House of Commons
Wednesday 4 March 2015
The House met at half-past Eleven o’clock
[Mr Speaker in the Chair]
Oral Answers to Questions
The Secretary of State was asked—
Labour Market Trends
1. What assessment he has made of trends in labour market statistics in Wales since 2010. 
I would like to take this opportunity, in the last Welsh Question Time before the general election, to pay tribute to the Welsh Members who have announced their intention to stand down. All eight right hon. and hon. Members have served their constituencies with distinction and played a vital role in making the case for Wales, as I know they will continue to do outside this House. We wish them all the very best.
Across the UK there have never been more people in work. In Wales there are 41,000 more people in work since the election, but we recognise that the job is not yet done, which is why we must stick to our long-term economic plan, which is starting to bear fruit for Wales.
May I associate myself with my right hon. Friend’s comments on the departing Members?
In my constituency unemployment has fallen by 27% year on year, and it has fallen by over 40% since the height of the recession, a situation that is replicated across Wales. Will my right hon. Friend join me in congratulating the small businesses the length and breadth of Wales that have contributed to the jobs-based recovery, and will he assure me that the policies put in place by this Government will continue if he remains in post after 7 May?
I absolutely agree that it is businesses across Wales, and particularly in north Wales, that are leading the economic recovery, creating the jobs that are making such a difference to the lives of families up and down Wales. What puts that at greatest risk is the prospect of a Labour Government with no vision or plan for the Welsh economy.
The unemployment figures in my constituency have been coming down for the past 15 years, with the exception of the recession years between 2008 and 2012, but many of those jobs are zero hours, part time and for agency workers. I have written to the Secretary of State about the prospect of between 200 and 300 jobs being lost at 2 Sisters. Will he meet me and a delegation from the company, because it is important to the Welsh and UK food industries?
I absolutely will meet the hon. Gentleman, who knows that I take a great interest in job prospects in Ynys Môn, and we will look into the situation in more detail. I caution him against peddling a gross caricature of the Welsh economy, because less than 3% of Welsh workers are on contracts that could be described as zero hours. Opposition Members are quite wrong to peddle this gross caricature of what is a business-led recovery that is bearing fruit.
The Secretary of State will be aware that the Welsh Government have nationalised Cardiff airport. What discussions has he had with the Welsh Government to ensure that they do all they can to keep employment rates high?
My hon. Friend makes an important point. He knows that I meet Welsh Government Ministers frequently to discuss how we can secure the economic recovery for Wales, because it is a shared enterprise across the two Administrations: they know the efforts that we have made to create a strong foundation for a business-led recovery in Wales, and we need them to play their part in helping to bring unemployment down across Wales.
May I begin by wishing you a belated happy St David’s day, Mr Speaker, and all Members of the House and by adding my thanks to all the Welsh Members of all parties who are retiring, but particularly my right hon. Friends the Members for Torfaen (Paul Murphy) and for Neath (Mr Hain), both distinguished former Secretaries of State who have served Wales extremely well?
We have heard an impressive array of statistics from the Secretary of State this morning, but will he set aside the spin for one moment and tell us what has really happened to the jobs market in Wales on his watch? How many of those new Tory jobs in Wales are on zero-hours contracts and pay a pittance in wages?
Let us remind ourselves of what we inherited in 2010. Under the previous Labour Government, unemployment across Wales had increased by 80%, youth unemployment had increased by 75% and, worst of all, long-term unemployment had increased by more than 150%. That is a scandalous record on jobs in Wales. I am proud to be part of a coalition Government who have created the right foundations for a business-led recovery to turn that around.
I think workers in Wales are heartily sick of this Tory propaganda. The truth is that of the 100,000 new jobs in Wales, as the Office for National Statistics said last week, 90,000 are zero-hours contracts paying, on average, £300 less per week than full-time jobs. As the Institute for Fiscal Studies said this morning, the average family incomes of workers in Wales have declined under this Government. Why does the Secretary of State not say the one thing he can to workers from Pwllheli to Pembrokeshire that would give them hope: vote Labour?
If the hon. Gentleman thinks that is any kind of boon for the Welsh economy, I point him to the opinion poll conducted by BBC Wales which this morning shows that a majority of voters across Wales, even in the Labour heartlands—from Rhondda to Cynon Valley, from Caerphilly to Pontypridd—prefer my right hon. Friend the Prime Minister to remain as leader rather than the Leader of the Opposition.
2. What recent discussions he has had with business representatives in Wales on the importance of membership of the EU to the Welsh economy. 
Membership of the European Union’s single market is good for businesses in Wales. However, businesses tell me that the burdens and costs imposed by the European Union are making it harder for them to grow. This Government are determined to renegotiate our membership with the European Union to get a better deal for Wales and for UK businesses, and to put that to the people.
How many tens of thousands of jobs in Wales does the Minister think would be at risk if the UK left the EU?
A renegotiated European Union provides greater opportunities for businesses in Wales. I know that the hon. Gentleman shows great interest in Airbus, which says:
“Regardless of which decision the UK will make, we are strongly committed to our operations in the UK”.
The British Chambers of Commerce also supports that position. I am absolutely confident that the growth in Wales will contribute to more jobs and provide more of the certainty that people want.
Does my hon. Friend agree that the issue of British membership of the EU is indeed of concern to the people of Wales, who have not had their say on the issue for 40 years? Does he further agree that the only way they will get that say is with the return of a Conservative Government, because Labour will not give it to them?
My right hon. Friend is absolutely right. We cannot pretend that this debate is not happening. We need to make the arguments for what the CBI wants—a reformed European Union of which the UK is a part.
I am intrigued. The Minister said earlier that businesses had told him various anti-EU things. Can he name a single business across the length and breadth of Wales—north, south, east or west—that has told him it would like Wales to leave the EU?
I am happy to point to the survey by the British Chambers of Commerce which showed that 77% of businesses support a referendum on EU membership, and said:
“British businesses remain determined to see a recalibrated relationship between the UK and the rest of the European Union, with more powers exercised from Westminster rather than Brussels.”
I hope that the hon. Lady supports that comment from the British Chambers of Commerce.
Does the Minister agree that businesses do not always speak with one voice on this issue? While big businesses are often the most able to cope with the bureaucracy sent to us from Brussels and might want to stay within the European Union, very often small businesses do not?
My hon. Friend makes an extremely important point. Many of the people who are scaremongering now are the same people who wanted to join the euro all those years ago. It is this party that stands up for the British economy and stands up for businesses, exactly as the British Chambers of Commerce, the CBI and Airbus say in the quotes I have given.
13.  In 1998, I was successful in persuading my right hon. Friend the Member for Neath (Mr Hain) to accept Denbighshire and Conwy into the bid for objective 1 European funding. In that time, Denbighshire has had a quarter of a billion pounds of private sector and public sector funding from Europe. If Britain pulls out of the EU, my constituency and my county will lose £100 million over the next seven years. What does the Minister feel about that?
May I remind the hon. Gentleman that European structural funds are aimed at the poorest parts of Europe? It is no mark of celebration to say that his constituency succeeded in winning that money. This Government have a long-term economic plan to turn the economy around for the longer term rather than depending on the grants and handouts for which he makes the case. He also needs to be reminded that that is our money coming back with conditions attached.
Does the Minister agree that the reforms that the CBI and others are recommending for the single market, and for the European Union in general, are absolutely right for Wales and absolutely right for Britain, and that that should be a consideration for the referendum?
My hon. Friend is absolutely right. Opposition Members talk about some sort of so-called uncertainty, but that so-called uncertainty has given us the fastest-growing economy in the G7 and has made Wales the fastest-growing part of the United Kingdom, which we should be celebrating and marking.
3. When he last met representatives of the tourism sector in Wales; and if he will make a statement. 
Wales Office Ministers regularly meet representatives of the tourism industry in Wales. Wales is a fantastic holiday destination, and this Government will continue to do all they can to promote Wales at home and abroad.
We are indeed fortunate in that people the world over want to visit the wonderful country of Wales—I and, I am sure, the Minister are very proud of the country—but more should be done in terms of tourism and the Welsh economy. What discussions has he or his right hon. Friend the Secretary of State had with colleagues to implement a 5% VAT rate for the tourism sector, which would bring 5,500 extra jobs to Wales?
With permission, Mr Speaker, a gaf i dalu teyrnged i’r Aelod gwir anrhydeddus? I would like to pay tribute to the right hon. Gentleman for his service in this House over many years, and for the way in which he has led his party here.
VAT levels for business are of course set by the Treasury. The right hon. Gentleman rightly points to the importance to the Welsh economy of tourism, which makes up almost 15% of the work force. That is why I am delighted that the number of international visits last year increased by 7.5%, or 26,000 visits.
Diolch i’r Gweinidog am ei eiriau caeredig. I will help Hansard with the spelling later.
In terms of competitive disadvantage, 24 EU states already have a reduced rate of VAT on tourism. In addition, the economic study by Professor Adam Blake, using the Treasury’s own modelling technique, showed that a cut in tourism VAT would increase GDP by £4 billion per annum.
A strong tourism sector needs a strong economy. Wales is the fastest-growing part of the United Kingdom, which creates a greater opportunity to attract tourists from not only the UK but beyond. VisitBritain is launching the Countryside is Great campaign, from which I know the right hon. Gentleman’s constituency is set to benefit.
The Minister is right to highlight the successes of the Welsh tourism industry. Will he reflect on the benefits of a cut in VAT for rural economies, particularly those in west Wales—the constituency of the Secretary of State and Ceredigion, Powys and Dwyfor Meirionnydd? They would really benefit because they are incredibly fragile economies.
VAT rates are a matter for the Treasury, but the hon. Gentleman will be able to make such points in the forthcoming Treasury debate. We need to ensure that Wales gets its fair share of VisitBritain, and the Countryside is Great campaign provides a great opportunity for his constituency and large parts of Wales to ensure that Wales is promoted internationally as well as within the United Kingdom.
4. What assessment he has made of the potential benefits to south Wales of the Severn barrage. 
We have made it clear that we remain open to considering any well developed and privately funded proposals that come forward for harnessing the tidal range resource in the Severn estuary. The right hon. Gentleman’s tenacity on this and a great number of other subjects will of course be greatly missed when he leaves this place. I look forward to meeting him next week to talk further about the Severn barrage project.
I am grateful to the Secretary of State. Is he aware that the company now taking forward the Severn barrage—exclusively for any form of renewable energy—requires no consumer subsidy through a contract for difference? That could be a game changer for the Government.
With your indulgence, Mr Speaker, may I thank my Welsh Labour colleagues for their comradeship, especially during my two years as a Welsh Minister and seven years as Secretary of State for Wales? We can be proud that we established a Welsh Assembly, and it has been a privilege to serve.
I thank the former Secretary of State for his question. As I said, I look forward to talking to him in more detail about the project, and to understanding how the proposal might have changed since he and his associates last presented the ideas to various Committees. Let me add that I am proud to be part of a Government who believe in major infrastructure investment, and who are delivering strategic infrastructure investment in Wales the likes of which we have never seen before.
As a lifelong advocate of the Severn barrage, I think that we must now reluctantly admit that the time for the barrage has gone and that there is a better alternative in the form of lagoons at Newport, Cardiff and Swansea. Does the right hon. Gentleman agree?
The hon. Gentleman makes a good point. He is aware of my enthusiasm for the lagoons project. That is why the Wales Office worked hard to secure the inclusion of the lagoon proposal for Swansea bay in the national infrastructure plan. There is a planning process in place and we need to respect that, but I am proud to be part of a Government who are working constructively and positively with the developers to take the project forward.
Jobs Growth Wales
5. What discussions he has had with Ministers in the Welsh Government on the role of Jobs Growth Wales in tackling youth unemployment in Wales. 
8. What discussions he has had with Ministers in the Welsh Government on the role of Jobs Growth Wales in tackling youth unemployment in Wales. 
I am proud of the efforts of this Government that have seen youth unemployment in Wales fall by 46% over the course of this Parliament. I have discussed with the Welsh Government the support that is available to help people into work to ensure that there is a coherent and joined-up approach in Wales.
Jobs Growth Wales has created 12,000 job opportunities for young people across Wales. Why will the UK Government not replicate it?
The Jobs Growth Wales scheme has been popular with employers—it is a wage subsidy, so of course employers like it. It is important to recognise that Jobs Growth Wales is for people who are so-called job-ready. An independent evaluation by Ipsos MORI, which was commissioned by the Welsh Government, found that 73% of people who found work through Jobs Growth Wales would have found work anyway. That raises questions about whether it is a good use of taxpayers’ money.
Jobs Growth Wales has created more than 400 jobs for young people in Blaenau Gwent. However, people need to be able to get to the jobs market on the coast in Cardiff and Newport. Given that the funding is now agreed, when will the valley lines electrification be completed?
I am pleased that the hon. Gentleman has referred to the valleys electrification project. It was a great achievement of this Government, along with the Welsh Government, to secure a deal to deliver electrification not just of the great western line to Swansea but, crucially, through to the valleys communities as well. We look forward to work starting on that project, subject to the Welsh Government agreeing the details, in 2018-19.
Does my right hon. Friend agree that it is not just Jobs Growth Wales but the coalition Government’s long-term economic plan that has delivered the unprecedented falls in youth unemployment, and that the binary choice that will be presented to the people of Wales on 7 May is between jobs, growth and prosperity and debt, deficit and dole queues?
As ever, the Chairman of the Welsh Affairs Committee is exactly right. He expresses the situation perfectly. What puts at risk all the great progress we have made in cutting long-term and youth unemployment across Wales is the prospect of a Labour Government who have no plan and no vision for the Welsh economy.
11. Will my right hon. Friend note that in my constituency unemployment has fallen by more than 30% since my election? Will he take every opportunity to remind the electorate and the House of something that has been true throughout the 23 years since I was first elected to the House, which is that every Labour Government have left office with unemployment higher than when they came to office? 
My hon. Friend should take pride in his record. On his watch, the falls in unemployment in Cardiff North have been truly impressive over the past five years. I know that Craig Williams, our excellent Conservative candidate in Cardiff North, will carry on the good work through all the excellent contacts he has with businesses across the city.
Given the 80% success rate of the Labour Welsh Government’s Jobs Growth Wales programme and the Secretary of State’s new-found enthusiasm for devolution, why did he not include in his St David’s day announcement the devolution of the Work programme, which, under his Government, gets only a miserable 10% of clients into work in Wales and is clearly failing people in Wales?
I thank the hon. Lady for that question. The crucial point is that the Work programme was brought forward by the coalition Government—the UK Government—and has helped more than 17,000 people in Wales who had been unemployed for the longest periods. Let us not forget how complacent the previous Labour Government were about long-term unemployment in Wales: the rate of long-term unemployment increased by more than 160% on their watch.
Cross-Border Health Care
6. What discussions he has had with the Welsh Minister for Health on cross-border health care provision. 
Wales Office Ministers hold regular discussions with Ministers in the Welsh Government on a range of issues, including the provision of health care services along the England and Wales border. We will continue to review current arrangements to ensure that they meet patients’ needs on both sides of the border.
A major problem facing rural Wales is difficulty in attracting GPs to come to work in Wales, and one reason for that is the bureaucracy involved in GPs having to go through a process of specific Welsh registration. Will the Minister work with the Welsh Government and the Department of Health to bring forward a common registration programme for Wales and England?
My hon. Friend makes an important point. We want the greatest flexibility in the NHS work force across the whole United Kingdom. The regulatory burden and bureaucracy involved is unacceptable, and the Department of Health and Welsh Government are working together with the support of the Wales Office to put that right.
Many health services for my constituents are delivered from England by specialist hospitals. Why do the Secretary of State and the Minister want to take away the voice of MPs from Wales to speak up on behalf of their constituents and look after their interests?
I do not accept the hon. Gentleman’s premise. Welsh MPs will still be here fighting for their constituents and ensuring the best care for them, be it on the Welsh or English side of the border. That is what we will be elected for.
Rural GP practices are at particular risk, as shown by the proposed closure of the Llanwrtyd GP surgery, and patients will have nowhere to go. Will the Minister make representations not only to the Royal College of General Practitioners but to the Wales Deanery, to encourage more GPs?
That is a matter for the Welsh Government, but I will happily raise that point. The point made by my hon. Friend the Member for Montgomeryshire (Glyn Davies) underlines the fact that flexibility would create greater opportunity to try to fill those gaps.
Will the Minister concede that one of the main problems with the health service in Wales is underfunding, on which the new announcement on further devolution has signally failed to deliver?
The hon. Gentleman makes an important point about funding, and there have been many debates in the Chamber about the funding of the NHS in England and in Wales. As my hon. Friend the Member for Aberconwy (Guto Bebb) once said, Aneurin Bevan would turn in his grave if he thought that a Welsh Labour Government were cutting the NHS budget while a Conservative Government in Westminster were growing the NHS budget.
National Police Air Service (Dyfed Powys)
7. What discussions he has had with the National Police Air Service on the provision of helicopter services within Dyfed Powys police force area. 
As a police-led initiative, it is for the National Police Air Service Strategic Board to develop the operating and financial models to meet the needs of all forces throughout Wales and England.
The Dyfed Powys helicopter base at Pembrey is a state-of-the-art facility that opened only in 2010, at a cost of £2 million to the residents of the force area. Last month the newly created National Police Air Service reneged on an agreement made only last November to preserve that base. Dedicated helicopter capacity is vital to policing in the Dyfed Powys area. On Monday, for example, the helicopter saved the life of an injured man at the LNG facility in Pembrokeshire, transporting him to Heath in Cardiff. Will the Minister raise that issue with the Home Secretary and NPAS, and will he meet me to discuss the concerns of the people of west Wales?
The hon. Gentleman makes an important point, and I pay tribute to the police and crime commissioner, Chris Salmon, for his work on that. He has an agreement in place that extends access to the helicopter service from 12 to 24 hours, with an 85% priority recall within 20 minutes. That is delivering more for less money. [Interruption.]
Order. There is a lot of noise in the Chamber. Let us have some order for the Chair of the Political and Constitutional Reform Committee of the House of Commons, Mr Graham Allen.
Income Tax Assignment
9. What recent discussions he has had with the First Minister on income tax assignment to Wales being carried out on the same basis as applies in Scotland. 
I have regular discussions with the First Minister on holding a referendum on the devolution of income tax to the National Assembly for Wales, as provided for in the Wales Act 2014. Following our commitment to a funding floor for Wales there is no reason for the First Minister not to call a referendum in the next Parliament.
Does the Minister accept that Scotland has now set a precedent on income tax assignment that can meet the base load of its expenditure? Will he continue his work to ensure that Wales also has income tax assigned? Will he talk to his colleagues in England to ensure that they understand that the basis of devolution in England must be financial independence by income tax assignment, too?
I am a bit surprised by the hon. Gentleman’s question, because the Government have worked really hard to deliver a devolution package for Wales that strengthens and clarifies, and makes devolution fairer for Wales. The negative response from Welsh Labour in Cardiff in recent days speaks more about the divisions between Labour in Westminster and in Cardiff. He really should speak to his own colleagues.
The Prime Minister was asked—
Q1. If he will list his official engagements for Wednesday 4 March. 
This morning I had meetings with ministerial colleagues and others. In addition to my duties in this House, I shall have further such meetings later today.
The Chancellor was asked six times this morning whether he had had conversations with Lord Green about tax avoidance. He refused to answer. Will the Prime Minister now clarify whether he or the Chancellor had conversations with Lord Green when he was a trade Minister about tax avoidance at HSBC?
We dealt with all this a fortnight ago. All the proper checks were made. This is the same Lord Green, the same Stephen Green, that Labour gave a job to just before the election. That is the truth and they cannot get away from it.
Q2. A centre for excellence is to be created on the Isle of Wight for composites, advanced manufacturing and marine technology. This project, led by GKN Aerospace and the Isle of Wight College, will benefit new and existing island businesses. Does the Prime Minister agree that this is an excellent example of the Government supporting the local economy and ensuring that young people on the island have the skills that the industries of the future will need? 
My hon. Friend is right: this is an excellent development. Solent local enterprise partnership has received nearly £11 million in funding through the growth deal to build the centre of excellence for composites on the Isle of Wight. This will provide 550 students with workshop and learning facilities, and will include more than 250 apprentices. This is all part of our long-term plan to build up Britain’s skills, build up Britain’s manufacturing, build up our apprenticeships and make sure more people get the security and stability of work.
Before the last election, the Prime Minister made a no ifs, no buts promise on immigration. Can he remind the House exactly what that promise was?
We promised to cut net migration. We have cut it from outside the European Union, but it has increased from inside the European Union, not least because we have created more jobs than the rest of the European Union put together.
The Prime Minister was rather coy about his precise promise. It was in his contract with the British people: net migration cut to the tens of thousands. But now it is at 298,000—higher than when he took office. Here is what he said in the contract:
“If we don’t deliver our side of the bargain, vote us out in five years’ time.”
When he said that, did he mean it?
There are two reasons for high migration. One is the growth of our economy, and the other is that our benefit system allows people to access that benefit system straight away. I say: let’s keep the strong economy; let’s change the benefit system. The right hon. Gentleman wants to keep the benefit system and trash the economy.
I have to say to the Prime Minister that his promise on immigration makes the Deputy Prime Minister’s promise on tuition fees look like the model of integrity. If he can break so spectacularly a solemn promise on a fundamentally important issue, why on earth should anyone believe any of his election promises this time?
I am glad the right hon. Gentleman mentions the document, because I have brought it with me. I have, as you say, procured a copy for the interests of the House, and I would like to run through the commitments we made. We said:
“We will protect pensions”,
and we have protected pensions. We said we would train 4,000 Sure Start health visitors, and we have trained 4,000 Sure Start health visitors. We said we would
“protect free TV licences for over 75s and keep free eye tests… for pensioners”,
and we kept that promise. [Interruption.] There is plenty more. I’ve got all day, Mr Speaker. I think these are very important. The contract says:
“We will keep the winter fuel allowance”,
and we kept the winter fuel allowance.
It said we would
“ensure that cancer patients get the…treatment they need”,
and we made sure that happened. There is lots more, so let us keep going. There is plenty of time. [Hon. Members: “More!”] We said we would increase health spending every year, and we have increased health spending every year. We said we would introduce the married couples tax allowance, and we have introduced a married couples tax allowance. We said we would increase the basic state pension, and we have increased the basic state pension. There is plenty more. These are commitments made, and commitments kept. What a contrast—
Order. I call Mr Miliband.
So now we know: we cannot believe the promise on immigration from the leader of the Conservative party. It is not worth the paper it is written on. [Laughter.]
Order. I ask the House to have some regard to the views of the public about our behaviour, given that we will be seeking their support in the weeks ahead. It is quite straightforward really.
They are laughing about the Prime Minister’s broken promise on immigration. I will ask again. He promised net migration in the tens of thousands. Will he now admit that he has broken that promise—yes or no?
I have been very clear: we have cut migration from outside the EU, but we have seen it rise inside the EU. We have a plan to deal with that. The right hon. Gentleman talks about commitments, but I have a few more. The contract said we would cut wasteful spending, and we have cut wasteful spending. We said we would reduce carbon emissions, and we reduced carbon emissions. We said we would have 400,000 apprentices—we have broken that promise, because we have had 2 million apprentices. It is election time, and we are all getting to think about leaflets, so I have a little question. Apparently, someone can go around to his office, and he stands on a soapbox to make himself look a little taller. How many people will put the Leader of the Opposition on their leaflets? Come on! Hands up! [Laughter.] I think that is enough about leaflets for now.
So it is all about leadership. [Hon. Members: “Yes.”] Excellent. Great. We have a good chance to discuss these issues. The broadcasters have proposed a live, head-to-head debate between the Prime Minister and me on 30 April—a week before polling day. I will be at that debate—will he?
Yes, it is all about leadership, but we have seen none from the Labour party. What is interesting is that we are having a debate now, and the Opposition cannot talk about the economy—they cannot talk about jobs, because more jobs are being created; they cannot talk about growth, because growth is going up; and they cannot even talk about living standards, because of today’s breakthrough report showing that living standards are back at their pre-crisis peak. I say let us have these debates, and let us get on with them before the election.
Okay, if the Prime Minister wants an additional debate between me and him before the election, I am happy to agree to it, but the broadcasters have set a date. He says the election is all about me and him, but the one thing he wants to avoid is a televised debate between me and him. I will give him another chance: I will be there on 30 April for a debate between me and him. Will he be there—yes or no?
The right hon. Gentleman has now given up on the seven-cornered debates; he does not want to debate with the Greens any more. He watched the press conference: we all thought it was a car crash; he probably thought it was a master-class. We are having a debate now, and he cannot talk about the economy; he cannot talk about jobs; he cannot talk about living standards; he cannot talk about what we have done for our economy. The reason for that is that he has no leadership whatsoever. The truth is that we have a recovering economy, and we must not let Labour wreck it.
Next Monday, a seemingly minor amendment to the Road Traffic Acts—[Interruption.]
Order. The hon. Gentleman is entitled to be heard.
Thank you, Mr Speaker. Next Monday, a seemingly minor amendment to the Road Traffic Acts will allow 70,000 severely disabled wheelchair-using children legally to use a heavier class of wheelchair that better meets their complex needs. Will the Prime Minister join me in congratulating the excellent Newlife Foundation for Disabled Children in my constituency, which has been campaigning for this change in the law for over five years, and can now continue to make a real difference to the quality of life of some of the most severely disabled children in our country?
I am very happy, with my hon. Friend, to praise that business and to pay tribute to all those who give disabled young people the chance of having more choice over wheelchairs. Anyone who has had a child in a wheelchair knows that choice is important so that their child can have a better quality of life. I am delighted that this change in the law will help make that possible.
Q3. My father died of cancer; my mother died of cancer; and my sister died of cancer. A year ago, the Prime Minister set a target for those on urgent cancer referrals to receive their first treatment within two months. Last year, 20,000 people did not have that target met for them. Does the Prime Minister understand that, even if the national health service can survive another five years of a Conservative Government, 100,000 cancer patients cannot? 
The hon. Gentleman, probably like everyone in this House and most people in our country, knows someone who has been affected by, or died of, cancer. We all know that, and we know it is one of the biggest killers that we must get to grips with in our country. What we have seen over the last five years, partly because we have protected health spending, is a 50% increase of referrals into cancer treatments, so about half a million extra people have been treated. When it comes to cancer, what we need is earlier diagnosis by the GP. That is why the information campaigns matter so much. When people go into treatment, it does matter that the waiting targets are met. Two out of the three key cancer targets are being met, and we need to make sure that all of them are met. We also need to keep on with the cancer drugs fund, which has given many cancer sufferers access to drugs and a longer life as a result.
Q4. Does my right hon. Friend agree that, too often, some of NATO’s leaders confuse announcements with action? Will he ensure that NATO does what it said it would do at Cardiff last year, so that those who, for their own domestic reasons, want to undermine the political and territorial integrity of the alliance realise that when we say we will defend it, we mean it, that we have the means to do so and that we will do so? 
My hon. and learned Friend is absolutely right. That is why the Cardiff conference was so important. We said we would stick to article 5—and we will stick to article 5. We said we would draw up an action plan to help countries in eastern Europe, including the Baltic states—and we are doing so. For Britain’s part, we have the Typhoons taking part in the Baltic air patrol and we have 4,000 British troops taking part in operations in eastern Europe. It is very important that we are clear to those Baltic allies that when we sign up to article 5, we mean it. They want to hear our support—when they face not only a conventional threat, but threats of cyber-attack as well. We need to show that we are standing with them at this time.
Q5. Without wishing to be personal, does the right hon. Gentleman realise that many people consider him to be a Prime Minister who simply does not understand the lives of millions of people of this country who try to live on modest incomes? The Tory party has been, and remains, the party of the rich and the privileged. 
I would say to the hon. Gentleman that a Government should be judged according to what happens to the people living in the country. We are now seeing 1.85 million more people with a job. That means that 1,000 people are getting a job for every day that the Government have been in office, and it means the security of a pay packet and the chance to provide for a family. [Interruption.] The hon. Gentleman shakes his head, but that is the reality of Britain today: more apprentices, more jobs, and more people able to provide for their families. I should have thought that the Labour party would welcome that.
The Department for Education has overruled Norfolk county council’s proposal for an interim executive board to resolve the future of The Hewett school in my constituency. Will the Prime Minister seek to establish why the DFE considers its own centrally imposed proposal to be preferable, given that it seems to go against the spirit of localism?
What we have done is ensure that when schools are not succeeding and when they are coasting, they are taken over and turned around, and I think it very important that we intervene on behalf of local parents to make sure that that happens. However, I will look into the specific case that the hon. Gentleman has mentioned.
Q6. At a time when the Government are losing millions through tax avoidance, how does it make sense to close North Ayrshire tax office, given that every officer there brings in taxes amounting to hundreds of thousands of pounds that would otherwise be lost to the Exchequer? 
We have made at least 40 changes to ensure that people pay their taxes. We inherited circumstances in which foreigners were not paying stamp duty, hedge fund managers were paying less tax than their cleaners, and a number of people were avoiding tax on an industrial scale. [Interruption.] Opposition Members sit there now, but they were the friends of the tax avoiders. They had 13 years in which to act, but they did nothing, and it took a Conservative Government to sort it out.
Q7. Does the Prime Minister believe that his own behaviour and that of the Leader of the Opposition during Prime Minister’s Question Time enhances or damages the image of the Houses of Parliament and, indeed, that of politicians in the eyes of members of the public? 
Prime Minister’s Question Time is, inevitably, a robust exchange. I am sure that there are always ways in which we can improve it, but it has an important function in ensuring that we have accountable government in our country, and that people can ask the Prime Minister anything they want.
Q8. Yesterday the Prime Minister rightly designated child sexual exploitation as a national threat. Sadly, the police are receiving more reports of abuse than ever before, but there are fewer investigations and prosecutions than there were in 2010-11. Since then, 16,000 police jobs have been cut. How can it be right to cut a further 1,100 next year? 
Let me begin by thanking the hon. Lady for mentioning the fact that we have made child sexual exploitation an issue of national importance. That will trigger work not just by local police forces, but by the National Crime Agency. That means that more resources will be put into investigations of this kind, which will employ all the tools that modern police are able to bring to their investigations. Rather than seeing priority being given to other issues, the hon. Lady will see priority being given to this issue. Yes, police budgets have been reduced, but the percentage of police on the front line has risen, and crime has fallen all over the country.
In a dangerous world, experience as a statesman is one of the many advantages that my right hon. Friend has over any alternative Prime Minister. Does he agree that, in such a dangerous world, the ultimate guarantee of our security is our nuclear deterrent, and will he confirm that he would never be involved in any shabby deal to give away our nuclear deterrent as part of a wider deal with a unilateralist party, simply to get the keys to No. 10?
My hon. Friend is absolutely right. The ultimate guarantor of Britain’s security is our independent nuclear deterrent. That is why we support it, and will ensure that it is properly renewed during the next Parliament. I think it important for everyone in the House to make that clear pledge.
It is concerning that nearly three quarters of Labour candidates oppose the renewal of Trident. I think that now is the time for Labour to rule out any agreement with the Scottish National party, because no one wants to see some grubby deal between the people who want to break up the United Kingdom and the people who want to bankrupt the United Kingdom.
Q9. To have the accountable Government the Prime Minister just talked about, he needs to answer the questions asked of him. A two-way debate is planned by broadcasters for 30 April. For the third time today, I ask him: will he be there? 
I have been very clear. I have said, “Get on with the debates before the election campaign,” and I think we should start now.
I bring the House good news. For the first time in 10 years British beer sales are up. The Campaign for Real Ale said the Chancellor’s scrapping of Labour’s hated beer duty escalator and two cuts in beer duty have saved 1,050 pubs. The Sun newspaper, which champions Britain’s beer drinkers, says today that the Chancellor is poised to repeat the cuts. Will the Prime Minister join me in assuring beer drinkers that this Government are on the side of publicans and on the side of British brewers, and will he urge the Chancellor to have a third cut?
I praise my hon. Friend for the work he has done to support the beer industry, to support Britain’s pubs and to stand up for our local communities where the pub is so often the hub of the village and the community. This Government have been a good friend of Britain’s pubs and the beer industry. I am delighted with the figures my hon. Friend read out. It always goes to show that life’s better under the Conservatives.
Q10. Does the Prime Minister agree with his Minister in the Department for Business, Innovation and Skills who says that prosecuting people who do not pay the minimum wage is the politics of envy? 
Prosecuting people for not paying the minimum wage is absolutely the right thing to do, and what we have done is made sure that the resources are there for that to happen, and let me give the hon. Lady the figures: 3,200 penalties have been issued for non-payment of the minimum wage, amounting to nearly £3 million in fines. What we have seen is the maximum penalty being increased, we are naming and shaming non-compliant businesses, and we are getting that sort of action under a Government led by me.
Q11. Our long-term economic recovery plan for the north-east has seen wages up, apprenticeships doubled and exports up, and unemployment in every constituency in the north-east has fallen in the last year, and by 37% in Hexham. We are fixing the mess left behind by the Labour Government. Can the Prime Minister set out the future plan for the north-east? 
We are setting out our long-term economic plan for the north-east. My hon. Friend is absolutely right about the figures in his own constituency: the claimant count in Hexham is down by 53%. But what is really fascinating about what is happening today is what is happening to youth employment, and I can tell the House a new figure: in the last year the UK saw a bigger rise in employment levels for under-25s than the whole of the rest of the European Union combined. That is what is happening with our economy recovering. The biggest risk to that economic recovery is the wrecking ball of the Labour party.
My constituent Mr Irfon Williams of Bangor has been refused the drug treatment for his cancer. He has moved to England and I understand he will begin treatment next Wednesday. What would the Prime Minister say to Mr Williams and others who have had to fight on a case-by-case basis for the treatment prescribed? Mr Williams himself is a senior health care professional.
What I would say to Mr Williams is, first, that he has my sympathy and understanding for the condition that he has. I hope he will get the treatment he needs in England, where we are investing £60 million in this Parliament to introduce bowel scope screening in the NHS, which I think will be absolutely vital. On the question of identifying this cancer, which is a major killer, much earlier, the English NHS is performing 850,000 more operations each year compared with 2010, but the problem is that in Wales the Labour party has made the wrong decision and cut NHS spending. It did not have to make that decision, because of course the increase in NHS spending in England triggers Barnett money being available in Wales, so even at this late stage I would plead with the Labour Government in Wales: make the right decision on health, increase the spending, increase the cancer treatments, and give people like the hon. Gentleman’s constituent the treatment they deserve.
Q12. On a recent visit to my constituency to announce the growth fund allocation for the Heart of the South West local enterprise partnership, my right hon. Friend learned how, as part of the city deal, the marine industrial campus on unwanted Ministry of Defence land in Devonport’s South Yard could create 1,000 new skilled jobs. As he knows, however, that opportunity could be lost if the land is not transferred to the city council before purdah. Can he confirm when that transfer is going to happen? 
I visited my hon. Friend’s constituency in January to see at first hand the plans for the maritime industrial campus, which is a very exciting development. As he knows, discussions are under way between Plymouth city council and the Defence Infrastructure Organisation. I do not think there is any reason why they cannot be completed by the end of the month, and I am pressing the Ministry of Defence to do everything it can to make that happen. I can also confirm that funding is there, should the case be approved; that funding was secured as part of the city deal. This is very important for Plymouth and I want to see it happen.
Q13. We all know that the Prime Minister trebled tuition fees. Will he today rule out increasing them again? 
I will tell the hon. Lady what we have done. We have created a system in which the universities are now better funded than others in Europe, the number of students going to university has increased and the number of people from poor backgrounds has gone up as well. The party opposite has taken four years to work out its policy, and it is a policy that hits universities, helps rich students rather than poor ones and does nothing to expand university education in our country. It is going to be paid for by additional pension taxes on senior nurses, military figures and firefighters. It has taken the Opposition four years to come up with a completely useless policy. It is, if you like, a monument to the chaos we would get under a Labour Government.
Unemployment in my constituency and across northern Lincolnshire has plummeted since 2010, and that is in large part due to infrastructure investment by this Government, including investment in the Humber bridge and in the A160 in the constituency of my hon. Friend the Member for Cleethorpes (Martin Vickers). May I urge the Prime Minister to look closely at the possibility of a feasibility study for the electrification of the southern TransPennine line in northern and north-eastern Lincolnshire?
I will certainly have a look at my hon. Friend’s proposal. As he knows, we have made real progress on the electrification of railway lines as part of our infrastructure investment. I was in his constituency recently with representatives of the Homes and Communities Agency to look at a vital road development that is opening up economic development there, but I would be happy to look at the electrification project as well.
Schools with outstanding academic results can go for years and years with no inspection of their child protection procedures. Is it not time to make child protection much more central to the Ofsted process, and to ensure that every school’s child protection arrangements are inspected regularly?
I will look carefully at the hon. Lady’s point. For many years, inspections were seen as almost too routine in outstanding schools that were delivering good results. We needed to focus more on the failing schools and those requiring improvement. She makes an important point, however. Child sexual exploitation is an issue that we need to address in this Parliament and beyond, as are the issues of forced marriage and female genital mutilation, and it is important to know that the right safeguarding policies are in place. Of course, these things can also be triggered by boards of governors or by concerned parents, rather than having to have a routine inspection, but I will have a look at her proposal.
Two years ago, a toddler in my constituency, Millie Thompson, tragically died following a choking incident at a local nursery. Her parents set up Millie’s Trust to campaign for a change in the law to require all relevant nursery staff to have paediatric first aid qualifications. An e-petition with more than 100,000 signatures and a Back-Bench business debate led to the Under-Secretary of State for Education, the hon. Member for East Surrey (Mr Gyimah) promising a review, which is currently being undertaken. Does the Prime Minister support the campaign, and if so, will he respectfully ask the Minister to get a move on?
I will certainly talk to my hon. Friend the Minister about the review. Obviously, it makes sense for as many people as possible to have that sort of training, because where we can prevent accidents and needless loss of life, we should do so. So let me talk to the Minister and get back to my hon. Friend.
Let us try the Prime Minister on another one of his promises: to make energy companies put their customers on the lowest possible tariff. Too many of my constituents are still paying many hundreds of pounds more per year for energy. Will he again make that promise or is he content to wait until an incoming Labour Government in May fix this energy market?
What we promised was to get energy companies to cut their bills by taking some of the charges off them, and that has been delivered. What the Labour party is promising is a price freeze even when prices are coming down. So even before the election Labour has started to inflict real damage on consumers in our country by helping to keep prices higher than they otherwise would be.
Worcestershire is one of the three fastest growing county economies in the UK, and in Worcester youth unemployment is now down by two thirds since it peaked under Labour. Businesses are investing in our world-class county, but one factor holding back that investment is the long journey time it takes to reach us by rail from the capital. Will the Prime Minister, whose constituency is on the same line, join me in the Fast Track Worcester campaign to deliver us a two-hour service?
I am very keen to join my hon. Friend in this campaign because it would benefit my constituency too. We have seen a dualling of more parts of the Cotswold railway line in recent years and an improvement in car parks, which is all to the good. This is a vital railway service—[Interruption.] We are hearing a lot from the shadow Chancellor today. He told us that he was a “long slow burn”, but I have to say that the only thing lying in ashes is Labour’s economic credibility.
Recent figures produced by the TUC have shown that 40% of workers in my constituency earn less than the living wage, with women particularly badly affected—53% of women workers earn less than £16,000 a year. What is the Prime Minister going to do to ensure that workers in my constituency start to feel the recovery?
First, I support the living wage and I think that those employers who can pay it should pay it. But what we do to help all people in this situation is to make sure that the minimum wage is properly enforced, to see it increased over time and then, of course, to lift people out of tax. We have lifted 3 million people out of tax by raising to £10,600 the amount of money that someone can earn before they start paying tax. That has benefited low-paid people and has benefited women, and if we get a Conservative Government after the next election, we will raise that threshold to £12,500 so that someone can work 30 hours on the minimum wage and pay no income tax whatsoever.
As we approach the general election, may I urge my right hon. Friend to abandon his natural reticence and remind the British people that the last Labour Prime Minister destroyed the public finances, ran up a massive £156 billion budget deficit, plundered the pension funds and sold off the gold at a ridiculously low price, whereas under my right hon. Friend’s stewardship and five years of hard graft the United Kingdom now has the fastest-growing economy in the G7, with average wages rising in real terms for the first time since 2007? What we need is, as my right hon. Friend said, a Conservative Government.
I am grateful to my hon. Friend for that. I have not felt particularly reticent today, but what I would say is that the economy is recovering. We see that in jobs, we now see that in living standards and we see it in the lowest rate of inflation that we have had for many years in our country. The economy has turned around, we have turned that corner, things are getting better and we must not let Labour wreck it.
The suffering of constituents of mine such as Liza Brady, Simon Davey and James Titcombe, who lost their babies at Furness general hospital, is hard to imagine. They have had years of struggle to get to the point yesterday where the Kirkup report put through a host of recommendations, both for our local hospital and for the wider NHS. Will the Prime Minister honour their struggle today by saying that the Government will implement those recommendations in full?
It is a very important report, which is why the Health Secretary made the statement that he did. We want to see many of these changes put in place. Where we have problems in our NHS—we saw them in Mid Staffs and in the case that the hon. Gentleman mentions—it is important that we do not sweep them under the carpet; we need to be open and honest about them. We should send in the inspectors with the newly beefed-up Care Quality Commission. We have this new post of chief inspector of hospitals, which brings focus to the whole organisation, and we need to work out how to turn a hospital around; how to put it into special measures; and how to get things fixed so that these tragedies do not happen again. My heart goes out to all those people who have lost their children as a result of things that should never have happened in our country.
Point of Order
On a point of order, Mr Speaker. I suggest that to enhance the reputation of this House, we should send the Prime Minister and his Ministers on a seminar to teach them the precise meanings of the words “question” and “answer” and the need for a link between the two. Today’s spectacle was the worst ever, as the answers from the Prime Minister to the Leader of the Opposition had no connection whatever with the questions. If we cannot improve Prime Minister’s questions, would it not be better to abolish them in the next Parliament, because they bring this House into further disrepute by providing a demeaning spectacle?
I thank the hon. Gentleman for what he has said. He has made his point with his usual force and alacrity, and it will be reported in Hansard tomorrow. As he will appreciate, I will have to leave it there. We will come to the ten-minute rule motion when Mr Pound has toddled out of the way; we are grateful to him for doing so. Other Members who are engaging in earnest discussions will, I am sure, wish to give the right hon. Member for Dwyfor Meirionnydd (Mr Llwyd) whose ten-minute rule Bill it is the chance to speak to it.
Victims (Bill of Rights)
Motion for leave to bring in a Bill (Standing Order No. 23)
I beg to move,
That leave be given to bring in a Bill to establish a framework for victims of crime; to provide for the training of criminal justice staff on the impact of crime on victims; and for connected purposes.
Over the past few years, it has been my privilege to play a part in realising changes to the law on stalking and domestic violence. During the course of the independent parliamentary inquiry into stalking law reform, which I was honoured to chair in 2011-12, our panel—many of whom are here today—took evidence from a number of victims of stalking whose experiences shaped a great deal of our report. Equally, in bringing in my ten-minute rule Bill on coercive control last February, I was indebted to victims of that abuse who came forward and shared their experiences with me. It is no coincidence that both campaigns resulted in changes to the law. Indeed, what those two campaigns had in common was that each was informed by the victims and their families. I have long harboured the view that victims of crime do not get the support they deserve from our justice system.
One victim, Tracey Morgan, gave evidence to our stalking inquiry. She said that it is not right that perpetrators get rights, while victims get only codes and charters. Complaints and appeal processes are lengthy and complex, and victims are put off engaging with the justice system at all.
Harry Fletcher of the Digital Trust who, alongside Claire Waxman, drafted the original Bill presented to the Clerks, identified numerous examples of victims being badly let down by unenforceable codes, which he recalls from his time with the National Association of Probation Officers. Those examples include a victim who was not told that their offender had been released from prison following a conviction for violence; a victim who went to court to find that the impact statement was not in the Crown Prosecution Service bundle, despite the perpetrator being tried for a serious imprisonable offence; a case where the Parole Board was not aware of a victim’s view that she wanted the perpetrator excluded from her postcode because of real fears of repeat attacks; a case that took 18 months to go to court, which resulted in serious stress for the victim, who was not given any reason for the delay or multiple adjournments; a case where a victim arrived at court to find that she had to share a room with a witness for the defence and felt intimidated; numerous cases where personal information about new victims’ whereabouts was disclosed in court when the abuser was present; and a case where a victim was told not to be openly emotional in court where her son’s murderer was facing trial. She faced removal from court, believe it or not.
All those examples are indicative of a wider culture of neglect, and I say neglect because that is what it is—a neglect of the justice system’s duty to protect and support victims of crime. The Bill aims to put that right by placing a responsibility on the Secretary of State to publish a victims Bill of Rights, which would be applicable to cases arising in criminal and civil courts.
The Bill would ensure that victims have the right to accurate and timely information from all relevant agencies; notice of all court and legal proceedings relating to the victim’s perpetrator; and direct contact details of all criminal justice agencies and individuals involved in the proceedings. Crucially, the Bill sets out that children and vulnerable adults should be able to give evidence from a location away from court—I realise that that does happen in part—and that victims should have access to discreet waiting areas during all court proceedings. There is also a provision to ensure that victims would have the right to a case companion who would update the victim on the progress of their case. Young witnesses would also have access to registered intermediaries to help them understand court procedures.
One of the factors that troubled us most during the stalking inquiry was how frequently perpetrators were able to use the family and civil courts to make vexatious claims against their victims and, in so doing, to continue their harassment of the victim. That is why this Bill would give the judiciary in family and civil proceedings the power to disallow claims that can be shown to be an abuse of process.
Claire Waxman was one of the brave survivors of stalking who gave evidence, very bravely and fully, to our inquiry in 2011. Since then, she has mounted a forthright campaign to secure a stronger voice for victims called Voice4Victims. Ms Waxman’s campaign has gained the support of numerous victims’ organisations and charities. A survey conducted by the campaign in 2014 highlights just how frequently victims are let down by our present system. I want to share some of the survey’s findings with the House.
More than 50% of the victims surveyed rated all agencies “extremely poorly” in communication, with the Parole Board scoring the highest with 67%. Furthermore, 55% of victims were never informed about criminal injuries compensation; 44% were never given the opportunity to make a victim personal statement; and 64% of victims never received any advice or support on writing their victim personal statement. The words of the campaign’s founder, Claire Waxman, sum up the situation powerfully:
“As a stalking victim, I experienced first-hand a torrent of abuse and re-victimisation at the hands of our Criminal Justice System. I naively believed the system was there to help victims, while instead it compounds their trauma. It placed the rights of my stalker above my rights to be protected.”
The Bill has received cross-party support, as evidenced by the names of the supporters to whom I shall refer shortly. I believe that, like the stalking and domestic violence campaigns, this is an issue on which this House is united rather than divided. We want to see change, because we owe it to victims of crime who have suffered wrong and they deserve just and fair treatment. I commend the Bill to the House.
Question put and agreed to.
That Mr Elfyn Llwyd, Sir Edward Garnier, Zac Goldsmith, Sandra Osborne, Mr Barry Sheerman, John McDonnell, Annette Brooke, Caroline Lucas, Ms Margaret Ritchie, Hywel Williams, Jeremy Corbyn and Dr Julian Huppert present the Bill.
Mr Elfyn Llwyd accordingly presented the Bill.
Bill read the First time; to be read a Second time on Friday 27 March, and to be printed (Bill 181).
supply and appropriation (anticipation and adjustments) Bill
Motion made, and Question put forthwith (Standing Order No. 56), That the Bill be now read a Second time.
Question agreed to.
Bill accordingly read a Second time.
Question put forthwith, That the Bill be now read the Third time.
Question agreed to.
Bill accordingly read the Third time and passed.
corporation tax (northern Ireland) bill (PROGRAMME (no. 2))
That the Order of 27 January 2015 (Corporation Tax (Northern Ireland) Bill (Programme)) be varied as follows:
(1) Paragraphs (4) and (5) of that Order shall be omitted.
(2) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion, at today’s sitting, two hours after the commencement of proceedings on the motion for this order.
(3) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion, at today’s sitting, three hours after the commencement of proceedings on the motion for this order.—(Mr Gauke.)
Corporation Tax (Northern Ireland) Bill
Consideration of Bill, as amended in the Public Bill Committee.
Trading profits taxable at the Northern Ireland rate
I beg to move amendment 1, page 64, line 30, after “by”, insert—
“(a) an insurance company (within the meaning given by section 65 of FA 2012),
(b) a building society as defined by the Building Societies Act 1986, or
(c) a credit union registered under the Credit Unions (Northern Ireland) Order 1985 or the Industrial and Provident Societies Act (Northern Ireland) 1969.”
It will not be lost on hon. Members when they see an amendment to clause 1 at page 64, line 30 just how long a clause 1 we are dealing with, as we found in Committee. The Bill is essentially all in clause 1 and the other clauses provide the trimmings.
In Committee, I and other hon. Members raised a number of issues through probing amendments and in clause stand part discussions. One issue that I raised was the position of credit unions in Northern Ireland. As we heard on Second Reading and as the Financial Secretary to the Treasury stressed in Committee, the Government, with the agreement of the parties in Northern Ireland, have been at pains to make sure that any move to devolve to the Assembly powers in respect of corporation tax would not invite any large artificial or contrived shifts by large parts of the financial services sector. Nobody has been in the market for making sure that banks and other major financial services businesses could in any way benefit from surfing on to the devolved corporation tax rate that would be available to Northern Ireland under the Bill. Everybody is ad idem on that.
There is, however, a concern that the exclusion of the financial services sector at large could lead to inadvertent discrimination against credit unions or mutual building societies that are wholly and solely based in Northern Ireland.
Will the hon. Gentleman take this opportunity to put on the record the very valuable contribution made by credit unions and mutual societies in Northern Ireland, which differs from that in the rest of the UK? In particular, can he give an idea of the number of savers and those who make use of credit unions and mutual societies?
Those are points that I shall touch on in my remarks, and I am sure that other right hon. and hon. Members will do so as well. By way of response to the hon. Lady, I make the point that there have been efforts over a number of years. When I chaired the Assembly’s Committee for Enterprise, Trade and Investment, we conducted an inquiry into credit unions in Northern Ireland, which have a very large membership base and a very strong savings base, far beyond those of credit unions here, which by comparison are merely developing.
The fact is that credit unions in Northern Ireland have been precluded from having as broad a range of services to offer their members, unlike credit unions here, and the key to broadening the range of services, of course, was to have credit unions in Northern Ireland regulated by the Financial Services Authority—subsequently the Financial Conduct Authority and the Prudential Regulation Authority.
However, while credit unions in Northern Ireland will be regulated from London institutions for those financial services, they still come under a devolved legislative window. That goes back to the Northern Ireland Act 1998, which deliberately ousted credit unions from the reserved power in relation to financial services through specific mention of the fact that devolution would include the Credit Unions (Northern Ireland) Order 1985. Credit unions are therefore in a sort of dual-control legislative and regulatory environment; they are registered under devolved legislation but regulated under financial services legislation of this Parliament, and rightly so.
However, that leads to some quirks and bumps in interpretation. A credit union Bill that would address some of those issues seems to be held up somewhere in the Assembly processes. In those circumstances credit unions are particularly concerned that they might become unintended casualties of some of the restrictions and exceptions that are rightly being introduced with the devolution of corporate tax by the Government and with the agreement of the parties in the Assembly.
Does the hon. Gentleman—indeed my hon. Friend—accept that in addition to that being grossly unfair to credit unions, mutuals such as the Progressive building society, which employs almost 200 people and operates solely in Northern Ireland, in fact its back office applies only to Northern Ireland, could end up being penalised by this legislation?
The hon. Gentleman is exactly right. I have to be honest that the slightly left-handed amendment I tabled in Committee could have introduced its own difficulties, as the Minister pointed out at the time. This less left-handed—I apologise to any cuiteogs in the House—amendment addresses the salient point in respect of credit unions and also takes in for the first time a point that I had overlooked in Committee: the position of a mutual building society based wholly and solely in Northern Ireland, such as the Progressive. This wider amendment, which thankfully has been seconded by the hon. Member for Belfast East (Naomi Long), is therefore designed to cater to both circumstances.
It is important to recognise—I think that the hon. Gentleman will agree—that the point of that exclusion was to prevent the kind of brass-plating whereby companies simply moved their headquarters to Northern Ireland without moving any economic activity or jobs. That is not the case with either credit unions or mutuals such as the Progressive, because they are based in Northern Ireland and work there, creating employment and investment.
I take that point fully. That is why I am so glad that the hon. Member has seconded the amendment and spoken so strongly to its main purpose.
I can assure the hon. Gentleman that my right hon. and hon. Friends support his amendment, and I trust that the House will accept it.
I thank the hon. Gentleman for that support and endorsement and hope that the House will today accept at least the spirit, logic and compelling sense of the amendment.
As I said in my opening remarks, there is no argument from these Benches, or indeed from any of the parties in Northern Ireland, whether or not they are in the Executive or the Assembly, that large-scale financial services should be able to shift profits or any of their activities simply to net benefit from devolved corporation tax provisions. However, we want to ensure that legitimate, bona fide, not-for-profit mutualised activity is not penalised as a result of the restrictions that are rightly being included.
Credit unions and mutual building societies such as the Progressive have long-standing histories, have done nothing speculative, did not need any Government bail-out and had no questions about their books, or about anything else, so there is nothing untoward, whiffy or sniffy about any of their activities, because they were solid, prudent and sensible. There is absolutely no question but that the parties would want to see such organisations penalised and unable to benefit from the same sort of devolved tax rate that would be available to small and medium-sized enterprises. When we look at the scale of the individual credit unions—remember that they are regulated individually, not as some sort of conglomerate activity—we see that the idea that they would find themselves caught, for corporation tax purposes, in the same category as a large bank, for instance, is absolute nonsense.
However, there is a bit of a rub in this. I know that the credit unions and others have listened carefully to our proceedings on the Bill. For instance, on Second Reading the point was made that the provisions on some classes of back offices, even those working for financial services companies, could qualify for the devolved tax rate, and there seemed to be an inference that some of those lines had been drawn with particular operations in mind. For instance, Citigroup was mentioned on Second Reading, and it was suggested that we should all be assured that its jobs are protected and that that work would be subject to the devolved tax rate. That leads to a situation in which companies such as credit unions and the Progressive building society are saying, “Well, if the back office operations in Northern Ireland can qualify for the devolved tax rate, which obviously we hope will be lower, why should the back office jobs of the Progressive Building Society not qualify?”
The Progressive building society is being advised by Her Majesty’s Revenue and Customs that only 5% of its activity might qualify for the devolved tax rate, and it has been given no reason for that, other than that it seems to be the multiplier figure in the Bill. For no reason that anyone can understand or source, it has been told that only 5% of its activity might qualify. The Government are telling other financial services that they want them to work as hard as possible to maintain a high street presence, which the Progressive building society has done, including new investment in my constituency. It just seems bizarre that it should be penalised without a thought. That is why so many hon. Members are here to support the amendment.
Does that not really take the biscuit when the Progressive is told by the Treasury that only 5% of its back office will apply for an exemption? Its staff are scratching their heads, wondering what part of their work does not apply to Northern Ireland and to activity solely related to Northern Ireland.
Exactly. I take the hon. Gentleman’s point. There is no known rational basis for it. In circumstances in which we are talking about arrangements aimed at preventing any artifice on the part of companies, just coming up with such an arbitrary figure does not particularly help. In circumstances in which we see that larger firms can be advised and assured that their existing operations of large and hopefully growing scope will be covered by the new devolved tax rate and will not be caught in the exclusion of financial services, it seems strange that the financial services entities that are not for profit, which are not taking money out of Northern Ireland but recirculating it into the local economy, would be penalised.
I have been watching the Government Front Bench and I know that the Secretary of State for Northern Ireland, the Minister of State and the Financial Secretary have been listening very carefully to the hon. Gentleman, as they should. It would be helpful to us if any one of them intervened to explain how on earth only 5% of the back office work of the Progressive would qualify for an exemption under the Bill. I am sure that the hon. Gentleman would be delighted if they did so.
I would be absolutely delighted. I would gladly accommodate that intervention, and not just in one instalment—I am prepared to take it 5% at a time if the Minister is willing.
Such is the invitation, I cannot refuse. This is a somewhat complex matter. I can assure hon. Members that I will set out the thinking behind the Bill’s provisions on financial services in terms of its principles and, in particular, the application of the 5% test relating to back-office functions. Hon. Members are making perfectly reasonable points, but rather than attempt to summarise a complex issue that needs to be put into context, may I ask them to be a little patient, and I will be keen to give a proper answer towards the end of the debate?
We await with bated breath the Minister’s great revelations and technical epiphanies.
Whatever the Financial Secretary says about the complex dimensions of this, there is nothing complex about the simple logic and justice of the proposition that wholly and solely-owned mutuals and credit unions should be able to benefit from a devolved tax rate.
Is my hon. Friend aware that the Assembly’s Committee for Enterprise, Trade and Investment, which he used to chair, is also supportive of the stance that he and other Northern Ireland Members are taking? It believes that mutual societies and credit unions based in Northern Ireland should be included within the Bill and able to avail themselves of the same reduced rates of corporation tax as other Northern Ireland-based organisations.
It is indeed the case that the Committee for Enterprise, Trade and Investment, through its chair, our party colleague Patsy McGlone, made a written representation to the Secretary of State that has been circulated to all Northern Ireland MPs on behalf of the Committee and is supported by all the parties on it. During my time on the Committee, all the parties worked to help navigate through the complexities of how we could alter the regulatory footing for credit unions in Northern Ireland so that they could offer more services, without abandoning the rightful devolved interest in relation to credit unions. The Committee’s representations have been endorsed with backing vocals from the Committee on Finance and Personnel in the form of a letter from its chairman, Daithí McKay. Again, the letter is on behalf of the whole Committee and supported by all the parties on it.
The hon. Gentleman alluded to this at the outset, but it might be beneficial to remind the Minister of the deep penetration of credit unions within Northern Ireland. There is a quantum of difference in relation to England, Scotland and Wales. There are tens of thousands of members of credit unions across Northern Ireland; they are an integral part of society and have been for decades.
I fully take the hon. Gentleman’s point. That was recently made apparent within the precincts of this Parliament when a delegation from the Irish League of Credit Unions gave evidence to the all-party group on credit unions, chaired by the hon. Member for Worcester (Mr Walker). The league pointed out that nearly 450,000 credit union members are accredited to it in Northern Ireland. The credit unions in Northern Ireland have total assets of over £1.2 billion.
Credit unions do not pay corporation tax on their lending activity—perhaps that was one of the misdirections in my original amendment in Committee—but they do pay it on their investments. There are issues about how the regulators have treated that in limiting some of the investments that they are able to make, although my conversations with regulators suggest that we may be turning a corner of understanding and a slightly more relaxed interpretation may be on the way. In 2012, credit unions in Northern Ireland paid £3.75 million in corporation tax on their investments. The three credit unions in my constituency alone pay between them over £0.5 million in corporation tax on their investments. That is a significant amount of money to them given that it purely goes back to their members in dividend payments. It is not going off to make profits by being speculatively invested in property or in any dubious market activities; it is staying very much within the traditional meat and drink of credit union activity, and rightly so. On that basis, it would be perverse to treat credit unions as being in the same category as a financial services corporation that may try to move in from London, Edinburgh or elsewhere in order to artificially avail itself of a devolved corporation tax rate.
We await the Minister’s more detailed explanation and context setting, but he said in Committee, on credit unions paying corporation tax on investment income and capital gains:
“As credit unions do not have a trade of lending money for corporation tax purposes, they are therefore neither explicitly included nor excluded from the Northern Ireland rate and as such are in no worse a position because of it.”––[Official Report, Corporation Tax (Northern Ireland) Public Bill Committee, 5 February 2015; c. 51.]
Can the hon. Gentleman help the House in dealing with the Minister’s point?
It was a bit of an enigma to some of us on the Committee. Although we asked the Minister about it, not much light was cast on the limbo status of credit unions whereby they are neither included nor excluded. Subsequently, I asked him about the power in clause 1, page 66, to amend the definitions of “excluded trade” or “excluded activity” or to make provision about the meaning of “back office activities”. That gives the Treasury a fair degree of leeway in making subsequent adjustments. I asked him whether that implied that some accommodation could be made regarding the particular sensitivities around credit unions—and now I add Northern Ireland-based mutuals, as we are all joined in making that case. I hope that he will be able to shed some light on that. If he can assure us that we are all working under a misapprehension and that our concerns can be allayed, then so much the better, but people want to see it clearly in the Bill and do not know why it should not be there.
The Northern Ireland credit unions fall within the legislative remit of the Assembly in respect of their registration and some of their activities, so it would be bizarre if it was denied the specific power to set their corporation tax rate in the same way that it would for SMEs, for example.
As credit unions are well embedded into the communities in which they are based, it just does not seem fair that they should be subjected to a corporation tax rate that is very different from the rate for the businesses they work alongside in those communities and neighbourhoods.
As we identify in the amendment, we want to extend the same consideration to the Progressive building society, for instance. Ministers may suggest that designing the clause to suit the particular circumstances of the Progressive building society would create the danger that we might somehow admit all sorts of others to the benefits of doing such activities. However, just as the details of regulations specify a threshold of business for small and medium-sized enterprises, the amount of employment, and the percentage of work time and expenses in Northern Ireland as opposed to elsewhere in the UK, so other measures could easily be built in to protect building societies and mutuals that wholly, solely or at least very largely base or centre their activities in Northern Ireland, rather than organisations that operate more widely and might artificially skew some operations to the north of Ireland to benefit from the corporation tax rates. If that is a concern or issue for Ministers, it could easily be accommodated.
It is clear that there is broad support on this issue from the parties in this House and from the wider range of parties in the Northern Ireland Assembly. Nobody intended, assumed or understood that credit unions and legitimate, bona fide locally based mutuals, such as the Progressive, would be caught in the Bill’s preclusions. We are seeking targeted and focused exceptions with the aim of ensuring that credit unions in Northern Ireland do not unduly pay corporation tax.
The amendment is an attempt by the parties to recognise that, unlike credit unions in Great Britain, which have been able to benefit from Government finance in the form of growth, development and modernisation funds over the years, credit unions in Northern Ireland have not benefited from direct funding. Credit unions in Northern Ireland are adjusting to the new regulatory obligations under the Financial Conduct Authority and the Prudential Regulation Authority, which have created issues of corporate governance, training and IT standards, but none of that has been funded or supported in any way. One compensation that we might, with due diligence, seek to extend to them would be to make sure that they are at least exempted from the higher rate of corporation tax that is meant to apply to big corporates and businesses in financial services. That is the salient point of the amendment.
I hope that the Financial Secretary will acknowledge that amendment 1 would not trigger any of the difficulties that he said would have arisen from the original amendment in Committee. The scope of this amendment extends beyond credit unions to take in other legitimate mutual organisations, such as the Progressive building society—in fact, that is the only one I can distinctly identify—and that is included for a purpose. I hope that the Financial Secretary and the Secretary of State, who has received representations from Committees of the Assembly, will show some understanding. I look forward to hearing any explanation but also, more importantly, any assurances about how the Government intend to respond to such issues as the Bill is taken forward and as its various rule-making powers are operated in future.
As we have heard, the amendment tabled by the hon. Members for Foyle (Mark Durkan) and for Belfast East (Naomi Long) aims to bring otherwise excluded trading profits of building societies and credit unions within the scope of the Northern Ireland rate of corporation tax. As it covers two different areas, I will respond to each in turn.
It may be helpful to remind the House that the design of the Northern Ireland regime has been guided by a set of principles agreed between the Northern Ireland Executive and the UK Government. The principles were agreed in the joint ministerial working group process in 2012. Once again, I am grateful to colleagues in the Executive for their co-operation and their constructive approach in those discussions.
In brief, the regime must be attractive to businesses, including in having only proportionate administrative burdens; it must encourage genuine economic activity in Northern Ireland; the costs for the Northern Ireland Executive must be proportionate and kept to a minimum; and the regime must satisfy state aid rules. I mention those principles to provide the background to why we designed the regime in the way we did, in keeping with the approach agreed with the Executive. I understand the intent behind the amendment, but its effect could be to undermine those principles and create wider risks to the regime.
Let me respond to the points raised about building societies. As we know, to limit the risk of profit shifting from the rest of the UK, the Bill excludes profits from certain highly mobile activities and trades from the Northern Ireland corporation tax rate. Chapter 17 in clause 1 lists those excluded activities, which include lending and investment. Excluding those activities is important because it helps to target the regime at only genuinely employment-generating activity in Northern Ireland. It also limits the risk that Northern Ireland ends up with a significant increase in the cut to the block grant, without any genuine economic activity. I believe that all Members will agree with such a principle, which was supported in our constructive and considered debates on Second Reading and in Committee.
Colleagues from across the House agreed that the design of the regime must limit incentives and opportunities for artificial profit shifting, as I believe the proposals do. Hon. Members will see that the Bill does not distinguish between different types of industry or business—for example, it does not exclude financial services, banking or building societies—but the nature of the excluded trades and activities means that they are those predominantly carried out by the financial sector, including building societies. Excluding trades and activities, rather than types of business, ensures that the rules do not have an adverse impact on a particular type of business structure; the focus is on the mobility of the activity.
The mobility of profits for building societies is similar to that for banks, and building societies and banks both carry out similar activities, as defined in chapter 17. It is therefore hard to argue that building societies should be treated differently from other organisations, such as banks, that carry out the very same types of activity. To do so could undermine the principles that I have outlined, particularly the principle of limiting profit shifting. Furthermore, there is a risk that the amendment would provide building societies with a competitive advantage over banks, which was never the intention of the reforms.
Similarly, to treat building societies differently on the basis of whether all or only some their activity is in Northern Ireland could lead to an uneven playing field. It might provide opportunities for companies to profit shift—for example, by setting up subsidiaries in Northern Ireland without bringing additional private sector employment.
In line with the objective of attracting genuine growth and employment, we will, however, allow companies with certain excluded trades and activities the option to make a one-off election for their back-office functions to qualify for the Northern Ireland rate. Not only do those activities not pose the same risk of profit shifting as the excluded activities, but they provide a fertile area of employment in Northern Ireland, so we take the view that it is right to allow them within the regime.
Such activities are generally to support other profit-making activities, rather than to be directly profit making in themselves. Therefore, we will compute a notional profit for the activities, which will be chargeable at the Northern Ireland rate. It will be calculated by applying a 5% mark-up to the costs of the Northern Ireland back-office activity. For example, if a company has eligible costs of £1 million from back-office activities, £50,000 of its profits would be chargeable at the Northern Ireland rate. That levels the playing field with companies that provide back-office functions through stand-alone companies—in other words, companies whose back-office functions are not part of an excluded trade. Such stand-alone companies will have their profits charged at the Northern Ireland rate because they will be carrying out a non-excluded trade—usually that of providing services. I believe that that is the fairest approach. It places all companies with similar lending and investing activities on a similar footing, while supporting the services sector and minimising the risk of profit shifting.
Let me turn to the part of the amendment that deals with credit unions. The hon. Gentleman tabled a similar amendment in Committee. As I said then, although I share his support for credit unions, I believe that the amendment is unnecessary. The amendment seeks to change the part of the Bill that excludes certain financial trades and activities, and to bring credit unions within the scope of the Northern Ireland corporation tax rate.
The Bill does not explicitly include or exclude credit unions from the Northern Ireland rate, as has been mentioned and as I said in Committee. That is because the part of the Bill that excludes lending activity is not relevant to credit unions. Credit unions already benefit from special corporation tax rules and those will continue to apply once the Northern Ireland regime and rate commence. Under those special rules, when a credit union makes a loan to its members the related income is removed from the trading income charge, so credit unions do not pay corporation tax on loan interest that is received from members. Credit unions are not permitted to make loans to non-members. Therefore, they are subject to corporation tax only on capital gains and income arising from the investment of surplus funds, as the hon. Gentleman acknowledged.
Those types of income are wholly outside the Northern Ireland regime. That is because a key part of the regime is that it applies only to trading profits, and not to investment income or capital gains. That design feature was agreed between the Government and the Northern Ireland Executive. Therefore, such activity is unaffected by the new rules and the new rate. The fact that trades and trading activities relating to lending and investing are excluded is not relevant to credit unions. Changing the rules to bring the income of credit unions within the trading income charge would almost certainly have the perverse effect of increasing the tax that credit unions pay, because their trading income would then fall within the corporation tax net, which it does not currently.
I hope that hon. Members will agree that the amendment is unnecessary in relation to credit unions. As for building societies, it would create risks of profit shifting and of an unlevel playing field across businesses with similar activities. I hope that hon. Members agree that that would be unfair and would not fall within the guiding principles of the Northern Ireland regime.
Many people save with credit unions in Northern Ireland and the credit unions are assisted valiantly by many teams of volunteers. Will the Financial Secretary kindly give a reassurance—a guarantee, in fact—that if the Bill goes through unamended and the amendment tabled by the hon. Member for Foyle (Mark Durkan), which we all support, not just the parties, but even Independent Members, is not agreed to, credit unions and the Progressive mutual society will not be adversely affected when it becomes legislation?
I can give that reassurance. They will not be affected by the legislation. Credit unions have two types of income on which corporation tax could be charged. There is no corporation tax charge on their trading income, as I have set out, and their investment income will fall outside the Northern Ireland regime, as does investment income for every other business. In that sense, credit unions will be unaffected. I hope that the hon. Lady is reassured. If building societies carry out excluded trades, they will be treated as they are currently and the Northern Ireland regime will not apply. That is based on the principles that were agreed with the Northern Ireland Executive. The Northern Ireland corporation tax regime is about trading profits. If something is not a trading profit, it will not fall within the Northern Ireland regime. We are applying that consistently. As it happens, credit unions do not pay corporation tax on their trading profits anyway, so they will not be adversely affected.
I am genuinely very grateful to the Financial Secretary. He has categorically assured the House and all those who will read the Hansard report of this debate that credit unions and the Progressive mutual society will not be adversely affected by the Bill if it goes through unamended. Will he sum up how they will benefit from the legislation? It is nice to know that they will not be negatively affected, but how will they benefit from the legislation? There is an unfairness. Northern Ireland is a very small jurisdiction. It is ridiculous that banks down the road will benefit from the Bill, but that credit unions that have served all sides of the community for years and years will not benefit from it. Let him stand up and assure credit unions that they will benefit. That would be very helpful.
The first point to make is that there are certain excluded activities. Lending and investment are excluded. Whether the entity concerned is a bank or a building society, if the activity is excluded, it is excluded. There is therefore a level playing field. Secondly, we are making provision for back-office services. It will be possible for a calculation to be made on the profit that is attributable to back-office functions by applying a 5% mark-up to the cost of those back-office functions. The lower corporation tax rate in Northern Ireland—assuming that it is lower—will apply to that. That will be of benefit to institutions, including building societies, in Northern Ireland.
I would also make the wider point, which has been made by the Northern Ireland Executive on many occasions, that the ability to set corporation tax rates will be good for the Northern Ireland economy. That is why the Northern Ireland Executive want the power. What is good for the Northern Ireland economy will presumably benefit institutions based in Northern Ireland, whether they be credit unions or building societies. That is the case that the Northern Ireland Executive have made to us.
When the Northern Ireland regime was designed, it was focused on trading income for very good reasons. Over the course of the debates in Committee, there has been a wide consensus that it is correct that it is focused on trading income. It would not be consistent with that approach for me to accept the amendment. I therefore urge the hon. Gentleman to withdraw it. If he presses it to the vote, I will advise Government Members to oppose it. I understand the widespread view, which has been articulated strongly this afternoon, on the importance of the credit union sector in Northern Ireland, but accepting the amendment would be a mistaken approach.
I will give way one last time if the hon. Gentleman wants me to, or perhaps he wishes to speak once I have sat down.
I give way.
Will the Minister indicate whether the powers in proposed new sections 357XH and 357XI of the Corporation Tax Act 2010, which appear on page 66 of the Bill, might in any way address in practice some of the concerns that we have voiced, as he seemed to hint in Committee?
I return to the point that I have made about the fundamental structure or principles behind the devolution of corporation tax rate-setting powers to Northern Ireland. I have given a fairly lengthy response, because I thought that it was appropriate to put in context the 5% computation in respect of back-office functions. There is the ability to come back to that. As hon. Members are aware, the OECD is looking, as part of the base erosion and profit-shifting process, at how much profit can be attributed to back-office functions. If memory serves, it is looking at a range of 2% to 5%, so we are at the upper end of that. There is the ability to make adjustments if there is evidence that there should be a higher mark-up for back-office functions. There is flexibility on that point if the evidence is presented to us and a strong case is made. However, we believe that 5% is the right level.
With that explanation, I hope that the hon. Gentleman can be persuaded to withdraw his amendment. If not, we will oppose it and I will advise my colleagues to vote against it.
I am disappointed by the tone struck by the Minister, because Members present—from all parties and none—have made it clear that we are not here to beat up the Government about this issue but are here in a spirit of understanding from parties across the Executive and Assembly. The Minister has called the Executive in aid several times, and he said that negotiations between the Treasury and the Executive have been clear about focusing on trading activities. Nobody—officials or Ministers—who conducted those negotiations on the part of the Executive intended to characterise credit unions and the like of the Progressive building society as trading operations, because they do not trade for profit—they are not conventional commercial trading entities in that sense. One, as a mutual building society, is clearly putting all its money back into its operations, and it all goes into Northern Ireland—none of it is speculatively streamed elsewhere. None of it has been lost, and no cost has fallen on the Government purse in any way.
Similarly, credit unions are not in the business of trading as such, and there is no way that they would allow the provision in the Bill to be abused by anybody else to shift activities or profits. Under credit union legislation, credit unions in Northern Ireland must show a common bond that must be wholly within Northern Ireland. There will therefore be no question of abuse or of stuff being shifted or anything else. The argument that the Minister tried to make for building society considerations would not apply to credit unions—certainly not to those that operate under the Credit Unions (Northern Ireland) Order 1985 or any other Northern Ireland-specific legislation that might come through the Assembly in future.
The Minister made a number of points about definitional standards that have been used. He portrayed the Treasury’s understanding of those terms, but as I have indicated, I have no sense that that was the working understanding or definitive intent of the Executive. After all, letters that have come from two cross-party Assembly Committees do not seem to have met with any cautionary advice from their respective Departments, or by Ministers saying, “Oh no, don’t upset this; there is an understanding and you will upset a delicate arrangement. You’ll open the floodgates and there will be all sorts of unintended consequences.” Everybody seems to be on board with the spirit of the amendment, just as they are largely on board with the spirit of devolving corporation tax for certain businesses. Nobody has an issue with the concept that the Assembly will have control over the rates of corporation tax for qualifying businesses, and that the Treasury will remain in control over all the rules on that and other things such as allowances. People seem to broadly agree with that architecture.
Where parties are concerned about the detail it is because we want credit unions and Northern Ireland-based mutuals not to be treated in the same way as the corporate and possibly multinational financial services conglomerate that the Minister seems to have in mind—the kind of people he thinks might suspiciously or dubiously shift activities. That does not apply to wholly grown indigenous entities that are rooted in the community.
The investment activities of credit unions are not for any speculative purposes but are to ensure that credit unions—on the basis of the same thrift that they encourage for their members—are able to show thrift and due diligence at a corporate level, and ensure that they are in a strong position to assist their members. Credit unions in Northern Ireland do not assist their members just to save; they also have a good working track record in assisting people with problems such as debt. That is currently an issue, perhaps because regulators do not want credit unions to assist people with debt in the way they have sometimes done. Unlike advisers who perhaps assist people in debt by creating circumstances in which they walk away from the debt and get discharged under various agreements, credit unions help people to repay that debt. They are in a stronger position to do that when they rely not just on the savings of their members but on sound investments. Those sound investments go back into the workings of the credit unions, and ensure that they are able to meet the new obligations and regulatory standards for which they are not getting any financial support, unlike their counterparts in Great Britain. It seems only fair and sensible to allow them that consideration in terms of corporation tax.
The Minister talks about credit unions as trading activities, but let us compare them with activities of a similar size—with small and medium-sized enterprises—in Northern Ireland that operate in the same neighbourhoods and district centres. Why should credit unions be in a different category from neighbouring trading businesses? They do not regard themselves as trading in that conventional sense, so why should they be penalised and treated differently?
If the Minister does not want us to put the amendment to the vote, will he at least indicate that he is prepared to listen not just to what we are saying in the House, but to future conversations in the Executive? After this debate and discussions in Assembly Committees, I think the Executive will make it clear that they do not like being called in aid in the way the Minister did when he lined them up behind his arguments, which I do not believe Executive Ministers endorse.
Will the Minister look at the provision on powers on page 66 of the Bill? It states:
“The Treasury may by regulations amend this Chapter so as to alter the meaning of ‘excluded trade’ or ‘excluded activity’ for the purposes of this Part.
(2) Regulations under this section may only be made if a draft of the statutory instrument containing them has been laid before, and approved by a resolution of, the House of Commons.
(3) Regulations under this section—
(a )may make different provision for different purposes;—”
that is essentially what we are saying—
“(b) may make incidental, supplemental, consequential and transitional provision and savings.”
New section 357XI continues:
“(1) The Treasury may by regulations make provision about the meaning of ‘back-office activities’ for the purposes of this Part.
(2) Regulations under this section may, in particular—
(a) specify activities that are, or are not, back-office activities, or
(b) specify circumstances in which activities are, or are not, to be regarded as back-office activities.
(3)Regulations under this section—
(a) may make different provision for different purposes;
(b) may make incidental, supplemental, consequential and transitional provision and savings.”
If the Treasury is accruing to itself the power to make adjustments, and to interpret and respond to behavioural issues and practices to anticipate possible interpretative challenges in the future, it must show that it is willing to listen to one sensible and compelling interpretive issue that has arisen.
We have identified a clear wrinkle in the Bill that is not intended by parties in the Executive or the Assembly at large, or by independent Members from Northern Ireland in this House. Understandably, given the way that the Bill was scrambled forward—we know the issue was there, hung around and went forward and back, and we are legislating in relatively short order—it takes time to give the issue more consideration. If the Government say that because some concerns about interpretive openings might arise they are not minded to accept the amendment, perhaps they will assure us that they will listen to the points that have been made.
The Secretary of State has heard from the Assembly Committees. I do not know what she intends to write to them, but if she writes in the same terms as those in which the Minister addressed the House, by quoting the Executive, she will find that a strong argument comes back. The parties will be saying, “How dare you quote us against our own representations? We have no part of it, and that was not what we understood or intended when we negotiated”
The Bill is based on the principle of separating trading activities from investment activities, and for a very good reason to do with profit-shifting risks and so on. The hon. Gentleman rightly points out that there is the capability to make amendments in future to regulatory powers and so on. It is not for me to bind the next Parliament, but those powers do exist so there is the ability to look at arguments. I hope he finds that reassuring. The only point I would make, and it is the point I made both in Committee and today, is that there is a very good reason, accepted by all, for a divide between trading profits and investment profits. If we were to break that rule—a principle that runs through all legislation here—it would raise a number of important questions on where to draw the line. I am sure he recognises that, but I had to make that point.
I take that point from the Minister; nevertheless, the provisions in the Bill that I just quoted allow the Treasury to draw and redraw that line in future. There is no argument in principle with that, even though we know that it may be arbitrary and capricious as well. It may well be the subject of representations when it happens, but we are asking for the spirit of that power to be used and even reflected in the Bill, if possible.
The point we need to go back to is that the Minister relies on the definition of trading activity. People will find it hard to see that the Government can, for a good and understandable reason, make sure—and want to declare on Second Reading—that something like the operations of Citigroup in the Titanic Quarter in Belfast are catered for. In spite of the fact that we are talking about international financial services activity, that will come under the devolved corporation tax rate, but somehow, under this handcuff the Minister is creating in the definition of trading activities, credit unions and mutual building societies such as the Progressive cannot be. That is what people see as disproportionate, artificial and unfair. The Assembly clearly wants to know that, when it has the power to set a corporation tax rate for small and medium-sized enterprises and has legislative power over credit unions, credit unions will pay the devolved rate of corporation tax on their investment income. That seems fair and reasonable in the overall scheme of things.
I hope the credit unions in Northern Ireland will continue to thrive and grow, and no doubt they will. However, at no point is the amount of money they will be paying in corporation tax or the amount of relief they will receive from the corporation tax rate going to bust the Assembly’s or the Exchequer’s budget. We are talking about clear, definable, workable and absorbable margins here. The money would be used for good and understandable purposes, and never sold for profit or given away in gross bonuses or anything else like that. The same applies in respect of the Progressive building society.
The Minister said that if I pressed the amendment to a Division he would vote against it. I do not want to create a complete lock-in on the issue. I do not want the Government to find themselves locked in on an argument they cannot climb down from. I just encourage the Secretary of State and the Financial Secretary, who are both here listening to the debate, to stay open not just to the arguments they have heard from me and other hon. Members today, but to listen very closely to the arguments they will be hearing from the Executive, the Assembly and the credit union sector in Northern Ireland—not just the credit unions that are members of the Irish League of Credit Unions, but the Ulster Federation of Credit Unions and other credit unions too.
The Minister has heard the arguments, although he has perhaps not listened to them as well as I would have wanted him to. I do not accept the points he has made in supposed rebuttal, because I do not think they stand up to the facts. I also do not think they stand up to some of the terminology used in the Bill. After all, the Minister on a previous occasion, as quoted by the right hon. Member for Belfast North (Mr Dodds), said that in the Bill as drafted they are neither included nor excluded from the devolved corporation tax rate. It seems very clear from what the Minister is saying today that for the purposes of the corporation tax they do pay on their investment income, they will definitely be excluded from the devolved corporation tax rate. The Minister seems to have left us in very little doubt about that, unless he wants to indicate that, under the powers outlined on page 66, that may be subject to other interpretation in the future. That is something I would certainly encourage if the Government are not prepared to accept my amendment, or any other amendment that I hope will be tabled in another place.
That said, I have no wish to press my amendment to a Division at this point, because I do not want to put people in that sort of difficulty. I want the Government to move on this, and I will not give the Government an excuse to embed their position. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
I beg to move, That the Bill be now read the Third time.
I would like to start by noting the immense amount of hard work done by my right hon. Friend the Secretary of State for Northern Ireland and, before her, my right hon. Friend the Member for North Shropshire (Mr Paterson) in getting this policy to where it is today. The parties of Northern Ireland are united in calling for this measure, saying that
“Securing the power to lower corporation tax is a key priority for the Executive to promote the growth of the local community.”
I welcome the ongoing co-operation of colleagues in the Northern Ireland Executive. I thank all hon. Members who have contributed constructively and positively to the scrutiny of the Bill, even if we have not managed to reach complete agreement this afternoon. We have now reached the final stage of this House’s consideration of the Corporation Tax (Northern Ireland) Bill. I have been pleased by the wide-ranging and informed debate we have had.
This measure will allow the Northern Ireland Executive and the Northern Ireland Assembly to set a different rate of corporation tax from the rest of the UK for most types of trading profits arising in Northern Ireland. The tax base, including reliefs and exemptions, will remain under the control of the UK Government. The earliest financial year for which Northern Ireland could have its own rate is 2017. This allows time for businesses and agents to become familiar with the new rules. The power will enable the Executive to encourage genuine investment that will create jobs and growth, meeting the shared goal of the UK Government and the Executive of rebalancing the Northern Ireland economy away from our dependence on the public sector.
I would like briefly to remind hon. Members of the aim of this policy and the key measures within the Bill. As my right hon. Friend the Chancellor said in the autumn statement:
“we recognise the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland.”—[Official Report, 3 December 2014; Vol. 589, c. 314.]
These include: its land border with the very low corporation tax environment in the Republic of Ireland; the fact that Northern Ireland is more dependent on the public sector than most other parts of the UK—estimates of the extent of this dependence vary, but it is generally accepted that about 30% work in the public sector, compared with about 20% in the rest of the UK; the claimant count in Northern Ireland in October 2014 was 5.9% compared to 2.8% in the UK as a whole, and the unemployment rates are reducing more slowly than the rest of the UK; and economic prosperity—GVA per capita—is persistently some 20% below the UK average and has been for a number of decades. To a large degree, many of these issues are the legacy of the troubles.
Devolving corporation tax recognises these unique challenges. The Northern Ireland regime has been carefully designed to enable the Executive to encourage genuine investment that will create jobs and growth, while minimising opportunities for avoidance and profit shifting. It balances this with the need to keep the costs of a reduced rate proportionate, both for the Executive and in relation to any additional administrative burdens for businesses. The design of the regime builds on the principles agreed in 2012 by the joint ministerial working group, which included Ministers from the Treasury, the Northern Ireland Office and the Northern Ireland Executive. In essence, companies trading in Northern Ireland will attract a Northern Ireland rate on their qualifying trading profits but continue to pay the UK rate on profits from non-trading activities, which do not generate jobs or economic growth in the same way.
Similarly, the regime does not extend to financial trades such as lending, leasing and reinsurance, as they offer significant scope for profit shifting without the benefits of substantial new jobs. The regime does not provide opportunities for brass plating, but the policy recognises the genuine growth and employment potential for Northern Ireland offered by back-office operations. Companies with financial trades not covered by the Northern Ireland regime may make a one-off election in respect of profits, determined by mark-up, on the back-office functions of those trades to qualify for the Northern Ireland regime.
I thank my hon. Friend for his hard work in taking the Bill through the House. It is important for Northern Ireland and its unique circumstances, but does he agree that there will probably be lessons for the rest of the UK to learn from Northern Ireland about further reducing corporation tax to make our country even more competitive?
My hon. Friend raises an important point. We are in an era when countries are generally reducing corporation tax rates. In this Parliament, we have reduced our rate from 28% to 21% and are about to reduce it further to 20%, although some advocate that we reverse some of that progress. I also note that the Indian Government set out a plan at the weekend to reduce their corporation tax rates. Certainly, I think that the whole UK will be watching the experience in Northern Ireland very closely to see what economic benefits arise as a consequence of a reduced rate.
In case we are building up false hope, I would be grateful if the Minister made it clear that reducing the rate of corporation tax—if that is what the Northern Ireland Executive decides to do in 2017 or thereafter—on its own will not rebalance the Northern Ireland economy or guarantee the creation of one extra job. We need a range of measures that combine to rebalance the economy.
The hon. Lady makes an important point, although it is for the Northern Ireland Executive to judge how to proceed. In the UK, our reductions in corporation tax have been an important part of our long-term economic plan, but they have not been the only part, and I know that the Northern Ireland Executive will want to do everything possible, in addition to this power, to put in place the conditions for economic growth. One should not pretend that this in isolation solves every problem. None the less it will be a very useful additional power for the Northern Ireland Executive, and, as my hon. Friend the Member for Macclesfield (David Rutley) said, there will be considerable interest elsewhere in how the policy develops and the benefits that accrue as a consequence.
To reduce the administrative burdens on SMEs, a special regime will be put in place. A simple in/out test will mean that the majority of companies will be spared the burden and cost of proportioning profits. More than 97% of SMEs operating in Northern Ireland meet the 75% employment test threshold and will benefit from the Northern Ireland regime.
I would like to take this opportunity to thank KPMG Belfast, the Association of Chartered Certified Accountants and PricewaterhouseCoopers for their written submissions to the Public Bill Committee and the other businesses that sent representations directly to HMRC, and I welcome the continued support shown by the Northern Ireland business community and businesses elsewhere in the UK for this measure. In January, 80% of firms polled at an Ernst & Young Ulster Hall seminar on the Bill believed that a cut in corporation tax would have a positive impact on their businesses.
As my right hon. Friend the Secretary of State for Northern Ireland made clear on Second Reading, the Bill’s progress through Parliament is dependent on the Executive parties delivering on their commitments in the Stormont House agreement, so I am pleased that the Executive has so far met their obligations. They agreed their budget for 2015-16, passing their Budget Bill last week, while the Welfare Reform Bill passed its Further Consideration stage in the Assembly at the end of February. The Government will continue to assess progress as the Bill moves forward, and in future years as decisions on implementing the powers are to be taken.
As we have recently seen, a cut in the higher rate of income tax leads to increased revenues—from the dynamic effects—so has the Treasury done any modelling on the optimum rate of corporation tax, if the aim is to maximise revenue?
My right hon. Friend will be aware of the Treasury’s study into the effects of our reductions in UK corporation tax, and it was clear that they would result in increased investment and growth in the UK. The Treasury’s assessment was that about half of the forgone revenue consequent on the reduction in corporation tax would be recovered over time. As the OECD has set out on numerous occasions, there is a strong case for saying that corporation tax is one of the more growth-damaging of taxes—it is economically very inefficient, being a tax on investment—and therefore making progress on that front is to be welcomed. Come April, the UK will have the lowest rate of corporation tax in the G20, and we on the Government Benches would want to maintain that position, despite the calls from others to abandon such an approach.
The Stormont House agreement also outlined the approach to adjusting the Executive’s block grant, alongside devolution of the power to set the rate of corporation tax. I recognise the interest of right hon. and hon. Members in the issue and have therefore set out further details in a letter to the Public Bill Committee. I would like to reassure Members that the UK Government and the Northern Ireland Executive continue to work closely to finalise the arrangements.
A minor and technical amendment was agreed in Committee to ensure that clause 5 was drafted in line with normal practice for commencement powers and to remove the scope for misinterpretation. It gives the Government the power to turn on the legislation by regulations made by statutory instrument.
The Bill is vital in allowing the Northern Ireland Executive greater power to rebalance the economy towards a stronger private sector, boosting employment, growth and the standard of living in Northern Ireland, with benefits for the wider UK. The unique challenges faced by Northern Ireland have been recognised by Members on both sides of the House, and I welcome the efficient and effective debate we have had so far. I am grateful for the Opposition’s commitment to co-operate with the Government to ensure that the Bill can be scrutinised appropriately and dealt with speedily in this Parliament, and I hope that hon. Members will see fit to read it the Third time.
I would like to associate myself with the Minister’s comments about the quality of our debate thus far on the Bill. We have had a thorough discussion. It has been shorter than originally anticipated, but that is because the Bill has wide-ranging support across the House, and it is a pleasure to rise, once again, to support the measures in it.
We are committed, as are Members across the House, to supporting measures to increase inward investment into Northern Ireland and support the much-needed rebalancing of its economy. We have all recognised that Northern Ireland has lagged behind the rest of the UK on productivity and prosperity. Over the years, measures have been implemented to boost the Northern Ireland economy, including through increased levels of investment and job creation programmes, but few have met with long-term success. It is important to consider a measure that would put a rocket-booster under the approaches taken so far to rebalancing and strengthening Northern Ireland’s economy. In that spirit, we have supported the Bill.
As I noted in Committee, the Bill is both straightforward and complicated. It is short in respect of the number of clauses, but those clauses include a huge amount of detail, some of which has still to be worked out. The Minister alluded to that in his comments. It is important to recognise that we are at the start-point rather than the end stage of the process.
Let me draw out a couple of issues that will be the subject of live discussions between the UK Government and the Northern Ireland Executive. Before I do so, however, let me reinforce a point made in the intervention by the hon. Member for North Down (Lady Hermon)—that it would be a mistake to think that corporation tax devolution will, in and of itself, do what is needed to rebalance Northern Ireland’s economy. It has to be part of a much wider picture that includes other policy drivers to help make this measure a success. That is certainly the experience of the Republic of Ireland, whose extremely low corporation tax does not sit alone; it is supported by other policy measures, particularly on skills and infrastructure. If this Bill is to be a success in Northern Ireland, it will be important for all parties to work together to ensure that the rest of the policy framework is in place to allow the rebalancing that we all want to happen.
I welcome the shadow Minister’s comments, but does she accept that much of this is about perception and the business-friendly nature of our economy, which will allow it to grow? It is about offering investors incentives to come in by providing good profit returns for their hard-earned labour. If we continue to build up and push that perception, does she agree that opportunities will flow from it and that this Bill now offers the best way forward in the current economic climate?
The hon. Gentleman is right to say that the perception of business is really important, but he will recognise, I think, a point that businesses often make to Members of all parties—that headline rates of corporation tax are extremely important for decisions about where to locate businesses, but that they are not the only factor that businesses take into account. I recognise the importance of this Bill for Northern Ireland, given the unique situation in which Northern Ireland finds itself. As I say, it is putting a rocket-booster under the approach taken so far to try to rebalance the Northern Ireland economy, but it will not succeed on its own—it has to be part of a wider policy framework. Despite recognition of the importance of a wider policy framework, we have not yet heard a huge amount of detail about what it will look like on the ground in Northern Ireland. These are matters largely for the Northern Ireland Executive, but they need to know and to hear that the Opposition support them in having a wider framework of policy measures around skills and infrastructure that will help to make all this a success, which we all want to see.
Will the hon. Lady give way?
I give way first to the hon. Lady.
I am grateful. I am curious to know what reassurances a future Labour Government would give, if they were in office after the general election of 7 May—none of us has a crystal ball, so we do not know—to credit unions and the Progressive building society, which we debated earlier?
I am grateful for the hon. Lady’s intervention, but I am afraid that I am going to disappoint her a little because my reading of the Bill, what it is intended to achieve and of the agreement that has been struck is very similar to that of the Minister. I agree with him that a deliberate part of the agreement relates to trading profits. Under the new Northern Ireland regime, corporation tax is to be devolved only in so far as it relates to trading profits rather than other aspects of business. That part of the policy is designed to make it successful and ensure that this devolution results in a genuine rebalancing of Northern Ireland’s economy. With respect, I feel that takes care of the point about the credit unions.
I have some sympathy with the argument when it comes to the Progressive building society. I have received communication from it about how it feels it will be caught unfairly by these provisions. I felt that the amendment tabled by the hon. Member for Foyle (Mark Durkan) did not take care of the scope for profit shifting within the financial services sector. We are all alive to that threat, but I am afraid that the amendment did not deal satisfactorily with the problem that the good work of the Progressive in Northern Ireland could slip through and be accounted for, whereas everything else that could result in profit shifting would be excluded. To that extent, my reading is similar to that of the Minister, and that will certainly be our approach. I am happy to give an undertaking—dependent on the outcome of the general election—to continue a debate with Members who feel strongly about this point, as did the Minister.
I do not want to repeat a lengthy debate on credit unions, but I will give way to the hon. Lady one final time.
I am extremely grateful, but we need some clarity on this. There is potential for the Labour party to be in government after the general election of 7 May, so I have to ask on behalf of all the people we on the Northern Ireland Benches represent whether the Labour party is ruling out any flexibility, as the hon. Lady seems to have done this afternoon. She has said that there will be no flexibility for credit unions, whereas I think the Minister said there could be at least some flexibility to look at back-office activities and excluded trades. Is the hon. Lady ruling that out for the Labour party?
With respect to the hon. Lady, the whole scope of the Northern Ireland regime under the Bill relates to trading profits. Credit unions do not pay corporation tax on their trading profits, so this Bill does not impact on them. I am not sure how many ways there are of saying that; I feel that the different formulations of the point have probably been covered. If the credit unions did pay corporation tax on their trading profits, we would be having a different discussion. If Members wish to see a devolution regime for Northern Ireland that includes activities other than trading profits, so that corporation tax would be paid on investments, income and so forth, that is a big call to make. If provisions were to be applied but limited to credit unions alone, it would mean carving out an exception to the regime. Let me say that that goes beyond the context of the agreement struck between this Government and the Northern Ireland Executive—the agreement that we have supported and the agreement that is the subject matter of the Bill. I would have a huge amount of sympathy if credit unions found themselves caught because they did pay corporation tax on their trading profits, but that is not the case, so—
Order. The amendment has been discussed and withdrawn. We had a lengthy debate on it and we do not have a lot of time for this part of the debate, so we must stick to what exactly is in the Bill—and nothing more.
I am grateful, Madam Deputy Speaker, and I will move on to the rest of my remarks.
Will the hon. Lady give way?
Forgive me, but because of time considerations, I will not.
Let me raise a couple of issues that received lengthy debate in Committee and will be important aspects of the work needed to take the Bill forward. I speak particularly of the block grant. I am grateful for the letter that the Minister sent to the Public Bill Committee, further setting out the Government’s approach to calculating the element of the block grant that the Northern Ireland Executive will have to pay back to the UK Government. We are still a long way from a nail-down formula, as it were, for how the block grant reduction will be calculated, particularly in respect of measuring and calculating behavioural effects that will need to be taken into account.
I note the indication in one of the appendices to the letter that the devolution of corporation tax to the Northern Ireland Executive in 2019-20 is expected to cost about £325 million if Northern Ireland opts for a 12.5% rate rather than the United Kingdom’s 20% rate, but much more work will need to be done on that, and an agreement will need to be struck with the Northern Ireland Executive.
Will the hon. Lady give way?
The right hon. Gentleman is persistent. I will give way to him very briefly.
When will the Labour party give justice to England? Surely, given the devolution of tax matters to Northern Ireland and Scotland—which we welcome—there needs to be a voice for England, and an ability for England to make her decisions on those matters as well.
With respect, responding to the right hon. Gentleman’s intervention would lead me into a much lengthier discussion on a matter that is not directly relevant to the Bill. However, he has put his point on the record once again, and I am sure that he is pleased about that.
As I was saying, it is clear that the methodology for calculating behavioural changes in particular will require detailed work between the United Kingdom Government and the Northern Ireland Executive.
The Minister said in Committee that there would be pressure on the Executive to take account of any profit shifting that might occur. Indeed, it is in their interest to limit profit shifting in order not to increase the amount that they must pay back to the Treasury. The Minister said that a memorandum of understanding would be drawn up between the UK Government and the Northern Ireland Executive in respect of the costs of policing the limitation of profit shifting, and the processes, governance and accountability that would be needed for assessment of the activity. That is an important part of the framework, but we have not been given many details so far.
We all hope that the devolution will go ahead in 2017, but a potential stumbling block is the condition that Northern Ireland’s finances must be put on a stable footing before that can happen. We have still not been told exactly what that will mean, and what threshold the Executive will have to cross in order to prove that they have met the condition. I hoped that the Minister might give some idea of the timetable agreed between the UK Government and the Executive in relation to when some of the key decisions will have to be made. I trust that they will be made well before 2017, although the Minister said in Committee that that was the deadline, because there is a great deal to be done between now and then. I think that we shall all have to return to the issue of conditionality after the general election.
We are in favour of all measures that will assist the people of Northern Ireland and their economy. It is in the interests of the whole United Kingdom for Northern Ireland’s economy to be rebalanced and strengthened. We therefore support the Bill, and will continue to support it.
I congratulate the Minister and the Secretary of State. I also pay tribute to my right hon. Friend the Member for North Shropshire (Mr Paterson), who saw the importance of a measure such as this even when we were in opposition and he was shadow Secretary of State for Northern Ireland. That was not the conventional thinking at the time, as I well remember because I was working with him, but he persisted, and the Bill eventually found its way to the Chamber.
Nearly five years ago—the time has passed quickly—when the Select Committee was re-formed and I had the privilege of becoming its Chairman, it decided to look into this matter. We decided that, in what was our first inquiry during the present Parliament, we would examine the current financial and economic issues rather than what might have been seen as the usual “orange or green” issues. We examined those issues in great detail, and, although I would be the first to admit that the report that we eventually published was not unanimously agreed, we saw the importance of a measure such as this. We also saw that it was not the silver bullet—it was not the only measure that needed to be taken in Northern Ireland to rebalance its economy and make it more prosperous—but we did consider it to be very important.
As has already been mentioned, Northern Ireland’s geographical position makes it special in this context. It shares a land border with another country, and it is also part of an island which is, in turn, off another island. That geographical position alone means that in order to attract the investment that it needs—especially overseas investment—it must have a different quality, because otherwise people might prefer to invest on the mainland. Although that might be good for many of us, it would not necessarily help Northern Ireland directly. Similarly, if the UK were just like the rest of the European Union, there would be no reason for people to invest here rather than on the continent. I am pleased that many aspects of our economy and the way in which we run things are different from what happens in the rest of the European Union, because that makes ours an attractive economy and makes this country a very good place in which to invest, as is clear from figures that were published only recently.
A short time ago, when the Select Committee visited Belfast, we had the pleasure of meeting Senator Gary Hart. He was there principally to engage in political discussions, but we discussed the economy as well, and he made a great many encouraging noises about the prospect of American investment in Northern Ireland if this step were taken.
I hope that the Northern Ireland Assembly will take advantage of the Bill when it is passed, because it is one of the very few measures with which all the parties in Northern Ireland—and, I think, all the parties in the House—agree. That is a very unusual situation in itself, but it is extremely welcome, because it gives us an opportunity to improve the economy in Northern Ireland to a greater extent than we have done so far. That is important for two reasons: it will ensure that people in Northern Ireland enjoy more prosperity, and it will give them the opportunity to cement the relative peace that has been achieved there. A strong economy will obviously help the cementing of that peace. For those two reasons in particular, I am very happy to support the Bill.
Let me begin by thanking the Secretary of State and the Minister of State for the Bill, and thanking Opposition Members for supporting it.
I must also apologise for the absence of some of my colleagues. As a number of Members will know, the father of my hon. Friend the Member for Strangford (Jim Shannon) has died, and was buried this afternoon. That is why my hon. Friends the Members for East Antrim (Sammy Wilson) and for Upper Bann (David Simpson) are not present either, although they have a tremendous interest in this subject. On behalf of all Members, I wish to express our sincere sympathy to my hon. Friend the Member for Strangford. We pray that the Lord will strengthen and comfort his family, especially his mother, at this time of their grief and sorrow.
I know that some Members have felt rather envious as they have sat back and watched the progress of the Bill to its present stage. Nevertheless, both the Government and the official Opposition have acknowledged that the circumstances of Northern Ireland are unique because of its land border with the Irish Republic, which has one of the world’s lowest corporation tax regimes. Government policy has directed us to rebalance the economy—to move away from our high dependence on public sector employment and boost the local private sector—but we cannot do that with no more than an instruction from the House; we need the tools that will allow us to do the job. We have an earnest desire to move Northern Ireland forward, and to transfer our people from the unemployment list to meaningful and gainful employment.
I assure the hon. Gentleman that many of us have pressed for a measure of this kind for a long time, and welcome it greatly. I like to see all parties united behind the simple proposition that tax cuts make us a more prosperous society. I only hope that they learn the lesson in respect of the other parts of the Union and the other taxes.
I thank the right hon. Gentleman for his comments. I certainly believe that we need to be very prudent in our expenditure, but we also need to allow people to have more of their own money in their pockets, and we want to see prosperity across the United Kingdom. I certainly want to see that achieved. After we have gone to the 20% corporation tax there has, rather worryingly, been some talk of moving back to 21%. That would be a retrograde step and I trust it will be put to bed this afternoon because it would have implications for the block grant for Northern Ireland. We need to get that clarified.
Businesses throughout my constituency tell me that corporation tax could be a game-changer, or at least assist in our genuine efforts for growth. Those who have in the past opposed the devolution of corporation tax stated that this would assist only large multinational companies, yet Her Majesty’s Revenue and Customs estimates that a reduction in corporation tax in Northern Ireland would affect some 34,000 companies of all sizes, including 26,500 small and medium-sized enterprises.
As the hon. Member for North Down (Lady Hermon) said, corporation tax is not a silver bullet that will transform the economy of Northern Ireland, but it allows us to go out with confidence on to the world stage and sell Northern Ireland without being undercut by our neighbours in the Irish Republic. I accept that other economic reforms are necessary. We need to train and upskill our work force, and focus on skills and competiveness, and strengthen our infrastructure, thereby achieving a stronger economy and a higher standard of living for all our constituents.
I welcome today’s debate. I am disappointed in the Minister’s response to the amendment tabled by the hon. Member for Foyle (Mark Durkan) and supported by the hon. Member for Belfast East (Naomi Long). However, we are getting an opportunity to assist the Northern Ireland Executive in gaining greater power to rebalance the economy and boost employment and growth by attracting more high-quality investment. Opportunity awaits us. To do nothing is unacceptable; to do our best is honourable.
I do not wish to detain the House for very long. I merely want to put on record my thanks to the Government for the work they have done in bringing this Bill forward, and also to the Opposition for their support for the Bill. I welcome the progress in this matter, which we have debated many times in this House, and we also talked about it for a long time when I was in the Assembly. Those of us on the Select Committee on Northern Ireland Affairs spent many hours discussing the issue of corporation tax and its potential positive impact on Northern Ireland and its economy, so I welcome the progress we have made in what is a relatively short period of time from the announcement. It is good to see this measure reach its Third Reading today.
Others have already said this is not a silver bullet for the economic challenges that face Northern Ireland, but it is a very important lever for the Northern Ireland Executive to have within their control to address the imbalances in the economy, to encourage further growth of our local companies and to encourage further inward investment. Even without corporation tax being reduced, Northern Ireland outperforms many other regions in attracting inward investment. This gives us another opportunity to raise our profile internationally and encourage more companies to look at Northern Ireland as a serious investment prospect, but also to see us as a competitive region where they can locate and do real business.
I look forward to seeing this Bill reach fruition. There will be challenges ahead for the Northern Ireland Executive as they go about the more complex work of setting a rate for corporation tax, particularly in terms of affordability at a time when resources are extremely tight. It will be difficult because there will be a gap between any benefits from the change and the amount they will lose to the Treasury in the interim. The Executive will have to look at that period very carefully in terms of affordability and how that is managed.
There is also a challenge in dealing with investment in skills, which are required if we are to see the full benefits of any reduction in corporation tax. There is no point in reducing corporation tax to get new businesses to come in and invest if we do not have the skilled workers to be able to take up employment in those companies. Part of the due diligence that any company will do before investment will involve looking at our skills base. That will be one of the key issues. We therefore have to see a renewed focus from the Executive on investing in skills, and particularly the right skills for the companies that we are encouraging to come to Northern Ireland.
We also face challenges in terms of infrastructure. As a civil engineer, it would be remiss of me not to mention that. It is not just our communications infrastructure, but also our physical infrastructure, which requires investment. Companies doing due diligence before investing in a region will look at such issues. It is hugely important that we are able to invest in infrastructure in a way that will both encourage and benefit companies locally who are already involved in growing their businesses and attract new inward investment to Northern Ireland.
Our connectivity will need to be defended. That is a role that both Westminster and the Assembly can have some regard to. It is hugely important that our air transport links, particularly those routes that allow us to cargo material from Northern Ireland for export markets, are protected. That should detain this House perhaps more than it has done to date.
If we are to benefit the economy and feel the true benefit of this change in corporation tax, we also need to create the kind of political stability in Northern Ireland that is conducive to creating economic growth.
On the economic issues and making the most of this devolved corporation tax power, does the hon. Lady agree that it is important that the Assembly and the Executive determine the sort of rate that is going to apply as quickly as possible so that Invest NI can get out into the marketplace and begin to sell Northern Ireland and the benefits of this as soon as possible? As she knows, there is a big lead-in time in terms of attracting investment?
I am aware of the pressure to want to do that quickly, but it is also important that, as the Executive do that, the cost of it to the Northern Ireland economy is thoroughly assessed and we work out how we are going to pay for it in the interim. Otherwise, before we reap the benefits, we could leave a gap in our public finances that creates pressure, particularly from those that are already under financial pressure. It could lead to a push back against the corporation tax reduction. Getting that balance right is important. I agree that it would be wrong for people to be unnecessarily tardy, but I also think it is important that proper due diligence is done around what that level should be.
Reaping the maximum benefit from the changes under this Bill requires political stability. It requires people, when they look to Northern Ireland, to see the positive images that are so often broadcast, as opposed to some of the more negative images we have seen in recent years. If we want lasting prosperity, it has to be shared among everyone in our society. It is therefore hugely important that we see political maturing not just in terms of the Unionist-nationalist question and how that is handled politically in Northern Ireland, but in terms of the productivity of the Assembly.
Does the hon. Lady agree that along with having corporation tax as a financial lever, and the need to create political and economic stability in Northern Ireland and the need to encourage people to come and visit, there is also a need for the Treasury to look at reducing VAT on tourism? That would enable us to be more competitive with the south of Ireland in terms of visitors and the economy.
I am aware that the hon. Lady has long since advocated such a move, as have I. Unfortunately, the Treasury response has been that in some way reducing the VAT on leisure would encourage people to have a rather lackadaisical attitude to the workplace. In fact both inward and outward tourism generates a significant amount of money into our economy, so I think a future assessment would be valid.
Today marks a very welcome step forward in the potential for Northern Ireland to rebalance its economy and encourage further growth of the public sector. I hope that when the Executive meet, as they will do over the coming months, they will meet the challenge of setting the rate and stepping up around infrastructure and skills, as well as around stability and peace building. We will then be able to reap the maximum reward for the work that has been done.
Thank you, Madam Deputy Speaker, for giving me the opportunity to speak in this important debate on corporation tax. Today is a red-letter day for Northern Ireland. The Bill certainly gives the lie to those who suggest that nothing ever changes in politics or that devolution does not actually do anything. It sends out the powerful signal that, after much diligent hard work, the constant dripping has eventually worn away the stone and we have achieved something positive for Northern Ireland: we have ensured that we can at last set our own rate of corporation tax.
This is what devolution is supposed to be about. It is supposed to allow the economies that make up the United Kingdom to compete according to their strengths, to set their own pace of change and to be agile. Many of us have argued for this change for a long time, and we at last see the legislation in print. We now see it moving forward on a very positive footing. So those who oppose devolution and say that nothing really changes can eat their words today, and I hope they choke on the Bill—
So to speak.
Some Members have suggested that the devolution of corporation tax is not a silver bullet, but I do not think I ever heard anyone say that it was going to be a once-in-a-lifetime, miracle-working, stand-alone solution. No one ever thought of it like that. It is one of the arrows in the quiver, to be fired at the right target at the right time.
The important thing about the corporation tax measure is that it will change people’s perceptions about our economy. We have a go-forward, low-tax, incentivised economy. Indeed, that seems to be part of the Government’s own economic plan. They have tried to reduce taxes time and again, and I welcome that. I agree with the right hon. Member for Wokingham (Mr Redwood), who has often contributed to debates in the House by demanding that we have even lower taxes across the whole of the United Kingdom. Would it not be a far better day today if the Bill were introducing a reduction in corporation tax for the whole of the United Kingdom? That is what we should really be debating, and I hope that one day Government Members will follow our lead and reduce their corporation tax to the new levels that Northern Ireland has ambitions to achieve.
The Government’s plan to reduce tax is welcome. When we look at the history of the economy of the Republic of Ireland, we see that it was not corporation tax reductions alone that supported the country’s boom years. There were other unique selling points that it is important to consider. The Republic sold the fact that it had a great, well-educated and advantaged youth population who made the country cheaper, as an offshore part of Europe, to invest in. Northern Ireland competes on exactly the same footing as that, and I believe that we can do it even better. After all, we are British. We are an offshore part of Britain: we are Britain offshore. If we can use that to our advantage as a unique selling point, we should do so, and I welcome those who will join us. As other Members have said, this change will affect 34,000-plus local companies, 26,500 of which—the small and medium-sized enterprises—form the backbone of our economy. I know that many of them welcome this measure, and I look forward to the opportunities that the legislation will create.
I welcome the fact that those on the Front Benches have changed their minds on this matter. For a long time, certain Members were like John the Baptist, in that they were preaching in the wilderness. Eventually, however, they have managed to convert; I think that those on both Front Benches recognised that they needed to do so. That is a good thing. There has been a lot of thought on this issue on both sides of the House and I welcome the change of heart, particularly on the Labour Front Bench. I remember the former Prime Minister telling us in 2007 that he could not do this. He gave us the Varney review and told us that we could tamper with this, that and the other. Indeed, the then Treasury spokesman, the right hon. Member for Leigh (Andy Burnham), said at the time that corporation tax reduction for Northern Ireland
“does not offer the best way forward”.—[Official Report, 17 December 2007; Vol. 469, c. 74WS.]
I am glad that we have recognition today that it is the best way forward, and I hope that we will have unanimity on the matter in the House.
As I have said, this is not going to be a one-night wonder; it will not change things overnight. It will probably take at least a decade before we reap the benefit of the change, but anyone who knows that Northern Ireland’s economy also has a strong agricultural sector will appreciate what I am about to say. Before we can reap the benefit of the changes, we have to sow, and today we have very good seed that I believe we are going to be putting into very good ground. I look forward to seeing the game-changing strategy that is being put in place today reaping a wonderful economic harvest for Northern Ireland over the next 15 to 20 years. I believe that anything the Republic of Ireland has been able to offer as a result of its corporation tax reduction, Northern Ireland will be able to do on steroids. We will do it better. After all, we are part of a G20 nation, and the benefits of that stability should be recognisable to all.
In 2011, the Select Committee, under the watchful eye of the hon. Member for Tewkesbury (Mr Robertson), indicated that this measure was going to be a game-changer. The Select Committee is to be congratulated on pursuing this matter and encouraging the Government to look afresh at it. At that point, it had been dropped from the agenda and people thought that it was all over, and the Chairman of the Committee should be singled out today and congratulated on pushing the matter forward.
Over the past five years, the Northern Ireland Executive have demonstrated their ability to look at other good competitive economic measures that we should be embracing.
Would my hon. Friend acknowledge that, in addition to some people here giving up on devolving the power to set corporation tax rates, there were parties and politicians in the Northern Ireland Assembly who had also given up on it? Our party did not give up on it, however, and we are glad to be seeing the fruits of our labour today.
I have to say that I am shocked. My right hon. Friend wants me to start electioneering in the House. He wants me to say that it was us that won it. Well, it was! We know that and the electorate know it; we will prove that on 7 May.
Look at the record.
I know that the record is a powerful one. We did not give up on this; we pushed for it. I think the hon. Member for Tewkesbury will confirm that it was our party that pushed the Select Committee to press the issue and to hold not just a desktop inquiry but a solid investigation. That investigation took us overseas, to the Republic of Ireland and to the United States. We looked at the issue, we pushed it solidly, and today we are reaping the benefits of that. Some of the foot-draggers did not want to see this day, but I am glad that those of us who were swift of foot have now reached the finish line.
Northern Ireland offers a unique brand for people to invest in. Obviously, we have a land border with the Republic of Ireland, so we have to demonstrate additional economic stimuli to get our economy going. The Bill will allow us to do that. A recent Ernst and Young survey on global cities of the future found that Belfast was one of the most business-friendly medium-sized cities in the world to invest in. That shows that what Northern Ireland is offering, to foreign indirect investment in particular, is an agile and capable economy with workers who want to see their economy change and grow.
We export the best buses; they come from my constituency to this city. Northern Ireland also exports the best pavements. I think that they come from the constituency of the hon. Member for South Down (Ms Ritchie), and they are used to pave London. We also export some of the best drink to ply the workers with, from Bushmills, and all our existing exports represent a continuing opportunity to grow the Northern Ireland economy. Northern Ireland is a good place to invest in. Indeed, 75% of investors reinvest after having been in Northern Ireland. Not only do they go there to make their initial investment but the lion’s share of them go back and reinvest because they see it as the place where their pounds can grow.
The hon. Gentleman will have noted that the Minister made the valid point earlier that the devolution of corporation tax to the Northern Ireland Executive was contingent on the implementation of the Stormont House talks. I am sure that the hon. Gentleman, who is speaking loudly for the Democratic Unionist party, would like to confirm that his party is absolutely wedded to the full implementation of all the commitments and recommendations that resulted from those talks.
This is not the place to debate all of the Stormont House agreement, but given that we were instrumental in helping to achieve it, we will, of course, be pursuing every line, every jot and every tittle to ensure that we get the best deal for Northern Ireland in all of that arrangement.
Between 2013 and 2014 we had a record year of investment in Northern Ireland. Nearly 11,000 new jobs were promoted and 23 first-time investors were welcomed into Northern Ireland. If we can do that in one year in advance of the corporation tax Bill, what can we not do if we can now go out around the world and start to market Northern Ireland as the place with what I hope will be the lowest level of corporation tax on these islands? If we can do that, we really will have the opportunity to see Northern Ireland attracting even more companies. Our attracting 23 new, high-calibre investors in the past year, in the hard economic climate we have been coming out of, is a signal that things they are a-changing.
Does the hon. Gentleman agree that as part of lowering the level of corporation tax in Northern Ireland there is a need not only to rebalance the economy, but to ensure that a balanced regional development approach is taken to the location of foreign direct investment and other investment, to ensure that all citizens benefit from this lowering of corporation tax?
The hon. Lady makes a good point—it is key. This tax is not just about investment in Belfast, Londonderry or key cities; it is about investment in the whole of Northern Ireland. The Prime Minister recently stated that he wanted to make the United Kingdom the “factory of Europe” and attract more jobs into the UK, and I hope he was speaking for every part of the UK. I hope he wanted to see those investments coming across not just to London and the south, but to all of the UK, because that is what we really need—we need more investment. I know that the hon. Lady wants to see investment in her constituency. My constituency is carrying what is going to be the single largest job loss in Northern Ireland in several years, with the closure of the JTI Gallaher factory in 2017. I want to see those jobs filled. I want to see opportunity created whereby more investment will be happening in my constituency and more factories will be brought there. If the current Government are returned, I hope that they will add meat to the bones of that call to turn the UK into the factory of Europe by bringing jobs, not only to the hon. Lady’s constituency, but to mine and, indeed, to all our constituencies. I hope we see a balance in the investment that is going to be made.
In an earlier intervention, the hon. Lady also called for a reduction in VAT, especially on our tourism trade, and I fully support that. Tourism is one of the key areas where we are trying to grow our economy and attract new business investment, with new hoteliers and new companies. If we can reduce VAT in that sector, we will see it grow. Again, we compete with the Republic of Ireland in that sector, but it has a lower tax rate and that damages us. We really need to try to make progress on that.
Order. I know that the hon. Gentleman will be very careful in sticking to the narrow confines of the Third Reading of this Bill. I appreciate that the points he is making are tangentially attached to the Bill, but I am sure that, in concluding, he will be referring entirely to the Bill.
Thank you for that prompt, Madam Deputy Speaker. I was actually at the point of conclusion, and I thank you for reminding me that I do have to conclude. I know that hon. Members are captivated by my oratory today and want me to continue, but I must desist and so I shall leave those points with the House.
I will probably differ in some emphasis and some recollection from the hon. Member for North Antrim (Ian Paisley), but I wish to begin on a point of absolute harmony, in offering thanks to the hon. Member for Tewkesbury (Mr Robertson) and all the members of the Northern Ireland Affairs Committee, who tilled this hard ground over quite some time, some years ago. The hon. Member for Tewkesbury has rightly been generous in acknowledging the role played by his colleague, the right hon. Member for North Shropshire (Mr Paterson), and I will do so, too.
The devolving of corporation tax to Northern Ireland has not always been the point of constant unanimity that it appears to be today. People did have different approaches and different concerns about it; back when we were negotiating the Belfast agreement or Good Friday agreement some of us wanted fiscal discretion as part of the devolved package, whereas most parties did not. My party was in the very small minority of those that did, and we were particularly clear about the corporation tax side of things. When we did get our institutions up and running, some of us argued the need for devolving corporation tax so that we could do more to maximise the north-south potential for inward investment on the island of Ireland, but many people resisted that idea of working with the south on inward investment. For that same reason, those people were very iffy about the idea of devolving corporation tax, as they felt that somehow it was going to separate Northern Ireland from the Union and be a chink in Unionism. I am very glad that, because of a variety of different experiences, positions have adjusted and moved on in that regard.
Reference has been made to the Varney review. When Sir David Varney was conducting the review of corporation tax issues under the previous Government, he made it clear that he was hearing different views from different parties in Northern Ireland and, in particular, from different Departments and from different Ministers. In fairness to the hon. Member for East Antrim (Sammy Wilson), he acknowledged that at times he had different views and different emphases on this issue, as it is understandable that a Minister of Finance and Personnel would have. I served in that office—I see that the right hon. Member for Belfast North (Mr Dodds) is in his place, too—so I am conscious of the fact that cautionary pieces of advice need to come from that office about what some of the consequences might be. When I was in that post, I used to tell people that as the Minister of Finance and Personnel I did not suffer from depression but I was a carrier. So I can accept that Ministers of Finance and Personnel perhaps did need to sound some cautionary note, but this seemed to go beyond those Ministers; I am glad that we now have a much stronger position on the devolution of corporation tax.
We also need to be clear that the devolution of corporation tax does not put the north—does not put the Assembly—on a par with the corporation tax powers of the Oireachtas. Although it allows the Assembly to set the rates for certain qualifying businesses, it does not allow it to decide who the qualifying businesses are, and the Assembly has no control over any of the other rules that attach to that. The Oireachtas has a very different arrangement. Even when moves are made in the Oireachtas on the “double Irish” situation, which are long overdue and right, we also see a targeted use of things. A bit like this Government’s use of the patent box, the Irish Government have introduced the knowledge box. So there are other ways in which they are going to target competitiveness, and incentivise particular industries and sectors.
That is one issue I wish to address at this point in examining the overall impact of the Bill, because too often the focus in Northern Ireland has been that devolving corporation tax would allow us better to compete with the south. We need to recognise that the competition landscape within these islands has changed. I acknowledge that a regional economic dynamic has been provided under this Government, through initiatives such as enterprise zones, city deals and growth deals, which are creating some drive, regional economic traction and city economic traction. If Northern Ireland relies just on corporation tax and does not look to some of those other tools that are helping to drive regional and local economic growth, we will lose out.
I represent a city where many people go to work across the border for companies that are benefiting from the 12.5% corporation tax rate. That proximity—this is in our travel-to-work area—does not mitigate the fact that my constituency has the highest registered unemployment of all the 650 constituencies represented in this House, which shows that a reduced corporation tax rate alone is not a magic bullet and does not solve everything. As has been said, including by the hon. Member for North Antrim, the south of Ireland’s approach is not just about corporation tax alone; it is about investment in infrastructure and in education, not least in third-level education. Even this week, as we see that the Irish Government’s revenues are up and things are shifting there, and they are looking at and talking about possibly adjusting the spending and tax profile, the Tanaiste, Joan Burton, is emphasising that if money can now be spent, it has to be focused on infrastructure and on education, particularly at the third level.
We see that emphasis in the south, but not in the north. We need to recognise that, with regard to the Stormont House agreement and the wider landscape, all that glisters is not gold. The fact is that the Assembly and the Executive will have a difficult Budget landscape over a number of years and there will be a price on the block grant. That was touched on by the hon. Member for Birmingham, Ladywood (Shabana Mahmood) when she referred to the letter from the Treasury to the Bill Committee—unfortunately, it arrived after the Bill Committee had completed its considerations. The letter, while reflecting the fact that negotiations with the Executive are ongoing, sets out a number of changes that will need to be made to the funding arrangements of Northern Ireland. I am talking about how the block grant will be set and how the Barnett formula will operate. More time needs to be taken to consider those wider consequentials and the implications for the devolved Budget.
In the Stormont House negotiations, I did question why we were not discussing the implications of a corporation tax rate cut or what the implications would be for the block grant. I was told by the First Minister that the rate cut was not an issue, that it would be modest and graduated and that it did not really need to come into our wider discussions about the strong budgetary pressures we were under. But that does not seem to be the case. His understanding and his reassurances were not reflected in the terms outlined by the Treasury Minister in the Bill Committee or in this letter and its attachments. There was an assumption that there would be a gradual working adjustment. In other words, there would not be a full hit in relation to the devolved envelope. But the Minister, both in Committee and in the letter, made it clear that the hit would be up front.
I joined the hon. Member for East Antrim—I understand that his absence is to do with the unfortunate bereavement experienced by the hon. Member for Strangford (Jim Shannon)—in questioning the arrangements. We asked about the working implications of the Executive’s Budget year on year and of the setting of the block grant. We wanted to know whether adjustments would have to be made to reflect higher or lower tax takes. In the letter from the Minister, which was sent on 16 February, we see that those adjustments may be made two or three years later, whenever the full tax yield is made. That creates uncertainty. Given that corporation tax is, as the Institute for Fiscal Studies has pointed out, sometimes volatile, there could be further implications that we should acknowledge. We should not say that we do not understand them or that they were someone else’s fault. We need to go into these things with our eyes open.
Let me turn now to the wider position of the Executive in relation to the operation of corporation tax. Under the Bill, the Treasury retains not just ownership of all the rule-making and interpretive powers, but the commencement power in relation to corporation tax. We know that the timetable is 2017, but, as we heard from the Minister in Committee, the Government will exercise that commencement power when they are satisfied that the Executive has a sustainable Budget.
Over the past couple of years, the Treasury has made it very clear that it judged the sustainability of the Executive’s Budget on whether the Assembly would pass welfare reform legislation. That legislation may not have been to the Assembly’s taste or of a devolved design, but they would have to pass it as a way of proving that they had a sustainable Budget. In 2017, the issue will be whether the Treasury will use that same power to impose policy choices on the Executive. In the Bill Committee, I specifically asked the Minister that question. Let us take the example of water charges. We know that the Executive have consistently tried to prevail on the Administration in Northern Ireland to move to direct water charges in one form or another. When I was a Minister, the then Chief Secretary to the Treasury, Paul Boateng, wrote to us at the Executive twice, asking that we make that commitment. The Executive, on my proposal, refused to do that. Various other ruses have been attempted. During the period of direct rule, Northern Ireland Water was essentially set up on a conveyor belt to privatisation. The question is whether the Treasury would abuse that power and say, “Just like we used to say that you had a sustainable Budget only when you had absorbed what we wanted you to do on welfare reform, we are saying now that you only have a sustainable Budget when we see you levying water charges, raising revenue in other areas or changing your policy in relation to student finances.” It could be linked again to welfare reform. After all, we are now locked into a welfare cap. Luckily, we are being given a lot of leeway in how the welfare cap operates at the minute. If the truth be told, the deal that was reached on welfare reform as part of the Stormont House agreement—
Order. I will say to the hon. Gentleman the same as I said to the hon. Member for North Antrim (Ian Paisley), who spoke immediately before him: I have not been very strict in keeping him to the exact words of the Bill, but, as he knows very well, he is beginning to stray a little. I trust that, in concluding, he will address precisely the points in the Bill that relate to Third Reading.
I am sticking very much to the thrust and the purpose of the Bill. The Bill is presented as part of a suite of measures coming from the Stormont House agreement. That suite of measures included issues in relation to welfare reform. After all, we were told that there would be no Corporation Tax Bill unless there was agreement on welfare reform, so what I am saying is entirely consistent. Ministers have referred to these other measures when they have addressed this Bill, as have other hon. Members. The point goes to something that is in the Bill, which is the control that the Treasury will have over the commencement of this power and whether it uses that to impose other policy choices on the Assembly. Given that the welfare cap will be in place in the next Parliament—if it is supported both by the Government and the Opposition—it could well be a part of the working reference of the Treasury when it comes to make a judgment on Budget sustainability. In fairness, the Minister made the point in Committee that the judgment would be made on the sum of the Executive’s Budget parts and on a range of issues, but not on specific measures. He would not rule out it being used in that way. Again, in terms of due legislative diligence, all of us must have regard to how this might operate in practice. I am talking about not just some of the detailed rules as they affect businesses but how the overall Budgetary situation of the Executive is affected. There is no point in our popping corks about the legislative power over corporation tax that the Executive and the Assembly will have if we are not also alert to the very real budget constraints and the hard choices that might be imposed with that.
The hon. Gentleman has said on a number of occasions that, as a result of the Stormont House agreement, one obligation was to sign up to welfare reform. Does he not agree that, more correctly, what was agreed was that we had to come up with a package on welfare reform that we could pay for? As it happens, that package was parity with a little bit of flexibility—
Order. Interventions are meant to be short. The hon. Lady has already spoken. It is perfectly in order for her to make an intervention, but it must be short, especially as she has, quite rightly, taken up the House’s time this afternoon. I politely indicated to the hon. Gentleman who has the Floor that he might consider drawing his remarks to a close. He chose to argue with me on the points I had made. I will speak less politely to him if he does not adhere to what I have said. He has spoken for a considerable time this afternoon. He is in order. He has the opportunity to conclude his speech. I am not saying that he must finish immediately now, but I am sure that he will give thought to other people in the Chamber.
I have no wish to argue with you now, Madam Deputy Speaker, but I must say that I was not arguing with you previously. I was simply clarifying the position and the background, as you have not had the privilege of sitting through all the debates on what was deemed relevant to the Bill and the wider Stormont House agreement.
The Executive and the Assembly will have to absorb the Bill’s wider implications. There are implications for the economy and for businesses, too. We have heard from many hon. Members that businesses are well seized of the need to try to take advantage of that. We have no problem with the regime on the balance between the rates and the rules, but we want to ensure that there is no undue assumption that the devolution of corporation tax to Northern Ireland alone will transform our economy. We need more investment in infrastructure and higher education and following the decisions in the Stormont House agreement it is not clear whether our borrowing power, which was originally designed for strategic capital, is now being used to pay for a voluntary exit scheme. There is an opportunity cost as regards the wider economic investments.
I do not wish to use the term long-term economic plan, but without addressing some of the other issues, including providing tools that compare with city deals, growth deals, enterprise zones and so on, and without a new level of commitment on third-level education and infrastructure, the Executive might well be getting the novelty of devolved corporation tax without strategic economic perspectives that are other than short term in nature.
I thank the hon. Gentleman for his courtesy and for not arguing with me.
Question put and agreed to.
Bill accordingly read the Third time and passed.
On a point of order, Madam Deputy Speaker. I should be grateful if you confirmed how this House could express our condolences to the family of Konstandinos Erik Scurfield, a constituent of mine who has been reported killed in Syria. Erik was a former Royal Marine who travelled to the region because he was horrified by Islamic State’s brutal atrocities. His parents have asked me to pass on this brief message:
“We are devastated to confirm the death of our son in Syria where he went to support the forces opposing Islamic State. His flame might have burned briefly, but it burned brightly, with love, courage, conviction and honour, and we are very proud of him. We would like to request that we be allowed to grieve in peace as a family, without intrusion at this difficult time.”
Three weeks ago, I raised this matter with the Foreign Office but I have not received a response. Given the serious nature of this issue I ask for more guidance on how I can best secure a response from Ministers so that together we can underline the grave dangers that face anyone who travels to Iraq or Syria.
I thank the hon. Gentleman for his point of order. Let me first say on behalf of the whole House that we send to his constituent’s family our most sincere sympathy at the loss of this brave young man. The hon. Gentleman knows that his point of order is not a point for me to deal with from the Chair. I am sure that those on the Treasury Bench will have heard what he said, and if he has not had a timely reply to a question he asked of a Minister, he ought to have. I trust that that message will have gone out loud and clear to the relevant Minister.
[Un-allotted Half Day]
Future Government Spending
I beg to move,
That this House rejects this Government’s failing austerity plan set out in the Chancellor’s Autumn Statement which the Office for Budget Responsibility has said will take public spending back to a share of national income not seen since the late 1930s, before the National Health Service came into existence; notes that the Institute for Fiscal Studies has said that this would entail cuts on a colossal scale and has raised concerns that this could involve a fundamental reimagining of the role of the state; further notes that the Chairman of the Office for Budget Responsibility has said that these spending figures were based on the policy assumption presented by the Chancellor of the Exchequer and signed off by the quad, which consists of the Prime Minister, the Deputy Prime Minister, the Chancellor of the Exchequer and the Chief Secretary to the Treasury; and calls on the Government to instead adopt a different, fairer and more balanced approach, which involves sensible reductions in public spending, a reversal of this Government’s £3 billion-a-year top rate of income tax cut for people earning over £150,000 and an economic plan that delivers the sustained rises in living standards needed to boost tax revenues, in order to get the current budget into surplus and national debt as a share of GDP falling as soon as possible in the next Parliament.
I associate myself with the remarks made by my hon. Friend the Member for Barnsley Central (Dan Jarvis) in his point of order. He made the point eloquently and I pass on our condolences from the Opposition Front Bench.
The choice between this Government’s failing austerity plan and a better plan for working families at this election is now clear. The majority of people are not feeling the benefit of the recovery and the squeeze on living standards has not been so prolonged since the 1920s. When we cut through the Chancellor of the Exchequer’s rosy view and spin and look at the report produced today by the Institute for Fiscal Studies, we can see that it confirms that the vast majority of people, typical working people, are worse off than they were in 2010.
Will the hon. Gentleman give way?
I shall give way in a moment. What has been less well known is the devastatingly corrosive effect of stagnant wages, falling tax receipts and rising welfare costs on the health of our public finances. The social security bill is £25 billion more than planned at the outset of the Parliament. Tax credit costs have risen to subsidise the low-wage economy. Incidentally, my hon. Friends know from looking at the statistics last week that, in just one year, the number of zero-hours contracts in our society has grown by 20%.
Will the hon. Gentleman give way?
I shall give way in a moment. The number of working people receiving housing benefit has gone up by two thirds since the last general election, tax receipts have been £68 billion lower than expected and national insurance contributions have been £27 billion lower than expected. That impact on the state and health of the public finances has been a direct result of the stagnant wages and suppressed living standards in our society.
Several hon. Members
I hope that the hon. Member for Aldershot (Sir Gerald Howarth) can explain why the deficit has continued at such a level and whether he agrees that the fall in living standards has had that effect on our public finances.
I am grateful to the shadow Chief Secretary for giving way. I will tell him why we are in this situation today: the destruction of the public finances by his right hon. Friend the Member for Kirkcaldy and Cowdenbeath (Mr Brown), the former Chancellor of the Exchequer and the former Prime Minister. When will the shadow Chief Secretary apologise to the British people on behalf of the Labour party for having put them through this misery, which we have now amended? We are restoring the strength of the British economy and we have the fastest-growing economy in the G7. That is no thanks to the shadow Chief Secretary but is thanks to this Government. Apologise.
I expected better than that from a knight of the realm. I thought that such partisanship would be beneath the hon. Gentleman, but no. I did not quite hear him mention those words “global banking crisis” and perhaps I might remind him of the cause of the difficulties our economy has faced. He did not answer my question about the state of our public finances today. He seems to feel content that the Chancellor of the Exchequer, who promised that the deficit would all have been eradicated by now, has not done exactly the job he set out to do in 2010. The hon. Gentleman also did not explain why things have not turned out as the Chancellor promised.
I will give way to the hon. Gentleman, because I know that he will try his hardest to explain why things have not turned out as the Chancellor promised.
I would be delighted to explain it to the hon. Gentleman. It is about something called the structural deficit and the Opposition must acknowledge that the problem we face was created not just by the banking crisis but by the massive overspending of the previous Government. That is called the structural deficit.
Now we are coming to some of the issues. The hon. Gentleman feels that the Chancellor did not make an error when he promised back in 2010 that by now we would have no deficit and that it would all have been eradicated. The esteemed Chancellor of the Exchequer promised in his autumn statement that
“we will meet our fiscal mandate to eliminate the structural current budget deficit one year early, in 2014-15.”—[Official Report, 29 November 2010; Vol. 519, c. 532.]
That is the year we are in now. This is about the Government’s record for the past four and a half to five years.
Will my hon. Friend give way?
I will give way to my hon. Friend, whose constituents have been very much affected by the squeeze in living standards. He knows that it is the health of the economy and of the finances of working people across the country that determine the health of our public finances.
Will my hon. Friend explain to the hon. Member for Braintree (Mr Newmark) and everyone else who seems to have forgotten that, in 2008, the massed ranks of the Conservative party supported Labour’s public spending plans, so they cannot now pretend that they were not in this as well?
It is amazing how quiet Conservative Members are on that particular point.
Will the hon. Gentleman give way?
I will give way to the hon. Gentleman in a moment, because a particular part of my speech is dedicated to him.
On the “Today” programme this morning, the Chancellor of the Exchequer—for it was he—uttered the phrase:
“We’ve got on top of our debts and deficits.”
Those were the words—[Interruption.] If Government Members really believe that they have been reducing the national debt and that the deficit has been eradicated, they are either delusional or not feeling particularly well.
I thank the hon. Gentleman for giving way; he is being very kind. He has blamed the biggest peacetime budget deficit, which we inherited from the previous Government, on the global economic crisis. Will he confirm that the Office for Budget Responsibility’s public finances database clearly shows that public spending rose by £267 billion between 1997 and 2009-10, and that 71% of that rise took place by 2006-07—well before the financial crisis? Will he confirm that that is true?
I wonder whether the hon. Gentleman was making those points before the last general election. If he can point to evidence that he was warning, “No, those spending plans are entirely wrong and we shouldn’t be spending on schools and hospitals in that way,” I will give way to him again. Did he warn us about those problems at the time?
I thank the shadow Minister for giving way again, but I think the way interventions work is that we on this side ask the questions. My question is simple: was the OBR right or wrong about 71% of the deficit coming from spending before the recession?
The hon. Gentleman is misrepresenting the OBR’s views. It is clear, as the Institute for Fiscal Studies has said today, that the global banking crisis had a devastating effect not just on this country’s public finances, but across the world. Conspicuous by its absence from the hon. Gentleman’s comments was any evidence that he had said in the past that public expenditure plans were all wrong. The Chancellor of the Exchequer and the Prime Minister signed up to support all the previous Government’s proposals.
Does my hon. Friend agree that Government Members should be reminded of chart 1.1 of the OBR report, which shows that total managed expenditure rose from 36% to 40% of GDP between 1998 and 2008, and then from 40% to 46% by 2009? In other words, the biggest part came from the banking crisis.
If we had a Government who understood that a connection exists between living standards, the health of our economy and the health of our public finances, perhaps we could make some progress on deficit reduction and tackle some of those issues. Instead, recent figures show that the gap between what the Government spend and their income is perpetuating at a very high level. I think it came down from £80 billion in the first nine months of last year to £74 billion in the first nine months of this year. The deficit reduction strategy is a thing of the past for this Government, because they do not realise how stagnant wages have pulled the rug from underneath it.
Of course, the inconvenient truth for the Conservative party is that it cannot whitewash history. [Interruption.] A BBC news online article on Monday 3 September 2007, under the headline, “Tories ‘to match Labour spending’”, said:
“A Conservative government would match Labour’s projected public spending totals for the next three years, shadow chancellor George Osborne has said.”
The reason Conservative Members are getting so irritated is that they do not like being reminded that it was a global banking crisis. They like to airbrush that entirely from the record. That has been their strategy throughout, but we will not let them forget that there was a banking crisis across the globe. We needed to take greater action to regulate it, but I did not hear Conservative Members calling for stronger regulation of financial services; the truth was quite the opposite.
If we had a rational debate, we would see the connection between living standards, growth and the health of the public finances.
I will give way in a moment.
I am afraid that Conservative Members are not driven by rationality when it comes to a strategy for dealing with the public finances. They are driven by dogma. [Interruption.] Oh, yes. They are on an ideological crusade to shrink public services as a percentage of national income. Their plan, when they stand up to talk about these things, is not about eliminating the deficit at all; it is beyond that. The guiding principle of the Conservative party is a desire for public services actively to decline year after year after year.
That is why so many Conservative Members have joined that fabled Conservative group, the Free Enterprise Group of Conservative MPs. The hon. Member for Spelthorne (Kwasi Kwarteng) is not in the Chamber, but he has famously called for massive reductions in public spending. The Economic Secretary, who will wind up the debate, is also a member of the Free Enterprise Group, as is her colleague the Exchequer Secretary and the hon. Members for Macclesfield (David Rutley), for Wyre Forest (Mark Garnier), for Esher and Walton (Mr Raab) and for Dover (Charlie Elphicke). I am sure there are others, although perhaps of a lower ranking order within the Free Enterprise Group structure. [Interruption.] Well, I am not a member of the Free Enterprise Group of Conservative MPs and, with members like that, I am quite glad I am not.
That organisation reveals the true face of the Conservative agenda. It believes very much in shrinking the state and it is driven by that fundamental belief. It is highly dogmatic and has used the financial crisis as a pretext for reducing the level of public investment.
Will the hon. Gentleman give way?
The hon. Gentleman is a member of the Free Enterprise Group. Does he stand by its manifesto?
Let us talk about Labour’s spending commitments. The shadow Minister has been going up and down the country making £20 billion-worth of unfunded spending commitments. Would they be paid for by more borrowing or more taxes?
That was a good try, but the hon. Gentleman knows very well that we do not have unfunded spending commitments. Our manifesto will be fully costed and fully funded. He does not need to take my word for it: we would be more than happy to let the OBR audit all of the proposals in our manifesto and to undertake to validate that they are, indeed, fully costed. I wonder if any Government Members would like to support the idea that all the political parties should have their manifestos fully costed by the OBR. Can I see a show of hands?
There is one individual: the hon. Gentleman is an independent champion on Treasury matters. I wonder whether he would like to at least say that there is a strong case for letting the OBR cut through this political nonsense and make sure that we have proper independent validation of spending commitments. Does he agree with that?
I do—absolutely. In the early part of this Parliament the Treasury Committee looked at exactly that point and there was a big and heated debate about it. Conservative members were in favour of it, but Labour members were not, and they were led by the shadow Business Secretary, the hon. Member for Streatham (Mr Umunna), who was dead against it. What does the shadow Minister have to say about that?
Well, we are all in favour of it now and I am delighted that there is consensus. In fact, I am tempted to invite the hon. Gentleman to this side of the Chamber, but we have a rigorous application process and he would need to go through a number of other stages first.
The Conservatives’ strategy is failing and there are good reasons for that. They do not realise the important role that active Government can play in supporting our economy and improving living standards. Government and public investment can make a real difference, whether by guaranteeing apprenticeships, tackling unfair energy bills, raising the minimum wage, banning exploitative zero-hours contracts or action on housing and infrastructure to boost productivity. All these would represent a better plan but the Conservatives’ 1930s strategy, coupled with that trickle-down philosophy, is totally discredited. Lavishing tax cuts on the very wealthiest 1% is not just the wrong priority; it is also the wrong strategy.
Several hon. Members
I am conscious that there are many hon. Members who want to get in so I will limit the number of interventions hereafter, but how could I resist giving way to the hon. Member for South Derbyshire (Heather Wheeler)?
The hon. Gentleman is very kind. He speaks about tax cuts being only for the top 1%. Will he congratulate Conservative-controlled South Derbyshire district council, which is not only holding the council tax for the fifth year running, but is going to give a rebate in July to every council tax payer in the whole of South Derbyshire? They will all get a council tax rebate.
Local government matters are for individual authorities. I know that there are a number of authorities that are struggling financially and finding things very difficult, not least because the funding formula has been so heavily rigged and skewed by the Secretary of State for Communities and Local Government. I do not know the individual case of the hon. Lady’s district council. Individual local authorities will have to make their own decisions. Her constituents, like others, have to look at the situation in the round. The Government are very good at giving a little bit with one hand, and taking back so much more with the other. Her constituents know about the rise in VAT that she voted for and those cuts to tax credits, among other things.
Several hon. Members
I will give way one more time, then I must make progress.
I thank my hon. Friend for giving way. He is being far too generous to Government Members, who do not deserve it. In my council area, £328 is being stolen from every man, woman and child and 1,700 good quality public servants are being put on the dole, just to prove that the Government’s long-term economic plan is working. It is not a plan; it is a sham.
We need to tackle the blatant unfairness of the rigged funding formula for local government finance, which the Labour party has committed to do in government.
Will my hon. Friend remind Government Members that when the Government introduced their Local Government Finance Act 2012, they deliberately set up a system that penalised the poorest councils more than the richest councils, they took no notice of the amount of council tax that could be raised from different boroughs, and in doing so they destroyed the social services system, which is now leading to people remaining in hospital when they should be out—a prime example of a stupid cut which costs more in the end? [Interruption.]
Government Members are trying to shout down my hon. Friend because they do not like to hear the truth. The truth is that many of our public services are affected by the support and the funding formula given to local government. She is right to highlight the impact—
Will the hon. Gentleman give way?
My hon. Friend the Member for Warrington North (Helen Jones) is right to highlight the impact on our national health service of some of the devastating changes that have hit social care. She made her point well.
It is bad enough that the Chancellor and the Prime Minister fight so hard against the idea that an inclusive approach leads to a stronger economy and a better plan. [Interruption.] What is worse is that the Prime Minister, the Chancellor and Government Members fully intend to accelerate the failing plan for a further five years—[Interruption.]
Order. Conservative Members have had their fun in shouting across the Chamber. The debate should settle down now, with interventions when they are taken, but a proper debate. Mr Smith, if you have a question, it is normal to stand up on an intervention, not just speak by Christian name across the Chamber. Thank you.
I appreciate that, Madam Deputy Speaker.
Will the hon. Gentleman give way?
I may give way to the hon. Gentleman in a moment, but not just yet.
I want to pause for a moment and reflect on the implications of taking UK public expenditure on vital public services down to the 35% level that was announced in the autumn statement. These plans would mean that we are only halfway through the cuts. These are plans for the biggest cuts to public services since the second world war. The Office for Budget Responsibility says on page 148 of its report that
“the closest equivalent in the National Accounts implies that by 2019-20 day-to-day spending on public services would be at its lowest level … since the late-1930s as a share of GDP.”
The OBR goes on to say—Government Members may not have heard this—that
“total public spending is now projected to fall to 35.2 per cent of GDP in 2019-20, taking it below the previous post-war lows reached in 1957-58 and 1999-00 to what would probably be its lowest level in 80 years.”
That recalls a time before we had an NHS, when children left school at 14, and when life expectancy was just 60. That is why Paul Johnson of the Institute for Fiscal Studies said on 4 December that we can expect
“Spending cuts on a colossal scale…taking total government spending to its lowest level as a proportion of national income since before the last war.”
Several hon. Members
I seem to have hit a nerve with Government Members. I give way to the good-looking one.
That is one of the few points on which I agree with the hon. Gentleman. He has been quoting selectively from various institutions. He has just quoted the IFS. The director general of the IFS has said that
“if the Conservatives win the election they will neither, despite what the opposition would have us believe, destroy the NHS nor return the welfare state . . . to 1930s level of provision.”
Does the hon. Gentleman accept that, and will he now withdraw his previous comment?
With the greatest respect, I do not accept that. I will come to that shortly.
When we look at the effect on public finances of the plan that the hon. Gentleman has signed up to with the Free Enterprise Group and with the Prime Minister and the Chancellor, the effect on our public services, not least the NHS, could be exceptionally difficult and potentially implausible.
Paul Johnson of the IFS asks:
“How will these cut be implemented? What will local government, the defence force, the transport system, look like in this world? Is this a fundamental reimagining of the role of the state? ... If we move in anything like this direction, whilst continuing to protect health and pensions, the role and shape of the state will have changed beyond recognition.”
Is it any wonder that UKIP has backed Conservative plans? No surprise there.
Be under no illusions—the Conservatives’ pathway for the next Parliament is a statement of intent to wage war on public services, and people need to understand the tremendous risks involved. It is a major threat to the viability of public services, which would wreak havoc especially in non-ring-fenced areas such as policing, border controls, child protection and social care. Such extreme plans would decimate skills, infrastructure, research and development and science, undermining the competitiveness of our economy. Devastation on that scale would not be tolerable, which is why we suspect that the Conservatives have secret plans to hit household finances in other ways.
Several hon. Members
I want to make sure that other Members have a chance to contribute to the debate, so I will give way one final time.
The difficulty that Government Members have is the question of motive. When people across the country see Sure Start centres, police stations and NHS walk-in centres closing, underinvestment in schools and queues outside our A and Es, they know what a Tory Government have done already, and they know what will happen if we go back to their 1930s plan.
The whole country will be affected, including Scotland, Wales and Northern Ireland, if the Conservatives are given a further five years for their ideological plan. The plan has not just failed to date; it will continue to fail and will continue to harm those on lower and middle incomes and those who depend on public services. The Conservatives will not set out where their billions of social security cuts will hit, for example, so we have to take past performance as a guide.
Several hon. Members
I will not give way again, because I want to make some progress.
Tax credits, for example, have already been hit hard in this Parliament. The typical household is £1,127 worse off this year as a result of the tax and benefit changes introduced since 2010. Those who depend on tax credits to make ends meet need to be aware of what five more years of Conservative Government would mean.
There is a better, sensible and balanced alternative, a sensible fiscal framework aimed at getting the current budget into surplus and national debt falling as soon as possible in the next Parliament. We must make progress and cut the deficit every year. Where we make promises in our manifesto, supported by the hon. Member for Wyre Forest (Mark Garnier), they will be fully funded—we want them to be audited independently by the OBR—and they will not involve additional borrowing. We need workable efficiencies and spending reductions in non-protected areas. We have already published seven of our interim zero-based review reports listing examples of where those could be made. We need fairer choices on taxation, not a £3 billion give-away to the richest 1% earning over £150,000 a year. Fundamentally, we need rising living standards and sustained growth to repair tax receipts and control welfare spending, which has got totally out of control under this Government.
This Government’s failing plan has not eradicated the deficit, but it has left us with an NHS in crisis, the bedroom tax and 20 million meals served in food banks last year. Their sharp turn towards a right-wing ideological approach would cull public investment to levels not seen since the late 1930s. For our public services, for policing, for social care, for defence and for the NHS, at this election the stakes have never been higher. I urge the House to reject the Conservatives’ risky and extreme approach and instead back Labour’s fairer and better plan for the future.
Well, here is another opportunity to tell the House about the successes of our long-term economic plan. I must say that I am impressed by the Labour party’s courage in selecting the economic recovery for the last Opposition day debate of this Parliament, but not by its judgment. Given the catastrophic situation in which Labour left the country after 13 years in charge, Members might have thought that it would have the good grace to accept that our economic plan is putting Britain back on track, delivering growth, jobs and prosperity for hard-working households up and down the country.
It is right that we focus on spending totals, but there is an even better argument. A careful academic study of National Audit Office and Public Accounts Committee reports over Labour’s time in government recently found that a staggering £230 billion was wasted on incompetence, inefficiency and undelivered programmes. That is a real legacy of 13 years of wasted Labour government.
My hon. Friend is absolutely right. Indeed, as a distinguished Chair of the Public Accounts Committee, he was heavily involved in identifying that wasteful spending. One of this Government’s achievements is the measures we have introduced to reduce such wasteful spending. In particular, the efforts of the Minister for the Cabinet Office in pushing forward reform and identifying efficiency savings have reduced the cost of Whitehall strikingly.
Is not it disingenuous—some might even say slightly dishonest—to pray in aid references to 35.2% of public expenditure, as opposed to GDP, as ideological extremism when we need look back only 12 years to the Blair-Brown Government to find a time when the percentage was 35.9%, which is almost indistinguishable? Is not that trying to hoodwink and fool the voters, and is not that pretty dishonest?
My hon. Friend makes an important point. The statistics he uses are absolutely right. With regard to public spending on services—I will turn to the detail in a moment—we are talking about returning to the levels of 2002-03, before the previous Government lost control of public spending.
The tenor of the Opposition’s argument is that public spending ought to be higher. Given that they are disagreeing with our plans, should they not specify how much higher they would want it to be?