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.

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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.

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[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.

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[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 & 3rd reading
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.

Cost of Living: Support for Young People

Wera Hobhouse Excerpts

Tuesday 18th October 2022 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairship, Ms Ali. I congratulate the hon. Member for Leeds North East (Fabian Hamilton) on securing this important debate. It gives us an opportunity to shine a light on young people, who are often overlooked. In my short remarks, I will focus on students.

The last decade will have a long and significant impact on the younger generation. Many entered their youth in the throes of the financial crisis, went through the pandemic in their formative years and are now experiencing the full force of the cost of living crisis. The latest economic shock is presenting a new set of challenges for young people, particularly students.

I recently met a group of students from Bath Spa University. They are hugely worried about the financial pressures that rampant inflation is placing on them, and their concerns are not unfounded. UK students have seen a 7.5% cut in their maintenance loans. That has had severe consequences: research by the National Union of Students shows that a third of UK students are being forced to live on £50 a month after paying rent and bills. Some are having to choose between feeding themselves and carrying on with their education; many are holding down multiple jobs to make ends meet. Mercy In Action, a local charity in Bath, has seen a fivefold increase in the number of young people and students who need to use its food pantry. Inevitably, students from the poorest backgrounds are disproportionately affected.

The cost of living crisis goes far beyond a purely financial hit. The Bath Spa students I spoke to described how the crisis was causing them considerable stress and anxiety. The Student Value Report showed that nearly two thirds of UK students felt their mental health had been negatively affected, while two fifths of students thought that their physical health had been affected. That is no way to go through a demanding course of study, or to sit and prepare for exams. The Government claim to view economic growth as a priority, but growth is not sustainable unless we support our young people. The students of today will shape our future, and should have ample opportunity to do so. The Prime Minister talks about equality of opportunity, yet she is not giving students the opportunity they need to achieve their potential.

Of course, failing to support students has a knock-on effect on local economies. Student spending supports over £80 billion of economic output: that is crucial for places such as Bath, where over a third of our population is made up of students. If students are struggling, the local communities in which they live will lose out too. To prevent the devastating effects of student poverty, the Government need to tie student support to inflation, as we have already heard, and deliver urgent maintenance grants and bursaries to those who need them.

[Paul Blomfield]

I know that the hon. Member regularly takes up student issues and is a strong advocate for her student constituents. Does she recognise that students, particularly those from poorer backgrounds, went into this crisis already at a disadvantage, not least because the salary threshold for eligibility for maximum loans in England has been frozen at £25,000 since 2008? Does she agree that a simple measure the Government could implement, and should not necessarily rule out, would be to adjust the threshold so that those from poorer backgrounds are more able to access those loans in England?

[Wera Hobhouse]

I thank the hon. Member for that remark—I have to admit that I was not totally aware of the detail, but I fully support what he has said about what needs to be done. It is clear that young people, including those who are now in their 30s, have already lost out because of the financial crisis. We need to support that younger generation, but we also need to support the young people who are coming through now, those who have been at a disadvantage as a result of covid. The least we can do is listen, and the Government need to listen to the recommendations that have been made today and act on them urgently.

As I said, the Government need to tie student support to inflation and deliver urgent maintenance grants and bursaries to those who need them. The cost of doing so would be low compared with other recent Government spending commitments. It would support the vital economic growth on which this Government tell us they are uniquely focused. While I applaud universities that have provided hardship funds, those institutions do not have enough means adequately to protect students in need: that is the responsibility of central Government. The Prime Minister has talked regularly about equality of opportunity and about growth. If this Government are serious about growth, they need to invest in people, especially young people.

--- Later in debate ---

[The Economic Secretary to the Treasury (Richard Fuller)]

What a great pleasure it is, Ms Ali, to serve under your chairmanship. I thank the hon. Member for Leeds North East (Fabian Hamilton) for securing the debate, and I thank the hon. Members who have contributed, including the hon. Members for Bath (Wera Hobhouse) and for East Dunbartonshire (Amy Callaghan). I thank my friend, the hon. Member for Sheffield Central (Paul Blomfield), for a number of very useful interventions, and the SNP spokesperson, the hon. Member for Glasgow Central (Alison Thewliss), and my colleague on the Front Bench opposite, the hon. Member for Ealing North (James Murray), for their contributions.

It was good that the hon. Member for Leeds North East started by referring to the YMCA publication entitled “Inside the cost of living crisis: The experiences of young people living at YMCA”, which was published earlier today, along with some other reports. I would like to draw colleagues’ attention to the statement with which that report starts, with which I am sure we can all agree:

“Everyone should have a fair chance to discover who they are and what they can become.”

The YMCA does great things across the country to enable people to achieve that objective.

There are real challenges facing our economy after two decades of low inflation. The world is now confronted with a high bout of fast-growing prices and the United Kingdom is not immune. While that takes place, we should all remember that our friends in Ukraine are at war, and the United Kingdom will continue to support them in a number of ways. We recognise that Putin is using energy as a weapon of war, pushing up prices and piling pain on citizens across the free world and particularly in Europe.

We should also recognise that young people can be in a particularly precarious position, because they are still in education or just starting out in their careers. They may not have had time to build a financial safety net. Many are at a critical stage of identifying and then seeking to accelerate their potential. I want to be clear: this Government are responding to help the most vulnerable to get through these tough economic times.

I want to answer some of the questions that have been raised. Very directly, on the uprating of welfare benefits in line with inflation, I will be honest: there are difficult decisions to be made. I want to reassure people that helping the most vulnerable will continue to be central to our decisions, just as it was when we announced support of £1,200 for millions of the most vulnerable households. The Government are required to review the rates of benefits annually to determine whether they have kept pace with price inflation. The Work and Pensions Secretary is yet to conduct her annual review of benefits and more will be said in the medium-term fiscal plan.

I think I heard the hon. Member for Glasgow Central ask why the universal credit standard allowance is lower for people under 25. That is to reflect that those claimants are more likely to live in someone else’s household and to have lower living costs. However, it is acknowledged that some claimants under 25 do live independently, which is why universal credit includes separate elements to provide support to claimants for those additional costs.

I want briefly to talk about the trend of poverty since 2009-10. Between 2009-10 and 2021, 2 million fewer people were in absolute poverty after housing costs—a figure that includes 500,000 children. In 2021, 536,000 fewer children were in workless households than in 2010. The youth unemployment rate fell by 1.3 percentage points in the quarter to August 2022 and is at a record low of 9%, which is around a quarter below its pre-pandemic level.

That progress requires us to talk about economic stability, which is vital for everyone and particularly for young people who may be looking for their first jobs or next steps. Instability affects the prices of things in shops, the cost of mortgages and the value of pensions, meaning that bringing stability to the economy will ease the cost of living for everyone. As the Chancellor has said, the United Kingdom will always pay its way and we remain committed to fiscal discipline. There will be more difficult decisions to take on both tax and spending as we deliver our commitment to get debt falling as a share of the economy over the medium term. We will publish a medium-term fiscal plan to set out our responsible fiscal approach more fully at the end of the month.

The only real way to create better jobs, deliver higher wages and spread opportunity is growth. Growth is what frees us to invest in the services that ordinary people need and to give people the financial security to live their lives as they want. Stability is a prerequisite for growth.

[Wera Hobhouse]

I do not think anybody could disagree that we all want growth, but the question is, how do we make that growth happen? My point was that we need to invest in people, particularly young people, to make that growth happen.

[Richard Fuller]

Yes of course, but the hon. Lady did not answer her question. The question is, how do we tap that potential? It is important to design policies that tap that potential. I was struck by a point made by the hon. Member for Glasgow Central about migrant families coming to this country and how they start their life. It is a fact around the world that first-generation migrant families, more often than not, contribute a greater proportion to the growth of the country that they go to than the population that they join. That seems to be a fact. I have not forgotten previous discussions with her before I took this role. The hon. Member for Bath said that we have to focus on people’s potential, but we have to find that strategy to achieve growth.

I remind hon. Members that while tackling these economic challenges, the fundamentals of the UK economy remain resilient. Unemployment is at its lowest in nearly 50 years. Our growth rate since 2010 has been higher than that of Germany, France, Italy and Japan, and it is forecast to be higher than that of any G7 country this year. The Labour spokesperson, the hon. Member for Ealing North, is shaking his hands, but these are the facts.

Our need for competence and stability is not at odds with the help that we are providing to those struggling with the cost of living. That is why the Government are focused first and foremost on helping everyone with the cost of living, most notably the cost of energy. The energy price guarantee and the energy bill relief scheme are supporting millions of households and businesses with rising energy costs. The Chancellor has already made clear that they will continue to do so—

The Growth Plan

Wera Hobhouse Excerpts

Friday 23rd September 2022 Commons Chamber

[Kwasi Kwarteng]

There are three big measures that are helping tens of millions of people up and down the country: first, the energy intervention announced by my right hon. Friend the Prime Minister last week; secondly, the reversal of the national insurance planned increase; and thirdly, the acceleration—the bringing forward—of the 1p cut in the basic rate. The hon. Gentleman should be welcoming those measures and not playing to the gallery with his tired old socialist rhetoric.

[Wera Hobhouse (Bath) (LD)]

Access to dentists has reached a catastrophic low. One in five people is resorting to DIY dentistry, and there are shocking stories from many of my Bath constituents. The only way to get a dental appointment now is to go private, which costs far more than any tax cuts will offset. How will tax cuts today offer my Bath constituents proper access to the dental care they need?

[Kwasi Kwarteng]

The growth plan will mean that, as we grow our economy, we can get more tax revenue to pay for vital public services. That is a key part and a key rationale of the plan.

Financial Services and Markets Bill

Wera Hobhouse Excerpts

2nd reading
Wednesday 7th September 2022 Commons Chamber

[Wera Hobhouse (Bath) (LD)]

Further to the previous question, does the hon. Lady agree that one does not exclude the other?

[Tulip Siddiq]

rose—

[Wera Hobhouse]

I am referring to competitiveness and having a green agenda.

[Tulip Siddiq]

I had to think for a second about what the hon. Lady was referring to, but she is absolutely right. I agree with her on that, and I will address it a bit later in my speech.

The Opposition particularly welcome the inclusion in the new secondary objective of a focus on the medium-term and long-term growth of the UK economy. Financial services are already an important driver of growth in the UK, but much more can be done to support the sector to invest in companies in every sector and every region in the country, to deliver long-term growth and well-paid jobs in the real economy. I understand that clause 26 requires the PRA and FCA to report annually on the new secondary objective, but will the Minister confirm in his closing speech whether that will include being held to account specifically on the advancement of long-term growth in the real economy?

That brings me on to the provisions in clauses 27 to 46, which deal with accountability more broadly. The Bill facilitates an unprecedented transfer of responsibilities from retained EU law to the regulators. We recognise the need for a rethink of how the FCA and PRA are held accountable by democratically elected politicians and Governments. We particularly welcome clause 36, which will formalise and strengthen the role of the Treasury Committee in holding regulators to account. However, as my hon. Friends the Members for Wallasey (Dame Angela Eagle) and for Kingston upon Hull West and Hessle (Emma Hardy) said, we need to be able to scrutinise decisions taken by the Treasury, and I hope the Minister will elaborate on that. Any new powers allowing greater involvement of and policy input from Government in the FCA’s and PRA’s rule making process must be carefully balanced with the need to protect their regulatory independence. We will be scrutinising these provisions closely in the weeks ahead.

The UK’s reputation for regulatory independence is a key driver of our competitiveness on the world stage, as I am sure the Minister will agree. Equally important, however, is ensuring that the City has a clear direction of travel on post-Brexit reform. I was worried about that, because over the summer the now Prime Minister made a series of off-the-cuff policy announcements and people around her were spreading rumours, which left the sector in a state of uncertainty about her Government’s plans for this Bill. The Minister has today confirmed that the intervention powers, or so-called call-in powers, will be included in the Bill through an amendment. I am disappointed that the Government have decided to cause greater uncertainty in the City by introducing a significant change at this stage, and I hope he will reassure me that they will publish the details of these new powers as soon as possible. I would also be grateful if the Minister would confirm in his closing remarks whether the Government have plans to abolish the FCA and PRA. That would seem to undermine many of the provisions in the Bill.

I also wish to discuss the issue of access to cash and banking services, which some Members have spoken about. The Opposition broadly support the Bill, but we are concerned that there are some serious gaps in it as it stands. Of course, we strongly welcome clauses 47 and 48, which will finally, after years and years of Government delay, protect access to cash. The industry, and particularly the major banks, should be applauded for coming together to help protect cash services at the end of last year, in advance of this legislation being put on a statutory footing. But the Bill does nothing to protect essential face-to-face banking services, which the most vulnerable in our society depend on for financial advice and support.

On this Government’s watch almost 6,000 bank branches have closed since 2015, and the “Community Access to Cash Pilots” report found significant overlap between those reliant on cash, estimated at about 10 million people, and those who need in-person banking support. Those without the digital skills to bank online, people in rural areas with poor internet connection and the growing number of people who are unable to afford to pay for data or wi-fi as the cost of living crisis deepens are at risk of being left behind. Banking hubs or other models of community provision, such as banking kiosks, will need to be part of the solution. These are spaces where dedicated staff can provide vital face-to-face support for those who need it, and tackle digital exclusion by teaching people how to bank online.

--- Later in debate ---

[Wera Hobhouse (Bath) (LD)]

My hon. Friend the Member for Richmond Park (Sarah Olney) has already indicated that there is quite a lot to welcome in this Bill, but there also are a number of things that we Liberal Democrats do not agree with and would like to be improved. The Bill does not actively promote the leading green finance sector that we were promised. According to the WWF, we need $32 trillion by 2030 to tackle the climate emergency. The Bill in front of us could be a unique opportunity to develop the green economy that the future needs by providing routes to roll out net zero technologies and allowing UK businesses to capitalise on green transitions.

As the chair of the Climate Change Committee pointed out only this morning, tackling soaring energy bills—currently the most important thing we are considering—and tackling the climate emergency go hand in hand. Net zero technologies could reduce household bills by £1,800 a year—a reduction that is desperately needed by so many people. This Bill could be a unique opportunity to make that happen, but it falls dramatically short.

In its current form, the Bill prioritises competitiveness over net zero and accountability. Clause 25 adds the need to advance compliance with the UK net zero emissions target to the list of regulatory principles to be applied by the FCA and the PRA. However, the new principle—namely, that regulators must “have regard” to the UK net zero target—is not strong enough. Additionally, they will have limited margin to acknowledge the role of nature in achieving net zero. This approach is reckless. The Bill opens up the possibility, as has been mentioned today, of soaring food prices by throwing out reforms introduced in 2008 to protect consumers from volatile trading practices.

The Government always defend their net zero strategy by placing responsibility on the markets, yet before the 2008 reforms, food prices rocketed after speculative trading on future food prices drove up prices. Regulators are vital to ensuring that consumers are protected and that markets function well but not out of control. A former UN special rapporteur has said that speculators

“are indeed betting on hunger, and exacerbating it”.

Our country cannot afford to have another dimension added to the cost of living crisis.

Rather than volatile competitiveness, the Bill must provide clear legal obligations and a commitment to the UK’s net zero target. Net zero must have the same priority for regulators as economic competitiveness. The scale of the climate crisis requires massive shifts in approach that can be achieved only with explicit legal duties, which must include a new objective to decarbonise the financial system. As I have already said, regulations and net zero aims have to work hand in hand. The Government must add climate targets to the primary objectives and thereby give them a status higher than the one the Bill currently proposes.

We Liberal Democrats would go even further and ban new fossil fuel companies from being listed on the London stock exchange. We would also create new powers for regulators to act if banks and other investors do not properly manage climate risks. That is the sort of ambition that we need, but the Government’s ambition is lacking. We have less and less time to act on the climate emergency. The time is now. I urge Ministers not to miss this unique opportunity.

Energy (Oil and Gas) Profits Levy Bill

Wera Hobhouse Excerpts

2nd reading
Monday 11th July 2022 Commons Chamber

[Wera Hobhouse (Bath) (LD)]

I congratulate the hon. Member for Wakefield (Simon Lightwood) on an excellent speech. He told us about the wonderful heritage, arts and culture in his constituency. I went to Yorkshire Sculpture Park, a long time ago now, and it was absolutely beautiful. I encourage everybody to go. I hope he will not suffer the fate of one his predecessors and get his foot jammed in one of the Lobby doors. Maybe if he comes early for voting, he can avoid that fate.

We Liberal Democrats have been calling for a windfall tax since last year. It was my right hon. Friend the Member for Kingston and Surbiton (Ed Davey) who first suggested, last October, a windfall tax on the super profits of the oil and gas giants that were taking millions of pounds in profit while households were starting to struggle badly. For months the Government tried to resist a windfall tax, defending the indefensible. The Government have finally caved in, but too late for many. For example, my constituent wrote to me in January saying that he had to stay in bed because he could not heat his home. Our Liberal Democrat analysis shows that more than double the amount could have been raised if the Government’s levy was tougher now and had been implemented earlier. The equivalent of £200 is lost to each household because the Government are doing too little too late.

[Imran Hussain (Bradford East) (Lab)]

The hon. Lady is making an absolutely excellent and pertinent point. Does she agree that the Government have had ample opportunities, but voted no fewer than three times in this House against bringing a levy in earlier?

[Wera Hobhouse]

I could not agree more. The Government have dithered and delayed. They could do something about it and back our amendment, which would ensure that the new levy on oil and gas companies is backdated to last October. That would at least reflect the dither and delay and do something about it.

What should we make of the proposals to exempt those companies investing in new oil and gas exploration? There is nothing in the Bill to incentivise investment in renewables. That flies in the face of the Government’s commitment to get to net zero. In fact, it demonstrates once more how quickly they are prepared to U-turn on their promises, making it harder for struggling households to get on top of soaring energy bills now and in future and failing to take serious action on climate change. What is more, where is the programme to transform the pace of home insulation, which is lagging shockingly behind? Where are the planning laws to ensure that we build zero-carbon homes now rather than allowing developers to build homes that will require very costly retrofitting in a few years’ time?

We need bold and swift action to help families with the soaring cost of living and energy prices. The cheapest form of energy is onshore wind. When will the Government drop their effective ban on onshore wind and turbo-charge its revival? That would be the surest way to help struggling households to bring their energy bills down in the near future. The Government, however, can only fire-fight, and they have no vision and no real ambition.

Under Liberal Democrat plans, we would cut most emissions by 2030. That would be good not only for the climate, but for people’s pockets as we wean ourselves off global oil and gas markets as soon as possible. The Government have to come clean on the fact that even if gas and oil are produced in the UK, that will do nothing for household energy costs, because the price of oil and gas is fixed globally, not nationally.

On new green jobs, cleaner air, warmer homes and lowering living costs, the levy could have done so much more. We Liberal Democrats support the Bill but deplore the lack of a much greater ambition from the Government to rein in soaring energy costs and tackle the climate emergency.

[Mr Deputy Speaker (Mr Nigel Evans)]

I call the shadow Minister, Abena Oppong-Asare.