14:09 - The House divided: - Ayes: 236 / Noes: 291 - Question accordingly negatived.
16:42 - The House divided: - Ayes: 261 / Noes: 309 - Question accordingly negatived.
16:57 - The House divided: - Ayes: 265 / Noes: 307 - Question accordingly negatived.
17:43 - The House divided: - Ayes: 303 / Noes: 250 - Question accordingly agreed to.
Seema Malhotra
My hon. Friend makes an important point. The conundrum of how we fund, finance and incentivise pension savings needs to be thought about much more holistically. He highlights an example of incentives that reach not the majority, but a minority. We must keep that under review.
The Public Accounts Committee took forward the work of the National Audit Office on these issues and took evidence. Its report found that some reliefs
“costing some £100 billion a year, are designed to deliver a policy objective that could be met instead through spending programmes”,
which would be more rigorous and more auditable. The report states that
“HM Treasury and…HMRC do not keep track of those tax reliefs intended to influence behaviour. They do not adequately report to Parliament or the public on whether reliefs are working as intended and what they cost and whether they represent good value for money.”
Nothing has really changed since the report was published last year. That is why Labour continues to raise this issue during the passage of the Finance Bill.
We need to question the efficacy of tax reliefs such as capital gains tax relief and entrepreneurs’ qualifying business disposals, or entrepreneurs’ relief. There are clear reasons for entrepreneurs’ relief and it can be argued that it incentivises investment, but does it make a great enough difference to be worth £3 billion a year to the Exchequer? I do not claim to have all the answers, but we do need evidence to prove that it makes that difference and the Government need to be challenged to justify this and other reliefs.
In Committee of the whole House, the then Financial Secretary to the Treasury defended entrepreneurs’ relief and, as usual, did so without evidence, saying:
“of course, as with all tax reliefs, it is entirely appropriate that the Government keep it under review to ensure that it is well targeted and not open to abuse”.—[Official Report, 28 June 2016; Vol. 612, c. 245.]
I challenge the Government to say when they will do that. New clause 14 would make the Government and all of us turn those warm words into action.
Furthermore, the Finance Bill introduces a new relief, investors’ relief, which extends the low rate of capital gains tax to investors in an unlimited trading company for at least three years. In principle, I support the idea of a relief that is intended to incentivise investment and to support access to capital for businesses, particularly at an early stage in a business’s life cycle, if we can provide evidence that it will help turn those with initial ideas into the successful job creators and innovators of the future. That is extremely important in creating the economy of the future, with all the opportunities that new technology and other initiatives can bring.
However, it concerns me that this could end up being yet another tax relief that is introduced for a good reason, but then left to mushroom into a relief that is extremely expensive and difficult to remove. We need a mechanism to ensure that there is time to review whether it is achieving the desired effect, whether the costs are aligned to those that are forecast and whether it constitutes value for money. For that reason, I support the sunset clause for the relief in Labour’s amendment 176, which would ensure that after a number of years, when we have the evidence on which to base our conclusions, those questions will not go unanswered.
I call on the House and the new Treasury Ministers to take seriously our scrutiny of tax reliefs and to support the Opposition amendments, which would put in place proper mechanisms for reviewing the reliefs and ensure that they remain targeted at supporting businesses, while showing evidence of value for money.
The Financial Secretary to the Treasury (Jane Ellison)
I will start by outlining the Government amendments in the group before responding to some of the points that have been made by hon. Members in what has been a thoughtful debate. As a new Treasury Minister, I have found a number of the speeches good food for thought as I look forward to a series of meetings into the autumn.
On Government amendments 149 to 151, the Finance Bill provides an incentive for people to invest in companies by reducing the main rates of capital gains tax from 18% to 10% and 28% to 20% on most gains made by individuals, trustees and personal representatives. We announced at the Budget that the 28% and 18% rates would continue to apply for carried interest. That is justified by the fact that carried interest is a performance-related award that is hybrid in nature, with characteristics that distinguish it from most other types of capital gain, as was alluded to by some hon. Members. We recently learned that it is possible to create an investment fund structure generating carried interest that, under clause 82 as it stands, would be taxed at 20% or 10%. That would clearly be unfair and contrary to policy. The amendments therefore ensure that the continuing 28% and 18% rates apply to all forms of carried interest.
Rob Marris
The Minister says that the measures will drive investment. What evidence is there for that?
Jane Ellison
That point has been made repeatedly. Contributions from those critical of the policy often miss the way in which measures interact. We are trying to create a climate that encourages investment. A number of international studies have indicated that low rates of CGT support equity investment in firms and promote higher-quality investment in start-ups. That is an important source of innovation and growth. The evidence is there. The measures are part of a package that is trying to create a climate that makes our country attractive to invest in and enables domestic investors to invest in company growth. At the same time, as we have stressed and as other measures in the Bill stress, taxes must be fair and must be paid; the hon. Gentleman took part in a good debate last night about some of those measures.
A number of external bodies have expressed support for clause 82—that also goes to the hon. Gentleman’s point. The CBI and the Institute of Economic Affairs have both welcomed the cuts as a means of encouraging entrepreneurship and growth, and, as I have said, there is a body of evidence, not least internationally, to indicate that lower rates support equity investment in firms and promote higher-quality investment in start-ups. Again, I welcome the support of and international perspective given by my hon. Friend the Member for Richmond (Yorks) on this subject.
The changes made by clause 82 are about encouraging investment where we want businesses to expand. As I have said, they are very much a part of a general pro-business agenda, but we have also been clear that we want fair and competitive taxes and that taxes must be paid. We addressed that in a good debate last night, when there was a good degree of cross-party consensus.
The hon. Member for Salford and Eccles (Rebecca Long Bailey) mentioned the geographical distribution of the CGT cut. HMRC publishes national statistics on CGT each year that include a breakdown of its payers by geographical distribution, so there is transparency on that. It is also worth saying that it has been estimated that up to 130,000 individuals will pay lower taxes as a direct result of these changes to CGT, including 50,000 basic rate taxpayers.
The hon. Member for Feltham and Heston (Seema Malhotra) made a typically thoughtful speech, not just on CGT but on her general thoughts on tax reliefs and how we review them, as well as on tax simplification. Again, I felt that she did not perhaps entirely address the interaction between the various measures—they cannot be seen in isolation. The other issues she mentioned are hugely important; for example, the investment in skills, but I did not think she was fair about what the Government have done on that agenda, which has resulted in record levels of apprenticeships. She is right to say that there are other issues such as that one, but these measures are part of a general package and are not the whole picture.
Amendments 175 and 176 were also tabled by the Opposition. In the 2016 Budget we announced the introduction of investors’ relief, benefiting long-term investors in unlisted companies. As has been explained, the amendments seek to end that new relief after a period of six years, with the option of an additional 12-month extension if agreed by both Houses, and ask the Chancellor to lay a review of the operation of the relief before both Houses.
The amendments are unnecessary as the Government keep all tax policy under review in line with normal tax policy making practice. The hon. Member for Aberdeen North (Kirsty Blackman) again, I thought, did not really give credit to the interaction of different measures nor to the wider point that, given that the Government are bringing the measures forward to stimulate economic growth, there is absolutely no incentive for us not to keep a very close eye on them and review them at regular intervals. We do so all the time because we want measures to work—we want our measures to stimulate economic activity, and we do not in any way want them not to work. Indeed, there are a number of measures in the Bill to correct things that have been done in the past, where we feel that an improvement could make something work better.
We feel that there would be limited merit in conducting a review within six years as the first data on the uptake of the relief in its first year of operation will not be available to HMRC until 2021. Amendments 175 and 176 are neither needed nor useful, and we ask the Opposition not to press them to a vote.
New clause 14, again tabled by the Opposition, proposes that the Chancellor publish, within six months of the passing of the Bill, a report of the Treasury’s assessment of the value for money provided by entrepreneurs’ relief. As I have just said, the Government keep all tax policy under review because we want it to do what we have set out as the intention behind it, namely to stimulate economic activity and to make investment in business attractive to people. That review includes entrepreneurs’ relief, as demonstrated by recent action taken to ensure that the relief is effective, well targeted and not open to abuse. We will continue to act, where appropriate.
My predecessor as Financial Secretary has already informed the House of this, but it is worth reiterating, as it is germane to this point, that HMRC officials have commissioned an in-depth survey of taxpayers’ reasons for using entrepreneurs’ relief and its effects on behaviour. We expect the results of that survey, which will be published at some point in 2017, to inform future changes to the relief. I hope that that gives Members some comfort that the relief is being looked at very closely.
In our wider debate, some general points were made about the Budget being tilted towards the south-east of England. A number of points could be made in rebuttal, not least the debate we had last night, which touched on support for the oil and gas sector in Scotland. More generally, some interesting points were made about having a simpler tax system. In the next part of our debate on the Bill, there will be an opportunity to discuss the Office of Tax Simplification, but as this point came up during the current debate it is worth noting that the Bill puts the OTS on a statutory footing. Around half of the OTS’s 400 or so recommendations to date have already been taken on board. I again take on board the point made by my right hon. Friend the Member for Cities of London and Westminster (Mark Field). I feel sure that this a topic that we will return to over the coming months and years.
I thank all Members who have spoken in the debate.
Rebecca Long Bailey
I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Clause 82
Reduction in rate of capital gains tax
Amendment proposed: 174, page 167, line 40, leave out clause 82.—(Rebecca Long Bailey.)
Madam Deputy Speaker (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
New Clause 2
Review of the impact of the duty regime for high-strength cider
‘(1) The Chancellor of the Exchequer must carry out a review of the impact of the rate of duty charged on sparkling cider of a strength exceeding 5.5%, and lay the report of the review before both Houses of Parliament within 12 months of this Act receiving Royal Assent.
(2) The review must address (though need not be limited to) the impact of the duty regime on tax revenues and on the consumption of alcohol.”
New Clause 3
Review of the operation of the transferable tax allowance for married couples and civil partners
‘(1) The Chancellor of the Exchequer must carry out a review of the operation of the transferable tax allowance for married couples and civil partners under Chapter 3A of Part 3 of the Income Tax Act 2007 and lay the report of the review before both Houses of Parliament within 12 months of this Act receiving Royal Assent.
(2) The review must address (though need not be limited to)—
(a) levels of take-up of the allowance;
(b) the impact of the allowance on individuals with children aged five years or under;
(c) the impact of the allowance on low-income households; and
(d) ways in which the allowance could be changed to target low-income families with young children.”
New Clause 6
VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service
The Chancellor of the Exchequer must commission a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service, including but not limited to an analysis of the impact on the financial position of Police Scotland and the Scottish Fire and Rescue Service arising from their VAT treatment and an estimate of the change to their financial position were they eligible for a refund of VAT under section 33 of the VAT Act 1994, and must publish the report of the review within six months of the passing of this Act.”
New Clause 8
Review of changes to tax on dividend income
‘(1) The Chancellor of the Exchequer must commission a review of how the changes to the tax on dividend income implemented by this Act affect directors of micro-business companies, to include—
(a) the impacts across the distribution of such directors’ net income;
(b) the impact on company failure rates; and
(c) options for amending the law to minimise the impact on such directors who are on low incomes.
(2) The Chancellor must lay a report of the review before both Houses of Parliament within six months of the passing of this Act.”
New Clause 15
VAT on Installation of Energy Saving Materials
‘(1) No order shall be made under the Value Added Tax Act 1994 which would have the effect of raising the rate of VAT on installation of energy saving materials, or any individual category thereof.
(2) No order shall be made under the Value Added Tax Act 1994 to vary Schedule 7A of that Act by deleting or varying any description of supply within Group 2 (Installation of Energy Saving Materials).
(3) “Installation of energy saving materials” has the meaning given in Schedule 7A of the Value Added Tax Act 1994.””
New Clause 16
Review of impact of tax measures on intergenerational fairness
‘(1) Within six months of the passage of this Act the Secretary of State must lay before Parliament a report assessing the impact of —
(a) Sections 1 to 3,
(b) Sections 19 to 22,
(c) Section 82,
(d) Sections 92 to 96, and
(e) Section 140
on the burden of taxation by age demographic.
(2) A report under this section must include an analysis of the proportion of taxation paid by working age people under the age of 35.”
New Clause 18
Impact of section 24 of Finance (No 2) Act 2015 on availability of affordable housing
The Chancellor of the Exchequer must commission a review of the impact of changes relating to income tax made by Section 24 of the Finance Act 2015 on the availability of affordable housing, and lay the report of the review before both Houses of Parliament within six months of the passing of this Act.”
New Clause 19
Distributional analysis of the impact of taxation measures
‘(1) The Chancellor of the Exchequer must review the impact of the measures introduced by this Act on households at different levels of income, and lay before each House of Parliament the report of that review within six months of this Act coming into force.
(2) The Chancellor of the Exchequer must review the impact of government fiscal measures on households at different levels of income at least once in each calendar year, and lay before each House of Parliament a report on each review.”
Government amendments 132 to 134, 146 to 148 and 135.
Amendment 179, clause 99, page 185, line 20, at end insert—
“(c) “earning” do not include any amounts that constitute qualifying bonus payments within the meaning of section 312B of the Income Tax (Earnings and Pensions) Act 2003.”
Government amendment 138.
Amendment 141, schedule 3, page 337, line 1, at end insert—
“Provision for small amounts of partnership share money repayable to employees to be exempt from tax if instead applied charitably
10 In section 503 of ITEPA 2003 (charge on partnership share money paid over to employee), after “paragraph 55(3) (partnership share money paid over on withdrawal from partnership share agreement),” insert—
“paragraph 55(3A)(a) or (b)(i) (partnership share money paid over on withdrawal from partnership share agreement),”
11 (1) In Schedule 2 to ITEPA 2003 (share incentive plans), Part 6 (partnership shares) is amended as follows.
(2) In paragraph 55 (withdrawal from partnership share agreement)—
(a) in sub-paragraph (3) after “as soon as practicable” insert—
“, unless the plan includes provision authorised by sub-paragraph (3A)”
(b) after sub-paragraph (3) insert—
“(3A) The plan may provide that, where an employee withdraws from a partnership share agreement—
(a) if the employee does not agree to an arrangement in accordance with sub-paragraph (b), any partnership share money held on behalf of the employee is to be paid over to the employee as soon as practicable, and
(b) with the employee’s agreement—
(i) if the partnership share money held on behalf of the employee exceeds a threshold amount of not more than £ 10 specified in the plan, the full amount must be paid over to the employee as soon as practicable, and
(ii) if the partnership share money held on behalf of the employee is equal to or less than the threshold amount referred to in sub-paragraph (b)(i), as soon as reasonably practicable, the full amount must either—
(3B) Partnership share money paid over to a charity or accumulated for that purpose under sub-paragraph (3A)(b) shall not count as employment income by reason of section 503.
(3C) While the plan includes any provision authorised by sub-paragraph (3A), the company and trustees shall make available to participants and qualifying employees at least annually an account of the total amount of partnership share money that would have been returned to employees were it not for that provision and of the related charitable donations made.
(3D) The Treasury may by order amend sub-paragraph (3A)(b)(i) by substituting for any amount for the time being specified there an amount specified in the order.””
Government amendment 139.
Amendment 180, schedule 25, page 642, line 2, at end insert—
‘(4A) The Chancellor of the Exchequer may not appoint the Chair of the OTS without the consent of the Treasury Committee of the House of Commons.
(4B) The Chancellor of the Exchequer may not appoint the Tax Director of the OTS without the consent of the Treasury Committee of the House of Commons.”
Amendment 181, page 642, line 40, at end insert—
‘(2A) The Chancellor of the Exchequer may not terminate the appointment of the Chair of the OTS without the consent of the Treasury Committee of the House of Commons.
(2B) The Chancellor of the Exchequer may not terminate the appointment of the Tax Director of the OTS without the consent of the Treasury Committee of the House of Commons.”
Amendment 182, page 643, line 3, at end insert—
“References to Treasury Committee
5A (1) Any reference in this Schedule to the Treasury Committee of the House of Commons—
(a) if the name of that Committee is changed, is to be treated as a reference to that Committee by its new name, and
(b) if the functions of that Committee (or substantially corresponding functions) become functions of a different Committee of the House of Commons, is to be treated as a reference to the Committee by which those functions are exercisable.
(2) Any question arising under sub-paragraph (1) is to be determined by the Speaker of the House of Commons.”
Jane Ellison
In this final debate, there is an array of amendments and new clauses to consider across a wide range of subjects. I am sure that we will cover a great deal of ground.
Let me first outline briefly the Government amendments, starting with Government new clause 9. To ensure fairness in the tax system, new clause 9 allows for the exemption from income tax of supplementary benefit payments funded by the Northern Ireland Executive. Government amendments 132 to 134 deal with disguised remuneration and Government amendment 139 deals with aqua methanol. Amendments 132 to 134 change the date for withdrawing a relief on returns arising from disguised remuneration for those who have not settled tax due to 1 April 2017, while amendment 139 changes the date on which the new aqua methanol duty rate comes into force to 14 November.
Government amendments 135, 146 to 148 and 138 concern venture capital trusts, the lifetime allowance and dividends respectively. They make changes to ensure that these policies work as intended.
Let me deal with the new clauses and amendments tabled by the Opposition. New clause 15, tabled by the hon. Member for Salford and Eccles (Rebecca Long Bailey) and her colleagues is designed to prevent the use of secondary legislation to alter the rate of VAT applied to the installation of energy-saving materials. Since 2001, the UK has applied the 5% reduced rate of VAT to the installation of 11 different types of energy-saving materials. That reduced rate remains in place and is unchanged. The European Court of Justice ruled last year that the UK had interpreted VAT law too broadly. Following that judgment, the Government published a consultation on this particularly complex issue, and we are considering the responses. While this new clause is designed to prevent the use of secondary legislation to alter the rate of VAT applied to the installation of energy-saving materials, the tax lock legislated for by this Government already achieves the same effect. Indeed, it goes further.
John Redwood (Wokingham) (Con)
Will the Minister confirm that, now we are leaving the EU, we would have no intention of raising VAT to that rate? I hope that we will scrap it altogether.
Jane Ellison
As the Secretary of State for Exiting the EU said yesterday in his responses to the lengthy statement, those are all matters that will be looked at. He confirmed that he is indeed looking at it, as is the Treasury.
We feel that the tax lock goes further by preventing the use of secondary legislation to vary the scope of any reduced or zero rate. In effect, the new clause would serve no purpose except to duplicate existing legislation.
New clause 3 on the marriage allowance would place a legal requirement on the Government to carry out a review. Although I am sympathetic and have discussed the concerns of my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) and others who support the new clause, I hope to be able to show that such a report is unnecessary and to address some of these concerns.
Let me reiterate that the Government remain committed to recognising marriage in the tax system and to ensuring that the marriage allowance is delivered successfully. As hon. Members will be aware, take-up of this policy was initially lower than expected, but the Government have taken decisive action to change that. In spring this year, HMRC ran a successful marketing campaign to help raise awareness among eligible families, and the results were quite dramatic. Daily applications increased by a factor of seven between November 2015 and March 2016. Next month, HMRC will receive its 1 millionth successful marriage allowance application.
We are going even further. HMRC will launch a more ambitious campaign to raise awareness next month to help to continue the momentum. The Government have also assessed the distributional impact of the policy, which I know is a matter of interest to my hon. Friend the Member for Enfield, Southgate. We found that a quarter of those who will benefit are households with children, and most of the benefit from the marriage allowance will go to those in the bottom half of the income distribution scale. I understand that my hon. Friend will want to make more points about this issue in his contribution. I will seek to respond, briefly if I can, at the end.
My hon. Friend has also tabled new clause 2, which proposes a review of the impact of the rate of duty charged on sparkling cider of an alcohol strength exceeding 5.5%. The concerns that he raises—he has raised them before—are important, and the Government will continue to tackle alcohol problems as a driver of crime and support people to stay healthy, building on the alcohol strategy of 2012. The Government are aware that some ciders can be associated with alcohol harm and we have already taken action. Since 2010, for example, we have required drinks to contain a minimum of 35% apple or pear juice to be defined as cider, which is designed to increase the cost of the cheap white ciders.
From my previous role as a public health Minister, I am obviously aware of the concerns about alcohol harm. Further changes to alcohol policy would need sufficiently to target cheap drinks associated with these harms, without of course penalising responsible drinkers. The Treasury is always willing to consider any evidence about how these products should be taxed. Although I do not think a legislative requirement for a review is necessary, I look forward to hearing my hon. Friend’s contribution to the debate.
Amendments 180 to 182 deal with the Office of Tax Simplification. The amendments, tabled by the hon. Member for Ilford North (Wes Streeting), would require appointments to or dismissals from the position of the OTS chair to be subject to the consent of the Treasury Select Committee. The OTS provides the Chancellor with independent advice on simplifying the tax system. As I alluded to in the last part of the previous debate, to ensure that the OTS continues its important work, the Government are putting it on a permanent statutory footing and increasing its powers. I am grateful to my right hon. Friend the Member for Chichester (Mr Tyrie), the hon. Member for Ilford North, whom I see in his place, and other members of the Treasury Select Committee for their commitment to safeguarding the independence of bodies within government and to increasing their transparency. The Government’s view is that there is a balance between ensuring that there is robust scrutiny and doing so in a way that is proportionate to the function of the OTS.
Having considered the representations of my right hon. Friend the Member for Chichester and the hon. Member for Ilford North, the Government will ensure that the Treasury Committee is able to hold hearings with future OTS chair candidates before their appointments are formalised, and to put appointments to a vote in the House. We believe that those arrangements should be a permanent method of appointment of future OTS chairs. I do not think there is any justification for going further and legislating for a power of veto, which is what the amendments would do. I hope that members of the Treasury Committee will welcome the arrangements that I have outlined, and I invite them not to press their amendments.
Mr Andrew Tyrie (Chichester) (Con)
I am grateful to the Minister for what she has said about the proposals. I am pleased that it has been possible to work out a compromise which I think is very reasonable all round, and which builds on the arrangements made by the former Chancellor for the appointments of the chairman and chief executive of the Financial Conduct Authority earlier in the year. I see no reason why this should not form the basis for a permanent arrangement to ensure that we get the best possible candidate into the OTS, supported by Parliament, in future years.
Jane Ellison
I thank the Chairman of the Treasury Committee for his indication of support for these arrangements. As he says, we have set out a procedure for the future. I have written to him, and the Chancellor will write to him as well, to confirm that for the record.
New clause 8, tabled by members of the Scottish National party, would require the Government to review the way in which the changes in dividend tax will affect directors of microbusinesses. First, we feel that it would be impossible to deliver such a review, because information from the self-assessment process will not be available until 2018. Secondly and more fundamentally, the dividend tax changes cannot be viewed in isolation, as I pointed out in the previous debate. Small company directors will have benefited from various recent tax changes made by the Government, including cuts in corporation tax and business rates—with more to come into effect in the spring of 2017—and the introduction of the employment allowance, which has made a considerable difference to business people in my constituency to whom I have spoken and, I know, to those in other constituencies. We think that these matters must be looked at in the round, and we therefore do not feel that we can accept the new clause.
New clause 18 proposes another review, on the impact of section 24 of the summer Finance Act 2015 on affordable housing. Again, we feel that that is unnecessary. The changes made by section 24 are being implemented in a gradual and proportionate way. Only one in five landlords is expected to pay more tax, and we do not expect the changes to have a large impact on either house prices or rent levels owing to the small overall proportion of the housing market that is affected. It is worth noting that the Office for Budget Responsibility has endorsed that assessment.
I gather from my predecessors that the subject of new clause 6, which asks the Treasury to conduct
“a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service”,
has arisen a number of times in the past, and I am afraid that I cannot add very much to the responses that SNP Members have heard before in the context of this and previous Finance Bills. The Treasury made it clear to the Scottish Government that the proposed changes would result in a loss of eligibility for VAT refunds. They chose to go ahead, which was their legitimate right, but there can be no expectation that we will review the issue, given that the consequences were clear beforehand.
Jonathan Edwards
If the United Kingdom opts for non-membership of the single market following Brexit, the UK Government—the Treasury—will be able to initiate all sorts of proposals relating to VAT, one of which may well be to devolve it to the devolved Administrations. The Scotland Act 2016 currently assigns responsibility for 50% of VAT receipts, but if the UK Government decided on the non-membership option, it would be possible to go further. Is the Treasury considering that?
Jane Ellison
As a number of Ministers have made clear in the House, we need to consider a huge range of issues as we proceed, but, as I have said, we are clear about the matter for the present. No doubt the hon. Gentleman will raise his point again during debates about our future outside the European Union.
New clause 16, tabled by Liberal Democrat Members, would require the Government to publish a review. I do not think that any Liberal Democrat Members are present, so I shall speak briefly before moving on swiftly to deal with new clauses and amendments tabled by members of other parties who are present.
The Government already undertake equality assessments of all new measures, which includes considering age as a protected characteristic. I am sure the whole House welcomes the fact that the Prime Minister has now launched an unprecedented audit of public services to reveal—among other things—racial disparities, and to look at the way in which public services serve people throughout the country. The Treasury will, of course, play its part in the audit, and no doubt some of these issues can be considered as part of that important exercise.
New clause 19 would require the Government to review the impact of measures in the Bill on different levels of income. In every Budget and autumn statement since 2010, the Treasury has published distributional analyses showing the impact of Government policy on the share of tax paid and spending received across household income distribution. Since 2010, the Government have published far more distributional analyses than their predecessors. As the Prime Minister has made clear on many occasions since taking office, we are determined to make Britain a country that works for everyone, and our policy choices and actions stand as proof of our commitment. The Government have received representations on this matter, not just from Opposition Members but from my right hon. Friend the Member for Chichester, on behalf of his Committee. We will consider the appropriate format of documents to be published at future fiscal events at a time closer to the date of the autumn statement.
Kirsty Blackman
When does the Minister think the autumn statement will be delivered?
Mr Tyrie
As the Minister knows, the issue of distributional analysis is of great importance to the Committee. The previous Chancellor accepted it in 2010, but resiled from it in 2015, to the Committee’s considerable concern. On the understanding that the Chancellor really is considering reinstating the arrangements that had been in operation for the preceding five years, I would not be minded to vote for new clause 19. Am I to understand from what the Minister has said that a serious reconsideration is taking place, and that she or the Chancellor will return to the House in due course to inform us of their conclusions?
Jane Ellison
Treasury Ministers and the Chancellor take points made by my right hon. Friend and his Committee members very seriously. As I said earlier and as has been confirmed in an exchange of letters between my right hon. Friend and the Chancellor, we will consider the issue at future fiscal events closer to the date of the autumn statement. I may be able to write to my right hon. Friend with further information, but that is what I am able to say at the moment.
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
I thank the Minister for giving way. She is being most generous.
Yesterday, in an intervention on the speech of one of the Minister’s colleagues, I asked when we were likely to expect the very important autumn statement. The response was “some time in November, maybe December.” Can the Minister confirm that that is indeed the case?
Jane Ellison
As I have said, the date will be confirmed in due course, but I think it reasonable to assume that the window of opportunity to which the hon. Gentleman has referred is broadly correct.
I shall speak briefly—as, again, there is no Liberal Democrat presence in the Chamber—about amendment 179, which deals with the apprenticeship levy. This would exclude qualifying bonus payments to employees of employee-owned businesses from being considered as part of the employer’s pay bill when calculating the levy. To ensure the levy is as simple and fair as possible, the Government have decided to use the existing definition of earnings—those used for employers national insurance contributions. This avoids unnecessary complication. This point about avoiding complication was made repeatedly to us during the consultation. We feel the amendment would add complication and therefore we urge the House to reject it.
Lastly, Labour amendment 141 on employee share schemes proposes a tax exemption for residual cash amounts remaining in share incentive plans when they are donated to charity. While we appreciate the proposal is made with the best of intentions, we are concerned the change would, again, add complexity and the amendment lacks details. We would need further development and evidence of this idea before giving it further consideration.
I will end there, but I may look to respond briefly at the end if there are any further points I can add that would assist the House. I look forward to the debate.
Rob Marris
I am disappointed by the Minister’s concluding remarks on amendment 141, which is in my name and those of my hon. Friends. She says the amendment lacks detail. We are talking about simplification today and I will go on to address the House on that issue, but this amendment covers more than an A4 page, so there is quite a lot of it. It might be the wrong detail—I freely accept that I am not an accountant—but I cannot get my head around the concept that it lacks detail. So I am disappointed and urge her to reconsider.
I am pleased at the movement from the Government on amendment 180. It will not surprise SNP Members to know that I want to touch briefly, as the Minister did, on new clause 6. Frankly, they have made their bed and they should lie in it. They were warned that this would be the financial effect, and having an inquiry into the financial effect of something they knew was going to happen and has happened—it may be an adverse financial effect—is what you get with devolution; you make your decisions and you live with them. They should not be looking indirectly through this mechanism for yet another bung from the English taxpayer when they are already getting shed loads of money under the Barnett formula. I support the Barnett formula and the Union, but sometimes people can push their luck a bit and I think that is what is happening here since they knew in advance what would happen.
I want to make some brief remarks on the question of evidence-based decision making and the difficulties we have in that regard as policymakers and legislators in this House. That applies particularly to financial matters. Although the House of Lords scrutinises Finance Bills, it does not vote upon them for good historical reasons. It cannot, therefore, amend the Finance Bill and we have to get it right here.
Oppositions cannot table amendments to put up taxes and it has become commonplace in recent years to table amendments to express concern and call for a review. That has been the mechanism used by those who take issue with a particular course of action, or lack of a course of action rather than moving amendments to abolish something, as the Liberal Democrats extraordinarily did yesterday with their amendment to abolish corporation tax, which, as the Minister said, would cost £43 billion a year. In this group, new clauses 3, 6, 8, 16, 17, 18 and 19 all call for a review, as did new clause 14 and amendment 176 which were debated previously. It is the flavour of the day.
This highlights a problem that the Minister addressed in her concluding remarks in the previous debate. We have at the moment an economy with extraordinarily good unemployment figures, and I praise the Government for that. That figure has come down, and we have had 2.5 million more jobs in the past six years. That is great, but it has been bought on a sea of debt, with the deficit going up 60% under a Government who said that they were imposing austerity in order to bring public finances under control. They are still not under control.
Jane Ellison
The hon. Lady referred to the issues that we have debated this afternoon as a “rag-bag”, but I think that is a bit unkind. I prefer to describe the debate as a smorgasbord of wide-ranging issues and thoughtful speeches. I shall not repeat my opening remarks, but I shall try to add something to each of the areas where it is relevant to do so, in no particular order.
I thank the hon. Member for Ilford North (Wes Streeting), who is no longer in his place, for welcoming the fact that the Chancellor is looking at the issue of distribution analysis, as he said he would in his letter to the Select Committee Chairman. We will comment further on that in due course. As a result, the hon. Gentleman decided not to press new clause 19 to a vote. [Interruption.] Ah, the hon. Member for Wolverhampton South West (Rob Marris) has returned to his place just as I was about to be nice about him. He must instinctively have known that I was going to thank him for his wide-ranging contribution to the debate. He presented me with some fair challenges as a new Minister. He also made some interesting points about tax simplification. I am due to have a meeting with the Office of Tax Simplification shortly, and he has certainly given me food for thought for my agenda. I reiterate that the Bill will put the OTS on a statutory footing, which I believe indicates the seriousness with which we take its work.
This has been a probing debate. My hon. Friend the Member for Enfield, Southgate (Mr Burrowes) is now on Select Committee duties and therefore unable to return to his place in the Chamber, but he made an interesting contribution on an issue that I know all too well—that of high-strength alcohol. This is something that needs to be looked at in the round, but I can assure him, given my three years in the job that I did before this one, that I take the matter very seriously. He was also generous enough to note, correctly, that the Department of Health has had a good deal of success, working with manufacturers, in reducing the number of very high-strength products on the market. I also note the discussion that took place about silver linings, in which varying views were expressed. I am sure that we will give further thought to these matters in due course. My hon. Friend the Member for Congleton (Fiona Bruce) and others also stressed the matter of the cost to society of some of those products.
My hon. Friend the Member for Enfield, Southgate also talked about the marriage allowance. I want it to be clear that the Government’s focus is on delivering the existing policy, but I did mention in my introductory remarks that a quarter of those who benefit are households with children. We do not want to create a two-track marriage system within the allowance, but the Government are none the less committed to helping low-income households and those with young children through a wide range of other policies including, for example, tax-free childcare and the new national living wage.
I want to add that the online application process for the marriage allowance takes only seven minutes. I call upon the hon. Member for Strangford (Jim Shannon) and my hon. Friends the Members for Congleton and for Enfield, Southgate and others who have an interest in this matter to assist us and promote it. I found in some of my summer recess meetings with groups in my constituency that awareness of the marriage allowance is low. It is of real benefit to lower-income married couples and all Members can contribute to promoting awareness and take up of it. None the less, I reassure all colleagues—my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) also spoke about this—that I will continue to look closely at take-up with HMRC. I also suggest that promoting the personal tax account is another good way of promoting the take-up of the allowance, because when appropriate people take up a personal tax account they can get a nudge to apply. I reiterate that HMRC will receive the millionth application next month, putting us on course to meet the OBR’s revised forecast for take-up this year.
I have already mentioned the seriousness with which we take the Office of Tax Simplification, but it is worth noting that the recommendations led to the introduction of cash-based accounting for tax. One million self-employed individuals took that up in the first year alone, so those recommendations were important.
I appreciate the intention behind amendment 141 tabled by the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), but I said that the Government feel that the change would add additional complexity; I do not think he agrees with that. We have received no indication that fewer companies are making use of share incentive plans due to the administrative cost mentioned by the Opposition, but we will keep that under review. To tease out why our views differ on how the scheme might work and why the Government feel that the idea needs further development, if the hon. Gentleman is willing not to press the amendment, I am happy to meet him to discuss the matter and to understand why he feels that way.
Jonathan Reynolds
I thank the Minister for those comments. I have a small sense of frustration as I believe that nearly every Conservative Member—indeed, all Members—would back the change on its merits, but I understand that Ministers have limited room for manoeuvre at the Dispatch Box, so I will accept that offer in good faith and will not press the amendment.
Jane Ellison
I thank the hon. Gentleman for that and look forward to our meeting.
Several Members spoke about new clause 15, including my right hon. Friend the Member for Wokingham (John Redwood) and the hon. Member for Salford and Eccles, and I reiterate that nothing would be achieved that is not already achieved by the Government’s tax lock. The reduced rate of 5% has applied to installations of energy-saving materials since 2001 and that rate remains in place and unchanged. As for the wider issues about European Union VAT and excise systems, we are considering a range of issues as we look to exit the European Union.
On new clause 19, as I said, we feel that the tax lock, for which we have already legislated, actually goes further by preventing the use of secondary legislation, about which the hon. Member for Salford and Eccles was worried.
Turning to new clause 18, I will repeat to the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) what I said in my opening remarks: the Government do not expect the measure to have a large impact on rents due to the small proportion of the housing market affected—around one in five individual landlords.
On the SNP’s new clause 8 and the points made about the changes to dividend tax, I reiterate that the way in which such changes affect small and microbusinesses cannot be looked at in isolation. The Government take the concerns of microbusinesses incredibly seriously—I met the Federation of Small Businesses only last week, for example. As for listening to the concerns of microbusinesses, I point hon. Members to the changes made to the Government’s “Making Tax Digital” consultation documents as evidence of our sensitivity to such concerns and we look to respond to them when we can. It is important to note that we believe the dividend tax is still progressive overall, and individuals with higher incomes will still pay a higher rate of tax on their dividends.
On the wider changes to small businesses and microbusinesses, I point the hon. Gentleman to Budget 2016 in particular, as it is introducing the biggest ever business rate reduction, worth £6.7 billion. It has yet to come into force, but it will make a very significant difference to a very large number of microbusinesses across all our constituencies.
Lastly, I hope to answer the highly technical point made by the hon. Member for Salford and Eccles, as well as the point made by the hon. Member for Foyle (Mark Durkan). Government new clause 9 will exempt from income tax supplementary payments that mitigate tax-exempt benefits paid by the Northern Ireland Executive. Any supplementary payments that mitigate tax benefits will themselves be taxable. As a result, all supplementary payments will be taxed in the same manner as the benefits they are mitigating, to ensure fairness and consistency with the tax system. I was asked whether the power being taken in this Finance Bill would be used more widely. No, the power being taken in this Bill will be restricted to only allowing for the tax status of the Northern Ireland supplementary payments to be established in regulations. Full welfare devolution has always been part of Northern Ireland’s devolution settlement. I hope that adds some clarity.
This has been a wide-ranging debate. We have touched on some good issues and found some common ground. The measures in this Finance Bill will benefit working people, boost UK businesses, and take on tax evasion and avoidance. In the days we have spent on Report, and during the Bill’s earlier stages, we have debated many aspects of it thoroughly, and on Third Reading the House will have a final opportunity to consider the Bill as a whole. At that point, I will set out the main reforms for which the Bill legislates, but I hope that this afternoon’s discussion has been helpful and that my responses to points have helped the various Members who raised them.
Question put and agreed to.
New clause 9 accordingly read a Second time, and added to the Bill.
New Clause 8
Review of changes to tax on dividend income
‘(1) The Chancellor of the Exchequer must commission a review of how the changes to the tax on dividend income implemented by this Act affect directors of micro-business companies, to include—
(a) the impacts across the distribution of such directors’ net income;
(b) the impact on company failure rates; and
(c) options for amending the law to minimise the impact on such directors who are on low incomes.
(2) The Chancellor must lay a report of the review before both Houses of Parliament within six months of the passing of this Act.”—(Philip Boswell.)
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Mr Speaker
I can now inform the House that I have completed certification of the Bill, as required by the Standing Order. I have confirmed the view expressed in my provisional certificate issued on 5 September. Copies of my final certificate will be made available in the Vote Office and on the parliamentary website.
Under Standing Order No. 83M, as modified by Standing Order No. 83S, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and on the parliamentary website, and have been made available to Members in the Chamber. Does a Minister intend to move the consent motion?
The Lord Commissioner of Her Majesty’s Treasury (Stephen Barclay)
indicated assent.
The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).
[Natascha Engel in the Chair]
Jane Ellison
I beg to move, That the Bill be now read the Third time.
I remind the House just how important the measures contained in the Finance Bill are for the success and prosperity of people in this country. It is about putting more money back into the pockets of all the people who work so hard but sometimes struggle to make ends meet. It is about helping our businesses to grow and succeed, to invest and create jobs, and it is about protecting the nation’s finances by taking action to stop any individuals or businesses that seek to evade or avoid tax.
The Bill has been thoroughly debated for weeks, including with me as the Minister during the past two days. I therefore want to take a moment to thank hon. Members on both sides of the House for their excellent scrutiny of it and for the insightful and wide-ranging debate that has taken place during its passage through the House.
It is worth noting a couple of breakthroughs for which the Bill will be long remembered. The first is the amendment that was moved last night by the right hon. Member for Don Valley (Caroline Flint) on public country-by-country reporting, which the Government supported. The welcome degree of cross-party consensus cemented the UK’s position of international leadership on this issue. It is also worth noting the long and successful campaign by the hon. Member for Dewsbury (Paula Sherriff) and others that has brought significant progress on the issue of VAT on sanitary products. There are a number of other important measures, some of which we have debated today, and we have made important Government amendments to ensure that things work as they should.
I pay particular thanks to my predecessor, my right hon. Friend the Member for South West Hertfordshire (Mr Gauke), for his excellent work. Indeed, he did the lion’s share of the work in steering the Finance Bill through each of its stages. I also thank my hon. Friends the Members for East Hampshire (Damian Hinds) and for West Worcestershire (Harriett Baldwin) for setting out the Government’s case at different stages. I express my general appreciation to all hon. Members who have contributed to the Bill.
The Bill means that we will do more to help hard-working individuals and families, more to help businesses large and small, and more to safeguard the nation’s finances. Above all, it will ensure that we move forward into the new future from a position of financial strength in our economy. I therefore commend it to the House.