House of Commons
Friday 25 November 2011
The House met at half-past Nine o’clock
Prayers
[Mr Speaker in the Chair]
I beg to move, That the House sit in private.
Question put forthwith (Standing Order No. 163).
On a point of order, Mr Speaker. The Deputy Prime Minister has been expounding in the media today a new Government policy in a major announcement of billions of pounds being spent on getting people into work. There is allegedly a written statement, but I have not seen it and it was not available to Parliament at the start of the day. It seems to me, Mr Speaker, that that announcement should have been made first in the House and not to the media. Is there any further action I can take on this point?
I am grateful to the hon. Gentleman for his point of order. I have seen no such written ministerial statement and at the time I came into the Chamber none was available. I note what the hon. Gentleman has said about media coverage and I reiterate the point I have repeatedly made from the Chair: statements of Government policy should be made first to the House of Commons. That is an obligation upon all Ministers, without exception. The hon. Gentleman is an experienced parliamentary hand and he will know that avenues are open to him to pursue this matter—if not today, on subsequent days. I hope that is clear and helpful.
Public Services (Social Value) Bill
Consideration of Bill, as amended in the Public Bill Committee.
New Clause 1
National social enterprise strategy
‘(1) The Secretary of State must prepare and publish a document setting out a strategy for the promotion by government departments of engagement in social enterprise in England (the “national social enterprise strategy”).
(2) The national social enterprise strategy must be designed with a view to promoting participation in its implementation by persons or bodies appearing to the Secretary of State to be representative of those engaged in social enterprise and by the public, whether by monitoring its effectiveness or otherwise.
(3) The Secretary of State may review the national social enterprise strategy and prepare and publish a new strategy to replace a previous national social enterprise strategy.
(4) In preparing the national social enterprise strategy or a new strategy, the Secretary of State must—
(a) consult such persons or bodies appearing to the Secretary of State to be representative of those engaged in social enterprise as the Secretary of State considers appropriate; and
(b) carry out such public consultation as the Secretary of State considers appropriate.
(5) For the purposes of this section a person or body is engaged in social enterprise if—
(a) the person or body is carrying on a business;
(b) the business’s activities are being carried on primarily for a purpose that promotes or improves the social or environmental well-being of the United Kingdom, whether the purpose is pursued in relation to all or any part of the United Kingdom or all or any of the persons resident or present in it;
(c) the greater part of any profits for distribution is applied for such a purpose;
(d) the business is majority-owned and controlled in the interests of improving the social or environmental well-being of the United Kingdom;
(6) The Secretary of State shall by regulations made by statutory instrument set out criteria for establishing whether a business falls within the definition in subsection (5)(d) above.’.—(Mr Thomas.)
Brought up, and read the First time.
I beg to move, That the clause be read a Second time.
With this it will be convenient to discuss the following:
New clause 2—Local authority strategies—
'(1) Section 4 of the Local Government Act 2000 (strategies for promoting wellbeing) is amended as follows.
(2) After subsection (1) insert—
“(lA) A local authority’s sustainable community strategy must include—
(a) their proposals in connection with promoting engagement in social enterprise in their area; and
(b) a statement of measures proposed for enabling persons or bodies engaged in social enterprise in their area and such other persons as they consider appropriate to participate in the implementation of the proposals referred to in paragraph (a).”.
(3) After subsection (4) insert—
“(4A) For the purposes of this section a person or body is engaged in social enterprise if—
(a) the person or body is carrying on a business;
(b) the business’s activities are being carried on primarily for a purpose that promotes or improves the social or environmental wellbeing of the United Kingdom, whether the purpose is pursued in relation to all or any part of the United Kingdom or all or any of the persons resident or present in it; and
(c) the greater part of any profits for distribution is applied for such a purpose.’”.
New clause 3—Annual report to parliament—
'(1) The Secretary of State must prepare and publish an annual report on the operation of the Government’s strategy for social enterprises in the preceding year and must lay a copy of the report before Parliament.
(2) The Secretary of State must, during the preparation of each report, consult—
(a) the National Audit Office;
(b) the Charity Commission;
(c) Co-ops UK;
(d) the National Council for Voluntary Organisations;
(e) Social Enterprise UK;
(f) the Association for Chief Executives in Voluntary Organisations;
(g) the Office for National Statistics; and
(h) such other organisations or persons as the Secretary of State considers appropriate.
(3) Each report must include statistics on the performance of social enterprises.’.
Amendment 1, in clause 1, page 1, line 3 after first ‘of’, insert ‘goods and’.
Amendment 2, in clause 4, page 3, line 36, after ‘Services (’, insert ‘Social Enterprise and’.
Amendment 3, in title, line 1, at beginning insert—
‘To require the Secretary of State and local authorities to publish strategies in connection with promoting social enterprise; to enable communities to participate in the formulation and implementation of those strategies;’.
Amendment 4, in title, line 1, leave out from ‘Require’ to ‘and’ in line 2 and insert
‘that public sector contracts include provisions relating to social outcomes and social value;’.
I congratulate the hon. Member for Warwick and Leamington (Chris White) not only on his choice of subject but on the way in which he has steered the Bill through the House thus far.
The Opposition want a comprehensive change programme to boost social enterprise further. I hope to set out this morning a more ambitious approach to the Bill than the Government and the Minister, sadly, have been willing to countenance so far, but before I do so let me explain how my amendments seek to build on some of the issues raised in Committee.
In new clause 1, I have sought to respond to the appetite shown in Committee for more certainty about the definition of social enterprises, and in particular how an asset lock might be worked into the Bill. In new clause 3, I have sought to provide a clear means of encouraging the Government to be accountable for their work in social enterprises. Amendment 1 offers the Minister an opportunity to clarify the arguments that he used in Committee to justify the limited scope of the Bill in relation to commissioning.
In Committee, we had an interesting discussion about the merits or otherwise of a national strategy for social enterprise. I fear that the absence of a clear requirement for such a strategy poses the risk of a loss of momentum behind the sector when ministerial attention is diverted, as it inevitably will be. An example is the point of order on which you ruled earlier, Mr Speaker. No doubt ministerial attention has been diverted, quite rightly, to youth unemployment and the return of the future jobs fund in another guise. There is a risk that other issues might also divert Ministers’ attention from their commitments to social enterprises in the future, and a clear strategy would help to avoid any such loss of focus and interest.
I fear that things that could and should be done by other Whitehall Departments to help social enterprises cannot be done without a requirement for a cross-Whitehall strategy. I fear, too, that some parts of the country will miss out, and that many communities that could and should benefit from what social enterprise can offer will not be able do so because of the absence of a clear strategy framework for Whitehall’s work.
The Minister claimed in Committee that there was a strategy for social enterprise, and cited social investment as one part of that strategy. I must point out gently to him that he did not seem to be willing to give many more such examples. He did, however, go on to say that the Cabinet Office was working with the Department for Business, Innovation and Skills, suggesting that that somehow proved that the whole of Whitehall was united behind work for social enterprises.
I believe that a strategy for social enterprise should touch on a series of issues. Access to finance is clearly a key issue, as are access to commissioning opportunities and the role that social enterprises can play in assisting the process of modernising our public services, making them more flexible and personal. Access to advice and support for fledgling or “wannabe” social enterprises is clearly a further aspect of such a strategy. Ongoing support and representation from—ghastly phrase—infrastructure organisations to help social enterprises to share best practice, to solve legal problems that they may face, or to tackle difficult human resource issues would also be worthy of inclusion.
A strategy could explore the scope for more work with, or indeed instead of, the private sector. It could also consider issues relating to coverage: which communities are likely to need more help to enable more social enterprises to emerge, and what should that help look like in practice? It could outline the role not only of other Whitehall Departments but non-Whitehall players in developing the Government’s endeavours to help social enterprise.
Does my hon. Friend share my regret that the original Bill, which was genuinely about social enterprise, has been reduced—as a result of, I believe, arguments within the Government—to a Bill that simply talks about the very minimal bit of social value that is left, rather than giving what could have been a really good boost to the social enterprise sector?
My right hon. Friend makes an important point. The Bill represents a huge missed opportunity for the Government to embrace the other elements of the Bill. This is a Government who made much of their commitment to the big society, yet here is, arguably, a big society Bill that they have—as my right hon. Friend rightly says—gutted. The absence today of Conservative Members who might have been present to defend and advocate this big society Bill is, I fear, further testimony to the lack of support for it in practice.
Let me now deal with some of the issues relating to access to money that might constitute part of a national strategy.
On the subject of money, may I ask whether the hon. Gentleman has assessed the possible cost of producing a national strategy?
I have not, but the explanatory notes prepared by the hon. Member for Warwick and Leamington for Second Reading contained an assessment of the cost, which, if I remember rightly, was approximately £41,000.
Many social enterprises clearly have a strong trading and enterprise ethos, but most have required start-up finance or transitional funds, or funds for specialist advice. For voluntary sector organisations wishing to become social enterprises, strong grant income can help to provide a cushion allowing a business model to be properly developed. If there is no clear, thought-through process to make appropriate funding available, the huge cuts in Government funding for the third sector may not only put at risk the services provided by voluntary and civil society groups on which so many of our constituents rely, but hold back the growth of the social enterprise sector.
It is, I would gently suggest, not enough for the Government to talk about a strategy for social investment. I do not doubt the Minister’s commitment to growing the market for social finance, and the Government’s interest in social impact bonds and support for the big society bank—both Labour ideas—are welcome, but when those initiatives are set against the scale of the cuts in direct funding from national Government and, as a result, local government, there seems to be little hope that the social finance market will have grown sufficiently robust to replace the estimated £3.2 billion—possibly as much as £5.1 billion—of direct funding that will be lost. That estimate of the potentially huge loss to the third sector over the coming comprehensive spending review period was provided by the independent analysts New Philanthropy Capital.
I am listening to the hon. Gentleman’s speech with great interest. He is making a point not only about the need for a strategy, but about the impact of cuts in the near term. Does he agree that, in essence, the Bill in its present form retains the opportunity to support social enterprises, and that the Social Enterprise Coalition and other leaders of social enterprises support it?
The hon. Gentleman makes a valid point when he says that the Bill, although its scope is substantially restricted, offers some opportunity for progress to be made in support of social enterprises. The Opposition welcome and support that, but, as my right hon. Friend said, this Bill provided the Government with an opportunity to be far more ambitious in scope, and it is a tragedy that the Minister has not been able to persuade his colleagues in Government to support the more far-reaching measures.
New Philanthropy Capital has assessed the funding situation facing the voluntary sector in the coming years. It noted how the scale of the cuts would be far too big for public foundations or other forms of philanthropy to be able to compensate for, and also noted that charities funded by local authorities, which will bear particularly heavy cuts, are at great risk. The Minister will not, I suspect, be surprised by these difficulties facing the third sector, especially those resulting from the Government’s cuts on local authorities. This is yet another example of their cutting public spending too far, too fast. I am sure the Minister will know about the cuts at Hillingdon Community Transport, Hillingdon Law Centre, Hillingdon Arts Association and Hillingdon Women’s Centre. Those are just a few examples of local organisations that are being affected by the coalition’s economic strategy.
Social enterprises that trade directly with the public are all too aware of the extremely difficult trading environment on the high street. The latest news, which came out today, is that Sir Philip Green is having to axe a whole series of shops. That proves the error of the Government’s economic strategy, and if his business is facing such difficulties, it is unsurprising that social enterprises that trade with the public are also experiencing falling incomes. The crisis facing the economy, and therefore the circumstances facing social enterprises trading with the public, are yet another reason why the Chancellor should consider introducing a temporary cut in VAT and adopting the plan B proposed by the shadow Chancellor, my right hon. Friend the Member for Morley and Outwood (Ed Balls).
New Philanthropy Capital also noted concerns for the third sector in respect of threats to cash flow from changes to commissioning and contracting arrangements. It points out that the shift of responsibility for commissioning from primary care trusts to GPs will create uncertainty, and the shift to payment by results could result in many social enterprises being paid for services in arrears, thereby putting strain on their cash flow. Access to grants will be important in future, and a clear, sensible, properly prepared strategy could help to ensure resources are used appropriately to support the Government’s objective of encouraging more social enterprises to flourish.
The second element of our proposed Government strategy to support social enterprises would be a focus on commissioning. Properly organised commissioning, with well-designed contracts and commissioners who understand the sector, could be a very important element in a successful strategy to develop the social enterprise sector.
Apart from the provision of a small capacity-building pot, it is unclear whether the Government have thought through how to get the well-trained commissioners they need, or how to get the support to the social enterprise sector that will be needed if social enterprises are to benefit from commissioning opportunities in the future. Claire Dove, chair of the Social Enterprise Coalition, said in evidence to the Public Administration Committee that uncertainty in commissioning was a key concern of the sector.
The Work programme is a classic example of a poorly designed commissioning process. The Minister for the Cabinet Office and Paymaster General claimed that 35% to 40% of the value of the contracts under the Work programme would go to third sector organisations such as social enterprises. That has not happened so far. Indeed, a recent report by the National Council for Voluntary Organisations, which represents more than 8,500 social enterprises, charities and voluntary groups, highlighted its members’ concerns about commissioning under the Work programme and the referrals that they were, or were not, getting. It stated:
“There have been a number of CSOs who are operating as ‘specialist’ or ‘tier 2’ providers that have not yet received any Work Programme referrals”.
It also noted wider concerns about the structure of the Work programme:
“While one of civil society’s strengths lies in specialist support for harder to reach customers, confining CSOs to these smaller contracts could compromise the long-term financial resilience of some organisations and their capacity to participate in future service delivery.”
In August and September the Association of Chief Executives of Voluntary Organisations conducted a survey of 155 third sector organisations that are Work programme subcontractors. It found that many had not yet received any referrals. The London Voluntary Service Council reported similar findings in its recent survey. It said the vast majority of specialist tier 2 providers in London had had no Work programme customers. The lack of a proper strategic framework for the commissioning of services from social enterprises has resulted in a poorly designed programme that is not likely to lead to the desired benefits to social enterprises.
This is of concern not only to Opposition Members. Baroness Stedman-Scott is, I understand, a Conservative peer, but she raised concerns in an article that appeared in The Guardian. She is chief executive of the welfare-to-work charity, Tomorrow’s People. It is having to close three offices, lay off a considerable number of staff—almost 30% of its work force—and halve the number of unemployed people it helps get into work each year from the current figure of 8,000, all because of fall-out from the Government’s Work programme.
The Government have not properly thought through how to make commissioning work for social enterprises and the third sector. They must do so. If the Work programme examples I have given have not convinced Members of that, let me also give examples involving the national health service, such as the commissioning experience of Central Surrey Health, an employee-owned organisation that was awarded the first ever big society award by the Prime Minister. The Minister for the Cabinet Office and Paymaster General declared it to be a classic example of the big society in action, yet in September it was announced that Central Surrey Health had lost out on a major NHS contract to a private company, Assura Medical Ltd, which is owned by Virgin Healthcare. I understand the Minister answering today’s debate has said since our Committee discussions that that was “just tough”, and that it was in the nature of competitive tendering, although I also understand he later accepted that there is not yet a genuinely level playing field for third sector organisations such as social enterprises wanting to compete with private sector organisations.
I wonder whether my hon. Friend shares the following concerns, particularly in respect of the national health service. If it is truly to become the biggest social enterprise in the world, as the Secretary of State for Health has said, there needs to be a lock on public sector assets that have been paid for by taxpayers, so that they are not transitioned into the private sector. That has already happened in some instances. I have made that point to the Minister on several occasions, and I am very concerned that public assets will be transferred to private companies, making private profit for people in the private sector.
I entirely agree with my right hon. Friend. It is precisely because of the concern she has raised on this issue—and the support she received, including from Members of the coalition parties, in Committee—that I propose a revised definition of social enterprise in this new clause. It seeks to provide in legislation the asset lock facility. Central Surrey Health is owned by the nurses and managers who work in it, and it was the first employee-owned spin-out from the national health service—that occurred back in 2006, under the Labour Government. It is a classic employee mutual. The Cabinet Office has confirmed that Central Surrey Health has delivered substantial improvements in quality and efficiency in the services provided. However, it would appear that quality counted for far less in the tendering exercise than the ability to raise capital.
The chief executive of Social Enterprise UK, Peter Holbrook, put it as follows:
“If Central Surrey Health, the government’s flagship mutual social enterprise, which has demonstrated considerable success in transforming health services, reducing waiting times and increasing productivity can’t win”—
in a commissioning contract process—
“what does this say for the future of the mutuals agenda?”
He went on to say:
“Public sector workers will be understandably anxious about spinning out from the NHS and setting up a social enterprise on the back of this news. The government needs to take action to reassure them that they will not be operating in markets weighted against them.”
The thought, consultation and preparation required in a proper strategic review of how to support social enterprises might begin to give those public sector workers the confidence they need to be part of employee spin-outs.
The sense that nobody has a proper joined-up grip of how to transform commissioning has perhaps left many public sector workers sadly sceptical about being part of creating an employee mutual. The Minister for the Cabinet Office and Paymaster General has bravely pledged that by 2015 the country will have 1 million more public sector workers in mutuals. I have tabled parliamentary questions asking each Department how many applications Ministers have received from employees to run services for which their Department is directly responsible. Sadly, the overwhelming majority of Departments had received absolutely none.
A strategy for social enterprises could also explore where and how social enterprises can get the advice, the support and even the training that they need in commissioning, and in the legal and human resources issues that they would face, for example, in respect of TUPE. Where do social enterprises go for that support now? Clearly they can go to the excellent Social Enterprise UK or Co-operatives UK, but are they well enough funded for the scale of the Government’s future ambitions? I pose that question in the context of Rise, the south-west social enterprise agency, having decided to close its doors because of a lack of income. As a result, there is understandable concern that Ministers have not thought through the external support required to grow the social enterprise sector. Social Enterprise UK has suggested that there should be more social enterprise hubs offering a combination of business support, shared work space and peer support to support the growth of the sector. That is a very interesting idea, and if there were to be a proper strategy, the Government could explore it in more detail.
What thought have the Government given to encouraging the growth of social enterprises to take on tasks that have traditionally been the preserve of the private sector, for example, in the areas of finance or energy? The Government want social enterprises to help them to roll back the state, but have they thought through the opportunities for social enterprises to do more in those traditional private sector areas? Let me give one example. Access to loans and the level of personal debt have been issues of huge concern across the House. Social enterprises that do not need to fund profits for shareholders could offer cheaper loans and could do so in areas where traditional businesses might not operate. Credit unions are a powerful example of the potential in that area. The London Mutual Credit Union, which I believe operates in Southwark and Lambeth, wants to offer a cheaper payday loan in competition with similar private sector products and it would charge far less than the very high rates of interest that private sector payday lenders currently offer.
Similarly, we need to see an increase in access to renewable energy. Why can such energy not be generated by social enterprises, with the profits reinvested into the very communities that are home to the sources of such energy? Baywind Energy in the Lake district is one such social enterprise—it is a co-operative. The Government could use the opportunity of a national strategy to set out how they can support, and even whether they would encourage, the growth of social enterprises in areas where big energy and big finance have previously operated largely unchallenged. A proper strategic look at the opportunities for social enterprises outside the public sector might identify new areas of opportunity that well-designed assistance from Government might help to come to fruition.
The National Institute of Adult Continuing Education recently produced a sensible and thought-provoking analysis of the role of education and learning in the big society. It makes the perfectly reasonable point that structural inequalities arising from social class, income levels and job status or prospects, and from issues relating to age, gender, race, faith and disability, can present complex barriers to participation in civil society. It also says that inequalities in skills can have a negative impact on levels of civic participation and, thus, on the readiness of some to play a part in forming social enterprises. NIACE highlights the learning needs of public sector employees who want to form a spin-out enterprise, saying that they will need expertise in service design or in understanding different business models. The question that NIACE’s work raises is: where will the learning come from to meet those needs? Where will the support come from to meet those educational challenges?
Again, a proper, well-thought-through strategy might consider how to ensure that all communities are covered and monitored, and that the characteristics of areas and authorities where fewer social enterprises were being developed were thought about, understood and considered for further support. A strategy would also think through what roles other non-Whitehall players could play in the Government’s ambition for more social enterprises. Further education colleges could perhaps play a role in meeting the training needs that I have just described. Key voluntary sector bodies could perhaps offer further support, and NHS trusts, foundation trusts and mutuals that are already part of the third sector in that sense could certainly have a role to play in supporting further NHS spin-outs. A strategy could help to lock in those key non-Whitehall players to help grow the social enterprise sector further.
Before we move off new clause 1, may I draw the House’s attention to subsection 5(b), which contains a definition of “social enterprise”? As I read it, Barratt Homes would qualify here, because one could argue that by building houses it is improving social infrastructure; the provision of affordable homes meets the criteria. Section 106 agreements, which provide affordable homes for rent, housing facilities and health facilities, all meet those criteria. In addition, the definition could exclude those seeking to provide fair trade services, because they do not provide or improve social or environmental well-being in the United Kingdom. Will the hon. Gentleman clarify how that provision would actually be applied? Would it not, in fact, open the door to every business?
The hon. Gentleman makes an interesting point about Barrett Homes. I draw his attention to subsection 5(d) of new clause 1, which refers to the business being
“majority-owned and controlled in the interests of improving the social or environmental well-being of the United Kingdom.”
Given that Barrett Homes has a substantial shareholder base, it would be difficult to justify in any court of law that it met that definition.
The hon. Gentleman's interesting point relates to Fairtrade, too, and if the Government accept the new clause, a small amendment in the other place could help to ensure that Fairtrade organisations were not excluded. I am open to the idea that his suggestion might work and I gently suggest that it would require the Minister to have a slightly more open mind than he demonstrated in Committee. Perhaps the hon. Gentleman will have more luck in encouraging the Minister behind the scenes than I did in Committee.
New clause 2 highlights the key role that local authorities will play in helping to grow the social enterprise sector. Indeed, many of the representations I have received about the Bill stress the importance of local authority commissioners for social enterprises. A requirement for a proper strategic look at the needs of social enterprises in each local authority area would mean that Conservative councils, desperate simply to privatise services, would have to at least to consider the merits of the social enterprise sector. They would do well to look at the example of the many Labour-run co-op councils around the country that are already doing much to encourage social enterprises to develop.
In Committee, a number of Members noted the danger of strategy documents gathering dust and achieving little, which none of us in the House of Commons would want to see. I accept that that is a risk, and new clause 3 is designed to help minimise that risk. I have been struck by the enthusiasm of many of the organisations included for consultation on new clause 3. New clause 3 requires an annual report to be laid before Parliament with the clear involvement through consultation of a diverse range of representative bodies from the sector and others, such as the National Audit Office, which, if it wanted to do so, could comment effectively on the success or otherwise of the commissioning for social value part of the Bill. The Charity Commission would be able to provide a view on the effectiveness of the Government’s strategy to encourage further charities that are social enterprises, while the Office for National Statistics clearly needs to be encouraged to develop statistics to enable the sector’s strength and performance to be properly understood.
Evidence-based policy making and proper evaluation of what has worked and what has happened so that one can learn from mistakes is surely always a sensible approach for Ministers and Parliament to encourage. The National Council for Voluntary Organisations, the Association of Chief Executives of Voluntary Organisations, Social Enterprise UK and Co-operatives UK are all strong, excellent bodies that could offer insightful comments to help Ministers and, crucially, Parliament, to assess the effectiveness of the Government’s policies for encouraging the sector to grow.
I was struck by the recent Public Administration Committee’s report “Change in Government: the agenda for leadership”, published in September. The Committee noted the Prime Minister’s promise on, among other things,
“re-empowering…communities as part of the ‘Big Society’”.
Two paragraphs on, it stated:
“The principal message of this report is that unless there is a comprehensive change programme for government, there will be little of the real change”
that the Conservative manifesto promised. There are three new clauses before the House today that all offer the chance of that comprehensive change programme for social enterprise to be embedded across Whitehall.
My final point on the three new clauses is to draw the House’s attention to the new suggested definition for the sector. In Committee and in her intervention today, my right hon. Friend the Member for Salford and Eccles (Hazel Blears) rightly raised the issue of an asset lock to protect taxpayers’ assets to stop them simply being transferred to the private sector. In Committee, my right hon. Friend received support for the principle of an asset lock from the hon. Member for Bedford (Richard Fuller) and even from the Minister.
As I said in response to the intervention from the hon. Member for Finchley and Golders Green (Mike Freer), subsection 5(d) of new clause 1 seeks to add a key description to the definition of social enterprise which locks in any public assets transfer to the social enterprise. That matters because the Opposition remember the bus privatisation scandal of the 1980s. The bus industry was transferred lock, stock and barrel from public ownership to employee mutuals. It was not that long before the employee mutuals handed themselves over to what had become big corporate bus businesses. Those businesses gained the assets on the cheap while the community and employees lost some of the social value implicit in those public assets, which were taken out as profits of those private businesses to reward their shareholders.
I do not criticise the entrepreneurs who set up and now run the bus industry, as the rules at the time allowed them to do what they did. I am certainly not against privatisation. It has its place, although that is not everywhere and not all the time. If that is the Government’s intention for an industry or a particular part of a sector, however, we should have proper, transparent debate about its merits.
I appreciate the point made by the right hon. Member for Salford and Eccles (Hazel Blears) about how some overage must be retained by the taxpayer when surpluses are gained later, but the hon. Gentleman is rewriting the history a little, I think, of the effect of bus privatisation. I remember that when I was a schoolgirl in Liverpool the introduction of choice and competition meant that we had better services, not worse, as a result of the privatisation.
My recollection is slightly different; we remember that in the 1980s there were substantial cuts in bus services after privatisation. Arguably, that is not the point. The key point is whether the assets should remain in the ownership of the public sector or, if not, in that of members of the public who are combining in a social enterprise. The asset lock clause seeks to achieve just that.
I thank my hon. Friend for allowing me to make a small contribution on this point. The publicly owned bus company in Edinburgh, Lothian Buses, has won bus operator of the year for five of the past 10 years. It is 90% owned by the city of Edinburgh council and 10% owned by each of the surrounding authorities in the Greater Edinburgh area, including Midlothian, East Lothian and West Lothian. That investment in public buses has made it one of the best bus companies in Europe—holding fares down and being responsive to local communities. I wholeheartedly agree with what my hon. Friend has just said.
My hon. Friend makes the interesting point that public sector-run organisations can be extremely successful and often are extremely efficient. The key issue we focused on in Committee is that when assets are transferred out of the public sector we need to ensure that if they have been built up over the years as a result of taxpayer investment, there will be proper protection for the social value that the assets have generated. My revised definition of social enterprise seeks to achieve that objective.
The last amendment on which I want to focus is amendment 1, as the others are all consequential on the three new clauses. Amendment 1 would ensure that the one part of the original Bill to which we know the Government are committed is widened in scope. The Government want and the Opposition support further reforms to the public procurement process to encourage the Government in their various forms to take account of wider economic, social and environmental well-being in the commissioning process.
The Bill places a duty on all commissioners in contracting authorities to consider how to improve social, economic and environmental well-being in services-only contracts that have a value above the EU procurement threshold and are at their pre-procurement stage. What was striking about the Minister’s comments in Committee—I say this gently and with affection—was the vagueness of his explanations as to why the pre-procurement stage is the only stage covered and why only services are covered. Let me give the House a flavour of the exchange that took place, provoked largely by my right hon. Friend the Member for Salford and Eccles and my hon. Friend the Member for Stretford and Urmston (Kate Green). The Minister said:
“I stress that it is not the Government’s intention to suggest that there would not be benefits in considering wider value in other forms of contract, but we do not believe that they warrant legislation at this time.”
What he did not or would not explain was why the scope of this key, crucial clause should cover only services—although I accept that goods could be covered if the contract was primarily for services. In Committee, he forced through amendments that prevented the Bill from covering contracts for goods or for work.
My hon. Friend will recall that in Committee I raised the example of B4Box, a construction social enterprise that refurbishes houses, does construction work and employs people who have a difficult and troubled employment history. The Minister was unable to satisfy me at that time—and I have heard nothing since—about how that amazing social enterprise could be covered under “social value”, because it deals with goods and services, and sometimes the goods might well exceed the services.
My right hon. Friend made a very valid intervention in Committee on exactly this point, and I shall return to that issue in a moment.
The Minister also said in Committee that he wanted to
“strike a proper balance between our”—
the Government’s—
“objective to encourage more commissioners to think about wider values, such as social and environmental values, in their considerations, and our determination to try to streamline the process and to reduce the number of additional duties on commissioners.” ––[Official Report, Public Services (Social Enterprise and Social Value) Public Bill Committee, 19 October 2011; c. 19.]
However, he did not explain why it is reasonable to encourage commissioners to think about social value in the context of services but is unreasonable to ask the very same commissioners—as it is usually, although not always, the same commissioners—to think about social value when awarding contracts for work or, crucially, for goods. Will he clarify a little further how he arrived at the view that services could be covered but that contracts for work and for goods should not be covered? Was there a discussion across Government in which he lost out? Perhaps the Secretary of State for Communities and Local Government saw this as a step too far. I note that there was a huge gap between the Bill’s Second Reading and Committee, which suggests there was a fairly intense debate behind the scenes in Government—was it on this issue?
If there was not a political problem in Government about the inclusion of contracts for work or for goods, perhaps there was some research basis for suggesting that only contracts for services mattered in legislative terms for encouraging and embedding that concept of social value in commissioners’ thinking. If that is the case, will the Minister enlighten the House as to the research evidence in question? The whole House believes in transparency and I am sure that we all want to see clear, evidence-based policy making. Will he tell us with whom he discussed such research, if it exists? Was it with Social Enterprise UK or with Co-operatives UK, either of which would have been a logical choice? Was it with the Charity Commission or just with officials? It would be helpful to know the thought process he went through in deciding to omit contracts for work and contracts for goods from the scope of the Bill so that not only those of us in the House today but people in the third sector, particularly public sector commissioners, who consider our debate can better understand what is expected.
During our Committee discussions, my hon. Friend the Member for Stretford and Urmston highlighted the issue of books and publications, which are goods, and the fact that publications providing information about the social security system are arguably providing a service. She noted the potential dangers of confusion and difficulty for commissioners with contracts for goods being excluded from the Bill’s scope.
My right hon. Friend the Member for Salford and Eccles raised in Committee the issue of construction, as she has just done, and whether it would count as a service, a good or work. I gently point out to the Minister that he did not answer her question on that. Following our Committee discussions, I have received further representations suggesting that construction contracts could be outside the scope of the Bill. The organisation in question suggests that legal advice might be necessary, but surely the Minister, having had so much advance notice of the concerns of many Committee members on this issue, can clarify the situation today. I have also received representations that if the Bill covered the provision of food, furniture or plants, the civil society organisations bidding for contracts would be more likely to benefit from the socially and environmentally responsible manner in which those goods are or could be produced.
Similarly, I have received representations suggesting that statutory guidance and training are required on how and where social value can legitimately be considered and inserted into tender specifications. Does the Minister intend to bring forward such guidance for commissioners and for those third sector organisations, social enterprises and others that could benefit from this clause? The Bill could achieve so much more. My amendments seek to do justice to our debates in Committee and, above all, to the huge potential that social enterprise and social value offer.
I thank all those who have enabled the Bill to get to this stage today. It is a rare feat for a Bill to go this far and it is a credit to all the political parties and Members who have been involved in the process that so much has been achieved. I again thank the Parliamentary Secretary, Cabinet Office, my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd) and the hon. Member for Harrow West (Mr Thomas) for their continued support for the principles enshrined in the Bill.
It is wise, at this juncture, to take a step back and remember what has been achieved so far. During the Bill’s progress through Parliament there has been significant national debate on the way that public money is spent. Across the country, local authorities, public sector commissioners, charities, social enterprises, chambers of commerce, community groups and politicians have been seriously considering how we should commission the services we need. In addition, all the political parties have signed up to the principles of social value commissioning. That cross-party support has been one of the most distinctive features of our deliberations on the Bill.
We are very close to being in a position to send out a message to commissioners across the country that we want to do things differently and that although we consider value for money as being important, we mean “value” not in its narrow sense but in its true sense—recognising the importance of social, environmental and economic well-being across our communities and in our lives. This has been welcomed by organisations throughout the country. Only this week a letter from the chief executive of Social Enterprise UK in support of the passing of the Bill was signed by the Association of Chief Executives of Voluntary Organisations, Action with Communities in Rural England, CAN, Children England, Co-operatives UK, Community Matters, Locality, the National Association for Voluntary and Community Action, the National Council for Voluntary Organisations, the National Council for Voluntary Youth Services, the Race Equality Foundation, Urban Forum and Social Firms UK. That is just the tip of the iceberg.
Across our communities, thousands of organisations are looking to us here today to give them a vote of confidence. Yes, we want to see those organisations able to deliver more of our public services. Yes, we want to support them doing the excellent work that they do. Yes, we appreciate the extra miles that they go to support our communities. The biggest show of support that we can give to these organisations is to pass the Bill today.
I appreciate that the hon. Member for Harrow West has only the best of intentions for the Bill. I am pleased that many hon. Members have taken the opportunity to engage seriously and considerately in the process leading up to today, and have sought to do what they can to help make the Bill a success. Every single Member of Parliament who has participated in discussion of the Bill should be proud of the role they have played in ensuring that we do something positive for charities, voluntary organisations, small businesses and social enterprises, but we cannot allow the best to become the enemy of the good.
I recognise that the shadow Minister is seeking to return to some of the clauses that were included in the original Bill, and I sympathise. Of course I want to see, and I believe we all want to see, a more strategic approach to supporting social enterprise in local and central Government. I believe, like him and like most of those in the Chamber, that social enterprise is the way forward and that social enterprise is good for our communities, but the best thing we can do for social enterprise is to focus not on reports or strategies, but on social value. Social enterprises, like other organisations, want more than words. They want concrete action, and the Bill has the potential to deliver that action.
In 2006, the then Parliamentary Secretary, the Cabinet Office, now the Leader of the Opposition, the right hon. Member for Doncaster North (Edward Miliband), produced a social enterprise action plan through the Office of the Third Sector. The action plan outlined 24 separate actions that it wanted to achieve, but nearly half of them were never acted on. That is not to say that we should not have strategies and plans, but strategies and plans by themselves do not necessarily lead to actions that benefit those whom they are meant to support. The social enterprise sector, like voluntary and community organisations up and down the country, see the Bill as a positive action that we can take today that will directly help them and potentially help thousands of others in the years ahead.
The social value aspect has always been the most important part of the Bill, and I am sure that all hon. Members recognise how imperative it is that the Bill goes through with that social value section intact. We should also remember that the Bill in no way prevents the Minister, his successors or local authorities from producing their own action plans and strategies to boost social enterprise, and if they were to do so, they would find in me one of their strongest supporters.
We should recognise that a great deal of the ideas generation that the sector needs comes from within it. The Social Enterprise Coalition, as it was before the last general election, produced an excellent manifesto for social enterprise which outlined a range of specific measures that could be taken to support the sector. We should take on board those ideas and encourage central and local government to work with organisations such as Social Enterprise UK and their regional bodies, to keep a constant dialogue going about how to boost the sector. However, if we are faced with the choice of having strategies within the Bill and it failing, or having strategies removed and it passing, I think we all know which is the more important. This is an opportunity that we simply cannot afford to miss.
The Minister made it clear in Committee that he did not support the extension of the Bill to all public sector contracts and wished to limit it to services. I appreciate the reasons that he gave for that, and although I am sure he would join me in wanting all commissioners actively to consider social value in all contracting—goods, services or works—it is better that the Bill covers services rather than nothing. We need to be practical and pragmatic in the way that we consider the legislation. This is one step on a journey, and we should ensure that we take this first positive step before we rush ahead and potentially trip ourselves up.
I know the hon. Member for Harrow West’s reasons for tabling amendments to re-open the scope of the Bill, but I believe that we need to secure and consolidate what we currently have, and leave discussions about goods and works for another day, hopefully when we have seen the Bill passed with cross-party support, seen its implementation and are able to look back at its strengths and weaknesses. We are on the cusp of achieving great things here today, and I believe that it would be remiss if the House were to fail to pass the Bill. If we were to throw away the opportunity to transform our procurement system, if we were to fail the various sectors supporting the Bill, and if we were not to honour the trust that they have placed in us to get it through this place, we would create a disappointment that would last for many years.
The hon. Gentleman has shown a great deal of courage, determination and tenacity in getting his Bill this far, and he will certainly have my support. He was speaking about the sector being disappointed if the Bill does not pass. Would he admit to a tiny degree of disappointment himself that his original Bill, which I believe was tremendous news for the social enterprise sector, has been reduced in scope, in scale and in effect by the Government?
I thank the right hon. Lady for that intervention. I appreciate the tremendous work that she has put into getting the Bill to this stage. All the work that she does with social enterprises is well recognised. Do I feel a touch of disappointment? I am a practical and pragmatic person. I want to see something that works, something to build on. That is why I am making the remarks that I am.
Will the hon. Gentleman give way?
I am about to conclude.
I appreciate that we all have a duty to ensure that the best legislation gets through the House. It is true in this case that some legislation is better than no legislation. This is a chance for us to send a message that when it comes to these important issues, we can all work together, we can prevent politics from getting in the way of good policy and we can be trusted to do the right thing when the time comes. I hope that given the hon. Gentleman’s well-documented support for the principles of the Bill and for the social enterprise, voluntary and community sectors, he will withdraw the amendments today so that we can push forward with much-needed reform of procurement. This is a chance that we may not get again for some time, so let us take it and see the Bill through to the other place and from there, we hope, on to the statute book.
I support new clauses 1, 2 and 3 and the amendments tabled by my hon. Friend the Member for Harrow West (Mr Thomas). They are excellent amendments that enable us to debate how we want to see things develop, even if the Bill passes today, as I hope it will, in its current truncated form.
The Bill originally had five clauses. It contained a specific commitment to a national social enterprise strategy and strategies for local authorities. I said on Second Reading, some time ago, that I thought the Bill was small but perfectly formed, and that if it went through in that form, it could have a transformational effect on the commissioning that took place in our public authorities.
This is no judgment on the hon. Member for Warwick and Leamington (Chris White), but I am afraid that the Bill in its current form represents a huge missed opportunity to drive forward with momentum and impetus the growth and flourishing of the social enterprise sector. The original Bill would have tilted the scales in favour of social enterprise through social value and economic, social and environmental well-being. That would have sent a strong message to public commissioners that the Government really wanted to put their weight behind it as commissioners and would have produced quite a transformational effect.
The hon. Gentleman’s original clauses about a strategy have been deleted. I have no time for strategies that are just pieces of paper, because in my experience harnessing the full power of every Department requires a central spine that says to those Departments, “This is what we want to do. We will hold you to account. We want to see what you have done over the past 12 months and how you can take it forward.” I worry that without such a mechanism the push towards social value commissioning will be taken up only by the best local authorities, which are good at commissioning and understand, particularly in areas such as social care and education, that social value means more impact for the money spent. Good local authorities understand that and are becoming quite complex commissioners. They are commissioning with the users and clients involved and going out to the public and asking what they want to see. That is a holistic approach to commissioning.
However, as I mentioned in Committee, I am worried about the local authorities that lack the capacity, skill and understanding to carry out complex commissioning. The Minister gave some assurance in Committee that there would be support for those local authorities to ensure that they can take this forward. What the Bill says is really good, but I fear that it will fall somewhat short of the transformational effect that the hon. Member for Warwick and Leamington wants to achieve.
The annual report proposed in new clause 3 might be dismissed by some as bureaucracy, but I know from my experience in government that requiring Ministers to come to the Dispatch Box once a year to report on what they have done and what the impact of that has been is a tremendous discipline to ensure that during the rest of the year they ask for regular reports and push for implementation. Unless there is a way of measuring and evaluating the social value achieved through a change in the commissioning process, I do not think that we will see the results that the hon. Gentleman talked about.
The hon. Gentleman says that he is pragmatic and practical, to which I can attest. My view is always to get what one can and then build on it incrementally, and I think that that is probably where he is now. However, I think that he is also quite determined to make a change, so I ask him to press his right hon. and hon. Friends in the coalition Government to say how they will measure social value and assess what difference it has made. In a year’s time, more commissioning will have social value at its heart. What work are we doing to hone in on how we measure social value so that we get a grip on this, because otherwise it will remain a fairly nebulous concept that is very easy for people who do not share the values to wriggle out of? I am sure that that is not what he wants.
The right hon. Lady has a lot of support for the work she has done in her career to support social enterprise. Will she add to her point about urgency and immediacy the fact that social enterprises provide one of the most exceptional ways to enhance productivity in public sector areas? As we are looking for the opportunity to grow our economy, it would be beholden on the Government to make every effort to look at ways in which social enterprises can enhance the productivity in that sector of the economy.
I absolutely share the hon. Gentleman’s point. The economy is difficult, there is less money around and public authorities have less resource to spend, so we must ensure that we get as much value as possible out of every pound we spend. The social enterprise sector is often very innovative and comes up with new ways of working and doing business, and that has been one of its particular advantages. There is good innovation in the public sector, but small organisations that have a complete passion for something will often take the system apart, look at how things are currently done, and get more value and productivity.
I entirely agree that there are many instances of innovation in some public sector organisations and in social enterprises, but does the right hon. Lady agree that there are also thousands of examples of innovation in the private sector?
I entirely agree. I was about to say that this is not just about the social enterprise sector. One of the good things about the Bill is that it is about social value wherever the commissioning take place, whether in the public sector, the private sector or the voluntary and community sector. There was perhaps a tendency in the past to limit social value to a particular niche in the market for the voluntary and community sector. That sector does fantastic work, but not exclusively. If we can get social value into some of the big private sector organisations, we will see more productivity and a greater impact. A range of large corporate organisations are recognising that doing good is good business. Getting that combination of people using their existing business model to achieve social action and social change is a big movement in this country. We have heard talk about responsible capitalism. There are moments when something happens in society, and I think that we are at one of those moments. Many big organisations have recognised that for their own sustainability—not for charitable purposes, but to do good business—using their procurement, supply chains, product development and investment for social action in communities will be very beneficial. I think that there will be a move from the traditional concept of corporate social responsibility of doing some charitable work once a year to embedding a social action model at the heart of business, small and large, in this country. It is a development that I welcome hugely.
I want to make a few comments about that change. The amendments that my hon. Friend the Member for Harrow West has tabled refer to the definition of social enterprise, which is important, and I hope that the Minister will address it, but I also think that the system currently has barriers to big corporations taking the agenda forward. If we are to have commissioning in the private sector that focuses on social value, we need to think about that. A social enterprise called Create opened its doors in my constituency only a week ago. It provides work opportunities for young people and older people who have been homeless. It brings them through a production kitchen to gain catering skills and provides outside catering services. It is a business that describes itself as being “for more than profit”, which I think is an interesting description. It started in Leeds and also operates in Doncaster, Liverpool and, now, Salford. In Leeds it now runs a five-star, top-class restaurant—a little like Jamie Oliver’s Fifteen—which teaches homeless people catering skills. It has a relationship with Morrisons supermarket, and if the people it trains do not go into catering, they are often job-ready and can go into the world of work. That fabulous partnership works for everyone involved and, increasingly, big companies want to work in that way.
Perhaps the Bill can do something to say to the private sector, “Commissioning for social value is good business for you.” John Lewis and the Co-op have done that for decades, but I want us to be able to have a range of different examples that are big in retail, manufacturing and the important sectors of our economy that use the power of their businesses, whether employing former offenders and people who have had difficulties in their lives. That is why I pressed the Minister on whether we can have goods and services, because I think the artificial distinction that this is just about services could limit the ability of the big corporate sector to come into this field. That is something that he might think about remedying if there are legislative opportunities in future.
When I pressed the Minister in Committee on whether there ought to be a definition of social enterprise, I was grateful for his answer:
“The right hon. Lady’s fundamental point is right...there is a spectrum, from pure charitable activity to social businesses. Some blurring of lines might not have mattered until now. She may be right that we have reached the point at which some definition in law is needed.”––[Official Report, Public Services (Social Enterprise and Social Value) Public Bill Committee, 19 October 2011; c. 16.]
He indicated that, in the review of charity law, there were perhaps two legislative opportunities for that.
Will the Minister confirm that such a definition is still firmly on his agenda? As we expand the sector and enable the NHS to establish a range of social enterprises, a definition is essential—not a definition that is a straitjacket or exclusive, but a definition that makes it clear to people what we mean by a “social enterprise”.
The Social Enterprise Coalition has done a huge amount of work on what that definition might look like. It talks about organisations that have a clear social or environmental mission, generate the majority of their income in trade and, crucially, reinvest the majority of their profits for community benefit, and organisations that are autonomous and independent, majority-owned and controlled in the interests of their social mission, and accountable and transparent. Those criteria would be a good way of putting into legislation any definition that we might end up with.
That would be important, because there is a tendency for people who do not meet those criteria to badge themselves as social enterprises, and many people in the social enterprise sector feel that the brand—if we like—that they have built over the past 30 or 40 years is being tarnished by people who pretend to be social enterprises because they think it will get them into the commissioning framework and reward them with contracts. It would be important also for the public to know that when we are commissioning, with their money through public contracts, we are attempting to achieve the maximum social value.
I obviously support the Bill, and I am delighted that we have managed to shepherd it through its various stages. The hon. Member for Warwick and Leamington has done a marvellous job in getting it so far, and for a relatively new Member to have the opportunity, in a private Member’s Bill, to change the law is incredible. I, like him, do not want the best to be the enemy of the good; I want to see whether we can make a start.
But this is only a start, because when we look at the public services White Paper and at transforming public service delivery with many more providers in different organisational shapes and forms, and when we use public money in particular to commission services, we have a responsibility to ensure that at the core of such work is not just the bottom line or the maximisation of profits for the private sector, but the achievement of as much social, economic, and environmental impact as we can. If we do not do that, we will miss a real opportunity for transformative change.
The Bill provides a chink of light, but there is the opportunity to do much more, and I hope that the Minister, in his term of office and in his current post, will be able to take the agenda forward. I genuinely think that he supports what we are trying to achieve, but I know that he will struggle with parts of government which find the whole idea of social value and social enterprise anathema. I well remember 10 years ago, as public health Minister, talking to the NHS and to the Department of Health about involving patients, about social enterprises and about different ways of doing our business, and they looked at me as if I was slightly unhinged.
Those organisations understood the public sector perfectly well, as they had been running a huge monolithic NHS for ever, and they understood the private sector perfectly well, too, because they understood private companies; what they did not get, between those two models, was the range of organisations that over the next 10 years all of us in our own ways would help to bring to the surface.
This Bill is an opportunity to highlight that issue, and I urge the Government to go further and faster—on this agenda, rather than on their economic agenda—[Hon. Members: “Ah!”] On this agenda, they are probably going too slow, and not deep enough! That is not quite as catchy as “too far, too fast”, but on this agenda there is a need to go faster, deeper—madder, truly, whatever! I will support the Minister in whatever he can do to strengthen his arm in those debates, and I hope that he will be encouraging when he responds.
May I, too, pay tribute to my hon. Friend the Member for Warwick and Leamington (Chris White) for the foresight, diligence and perseverance with which he has brought forward the Bill? He has already achieved much by influencing mindsets and stimulating public debate, and those involved in the commissioning of and bidding for public services have already become much more aware of the importance of social value to the process. So, even before the Bill has passed into law, I congratulate him on all that he has achieved.
In opposing the new clauses proposed by the hon. Member for Harrow West (Mr Thomas) I must say that if a key aim of the Bill is to stimulate and encourage creativity and innovation in the growth of social value and social enterprise, particularly locally, and if, as I think we all agree, we are on a journey in that respect, much can be achieved, as my hon. Friend has already demonstrated, without unnecessarily defining or delaying the process through a national strategy. Let us get on with it and see the Bill passed into law.
The broad potential improvements and impact of the Bill are substantial. I shall touch on some of them now and, if time permits, on some of the ways in which, in my local authority already, there is refreshed thinking about the importance of considering social value when awarding contracts.
One of the key merits of the Bill is its proposal to expand and embed the concept of social value in the bidding process for public sector funding, and that is true not just when social enterprises are involved, but when private sector providers compete against one another. Providers are likely to lever social value into many more submissions for public funding, and in that respect the Bill will have an exponential effect on the bidding landscape.
The Bill will, I hope, introduce more flexibility to tendering. When I discussed it with the head of CVS Cheshire East, she said that the tendering processes need reviewing and
“need to be relevant to the service that is being commissioned”.
She went on to say that
“grants are often used to encourage creative solutions to a need or problem…A tender often doesn’t enable this to happen, as the method for solving the need has already been set.”
Another way in which I hope the Bill will add social value is by opening up the often complex and baffling area of public procurement to smaller local social enterprises. They work at the grass roots of their community and with an ear to the ground, and they are often best placed to work most effectively for their communities and to add social value by levering in, for example, volunteering, but until now they have felt that the bureaucratic barriers to tendering have been just too great. For local authorities to say, “We welcome you, recognise what you have to offer and are going to proactively work with you through the application process to help you successfully bid,” will be a real step change for such enterprises.
Many faith-based organisations augment our local communities, adding so much social value through youth work and work with the homeless, the elderly, the addicted and the lonely and in many other areas, but in recent years they have felt discouraged from applying for public sector funding, perhaps because of concerns that in procurement their ethos does not tick all the right boxes. I therefore hope also that, as a result of the Bill, they will be encouraged to make such applications in future. So often, what injects faith-based organisations with their tremendous energy, dedication and perseverance springs from that very ethos, and in a truly diverse society let us celebrate, not seek to neutralise it, because at the end of the day all organisations have an ethos; none can be wholly devoid of one, or totally neutral. So let us welcome such valuable organisations fully into the public procurement process. The Bill sends out the right signals in that regard, and I welcome that aspect of it.
I now quote some specific comments on the Bill from social enterprises in my constituency and cite some examples of good practice among them, showing how very much they welcome the Bill. Plus Dane is a housing association based in Cheshire and Merseyside that manages 12,500 homes and works as a neighbourhood investor. Mike Doran, its manager, who is based in Congleton, said:
“I believe the Bill will be of great benefit both to organisations such as ourselves but also to the wider community of locally based social enterprises…The need to demonstrate social value within procurement activity will ensure that a double bottom line of both economic and social good can be generated.”
I congratulate Cheshire East council as a forward-thinking council in this respect which absolutely recognises the value that organisations, community groups and social enterprises can add to our community livelihoods. I am delighted that in the recent past it has worked with Plus Dane on various projects. Plus Dane is delivering grounds maintenance and environmental services to the local authority. It is providing training and work for young people who have been long-term unemployed or have a history of getting into trouble with the law, enabling them to go on to gain full-time employment elsewhere. Plus Dane is working with the council in the provision of house building, with 35 apprentices, and it is supporting the development of a local apprenticeship initiative in Congleton that has involved the chamber of commerce, Congleton town partnership and local schools. This type of project is laudable, and this Bill will encourage a far greater recognition of such partnerships across local communities, which can make an exponential difference.
Another example is an enterprise called Visyon, which provides advice to young people who are suffering from abuse, the results of family breakdown, bullying and so on. It recently acquired devolved premises in my constituency through the local authority community transfer of assets scheme. In this respect, I commend the work of the right hon. Member for Salford and Eccles (Hazel Blears), who did so much to instigate that scheme. The hon. Member for Harrow West, who is not in his place, talked about the possibility of assets going out on the cheap. Visyon has received a local hall that was not being used to its maximum potential. The local authority has awarded it a contract that will enable those premises to support the development of many other groups across the constituency and their work within the local community. It is not about assets being passed across on the cheap but about a broader, better and more beneficial use of those assets for the whole community.
I pay tribute to my hon. Friend the Member for Warwick and Leamington. I feel privileged to have been able to support him on the journey that this Bill has undertaken, and I will continue to do so in future. I look forward to its outworking right across our nation.
I, too, pay tribute to my hon. Friend the Member for Warwick and Leamington (Chris White) for getting his Bill this far. I characterise the remarks of the right hon. Member for Salford and Eccles (Hazel Blears) in that my business career was in the private sector but I also led one of the larger councils in the country. To be honest, when I first saw the Bill my heart sank, because I shared the prejudices that so many others have had regarding social enterprises. It was only when I started to see the Bill progress and to understand more of what was being done that the scales fell from my eyes and I became a supporter of it. It is better that a sinner repenteth than not change at all, if I may mix that analogy.
Although I support the Bill, I have some concerns that I hope the Minister can deal with. I believe that the definition of “social enterprise” needs to be clarified. As I said in my intervention on the hon. Member for Harrow West (Mr Thomas), there are many private sector organisations that we may not believe to be social enterprises but of which we could argue that part of their business is to improve the social welfare of the United Kingdom, although we may disagree. That is why unless we specify what is a social enterprise—including types of ownership, not just outcomes—we could end up with a lawyers’ charter as many companies argue that they have a social angle to their enterprise and should therefore qualify.
Will the Minister clarify whether, when there is a change of ownership, the normal contract rules apply whereby a significant change of ownership means that the contract can be revisited? That should also apply to any contracts let to social enterprises. For instance, Ealing Community Transport, the provider of recycling services to my London borough, was a very good social enterprise that was acquired by May Gurney, a private organisation. Will a social enterprise that ceases to be a social enterprise have to go back through the contracting, and what is the legal position?
Will the local government finance regulations on best value be amended to allow social enterprises that over-bid a private sector organisation to have that contract awarded? Currently, it is very difficult for local authorities to award contracts to a higher bidder without, in some cases, a Secretary of State’s approval—as the right hon. Member for Salford and Eccles will know, as many such cases probably came across her desk.
I hope that the Minister will be able to deal with those points. I support the Bill, and I congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) on introducing it.
It is, as always, a great pleasure to follow my hon. Friend the Member for Finchley and Golders Green (Mike Freer), who brings his experience in local government to this debate.
I rise to oppose new clauses 1, 2 and 3 and amendments 1, 2, 3 and 4. That is primarily because, while I appreciate that there is sometimes a time and a place for strategies, and that it is sometimes a good thing to have a strategy, I agree with what the Minister said in this House on Second Reading:
“I believe that, particularly in this context, strategies should be governed by the need of the moment, and should be driven by conviction rather than by a requirement to comply with some bureaucratic process. I do not want the process of drawing up strategies to be bureaucratic. I do not want it to be simply an exercise in producing more glossy brochures that fill up the bookshelves in our offices, which are not read and which do not have real traction.”—[Official Report, 19 November 2010; Vol. 518, c. 1217.]
I could not agree more. There is a real danger that the new clauses will have the effect of introducing a level of bureaucracy to this procedure that will not add anything to the overall aim of the Bill.
I congratulate my hon. Friend the Member for Warwick and Leamington (Chris White) on his perseverance and determination in piloting the Bill through to this stage. He should be commended for that. Although it has been over a year since Second Reading, and some might think that that is slow progress, it has been positively sprightly when compared with the glacial progress made by the Bill promoted by my hon. Friend the Member for Castle Point (Rebecca Harris), who I see in her place—the Daylight Saving Bill, which, after a year, has yet to reach its Committee stage.
On the cost of these strategies, when I intervened on the hon. Member for Harrow West (Mr Thomas) he referred back to the cost of £41,000, which was cited by my hon. Friend the Member for Warwick and Leamington on Second Reading. I was not present on that occasion, but when I read the record of the debate shortly afterwards, I thought that estimate slightly optimistic, if my experience of the costs of achieving anything in government are anything to go by. I am still of that opinion today. In fact, I think that the figure is wholly unrealistic.
The costs are compounded by the solution that is given to the question of how one comes up with a mechanism to ensure that the strategies are actually carried out, provided in new clause 3, which is to produce an annual report—yet another cost and yet another obligation on the Secretary of State. The Secretary of State would have not only to produce a report, but consult several bodies including the National Audit Office, the Charity Commission, Social Enterprise UK, the Office for National Statistics and many others. I do not think that that would help to achieve the overall aims of the Bill.
I am often concerned when a Bill has cross-party support. I notice that there were no Divisions on Second Reading or in Committee.
Yes there were.
Oh, there were Divisions in Committee.
This Bill plays a large part in the big society agenda. Once or twice today, anybody listening to this debate would have thought that it was a Government Bill. Of course, it is actually a private Member’s Bill. I am sure that even in its slimmed-down form, thousands of social enterprises across the country will welcome the progress that it has made. Having said that, there seems to be little in the Bill that could not take place regardless of whether the Bill makes progress and without the passage of new legislation. What is needed by those involved in the commissioning and procurement of public sector services is the will to secure diversity of provision. Users of public services are not concerned about whether the services are provided by the public sector, the private sector, the third sector, voluntary organisations, charities or social enterprises; what matters is the quality of the service they receive.
We need the process of bidding for public sector contracts to be made a great deal easier, not just for social enterprises, charities and voluntary organisations, but for small and medium-sized enterprises in the private sector. In that regard, I associate myself with the remarks made by my hon. Friend the Member for Congleton (Fiona Bruce). Smaller organisations, whether in the third sector or the private sector, often need a helping hand to guide them through what can seem to be a burdensome, complex and bureaucratic procedure. One thing that we need to do, as a Government and as a society, is to make that whole process much easier.
I hope that the Bill will encourage more social enterprises to develop and to take over, where feasible, areas of service from the public sector. From my point of view—I appreciate that this will not be welcome in all parts of the House—I would not worry if this was seen as a stepping-stone towards services being provided by the private sector. Of course when assets leave the public sector, the true and full price must be paid. Provided that that is done, there should be no loss to the public sector. We need dynamism in the procurement of public services, with contracts moving. Sometimes contracts might be kept in-house, sometimes they might go to the—
Order. I have given the hon. Gentleman quite a lot of latitude, as I have with other Members, but we are not on Third Reading or Second Reading; we are discussing new clauses and amendments. Perhaps the hon. Gentleman could anchor his remarks in the debate that we are currently having, not the one that we have not started.
I am obliged to you, Madam Deputy Speaker. In fact, I was just making my final point, so if I may, I will complete that sentence and finish my remarks there.
I was saying that we would see contracts going from the public sector into the private sector, on to the third sector and then back again. There would be dynamism in the sector, which would mean that sometimes contracts would be lost by social enterprises and go back into the public sector or the private sector, and then be regained again. With that, I will not seek to catch the Chair’s eye on Third Reading, which I am sure you will be pleased about, Madam Deputy Speaker.
May I start by adding my voice to those who have congratulated my hon. Friend the Member for Warwick and Leamington (Chris White) on the way in which he has led this Bill? I have said that on every occasion and I mean it. I thank him in particular for reminding the House, in what was a statesmanlike response to the shadow Minister, of the importance of the cross-party support that has built up over some years behind this agenda. That is essential if we are to make further progress.
I was delighted by the contribution of the right hon. Member for Salford and Eccles (Hazel Blears). She may have been described as unhinged in the past, but she was perfectly hinged today in her comments. She made it clear that, whatever her frustrations with the Bill, she recognises that it is a start and is happy for it to progress.
The hon. Member for Harrow West (Mr Thomas), my Harrow neighbour, is entirely right that we must not lose momentum. This agenda is more important than ever. We have a highly risk averse public sector system and a traditional business sector that is too stagnant in many areas. They must take this opportunity to create space for the change makers and the people who have the vision to stand up and say, “We see what you are doing. It can be done better.” This is exactly the time to do that. I have a lot of sympathy for the thrust of the hon. Gentleman’s remarks, which was about encouraging the system to go further. What he neglected to mention, in complaining about the playing field not being level, was who has tended the playing field for the past 13 years.
The hon. Gentleman also forgot to mention that it was a Labour Secretary of State for Health who reversed policy and made it clear that the NHS was to be the supplier of choice—a statement that sent shockwaves through the social enterprise and charity sector. I am glad that we are back on track and giving new momentum to the message that we must diversify our base of public sector delivery partners and that we must create more space for the change makers who are prepared to challenge the system.
That message is being recognised in some bizarre places. I wish that the hon. Gentleman had been with me this time last week in Brussels—I could have done with the company. I was at a conference where 800 people gathered from all over Europe, summoned by President Barroso and Commissioner Barnier for the launch of their social business initiative. Here we are in the middle of the greatest crisis facing the eurozone and the Commission is taking time, with leadership from the top, to state the importance of the whole area of social enterprise and social entrepreneurship. Speaker after speaker came to the podium to congratulate Britain on its leadership in Europe on this agenda. We must not lose sight of the big picture. We have the opportunity and the need to keep the momentum going.
I differ from the hon. Member for Harrow West on his view that simply legislating to require the Government to produce a statutory document will be transformational. We had a good debate on this matter in Committee, so I will not labour the point. However, I am extremely grateful to my hon. Friend the Member for Bury North (Mr Nuttall) for quoting what I said on Second Reading. I agreed with every word of it—I was on good form that day—and I stick to it. My hon. Friend the Member for Warwick and Leamington usefully reminded the House that we have had action plans before, and it is about not the publication of a plan but delivery and action.
The hon. Member for Harrow West bemoaned the lack of a strategic framework, but I would argue that in fact the coalition Government set a strong lead and set out a very strong framework in the agreement for government, which contains an explicit statement about our commitment to support the creation of mutuals and social enterprises and encourage them to play a bigger role in public service delivery. From that, a flow of action is increasingly evident in various areas, which I will summarise briefly.
The first area is the most directly relevant to the Bill. If we want to create new space for social enterprises and social entrepreneurs, we have to open up new market opportunities for them. No bigger market opportunity exists than the opportunity to help us deliver better public services. My hon. Friend the Member for Warwick and Leamington has understandably spent a lot of time talking about mutuals and co-operatives, so he knows of the opportunity to build on a new movement to unlock the entrepreneurial energy inside the public sector. It is about encouraging nurses and other public servants to continue what they do and the care and the service that they provide in a different setting in which they feel a greater sense of ownership and responsibility.
Those of us who have had the good fortune to visit some of the pathfinders, the leaders in that space, as I know many of us have, can feel the difference in those organisations and feel that we need to build on what they are doing. The hon. Member for Harrow West was slightly sniffy about progress, but we have made a good start and feel that with the introduction of the Mutuals Information Service, which has a £10 million investment behind it, we will continue to send a very strong signal to the system that we encourage mutuals and want to support them actively.
Will the Minister acknowledge that it was in fact the previous Labour Government who introduced the legislation that enabled social enterprises to be established in the health service, and who provided significant financial support to get them off the ground? That was a Labour initiative. There are organisations such as Six Degrees, Unlimited Potential and the Angel health centre all across my city now, and they are providing excellent services. That was an initiative of the Labour Government.
I am very much prepared to accept, as I have in public on many occasions both in the House and outside, that we are building on some excellent work, to which consistency is fundamental. The point that I made earlier was that it was a Labour Secretary of State who sent a very mixed message to the market by giving an explicit statement that the NHS was to be the supplier of choice. I am delighted that there now seems to be cross-party support again for a message that is more positive for, and supportive of, social enterprises and charities and the opportunity for them to deliver public services.
The hon. Member for Harrow West mentioned the Work programme, and he is right that it is early days. There is certainly some frustration and cynicism out there in the social sector, and I am listening to it and liaising closely with the Minister of State, Department for Work and Pensions, my right hon. Friend the Member for Epsom and Ewell (Chris Grayling), on it. However, we cannot lose sight of the fact that under one of the most important of the Government’s programmes, deliberately structured as a payment-by-results system to incentivise primes to work with organisations that have a track record and a good opportunity to deliver results, we have 300 social enterprises and charities in the supply chain. Depending on their delivery, I believe they are set to earn several hundred million pounds over the life of their contracts. That is definitely a step forward.
The Work programme is not just about encouraging different suppliers of existing services. We are trying to get the system to think differently about how services are commissioned, so we are working with four local authorities on troubled families with multiple problems. I think we all know from our constituencies that the state has historically not done a very good job of supporting such families. We are encouraging those local authorities to consider working in a different way and structuring a more holistic service based more on prevention and an openness to working with different suppliers under a payment-by-results contract. We hope that will lead to four new social impact bonds, to encourage social investors to come in and share some of the risk and return.
That action and activity is intended to break down what the right hon. Member for Salford and Eccles and others know is a tremendous aversion to risk in the system. No one can pretend that that is easy, or that publishing a strategy document or even Government guidelines will instantly break down the culture of risk aversion in the public sector. She rightly talked about the need to support commissioners better, because they are operating in systems that are tremendously averse to risk. I have sat around tables with commissioners who get what we are talking about and want to make progress and work more with social enterprises and charities to restructure services. However, I have had queues of people at the door saying, “You can’t do that.” I am sure she knows—she has been there—that the more we consider the matter, the bigger the challenge gets.
We are thinking afresh about how we support commissioners, and the Minister for the Cabinet Office has talked about our plans to set up a commissioning academy to try to support commissioners, develop more intelligent commissioning and raise the status of the profession and the qualifications in it. We want to develop learning resources that build on the best practice that is being developed around the system, and that is a serious project.
The Bill will add value to that process—perhaps not in ways that every Member would like, because we all know that politics is the art of the possible at a given moment and that there are compromises to be made, but we are on a journey. The Bill will complement the best value duty, which Opposition Members did not mention but which my hon. Friend the Member for Finchley and Golders Green (Mike Freer) brought up. That was an important piece of guidance from the Secretary of State for Communities and Local Government to local authorities, setting out an expectation that commissioners should consider the overall value of service provision, including economic, environmental and social value. That covered the full procurement chain for services and goods, and was a very clear new piece of guidance.
We believe that the Bill will complement that useful guidance by sending an additional signal to commissioners outside local authorities that, where it is relevant and proportionate, they should consider social value at the pre-procurement phase when they are considering commissioning services. That is how we can balance out the areas in which we think the biggest impact can be made now and our desire not to impose too many disproportionate duties and burdens on people who are doing already very difficult jobs. That is where we are comfortable with pushing the agenda forward.
I am grateful to the Minister for his clarification of the guidance from my right hon. Friend the Secretary of State for Communities and Local Government. Guidance is fine, but from memory I believe it is still open to a local council tax payer or resident to challenge a local authority’s accounts if they believe that the local authority has not achieved best value. We need to go beyond guidance and ensure that the legislation all lines up.
I accept that point, and to some degree that is what we are doing today. We are moving forward on that. My hon. Friend mentions the concept of the right to challenge, which had not previously been mentioned in the debate. Again, we are moving forward on that, because we are moving into a world in which there will be much more information about what commissioners are doing and how public money is being spent. Through the Localism Act 2011, which I am delighted to say has completed its passage through Parliament, the right to challenge is now set in statute, with regulations to follow shortly to clarify how it will work. That is progress on the journey that I have described.
Will construction be covered by the clause on social value?
I have nothing to add to what I said in Committee. The Bill is reasonably clear about where it will apply.
The right hon. Member for Salford and Eccles mentioned B4Box in her constituency. The position will be enhanced by the new best value guidance, and there is nothing to prevent the local authority from working on the basis that she described. I am grateful to her for bringing Aileen in to talk about the matter. Aileen is doing it. There is space in the system for her to do it. She and I would probably agree that we need to send a stronger signal that it is okay, but it is okay and people are doing it. The best value guidance from the Secretary of State moves things on further by sending a signal of permissiveness.
I have always made it clear that the Government have from the start supported the principle of the Bill because of the value that it adds to the process, and it goes with the grain of what the previous Administration were trying to achieve. The system, risk averse as it is, is getting a consistently stronger signal about the need to take account of wider social value considerations when spending taxpayers’ and constituents’ money and to be more alive to opportunities to commission intelligently. Lots of examples have been cited in our debates of fantastic organisations, such as Create, that are adding value to our communities. I cited that example in my Brussels speech because in many ways it embodies exactly what we are trying to encourage.
We can do more. The hon. Member for Harrow West goaded us to come up with more ideas to support social enterprises in this movement. I have talked about the need to open up new market opportunities to help these enterprises grow and to help more people, but the Government can do more to make life simpler for the social entrepreneur. I shall come later to the question of definition but these are businesses first and foremost, and the guidance and requirements that we place on people trying to run businesses in this country are ridiculously disproportionate. A rigorous process is under way. It cannot be undertaken lightly and it does not lend itself to soundbites. It is a rigorous process of going through each subsector of the economy to look at the regulatory burden and to discuss with the players in those sectors what we can remove and what is no longer proportionate or necessary. That process is well under way.
We can also help social enterprises with the increasingly important question of how to measure social impact. That is their currency. Many of us know that the money providers, whether private or public, are increasingly demanding that social enterprises, charities and, I hope, other organisations measure and communicate their social impact and social value, which is their unique selling point. Many of us are also aware that arguably there is too great a profusion of initiatives in this area and of the risk that this will only confuse the landscape. I want greater coherence and consistency not least so that we, as funders, and other stakeholders can agree on what is worth measuring and how it can be measured affordably by all organisations.
This is a really important point. There is a plethora of ways to measure social value. I mentioned in Committee an organisation called Connectives, which has moved on from the social return on investment transactional model towards a much more in-depth assessment of what social value means. Is the Minister prepared to meet the two female accountants behind Connectives to explore their ideas?
I would be delighted. I thoroughly enjoyed the first meeting that the right hon. Lady invited me to, and I am sure that this one will be just as informative. I also thank her for reinforcing my instinct that the Government can take a lead in trying to make life simpler for all parties, not least in our role as a major funder, and to help people to reach greater coherence and consistency when working out what is worth measuring and how it can be measured by all organisations, not only those with the deepest pockets.
We can make life much simpler by making better connections between those in the not-for-profit sector and those in the for-profit sector. Both groups could benefit from that. The right hon. Lady touched on this. There is an untapped opportunity here. I was fortunate earlier this week to sit down with Professor Muhammad Yunus, the Nobel prize winner and father of the microcredit. His latest initiative is a social business and joint venture with Danone to provide better nutrition for the poorest children in Bangladesh. He has persuaded Danone to come in as a partner. As one listens to how the initiative is structured, it becomes clear that here we have one of the biggest companies in the world focusing its energy on what it is really good at in order to help some of the most vulnerable and disadvantaged people in the world, and in the process it is being stretched and tested to rethink how it makes and distributes its products, so its core business is benefiting from the process.
Given how rare these examples are, the opportunities are exciting. I want more corporations to see the opportunity to improve themselves by stretching themselves to apply their skills in different settings. More specifically, in this country we think that there is tremendous scope for making better connections between social enterprises, the not-for-profit sector and the traditional business community at a local level. Most of us know from our constituents—certainly mine—that we have barely scratched the surface of what we can achieve if we can make these connections work better. That involves different languages and communities, but we are interested in doing more together. It requires human interventions to make these connections work better.
We are working with businesses and communities to pilot business connectors—people seconded from businesses such as Sainsbury’s and Greggs—to play a community role: to find out what communities need and connect it to what local businesses say they can supply. Already I have seen in Redcar how a business connector persuaded the council to make an empty shop available to incubate five social enterprises with the support of local business—an empty shop gets used, five businesses are formed and older businesses find out much more about what their community needs. It is a win-win situation. Again, this is all new movement, new progress.
The hon. Member for Harrow West mentioned the fundamental need to make it easier for social entrepreneurs to access finance. There is real momentum there, and I am happy to say that we are building on initiatives by the previous Government—for example, the enabling legislation on dormant bank accounts. That is fundamental to allowing us to do what we want to do. However, our ambition is considerably greater than that of the previous Administration, who were prepared to commit only up to £75 million to the social investment bank, whereas we are on track to capitalise that institution with about £600 million. That is a quantum leap in ambition.
The momentum is there. Social entrepreneurs have been telling Governments of various hues over the years that the biggest barrier to growth has been access to finance. As we well know, the traditional world of finance in this country—the people who manage our deposits and savings—is not connected to the social sector in any meaningful way, despite the fact that we, their customers, care deeply about a number of the social challenges facing this country and would, I think, like to be part of the solution. However, we are not being presented with that opportunity at the moment.
Part of our vision is to grow the social investment market—a market for money where people are prepared to blend financial return and social impact—to make a better bridge between the world of savings and the social sector. If we can build that market, we can move serious money into the social sector. Big society capital is our major intervention in that respect—it is ambitious; it is on track. It is extremely important, but it is not enough in itself, because intermediaries—the people working with social enterprises—say that there is a problem with the quality of the pipeline of deals and investable opportunities. We need to accelerate and improve that pipeline, which is why we have announced a £10 million technical assistance fund that will deliver grants to enable front-line organisations to become more investment-ready.
This is all about trying to make it easier for social entrepreneurs to access capital and for savers in this country to be part of the solution to some of the social challenges that we face, and that we all want to get serious about tackling. Fundamentally, there is a cross-party consensus on this issue and the need to send a stronger signal to a risk-averse system that it is okay to innovate and to think about reconfiguring services or working with different providers. On that basis, the Bill adds value to that process and that journey.
We oppose the amendments. We note that most of the stakeholders in this conversation are happy with the Bill as it stands. I urge the hon. Member for Harrow West not to press his new clause to a vote, because it runs the risk of wrecking a Bill that is a useful, incremental step. It is certainly not the end of the journey; it is a chink of light. When I took the Sustainable Communities Act 2007 through Parliament, I was clear that it was not complete; rather, it was about putting a foot in the door, confident that the door would not then be closed. From that process, the Localism Act 2011 is now on the statute book and the game has been changed. On that basis, I urge the hon. Gentleman to withdraw his new clause and allow the Bill to move to the Lords and, I hope, on to the statute book, so that we can continue on this journey.
We have had an excellent debate on new clause 1 and its associated new clauses, with an excellent speech from my right hon. Friend the Member for Salford and Eccles (Hazel Blears) and similarly strong speeches from the Bill’s promoter, the hon. Member for Warwick and Leamington (Chris White), and the hon. Members for Congleton (Fiona Bruce), for Finchley and Golders Green (Mike Freer) and for Bury North (Mr Nuttall), as well as the Minister.
The hon. Member for Warwick and Leamington encouraged us in the view that he was a practical and pragmatic person; I hope that I, too, share those characteristics. I say gently to him and his hon. Friends who are not convinced of the merits of a strategy that if one is comfortable with unintended consequences or outcomes that one does not necessarily want, a strategy is certainly not required. However, if one has a clear vision and a sense of the possibilities for a sector, a strategy can help to unlock the incremental steps required to allow it to flourish. The hon. Gentleman mentioned the social enterprise plan, which my right hon. Friend the Leader of the Opposition developed when he held the position currently held by the Minister. The hon. Gentleman said that some parts of that strategy were not implemented, but that is often the case with strategies. Not everything is successful, but if one is trying to grow a sector strategically, one learns from the things that have not worked in order to enjoy even more success in future.
My right hon. Friend the Member for Salford and Eccles suggested that the Government were moving too slowly and not deeply enough on this agenda—a succinct and accurate summary of some of the problems that parts of the Government face in implementing it. She rightly talked about the potential benefit of the one bit of the Bill that the Government support, which is that on encouraging businesses in the private sector to continue the journey that many are already on and think about how best to use social enterprises in their supply chains. Many businesses recognise that CSR reports, corporate donations to charity and corporate philanthropy are important, but not enough on their own, and that building social enterprises into their supply chains—she gave the example of how Morrisons is working with social enterprises in her area—can make a genuine difference to the private sector and, similarly, help to grow social value.
The hon. Member for Congleton praised the social enterprises in her constituency and highlighted how the social value element of the Bill could help them to grow further.
The hon. Member for Finchley and Golders Green explored in his speech some of the issues that he raised in his intervention on me about the definition of a social enterprise. I was struck by the benefit that a proper strategic conversation on how to grow the social enterprise sector might have for one very interesting idea recently presented to me—the idea of developing the concept of a social enterprise limited liability partnership to help ease investment finance from the City into social enterprises.
The Minister began his remarks wishing I had been with him in Brussels. He is, as ever, charming and I would have found it hard to resist if he had indeed called me in time to accompany him. He is absolutely right that the Government have taken some positive steps on this agenda, but, sadly, there have also been negative steps backwards for the sector. I welcome the progress made on the big society bank, but even the £600 million with which the Minister hopes the bank will be capitalised will not plug the huge amount of grant income being taken out of the sector.
I was encouraged by the Minister’s recognition that the Work programme has not gone well for the sector. He said that he is listening, but I fear that his colleagues in the Department for Work and Pensions are, sadly, out of touch with just how badly things are going for many charities and social enterprises that had hoped to be part of the Work programme.
Let me leave the House with one further statistic about the failure to date of commissioning in this area. The London Voluntary Sector Consortium surveyed some 25 tier 2 providers, 23 of which had had no referrals from their prime contractors—hardly a ringing endorsement of the success of commissioning for social enterprises under this Government to date.
Lastly, the hon. Member for Bury North almost appeared to lament the cross-party support for the Bill. I thought he was encouraging me to press my amendments to the vote. I recognise that there are insufficient Members in the House today, which means that if a vote were called the Bill’s progress would be stalled. Although the Minister has made a slightly better fist, if I may say so, of answering the concerns of Labour Members about the Bill’s narrow scope, I would have been tempted to press some of my amendments. I want the Bill to make progress, however, so I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Third Reading.
I beg to move, That the Bill be now read the Third time.
I will be brief, as a great deal of what needs to be said has already been said. The Bill before us may not be perfect, although it is perfectly timed. It comes at a time when social enterprises and voluntary community organisations across our communities are looking to the Government and all political parties to show support for the work they do.
There is still a long way for the Bill to go. I hope that it will continue to find support on all sides in the other place and when it comes to implementation. People want to see more of this kind of politics. It is not partisan politics, motivated by getting one over on the other side. It is politics that puts society first, recognising that when it comes to the better use of public money for the benefit of our communities, we can all benefit from it. There is much more work to be done, and I hope it will be done in the same cross-party and consensual manner that we have seen on the Bill so far.
Let me again congratulate the hon. Member for Warwick and Leamington (Chris White). He has done a masterly job in nursing his Bill through the corridors of Whitehall, where I suspect that he has engaged in some particularly interesting conversations, and through its various stages in the House. He took his party’s leaders at their word and presented a big society Bill, and it is certainly not his fault that the Government have gutted it. What remains is nevertheless useful, and, as many Members have observed, could begin to make a difference in local communities as commissioners think a little more carefully about how to maximise social value.
The hon. Gentleman has correctly described this as a useful Bill. Will he give the House the assurance of his party that in the other place everything possible will be done to ensure that it is passed before the end of the current parliamentary Session?
I will certainly do all that I can to encourage its passage. I hope that I have demonstrated to the hon. Gentleman, as well as to the hon. Member for Warwick and Leamington, the spirit of co-operation that was needed for it to make progress today, and I sincerely hope that it is passed in the other place and becomes law.
A week or so ago, on social enterprise day, I visited Hackney Community Transport, a remarkable social enterprise. I met not only its chief executive, but some of the staff who have been selected as this year’s social enterprise champions for the organisation. It is a remarkable outfit. In the early 1980s, finding it increasingly hard to obtain the grants that it needed in order to continue to meet the demand for transport from pensioners’ clubs, community swimming groups and the local Guides and Scouts, it set out to try to win commercial transport contracts. Last year its turnover was some £28 million, and over the past five years it has sustained a 20% to 25% annual rate of growth. That is a remarkable success by any definition.
Hackney Community Transport creates social value by reinvesting the profits from its commercial contracts in transport services for community groups in its area, and by training the long-term unemployed to help them prepare for a return to work. In its small way, the Bill will reinforce the extra value that it creates in its local community. Let me point out gently to Conservative Members that Hackney council has been a supporter of that social enterprise, working with it and commissioning contracts in ways that give it a fair chance. Here is the state in action at its most innovative, working with the community to create real social value and community benefit.
The Bill has the potential to help two more excellent social enterprises, as well as, I am sure, many others. Greenwich Leisure is another part local government, part enterpreneurial employee-led social enterprise, born in response to John Major’s cuts in the early 1990s. Winning contracts from local authorities to provide leisure services, it has created many new jobs and offered a range of initiatives to persuade those who have previously been unable or unwilling to use leisure centres through its doors. I am delighted to say that my own council has a contract to run our leisure centre with that excellent social enterprise.
The superb Coin Street Community Builders, 10 minutes away from this great House, was formed as a result of a challenge from the private sector. Big hotel groups wanted to take over the frontage of the River Thames, not for the community’s benefit but purely in their own interests. The tenacity of the community—and, to be fair, the skill of the Greater London Council planners at that time—led to the site being protected. Through a mix of legal forms—a housing association, a co-operative, a company—the community gradually generated new social housing. It has also refurbished the striking Oxo tower, created new work spaces for businesses, and helped regenerate the surrounding area. That has created considerable community benefit, and real social value.
The Labour party champions social enterprise and social value, not because we want to roll back the state or provide cover for tax cuts for the few and huge cuts in services for the many, but because we believe in strong communities and we recognise that we need to allow the ideas and imagination of the brightest and the best in our communities to flourish. Social enterprise and social value, along with Government, have key roles to play in that regard, and we support the Bill on that basis.
I wholeheartedly support the Bill promoted by my hon. Friend the Member for Warwick and Leamington (Chris White), as it enhances both supply and demand in a very important part of our economy: social enterprise. I think that this Bill can achieve more than my hon. Friend the Member for Bury North (Mr Nuttall) has said can already be done. I encourage my hon. Friend the Member for Warwick and Leamington to continue his efforts and, indeed, to continue to challenge the Minister to do more.
The aspects of the Bill that I find most intriguing and to which I give most support concern its role in enhancing our country's ability to meet the challenge of our economic situation. We hear every day about the demands for growth, the challenge of deficits and the overhang of debt, and we look for the remedies that we may have to overcome all those great challenges. We look at our televisions screens and see elderly people in many of our social services lacking in the care that they need and being denied the dignity that they deserve, and we ask why such things happen in our country.
The solution to those challenges lies not in some technological innovation or substantial additional contribution of funds, but in understanding and enhancing the entrepreneurship of every man and woman in this country. I often struggle to understand all the reasons and rationales for people wanting to become entrepreneurs, because it is not simple; it is not straightforward. We have heard many examples from both sides of the House today of people who started social enterprises and businesses. Underpinning all that is the fact that the individual wanted to step up. He or she felt motivated to step forward and do something that was different and innovative. Their motivation could be the desire to make money; it could be that they want to do something for their community or their country; or they could be motivated by some spiritual values at the core of their heart. This Bill takes us a step forward in saying to those whose motivation is to help the community that this Government believe in them, want them to step forward and want them to achieve things on behalf of our country.
The right hon. Member for Salford and Eccles (Hazel Blears) made a pertinent point about the social value rather than the organisation. Social value is what we are looking to achieve—not to define some particular circumspect or corporate identity—and it is at the core of my hon. Friend's Bill.
For people who have the motivation to step up, the Bill creates a market and demand. Members on both sides of the House have raised concerns about whether the provisions should cover services alone, or if goods should be included too. That is a fair point. We have heard that, perhaps, we are not pushing boldly enough for a strategy, and therefore condemning ourselves to dealing with just two or three local authorities rather than the country as a whole. That is a fair point, too. What we are doing is creating a market. We are creating an opportunity for people now to say to local authorities across the country, “What are you doing to promote what I see in my heart and what motivates me to do better in my community?” The Bill does not define a document; it creates that space for these entrepreneurs, and it could not come at a more opportune time to meet the challenges that our country faces.
I commend the Minister for his support for the Bill. We understand the scale of the challenges that we face, we support all the initiatives outlined today, we understand that there must be caution in financing initiatives, and we understand that there are limitations on what the public purse can support, but he needs to understand that the group of people who sit behind him—those individuals who want to step up and do better in their community—are looking to him to see this Bill not as the ending point of a particular piece of work, but as the start of what we hope will be a radical Administration in this area. I thoroughly and wholeheartedly support the initiative of my hon. Friend the Member for Warwick and Leamington and encourage the House to support the Bill.
I shall be brief, because I had the opportunity to make my comments at length during the debate on the new clauses. I just want to put on the record my thanks to the hon. Member for Warwick and Leamington (Chris White) for using the precious opportunity to introduce a private Member’s Bill to introduce this Bill about social enterprise and social value. It is also part of a journey, as the Minister said, to transform the way in which we commission and provide essential services in this country and to unleash the innovation that the hon. Member for Bedford (Richard Fuller) has just talked about.
There has been a great deal of consensus on these issues. I hope that that consensus will continue and when we get the Health and Social Care Bill back in this House, Government Members will support us in trying to move forward with a definition of “social enterprise” in the health context. If the NHS is to be the biggest social enterprise in the world, we certainly need more clarity and reassurance about what that organisation should look like, what its legal responsibilities are and whether it will have an asset lock on the spin-outs in employment. I hope that the consensus will continue.
Having said that, there are differences between the parties, even on this agenda, as the speech made by the hon. Member for Bury North (Mr Nuttall) illustrated. So I have no doubt that we will continue to have a lively debate about the role of social value. I am very keen to see it extended into the private and corporate sector, and I think that there is a genuine move among businesses to want to be bigger players in this area than they have perhaps been in the past. Again, I am looking to the Government to think about what incentives can be put into the system to encourage corporate bodies to shepherd social enterprises and to use them in their supply chain. Big construction companies such as Wates Construction are beginning to get that argument but, again, the Government can send messages to push the system along to ensure that we do not have to wait 10 years for that kind of development to take place.
The Bill is an important step on that journey and helps to reinforce the idea that the economic situation gives us a huge impetus to try to get more value out of the taxpayers’ money that we spend. The innovation of this sector can help us to do so much more. If, in the process of doing that, we can persuade people in business that making a contribution to the community is not just a good thing in itself, but that it helps them to augment and enhance their company, we will have made an excellent contribution.
I am delighted to have been a part of this Bill from the very beginning, and it is lovely to see it through to the end. I am not that used to private Members’ business, but I have certainly learned a lot on this journey and I am grateful to the hon. Member for Warwick and Leamington for his courage. I will do everything I can to ensure that the Bill gets a swift passage in the other place so that we see it on the statute book.
My hon. Friend the Member for Warwick and Leamington (Chris White) is bathing in the warm glow of the House’s approval and he deserves it, because he and his Bill have reached a milestone that very few people pass. He is to be very warmly congratulated on it. I have been in his position, so I know how frustrating the journey can be and how much patience is required—he has demonstrated all that. I would particularly like to congratulate him on the way in which he has worked with stakeholders outside this place to bring them together and keep them together on this journey. I know that it has been deeply appreciated.
My hon. Friend can take some comfort from the fact that I believe sincerely that the Bill has not been gutted—far from it. It has been focused on what is most important and valuable right now, which is sending a much clearer signal to those who are doing the very difficult job of buying services on our behalf. At the critical pre-procurement phase—the importance of which is so often underestimated and at which those buying are thinking hard and consulting about what is needed and about what they are buying, shaping the market of potential supply for that service—they should receive a clear message from us that we expect them to consider social and environmental value, when relevant and proportionate. That is a very useful addition and complements the other initiatives that are all pushing for space, not least the best value guidance from the Department for Communities and Local Government.
I am delighted to stand at the Dispatch Box on behalf of the Government to congratulate my hon. Friend, to confirm our support and to wish him every good fortune in the other place. If he succeeds, his name will be on the milestone of a very important journey that will help to unlock the entrepreneurial energy that wants to be part of this process. We will then be able to deliver what we all want: better public services for the people we serve.
Question put and agreed to.
Bill accordingly read the Third time and passed.
Taxation Freedom Day Bill
Second Reading
I beg to move, That the Bill be now read a Second time.
It is a privilege to move Second Reading of the Taxation Freedom Day Bill. It is a small Bill with an important message to Her Majesty’s Government from the Great British taxpayer and provides for an annual taxation freedom day to reflect the proportion of tax paid by individuals from their income. The idea is that each year, the Chancellor of the Exchequer must, by way of a statutory instrument, specify a day that will be observed as taxation freedom day. The purpose of this taxation freedom day will be to mark the day in any given calendar year on which the United Kingdom’s net national income reaches the level of the United Kingdom’s estimated level of national taxation for that calendar year.
In the Bill, total national taxation includes all forms of direct, indirect and local taxation and it will be calculated not by Her Majesty’s Government and not by me, but by the independent and trusted Office for National Statistics. Likewise, the Office for National Statistics would also be charged with calculating net national income.
Each year, the Chancellor of the Exchequer will determine the day in the year when taxation freedom day will fall using the proportion of the United Kingdom’s estimated level of national taxation to the United Kingdom’s estimated net national income. Under the terms of the Bill, an order would not be able to be made unless it was laid before and approved by resolution of each House of Parliament. Each year, before 30 November, the Chancellor of the Exchequer will have to lay before Parliament the estimated date of taxation freedom day in the following year and, before 31 May, the Chancellor will have to lay before Parliament a report setting out whether the estimated date of taxation freedom day in that calendar year was correct.
The purpose of the Bill is to try to provide some transparency for the British taxpayer about the burden of taxation on them and on the national economy. It is essentially politically neutral and is not an argument for or against any particular level of national taxation. I have my own views on that, on which I hope to elaborate later, but all I seek to do is to get across, in a readily understood and straightforward way, the proportion of our economy that is taken up in taxation. The Bill is one of almost a dozen that I have put before the House in this Session. I should like to place on record my thanks to Jonathan Isaby at the TaxPayers Alliance for his contribution to the Bill’s drafting. I thank also the Adam Smith Institute for its germ of an idea about having a readily understood national taxation freedom day, as well as the Freedom Association, which has been extremely supportive.
Taxation freedom day in 2011 was 30 May—three days later than last year—which means that, on average, every British taxpayer had to hand over all their income to Her Majesty’s Government for the first 149 days of 2011. Only after 30 May did they get to keep for themselves any income they earned. Having recognition of such a calendar date would reflect and get across in a very simple and straightforward way the burden of taxation on our economy.
The date of taxation freedom day varies from year to year, and the point is to make it easy to understand how the burden of taxation changes each year. In 1964, taxation freedom day was 23 April, whereas in 2011, as I have mentioned, it fell on 30 May. So, over that period, taxation freedom day moved by 37 days. In 1964, the average British taxpayer had to work for only 114 days before they could keep their income for themselves, but in 2011 they had to work for 151 days before they could keep their income.
My hon. Friend is making a very cogent speech. Is he aware that these figures have been calculated back to the turn of the 20th century? In 1900, the figure was only 22 days and in 1910 it was only 19 days.
I am grateful to my hon. Friend for that most helpful intervention. Such interventions highlight how well he serves his constituents with the depth of his knowledge and research into legislation such as this. The figures he gave put into context the horrifying advance in the burden of taxation that we all have to pay. The fundamental truth is that Her Majesty’s Government and Ministers such as the Economic Secretary to the Treasury, who is on the Front Bench, do not have any income or resources of their own. Everything that the Government spend on our behalf either comes from the British taxpayer or is borrowed. The burden of that taxation demand is of concern to everyone.
There may well be Members, perhaps on the Opposition Benches, who believe that the burden of taxation should go up. That is a perfectly respectable argument. There are those who believe that the state can marshal the resources of the British people better than the individuals themselves. I do not happen to agree with that, but it is a perfectly respectable point of view. I would expect them to welcome taxation freedom day going up the calendar, so to speak, perhaps into June, July or even August. My Bill does not say that that is a bad thing. What my Bill says, in a politically neutral way, is, “Let’s let the British people know what the burden of taxation is so that they might make a judgment about whether it is acceptable or not.”
The figures that my hon. Friend the Member for Bury North (Mr Nuttall) cited from the turn of the 20th century demonstrate how far we have come, in an adverse way, since those days. My humble remarks go back only to 1964, which happens to be the year in which I was born. In 1964 British taxpayers had to work for only 114 days until taxation freedom day, and now, in 2011, the equivalent figure is 141.
Taxation freedom day has moved around quite a lot in the past 47 years. The House might be interested to know, for example, that between 1964 and 1970, taxation freedom day moved by 40 days, from 23 April to 2 June. Those were the days of the devaluation crisis, a great deal of trade union militancy and the public finances being in some disorder. The burden of taxation went up by more than a month’s worth—40 days’ worth—over that period. Then, from 1970 to 1973, taxation freedom day fell by 21 days, from 2 June to 11 May.
Good old Ted Heath.
Indeed. Before the U-turn the burden of taxation on the British economy went down but then, as we know, it all started to go wrong, and from 1973 to 1975—three calendar years, in effect—those 21 days were reversed and taxation freedom day went back up to 2 June. One of the major reasons for that was the very high price inflation of that period. The Government of the day did not re-index all the taxation allowances and there was a huge fiscal drag effect, taking people into high rates of income tax.
Taxation freedom day did not change much until 1978. Between 1978 and 1982, it moved by 24 days, from 27 May to an all-time peak, 20 June, in 1982. In that period we had the rapid appreciation of sterling, particularly against the dollar, there was the doubling of VAT from 8% to 15% in Geoffrey Howe’s first Budget, a huge collapse in gross domestic product—not as sharp a fall as we are currently experiencing, but nevertheless a very dramatic slow-down in the economy—and another period of high inflation fuelled, in part, by a second big rise in oil and petrol prices. That meant that in 1982 the average British taxpayer had to work for 172 days, with all their income for those 172 days going, in effect, to Her Majesty’s Government.
There then followed quite a long period, from 1982 to 1996, just before the end of the Conservative Government, when taxation freedom day fell back by 25 days, from 20 June to 26 May. In 1997, when Tony Blair came in, taxation freedom day started to rise once again. Interestingly—I hope that this will convince the two Opposition Members present that I am trying to be as politically neutral as possible—taxation freedom day in 1997, when Labour took office, and in 2010, when Labour left office, fell on exactly the same day: 27 May. It rose in the middle of that period to 4 June, an increase of nine days, but in other years it fell by three days.
I congratulate my hon. Friend on his excellent Bill. Despite what he has just said, does taxation freedom day not generally fall earlier under long periods of Conservative government than under periods of Labour government?
I am most grateful for that penetrating intervention from my hon. Friend, who serves his constituents with great enthusiasm and ability. Although I would like to think that there is an obvious correlation, my honest answer is that it might not be as strong as we would like it to be. That reflects the overall bad picture of all modern Governments settling a burden of taxation on the economy that is rather higher than he or I would like. Although brave attempts have been made to reduce that burden, particularly by Conservative Governments, they have not always been successful as problems have got in the way. For example, the oil price crisis in the early 1970s and the big increase in trade union militancy blew the Conservative Government of the day off course, which meant that they had to increase the burden of taxation in response. Likewise, in the first years of the Thatcher Government the burden of taxation increased sharply. As I have said, between 1979 and 1982 taxation freedom day moved from 30 May to 20 June, which was a sharp ratcheting up.
I commend my hon. Friend on introducing his Bill. I presume that his aim is to try to shame the Government into making taxation freedom day fall as early as possible each year, which is certainly the basis on which I support it. With that in mind, has he considered specifying a date beyond which no Government can allow taxation freedom day to fall, to ensure that we guard against excessive taxation?
I am most grateful for that intervention from my hon. Friend, who is a legend not only in his constituency, but in this place, precisely because of that sort of contribution. I also take it as a bid to serve on the Bill Committee. I for one would welcome that as an amendment that would improve the Bill, because I know that one of the major roles he performs in this place is providing helpful ideas to Members and the Government on how legislation might be improved, and what he suggests is one of the best examples I have heard. Like me, he believes that the burden of taxation in this country generally is too high and would like to see it fall. However, Members need not share our views to support the Bill. It is possible to be an enthusiast for more taxation to provide more public services and still to support the Bill. The Bill would make the burden of taxation transparent to everyone.
I hesitate to correct my hon. Friend, but it is possible to have more public services without necessarily increasing taxation.
My hon. Friend is absolutely right. That is what Her Majesty’s Government are currently trying to do.
More for less.
Indeed. We can have better public services that are less dependent on public subscription. By making the burden of taxation transparent, through this calendar mechanism, the arguments for the more efficient use of public resources can be strengthened by the simple idea of trying to make taxation freedom day fall earlier.
The Conservative party has supported the idea of taxation freedom day in the past, but I am disappointed to see that, in the handout from the Government machine, the Government are going to oppose the Bill today.
Surely not!
I know that my hon. Friends are shocked by that news, and I very much hope that I am mistaken. When our hon. Friend the Economic Secretary to the Treasury rises to make her remarks, I hope that she will disabuse us of that notion, because in 2003 Lord Saatchi in the other place launched a Bill to make taxation freedom day a bank holiday. It was official Conservative party policy, supported at the time by the then shadow Chancellor, the right hon. Michael Howard, and a great deal of news was made about it.
I do not propose in my legislation to make taxation freedom day a bank holiday.
That is a very good question, and it may well be the subject of another amendment that my hon. Friend tables in Committee, because I for one support the idea of a bank holiday to celebrate taxation freedom day. I personally think that it should replace the May day bank holiday, which for most of my constituents and most people throughout the country is not an appropriate day for a public holiday. If it were replaced by taxation freedom day, that would be a very good thing, but that is not in the Bill.
I commend that idea to my hon. Friend. It might encourage the Labour party to bring forward taxation freedom day each year so that it coincides with May day.
That is a very good suggestion, and yet another reason for Opposition Members to support the Bill today.
My Bill does not propose that taxation freedom day be a bank holiday. What it does propose is that, basically, Her Majesty’s Government make official recognition of what taxation freedom day does. In the Taxation (Information) Bill, the Conservative party Bill that was launched in the other place in 2003, Lord Saatchi suggested the following mechanism for calculating how taxation freedom day should be arrived at. He said that taxation freedom day is
“determined by taking total tax revenue, including direct and indirect taxes, local taxes, capital taxes and national insurance contributions as a percentage of total income”,
and that it is
“calculated as general government tax revenue as a proportion of net national income”. —[Official Report, House of Lords, 9 July 2003; Vol. 651, c. 380.]
Net national income differs from the more familiar gross domestic product, or GDP, in two ways: first, net national income adds in net property and the entrepreneurial income of UK citizens from abroad; and secondly, it subtracts capital consumption. Net national income is therefore smaller than GDP, making the ratio of tax revenue to net national income larger than that to GDP.
I do not particularly mind what mechanism the Office for National Statistics uses for calculating taxation freedom day, because there are all sorts of suggestions about how it be done, but whatever mechanism is used, it ought to be clearly explained and consistent year on year, with lots of backdated calculations—perhaps even to the start of the 20th century, as my hon. Friend the Member for Bury North suggests—so that we can track consistently how taxation freedom day has moved around. There we have an official Conservative party suggestion from 2003, however, and it is a helpful contribution to the idea of pushing this Bill forward.
None other than the current Chancellor, before he became Chancellor, has spoken about taxation freedom day on two occasions. First, interviewed by Polly Toynbee in The Guardian on 2 June 2006, he said:
“This Saturday—June 3—we celebrate Tax Freedom Day. That is the point in the year when people stop working for the chancellor and start earning for themselves.”
In 2006, according to this enlightened quotation, the then shadow Chancellor saw the value of taxation freedom day. I very much hope that now he is the actual Chancellor he can put his words into practice. On another occasion, when interviewed in 2007 about taxation freedom day having slipped to 1 June in 2007 from 27 May in 1997, he was quoted in the Daily Express as saying:
“Here’s the proof that Gordon Brown’s stealth taxes hit us every hour of the working day. Hard-working people hand their money over to the Chancellor and the tragedy is that they cannot trust him to spend it wisely.”
In his role as shadow Chancellor, my right hon. Friend the Member for Tatton (Mr Osborne), has on two occasions publicly backed the idea of taxation freedom day. That is extremely helpful, and I hope that point of view is now consistent with Her Majesty’s Treasury in its present form.
On 6 June—D-day—2000, Mr Deputy Speaker, none other than your boss, the Speaker, tabled a ten-minute rule Bill called the Taxation (Right to Know) Bill, which had three main elements. If I may quote Mr Speaker in his absence, he said:
“In my Bill, the Treasury is required to prepare and send to every household and business an annual statement of the rates of each tax and excise duty…My second proposal is that the proportion of the purchase price of key products that is represented by tax and excise duty should be publicly displayed on the bills that customers pay…My third suggestion is that each year the Treasury should publish an assessment of the merits of each tax, considering not only its yield but its administration cost, its compliance cost and its economic cost in terms of lost output and diminished competitiveness.”—[Official Report, 6 June 2000; Vol. 351, c. 175-176.]
In his remarks to the House, the right hon. Member for Buckingham (John Bercow) stressed that our taxation freedom day, which in 2000 was on 29 June, was no fewer than 20 days worse than in the United States, where it had fallen on 10 May. The Bill proposed by Mr Speaker—before he was Speaker—in 2000 and my Bill essentially try to do very similar things. We are trying to make the burden of taxation on every individual business and organisation in this land far more transparent so that taxpayers can understand how much of their money is going to the Government and what it is being spent on.
That drive for transparency is being promoted by all sorts of organisations, not least the TaxPayers Alliance, which, in a major tax transparency campaign, has launched a tax app. For those of us who are rather technologically challenged, that might not be immediately appealing, but that will not be so for enlightened individuals such as my hon. Friend the Economic Secretary, or even my hon. Friends the Members for Harlow (Robert Halfon), for Bury North, and for Shipley (Philip Davies), who are at the forefront of IT developments. The Tax Buster app for smartphones allows shoppers to find out how much they really pay when buying everyday items. With a few details about any particular purchase, it can calculate how much money from an item went on VAT and duties.
Can my hon. Friend confirm whether this app would be compatible with BlackBerrys?
I am most grateful for that intervention. I think that the answer is yes. One would have to access the Tax Buster website to find out how to do so. I think that the app is available for all kinds of cellphone technology. I know that my hon. Friend has the very latest gadget.
When an individual puts into the app a few details about their purchase, it tells them how much they had to earn before they paid taxes to have enough money to buy the product. For example, 20 cigarettes that cost £6.49 would have cost £1.24 without indirect taxes. Paying the £6.49—I am looking at my hon. Friend the Member for Dover (Charlie Elphicke), who I believe might occasionally buy the odd cigarette—requires earnings of £11.35 before income and corporate taxes.
I would like to put it on the record that I share wholeheartedly my hon. Friend’s concern that cigarettes are over-taxed. That is a clear case for reform, which I hope Treasury Ministers will take on board.
I am most grateful for that helpful intervention.
My next point will be of interest to my hon. Friend the Member for Harlow. Filling the car with £60-worth of petrol would cost only £23.86 without indirect taxes. Paying that £60 requires £104.84 in earnings before income and corporate taxes. For higher rate taxpayers, the equivalent figure is £122.91.
I thank my hon. Friend for being so generous in giving way. Does he agree that if the Government do not raise fuel duty as planned in January, the day on which taxation freedom day falls will be much earlier?
That is a very good point and the Economic Secretary has heard it. She will also have heard the voice of the House expressed only the other week in support of my hon. Friend’s motion. The burden of petrol taxation has got to such a level that it is probably constraining economic growth in an unacceptable way, at a time when growth from anywhere would be most grateful.
My hon. Friend said what the gross figure would be for a higher rate taxpayer. Of course, we now have two rates of higher tax at 40% and 50%. Does he know to which of those rates his figure applies?
I believe that the figure I quoted is applicable to the lower of the higher rates. The figure would be even worse for those who pay the top rate. I am sure that the Tax Buster app has a facility to calculate the tax burden for those on the very highest rate.
The aim of the app is to bring greater clarity and to illustrate for taxpayers the need for more transparent taxes. The Government have been pushing for more spending transparency, which is welcome. I hope that in her remarks, the Economic Secretary will welcome this effort to make our taxation system more transparent and offer the TaxPayers Alliance the Government’s support.
Another great concern for taxpayers is that this country has two big taxes on individual incomes: income tax and national insurance contributions. There are many in this Chamber and many organisations outside who believe that those two should be combined. That would make the taxation system more readily understandable for taxpayers. To most people, national insurance is almost indistinguishable from income tax. Its function is now essentially the same—raising revenue for the Government. Despite performing essentially the same task, the two systems operate in a different manner in eight key ways, for example in the collection period and the definition of earnings. That is unnecessarily complex and adds to the expense of collecting revenue for Her Majesty’s Treasury. Most importantly, national insurance contributions obscure the public’s understanding of how much they are being taxed. Most debate at the time of the Budget or the autumn statement focuses on the level of income tax. National insurance, despite being extremely important, is often overlooked.
I would support reforming national insurance to align it with income tax, which would cut costs, reduce complexity and improve transparency. I therefore believe that the Government should abolish national insurance for both employers and employees, and combine it into one taxation system. Abolishing national insurance would make the whole thing simpler, cheaper and more transparent.
I have spoken about the simple version of taxation freedom day, but of course we can take the matter a step further. As well as having a national taxation freedom day, we could break it down into regional variations. The Adam Smith Institute has done that for the United Kingdom. It calculates that in 2011, there are huge variations. In Wales, the regional equivalent is after 35 days, and in London it is after 51 days. The taxpayer in London is having to work for 51 days with all their income going to the Treasury, but in Wales it is far less. In the east midlands, where the constituency that I have the privilege to represent is located, it is 38 days.
The institute has also calculated the number of days that it takes Britons as a whole to pay off each individual tax. For example, income tax takes up the first 39 days of the year; national insurance the next 26 days; VAT the next 29 days; corporation tax the following 12 days; fuel duties and petroleum revenue tax the next seven days; local taxes including business rates and council tax the following 13 days; capital gains and inheritance tax the next two days; duty on alcohol and tobacco the next five days; and all other taxes the following 17 days. Again, that helps to clarify the burden of taxation on the hard-pressed British taxpayer and how it is split up by each of the individual taxes that we are all obliged to pay.
I mentioned earlier the briefing that the Government information machine has circulated about my Bill. I have to say, I am very disappointed by it, and it makes a number of points that need to be tackled head-on. I will do that now, so that instead of reading out those points the Minister can respond to them. The Government’s first attack point is:
“The methodology for calculating Tax Freedom Day includes all forms of direct, indirect and local taxes. This gives an exaggerated sense of the tax burden on an individual level and does not recognise the progressive elements of the tax system.”
I do not share that concern. I do not want to exaggerate anything; all I want is a transparent system.
I would welcome comments from the Government about how they feel the burden of taxation on the average British taxpayer ought to be calculated. I am not particularly fussed about the methodology of that, as long as it is consistent year on year and can be backdated for a reasonable number of years so that we can get a sense of the progression either way. As I stressed at the beginning, my Bill is politically neutral in that sense. It does not argue that taxation is a good or bad thing; it is simply intended to make the way of getting that across to the public as transparent as possible.
The Government’s second attack point is:
“Acknowledging the need for freedom from taxation disregards the public benefits that flow from the revenue raised, through public spending. These include some of the country’s most important priorities—the healthcare of our people, the education of our young, our nation’s security, and the infrastructure that supports our economic growth.”
Of course, that is right. We need taxation and public services. I am not arguing with that. My Bill is politically neutral in that sense and does not disregard the public benefits of taxation; it simply aims to get across to the British people how much they are obliged to cough up to pay for those public services.
The third point:
“In the past decade the date for Tax Freedom has varied very little. How can those supporting the Bill justify the expense and Parliamentary time that will be taken up designating a specific date each year?...What assessment have those supporting the Bill made of the costs to the Treasury of the proposed legislation?”
The Government must have been struggling to come up with attack points when they got to that one because I cannot imagine that much expense would be involved in designating taxation freedom day.
Furthermore, as my hon. Friend has demonstrated, over the years tax freedom day has fluctuated wildly.
Indeed. The Office for National Statistics is a thoroughly competent organisation whose judgment we all respect, and I cannot believe that to get this exercise under way would place a massive burden on it or Her Majesty’s Treasury. The Adam Smith Institute, through its good offices, has published its version of this information. That is a small, privately funded organisation. Given all of Her Majesty’s Treasury’s resources, at taxpayers’ expense, I am sure that getting this exercise under way would be a small matter. On parliamentary time, we are talking about one statutory instrument a year, and we know that passing hundreds of statutory instruments accounts for only a small fraction of the cost of running Parliament.
Is it not bizarre that the Government, who are happy to give £18 billion a year to the European Union without so much as a by-your-leave, are quibbling over the cost of setting out when tax freedom day is each year?
It does rather put it into perspective, does it not? I shall not be led too far astray, Mr Deputy Speaker, but I cannot resist adding to the strength of my hon. Friend’s point. Our bill to the EU for the last five years of the previous Government was £19 billion, but in the lifetime of the coalition Government to 2015 it is set to be £41 billion. It will more than double.
May I suggest one saving that could be made to help fund the cost of these regulations? The excellent TaxPayers Alliance recently published a document showing that we could save £113 million by getting rid of all the full-time paid union officials, which would also enable people to work more effectively.
That is right. That so-called facility time is of huge concern to taxpayers up and down the land. [Interruption.] I know that this point exercises some Labour Members, and I can understand their concern —they have their views—but the Bill is a transparency exercise, so those, like Labour Members, who believe in facility time and recognise its value will have no problem recognising that that facility time, which costs hundreds of millions of pounds, will shift taxation freedom day. They can argue the benefits of facility time to the British taxpayer. I happen to disagree with facility time because I do not think that public money should be spent on such things, but I recognise that there are views on the other side. My Bill does not state whether such spending is good or bad; it simply tries to demonstrate its effect on the public purse. That is why I hope that Members on both sides of the House will support the Bill on Second Reading.
My Bill is a small Bill—it does not even run to two pages—it is concise and it proposes the establishment of a simple and straightforward mechanism to let British taxpayers know how much of their money goes each year to Her Majesty’s Government through all the different burdens of taxation. It is not just about income tax or national insurance contributions; it tries to add up the total burden of taxation on every man, woman and child in the country. There is a need for transparency, because a particularly enthused member of the public who was trying to work out the burden of taxation might, for example, go to the Finance Bill, which is typically more than 500 pages long, with hundreds of different clauses, or one of the Budget reports, with its supporting documentation, which also run to hundreds of pages, containing huge amounts of detail. However, a taxation freedom day—a calendar point each year that simply illustrated the burden of taxation—would be a lot more readily understood.
Importantly, a taxation freedom day would also help to expose the increasing burden of stealth taxes on our economy. It is all very well concentrating on the headline rates of income tax, the thresholds at which they kick in or national insurance contributions, but as we have seen over the last decade, one of the big increases has been in stealth taxes, particularly council tax, in the hope that the British public would not spot that. However, by having an effect on taxation freedom day, the burden of stealth taxation on our economy could also be exposed.
In closing, I would like to stress that my Bill is politically neutral. It is an attempt to make our country’s taxation system more transparent, in a way that, crucially, every individual in the land would readily and easily understand. I very much hope that my hon. Friend the Minister has been persuaded by the power of my arguments and that she will confirm that the Government will support the Bill, because there is enough time in the current Session for it to complete its passage.
I commend my hon. Friend the Member for Kettering (Mr Hollobone) for introducing his Bill. He is a great champion in this House not just of his constituents, but of common sense. This Bill is a prime example of the common sense he is trying to bring to bear on this House and on the Government.
I am optimistic, and would urge my hon. Friend to be optimistic too, because in the Minister we have someone who is broad-minded. She will not just be persuaded by the drivel that was written by the Government machine—as I think he so delicately put it—but will listen to the force of his argument. I was certainly persuaded by the power of his argument, and I am sure that other hon. Members were. If we were persuaded, I see no reason why she would not be persuaded either, given her qualities and her open-mindedness. I therefore look forward to a rethink of the briefing from the Government machinery. Indeed, I am sure that her speech is being torn up as we speak, to reflect the points that my hon. Friend made.
My hon. Friend is a reasonable man—something that probably I am not—and he made the point that his Bill is neutral. He did not say whether taxes should be higher or lower; he is merely trying to introduce some transparency. Therein lies the weakness of his Bill, if he does not mind me saying so. I return to the point that I made in my earlier intervention. The Bill would be much healthier if it were far more partisan and made the point that taxes are too high and should be lower. I would therefore love to insert in the Bill a date each year beyond which tax freedom day must not fall, thereby acting as a safeguard to prevent taxpayers from excessive taxation, however bad the Government were in future. When his Bill goes to Committee, as I am sure it will, I would wish to move an amendment proposing that. I think that most taxpayers would welcome it.
My hon. Friend made the perfectly reasonable point that there is a slight discrepancy in how tax freedom day is calculated. I would therefore wish to guard against Governments obsessed with spin—I am sure he can think of some from the not-too-distant past—trying to manipulate the calculation of tax freedom day to suit their own ends and their own agenda. I do not know whether he considered this in preparing his Bill, but although the Government may well be strapped for cash—it seems that they cannot afford to announce when tax freedom day is; I am not entirely sure what the cost incurred in doing so is, but it is clearly substantial—perhaps we should encourage them to state where the UK is in the league table compared with other countries. If every country is being calculated on the same basis, at least we will know, however it is done, that every country is being calculated on the same basis, so we can look at where Britain stands in the league table and see whether we are doing relatively better or worse than other countries. Helpfully, the Molinari Economic Institute has provided such a document based on the reports it produces each year.
Relevant to this debate is the issue raised by my hon. Friend the Member for Kettering about the differences in calculations. He and I think that tax freedom day fell on 30 May this year, which was three days later than it was in the previous year, which might be one reason why the Government have changed their minds about the publication of tax freedom day. They might not wish to draw attention to the fact that tax freedom day is three days later this year than it was last year. I put that out there as a possible explanation for the change of policy.
Those who produced the document that calculates tax freedom day across Europe are clearly more generous because they have this country’s day as falling on 17 May —13 days earlier. I do not think we should be led astray by what date it is; what is important to me is where the United Kingdom falls in relation to other countries in the European Union—and, indeed, countries outside the EU, which also appear in the table. The figures show how competitive our economy is in comparison with our neighbours.
My hon. Friend may be surprised to know that the UK does reasonably well, even though 17 May might seem too long for those who believe that taxes are too high. I would urge my hon. Friend, however, to avoid Belgium like the plague, as Belgian tax freedom day, according to this document, is 4 August. I certainly urge people in Belgium to rise up against their Government and demand lower taxes.
In order that people do not become complacent, I point out that in Cyprus tax freedom day is 13 March. I do not know about my hon. Friend, but I would certainly urge the Government to move more towards a Cypriot level of taxation than to a Belgian one. This gives the Government something to aim for—perhaps a target. I am not usually a big fan of targets, but perhaps the Government could target themselves to beat Cyprus.
My hon. Friend is making an excellent speech, which I am hugely enjoying. Does he have the figures for Greece? Can he confirm whether the Greek Government actually collected any taxes at all?
My hon. Friend makes a good point. According to the document I have with me, Greece’s tax freedom day is 12 June. Whether that was simply an academic exercise rather than a real one, I am not entirely sure. I probably share my hon. Friend’s implied view that, for far too many Greeks, tax freedom day was 1 January. I am not advocating that this Government aim for a 1 January tax freedom day, but I am sure they can do better than they are at the moment—on the best analysis I have seen, the middle of May or what we think is actually the end of May.
Is not a central point about tax freedom days in relation to Greece the need to avoid the risk of creative accounting? We must be sure that accounts are accurate, especially where there has been a change of Government. I believe that the Labour party has so far spent its bank tax nine or 10 times over. We must ensure that, whatever happens, there will be no creative accounting; we must be able to trust the figures.
My hon. Friend is right, and I believe that the Bill will provide a good safeguard against Governments exercising sleight of hand in their presentation of figures. If we have an independent body—I do not really care whether it is the Office for National Statistics, which is mentioned in the Bill, or the Office for Budget Responsibility—and a set of figures that can be trusted, no matter how many times the Government announce the same tax increases or tax cuts, we would at least know where we stood as we would have trusted figures that overrode the spin. I think that the Bill is a particularly good safeguard against that.
The Adam Smith Institute has been on to this for quite some time, and has helpfully informed people when tax freedom day falls in this country. Although the transparency element is important, what I find most striking is the fact that British people must work for 149 days just to pay their taxes. I was also interested by the regional variations mentioned by my hon. Friend. The Welsh, for instance, spend 35 days paying their income tax, while people in London spend 51 days paying theirs.
I do not understand why the Government do not want to make people aware of how difficult the Government’s financial position is. The Adam Smith Institute used a tax freedom day-style mechanism to illustrate the extent of the United Kingdom’s debt problem. It calculated that our burden of debt was so great that UK taxpayers would need to work for nearly a year and a half, with their entire wage packet going to the Government and not a penny being spent on public services, just to pay off the national debt.
When the Government talks of our being heavily in debt, whether they are telling us that we are adding £150 billion a year to our debt or that the debt burden is more than £1 trillion, it is difficult for people to get their heads around the figures. Millions used to sound like a lot of money, but nowadays no one is interested unless it is billions. Explaining to people in simple terms that they would have to pay tax for a year and a half without any of it being spent on public services would make the extent of the debt clear to them.
We could also be shown a way out of our financial problems. Sam Bowman, head of research at the Adam Smith Institute, says:
“Tax Freedom Day underlines the huge burden of government on working people’s lives. For five months of the year, we are slaves to the state. No wonder growth is so slow—we need robust tax reform now, bringing lower, simpler, flatter taxes. The government should resolve to make Tax Freedom Day something we can celebrate earlier and earlier each year.”
I think that Sam Bowman is on to something. When we can see the facts for ourselves, when we worry about where growth in the economy will come from and conclude that it depends on people having more and more disposable income so that they can go to the shops and buy things—thus helping businesses—and when we are made aware of how long people are having to work just to pay their taxes without even having a disposable income, the way out of our debt problem begins to become clear. If we can indeed make tax freedom day arrive earlier and earlier, people will have more and more disposable income that they can use to try to get the economy going. I think that that would help the Government to see a way towards economic growth, which is what will solve our debt problem—together with, I hope, a cut in Government expenditure at some point. They do not seem to have been able to manage that so far.
Let me draw my hon. Friend’s attention to the position in other parts of the world, particularly America. Traditionally, America has been far better at generating economic growth than the wretched European Union ever has. This year, tax freedom day in the United States will arrive on 12 April, well over a month before it arrives in this country. Whereas in this country people must work for 149 days just to pay their taxes, in America they need work for only 102. Many of my constituents would much rather work for 102 days than 149.
The great recession has reduced tax collections even faster than it has reduced income. After a long debate, President Obama and the Congress extended the Bush-era tax cuts for two additional years, which is very welcome. Despite those tax reductions, Americans will pay more in taxes in 2011 than they will spend on groceries, clothing and shelter combined, despite the fact that tax freedom day falls much earlier in America.
The statistics in America are calculated by state—my hon. Friend the Member for Kettering gave figures for different parts of the UK—and they are very revealing. Mississippi has the lowest average tax burden of all the states, and its tax freedom day falls as early as 26 March, whereas in Connecticut it falls on 2 May and in New Jersey it falls on 29 April. There are massive regional variations, therefore, and drawing comparisons can serve to promote competition between states. If voters in America can see how their state compares with other states, they might be encouraged to say, for instance, “Well, hold on a minute; if Mississippi can have tax freedom day on 26 March, why can’t we have that in Connecticut, too?”
One of the best ways to get Governments to reduce the tax burden is to introduce an element of competition. That is why I want the Bill’s provisions to be strengthened so that we encourage the Government to set out in the calculations how the UK compares with other countries in respect of a tax freedom day, and in particular how we compare with countries such as America whose economic growth has traditionally been stronger than ours. After all, if we want to grow the economy, we should want to adopt best practice. Any business that wants to improve its performance will look at what its competitors do. That is how most organisations seek to improve; they benchmark their own performance against that of similar organisations to see what they might do better. I would like the Government to start doing that in respect of taxation rates. If they are forced both to show that lower taxes can be delivered in other parts of the world and to consider how those countries achieve that, they might then try to introduce a similar discipline and focus to this country.
I am sure there will be intense competition for places on the Committee, but does my hon. Friend share my optimism that the Bill might be able to pass through that stage and complete its passage during this parliamentary Session, so that many of his welcome ideas become legislation?
My hon. Friend is very kind. I would not be so bold as to say that my amendments would improve his Bill, as it is perfectly good in its current form. I am merely using this opportunity to suggest some ways in which it could, perhaps, be strengthened. If my hon. Friend is seeking cross-party consensus and therefore does not entirely share my agenda, I could, perhaps, be persuaded to ditch some of my more strident amendments in order to get the basic measures through. I merely offer these amendments up now to show that the Bill could be improved.
My hon. Friend was making a very good speech up to that point; the idea that he should retreat or give in on any issue is appalling, but when he is absolutely right, as he is on this one, I must ask him to press it very firmly in Committee.
Again, my hon. Friend is very kind. I am probably more strident than my hon. Friend the Member for Kettering, and my hon. Friend the Member for Wellingborough (Mr Bone) is clearly more strident than I am, so I invite him to take part in more debates that I am involved in to show what a moderate I am. His presence is very helpful in that regard and I thank him for that.
The country is in a massive financial hole. I want to stress that I do not think that the Bill is simply something that will add transparency to the situation so that people can see where they stand; I think it has the potential to be much better and more radical than that. It will give an opportunity for people in this country to start questioning seriously why our rates of tax need to be so high, given that other countries, often ones doing better than us, seem to manage with a much lower rate of tax. If we can get that agenda discussed in politics, we can do something that will transform the British economy—it does need transforming.
We cannot carry on as we are, trying to get ourselves out of huge debt by scoring a few quick singles here and there. We need to go for some boundaries—we need to go for some fours and sixes if we are to get ourselves out of this. Quick running between the wickets, on its own, is not going to make any impression. The Bill has the potential to change radically the way we think about taxation in this country, and about how we press our Governments to do the right thing and be more efficient in the way they do government.
I do not want to overstay my welcome, Mr Deputy Speaker, so I will close on that point, but I say to my hon. Friend the Member for Kettering that, once again, he has put a vital issue on to the political agenda. Although my speech will certainly not have persuaded the Government to support his Bill, I still see no reason why his speech would not have done so. I look forward to the Government supporting the Bill and at least allowing it to go into Committee.
As always, it is a great pleasure to follow my hon. Friend the Member for Shipley (Philip Davies), who has demonstrated the great need for this Bill. I start by congratulating my hon. Friend the Member for Kettering (Mr Hollobone) on preparing the Bill and bringing it before the House today. In his opening remarks, he said that he thought that this was a simple and straightforward measure and, of course, in many ways it is. I have a great deal of sympathy for the measure, and I would have thought that hon. Members on both sides of the House could agree on the issue of transparency on tax matters.
I start from the position of broadly supporting the principle of ensuring that taxpayers should be given clear information about the size of their tax burden. I was initially very encouraged that the Bill would go a long way towards improving the transparency of our tax system, but when I began to study the detail of the Bill and consider all the issues involved, I found that in many ways it is far from simple and straightforward. Indeed, this is a fiendishly complex matter, which is not as simple and straightforward as it may appear at first sight.
I wish to deal with several issues in my contribution, the first of which is why making the tax burden more transparent is so important. Taxation legislation is incredibly complex, covering a wide variety of taxes and duties. Indeed, it is worrying that the list is so long. Most people, when they hear the word tax, automatically think of income tax, but that is just one of several taxes with which the individual might be burdened. To income tax, we can add value added tax, national insurance, capital gains tax, stamp duty, fuel duty, alcohol duty, tobacco duty, air passenger duty, insurance premium tax, landfill tax, corporation tax, petroleum revenue tax, council tax, the climate change levy and the aggregates levy. Then, for anyone who has still managed to live frugally enough to be left with any assets after paying their way through life while paying all those taxes, subject to the various exemptions and the nil rate band, those assets are taxed again, with the imposition of the inheritance tax.
Is my hon. Friend not making the case for a flat tax?
There is a great need for simplification of our tax system and a flat tax might well have a part to play in that.
Mark Twain is often attributed with the quotation that the only two certainties in life are death and taxes, and throughout the ages Governments have always cast around for things to tax. Over the years, we have had window taxes, beard taxes and brick taxes. I particularly like—only because it will give me the chance to mention that great son of Bury, Sir Robert Peel—the glass tax that was introduced in 1746, in the reign of King George II. At that time, glass was sold by weight and manufacturers responded to the tax by producing smaller and more highly decorated objects, often with hollow stems, which are today known as excise glasses. If anyone has ever wondered why the crystal glassmaking industry flourished in Cork and Waterford, it was because in 1780 the Government granted Ireland free trade in glass, which continued until 1825, when the tax in Ireland was restored. That led to a gradual decline in the industry until the glass tax was finally abolished by that great son of Bury, Sir Robert Peel, and his Government in 1845.
The complexity of today’s tax legislation is perhaps best illustrated by the fact that Pythagoras’s theorem can be set out in 31 words—I was told it was 24, but when I counted there were 31—the Lord’s prayer contains 66, the 10 commandments contain 179, the US declaration of independence contains 1,300 and the entire United States constitution, with all 27 amendments, apparently contains 7,818, but to get to grips with the United Kingdom’s tax system, one would have to purchase several weighty volumes such as Tolley’s tax manuals, setting one back several hundred pounds.
Is it, however, shorter than the acquis communautaire?
My hon. Friend makes a very good point. That would weigh even more, I am sure, and it is certainly weighing more on the efficiency and competitiveness of British business. As he will be aware, my view is that the sooner we can free ourselves from the acquis communautaire the better.
When one considers those facts, it is no wonder that adopting a simple way of demonstrating to people the size of their tax burden by calculating and publishing the number of days the average individual would have to work to discharge it is such an attractive idea. The result of all the complexity, of course, is that people do not understand how much tax they really pay, but putting it in terms of how many days the average person has to work solely to pay taxes would start to bring it home to people.
May I float another idea past my hon. Friend? Not only should the day on which people have paid off their taxes be announced as tax freedom day, but there should also be an announcement of the day on which the Government’s spending programme has been matched fully by taxation. In America, tax freedom day is on 12 April, but if all the money to pay for all the Government spending had to be collected—$1.48 trillion more—the date would be 23 May. Perhaps we should also see what the gap is between taxation and the amount that the Government are incurring in expenditure.
My hon. Friend makes a very good point. That could be dealt with in Committee; we could amend the Bill to include that date as well. That opens up a whole new area of complexity, because there is not only the difference between income, expenditure and the actual spending programme to consider but the effect of existing debt that needs to be paid off.
Let me deal with the Bill in a little more detail. Clause 1(1) requires the Chancellor of the Exchequer to specify one day each year that
“shall be observed as Taxation Freedom day.”
Unfortunately, the Bill is silent on how we as a nation are to observe this great day. I understand the reluctance of my hon. Friend the Member for Kettering to suggest having another bank holiday, but I submit that it might be appropriate to mark the day with an annual debate in the House on the ways in which the burden of taxation could be reduced in future years and hence the day brought forward.
I am enjoying my hon. Friend’s speech hugely, and that is a most constructive suggestion. In formulating the Bill, I had in mind that at the very least the Chancellor of the Exchequer could make an oral statement to the House and we could then question him or her on the taxation freedom day proposals, but an annual debate—with a motion, one would hope—would be excellent.
I am grateful to my hon. Friend.
Will my hon. Friend make it clear that if there were to be such an oral statement by the Chancellor, it should be made to the House first rather than being given to the media in advance?
Yes; in view of recent publicity I am sure that all Government Ministers will want to make announcements to the House first.
The purpose of tax freedom day is set out clearly in clause 1(2), as being to mark the day in each year when
“the United Kingdom’s net national income (calculated from the beginning of the calendar year) reaches the level of the United Kingdom’s estimated level of national taxation for that calendar year.”
At this point the whole matter becomes more complicated. The term “total national taxation” is helpfully defined in clause 1(3) as including
“all forms of direct, indirect and local taxation”,
and as my hon. Friend the Member for Kettering mentioned, the task of making this calculation is given over to the Office for National Statistics. However, the problem with that approach is that very few people’s personal tax freedom day would actually coincide with the day specified under the Bill. Levels of council tax vary throughout the country and dwellings are divided into several bands within council tax. It seems to me that in this age of personalisation of services, the Bill could usefully go on to provide for the notification to each individual taxpayer of their personal tax freedom day.
That is not a new idea. In Canada, the Fraser Institute provides a personal tax freedom day calculator which takes into account variables such as the age of the head of the household, their marital status and the number of children they have. I wonder whether the TaxPayers Alliance app for mobile telephones and tablet computers that my hon. Friend mentioned earlier could be adapted to provide a personal tax freedom day for individuals.
What about so-called non-taxpayers? I am always mystified by the term “non-taxpayer”. I accept that there are people who, for various reasons, might not pay income tax, and thanks to the steps that this Government are taking, fewer and fewer people are paying income tax. I am pleased that we are moving towards the target of a £10,000 personal allowance each year. That is a huge improvement in the field of tax simplification and it has meant, for example, that this year’s £1,000 increase in the personal allowance has removed an additional 800,000 people from the burden of paying income tax.
However, we should not fall into the trap of thinking that those who do not pay income tax are non-taxpayers. They could still be liable for council tax. They may still have to pay insurance premium tax. If they travel, they will have to pay air passenger duty. Whenever they purchase goods or services that are liable for VAT, they will have to pay value added tax. The list goes on.
I thank my hon. Friend for giving way; he is being extremely generous in taking interventions. My own research has indicated to me that the effective tax rate on the least well-off in the past 10 years, under the previous Government, was higher than the effective tax rate on the richest. That is the inequality fostered under the previous Government.
Yes, and we must not allow ourselves to think that people who are non-income tax payers are non-taxpayers. There is a great difference. They would, I suspect, be very surprised if the total tax liability from all the various forms of indirect taxation was calculated and expressed, as the Bill seeks to do in a general way for the nation, as their own personal tax freedom day.
We should ask ourselves why this approach to transparency has not been adopted before now by the Government and by previous Governments. The idea of a tax freedom day was developed decades ago in 1948, in the aftermath of world war two, when a Florida businessman who went by the great American name Dallas Hostetler trademarked the phrase “tax freedom day”. He proceeded to calculate it for the nation for the next two decades until he retired in 1971, when he transferred the trademark to the Tax Foundation, which ever since has continued to calculate the American tax freedom day. It is used as a mechanism for illustrating the proportion of national income that is diverted to fund the annual cost of Government programmes.
As my hon. Friend the Member for Shipley mentioned, since 1990 the Tax Foundation has been calculating a separate tax freedom day for each state. The concept of calculating a nation’s tax freedom day is enormously popular around the world. Dozens of countries produce their own calculations. There are too many, the House will be relieved to hear, for me to list individually. What is important for the purposes of comparison is for the calculations to be based on the same year. Fortunately, that can be done in the case of the European Union.
Last year a newspaper in Brussels entitled L’Anglophone compared the tax burdens for workers earning a typical wage in each of the 27 member states of the European Union. It took into account the income tax contributions and the social security contributions made by the employee and the employer, and included a projected value added tax contribution. From this research we see that the latest tax freedom day in one of the member states occurred in Hungary. It was 6 August, the 218th day of the year, representing a tax burden of an eye-watering 59.4%. The earliest tax freedom day in the EU was in Cyprus—this endorses the statistics produced by my hon. Friend—where it was calculated to be 13 March, or day 72, representing a tax burden of just 19.4%.
The importance of establishing a correct basis for calculation is perhaps best illustrated by looking at just one of those countries: Belgium. The accountancy firm PricewaterhouseCoopers calculated that for the second year running tax freedom day in Belgium fell on 8 June, whereas L’Anglophone research indicated that it fell almost two months later on 3 August, or day 215, representing a tax burden of 58.5%. The authors of L’Anglophone explained the discrepancy by noting that PricewaterhouseCoopers’s figures
“count revenue from all taxes (including those on corporate profits, petrol, cigarettes, &c.) and thus present a more complete picture of the country’s total tax burden.”
They added that it is
“an average applied to all Belgians—not all Belgian workers; in 2008, less than half of Belgium’s population (4.99 million working out of 10.67 million citizens) was legally working. Consequently, a huge share of Belgium’s tax burden is borne by the working population.”
That demonstrates the need for consensus around the world on an agreed formula for calculating tax freedom day, and I submit that that should be discussed and agreed at a future meeting of the G20. It also demonstrates the complexity of the tax involved and why for many people a personalised approached might be the way forward.
Another complication that would become apparent when comparing one year with another is the effect of a leap year. Indeed, next year will be affected, as 2012 is a leap year. It is worth noting that leap years have a slightly distorting effect on comparisons, to the extent of 1/366, or 0.27%.
I must deal with one of the major criticisms I have heard levelled at the idea of publishing a tax freedom day: the notion that that somehow devalues the importance of the work done by those engaged in public service. I do not accept that for one minute. I think that the British people are quite capable of recognising the need to pay our armed forces and police forces and all those who are essential public sector employees. The introduction of a taxation freedom day will provide citizens with a reminder of the amount of tax they pay and an opportunity to consider whether what they pay is reflected in the value of the public services they receive.
I have another concern, about the requirement set out in clause 1(2) stating that the UK’s net national income will be
“calculated from the beginning of the calendar year”.
I understand that the Adam Smith Institute calculates tax freedom day in that way. Indeed, having looked at the systems used around the world, it seems that calculating it from the start of the calendar year is the usual way. However, I suspect that that has arisen because in America the tax year is the same as the calendar year and, as the concept of tax freedom day started in America, that is what has been adopted in other countries.
Here in the United Kingdom, however, we of course run our tax year from 6 April, so I wonder whether it would not be simpler and easier to calculate the figures for notional income and the level of taxation on the same basis as the tax year, rather than the calendar year. Again, we could consider that in more detail in Committee.
The calculation period is particularly relevant when one considers the Chancellor of the Exchequer’s duties, which are set out in clause 2. The Chancellor will be required before the last day of November to estimate the taxation freedom day in the following calendar year, which will mean having to estimate the levels of taxation and spending for the following year before the annual Budget. The whole process might be better aligned with the annual Budget, however. Indeed, it could become a centrepiece of each year’s Budget, so that when the Chancellor made the annual statement he announced the annual tax freedom day.
It would of course be simple to base the calculation on the traditional tax year, and for the number of days required to be calculated on that basis. For example, if the 2011 Adam Smith Institute figure for the UK of 149 days—representing 40.8% of the year—had been calculated from 6 April, taxation freedom day would have been 1 September, and for the purposes of international comparison it could then, as it is now, be given as 30 May, the equivalent date from a 1 January start.
There is a further problem with calculating a national figure, and it arises in respect of Scotland. The Scottish Parliament now has limited tax-raising powers of its own, and if it exercised them it would lead to a distortion of the national figure. The existing power to increase income tax by 3p in the pound has not been used, but, when the new powers become available after the passage of the Scotland Bill, and with a Scottish National party Government in power in Scotland, they could be used, so a separate figure ought to be calculated for Scotland. It would not be fair or equitable for the UK Government to be criticised for spending decisions taken in Holyrood.
In conclusion, the Bill raises important issues about the levels of taxation and spending. Increased transparency in Government spending is vital, and I warmly welcome the measures that the Government have already taken to reveal the detail of public expenditure. Shining the searchlight of public scrutiny on the spending decisions of politicians is without doubt one of the best ways to control Government spending, and such moves help at the micro-level, but this Bill will extend the principle of public scrutiny, openness and transparency to the macro-level.
A single, simple day can be tracked each year. It can be monitored, and I venture that it could become a feature of general election contests, with the parties including in their manifestos their target for tax freedom day over the lifetime of the following Parliament.
I sincerely hope that the Bill receives its Second Reading and is able to proceed into Committee, so that we can take it through its remaining stages when we meet again on 20 January.
I congratulate the hon. Member for Kettering (Mr Hollobone) on securing this debate, which is clearly of great importance to him. He referred to two dates: 1972, when tax freedom day would have been earliest in the year, and 1982, when it would have been latest.
In 1972 we had a three-day week, so there was not much happiness, and there would not have been much to celebrate on taxation freedom day. In 1982, we had unemployment of 3 million. The reason taxation freedom day came so late that year might be that there were not enough jobs and more was being paid out in benefits with not enough coming in via tax revenue.
The hon. Member for Shipley (Philip Davies) said that he would like us to be more like Cyprus and less like Belgium. The Belgian economy has grown by 1.8% over the past year, and Cyprus is one of just three countries in the European Union, along with Portugal and Greece, that has had a slower rate of growth than the anaemic growth that we have seen in the UK this year. I think that many of our constituents would rather we were a little more like Belgium, with stronger growth and lower unemployment, and a little less like Cyprus, but we may differ on that.
I take it from what the hon. Lady has said that the Labour party’s official stance is that it would like taxation freedom day in this country to be 4 August.
No, that is not our stance. If the hon. Gentleman would like us to be a bit more like Cyprus, he might want to look at it in the round, because, as I said, Cyprus is one of just three countries in the European Union that has grown at a slower rate than the UK this year.
Conservative Members have spoken about the difference between taxation freedom day in the US and in the UK. One of the reasons taxation freedom day in the US will come a little earlier is that it does not have a national health service, and, as a result, people have to pay from their own income for the health service. If hon. Members took into account how much individuals and businesses contribute towards health care insurance in the US, they might find that its taxation freedom day came a little later in the year—perhaps even later than in the UK.
My main question is why we need a Bill on this. Hon. Members, particularly the hon. Member for Kettering, have spoken about the work of the TaxPayers Alliance and the Adam Smith Institute. If they have all the facts and figures, why do they not organise a celebration for taxation freedom day? Why do we need Government legislation? If we had Government legislation on taxation freedom day as a result of passing this Bill, the day might fall a little later in the year because of the additional costs.
Surely the hon. Lady is not saying that the cost of announcing taxation freedom day would shift it by one day—that is patently absurd.
I am sure that the hon. Gentleman would agree, though, that there would be costs associated with the legislation, the statutory instrument, and civil servants’ time. I wonder why hon. Members want more legislation when presumably they really want less legislation and less money spent on civil servants and so on.
The hon. Lady has converted me. I always thought that Palmerston was right when he said that the House of Commons would eventually run out of things to legislate on. It is a thoroughly good idea that we should run out of things to legislate on and not legislate for everything we feel like. For once, I have been converted by a Labour Front Bencher.
I am not sure whether to celebrate that, but this does seem to me to be a strange thing to want to have a piece of legislation on.
An interesting comparator would be the interest that my hon. Friend the Member for Wellingborough (Mr Bone) has taken in human trafficking. Her Majesty’s Government have designated an anti-slavery day and given it official recognition. All the Bill asks the Government to do is officially to recognise taxation freedom day.
That does not seem necessary to me, but I guess that the hon. Gentleman and I disagree. If the work of the TaxPayers Alliance and the Adam Smith Institute is as fantastic as he thinks, why could they not organise a celebration, as other groups organise days to celebrate things? One does not necessarily need legislation in order to celebrate a day that one thinks important.
There is a serious point here. Everyone knew when anti-slavery day was, but its official recognition by the Government lent weight to its importance. That is the reason taxation freedom day would be so important.
I guess that we disagree on that. There are costs associated with all these things and I do not think this is a cost that my constituents and many hon. Members’ constituents would want to bear.
That brings me to my main point. This is a worrying time for businesses and families throughout the country. They are struggling with higher food prices and fuel bills, and are worried about their jobs and their children’s future. I am not convinced that the hon. Member for Kettering has explained what the Bill would do to help an ordinary family in Kettering who are struggling with stagnant wages, high unemployment and high inflation. In Kettering, there has been an increase in long-term youth unemployment of 127% since January this year.
It seems to me that the most important thing that Members of Parliament can do in representing our constituents is to put in place policies to address those issues. I am not sure that celebrating tax freedom day would help get young people back to work, help families facing a squeeze in their living standards or help businesses that are seeing demand dry up. I am certainly not sure what it would do for the 4,000 people who are unemployed in my constituency of Leeds West.
One tax that the hon. Member for Kettering might want to change is VAT. I wonder whether next Tuesday he and other Government Members will support the Opposition when we argue that VAT should be cut temporarily. That would bring forward tax freedom day and put £450 in the pocket of the average family. It would be a real step to help families and businesses across the country.
The hon. Member for Dover (Charlie Elphicke), who is no longer in his place, spoke about the tax on cigarettes. Many people would think—[Interruption.] Oh, here he is. Welcome back. It seems that if anyone mentions cigarettes, he is automatically in his place. Most of our constituents recognise that cigarettes should be taxed because they have social costs beyond the cost of producing and selling them. However, if one looks at the increase in the cost of petrol that we all face when we fill up our cars, reducing VAT back down to 17.5% would reduce the cost of petrol by 3p in the pound.
If the hon. Lady is so keen for people to have an extra £450 back in their pocket, which I could certainly support, will her party propose a reduction in income tax to deliver that? If her party proposed cutting income tax to give £450 back to people, I might even be tempted to support it.
The hon. Gentleman mentioned earlier—or it might have been the hon. Member for Bury North (Mr Nuttall), but I am sure that they agree—that the increase in the income tax threshold means that fewer people are paying income tax. The good thing about reducing VAT is that it has a progressive effect, because people on lower incomes spend a higher proportion of their income on VAT than people on higher incomes. A reduction in VAT would therefore help to get money in the pockets of the people who most need it at the moment in a way that a cut in income tax would not.
I am grateful to the hon. Lady for being so generous in giving way. She said that one way to reduce petrol and diesel prices would be to cut VAT. Is it not the case that the majority of businesses get their VAT back? What most people want is a fuel duty cut, which is why I welcomed the Government’s cut in fuel duty in the last Budget and hope that they will not increase it next year.
The reduction in VAT would put money in the hands of families. Of course, most people who run businesses are also part of a family, so they would benefit from the reduction in VAT. Labour’s five-point plan for jobs and growth also includes a national insurance holiday for small businesses taking on new employees, so that plan would help families and businesses up and down the country.
Are Government Members to assume that the hon. Lady has absolutely no support from her party, as the Opposition Benches are completely empty?
Well, they were empty.
I think my hon. Friends are where I would like to be today—in the constituency meeting constituents, rather than here. I usually try to go back to my constituency on a Thursday, as do many other MPs. Of course, the Members who are here today think that this issue is more important than doing work in their constituencies.
A few moments ago, the hon. Lady mentioned the taxation of cigarettes. Seeing my hon. Friend the Member for North East Somerset (Jacob Rees-Mogg) in the Chamber, it is only right that I remind her that the Roman emperor Marcus Aurelius said in his “Meditations”:
“Into every life a little rain must fall.”
Those of us who smoke have enough rain with the health hazard, without massive taxation on top.
I am afraid I only went to a comprehensive school, so I did not study Latin. Maybe the hon. Member for North East Somerset (Jacob Rees-Mogg) would like to do some interpretation.
The hon. Member for Kettering reminds me of my holidays when I was at school. As he knows, I used to go to Kettering in all my school holidays, because my grandparents lived there. I still have many family members in Kettering.
Do they vote for him?
I expect not.
I was just thinking about the lives that my grandparents led and the things that mattered to them. Every day, they benefited from what happened in both the public and private sector. They worked in the shoe factories in Kettering, as the hon. Member for Kettering knows—we have discussed it before. However, they also lived in a council house, when they were ill they used Kettering general hospital, and their children went to state schools in Kettering. My father went to Kettering grammar school.
Having a tax freedom day suggests that until that date in May, June or whenever it falls, people are contributing to someone or something else, or to the Exchequer. Actually, the money that they pay in taxes every day from the beginning of January until the end of December is used for things that matter to them, for instance building council houses such as my grandparents lived in, paying for teachers and for schools such as they went to and paying for nurses and doctors in the hospital that treated them when they were ill. It seems a little irrelevant to have a tax freedom day, because whether it is 5 February or 25 November, people need both what they pay their taxes for and disposable income to pay for things that matter to them. That is why those suggesting a tax freedom day misconstrue the situation.
The hon. Lady makes the point that public services need to be funded. Does she not recognise that tax is needed also to fund the interest on the Government’s debt, much of which was added by the previous Government? Does she share my regret that we have so much debt as a nation?
The reality is that because the current Government have failed to get a grip on growth, and because unemployment is rising and inflation is higher than forecast, borrowing is now expected to be £46 billion higher over the course of this Parliament than they had previously planned. When the Office for Budget Responsibility reports next week, we are likely to see that Government borrowing will be higher still.
The point is that we cannot reduce the budget deficit just through tax increases and spending cuts. We also need economic growth, and we can see the difference between the UK’s growth rate of 0.5% over the past year and the higher rates of other countries such as the US, Canada and even Italy. We cannot reduce the deficit and get debt down unless the economy is growing again and creating jobs; otherwise, we will end up paying more out in benefits and getting less in through tax revenues. That is why the Government’s deficit reduction plans are not bearing fruit—they do not have the strategy for growth upon which all that hinges. I believe that if we want to reduce the deficit and get our constituents back to work, we need a plan for jobs and growth. Without that, borrowing will continue to get higher and tax freedom day will be a little bit later in the year.
I was looking earlier at Labour’s five-point plan for jobs and growth and wondering how much of it Conservative Members, particularly the hon. Member for Kettering, might support. The first point is a temporary reduction in VAT, which he might support because it would bring forward tax freedom day to slightly earlier in the year. I suspect that he would not support the second point, which is a £2 billion tax on bank bonuses, although most of our constituents would not be affected by it. The bank bonus tax would be used to fund 100,000 jobs for young people, which would get more people back to work and paying taxes and mean that less was being paid out in unemployment benefits. Perhaps that, too, would bring forward tax freedom day.
The third point is the introduction of long-term investment projects. That might sound like something that the hon. Gentleman would disagree with, but if it helps people to get back to work, particularly in the construction sector, perhaps Conservative Members would support it. It would get more people back to work and paying taxes. The fourth component of Labour’s five-point plan for jobs and growth is a one-year cut in VAT—to 5%—on home improvements. Perhaps Conservative Members could also support that, given that it is a tax cut. The fifth point is a one-year national insurance tax break for every small firm taking on new workers. I hope that they could support that, too, because it would help small businesses to take on more employees and get the economy moving again.
The hon. Lady mentions a long wish list but what would be the total cost in extra public spending?
The Government will be borrowing more this Parliament because they are paying the costs of economic failure: they are paying the costs of having 2.62 million unemployed people, including 1.02 million unemployed young people; they are paying because growth, at 0.5% over the past year, is lower than the Office for Budget Responsibility forecast; and they are paying for the higher levels of inflation, which was 5.2% in September compared with the 4.3% that the OBR forecast, which means that we are paying out more in benefits.
The Government are borrowing £46 billion more this Parliament, and as I said earlier, that number is likely to rise next week because the Government have not done enough to get the economy moving, to get people back to work and to contain inflation. The VAT increase led directly to that increase. I accept that these policies would cost money but they would get people back into jobs, get the economy growing again and reduce the budget deficit at a more balanced pace. As Conservative Members have said in the past couple of days, it is clear that although targeted tax cuts now might mean a bit more borrowing, they would help to get the economy back on track, which would also help to reduce the budget deficit in a balanced way.
But would that extra borrowing not put at risk our interest rates? I do not know whether the hon. Lady is aware, but today the interest rates on UK gilts are lower than those on German bunds. I do not know when that last happened. The risk is that if we borrow more, interest rates will be higher, which will have vastly more negative effects on our economy than the current spending squeeze—
Order. I do not want this turned into a general economics debate. I ask the hon. Lady to focus on the Bill.
May I finish first, Mr Deputy Speaker? That would delay tax freedom day.
It is good to know that the hon. Gentleman will talk about more than just the cost of cigarettes. The last time I looked, yields on German Government bonds and UK gilts were 2.14% and 2.16% respectively. I do not know whether that changed when he nipped out of the Chamber for a cigarette.
Market traders are looking for a deficit reduction plan, but they are also looking for economies that will grow. Economic growth is a component of reducing the debt and tackling the budget deficit. Unless we have growth, we pay out more in benefits and get in less in taxes. If we want tax freedom day to be a bit earlier in the year, we need more people in work and more businesses succeeding, which is why Labour’s five-point plan for jobs and growth is so important to getting people back to work and achieving the balanced deficit reduction that we need.
In conclusion, I do not support the Bill. It is not a good use of Government time, parliamentary time or taxpayers’ money to celebrate a tax freedom day. Our constituents would all prefer us to concentrate on the things that matter to them: jobs, growth and the squeeze on living standards. The Minister said earlier in the week that the Government were on track to meet their deficit reduction plans. It would be interesting to hear what she has to say about that today, ahead of the OBR’s numbers’ coming out next Tuesday. I believe that a policy of targeted tax cuts to help families is more in touch than the Government sticking doggedly to plan A. I thank the hon. Member for Kettering for giving us a chance to debate these issues today, and I am sorry that I am unable to support his Bill.
I congratulate my hon. Friend the Member for Kettering (Mr Hollobone) on securing this debate and those who have spoken in it. By way of a preamble, you, Mr Deputy Speaker, may know that, like Kettering, my Norwich North constituency has a fine history of shoe factories, which sits alongside a history of manufacturing chocolate, mustard and many other fine products that Members are welcome to come and enjoy on their holidays.
The House will be aware that my right hon. Friend the Chancellor will make his autumn statement on Tuesday, so I will not set out the Government’s plans for the future in this debate. However, with that caveat, I will address—or attempt to address—the extensive points made by my hon. Friend and others, with reference to the principles for good taxation, tax simplification and transparency and, of course, the public finances and public spending.
In many ways, tax freedom day is an absolutely excellent idea. We all insist on knowing what we are paying for our goods and services, whether they be chocolates, shoes or anything else. Where we have ongoing payments, we adjust our direct debits so that we know what we owe and pay only that. Understanding the value of paying tax in some simple way should not be sniffed at. To quote the HMRC slogan—I cannot quite believe I am doing this on the Floor of the House—“Tax doesn’t have to be taxing”. Tax and our understanding of its value to the Government should be simple. None of us wants tax to be imposed sneakily, through the back door. We want tax to be proudly transparent.
There is a problem, however, which is that our lives are not that simple. If I paid only income tax, perhaps a basic “money in, money out” assessment could be made, but we have a variety of taxes in this country, which helps to maintain a balance for the individual and the state. Tax provides carrots for some activities and sticks for others. Talking of sticks, I suppose I should note what my hon. Friend the Member for Dover (Charlie Elphicke) said, which surprised me somewhat, because I am told that he told the Finance Public Bill Committee in 2010 that he was giving up. Perhaps he would like to confirm that—or not—in the remainder of this debate. [Interruption.] I beg my hon. Friend’s pardon.
Let me return to the more serious content of the debate. Tax rightly provides carrots and sticks, and people will experience taxation differently, depending on their circumstances and choices. For example, my personal tax freedom day may vary if I go out for dinner tonight or drive an extra 30 miles—my hon. Friend the Member for Harlow (Robert Halfon) will remember what I said in a debate with him only a few days ago. If my daily income varies depending on my daily work, my personal tax freedom day might also be different. In summary, if, like some television personalities, I was a supercar-driving, spirit-consuming, cigar or cigarette-smoking, house-buying, asset-selling additional rate payer, I would experience an entirely different tax freedom day from many others.
If our intention is to bring about a better understanding of what happens to our income and how much tax we pay, let us try to do that by striving to improve the perception and interaction of our taxes. We need to be clear about what tax revenue does and about the value of the interaction between the individual and the state. These are complex issues, which sadly are not captured in the calculation of tax freedom day, as set out in the Bill.
Let me work through some of the points raised by my hon. Friend the Member for Kettering and others. I applaud his championing of the great British taxpayer, and I absolutely applaud his drive for transparency. One strong point of the Bill is that it turns to the independence of the Office for National Statistics. At this point, Mr Deputy Speaker, you would expect me to underline the independence of the Office for Budgetary Responsibility, too, and the benefit it can bring to the way we look at taxation and public spending.
I have heard the point that national tax freedom day has moved by more than 30 days. I was extremely interested to hear the historical point made by my hon. Friend the Member for Bury North (Mr Nuttall) who noted, if I recall correctly, that in 1900, it was 22 days —[Interruption.] Does my hon. Friend want to intervene?
I do not have the figures with me, but I think the Minister is giving the figures for America. There was, however, a clear link between them and the figures for here, demonstrating that there has been a massive increase in the tax burden since the turn of the 20th century.
I thank my hon. Friend for that clarification. I was briefly about to exercise my mental arithmetic by suggesting that while it was 22 days in 1900, it was 19 days in 1910, demonstrating that these figures, like all good things in life, can go down as well as up.
I particularly note the birth date of my hon. Friend the Member for Kettering. May I briefly wish him a happy birthday—with, dare I say it, his 50th birthday falling only the year before the next general election? What a miserable time to have one of one’s major birthdays—in 2004 and 2014! We must do our best to give him a happier birthday in this place than he would otherwise look forward to.
My hon. Friend rightly pointed out that the Government have no money of their own. Taxation is not the Government’s money; it is never that. Taxation is people’s money pooled for the common good. That is my view of taxation. I should note that we spent a good deal of time earlier this morning talking about the value of society in debating the previous Bill. Margaret Thatcher spoke about there being “no such thing as society”, but only individuals. The current Prime Minister has moved the point forwards by saying that there is such a thing as society, but it is not the same as the state. I put myself in both those traditions and, I hope, alongside the views of my hon. Friend the Member for Kettering in feeling myself to be on the side of people who work hard, want the Government off their backs and want to be left with as much money as possible in their pockets to spend according to their own choices.
I was interested to hear the debate about whether tax freedom day would be better under a Conservative or a Labour Government. I note that there might be a cricketing correlation here. I suspect that my hon. Friend the Member for Shipley (Philip Davies) is a cricketing fan, as am I. He might be interested to think about the successes of the national side in 1981-82, when I regret to have heard tax freedom day might have been at its peak. He is interested in fours and sixes and not singles, so let us see what we can achieve now that England is once again at the top of the cricketing league. Let us hope that Britain is at the top of other leagues.
My hon. Friend the Member for Shipley wishes, I think, to oblige the Government to make tax freedom day as early as possible. I note briefly that his comparison to the United States could be unfortunate, given that a number of American politicians have recently pledged never to increase taxes, which has led to some gridlock in the US political system. I am not sure that we would want to see that here, given the attendant impact on the credit rating of that great country.
Some interesting points of difference have emerged, which it would no doubt be delightful to iron out in Committee. One is about how we might celebrate tax freedom day: should we have a bank holiday or achieve it in some other way? An additional bank holiday will always impact on the economy. Many business people in my constituency and doubtless elsewhere express concern at the idea of having an extra bank holiday.
Thanks to organisations such as the Adam Smith Institute, we are aware that tax freedom day this year is on 30 May. Does the Minister think she could get the combined brain power of the Treasury on to the case to work out when, if the Government were planning to collect enough in taxes during this year to finance all their spending, tax freedom day would fall?
I am sure that the combined brains of the Treasury could make those calculations, but I regret to say that my brain, combined or otherwise, is not agile enough to engage in such mental arithmetic on the spot for my hon. Friend’s benefit.
I think that learning of the existence of a “tax app” has enhanced all our lives today. I have only recently acquired a more sophisticated phone. I could not possibly reveal the brand name, but Members should note that I am now tweeting. They may wish to begin following my tweets, as no doubt others will.
As I have said, I noted what was said about taxation on items such as cigarettes and fuel.
Regional variation has been mentioned. My hon. Friends clearly do not want centralised uniformity in any shape or form, and I do not imagine that they would want taxpayers in London, by dint of legislation, to have to pay the same as taxpayers in Wales, or vice versa. I am sure that they support the Government’s actions in not only rebalancing the economy in the direction of a thriving private sector everywhere in the United Kingdom, but creating a thoroughly localist agenda to give people as much freedom locally as possible.
My hon. Friend the Member for Shipley mentioned Belgium and Cyprus. He will be aware that Belgium has had no Government at all for the past 528 days. He might welcome that in principle, but regrettably I am not sure that the average Belgian punter does.
My hon. Friend the Member for Bury North took us for a canter through many different types of tax. He cited Twain, mention of whom, as a lover of literature myself, I always welcome in any debate. He also succeeded in teaching me about the crystal and glass industry—and perhaps you as well, Mr Deputy Speaker. I do not know whether you knew that the stems of some glasses are hollow, but I had no idea that that was the case. In the words of Abba, if I had a little money in a rich man’s world, I might know more about expensive glass and crystal.
The Minister is making a delightful speech, but it has very little to do with what we are discussing today. It appears to me to be a filibuster, intended to prevent the Bill from securing a Committee stage. Is that what the Government are up to?
Order. Had I heard a filibuster I would have stopped it, as the hon. Gentleman knows.
Thank you, Mr Deputy Speaker. I had assumed that my hon. Friend the Member for Wellingborough (Mr Bone) would appreciate a Minister’s taking the points made by Back Benchers seriously and dealing with them individually, which is what I am endeavouring to do.
Let me return to the subject of tax freedom day, as it is right for me to do in the remaining minutes that are available. My hon. Friend the Member for Kettering invited me specifically to rebut four points. He felt that an aspersion had been cast on the methodology proposed in the Bill. The aspersion that I would cast is that there is no such thing as the average person. That is what chiefly concerns me about the calculation establishing when tax freedom day should fall: I do not believe that it would represent the average citizen in a meaningful way.
My hon. Friend asked me to deal with the way in which the proposed methodology does or does not regard or disregard public benefits. I am glad that he welcomes the fact that taxation has another side, namely what can be done with the money once it has been collected. I shall say more about that in a moment.
My hon. Friend also asked me to discuss whether tax freedom day had or had not varied very little in the last decade. I think that that has been covered by earlier remarks, and by the clarification offered by my hon. Friend the Member for Bury North. The numbers do go up and down by small amounts. Like other Members, I have reservations about whether we should burden the Office for National Statistics with this further task—and, indeed, whether we should burden the Treasury, which, as Members will know, is one of the smaller Departments in terms of the number of people who work there. No doubt Members welcome that, and do not wish it to become any larger.
Given that the Economic Secretary has made such great play of the burden this would impose on Government, will she tell us what estimate the Treasury has made of the increased costs the Government would incur by introducing this measure?
Unfortunately, I do not have that figure to hand, but I will be happy to look into the matter.
As I suspect my hon. Friend has often argued, both small and large businesses find regulation burdensome, as do citizens. The Government have therefore endeavoured to reduce the amount of regulation, and I question the need for this measure as it is an extra piece of regulation. My hon. Friend also noted that as we can spend on Europe, we should be able to spend on this measure. I agree with his point: we all wish to keep firm control on what we spend in respect of the European Union.
In the March Budget, the Chancellor set out the Government’s principles of good taxation. Our taxes should be efficient and support growth. They should also be certain and predictable: they should be simple to understand and easy to comply with. The tax system should be fair, and should reward work, support aspiration and ask for the most from those who can afford it most. Those are the principles to which we are committed, and against which our tax system should be judged.
In trying to meet those principles, our taxes will necessarily become clearer, a goal to which we all aspire. In debating tax in general, its role in our economy and why the burden of taxation may be felt more keenly at certain times, we must bear in mind our current economic situation. Britain had endured the longest and deepest recession in living memory, we were borrowing £1 for every £4 we were spending, and we had the largest budget deficit in our peacetime history—one of the largest in Europe, and the largest in the G20—yet following the 2010 general election no detailed plan to deal with all that had been left in place by the previous Government.
That was not the end of the story. In the preceding decade Britain had slipped down the international league of competitiveness, falling from fourth to 12th. We had seen our share of world exports decline. We were considered to be a worse country in which to start a business than many of our European neighbours. That was this coalition Government’s inheritance.
We have therefore set about restoring confidence and stability to our economy, with a clear strategy for growth. At the heart of that strategy is a credible plan to tackle the enormous budget deficit, which we are already implementing.
One part of that plan is making changes to taxation. We must understand the changes this Government have made in order to see that a tax freedom day does not fully accord with what we want to achieve. For any taxation, we must, of course, make it clear why we are asking for a contribution, what we are doing in terms of public spending to balance changes in taxation, and why it is important to strengthen the public finances.
Growth is a key component of a strong economy; all parties agree on that. In the Budget we set out four economic ambitions: that Britain should have the most competitive tax system in the G20; that Britain should be the best place in Europe in which to start, finance and grow a business; that we should seek to be a more balanced economy by encouraging exports and investment; and that we should have a more educated work force, who should be the most flexible work force in Europe.
For the past decade Britain has been losing ground in the world economy. Other nations have reduced their business taxes further and faster, and some have removed barriers to enterprise, while ours have grown higher still. We cannot afford for that to continue.
Our plan for growth is based on private sector enterprise, not public sector borrowing. It is based on growing businesses, not growing debts, and on securing sustainable long-term investment. An essential aspect of that is creating a competitive tax system that enables our businesses to compete on the global stage and that gives value to businesses in ways that this Bill would struggle to measure.
claimed to move the closure (Standing Order No. 36), but the Deputy Speaker withheld his assent and declined to put that Question.
I shall briefly move on to something that will be of significant interest to hon. Members and to the businesses that I have just begun speaking about, which is modernising the administration of the personal tax system and creating proper tax transparency for individuals. I note that a fine document is being given out by Her Majesty’s Revenue and Customs at the moment. Hon. Members could encourage businesses and individuals in their constituencies to respond to it and help in the effort that we all want to see to improve the understanding of taxes—
The debate stood adjourned (Standing Order No. 11(2)).
Ordered, That the debate be resumed on Friday 20 January 2012.
Before we deal with the other Bills, may I ask the House to wait until the Clerk has read the name of the Bill and the mover has moved it? Will Members acting on behalf of another Member please state that they have permission? Members proposing a date must have the authority of the Member in charge of the Bill.
Business without Debate
bbc licence fee payers (voting rights) bill
I have it in command from Her Majesty the Queen to acquaint the House that Her Majesty, having been informed of the purport of the Bill, has consented to place her prerogative, so far as it is affected by the Bill, at the disposal of Parliament for the purposes of the Bill.
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
parliament (amendment) bill
Resumption of adjourned debate on Question (4 March), That the Bill be now read a Second time.
Object.
Debate to be resumed on Friday 20 January 2012.
electoral law (amendment) bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 16 December.
apprenticeships and skills (public procurement contracts) bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
gangmasters licensing (extension to construction industry) bill
Resumption of adjourned debate on Question (3 December), That the Bill be now read a Second time.
Object.
Debate to be resumed on Friday 20 January 2012.
smoking in private vehicles bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
children (access to parents) bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
sunday trading (amendment) bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
safe standing (football stadia) bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
common fisheries policy (withdrawal) bill
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 13 January 2012.
contaminated blood (support for infected and bereaved persons) bill [lords]
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
house of commons disqualification (amendment) bill
Resumption of adjourned debate on Question (9 September), That the Bill be now read a Second time.
Object.
Debate to be resumed on Friday 13 January 2012.
live music bill [lords]
Bill read a Second time; to stand committed to a Public Bill Committee (Standing Order No. 63).
building regulations (review) bill [lords]
Motion made, That the Bill be now read a Second time.
Object.
Bill to be read a Second time on Friday 20 January 2012.
Economic Growth (Waveney)
Motion made, and Question proposed, That this House do now adjourn.—(Mr Newmark.)
I am very pleased to have secured this debate. Its timing is particularly appropriate, coming as it does just before the Chancellor’s autumn statement on Tuesday.
The Waveney constituency is in north-east Suffolk and its main town, Lowestoft, is the most easterly point in Britain. Lowestoft has a proud history, and much of its heritage is based on fishing. Some 40 years ago it could be viewed as the model of how the economy in a coastal town should operate, with a diverse and prosperous economic base underpinned by fishing and its allied industries, the Richards and Brooke shipyards, the emerging oil and gas sector, food processing factories such as Birds Eye and Beechams, the Eastern Coach Works, the Co-op canning factory, the Boulton and Paul timber yard and the Pye television factory, as well as a flourishing tourism sector.
Gradually, over the years, those businesses have gone, though Birds Eye remains. Some people feel forgotten and neglected by the Government, but new businesses are arriving, many in the emerging energy sector, and there is a real desire across the whole of the Waveney district for them to succeed and for the area to play a full role in the economic recovery, creating jobs and helping rebalance the economy away from its over-reliance on financial services and London and the south-east. In many respects, Waveney is now at a crossroads. We can take the low road of limited aspirations and just trundle along or we can take the high road and be ambitious and a key player in working with the Government to deliver the growth strategy, creating jobs and helping Britain emerge from the most savage economic downturn for a generation.
Over the past 18 months, the coalition Government have laid the foundations on which the Waveney economy can grow. The deficit reduction strategy means that interest rates remain low, and although there is no such place as a safe harbour in today’s global economy, the Chancellor has steered Britain out of the eye of the storm. We should not forget that, last May, Britain was viewed by many as in the same category as Greece, Italy and Spain.
The New Anglia local economic partnership, formed at the beginning of the year and covering Norfolk and Suffolk, can play a key role in creating jobs across the two counties. The LEP has hit the ground running and is approaching its job in a targeted, pinpointed and coherent way, focusing on three areas: food production and processing; tourism; and, most importantly for Waveney, the energy sector, building on the opportunities along the coast from the gas terminal at Bacton, the oil and gas sector, the nuclear industry at Sizewell and offshore renewables. Lowestoft is at the centre of the world’s largest market for offshore wind energy, and the UK’s most dense area for offshore development is between the Humber, the Wash and the Thames estuary.
The LEP and the four councils—Waveney district council, Great Yarmouth borough council and Suffolk and Norfolk county councils—are to be congratulated on their successful enterprise zone bid for Lowestoft and Great Yarmouth, which is aimed at the energy sector. That can also play a crucial role in creating jobs. Also welcome is the creation of the Green investment bank, which will play an important role in leveraging in the large amount of private sector investment needed to transform our energy sector.
The Government’s ambition to provide superfast broadband across the UK by 2015 is also good news, with the granting of funding from Broadband Delivery UK to Suffolk county council to reach the “not spots”, many of which are in Waveney, whether on the south Lowestoft industrial estate or in the rural area around Bungay and Beccles where the market will not deliver on its own.
The Government’s emphasis on apprenticeships and skills is important, as there is a need to provide people in Waveney with the skills that energy businesses and those in their supply chains are looking for. Much has been done in the past 18 months, but with the problems in the eurozone, now is not the time to be resting on our laurels. We need to redouble our efforts and work overtime to ensure we do everything possible to create economic growth in Waveney.
My hon. Friend and neighbour is making a very eloquent case for his constituents—there is no greater champion of Waveney than he. I share Waveney district council with him and our area is known for tourism, with Southwold. Will he pay tribute to the students and particularly to the teachers and supporting schools who help the North Suffolk skills centre in Halesworth, which does a lot to help people with vocational careers, especially in engineering?
I am very happy to do that. The North Suffolk skills centre, which serves the northern end of my hon. Friend’s constituency and much of mine, plays a vital role in giving people vocational training in engineering and other such skills.
As I was saying, the endgame is not the announcement of a policy—that is only the beginning. We need to be driving policies through and ensuring that they deliver what they are intended to achieve. There may be times when we need to take stock of a particular initiative and ask whether it is working and whether we need to be tackling the problem in a different way.
In the time remaining, I shall outline the areas in which I believe we need to redouble our efforts. As I have said, the Government are to be commended for their focus on skills and apprenticeships. In Waveney, that focus has already had positive results, with a provisional 810 apprenticeships having been delivered in the 2010-11 academic year—an increase of 48% on 2009-10. However, more needs to be done not only to provide businesses with the support they need but to work with business, Lowestoft college and the high schools, all of which are very much up for the challenge. The creation of guilds that concentrate on a particular industry such as energy could well be a way forward. We also need to tackle deep-rooted worklessness: in some places, there are three generations of families who have never worked.
If Waveney’s contribution to Britain’s economy is to be successful in the long term, our poor infrastructure links must be improved. In making small talk, the British talk about the weather, but East Anglians talk about roads and railways either because we do not have any or because those we do have are substandard. There are reasonable prospects for upgrading the railways to Waveney with the provision of funding for the Beccles loop, which will enable an hourly service to operate on the east Suffolk line. Longer franchises will provide opportunities for further improvements to the railways and I am working with Network Rail to ensure that everything is done to upgrade Lowestoft and Beccles stations, which are both in a shocking condition.
The road network provides a greater challenge. It is vital that regional links across East Anglia are improved and that the roads in Waveney are upgraded. The dualling of the A11 at Elvedon is good news and work needs to be done at the A14 bottleneck between Cambridge and Huntingdon. Locally, the Beccles southern relief road will open up further employment opportunities at Ellough and it is vital that the road system in Lowestoft is improved. I am working with Suffolk county council and Waveney district council to come up with a blueprint of the roads we need, which will include a new crossing of Lake Lothing, which divides the town. The enterprise zone challenge fund provides a means of promoting and building new roads. I issue a challenge to the Government: if we can demonstrate that jobs will flow if new roads are built, will they provide the money to do the work?
Let me address the issue of the 21st-century highway—broadband. As became apparent at the Suffolk broadband conference that I hosted in April, broadband is a huge enabler of economic growth. It will help the retention and growth of small businesses and will provide access to a global market. It will also help to raise and modernise skills and achievement levels. Broadband Delivery UK has made it clear that community engagement is the key to the roll-out of superfast broadband, very much in line with the big society and localism agendas.
The reference to the big society provides me with the opportunity for a short commercial break to congratulate the Beccles Lido on winning the Prime Minister’s big society award. In 2010, Beccles Lido bought the swimming pool from the local council, and has since raised over £300,000, carried out significant improvements and this year attracted nearly 30,000 visitors, up from 8,500 in 2008, turning a £60,000 loss into a profit. I congratulate the organisation on its great work and I wish it all the best with its new project, the public hall.
As I said before the interlude, community engagement with broadband is the right approach, as it is only local people who know what their communities need and the challenges they face. It appears that small local providers may be having difficulties in their attempts to provide services as part of local broadband plans. This is due to a combination of the sheer cost of procurement and other factors, such as European state aid rules and network security. I urge the Government to do all they can to resolve these issues so that we can ensure that the remote rural parts of the country, and Waveney in particular, from my viewpoint, have every opportunity possible of receiving next generation broadband.
Turning to the energy sector, there are encouraging signs. Orbis Energy in Lowestoft is a global centre of excellence for drawing together innovation and technology, supporting supply chain development and acting as a catalyst for development in the offshore renewables sector. SSE’s operations and maintenance base for the Greater Gabbard wind farm is already in Lowestoft port, and last month Scottish Power Renewables and Vattenfall signed a memorandum of understanding with both ABP Lowestoft and East Port in Great Yarmouth for the development of the East Anglia Array wind farm.
On Monday, SSE submitted its development consent order to the Infrastructure Planning Commission for the Galloper wind farm. It is vital that the planning process operates in a smooth and timely fashion, and also that the Government provide a clear, consistent and stable framework in which investors can operate, making long-term financial commitments in the offshore renewables sector. This means that there should be no sudden change in the fiscal regime, and electricity market reform must be addressed at an early stage in the next Session. It is important that the Government liaise with the industry now on this issue.
A particular feature of the East Anglian and Waveney economies is the large number of small businesses and SMEs, as well as a spirit of enterprise, which needs to be properly harnessed. In 2009, Lowestoft won the award for being the most enterprising place in Britain. More needs to be done to help small businesses set up and then flourish. That means, first, reducing red tape. I am conscious that the Government have already done much work in this area, though from what local businesses tell me they have yet to see the full benefits of that on the ground. Red tape is like Japanese knotweed—once it is there, it takes a superhuman effort to get rid of it.
Secondly, more work should be done with banks to ensure that they work with and support small businesses. The bid made by NWES and others, along with Barclays bank, to the regional growth fund for funding a national start-up programme, which will also operate in Waveney, will help to address that. Thirdly, it is important that in promoting business, Ministers do not just hold press conferences and stage PR announcements at high-profile showcase companies. It is important that they also visit smaller start-up and early-stage businesses so as to encourage entrepreneurship. So many people will be able to relate to and identify with such businesses and take inspiration from them.
I am fully aware of the impact of high fuel prices on small businesses and those travelling long distances to work. Waveney is out on a limb and, although the public transport network is gradually being improved, many have no choice but to use private transport. People in Waveney spend on average £68.09 a month on fuel, while those in the City of London, who have far higher incomes, spend on average only £26.93. I urge the Minister to reinforce the message to the Chancellor to cancel the fuel duty rise due in January.
In conclusion, in the summer of 2010, the CBI for the east of England launched its blueprint for growth. It highlighted a variety of factors: East Anglia is a world leader in many emerging sectors, including renewable energy; the east of England is forecast to create 400,000 new jobs by 2031; the area produces more entrepreneurs per head than the UK average, and the businesses they create survive longer; and £1 for every £5 of venture capital investment in the UK flows to east of England businesses.
My message to the Government is that if they work with us and invest alongside us, Waveney and East Anglia can play a pivotal role in promoting sustainable growth and creating new jobs. A good start has been made. We now need to deliver and to take that high road so that Lowestoft is again the model economy for a coastal town.
I congratulate my hon. Friend the Member for Waveney (Peter Aldous) on securing the debate and on a commanding speech that offered a comprehensive survey of all the key challenges facing his local economy. I am also delighted to see our hon. Friend the Member for Suffolk Coastal (Dr Coffey) in her place.
My hon. Friend the Member for Waveney said that everyone should work overtime to promote growth. It was clear from his speech that no Member of the House works harder, more persistently or more effectively to promote their local economy than he does. Indeed, it is worth reflecting on the contributions he has made during his short time in the House. He has had debates and questions on the fishing industry, which I know is close to his heart; the offshore renewables sector; local transport; strategic transport, whether rail or road; the local enterprise partnership and enterprise zones; planning; and economic development. In a short period he has become a persistent and eloquent advocate for all the needs of his area. His constituents in Waveney and residents in the local area should be proud of the service he gives them, in alliance with our hon. Friend the Member for Suffolk Coastal. They are very well represented in these matters. He also takes matters to the top, having questioned the Prime Minister, the Chancellor of the Exchequer and the Business Secretary.
My hon. Friend the Member for Waveney will know that many of the issues he has raised today will be responded to in the weeks ahead. We are all looking forward to the Chancellor’s autumn statement next week. There will be statements in the weeks ahead on some of the transport matters he referred to and many of the decisions that will be taken by the local enterprise partnership will be made in the coming weeks. He is absolutely right that we have put the groundwork in, and some of the decisions in the weeks and months ahead, which will increasingly be taken locally, will determine and shape the future success of the local economy. I know that his leadership, and that of our hon. Friend the Member for Suffolk Coastal, will mean that those opportunities will be taken keenly.
Let me say something about the context. Although Waveney is the eastern-most point of England and geographically distant from our motorway network—my hon. Friend the Member for Waveney has told me before that the nearest motorway to Lowestoft is in Holland—it is very much connected with the wider global and European economy. The overall context of the economy, of course, affects Suffolk as it affects everywhere else in the country, but the most essential building block of our economic future is fiscal discipline, which he acknowledged.
We inherited a situation in which our deficit was set to overtake that of Greece. We had a lack of fiscal responsibility which needed to be sorted out urgently, so the fundamental basis of our economic reforms is to secure the fiscal discipline that we need in this country. My hon. Friend knows that businesses in Suffolk and throughout the country regard that as essential to our economic credibility.
I spent some time this week at the CBI conference, where there was not a single business representative who did not think that it was absolutely in our interest to cleave to the record of fiscal discipline that we have established in recent months—and absolutely essential to send to the rest of the world a signal that we are resolute in that. The situation affects us all.
I was struck by the comments this week of one of our leading businessmen, the managing director of the John Lewis Partnership, one of our most successful businesses, who, speaking in his capacity as the chairman of the Birmingham and Solihull local enterprise partnership, said that the Government get the idea that they must stick decisively to the deficit reduction strategy, which, in his personal view, he endorses.
That is typical of comments that the business sector generally has made, and the reason is that the strategy has an impact on interest rates, which are crucial to the investment decisions that need to be made over the months and years ahead. Despite the deficit that we inherited being of Greek-style proportions, interest rates in this country are more comparable to those enjoyed by Germany, and that is in very large part due to international investors’ confidence in the seriousness of our intentions.
Of all the contributions that the Government can make to the economy, and to making setting up and expanding businesses easier than it might be, the interest rate is crucial, because any investments are likely to involve borrowing and capital investment. It is important that we do not take for granted our environment of low interest rates; it is an important feature of our economic policy, and it is important that all our constituents and my hon. Friend’s local businesses understand that it follows from our fiscal demeanour.
There is an additional aspect, however. If we secure our fiscal discipline and have low interest rates, there is a major role for local leadership, which my hon. Friend exemplifies, because local economies, like local councils and local businesses, can be well run or badly run, and one thing that has been most impressive in Suffolk and, indeed, East Anglia over recent months is the flying start that the local enterprise partnership has made.
That LEP is particularly impressive, and it reflects the close work of some of the best businesses and the local authority leaders in the area. I know that my hon. Friends the Members for Waveney and for Suffolk Coastal and others throughout the region worked hard to bring together business leaders and councillors to ensure that the partnership was in place.
The LEP has also been particularly innovative in establishing an enterprise zone that crosses boundaries between not just districts, but counties, and the fact that the case was made so persuasively for such an unusual arrangement, linking into the great potential of that part of the world to secure investment in offshore renewables, underlines the progress that the partnership has made. I, through him, congratulate all members of the LEP on their work in recent months.
The benefits will begin to accrue very quickly. There is already the potential for investment to be made on the basis of the exemption from business rates that will be available in the area. It is estimated that by 2015, 2,000 jobs will have been created in the enterprise zone. Many of the features that will be enjoyed by the local enterprise partnership can be made available elsewhere in his district. The Localism Act 2011, which received Royal Assent only last week, allows, for the first time, business rate discounts to be allocated by local authorities in a way that they consider to be in the best interests of their businesses. For example, they may be provided for new business start-ups, for businesses in a particular sector, or for businesses that are outside the enterprise zone but in an area that needs to be regenerated. I hope that there will be great flexibility and, as my hon. Friend the Member for Waveney said, great encouragement to take up some of the new powers and freedoms that are available.
This also applies to planning powers. Of course, planning powers are vested in local authorities. Another feature of the Localism Act is to have swept away the regional spatial strategies, as well as the regional development agencies. Those strategies imposed on local people a form of administration that many had recognised as bureaucratic and did not reflect sufficient local knowledge and local interest. My hon. Friend made a comparison with Japanese knotweed regarding some of the regulation, bureaucracy and red tape that has emerged, and said that it should be uprooted. I would go further. We need to ensure that the bodies that promoted and created this red tape are finished once and for all—to cut the head off the snake to ensure that this cannot happen again. We have done that with the regional strategies and with many of the regional bodies.
The Government’s reforms make more powers available so that areas can benefit from economic growth locally. It has always struck me as ridiculous and counter-productive that if an area is led successfully by a local authority and encourages the location of businesses in that area, it shares scarcely at all in the economic benefits, which have all been spirited away to the Treasury. The reform of business rates that we are consulting on and intend to introduce very soon will provide a clear incentive and a sense of justice in that if an authority such as Waveney benefits from having success in attracting businesses, it should be able to keep some of the upside. That becomes a virtuous circle whereby knowing that some of the business rates can be retained allows investments to be made in anticipation of the economic effects, and that unlocks some of the infrastructure investment that my hon. Friend mentioned. If one adds to business rates reform the community infrastructure levy and the new homes bonus, one sees that there is a new ability for local authorities to invest proactively in, especially, infrastructure in their area.
My hon. Friend is right to say that there are challenges in the local area. One of the impressive features of the local enterprise partnership bid was that those challenges were very well addressed. He spoke eloquently about skills. His part of the world has underperformed, compared with some other parts of the country, in terms of skills at national vocational qualification level. It is absolutely right that he puts down a challenge to us in Government to ensure that his local enterprise partnership and his local authorities are given every assistance with raising the skills level in East Anglia, particularly in Lowestoft and Waveney. The new industries to which he refers are important in their demand for engineering skills. The commitment we can make to him is that they can invest for the long term.
Waveney may be the most easterly point of the United Kingdom, but this, far from being a disadvantage, can be a positive advantage given that a lot of opportunities will be available in the North sea and on the continent. We need to capitalise on those opportunities. With the very well-led local enterprise partnership and the representation of exceptional Members of Parliament, I am greatly encouraged by the prospects for Lowestoft. I know that my hon. Friend will continue to do what he has done over his first 18 months in the House—keep us constantly up to date and on our mettle to ensure that we do everything we can for a very important part of the country.
Question put and agreed to.
House adjourned.