Finance (No. 2) Bill

Peter Dowd Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[Jane Ellison]

I will make a little more progress and then I will happily give way.

Before setting out the Bill’s contents in more detail, I should of course refer to the fact that the Prime Minister has today announced her intention to lay before this House a motion calling for an early general election.

[Peter Dowd (Bootle) (Lab)]

When?

[Jane Ellison]

Members should be paying more attention. Earlier today the Leader of the House updated right hon. and hon. Members on how that motion, if it is passed, will impact on the business of the House. We hope to hold constructive discussions with the Opposition, through the usual channels, on how this Bill will proceed.

--- Later in debate ---

[Peter Dowd (Bootle) (Lab)]

Plausibility ran through every sentence in the Minister’s speech. Plausibility ran riot, but plausibility I do not accept.

Who would have thought that a general election would be called on the day we were in this Chamber, which is packed-out, for this scintillating debate? I do not think anyone would have thought that. Only a few weeks have passed since the Chancellor’s shambolic Budget U-turn, yet today the Prime Minister has announced a U-turn in relation to the general election. We all thought the lady was not for turning, as she has led us to believe on at least seven occasions, and of course we were wrong. [Interruption.] Apparently the Prime Minister did not want an election, and clearly in the last few days she has had some sort of damascene conversion—a damascene conversion to democracy, apparently. We had the Brexit referendum last year which gave authority to push on with Brexit, but we now find that the Prime Minister says she wants even more authority. I thought we had been getting the Brexit vote pushed on us time after time, but clearly that has not been enough. The Prime Minister might possibly be feeling slightly insecure; I really do not know, but we are where we are.

As the Finance Bill is a product of the Budget, it is only right that we start this debate by offering a reminder of its contents. Notwithstanding what the Minister has just said, the Budget continued the Government’s programme of tax cuts for multinational corporations and the super rich: by the end of 2021 they would have received £70 billion-worth of tax breaks, paid for by those on middle and low incomes and of course the self-employed. [Interruption.] That is a fact; it is clear from the Office for Budget Responsibility’s figures and the Government figures.

The Budget failed, however, to address adequately the social care crisis, and we are now seeing 900 adult social workers in England leaving the profession every day—and goodness knows how many GPs getting their pension statements are ready for moving on as well. It also did little to support small and medium-sized business owners, who are the lifeblood of the economy and increasingly feeling the pressure as the economy slows and inflation rises.

More importantly, the Budget demonstrates that this Government are willing to break their manifesto commitments at the drop of a hat. Despite the Chancellor’s bravado, the Government’s economic ineptitude after seven years is clear for all to see. His Government have presided over the slowest recovery since the 1920s, with growth and average earnings downgraded yet again. The Chief Secretary said in his Budget speech that the Government do not believe in “spending and promising” what they “cannot deliver” and agreed that that is an important barometer by which to judge the Government’s record. Let us look, therefore, at what the Government have promised over the past seven years and what they have actually delivered.

On coming to power, the Conservatives committed to balancing the books by 2015—a Conservative broken promise. They said that would be pushed back to 2019-20—another Conservative broken promise. Instead, by 2020 they plan to be borrowing an eye-watering £21.4 billion. Some 10 of the Government’s 14 Budget and autumn statements since 2010 have seen an increase in forecasted borrowing. This Government’s record on borrowing has been missed target after missed target, with constant upward revision. The Government pledged that debt as a percentage of GDP would start to fall in 2015; instead it continues to grow—another Conservative broken promise.

The Government’s record on growth has been one of epic failure. The OBR has now revised down economic growth for 2018 and for every remaining year of the Parliament, notwithstanding the comments made before about the OECD. The British people wait to see any benefits of growth, but the only growth they can expect to see is in the size of the Government’s Finance Bills; this one is a whopper, coming in at 762 pages, longer than any previous Finance Bill and one of the largest pieces of proposed legislation ever presented to this House. Those 762 pages are hardly riveting reading, I have to say. [Interruption.] I have read every single syllable of it, several times.

We would need to search long and hard through those hundreds of pages for anything that helps ordinary taxpayers. Instead it is replete with ever-more complex giveaways to corporations and the super-rich. But even those hundreds of pages are not enough to contain the Government’s giveaways to the rich. This mammoth Bill will be supplemented by an unprecedented number of statutory instruments, on the back of the Treasury’s already unheard of use of SIs. There were 90 in the last Session, and there have already been 88 in this one. We have heard about Henry VIII edicts, but this makes the Chancellor look like a committed parliamentarian.

The growth in the size of the legislation is matched only by the growth in the number of broken Conservative promises. Are this Government doing anything to deliver growth that benefits the average household? The Chancellor has consistently pledged action to tackle the UK’s productivity gap, but under this Government, this country’s productivity gap with the G7 has grown by a fifth, and we now have the largest gap since 1991. The Conservatives were in government at that time as well.

This Government have done little to tackle the scandal of chronic low pay and insecure work. Despite falling unemployment, workers are currently suffering their worst decade for pay in 70 years. Rising inflation is now outstripping wage growth and, according to the Resolution Foundation, real-terms pay is now falling for around 40% of the UK workforce. The Government’s promise of a £9 national living wage has been consistently revised downwards—first to £8.80 and now to £8.75—while rising inflation results in the cost of living going up for everyone. It is clear that when it comes to introducing a wage that working people can live on, only a Labour Government will deliver. This Finance Bill does little to address the crisis in living standards that many of our constituents are currently feeling. Nor does it offer support for small and medium-sized businesses, which are facing rising costs and a lack of investment due to the Government’s hard Brexit strategy—if you can call it a strategy.

[Tom Tugendhat (Tonbridge and Malling) (Con)]

The hon. Gentleman is making some interesting points, but I hope he will forgive me for saying that they seem to run contrary to the facts as I see them. I see businesses coming to Britain, I see investment moving to Britain, and I see opportunity starting in Britain. This all seems to run contrary to his argument, and I wonder whether he can explain why businesses see Britain as a land of opportunity and growth when he clearly does not do so.

[Peter Dowd]

If that is what the hon. Gentleman sees, I suggest that he needs to take off his rose-tinted spectacles.

We are all aware that the only Conservative idea for the shape of a post-Brexit economy is to turn our once pride-worthy economy into a bargain basement tax haven. That is what the Conservatives want. We have had seven years of slogans from this Government, but we still have no evidence that their negotiations on Europe amount to anything more than something written on the back of a fag packet. They are non-existent, and they have been non-existent for the two or three years since the announcement of the referendum, other than their preparation to sell us down the river to tax avoiders and dodgy dealers across the globe.

The Government make great claims on tackling tax avoidance in the Bill—we heard the Minister talk about this earlier—but it is a charter for tax avoiders, and no amount of smokescreens and bluffing can hide that fact. The Chancellor wants us to believe that measures to bring some non-doms into tax will really tackle the problem, but throughout the Bill we see measures to preserve the special status of non-doms and to privilege that group over domiciled taxpayers. Even the Government’s headline “deeming” measure is undermined because they have chosen to preserve the non-dom status of offshore trusts. How on earth is this going to get more taxes paid if non-doms are being forewarned that they can simply hide their money away in a trust and still keep it beyond the Revenue’s grasp? When is closing a loophole not closing a loophole? When it is hidden in a magic spreadsheet.

The Bill fails to introduce any meaningful measures to tackle tax avoidance and evasion, which even this Government admit are costing at least £36 billion a year. In short, this Finance Bill continues to push our country towards a low-tax and low-pay economy in which a small minority of the rich can get wealthier at the expense of everybody else.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

I would love this to be a low-tax economy, but is the hon. Gentleman aware that tax as a percentage of GDP is going to be at its highest level since Harold Wilson was Prime Minister?

[Peter Dowd]

I am grateful to the hon. Gentleman for bringing that to my attention. Let me put it like this: if we had a Labour Government, the percentage would be even higher.

The Finance Bill does nothing to fund the NHS, which is facing its worst ever crisis. As the former Secretary of State for Health, Lord Lansley, has said, the Government planned for five years of austerity, but having 10 years of it was neither planned for nor expected. That came from a man who wasted £3 billion on a top-down reorganisation of the NHS. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink; that must be in everybody’s postbag.

[Tom Tugendhat]

It is very kind of the hon. Gentleman to give way again. As he has brought up the NHS, I feel that it is only right for us to ask how Labour is doing on the NHS. We have to look to Wales to see how Labour is doing—not well, is the answer. The statistics from the NHS in Wales indicate that treatment is poorer, waiting lists are longer and people are less satisfied than they are in England or, indeed, in Scotland, where the SNP has, sadly, also delivered worse results.

[Peter Dowd]

I draw the hon. Gentleman’s attention to waiting lists in England, where an estimated 3.8 million people are waiting for treatment. I suggest that he should be more concerned about those 3.8 million people in England than he is about Wales.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Does my hon. Friend think it is remotely credible for a Tory MP on the eve of a general election to boast about the NHS? If one thing is certain as we go into this election, it is that people know who they can trust on the NHS.

[Peter Dowd]

My hon. Friend is completely right about that. If Conservative Members want to send me their manifestos on the NHS, I will be happy to look them through. As a matter fact, I might get even more votes if I put those manifestos through the doors in my constituency.

The Finance Bill does nothing to help to fund the NHS. It is as simple as that. By underfunding and overstretching the NHS, the Tories have pushed health services to the brink. The number of NHS beds has been cut by 10% since the Tories came into government; that issue has been raised. GP recruitment is at an all-time low, and more GPs are moving out of practice. Community pharmacy funding has been savagely cut back, in some instances by as much as 20%. As a result, as many as 3,000 pharmacies, in rural and urban communities alike, face closure. That is not the best record on the NHS; it is as simple as that.

[Sammy Wilson]

I accept what the hon. Gentleman has said about the difficulties that the NHS is facing. However, earlier in his speech he described borrowing as eye-wateringly high, so how does he propose to fill the gap in funding to increase standards in the NHS?

[Peter Dowd]

I referred earlier to the money—£70 billion, I believe—that the Government have given away to corporations. That would be a start, and I would welcome the hon. Gentleman’s support for my proposal in the next Parliament.

We have seen £4.6 billion cut from the budget for social care, which is linked to, and on a continuum with, the NHS. The Chancellor has pledged to return only £2 billion over the next three years—£1 billion for the year 2017-18 and £500 million a year for the two following years—which is half what the King’s Fund has estimated that the social care sector needs not for next year, but today. That is another Conservative broken promise. Missed targets are pushing the NHS and social care into further crisis. The Government are behaving like an ostrich in that regard, and the situation is coming back to bite them.

I turn to small and medium-sized businesses, which contribute more to the British economy than they have ever done. SMEs are forecast to contribute £217 billion to the UK economy by 2020, but the Finance Bill does little to address the concerns of many business owners. The business rate system continues to be rigged in favour of giveaways for big corporations at the expense of SMEs. How can it be right for the business rates bills of a leading supermarket’s biggest stores to fall by £105 million, while independent shopkeepers struggle with a cliff-edge hike in their rates? That is a fact today. The system needs to be fairer and weighted more in favour of SMEs, which is why a Labour Government would bring in a package of reforms to ease the burden of business rates. Rising business rates and rising inflation are creating a perfect storm for SMEs. Small business inflation has risen to its highest point in eight years, with basic costs soaring by 3.2% last year. SMEs’ costs are predicted to go up by £6.8 billion by the end of this year. All that is happening while the Conservatives continue to look the other way in complete denial.

[Victoria Atkins (Louth and Horncastle) (Con)]

In that spirit, does the hon. Gentleman welcome the additional £20 million to £25 million a year to support some businesses that will no longer receive small business rate relief after the revaluation?

[Peter Dowd]

Of course I welcome that figure, but the hon. Lady has to ask herself whether businesses should have been put in that position in the first place. That is the fact of the matter. It is too little, too late. I accept the £20 million figure, which is fine. Small businesses need all the support that they can get, because we are talking about people’s jobs and about businesses that people have worked hard to grow and nurture, and there is a danger that they will go out of business as a result of Government policies.

[Sammy Wilson]

Given that larger stores weathered the recession much better than many small businesses, would the hon. Gentleman consider the policy that has been introduced in Northern Ireland whereby larger stores pay a 15% premium on their rates to finance some relief for smaller businesses in town centres?

[Peter Dowd]

If that suggestion came from the Government side, I would say that I would listen to the representations, and we would listen to any representations, so to speak, that would help small businesses.

Moving on to alcohol duty, the Finance Bill will only further undermine our local pubs, which are already under threat, with 29 pubs closing every week. While we welcome plans to make tax digital, the Government’s plan will shift huge administrative burdens on to small businesses and the self-employed, who are just trying to pay the taxes they owe—so much for the Conservatives being the party of small business. There is no reason businesses should have to submit quarterly digital tax returns, particularly when they lack the time, resources and capacity to convert records into digital standards on a frequent basis. All that comes when they are under stress from business rates. That is why we support the view of the Treasury Committee and of small business owners and the self-employed that it is better to exempt the smallest taxpayers from quarterly reporting and to phase in making tax digital to ensure that implementation is right for all, rather than the Conservative party wasting taxpayers’ money and time by correcting mistakes further down the line.

Making tax digital will also place new burdens on HMRC, which is already teetering on the edge after the constant slashing of its resources over the past few years. Thousands of hard-working staff have already been dismissed, and taxpayers are waiting on the phone for hours, which costs far more than the cuts have saved. The closure of dozens of tax offices across the country is still to come, putting thousands of jobs at risk in my constituency alone. How will HMRC cope with the ever-increasing complexity of its responsibilities with just a skeleton staff? How will any of the “reduction in errors” expected from making tax digital actually come about? How will we ever close the tax gap when there are no tax inspectors left to help taxpayers get their returns right and when HMRC has been filched of the resources it needs to run a service? It is a total false economy.

[Jane Ellison]

I am sorry, but I rise to defend HMRC. What the shadow Minister just said is the most outrageous attack on the hard-working men and women of HMRC. Far from people hanging on the phone for hours and the various other exaggerations that we just heard, I suggest that he look at the publicly available figures for HMRC performance in a range of areas, where he will see that what he said is far from the truth. HMRC’s performance has been excellent in recent years in many areas, as shown not least by the £140 billion extra raised since 2010 from avoidance and evasion.

[Peter Dowd]

That attempt at plausibility has gone amiss yet again. The reality is that we are constantly contacted by people about HMRC. Those on the frontline, such as the thousands in my constituency, are doing a damn fine job. The idea that I would attack thousands of people from my constituency is complete nonsense. They are struggling against the odds, which have been stacked against them by this Government. That is the reality. The Finance Bill was a failure before it was even started. It is a busted flush.

The Minister referred earlier to helping homeowners. If the Government are setting aside resources to help homeowners, such as through lifetime ISAs, they should also tackle the threat to the stability of the housing market from organisations such as Bellway, which is tying people to their homes through its leaseholds. That is a scandal and an outrage. The housing market is in danger if such scams are allowed to continue. The Government are quite rightly putting in resources to fund the housing market, so if we are to deal with the issues in it, they should be calling those organisations in, getting a grip on them and telling them to stop ripping off the people who bought homes from them.

The Bill is making income tax payers, small and medium-sized businesses, and the self-employed pay the bill for the endless stream of tax cuts for corporations and the super-rich. It takes no serious action to tackle tax avoidance, putting in place get-outs and workarounds that mean it is just another smokescreen.

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

Does the hon. Gentleman accept that the Bill comes from a Government who have significantly increased the number of people in employment? Earlier this year, only 370 people were unemployed in my constituency.

[Peter Dowd]

A million people in employment are on zero-hours contracts. Millions of people are in insecure work. Of course I welcome employment, but it has to be secure, well-paid, reasonable, sensible employment that allows people to sustain their families. Under this Government, millions of people are unable to sustain an ordinary life with the wages they receive. That is the reality.

[Tom Tugendhat]

The hon. Gentleman is being generous in giving way. Does he understand that his pledge further to increase taxes runs directly contrary to his hope for better employment? Increasing taxes and increasing the burden of the state on companies around our country would lead to employment falling, not rising. Welfare cases would rise, not fall. It would be generally bad for our entire economy.

[Peter Dowd]

I do not know which speech the hon. Gentleman has been listening to, but I did not refer to raising taxes.

[Tom Tugendhat]

You did!

[Peter Dowd]

No, I did not. I was asked earlier how I would pay for the changes, and I indicated that I would start with corporations. In effect, corporations receive £70 billion in relief over a five-year to six-year period through banking levy reductions and so on. That is the starting point for us. As far as I am concerned, the Bill takes us no closer to knowing when the Conservatives will finally meet their target of closing the deficit. A series of failures has led them to borrow more than any other Government in history, and far more than every Labour Government combined. That is the fact of the matter.

[Lucy Frazer]

Can the hon. Gentleman tell us how much Labour would borrow under his plan?

[Peter Dowd]

Certainly less than you. In short, this Bill is another Conservative broken promise, and I urge the House to refuse it a Second Reading.

--- Later in debate ---

[Mr Rees-Mogg]

Absolutely. That is an important part of the reforms, but there has perhaps been a tone—more from the previous Chancellor than from the current Chancellor—that the non-doms were using the system. A lot of them could actually go anywhere in the world, but they come here because of the great virtues of investing in the UK: we have clear rights of property; we have an effective rule of law; and we have had simple regulations that have allowed them to be here. However, we have now increased the charges on them and increased their eligibility for certain taxes, and I think we should be very cautious about that because one never knows, with these sorts of things, where the tipping point will come. It may be that the annual charges applied to non-doms seem quite small compared with their wealth, but when we consider that they have families—the charges have to be multiplied for the wife, the number of children and grandparents, or whoever—we may find that the charges become quite high. The people bringing such wealth into the country have enormous mobility: they can go elsewhere. I know that standing up for non-doms six weeks before an election is not necessarily going to be a great rallying call for North East Somerset, but ultimately I think good economics leads to good politics rather than the other way around. A lot of what was done with regard to non-doms was much more about politics and perception than the contribution non-doms make to this country. In the context of Brexit, we want to show that we are genuinely open to the rest of the world. We want people to come here to invest and to spend their money, because that is so important to our long-term economic prosperity.

There is a broad challenge with this Finance Bill, as there will be with its successor which will no doubt come. I have a feeling that this will be one of those happy years where we get more than one Finance Bill. Finance Bill debates are particularly enjoyable parliamentary occasions because they have no time limit. The hon. Member for Aberdeen North (Kirsty Blackman) said that we might go right through the night and not be able to have our debate tomorrow. I look forward to that happening at some point in the future, but I have a feeling it is not going to happen today. Finance Bill debates are the best debates because of their fluidity and flexibility.

When we get to the second Finance Bill, a fundamental choice will still have to be made. This relates to the answer we had from the hon. Member for Bootle (Peter Dowd) on the Opposition Front Bench. There is an absolutely key point at the heart of this Finance Bill, as there will be at the heart of any new Finance Bill. When I intervened on him and said that the tax rate as a percentage of GDP was at its highest since the days of Harold Wilson, his answer to me was that under Labour it would be even higher.

[Peter Dowd]

May we just have clarity on this? I did not say that. The hon. Gentleman brought it to my attention that it was high under Harold Wilson and I made the point that yes it was.

[Mr Rees-Mogg]

I look forward to reading the characteristically accurate transcript Hansard will have for us tomorrow. The great thing about Hansard is that it allows us to correct our grammar—indeed, it often corrects it for us—but it does not allow us to correct the sense, so we will see what was said precisely.

That is the choice. If the hon. Gentleman now wishes to move away from that choice I think that is telling: with an election approaching Labour Members are nervous about it, but the Labour party—the socialists—remains the party of high taxation. The Conservative Government have had to increase taxation because of the enormous deficit left by the spendthrifts of the last Labour Government who almost bankrupted the country. We would probably have gone to the International Monetary Fund at the time if it had had any money left, but it was bailing out Greece and everywhere else so it did not have much for us by the time the Conservatives came in. Through hard work, control of expenditure and, I am sorry to say, some tax rises, the deficit has been brought under control. That is the fundamental achievement of this Government.

As we go into an election, it is the really big picture that matters. It will give such a clear and forthright choice to the British people. Do they want to continue to be governed by people who recognise that it is their money—the money of the individual taxpayer—of which the Government must take as little as possible to finance that which they are required to do? Or are we going to go back to the days of socialist tax and spend, with a huge increase in the deficit to finance spending programmes and tax increases that are even higher than those in the days of Harold Wilson? It was, of course, Denis Healey who said that he would squeeze the rich until the pips squeaked. That was his approach to taxation. Do we, by dutiful, sensible and prudent management of the economy, get things back under control where, with proper reforms, we can lower the tax burden?

--- Later in debate ---

[Peter Dowd]

If the long-term economic plan was such a wonderful strategy, why did the former Chancellor and the current Chancellor keep missing their targets?

[Mr Rees-Mogg]

Targets are based on forecasts and forecasts have variables within them that even the wonderful, or not always wonderful, boffins cannot get absolutely right. What matters is not the precision of the forecast, but the broad trend of the economy. We have had consistent economic growth. We have the highest employment on record. This is an enormous achievement. As I said a moment ago, we have the fastest growing G7 economy.

National Spitfire Project

Peter Dowd Excerpts

Tuesday 28th March 2017 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is always a pleasure to debate under your stewardship, Mr Davies—and particularly on this occasion. Regrettably, I do not have any stories to tell about R.J. Mitchell’s connection with my constituency or with Liverpool, but there is a story about a Spitfire that crashed in October 1942 in Birkenhead park. It flew over the Mersey and the pilot, who had baled out, landed on the Liverpool maternity hospital. It took until 2007 to recover the Spitfire. It was said that the engine was still in beautiful condition, which is a tribute to its engineering.

Hon. Members have referred to many aspects of the matter, and I want to comment on the speech of the hon. Member for Southampton, Itchen (Royston Smith). I thank him for bringing this important matter before the House, and for his tribute to the people of Southampton; they deserve it. He referred to the role of women in the factories and the whole range of people who were involved in building and servicing the Spitfire.

The hon. Member for East Lothian (George Kerevan) talked about the Spitfire being an iconic symbol of these islands, about people’s endeavour in fighting Nazism and fascism, and about the role of women in manufacturing Spitfires. The hon. Member for Aldershot (Sir Gerald Howarth) talked about his and, more importantly, his mother’s passion for the Spitfire. We will have to take his word for it that he flew the Spitfire with sobriety; I am sure that he did. The hon. Member for Stirling (Steven Paterson) talked about how the Spitfire helps with bonds between servicemen and servicewomen across the country and made reference to 43 Fighter Squadron commemorating 100 years at Stirling castle. There is no better way to tell the story of the Spitfire than by looking at the role of those people in that. The hon. Member for Eastleigh (Mims Davies) joined us all in supporting this proposal.

My hon. Friend the Member for Southampton, Test (Dr Whitehead) asked clearly and unambiguously for the money right up. He, too, talked about Southampton’s proud role in the story of the Spitfire and its deep bonds with it, and about how he is looking forward to seeing the monument over Southampton water. The hon. Member for Argyll and Bute (Brendan O’Hara) said that he, too, looks forward to going down to have a look at the Spitfire over Southampton Water. All those contributions were fantastic. This is a matter of substance, honour and pride, about which many Members spoke in detail, and I have tried simply to echo what they said.

As the hon. Member for Argyll and Bute indicated, people of a certain age, including me, used to watch the black and white movies of the 1940s and ’50s. Those were part of my staple diet on a Sunday afternoon after my lunch. One of the pictures he referred to was “The First of the Few”, which was released in this country in 1942. Its title in the United States was “Spitfire”, and it was released there in 1943, just days after the main actor, Leslie Howard, who played R. J. Mitchell, was himself shot down by the luftwaffe. It is perhaps fair to say that that picture was the first memorial or monument to the Spitfire. However, no matter how iconic it might be, the Spitfire needs more than a pictorial monument.

The story of the Spitfire is replete with stories of bravery, commitment, honour, valour, stubbornness, will power, camaraderie, self-deprecation and, above all, modesty. How else could people have got through without all those virtues and that approach to duty? The story of the Spitfire is legendary, but legends are often untrue—not this one. If anything, it has been underplayed. We all have family members who fought or were injured or killed in the two world wars, and who may have died thereafter as a result of the trauma. They command—that is not a word that they would use, but they do—our attention, our thanks and our commitment to their memory. Who could argue with that? None of us would argue with that.

Many of the comings and goings of the battle of the Atlantic—a literal nom de guerre given to it by Winston Churchill—occurred in my home town of Bootle and in Liverpool. The battle was conducted from Derby House and was the longest of the last war. It started on the day war broke out and concluded on the day the war finished—it was five years, eight months and five days. At Pier Head in Liverpool we have a memorial to those who were involved in the battle of the Atlantic and a monument to a brave man, Johnny Walker, who went across the seas after U-boats and is one of the most successful U-boat hunter commanders in history.

There are quite rightly monuments elsewhere, but we have a monument in Merseyside, symbolically next to the water from which many never returned, to celebrate their memory. As the monument says, they have no grave but the sea. I say “celebrate” because I, for one, do celebrate those who fought for our freedom against the most evil of regimes. Those who lost their lives in the battle of Britain and other air combat, and those who were willing to give their lives freely, are equally important and also deserve a monument to celebrate their sacrifices. The Spitfire personifies those men and women. It was a stalwart of the war and beyond, as were those who built, serviced and flew it.

The National Spitfire Project website sums up the issue as follows:

“Even after the bombing of the Supermarine factory, the people of Southampton continued to produce the Spitfire, dispersed to locations throughout the city, for the duration of the war. The Spitfire and Southampton are inseparable and it is the attitude of perseverance, ingenuity and patriotism that really does embody the Spirit of the Spitfire.”

We really do need a Spitfire monument, and it needs to be near the fulcrum of its design and build; near where, under siege and bombing, brave people fought on in more ways than one. I do not think that is too much to ask. It should be a monument that does our nation proud, does our democracy proud and, more importantly, does our heroes and the people of Southampton and its environs proud. There are only a few of the few left. Time is not on their side. We really should try to stop the clock now and, with good will, help to resolve this issue.

Equitable Life Policyholders: Compensation

Peter Dowd Excerpts

Thursday 23rd March 2017 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

First, I should like to associate myself with all the comments that Members have made about the dreadful events that occurred yesterday. I send my condolences to the families of those who died and I wish a speedy recovery to those who were injured.

This has been an incredibly thoughtful and considered debate on both sides of the House. I should like to thank the hon. Member for Harrow East (Bob Blackman) for bringing this subject before us today. He has devoted a huge amount of time and commitment to this issue over the years. He and my hon. Friend the Member for Leeds North East (Fabian Hamilton) have pursued it doggedly, and I would like to thank them for that. The hon. Member for Harrow East set out the situation clearly today. Words such as “scandal” and “confidence” have been thrown in during interventions, and they sum up the issue for many people. I thank the hon. Gentleman for setting out the landscape for us today.

I should also like to thank my hon. Friend the Member for Leeds North East, who said that there was a moral duty to compensate the hundreds of thousands of people who have been affected over the years. He said that this was a moral issue and a question of trust in the state, and I think that that resonates with many of us. The hon. Member for Bromley and Chislehurst (Robert Neill) reminded us that people had been encouraged to save, and that that was the right thing to do. He said that they should not be dis-benefited as a result of that now. He also talked about the catastrophic regulatory and company errors that were made—I shall say more about that later—and about the alarm bells that were ringing. He said that the Government’s providing the necessary resource would be a gesture of confidence for the public.

The hon. and learned Member for Edinburgh South West (Joanna Cherry) also raised the issue of the failures in the system, and said that the unfairness was continuing. She spoke movingly about her constituents’ experiences, and about the trust that people must have in the system. The hon. Member for Stafford (Jeremy Lefroy) talked about equity, and I think that he probably meant equity not only with only a big E but a small one. He said that the regulations should not only be carried out but be seen to be carried out. He also talked about confidence and trust in the system, and the question of long-term security through confidence in the regulatory process.

[Sir Desmond Swayne]

It is alleged that when Gordon Brown was put under pressure by members of his own party in the early 2000s to compensate the policyholders, he retorted, “These aren’t our people.” Whether that is true or not, would the hon. Gentleman accept that they are very much his people, as indeed they are ours as well?

[Peter Dowd]

I have no doubt whatever that these people are all our people.

My hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) talked about cross-party support and about the appropriate action that the Government need to take. He said that policyholders were still being short-changed. He, too, talked about the restoration of trust and confidence in the system, and referred to the WASPI women. He said that the erosion of confidence could cost more in the long run, and that justice delayed was justice denied. The hon. Member for East Renfrewshire (Kirsten Oswald) talked about her now elderly constituents who are in distress, and about the failed and toothless regulatory system. That saga cannot continue. The hon. Member for Strangford (Jim Shannon) talked about his constituency and looked to the Minister for solutions, saying that people are justified in their pursuance of full compensation.

[Mr Stewart Jackson (Peterborough) (Con)]

The hon. Gentleman is making a characteristically erudite speech. Does he agree with me, and possibly the hon. Member for Angus (Mike Weir), that it is important to redouble our efforts at the opposite end of the spectrum? It is imperative that young people receive financial education so that they understand the long-term benefits of securing a long-term and sustainable pension income.

[Peter Dowd]

That is an excellent suggestion—I would expect nothing less from the hon. Gentleman—but if people do take out a pension, they must have confidence in the system.

The Minister has heard the clear and unambiguous views of many Members from across the Chamber. The Opposition will not make any cheap party political points on this matter. We give credit where credit is due to the coalition Government for setting aside £1.5 billion in a compensation fund for those who invested in the Equitable Life Assurance Society, most of which was invested in pensions. The compensation scheme was set to close in 2014, but the previous Chancellor extended it to December 2015, with the fund set to close mid-2016. EMAG—the group that represents the policyholders—has called since February 2016 for £2.7 billion of additional compensation, arguing that that is the shortfall, and many Members have made the same point today.

The Conservatives committed in their 2010 manifesto to make fair and transparent payments to Equitable Life policyholders, and the debate continues about what that amount should be, but £4 billion is the generally accepted figure. In the previous debate on this subject, the then Minister, the hon. Member for East Hampshire (Damian Hinds), stated:

“The improvements our economy has made since 2010 are greatly to be welcomed and show that the Government’s long-term economic plan is working, but the plan is not complete and we have some way to go to fully restore the public finances.”—[Official Report, 11 February 2016; Vol. 605, c. 1186.]

The current Minister will also note that. The Chadwick report of July 2010 concluded that relative loss should be defined as those who have suffered financial loss, pointing out that the Ombudsman recognised that losses in policy values were only partly due to maladministration and that the backdrop to cuts in policy values was a sharp fall in world stock markets that all life insurance companies were forced to respond to. Similarly, the report also argued that compensation should be assessed on the cost of maladministration as opposed to the size of investor losses. However, we are politicians and we can make different decisions and choices, and the Minister has been asked to consider carefully whether we want to make different decisions or choices.

I want to make an important point that has been pushed time and again about regulatory failure. There is a broad consensus among the parties that compensation should have been paid out by the Government for maladministration, which has happened to a degree, but we are unsure whether regulatory failure continues to exist. We have to ensure that the regulatory frameworks that operate in this country are continually stress-tested and reviewed again and again. The regulatory organisations need the appropriate resources to ensure that proper regulation occurs. We have to consider that 100 or 150 people are looking at 200 insurance companies. I am not suggesting that there should be more staff; I am saying that we should take the resourcing of regulatory authorities into account.

This scandal does not relate to one particular Government. As Members have said, it was ignored by regulators throughout the ’80s. With the knowledge that the regulatory system did not work, however, it is all the more important that we continue to check it. The second ombudsman report states:

“The central story of this report is that this robust system of [financial] regulation was not, in respect of the Society, implemented appropriately—that is, consistently, fairly, and with proper regard to the interests of those directly affected—by the prudential regulators and those providing assistance and advice to those regulators.”

That is absolutely salutary. We have had scandals in the past, such as with PIPs and the 1980s endowment scandal, and we must always keep a lookout for them. There is the growing concern about the sale of leaseholds and some new properties, which we should not allow to become a scandal. There is even the problem of airlines refusing to pay people compensation for delays, so it is important to keep looking at the regulatory system.

I want to conclude by pushing the question about confidence in the regulatory system. What efforts are the Government making to trace policyholders who have still not been found after the scheme has closed? Can we have an update on the number of people who have received compensation from the £1.5 billion? How many policyholders does the Minister estimate are still affected? I know that this is a moveable feast. What are the broader steps that the Treasury has to take to restore faith in the financial regulatory system? In summary, it may be that the Government are not legally required to pay the compensation, but many Members have pushed the moral imperative, and the Government will have to consider that matter today and in the coming months and years.

Draft Individual Savings Account (Amendment No.2) Regulations 2017

Peter Dowd Excerpts

Wednesday 15th March 2017 General Committees

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to work under your stewardship, as ever, Mr Evans. First and foremost, I have a complaint to make. It is a real shame that consideration of the regulations has been scheduled for today, when the Chancellor is making a strategic withdrawal in relation to national insurance contributions. I cannot let that go without comment. Given that those proposals have been withdrawn, I am glad that some self-employed people may have a little extra money to put into ISAs.

We had a fair old debate on this matter on the Savings (Government Contributions) Bill Committee last year. We received evidence from many people about the efficacy of not just this product but others. The Opposition welcome any scheme that encourages people to save, as long as the burden on the taxpayer is not too much. Does the Minister believe that the benefit to the taxpayer is commensurate with that resulting from the scheme?

We are also concerned about whether putting another product in an already crowded market is appropriate. We accept that the lifetime ISA is a simple product, but nevertheless there is a crowded market out there. The Minister may want to share her view on that and comment on the possibility of a future review following the scheme’s roll-out.

We must also repeat our concern that the scheme will discourage people from taking up pensions. We are genuinely concerned that it will lead to people not taking the conventional pension route and that they might duck out of auto-enrolment and put their eggs in a different basket that is not tried and tested.

Will the Minister comment on another concern of ours? We wanted a mechanism whereby there would be an absolute requirement for independent advice before any money could be withdrawn, but that is not included in the draft regulations. Has the Minister had second thoughts about independent advice on a matter of such importance, especially given that for some people it involves buying a house?

Many MPs have a genuine concern that is not directly related to the draft regulations, but it is worth expressing it in this Committee. Companies such as Bellway are selling on freeholds, which is costing people an arm and a leg. People enter the housing market and find that when they want to buy the freehold of their property after a year or two, they have to pay a huge amount to do so. On top of that, they experience almost exponential increases in ground rent. The freehold issue must be addressed. We have expressed concerns that it crowds the market, potentially puts people off buying and, through that latest scam, adds to the dissonance in the housing market.

[Jake Berry (Rossendale and Darwen) (Con)]

As a north-west MP, the hon. Gentleman will be aware that that is particularly prevalent in the north-west of England. The Government announced in their recent White Paper on housing that they will look at it. Will he join me in welcoming the Government’s proposal to look at ways in which we can modernise how people can buy the freehold of their property under the Leasehold Reform Act 1967, which has historically been called the leasehold enfranchisement Act?

[Peter Dowd]

I am pleased that the hon. Gentleman has mentioned that. Of course I welcome anything that the Government do to stop such scams gaining ground. We are more than happy to participate in a bipartisan way in anything to stop that happening.

I raised that issue because it is a matter of concern, and one that we have expressed before in connection with the housing market. The last thing we want in this country is for people to stop buying houses and entering the housing market because they are frightened to death that something in the small print will be produced later. I have taken this opportunity to mention that.

As I have said, we welcome the fact that the Government are helping people to save. We still have concerns about whether the draft regulations are necessarily the right way forward, so although we will not oppose them, neither will we slap the Government on the back for this particular product, given all the concerns that we have expressed in the past.

Budget Resolutions

Peter Dowd Excerpts

Thursday 9th March 2017 Commons Chamber

[Mr Raab]

Let me give the hon. Gentleman my three points; I will look forward to hearing his intervention after that.

There is also the whole concept of people’s quantitative easing—the idea that the Bank of England should print more money to spend on some of these ivory-tower, socialist-pipedream projects. That is the Mugabe school of economics; it is deeply irresponsible. Again, if we are talking about difficult decisions, that would be far worse for savers than any of the difficult decisions that have had to be made in this Budget.

Finally on the alternatives put forward by the Labour party, the leader of the Labour party is actually on record as being amused about the possibility of raising the basic rate of income tax by 5%—I have the quote here, but I will not embarrass Labour Members by reading it. Honestly, of all the tax rises in the world to contemplate, a rise in the basic rate is deeply irresponsible, not just economically but socially.

[Peter Dowd (Bootle) (Lab)]

Why do you not talk about your manifesto instead of our manifesto? Why do you not talk about the promises in your manifesto that you have broken?

[Madam Deputy Speaker (Natascha Engel)]

Order. The hon. Gentleman should remember that he is speaking through the Chair. It is not my manifesto—it is the manifesto of the hon. Member for Esher and Walton (Mr Raab).

--- Later in debate ---

[Mr Raab]

I will give way at a time of my choosing, not the Labour party Whip’s choosing.

If the shadow Minister would like to explain how it can possibly be right to hike the basic rate of income tax by 5%, I will give way.

[Peter Dowd]

I beg your pardon, Madam Deputy Speaker.

The bottom line is that we should be talking about the broken promises from the Conservative party manifesto. However, the national infrastructure plan involves £500 billion of expenditure—some public expenditure and some private—so I would ask how the Government are going to fund that.

[Mr Raab]

I am not sure that it is incumbent on me to fund the commitments that the Labour party may or may not be willing to make.

The truth is that we have a properly funded Budget in which difficult decisions have been made. Investment is being made in the right things, such as skills and social care, but—

[Peter Dowd]

Will the hon. Gentleman give way?

[Mr Raab]

No, I will not. The hon. Gentleman has had plenty of opportunity. I have allowed him to intervene on me and I am looking forward to hearing his speech. However, the truth is that he is unable to answer the question of how it can possibly be right to raise the basic rate of income tax. I would just point out that, as a result of the extension of the personal allowance, the average taxpayer will receive £1,000 a year extra.

[Peter Dowd]

It is fantasy.

[Mr Raab]

No, these figures have been properly costed. From the Institute for Fiscal Studies to the official figures, it is clear that, by raising the personal allowance, we are putting £1,000 back into the average taxpayer’s pocket. At the same time, the Labour party—[Interruption.] Not just the uber-rich—we are used to hearing about that predictable bugbear from the Labour party.

[Peter Dowd]

He’s frit.

[Mr Raab]

Having taken two interventions from the hon. Gentleman, I have to say that the suggestion that I am frit is a bit silly.

The truth is that the Labour party will want to put up taxes on not just the super-rich, but low and middle-income families. Frankly, that is fantasyland.

[Mr Raab]

My hon. Friend hits the nail on the head. The key thing the Government can do is to create the conditions for record levels of employment, with real wages rising, and with inflation—yes, it needs to be looked at—stable and under careful control. Even on the worst-case scenarios that have been forecast, inflation would rise above 2%, but come back down shortly thereafter.

The reality of this Budget is that we have a Chancellor and a team of Ministers grappling with difficult decisions at a sensitive time, when there is a degree of uncertainty because of the referendum result, and coming up with a sensible, measured package. We have the Labour party talking about printing money and £500 billion of spending commitments when it has no idea where it can fund them from, and we have a Government who are committed not to tilting at socialist windmills, unlike the leader of the Labour party, but to building a better Britain—not only an enterprise economy but a meritocratic society for our children—and to making sure that the most vulnerable, and particularly the elderly, have the social care they need. [Interruption.] If the hon. Member for Bootle (Peter Dowd) would like to intervene on me rather than chuntering in frustration—more in frustration at his own party, I suspect, than at me—I will give way.

[Peter Dowd]

The hon. Gentleman can make up as many false “facts” as he would like, but the fact of the matter is that he is making them up. He should concentrate on his own manifesto. He still has not answered the question about the £500 billion in the Government’s national infrastructure plan. Where are the Tories getting the money for that from?

[Madam Deputy Speaker (Natascha Engel)]

Order. We are mulling over making up false facts. I think we are starting to get quite close to language that is not really acceptable in Parliament. We should just be aware of it.

--- Later in debate ---

[Mr Reed]

Perhaps Conservative Members, including the hon. Gentleman himself, should have thought about that before they stood for election on a manifesto that said absolutely categorically that there would be

“no increases in...National Insurance contributions”.

It does nothing for trust in politics when politicians say one thing to persuade people to vote for them but then, once they are elected, do the polar opposite. They are helping to further break trust in this House and trust in politics. This is not down to the IFS; it is down to Tory Central Office, the Prime Minister, the Chancellor of the Exchequer and—dare I say it?—the hon. Gentleman himself, if he is going to vote for the proposal. Given all the uncertainty about Brexit—it is shocking that the Chancellor had so little to say about Brexit in his statement—small businesses and the self-employed need reassurances, not broken promises.

I now turn to those in employment, because this Budget has very little to offer them either. Low pay and stagnant wages have become endemic. Most people have seen no growth in household incomes in the 10 years since the global financial crash; indeed, many have seen a real-terms cut. The British economy might be getting richer, but British working people are getting poorer. Ours is the only advanced economy in which wages fell while the economy grew between 2007 and 2015. In Croydon, average earnings have fallen by 7.6% in real terms, and today more than one third of my constituents earn less than a real living wage. So where has the money gone? Who has taken the proceeds of that growth? It is not the vast majority of people in Croydon or across Britain who work around the clock to pay the bills and put food on the table, but the shrinkingly small number of the super-rich whose interests this Government really represent. Wages are stuck and household debt is soaring, but the Chancellor had absolutely nothing to say about any of it.

[Peter Dowd]

Is my hon. Friend aware of today’s Resolution Foundation report that says that the UK is set for the worst decade for pay growth in 200 years?

[Mr Reed]

That is absolutely shocking, but it reflects what we are seeing in our constituencies and what our constituents are telling us.

Once upon a time in this country, there was a covenant between people and Government. People gave their consent to the system in return for a fair reward for the work they put in. There was an understanding that if people worked hard, they would do well. They could expect a decent home, security for their family, and healthcare when they fell ill or grew old, and that if they could not work, they would be looked after with dignity and respect. But today that covenant is broken. The unfairness and inequality that this Government stoke has bred resentment that has catapulted us out of the European Union and over a cliff edge into uncertainty.

--- Later in debate ---

[Kerry McCarthy]

As the Bill goes through Parliament, we will have to scrutinise the detail. All I know at the moment is that I have constituents who are extremely worried about this proposal and it is making them think twice about whether they should continue as self-employed or look for jobs that are potentially less lucrative, but that have more security.

[Peter Dowd]

Does my hon. Friend agree that if the Government get away with this proposal, it will be a down payment on more NIC and tax increases?

[Kerry McCarthy]

That is certainly the concern. As has been said by several hon. Members, if people cannot trust the Government on this matter, they will think that they cannot trust the Government on anything in respect of their future economic security.

--- Later in debate ---

[Wes Streeting]

I shall return to the subject of Europe, and the hon. Gentleman may want to intervene later. I am conscious that other Members are waiting to speak. There are still a number of them on the Labour Benches, even if there are none on the other side of the House.

This is a case of all pain and no gain. If it were not bad enough that the Conservative Chancellor arrived yesterday to clobber the self-employed, he is also failing to put right the public services on which people depend. We were told that the crisis in the NHS and social care required an additional £6 billion by 2019. While the £2 billion announced yesterday may be welcome, it is wholly insufficient to meet the demands of our rising population, our ageing population, and the people who want to be able to rely on the NHS and social care when they need it most.

Having been a local councillor for nearly seven years—I will stand down next year—I have to say that the situation facing local authorities is dire. When faced with a choice between child protection and adult social care, councils will of course prioritise keeping children safe, along with keeping the elderly and disabled alive and well. However, such choices have consequences: increased council tax for people who can ill afford it, and cuts that affect the services on which people rely and for which they pay their council tax. I only wish that the Government would have the courage to accept, 75 years on from the Beveridge report, that the model for health and social care in this country is no longer fit for purpose and no longer sustainable unless it receives the funding that is so badly needed. I cannot understand why Ministers have not had the courage to ask Members on both sides of the House to help the Government come up with a plan to make the NHS sustainable for the 21st century.

[Peter Dowd]

Was my hon. Friend as shocked as I was to find that it was being trailed today by the Government that unless Tory MPs backed down, social care funding would be under threat?

[Wes Streeting]

I entirely agree. I am not sure how many experienced, wise leaders of the NHS and local councils could come forward and warn the Government about not just an impending crisis, but a crisis that is affecting hospitals and care services in each of our constituencies today. What more will it take for the Government to show the courage, and find the money, to fund social care? Imagine what a cross-party commission led by the likes of my hon. Friend the Member for Leicester West (Liz Kendall), the right hon. Member for North Norfolk (Norman Lamb) or the hon. Member for Totnes (Dr Wollaston) could do to build a health and social care model for the 21st century.

Was it not a travesty that, as schools in our constituencies faced cuts in their budgets, the Chancellor chose to arrive yesterday with a funding package that would benefit a small number of pupils at a few selective schools? What do Ministers have to say to headteachers and parents in my constituency, or to the pupils who attend the vast majority of schools in my constituency, about the fact that they face on average a funding cut of £188 per pupil per year? I do not need an opinion poll to tell me that there are a few things that people, whether they vote Labour or Conservative, expect the Government to do, and among them are to make sure that we have decent hospitals and well-funded schools. It is a scandal that so much of the educational progress made in my city and across the country, led by the last Labour Government and following on since then, is being put at risk because of swingeing budget cuts to schools. What sort of Government choose to cut education for the next generation while also cutting the tax bill for the very wealthiest?

The flimsiness of the Budget Red Book—for once it did not take long to get through—betrays the fragility of our economy. In the long list of supposed good news the Chancellor arrived with yesterday, a few facts were missing. This was the ninth Budget by a Conservative Chancellor since 2010, and what do we have to show for it? We have the only developed economy that has a growing economy but falling real wages; rising costs of living, but wages still at pre-crash levels; a widening productivity gap holding back growth and depressing wages; a weaker currency fuelling inflation that households and businesses can ill afford; a failure to meet the Tories’ own targets for debt and deficit reduction because they have never understood the need to balance spending cuts with investment for growth; and a failure to meet their own welfare cap because of their failure to tackle unemployment, under-employment, casualisation of the labour market and exploitation by unscrupulous employers, which leaves a welfare system that lacks the confidence of the majority of the public but also fails the people who need it most. That is the very worst of all worlds, and even now, in the wake of a Brexit vote driven in large part by the votes of people who have been left behind, we have a Government willing to preside over rising child poverty, public services at breaking point, and an economy ill equipped for the challenges that lie ahead.

It should not take dragging a former—Conservative—Prime Minister out of retirement to tell this Government that the way they are handling the single biggest issue facing our country, the departure from the EU, and the path they have set us on is putting the economy at risk. What John Major said was very straightforward:

“There is a choice to be made, a price to be paid; we cannot move to a radical enterprise economy without moving away from a welfare state. Such a direction of policy, once understood by the public, would never command support. It would make all previous rows over social policy seem a minor distraction.”

Sir John Major could have been reading from the Labour party script on this issue. There we have it: a former Conservative Prime Minister holding up the truth that we on the Labour Benches know, which is that unless the Government negotiate a smooth and sensible exit from the EU, they will consign this country to being a small tax haven off the north-west coast of Europe, unable to meet the needs of their people and unable to make sure that prosperity is shared.

Of course, it is not just John Major who has concerns: the former Chancellor, the right hon. Member for Tatton (Mr Osborne), told the House that this Government have chosen not to make the economy the priority. When so much of this country’s economic success relies on trade abroad, when we have the largest single market in the world on our doorstep, and when being a member of the customs union gives us access to more trade agreements than are enjoyed by any leading economy in the world, for a Government to decide not to make the economy the priority is reckless and irresponsible.

--- Later in debate ---

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

After the spin around the Budget, which has not exactly gone to plan, let us look at the actual facts. According to the Resolution Foundation, we have had the worst decade for pay growth in two centuries of earnings data. GDP growth is overplayed and inflation is underplayed. GDP growth is expected to flatten as increasing inflation, which has sped up in the past few weeks according to much of the data, squeezes living standards, and as consumer spending, which as we have heard has been largely driven by a credit card boom, dries up. Again, that creates a false impression. Borrowing continues to rise and is expected to rise further. The OBR has made it absolutely clear that the

“government does not appear to be on track…to return the public finances to balance at the earliest possible date in the next parliament”

as they had promised.

On productivity, the Chancellor did a very good job of outlining what a bad job the two successive Conservative-led Governments have done. He said:

“The stats are well known: we are 35% behind Germany and 18% behind the G7 average”.—[Official Report, 8 March 2017; Vol. 622, c. 818.]

What on earth have they been doing for the past seven years if we are in that position? Small businesses are hit not only by the NICs issue, which I will come to, but by the reduction in the dividend allowance, which we have heard about, and the additional red tape and burdens of things such as quarterly reporting.

We can talk about statistics and the real things going on in the economy, but the impact I am interested in is the impact on my constituents in Cardiff, Penarth and the Vale of Glamorgan. I am proud that the Welsh Labour Government are investing in our schools and hospitals. New schools and hospitals are being built in my constituency, and more is being spent on NHS and social care together than the average spent in England. Indeed, councils in Cardiff and the Vale of Glamorgan are doing their best to invest in local services and to protect people who are suffering as a result of the policies of the Tory Government in Westminster. The fact remains, however, that by 2020, according to the Joseph Rowntree Foundation, ordinary working families will be worse off than they were in 2015. The income of a couple with two children, working full time and receiving the so-called national living wage, will fall by £1,051, while that of a lone parent with two kids, working full time on the national living wage, will fall by £3,363. My constituents tell me about the real challenges and hardships that they face, as opposed to the spin that we get from the Government.

Let me say something about self-employment and the increase in national insurance contributions. I think that the Government’s approach has been a huge mistake. It is clear that those in the self-employed sector face huge additional fixed costs and risks. I speak to many self-employed people every week in my surgeries—for example, I have spoken to a number of taxi drivers recently; I shall say more about them shortly—and I know about their lack of benefits, their higher insurance premiums, and their difficulty in obtaining mortgages. There is clearly some abuse on the margins of self-employment, and we must address the issue of bogus self-employment, but hitting a whole swathe of self-employed people is a crude measure which can have hugely differential and damaging impacts on some sectors and groups.

[Peter Dowd]

My hon. Friend said that the Government’s approach had been a mistake. Today, on Radio Cymru, the Under-Secretary of State for Wales, the hon. Member for Aberconwy (Guto Bebb), said:

“I believe we should apologise. I will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election.”

Well, he was the Minister, but I am not sure whether he still is. Does my hon. Friend know?

[Stephen Doughty]

I was not aware of those comments, but, as someone who listens to Radio Cymru occasionally, and to Newyddion, I shall listen carefully to what the Minister said, whether it was in Cymraeg or in English. I hope that his ministerial colleagues will listen as well, because it is clear that there is much disquiet on the Government Benches. Perhaps that is why so few Conservative Members are present today, and why those who have spoken have been quite critical of the decisions in the Budget.

There are 4.8 million self-employed people in the country, and nearly 5,000 in my constituency. It is all very well to say that this measure will not affect the very poorest, and, at the other end of the spectrum, that it will ensure that the very richest are brought into line. However, as we heard from my hon. Friend the Member for Ilford North (Wes Streeting), no amount of distributional analysis and charts can reflect the reality and the impact on those in the middle deciles: people who are just about managing, and the strivers who the Government were so keen to say that they were trying to support, but who have been shafted. The Government are not helping those people; they are doing exactly the opposite.

The Federation of Small Businesses has described the measure as

“a tax grab on middle-income self-employed people who are just about managing”.

The Musicians Union—I work closely with that union, and with many other unions representing the creative industries in my constituency—has said:

“This Conservative Government…have done nothing but cut funding for the arts and for music, and they are now penalising musicians further by increasing their tax contributions.”

Those are the real facts. The Federation of Small Businesses at one end of the spectrum, and representatives of those in the creative industries at the other, have decried this measure.

I want to say a little about the reality of life for one group of workers who are self-employed at present, although many of them would argue that they are actually employed, and, indeed, that is the subject of many current legal cases. I am talking about taxi drivers. As a member of the GMB, I am proud to have been working with its members locally, and hearing about the concerns of many taxi drivers in Cardiff, the Vale of Glamorgan and south Wales as a whole.

Taxi drivers are hard-working people. They work every hour that God sends. They are striving to make a difference for their families, but they are struggling with the costs that they face from the companies that engage them. There are the fines, the administration fees, the cost of fuel, and the cost of replacing windows when they do not accord with regulations which vary so much across the country. They are often trapped in low-paid account work, receiving wages that do not reflect the effort and time that they put in. They have differential insurance costs. Drivers from other local authorities, or indeed from London, where different rates are paid under different regulations, come to Cardiff and undercut the industry there. Antiquated legislation allows private hire licences to continue to rise without any cap; that is a simple matter of supply and demand. These national insurance rises will hit people who are striving on the margins. They can barely afford the additional £20, £30 or £40 that this measure is going to bring in. They are the ones who are going to be hardest hit, and they are already hit hard by many other measures.

This is just one measure hitting those in self-employment. I have been speaking to a number of companies in Cardiff that are using the self-employed in the ways I have mentioned. I am concerned that companies such as Dragon and Veezu, who operate taxi firms, are not willing to meet drivers to discuss their concerns or to meet the GMB. That is of great concern to me. Fundamentally, what are the Government doing to help such people who are striving and working hard, and who just want a level playing field and enough money to be able to support their families?

I mentioned the impact on the creative industries. We have lots of start-up creatives in my constituency, including small design, music, production and technology firms. They are also going to be hit badly by these changes. What are the Government doing to support them?

Finally, I will make a few further points. Where on earth was the mention of Brexit? That is the biggest economic challenge facing this country in generations, but it was not mentioned. There were no answers on the question of the additional debt that the OBR has predicted is going to be added to the national debt; no answers on whether Wales is going to be left a penny worse off as a result of the potential changes to regional finance and structural funds; no answers to the exchange rate volatility that is causing the prices at the pump to go up; and no answers on the single market, or the impact of tariffs if we end up in the “deal or no deal” situation that the Prime Minister seems to be leading us towards. Where was the mention of those things? That was utterly irresponsible.

We should consider what else was missing, too. Where was mention of climate change, or further support for the steel industry, or support for veterans—including younger veterans who are leaving but are struggling with their housing costs and are discriminated against in housing benefit? Where was action to right the injustices for women pensioners? The WASPI campaigners were here yesterday; thousands from across the country, including hundreds from Wales, were here speaking out. Where was the help for the Allied Steel and Wire pensioners who were let down in my constituency, and are still let down today? Where was the money to address the police cuts—the police are suffering huge pressures, as the former Chair of the Home Affairs Committee, my right hon. Friend the Member for Leicester East (Keith Vaz), pointed out? Where was the help on energy prices when people are seeing their bills go up?

This Red Book is one of the thinnest Budget books we have seen, certainly since I have been in this House. That is because there is a whole lot missing from it, and, frankly, the Chancellor is going to have to do a lot of rethinking on the bits that are in it.

Beer Duty

Peter Dowd Excerpts

Tuesday 7th March 2017 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is a pleasure, as always, to serve under your stewardship, Sir Roger. I too congratulate the hon. Member for St Austell and Newquay (Steve Double) on bringing this matter to our attention.

Tomorrow’s Budget day is also International Women’s Day, so I thought it would be apt to begin my remarks by quoting the great female poet of the 20th century, Sylvia Plath:

“The beer tastes good to my throat, cold and bitter”.

At the other end of the spectrum, we have Frank Zappa, who said:

“You can’t be a real country unless you have a beer and an airline—it helps if you have some kind of football team, or nuclear weapons, but at the very least you need a beer.”

That probably sums matters up. They are just two of two of the vast number of people who, like us, have enjoyed what is widely believed to be the oldest and most consumed alcoholic beverage in the world.

According to estimates by the British Beer and Pub Association, around 30 million adults visit a pub at least once a month, and beer accounts for around two thirds of alcohol sold in pubs. In economic terms, the pub sector contributes £23.1 billion to the British economy and £12.6 billion in tax to the Exchequer. It also supports nearly 900,000 jobs, 42% of which are for under-25s. Brewing alone employs over 100,000 people, as many Members have referred to today.

Of course, that picture has to be counterbalanced by the health impacts of alcohol, which have already been touched on by Members today. Public Health England estimates that alcohol harm costs about £21 billion a year generally and specifically costs the NHS £3.5 billion. Consequently, when we debate this issue, we really must consider it in that wider context.

Of course, many traditional drinking establishments are now under threat, not least because business rates revaluation is coming into effect, as my hon. Friend the Member for Chesterfield (Toby Perkins) said. In fact, in my constituency we have had to say goodbye to several novel establishments, including the Talbot, the Elm House, the Wyndham Hotel, St George’s Tavern and the Stand Park, some of which I have drunk in myself in the past. We tried to make the Priory a community pub but could not succeed, and the story is the same right across the country. None the less, we still have many great pubs and long may it remain so. In my constituency, in the Crosby area, there is a micro-pub called the Liverpool Pigeon. That has given a really good boost to the sector and to the confidence of the local community, so I say “Well done” to the Liverpool Pigeon.

Pubs are more than just small businesses. As many Members have said today, they are often community hubs. Increasingly, they offer other goods and services, such as food, hot drinks and meeting spaces, and even libraries and postal services in some places. In my constituency—and, I am sure, in many others across the country—we have church parish clubs, including St Benet’s and St Elizabeth’s and even one called the Holy Ghost, which play a similar role to community pubs. The Holy Ghost is not the top of the pile, except perhaps in theological terms. My constituency also has the Royal British Legion and the Royal Naval Association comrades clubs. All those establishments help to support our communities in a whole range of ways.

I think all hon. Members would acknowledge that pubs are an important community asset and that we must do all we can to help them to succeed, not withstanding the health issues. We always need to have those issues in mind, but we should not let them overshadow all other considerations.

As hon. Members have said, it was announced in the 2016 Budget that the duty on beer, spirits and most ciders would be frozen for 2016-17; that freeze followed three consecutive years of duty cuts on a typical pint of beer. On the other hand, duties on all other alcoholic drinks, such as wine at or below 22% alcohol by volume and high-strength sparkling cider, rose in line with the retail price index. Will the Minister say what effect that has had on prices for customers and what mechanisms are in place to monitor the effectiveness of these measures?

Of course, the industry welcomed the duty freeze, and Oxford Economics has produced research supporting the argument for a beer duty cut, to protect jobs and investment during uncertain times as the UK leaves the European Union. Labour was not opposed to the freeze on beer duty. However, in distributional terms the freeze favoured those who consume more of the relevant types of drinks. The equalities impact statement relating to last year’s freeze noted that

“any changes to alcohol duties will have an equalities impact that reflects consumption trends across the adult population”,

but it failed to outline what the specific equalities impact is with regard to gender. It would be helpful to get that assessment at some point. Data from the Office for National Statistics show that wine, the tax on which was not frozen, is the most popular type of drink among women, while the most popular types of drink among male drinkers of all ages are normal-strength beer, lager, cider and shandy. We must take that factor into account as well. Additionally, many trade bodies have questioned why wine has been singled out for a duty rise, and I invite the Minister to comment on that issue, either today or in the future.

Of course, it is only proper to point out the Government’s continuing duty of health care, and I will re-emphasise that. It is absolutely crucial, but having said that, let us strike a balance. The Government acknowledged in their policy paper that the freeze last year was

“likely to lead to a minor increase in overall alcohol consumption”.

Will the Minister provide information on whether such an increase did occur and, if so, what mechanisms are in place to monitor it?

As I have said before, Labour is committed to securing the long-term future of pubs and the wider hospitality sector. Action must be taken to give pubs a fair chance to be profitable and to make a go of things, as well as give some of the independent small businesses a chance to grow, which is absolutely crucial. My hon. Friend the Member for Chesterfield raised the issue of business rate revaluation, which needs thorough examination. I point the Minister in the direction of Labour’s five-point plan, which will be a good starting point for her. We are calling for an overhaul of business rates to support local high streets and small businesses, including pubs and clubs, and I hope she will take these ideas on board, because this debate is not all about beer duty. It is also about helping pubs in a range of other ways.

--- Later in debate ---

[Jane Ellison]

Again, that is perhaps for a wider debate, but, as I recollect from my time as Public Health Minister, the industry was rightly praised for the extent to which it stepped up to address issues with certain products. A lot of alcopop products have been phased out by some producers who decided to change their portfolio. One or two speakers referred to the bigger chains and the fact that they have tried to shift their portfolios as they recognise the challenges that certain products pose, especially for younger drinkers. It is worth putting on the record a recognition of the industry’s actions in that regard, although there is always the challenge to do more.

I hope that I have been able to reassure Members on some issues. In opening the debate, my hon. Friend the Member for St Austell and Newquay said that the industry wanted to make sure it was not overlooked, and I can reassure him that it is not. Its voice is rightly heard loud and clear across the House and within Government. We have regular meetings and dealings with the industry and we listen very carefully to all the points made.

[Peter Dowd]

Will the Minister give way?

[Jane Ellison]

Very briefly.

[Peter Dowd]

I take the point that the Minister makes about the industry not being overlooked, but it is important to put this in context. For example, according to the industry, the business rates rise will put a 15% increase on pubs’ costs and 23% on restaurants’ costs. That is an additional £300 million to £500 million a year. The Minister should perhaps give more consideration to that.

[Jane Ellison]

If the shadow Minister thinks that the Government have not given consideration to business rates in recent weeks, he has not been looking at the newspapers. Of course it is an important issue and we have given consideration to it. Many establishments in different parts of the country will gain from the business rates revaluation. More businesses will see their rates cut or frozen than will see an increase. For those that see an increase, transitional relief is available, so it is important for people to look at that. No doubt people will look at the impact of that fiscally neutral revaluation in their own areas.

To return to my previous point, the industry’s voice is rightly heard loud and clear in Government. It has powerful advocates in all parties in this House. The debate has been constructive and has brought out important issues. I have heard all hon. Members’ contributions today and will take them as representations ahead of tomorrow’s Budget.

Draft Sovereign Grant Act 2011 (Change of Percentage) Order 2017

Peter Dowd Excerpts

Thursday 2nd March 2017 General Committees

[Peter Dowd (Bootle) (Lab)]

It is a privilege to serve under your chairmanship, Mr Bone. This matter has been debated on a number of occasions, and people have indicated that they are unhappy that Buckingham Palace has fallen into its current state over the years. That prompts us to ask why that has happened, but we are where we are. The fact that it has not been picked up before now, when perhaps it should have been, is a different kettle of fish. I am sure that those responsible for such matters will give careful consideration to that and ensure that this sort of thing does not happen again.

We cannot periodically push up, from 15% to 25%, the percentage of Crown Estate profits given to the sovereign grant. We have to put in place a coherent, cogent and long-lasting system, so that this type of event does not happen again. I do not want to sound as though I am finger-wagging too much, but we are in an age of austerity. We have to be clear that every penny of public expenditure is appropriately accounted for and that we should not have to spend money in the short term because of long-term decline. Although we are not over the moon at the situation, on this occasion we shall not object to the proposal.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 28th February 2017 Commons Chamber

[Mr Gauke]

My hon. Friend raises an important point. He is absolutely correct about the resources that we are putting in, but if we want to improve the quality of healthcare, particularly in the context of social care, it is also important that there is greater integration. That is why we announced the better care fund, which is making an important contribution to supporting social care and improving integration.

[Peter Dowd (Bootle) (Lab)]

The Chair of the Treasury Select Committee is absolutely spot on. If the Chancellor does discuss with the Department of Health any increase in levels of funding, will he point the Health Secretary in the direction of the Public Accounts Committee report, which says that he should stop “plundering” NHS funds? In particular, it asks him to stop his “repeated raids” on NHS capital funds, with £950 million having been taken out of £4.5 billion.

[Mr Gauke]

First, may I congratulate the hon. Gentleman on his promotion to the post of shadow Chief Secretary? He is my eighth shadow as a Treasury Minister, so I look forward to sparring with him over the weeks ahead.

Let me repeat what I said earlier: the agreement on the budget settlement for the NHS and the balance between resource spending and capital spending was reached with the Department of Health. Indeed, that switch towards more on resource was very much pushed by the Department of Health.

[Peter Dowd]

So I am the eighth shadow Minister,

“How very promiscuous of you”,

as I said in my tweet to the Chief Secretary.

Some 4,000 urgent operations have been cancelled, 18,000 people a week waited on trolleys in January, 3,000 community pharmacies are going to be lost and £4.6 billion has been cut from social care. When those funding levels are discussed with the Department of Health, will he tell his colleague that he should be caring for the NHS, not giving it a lethal injection?

[Mr Gauke]

If the Labour party’s policy could move beyond the level of placard design, that might help. Let me be clear: we are putting more money into the NHS and it is providing more support and help to people than ever before. I have listed some of the achievements since 2010. This Government remain committed to the NHS, which is why it has been a priority in our public spending plans for the past seven years.

Cerberus Capital Management: Purchase of Distressed Assets

Peter Dowd Excerpts

Wednesday 22nd February 2017 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is, as ever, a pleasure to serve under your stewardship, Mr Owen.

Hon. Members have already made excellent points in the debate, particularly the hon. Member for East Lothian (George Kerevan), who I know has been interested in this matter for some time and has a great deal of knowledge of it. I appreciate that he has enabled us to have the opportunity to consider this matter and that he has shared his thoughtful views, which were, as always, penetrating.

This matter has its origins in the financial crisis. I do not want to regurgitate the debate about the origin of that crisis, but increasingly it is apparent that it is not simply about the claims, for example, that the last Labour Government “maxed out” on the country’s credit card—a hackneyed claim, if ever there was one, and one that does not go to the heart of why this situation has occurred.

The 2008 crisis almost brought down the world’s financial system; it took huge taxpayer-financed bail-outs to shore up the industry. In that regard—this relates to the last point that the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin), the Scottish National party spokesman, made—it is important that taxpayers get value for money when assets are sold. The process must be as open and transparent as possible, and it must stand up to scrutiny at the time and thereafter, especially when public services across the board are under such strain. The Government ought not to sell on assets when the people at the other end of the process are going to be treated unfairly and unjustly at some point. That is not acceptable. As has been said, the Government have a duty of care.

I will concentrate my comments today on the here and now, as other Members have covered the pertinent background and context of this matter, for which I am grateful. I will not repeat what they have said, other than to say that issues about on-selling, the plight of customers, business models, tax avoidance, the cost to the taxpayer, the regulatory issues and—fundamentally—the duty of care to people and businesses have gone completely and utterly out of the window.

The Government’s response to the Public Accounts Committee’s 24th report of this Parliament was sandwiched in between the PAC’s reports on “Universal Credit and fraud and error”, and the “UnitingCare Partnership contract”, and those reports do not exactly show Government management in those policy areas to be particularly competent either. I believe that the PAC’s report on this matter is a good place to start, as it is the current Government who made the decision to dispose of this £13.5 billion of mortgages and loans to Cerberus.

As you know, Mr Owen, in Greek mythology Cerberus was the three-headed “hound of Hades” who guarded the doors of hell, to stop the dead from leaving and the living from getting in. That is a metaphor for this organisation; it stops people from leaving. It gets them by the throat and they are trapped forever, and that is not acceptable. I am not sure what to make of that name for a company, but it is well worth leaving that in the air for people to ponder on for a moment.

As hon. Members will be aware, we have been led to understand that the sale of these assets represented the Government’s largest ever financial asset sale, and we have been told that it was “value for money”. I would expect the Government to claim nothing less, so there is no surprise in their making that statement. However, it prompts the question: what evidence have the Government given to support that assessment? The answer is, “Very little”.

If the Government’s claims stack up, why are they so reluctant to accept certain recommendations set out in that PAC report, not least those on the issue of transparency? Why have the Government rejected the recommendations regarding the setting up of an independent panel of valuation experts for all major sales, to review and challenge valuations in advance of all large asset sales and the reliability of the organisations that those assets are going to? If that had been done in this instance, we might not be in this situation. Surely such an evaluation would vindicate the Government’s position that what they did was correct, above board and transparent, and that no one is any worse off for the decision they took. However, that has not happened.

Similarly, the Opposition find it difficult to understand why, if the Government are committed to tackling tax avoidance and evasion, they rejected the PAC’s recommendations that Government Departments should be required “as far as possible” to discount gains from tax avoidance that may be factored into bids, and that the Treasury should produce unambiguous guidance, for both selling Departments and potential bidders, on how tax will be taken into consideration as part of a sale or a contract award. The Government have done nothing about those recommendations either, and their answer to the PAC’s report is incredibly vague. It goes around and around in a circle, and no one can break into it.

Nevertheless, the Government are proud of their enormous financial asset sale, claiming, as I have said, that it was a good deal for the taxpayer. I am not convinced about that, and it certainly was not a good deal for the end users who were on the receiving end of it.

It is true that the National Audit Office said that some aspects of the sale were conducted appropriately, but the NAO also raised a number of key concerns about the Government’s approach. Mortgage holders who are worried about the future will not have been reassured by anything that the Government have done, and the NAO pointed out:

“While the mortgages and loans are currently owned by FCA-licensed entities, they, like any…mortgage, could be sold in the future to an entity which is not regulated. If…customers needed to seek redress, they would have to do so under the Consumer Rights Act”.

That is not right. The Government have a duty of care, but they did not seem to care, as they wanted these assets off the books.

It does not stop there. The NAO criticised other aspects of the sale, saying, for example, that UK Asset Resolution Ltd’s

“limited competitive tendering in the procurement process for its financial adviser was not good practice.”

That refers to the sale of assets, which was not done under appropriate good practice. Similarly, the financial advising company involved—Credit Suisse—also acted as financing bank to the bidder. The NAO said of that:

“Due to a potential conflict of interest, this had not been permitted under previous sales.”

So I ask the Minister—what of that? Or is that detail unimportant?

When it comes to people’s lives and businesses, and for example to public sector staffing, we should note that, according to the NAO:

“UKAR identified an alternative sale option which had a higher…valuation.”

So the assets might have gone to someone more appropriate, but UKAR

“did not have enough staff capacity to run multiple transactions concurrently”.

There is something wrong with that situation, and it goes to the heart of the duty of care not only to the taxpayer but to the people affected by this matter, who in effect got a double whammy.

The Government have a lackadaisical attitude to this matter; indeed, it borders on the insouciant. Surely, given that there was such value for money for the taxpayer, it is not unreasonable to ask how it can be that our hospitals and schools are in a state of crisis and starved of funding, because they are being affected by this as well. When Opposition Members hear the phrase “value for money”, which has been rammed down our throats time after time in relation to this matter, we ask, “Which values?”, and, “For whom?”

This week, NHS trusts posted a massive deficit of almost £1 billion at the end of the third quarter, and yet we are told that this sale is value for money. Meanwhile, social care is in crisis, with 1.2 million elderly people needing care, but we are still told that this is value for money. Selling off assets not in the interests of the many, not in the interests of the taxpayer and not in the interests of the people sitting behind us in Westminster Hall today, but just to fund a failed deficit reduction programme, is not acceptable. It is a false saving.

Finally, the Government say that they will learn lessons from these reports, and I applaud them for that. The question is, when will they share those lessons with the rest of us and prevent this dreadful scam from ever happening again?

[Danny Kinahan (South Antrim) (UUP)]

Will the hon. Gentleman give way?

Value Added Taxation

Peter Dowd Excerpts

Tuesday 21st February 2017 General Committees

[The Chair]

We now have until 9.55 am for questions to the Minister. Although I may allow the shadow Minister some leeway, I remind hon. Members that questions should be brief. Subject to my discretion, it is open to a Member to ask related supplementary questions.

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Davies. I thank the hon. Member for North East Somerset for his presentation and the Minister for soldiering on with a cold or virus.

Reference was made to “Time to decide”. I think that was 23 June last year, actually. That is symptomatic, in that many hon. Members are exercised by the fact that the Government are in assent on this matter and for so long have been all at sea—I think mid-channel might be where they are. Of course, the European Scrutiny Committee showed its exasperation on this matter and wagged its finger at the Government for not being able to debate this in due time to tease out many of these very important issues. However, we are where we are.

I think that in the last Committee of this nature that I was at, I raised the fact that we are now, in the light of the referendum, just going through the motions; I think we are all going through the motions. Before the hon. Member for North East Somerset got up and spoke, I thought, rather quaintly, that some Members do not grasp that, but clearly everybody is now beginning to grasp it.

On a more positive note, we have before us a framework in relation to the operation of a VAT system that simplifies things by reducing bureaucracy and so on. No one can disagree with that, but within a couple of years we will not be a member of the EU. We will not be in the single market, I suspect, or in the customs union and all the other institutions, so the debate that we are having, to some degree or another, will all be pretty obsolete. Unless the Government can push this along in the next two years—so pretty sharpish—it is pretty pointless, but of course by that time we will, I assume, have gained complete sovereignty over our tax affairs. We will not be beholden to the Commission—presumably. We will be able to have whatever VAT rate we want—presumably. We will be able to be as flexible as we want with the rates—presumably. Conservative Members, who wear subsidiarity as an amulet, will even be able to get rid of the descriptive name of the tax and call it something other than VAT. I am sure that Members will have their own monikers and acronyms ready: WOT, the “We’re off” tax, or GOT, the get-out tax. I suspect that it will be the legacy of some Conservative Members to get rid of the last vestige of European colonialism. It will be similar to when the Irish painted their red postboxes green.

Anyway, VAT arrangements will still exist. The bottom line is that we need certain assurances that over the next two years there will not be more loss of tax from the VAT regime as a result of aggressive tax avoidance or evasion, especially given that Her Majesty’s Revenue and Customs’ ready reckoner indicates that a 1% change to the standard rate is worth about £5.7 billion. We really have to keep our eye on that. As we move into this transition, we have to keep our eye on that. We have to put markers down in relation to green tax as well. I am talking about commitments not to put too much tax on green issues. We do not want tax hikes by the back door.

On the tampon tax, my hon. Friend the Member for Dewsbury (Paula Sherriff) and many women’s groups have fought hard to abolish the tax, and we need to push on and get an unambiguous commitment from the Government.

[The Chair]

Order. We will have a debate after the questions. I was prepared to give the hon. Gentleman some latitude but I ask him to crack on. I do not want him to use up his debate material during the questions. He might want to save it up for the debate.

[Peter Dowd]

I have raised the issues of tax avoidance and the green tax. On the optimism about getting the measure through, do we believe that we will be able to introduce it within the next two years? How long is a piece of string in relation to this matter? I hope that we do not have to hold our breath for too long.

[Jane Ellison]

I will make a general point and then respond with a bit more detail on fraud. I could not disagree more with the shadow Minister, although I thank him for his kind words on the state of my voice—I apologise to colleagues. It is certainly not the case that the vote to leave the European Union makes the debate “obsolete” and our participation in and engagement with the agenda pointless. For a start, there are UK businesses that have EU subsidiaries that will continue to be affected by the VAT rules within the EU, so it is important that the rules work well and are subject to sensible reform. The UK has always been a good influence for pragmatic reform in all such regards.

The precise arrangements under which we operate outside the EU will be subject, as we all know, to detailed and complex negotiation once article 50 has been triggered, but the EU will remain a major trading partner. We are leaving the EU; we are not leaving Europe. It will be an extremely important commercial relationship. The extent, therefore, to which the direction of travel on EU VAT rules aligns with our own priorities regarding simple and pragmatic regulation that is not burdensome to small businesses is, and will remain, extremely important.

Before we came into the debate, I asked my officials about how we will influence policy once we are outside the EU. The reality is that there are people who are not in the EU now who will influence and have a view about the EU’s VAT proposals. Equally, the OECD does a lot of work in that respect. There is a broad alignment of direction of travel between that organisation and the EU, and to that extent we are an important influence within the OECD. I reject the idea that the debate is obsolete and that our interest ceases once we are outside the EU. It remains the case that we need the rules to function sensibly and in a way that is as unburdensome as possible and addresses fraud, to which I now turn.

No system will be entirely fraud-free, and the concern for the UK and member states more generally about any move to a new system is that any change could introduce a new type of VAT fraud. In all aspects of the tax system, we have to consider where people might look to exploit the gap created by a change. In the UK, the level of VAT fraud attributable to criminal attacks on cross-border trade has fallen from a peak of between £2.5 billion and £3.5 billion in 2005-06 to between £500 million and £1 billion in 2014-15. The Commission has done various studies, and the one from 2013 estimates that such supplies amount to about €184 billion-worth of VAT for the UK alone, in terms of intra-EU supplies. Any change to the VAT rules on intra-EU supplies that would introduce a new type of fraud has, therefore, the potential for huge losses and it is important that we tread carefully. Within any proposal for a definitive VAT system, that will be an area for great scrutiny. We welcome the Commission’s engagement with us and its acceptance that member states will need to work very closely together to explore and evaluate.

[Peter Dowd]

I was trying to make a point about the obsolete nature of this debate. Would the Minister agree that there is a big difference between having a debate when a member of the European Union, with access to the single market and so on, and when outside the Union? We have been discussing it for several years; we are moving out and the EU know that, so this debate is to some extent pretty obsolete.

[Jane Ellison]

Without rerunning the referendum campaign, those issues were explored. I do not accept the basic premise, for the reasons I have given. Many businesses will continue to trade within the EU and have EU subsidiaries. The EU will remain a hugely significant trading partner and, as with all our trading partnerships around the world, we would look to bring UK influence to bear in a way that would support our own economic goals. There is a mutual benefit in having rules that work for everyone. We will also be a major trading partner for many EU members when we are outside the EU. Those are also important trading relationships. To that extent, there is mutual interest in making sure that we continue to move in a broad direction of travel and that we bring UK influence to bear.

When I was Europe Minister in the Department of Health, my experience was that the UK perspective on regulation, particularly with regard to the burden on business, was always felt to be a pragmatic and valuable contribution. I have no reason to think that that will change afterwards, albeit that relationships are clearly going to be in flux over the coming period of negotiation.

[Peter Dowd]

I take the Minister’s point, but the first sentence in the document is:

“This action plan sets out the pathway to the creation of a single EU VAT area.”

That is in the context of the single market. Does the Minister not agree that she is putting her head in the sand in the way that she is continuing to discuss this matter?

[Jane Ellison]

I am not sure I can add a great deal more. No, I do not have my head in the sand. I am being practical, as many of us now have to be. As Ministers, many of us are engaged on a day-to-day basis with the practicalities of how we move forward.

To reiterate, when we are outside the EU, it is probably going to remain our most important trading relationship. Therefore, it is vital that we continue to be good EU members while we are in, and that we continue to be engaged, practical and positive once we are out.

--- Later in debate ---

[Jane Ellison]

I will reflect and try to understand what was just said.

[Peter Dowd]

Just a final question from me. The Minister also did not answer the question from the hon. Member for Wycombe about the tampon tax. Although the Government have legislated to get rid of the tampon tax, depending on whether we are in or out of the Union, does the Minister believe that we will be able to implement a zero rate on the tampon tax before we leave the Union? What is the real possibility of that happening?

[Jane Ellison]

We have taken the House’s instructions very seriously. There was not just the debate on Report last year, to which I responded; this has been a live debate probably for my adult lifetime, and there have certainly been a lot of debates in the House in recent years, so we have been actively pursuing this issue. I recently detailed in a written answer some of the extensive engagement we have had at ministerial level and through letters at official level.

While we are in the EU, both sides continue to be bound by existing rights and obligations, and EU law allows for a reduced rate of not less than 5% to be applied to those products. We apply the lowest reduced rate, but we cannot apply a zero rate until there is an EU legislative change. We continue to push for it and to engage on the issue very actively, but the EU legislation can be initiated only by the Commission, and to date it has not provided the proposal that it was planning to bring forward before the EU membership referendum. We continue to push for the proposal, and we have tried to find ways of accelerating the prospects of a change, but it is likely that it will feature only as part of the VAT rates review that we anticipate will happen towards the end of this year. We will continue to keep the House updated, and no doubt we will return to the issue in the debates on this year’s Finance Bill.

--- Later in debate ---

[Peter Dowd]

I have nothing further to add to this debate.

[Kirsty Blackman (Aberdeen North) (SNP)]

I have a few things to add to our debate. First, I want to talk about the Scottish context, particularly on VAT for police and fire. It has previously been said that there cannot be changes to VAT for police and fire because of European regulations, and that there cannot be a change within what is classed as one member state.

In Scotland, our police and fire services are paying £35 million a year in VAT that we believe we should not be paying. We have made that case on a number of occasions, but the UK Government have refused to make changes to the system, despite allowing both the London Legacy Development Corporation and Highways England a derogation in terms of their VAT, which has not been the case for the Scottish police and fire services. If we are leaving the European Union, which it seems we are, will there be changes in that regard?

The other thing to consider is that if we go forward on the basis of what has been provided today—the document that has been put forward by the EU—there is a suggestion that there will be more flexibility for member states regarding what they can and cannot zero-rate. So if we continue with these regulations, would there be a possibility that the UK Government could more easily zero-rate the police and fire services than they have so far been willing to do? That is a specific point about the Scottish context.

I will also mention sanitary products. Again, this document mentions a couple of options for the future, option 1 and option 2, both of which involve changes around some of the derogations; option 2 in particular involves changes of that kind. We have this historical situation whereby the derogations were created when we first joined the European Union and they make little sense in today’s context. Some things that are luxury products—I consider them to be luxury products—currently have a derogation, and there are some things that I would consider essential products, such as sanitary products, that do not. I am not just talking about products for the absorption of blood but those for the absorption of urine or breast milk, which I have pressed the Minister on previously.

Those products should have a zero rate of VAT, because they are necessary. There are strange contextual issues around products used for the absorption of urine, but a number of people have got to pay VAT on them even though they are absolutely necessary products for them. It is really important that the Government consider this issue as we go forward.

I will put both those things in context. I disagree with the hon. Member for Bootle, who said that this debate is almost irrelevant; the opposite is actually true. What we need to do, as current members of the European Union, is ensure that decisions taken around VAT are as favourable as possible for the UK. We need to go into those negotiations and make our position clear, which is why I am taking the time today to speak about those things that I think are really important, so that the Minister is aware, when he goes into those negotiations, that I think they should be key priorities.

The wider context is that we will be outside the EU and we will have less of a seat at that table than we do currently. The Minister has mentioned the seat that we have around the OECD table, but when it comes to the single EU VAT area the likelihood is that it will take some time to create it and that we will lose our seat at the EU table before it actually comes into force. So we need to make our voice heard as clearly as possible right now, so that future regulations are positive for us.

One of the reasons I think this issue is really important is that if Members look at the top of page 8 of the papers we have been given they will see that the second paragraph says:

“better cooperation with international organisations and non-EU countries over VAT should make it possible to extend the EU system of administrative cooperation to non-EU countries, particularly to ensure effective taxation of e-commerce.”

[Peter Dowd]

I do not understand why people do not get this point, but does the hon. Lady agree that the Commission will not discuss anything in this whole debate about post-Brexit issues with us? It just will not do that. Does she accept that?

[Kirsty Blackman]

In the context of the article 50 negotiations that we will have, I think that the Commission will say to us, “No, we’re not very keen to discuss some of the ongoing future framework.” However, we are currently a member state. We have not yet triggered article 50 and while the article 50 negotiation period is happening, we have two years as an EU member state. The Commission does not have the ability to exclude us from negotiations about how things will develop in the future. So if the Government and the UK fail to do what I am suggesting, there will be a huge issue regarding how the UK gains access to things such as the single market in the future.

--- Later in debate ---

[Peter Dowd]

I repeat what I said earlier: this action plan—not a future action plan or one we would like—sets out the pathway to the creation of a single EU VAT area. Does the hon. Lady not understand that we are not going to be in a single EU VAT area?

[Kirsty Blackman]

We will not be in a single EU VAT area because we will not be an EU member state. However, the paragraph that I have just read out says that it should be

“possible to extend the EU system of administrative cooperation to non-EU countries, particularly to ensure effective taxation of e-commerce”,

so we will be involved as a third country. Given the way the EU does trade deals, it will look to ensure that there is as much equivalence and commonality as possible in a number of areas. We therefore need to make the case for the industries, sectors and products that we think are important. Ensuring that our voice is as loud as possible in these negotiations will benefit us as a country.

The likelihood is that the EU will look to include some commonality or equivalence in relation to VAT systems in a post-Brexit deal with the UK. The EU is a much bigger entity than the UK, so we need to think carefully about how the EU is currently structured and what it is currently doing to ensure that it is as favourable as possible for us when we become a third country and try to make a trade deal with it.

--- Later in debate ---

[Jane Ellison]

I thank hon. Members for their contributions. I particularly thank the hon. Member for Aberdeen North, who spoke for the Scottish National party, for her wide-ranging contribution. I note that she made a bid with regard to police and fire services to add to the Treasury’s £30 billion and counting of VAT bids. We have explored the issue of the VAT incurred as a result of the changed arrangements, so she will be familiar with the point that I am going to make. That issue was in the business case for the changed arrangements. The Scottish Government were warned repeatedly that that would be the result of the way that they restructured emergency services, so it is surprising that the SNP keeps raising the issue as if the change was somehow imposed from the outside. The Scottish Government were alerted at the time. Our position on that remains unchanged, but as I said, I will add it to the list of things for which people want to see relief, along with the others that she mentioned.

I agree with the hon. Lady more—I think we both perhaps disagree slightly with the shadow spokesman for the Labour party—on her point that it remains very much in our interests to continue to engage with this debate. I will not speculate or second-guess the outcome of our Government’s negotiations or where the EU Commission is going on this, but there is a mutual interest in smooth and competitive trading arrangements. European markets account for around half the UK’s overall trade and foreign investments; around 3.5 million jobs. We will therefore continue to engage extremely actively and constructively while we are in the EU. However, it remains the case that even once we are outside it, the EU VAT system is influential. It is in our interests to ensure, to the extent that we can, that it is aligned with OECD and other international work, to take up the point made by my hon. Friend the Member for Wycombe that this debate is wider than the EU.

We will remain engaged and there is mutual benefit, not just because of businesses that have EU subsidiaries. Because of the cross-border nature of trade, there is mutual advantage in making sure that arrangements make sense, both within and without the EU. I reject the counsel of despair from the Opposition Front Bench that there is no point in doing this—there is every point.

[Peter Dowd]

I am surprised the Minister has taken that view. It is a complete distortion. We are talking in the context of the document before us. This debate is specifically in relation to the document before us. It has taken years to get to this position. We are only two years from leaving the EU, and the idea that this has to do with post-Brexit negotiations is complete and utter tosh. Does the Minister agree that there is a difference between trying to saddle us, in relation to post-negotiation deals, with this and trying to deal with this specific issue? The two are completely different and the Minister should know that.

[Jane Ellison]

The Minister does know that, but the point I am making is that we are obviously in the EU until we are not. It continues to be in our interest to influence debate. I think I have engaged very directly with the shadow Minister’s point. The point I have been trying to make is that this is a broader challenge than just within the EU. The international direction of travel on VAT remains important. The extent to which, for example, better co-operation is enshrined within new systems will provide better information on which we can help to shape policies around supplies across borders.

The OECD is already looking at ways to improve international co-operation, so there is every reason to continue to engage with this agenda. It is nonsense to say that it is irrelevant, even though we will be outside the EU in due course. The extent to which we have a degree of alignment in objectives and that direction of travel between the EU and other major trading blocs, and international trading and economic organisations such as the OECD remains fundamentally important because they have at their heart the desire to find some key principles around which we can all agree that will facilitate trade, less fraud and lower burdens on business across the piece.

I end where I began by saying that this is an important issue on which we will continue to engage while we are in the EU, and continue to influence in a number of different ways once we are outside it.

Question put and agreed to.