Tuesday 17 March 2015
[Sir Edward Leigh in the Chair]
Thames Valley Technology Sector
Motion made, and Question proposed, That the sitting be now adjourned.—(Harriett Baldwin.)
Sir Edward, I am delighted to lead this debate under your watchful and noble eye—that is a prediction for the future, I hope. I am particularly delighted that the Backbench Business Committee has allowed this debate on Thames valley technology, because it seems to me that all the good things that we want for society in the future will be based on technology.
Let me explain what I mean. Whether we are talking about empowering citizens and voters with more information through the internet and online services; empowering consumers with lower prices, through greater access to competitive pricing on products and services; enriching the academic world, and enabling it to thrive through online access to research material and to coursework for students; driving economic growth through the creative industries; recreational activities such as gaming; more serious activities—business activities—relating to pretty much every area of our lives, including financial technology, banking services or business-to-business services, the digital world is at the heart of facilitating that growth.
As someone who came to Parliament from a technology background, building technology businesses both online and offline, I am not only fascinated by the developments taking place, but very cognisant of the benefits that they will bring for democracy, education and economic growth. Digitisation has the potential to bring new products to market, boost jobs and growth and transform the way we work. Even in this place, that transformation has started to happen, with Hansard online and with TheyWorkForYou, through which we are held to account for how long we speak, what we speak about and how we vote—not that that is a signal that I wish to speak for the full 90 minutes today, because I want to leave plenty of time for other hon. Members to intervene and make observations about their constituencies.
I am pleased that the Government have played a very positive role in encouraging and facilitating the digital sector and the creative industries, and in making digital Britain something that can be achieved in reality. As chairman of the Parliamentary Office of Science and Technology and of the parliamentary space committee, I have seen at first hand the strides that we have made in this Parliament, both within Parliament, with the use of scientific knowledge and of the digital, and in the wider economy. We have a thriving space industry and plans for driverless cars. The broadband roll-out is almost there; we hope that it will be there shortly. There is also the place of computing in the national curriculum. All those things show that the Government are helping to move the economy and society in the right direction. Nevertheless, there is some way to go to remove the obstacles that remain in the way of a fully digitised economy.
As the title of the debate suggests, I want us to stop and stare and focus on the Thames valley region. It includes my constituency of Windsor, which is at the forefront of digital innovation, but also areas across Berkshire, Oxfordshire and Buckinghamshire. Digital technologies and businesses have quite a large presence in my constituency, and I think that has been instrumental in some of the results that we have seen locally. Since 2010, unemployment is down by half and youth unemployment is down by two thirds. I think that that partly reflects the fact that 13% of businesses in the Windsor constituency are involved in information and communications technology industry activities, compared with the national average of about 8%. The number of enterprises operating in the tech sector in the Thames valley grew by 13% between 2011 and 2013, and the area boasts the second highest start-up rate outside London. Thames valley, Berkshire, is home to the offices of more than 200 Fortune 500 companies, including Konami, which relocated its European headquarters from Germany to the Windsor constituency last year, as well as 11 of the top 15 global software companies, so in the Thames valley, we really are a powerhouse.
I congratulate my hon. Friend on securing this important debate. Does he agree that more companies will move to the Thames valley when they can arrive at Heathrow and turn left? The new rail spur will be an enormous boost. It will bring 42,000 jobs to our region, when it happens. Is he, like me, dismayed that it is taking until 2021 for it to happen, and that Network Rail feels that it has to have a pre-consultation, a formal consultation, a post-consultation, and then a consultation on the planning permission? People in the Thames valley are looking at those kinds of delay with frustration, because they want these infrastructure projects to go ahead.
My hon. Friend makes the point in a passionate way, and I wholeheartedly concur. Whether we are talking about Crossrail or the new link from Heathrow to mainline railway stations and the mainline network, these are arteries that will pump business, commuters and tourists into the Thames valley, and it is deeply frustrating that sometimes these projects take such a long time. Clearly, we have a planning framework. Perhaps the new Government will take a look at that. However, there is no doubt—I do not think that there is any controversy—about the benefits of having better rail links, better transport links generally and better broadband links to Berkshire and the Thames valley. That will make a huge difference and will add to the growth that we are seeing.
The wider Thames valley region can be seen as the largest technology cluster—I will come to clusters in a moment, because I am sure that you, Sir Edward, are fascinated by technology clusters—in Europe, with its unique blend of established technology corporates, innovative start-ups and small and medium-sized enterprises, which together account for 16% of all enterprises in the sub-region. That is double the national average, which stands at 8%. The proportion of people employed in the ICT sector is more than twice the national average in Windsor and Maidenhead.
The region is also home to world-class research facilities such as the university of Reading and the Atomic Weapons Establishment. The region is a natural fit for developing trends in ICT, such as big data and financial technology services. A new multimillion-pound world-class environmental science big data research and analysis centre is due to open at Reading university later this year.
Just last month, I visited an exciting new company in my constituency that is at the forefront of a sea change in the way finance is raised for property development. Proplend is a peer-to-peer lending site for property owners. It allows them to find alternative finance, and to circumvent the tightly controlled financial services industry, which in many cases is still too worried about the risk of lending to smaller clients because of the bureaucratic burden of doing so. That is not to say that the banks and the big corporates do not have a place among the new lenders, but for the first time in 100 years, we have seen new challenger banks begin to appear on high streets. That is pretty significant, because challenger banks are able to appear on the high street only because of the digitisation of banking. The overheads are so much lower and the ability to monitor, regulate and provide services is so much easier through technological means.
I was proud to be at the opening of a branch of Metro bank in Windsor in 2013. Metro bank is the first new high street bank in the UK for more than a century. Those types of financial innovation will help to transform the way we do business, but also, with access to the internet and digital technologies, we will be better able to educate our young people as well as our graduates, and we will be in a better position to enrich the lives of so many people.
With public services coming online at an ever-increasing rate, it is important that in areas such as Thames valley, Berkshire, and across the country, broadband roll-out continues rapidly. That is why I am glad that the Conservatives in leadership have made vital changes over the past few years. A personal favourite of mine was the decision to put computing at the heart of the national curriculum. When I was at school, computers were hardly in evidence. We had punch cards to do our maths tests in the mid-’70s, but that was about it. Now, ICT lessons are not just about learning how to use PowerPoint, a spreadsheet, a word processor or presentation software; they are more about the process of learning and analysis required to create programmes. The digital and technology worlds encourage that sort of analytical thinking, because in order to solve a problem, one has to understand it and be able to encode and systematise it. Such analytical thinking is incredibly helpful if we want to live in a society that is rational and able to solve its own problems.
This is probably a reflection of my age, but children now learn programming and coding of the sort that in my generation, one learned only after one had finished school and university. After I studied agricultural economics for my BSc, I was immediately attracted to the information technology industry, because I recognised the overwhelming power of the internet and the digital to accelerate economic growth and the social and economic developments that we want. That is why the new curriculum is important. The Government’s work to attract qualified teachers and retrain existing ones is also welcome.
The Government have identified eight great technologies to focus on, which include big data and the space industry. We often think of space as being like “Star Trek” and involving manned space flight, but there is more to it than that. I know from my time as shadow Science Minister many moons ago that the space industry has for many years achieved double-digit growth of 10%-plus. On average, for the past 10 or 15 years, it has experienced 7% to 8% growth per annum. Space is not just about exploration and “Star Trek”; it is about our mobile phones and our ability to communicate, to access broadband and to access public services.
My hon. Friend is making a powerful case. He is an agricultural economist by training, and farming is also affected by space. A farmer can now drill a field of corn using satellite technology, which requires less input—fewer sprays and fertilisers. That keeps our rivers cleaner. A different sort of person is required to come into the business. My hon. Friend is making a powerful case about education, but I am interested to know how he believes we can ensure that more people understand that some jobs that were once considered to be manual and functional now require a high degree of understanding about IT.
Absolutely; the landscape, if I can put it in such a way, in agricultural businesses, estate management and farm management has changed enormously. Satellites and GPS guide some of the new combine harvesters and planting devices, and the digital world permeates almost every part of our lives. If we look at farming productivity across the world—some developing countries are one step ahead of the UK in this regard—we see that many of the newer farming technologies in use are based on the digital. Companies across the Thames valley are, and have been, instrumental in developing some of the devices and monitoring technology required for modern farming. There is a massive population explosion across the world; we are heading towards 7 billion people on the planet, of whom perhaps 64 million or 65 million will be the UK. They will all need to be fed, and the digital world and digital technologies will enable us to make the great leaps in productivity that will be required.
If we consider what it means to be a human being, our DNA is ultimately digital. Initiatives such as the human genome project, and the 100,000 genomes project in the NHS, will enable the world to make huge leaps forward in health care technology based on the digital world. I cannot overemphasise the importance of such new technology and development. As a Conservative, some people might expect me to be nervous about such dramatic and radical changes to the way in which we live. In fact, the digital is an evolutionary process. There are big leaps from one decade to the next, but every single process in technology is incremental.
As I have said, the Government have identified eight technologies on which to focus. I am particularly pleased about big data and space, because digital technologies in space allow us to monitor earth’s systems, so we can see where there is a forest fire or a tsunami and work out where emergency services need to be deployed. Clearly, those technologies have a military application as well. They also govern our mobile phones, broadband technology, GPS in our vehicles and so many other things.
I look forward to seeing the way in which big data will transform our public services. Government projects, many of them run from within the Thames valley, are already looking at and analysing all the data sets that the Government have at their disposal through public bodies, and working out whether those data contain patterns. We have recently had some debates about security, particularly in the light of the threat from ISIS and home-grown terrorist challenges. By looking at patterns of data, one can identify activity that may need to be looked into. Without digital development, it would be tricky to analyse those data.
ICT is not simply about business; it is also about research. The Government’s decision to protect the £4.6 billion science budget—I claim a small amount of credit for that from my time as shadow Minister—has helped to keep us ahead of the global curve in new developments when it comes to technology and the digital. It would have been easy after the last election, especially given the constrained financial situation in which we found ourselves, with a £160 billion deficit, to say, “Right, let’s cut the budget for science and research.” Thankfully, we refrained from doing so. I echo William Waldegrave, who said that even in straitened times, the two budgets that one must never cut are those for basic scientific research and for security. We must always take those matters seriously, and I am glad that the coalition Government have done so.
Thames Valley Berkshire local enterprise partnership has been instrumental in driving growth in technology. The LEP has established a Berkshire business growth hub to support and upskill small and medium-sized enterprises, and it will invest EU funds to fast-track the creation of the first ever science park in the region. I am always nervous about mentioning the EU, because doing so tends to lead to a fairly strong reaction. It is useful to gain EU funds in this case, however. We pay into the EU, so bidding for EU funds and getting them back to the UK is a jolly good thing to do.
I apologise for intervening yet again, but my hon. Friend has touched on the European single digital market, which is worth mentioning in this context. It can bring our constituents, particularly in the Thames valley, the benefit of a proper single market. That is what most of our constituents want from our relationship with the European Union.
I am sure that it would. My hon. Friend brings me on to my next point, which is that although there may be many negatives to being members of the European Union, the single market is one of the great benefits. Our great challenge, particularly in the digital world—as I can see from the businesses in Windsor and across the Thames valley—is to ensure that competition continues and that there is a level playing field for the supply of goods and services through digital media. There are questions about whether some larger companies, search engines and suppliers of goods and services across the EU are in a monopolistic position. It is easy for us in this place sometimes to suspend our view that markets should be competitive because, somehow, digital is different, but digital is exactly the same as everything else albeit at a far more rapid pace. It is vital that Britain is part of a functioning single market that offers fair competition in both the digital and terrestrial worlds. We will never stand by and allow the manufacturer of a particular good or service to have 95% market share. In the same way, it is important that both the EU and the UK ensure that competition exists in the digital world so that people have a choice about where they get their goods and services online.
Thames Valley Berkshire is working with neighbouring LEPs to align resources behind the 5G innovation centre at the university of Surrey. In 2014, the LEP injected a significant amount of money, about £145,000, in Connect Thames Valley Tech—ConnectTVT—to identify and support at least 100 start-up companies by the end of 2015. New developments bring new challenges as well as opportunities, and some issues surrounding those new developments have rumbled on without a clear attempt to draw lines and clarify what the Government should be doing. I will highlight a handful of areas that an incoming Government will need to address in Thames valley, given the high presence of digital businesses and the high levels of economic growth and employment in the area. I am interested in the Minister’s comments, but these are not demands; they are observations. I recognise that, with the work that has already been done, there may be other areas to address.
An awful lot of our private data are out there held by commercial companies, the Government and the public sector, as well as on our home devices, iPhones and PCs. Do those data belong to us as citizens? Do they belong to the Government, God forbid? Do they belong to those private companies? Although many services, sites and businesses have good privacy statements covering people’s information when they access goods and services, I am not sure that many people read those privacy statements. It is important that, at some point, we know to whom those data belong. With the incredibly quick advance of digital, the data that we put on individual websites or applications can easily be spread and shared with all sorts of people whom we would not wish to have them.
A case in point might be 23andMe, which is an American service through which people can analyse their DNA. I had a go the other day, and it is fascinating. My results show that I am clearly not a superhuman, but I should hopefully live a relatively long time. If we are having our DNA analysed—our DNA is at the heart of whom and what we are—we need to be clear about who owns those data. If someone is processing our data, we need to know how long they are able to hold on to them and whether they are allowed to pass them on. Although the privacy statements and data-handling statements on such websites may be attractive, are we secure in the way in which those data are held, used and owned?
The second important area—I have touched on this already—is competition. We sometimes glaze over when people start talking about digital. We think it is all modern and trendy, and perhaps some of the principles that we hold dear in terrestrial marketing and businesses are not necessarily the same in the digital world, which is a strange place in which things happen quickly. With the permeation of digital throughout all our lives, it is more important than ever that the online economy is as competitive as the rest of the economy. Some good headway has been made, particularly with search engines, at European Union level, and I am glad that some of that regulation has rippled through to the UK. I am sure we could have done that ourselves but, given that the EU has done the work, it is good that the regulation has rippled through into our legislation. We must never forget that it is not just growing businesses or innovation but competition between businesses that drives down prices and spurs innovation. There may be more work to be done to ensure that we do not have any closed shops on the internet. We have had a challenge with our energy firms and, to be honest, many energy firms are now largely digital. They may supply some goods and services, but their main processes and main business are digital. We could learn some lessons from the apparent lack of competition within the energy markets.
Centrica, which is a fantastic business, employs hundreds of people across my Windsor constituency. I have been to see its trading floor and some of its operations, and it is striking that about 80% of those staff are in the digital world. They do not do much with gas and the supply of energy; they use programmes, algorithms and applications to supply goods and services. They are technicians, programmers and analysts; they are not gas workers in the traditional sense.
The third part of ensuring that Thames valley tech is healthy for the future is in addressing bureaucracy. Unforeseen obstacles created by old regulations often cause difficulties for businesses. We should encourage a technology neutral approach to disruptive innovation that provides a framework for “permissionless creativity.” The Minister is behind this country’s creative industries, and he has done an awful lot in his portfolio to ensure that those industries thrive, but we need to be clear that inventors, particularly in the digital world, should not be hampered by regulations that were never meant to govern what they do. There also needs to be clarity on intellectual property that allows inventors to profit from their products, and particularly from newer products and services that are being created day by day, week by week and month by month in the Thames valley and beyond. We also need to ensure that structures are in place so that corporations, particularly in the IT sector, are not able to hoard patents and hold up progress in those markets.
The fourth area is the concept of clusters. A lot of good work has been done on clusters. When I was shadow Minister, my right hon. Friend the Member for Havant (Mr Willetts) and I had a close look at the definition of a technology cluster. That issue faces the Thames valley head on. I read with great interest the “Tech Nation” report by Tech City, which was released just a few weeks ago. It is a fantastic report that canters through all areas of digital technology, including both the benefits and the challenges to the nation. One little area about which I am slightly concerned is the lack of clarity on the definition of a technology cluster. The report sometimes refers to Oxford, the Berkshire cluster or the Reading cluster, and in the not-too-distant future, if we are to take technology clusters seriously, we need a better working definition of what they are and of their benefits and disbenefits. On its own, the Thames valley might constitute the biggest technology cluster in the whole of Europe, which is a key point. From my understanding of the area—my Windsor constituency is very high tech—I think that Thames valley is the largest technology cluster in Europe, but the Government need to do a little more work on the definitions in terms of investments and enterprise zones.
The fifth and final point is that we cannot have a thriving technology cluster unless businesses and homes in the region have significant levels of broadband access. I am delighted that the Government will certainly meet their broadband roll-out targets in the Windsor constituency. The other day, I mentioned in a question on the Floor of the House that, in the past, my wife sometimes looked at me suspiciously because I was up very late at night fiddling around on the internet and she was wondering what I was up to. [Laughter.] Exactly. Then I simply point out that our broadband access is so slow that when I log into the House systems to do my constituency correspondence, it takes an awfully long time. Thankfully, a few weeks ago, superfast broadband rolled out to my area of Old Windsor, and now it is like lightning; I can go to bed at a reasonable hour. That is my excuse, anyway.
Access to superfast broadband is important. As my hon. Friend the Member for Newbury (Richard Benyon) pointed out, although farmers must log in online to get their rural farm payments, a huge number of farms throughout the United Kingdom do not have access to broadband, so they cannot. I would nudge the Minister on this issue, although I appreciate that we are now at the end of the coalition period and might need to wait several weeks to find out what happens next. An opportunity may well have been missed on this issue. We have been rolling out fibre, which is of course essential for the majority of households in this country, but if we want 100% superfast broadband coverage, it can be done within a few weeks.
I will explain how. Although we will reach 90% and potentially 95% coverage within the next couple of years, there are certain areas where it is not economically viable to install fibre 2 miles down a country track to get to two or three homes. However, we already have satellites that can give 30, 50 or 60 MB links straight from the skies. Ultimately, although the investment has been worth while and roll-out is pretty much on track—that is a great step forward, and I thank the coalition Government for it—we must open our minds in the next Parliament to achieving broadband roll-out to every part of the country using satellite broadband. I am a bit disappointed that we did not pursue that route more actively earlier. It is no deep criticism, however, because we are pretty much on track; I simply nudge the Minister in that direction, should he be in the same job after the election, as I hope he will be, although preferably as a right hon. Member. Is he a right hon. Member at the moment?
Okay. Preferably he will have “right hon.” at the beginning of his title. Some great broadband pilot schemes are coming from the Minister’s Department, which are welcome, including the point-to-point beaming of broadband to smaller villages and hamlets around the country, but again, I would like a little more focus on using solutions that are already available to access hard-to-reach areas.
We have many great businesses in Windsor. Indigina Technologies and Imagebase Technology do software design, and Honeycomb Digital does digital marketing. When it comes to education, of course, we also have East Berkshire college and many others running new technology curriculums, giving young people practical skills in state-of-the-art classrooms and making good use of broadband locally.
I am a great believer in the power of science, technology and the digital. To be party political for a moment, I believe that the digital world is part of the Conservative vision of the world. It changes the data asymmetry between Governments and public services, enabling citizens to see the same level of data. If we use it correctly, citizens will certainly become more powerful, and the state will gradually become less powerful. It is interesting that the Thames valley is rather Conservative in the complexion of its MPs, which is a good thing—
It is also significant because consumers get choice, and technology is a wonderful way of presenting choice. I hope that in years to come, through some of the wonderful and innovative companies in my constituency and across the Thames valley, new applications will be developed so that even when we decide that we want to use a public service, it will be easy to do so on our iPhones, smartphones and PCs.
To give an illustration, somebody with a family who is reasonably well-to-do may want to take their child to a doctor or go to a doctor themselves, or have an operation at a particular time. Clearly, that might not be possible on the NHS, due to waiting lists and the routine that must be followed; it can take eight or sometimes up to 12 weeks to get to that position. If there were an application, the digital world could deliver a choice. Someone who could afford to pay and chose to pay—there would be no coercion—might be able to go to a particular site that said, “You can have an appointment with your local GP in about a week’s time, or you can have an appointment on Sunday afternoon at 3.27, when you want it, but you will have to pay for a private GP.” It might also show slots for the less well-off supported by voluntary sector organisations and charities. Technology can present consumers and public service users with choices.
That is not to say in any way that the NHS should not exist in its current form, free at the point of delivery; it is just about leveraging more resources. If people have an easy choice before them to receive a service in a different way using their own resources, existing resources remain in the NHS. That is a great way to boost resources in the NHS. There are so many ways that technology can empower consumers and citizens. It is incredibly important that we push on and ensure that we are not resistant but ready to embrace the benefits that digital technology can bring by boosting innovation, growth and citizen and consumer power, and by enhancing people’s experience not just with gaming but with education and access to research.
Finally, I welcome the coalition Government’s work on this issue. We need to consider satellite broadband and review what we mean by clusters and what the Government’s role is in supporting them, but on balance, I think the glass is half-full. We live in a far better place technologically than we did five years ago. I hope that that process continues, and that my constituency continues to be at the heart of those innovations. The whole constituency of Windsor is a great place to live, and Thames valley Berkshire is the largest and one of the most dynamic digital clusters in Europe. Long may it reign.
It is a pleasure to serve under your chairmanship, Sir Edward. I wish you and other hon. Members a happy St Patrick’s day.
I enjoyed the contribution of the hon. Member for Windsor (Adam Afriyie). He hinted, far too modestly, at his considerable knowledge and experience of the technology sector, having been an entrepreneur in the field before coming to the House. He has demonstrated that passion and knowledge admirably. I praise him for his great work as chairman of the all-party parliamentary group on space. It is a leading technology not only in Britain but for the rest of the world. Britain is well placed to be a leading player in the space industry of the future. I agree with the ambition to secure 10% of the global space market, which represents £40 billion, by 2030. It is incredibly admirable how he advocates for the space industry in this House and throughout the Houses of Parliament.
I welcome the Minister for Culture and the Digital Economy, the hon. Member for Wantage (Mr Vaizey). His constituency covers a large part of the area discussed by the hon. Member for Windsor. On the space industry, the Minister will be aware that Harwell in his constituency is the nucleus of a great and exciting emerging space industry cluster; that must continue in future.
It is clear from the contribution of the hon. Member for Windsor that the Thames valley has considerable strengths in the technology sector. As he mentioned, the area boasts the European and global headquarters of more than 200 Fortune 500 companies, such as Microsoft, Oracle, Vodafone, Fujitsu, Johnson & Johnson and Honda. Huawei, one of the fastest-growing telecoms companies in the world, recently moved its European headquarters to Reading.
One structural weakness of the British economy is the widening productivity gap between us and the rest of our economic rivals, but the technology sector shows that we in Britain can resolve that. It has demonstrated the highest productivity of any sector in the UK economy, and has powered ahead in the past 10 years.
This sector has enormous potential. TechUK estimates that the internet of things will reach a global market value of $7.3 trillion by 2017. The hon. Member for Windsor mentioned big data. Big data and data analytics will have a global market value of $32.4 billion by 2017. And wearable technology will be worth $70 billion by 2024. The world is changing fast, but it is clear that the Thames valley can develop and evolve its comparative advantages in this important sector, and create more jobs and wealth, not only for itself but for the rest of the United Kingdom. However, in order to achieve that potential, the area needs to address several elements, as we heard time and time again during the hon. Gentleman’s remarks.
The first point that I will address is skills. The UK Digital Skills Taskforce, led by Maggie Philbin, has stated that we face a growing shortage of digital skills. The Science Council has stated that the information and communications technology work force will grow by 39% by 2030, and O2 concluded in 2013 that around 745,000 additional workers with digital skills would be needed just to match existing demand between 2013 and 2017. Baroness Lane-Fox has gone further, saying that a million new tech jobs will be needed by 2020.
The Thames valley is well-placed to take advantage of this growth, but skills shortages remain a problem for the area. I want to avoid engaging in partisan hectoring and criticism, but how are the Government addressing this problem? In order to have a long-term industrial strategic approach, it is necessary, with the full co-operation and indeed leadership of industry, to marry up business policy with education and skills policy, and to ensure that they are aligned. The hon. Gentleman talked about coding and computing being part of the curriculum, which is a very welcome step, but how will we in this country ensure that we gain the digital skills that we need by making sure that, from the earliest possible age at primary school, the curriculum is developed through, so that the workers of the future will be well-placed to get well-paid, fulfilling tech jobs?
It is important to link different parts of business policy with other aspects of Government. So, does the Minister think that the Government’s immigration policy addresses this issue? I am not suggesting for one moment that we have an open-doors policy, but ensuring that the UK is a great destination, both for inward investment and global talent, is incredibly important. Has the Minister considered several points made by techUK about the field of immigration, such as reinstating the two-year post-study work visa and extending the tier 1 exceptional talent visa beyond start-ups to scale-ups, which I will come on to in a moment? How are we making sure that immigration policy is geared up towards fulfilling the potential of the technology sector?
One of the problems regarding skills could be exacerbated by the magnet of London’s Tech City pulling talent away from the Thames valley and other regions. Richard Devall, a partner at the law firm Pitmans, has recently been quoted as saying:
“We have become an established tech region at the expense of home-grown start-ups. Local and even global talent is going to places like London because it is perceived as ‘where it’s at’. People still don't know what the Thames Valley offers. The pull of London’s east end Tech City is immense for a young techie and the Thames Valley is losing out, certainly on global talent.”
The Thames valley area is often seen as a destination for large and mature companies in the tech space. There is nothing wrong with that whatsoever, as large companies provide great employment and can nurture a wide cluster or ecosystem of companies through their supply chain. Nevertheless, this issue has been identified as a challenge for the Thames valley, not only by Richard Devall but by Louize Clarke, co-founder of ConnectTVT, a new accelerator community in Reading. She said:
“It appears we have decided as a region that we are going to be mature, and not do anything to attract the next generation of technology start-ups. We are just not looking at that community locally, and they are going elsewhere. Yet, if you support a start-up community it will help improve local talent, because not all start-ups succeed, and people within them learn, then go into other local businesses.”
I fully accept that this sector is not the sole responsibility of Government, but what are they doing? Are they working together with the local enterprise partnerships to ensure that start-ups, scale-ups and the whole cluster or ecosystem that the hon. Gentleman for Windsor mentioned is actually being developed in the Thames valley?
As part of that wider cluster, procurement can be used to stimulate growth and scale-up in smaller firms. The Government have a target to ensure that 25% of central Government spending on procurement is being awarded to small and medium-sized businesses. Given that we are now in 2015, when the target was meant to be met, could the Minister update the House as to how the Government are progressing towards achievement of that target? Also, given the strength of the tech sector in the Thames Valley, how does that area fare when it comes to winning contracts from both central and local Government?
More emphasis should also be given to scale-up companies. An excellent report last year by Sherry Coutu, who is herself a prominent tech entrepreneur, stated that if we closed the gap of scale-up between ourselves and the US and other leading economies, in the short term—within three years—an additional 238,000 jobs and £38 billion in additional turnover would be possible, and in the longer term—by 2034—150,000 net additional jobs and £225 billion additional gross value added in the economy could be provided.
That excellent scale-up report from last year, with its ambitious but achievable recommendations, does not seem to have progressed with Government. Can the Minister give the House an update as to how the Government are taking forward the recommendations in the report? Can we expect to see a detailed Government response before Dissolution? How will the Government ensure that local decision-makers—particularly LEPs, which are mentioned a lot in the report and which are very relevant to the Thames valley—are included in the planning for the report’s implementation and delivery?
We have heard from a number of hon. Gentlemen today—both the hon. Member for Windsor and the hon. Member for Newbury (Richard Benyon), who is no longer in his place—about how infrastructure is vital if the Thames valley area is to achieve its vision of prosperity. From a northerner’s point of view, the tech sector in the Thames valley is often seen as being the M4 growth corridor, which gives an indication of the importance of the road network. However, the importance of rail has also been mentioned in the debate today.
In addition, will the Minister accept that in order to attract global talent and inward investment, a co-ordinated aviation strategy is also needed? In the debate today, we have only heard about aviation in passing. However, discussion of Heathrow’s future is important. What should the Government be doing with regard to a swift implementation of the recommendations of the Davies airport commission, to ensure that our international competitiveness is not compromised and that linkages with the growth hubs of the world are developed?
On the subject of infrastructure, the Minister will recall that about a week ago we had a debate in Westminster Hall on broadband; he will remember because, to be honest, he was quite grumpy, with respect to the success of the broadband roll-out.
Broadband has again been referred to a number of times in today’s debate. The hon. Member for Windsor mentioned how broadband can be not only about fiddling late at night but about ensuring that broadband connections are the arteries of economic growth in the future economy. How can we ensure that that is the case? And what is happening with regard to roll-out of broadband, both in the Thames valley generally and in its rural areas?
I would suggest that linked with all of this debate is an emphasis on the need for long-term policy stability and certainty that transcends Parliaments, ensuring that it is recognised that the future of this country’s prosperity is based upon embracing a knowledge-based economy and ensuring that Government can work together with industry to achieve the tech sector’s enormous potential and benefit from its comparative advantages. That being the case, the Minister will know the importance of a long-term innovation strategy in science, particularly when it comes to providing a long-term funding framework to develop science, innovation, research and development.
I am very conscious that tomorrow is the Budget and I know that the Minister will not pre-empt any announcements that the Chancellor might make. Nevertheless, could he give an indication of the Government’s position on making sure that that long-term funding framework for science and innovation, which is necessary to exploit the advantages that the tech sector can provide, is being recognised and put forward by Government?
My final point is about Europe and the EU. Europe is an important part of our marketplace and of how we will derive prosperity. The development of the European digital single market is an important part of the tech sector’s future. I agree with techUK’s firm assertion that the EU digital single market should be shaped and led by Europe’s most successful digital economy, which is the UK’s economy. We should be leading, not following. We should be shaping it according to our own interests, not sniping on the sidelines. That being so, will the Minister explain how he, and other colleagues—but particularly him, because he takes an interest in this—are shaping the European digital single market and ensuring that it is to our key advantage?
This is an important debate. The tech sector is a key part of future economic growth, prosperity and employment for this country, with a particular emphasis on a knowledge-based economy. The Thames valley is well placed to be at the forefront of that sector. However, it requires a co-ordinated, integrated industrial strategic approach that is industry-led, with join-up between central Government and local government and industries. Huge prizes are on offer with regard to the tech sector and we can achieve those with such a co-ordinated approach. I know that the Minister will want to talk about how Britain can succeed in the tech sector, both now and in future.
May I say what a pleasure it is to serve under your chairmanship, Sir Edward? I wish you a happy St Patrick’s day. As a descendent of Henry VII, Lord of Ireland, I know that this day in particular means something to you.
I congratulate my hon. Friend the Member for Windsor (Adam Afriyie) on securing this important debate. He spoke without hesitation, deviation or repetition for 37 minutes. He could have spoken for a lot longer, because he has a great story to tell about the successes in the Thames valley, including in his own constituency.
I thank the hon. Member for Hartlepool (Mr Wright) for his slightly shorter, but no less potent, contribution. Were things to turn out differently, he would make a fine Business Minister. Sadly, as his party is going to lose the election, we can simply dream of what might have been.
Let be begin with some important statistics about the Thames valley, Berkshire. Business start-ups are at an all-time high. Almost 9,000 businesses started up across the Thames Valley Berkshire local enterprise partnership area in 2014, an increase of nearly 50% on the year before. My hon. Friend talked about the importance of the IT sector, and no wonder, because it represents about a quarter of the gross value added in Berkshire, compared with just 6% nationally.
As a Government, we are supporting the growth in Berkshire. As my hon. Friend mentioned, under the growth deal there will be some £100 million-worth of investment. We estimate that that could bring up to 20,000 jobs and 12,000 homes and £40 million-worth of public and private sector investment. In addition, we have supported 10,000 new homes in Wokingham with £24 million. We are investing in transport infrastructure, with £10 million for Maidenhead station. The huge redevelopment of Reading station is costing some £800 million.
I will talk about broadband later, albeit more philosophically than previously. The hon. Member for Hartlepool was right to say that I was grumpy in last week’s debate about broadband. Not that I spent any time on Twitter during my hon. Friend’s speech, but a Deloitte media and telecoms conference is going on at the moment, and the Twitter feed is all about how grumpy the BT man is during his presentation. He is obviously as fed up as I am with hearing the criticisms of the broadband programme, which has been hugely successful, particularly in Berkshire, where £6 million of investment will ensure that we reach 97% coverage by 2017. More than 6,000 homes there had broadband by the end of last year, thanks to this programme.
I will talk about education in some detail as well. My hon. Friend mentioned the £2.3 million that the Government have invested in three new solutions labs, in partnership with local further education partners, to provide science, technology, engineering and maths skills. We think that the solutions labs will bring 250 new jobs to the area, as well as 130 level 3 apprenticeships, 210 higher apprenticeships, 220 level 3 STEM qualifications and 140 STEM traineeships.
It is important to recognise the contribution of the British Business Bank in investing in British businesses, providing more than £890 million of new lending to 21,000 small businesses.
The “Tech Nation” report, mentioned by hon. Members, shows that one in five enterprises in the area we are talking about are tech companies. Indeed, as my hon. Friend said, some of the biggest technology companies in the world are based in Reading, including Oracle, Microsoft, Symantec, Huawei and Nvidia.
The university of Reading is home to a number of science and tech-based specialisms. It has just received a catalyst fund grant of almost £6 million from the higher education funding council for a multi-million pound environmental data centre.
These are all good news statistics for the Thames Valley Berkshire area. Given that I am standing in for the Business Minister, as usual—it seems to be my main role in life: it is nice to find a role after all these years—I shall use this opportunity to big up the Thames Valley Berkshire LEP neighbour, the Oxfordshire LEP, the star of which is, of course, my own constituency of Didcot and Wantage.
My hon. Friend, who is chair of the parliamentary space committee, talked a lot about the success of the space sector. The hon. Member for Hartlepool was kind enough to point out the role of Harwell—in my constituency—in that sector. My hon. Friend will be interested to know that three years ago, there were about 200 high-tech posts in the space sector and now there are nearly 500, and it is estimated that in the next 15 years there will be 5,000 posts, making Harwell the largest multinational space complex in Europe.
Harwell is where the satellite applications catapult is based. My hon. Friend the Member for Windsor, and my hon. Friend the Member for Newbury (Richard Benyon), talked about using satellites to help farmers, which is precisely what the satellite applications catapult is there to do. It is there to show lots of businesses that may not think that satellites have any role to play in their business how those can help them enhance what they do.
In the past 18 months, the UK’s space gateway at Harwell campus has grown from just over 40 to 60 organisations, and only 10 years ago there were fewer than five. This summer, both the European Space Agency’s European Centre for Space Applications and Telecommunications building and the Rutherford Appleton Laboratory space environmental test building will open on the campus.
Just down the road, as part of this Thames valley success story, 1,000 additional jobs have been created at Milton Park just in the past 12 months. Of course, we remain the UK’s, and indeed the European, centre for cryogenics. All this is good news.
Let me start to address points put to me both by my hon. Friend the Member for Windsor and the hon. Member for Hartlepool. We always listen with great care to what my hon. Friend says. He has a distinguished track record in technology and science and is known in this House as a thoughtful and intelligent man. Therefore when he raises issues they are worth addressing and considering.
My hon. Friend’s first point was about data ownership. He is right to raise this issue. All sorts of metaphors can be used, including big data being the big oil of the 21st century, or whatever, but there is no doubt that data are the currency driving the 21st century technology economy and, as such, a relatively dry subject has moved up the agenda. The ownership and use of data is an important issue.
The European Commission and the European Parliament are due to conclude a data protection directive, which could be a big prize, giving Europe one data protection regime across all 28 member states. I am fond of saying that, in many respects, it may be the most important piece of economic legislation that Europe passes in the next decade, because if its final iteration is too bureaucratic or business-unfriendly, it could have a big impact on business. However, we start rightly with the principle that the citizen owns their own data and should have control over how those data are used. It is a circle that has to be squared. The citizen has to trust and understand how the data are being used, but at the same time businesses need to be able to use those data to function efficiently and provide the services that many people want.
I am sorry not to reach a clear conclusion on my hon. Friend’s contribution. I am simply acknowledging that this debate will continue.
I am grateful for my hon. Friend’s kind words. The other issue that he alluded to was closed shops on the internet. He is right that that will provoke debate and policy developments over the next few years. Clearly, the large tech companies play an increasingly important part in our lives, whether they are Facebook, Google, Apple, Amazon or others, but it is important that we remember the first principles of open competition. The competition authorities have the requisite powers to stop any potential abuse of market power, not that I am suggesting that there is any at the moment. It is one of those debates that we will continue to have. As for the permissiveness of creativity, we have undertaken some important intellectual property reforms over the past few years. The Government remain committed to the protection of intellectual property, and that is right and proper, but we also recognise that intellectual property has to be up to date in how it is used in the digital age.
My hon. Friend talked about clusters and Tech Nation. The clusters identified in the “Tech Nation” report were in essence self-identifying and organic, but I take his point that we should be accurate when we identify a cluster, and at least use the same name consistently so that people are used to it. Tech City has done a great job in bringing together the 20 or so clusters identified in the “Tech Nation” report to share best practice. I agree that Thames valley is the largest tech cluster in Europe. When politicians say that they want to create a Silicon Valley in the UK, I say, “You already have it. If Cambridge is included, you have effectively got a Silicon Valley in and around London.” There are Silicon Valleys all over the UK, and that is the great strength of technology. In any major city in the UK, from Dundee to Brighton, there are important tech clusters, which often specialise in particular areas.
My hon. Friend concluded by talking about the importance of access to broadband. I was disappointed to hear that he had only just got superfast broadband, but given the size of his estate, it is not surprising. The huge amount of engineering and the massive length of fibre that had to be rolled out to reach his study will have taken years of digging. I am glad that BT has finally made it past the ornamental cannon to the front door, through the scullery and into the study. He is a passionate supporter of satellite. I have never been against it; my only point throughout the entire debate has been that satellite does not provide the mass market solution. It will be appropriate in certain places. One of the pilots to identify how to bring broadband to the most difficult areas—what we call the last 5%—has been a satellite pilot. It is not beyond the wit of man to speculate that satellite may well prove to be one of the solutions put forward to reach the final 5%. His point was well made.
The shadow Minister expressed his concerns, which the Government share, about skill shortages. It is important to stress that every country in the world and every developed nation in the world is aware of skill shortages. The debate is happening in America and in the major economies of Europe. How do we upgrade people’s skills to cope with a fast-moving technology economy? The shadow Minister and my hon. Friend were right to say that virtually every business is a digital business, whether it is a very small business that needs its own website and e-commerce software or the largest businesses that rely on data management software to manage the work force and stock and so on.
We have made great strides. Not only have we put coding on the curriculum, which is a long-term investment, but we are beginning to properly audit further education and higher education courses to ensure that they are fit for purpose. We have launched degree apprenticeships, which are effectively employer-led degrees where people will spend as much time working with an employer as they will at university. That is a fundamental change that has been brought about by technology. The world of work and the world of study will necessarily have to blur, because, funnily enough, it will be the world of work that has the most up-to-date technology and a much greater understanding of how that technology will be used in the real world. There is also our huge push on apprenticeships, where we focus on technology apprenticeships. In Didcot, for example, I was pleased to meet six apprentices at Harwell last Friday. I am pleased that Didcot university technical college is due to open in September. UTCs are another innovation that recognises the need to develop the proper skills required for the work force.
We welcome “The Scale-Up Report” by Sherry Coutu. It made a valuable contribution to the debate. We are not planning a formal response to it, but Sherry Coutu remains an important adviser to Government and politicians of all colours. Her passion is for the technology sector, and she has been a great advocate for it. She pioneered “Silicon Valley in the UK”, where tech companies from Silicon Valley came over to meet tech companies in the UK. We are taking forward a lot of her recommendations. Many were already in train. Baroness Joanna Shields has pioneered the Future Fifty, where 50 fast-growing companies in the UK are identified. The Government work with them and offer mentorship in the belief that they should stay in the UK, eventually float in the UK and grow to be significant British businesses.
The shadow Minister rightly mentioned aviation, which is not part of my brief. The Davies report will be important and will drive the debate forward. When it is published after the election, I am sure all parties will study its recommendations. I have covered broadband and why it makes me grumpy. So far as long-term science funding is concerned, all I can say is that we clearly have a Chancellor who is passionate about the science base and who recognises that scientific research is an incredibly important and fundamental starting point for our leadership in so much of the technology sector.
The shadow Minister also mentioned procurement. I do not have the exact figures in front of me on the Thames valley businesses that have succeeded in getting procurement services from Government, but I will happily write to him on that. As he well knows, the Government are committed to opening up Government procurement to small businesses. We have launched an improved Contracts Finder website. We have made the process far less bureaucratic, for example by redrafting the pre-qualification questionnaire. We have also improved our record on late payment by ensuring that the public sector will pay undisputed invoices in 30 days.
Finally, we talked about the digital single market, which could be a great prize for this country and for Europe. We often talk about Europe in very negative terms, but a digital single market where UK tech companies can sell their wares to a marketplace of 500 million consumers with uniform consumer protection, uniform terms and conditions and secure delivery and carriage would be a great prize that we can work towards together as a family of European nations. I know that you, Sir Edward, will take that closely to your heart. On that note of hope and aspiration, it is time to conclude my remarks.
It is a huge pleasure to serve under your chairmanship, Sir Edward, I think for the first time. It is also a great pleasure to have secured this debate. My motive for doing so was simple: I have spent six months representing my party on a non-partisan commission that was set up to look at the issue of financial inclusion, by which I mean the ability of our constituents to access the financial products and services that help them to function effectively in society. Those are products and services that many of us take for granted—after all, we live in a country with one of the most sophisticated financial systems in the world—yet the commission’s work raised a real concern that the issue of financial inclusion needs to be given higher priority. I therefore welcome the opportunity to make the case and hear the Government’s response.
The commission took written evidence and held oral evidence sessions around the country, in Liverpool, London, Cardiff and Glasgow, including with people who are or have been financially excluded. In all, representatives of 84 organisations came forward to share their views with us, including big banks, small charities, academics, entrepreneurs, insurance companies and local authorities. There was a wide range of people, but a consistent view that we could and should be doing better as a country to make the financial system work better for everyone, to improve the financial health of the millions of people who are, quite frankly, living on the edge.
The picture that came out of all the evidence is not reassuring. Nearly 2 million adults in the UK do not have a bank account; an estimated 2 million people took out a high-cost loan in 2012 because they were unable to access any other form of credit; and 50% of households in the bottom half of income distribution do not have home contents insurance. There is a price attached to that exclusion. Financially excluded people pay a poverty premium that has been estimated by Save the Children at £1,300 a year. Even more powerful is the picture of financial vulnerability and lack of resilience that came through so strongly from the evidence. Up to almost 9 million people are over-indebted, depending on the definition used; 13 million people do not have enough savings to support them for a month if they experience a 25% cut in income; and 15 million people—31% of the population—report one or more signs of financial distress. That is not the picture of financial health in the UK that I am sure we all want, irrespective of our politics.
At a time when the public are hearing a lot from their politicians about the public finances, the commission argues that the vulnerability of private finances should also be a major political concern, and that the issue of financial inclusion needs to be given higher priority.
I commend the hon. Gentleman on securing this debate on an important subject. Does he share my concern that because most of the means tests in the welfare system do not consider debt repayments, private indebtedness hits very hard at times when people need additional help?
The hon. Gentleman has made a valid point well. The concerning picture I have outlined should not be interpreted as a criticism of the current Government. Much of the vulnerability I have discussed is clearly the consequence of a brutal recession, and the commission’s report recognises the clear evidence of economic recovery and the boost that many people will get from vigorous job creation, the improving quality of jobs, increasing wages and falling prices. Although this Government disbanded the financial inclusion taskforce in 2011, they can point—I am sure the Minister will—to plenty of activity on tackling specific barriers to financial inclusion. The report recognises, for example, the £38 million credit union expansion project, the inclusion of financial education in the national curriculum in England for secondary school students, the regulation of high-cost, short-term credit, auto-enrolment for workplace pensions and, last but not least, the Treasury’s welcome agreement with high street banks to provide fee-free basic bank accounts—the Minister has earned a great deal of praise for her work in knocking heads together to achieve that important step.
It is not just the coalition Government who have been busy. The devolved Administrations have arguably been leading the way in developing financial inclusion strategies and promoting financial inclusion, and several major local authorities have adopted their own financial inclusion strategies. Nor should brownie points go only to the public sector; the private sector has invested in and developed new products such as credit building credit cards, and prepaid cards. The not-for-profit sector has also been busy, not least the Archbishop of Canterbury’s task group on credit unions, which has challenged high-cost lenders and is piloting savings club programmes in Church primary schools, in partnership with credit unions.
That is all good, but it may not be sufficient. Indeed, the commission’s central message is a warning against complacency or any feeling that we have “done” financial inclusion, not just because the existing numbers tell us something different but because of fresh challenges that are emerging. Those challenges offer both opportunity and risk, and need to be managed properly if we are not to make the problem of exclusion even worse.
The first challenge is universal credit. There appears to be cross-party support at least for the principles of universal credit, so there will be change whoever wins the election. The big change will be in the way in which people receive their benefits, with six benefits combined into a single lump-sum payment that will be paid monthly in arrears. I believe that that change will benefit many people, as it will make payments more like income from work and so ease the transition into the labour market. However, it will profoundly change the way some people on low incomes have to manage their money.
A lot of concern was expressed to us about the need for effective support. I believe that the Government recognise that, and the report acknowledges that support will include alternative payment arrangements for those who need them, budgeting loans to help bridge the gap to the first payment, and universal support delivered locally—USDL, to use the jargon—which is the support system, led by local authorities and jobcentres working with local partners, to help people improve their digital skills and financial capability. The effectiveness of that support needs to be monitored very closely. We argue that minds in Government should be open to promoting inclusive alternatives to the Post Office card account that meet the new basic bank account industry standards agreed by Her Majesty’s Treasury, including electronic payment facilities.
The second challenge the commission highlights is linked to technology. Technology is changing the way we live and work, yet as Tristan Wilkinson of Go ON UK argued to us,
“We are only just starting to see what the potential of technology and its disruptive influence in society could become.”
Given the number of adults who have a mobile phone and access to broadband, it is clear that digital innovation has the capacity to drive some groundbreaking and disruptive product development. It can transform our ability to access valuable information on how to get the best deal, as well as our ability to keep control of our finances. That is exciting, not least as it creates space for entrepreneurs to come in and tackle market failure with new platforms that do not carry the overheads that the old players are lumbered with.
I know from my work as a Minister in the Cabinet Office, however, that we must never lose sight of the fact that some 16% of the population—over 8.5 million adults—are non-users of the internet, and that the digitally excluded are more likely to come from groups at risk of financial exclusion. I know that the Government have an ambitious digital inclusion strategy and I was proud to play a part in driving it forward. However, we must not lose sight of the fact that other services must remain available for those who cannot or choose not to manage their money in the way that new technology permits.
The other major challenge that I wish to highlight is the impact of higher interest rates. Interest rates have remained at 0.5% for the past six years, which is testimony to the credibility of the Government’s long-term economic plan. It has been good for the economy, if not for fixed-interest savers, but it is not sustainable, and at some point interest rates are likely to rise. The evidence we took was clear in expressing concern about the potential adverse effects of that rise on many households struggling to pay off their debts. According to the Resolution Foundation, around 600,000 households spend more than half their income on debt repayments; other research indicates that 60% of borrowers say they would cut down on spending if interest rates rose by two percentage points.
There is therefore no shortage of challenges, and there are no grounds for complacency if we are to secure the broader financial health that we want this country to achieve. What should be done? The report has 22 recommendations to provoke thought and debate, which the Minister will be delighted to hear I will not go through in detail. However, I will highlight some important strands of our argument, and I would be grateful for a response to them.
The first strand is about the need for clearer leadership and co-ordination. A clear feeling out there came through in the evidence that some momentum and energy has been lost. The Minister may well sigh at the recommendation that she or her successor should take the title of Minister for financial health and take a lead across Government on that, but there is an opportunity to pull together something that does not exist, but could exist given the good will out there: a national strategy, and more effective and visible co-ordination of the activity going on across sectors. There is some merit in the idea of an independent body to help Government accumulate evidence on what is going on, as well as providing accountability along the lines of the social mobility commission.
There is an urgent—in fact, it is imperative—need to stimulate more innovation. The way I see it, we cannot expect too much of the mainstream financial services players. They are not trusted and, frankly, they lack incentives to target the kind of customers we are talking about. However, with FinTech, this country leads the world in financial innovation, so we should be creating the space to encourage innovation and look at how technology and other means of disruptive innovation can come in to help tackle market failure.
We were impressed by the entrepreneurial instincts and drive of organisations such as Change Account and Ffrees, which are helping to tackle market failure, but they need support. One recommendation was not for Government, but for the industry to consider setting up a centre for financial services innovation—the United States has had one for 20 years—with a network of industry-led innovation and learning, trying to move the needle to stimulate the development of products and services that work for people on all incomes.
The second strand is on the need for a more concerted effort to identify, understand and tackle market failures. There are too many people for whom existing products and services do not work. They are disadvantaged and turned off from doing the right thing, which would make their lives easier. On personal current accounts, we were struck by the financial inclusion taskforce’s evidence that perhaps six out of 10 of the millions of people who do not have accounts had one previously, but were turned off by bad experiences with their banks.
There is an issue with identity requirements. Dr Paul Jones from Liverpool John Moores university told us,
“I have been to many groups around here and they will say that, ‘We cannot save and we cannot get a bank account’. They tell me things like, ‘You need a letter from God to get a bank account round here.’”
It is too hard. Payment mechanisms are critical to helping people to manage their finances, but new entrants and alternative providers tell a consistent story of the difficulty in being able to offer mainstream direct debits and fast payments. Direct debits themselves are problematic for many people on low or volatile incomes. All the evidence suggests that we need to encourage payment mechanisms that have more flexibility and better meet people’s needs.
There is a low income credit gap. The Government have borne down on extortionate lending rates through regulation, but the demand is still there. We were clear about the need to do more to support the scaling up and sustainability of the alternative community finance and credit union movements. A lot has been done, but that issue has not been sorted out. That matters, as does taking the opportunity to make wider data disclosures to help us to understand credit risk better in such income brackets, and to identify financial inclusion black spots.
Last but not least is the need for saving products and incentives that work for people on low incomes. We were struck by the evidence from one of the money mentor graduates at Toynbee hall, who said:
“I went to the bank to ask about saving. They told me that I could save £5,000 in an ISA. I was thinking of saving £1 or £2 a week, so I immediately thought that this wasn’t for people like me.”
Case after case bears witness to the statement that, for too many people, existing products and services do not work. We need to bear down on that market failure.
The third strand underpinning our recommendations is about a need for a longer-term commitment to building numeracy, financial skills and capability. There is a specific recommendation that the existing commitment to secondary schools should be brought forward into primary schools. Over the years, the Minister has been a passionate advocate of early intervention, and she understands the importance of shaping habits and skills at an early age.
Financial education needs to start earlier. There must be a robust, outcomes-based evaluation of how to improve financial capability, and a role for a reformed Money Advice Service to co-ordinate that. The evidence was compelling. Catherine McGrath of Barclays said:
“In New Zealand”—
where she comes from—
“financial inclusion is not a debate that is in the sector really at all. The only thing that I can point to...is that financial education is at the heart of the education curriculum and has been for quite a considerable period of time.”
In conclusion, we take great pride in having one of the most sophisticated financial services systems in the world, but it does not work for everyone. The consequence is that too many people’s lives are harder than they need to be. We have a major challenge in building the financial resilience of the millions of households who are living on the edge.
A recovering economy is clearly a necessary condition. Arguably, a reassertion of the value of thrift and saving is the long-term cultural requirement we need to see, but in the short term, the next Government can do a great deal to harness the energy and creativity of many organisations across the public, private and voluntary sectors to reduce financial exclusion and give more people the opportunity to create a future of greater possibility, both for themselves and for their families. I hope that that idea has cross-party support.
I agree with everything that my hon. Friend the Member for Ruislip, Northwood and Pinner (Mr Hurd) said. I am grateful to him for securing the debate on this important subject. He referred to the Financial Inclusion Commission’s report, which is an important piece of work that I am extremely interested in.
I hope to be able to give my hon. Friend an overview of the many things the Government have done that show that we have been absolutely committed to trying to improve the plight of the financially vulnerable. We see financial inclusion in two parts. First, it has to enable people. Secondly, it has to empower them. Enabling means making sure that people have the tools to manage and save their money, using services such as bank accounts. Empowering means equipping people with the skills and knowledge to make the right financial decisions. The Government have taken significant steps in pursuing that agenda.
First, on basic bank accounts, as my hon. Friend pointed out, independent research published last year showed that about 1.9 million adults in the UK were without a bank account. Of course, there are also many who have bank accounts but cannot use them because fees have been so racked up that they cannot afford to pay. Therefore, in December the Government secured a landmark deal with the major banks, which will end fees for failed payments as well as ensure access to banking facilities for all. We held extensive negotiations with the banking industry to bring basic bank accounts up to scratch.
The result is that the nine major high street banks and building societies have agreed to offer a better deal for customers. Truly fee-free accounts will be available to anyone who does not already have a bank account or who cannot use their existing account owing to financial difficulties.
Once someone has a bank account and can begin to manage their finances, other issues automatically become important. Such issues include physical access to banking: a branch or free-to-use ATM near work or home. In terms of the Post Office and rural access to banking, while we appreciate that all banks must balance customer interests with market competition and other commercial factors, alongside the Secretary of State for Business, Innovation and Skills, I have chaired a series of round tables with senior representatives from UK banks and building societies at which we challenged industry to explore how we could improve customers’ access to banking services. We have looked at how to increase awareness of the services provided through the Post Office’s extensive network, which will ensure that essential banking facilities are available in as many communities as possible.
Customers can withdraw money, deposit cash and cheques and check balances at all 11,700 post office branches in the UK. The Government have committed almost £2 billion to protect and modernise the post office network. I recently met senior people from the Post Office to discuss how they could improve things further, with longer opening hours and better security in post offices for those wanting to deposit cash. It is vital in relation to access to finance that the post office network should become part of the solution.
We have also made crucial progress on ATM provision. The number of free-to-use ATMs is at an all-time high, with 97% of withdrawals being made free of charge. However, it is often the most disadvantaged communities that cannot get access to free-to-use ATMs, so the Government are working closely with the LINK network’s financial inclusion programme to subsidise free-to-use cashpoints in more than 1,400 remote and deprived areas across the UK. Importantly, members of the public can nominate their own area. My round tables with bankers have opened up positive discussions and looked at what greater functionality ATMs could provide over and above cash withdrawals and balance inquiry services.
Of course, however, we realise that bank accounts are only one of several ways of furthering financial inclusion, and that credit unions also play a key role in providing financial services to more than 1 million customers across Britain. We would like that to double or treble, so we have taken significant action to ensure that credit unions go from strength to strength. Last summer, I issued a call for evidence on credit unions, asking for views about their future and what more the Government could do to support the development of the movement. We have committed to using the responses to the call for evidence when considering legislative amendments for the next Parliament. On 1 April last year, we raised the interest rate cap on British credit unions from 2% to 3% per month, to enable credit unions to become more sustainable over the long term. As my hon. Friend said, we have committed £38 million to the credit union expansion project, with the clear aim of helping credit unions to modernise, be sustainable and expand to meet demand.
Similarly, community development finance institutions provide finance to under-served markets and are another important tool in reaching out to the financially excluded. In 2012 the Government created a £60 million fund for CDFIs to lend to businesses from deprived areas and disadvantaged groups, and in February they commissioned a report exploring how the CDFI sector can operate more sustainably. That will provide more evidence about the sector and, building on that, we hope that CDFIs will be able to help even more viable smaller businesses and consumers to gain access to the finance they desperately need.
As has been mentioned, the Government have also taken steps to tackle those who prey on the financially excluded and make the problem worse. I know that in some circumstances short-term loans provide a needed service to people who need money quickly; but customers must be protected from poor or even predatory practice in those markets, which is why we have fundamentally reformed the regulation of consumer credit to deliver a market that helps with customers’ needs. Last year, we transferred responsibility for regulating consumer credit from the Office of Fair Trading to the Financial Conduct Authority. The FCA has introduced tough new rules in both the payday and debt management sectors to improve consumer protection, and has far greater powers than the OFT did to punish breaches of those rules.
The hon. Member for Chippenham (Duncan Hames) and my hon. Friend the Member for Ruislip, Northwood and Pinner asked about whether greater consideration should be given to individuals’ debt repayments. I can inform them that the FCA requires those collecting consumer credit debts to leave a subsistence balance in a consumer’s bank account to enable them to continue to pay for essentials, including food, energy and rent. I consider that essential and have recently written to the FCA on that very point. In addition, we have passed legislation that places a duty on the FCA to cap the total cost of payday loans. That came into force on 2 January.
My hon. Friend is right to talk of the massive contribution that financial innovation can make, particularly for those who are financially vulnerable. Ideas such as mobile payments, which mean that instead of hanging on for ages with a customer service unit, waiting for an answer, people can simply ping cash using a mobile number, are important for all of us, but particularly for the financially vulnerable. Being able to make remittances at the press of a button is incredibly valuable for people with family overseas; and many other innovations in the FinTech sphere will help financially vulnerable people. The present Government have done more than any other to support financial innovation. I am sure that my hon. Friend will want to hear what more we are doing, at the Budget tomorrow; he will be delighted.
The second part of financial inclusion is empowering consumers so that they have a better understanding of financial services and what is available to them, so I want to talk about financial education—how we help people to make the best of financial tools and ensure that future generations will be financially literate. By establishing the Money Advice Service in 2011 we have ensured that consumers have access to free money advice. There is always somewhere for vulnerable consumers to turn. We have also committed to supporting new pensions freedoms through free and impartial guidance from Pension Wise, to help people make informed and confident decisions about how they use their pension savings in retirement.
Not only can education initiatives help to solve a problem now; they can help to prevent future problems. In September 2014, we made financial literacy a compulsory part of the national curriculum. As part of the citizenship course for 11 to 16-year-olds, pupils will learn about the importance of budgeting, sound management of money, and credit and debt, as well as understanding different financial services and products. For younger children, the Government are working with the Archbishop of Canterbury’s credit union taskforce, to fund a project called LifeSavers, which will go into primary schools and teach young people good financial habits. It will also introduce them to credit unions, which, as hon. Members will know, have a clear steer to help with saving as well as borrowing.
I am sure that my hon. Friend will appreciate that financial inclusion is a complex issue. I absolutely assure him that I will ensure that the Government put the consumer at the heart of financial policy and that we are looking to create a financial sector that is truly inclusive for the next generation. I am personally committed to that agenda, and assure my hon. Friend and the hon. Member for Chippenham that, given the opportunity, we will put financial inclusion at the heart of the next Government’s agenda. Once again, I thank my hon. Friend for raising these important issues in what has been an excellent debate.
Tourism Industry and VAT
[Nadine Dorries in the Chair]
No time limit has been allocated to speeches in this debate. I have seven Members down to speak, but there are a lot more than that in the Chamber, so if you wish to speak, you will have to catch my eye. With interventions considered, if Mr Williams takes only 10 minutes to introduce the debate, Members will have 10 minutes each, but there may be less time than that, so some brevity would be appreciated.
I am grateful for the opportunity to have this debate and it is a pleasure to serve under your chairmanship, Ms Dorries. In the midst of Wales tourism week and on the eve of the Budget, I would like to make the case for a reduction in the VAT rate for the tourism industry from 20% to 5% specifically, and importantly, for visitor attractions and accommodation, to bring our country into line with competitor destinations in the European Union.
The Minister has been well lobbied on this issue and perhaps he gets tired of hearing the arguments that some of us advance for that cause, but I would like to draw his attention to research published recently on behalf of the Cut Tourism VAT campaign. I am aware that the campaign recently met Treasury officials. The research further strengthens the case for making a change in our VAT regime. That case is borne out by the number of Members here for the debate representing constituencies across the United Kingdom.
As the hon. Gentleman is mentioning the diverse, wide range of constituencies, this is an opportune moment to say that I have had correspondence from Shonnie MacRitchie from the County hotel in Stornoway, who points out that the UK is the 138th most competitive of 140 for VAT in tourism. Indeed, there are only two other countries in the EU that have not reduced that VAT rate. That could be done now without any derogation from Europe, so does he agree that it should be done?
I am mindful of your stipulations, Ms Dorries, but I very much concur with that intervention. The debate is about making all component parts of the United Kingdom competitive across the board with our friends and colleagues in Europe. There are few constituencies—in fact, I cannot think of any—that would not benefit from a reduced rate of VAT, whether through accommodation or visitor attractions.
On that point, my constituency would benefit by about £10.5 million as a result of such a change. This is about not just the tourist resorts, but the inner cities, which will benefit even more. It is a question of how we get the support of MPs from areas not known for tourism—particularly those from London—which will benefit enormously.
I am grateful for that intervention. My hon. Friend is right: the name “English riviera” speaks for itself about the importance of the tourism sector to his constituency. He is right that more generally it would benefit just about all component parts of the UK: cities and rural areas alike. That is the spirit in which the debate and the Cut Tourism VAT campaign’s call has been made.
My hon. Friend is right that the debate has a strong, important regional dimension. That is borne out by the representatives here today.
Such is the nature of the debate, with it being a few weeks before Dissolution, that it could be something of a damp squib. However, I would rather raise this matter with the Minister before the Budget than after it. In many ways this is an opportune moment to remind ourselves of the importance of the tourism sector. In Wales, we are celebrating Wales tourism week in which thousands of our local hoteliers and attraction owners will be showcasing what Wales has to offer. What better way is there not just to celebrate what is happening in the industry at the moment, but to promote its opportunities for growth? That is what the debate is all about.
The tourism sector currently contributes £3.1 billion to Wales’s GDP, which is 6% of its total. It also accounts for 8% of jobs in Wales—a huge number. When we add in those supporting businesses down the supply chain, we see that the sector contributes about £7 billion to Wales’s GDP, which accounts for 14% of the Welsh economy and 15% of jobs.
Quite rightly, the promotion of the Welsh tourism sector is a devolved responsibility. Visit Wales does a lot of excellent work in promoting the Principality, but on VAT it is the Treasury and this place that has primacy and that is why we are asking for action. The debate is about sustaining the tourism sector, but, critically, it is also about growing it. I believe that this could give the industry the financial jolt that it needs.
The hon. Gentleman is coming on to sustainability. We are looking not only to make jobs, but to sustain those already there. Many people in the industry are finding it difficult to keep going, but if a VAT cut were to be implemented, that would go an enormous way towards retaining those jobs.
The hon. Gentleman is right. It is also about sustaining and building on the quality of jobs in the industry. That is important. Traditionally, the level of wages in the tourism sector has been low. However, I am confident that any VAT cut would feed its way through to wage increases as well.
I am grateful to the hon. Gentleman for giving way and congratulate him on the debate. When it comes to jobs, does he agree that lots of young people find jobs in tourism, so the benefits of increasing tourism will go disproportionately to them, which would be good from a social perspective?
The hon. Lady is right that it is about developing for a social perspective and building a skills base for the future. Many parts of the tourism sector are ideal way for doing just that.
I will proceed and not take any more interventions. The Cut Tourism VAT campaign commissioned a report by Nevin Associates Ltd, which suggests that a change in VAT would give the UK a £4 billion economic boost, with £166.5 million coming to Wales. There would be 6,000 more jobs in Wales and 120,000 across the UK. In my constituency, with its vibrant local tourism sector, that could amount to a £5 million injection into our economy.
My hon. Friend the Member for Torbay (Mr Sanders) talked about a £10.5 million impact in his constituency, but £5 million would be very important to Ceredigion’s economy. That could create 166 jobs directly and many more indirectly.
Let us look at the arguments borne out of the research a little more closely. First, we need to talk about the increased tax revenue for HM Treasury. Research indicates that, yes, there would be a net revenue loss to the Treasury for the first two years, but after five years such a move would generate a positive net value of £668 million and over 10 years that value could reach £4 billion. Those are significant figures.
Where does that money come from? The research indicates six key areas. First, there will be lower prices, which will create greater demand and much higher turnover in the sector. Secondly, the Treasury will receive increased income tax and national insurance payments generated by the new jobs that we have talked about and, critically, by higher wages in the sector. Thirdly, there will be savings in social security payments as a consequence of lower unemployment, with some of the new jobs created in the sector taken up by those who were previously unemployed. Fourthly, there will be increased corporation tax payments as a result of the higher turnover and growth in those businesses that we all aspire to. Fifthly, there will be an increase in income taxes paid on dividends to shareholders, which would be generated by the accommodation and attraction sectors. Sixthly, there will be the multiplier effect of the additional taxes generated down the supply chain from the accommodation and attraction industries.
I think back to debates and the petitions presented at the time of the VAT measure on static caravans, which stemmed from an unfortunate Budget. I am sure that tomorrow’s Budget will be vastly more successful than that. I remember talking to operatives in my constituency about that very narrow thing, the sale of static caravans in west Wales, and the knock-on effect of the reduction on VAT was immense. The highly integrated nature of the tourist economy was clear in that debate, so the knock-on effects of this change could be hugely significant for the rest of the economy. As I said to my hon. Friend the Member for Newton Abbot (Anne Marie Morris), it would be a real boost for regional economies and tourism-dependent areas such as mine. In my local economy, if we take out the big employers, such as the national health service, the local authority and two universities, a cross-section of small businesses is left, largely involved in farming and tourism, and we need to grow those businesses.
I move on to the impact that this change would have on the UK’s balance of trade. New research published in this area has provided information that was not considered before; the research shows that a significant boost would be provided to the UK’s exports. That is important, given the internationally competitive nature of the sector and concerns about the UK balance of trade deficit. In 2013, tourism expenditure by overseas visitors to the UK was £21 billion, which accounted for 3.8% of the UK’s total exports of £550 billion. Over a 10-year period, the research by Nevin Associates Ltd indicates that the total improvement in the UK’s balance of trade in response to a VAT cut would be £20 billion, which is a huge potential contribution.
The other area of growth is the number of businesses paying VAT. We all know that the UK tourism industry is populated by a very large number of very small firms that may or may not choose to expand or invest in order to keep below the VAT threshold. If my hon. Friend the Member for Aberconwy (Guto Bebb) is called to speak, he may want to talk specifically about the issue of VAT thresholds. Lower VAT would encourage these companies to register for VAT and develop their businesses.
I congratulate the hon. Gentleman on securing the debate. He has been emphasising all the pluses and why we should be acting to reduce VAT, but has he made an assessment of the likely effects on the economy from failing to act on reducing the rate of VAT to accommodation, restaurants and visitor attractions?
Well, I am specifically talking about visitor attractions and accommodation. In this House we are all united by one thing: we want to see our economy growing and thriving. My contention is—I think it is the contention of most people in the Chamber today—that reducing VAT is a strong way of boosting our economy. Lower VAT would encourage these companies to register for VAT and develop their businesses. In France, the amount of businesses falling outside the tax regime has been cut by an estimated €720 million a year, following hospitality VAT reductions.
As the Minister is aware—this is the root of this debate—differential rates of VAT can be introduced due to EU legislation, and all but three countries in the EU have a reduced rate of VAT on the tourism sector. Only the UK, Denmark—which has no reduced rates for goods or services—and Slovakia have not reduced rates. Lithuania used to have no reduced rate, but in January, they lowered their rate of VAT on hotel accommodation to 9%.
Looking at the Irish experience—perhaps pre-empting comments from friends from Northern Ireland today—according to the review of the policy in Eire by the Irish Government, who cut tourism VAT in 2011, they have seen employment increase by 20,000 people directly in the tourism sector. Operators have passed VAT reductions down to customers and as a result, we have seen a sustained growth in tourists and earnings, meaning that what was a temporary measure is now to become a permanent one.
The Minister will also be aware of the work of Professor Blake and the evidence session of the Select Committee on Culture, Media and Sport in which he spoke in January. He concluded—he is a former Treasury adviser—that reducing tourism VAT was a very efficient tax reduction for two reasons. First, he said that VAT on tourism was not an efficient way of creating revenue, as tourism was an elastic product, meaning that demand would go up as well as down. Secondly, he said that tourism VAT was a tax on domestic goods while foreign goods were being left untaxed. Therefore, that made the VAT highly inefficient, as customers will buy foreign goods over domestic ones. Those of us who are trying to promote growth in the domestic sector want people to have holiday weekends in Aberystwyth and Aberaeron, not over in Barcelona and Torremolinos. That is the nature of the competition that we face.
As part of the recent Select Committee on Welsh Affairs report, it was agreed to look at this issue. The Select Committee agreed and included in its recommendations to the UK Government that
“the UK Government review its policy on the VAT rate for…tourism…with the ultimate aim of reducing the current 20% rate.”
The Government rejected that. I am not expecting a miraculous change overnight on the basis of this debate, although that is what I wish for. However, I hope that at the very least, this debate will promote continued reflection on the matter by the Treasury. There is a message there for the Labour party as well, because sadly, to date, the messages we have had on this issue from Labour have not been particularly robust either. However, what I can say is that the Cut Tourism VAT campaign will continue to push the case as robustly as we can.
Finally, the global recession may well have been the main reason, between 2006 and 2012, for falling numbers of visitors to these islands. However, since 2013, we have experienced—Wales included—an upward trajectory, which we all celebrate. The Government, through VisitBritain, have put funds into promoting tourism to good effect, as have our Assembly Government in Cardiff. However, our contention is that there is a vast potential for growth. As the economy continues to grow, as deficit reduction yields results and as public finances are managed, the Government—whatever their political complexion—need to address this issue.
I detect a huge enthusiasm in large parts of this country for developing the tourism sector. There is a great deal of innovation and some really impressive personalities out there developing their businesses. Reducing VAT in this selective way—on accommodation and on visitor attractions—would be the biggest boost imaginable for our very important tourism sector.
It is a great pleasure to follow the hon. Member for Ceredigion (Mr Williams), who is a fellow Welshman. We are having this debate in Welsh tourist week, and we have had a very good week promoting the pleasures that people can experience when they come to Wales.
I pay tribute to the Cut Tourism VAT campaign group for its excellent campaign. If the Chancellor is minded to make an announcement tomorrow and follow suit with what we are asking for in this debate, it would be a lot to do with the long-term work of the Cut Tourism VAT campaign, and indeed, the cross-party support that it has received.
I am very much an opponent of VAT. I believe that, as a consumer tax, it is regressive and hits the poorest in our society, an argument that I shall develop later. I agreed with the Prime Minister when he said, as Leader of the Opposition only a few weeks before the last general election, that VAT was a regressive tax and that it has had negative implications for the economy. I have been consistent in my view and I believe that the rise in VAT in 2010 sucked oxygen out of the economy at a very difficult time and held sectors back, including tourism.
Yes, indeed; it was a brave step. [Interruption.] It is interesting that we are getting heckled from across the Chamber by people who voted to put VAT up previously, but are campaigning here today to cut it. We are not going to take any lessons from some Members here in the Chamber today. I believe, as does the hon. Member for Ceredigion, whom I congratulate on securing this debate, that cutting VAT would give a great example to the industry.
In the past few months, I have spent time in France and the Republic of Ireland, where I have seen our near neighbours benefit from a cut in value added tax.
I do not speak for the Labour party, and if the hon. Gentleman checks the records, he will see that I do not vote with the Labour party when I think that that is right. I speak for myself. Unlike the sheep in the Scottish National party, who are all herded through one Lobby, I tend to have a little independence of spirit and mind when it comes to these issues. I feel very strongly that the case has been made to cut VAT on this occasion and I will certainly support any amendment tabled in the Budget to ensure that there is a cut. I hope that Conservative Members who voted to put VAT up before but now support a cut will follow their conscience and vote to cut VAT for tourism.
Since 2012-13, there has been growth in tourism right across the four nations of the United Kingdom. It is a resilient industry, but it is the industry itself that is asking for a cut, because it feels that it could contribute so much more in employment and generating wealth for regional economies and the UK economy if there was a cut.
As the hon. Member for Ceredigion said, Ireland has reduced its VAT on tourism to 9%. Only last week, I was in the Republic of Ireland. We were launching the new vessel that goes between my constituency and Dublin. Holyhead to Dublin has been branded the new Dover to Calais, and as Dublin is one of the fastest growing ports in Europe, that benefits my constituency. Also, as we are near neighbours, the vessel takes people, who come from places across the United Kingdom, from Wales to holiday in the Republic of Ireland. My colleagues from Northern Ireland will have experience of this. The crossing from Holyhead to the Republic of Ireland takes only two hours. Many tourism operators that book people going to Ireland overnight say that one reason why they are going to Ireland is that the Irish Government have focused on tourism, focused on the brand and focused on how tax reductions on accommodation help the industry.
Does the hon. Gentleman agree that many hotels that offer discounts and packages such as short-stay breaks, particularly in Northern Ireland, Wales and on the western fringes of Scotland, find that they are impacted by the very attractive bargains that can be offered by their counterparts in the Irish Republic precisely because of the VAT rate?
Absolutely. That is the case I am making, and I am sure that colleagues from the south of England will see the same with France and, in particular, northern France and the Dover to Calais route.
This campaign, as I said, has been industry led. It has been led well by the industry, which has made a very articulate case. However, I believe that the campaign should also be people focused, because a lot of jobs could be created and many of the people who would be affected positively by a cut—
Sitting suspended for a Division in the House.
Before the break, I indicated that the campaign had been brilliantly led by the industry, but that we needed to focus on people and get the message across to the great British public. Cheaper and more fairly priced holidays for consumers in the UK would help those with low earnings considerably, because VAT disproportionately affects such people. I believe that VAT at 20% is simply too high. When a working-class family of four go out for a meal, they share a fifth of their bill with the Chancellor of the Exchequer. In a sense, everybody who goes out for a meal takes the Chancellor with them, because they have to pay 20% of the total to the Treasury. That is too much for many families, and it has reduced many people’s spending power.
A cut in the VAT rate would also have a positive impact on jobs. As has been indicated, most of the jobs that have been created in tourism are low skilled and for young people. I welcome any reduction in youth unemployment, which has been stubbornly high. Those who work in the industry have indicated that one of the first things that they would do if VAT were cut is employ more people, to provide a stimulus to their businesses and to the sector. In my constituency, an estimated 120 jobs would be created, which would boost the local economy by some £3.8 million. The measure could bring huge sums of money into local economies and the UK Treasury in the long term. I understand that it will be difficult to convince the Treasury when there would be, in the first instance, a hit on moneys that are coming into the Treasury—
There is now, and I will abide by it. As someone who has consistently opposed increases in VAT, I believe that a reduction would help local economies, the tourism sector and the low paid in our society. It would be good for the country and good for jobs. I hope that the Treasury, on the eve of the Budget, will reconsider. If we are going to have a give-away Budget tomorrow, let the Chancellor give way on that important issue.
It is a pleasure to serve under your chairmanship, Ms Dorries, for what I believe is the first time.
Torridge and West Devon, which I have the privilege to represent, is a tapestry of small tourist businesses. In common with many hon. Members who are in the Chamber today, I represent a coastal area as well as a large rural area. Across the length and breadth of the south-west, particularly in my constituency—my hon. Friend the Member for North Devon (Sir Nick Harvey) is here, and he will know what I mean—there is an enormous yearning for something that will boost the tourism industry. Along with agriculture, tourism is the backbone and staple of Devon, Cornwall and the south-west. We are waiting for something that will bring the benefits of the recovery to the south-west. Throughout the south-west, there is a growing consensus—not only from the tourism industry, but from other regional figures who have examined the economy—that a cut in VAT on the tourist industry would provide such a boost.
We have debated the matter on two or three occasions. In 2011, my hon. Friend the Minister said that it was too early to cut the rate of VAT, that we had not taken into account the impact on the economy and that we should not jeopardise our efforts to bear down on the deficit. We all understood in 2011 that it was important not to shake international confidence, and to keep interest rates low. We returned to the subject in 2013, when he told us that the problem was that the Treasury’s analysis produced figures that were different from those of the Cut Tourism VAT campaign. He said that according to the Treasury’s analysis, there was no equivalence between the potential gains from the cut and the loss of tax revenue in the first few years. He said so again last year. Why, then, does independent, third-party research from some very serious figures, such as Professor Blake and Deloitte, conclude that although there would be a revenue fall in the first two or three years, it would be more than made good by the economic activity generated in the sector, which is critical all over the country?
I submit that we must ensure that we do not create an uneven recovery that fails to reach all parts of the country. In the south-west, although we are enormously grateful for the effects of the Government’s stewardship and their long-term economic plan, which are reaching us, pockets of our economy have not yet fully come back to health. This measure is a golden wand that would conjure into life confidence, buoyancy and a willingness to invest. I urge the Minister to commend it to the Chancellor of the Exchequer.
Torridge and West Devon is one of the lowest-waged areas in the country. It shares all the traditional disadvantages of coastal areas, and tourism is its most important staple. I urge the Minister to listen to the campaign and to the voices of my hon. Friends and Members from all parties who say that one of the most important things that can be done to reach those hard-to-reach areas—across the economy, including in inner cities—is to provide that boost.
The Irish experience is positive. Our tourism industry is at a competitive disadvantage, compared with many of our neighbours. This important measure would give enormous assistance to hundreds of thousands of people, and provide important jobs in disadvantaged areas and to young people, as the hon. Member for Brighton, Pavilion (Caroline Lucas) said. I urgently commend it to the Minister.
It is a pleasure to take part in this important debate and to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Ceredigion (Mr Williams) on bringing forward this issue.
I have been raising this matter for more than a decade. I first asked a question about golf tourism in 2004, at which time I represented the magnificent golf course at Carnoustie—sadly, I no longer represent it, due to boundary changes. I had no luck with the Chancellor at the time, and I have had no luck with Chancellors since.
Tourism is a vital part of Angus’s local economy. According to the Government’s official labour market statistics, tourism-related jobs account for a higher percentage of the workforce in Angus than the UK and Scottish averages, which is not surprising, given the wonderful mountain glens and coastal areas that we enjoy. Many other rural areas across all parts of the United Kingdom rely heavily on such jobs. The current campaign has a lot of support in Scotland, including from the Scottish Tourism Alliance.
Unlike many other parts of the European Union, there is currently no provision in the UK for charging a lower rate of VAT for tourism-related businesses, yet there is nothing to prevent the Government from doing so. For example, it has been done for hotel accommodation in 24 of the 28 European Union states, including Germany and France. The factsheet of the Cut Tourism VAT campaign shows that the UK has the second highest rate of VAT on hotel accommodation. It is exceeded only by Denmark, and it is equal to Slovenia, while Luxembourg’s rate is 3%, and Portugal, which is a major tourist destination, has a rate of 6%. Tourism businesses are fighting hard to retain business against cheaper destinations, and those lower rates give continental destinations a considerable advantage over businesses in the UK.
The 2013 World Economic Forum report on travel and transportation ranked the UK 138th out of 140 countries on the basis of price competitiveness. The VisitBritain website laments Britain’s lack of competitiveness for visitors from the USA, Australia, Canada, Germany, Austria, Belgium and the Netherlands. It showed that Britain has a clear competitive weakness in terms of value for money and expense. Ratings of holidays in Britain were below almost every major European destination for value and expense for both short and long-haul visitors. Britain was the only destination to have a negative balance, in terms of expense, compared with expectations.
The Government have not always been averse to cutting VAT on selective tourism-related operations. In the 2012 Budget, they cut the VAT charge on ski lifts, which was a welcome change—especially for businesses in the constituency of the Chief Secretary to the Treasury, which were the main beneficiaries. That vividly illustrates that it can be done and that it need not apply only to accommodation facilities.
Ireland’s 9% rate applies to facilities for taking part in sporting activities, including green fees charged for golf and subscriptions charged by non-member-owned golf clubs. A rate of that kind would be a boost for places such as Carnoustie. It puts the Irish at a competitive advantage, compared with the wonderful golf clubs in Scotland and other parts of the UK. In addition to that 9% rate, for some time Ireland had a 13.5% rate on some other services, including short-term car hire and tour guide services, which shows that a multitude of things can be done to assist tourism businesses.
The Government’s 2011 tourism strategy stated that they aimed to generate 4 million extra visitors by 2015. It said:
“The increase in overseas visitors would bring an extra £2 billion worth of visitor spend and help to create 50,000 new jobs across the country over that period, securing tourism’s place as one of Britain’s biggest industries.”
I struggle to see how the GREAT campaign and simplifying visa applications for Chinese visitors, which seems to be all that has been done so far, could in isolation do anything to achieve those objectives. However, a cut in VAT would have a significant impact.
Clearly, there is a huge opportunity to increase employment by promoting tourism. One of the most effective ways of doing that is to cut VAT on tourism businesses, which is well within the Government’s power.
I am sure that is the case. The hon. Lady can develop that argument if she catches the Chair’s eye.
It is not cheap to holiday in many areas of the UK. The standard rate of VAT puts our tourism businesses at a considerable disadvantage when competing with other parts of Europe. An increase in visitors would not only help tourism businesses, but bring much-needed income into many other businesses in the rural economy. The Republic of Ireland’s 9% rate—its standard rate is 24%—is calculated to have boosted the Irish economy by about €40 million and created between 5,600 and 35,000 jobs, depending on how the figure is calculated. The Irish Minister for Finance claimed in his Budget speech that it created 15,000 jobs. Various pieces of research have shown that a similar—perhaps a greater—effect could be achieved here, including Professor Blake’s work, which has already been referred to.
A VAT cut would reduce the Treasury’s income in the short term, but it would generate a stimulus that created a large number of jobs and increased businesses directly and indirectly. It could lead to a significant, long-term increase in income that would have a positive effect on the whole economy. Research suggests that up to 123,000 jobs could be created in the UK, which could contribute a surplus to the Treasury of £3.9 billion over 10 years. Additional spending and growth in tourism and the wider economy could produce GDP gains of up to £4 billion per year.
The Irish experience suggests that the cost per job created by the VAT cut is about €23,000. That is a competitive rate for creating jobs—certainly, in rural areas of the UK. I urge the Minister, even at this late stage, to look positively at cutting VAT to give a much-needed boost to our rural economies.
I congratulate my hon. Friend the Member for Ceredigion (Mr Williams) not only on securing this debate but on having campaigned vigorously for years on this theme.
I have only one point to make. I was standing in Strangers yesterday holding up a placard about VAT and tourism while pointing at a screen. I chanced to ask the person who had asked me to do that, when he put his camera down, how long the campaign had been running for. He said that it had been running for about 18 years, to his knowledge. Hon. Members can imagine people from the industry trooping into the Treasury during those 18 years to speak to stony-faced mandarins, who find reasons for inaction. Ministers will have come and gone during that time, but the Treasury’s line will be familiar to the people lobbying it.
I am sure that, in those discussions, the Treasury will have heard good words, such as “growth”, “expansion”, “development” and “jobs”, and phrases it does not want to hear, such as “forfeit of revenue”, “loss of income” and so on. However, a counter-argument has always been put, which I could put in terms of a Laffer curve if I actually understood what a Laffer curve was. In simple terms, the counter-argument is that if there is development and growth, there will be more taxpayers, and more business will be done, so there will be more revenue and other gains, such as regeneration, which other Members have spoken about. The real choice, as far as the Treasury is concerned, is between getting more tax at a lower rate from more people, and getting more tax at a higher rate from fewer people.
That seems to be the hard choice the Treasury faces, and it is at best cost-neutral. I am not sure that it is cost-neutral in the short term—no one has suggested that, I think—but it certainly is in the long term, and it has other benefits, including regeneration and reviving areas such as the south-west and north-west.
Indeed. Many persuasive arguments would suggest a net benefit to the Treasury from what we propose.
Treasury scepticism is not wholly unreasonable, but it can be allayed. I do not think that international comparisons console the Treasury especially; perhaps the thinking is that such comparisons relate to foreign places where the world functions differently, and tax regimes and people’s behaviour are different, and therefore the Treasury is not satisfied by ample international evidence. Certainly it will not be satisfied by research, however good, commissioned by the industry.
There is a way forward, however. The solution is not simply inaction. The Treasury could commission its own independent research, on a basis agreeable to the industry. That would be a huge step forward—some progress in relation to the past 18 or 19 years. It would be a step along the path of evidence-led policy—a good step to take. We would all be amazed if tomorrow the Chancellor said that he had decided to cut VAT for tourism. We would fall about and do more than wave our Order Papers—we would go into paroxysms. However, he could, if he wanted, do something that would cost nothing and might attract a great deal of good will: he could say, “We will have some independent research commissioned on this very difficult subject on which Parliament has occupied itself for some considerable time.” That would lay the ghost to rest and bottom out the issue.
Why should the Chancellor not do that? It would be an intelligent reaction to the plausible and effective argument that has been put by a crucial industry employing many more people than is ordinarily to be expected. If the Chancellor does not do that, he could be embarrassed later by someone moving an amendment to require the exact same thing. I have little doubt that it would be carried, as there is widespread support in the House for such research.
It is a pleasure to serve under your chairmanship, Ms Dorries. I join other hon. Members in congratulating the hon. Member for Ceredigion (Mr Williams) on securing the debate, which is appropriate at the beginning of Wales tourism week. I was pleased to be part of a small group that welcomed representatives of the tourism sector to the Wales Office yesterday, and on Thursday and Friday I will be getting involved with that sector in my constituency, to highlight its importance to the economy there.
I am taking part in the debate very much in my constituency role. My constituency is the second most dependent on tourism in the country, if the experts are to be believed. It has everything from seaside resorts such as Llandudno to historical towns such as Conwy; it has the Conwy valley, and access to Snowdonia via Betws-y-Coed. Tourism is a vibrant and growing sector of the economy, and in many ways it shows what small rural businesses can do. The Government have a great track record of support for small businesses such as those in the tourism sector. Many will be sole traders, or husband-and-wife partnerships, and the significant increases in the personal allowance will make a difference to the profitability and value of those individuals’ businesses. The increase is a huge contribution to the well-being of those who run small tourist-related businesses.
The reductions in corporation tax also obviously have an effect, but just as important, from the point of view of a sector employing so many staff, is the introduction of the employment allowance—in effect a national insurance rebate. That makes a huge difference. Finally, there have been changes to business rates, including the business rates rebate, which also makes a difference to small tourism providers. So the story is not one of the Government ignoring the small business sector. There is plenty of evidence of support being offered to the sector; but we seem to have a problem getting the message across about whether a VAT reduction would make a significant difference.
I am persuaded of the evidence, but I agree with the hon. Member for Southport (John Pugh) that there is unlikely to be an announcement in the Budget tomorrow. However, it is important to keep a watching brief. I find it hard not to agree with the recommendation about an independent examination of the evidence. If it pointed clearly to a huge implementation cost, we could be persuaded that the Treasury is right in its approach to the issue; but if any independent evidence suggested that the campaigners’ arguments are valid, there would be a good reason to reconsider reducing VAT.
There are examples on which to build. I was one of the MPs who campaigned vigorously against the proposal to put 20% VAT on static caravans, and I am delighted to say that the Treasury listened. It is no bad thing for any Department to listen to points made by Back-Bench Members on behalf of their constituents. I was disappointed by the comments of the hon. Member for Angus (Mr Weir), who dissuaded me from thinking I might have any influence on Government policy. As I have a cable car in my constituency, I thought my efforts towards a reduction to 5% were just as important as those of the Chief Secretary to the Treasury.
Finally, I have spent a significant time on the Public Accounts Committee during this Parliament, and we have gone on and on about tax avoidance, which clearly we should strongly condemn. However, we need clarity about the fact that the tax system should not create a situation that discourages businesses from growing. That is exactly what 20% VAT in the tourism industry does. A good-quality local bed and breakfast whose turnover hits the £80,000 threshold has a choice: increase turnover to £96,000 to stand still, or close for the rest of the winter. I find it unacceptable when I see that small businesses in places such as Betws-y-Coed have opted to close for the winter, because, being honest individuals, they do not want to avoid paying tax that is due, but the challenge of increasing turnover to a level at which they will still benefit from their efforts is far too much. That vast threshold keeps businesses from growing. Any policy that prevents businesses from wanting to grow and serve their customers needs to be looked at again.
In considering the 5% VAT target for the tourism sector, the key thing for the Treasury to examine is whether the 20% threshold stops good businesses growing. If the evidence suggests that it does, action should be taken.
It is nice to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Ceredigion (Mr Williams) on obtaining the debate.
For the past 10 years, until last year, I was responsible for tourism and economic development in Portsmouth, and I cannot remember a time when, on visiting a tourist attraction, the first thing I was asked was not whether there was a chance of a reduction in VAT on that activity. An important issue is that many of those tourist attractions are on the cusp of survival. Some are working against the clock, trying to keep footfall to a level that sustains the jobs they provide. In my city, tourism brought in 10.2 million visitors, and the local economy has an annual tourist spend of £600 million—an awful lot of money. A lot more could be achieved if VAT were reduced.
Ferries operate out of my city to seven destinations in France, Spain and the Channel Islands, mostly in the months of May to September, and probably part of November. They are crowded with people from this country going to other parts of Europe. I look enviously at the way in which those people are treated on the other side, with cheap accommodation in first-class hotels, and attractions that are not pestered by a 20% rate of VAT. It would be to our enormous benefit if we could convince just a third of those tourists to stay in this country, but when I speak to tourists at the ferry port in Portsmouth and ask them why they have not decided to enjoy what we have to offer in Portsmouth, they say that our hotel prices are too high for a family of four or six, which we have to understand. Those hotels would see an enormous benefit from a VAT reduction almost immediately.
The figures provided by the Cut Tourism VAT campaign for the south-east and south-west, excluding London, show that 29,000 jobs would be created over a period of time. Okay, the Government will take a hit from reducing VAT from 20% to 15%, but can we really calculate what having 29,000 more people working in the economy will do for those people’s self-esteem, for the attractions in which they work and for the Treasury, which will benefit from the income of those people in gainful employment? We should not ignore the campaign, and I am sure that the Minister will not. He will have listened carefully to Members from across the political spectrum on this issue’s importance.
Sir Ben Ainslie’s sailing centre was recently built in Portsmouth, and we are grateful for the Government’s support. When tickets were advertised for an event to be held at the centre later this year, the whole allocation of 10,000 seats, which were offered to the people of Portsmouth, went in 24 hours. We expect 100,000 people to come for that event, but our problem is that we would like them to stay longer, rather than just coming for the day to watch the sailing attractions on the Solent. We would like to see them enjoy the other facilities, to fill our hotels and to generate income.
Portsmouth is important in the national scheme of things because it is the home of the Royal Navy, and we appreciate that much Government expenditure has gone into, and will continue to go into, the naval base, but the Government must support the most critical industry of all, which is fragile in many ways. Well over 12,500 people work in the tourism industry in my city, and many of them are in fragile job positions because of the cost of taking families into the various attractions. We have to do something, otherwise in the next Parliament there will be debates about the jobs that we have lost. I do not want that to happen; I am sure that nobody in this room, including the Minister, wants that. Let us be positive, and send the message to our colleagues in the next Parliament, and to Ministers in the next Government, that the tourism industry and cities that flourish because of tourism need the support that only the Government can provide. The best step forward would be to reduce VAT.
It is a pleasure to speak in this debate, and I thank the hon. Member for Ceredigion (Mr Williams) for securing it. None the less, it is a source of frustration that we have previously debated this issue. We are in jeopardy of missing a fantastic opportunity for all our communities; that has been the thrust of every comment so far.
I declare an interest, because I represent one of the most idyllic and beautiful constituencies in the United Kingdom, if not the world. Although I realise that every Member present is envious—I do not doubt that for a second—I hope they will keep an open mind on VAT reduction, which could help their constituencies to thrive, just as it would help my constituency of Strangford. Today we celebrate St Patrick, the patron saint of Ireland, north and south, and it is always a pleasure to do so. It was my pleasure last week to attend Champ UK’s annual St Patrick’s day event, at which I heard Tourism Ireland’s fantastic news about the increasing attractiveness of Northern Ireland as a tourist destination. Tourists seem to gravitate towards the Republic of Ireland, but the Northern Ireland Statistics and Research Agency states that total overseas visitors to Northern Ireland for the first nine months of 2014 grew by 3%, which is a welcome development. However, we in Northern Ireland still fall foul of the Republic of Ireland’s 9% VAT rate, which was set in 2011.
Across the United Kingdom and Northern Ireland, our golf clubs provide fantastic accommodation and food, but there is a distortion of VAT payments between proprietary clubs and member-run clubs. Surely that anomaly should be addressed. Doing so would create more employment and would be good for tourism.
My hon. Friend is right. Hospitality services—golf clubs, hotels, restaurants and attractions—all suffer as a result of VAT on tourism, and it is important that we try to address the situation. That feeling is particularly tangible in Northern Ireland because we share a border with the Republic, which has a much lower VAT rate. Although we have seen an improvement in visitor numbers over the past year, which is good news, the benefits of a VAT reduction might have assisted those numbers even further. We are four years behind the Republic in implementing this decision, and I ask why. There has been a long-running campaign by the hospitality industry in the United Kingdom to reduce the VAT rate below the standard of 20% for services supplied to tourists, and I re-emphasise the importance of that industry to our economy. Tourism makes up 10% of Northern Ireland’s GDP and provides 40,000 jobs, and the sector is still growing.
Does the hon. Gentleman agree that one of the main challenges for tourism in our constituencies is extending the tourist season? A reduction in VAT would make weekend breaks and mini-breaks all the more affordable and attractive.
That illustrates the case for a VAT reduction. The tourist industry gives so much to us: it gives us global status as a destination, and growth. The industry aims to create more jobs, improve services and enhance the hospitality experience for which the UK is renowned.
The British Hospitality Association, when questioning operators within the industry, received some incredible responses, of which I am sure the Minister is aware. Some 82% of respondents said that, in the event of a reduction in VAT, they would invest more in the service they supply; 67% would create further employment positions; 57% would provide more training; and just under half would increase wages. There is a clear indication from the tourism industry that it could do a lot more. Although I recognise that there are concerns about the restrictions on the room for manoeuvre on public expenditure, a decision to reduce VAT would have long-term benefits, not least of which would be tourism spending spilling over into all areas of the economy in Strangford, across Northern Ireland and across the United Kingdom.
It is important to rectify youth unemployment, and we can do that by expanding the tourism sector. In Northern Ireland we have a large number of enthusiastic young people who are taking tourism, catering and hospitality courses in a number of our South Eastern Regional colleges. There is clear interest and growth in the sector, and all we need to do is kick-start the sector. My local South Eastern Regional college in Ards in my Strangford constituency is training young people to an exceptionally high standard, and it is important to maintain excellence in this area. The launch of the Diageo tourism and hospitality academy, run by Belfast metropolitan college, is another indication of what we can do.
The Cut Tourism VAT campaign emphasises that British families and international visitors who choose a British holiday will pay almost three times as much VAT as they would in a French or German break, and twice as much VAT as they would in a break in Italy, Spain or the Republic of Ireland. Reducing VAT for tourism would help to lower prices all round, and it would incentivise families to take an annual trip that they might otherwise be reconsidering.
I have attended a number of events organised by Pubs of Ulster, and I believe that we should support the UK-wide Cut Tourism VAT campaign. Northern Ireland is home to some 10 breweries, and my constituency of Strangford is home to 63 pubs that support 672 jobs, 138 of which are for 16 to 24-year-olds, whom we should be encouraging. We have the attractions, restaurants, bars and locations, and it is now time to ensure that we can offer even more by asking the Minister genuinely and sincerely to consider reducing VAT.
It is a pleasure to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Ceredigion (Mr Williams) on securing this debate and on his work to highlight the issue. We have heard some excellent and important contributions that have reminded us of the importance of tourism to UK plc, and the case has been passionately made for reducing VAT below the standard rate of 20% on services supplied to tourists, in order to improve the sector’s international competitiveness.
As we have heard, member states’ discretion to set lower rates on goods and services is limited by European VAT law, but there is a special dispensation for a lower rate on certain supplies associated with tourism, specifically including hotel accommodation, certain restaurant services and some types of admission charge, including charges for entry to amusement parks. Some member states have made use of that dispensation to charge lower rates, including the Republic of Ireland, which introduced a lower rate of 9% in July 2011. We heard a bit more about that from some hon. Members in their contributions.
The campaign is long-running. This is the second debate on the topic in which I have taken part; the previous one took place almost exactly a year ago, ahead of last year’s Budget, and was secured by the hon. Member for South Down (Ms Ritchie), the hon. Member for Brighton, Pavilion (Caroline Lucas) and the hon. Member for Strangford (Jim Shannon), from whom we have just heard.
The hon. Member for Ceredigion made a powerful opening speech focused partly on his constituency and the impact that a VAT reduction could have on the Welsh economy. He also made the point about a potential link between a VAT cut and economic growth. I take slight issue with his assertion that the Labour Opposition have not been robust in our approach to this matter; we have been robust, but unfortunately the answer that we have arrived at is similar to the Government’s rather than being the answer that he and others hoped for. Those hoping for a different answer from us and the Government include members of our own party; I acknowledge the role of Labour Back-Bench Members in the campaign, including that of my hon. Friend the Member for—is it Ynys Môn?
I thank my hon. Friend. I hate to get people’s constituency names wrong, so I am glad to have got it right on this occasion. He made the point that it is Welsh tourism week, and Welsh Members of Parliament from various parties have been well represented in this debate. I recognise his long history of campaigning on this issue, and particularly his focus on the number of jobs and the amount of economic growth that such a change could create in his constituency and the Welsh economy as a whole. I fully expect him to continue lobbying Labour colleagues and a future Labour Treasury on the issue, as he has done alongside others throughout this Parliament, but I am afraid that I will disappoint him and other hon. Members throughout the House once again by not making a commitment that the next Labour Government will reduce VAT for the tourism sector in the way that they envisage.
If the shadow Minister is giving us a blanket no, can she give us an assurance that whatever happens after 7 May, if Labour is in power, it will consider it? If the Government applied to Europe, they could get a reduction. At least if we knew that it would happen, a move would be made. Let us see what happens.
I am grateful to the hon. Gentleman for that intervention. I was just about to develop a point about the evidence presented by hon. Members in this debate, and how we will react to it if we form the next Labour Government and Treasury.
I start by recognising that cutting VAT is a significant monetary challenge. The Opposition are clear that we will put no unfunded promises in our manifesto, the basis on which we will seek election from the public in the coming weeks, and we will not borrow any more money for day-to-day spending. We note the evidence presented by hon. Members in this debate from notable academics who have considered the issue in detail. It has been cited in support of the argument by the Cut Tourism VAT campaign. From opposition, I am not in a position to assess that evidence in the same way that the Treasury can, as it has access to data sets that we do not, but I note the Minister’s answers to hon. Members in written parliamentary answers and oral answers during departmental question time in the House. He has said, on the basis of analysis undertaken by the Treasury, that a VAT cut for the sector would not produce sufficient economic growth to outweigh the consequent revenue shortfall. It would be helpful if in summing up, the Minister put more of that evidence on the record, if the position is the same as before.
I apologise for coming late; I was involved in the debate in the main Chamber. The hon. Lady says that the Opposition are unable to examine the figures, but during this Parliament the Opposition have posited that an overall decrease in VAT would encourage consumer spending on all sorts of important consumer goods. Does she not accept that there is evidence to suggest that the measure would at least help trap the multiplier in a more targeted way in areas that depend on the tourism economy?
The hon. Gentleman will know that in the early part of this Parliament, we proposed an alternative package to the Government as an immediate measure to stimulate the economy. It envisaged a temporary VAT cut, which at the time could have made a difference across the whole economy and might have meant being in a different position today. I note, though, that the previous Labour Government, when lobbied on the issue, felt that targeting the cut in the way then envisaged would not necessarily have produced the effects anticipated by hon. Members.
That is why it would be helpful to hear more from the Minister about current Treasury thinking and analysis of the available evidence. An incoming Labour Treasury would certainly want to consider all that evidence and see the analysis at first hand. In particular, we would want to understand the relationship between different measures that could be taken, including a potential VAT tax cut compared with, for example—the Government have also cited this in defence of their position—the employment allowance, a £2,000 rebate on employer national insurance contributions introduced by the Government earlier in this Parliament. I would also want to be convinced that we would achieve as close to 100% pass-through of such a big change if we were to start considering seriously the case for making it.
However, we return to the fact that if we cut VAT in that way, the most recent Office for National Statistics data from 2012 suggest an annual cost to the Exchequer of £11 billion to £12 billion. Those sums would have to be found elsewhere, and we as an incoming Labour Government would not be in a position to make that choice. So I cannot commit to a VAT cut of the nature called for by the campaign, although I can of course commit, if I become a Treasury Minister after the election in May, to assessing the analysis and all available evidence. I will also work with colleagues in the Department for Business, Innovation and Skills and the Department for Culture, Media and Sport to examine what else can be done to assist the tourism sector and ensure that it plays its full part in encouraging sustained and balanced economic growth. I am sure that the Cut Tourism VAT campaign will continue to make its case in full heart in the life of the next Parliament; it is certainly made up of doughty parliamentary campaigners. I look forward to engaging with them in much the same way that I know the Minister has engaged with them thus far in this Parliament.
Tourism is a hugely important sector to the UK. It is our fourth largest service industry; it employs 9.6% of the UK work force, or 3.1 million people; it generates 9% of the UK’s entire GDP; and in 2013 it contributed £127 billion to the economy. So, it is in everybody’s interests to ensure that the sector grows, thrives and continues to provide the jobs necessary for UK plc.
As I highlighted in our debate on tourism last year, there are other policy levers that can be pulled, without the cost implications that a VAT cut on tourism would entail, which would still be of real benefit to the sector. One of the most effective of those levers could be around immigration policy, particularly given the complexity around fees, visa applications and the monitoring required to make sure that people do not overstay their visa. The Government have made particular changes with respect to some countries, such as China. However, it is the case that other countries are deemed to be a high risk for potential overstaying but whose genuine visitors are often locked out. I see that in my own constituency with visitors who want to come from the Indian subcontinent, but the immigration officials almost take a first view that those people are more likely to overstay than not. Often, that is not the case. People want to come to the UK to see the land that their forefathers left their countries of origin for, and they wish to come and celebrate family events such as weddings. They will spend money here, and their British citizen relatives will spend money showing them a good time and showing them what Britain is all about. We should assist that process and not hold it back.
Therefore, although I cannot agree for the cut that has been called for, I commend the work of the Cut Tourism VAT campaign and the work of its supporters in the House. We will continue to work closely with the tourism sector and we look forward to hearing more from the campaigners in the future.
I hope the hon. Lady will indulge me. She says that she does not agree to the cut, but would she agree to the concept of having independent research commissioned by the Treasury? Has she any fundamental objection to that, which would be a lesser commitment?
I am grateful for that intervention. I do not have a fundamental objection, in principle, to that idea, but I am not in a position to commit to a formal review of some kind. Nevertheless, as I have said, if I was in the Treasury I would happily look at any additional evidence and at the Treasury’s analysis of the data at first hand, rather than hearing it from the Minister.
It is a great pleasure to serve under your chairmanship this afternoon, Ms Dorries, and to respond to this debate. This is not the first time that I have had the privilege to respond to such a debate. I start by congratulating the hon. Member for Ceredigion (Mr Williams) on securing this debate, and for giving hon. Members an opportunity to discuss this important issue. I also congratulate him on the manner in which he set out his case. His constituency is well-known for being one of the most beautiful in Wales, and indeed in the entire country. I make that point with a degree of concern because I appreciate that, having made it about his constituency, there is a very strong case to make it for many of the other constituencies that are represented here in Westminster Hall today.
Let me reassure the hon. Gentleman and indeed other hon. Members that the Government value the importance of the tourism sector, not only in the hon. Gentleman’s constituency but across the United Kingdom. I will say more about that later, but Ministers from both the Treasury and the Department for Culture, Media and Sport have been working closely with the industry to increase both in-bound and domestic tourism.
On the specific issue of VAT, I should briefly explain that VAT is, of course, governed by EU law and that reliefs from VAT are therefore strictly limited. However, EU VAT law allows member states to implement certain reduced rates of VAT, which are listed in annex 3 of the VAT directive, at the discretion of individual member states. Three of these reliefs are of particular interest today: first, accommodation provided in hotels and similar establishments, including the provision of holiday accommodation and the letting of places on camping or caravan sites; secondly, restaurant and catering services, excluding alcoholic drinks; and, thirdly, admission to leisure attractions, including shows, theatres, amusement parks, concerts, museums, and similar cultural events and facilities.
I know that the hon. Gentleman is aware that a number of other member states have chosen to implement a reduced rate of VAT on tourism and related activity. However, this Government are yet to find any conclusive evidence of a causal link between VAT rates and tourism activity. Comparisons with other countries tend not to take into account the significant VAT reliefs that the UK already provides for cultural attractions and public transport, nor the other tourist taxes that other member states choose to levy.
I am very interested in the statement the Minister has just made that there is no conclusive evidence to support the argument that a cut in VAT would generate more activity. So, what is the evidence that he is using to say that there would be no improvement, and who produced it?
I will say a little about that. For example, the case has been made that in the Republic of Ireland there has been an increase in the number of tourists in recent years, since there was a reduction of VAT on the tourism sector there. However, we have seen a very similar increase in the number of tourists in the United Kingdom. So, we should not jump to the conclusion that there is necessarily a causal link.
Earlier, I raised the issue of the distortion of VAT payments between certain golf clubs—the disparity between the proprietary clubs and the member-run clubs. Surely that disparity should not exist. If it is a golf club, it is a golf club, and there should be a level playing field. Golf clubs create tourism, food and accommodation.
The hon. Gentleman leads me to a different debate on the VAT treatment of golf clubs, which I am sure he will understand is a matter of some complexity and indeed of some litigation, too. So, Ms Dorries, I hope you will forgive me, but I will not be too diverted by the particular point that he has put on the record.
In the UK, we apply a zero rate of VAT to food, newspapers and books, and passenger transport. The UK also refunds VAT incurred by many world-famous museums and galleries, making them free to visit for all. In addition to the sector-specific reliefs, the UK’s VAT registration threshold is the highest in the EU, meaning that much tourist accommodation and many attractions do not have to charge any VAT to their customers.
As I have said, Ministers from both the Treasury and DCMS have discussed the Cut Tourism VAT campaign, and recently I have both met and engaged in correspondence with campaigners. VAT raises more than £100 billion a year, which has been critical in enabling us to manage the UK economy through tough economic times, and the latest figures from the Office for National Statistics suggest that reducing the rate of VAT to 5% for catering services, such as the supply of meals, snacks and drinks sold by restaurants, pubs, cafés and canteens, would cost the Exchequer £10 billion per year. Similarly, a cut in VAT to 5% for accommodation would have an estimated cost of around £2 billion a year to the Exchequer. I do not have to remind hon. Members that those costs would have to be met either by increasing other taxes, which may well have an adverse effect on growth and jobs elsewhere in the economy, or by increasing borrowing. That would risk raising interest rates, which would undermine our hard-won recovery and would have an adverse impact on families and small businesses.
The Minister made the comparison with the Republic of Ireland, saying that we have had a comparable increase in the number of people visiting this country. Does he have any comparable figures from the Republic of Ireland that show the boost to the tourism sector there, and if so, is he taking them into account when he talks about the extra revenue that has come into the Irish Exchequer?
The point that I am making is that the number of tourists in both countries has increased at largely the same rate, at a time when one of them has reduced VAT and the other has not. Of course, these matters can be somewhat complex and there are many factors to consider, and when it comes to tourism matters, and particularly matters affecting in-bound tourists, we should not forget the importance of the exchange rate. It is very significant and, of course, recently the exchange rate has gone in different directions.
If the Minister wants a comparison, he should compare the Republic of Ireland and Northern Ireland. Clearly, the number of visitors to the Republic of Ireland has grown enormously above the number visiting Northern Ireland. That is a clear example of the advantage of a reduced VAT rate. We could all take advantage of that if it happened across the whole of the United Kingdom, and particularly in Northern Ireland.
As I say, a comparison of the Republic of Ireland with the UK as a whole suggests that there is not a big difference. Indeed, I understand that there has been a pretty positive increase in the number of tourists to Northern Ireland specifically in recent years.
All hon. Members will be aware that this Government’s priority is to tackle our budget deficit decisively but fairly and to restore confidence in our economy. The Government have concluded that a VAT cut would not produce sufficient economic growth to outweigh the revenue shortfall. I have not seen any new conclusive evidence that has led me to revisit that conclusion. So at present the Government have no plans to introduce a VAT cut for this sector.
I reassure hon. Members that the Government recognise the importance of the tourism industry and we remain committed to a wide range of other measures to support the sector. For example, to date we have invested more than £129 million through VisitBritain and VisitEngland, to market great British holiday destinations at home and abroad. This has already leveraged significant private sector investment of more than £84 million. We have announced a £10 million tourism in the north fund in the next financial year. We have announced £2 million in the next financial year, to help promote our cities and regions overseas as part of the GREAT campaign, through VisitEngland.
The tourist industry has benefited from other policies introduced by this Government. I thank my hon. Friend the Member for Aberconwy (Guto Bebb) for making this point. For example, capping business rates and doubling business rates relief benefits the retail and hospitality sector by a considerable sum. Those sectors have benefited from the introduction of the employment allowance and will benefit from the abolition of employer's national insurance contributions for under-21s and for apprentices under 25.
I hope that this intervention will help. The Minister is saying clearly to the industry and to hon. Members that he has seen no conclusive evidence. If that is not to be a fob-off, should not he sketch out what conclusive evidence would look like to the Treasury? What is the Treasury actually looking for in evidence that would convince it that this case was valid? If he cannot say that, it will simply look like a stalling move.
A considerable amount of evidence has been produced. The essence of the case is that we would want to see evidence suggesting that the benefits to the economy outweigh the costs. The costs to the Exchequer are, as I have outlined, considerable. The Cut Tourism VAT campaign acknowledges in the numbers that it has produced—I can go into a little bit more detail on issues that we have with its methodology—that there would be an immediate shortfall. Its argument is that, over time, much if not all of that shortfall would be recovered. However, that immediate shortfall has to be dealt with. There is not the opportunity for us to say, “We can borrow extra billions of pounds to fund this, in the hope that that money will be recovered in future years.” If we undertook such a measure, we would need to replace that shortfall with additional taxes or reduced spending, and that in itself would have an impact upon the economy.
The actions we have taken in support of VisitBritain and VisitEngland and the tax reforms that I outlined, are delivering positive results for the UK tourist sector. Provisional figures for 2014 show that the UK welcomed 6% more visitors than in 2013: a total of 34.8 million. In total, UK tourist spend is also up by 3%, which is a total of some £21.73 billion. Provisional figures for tourism in Wales for 2014—the hon. Member for Ceredigion will be interested—show that more people are holidaying in Wales than ever before, with Wales now accounting for over 12% of holidays in Great Britain, leading to an increase on holiday spend in Wales. I am certain that, on top of the increase in numbers, all the successful events that the UK hosts year on year will only serve to make more people aware of the UK’s desirability as a tourist location.
Wherever we can, the Government will of course continue to invest in tourism and provide support for tourism across the UK. Although the hon. Gentleman, and other hon. Members who spoke in this debate, may be disappointed with my answer on VAT, I hope he and other hon. Members will be reassured that we support the sector; that, wherever we can, we will continue to support it; and that we are confident that both inbound and domestic tourism numbers will continue to rise.
Survivors of Child Abuse
It gives me no pleasure to open a debate on the lack of support for child abuse survivors. The issue is predominant in the media at the moment; there is almost a frenzy of activity going on, with media and public interest in the issue of prominent people and child abuse.
One of the great dilemmas for anyone provided with information by people out there is understanding the context of what was going on. The context is worth spelling out a little bit, because it affects understanding of how those who survived childhood exploitation and abuse were treated at the time. One of the dilemmas regarding the involvement of Members of Parliament, politicians and other prominent people is that there is a fine line to be drawn between MPs in the past who were secretly homosexual, those who were secretly homosexual and paying for sex with teenage boys, although it used to be illegal for men to have sex under 21, and those who were doing so with younger children. Of course, if MPs—or anyone else—are paying for sex with teenage boys, they probably do not ask, “Are you 18, 19, 14 or 15?” Part of the problem of exposing the past is precisely that. Who are the real perpetrators?
There is a separate side to this that is equally difficult. The vast majority of adults who come to me having been abused as children raised issues with the authorities as small children, but were treated as being the problem, as we saw rather graphically recently in Rotherham. Rotherham is no different from anywhere else—no different from Nottingham or Bassetlaw, which in turn is no different from the rest of the country.
For example, I have spoken to someone who, aged 11, was fostered out with nine other children and alleges multiple abuse, including rape, of these young children, some of whom were younger than him. He was forced into slavery—forced to work, in a workplace that I can identify in my constituency, from age 11 to 15, for nothing, the money going to his foster parents. The head teacher of his school wrote—I have seen the letters—saying that he did not want the child in the school, and claims in the attendance records that he was there when he was not. He was working for nothing in a foundry—a foundry!—aged 11, 12 and 13. He came forward for the first time to see me, his MP. Why me? I do not know, but he did. He has not been to anyone else. He is going to the police. He will go public, I am quite certain. The media will get a phenomenal story on what was going on. More victims will emerge, I know, because I have already done my own investigations. It was not a one-off; this was going on for years.
I have to tell my constituent that in a court case last week, it was ruled that children in foster care cannot make a civil claim against a local authority, because the local authority has no liability. I look at what local authorities across the country are doing, and I see documents about liability insurance and liability. They do not have a problem with kids in foster care, because the courts just ruled that there is no liability, but hang on a minute: what support is there for my constituents who were put into slavery aged 11 and abused? My constituent’s sisters and brothers were abused, too.
What support is there now for a constituent of mine who was raped repeatedly as a child in different care homes and foster homes? She made multiple allegations that take in different police forces and Crown prosecutors across the country. She spent three days in hospital under sedation, after giving her statement to the police and reliving the trauma, to try to get one of the prosecutions off the ground, and we are dealing with councils that are worried about insurance liability and are writing papers on that as their priority. That is what is fundamentally not understood.
I could give a list of MPs past and present suspected of involvement in child abuse. Most of the names would be accurate, although they would not all be, and that is why I am not going to do it. It would hinder the police. I spoke to the police minutes before coming in here about whether it would be helpful to do that. They are neutral, but my judgment is: let the police follow the evidence. One way or another, the names will get out. I want the people out in a court of law, being prosecuted and imprisoned. That is the appropriate thing. Critically, what I want from this debate is a system that supports these adults. The woman who was repeatedly raped and was sedated going into hospital after giving a statement—can you imagine what it is like, reliving the trauma in detail to give a statement so that a prosecution can be considered?
I congratulate the hon. Gentleman on securing the debate this afternoon. It is a pleasure to serve under your chairmanship, Mrs Dorries. The hon. Gentleman is getting to the nub of the problem. It is not just about the huge courage the victims have to have to come forward; the system needs to support them afterwards. My constituent, Jo, was repeatedly raped at 15. She has suffered because there are inadequacies with the Crown Prosecution Service and the Parole Board, and her perpetrator is back out on the streets. He had five life sentences. Will the hon. Gentleman expand on his issues with how the system has been letting people down, such as my constituent, Jo?
It has been letting down the hon. Lady’s constituents and mine alike. Three girls were repeatedly raped from age 5 onwards. There is no case to answer, because their statements taken at the time, when they were young kids, do not add up. The Crown Prosecution Service said, “Oh, there is nothing we can do. We will not win in court.” What support is there for them? I will tell you what support there is: me. That is who they come to. I will give them support, but what I need from the state and national and local government is properly resourced mental health services that do not, as they did to my constituent, send people away—she needed to be sedated for three days, having made a statement about the multiple rape and other violence—and say, “Come back in a month’s time.” That happened in Nottinghamshire this year to one of the victims. Mental health services are totally disjointed when it comes to support.
I am dealing with children’s social services, but some of these adults are in their 50s or 60s. They will not be going to children’s social services, so where is the support from adult social services? There is no system in place that gives them that. I have constituents who have been hung out to dry by the police and given no support. They were not even referred to the support agencies, having come and said, “We were raped as children.” What on earth is going on when we have no support systems in place?
The hon. Gentleman is making a very powerful case on behalf of victims of child abuse. In Northern Ireland in the past year, 50 offenders have been arrested and questioned in relation to sexual abuse. Does he feel that the first thing that survivors of child abuse want to see is the culprits arrested, investigated and referred to the courts for sentencing? Do resources need to be made available for that to happen?
The survivors want justice, and the only way they will get that is by being believed and by perpetrators being prosecuted. The Crown Prosecution Service cannot cope with the volume. It has hardly any cases compared with the cases that will go to it. For the Crown Prosecution Service in the east midlands, we are talking about a manifold increase just from the cases I am bringing. How on earth do we expect such places as Rotherham to deal with the numbers? The expertise to take the cases forward is there, but the resource is not. What is being said is, “We will put it on the long drift for years and years.” That is what has happened with the police. They are not even getting to some of the people who should be questioned as potential perpetrators, because they do not have the resource to do that.
I am not criticising Government spending; what they spend on this, that and the other is a separate debate. It is important that we all get our heads around what is needed. We are not talking about the Government announcing another £100 million or £200 million here or there; we are talking about a far bigger resource than that. In my constituency, I am personally dealing with 25 victims—25 survivors of child abuse. That is so far. There are loads and loads more out there, just in my constituency.
The Crown Prosecution Service and the police cannot handle the prosecutions, the mental health services cannot handle the support services for the victims and social services cannot handle virtually anything to do with them. They do not have the resource. If we are to get on top of this huge legacy, we need to define what I put to the Minister as a Roll-Royce service. What does that mean? A standard needs to be put in place so that when someone comes forward, there is a benchmark that defines what they are entitled to. It is an entitlement. This man was forced into slavery and went to the police, and the police and the social workers returned him and his sisters to the abusers not once, not twice, not three times, but more. He did the right thing, and he is entitled to a Rolls-Royce service. That can come in different forms. What is his major demand? One-to-one literacy lessons, because he finds it a bit hard to get on, being unable to read and write because he was not in school because he was forced to work in a foundry by some predatory paedophile abuser who was the foster carer over him—and that is what they were. Literacy is the most important thing for him.
There is no system in place that says, “You will get this. You are entitled to this.” What is he meant to do—go to the civil courts, as so many thousands have already done? That is not a sensible approach, given that lawyers will not even share information, and are telling people in Nottinghamshire not to come to me, the media or anyone else. They say, “Stick with us, we’ll get you a little bit of money.” How much is a life worth in Nottinghamshire? Eight grand a settlement. It is not good enough, and it is not going to be good enough in future.
Whether under this Government or the next Government, whoever is in power in the next Parliament, whoever the Minister is, from whichever party, I need to see defined an immediately available Rolls-Royce service. Whatever resource is needed, we will have to find it. This is not about me getting up and having a go at the Government; it is about Parliament taking responsibility. This is about saying that a huge amount of the available resources needs to be given and broken down into different areas.
I have been contacted by constituents and many others from all over the country who have survived abuse. They want prosecutions to proceed. They want the police to be able to investigate. They want mental health and other NHS facilities and services to be available. They want support from adult social services. They need that, and they need it as they come forward.
There is one final thing that they need. The Government have made their decisions about the independent panel and Goddard. We can learn a lot from abroad. They do this stuff better in Scandinavia and New Zealand. We should be stealing all their best practice for how we deal with things. Whoever is the Minister, and whoever sits on the Select Committees and all the rest, should get out there, steal their good ideas, bring them back and implement them here. But survivors need their own forum. They have called for a national institute for people abused in childhood. They need that, because then they can provide some of the support and guidance, and they can contribute to the definition of a Rolls-Royce service.
I cannot be dealing with more people attempting suicide, having come to me because the support services are not there. I do not give a damn which heads are going to roll. If those support services are not there, I will get rid of the people at the top, because it is not good enough for my constituents, who are no different from people anywhere else.
I need from the Government a clear undertaking that the resources and expertise will be there. If someone has survived this trauma and lived with it all their life, they have a right to and an expectation of support when they bravely come forward. That is what we as a society and we as a Parliament are going to have to give them. That is why this debate is not only timely, but critical. We need action within months, not years.
I thank the hon. Member for Bassetlaw (John Mann) for leading such an important and timely debate about the support available for those who have suffered child sexual abuse. The first thing that any victim wants is honesty. People in authority must take reports seriously and confront abuse wherever it occurs. As the hon. Gentleman said, victims have not only a right to be believed, but a right not to be treated as the problem. That is why we have been determined to tackle the issues of both historical and current child sex abuse.
For too long, people in positions of power have swept concerns about child abuse under the carpet, failing to act even in the face of clear evidence. That cannot be allowed to carry on; we have to act. The Home Secretary has said that what we have seen so far is likely to be the tip of the iceberg. The hon. Gentleman’s speech has reaffirmed the fact that there is still much for us to understand and learn. We must consider how we can ensure that victims of abuse are given the support that they rightly deserve. That is why the Home Office set up an inquiry under the leadership of Justice Lowell Goddard to investigate the shocking claims that we have heard and are still hearing about child sexual abuse by those in positions of power in the past. We are now finally seeing police forces throughout the country showing the will and determination to tackle child sexual exploitation wherever it occurs, be it in Oxfordshire, Rotherham, Derby, Rochdale, or elsewhere, as the hon. Gentleman said.
We have already announced that we will consult on a new criminal offence of wilful neglect for teachers, councillors and social workers who fail to act on evidence of child abuse, and the Prime Minister has upgraded child sexual exploitation to a national threat, creating a duty on police forces to co-operate across force boundaries.
We have already improved the data, not only on children in care who are missing, but on absence. Rather than being only on those who have disappeared for more than 24 hours, the data—whether from the local authority or the police—now cover every single case of a child who has gone missing from care, irrespective of the type of placement. That is important because we know that those children are particularly vulnerable to exploitation, especially those in residential care, which is why we have undertaken such wide-ranging reforms to improve risk assessments for children’s homes, to improve the quality of care in those homes, and to ensure that the decision makers—particularly those who place children out of area—are much more robustly accountable for their decisions than they have been in the past.
The hon. Gentleman is correct to say that listening to survivors of child sexual abuse is not enough on its own. They need support, often well into adult life. The psychological effects of childhood abuse can be absolutely devastating—from depression and anxiety to eating disorders, self-harm, alcohol and drug addiction, and severely disrupted learning that can hamper them for life. On the latter, the hon. Gentleman gave the example of a constituent who came to him for help and wanted one-to-one literacy lessons. That is a good example of the wide-ranging consequences of something that has been left untouched and not properly considered as part of his constituent’s rehabilitation.
I will come on to the various strands of support that are either in existence but need to improve, or that the Government have announced to try to ensure that we better support people who find themselves in that situation. The truth is that long-term specialist intervention may be required to rebuild self-esteem and resilience, as well as to tackle serious psychological ill health.
The hon. Gentleman will not want me to quote a succession of numbers at him relating to the money that has been made available to support victims of child sexual abuse, but it is right to recognise that a fund has been established for 2014-15 and 2015-16. We are working with the support of organisations that are reporting an increase in referrals prompted by the independent inquiry into child sexual abuse.
I have also listened with interest to the hon. Gentleman’s call today for a national institute for survivors of child abuse. I undertake to take up the proposal with all other relevant Ministers, including the Home Secretary, because despite the fact that the independent inquiry is up and running, it is important that we still take time to consider what other support we might be able to offer to give us confidence that we are addressing the issues that many survivors are raising. We have already announced the establishment of a new centre of expertise, which will help to develop and deliver better approaches to tackling child sexual abuse, spreading the best practice that the hon. Gentleman spoke about from as far afield as New Zealand and Scandinavia. We can also learn from the many professionals who are out there but need the capacity to deliver services more widely. Part of that has to be how victim support is built into that body of expertise.
Survivors have rightly been instrumental in the setting up of the statutory independent inquiry into child sexual abuse. Both Justice Goddard and the Home Secretary are clear that they must also have a strong voice in the work of the inquiry. Justice Goddard will write to survivors and their representatives shortly to set out her intention to create a survivors and victims consultative panel, and to seek their views on how that will work and who should be on it. The panel will have a specific role and function within the inquiry. The inquiry’s terms of reference state that it must:
“Consider the experience of survivors of child sexual abuse; providing opportunities for them to bear witness to the Inquiry, having regard to the need to provide appropriate support in doing so”.
Rightly, it is for the inquiry to consider the most appropriate way to take things forward, but survivors have to be a key part of its remit.
What cannot be disputed is that now and at any point in history safeguarding children—the action that we take to promote the welfare of children and to protect them from harm—is everyone’s business. Everyone whose work brings them into contact with children and families, from the school receptionist, the police and health practitioners to the social workers, will have an important role to play in spotting and rooting out abuse and then supporting those young people, and sometimes adults, to come to terms to with what has happened to them and in how to deal with their future.
I thank the Minister for his positive remarks. Whoever is elected at the next election, does he agree that it would be highly sensible for the 650 individual MPs to be given proper training in how to handle people who might come to see them in the near future? That training need is clearly not being met at the moment and all of us could benefit from it. It could be hugely significant to individual lives.
I hesitate slightly because I come from a legal background in the family courts, but I can see the benefit to me of having had the opportunity to familiarise myself with many of the challenges and consequences for not only the victims of child sexual abuse, but the wider family. I have found that experience invaluable in trying to understand the wider needs for addressing the problems that society is now facing up to. I will not write the book of MPs’ training, but from my perspective as a constituency MP—like many colleagues—the background and experience that I have been able to draw from has been important in empathising with and understanding the significance of the many whom I have encountered in my surgeries and casework. It would be helpful for many other colleagues to have the opportunity to understand better the types of issues that they will undoubtedly come across in future.
Effective safeguarding of children can be achieved only by putting children at the centre of the system and by every individual and agency playing their full part. Failure to do that has been shown starkly in the reports from Rotherham and Oxfordshire, which have revealed a need for a co-ordinated response to protect children from child sexual exploitation and sexual abuse. That requires a system in which professionals work together to identify emerging problems and goes right through to supporting children who are in need or on a child protection plan.
No single professional can ever have a full picture of a child’s needs and circumstances. If children and families are to receive the right help at the right time, everyone who comes into contact with them has a role to play in identifying concerns, sharing information and taking prompt action. Where that happens, children are better protected. We will therefore shortly publish a revised version of the “What to do if you’re worried a child is being abused” advice, which has a stronger focus on ensuring that professionals are aware of the signs of abuse and neglect and what action they need to take in response. We will also publish revised guidance on information sharing to set out the key principles for how to do that effectively.
Once a child’s need has been identified, getting help quickly is important to stop needs escalating. However, the quality of the intervention will determine how children can be helped to overcome their abuse. Targeted help is required to meet individual needs—as highlighted by Alexis Jay’s report into the failings in Rotherham, a child who has experienced sexual abuse will almost inevitably require long-term specialist intervention. Help will range from basic support to rebuild self-esteem and resilience, to interventions that tackle serious psychological and mental ill health.
Effective and timely support for victims of child sexual abuse is a matter of national importance. That is why the Government are doing more than ever to help victims of rape and sexual violence through the female rape support fund, which has funded 86 rape support centres to provide independent, specialist support to victims of recent and historical rape and sexual violence. In December last year we announced an immediate uplift of £7 million in non-statutory sector support to victims and survivors through the existing female rape support centres and two funds available to organisations supporting victims in areas where there is high prevalence of child sexual abuse and exploitation. Importantly, we have set up the first fund dedicated to help male victims of rape and sexual abuse.
We are also working with professional health organisations such as NHS England on where efforts should be focused to train staff on trauma-informed approaches to care in mental health services. As the hon. Gentleman knows, the Government report on the work of the children and young people’s mental health taskforce was published earlier today. It sets out a clear national ambition to support and inform the delivery of a local offer of services to all children and young people.
We also announced £80 million to help to cut waiting times in adult mental health services. The hon. Gentleman made the important point that it is not until they are adults that the child sexual abuse of many of the victims or survivors comes to the notice of the authorities. That is far too late, but it does not mean that we give up. We continue to strain every sinew to ensure that those survivors get the help that they need, whether through the health service, social care or other agencies.
We need to be better—this is what the taskforce is trying to ensure—at ensuring that all those who should have an interest do have an interest in working closely together to provide the package of support that we know when done effectively can have transformative results. Clearly, child sexual abuse is something that never leaves people who are victims of it. I have worked with many children and, in particular if abuse takes place in a family environment, it has been hard for them ever to come to terms with it.
As the hon. Gentleman said, not only as a Government, but as a society we need to recognise that child sexual abuse is something that we all must take seriously. We must all play our part to ensure that it is not simply swept under the carpet, as has happened in the past. It must be put centre stage, thus addressing a national issue that we must never hide. We should be clear about tackling it head on. If we do not do so, we are only storing up more problems for the future, and more strain and pressures on services that are working hard to support the victims of child sexual abuse. For whoever is in government after 8 May, it will no doubt be a high priority to demonstrate that everyone in society should set out our stall in support of those—in particular the most vulnerable—who have, through no fault of their own, been victims of child sexual abuse.
Another important element is to give professionals not only the tools and skills, but the confidence to know that they can spot child sexual abuse and go to their senior management and others in authority knowing that they will be supported. In Rotherham and other cases, that has not happened, which has meant that too many children were let down and too many adults are living with their horrific past. It is incumbent on all of us to turn that situation around. I welcome the hon. Gentleman’s contribution to the debate.
Premier Motor Auctions
The tale I want to tell today is an everyday story of business folk who have been robbed of their company by big banks acting in collusion with one of the big four accountancy houses—two sets of robbers, both too big to be touched by the machinery of regulation that we have. It is a story that is told several times in the Tomlinson report; those stories relate mainly to the Royal Bank of Scotland, whereas this story relates to Lloyds bank.
By analysing the process of company theft by banks and big accountancy houses working in collusion, I have discerned four stages. First, they introduce a Trojan horse to the company. Whoever it is, the Trojan horse then buddies up to the company and finds its vulnerabilities, while presenting a nice image and offering advice. Naturally, if that Trojan horse is a representative of one of the big four accountancy houses, they will be trusted, because we can trust the big four, can we not? They are big institutions of great repute that are worthy of trust. The third stage is that the Trojan horse insists on restructuring the company’s finances to put the bank in control. In the fourth and last stage, the company is put into administration for the bank to take for its own or to sell on to whoever is interested.
That is the technique and the four stages that were applied to Premier Motor Auctions, a Leeds-based auction firm that was profitable and well run. Lloyds bank itself described it as profitable and as a business of significant value. The company had an overdraft with Lloyds of £1.75 million. The Trojan horse was Irving Warnett of PricewaterhouseCoopers, who was put into Premier Motor Auctions, and welcomed by the company, as a non-executive director. As he put it, he was there as a “critical friend” to advise on how to run the business. Warnett went on to create a £2 million black hole in the company’s accounts by insisting—wrongly, as it turns out—that it had to have a separate account for its business with the Driver and Vehicle Licensing Agency, business that was in itself profitable. Legally that was not true, but the company went and created a separate account, which in turn required the overdraft to be increased from £1.75 million to £3.75 million.
At that point, the bank used its power to take control of the company. At the same time, it transferred the account to the Lloyds business support unit, which charged a higher interest rate and a £250,000 arrangement fee for its services to the company. Having created the black hole and transferred the account, the bank immediately instructed Keith Elliott, the chief executive and owner of Premier Motor Auctions, to sell the company “vigorously and robustly” via an administration that was to be handled by PwC.
As anyone sensible would, Elliott fought back. He got a rescue deal from a venture capital firm called Endless, which described the company as an “excellent firm” enjoying record sales. Lloyds scuppered the deal with Endless. It demanded 50% of the new deal. The manager of the Lloyds business support unit in Leeds said, “This is our attempt to crystallise the position and do an Endless/Lloyds deal without Keith Elliott.”
Not to be beaten—he is a resilient man and who can blame him for fighting to retain control of a company he built up?—Keith Elliott did another deal, with Scottish Motor Auctions, which would have secured the £2 million by which the overdraft had to be reduced to stop the administration. Someone—we do not know who, but it was either someone from Lloyds or PwC’s man, Irving Warnett—scuppered that deal in 24 hours. Lloyds has given me a long explanation, which I am inclined to accept, and which says that it was not someone from Lloyds, so the finger points at Irving Warnett and PwC. The deal was scuppered and Premier Motor Auctions was put into administration. In charge of the administration was Ian Green, the head of PricewaterhouseCoopers’ business recovery service and the boss of Irving Warnett, the man who had been put into the company in the first place and who was the architect of the whole financial arrangement.
Lloyds therefore got an equity interest in a company that Lloyds Development Capital had wanted to take over for some time. Through the administration, it took over a company that was making an annual profit—and still is—of £2.7 million. As for PwC’s share of the deal, it of course got a much higher fee for the administration than it would have from the simple transfer.
To put it bluntly and accurately, that is theft. That company was stolen. I have raised the issue in Parliament before, and Keith Elliott and I have raised it with various bodies. Elliott raised it at the Lloyds annual general meeting, and wrote to every director and partner of PwC, until eventually he was told to stop contacting the firm because he was becoming a nuisance.
After that, we went to the regulators. Regulators are surely there to protect companies and those who run them from theft and from having their company stolen from under their feet—what are they there for if not to offer that protection? Every one of them turned out to be a broken reed. Both Elliott and I appealed separately to the Institute of Chartered Accountants, which is the regulator for PricewaterhouseCoopers. It refused to investigate, because the case was “not a disciplinary matter”. I hope hon. Members have noted that point: theft is not a disciplinary matter, so if one of the big four accountancy houses colludes in the theft of a company, it cannot be disciplined—it is not a disciplinary matter. I do not know what it is; perhaps it is business acumen, but apparently it is not theft or a disciplinary matter. That was the response from the ICA. Elliott and I both wrote to protest against the decision, and it wrote back to say it would not answer any further correspondence on the matter. We were becoming a nuisance—as we should have been.
We then went to the Financial Reporting Council—the regulator of regulators. It too refused to investigate, saying that it was “not in the public interest” to do so. In other words, theft does not matter and is not in the public interest; or perhaps—I do not know whether this was what it was saying—theft is in the public interest but investigating it is not in its view. That is obvious balls. It is rubbish, and should never have been allowed.
When PricewaterhouseCoopers refused to answer my questions, the then Minister in the Department for Business, Innovation and Skills, the right hon. Member for Cardiff Central (Jenny Willott), kindly wrote to PwC—I am grateful to her for doing so—to say that it should answer MPs’ legitimate questions. That is absolutely right and I am grateful to the Department for that. PwC told the Yorkshire Post, which inquired about how that had gone, that it had written to the Minister, who had no further questions to ask.
The Yorkshire Post then discovered, through a Freedom of Information Act request, that the Department had not received a letter from PwC. I do not know whether that was a lie commensurate with the lie it told the Public Accounts Committee when it said that it was not selling tax evasion schemes, but it certainly was not true. It escaped from the Minister’s requests.
Ian Powell, a senior partner at PricewaterhouseCoopers, wrote to me:
“I am satisfied that PwC acted properly.”
When someone is judge and jury in their own case, it is easy to develop satisfaction that their company acted properly. So that was a nice reply, saying “something off” to me.
Mr Warnett had been retired by that time—I do not know why—and PwC has refused to allow him to be interviewed about his part in the matter, either by me or the new liquidators. He will not answer questions and PwC will not answer questions. In particular, it will not answer questions on the crucial issue of what Irving Warnett did to increase the debt, whether that was right—the lawyers say that it was not—and what he did to scupper the Scottish Motor Auctions deal, which would have saved Premier Motor Auctions from going into administration.
After being sent lots of letters, PwC gave me some answers in a final letter on 14 November. Those answers turned out not to be correct, but it says that it has answered. Instead of answering the questions, a woman from PwC wrote to me—Margaret Cole is her name, and she describes herself as general counsel to PwC—and told me, kindly:
“It is apparent from your latest letter that you believe that Parliament has a role in resolving disputes such as this. I do not agree with this”.
That is what she said. She continued:
“The courts are the ultimate and appropriate forum.”
In other words, she is saying, “Don’t go whimpering to Parliament if your company is robbed, thieved or if PricewaterhouseCoopers colludes with a bank to take it. Don’t go whimpering to Parliament—it’s got no power. Don’t go to the regulators, because they’ve got no power. Go to the courts, and face PricewaterhouseCoopers’s enormous army of highly paid lawyers. Drive yourself into bankruptcy by embarking on legal action against these big battalions.” That is to a man who has lost his company and his money. That is incredible advice and it is unbelievable that PwC should have the impertinence to say to a Member of Parliament, “Parliament’s not the forum; it’s the courts. And we’re bound to win in the courts because we’ve got weight, scale, big lawyers and clever arguments.”
That letter makes it clear that the little guy is very vulnerable in such situations and that he has no means of redress. It is clear that the big four and the banks are too big to take on, break up or deal with. Their power is overwhelming. It has increased and it must be diminished. They must not be able to crush the small guy on a whim in their determination to take on a profitable company.
Instead of chaps regulating chaps, we need effective regulation, just as they have in the United States, to stop such theft. If we do not get that, a threat will hang over all small and medium-sized enterprises that are in financial difficulties or have to turn to the banks for overdraft facilities. They will be crippled, robbed and possibly stolen by those powerful predators.
The big four and the banks are the new barons, with enormous power, and the citizen has little power. I am glad to say that Keith Elliott is still fighting back, now not only against the dirty deal imposed on him, but for all the small and medium-sized companies threatened by that kind of brutal takeover by financial institutions.
The power of these big institutions—the banks and accountancy houses—is far too great and must be diminished, but that can be done only by regulation and by making them accountable: by redressing the balance that weighs so heavily against the ordinary Joe. That is Parliament’s job and I hope that the Minister will tell us how the Government will address that imbalance and provide some means of redress for small companies and their directors who face such a situation. I am fighting on behalf of not only Premier Motor Auctions and Keith Elliott, but all companies threatened with that kind of financial takeover by big institutions.
It is a great pleasure to serve under your chairmanship, Ms Dorries. I congratulate the hon. Member for Great Grimsby (Austin Mitchell) on securing the debate. I recall, as he mentioned, that we debated this subject in November 2013. The fact that he has returned to it for discussion today is testament to his tenacity and willingness to pursue the matter raised by his constituent, Mr Elliott, who he feels passionately has suffered a real injustice.
In our discussion almost 18 months ago, I set out that I shared and had some sympathy with many of the concerns raised. A wide range of people have expressed concerns about some aspects of insolvency regulation, which is why we have taken steps to make changes. I set out, which remains the case today, that I did not have powers to intervene in this case. Of course, the changes we are making will not be retrospective, but I hope to be able to set out the package of reforms that we have been able and continue to bring forward to strengthen the insolvency regime, which together are a bold step forward. I hope that the hon. Gentleman will be reassured by that.
I appreciate that that does not help in this specific case, which is covered by the systems that applied at the time. I know that the conflict of interest issues have been considered by the court, who dismissed that application. The ICAEW reviewed the complaint and concluded that there were no such issues. The Insolvency Service then considered the ICAEW’s handling of the complaint and did not find fault, so in terms of the different routes available in this specific circumstance, it was hard to see how the redress the hon. Gentleman ultimately seeks would be possible. However, in terms of the wider regime going forward, we are determined to improve the situation for companies that might find themselves in similar situations.
I appreciate that that will be frustrating, not least for the hon. Gentleman’s constituent, but he has been able to set out his concerns about the case and the behaviour of the different organisations involved in handling it powerfully. If I may give my view, which is perhaps different from that given by those organisations, I think it is absolutely the place of parliamentarians to represent their constituents’ views, raise issues of concern and put those firmly on the record in Parliament when they believe that an injustice has been done. I do not think it is for other organisations, frankly, to tell MPs whether this is an issue that they should or should not pursue on their constituents’ behalf.
On that note, although we are from different parties, I would like to recognise that the hon. Gentleman has a reputation for being a great defender of his constituents, with ever-forthright comments about whatever issue of the day he is concerned about. Although this may not be his last contribution in this House—I hope it is not—it may well be one of the last, and Parliament will certainly be losing a character when he steps down from his constituency in a short while.
I will turn to what we are specifically doing to strengthen insolvency regulation shortly, but first, let me say that we have an open mind on whether to take further steps. The ethics code requires administrators to satisfy themselves that the board is happy with the appointment and to consider any threats to their independence. We are reviewing that in conjunction with the regulators and seeing whether it is sufficiently robust, so that is one area in which there could be further movement, depending on the outcome.
Great minds think alike, because that was going to be my very next point. In 2014, the Financial Conduct Authority announced that it had appointed firms to conduct an independent skilled persons report to examine RBS’s treatment of business customers in financial difficulty and consider the allegations that were set out in the report by Lawrence Tomlinson, which were about poor practice that he had evidence of. Once the FCA skilled persons report has been published, which we expect to happen this summer, we will carefully consider whether any issues need to be taken into account in terms of insolvency legislation—including the regulation of insolvency practitioners—that have not been addressed by the reforms in progress. It may be that those issues are already addressed by our package of reforms, but if further issues are raised, we will keep an open mind about taking further steps.
I turn to measures that we are already taking on strengthening insolvency practitioner regulation. The Small Business, Enterprise and Employment Bill, which is currently before the House, contains measures to strengthen the regulatory regime for insolvency practitioners. The introduction of regulatory objectives will make sure that insolvency regulators have a framework within which to carry out their activities. That is intended to make sure that a consistent approach is applied and to give a reference point for discussions between regulators, insolvency practitioners and the Insolvency Service. The objectives set out in the Bill will ensure that the regulators have a system of regulating insolvency practitioners that gives fair treatment and consistent outcomes for people affected by their acts or omissions.
Regulators will have to encourage an independent and competitive insolvency profession, whose members deliver high-quality services at a fair and reasonable cost, with transparency and integrity. They must seek to maximise returns to creditors and be prompt in making those returns, and the public interest must be protected and promoted during the insolvency process.
Another measure could have been relevant in this case, had the provisions been in place at the time; I am referring to the power to allow the Secretary of State to apply to the court for a direct sanctions order against an insolvency practitioner, when that is in the public interest. The sanctions could be a range of measures, including revoking authorisation and a financial contribution to creditors. I said when we previously discussed this issue that there was literally no power for Ministers to intervene, but the new regulation addresses that. We anticipate that, because this is a strong power, it would be used sparingly. It would need to be used when there was clear public interest and evidence of serious breaches of law or standards by insolvency practitioners, and when swift action was necessary. None the less, that gap, where previously there was no power, is being filled and there will be a power. Combined with other measures in the Bill, that should hopefully address the perception that the current disciplinary procedures for insolvency practitioners are not always effective in delivering fair and prompt outcomes for those affected.
The sanction powers and the regulatory objectives will hopefully make sure that we have a clear, transparent system that can hold people who do not deliver to account. Those changes, along with work that the Insolvency Service is doing with both the profession and the regulators to enhance the regime, should improve trust and confidence without the need for further intervention. However, if that set of measures is not sufficient and there is still a lack of trust and confidence in the system, we have the back-stop power in the Bill to establish a single insolvency regulator. That is if we do not see the anticipated improvement and confidence in the regime.
Many people express surprise that there are eight different regulators that authorise insolvency practitioners. I confess that before becoming the Minister responsible for insolvency, I was not aware of that. I had heard of some of the bodies, but was not fully aware of the degree of complexity. I well understand the view that that diversity does not necessarily help matters. I can see the potential benefits, including choice, but that fragmented regulatory landscape can lead to problems of inconsistency and complexity.
We were working, even before introducing the powers in the Bill, to deliver more consistency. A common sanctions framework has been agreed and a single gateway for complaints set up. That should ensure that, whichever body regulates a particular practitioner, the complaints process and the outcomes will be consistent across the profession.
I will turn briefly to the improvements made in relation to pre-packs, which have been a concern of many hon. Members. The Government commissioned Teresa Graham to conduct an independent review in 2013, and her recommendations were published in June 2014. The report concluded that pre-packs were an important and valuable part of the insolvency landscape— indeed, I think it was intended and hoped that a pre-pack would be the solution in this case, even though there was not a successful outcome—but that there was a lack of transparency and confidence, particularly where a sale was to a connected party.
The review recommended a voluntary package of reforms, which my officials have been working with stakeholders to implement. The reforms include setting up a pool of experienced business people to scrutinise a planned pre-pack sale to a connected party and a strengthened professional standard for pre-packs, which will require more information on the valuation and marketing of businesses to be provided to creditors. We are working to put that in place. The review also recommended that we should take a back-stop power for use if the voluntary reforms were not successful, and we have done that in the Bill. Those reforms are in place, and we hope that they will be successful, but if not, we have additional powers in the Bill. Sometimes additional powers can also act as an incentive for all those involved to ensure that the voluntary regime delivers the outcomes needed.
There has been significant concern about the fees that insolvency practitioners charge. Earlier this month, I announced new legislation affecting how IPs charge fees. In the future, they will be required to give clear information on their fees and expenses before asking creditors to approve them. Where fees are based on time costs, creditors will need to agree an estimate of the likely fees. If the insolvency practitioner’s fee then exceeds the approved limit, they will need to seek further approval before being able to draw any additional amounts. Basically, the estimate acts as a cap on fees. Those measures deal with the concerns that many creditors had about a blank cheque in effect being written for the administrators, and have been welcomed by the profession and creditor bodies.
I have mentioned some of the other things that are already being taken forward, such as the review of the ethics code and the new complaints gateway, which will bring some consistency to the issue. People are becoming more aware of the complaints gateway. Last year, nearly 1,000 complaints were dealt with via that single complaints gateway. That is a sign that there is a degree of success from the changes that we are making.
I hope that the hon. Member for Great Grimsby will recognise that the Government have listened and continue to listen to the comments that he and others make about the problems in parts of the insolvency regime, which generally is very highly regarded. We need to remember that we have one of the best regimes in the world. Our insolvency profession is highly skilled and undertakes difficult work in challenging circumstances, saving many businesses and thousands of jobs each year. However, we must always strive to improve it. That is why we are undertaking these reforms. They will mean that in the coming months we will have an improved insolvency regime, including a better regulatory regime that will inspire greater confidence that insolvency practitioners and their regulators are working in a way that strikes the right balance between parties affected by insolvency. I hope that cases such as the one—
Sitting adjourned without Question put (Standing Order No. 10(13)).