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Westminster Hall

Volume 737: debated on Thursday 7 September 2023

Westminster Hall

Thursday 7 September 2023

[James Gray in the Chair]

Backbench Business

UK’s Relationship with Mexico

I beg to move,

That this House has considered the UK’s relationship with Mexico.

It is a pleasure to serve under your chairmanship today, Mr Gray. I thank the Backbench Business Committee for giving time for this debate, and I look forward to hearing from my colleagues, all of whom have a deep interest in Mexico and its people.

I am pleased to have secured the debate, not just because we are nearing the 213th anniversary of Mexican independence and 200 years since the establishment of UK diplomatic relations with Mexico, but because I believe that this is the first time since 1938 that Parliament has found time to specifically debate UK-Mexico relations. Given Mexico’s immense economic, geopolitical and cultural importance the world over, I trust that hon. Members present will agree that this discussion is long overdue.

I am also pleased to say that this debate takes place in a far warmer diplomatic climate than its predecessor 85 years ago. I am sure that no one needs reminding that in 1938 our two countries had just severed diplomatic ties. The Mexican Government of the time, fresh off a progressive social revolution, had moved to expropriate foreign oil companies, which prompted our Government to suspend bilateral relations until 1942.

Today, of course, the situation is reassuringly different. For several decades, the United Kingdom and Mexico have enjoyed a close and fruitful relationship, the continued success of which will be predicated on the principles of co-operation and mutual respect. A shining example of that is the British Mexican Society, which recently celebrated its 70th anniversary. We can also enjoy the fruits of the relationship through the all-party parliamentary group on Mexico, which, next month, I will have had the privilege of having chaired for five years.

I thank the current ambassador to the UK, Josefa González-Blanco, who is a friend, as well as all her team at the embassy of Mexico. They have used their position to strengthen diplomatic ties at every opportunity and in particular to showcase Mexican culture on these shores. Few APPG chairs will receive the sheer number of invitations that I do to events hosted by the embassy, which showcase the culture, music and vibrancy that Mexico has to offer. Let me also praise our ambassador in Mexico City, Jon Benjamin. He is a good friend and one of the finest representatives we could have in Mexico City.

Today I intend to speak about a few areas. Let me start with our current economic relationship with Mexico. In 2021, Mexican foreign direct investment into our economy totalled £16.3 billion, and trade between our two countries amounts to £4.9 billion a year. However, there are many more opportunities to expand the relationship. Britain’s imminent accession to the comprehensive and progressive agreement for trans-Pacific partnership should represent an opportunity to give a significant boost to the size and scale of our trade with Mexico. On the whole, that should be a welcome development, but I urge my fellow hon. Members to hold on to a degree of caution. As is the case with any trade agreement, the CPTPP risks falling prey to the organising logic of our current system of global trade, which, without scrutiny, can prioritise narrow interests over the wider needs of communities, working people and the environment. I hope that as a CPTPP member, Britain will work with Mexico in supporting the agreement’s existing provisions, and furthering them, on issues of labour rights and environmental protection, which I know are also priorities for the Mexican Government.

In November last year, I asked the then Minister—the right hon. Member for Chelsea and Fulham (Greg Hands) —what progress had been made on securing a bilateral free trade agreement with Mexico. He assured me that talks were progressing positively. The Foreign Secretary echoed that sentiment in his speech delivered in Chile in May, pointing out the recent completion of a third round of talks. I would welcome an update from the Minister on those discussions and would appreciate him telling us whether the Government still plan to appoint a trade envoy to Mexico. I hope that negotiations will be successful and that a deal will be agreed soon. I fear that sometimes the Mexican Government feel like they are not the UK Government’s priority; we must ensure that that is not the case.

In the Foreign Secretary’s speech in Chile, he also sought to conjure the ghost of George Canning. If I may direct hon. Members’ attention to another slice of our history with Mexico, Canning was Foreign Secretary during the Spanish-American wars of independence in the early 19th century. In that position, he resolved to swiftly recognise the newly won sovereignty of the fledgling American republics. Indeed, it was because of Canning that Britain became the first European power to establish formal bilateral relations with independent Mexico.

Conservative politicians are fond of that historical anecdote and reach for it almost every time they speak publicly about the UK’s relationship with Latin America. It is easy to see why. At first blush, it appears to be a solely positive story. Considering that the UK’s historical attitude towards the region has too often been defined by indifference or commercial exploitation, it is reassuring to be reminded that our history there started on such a bright mark. However, the version that gets relayed in speeches such as the Foreign Secretary’s is doused with a more-than-healthy dose of myth. Canning’s support for Mexico and other Spanish-American countries did not stem solely from an unnerving commitment to the shared values of liberty and democracy; it was part of a calculated strategy to advance Britain’s imperial interests and consolidate its primacy in Europe. Canning said as much himself, declaring in 1826 that he had spoken

“the New World into existence, to redress the balance of the Old.”—[The Parliamentary Debates, 12 December 1826; Vol. 16, c. 397.]

The Foreign Secretary also cited that famous sentence in his speech. In short, Canning saw the UK’s support for Latin America as a means to an end. In the succeeding decades, that support was repeatedly withdrawn whenever it was politically expedient.

The point that I am seeking to get across, which I think is the hidden lesson from Canning’s story, is that for Britain to truly strengthen its political, economic and cultural relationship with Mexico—successive Governments have consistently stated that to be an essential diplomatic objective—we need to approach that relationship as something positive and desirable in itself. I believe that it is here that we find the true crux of successful bilateralism.

We cannot treat our relationships with Latin American countries like pawns on a chessboard. We cannot view them purely as opportunities for the wealthy few to further enrich themselves. Our support for the principles of national sovereignty, self-determination and mutual respect cannot be solely symbolic. We must not appear to be more interested in protecting a few commercial interests than in building a lasting framework for international co-operation. That approach to foreign policy is not only objectionable but unsuited to the 21st century. It is plainly ineffective. As we gear up for an age of genuinely global challenges, we have to lay the foundations for meaningful multilateral action now. There are no viable solutions to problems such as climate change that do not involve closely co-ordinated international action, and Britain is incredibly well placed to play a leading role in those efforts, but to do so, we must first shed the last vestiges of colonial paternalism and single-minded self-interest. The way that we choose to manage our relationship with Mexico and other countries in the region—and countries across the global south—will determine our capacity to play that role.

In my third and final reference to Mexican history, I will borrow from Benito Juárez, the first indigenous President of Mexico, words that capture the sentiment that I have sought to convey today:

“Among individuals, as among nations, respect for the rights of others is peace.”

Let me say, in the spirit of those words, that I have no doubt that the Mexican people understand their country’s challenges far more intimately than I ever will. For them, epidemics of femicide, disappearances and drug-related violence are not abstractions but terrifyingly common features of their lived reality. Some 152 journalists were killed in Mexico between 1992 and 2023. Every day, 10 women and girls are murdered by intimate partners or family members, and 100,000 people are currently disappeared. That is 100,000 families saddled with the heart-wrenching burden of not knowing whether their loved ones are dead or alive.

Of course, there are also the dislocating effects of climate change. As a result of its tropical latitude, Mexico is vulnerable to drought, food insecurity and the increased frequency of extreme weather events. The country’s status as one of the most biodiverse places on earth further raises the stakes. I make those points not in an accusatory way; indeed, we in Britain must reflect on how our legal and social relationship to drugs, and our consumption habits more broadly, contribute to the enormous human cost borne by the American people. I draw attention to those issues rather to remind Members that the UK has to, as a matter of course, assert its commitment to supporting Mexico, and to helping it tackle these substantial challenges—not as a finger-wagging imperial power, but as an equal partner sincerely invested in that country’s success.

I believe wholeheartedly that Mexico has at its disposal all the ingredients needed to develop into an unqualified success story. Its young population, burgeoning industrial capacity and rich cultural tapestry can all ensure that Mexico attains its obvious potential. For those reasons, it would be so encouraging to see a visa arrangement akin to that which the Foreign Office has secured with Uruguay included in any future trade deal with Mexico. That would allow young Mexicans and Britons to live and work in each other’s country for two years. Such an agreement would allow a new generation of young people to join the likes of D.H. Lawrence and Leonora Carrington in being part of the great tradition of Britons finding in Mexico the dynamism and inspiration that allows them to produce some of their best work. I look forward to hearing the contribution of others on this important relationship to the UK.

As I am sure you and others in this Chamber recognise, Mr Gray, the hon. Member for Liverpool, Walton (Dan Carden) clearly has a very genuine interest in all matters Mexico, and I compliment him on his speech. I will keep my words brief, but I would add that he and I have met on other occasions, on which he has supported me in my role as trade envoy to Brazil. I have a wider interest in all matters Latin America, as does he. The trade envoy programme is an area where we can put our politics to one side and bring into the fold those with a genuine interest in a country. Whatever the political nature of Brazil’s Administration—whether we are talking about the politics of Bolsonaro or Lula—my interest in Brazil remains unabated. I am just as resolute, excited and enthusiastic about the prospects for our relationships with all South American countries, including Mexico, but especially with Brazil.

I am sure that the Minister would like to reflect on these few words, and also on how he might see Mexico developing as a future powerhouse in the wider Latin American region. I know that he is very well travelled, including going to Brazil; I am not sure about his diary in relation to Mexico, but I am sure that he will expand on that as and when he speaks. I take this opportunity to thank you for your indulgence, Mr Gray, because I had not put in to speak in the correct way, and for accepting these few words. I give my compliments again to the hon. Member for Liverpool, Walton on his words. We are all grateful for the ambassador’s presence here in recognition of what is being debated.

I am delighted that we are having this debate on Mexico. I did not realise that it is the first one since 1938; I was not here at the time—I have been at all the subsequent ones. We have had many debates on Latin America, and obviously Mexico has been raised on a number of occasions. One should reflect, though, that in 1938 Mexico was going through a massive social revolution under the great Government of President Cárdenas, which brought about so much social justice and land reform for the people of Mexico. There is a memorial to the people of Mexico in Vienna that thanks them for being the only country in the League of Nations to oppose the Anschluss pact between Nazi Germany and Austria. Those anti-Nazis in Austria and Germany have never forgotten the role that Mexico played at that time.

One should also reflect that, for all of Mexico’s human rights problems, which I will come on to in a moment, it has traditionally been a place of welcoming for desperate people. Many republicans who had to leave Spain at the end of the Spanish civil war made their way to Mexico and were welcomed there, and they made a massive contribution to Mexican society. Indeed, many of those who were forced out of Chile 50 years ago this weekend, when the Government of Salvador Allende was overthrown in a military coup, initially made their way to Mexico. Some went on to Europe, Cuba and other places. We should recognise Mexico’s enormous contribution in a very principled, non-aligned way on the global stage in providing a place of exile for people, which has turned Mexico City into one of the most vibrant, multicultural cultural environments anywhere in the world, because of the coming together of people from all over the world.

I have been to Mexico many times. As many will know, my wife, who is here today, is from Mexico as well, so I have been well educated on Mexican history. I always appreciate—the hon. Member for Liverpool, Walton (Dan Carden) just made this point—that in Mexico there is an understanding and appreciation of history in a popular sense that does not really apply in any other country I have been to anywhere in the world. There is that sense of absolute pride in the Maya and Aztec remains there, but there is also pride in the pre-Aztec and pre-Maya remains at Teotihuacán, near Mexico City and in magnificent places such as Chichén Itzá and all the others that are so famous on the global stage.

Despite all the Hispanicisation—if that is not a tortuous word—of Mexican society after the invasion of the Spanish empire, the languages have survived. Indeed, some of the writings have survived in the great writings of an indigenous woman, Sor Juana Inés de la Cruz, who was disliked by the Catholic Church because she could read, write and understand many languages and wrote a great deal of poetry, most of which was burned by the cardinals and others, but some of which survived and is now published in Mexico and other places. We should appreciate and understand that enormous cultural strength and history in Mexico.

If anyone visits Mexico, I urge them to stay two days longer, whatever their plans, and go to the National Museum of History in Mexico City. It is so wonderful and so large—it takes someone at least two days to work their way around it—but it is an education in itself on the history of Mexico and world history. There is an invitation to everybody: on any delegation, stay two days more, just to understand that part of the history.

Mexico also has the problem of its noisy neighbour to the north, the United States, and the history of that relationship, which has often been abusive. It was described wonderfully:

“Poor Mexico, so far from God and so close to the United States.”

There were the USA’s wars with Mexico, in which it lost a lot of its territory, but the solidarity that some showed with the people of Mexico is not forgotten. Indeed, in the north of Mexico there is a very proud memory of the San Patricio brigade, of Irish people who started off fighting for the USA against Mexico, decided it was an unfair conflict, switched sides to join Mexico, and defeated the USA—as you do. Again, we should try to understand that history.

Like other Latin American countries, Mexico gained independence from Spain, but it was not a liberation of the indigenous people or the poorest people across the country. The landowning system was maintained, as was so much else. It was the 19th-century Government that brought about the great changes in Mexico. Benito Juárez’s constitution brought about rights, more democracy, and the beginnings of some degree of land reform and change. That was returned to in the 1917 constitution, at the end of the conflict in Mexico. We have to remember the rich vein of history that runs through Mexico, and the determination of people such as Zapata, who was a fantastic leader in many ways, to bring about justice and land reform in Mexico.

That is a fundamental point of history that we should understand. I wish that more British people who went on holiday in Mexico—well done them; it is good for the Mexican economy—would do a bit more than just go to the beach in Cancún, because there is so much more to see; as wonderful as the beach in Cancún is, it is important to see so much else. It is the diversity of Mexico that I fully understand. I want to express my appreciation to the many people in Mexico who have informed me a great deal, and hosted me on my visits to Mexico.

The Government in Mexico is that of President López Obrador, who is coming to the end of his term of office; elections are coming up next year, when he will have been in office for six years. I know López Obrador very well—I consider him a friend—and I had a very interesting conversation with him for several hours on the day before he became President in 2018. We talked a lot about how he would face the issues. Anyone who has aspirations to go into government here knows that there are challenges, difficulties, conflicts and all that, but think for a moment of going into government in Mexico and being faced with a huge problem of massive poverty, injustice, corruption, human rights abuses, unaccountable public services, and enormous numbers of human rights complaints against the police and the armed services. It is not a simple operation. One has to pay tribute to the work of López Obrador’s Government in trying to eliminate poverty in Mexico, through a very large increase in the minimum wage, better rights and working conditions for everyone in Mexico, and work to ensure that companies are better employers, which has involved working with trade unions.

There are also issues of healthcare and other reform issues. In our conversation, I said to López Obrador, “Is there anything you particularly like, admire or would want from Britain, as you move into the presidency?” I thought that was a bit of a leading question. He stared out of the window for a while, and I thought, “Oh God, I’ve asked the wrong question here.” Then he turned round and said, “The national health service. The principle of universal healthcare free at the point of need is something I absolutely admire about Britain, and I would love to emulate that in Mexico.” It has not been completely emulated in Mexico by any means, but there has been a huge increase in hospital building programmes, general practice programmes and access to healthcare. Prior to his Government, the majority of the population had no access to free healthcare other than the weekly one-hour free advice that was given by doctors. Queues would form six and 10 hours before the allotted hour to try to get a few minutes with a doctor, which was all the poorest people could get. It is not completely there yet, but it has improved a great deal, and we should recognise and applaud that.

The population is large and youthful, and education is key. The country has managed to put a lot more money into education, new school building programmes and, above all, new university programmes. Unlike this country, it does not aspire to load anyone who goes to university with a massive debt for the rest of their life. It wants to get them into university for free education to ensure it gets the professionals of tomorrow—the doctors, teachers, engineers and all the others who are needed. We should compliment the Government of Mexico on what they have achieved in those areas, and on what they are trying to achieve.

There are huge environmental issues and concerns. Mexico relies heavily on a hydrocarbon-based economy. That was an issue for the Cárdenas Government, which nationalised the oil industry in the 1930s, and Mexico still relies heavily on petrochemicals. I would like to see a faster transition away from that to a sustainable economy. It is very easy for us to lecture on hydrocarbon-based economies’ transitioning, but we must recognise the difficulties of doing that in rapid time. Colombia is going through exactly the same problems. Such issues are important.

I was pleased to attend President López Obrador’s daily press conference. He has a daily press conference for three hours every morning starting at six o’clock. He gets there at 5.30 to get ready for it, and then he takes questions for three hours. It is quite a sterling performance. I do not think that any other President anywhere in the world would do that. He asked me what I thought about the idea, and I said I thought it was completely crazy. He was determined to do it, anyway, and he insisted that I sit all through one to rid me of my criticism of the idea, and I did.

I was very pleased to be at the press conference when he re-announced that he was very sorry about the way that Julian Assange was being threatened with removal from this country to the United States, and he would always be welcomed and offered safety and sanctuary in Mexico, just as Mexico has offered sanctuary to many other people in the past.

However, Mexico faces massive problems in dealing with corruption and human rights issues. I have examples, but first I want to pay a huge compliment and express my thanks to our ambassador to Mexico, Jon Benjamin, who is deeply engaged in Mexican society in every possible way. He is very well thought of and respected throughout the politics of Mexico, and has been incredibly helpful on human rights cases in which there is British involvement. I will mention some cases.

The Ayotzinapa 43 were 43 students who, in 2014, left their rural agricultural workers training college on a bus to go to a demonstration. They all disappeared— all 43 of them. There was a hue and cry, and international outrage, and the authorities then started a rapid search to try to find out what had happened to them. What did they find? Unmarked graves, all along the area where the Ayotzinapa 43 had been, in Guerrero state, but none of them contained any bodies of the Ayotzinapa 43.

The sadness and the tragedy of migrant people from central America trying to get to the USA, in order to get to some place where they might be able to sustain themselves economically because of the poverty in central America, is that they end up being prey to gangs and all kinds of awful things, and they end up dying in unmarked graves. Those were the kind of people whose bodies were found, that were not the bodies of the Ayotzinapa 43, although I believe that the bodies of one or two of the Ayotzinapa 43 have since been identified.

On my last visit to Mexico, I spoke to Minister Encinas, who is dealing with the investigation into all this. The Mexican authorities have arrested and charged a large number of police officers and army officers on this case, but they have still not got to the bottom of it or the truth of it.

I give this example not because it is the only example of the brutality that corruption brings, but because it is just the tip of a very much bigger iceberg. Many criticisms are made, some of them justified, but the issue is the direction in which Mexican society is travelling. Is it trying to find out the truth about human rights abuses, or is it trying to sweep that under the carpet and get away? The former is absolutely the case; Mexico is trying to find out the truth.

There are a couple of other cases that I will mention, one of them because it has a particular British connection: the case of Claudia Uruchurtu, who was living in this country with her sister and family. She went back to Mexico and lived in Oaxaca. She was involved in a demonstration against corruption by local officials, one of whom was subsequently arrested, charged and imprisoned for corruption. She was last seen getting into a van and was never seen again. Now she is declared dead and disappeared.

Claudia’s family obviously want to know the truth; our ambassador, Jon Benjamin, wants to know the truth; I want to know the truth; and many others do, too. I thank Jon Benjamin for the work that he has done, and I thank Her Excellency the Mexican ambassador to Britain, Josefa González-Blanco, for the huge support and help she has given on the case, and for the work that she does as Mexico’s ambassador to Britain.

I am grateful to my right hon. Friend for raising the case of Claudia Uruchurtu. We had the privilege of meeting her family when we visited Oaxaca last November. I also want to put on record my thanks to Jon Benjamin and his team, who have pursued this case all the way from the beginning. It has obviously caused incredible heartache for that family. I know that the Minister has had conversations on this issue, and I hope that at the end of the debate, he might be able to update us on whether there has been any progress.

I thank my hon. Friend for that intervention and I endorse absolutely everything that he said. I hope that when the Minister comes to reply, he will acknowledge the severity and seriousness of this case, and will say that the Foreign Office will remain seized of it and will continue supporting any investigations to bring about justice. That will not bring Claudia’s life back, sadly, but the prosecution of elected public officials for this is an important change in the legal process in Mexico. It sends the important message that when any similar case comes up, people all around the world will continue to pursue it. We should recognise that.

I acknowledge that the Minister is nodding.

There are many, many cases that one could talk about. The one other case that I will mention is that of Miguel Orlando Muñoz Guzmán, an infantry lieutenant in the army who has been missing since 1993. He was last seen in Ciudad Juárez in Chihuahua, and he could have been threatened with the danger of going missing. He has been searched for all these years. Although the Government of Mexico have taken some action on this case, we want them to carry out a complete, impartial and effective investigation to determine Mr Muñoz’s fate.

Mr Muñoz is not the only one; his case is one of many that has been taken to the UN’s Committee on Enforced Disappearances. That is because Mexico faces the endemic problem of its relationship with the USA to the north and the pressure of large numbers of desperately poor migrant people from the south trying to get into the USA. Successive US Administrations—all of them; Obama, Trump and Biden—have essentially taken a broadly hostile approach to migrants coming into the USA from the south, even though the US economy does incredibly well out of the work, which is often very low-paid, of people who have migrated there.

I have discussed this issue at length with people in the Mexican Government. Ultimately, the only way forward is through better economic development and prospects for people all through central America, in Honduras, Nicaragua, El Salvador, Costa Rica and so on. All those countries need stronger economic bases, and they have elected Governments who are trying to bring about that. I hope that the British Government will recognise that it is important to have not just good relations with Mexico, but a sensible trade and aid relationship with central American Governments, to help them bring about better forms of administration, less corruption and less inequality in their societies.

There is so much about Mexico that one could speak about for a great length of time, but I will not go on any longer, because I can see from the clock the way that time is moving on. I just want to thank the embassies for their work, and my hon. Friend the Member for Liverpool, Walton, for his work as chair of the all-party Mexico group. We should see that the Government of Mexico are trying to improve the social conditions of their people. That is promising, and it is going very well.

There is an incredibly challenging situation, regarding relations with the USA and the historic levels of corruption and violence in society, brought about by the drug trade and drug war. While that is not for today’s debate, we may need to think more deeply about dealing with the drug issue in the USA and Europe by conducting a war in central America, Colombia and elsewhere. It clearly is not working and has not worked. Tens of thousands of people have lost their life in this drug war, and it has not brought about any solution. That may be for another day, but it is an issue that we need to be serious and think very deeply about. I thank Mexico for its work on the international stage to try to bring about nuclear disarmament, peace and non-alignment around the world.

Thank you, Mr Gray, for chairing the debate today. I also congratulate the hon. Member for Liverpool, Walton (Dan Carden) on making a well-informed and understanding opening speech about the relationship between Mexico and the UK. It was incredibly helpful for him to set the scene in that way and he demonstrated well that he has a huge depth of knowledge in this area. I congratulate him.

I also thank the Backbench Business Committee for granting the debate. I was also not aware that it had been such a long time since we had had a debate on Mexico, so I am glad that we have been able to have one today. The last thing I want to say in opening is that the small number of hon. Members here does not demonstrate a lack of passion throughout the House for the UK’s relationship with Mexico. Unfortunately, it is a Thursday afternoon, when debates here tend to be a bit less well subscribed. Many of our colleagues would have liked to be here but other commitments have kept them elsewhere.

Thankfully, we have had a number of excellent and illuminating speeches. I congratulate the right hon. Member for Islington North (Jeremy Corbyn). His depth of knowledge is, again, clear. Unfortunately, I have not visited Mexico, but the more he talked about the excitement around its history, the keener I was to go there. I may do so once my children are a little bit bigger because dragging them on to a flight of that length is probably not something that I will do at this point. Once they have left home, it will be one of the very top countries on my bucket list.

I will largely talk about the subject of the debate, which is the UK’s relationship with Mexico, but first I want to touch on an issue in Mexico that we could learn from. In recent times, the Mexican Government have raised their age of military recruitment from 16 to 18. The SNP has been pushing for that for the UK’s armed forces. The UK is an outlier in the matter, with only 13 countries in the world that continue to allow 16-year-olds to be recruited. We know from Child Rights International Network that UK Army recruits under the age of 18 are twice as likely to commit suicide while serving. There are massive inherent risks with 16 being the age at which we continue to recruit people into our armed forces. I would therefore urge the Minister in his conversations with Mexico and the people who have implemented this policy change to ask how it happened, how it was implemented, and what was put in place to ensure the transition went as smoothly as possible. That will enable us to hopefully emulate that change here in the UK and no longer be an international outlier.

Moving specifically to the relationship between the UK and Mexico, I want to speak about the free trade deal and trade with Scotland in particular, as Members would expect. Scotland exports to Mexico more than any area of the UK, except for the east of England. It is not in our top 10 export destinations, but it is a priority for the Scottish Government, and we are hoping to get it into the top 10. Mexico is the ninth most popular country for whisky exports, which is obviously a massive export for Scotland. Of the UK’s exports, 12.5% come from Scotland, which is more than Wales, Northern Ireland and the south-west of England combined. We hope to keep the strong relationship with Mexico.

As the UK Government move toward a trade deal, we need to ensure that it is as advantageous as possible for both the people in Mexico and people here. I know the UK Government will be trying to prioritise wins in trade deals, but they have unfortunately set a disappointing precedent with the New Zealand and Australia trade deal in relation to beef and lamb exports from those countries. A significant risk is posed to Scottish farmers from an increase in beef and lamb exports from Mexico should a trade deal be signed. Unfortunately, given that the UK has already done these deals with Australia and New Zealand with few safeguards regarding beef and lamb, the Mexicans will be very well aware of that and will be negotiating on the basis of precedent.

I urge the UK Government when looking at the trade deal to ensure that they are protecting the rights and livelihoods of our farmers, to ensure that we can continue to grow our own food, and to provide some measure of food security for the people who live in Scotland and the wider UK. It is very difficult for our farmers to have this security if they are being undercut by the UK Government’s poor decisions in trade deals. The UK Government must prioritise this when looking at exports.

On the links between Scotland and Mexico, we have seen an increase in the number of Mexican students coming to Scotland, which is truly excellent. There is a significant number at Glasgow University, for example, which has a burgeoning Hispanic society. That is a positive thing. Unfortunately, some of this has come about because of a reduction in the number of EU students as a result of Brexit. We want the immigration and visa systems to be as flexible as possible, allowing people to live, work and study in our country.

Obviously, the Scottish Government are not in charge of immigration. Constituents come to our offices every day with significant problems with the visa and immigrations systems. Visas are granted in some cases, but it is taking months and months for people to hear anything about it. In some cases, appeals are delayed or they win on appeal anyway and then are living in uncertainty. Because of this oppositional immigration system, we are not able to attract the talent that we would like to from Mexico or other countries, and this is because we in Scotland do not have control of our own immigration system. The UK Government should look again at the lag in visas and the issues that that causes, particularly for people coming to work and study, because it makes Scotland and the UK a less positive destination. People are less likely to want to come and live and work here purely because of the ridiculous hoops, bureaucracy and time lags in our immigration system.

The right hon. Member for Islington North mentioned hydrocarbon-based economies. That is an important link that Scotland, particularly the north-east, has with Mexico and other Latin American countries—oil-producing countries. A significant number of my constituents have spent time in places such as Mexico, Texas, Dubai and Norway. They probably have a slightly different profile from the majority of constituents across this House and these isles who go to visit those countries. We can learn a lot of good practices and positive things from each other in relation to this issue.

Obviously, we have a declining ability to access oil and gas. We are doing what we can to move towards a just transition. Scotland is doing what it can to meet its climate change targets and try to provide economic certainty for the regions. We have put additional moneys into the just transition, which the UK Government have failed to match. Although the UK Government are not doing as much as I would like on that just transition, there is still a significant amount to learn and a lot of positive knowledge to share to ensure that the transition away from hydrocarbon-based economies is as non-negative as possible.

We do not want what happened to the mining communities. We want a planned transition so that the people coming out of jobs in oil and gas—whether in Aberdeen in the north-east of Scotland, the UK or Mexico—have jobs to go to, and so that those skills, particularly the ones applicable to renewables, can be utilised as widely as possible. We could have a positive relationship with Mexico regarding that move.

There is also the opportunity for us to trade in decommissioning, for example, given the incredible amount of experience and expertise in and around Aberdeen. We are one of the first countries in the world to be doing decommissioning en masse. As other countries move into that space, we should be utilising our economic powers and opportunities to be able to share that. Also, with the continental shelf, the UK is the gold standard for safety. Things have been not quite so good recently, but certainly previously we were the gold standard. If we can, it would be great to ensure that other countries decommission as safely as possible in order to protect both our environment and the men, mostly, who are working on it.

Lastly, on democracy, the Mexican president has gone on record to say that the UK Government must honour the principles of “participant democracy” and allow an independence referendum. We welcome that support. Scotland has continually voted for the SNP standing on a manifesto that includes an independence referendum. We have an incredibly positive relationship with Mexico, including an honorary consulate in Glasgow to ensure that we keep those strong links. We recognise and appreciate the support for our democratic right to an independence referendum, and we thank the Mexican president and the country of Mexico for the honorary consulate and for their support for Scotland’s democratic voice to be heard.

It is an absolute pleasure to serve under your chairship, Mr Gray, especially on this wonderful, warm and fabulous Thursday.

I thank my hon. Friend the Member for Liverpool, Walton (Dan Carden) for securing this debate. As we know, he brings strong knowledge to this place on international relations, not only because of his role as president of the Forum of Young Parliamentarians of the Inter-Parliamentary Union, but because of his leadership of the APPG on Mexico. As we work to reconnect Britain with our friends and partners around the world, it is essential to engage closely through Parliament and inter-parliamentary institutions. It is through these organisations that we help to build consensus on issues important to all our countries—from trade, to human rights, to the rule of law and the importance of the international rules-based order.

My hon. Friend the Member for Liverpool, Walton is clearly doing an absolutely sterling job on that account, including with this debate. I express my thanks on behalf of the Opposition to him and all those who play such an important role in forging and developing the ties that bind our two countries ever closer together. That includes our diplomats, but equally businesses and civil society leaders.

I thoroughly enjoyed listening to the contribution by my right hon. Friend the Member for Islington North (Jeremy Corbyn). I have now absolutely clocked his plea for us to add two days to any trip that we might be lucky enough to have to Mexico. I would certainly love to go round a museum like that to show me the depth of the history and the beauty of the culture of this amazing nation. If I am completely honest, UK-Mexico relations are not yet an area of expertise for me—

Not yet. So I hope colleagues will forgive me if I keep my remarks briefer than normal on this occasion. I add my voice to those saying what an absolute privilege it is to be joined by Ambassador Josefa González-Blanco Ortiz-Mena and her embassy team today, who work tirelessly to strengthen the ties between our nations. I congratulate my hon. Friend the Member for Cardiff North (Anna McMorrin) on her appointment to the Labour Foreign, Commonwealth and Development team as shadow Minister for Latin America and the Caribbean. Unfortunately she cannot be here today, but I am delighted to be here instead.

As my hon. Friend the Member for Liverpool, Walton stated, 2023 marks the bicentennial anniversary of the start of formal diplomatic relations between the UK and Mexico, and next week on 16 September Mexicans will celebrate their independence day. The Opposition wants to extend our warmest wishes for that happy event. Strengthening our relationship with Mexico can only bring significant benefits to both our countries. Mexico, as we know, is the second largest economy in Latin America and the 16th largest in the world, and its demand for exports is expected to increase by over a third by 2035. So much more can be done to raise awareness and to seize trade and investment opportunities. Sadly, Mexico accounted for only 0.3% of UK trade in 2021, making them our 44th largest trading partner.

My hon. Friend will be aware that the huge Tren Maya project that the Government of Mexico have been pursuing to build a 15,000 km railway line across the southern part of Mexico will be joined by some British Railways rolling stock in the near future. It is being shipped from Great Yarmouth as we speak to help make up the rolling stock needs of the new railway, so there is an improvement. There is an awful lot of railway technology in Britain that could well be marketed in Mexico.

I am grateful to my right hon. Friend for that information. As the Foreign Secretary said earlier this year,

“With some British businesses, they don’t think of Latin America”

so I hope the Minister will expand on what the Government are doing to change that, to build on the example that my right hon. Friend has just given us, and to create new opportunities following our signing of the CPTPP trade agreement in July. As we know, once this agreement is in force next year, it should lower certain barriers to trade and enable our economic ties to deepen. At present, our trade is based on a continuity agreement following Brexit and, unfortunately, this covers only goods, leaving out our strong service industries, including creative, digital, financial and legal. I hope the Minister might be able to explain what progress is being made on the prospects for an expanded bilateral agreement that takes better account of the UK’s strengths and how global trade has changed over the 20 years since the Mexico-EU agreement was struck. Since May last year, three rounds of talks have concluded. In what ways do these talks include climate change, human rights and workers’ rights? I know they are also priorities for Mexico.

In the 2021 integrated review, the Government stated:

“We will deepen our ties with Brazil and Mexico, strengthening partnerships on trade, innovation, climate, security and development”.

How does the Minister think that we can achieve a greater synergy between Mexico’s trade priorities and our own? As we know, Mexico plays a critical role in the region’s geopolitics, so what steps are being taken to make that strategic commitment to Mexico a reality? Why has no prime ministerial trade envoy to Mexico been appointed? Can the Minister account for that? There are so many opportunities for stronger connections and partnerships, and some of my hon. Friends have participated in roles like that and made a real difference. It might be something to consider.

Mexico has significant lithium deposits, and some states reportedly have rare earth resources. As we know, securing a reliable supply chain for these minerals will be even more essential as the UK decarbonises its economy. Under a Labour Government, which we hope to see soon, that will be a still greater priority given our ambition for a rapid shift to green energy and green industries.

Both the UK and Mexico have strong and distinctive drinks industries. I must admit that I am a tequila fan. The UK is the fifth-largest importer of Mexican tequila in the world and, as we have heard from the hon. Member for Aberdeen North (Kirsty Blackman), Mexico is the seventh-largest export market for Scotch by volume. I also like a Scotch. Surely there is potential to get more economic value from those trading flows for our mutual benefit.

As all Members have noted, there are significant concerns about the rule of law, human rights and insecurity in parts of Mexico. When it comes to our friends and partners, we must have the courage and conviction to speak honestly and frankly on a variety of issues. In response to those concerns, the Government have committed to establish a formal bilateral human rights dialogue with Mexico, which will complement their trade negotiations. I welcome that, but we have sadly not heard when the dialogue will begin, or if it has already begun, and I hope that the Minister will update us on that.

Reconnecting Britain with our partners around the world is a vital objective for the Opposition, and our relationship with Mexico is clearly a high priority within that, so I hope the Minister will be able to reassure us that significant progress is being made on strengthening our connections with this important partner.

It is a pleasure to serve once again with you in the Chair, Mr Gray, and I congratulate the hon. Member for Liverpool, Walton (Dan Carden) on securing this debate. I pay tribute to him, as everyone else has, for his interest in Mexico and international relations—in particular our partnership with Mexico—and for his sterling work as chair of the APPG, not just for five months or a year or two, but for five years. That shows real commitment, which is much appreciated on both sides of the House.

We are also grateful that Her Excellency the Mexican ambassador is here with us today. She is a formidable, energetic partner and friend. We work hard to try to keep up with her enthusiasm for things to do with the UK and for binding our relationship. We are extraordinarily grateful for the work of her team and for our partnership.

I am grateful for all the contributions that have been made today. I welcome the hon. Member for West Ham (Ms Brown) to her place, talking about such matters. I always think of her in relation to other international priorities, but it is great to see her. I also say a big thank you to the hon. Member for Leeds North East (Fabian Hamilton) for his interest and commitment. He is a good man with a big heart and he will be missed. We all know about reshuffles—you gotta love ’em, but they don’t always go your way. We wish him well and thank him for his work in this area. We also welcome the hon. Member for Cardiff North (Anna McMorrin) to her role, and look forward to debates with her.

This goes without saying, but I want to say it on the record with full passion and conviction: the UK values our relationship with Mexico enormously. The two countries share deep and historic links. We are looking forward to the future with new and ambitious partnerships based on two most crucial values, democracy and freedom. Today, we have had some great lessons from people with a huge amount of experience in Mexico about our relationship. We look forward to celebrating with Mexico its independence day next week. In fact, I think I am going to the embassy—the ambassador gives me a wink to suggest that that is true. I am looking forward to it. Mexico knows how to have a party, how to celebrate well, and how we can move relationships forward.

Some important points were made about history, not least by the right hon. Member for Islington North (Jeremy Corbyn). We are grateful for what he set out about the history and for his reminder to all of us, and anyone who goes to Mexico, that there is more to see beyond the beaches. When I visit Mexico, I never see much of beaches, because I am tied up with meetings, but I can attest that there is a lot more to Mexico than the beaches, which I do not know much about. The relationships between our Parliaments and parliamentarians are important, and I know that the right hon. Member’s relationships with the President, Cabinet and Government have enabled our dialogue and friendship to be fostered. I am grateful to him for that.

The debate has shown that our relationship with Mexico goes well beyond party politics. Across the spectrum, and across the different nations in the UK, it is an important relationship. I will set out why I believe that it is one that we need to put a lot more focus on, as has been said by others.

One thing that has not been mentioned enough is the importance of Cornwall and the Cornish miners who brought their famous pasties—pastes, as they are known in the region—to the mines of Hidalgo in 1825. Now, half a million people travel from the UK to Mexico each year, and 3,000 Mexican students have experienced our fantastic education system through Chevening scholarships. All those things are weaved into our relationship and help to strengthen it. We want to ensure that that relationship gets stronger.

Of course, it goes without saying that those Cornish miners did not only bring pasties; they brought football. Football speaks volumes. Even the hon. Member for West Ham has to agree that Mexicans pack a punch on the football pitch. We are so pleased that Mexico will co-host the World cup in 2026, providing another opportunity for our countries to work together—although we hope that it does not do too well in the competition at our expense.

This debate is also timely because the UK and Mexico are preparing to celebrate the 200th anniversary of our consular relations, which falls next month. We are busy planning a series of activities to celebrate all parts of our relationship, from exploring our shared histories in conversations with historians to cultivating more recent cultural links through art and musical performances. Such activities will showcase the breadth of exchange over 200 years, which has seen our relationship go from strength to strength.

In the past year, our Ministers have been in regular conversation. My right hon. Friend the Secretary of State for Business and Trade visited in February, and my right hon. Friend the Foreign Secretary met the then Foreign Minister in the spring. I received an incredibly warm welcome when I was fortunate enough to travel to Mexico in May. During my visit, I met the Minister responsible for human rights, discussed our bilateral relations and ties with members of the Mexican Congress’s UK-Mexico friendship group—focusing particularly on the free trade agreement—and saw at first hand the impact that our excellent collaboration on climate programmes is having in Guadalajara and elsewhere.

I commend the hon. Member for Liverpool, Walton on the success of the Inter-Parliamentary Union delegation that he led to Mexico at the end of last year. Time flies—where is this year going? I am glad that he and other hon. Members had an interesting and productive visit, not just to Mexico City but in Oaxaca.

Mexicans are looking forward to the presidential elections next year. We will work closely with whomever they elect as their new President, to continue our growing relationship. As has been said, this goes beyond party politics; on both sides, this is an important relationship. I know that some comments were made about our relationship and how it should be fostered. I would just like to say, in terms of my experience and the work that we are striving to do—I am sure that this cuts across parties—that it must be based on shared values, shared priorities and mutual benefit. When there is that sort of relationship, built on trust, things will move forward.

Order. As the right hon. Member for Esher and Walton (Dominic Raab) has only just arrived in the Chamber, I am not sure that that would be appropriate. If the Minister would like to continue—

On this occasion, given that this is a former Foreign Secretary, I think, with your permission, Mr Gray—

No, I do not think so at all. The right hon. Gentleman may be a former Foreign Secretary, but he was not here for the debate; he has just arrived in the Chamber. He may not intervene, and the Minister will continue his winding-up speech.

I bow to your judgment, Mr Gray.

Another key thing in the relationship is about building capacity and building strength on both sides of the relationship. We are absolutely committed to doing that to create a sense of genuine partnership. With existing free trade agreements with 46 countries, and others on the way, Mexico is without a doubt a titan of free trade; and with the second largest economy in Latin America, Mexico’s demand for imports is only set to grow. We look forward to using our bilateral relationship to give fresh opportunities to British businesses across multiple sectors.

I did not agree with absolutely everything that the hon. Member for Aberdeen North (Kirsty Blackman) said, but she said many wise things. She may already know this stat, but last year alone, whisky exports were up by 22%. I have to say that, for a teetotaller, I know a lot about the flow of spirits that sees whisky going from one side and tequila the other way. I know that Members here appreciate that.

As we look to this mature trade relationship, there are of course opportunities, particularly in offshore wind and particularly in north-east Scotland. There are huge opportunities across the region, including in north-east Brazil, as my hon. Friend the Member for Dudley North (Marco Longhi) knows as the trade envoy for Brazil, and in Costa Rica and the US. Wherever I go, we talk about this relationship and these opportunities.

The recently signed comprehensive and progressive agreement for trans-Pacific partnership—known as the CPTPP to its friends—presents us with significant opportunities. British businesses will benefit from enhanced access to the Mexican and other markets. Our exporters will enjoy reduced tariffs when selling to Mexico, including on our high-quality beef, pork and apples, and UK consumers will pay less for Mexican products such as honey and chocolate. I say gently to the hon. Member for Aberdeen North, because I know that she cares about this, that animal welfare protections are and will continue to be in place. My right hon. Friend the Prime Minister and other Ministers have set that out, as I did when I served several years ago as the Minister with responsibility for food.

British businesses will benefit from enhanced market access without a doubt. Our friends in Mexico know how keen I am for them to ratify the UK’s accession to the CPTPP soon. It was the clear focus of my recent visit. Also during that visit, we talked a lot about the third round of negotiations on the UK-Mexico free trade agreement. That will be an important pillar of our relationship, and the opportunities that it will present to develop exports in both directions are huge. We have had three productive rounds of FTA negotiations so far. Both countries are united in their objective to build a bilateral agreement to complement the CPTPP and provide a solid framework in which our bilateral trade relationship can flourish, including by strengthening commitments to support small and medium-sized enterprises, innovation, trade and gender equality. Together with colleagues in the Department for Business and Trade, I am determined to ensure that the new deal adds value to the UK economy and brings benefits across the country, as well as to our friends in Mexico.

I very much hope that more UK companies will take up the trade opportunities that anybody who goes to Mexico will see. When I was in Guadalajara, I was able to understand more about the benefits that Diageo and AstraZeneca see in that great city. With Mexico’s increasing expertise in advanced manufacturing, the opportunities for friendshoring and closer relationships should be clear to all. We need to ensure that those opportunities are made fully available to UK companies and bring them to Mexico.

There were a few references to a potential trade envoy to Mexico. I know that that issue has been raised on a few occasions. The Government continue to review countries where such an appointment would be of greatest benefit. Obviously, the ultimate decision is for the Prime Minister, but my hon. Friend the Member for Dudley North does an outstanding job in Brazil, and my hon. Friend the Member for Fylde (Mark Menzies) does an amazing job in Argentina, Chile, Colombia and Peru. The comments made today have been fully noted, and I am sure that the work that the hon. Member for Liverpool, Walton has done will be noted in any conversations or decisions about this particular opportunity.

We recognise that in a debate about Mexico it is important to address and acknowledge the complex issues of human rights. That has been a concern in the country for many years, and it continues to be an area of focus. I recognise the important work of our ambassador, Jon Benjamin, who has been referenced by many people in this debate. He has a principled, patient and passionate stance, which is exemplary, and he is seeking to engage at the appropriate levels in Mexico. There is no question but that it is a dangerous country in which to be an environmental activist or a journalist.

On the question of human rights, I assume from what the Minister said that the continuing trade discussions with Mexico will include a human rights dialogue. Will he also give a commitment that the Government will remain supportive of the family of Claudia Uruchurtu and their needs in her case, not just for her but as an example of our willingness to support people who are trying to bring about human rights and justice? There are concerns that the mayor who was imprisoned after Claudia’s disappearance, Lizbeth Victoria Huerta, may well be released at the end of September, because she was not charged, in my view, with a sufficiently severe case put against her. There are concerns about the safety of the family as a result.

As far as the free trade agreement goes, obviously those conversations—that dialogue—will be moved forward. Human rights in our relationship with Mexico are being dealt with in a different track, and I will come on to that in a minute in terms of a formal human rights dialogue. I will also mention the case that the right hon. Gentleman talked about. All those points are important.

The right hon. Gentleman also talked about the recognition of disappearances—111,000 since records began in 1964. Each of those disappearances is a tragedy. That is absolutely clear to me, as I met the mothers, siblings and relatives of victims when I was in Guadalajara. Our commitment to the promotion of universal human rights is unwavering. We regularly raise our concerns about abuses and levels of impunity with the Mexican Government, at both ministerial and official level. We continue to work with Mexican federal and state governments in support of work to develop the rule of law. For example, we recently supported the development of a new investigation protocol, which is a framework based on UK best practice that sets out how a crime should be investigated. It is in part due to the work of our embassy that that has now been adopted in 32 states in Mexico. That is a great step forward.

The right hon. Member for Islington North mentioned the tragic case of Claudia Uruchurtu, who tragically disappeared in 2021 as she protested against corruption in Oaxaca. The convictions of those involved in her disappearance are a welcome and important step in achieving justice for her and her family, but I say to the right hon. Member that we continue to monitor the case very closely.

I welcome the interest shown by the Mexican Government in holding a bilateral formal human rights dialogue with the UK, which we hope will take place later this year. I discussed that in depth when I met the human rights Minister in May, and we are in close conversation with Mexico on how best to use a dialogue to discuss our shared human rights priorities, both in multilateral forums and bilaterally.

As I mentioned, the UK and Mexico share core values. The quality of our work together was very much in evidence during Mexico’s most recent period on the UN Security Council in 2021 and 2022, and our shared voting record of 98% speaks volumes.

We also we celebrate Mexico’s work in progressing gender equality globally. Together with the UK, Mexico has been at the forefront in leading that important work. We continue to work closely together in the UN and through excellent projects with the British embassy, such as training for public and private sector organisations on reducing the gender pay gap.

The right hon. Member for Islington North and the hon. Member for West Ham talked about what we are doing more widely in the region, beyond Mexico. All I can say is that I have been enormously privileged over the past 10 months or so to travel to around 22 countries in the Americas. I think that we all agree that the way to build relationships of trust—I know that everyone who has spoken in today’s debate is passionate about that, because I observe them to do that in their lives as well—is face to face, not on a screen. I have visited just about every country in central America, with the exception of Nicaragua; I returned from Belize this morning. We want to move things forward in our relationship there through the UK-central America association agreement, and on climate change through the biodiverse landscape fund. There is a positive agenda, and we have a role to play in central America.

I could bore hon. Members for another hour or so about the opportunities for trade in Latin America more widely, but you would not allow me to do that, Mr Gray. There are huge opportunities. The hon. Member for West Ham says that she wants to expand her knowledge about Latin America. Well, she has already pointed out the most important thing, which is that the opportunities to trade there are immense, and we need to encourage more businesses to look at those opportunities and explore them in a meaningful way.

I will conclude by stressing again just how much our relationship with Mexico offers to both our countries; we have a like-minded partner in trade, in the multilateral space, and in our support for a rules-based international system. The UK was the first European power to recognise an independent Mexico—historians will attest to that—and in the 200 years that have followed, our trade, diplomatic and people-to-people links have grown. As our relationship grows, its benefits multiply.

As we look forward to the bicentenary of the relationship between our two remarkable countries, I am sure that hon. Members will agree how exciting it is to see our association and connection with Mexico prospering, and I am sure that they will be as ambitious as I am in wanting to see it continue to prosper over the two centuries ahead.

I am delighted that we had the opportunity for this debate and to hear that there is real expertise on Mexico and on the relationship between the UK and Mexico. I thank the hon. Member for Dudley North (Marco Longhi) for his support over the last few months and engaging with issues in the region. I also thank my right hon. Friend the Member for Islington North (Jeremy Corbyn), who has such a fascinating history, as well as a relationship with the current President of Mexico, which, as the Minister graciously said, is such a benefit to the UK and our relationship. I am grateful for my right hon. Friend’s attendance today.

I thank the hon. Member for Aberdeen North (Kirsty Blackman) for her contribution on the special relationship between Scotland and Mexico, as well as my hon. Friend the Member for West Ham (Ms Brown), who was covering today but I think is eager to get to Mexico in the years ahead.

As the Minister said, I was able to visit Mexico last November through the Inter-Parliamentary Union. It was a brilliant visit. We were able to have meetings in the Congress, including in the Senate, and to meet the Mayor of Mexico City, Claudia Sheinbaum, who is now a presidential candidate. We watch her progress with interest. We also went to Oaxaca, which is a beautiful state, and visited Monte Albán, one of the heritage sites that my right hon. Friend the Member for Islington North talked about. Those ancient civilisations are a great part of Mexican history.

Mexico is an awe-inspiring country. It has its challenges; there is no doubt that there is a human rights crisis in Mexico, but it offers opportunities for Mexico’s allies, such as us, to work with it. The Minister talked about our ability to share our expertise on the rule of law. I would love to see the Government do more of that with Mexico. I know that if we have a strong developing relationship between the UK and Mexico then we can support it in those areas. We also have a lot to learn from Mexico. Our voting records at the UN show that the values of the British people and the Mexican people—and hopefully its Governments, for a long time to come—are shared. That is why the relationship is one that we can cherish and develop, and one that can be strong going forward.

Let me finish by paying tribute once again to both ambassadors: my friend Jon Benjamin in Mexico City, and Josefa González Blanco, who joins us in the Public Gallery today.

Question put and agreed to.


That this House has considered the UK’s relationship with Mexico.

Sitting suspended.

Tax-free Shopping for International Visitors

[Dr Rupa Huq in the Chair]

I beg to move,

That this House has considered tax-free shopping for international visitors.

I thank you, Dr Huq, and Mr Speaker very much for granting me this opportunity to bring before the House the important subject of tax-free shopping—both VAT reclaim and duty-free shopping—for international visitors to this country. I also thank my hon. Friend the Minister, to whom I am grateful for turning up on this hot afternoon when I am sure she would much rather be doing something else. I am delighted to have the support of colleagues from throughout the country on this campaign. Of course, this issue affects not only London—it affects London greatly—but cities and tourist hubs across the UK, shopping destinations, cultural venues and the major regional airports.

This is an important debate on an issue I have campaigned on for the past few years following the Government’s decision to end tax-free shopping for international visitors when we left the EU. We are now the only major European country that does not have tax-free shopping, and the British economy is missing out as a result. In fact, the United Nations World Tourism Organisation barometer shows that Britain’s post-pandemic recovery in visitor numbers is the worst of all major European countries.

It is important at the start of the debate to respond to the idea that such a scheme would not benefit the British people. A study by Oxford Economics showed that restoring tax-free shopping would directly create a staggering 78,000 new jobs up and down the UK, possibly add as much as £4.1 billion to UK GDP, and result in—we believe—a net positive £350 million each year for His Majesty’s Treasury. In my speech, I will go into more detail and examine what the data suggests on the opportunities for economic growth from reintroducing tax-free shopping and VAT reclaim for foreign visitors.

Before we review the figures, I make it clear that my sole ask today of my hon. Friend, which I have to say would be almost cost-free, is for the Treasury to commission an independent assessment through the Office for Budget Responsibility or a respected audit firm—so that the Treasury believes it when it gets the results—of the full economic effect of tax-free shopping on the UK figures and all the figures that are available.

I believe the Government’s current position is based on inaccurate and incomplete Treasury figures that say that the cost of tax-free shopping would be £2 billion a year in refunded VAT. To highlight briefly how inaccurate those figures are, that calculation was reached by overestimating VAT refunds to UK shoppers by £600 million and excluding any tax revenue from increased spending by extra tourists. I therefore urge the Government to reconsider their objections to tax-free shopping which, as I say, I believe are based on inaccurate figures. We need an independent review to consider the topic so that we do not miss out on what could be a hugely positive and almost instantaneous win for the UK economy.

On 31 December 2020, the UK ended its tax-free shopping schemes for non-EU visitors and did not extend the schemes to EU visitors after the UK left the EU. The Government’s reasoning for that decision was the estimated cost of extending tax-free shopping to EU residents. Incidentally, all EU countries refund VAT on goods purchased by non-EU visitors—those visitors get the VAT refunded on purchases on the high streets and at duty-free shops in airports. Critically, Britain is therefore now 20% more expensive for shopping than any EU destination.

As we know, the entire economy was badly hit by the covid-19 pandemic and the wide shutdown of society during lockdown. Some of our hardest-hit industries were the tourism, culture and leisure, and hospitality sectors, which, owing to the very nature of their businesses, were unable to adapt easily to the hard lockdown rules, the impact of international restrictions, and reduced travel and tourism.

Now, thankfully, the pandemic is over. We have seen tourists return to the UK to enjoy the cultural sites in London, travel to our other great cities across our great country, and visit our picturesque towns and villages—including tens of thousands of visitors, I am glad to say, to my constituency of the Cotswolds. Sadly, however, our tourist industry recovery has not been as strong as that of some of our European neighbours.

All the real trading data from 2022, as international travel resumed, consistently undermines the Treasury’s forecast, which is that tax-free shopping would have little impact on visitor numbers and spending. The actual data on visitor numbers from 2022 and early 2023 show that ending tax-free shopping has had a significant negative impact on the behaviour of international travellers. Many choose to visit the UK, but unfortunately the really high spenders travel to Europe, because it is 20% cheaper to do their luxury goods shopping there.

For example, in 2022, spending by US visitors to the UK was back to pre-2019 pandemic levels, but in France, Spain and Italy it was double. In quarter 1 of 2023, US visitor spending was still just at 2019 levels in the UK, but in France and Spain it was around three times as much as 2019. Unfortunately, the differential is widening. Similarly, spending by Gulf Co-operation Council visitors to the UK in 2022 was around 65% of 2019 levels, whereas in Italy and Spain it was one and a half times the 2019 levels and in France it was double.

Brexit was an opportunity to create change in our economy that truly benefits the UK—creating new opportunities for growth for our innovative and internationally renowned retail, tourism and hospitality sectors. Instead, the EU is enjoying a Brexit bonus at Britain’s expense. Unfortunately, we have a double whammy: British shoppers joining other international visitors to shop tax-free in the EU, not in the UK, but not the same level of increased spending here as in other European countries. British shoppers now spend £1 billion on shopping tax-free in the EU, not here. If tax-free shopping was reinstated, Britain would be the only major European economy where 447 million EU residents could shop tax-free, which would create a huge new tourist market. Britain is missing out on a £1 billion Brexit bonus—a real opportunity for Brexit growth.

HMT did not forecast that that many visitors would be diverted completely from visiting the UK in favour of EU destinations. At the Government’s request, many businesses submitted actual evidence to HMT, in confidence, on the impact of ending tax-free shopping. The submissions show without a doubt that British businesses have suffered hundreds of millions of pounds in lost sales since 2022, and they see it getting worse, as more and more international travellers realise that they cannot shop tax-free in Britain.

In June 2023, the business improvement district for London’s west end, the New West End Company, which my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken) knows well, surveyed its member businesses. More than half—54%—said that they were reviewing their long-term capital investment programmes to take account of the fall in the relative performance of their west end stores compared with their stores in continental Europe. More than one fifth—22%—are considering closing their London stores and relocating to mainland Europe. That is an example of how the UK is losing out.

HM Treasury forecasts that allowing 415 million EU residents to shop tax-free in Britain would generate only 50,000 additional trips annually—0.2% of the 24 million EU visitors in 2019. By the same logic, 66 million British residents now being able to shop tax-free in the EU would generate only an additional 9,000 trips. That is simply not credible. The reality is that in 2022 around 48,000 British people claimed VAT refunds in the EU, worth more than half a billion pounds. In 2023, that figure has more than doubled. We estimate that more than 1 million British residents will spend more than £1 billion on tax-free shopping in the EU, but not in the UK. That is one more proof that the Treasury has out-of-date forecasts.

On 3 August, along with my right hon. Friend the Member for Ashford (Damian Green), I co-signed a letter to the Chancellor highlighting the most recent forecasting report from leading economics consultancy Cebr, the Centre for Economics and Business Research. Its figures were built on an earlier study by Oxford Economics. The two reports were staggering. Cebr forecast additional visitor numbers of between 1.6 million and 1.7 million into this country if the measures were reinstalled, and increased spending of £1.7 billion to £2.8 billion. They each forecast that the GDP of the UK could increase by between £4.1 billion and £9.1 billion annually.

I note that the Treasury forecast is just an extra 50,000 visitors. The slight difference between the data of the Oxford Economics and Cebr forecasts is due to timing, with the former’s report released in October 2022 and the latter’s published in July 2023. However, we now have real consumer behaviour and spending data. By contrast with the up-to-date findings from Cebr, the Treasury’s own figures, on which the Government are making their decisions, come from 2020 estimates. I say to the Minister that the data is quite out of date and so low that it considerably reduces the estimate for visitor numbers and spend.

The Minister recently wrote to me saying that the Government were concerned that the findings of the Oxford Economics study did not match those of the OBR, particularly on the expected number of visitors as a result of introducing tax-free shopping. As I just said, the Oxford Economics forecast is an extra 1.6 million visitors, whereas the OBR forecast is 50,000. However, the Oxford Economics forecasts are being proved right by the real data from businesses that is now coming in, and the OBR figure is being proved significantly wrong.

All the data coming in clearly shows that the reason why the Treasury does not recognise the figure from Oxford Economics is not because the Oxford Economics forecast is wrong but because the OBR forecast is out of date. The Government are understandably acting on figures from the Treasury that they deem to be reliable. To assess the figures and bring some finality to the debate, I wrote to the OBR in May asking whether it could examine the costings and benefits related to tax-free shopping, both for VAT reclaim and duty-free shopping. Unfortunately, I am yet to receive a full response.

Chinese travellers are the biggest spenders of all, and in the last year Chinese visitors spent $258 billion—almost twice as much as visitors from the USA, who are the second biggest spenders at $135 billion—and they have the biggest potential for growth in the UK. Shopping is their No. 1 priority. Ending tax-free shopping in Britain is closing the door on the most important market for the international visitor economy. From 2009 to 2019, I was heavily involved in growing the number of Chinese visitors to the UK from 130,000 to 800,000, which is almost as many as France has. It was largely due to that increase in high-spending Chinese visitors that overall international spending pre-pandemic increased by 60%, from £17.6 billion to £26.4 billion.

The figures are significant. In 2019, some 800,000 Chinese visitors made up 5% of the 16 million non-EU visitors to the UK, but accounted for a staggering 32% of all tax-free shopping in the UK, spending around £1 billion. Of course, the Chinese were not travelling in 2022 because they were still locked down, but a survey of Chinese who had previously shopped in Europe showed that Britain had dropped from the second favourite European destination in 2019, just below France, to the least popular of all major European countries. In 2022, 75% visited France but only a tiny 42% visited the UK.

The Minister has quite rightly been asking for real evidence on the ground; I will give it to her now. Evidence from Heathrow airport shows that Chinese visitor numbers in July 2023 were at 88% of their 2019 levels, but spending in the shops at Heathrow was at just 33%. The Chinese are coming to the UK, but they are not spending money without the option of VAT reclaim.

There is a common perception that tax-free shopping affects only Oxford Street, Bond Street and the west end; however, this issue affects the whole United Kingdom. That is why the campaign has such wide and growing support, not just from colleagues throughout the country in this House but from major airports, hoteliers, cultural institutions and companies. The amounts spent outside London are significant for local economies—for example, Edinburgh, Manchester, Liverpool, Glasgow and Leeds together accounted for £225 million of tax-free sales in 2019.

The direct impact of all this is on retail sales, but there is also a wider impact on hospitality, culture, leisure and manufacturing. Here is another real example: in its annual report, the Dorchester hotel group reported that its Paris hotel was overperforming and its London one was underperforming as a direct result of the end of tax-free shopping. The Royal Opera House, Shakespeare’s Globe, west end theatres and Rank casinos have all publicly criticised the ending of tax-free shopping.

International travellers buy more goods from brands in the countries they are visiting, so British brands such as Mulberry, Burberry and Church’s shoes suffer the most. Mulberry has already had to close its flagship Bond Street store, which it blames solely on the end of tax-free shopping. Just imagine that: Mulberry, after all those years on Bond Street, is having to close. That has an impact on its London stores but also on the manufacturing plants and jobs throughout the UK that depend on the shops that are closing. Burberry manufactures in the north-east, Mulberry manufactures in the south-west and Church’s shoes manufactures in the east midlands, so support from across the country has been submitted in this campaign, demonstrating the real impact of the removal of tax-free shopping.

Just a few case studies include National Museums Scotland’s shop, Essential Edinburgh, Edinburgh Tourism Action Group, Birmingham Chamber of Commerce, Marketing Manchester, North West Business Leadership Team and businesses including Johnstons of Elgin, Church & Co, Boodles and Samsonite. The estimated loss of revenue and jobs will affect regional airports as well as manufacturing in factories in Blyth, Yorkshire and Somerset and high-value shopping areas such as Edinburgh, Dundee, London, Manchester and Leeds.

My hon. Friend the Financial Secretary kindly responded to my letter to the Chancellor yesterday to say that the Government are accepting evidence—I welcome that openness and thank her for that—to inform their policymaking on this issue and ensure that the Treasury has the latest data on the impact of the removal of the VAT retail export scheme. I hope that she and other colleagues will find that this debate adds to the compelling case for tax-free shopping for international visitors.

With all the real-world data emerging by the day showing that HMT’s forecasts are out of data, we urgently need the independent assessment that I referred to earlier on the full impact of tax-free shopping on the UK economy and its tax revenues. I say this to my hon. Friend the Minister: if an independent assessment shows that the full tax impact is either neutral or net positive, the Government must move quickly to restore tax-free shopping before more damage is done to the UK economy. If such a study proves that the Treasury’s figures of £2 billion costs are correct, I will happily accept that and go away and not be a nuisance to her.

International visitors pay VAT when they stay in hotels, eat in restaurants, drink in bars and go to the theatre, so the independent review must look not just at retail but at the possible VAT revenue that the Treasury would receive if there were more international visitors coming here to shop.

My hon. Friend makes a really good point. This is what the Treasury figures do not cover at the moment. It is not just the VAT reclaimed; it is the VAT paid on all the other items, such as meals in hotels. And it is not just VAT: it is corporation tax, air passenger duty and a range of other duties that will be brought into the Treasury. That is where the figure of £350 million—our estimate—comes from, so my hon. Friend makes a really important point.

You will be glad to know I am coming to a conclusion, Dr Huq. The Treasury’s figures are based on the wrong methodology that does not consider in full the major upside for the country. I make an urgent plea today to the Financial Secretary. It is time that the OBR or another audit firm did a proper investigation into all the figures, as my hon. Friend the Member for Cities of London and Westminster said, instead of sticking to the figures that were produced for it in 2020. If it proves that the Treasury figures are correct, so be it. But if, as so many experts and businesses believe, there is considerable economic gain from introducing tax-free shopping, it would be an utter tragedy not to do so. Let us consider the real opportunity for growth and invigorate our economy by introducing tax-free shopping for tourists who come to this country.

It is a pleasure to serve under your chairmanship, Dr Huq. I thank my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) for securing this important debate. As the Member of Parliament for Cities of London and Westminster, the issue is incredibly important to the economy of my constituency.

International visitors are the lifeblood of so many businesses in areas such as Knightsbridge and the west end, including iconic streets such as Oxford Street, Bond Street and Regent Street. Retail in the two cities accounts for over 4,000 businesses employing approximately 55,000 employees. World famous department stores such as Selfridges and Liberty, as well as the luxury brands along Regent Street and Bond Street, rely on international visitors from China, India, the USA and the middle east. I highlight visitors from those countries and regions because visitors from those areas spend on average 60% more than EU visitors. But of course we are also currently disincentivising visitors from both outside and inside the EU.

Visitors from India and the middle east consistently list shopping as the No. 1 reason for visiting London, according to VisitBritain. Visitors from those areas also state that the tax rate is a consideration when they decide where they wish to travel and how much they are willing to spend when they travel.

I know the Government are committed to supporting retail businesses of all sizes. I thank the Minister for her Department’s strong support over the challenging couple of years that we have endured during the pandemic, but now is the time to kickstart the regrowth of our high streets. She will recognise that reintroducing tax-free shopping would be a boost to the businesses that suffered most in the pandemic as their physical stores were forced to shut and tourists were not allowed to travel.

Many of the luxury brands that visitors love to buy in the shops in my constituency have factories based in the United Kingdom, creating skilled jobs and supporting great British manufacturing. For example, Burberry’s iconic trench coats are handmade in Castleford in Yorkshire.

As a Conservative, I believe strongly in the growth potential of cutting taxes. Tax-free shopping for international visitors is a perfect example of when cutting a tax rate will increase the total amount of taxable spending. It goes back to the point that I made earlier: when we consider how much tax revenue that international visitors bring in, the issue is not just about shopping. We should take tax away from shopping and allow people to claim back tax on it. They are spending millions, probably billions, of pounds. They probably spend more money on the theatre, restaurants, drinking in our bars and going to other tourist attractions and paying VAT on that. That is why I would ask for an independent review of the whole situation in which we look at VAT and other taxes, including national insurance for the increased number of employees we will have if we want to grow our economy. We want to grow our hospitality sector and our leisure and tourism sector. Those are real jobs. Companies pay corporation tax and employee tax.

I truly believe that re-introducing tax-free shopping will provide a much-needed boost to a wide range of businesses across a number of sectors. This is borne out of new research from Oxford Economics and the Association of International Retail that clearly demonstrates that the tax receipts we will take from these connector sectors will far exceed the revenue lost by offering VAT exemptions on visitor shopping. By offering a VAT exemption, we will reverse the trend we have seen since the abolition of tax-free shopping, where international visitors have been choosing to go to Paris instead. UK international arrivals are down 22% since 2019. The pandemic has obviously had an impact, but France’s visitor figures are down by only 12.7%.

I suspect that one of the reasons for the discrepancy is that EU countries still offer tax-free shopping for international visitors. I believe that the French actually improved their tax-free shopping offer for international visitors once we got rid of ours. That shows how important it is to attract visitors into the country—and the French realise this. We know that these visitors are spending less in the UK compared with other European countries. In 2022, spending by visitors in the UK from the US was at 101% of 2019 levels, but in France it was a staggering 226% of 2019 levels. It is obvious that we must do all we can to ensure that London remains the No. 1 destination for international visitors.

Let us not forget that when international visitors come here, they come to London—it is obviously a huge draw to go to the capital city of a country—but they also go elsewhere. They go to Edinburgh, to Inverness to see if they can find Nessie, to York, to Oxford and, of course, to the beautiful Cotswolds. Reintroducing tax-free shopping will lead to more international visitors enjoying the rest of the United Kingdom and the home nations. Since taking away tax-free shopping for international visitors, the number of days that people are coming here for has reduced. People come to London from all over the world, but now, rather than staying for four or five days, they stay for two or three days and then take the Eurostar to Paris to do their shopping. That is what we need to stop. We need to ensure that people come here to enjoy London and the rest of the United Kingdom and to shop here too.

We must reintroduce tax-free shopping. London is one of a small handful of global cities, and I fear that losing tax-free shopping is damaging our reputation as a global city. As my hon. Friend the Member for The Cotswolds mentioned, the Oxford Economics study predicted that by offering tax-free shopping, we could attract more than 1.6 million extra visitors to the UK every year, stimulating an extra £2.8 billion in tourist spending overall. Think about the tax revenue that we could get from VAT on all the other money they spend here. We must not underestimate the huge impact these extra visitors have on the spending in our wider economy, not just in my constituency but across the United Kingdom. I do believe that it was one of the big attractions when people came here.

The key point is that people do not just spend their money on clothes, or jewellery or watches. They spend money in the restaurants they dine in and in the black cabs they take—I checked earlier, and people have to pay VAT on black cabs, so the cabbies should be supporting our campaign here. People also go to theatres and clubs. They spend money across so many sectors.

I know from speaking to restauranteurs, theatre owners and other stakeholders, such as UKHospitality, that they are all united in wanting tax-free shopping for international visitors to be reinstated. Many of these businesses tell me that they are struggling to get back to their pre-pandemic levels of business and believe that a large part of that is a reduction in foreign visitors, who are preferring to go to Paris or Milan.

The Cities of London and Westminster can be seen as a jigsaw in many ways. The hotels, restaurants, shops, bars, cafés and theatres fit together neatly as an impressive tourist offer. Tax-free shopping has become the missing piece of that jigsaw. If it is returned, it will benefit not just my constituency and retailers, but thousands upon thousands of businesses across this country. That is why I call on the Government to review the whole situation and consider reintroducing tax-free shopping for all international visitors from the EU and outside it.

It is a pleasure to serve under your chairship, Dr Huq. I take this opportunity to sincerely congratulate the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown) not only on securing the debate, but on his persistence on this issue. The first time that he and I spoke at the same time on this issue was in a debate on 10 December 2020. I think he only had three minutes on that particular occasion—it was quite a well-subscribed debate on the future of the high street—so it was a great pleasure to hear him expand those arguments today because I am sorry to say that the essential logic of many of the arguments being made on that day has not changed. In removing tax-free shopping on 1 January 2021, the Treasury seemed to make two key assumptions. The first was that ending tax-free shopping would have no significant impact, or so it thought, on foreign visitor numbers or spend in the UK, whether in terms of choosing to come to the UK or spending once they were in the UK. The second assumption seemed to be that extending tax-free shopping to EU resident visitors would attract few additional visitors to the UK.

There has been lots of logic—not to say economic coherence—missing from some recent budgets, which we are all still paying the price for. However, even taking those Treasury arguments at face value, there is a logical flaw that the presence of tax-free shopping was not always necessarily about attracting additional visitors, although I believe that it does do that, but about not losing them to other areas. The main locations, according to the Treasury, that benefited from it were central London and Bicester Village. It is probably hard to argue with the volume of sales there, but, as has been said, many other locations around the UK benefited too, including many in Scotland. Of course, those were only the areas where sales were recorded, and it does not show the economic activity that otherwise might not have taken place if people had not been attracted here in the first place.

This is of particular significance on a couple of levels to Scotland, but particularly to rural Scotland, where tourism, hospitality, transport and the production of luxury clothing are significant contributors to the local economy. In addition, the whisky and spirit distilling industry is of great significance to not only the locations where it is based and the high-value employment that it creates, but the Treasury’s coffers in terms of the overall duties it pays.

We now have data to set against the Treasury’s theory, and the results are in. The data appears to indicate that lots of pent-up spend was available. US tourists are spending about the same in the UK in 2022 as they were in 2019. The Treasury says that is a sign of success in terms of tax receipts, but US visitors are now spending three times more in Spain, Italy and France than they were in 2019. The Treasury also forecast that only 50,000 additional EU visitors might be tempted to come to the UK if they could shop tax free, yet 170,000 UK citizens were claiming tax back from the EU in 2022, which is likely to rise to almost 400,000 in the current year. If we take that figure pro rata and apply it to the EU population, that 50,000 would be 2 million in 2023—we are missing out on 40 times the Treasury’s forecast in terms of people coming to the UK to spend. That real-life data seems to undermine the forecasts.

The impact is on not only retailers, but hospitality, travel and indigenous producers who manufacture the goods being sold in the first place. The usual reaction of many tourists on getting a VAT rebate is to go and spend it immediately where they are—I find that hard to believe, but who am I to argue with observed human behaviour in the real world? So there would be a double benefit, in that the Treasury would get most of it back. The result would be a double-whammy—not just to the Treasury, but to the retailers and producers of these goods. What we are really doing is simply exporting those sales to other countries; in fact, that seems to be one of the few areas where exports seem to be very much up as a result of the Government’s economic policies.

The hon. Member for The Cotswolds described the return of tax-free shopping as a Brexit bonus, but I part company from him there. As with the Windsor framework in Northern Ireland, it would only bring us back to the situation that we were all collectively in prior to Brexit and the Treasury decision. We could still offer tax-free shopping even as part of the European Union; Brexit ought to neither here nor there.

It is not as if the Prime Minister is unaware of the issue; he was still the Chancellor when the decision was taken. But he has certainly had a reminder during his time as Prime Minister. The firm Burberry was mentioned earlier. Gerry Murphy, the chairman of Burberry, was introducing the Prime Minister at a Business Connect event in April this year. He took the opportunity to deliver a few home truths in warning the Prime Minister of the somewhat perverse decision to remove VAT refunds, and said that that had hurt the economy. He said that it had

“made the UK the least attractive shopping destination in Europe”,

noting that virtually every other major destination still offers VAT refunds and that for Burberry the recovery from the covid-19 pandemic was much stronger in Paris, Milan and Munich—all, like London, prime locations for tourism. He called on the Prime Minister and Chancellor to rethink their spectacular own goal, warning that Brexit was acting in that regard as a drag on growth.

Given that Aberdeen airport is in my constituency, it would be remiss of me not to include a pitch for the impact that the issue has on regional airports. Shopping comprises about 45% on average of the revenues that regional airports take in. That revenue is absolutely vital in keeping airports going and route development for the benefit of the area. Aberdeen is, of course, synonymous with the oil and gas sector, so Aberdeen airport has a strategic importance out of all proportion to the area that it serves simply because of how it serves that location and those key industries.

I speak regularly with management at the airport. Every time I visit, they tell me that they are losing sales hand over fist—to Norway, Spain, the Republic of Ireland and France: all the locations to which Aberdeen has a direct air connection—because of the decision. In actual fact that spend should be taking place, providing employment in my constituency and allowing the airport to develop routes. It should also be allowing us to get an economic benefit that, although not directly connected, is tangentially related to the benefits that come from tax-free shopping, which can allow the economy to develop in so many other areas and enable wider connectivity to Europe and the rest of the world. The policy is very much to the detriment of not only the operation of regional airports such as Aberdeen but the surrounding tourist and business economy.

I will draw my remarks to a conclusion, but I say to the Minister that in an earlier exchange this week she undertook to make inquiries about a matter that I raised in the main Chamber. I was very pleased with that response and I hope that, in a similar vein, she will also look very favourably on the very reasonable asks made today by the hon. Member for The Cotswolds to encourage the Treasury to commission research to inform Ministers. That, hopefully, will lead them to a different conclusion about this matter.

It is a pleasure to serve under your chairship, Dr Huq.

I begin by congratulating the hon. Member for The Cotswolds (Sir Geoffrey Clifton-Brown) on securing this debate on tax-free shopping for international visitors. On behalf of His Majesty’s official Opposition and as a shadow Treasury Minister, I am absolutely thrilled to respond to the debate. I do so for the very first time in my new role as shadow Exchequer Secretary to the Treasury, so no doubt hon. Members will be very kind to me today, Dr Huq.

As hon. Members, including the hon. Member for Cities of London and Westminster (Nickie Aiken), eloquently made clear, the publication of official independent statistics on this issue commissioned by the Government is long overdue. Manifestly, businesses across our country—although there is a special need for those concentrated close to our airports and in visitor hotspots—need a supportive and stable Government able to provide certainty for the future. Stability and certainty are crucial to enable businesses to plan, invest and grow, but when it comes to tax-free shopping—the arrangement whereby products that are bought here but not consumed here are ultimately VAT-free—the uncomfortable truth for the Government is that Ministers changed course on this policy twice in the space of two months last autumn.

The Prime Minister, when he was the Chancellor, ended VAT-free shopping for tourists in 2021. The right hon. Member for Spelthorne (Kwasi Kwarteng), who became Chancellor, promised in September 2022 to reinstate it, as part of his disastrous mini-Budget. Weeks later, as the musical chairs to become Chancellor continued, the right hon. Member for South West Surrey (Jeremy Hunt) came in as Chancellor and performed another U-turn: tax-free shopping was again off the table. No sooner had one Conservative Chancellor marched businesses all the way to the top of the hill than the next one marched them all the way back down again. The country will not forget the worry and pain that began nearly one year ago with a Tory mini-Budget that crashed our economy, led to interest rates rising, and caused lasting damage for households and businesses. The reversal of the disastrous mini-Budget was necessary, of course, but businesses affected by the U-turn have been left understandably frustrated by changes and decisions made in haste.

We in the Opposition have been listening carefully to the concerns of those calling for VAT-free shopping to be reinstated, but at a time when the nation is having to navigate its way through multiple Tory Government-induced crises, we do not believe that reinstating tax-free shopping for international visitors should be a priority for the use of the billions of pounds of public money. Nevertheless, although we are not calling for VAT-free shopping to be reinstated, we firmly believe that retail and hospitality businesses, particularly those concentrated on our high streets, need support from the Government.

That is why, as my right hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor, has set out, Labour is committed to reviving Britain’s high streets by replacing the current system of business rates with a new and reformed system that is fit for the modern day. Businesses on our high street provide essential services to people across the country and make a significant contribution to the Exchequer. They are not just places to buy things we need, but an important part of where we live, work and go about our daily lives. Their success is a key part of our mission to secure for the UK the highest sustained economic growth in the G7.

I thank the shadow Exchequer Secretary for giving way. I did not realise he had just been promoted, so I congratulate him on his new post. For understandable reasons, he is not committing to restore tourist tax-free shopping, but would he support my plea to the Minister that we should have a proper independent examination of all the figures to prove whether it would be a tax benefit, neutral or negative for this country, so that we can make informed decisions?

As I mentioned earlier, it is imperative that those official, independent and highly regarded statistics commissioned by the Government are there for all to see, for the sake of transparency. However, we feel that at a time when we have the highest recorded waiting lists for the NHS, the biggest tax burden and drop in disposable income since the second world war, and many other crises besides, this cannot be a priority for what I hope will be the incoming Labour Government—touch wood.

We will support businesses, create jobs and increase productivity across every part of our country. A Labour Government will keep listening to and working with businesses as we set about making the tax system fairer and providing the stability and certainty that businesses so desperately need.

It is a pleasure to serve under your chairmanship, Dr Huq. It is the first time I have done so, and I am delighted to be chaired so well.

I welcome the hon. Member for Slough (Mr Dhesi) to his place. It is a pleasure to see him there and I look forward to our doing battle over the Dispatch Box in the coming months. I thank my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) for securing today’s discussion. He is an assiduous advocate on the issue, and his speech showed the great care and thought that he has put into it. I genuinely thank him for his speech, as I do my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken); I will be dealing with some of her points later.

I hope the House will forgive me if I start with some points of clarification. I have said in this Chamber before that in the very complex world of tax law, VAT is the most complicated area; it is also the most litigious. When the Treasury or His Majesty’s Revenue and Customs faces litigation on VAT rules and their interpretation, the organisation can often bear millions of pounds of risk on behalf of the taxpayer on a single word in a piece of legislation. That is why I am going to be very particular about the terminology. I am conscious that lots of people will be paying great interest, and it is important that we get the terminology right.

The phrase VAT-free shopping can be used in the context of this debate, but for the avoidance of doubt, for those acts of shopping by tourists there will often be taxes and duties payable on their purchases on their return to their home country. We are focusing on what is actually called the VAT retail export scheme—VAT RES for short. I note that airside tax-free shopping is also in scope, but it has not been raised so I will not trouble the House with it. VAT RES is still available for all non-UK visitors who purchase items in store and have them delivered to their overseas address, which many shoppers would rather do than have to take them all home in their luggage. It also applies to overseas shoppers who buy online and have items delivered, so they can support British businesses from far afield.

I anticipated that my hon. Friend would raise that—in fact, I nearly put it in my speech to stop her doing so. The proportion of people who want to reclaim the tax and have goods delivered—let us think of, say, a Chinese person visiting this country—is minute compared with the proportion who shop in this country and then physically reclaim the VAT and go home. So while that scheme is available, it is very little used.

In fairness, it may be that people do not know that it is available. I do not know whether shops or brands advertise it to their customers. If a consumer is buying a larger item, they may think it much more convenient to have it sent home. The scheme is available should shoppers wish to make the savings described in the debate.

I acknowledge this has not been the case today, but some people call the current situation a “tourist tax”. Again, that is not correct, because the change in the law that happened a couple of years ago means that we simply expect overseas tourists to pay the same amount of tax as British people do when making a purchase, especially when so many countries—including some of the alternative shopping destinations that can be mentioned—do impose a genuine tourist tax on their visitors. So please let us not refer to it in that way, because that would not be correct.

My hon. Friend the Member for The Cotswolds understandably referred to a 20% saving from such VAT refunds, but that assumes that shoppers receive all the VAT back. In reality, we know that the companies processing refunds, who are sometimes the retailers themselves, charge significant administrative fees for the service. Indeed, one third of VAT RES users surveyed by HMRC were charged more than 50% of their refund in fees, and the average was 36%, so the savings to the consumer may be far less than the 20% rate of VAT.

To try to set in context the environment in which I am considering this request—alongside many others—since we voted to leave the European Union in 2016, the Treasury has received some £50 billion-worth of helpful suggestions and requests for products or items that should be zero-rated or have VAT relief applied to them. Cases are made in different debates on different subject matters where we are asked to make VAT relief decisions. Of course, VAT remains our third most productive tax in the UK, and it helps to support many of the public services that we all care so deeply about. Those are serious considerations that we must take into account for any request for VAT relief that we receive.

I completely understand the intentions behind my hon. Friend’s work—indeed, I commend him on it—and I share his wish to ensure that the UK remains an attractive place to visit and that support for our retail sector and high streets is strengthened. Both intentions and aspirations are shared across the Government. Therefore, if I may, I will take a couple of moments to help the House understand what we have done to achieve exactly that.

Through VisitBritain and the GREAT campaign, we have invested significantly in marketing the UK both domestically and internationally to stimulate demand and support recovery. According to updated forecasts from VisitBritain, there are due to be 37.5 million visits to the UK this year, which is some 92% of the level seen in 2019 before the pandemic, and inbound visitor spending is forecast to be £30.9 billion, which is up 9%. Those updates follow the stronger recovery we are seeing, with spending by American visitors up 42% to a record £6 billion last year alone. Sadly, international visitor numbers are still below 2019 levels for all G7 members and large European countries in 2022 and 2023, but of course that comes against the backdrop of the UK economy doing much better than was forecast over the last year or so, as we saw really encouraging growth figures more generally for the economy last week. Rather than ours being the weakest post-pandemic recovery in terms of visitor numbers, the post-pandemic recovery in the UK has been stronger than in countries, such as Germany and Japan, that continued to offer VAT RES. Post-pandemic recovery in the UK has also been stronger than in the United States and Canada in both 2022 and 2023.

We want to make sure that the tourist experience in the UK is as great as it can possibly be. One of the ways in which we have tried to reduce the bureaucracy and the barriers for tourists coming into the UK is by creating an exemption from visa requirements through our new electronic travel authorisation scheme to boost international tourism numbers, with visitors from the Gulf Co-operation Council states and Jordan being the first to benefit. We have also worked with industry to set up the tourism industry working group on international competitiveness and demand, which has been established to recommend practical policy options to support tourism recovery.

I was interested to hear about that new collection of people working together to improve the tourist offer. If that group recommended that VAT RES be reintroduced to help the growth of tourism, would the Treasury be minded to accept that recommendation?

My hon. Friend will know that that group will not necessarily have access—in fact, I would be surprised if it did—to the macroeconomic data that the Treasury, the OBR and others, including the retail industry itself, have. We understand that every decision we make will be scrutinised in due course by the independent Office for Budget Responsibility, so there are processes that we have to go through. As I have said, however, and as I will repeat in this speech, we are very keen to hear evidence and data from the retail sector. We very much keep this policy under review.

In respect of high streets, it is argued that the reintroduction of the VAT RES scheme would be a useful move to support our world-leading retailers. This Government are proud to have provided huge support to the retail sector, not least through the extreme challenges that that sector faced during the pandemic. Hon. Members will recall the measures that we took to ensure that the sector paid no business rates—support that was worth £16 billion to businesses in the retail, hospitality and leisure sectors throughout the pandemic—as well as the very practical support measures such as the furlough scheme, bounce back loans and even small business grants for the smaller businesses in our communities, all of which helped to secure and safeguard millions of jobs across the UK economy and keep businesses surviving through that very difficult time. We would argue that that support helped to keep our high streets, our retail centres and our communities thriving.

We clearly recognise the importance of retailers and will continue to act effectively to support them. At autumn statement 2022, the Government announced business rate changes and tax cuts worth more than £13.5 billion over the next five years, which will support the retail, tourism, leisure and hospitality sectors, as well as other parts of the economy. These announcements included a freeze to the business rates multiplier for 2023-24, which is a tax cut worth £9.3 billion over the next five years, meaning that all bills are 6% lower than without the freeze.

We also introduced an Exchequer-funded transitional relief scheme, which many sectors had asked for and which is worth £1.6 billion, to protect an estimated 700,000 rate-payers facing bill increases due to the increases in rateable value. Indeed, I have had the pleasure of visiting that great British company John Lewis, on Oxford Street, to see for myself the positive impact that these and other changes have had on that really important British business.

I thank the Minister for giving way yet again. I am interested in what she says about a great British company such as John Lewis, which is based in my constituency, and its flagship branch in Oxford Street, which is also in my constituency. Does she agree that, if we are to encourage people back to places such as Oxford Street—the nation’s high street—those places have to have a great offering? They have to look good, be clean and have brilliant shops, and not so many of the candy stores and that type of retail offer, which we seem to have at the moment and which is really disappointing. Also, the Mayor of London has a huge role to play in ensuring that there is a tourism offer, and the current Mayor is letting down London.

Order. May I just say that we are straying from the subject matter, which is tax-free shopping? Also, when you say “you,” that means me. I did not do anything—it is “the Minister”.

I hope to ingeniously incorporate VAT RES into my response to my hon. Friend. She is absolutely right that, although the advocates of the scheme place a great deal of emphasis on it as a tax lever to encourage tourists back to the United Kingdom, in reality tourists come to the UK to look at our beautiful architecture, visit theatres, visit wonderful historic locations, and—dare I say it—visit the Lincolnshire wolds and other places of great beauty around the country.

Including, of course, the Cotswolds. We must look not just at how to encourage more tourism through tax levers, but at the actual offering to tourists when they are here in Oxford Street, Burford or Bourton-on-the-Water, so we ensure that those places are as attractive and inviting as they can possibly be. I hope that the House is therefore in no doubt that the Government are determined to do everything they can to make the UK an attractive place to visit, both to support tourism and hospitality and to support our retailers.

As I have said, the VAT retail export scheme is still available to those non-UK visitors who purchase items in store or online and have them delivered to their overseas address. However, as we heard from my hon. Friend the Member for The Cotswolds, a significant Treasury analysis in 2022 estimated that introducing worldwide VAT RES shopping would come at a fiscal cost of around £2 billion each year. I know that my hon. Friends and others have questioned that analysis and methodology, and I will try to address some of those queries and concerns. We also know that industry-commissioned analyses have reached different conclusions, including the Oxford Economics report, which I have gone through carefully with officials. I will try to break some of those down.

The Treasury costings include estimates for an increase in the numbers, but it does not agree that as many extra visitors would come to the UK as a result of changing the tax measure, as suggested by the external research that we have seen so far, particularly the Oxford Economics analysis. For example, the Government estimate that 50,000 to 80,000 more people would come to the UK if we introduced such a scheme. My hon. Friend thinks the figure would be higher, and I think the Oxford Economics report suggested something in the region of 1.6 million, but the 50,000 to 80,000 figure has been endorsed by the OBR, which is the independent body that scrutinises Treasury calculations and assumptions. Indeed, my hon. Friend has asked the OBR to review the policy.

The figure of 50,000 to 80,000 extra visitors is just 4% of that suggested by Oxford Economics, which suggested that 1.6 million more people would come every year. To put that in context, the total number of tourists we welcomed in 2019 was just over 40 million. We therefore find the external assumption to be much stronger than the Treasury was able to find evidence for.

Let me try to reassure observers about the Treasury’s methodology. I know that the concern is raised that it does not properly account for an increase in visitors. I reiterate that the fiscal cost of £2 billion was made up not just of that factor, but of many other components. For example, the cost includes the VAT loss on purchases from EU and non-EU visitors. The cost also takes account of changes in behaviour. It includes an adjustment for the changes in the number of visitors, the changing spending patterns of visitors and the impact of digitalising a VAT RES scheme.

It is also said that the costings overestimate VAT refunds to EU shoppers, but, in fact, EU visitor spending is adjusted to account for the fact that these visitors tend to spend less than non-EU visitors. Government analysis assumed that EU visitors would spend at about 60% of non-EU levels, but, for comparison, Oxford Economics used 63%, so the Government’s assumption was in fact more generous.

Even taking into account those effects, the Government still estimate that the measure would cost in the region of £2 billion each year, and the methodology for calculating that £2 billion cost is consistent with the methodology signed off and certified by the OBR in 2020.

However, as my hon. Friend the Member for Cities of London and Westminster emphasised, tourism must be seen in the round. We should be confident that the UK’s attraction as a destination extends well beyond our shopping, even though we have pretty brilliant shops in our great city and around the country. Evidence from VisitBritain shows that the key motivators for tourists visiting the UK are our rich history and heritage and our vibrant towns and cities, not just shopping.

HMRC has surveyed VAT RES users and found that VAT RES did not make the list of reasons for visiting Great Britain. Furthermore, two thirds of those surveyed said that they would have purchased the items regardless of the scheme, while 28% would have purchased fewer items, meaning that 95% of tourists would still shop even without the scheme.

To emphasise that point, I have asked officials for figures on how much tourists spend when they are visiting. I am told that the average spend per visit was £696 in 2019 and £848 in 2022, which is an increase of 8% in real terms. That tends to indicate that international spending habits in the UK are not directly informed by whether VAT RES is in place.

I accept, of course, that individuals will make different decisions on VAT, and that some customers are more price-sensitive than others. However, taken in the round, those are the figures with which I have been provided. We have looked at the Treasury’s analysis and the OBR’s analysis, which suggest that the increase in tourist spending is marginal, but the policy would still come with a significant price tag.

My hon. Friend the Member for The Cotswolds advocates for a review. As with all taxes, the Government keep VAT policy under constant review. Further to that, we have committed to understanding the latest evidence on VAT shopping, or on the impact of the VAT RES scheme on shopping in British high streets. That is why the Chancellor has already invited evidence submissions from industry to inform our policy making.

I would like to take this opportunity to thank the retail and hospitality industry for providing so much data already for my officials. I am obviously keen for them to carry on with their businesses—earning money, making profits, employing people and contributing to our growing economy. I am grateful to them for taking the trouble and time to help us with this. We expect further evidence in the coming weeks, which we look forward to receiving and will consider very carefully.

Although I am obliged to stress that the independent OBR certified the Government’s costings for the removal of the VAT RES scheme and that we have set out our methodology for how the £2 billion estimate was calculated, I have heard my hon. Friend’s call for an independent review and I will reflect carefully on his eloquent submissions.

We are committed to ensuring that the UK remains an attractive place to visit and committed to supporting our retail sector. None the less, the Chancellor is clear that being responsible with the public finances is a key priority. In that regard, VAT RES would subsidise a large amount of tourist spending that already occurs, arguably, without a tax relief in place. But we very much want to listen to industry and support long-term sustainable growth, so we will continue, as I say, to receive evidence and keep the policy under review. I am extremely grateful to my hon. Friend for setting this debate in motion.

I am grateful to you, Dr Huq, for giving me the opportunity to briefly reply to this debate; it is very important. I thank the Minister for setting out in detail for the first time how the Treasury’s methodology works. I will come back to that in a minute. Before she did so, she set out in detail the reliefs that the Treasury has given to businesses in rates and VAT, as well as high street grants and business grants during the dreadful pandemic, all of which were very much appreciated by businesses and no doubt kept a lot of them going. Some of those reliefs still persist today, for which I am sure businesses are grateful. But that is no substitute for businesses getting profits into their bottom line, and one way of doing that is to get more tourists into this country spending more money. That is why I think the issue is so important.

The Minister has fully set out the case for why she believes the Treasury’s methodology relating to the £2 billion cost to the Treasury is correct. I suggest that I take that away and ask industry to go through, in depth, all the things that she has mentioned and come up with a statement on whether they agree on each individual point, and if not, why they disagree and what the effect would be. If, at the end of the day, we still disagree with the Treasury’s methodology, may I come back to her with a comprehensive statement and discuss it further? I would still say that we badly need an independent study.

I have not brought my brief today, but I recall that when the OBR addressed the Treasury Committee, it said that it placed low reliance—I think that is what it said—on the visitor number forecasts.

I was anticipating this point and, indeed, quizzed my officials about it. I think the phrase my hon. Friend refers to is a high uncertainty rating. I am told that that rating given by the OBR is not unusual in the context of Government policy. That is because it is driven by behavioural uncertainty, which is difficult to predict with limited data and the additional complexity linked to EU exit. It was not, I am told, because of concerns with the methodology employed. As I say, we are very keen to hear further evidence and views in due course.

I am grateful to my hon. Friend for being so well informed to be able to answer that individual point. However, I suspect, again, that industry and the OBR will disagree with her over that matter.

I thank the Minister very much, and you, Dr Huq, for so ably chairing this debate. It has been thoroughly useful. The fact that we have had relatively few speakers has enabled us to examine the whole issue in detail; I think industry will be very grateful for that. I suspect that it will come back with all sorts of replies that will rebut what my hon. Friend has said. Let us see and then I will go back to her and I am sure the debate will continue. Nevertheless, I thank her very much for what she has done this afternoon.

Question put and agreed to.


That this House has considered tax-free shopping for international visitors.

Sitting adjourned.