Stella Creasy:
The hon. Gentleman raises the point about the well-founded fear, but my point is that every generation faces the test that the 1951 convention sets us. When a person comes to us and says, “I am in danger, will you help me?”, how we answer defines us as much as it defines their future. As the hon. Member for Gravesham said, it is a moral question. When we signed the convention in 1951, nobody could have predicted the situation that we are in now, but the fact that we could not predict it does not absolve us of the responsibility to answer the question. We are not absolved when the people fleeing the murderous intent of ISIL ask, “Will you help?” Our answer should be yes. When people are fleeing sexual violence in the Democratic Republic of Congo, will you help? Yes. When people are fleeing the repressive regime of Robert Mugabe, will you help? Yes. When people are fleeing civil war in Sudan and Eritrea, will you help? Yes. How we answer says as much about
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us as it does about them, so when we quibble about numbers and qualify them by saying that we will take 20,000 but over a number of years, or perhaps that we will take not 20,000 but up to 20,000—
Mr Holloway: Will the hon. Lady give way?
Stella Creasy: I will give way very quickly, and only once.
Mr Holloway: So rather than quibbling, will the hon. Lady tell me how many people we should be taking in her constituency and for how long?
Stella Creasy: I shall come on to talk about Walthamstow and am happy to invite the hon. Gentleman, who need not come under cover, to see the welcome that we give to people in Walthamstow. It is not easy, but we do it because it says something about us as a country and a community that when people are at risk we answer the call. When the people of Germany have answered the call to the tune of 800,000, when the people of Sweden have answered the call by taking eight per 1,000 of population, that challenges us all in the UK.
Let us look at the camps, because the Government are specifying that we should take people from the camps alone. When we consider the figure of 800,000 taken by Germany, it is sobering to realise that Lebanon has taken more than 1.1 million people in a country of 4.5 million.
Mrs Helen Grant (Maidstone and The Weald) (Con): Will the hon. Lady give way?
Stella Creasy: I am sorry, but I have taken a number of interventions.
Turkey has taken 1.9 million people. If we think that taking 20,000 over five years is big, we do not understand our own history or the scale of the challenge. The UK has taken just 1% of the world’s refugees. What does that say about us?
I know that answering that question is not easy, because we have answered it in Walthamstow. It is not an easy challenge to accept people and be able to integrate them. I am proud of the way that people in Walthamstow have responded to the situation in Calais. Many have gone there themselves with goods to help support people and show their solidarity. I am proud that that is not a one-off—we have set up our own migrant welcoming centre. Walthamstow means welcome; it is what we do in my community.
I know that it is a hard question to answer when the voices of the persecuted are sometimes quiet and vulnerable, by comparison with the other voices we hear, such as the headlines that say, “Halt the asylum tide now”, “Draw a red line under immigration or else” or “The swarm on our streets”, or calls for deployment of the Army against the people that the hon. Member for Gravesham (Mr Holloway) has accepted may well be fleeing persecution. It is hard to hear their voices. We should also understand the consequences of not hearing their voices. We cut the funding for Operation Mare Nostrum, thinking that somehow that would stop the boats. The boats came anyway, and the lorries are still running.
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Let us think about the people whose lives we have not been able to save, and of the contribution that they would have made to our world. Think of the men who might fail school exams or lose jobs and who we will not give visas to—men like Einstein, or the father of Steve Jobs. The people fleeing persecution have so much to contribute to our world, so when we answer the question “Will you help?” with a yes, we do everybody a benefit. Think of the doctors, engineers, writers and lawyers currently in those camps.
It is not the thought of life in Britain that is the pull factor. It is not the £35 a week we give people. It is not the misery of dealing with UK Border Force, or the threat that even if you are a victim of sexual violence we will lock you up in Yarl’s Wood. The pull factor is staying alive. The pull factor is being able to give your children the possibility of adolescence. That is why people are making that choice. There is no speech we can make here, no threat we can make to those boats and no lesson we can learn from Australia that will override the enduring wish of every parent to give their child that kind of future.
If we do not hear those voices, the question is not about them; it is about us. The problem is not refugees or migrants; the problem is politicians not doing their job. It is our job to ensure that the benefits of migration are equally distributed in this country. It is our job to ensure that we help those people who are fleeing persecution, and that is what we should do. Let us not be the problem; let us be the solution. If we can take 20,000 and there are 20,000 now, let us take the 20,000 now. Let us not quibble or qualify that; let us take them now. The Government accept that we can house these people, so let us do it now. Let us not make it an either-or with our European neighbours; let us help all those people. If we want to stop the boats and lorries, that is what we must do.
I want to make a final plea to the Home Secretary. Save the Children is putting out a charity single that has been set up by Caitlin Moran, Pete Paphides and Mat Whitecross. Will the Home Secretary please join me in calling for the VAT on that charity single to be waived so that the money can be used to help the refugees? The single is called “Help is Coming”. Let that be the message that comes from the House of Commons today, not the quibbling, quantifying and denying. Let us send the message that help really is coming.
3.58 pm
Nusrat Ghani (Wealden) (Con): Let me first offer my apologies, Mr Speaker, for having to leave the Chamber immediately after my speech; we are interviewing the mayor of Calais about the refugee crisis. No one can have failed to be deeply moved by the picture of Alan’s lifeless body on a beach in Turkey. We can do nothing for him but mourn, while our consciences cry out to act now, and to act with compassion. It is a hard-headed duty to address the root causes and ask the difficult questions.
I welcome the Prime Minister’s statement yesterday that on top of aid spending on the humanitarian crisis, which will reach £1 billion, we will be welcoming 20,000 refugees to the UK. Especially welcome is the news that they will be taken from the camps around Syria, because it is often the women and children who remain behind in the camps closest to conflict. Those are the most
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vulnerable, where duty and conscience collide. It is our clear duty to do all we can to deter the people traffickers peddling false hope by selling death in airless lorries and cramming families on to leaking dinghies that seal their fate.
We are seeing levels of migration not experienced since the second world war, or indeed since the partition of India and Pakistan, when over 1 million people perished and many millions more were left homeless and were settled elsewhere. Those were the harrowing stories that I grew up with, with distant relatives never getting over their journey and having lost their relatives.
A global crisis needs an international response. That is why it is right that our generous international aid budget will be reassigned to provide the funding to support 20,000 refugees. I would however urge us to assess how and where our money and humanitarian relief is allocated and to which agencies. We should consider assigning more of these funds to local authorities and British-based agencies so that they can offer a longer period of support and shelter.
Aylan’s father gave a heart-rending speech at the funeral of his wife and children that revealed an important truth: the family, all Syrian Kurds, did not feel welcome in Turkey. Turkey has borne the brunt of the refugee crisis, but we must ask whether its attitude towards the Kurds—the one group proven to have taken the fight to Daesh—has not made the situation worse. Equally, Aylan’s father asked what the Arab-speaking countries in the region were doing. The lack of welcome for refugees across the middle east cannot be ignored any longer. Let us ask the hard-headed question: where are the Arab countries in all of this? It is not enough for them to speak passionately about Muslim solidarity but fail to step up to the plate in the midst of this crisis. We should ask why none of the Gulf countries has signed the refugee convention, and we should make our aid to them conditional on acceptance of international norms.
We must be prepared to tackle the fundamental cause of the instability wreaking havoc in the middle east. Wahhabi extremism is the cancer that has destroyed the body politic of Syria and Iraq. Daesh needs to be destroyed. There can be no political solution until that has happened. We must hold our nerve and consider effective military intervention at the earliest opportunity.
4.1 pm
Mr Alistair Carmichael (Orkney and Shetland) (LD): Thank you, Mr Speaker, for allowing the House to have this debate today. I congratulate the shadow Home Secretary on her initiative in seeking the application for it under Standing Order No. 24. We will return to this subject again tomorrow in the Scottish National party’s Opposition day debate, so I think it is fair to say that it will not suffer from under-scrutiny.
I welcome and recognise the significant movement in the Government’s position that we have seen in recent days and weeks. I say to the Home Secretary, who I am delighted to see remains in her place throughout the debate, that where the Government get things right they will have the support of Liberal Democrats and, I suspect, of all Opposition parties. Yesterday’s announcement by the Prime Minister of humanitarian visas for five years is exactly the sort of initiative that we ought to be
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taking. It is welcome and we commend the Government for it. I also commend them for the work that they continue to do in-country with refugee camps, especially in Syria. That work is absolutely essential and a very good use of the money that we have in our international aid budget.
I also welcome the announcement that the number of refugees to be taken from Syria is now to go up to 20,000. However, spreading this over the five-year period of the Parliament needs to be looked at again, because the need for these people to come to this country is in the here and now. The Government’s refusal to accept the urgency and immediacy of the problem requires revisiting.
The other issue that requires revisiting is the Government’s insistence on raiding the international development budget to pay for this in-country work. It has been paid for from the reserves in the past, and I do not see why it should not be again now. The work of the Department for International Development is absolutely crucial in ensuring that, in the medium to long term, the need for people to leave their country as refugees is eliminated. Using this money for spending in-country is an exercise in robbing Peter to pay Paul.
As I said in my intervention on the shadow Home Secretary, I would like the Home Secretary to look again at the exclusion from assistance of those who have already made the journey and are already in Europe. The Government are right that in the medium to long term the solution will be to keep people within the country or within the region as far as possible, but does the Home Secretary really think that people are going to stop making that journey simply because we have punished those who have already made the decision to do so in the most desperate of circumstances? It brings to mind the Victorian distinction between the deserving and undeserving poor—that somehow some desperate people are worthy of support while others are not. We should help all those who need our help on the basis of their need and not on the basis of a decision they have made in desperate circumstances.
As has been said, this is a significant moment for our country. This debate is not just about refugees; it is about how we see ourselves and our place in the world. I say to the Home Secretary that it is clear that the Government have a lot of catching up to do with public opinion. The Prime Minister often speaks with dewy-eyed fondness about his support for British values. If that is true, we should consider his current position and compare it with that of the German Chancellor. When asked about the numbers arriving in Germany, she replied:
“If so many people brave such hardship to come here, this is a sign of approval for us…The world sees Germany as a country of hope and of chances. That hasn’t always been the case.”
That is masterful understatement, but the question it brings to my mind is how the people of Britain will be seen on the world stage. That is what is at stake here. It is not a question of numbers, but of our standing in the world. Although it is welcome that the Government have moved their position, that is why they now need to do a great deal more.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. I want to move on quickly and make the time limit four minutes. We should get everybody in.
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4.6 pm
Bob Stewart (Beckenham) (Con): Syria is like nothing any of us have experienced. I and my hon. Friend the Member for Gravesham (Mr Holloway), who is not in his place, saw the Balkans. The situation is Kafkaesque. It is worse than anything we can imagine and terrifying for the people who live there. It is hardly surprising that so many people want to get out of the place and have become refugees.
There are two reasons for that: one is the Daesh thugs who are killing so many people, and the other is the Assad regime. Our old plan to try to help and at least get rid of Daesh was for the west—by which I mean the United Kingdom and the United States—and a few Arab allies to look at things from the air and possibly direct air strikes, which are much more surgical than people think, and for the Arab nations on the ground to sort themselves out and deal with Daesh and possibly Assad. That has not happened. The old plan has failed. By now, Daesh should be no more.
I do not have a problem with extending UK air strikes into Syria—it does not make military sense for it not to happen—but that would be a pin prick and it would not solve the situation, because the other part of the plan has not worked. The Arab nations were supposed to do something on the ground, but, while the Kurds are doing very well, others are not.
As for the idea of safe havens, I set up a safe haven in Srebrenica in April 1993. What a disaster. A battalion tried to stop people coming in and attacking innocents. It is not possible. It requires compliance by all the actors in the area, including the belligerents, and internationally. When that is achieved, people have then to be looked after properly and there has to be a plan of civil administration. It did not work in Srebrenica. Two and a bit years after my soldiers set up the safe haven, 8,373 men and boys had been murdered. Safe havens are a good concept, but dealing with them is almost impossible.
We need a short and a long-term plan to sort out what is happening not only in Syria, but in the whole middle east. We must destroy Daesh and change the regime in Syria. We have to get a Security Council resolution to give us legitimacy. We must have a plan, which will undoubtedly mean people going in with rifles to sort out thugs, because thugs do not actually listen to anything else. I do not want those people to be British; I would much prefer local nations to do it.
In the end, if this threat is spreading right across the world, the world has got to sort it out, and we may well have to play our part. The United Nations will have to give its sanction, and we may well have to risk our precious armed forces in defence of everything we stand for.
4.10 pm
Stephen Twigg (Liverpool, West Derby) (Lab/Co-op): I congratulate my right hon. Friend the shadow Home Secretary on securing this very important debate. The International Development Committee met this morning and agreed to undertake an urgent inquiry into DFID aspects of the refugee crisis. As other Members have said this afternoon, the very strong public response throughout our country surely shows our country at its very best.
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Both yesterday and today, we have seen the Government’s response with the new figure of 20,000. I support those who have said that there is urgency about granting access to as many of those 20,000 as possible. With the onset of winter, this is an immediate crisis. I particularly highlight the point made by Save the Children about the need to give the 3,000 unaccompanied children safe haven.
Part of the announcement concerns what the Chancellor said on Sunday about the use of the DFID budget to accept more refugees. That will require very careful scrutiny. The rules on official development assistance are clear: they allow for domestic expenditure to fund refugees for the first 12 months. However, I urge the Government to proceed with caution, for the reasons that Members have set out in this debate. Surely the focus of effective development policy must be to prevent crises from happening in the first place.
There is a balance to be struck. The Home Secretary spoke about the 0.7% commitment and about how, with the growing economy, the amount of cash available will increase. I seek a commitment from the Government that if the costs associated with refugee resettlement exceed the increase in the cash available, they will look elsewhere for the money, including to the contingency reserve.
Mark Field: The hon. Gentleman is absolutely right, because his Committee should scrutinise such issues very closely. Does he accept that community cohesion should be one of the goals of DFID expenditure? It is right that a safe haven for people who will come to this country—I hope, temporarily—should be done under the DFID budget, rather than through the Department for Communities and Local Government or other Departments.
Stephen Twigg: We will certainly examine that matter as part of our inquiry. My instinct is that the current provision for 12 months goes as far as we should. If the Government proposed going beyond that, we would want to look at it in real detail.
The hon. Gentleman brings me to my next point. I am delighted that in my own city of Liverpool, our mayor, Joe Anderson, has responded to the shadow Home Secretary’s call to take 10 refugee families by saying that Liverpool City Council will take 100 refugees. As Joe Anderson put it:
“In Liverpool, a city famous for our warm welcomes and as a safe port in the storm of global conflict, we are prepared to play our part.”
Like other cities, however, Liverpool faces very large cuts in its funding from central Government. It is important that central Government provide support to enable communities across the country to take the refugees.
One of the central themes of this debate is the prevention of and the response to conflict. There is no doubt that we can be proud as a country of reaching the 0.7% target, about which the Home Secretary was right to remind us. We are second only to the United States in what we have contributed in bilateral aid to Syria, and we should be very proud of that. We need to say to our European partners who are nowhere near achieving 0.7% that they should rise to the challenge and match what we have done.
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However, I do not believe that this is an either/or situation in which we either fulfil our obligation to 0.7% or take more refugees. In the crisis that we face, we have to do both. We need to say to our European partners that they need to rise to the 0.7% aid challenge, but we need to rise to the challenge of accepting more refugees. The figure of 20,000 is a very important development, but as others have said, the need is immediate, the crisis is now and we should seek to accept refugees as quickly as possible both from the camps in Syria and from among those in Europe. It is only right that we share that burden with our European partners.
4.15 pm
Byron Davies (Gower) (Con): I am grateful for the opportunity to speak on this issue of critical importance. As the Prime Minister said yesterday, this is the biggest challenge facing countries across Europe today.
Many people have taken the perilous journey, fleeing the ravages of the conflict that has torn Syria apart. They are fleeing the terrors of Bashar al-Assad, ISIL and other perpetrators of the terrible and unimaginable violence in Syria. The conflict has driven more than 11 million people from their homes. We have all seen and despaired at the heart-breaking photos and stories from the conflict. Therefore, it is absolutely right that the Government and Britain will fulfil their moral responsibility to help those fleeing the horrific conflict that is gripping parts of the middle east.
The United Kingdom has a long and distinguished history of helping those who are most in need, as we have heard from others this afternoon, from Jewish refugees fleeing the horrors of Nazi Germany to Hungarian refugees following the crushing of the Hungarian uprising by Soviet tanks in 1958 and those fleeing the clutches and horrors of the Idi Amin regime in Uganda. We have always, as a nation, helped those who have desperately needed to flee the persecution and terror of different conflicts and regimes.
Furthermore, we are the only major nation in the world that has kept its promise to spend 0.7% of its GNP on aid. That is a record that I am proud of and that all in this Chamber should be proud of. It is the mark of a nation that will always try to alleviate suffering, wherever it may be found.
Alex Cunningham (Stockton North) (Lab): The hon. Gentleman is talking about vulnerable people. A Save the Children briefing issued at noon today says that of the 13,000 lone children who arrived in Italy in 2014, 4,000 have already disappeared. Who knows what life they are now living, if they are still alive. Will he join me in supporting the call of Save the Children for the UK to take 3,000 child refugees now in order to take them out of the trouble that they are facing in their lives?
Byron Davies: Save the Children does a remarkable job and I would always be open to helping with any of its initiatives.
We are the second largest bilateral donor of aid to the Syrian conflict. We are providing more than 18 million food rations, 2.4 million medical consultations and 1.6 million people with clean water. That is the largest ever response to a humanitarian crisis.
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I welcome the Government’s response. It is only right that we have gone further and done more to help. I will always be a supporter of our welcoming refugees who are fleeing the horrors that have engulfed their former homes. It is only right that Britain plays its part, as it always has done, to support and take in such refugees. I have received countless letters and emails from constituents who are willing to help those in need, as I am sure has everybody in this Chamber. There have been offers of support from families and communities the length and breadth of Britain. That is the hallmark of the generosity of spirit in Britain.
I am therefore sure that people and communities will strongly welcome, as I do, the Government’s proposal to resettle 20,000 Syrian refugees. It is a measured approach. It is crucial that our approach ensures that we not only act with our heart, but think with our head. I fully support the Government’s approach of taking refugees from camps and elsewhere in Turkey, Jordan and Lebanon.
Bob Stewart: Will my hon. Friend give way?
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. Many Members wish to speak and, in fairness, the hon. Gentleman has had a good chance to speak. I want to get everybody in, if possible.
Byron Davies: We must try to provide refugees with a more direct and safe route to the UK, avoiding the clutches of people traffickers. This point brings into sharp focus the current crisis in Europe. Tragically, the hazardous journey has cost many lives. When the shadow Home Secretary winds up the debate, perhaps she will say whether she agrees that resettling refugees directly from the camps in the middle east, which is the approach of the UK but not of all other EU nations, is the best way to discourage vulnerable people from making the dangerous journey to Europe.
I should add that the current situation has shown the complete failure of the EU’s borderless Schengen area agreement. I witnessed that first hand when working in eastern Europe. I have long said that that was a major problem waiting to collapse in Europe. It has exacerbated an extremely complex and difficult situation. The writing was on the wall long ago.
Simply taking refugees will not alone solve the crisis. We should make no mistake: we need a comprehensive solution that deals with those responsible for the terrible scenes we see—President Assad, ISIL and criminal gangs. We need to be tough on all those who are guilty of perpetrating the terrible crimes that we see daily. I strongly welcome the Government’s commitment to invest more to tackle the causes of the crises in the middle east and north Africa. As one of the five permanent members of the United Nations Security Council and one of the most important nations in the world on matters of foreign affairs, we must seek to bring all our influence to bear to provide a solution at the source of the problem.
I am sure that my right hon. Friend the Home Secretary shares my pride that Britain is the only country in the world that can say that we stand up to the world’s poorest by meeting our commitment on development spending while defending our own citizens and working for peace by meeting our NATO defence spending obligation of 2%. The Government must use every tool at their disposal to achieve that.
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4.21 pm
Toby Perkins (Chesterfield) (Lab): I commend my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper), the shadow Home Secretary, for securing the debate, and for the tremendous way in which she has led the fight. Labour Members are of the view that the Government’s response is inadequate, but the Government have responded more generously than they did a few weeks ago. The shadow Home Secretary deserves great credit for getting the Government at least to take the steps they have taken.
The tragic death of Alan Kurdi is a bucket of cold water over the whole of our nation and the Government. It was the moment at which public opinion changed and when people said we must do more. We recognise that the appalling suffering of those refugees is a moment in history. History will look back on our generation, and on this Parliament and this Government, and ask what we did when we faced this appalling moment. I believe that we are failing to live up to our historical role as a place of safe haven, and to live up to the incredibly proud role that Britain has played over many years to support refugees, whether that is the 10,000 of the Kindertransport in the late 1930s, the 300,000 Poles who came here after the second world war or the 42,000 Ugandan Asians who came to Britain after the historic situation there. When history looks at our generation and our current response to this appalling situation, it will judge us badly for the failure to take more refugees.
In the Government’s response, they not only fail to appreciate the suffering that people are experiencing, but underestimate the capacity and desire, which the harrowing pictures have evoked, to help people. I said yesterday to the Prime Minister that if ever there was an opportunity for him to make the big society something that means something to people, this is it. People all over our communities are saying that they want to make a difference.
Mrs Helen Grant (Maidstone and The Weald) (Con): Will the hon. Gentleman give way?
Toby Perkins: With respect to my colleagues, I will not give way.
People are saying that they want to make a difference. They are saying, “Please let me know how I can help.” Councils in Derbyshire have offered to act as reception centres for refugees. The Labour council in Chesterfield has said that it stands willing to do whatever is needed to support people in that terrible situation. The Government underestimate the capacity in our country to make a stand in the once-in-a-lifetime atrocious situation that we face.
The Government should explore the far greater potential that there is among proud Britons who are standing ready and willing to help people in their hour of need. In our history, when the world has needed heroes, Britain has so often come forward and shown how truly great our nation can be.
Let us not let this generation, when the world is expecting so much of us, be the one that lets our country’s reputation down. Let us not be the ones who, when we tell our children and grandchildren about the roles we played, have to look down at our shoes and say that when this country was needed we did not do what
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we could. There is more we can do. We should be taking more refugees. In all our communities, we know we can do more. Let this Parliament and this Government be the ones to say we will do more. Let us lift what we are doing right now.
4.25 pm
Wendy Morton (Aldridge-Brownhills) (Con): The news we read, the images we see and the stories we hear of the refugee crisis are, all too often, heartbreaking. I am sure we all agree that recent events in particular have been deeply moving. They have brought the events in Syria once again to the forefront of our minds.
Eighteen months ago, I travelled to Turkey with some other Members of this House to visit one of the camps on the Turkish-Syrian border. What struck me was the size of the camps. The one I visited was home to 17,000 refugees or guests. It was a city of tents and container homes, with a school and other facilities. This was just a fraction of the total number of those who, at that time, had escaped and fled Syria to seek refuge. Many, many more were still in their home country, but displaced from their homes by the brutal civil war. In many ways they too are refugees, but refugees in their own home.
Current figures show there are 16.2 million people in need of humanitarian aid. Some 12.2 million of those are in Syria and the other 4 million are in the surrounding area. What also struck me when I visited the camp and spoke to some of the families was that they viewed it as their temporary home. They wanted to get back to their homes and their homeland. It may well have been destroyed, but they wanted to go back home and their real home was Syria. Here we are, many months later, facing this ongoing and worsening situation.
We must not let those refugees down. We have a humanitarian and moral duty to help them. I believe we are a moral nation. Last year, the UK received 25,000 applications for asylum, just over 2,000 of which were from Syria. Since the beginning of the Syrian crisis back in 2011, the UK has granted asylum to about 5,000 Syrians. Yesterday’s statement from the Prime Minister proposed that Britain would settle a further 20,000 Syrian refugees over the next five years. We have sent the Royal Navy to the Mediterranean to help to save lives. We committed to spending 0.7% of GDP on international development, and I think all of us in this House should be very proud of that. We are the second biggest bilateral donor in the world to Syria and Syrian refugee camps. We have contributed considerably more than any other country in the EU, including food, water, sanitation and medical care to people in need. Those are some of things that I saw in the camp I visited. Our contribution is significant and it is right that we make it.
We must not let the refugees down, but we must not give in to terror. We must not do anything that encourages trafficking and we must not encourage people to make those perilous sea crossings. We need to recognise that people migrate for different reasons. It is vital to be able to distinguish between refugees and economic migrants. As we seek to help in the short term, we must seek to secure a long-term solution. That is why I support the Prime Minister’s statement and the work of the Home Secretary. We can, of course, always do more; and we should always ask whether we are doing enough and what more we can do.
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4.29 pm
Ms Diane Abbott (Hackney North and Stoke Newington) (Lab): Over this debate hangs a shadow—the shadow of the toxic political discourse we have had on migration month on month and year on year. That is what has made it difficult to fashion a coherent approach to the migrant issue and why the Prime Minister was so slow to understand the change in the public mood. I give all credit to the Government for the money they have given to the camps and the region, and I believe that other European countries should match what Her Majesty’s Government are doing, but we should not use our non-membership of Schengen as an excuse not to step up to our responsibilities as part of the European family of nations. We should take our quota of refugees, whether from the camps or elsewhere, and we should actively support Italy and Greece, which are bearing the brunt of some of the Mediterranean migration of refugees.
I believe that refugees should apply for asylum in the first country they come to, but, for that to happen, much more support needs to be given to countries such as Italy and Greece. The Baltic states, which have been so noisy about not wanting any refugees at all, should be made to make an appropriate financial contribution. Unless we recognise that this is a Europe-wide issue that requires a Europe-wide co-ordinated response, we will fall short of what is necessary. There is also the question, raised earlier, of the regional powers. How many refugees is Saudi taking? How many refugees have the Gulf states taken? We need to make the historical allies in the region step up and play their part in helping with Syrian and other refugees.
Government Members were jeering earlier and asking some of my colleagues, “How many refugees would you take?”. Do not challenge a Hackney MP over how many refugees we would take. Hackney has been a safe haven for refugees for hundreds of years. We are proud of our position and our history of welcoming refugees, whether from eastern Europe, east Africa or Syria. Hackney is proud of what refugees have done for our community. Londoners are proud to live in an open city. Rather than worrying about what the polls tell us about people conflating refugees with migrants and not being happy about the numbers, we need to build on our history as an open and tolerant country and move towards a coherent, integrated, Europe-wide approach that will last not just one 24-hour news cycle but for decades to come.
4.32 pm
Tom Tugendhat (Tonbridge and Malling) (Con): I stand here proudly as the grandson of a refugee who came here in the 1920s. When my great uncle came as a Jewish refugee from Austria later in the late 1930s, the nation’s security was in such question that he was interned, as was every other adult Jew leaving Austria or Germany. I therefore welcome the Government’s efforts to take the nation’s security seriously while not damaging the right of refugees to come. It is right that, as we have done in the past, we balance our security with our generosity.
It is also right that we treat the cause, and not just the symptom, so I welcome the Government’s position. It is easy to say we should take more individuals, in theirs ones and twos, tens and even thousands, but unless we
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address the cause, we will be talking about millions, not thousands. Only 3% of the population has so far left the region, leaving 97%, and it is right that Britain has made the single largest contribution per capita in helping those people. That 97% is being helped by Britain. That is what we are doing for Italy and Greece. We are stopping the migration by supporting those in the region.
More than that, we are helping Syria. It is not enough to take the fittest, the strongest, the cleverest and the richest—those able to make the trip—and to integrate them into our societies to have them as our professors, our doctors and our lawyers. They would undoubtedly contribute handsomely to our future, but they should not be stolen like that.
Civil wars tend to last between seven and 12 years. Tragically, we are already four years into this one, but that means—I hope this is true—that we are approaching the final stages. I cannot tell the House whether that is guaranteed or not—nobody can—but we all hope very much that the war will end and soon. At that point we will want the people nearby to be able to go back and rebuild their society.
That is why I call on Her Majesty’s Government to do one more thing than they are already doing: to use the good offices of the Foreign Office and the efforts of the Minister for the middle east, the Under-Secretary of State for Foreign and Commonwealth Affairs, my hon. Friend the Member for Bournemouth East (Mr Ellwood), who has done much already on this, to talk to our allies in the region—the Jordanians, the Turks, the Lebanese and the Iraqis—and to extract financial support from our Gulf allies and the other wealthy nations so that the camps can be used not just as refuges, but as lily pads from which we can jump back into Syria with economic development. If we can turn the camps—as others have in other parts of the world—into zones of industry and economic growth for refugees in exile, they can re-import their labour, their ideas and that drive back into Syria, so that instead of needing to have a Marshall plan lasting 30 or 50 years to support Syria, it will rebuild itself in half that time.
It is possible. The Government are making the right noises and doing exactly the right things. I would encourage them to go further and harder on that path, but I am very grateful for the work of the Home Secretary and the Prime Minister.
4.36 pm
Gavin Newlands (Paisley and Renfrewshire North) (SNP): I very much welcome the opportunity to make a contribution to this extremely important debate on an issue that has galvanised support right across the political spectrum. Rarely in my lifetime have I seen so many ordinary members of the public not happy with just donating money to a financial appeal, but desperate to do something themselves: to organise, to collect, to donate —indeed, to drive hundreds of miles to get to those in need.
I am sure this is common across the UK, but in Renfrewshire I have been inspired by a number of individuals and groups who were sick of waiting for their Government to show leadership and decided to stand up themselves. Over the weekend, I contacted a number of those groups to organise a meeting with a view to bringing them together to work more efficiently.
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I am pleased to say that Renfrewshire Aid was born out of that meeting and is now operating out of two substantial hubs, in Gallowhill and in the students association of the University of the West of Scotland in Paisley. The actions of those individuals and groups show how great and welcoming our country is. They are showing this Government how they should be acting. They are showing them that when someone is crying out for our help, the answer is not to close our eyes, put our heads down or walk the other way. The answer is to extend the hand of compassion and friendship and to help those who badly need our help.
However, this is not the first time that Paisley has come to the aid of refugees. During the first world war, Paisley played host to hundreds of Belgian refugees. Indeed, the UK took in an estimated quarter of a million, including 16,000 in a single day through Folkestone in October 1914. Sixteen thousand in a day rather highlights the complete inadequacy of 20,000 over five years. The Government’s capacity for compassion seems a little smaller 100 years on.
This absolutely should not be a party political issue. It is an issue on which parties should unite in common cause and demonstrate that such issues should be above the fray. That is certainly true at the local level, where members of many political parties and those belonging to none are coming together to help those affected. However, having listened to the Prime Minister’s statement yesterday, when he attempted to muddy the waters and conflate the refugee crisis with counter-terrorism, I am not entirely sure that he shares that same ethos of solidarity. The two issues that were brought up yesterday are two of the most important topics that can be brought to this Chamber. These topics deserve separate statements and debate.
Last week I wrote letters to my local Labour council leader and to the Prime Minister. It should be noted that I received a very positive reply from the council leader, who would like to do more, but requires the funds to be able to do so. I urge the Government to financially support local authorities such as mine so that they are able to play their full part in the crisis. I still await a reply from the Prime Minister. In my letter to him, I urged him to show true leadership and accept the UK’s moral responsibility to do considerably more. After yesterday’s statement, it is clear that he is shirking that responsibility.
However, it is not only the Prime Minister’s failure or unwillingness to act that disappoints me about the way he has responded—or, more appropriately, not responded —but the language that he has used to describe those fleeing persecution or violence. Let me be clear: these are not economic migrants who, as some on the Government Benches would have us think, want to come to our country to live a life of luxury on benefits; they are human beings. They are mums, dads, grans, uncles and, yes, sons and daughters too.
Mrs Helen Grant: Will the hon. Gentleman give way?
Gavin Newlands: No, I am afraid I have very little time.
The people affected by this humanitarian crisis are just attempting to do what we would all do in the same situation: protect their families from harm. The families and individuals caught up in the crisis are willing to
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leave their homes and travel thousands of miles in the worse circumstances possible to move to a new country. These are people who are willing to go through hell and high water to protect their children and flee the violence that awaits them back home. To suggest that these people are “economic migrants” is nothing short of appalling, and it shows how out of touch some Conservative Members actually are.
It saddens me to say that the Prime Minister seems uninterested, unwilling or just plain unable to act in the way that the country demands. In the biggest mass movement of people in the world for over 70 years, future generations will judge how we respond to this escalating crisis. The Prime Minister is currently facing a guilty verdict, but he has time to change course and do what is right—I urge him to do so.
4.40 pm
Mrs Flick Drummond (Portsmouth South) (Con): I welcome the opportunity to debate the plight of the refugees, having been a supporter of our efforts throughout the crisis. I am disappointed that the shadow Home Secretary did not extend the motion. The refugee crisis is not just in Europe, and the cause of the crisis is not in Europe. This is a refugee crisis far bigger than Europe, and we should be working further with the countries of the middle east.
There are 9 million displaced people in Syria: 3% have left for Europe, but there are still 1.9 million in Turkey, 1.1 million in Lebanon, 600,000 in Jordan, while Algeria has taken in only 25,000, Bahrain 500 and Saudi Arabia 561 with 100 asylum seekers. They have given some money, but nowhere near the £1 billion that this country has led with.
This humanitarian crisis has been happening ever since the Syrian civil war. It has taken us time to start putting the aid in. I welcome the announcement that this country will take refugees directly from camps around Syria. There are 4 million in the camps, 39% of whom are 11 or under, with 51% under 18. I am pleased that the Government have said that they will concentrate on the most vulnerable people. Those are the people in the gravest danger.
We have led the way as a country in delivering humanitarian aid to people in the region, and £1 billion is no small sum. To those who say we are not doing enough, I have to say that that does a disservice to those who have been working with DFID and its partner agencies. We have been leading the world in hitting our 0.7% target.
We are absolutely right to be taking people from the camps and not to be helping the traffickers gain out of others’ misery. The best place to deliver that aid is in theatre—in Syria and the region. When the war is over, we will eventually have to tackle the problem with our international partners. I want Syria to be restored to the diverse, educated and economically stable country that it once was. The Syrian people have been afflicted by brutal and undemocratic regimes, but they are a tolerant people and have it in themselves to recover.
We must reach out to the Syrians and others affected by Daesh atrocities, including the Kurds and the Yazidis as well, but we have to be mindful of our responsibilities. We cannot look after anyone else if we cannot look after ourselves. In my own crowded city of Portsmouth,
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I spend a lot of time working with people who face housing difficulties or helping to resolve problems in education and health.
Many Portsmouth people have written to me, as other constituents have written to their MPs, because they would like to help by taking people in. Some have been collecting aid already and they have taken it off to Calais. I am going to urge them to keep some of it for the people who will be coming into the UK. We will need to support the care for refugees beyond their first year in the UK; the burden must not fall only on the local authorities. People want to be assured that we are not undermining our own society in trying to support others.
We must not decrease our overseas aid while we put in aid to fund the refugees here. I urge the Government to carry on contributing part of the £1 billion or more to the Syrian camps. We must give the refugees shelter now and offer them the prospect of a return home after the war. We cannot permit the collapse of society in one of the cradles of civilisation. We know Daesh has been on a campaign of atrocity against Syria’s history and its pluralistic society. Unless we restore Syria as a state and a people, we will have failed.
4.43 pm
Ian Murray (Edinburgh South) (Lab): I am grateful for the opportunity in a couple of minutes to represent the thousand or so constituents who have contacted me, as well as the international organisations based in my constituency such as Mercy Corps.
I would like to make three brief points and not reiterate what has already been said in this excellent debate. My first point is that this is a refugee and humanitarian crisis on an unprecedented scale. This year alone, 350,000 have crossed the Mediterranean, and it has been the worst place in the world for a humanitarian crisis. According to the Scottish Refugee Council, 2,643 people have been killed and lost their lives making those journeys this year. This is not an economic migrant crisis; it is a refugee crisis, with people fleeing persecution from places ravaged by war. They are risking their own lives and those of their families as a very much a last resort.
That brings me to my second brief point in this short speech, which concerns unaccompanied children. We need to participate in helping such children who are already here in Europe. The Prime Minister’s announcement yesterday involved only people who were directly airlifted from the region. Although there are reasons why that is desirable, we must bear in mind the children who have been coming into Europe and across to Calais looking for sanctuary. We cannot imagine our sons or daughters,
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our nieces or nephews, our grandsons or grandaughters, making those journeys on their own. Those children need to be given sanctuary in this country.
Let me make my third very brief point directly to the Home Secretary. When she goes to the home affairs Ministers’ meeting in Europe, she must play a full role in ensuring that Britain maintains the search and rescue missions in the Mediterranean and improves the safe and legal routes into and through Europe, that we strengthen the reception and processing of refugees, and that the burden is spread across Europe, relieving, in particular, the pressures on southern Italy and Greece. Ministers must agree to share the burden of resettlement across Europe. Twenty thousand is just a number; this must be about individual people who are fleeing persecution and war zones to countries across Europe.
I hope that the Home Secretary will step up to the mark. The Prime Minister has been shamed this week, but the Home Secretary has an opportunity to resolve the situation next week. I hope she takes that opportunity to ensure that Britain, once again, takes the responsibility that it has been known for taking throughout history.
Mr Deputy Speaker (Mr Lindsay Hoyle): Order. As we are almost out of time, I call Yvette Cooper.
Yvette Cooper: With the leave of the House, Mr Deputy Speaker.
I thank the House for a very thoughtful debate. It has been an important debate, but we have not yet heard what we need to hear from the Government. We all agree on the need to provide aid for the region, to take refugees from the camps and to tackle trafficking, but we need two more things. First, we need a commitment to providing more help this year, now, and to taking refugees straight away, because the crisis is happening now. Secondly, we need a commitment to take refugees from Europe, not simply from the camps. This year, 130,000 people arrived in Greece seeking sanctuary. Where do we think they are going to go if they cannot all stay in Greece? How are we going to persuade other European countries to help if we will not do so?
Tomorrow we will debate this issue again, and we will vote. I urge all Members throughout the House to read the report of the Kindertransport debate of 77 years ago before the SNP’s Opposition day debate, and before the vote. I ask them not to vote against the additional help that we need. We have a moral responsibility to do more. What the Government have done is good, but it is simply not enough. Let us do more.
4.48 pm
Three hours having elapsed since the start of proceedings, the motion lapsed (Standing Order No. 24).
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Finance Bill
(Clauses 16, 17, 43 and 45; Schedules 2 and 3; any new clauses and new schedules relating to the subject matter of those clauses or schedules)
[Mr Lindsay Hoyle in the Chair.]
Insurance premium tax: standard rate
4.49 pm
Barbara Keeley (Worsley and Eccles South) (Lab): I beg to move amendment 1, page 59, line 19, at end add—
“(6) The Chancellor of the Exchequer shall, within three months of the passing of this Act, undertake, and lay before both Houses of Parliament, a review of the impact of any further rise in the standard rate of insurance premium tax with particular attention to the impact on—
(a) the price charged for insurance policies; and
(b) the take-up of insurance policies”.
The Chairman of Ways and Means (Mr Lindsay Hoyle): With this it will be convenient to take clause 43 stand part.
Barbara Keeley: The change in the level of insurance premium tax from 6% to 9.5% will have an impact on insurance premiums, and it will mean increased costs for families. Treasury figures show that the increase will have one of the biggest impacts on Government finances of any policy revealed in the summer Budget. By 2021 Ministers will have brought in an extra £8 billion from the measure, a cost that is likely to be passed on by insurance companies to consumers, so as we debate clause 43 and Labour’s amendment I want to ask the Minister to explain the reasons behind the level of this tax rise and to ask whether Ministers have fully considered where the impact of this rise will be felt and which groups will be most affected.
In 2010 the coalition Government announced a similar but much smaller rise in insurance premium tax from 5% to 6%, but this most recent change increases the tax by 58%. I want to ask the Minister for the reasoning behind that scale of change.
A colleague of the Minister in the Lords, Lord Northbrook, has described the insurance premium tax increase as an easy target. Taxes should not be increased just because they are easy targets. Indeed, any decision to increase Government revenue should be undertaken after a robust analysis of the impact the changes will have on individuals and businesses. There are still many questions to be answered about the impacts of this measure on family finances and on the take-up of insurance. So in addition to other questions later, I want to start by asking why the Government have chosen to make such a marked increase in insurance premium tax from 6% to 9.5%, an increase of 58%.
Mr Alan Mak (Havant) (Con): Does the hon. Lady agree that the proposed new level of tax will still be substantially lower than the 19% rate levied in Germany, and that the proposals strike the right balance between raising revenue and making sure premiums are competitive?
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Barbara Keeley: I do not think making such comparisons is particularly valuable and I will come on to the reasons why.
The insurance industry has raised concerns about the impact of this increase. Huw Evans, director general of the Association of British Insurers, responded to the proposed increase in insurance premium tax by warning that consumers would be worse off. He said:
“Insurance Premium Tax is a tax on people and businesses at the point at which they buy a general insurance product. So it’s very disappointing to see a more than 50% tax increase being imposed on consumers, especially when the insurance industry and Government has worked so hard in recent years to bring down the cost of essential insurance.”
The ABI calculates that the new rate of insurance premium tax will add almost £10 to the average annual household insurance policy for buildings and contents combined, and over £12 to the average annual comprehensive motor policy. However, the increase will be much higher for some groups, and I want to come on to talk about them.
Diana Johnson (Kingston upon Hull North) (Lab): Does my hon. Friend share my concern about householders in areas prone to flooding who might already have to pay high premiums and for whom this is an additional amount they will have to find on top? That is certainly the case for a number of properties bought under the Help to Buy scheme set up by the Treasury, as those properties built after 2009 are not eligible for the Flood Re insurance scheme the Government have brought in.
Barbara Keeley: Indeed, and I will come on to that, because the cumulative impact of this and other changes in the Budget on specific groups is of great concern. My hon. Friend is right that there could be a real issue in parts of the country prone to flooding. We do not want to see families in the properties my hon. Friend talks about that are outside the Flood Re scheme go without insurance.
John Redwood (Wokingham) (Con): If the hon. Lady wants to forgo this substantial increase in revenue, what would she replace it with, given that her income tax proposals would also cut the revenue because the higher rate would collect less?
Barbara Keeley: It is not for me to make those suggestions; it is the Government’s Budget, not mine.
As I have said, the increased cost of this will be much higher than the averages for some groups. The AA has also shared its concern. After the Budget, AA president Edmund King said:
“The sting is in the tail. The Insurance Premium Tax increase on the average car insurance policy is still equivalent to a fuel duty increase of almost 2p per litre. Either way drivers are being hit in their pockets. This is an outrageous hike which could well backfire by leading to an increase in uninsured drivers.”
Chris Philp (Croydon South) (Con): Will the hon. Lady join me in welcoming the fact that the freeze on the motor fuel duty escalator over the past three or four years has saved motorists far more than the 2p a litre to which she has just referred? It is saving the average motorist about £10 every time they fill up, which is far more than the 2p that she mentions. Will she join me in welcoming that measure?
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Barbara Keeley: No I will not. As I have just stated, the president of the AA, Edmund King, has said of the Budget:
“The sting is in the tail.”
It is fine to make improvements that help the motorist, but the sting is in the tail and he has made the point that this is an outrageous hike. I ask the hon. Gentleman to reflect on the impact on young motorists and the possible increase in the number of uninsured drivers. If that were the result of this hike, it would be a very dangerous development.
The chief executive officer of the British Insurance Brokers Association, Steve White, has also raised concerns about the impact of the tax on insurance policies and on the industry. He makes this important point:
“Those hit by this stealth tax will include the 20.1 million households with contents insurance, 19.6 million with motor insurance and 17 million with buildings insurance. The Government has been working with the industry to reduce the cost of insurance for consumers…It therefore seems counterintuitive to be taking measures which will add to the cost—effectively taxing protection.”
Let us be clear about what is going on. This is a tax on the protection that families need.
The Financial Secretary to the Treasury, who is now in his place, has made clear in the past his views on the impact of increases to this tax. In 2010, he said of the smaller rise that was introduced at the time:
“I am not denying that we expect the increase to be passed on predominantly to consumers; we expect that the bulk of it will be.”—[Official Report, 15 July 2010; Vol. 513, c. 1130.]
Indeed, some of the UK’s biggest insurers, including Aviva and RSA, have already confirmed that they are planning to pass on the cost to consumers.
We need to be clearer about which groups will be affected by this increase and what impact it will have. Car insurance and home contents insurance policies will clearly be affected. Of course we welcome the assurances that the Government have given about preventing a rise in VAT, income tax and national insurance, but families in the UK will still be hit by these changes to the insurance premium tax. This tax increase on families comes in addition to other Budget measures that will hit families, such as cuts to tax credits. We must always keep in mind the cumulative impact on families of all the Government’s policies.
Hon. Members have asked what else we would do. The tax rise is also contrary to what the Chancellor promised before the election. He said that
“tax increases are not required to achieve”—
further consolidation, and that this
“can be achieved with spending reductions”.
So the Chancellor did not foresee these measures. Despite his claim, however, he has chosen to deliver a Budget that increases taxes as well as placing a significant squeeze on public finances and services. The average household is likely to be affected by these changes in multiple ways. Many families purchase more than one type of insurance, which means that they will have to pay this tax increase more than once.
We must also consider the effect of the policy on different groups. People’s insurance needs differ depending on their age and income and on whether they own their home. Those who have high premiums are more likely to be adversely affected by this increase to the taxation rate. The groups that I single out are young motorists,
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homeowners and some businesses. For example, insurers have estimated that the average cost of a year’s cover for drivers under 25 will jump by around £50. The British Insurance Brokers Association has stated that
“a young driver or an experienced driver in an inner city area would see the amount of tax on an annual car insurance premium of £1,500 increase from £90 to £142.50”.
Young motorists already pay the highest premiums, with the average policy for someone who is under 25 already costing more than £1,200 a year. For a young apprentice, jobseeker or student, the increase could make the difference between being able to afford insurance so that they can travel to work for their first job and not being able to do so. Young people are already having their eligibility removed for housing benefit, jobseeker’s allowance and the new minimum wage, and this is just another financial burden that the Government are placing on them.
Another group facing higher insurance premiums are people who have become unemployed. A BBC report in 2012 showed that those without a job are generally asked to pay more for motor insurance cover than those in full-time employment. BBC research with three different brokers found that car insurance premiums averaged almost a third more—30%—for those out of work, but that the cost could be as much as 63% higher. People who are out of work already face many challenges: looking for a job; finding the money to pay their rent or mortgage; and finding the money to feed their families and run their homes. Insurance premiums are higher than regular premiums, so this increase is just another blow to people who are struggling to find work.
5 pm
We must also consider the impact this policy will have on businesses, as corporate insurance premiums will also be affected by this increase. Although large companies might be able to absorb it, concerns remain about how small and medium-sized businesses will be affected by the extra cost. Will the Minister therefore tell me what assessment has been made of the impact of the tax rise on the take-up of insurance by business?
The insurance industry is also under a significant amount of pressure to implement the changes needed for this tax increase, which will apply from 1 November 2015. The Association of British Insurers has stated:
“Firms had no advance warning of the increase in Insurance Premium Tax announced in the Budget, meaning preparations for the implementation date of 1 November have placed sudden pressure on IT and back-office services.”
The Government’s failure to foresee this difficulty suggests the need for a more thorough assessment of similar tax increases in future and a consideration of whether industries can implement changes in such a short period of time.
The rise in insurance premium tax may also put extra pressure on insurance companies, given their other obligations. We have already touched on the Flood Re scheme, which was introduced in 2011 as a mechanism to protect households at risk of flooding from high insurance premiums. In 2013, as part of the Flood Re scheme, the ABI and the Government agreed to a cap on flooding insurance premiums in order to ensure that affordable home insurance was made available to those most likely to need it in the event of a flood. The Flood Re pool has two sources of income: the flood element
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of the policies passed into it; and an additional levy on the industry. Although the amount of money the levy needs to raise each year is fixed, if insurance companies start to see a significant decrease in profits because of the rise in insurance premium tax, they may consider passing on more of the cost of this levy to policyholders, again meaning a steeper increase in their premiums. My hon. Friend the Member for Kingston upon Hull North (Diana Johnson) has already raised the issue of households outside the Flood Re scheme suffering higher premiums. Once again, those with the highest premiums could suffer the most, particularly if those with lower risks decide to forgo insurance altogether.
Her Majesty’s Revenue and Customs’ policy paper reports that the mechanism for monitoring and evaluating the policy will be through
“information collected from tax returns and receipts”.
We believe there is a need for more in-depth analysis and understanding of exactly who will be affected by the increase and the impact this will have on the take-up of insurance. Concerns have been raised that the increase in the insurance premium tax rate could create perverse incentives and market distortions, meaning that fewer people take up the correct level of insurance to cover them against certain risks and liabilities. Clearly, insurance is a vital tool that helps people plan for risks in their lives. We should be encouraging people to take out policies that suit their needs and encouraging the insurance industry to offer competitive and affordable policies—it seems the Government were concerned about that but their concern has now ended.
We believe that vehicle insurance is of the greatest importance, because drivers are legally required to insure their vehicles if they want to drive in the UK. The legal minimum of third-party insurance covers drivers if they have an accident causing damage or injury to any other person, vehicle, animal or property. It is right that the UK law encourages drivers to take that responsibility. When fines for driving uninsured are becoming a fraction of the costs of insurance, higher premiums could lead to more uninsured drivers, and there is a real fear about that in the industry. Young drivers already face premiums of more than £1,200, and that will increase with this tax increase, so a fixed penalty which can be only £300 and six penalty points could be seen increasingly as a risk that people are—wrongly—prepared to take.
Huw Merriman (Bexhill and Battle) (Con): There seems to be the assumption that the entire increase will be passed on—perhaps in part it will—but I visited one of the country’s largest insurers in my constituency and it did not seem to have cause to pass on the increase. Perhaps the hon. Lady should reflect on that and see that passing on such costs may not be automatic. It may be that a reduction in corporation tax means that the costs can be absorbed.
Barbara Keeley: I think that I have already covered that. In a debate in 2010 it was accepted that these costs are almost always passed on. Almost every commentator has said that the costs will be passed on. Aviva and RSA have already announced that they will pass them on, so all the signs are that they will be passed on. Clearly, it would be good if any part of the insurance industry decided not to pass on the costs, but what we are seeing is an increase in premiums across the piece.
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This tax increase on a merit good like insurance could undermine the message that individuals and society benefit if the correct level of insurance is taken out. An increase in the insurance premium tax of 58% punishes families and individuals for acting responsibly. When there have been previous increases in the tax, they have been something in the order of around 1%. There is a major concern that this steeper increase could be large enough to alter the coverage chosen by customers, which means that they would become underinsured. It may be that Conservative Members do not face problems of underinsurance in their constituencies. I must say that I have seen a lot of it in my constituency. People really suffer when they are underinsured. If levels of crime are high and there are other issues affecting them on the roads, underinsurance is a real issue.
The Government need to ensure that tax policies do not lead to a situation in which families struggling on low incomes decide to forgo insurance or let their previous policies lapse because prices have risen and they decide that they can no longer afford insurance. That could leave many families at risk of great loss in the event of burglary, or if they have a road accident.
Underinsurance could be a consequence of this rate rise. People could also opt for cheaper policies, which means that they do not get the right coverage, or they opt for higher excesses, which effectively means that their coverage is less. Buying insurance can be a complicated business and a good price may often take precedence over having the right level of coverage.
The HMRC policy paper for this rate rise estimated that there would be
“a small reduction in the demand for standard-rated insurance.”
Any fall in demand for insurance that leaves families open to greater risks should be avoided. Where does the Minister believe this “small reduction” is likely to occur and what is she doing to prevent reductions in the demand for insurance?
Finally, HMRC suggests that there could be changes in the behaviour of insurance companies. It states that there is likely to be
“a small increase in tax planning activity by insurance companies.”
What are the Government doing to minimise this further potential unwanted consequence?
Clause 43 is a typical measure from a Conservative Government who promise one thing and then deliver the opposite. In this case, the Chancellor promised before the election that he had no need to raise taxes, but then he raised this tax, which will have an impact on households throughout the UK and on their usage of insurance. The increase could have a number of negative consequences. Higher insurance premiums may lead to fewer families and individuals purchasing much-needed insurance to protect themselves against everyday problems, which happen much more often in some parts of the country than in others. I am talking about burglary and damage to property and possessions.
The Government must provide more information and analysis of the wider impacts of this tax increase, as well as strategies to prevent the negative consequences that are likely to result from this policy. Labour’s amendment to clause 43 asks the Government to consider the impact of any future increase of the tax.
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The Institute for Fiscal Studies has called for a road map to indicate a long-term strategy for our tax system. The CBI has outlined its concerns about the UK tax system in a letter to the Financial Secretary, stressing the need for Ministers to recognise that
“changes to the tax system that appear innocuous can have wide-ranging effects.”
The CBI also stated that there was a need for “renewed discipline” in tax policy making and that the lack of consultation and notice period for tax changes can cause great uncertainty for businesses. None the less, the Government continue to increase and lower taxes for short-term policy goals. Labour believes that we need to consider how to reform our tax system so that people and businesses are taxed efficiently and fairly.
As I have outlined, there are particular concerns about this and any future potential rise in insurance premium tax because of the impact it might have on the price of insurance policies and the take-up of insurance by families and individuals. With that in mind, will the Minister comment on the potential for any further increases in the insurance premium tax during this Parliament, given the comment of her colleague in the Lords that the tax is an easy target?
Labour’s amendment will ensure that the impact of any future increase is properly considered by the Government. It will ensure that there are careful deliberations—much more careful than we have seen on this occasion—on the short and long-term consequences of any further increase in the insurance premium tax and its effect on families and business. I ask Members on both sides of the Committee to support our amendment tonight.
John Redwood: : I remind the Committee that I advise an industrial and an investment company and the details are set out in the register.
I found it interesting to listen to the hon. Member for Worsley and Eccles South (Barbara Keeley)speak from the Opposition Front Bench on this important matter. As someone who thinks that taxes are best kept low and that we need to do all we can to maximise the spending power of those we represent, I had a lot of sympathy with much of what she was saying. Of course, there will be people who do not want to pay an increased insurance tax—who does? In particular, some people will find it difficult because it is quite a high tax. I would have found the hon. Lady more convincing had she been able to answer the question in my intervention: if not this, what?
We have just had a passionate debate in this House in which the Opposition, understandably, wanted us to do more for Syrian refugees. That takes money. We are already being very generous with our overseas aid budget, and although we understand their motivation they are not proposing lots of reductions in spending.
Helen Goodman (Bishop Auckland) (Lab): Perhaps the right hon. Gentleman has forgotten that in July we voted against the cut in inheritance tax in the Budget, which would bring in another £1 billion in the final year.
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John Redwood: That is interesting, because one of the difficulties with capital taxes is that they are sensitive to the rate and details of the scheme. The first rule of any tax must be that if it is raised, more revenue must be got from it. One thing that is certainly true of this insurance tax is that although we would rather it was at a lower rate, it is still at a low enough rate that if we raised it we would collect more revenue. I am not sure that that is true of the inheritance tax system, and the hon. Lady must understand that quite a lot of her constituents are not very happy about the current regime and are looking for changes.
Helen Goodman: The right hon. Gentleman is talking through his hat. In my constituency last year, not one property sold for £650,000 and the Government are raising the threshold to £1 million. It certainly will not affect any of my constituents.
John Redwood: The hon. Lady might well find that some of her constituents have aspirations and could be successful; I am surprised that she is so negative about them. Many people in all parts of the country welcome the idea. In 10 or 20 years’ time, if there is a death in the family and assets pass, they would be grateful not to have that limit. It was a good effort and I accept that the hon. Lady came up with the least bad of the Labour attitudes. Everything else that Labour wants to do involves either spending more money or increasing tax rates, which will reduce the revenue.
Barbara Keeley: The right hon. Gentleman should be directing his question to the Chancellor, because, as I said, it was the Chancellor who said that
“tax increases are not required to achieve
“this can be achieved with spending reductions”
The right hon. Gentleman ought to be asking the Government and his right hon. Friend the Chancellor his question rather than the Opposition, because the promise to the electorate—this is the important thing—was that there would be no tax increases, yet here we are soon after the Budget with a tax increase that will hit many millions of households and bring in £8 billion.
5.15 pm
John Redwood: But I support the Government on that. I think that they are right to want to make more progress in bringing down the deficit—I am not sure whether the hon. Lady agrees. I also think that they are absolutely right to honour the very important promise they and I made to our electors not to increase income tax or VAT. Better still, we must honour our pledge to get income tax down, particularly for people on lower incomes, by raising the threshold. I also wish to see reductions in income tax at the 40% level, which affects many of my constituents and those who aspire to better jobs and pay, which we hope our economic recovery will deliver to many more people. We are honouring our pledge not to increase income tax rates, but to make the cuts we specified over the five-year period, and we are honouring our pledge on VAT.
Barbara Keeley:
There seems to be a very selective honouring of pledges going on. The pledge not to increase taxes is not being met, because £8 billion is
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being taken. The other thing that I am very concerned about is the Government’s decision to ditch the pledge to cap social care costs. It is one thing to allow people with properties worth £1 million not to pay inheritance tax, but it is quite another when people up and down the country will be hit by the dropping of the pledge to cap care costs. Perhaps the right hon. Gentleman would like to comment on that, because I am sure that it affects his constituents just as it affects mine.
John Redwood: I think that we are now going rather wide of the amendment and the clause that we are meant to be debating. I wish to see a generous care system that is properly controlled and disciplined. If the hon. Lady has individual cases where people will be adversely affected unreasonably, I am sure that Ministers will be willing to look at them. The last thing I wish to see is unreasonable cuts affecting people who really need the money, but I also wish to see more work done—this is what the Government are doing—to promote the abilities of many people, including those she suggests are disabled, because many people have many abilities. This Government are about encouraging those abilities, helping people to do more for themselves and, where possible, to get into work so that they can lead more rewarding lives, and so that they can receive pay in addition to the benefit assistance for which they currently qualify. There is a complete policy there to promote better lives for everyone in society, and cutting income taxes is an important part of that, and promoting abilities and opportunities is another.
George Kerevan (East Lothian) (SNP): Does the right hon. Gentleman not recognise that there is a moral hazard to a degree in taxing insurance? There is a moral hazard that we recognise through the fact that 80% of activity in the insurance business is not taxed. Therefore, if we are increasing the tax burden on that 20% simply to raise revenue, it might be worth coming back and looking at the consequences.
John Redwood: That is very good advice, and that is exactly what this Committee is trying to do by highlighting the issue in a short but thorough debate.
I will now make some progress on the specific matters relating to insurance tax. It passes my first test, which is that if we have to increase a tax rate we must ensure that we get more revenue from it. It passes that test because the starting rate is sufficiently low, and the forecasts indicate that we will see a substantial increase in revenue as a result of the change.
The second question is what is its distributional effect. The hon. Member for Worsley and Eccles South understandably made much of the cases that are the hardest, but overall I would imagine—the Minister may have some figures—that people who are better off will pay more of this tax than people who are not so well off, because a lot of it is insuring property and asset and businesses, and it will be the people with the most substantial assets and businesses who will pay rather more of that tax. It therefore meets a general test of fairness in the sense that it is progressive.
My one nervousness about that—I look forward to the Minister’s response on this—is over the issue of the young driver, which the hon. Member for Worsley and Eccles South raised. I think that we need to ensure that we have a very supportive package for young people
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generally, because they are finding it difficult to price themselves into housing, and they do not always get the rates of pay at the beginning of their careers that we would like to see them enjoy. It is very important that we keep cutting the income taxes at the lower end of income, especially for them, because they really need to keep everything they earn if their starting pay is not very good.
The biggest problem for the young driver, particularly the young male driver, is that the starting prices for insurance can be exceptionally high. Indeed, it is sometimes difficult for the very young male driver to get insured at all. We have to ask ourselves why that is. The main reason, of course, is that the young driver is perceived to be a bad risk by the insurance company. There is some evidence that the younger driver may, on average, have a worse record than the older driver, and that is why the premiums can be particularly high on younger people.
Perhaps the Government can help rather more, through and with the industry, to tackle the main problem, which is not the tax on the premium but the initial height of the premium. Some good work has been done in the industry to provide methods of reassurance that the young person will drive well and safely by means of technology in the car that monitors them, at their own request and with their agreement. That may be the price of their getting the lower premium. We need to look at how technology and support for good driving can be reinforced so that a young person is more readily insurable at a realistic price. Of course, if the young person behaved recklessly, that would become obvious and the arrangements would have to be changed, but there are ways in which this can be done.
Barbara Keeley: It is not a question of technology changes. This £50 increase, at least, in the duty paid on the very high premiums that the right hon. Gentleman is talking about will prevent young people—presumably young men, more than young women—from getting to the point where they can start to gain experience. The age at which people will be able to be insured will advance and advance so that they will be unable to get started. That is the issue. It is not a question of technology but of making insurance affordable, and this makes it worse.
John Redwood: I am trying to deal with the underlying reason why it can be very difficult for young men, in particular, to afford insurance. The big problem is not the increment on top of the current insurance tax or the bigger increment resulting from this Bill; it is the starting level of the premium. People are working on ways in which we may be able to address that.
If the young person can accept a system that will reassure the insurer that they are going to drive sedately, prudently and safely, then the reason for charging them more disappears. By accepting the constraints of the technology, they can demonstrate that they are driving safely. That reinforces their cheaper premium and they can start to earn the bonuses that the rest of us enjoy if we have driven safely for a long period and then get discounts on the insurance costs. It is getting started that is so difficult for young males, in particular, when they are all judged by the average standards of high claims that the industry experiences. I hope that the Minister and her colleagues in Departments more directly
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related to the insurance industry will look at this problem. It is not caused primarily by the tax system but by assessment of risk and perceptions of driving behaviour. It can be very unfair on individuals, and the more that can be done to smooth that out, the better.
I do not like tax rises. Part of the reason I am in Parliament is that I want to be a voice to try to keep taxes down and have a more prosperous society as a result. I cannot say that I welcome this part of the Finance Bill, but as someone who believes that there are important public items that we cannot cut, and faced as we are with Opposition parties that very rarely come forward with any proposals to save public money, we have to raise a reasonable amount of money. We have been borrowing too much, and this is part of a series of measures to try to get our borrowing under some kind of control. With regret, I conclude with the Government that this is one of the least bad options for trying to do that. I hope that they will take on board the need to work away at some solutions to the underlying problem of individual categories such as young drivers who may find this to be another increment on top of a difficult situation.
Diana Johnson: I want to speak briefly to amendment 1, tabled by my hon. Friend the Member for Worsley and Eccles South (Barbara Keeley). It centres on the need to review within three months the impact of clause 43 on the charges for and take up of insurance policies. As I said in my intervention on my hon. Friend, the proposal relates directly to those properties that are not part of the Flood Re scheme.
I want to address this issue because of its effect on Kingswood in my constituency. Hull was one of the most successful areas in the country for the previous Government’s Help to Buy scheme. I welcome that. Obviously it is important that people are assisted in buying their own homes and properties. The problem, however, is that more than 95% of the city of Hull is below sea level and it has been prone to flooding in the past. In 2007 we had very bad surface water flooding, so insurance companies look at what has happened in Hull and fix their premiums accordingly.
The Flood Re scheme has assisted in the past and we now have the new Flood Re scheme. The problem, however, is that it does not apply to properties built after 2009. Those young people and first-time buyers who have bought properties in Kingswood over the past few years are not able to access the Flood Re scheme, so they have to go to the open market for house insurance. I am concerned that those people, who are trying to do the right thing and buy house insurance, may find themselves being doubly penalised, because not only are they not entitled to the Flood Re protection, but they will have to pay this increase in insurance tax.
Sue Hayman (Workington) (Lab): I am interested to hear what my hon. Friend has to say about the Flood Re scheme. Cockermouth and Workington in my constituency have suffered very badly from floods. Does she agree that it is also a problem that businesses are not covered by Flood Re and thereby fall short?
Diana Johnson:
Yes. There are many welcome things in the Flood Re scheme, but, if I recall my reading on it correctly, it does not cover small businesses operated by
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people from home. I do not want to go too far down the road of Flood Re, because clause 43 relates to insurance tax.
I welcome the Labour Front Benchers’ proposal and I hope the Minister will be willing to consider a review. I do not agree with everything the right hon. Member for Wokingham (John Redwood) said. The properties I am talking about are small starter homes. These people do not earn a lot of money. They do not have big properties or an income that would allow them to pay sizeable premiums for a property. They are struggling and are often on the minimum wage. They have bought their properties, but every penny counts and I am worried that they will not be able to afford to pay not only a hike in premiums because they are not in the Flood Re scheme, but an additional increase in tax.
Mr Mak: The cost of home contents insurance has fallen across the country by about 8% since last year. Does the hon. Lady agree that, as a result, clause 43 will have a limited effect on those sorts of costs and that it strikes a fair balance between raising revenue and maintaining a competitive insurance market?
Diana Johnson: Unfortunately that is not the experience of many of my constituents in Hull. Every year lots of people contact me when their premiums are up for renewal, because they have such difficulty in getting affordable insurance. I stress that that is particularly the case for those who are not in the Flood Re scheme, which offers some protection at premium levels. I am concerned about those who are not part of the scheme and are in small properties and do not earn very much—as I have said, every penny counts. There should be a review so that those people, who generally will do the right thing and pay for insurance, do not find themselves unable to afford to do the right thing in the future. I hope the Minister will take on board what my hon. Friend the Member for Worsley and Eccles South has said.
5.30 pm
Chris Philp: I thank the hon. Member for Worsley and Eccles South (Barbara Keeley) for raising the significant issue of fuel duty, which affects all our constituents. It is, however, important to recall the context in which that taxation arises, which is the need to close what is still a very large deficit. Where opportunities exist to adjust taxation sensibly, it is prudent to do so.
My hon. Friend the Member for Havant (Mr Mak) mentioned the context a few moments ago. Home insurance premiums have reduced by 8% year on year during the past year, and car insurance premiums have reduced by about 10% during the past three years. Those reductions more than offset this relatively modest tax increase. I share the distaste of my right hon. Friend the Member for Wokingham (John Redwood) for tax increases, but I understand how, in these times of financial difficulty and given the need for deficit reduction, difficult choices have to be made, and I fear that this is one of those difficult choices.
I want to expand on my intervention about the effect of the fuel duty escalator. One of the most significant areas of insurance premium taxation is that of motor vehicles. The suspension of the fuel duty escalator has had a really quite impressive effect on the cost of
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motoring. The hon. Member for Worsley and Eccles South mentioned an estimate that the insurance premium tax increase would add about 2p to a litre of fuel. I have done some rough calculations on my iPhone during the debate, and I estimate that the saving delivered by the freeze in the fuel duty escalator in 2011 has saved approximately 12p per litre. Taken together, the effect of this Government’s policies on the cost of motoring is a net saving of 10p per litre, which I very strongly welcome.
I want to say more about an opportunity to do more to combat the cost of insurance premiums. I have personal experience of the very widespread practice of making fraudulent claims, particularly for personal injury. I will mention some statistics in a moment, but I will first talk about my personal experience.
A year or two ago, my wife and I were involved in a very minor traffic collision: the car got a bit of a bump and the bumper had to be replaced, but it was nothing more serious than that. A claims management company based in the north of England somehow got hold of my mobile phone number. I have no idea how it did so—from the breakdown recovery company, the insurance company or the police—but weekly for at least a year after the accident, I was called by an extremely pushy and aggressive salesperson. Essentially, they incited me to commit fraud. No matter how often I explained that I, my wife and my young twins had suffered no injury, they insisted that I must have suffered an injury such as a bad back or an aching neck and that I had a claim that could be settled at the insurance company’s expense. They repeatedly and persistently incited me to commit fraud.
The figures show that that is not an isolated example. Aviva is currently investigating 5,500 claims of personal injury fraud. Such fraud has increased 20% year on year. Personal injury claims have increased by 50% since 2007, despite the fact that the number of road traffic collisions has fallen during that period. In this country, personal injury claims make up 35% of insurance pay-outs; in Germany, it is only 4%. Aviva estimates that those claims add £50 to each and every insurance premium paid in this country, which is significantly more than the tax increase we are debating. It is estimated that one in nine personal injury claims is fraudulent.
We have an opportunity to do more to stamp out such fraud and to reduce the cost of insurance premiums, as hon. Members on both sides of the House have mentioned. I believe that there is a case for simply banning outright outbound phone calls by ambulance-chasing law firms. We should just make it illegal for them to call people to incite fraudulent claims. I would certainly be very happy to vote for legislation to outlaw such a practice. If anyone has a genuine claim, they can find a law firm’s number in the “Yellow Pages” or on Google; people do not need to be phoned in this way. I urge both Government and Opposition Front Benchers to take my proposal very seriously.
Michelle Thomson (Edinburgh West) (SNP): I will do something that feels slightly unusual and address my brief remarks to clause 43.
We know that there is a planned increase from 6% to 9.5%—an increase of 58%—but let us not forget that that also applies to administration costs. Throughout the debate, the figures have been evaluated and we have realised that the increase to house contents cover will affect about 20 million people. The people who are
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likely to move more frequently are those who are not owner-occupiers. Of course, that plugs into the argument, which has already been proven, that lower income groups pay more. The so-called poverty premium, which was explained by Donald Hirsch and backed up by the Joseph Rowntree Foundation, is therefore valid in this instance.
The Government state that the tax applies to only one fifth of all premiums, but that is the wrong measure. We should be concerned about the distribution of those premiums. Young drivers aged 21 to 29 make up 14% of the driving population, but 34% of uninsured drivers. Perhaps Adrian Smith of KPMG called it correctly when he noted wryly:
“All I can guess is that there were so many taxes David Cameron ruled out increasing that there weren’t so many left”.
If the driver for this proposal is an increase in tax-take, it should be noted that the rise in January 2011 actually saw a fall in tax receipts of 1.3% between 2011 and 2015. Despite that, the Government suggest that receipts are expected to grow by 1.9% year on year between 2015-16 and 2020-21. I wish I shared their confidence. It may be that higher income groups will drop their health insurance, which is included in their P11D liability. That would, of course, put more pressure on the NHS.
Although the tax is levied on companies, I believe that it will inevitably be passed to consumers. It seems somewhat anti-business that the insurance industry, having done the right thing in making determined attempts to reduce fraud and passing the savings on to consumers, is rewarded with such a significant tax rise over such a short timescale. Let us not forget that businesses will also be affected by the application of the increase to corporate premiums. My worry is that that will disproportionately affect small businesses, which continue to struggle with a range of factors in the current operating environment.
Ultimately, if insurance is about protection and the negation of risk, why should it be more expensive for those who have the most to lose—in other words, the lower income groups?
The Economic Secretary to the Treasury (Harriett Baldwin): In responding to the debate, I hope to touch on many of the questions that have been raised by hon. Members.
Clause 43 increases the standard rate of insurance premium tax to 9.5%. The policy will increase the revenue raised from the tax and help to close the deficit.
Before I turn to the amendment, I will cover some of the points that have been mentioned. I confirm that the insurance charge includes the gross premium that the insurer chargers, including the broker commission and any other directly related costs. It is a charge on the insurer rather than on the individual. It is due on general insurance, which accounts for approximately one fifth of insurance premiums. As we have heard, it includes motor insurance, home insurance, employers liability insurance and medical insurance.
Some 80% of the insurance market is exempt, including reinsurance, long-term insurance such as life insurance and permanent health insurance, and the permanent health insurance that is used to pay for critical illness insurance.
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Travel insurance and insurance that people purchase on warranties with, for example, white goods, is already charged at the considerably higher rate of 20% to prevent VAT avoidance. That, too, is unaffected by the change. It is important to remember that there is no VAT overall on insurance.
The new rate for the taxable insurance premiums will begin to apply with effect from 1 November 2015. In the tax year 2016-17, it will raise an extra £1.4 billion, which can be used to reduce the deficit. If insurers pass on the increase, it will affect businesses and households, particularly by increasing the cost of their property and motor insurance. However, we expect that any impact on consumers will be modest. Most households and businesses have some form of general insurance and any impact of a rate rise is therefore shared by a large number of people and organisations, as we have heard. To give some idea of what that means, if insurers chose to pass on the whole increase, the average household expenditure on insurance would increase by 70p per week.
We do not anticipate that the tax increase will reduce the number of people taking out general insurance. Even if insurers choose to pass on the increase, any increased costs will be a very small proportion of the overall cost of insurance. As the insurance market is competitive, customers affected by the change can shop around to find a policy that best fits their needs.
Barbara Keeley: I hope the Minister will address the point I made about the impact of insurance costs on unemployed people. I quoted BBC research, but work done for MoneySavingExpert.com found that there is an enormous differential when people lose their jobs. In one case, insurance for an office manager to insure her vehicle went from £359 a year to £1,034. It is all right to talk about averages of £10 here or £12 there, or even £50 for young people, but insurance premiums can be disproportionately increased by unemployment. That point was made in the social media debate on the Budget, and that is one reason why I have taken it seriously. The increase is unfair, because it hits people straight away when they become unemployed. We must start to reflect on that.
Harriett Baldwin: I will come to the distributional points raised by questions from hon. Members but, with the greatest respect, the situation the hon. Lady describes would be unaffected by the changes the Government propose this afternoon.
We heard from my hon. Friend the Member for Croydon South (Chris Philp) that the increase must be seen in the context of significant Government action to reduce costs for the insurance industry and for motorists. We are taking a lot of action to reduce insurance fraud. According to the Association of British Insurers, insurance fraud alone adds an average of £50 a year to average household insurance costs. Our previous action to reduce the cost of fraudulent claims includes a ban on referral fees in personal injury cases and reform of the regulation of whiplash claims. Those actions have been welcomed by both industry and consumer groups. The insurance fraud taskforce is due to report at the end of the year with suggestions on how further to reduce the cost of insurance fraud.
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In the summer Budget 2015, my right hon. Friend the Chancellor announced a further consultation to establish how to introduce a cap on fees charged by claims management companies, and a fundamental review of the regulation of claims management companies, which is due to report in 2016. I note with interest the point my hon. Friend the Member for Croydon South made about banning outbound calls. More generally, the Financial Conduct Authority is working on how to encourage people to shop around for insurance, which will ensure that people find the best deal for their circumstances and that the market remains competitive.
The Government have been working hard with the insurance industry to develop the Flood Re scheme, which will continue to allow insurers to offer affordable home insurance. The hon. Member for Kingston upon Hull North (Diana Johnson) and I both have constituencies where there are a lot of flood-prone properties—I pay close interest to the topic. Of course, properties built after 2009 will be exempt from the scheme because we do not want to incentivise builders to build in flood-prone areas.
Diana Johnson: I fully accept that; in fact, I think it is absolutely right. The problem for me and my constituents is that 90% of the city of Hull is below sea level. Anything that is built will, by definition, be on a flood plain. A bit more thought has to be given for areas of the country. It is not just Hull; other low-lying areas will find themselves in this difficulty.
5.45 pm
Harriett Baldwin: The hon. Lady makes a very good point. She and I come across the same sorts of issues in our casework, and a lot of London is built on a flood plain. In some cases, I have had to work with specialist insurance broking to find a broker service. The British Insurance Brokers’ Association is very useful in that regard. I am sure she and I will continue to pay close heed to how the Flood Re scheme is delivering for our constituents.
A number of hon. Members raised the issue of motor insurance, particularly for young people. My right hon. Friend the Member for Wokingham (John Redwood) asked whether technology could help young people with the costs of their insurance. Young people can currently take the opportunity to install a telematic device. Many insurers will reduce the cost of motor insurance in those situations.
I am able to reassure hon. Members on the impact on young drivers’ insurance premiums. Young drivers pay a much higher premium at the moment, but the overall cost impact of this change for young drivers in their 20s is estimated to be 25 pence a week and the overall impact for a driver aged 17 or 18 about £1 a week. Obviously, all tax increases are unwelcome, but this needs to be set against the fact that drivers are currently saving about £9 every time they fill up their vehicles.
Barbara Keeley: The figures I was given from the industry were that the increase in duty alone on the average premium paid by a young driver would be from £90 to £142.50. That is not 50p or 25p a week; that is £1 a week. Various points have been made about fuel duty, but this is a tax that has to be paid. This is a very serious increase for young people who are being hit in the other ways that I outlined.
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Harriett Baldwin: The hon. Lady and I can duel with statistics all afternoon, but I wanted to point out that it was the 17 and 18-year-olds who pay a substantial amount more than those in their 20s. I think she is probably quoting statistics relating to 17 to 25-year-olds. Nevertheless, the changes need to be seen in the context of the amount that young drivers are saving and the opportunities they may have from using a telematic device to measure their driving performance.
Finally, I want to say a word about implementation. We recognise that the insurance industry needs notice to effect the changes. We have tried to ensure a smooth implementation of the new rate by following the approach agreed by industry representatives and HMRC back in 1995. That sets out transitional arrangements required by the insurance industry to account for the tax at the new rate. The rate, as we said, comes into effect on 1 November, which provides a period of nearly four months from the date the measure was announced. There is a further four-month statutory concessionary period for insurers who have elected to account for the tax using a special accounting scheme. In simple terms, the concessionary period ensures that premiums for policies beginning before 1 November will be taxed at the current rate effectively until 1 March 2016.
That leads me to the Opposition’s amendment, which proposes that a report be produced on the impact of the change in the standard rate of insurance premium tax as soon as three months from the enactment of the Finance Bill. It calls for the report to be undertaken very soon at a time when the impact of the rate will have hardly begun. That is why we will not agree to the amendment this afternoon and encourage the hon. Lady to withdraw it.
The impact of any increase in the rate of insurance premium tax will depend on whether insurers change their prices to pass on the increase. As I have said, it is a tax on insurers, not customers, and we are aware of at least one insurer—we heard earlier of another example—that has pledged to absorb the cost of the increase for at least one year. We think this is partly because insurers have benefited, and will continue to benefit, from the reductions in corporation tax announced in the Budget. Any such benefit might encourage more of them not to pass on this additional cost.
We have investigated what the overall distributional impact would be if all insurers passed on the entire rate rise. If the entire rate rise of 3.5 percentage points were passed on, households in the top income decile would pay just over £1 a week more for their insurance, while the additional costs for those in the bottom income decile would be less than 40p a week. We calculate that almost two thirds of the overall distributional impact will fall in the top half of the income distribution.
Suella Fernandes (Fareham) (Con): Does my hon. Friend agree that this slim and modest tax rise should be viewed in the context of the falling cost of home insurance and comprehensive car insurance and our commitment not to increase VAT, national insurance or income tax? Overall, will not these policies benefit householders and families?
Harriett Baldwin:
My hon. Friend is right to point out the overall context; this measure should not be seen in isolation. The cost to businesses was mentioned earlier. I am sure that Members will welcome the fact that,
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according to the British Insurance Brokers’ Association, the overall cost of insuring a commercial vehicle has fallen by more than 13% in the past 12 months alone.
I hope that I have answered hon. Members’ questions, particularly those about young drivers and household flood insurance. In particular, I want to support the points my hon. Friend the Member for Croydon South made about personal injury claims management.
In drawing my remarks to a close, I must stress that most households will see very little impact from the increase in the standard rate of insurance premium tax. It will remain at a low rate compared with many other countries and will certainly not make the UK a less attractive place to do business. I therefore ask that clause 43 stand part of the Bill and request that amendment 1, tabled by Opposition Members, be withdrawn.
Barbara Keeley: I do not propose to withdraw the amendment. The reason for it is the lack of a full analysis of where the impact of the increase will be felt and the groups that will be most affected. I have been quite disturbed by the complacent attitude of some Government Members, including the Minister. I have quoted many senior industry figures on the impact on their business and industry and the strength of their feelings about this tax, which they have called a stealth tax. I will quote some additional comments. Janet Connor, managing director of AA Insurance, said:
“That premiums have been falling seems to be the Chancellor’s justification for the tax increase but he is wrong. His timing couldn’t have been worse; not only are premiums starting to rise but the tax can only lead to even greater premium increases than could otherwise be expected over coming months.”
“There is no justification for this underhand and unfair tax increase.”
I have quoted various insurance organisations, but the ABI said:
“UK drivers benefit from one of the most competitive motor insurance markets in the world. But with pressure on claims costs”,
which some Government Members have recognised,
“and an increase in insurance premium tax adding an additional £12.80 to the cost of the average policy…other factors are starting to put up costs.”
The key thing is that a range of factors are in play, despite our having had a successful couple of years, which has reduced premiums and rates. I hope Ministers will not continue to be complacent about the cost of premiums for young drivers and the danger of under-insurance or no insurance.
Graeme Trudgill, the executive director of the British Insurance Brokers Association, has said:
“Insurance has been seen as a special case in terms of taxation as it is a social good”.
Ministers seem to be ignoring the fact that it is a special case, in that it is a social good. We must take that into account.
Suella Fernandes: Will the hon. Lady give way?
Barbara Keeley: No, I will not.
“Young drivers are the most over-represented age group for uninsured driving and increasing the cost of their motor insurance further is likely to increase the level of uninsured driving, which we are aware has now started to deteriorate.
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The increase completely undermines the constructive work that the industry and government have done in the past few years to tackle fraud—particularly with regard to whiplash claims—which previously saw premiums soar.”
Ministers and Government Members should be clear that what they are doing is hitting the industry at a point when premiums have started to go in the wrong direction and the good work that has been done could be undermined.
I want to leave Government Members with a couple of other points about this amendment. The AA calculates that uninsured drivers cost the insurance industry around £380 million a year and add £33 to cost of every motor insurance policy. Finally, the Motor Insurers Bureau reports that 2.8% of UK motorists—and about 1 million vehicles on the road—are estimated to be driving without insurance. That is the risk that the Minister is taking.
Question put, That the amendment be made.
The Committee divided:
Ayes 269, Noes 308.
Division No. 62]
[
5.56 pm
AYES
Abbott, Ms Diane
Abrahams, Debbie
Ahmed-Sheikh, Ms Tasmina
Ali, Rushanara
Allen, Mr Graham
Anderson, Mr David
Arkless, Richard
Austin, Ian
Bailey, Mr Adrian
Bardell, Hannah
Barron, rh Kevin
Beckett, rh Margaret
Benn, rh Hilary
Berger, Luciana
Betts, Mr Clive
Blackford, Ian
Blackman, Kirsty
Blackman-Woods, Dr Roberta
Blenkinsop, Tom
Blomfield, Paul
Boswell, Philip
Bradshaw, rh Mr Ben
Brake, rh Tom
Brennan, Kevin
Brock, Deidre
Brown, Alan
Brown, Lyn
Buck, Ms Karen
Burden, Richard
Burgon, Richard
Byrne, rh Liam
Cadbury, Ruth
Cameron, Dr Lisa
Campbell, rh Mr Alan
Campbell, Mr Ronnie
Carmichael, rh Mr Alistair
Champion, Sarah
Chapman, Douglas
Chapman, Jenny
Cherry, Joanna
Clwyd, rh Ann
Coaker, Vernon
Coffey, Ann
Cooper, Julie
Cooper, Rosie
Cowan, Ronnie
Cox, Jo
Coyle, Neil
Crausby, Mr David
Crawley, Angela
Creasy, Stella
Cryer, John
Cummins, Judith
Cunningham, Alex
Cunningham, Mr Jim
Dakin, Nic
Danczuk, Simon
David, Wayne
Davies, Geraint
De Piero, Gloria
Docherty, Martin John
Dodds, rh Mr Nigel
Donaldson, rh Mr Jeffrey M.
Donaldson, Stuart
Doughty, Stephen
Dowd, Jim
Dowd, Peter
Dromey, Jack
Durkan, Mark
Eagle, Ms Angela
Eagle, Maria
Edwards, Jonathan
Efford, Clive
Elliott, Julie
Elliott, Tom
Esterson, Bill
Evans, Chris
Farrelly, Paul
Farron, Tim
Fellows, Marion
Ferrier, Margaret
Fitzpatrick, Jim
Fletcher, Colleen
Flint, rh Caroline
Flynn, Paul
Fovargue, Yvonne
Foxcroft, Vicky
Gapes, Mike
Gethins, Stephen
Gibson, Patricia
Glass, Pat
Glindon, Mary
Godsiff, Mr Roger
Goodman, Helen
Grady, Patrick
Grant, Peter
Gray, Neil
Green, Kate
Greenwood, Lilian
Greenwood, Margaret
Haigh, Louise
Hamilton, Fabian
Hanson, rh Mr David
Harman, rh Ms Harriet
Harpham, Harry
Harris, Carolyn
Hayes, Helen
Hayman, Sue
Healey, rh John
Hendrick, Mr Mark
Hendry, Drew
Hepburn, Mr Stephen
Hermon, Lady
Hillier, Meg
Hodge, rh Dame Margaret
Hodgson, Mrs Sharon
Hoey, Kate
Hollern, Kate
Hopkins, Kelvin
Hosie, Stewart
Hunt, Tristram
Huq, Dr Rupa
Hussain, Imran
Irranca-Davies, Huw
Jarvis, Dan
Johnson, Diana
Jones, Gerald
Jones, Graham
Jones, Helen
Jones, Mr Kevan
Kane, Mike
Kaufman, rh Sir Gerald
Keeley, Barbara
Kendall, Liz
Kerevan, George
Kinahan, Danny
Kinnock, Stephen
Kyle, Peter
Lamb, rh Norman
Lavery, Ian
Law, Chris
Leslie, Chris
Lewell-Buck, Mrs Emma
Lewis, Clive
Long Bailey, Rebecca
Lucas, Caroline
Lucas, Ian C.
Lynch, Holly
MacNeil, Mr Angus Brendan
Mactaggart, rh Fiona
Madders, Justin
Mahmood, Mr Khalid
Mahmood, Shabana
Malhotra, Seema
Mann, John
Marris, Rob
Marsden, Mr Gordon
Maskell, Rachael
Matheson, Christian
Mc Nally, John
McCarthy, Kerry
McDonagh, Siobhain
McDonald, Andy
McDonald, Stewart
McDonald, Stuart C.
McDonnell, John
McFadden, rh Mr Pat
McGarry, Natalie
McGinn, Conor
McGovern, Alison
McInnes, Liz
McLaughlin, Anne
Meale, Sir Alan
Mearns, Ian
Miliband, rh Edward
Monaghan, Carol
Monaghan, Dr Paul
Moon, Mrs Madeleine
Morden, Jessica
Morris, Grahame M.
Mulholland, Greg
Mullin, Roger
Murray, Ian
Newlands, Gavin
Nicolson, John
O'Hara, Brendan
Onn, Melanie
Onwurah, Chi
Osamor, Kate
Oswald, Kirsten
Owen, Albert
Paterson, Steven
Pearce, Teresa
Pennycook, Matthew
Phillips, Jess
Phillipson, Bridget
Pound, Stephen
Powell, Lucy
Pugh, John
Qureshi, Yasmin
Rayner, Angela
Reed, Mr Jamie
Reed, Mr Steve
Rees, Christina
Reynolds, Emma
Reynolds, Jonathan
Rimmer, Marie
Ritchie, Ms Margaret
Robertson, Angus
Robinson, Gavin
Robinson, Mr Geoffrey
Salmond, rh Alex
Saville Roberts, Liz
Shannon, Jim
Sharma, Mr Virendra
Sheerman, Mr Barry
Sheppard, Tommy
Sherriff, Paula
Shuker, Mr Gavin
Simpson, David
Skinner, Mr Dennis
Slaughter, Andy
Smeeth, Ruth
Smith, rh Mr Andrew
Smith, Angela
Smith, Cat
Smith, Jeff
Smith, Nick
Smith, Owen
Smyth, Karin
Spellar, rh Mr John
Starmer, Keir
Stephens, Chris
Stevens, Jo
Streeting, Wes
Stringer, Graham
Stuart, Ms Gisela
Tami, Mark
Thewliss, Alison
Thomas, Mr Gareth
Thomas-Symonds, Nick
Thompson, Owen
Thomson, Michelle
Timms, rh Stephen
Trickett, Jon
Turley, Anna
Turner, Karl
Twigg, Derek
Twigg, Stephen
Umunna, Mr Chuka
Vaz, rh Keith
Vaz, Valerie
Watson, Mr Tom
Weir, Mike
West, Catherine
Whiteford, Dr Eilidh
Whitehead, Dr Alan
Whitford, Dr Philippa
Williams, Hywel
Williams, Mr Mark
Wilson, Corri
Wilson, Phil
Wilson, Sammy
Winnick, Mr David
Winterton, rh Ms Rosie
Wishart, Pete
Woodcock, John
Wright, Mr Iain
Zeichner, Daniel
Tellers for the Ayes:
Heidi Alexander
and
Susan Elan Jones
NOES
Adams, Nigel
Afriyie, Adam
Aldous, Peter
Allan, Lucy
Allen, Heidi
Amess, Sir David
Andrew, Stuart
Ansell, Caroline
Argar, Edward
Atkins, Victoria
Bacon, Mr Richard
Baker, Mr Steve
Baldwin, Harriett
Barwell, Gavin
Bebb, Guto
Bellingham, Mr Henry
Benyon, Richard
Beresford, Sir Paul
Berry, Jake
Berry, James
Bingham, Andrew
Blackman, Bob
Blackwood, Nicola
Blunt, Crispin
Boles, Nick
Bone, Mr Peter
Borwick, Victoria
Bottomley, Sir Peter
Bradley, Karen
Brady, Mr Graham
Brazier, Mr Julian
Bridgen, Andrew
Brine, Steve
Brokenshire, rh James
Bruce, Fiona
Buckland, Robert
Burns, Conor
Burns, rh Sir Simon
Burrowes, Mr David
Burt, rh Alistair
Cairns, Alun
Carmichael, Neil
Cartlidge, James
Cash, Sir William
Caulfield, Maria
Chalk, Alex
Chishti, Rehman
Chope, Mr Christopher
Churchill, Jo
Clark, rh Greg
Clarke, rh Mr Kenneth
Cleverly, James
Clifton-Brown, Geoffrey
Coffey, Dr Thérèse
Collins, Damian
Colvile, Oliver
Costa, Alberto
Crabb, rh Stephen
Crouch, Tracey
Davies, Byron
Davies, Chris
Davies, David T. C.
Davies, Glyn
Davies, Dr James
Davies, Mims
Davies, Philip
Davis, rh Mr David
Dinenage, Caroline
Djanogly, Mr Jonathan
Donelan, Michelle
Double, Steve
Dowden, Oliver
Doyle-Price, Jackie
Drummond, Mrs Flick
Duncan, rh Sir Alan
Duncan Smith, rh Mr Iain
Dunne, Mr Philip
Ellis, Michael
Ellison, Jane
Ellwood, Mr Tobias
Elphicke, Charlie
Eustice, George
Evans, Graham
Evans, Mr Nigel
Evennett, rh Mr David
Fabricant, Michael
Fallon, rh Michael
Fernandes, Suella
Field, rh Mark
Foster, Kevin
Francois, rh Mr Mark
Frazer, Lucy
Freeman, George
Freer, Mike
Fuller, Richard
Garnier, rh Sir Edward
Garnier, Mark
Gauke, Mr David
Ghani, Nusrat
Gibb, Mr Nick
Gillan, rh Mrs Cheryl
Glen, John
Goldsmith, Zac
Gove, rh Michael
Graham, Richard
Grant, Mrs Helen
Gray, Mr James
Grayling, rh Chris
Green, Chris
Green, rh Damian
Greening, rh Justine
Grieve, rh Mr Dominic
Griffiths, Andrew
Gummer, Ben
Gyimah, Mr Sam
Halfon, rh Robert
Hall, Luke
Hammond, rh Mr Philip
Hammond, Stephen
Hancock, rh Matthew
Hands, rh Greg
Harper, rh Mr Mark
Harrington, Richard
Harris, Rebecca
Hart, Simon
Haselhurst, rh Sir Alan
Heald, Sir Oliver
Heappey, James
Heaton-Harris, Chris
Heaton-Jones, Peter
Henderson, Gordon
Herbert, rh Nick
Hinds, Damian
Hoare, Simon
Hollingbery, George
Hollinrake, Kevin
Hollobone, Mr Philip
Holloway, Mr Adam
Hopkins, Kris
Howarth, Sir Gerald
Howell, John
Howlett, Ben
Huddleston, Nigel
Hunt, rh Mr Jeremy
Hurd, Mr Nick
Jackson, Mr Stewart
James, Margot
Javid, rh Sajid
Jayawardena, Mr Ranil
Jenkin, Mr Bernard
Jenkyns, Andrea
Jenrick, Robert
Johnson, Boris
Johnson, Gareth
Johnson, Joseph
Jones, Andrew
Jones, rh Mr David
Jones, Mr Marcus
Kawczynski, Daniel
Kennedy, Seema
Knight, rh Sir Greg
Knight, Julian
Kwarteng, Kwasi
Lancaster, Mark
Latham, Pauline
Leadsom, Andrea
Lee, Dr Phillip
Lefroy, Jeremy
Leigh, Sir Edward
Leslie, Charlotte
Letwin, rh Mr Oliver
Lewis, Brandon
Lewis, rh Dr Julian
Liddell-Grainger, Mr Ian
Lidington, rh Mr David
Lilley, rh Mr Peter
Lopresti, Jack
Loughton, Tim
Lumley, Karen
Mackinlay, Craig
Mackintosh, David
Main, Mrs Anne
Mak, Mr Alan
Malthouse, Kit
Mann, Scott
Mathias, Dr Tania
May, rh Mrs Theresa
Maynard, Paul
McCartney, Jason
McCartney, Karl
McLoughlin, rh Mr Patrick
McPartland, Stephen
Menzies, Mark
Mercer, Johnny
Merriman, Huw
Metcalfe, Stephen
Miller, rh Mrs Maria
Milling, Amanda
Mills, Nigel
Milton, rh Anne
Mitchell, rh Mr Andrew
Mordaunt, Penny
Morgan, rh Nicky
Morris, Anne Marie
Morris, David
Morris, James
Morton, Wendy
Mowat, David
Mundell, rh David
Murray, Mrs Sheryll
Neill, Robert
Nokes, Caroline
Norman, Jesse
Nuttall, Mr David
Offord, Dr Matthew
Opperman, Guy
Osborne, rh Mr George
Parish, Neil
Patel, rh Priti
Paterson, rh Mr Owen
Pawsey, Mark
Penning, rh Mike
Penrose, John
Percy, Andrew
Phillips, Stephen
Philp, Chris
Pickles, rh Sir Eric
Pincher, Christopher
Poulter, Dr Daniel
Pow, Rebecca
Prentis, Victoria
Prisk, Mr Mark
Pritchard, Mark
Pursglove, Tom
Quin, Jeremy
Quince, Will
Raab, Mr Dominic
Redwood, rh John
Rees-Mogg, Mr Jacob
Robertson, Mr Laurence
Robinson, Mary
Rudd, rh Amber
Rutley, David
Sandbach, Antoinette
Scully, Paul
Selous, Andrew
Shapps, rh Grant
Sharma, Alok
Shelbrooke, Alec
Simpson, rh Mr Keith
Skidmore, Chris
Smith, Chloe
Smith, Henry
Smith, Julian
Smith, Royston
Soames, rh Sir Nicholas
Solloway, Amanda
Soubry, rh Anna
Spelman, rh Mrs Caroline
Spencer, Mark
Stephenson, Andrew
Stevenson, John
Stewart, Bob
Stewart, Iain
Stewart, Rory
Streeter, Mr Gary
Stride, Mel
Stuart, Graham
Sturdy, Julian
Sunak, Rishi
Swayne, rh Mr Desmond
Swire, rh Mr Hugo
Thomas, Derek
Throup, Maggie
Timpson, Edward
Tolhurst, Kelly
Tomlinson, Justin
Tomlinson, Michael
Tracey, Craig
Tredinnick, David
Trevelyan, Mrs Anne-Marie
Truss, rh Elizabeth
Tugendhat, Tom
Turner, Mr Andrew
Tyrie, rh Mr Andrew
Vaizey, Mr Edward
Vara, Mr Shailesh
Vickers, Martin
Walker, Mr Charles
Walker, Mr Robin
Warburton, David
Warman, Matt
Watkinson, Dame Angela
Wharton, James
Whately, Helen
Wheeler, Heather
White, Chris
Whittaker, Craig
Whittingdale, rh Mr John
Wiggin, Bill
Williams, Craig
Williamson, rh Gavin
Wilson, Mr Rob
Wollaston, Dr Sarah
Wood, Mike
Wragg, William
Wright, rh Jeremy
Zahawi, Nadhim
Tellers for the Noes:
Simon Kirby
and
Sarah Newton
Question accordingly negatived.
8 Sep 2015 : Column 316
8 Sep 2015 : Column 317
8 Sep 2015 : Column 318
8 Sep 2015 : Column 319
Clause 43 ordered to stand part of the Bill.
CCL: removal of exemption for electricity from renewable sources
Question proposed, That the clause stand part of the Bill.
The Temporary Chair (Mr George Howarth): With this it will be convenient to discuss new clause 2—Report on the removal of the Climate Change Levy exemption—
“(1) No later than 6 months following the passing of this Act the Chancellor of the Exchequer shall publish a report into the effect of the removal of the Climate Change Levy exemption on renewable energy generators.
(2) That report must include information about:
(a) The effect that the removal of the exemption has had on existing generators
(b) The effect that the removal of the exemption has had on projects which were in the planning process
(c) The cumulative effect on investor confidence in renewable energy of this change in the context of wider government policy on renewable energy; and
(d) The effect of these changes on the United Kingdom’s ability to meet its climate change targets and commitments.”
The Exchequer Secretary to the Treasury (Damian Hinds): Clause 45 ends the exemption—[Interruption.]
The Temporary Chair: Order. Will Members leaving the Chamber please do so quietly?
8 Sep 2015 : Column 320
Damian Hinds: Thank you, Mr Howarth.
Clause 45 ends the exemption from the climate change levy for renewably sourced electricity. The CCL renewables exemption was misaligned with today’s energy policy and represented an inefficient way of supporting renewable electricity generation. In the past 15 years the UK’s renewable energy policy has fundamentally changed. When the renewable electricity exemption was introduced in 2001, renewable generation made up just 2.5% of the UK’s electricity supply; it now makes up around 20%. Since the exemption was introduced, more effective policies have been put in place which support renewable electricity generation directly.
In contrast, the CCL exemption provided indirect support to renewable generators. Together, policies such as the renewables obligation and feed-in tariff will provide over £5 billion-worth of support to renewable generation in this financial year.
Caroline Lucas (Brighton, Pavilion) (Green): How can the Minister possibly justify this measure when the Government’s own impact assessment says that as a result of this measure the UK will be producing over 1 million more tonnes of CO2 every single year?
Damian Hinds: I can absolutely say how we justify this measure. As I have stated, there are now more effective and efficient direct methods of encouraging renewable generation than the CCL exemption. We have also seen a sharp decline in CCL revenue over the last Parliament. The forecasts from the independent Office for Budget Responsibility show that, without change, by 2020 virtually no CCL would have been paid on electricity at all. Removing the exemption helps maintain a price signal through the CCL for all business to use energy more efficiently. In addition, last year a third of its value went to renewable projects based overseas—projects which of course do not contribute to our climate change or international development commitments, making this a poor use of taxpayers’ money.
Clause 45 ends the existing exemption for renewable energy from the CCL. It applies to any renewable electricity generated after 31 July 2015, when it is supplied to businesses or the public sector under a renewable source contract. From 1 August we entered into a transitional period in which suppliers may claim a CCL exemption on any renewable electricity generated before that date. The Government are discussing the details of this transitional period with the affected suppliers, to determine an appropriate length for it. We intend to put the final transitional arrangements in place through legislation in the Finance Bill 2016.
Caroline Lucas: Will the Minister tell me what consultation he had with the solar industry in Britain before announcing the ongoing discussions that are now going to happen?