Finance Bill

Helen Goodman Excerpts

Tuesday 8th September 2015 Commons Chamber

[John Redwood]

: I remind the Committee that I advise an industrial and an investment company and the details are set out in the register.

I found it interesting to listen to the hon. Member for Worsley and Eccles South (Barbara Keeley)speak from the Opposition Front Bench on this important matter. As someone who thinks that taxes are best kept low and that we need to do all we can to maximise the spending power of those we represent, I had a lot of sympathy with much of what she was saying. Of course, there will be people who do not want to pay an increased insurance tax—who does? In particular, some people will find it difficult because it is quite a high tax. I would have found the hon. Lady more convincing had she been able to answer the question in my intervention: if not this, what?

We have just had a passionate debate in this House in which the Opposition, understandably, wanted us to do more for Syrian refugees. That takes money. We are already being very generous with our overseas aid budget, and although we understand their motivation they are not proposing lots of reductions in spending.

[Helen Goodman (Bishop Auckland) (Lab)]

Perhaps the right hon. Gentleman has forgotten that in July we voted against the cut in inheritance tax in the Budget, which would bring in another £1 billion in the final year.

[John Redwood]

That is interesting, because one of the difficulties with capital taxes is that they are sensitive to the rate and details of the scheme. The first rule of any tax must be that if it is raised, more revenue must be got from it. One thing that is certainly true of this insurance tax is that although we would rather it was at a lower rate, it is still at a low enough rate that if we raised it we would collect more revenue. I am not sure that that is true of the inheritance tax system, and the hon. Lady must understand that quite a lot of her constituents are not very happy about the current regime and are looking for changes.

[Helen Goodman]

The right hon. Gentleman is talking through his hat. In my constituency last year, not one property sold for £650,000 and the Government are raising the threshold to £1 million. It certainly will not affect any of my constituents.

[John Redwood]

The hon. Lady might well find that some of her constituents have aspirations and could be successful; I am surprised that she is so negative about them. Many people in all parts of the country welcome the idea. In 10 or 20 years’ time, if there is a death in the family and assets pass, they would be grateful not to have that limit. It was a good effort and I accept that the hon. Lady came up with the least bad of the Labour attitudes. Everything else that Labour wants to do involves either spending more money or increasing tax rates, which will reduce the revenue.

--- Later in debate ---

[Andrew Percy]

It is a pleasure to follow the hon. Member for Wirral South (Alison McGovern), and I agreed with much of what she said.

I find myself, not for the first time, standing to criticise a Government of my own party, but they should pay heed when Members such as my hon. Friend the Member for Selby and Ainsty (Nigel Adams) make such speeches. When my hon. Friend and neighbour makes such a speech, the Government need to consider whether they are in the right place, because he is not a serial trouble causer, as some of us are sometimes labelled—for a Yorkshireman, it is a badge of honour. Given that he made the speech he made, I hope the Government listen to him.

I support my hon. Friend, representing the constituency that I represent, and having looked through the proposals and the impact they will have on my area. I will say something about Drax in a moment, but I agree entirely with my hon. Friend on Eggborough. It is a deeply concerning situation. We are not addressing Department of Energy and Climate Change Ministers tonight, but it is fair to say, having seen the Budget, that DECC is now a wholly owned subsidiary of the Treasury. Perhaps a message will get back to those who are really running DECC.

Our concern about Eggborough is significant. A range of factors affect Eggborough, not all of which are in the Government’s gift. However, they need to be conscious of the potential crunch that is coming. When we had meetings a year or so ago, we were told that Eggborough would probably not close and that it was playing something of a game. That is certainly not what has come to pass. The warnings, which my hon. Friend was making privately a year or so ago, have come to pass. He should have been listened to then as he should be listened to now.

I hope the Government give great weight to the significant dangers if we lose 4% of generating capacity next year, given the crunch that will come in 2016-17. I hope Ministers consider what more can be done to support Eggborough and the brilliant workers, many of whom live in my constituency, who make their living there.

I do not agree with the comments of the hon. Member for Brighton, Pavilion (Caroline Lucas) on solar and onshore wind—she perhaps would not expect me to do so. We have fought off a number of proposed solar farms on grade A agricultural land in my constituency and my constituents cannot be described as being in favour of the solar farms that have appeared. I feel no sorrow for what is happening to onshore wind and solar—my constituency is peppered with hundreds of onshore wind turbines and we will be pleased to see the back of further support for them, given that we have been dumped with far more of them than anybody could have reasonably expected. They continue to be dumped on us.

On biomass, I am concerned about the impact that the measure will have on Drax. I should declare an interest: I live opposite Drax. If I invited you up to my bedroom, Mr Howarth, you would see Drax power station. [Hon. Members: “What?”] It is not going to happen, Mr Howarth, but you could look further and see Eggborough and Ferrybridge. We have a string of power stations that we are proud of. We are proud of the contribution we make to energy supply in this country and of the skilled and well paid jobs that are created by those industries. We are proud of the role we have played in the industrial development of the country, through pits such as Kellingley, which unfortunately is to close, in the neighbouring constituency of my hon. Friend the Member for Selby and Ainsty. We are proud of the contribution that coal-fired generation has made to this country and proud of the contribution we continue to make through biomass and through some coal still at Drax power station.

Drax provides 1,300 jobs for those living in my hon. Friend’s constituency and mine, and in the other constituencies around us in Yorkshire. They depend strongly on Drax, so it is very significant and concerning that, as my hon. Friend pointed out, £450 million was wiped off the value of Drax overnight from a decision that nobody saw coming. As Dorothy Thompson, the chief executive of Drax, said after the Budget:

“We are surprised and disappointed at this retrospective change to a support regime which has been in place since 2001 specifically to encourage green energy and support renewable investment decisions.”

I have met people from Drax countless times, as have a number of other Members. The one thing they have always asked of us during the past few years is stability to secure investment. To remove that stability overnight with a click of the fingers is not good decision making. That is not joined-up government and it does not provide the confidence that investors such as Drax require. I do not need to reiterate the point about the impact on international versus domestic companies. My hon. Friend and others have made it clear that 70% of the income from the exemption currently goes to UK generators. In the case of Drax, the levy exemption certificates are worth about £4 a megawatt-hour, which provides an additional source of income on top of the generating revenues.

Drax has done everything that has been asked of it and more in its conversion to biomass. The power station is part of a network along the Humber in east Yorkshire and north Lincolnshire that has seen significant investment to support the conversion to biomass at Drax. As I have said, 1,300 people are currently employed at Drax. My village is a power-generating village: power is the main source of income for many people, including our neighbours. It is how we make our livings locally. After the conversion to biomass at Drax, and what we hoped for at Eggborough, we were convinced that that would continue. I really hope the Government will pay heed to today’s debate and ensure it will continue.

Drax invested significantly to improve delivery facilities, surveying the investment landscape and concluding it was stable. Some £125 million was invested directly in importing facilities, in particular at the Immingham renewable fuel terminal. One can trudge along my constituency and follow the biomass as it arrives at Immingham in the Cleethorpes constituency and travels by rail through my constituency up to Drax. Some 100 jobs were created during the construction phase at the port and 100 more once the facilities were operational.

We thought the new facilities underlined the Humber’s reputation as the UK’s energy estuary, something that is at the heart of the northern powerhouse. When I was asked by the Chancellor only a year or so ago what the vision was for the Humber, I said that our vision is very clear and simple: to be the UK’s premier energy estuary. That includes the support going into offshore wind. It is not just offshore wind, although it has been much of the focus locally. The point we have always tried to make absolutely clear is that other power generation is at the heart of our economy in our bit of the northern powerhouse. The jobs in place at the moment relate very strongly to biomass and its importation from the United States and elsewhere. Drax’s £700 million conversion project was going to reduce carbon emissions by 80%. That is exactly what we should be aiming for: providing sustainable replacement for coal and generation that is stable in the market and on the grid. That project, alongside the carbon capture and storage project, White Rose, which we have also been keen to emphasise, will support 3,200 jobs. So this is a significant issue for my constituents and those of my hon. Friend the Member for Selby and Ainsty.

Biomass and the future stability of Drax are significant for the whole UK. Drax accounts for 8% of generating capacity, while Eggborough accounts for 4%—of course we are losing Ferrybridge, the third power station in the M62 corridor. When the chief executive of a company that provides 8% of the electricity generated in this country says we are on the wrong side on this issue, we have to listen, and that is what I hope the Government will do. Along with my hon. Friend, who made a fine speech—a better speech than I could on this—I will not support the Government on this issue. I have been unimpressed by other things in the Budget and will vote accordingly next week. I have a lot of sympathy for new clause 2, tabled by the hon. Member for Worsley and Eccles South (Barbara Keeley), and I will lend that my support this evening.

[Helen Goodman]

It is a pleasure to see you in the Chair this evening, Mr Howarth.

I am pleased to follow the hon. Member for Brigg and Goole (Andrew Percy), who made an excellent speech in support of the industry in his constituency. I agreed with much of what he said. The hon. Member for Selby and Ainsty (Nigel Adams) made an outstandingly good speech, contextualising the issue and setting it in the framework of the energy market in this country. His was a very helpful contribution.

Just before the summer recess, I became a member of the Treasury Select Committee, and in July we took evidence from the Chancellor, so I took the opportunity to ask him why he had taken this decision on the climate change levy. The first question I asked was:

“Are you a climate change denier?”,

to which he responded:

“I am not sure I accept that phrase as a general term in British politics, but what I will certainly say is that I think climate change is happening, that it is caused by human beings, in part, and that it is not good for our society, going forward.”

This did not seem a very strong endorsement from the greenest Government ever—as they like to think of themselves—so I asked whether he supported the international work and whether he was

“looking for a good, strong commitment in Paris, internationally agreed, on climate change”.

“Yes”, he said. So then I asked about the domestic legal framework:

“Do you wish to see any changes to the legal frameworks that we have in this country? So, the carbon budgets out to 2027, the target to have 15% of our electricity generated through renewables by 2020, or our target to see carbon dioxide emissions reduced by 80% by 2050; are you looking to change any of those frameworks?”

“No”, he said.

As hon. Members have said, the pattern of words and actions do not seem to fit, so I said to the Chancellor:

“Notwithstanding the fact that you are committed to all of those, you have removed the climate change levy exemption for renewables, removed the subsidy for onshore wind, restructured VED, and ended the zero carbon homes commitment”—

since then, of course, he has also changed the solar subsidies as well. The papers the Committee had from HMRC said, with respect to the climate change levy, that there would not be any impact on climate change, so I asked him whether, taking all four measures together, there would be

“any reduction in the rate at which we are reducing our carbon emissions from the measures you have taken”.

He said:

“We can go through each one individually, but I think for different reasons they are not effective or good value for money, and I think there are better ways to meet these targets.”

He said we needed to meet the targets, but in a cost-effective way, so I asked him:

“Do you have any forecast or any scenario setting out how you think that the environmental objectives will be achieved on your new policy framework?”

“Yes”, said the Chancellor.

“I am happy to send you some analysis.”

--- Later in debate ---

[Harriett Baldwin]

What a pleasure it is to serve under your Chairmanship this evening, Ms Engel.

Clauses 16 and 17 and schedules 2 and 3 make changes to the banking tax regime. They will ensure that banks continue to make a fair contribution to the economic recovery in a way that does not harm the UK as a global financial centre or affect banks’ ability to support the economic recovery.

It might be helpful if I set out the background to the Government’s approach to taxing the banking sector. In his first Budget in 2010, my right hon. Friend the Chancellor announced the introduction of the bank levy, an entirely new tax on banks’ balance sheets, equity and liabilities. The levy had two objectives. First, at a time when banking profits were low, it was designed to ensure that banks made a fair contribution to the taxman to reflect the risks that they pose to the UK economy —risks that were made very clear in the extraordinary events of 2008. Secondly, the levy was designed to complement the developing regulatory regime by providing incentives for banks to reduce the size of their balance sheets and support their activities with more stable forms of funding.

Measured against those objectives, the bank levy has undoubtedly been successful. It raised more than £8 billion across the last Parliament and is forecast to raise a further £17 billion by 2021. It has played a key role in increasing the stability of the UK banking sector, with banks now holding more capital against their assets and being less reliant on short-term risky funding. It has helped to satisfy the UK’s resolution financing obligations under the EU bank recovery and resolution directive, thus supporting the more orderly resolution of banks in crisis. Despite those successes, the Chancellor has been consistent about the need for balance in ensuring that banks pay a fair contribution, while ensuring that this supports the UK as a global financial centre and banks’ ability to support the wider economy.

The Government believe that, as the sector returns to profit, a change is required to maintain that balance. The reforms in the clauses achieve that over the coming Parliament and beyond. The first change is a gradual reduction of the bank levy. Clause 16 reduces the bank levy rate to 0.18% from 1 January 2016 and sets out further reductions to the main rate over the following five years, resulting in a rate of 0.1% from January 2021. The Government have committed to exclude non-UK subsidiaries from the bank levy charge from January 2021, a change we are committed to legislate for in this Parliament.

Clause 17 introduces a surcharge on banking sector profit from January 2016. That is a new 8% tax on the corporation tax profits of regulated banking entities within banking groups. It will apply to profits that exceed £25 million across a group, disregarding the losses that banks have carried forward from periods before the surcharge’s introduction. The first £25 million will benefit from the reductions in the main rate of corporation tax—from 20% today to 19% and then to 18%—included elsewhere in the Bill, giving the UK the lowest rate of corporation tax in the G20. It means that the overall rate of corporation tax will be slightly lower for banks than it was in 2010.

The OBR forecasts that the surcharge will raise £6.5 billion from the sector by 2021. That revenue more than offsets the cost of reductions to the bank levy rate. It means that banks will pay an additional £2 billion in tax over the period, increasing banks’ total additional contributions beyond £23 billion.

[Helen Goodman]

Like many hon. Members, I am sure the Minister has had many letters from small banks and the building societies about the fact that the surcharge will be imposed on them. The Building Societies Association says that it expects it will cost them £630 million over the lifetime of the Parliament, which would be sufficient to fund at least £4 billion in new mortgage lending. That means 15,000 or 20,000 new homes. The effect of including building societies is therefore to make it more difficult for 15,000 or 20,000 families to have a new home. Will the Minister consider whether that is a good idea?

[Harriett Baldwin]

I hope the hon. Lady recognises that the rate paid by building societies and smaller banks will be lower than it was at any time when she and the Labour party were in government. In fact, the measure brings the corporation tax rate to a level lower than when the Conservatives took power in 2010. In addition, 90% of building societies will be exempt from the charge because the first £25 million is exempt from the surcharge.

At the same time, we believe that the changes in clauses 16 and 17 will create a fairer, more competitive and more sustainable basis for taxing the UK banking sector. By rebalancing banks’ contributions towards a tax on profits, future charges will be more aligned with profit and capital accumulation. That reduces the risk of tax affecting banks’ decisions on where to invest and helps to ensure that tax does not impact banks’ ability to lend to businesses and individuals.

By aligning banks’ contributions with their activities in the UK, the changes recognise and reduce the impact of tax on UK banks’ ability to compete in overseas markets. They help to reflect the impact of regulatory reforms, which have reduced the risk of those overseas operations to the UK economy.

I shall draw my brief remarks to a close. The Government firmly believe that banks should make a fair contribution to the economic recovery. However, that contribution must be balanced with the need to maintain the competitiveness of the UK and to support lending to the wider economy. The changes in the clauses provide a better balance between those two objectives, and do so while providing long-term certainty and stability to the sector, and short-term revenue to the taxman. I therefore hope that clauses 16 and 17 and schedules 2 and 3 stand part of the Bill.