Review of impact of Act on nations and regions of the UK

Finance Bill – in a Public Bill Committee at 2:00 pm on 18th June 2020.

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“(1) The Chancellor of the Exchequer must conduct an impact assessment of this Act on the different parts of the United Kingdom and regions of England, and lay this before the House of Commons within six months of Royal Assent.

(2) This assessment must consider the impact on:

(a) Household incomes in each part of the United Kingdom and region of England; and

(b) GDP in each part of the United Kingdom and region of England;

(3) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and ‘regions of England’ has the same meaning as that used by the Office of National Statistics.”—(Wes Streeting.)

This new clause would require the Chancellor of the Exchequer to review the impact of this Bill on the nations and regions of the UK.

Brought up, and read the First time.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

I beg to move, That the clause be read a Second time.

Photo of Andrew Rosindell Andrew Rosindell Conservative, Romford

With this it will be convenient to discuss the following:

New clause 18—Assessment of impact of provisions of this Act—

“(1) The Chancellor of the Exchequer must review in parts of the United Kingdom and regions of England the impact of the provisions of this Act and lay a report of that review before the House of Commons within one month of the passing of this Act

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

(a) GDP

(b) business investment,

(c) employment,

(d) productivity,

(e) company solvency,

(f) public revenues

(g) poverty, and

(h) public health.

(3) A review under this section must consider the following scenarios:

(a) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are continued for the next year; and

(b) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are ended or changed in any ways by a Minister of the Crown.

(4) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

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

This new clause would require a review of the impact of the Bill in different possible scenarios with respect to the continuation of the coronavirus support schemes.

New clause 21—Sectoral review of impact of Act—

“(1) The Chancellor of the Exchequer must make an assessment of the impact of this Act on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of Royal Assent.

(2) The sectors to be assessed under (1) are—

(a) leisure,

(b) retail,

(c) hospitality,

(d) tourism,

(e) financial services,

(f) business services,

(g) health/life/medical services,

(h) haulage/logistics,

(i) aviation,

(j) transport,

(k) professional sport,

(l) oil and gas,

(m) universities, and

(n) fairs.”

This new clause would require the Government to report on the effect of the Bill on a number of business sectors.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

It is a pleasure to move new clause 3, in my name and those of my hon. Friends, and to speak to new clauses 18 and 21, which will be put forward by the hon. Member for Glasgow Central.

As this is likely to be the last sitting for line-by-line scrutiny, I would like to take the opportunity to thank you, Mr Rosindell, and Ms McDonagh for so effectively chairing our proceedings in the course of that scrutiny. I thank the staff in the Public Bill Office for all their assistance in putting together various amendments and new clauses. I thank my own team in Westminster—in fact, not in Westminster but working from home—for the efforts that they have made in supporting me and other hon. Members throughout this process, and I thank staff working in the offices, or not in the offices, of other members of the shadow Treasury team. They have done a sterling job—it should be borne in mind that we do not have the resources of the civil service to support us through all this—and it is much appreciated.

Ours is a great country, full of promise and opportunity. One of the richest countries in the world, we are home to world-class universities, entrepreneurs, captains of industry, groundbreaking scientists and inventors, globally renowned artists and a vibrant civil society. However, as we will consider across a number of our debates this afternoon, this is also a country of staggering inequality, intolerable poverty and wasted potential—and that is before we consider the impact of coronavirus on our country’s economic prospects.

I am starting with new clause 3. The economic divisions in our country are not merely reflected through class inequality, but reflected and represented in our geography. Britain is home to nine of the 10 poorest regions in western Europe, but also the richest, in inner London. A child on free school meals in Hackney is still three times more likely to attend university than an equally poor child in Hartlepool. The gap in productivity between English regions is worth about £40 billion a year, with productivity in London and the south-east standing at 50% above the national average.

The past 40 years have seen a significant decline in our country’s manufacturing base, with serious social consequences in former industrial towns and profound consequences for people’s lives and livelihoods—and our politics. People have seen their jobs disappear as a result of one of the largest deindustrialisations of any major nation, with production exported to countries with cheaper labour costs through outsourcing, or being lost altogether to labour-saving technology.

That is why the so-called levelling-up agenda is so important, and it is made all the more pressing by the covid-19 pandemic. We know from the evidence emerging all the time that without an effective regional response from the Government, the economic crisis brought about by covid-19 risks entrenching existing inequalities in our country and creating new ones that, unchecked, might persist for decades.

According to the RSA, the Royal Society for the encouragement of Arts, Manufactures and Commerce, rural areas and coastal towns in the north and south-west of England are most at risk of covid-19’s impact on unemployment. This involves many coastal towns, national parks and tourist hotspots, with economies dependent on hospitality, retail and tourism. The RSA identified the district council of Richmondshire in North Yorkshire, which forms part of the Chancellor’s constituency, as the most at-risk area.

Meanwhile, KPMG’s chief economist in the UK believes that the west midlands could face the biggest impact. My right hon. Friend Liam Byrne has been banging the drum for the west midlands economy, highlighting in particular the risks to manufacturing in the region. The weighting of the average sectoral impact, measured by the Office for Budget Responsibility against the distribution of each local authority’s gross value added by sector, concluded that the decline in economic output in parts of the midlands and the north-west could be as much as 50% and that nine out of the 10 worst affected local authorities will be located in those regions.

That is not to say that we should not be concerned about our major cities either. Edinburgh, in particular, has the highest level of exposure to the reduction in international tourist spending, with consequences for the city and surrounding regions. Indeed, I hope we can move away from the narrative of London versus the rest of the country. Our capital city is a truly global city, and its success is inseparable from our national success, but London’s political leaders and our business leaders recognise the need for a more balanced regional economic settlement and the benefits that that would bring to all of us, wherever we live and work.

As we think about the crisis that we are living through and the recovery that we hope will follow, let us take heed of the warning from the New Local Government Network and so many others that recovery cannot be a synonym for the resurrection of business as usual. It cannot be a coincidence that our country has one of the most imbalanced economies in the developed world and also one of the most centralised systems of government.

As TheCityUK has argued,

“the crisis should prompt policymakers to consider anew some long-standing potential solutions to the problem of regional inequality, such as devolution of political and potentially fiscal powers.”

It is important that, at every Budget, Finance Bill and fiscal event, the Treasury looks carefully at whether we are moving the dial in the right direction when it comes to tackling the gross regional inequality in our country. I think it is fair to say that, under successive Governments, the Treasury has had a much more centralising tendency and cultural mindset than other Departments. Of course, it is easy to understand why that is and the appeal of being able to make big decisions and pull big policy levers that have an impact across Government and the country. But the way in which decisions are taken in Whitehall has a direct effect on not just town halls but communities right across our country.

Photo of Stephen Flynn Stephen Flynn Shadow SNP Deputy Spokesperson (Treasury - Financial Secretary)

The hon. Member is making a number of excellent points. He could perhaps go further, because what he is referring to could also be an emboldened and more powerful Scottish Parliament with further devolution to Scotland.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

I am grateful for that intervention. I was very encouraged by the recent policy position published by the leader of the Scottish Labour party and excitedly relayed to the rest of us by the shadow Secretary of State for Scotland, my hon. Friend Ian Murray. Scottish Labour has come out with some really bold proposals for how devolution could go even further, extending to home rule in Scotland. I know that that is not a position shared by the separatists in the Scottish National party. We could spend the rest of the afternoon discussing the merits or otherwise of Scottish independence, but, to allow SNP Committee members to get back home at the end of the day, perhaps we should not dwell on that this afternoon.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

It is too tempting for me not to ask the hon. Member to share a few of his views on Unionism in Scotland and whether he thinks that is a good idea.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

I think that the economic benefits of the Union are so obvious and well rehearsed from the debate on Scottish independence and the referendum campaign, but for me this is not just a question of economics or a statistical debate about the merits of Unionism; it is also about the shared history, shared benefits, shared prosperity and shared identity of the United Kingdom.

I have a great affection for Scotland as a country, and indeed for its history, its separate identity and its separate strength where policy there is different. For example, thinking back to my experience before entering this House, I have always greatly admired the Scottish higher education system, and the way in which issues such as quality enhancement are approached in Scotland. I just think that we are stronger together.

I will now pick some wounds in the other direction, because just as I have never understood how the SNP can be pro-union at a European level but hostile to it at a UK level, so too have I never understood the Conservative party’s anti-unionism in relation to the EU and its pro-Unionism in a UK context. In fact, returning to the economic matters addressed by the Bill, I have as much belief in the merits of the single market of the United Kingdom as I have in the merits of the single market of the European Union. Unfortunately, these questions have already been settled—in one case favourably; and in the other unfavourably, in my opinion. But I shall dry my remainer tears and return to our consideration of new clause 3—[Hon. Members: “Hear, hear!”] Government Members are cheering in all the wrong places.

Finance Bills, Budgets and other fiscal events are not simply number-crunching exercises, or processes of bureaucratic tidying up, as much of the Bill is concerned with, important though those often are; they also reflect the political priorities of the Government of the day and send a message to the country about the things that the Government value and want to achieve. Every one of them should move the dial on the big challenges facing our country in the right direction. That is why new clauses 18 and 21, tabled by the hon. Member for Glasgow Central, are also so important.

The economic impact of covid-19 has been felt right across our economy but, as the ONS figures show, some sectors have been hit harder than others, and we know that some sectors will be hit harder for longer. If we take the gross value added figures and look at the percentage change from March to April, we see a fall of 5% in the financial sector, for example, or 6% in agriculture, forestry and fishing. Compare that with a fall of 88% in hospitality, 40% in construction, 40% in arts, entertainment and recreation, and 24% in manufacturing. Those figures are extraordinary.

What makes the country’s experience of this crisis so different from that of 10 years ago, in the aftermath of the global financial crisis, is that we are seeing that really significant variation. If we look at the GVA figures for the impact of the financial crisis sector by sector, and then we look at the OBR’s projected output figures, as the Resolution Foundation has done, we see such a stark contrast, sector by sector, between the standard deviation 10 years ago and the one projected now.

That is why a one-size-fits-all approach to our economic response to coronavirus simply will not cut it. We of course recognise the steps that the Chancellor has already taken, and my hon. Friend the shadow Chancellor has been keen to work constructively with the Government on the economic response, as indeed have we all, but we are concerned about what lies ahead and about how the Chancellor is proposing to handle the economic response and the long-tail effects. That is why this week we have called on the Chancellor to come forward with a full Budget in March—a back-to-work Budget focused on jobs.

What gets measured is what counts. The Treasury will make better decisions and Parliament will be able to scrutinise more effectively if we look more closely at the impact of Treasury decisions on the issues that matter most to our country. That is why is it so important to consider the impact of the Bill on regional inequality, so I commend to the Committee new clause 3. I also indicate the official Opposition’s support for new clauses 18 and 21, which would look at the impact sector by sector and across a range of other important economic factors.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury) 2:15 pm, 18th June 2020

It is a pleasure to see you in the Chair, Mr Rosindell.

I will reflect on some of the issues raised by the hon. Member for Ilford North. The Government down in Westminster are doing such a cracking job of selling the Union that a new Panelbase poll at the start of the month put support for independence at 52%; it had 20% of no voters in 2014 now having swapped to be in favour of independence; and most people wanting to see a vote in the next five years. A great commendation of the UK Government on the job that they are doing is that people in Scotland are regretting at a greater rate than ever before how they voted in 2014.

Photo of Wes Streeting Wes Streeting Shadow Exchequer Secretary (Treasury)

Perhaps when the hon. Lady returns to her constituency, she might reassure her constituents who worry about policy making at a UK Government level that, hopefully, we will have a Labour Government again before too long.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

People can promise things in the never-never—perhaps that will happen, but we do not quite know. But how Scotland ends up getting governed should not be down to whether votes in England sway one way or the other. We would do a far better job of governing ourselves, as many small independent countries around the world do. Many small independent countries are also making a much better fist of dealing with the coronavirus crisis than the UK is—in fact, most countries in the world are, never mind small ones. Look at how well New Zealand has managed the crisis, and how well it has been able to come out of it, under the brilliant leadership of Jacinda Ardern. We have a lot to learn from other countries about how to do things better in so many ways.

We are very supportive of Labour’s new clause 3 and of the complementary new clauses 18 and 21, which I tabled. New clause 18 seeks assessments of the impact of the Bill within a month on various economic variables, comparing situations in which the Treasury ceases or continues its covid-19 support schemes for the next year.

The likely reality is that when the schemes are discontinued, as planned, the economy and people’s living standards will be sent reeling. We know that from the many studies that have been done of people who have taken up the coronavirus job retention scheme—the majority of uptake of the scheme in the hospitality and tourism industries is significant. YouGov polling out yesterday suggested that a huge number of people would lay off their staff if the schemes were withdrawn. The Government need to listen carefully to the experience of people in those sectors on the impact of withdrawing too early.

We feel it is important that that is looked at in the context of the Finance Bill. As everyone has seen, as the Finance Bill progressed from the Budget to where we are now, the world in which we are living changed—changed dramatically—for so many people and their living standards. For the Government to have such a review seems wise.

The schemes covered by new clause 18 are the job retention scheme, the business interruption loan scheme, the bounce-back loan scheme and the self-employed support scheme. We know that the Chancellor has said that he will do “whatever it takes” to protect jobs, but we also know—I am a member of the Treasury Committee, and we have found that from the evidence received from many—that more than 1 million people have fallen through the gaps in the schemes. We need to understand what impact that and the measures in the Finance Bill will have on those groups.

Earlier, the Office for National Statistics revealed that in April the UK’s economy suffered its biggest monthly slump in GDP on record—20.4%—due to the pandemic. We therefore think that it would be wise for the Government to expand the support schemes, rather than winding them down. That is also critical for the devolved nations, which are moving at a slightly different pace, due to the circumstances in which we find ourselves, hence why we want to look at the different nations as well.

In new clause 21, we ask the Government to report on the effects of the Bill in a number of different business sectors. Different sectors will be differently affected. The sectors mentioned in the new clause include leisure, retail, hospitality and tourism, all of which we know from our constituency experiences have been severely hit, with retailers having real problems and many in the leisure sector perhaps falling outwith some of the schemes and finding it very difficult to get started up again. As I mentioned earlier, some businesses in my constituency were unable to access the support for various technical reasons. Financial services, business services, health life/medical services, haulage and logistics and aviation have also been severely impacted. Many bus firms and tour firms are struggling to keep going, which will impact on schools as they return. Many are rural schools and so rely on the transport sector to move pupils around. Those factors need to be considered as well.

My hon. Friend Mhairi Black has spoken a great deal about the impact on the aviation sector, which, in turn, will have a huge impact on the behaviour of BA. The way it is currently treating its staff is absolutely appalling.

We also want to talk about professional sport and oil and gas, which my hon. Friend the Member for Aberdeen South covered so well earlier. Universities will be hugely impacted by the number and ability of foreign students to come here to work, study and live. Those universities have been in contact with me—indeed, several are based in my constituency and several neighbour my constituency —saying that they are very concerned about their future, which the Government have not really talked about to any great extent. Fairs, too, face problems. I have many show people based in my constituency, and they are also very concerned about the loss of their season and their ability to continue trading, because they do rely on that public-facing role—opening up the funfair to people, taking money and exchanging cash. Without that, they have no income at all. They have very few alternatives. Many may operate things such as snack bar vans, which, again, have not been operating to the same extent as previously.

We are keen to press the Government on these things and to understand the impact of what has been proposed here and to see what schemes are running. I am very happy to move these new clauses in my name and the names of my hon. Friends.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

I rise to urge the Committee to reject these new clauses. Let me say a few things about them and then I will turn to the comments that have been made.

New clause 1 would require the Chancellor to conduct an impact assessment on the effect of household incomes on GDP in each part of the United Kingdom and in each region of England. New clause 18 would require the Government to conduct a review within one month of Royal Assent, of the effect of the Bill on the nations and regions of the United Kingdom if the Government’s main coronavirus support schemes continue for the next year—a hypothetical case if that be so—or if they were ended or changed in any way by a Minister of the Crown. The SNP’s new clause 21 would require the Chancellor to make an assessment of the impact of the legislation on a large number of different sectors and to lay a report of that assessment before the House of Commons within six months of Royal Assent.

We do not think that any of those clauses are necessary. I should remind the Committee that, apart from the provisions relating to the main rates of income tax, provisions in this Bill will apply across the whole of the United Kingdom and will directly benefit households and businesses in every part of the country. They have been developed with careful consideration of their impact on all regions and sectors of the United Kingdom. It is worth just saying that Ministers assess individual measures as well as the package as a whole for the differential impacts that they may have on each part of the UK throughout the policy development process, and they are under a statutory duty to assess the equalities impact of the provisions contained in the Bill, and those have been analysed and published.

In addition, the Treasury publishes extensive distributional analysis of the impacts of this Bill, together with the impact of the Government’s decisions on welfare and public services. What that amounts to is a rigorous and detailed record of the impact of the Government’s policies on households. The Office for National Statistics also publishes monthly estimates of GDP, and analysis of the impact of Government decisions on GDP is also carried out by the Office for Budget Responsibility, which is itself independent.

Therefore, between those checks and balances and that degree of inbuilt institutional consideration and the packages of support that we have offered, I think that it should be fairly plain that these new clauses are not required. We continue to monitor the impact of the coronavirus crisis closely as well as the response to the schemes that have been put in place. It is right that we should do so alongside the general continuous review of tax and the economy in relation to policy.

Let me remind the Committee that the Government have a commitment to consult—and they do consult—regularly on new tax policy and tax legislation in order to make sure that as wide a range of views and impacts as possible are captured during the tax policy-making process. We have touched on that matter in a previous discussion.

Let me come quickly to the points raised by the hon. Members opposite. The hon. Member for Ilford North rightly highlighted the levelling-up agenda, and he was fully justified in doing so. He said that London was a global city and should be understood as such, but that the Government’s attention should properly be on all the regions and nations of the country, and of course I share that view.

The hon. Gentleman talked about centralisation within the Treasury. I have been a trenchant critic of centralisation in the Treasury historically and on the public record, and I think it reached a bit of an apogee under the last Labour Government—I would say that, wouldn’t I? But I still think it is true—there was a tendency to view every problem as potentially soluble by tweaking the marginal costs and benefits of a system. In some respects, we have had to counteract that tendency in order to give us more of an inclusive view of what ultimately are a set of devolved settlements as well as a UK picture.

The hon. Member for Glasgow Central said something that I thought was quite bold: that the Scottish Government would do a far better job of governing Scotland than the UK Government do within a UK national framework. Of course, the UK does not govern Scotland; it has areas that are reserved and areas that are devolved, and many areas, including higher education, are devolved in Scotland.

I must say that I share the high regard that the hon. Member for Ilford North has for the history of higher education in Scotland. He will know that for many hundreds of years there were two universities in England and five in Scotland, which represented and reflected a high-quality orientation and a commitment to higher education. Unfortunately, it is in the record that Scottish higher education has not made the same kind of progress under the Scottish National party Government, particularly in relation to minorities and equalities, which is a terrible, terrible shame. I wish it were otherwise. So I would not accept the suggestion made by the hon. Member for Glasgow Central, but I will invite the Committee to reject these clauses.

Photo of Andrew Rosindell Andrew Rosindell Conservative, Romford

Does the hon. Gentleman intend to press the new clause to a vote?

Question put, That the clause be read a Second time.

Division number 8 Finance Bill — Review of impact of Act on nations and regions of the UK

Aye: 7 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 7, Noes 9.

Question accordingly negatived.