The Economy and Work

Part of Debate on the Address – in the House of Commons at 1:49 pm on 26th May 2016.

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Photo of Stewart Hosie Stewart Hosie SNP Deputy Leader, Shadow SNP Westminster Group Leader (Economy), Deputy Leader, Scottish National Party 1:49 pm, 26th May 2016

We are using every single power available to us, and we will use all our powers over taxation when they come. How we choose to do that will be a matter for the Scottish Government. What I suspect we will not do is to impose a 5% increase on the poorest workers in Scotland, which was a plan posited by others and led them to come third in the election.

This Queen’s Speech could have been used for the delivery of vital and urgent aid to support trade and exports, and for measures to stimulate investment and growth to turn round what is now recognised in the real world as this Chancellor’s failed stewardship of the economy, which has seen the trade deficit widen to its worst level since the crisis in 2008 and will see the Treasury miss by £300 billion its own target of doubling exports to £1 trillion by the end of this decade.

We could and should have had a fair tax Bill, simplifying the UK tax system and delivering greater tax transparency; and, vitally, measures such as a moratorium on this Government’s programme of HMRC office closures. We should have had the establishment of an independent commission to simplify the tax code and strengthen tax transparency by guaranteeing that beneficial ownership of businesses and trusts—here, in the Crown dependencies and in the overseas territories—would be made fully public.

We should have had an energy security and investment Bill, facilitating an export-led sustainable energy sector. As my hon. Friend Callum McCaig said, we should have had a comprehensive strategic review of tax rates and investment allowances in the North sea. In addition, we should have had a review of securing the future energy supply of the UK and an ending of the UK Government’s commitment to the failing Hinkley C nuclear project. We should have been directing investment instead into renewable energy and into carbon, capture and storage. Those, among other initiatives, would have formed the basis of solid economic proposals to grow the economy. What we ended up with in economic terms was a digital economy Bill, a criminal finances Bill and a better markets Bill. I shall deal briefly with those Bills.

We understand the benefit of digital connectivity and welcome the roll-out of superfast broadband, which has the potential to boost productivity. According to a Deloitte report commissioned by the Scottish Futures Trust last year, increased digitisation could boost the Scottish economy alone by around £13 billion. Increased digitisation and reach across Scotland would also have a direct impact on improving productivity, business creation, jobs, earnings, exports and tax revenues—and many more positive outcomes for public provision. The report suggested that if Scotland were to become a world leader, we could see a significant increase in GDP, something in the order of 6,000 extra small and home-based enterprises and potentially an extra 175,000 jobs by the end of the decade.

We therefore welcome moves by the UK Government to provide digital infrastructure, but we are unconvinced that this digital economy Bill will turn round the UK’s persistently poor productivity levels in the way that it might have done. We are particularly unconvinced about whether the implementation of this digital plan, particularly the broadband roll-out, will deliver—not least because we have evidence that the UK Government have failed in this regard before.

As long ago as July 2013 the National Audit Office reported on the Government’s then broadband programme, saying that broadband roll-out was 22 months late. The Environment, Food and Rural Affairs Committee reported last year that the UK’s target dates for broadband had been changed many times, raising concerns that the target for delivering superfast broadband to even 95% of the UK was in jeopardy—in other words, not very good with targets at all. We nevertheless welcome the UK Government’s commitment to introducing a universal service obligation, not least because it was in the SNP manifesto and we believe that if it can be fulfilled, it would bring particular benefits to rural communities.

We welcome, too, Government moves to tackle corruption, money laundering and tax evasion, but the criminal finances Bill does not go far enough to combat this systemic problem. Following the release of the Panama papers, my right hon. Friend Angus Robertson called on the Prime Minister to go further with measures to crack down on tax evasion and aggressive tax avoidance, pointing out that illicit cross-border transfer financial flows are estimated at around £1 trillion a year, which is 10 times more than global foreign aid budgets combined. We believe that the Prime Minister and the Government should prioritise bilateral tax treaties, not least with places such as Panama and other tax havens, as part of the global efforts to co-ordinate better against tax avoidance.

Furthermore, we call on the UK Government to embolden compliance by guaranteeing that the beneficial ownership of companies and trusts is made fully public. It is also the case, as I alluded to earlier, that the UK has one of the most complicated tax codes in the world. That leads to a loss of tax yield and perpetuates opportunities to exploit loopholes. We have called on the Government to bring about a just tax system, which will assist in ensuring that all taxpayers are given a fair deal.

In our alternative Queen’s Speech, we call for the Treasury to convene a commission and report back within two years, following a comprehensive consultation on the simplification of the tax code. With a simplified—not a flat tax code—tax system, the Government could boost yield, encourage compliance, and avoid exploitative loopholes such as the Mayfair loophole. While we welcome the long-overdue measures by the UK Government to tackle corruption, money laundering and tax evasion, we wait with interest to see the detail of these measures.

Whatever good may come of this, however, the counterproductive decision to close 137 HMRC offices will strip local businesses and individuals throughout the United Kingdom of the support that they need to ensure that they comply with the law. If they are to tackle tax avoidance at all levels and continue to provide local support when it is needed, the UK Government must place a moratorium on HMRC office closures. We take the view that, by and large, individuals and business want to contribute to society by paying tax, and that a high proportion of the SME tax gap—caused not by fraud, but by genuine error and miscommunication—could be dealt with by removing the threat to local offices. It is extraordinary that, although tax compliance is now at the heart of much of our economic debate as it has not been for decades, the HMRC workforce have been cut by 20% since 2010.

The final Bill that comes under the broad heading of “the economy” is the better markets Bill, whose main purported benefits are to give consumers more power and choice through faster switching and more protection when things go wrong. That is welcome. The Bill would simplify the way in which economic regulators operate to make life more straightforward for business and cut red tape, and would also speed up the decisions of the Competition and Markets Authority for the benefit of businesses and consumers alike. That too is welcome.

The intention is to deliver a manifesto commitment to increase competition and consumer choice, particularly in the energy market. However, while we welcome Government moves to challenge rising energy prices by encouraging market choice, the Bill does not go far enough to combat the problem of fuel poverty at a structural level. According to the UK means of calculating fuel poverty, in 2014 some 2.5 million households were in fuel poverty. According to the methods used in Scotland, Wales and Northern Ireland, over the last three or four years the figures have sat between 30% and 40%. The structural issue here is not a shortage of gas or electricity, it is not necessarily a shortage of competition, and it is not necessarily the ability to change suppliers quickly; it is a shortage of money to pay for the gas and electricity coming into the house.

I am sure that there are good intentions behind many of the economic measures in the Gracious Speech, but they are simply too little, too late.