Two MPs break a barrier and challenges the Government

The recent history of our Parliament is that Jacob Rees-Mogg was not prepared for many months for any MPs or Ministers to participate in debates using video systems at all until Boris Johnson was forced to respond from No 10 Downing Street to make an announcement and also to participate in Prime Ministers Questions. Prior to that point and many months earlier at the end of the first lockdown there was a very short period when the House of Commons was allowed to use technology and indeed when MPs could vote virtually which is a system still taking place in the House of Lords. However following Boris Johnsons requirement to stay at No 10 temporarily things have slowly changed and that is very encouraging. On Monday night at 10.11pm there was a very short debate that took place at the end of the day. The debate that took place involved two MPs and one Minister. The first was Owen Thompson, an SNP MP who is also their whip, the second was Caroline Lucas who is the only Green MP and is also my own MP and the Government Minister was Jesse Norman, the Financial Secretary to the Treasury. The barrier that was broken however was expressed by Nigel Evans, Deputy Speaker at the end of the brief debate. This is clearly a significant response:

We have all had to adapt during the covid pandemic, and tonight may well be a piece of history in that the entirety of a debate has been held in the Chamber of the House of Commons when none of the participants were present. That is quite incredible. I thank the half a dozen people who kept me company for the last half hour, which was amazing. Happy Burns night. I suspect that quite a few drams will be drunk virtually this evening, if not virtually drunk. None the less, happy Burns night everybody.

Question put and agreed to.

House adjourned.

So back to the subject which is intended to challenge the Government. The whole debate is available here. The title is Covid-19: Limited Company Directors and these are some of the points from Owen Thompson:

The reasons for people being excluded have been raised many times in this Chamber, and the case is absolutely clear. How can 10% of the working population simply be dismissed as collateral damage? On what planet does that make sense? We need the excluded, all 3 million of them. They are grafters. They are innovators. They will help to rebuild after the crisis, if we help them now. Instead, they are being ground down by poverty and despair, by a Government who claim to be business friendly.

Tonight the focus is on small limited company directors, but the issue, if not the detail of the solution, applies to all those excluded groups, and I want to emphasise again that no one should be left behind. I note today’s announcement of another proposal by the all-party parliamentary group on gaps in support. The targeted income grant scheme, costed at about £10.5 billion, would provide some support for the newly self-employed, pay-as-you-earn freelancers and taxpayers excluded by the 50:50 rule, as well as limited company directors. I welcome that contribution. After 10 months without any options drafted by the Treasury, it is getting its work done for it by the very people who have been left out, showing just how innovative and determined a group they are. I very much hope that the Treasury will take this proposal seriously and work with the excluded groups to reach solutions, not scramble for excuses to reject them.

About 2 million actively trading limited companies in the UK are micro and small companies. Collectively, they employ 7.5 million people. As the Minister knows, they fall into a separate category from the self-employed and commonly pay themselves a mixture of PAYE and dividends when their company has a profit. Many company directors found themselves unable to furlough because it would prevent them from working, which might mean the demise of the business. Some were actively excluded due to running an annual payroll with an RTI submission date after 19 March. For those who could furlough, the payments were often too low to live on because they are based solely on PAYE earnings. Many firms missed out on grants, particularly if they had no commercial premises, and discretionary grants can be a postcode lottery.

In essence this was the opening part of his concerns and then he later on states:

People are angry, frustrated and in despair, but we are past the time to plead the case. If the Government do not care about the human cost, perhaps warnings of the economic cost will finally cut through. It is the endgame for many businesses, and cleaning up the mess later will be far more costly than providing support now to prevent them from falling off the cliff. There are 7.6 million jobs reliant on those businesses. Many of the directors are surviving only through spiralling mountains of debt. If they go down, there will be no place for staff to go back to when furlough ends. The small-scale entrepreneurs and wealth-makers we need to lift the UK economy will, instead, be left to wither on a shrinking vine, while an unemployment cliff edge approaches.

his comments were followed by Caroline Lucas who stated the following as the bulk of her statement:

The Minister has engaged with me on a number of occasions about support for small limited company directors, and he can be in no doubt about my concerns, but I am pleased to have this opportunity to stress three points to him again. First, I want to check that he, the Chancellor and Treasury officials fully understand that the DISS proposal does not use dividend payments as the basis for calculating a suitable level of income support for directors. It very deliberately avoids doing that, and is based instead on CT600 taxable profits.

Secondly, as Northern Ireland has managed to develop a scheme that meets its—presumably—equally high standards on avoiding fraud, can the Minister tell us why it has been so difficult for the Treasury to achieve that? Will he take this opportunity to correct the impression that directors of limited companies are somehow less trustworthy than others who have benefited from Government support?

My third point is simply to ask whether, if the DISS does not meet with Treasury approval, the Minister will commit to coming up with something that does. I am running out of ways of explaining that some directors of small limited companies have received nothing in income support from his Government since March last year, and they are desperate. As well as the DISS proposal, he has other options that have been put to him. It is his responsibility to actively continue to engage with those affected and to find a solution.

The response from Jesse Norman includes this:

The furlough and self-employment schemes have been designed with two overriding principles in mind: the need to target support at those who need it most, and the need to safeguard taxpayer funds against fraud, error and abuse. As the hon. Member for Midlothian has recognised, it is an obligation—a duty—on the Government to keep fraud, error and abuse to a minimum, and that is what we have sought to do. This approach has meant that the vast majority of those who have requested help have been able to obtain it, while the taxpayer has been protected.

But it is important to say that the Government recognise that some people do not qualify for either support scheme, and this group includes some company directors. Let me turn to the specific situation facing this group. Directors who pay themselves a salary through a PAYE scheme are eligible for the coronavirus job retention scheme—that is, the furlough scheme. However, as Members will be aware, and as the hon. Gentleman has acknowledged, many directors pay themselves in large part through dividends while taking a small salary. Directors can claim from the furlough scheme on their salary, but dividends are not covered by this scheme, nor by the self-employment income support scheme. This is because income from dividends is a return on investment in the company rather than wages. Under HMRC’s current reporting mechanisms, which it inherited from many years before this pandemic crisis struck us, and which have been designed to meet the needs of a tax system operating in normal times, it is not possible to distinguish between dividends derived from an individual’s own company and dividends from other sources…..

…..Throughout the past few months, I and my colleagues in the Treasury have been exploring proposals from some of these organisations to see whether they can provide a viable solution to the gaps in coverage and, in particular, the issue facing directors. As has been mentioned by both hon. Members, these include the directors income support scheme, which has been suggested by the Federation of Small Businesses and others. I am very grateful for the care and support that have gone into drawing up the proposal and ask the House to recognise that we take it extremely seriously. I have met its supporters. I and my officials have had detailed conversations about the scheme and have sought further information and ideas on critical areas and potential concerns. This continuing engagement has taken some weeks. At this time, however, although I and my officials by no means rely on the suggestion that the scheme intrinsically involves dividends—we recognise the construction of the scheme and the structure it represents; dividends are a means by which directors can be paid, but they are not intrinsic to the approach being taken in the scheme—I and my officials do not believe that as framed it overcomes the fundamental issues of protecting taxpayers’ money and safeguarding it against fraud and abuse.

I have raised those concerns with the FSB and the other members of the DISS group, and I and Treasury officials remain ready to engage with them on the issue. In addition, as the hon. Members mentioned, my team is reviewing the targeted income grant support just received, as proposed by the gaps in support all-party parliamentary group. As I have said, we very much remain open to other constructive suggestions.

It would seem that the need for constructive suggestions to be listened to and responded to are vital. Let us hope that along with the use of the video technology to prevent MPs needing to travel into London for the sake of a few words expressed in a debate that Ministers begin to listen more carefully and respond more effectively to the calls from FSB and DISS along with a number of other agencies.

About ianchisnall

I am passionate about the need for public policies to be made accessible to everyone, especially those who want to improve the wellbeing of their communities. I am particularly interested in issues related to crime and policing as well as health services and strategic planning.
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