Dame Harriett Baldwin
MP for West Worcestershire · Conservative · United Kingdom
“I welcome the Chancellor to his new role. I paid close attention yesterday to the long speech he made to reset the narrative and drive growth Britain. In paying tribute to his predecessor, will he recognise that she left the highest tax burden on record? Instead of postponing the words he could utter to my hon.”
“I welcome the new Prime Minister to the Dispatch Box. I note that in his statement he referred to the biggest issues facing the country as being “the economy and the cost of living crisis”. Will he accept that one of the things that has damaged our economy and caused prices to be higher is the tax-and-spend Budget in November 2024?”
“Could the Leader of the House make a commitment that the new Chancellor of the Exchequer will come to the House on the first day we are back from recess?”
“With a stroke of his Whitehall pen, the Secretary of State has just abolished Malvern Hills district council, Worcester city council, wonderful Wychavon district council and Worcestershire county council. He said in his statement that this is about making “real improvements to people’s lives and…communities”.”
“In recent weeks in West Worcestershire, I have met local police and the police and crime commissioner; the police and crime commissioner is being abolished, and the police are being reorganised. I have met the local health commissioners; they are being reorganised, and Healthwatch is being abolished.”
“Will the Leader of the House confirm that, given that the other place is sitting next week, there is nothing to stop him tabling a business statement to enable this House to sit next week? Given the enormity of the events happening in the Government next week, does he not think that would be a good idea?”
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“If insurers pass on the increase, it will affect businesses and households, particularly by increasing the cost of their property and motor insurance. However, we expect that any impact on consumers will be modest. Most households and businesses have some form of general insurance and any impact of a rate rise is therefore shared by a large number of people and organisations, as we have heard. To give some idea of what that means, if insurers chose to pass on the whole increase, the average household expenditure on insurance would increase by 70p per week. We do not anticipate that the tax increase will reduce the number of people taking out general insurance. Even if insurers choose to pass on the increase, any increased costs will be a very small proportion of the overall cost of insurance.”
“Some 80% of the insurance market is exempt, including reinsurance, long-term insurance such as life insurance and permanent health insurance, and the permanent health insurance that is used to pay for critical illness insurance. Travel insurance and insurance that people purchase on warranties with, for example, white goods, is already charged at the considerably higher rate of 20% to prevent VAT avoidance. That, too, is unaffected by the change. It is important to remember that there is no VAT overall on insurance. The new rate for the taxable insurance premiums will begin to apply with effect from 1 November 2015. In the tax year 2016-17, it will raise an extra £1.4 billion, which can be used to reduce the deficit.”
“In responding to the debate, I hope to touch on many of the questions that have been raised by hon. Members. Clause 43 increases the standard rate of insurance premium tax to 9.5%. The policy will increase the revenue raised from the tax and help to close the deficit. Before I turn to the amendment, I will cover some of the points that have been mentioned. I confirm that the insurance charge includes the gross premium that the insurer chargers, including the broker commission and any other directly related costs. It is a charge on the insurer rather than on the individual. It is due on general insurance, which accounts for approximately one fifth of insurance premiums. As we have heard, it includes motor insurance, home insurance, employers liability insurance and medical insurance.”
“The Government have been working hard with the insurance industry to develop the Flood Re scheme, which will continue to allow insurers to offer affordable home insurance. The hon. Member for Kingston upon Hull North (Diana Johnson) and I both have constituencies where there are a lot of flood-prone properties—I pay close interest to the topic. Of course, properties built after 2009 will be exempt from the scheme because we do not want to incentivise builders to build in flood-prone areas.”
“Those actions have been welcomed by both industry and consumer groups. The insurance fraud taskforce is due to report at the end of the year with suggestions on how further to reduce the cost of insurance fraud. In the summer Budget 2015, my right hon. Friend the Chancellor announced a further consultation to establish how to introduce a cap on fees charged by claims management companies, and a fundamental review of the regulation of claims management companies, which is due to report in 2016. I note with interest the point my hon. Friend the Member for Croydon South made about banning outbound calls. More generally, the Financial Conduct Authority is working on how to encourage people to shop around for insurance, which will ensure that people find the best deal for their circumstances and that the market remains competitive.”
“I will come to the distributional points raised by questions from hon. Members but, with the greatest respect, the situation the hon. Lady describes would be unaffected by the changes the Government propose this afternoon. We heard from my hon. Friend the Member for Croydon South (Chris Philp) that the increase must be seen in the context of significant Government action to reduce costs for the insurance industry and for motorists. We are taking a lot of action to reduce insurance fraud. According to the Association of British Insurers, insurance fraud alone adds an average of £50 a year to average household insurance costs. Our previous action to reduce the cost of fraudulent claims includes a ban on referral fees in personal injury cases and reform of the regulation of whiplash claims.”
“I am able to reassure hon. Members on the impact on young drivers’ insurance premiums. Young drivers pay a much higher premium at the moment, but the overall cost impact of this change for young drivers in their 20s is estimated to be 25 pence a week and the overall impact for a driver aged 17 or 18 about £1 a week. Obviously, all tax increases are unwelcome, but this needs to be set against the fact that drivers are currently saving about £9 every time they fill up their vehicles.”
“The hon. Lady makes a very good point. She and I come across the same sorts of issues in our casework, and a lot of London is built on a flood plain. In some cases, I have had to work with specialist insurance broking to find a broker service. The British Insurance Brokers’ Association is very useful in that regard. I am sure she and I will continue to pay close heed to how the Flood Re scheme is delivering for our constituents. A number of hon. Members raised the issue of motor insurance, particularly for young people. My right hon. Friend the Member for Wokingham (John Redwood) asked whether technology could help young people with the costs of their insurance. Young people can currently take the opportunity to install a telematic device. Many insurers will reduce the cost of motor insurance in those situations.”
“We have investigated what the overall distributional impact would be if all insurers passed on the entire rate rise. If the entire rate rise of 3.5 percentage points were passed on, households in the top income decile would pay just over £1 a week more for their insurance, while the additional costs for those in the bottom income decile would be less than 40p a week. We calculate that almost two thirds of the overall distributional impact will fall in the top half of the income distribution.”
“It calls for the report to be undertaken very soon at a time when the impact of the rate will have hardly begun. That is why we will not agree to the amendment this afternoon and encourage the hon. Lady to withdraw it. The impact of any increase in the rate of insurance premium tax will depend on whether insurers change their prices to pass on the increase. As I have said, it is a tax on insurers, not customers, and we are aware of at least one insurer—we heard earlier of another example—that has pledged to absorb the cost of the increase for at least one year. We think this is partly because insurers have benefited, and will continue to benefit, from the reductions in corporation tax announced in the Budget. Any such benefit might encourage more of them not to pass on this additional cost.”
“That sets out transitional arrangements required by the insurance industry to account for the tax at the new rate. The rate, as we said, comes into effect on 1 November, which provides a period of nearly four months from the date the measure was announced. There is a further four-month statutory concessionary period for insurers who have elected to account for the tax using a special accounting scheme. In simple terms, the concessionary period ensures that premiums for policies beginning before 1 November will be taxed at the current rate effectively until 1 March 2016. That leads me to the Opposition’s amendment, which proposes that a report be produced on the impact of the change in the standard rate of insurance premium tax as soon as three months from the enactment of the Finance Bill.”
“The hon. Lady and I can duel with statistics all afternoon, but I wanted to point out that it was the 17 and 18-year-olds who pay a substantial amount more than those in their 20s. I think she is probably quoting statistics relating to 17 to 25-year-olds. Nevertheless, the changes need to be seen in the context of the amount that young drivers are saving and the opportunities they may have from using a telematic device to measure their driving performance. Finally, I want to say a word about implementation. We recognise that the insurance industry needs notice to effect the changes. We have tried to ensure a smooth implementation of the new rate by following the approach agreed by industry representatives and HMRC back in 1995.”
“It will remain at a low rate compared with many other countries and will certainly not make the UK a less attractive place to do business. I therefore ask that clause 43 stand part of the Bill and request that amendment 1, tabled by Opposition Members, be withdrawn.”
“My hon. Friend is right to point out the overall context; this measure should not be seen in isolation. The cost to businesses was mentioned earlier. I am sure that Members will welcome the fact that, according to the British Insurance Brokers’ Association, the overall cost of insuring a commercial vehicle has fallen by more than 13% in the past 12 months alone. I hope that I have answered hon. Members’ questions, particularly those about young drivers and household flood insurance. In particular, I want to support the points my hon. Friend the Member for Croydon South made about personal injury claims management. In drawing my remarks to a close, I must stress that most households will see very little impact from the increase in the standard rate of insurance premium tax.”
“The first £25 million will benefit from the reductions in the main rate of corporation tax—from 20% today to 19% and then to 18%—included elsewhere in the Bill, giving the UK the lowest rate of corporation tax in the G20. It means that the overall rate of corporation tax will be slightly lower for banks than it was in 2010. The OBR forecasts that the surcharge will raise £6.5 billion from the sector by 2021. That revenue more than offsets the cost of reductions to the bank levy rate. It means that banks will pay an additional £2 billion in tax over the period, increasing banks’ total additional contributions beyond £23 billion.”
“The first change is a gradual reduction of the bank levy. Clause 16 reduces the bank levy rate to 0.18% from 1 January 2016 and sets out further reductions to the main rate over the following five years, resulting in a rate of 0.1% from January 2021. The Government have committed to exclude non-UK subsidiaries from the bank levy charge from January 2021, a change we are committed to legislate for in this Parliament. Clause 17 introduces a surcharge on banking sector profit from January 2016. That is a new 8% tax on the corporation tax profits of regulated banking entities within banking groups. It will apply to profits that exceed £25 million across a group, disregarding the losses that banks have carried forward from periods before the surcharge’s introduction.”
“It has played a key role in increasing the stability of the UK banking sector, with banks now holding more capital against their assets and being less reliant on short-term risky funding. It has helped to satisfy the UK’s resolution financing obligations under the EU bank recovery and resolution directive, thus supporting the more orderly resolution of banks in crisis. Despite those successes, the Chancellor has been consistent about the need for balance in ensuring that banks pay a fair contribution, while ensuring that this supports the UK as a global financial centre and banks’ ability to support the wider economy. The Government believe that, as the sector returns to profit, a change is required to maintain that balance. The reforms in the clauses achieve that over the coming Parliament and beyond.”
“First, at a time when banking profits were low, it was designed to ensure that banks made a fair contribution to the taxman to reflect the risks that they pose to the UK economy —risks that were made very clear in the extraordinary events of 2008. Secondly, the levy was designed to complement the developing regulatory regime by providing incentives for banks to reduce the size of their balance sheets and support their activities with more stable forms of funding. Measured against those objectives, the bank levy has undoubtedly been successful. It raised more than £8 billion across the last Parliament and is forecast to raise a further £17 billion by 2021.”
“What a pleasure it is to serve under your Chairmanship this evening, Ms Engel. Clauses 16 and 17 and schedules 2 and 3 make changes to the banking tax regime. They will ensure that banks continue to make a fair contribution to the economic recovery in a way that does not harm the UK as a global financial centre or affect banks’ ability to support the economic recovery. It might be helpful if I set out the background to the Government’s approach to taxing the banking sector. In his first Budget in 2010, my right hon. Friend the Chancellor announced the introduction of the bank levy, an entirely new tax on banks’ balance sheets, equity and liabilities. The levy had two objectives.”
“The changes in the clauses provide a better balance between those two objectives, and do so while providing long-term certainty and stability to the sector, and short-term revenue to the taxman. I therefore hope that clauses 16 and 17 and schedules 2 and 3 stand part of the Bill.”
“That reduces the risk of tax affecting banks’ decisions on where to invest and helps to ensure that tax does not impact banks’ ability to lend to businesses and individuals. By aligning banks’ contributions with their activities in the UK, the changes recognise and reduce the impact of tax on UK banks’ ability to compete in overseas markets. They help to reflect the impact of regulatory reforms, which have reduced the risk of those overseas operations to the UK economy. I shall draw my brief remarks to a close. The Government firmly believe that banks should make a fair contribution to the economic recovery. However, that contribution must be balanced with the need to maintain the competitiveness of the UK and to support lending to the wider economy.”
“I hope the hon. Lady recognises that the rate paid by building societies and smaller banks will be lower than it was at any time when she and the Labour party were in government. In fact, the measure brings the corporation tax rate to a level lower than when the Conservatives took power in 2010. In addition, 90% of building societies will be exempt from the charge because the first £25 million is exempt from the surcharge. At the same time, we believe that the changes in clauses 16 and 17 will create a fairer, more competitive and more sustainable basis for taxing the UK banking sector. By rebalancing banks’ contributions towards a tax on profits, future charges will be more aligned with profit and capital accumulation.”
“It has been a great pleasure to have my Opposition shadow, the hon. Member for Wirral South (Alison McGovern), in the Chamber today making the points that she has. I sincerely hope that next week she will continue to be my Opposition shadow, because it is clear that she takes her role very seriously. I know that she supported the hon. Member for Leicester South when it came to nominating the leader of her party, so I hope that her point of view prevails when it comes to the announcement on Saturday.”
“There were more than 20 inquiries into banking competitiveness, but they were obviously unsuccessful. The hon. Lady asked a number of questions, and although I do not want to detain the House for long with this entertaining discussion I want to respond to some of the points raised in the debate. I was asked a couple of times about building societies, and I said that 90% of building societies would be unaffected by these changes. Obviously, the vast majority of building societies do not make a profit of more than £25 million a year, so the sector will benefit from the reduction in corporation tax over the life of this Parliament down to 18% by 2020.”
“You are quite right, Mr Howarth. What I wanted to say was that one would not believe from the remarks that the hon. Member for Wirral South made at the beginning of the debate that the banking system had fallen into massive failure, meaning that this Chancellor had to take steps in 2010 to sort out the country’s banking system and the deficit. Listening to the hon. Lady this evening, one would have thought that banks were then paying less tax than they are today but in fact, after the changes in clauses 16 and 17, the banking sector will pay the lowest rate of bank tax in the G7. One would also not believe from the remarks we heard at the beginning of the debate that over the 13 years for which the hon. Lady’s party was in power there was no increase in competition in banking.”
“She asked about the Ernst and Young forecast in today’s papers, and even she got the giggles when she raised the forecast, which is really quite laughable. It takes into account only one side of the equation in terms of the potential rise in the take from bank corporation tax. The hon. Lady asked about competition, and I have mentioned the competition track record of her party when in power, but it is helpful to be able to talk about the range of things my party did in the last Parliament to improve bank competition. It is a strong focus of this Government. I am glad that the SNP spokesman, the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin), mentioned the ambition to have 15 new banks receive a banking licence. I understand that there are a large number in the pipeline. Indeed, one new bank has already got its licence this year.”
“Absolutely, and it is 90% of all building societies. Clearly, a handful of building societies are big enough to be able to pay the additional levy contained in these clauses and, even after the surcharge, they will still be paying a lower rate of corporation tax than they were paying under the previous Labour Government. With the hon. Lady’s conversion to lower taxes, she should be welcoming and celebrating the fact that the Budget announces these long-term changes. The hon. Lady also asked whether the numbers in the Red Book take into account the corporation tax changes, and indeed they do. She asked about revenues after 2020-21 and I am delighted that she recognises that it will be the Conservative party that will be making those decisions after the next general election.”
“Members for Wirral South and for Kirkcaldy and Cowdenbeath do not to press amendments 3 and 4 and new clause 1. Question put and agreed to. Clause 16 accordingly ordered to stand part of the Bill. Clause 17 ordered to stand part of the Bill. Schedule 2 agreed to. Schedule 3 Banking companies: surcharge Amendment proposed : 3, page 74, line 4, leave out “8%” and insert “the relevant percentage”.— (Roger Mullin.) Question put, That the amendment be made.”
“Again, I am surprised that the hon. Lady seems to want me to keep mentioning the rate of corporation tax, because it is now lower for building societies than it was when her party was in power—it seems an extraordinary line of attack. Yes, a handful of building societies are large enough to pay the surcharge, but 90% of them—by number—will not only be unaffected by the change, but will benefit. Capital formation and the ability to retain earnings within the mutuals will improve as a result of the corporation tax reductions that we are introducing, which she opposed in the manifesto she stood on at the general election. In conclusion—I will be quick, because I know that the Committee wants to express an opinion—I commend clauses 16 and 17 and schedules 2 and 3 to the Committee, and I respectfully request that the hon.”
“The Equitable Life payment scheme has already gone to great lengths to find policyholders, including checking against credit histories, a national advertising campaign and sending letters to last-known addresses. Thanks to that, almost 90% of policyholders have been paid. Where possible the scheme is now tracing all those remaining who are due £50 or more against DWP, national insurance numbers and address records.”
“I am sure that my hon. Friend will welcome the fact that my right hon. Friend the Chancellor, in his excellent summer Budget, did in fact announce that all eligible non-annuitant policyholders in receipt of pension credit will see their lump sum payments doubled.”
“The 2020 export target of £1 trillion is ambitious. UK Trade & Investment has doubled the number of businesses it helps since 2010. The productivity plan sets out steps to take this further by mobilising the whole of Government behind helping our great British businesses to export much more.”
“We can see the disarray in the hon. Gentleman’s personal life, given that he walked through the Lobby to support one leadership candidate last night, while publicly backing another who abstained. He mentions the importance of exporting to emerging markets. I can confirm that UK exports to China have increased by 72% since 2010, while exports to South Korea—many of them in the creative industries—are up by 148% and to Hong Kong by 63%.”
“My hon. Friend is an example to Opposition Members in the consistency of his political viewpoint. He is right to point out that the euro area has indeed been sluggish. One of the reasons we are experiencing slow growth in the euro area is that our goods exports have been falling to that part of the world. That is why it is so important that we refocus British businesses on exporting to some of the faster growing parts of the world.”
“I am glad that the hon. Gentleman shares my view that it is very important for us to help British businesses to export more. We have some fantastic British businesses, and many of them have started to export. UKTI has doubled the number of companies that it has helped in the past five years. He is absolutely right that we should aim to be very ambitious in this area. I would like to point out that export volumes outside the EU have actually grown by 24% since the first quarter of 2008.”
“The Government are committed to rebalancing the economy and strengthening every part of the UK. The summer Budget announced new commitments to rebalance the economy, including devolving further powers to city regions, inviting a new round of bids for enterprise zones and launching an ambitious transport package for the north of England.”
“I know the hon. Gentleman has a long-standing point of view in this regard. The important point is that we want to empower local economic areas to grow as fast as London and the south-east. Among the important measures in the Cities and Local Government Devolution Bill are the strong and accountable governance arrangements for, for example, Mayors.”
“Residents in Barton-upon-Humber are very fortunate to have such a champion as my hon. Friend representing their interests. I am sure that as he has raised the matter in the House the banks in question will have noted his point, and he has represented his constituents well.”
“Metro bank is planning to open 150 branches by 2020, and its branches are open seven days a week.”
“Steady progress is being made in extending the ATM network across the UK, and the number of free-to-use ATMs is at an all-time high. In fact, 97% of withdrawals are now made free of charge. Isolated, disadvantaged and rural communities often have the worst access to free-to-use ATMs, however, so the Government are working closely with the Link network’s financial inclusion programme to subsidise free-to-use cashpoints in more than 1,400 remote and deprived areas across the UK. Importantly, members of the public in my hon. Friend’s constituency can nominate their area for inclusion in that programme. This debate has focused on branch closures, but it is also important to recognise that many banks are choosing to prioritise their branch network and are opening new high street bank branches, with TSB and Metro bank being good examples.”
“We should also recognise that the modernisation of banking services is leading to new opportunities for customers, and we should all be excited about that. Since April 2014, for example, customers have been able to transfer money instantly to another bank account using only their mobile phone number; from 31 July 2016, customers will be able to use their smartphone to photograph cheques for payment into their bank account, helping to make life easier for customers in remote areas. Banks are taking action to ensure that customers are able to use such new and exciting technologies with confidence. Those innovations also apply to the UK’s ATM network, which can play a more important role in addressing some of the concerns voiced by consumers when their local branch closes.”
“Late last year, the British Bankers Association and the Post Office began negotiations to agree a standard set of services, such as withdrawals, deposits and balance checking. The agreed services will be made available to bank customers at post office counters across the country. The negotiations are ongoing, but I make it clear that the Government consider completion of that work to be a priority. The protocol includes a measure for an independent review after one year, which I hope will indicate whether it has been effective—I will take a close interest in that matter. We also expect to see concrete progress on publicising the services that are already available. As I have made clear, banks should be there to help their customers achieve their aspirations at every stage of life.”
“Sixteen banks offer services to their personal customers and small businesses through the Post Office, including those that he mentioned. That is a huge network, which offers most customers a real opportunity to continue banking locally. I know that more can be done, however. The range of services offered by the Post Office may be more limited than those offered in a traditional bank branch, and my hon. Friend has mentioned how popular they are. Service provision may vary by bank and by the capacity of each post office. That is why the Government are supporting measures to improve the banking services that the Post Office offers and to make those services more consistent for customers.”
“For example, through the high streets innovation fund we have provided funding to the 100 towns that have the highest rates of empty property. Small business rate relief is also a valuable bonus for high street shops. In March 2015, the vacant share of retail outlets fell to 13%, which is the lowest vacancy rate since 2010. As well as taking seriously the impact of branch closures on local communities, we must consider how customers will continue to access banking services. A range of alternative measures is in place, and I would like to talk in more detail about some of those measures. As my hon. Friend mentioned, at more than 11,500 of its branches in the UK, the Post Office allows customers to access their bank accounts, check their balances, withdraw money and deposit cash and cheques.”
“The protocol means that when a bank decides to close a branch, it must think carefully about the consequences of doing so; it must engage with its customers; it must consider the needs of its customers; and it must identify ways for its customers to continue banking after the branch has closed. The results of that engagement with the community and an impact assessment will be made public before the branch is closed. We have also made it easier for my hon. Friend’s constituents in north Lincolnshire to switch their bank accounts, with seven-day switching to one of the banks that remain open. I appreciate my hon. Friend’s concern about the impact that branch closures will have on shops in local high streets. I assure everyone that the Government are committed to safeguarding high streets and town centres.”
“Those changes mean that the banking industry, which has to modernise and improve its services to maintain profitability, often has to make tough decisions. They are commercial decisions for the individual institutions, but it is right for the Government to seek to ensure access to banking services for everyone, wherever they live. We made strong progress on that agenda during the last Parliament. In March this year, the Government welcomed an industry-wide agreement known as the access to banking protocol. I am pleased to say that all the major high street banks agreed to that protocol, which came into effect in May this year.”
“I strongly believe that banks should be there to help and enable customers to achieve their aspirations at every stage of their lives, whether that is saving for their first home, taking out a mortgage, buying a car or saving and investing for the future. As my hon. Friend mentioned, how we bank is going through a period of unprecedented change. New online and mobile technology means that customers are reducing their use of high street branches. As he mentioned, some banks had pledged not to close a branch if it was the last one in town, but since those pledges were made the volume of transactions in high street branches—including in the last branches in town in places such as Caistor—has continued to decline.”
“What a pleasure it is to serve under your chairmanship this afternoon, Mr Davies! I congratulate my hon. Friend the Member for Cleethorpes (Martin Vickers) on securing the debate. He has spoken eloquently on behalf of his constituents and communities. He is without a doubt the most diligent and effective Member for Cleethorpes I have ever known. As my hon. Friend set out, bank branches play an important role in their communities—communities such as Barton-upon-Humber, Caistor and Market Rasen. They are valued by individual consumers and small businesses, and the services that they provide make a real difference to people’s lives. One of my key priorities as Economic Secretary is financial services that deliver for customers.”
“Banks and building societies need to balance customer interests, market competition and other commercial factors when considering their strategy. It is right that the Government do not intervene in such commercial decisions, but we are clear that banks and building societies should support access to banking services for everyone. Once again, I congratulate my hon. Friend on raising these important issues today. Question put and agreed to .”
“Of course, each bank must specialise and differentiate itself from its competitors, but that should not prevent the industry from thinking creatively about how premises and services could be shared. The British Bankers Association is currently considering that issue in consultation with its members. In particular, it is exploring where local circumstances may mean that sharing a branch is the best solution. I understand the concern of communities in northern Lincolnshire about local bank branch closures—my hon. Friend mentioned Barton-upon-Humber, Caistor and Market Rasen—and many communities across the UK, including the one I represent, are experiencing a similar situation. Changes in the banking industry reflect changes to customers’ needs and habits.”