Good morning, everybody. I have a few preliminary points. Remember to switch your electronic devices to silent mode. Stimulants, with specific reference to tea and coffee, are not allowed.

Obviously, the important thing today in Committee is social distancing. The main body of the Committee Room has capacity for a maximum of 15 Members. If more than 15 Members are present, two will need to sit in the Public Gallery, but if they catch my eye during the sitting, they will obviously be able to participate. I will have to suspend the sitting if I think anyone is breaching the social distancing guidelines.

The Hansard Reporters would be very grateful if Members could email electronic copies of their speaking notes to hansardnotes@parliament.uk.

Members will be aware that Parliament will hold a minute’s silence at 11 am in memory of George Floyd. I will suspend the sitting for one minute just before 11 o’clock.

Today we begin line-by-line consideration of the Bill. A selection list for today’s sittings is available at the other end of the room, showing how the selected amendments have been grouped for debate. Amendments grouped together are generally on the same or a similar issue. Decisions on amendments take place not in the order in which they are debated, but in the order in which they appear on the amendment paper. The selection and grouping list shows the order of debates. Decisions on each amendment are taken when we come to the clause that the amendment affects. I will use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules, following the debates on relevant amendments. I hope that that explanation is helpful.

Clause 1

Definition of “domestic abuse”

I beg to move amendment 50, in clause 1, page 2, line 7, at end insert—

“(5A) For the purposes of this Act, people affected by domestic abuse may include any child (such as a child in relation to whom A or B has a parental relationship) who sees, hears or is otherwise exposed to domestic abuse within the meaning of this section.”

An amendment so children are recognised within the statutory definition of domestic abuse.

Thank you, Madam Chairman—that always sounds ridiculous, so I will say Madam Chair. I will start as I mean to go on, with a feminist flourish. The aim of the amendment is to ensure that children who see, hear or are otherwise affected by domestic abuse—in other words, who themselves experience the domestic abuse—perpetrated by one person aged 16 or over against another, are recognised in the proposed statutory definition of domestic abuse.

We will come later to the debate about the statutory definition and the importance of having a statutory definition. It is almost unbelievable to somebody who has worked in the field for so long that one does not exist. I think people on the street would think that one did. I will not talk more broadly about the definition now, but merely about the amendment with regard to children.

What are the reasons for the amendment? Why is it important? Analysis from the Children’s Commissioner suggests that 831,000 children in England live in households that report domestic abuse. On average, 692 child-in-need assessments—I presume that that is the figure for before covid-19—are carried out every single day that highlight domestic abuse as a feature of a child’s or a young person’s life. Having worked in the field, I know that that is an enormous under-reporting, but, still, the figure is 692 children every single day.

The Women’s Aid annual survey reported that, in 2018-19, 13,787 children used refuge services, compared with 11,489 women, so there are more children accessing our refuge services. When I worked in Refuge, there was always a board that said, “Flat 1, flat 2, flat 3, flat 4, flat 5”, and it was always, “Woman plus three” or “Woman plus four”—that was the number of children she had with her in the refuge accommodation. There were always more children than women in Refuge.

According to the Women’s Aid study, 187,403 children used community-based services, compared with 156,169 women. I want to explain that a little bit, because the headline figure of 187,403 does not mean that, in a single year, those children necessarily received any direct support as a result of their domestic abuse. I worked for a Women’s Aid in community services. That is where the vast majority of victims of all kind are seen; it far outstrips refuge accommodation. The reality is that you would sit with a form in front of you and often with a woman in front of you who was telling you of the horror she was facing at home, where she was still living or interacting with the perpetrator, because of the family courts or for a variety of other reasons, and you would know, and would have recorded on your system, the number of children in her household, but you might never lay eyes on those children—you might never see them. They would never necessarily come into community services. My organisation dealt with 8,000 to 9,000 community cases a year. Had we had the associated children in, it would have been like running 10 inner-city schools in the west midlands. Although that number of children are recorded in community services, it does not necessarily mean that they are accessing support.

The consequences of these childhood experiences are well known, ranging from brain development being negatively affected and cognitive and sensory growth being impacted, through to people developing personality and behavioural problems, depression and suicidal tendencies. Children who experience domestic violence from the age of three onwards reported 30% higher than average antisocial behaviours at the age of 14.

There is not really any crime type that we debate in this building that we could not link back in some way to adverse childhood experiences, whether we are talking about the link between domestic violence perpetration and terrorism, about the adverse childhood experiences that lead to grooming and sexual exploitation, about knife crime or about county lines exploitation. In every single one of these crime types, if we were to look back at adverse childhood experiences, it would not be too long before we saw a pattern of domestic abuse. It is haunting how much domestic abuse affects many of the issues that the Home Office deals with.

The children who have suffered report 13% higher than average conduct problems, such as fighting with their peers. The Joint Committee on the Draft Domestic Abuse Bill highlighted concerns that if children’s status as victims of domestic abuse that occurs in their household—rather than that which occurs to them as individuals in their own relationships or directly at the hands of the perpetrator in their home—was not recognised, the Bill could have a negative impact on the level and quality of specialist support available to children.

The provision of services for child victims of domestic abuse is already disjointed. Studies have shown that support for children is often a bolt-on to existing domestic abuse services and that many children do not receive any specialist support following their experiences of domestic abuse and violence.

Without wanting to blow my own trumpet, I think it is important to say that my in-depth knowledge of the domestic abuse services in Birmingham is probably a little bit better than that of the average Member of Parliament. I have worked in most of those services; I know where the services are. When I need a refuge bed, I rarely go through a referral line—my next-door neighbour but one is the place where I would go—and I have the phone numbers of the people I need to talk to at any given moment. If a child came into my constituency office and was facing domestic abuse at home, or came in with their mother and their mother was begging for direct support for that child, I would not know where to send that child for certainty of service.

What my hon. Friend describes is a set of services that works within the rules. I believe she is saying that guidance and codes go so far, but we really need legislation. Does she agree that the very existence of this good Bill, which we need, proves that statutory definitions make a difference and that that, fundamentally, is why we need their extension to children?

I absolutely agree. Throughout the day, no doubt, we will be told, as we were on Second Reading, and as we will be on Report, that, even though I am a sometime opponent of some things in the Bill—actually, I am not an opponent of anything in the Bill; I am an opponent of what I fear is missing from it—the definition is important and ground-breaking. We will be told that it is finally the leap pad that we can all use to do some things we have all so deeply wanted to do, but we have to make sure that we do that for the nation’s children and that they are on the face of the Bill.

I was talking about what I saw in services and saying that I would not necessarily be able to find somewhere for a child. In a case in my constituency, a woman’s husband was convicted in the Crown court of domestic abuse towards her. Her child is now going through the family courts. That is a story we will hear again and again throughout the passage of the Bill. The child’s school identified a need for extra support and had access to some educational psychology resources that could be put in place at the school. The school had to get permission from both parents. The father refused to allow the child access to the support. Those involved at the school, which is not huge administratively—primary schools in Birmingham, Yardley do not have big teams of policy people and people making decisions—felt anxious, nervous and unprotected about what to do, so they allowed the father to make that decision. There are all sorts of reasons why we need legislative change to provide explicitly that public bodies have a duty in that area. That is just one example.

When I worked in Refuge accommodation, I saw a decline in the number of family support workers. When I arrived, we had two children’s rooms in the main refuge, which had 18 flats for families to live in. There were communal spaces and two family support units, and, more importantly, four family support workers. Their entire job was to work with children, and to work through their experiences with them, and also to work with mothers whose sense that they could tell their children what to do had often been removed by a perpetrator who had undermined them at every level, to the point where the children—certainly the older children in Refuge—became the parent. Those workers watch childhoods being lost, usually by older teenage girls. However, in some cases it is boys who become a parent to their younger siblings.

I have seen horrendous cases, including one where I had to help with and facilitate the removal of children from a family for their best interest, when a group of three siblings was separated so that the oldest was sent somewhere separate from the two younger ones. I have lots of siblings, and it felt as if separating that sibling group was the cruellest thing ever to have to do, but that older child would never have had a childhood had she been resettled with her younger siblings, because, at the age of eight, she had become their mother.

Even in the time I worked in Refuge accommodation, we closed the family rooms because there was no longer funding for specific family support work, which came through early intervention grants, either through Supporting People funding or the local authority. The rooms that had been filled with big murals of Disney characters and the play schemes that offered places in summer—I remember we used to do this brilliant den-building thing, because of the idea that kids would like to build a space they felt safe in—started to disappear from refuges across the land. The onus on, and ability of, organisations to work directly with children has been limited.

If we were truly representative and I asked Members to survey all their constituents who had suffered domestic abuse about what single thing every victim wanted to see, there would be a variety of answers. However, I guarantee that a huge percentage would say, “I just want some support for my kids. I just want someone to talk to my kids. My kids have nowhere to go.” That is what victims of domestic violence say again and again at coffee mornings, at refuge support groups and at every refuge’s weekly house meeting. People are saying, week in and week out, “I just want something for my kids.”

Do not just take my word for it. Research conducted by the University of Stirling has shown the following: in two thirds of local authorities questioned, children faced barriers to accessing support in cases of domestic abuse. Over 10% of those local authorities had no specialist support for children who were victims of domestic abuse. In one third of local authorities questioned, children’s access to services was restricted by postcode.

I see the hon. Member for Dudley South in the room; I used to work at Black Country Women’s Aid and offer services across the great borough of Dudley. We had a rape crisis service that offered services to adults and children who were victims in Sandwell, but we offered other services in Dudley—around domestic abuse, for example. Rape victims and children who had been sexually abused or sexually assaulted would ring our services, and if they lived in Dudley, we would have to say to them, “I’m sorry, that service is for Sandwell kids. We cannot come into a school in Dudley.” I hasten to add that that is not the case now, I am pleased to say.

I am covered by parliamentary privilege, so I can say that I sometimes used to fake an address in Sandwell. I used to think, “The crime data for this one house is going to go through the roof. This is going to be some horrible hothouse of abuse where every person in Dudley who has ever been abused lives.” There is nothing worse than working for a service and telling people that they cannot access it. The people who live in Sandwell and Dudley definitely know the difference between the two, and it would be a grave insult to accuse someone who is from one area of being from the other; that would be like saying I am from Manchester. Nevertheless, the idea that people in the west midlands understand lines drawn on a local government map in 1974 when their children need support is frankly laughable.

Funding for children’s services fell by £3 billion between 2010 and 2018, and children’s services in two thirds of local authorities questioned are reliant on time-limited funding. It is important to stress the issue of time-limited funding: if I had superpowers beyond those I will ever have, I would scrap 31 March from every calendar in the world. People who work in the voluntary sector are aware that when a child comes in to start 10 sessions of support over a financial year, they might not know until well into April whether they will still have the funding to carry on supporting that child. The voluntary sector currently lives hand to mouth; that is not a criticism of this Government, but a criticism of literally every Government. The way we manage funding for those dealing with people whose lives are completely and utterly chaotic is a travesty.

In addition, 60% of local authorities that responded to the recent Women’s Aid survey have had to reduce or cancel children’s services as a result of covid-19. Cross-national comparative research has shown that when children are recognised as direct victims, they are more likely to be spoken to and have their perspective taken into account.

I refer to my own experience when I was a councillor responsible for local education. I remember—this varies between local authorities—how effective it was that looked-after children were the responsibility of the local authority and the schools were held to account for their educational performance. Obviously, this must be handled sensitively, but we know that children and their educational outcomes suffer in these circumstances, so making this more consistent must be beneficial.

I absolutely agree; there needs to be a consistent thread. I suppose the Government would lean on the idea of Ofsted’s safeguarding principles with regard to all schools, regardless of whatever jurisdiction they sit under. However, if we looked at any of the inquiries into sexual violence or harassment in schools, which have been done by what feels like every Select Committee over the past five years, we would see there is a real disconnect between the safeguarding that Ofsted is able to identify and incidents where, for example, peer-on-peer sexual violence in a school is handled appallingly. I cannot help but think there needs to be a far more consistent approach.

What is more, for example with Operation Encompass, a proper monitoring review and action plan needs to come out of any review. A former chief constable of Dorset Police wrote to me. He now runs an organisation that goes into schools and works with Operation Encompass. He told me that during a recent webinar with 150 school safeguarding leads, he ran an online poll, to ask who was aware of Operation Encompass: 35% said yes, they were aware; 49% said no, they were not; 9% said that they were not sure; and 7% said yes, but that they were not receiving any calls about children in such circumstances. I can only hope that they have very lucky children in their school without any incidences at home, although I find that vanishingly hard to believe.

When we talk about the voice of the child, nowhere in the debate that we will have over the next 10 days will we hear what I can only describe as a primal cry about hearing the voice of the child, including when we discuss the family courts. If I wanted to filibuster all day, I could read from the special folder in my inbox, which contains hundreds if not thousands of emails from children and adult victims who have been through the family courts, talking about how the children were ignored. There is a deep and meaningful reason why the voice of the child has to be put on the face of the Bill. Later, when we discuss the family courts, what we hear will put us all beyond any doubt that rarely are children asked what is happening at home by anyone, even when services are instigated.

Including children in the definition of domestic abuse would also mean that public authorities and frontline practitioners, including CAFCASS—the Children and Family Court Advisory and Support Service—and the police, will be encouraged to recognise and respond to children experiencing domestic abuse. Local authorities and their partners would recognise the importance of ensuring that child victims have access to support for their needs. That is deeply important.

I do not underestimate how stretched local authorities are. In most circumstances, they are trying to do the very best that they can. I used to say that I wished that the victims of domestic abuse were as important as the bins—there is a statutory duty to collect the bins—but now they will be. We have made it to the heady level of domestic abuse victims being as important as bins! I now wish to see children in every local authority reach that heady status. I do not underestimate the importance of bins, though. I am from Birmingham, where we have bin strikes all the time, so I cannot tell you how important I think that the collection of bins is—I do not wish to present otherwise to the Committee.

The report of the Joint Committee on the Draft Domestic Abuse Bill echoed much of what I am saying, stating:

“We recommend the Bill be amended so the status of children as victims of domestic abuse that occurs in their household is recognised and welcome the assurance from the Home Office Minister that the Government seeks to include the harm caused to children in abusive households in the definition”—

we would welcome that.

The Minister sent a letter following Second Reading this time—the Joint Committee report is actually a piece of scrutiny work done on a previous Bill. The Bill we are considering is a different one but, in shorthand, let us all assume that we are talking about the same Bill for now. In the letter, the Minister stated:

“It is vital that we support children who are affected by domestic abuse, and the Bill expressly recognises that in the statutory functions of the domestic abuse commissioner. One of the key functions of the commissioner will be to encourage good practice in the identification of children affected by domestic abuse and the provision of protection and support.”

I want to know what “encourage” means—the domestic abuse commissioner will “encourage”.

The domestic abuse commissioner, in her evidence to us on Monday, very much encouraged the idea that more support is needed for the victims of domestic violence who are children. She told a clear story about how shocking one particular service that seemed to be doing it well was to her—that she had never seen such a service. What powers will the powers of encouragement have? Will the Minister explain in her remarks how the commissioner will encourage that? The Government have not been encouraged to include children. The commissioner—regardless of her title—has no budget to commission children’s services in the country, and she has no power to demand that a local authority does it.

My hon. Friend makes an important point in focusing on the attention that encouragement is given in the current system. Can she give some examples, from her own experience, of all the other areas where services are encouraged to do something, but that does not actually happen?

rose—

In replying, I am sure the hon. Member will remain within the terms of the Bill Committee.

I will remain within the terms by saying that we, as members of the Committee, received evidence yesterday from the Children’s Commissioner. She is encouraging us to look at this amendment and to pass it. I do not think anyone in this room doubts that the Children’s Commissioner has been trying to encourage that to happen, and it has not happened. That encouragement is just one good example of how the role of a commissioner, which will we talk about later, is deeply important. It must mean something more than just encouraging. I do not know why the Government would not want to be encouraged to include children.

The Minister’s letter goes on to say:

“In addition, clause 66 of the Bill places a duty on the Home Secretary to issue guidance on the effect of domestic abuse on children. Alongside the Bill, we announced on the day of Second Reading that the Home Office had awarded £3.1 million to specialist services for children who have both been directly and indirectly affected by domestic abuse.”

The organisation I worked for was one of those that received some of that money, for work in the area represented by the hon. Member for Dudley South; no one would argue with that. However, as will be said many times in the Committee, saying that advice will be issued in the guidance is all well and good. We want to see incredibly robust guidance. I spent the weekend reading the guidance on human trafficking, which nobody would want to see on the face of the Bill because it is long, in-depth, ridiculously detailed and targets specific agencies with specific nuance. That is what good guidance should do.

I understand that kicking the issue of children to the Commissioner and the guidance might make it feel as if the issue is forgotten. I do not think that Members opposite—certainly the Minister—do not want to see the very best for every child in our country. I absolutely think that the Minister wants that—it would be horrific to think otherwise—but the suggestion is that it does not need to be on the face of the Bill but will play its role in the guidance, which we have not yet seen. This is not a new Bill. The Domestic Abuse Bill is like an old lady of the House. The joint Committee compelled the previous Bill—this Bill’s sister—to publish the guidance before we even reached Second Reading. Why, if we are so confident that the issue of children can be dealt with in the guidance, can we not see that guidance? Why cannot this body of Parliament scrutinise the guidance before we agree that children will be perfectly well catered for? That guidance might allay my fears. I would probably still want to see it on the face of the Bill because I am a person who likes to use the law to get what I want, but maybe the guidance would allay my fear. Perhaps the Committee could be allowed to see a draft of the guidance during its discussions? I will not press it to a Division as I am sure all Members would agree.

Of the £3.1 million that was announced, which was of course welcomed, not a single penny would enable me to place anyone in Birmingham into the service. The hon. Member for Dudley South and people in his area are in a lucky position. Maybe we now need a Dudley house for Birmingham children to go to—it is not far, I will drive them and we will go to the Black Country Living Museum on the way. Most people in this room, let alone most Members of Parliament, would not have got any of that £3.1 million for any child in their area. They would not be able to access that service. Once again, we are back to postcodes and houses with ridiculous crime reports.

I am not sure why there is a resistance to include children in the Bill. I have concerns about how all issues that are too difficult to deal with are pushed on to the commissioner in statutory guidance. The Bill has been going through the Commons for so long that it is not unreasonable to expect to have seen the guidance.

My hon. Friend and I both have a lot of experience working in the voluntary sector, admittedly in very different parts. We both know that, if we had three charities in a room and asked them a question, we would get three different answers, but on this issue, is she aware of any charitable or campaigning organisation that supports children and opposes including children in the definition in the Bill?

I am not. Often, the two issues that the children’s sector mainly campaigns for in this regard become conflated. One is the issue of teenage relationship abuse and the age limit of 16, at which the definition that we are discussing currently sits. There is some divergence of opinion about whether the way to include children in the Bill is to remove age limits. For very obvious reasons, there are concerns about that. As somebody who has represented and worked with child victims in the past, I would not wish to see them criminalised—that is one issue. On the issue of whether a child should receive in the definition the status of victim rather than witness of domestic abuse, I have heard no divergence—my hon. Friend is absolutely right.

As somebody who worked in the women’s sector, I have to say that if the Government want to take some real credit for what they have done for the domestic violence sector, the greatest thing that they have done— I do not mean this in a glib way— is to genuinely unite charities, which now work in a way that was certainly not always the case when I worked in the field. On this matter, they are all singing from the same hymn sheet.

As always, I want to give voice to some of those who have suffered in childhood. Charlie Webster, the Sky Sports presenter, who sits on the victims’ board at the Ministry of Justice to advise the Government, has expressed real frustration that there seems to be little to no movement on this issue. She has talked about her experience of living with domestic abuse as a child. She said:

“Home is supposed to be your safe, loving space. As soon as I walked in the door from school I wouldn’t know where to put my feet in case I made a noise. I would chew quietly and make sure my teeth wouldn’t touch my knife and fork, not making any noise, trying to keep the peace to protect my mum. Anything would make him angry, even the sound of me eating. Hearing that, he would smash the table with his fists near your face. I was constantly on edge.”

Charlie admits that growing up feeling worthless and unloved has affected her adult relationships. Lasting effects include an inability to accept praise. Charlie said:

“I was traumatised and had a lot of nightmares. If I got close to somebody, it would trigger a feeling of a lack of safety and stability.”

She said that her situation was a factor in her being sexually abused by her former running coach in her teens, and added that,

“People like that coach are predators who prey on vulnerable people for the power. It was easy to have power over me.”

I wish I could say that Charlie’s case was an unusual one in which domestic abuse in childhood had not laid in step the trap of both domestic abuse and sexual violence and exploitation in adulthood.

I would like to say that Charlie Webster is a good friend of mine. I have lived through her testimony and it is harrowing, to say the very least. There are many reasons why she was let down by local authorities and by the police. To go back to what you were saying, Jess, as the children’s services lead for a London borough, I have seen at first hand that the trauma of domestic abuse runs through all families and all relationships.

I would like to ask what you think the Domestic Abuse Bill will achieve by adding that definition of children, compared with what the definition does in the Children Act, where children are protected. Also, from the point of view of CAFCASS, there is the importance of family courts and of listening to children. I have sat on the board of CAFCASS and know that they have a huge part to play.

Order. I remind Members that interventions need to be short. Also, may I make a gentle reminder that the speaker is addressing the Chair, and therefore not referring to other Members by their first name?

On that point, this is the first time for lots of us, doing a lot of things. We are all learning: I will inevitably get some of the procedure wrong— I almost always do. I have learned to live with that fact, and wear it almost as a weapon. I totally agree with the hon. Member about the effect that domestic abuse has. However, if the Children Act currently does that job, why is it not happening? The Children Act is currently failing. When you intersect—as the language has it these days—the Children Act with domestic violence, from my own experience there is starting to be a breakdown in understanding. I would argue that that has been brought about by the austerity faced by local authorities, although I have no evidence to back that up.

Usually, the main point of intersection between the Children Act and domestic abuse services is section 17 of the Children Act 1989. Section 17 is my favourite piece of legislation that was ever written. It is as though I keep it in a drawer and can just pull it out. Section 17 of the Children Act means that if a woman is destitute with her children, the local authority has a duty and power to house that child. Although I represented an area in the Black Country that was incredibly parochial, domestic violence services are national schemes. In cases of domestic abuse, we very often get the response from a local authority area—we take people from all over the country, and we disperse people out into different areas of the country. In fact, as part of the safeguarding approach, people are not allowed to stay in a refuge if they live within five miles of its location.

We would therefore be ringing round local authorities trying to rehouse people out of a refuge—or, in fact, rehouse people in our refuge, being paid for by that local authority. Any number of times, we would get “Computer says no” for x, y or z reason; but if the woman had a child, we knew that by the end of the day we would have bed space for her, because of section 17 of the Children Act. I have seen that eroded of late, because I have seen section 17 being used as a tool against victims of domestic violence to say, “We will rehouse your child, but you are going to have to go and sleep in your car, because we have a duty to the child, not to you as a family”.

So, while I love the Children Act, it is currently not doing this. From some of the evidence we heard from the victims, if you are multiply presenting, for whatever reason—in the instance of the evidence we were given, it was disability and domestic abuse—it is often the case that those who are specialist in one area are not specialist in the other. In domestic violence services, that person was being seen just as a disabled victim, and in disability services she was not being seen as a victim of domestic abuse. I am afraid that, with reliance on the Children Act and the agencies that necessarily come out of a local authority through the Children Act—namely, children’s social care—the situation was at the point where you would be able to access services only if you were near death; access is vanishingly rare, unless your threshold is certainly in Birmingham. I do not know why that is so, just because of the laws that exist to protect children: other laws exist to protect all people, if they are represented in the Bill. There is another law for everybody: why would we not include them?

I will often, because of the nature of this crime, lean towards talking about women. I cannot help but do it—it comes from the background I come from and the working organisation that I come from. However, I want to highlight the pain suffered by boys and young men who grow up with domestic abuse. I want to send a very clear message to my friends Rachel Williams, Jacky Mulveen and Mandy Thomas—three women who have dedicated their lives to campaigning for and supporting victims of domestic abuse, and all of whom have suffered the unimaginable loss of a death of a son because of domestic abuse. All talk about the strain that living with domestic abuse had on their sons and other children.

Rachel has talked many times about how the violence against her affected her children. Rachel’s ex-partner abused her for years. On 19 August 2011, Darren Williams walked into Carol-Ann’s Hair Salon, Rachel’s place of work in Newport, and attacked his wife of 18 years after she asked him for a divorce. Williams used a gun butt to smash Rachel in the head and fired two shots into her legs, which left her unable to walk until surgeons replaced her shattered bones with titanium. Six weeks later, her 16-year-old son Jack took his life. Rachel said:

“Children are not seen as victims of domestic abuse but as witnesses and that’s not the case. It’s about putting a strong message out that we need to do more in our society to stop this from happening.”

Rachel said her son was a “strong-willed boy” and she was “shocked and distraught at his death.” She added:

“He was a popular boy in school and was a bit of a Jack-the-lad but he was a loving boy. He was the first to put his shoes on and help me with the shopping from the car.”

Jacky Mulveen is a woman so very close to my heart. She runs local services in Birmingham that are utterly life-saving for victims of domestic abuse. Over many years, Jacky and I have spent time sitting on my living-room floor, late into the night, surrounded by papers for funding bids to keep her work going. A constant problem we face is the need for crèche facilities to care for children while their mothers get support. Even that, which is the most basic hat tip to the existence and needs of children whose families might need support, is almost never available. I cannot tell the Committee the number of times that I have had to pull a support service because we could not get a crèche or we could not afford it in the funding or the funding provider would not provide for childcare services. It is always hard to get funding for children’s support or to enable mothers to get support to help their children.

I am sure that the idea that there is currently support available for children living with domestic abuse would be met with the world’s greatest meme-worthy eye-roll from Jacky. Jacky is a manager, a support worker, a group leader, a fundraiser, a campaigner. Like so many women running local services, she has to do everything. I remember once I spent hours and hours erecting beds in refuge; I was one of the senior managers and my job that day was to put up the beds.

Jacky suffered years of horrific abuse at the hands of her ex-husband. She bears many scars, but none worse than the scar of losing her son, Karl, at the age of 17, after he suffered years of growing up in a household of tyranny. Karl lived just around the corner from me. He was born the same year as me and today I should be bumping into him in our local high street. Perhaps our kids would have been in the same school, even in the same class.

Jacky, Karl’s mother, wanted me to say the following: “21 years ago, my 17-year-old son died from inhaling butane gas, a way of dealing with the stresses of his childhood and the impact of growing up in a household of domestic abuse. Karl’s death was the catalyst to me leaving, so not only did he save my life, he also saved the lives of his brothers, who were then able to grow up in a household free from abuse, and also the lives of hundreds of children whose mothers our project has supported over the years.

I don’t want Karl to be an unspoken tragedy. His legacy is the work I do every day. I may not have been able to save my son, but I can use my knowledge and experience to support other mothers so that they can support their children and help them to heal. I want people to understand the devastating impact on children’s lives. Our children are dying, but their death certificates do not tell the full story. I also want people to understand that when you abuse a mother, you abuse the child, and when you support a mother, you are supporting the child. When we start to heal, we can then provide a foundation for our children’s healing. Leaving is a process and healing is a process and this process must not be missed out when commissioning services.”

I thank the hon. Lady for her contribution. Does she, like me, believe that if we do what is proposed, we will have a completely different concept of what domestic abuse is and we will begin to tackle it in a way that prevents it from happening in the first place, because—as she so eloquently said—we see children become abusers and abused and the key to tackling it properly, although we will never wipe it out, is including children not only in the definition but in the care and the approach that we take?

I absolutely agree. If we are going to write a ground-breaking Bill, let us make it break ground. If we do not genuinely think, as a Committee and as a House, that it is worth putting children in, “because what difference will that make?”, what is the point in any of it? That is the question I would ask. What is the point in having a definition at all if we do not see the reality of domestic abuse?

As I have said, in moving this amendment, I absolutely feel that I have the ear of the whole House, so I feel that, on Report, there will be huge support. Across this House, no matter the colour of our rosettes, people have spoken up for children in our debates. That sends an immense message that we might not realise; and we have a chance, with this amendment, to send the same message again.

Regarding the amendment, I want to hear the debate develop and I trust that my hon. Friend the Minister is listening.

In many ways, children are long-term “silent victims” of domestic abuse. The Public Health Wales adverse childhood experiences research found that 16% of adults in Wales grew up in a house with domestic violence. The definition of domestic violence used in the past obviously does not extend to domestic abuse as defined in the scope of the Bill. Indeed, children’s social care assessments for children in need in England show that more than half—51%—of relevant assessments last year cited domestic abuse as a factor. Given those figures, it is likely that many in this room will have witnessed or suffered from some form of domestic abuse in their childhoods.

It is a pleasure to speak in this debate on amendment 50, which would include children in the definition.

My hon. Friend the Member for Birmingham, Yardley set out very fully the framework and the background to the need for this amendment to be made to include children in the statutory definition of the abuse. Why? We speak calmly about children observing—a very calm word here—domestic violence. What that means is that children experience violence—violent behaviour, abusive behaviour, shouting, fear and dread. They are not just observers but victims, affected emotionally and physically by that abuse. They feel the violence and danger. None of us in this room, I think, would disagree with that.

Why should we amend the definition to include children? Because they need to be recognised formally as victims in order to be sure that they can access the support and services that they will really need at the time they need them. Their needs would therefore be addressed specifically when dealing with domestic abuse. That needs to be set out in law, so that they have that beyond any doubt.

On Thursday, in the evidence sessions, we heard about the substantial support for the inclusion children in the definition of domestic abuse. We heard from the domestic abuse commissioner and the Victims’ Commissioner, both of whom gave evidence and believe that it is hugely important to include children.

Last Friday, the Minister kindly met me virtually, along with the children’s charities Action for Children, the NSPCC and the Children’s Society. We specifically discussed including children in the definition. We talked about the age 16 limit, which appears in an earlier subsection. The charities told the Minister that they and the wider sector were agreed in their wish not to change the reference in the Bill to age 16, but rather to support this amendment to include a wider description of children.

Yesterday, I was pleased to see, circulated by the Clerk, evidence submitted by the sector on the age 16 issue—DAB 44—including the people we heard from last Thursday, such as the Women’s Aid Federation and other organisations. No one wants to see children criminalised as a result of relationships between each other, and it is really helpful that yesterday that statement was circulated making the sector’s unequivocal support for the amendment absolutely clear.

I have talked to constituents about this issue, and to some excellent local organisations in the north-east, such as Children North East, which provides support for children affected by domestic abuse. They tell me about the difficulty of ensuring that they have funding and commissioned services for children. They are doing a great job, but there is so much more that we need to do to ensure that children have support when they are victims of domestic abuse.

In the Westminster Hall debate that I was fortunate to secure earlier this year, I spoke about my constituent Christine, who had been a victim of domestic abuse. She has come through that and now wants to change things. She talked to me about the need for children to be properly supported.

Christine’s daughter, who is now an adult, is still dealing with the trauma of the domestic abuse suffered by Christine and living in the home where that took place. Her daughter contacted me after the Westminster Hall debate—she sent a very nice card—to say how much she appreciated the fact that finally people were taking notice of the needs of children and recognising them as victims in their own right. She was so pleased that there might be a glimmer of hope that things might improve for children.

Again, why should this be in the definition rather than the guidance? Inevitably, people looking at what service they need to provide, especially in times of financial constraint, will ask, “What does the law require us to do?”. That is why it is important to have the amendment in the Bill. It will mean that statutory authorities must address the needs of those children. Statutory guidance is not enough and in any case, as we know, it is not yet ready. I support the amendment and hope that the Government feel able to accept it.

I am delighted to hear that the Minister is certainly in listening mode. Having heard from the hon. Member for Blaydon that the Minister met with children’s charities on Friday, it is clear that she is in listening mode.

I would like to make the point that there is a lack in the role that local authorities should be playing under the Children Act, which I mentioned earlier. I led a council and was the children’s services lead at a time— 2010 onwards—when it got quite difficult. We were innovative and put children first. That was responded to by Ofsted, which awarded Westminster City Council the outstanding grade in children’s services. Again, last year, that was repeated—the first time any local authority had received an improved Ofsted outstanding grade. That was a brilliant example of how social workers and children’s services experts put the child at the forefront of all that they do.

Domestic abuse runs through so much, as we have heard today. Having launched the first ever domestic abuse strategy for Westminster back in 2012, I know that we put children at the heart of that.

The hon. Lady cited the example of Ofsted, which I think is a good example, because schools have a legal duty to improve; if they do not, Ofsted has the power to intervene. She is not making the case that it is important for children to have a legal footing in the Bill. Does she see the similarities in the argument, and is she open to the idea that it might be worth exploring the concept of having a statutory definition of children in the Bill?

I think it is down to the Minister to decide that, but, as I said, from the commissioner’s point of view, it is important to encourage and to be part of the whole system. There is a lack in the involvement of local authorities, which already exists.

Having sat on the CAFCASS board for several years, as I said earlier, I was appalled when we had a briefing from experts who had been sent to Birmingham City Council to do the quality assurance, because the council was letting down its children. What I took away from the briefing, and what I have taken away from the evidence we heard last week, is that local politicians have to play a part and ensure that they put their children at the heart of their children’s services strategy. There is still a lack of that approach. In Rotherham, for example, where were the local politicians holding their services to account?

I speak as a local politician in Birmingham. If we would like a tally of who can slag off Birmingham City Council more, I would definitely win. The hon. Lady is talking about the children who might interact with Birmingham City Council or Westminster City Council. The reality is that they represent a tiny fraction of child victims of domestic abuse. The vast majority the children we are talking about will never interact with any children’s social worker ever. It is the duty of the council to fund services beyond that. While I could definitely take pot shots at Birmingham City Council, it is fair to say that, in reality, it would not be able to afford most of what we might be suggesting here.

Having been a local politician for over 15 years, I have always taken the view that it is not always about the money. It is usually about the attitude of local authorities and the innovation that they can bring. Westminster City Council achieved two outstanding Ofsted grades at a time when we saw about 50% of our funding cut.

Let me end with the words of Charlie Webster, a victim whom the hon. Member for Birmingham, Yardley quoted today. I spoke to Charlie this morning and, when I told her I was hoping to speak today, she said:

“Thank you so much for validating the many times I’ve had to convince myself my life is worth living both as a child and an adult. I’m praying that this will make a difference to actually start to tackle the root cause and allow children love and to reach their potential because they’re absolutely deprived of it in Domestic Abuse.”

That is where I would like to end. I am delighted that we are debating the Domestic Abuse Bill in Committee today.

I, too, am a new Member of Parliament and this is the first time I have sat on a Bill Committee.

Since I started as a Member of Parliament, I have been inundated with casework, as Members can imagine, given what has happened in my constituency. We have had terrible flooding, the coronavirus pandemic, and the comings and goings of a certain political adviser, but I have also had lots of casework relating to domestic abuse and domestic violence. It has mainly been from women, with some from men, and, more often than not, it includes children in the family units, all of whom are victims who need equal protection. As it stands, the Bill does not fully address the needs of children affected by domestic abuse.

As we have heard from other Members, this Bill has the opportunity to change things and to save lives. Lives are not saved through encouragement, guidance or attitude; they are saved through funding services and by putting children in the definition in the Bill. That is how lives will be saved. Given that the Bill will inform the Government approach to tackling domestic abuse, it is vital that we understand the impact on children. We have heard many harrowing tales; as my hon. Friend the Member for Birmingham, Yardley said, we have all heard such tales.

Children need our protection and our support, and that needs to be fully reflected in the Bill. As a new Member and somebody who has already had people come to me about the issue, I cannot see how we would not include children, in order to save lives. It seems unconscionable to me that we would not do that. Members might say that legislation in the Children Act may save children, but what my hon. Friend the Member for Birmingham, Yardley said really hit me. There is legislation for everything now. We have legislation that will stop people from abusing people, but just include children in the Bill to save their lives.

It is a pleasure to serve under your chairmanship as always, Ms Buck. I thank everyone who has contributed to the debate and those colleagues who have not risen to their feet to speak. I know that there are a few who consider these matters very important and have given them great thought throughout the debate, and who will do so as we go forward.

I am very grateful to the hon. Member for Birmingham, Yardley, for setting out the case for the amendment. I wholeheartedly agree that it is vital that we recognise that children are direct victims of domestic abuse. Growing up in a household of fear and intimidation can affect children’s wellbeing and development with lasting effects into adulthood. Children who are exposed to domestic abuse are more likely to experience mental health difficulties, to be excluded from school, and to become victims of domestic abuse in later life.

Many colleagues talked about adverse childhood experiences, including my hon. Friend the Member for Ynys Môn, who cited one of the highest percentages of looked-after children in Wales and is obviously very concerned. That is something that I have to consider, not just in the context of domestic abuse, but in my work at the Home Office on gangs and violence against women and girls specifically. That factor has many repercussions beyond the immediate impact in the household where the abuse occurs. I am very alert and alive to that.

I thank the hon. Member for Blaydon for our virtual meeting on Friday and for clarifying that the issue that she mentioned is now no longer taken on age. I make that point because in a moment I will describe the journey on which the Government have been with the definition so that there is transparency and no mystery about why the definition is phrased as it is. In the Westminster Hall debate, the argument was made that there should be no minimum age threshold. I said frankly during that debate that although it was a balancing exercise, we had come down on the side of keeping the age of 16 as the threshold. I was very pleased that on Friday, having had our discussions—I hope I am not misquoting—there seemed to be consensus about keeping that age in the definition.

I will explain the Government’s approach so that there is no misunderstanding that we are not in any way taking into account the terrible impact that domestic abuse has on children. The approach that we have taken with the definition is to describe the relationship between the abuser and the abused—the immediate victim of the abuse—and to define categories of abusive behaviours. That will be relevant when we look at other clauses as, understandably, people want particular manifestations of behaviour to appear in the Bill. We draw people back to the fact that we are looking at categories of behaviour because, sadly, there are countless ways of emotionally abusing someone, for example, and—as Members of this House will know—if we listed everything in statute, it would take quite some doing to change or update it, whereas statutory guidance is more flexible and we can update it.

The basis of the definition in the Bill is to focus on the relationship between the abuser and the direct victim, and to define the categories of behaviour. The definition does not address the impact of abuse on adult victims. I would not dream of trying to define in statute how Claire Throssell, for example, experienced the harrowing and awful things that happened to her. Nor would I dream of trying to put into statute some of the experiences described by the hon. Member for Birmingham, Yardley. We cannot do justice to them in the Bill.

That is the approach that we have taken, and that is why we place so much emphasis on the statutory guidance. That will be the document that commissioners and police forces look at to work out how to interpret the Bill at local level. Just as we have not put the impact of abuse on adult victims in the Bill, we have not done so with the impact of abuse on child victims. Instead, we will rely on the statutory guidance. We have, however, referred in the definition to the fact that perpetrators can use children in their abuse towards their victims. Clause 1(5) states that the perpetrator’s

“behaviour may be behaviour ‘towards’ B”—

the victim—

“despite the fact that it consists of conduct directed at another person (for example, B’s child).”

We have, therefore, put in the Bill the fact that the perpetrator may not confine their abusive behaviour towards the immediate victim, but that it can be directed through a child or another person as well. We have also emphasised the statutory guidance set out in clause 79(2)(b) in which the Secretary of State must issue guidance about

“the effect of domestic abuse on children.”

I just wonder—this might be a massive ask—if the Committee could see that guidance, or have sight of at least that section about what we are going to discuss throughout the Bill.

I very much appreciate the request, but, sadly, I cannot provide the Committee with a copy at this point. When it comes to the transparency of the journey to this point, the guidance has not been created by a silo of Home Office officials who did not talk to anyone else. We have involved, consulted and asked other people, and that has included asking the designate domestic abuse commissioner for her views. Indeed, she mentioned last week that she had seen it. Other charitable sectors have been very much involved and consulted in the drafting of the guidance. Sadly, covid-19 has had an impact on our ability to draft the guidance so we have not been able to publish it in time for the Committee, but we are aiming to publish it in draft form before Report. I hope that members of the Committee will be able to see it before the next procedural stage, and I apologise for it not being available now. We want people’s views on it. All sorts of colleagues have been asking me whether certain things are being included in the guidance, and I have been saying to them, “This will be open for people to give their views on it.” Of course, I welcome views on it.

I wonder to what extent the Minister has considered the Rights of Children and Young Persons (Wales) Measure 2011, and the fact that when we are dealing with children we are at the jagged edge of devolution—between the laws affecting Wales and those in England—as well as considering how the interplay will work with these measures.

The hon. Lady probably does not know this, but she may be committing a parliamentary first. The old hands that have previously sat on Bill Committees will know that part of a Minister’s job is to keep talking while her officials furiously scribble notes that are handed to her to enable her to accurately answer difficult questions. Sadly, I do not have that ability, but Members may see me looking at my mobile phone. I would be grateful if the hon. Lady would indulge me and allow me to return to that later, because she asks a specific question. In general, I am, of course, aware of the jagged edge, as she describes it.

Part of me feels that I may be a little bit boring in this Committee, because I have a duty to say, “Look at what has been done in Wales and look at the responsibilities that lie in Wales.” I fear—this came up in the Joint Committee on the Draft Domestic Abuse Bill—that we have two pieces of legislation in operation and this piece of law will affect the legislation that I have mentioned. We will create wonderful events, or we may unexpectedly create tensions out of the divergence test. It is important that that is considered at this stage.

Very much so. May I postpone my answer until we debate the amendment that the hon. Lady has tabled on Welsh devolution, so that I can address the point about clause 11? We are aware that good work is going on in Wales on domestic abuse through the devolved authorities. Where matters are devolved, we have the “jagged edge”, as she describes it: some areas in Wales are devolved and some are not. It is perhaps a little clearer cut in Scotland, but we are clear that we want to work with our Welsh colleagues, and I hope that the commissioner gave reassurance last week. I think I am right in saying that the Home Office has helped to fund the work on adverse childhood experiences has been conducted by the South Wales Police. We see that as a really important piece of work with the police and crime commissioner in South Wales, and we hope that it will help the rest of the country as the findings are evaluated.

Perhaps my intervention will give the Minister’s officials time to get a note to her on the previous question. I realise that this might turn into a sketch from “The Two Ronnies”, with her answering the previous question to mine, but we will deal with that when it arises.

Can the Minister explain why there is a conflict between establishing the rights of a child in the Bill and having it in guidance? From what I have heard so far, I do not understand why we cannot have both.

At the risk of turning into a sketch from “The Two Ronnies”, I am told that we will be consulting Welsh Ministers on the precise point raised by the right hon. Member for Dwyfor Meirionnydd, so I am grateful for that.

In relation to the intervention from the hon. Member for Hove, it is not a question of conflict. I was trying to explain the journey of the Government’s drafting of the definition. I do not wish anyone to think that children have been forgotten or ignored in the course of drafting the Bill. I hope that the references to children that we have scattered through the Bill—clause 66 is a good example—show our thinking on that.

The Minister has referred to some of the people who have commented on the early draft of the statutory guidance. Does she not agree that in their written and verbal evidence, most of them asserted a preference for the definition to include children?

I do. I am going to complete the journey, because I suspect that where I end up will, I hope, answer some of those concerns. I take on board carefully the views of children’s charities.

We have made sure that the domestic abuse commissioner is required to recognise the impact on children in her statutory functions, which can be seen in clause 6. Of course, we also have local authorities. My hon. Friend the Member for Cities of London and Westminster set out the responsibility and the ways in which local authorities can help to deliver services on the ground. Indeed, I was most interested to hear about the domestic abuse strategy introduced by her council under her leadership. That is a very sensible point to be making and it is why, in part 4 of the Bill, where we put the responsibility on tier 1 local authorities to provide support to victims of domestic abuse in safe accommodation, we have expressly referred to victims and their children in that duty.

The need for statutory agencies to recognise and respond to the impact of domestic abuse on children is already embedded in the Bill. Councillor Simon Blackburn gave helpful evidence last week—he has experience as a former social worker, but also as the current leader of Blackpool Council and through his work in the Local Government Association—about the safeguarding legislation in respect of children and how, in some cases, although I accept not all, the safeguarding legislation will kick in.

I also remind colleagues that in clause 54—this has not necessarily come to light yet in the evidence, but I hope it will do so in due course—as part of that duty, tier 1 local authorities are required to set up local partnership boards for domestic abuse. One of the members of that board must represent the interests of children who are victims of domestic abuse.

The theme of children, and the impact on children, already runs throughout the Bill, but I take very seriously the concerns that members of the Committee have voiced and, indeed, the concerns of children’s charities and the witnesses we had last week. I am going to reflect carefully on this debate, and I invite the hon. Member for Birmingham, Yardley to withdraw her amendment.

Order. I think the House is about to suspend for one minute’s silence.

I thank the Minister. I think that, in the words of Belinda Carlisle, everybody on the Committee dreams the same dreams and wants the same things—[Interruption.] Belinda Carlisle was not from Carlisle. The fact of the matter is that we all want the same thing from this Bill. We all want to see children represented in the Bill and the guidance—in every part of it. The Minister can point to clauses where children have been considered. We will not press the amendment to a vote, partly because the whole House would like the opportunity to discuss these issues further, with potential Divisions on Third Reading.

I want to say, with as much grace as somebody like me can manage, that it is a pleasure to hear that the Minister wishes to listen to what has been said today and what is being said by the sector, and seeks to act on it. I thank her for giving us the option of seeing the guidance prior to the next stage of the Bill. I beg to ask leave to withdraw the amendment.

Amendment, by leave withdrawn.

Clause 1 ordered to stand part of the Bill.

Clause 2

Definition of “personally connected”

I beg to move amendment 48, in clause 2, page 2, line 21, at end insert—

“(ee) one person is a provider of care to the other;”.

With this it will be convenient to discuss amendment 49, in clause 2, page 2, line 34, at end insert—

“‘provider of care’ means any person (‘A’) who provides ongoing emotional, psychological or physical support to another person (‘B’) with the aim of enabling B to live independently, whether or not A is paid for this support;”.

An amendment to ensure a carer of a person with disabilities is included in the definition of “personally connected”.

We are now moving on from the definition to talk about exactly who we mean by “connected parties”. The amendment is a response to calls from people with disabilities and organisations within the disability rights sector that have been in touch with us to express their concerns about whether they are seen in the Bill.

As we said in the debate about whether children should be in the Bill, we recognise that there is a need for much more detailed and in-depth guidance. In relation to domestic abuse, we are potentially missing some real opportunities that genuinely need to be responded to with law—the courts of our land—but are currently not covered by the area of “connected parties”. The issue is those whose connection to a person is that they are their carer. We are not necessarily talking about paid carers.

Carers UK announced yesterday that 4.5 million people have become unpaid carers during the coronavirus crisis, so it is not a minority issue or something that happens only in certain areas. People who very much rely on others for their care might not currently be covered by what is outlined in the Bill as a connected party. They might never have been married or had a civil partnership. They might never have been divorced, which got a bit easier yesterday, and they might not be related. I should tell my husband that it got easier to get divorced yesterday—

He has been in touch already. [Laughter.]

The reality is that for lots of people a connected party to their wellbeing, their life, or what people would call their family, is a bit like in working class communities, although I am sure it happens in others: a woman lives down the road and her husband borrows somebody’s dad’s ladder, so they call her auntie, even though she is absolutely no relation whatever. We have to understand that in lots of people’s lives, connected people might not be what we would naturally recognise.

On the definition of “personally connected”, I want the Bill to reflect the realities of all domestic abuse victims. I want all victims to be able to access services, justice and support when needed. I think we would all agree that no victim should be left behind. We are taking our time—my gosh, it is quite a lot of time—to get the Bill right and see it through. It will never be perfect, but we should make every effort to make it as perfect as it can be.

Clause 2 defines what it means to be personally connected. In other words, the clause sets out the relationship between a victim and a perpetrator that comes under the definition of domestic abuse. The list includes what we would typically expect: as I have already laid out, those in intimate personal relationships with each other. However, my concern is that the clause, as it stands, fails to recognise the lived experiences of disabled victims of domestic abuse, who are among the most vulnerable. Their abuse often goes unnoticed.

The crime survey for England and Wales found that individuals with long-term illness or disability were more likely to be victims of domestic abuse. A 2016 report on intimate personal violence by the Office for National Statistics found that 16% of women with long-term illness or disability had experienced domestic abuse. Disabled victims are also more likely to experience domestic abuse for a longer period of time: 3.3 years, on average, compared with 2.3 years for non-disabled victims. With that in mind, I want the Bill to make it easier for disabled victims of domestic abuse to be recognised. To do that, we have to accept the reality of disabled people’s lives, where significant relationships are perhaps different from those of a non-disabled person with an unpaid carer.

Ruth Bashall, the chief executive of Stay Safe East, said that disabled people

“have emotionally intimate relationships with the people who, in very large inverted commas, ‘care’ for us, and the experience of abuse by those people is exactly the same as domestic abuse: the coercive control, the violence, the financial abuse and so on.”

It is important that we recognise, based on the evidence presented to the Committee, that a large number of disabled people will have no relationship with anyone except for the people who “care” for them. This type of close relationship can easily take on a problematic power dynamic that closely mirrors familial or intimate partner violence. As I have said, we can see how that might occur. I have been doing shopping and taking money from people who needed me to go to the shops for them. It would, if I were that way inclined, not be particularly difficult to build a relationship, a rapport and a need from me in that person that I could then exploit over a number of years. I would not do that, obviously.

In response to the Joint Committee’s report, the Government said that they did not propose to review the personally connected clause at the current time. Paragraph 60 of the their response states:

“If they are personally connected to their carer, this will be covered by our definition of domestic abuse. Otherwise, abuse of disabled people by their carers is already covered by existing legislation.”

What we heard from Saliha in the evidence session last Thursday was that, as a disabled victim of domestic abuse, she often finds that she is not understood by one or the other. As I have said this morning, her experience as a victim of gender-based violence or domestic abuse is often not expected, dealt with or understood by disability agencies, and vice versa: as a disabled person, she finds getting access to mainstream domestic violence services difficult.

We have to be very careful, when writing this Bill, not to ignore those intersecting groups of people and just say, “Well, there’s already existing legislation that would cover it.” It would not cover it from the point of view of domestic abuse because, as we all know, that has been lacking from our laws, and that is what we are here to try to improve.

I urge the Government to rethink their position for a number of reasons. First, it is not appropriate to say that abuse of disabled people by their carers is already covered by different legislation. This is a Domestic Abuse Bill for all victims. Therefore, if the abuse of a disabled person meets the definition of domestic abuse—if it is financially controlling, or if it involves sexual, economic or psychological abuse—but it is not by somebody in one of the connected party groups, that disabled person would not be left with many places to turn to take the case of domestic abuse to court or wherever.

If a disabled person meets the definition, that ought to be recognised and covered by this legislation, not something else. We cannot just keep saying, “Well, if you’re in this group you’re covered by this, and if you’re in this group you’re covered by this.” I would have thought that we would want to make a Domestic Abuse Bill that covers everybody.

I would go even further, and suggest that the Government’s response is a bit dismissive and fails to recognise the gender-based nature of domestic abuse solely because the victim is disabled. We cannot have domestic abuse covered by other legislation just because the person is disabled.

Secondly, while I appreciate that section 42 of the Care Act 2014 places a duty on local authorities to carry out safeguarding inquiries if they suspect abuse, that is no reason why disabled victims should not be represented in this Bill. Furthermore, there is evidence to suggest that local authorities are failing even to identify victims, even those who are at highest risk. Between 2015 and 2016, none of the 925 referrals of disabled victims to domestic abuse services were from adult safeguarding—zero.

I would be so bold as to bet that every piece of single adult safeguarding guidance in every adult safeguarding group that exists in every single local authority has domestic abuse written within it somewhere, and says that the vulnerable adults can be victims of domestic abuse. In all my years, I have literally never once referred a victim of domestic abuse to adult social care, because that is not what adult social care is for.

If I were to ring up my local authority or, I would even wager, Westminster City Council and say, “I’ve got this woman and she’s a victim of domestic abuse, and I see that that’s written into your adult social care board, so can I get a social worker out to see her later? She’s suffered some violence over the years and a bit of emotional abuse recently, the kids are getting a bit—”, the idea that an adult social worker would go out and see that victim is for the birds. The fact that zero referrals —none—to domestic abuse services of disabled women came from adult social care speaks to the evidence.

That is why we are proposing to amend the Bill to include carers in the definition of “personally connected”. Including carers will raise awareness and, I hope, help the police and local authorities to adopt better practices—for example, on something as simple as questioning a victim separately from the carer, which I imagine happens quite rarely. It is vital that those sorts of policies are put in place. The amendment provides an opportunity for us to tackle the profound inequalities faced by disabled survivors.

Stay Safe East sent a number of case studies, such as this one:

“A disabled woman was targeted by a man who was homeless. He gradually gained her trust and over a period of months, she began to see him as her friend, then as ‘better family than my own’. He assisted her first with shopping (while taking her money), then with household tasks and eventually with personal care. His controlling and intimidating behaviour towards the woman’s carers led them to withdraw the support, leaving him in complete control of the disabled woman’s life.”

To anyone who has ever worked in domestic abuse services, that sounds exactly like what a domestic violence perpetrator does—isolate, control and ensure there is no one else there to turn to. The quote continues:

“There was physical, sexual, emotional and financial abuse. The man then brought his friends into the woman’s home; they further intimidated her. When she was eventually able to seek help, her health had deteriorated due to neglect. Whilst the actions of the man and his friends could be described as ‘cuckooing’ (a term used by the police to describe taking over a person’s home for criminal or other purposes), they also constitute domestic abuse: the woman had a ‘close personal connection’ with the abuser which left her dependent on him and open to abuse.”

I am sure the Minister would say that the woman would have been able to get support from this service or that service, but why should she not be able to access direct support from domestic abuse services? Why would we not want to compel councils, for example, to commission services specifically for victims of domestic abuse who are disabled? Should the police take that case, on different grounds, using different legislation from a different law —[Interruption.] The very polite Member for Cheltenham is leaving; take care. It is a lovely constituency.

It is not fair to say that the woman had not been a victim of domestic abuse. It is not fair that she would not then be entered into the system that would allow her to access the specialist support that comes with understanding control, power and her own sense of worth in the world.

Another case study notes:

“A neighbour befriended a woman with learning disabilities, became her carer and provided her with support. He then demanded sex and verbally abused her because she would not have sex with him.”

These women experienced abuse by people who had in effect become their family, and with whom they had a close personal connection. They experienced this abuse as domestic abuse. In lots of the cases that Stay Safe East sent, when these women sought help, they were often refused services as victims of domestic abuse—they did not fit the current definition, and they suffered for months before being able to access the right, more specialist support.

Disabled people face huge barriers in getting support from the services that are available today and that we all hope to see improved. They still find it very difficult to access domestic abuse services; by and large, only one or two beds available in an area will be accessible.

With regard to specialism in learning disability support, for example: with the greatest will in the world, people like me and the women who work in the refuge where I worked are not specialists in dealing with people with learning disabilities. We did not have specialist training. With 19 women and 28 kids in the building each night, and people coming and going because of housing emergencies, where is the level of specialism that might be needed in our refuge for somebody with severe autism? Everybody does their best, but the specialism that can be found for disabled victims is often provided only by disabled voluntary sector providers, who do not deal with the manifest issue of recovering from the trauma of domestic abuse. We have to find a way to make sure that if a disabled person is the victim of domestic abuse, they get the same service as they would if they were not disabled—I am not saying that it is perfect for everyone, by any means.

Again, I cannot help but go back to the evidence from the victim Sal. She told the Committee that that was exactly what had happened to her: her parents had abused her, stating that she would never be able to do anything or go anywhere, and she had to allow them to control her because as a disabled woman in society she would not be able to cope. We have to hear her voice and make sure that we make the Bill as inclusive as possible, so that it can help as many people as possible.

I will try to finish in eight minutes. I thank the hon. Member for Birmingham, Yardley for setting out the case for her amendments.

Clause 2 defines “personally connected” for the purposes of the definition of domestic abuse in clause 1. We believe that the personal relationship between the perpetrator and the victim is central to the nature of domestic abuse, which is why our clause 2 definition of “personally connected” covers two individuals who are or have been in an intimate relationship or have a familial relationship, as defined. We believe that the connection between the two—the victim and the perpetrator—is central not just to our understanding in the Bill but, frankly, to the public’s understanding of what domestic abuse is.

The hon. Lady set out the horrors that disabled victims have faced. We absolutely agree that the abuse of a disabled person by their carer is as unacceptable as any other form of abuse, but we fear that the impact of the amendment would be to broaden the scope of the definition of “domestic abuse” by capturing a range of people who are not personally connected. That would widen the definition beyond how it is commonly understood.

The examples of exploitation that the hon. Lady gave could, as she says, be dealt with by other legislation. I myself have prosecuted carers for stealing the life savings of an elderly woman with dementia; we were able to catch that exploitation and the resulting loss with existing legislation, under the Theft Act. There are other examples of exploitation; it is not something that we like discussing in day-to-day life, but the fact is that there are forms of exploitation across many, many walks of life.

Another example within my portfolio is county lines gangs. Gang leaders ensnare vulnerable children as young as 11, 12 or 13, build relationships with them and build up the trust that the hon. Lady described in her examples. They offer them food or new pairs of trainers, and when the children have accepted those “gifts”, they are part of the gang—they are sent out to work: to rob, steal and deal drugs. That is exploitation.

Good morning. I remind Members that tea and coffee are not permitted in Committee meetings. Please would all Members ensure that mobile phones are turned off and switched to silent mode during Committee meetings?

The selection list for today’s sitting is available in this Committee Room and written evidence received since the last sitting of the Committee, on Thursday, has been circulated by email to all members of the Committee.

The Hansard reporters would be most grateful if Members emailed any electronic copies of their speaking notes to hansardnotes@parliament.uk. Members should be aware that at 11 o’clock I will invite the Committee to observe a minute’s silence in remembrance of George Floyd.

Clause 21

Annual allowance: tapered reduction

Question proposed, That the clause stand part of the Bill.

Thank you very much indeed, Mr Rosindell; it is a delight to see you in the Chair.

I start by saying that we are at the point in “The Pilgrim’s Progress” where we are about to enter the slough of despond, and I apologise to all colleagues that the slough is a rather extended period of technical amendments. I can promise them that in due course we will enter the place of deliverance, although possibly not for some time.

Clause 21 raises both pensions tapered annual allowance thresholds by £90,000 each and also lowers the minimum annual allowance to £4,000. The Government provide tax relief on pension contributions. To give some background, in 2017-18 income tax and employer national insurance contributions relief cost £54 billion, of which 60% went to higher and additional-rate taxpayers.

The Government therefore impose limits on pensions tax relief. One of these limits—the tapered annual allowance—has affected some senior clinicians in the national health service and also some individuals in other public service workforces. This measure is the outcome of the Government’s manifesto commitment to carry out a review of the impact of the tapered annual allowance on the NHS. That review built on another review of the effect on public service delivery more widely, which was announced last August. Roundtable discussions with public service stakeholders, including representatives of the health professions, were held as part of these reviews. These reviews concluded at the Budget on 11 March.

In the last tax year, in recognition of the impact that the tapered annual allowance was having on some doctors, NHS England announced a special arrangement, for 2019-20 only, in which doctors in England could use that arrangement to ensure that they would not be worse off as a result of taking on extra shifts. As health is a devolved matter, that special arrangement applied only to England, but we are aware that the Welsh and Scottish Governments also put similar arrangements in place during 2019-20 for NHS staff.

Raising the two thresholds at which the tapered annual allowance applies by £90,000 each is the quickest and most effective way to solve this issue for senior doctors and other clinicians. It delivers a tax solution, which has been the British Medical Association’s primary request, and it comes into effect from 6 April, which is the beginning of the current tax year.

The changes made by clause 21 mean that no one with income below £200,000 will now be caught by the tapered annual allowance. The annual allowance will only begin to taper down for individuals who also have total income, including pension accrual, above £240,000. We estimate that this will take up to 96% of GPs and up to 98% of NHS consultants outside the scope of the tapered tax allowance, based on NHS earnings alone.

As this is a tax change, these measures will apply both to clinical and non-clinical staff across the whole UK, and they will apply in the same way to all workforces. These measures will also apply equally across public and private sector registered pension schemes. However, to ensure that the very highest earners pay their fair share of pension tax, the minimum level to which the annual allowance can taper down is reducing from £10,000 to £4,000 from the beginning of this tax year. This will affect only those with a total income, including pension accrual, of over £300,000. These measures will cost over £2 billion over the next five years.

The changes demonstrate that the Government are committed to ensuring that hard-working NHS staff do not find themselves reducing their work commitments as a result of the interaction of their pay, their pension and the tapered annual allowance tax regime. This meets the Government’s commitment to allow doctors to spend as much time as possible treating patients, and supports vital public services while ensuring that the very highest earners pay their fair share of tax. I commend the clause to the Committee.

It is a pleasure to welcome you back to the Chair this morning, Mr Rosindell.

The Opposition welcome the Government’s efforts to resolve the issue. Hon. Members will know that the primary function of introducing the tapered reduction of the annual allowance in 2016 was to prevent tax avoidance in the private sector, but whatever the original intention of the tapered annual allowance threshold, its impact was not properly considered. The result has been damaging to our NHS: as the Financial Secretary says, it has led to a situation in which senior practitioners have refused to undertake extra shifts because of the tax impact, and in many cases have taken early retirement.

According to a British Medical Association survey, just under a third of doctors have reduced the number of hours they spend caring for patients because of actual or potential pension taxation changes, while 37% of those who have not yet reduced them plan to do so in the next year. That is perhaps unsurprising considering the nature of the tapered annual allowance: as the BMA sets out, it creates a tax cliff edge whereby doctors effectively pay to work. Although the Treasury and HMRC have repeatedly stated that tapering affects only people with earnings over £150,000, in defined benefit schemes it has created a tax cliff at the income threshold of £110,000, which means that those in defined benefit schemes may face additional tax charges of up to £13,500 if they exceed the tax threshold income by just £1, while some could face effective tax charges greater than 100%.

Of course, we should recognise that that is not the only factor contributing to the real problem of staff retention in the NHS. Aside from the impact of coronavirus, hospitals and A&Es have been overstretched for years, increasing numbers of people are waiting too long for operations, and key performance targets are being missed month after month. We also face a chronic lack of family doctors; as the Nuffield Trust has highlighted, we have seen the first sustained drop in GP numbers in 50 years, which adds to the pressures on remaining staff. The problem is particularly acute in certain parts of the country: in Sunderland and the wider north-east, we can see the same picture at a much bigger level, where we face a real challenge to recruit and retain family doctors.

The doctors I speak to are always striving to do the best they possibly can in challenging circumstances, but we must acknowledge that the stress they have been placed under, due to the underfunding and neglect of our NHS by this Government, has made the situation even worse. The pension situation that many have faced since 2016 has no doubt proved to be the final straw, as doctors have opted not to take shifts, or to retire early. As we have seen, that is complicating efforts to retain such important NHS staff.

The situation would be unsustainable even if we were not facing the impact of coronavirus, but the additional pressures on doctors, many of whom will have taken on extra shifts, make resolving the issue more pressing than ever. All of us owe a debt of gratitude to those NHS staff who have put themselves on the frontline, in harm’s way, to do all they can in the national interest at this very difficult time for our country.

It is important to note that the problem is not exclusive to staff within the NHS; the annual allowance is a problem in other defined benefit schemes, including for the armed forces. As the Forces Pension Society states,

“in 2018 almost 4,000 serving military personnel, including those in non-commissioned ranks, received notification that they might have exceeded their annual allowance limit and for many a significant tax charge followed—well ahead of receiving any of the future benefit on which the tax is levied.”

The society argues that

“unless action is taken, there is a real risk to retention and operational effectiveness”—

a concern also highlighted by the Ministry of Defence.

We all owe it to those in our public services and our armed forces, who do so much to care for us, protect us and keep our country safe, to make sure that they are treated fairly and can plan effectively for their pension and later life. It is clear that that has not happened as a result of the changes implemented by the Government in 2016. The proposed measure does at least promise to address the issue in part and in the short term and the BMA has stated that the vast majority of doctors are now removed from the effect of the taper. However, there are still concerns, and I hope the Minister will be able to respond to them.

The proposed tax change would take effect only from 6 April 2020; as the Minister will know, the additional pressures created by covid-19 began before that point. As the Chartered Institute of Taxation has identified, that means that doctors who took on extra shifts during this period face the risk of being hit by higher tax bills later. What consideration has been given to the issue of medical staff who have made extra efforts during this crisis, but before 6 April 2020? Has any analysis been undertaken of the scale of the problem and will any measures be necessary to address it?

Given that the purpose of the clause is to reduce and reverse the trends with doctors not taking shifts and retiring early, I would also welcome confirmation from the Minister that the Government intend to monitor the impact of the clause on an ongoing basis, to ensure that it is having its intended effect.

We have concerns more broadly because, as the Minister said, the proposed change would benefit all high earners, not just NHS staff and those in our armed forces that the clause ostensibly targets. Monitoring the effect on taxation revenue will also be critical, because the Opposition want to see fairness right across the system. Although the measure seems to address the issue in the short term, the Minister will be aware of the wider concerns about whether the tapered annual allowance is appropriate in general.

The Office of Tax Simplification has suggested removing the annual allowance from defined benefit pension schemes, and that move was supported by the BMA. As it said in its response to the 2020 Budget, although it welcomed the Government’s proposal in part, problems remained, given that many doctors with incomes far below the new threshold will face tax bills as a result of exceeding the standard annual allowance, which remains at £40,000. That can happen simply following a modest rise in pensionable pay—for example, when receiving a pay increment, taking on a leadership role or being recognised for clinical excellence. The BMA has added that there is no change to the lifetime allowance and many doctors will still need to consider taking early retirement.

The Minister will no doubt be aware that the former Pensions Minister, Baroness Altmann, has similarly warned that just raising the threshold of earnings at which the tapered annual allowance starts will certainly not solve the underlying problem. She has called for fundamental reform to provide those in defined benefit schemes with greater certainty into the future. The Opposition support that call for broader consideration of the issue.

All that brings us to wider considerations around pension tax relief and whether the system as it operates works as well as it could. The Chartered Institute of Taxation, among others, has said that a review of how tax relief applies to pension savings should be considered, given that the solution that the Government have presented here has only been achieved at significant cost to the Exchequer and to the benefit of many higher-earning people, beyond our medical and armed forces staff. Will the Government consider such a review and think more widely about creating a simpler, fairer and more sustainable pensions system?

I thank the hon. Lady for her remarks and for welcoming these measures. She expresses what I know will be the universal sentiment in this Committee: a sense of profound gratitude to the NHS for the astonishing way in which it and all the public services around them have responded to the crisis posed by coronavirus. I certainly echo that.

The hon. Lady talked about underfunding of the NHS. I really do not recognise that at all: the NHS has been very well funded, with continuous above-inflation funding settlements. In relation to coronavirus alone, public services have received over £16 billion, the NHS central among them. However, that only underlines the point that extraordinary work was being done by the NHS before, and it throws into greater relief how flexibly, energetically and effectively it has responded to the coronavirus pandemic. I think that shows the inner resilience of the organisation.

The hon. Lady asked about people somehow being deterred from taking extra shifts in the NHS. She will be aware that NHS England put in place its own measures for last year, and we understand that parallel measures were implemented in Scotland and Wales.

The effect of the change, which begins in April, is to give a sufficiently generous increase in the annual allowance thresholds so that up to 96% of GPs and up to 98% of senior medical staff will be out of scope of the tapered annual allowance as regards their NHS earnings. It is interesting to note that, as the hon. Lady rightly acknowledges, that has been widely recognised by the key institutions. The BMA said:

“The vast majority of doctors are now removed from the effect of the taper and will no longer be in a situation where they are ‘paying to go to work’”

as they see it. NHS Employers said:

“Employers across the NHS will welcome this significant step in reforming pensions taxation.”

That is all to the good.

The hon. Lady asked whether we will monitor the clause’s impact. The Treasury will of course monitor it as we do the effects of taxation across the piece. This reform will retain a certain political currency and therefore, I think, support and enthusiasm across the Committee. She also asked about fairness across public services. She will be aware that one of the benefits of a tax reform is that it offers fair treatment across those public services, irrespective of how people work.

The question of whether the allowance taper should be removed has been scouted by some. Of course, unless it was replaced by some other approach, it would have the effect of there being no corresponding reduction in the capacity to add pensions relief. The absence of a taper would therefore create precisely the cliff edge that the hon. Lady warned against.

The hon. Lady mentioned the idea of a review. She will be aware that the Treasury had a review only a short number of years ago, which was inconclusive. We continue to reflect on this complex and difficult area of taxation and will do so as we ponder the future fiscal effects. With that in mind, I hope the Committee will agree that the clause should stand part of the Bill.

Question put and agreed to

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Entrepreneurs’ relief

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

That schedule 2 be the Second schedule to the Bill.

New clause 8—Review of changes to entrepreneurs’ relief—

‘(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to entrepreneur’s relief by section 22 and Schedule 2 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment, and

(c) productivity.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’.

This new clause would require a review of the impact on investment of the changes made to entrepreneurs’ relief.

The clause and schedule 22 rename entrepreneurs’ relief as “business asset disposal relief” and reduce the lifetime limit for gains eligible for relief so that from 11 March 2020 the relief can be claimed on gains of up to £1 million. The purpose of renaming the relief is simply to reflect its function and purpose more accurately.

The relief offers a reduced rate of 10% capital gains tax on disposal of eligible business assets. Evidence shows that for some people—indeed, quite a few people—the relief has been a tax planning tool, helping some of the richest people in society to pay less tax rather than discharging its purpose of incentivising entrepreneurship and enterprising business activity. Last year, three quarters of the relief’s cost was for claims made by just 6,000 people disposing of assets with gains of over £1 million. The reform ensures that the Government can more sustainably support small businesspeople with up to £100,000 capital gains tax relief available over their lifetime.

The clause also makes special provisions for disposals entered into before 11 March 2020—that is to say, Budget day—that have not yet been completed. The provisions ensure that such people can still use the previous lifetime limit, but only where the disposal has not been artificially structured for the purpose of securing a tax advantage. It is therefore an anti-forestalling rule, with the rules ensuring that everyone pays their fair share of tax.

The previous lifetime limit of £10 million was an unsustainable degree of support for those less in need of it, and, as I have said, did not discharge the purpose of supporting entrepreneurship as it should have done. The new £1 million lifetime limit is far more sustainable and better targets the people who it was intended should benefit from the relief.

I begin by acknowledging that the action on the relief is welcome, even if we believe it is overdue and could go further. The Minister might be familiar with the Resolution Foundation’s description of the entrepreneurs’ relief as “the worst tax break” that is, “expensive, ineffective, and regressive”. According to HMRC, it cost an estimated £2.1 billion in 2019-20 alone. Before responsibility is laid at the door of the previous Labour Government for introducing the measure, I should argue that many of the undesirable effects have followed changes made post-2010. I thank the House of Commons Library for providing me with a timeline of the changes made to entrepreneurs’ relief since its introduction in 2008, which has allowed me to illustrate that point.

The relief was introduced by the then Chancellor, Alistair Darling, in 2008 with the goal of promoting entrepreneurship in the UK and making us a world leader in the field by encouraging business owners selling up to reinvest the money into new businesses. The 2008 Budget established that the relief would set an effective tax rate of 10% for up to the first £1 million of gains made over a lifetime, which was increased to £2 million from April 2010.

In the coalition Government’s first Budget on 22 June, the then Chancellor, George Osborne, announced that the lifetime limit for entrepreneurs’ relief would be set at £5 million, while the single flat rate of capital gains tax would be replaced with the higher 28% rate paid by higher rate taxpayers. As part of the Government’s second Budget in March 2011, it was announced that the lifetime limit for entrepreneurs’ relief would be increased to £10 million from 6 April 2011.

When the relief was introduced by the Labour Government, the estimated cost was £200 million a year: the generous uprating of the lifetime limit under the coalition Government has undoubtedly contributed to its ballooning cost. Perhaps the cost would be justifiable if it had been shown to have a positive impact in boosting investment in jobs across our country, but there is no evidence to suggest that that has been the case.

The Institute for Fiscal Studies has calculated that, in 2017-18, three quarters of the £2.3 billion cost of entrepreneurs’ relief benefited only 5,000 individuals, with an average tax saving among that group of £350,000. The Resolution Foundation highlights HMRC data that shows that 82% of those who benefited have been male and in their late 50s, and that the majority of capital gains tax revenue is concentrated in London and the south-east. The 2017 HMRC evaluation found that only 8% of people claiming entrepreneurs’ relief in the previous five years had said that it influenced their investment decision making. That demonstrates the extent to which the relief was not working as intended, and the necessity of Government action.

Putting aside whether the approach taken by the Government is the right one, there are some technical issues that I hope the Minister can clarify. The Chartered Institute of Taxation has expressed a degree of surprise at the lack of transitional provisions, given that the capital gains tax changes are retroactive, affecting gains that have already accrued but not yet been realised and investment decisions that have already been made. The institute has also expressed concerns about the strength of the anti-forestalling measures for what is a change of policy rather than anti-avoidance legislation, saying it regards one aspect of the measures as open to challenge as retrospective taxation because the Government are changing the tax effect of an action after the right to take that action has arisen. Having sought legal consultation, it fears that may even be a breach of human rights. It has suggested changing the clause to allow a shareholder whose shareholding no longer qualified for entrepreneurs’ relief immediately after an exchange of shares to elect to retain the £10 million limit. Will the Minister tell us what consideration the Treasury has given to the issue?

What consideration have the Government given to going further than the measures contained in this clause? As I have sought to set out to the Committee, entrepreneurs’ relief is costly and is failing to achieve its objective. The Minister is aware, no doubt, that any number of organisations are critical of maintaining it in any form, although the criticism is not unanimous. The Federation of Small Businesses has voiced its concerns and believes that removing entrepreneurs’ relief would disincentivise employee ownership by reducing the value of businesses as they are handed over. Can the Minister say anything by way of reassurance to the Federation of Small Businesses, and does he agree with its assessment?

Many others remain critical and that is where the majority of opinion rests. The Institute for Fiscal Studies has stated that the £1 million relief in the clause is still too generous. The Association of Accounting Technicians says it is disappointing that the Government have failed to scrap it altogether, highlighting an overwhelming body of evidence from focus groups, HMRC-commissioned research, the Office of Tax Simplification, the National Audit Office and others,

“which indicates that the relief does not achieve its policy objectives, that it’s extremely expensive, poorly targeted and ultimately ineffective.”

In the light of that, will the Minister set out for the Committee why the Government have not gone further in this area?

On the new clause, which was tabled by the Scottish National party, we understand the rationale for a review of the measure’s impact on business and on different parts of the UK, but as I have sought to set out to the Committee, there is a strong body of evidence of the entrepreneurs’ relief not working effectively. I would appreciate a better understanding of the impact the amendment seeks to achieve. We do not oppose the new clause; we just think it could go further.

Let me make it clear that a more progressive approach to entrepreneurs’ relief should not be confused with being anti-business. As my hon. Friend the Member for Ilford North set out last week in Committee, Labour Members support measures to promote investment and entrepreneurialism and to support the small businesses that are the backbone of our community and that are doing so much at a difficult time to try and keep people in work, to support our communities and to contribute to our country. The Government need to bring forward measures to ensure that tax reliefs work effectively. The evidence suggests that the entrepreneurs’ relief, as conceived and delivered over the past decade, does not work.

There is a wider issue here that I hope we can revisit in later stages of the debate regarding the Government’s efforts to monitor the effect of tax reliefs such as entrepreneurs’ relief. The National Audit Office’s excellent recent report on tax reliefs shows that the Government are not reporting costs on over two thirds of them and that HMRC did not know whether most tax reliefs offered value for money. I believe the Public Accounts Committee will be taking evidence on this very shortly and publishing its report on the work of the National Audit Office in considering this important issue. We on the Opposition Benches will be following that discussion carefully, because it seems incredible that the Government do not have a proper grip on that area, where there is a real problem around value for money and whether the information provided to Parliament is sufficient, so we can understand whether tax reliefs are having the outcome intended by Government and whether fairness is built into the system.

We will continue to argue for a broad review of tax reliefs and continue to encourage Ministers to adopt the policy to determine exactly who is benefiting from the hundreds of tax reliefs that exist, whether they are fair, whether they represent good value for money, whether we can be confident that they are securing the policy outcomes as originally intended, and that the Government should legislate to make the system fairer as a whole.

This is my first experience of a Finance Bill Committee—indeed, I think it is the first time we have met, Mr Rosindell, and I look forward to serving under your chairmanship. Dare I say that our new clause is constructive? That is the manner I am starting in. I would like the Government to change their stance a bit and look at the wider picture.

Before the Budget, it was well known to all of us in the public sphere that the Government were considering entirely scrapping entrepreneurs’ relief. We read a number of comments in the press and the public domain about Conservative Back Benchers being unhappy with that move because they felt it would stifle investment. Ultimately, the Chancellor did not scrap entrepreneurs’ relief but simply took it back to the level it was at when the Labour party introduced it in 2008, reducing it from £10 million to £1 million. We need to know what the Government’s long-term direction of travel is. We cannot be driven by a rebellion on the Government Back Benches. If the Government do not feel that entrepreneurs’ relief is beneficial, they should make that clear.

The Minister said that the Government have conducted a review, and indeed they have, but it was an internal review; as far as I am aware, it is not in the public domain. They are more than welcome to put it into the public domain, or they could agree to our new clause. The hon. Member for Houghton and Sunderland South talked about what we are could achieve. It is important that we have that review so that we all know where entrepreneurs’ relief is going to be in the coming years.

As I say, this is a constructive suggestion. It is based not just on our interpretation of the situation, but on the evidence. The IFS believes that entrepreneurs’ relief is poorly targeted; the FSB, on the other hand, is broadly supportive; and the Chartered Institute of Taxation believes that a public consultation on objectives and efficacy is necessary. There is a broad range of views about this policy, so the time has come for the Government to undertake a review in the public domain so that we all understand the direction of travel and know where they seek to go. Hopefully, that will inform us all a bit more about the position. As I say, this is a constructive suggestion, and I hope the Government will change their stance.

I thank the hon. Members for Houghton and Sunderland South and for Aberdeen South very much for their comments. They raise a number of important points.

It is certainly true that this relief has attracted widespread criticism from different interested and expert bodies; the hon. Lady is absolutely right to point that out. It is important to note that the Government have tried to strike a balance. An outright abolition might have had the effect of penalising a lot of entrepreneurial activity, undertaken in good faith up to the level that has been determined. That would have been, in the Government’s view, an overreaction to the situation. Therefore, we have tried to strike a balance by trying to keep the vast majority of entrepreneurial activity that is protected in place while cutting back on aspects that are ineffective or regressive.

It is interesting, as has been noted by Opposition Members, that alongside widespread concern there has also been notable recognition of the importance of that aspect of the relief that I have highlighted from the Federation of Small Businesses. I note that the national chairman described this as a

“sensible compromise on Entrepreneurs’ Relief”,

in which

“everyday entrepreneurs will be pleased to hear the Chancellor say that he has listened to FSB”.

We continue to stride boldly through the slough of despond. Here we come to the reform of the capital gains tax private residence relief ancillary reliefs. The clause makes changes to capital gains tax private residence relief where individuals have more than one residence, reducing the final period exemption from 18 months to nine months and reforming lettings relief so that that relief only applies where the owner shares occupancy with a tenant.

The clause also makes several other minor changes to make the private residence relief rules fairer. The Government are committed to keeping family homes out of capital gains tax, and private residence relief will still be available for the entire time a property is lived in. However, ancillary reliefs mean that in some circumstances people can accrue relief on two or more properties simultaneously. The reforms make private residence relief fairer by better targeting relief at owner-occupiers.

The final period exemption currently relieves the last 18 months of ownership of a main residence or former main residence from capital gains tax. This provides relief as people go through the process of selling their home, but it allows people to accrue relief on two properties simultaneously. From April 2020, the exemption will be reduced to nine months. The 36-month exemption for those who are disabled or are in a care home will remain.

Lettings relief is available when a property that was someone’s previous main residence is wholly or partly let out. This can extend the benefit of relief by up to £40,000 for an individual and £80,000 for a couple, while they are also accruing relief on their current main residence. In order to better target the relief at owner-occupiers, from April 2020 lettings relief will only be available in cases of shared occupancy. The armed forces future accommodation model is also a source of concern. We want to be sure that the clause will extend the benefit of employer-provided accommodation relief to those service personnel who live in privately rented accommodation under that new model.

The Government are also legislating on two extra existing statutory concessions. The first applies when an individual has more than one residence, but only one has any real capital value. This concession extends the time period for nominating the individual’s main residence. The second allows 24 months of relief where, for specific reasons, a person is unable to occupy a new home for use as their main residence. There is also a change to ensure that, when spouses or civil partners agree to transfer shares in a residential property between themselves, the receiving spouse or civil partner will inherit the transferring spouse’s past use of the property, no matter the use of the property at the time of transfer. This prevents unfair outcomes arising in certain cases.

The Government are committed to keeping family homes out of capital gains tax, through private residence relief. However, the current availability of lettings relief, and the 18-month final period exemption, can mean that people accrue relief on two or more properties simultaneously. These reforms address those concerns and make private residence relief fairer, by better targeting it at owner-occupiers. I therefore commend the clause to the Committee.

The objectives behind the clause seem well intentioned, but the Minister will no doubt be aware of the severe impact of covid-19 on the housing market, as referenced by many stakeholders—a point which I should be grateful if he would address. According to the Chartered Institute of Taxation, the evidential basis for the reduction in the final period exemption was based on an average selling time—before the current pandemic—of approximately four and a half months, and it is concerned that this evidence base may be undermined by the effects of covid-19.

The Minister will be aware of his Government’s own advice, which lasted until 13 May, that physical viewings of homes were not permitted, and as such, that the home-buying process would take longer, with people advised to delay moving into a new house. While there is updated advice, there are still clearly restrictions that will slow down the process of buying a new home, and wider practical difficulties in this area when it comes to estate agents, banks processing payments and the wider conveyancing system.

The Chartered Institute of Taxation referred to research by Zoopla, conducted between 12 and 19 May, which found that 41% of would-be home movers across Britain had put their property plans on hold in light of market uncertainty, loss of income and lower confidence in their future finances, with property inquiries reported to be more than 50% down on pre-lockdown levels. Given that ongoing uncertainty, it is increasingly likely that it may take longer than nine months for some of those affected by this provision to sell their property, given the deterrent impact of covid-19 and the lockdown on potential buyers, as well as all the practical difficulties for buyers, which I am sure we appreciate. That could leave sellers with an unexpected tax liability when a property takes longer than nine months to sell. Many stakeholders consulted on this legislation believe that the fairest way to resolve the issue is to defer the introduction of the final period exemption, so as not to burden some sellers with an unprecedented tax liability.

In their consultation with stakeholders from July 2019, the Government responded to worries about the nine-month period exemption being too short by saying that

“a 9 month final period exemption strikes the right balance between being long enough to provide relief whilst they go through the process of selling their home, but not so long that they are able to accrue large amounts of relief on two properties simultaneously, or on homes that are no longer used as their main residence.”

I will not seek to blame the Government for not predicting at that point the impact of a global pandemic, but we are living through some very difficult times. Has any further consideration been given to the timing of the measures contained in the clause? Given the pressures on the housing market, does he still regard them as appropriate and realistic? Is the Treasury considering the impact more broadly?

Putting the coronavirus aside, concerns have been raised that the clause runs in contradiction to the parliamentary convention on retrospective taxation, whereby retrospection is permissible only when dealing with unacceptable avoidance schemes. The clause is about changing long-standing reliefs rather than countering avoidance, and the Institute of Chartered Accountants in England and Wales has highlighted that the clause is retrospective. It also argues that it would be simpler for taxpayers if the measures were delayed until the start of the next tax year. I am sure the Minister has given consideration to that point, and I am keen to hear his views on the topic.

Another point raised by the Chartered Institute of Taxation is that the new rules must be well communicated. Their introduction coincides with the new 30-day time limit running from the date of completion to the reporting and payment of capital gains tax, meaning that there is now much less time to establish capital gains tax liability. What are the Government doing to communicate such changes, so that they are well understood?

The changes as a whole are projected to raise £50 million for the Government in this tax year and £120 million next year. Given the current situation in the housing market, I shall be interested to hear the Minister’s views on whether any change has been made to any projections in this area. It is vital that the Government can raise funding for our vital public services, but in the grand scheme of things, those seem like relatively modest sums. Although I want to ensure that our public services have the funding they need to get through this crisis, I am sure the Government would not seek to disadvantage those who, through no fault of their own, find themselves in a very difficult situation owing to the pandemic.

Those are the only comments that I seek to offer on the clause. I shall be grateful for a response from the Minister.

I thank the hon. Lady for her comments. She raises the question of retrospectivity. We do not regard the changes as retrospective. Capital gains tax is due only when a disposal is made, and taxpayers have 18 months’ notice of the changes. They have therefore had plenty of time to rearrange their affairs—for example, by selling property under the old rules if they had wished to do so. It is important to remember that any private residence relief accrued from periods when the property was lived in as a main home is retained.

I am glad that the hon. Lady does not blame the Government for failing to predict the pandemic. That would be a very widespread source of blame; few people across the world could be exculpated from that. She also raised the question of the effect of covid-19. It is worth saying that, as she highlights, the nine-month exemption is based on evidence that the average selling time was four and a half months, and the suggestion is therefore that nine months is not long enough. I note her point and will take it away with me from this sitting; I thank her for that. It still leaves the average significantly short of nine months. It is worth pointing out that, if people are taken over that level, they will still likely pay very little, if any, capital gains tax, because the annual exempt amount, which has just been increased to £12,300, keeps small gains out of CGT. If someone was running over by a month, it would have to be an enormous gain in order to breach the annual limit.

As I said, there are no changes to the wider 36-month exemption that is available to disabled people and to those in care homes. The Government think the CGT allowance provides an additional safeguard in case there are circumstances in which people might inadvertently run over time.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 24

Corporate capital losses

Question proposed, That the clause stand part of the Bill.

With this it will be convenient to discuss the following:

That schedule 3 be the Third schedule to the Bill.

Clause 25 stand part.

New clause 9—Review of changes to capital allowances—

“(1) The Chancellor of the Exchequer must review the effect of the changes to chargeable gains with respect to corporate capital losses in section 24 and Schedule 3 of this Act in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within two months of the passing of this Act.

(2) A review under this section must consider the effects of the changes on—

(a) business investment

(b) employment, and

(c) productivity.

(3) A review under this section must consider the effects in the current and each of the subsequent four financial years.

(4) The review must also estimate the effects on the changes in the event of each of the following—

(a) the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement,

(b) the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union, or

(c) the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.

(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.

(6) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

This new clause requires a review of the impact on investment, employment and productivity of the changes to capital allowance over time; in the event of a free trade agreement with the USA; and in the event of leaving the EU without a trade agreement, with an agreement to retain single market and customs union membership, or with a trade agreement that does not include single market and customs union membership.

We are 50 minutes in and making very good progress, so thank you for your leadership from the Chair, Mr Rosindell.

Clauses 24 and 25 and schedule 3 make changes to UK corporation tax loss relief rules to introduce the corporate capital loss restriction that was announced at Budget 2018. At that Budget, the Government announced changes to the treatment of capital losses for corporation tax purposes. Currently, if an asset is sold at a loss, that capital loss can be carried forward and offset against up to 100% of the capital gains in future periods. In order to ensure that large companies pay corporation tax when they make significant capital gains, the Government will restrict the use of companies’ historical capital losses to 50% of the amount of annual capital gains from 1 April 2020. This policy builds on previous reforms to corporation tax loss relief, and brings the treatment of capital losses into line with the treatment of income losses.

The changes made by clause 24 will apply a 50% reduction to the amount of carried-forward capital losses that a company can set against chargeable gains that arise in a later accounting period. Various other changes that are required to deliver or support that loss restriction are also included. They include provisions to ensure that the restriction is proportionate for companies entering into liquidation, and that it operates effectively for companies in sectors that are subject to unique tax regimes, such as oil and gas, life insurance and real estate investment trusts.

This loss restriction will raise approximately £765 million in additional revenue over the next five years. An annual allowance of £5 million will apply across both income and capital losses to ensure that small and medium-sized companies are not affected. We estimate that less than 1% of companies will have to pay additional tax as a result of these changes. The change made by clause 25 is to amend the quarterly instalment payment treatment for certain companies with no source of chargeable income, which have a short accounting period resulting from a chargeable gain accruing.

New clause 9, tabled by the SNP, requires a review of the effect of the change to chargeable gains introduced by clause 24 and schedule 3 within two months of the Bill’s receiving Royal Assent. The review would focus on the effects of changes on business investment, employment and productivity across different regions of the UK, as well as the effects of various scenarios following the end of the EU transition period, and under circumstances in which the UK signs a free trade agreement with the United States.

The Government’s view is that such a review is not necessary. We set out detailed information on the Exchequer macroeconomic and business impacts in 2018, when this policy was first announced, and provided a further update at Budget 2020. Those estimates, which have been certified by the independent Office for Budget Responsibility, confirm that the changes made by the clause are not expected to have any significant macroeconomic impacts. The changes will affect very few companies—about 200 every year, which are likely to be dispersed across the UK. That estimate is not expected to change in any of the EU transitional free trade agreement scenarios set out in the amendment. A further review of the clause would not provide any additional useful information.

This restriction is a proportionate way of ensuring that large companies pay some tax when making substantial capital gains. The review that the new clause would legislate is unnecessary. I therefore urge the Committee to reject new clause 9, and I commend the clauses and the schedule to the Committee.

It is a pleasure to be here again on such a fine day in the Committee Room, going through some of the more technical elements of the Finance Bill.

We have heard from the Financial Secretary why clause 24 and schedule 3 appear in the Bill. As Members can see for themselves, part 1 of schedule 3—paragraphs 1 to 38—deals with changes required to introduce the corporate capital loss restriction; part 2—paragraphs 39 to 41—introduces changes in the treatment of allowable losses for companies without a source of chargeable income and makes other required minor amendments; and part 3—paragraphs 42 to 46—contains commencement and anti-forestalling provisions for the CCLR.

All in all, schedule 3 comes to 18 pages. I am sure that the Treasury deems them essential, or they would not be in the Bill, but it does seem to run somewhat contrary to the Government’s stated aim of simplifying the tax system. In case anyone wanted to reach for the explanatory notes for some salvation and solace, even they extend to 10 pages. I do wonder whether it was really necessary, with such a lengthy schedule and explanatory notes, to go into such detail; I guess my question to the Financial Secretary is whether anything can be done to simplify it. As I said, the Government’s stated aim is to simplify taxes—they even created the Office of Tax Simplification —but the OTS’s job is made much more difficult if, while it is trying to simplify the existing tax code, we are adding reams and reams of clauses to it.

The measure set out in clause 24 and schedule 3 is expected to raise significant revenues in corporation tax from large corporations. That is not something that I will complain about too much—in fact, I am not complaining at all—but a common concern among respondents to the Government consultation was about the timing in relation to our exit from the European Union and in the context of concerns about the impact on UK competitiveness. Although we do not oppose what the Government seek to do, it is important that they address those concerns up front—not least so that when people reply to Government consultations, they know that someone is reading and listening, and that the Government will at least address their concerns even if they do not share them.

Turning to clause 25, I am sure the Financial Secretary will recall that the London Society of Chartered Accountants wrote to the Chancellor on 19 April, copying him in, to raise issues about several clauses of the Bill. Paragraph 13 of that letter states:

“We note that this proposes that a company that would otherwise be ‘very large’ would be ‘large’ in the context of the regulations requiring payment of corporation tax in instalments if it is chargeable only because of a chargeable gain on disposal of an asset, but only for APs beginning on or after 11 March 2020. It is obviously aimed at non-resident companies that only come within corporation tax as a result of their new exposure to corporation tax on disposals of UK land and interests in entities that are ‘UK land-rich’. A single such disposal would result in the due date being on that one day that the company disposed of the property, so this is a welcome change for any but the largest organisations. However, it is unfortunate that this is not to apply to events before 11 March 2020, where companies have had to rely on a concession by HMRC. In such circumstances, HMRC propose that tax should be paid within 3 months and 14 days after contracts are exchanged unconditionally.”

It would be good if the Financial Secretary addressed those concerns in his reply.

We have already heard the Financial Secretary’s account of why he thinks the review required by new clause 9—tabled by our colleagues in the SNP, led here by the hon. Member for Glasgow Central—is not necessary. The proposed review of changes to capital allowances

“must consider the effects of the changes on…business investment…employment, and…productivity…The review must also estimate the effects on the changes in the event of each of the following…the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement…the UK leaves the EU withdrawal transition period with a negotiated agreement and remains in the single market or customs union”—

I will not hold my breath on that one—

“or…the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.”

I understand why the Financial Secretary may not consider such a review necessary in the context of changes to capital allowances, but I would say two things in response. First, clear, widely available and readily understood analysis of the wider context and the wider pressures on the economy, covering issues such as business investment, employment and productivity is absolutely essential. Secondly, the headlines are obviously dominated by the coronavirus and, more recently, by events in the United States, with the murder of George Floyd, and the Black Lives Matter movement protests we have seen on the streets of the UK. However, in the background, as we know, there is the ongoing issue of Brexit, which has almost been forgotten in the national conversation, but which remains one of the single biggest challenges facing our country. The Committee on the Future Relationship with the European Union is hearing from Michel Barnier this week.

Whether Brexit is viewed by Members of the House as an opportunity or a threat, or perhaps a combination of the two, I do not think anyone would dispute that unravelling ourselves from the most sophisticated political and economic alliance in the history of the world is simple or straightforward, or without consequences. We have reached a settled position—to be clear, the official Opposition recognise that settled position—with a referendum and two general elections that have given the Government a mandate to implement the referendum. The question of whether Brexit takes place has been settled by those three democratic events; the question now is how it happens. At the same time, we are in the middle of a global pandemic that, as well as being a public health crisis, threatens to be an economic crisis. We are already in a recession, and the choices the Government make in the coming days, weeks and months, along with the choices they have already made, will shape and determine whether the recession is as short and shallow as we would hope.

I do have a concern when I listen to statements made by Ministers—not so much Treasury Ministers, but certainly Ministers in other parts of the Government, including the Prime Minister and the people around him—that the economic issues and priorities of the country are playing second order to political considerations. That is a terrible mistake. I hope that the Government will take a more stable and orderly approach—if I may borrow a phrase from our former Prime Minister—to some of these choices and issues, and that the Treasury flexes its muscles at all points in conversations with other Departments about the considerations that must be made about our future relationship with the European Union and, indeed, about free trade agreements with other countries, including the United States.

The Financial Secretary may not have a great deal of sympathy for the case made for a review in the context of changes to capital allowances, but I am glad we are having this conversation, because debate in this place is moving too often away from some of the really serious economic challenges that are presenting themselves. We cannot wish those challenges away; we need to make active, sensible and wise choices to ensure that our country emerges from this period of our history with a stronger economy and with greater and more widely shared prosperity than we have today. I hope that that cause is shared by Members right across the House.

Finally on new clause 9, the reason why we table such amendments and new clauses calling for reviews is that that is one of the few ways in which Opposition parties can debate issues on the Finance Bill. In recent years, it seems Ministers—to their shame, actually—have been too frightened and cowardly to allow Finance Bills to be subject to amendments in the way they were traditionally. We no longer have the same freedom and flexibility to propose practical, concrete changes that we might like to see, which strengthen democratic and political debate in Parliament, with Oppositions not just criticising Government, but laying down alternatives so that we can debate their merits versus the Government’s approach. So, instead, we call for reviews.

Dare I say that I think I am potentially being constructive again in the new clause that the SNP have tabled? We are seeking to allow the Government to open their eyes to what is coming down the track and to look at the impact on business, investment, employment and productivity of a number of different scenarios, be they a comprehensive free trade agreement, remaining in the single market and customs union, not remaining in the single market and customs union, and/or a free trade agreement with the United States.

Ultimately, however, this is not just about helping the Government to see the error of their ways, should they follow the path they are on, but also about reinforcing to hon. Members the huge detrimental impact that leaving the European Union will have on Scotland. Lest we forget, the people of Scotland voted overwhelmingly to remain in the European Union. We are being forced to put forward amendments such as this because the democratic views of the people of Scotland have been disregarded once again by this Parliament.

I will touch briefly on the reality of the situation facing Scotland, because it is incredibly important to the debate we are now having. A new study from the Scottish Government says that, if an extension is not agreed, Scottish GDP could be up to 1.1% lower after two years. That is just in relation to an extension. The cumulative loss of economic activity from leaving the EU would be up to £3 billion over those two years. That is on top of the devastating impact of the current pandemic on the Scottish economy. We will potentially have billions wiped from our economy at a time when we are reeling from the impact of this public health tragedy. That is simply not good enough.

The very notion that a US trade deal will save the day is complete and utter rubbish. Analysis from the Scottish Government highlights that the loss of friction-free trade with the EU would lower GDP by 6.1% by 2030. Analysis by the UK Government shows that a free trade agreement with the US would increase UK GDP only by up to 0.16%. Those are remarkable figures, which we all need to consider in full. The reality is that the reckless approach of the UK Government in potentially losing full access to the European single market will have a devastating impact on Scotland’s economic growth and prosperity. It also puts in jeopardy many of our key priorities: the NHS, upholding food standards and tackling the climate emergency.

Lowering standards is perhaps a topical subject to touch on, because we have all read with interest comments in the press over recent weeks about the impact of lowering food standards on imports of food into the United Kingdom. We are proud of Scotland’s agricultural sector and the produce we create, which is world renowned for its class. We cannot under any circumstances have a situation where the quality of that produce is impacted by the decisions of the UK Government, particularly when those decisions will be made on the back of something we did not vote for. I cannot emphasise that enough to Members. Whether it is chlorinated chicken, selling off the NHS to Donald Trump or simply trying to bring down the tariffs on Scotch whisky, the UK Government have shown they are incapable of meeting the needs of the people of Scotland, and I have grave concerns about what is coming down the line.

As I say, the new clause we have tabled today is constructive, because it would allow the UK Government’s eyes to be opened to the reality of the situation facing Scotland. If they are true in their comments about believing that Scotland is a key part of the United Kingdom, and Scotland should lead and not be led, they will hopefully bear the new clause in mind.

I will finish by touching on the comments of the hon. Member for Ilford North, who rightly said that, for many, Brexit has been forgotten about. Well, for people in Scotland it has not been forgotten about, because we overwhelmingly do not support it. Rightly, the pandemic—overcoming it and ensuring that lives are saved—is the focus of all our priorities at this moment, but we know what is coming down the line and we are fearful. Up until now, none of the mood music coming from the UK Government has offered any reassurance whatever. Hopefully, the figures I have highlighted in relation to a United States trade deal will re-emphasise the reality of the situation to the Government.

I said I would finish, but that was perhaps a fib, because there is one further comment I wish to touch on. I apologise if I get a word or two wrong, but the Minister said that the new clause would not provide “any useful information”, and I am astounded at that. I thought that a UK Government Minister would want to know about the impact on productivity of the decisions that the UK Government may take. I thought a UK Government Minister would want to know about the impact on employment of the decisions taken on business productivity, but it appears not. It appears that wilful ignorance is the story of the day, which is not a good thing. The people of Scotland will pay close attention to the actions of the UK Government moving forward, as they have up until now.

I call the Minister to respond.

I would not have dreamt of not responding to the concerns raised by Members of the Opposition, and I am grateful to you, Mr Rosindell, for allowing me to do so.

The hon. Member for Ilford North mentioned the simplification of the tax system and asked whether the measures before us could be regarded as a simplification. He is absolutely right that simplification of the tax system is a highly desirable thing. In this case, without getting too far removed from political business, it seems there is a parallel to some of the work done by Thomas Kuhn on how science proceeds, where he distinguishes between times in which normal science proceeds, as it were, in a normal fashion and times when there is a paradigm shift and everything changes. Often, the effect of a paradigm shift is to create a moment of radical simplification to a system that was becoming overly complex in its theoretical analysis before. That was the effect of Copernicus on the Ptolemaic system, and of Newton on pre-Newtonian physics. There may well come a case, as in the past, where this Government or their successor decide on a radical tax simplification, but while we are in the world of existing tax, that is not the world we are talking about.

The hon. Gentleman should be pleased to know that these measures have been regarded within the profession as the model of how to achieve effective tax legislation— that is not always the case with Government legislation. There is a nice quote in the Tax Journal for 5 December 2018:

“The corporate capital loss restriction is a good example of how to produce effective legislation. The consultation will enable draft legislation to be produced for publication in December 2019. This will be subject to technical consultation ahead of its inclusion in the Finance Bill 2020. This allows time for the profession to work with HMRC to iron out the inevitable teething troubles.”

That is right. As I have identified, there were essentially two periods of consultation: one on policy design and, in due course, more technical consultation on draft legislation. That work is what is reflected in this piece of legislation. I hope I have reassured the hon. Gentleman on that front.

The hon. Gentleman raised a question about competitiveness. He will know that the components of competitiveness are many and various. It is not immediately obvious why the treatment of capital for capital losses should have any huge or certainly immediate competitive effect. We are talking, lest it be forgotten, about a measure that is likely to have an effect on some 200 companies. Some of them may be large, but this is a very small proportion of the overall corporate world in which we live. It is also worth saying that, even after this change, the system that remains is significantly more generous in some crucial respects than the system in many other countries that are our notional international competitors.

The hon. Gentleman raised the question of whether the Government are disallowing adequate challenge to the Bill. I would say that one man’s meat is another man’s poison, one woman’s meat is another woman’s poison and so on. The effect of having this structure to the Bill is that, as we grind through these clauses—I apologise to colleagues if it is a grind—and give them the detailed consideration that this Parliament would expect with its history of scrutinising tax, that is now being done under a system in which non-charging measures are covered by individual resolutions. That is an increase in clarity and, I think, very much to be welcomed.

The hon. Member for Aberdeen South talked vigorously about what he sees as the democratic views of the people of Scotland. May I remind him of a few facts? Scotland had a referendum in 2014 in which, I am pleased to say, a substantial majority was in favour of remaining part of the Union. In so doing, Scots reflected the wisdom of arguably one of Scotland’s greatest thinkers, Adam Smith, when he said that the Union with England was a measure from which infinite good had derived to Scotland. How right Smith was. Of course, it would overturn the settled convention that referendums take place once in a generation, and, to that extent, it would be a denial of the democratic basis of referendums, to have another in a shorter time period.

May I also remind the hon. Gentleman that it was extraordinarily lucky in many ways that the Scots were, as I trust they will always be, wise enough to see their future within the Union, because when crisis struck, and the oil and gas industry were completely clobbered and the oil price fell, that would have cut an enormous hole in the GDP of an independent Scotland, which disastrous economic outcome was avoided by Scotland’s ability to work with and benefit from its position within the Union? The same will be true under coronavirus, given the different exposures that the Scottish economy has to sectors affected by the economic downturn.

This is a very small and technical measure that widens the scope of capital gains tax relief in respect of loans to traders, so that from 24 January 2019 it applies to loans made to traders located anywhere in the world and not just in the United Kingdom.

Relief for loans to traders is available where a loan is made to a UK company, sole trader or partnership, for the purposes of a continuing trade, profession or vocation, or for the setting up of trade, but then the loan subsequently becomes irrecoverable. The relief allows a person to write off the loss against chargeable gains.

The UK has now left the EU and has agreed to follow its rules for the duration of the transition period. On 24 January 2019, the European Commission issued a reasoned opinion, arguing that the existing legislation for relief of loans to traders contravened the free movement of capital principle. The Government accepted that the legislation, as drafted, was too narrow, and agreed to introduce legislation to expand the rules and to comply with that principle.

The change made by clause 26 widens the relief, so that it applies to qualifying loans made to businesses worldwide and not just in the UK. The proposed changes are not expected to have any significant impact on the Exchequer, due to the small number of people making these loans. Loans of the type covered by this relief are often risky, making them unattractive to many investors. Widening the geographical scope of the relief will not make such loans less risky, but it will give UK-based investors a remedy should an overseas investment be lost. Draft legislation setting out this change was published during the summer and no comments were received.

The Government consider that this legislation is appropriate for supporting overseas investment opportunities for UK-based investors and for meeting our residual obligations to the European Union. I therefore commend the clause to the Committee.

Earlier, the Financial Secretary described our proceedings as “a grind for some”. How could it possibly be a grind when we were treated to such a fascinating history lesson as the one he gave at the end of the debate on the last group? However, I am not sure that invoking the economic lessons of Adam Smith will be enough to persuade the hon. Member for Aberdeen South of the case for the Union. Indeed, I am not sure that it would persuade me of the case for the Union. I will return to reading the books by our esteemed former Prime Minister, Gordon Brown, and I will leave it to my hon. Friend the Member for Edinburgh South (Ian Murray) to lead the charge in making the case for the Union. That might be more persuasive to the people of Scotland than the history lesson given to us by the Financial Secretary.

We are all learning new things this morning. In fact, the hon. Member for Aberdeen South has learned that, in this place, the words “and finally” are generally a statement of intent rather than a binding commitment. I am sure that on many occasions I have used the words “and finally” more often than once.

The Financial Secretary described clause 26 as very small and technical, and I suppose that is true to an extent. As we have heard, relief for loans to traders is a capital gains tax relief; it gives relief where a loan is made to a UK company, sole trader or partnership for the purposes of an ongoing trade, profession or vocation or the setting up of trade, and the loan subsequently becomes irrecoverable. To qualify for the relief, the loan must be to a borrower who is resident in the UK and who uses the money wholly for the purposes of a trade, profession or vocation or to set up trade, as long as they start trading. Relief is due only if there is no reasonable prospect of the loan ever being repaid.

Who can argue with any of that? The clause is technical and straightforward, and the Financial Secretary has made the case for it. Only towards the end of his speech did we hear that the purpose of the clause—please shut your ears, Mr Rosindell—is to extend the relief to borrowers outside the UK, which will ensure that the relief complies with article 63 of the treaty on the functioning of the European Union, and with the rules on the free movement of capital.

I thought we might have a bit of fun dwelling on that for a moment, because we are locked in negotiations on our exit from the European Union. I am sure it was not meant to be sneaky—Ministers would never be sneaky—but at the end of the Financial Secretary’s speech on the clause, he briefly mentioned that it was about bringing ourselves into alignment with European Union law. It is curious that we are trying to negotiate our exit from the European Union at the same time that we are passing domestic law to bring ourselves into alignment. The Government have begun their fourth round of trade negotiations with the European Union; the process is far from complete. With the Government’s self-imposed December deadline looming, it appears there is nothing that the Government are not willing to sacrifice for their ambition to get Brexit done.

In the light of that, I am curious about whether the Government intend for the alignment to be permanent, or whether it will be a measure from which they wish to diverge in the future. I wonder what other rules we are planning to align with at the same time as we are planning divergence, and I wonder how the Government are weighing up the case for alignment and the case for divergence. The clause is designed to align the UK with EU trade regulations and EU laws, which reveals an uncomfortable reality at the heart of the Government’s strategy: no matter how much they might claim that Brexit means Brexit and that we can shirk our obligations, we know that the continuing harmonisation of laws and rules will continue within the European Union, and that, over the course of our future relationship with the European Union and with any future trade agreement with any third party, there will always be compromise, choices, trade-offs, harmonisation, agreement to abide by the same rules, and a mechanism for dispute regulation.

I certainly do not wish to re-fight the battles of the past. As I have already said, we accept that this question is settled. We have left the European Union. The only question now is about our future relationship. However, in the same way that the Government have recognised, through the clause, that we have obligations to meet, and that doing so is in the interests of businesses here in the UK—as a principle, it does not apply only to businesses, but in this case we are talking about the capital gains tax relief that will benefit different types of businesses—it is important that we acknowledge that, in our future relationship, there may well be instances in which it is in our national interest to align with the European Union, or to persuade the European Union to align with us.

Going back to my previous remarks, it seems to me that there has been far too much dogma in the debate, and far too much emphasis on demonstrating, in a robust and visible way, that we have left, almost as though divergence is a point of principle and a good in and of itself. There may be opportunities and occasions on which my Opposition colleagues and I might see divergence from a particular approach taken by the European Union as an opportunity presented by Brexit, and there may be occasions, particularly in the context of debating our domestic tax affairs and economic policies, in which opportunities might present themselves, and we might propose courses of action that otherwise might not have been possible as members of the European Union. However, there will be occasions when alignment with the European Union and its approach is in our national interest, and the Government should be brave enough to say so.

I think that most people in this country, whether they voted leave or remain, would accept that there are lots of occasions when a deep partnership with the European Union would be in our interest. Indeed, reflecting on the conversations that we had during the referendum and since, it seems to me that one of the least concerns that people had about the European Union was the notion that we had an economic partnership. My constituency split pretty much down the middle on Brexit, so I have the opportunity to speak to people who voted leave and remain all the time, which I find insightful, instructive and enriching. I find that, when people reflect back on our membership of the European Union, one of their least concerns was about the economic relationship and the notion that it was a free-trade bloc and a trading partnership. In fact, one complaint that I got from lots of leave voters who were voting leave because of concerns about sovereignty is that it had become too much of a political project and not so much an economic one.

I hope that, as the Government scope out their policies, and as the Treasury seeks to influence other Departments and to restore some sense of reality and grounding in some of the economic considerations of our future relationship, people right across Government bear that in mind, and that we do not end up cutting off our nose to spite our face. This country already had a number of underlying structural problems with our economy that we needed to address—slow growth over the last decade, weak productivity and the extent to which our country is divided, not only in the economic gap between the wealthiest and poorest but in the regional, place-based economic inequalities across our country.

There are lots of issues for us to deal with, but I fear that our job is being made even harder by the covid-19 crisis and its obvious impact, and I fear that the job of tackling those problems will be made harder still if we make unwise decisions about our future relationship based on political and ideological dogma, rather than on the economic considerations. I hope that message will be taken back to the Treasury.

I am keenly aware of the 11 o’clock minute’s silence, and I wish to respect that, so I will keep my remarks short. The hon. Gentleman will be aware that my consideration of the EU in my speech was probably 40% to 45%, rather than a concluding thought. I am glad he recognises that opportunities will emerge after we have left the EU, and I am sure he is right that there will be cases in which we should wish to align with it on a sovereign basis.

Order. At 11 o’clock, I will suspend the sitting for a minute’s silence. The bell will ring at that point. I propose we do not proceed with any further discussions until after the minute’s silence. Please be upstanding.

Before we begin, I have a few preliminary points. Members should switch off any electronic devices or switch them to silent. As in all Bill Committees, tea and coffee are not allowed during sittings. Obviously, I must stress the importance of social distancing in the Committee Room. I will suspend proceedings if at any point I am not satisfied that advice on public health is being observed.

The Hansard reporters would be most grateful if Members could email any electronic copies of their speaking notes to hochansardnotes@parliament.uk.

We will first consider the programme motion. We will then consider a motion to enable the reporting of written evidence for publication and a motion to allow us to deliberate in private about our questions before the evidence session. If there are any questions about our unusual procedure because of social distancing during that session, we can deal with them then. In view of the limited time available, I hope we can take these matters without too much debate. At 11 o’clock, there will be a minute’s silence in memory of the death of George Floyd.

I call the Minister to move the programme motion, which was agreed at the Programming Sub-Committee yesterday.

I beg to move,

That—

(1) the Committee shall (in addition to its first meeting at 9.25am on Tuesday 9 June meet—

(a) at 2.00pm on Tuesday 9 June;

(b) at 11.30am and 2.00pm on Thursday 11 June;

(c) at 9.25am and 2.00pm on Tuesday 16 June;

(d) at 11.30am and 2.00pm on Thursday 18 June;

(e) at 9.25am and 2.00pm on Tuesday 23 June;

(2) the Committee shall hear oral evidence in accordance with the following Table:

(3) proceedings on consideration of the Bill in Committee shall be taken in the following order: Clause 1, Schedule 1, Clauses 2 to 5, Schedules 2 and 3, Clauses 6 to 9, New Clauses, New Schedules, remaining proceedings on the Bill;

(4) the proceedings shall (so far as not previously concluded) be brought to a conclusion at 5.00pm on Thursday 25 June.

It is a pleasure to serve under your chairmanship, Mr Stringer. I welcome my shadows, the hon. Members for Halifax and for Cumbernauld, Kilsyth and Kirkintilloch East, to the Committee.

Question put and agreed to.

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Kevin Foster.)

Copies of written evidence that the Committee receives will be made available in the Committee Room.

Resolved,

That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Kevin Foster.)

We will now go into private session to discuss lines of questioning.

We will now hear oral evidence from a representative of the Federation of Small Businesses, who is attending by audio link, and from a representative of the London Chamber of Commerce and Industry, who is with us in the room. I welcome our witnesses and thank them for appearing today. Before calling the first Member to ask the first question, I remind all Members that questions should be limited to matters within the scope of the Bill, and that we must stick to the timings in the programme motion that the Committee agreed earlier. We have until 10.20 am. Before we get to the questions, perhaps the witnesses could introduce themselves.

On a point of order, Mr Stringer. May I first draw the Committee’s attention to my entry in the Register of Members’ Financial Interests in relation to financial support that I receive in my office for work on immigration policy?

Thank you. Richard Burge, please introduce yourself.

Richard Burge: Thank you very much. My name is Richard Burge. I am the chief executive—fairly recent—of the London Chamber of Commerce and Industry.

Martin McTague: I am Martin McTague. I am the chair of policy and advocacy for the FSB in the UK.

Q I will start with a slightly more open question to the two witnesses. How do you see small businesses adapting to the new system that we have proposed?

Richard Burge: With difficulty. The obvious difficulty they have is that they are surrounded by chaos at the moment. Many small businesses have furloughed a large number of members of staff, or they are operating on their own. They have only so much bandwidth, so this will be hard work for them, particularly as they do not know what the rules will be. If they employ EU citizens, their concern is that they will now be introduced to the world of having to register themselves and get themselves licensed, which, like customs documentation, is a completely new world for them, and they have six months to do it.

Martin McTague: Sorry, I could not hear that question very well. Could you repeat it? You are very echoey and quite distant.

Just before you do, Minister, it would be helpful if when asking questions, Members said who they were directing the question to.

Q Certainly, Mr Stringer. The question was an open one, directed at both witnesses, and it was basically about how they see small businesses adapting to the proposed new immigration system.

Martin McTague: I just about got that; I think it was a question about small businesses’ experience of immigration. The reality is that 95% of small businesses have absolutely no experience of dealing with any kind of visa system, and the system has been largely designed for larger businesses with reasonably sophisticated HR resources. We have found that the biggest concentration of issues is to do with mid-skilled occupations; in other words, the debate tends to be very binary. It either refers to high-skilled and very sophisticated employment requirements or completely low-skilled ones, but there are a lot of mid-skilled positions that fall within the £20,000 to £30,000 bracket, and those are the ones that cause the most problems for small businesses in the UK.

Q I would like to ask two follow-up questions, one to each witness, if that is acceptable. My first question is to Mr McTague, given what he has just said about mid-skilled workers being a particular issue. Does he see the skill level of skilled workers’ being changed to RQF3—that is, A-levels—as helping to address that issue?

Martin McTague: I assume that was to me, was it?

My question to Mr Burgh is about the fact that he talked about the process of sponsorship and becoming licensed. He may be aware that the Home Office is looking to streamline that system. Is there a particular change, or changes, he thinks we could make to the sponsorship licensing system that would help address some of the concerns he outlined?

Martin McTague: [Inaudible] it is welcome. It is a change that we were keen to see, and there has been a welcome change in the Government’s approach.

Richard Burge: To add to that, first of all, I have great admiration for the Home Office team working on this. I have worked for Matthew Rycroft before, in the Foreign Office, and he is one of the most talented managers in the public service. I think umbrella licensing is a good idea: it has good precedents, and it would create a huge relief for small businesses if they felt they could go to an organisation that had the ability to provide umbrella licensing. It would provide reassurance to the Home Office and a workable solution for small businesses, and we would be happy to be part of that process.

Q As free movement comes to an end with this Bill and we transition to the minimum income requirement of £25,600, how have your members responded to that minimum income threshold?

Richard Burge: In two ways. One is relief that the threshold was lowered; it is now a much more realistic threshold. I have to say, though, that it is going to be a lot more workable within London than it is for my colleagues who run chambers in other parts of the country. A threshold of £25,600 is quite high in different parts of the UK, given the wage levels there, so while I think it is workable in London—not ideal, but workable—I also think we concentrate on income too much as an indicator of value, rather than skills, and that in parts of the country, the threshold is still probably too high.

Q Martin, may I ask you the same question? I will repeat it: as we transition away from free movement and towards the minimum income threshold of £25,600, how have your members responded?

Martin McTague: There has been a broad welcome for that change. I think there was a strong feeling that the previously suggested £30,000 threshold was going to be far too high, so £25,600 is a really good move in the right direction. We actually think it should be lower, because there are quite a few jobs, especially in the care sector, that pay less than £25,600. That is why we have called for a care sector visa, because we think the requirements of that sector will always be uniquely different from most of the rest of the economy. However, the move to £25,600 is definitely welcome.

Q An open question to both of you: if you could change one thing about the Bill to make it work for your members, what would it be?

Richard Burge: It would be quite complex. It would be a move away from worrying about what people are paid to worrying about their skills. Skills are not necessarily measured by qualifications, so we welcome the reduction down to A-level standard. However, for instance, you could look at a small coffee shop, where you pay with your credit card. No accountant, bookkeeper or partner in an audit company is physically involved in your paying your money and it appearing in the annual accounts of that company, but you still need a barista to serve your coffee, so the question is: what matters now—is it skills and competence, or is it qualifications and what you happen to be paid? I would like to see that change.

Martin McTague: The biggest thing for us is the bureaucracy of this system. We estimate that a typical business with fewer than 50 employees will probably have to spend about £3,000 per employee to get through this tier 2 process. That is made up of a whole series of different costs. The biggest obstacles to recruiting somebody through this system are simply the cost and the time required to do it. Many businesses that traditionally recruit on the open market and have never gone anywhere near this kind of tier 2 system will find it very off-putting, and may just constrain their ambitions and avoid doing it completely.

Q When the Bill was being formulated and opinion was being sought, the UK jobs market was entirely different from the one we shall see from the summer onwards, with many skills in very short supply—particularly for things like engineering, or even for people working in care homes or picking fruit. Do you not think that we shall see a situation in which a lot more British workers come into the jobs market, and that some of the concerns expressed in the past about the bureaucratic hurdles that might need to be coped with will actually not be such a great problem, because we will have a lot of very well-qualified and well-skilled British people? Is it right that the costs that we have just heard of from the Federation of Small Businesses will be a real incentive for companies to employ British people who are now, sadly, in many cases being thrown back on to the jobs market, in a situation in which we do not have, in effect, full employment? I think the FSB should be the first to answer that.

Martin McTague: I can see that there will be more incentive to look for indigenous employees, but the reality is that a lot of the shake-out, or the potential shake-out, that we are hearing is likely to happen will be among the least-skilled people. Companies are going to enormous lengths to try to hang on to the rare skills that they have. If they have managed to recruit somebody from, say, the European Union, they are going to enormous lengths to try to get them to apply for settled status and to reassure them about the covid situation. I do not think that a new influx of unemployed people, many of whom will have poor skills, will solve a lot of the problems for these companies.

Richard Burge: From a London point of view, I think the jury is out, literally. I do not think we really know what to expect as we come out of covid-19. The critical thing for London, and probably for all metropolitan areas, is the mobility of people, and the willingness of people to be physically mobile to go and find new work, possibly earning less than they were earning before. However, it is also about emotional mobility, too. Are people emotionally prepared to go and do new work, taking completely new tangents in their lives and probably earning less? That will be a real challenge. I think there will be greater opportunities, but not necessarily in a career path that people might have been expecting.

Q May I go first to the London Chamber of Commerce and then to the FSB? You have both spoken eloquently about the new challenges and red tape that the system will impose upon businesses. Looking at the other side of the coin, is there also not an extent to which this process puts some red tape and expense on potential employees from the European Union? It risks making coming to the UK to work less attractive. For example, I am from Germany and I have a job offer in London or I have a job offer in Dublin. Going to Dublin does not involve any charge or bureaucracy; going to London involves a visa, a health surcharge, and so on and so forth. Is there a danger that we are going to make this country much less attractive for skilled workers to come to?

Richard Burge: I think it is inevitable that it is going to be more difficult for people from the European Union; that is the consequence of leaving the European Union and not having an immigration policy for people from there. It is no longer an internal market; it is now a normal external market.

I think what we need to do is to make the red tape manageable. I think part of that is umbrella licensing. Part of that will be border clearance that is rapid and smooth, so it needs to be digitised and there needs to be e-clearance, and that also means that it cannot get cluttered up with tourism. We hope that everyone from the European Union will be able to come without a visa and not get caught in that process. Part of this process is the mechanism, and I think that one of the big challenges for the Home Office is to ensure that, while there may be more bureaucracy, it tries to make that process as smooth and as digitised as possible, and that is going to be a big ask before 1 January.

Martin McTague: I am really sorry; I can barely hear the conversation. Is there anybody closer to the microphone who could just repeat the essence of that question for me?

Q It was a question about whether or not there is a danger that introducing this system for EU nationals will make the United Kingdom much less attractive as a place for them to come and work, if they have fees and visas to apply for, whereas the equivalent job offer in Dublin, for example, would involve none of that.

Martin McTague: I got the essence of your question. Most small businesses treated EU nationals just as part of the pool of labour; they would not even question where they originated, and it was just a very simple recruitment process. I think that the additional costs will act as a disincentive, but more importantly it is quite hard to persuade a lot of EU employees to stay in the country. They are leaving, and they are leaving with the kind of skills that are in really short supply.

Q My other question relates to the proposals that we were debating this time last year, when the same Bill was going through Parliament, and there was a proposal for a 12-month visa for workers at lower pay levels. That was fairly controversial at the time, but now it has been scrapped altogether, rather than being improved, which some of us would have liked to see. Is that a change that you welcome, or would you want the Government to think again on that? Again, I will go to the London Chamber first.

Richard Burge: If I may start with that, certainly from a London Chamber point of view, and I think from the point of view of all my colleagues around the country, it was hugely disappointing to see that disappear completely from the Bill this time. It was a very sensible scheme. I think it demonstrated flexibility and a willingness to try to respond to helping people get through what will be a permanent change in the market. It is very sad to see it go. We would like to see the route for lower-paid workers—lower-skilled workers—being reintroduced in the same way as it was under the previous Prime Minister’s Government.

Martin McTague: I think I picked that up. We were disappointed to see the disappearance of the 12-month scheme; we thought that was addressing an important part of the labour market, and it is regrettable that it disappeared. Hopefully something can be done to implement something similar.

Q I have a question regarding the change for non-EU migrants where it looks like the thresholds for wages are going to be coming down. The question is particularly for the London Chamber of Commerce and Industry. What impact do you think that that might have on the ability to get migrants with the right skills into the labour market in London and across the rest of the UK?

Richard Burge: It is helpful, because it is creating bigger diversity in terms of availability and access to labour. I think most small businesses, though, or any business will be keen to employ UK-based labour if they can. That is simpler and easier. In the end you do need to have access to global markets. We have to remember that we are a globally trading nation and, in the 21st century, trading tends to be in the skills of individuals and their brainpower and abilities. It is mostly about people rather than things, although we tend to focus on trade as being about things rather than people. The more we can do to keep our borders—within the Government’s requirements in terms of immigration for other purposes, social purposes—as open to people for work as they are for goods and services, the better.

Q How important are social protections, such as access to healthcare or pensions, to the recruitment and retention of employees from the EEA and around the world? Perhaps we can start with Mr Burge.

Richard Burge: They are hugely important, particularly when you are talking about people whose skills are valued less in the marketplace of wages than those of others, so any complexity to that will be a disincentive to employment. I would ask that whatever we do in terms of social security payments and pension provision, we try to make that as simple as possible. They are potentially a huge attractant.

Q I have a follow-up or separate question for you, Mr Burge, about higher-skilled workers and particularly graduates. What can the Government do, or what have the Government been doing, that might continue to make the UK an attractive destination for overseas graduates and EEA graduates in particular?

Richard Burge: The first community I would like to talk about is overseas graduates who graduate from British universities. What the current Government have done to release the block on people who graduate from British universities and come from overseas being able to work is a hugely positive step, enabling people who have been to university here to stay on and work for a year. That is hugely encouraging and hugely exciting, and I think most businesses will be enthusiastic about trying to pick up that market.

In terms of people coming from overseas universities and institutions, I think it is very important that we move ahead on equivalence of qualifications—the transferability of people’s qualifications—particularly in vocational skills. I think we have to streamline that. Obviously, we have to make sure, particularly when they are in life-governing professions like medicine, that those qualifications are rigorously examined, but the more we can move towards a universality of qualifications between like-minded countries, the better. That will help hugely as well, and I think we in the UK should be leading on it. We have the best universities in the world and therefore it is in our interests to make sure we have inter-transferability of those higher-level qualifications.

Q Thank you. Mr McTague, have you any comments on the approach to attracting higher-skilled overseas job applicants?

Martin McTague: I think the key is trying to make sure that graduates or undergraduates are attracted to UK universities, because once they are in that pool of the immediately graduating, they become a much more attractive group for small businesses in particular. It seems that a lot of the barriers that have been put up and are going to restrict the entry of undergraduates are the biggest worry for a lot of small businesses, because they think that therefore they will not have that pool of very skilled labour to draw on.

Thank you.

Q My question is for Richard Burge in particular and concerns international companies in London that might well have existing employees based in Japan, Singapore or the United States who wish to come to London to work as part of their company’s operation. There are also companies that might be based in the European Union whose employees have habitually come to work in London but, under the new regime, will be in the same category as those first workers. My question to Mr Burge is, under the new regime, how will that system function? Will it be an equivalent situation, something that companies can work with easily, or will there be problems for international workers coming to the UK within a company that might even be based in London, but certainly an international one?

Richard Burge: The answer is that I don’t really know. A lot of companies that are already established in places such as Japan will find it easier; for the ones that have operations elsewhere in Europe, this will be a new world. This also comes down to the Home Office being flexible and agile in terms of making sure that we assume positive intent on the part of companies—that they are not getting people into Britain secretly to do full-time work, but that they are in fact part of the transferable market within their company.

We need to address that. It will be complicated, but there are precedents in companies outside the EU, so I think we will use that as an example. It will be more difficult for smaller companies. Increasingly, we find that international companies in London are actually quite small; they are not huge operations. You can find yourself to be an international company in London by dint of the first order put on your website, whereas in the old days you would have spent 20 years developing a domestic market and then you would move internationally. Smaller companies might find themselves potentially hostage to this without realising it. So yes, complex.

I remind hon. Members of the scope of the Bill, which is EEA nationals, EU nationals and Swiss nationals, not the rest of the globe.

Q Thank you for that guidance, Mr Stringer. Of course, EU nationals will be in the same category as non-EU nationals were. Does the Bill provide the equivalence of the posted workers directive? Under EU regulation, under that directive, people can work in other EU member states. Will there be equivalence in this to cover that particular situation, where some workers—particularly people such as lorry drivers but other sectors too—may use that regulation to enable them to work?

Richard Burge: I don’t know. We will look at that and provide you with some written advice on it.

I wanted to ask a follow-up to the question of the shadow Minister, my hon. Friend the Member for Halifax, about the income threshold. In some answers, we have heard about the effect that that might have on particular sectors, such as the care sector. Will you both say more about the regional impact of the provisions of the Bill? Do you have particular concerns for the regions? I understand that Richard Burge is speaking for the London Chamber of Commerce, but I am interested in what other chambers of commerce around the country might be thinking.

Martin McTague: We have made it clear that we think—if I heard the question correctly—that the care sector is a special case and should have a separate visa arrangement, because it does not fit neatly into any of the categories that we might like to define under normal immigration rules. It is clear from the experience that we have had over the last few months that this sector is under massive pressure. Any major changes would be disastrous.

Richard Burge: I would agree to the extent that I think that the care sector is a special case, but we need to make sure that the definition of the care sector—in terms of immigration—runs alongside what I hope is emerging in the Department of Health, which is a much closer definition of what care is, bringing it in. Certainly, the Health Secretary has been trying to say that care is as important as the NHS, so I think that it needs much more careful definition.

In terms of the regional perspective, we are a country of many parts. For instance, on the lower wage threshold, I am deeply worried that, particularly in essential services—care being among them, but also things such as porterage in hospitals—in many parts of the country this is not a sufficiently low level of wage to enable us to get people in who technically have lower skills but are in high demand. There needs to be a more nuanced approach to this in order to respond to the different economic circumstances in different parts of the country. My colleagues in other chambers think that I am quite fortunate being in London, where this wage level will get us through most of our problems but will not get them through theirs.

Q Do you feel that by 1 January there will be a regime in place that will be sufficiently efficient to ensure that members of the Federation of Small Businesses will be able to have confidence that the scheme is going to work well for them and the requirements of their business? I am mindful of the very difficult situation that we are in with covid-19, as has been said already, and the bandwidth that is available in government at the moment.

Martin McTague: The short answer is that the time available is far too little for most small businesses to adjust to what is a completely alien system. It is relatively easy for the larger businesses with HR departments to make this adjustment. They may already be recruiting tier 2 employees, but for most small businesses it will be extremely difficult and costly. I think that all it will mean is that most of them will decide to scale back their operations and make sure that they adapt to a new world that has fewer skilled people.

Richard Burge: My view is that most small businesses will be able to get through this, if they know the rules soon enough, if there is a process by which they can use umbrella licensing, and providing that new systems are put in place by the Home Office. I think that is the critical thing. As I said, I have huge respect for the Home Office under the leadership of Matthew Rycroft and his team, but they are dealing with things such as covid-19 issues on immigration, refugees arriving over the channel, the situation in Hong Kong, and the immigration surcharge. They have a huge job list to do—and this is the only one in which they have a choice about the timing. I hope that the Home Secretary will be looking internally at the Home Office and its capability to deliver things that will then enable business to respond in a timely manner. I am concerned about the pressure being put on them.

Q Since we have a little time left, to what extent does the shortage occupation list offer a partial solution to some of the challenges you face? We sometimes hear criticism that it is slightly unwieldy, slow and unresponsive. What is the experience of your members—from the London Chamber first?

Richard Burge: It is slow and unwieldy and should be faster. One way of improving that is to involve businesses much more directly in analysing what a shortage occupation should be. We can rely on businesses who are asked to join, say, an industry body, to work alongside the Migration Advisory Committee on that work. We can rely on them to be forthright but not to plead special interest. It needs to involve business much more directly and that, it is hoped, will enable it to be much more responsive to the marketplace. The marketplace is going to change very dramatically over the next 12, 18 or 24 months, and we do not really know how it is going to change, so we have to be light of foot.

Q Mr McTague, what is the experience of your members with the shortage occupation list?

We seem to have a technical problem. While we are trying to sort that out, are there any questions to Mr Burge?

Q One final question, if I may, Mr Stringer. It is a broader question about the nature of this Bill, since, obviously, this morning we are going into the fine detail of a future immigration system. In fact, the Bill is pretty much silent on that and essentially hangs the powers to put that system in place on the Home Secretary. That would be the end of MPs’ involvement to all intents and purposes. Is that the appropriate way to go about making immigration policy?

Richard Burge: It is up to you in this House to decide how you use legislation to maintain scrutiny of Government. We would ask that, whatever means are chosen—through primary legislation or regulation—it is done in a transparent way and involves us. Instead of us in business being told what is happening, we should be involved in those discussions and make them as transparent as possible. As far as I can see, employment and immigration are not a national security issue; it could be discussed much more openly and transparently. We can resolve differences through public dialogue rather than through private discussion.

May I just check that Mr McTague is there? Apparently, he is not. We will try to get him back.

Q Just while we are waiting to reconnect, I notice that the London Chamber of Commerce and Industry sometimes speaks on behalf of other chambers—in your answers you have said a number of times, “And my colleagues in other chambers.” What dialogue have you had with, for example, the Scottish chambers of commerce and others around the country to speak on their behalf?

Richard Burge: Just quickly, there is a thing called the British Chamber of Commerce, which is a hub body.

Q The Scottish chambers of commerce are not part of that.

Richard Burge: No, but individual chambers—the 53 member chambers across the UK—are members.

Q So only eight in Scotland.

Richard Burge: That is right. There are 53 accredited chambers.

Q So just to check for the record, a large proportion of the chambers that you are speaking about are not the Scottish chambers.

Richard Burge: No.

Do we have Mr McTague?

Martin McTague: Yes, I am here. Sorry, the line dropped.

Q Thank you, Mr McTague. Sometimes the shortage occupation list is said to be an answer to some of the issues that you have flagged up this morning. At other times, we hear criticism that the shortage occupation list has been a slow and clunky process. What has been your members’ experience of the shortage occupation list?

Martin McTague: The principle of the shortage occupation list is a difficult one for us, because it is a fast-moving situation and the shortage occupations can change from week to week and from month to month. It is better for them to be in a general category, but it is rather bureaucratic and clunky. It is a situation that we are prepared to stomach rather than appreciate.

Q How would you try to improve it?

Martin McTague: Sorry, I could not quite hear that.

What improvements would you want to make to the procedure?

Martin McTague: I would like to see a much more active engagement with business representative organisations so that, if there are changes, they can be quickly implemented and we are not waiting for a long, drawn-out bureaucratic process to work its way through the system. It is about keeping as much flexibility in the system as possible.

Q My final question to you, Mr McTague, is a broader question about the Bill. We have spoken a lot about the future immigration system that has been proposed by the Government, yet the Bill is pretty much silent on that. In fact, it is basically just handing a blank cheque to the Home Office to implement that. Do you think that is the best way to go about scrutinising and making immigration policy, or would you prefer to see the rules made in a different way?

Martin McTague: I am really sorry, I can barely hear you. It is echoing and distant. Could someone closer to the mic help me?

Can you try one more time?

Q I will try again, Mr McTague. It is a broad question about how we make immigration policy. This Bill essentially gives the Home Secretary the power to put in place a system with limited scrutiny and oversight from Parliament. Do you think that is the appropriate way to go about things or would you prefer to see immigration policy made in a different way?

Martin McTague: I think the fact that the Home Secretary is in a position to vary it and respond to changes in market conditions is better than if it was written on the face of the Bill and we had to go through some sort of legislative process to get changes made. In terms of flexibility, my vote is for the most flexible system we can adopt.

Q Is there no way you can have flexibility but with parliamentary oversight?

Martin McTague: Sorry, can you say that again.

Flexibility does not mean that you cannot have parliamentary oversight, does it?

Martin McTague: No, it is not that. I think the Home Secretary will be answerable to Parliament about the decisions that she or he has made. That would be a way in which Parliament could ensure there was proper scrutiny. There needs to be a system that can respond in real time to some of the really big changes in market conditions. They will be even more marked in the coming months.

Q Yet, ironically enough, you have spent most of your evidence saying that the Home Secretary was not responding to what business was saying at all.

Martin McTague: I’m sorry, I am struggling to hear you.

I will stop digging there.

Martin McTague: I apologise.

If there are no further questions, I thank Mr Burge and Mr McTague. These are not ideal conditions, but thank you for giving us valuable evidence this morning.

Martin McTague: Thank you for bearing with me.

Good morning, Mr Fell. The Bill Committee will now hear your oral evidence. I am sorry about the technical hitches; you will be on your own, not with Make UK.

Thank you very much for agreeing to give evidence today. If you would like to briefly introduce yourself, we can move straight to questions. We have about 10 minutes.

Matthew Fell: I am Matthew Fell, chief policy director at the CBI.

Q I will ask one question, because of constraints of time. How do you see your members working with the proposed new migration system?

Matthew Fell: I think our members completely understand that free movement of people is ending. Business gets that, and it is ready to phase into a new immigration system. I think, with the proposed approach of a points-based system, it is entirely possible to design a system that works for business. There are many positives in it so far—the headline salary threshold changes that have been announced and the commitment to streamline and improve the system are all positives—but I would say that there are perhaps three areas of concern for our members at the moment.

One concern is the absence of any route at all below level 3, which will prove challenging for the care, hospitality and logistics sectors and so on. The second, from the Government’s perspective, is introducing this with a phased approach; I can perfectly see where they are coming from, but it means that business will be left with a reasonably cumbersome system from the off, with a promise of improvements to come. The third is that we are getting very close to the deadline for the system being introduced, and business is still looking for further clarity, time to prepare and assurances that the system will be ready in time. Those are the concerns, against a backdrop of an effort to really make this work and lean into it.

Q Bearing in mind what you have just said, what are the things that you would really like changed about the Bill? Alternatively, what would the Government need to do to support you to manage the impact that it will have on your businesses?

Matthew Fell: There are a few things that we would like to see in the proposed new immigration system. We believe that a temporary route for people to come and work in this country would be a helpful addition to the system as it is currently set up.

Secondly, I would say to accelerate efforts to streamline the proposed approach. The vast majority of businesses have never previously had to engage with the visa system; something like only 30,000 businesses in the country have grappled with it so far, because we have lived and worked with free movement of people for so long. It will be a big change, so I would say to accelerate the changes to streamline and improve the system, reduce red tape and so on.

The final piece, just to reiterate, is to accelerate efforts to get clarity and detail out there and known to businesses as soon as possible, so they can begin to familiarise themselves, prepare and get ready.

Q Last year, when you gave evidence to the Bill Committee, you described tier 2 as a

“restrictive, complex and burdensome system.”––[Official Report, Immigration and Social Security Co-Ordination (EU Withdrawal) Public Bill Committee, 12 February 2019; c. 67, Q178.]

Could you say a little more about what you mean by that?

Matthew Fell: There are a couple of areas. It comes down to some of the red tape issues, and there are a few examples. The initial sponsor licence, businesses tell us, is very document-heavy, in their words—for example, on the HR practices side, having to evidence, track and monitor things that small businesses feel are perfectly obvious. If they employ 10 or up to 20 people and one person is missing, that is self-evident; they know if a person is not there.

There is quite a lot in the reporting requirements that could be streamlined. Lots of people say to us, “We have to report it if a migrant’s pay has increased, and we don’t quite understand why. If they were already given the green light because they cleared the salary threshold, why would we need to report that that has increased?”

Thirdly, people feel that the volume of documentation required to be kept on file, including details such as notes from interviewing candidates, is quite onerous. Those are some of the examples of red tape burdens that we would welcome efforts to streamline.

Q May I also ask about the costs that will be involved now? How much more expensive will it be for businesses who have never done this before to recruit workers from the EU?

Matthew Fell: There will be a significant uplift in cost, particularly for businesses that have never grappled with this before. There is an ongoing cost, but there is also a first-time familiarisation effort that will cost more, particularly for small businesses. Larger companies who deal with high volumes of people are likely to have in-house HR and legal expertise. That is much less likely to be the case for small and medium-sized businesses, who will need to pay for external advice to be able to navigate this new system.

Q To turn the question around a little and look at it from the perspective of prospective employees as opposed to employers, if somebody has a job offer in London or Dublin, is there a danger that imposing the tier 2 system is going to make London much less attractive than Dublin, if they are faced by, for example, visa fees and visa applications and immigration health surcharges?

Matthew Fell: That is an issue. It is an issue that companies will look at, for example, if they were a multinational business and they were choosing the location of business, so it is true from a business perspective. From the employee perspective, it might be down to the speed with which they can get certainty—“Can I go and live there and know that it is okay?” Clearly, there are others who would speak more for the employee perspective, but that would be my perspective on the employee view.

Q How important is access to social protections such as health cover or protection of pension rights to the recruitment and retention of EEA nationals?

Matthew Fell: I think it is an important factor. It is quite hard to say exactly where the detail of that lands, particularly in the context of the EU-UK negotiations that are ongoing; we will need to see where they land. Social security measures and the issues that you have just described are really important for reciprocity—not just migrants coming to work in the UK, but UK workers overseas—and that reciprocity is particularly important for mobility of labour as well as for migrants coming to work in the UK.

Q In terms of highly skilled workers, including graduates, what is in place to support employers to access the skills that they need?

Matthew Fell: I think that bringing the skill threshold in the Bill down from degree to A-level is a positive change. That is a highly positive move that the CBI supported and which clearly broadens out the range of roles that can be addressed through that route. The issues are less about whether they can clear a threshold in terms of the work; they are more about the system costs and streamlining the red tape that I was describing. That is what would be most helpful.

Of course, even with that skills threshold reduced down to level 3 or A-level equivalent, that still leaves out many important roles for which businesses will find the transition and the adjustments quite hard to address in the short term.

We have just over a minute for a very quick question and answer.

Q I just wanted to ask what your views are of any regional implications of the changes that are to be introduced by the Bill.

Matthew Fell: The regional implications will be down to where there is a particular proliferation of types of sectors within a regional make-up. Some of the ones that we think are quite hard hit are care workers, general labourers in construction and the hospitality sector, as well as logistics. Hospitality is very much a regional industry, and that could be one that bears most of the brunt.

Mr Fell, thank you very much for giving evidence to us. We found that very valuable. I am sorry about the technical difficulties we had getting through to you. We now move to our next witness.

Examination of Witness

Welcome to the Committee. I apologise for the difficulties we had before. You will be on your own. First, can you introduce yourself to the Committee for the record, and then I will ask the Minister to ask you a question?

Tim Thomas: My name is Tim Thomas. I work for Make UK, the manufacturers’ organisation. I am Make UK’s director of employment and skills policy, so I cover all work-related issues and a few political issues, including immigration policy.

Q Mr Thomas, how do you see the manufacturing sector working with the proposed new migration system?

Tim Thomas: Sorry, could you just repeat that? It was a bit echoey. Apologies for the line.

I will say it slowly; it will sound weird. How do you see the manufacturing sector working with the new system?

Tim Thomas: In terms of how the manufacturing sector will work with the new system, it will be a considerable challenge to cope with the end of free movement. Around 95% of our members employ an EU worker and about 5% employ a non-EU worker, so the majority of Make UK members do not currently interface with the tier 2 non-EU migration system. There will be a considerable change for manufacturers’ recruitment practices with the implementation of the points system.

It is fair to say that the changes to the proposed points-based system for manufacturers will ease the route. The reduction in the qualification level from level 6 to level 3 and the reduction in the salary threshold will make things easier for manufacturers than they would be. However, manufacturing is a global business; about half of manufacturing exports go to the European Union, and they cannot export their British-manufactured goods to the EU without an exchange of people. People, and the cross-fertilisation of people between the UK and the EU, go hand in hand with trade in manufactured goods. There is a strong connection with the EU and global trade in the manufacturing sector, and the ability to recruit people from outside the UK is vital to that trade.

Q As free movement comes to an end, Mr Thomas, how satisfied are you that the Migration Advisory Committee and the shortage occupation list understand the requirements of the manufacturing sector and are able both to respond to potential shortages in skills and to understand the variety in salaries paid in your sector?

Tim Thomas: At Make UK, we have responded over several years to calls for evidence from the Migration Advisory Committee, and we are preparing our response to the current call for evidence. If I may make one point before I come to your question, the call for evidence from the MAC has a very short window for Make UK and other organisations to respond. That is because the points-based system is being implemented on a very truncated timeline. In gathering the evidence for the MAC, Make UK and other organisations face a stiff challenge in ensuring that our response is evidence-based and provides a realistic forward look at the manufacturing sector and the jobs we will need in the future.

As for how realistic the MAC can be in its work and how realistic we can be, covid-19, the changes to the manufacturing sector and the difficulties it is in have presented a challenge in showing the MAC the true state of what occupations are in shortage in our sector at the moment. The manufacturing sector systemically suffers from long-term skills shortages—we are no different from any other western European economy in that regard—and that is not because manufacturers do not train. About 75% of manufacturers have apprenticeship programmes, and Make UK is an apprenticeship provider. We are investing in training the next generation of talent, but the fact is that there are certain skills, including digital skills, that are not available in the UK, and we need them to make sure the manufacturing sector is internationally competitive and productive. In terms of the work of the MAC, it needs to take a realistic view of what the UK labour market can provide, given those skills shortages and how long it will take it to adjust at the end of free movement, given that those skills can be brought in through the points-based system.

There are some key elements of the manufacturing sector for which workers tend to come from the European Union. One is new green technology. We all support the move away from an economy in which electricity generation is carbon-based, towards clean energy. Clean energy is something that our members are investing large amounts of resource in. A lot of those skills, simply because the technology has been deployed for longer in the European Union, exist in, for example, Germany and Denmark to a greater extent than they exist in the UK. Accessing those green skills—those environmentally friendly skills—and that new technology is something that most people would support. We just need to make sure the MAC captures the fact that those skills are in shortage in the UK at the moment.

We have very limited time, and three Members are indicating that they wish to ask questions, so please make the questions and answers brief.

Q Mr Thomas, in your first answer you mentioned that 95% of the workers in production and manufacturing are from the EU. What proportion of that percentage are UK workers?

Tim Thomas: With great apologies, I could not catch much of the question. Could you repeat it? Is it possible to come closer to the microphone?

In your first answer you said that 95% of workers in production are EU nationals. What percentage of that are UK workers?

Tim Thomas: Apologies—what I said was that 95% of our members employ an EU worker. Across the whole of the sector, we employ between 2.7 million and 2.9 million workers, of whom about 330,000 are EU workers.

Q Given what you said, Mr Thomas, and everything that is going on, would it be helpful for the implementation of the new immigration system simply to be postponed?

Tim Thomas: I think that would simply lead to more uncertainty among manufacturers. We expect the UK Government to implement the new points-based system on the timeline that they guaranteed, and to provide businesses with the full suite of material—the statutory instruments and guidance—by the end of the summer at the latest so that we have a significant period to familiarise ourselves with it before January. If we delayed implementation, that would cause more uncertainty among businesses. Clearly, we need time to adjust and to see what the new system is. However, we naturally do not want a delay to the implementation date.

And, quickly—

Order. No, sorry. Robert Goodwill, very briefly.

Q Many of the concerns about being able to get skilled workers such as engineers were expressed before the current covid crisis. Do you think that, in the new situation that we will be in, there will be lots of British workers with these skills looking for work? Therefore, if it is slightly more difficult to get in an EU worker, it might actually benefit British workers looking for jobs in your sector.

Tim Thomas: I understand the point that you are making, but our issue is with the type of skills that we need. I mentioned green skills, and we also need digital skills. We need a range of skills that are not available in the UK labour market. We are training domestic UK workers for them, but in the meantime there is a skills mismatch between what employers need and what is available in the UK labour market. There may be some mitigation, but I would say that we are still going to need non-UK workers for the foreseeable future, until we develop those skills in the domestic labour market.

Mr Thomas, thank you very much for the full evidence that you have given. It is valuable and I am sorry about the technical difficulties that we had in getting through to you.

Tim Thomas: Not at all. Thank you for your time.

We shall now hear oral evidence from the Migration Advisory Committee. May I take this opportunity, while the witness is coming in, to remind hon. Members about the scope of the Bill. It does not encompass a points system. I did not want to interrupt the previous witness, given the problems that we have had, but perhaps we can remember the scope of the Bill.

Examination of witness

Brian Bell gave evidence.

Mr Bell, thank you very much for coming today. I remind members of the Committee that at 11 o’clock the bell will ring and there will be a minute’s silence for George Floyd. We will stand for that minute. Would you like to introduce yourself, Mr Bell, for the benefit of the record?

Brian Bell: I am Professor Brian Bell. I am the interim chair of the Migration Advisory Committee and professor of economics at King’s College London.

Q I will start with perhaps a slightly more general question. The Migration Advisory Committee has recommended that in the context of the Bill ending free movement with the European Union there should not be a dedicated general route for employers to recruit at or near the minimum wage from outside the UK and the Republic of Ireland. Would you like to explain to the Committee the reasoning behind that recommendation?

Brian Bell: If you move to a system in which you take control of immigration and are no longer subject to free movement under the European Union, you essentially have to have a selective immigration policy, and the question is where you think that selectivity should be. All the evidence that the committee reviewed in its 2018 report pointed to the benefits to the United Kingdom being highest when we focused on high-skill immigration—often high-wage immigration—and the gains, to the economy as a whole and also the resident population, which is our key metric, as it were, being highest with those kinds of workers. If you are going to have any kind of selectivity, that is where you want to tilt the balance, as it were.

That does not necessarily mean that you do not have any access to workers at low wages and with lower training or educational requirements. There are other routes that are already available within the system for immigration. For example, the family route allows you to recruit people who come through the family route for immigration, and there is the asylum route—once applicants are granted asylum they can be employed in the United Kingdom without regard to their skill level. There are alternative routes, and in fact that is extremely common. There are an awful lot of non-EEA workers employed in British firms across sectors who would not meet the requirements of the new immigration system but still have a job because they can come through different routes.

At the end of the day, there is a crucial distinction that we draw. With jobs where the training requirement and the education, both academic and vocational, to begin that job are reasonably low, firms can actually compete against each other, and we sort of want firms to compete against each other for workers, because that is good for workers; whereas for more technical, highly skilled jobs with very high training requirements there is often a practical difficulty in getting a new supply if you need it. You cannot just turn on the tap, so migration is a more obvious response for that.

In terms of that general route for recruitment, the MAC made some specific comments on the care sector, again in the context of the Bill ending freedom of movement. It was very specific against a sectoral scheme. Could you explain some of the rationale for that?

Brian Bell: The first point to bear in mind when thinking about the social care sector is that it is often described as being dependent on migrant workers. Nothing could be further from the truth. Something like 80% of those working in the social care sector are British, so actually it relies on British workers. The European Union is a relatively small fraction of the social care employment sector relative to the economy as a whole, accounting for about 5% of it, depending on which statistics are used.

We do not think there should be a particular route for social care because we think that immigration has historically been used as an excuse to not deal with the problems of the social care sector. The problems of the social care sector are fundamentally nothing to do with immigration. They are to do with the fact that, frankly, Governments of all stripes have failed to grasp the funding issue of social care. If people say that the response to the social care issue should be, “Well, employers should be allowed to bring in as many migrants as they want at the minimum wage,” first, that does not sound like the low-wage problem of the social care sector is being dealt with, and secondly it suggests that one of the groups that will really suffer from that is the social care workers. You are saying that you are going to keep on allowing their wages to be held down by allowing employers to bring in workers at the minimum wage, whereas we want to see wages rising in that sector. That will not happen if there is a continuous supply of free labour from abroad willing to work at the minimum wage.

Q Some of the earlier witnesses—particularly those from the London Chamber of Commerce and Industry and especially from the Federation of Small Businesses—talked about the need for flexibility when it comes to those sections of the Bill setting how we will empower Ministers to set the future migration system. Given that the Migration Advisory Committee’s role is to provide expert advice to the Government—to myself and the Home Secretary—how do you see it being able to respond to the demands of the new system in the context of the Bill?

Brian Bell: The Migration Advisory Committee has a key role in making sure that we keep a pretty constant view of what is happening across sectors, occupations and industries as the new system is rolled out, to see where problems are emerging. When you switch from a system that has been running for 40 years to a new one that incorporates all European Union countries as well, there will inevitably be teething problems. It would be surprising if that were not the case. We will be focussed on looking for the evidence: where is the system having problems? We will be highlighting those to the Government, and we can do that. We have an annual report that we will be publishing, and we will be highlighting to Ministers where the problems are, as well as potentially what solutions might be available.

Q The Migration Advisory Committee also advised specifically against having regional variations in the migration policy, specifying that there should not be any in the Bill. Is there any particular reasoning behind that recommendation?

Brian Bell: We were asked explicitly to think about whether there should be regional variation in the salary thresholds that are a key part of the system. The easiest way to answer that is to think about the fact that the median wage in Edinburgh for a full-time worker is higher than it is in Newcastle, Manchester, Leeds, Birmingham, Cardiff and Belfast. Compared to Dumfries and Galloway, it is 25% higher. In other words, regional wage variation—if by that you mean either the nations of Britain or the regions of England—demonstrates that variation within those areas is much greater than variation across them. If you really wanted to go down that route, you would need an immigration system that set thresholds in every local community around Britain. I do not quite know how that would be enforced. You would be explicitly saying that low-wage areas should stay low-wage areas and that high-wage areas should stay high-wage areas. I am not sure that it is a very sensible policy.

Q Just to come back to the points you made about social care, I am inclined to agree with a great deal of what you have said about social care. There will be a shock to the social care sector delivered by that cut-off when free movement comes to an end, combined with—we hope—the UK’s emergence from the coronavirus pandemic. We have heard concerns about the Migration Advisory Committee, including concerns that it is not particularly dynamic. When you factor in all those considerations, would the committee need to do a lot more to assess shortages in social care workforces at that moment in history?

Brian Bell: I think I can answer that, hopefully. At the moment, the Migration Advisory Committee is being asked to report on the shortage occupation list for the new system. We will report in September and we are taking evidence at the moment. Senior care workers are eligible for the new system.

Q When you talked about those who fall below the skills and salary threshold not being considered by the MAC, is that not entirely the problem with this approach? Are we still not identifying where there are workforce and skills shortages because we are looking at only half of the workforce?

Brian Bell: About 60% of the workforce are RQF3 and above. Again, in a sense it goes back to my first answer: if you are going to have a selective policy, you need to draw the line somewhere. To the extent that you say, “This sector should get an exemption,” you really need to say that what that means logically is that we are going to take away some of the other occupations and say they are not eligible any more, or we are going to make the system more liberal and expand the remit. In one sense that would be fine. Fundamentally, it is a political decision as to where you draw that line. You could have completely free movement for the entire world if you wanted it. No other country does that, but that is a choice. Our evidence was that if you are to draw that line favouring the higher paid and higher skilled, it is better for the UK economy and the public finances as well.

The one thing I can guarantee is that we will look carefully at what happens in social care going forward. To the extent that the system causes problems for them, we will report on that. There is not quite a knife edge. It is sometimes described as a knife edge, but it is not. Every single person who is a European Union citizen who is employed on 31 December will still be employed on 1 January. There is no requirement—the stock will stay the same. What will change will be the flow coming in. In the EU settlement scheme, some 3.5 million people have applied already.

Q I am very mindful that you are from the Migration Advisory Committee. Given what you have just said about analysing and reforming the shortage occupation list, do you also think that, having identified the gaps, there should be a role in informing domestic skills policy as well as migration policy?

Brian Bell: Absolutely. If we identify an occupation that we think is in shortage, I consider that essentially a failure. You might not think it is a failure if there has been a big increase in demand for that sector, so the sector suddenly sees a large increase in the demand for its product. In the short run, there might be a shortage in terms of getting the appropriate labour for that—that is fine and makes sense—but often the shortage occupation list identifies a failure of the British education system to provide the people who are needed. A classic example of that is nurses. Nurses have been on the shortage occupation list since I can remember ever hearing of it. Every time they are put on the list, we hear statements along the lines of, “Yes, we know that they are in shortage, and we have a plan to increase the number of nurses who go through training so that we deal with the shortage in the long run.” They are still on the shortage occupation list. We should be using the shortage occupation list to signal both to Government and to employers that there are training needs that need to be fulfilled.

Q Professor Bell, you referred to the care sector, but another sector that I am sure regularly makes representations to the MAC is the agricultural sector. We often read stories about crops rotting in the fields if we cannot get enough people to work there. Indeed, the Government have a seasonal agricultural workers scheme for non-EU workers. Do you feel that the provisions in the Bill will accommodate the needs of agriculture, or will the sector continue to need special exemptions to allow that to happen?

Brian Bell: The seasonal agricultural workers scheme is probably the only sectoral scheme that the MAC has recommended as a good idea. That is because it is truly unique. I think the statistic is that 99% of seasonal workers in agriculture are not from the UK, which makes sense. As it is directly seasonal, the job does not fit with people who live in the UK and who want a year-round job to make a living. Most countries have some type of seasonal workers scheme, and I would be surprised if there was any argument for why we would get rid of that. It is in a pilot at the moment; as I understand it, the pilot is going well.

Q So you think that the current scheme should be extended to include EU workers. Can they come under the provisions in the Bill?

Brian Bell: Actually, that is a good question. It would be a question for Government. If there is a seasonal workers scheme, and we have removed the special entitlement of European Union workers in terms of access, there is no reason why the seasonal workers scheme should not be open to people of any nationality, but that is a question for Government.

Q Finally, do you carry out any analysis of the economic impact of workers who come here, put down their roots, bring up their children and pay their taxes and of workers who may well see their time in the UK as being short, who send a lot of the money back to their families, and whose children are in education in other countries? Do you carry out any analysis of the impact on the UK economy of that type of immigration?

Brian Bell: One thing that we have done, which is particularly important for public finances, is think about different types of immigrants, such as a migrant who comes to the UK and then makes their home here. We often highlight how migrants in general are positive for public finances. When we see them before they get permanent leave to remain, they are often not bringing their family or they are only just forming a family unit, so they are not using public resources but they are paying in taxes. Once they have permanent leave to remain and either become British citizens or stay here permanently, they begin to cost the Exchequer because they tend to start using schools and the health service. From a purely public finance perspective, you would like migrants who just come, pay their taxes, do not use any of the resources and then leave. We have done that kind of analysis. We have done less analysis in thinking about the broader questions on what the benefits are to British society more generally of having migrants who come to the UK and stay for a long time.

Q Is it more likely that EU workers will come and stay? If they are deterred from doing so, we might have more workers from outside the EU, who might not stay so long.

Brian Bell: I certainly have not seen any evidence of that. It is a difficult one, because there has been a different rule up until this point in time. I have not seen any evidence that suggests European Union workers are more or less likely to stay on a long-term basis than non-EU workers. The data are not very good on that kind of thing, but it would be an interesting thing to look at.

Q Professor Bell, may I take you back to what the Minister asked you about regional variations? It is important to be precise about exactly what the MAC recommended. The Minister suggested that the report recommended against regional variations, but you were very careful to say that your report addressed regional variations and salary thresholds. The MAC was not looking at the broader issue of regional visas or devolution of immigration control.

Brian Bell: That is correct. Immigration is a reserved matter, so we were asked to report just on that.

Q On the salary threshold?

Brian Bell: Yes, on the salary threshold.

Q Is it fair to say that your report says the decision was finely balanced, that there were arguments on both sides and that the majority of people responding to the consultation supported the idea of regional variations in salary threshold?

Brian Bell: I agree it was certainly finely balanced, although there was an extensive discussion on the maths. It is fair to say that that was primarily driven by Northern Ireland. The differences in wages between Northern Ireland and the rest of the United Kingdom are more significant than in other devolved Administrations, and they had different issues because of the land border.

You are probably right that the majority of our respondents were in favour of it. That partly tells you that when you call for evidence, you get very interested parties on one side, and not many on the other. A classic example is that when we did our major report in 2018 on the impact of immigration from the European Union, we got some 450 responses, almost none of which were not in favour of freedom of movement. Almost all were kind of in favour, which did not properly reflect what the British people as a whole thought. That is the nature of a call for evidence.

Q The report called for a pilot scheme about our remote areas. What was the reason for that, and are you troubled in any way that the scheme seems to have since disappeared?

Brian Bell: The reasoning was that we received reasonably strong evidence, not just from Scotland but from other areas, nations and regions of the United Kingdom, that there are rural communities that find it difficult to recruit in the way that employers can in more urban and suburban areas. Often those employers are key to that small community, so they are sometimes more important than your average employer in a big city. That was our thinking about that.

We suggested a small pilot—it is important to emphasise that we thought it should be a small pilot. Such a scheme has clear risks, two of which I suppose I should highlight. One is that you issue a visa to someone and say, “You have to stay in one small area, with one employer, and you cannot move, because it is a rural scheme.” We generally do not like the idea of saying to workers that they have to stay with one employer, because that gives the employer lots of power and does not give the worker much power. There is an uncomfortableness about that kind of scheme.

The second problem is our worry that it does not deal with why rural communities are losing population. As soon as you have this type of scheme, you might get an immigrant to go there, but as soon as they have freedom to move—for example, if they get permanent leave to remain and can go anywhere in the UK—if the reasons why people in those communities do not want to stay in the first place still exist, why would we not expect that migrant to move as well?

There are problems, but we recommend the scheme. As I understand it, the Government have not yet decided whether to have such a pilot or not. If I have to be honest, part of that is because an enormously complicated system is about to be introduced. You want to go in steps, so the Government are focused on the main work route at the moment.

Q I appreciate that there are challenges, particularly around tying a person to an individual employer, but that is not dissimilar to what we do now with tier 2. There are procedures to transfer to another employer, if criteria are met. That is a something worth exploring. In relation to Northern Ireland, did the report go as far as saying that consideration should be given to regional variations in salary there?

Brian Bell: We did not go as far as that. We said that we thought the argument was most compelling in Northern Ireland, but in the end we did not think the differences were quite big enough to justify having the more complicated system.

Q Is that simply because you could be an employer in Northern Ireland and just a few miles down the road somebody is able to access labour without reference to tier 2, experience, salary thresholds or whatever else might be in place?

Brian Bell: There is a clear difference because of the border. To be clear, the shortage occupation list that we are reporting on at the moment has the ability to have a Northern Ireland SOL that is separate from the UK-wide SOL. If there are representations made to us that there are particular recruitment problems in Northern Ireland in some occupations, that are not true for the UK as a whole, we have the ability to recommend to the Secretary of State that they be put on the Northern Ireland SOL but not on the UK-wide SOL, as is true of Scotland.

I think—

I call Kate Green.