Balanced Budget Rule

Steve McCabe Excerpts

Wednesday 23rd January 2019 Westminster Hall

[Alex Chalk]

He did not answer my question.

[Steve McCabe (in the Chair)]

Order. Have you finished, Mr Dowd?

[Peter Dowd]

Yes, I have.

[Steve McCabe (in the Chair)]

Okay. I call the Minister.

European Union (Withdrawal) Act

Steve McCabe Excerpts

Thursday 6th December 2018 Commons Chamber

[Mr Hammond]

I am afraid that the hon. Gentleman is just wrong on the question of the financial services community and WTO. The financial services community would not support a WTO exit. That would be the worst possible scenario for financial services, with no time for preparation. Frankly, given the role of financial services in our economy—7% of our GDP—and their even larger role in our fiscal economy, accounting for over 11% of our fiscal revenues, anything that damages that industry will be extremely damaging to our economy and our public services.

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

Will the Chancellor give way?

[Mr Hammond]

In the absence of any better offers, I will give way to the hon. Gentleman.

[Steve McCabe]

The Chancellor is as kind as he is funny.

If the Chancellor sincerely believes the situation that he has just described to us and if he cannot convince this House of that situation on Tuesday, will he resign because he has clearly lost the confidence of this House?

[Mr Hammond]

I regard my job as to go on making the case for a sensible middle way out of this situation. I do not believe that we can afford the economic cost of a no-deal exit, but I equally do not believe we can afford the political and societal costs of trying to undo the decision of the British people in the referendum. We have to find a negotiated way forward. The Prime Minister has presented us with the route forward, and we have to take it.

--- Later in debate ---

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

I want to make a contribution to recognise the wishes and fears of people in Selly Oak who took part in the referendum and to acknowledge all those who have contacted me offering sincere advice, opinions and sometimes threats about how I should vote. I also want to thank everyone who has taken part in my surveys as I have attempted to understand this in the context of the needs of my constituents, a majority of whom voted to remain—in fact, two wards voted to remain and two voted to leave. I have always accepted that people took part in the referendum in good faith and we should try to acknowledge the overall result, even if it is extremely uncomfortable in a constituency such as mine, but what I cannot accept is that people voted for the deal that the Prime Minister is now trying to represent as the will of the British people.

We are much better informed now about the implications of Brexit than was the case during the referendum. We also know more about the behaviour of the leave campaign, which casts a shadow over the result. I admire the Prime Minister’s stamina and do not envy her the impossible position she was bequeathed, but the reality is that her offer is the deal that does not deliver. She promised to make us stronger, but it will make us poorer. She promised to end free movement but expects us to vote without even having had sight of her immigration plans. She promised co-operation in the fight against crime and terrorism, while opting out of vital security arrangements. The answer to every question is the political declaration, which is a fudge—the very kind of fudge unacceptable to all those who want to leave. The reality is that we will continue to be subject to the European Court of Justice but lose our right to participate and have a say. We will also lose our access to the Schengen database.

This deal may give the illusion that we have left, but every leaver knows that Brexit does not mean Brexit under this deal, and every manufacturer and exporter must realise that this is not the frictionless trade they are seeking. It is a political declaration where the obligations have yet to be addressed—in other words, it is without guarantees, on jobs, exports, the arrangements for businesses beyond the transition period, higher education, research and health. It is a real pity the Prime Minister spent so little time trying to build bridges across this House and so much time trying to placate the extremists and shoring up the interests of her purchased Democratic Unionist party majority. We have reached the stage where we can have no deal, a very poor deal or a genuine review of what people really want. I am not going to vote for this deal, because it does not give any guarantees to my constituents. Leavers do not really leave and they will be poorer. Remainers end up as associate members of a partnership where they once had much better rights and deals, and they will end up paying and taking rules without getting anything like the same in return.

I think the Prime Minister ought to set up an all-party commission. Let those of us of good will who want to work together to see whether there is something we can salvage from this do so. We must stop telling people that this deal delivers where it does not. We must stop pretending that the referendum was some definitive judgment. We must stop pretending about the manifesto commitments. Let us try to get a deal, and then put that to the British people and let them decide.

Summer Adjournment

Steve McCabe Excerpts

Tuesday 24th July 2018 Commons Chamber

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

I want to take advantage of the debate to raise a few issues of concern to my constituents on which the Government could offer some assistance. On smart meters, the Government persist with the fiction that all is well, but we know that that simply is not true. There are problems with smart meters working in the north of the country, and installation figures are well behind schedule. There is no evidence to suggest that smart meters for gas supply are working on a commercial basis, and the Data Communications Company cannot or will not supply any evidence to show that its plan is on track. The promised dividend for consumers is plummeting, and the supply companies are blaming Government plans for increases in customers’ bills. When will the Minister responsible wake up to the fact that she needs to call a halt and conduct a serious review of this programme before she lands us all with a technological white elephant?

Tomorrow marks Louise Brown’s 40th birthday. That should certainly be a cause for celebration, but although we have heard some encouraging words from Health Ministers, we are yet to see any action on fair access to IVF. The plight of one in six couples with a recognised medical condition continues to be ignored by many of the faceless bureaucrats running our health service. The provision of IVF is patchy and reducing across the country. Clinical commissioning groups are allowed to introduce arbitrary criteria to ration the service. National Institute for Health and Care Excellence guidelines are simply ignored, and the two-year-old exercise in price standardisation shows no signs of progress. We are supposed to be celebrating 70 years of the national health service, as well as the 40th birthday of Louise Brown, so when will Ministers take the health of those with fertility problems seriously and offer a national level of service to treat their illness?

Once again, my constituency is suffering from the cat-and-mouse game of illegal Traveller encampments. We have been promised a consultation, but what we need is action. We need action to ensure that all local authorities provide some sites for legitimate, law-abiding Travellers; and action to make it easier to remove and ban those who persistently break the law and treat local communities with contempt. This issue affects constituencies up and down the land, so why do the Government persist in ignoring it?

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

We have similar problems in Coventry to those that my hon. Friend mentions, and what he says is right. Many years ago, we used to have proper sites where Travellers could go. They could arrange for their children to go to school and, more importantly, there were facilities on those sites to provide cleanliness. Does he agree that we should do something similar?

[Steve McCabe]

I agree, and I think that the Government could help by offering some action. The process requires local authorities to work, and the Government need to give a lead.

Last Friday, I saw two women in succession at my advice centre who were living in a local Travelodge with their children. They are homeless, and both the victims of domestic violence. What is happening in the 21st century in this country that means our response to women and children fleeing domestic violence is to condemn them to a life of hostels and Travelodges? These establishments have no cooking or laundry facilities; children are forced to live on McDonald’s and other takeaway meals.

[Ruth Smeeth (Stoke-on-Trent North) (Lab)]

My hon. Friend is making an incredibly important speech. Does he agree that the situation is made even worse in the summer holidays, when children do not have access even to free school meals?

[Steve McCabe]

Yes, that is a real consideration. The situation is bad enough at any time, but it is much worse in this period. The reality is that these poor women are forced to spend their meagre incomes on takeaway meals and at laundrettes. Surely a civilised society ought to be able to do better, and surely these women and their children deserve better.

Finally, I learned this week that phone giants Vodafone and O2 plan to ride roughshod over my constituents’ views and erect a 17.5 metre phone mast in the heart of George Cadbury’s garden village of Bournville. They have not consulted local residents because they are not interested in their views, and they have not obtained proper planning permission. Apparently, officers at the planning authority, in their wisdom, missed the deadline for registering the application, which had previously been refused, by one day. Vodafone and O2 pounced on that error to claim planning permission by default.

These are the people who stand accused of ripping off the British taxpayer through £6 billion in tax avoidance. Their profits are all that matters. Their chairmen do not have the courtesy to reply to letters from the local MP and even refuse to meet local residents. I wonder how Mark Evans or Gerard Kleisterlee would like having a 17.5 metre mast in their gardens. These companies are little more than tax-avoiding parasites, and it is time that we took some action to curb their arrogant, bullying activities. We ought to think seriously about measures to exert far more control over these people, who do not care about our country, our people or our environment.

Financial Guidance and Claims Bill [Lords]

Steve McCabe Excerpts

3rd reading: House of Commons & Report: 3rd sitting: House of Commons
Tuesday 24th April 2018 Commons Chamber

[Stephen Lloyd]

You make a salient point, Madam Deputy Speaker. I have been sitting here for two hours, so I agreed with a lot of what you said.

I am glad that we are finally concluding our consideration of the Bill. I rise to speak to amendment (a) to new clause 9, as well to new clause 7, amendment (a) to amendment 10 and amendment 34. The Liberal Democrats welcome the amendments that the Government have tabled, but we believe that they do not go far enough.

The Bill as introduced in the other place had three major flaws. First, the single financial guidance body had no explicit function to protect consumers. Secondly, the Government missed an opportunity to ban cold calling by claims management companies, as they had promised to do in their manifesto. The ban should also have extended to other financial products. Thirdly, there were no safeguards to ensure that people received financial guidance before they accessed or transferred their pension benefits.

I pay tribute to my Liberal Democrat colleague in the other place, Lord Sharkey, whose amendments to the Bill paved the way for the concessions that we have today. I know that he and others from across the political divide have been lobbying Ministers intensely behind the scenes. It would have been nice if the concessions had come earlier in the proceedings, but there we go.

My support for the concessions is not absolute. In particular, under clause 34, claims management companies must act as though all UK phone numbers are registered with the Telephone Preference Service. As the House will be aware, however, the TPS has proven to be somewhat ineffectual. The Information Commissioner’s Office received more than 11,000 reports of cold calls from people on the TPS register last year. We believe that the Financial Conduct Authority has more teeth to enforce a ban on cold calling by claims management companies. For that reason, we support new clause 8, which would put Lord Sharkey’s amendments back into the Bill. The other amendments to new clause 9 would have a similar effect, allowing the FCA to police the ban on pensions cold calling.

Government new clause 9 allows Ministers to ban pensions cold calling and, if they do not, they must lay a statement before Parliament each year. Although I would love to name and shame Ministers every year until a ban comes into effect, I would rather that they just got on with it. Amendment (a) to the new clause would make it a legal requirement for the Government to ban cold calling, rather than just an optional extra.

New clause 4 allows the Government to ban cold calling in relation to any other financial services product after receiving advice from the SFGB. I welcome the amendment, but Lord Sharkey and I are worried that the SFGB’s duty to report on cold calling “from time to time” is too weak. I have tabled amendment (a) to amendment 10 to ask the SFGB to publish its report on cold calling at least every two years. This duty should not fall quietly by the wayside.

I also encourage the Government to accept amendment (b) to new clause 9, which was tabled by the right hon. Member for Birkenhead (Frank Field). As my colleague, Lord Sharkey, pointed out in the other place, a ban on cold calling must also include a ban on the commercial use of data obtained by cold calling. This gives the Information Commissioner two bites at the cherry to punish companies flouting the ban.

I now turn to the two amendments that I tabled on income shocks. They would require the SFGB to improve the capability of the public to plan for sudden reductions in income. The issue was brought to my attention by the former Pensions Minister, Professor Steve Webb, and the Chartered Insurance Institute, to which I am very grateful. Too many people are unprepared for a sudden fall in income. The 2015 financial capability survey found that 26% of working-age adults have no savings to fall back on and that a further 29% have less than £1,000 saved. There are many reasons why income shocks could occur. Money Advice Service research from 2016 found that nearly three in four households receive an unexpected bill every year. One third of households have had to make an unexpected car repair or replacement, at a cost of £1,300 on average.

The “Improving Lives” Green Paper revealed that 1.8 million employees have a long-term sickness absence of four weeks or more in a year, yet statutory sick pay is worth less than three hours’ work a day on the national living wage. This problem is made worse because, as the FCA has noted, people with serious illnesses often have poor access to financial services, particularly insurance.

Amendments considered in the other place also touched on this issue. In response, the Government said that public preparedness for income shocks would be an aspect of the money guidance function. Although I welcome that commitment, I would like the Minister to go further. The Bill contains no specific direction for the body to improve preparedness for income shocks or any mechanism to measure the progress of the body in this regard.

The SFGB’s focus will be pulled in every direction. How will the Government convey to the SFGB the strategic priorities for the coming year, and how will Parliament and the public be able to scrutinise and evaluate that work? The Government have finally listened to the arguments made on these Benches and in the other place. I thank them for doing so, but they must now go the distance. They must take robust action to end the scourge of cold calling and protect millions of vulnerable people from sudden income shocks.

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

I apologise for missing the earlier part of the proceedings; I was chairing a debate in Westminster Hall.

I want briefly to voice my support for amendments 8 and 9, to which I have added my name, and also for new clause 8, in my name, which effectively repeats amendment 42 as proposed by Lord Sharkey in the other place. As Members will know, that amendment was withdrawn on the solid understanding of a promise by the Minister in the Lords who said that her officials were working through the detail of a ban on cold calling. She went on to say that the Government would bring forward amendments to this House to implement that ban. Plainly, they have not done so.

I am not quite sure why the Government have backtracked on what seemed to be such an obvious and solid promise. It might have seemed that focusing on the role of the Information Commissioner and Ofcom was the easy option, but, with all due respect to the hon. Member for North Warwickshire (Craig Tracey), the kind of cold calling that innocent people are being subjected to every day is actually a cold, calculated business strategy; it is not only an issue about the misuse of personal data, important though that may be.

This Bill is supposed to be designed to ensure that people are protected and that the financial decisions that they make are taken after careful consideration and access to independent guidance. Why on earth are the Government reneging on their promise to eliminate cold calling for commercial purposes, the aim of which is to bounce people into decision making and deny them the time for proper, careful consideration and access to good guidance? New clauses 3 and 4 simply will not do the trick. People may well see them as a deception—an attempt by the Government to fool people into thinking that they are taking action when they are not really doing so at all. Everyone knows that it is a complete nuisance and underhand practice designed to entrap consumers.

Credit Cards: Cost Regulation

Steve McCabe Excerpts

Wednesday 7th February 2018 Westminster Hall

[The Economic Secretary to the Treasury (John Glen)]

It is a pleasure to serve under your chairmanship, Mr McCabe. I thank the hon. Member for Walthamstow (Stella Creasy) for raising this significant issue with characteristic passion. I will seek to answer the specific questions she has raised about the role of the FCA and how fluid the situation is.

Consumer credit, including credit cards, plays an important role in our economy, helping consumers to smooth their income, spread costs over time and cope with unexpected financial shocks. However, risk is inherent in any credit product, so it is vital that consumers are treated fairly and protected from unscrupulous or predatory practice. The Government recognise that and are working with the regulator to ensure that such activity is curtailed.

I think it will be helpful if I set out first what the Government have already done on consumer credit. Our vision is of a well functioning and sustainable consumer credit market that responsibly meets the needs of all consumers. That is why we fundamentally reformed regulation of the consumer credit market, transferring regulatory responsibility from the Office of Fair Trading to the Financial Conduct Authority on 1 April 2014. The Government have given the FCA a robust set of powers, designed to protect consumers, in three key areas. The FCA assesses every firm’s fitness to lend and it has put in place a binding standard on firms. The FCA requires all firms to assess each customer’s ability to repay. The hon. Lady gave the example of Vanquis being able to lend £1,000 without any checks. I repeat: all lenders must make that assessment of their customers’ ability to repay. Firms must also treat customers who fall into arrears fairly. Thirdly, the FCA monitors the market. The characterisation of the FCA as passively waiting for a crisis does not do justice to the actions it has taken. I will go on to set those out and describe how they are still under review.

Focusing on the areas that are most likely to cause consumer harm, the FCA has a broad enforcement toolkit to punish breaches of its rules. The FCA’s enforcement arm supports its objectives by making it clear that there are real and meaningful consequences for firms and individuals who do not follow the rules. There is no limit to the fines it can levy. Crucially, it can force firms to provide redress to consumers. For example, in October 2017 the FCA announced that BrightHouse, a rent-to-own firm, will pay over £14.8 million in redress to customers in respect of agreements that may not have been affordable and payments that should have been refunded. That is just one example of the effectiveness of the FCA enforcement action. In total, the FCA issued fines of nearly £230 million last year, and as of December 2017 it had secured £734 million in redress for more than 1.47 million customers in the consumer credit market.

I turn now specifically to credit cards. When the Government gave the FCA responsibility for consumer credit regulation in 2014, it sought to build a sound understanding of the credit card market and to assess whether it was working well in the interests of consumers. To that end, as the hon. Lady mentioned, the FCA conducted an extensive study of the credit card market between 2014 and 2016. It found that competition within the industry was working well for the majority of consumers, but identified concerns about the scale and extent of problematic credit card debt. Last year the FCA consulted on remedies to tackle persistent credit card debt and proposed a robust package of remedies to tackle the issues—

[Steve McCabe (in the Chair)]

Order. There is a Division in the main Chamber, so we will have to suspend the sitting and you will all have to come back to conclude. We will suspend for 15 minutes.

Childcare Vouchers

Steve McCabe Excerpts

Monday 15th January 2018 Westminster Hall

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

It is always a pleasure to serve under your chairmanship, Mr Bailey. I congratulate my hon. Friend the Member for Newcastle upon Tyne North (Catherine McKinnell) on the comprehensive case she made in support of the petition, which is essentially about allowing parents to continue to join the employer-supported childcare scheme after April this year. As we have heard in all the contributions so far, that is basically because the existing scheme is more generous to those on lower and modest incomes than the changes that the Government propose. I will not go through all the figures again, but clearly a basic rate taxpayer in a family with one parent working does reasonably well under the childcare vouchers scheme, but not at all well under TFC. If both parents are working and paying the rate and have average childcare costs, they can expect about £1,800 under childcare vouchers, but less than half that under the new arrangements.

Another important point that has been made today is that the scheme seems to be skewed towards London and the south-east. It is a bit difficult to make sense of that, given the Prime Minister’s expressed desire to create a fairer and more just society, and the Government’s oft-repeated claims that they want to narrow regional disparities. I am not quite sure in the design stage how the Government thought they were helping by creating a scheme that would be less generous to those struggling to get by and trying to do the right thing, and why they thought it was important to skew childcare support towards those living in London and the south-east rather than in the rest of the country.

My hon. Friend the Member for Newcastle upon Tyne North said that 50,000 employers offer childcare voucher schemes, according to a Library briefing paper. I saw in another briefing that it was about 60,000. The correct figure may be somewhere in the middle—I do not know—but I think the reality is that about two thirds of employees in this country are working for businesses that offer the existing scheme. That is the important point; it is a relatively well-established scheme. It has shortcomings, as my hon. Friend and the hon. Member for Belfast South (Emma Little Pengelly) pointed out, but in essence it is a well-supported scheme.

Employers, particularly some smaller businesses, are interested in the scheme because they argue that it has benefits for them, particularly when there are labour or skills shortages. It is a recruitment and retention tool for many of the very businesses that the Government are trying to encourage with things such as the northern powerhouse and the midlands engine—in other words, businesses outside London. Employers say that it is very easy to administer. A survey conducted by the Childcare Voucher Providers Association reported that 77% of employers said that it takes them less than 30 minutes per month to administer the scheme, so it does not exactly sound massively onerous.

In contrast, we have heard that there are problems with the policy and the technical design of the new scheme. As many hon. Members said, the Department for Education’s figures show that many families are going to be worse off under the new scheme than under the existing one. To obtain the full £2,000—the Government may not have advertised that figure widely, but it is a strapline that they have been happy to be associated with, and it is the benefit that most people will have seen to date—a family needs to be spending about £10,000 per year on childcare. Very few people on low and modest incomes are in a position to spend that sort of money, so it is obvious how skewed the scheme is.

My hon. Friend the Member for Stockton North (Alex Cunningham) made an important point about the difference in availability depending on age. As someone who spends a lot of time listening to parents and other members of the community talking about the care that needs to be taken with teenagers to ensure they do not go off the rails and that they do the things we expect of them, I am not sure how the judgment could have arisen that it is all right to provide childcare support up to the age of 11, but that after that it does not matter. My hon. Friend put that issue to the Minister, and I hope the Minister will give some kind of an explanation for that rationale, because it does not just affect this policy, but has much wider implications if it is a reflection of current Government thinking.

On the technical front, I cannot quite get my head around the figures I have seen, so I wonder whether the Minister can explain them. I am not saying that I have got them all right. The Government initially told us that about 1 million people would register and benefit from the scheme but, as my hon. Friend the Member for Newcastle upon Tyne North said, it was announced this morning that about 170,000 are registered. It does not take a genius to work out that there is a bit of a gap there, and I cannot see it being made up in the next couple of months. In addition, I understand that only about 30,000 of those who have registered can expect to receive a payment this year. That implies that the system is in a bit of difficulty. The Government have had some problems with the introduction of other schemes and programmes, and I would hate to see them go down a road that leads to another problem. Certainly, Lord Bates has indicated that he thinks that there are problems that could go on for some time.

When I was reading up on the scheme, I noticed that Atos—like Carillion, it is one of these parastatal organisations, and of course it provided such an outstanding service in relation to work capability assessments—is building what is being called the Childcare Choices platform. As we have heard, there are problems with that website. There are reports of the release of sensitive personal information, which will not do much for people’s confidence in the system, and of system crashes. My hon. Friend gave a startling account of one person’s difficulties with trying to access the system. That is not the way to build confidence and give people assurance.

There also seems to be some confusion relating to communication, which is reminiscent of the Government’s problems with universal credit and their communication difficulties with the WASPI women—Women Against State Pension Inequality—as they have become known. It seems that Her Majesty’s Revenue and Customs has been writing to parents to tell them that they must leave the childcare vouchers scheme in order to access the Government’s promised 30 hours of free childcare. Parents have left the scheme, only to discover that that is not actually the case, but once they have done so on the basis of that inaccurate information, they are not able to rejoin it. Can the Minister shed any light on what has happened here? Is there an investigation ongoing? How will the Government offer redress in those circumstances?

Can the Minister give us any hard information about the number of self-employed parents who will receive TFC this year and in future years? The Government argued that one of the major benefits of the new scheme is that it is more effective to introduce an entirely new scheme than to adjust childcare vouchers to accommodate the self-employed. At the moment, we have no idea whether it is having any impact at all, so it would be useful to know that.

The point is, as other hon. Members said, that we are still in the roll-out phase. HMRC has not even published the final guidance, although I understood that the whole thing was meant to be live by April, and the legislation to close the existing voucher scheme has not yet been brought before the House. There is plenty of scope to make changes, if Ministers wanted to do so, without causing massive difficulty and without anyone losing face. The intention, as I understand it, is to grandfather the existing scheme for those currently in receipt of childcare vouchers, so it is obvious that there will be a need to retain this apparatus for some time, although interestingly those currently in receipt automatically lose their rights if they happen to change job. Again, that sounds rather punitive—I am not sure that is the intention.

Would it not make sense to let the existing voucher scheme operate alongside the new TFC scheme? Would it not make sense to give people a choice? There was once a time when the Conservative party was in favour of choice—in fact, the Minister is supposed to be in favour of choice. At the very least, would it not make sense to have a longer phasing-out period so that the problems that everyone has identified can be addressed, and so we do not do away with something that is working well for parents up and down the country and replace it with a scheme that will only cause problems that the Government are already aware of?

--- Later in debate ---

[John Glen]

As a former policy person, I acknowledge the detail of the hon. Lady’s analysis, and that there is more work to be done. I shall take that back to the Treasury as we try to address all dimensions of the productivity challenge.

The Government think it is right that we replace childcare vouchers with tax-free childcare from April 2018. However, I would like to reassure any parent who is currently receiving vouchers but is not eligible for tax-free childcare that there will be no automatic withdrawal of the voucher scheme. If they currently receive vouchers and their employer continues to provide them, they can continue to receive vouchers as long as they stay with that employer.

[Steve McCabe]

I acknowledge what the Minister says, but what will he do about parents who may change their employer? Presumably those parents will be discriminated against.

[John Glen]

I think they will be eligible for the tax-free childcare scheme.

Again, I thank all those who signed the petition, and all hon. Members who spoke this afternoon. As I have set out, tax-free childcare will help more households, and is better targeted and simpler, than childcare vouchers. HMRC has done extensive work to ensure that the childcare system is ready for full roll-out. It is therefore right that we continue with the reform as planned, to the benefit of millions of households around the country.

Draft Double Taxation Relief and International Tax Enforcement (Colombia) Order 2017 Draft Double Taxation Relief and International Tax Enforcement (Lesotho) Order 2017

Steve McCabe Excerpts

Wednesday 10th January 2018 General Committees

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

I am conscious that it is not common for Members to queue up to take part in Delegated Legislation Committees. I am genuinely pleased to be able to make a contribution to the Committee, because I believe that the significance of the UK’s network of bilateral tax treaties is far greater than the level of transparency and scrutiny afforded to it under the system of negotiation, renegotiation and ratification.

There are two major issues surrounding bilateral tax treaties. First, there is the question of tax treaties that enable companies to route money through tax havens such as Crown dependencies. That can come at a particularly high cost to the revenue raising capacity of Governments in poorer countries. Only a few years ago, ActionAid revealed how Deloitte was advising prospective clients in western and Chinese companies with an interest in Africa on how they could route their investment through Mauritius, a known tax haven. Perhaps not surprisingly, Mauritius has tax treaties with both the UK and Lesotho, so it is possible—if not highly likely—that UK companies investing in Lesotho are avoiding tax through such a route.

Secondly, many of these treaties are restrictive and cost lower-income countries billions of pounds each year that could be used to improve public services and alleviate poverty. For the purpose of the Committee, I want to concentrate on the treaty with Lesotho, one of the world’s poorest countries. It is regularly argued that such treaties boost economic development, but the World Bank has argued that there is very little conclusive evidence that tax treaties between OECD countries and low-income countries actually do so. My right hon. Friend the Member for Barking (Dame Margaret Hodge) writes in her excellent book “Called to Account”, that Angel Gurría, the secretary-general of the OECD, said in 2008:

“Developing countries are estimated to lose to tax havens almost three times what they get from developed countries in aid.”

He also said:

“poor countries could eliminate hunger in just one decade with less than a third of the money they lose to tax avoidance by big corporations”.

In 2014, the International Monetary Fund reported:

“the use of tax treaty networks to reduce…payments…is a major issue for many developing countries, which would be well-advised to sign treaties only with considerable caution.”

Britain has a large network of bilateral tax treaties both with low-income countries and tax havens. Analysis by Martin Hearson, a leading authority on the subject, found that the UK has the joint highest number of highly restrictive treaties with lower-income Asian and sub-Saharan African countries across the world. Ironically, we send a substantial amount of aid to those countries. Last year, DFID was responsible for delivering nearly £6 million of British taxpayers’ money in aid to Lesotho, yet we are signing a treaty that will actually deprive that country of corporation tax to which it is entitled.

I said that I was grateful for the opportunity to contribute, because this is one of the few opportunities for any kind of parliamentary scrutiny of a treaty of this nature—a treaty that the Government have already concluded. I am aware that there is a power for referring such treaties to the Floor of the House, but I understand that that has not been done since 1984. For most of us, this Committee is what passes for scrutiny. There is scant information on the reasons for this treaty in the explanatory notes or in the presentation we have just heard from the Minister. The Government do not publish their reasons for negotiating or renegotiating treaties. We do not appear to have any analysis of the expected impact of the treaty on investment or tax revenue. Perhaps the Minister will enlighten us.

The House of Commons Library conducted a comparative analysis of the approaches of a number of countries to such treaties. Many countries establish specialist committees to scrutinise them. In other countries, treaties are scrutinised by both Houses or Assemblies. Here, it is done by a Delegated Legislation Committee. In Canada, parliamentarians have a formal opportunity to review such treaties before they become binding. In Australia, there is a national interest analysis and formal hearings to approve treaties. In the United States, the Department of the Treasury produces a technical explanation of the agreement. We should compare that with the information before us today as we consider these treaties.

Is the Minister willing to consider that the Government should at least publish the specific objectives they are seeking to achieve before future tax treaties come before a Delegated Legislation Committee? Will he tell us the rationale for opening negotiations on these treaties? Is it not the case that if the Lesotho treaty did not exist, Lesotho would be free to charge the diamond companies and others a 25% withholding tax, rather than one of 5%? Why are the rates of the withholding tax in this treaty so low? It seems like Robin Hood in reverse.

Will the Minister say something about the binding arbitration clause in the treaty? I recall that kind of thing being a source of some concern to people in this country during the Transatlantic Trade and Investment Partnership negotiations. Am I right in thinking that this is the first UK tax treaty with a low or middle-income country to include a binding arbitration clause? What safeguards exist to ensure that large corporations do not use it to threaten Lesotho so that it does not try to challenge blatant tax avoidance? Have any British companies made representations to the Government for a binding arbitration clause to be included in the treaty?

Why is it so difficult to obtain information about the likely effect of the treaty? The EU produced detailed sustainability impact assessments that analyse the potential economic, social, human rights and environmental impacts of all trade deals. Why can a similar framework not be adopted for treaties such as these? As well as the treaties before us today, two more will be considered next week. I understand that there are treaties pending for Malawi, Nepal, Trinidad and Tobago and Uzbekistan. Will the Minister confirm whether all the existing tax treaties with EU countries will have to be renegotiated as part of the Brexit process? Surely we need a much better parliamentary process that involves full and proper scrutiny and provides evidence that such treaties are fair and in keeping with the values and traditions of our country.

I hope that my hon. Friend the Member for Oxford East shares my view about the inadequacy of the process and that she might consider testing the will of the Committee on the Lesotho treaty so that, at the very least, we can make our concerns crystal clear.

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[Mel Stride]

May I, at the outset, make one thing extremely clear to the Committee? The Government are entirely committed to supporting lesser developed countries. We are one of the few countries in the EU and among the advanced industrialised countries that meets the 0.7% aid requirement. The hon. Member for Oxford East will know that the Taxation (Cross-border Trade) Bill, which is going through Parliament, will ensure that we take into UK law the unilateral preferences that pertain under the European acquis to ensure we provide zero-duty arrangements on a selfless, unilateral basis with a number of countries that need our support. It is important to understand where we are coming from in our overall negotiations and in the arrangements we enter into with the countries that are the subject of this debate.

I will go through some, at least, of the most prominent questions that were asked. There was a rather eye-watering number of them, delivered at rattle-gun speed, and some were quite technical. Although I enjoy the mental gymnastics of these debates—I always enjoy debating with the hon. Lady—I hope she bears with me as I do my best to pick them up. I was barely thinking about some of them when I had two or three more thrust in my direction. I will do my best to cover as much as I can.

The hon. Member for Glasgow East asked who opened the discussions between ourselves and Colombia. It was us, because Colombia is a significant Latin American economy. It is currently going through its accession process with the OECD, and it is expanding its network of double taxation agreements, including with our competitors—other nations around the world. We have always had close and friendly ties with that country, so we approached it. It was willing, and we have now concluded an agreement.

Like the hon. Members for Birmingham, Selly Oak and for Oxford East, the hon. Member for Glasgow East raised the important issue of transparency in the negotiation process. Tax treaties are international agreements that are given effect through law. They are therefore subject to parliamentary scrutiny and debate. Only when both sides are satisfied with the content of a new treaty will it be signed and published. Parliament will then scrutinise the agreement. If Parliament is not satisfied, the treaty will not enter into force. Where these treaties come about, we are in a position to scrutinise them, as we clearly have in some detail in this Committee. Such treaties have generally enjoyed cross-party support to date. It is recognised that they generally have a positive role in creating and enhancing cross-border trade, investment and employment.

The hon. Member for Birmingham, Selly Oak raised an example of the potential use of this arrangement or treaty in the context of tax avoidance. He mentioned Mauritius specifically. Mauritius has now become a signatory to the OECD base erosion and profit shifting project. It is therefore bound by the rules and regulations in that regard. If we look at offshore so-called tax havens—I think that was the expression he used—they are most typically brought into play where double taxation arrangements are not necessarily in place and there is a fear that double taxation may occur. In that sense, so-called tax havens or overseas tax trusts are being used to create a neutral tax space. The overarching point is that the proliferation of double taxation agreements is to be welcomed in that context.

The hon. Members for Birmingham, Selly Oak and for Oxford East raised the important issue of whether we were in some way exploiting Lesotho as a consequence of the agreement. The hon. Lady went into some detail on her bedtime reading. She went back to the 1997 treaty to look at the various rates of withholding tax and so on. The point I would make is that it is not possible for us to impose a treaty on another country, even if we wanted to. It is for the other country to decide when it is ready to enter into negotiations and to weigh up the trade-off between retaining all its taxing rights and possibly limiting those rights to attract foreign investment.

To answer a question that the hon. Member for Glasgow East posed about Colombia, it was Lesotho that approached us to seek a further double taxation arrangement. There were certainly elements within that negotiation where it sought to achieve certain outcomes to which we acquiesced.

The hon. Member for Birmingham, Selly Oak also raised the issue of how the tax treaty will support Lesotho’s development. UK tax treaties are negotiated by Her Majesty’s Revenue and Customs, reporting to Treasury Ministers. DFID is fully supportive of HMRC’s approach. It works with the Treasury on various aspects at various times in these various arrangements. DFID supports the tax authorities in developing countries to increase their capacity to raise revenues, and it works with the Treasury to develop the Government’s tax and development policy. The Government have also set up a specialist tax capacity building unit in HMRC that deploys HMRC staff in support of DFID country offices to provide technical expertise. The point is that, even outside the context of the treaties, the Treasury and HMRC are there alongside DFID in ensuring that we provide support to those countries and recognise the importance that they rightly place on the sustainability and durability of their tax base.

Other Governments have approached the negotiation of treaty arrangements and the process by which they go through Parliament in exactly the same way as we are looking at this today. It is certainly the case that treaties of this nature under the last Labour Government —in the dim and distant past—went through a similar process to that which we are following today.

The hon. Member for Birmingham, Selly Oak raised the important issue of binding arbitration and asked whether it is typical of these kinds of arrangements. In some cases it is; in some cases it has not been. That is because of historical changes that have occurred in this area. The new model agreed under the auspices of the OECD will now make it more normal. The decision taken by Lesotho and ourselves was that it would be appropriate to operate the model set out by the OECD for binding arbitration.

A question was raised about the renegotiation of our existing trade treaties with other nations—those treaties being between the European Union and other countries. It is my understanding that we will not need to do that in the case of those particular treaties.

The hon. Member for Oxford East asked for reports on the effects on the investment and the tax take and so on. Those are immensely complicated questions to answer; it is very complicated to try to assess and determine exactly what the impacts of a double taxation agreement with another country—an agreement with two countries interacting, with all the various externalities that impinge on those circumstances—will be. It is, of course, the British Government’s responsibility to continue to closely monitor those impacts as far as we can. All legal measures, treaties and agreements with other countries are always constantly under review, as the hon. Lady would expect.

[Steve McCabe]

I want to clarify one point on binding arbitration. As I understand it, consultations take place between the Government and various stakeholders and interested parties in preparation for the treaty. I am curious to know whether any British companies made representations that they wanted the binding arbitration clause included. If so, would the Minister tell us who they are?

[Mel Stride]

As the hon. Gentleman will appreciate, that is a highly specific question, which I cannot be expected to be in a position to answer at present. I am certainly happy to get back to him. Typically with treaties of this nature, a number of discussions are held with stakeholders, the overseas Governments concerned and so on. That is one reason why such arrangements take a considerable time to come to a conclusion.

The agreement with Colombia—our first with that country—brings a significant improvement to our coverage of the region and will improve the trading conditions for businesses in both countries and aid the fight against tax avoidance and evasion. We have brought forward a mutually beneficial treaty in the case of Lesotho.

Finance (No. 2) Bill

Steve McCabe Excerpts

2nd reading: House of Commons
Monday 11th December 2017 Commons Chamber

[Mel Stride]

The hon. Gentleman raises an important issue, but these will be matters for the Royal Bank of Scotland. The most important aspect when one considers the Royal Bank of Scotland is clearly that it is brought back to being a fighting-fit organisation, employing as many people as possible as a business, contributing to the Exchequer, and creating value going forward.

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

I am interested to hear the Minister’s confidence about the money he will be taking through the bank levy. How does the money the hon. Member for Dover (Charlie Elphicke) says has been raised so far compare with the amount the taxpayer has already paid to bail out the banks, and how much of that money have we had back?

[Mel Stride]

It is interesting that the hon. Gentleman mentions the amount that was required to bail out the banks, given that it was the then Labour Government who caused the problem that required the bail-outs in the first place. There is a long and detailed history of exactly what happened: we had lax regulation, and the Bank of England was not in a position to regulate the institutions concerned. The hon. Gentleman might like to look up the answer to his question himself and then inform other members of the Labour party of what he discovers.

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[Peter Dowd]

The hon. Gentleman can ask as many questions as he likes—[Interruption.] And the hon. Member for Croydon South (Chris Philp) can say “Yes or no?” But the Conservative party is in a state of chaos, it is as simple as that. After seven years, the verdict on Tory austerity is clear for all to see. Economic growth stands at its lowest point since the Conservatives came to power, and it has been revised down by the Office for Budget Responsibility for every year of the forecast. The UK has the slowest growth in the G7, and the Institute for Fiscal Studies has warned of two decades of lost earnings growth. That relates to what my hon. Friend the Member for Liverpool, Walton (Dan Carden) said.

[Steve McCabe]

I agree with my hon. Friend that the predictions suggest that the economy is not in good shape. Was it not extremely sad and disappointing that we did not hear from the Financial Secretary a word of acknowledgement of the pressures that are being inflicted on public services, such as children’s services? They have been damaged not only by cuts but by Government errors. The Minister did not say a word to suggest that the Government would make reasonable adjustments, even in cases in which they have acknowledged that errors have been made. Birmingham, for example, has lost £100 million as a result of mistakes that the Government now acknowledge, and that is money that could be spent on children’s services and social care.

[Peter Dowd]

My hon. Friend is prescient, and I will come to the point that he makes in a minute. Let us continue with a few more statistics, because it is worth our while to look at them. The Minister referred to productivity rates, and UK productivity rates have fallen far behind those of the French, the Americans and the Germans. The OBR’s decision to revise down UK productivity rates for every year of the forecast is seismic, and it reflects years of inaction from a Government who have refused to invest in our infrastructure and skills or in the UK workforce.

Tax Avoidance and Evasion

Steve McCabe Excerpts

Tuesday 14th November 2017 Commons Chamber

[Dame Margaret Hodge]

I hope that the right hon. Lady will listen to the whole of my speech. I think she will acknowledge, as we move forward, that a little progress has been made but not enough. I agree that the previous Labour Government’s record on tackling tax avoidance was not as good as I would have wanted, but the record and actions of this Government are inadequate and somewhat hypocritical. Their rhetoric is mostly fine, but the reality is badly wanting.

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

When ordinary people hear the Budget next week and have to think about their taxes against the background of inflation in food prices, will they not wonder why the Members opposite are hellbent on avoiding any inquiry into aggressive tax avoidance?

[Dame Margaret Hodge]

I agree entirely with my hon. Friend. Indeed, I was about to say that those who pay their taxes are completely fed up. By 8 o’clock this morning, nearly 156,000 people had signed a petition going to the Prime Minister. This is an issue that angers people across the country, men and women, supporters of all political parties, people of all ages and people in every income group.

Paradise Papers

Steve McCabe Excerpts

Monday 6th November 2017 Commons Chamber

[Mel Stride]

My hon. Friend is absolutely right. This is but one further example of making companies criminally responsible where their employees try to facilitate tax avoidance. That is the right way to go and is just another measure the Government have brought in.

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

Does the Minister accept that the scale of aggressive avoidance exposed by these revelations shows that the general anti-abuse rule introduced in 2013 is not working and that what we need is general anti-avoidance legislation so that there is no room for doubt and no room for manoeuvre?

[Mel Stride]

The hon. Gentleman talks about the amount revealed by these disclosures, and I assume he is centring his remarks on the half-hour television programme last night. The reality is that we do not yet know exactly the extent of what will be revealed, which is why HMRC has asked those with the data to make it available—so that we can use it to get on with the job of cracking down on those who might not have behaved as they should.