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Treasury

Volume 676: debated on Monday 18 May 2020

The Chancellor of the Exchequer was asked—

Self-employment Income Support Scheme

What plans he has to modify the self-employment income support scheme as part of the Government’s covid-19 lockdown exit strategy. (902683)

The self-employment support scheme opened last week ahead of schedule and provides support worth up to £7,500 to millions of individuals. I am pleased to tell the House that, at the end of yesterday, there had been more than 2 million claims, with grants worth £6 billion in total being claimed for. Those people will have the money in their bank accounts within six working days of their claim, and of course, I will keep the scheme under review.

I thank the Chancellor for his response. Despite him saying that the self-employment scheme is one of the most generous in the world, tens of thousands are still missing out—new starters, pay-as-you-earn freelancers, those paid through dividends and those earning over £50,000. I have three simple questions for the Chancellor. Will the self-employed income support scheme be extended in line with the job retention scheme? Are there plans to lift the cap on profits? And will he please look again at supporting new starters?

We have discussed these things before, but I do not believe that removing the cap would be the right or socially just thing to do. The average income of those above the cap is £200,000, and 95% of those who are self-employed fall underneath the cap.

Covid-19: Economic Support

Our plan to support businesses and individuals is one of the most comprehensive in the world. We have provided tens of billions of pounds in cash grants, tax cuts and discounted loans for businesses; deferred taxes for those who are self-employed, employed and in business; a world-leading job retention scheme to keep as many people in employment as possible; income protection for the self-employed; and a strengthened safety net to protect the most vulnerable in our society.

Successful businesses in the tourism and hospitality industries before the lockdown will face a very different reality at the end of it, with overseas visitors gone for the foreseeable future and social distancing in place. These businesses need time to reinvent themselves for the new post-covid environment. What measures will the Chancellor introduce to enable much greater flexibility in the furlough scheme to support them as they prepare for this new reality?

It is precisely because of the time it takes for businesses to ramp up that last week, I announced an extension to the furlough scheme all the way through to October, to provide that runway for growth—in particular, for those who will open later in tourism and hospitality. As I said, we will introduce flexible furloughing in the extension period of that scheme.

Those on fixed-term contracts are in a particularly difficult situation where employers have placed them on furlough but are unwilling to extend it past their contract end date. One employer highlighted to me that that is because they are concerned that if they continue to furlough an employee without formally extending the contract, Her Majesty’s Revenue and Customs will deem the furlough frivolous and seek reimbursement. Can the Chancellor confirm that employers can continue to furlough those whose fixed-term contracts have ended without any financial repercussion?

I am happy to look at the specific example mentioned. It is important for us—and to protect the taxpayer—that we are paying furlough payments to those who are genuinely in employment and have a formal employment contract, but I am happy to look at that example.

I welcome the right hon. Member for Wolverhampton South East (Mr McFadden) back to the shadow Front Bench.

Thank you, Mr Speaker.

Despite the interventions that the Chancellor has announced, some of our major industrial companies find themselves locked out of the lending scheme for the largest firms—the covid corporate financing facility—because they are not classed as investment grade. These companies support hundreds of thousands of jobs, either directly or through their supply chains, and are often the main employers in the towns and cities where they operate. Will the Government show the same flexibility and urgency in getting finance to these companies, which make up the industrial backbone of Britain, as they have done through the loan scheme for small companies, so that we can retain as much economic capacity as possible through this crisis?

The right hon. Member is absolutely right: finance should flow to the industrial base of our country. The investment grade rating, which relates to the corporate financing facility that the Bank of England runs, is important. Because that money is accessed by companies without any additional credit check by the Government, it is right that an investment grade rating is used, to protect the taxpayer. We have taken a flexible and generous interpretation of that, providing companies with the ability to use their bank rating to get access. For those companies for which commercial paper is not the right approach—many of the industrial companies he mentioned—we have a larger coronavirus business interruption loan scheme programme, and I am in conversations with various industry stakeholders to ensure that that is appropriately sized to provide finance to every part of our industrial base.

Research by the Chartered Institute of Personnel and Development today released today has found that participants in the furlough scheme would otherwise have made up to 35% of their workforce redundant, rising to half the workers in hospitality, where the uptake of the scheme is particularly high at about 80%. Hospitality and tourism were first out and will be last back. Many of these companies have no income and are building up debt, and may feel compelled to sack workers if they are asked to pay more by the Government at the end of July. How does the Chancellor intend to prevent this and to support this part of the economy in the months ahead?

It is precisely the retail, hospitality and leisure sector that has received the most direct fiscal support from the Government through cash grants of £10,000 or £25,000 and a business rate holiday for the entire year—well beyond the point of reopening. That represents significant support, and the extension of the furlough scheme through to October gives those companies enough of a runway to grow back into a safe space.

Coronavirus Job Retention Scheme

As I announced last week, the coronavirus job retention scheme has been extended by four months until the end of October.

New starters not registered with HMRC before 19 March and agency staff workers are some of those who currently find they are in limbo when it comes to accessing the job retention scheme. What more can the Chancellor do to help these workers now facing hardship?

When I announced the scheme, we said that those who were on real time information and had notified HMRC on 28 February would be eligible. That covers 29.5 million workers in this country. We found a way to extend that to 19 March—the day before the announcement was made. That protects the taxpayer against fraud and enables as many of those people to be included as possible. It brought another 230,000 people into the scheme. It is important to remember that this scheme now covers close to 30 million workers. As of the end of last week, 8 million people from about 1 million businesses are covered by the scheme and having their wages paid by the Government to protect their jobs and their future security.

Thank you, Mr Speaker.

The future fund will provide venture capital-backed businesses with vital support, but of course it excludes investments made through the enterprise investment scheme and the seed enterprise investment scheme. It is certainly the case that there is significant public subsidy within those two schemes. However, businesses supported by them still face the challenges of the virus and, where successful, still go on to generate significant numbers of jobs. Will my right hon. Friend therefore take a second look at the qualification requirements for the future fund to see whether EIS and SEIS might be accommodated in some way?

As my right hon. Friend will know well, EIS is a notified EU state aid, and that is what presents the challenge to providing EIS relief for convertible loan instruments into the future fund. That said, guidance was published today, and the fund will be open for applications on Wednesday. I have been crystal clear that should applications exceed the initial £250 million provided, I will be more than happy to expand the scheme. I think this will be a vital part of fuelling our recovery, because, as he said, these companies provide the growth of tomorrow and they deserve our support.

Labour supported the introduction of the furlough scheme, and we have consistently called for it to become more flexible. We recognise that it cannot persist forever. However, according to press reports, the Treasury is considering asking all employers to pay 40% of employee wages on the JRS from 1 August, which risks a massive spike in job losses.

As I think the shadow Chancellor has acknowledged previously, we are in deep consultation with both unions and business groups to ensure that we get the design right for the second part of this scheme. It is right both for the economy and, indeed, for the taxpayer to ask employers to make a contribution to paying the wages of their employees. They will have the benefit of flexibility in furloughing to help offset that. I cannot comment now on this, but I did say that details will be provided by the end of the month.

I appreciate the Chancellor’s comments, but we really need clarity around whether he is considering evidence from other countries, which, in many cases, are calibrating changes to their salary backfill schemes with the lifting of the lockdown. Is he looking at that evidence, particularly on the potential impact of unemployment, or is he only looking at potentially the introduction of a uniform contribution from 1 August?

As I said, there will be details at the end of the month, but the hon. Lady can rest assured that I speak regularly with my counterparts in countries across the world to learn from their experience and will make sure that our scheme continues to be one of the most generous, comprehensive and effective anywhere in the world.

Covid-19: Local Authorities and Devolved Administrations

What fiscal steps he is taking to support (a) local authorities and (b) the devolved Administrations during the covid-19 outbreak. (902697)

What recent discussions he has had with the Secretary of State for Housing, Communities and Local Government on the adequacy of funding for local authorities during the covid-19 outbreak. (902711)

What recent discussions he has had with the Secretary of State for Housing, Communities and Local Government on the adequacy of funding for local authorities during the covid-19 outbreak. (902712)

We have announced £3.2 billion of new funding for councils, alongside the £3.4 billion of further support with cash flow. I am in regular contact with Ministers in the relevant Department on further support.

I welcome the Treasury’s unprecedented package of support, including the provision of grants, which are benefiting many of the smallest businesses right across Bishop Auckland, but many small businesses in my constituency and others do not pay business rates because they are in shared spaces. What steps is the Treasury taking to make these grants more readily available?

My hon. Friend raises an important point, which is why we have allocated a further £617 million of support to local authorities for discretionary payments for cases such as the one that she highlights. Local authorities are free to focus those payments in line with local need.

District councils are the level of local government closest to residents, and I know that they very much appreciated the support that the Government have provided, but responding to the virus has incurred both additional expenditure and a loss of revenue—they have had less income from things such as car parking and leisure services. How can the Minister ensure that district councils are able not only to meet their short-term demands, but to ensure a long-term, sustainable future?

My hon. Friend is right to point to the particular pressures on lower-tier councils, which is why councils such as Rugby have benefited from more than £1 million of additional funding. Seventy per cent of district councils have received more than £1 million, which is why the profile for the second allocation of £1.6 billion was changed to recognise the points that he highlights.

I pay tribute to the Chancellor and to the Chief Secretary for their approach. They will appreciate that the sums involved are staggering, but obviously necessary at this time. Does my right hon. Friend recognise that this is an occasion where we appreciate the strength of the Union—the financial muscle to protect economies and communities in all parts of the UK? Has the Chancellor calculated whether individual nations could have acted independently and, if so, what impact has the collapse in the recent oil price had on that assessment?

My right hon. Friend is absolutely right. That is why £7 billion has been allocated through the Barnett consequentials, including £2.1 billion of additional funding to the Welsh Government. That, of course, sits alongside the UK-wide measures, such as the furlough scheme or the self-employed income support scheme that the Chancellor has announced.

In Bristol, that current funding gap is £82.4 million as a result of the current crisis. Will the Treasury consider allowing local authorities to retain all surpluses against the business support grants so that they can be reinvested into local short-term interventions to get us through this crisis?

What we have seen through this crisis is an unprecedented level of support, including the £3.2 billion that has been announced and the further £600 million of support specifically targeted at the care home sector. That sits alongside earlier funding, including the estimated 4.3% real-terms increase that councils received this year.

Although the Government’s announcement of additional funding for local authorities in England is welcome, care staff, refuse collectors and social workers need to know that their work will continue to be funded once the current lockdown is over. My local council, Stockport, is facing a staggering shortfall of £25 million, with the cost of the coronavirus response standing at £41 million. Will the Minister offer those workers that assurance?

The hon. Gentleman is right to highlight the importance of that sector. It is why the initial £1.6 billion funding announced in March was not ring-fenced. It sits alongside the £600 million announced last week. In addition, there is money to help with cash flow, including the £850 million targeted at adult social care, which was paid in one go in April.

Local Transport Infrastructure

My hon. Friend the Member for Keighley (Robbie Moore) has, I know, been working hard to highlight the important pedestrian crossing issues in his constituency, and I am committed to working with him on that. He can benefit from the significant funding for cycling and walking included in the £2 billion announced recently.

I thank my right hon. Friend for that response, and I am pleased to hear that he will work with me in delivering a pedestrian bridge. May I seek further reassurance that he will meet me and the transport team, so that we can deliver this vital piece of local infrastructure, which will connect Silsden and Steeton in my constituency?

I am happy to continue to liaise with my hon. Friend on this important issue. He will know that, in addition to the £2 billion for walking and cycling, we also announced at the Budget £4.2 billion for long-term local transport. His authority, West Yorkshire Combined Authority, will be able to benefit from that.

I thank the Treasury team for their leadership throughout this crisis. As they look at ways to stimulate our economy, will they consider issuing a UK green gilt as a specific way to fund local transport infrastructure and to affirm this Government’s commitment to climate change?

My hon. Friend raises an important point. Although at present we have no plans to do as he suggests, he will be well aware, from the green finance strategy, that the Government remain open to the introduction of new debt instruments, and I am happy to continue to discuss the issue with him.

Business Rates Relief

If he will take steps through the Government’s Business Rates Review to tackle exploitation of business rates relief. (902691)

The Government have committed to undertake a fundamental review of business rates and published the terms of reference at the Budget. The review will be comprehensive and look at the effectiveness and operation of different reliefs and compliance with the tax. The call for evidence will be published in the coming months; stakeholders will be invited to contribute their views throughout the review, and I will welcome any thoughts or ideas my hon. Friend may wish to add.

I welcome the Government’s wholesome package of support for the business sector and the hospitality and tourism sector, showing that we are a Government for the many, not the few. Would the Minister meet me to discuss how we might close the loopholes that may be used by those who would opportunistically exploit current business rates?

If there are people who are illegitimately taking advantage of loopholes in the rates, I am of course happy to discuss that. I remind my hon. Friend that there may well be circumstances in which people are in fact complying with the rules. It is a fiddly area, and I want to be certain that we are going after the people we should be going after.

Covid-19: 2019 Loan Charge

What assessment he has made of the potential merits of suspending the 2019 loan charge during the covid-19 outbreak. (902696)

My right hon. Friend will know that taxpayers with loan charge liabilities can already defer submission of their tax return until 30 September this year. Her Majesty’s Revenue and Customs has always worked very hard to support taxpayers who may need to help to managed their disguised remuneration liabilities, and this is no exception. HMRC will continue to offer people the time they need to settle, and of course that also applies to those who are affected by issues related to coronavirus.

In September this year, we will be in the middle of the recession that we are about to face. Given the hundreds of billions of pounds that the Treasury has already committed to supporting business to get us out of this recession, it would take a relatively trivial amount to write off the damaging loan charge policy. Originally, the Treasury forecast that it would raise £3.2 billion from the policy, and less than £2.5 billion from employees. What does the Minister estimate he will now raise?

The Treasury will have published its estimate at the time the original tax information was published. I understand the passion that my right hon. Friend brings to the issue, but I would remind him that 99.8% of taxpayers do not engage in disguised remuneration schemes, and the fact that we are supporting people across the country in their jobs and their livelihoods is not, in and of itself, a reason to let people who owe tax off the tax that is due.

Coronavirus Business Interruption Loan Scheme

What recent discussions he has had with the Secretary of State for Business, Energy and Industrial Strategy on the effectiveness of the coronavirus business interruption loan scheme. (902702)

The Treasury is working closely with the Department for Business, Energy and Industrial Strategy to monitor the uptake and effectiveness of the coronavirus business interruption loan scheme. The scheme has already helped thousands of businesses since its launch on 23 March and is continuing to ramp up. As of 10 May, almost 36,000 facilities with a value of over £6 billion have been approved through the CBILS. SMEs now have a choice of over 60 lenders offering finance under CBILS, and further announcements on numbers will happen later this week.

Despite that, the uptake of the coronavirus business interruption loan has been disappointing, leading to the bounce-back loans. Could we have much more accurate reporting on this, much more like the health statistics and perhaps also by region, so we can see what is actually happening?

We are looking very carefully at the figures and we publish them on a weekly basis. I am having conversations with banks on a regular basis, and we are having a roundtable this week to monitor progress. We will look to make further interventions should that be necessary, but absolutely it is important that the loans get out quickly, as they have been designed to do.

Business Rates: Small Companies

What recent discussions he has had with Cabinet colleagues on the number of small companies that pay business rates collectively through landlords that have been able to access cash grants through local authorities during the covid-19 outbreak. (902707)

The Government have recently allocated up to an additional £617 million to local authorities to enable them to give grants to businesses excluded from existing schemes. That will enable many thousands of businesses in the situation described by the hon. Member to receive cash grants.

Will the Minister ask local authorities to report on the extent to which landlords are passing on the grants to tenants, because it is not just in Lancaster and Fleetwood that we are seeing widespread evidence that that is not occurring?

The hon. Lady makes a reasonable point. We are monitoring the effectiveness of all these schemes, and the way that local authorities are using their discretion in giving out those grants, but this is a matter that we will continue to examine carefully.

Covid-19: Regional Economies

The Government are closely monitoring the impact of covid-19 on local communities across the UK. We are engaging with local authorities, local enterprise partnerships and mayoral combined authorities, and remain committed to levelling up opportunity all over the UK.

The public transport infrastructure will be essential to Greater Manchester’s economic recovery, and funding has been provided to help Manchester Metrolink, but it is insufficient and the situation will be exacerbated because social distancing will mean that it can carry fewer passengers for the foreseeable future. Will the Treasury commit to fully funding Metrolink so that it can help to get the city region back on its feet?

I have been in conversation with the Mayor of Greater Manchester, Andy Burnham, and the Treasury is well aware of this issue. At the moment, we have provided £630 million for councils. We have provided some funding to Metrolink and we will continue to explore the issue further.

Hydrogen Technology

My hon. Friend is right that hydrogen could play an important role in our transition to net zero, which is why we are investing up to £121 million to support a range of projects to explore and develop the potential of low-carbon hydrogen technology.

Does my hon. Friend agree that incentivising low-carbon technologies such as hydrogen and carbon capture and storage will aid us in our recovery, help the Government to reach their net zero targets, and level up across all regions of the UK?

My hon. Friend is absolutely right. Budget 2020 announced at least £800 million to develop carbon capture and storage infrastructure, and my hon. Friend will of course know that Teesside is one of four sites under consideration for support through that funding.