Fiscal Responsibility and Fairness

Stewart Hosie Excerpts

Thursday 19th March 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I have never seen a statement, other than a Budget statement, that is so heavily redacted. It is almost as if the Chief Secretary is trying to pretend that he is important. He sat there yesterday and grinned as the Chancellor announced £30 billion of cuts. He voted for £30 billion of cuts in January and he has boasted about it today. He has not laid out a plan that combines fiscal responsibility and fairness. The plan is in the Red Book. It is not responsible and it is not fair; it is just another five years of austerity and cuts, and he knows it.

[Danny Alexander]

Given that the hon. Gentleman speaks on behalf of a party that wants to break up and bankrupt the United Kingdom and that has set out plans to have the national debt higher at the end of the next Parliament than at the beginning, he has a cheek. The Scottish National party’s plans would do nothing to sort out this country’s economy. They would damage the recovery and cause jobs to be lost in Scotland. I think that the people of Scotland can make up their own minds about that.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 10th March 2015 Commons Chamber

[Danny Alexander]

I wholeheartedly agree with my hon. Friend. I have had a number of meetings with Oil & Gas UK and representatives of the oil industry. Having set out in December the fact that the tax regime for the North sea is going to be on a declining path, recognising precisely the issues that he mentions, we have set a clear direction of travel, and the Chancellor will set out our decisions in the Budget next Wednesday. Let me reassure my hon. Friend that this Government take incredibly seriously the need to make sure that we have a fiscal regime that supports maximum economic recovery of the resources of North sea oil and gas.

[Stewart Hosie (Dundee East) (SNP)]

The Chief Secretary knows that the fundamental issue is the cost of doing business in the North sea basin. The up to 81% marginal tax rate on production is something that the Government could do something about. Given that this Chief Secretary boasted that putting up the supplementary charge was his decision, will he now apologise for that and make sure that the charge begins to be reduced in the Budget next week?

[Danny Alexander]

In fact, we made sure that the supplementary charge began to be reduced in the autumn statement in December, so the hon. Gentleman should catch up on his facts. The fact remains that the measures we are taking to support the industry—through the Wood review, the establishment of the Oil and Gas Authority, and decommissioning deeds and field allowances —have already created an environment that has seen very substantial investment in the North sea in the past few years. The point that my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) made is right. Making sure that we have a climate for long-term investment is precisely what we are trying to do, and the hon. Gentleman will have to wait for the Budget for our decisions.

Future Government Spending

Stewart Hosie Excerpts

Wednesday 4th March 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

We debated similar issues early in January, when the Government laid out their proposals for the “Charter for Budget Responsibility”. I explained in that debate that the Government had promised that they would eradicate the entire structural deficit within the five years of this Parliament. It is important to understand what the Government pledged. They specifically stated that debt would begin to fall as a share of GDP in 2014-15, that the current account would be in balance in 2015-16 and that public sector net borrowing in that year would be barely £20 billion. We now know that, on their numbers, debt will not begin to fall as a share of GDP until 2016-17 at the earliest, that the current account will not be back in the black until at least the following year and that public sector net borrowing will not be £20 billion for the forthcoming year but almost four times that amount, at £75 billion. In short, the Chancellor and the Government have failed to meet a single one of the key targets that they set for themselves. The Tory policy of a fixed-term approach to deficit reduction strangled the recovery in the early years of this Parliament, and with tens of billions in cuts and tax rises still to come, the inescapable conclusion is that austerity has failed.

[Oliver Colvile (Plymouth, Sutton and Devonport) (Con)]

Does the hon. Gentleman not recognise that there was a big issue, and that it was called Greece? The problems there and in the eurozone blew everything off course completely.

--- Later in debate ---

[Stewart Hosie]

That is precisely why the Government should have taken a flexible approach to deficit consolidation, rather than a fixed-term approach. I will say more about that in a moment.

It is useful today to identify precisely what is on offer, other than the £30 billion of extra cuts that were promised by the Government in January. That is, of course, no more than a continuation of the existing failed policy of fixed-term deficit consolidation and a plan for further attacks on the welfare budget. It is a plan to balance the books on the backs of the poor, which we now understand means taking levels of public expenditure back to those of the 1930s.

Today’s motion calls for a

“different, fairer and more balanced approach”

and I agree with that. The key thing that needs to be changed is the fixed-term approach to cutting the deficit. Instead of that approach, which has self-evidently failed so far, we should have a more flexible, medium-term strategy whose first principle should be about reducing debt to a “prudent” level. It is important that the Government of the day should specify what is or is not prudent, depending on the real circumstances that they face, precisely to deal with the kind of external shocks that the hon. Member for Plymouth, Sutton and Devonport (Oliver Colvile) has just mentioned.

[Mrs Main]

I hope that the hon. Gentleman can enlighten me. What are the

“sensible reductions in public spending”

proposed in the motion, and how much will they raise? I really would like to know, given that the motion mentions them.

[Stewart Hosie]

It is a Labour motion, and I might not even support it. I am merely pointing out that the Tory party told us that the current account would be back in the black, but it is not. We are borrowing almost £80 billion this year. The Tories’ austerity programme has failed.

We need to reduce debt to a prudent level, with the Government of the day specifying what is or is not prudent, depending on the circumstances. A second principle should be that, once debt is reduced, the Government should maintain a balanced budget on average over the medium to long term, not in a way that would prevent them from implementing the steps they believed necessary to achieve their long-term objective, but in order to afford them the flexibility to deal with external shocks over the medium term.

A third principle is that the Government should achieve and maintain a level of net worth that provides a buffer against unforeseen factors. A fourth calls on the Government to manage fiscal risks prudently. A fifth principle is that the Government should pursue policies consistent with a reasonable degree of predictability about the level and stability of tax rates. That is incredibly important, because the tax system, tax rates and tax certainty form a vital component of fiscal stability and fiscal responsibility.

[Sandra Osborne]

Will the hon. Gentleman give way?

[Stewart Hosie]

I am sorry; I have given way already, and we are time-limited.

The motion also calls for a programme to get the current account into surplus and to get the national debt falling as a share of GDP as soon as possible. In principle, I agree with that, but my party wants to see an explicit end to austerity because, as the hon. Member for Rutherglen and Hamilton West (Tom Greatrex) pointed out, people have suffered enough already. That is why we have set out a plan for a modest real-terms increase in departmental spending that would deliver £180 billion of investment in the next Parliament. Our plan would result in the deficit coming down, from 3.4% to 3%, 2.5% and 2.1% of GDP from 2016-17. It is a plan that would see the national debt fall as a share of GDP, albeit on a different, more shallow trajectory. It is a plan that would in the first year, 2016-17, not see £23 billion of extra Tory-Liberal cuts, but £25 billion of investment. We think that is extremely sensible, and it ties in to what the Chief Secretary said about active government and what difference that and the Government’s investment can make.

The motion also calls for

“sensible reductions in public spending”.

Our plan is to see a modest increase in departmental spending. Although I would most certainly accept a sensible reduction in spending on Trident and its replacement—a policy apparently supported by three quarters of Labour candidates—that is not on offer today. Sadly, what Labour appears to have proposed is no more than keeping to the Tory spending cuts, and we simply cannot support that.

I hope that tomorrow, in Scotland, Labour will take a different view, and support a real end to austerity and a real increase in public spending, because we do need to take a different approach. We need to take a different approach to economic management because if we do not, we will have set in concrete a further attack on our welfare budgets. With 22% of our children, 11% of our pensioners and 21% of our working-age adults in Scotland in poverty, launching a further attack on welfare, as this Government are planning to do, is simply wrong. We also need to change the way we manage the economy or we will be faced with a plan, set out in January by this Government, for future discretionary consolidation that changes the ratio of cuts to tax rises from 4:1 to more than 9:1—in effect, trying to balance the books on the backs of the poor. I am sure no Opposition Member would support that.

This motion also talks of the need for

“an economic plan that delivers the sustained rises in living standards needed to boost tax revenues”.

That is sensible, so I hope the Labour party and others would support the Scottish Government’s economic strategy, which was published yesterday. In particular, I hope they would support the Scottish business pledge, which is designed not just to promote economic growth, which is necessary, but to drive fairness and help tackle inequality at the same time. In return for assistance from the Scottish Government, businesses will be required to pay the living wage, commit to an innovation programme, cease using zero-hours contracts, agree to pursue international opportunities, make progress on gender balance, support youth and so on. That is the kind of initiative that should form the bedrock of any genuine long-term economic plan, and it is one that recognises not only that business growth and economic growth are essential to fund and pay for our vital public services, but that squeezing out inequality is an absolute prerequisite for a growing economy in the first place.

I am sure that there will be more of this debate as we move towards the end of this Parliament and into the election. I am disappointed that Labour appears on its last Opposition day to have said that it will stick to the Tory spending cuts. Let us hope that the results after the election ensure that everybody can change their mind.

Tax Avoidance (HSBC)

Stewart Hosie Excerpts

Monday 9th February 2015 Commons Chamber

[Mr Gauke]

There clearly have been issues with some tax inducements being used for avoidance purposes. To be fair, this matter relates more to tax evasion. None the less, it is important that legislation is tested and it is important that we now have a general anti-abuse rule, which we did not have in 2010, to ensure that reliefs and exemptions are not exploited in a way that is contrary to Parliament’s intention.

[Stewart Hosie (Dundee East) (SNP)]

In March 2012, a protocol was signed between the UK and Swiss Governments, changing the previous tax agreement. It included the provision for a one-off payment to cover past misdeeds and tax rates of up to 41%. Given the revelations from HSBC, is it the Government’s intention to look again at the protocol, or does the Minister believe that it is robust enough for what we are seeing?

[Mr Gauke]

The Swiss deal is on course to bring in £1.2 billion that would not otherwise have been brought in. Since the agreement was signed, we have made much further progress, with 90 countries, including Switzerland, signing up to the automatic exchange of information, which means that the era of bank secrecy is over and that it will not be possible to hide assets in the way that it was in the past. That is a consequence of the UK’s leadership on this front.

Oral Answers to Questions

Stewart Hosie Excerpts

Tuesday 27th January 2015 Commons Chamber

[Mr Osborne]

My hon. Friend has been a champion for his constituents and for all the 1.5 million people who are off the grid and rely on heating oil to warm their homes. That price has fallen by 20%, so people are seeing the benefit of the falling oil price, but we continue to put pressure on the heating oil companies, and we have met them in the Treasury to continue to reinforce the argument that those prices must be passed on and must continue to be passed on.

[Stewart Hosie (Dundee East) (SNP)]

The oil industry has told us that the softening in the oil price has highlighted the underlying problem in the North sea, which is the high cost of doing business there, driven by an up to 81% tax on production. Instead of waiting till the Budget, will the Chancellor take urgent action on investment allowances and on a cut to the supplementary charge?

Charter for Budget Responsibility

Stewart Hosie Excerpts

Tuesday 13th January 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

I was struck by the shadow Chancellor’s contribution. His criticism of the charter appeared to be that it was not particularly clear when some of the Government’s targets or aims might be met—not an unreasonable criticism, although I was reminded that the last Labour Government used to try to balance the books over the economic cycle and then change the start time of the economic cycle to make the numbers fit. However, that is ancient history.

What is also history is that five years ago this month on 5 January, the then Labour Government debated their Fiscal Responsibility Bill. It set out the framework that they would work within to halve the deficit in a four-year time frame. This Government went further and announced that they would eradicate the entire structural deficit within a single five-year Parliament, and the following year the first charter for budget responsibility was introduced. To meet the provisions of that charter, the Government said that debt would begin to fall as a share of GDP by this year, 2014-15, the current account would be in balance next year, 2015-16, and public sector net borrowing then would be reduced to £20 billion. We know now from the autumn statement, given one month ago, that debt will not now fall as a share of GDP until 2016-17 at the earliest, the current account will not be in the black until the following year, and borrowing in 2015-16 will not be the £20 billion promised, but nearly four times that at £75 billion. The new targets are the essence of the new charter.

The Chancellor and the Government have failed to meet a single one of the targets that they set for themselves. The policy of a fixed-term approach to deficit reduction strangled recovery in the early years of this Parliament, and with £75 billion of cuts and tax rises to come, the inescapable conclusion is that austerity has failed. So today’s measure is less about the purported updating of the charter for budget responsibility and more about providing cover for a failed policy of fixed-term deficit reduction; cover for a plan for further attacks on the welfare budget, which are in the charter; and cover for a plan to balance the books on the back of the poor when public spending goes back to 1930s’ levels.

[Jonathan Edwards]

Is it not the case that we are living in very uncertain times in terms of the global economy? As the right hon. and learned Member for Rushcliffe (Mr Clarke) said, we could have a Greek exit from the eurozone in a matter of weeks, with all the turmoil that would create for the eurozone, and the direct impact that would have on the wider UK economy. With that in mind, would it not be more advisable and wiser to have a more flexible approach to fiscal policy?

[Stewart Hosie]

That is absolutely right. I will answer that question directly. Instead of the provisions in the charter, we should be tackling the deficit reduction and the debt reduction in a different way. It should not be a fixed-term approach; it should be a principles-based approach based on the medium term. It has been proven to work in New Zealand, and I want to refer to the way in which it goes about that. It says that the first principle should be about reducing debt to a prudent level, where the Government of the day specify what is or is not prudent, depending on the circumstances that they face—precisely the point that my hon. Friend made. The second principle should be that once debt is reduced, the Government should maintain a balanced budget over the medium to long term. That would not prevent any Government from implementing the steps they believe are necessary to achieve the long-term objective of having a prudent level of deficit, but it would mean that it would happen, on average, over the medium to long term, rather than arbitrarily specifying one cycle or one Parliament.

The third principle says that the Government should achieve and maintain a level of net worth that provides a buffer against unforeseen future factors. The fourth principle calls on the Government to manage fiscal risks prudently, and the fifth is that the Government must pursue policies consistent with a reasonable degree of predictability about the level and stability of tax rates. That is incredibly important, because the tax system, tax rates and tax certainty, which have not yet been mentioned today, are a vital component of fiscal stability and fiscal responsibility. In the sense that we have seen tax yields reduce, it is all the more important to get that bit right.

[Charlie Elphicke (Dover) (Con)]

The hon. Gentleman talks about fiscal stability and fiscal responsibility, but let me take him to task on the plans the SNP made, based on the price of oil, and what has happened to the price of oil. Does that not show that what the SNP has to say on these matters is not worth listening to?

[Stewart Hosie]

That is a ridiculous argument. If one thinks that those oil revenues, which are most certainly falling, are causing a big hit to the UK tax yield, all the more reason, one would have thought, to allow a degree of flexibility in the economic plan so that the overall strategy of deficit consolidation and debt reduction is achieved, rather than the facile political comment from the hon. Member for Dover (Charlie Elphicke).

Before I move to the second and third criticisms of the plan, on the overall plan for deficit consolidation and our opposition to it being on a fixed-term basis, when the New Zealand finance committee looked at alternative models—rigid, straitjacketed models—it made a number of interesting observations. The committee said that there was no solid theoretical justification for any particular fiscal target to be maintained over a period of time, and that judgments on the appropriate level of fiscal aggregates vary over time and depend on the prevailing economic circumstances. A fixed-term target with a fixed objective cannot do that.

Having looked at other countries, the committee said that their experience of legislated targets suggests that there are substantial risks attached to their use. In particular, rigid adherence can seriously distort decision making and, unless carefully handled, minor variations from target can result in significant but unnecessary damage to credibility. The committee went on to observe, in the context of the inherent inflexibility of a fixed target system, that it

“makes it difficult for fiscal policy to respond appropriately to the inevitable volatility of economic circumstances.”

Given that we have seen, and hon. Members have commented on, the eurozone crisis, the Cyprus banking crisis, the Irish bank bail-out and other issues, to put this country back into a straitjacket of a policy which has failed so far, ignoring the possibility that similar shocks could occur in the near and medium-term future, is silly and wilful. It is most certainly a political dividing line which we will not support.

Apart from its inherent inflexibility, our second criticism of the measure is that it sets in concrete a further attack on welfare budgets. With 22% of Scottish children, 11% of Scottish pensioners and 21% of working age adults in poverty, to launch a further attack on welfare at this time under the guise of amending the charter for budget responsibility is simply wrong. Thirdly, to set out a plan for future discretionary consolidation, on which the charter is predicated, which changes the ratio of cuts to tax rises from 4:1 to 9:1 to try, in effect, to balance the books on the backs of the poor is completely wrong.

We do not believe that anyone genuinely opposed to austerity could support the measure tonight. We do not believe that anyone who is genuinely opposed to the draconian changes to welfare can support this Government tonight. We do not believe that anyone who is opposed to trying to balance the books on the backs of the poor and take public spending levels back to those of the 1930s can support this Government tonight. My right hon. and hon. Friends and I will oppose the measure tonight.

Autumn Statement

Stewart Hosie Excerpts

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

My right hon. Friend is absolutely right. I commend him and the community leaders in Bicester for working with us to secure this extra investment in the town, to create the vision of a garden town, and to make sure that there are housing and jobs for the town’s population while preserving its beautiful character.

[Stewart Hosie (Dundee East) (SNP)]

I welcome some of the individual measures announced today, but they do not amount to a long-term economic plan. At its heart, what the Chancellor said was that the target to see debt fall as a share of GDP this year has not been met; that the current account will not be in the black next year, as he promised; and that borrowing then, far from being £20 billion, will be almost four times that, at £75 billion. Why should the public believe that if the Government do the same things over the next two or three years, that will be any different from their failure in doing them first time round?

[Mr Osborne]

At the moment, we see Britain as the fastest growing major economy in the world. We also see a record fall in unemployment, and the highest rate of job creation occurring in Scotland. That is the United Kingdom delivering for the people of Scotland. Now we have proposals from the Smith commission, jointly agreed between the different parties, whereby the Scottish Government, and the Scottish Parliament, can take more responsibility for raising their own taxes to pay for their own expenditure. Then we will have an even better debate in Scotland on how things are paid for.

EU Budget (Surcharge)

Stewart Hosie Excerpts

Monday 10th November 2014 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

The rules that determined this payment were agreed in May, without discussion. The UK participated fully in those discussions, and had two formal opportunities to respond but did not do so—indeed, there was not a single signal from the UK that there was a problem until late October. Is the truth not that this performance by the UK Government has less to do with payments to Europe and more about pandering to the open wound of anti-Europeanism from the Members who sit behind the Chancellor?

[Mr Osborne]

If the separatists had had their way, Scotland would not be in the European Union. But I make this point: Commission Vice-President Georgieva confirmed in the press conference afterwards that there was no way that member states could have known the net figure until 17 October, which was when the official meeting took place in Brussels. That has also been confirmed by the Dutch Prime Minister and the President of the European Commission. Again, this is one of those examples in which the shadow Chancellor says that he knew better than the rest of us, but those Heads of Government confirm that Britain could have known only in late October.

Finance Bill

Stewart Hosie Excerpts

Wednesday 2nd July 2014 Commons Chamber

[Mr Gauke]

I am grateful for my hon. Friend’s observation. Without getting too much into the details of what we will announce in due course, it is important to point out that there are various means and methods of delivering guidance and that different people will want different things. We have made it clear that face-to-face guidance will be available for those who want it.

[Stewart Hosie (Dundee East) (SNP)]

The Minister said that he is discussing this with the industry and other interested parties. I welcome that because, as he will be aware, on the announcement of this plan, the share price of many businesses in the life and pensions field dipped quite sharply with the market discounting what might happen in future. Will he confirm that he is paying attention to ensuring that the life and pensions sector is protected while offering flexibility to people who have saved?

[Mr Gauke]

The purpose of the reforms is to ensure that there is a savings and pensions environment that is good for those saving for their pension and those claiming on their pension. We believe that the reforms that we have set out will result in greater innovation in this area. We do not think that the purpose of the rules is to protect particular businesses. Nevertheless, the industry has responded well to our proposals. Many see this as an opportunity to improve the culture of saving and have engaged very constructively with the Government. I hope that that addresses the hon. Gentleman’s concerns.

--- Later in debate ---

[Charlie Elphicke]

Let me develop my point, and I shall give way again in a few moments.

It is important and instructive that this Government have incentivised investment. What the hon. Member for Newcastle upon Tyne North (Catherine McKinnell) did not develop during the debate is what underpins the whole issue of investment allowances and capital allowances. Why we need capital allowances takes us to the whole issue of business investment. The challenge we all face, and have done for a very long time, is the rising corporate cash balances—about £750 billion—and the desire of us all to see that money spent.

Let us look at the Government’s policy in this area. They initially announced a reduction to £25,000 from April 2012. The hon. Lady’s first argument was that that created some form of uncertainty. The traditional argument goes, “We need to give businesses time to plan ahead; otherwise, we create uncertainty.” Well, the reduction was part of the June 2010 Budget, and it was about two years after the policy was announced before it came into effect, so I do not think that the certainty argument succeeds. The Government increased the amount substantially after only a short period of time, highlighting their concern to ensure investment.

The second problem I have with the hon. Lady’s case is that it is high risk to consider a policy on setting an investment allowance or a capital allowance on its own, as the Minister argued in an intervention. It is instructive that when Labour introduced the investment allowance, they funded the initial £50,000 by reducing general capital allowances from 25% to 20%. All policies need to be seen in a package taken together; they cannot properly be considered and debated unless the other pieces in the jigsaw are taken into account.

[Stewart Hosie]

That argument is fine as far as it goes, but in the space of seven years, we went from the abolition of the industrial buildings allowance to having an annual investment allowance of £100,000, which was then reduced to £25,000 followed by the very welcome increase to £250,000 for two years—and then there was another change. Of course making that many changes in such a short period of time is going to have an impact on planning for investment. Surely the hon. Gentleman can understand that.

[Charlie Elphicke]

The hon. Gentleman reinforces my point, which is that under Labour there were substantial reductions and changes to capital allowances that were part of the 2008 package. As I said, the main rate of capital allowances was reduced from 25% to 20%, followed by the creation of what was effectively the old first-year allowance—initially at £50,000. A number of other changes went on in parallel, including the phased withdrawal of the industrial and agricultural buildings allowances—IBA and ABA. We need to look at all policies in context and think about what else was going on, and that includes the changes that the Government announced in the Budget of June 2010. No policy can be viewed in a vacuum.

--- Later in debate ---

[Mr Gauke]

It is a little difficult to compare a period in the 1980s before the election of Margaret Thatcher, given that she was elected in 1979. What I say to the hon. Gentleman is that we are forecast to have the fastest growth in the G7 this year. Clearly, Members on both sides of the House should welcome that, but we must not be complacent because we have further to go and we need to ensure that we stick to the plan to deliver that growth on a sustainable basis.

[Stewart Hosie]

The Minister has said he has plans for low corporation tax, and fewer reliefs and allowances—I understand the strategy. He will be aware that the argument is that it helps to establish profitable businesses but is less helpful to growing, investing businesses. Even if he was right, that would rather argue against the Government increasing the annual investment allowance to £250,000. Therefore, is the report envisaged in the new clause not precisely what is required to identify whether that allowance is at the correct level?

[Mr Gauke]

I am grateful to the hon. Gentleman for returning me to the subject matter before us, and no doubt you are, too, Madam Deputy Speaker.

The Office for Budget Responsibility forecast in the June 2010 Budget stated that the cuts in the corporation tax rate would more than offset the reduction in investment allowances such that the

“cost of capital for new investment is lower for all non-financial companies, and the rate of return from the existing capital stock is higher”.

That very important point could easily be missed from this debate. However, we also recognise that in the current economic climate, businesses face particular challenges. Having got the corporation tax rate down significantly, making a temporary boost to support and encourage increased investment was both appropriate and desirable. That is why we introduced a temporary generous increase in the annual investment allowance at the 2013 Budget, and we have gone on to double its generosity a year later.

--- Later in debate ---

[Christopher Pincher (Tamworth) (Con)]

I welcome the chance to make a brief contribution to the debate on this group of amendments. It was a pleasure to serve on the Public Bill Committee with the Exchequer Secretary; it was certainly an educational experience for me. It was also a pleasure to serve with the hon. Member for Newcastle upon Tyne North (Catherine McKinnell), although her professed determination to scrutinise the legislation line by line did at times make it feel as though she was scrutinising it word by word.

I should like to speak briefly to Government amendments 1 and 2, which affect clause 207, encompassing clauses 192 to 212. As the Minister and the shadow Minister have said, those provisions deal with follower notices and the accelerated payments regime. I was heartened to hear that the Minister is spelling out the ground rules for appeal in respect of follower notices, but he will know that there remains some residual concern, to say the least, about the retrospective nature of accelerated payment notices.

A number of people and their advisers have made what they believe to be a proper disclosure, particularly after the increase in the fine for non-disclosure from £5,000 to £1 million, erring on the side of caution and over-disclosing. They are concerned that they will now be caught up by that disclosure and will find themselves with retrospective tax liabilities, perhaps dating back to 2004. The Minister was good in Committee in making it clear that he would continue to consult the industry and taxpayers, because the original consultation was brief. I hope that he will do that, and will continue the dialogue with the industry and with taxpayers to ensure that nobody is caught up unfairly, having tried to do the right thing, by these proposals. I look forward to hearing him make the position clear in his remarks .

[Stewart Hosie]

I rise to speak against new clause 1 and the introduction of the bareboat chartering regime. I heard the Minister’s comment that this is about trying to get a fair tax return from this small but important sector. It tells us that at the moment it is paying about £200 million a year in tax and national insurance. At a yield of about £100 million, the tax return from this small sector will be increased by about 50%—that seems a substantial increase in a short period.

I would like to say that this bareboat chartering regime was a one-off stand-alone bad measure, but it does not stand in isolation. It is part of a pattern of ill-judged, disjointed and sclerotic decisions that this Government have taken, and it typifies their attitude to the North sea. Some years ago, we had the massive hike in North sea corporation tax supplementary charge, which absolutely stifled investment and brought it to a grinding halt. That led the Government, in panic, to make some kind of correction through the introduction of a large series of complicated new and enhanced field allowances.

[Mr Weir]

My hon. Friend makes a very good point. Given that the Government have so recently and so enthusiastically embraced the Wood review, does he not think that it is an odd measure to introduce, as it will hit the maximisation of the recovery of our oil and gas reserves?

[Stewart Hosie]

That is an extremely good point. It is not just the International Association of Drilling Contractors that has welcomed the Government’s approach to accepting the full recommendations of the Wood review, but the overall trade body, Oil and Gas UK. Indeed, the Scottish National party thinks that it is a good thing, too. Both the industry and the SNP have also welcomed some of the field allowances that the Government were forced to introduce, particularly the ultra-high-temperature, high-pressure field allowance for mixed gas and oil fields. That kind of measure is incredibly sensible, but as my hon. Friend says, and as Oil and Gas UK points out, there is huge disappointment that the Government are continuing with the bareboat charter measure. They believe that it is ill-conceived and should have been dropped in its entirety. The backdrop to its introduction is a period in which operating costs have increased sharply. Last year’s cost increases of more than 15% led to an all-time record high of almost £9 billion in costs. I understand that new developments in the North sea are facing similar cost pressures, so it is illogical to introduce this measure at this point, especially as drilling rigs and accommodation vessels alone are included in the scope of the legislation.

We are looking at a part of the sector where the return on capital is only 8% or 9%, and the cash break-even on a drilling rig or an accommodation platform is typically 15 years. These are large investments, with investors taking substantial long-term risks, and we cannot understand why the Government want to put that at risk at this particular point.

[Mr Weir]

My hon. Friend makes a very good point. Does he also recognise that there is a shortage of rigs? By applying this measure specifically to drilling rigs, we are adding another disincentive for investment in the North sea that would maximise our oil and gas recovery.

[Stewart Hosie]

Indeed; I recognise all those points, and the pressures that are being applied to finite and very mobile resources, such as rigs and accommodation vessels, but I will come back to some of that later.

This measure not only penalises the drilling and accommodation vessel sector, but potentially impacts on the entire £35 billion upstream oil and gas supply chain. Derek Henderson from Deloitte UK said:

“While it doesn’t affect operators directly, many expect that the costs will be passed on to them and could discourage drilling.”

That would impact on the entire support and supply chain that is dependent on drilling activities.

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

On the point about making other jurisdictions more attractive, are the Government not actually helping Scotland’s competitors by ensuring that rigs, of which there is a shortage, go to more sympathetic jurisdictions?

[Stewart Hosie]

Indeed, and Malcolm Webb from Oil and Gas UK made a near-identical point when he said:

“It is perplexing…that the Government has chosen to proceed with the bareboat measure. This can only increase costs on the”

UK continental shelf. He also said:

“we fear that this move will drive drilling rigs, already in short supply, out of the UKCS.”

That would be a ridiculous thing to do.

What makes this measure all the more peculiar is that the bareboat charter arrangements are commercial arrangements that are widely used across a range of industries, and not just in the oil and gas sector. The arrangements we are talking about are used internationally, and have formed a consistent part of the UK continental shelf operation for 40 years. So why pick now to take an extra £500 million or £600 million out of the North sea over the next five years? The Treasury’s decision in the Budget to apply this measure only to the oil and gas industry, and only now, to a few specific vessel types, is utterly illogical.

I do not want to detain the House too long, so I think that the key thing to do is to consider the points that the International Association of Drilling Contractors makes about the measure. This is not a gentle criticism of a mildly inconvenient tax; it is an excoriating critique of what the UK Government have done. The association says:

“The measure is unfair and a unilateral deviation from international best practice…with no ability for contractors to reset prices,”

it

“amounts to retrospective and double taxation”,

and in a real and practical sense, it does. It says:

“The measure will depress economic activity. The…changes affect the cost base of the drilling industry”,

with all the impact that might have. It goes on:

“The measure targets a single, specialist sector for additional rent…Specialist international companies that have relocated”

to the UK “will be particularly hit”, when they and their investment should be welcomed instead.

The association argues:

“The government has manipulated the introduction of the measure to avoid proper scrutiny.”

In a particular criticism, it goes on to say:

“It is not appropriate for legislation as complex as this to be published in initial draft form”

on the day it was due to come into effect. That is a preposterous way for the UK Government to behave. The association continues:

“The consequences of the measure have not been properly assessed by HRMC”,

and it says that there are reports that up to £2 billion could be lost from the continental shelf. It also says:

“The measure is deliberately discriminatory...all vessels bar drilling rigs and accommodation units have been exempted for reasons that are far from clear.”

To put that another way, only two sorts of vessels remain included in the scope of the measure, which appears to be the usual sort of smash-and-grab cash raid that this Government make on the North sea.

There appear to be a great many reasons why the bareboat chartering regime is wrong. There appears to be an illogicality about the way it is being introduced, as well as a complete lack of transparency and time properly to assess the long-term impact, not just on drilling rigs and accommodation vessels, but on the entire supply chain. Little concern appears to have been felt about the consequential impact on growth and jobs in the sector and in the economy in general. That is quite a scathing set of criticisms to make of this Government, although it is not unique and could apply to any number of other things that they have done.

I look forward to hearing what the Minister has to say, but unless there is a very credible explanation of the amount of tax that he believes is lost, and of how the proposals will help, rather than having the consequences that I have described, I fear that we might divide on new clause 1.

[Helen Goodman]

I should like to speak to new clause 5 and new schedule 4 on the theatre tax relief and to set this in the context of the current state of British theatre.

The Government’s own documents point out that the film tax credit introduced by the previous Labour Government has been a significant success. In answer to written questions from my right hon. and learned Friend the Member for Camberwell and Peckham (Ms Harman), the Government have told us that the film tax credit has supported 1,200 films, provides 46,000 jobs, and has brought in £1 billion of investment. Obviously, therefore, a theatre tax relief is a good idea in principle, but it is worth considering whether the drafting of the new clause will achieve all the desired objectives. If it is not drafted sufficiently generously, the positive benefits to the theatre industry and to the British economy will not be achieved, but if it is drafted too loosely, it can become open to abuse. In either of those instances, we will have to come back and revisit the drafting, and the industry will face an unstable regime that is not helpful to its planning. In one respect, the drafting is a bit too loose and in another respect it might be a little too tight.

--- Later in debate ---

[Mr Gauke]

We have had, unsurprisingly, a wide ranging debate. I shall try to respond to the points raised by hon. Members in our debate, starting with those relating to new clause 1 and new schedule 1 on oil and gas. I outlined the measure in my opening remarks, and a number of questions have been raised. The question that gets to the heart of the matter concerns the impact on drilling activity and how that affects the UK’s competitiveness.

The Government’s support for the sector over the past few years through field allowances and decommissioning relief certainly has helped to encourage record levels of investment—£14.4 billion in 2013 alone—and supported the market for rigs in the UK continental shelf, where rates are driven by demand. Rig rates in the UK are among the highest globally, so we are not convinced that this measure will drive rigs from the UK continental shelf. In fact, recent press coverage indicates that rigs continue to be attracted to the UK continental shelf after the measure’s introduction.

In addition, the Government do not accept that they should seek to address the issue of rising costs by accepting an unfair tax system where a small group of companies are able to pay almost no UK tax. The new oil and gas authority which the Government announced as part of their implementation of Sir Ian Wood’s recommendations will aim to identify ways to ensure that Government and industry can work together to address cost escalation.

[Stewart Hosie]

That is a valid point to make, but having had the chartering regime in place in the North sea for 40 years, why introduce change now and why restrict it to rigs and accommodation vessels, affecting only one industry?

[Mr Gauke]

On the question why now, it is worth pointing out that following a refocusing of the UK corporation tax regime to a more territorial basis over recent years, and in view of increasing recognition, through the base erosion and profit shifting OECD initiative, that transfer pricing and other international rules do not always provide a fair or consistent outcome, the Government have decided that the need to protect the tax take from those who benefit indirectly from the exploitation of the UK’s natural resources requires domestic action now.

In addition, recent Government incentives have resulted in record investment in the UK continental shelf. It is right that action is taken to ensure a fair amount of tax from activities carried out in connection with the exploitation of the UK’s natural resources, and HMRC ensures that all businesses pay the tax due in accordance with the tax law.

Finance Bill

Stewart Hosie Excerpts

Tuesday 1st July 2014 Commons Chamber

[Ian Murray]

I am afraid we do not have much time, but if there is time at the end I will take an intervention.

Many hon. Members have mentioned the wages crisis in this country, which is of course connected to taxation. We also have a cost of living crisis: people will be £1,600 a year worse off by 2015. We have a youth unemployment crisis, and we are in danger of writing off another generation of young people, as happened in the 1980s when all those wonderful top rate reductions in tax were being made; and we have the lowest rate of house building since the 1920s. All these are priorities that the Government could put to the top of their policy agenda instead of concentrating on a tax cut for the wealthiest.

On the back of all this, we have a Chancellor who has set golden rules for the economic cycle but who has failed on pretty much all of them, while taking £3 billion from the Treasury’s coffers with this tax cut. The UK has lost its triple A rating, and not only will the Government not balance the books by the end of this Parliament, but they will borrow £75 billion this year alone— £190 billion more than planned. They have missed their targets for the deficit and for debt, and they broke every fiscal rule that they set themselves. What is their answer to the conundrum? It is to cut the top rate of income tax for the very richest in the country. Everyone has seen an increase in VAT, which is the most regressive tax; and we have had the granny tax—the list is endless. If politics is about priorities, the Government should come forward with a report, as suggested in new clause 14, and say how much the tax would raise or not raise. We can then decide whether it was the right idea and priority to lower that tax, alongside the long list of this Government’s failures, including social policy failures.

I was interested to hear the intervention from the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards), who is no longer in his place. He wanted to talk about the 50p tax rate. I am very surprised that our Scottish nationalists have not mentioned it—they refuse to confirm whether or not an independent Scotland would back a 50p tax rate because the answer is no.

[Stewart Hosie (Dundee East) (SNP)]

Will the hon. Gentleman give way?

[Ian Murray]

I am being told to wrap up, so I shall do so by saying that a tax cut for this country costs £3 billion, according to the Treasury’s figures. The Government are standing up for the wrong people, they have the wrong policies, and new clause 14 needs to be approved by the House.

[Stewart Hosie]

On a point of order, Mr Deputy Speaker. Can you confirm that if an hon. Member is mentioned in the Chamber, the Member who mentioned them is obliged to accept the intervention?

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

We both know that the hon. Member for Edinburgh South (Ian Murray) is not obliged to give way. The hon. Member for Dundee East (Stewart Hosie) has made the point well, and I am sure the hon. Member for Edinburgh South will finish now because Frank Dobson is waiting.

--- Later in debate ---

[Catherine McKinnell]

The proposition risks ringing of that. It lacks an ethical approach, given that it trades people’s rights for £2,000 of shares. More than that, it flies in the face of what we know to be true about productivity and engagement. We know that engaging a work force and building their trust makes businesses more successful. Sarah Jackson, chief executive of Working Families, says:

“It also flies in the face of everything we know about productivity and employee engagement. Treat your employees well, give them the flexibility they need, and you will be rewarded by highly motivated and high performing employees.”

The proposal we are discussing goes in completely the opposite direction, undermining the rights of employees and buying them off with shares that could carry a lot of risk for them. It is no wonder that so few businesses have taken up the offer.

[Stewart Hosie]

That is the key point, is it not? Share schemes and share option schemes are fantastic incentives in their own right. That is what should be promoted, not the link with the withdrawal of rights, which is absurd and preposterous.