§ 5. Mr. Philip Hammond (Runnymede and Weybridge) (Con)What steps she is taking to reduce unintended incentives to financial services companies to relocate call centres outside the European Union. [156256]
§ The Secretary of State for Trade and Industry(Ms Patricia Hewitt)Financial services companies take into account cost, quality, customer reaction and many other factors when making decisions about whether or not to off-shore their call centres. We will continue to ensure that the UK is an attractive place to do business, in this and other sectors.
§ Mr. HammondThe Secretary of State will be aware of the concern about the exodus of call centre jobs overseas. I know that she is looking carefully at ways of making the UK an attractive place for the call centre industry, but there is no point in her trying to support the sector if her colleagues in Government introduce further disincentives for centres to remain in the United Kingdom.
402 The Secretary of State will be aware that not only are labour costs lower outside the European Union, but financial services companies outsourcing their call centres outside the EU are not subject to a 17.5 per cent. VAT charge, which would not be recoverable. Is she also aware that Customs and Excise now proposes to tighten the grouping rules, so that for many financial services companies outsourced call centre work in the UK will be subject to an immediate additional 17.5 per cent. cost, leading inevitably to a further exodus abroad? Will she please undertake to talk to the Chancellor of the Exchequer and try to achieve some joined-up government?
§ Ms HewittThe British Bankers Association has said that tax is not a major factor in decisions on outsourcing, and I am a little surprised to hear the hon. Gentleman criticise Customs and Excise for tightening arrangements to prevent tax avoidance.
The current VAT rules—agreed by the Conservative party in 1992—do not create a level playing field, which is why my right hon. Friend the Paymaster General is currently negotiating to ensure that in future VAT on services will be charged wherever those services are consumed. That is than answer to the problem, which in any event is a very minor factor, if a factor at all, in decisions to off-shore.
The important point is that when workers are displaced in Britain they should be able to look for support to a Government who are investing in innovation, business creation and skills. They would receive no such support from the Conservatives, whose shadow Chancellor has now committed himself and his party to cutting all public spending in those vital areas.
§ Mr. Barry Sheerman (Huddersfield) (Lab/Co-op)Does my right hon. Friend agree that although call centre work is not the most high tech and innovative, it provides a good, steady income for many of our constituents? Would she talk to her opposite number in the Department for Transport about the fact that the rail industry, which is heavily subsidised, is talking about taking its call centre for railway timetables abroad? It seems strange to subsidise a timetable service that is taken away to somewhere like India.
§ Ms HewittMy hon. Friend makes an important point, but I should stress that we are seeing an increase of call centre employment in Britain. BT, which was criticised for investing in three call centres in India, has invested in 31 call centres here in Britain. Other companies have come back to Britain after having tried call centre operations in India. Each company should consider for itself what the balance of advantage is and how it can deliver the best quality services to its customers.
None of us should make the mistake—I know that my hon. Friend is not doing so—of thinking that one more job in India is one fewer in Britain. It is not. As the call centre industry in India grows, so it will grow in this country, as we have larger markets for our exports and more effective partnerships between companies here and those abroad.
§ Mr. Quentin Davies (Grantham and Stamford)(Con)Is not the Secretary of State extraordinarily complacent and misinformed about this issue? How can she argue that 17.5 per cent. is an insignificant cost handicap for a company that is contemplating an investment? She cannot have had any experience of investment appraisal if she says something like that. We all know that the Government are wasting a lot of money on a burgeoning bureaucracy, so are desperate to get money out of the public by any means, fair or foul. What they are doing is crazy. They will not make any more money. All that will happen will be that employment will be exported outside the European Union and these call centres will be established elsewhere, so the Government will not get the 17.5 per cent. anyway.
§ Ms HewittThe hon. Gentleman is talking nonsense. I have already said that we are seeking to change the VAT rules to provide a level playing field for VAT, so that wherever services are delivered, they will be taxed on the same basis, whether they are provided by a UK-based company in-house, outsourced or offshored. The hon. Gentleman ignores the fact that, as the British Bankers Association has said, this is not a major factor in decisions. I refer him to the decisions of the Alliance and Leicester, the Royal Bank of Scotland and many other companies, which have said that they will stay in Britain so as to get the quality of customer service that they want. They are reinforced in their decision by knowing that, as every independent survey shows, the Government have created one of the best environments for business and investment in the developed world.
§ David Cairns (Greenock and Inverclyde) (Lab)I welcome my right hon. Friend's commitment to the UK call centre industry, especially in financial services, as the mortgage centre of the Royal Bank of Scotland is in my constituency. An issue that is worrying me is the level of basic skills training that people need in these jobs, which are not as basic as people think. The RBS has told me that when it advertises—it recently advertised in Greenock for 150 new jobs—some of the people who turned up did not have the basic skills that my right hon. Friend and I would take for granted, such as the ability to hold a telephone conversation for 20 minutes. When framing our training and skills programmes, will she ensure that she does not end too far up the chain, as basic skills are needed to keep these jobs in the United Kingdom?
§ Ms HewittMy hon. Friend makes a very important point. I recently had the pleasure of visiting one of the RBS's call centre operations. It is essential that we get investment not only in basic skills, but in the higher level skills that will ensure that we remain competitive in call centre operations and in many other sectors. We are working with the Call Centre Association, employers and unions to achieve, that. That is why it is important that the Government go on investing in education, adult skills and lifelong learning. The Conservative party has already made it clear that it would cut that investment.