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House of Commons

Tuesday 27 January 2015

The House met at half-past Eleven o’clock


[Mr Speaker in the Chair]

Oral Answers to Questions


The Chancellor of the Exchequer was asked—

Uncollected Tax

1. Katy Clark (North Ayrshire and Arran) (Lab): What recent estimate HM Revenue and Customs has made of the amount of uncollected tax in the UK. [907233]

The Financial Secretary to the Treasury (Mr David Gauke): Her Majesty’s Revenue and Customs published its latest tax gap estimates on 16 October 2014. In 2012-13, the tax gap was estimated at £34 billion, 6.8% of total tax due.

Katy Clark: The Government’s own figures suggest that the tax gap has increased by £3 billion. Independent experts say that the tax gap could be up to £120 billion. In North Ayrshire, the local tax office has been closed by this Government, and since 2010, 10,000 people in the Treasury have lost their jobs, despite the fact that every tax inspector brings in far more—in taxes—than they cost. Do the Government believe that they should rethink their strategy?

Mr Gauke: The reality is that the tax gap for 2012-13 was lower than in any year under the previous Labour Government. As for the yield—the money that is brought in by HMRC as a consequence of its activity—that has gone up by £9 billion since 2010-11, and is forecast to be £26 billion this year. That is a very good record.

Andrew Jones (Harrogate and Knaresborough) (Con): Will the Minister confirm that the compliance tax yield for this year has been revised up to £26 billion, which is an increase of £9 billion since this Government came to office?

Mr Gauke: My hon. Friend is absolutely right to make that point, and there has been an increase—[Interruption.] It is a point that bears repeating. Members really should take in the fact that, under this Government, we have seen a significant increase in HMRC’s yield. HMRC is more effective than ever in dealing with tax evasion and tax avoidance.

Nick Smith (Blaenau Gwent) (Lab): Two thirds of people getting tax credits are in work, so why does the Chancellor want to cut tax credits again? That will penalise hard-working families.

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Mr Gauke: I suspect that, a couple of weeks ago, the hon. Gentleman walked through the Lobby in support of the charter for fiscal responsibility, which requires us to find £30 billion of savings, either in tax increases or in spending cuts. If he is not prepared to take action in that area, he has to tell his constituents where he is prepared to take action.

Mr Philip Hollobone (Kettering) (Con): I congratulate Her Majesty’s Treasury on its successful efforts to reduce the tax gap. Where are the main hiding places that people are using to try to avoid tax?

Mr Gauke: My hon. Friend raises an important question to which I could give a lengthy reply. But what I will say is that, as a Government, we have taken action, for example, to improve the automatic exchange of information between various jurisdictions, so that there is nowhere for people to hide their money. The net is closing in on those who have evaded their taxes, and we are increasingly effective at dealing with tax avoidance as well.

Chris Leslie (Nottingham East) (Lab/Co-op): With economic growth now showing signs of slowing and wages stagnating, is the Minister not worried that the amount of income tax and national insurance that he said he would collect is failing to live up to expectations? Will he tell the House by how many billions of pounds income tax and national insurance receipts have fallen short because of low wages, compared with the original Office for Budget Responsibility forecasts back in 2010?

Mr Gauke: We are aware that, since 2010, the economy has had to face challenges, which in 2010 were not anticipated by the OBR to occur in the way that they did. We have had to deal with the eurozone crisis, the high commodity prices at the time and the aftershocks of the financial crisis. The consequences have been significant, but if we want wages to rise we need to improve productivity. That is about improving our education system, and having more apprentices and a competitive tax system, and that is what this Government are delivering.

Chris Leslie: The answer is that income tax and national insurance receipts are down by a staggering £95 billion over this Parliament. Is it any wonder that the Minister and the Chancellor have failed so woefully to eradicate the deficit, and when will he realise that it is the low-wage economy that is the recipe for more borrowing, more welfare spending and more debt?

Mr Gauke: We discovered this morning that in 2014 the UK was the fastest growing major western economy. Employment is at a record level and unemployment has fallen dramatically, contrary to the Opposition’s predictions—but, yes, we have got further to go to reduce the deficit, which is why we need a Government who are prepared to make difficult decisions. All that we have heard from the hon. Gentleman is that he is going to put up fees on gun licences, which is not going to solve the deficit.

Sir Tony Baldry (Banbury) (Con): Am I right in thinking that under the charter for fiscal responsibility, to which everyone recently signed up, we have made it clear that part of the savings that we are going to make involves bearing down on tax avoidance? Indeed, we

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have set out clearly exactly where we are going to save every penny of the £30 billion that needs to be saved. How is it possible for anyone to sign up to a charter for fiscal responsibility without making it clear where they are going to make those savings?

Mr Gauke: My right hon. Friend is absolutely right; the Opposition have given no indication of the balance between tax and spending and how they are going to find that £30 billion. At a time when Labour Back Benchers are saying that Syriza shows the way while those on the Labour Front Bench apparently support a £30 billion fiscal tightening, all we get from the Opposition is chaos.

Bank Bonuses

2. Kerry McCarthy (Bristol East) (Lab): What recent representations he has made to the EU on the cap on bank bonuses. [907234]

The Economic Secretary to the Treasury (Andrea Leadsom): The Government keep their opposition to the EU-wide cap on bonuses, but we withdrew our legal challenge in November 2014 after it became clear that it was not likely to succeed. We believe that the cap is flawed, and will just serve to put up fixed salaries, but instead of pursuing the legal challenge we are looking at other ways of building a system of pay in the banking system that only rewards excellence and clearly promotes responsibility.

Kerry McCarthy: Can the Minister tell the House how much the Chancellor spent on legal fees alone in that failed legal challenge? Was that not a huge waste of money when the priority should have been to help those people most in need?

Andrea Leadsom: No. The amount spent was £43,000. The Government believe fundamentally that we need to have the toughest regime in the world of any global financial centre on pay, and that is what we have. We have ensured that bankers will be remunerated in future on performance and that pay can be clawed back. We have put in place a system that is far better and far more accountable than anything that the previous Government attempted.

Mark Garnier (Wyre Forest) (Con): In the light of all the hard work by the Government to ensure that bonuses are held back by banks to secure better behaviour by staff and greater stability for banks, is not the bonus cap a crude measure that will increase bank instability and bad behaviour by bankers?

Andrea Leadsom: My hon. Friend is exactly right. The Government wanted to challenge that cap because it would push up fixed pay, which means bankers being paid not for performing but for simply turning up and raises prudential risks associated with higher fixed costs. It was vital to the interests of this important sector to the UK that we introduced a better regime, and I am delighted that the Chancellor has written to the Governor of the Bank of England in his role on the Financial Stability Board to ask him to look at other ways of ensuring accountability.

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Oil Prices

3. Michael Fabricant (Lichfield) (Con): What assessment he has made of the effects of recent trends in the price of oil on the economy; and if he will make a statement. [907235]

5. Andrew Percy (Brigg and Goole) (Con): What assessment he has made of the effect of falling oil prices on households. [907237]

The Chancellor of the Exchequer (Mr George Osborne): The fall in the oil price clearly means that certain sectors such as the North sea face real pressure, which the Chief Secretary and I are determined to help them with, but overall this is a good thing for the United Kingdom and for British families. Today’s GDP figures confirm that the recovery is on track, and our plan is protecting Britain from the economic storm with the fastest growth of any major economy in 2014. However, the international climate is getting worse, and with 100 days to go to the election, now is not the time to abandon the plan and return Britain to economic chaos.

Michael Fabricant: We have all noticed that we no longer hear about the cost of living crisis. Could my right hon. Friend tell me precisely how the change in oil prices has affected the retail prices index and how that compares with wage inflation?

Mr Osborne: Inflation is at 0.5% and wages are growing at three times that rate. If the oil price is fully passed on—and we have put pressure on the petrol and utility companies to do so—British families will on average be £750 better off. If we had accepted the ludicrous price freeze proposed by the Opposition we would have locked in those high oil prices and people would not see the benefit in their utility bills.

Andrew Percy: The good folk of Brigg and Goole have noticed that the price of a gallon of petrol has fallen significantly and they welcome that. Many of my residents, however, are off the grid and their heating oil bills have not necessarily fallen as they should have. What steps can the Chancellor take to put pressure on heating oil companies to make sure that the cost of heating also falls for those residents off the grid, in line with oil prices?

Mr Osborne: My hon. Friend has been a champion for his constituents and for all the 1.5 million people who are off the grid and rely on heating oil to warm their homes. That price has fallen by 20%, so people are seeing the benefit of the falling oil price, but we continue to put pressure on the heating oil companies, and we have met them in the Treasury to continue to reinforce the argument that those prices must be passed on and must continue to be passed on.

Stewart Hosie (Dundee East) (SNP): The oil industry has told us that the softening in the oil price has highlighted the underlying problem in the North sea, which is the high cost of doing business there, driven by an up to 81% tax on production. Instead of waiting till the Budget, will the Chancellor take urgent action on investment allowances and on a cut to the supplementary charge?

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Mr Osborne: The Chief Secretary and I certainly recognise the pressure on the North sea producers. We want to make sure that we continue to extract the maximum amount of oil from the North sea basin. That is why we cut oil taxes at the autumn statement, published a consultation on the investment allowance and made it clear that further action may be required at the Budget.

May I draw it to the House’s attention that what the hon. Gentleman calls the softening of the oil price would have done disastrous damage to the finances of an independent Scotland? The Scottish National party’s projections for its oil revenue were out by almost threefold. It is a reminder of the strengths of the United Kingdom that we can bear pressures such as a falling—or, indeed, a rising—oil price across the entire UK.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Industry and economic experts say that thousands of jobs in the North sea oil sector are at risk, yet both the UK and the Scottish Governments seem to be passing the buck, rather than taking the urgent action that is needed. Will the Chancellor give a commitment to bring forward tax measures immediately to support the industry, as we have called for, rather than delaying for another seven weeks until the Budget?

Mr Osborne: As I said, we have already cut the supplementary charge. I announced that in the autumn statement and it came into effect at the beginning of this year. We have launched a consultation on an investment allowance. We regularly meet the industry; we met industry representatives last week. They think the Budget is the appropriate time to make further announcements, if there are further announcements, on the North sea oil and gas tax regime, but the hon. Lady and the industry have my assurance that we will do everything we can to support the North sea oil and gas industry during this difficult time. Of course it is impacted by the fall in the oil price. We want to make sure that we get the maximum amount of oil out of the North sea and that the record investment that we have seen over the past year is sustained.

Mr John Baron (Basildon and Billericay) (Con): Given the financial short-termism of the previous Government, I welcome the Chancellor’s comments about a shale gas fund. When he is Chancellor after the next general election, will he consider expanding the concept to create a North sea sovereign wealth fund for the benefit of the country as a whole?

Mr Osborne: Of course, our challenge is to eliminate the deficit and to get our debt falling. Sovereign wealth funds are built up by countries that run consistent budget surpluses, which is exactly what we need to do in the United Kingdom. In particular, I would like to see some of the revenues from the shale gas industry used to support local communities. That would be a boost to communities across the country, especially in the north of England.

Dame Anne Begg (Aberdeen South) (Lab): Although the Government cannot control the world oil price, they can do things such as drive down the costs in the industry. If the oil price remains low and perhaps drops further to the level where it costs more to take the oil

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out of the North sea, that is bad not just for the economy of Aberdeen and north-east Scotland, but for the economy of the UK.

Mr Osborne: I agree with the hon. Lady and I know that she is deeply involved in these issues as the Member of Parliament for Aberdeen South and chairs the all-party committee on these issues. We have to work out how we protect the industry as best we can from a rapid fall in the world oil price, and we must make sure that the brilliant skills, jobs and investment in north-east Scotland continue. That is why we anticipated the challenge by launching the consultation in the autumn statement and making immediate cuts to the tax regime. We have to take further steps over the coming year because we are determined that this brilliant industry will have a brilliant future.

Mr Andrew Tyrie (Chichester) (Con): Will the Chancellor confirm that when the oil price halves, as we have just seen, that is likely to be extremely good news for the British economy? Will he also confirm that this fall in the oil price is particularly good news for the 70% of car owners who need cars to get to work? The House will realise that no Chancellor will want to commit himself now, but will he at least agree that there is now great merit in a period of stability in fuel duty?

Mr Osborne: My hon. Friend is right. As I said at the beginning, the fall in the oil price, for all the challenges it poses in the North sea, is good for the British economy and good for British families. It is being felt at the pump, where petrol is now cheaper than when this Government came into office. One of the reasons why is that we abolished Labour’s fuel duty escalator. As a result, petrol is 20p per litre less than it would have been had we stuck with the shadow Chancellor’s disastrous tax plans. We have to make sure that motorists feel the full benefit of the falling oil price. As I say, it was a good move to abolish that disastrous escalator.

National Insurance

4. Nigel Adams (Selby and Ainsty) (Con): What assessment he has made of the effect of lowering the rate of national insurance on levels of employment. [907236]

6. Adam Afriyie (Windsor) (Con): What assessment he has made of the effect of reducing employers’ national insurance contributions on employment. [907238]

The Chancellor of the Exchequer (Mr George Osborne): This Government inherited damaging plans from the previous Government to increase the jobs tax. We responded by reducing the burden of national insurance. Since then, we have introduced an employment allowance that cuts national insurance for almost 1 million firms, and now we are going to cut national insurance for employing under 21-year-olds and young apprentices. These measures have contributed to record falls in unemployment. A rise in the jobs tax of the kind contemplated by Labour would have the reverse effect and destroy jobs.

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Nigel Adams: I am very grateful to the Chancellor. Will he join me in congratulating the entrepreneurs and risk takers who, across my constituency, have stepped up to the plate since 2010—so much so that we now have 60% fewer people claiming out-of-work benefits? What further measures can my right hon. Friend deliver to ensure that the economic recovery continues in my part of North Yorkshire?

Mr Osborne: My hon. Friend is absolutely right that unemployment in his constituency has fallen. Twelve thousand extra jobs have been created in his constituency. That is because local businesses are benefiting from the employment allowance, and there is more to come with the cuts to national insurance for employing under-21s and apprentices. One of the reasons businesses are coming to his constituency is that he is such a champion of his constituency as a place to invest and employ. He goes out of his way to bring businesses and jobs to his constituency. That is why unemployment has fallen so fast there.

Adam Afriyie: It seems to me that we would be wise as a nation to reduce taxation on the activities that we wish to encourage. I therefore very much welcome the reduction in employers’ national insurance, which has created jobs in my constituency, and I suspect in every constituency around the country. Does the Chancellor agree that we would do well to push on with these reductions in employers’ national insurance, which, to all intents and purposes, is a tax on jobs that discourages their creation?

Mr Osborne: My hon. Friend is absolutely right that national insurance is a tax on jobs—

Ed Balls (Morley and Outwood) (Lab/Co-op): He is a champion!

Mr Osborne: My hon. Friend is a champion of businesses in his constituency. That is one of the reasons unemployment has fallen in Windsor and 2,000 businesses in Windsor are benefiting from our employment allowance. We are going to go on reducing national insurance on employing 21-year-olds and apprentices. The alternative path—the path offered by the Labour party—is to put the jobs tax up. That would increase unemployment and return Britain to the economic mess it was in when Labour was last in charge.

Mr Gregory Campbell (East Londonderry) (DUP): The lower-paid, particularly those who are earning £15,000 a year or less, should benefit from the Chancellor’s decision to raise the personal income thresholds, but will he also look at raising to the same level the threshold at which national insurance contributions are made, so that the lower-paid pay neither income tax nor national insurance contributions on £300 a week?

Mr Osborne: We increased the employer’s threshold when we came into office to reverse the damage done by the jobs tax increase proposed by the previous Labour Government. We have used the personal income tax allowance as the best method of lifting people out of income tax. It stands at £10,600, and our long-term economic plan proposes to raise it to £12,500. I am happy to work with the hon. Gentleman on other measures we can undertake to support employment and

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jobs in Northern Ireland. Is it not absolutely striking that on a question about the jobs tax and a question about unemployment, not a single Labour MP gets up to speak?

Business Support

7. James Morris (Halesowen and Rowley Regis) (Con): What progress his Department has made on supporting businesses. [907239]

The Exchequer Secretary to the Treasury (Priti Patel): This Government champion British businesses. We are delivering a significant programme of reform to enable businesses to grow, expand and, importantly, become successful. The reforms are all part of the Government’s long-term economic plan to secure business-led economic recovery.

James Morris: The number of new business start-ups in my constituency has increased by 100% since 2010. Does the Minister agree that creating a good business environment, with lower taxes and incentives to invest, is crucial to the future of the black country economy in the west midlands, part of which I represent?

Priti Patel: My hon. Friend is absolutely right. [Hon. Members: “Is he a champion?”] He is, indeed, a champion, and a strong voice for his constituency and his constituents. He is of course right in every respect. This Government are backing business every step of the way. Our long-term economic plan is making it easier to start and grow businesses, as he has seen across his constituency.

Mr Andrew Love (Edmonton) (Lab/Co-op): Figures published by the Bank of England last week show that net lending to business is still negative. After four and a half years of this Government, when can we expect the figures to go positive, and will we see out the last 100 days of this failed Government, who need a fresh Government to do the job for them?

Priti Patel: To put it bluntly, this Government have turned around not only the economy, but the business environment. This Government have backed British businesses and business lending every step of the way, which is in stark contrast to a Labour Government, under whom that would only go backwards.

Sir Robert Smith (West Aberdeenshire and Kincardine) (LD): Does the Minister recognise that when the consultation on tax reforms for the North sea finishes, it will be crucial to businesses in the north-east of Scotland for the Budget to set in place permanent reforms for the long term, not just for the crisis?

Priti Patel: My hon. Friend touches on a very significant point. The reality right now is that the reforms are all about long-term economic security. This Government have worked assiduously to ensure that every measure undertaken, whether to back businesses or to create the right tax environment for businesses—he has championed that in his constituency—is the right way forward.

Meg Munn (Sheffield, Heeley) (Lab/Co-op): What discussions has the Minister had with her colleagues in the Department for Business, Innovation and Skills

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who, in answer to a recent question, admitted that they expect to spend less than £1 million of the employer ownership fund, which was allocated £30 million to help businesses? What will she do about this failure to help businesses?

Priti Patel: I emphasise again that this Government have supported businesses and lending to businesses. That is in stark contrast to the failed policies of the Opposition, and to the fact that the hon. Lady’s party would just put up business taxes and take away the support given to small businesses under this Government.

Defined Contribution Pensions

8. Nigel Mills (Amber Valley) (Con): What assessment he has made of the further steps which are necessary to ensure the fair treatment of defined contribution pension customers in response to the recent market reports published by the Financial Conduct Authority; and if he will make an assessment of the potential merits of introducing a second line of defence protection for such pension schemes. [907240]

The Economic Secretary to the Treasury (Andrea Leadsom): We welcome the Financial Conduct Authority’s announcement yesterday that it will introduce new rules in April to protect consumers accessing their pension pot. The rules will introduce a second line of defence, with pension providers required to give consumers wanting to access their pension pot very clear risk warnings and to highlight the fact that guidance from Pension Wise or regulated advice can help them to avoid making a poorly informed decision.

Nigel Mills: I thank the Minister for that answer. I welcome the fact that the FCA, perhaps at the last minute, recognised there was an issue and took the right action yesterday. What more will she do to ensure that when people make free choices about their investments after April, they buy the right thing, not make a terrible mistake?

Andrea Leadsom: I congratulate my hon. Friend on expressing the importance of a second line of defence. The Government are determined to give pensioners the opportunity to make their own decisions about what to do with their pension savings. Nevertheless, it is vital to ensure that they have reasonable protections.

Sheila Gilmore (Edinburgh East) (Lab): There were reports yesterday that some people who exercise these rights might face large tax bills that they did not know about. Will the Minister be absolutely clear about what measures will be put in place to ensure that people are not disadvantaged, because she knows, as I do, that people are already being approached informally to get them to exercise these rights?

Andrea Leadsom: I reassure the hon. Lady that we have sought to give people the opportunity to make their own decisions about what to do with their lifelong savings. That is far better than in the past, when they were effectively told, “You buy an annuity and that’s that.” We are putting in place clear protections, with a criminal measure on scamming and on pretending to be the Government’s pensions guidance service, and there

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will be proper guidance, with fully qualified guiders who are able to help people through the process. There is now a further line of defence, because pension providers will be required to point out to people the vital importance of taking guidance or regulated advice.


9. Mark Hunter (Cheadle) (LD): What assessment he has made of the implications for his policies of recent trends in unemployment figures. [907241]

The Chief Secretary to the Treasury (Danny Alexander): Since the Government came to power, employment has increased by 1.75 million and now stands at its highest level ever; unemployment has come down by almost 600,000; and the number of jobseeker’s allowance claimants has fallen by more than 40%. That is one of the many ways in which the stronger economy that we are building is leading to a fairer society in this country.

Mark Hunter: Does my right hon. Friend know that unemployment in my constituency is down to 1.3%, which is precisely half what it was at the last general election and one of the lowest figures in the north-west of England? Does he agree that without the Liberal Democrats and the coalition Government, we would not have had the political stability that was essential for the recovery to take hold?

Danny Alexander: I wholeheartedly agree with my hon. Friend. Not only has unemployment halved in his constituency, but employment has risen by 1,300 since 2010. That is testimony to the work of Liberal Democrats and the Government in creating stability and to his role of supporting and championing local businesses in the north-west of England.

Stephen Timms (East Ham) (Lab): A striking feature of the recent trends in unemployment is the increase in youth unemployment, which has risen for three months in a row. In the figures that were published last week, it rose by 30,000, which is the biggest jump for almost two years. Why is it that while overall unemployment is coming down, youth unemployment is going up? Why are young people losing out?

Danny Alexander: I am sorry to have to correct the right hon. Gentleman, but youth unemployment has come down by 171,000 over the past year and is 175,000 lower than when the Government came to power. In his constituency, it is down 53% since 2010—a fact that I am sure he will join me in welcoming. I would agree with him that we need to continue for a number of years with the successful policies that are reducing unemployment in this country, to ensure that every young person has the opportunity to make the best of their life.

Richard Drax (South Dorset) (Con): May I congratulate the Front-Bench team on their economic policy and their long-term economic plan? Unemployment in South Dorset has halved over the past five years. Does the Chief Secretary agree that to hand the country back to the Opposition in a few months’ time would be an absolute disaster for the economic future of this country?

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Danny Alexander: I agree that the right course for the country is to continue with the balanced, sustainable, fair action that we have taken to deal in a common-sense way with the country’s financial problems. Lurches away from that path are offered by the Labour party and, I am afraid to say, the hon. Gentleman’s party. That is why it is necessary to have the Liberal Democrats to keep the country on the straight and narrow.

Sammy Wilson (East Antrim) (DUP): Although unemployment in Northern Ireland is lower than would be expected at this point in the economic cycle, growth has not reached out to many of the regions of the United Kingdom, including Northern Ireland. What steps are the Government taking to address the concentration of growth in the south-east of England and the fact that it does not extend to the regions?

Danny Alexander: I do not accept the hon. Gentleman’s characterisation, because we see strong economic growth in London and the south-east and in Scotland, and the economy of the north-west of England has been growing well, particularly in employment. We are seeing a more balanced pattern of growth and job creation than in previous economic recoveries.

None the less, the hon. Gentleman is right to say that there are significant problems of unemployment in Northern Ireland. That is why we have put in place a range of policies to help support the Northern Ireland economy, some of which we will be debating this afternoon.

Fiscal Consolidation

11. Daniel Kawczynski (Shrewsbury and Atcham) (Con): What progress he has made on his fiscal consolidation plans. [907243]

The Financial Secretary to the Treasury (Mr David Gauke): The Government inherited the largest deficit since the second world war. Since then, we have made substantial progress on reducing the deficit. Borrowing has already fallen by more than a third since 2009-10 and is forecast to have fallen by half this year as a share of GDP. The Government’s consolidation plans have been central to the reduction of the deficit.

Daniel Kawczynski: I thank my hon. Friend for that answer. Given the eye-watering amount of British taxpayers’ money that is spent on paying the interest on our national debt, I am pleased that the Government have already reduced the annual structural deficit by half. Does he agree that it is vital to continue with the policy of reducing the annual structural deficit in order to tackle our national debt?

Mr Gauke: I completely agree with my hon. Friend, who is right to make that point. We need to go on and run an overall surplus, to ensure that our public finances are sustainable over the longer term.

Clive Efford (Eltham) (Lab): Is the Office for Budget Responsibility not right to say that stagnant wages have led to more borrowing? Is that not the key reason why the Government have missed their borrowing targets by more than £200 billion?

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Mr Gauke: If we want wages to increase, which we do, we need to improve our education system, ensure that we have a welfare system that makes work pay, improve our infrastructure and have competitive tax systems. In brief, we need a long-term economic plan. That is what we have got with this Government, and it is not what we would have with the Labour party.

Alec Shelbrooke (Elmet and Rothwell) (Con): My hon. Friend will recognise that getting the deficit under control is vital if we want a strong economy. For all the posturing that we have seen today from the Labour party about the NHS, does he recognise that Greece, which had a smaller deficit to the one we had in this country when we came to power, had to cut spending on health services by 14%? Does he agree that only a strong economy can deliver a strong health service?

Mr Gauke: I completely agree with my hon. Friend, who puts it well. We want a strong NHS, but a strong NHS requires a strong economy, and that requires the Government’s policies to continue.

Steve McCabe (Birmingham, Selly Oak) (Lab): In the long-term economic plan—[Hon. Members: “Hurray!”] I would wait for the second part of the question. In the long-term economic plan, is missing a target by 50% evidence of success or failure?

Mr Gauke: We have turned the British economy around, and we grew faster in 2014 than any major western economy. Employment is increasing and unemployment is falling, including by 40% since 2010 in the hon. Gentleman’s constituency. That is a success.

Northern Powerhouse

12. Miss Anne McIntosh (Thirsk and Malton) (Con): What recent representations he has received on creating a northern powerhouse. [907244]

The Chancellor of the Exchequer (Mr George Osborne): We are making good progress in building a northern powerhouse. Over the past year, private sector employment in the north has increased by more than 200,000, a faster increase than the national average and faster than in the south. We want to sustain that by investing in new transport, new skills and new science, by devolving power and by bringing our northern areas closer together into that powerhouse.

Miss McIntosh: May I applaud the Chancellor and the Government for their work on creating a northern powerhouse? Will he ensure that rural communities participate in that wealth growth, and that rural broadband reaches farms and rural businesses that want to drive the rural economy and economic growth?

Mr Osborne: My hon. Friend is absolutely right that we want our rural communities in the north to be part of the powerhouse. It is not just about connecting the cities; it is about ensuring that the rural economy is a vibrant part of the northern economy. Superfast broadband is a key part of that, and, as she well knows, we have made special efforts to develop it in North Yorkshire. Rural transport is also incredibly important, as is supporting

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agriculture. The investment that we are making in agricultural science will benefit agriculture all over the country, including in her constituency.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): The Chancellor will have noticed that, for the first time in a recessionary period, the unemployment figures in Scotland—our northern powerhouse—are consistently better than in the rest of the UK, as the SNP Government, where possible, have followed different economic policies. Is his opposition to proper economic powers for Scotland based on a fear of being further outperformed by the Scottish Government? Is he afraid of the competition from a real northern powerhouse?

Mr Osborne: I am delighted for Scotland that unemployment has fallen and it is seeing growth. I remember, however, that the SNP predicted that our economic plan would cause unemployment to rise in Scotland and shrink the Scottish economy. That has not been the case because Scotland has been part of a stable United Kingdom that is following a long-term economic plan that is benefiting the entire country.

20. [907255] Andrew Stephenson (Pendle) (Con): On 4 November at Treasury questions, I raised the issue of Brierfield Mill, the largest redundant mill complex in Lancashire and situated in my constituency. Following that, my right hon. Friend the Minister for Universities, Science and Cities visited the project on 16 January. Now, inexplicably, the Lancashire local enterprise partnership has failed to bid for even a penny of funding as part of the second round of the growth deal. Will my right hon. Friend agree to meet me urgently to discuss Government support for that important project?

Mr Osborne: I am well aware of the economic potential of the Brierfield Mill development and when I met my hon. Friend in Nelson recently we talked about those benefits with local businesses. He is a champion of that development and it is extraordinary that the Lancashire LEP and, in particular, Lancashire county council have not promoted the project. He is promoting the project because he is a champion of his constituency and I will happily meet him to see how we can progress the Brierfield Mill project and bring more jobs to the Pendle constituency.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The Centre for Cities recently reported that for every 12 new net jobs created in the south-east of England, only one is created in the rest of the UK. What is the Chancellor doing to address that two-tier economy?

Mr Osborne: The hon. Gentleman says it is a two-tier economy, but youth unemployment is down by 45% in his constituency and unemployment down by 31%. I agree that the Labour Government in the Welsh Assembly are doing damaging things to the Welsh economy, but thankfully the UK Government are promoting Wales and the Welsh economy and, as a result, we are seeing jobs being created. I am happy to continue to come forward with policies that support Wales and its economic development.

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Ian Swales (Redcar) (LD): The north-east chamber of commerce recently said:

“Businesses are surging into 2015 on a wave of sustained growth and positivity”,

and unemployment is falling faster in the north-east than anywhere else in the country. Will the Chancellor ensure that the north-east is properly connected to the northern powerhouse and that the necessary infrastructure investment is delivered?

Mr Osborne: I assure my hon. Friend that that will be the case. The north-east is an incredibly important part of the northern powerhouse, and that is why we are investing in road and rail links there. We are also putting investment into science there, for example at Newcastle university, and of course in his constituency he has seen steelmaking begin again after it ended under the Labour Government. People will have a clear choice at the general election.

Tax Credits and Employment

13. Tom Greatrex (Rutherglen and Hamilton West) (Lab/Co-op): What proportion of recipients of tax credits are in employment. [907246]

The Exchequer Secretary to the Treasury (Priti Patel): Seventy-one per cent. of households in receipt of tax credits are in employment.

Tom Greatrex: I thank the Minister for that confirmation that more than two thirds of people getting tax credits are in work. How can she claim to be helping working families when the Chancellor wants to cut their tax credits again, causing real-terms economic pain?

Priti Patel: Let us put this into some context. For a start, tax credit spending rocketed under the previous Government and throughout this Parliament we have made it abundantly clear that we support those with low incomes. Let us not forget either that the impact of Labour’s great recession is still being felt. We continue to help people with the cost of living through the increases in personal allowances, the freeze in fuel duty, cuts in council tax and, of course, by reducing the cost of child care.

Richard Fuller (Bedford) (Con): Working tax credits are in effect a form of corporate welfare for employers who could pay higher wages, especially if tied to increased skills. Will the Minister continue her conversations with the Minister for Skills and Equalities about ways in which we can create a combination of those two, perhaps in the form of tax credits for training, such as proposed by Premier Inn?

Priti Patel: I thank my hon. Friend for his suggestion. He is right that more can be done through working with business and learning from their suggestions.

17. [907251] Pat Glass (North West Durham) (Lab): How can the Minister claim there is no cost of living crisis when average full-time wages are down by £2,000 a year, when huge and increasing numbers of workers are dependent on state benefits to make ends meet, and when the gap between chief execs’ salaries and the people who work for them is growing all the time?

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Priti Patel: Let us be clear. There are a couple of points I would like to make. The Government have shown that the only way to improve and increase living standards is by tackling head-on the country’s economic problems, which are down to the legacy of the previous Government, and by supporting those who do the right thing and aspire to work. I hope the hon. Lady welcomes the fact that in her constituency things have improved, with employment down substantially by 47% and youth unemployment down by 52%.

Richard Graham (Gloucester) (Con): Tax credits have helped many people, but it is also true that some have been prevented from taking a promotion or a salary increase because they would lose more in taxpayer-funded benefits than they would gain from their employer. That has to be wrong. Does my hon. Friend agree that as universal credit is rolled out across the country, so we return to the crucial principle that work always pays? I am afraid that that got lost under the previous Government.

Priti Patel: My hon. Friend is absolutely right. He mentions the very important universal credit roll-out. As it rolls out—[Interruption.] It is already being rolled out, and it is going well. As it rolls out, more and more people will benefit. He is right to point out that this is about both the value of work and aspiration. We are the only party that stands for aspiration and value in work, and inspiring people to get off benefits and back into work.

Household Budgets

14. Helen Goodman (Bishop Auckland) (Lab): What recent estimate he has made of the effect on household budgets of tax and benefit decisions taken in the present Parliament. [907248]

The Chief Secretary to the Treasury (Danny Alexander): Since 2010, I have published regular distributional analysis of the impact on households of our reforms to tax, welfare and public spending. It is the most comprehensive analysis available. The most recent analysis we published, alongside the autumn statement last month, shows that the wealthiest continue to make the biggest contribution towards reducing the deficit. By 2015-16, the net contribution of the richest 20% will be larger than the remaining 80% put together.

Helen Goodman: Today, the second independent report in as many weeks shows that proportionately the Government have hit the poorest and those with small children the hardest. Today, half a million more children are living in absolute poverty than when the right hon. Gentleman walked into the Treasury. Will he tell us why, instead of tackling that, he supported tax cuts for millionaires?

Danny Alexander: Those analyses ignore some of the most important and most progressive policies put in place by the Government. They ignore the pupil premium, which is investing money in the life chances of young people. They ignore the extra early years education provided to three and four-year-olds, and to the most disadvantaged two-year-olds. They are not included in

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those analyses, but they are helping to ensure that young people have better life chances under this Government.

Charlie Elphicke (Dover) (Con): Does the Minister not agree that it is important to note that real wages are rising, real disposable income is rising, child poverty is down and inequality is down under this Government?

Danny Alexander: It is very important to note all three of those facts, but it is also important not to be complacent. There is a lot more to do to ensure that we continue to deliver the successful growing economy that is creating jobs, because ultimately getting into work is the best route out of poverty for families.

Shabana Mahmood (Birmingham, Ladywood) (Lab): I am not surprised that the Chief Secretary to the Treasury does not want to acknowledge the full truth unveiled last week by the Institute for Fiscal Studies’ figures. Its report shows clearly that tax and benefit changes under this Government have left households £1,127 a year worse off on average, and that families with children have been hardest hit of all. Does that not make a complete mockery of the Government’s claims that they would be the most family-friendly Government ever?

Danny Alexander: As I said, the published analysis is incomplete because it ignores public expenditure. Public expenditure is a very important part of fiscal consolidation, but it is the shift in public expenditure, towards such things as early years education, the pupil premium and supporting disadvantaged young people through the education system, that is a vital part of improving life chances. I hope the hon. Lady will want to recognise that the measures the Government have taken have been aimed at improving the life chances of people. That is why we are making so much progress on attainment in schools, reducing child poverty and so on.

Topical Questions

T1. [907223] Nadhim Zahawi (Stratford-on-Avon) (Con): If he will make a statement on his departmental responsibilities.

The Chancellor of the Exchequer (Mr George Osborne): The core purpose of the Treasury is to ensure the stability and prosperity of the economy.

Nadhim Zahawi: We in Stratford-on-Avon are rightly proud of our world-class chamber orchestra, the Orchestra of the Swan, which, as well as playing to packed audiences in Stratford, is busy exporting British culture to the US and China. What assessment has my right hon. Friend made of the extra jobs and growth resulting from the new tax relief for theatres and orchestras?

Mr Osborne: The new tax relief for theatres has been a real success. It has been taken up by many theatres and is supporting regional productions. Separately, at my hon. Friend’s request, we have also helped the Royal Shakespeare Company to take its plays to China. Orchestra tax relief, the consultation on which we announced last week, will be another huge boost for British culture and

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music. We will set out further details in the Budget about how it will work, but it will be there to support a thriving orchestra industry—if that is the right word!

Ed Balls (Morley and Outwood) (Lab/Co-op): First, on a note of consensus, today is Holocaust memorial day. Following our conversation last night concerning today’s report by the cross-party Holocaust commission, on which I am proud to serve, will the Chancellor confirm the cross-party agreement to fund the commission’s recommendations, alongside ongoing funding, for the rest of the decade, for the vital work of the Holocaust Educational Trust, to ensure we have a new and permanent memorial and that future generations never forget that terrible atrocity?

Turning to today’s GDP figures, is the Chancellor, like me, concerned that economic growth is slowing? With just 100 days until the election, will working people be better off than when he became Chancellor, or will they be worse off?

Mr Osborne: First, this being the 70th anniversary of the liberation of Auschwitz, we should remember the inhumanity and the suffering of those who died and those who live with the memories of the holocaust, and we should vow as a nation to keep their memory alive. The right hon. Gentleman and Members from other political parties served on the Holocaust commission, the chairman of which, Mick Davis, briefed the Cabinet today on its proposals for a permanent memorial and an education learning centre. I made it clear in the Cabinet meeting that the Government would provide £50 million to support this brilliant plan, and of course we will continue to fund the work of the Holocaust Educational Trust, which takes Members and many school children to Auschwitz to see for themselves the horror that happened there. Across the House, we can come together to commemorate this day and ensure that the holocaust is never forgotten and that we never repeat its mistakes.

I hope you, Mr Speaker, will allow me a slight change of tone for a couple of seconds. The GDP numbers, which the shadow Chancellor complains about, show that Britain’s was the fastest-growing major economy in the world in 2014. He kept telling me to listen to the IMF—well, the head of that organisation said that few countries were driving growth like America and the UK. Growth is improving, the deficit has been reduced and unemployment is falling, and the President of the United States says we must be doing something right. When the shadow Chancellor complained about the Prime Minister’s going for dinner at the White House, he said, “I haven’t been neglected. They invited me in and gave me coffee and biscuits.” That is all the endorsement he is going to get for his economic plan anywhere in the world.

Ed Balls: It is good we have cross-party agreement fully to fund the Holocaust commission’s report.

If things really were fine and if the economy really were fixed, people would be better off, but instead they are worse off, and the Chancellor would have balanced the books, as he promised, but he has not—he has completely failed to do it. It is because of that failure on the deficit that he is now planning spending cuts in the next Parliament that the IFS calls “colossal” and that

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the Office for Budget Responsibility says will take us back to levels in our economy not seen since the 1930s—before the NHS existed. Every developed country with spending as low as he is aiming for has widespread charges for health care. Is that not the real Tory economic plan?

Mr Osborne: We have a free-at-the-point-of-use national health service, which we are proud of and will continue to fund. What is clear is the total confusion in Labour’s health policy today. This morning the Labour leader said he was going to use his so-called mansion tax to pay down the deficit; six days ago the shadow Chancellor said that money would be used to pay for his NHS plan. It is total confusion today. The only way to have a strong national health service is to have a strong economy.

Let me end on this note. We read in the last couple of days that the shadow Chancellor has been sidelined from the general election:

“In a major humiliation, party bosses have quietly shunted”


“out of the media spotlight”.

Let me reach across the Dispatch Box and offer the hand of friendship. Let us resolve that we are both going to put him at the centre of this general election campaign.

T2. [907224] Stephen Phillips (Sleaford and North Hykeham) (Con): By sticking to our long-term economic plan, huge strides have been made towards reducing the deficit—something that seems to evade the shadow Chancellor. Does my right hon. Friend agree that there is only one party that can be trusted to take the difficult decisions needed for prosperity in this country and for sound public finances, and it is the one that he and I represent?

Mr Osborne: My hon. and learned Friend is absolutely right. In Lincolnshire and across the country, people have seen unemployment fall and businesses grow. We have got to stick with the long-term economic plan, particularly at a time when the global economic risks are increasing. By working through that plan, we can deliver that economic security for his constituents and mine, and make sure this country has a brighter economic future.

T4. [907227] Mr Jim Cunningham (Coventry South) (Lab): Is the Chancellor aware that of the 150,000 people employed in Coventry, 50,000 of them—mainly women and young people—are in part-time, low-paid jobs? What are the Government going to do about it?

Mr Osborne: Of course we want to get unemployment down further, and for those who want full-time work, we want to make sure it is available. However, I would point out that, in the hon. Gentleman’s constituency, youth unemployment is down by 73% over this Parliament and unemployment is down by more than a half, so we have got to go on with our long-term plan, which is delivering those jobs in Coventry. Eighty per cent. of the jobs created in the UK at the moment are full time, so we need to sustain that plan, not go back to the chaos we saw under the Government he supported.

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T3. [907225] Mr John Baron (Basildon and Billericay) (Con): May I suggest that the Chancellor heed no criticism from the Labour party about deficits, given that it more than doubled the national debt when last in power? As we have heard, the Government have done much to help small businesses, which is why unemployment is falling across the country and in my constituency. As the country’s finances continue to improve, will he look further to ease the tax burden on small businesses—particularly corporation tax—which are very often the backbone of our local economies?

Mr Osborne: My hon. Friend is right that small businesses are absolutely central to our country’s economic growth and job creation in the future. We have cut small companies corporation tax in this Parliament. From April, we will have a single corporation tax, as it is consolidated around 20%, which removes a lot of the bureaucracy. On top of that, we have taken the smallest businesses out of business rates, and the employment allowance has helped with the national insurance bills of small businesses. Of course I will bear in mind anything else we can do to help small businesses. We have got some measures in the pipeline, but there is clearly more to do.

T6. [907231] Chi Onwurah (Newcastle upon Tyne Central) (Lab): This Government are demonising those on benefits, while doing little about tax evasion and avoidance, which, as we have heard, have risen significantly on their watch. Today sees the launch of the Tax Dodging Bill campaign, as 85% of British adults say that tax avoidance by large companies is morally wrong, even when it is legal. Why will the Chancellor not impose penalties for breaches of the general anti-avoidance rule, as we have called for?

The Financial Secretary to the Treasury (Mr David Gauke): First, it was this Government who got the base erosion and profit shifting process running with the OECD, looking to deal with the international rules. It was this Government who announced at the autumn statement that we are bringing in a diverted profits tax to deal with some of the contrived and artificial behaviours that people are worried about. It was also this Government who introduced the general anti-abuse rule and it is this Government who are consulting on bringing in penalties for it. I have to say, it is not a bad record.

T5. [907230] Mr David Ruffley (Bury St Edmunds) (Con): I commend the Chancellor’s aim of running an overall budget surplus in 2019-20 and cutting the national debt so that the next generation are not saddled with punitive taxes. Does he agree that this is a case of simple fairness, not ideology?

Mr George Osborne: My hon. Friend is absolutely right. Countries such as Canada and Sweden, both of which have quite strong social democratic traditions, have forms of balanced budget rules, or rules where surpluses are run in good times. That has enabled them to bring their public finances under control and their debt down. They did not endure the hardship we saw as a result of the financial crisis here in the UK. We propose that countries should run a surplus in good times. That is the only sustainable way to get our

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national debt down. If we do not do that, we leave Britain exposed to whatever economic shocks the world throws at us.

T7. [907232] Mr Stephen Hepburn (Jarrow) (Lab): The Chancellor will be aware of the importance of the success of Newcastle international airport and of the need for successful businesses to plan ahead. He will understand, then, how the possible cut in air passenger duty north of the border is felt as a threat. Will the Chancellor give an assurance to the business of the Newcastle international airport and to other potential businesses affected that we will match any cut in APD funding north of border?

Mr Osborne: The hon. Gentleman raises a serious point, and there is agreement on it across the political divide. The devolution of air passenger duty to Scotland raises the potential for real pressure to be put on airports in north-east England, but also on Manchester airport, which is partly in my constituency. We will of course have to see what the Scottish Parliament does when the powers are devolved, but the hon. Gentleman has my assurance that we will work together to ensure that we minimise the impact on the north-east if this happens, and that we will protect regional airports in England. We have a couple of years to work this out—it does not have be done tonight or tomorrow—and we can work out a plan that protects the brilliant Newcastle, Manchester and other regional airports.

Greg Mulholland (Leeds North West) (LD): This Treasury team abolished Labour’s unjustifiable and unfair beer duty escalator and delivered two historic successive cuts in beer duty. We still pay more tax on our beer, however, so our British brewers are not getting a fair deal in comparison with their European counterparts. Will the Treasury make it a hat trick?

The Chief Secretary to the Treasury (Danny Alexander): During his time in Parliament, my hon. Friend has been a champion of the beer industry, small pubs and small brewers across the country—and a very effective champion he has been, too. Of course I cannot make any commitments about the Budget at this stage, but I welcome his recognition of the progress made on this subject during the course of this Parliament, and I will certainly take his recommendations for the Budget very seriously.

Kelvin Hopkins (Luton North) (Lab): Britain has an enormous and persistent trade deficit with the European Union—clear evidence of a misaligned exchange rate. The significant weakening of the euro in recent days will make the position even worse and cause damage to British industry. When are the Government and the Bank of England going to take seriously the need to achieve and sustain an appropriate sterling-euro exchange rate?

Mr George Osborne: This Government do not target a particular exchange rate. Successive previous Governments found to their cost that doing so was difficult and damaging. What we do is ensure that Britain is competitive. I think the best thing to do to support exports is to make sure that our British businesses are taxed in a competitive way; they have great skilled work forces working for them—[Interruption.] They are chuntering away on the Opposition Front Bench. I seem to remember that when the Labour leader was asked recently when

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Britain would join the euro, he said it depended on how long he was the Labour leader. It is still official policy to join the euro and tie the currency up to the eurozone—with all the ensuing chaos that would follow.

Mr Henry Bellingham (North West Norfolk) (Con): Is the Chancellor aware that since 2010 unemployment in my constituency is down by a staggering 1,000? What assessment has he made of the role of small business start-ups in reducing unemployment?

Mr Osborne: Small business start-ups have been central to job creation. We have helped them with the employment allowance and the enterprise investment scheme, and we have given the new enterprise allowance to young unemployed people to help them to start businesses—and that has been a great success. We have in place many initiatives to back our brilliant small businesses in Norfolk and across the country.

Ms Margaret Ritchie (South Down) (SDLP): Considering the economic modelling carried out by one of the Treasury’s own economists, Professor Blake, what further progress has been made on reducing VAT on tourism, which would benefit all regions and particularly coastal regions in the UK?

Mr Gauke: We have looked at that, but there is a significant cost involved in making the changes. On the point of helping tourism, the hon. Lady will be aware of the substantial increase in Northern Ireland and other places over recent years and, secondly, the coastal communities fund provides a lot of support to many of the areas that benefit from tourism.

Mr Nigel Evans (Ribble Valley) (Con): Cutting beer taxes, raising income tax thresholds and stopping the

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petrol tax increases proposed by the Labour Government have helped the Evans household and, probably, a number of other household budgets throughout my constituency. In the next Budget, will the Chancellor please keep calm and carry on cutting taxes?

Mr Osborne: I will not make any commitments in relation to the Budget, but my hon. Friend is right to point out that our support for the pub industry and for motorists has provided huge boosts for industries and families in Lancashire and throughout the country. Of course, we do not encourage people to mix the two.

Mr Speaker: Last but not least, and very pithily, Alison McGovern.

Alison McGovern (Wirral South) (Lab): Will the Chancellor confirm that he has ruled out a further VAT increase in the next Parliament?

Mr Osborne: Our plans do not involve a VAT increase, because we are prepared to make difficult decisions on public expenditure, including decisions on the welfare budget. The hon. Lady and her colleagues voted for £30 billion of consolidation. If they are not prepared to do that by achieving expenditure savings, they must be contemplating big tax rises. With 100 days to the election, we know the choice: it is between a competent Conservative plan that is delivering growth, and a return to economic chaos under the Labour party.

Several hon. Members rose

Mr Speaker: Order. I apologise to colleagues whom I was not able to accommodate, but, as usual in the case of Treasury questions, demand massively outstripped supply.

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On-the-Runs Scheme

Mr Speaker: Before I call the hon. Member for North Antrim (Ian Paisley) to ask his urgent question, I must remind the House that the inquest into the death of Mr Gareth O’Connor, although stayed, is still sub judice. I have agreed to waive the sub judice resolution in order to allow an issue of national importance to be raised, but I ask Members in all parts of the House to be very careful in making any reference to the inquest. Members should also take care to ensure that their comments do not impede any future prosecution. Questions about the on-the-run scheme and the dates of the crimes concerned would be in order.

12.37 pm

Ian Paisley (North Antrim) (DUP) (Urgent Question): To ask the Secretary of State for Northern Ireland to make a statement about recent developments relating to the on-the-run letters which have permitted a second fugitive to evade justice.

The Secretary of State for Northern Ireland (Mrs Theresa Villiers): On Monday 26 January, the coroner conducting the inquest into the death of Mr Gareth O’Connor, who disappeared in May 2003, directed that the inquest should be stayed pending an investigation by the Police Service of Northern Ireland into one of the suspects in Mr O’Connor’s murder. The suspect was part of the administrative scheme dealing with so-called on-the-runs, and was in receipt of a letter from the Northern Ireland Office informing him that he was not wanted for arrest by police forces in the United Kingdom. This case is specifically covered on pages 107 and 108 of the Hallett report on the on-the-runs scheme, where it is described as “error 2”. The fact of the error has therefore been in the public domain for some time, and the case is not a new development.

The Police Service of Northern Ireland is investigating the suspect’s case, and will be considering whether charges can be brought against the individual concerned. I spoke to the Chief Constable of the PSNI yesterday, and I understand from him that this is a live police investigation. I also briefed the Justice Minister—in brief—on the case. The police will investigate where the evidence leads them. In the circumstances, it would not be appropriate for me to comment further on the specifics of the case.

As for the OTR administrative scheme, I set out the Government’s position fully in my statement to the House on 9 September. That followed detailed consideration of the report by Lady Justice Hallett, which was published in July. I made clear in my statement that the scheme was at an end, and that there was no basis for any reliance on letters received by so-called OTRs under the scheme. There is no amnesty, immunity or exemption from prosecution. Those who received letters under the scheme should be in no doubt: if there is considered to be evidence or intelligence of their involvement in crime, they will be investigated by the police, and if the evidence is sufficient to warrant prosecution, they will be prosecuted.

Ian Paisley: I thank the Secretary of State for her answer. The most disturbing aspect of what she has told the House today is the fact that the O’Connor murder

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relates to a post-1998 murder that occurred in 2003. We have been consistently told that the names of the OTRs were critical to securing a 1998 peace agreement, yet this murder post-dates that. Will the Secretary of State now agree to publish all the names with all the letters? Will she publish correspondence between Baroness Scotland and the right hon. Member for St Helens South and Whiston (Mr Woodward), whom I informed earlier I would be mentioning in the House, in terms of the relationship between that correspondence and the murderer of Mr O’Connor? Will the Secretary of State estimate how many other errors there are in this catalogue of errors and accept that the Government and the Hallett review conclusion that there is a single error is now without foundation?

Will the Secretary of State now consider legislation formally to annul the value of all these letters, to put meat on the bones of what she has said: that these letters are without value? Does she agree that Gerry Kelly must be formally investigated for how these letters have been distributed and for whom these letters have been requested? What compensation is now being considered for the families of those who have suffered as a result of Mr Downey’s activities and as a result of the actions by the murderer of Mr O’Connor, because these people cannot get justice by any other means and must now be entitled to some form of compensation?

Mrs Villiers: As is clear from the conclusions of the Hallett report, this letter should not have been issued; it was issued in error. For a number of reasons I do not think it would be appropriate to make public the names of the individuals who received letters under the scheme, not the least of which is that doing so could prejudice a future prosecution and make it more difficult to secure a conviction.

In relation to the number of errors, Lady Justice Hallett identified in her report two errors in addition to the one made in the case of Mr John Downey. She also identified a further 36 cases considered by Operation Rapid where she believed there was a risk that the wrong test had been applied. She did not conclude that there were actually errors in these cases, but she proposed that they should be a priority for further investigation because the risk of error in those cases was higher than in others.

In relation to legislation, as I briefed the House in September, it is clear to me that the most effective means to guard against future collapses of trials and future abuse of processes defence is to issue a clear statement indicating to anyone who received a letter under the scheme that it is not safe to rely on those letters—that they should not be relied on—and that is what I did. The option of legislating on these matters was carefully considered, but the conclusion is that legislation would not be as effective as a clear statement at the Dispatch Box that the scheme is at an end and these letters should not be relied on, not least because of a risk that errors have been made in other cases.

Mr Laurence Robertson (Tewkesbury) (Con): I thank the Secretary of State for the response to the urgent question. She will be aware that as well as the 36 cases identified by Hallett as being perhaps the most worrying, we were told by the then assistant chief constable, now the deputy chief constable, of the PSNI that 95 people

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who received letters are connected through intelligence to almost 300 murders. That is a very serious situation indeed. Will the Government ensure that the PSNI has the full resources to look into all those cases not in the period of as long as nine years that the PSNI estimates it may take it, but very quickly so that the Government can decide whether there is a need for legislation to make it absolutely clear that nobody can rely on these letters to protect them from prosecution?

Mrs Villiers: I am grateful to the Chairman of the Select Committee on Northern Ireland Affairs for his question. It is of course important that the PSNI has appropriate resources for its investigations under Operation Red Field relating to OTRs, as is the case for all other matters for which it has responsibility. I welcome the fact that the agreement on a final budget for the Northern Ireland Executive for 2015-16 allocated an additional £20 million to the PSNI. There is also the Stormont House agreement, which commits the Government to contributing £150 million to aid Northern Ireland in its treatment of legacy cases. I will look carefully at how that money should be appropriately deployed in the coming weeks.

On the question of legislation, I do not think I can really add to my previous answer. Having considered this carefully, the most effective means to ensure that we do everything we can to remove barriers to justice is a clear statement indicating that this scheme is at an end and these letters should not be relied on. That is what I have done. Legislation would not take us further and, I believe, would not be the right option in this instance.

Mr Ivan Lewis (Bury South) (Lab): As the hon. Member for North Antrim (Ian Paisley) suggested, the revelation yesterday regarding the collapse of the inquest into the murder of Gareth O’Connor has caused further concern and anxiety in Northern Ireland. Our thoughts today should be with the O’Connor family. Like so many of those left behind, they sought justice and truth about what happened to Gareth in 2003. They have waited 12 long years for an inquest into the death of their son, and the thought of preparing for a week-long inquest would have been harrowing for the family. This development made a highly stressful situation even worse.

News of another error from the administrative scheme for the on-the-runs is devastating, following the catastrophic error in the Downey case last year. We have apologised for the Downey error, and do so again for the error in the O’Connor case. In the same way as this scheme never offered amnesty, it was also never intended to cover alleged offences committed after the signing of the Good Friday agreement. Doubly troubling is the delay in the coroner and the family being made aware of the error. The Northern Ireland Office and the police knew about the case—indeed, it was referred to in the Hallett report.

I have several questions for the Secretary of State. Why did the Northern Ireland Office not ensure this family were told of the error in the immediate aftermath of the publication of the Hallett report? Secondly, further to the question from the Chairman of the Select Committee, in view of the financial pressures facing the PSNI, how long does the Secretary of State estimate it will take to review all the cases covered by the OTR

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scheme? I do not believe she has clarified that in her answer to the House today. Finally, on a related matter that has caused similar concerns, can the Secretary of State update the House on investigations into the missing information regarding royal prerogatives issued before 1997?

Mrs Villiers: I thank the shadow Secretary of State for his questions. It is useful to remind the House that this scheme never offered an amnesty, and that it was designed to give individuals who were not wanted an indication that they were not wanted by police, so the letters issued in relation to the Downey case and this one were clearly issued in error.

On the Chairman of the Select Committee’s question about the connection between the 95 individuals and intelligence or indications relating to 300 crimes, these are of course matters for the police to investigate, but I would emphasise that a connection to intelligence or evidence is not necessarily sufficient to justify arrest or prosecution.

I welcome the shadow Secretary of State’s repetition of the apology he gave on behalf of the previous Government for the errors made in these cases, and I, of course, am happy to reiterate the apology I made on behalf of this Government for the pain and hurt caused to all families affected by the OTR scheme. I think there is consensus that the scheme should, at the very least, have been handled in a much more transparent way.

I acknowledge that the way the family in this case found out about the connection to the OTR scheme was very problematic. My understanding is that the PSNI has issued an apology for that, and I join in confirming that apology. It is, of course, as I said in response to the previous question, important that the PSNI is properly resourced for all its functions, which is why the Government have provided extra security funding of £230 million and one reason why we have provided funding for help in investigating the past. Even with those additional resources, it is clear that Operation Red Field, the investigation into all the OTR cases, will take some years.

Mr Andrew Robathan (South Leicestershire) (Con): The Secretary of State is to be congratulated on bringing some transparency to this scheme, via the Hallett inquiry. Such transparency was needed, because the previous Government set up the scheme and kept it under the carpet, if not secret from the nation. Does she agree that it was one of the shabbiest deals they did, notwithstanding the shadow Secretary of State’s apology? Will she further reassure me, the House, the country and the courts that she has taken legal advice on her statement that nobody can rely on one of these letters any more?

Mrs Villiers: I have taken into account a number of factors in deciding how to respond to the Hallett report, and they of course include legal advice on the best way to guard against further trial collapses as a result of abuse of process. My right hon. Friend has referred in clear terms to his view of the scheme. As I said, I think there is agreement that it was deeply unfortunate that the scheme was not handled in a more transparent way. That is something for which I have apologised, but I emphasise once again to the House that it was never an

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amnesty and it was never a scheme to let people wanted for arrest get off without arrest or prosecution; it was, from the start, intended to be a scheme that merely indicated to those who were not wanted by the police that that was the factual position at the time in question.

Mr Gregory Campbell (East Londonderry) (DUP): The Secretary of State has repeatedly said that individuals should not rely on the OTR letters as the police carry out their duties. Does she agree that the law-abiding community in Northern Ireland would see much greater strength in that reassurance whenever they saw people with an OTR letter in their possession standing in the dock and the judge carrying out his duty, despite their having possession of a letter?

Mrs Villiers: It is, of course, important for all crime to be properly investigated in Northern Ireland and for those guilty of offences to be brought to justice, regardless of whether or not they have an OTR letter.

Nigel Mills (Amber Valley) (Con): We all want to see people with a strong case against them standing trial to see whether a jury will convict them. Will the Secretary of State revisit her legal advice on her statement that these letters should not have any great effect on a trial, to make sure that, in the light of this new decision, it remains correct and there is no need for further action by this place?

Mrs Villiers: I am certainly happy to do that, and I discussed the matter with the Chief Constable yesterday. Just to reiterate, the Northern Ireland Office stands ready to take any further steps that might assist in removing barriers to prosecution. My current view is that the best way to guard against future problems in relation to abuse of process is a clear statement that these letters should not be relied on, and that is what I have made and issued to this House in September.

Naomi Long (Belfast East) (Alliance): The PSNI has already confirmed that Operation Red Field will take at least three years, so I am glad the Secretary of State is looking directly at how she can assist with the funding. This was a Northern Ireland Office scheme, not a devolved scheme, and so the review should not come from the Northern Ireland budget. Is she in a position to shed any light on the allegations that have been made in the media that this individual was issued with a letter in respect of crimes that predated 1998 but which included a crime for which they were wanted in 2003, and that the tag of “wanted” on their file was then changed subsequent to the issue of that letter to “not wanted”, which would have made this incredibly difficult to detect?

Mrs Villiers: For the reasons I have given, I am reluctant to get into the specifics of this case. As I have mentioned, the hon. Lady will find some further detail on these matters on page 108 of the Hallett report. In particular, there is a real concern that the offence in question was a post-1998 offence.

Richard Drax (South Dorset) (Con): Having done three operational tours in Northern Ireland, I fully appreciate that some areas are murky and remain so,

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and these 200 letters were a shabby effort to sign up to the peace deal. Will the Secretary of State tell me how long it will take to investigate these 95 people who have received letters? As we understand it, through intelligence, they are connected to 300 murders, so how long will it take to pursue this and ensure that proper justice is done?

Mrs Villiers: As I have said to the House, it will, unfortunately, take some years to go through all the OTR cases. That is why we will need to give serious consideration as to whether some of the extra funding provided as a result of the Stormont House agreement to deal with matters relating to the past can be used in some way to assist the PSNI in this important work.

Mr David Anderson (Blaydon) (Lab): In response to the question that my hon. Friend the Member for Bury South (Mr Lewis) asked about why the family and the coroner were not involved in July when Hallett produced the report, the Secretary of State said that it was “problematic”. That is not good enough. We want to know what has been going on since July. We have been told earlier that the police are now investigating this case, but what have they been doing since July? And what has the NIO been doing since July?

Mrs Villiers: The NIO has been involved in a number of matters implementing the conclusions of the Hallett report. They include consideration of this case by the policy board set up as a result of Lady Justice Hallett’s conclusions. We also implemented a number of her conclusions through my statement to the House to provide clarification of the status of the scheme. That also covers the recommendations that she made in relation to removing barriers to prosecution. The PSNI has also made progress on the matters in Lady Justice Hallett’s recommendations on how it deals with police databases and the PSNI’s liaison with other police services in the United Kingdom.

Mr Anderson: What about this family?

Mrs Villiers: We have to bear in mind that deployment and disclosure of information in relation to these individual cases needs to be handled with the greatest care, because any disclosure presents risks in relation to future prosecutions. That is probably one of the reasons why the information came out at the time that it did. So we need to reflect carefully on these matters. It did come out in an unfortunate way; I reiterate the apology I made earlier to the family for how they learned of this matter, but we all need to take care on the disclosure of information about this scheme, because none of us would want to be responsible for the collapse of a future trial.

Ms Margaret Ritchie (South Down) (SDLP): I am reflecting and thinking of the O’Connor family from Newry today. Will the Secretary of State confirm, notwithstanding the content of the Hallett report, that no further errors will be revealed?

Mrs Villiers: No, I am afraid that I cannot give that confirmation. The Hallett report was clear in its conclusions about the management of the scheme: it was not properly managed and the risk was not properly managed. Anyone

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reading the Hallett report must expect that further errors will come to light. As I told the House earlier, Lady Justice Hallett highlighted 36 further cases as ones where the risk of error is higher than in others. That is one reason why nobody should be relying on these letters; because of the errors in the way the scheme was managed, it is likely that other errors will come to light.

David Simpson (Upper Bann) (DUP): The Secretary of State will know that I have raised the position of the victims on a number of occasions, and they are at the core of the whole issue. Many victims will never see justice because of these OTR letters. My hon. Friend the Member for North Antrim (Ian Paisley) made a point about printing the names. Is one reason why the Government will not print the names of those with OTR letters and the royal pardons that they were received by some people who have been elected to this House and are currently elected to the Assembly?

Mrs Villiers: Let me emphasise that the issue of an OTR letter does not necessarily lead to the result that it did in the John Downey case. The judgment is clear: the reason why the trial collapsed was that the letter was incorrect. Mr Downey was wanted, but he was sent a letter indicating that he was not. The issue of an OTR letter does not give immunity from prosecution; it never did and it will not do so in the future. On the disclosure of names, I have said to the Northern Ireland Affairs Committee on many occasions that, by disclosing names, there is a risk that I would jeopardise future prosecutions, make them more difficult and increase the risk of an abuse of process. That is why I will not disclose names in relation to this scheme or be drawn on categories of individuals who might have been part of it.

Mr Stephen Hepburn (Jarrow) (Lab): Does the Secretary of State agree that we should not have short memories when it comes to Northern Ireland? The fact is that 3,600 people were killed during the civil war. Rather than condemn the previous Government, we should acknowledge the risks that they took to make Northern Ireland the fantastic place that it is today.

Mrs Villiers: I have certainly always tried to be objective and measured in how I view the actions of the previous Government on these matters. In relation to OTRs generally, there certainly are some differences between the parties, not least of which is the opposition of the Conservatives and the Liberal Democrats to the Northern Ireland (Offences) Bill. In relation to this scheme and the way in which Northern Ireland matters were handled generally by the previous Government, I do not doubt their sincerity. They were motivated, I am sure, by a wish to see the process move forward and to secure peace and stability for Northern Ireland. The key problem that was revealed by the Hallett report was that, unfortunately, the scheme was not managed in the way that it should have been, and that gave rise to risks. Errors were made, which, unfortunately, could jeopardise future prosecutions.

Jim Shannon (Strangford) (DUP): At a time when yet another OTR is issued a covert letter to escape jail, British soldiers—funded by legal aid—are being investigated

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for a shoot-out with terrorists which led to the much-deserved deaths of those terrorists. Does the Secretary of State not accept that the legal system and the rule of law are being undermined by the fact that while some individuals are not being charged for their terrorist activities, British soldiers are being investigated?

Mrs Villiers: For some, confidence in the legal system has been shaken by the OTR scheme. But that is a reason to be very clear that it was not an amnesty; it never was. It was a scheme designed to ensure that individuals who were not wanted by the police were told that that was the case as a matter of fact at a particular point in time. It is important that the scheme is described in such a way to provide as much reassurance as possible to the people who have been understandably distressed by what has happened.

Mark Durkan (Foyle) (SDLP): The Secretary of State will recall that much of the negotiations in relation to the Stormont House agreement revolved around concerns to protect the option of the inquest process into the future. Does it not strike her as somewhat disappointing that after parties such as the SDLP and Sinn Fein argued to defend that very process, an inquest has been compromised by what has happened in relation to this discredited OTR scheme? Although we will not join the call for the publication of the names of everyone who received letters, we ask the Secretary of State to assure us that those letters and the details around them will be shared with the new bodies that will be dealing with the past, which were set up as a result of the Stormont House agreement. In that way, no one else can be surprised by events in the way that they were with this twisted and terrible case.

Mrs Villiers: I agree with the hon. Gentleman that inquests were a key matter that were considered at great length in the Stormont House agreement talks. Although we could not build a consensus on the way to reform inquests, we did reach a consensus on the fact that the inquest system needs to be reformed because, at the moment, it is not working effectively enough to give proper answers to families. I am working with the Justice Minister and others in the devolved Executive to do everything we can to take that reform process forward; it is vital that we do that. Disclosure was also debated at length, and I can assure the House that the Government are committed to the fullest disclosure in relation to the new bodies to be set up under the Stormont House agreement. But when it comes to onward disclosure, we will of course need to put in place national security measures, which are broadly equivalent to those that apply in respect of current institutions. In conclusion, I wish to pass on my condolences to the O’Connor family, who must have been distressed and upset by recent events.

Sammy Wilson (East Antrim) (DUP): I am sure that the Secretary of State will understand why the people of Northern Ireland are cynical about her oft-repeated mantra that no one can rely on these letters, when we have already had two people relying on them, and she has indicated today that there could possibly be another 36. Will she tell the House who was responsible for the error, and what the nature of the error was? In that way,

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we can at least determine whether this was a deliberate action to ensure that a killer was not brought to justice or a genuine mistake.

Mrs Villiers: The Hallett report indicates that the error may well have originated within the PSNI, but we should not rush to judgment on that. As I have said in relation to the John Downey case, wherever the error arose, the problem was that the scheme was not designed to guard against errors or to pick up on them when they were made. The overall responsibility for the errors still rests at ministerial level. There is a consensus on both sides of the House that the Ministers in power at the time need to take responsibility for what happened, even if, at the end of the process, the error may have been made by the PSNI. It is a matter on which we should not rush to judgment. The hon. Gentleman may wish to look at page 108 of the Hallett report to assess how the error occurred.

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Voter Registration

Motion for leave to bring in a Bill (Standing Order No. 23)

1.7 pm

Chris Ruane (Vale of Clwyd) (Lab): I beg to move,

That leave be given to bring in a Bill to make provision for the registration of voters by registration officers; and for connected purposes.

Mr Speaker, as you and many Members of this House may know, I have been raising the issue of voter registration since 2001. In that time, we have seen massive and far-reaching changes to the way in which we register to vote in order to empower citizens with the ability and confidence to cast their vote come election time. What I propose in this Bill will work towards increasing the number of people registered to vote, particularly those who are least likely to be registered to vote, which includes young people.

Since 2001, we have seen the number of non-registered voters increase. I do not wish to shy away from the arguments about why people are not registered to vote, but first let me say that, according to revised figures from the Electoral Commission last year, some 7.5 million people were missing off the electoral register in 2010. But even in the past 18 months, England, Wales and Scotland have collectively gone through the biggest change in the way people register to vote since the Great Reform Act 1832. The move to individual electoral registration has seen 5 million people fail to transfer over from the household register to the new individual electoral registers, and 1 million people have fallen off the electoral register completely.

I have been working with the fantastic group, Bite The Ballot, which is a neutral cross-party youth democracy group, to bring forward this Bill to tackle the under-registration of young people in England Wales and Scotland, and to make registration easier with an “opt-in” option on Government forms.

The first part of this Bill seeks to emulate what is now practice in Northern Ireland. Following the transition to individual voter registration in Northern Ireland in 2002, there was a marked decrease in the number of people registered to vote. In 2008, to tackle that problem, the chief electoral officer for Northern Ireland was given the power to request information from post-primary schools to pre-populate electoral registration forms for those eligible attainers.

The schools initiative, according to the chief electoral officer for Northern Ireland, is the most productive part of his community engagement programme. His office visits 182 schools between mid-September and early November each and every year, and has successfully registered 50% of the total eligible youth population via the scheme alone. Bite The Ballot, which has five years’ experience in inspiring attainers and young people to register, tells us that face-to-face engagement is the best way of ensuring that young people register, so I say, why not follow best practice in Northern Ireland, and follow suit in the rest of the United Kingdom? By visiting schools and colleges, and running voter engagement sessions, our youngest citizens can be inspired to begin their lifelong democratic journeys as active, engaged citizens.

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The Bill also seeks to open up the avenues to registration with a simple opt-in tick box on all Government forms. The measure is similar to the USA’s “Motor Voter” Act of 1993, which has enabled a massive 32% of American voters to register through interactions with the state. It would empower citizens to register to vote when filling in, for example, applications for a renewed driver’s licence, a passport and benefits, or when enrolling with a GP. The system I am advocating would only ever operate on an opt-in basis to protect the individual’s private data and identity. Having moved to a system of online registration, that type of data sharing is surely not beyond the skill of the Government Digital Service.

The Government have just announced £10 million to aid local authorities and national organisations in the task of registering people to vote. That is welcome, and must be spent on activities that work and are known to work. School and college visits, as Bite The Ballot proves, work. Enabling people to register when they interact with Government services, as the Americans have proved, works. My Bill seeks to make the UK’s system of voter registration as easy, engaging and accessible as possible. I believe that the two proposals I make in the Bill go some way towards achieving that.

In conclusion, may I pay tribute to you, Mr Speaker, for your support for the issue of registration and turnout, including your support for lighting up the Victoria tower with a big X on voter registration day next week, and your support for online voting by 2020?

Question put and agreed to.


That Chris Ruane, Mr Russell Brown, Nic Dakin, Mr Clive Betts, Mr Kevan Jones, Mr George Howarth, Mr Mark Williams, Mr Elfyn Llwyd, Jim Shannon, Jessica Morden and Mark Durkan present the Bill.

Chris Ruane accordingly presented the Bill.

Bill read the First time; to be read a Second time on Friday 6 March 2015 and to be printed (Bill 163).

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Corporation Tax (Northern Ireland) Bill

[Relevant documents: First Report from the Northern Ireland Affairs Committee, Session 2010-12, Corporation Tax in Northern Ireland, HC 558, and the Government response, HC 1767.]

Second Reading

1.14 pm

The Secretary of State for Northern Ireland (Mrs Theresa Villiers): I beg to move, That the Bill be now read a Second time.

The Bill provides for the devolution of a rate-setting tax power to the Northern Ireland Assembly and would allow Northern Ireland to set its own rates of corporation tax. Just under five years ago, the Conservative party went into the general election with a commitment in our Northern Ireland manifesto to produce a Government paper examining the mechanism for changing the corporation tax rate in Northern Ireland. The pledge subsequently formed part of the coalition’s programme for government. It was part of our strategy for rebalancing the Northern Ireland economy from over-dependence on the public sector by revitalising private enterprise and attracting new investment.

The commitments in the Conservative manifesto and the programme for government were fulfilled a little under four years ago, when the Government launched a consultation on rebalancing the Northern Ireland economy and on the potential for devolving corporation tax powers to the Executive and the Assembly. The response to that consultation was near-unanimous support from Northern Ireland’s political leaders and the business community for the devolution of corporation tax. We have worked tirelessly since then on the technical details needed to make devolution possible.

My predecessor, my right hon. Friend the Member for North Shropshire (Mr Paterson), whom I welcome to the Chamber today, established a joint ministerial working group with the Treasury and Executive Ministers in late 2011 to work through the main questions of contention. In the economic pact that we signed with the Northern Ireland Executive in June 2013 on the eve of the G8 summit, we committed to further progress and a final decision in principle on devolution no later than the autumn statement of 2014. In that autumn statement my right hon. Friend the Chancellor said that

“we recognise the strongly held arguments for devolving corporation tax-setting powers to Northern Ireland. The Treasury believes it can be implemented provided that the Northern Ireland Executive can show that they are able to manage the financial implications. The current talks will see whether that is the case. If it is, the Government will introduce legislation in this Parliament.”—[Official Report, 3 December 2014; Vol. 589, c. 314.]

As I informed the House on 7 January, following extensive negotiations, those cross-party talks reached a successful conclusion on 23 December with the Stormont House agreement. That agreement, which also covered crucial legacy issues such as flags, parading and the past, sets a path for the Executive to put their finances on a sustainable footing for the future. That has paved the way for us to go beyond the commitments we made in our manifesto in 2010 and to introduce the Bill to devolve corporation tax rate- setting powers to Northern Ireland. Unlike the Opposition, the Government believe in lower taxes for business because we understand that businesses thrive

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when they are free to get on with what they do best, unencumbered by burdensome regulations and excessive taxes.

That is why since 2010, the Government have cut the main rate of corporation tax from the 28% we inherited from Labour to 21% today. It will fall still further to 20% in April, giving the UK the joint lowest rate of corporation tax in the G20—a competitive edge that Labour wants to deny British business, as the Shadow Chancellor is committed to reversing that reduction. The small profits rate has also been cut to 20%. Those tax cuts are a central part of the Government’s successful long-term economic plan to make the UK as a whole more competitive, supporting business investment and job creation— something that would be jeopardised by a return to the high-tax, high-spending, high- borrowing policies of the previous Government.

Jonathan Edwards (Carmarthen East and Dinefwr) (PC): The Secretary of State will be aware that the UK Government-sponsored Silk commission, which was set up in Wales a number of years ago, reported that if corporation tax were devolved to Northern Ireland, consideration should be given to devolving it to Wales and the other devolved Parliaments. Can she enlighten the House on the Treasury’s thinking, now that a decision has been made for Northern Ireland, on the other devolved Parliaments?

Mrs Villiers: Careful consideration has been given to the devolution settlements across the United Kingdom. The Government have made it clear that the fact that Northern Ireland shares a land border with a low corporation-tax jurisdiction means that the case for reform is strong for Northern Ireland, but it is not made out in relation to the rest of the United Kingdom. Northern Ireland is different from the rest of the country, because the history of the troubles has left its economy with a high dependence on the public sector. That is another reason why Northern Ireland is different, and corporation tax devolution could provide a boost to growing the private sector in Northern Ireland. While there is a clear case for doing this in Northern Ireland it would not be the right move for other parts of the United Kingdom.

Ian Paisley (North Antrim) (DUP): Has any assessment been carried out about the level at which Northern Ireland should set its new rate of corporation tax, given what the Minister has just alluded to—our competitiveness with the Republic of Ireland, which has a rate of 12.5%? Has any research been carried out by the Treasury on that?

Mrs Villiers: The principle of the Bill is that that becomes a matter for the Northern Ireland Assembly and the Executive. It is for them to make the choice and decide whether to go ahead with implementation of a reduced rate. Obviously, there is a great deal of support for bringing down the rate of corporation tax in Northern Ireland to the same level as in the Republic of Ireland. I know that the hon. Gentleman’s party colleague, Minister Foster, would like to see it reduced still further. Those matters are not provided for in the Bill because the Bill vests that choice with the Northern Ireland Executive once commencement has taken place.

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As I was saying in response to the intervention, Northern Ireland has a unique position within our United Kingdom. The land border that it shares with a very low corporation tax environment in the Republic of Ireland puts it at a significant competitive disadvantage when competing for inward investment into the island of Ireland. Northern Ireland is also more dependent on the public sector than most other parts of the UK. Estimates vary as to the extent of this dependence, but it is generally accepted that around 30% work in the public sector, compared with about 20% in the rest of the UK. Some surveys put the dependence on the public sector at even higher levels.

Economic prosperity as measured by gross value added per capita is still some 20% below the UK average and has been so for a number of decades. Of course, Northern Ireland faces a range of difficult issues flowing from the legacy of the troubles. All these challenges need to be overcome if Northern Ireland is to compete successfully on the national and global stage for jobs and for investment. None of this is to say that Northern Ireland does not have some amazing entrepreneurs and some hugely successful businesses that are truly world-beating. Under this Government unemployment in Northern Ireland has fallen in every month for the past two years and the record of foreign direct investment is strong, not least because of the efforts of the Northern Ireland Executive.

But for all the great businesses we have in Northern Ireland, the blunt truth is that there are just not enough of them, so the Government are convinced that to boost the private sector and enable Northern Ireland to perform even more strongly in attracting inward investment, we need to go further. We need to provide stronger incentives for Northern Ireland firms to invest in growth. The Bill before the House today will give the Assembly a powerful tool to help them do this, enabling Northern Ireland to take a decisive step forward towards rebalancing its economy.

The Bill provides a further demonstration of this Government’s general commitment to devolution, which we have shown in many ways, including with the Scotland Act 2012. We are making progress on implementing the Smith commission proposals for further powers for Scotland over tax and welfare to be transferred to the Scottish Parliament. Draft legislative clauses were published on 22 January.

Nigel Mills (Amber Valley) (Con): Is my right hon. Friend aware of the data which suggest that almost twice as much will be raised from companies moving from Great Britain to Northern Ireland than from those moving into Northern Ireland from overseas? If that is the case, does she think it fair that Members from Northern Ireland may vote on the UK-wide corporation tax rate as well as their own, when they are effectively competing with our constituents?

Mrs Villiers: I emphasise that the new system is designed to deal with artificial avoidance. A number of measures are in place to prevent abuse of the new system; I will come to those in a moment. In relation to voting on taxation matters, my hon. Friend will be aware that ensuring that the devolution settlement is fair to the English as well as to the rest of the United Kingdom is an important matter under consideration

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by the House and by the political parties. I am sure it will be extremely important that we get the right outcome to ensure that the devolution settlement is fair across the board, but it is also crucial that we have a coherent and unified tax system.

Naomi Long (Belfast East) (Alliance): I take on board the issue raised by the hon. Member for Amber Valley (Nigel Mills). Does the right hon. Lady agree with me, though, that Northern Ireland would want to avoid corporation tax devolution and any subsequent reduction by the Assembly leading merely to brass-plating of companies in Northern Ireland? For us to benefit from the economic out-turn of investment, we need people who are involved in creating employment and raising skills levels as well.

Mrs Villiers: As the hon. Lady will hear when I get further into my remarks, the approach in the Bill is to focus on genuine economic activity which generates jobs. We want to minimise the risks of matters such as brass-plating and artificial avoidance schemes, so the Bill maintains the coherence of the corporation tax system as a whole and also provides an incentive to bring genuine economic activity to Northern Ireland and assists in that rebalancing process.

The Wales Act 2014 came into effect on 6 January, providing the legislative framework to support the implementation of recommendations made in the first report of the Silk commission. As my right hon. Friend the Secretary of State for Wales has told the House, he continues to take forward discussions on the next steps for devolution in Wales. The debate continues on the most effective way to ensure that devolution operates in a fair way with regard to England, as one of the component nations of the United Kingdom.

Turning back to Northern Ireland matters, the devolved system for corporation tax rates set out in the Bill reflects the following overarching Government goals: we want to attract genuine economic activity to Northern Ireland, minimise additional administrative costs for business, keep the costs of a reduced rate for the Executive at a proportionate level, and ensure as much consistency as possible between the new NI provisions and the main UK corporation tax regime—and of course we need to comply with legal requirements.

The legislation does not cut off Northern Ireland from the rest of the UK tax system or establish a separate and distinct corporation tax regime for Northern Ireland. Control over what is taxed remains a matter for the UK Government and this House. The Bill devolves only the power to vary the rate, so Northern Ireland’s trading regime remains firmly and clearly within the overall UK corporation tax system. The Bill will insert new part 8B into the Corporation Tax Act 2010 and amend the Capital Allowances Act 2001. These changes would give the Assembly the power to set a rate of corporation tax for certain trading profits, based on a proposal from the Northern Ireland Executive. That would be a decision for Northern Ireland, independent of the UK Government or this House. It will give the Assembly and the Executive a powerful economic lever to drive potential growth and enable it to be exercised on the basis of the wishes of Northern Ireland voters, taxpayers and businesses.

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Efforts are made to minimise the scope for artificial tax avoidance, as I said in response to interventions. Existing anti-avoidance measures will continue to apply, including the UK targeted anti-avoidance rules and the general anti-abuse rule, and further protections may be introduced before implementation. The overall structure of the devolved regime has been designed to limit the opportunities for avoidance, as I told the House in response to interventions.

A new Northern Ireland rate would cover trading profits, such as those associated with manufacturing and providing services. Other profits—non-trading profits, such as those associated with property income—that do not generate jobs or economic growth in the same way will continue to be subject to the UK-wide rate. Similarly, activities such as lending, leasing, and reinsurance offer significant scope for profit shifting without the benefits of bringing substantial new jobs, so these, too, will be excluded from the Northern Ireland provisions.

To promote continued success in Northern Ireland in attracting back-office functions, companies with excluded trades and activities may make a one-off election for the back-office functions of those excluded trades or activities to qualify for the Northern Ireland Office regime. This is an example of the UK Government’s responding specifically to areas of activity where Northern Ireland has demonstrated its great strength in attracting inward investment. It will not apply to the oil and gas or long-term insurance sectors, which have their own separate regimes and will not be included in the new devolved arrangements. Allowances and credits remain reserved to Westminster to help to maintain a common tax base across the United Kingdom and to prevent unnecessary new complexity from being added to the tax system.

However, a number of rules will be amended to reflect the new circumstances. For example, if there is a lower rate of tax in Northern Ireland, research and development tax credits, capital allowances and creative reliefs for the film, TV and computer game industries will be adjusted to ensure that they continue to be broadly equivalent in value to those in Great Britain. That means that Northern Ireland can continue to be just as attractive a location for successful projects such as “Game of Thrones” and other film and television productions.

The devolved tax regime will also operate differently for larger and small businesses. Larger businesses will need to divide their profits between Northern Ireland and Great Britain, as they do now between the UK and other countries. This effectively means that they will treat their Northern Ireland trading activity as a separate business from their activity in the rest of the UK and allocate the appropriate amount of profit to Northern Ireland. We recognise, however, that this would be burdensome for smaller businesses. Indeed, the issue of potential administrative burdens on small business was one of the key concerns brought out by the 2011 consultation, and the matter was raised by Northern Ireland Executive Ministers on a number of occasions at the ministerial working group. Therefore, if at least 75% of such a business’s staff time and staff costs relate to work in Northern Ireland, then all their trading profits will be chargeable at the Northern Ireland rate. If not, they will be chargeable at the UK corporation

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tax main rate. This simple in/out test will mean that the majority of small and medium-sized enterprises are spared the burden and cost of apportioning profits.

As I made clear in my previous statement to the House, the Bill’s progress through Parliament is dependent on the Executive parties delivering on their commitments in the Stormont House agreement. Those include agreeing and delivering a 2015-16 budget that works, legislating for changes to the welfare system, and taking the steps required to put the Executive’s finances on a stable footing for the long term. I warmly welcome the progress that is under way on those three crucially important matters, with, for example, the recent agreement on a budget for 2015-16. Given the practicalities of implementation, the earliest point at which reduced rates could come into effect is April 2017. The Bill contains a commencement clause meaning that these devolved powers will be switched on for the planned start date in 2017 only if the Executive can demonstrate that they have succeeded in the third goal of achieving sustainable public finances. This is in line with the approach used for other tax devolution measures in other parts of the UK.

The Government have been very clear that devolving corporation tax rates is not an end in itself. Certainly, on its own, it is clearly not the answer to all the economic challenges facing Northern Ireland. If the full potential benefit of corporation tax devolution is to be realised, a number of areas of economic reform need to be addressed, such as planning, skills and infrastructure. However, given the land border that Northern Ireland shares with a lower-tax jurisdiction, it is difficult to think of any one policy which, on its own, may potentially have such a transformational impact on the Northern Ireland economy—

Ms Margaret Ritchie (South Down) (SDLP) rose

Mrs Villiers: And, I believe, on the hon. Lady’s constituency.

Ms Ritchie: Does the Secretary of State agree that, as regards potential visits and potential locations for foreign direct investment, there is a need to address the historical legacy of under-investment and regional imbalance if the issue of corporation tax is to have any meaningful benefit in pump-priming the local economy?

Mrs Villiers: I know that the Northern Ireland Executive are committed to doing all they can to ensure that the effects of boosting the private sector and enhancing prosperity are felt throughout Northern Ireland. All Administrations grapple with the difficult problem of how to ensure that economic prosperity is appropriately spread. I believe that corporation tax devolution—coupled with a focus on other areas of economic reform such as skills, planning reform and investment in infrastructure—is a crucial way to enhance the private sector and boost prosperity throughout Northern Ireland. I am sure that the hon. Lady will be aware of some of the many difficulties that have been experienced in border areas over the years. People living in border areas stand to benefit as much as everyone else in Northern Ireland from a potentially significant and welcome impact in achieving the rebalancing of the Northern Ireland economy that we all want to see.

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Members of the business community have told me on very many occasions that they are convinced that this is the right measure for Northern Ireland. They believe that it will boost the indigenous private sector, both large and small, as well as attract foreign direct investment, and will provide an effective means of rebalancing an economy which for decades has been over-dependent on the public sector. They have therefore strongly welcomed the Government’s introduction of this Bill. I am very grateful for the support for this measure shown within the Northern Ireland business community.

The Government will use our very best endeavours to get the Bill on to the statute book before the Dissolution of Parliament. This legislation has strong support in Northern Ireland. Moreover, the whole of the UK will benefit if corporation tax devolution can help to drive economic growth and rebalancing, and help to deliver a prosperous and stable Northern Ireland.

Mr Gregory Campbell (East Londonderry) (DUP): The Secretary of State alludes to the need to get the legislation on to the statute book, and I hope that progress is now being made towards that. Does she agree that beyond that stage, the next Government, and the next Prime Minister and Secretary of State, will have a central role in helping the Northern Ireland Executive in terms of overseas trips and inward investment to ensure that maximum advantage is taken of the opportunity to get the most benefit out of corporation tax reduction?

Mrs Villiers: I agree that if the benefits of a reduced corporation tax rate for Northern Ireland are to be realised, that needs to be accompanied by a determined effort to sell the benefits of Northern Ireland to the world. I am absolutely 100% certain that if my right hon. Friend the Member for Witney (Mr Cameron) is Prime Minister in the next Parliament, that is exactly what the UK Government will be doing, because he is completely committed to Northern Ireland and believes that it is a wonderful place. That is why he takes every opportunity to tell the rest of the world what a fabulous place it is, and why he brought the G8 summit to County Fermanagh.

Turning to the mechanics of passing the Bill, any delay would be a great mistake. I therefore very much welcome the support that the Bill has received from hon. Members from Northern Ireland, who have rightly highlighted the importance of corporation tax devolution to their constituents and the potential benefits it could deliver. I welcome, too, the recent U-turn by the Leader of the Opposition, who last week confirmed that Labour will facilitate the passage of the Bill. I am most grateful for that. That recognises the firm and consistent support for the change from the five parties in the Northern Ireland Executive, as well as the fact that this new piece of devolution has a key part to play in the Stormont House agreement.

Mr Ivan Lewis (Bury South) (Lab): Will the Secretary of State explain at what point the Opposition ever said they would oppose the devolution of corporation tax to Northern Ireland in this Parliament? Can she give a date and a time when the Opposition said that?

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Mrs Villiers: I seem to remember that when I reported to the House on the Stormont House agreement just a few weeks ago, the shadow Secretary of State was distinctly lukewarm in his approach to corporation tax change, and called for more consultation despite the fact that we had a very extensive consultation back in 2011. If he is now an enthusiast for corporation tax devolution, I welcome that and thank him for coming on board for a project which, of course, the Conservatives have been championing for many years. It is great that Labour has seen the light at last.

In closing, I want to pay the fullest possible tribute to my right hon. Friend the Member for North Shropshire, who picked this issue up off the floor where it had been left by the right hon. Member for Kirkcaldy and Cowdenbeath (Mr Brown), championed it, and put it firmly back on the political agenda here in Westminster and in Northern Ireland. It is in no small part due to his determined and dogged support that this ground-breaking Bill for Northern Ireland is before the House today.

Taking the Bill through Parliament shows that the UK Government are delivering on the commitments the Conservative party made to Northern Ireland at the last general election, and it demonstrates real progress on implementing our side of the Stormont House agreement. The agreement addresses issues that threatened the credibility, the stability and even the continued existence of devolution, and if it is fully and faithfully implemented, it will help us to build a Northern Ireland where politics works, the economy grows and society is stronger and more united. The agreement enables Northern Ireland to take a further step along the road towards a more stable, prosperous and confident future, and I warmly commend the Bill to the House.

1.40 pm

Mr Ivan Lewis (Bury South) (Lab): On his visit to Belfast last week, my right hon. Friend the Leader of the Opposition spoke of the inextricable link between peace and stability and economic and social progress in Northern Ireland. He was right to do so: without stability, the business confidence necessary for investment and growth will inevitably be undermined; without economic and social progress, stability will be fragile as people see little or no evidence of a peace dividend. The interdependency between the economy and the peace process should be at the forefront of all our minds as we debate the Bill.

For Northern Ireland to move forward there is an urgent need for private sector jobs and growth as part of a long-term rebalancing of the economy. Both further increases in global inward investment and support for new local start-up businesses and small businesses with the potential to scale up will be crucial to progress in Northern Ireland in the coming years.

We should use every opportunity to celebrate the remarkable progress that Northern Ireland has made since the end of the troubles. There are no greater reminders of that than recent achievements such as Derry/Londonderry’s success as the city of culture, and Belfast’s holding the world police and fire games and turning pink for the Giro d’Italia last year. Those amazing events boosted the economy and brought communities together.

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In the past few months, there have been major job investments supported by Invest Northern Ireland, including in more than 800 posts at PricewaterhouseCoopers in Belfast, and in almost 500 posts at First Derivatives in Newry. The services sector has recouped almost all the jobs lost during the recession. In recent years, there has been a significant increase in direct foreign investment to Northern Ireland. UK Trade & Investment figures for 2013-14 showed an increase of 32% in inward investment projects compared with the previous year. Northern Ireland outperformed all other nations in that regard: England, including London, achieved 11% growth; Scotland achieved 10% growth; and Wales achieved 18% growth. In 2014 alone, 50 new foreign direct investment projects were secured in Northern Ireland. That significant progress and international interest have been possible because of the leadership of the First Minister and Deputy First Minister, supported by the Northern Ireland Executive.

It must be said, however, that that investment is from a low base, and has inevitably been constrained by the consequences of the global banking crisis. We must acknowledge that the Northern Ireland economy still in fact faces real difficulties in relation to its economy overall, which is not working for the many or reaching kitchen tables in Northern Ireland.

Northern Ireland’s recovery continues to lag behind that in the rest of the UK. Last week’s labour market statistics show that unemployment is still gradually falling—we welcome the fact that it currently stands at 5.8%, a six-year low—but youth unemployment in Northern Ireland is stubbornly high at 19.2%, which is above the UK average of 15.4%, and over half of unemployed people have been out of work for a year or more. Northern Ireland has the highest inactivity rate of all UK regions. The earnings of a typical full-time employee in Northern Ireland fell by 1.4% in 2014, according to the official annual survey of hours and earnings. There has been a very disappointing loss of momentum in the private sector. For example, Ulster Bank’s purchasing managers index for January shows that business recovery in Northern Ireland has slowed, and output has dropped in the main sectors of manufacturing, construction, retail and services.

The Bill recognises many of the unique challenges that Northern Ireland faces. It shares a land border with the Republic of Ireland, where corporation tax is 8.5 percentage points lower than in the UK, and its society is emerging from conflict, with all the challenges that that presents. The public sector employs nearly one in three workers in Northern Ireland compared with fewer than one in five in the UK as a whole. It is therefore right that rebalancing the economy is a priority for the Northern Ireland Executive.

It is clear from the Stormont House agreement and the commencement clause in the Bill that the final transfer of the powers will not take place until April 2017 at the earliest. That ensures that there is adequate time for the proper impact assessment and consultation that the Opposition feel is essential in the interests not only of Northern Ireland, but of the rest of the United Kingdom.

For all those reasons, as well as out of respect for the existing political consensus in Northern Ireland on this issue, we will not seek to divide the House. Moreover, I want to make it very clear that, assuming we have

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reasonable time for an acceptable level of scrutiny, we will work with the Government to facilitate the passage of the Bill in this Parliament.

As the Secretary of State has set out, the Bill will give the Northern Ireland Assembly the power to set the main rate of corporation tax in respect of certain profits, while control over the corporation tax base, including reliefs and allowances, will remain with the UK Parliament. The devolved rate will apply to all the trading profits of micro and small and medium-sized enterprises if the majority of employee time and costs fall in Northern Ireland. The devolved rate will apply to all the profits of large companies attributable to a Northern Ireland trading presence. Certain trades and activities will be excluded from the scope of the rate, including lending and investment activities. Her Majesty’s Revenue and Customs estimates that the changes will affect 34,000 companies of all sizes in Northern Ireland, including more than 26,000 SMEs, with the exact impact depending on the conditions.

The Opposition accept that the devolution of corporation tax and its subsequent reduction could play an important part in boosting private sector investment in Northern Ireland, alongside a range of other measures.

Jonathan Edwards: I am happy that the Labour party is supporting the UK Government’s proposal to devolve corporation taxes to Northern Ireland. The Labour party is also in favour of fully devolving income tax to Scotland, yet it opposes the devolution of any major taxation powers to Wales. Why is Wales being offered an inferior deal?

Mr Lewis: We believe that Northern Ireland has special circumstances—a land border with the Republic of Ireland, and a society emerging from conflict—that are incredibly important in this context.

Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP): I welcome this measure for Northern Ireland, and I think that it will inevitably come to Scotland when we have a large Scottish National party group in Westminster. The argument about the land border is a strange one, because there are many places on land borders that have different rates of corporation tax. Logically, that could lead to a situation in which corporation tax was set island-wide in Dublin. I would not like to see such a situation, but that is the logic of the argument about the land border.

Mr Lewis: The hon. Gentleman’s party has long advocated the devolution of corporation taxes in Scotland, but the fact is that it did not push very assertively for that during the Smith commission negotiations. Equally, Scotland has enough to do getting on with the very considerable devolution package on which there is tremendous consensus.