UK Economy

Wera Hobhouse Excerpts

Monday 19th February 2024 Commons Chamber

[Bim Afolami]

I thank my hon. Friend for that question—I would say that the loss of large retail groups in Norfolk is the House’s gain. His point about the international context is serious and important. Although Labour Members do not like to hear it, facing a once-in-100-years pandemic and Putin’s illegal war in Ukraine, which caused energy prices to skyrocket, will have adverse impacts on the economy. The country understands that and the House understands that; the Labour Front Bench should also understand it.

[Wera Hobhouse (Bath) (LD)]

This recession is a direct result of the choices that this Government have made. Years of potential growth have been missed, and the Government have failed particularly to capitalise on the green transition. Green investment will be worth £1 trillion globally by 2030, including half a million jobs in this country. When will the Government bring forward a green investment programme to match the ones in the US or in Europe?

[Bim Afolami]

First, our record on decarbonisation beats anywhere else in the G7, so we do not take lessons from the United States or any other country in that regard. In relation to the green investment plan by 2030, the hon. Lady should direct her ire at those on the Labour Front Bench for not being clear as to what their plan is. The Leader of the Opposition says—[Interruption.] Well, it is important because politics is a contest of ideas, as indeed it is a contest between two parties. If Labour Members believe they can spend an extra £28 billion without that having an impact on taxes and borrowing, they are trying to pull the wool over the eyes of the British people.

Hospitality Sector: Fiscal Support

Wera Hobhouse Excerpts

Wednesday 31st January 2024 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to see you in the Chair, Ms Bardell. I congratulate the hon. Member for Stirling (Alyn Smith) on securing the debate, and I welcome the Minister to his place. I remember his visit to Bath; in Bath, we consider him a friend.

My Bath constituency has a thriving hospitality sector that caters to local people and to visitors from all over the world. However, our businesses have had to deal with Brexit, covid and now high and rising costs. Bath’s visitor numbers are recovering from the pandemic, yet many of our cultural attractions and hospitality venues are still struggling, with fewer visitors and increasing costs.

The difficulties that the sector faces are widespread. A survey by the Night Time Industries Association revealed a staggering 40% increase in total operating costs last year because of rent increases, energy costs, inflation and business rates. Businesses are trying to manage increasing costs while keeping prices affordable for customers, and it is smaller, independent hospitality venues that bear the brunt. Our high street is kept vibrant by the variety of pubs, restaurants and other businesses to choose from, but without financial assistance from the Government, only large chain companies are insulated from the cost rises.

The hospitality industry employs 3.5 million people nationally and contributes more than £50 billion in tax receipts to the Treasury. By employment, it is the UK’s fourth largest sector. Many owners fear that they may have to close permanently in the coming year; many others have already shut their doors. In Bath we are still reeling from the closure of Moles, a small music venue that was loved and known across the UK for nurturing young and up and coming musical talent. Last year, 3,000 hospitality businesses closed. Among UK businesses that filed for administration in 2023, the third-highest sector was the hospitality industry, which accounted for more than 10%. The figures have nearly doubled in two years and owners are afraid that they could continue to rise, so it is important that the Government take note. Every single closure means the loss of people’s livelihoods and of valuable community institutions.

Many businesses in my constituency have expressed disappointment that the Government decided to remove energy bill support. One pub’s energy bill went up by £35,000. If the energy bill support scheme that was in place until April last year had continued, that bill would have been reduced to £5,000. The Chancellor’s decision to replace the scheme has meant that the pub now receives only £3,000. Under Liberal Democrat proposals, small and medium-sized businesses would have been offered Government grants covering 80% of the increase in their energy bills for one year, giving small hospitality businesses the stability that they need to get through these difficult times.

It is impossible to talk about energy without discussing the role of the green transition. The Government must accelerate the review of electricity market arrangements so that households and businesses alike can benefit from lower-cost renewables. That should involve decoupling electricity from wholesale gas prices. Renewables are now the cheapest source of energy, but their price is artificially linked to expensive natural gas. The Federation of Small Businesses has suggested a help-to-green scheme, which would provide direct financial support and advice to companies. That would include a grant to allow small businesses to invest in energy efficiency or microgeneration. The independent review of net zero also championed that idea. Have the Government looked at that?

The Government must provide the temporary help that small businesses need now, as well as long-term solutions to stabilise rising costs. We must act now to protect all the well-loved businesses in our constituencies from difficult times in future.

--- Later in debate ---

[The Financial Secretary to the Treasury (Nigel Huddleston)]

It is a pleasure to serve under your chairmanship today, Ms Bardell. I congratulate the hon. Member for Stirling (Alyn Smith) on securing the debate, and thank everybody who has contributed. Everyone contributed in a very constructive manner—until a few minutes ago. Many hon. Members graciously commented on my previous role. As tourism Minister, I had the real pleasure of visiting the vast majority of their constituencies, and it has been fantastic to have a tour of the UK today. We have heard about the fantastic hospitality, tourism and leisure offerings in everybody’s constituencies, including some absolute gems that make us very proud of this industry.

The hospitality and leisure sector is formidable. Definitions can sometimes be difficult; sometimes when people use the term “hospitality”, they are just talking about pubs, bars and restaurant, but we are thinking more broadly about the tourism, hospitality and leisure offering. To respond to the hon. Member for Ealing North (James Murray), I can say that we engage with the sector all the time. Just yesterday, many of us attended the UKHospitality reception, at which the formidable Kate Nicolls articulated the sector’s asks very well. We hear them all the time, and we are always listening to ideas.

[Wera Hobhouse]

The Minister mentioned a range of hospitality businesses. Will the Government please look at ensuring the survival of struggling businesses such as small music venues, which will close if they do not get the support they need?

[Nigel Huddleston]

In this debate we have heard an ongoing request for simplification in recognition of these challenging times—we did, of course, spend £350 billion on the pandemic—and a series of requests for additional relief here, there and everywhere. Everybody recognises—the Welsh and Scottish Governments are also struggling with this—that financial times are tight and that every single one of those requests comes at a cost: either other people would pay more tax or spending would be reduced somewhere else.

We absolutely hear the requests, but as my hon. Friend the Member for St Austell and Newquay (Steve Double) pointed out, over the past few years—certainly during the pandemic—the Government have recognised how vital the sector is and have been absolutely committed to it. It rightly received the immense support that it needed during the pandemic, including through the culture recovery fund to help music and heritage. So many sectors contribute to our tourism and hospitality offering. If we had not made those interventions during the pandemic, many businesses that are here today would otherwise not be. Ongoing asks during the period of recovery, when we need to start paying back that £350 billion, are very difficult because there would be massive consequences for taxpayers and the whole of the economy. I understand the challenges, but I think everybody recognises that every one of those asks comes at a cost.

Loan Charge

Wera Hobhouse Excerpts

Thursday 18th January 2024 Commons Chamber

[Sammy Wilson]

Thank you, Madam Deputy Speaker. I hope that the point I was making about Tony Lloyd was picked up. I want to pass on the condolences of our party to his family, and I pay tribute to the work he did as shadow Minister for Northern Ireland.

I thank the Backbench Business Committee for granting the debate. It is a timely debate and I know that the many thousands of people across the United Kingdom who have been affected by the loan charge in a very detrimental way will be glad that it is being considered in this House. Over the past two weeks, we have been looking at the dramatic fallout of the Horizon scandal at the Post Office and, quite rightly, we have been focusing on what belatedly can be done to repay and to deal with that great injustice. I say to the House—I do not think that I am being overdramatic when I say this—that we are looking at another Horizon scandal, and the parallels are frightening.

First, because of the actions of a Government Department, 10 people in the United Kingdom have committed suicide and many others have attempted to take their own lives because of the pressure they were put under by officials and by statute passed by this Parliament. We have heard time and again in evidence to the loan charge and taxpayer fairness all-party parliamentary group of the disruption and disaster this has caused in many families.

Secondly, despite the fact that alarm bells should be ringing in the Treasury, no action has been taken. Indeed, some Ministers have even refused to meet the group. Others have simply put out the party line and regurgitated the excuses of His Majesty’s Revenue and Customs for what is happening.

[Wera Hobhouse (Bath) (LD)]

Does the right hon. Gentleman agree that it seems to be the case yet again that people acting in good faith are being prosecuted and pursued, whereas the people who absolutely knew what they were doing are getting away scot-free?

[Sammy Wilson]

That is a point I want to come to.

We are seeing that once again Ministers are turning a blind eye, and these lessons should be learned. Apart from two examples of Ministers that I can think of, one of whom—a former Minister—is present, Ministers turned a blind eye for years. We then had the result, but it was not until an ITV programme brought this matter to the nation as a whole that action was taken.

We have had attempts by HMRC to justify what it has been doing. In the past, postmasters and postmistresses who had unblemished records for years were accused of being thieves. We are now being told that the people who HMRC is chasing today are—to use its words—“serial tax evaders”. Minister, I have to say that when I read the letter that you—

--- Later in debate ---

[Greg Smith]

My hon. Friend makes an incredibly powerful point with which I entirely agree. Part of the ask of this debate and of the all-party parliamentary group on the loan charge and taxpayer fairness is a fair settlement that people can actually afford to pay; that takes into account—dare I say it—reality; and that understands what people actually earn and that they acted in good faith and took the professional advice that I mentioned a few moments ago.

[Wera Hobhouse]

Will the hon. Gentleman give way?

[Greg Smith]

One more time.

[Wera Hobhouse]

The hon. Gentleman is being generous. Is it not the case that what we need is proper transparency in how Government bodies operate? When so many people see these problems again and again, that really undermines trust in Government.

[Greg Smith]

I agree with the hon. Lady. Of course we need transparency across all walks of life—Government or otherwise. The right hon. Member for East Antrim referred to the Horizon scandal and the Post Office. There is a clear similarity, and there needs to be an inquiry and serious action. How can a body of the state—the Post Office in the case of the Horizon scandal, and HMRC in the case of the loan charge scandal—be autonomous in being judge, jury and executioner at the same time? We simply have to take that away. Checks and balances must be built into HMRC if we are to see justice for the loan charge victims, as well as for victims of any other scandal that might well come about.

I could say much more on this subject, but I am mindful of the time limit that you have set, Madam Deputy Speaker. I am incredibly grateful to my hon. Friend the Minister for his letter yesterday offering a meeting with the all-party parliamentary group. I hope that we can get that meeting in the diary as soon as humanly possible so that we can have meaningful dialogue on how to get to a settlement, a review of HMRC practices and justice for the loan charge victims. Given the colleagues whom I have seen bobbing, particularly from the Conservative Benches, I suspect that we will hear many more powerful stories and testimonies from victims of the loan charge, whose lives we should see as totally valuable and deserving of our attention and of justice.

--- Later in debate ---

[Wera Hobhouse (Bath) (LD)]

What I am going to say will echo what has already been said this afternoon, but I want to add my voice to those of all Members, and particularly to those of my constituents, because Bath constituents have been affected, and I want to help them as much as I can.

The loan charge has destroyed lives. Of course businesses and individuals should pay their fair share in tax; however, much damage has been done to people who acted in good faith. They have been punished in an entirely inappropriate way, while those who were behind the schemes have got away scot-free. We must defend individual taxpayers, even if we think that they might have been ill advised in the first place. As we have heard, many were forced into the schemes and did not have a choice.

The Morse review concluded that the loan charge was not an appropriate or fair response to the use of payroll loan arrangements. It focuses on loans made many years ago. They were not taxable under the law as it was understood at the time, and HMRC did not act against them. As enacted, the loan charge means that income tax must be paid as if the outstanding amount were part of the income taxed in the current tax year. That does not account for changed financial circumstances, which is particularly relevant for freelancers. Those taxpayers pay much more than they would have if they had paid tax on the loan at the time.

The loan charge’s stated aim is to end tax avoidance schemes, which is understandable. We all want to ensure that people pay their share; however, the central injustice is that HMRC has pursued only the users of the schemes, who acted in good faith, instead of those who recommended, promoted and operated them. As a result, the loan charge is not even a deterrent. There has never been a conviction of those promoting loan schemes that are now subject to the charge. The people who were compliant and disclosed information on their tax returns have been hit the hardest. Nearly all respondents to a survey by the loan charge and taxpayer fairness APPG reported that the risks of payroll loan arrangements were not explained to them. Now some face tax bills as high as £400,000.

Families have broken down, and there have been suicides. People were made to feel like criminals, despite having entered into the arrangements following professional advice. Many have said that as contractors they had little or no choice but to enter the schemes. Many small and medium-sized company owners and directors were also impacted after following professional tax advice. Their staff now face redundancy. As well as the awful mental health impacts, which the hon. Member for Strangford (Jim Shannon) mentioned, tax bills of hundreds of thousands of pounds leave some with no option but to go bankrupt. In many cases, being declared bankrupt will prevent people from working again or paying tax.

None of that would have happened had HMRC identified the issue earlier, publicised the risks of payroll loan schemes and penalised those behind them. The nightmare now unfolding has echoes of the Post Office scandal, where individuals with no intent of wrongdoing were left with impossible choices. Livelihoods and lives are being destroyed while those running the schemes, who knew what they were up to, are getting away with it. In addition, Government bodies are magnifying the injustice, pursuing people with intimidation and making them fearful. We should put that right, rather than making this wrong even more wrong.

We urgently need a genuinely independent review of the whole loan charge, and a fair and final resolution for all. It is clear there is huge cross-party interest. It is in everyone’s interest to finally resolve this, not just for those facing overwhelming tax bills but for HMRC and the Government. The loan charge has not even achieved its intention. Instead, it represents a policy failure that has left thousands suffering. It is for all of us to act, and act quickly.

[Madam Deputy Speaker (Dame Rosie Winterton)]

I call the spokesperson for the Scottish National party.

--- Later in debate ---

[The Financial Secretary to the Treasury (Nigel Huddleston)]

I would also like to thank the right hon. Member for East Antrim (Sammy Wilson), my hon. Friend the Member for Buckingham (Greg Smith) and others for securing the debate, and I am grateful for all the contributions from hon. Members across the House. I would like to name them all, because it is important that we get on the record all those who have contributed. They include my right hon. Friends the Members for Chingford and Woodford Green (Sir Iain Duncan Smith), for New Forest West (Sir Desmond Swayne), for North East Somerset (Sir Jacob Rees-Mogg) and for Haltemprice and Howden (Sir David Davis); my hon. Friend the Member for North Norfolk (Duncan Baker); the right hon. Member for Hayes and Harlington (John McDonnell); and the hon. Members for Merthyr Tydfil and Rhymney (Gerald Jones), for Chesham and Amersham (Sarah Green), for Kirkcaldy and Cowdenbeath (Neale Hanvey), for Arfon (Hywel Williams), for Strangford (Jim Shannon) and for Bath (Wera Hobhouse); and, indeed, others who have contributed to the debate.

There is no doubt that we have heard today the strength of feeling on the issue. Of course, I stand at the Despatch Box as not only the Minister—Financial Secretary to the Treasury—but a constituency MP who has also had representations on these issues from my constituents.

The loan charge, alongside the wider issue of the use of disguised remuneration schemes, is a complex subject that is deeply impactful for many of our constituents. I can assure hon. Members that the Government take the issue incredibly seriously and recognise the impact the loan charge has had. I will endeavour to address the points that have been raised in the debate, but I also wish to reassure colleagues that many of the questions they have asked, about disguised remuneration, Government policy, the loan charge and the approach and tone taken by HMRC, are precisely the questions that I have been asking officials, for the very reasons they have outlined.

I hope that during the course of my response I can provide some additional reassurance because, particularly in the light of recent circumstances, I want to make sure that I am making the right decisions and asking the right questions. Tax authorities and tax Ministers are never popular—it is the nature of the work—but I want to make sure that we act in a way that is reassuring, correct and fair to all taxpayers. I take that duty and responsibility very seriously. For example, I have had discussions and conversations with Jim Harra, the chief executive of HMRC, in the light of the Post Office scandal, about whether there are commissions or perverse incentives for people that may lead to distorting behaviour, and I have been reassured that there are not. This debate and these conversations are very useful, because they enable me to ask the right questions of my officials.

I will not be able to give everybody the answers they want, and I am going to disappoint some people with this response, because I believe we have taken the right approach. There are certain areas where I will continue to ask questions. I am aware that I will not be able to satisfy everybody today, but that will never stop me from continuing to ask the right questions.

Briefly, by way of context, because not everybody who is listening to this may be aware, the purpose of the loan charge was to ensure that users of disguised remuneration schemes paid their fair share of income tax and national insurance contributions. Disguised remuneration schemes are contrived tax avoidance arrangements that seek to avoid income tax and national insurance on income by disguising it as some other type of payment, typically in the form of a loan that is wrongly alleged to be non-taxable. Hon. Members should be in no doubt that, as has been recognised across the House, those schemes cost the Exchequer and other taxpayers hundreds of millions of pounds a year. Indeed, the total burden is to the tune of billions of pounds.

It is therefore right that, when we identify these completely inappropriate schemes, we take action. From the earliest days of the schemes, HMRC opened thousands of inquiries into their use and challenged their operation through the courts. In 2017, the Supreme Court agreed that the schemes did not work and have never worked to legitimately avoid tax, so tax is due on these payments. However, as I have heard very clearly in this debate, many questions have been raised about how we recover that tax due and who has paid it.

In 2022, the Court of Appeal ruled that, even where other parties may have obligations to withhold tax under PAYE, the liability for income tax is always that of the individual, fully endorsing a long-standing position of HMRC and of Governments of all colours. That is a key point: the individual is ultimately primarily responsible for the tax they owe and for their own tax affairs.

[Wera Hobhouse]

Does the Minister not recognise that quite a lot of people who used the schemes, who were made contractors against their will, are often just individuals who are not tax experts, who paid the tax they were asked to pay at the time and did not think anything was wrong until years later, when suddenly HMRC came to pursue them? Does he not recognise that he is doing the wrong thing to those people who really did not know better?

[Nigel Huddleston]

I thank the hon. Lady for her comment and I understand completely where she is coming from, but there are multiple points to discuss there. The schemes were never legitimate; they were always tax avoidance, and therefore there was always a clear path that tax was owed. With respect to who then pays, I will mention that in a moment, but, if we move away from the underlying principle that individuals still have personal responsibility to check their tax affairs, it is very difficult to move back to it. I will also come on to the point she raises about further Government action in a moment, because there are some people are being deceived and forced into errors that are completely inappropriate.

The early stages of such loan schemes involved the very wealthy and people who, I think we can all agree, knew exactly what they were doing, but as the schemes evolved and got more sophisticated, and more people were drawn into them, there was a long tail of people who were acting in good faith, and theirs are many of the cases that we have heard today. Although we keep the principle that ultimate responsibility lies with those individuals, it is important that we do the right thing in ensuring that tax affairs are straightened.

Oral Answers to Questions

Wera Hobhouse Excerpts

Tuesday 5th September 2023 Commons Chamber

[Nadia Whittome (Nottingham East) (Lab)]

2. What assessment he has made with Cabinet colleagues of the potential impact of climate change on the economy.

[Wera Hobhouse (Bath) (LD)]

16. What assessment he has made of the potential impact of climate change on the economy.

[The Exchequer Secretary to the Treasury (Gareth Davies)]

The Treasury’s 2021 net zero review noted that unmitigated climate change damage has been estimated to be the equivalent of losing between 5% and 20% of global GDP each year. The costs of global inaction significantly outweigh the costs of action, and McKinsey estimates that there is a global market opportunity for British businesses worth £1 trillion.

[Gareth Davies]

It is important to point out that we are the fastest decarbonising economy in the G7. Since 1990, we have decarbonised by 48% while growing our economy by 65%, but the hon. Lady is right: this will take a balanced approach involving both public spending and private investment, including pension fund investment. The recent pension fund reforms, for example, should unlock some new assets for green infrastructure.

[Wera Hobhouse]

I agree with the question about the Carbon Tracker report. It has found that policy decisions are being based on 1990s literature. That is 30 years old. Will the Chancellor review the data and the thinking that the Government are using to make sure that all strands are in line with the climate science of the 21st century?

[Gareth Davies]

The data that I look at shows that last year 40% of our electricity was generated from renewables. That is an amazing achievement, but we are alive and present when it comes to decarbonising our economy. We have great plans and we are building on our great track record. We will continue to do that.

Funding for Major Infrastructure Projects

Wera Hobhouse Excerpts

Wednesday 3rd May 2023 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

I beg to move,

That this House has considered funding for major infrastructure projects.

It is a pleasure to serve with you in the Chair, Mr Sharma. Any Government should have a long-term strategic vision for the country beyond short-term election cycles. Infrastructure planning must be at the heart of any serious Government. However, such a long-term coherent infrastructure strategy is lacking and the Government are failing to capitalise on the long-term benefits of upgrading our infrastructure. We need an infrastructure strategy now to face the challenges of the future.

--- Later in debate ---

On resuming—

[Wera Hobhouse]

Thank you, Mr Sharma—again, it is a pleasure to see you in the Chair. I think I had just got beyond my first sentence, so I will repeat what I finished with. Currently, a long-term, coherent infrastructure strategy is lacking, and the Government are failing to capitalise on the long-term benefits of upgrading our infrastructure. We need an infrastructure strategy now to face the challenges of the future, get to net zero, transform our energy and transport systems and solve our housing crisis. We need vision, not permanent crisis management.

Public investment levels in the UK are too low and too volatile. We have averaged 2.5% of GDP per year this century—well below the 3.7% average for industrialised countries. The UK’s frequent large changes in investment spending plans mean that it has the most volatile annual growth rate among all OECD advanced economies bar one, which makes it harder to deliver investments. The Government are failing to spend around £1 in every £6 they want to spend. The Chancellor of the Exchequer has said that infrastructure investment is one of the Government’s main growth priorities, but the National Infrastructure Commission has argued that they are not delivering fast enough.

Infrastructure enables trade, powers businesses and connects us all. It creates opportunities for struggling communities and protects us from an increasingly unpredictable natural environment. Weak investment in infrastructure makes all this harder. We need strong infrastructure commitments and the certainty that projects will go ahead on time and continue to be funded appropriately.

Government dither and delay over infrastructure investment is making us all poorer. Take transport: the Government have said that their decision to delay building the Birmingham to Crewe leg of High Speed 2 and the planned link into central London was made to balance the books.

[Sarah Green (Chesham and Amersham) (LD)]

I share my hon. Friend’s concerns that even the Government’s attempts to keep construction of HS2 in budget will, in practice, only add to the already spiralling costs. Surely this shows that spending on HS2 is completely out of control. Whatever our views on this particular project— I personally think it is no longer value for money and should be scrapped—does she agree that it demonstrates a clear need for the Government to more closely monitor the progress of such projects, particularly where the taxpayer is pouring in billions of pounds?

[Wera Hobhouse]

My hon. Friend’s intervention goes straight to the issue. What were the initial contracts the Government signed with contractors? We have to scrutinise the plans for delivery to make them viable for taxpayers. To pick up my hon. Friend’s point, the National Audit Office has said that the decision to delay will lead to additional costs and potentially a more expensive project overall. The Transport Secretary himself even admitted that the delay would not save money—I would be interested to hear how much it will cost the taxpayer. I agree with my hon. Friend that, whatever our views are on HS2, it is important to know what the overall delay will cost the taxpayer.

The Institution of Civil Engineers says that delaying HS2 could make the building process

“more difficult as construction firms shift their focus to other countries.”

Whether or not we agree with HS2, this incessant delay and further uncertainty benefits no one.

Another example of this Government’s short-sightedness is the M4 to Dorset coast strategic road network, which is due to undergo major upgrades. This is a matter of great importance to my Bath constituents. The present strategic route is a mixture of the A36 and A46 and goes right through the centre of Bath—a world heritage site. My local Liberal Democrat council has rightly argued that the route should not go through Bath. I recently met with the Under-Secretary of State for Transport, the hon. Member for North West Durham (Mr Holden), and National Highways to hear more about how the M4 to Dorset coast study is progressing.

National Highways said that the route through Bath has high accident rates, is heavily congested and has more cars passing through than it was designed for; it also said that the A350 route via Chippenham delivers greater benefits and has fewer challenges. However, it is still considering using the Bath route. I understand that money does not grow on trees, but why are the Government not giving enough attention to the long-term benefits to people, which include health? The A36-A46 route through Bath is not fit for purpose. The Government know this, but they are paralysed when it comes to promoting and delivering alternative routes.

The Government also fail to deliver for rail electrification. We need to electrify our railway to get to net zero. The Railway Industry Association notes that an electric railway is the cheapest to operate, saving £2 million to £3 million per vehicle. Electric trains are also up to 300% more reliable than diesel trains, and are three times more efficient than diesel or hydrogen trains. Electrifying our railway is a no-brainer. However, the Government cannot see past the short-term cost. Network Rail has said that 278 miles of track must be electrified every year to reach net zero. Last year, the Government added only 1.4 miles of newly electrified track.

[Stephen Hammond (Wimbledon) (Con)]

The hon. Member is making an interesting speech, and I agree with some of what she has said, but let us be clear: the reason so little track was built was because Network Rail failed to deliver it. That is not the Government’s fault; that is an implementation fault. Network Rail has actually underspent its investment budget in the last two control periods. It is not a question of money not arriving or the Government not doing their job; Network Rail is supposed to deliver the project but has failed to do so.

[Wera Hobhouse]

I thank the hon. Member for his intervention; I have already answered half the points he raises. The problem is that the Government need a scrutiny process to ensure that those contracts are delivered on time and on budget. There seems to be something wrong with the Government’s system to keep track of them, because in the end, big infrastructure projects are national projects, and the Government should have some interest in how they are delivered.

Bath has a big air pollution problem. The council has tried to address the issue by introducing a clean air zone, amid considerable opposition, but the electrification of the line through Bath has been on hold for years, and dirty diesel trains are still going through the city. How can I persuade my constituents that it is reasonable to stop them from driving their diesel cars through Bath when the public transport alternative is still operating on polluting diesel fuel? Air pollution kills. Not getting on with electrification is a complete dereliction of duty, not just to our net zero plans but to public health—and that costs a lot of money if we get it wrong.

Just over a year ago, the Treasury blocked a £30 billion plan to electrify Britain’s railways over the next 30 years. The Government said that Great British Railways would produce a 30-year plan to electrify the railways. However, that organisation is not expected to be fully up and running until 2024 at the earliest—more dither and delay. We have not even seen the Government’s plans for a transport Bill. I am interested to hear from the Minister whether the Treasury is kicking electrification into the long grass.

Sustainability should be woven into all aspects of transport infrastructure policy, not just for climate but for health reasons, as I have mentioned. The Government recently announced that overall funding for active travel in the current parliamentary term is being reduced by £800 million. That includes a cut of dedicated capital funding by two thirds over the next two years. It is a backwards move and will counteract the tremendous progress we have seen in recent years.

I am a keen cyclist, and I try to do most of my journeys within Bath on my bike. I am fully aware of the benefits of supporting active travel, which far outweigh the costs. People walking, wheeling and cycling in 2021 saved 2.5 million tonnes of greenhouse gas, prevented 138,000 serious long-term health conditions and avoided more than 29,000 early deaths. Active travel contributed £36.5 billion to the economy in 2021, and with continued investment, that would only increase. I urge the Government to reverse the cut to active travel infrastructure, and help more people to actively walk, wheel or cycle to the places they need to go to. Will the Government support the Liberal Democrat’s plan for a £20 billion community clean air fund that will create new walking and cycle routes, as well as expanding bus routes and creating new council-led clear air zones for congested towns and cities?

The Government might claim that all those decisions were made to protect the public finances, but that is ironic, given their record of wasting money. Network Rail has spent more than £25 million on the new station at Reading Green Park. Its response to my written question had me wondering whether the decimal point was in the wrong place. The National Infrastructure Commission and the Climate Change Committee wrote a joint letter to the Government last year urging them to produce better plans to improve the resilience of infrastructure to climate change. Record temperatures last summer forced the cancellation of hundreds of train services, and flights were stopped at London Luton airport after heat melted the runway.

The Secretary of State for Energy Security and Net Zero, in his former role as Transport Secretary, warned that it will take decades to make the UK transport system resilient to extreme heat, but we do not have decades to wait. If we do not prioritise climate adaptation now, we will pay for it later. A full national-scale economic review of resilience and adaptation, led by the Treasury, is needed to quantify the value of climate adaptation, and therefore to incentivise investment in resilience. Investment in renewables is vital to combat climate change and preserve our energy security. If the Government had supported renewables harder, faster and earlier, my constituents would not be paying the price for Putin’s war now.

China is currently the biggest investor in renewable energy. It accounts for just under half of global energy transition investment. Cumulative growth in Chinese wind power between 2021 and 2022 was more than three times greater than in the US and more than seven times greater than in Europe. If we fail to prioritise renewable investment now, we risk moving our energy dependence from one autocratic power to another. If we want to be a global competitor, we must get our act together now.

The US Inflation Reduction Act and the EU’s Net Zero Industry Act will be transformative and will incentivise huge investment in new renewable technologies and crucial net zero infrastructure, but our Government are not following them. There was no new funding on Energy Security Day, and the Chancellor has refused to go toe to toe with the Inflation Reduction Act. The UK’s investment in the energy transition fell by 10% from 2021 to 2022. In contrast, similar investment rose by nearly a quarter in the US and by 17% in countries such as Germany. When will we see a real response from the Government? Global competition over talent and resources is fierce, but the Government seem content to be left behind.

The UK has huge competitive advantages in renewables such as tidal, yet the Government have failed to give the industry the funding it needs to prosper. We still do not have enough detail about how net zero investment is being defined. I hope the Minister will provide some clarification today. If other countries provide greater certainty for green investment, we will see investors and engineers leave.

When he was Chancellor, the Prime Minister used Britishvolt as a success story. He said that the factory would produce enough batteries for more than 300,000 electric vehicles a year. The former Prime Minister, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson), told the House that support for Britishvolt would be delivered, and that the Government remained 100% behind the project, yet within a month it had collapsed. It is clear that mistakes were made at the company, but is there really nothing that the Government could have done to prevent the loss of a strategic battery producer? It is emblematic of an erratic Government without a plan—a Government who change their mind with the wind. Why on earth would people invest in the UK when they cannot have any confidence in what the Government will do from one month to the next?

The Treasury should consider giving a statutory underpinning to the publication of a national infrastructure strategy every five years, as opposed to once every Parliament. That would provide greater long-term clarity to investors, supply chains and other stakeholders about the Government’s plans. It would provide developers with a clear, long-term timeframe to plan ahead with confidence when delivering projects. The Institution for Civil Engineers argues that that means that projects can be delivered quicker and at a lower cost. Will the Minister meet it to discuss the detail of how that change would work in practice?

After the 2019 election, the Government set out their intention to raise public investment to a level not sustained since the 1970s, but now that pledge is in tatters. The Resolution Foundation has said that an increase in public investment set at around 3% of GDP would not only improve our infrastructure but would boost economic growth by about 0.8% over five years. Its research found that that boost would still allow us to keep our debt-to-GDP ratio on a downward path. According to the same research, the UK’s public investment levels could have been a transformational £500 billion higher if they had kept up with the OECD average over the past two decades. I am interested to hear whether the Government think that we should be working to close the gap with OECD counterparts.

The quality of our national infrastructure will determine the quality of our lives. It impacts how we communicate, travel and power our homes. Infrastructure in the UK is now not fit for purpose. This Government have become so focused on the here and now that they are unable to consider the future. They are so used to short-term firefighting that they are unable to take the long-term decisions that would stop fires happening in the first place. They have failed to safeguard our public finances to ensure that we can afford the vital investments that our communities are crying out for.

We need an urgent overhaul of our infrastructure strategy and more focus on the long term. Only then can we fix our crumbling and outdated infrastructure and build a vibrant, sustainable country that is fit for the 21st century.

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

It is a pleasure to serve with you in the Chair, Mr Sharma. I congratulate my hon. Friend the Member for Bath (Wera Hobhouse) on securing today’s very timely debate. It strikes at many of the issues that we face in politics at the moment—issues that must be dealt with over something longer than the current electoral cycle. One of the failings of politics and the frustrations with Government that we have all experienced over the years is that we are all focused on the next four or five-yearly electoral event. For some infrastructure projects—we have touched on HS2, and I will speak about some that are closer to home for me than that will ever be—we need a more strategic approach.

When it is at its best, the Treasury is very good at doing the strategic, but often it becomes a bit hidebound by its own rules, and it lacks a little of the creativity that we require. For those of us in the northern isles, the most important infrastructure that we have is our transport infrastructure, in particular our ferries. We have the ferries that go between Orkney and Shetland and Scotland—or mainland Scotland, as some people like to call it—and the ferries that go between the different isles that make up Orkney and Shetland. What brings me to the Chamber today is the community discussion of those internal ferry services in recent years.

Earlier in the sitting, I was pleased to welcome the announcement of funding of £26 million for a replacement Fair Isle ferry—a significant amount of money, but that money is critical to preserving one of the smallest and most economically fragile communities to be found anywhere in these islands. The geography of Shetland is such that, apart from Fair Isle, Foula and others, the islands are pretty close together on a map. To our mind, it makes perfect sense for those islands to be joined not by ferry services, which are subject to weather delays, breakdowns and all the rest of it, but by a series of short tunnels—fixed links. In recent years, the debate on the islands has very much headed in that direction. We look with some envy at what our Nordic cousins in the Faroe Islands have done by linking their islands together and at the west of Norway, where parts of the mainland are linked by tunnel, as indeed are some of the smaller islands.

As a consequence of those discussions, which have been happening in the community for some time, my colleague Beatrice Wishart MSP and I set up a series of town hall meetings in the summer of last year. Obviously there are no towns, so they were not in town halls; they were in community halls and church halls in Fetlar, Unst, Yell, Whalsay, Out Skerries and Bressay. In an age in which we are always told that people are uninterested in politics and will not turn out for a public meeting, about 250 people from these small communities came out over the course of a week to offer their views on what fixed links could do for their communities.

A tiny number of people demurred, but the overwhelming consensus was that in our communities the construction of fixed links could be absolutely transformative for the design and delivery of public services. Keeping GPs based in an island community of a few hundred people is a big ask, for example. Then there is the creation and ongoing maintenance of schools in those communities, which are constantly shifting.

I was born and brought up in Islay; I grew up there in the ’60s, ’70s and early ’80s. In those days, one GP served our end of the island. If he went fishing for the day and someone had an accident, they had to wait until he came back from his fishing trip. In the 21st century, thankfully, that is not how the NHS works. We need a wider range of clinical practitioners, and people expect different standards from those practitioners. Maintaining public services of that sort in such communities becomes ever more difficult and challenging for us.

At every meeting we heard the same story. Overwhelmingly, the view was that young people wanted to stay in the outer isles in Shetland, but were forced to leave by the nature of the opportunities for employment, health and education for their family and were desperate to return. If these people stayed in our island communities, they would contribute to their economic growth. They would be able to found, run and grow businesses or maintain businesses that had been run by their family for generations, keeping children in the schools and keeping money going through local contractors into post offices, shops and all the rest of it.

For the bigger economic development projects, getting products from the outer isles to the market will always require at least one ferry service, but there is no reason it should need two. I think of businesses such as Cooke Aquaculture, which has a processing station in Mid Yell: it has to construct an entire staff rota on the availability of ferry services to get its product from Mid Yell down to Lerwick before it catches the ongoing ferry. That is how the infrastructure provided has a very direct impact on one of the most important food-producing businesses in my constituency.

[Wera Hobhouse]

I do not know too much about ferry services, but I think the point that my right hon. Friend is making is that we cannot just look at one product in isolation. The cost benefits are wider, in the round.

[Mr Carmichael]

Absolutely. I am horrified that, having been a colleague of mine, my hon. Friend says she does not know much about ferry services—she has clearly not been listening! However, the point she makes is a good one.

This is where Treasury rules and funding come into play. If we are looking at ferries, for example, we look for a pay-down over a 20-year or possibly 30-year period. A tunnel will be several times that, but Treasury rules constantly push people towards a like-for-like replacement. They seem to lack the flexibility and creativity necessary to provide the services that will maintain the economic and social viability of such communities in the longer term.

There is also a continuing role for EU—sorry, for Treasury—funding.

--- Later in debate ---

[Wera Hobhouse]

I completely agree, but there is also the issue of the long term. I go to meetings and listen. Private investors in green infrastructure or insulation projects, for example, ask time and again for longer-term planning, because that is the only way they can deliver. Does the hon. Gentleman not agree?

[Stephen Hammond]

Private investors ask for two things: certainty that the project they are involved in will be delivered; and the certainty of an operating licence for a period, so that they can get back their investment. Therein lies the second accountability problem. In the operational phase, one should ensure the operator’s accountability. Design, build and finance operational models are well known throughout the world, and have delivered major infrastructure projects across the world—and, at times, in this country.

We must not close our eyes to the fact that the UK is still an attractive place to invest for many people. It has legal and regulatory certainty, which other countries do not have. It has certainty of Government. The Government should look again at the opportunities for an electrification infrastructure bond. What are the opportunities for working with major institutions, such as Siemens, that produce the battery infrastructure that could be accelerated into the rail industry? There are many opportunities for the Government and the country to look beyond the Government’s providing all the finance.

The key issues coming out of this debate are these. There is not a lack of vision, but a lack of implementation. We need to ensure that the bodies are put in place, be it Highways England, Network Rail, Great British Railways or BT Openreach. We have talked today only about transport and hard, physical infrastructure, but the investment in digital infrastructure and human infrastructure is almost as important for quality of life, which is a debate in itself. Getting the design and implementation phases right will undoubtedly make the financing of major infrastructure projects easier.

--- Later in debate ---

[The Exchequer Secretary to the Treasury (Gareth Davies)]

It is a great pleasure to see you in the Chair, Mr Sharma, particularly as this is my first outing as a Minister in Westminster Hall. What a great start!

There has been a really informed, detailed and, if I may say so, courteous display of speeches. The central core of every one of them was a deep care for our national infrastructure and a recognition of how important it is to all our constituencies. I congratulate the hon. Member for Bath (Wera Hobhouse) on securing the debate—at the last minute, I hear, although you would not know it—and thank hon. Members for all the other contributions. I will try to cover off some of the points raised in the time available.

Good infrastructure acts as a knot that ties our communities and our Union together. It is a vital part of how we protect our environment and helps us to unlock economic potential. The Government, right up to the Prime Minister and Chancellor, are absolutely committed to delivering the long-term economic benefits derived from capital investment and infrastructure schemes. We want to build infrastructure that is modern, efficient and accessible to everybody across our four nations.

During this Parliament there has been a step change in how we fund national infrastructure, underpinned by our national infrastructure strategy, which was referenced by my hon. Friend the Member for Wimbledon (Stephen Hammond). To achieve the aims of the strategy we are increasing funding; we have a strategy and we are matching it with funding. That was announced in the spending review of 2021. A multi-year settlement provided £100 billion of investment in economic infrastructure for this spending review period. That includes over £35 billion for rail investment—including, yes, HS2, which I will come to in a moment—and other rail enhancements to boost connectivity across our country. In the longer term, our integrated rail plan, published in November ’21, committed £96 billion for rail construction and upgrades, representing the biggest ever single investment into our rail network. It will deliver a modern network that will benefit small towns and big cities, boost productivity and bring our communities closer together.

The hon. Member for Bath referred to HS2, so let me address that head on. It is a key part of our rail strategy—a long-term investment that will improve connectivity across the country and provide a low-carbon alternative to cars and planes for many decades to come. It is already supporting tens of thousands of jobs. The Government remain absolutely committed to delivering HS2 from Euston to Manchester, and continue to push on with the sections in peak construction so that the first high-speed services—running from Old Oak Common in west London to Birmingham Curzon Street—can be delivered between 2029 and 2033.

[Wera Hobhouse]

I share the Minister’s wish for HS2, but it is just that because there are so many delays, we are losing the public. Is it not important that the Government really come clean and say, “We will deliver this, and it will be great for this, that and the other reason,” rather than putting doubt into people’s minds that it might not be delivered, might be only half-delivered, or whatever it is? Let us go out there and really sell this as a great improvement to our rail infrastructure. Does the Minister not agree?

[Gareth Davies]

I thank the hon. Lady, although I think we are selling it. She is absolutely right: it will boost productivity. It is creating jobs, as I have said, and it will boost connectivity. It is important that we all do go out and sell that. However, we have to be real: we have to balance the need for high-speed rail with sustainable public finances and respond to events as they happen around the globe. That is the reality of what we are doing with the recently announced rephasing. This is true for construction projects all over the country and, if I may say, in many parts of the world; we face significant inflation as a result of Putin’s war in Ukraine and supply shortages coming out of covid. We are reacting to that as hon. Members would expect any reasonable and responsible Government to do.

The hon. Member for Bath referenced the National Audit Office report—I can tell her that we are looking at that report very carefully and will respond in due course. However, the point I am trying to make is that on HS2 is that it is vital and we are committed to it, but we have had to make difficult decisions and choices in order to balance the need for both robust transport infrastructure and robust public finances, which we will always do for the British people.

More broadly, as has been mentioned by many speakers, we are improving rail connectivity and restoring our transport services across the country, but in particular to reverse the 1960 Beeching cuts. It is important that we expand the rail network as well as improving the existing rails.

In the interest of time, I will pick up some of the direct points raised by hon. Members. The hon. Member for Bath should be aware that I am briefed on the M4, which she mentioned—even though I am only a week in, I know about the M4 connection to Dorset. The hon. Lady will know that the DFT commissioned a study by National Highways on that route, and its outcomes are being carefully considered by the Government and wider stakeholders. It is a live discussion and we look to come back on that very soon.

The hon. Member for Bath and my hon. Friend the Member for Wimbledon also made some excellent points on rail electrification. The hon. Lady should be aware of the transport decarbonisation plan, which will deliver a net zero railway by 2050. She referenced some specific statistics, and I will respond with a couple of my own: since 2010, we have electrified 1,224 miles of track, of which 1,000 miles have been installed in the past five years alone—compared, by the way, with just 70 miles electrified in England and Wales between 1997 and 2010. I think we are doing a pretty good job, although there is more to do. I do not think anybody would deny that.

The right hon. Member for Orkney and Shetland (Mr Carmichael) made a very insightful and interesting speech about the challenges his constituents face. I will look into the issue he raised about Treasury responsibility for the pot and come back to him.

My hon. Friend the Member for Wimbledon said eloquently that these things do not all rest on Government finances; the Government cannot pick up the tab for all our infrastructure projects. The benefits of our national infrastructure strategy will be secured through Government and private funding, so we will win the prize by mobilising private capital investment. Almost half of the UK’s future infrastructure pipeline is forecast to be privately financed, and the Infrastructure and Projects Authority recently estimated that the total infrastructure investment for the next decade across the public and private sectors will be nearly £650 billion.

As my hon. Friend mentioned, we are building on a strong base. The UK is a great centre for private investment. We have a strong system of regulation, a strong legal framework that is replicated all around the world, and a leading financial and services sector that helps to mobilise private capital. He talked about the bond market, and as he knows we are one of the leading issuers of green gilts. We are doing a lot to help mobilise private capital, but critical to our financing will be the mechanisms and institutions that we have available to mobilise private capital. That is why, when I was a Back-Bench MP, I was delighted to join him in the debate on the UK Infrastructure Bank, which will play a massive role in funding the projects that people around the country rely on. It has been set one mission: to partner with the private sector and local government authorities to increase infrastructure investment in pursuit of two objectives. The first is to tackle climate change, and the second is to support regional and local economic growth through connectedness, opportunities for jobs and higher levels of productivity. As it stands, £22 billion of financial capability has been provided to the bank, and we expect it to crowd in private capital investment and support more than £40 billion of infrastructure investment. To date, it has already announced 15 deals worth more than £1.4 billion, covering clean energy, digital infrastructure and green transport. That will be transformational.

A lot of Members mentioned net zero, which is absolutely critical. What every party has in common is our commitment to the health of the planet. We are world leaders in fighting climate change and galvanising action on the global stage, as we saw at COP26, and we are right to do that at home with our net zero pledge. The UK already has a world-leading track record of delivering decarbonisation. We have reduced emissions faster than any G7 country since 1990. By the way, we have grown our economy by 75% over the same period.

The Government are committed to a total of £30 billion of domestic infrastructure for the green industrial strategy. Since March 2021, an additional £6 billion for energy efficiency was committed at the autumn statement, and £20 billion for carbon capture, utilisation and storage was announced at the spring Budget. We have in place a clear strategy to deliver on our net zero obligations, deliver energy security and drive economic growth.

To Members who question our ambition and ask whether it is achievable, I say look at what we have already done. Some 71% of all UK households have access to gigabit-capable broadband—an uplift of 8% since November 2021—and we are on track to reach a target of 85% coverage by 2025 and at least 99% by 2030. Some 92% of the UK has access to 4G mobile coverage, and we are on track to meet the Shared Rural Network target of 95%, which has a big impact on Scotland. We also had the opening of the Elizabeth line between Paddington and Abbey Wood. Those are all high-quality infrastructure priorities and projects, and other crucial projects will be announced for economic growth, boosting productivity and competitiveness.

We will go on. We will continue with our strategy, our funding and our prioritisation of national infrastructure. We will transform our railways, including HS2 to Manchester, East West Rail and the Northern Powerhouse Rail core network. We will secure the UK’s energy security through delivering new nuclear power, including Sizewell C, and the roll-out of cheap, clean renewables, including wind and solar.

Infrastructure offers us one of the most exciting and efficient direct ways of improving living standards, boosting our economy and supporting our communities, and I appreciate the opportunity to outline that today.

[Wera Hobhouse]

The debate has been interesting and I thank all colleagues for being here and sharing their considered thoughts. I think we all agree that long-term infrastructure projects are vital for our four nations. They are complex to deliver and see through; they require a well-resourced Treasury and a vision that survives from one Government to the next; and last but not least—we have not really talked about this—they require an engaged public who share that vision and are prepared to see it through with the Government of the day. If that is true of anything, it is true of getting to net zero. We agree on a lot of things, but I think we disagree about the pace of change, which for me is not fast enough. The Government will of course say, “Yes, we are getting there,” but that is the nature of these debates, and I am glad that we had such a considered debate today.

Question put and agreed to.

Resolved,

That this House has considered funding for major infrastructure projects.

Oral Answers to Questions

Wera Hobhouse Excerpts

Tuesday 7th February 2023 Commons Chamber

[James Cartlidge]

The hon. Gentleman is aware that we have already introduced two new levies: the energy profits levy, which relates to North sea oil and gas; and the electricity generators levy, which relates to the exceptional returns that generators will have received because of the exceptional prices following the invasion of Ukraine. I said to the right hon. Member for Dundee East that he was more than welcome to write to me with the specifics of the case he mentioned, and I look forward to receiving that letter.

[Wera Hobhouse (Bath) (LD)]

12. What fiscal steps he is taking with Cabinet colleagues to maximise short-term investment in wind and solar energy.

[The Exchequer Secretary to the Treasury (James Cartlidge)]

The Government are committed to encouraging investment in the UK energy sector. The contracts for difference scheme has been hugely successful in driving the deployment of renewable energy while rapidly reducing costs. It is an established and successful mechanism that provides greater confidence to investors in renewable electricity projects, and to date CFD generators have received almost £6 billion net in price support through the scheme, enabling world-leading renewable deployment and lowering the cost of capital to investors.

[Wera Hobhouse]

Since 2016, the Government have handed out over £10 billion in oil and gas exploration and extraction subsidies. In contrast, major economies such as the US and the EU are putting together huge investment plans to accelerate the renewable energy transformation, and Britain is lagging behind. Is it not time that the UK phased down subsidies for new oil and gas exploration and invested that money in renewables to accelerate the transition? The Minister knows we are not transitioning fast enough and that we are missing many of our net zero targets.

[James Cartlidge]

I respect the hon. Lady’s consistency in asking these questions, but I beg to differ when she says we are lagging behind. We have reduced our emissions faster than any other G7 nation. Last year, 40% of our energy came from renewables and just 1.5% came from coal. We have seen huge investment in renewables. Our new Department is called the Department for Energy Security and Net Zero because it is about not just net zero but energy security. On the transition to net zero, we still need to invest in the North sea and our domestic energy sources.

Financial Services and Markets Bill

Wera Hobhouse Excerpts

Report stage
Wednesday 7th December 2022 Commons Chamber

[Danny Kruger (Devizes) (Con)]

I am going to speak briefly to new clause 7 on access to cash, and to new clause 27 on access to banking services. I very much support the Bill and completely commend what the Government are trying to do. It is a source of great pride that they are bringing financial regulation home as one of the great benefits of Brexit. I applaud what they are doing and appreciate all the engagement that Ministers have had with colleagues on the new clauses that I am speaking to.

I understand that there is an intention not to push new clause 27 to a vote, and I intend to abstain on new clause 7 if there is a Division on it, because I look forward to the policy statement that the Government have promised. I support the principle behind both the new clauses. As Members have mentioned, we seem to be moving inevitably towards a cashless society, and we can all see the personal convenience of that. Like the royal family, I personally do not carry cash around. It is only embarrassing when I am in church and the platter comes around. That is pretty much the only occasion when I feel the need for it, but that is not the case for everyone.

For anyone using a digital payments system, the operator of the platform has potentially immense control over their life, in principle and in practice. That is why what PayPal did to the Free Speech Union and others a few months ago is so important. Yes, we can acknowledge that that event was an outlier. It was a rare and slightly inexplicable event and, yes, it was quickly corrected in some of the cases of the accounts that were closed, but the fact is that it happened. It was a straw in the wind, and the fact that individuals and organisations with heterodox political opinions found themselves unable to operate economically because of the decision of a private company acting entirely on its own initiative, possibly under pressure from external campaigns, is a troubling development. So it is vital that we send the strongest regulatory, and also cultural and political, signal to these private payment platforms that the opinions of their customers are none of their business.

Nor are private opinions any business of the state, and this is why the question of access to cash is about more than the important issue of protecting the vulnerable, although I agree with the points that have been made on that. It is also about liberty. Just now, behind the scenes, the Government and the Bank of England are developing plans for their own central bank digital currency. Again, we can see the practical appeal, but the threat is that the Government will have oversight of the economic activity of private citizens, which is something that no Government of this country have ever had in our history. It is therefore vital that the debate on a central bank digital currency has liberty front and centre. We can all say warm words about the importance of safeguards and freedoms, but the fact is that if the emergency is bad enough and the powers are available, those powers could well be used.

We saw this happening around the world, and to some degree in our own country, during the covid crisis. We have only to look at what the Canadian Government did to block access to the bank accounts of truckers protesting against the covid policy there to see what can be done in a modern liberal western country. It would be a shame if we took back control of financial regulation from the EU only to empower private payment platforms, or indeed our own central bank, in that way. Cash services and banking services are part of the infrastructure of our communities. They are also part of the infrastructure of liberty.

[Wera Hobhouse (Bath) (LD)]

I rise to speak in support of new clauses 34 and 35. Both are tabled in my name and deal with the rules and duties of pension schemes and investments.

This Bill could be a unique opportunity to develop the green economy we need by providing the finance required to support our net zero transition. Unfortunately, this Government might again miss the boat. The Bank of England recently warned that UK banks and insurers will end up shouldering nearly £340 billion-worth of climate-related losses by 2050. Such losses will be unrecoverable, so it is cheaper to save the planet than to destroy it.

The World Bank suggests that up to 216 million people could be forced to move within their countries by 2050, but immediate climate action could reduce that by up to 80%. Limiting global warming to 1.5°C instead of 2°C could result in around 42 million fewer people being exposed to extreme heatwaves. We have pensions to provide adequate quality of life after retirement. How absurd it would be if the climate catastrophe meant that there was little quality of life left.

Autumn Statement

Wera Hobhouse Excerpts

Thursday 17th November 2022 Commons Chamber

[Jeremy Hunt]

The hon. Lady makes an important point. I am in constant discussion with the Secretary of State for Levelling Up, Housing and Communities about the importance of housing policy creating new houses for people on low incomes. However, on wages overall, the £4.7 billion for the social care sector, for which she advocates, will make a significant difference in that area.

[Wera Hobhouse (Bath) (LD)]

The Chancellor’s statement is forcing everybody to pay the price for the puncturing of the economy by his Conservative Government, and I put Brexit very much at the core of the problem. Everybody is paying except the big oil and gas companies, because there are still massive tax loopholes for companies drilling for new fossil fuels. Let me ask him this serious question: who is his statement benefiting—the renewable energy companies or the fossil fuel sector?

[Jeremy Hunt]

The renewable energy companies and people in the traditional energy sector are paying a windfall tax, and as a result, we can have more money for doctors, nurses and people in social care up and down the country. That means that we are investing in the NHS in a way that was not possible when we were in coalition with the Liberal Democrats in 2010.

Oral Answers to Questions

Wera Hobhouse Excerpts

Tuesday 15th November 2022 Commons Chamber

[Stephen Kinnock (Aberavon) (Lab)]

14. What fiscal steps he plans to take with Cabinet colleagues to support the development of floating offshore wind.

[Wera Hobhouse (Bath) (LD)]

21. What fiscal steps the Government is taking to support the development of floating offshore wind.

[The Exchequer Secretary to the Treasury (James Cartlidge)]

We are committed to developing floating offshore wind to support our energy security and net zero ambitions. The contracts for difference scheme has already supported the first-of-its-kind TwinHub project off the coast of Cornwall, which will deliver enough energy to power 45,000 homes. The floating offshore wind demonstration programme provided £31 million in grant funding to support many other new innovative projects.

[James Cartlidge]

The hon. Gentleman is a staunch campaigner for his constituency’s ability to take advantage of this exciting new technology, and I pay tribute to him for that. As he knows, the Crown Estate works independently to manage the seabed and has an important role in the deployment of floating offshore wind. Its approach for the 4 GW leasing opportunity in the Celtic sea is focused on ensuring the development of this new technology market in the UK as quickly as possible. But, to be clear—cutting to his point about content—the Crown Estate has announced that for the first time it is reforming the tender process to consider supply chain plans, sending a clear signal to the market that UK content is important.

[Wera Hobhouse]

Many renewable energy projects are limited by a lack of grid capacity. We have more wind farms ready for investment in the coming decade than the rest of the world, but the grid is not ready. For future offshore wind projects, who will be paying for the grid connections?

[James Cartlidge]

This issue has certainly captured the imagination in East Anglia, where the hon. Lady may be aware that there are certain proposals to bring forward improvements in the grid, although that is ultimately the responsibility of National Grid. We need to address the grid, but I hope she will agree that the country has already made enormous progress in increasing capacity from offshore wind. She may be aware that in 2011 renewables made up just 9% of our electricity; that figure is now over 40%.

Vehicle Taxation Reform

Wera Hobhouse Excerpts

Wednesday 19th October 2022 Westminster Hall

On resuming—

[Wera Hobhouse (Bath) (LD)]

I beg to move,

That this House has considered reform of the vehicle taxation system.

I am delighted to bring this matter to Westminster Hall for debate. There is an urgent need for reform of our vehicle taxation system, for both fiscal and environmental reasons. The public understand that change must come; they look to the Government for clarity on the path to be followed. I hope that the Minister will be able to aid that process today. She will recognise that the future of travel is changing every year; Britain’s transport networks and habits are moving into the net zero era.

Electric vehicle ownership is rising, as people try to help the planet and their wallets. Battery electric vehicles, or EVs, made up 14% of the new cars sold so far this year, and more electric vehicles were sold last year than in the previous five years combined. 2030, the year in which polluting vehicles will no longer be produced or sold, is fast approaching. The Government must act to reform road tax if they are to avoid yet another huge black hole opening up in their finances.

No form of change will be easy, but the sooner change is made the easier it will be. The main form of vehicle tax in the UK is fuel duty, which is nearly 53% added to every litre of fuel paid for at the petrol pump. Fuel duty raises approximately £28 billion a year for the Treasury. That is alongside the 28% VAT that is paid on fuel sales.

[Richard Foord (Tiverton and Honiton) (LD)]

I thank my hon. Friend for securing this debate. The issue of how we tax road usage is very important, but I am deeply concerned about what is happening right now. In rural areas such as mine, where cars are essential to get around, we see people being hammered at the fuel pump. In part, that is due to limited competition and because there are fewer forecourts. Does she agree that we need to expand fuel duty relief for rural communities, so that it brings down prices immediately and eases the cost of living in the short term?

[Wera Hobhouse]

Absolutely. We see that people are facing great problems in rural communities and it is important to make short-term interventions to help them. However, I am really talking today about what vehicle taxation will look like in the long term, once we transition to net zero. Nevertheless, I fully take the point made by my hon. Friend.

On the other hand, drivers of electric vehicles pay no fuel duty. The Government need to continue incentivising the use of electric vehicles for environmental reasons. However, there are many ways in which that can be done without subsidising fuel duty. One option is to increase the number of public electric vehicle charging points. So far, the UK has only 31 electric vehicle charging points and only six rapid charging points per 100,000 people. If the Government are serious about encouraging the uptake of electric vehicles, they must ensure that the infrastructure is there. That would be of great benefit to my constituents in Bath and to the wider south-west, as our region is the second largest in the country for electric vehicle uptake.

Other incentives could include providing grants for electric car conversion. The conversion of old cars has significant benefits. For example, the carbon footprint of producing a new car is far higher than that created by continuing to use an old car. Currently, buying a new electric car is not an easy option for many people who do not have off-road parking or their own charging facilities. The conversion of older cars would help lower-income families who are struggling with the cost of living crisis, while also being part of the movement to less carbon-intensive transport options.

If we are to transition to net zero sustainably, the Government must find a way to fill the taxation income gap caused by declining fuel duty. The Government’s own net zero strategy from 2021 states that the taxation of motoring must keep pace with electric vehicles. I understand that the Treasury has said in the past that the level of income from motorists should stay about the same in future, but how can that be achieved?

[Huw Merriman (Bexhill and Battle) (Con)]

I congratulate the hon. Lady on securing this excellent debate. The Select Committee on Transport, which I chair, has put a series of recommendations to the Treasury, and we work closely with it. In advocating a form of road pricing, she rightly says that there will be a fiscal black hole. Some 4% of the entire tax take comes from motoring taxes. The evidence we received from the Treasury was that that figure would plummet to zero by 2040, so that means a loss of investment not just for roads, which account for just 20% of that total tax figure, but for schools and hospitals. Does she agree that the reason why we need road pricing is not just to fill the hole, but because devolved Mayors, in using their powers, are creating a patchwork of road-pricing schemes, and it will be difficult for the Government to get into that space with that patchwork already in place?

[Wera Hobhouse]

I totally agree. We need some clarity and something that motorists across the country can see as a coherent strategy, rather than the patchwork that the hon. Gentleman spoke about. One approach would be a scheme based on mileage. Other factors, such as emission levels or road type, could be added into the mix. Road pricing, as it is often referred to, is not a new idea. The Liberal Democrats proposed a version of it in our 2010 manifesto. It has been explored in depth many times. So far, no noticeable progress has been made towards its adoption and the hon. Gentleman is absolutely right that we need to act and find ways forward quickly.

Nearly 20 years ago, the then Transport Secretary said that road pricing was 10 years away, but we do not have another 10 years to waste. The motivation then was to cut pollution and reduce congestion, particularly in larger cities. Our most urgent need now is getting to net zero and, while doing that, looking at the immediate financial implications that I have mentioned.

I want to draw the Minister’s attention to an excellent report released just a few days ago by the Campaign for Better Transport. The report tested options for a national road pricing system with a large cross-section of the public. The good news is that the public appear to be open to the idea of road pricing, otherwise known as pay-as-you-drive. In the survey, nearly 50% of respondents felt that fuel duties were unfair. That is unsurprising. Low-income households are more likely to have older, more polluting and less fuel-efficient cars and to pay more fuel duty per mile travelled. That is in contrast to wealthier households with newer, more fuel-efficient vehicles. According to Policy Exchange research, someone with a new car could pay half the amount of fuel duty compared with the owner of an older car. Other findings from the report show that 65% of those surveyed believe that electric vehicle owners need to pay tax to use the road system. Drivers felt that people with electric vehicles are effectively driving tax free, while those who are unable to switch—largely for financial reasons—must pay.

We must encourage the take-up of electric vehicles to reach net zero. However, the public are acutely aware that Britain’s finances are under pressure after the recent economic shocks. Money must be found somewhere. There is evidence that the current vehicle taxation system is not fit for purpose, and the public agree. In the Campaign for Better Transport report, 60% of respondents agreed that there was a need to reform the vehicle taxation system. What options are available to Government and are these options fair in the eyes of constituents? Pay-as-you-go, or pay-as-you-drive, is worthy of consideration. It is widely regarded by experts as a progressive step forward. A pay-as-you-drive system could charge drivers directly per mile driven with a set distance charge. Another alternative could be smart road pricing, whereby the charge per mile varies depending on different factors. The Treasury would have the option of applying this equally to all vehicles. Alternatively, it could create a series of levels based on emitting status and/or the location where the person is driving.

The Climate Change Committee report to Parliament this year noted that road pricing “will be necessary” in the longer term. It recommended that the Government implement it “later this decade”. The Select Committee on Transport has recommended smart pricing, as has the Policy Exchange, the AA, and the Social Market Foundation.

For the first time in a long time, consensus is beginning to emerge. When pay-as-you-drive was initially pitched in the Campaign for Better Transport survey, 42% of respondents supported the idea, with 21% saying “No”. After the concept had been explained and questions answered, the percentage in favour rose to 49%, with opposition dropping to just 18%.

Pay-as-you-drive can come in many forms, but there are three options worth considering. One is a flat per-mile charge for electric vehicles. That would keep fuel duties as they are for existing petrol and diesel vehicles, and those duties would wither away as those cars disappear from our roads. Another option is replacing fuel duty and vehicle excise duty, with a set per-mile charge based on the emissions level of the vehicle. That could be estimated at the annual MOT mileage check. Lastly, we could replace fuel and excise duty with a smart per-mile charge that varies with vehicle type, emissions, location and time of day.

The main argument in favour of pay-as-you-drive comes from the need to reduce the number of people driving to lower congestion and reduce air pollution and carbon emissions. The transport sector is now the biggest source of domestic greenhouse gas emissions and accounts for 28% of all emissions. Cars make up 55% of that figure, while lorries and vans make up 32%. Buses, coaches, and rail collectively account for just less than 5%, according to Government figures.

A system based on rewarding those who drive less, rather than a flat rate, could lead many members of the public to use their cars less and use public transport more. The idea that drivers who drive more should pay more in tax, and that those who drive less should pay less, was popular in the survey and it is clearly the right direction to take.

There is no doubt that ensuring investment in public transport, including reforms to the integration of bus and rail ticketing systems, is critical to a functioning pay-as-you-drive system. Those reforms cannot exist in a vacuum and must be part of a wider conversation on how we move people away from private cars and on to environmentally friendly public transport.

In the Campaign for Better Transport survey, 69% of respondents stated that a key element of making the entire system fairer for drivers was to make public transport cheaper. The Liberal Democrats would seek to give new powers to local authorities and communities to improve transport in their areas. That would include the ability to introduce network-wide ticketing, like that in London, and greater powers to franchise bus services and simplify the franchise application system. We would also reverse the ban on local authorities setting up their own bus companies, which should give councils the tools to make transport accessible for everyone.

Reforming the system towards pay-as-you-go would also bring transparency to vehicle taxation. Many drivers are unaware of the level of fuel duty that exists within the price that they pay for fuel. It is important that we bring clarity and openness to the vehicle taxation system when we reform it.

We must do everything possible to reach our net zero targets. However, that transition needs to be sustainable and accessible. Pay-as-you-drive is a progressive way of solving the problem of declining fuel duty revenue. In particular, it would encourage much more sustainable transport habits. Clearly, pay-as-you-drive schemes must be combined with more investment in public transport and environmentally friendly infrastructure. I look forward to the Minister’s response.

[The Exchequer Secretary to the Treasury (Felicity Buchan)]

It is a pleasure to serve under your chairmanship, Sir George, on my first outing as a Treasury Minister in Westminster Hall. I will begin by congratulating the hon. Member for Bath (Wera Hobhouse) and thanking her for securing this important debate on vehicle taxation. As today’s discussion has demonstrated, it is a highly topical issue.

These taxes bring in some £35.5 billion to the Exchequer every year—money that is essential to fund high quality public services. That sum is worth about 4.3% of our total tax take, so it is critical. As the hon. Member for Bath said, the taxes have a crucial role to play in our transition to net zero, to which this Government are absolutely committed. Vehicle taxation and its future are a matter of great public interest. Road vehicles in Great Britain covered almost 300 billion miles in 2021, underscoring our need to maintain high-quality infrastructure while minimising emissions. As we transition to net zero, it is vital that we also consider how we continue to pay for our roads, as well as our schools, hospitals and armed forces.

Let me begin to outline the background by exploring the present system of vehicle taxation. We have two main vehicle taxes in this country: fuel duty and vehicle excise duty. Fuel duty is currently the largest yielding excise regime, raising £26 billion in 2021-22. Vehicle excise duty, or road tax as it is sometimes known, is worth a further £7 billion a year. Altogether, those revenues equate to just under 40% of the total education budget for this entire financial year, as we have an Education Minister, my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis), present in the Chamber.

We also have other smaller taxes, most notably company car tax, which raises some £2.5 billion a year. That tax applies when a car is made available to an employee for private purposes, since that represents a taxable non-cash benefit. The funds raised from all those taxes contribute to both road maintenance and the resourcing of other vital public services. The Government have refined those taxes both to help families and businesses navigate cost of living pressures and to support our net zero ambitions.

At spring statement 2022, the Government announced a temporary 12-month cut of 5p to fuel duty on petrol and diesel, worth £2.4 billion. That is the largest ever cash-terms cut to fuel duty. Perhaps I can use this opportunity to address a few points made by the hon. Member for Tiverton and Honiton (Richard Foord). First, we asked the Competitions and Markets Authority to undertake an urgent review of the market for road fuel. Its findings suggest that the fuel duty cut was largely passed through, but Government have asked it to do a fuller market study on the supply of road fuel, and Government will react to those conclusions.

I draw the hon. Member’s attention to the rural fuel duty relief scheme, which gives support to motorists by compensating fuel retailers in some select rural areas that meet certain criteria. If they qualify, there is a 5p per litre reduction for the retailers. We have also adapted those taxes to incentivise take-up of electric vehicles. Road transport accounts for a massive 24% of UK carbon emissions, so reducing those emissions is essential to the UK’s transition to net zero.

Industry statistics suggest that more than 1 million battery and plug-in hybrid electric vehicles are now registered in the UK, which is a huge success, but we need to go further and faster. To support that, we will introduce a ZEV mandate in 2024, and end the sale of petrol and diesel-powered vehicles by 2030 and of hybrid vehicles by 2035. At that point, all vehicles sold will be zero emission. In all, the Government have committed £2.5 billion since 2020 to support the transition to electric vehicles, with targeted funding to offset the higher up-front costs and to accelerate the roll-out of charge point infrastructure. That includes £500 million to support local charge point provision, £950 million to support rapid charging on motorways and major A roads, and funding for charge points in homes and businesses.

In addition to those measures, the Government also use the vehicle tax system to incentivise the take-up of vehicles with lower carbon emissions. In 2017, the Government introduced a reformed vehicle excise duty system for new cars. Under that system, zero emission models pay nothing on first registration, while the most polluting pay more than £2,000. In subsequent years most cars move to a standard rate, currently set at £165 per year; meanwhile, zero emission vehicles pay nothing, either on first registration or subsequently. Company car tax, too, is adapted to the pursuit of net zero, and it has been effective in incentivising the uptake of electric vehicles and ultra-low emission vehicles. Company cars comprise a significant proportion of electric vehicles and ultra-low emission vehicles on the road today. Those cars will filter through to the second-hand market, increasing the supply of used electric vehicles and making the transition more affordable for consumers.

I will move on to the future of motoring taxes. I start by paying tribute to my hon. Friend the Member for Bexhill and Battle (Huw Merriman) who, as Chair of the Transport Committee, has done a lot of work on that topic. As more road users switch to electric vehicles, tax receipts from fuel duty and vehicle excise duty will decrease if the present system remains unchanged. The net zero review indicates that tax receipts from fossil fuel-related activity will eventually trend towards zero. Revenue from fuel duty is projected to decline from 1.2% of GDP in the middle of the decade to 0.2% by the 2040s, and revenues from vehicle excise duty will also fall. The Government are committed to ensuring that revenue from vehicle taxes keeps pace with that change, with taxation simultaneously remaining affordable for consumers. That will ensure that we can continue to fund the public services and infrastructure that people and families across the UK expect. In considering how to replace those lost tax revenues, the Government will also consider the secondary impacts of existing vehicle taxes, not least in reducing road congestion.

[Wera Hobhouse]

Does the Minister agree that the principle of all new taxation has to be that we disincentivise people from using their cars and incentivise more use of public transport? Ultimately, that is the most sustainable way to go forward.

[Felicity Buchan]

I am sure the hon. Lady will recognise that we have a medium-term fiscal plan coming up in about 10 days, and at this stage we will not commit to anything ahead of that plan.

I conclude by thanking the hon. Member for Bath for the opportunity to have a fruitful discussion about vehicle taxation. We are all aware of how important the issue is, given the fact that motoring taxes account for 4.3% of total tax take and £35 billion—a significant sum. We are also all aware that our constituents have a strong interest in any changes to vehicle taxation. I welcome the widespread support that hon. Members have expressed for using vehicle taxation to facilitate our transition to net zero, and I am grateful that so many hon. Members appreciate the need to reform vehicle taxation to maintain tax receipts while achieving net zero. We will listen to our constituents and to hon. Members as we continue to refine vehicle taxation and adapt it to the Britain of net zero, economic growth and fiscal responsibility.

Question put and agreed to.