Catherine McKinnell
MP for Newcastle upon Tyne North · Labour · United Kingdom
“The family of a terminally ill constituent contacted me in desperation last month after trying to resolve the pension issues of their family member since January. She died yesterday, with her pension still unresolved. Can the Minister be more specific for that family about what will be done to resolve this issue?”
“As the UK trade envoy to Italy, I thank the Secretary of State for confirming the GCAP funding in his statement. As MP for Newcastle upon Tyne North, I add my voice to those who want to see this as an opportunity to genuinely spread investment and opportunity that will build strength and resilience in our people right across the UK—they a…”
“This report is welcome, but that does not make its existence any less tragic. Far too many mothers and babies have been failed, including mothers like my constituent Amie, who late last year was turned away repeatedly, despite reporting reduced movements. Her baby Seren was born stillborn.”
“Failures to address these issues have significant effects, both on the public finances and on the most vulnerable people in society, and, indeed, they are issues that are often reflected in our constituency mailboxes. I was contacted recently by a young woman who had reported child sexual abuse to the police last year.”
“Her husband was the victim of an assault by the defendant, who had raped his wife. They were forced to wait four hours for the trial to begin. They were eventually told that the defendant would arrive and that the delay to his delivery was causing the delay, but it had a knock-on effect on additional days in court.”
“Friend has said, we need a court estate that is fit for purpose in order to maximise the use of these additional days. I too have visited my local court, in this instance Newcastle Crown court.”
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“15. In the autumn, East Coast achieved the highest passenger satisfaction rates since records began, so why are the Government wasting taxpayers’ time and money privatising that successful service rather than getting to grips with the cost of living crisis and this Government’s inflation-busting rail fare price rises?”
“Can the right hon. Gentleman now confirm that the number of people working part time because they cannot get a full-time job has risen over the past year to 1.45 million and is now at a record high? With prices rising faster than wages for 39 of the past 40 months, is this not just another reason why so many working people are facing a cost-of-living crisis after three wasted years under this Chancellor?”
“20. I recently joined more than 100 supporters of 2nd Battalion the Royal Regiment of Fusiliers as they marched on Parliament protesting against the Government’s decision to scrap it. Ministers believe that the battalion can be replaced by reservists, but the chairman of the Northumberland and North East Fusilier Association is concerned that it will be impossible to recruit the necessary numbers. Will the Secretary of State tell us to what extent the targets are being met?”
“I believe this is my first opportunity to congratulate you, Madam Deputy Speaker, on your new role. We have had a good and wide-ranging Second Reading debate on the Bill, and my hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood), my new colleague in the shadow Treasury team, made an excellent opening contribution from the Opposition Front Bench. I extend my welcome to the Minister. We have already exchanged pleasantries in a Committee, but I reiterate them now in the Chamber.”
“Let us think back to 2011 and the similarly entitled National Insurance Contributions Bill of that year.”
“As we have heard, although this was not included in the draft Bill published on 16 July, the main purpose of the National Insurance Contributions Bill is to implement the employment allowance announced by the Chancellor in the Budget 2013. Given the apparent importance of the policy—which accounts for clauses 1 to 8 of this short Bill—perhaps when she concludes the Minister will say why the employment allowance was not mentioned in the draft legislation. It would be useful to clarify that. As my hon. Friend the Member for Birmingham, Ladywood made clear in her excellent opening speech, the Opposition support the introduction of this measure and this Bill. It might be painful for the Exchequer Secretary—although he is not here to pained—but it could be helpful to cast our minds back to why we support this Bill.”
“Member for Skipton and Ripon (Julian Smith) finds that somewhat depressing, but I am going to do it anyway. I am disappointed that the Exchequer Secretary is not in his place for the winding-up speeches, as it is important to take a little step back in time and recall how the Bill was introduced. Until recently he was my opposite number, and it would have been good to have him in his usual place. The hon. Gentleman has the dubious privilege of being one of an ever-diminishing number of junior coalition Ministers who have been in the same job since 2010. He therefore finds himself in an unfortunate position because we can measure the ambitions that he set out for supporting small businesses and job creation against his actual record of delivery in government.”
“It is interesting that the hon. Gentleman raises that point, because the Opposition will set out clearly that we very much support and welcome this measure. It is something we have been proposing for the past three years, so we greatly welcome its introduction through the Bill. We have had a wide-ranging debate. We have touched on the living wage, the economy, employment, unemployment, self-employment—many forms of employment. We have strayed far from the core subject and, I think, strained the patience of the Deputy Speakers in the Chair today. At times, we have been on a magical history tour in which the history of this country and its economy has not only been airbrushed, but at times rewritten. In my concluding remarks, I hope to bring back a bit of realism to the discussion. I know that the hon.”
“Indeed, serious concerns about the scheme’s complexity were raised at the time by Robert Chote—then at the Institute for Fiscal Studies; now at the Office for Budget Responsibility—who told the Treasury Committee that the policy “might be a little too complicated to offer best value for money.””
“The scheme, which was originally announced at the Chancellor’s first Budget in June 2010, was not aimed at supporting just any employers, however, because it was restricted. It did not apply to businesses in London and the south-east or east of England, as we mentioned earlier, and it extended only to new business start-ups, and then only to the first 10 employees of those firms—but, of course, only to those first 10 employees who had been hired in the first year of that business. I hope hon. Members are still with me. [ Interruption. ] I am sure the Minister is still with me as he designed the dubious policy.”
“I will repeat the words of my hon. Friend, who said that she was proud to stand in 2010 on a manifesto for a Labour Government who were committed to reducing the deficit but had an economy that was growing. Since then we have seen three years of stagnating growth, wages rising slower than prices, and borrowing not coming down anywhere near the amount the Government promised. I would caution Government Members against trying to rewrite in this Chamber the history of what they have achieved over the past three years. On that point, let us return to 2011. The Bill taken through this House by the Exchequer Secretary—I welcome him back to his seat—included the introduction of the three-year national insurance holiday, worth £5,000 for employers.”
“Once again, Government Members want to airbrush the past three years of stagnation, lack of economic growth and the failure of the Government’s implementation of that policy. They failed to address the issue quickly enough, so only today are we finally introducing a policy that will help and that will give that support to small businesses. Unfortunately, it is a little too late in the day for some businesses, which have suffered over the last three years, and for the people who have lost their jobs as a result.”
“It is not regionally restricted and will apply to charities as well as businesses, and it will apply whether or not they are start-ups. It should be easier for firms to access it because it will be delivered by the standard payroll software and Her Majesty’s Revenue and Customs real-time information system, as the Exchequer Secretary said in his opening comments. The question is this: why did it take so long? Given that the scheme will not be available until April 2014, we have had nearly four wasted years when the Chancellor could have helped the thousands of small businesses about which Government Members have spoken so passionately to expand and create jobs.”
“When the previous scheme was introduced, the Opposition called for there to be no regional restrictions on it, for it to be extended to charities, and for a review of its effectiveness after six months. Those proposals were rejected. The Government ploughed on with a scheme that obviously was not delivering the goods throughout its operation. That was why, as long ago as September 2011, my right hon. Friend the Member for Morley and Outwood (Ed Balls), the shadow Chancellor, called for a one-year national insurance break for every small firm that took on extra workers, using the money left over from that failing Government policy—it was clear that it was failing even in September 2011. The Government are now introducing the employment allowance.”
“Sadly, he cannot do so—sadly for the businesses that failed to benefit. Only through a written answer obtained by my hon. Friend the Member for Nottingham East (Chris Leslie), the shadow Chief Secretary to the Treasury, did we learn that a grand total of some 25,400 businesses successfully applied for the scheme over the three-year period. That is undeniably a sizeable number, and the creation of any new jobs in the past three years, during a period of economic stagnation, is welcome; but with only 6% of the target reached, the Exchequer Secretary has had to acknowledge that, as flagship policies for economic growth go, that one has been a bit of a flop.”
“Coalition Back Benchers want to forget what the Government have done and the past three years of the policy we are debating. They want to debate a policy that never came into play. None the less, despite the restrictive and complex nature of the previous scheme, the Exchequer Secretary and his Treasury colleagues had bold ambitions for it. He acknowledged from the Dispatch Box that some 400,000 new businesses would benefit from the scheme, with each successful applicant creating an average of two jobs. At that rate, the scheme would have created 800,000 new jobs, with a total cost to the Exchequer of £940 million over its three-year lifespan. Given that the scheme, which was one of the Chancellor’s flagship policies, drew to a close in September, one might have assumed that the Exchequer Secretary would want to promote the outcome.”
“The budget for the policy in the Bill was there, but the Government introduced a failing policy that was badly delivered, badly thought through and not revised in the appropriate time frame. Given the Government’s record on delivering the previous national insurance contributions initiative, what reassurances can the Minister provide that they are on top of delivering this one?”
“Many of the changes we called for will be introduced in the employment allowance, but it is disappointing that for hundreds of thousands of small businesses it has taken almost four years to deliver the policy that they need. They deserve better, but the Bill is a small step in the right direction today.”
“Arrangements are being put in place to appoint a successor.” It would be helpful to hear from the Minister exactly what those arrangements are, when she expects the appointment to be made and, most importantly, how she and her ministerial colleagues will ensure that this never happens again. If the GAAR is to retain or, indeed, regain any shred of credibility, what are the Government going to do about that? As we have said, we back the Bill, especially the main provision—the employment allowance. We repeatedly called for changes to the previous national insurance holiday scheme and we consistently warned that it would be a flop.”
“At the time, I said: “What a tax expert considers to be reasonable might be regarded differently in the eyes of a member of the public. Indeed, many tax experts will differ on what they believe to be reasonable tax planning, as opposed to something egregious that would fall under the GAAR.” —[ Official Report , 17 April 2013; Vol. 561, c. 425-426.] What has changed since April? A matter of weeks after being hand-picked to deliberate on the Government’s flagship anti-avoidance policy, one panel member was caught on camera at a tax planning conference offering tips to people on how to keep their money “out of the Chancellor’s grubby mitts”. HMRC’s website simply tells us: “David Heaton resigned from the Advisory Panel on 13 September 2013.”
“However, there is also the highly subjective double reasonableness test, which can be used to determine whether a means of avoiding a tax can “reasonably be regarded as a reasonable course of action”. That subjectivity is helpfully explained in the GAAR guidance, which states: “The words ‘contrived’ and ‘abnormal’ are not defined, and therefore will be applied in their normal sense”. We have long argued that that is a fig leaf, or could be used as a fig leaf, for tacitly legitimising tax avoidance that does not fall within those definitions. We tabled amendments to ensure that the GAAR would be reviewed, and to assess its effectiveness. Most critically, we have questioned the independence of the advisory panel established by the Treasury to oversee the GAAR.”
“The latest HMRC estimate, which covers 2011-12, indicates that some £15.3 billion of the gap can be accounted for by unpaid income tax, capital gains tax and NICs combined. HMRC suggests that approximately £4 billion of the gap arises out of avoidance “behaviour”. Will the Minister therefore clarify exactly how much of the £35 billion tax gap is thought to be made up of NICs that are unpaid through avoidance? Given that the Bill deals with only the most aggressive or egregious avoidance activity, how much will extending the GAAR to NICs yield for the Exchequer in additional revenue? The Opposition have raised many other concerns about the GAAR—my hon. Friend the Member for Birmingham, Ladywood mentioned the Swiss deal and the number of holes in that arrangement, which leave a hole in the Government’s estimates.”
“During the debate on the 2013 Act, I pointed out that the GAAR is expected to yield £60 million in 2014-15, rising to £85 million by 2017-18. I am more than willing to acknowledge that those are sizeable sums, but the point made in the House back in April was that it represented a drop in the ocean compared with the then tax gap of £32.2 billion. What has changed since? HMRC’s latest tax gap estimate, of the difference between what is collected and what would be collected if everyone complied with the letter and spirit of the law, concluded that it has increased to £35 billion, a staggering 8.7% increase in the space of 12 months. I accept that many dispute the figure and say it is too low—that it does not include much of what could be incorporated in the figure for tax avoided.”
“The GAAR, which came into force on Royal Assent of the Finance Act 2013, incorporates income tax, corporation tax, capital gains tax, inheritance tax, petroleum revenue tax, stamp duty, land tax and the new annual tax on enveloped dwellings. A number of Opposition Members raised the concern that the GAAR is intended to prevent only “highly contrived tax avoidance” that has “abnormal features”. The man who designed the GAAR, Graham Aaronson QC, believes that it is “clearly intended to apply only to egregious, or very aggressive, tax avoidance schemes”. What deterrent effect is such a narrowly drafted GAAR expected to have? As the Government’s flagship policy for tackling tax avoidance, what dent will the GAAR make on the tax gap, which HMRC says is £32.2 billion a year?”
“The Opposition support the legislation and it will pass unopposed this evening. It is rightly up to the Government to promote their support for small businesses. As Government Members have said, HMRC should take a proactive role in ensuring that businesses are aware of schemes that are available to support them. Clauses 11 to 20 relate to the certification scheme for oil and gas workers on the continental shelf, limited liability partnerships and several miscellaneous measures, but I want to focus briefly on clauses 9 and 10, which seek to extend the application of the general anti-abuse rule to national insurance contributions.”
“I thank the Minister for responding to some of the questions that I raised. She seems to be moving away from the subject of the GAAR, but I wonder if she could address the questions relating to the advisory panel and the member who was dismissed from it in disgrace. What will the Government do to ensure that that does not happen again and that the credibility of the GAAR advisory panel, which was dented by those events, is restored?”
“The Minister is making a powerful argument, but it leads to the question: why did the Government introduce a national insurance holiday scheme in 2011 that was so complicated they could reach only 6% of the businesses it was targeted at?”
“My hon. Friend is making an excellent speech and a very reasoned case for the Bill, which, it seems to me, will also create a level playing field for businesses. Businesses want legislation such as this because, although there are patches of good practice, if that good practice existed throughout the country, there would be a level playing field not only for the young people who will benefit from the Bill, but for the businesses that invest in them and, at present, must compete with those that do not bother to do so.”
“Who can blame people for being concerned when they face a worsening cost-of-living crisis, with soaring energy bills, increasing child care costs, countless other demands on household budgets, and prices rising faster than wages in 39 out of the past 40 months since the Government came to power? The fair tax on flying campaign is driven by a number of the UK’s leading travel organisations, including airports, trade associations and destinations. In my new role as shadow Economic Secretary to the Treasury, I look forward to engaging with those bodies and their concerns with my fresh eyes.”
“Thank you, Mr Speaker. I commend the Democratic Unionist party, and particularly the hon. Member for East Antrim (Sammy Wilson), for bringing this timely issue before the House. He gave a thoughtful and considered introduction to the debate. It is clear from the hon. Gentleman’s contribution that air passenger duty causes concern to many hon. Members on both sides of the House and their constituents. More than 100,000 people backed the petition of the fair tax on flying campaign, which resulted in a Backbench Business Committee debate in November 2012.”
“It is interesting that the hon. Lady mentions cheering up—an ONS report out today says that Northern Ireland is one of the happiest places in the UK—but I appreciate that APD is a cause of unhappiness, as was clearly articulated by a number of hon. Members, particularly the hon. Member for East Antrim. I will set out the Labour party’s position on the subject later, but I want to focus on the Government’s approach— [ Interruption. ] Given the Prime Minister’s performance today, one wonders who is running the country.”
“As I said, I will set out the Labour position, but it is interesting that Government Members are keen to deflect responsibility. It is important to reflect on what the Government have said to date on air passenger duty. I would, however, first like to reflect on the contribution by the hon. Member for East Antrim, who made a well-thought-out speech, particularly on the 2013 PricewaterhouseCoopers report into the impact of APD. The report concluded that APD affects not just the travel and tourism sector, but the economy as a whole. PWC was commissioned by British Airways, Virgin Atlantic, Ryanair and easyJet, and suggested that the abolition of APD could result in a 0.45% increase per year in GDP and the creation of almost 60,000 jobs between now and 2020. The Government dispute those figures, but I will return to them later in my speech.”
“It is therefore little wonder that the Government’s dither and lack of direction has caused significant frustration for passengers, the travel and tourism sector, and the industry as a whole. What have we heard so far from the Government on APD? The Conservative 2010 election manifesto pledged to: “Reform Air Passenger Duty to encourage a switch to fuller and cleaner planes”. The Liberal Democrats went further, suggesting that they would ensure that pollution was “properly taxed” by replacing the per-passenger APD with a per-plane duty and that air freight would be taxed for the first time. They also said that they would introduce an additional, higher rate of PPD on domestic flights if realistic, alternative and less-polluting travel was available.”
“I thank the hon. Gentleman for his kind wishes. The companies commissioned the report, but it is for the Government to set out their position and their own findings. I would like to focus on the Government’s statistical analysis and assessment of APD. I know the value added to the north-east economy by Newcastle airport. I know how critical certainty and stability on issues such as APD are for the airport and the businesses that rely on it, and for the export-led recovery that the hon. Member for East Antrim referred to on a number of occasions. Newcastle airport alone supports 7,800 jobs across the north-east region, with 3,200 on site, and more than £250 million of UK exports were shipped through the airport in the last year—facts that speak for themselves.”
“At Budget 2011, the Chancellor went on to state: “In the meantime, we are consulting today on how to improve the existing and rather arbitrary bands that appear to believe that the Caribbean is further away than California. We will also seek to bring private jets, which pay no duty at all, into the scope of taxation.” —[ Official Report , 23 March 2011; Vol. 525, c. 963.] The APD rate rise due in April 2011 was deferred to April 2012.”
“In between, the fair tax on flying campaign was launched not only to raise concerns about this issue, but to elicit a modicum of action or at least certainty or clarity from the Government. Budget 2011, however, saw the Chancellor U-turn on the coalition agreement pledge made less than 12 months earlier to switch to a per-plane duty, informing the House: “we had hoped that we could replace the per passenger tax with a per plane tax. We have tried every possible option, but have reluctantly had to accept that all are currently illegal under international law. So we will work with others to try to get that law changed.” Will the Minister update the House on how that work on changing the law is going?”
“The hon. Gentleman anticipates my next comment. It is important not to take a Liberal Democrat election manifesto at face value, but one might reasonably have expected to see some action from Ministers given that the coalition agreement promised that the Government would: “reform the taxation of air travel by switching from a per-passenger to a per-plane duty.” and “ensure that a proportion of any increased revenues over time will be used to help fund increases in the personal allowance.” The Chancellor then announced in the 2010 Budget that major changes to APD, including switching to a per-plane duty, would be subjected to public consultation, but nothing happened, and almost one year later, at Budget 2011, he announced that the Government would consult on simplifying the structure of APD.”
“The reforms in Northern Ireland addressed the very specific situation in that part of the UK, but this issue affects the whole of our country. After three years of a flatlining economy, and with households up and down the country in the midst of a cost of living crisis, the Government’s complete lack of direction on APD has been extremely unhelpful at a time when family purse strings have been tightened and businesses have been crying out for support. The lack of certainty on this issue from the Government simply risks investment decisions being delayed and future development being jeopardised, which, crucially, puts jobs at risk, too. This just is not good enough, but it is what we have come to expect.”
“The motion states: “that it is the intention of the Prime Minister to review green taxes; and calls on the Government, as part of that review, to give high priority to the abolition of air passenger duty.” In preparing my comments for today, I wondered whether this review actually existed, but the Prime Minister seems to have confirmed it at questions, because he is apparently waking up to the fact that struggling families need support and believes that this is the way forward. We then read, however, that this review has been kiboshed by the Liberal Democrats before it has even begun. Perhaps the Exchequer Secretary will shed some light on that issue, too, in his concluding comments. In conclusion, despite various promises of action on this issue, we have seen anything but.”
“There is no doubt that APD brings in a significant amount of funding to the Treasury, with a yield of £3 billion anticipated this year and next, as the Minister mentioned a good number of times. The matter does need to be considered in the round, but the Government’s unscientific approach to this issue seemed to be a cavalier one to take to economic growth, given that we have had three years of a flatlining economy.”
“They have stated: “The Government disagrees with the findings of the PwC report. The Government believes that abolishing APD would have a smaller impact on GDP than the report implies and would cause a net loss of tax receipts. This reduction in receipts would need to be paid for through tax rises or spending cuts elsewhere, which would themselves have an economic impact.” The response went on to state: “The Government has no plans to undertake a review of the economic impact of APD at this point.” So, the Government do not believe the findings of others about the economic impact of APD, but have no plans to verify them or otherwise undertake their own review.”
“Included in the recommendations were that: the Treasury should conduct and publish a fully costed study of the impact of APD on the UK economy; the Government should carry out an objective analysis of policies such as differential rates of APD; the Government should conduct a 12-month trial on an APD holiday for new services operating out of airports not in the south-east; and the Government should not further devolve APD at this stage, as it may have negative impacts, for example, in the north of England. Some of those recommendations stemmed from the February 2013 PricewaterhouseCoopers report, to which reference is made in the motion. Ministers appear to have totally dismissed both reports, rejecting all the Select Committee’s recommendations apart from the one on devolution.”
“But the Government’s piecemeal approach to dealing with APD, an issue that affects the UK as a whole, is regrettable, particularly given the importance of long-term certainty on this issue for industry and the wider economy. Leaving aside the changes we have seen in Northern Ireland, it appears that the Government have simply given up on this issue altogether. In May, the Select Committee on Transport published a number of proposals on APD as part of its wider inquiry into aviation strategy.”
“George Best Belfast City airport and Belfast International both compete directly with Dublin in attracting airlines, routes and passengers. So the Opposition supported the Government’s move on APD in relation to long-haul flights and Northern Ireland. Given that Northern Ireland also largely relies on air transport for its link to the rest of the UK, we are sympathetic to the argument for reducing APD on all routes from Northern Ireland, but we would need to examine the impact of that in the round, including on the block grant, which the hon. Member for East Antrim acknowledged. Other options are, of course, available. We could consider protected routes, which already exist in the UK—the air link to the Scottish islands being an example—with Belfast to Heathrow being suggested as the obvious choice.”
“In order to maintain the transatlantic route from Belfast to Newark, the Chancellor announced in September 2011 that the APD rate on long-haul flights using airports in Northern Ireland would be cut, because Continental Airlines had, unsustainably, been paying the APD itself at a cost of some £3.2 million a year. Then, in the Finance Act 2012, APD on direct long-haul flights departing from Northern Ireland was devolved to the Northern Ireland Assembly, which then abolished it on these flights from 1 January 2013. Clearly, flights from Northern Ireland face specific challenges, as I have noted and as was set out clearly by the hon. Member for East Antrim. It is the only part of the UK that has a land border with another EU member state.”
“For the whole of the UK, apart from announcing that APD would be extended to business flights, they did absolutely nothing. In their response to the consultation, they confirmed in December 2011 that they did not propose to make any changes to the tax’s banding structure, to how different classes of flight were taxed or to the application of APD to the regions. It is little wonder then that industry players described the consultation as “a sham and a waste of taxpayers’ money”. Of course, we saw action on Northern Ireland, following the July 2011 Northern Ireland Affairs Committee report, which urged the abolition of APD on flights to and from airports in Northern Ireland owing to the specific problem faced there—direct competition from airports in the Republic and its lower rates of APD.”
“The paper set out two options: returning to the pre-2009 structure of two tax bands and a different rate between two classes of travel; and combining the two higher bands for flights over 4,000 miles to create a three-band structure and retaining different rates between different classes of travel—an option, however, that would not have resolved the Caribbean concern. The consultation also raised the prospect of a lower rate of APD for flights from regional airports and the question of whether APD should remain a UK-wide tax or be devolved. The Government spent the best part of a year apparently listening to interested parties that took considerable time and effort to respond in good faith to the consultation. And then what?”
“Not just yet, because I need to make some progress. At the same time, we saw an 8% increase take effect, with APD rates thereafter rising in line with inflation. As announced at Budget 2010 and then again at Budget 2011, the Government did indeed consult on the structure of APD, in a consultation that covered several areas, including private jets, different tax bands, premium economy flights, flights from regional airports and the possible devolution of APD. The consultation paper raised the concern that the existing four-band structure was damaging UK competitiveness and contained several anomalies, such as the higher rate on Caribbean flights than on flights to destinations in the USA, about which several hon. Members have raised concerns.”
“The reality is that, because of this Government’s warped priorities, women are paying three times more than men to bring the deficit down. Will this all-male Treasury team explain how that is helping families manage the cost-of-living crisis?”
“Member for Suffolk Coastal (Dr Coffey) spoke in favour of tax simplification and discussed the perceived merits of the Government’s measure. She put forward an interesting argument of which there was much to commend but, despite that, I shall explain why we do not support the reforms and especially the way in which the Government have gone about bringing them into play.”