

There was also only indirect support for renewables. This is a really important point that goes to the heart of what the hon. Members for Aberdeen North (Kirsty Blackman) and for Coatbridge, Chryston and Bellshill (Philip Boswell) were saying. The renewables obligation and contracts for difference are much more effective at providing direct support, at a higher level than the £5.54 per hour, to bring on the generation that we need.

The success of the deployment of renewables in this country paradoxically has an adverse impact on the effectiveness of the CCL exemption, such that by the early 2020s it would not be effective in stimulating new capacity to come on stream. Its value to generators would be declining, because the supply of renewables and therefore of the levy exemption certificates would exceed in volume the total potential demand from eligible customers in business and the public sector.

[Kirsty Blackman]

If the Minister is saying that the exemption will not be effective after 2020, does he concede that it would therefore be effective to keep it in place now?

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[Damian Hinds]

Sir Roger, he does not. As I was trying to say, this is not a cliff-edge thing. Its effectiveness has been declining over time and a lot of the value leaks overseas. Most important of all, there are other ways of directly stimulating new renewables provision. Without getting too far into the weeds and the details of what goes where, those other ways make sure that the benefit goes directly to the generators rather than being split between different parts of the value chain. CfDs stabilise the price relative to some of the fluctuations of the wholesale market, which in turn increases investor confidence and can help drive investment.

The hon. Member for Salford and Eccles (Rebecca Long Bailey) asked about the transitional period, and her various parliamentary questions about the responses received to the informal consultation on that. Suppliers were invited to respond; of those that did, only one requested a transitional period in excess of three years. All others were content with an end date of 31 March 2018. Most said that they would have used their levy exemption certificates within a year. We have not published the results of that consultation because, as she rightly said, it included commercially sensitive information. The size of the sample and the number of responses mean that it does not make sense to speak in terms of the average period that was called for.

I turn to the abolition of the carbon reduction commitment and changes to the climate change levy main rates. Those are major simplifying moves. We had extensive consultations—both written consultations and meetings, a number of which I sat in on—and businesses said loud and clear that they wanted to simplify how it all worked. They valued the discussions that had taken place and the elevation of the role and salience of energy efficiency within their companies. But the CCL as a single tax will be a straightforward price signal. We will also be removing some of the additional administrative burden.

The Government will also consult on a simplified reporting framework this year, to encourage large businesses to identify energy efficiency savings. In addition to the tax changes, that will further enhance the UK’s ability to reduce its carbon emissions. The Department of Energy and Climate Change intends to publish an impact assessment of the changes later this year, alongside its consultation on a simplified reporting framework. That will include analysis of the impact on carbon emissions. Rebalancing CCL rates towards gas will better incentivise emissions reductions from that fossil fuel, as well.

I will finish by restating, lest there be any doubt, the very firm commitment and strong track record of this Government on reducing emissions. Since 2010 we have reduced the UK’s greenhouse gases by 14% and outperformed our closest European counterparts with the largest cuts in greenhouse gas emissions since 1990. As the hon. Member for Aberdeen North mentioned, we secured the first truly global, legally binding agreement, the Paris agreement, COP21, with our Secretary of State playing a key role. Annual support for renewables will more than double, to more than £10 billion in 2020-21. We are the first major developed economy in the world to commit to phasing out unabated coal, the dirtiest fossil fuel, by 2025. We are the world’s leading player in offshore wind, with just over 5 GW installed, a figure that is forecast to double by the end of the Parliament.

There can be no doubt about the Government’s credentials when it comes to our commitment to reduce emissions. With these tax changes, we have reformed a tax that was proving less effective, over time, with regard to its original aim as stated in 2001, when of course the proportion of renewable electricity generation was so much lower—I believe it was 2.5% in those days. With the changes to business taxation we are keeping the price signal very firm—indeed, making it sharper—by reducing administrative burden. I encourage all hon. Members to support the clauses but not amendment 183.

Question put and agreed to.

Clause 132 ordered to stand part of the Bill.

Clauses 133 and 134 ordered to stand part of the Bill.

Clause 135

CCL: main rates from 1 April 2019

Amendment proposed: 183, page 189, line 13, at end add—

‘(3) The Chancellor of the Exchequer shall conduct a review of the impact of the Climate Change Levy in reducing carbon emissions within 12 months of the passing of this Act.

(4) The report shall have particular reference to—

(a) the removal of the exemption for electricity generated from renewable sources;

(b) the abolition of the Carbon Reduction Commitment; and

(c) reporting requirements by companies and public sector bodies for energy usage and carbon emissions.”—(Rebecca Long Bailey.)

Oral Answers to Questions

Damian Hinds Excerpts

Tuesday 7th June 2016 Commons Chamber

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

9. What assessment he has made of recent trends in the level of employment.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

We have the highest employment rate on record, a record number of women in work, and the lowest claimant count since 1974. That means millions more opportunities for our fellow citizens. We must not now put at risk the security that has been brought about by our long-term economic plan.

[Chris Green]

From April to June 2014 to April to June 2015, the employment of British workers in the UK increased by a welcome 84,000, but the figures are three times higher for EU nationals. With respect to the national living wage, what assessment has been made of anticipated job growth in the UK? Does my hon. Friend believe that that will benefit the UK or EU citizens most?

[Damian Hinds]

Almost two thirds of the increase in employment over the past five years is accounted for by UK nationals. Today, nine in every 10 people in a job in the UK are UK nationals. As my right hon. Friend the Chancellor has said, Britain deserves a pay rise and the national living wage delivers it.

[Michael Tomlinson]

I am sure the Minister and the whole House welcome the latest unemployment figure in my constituency—it stands at only 361, or less than 1%—but what more can be done to ensure that that trend continues, given that we are down to the last few and the most difficult cases, especially bearing in mind the over-50s and those in the 18 to 24-year-old bracket?

[Damian Hinds]

I welcome that news from Mid Dorset and North Poole, and by further increasing support for the hardest to help we share my hon. Friend’s keenness to ensure that no one is left behind. We have announced the new youth obligation and made it more cost-effective for employers to hire young people and apprentices. We are also helping older jobseekers to retrain through pilot schemes that began in April 2015.

[Helen Goodman (Bishop Auckland) (Lab)]

This morning, the head of Hitachi warned that a Brexit vote means that jobs will be lost. What is the Treasury’s estimate of the number of jobs that will be at risk if we leave the European Union?

[Damian Hinds]

Our projection is that, following the immediate economic shock that would follow from Brexit, 500,000 jobs would be lost and there would be an increase in unemployment. Part of that is from the initial impact on foreign direct investment, but that effect continues thereafter.

[Stephen Timms (East Ham) (Lab)]

It is a concern not just of Hitachi but of any non-European company that has its European headquarters in the UK. The UK is much the most attractive location for them currently, and they would be in great difficulty if we left the European Union. Has the Department made an assessment of what that group of employers contributes and will contribute in future to UK employment, which would be at risk if we left the EU?

[Damian Hinds]

We have modelled the effect on foreign direct investment. One does not have to believe that people currently in the UK would leave. All one has to consider in relation to the detrimental impact on the UK is what will happen to foreign direct investment in the future. There are many good reasons to invest in Britain, but we know that 72% of firms that invest in this country say that our membership of the European Union is a key factor.

[Andrew Percy (Brigg and Goole) (Con)]

Alongside genocide and war, we hear all about the threat to jobs of leaving the European Union. Will my hon. Friend tell me what will be done if we vote to stay in and continue to have unlimited immigration from 27 foreign countries? What will be done to protect my constituents, low-paid workers who have seen their wages flatline because of unlimited immigration?

[Damian Hinds]

We have already taken steps to ensure that people cannot just come here and claim benefits from day one. The renegotiation the Prime Minister secured addressed the unnatural draw of our in-work benefits system. I should also say that one should not assume that the effect on immigration would be quite as great as is sometimes supposed, particularly when we look at the other models of agreements with the European Union, a number of which include free movement.

[Ms Margaret Ritchie (South Down) (SDLP)]

Does the Minister agree that a vote to leave the European Union on 23 June could have a negative effect on employment trends, particularly in Northern Ireland where 50,000 jobs are related to exports to the EU? The Chancellor saw the effect of that directly yesterday in Warrenpoint in my constituency.

[Damian Hinds]

I know that my right hon. Friend was in the hon. Lady’s constituency yesterday. Northern Ireland is of course in a particularly sensitive position because of the land border with the Republic of Ireland, which would be a land border with the EU if we left. There are more people in work in Northern Ireland than ever before and we need to protect that.

[Robert Jenrick (Newark) (Con)]

5. What fiscal steps he is taking to support business.

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[Mr Jim Cunningham (Coventry South) (Lab)]

12. What assessment he has made of the potential effect of the UK leaving the EU on the economy of (a) Coventry and (b) the west midlands.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

The projected rise in unemployment of 500,000 that I mentioned just now includes 24,000 people in Wales and 44,000 people in the west midlands. In the long term, the Treasury’s central estimate is that GDP would be lower by around £4,300 per household by 2030 than it would be otherwise.

[Mr Hanson]

The head of the World Trade Organisation said yesterday that the process of negotiating deals outside Europe would take decades. Is that not one of the reasons why confidence would be hit, currency would fall and jobs would be lost, including the 24,000 in Wales that the Minister has mentioned, and why companies such as Hitachi have mentioned today that they would pull out of the United Kingdom? Do we not agree on this one, Minister?

[Damian Hinds]

I think we do agree on the turmoil that uncertainty can bring, and the uncertainty about future trade deals that the right hon. Gentleman raises is part of that. There is much more uncertainty as well, of course, for businesses that currently trade with other European countries and people who are employed in those countries or might be thinking of going to them. All these things generate uncertainty, which creates economic turmoil in the short run. There is a real danger of missing out on a very large number of third-party trades in the long run, when all the EU trade deals currently under negotiation are finished, which will account for some 80% of our trade.

[Mr Cunningham]

Can the Minister say what the economic benefits are of us being in the European Union, particularly in places such as Coventry and the west midlands, and more importantly what the impact on manufacturing is?

[Damian Hinds]

The automotive sector in the hon. Gentleman’s constituency and elsewhere is particularly important. It is a high value-added sector that has been a great British success story in recent years and it has complex cross-border supply chains, so it is unsurprising that those speaking out in favour of remain include the chief executives of Jaguar Land Rover and Rolls-Royce and the chairman of the Coventry and Warwickshire local enterprise partnership.

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

Considering that the UK has been a member of the EU for over 40 years and we still do not even have a trade deal with the United States of America, the largest economy in the world, does my hon. Friend not agree that our economy would benefit from the United Kingdom being able to negotiate our own free trade deals?

[Damian Hinds]

The businesses that I speak to say overwhelmingly that they feel they would get a better deal with the increased economic clout—five times the economic weight—that comes from being a member of the EU as opposed to Britain being on its own. All these trade deals take a long time, but when all the current EU negotiations are completed, the EU will have more trade deals with the rest of the world—so we will, too—than the United States and Canada combined.

[Mr Philip Hollobone (Kettering) (Con)]

The living wage is a very attractive economic policy, especially in eastern Europe. Given the extensive financial modelling that my hon. Friend has conducted, can he tell the House his official estimate of the number of unskilled migrants coming to this country from eastern Europe in the first five years after a vote to remain?

[Damian Hinds]

The national living wage makes sure that British workers who are low paid cannot be undercut by people coming from other countries. It will be of great benefit to our economy. It is also the case that as our legal minimum pay increases, we will still be within the middle range internationally.

[Sammy Wilson (East Antrim) (DUP)]

Yesterday the Chancellor told the people of Northern Ireland that house prices would fall by 18% if we voted to leave the EU, even though the day before he said that housing costs would go up by 9%. He told us that 14,000 jobs would be lost in export industries, even though the exchange rate, which would help exports, was set to plummet, and made an uncanny prediction about incomes in 14 years’ time. Does the Minister not realise that the Chancellor is expending his own credibility and that of the Government, given the panic that has now set in, by trying to sell the threadbare economic case for remaining in the EU?

[Damian Hinds]

Saying that house prices would come down but housing costs would go up is not inconsistent at all, as the cost of borrowing would go up. Northern Ireland is a special case when it comes to the housing market, but in many parts of the country people might say that while it would be a good thing for house prices to come down, that should not be a result of crashing the economy and making it more difficult for people to borrow.

As for the long-term forecast, it is, of course, difficult to predict what will happen 15 years hence. What the Treasury analysis seeks to do is say, other things being equal, what will happen to the 15-year forecast whether we are in or out of the European Union, and the answer is clear: in the central scenario, GDP will be hit to the tune of £4,300 per household.

[Neil Carmichael (Stroud) (Con)]

Does the Minister agree that, given that so many international firms—including, most recently, Hitachi—have made it very, very clear that being in the European Union and in a single market means that this is a good country in which to invest, the obvious thing to do for the purposes of investment and jobs is remain in the European Union?

[Damian Hinds]

I do agree with that. The United Kingdom has the third highest stock of foreign direct investment in the world, coming behind only the United States and China. We are the biggest recipient of foreign direct investment in the European Union, and also from the EU. The experience of accession countries shows that the move into the European Union really does make a difference, and that it is not just about tariffs, but about membership of a customs union. Some, indeed most, of the alternative models do not include that, but it is very important in relation to, for example, the cross-border supply chains about which the right hon. Member for Delyn (Mr Hanson) asked earlier.

[Geraint Davies (Swansea West) (Lab/Co-op)]

Only two countries, Germany and the Netherlands, run a surplus with Britain; the rest run a deficit. Does the Minister agree that in the event of a Brexit, those other countries would vote for tariffs—as, indeed, would Germany, in order to stop Japanese car imports? Has he created a model to assess what impact those tariffs would have on employment levels in the short and medium terms, and on inward investment? I suggest that the impact would be disastrous.

[Damian Hinds]

Different countries will have different interests, and no doubt they would come to the surface during the two years of the article 50 negotiations. A very large majority of other countries using enhanced qualified majority voting would be needed to agree a deal. Fundamentally, however, I do not think that this is about the deficit that one country has with the EU, or vice versa; I think that it is about the relative size of the export market to that country. While 44% of our exports go to the EU, the EU figure is 8% in the other direction, which means that in any negotiation, the other side will have the better hand.

[Philip Davies (Shipley) (Con)]

Can the Minister explain why we are paying more than £10 billion net this year for a £68 billion trade deficit with a declining part of the world’s economy, when anyone with even an ounce of common sense knows that it is possible to have a £68 billion trade deficit with a declining part of the world’s economy for nothing?

[Damian Hinds]

I think that I detected a revised figure in my hon. Friend’s assessment of our net contribution to the European Union. The fact is that for every pound that is paid in tax in this country, a little over a penny goes to the European Union. That is a cost—it is not a trivial cost, and I do not belittle it—but what comes with it are the trade benefits, the enhancement of our economy and the protection of jobs and investment that we want to see.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

7. What steps he is taking to increase exports.

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[Barbara Keeley (Worsley and Eccles South) (Lab)]

11. What steps he is taking to ensure that disabled people are not disproportionately affected by reductions in government expenditure.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

The Government have protected the value of disability benefits, exempting such payments from the uprating freeze and exempting those in receipt of them from the benefit cap. Disability spending will be higher in every year to 2020, relative to both 2010 and today.

[Barbara Keeley]

That may the case, but a 40% reduction in core Government funding to local authorities has led to cuts that affect services. Local authorities are required to provide short breaks for children with disabilities, but 58% of local authorities have cut their short break funding by 15% or more. It is Carers Week. What will Treasury Ministers do to reverse the trend and ensure that there is money for local authorities to fund those important short breaks?

[Damian Hinds]

We have provided funding for respite breaks. The hon. Lady is right to identify this as an important thing for carers in this, Carers Week. There are 200,000 more people now receiving carer’s allowance in this country. The Care Act 2014 extends rights to assessments, and the Government are launching the new carer strategy in recognition of how important a role this is for millions of people throughout the country.

[Mr David Burrowes (Enfield, Southgate) (Con)]

Recognising the risks of homelessness for disabled people, may I welcome the financial commitment in the Budget to prevent homelessness? But does the Minister recognise the risks of a local housing allowance cap on supported housing?

[Damian Hinds]

I, in turn, acknowledge my hon. Friend’s welcome for the additional money for tackling homelessness that was in the Budget—and, indeed, that has been provided previously. On the LHA cap, we now have a joint evidence review being conducted by the Department for Communities and Local Government and the Department for Work and Pensions, and the one-year exception, to make sure that we get this right, so that we can have a long-term, sustainable funding solution for this sector.

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

13. In what circumstances the use of his Department’s Contingencies Fund is authorised.

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[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

The Government have made significant public spending cuts affecting disabled people, including nearly £30 billion of cuts in social security to 3.7 million disabled people. Given that disabled people are twice as likely as the general population to be living in poverty, how many more disabled people will be living in poverty by 2020?

[The Exchequer Secretary to the Treasury (Damian Hinds)]

In fact, spending on disability benefits is going up, not down. There are many more personal independence payments claimants getting the highest rate than there were under disability living allowance; 200,000 more people are getting carers allowance; 22,000 more people are getting help through Motability, and we have a firm commitment to work towards halving the disability employment gap, which is so important for driving up incomes. The gap has remained stubbornly wide, but the most recent quarter showed a small decrease.

[David Morris (Morecambe and Lunesdale) (Con)]

In 1945 there was a dream of a link road from what is now the M6 to Heysham port, through which 10% of our GDP comes in. That link road will soon be opening. Does my right hon. Friend the Chancellor agree that part of the long-term economic plan is to show that this area of Lancashire will be regenerated? More to the point, would he, diary permitting, like to open the road?

Oral Answers to Questions

Damian Hinds Excerpts

Tuesday 19th April 2016 Commons Chamber

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

10. What fiscal steps he is taking to support the development of solar power.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

We are continuing our support for solar, keeping the small-scale feed-in tariff scheme open beyond January 2016, setting tariffs on a path to help transition the industry to a sustainable, subsidy-free future.

[Caroline Lucas]

I thank the Exchequer Secretary for that very short answer. Given that the EU’s VAT reform action plan will give Governments discretion in applying rates of VAT, including on solar power, will he confirm categorically to solar installers in my constituency that the UK has officially and permanently dropped the proposal to hike solar VAT to 20%?

[Damian Hinds]

The reduced rate of VAT remains in place on all 11 of the categories of energy saving materials. Following the decision by the European Court, we have consulted interested parties on the issue and, given the complexities involved, we are still considering the responses.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

Does my hon. Friend agree that about 90% or more of the solar-powered energy available in Britain has been put in place under this Government? Does he also agree that, in order for intermittent renewable power to provide a steady baseload, the investment with which the Government are supporting battery technology is absolutely key?

[Damian Hinds]

My hon. and learned Friend is, of course, right on multiple counts. Solar has been a great British success story: more than 99% of the installed solar PV capacity has happened since May 2010. He is also correct to say that the development of battery technology here and elsewhere is incredibly important for the future.

[Mary Creagh (Wakefield) (Lab)]

I am sure that the Exchequer Secretary will welcome the report published today by the Environmental Audit Committee, which finds that membership of the European Union has been overwhelmingly positive for the UK’s environment. Our Committee is also conducting an inquiry into the Treasury’s approach to sustainability and the environment. Will he encourage his colleague the Chancellor to come before the Committee to discuss the Treasury’s approach to solar power, offshore wind, waste and recycling policy?

[Damian Hinds]

I look forward to reading the hon. Lady’s report. The Treasury takes a balanced approach to making sure that we stay on target to meet our commitments. We are on target to meet our commitment of 15% of renewable energy by 2020, but we must do so in a cost-effective way, recognising that the subsidies to early stage technologies can only be paid for by taxpayers.

[Nigel Huddleston (Mid Worcestershire) (Con)]

Will the Exchequer Secretary join me in congratulating the UK solar power industry on being one of the top 10 in the world? It is larger than that in Australia and slightly smaller than that in Spain, despite having a rather less advantageous climate.

[Damian Hinds]

Indeed. Were it only the case that the sun would always shine. Under Labour, we had the highest dependency on fossil fuels in the G8 and the lowest contribution from renewable energy of any major EU country. As I said earlier, the deployment of solar power has been a great success story since 2010.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

One of the big things this Government could do to help solar and, indeed, all renewables is to remove the double charge on storage, whereby storage is charged when it takes on the power and charged again when it gets rid of the power and puts it back in the grid. Will the Treasury consider changing its approach and helping storage? It could do so with a stroke of a pen and it would make a huge difference. I urge the Treasury to stroke that pen and make sure that that change happens.

[Damian Hinds]

The tariffs are designed to make sure that there is a reasonable and appropriate return to investors. They have to be adjusted periodically when costs come down. Of course, one of the great parts of the success story of solar is the fact that costs have come down by about two thirds since 2010.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

According to the Solar Trade Association:

“Government will be spending just 1% of new expenditure under the Levy Control Framework supporting solar power…yet mainstream analysts expect solar power to dominate future energy supply.”

With that in mind, will the Chancellor promise to do much more to ensure that Britain becomes a market leader in the industry, or are we going to let China take the lead yet again?

[Damian Hinds]

Britain does have a leadership position in the industry, but we need a balance. We need a portfolio of energy sources and to recognise the importance of baseload power. That is why the development of new nuclear is also so important.

[Maggie Throup (Erewash) (Con)]

11. What steps he is taking to facilitate transactions between UK and Iranian financial institutions.

--- Later in debate ---

[Judith Cummins (Bradford South) (Lab)]

T8. Following reports in this morning’s Daily Mail that energy firms overcharged customers by £130 for their energy this winter, does the Chancellor agree that Treasury cuts to incentives for building new renewable energy sources were another one of his bad ideas?

[The Exchequer Secretary to the Treasury (Damian Hinds)]

As we covered earlier, the tariff system in place to encourage renewable energy has to deliver a balanced portfolio of energy, and it does so. Of course, we encourage energy firms always to pass price cuts that they benefit from on to their customers.

[Mr Alan Mak (Havant) (Con)]

T9. All 31 local firms that have reached the final of my Havant small business awards will benefit from the Government’s corporation tax cut. Will the Chancellor join me in congratulating all the finalists and confirm that the Government will continue to support small businesses across the country?

--- Later in debate ---

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

I welcome the fairer funding consultation that has just closed. When taking into account figures for growth in pupil numbers, will the Minister consider the actual numbers for the new school year, rather than the previous one, to ensure that we have a truly fairer funding formula?

[Damian Hinds]

The national funding formula will address historical unfairness. As now, school budgets will be set on the basis of the pupil census in the October prior to the start of the funding year, giving schools the certainty they need. The Department’s consultation also proposes to include a new factor to recognise in-year growth, targeting funding to schools with significant increases in pupil numbers.

[Tom Elliott (Fermanagh and South Tyrone) (UUP)]

Nobody has ever accused me of a lack of stamina, Mr Speaker. Am I right and accurate in my assessment that LIBOR funds can be used only for charitable purposes and will not go to a Department?

Economic Assessement

Damian Hinds Excerpts

Monday 18th April 2016 Written Statements

[The Exchequer Secretary to the Treasury (Damian Hinds)]

The Government’s document “HM Treasury analysis: the long-term economic impact of EU membership and the alternatives” has today been laid before Parliament.

The document provides rigorous and objective economic analysis of the long-term impact of remaining a member of the EU, compared to the alternatives.

Copies of the report are available in the Vote Office and Printed Paper Office. It is also available on the www.gov.uk website.

[HCWS676]

Finance (No. 2) Bill

Damian Hinds Excerpts

Carry-over motion: House of Commons
Monday 11th April 2016 Commons Chamber

[The Exchequer Secretary to the Treasury (Damian Hinds)]

This Government have delivered on growth, record levels of employment and a deficit that is forecast to be down by almost two thirds from its peak. This Finance Bill legislates to continue that record: it provides opportunity for families and hard-working individuals; it backs business and enterprise; and it puts the UK at the forefront internationally in tackling tax evasion and aggressive avoidance.

We started late, Mr Speaker, but we have had a lively and full debate, and I wish to respond to a few of the points raised. The hon. Members for Feltham and Heston (Seema Malhotra) and for Wolverhampton South West (Rob Marris), and others, spoke about the effects of Government policies on women. We have an employment rate among women that is now at a record high, with the majority of women in full-time roles. More than 1 million more women are in employment than was the case in 2010. By 2017-18, 13.1 million women will benefit from increases in the personal allowance, and about two thirds of those who benefit from the national living wage will be women. There are 300,000 fewer children in relative poverty compared with 2010 and there has been a massive reduction of 480,000 in the number of children growing up in workless households. Some 40% of two-year-olds—the least well-off—are benefiting from 15 hours of free childcare and working parents will be benefiting soon from 30 hours of childcare for three and four-year-olds, with tax-free childcare to come in from this month. There are also increases in childcare support under universal credit, including at small hours of work, to allow more women to re-enter the workplace.

Housing was mentioned a number of times, including, entertainingly, by the hon. Member for Bassetlaw (John Mann). We absolutely agree on the centrality of housing in a number of respects, from affordability to social and geographic mobility and to productivity. That is why we have such a focus on this area, working towards 400,000 affordable housing starts by 2021. It is why the spending review doubled the housing budget from 2018-19. We want to get on with this as quickly as possible, which is why we are bringing forward capital for affordable homes and why central Government and local authorities are working collaboratively together, and with their partners, to release more land for homes.

The hon. Gentleman talked about his fifth proposal on devolution and I understand that he is due to meet the Chief Secretary to the Treasury soon. Likewise, the right hon. Member for Don Valley (Caroline Flint) is to meet the Financial Secretary to discuss some of her points about tax transparency. The hon. Members for Leeds West (Rachel Reeves), for Aberdeen North (Kirsty Blackman) and for East Lothian (George Kerevan) talked about savings, and I am sure they will welcome not only the lifetime ISA, but, crucially, the help to save programme, which allows investment of up to £50 a month, with a Government 50% top-up, which could be worth a significant sum over the four years. For many people it could be the opportunity to build up a rainy day savings fund—a cushion against life-shocks—for the very first time.

The hon. Member for Leeds West also talked about the tax gap—I think she said I was muttering at the time. I did not mean to mutter; the only thing I wanted to mention to her was that in the year to 2014 the tax gap was 6.4% of the tax due, whereas if it had stayed at its 2010 value of 7.3% of the tax due, £14.5 billion less tax would have been collected. This Government have a good record on narrowing the tax gap.

The hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin) and for Wolverhampton South West talked about transparency and publicly available information on company ownership. Our public register of company beneficial ownership will go live in June, but we want to go further, which is why we are consulting on extending transparency requirements to overseas companies purchasing property in the UK or bidding on public contracts. The overseas territories and Crown dependencies have to play their part as well, and at last December’s Joint Ministerial Council territory leaders agreed to hold company beneficial ownership in central registers or similar effective systems.

This Government have always believed that we should back working people. The Bill implements key measures to help working people to keep more of the money they earn, support the next generation, build up their assets and save. It increases the personal allowance by an extra £500 next year to £11,500, cutting taxes for 31 million people, with a basic rate taxpayer paying over £1,000 less in income tax than in 2010. It increases the higher rate threshold to £45,000 next year, taking 585,000 people to below that threshold. It introduces a new personal savings allowance that means that basic rate taxpayers will pay no tax on their savings income up to £1,000 and higher rate taxpayers will not pay tax on savings income up to £500. It also implements higher rates of stamp duty for the purchase of additional residential properties and £60 million of those additional receipts will enable community-led housing development in areas where the housing market is particularly affected by the prevalence of second homes.

Despite record-breaking increases in employment and strong overall economic growth, productivity growth has been weaker than forecast. The Bill takes further steps to back business, drive productivity and create yet more job opportunities. My hon. Friend the Member for Somerton and Frome (David Warburton) reminded us how fundamental those job opportunities are to families throughout this land. A highly competitive corporation tax rate has been a central part of the Government’s economic strategy to get businesses to invest in this country and the Bill drives progress even further by cutting the rate to 17% in 2020. It encourages investment in companies to help them to access the capital they need to grow by cutting the higher rate of capital gains tax for most assets from 28% to 20% and the basic rate from 18% to 10%.

The hon. Member for Aberdeen North rightly spoke up for her constituents and the key industry in her constituency, oil and gas. The Budget and Finance Bill deliver a £1 billion package of reforms to ensure the UK has one of the most competitive tax regimes for oil and gas in the world, taking the petroleum revenue tax to zero, halving the supplementary charge and extending the investment and cluster area allowances to safeguard jobs and investment. No other Government have responded on the scale that we have to the fall in the global oil price.

We must ensure that people have the right skills to realise our productivity potential. My hon. Friend the Member for Macclesfield (David Rutley) talked about the centrality of skills and how skills and investment go hand in hand. Improving the quality and quantity of apprenticeships is an integral part of the plan. The Bill ensures that that can be achieved by introducing from April 2017 an apprenticeship levy of 0.5% of an employer’s pay bill where it exceeds £3 million.

This Government have demonstrated that we are tough on tax avoidance and on evasion—a subject rightly raised by a number of speakers, including the right hon. Member for Don Valley, the hon. Member for Kirkcaldy and Cowdenbeath and my hon. Friend the Member for Amber Valley (Nigel Mills). We have led the way internationally, acting unilaterally in the Finance Act 2015 to introduce the ground-breaking diverted profits tax to deter large multinationals from avoiding UK tax. This Bill goes even further to ensure that all companies and individuals pay their fair share. It stops multinational tax avoidance by introducing new rules to address hybrid mismatch arrangements and by tackling contrived arrangements relating to payments of royalties.

[Caroline Flint]

Will the Minister meet me and colleagues from other parties to talk about the ways in which we can put into the public domain more information from the big corporate multinationals?

[Damian Hinds]

I believe that a meeting has been set up for the right hon. Lady with the Financial Secretary, so I hope that, like him, she is looking forward to that.

The Bill targets key areas of online VAT evasion by providing stronger powers to make overseas sellers pay the VAT that is owed, helping to create a fairer market against UK players. It legislates to ensure that profits from the development of UK property are always subject to UK tax, reflecting the fact that land is a precious natural and national resource, and ensuring that UK developers share a level playing field with overseas developers.

Finally, the Finance Bill introduces a tougher anti-offshore tax evasion regime, with new criminal offences and civil penalties for those who evade or enable evasion. The Government’s position is clear. We will deliver a low tax regime for businesses, but they must pay their fair share of taxes here too. Evading tax is unacceptable and we will continue to bear down on it. The Government have announced legislation for 25 measures to tackle avoidance, evasion and aggressive tax planning, which are forecast to raise over £16 billion in this Parliament, on top of more than 40 changes made in the last Parliament.

As always, at Budget 2016 the Treasury updated its distributional analysis. The headlines are: it remains true that since 2010, the distribution of spending on different income groups or quintiles has remained essentially unchanged, while the incidence of taxation has shifted towards the most affluent fifth; the best-off 20% will pay more tax than all other households put together in 2019-20; and UK income inequality is now lower than it was in 2010.

Since 2010, the Government’s long-term economic plan has focused on sound public finances. Significant progress has been made, with the deficit as a share of GDP forecast to be cut by almost two thirds from its peak in the last year of the Labour Government. The Finance Bill ensures that the record can continue. It provides certainty for working people by reducing income tax and rewarding savers. It backs business and enterprise by cutting corporation tax and reforming capital gains tax. It supports the simplification of the tax system, and it takes bold steps to tackle tax avoidance and evasion. The Finance Bill demonstrates the Government’s commitment to a stronger, secure and more productive economy, and I commend it to the House.

Question put, That the Bill be now read a Second time.

Finance (No. 2) Bill

Damian Hinds Excerpts

Monday 11th April 2016 Commons Chamber

[Rachel Reeves (Leeds West) (Lab)]

In 2010, the Chancellor promised us a new growth model based on higher savings, investment and exports. However, notwithstanding what we have just heard from the hon. Member for Somerton and Frome (David Warburton), those fundamentals, which underpin the economy and are the backdrop to the Bill, are not going as well as we might have hoped. Our national savings ratio has hit an all-time low of 3.3%. In the latest figures, investment has been revised down, with a staggering £87 billion wiped off forecast business investment since last November, and public investment is falling as well. Our export performance has deteriorated further, with the gap between the Chancellor’s 2020 target for a trillion pounds-worth of exports and the OBR’s expectations now widening to £357 billion. That is before we factor in the calamity that the Government have allowed to unfold in our steel industry or the enormous risks to our economy created by putting our membership of the European Union in question. Indeed, just a few weeks after the Budget statement, we have seen even more bad news about not only steel, but the manufacturing sector in general and the worst balance of payments figures that the country has seen since the second world war, with the deficit in the fourth quarter of 2015 reaching a staggering 7%.

All that has an impact on living standards. On top of the downward revisions that we saw in November, expected earnings have been revised down in the forecasts for every single year of this Parliament. Looking at the deterioration in expected earnings since the Budget just after the general election, the OBR forecasts that the average UK worker will be £823 a year worse off by the final year of this Parliament. Following the downward revisions, the total loss over the course of this Parliament is £2,000, the impact of which will be felt most by those on low and modest incomes. Indeed, because the national living wage is linked to average earnings, somebody on the minimum wage will be £600 a year worse off than when the Government originally announced it. In less than a year, the average worker will be £2,000 worse off over the course of this Parliament and somebody on the minimum wage will be £600 a year worse off compared with what the Government originally announced.

Against that background, one might think that a Chancellor who once proclaimed that we were “all in this together” would want to use the Budget and this Finance Bill to target help towards ordinary working families and the low-paid. Instead, we have a package of measures before us that disproportionately benefit the better-off, rather than those who most need support. Let me give three examples. First, fewer than one in five taxpayers will gain from the £2 billion cut in higher rate income tax in clause 2. Those who will gain will also receive the largest benefit from the expensive and poorly targeted increase in the personal allowance in clause 3. The 4.6 million lowest-earning workers in the country will receive no benefit at all from either change. At a time when the earnings of those on middle and low incomes are being squeezed and public finances remain extremely tight, raising the threshold at which people start paying the higher rate of income tax is the wrong priority.

Secondly, the cut in capital gains tax in clause 72 will cost taxpayers more than £2.7 billion over the next five years, but directly benefit only a tiny minority. Just 130,000 individuals will share the gains, the majority being higher rate taxpayers. Around half of capital gains tax is paid by just 5,000 individuals who will therefore receive a windfall and get the bulk of the advantage, so the benefits of this tax break will be pocketed by a relatively fortunate few. Again, that is not the right priority when the living standards of ordinary people are being squeezed and when our public finances are so stretched.

The Chancellor would no doubt protest that that is a price worth paying for the entrepreneurial energy that the capital gains tax cut will unleash, but the official documents reveal that the OBR has made no upward revisions to its forecasts for investment, productivity or growth as a result of the measure, which will cost £2.7 billion. Indeed, the most likely impact of the move will be to increase the incentive to avoid tax by converting income to capital gains. Perhaps the Chancellor has been taking advice from the Prime Minister, who seems to have enjoyed the benefit of some careful tax planning. But, again, I would argue that with squeezed family finances and tight public finances, this is neither fair nor fiscally responsible.

Thirdly, as part of his Budget the Chancellor has chosen to increase the amount any individual can contribute to a tax-free savings account to £20,000 a year, as the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) mentioned. I welcome action to make it easier for ordinary workers and families to save, but we have to ask whether this approach should be the priority when most of our constituents are lucky to earn £20,000 a year and have anything left to save at all. In my constituency, average earnings are just under £20,000 a year, and many people would struggle to put anything aside, let alone take advantage of a £20,000 individual savings account limit. In the latest year for which detailed data are available, the average ISA subscription was less than £4,000 in the year. Fewer than one in 10 people who contributed to an ISA were able to save the maximum amount of just over £15,000, with a disproportionate number of those who did so having incomes above £150,000 a year. The trends of recent years suggest that as the Government have focused on raising the annual limit for ISAs, the total amount of cash put into ISAs has increased sharply even as the total number of people contributing to an ISA has fallen. In other words, this is moving ISAs away from their original purpose as a platform to support broad-based saving and investment, and increasing their use as a way to minimise tax liabilities for those with large amounts of cash to move around. That is having the wrong effects and the wrong people are benefiting. I support ISAs and tax-free savings, but only if they are there to support those people who need to save. What we are seeing is a falling savings ratio, with the most wealthy people being incentivised to save. We need to help those people on more modest incomes to put something aside for their future.

This Finance Bill, like those before it under this Chancellor, contains a long list of clauses ostensibly aimed at reducing tax evasion and avoidance. Anything that genuinely advances that end is to be welcomed, but we will judge the Government’s achievements not on the number of clauses in their Bills, but on the real progress made towards closing the tax gap and ensuring that everyone pays their share. I urge the Government to do more, by supporting, not blocking, measures in the European Parliament that strive to meet that objective.

The truth is that HMRC’s own figures show that the tax gap fell by £4 billion over the last five years of a Labour Government but has risen by £1 billion under the current Chancellor. The consequences of this Government’s refusal to take the necessary action on UK Crown dependencies—[Interruption.] I am happy to take an intervention instead of having the Minister muttering from a sedentary position.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

I wonder whether the hon. Lady would like to comment on the percentage tax gap.

[Rachel Reeves]

If the Minister is so concerned about the tax gap, why did his Tory MEPs block measures in the European Parliament to crack down on tax avoidance and why did the Prime Minister write to Herman Van Rompuy in 2013 asking for trusts to be excluded. As I say, instead of looking at the number of clauses in a Bill, we should judge the Government by their record, by their actions and by what is happening to the tax gap. Under Labour the tax gap narrowed but under the Tories it is widening. They need to make much more effort to ensure that people at the top and big corporations pay their fair share of tax, but that is not happening under a Conservative Administration.

I hope that I have demonstrated that this Finance Bill prioritises tax breaks for the wealthy at the same time as pulling vital support from the vulnerable and disadvantaged. The shadow Chief Secretary to the Treasury cited the Resolution Foundation. It has calculated that the tax and benefit measures already taken by this Chancellor since the election will cut the incomes of the poorest 30% by £565 a year, while increasing those of the richest 30% by £280 a year—and that is before we factor in the impact of any further cuts to social security needed to meet the Government’s welfare cap and fill the multi-billion-pound fiscal hole following their U-turn over personal independence payments.

During a sitting of the Treasury Committee I pressed the Chancellor on all of this, particularly the changes to disability benefits. All he would say was that he had “no plans” for further raids on the fragile finances of disabled people, low-paid workers or children living in poverty, but that gives very little reassurance to those who rely on social security because they are sick or disabled and cannot work, or because they are in low-paid work and struggle to make ends meet; nor does it reassure families bringing up children in poverty that the Government will not once again hit their family finances.

Perhaps even more problematic than the measures in the Bill are the measures that are missing from it. The House will remember that this was supposed to be the Finance Bill that reformed our unfair system of pensions tax relief. We spend £34 billion on pensions tax relief and 14% of that benefit goes to people earning more than £150,000 a year, even though they represent a tiny proportion of all taxpayers. Just 10% of the benefit from the relief goes to those in the bottom half of the income distribution. That is why I argued for a 33% flat rate of pensions tax relief, which would be fiscally neutral but fairer to families on ordinary incomes and those who are trying hard to put something aside for the future. It would also give a strong incentive to save by, in effect, providing a simple two-for-one offer: for every £2 people put into a pension, the Government would add another £1. At a time when wealth inequalities are widening, our savings rate is plummeting and the costs of an ageing society are increasing, that measure would provide a powerful incentive to save for millions more people and definitely help more people than a £20,000 ISA limit.

The Bill was also an opportunity for the Government to admit they had made a mistake and to reverse the Chancellor’s expensive and poorly targeted cuts to inheritance tax, due to be phased in from next year. The Treasury’s own leaked analysis confirms that the policy will

“most likely benefit high income and wealthier households”

concentrated in London and the south-east of England. It also states that

“there are not strong economic arguments”

for the cut, which will

“push up house prices and possibly rents”

and

“make it more difficult for younger households to buy a house.”

Yet that is a priority of this Government. Meanwhile, the overall cost is set to rise to almost £1 billion a year as the policy is introduced. I believe that the money could be much better used to help ordinary families who struggle to stay in work when their children are young by, for example, creating a universal childcare entitlement for children aged two. That would be a more prudent use of funds when family finances are stretched and so are our public finances.

I remember being shadow Chief Secretary to the Treasury in 2012, when we had what we dubbed the “omnishambles Budget”. This Budget has unravelled even faster than the 2012 Budget, with the flagship measure—changes to disability benefits—dropped and the changes to pensions tax relief dropped before they were even announced. The flagship measure in the 2012 Budget—the cut in the top rate of tax from 50p to 45p —stayed, but the flagship measure in this year’s Budget was dropped.

I believe that the Chancellor wanted to reform pensions tax relief, but could not do so because Tory MPs protested too loudly. Instead, at the last minute he decided to raid the disability budget, but then—after that was announced—recognised that it did not really fit with his rhetoric of, “We’re all in it together.” That is why the Budget has unravelled so quickly, but most important—well, not the most important—it is why the political prospects of the Chancellor have unravelled so quickly as well. The highest price for this Budget will be paid by ordinary taxpayers, working families and future generations. That is why I and my colleagues will vote against the Bill this evening. It represents the wrong priorities for our country.

Scotch Whisky Industry

Damian Hinds Excerpts

Wednesday 9th March 2016 Westminster Hall

[The Exchequer Secretary to the Treasury (Damian Hinds)]

It is a great pleasure to see you in the Chair, Mrs Moon. I congratulate the hon. Member for Argyll and Bute (Brendan O'Hara) on securing this important debate. I have sometimes wondered what it is like to be at the Scottish National party conference, and I need wonder no longer. I commend all colleagues, from the SNP and from the Conservative and Labour parties, for being here for this debate. I welcome all the contributions, including from the SNP spokesman, the hon. Member for Berwickshire, Roxburgh and Selkirk (Calum Kerr), fresh from his unexpected starring role at today’s Prime Minister’s questions—he was “Callum”. [Interruption.] I recall all his colleagues pointing at him. I also welcome the contribution of the hon. Member for Salford and Eccles (Rebecca Long Bailey), who as always made a thoughtful speech and some good points. During my remarks I will return to the points that have been raised.

This has been a good debate, which made me thirsty more than once, particularly when the hon. Member for North Ayrshire and Arran (Patricia Gibson) was speaking—and that was just when she was describing the water. Even the most enthusiastic champions of the spirits industry would stop short of calling whisky a daily necessity. [Interruption.] I may stand corrected but, according to the Wine and Spirit Trade Association, just over half of UK adults, the equivalent of 26 million people, drink spirits. Aside from that, the whisky industry makes a hard and important economic contribution to the UK economy. Every second, whisky exports earn this country £125—we will not quibble over £125 or £135. Scotch is solely responsible for a quarter of all UK food and drink exports. With Scotch present in some 200 markets worldwide, there is a good case to be made for calling it our most widely consumed export. Leading markets for Scotch whisky exports include France, the US and Spain. In Spain, exports increased by nearly 8% in volume between January and June 2015.

[Martin Docherty-Hughes]

On sales, France is the largest consumer of Scotch whisky by volume. Does the Minister agree with SNP Members that a Brexit would be both fundamentally difficult for the Scotch Whisky Association and would limit its ability because further trade agreements would be required for that volume of sales to continue?

[Damian Hinds]

The hon. Gentleman anticipates some of my later points. If he will forgive me, I will delay my response until then.

One of my favourite whisky-related export stats comes from Japan. It will be a matter of equal sadness and joy to the hon. Member for Argyll and Bute that, scandalously, the best whisky of 2015 award was won by a Japanese brand but that Japan increased the volume of its imports of Scotch whisky by 23% between January and June 2015. Clearly the consumers of Japan have very good taste. We should also acknowledge the wider British spirits industry. I am pleased to say that the main trade association reported that 140 million bottles of British gin are exported to foreign markets, which works out as a 37% increase in five years.

It is also important to bear in mind the very positive effects that the Scotch whisky industry has on employment; many hon. Members have already alluded to those effects. The Scotch Whisky Association estimates that the industry already supports over 40,000 jobs, including—importantly—7,000 in the rural economy. Of course, distilleries remain a key source of jobs in the Scottish rural economy, and are strongly aligned with wider tourism activities. Also, as we have already heard this afternoon, every job in the Scotch whisky industry supports 2.7 further jobs in the broader economy, and some of that benefit is spread throughout the UK.

In the constituency of the hon. Member for Argyll and Bute, Scotch whisky is definitely a traditional industry that remains a critical part of its heritage. A total of 14 distilleries are in operation in the constituency, including Bowmore, Ardbeg, Kilchoman, Glengyle, Springbank, Glen Scotia, Tobermory and Oban, and a few others that are less obviously uni-phonetical, so I hope that he will forgive me if I stop there. It goes without saying that we want to continue and wholeheartedly support this Great British success story.

Over recent weeks, I have had the opportunity to meet the hon. Gentleman and some of his colleagues who are sitting with him today in the all-party group on Scotch whisky, as well as representatives from the SWA, and the Wine and Spirit Trade Association, among others. I have taken on board the confidence that they have about the continued success of their industry, and I assure the hon. Gentleman that we are united in wanting to help the industry go from strength to strength.

Of course, it was precisely for that reason that my right hon. Friend the Chancellor announced in the Budget of March 2015 only the fourth duty cut in spirits history, the previous one having been in 1996. I strongly supported that decision. Since then, the trend in whisky production has been notable. Between 2014 and 2015, the volume of whisky cleared for sale in the UK increased by 2%. Increasing confidence from the Budget 2014 duty freeze, combined with demand for exports, has contributed to this significant turnaround from the decline in production that the industry had experienced between 2010 and 2014.

The encouraging news continues with the developing trend in small distilleries entering the market. From 2014, seven new whisky distilleries have opened, taking the total number of Scotch whisky distillers to 117. In addition, it is planned that a further 30 to 40 distilleries will enter the market in the coming years, which is a good thing for investment and jobs in Scotland.

I am pleased that the Scotch whisky industry remains dynamic. As has been mentioned, the £1.7 billion investment in its supply chain has helped to meet the demand from overseas markets, and supported jobs over the long term, which is particularly significant for our rural economies.

How can we as a Government continue to support the industry over the coming years? Hon. Members know that next week my right hon. Friend the Chancellor will deliver his Budget in the Chamber, and the hon. Member for Argyll and Bute and his colleagues know that it would clearly be wrong for me to anticipate that in any way whatsoever.

However, it is important to maintain our efforts in two particular areas. The first is the export market. Nine out of every 10 bottles of Scotch whisky sold are sold overseas, and I must remind hon. Members that, on that volume, no UK duty is paid. The hon. Member for Salford and Eccles rightly asked what export support could be given to continue the growth of this important industry. Through the efforts of UK Trade & Investment, we have seen some very strong success stories, all contributing to the 90% growth in exports that the Scotch whisky industry enjoyed between 2004 and 2014. Each second, 40 bottles of whisky are shipped overseas.

We have increased the budget and the remit of UKTI so that it can continue and even extend its promotion of British products worldwide and, importantly, negotiate with export markets for the right regulatory regime, to help people enjoy their dram wherever they may be in the world.

Distillers can now supply their product in countries including India, which can further open the door to other countries. Although Scotch whisky’s share of total spirits volume in India is only around 1%, the SWA expects that that would increase to 5% if there was full and fair market access. The UK supports a broad and ambitious free trade agreement with India. However, there are outstanding issues, including on spirits, that need to be addressed.

The Government are keen to restart negotiations on the free trade agreement and have made the case for that to the European Commission and in bilateral engagement with India. I am sure that most hon. Members here will agree that, as was mentioned earlier, in this endeavour we are better equipped as part of the world’s largest single market than we would be alone, even if my hon. Friend the Member for Brigg and Goole—and Saskatchewan—(Andrew Percy) may only agree with that comment for half the debate. He also reminded us of the importance and the number of other potential export growth markets around the world, including Canada.

Opening up more export markets is just one part of the Scotch whisky success story, and I hope that we see much more success in the coming years, as our expanded UKTI teams continue to make the case for Scotch whisky.

The second area that the Government can support is a little more nebulous, and the hon. Member for Edinburgh West (Michelle Thomson) referred to it. I think of it as protecting and enhancing the quality mark of genuine Scotch provenance. Scotch whisky is clearly an iconic product for Scotland and the UK, but with iconic products comes the risk of poor-quality imitations. To protect the integrity and the high reputation of the brand of Scotch whisky worldwide, we launched the spirits verification scheme, which the hon. Member for Salford and Eccles mentioned. This scheme sets standards on production and labelling for producers to sign up to, helping to identify non-compliant products and counterfeits, and making sure that people who buy Scotch whisky get exactly that.

The geographical indication for Scotch whisky is now recognised in the laws of nearly 100 countries, including the whole of the European Union, which is another reason for there to be continued optimism in the industry and continued worldwide recognition for Scotch. But why limit consumers to what they recognise as Scotch whisky from the front of a bottle? The hon. Member for Ross, Skye and Lochaber (Ian Blackford) mentioned the tourism opportunities, and that point was echoed by a number of other colleagues.

Producers are offering tours of their distilleries, opening up a whole new way to connect with thirsty tourists who are keen to understand the traditional side of their whisky—the pride and the passion that go into every bottle of Scotch. According to the SWA, collaborative efforts by the industry and VisitScotland have contributed to more than 1.5 million visits over the last year, with visitors spending more than £50 million at distilleries.

The other aspect of protecting and enhancing the brand of Scotch whisky is, of course, the health issue. Let me be clear about this—Scotch whisky, like all drinks, is perfectly capable of being enjoyed responsibly, and of course it is also capable of being misused. However, this Government firmly believe that the irresponsible actions of some should not be a barrier to the vast majority of people who enjoy a drink responsibly. That is why we will continue to combine efforts with the industry to raise awareness of the need for responsible drinking.

The Scotch Whisky Action Fund is an excellent example of what the industry can do. It is entering its third year of a five-year programme and is delivering £500,000 of funding to support community-based projects that are aimed at reducing alcohol-related harm in Scotland. I am confident that we will continue to strike the right balance between enabling responsible enjoyment of a traditional product, and dissuading irresponsible and harmful behaviour.

Let me turn very briefly to a couple of the other points that were made in the debate. It is not a new development that different countries choose to tax alcoholic beverages differently. Of course, countries choose their tax system, including the balance between direct and indirect taxes, to reflect their needs. When setting duty rates, the Government have to consider the wider fiscal picture. Total revenue from alcohol duty in 2015 was £10.7 billion, with revenue from spirits contributing around 30% of that. Just to give some perspective, £10.7 billion is the same as the entire budget for the Home Office.

I do not know of any EU country that has full duty equivalence among alcoholic drinks. In this country, of course, a typical serving of 25 ml of spirits has lower duty than other typical servings of drinks, for example a pint of beer or 175 ml of wine. As I have already said, the majority of Scotch does not have duty applied to it as it is for export. As I am sure hon. Members appreciate, any and all announcements on duty rates are made in the Budget.

The contribution of Scotch whisky to the UK economy is not least due to the tireless work of distillers who put in the hours and, in this case, the years to produce such a high-quality product. We want the industry to continue to succeed, both domestically and in ever widening markets overseas, promoting Scotland and the UK, and creating jobs and growth. Our programme for Government is based on creating long-term growth and security, and a successful and strong Scotch whisky industry is an integral part of that.

I thank the hon. Member for Argyll and Bute once again for bringing this important subject to Westminster Hall for debate today.

[Mrs Madeleine Moon (in the Chair)]

I call Brendan O’Hara to speak again. I am afraid that you have only seconds left.

DRAFT Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2016

Damian Hinds Excerpts

Thursday 3rd March 2016 General Committees

[The Exchequer Secretary to the Treasury (Damian Hinds)]

I beg to move,

That the Committee has considered the draft Tax Credits (Income Thresholds and Determination of Rates) (Amendment) Regulations 2016.

It is a pleasure to have the opportunity to serve under your chairmanship for what I believe is the first time, Sir Alan. I confirm that the regulations are compatible with the European convention on human rights.

I will set out the purpose of the regulations. As hon. Members will recall, tax credits were introduced in 2003, at which point the income rise disregard was set at £2,500. At that time, the tax credits system was unable to cope and in 2006 the then Government increased the disregard to £25,000. Two families with significantly different incomes could therefore receive the same tax credit award. I will shortly give some examples of how that works in practice. Following the 2010 election, the coalition Government reduced the disregard to £10,000 and then to £5,000. Improvements to stabilise the tax credits system and the increased use of real-time information mean that the system is now able to be more responsive to claimants’ changes of circumstances.

The regulations make a single change: they reduce the income rise disregard from £5,000 to £2,500, taking it back to the level it was set at when tax credits were introduced by Gordon Brown in 2003 and aligning it with the income fall disregard. That change was announced in the summer Budget on 8 July 2015.

The change brings forward some of the benefits of universal credit, which will replace tax credits. Universal credit does not have an income change disregard, so awards will more accurately reflect the claimant’s most recent earnings and overpayments will be reduced. Tax credit claimants will see a change in their award within a tax year only if their income increases in year by more than £2,500, and there will be no cash losers.

The disregard provides a buffer zone in which a family’s income can increase during a year without that affecting their tax credit entitlement. The disregard has been a feature of the tax credits system since its inception in 2003 and, as I said, was set originally at £2,500.

I will explain how the disregard works in practice. Following receipt of a claim, Her Majesty’s Revenue and Customs makes an initial tax credit award based on the claimant’s current circumstances and their income in the previous year. As the tax year progresses, claimants can notify HMRC of changes in their circumstances. Certain changes—for example, a partner moving in with a previously single claimant—must be reported within one month. Other changes, such as changes in income, do not need to be reported until the end of the year, but claimants are encouraged to keep HMRC up to date if their earnings change, otherwise they could end up with an overpayment, which they would need to pay back.

After the end of the tax year, HMRC sends the claimant renewal papers. The purpose of the renewal papers is to determine the claimant’s actual entitlement for the year that has just ended and, if appropriate, to initiate a claim for the year ahead; HMRC does that by asking the claimant to confirm their income and circumstances for the year that has just ended. Where the claimant’s income has stayed the same as the year before or has risen by less than the disregard, the tax credit award for that tax year is not affected, as any such increases in income are disregarded from the final calculation of the award. However, if claimants’ income has risen by more than the tax credit disregard, their award is decreased in year. Those individuals will, of course, still be taking home more money because of the increase in their income.

Either way, in the subsequent year, a claimant’s tax credit award will be calculated in the usual way, with their full annual income used to determine their tax credit entitlement. After the change in the tax year, the disregard is irrelevant; regardless of whether the recipient’s pay rise was above or below the disregard level, their tax credit award for the following year will be adjusted downwards to what it would have been had no disregard existed.

In practice, under the system that we inherited in 2010, where the then Government had set the income disregard at £25,000, somebody on tax credits could get a pay rise of £2,000 a month—which I am sure hon. Members will agree is a significant sum of money—and still be technically entitled to the same tax credit award until the end of the tax year, whereupon they would then see a big drop in their award and in their total income. We changed that, but even under the current, far more equitable system, a household can see its income rise by £400 a month and still be entitled to the same award as they were previously, until the end of the tax year. Claimants would subsequently see their tax credit entitlement reduced in the following year, having become accustomed to that quite large change in income.

Let us assume that that pay rise of £400 a month now means that the household is taking home as much money as their next-door neighbours, whose circumstances are exactly the same in other respects. The next-door neighbours are not entitled to the same level of tax credits, even though they have exactly the same income and circumstances. That is hardly fair; nor is it right. Under the system set out in the regulations, the household with an increased income of £4,800 a year would see its tax credit award adjusted sooner, to reflect its increased earnings. The household’s total income would rise more than the decrease in the tax credit award, which would provide the buffer zone that the income rise disregard is designed for, as well as more closely aligning the award with the next tax year’s entitlement, and making it the same as that of the next-door neighbours.

That example shows how reducing the income rise disregard reduces the unfairness in tax credit awards for families in similar circumstances. This is the right thing to do, to ensure fairness to all tax credit claimants. The principle is already live in universal credit, where a claimant’s award changes each month based on their earnings; this change brings forward some of those benefits. HMRC will communicate the change by providing information in tax credit renewals packs, which will highlight the change to the disregard, what it means when claimants have a rise in income and what they should report to HMRC.

With the introduction of real-time information, employers are now able to submit employee payroll information in real time. As 99% of employers are covered by the scheme, HMRC is now in a much better position to proactively check that it has the correct income details when claimants come to renew their awards at the end of the tax year; it also provides an opportunity to check awards within a tax year. From September 2016, HMRC will use the RTI to conduct automated checks of an individual claimant’s monthly income. Therefore, HMRC will be better able to assess a claimant’s tax credit entitlement in relation to their increased income. Should RTI find that a claimant’s entitlement should be reduced by £500 or more, HMRC will send a letter, text message or automated voice message to the claimant, prompting them to make contact with HMRC within 14 days. If they do not make contact, their income on the system will be automatically amended.

Let me be clear. HMRC will not only tell all claimants up front when they must report changes in their income, but in the majority of cases prompt claimants to report significant increases in income that HMRC picks up through the RTI feed. If claimants do not respond to the prompt, the system will automatically make the change and reduce the claimant’s tax credit award. That reduces the risk of overpayments, while making clear to the claimant their responsibilities.

The disregard reduction will affect only those claimants whose income increases in year by more than £2,500. There will be no cash losers. The change will make tax credits more responsive to income changes, reduce the over-inflated rise and subsequent fall that follows an income rise and reduce the inequality of very different awards to families in similar circumstances, with similar employment incomes. It returns the disregard to its original design and purpose. Now is the right time to do so, because the tax credits system is much more able to deal with income changes. I commend the regulations to the Committee.

--- Later in debate ---

[Damian Hinds]

I thank everyone who has taken part in the debate, which was constructive and useful. I particularly thank the hon. Member for Salford and Eccles, who speaks for the Opposition, for a measured and constructive speech in which she put some reasonable points and questions.

Alongside the broader steps that the Government are taking on long-term reform to welfare, the creation of jobs, and making work pay, the regulations will reduce the unfairness in the tax credits system. The reduction to the income rise disregard will decrease the instances where one family receives a higher tax credit award than another family with precisely the same income and the same circumstances. That is a clear point of fairness, and I hope that hon. Members can agree that on principle it is the right thing to do.

As I have already set out, the provision returns the income rise disregard to the original level; but there is a key difference, compared with 2003. This time the Government are making sure that the system is able to cope with fluctuations in family incomes. The answer to one of the parliamentary questions tabled by the hon. Member for Salford and Eccles would be that we estimate that the income of about 800,000 claimants will increase by more than £2,500 in year, and that therefore they will have an adjustment to their tax credit payments. Those people are doing the right thing, as a number of Opposition Members have said. They are working hard to increase their income. No one will have a cash loss, because their pay rise will always exceed any change to their tax credit award in year; so there will still be a clear incentive for working claimants to increase their earnings, as they will take home more money.

[Dawn Butler]

As there is no impact assessment, does the Minister agree that the measure will probably affect women and children more than any other group?

[Damian Hinds]

The 800,000 recipients are households, and the majority of them will be couples. The majority of those couples will be male and female couples. However, let us be clear, come the end of the tax year, whatever the income rise disregard and with or without today’s statutory instrument, their tax credit award will be adjusted downwards to take account of their higher income—by which time they may, of course, have become accustomed to what was to be a temporarily higher award.

The measure ensures fairness to the taxpayer, because a system of large income disregards unnecessarily increases costs. The Exchequer—hon. Members’ constituents— bears the cost of paying tax credit recipients a much higher award than they would get if their increased income were taken into account. Rather than continuing with that, the Government are taking action to make tax credits more responsive to income changes, which ensures that more claimants receive the entitlement that more closely reflects their actual income.

Real-time information will ensure that the changes to income can be identified earlier. From September 2016, the majority of claimants will be prompted to report increases of income to HMRC through a text message, voice message or letter, with the default action, in the event of non-response, that the award will be adjusted to reflect the income change. That will mitigate the likelihood of overpayments, and will make clear to claimants, in a fair way, their responsibility to report an increase in their income.

HMRC will provide information to those affected by the change, in tax credits renewals packs and updated guidance and notes to claimants, as well as in briefing lines for the tax credit helpline, to ensure that claimants are aware of the change and what it means for their tax credit award. The Government are committed to seeing the change implemented correctly, and are taking a considered approach to both the operational IT delivery and engagement with claimants, to ensure there will be a reduction in tax credit overpayments and the number of claimants falling into debt.

I will now answer some of the points raised by the Opposition during the debate. The hon. Member for Salford and Eccles asked about the rationale for the precise number, and we have had a similar discussion in previous debates. There is never one single magic number that can be applied to such a threshold.

As the hon. Lady said, the figure of £2,500 brings the design of the income rise disregard back to Gordon Brown’s original figure. It is a balance between on the one hand making sure that the system adjusts as quickly and smoothly as possible to someone’s rise in income—to reduce the fall they would otherwise experience at the end of the tax year—and on the other not having to make an administrative change, and change the tax credit award, when there is a very small increase, such as from an annual pay award or a small increase in hours. The big change compared with 2003 is real-time information. To answer the hon. Member for City of Chester, real-time information is already operational and has been since 2013. A lot of the debates he mentioned have happened, but it is an important part of the continuing development of our taxation system.

The hon. Members for Salford and Eccles and for Banff and Buchan mentioned people on zero-hours contracts. I think it is always worth repeating this point because sometimes one could get the impression from listening to the Opposition that people on zero-hours contracts are the overwhelming majority when they are not; something like 2.5% rely on a zero-hours contract. Some of those are coming back into the workplace, and some of them are students. On average, zero-hours contracts deliver 25 hours of work a week.

The important point, which also applies to later in the debate, is that tax credits are still based on an annualised estimate of income. It is not necessarily the case that every single time there is a change in someone’s hours in a particular month they will have to say that this year’s permanence level of annualised income has changed. Through the RTI system there is an opportunity for those on PAYE to be prompted to do so, and others still can do so. The point is what they expect their total annual income to be. That is what the tax credit architecture of the system is based on today. It has always been based on an annual view of income.

The hon. Member for Salford and Eccles also asked how we define no cash losers. It is very simple. People’s pay is going up, which is a good thing. Because the tax credits award cannot go down by more than the pay has gone up, therefore these people will be better off.

[Chris Stephens (Glasgow South West) (SNP)]

I have listened attentively to what everyone has said. We know that a large number of the Government’s employees are on tax credits. For example, the Department for Work and Pensions has 40% of its employees on tax credits. I ask the Minister whether any assessment has been done on what this proposed change would mean for the Government’s workforce.

[Damian Hinds]

I do not want to repeat myself as though I have nothing new to say. Those are people whose income is going up. This is good news for those people. The change is responding more quickly than would have happened anyway. That is a really important point. It is responding further and more quickly to that change in income, but their income has gone up.

There were quite rightly questions about the equalities impact. In response to the hon. Member for Brent Central, I have already talked about the proportion who are women. We have provided information to the Secondary Legislation Scrutiny Committee. As with all secondary legislation, the Government take into account the equalities impact, as we are legally obliged to do.

I think I have dealt with the questions around fluctuating incomes in relation to zero-hours contracts and the introduction of real-time information. I also want to respond to the point about HMRC and operational efficiency. The hon. Member for Bristol South is right to raise those important points. HMRC’s performance has improved significantly this year, answering more than 90% of calls with wait times averaging under six minutes. Of course, we still want those numbers to improve; do not misunderstand me. It brought in additional staff to cover some of the busiest times, recruited some 3,000 more staff and put on additional training.

In conclusion, this change to reduce the income disregard to £2,500 is fair to claimants, reducing inequalities in the tax credit system, and it is fair to the taxpayer, reducing unnecessary cost. There are no cash losers because these are people whose pay is going up quite substantially. It will reduce the incidence of temporarily inflated awards because the system will respond sooner and further to people’s change in income. I commend the regulations to the Committee.

Question put.

Oral Answers to Questions

Damian Hinds Excerpts

Tuesday 1st March 2016 Commons Chamber

[Stuart Blair Donaldson (West Aberdeenshire and Kincardine) (SNP)]

1. What fiscal steps he is taking to support the oil and gas industry.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

This Government are clear that the broad shoulders of the United Kingdom are 100% behind our oil and gas industry and the thousands of families it supports. Last March, my right hon. Friend the Chancellor announced a wide-ranging fiscal package, including reducing the headline rates of tax and a new investment allowance, further expanded at the summer Budget to drive investment and support maximising economic recovery.

[Stuart Blair Donaldson]

Oil and Gas UK has highlighted that headline tax rates of 50%, or 67.5% for companies paying petroleum revenue tax, are no longer sustainable. As the UK continental shelf enters an new, ever more mature phase, and the oil price remains lower for longer, the fiscal burden needs to reflect these changing circumstances and to be permanently reduced. Will the Government listen to the industry, and what fiscal support will they bring forward for the oil and gas industry in this year’s Budget?

[Damian Hinds]

In the “Driving investment” paper, the Government absolutely recognise the need over time to change the fiscal structure. The scale of what my right hon. Friend did reflects the fact that the figure stood at £1.3 billion. The most recent of the headline tax reductions took effect on 1 January this year.

[Peter Aldous (Waveney) (Con)]

I echo these points. The North sea oil and gas industry is facing very serious challenges at this time. Working with the industry and the Oil and Gas Authority, the Treasury can help to overcome the problems. May I urge the Minister to include in the Budget tax-cutting initiatives and support that build on last year’s measures and help to attract investment to this basin and to ease the worries of many very worried people?

[Damian Hinds]

My hon. Friend highlights the fact that many jobs supported by the sector are in England as well as in Scotland. I commend the work he has been doing with New Anglia local enterprise partnership on supporting companies that have found themselves in difficulties, working particularly on skills and so on. I assure him that we continue to listen to the industry, to the Oil and Gas Authority, to Oil and Gas UK, and to many individual companies to see what more can be done to support this vital sector.

[Mary Glindon (North Tyneside) (Lab)]

OGN in North Tyneside has now shed all its 2,000 jobs. The company has been in touch with the Government to ask for help with a rather difficult contract to develop wind farms, but as yet has heard nothing about any help that can be given. Will the Minister see whether there is going to be any help, or will he meet me and representatives of OGN for the sake of these jobs?

[Damian Hinds]

I thank the hon. Lady. I would of course be very happy to meet her and the company to see what proposal it would put forward.

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

An application for shale gas exploration in my constituency may result in many millions of pounds in community benefits. Does the Minister agree that those community benefits should go to the communities most affected by development?

[Damian Hinds]

My right hon. Friend the Chancellor has said that the shale wealth fund could deliver up to £1 billion of benefits to communities hosting shale gas development. This is in addition to the existing industry scheme. My hon. Friend is entirely right that it is important that communities see those benefits and have the reassurance of additionality.

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

2. What recent assessment he has made of the potential effect on the economy of the UK leaving the EU.

--- Later in debate ---

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

7. What assessment he has made of the effects on the economy of the reduction in duty on spirits announced in the 2015 Budget.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

The 2% duty cut at the March Budget 2015 continues to support the 296,000 people across the sector, including such distilleries as Highland Park in the right hon. Gentleman’s Orkney and Shetland constituency.

[Mr Carmichael]

The Minister will recall that, last year, the Red Book estimated that the cuts in alcohol duties would lead to a reduction of £185 million in revenue. In fact, from April 2015 through to January 2016, we have seen a £190 million increase in revenues. Will he therefore look very carefully at the request from the Scotch whisky industry for a further 2% cut in spirits duties this year?

[Damian Hinds]

I know how much the sector values the cut in the duty—it was the first since 1996—and it is great to see the industry in good health, with the number of distilleries and exports to other parts of the world growing strongly. I have received representations from the Scotch Whisky Association among others in relation to the upcoming Budget.

[Mr Speaker]

On spirits, Mr Andrew Griffiths.

[Andrew Griffiths (Burton) (Con)]

Any changes or reductions in spirit duty will impact on the market for other drinks, such as beer. I draw the House’s attention to my entry in the Register of Members’ Financial Interests, but this Government and this Chancellor scrapped Labour’s hated beer duty escalator and cut beer duty three times, which led to more beer sales and more revenue for the Treasury, and which saved hundreds of pubs. Will he continue that support in future?

[Damian Hinds]

My hon. Friend speaks in exactly the right spirit. He is the representative of Burton, the home of beer, and nobody has done more to advocate for that important British industry. The Budget is on 16 March. My right hon. Friend the Chancellor makes any and all changes to any duties at such fiscal events.

[Margaret Ferrier (Rutherglen and Hamilton West) (SNP)]

Scotch whisky is the biggest net contributor to UK trade in goods. Without it, the UK’s trade deficit would be 11% larger. Manufacturers across Scotland, including Spey in my constituency, that have experience of exporting know that domestic rates of tax have an impact on the attitude of international markets. What consideration has the Chancellor given to industry calls to reduce the excise in the upcoming Budget?

[Damian Hinds]

My right hon. Friend the Chancellor is always very alive to representations from the Scotch whisky industry. Of course, that product accounts for some 25% of UK food and drink exports. Japan has been a strong export market for the sector, but others have not worked out so well. We continue to listen to what that important sector has to say.

[Alex Chalk (Cheltenham) (Con)]

8. What assessment he has made of recent trends in the level of employment.

Canary Wharf Bombing: Compensation

Damian Hinds Excerpts

Tuesday 23rd February 2016 Westminster Hall

[The Exchequer Secretary to the Treasury (Damian Hinds)]

I am grateful for the opportunity to serve under your chairmanship, Ms Dorries. I thank the hon. Member for Poplar and Limehouse (Jim Fitzpatrick) and commend him for securing this important debate on a subject that is of particular importance to his constituents and on which he has campaigned consistently. I also commend the hon. Members from four different political parties who are attending this debate.

The docklands bombing of February 1996 was an horrific event—a black day for London and the United Kingdom. I add my condolences to all those whose lives were affected by the terrible events that day. The horror will not be forgotten. Two people died and 39 were injured, some permanently. It was a breaking of the IRA ceasefire and a failure of humanity. The involvement and support of the Gaddafi regime in this and other events marks a low point even in Gaddafi’s reign of terror. It is right that those whose lives were affected by these senseless bombings seek redress and compensation, and we will do what we can to ensure they get it. I know how important this issue is to the hon. Gentleman and to other hon. Members who are here today.

The hon. Gentleman specifically asked about the Libyan assets frozen in the UK, and the potential use of those to compensate victims of Gaddafi-sponsored terrorism. To answer that, it is important to set out the background of how those assets came to be frozen in the UK, and to explain the limits on the use to which they can be put.

In 2011, the United Nations took action against those involved in, or complicit in, ordering, controlling or otherwise directing the commission of serious human rights abuses against persons in Libya. This included, among other measures, the imposition of an asset freeze against a number of individuals and entities, including Muammar Gaddafi and some members of his family. On 2 March 2011, the European Union implemented these asset-freezing measures through regulation 204/2011, which has direct effect in the UK. The UK Government have no additional domestic freezing measures under the Libyan sanctions regime.

The approximate aggregate value of funds frozen in the UK under the Libyan financial sanctions regime is just under £9.5 billion. It is very important, for the purposes in which the hon. Gentleman is interested, to recognize that the whole Libyan Government are not subject to sanctions. A small number of entities associated with the Libyan Government are subject to asset freezes. The names of those entities are published in the Treasury’s consolidated list of financial sanctions. They include the Libyan Investment Authority and the Libyan African Investment Portfolio, which are subject to partial asset freezes, which means they are free to deal with new funds generated after 16 September 2011. The Libyan Government additionally hold further unfrozen funds in the UK and elsewhere. Therefore, existing financial sanctions would not prevent the Libyan Government from agreeing compensation with victims and making payments to them from unfrozen funds.

[Kate Hoey (Vauxhall) (Lab)]

Given that it could be some time before there is a genuinely workable Libyan Government, why could this Parliament not—the Minister will tell me if this would not be legal—decide to unfreeze a certain proportion of those frozen assets so that we can sort out the issue of compensation to victims in the UK?

[Damian Hinds]

I will come to that. As for the financial sanctions that are in place, an asset freeze means that the assets of the individual or entity must be frozen where those assets are. The funds continue to belong to the individuals and entities listed under the sanctions regime and are not seized or held by the United Kingdom Government. The funds remain frozen in the bank account they were in at the time of designation and, for individuals and entities subject to a full asset freeze, interest may be credited to those accounts provided that the interest is also frozen. The sanctions prevent any person from dealing with those funds or making funds available to the individuals or entities listed under the sanctions regime without a licence from the competent authority—in the United Kingdom, as the hon. Gentleman rightly identified, the competent authority is Her Majesty’s Treasury.

Access to frozen funds can only be licensed in accordance with the grounds set out by the United Nations and the European Union, and there are seven licensing grounds applicable to this sanctions regime. To summarise, the grounds allow for payments in the following categories: first, for the basic needs of the designated person; secondly, for the legal fees of that person; thirdly, for fees for the routine maintenance of frozen assets; fourthly, for the extraordinary expenses of the designated person; fifthly, for the satisfaction of judicial or administrative orders enforceable in the EU; sixthly, for humanitarian purposes; and seventhly, for obligations arising under contracts prior to the imposition of sanctions.

To clarify further, a Treasury licence would not compel a payment to be made, but would simply provide that the payment would not be a breach of financial sanctions. It is clear that none of the licensing grounds would allow the Treasury to select a frozen account at will and require that funds be paid from it to a third party.

[James Cartlidge]

rose—

[Gavin Robinson]

rose—

[Damian Hinds]

I am conscience of the time, so if all three hon. Members will allow me, I want to ensure that I get through what I need to say. If time allows, I will of course be happy to give way.

Although the entities designated under the Libyan financial sanctions are generally ultimately owned by the Libyan Government, they are entities in their own right and are governed by boards of directors who make decisions about the use of their assets. If the Libyan Government came to an agreement with victims to pay compensation, and came to an agreement with individuals or entities that their frozen funds should be used to pay that compensation, the Treasury would be in a position to consider such an application for a licence under the current framework. However, depending on the licensing ground that applies, approval for granting the licence would also need to be obtained from the United Nations.

Although I very much understand and share the concern of hon. Members for the victims of the docklands bombing and other Gaddafi-sponsored terrorism, I am afraid that the legal framework relating to financial sanctions is focused on preserving the funds for the benefit of the Libyan people and does not allow the UK Government to use them as we wish, no matter how worthy or how important to us and to all hon. Members a cause may be. Indeed, the UN Security Council has repeatedly made clear its determination that, when sanctions are lifted, frozen assets must be made available to, and for the benefit of, the people of Libya. The Security Council has held that position in a series of resolutions going back a number of years.

The hon. Member for Poplar and Limehouse asked about the 2008 US-Libya compensation settlement. In May 2008, it became clear that the US and Libya were proceeding on a bilateral agreement to settle outstanding claims. The then Government made representations to the US and Libyan authorities to include UK claimants on the list of recipients. Unfortunately that proved not to be possible, mainly because international and US law does not allow the US to espouse the claims of foreign nationals. Furthermore, the Libyans made it clear that they had answered questions about their support for the IRA in 1995 and that they considered the matter to be closed.

Important questions have also been raised about the similarities and differences between this case and the case of the Lockerbie bombing, in which victims were paid compensation. I stress that there are important differences between the two cases. First, the Lockerbie bombing was an act of terrorism directly committed by agents of the Libyan state, not indirectly through IRA terrorists with Libyan supply.

[James Cartlidge]

Will the Minister give way?

[Damian Hinds]

If my hon. Friend will forgive me, I will continue.

Secondly, in the case of Lockerbie, the Libyans approached the US Government tacitly acknowledging their guilt for the atrocity. Thirdly, Gaddafi wanted something in return from the United States, namely readmission to the international fold, from which his actions had excluded him. Finally, the Lockerbie claims were supported by a UN Security Council resolution. Above all—this is important—it is highly unlikely that a future Libyan Government would acknowledge themselves as guilty in the same way as Gaddafi, the individual. The Libyans see themselves as victims of Gaddafi, not the bearers of his legacy.

We believe that the best approach in these difficult cases is to support and facilitate contact between victims and the relevant Libyan authorities so that claims can ultimately be settled directly. Unfortunately, the current political and security situation in Libya makes it difficult for victims, their families and representatives to pursue their claims. The Foreign and Commonwealth Office already provides facilitation support to victims, their families, legal representatives and campaign groups where it has been requested and is appropriate. However, it is a long-standing decision for the Government not to espouse private claims, so we do not provide funding for victims’ campaigns. As the hon. Member for Poplar and Limehouse may be aware, there has recently been important progress towards the establishment of a new Libyan Government. The Presidency Council has announced a revised list of Government Ministers, and the next step is for the House of Representatives to endorse that list and the Government programme. We urge the House of Representatives to do that without delay.

The hon. Gentleman may also be interested to know that the Foreign and Commonwealth Office Minister with responsibility for the middle east, my hon. Friend the Member for Bournemouth East (Mr Ellwood), raised the issue of redress for UK victims when he met the Prime Minister-designate in November 2015. I assure the hon. Gentleman that the Minister will continue to raise that issue in our engagement with the new Libyan Government, and he will encourage the Libyan authorities to engage with UK victims, their families and representatives, including those seeking compensation, once stability returns and our embassy reopens. The Minister will also meet UK victims in March, and I know that he will also be happy to meet the hon. Gentleman to discuss the issue in greater detail, if the hon. Gentleman would like to do so.

There is going to be time, so I will happily give way to the hon. Member for Belfast East (Gavin Robinson).

[Gavin Robinson]

I thank the Minister for giving way, which I greatly appreciate. He has fairly outlined the restrictions associated with the asset-freezing sanctions. One issue with which the Northern Ireland Affairs Committee has wrestled is the representations made, at either EU or UN level, when the sanctions were imposed to advocate on behalf of victims, recognising that there were outstanding requests for compensation. I know he is not a Foreign Office Minister, so if he is unaware of the representations that were made, perhaps he could ask those questions and report back to the Chair of the Select Committee, the hon. Member for Tewkesbury (Mr Robertson), or to me.

[Damian Hinds]

I will have to write to the hon. Gentleman with the detail in answer to that question, but of course the sanctions regimes are not unique to the UK and are governed by international law and UN and EU conventions.

A great wrong was inflicted on innocent victims on that day in 1996, and a key part—

[Kate Hoey]

Will the Minister give way?

[Damian Hinds]

If the hon. Lady will forgive me, I will make progress.

[Kate Hoey]

You have three minutes.

[Damian Hinds]

Will the hon. Member for Poplar and Limehouse be responding, Ms Dorries?

[Nadine Dorries (in the Chair)]

That is up to you, Minister. If Mr Fitzpatrick is going to wind up, you will have to stop very soon.

[Damian Hinds]

I want to make sure that the hon. Member for Poplar and Limehouse has brief time at the end.

A great wrong was inflicted on that day, and clearly part of the responsibility lies with the Libyan dictator, Gaddafi. At some stage, the Libyan people will want to come to terms with what was done in their name and consider the issue of reconciliation and compensation for victims, both Libyans and foreigners. When they do, we will have something to offer from our experience in Northern Ireland, and we will of course also push for the inclusion of Gaddafi’s UK victims in any compensation scheme.