Finance (No. 2) Bill (Third sitting)
Thursday 18th May 2023
(11 months, 3 weeks ago)
Public Bill CommitteesRead Full debate Finance (No. 2) Act 2023 View all Finance (No. 2) Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 May 2023 - (18 May 2023)
The Chair
We are now sitting in public, and the proceedings are being broadcast. I have a few preliminary announcements.
Owing to a printing error, Government amendment 9 was missing from the amendment paper issued earlier this morning. That omission was rectified, and the correct version of the amendment paper is available in the room, from the Vote Office and online.
Hansard colleagues will be grateful if Members could email their speaking notes to hansardnotes@parliament.uk. Electronic devices should be on silent. Tea and coffee should not be brought into the room. It is getting a bit muggy, so any Member wishing to take off their jacket may do so. We now continue line-by-line consideration of the Bill.
Clause 313
Transactions funded with the assistance of a public subsidy
Question proposed, That the clause stand part of the Bill.
The Financial Secretary to the Treasury (Victoria Atkins)
It is a pleasure to serve under your chairmanship, Mr Stringer.
As a matter of housekeeping, I should say that the shadow Minister, the hon. Member for Ealing North, asked me questions on Tuesday regarding the implementation of changes to the company share option plan, and I committed to write to him with those details. That letter has gone to him this morning, with copies deposited in the Libraries of the Houses. Indeed, I have also arranged for it to be sent to the other Committee members, for their convenience.
The clause will amend existing stamp duty land tax rules to ensure that registered providers of social housing are exempt from the tax when purchasing property using funding allocated under section 31 of the Local Government Act 2003. In December last year, the Government announced an additional £650 million for the Homes for Ukraine support package, which included giving local authorities in England an additional £0.5 billion to reduce homelessness by obtaining housing to reduce pressure on social housing and to help accommodate Ukrainian and Afghan refugees. On 28 March this year, the Government announced a further £250 million of funding, the majority of which will be used to house Afghan families in bridging accommodation. The rest will be used to ease existing homelessness pressures.
The additional funding, as I said, is allocated under section 31 of the Local Government Act, and the existing stamp duty land tax system includes an exemption for social housing purchases. However, not all social housing providers in receipt of the additional funding would benefit from those exemptions, so we are looking to correct that and to enable registered providers of social housing to benefit from the exemption when they use the new funding. It is a sensible clarification and I hope that the Committee will support the clause standing part of the Bill.
James Murray (Ealing North) (Lab/Co-op)
It is a pleasure to serve in Committee with you as Chair, Mr Stringer.
The acquisition of certain properties by registered social landlords is exempt from stamp duty, provided that the purchase is funded with the assistance of public subsidy. As the Minister set out, in December last year the Department for Levelling Up, Housing and Communities announced an additional £500 million in funding for local authorities to secure additional housing stock for those fleeing conflict, including those from Ukraine and Afghanistan. We understand that that additional funding was allocated under section 31 of the Local Government Act, and the clause will add that section to the list of public subsidies that enable a purchase to qualify for the stamp duty exemption. For the purposes of the stamp duty exemption, we understand that local authorities that intend to register with the Regulator of Social Housing are treated as not-for-profit registered providers of social housing.
The explanatory notes state that £500 million was announced for the local authority housing fund in December 2022, and I welcome the Minister’s assurance that the additional £250 million announced since will also be covered by this clause. We will not oppose the clause, as any support it offers to local authorities that buy homes to provide social housing is welcome.
Dame Angela Eagle (Wallasey) (Lab)
It is a pleasure to serve under your chairmanship, Mr Stringer. This is not the first time that I have been on a Committee with you in the Chair.
Will the Minister give a view about how many extra homes this change to stamp duty land tax will enable local authorities to fund? Has any analysis been done? There will obviously be a positive effect, but how large will it be? Many Afghans are still in hotels and are unable to put down roots so that they can begin to establish themselves in this country and flourish. For large families living in hotels, this is a difficult time, so I would have thought that Members from both sides of the House are anxious to see this scheme work. Knowing the Treasury, it will have done some analysis of the positive benefit of the proposal, so will the Minister share it with the Committee?
How long does the Department for Levelling Up, Housing and Communities expect these extra moneys to last? Will the Minister come back to Parliament to extend this exemption further, or will that happen in a spending review?
Douglas Chapman (Dunfermline and West Fife) (SNP)
It is a pleasure to serve under your chairmanship, Mr Stringer. The hon. Member for Wallasey just asked about the length of the funding. As MPs, we all have hard cases to deal with involving refugees from other parts of the world. What funding will be given to Scotland, Wales and Northern Ireland so that the devolved Administrations can implement their own schemes?
Victoria Atkins
I can answer yes to the question that the hon. Member for Ealing North asked about the £250 million.
On the question that the hon. Member for Wallasey asked about the number of houses, DLUHC has estimated that it will be about 1,300 homes. She will understand—indeed, we discussed this when I was Minister for Afghan Resettlement—that one of the complexities with Afghan families is that their larger family sizes mean that there is not the availability of housing stock that there is for slightly smaller families. That is why it is taking a bit of time.
The hon. Member for Dunfermline and West Fife asked about Scotland, and I commit to write to him. This is across the board, so I imagine the scheme will be UK-wide, but I will get that confirmation for him by the end of the sitting.
Samantha Dixon (City of Chester) (Lab)
It is a pleasure to serve under your chairship, Mr Stringer. According to the Home Office figures that were issued at the end of April, there are 8,000 Afghans currently in UK hotels, half of whom are children. On the point about revisiting this at a future date, does the Minister think the Government have done enough?
Victoria Atkins
I must direct the hon. Lady to the Minister for Veterans’ Affairs, who is now leading on that. He has overall control of the programme of rehousing for Afghan refugees, and the Homes for Ukraine scheme—obviously that is a very separate system. The scheme is one of the tools available to the Government, which is why we are making the stamp duty changes to assist local authorities in their efforts to find homes for refugees. It will not be the only way in which we find accommodation for those families; there are other ways, including the military helping with accommodation for those who formerly served or helped the armed forces when they were in Afghanistan. It is one tool, and we want to make it as easy as possible for local authorities to use. I encourage the hon. Lady to speak to the Minister for Veterans’ Affairs, who is leading on the issue.
Dame Angela Eagle
Another question occurs to me: is the scheme only for Afghans and Ukrainians, or does it accommodate other homeless people who are fleeing conflict? It is clear that those who have fled Afghanistan and Ukraine are in a pretty unique position, with special schemes attached. Could the Minister put it on the record that the exemption may then also help others who are in a similar situation, but not in those categories?
Victoria Atkins
I am very happy to. The scheme is certainly not restricted to Ukrainian and Afghan refugees. It is designed to meet all local authority social housing needs. It is a measure to help alleviate overall social housing pressures on local authorities, precisely because we realise that the enormous generosity of the United Kingdom in helping Ukrainian and Afghan refugees has put increased pressures on local authorities when it comes to social housing. We want to ensure that this is sorted out for local authorities, as part of our humanitarian response to those crises—we are also long enough in the tooth to understand that there may be other humanitarian crises in the future.
Question put and agreed to.
Clause 313 accordingly ordered to stand part of the Bill.
Victoria Atkins
On a point of order, Mr Stringer. Before we move on, in relation to the clarification that the hon. Member for Dunfermline and West Fife asked for, stamp duty applies only in England and Northern Ireland. Scotland and Wales have their own land transaction taxes. Obviously, we are very happy to work with the devolved authorities if there is a point of clarification that they need on that.
Clause 314
Deposit schemes
Question proposed, That the clause stand part of the Bill.
Victoria Atkins
Clause 314 makes changes to the Value Added Tax Act 1994. Those changes will enable further secondary legislation designed to ensure that businesses only account for VAT on the price actually paid for bottles or drinks containers covered by deposit return schemes. Such schemes are being introduced across the UK to encourage the recycling of containers, and under existing law VAT is due on the full price paid for a drink, including any deposit.
Existing rules do not permit VAT adjustments for deposit scheme refunds. That means that under the current law VAT would be collected on drink deposits, even though they have been refunded. We do not want that to happen, because we want to support the environmental aspirations of such measures. The changes made by clause 314 will address that, by removing the need to account for VAT on the deposit amount when it is charged. The new rules will require VAT to be accounted for only on unreturned deposits.
To avoid complexity for both consumers and businesses, only the business that makes the first sale of the drink with a deposit will be required to account for VAT on unreturned deposits. What that means in practice is that producers and importers will be the ones liable to account for it on their VAT returns. We have tried to protect both consumers and small shops—corner shops, newsagents and the like—from having to deal with any VAT complexity from the measure. When drinks containers are returned, they will be scanned, and the consumers will receive a refund of the deposit. It will not touch them; they will get the money back that they put forward. Information on numbers of returned products will be collected and passed to the business that made the first sale of the product on which a deposit was charged.
James Murray
As we have heard, the clause introduces rules for VAT accounting for deposit return schemes. As the Minister set out, it means that when making sales within the scope of the relevant deposit scheme, no VAT will be charged in relation to the deposit amount. However, VAT on unreturned deposit amounts will be paid by the first seller of a deposit scheme product.
We recognise that, under existing legislation, deposit return schemes may be introduced across the UK, and we recognise that the clause helps to facilitate the operation of such schemes by introducing VAT accounting rules. The clause ensures that no VAT will be charged at any point in the supply chain in relation to the deposit element of the price for a deposit scheme product. There will only be a requirement to account for VAT where suppliers make the first sale of standard-rated deposit scheme products that include a deposit amount.
More widely, we have been disappointed by the delays in the introduction of a deposit return scheme. It was only after multiple consultations that the Government finally announced in January 2023 that they would introduce a deposit return scheme for plastic and cans, but not for glass, in England, Wales and Northern Ireland from 2025. We will not oppose the clause. Indeed, we want to see a deposit return scheme introduced as soon as possible, so I would be grateful if the Minister could use this opportunity to confirm whether the Government are still committed to introducing one in England, Wales and Northern Ireland by 2025.
Dame Angela Eagle
Obviously, the VAT rules account for some of the most complex parts of the duties and excise that the Minister has to wrestle with on a day-to-day basis. When one talks to businesses of all sizes, often one of the biggest complaints is about the complexity of the VAT rules. Given how much revenue VAT brings in and how all-encompassing it is, perhaps that is not surprising, but I wonder whether the Minister is happy with increased complexity that the changes bring. Perhaps she could give us a flavour of her thoughts and considerations in dealing with the issue of deposit schemes and the complexity of the VAT rules.
Given that VAT will be levied only on the first seller, the Minister has clearly tried to make the rules as simple as possible. But how much complexity does she think the clause will introduce, given that it will be applicable to plastic and cans—presumably aluminium—both of which are easily recyclable, but not to glass? I assume that she is not introducing glass straight away because of the sheer number of glass bottles and the size of the task. Again, perhaps she could give us a flavour of the thinking behind excluding glass, and tell us whether the intention is to include it at a later stage. How complex does she think doing that might be?
I am old enough, as I am sure—I am going to put this politely—you are, Mr Stringer, to remember when we had deposit return schemes for glass, long before anyone thought about digitally scanning anything or any of the computer-based structures that I assume will facilitate the VAT inspectors’ task. Perhaps the Minister could give us some indication of that. Again, how much revenue does she think will have to be forgone?
What assumptions have His Majesty’s Revenue and Customs and the tax inspectors made about the actual cost of schemes such as this in revenue forgone? Clearly, the idea—to incentivise good behaviour that will assist in increasing recycling—is one we would all support. We all want that to work, but if it is not done properly, it could be an enormous fiddling thing that does not really have much effect at all. All of us would applaud the decision not to impact the customer and, clearly, we want to see the containers for recycling brought back.
Can the Minister say a little about whether she has considered how the scheme might interact with the packaging regulations? Again, they are a moveable feast, given that we have left the EU and they have had to be changed as well, but there is clearly a direct connection between the two. We must make certain that the way the packaging regulations work increases, if possible, the incentive for the recycling to work.
There is also the landfill tax, which might have an impact on behaviour. I am sure that the Minister has had a towel on her head thinking all that through to try to make certain that it works as intended. It is currently due to come into effect in 2025. Given the complexity, is she confident that that will happen, given that there have already been delays and the scheme itself is now smaller than most people want it to be, because it excludes glass?
Given the complexity of VAT—when it must be done, when the returns must be made and how difficult that can be for businesses—does the Minister think that moving on without a set timescale, and the uncertainty created by that, give the best background for a successful introduction? The delivery of the scheme in Scotland seems to have run into trouble. I do not know whether the hon. Member for Dunfermline and West Fife has insights that he can share with us—it is almost as late as a TransPennine Express train.
I am interested in what the Minister has to say about some of my questions. The scheme might seem to be a fiddling little thing, but it fiddles with a very complex tax and interacts with many other things. A bit more insight into the Minister’s thinking and her confidence about whether the scheme can be delivered on time would be really welcome.
Douglas Chapman
I will take the towel off my head before I reply. There have been difficulties in Scotland with the implementation of the deposit return scheme. In general, I am reading that this is a simplification, and it maybe brings a bit of clarity to what is possible in a DMS scheme. The important point is that, as pointed out by the previous speakers, it would be fantastic if we could operate across the whole UK. It is not often I say that, but there are opportunities with such a big environmental project that we could all share in.
Although this is not for debate as part of the Finance Bill, I hope that the Minister will take the opportunity to listen to some of the comments made and see whether we can work with other Departments—and Wales, Northern Ireland and Scotland—to see what combinations can be brought to bear. I notice that the Nordic Council, for example, had a discussion session not so long ago where it talked about operating almost a Scandi food waste policy, which would cover all the various countries in the Nordic Council. I do not see why we cannot be working in a positive way like that across the whole UK, albeit that we in the SNP have other ambitions to take our country in a slightly different direction.
Samantha Dixon
Clearly, this is a complex piece of work that has taken a great deal of time, but I get the sense that the Government may be kicking the proverbial recyclable can down the road. Taking it piecemeal without a comprehensive view across the whole UK does not seem to be the best approach. Could the Minister speak to that?
Victoria Atkins
On the last point, I gently redirect the hon. Member’s observation about a piecemeal approach. That is probably more for the Scottish Government to answer because we would very much like to be acting in tandem. By the way, I am responsible for only the VAT elements, so questions about the wider design of the scheme, including whether glass is included, must be directed to the Department for Environment, Food and Rural Affairs.
I have been holding that wet towel over my head at night thinking about this. For example, what happens if somebody buys their bottle of drink just north of the border, pops over to visit Newcastle for the day and wants to get rid of that bottle? There are practical considerations. With some of this—and the Scottish Government are in this position as well—we will have to see how consumers behave. I hope that the scheme will be an enormous success and that the producers will pay the VAT on returned bottles, but it will take us a bit of time to get used to it.
Douglas Chapman
Would it not be a good idea to have a consistent approach that the UK Government could get behind? We have had to push on with our DRS to actually achieve some of our net zero targets and a better environment for our citizens, so the Government could back us up on that and bring in their own scheme.
Victoria Atkins
Again, I am trying to be terribly tactful about how I put this. There has been so much discussion between officials behind the scenes. Scotland has wanted to run ahead with its scheme. Frankly, there were some significant intellectual debates about how VAT is dealt with in this scenario. If the hon. Member—I am not pressing him because I know this is not his portfolio—or others in the Scottish Government want a little breathing space to check that we are all going in the right direction, that is of course a matter for them.
We are committed to implementing the scheme in 2025, but it will need a lot of publicising as to the impacts for consumers. We will all want to encourage our constituents to either use their own drinking vessels wherever possible or to return their bottles and cans when they can, but we have tried to simplify the VAT so that the larger producers will be the target of that first stage of VAT accounting.
On the complications, as I say, we have tried to simplify the scheme. One can imagine the scenario where if we were accounting for VAT at every single stage of the transaction process, that would be a nightmare for the tiny retail shops that we all care so much about. That is a good example of two of the three objectives that I set His Majesty’s Revenue and Customs and the Treasury to ensure taxes are fair and simple so that there is a little tension between them, but we have tried to ensure it is as simple as possible for consumers and smaller businesses.
Just to make it clear, we are not making any money from this scheme. Indeed, we hope that tiny amounts of VAT will be paid to us, because that would mean that the overwhelming majority of people were returning their bottles. I hope we make as little money out of this as possible, which is perhaps unusual for me to say.
We will deal with the plastic packaging tax later in the Bill. The latest figure is just over £200 per tonne. As with the landfill tax, it will sit alongside this scheme and the whole point is to, first, cut down on plastic and secondly, make sure that less of it goes to landfill. I very much hope that people will see this as a holy trinity of environmental measures to try and achieve the ends that we are all so keen to achieve. Unless there are any further takers, I will sit down.
Question put and agreed to.
Clause 314 accordingly ordered to stand part of the Bill.
Clause 315
Dumping, subsidisation and safeguarding remedies
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 19 be the Nineteenth schedule to the Bill.
That schedule 20 be the Twentieth schedule to the Bill.
Clauses 316 and 317 stand part.
Victoria Atkins
This grouping can be summarised as further tools to defend UK businesses in international trade disputes or where the rules are not clear or could be interpreted in a variety of ways. The Department for Business and Trade leads on this work, but it is my pleasure to bring these measures into the Finance Bill to help it assist UK businesses in taking full advantage of our Brexit freedoms and ensuring that they continue to flourish in exporting their goods and services around the world.
Clause 315 and schedule 19 deal specifically with existing trade remedies legislation and create new processes for bilateral safeguards. At the moment, we have only two choices when making decisions on trade remedies: we either accept a Trade Remedies Authority recommendation in full or we reject it entirely. That means that we have a limited ability to consider the broader public interest, which the Trade Remedies Authority cannot consider. The changes made in schedule 19 will allow for a greater flow of information between Government and the TRA by requiring the TRA to notify Ministers before initiating new investigations.
The other changes will maintain the TRA’s expert, independent, analytical and investigative role while giving Ministers greater flexibility when making decisions about trade remedies. It will provide Ministers with the power to request that the TRA reassess a recommendation and give them the flexibility to apply a different remedy to that recommended by the TRA and to revoke a measure without a TRA recommendation, provided there is supporting evidence to do so and it is in the public interest. The TRA will have the power to provide alternative options of recommendations to Ministers where justified.
Currently, the TRA can only recommend a measure if it meets the economic interest test, which goes beyond World Trade Organisation requirements. Schedule 19 makes that test advisory, meaning that Ministers can consider the overall economic impact of a measure alongside the broader public interest. It makes technical provisions to allow for the reimbursement of trade remedies duties, the backdating of trade remedies exemptions and the claiming of unpaid duties by HMRC in certain circumstances.
Clause 315 also introduces schedule 20, which concerns bilateral safeguards: another type of trade remedy that may be used when domestic industries are suffering from the adverse effects of increased imports as a result of a free trade agreement. The changes made in the schedule create a new process for the investigation and application of bilateral safeguards, extending the role and responsibility of the TRA and aligning the process to the wider UK trade remedies framework. That will ensure that the UK can adequately protect UK industry and fulfil provisions in our free trade agreements.
Clause 316 introduces customs advance valuation rulings. Those will enable UK traders to apply for legally binding rulings from HMRC on how to calculate how much duty and tax for a specific good is due. That will facilitate trade flows by giving businesses importing to the UK certainty on the amount due before their goods are shipped and will therefore help to support financial planning. We already issue advance rulings in respect of tariff clarification and origin of goods, but we have not provided advance rulings on customs valuations. That is a legacy of such rulings not being provided in the EU, so we are correcting that through the Bill. Indeed, customs authorities worldwide offer them outside the EU. All traders with an economic operator registration and identification number will be able to apply for such a ruling.
Clause 317 updates customs legislation to ensure that decisions by HMRC to require a financial security as a condition of releasing imported goods from customs control are subject to appropriate safeguards. It also brings together all legislation relating to customs guarantees into a single framework. As I say, those are a variety of tools to help Ministers, the TRA and HMRC ensure that we have what we need to protect UK business and to help the flow of goods between the UK and other countries.
James Murray
As we heard from the Minister, clause 316 introduces schedules 19 and 20, which relate to the Trade Remedies Authority. When the UK left the EU, the UK Government established their own UK Trade Remedies Authority to undertake work on trade remedies previously carried out by the EU. The organisation was established in June 2021 to carry out investigations and recommend remedies related to dumping, foreign subsidies and safeguards for internationally traded goods.
The explanatory notes to the Bill explain that schedule 19 is intended to allow the Secretary of State to exercise a great deal of flexibility when making decisions on trade remedy cases. The notes also explain that schedule 20 extends the TRA’s remit to include bilateral safeguards in some of the UK free trade agreements. It also seeks to enable Ministers to request that the TRA open an investigation to determine whether the criteria to apply a measure has been met and what form a potential measure should take. It further provides Ministers with the power to apply a measure to ask the TRA to reassess its determination and recommendation, and to enable Ministers to take a different decision from the TRA’s recommendation.
It seems clear that the schedules represent a significant increase in the power of Ministers over the Trade Remedies Authority, which was established just two years ago. Despite its short life, the Trade Remedies Authority found itself at the heart of a political storm in Downing Street last year. Right hon. and hon. Members might recall that in June 2022 Lord Geidt resigned from his position as the ethics adviser for the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) when he was Prime Minister. In his resignation letter Lord Geidt wrote:
“I was tasked to offer a view about the Government’s intention to consider measures which risk a deliberate and purposeful breach of the Ministerial Code. This request has placed me in an impossible and odious position.”
In his response, the then Prime Minister confirmed what the dispute concerned. He wrote to Lord Geidt:
“You say that you were put in an impossible position regarding my seeking your advice on potential future decisions related to the Trade Remedies Authority.”
Despite that brush with the former Prime Minister, the Trade Remedies Authority has continued to exist. The measures being introduced by the two schedules that we are discussing will have a significant impact on its relationship with Ministers. This is a fair amount of change for an organisation that has existed for less than two years.
To help members of the Committee put the proposals in context, will the Minister explain the Government’s reasoning behind the initial arrangements for the Trade Remedies Authority two years ago, and how the changes to the arrangements that we are considering today were decided? Will she explain whether there has been any international benchmarking of similar authorities in other countries? What are their levels of independence and their relevant relations with politician?
Clause 316 would allow customers to apply to HMRC for advance valuation ruling decisions. Advance rulings provide traders with a legally binding decision from customs authorities in advance of a shipment, which gives them certainty about how their goods are treated with implications for duty levied. The UK currently issues advance rulings in respect of tariff classification and origin of goods but has not provided advance rulings on customs valuation. That is because customs valuation rulings were not provided for in the EU. However, as the Minister said, they are widely offered by customs authorities worldwide.
We understand that the measures would allow HMRC to provide businesses with more certainty when they are deciding on the most appropriate method of customs valuation for valuing their goods for import. Anything that gives businesses greater certainty is to be welcomed, so we will not be opposing the clause. On a specific point of clarity, however, I would be grateful if the Minister could confirm that the clause’s advanced rulings provision is required as a condition of the UK’s accession to the comprehensive and progressive agreement for trans-Pacific partnership.
Finally, clause 317 updates legislation to permit HMRC to require financial guarantees to be given for duty amounts payable on imported goods and ensure that decisions to require such guarantees will be subject to review and appeal rights. Since January 2021, section 119 of the Customs and Excise Management Act 1979 has been used to require a financial guarantee from importers as a condition of releasing imported goods from the control of an HMRC officer where the amount of customs duty due for the goods is unclear. However, there has been no statutory right for an importer to request a review of, or an appeal against, such a guarantee requirement. Those appeal and review rights were inadvertently omitted when EU legislation was transposed into domestic legislation, which seems to have been an oversight by the Government. We will not oppose the clause, which seeks to remedy the Government’s mistake, but will the Minister explain what impact that mistake has had? Specifically, how many appeal and review requests by importers have been lodged but denied consideration since January 2021, and what steps are being taken to rectify any individual grievances that have arisen as a result?
Dame Angela Eagle
The clause seems quite mild, but it seems to have many implications for the policing of import duties; the prevention of widespread dumping or misuse of products on our markets, which could destroy establishing domestic industries; and the regulation of free trade agreements that we make around the world. Will the Minister give us some indication of how the Trade Remedies Authority changes that are encompassed in clause 315 and schedules 19 and 20 will impact on its independence? From listening to the Minister, it seemed to me that that was one of the most important aspects of the changes, and the Committee needs to understand it as we continue to scrutinise the Bill.
Clearly, a trade remedies body must be independent of those it oversees, so that it is seen as an appropriate body to make decisions that might have serious economic consequences for one side or the other. It is, effectively, a trade judiciary; if it is to be effective, it has to be seen to be independent and widely respected for its independence. The changes made by the clause seem to eat away at some of that. The Minister was talking about different changes to the way in which the authority can pursue its job, including increases in different kinds of information and having to notify Ministers before initiating reviews. It is a quite a big step to put that in legislation, rather than have it as memorandum of understanding. Reading between the lines, that implies that Ministers are not happy with the way in which the Trade Remedies Authority is behaving. Why have the Government decided to put these changes in legislation, rather than in a memorandum of understanding, and why do they think that the Trade Remedies Authority needs to be constrained by law? Is it because there has been a breakdown in the relationship between Ministers and the people who run the authority? Is because there is a lack of trust, or is it simply because Ministers want more direct control over the way in which the authority behaves? That would have implications for the TRA’s independence, and it would certainly have implications for how its independence would be perceived by those wishing to approach it for a jurisdictional reason or for decision making.
Victoria Atkins
I hope I will be able answer some of the questions that the hon. Member for Wallasey asked about why the changes are being made. We announced our decision to reform the trade remedies framework in June 2021, and this is the end of a review process to look at how our framework is working. As I suspect Members across the House, not just this Committee, might expect, we have been talking and listening to industry, asking it for its views on how the trade remedy system could be improved. Consultations on including bilateral safeguard provisions have taken place as part of new free trade negotiations, and those will continue to occur for each negotiation. Importantly, we have asked not only the industry but the TRA, and we will work with it to ensure that the changes are implemented effectively.
The hon. Member for Ealing North asked about international comparators. I confirm that all the changes we are making are in line with our obligations under the WTO. Advance rulings are a key component of the UK’s accession to the comprehensive and progressive agreement for trans-Pacific partnership and other key free trade agreements, but they also help business. Those are some reasons for introducing them. On clause 317, no statutory right of appeal for traders has existed since we left the EU, but we continue to offer the trader the right to be heard scheme, which gives a trader a period of 30 days to present additional information before HMRC confirms the decision.
The hon. Member for Wallasey asked some important questions about the TRA and its independence, including why this has to be done through legislation. The TRA very much remains an independent body, and we genuinely value its expertise and advice. Its core objective will be to investigate allegations of unfair trading practices and unforeseen surges in imports, and to make recommendations to Ministers. It will continue to run fair, impartial and evidence-based investigations. The Secretary of State will then decide whether a measure should apply based on the evidence provided.
The Bill injects another element of transparency, because the Secretary of State for Business and Trade will have to make a statement to Parliament if Ministers decide to apply an alternative remedy to that recommended by the TRA—I imagine that the Treasury Committee would take a great interest in that—and the statement would set out the reasons for their decision. The TRA will continue to maintain a public file of the evidence and publish its conclusions as well. I hope colleagues will be reassured by the transparency that we seek to bring in.
On the TRA itself, it started to investigate cases in 2021. To date, its completed cases include one new investigation and 11 measures transitioned from the EU. It investigates, for example, allegations of dumping, subsidy and unforeseen surges in imports, and it provides objective, independent and evidence-based advice to Ministers, which we will very much continue to value.
As to why we have to make the changes through legislation, the TRA is a statutory body, it can therefore only act within its statutory powers. That is why we have to bring forward the legislation. Furthermore, it will give certainty to parliamentarians should it be needed in future—though I hope that will not be the case.
James Murray
I thank the Minister for her response, although she might have misunderstood my question on international comparators. Her response, I believe, was that what the UK Government are doing is in line with WTO requirements, but my question was whether there had been any international benchmarking of the TRA, its role, its powers and its relationship with politicians—its level of independence and so on—against similar authorities in other countries. Perhaps she will address that question.
Victoria Atkins
I do not have that information to hand, but I will endeavour to get it as quickly as possible and furnish the Committee with it.
Question put and agreed to.
Clause 315 accordingly ordered to stand part of the Bill.
Schedules 19 and 20 agreed to.
Clauses 316 and 317 ordered to stand part of the Bill.
Clause 318
Excepted machines etc
Question proposed, That the clause stand part of the Bill.
Gareth Davies (Grantham and Stamford) (Con)
I am afraid you’ve got me, Mr Stringer. It is a great pleasure to serve under your chairmanship.
Clause 318 makes technical amendments to the legislation that restricts the entitlement to use rebated fuels to a number of qualifying uses from 1 April 2022 to adjust the restrictions and ensure the legislation operates as intended. It makes minor amendments to changes that were introduced in April 2022 to restrict the entitlement to use rebated fuels.
At Budget 2020, the Government announced that we would remove the entitlement to use rebated diesel and biofuels, including marked oils, from most sectors to help meet our climate change and air quality targets. The changes were legislated for in the Finance Act 2021 and amended by the Finance Act 2022. The changes ensure that most users of rebated fuels prior to April 2022 are now required to use fully duty-paid fuel, like motorists. That more fairly reflects the harmful impact of the emissions that they produce.
Following the implementation of the changes, the Government were made aware of a small number of unintended impacts on fuel users. This measure will make minor amendments in relation to them and will correct a technical issue in section 14B of the Hydrocarbon Oil Duties Act 1979.
The changes in the clause will adjust restrictions on the entitlement to use rebated fuels to a number of qualifying uses, will qualify how the changes to the new rules work, and will allow the legislation to operate as intended. They will allow machines or appliances used to generate electricity or provide heating primarily for non-commercial premises to use rebated fuels even if they also provide some of the electricity or heat to commercial premises. They will also add arboriculture to the list of activities for which machines and appliances, other than vehicles, can use rebated fuels. That clarification will allow those working in the sector to use rebated fuels in the same machines and appliances as they did before April 2022.
The changes allow the use of rebated fuels in tractors and gear owned by lifeboat charities used to launch and recover their lifeboats. Finally, they make minor technical corrections to remove an anomaly of section 14B of the Hydrocarbon Oil Duties Act 1979.
These changes reflect feedback received from stakeholders since the Finance Act 2022 received Royal Assent. The technical changes in the clause will ensure that the Government’s reforms to the tax treatment of rebated fuels made in April 2022 work as intended. I commend the clause to the Committee.
James Murray
As we know, at Budget 2020, the Government announced that they would remove the entitlement to use rebated diesel and biofuels from those sectors. As we heard, these changes took effect from April 2022, and they ensure that most users of rebated diesel prior to April 2022 are now required to use fully duty-paid diesel, as motorists do.
As the Minister set out, the Government have been made aware of unintended impacts of the legislation on fuel uses, so further amendments to it have been needed by way of the clause. As we heard, the clause amends the Hydrocarbon Oil Duties Act 1979 to adjust restrictions on the entitlement to use rebated diesel and biofuels.
We understand from explanatory notes that the changes will affect businesses and individuals who use rebated fuels to provide electricity or heating to premises that are used for both commercial, and non-commercial purposes, businesses and individuals using machines or appliances other than vehicles for purposes relating to arboriculture, and charities operating lifeboats. I ask the Minister for further information on that last category. Can he help us better understand what issue the measures in the clause are seeking to address specifically in relation to charities operating lifeboats? Can he explain what impact the law, as it currently exists, has been having on those charities operating lifeboats?
Gareth Davies
Essentially, as the hon. Gentleman points out, the measure is to correct some unintended consequences. One of those does relate to lifeboats. The initial provision was to include lifeboats and their ability to use rebated fuel. It did not include tractors and geared machines, which enable lifeboats to get in and out of the water. It is not something that was raised as part of the consultation process initially, but it was raised after the legislation went through. We are now amending that to ensure that not only lifeboats but tractors and geared machines can use rebated fuel.
James Murray
I thank the Minister for his clear response on that point. Obviously, charities operating lifeboats are ones that we all seek to support and to ensure are not disadvantaged inadvertently by any laws. Has the Minister had any discussions with those charities about whether they have lost out because of the unintended consequences, and whether there will be any redress?
Gareth Davies
I personally have not had that engagement. I will look into what discussions have taken place, and I would be happy to report that back to the hon. Gentleman.
Question put and agreed to.
Clause 318 accordingly ordered to stand part of the Bill.
Clause 319
Rates of tobacco products duty
Question proposed, That the clause stand part of the Bill.
Gareth Davies
Clause 319 implements changes announced at the spring Budget 2023 concerning tobacco duty rates. The duty charge on all tobacco products will rise in line with the tobacco duty escalator, with additional increases being made for hand-rolling tobacco and to the minimum excise tax on cigarettes. Smoking rates in the UK are falling, but they are still too high. Around 13% of adults are smokers. Smoking remains the biggest cause of preventable illness and premature deaths in the UK, killing around 100,000 people a year, and about half of all long-term users.
We have plans to reduce smoking rates further, towards our Smokefree 2030 ambition. To realise that ambition, the Minister for Primary Care and Public Health recently announced the next steps to help people quit smoking. Our policy of maintaining high duty rates for tobacco products will support the Government’s plan to reduce smoking to improve public health. According to the charity Action on Smoking and Health, smoking costs society £21 billion a year in England, as a result of sickness, disability and premature death, including £2.2 billion in costs to the NHS for treating disease caused by smoking.
At the spring Budget, the Chancellor announced that the Government will increase tobacco duty in line with the escalator. Clause 319 thus specifies that the duty charged on all tobacco products will rise by 2% above the retail prices index level of inflation. In addition, duty on hand-rolling tobacco increases by a further 6% above RPI inflation. The clause also increases the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—by an additional 1% to 3% above RPI inflation. The new tobacco rates will be treated as having taken effect from 6 pm on the day they were announced, which was 5 March 2023.
Recognising the potential interactions between tobacco duty rates and the illicit market, the Government intend to introduce tougher sanctions later this year to punish those involved in the illegal tobacco market. The Government also recently announced that HMRC and Border Force will publish an updated strategy to tackle illicit tobacco later this year.
This clause will continue our tried and tested policy of using high duty rates on tobacco products to make tobacco less affordable, and will continue the reduction in smoking prevalence towards a smoke-free 2030, as well as reducing the burden of smoking on our public services.
Craig Whittaker (Calder Valley) (Con)
On the Government’s ambition to reduce smoking, I briefly want to mention heating tobacco, in preference, I might say, to vaping.
The only problem with vaping, of course, is that there is absolutely no evidence of any health benefits or health risks. However, with heating tobacco, there is a huge amount of evidence, particularly from Japan, about its health benefits, in helping people to reduce and stop smoking. I just wondered whether the Minister has had any indication that heating tobacco has been looked at as an alternative to vaping. Of course, adding extra duties to it is an inhibitor to people reducing or stopping smoking.
Dame Angela Eagle
We are obviously dealing with a product that kills and, as the Minister said, cost the public purse £21 billion a year. That is why there is cross-party support for the tobacco duty escalator, which the Minister just outlined, explaining how it applies to current costs. It will increase the average price of a packet of cigarettes by 95p and the average price of a 30-gram packet of hand-rolling tobacco by £1.75. I have to say that hand-rolling tobacco is the tobacco product that is smuggled most, so we have to be particularly aware of that. The Minister will know that, if he has been to see Border Force. A 10-gram packet of cigars will go up by 48p, a 30-gram packet of pipe tobacco—again, that is a tobacco product that is often smuggled—by 63p and a typical 6-gram pack of tobacco for heating by 24p.
The Office for Budget Responsibility estimates that these increases will raise the amount of revenue taken by tobacco from £10 billion last year to £10.4 billion next year, which will actually return it to where it was the year before. Clearly, that is just an OBR estimate, but I presume that it is based on the work of and information given by Border Force and HMRC. If we are trying to get to a tobacco-free place by 2030, surely we need more progress than this kind of stasis on receipts. I wonder whether the Minister might wish to comment on that.
Clearly, the innovation of vaping is helping many people to give up smoking, but there are unknown health risks to vaping. In particular, would he comment on the way that vapes are being marketed at the moment in our society, with sweer flavours like bubble gum and melon, in a way that is clearly aimed at children. I do not think we should tolerate that. Will he give us a view rather than just saying that vaping is better than smoking cigarettes, which is clearly true?
What that does not include is the alarming rise in vaping among children, which is addicting them to nicotine in a way that might have difficult implications for public expenditure, health and their wellbeing if we allow it to continue. Will the Minister give us at least an early indication of his Department’s thinking on this juxtaposition?
Some organisations that do not think we are going far enough fast enough to eliminate tobacco as a habit to get to a smoke-free 2030 are proposing capping net profit margins on UK tobacco sales to no more than 10%—currently it is 50%—in line with the average for UK manufacturing. That could directly raise £700 million, which could fund the Khan review proposals, which contained a more radical way of trying to get us to the smoke-free target. Is the Department considering something more radical on revenue raising from tobacco products, given that progress has stalled?
As the Minister mentioned, and it is no surprise that he did, as soon as the tax goes up on tobacco products, the financial incentives to smuggle get greater. He mentioned there would be another smuggling strategy, which presumably will try to prevent the complete loss of revenue and lack of any capacity to prove whether the products being smuggled are even vaguely acceptable, because they are adulterated by all sorts, including brick dust. Will the Minister give us more information about what effect that will have on smuggling, because it is a constant problem?
Gareth Davies
There was quite a bit in there, but a lot of it was related, so I will do my best to address those points. First, to my right hon. Friend the Member for Calder Valley, I will need to educate myself a little better on heated tobacco, but if he would like to write to me, I will provide a more detailed response. I will address his comments on vaping, together with those of the hon. Member for Wallasey, in a moment.
The hon. Member for Wallasey mentioned hand-rolling tobacco and the connection to illicit trade. I want to clarify for the Committee that the fact we are raising the rate so significantly—6% plus RPI—is to help hand-rolling tobacco prices catch up with cigarettes to help us towards our Smokefree 2030 ambition. I wanted to provide that clarity because I did not in my opening remarks. The hon. Lady alluded to various calls to do more and to raise prices even more, and she referenced the OBR’s estimates for that. I will take that, together with the point she raised about the Khan review recommendations. We have to get the balance right with this taxation, as the hon. Lady said. If it is too high, it is likely to push people into the illicit trade. That is a known fact. That is one of the reasons why we have not proceeded with the 30% suggestion from the Khan review. At every review, we are trying to get that balance while also seeking to improve our enforcement action on illicit trade.
I referred to the updated review from HMRC and Border Force that is coming out later this year. I do not want to pre-empt what it is going to say or what it may achieve, but I certainly await it with eager anticipation. I would also add that the Finance Act 2022 included new sanctions, such as enhanced penalties, to strengthen the agencies’ enforcement abilities. That is a key focus of the Government right now.
The Chair
With this it will be convenient to discuss that schedule 21 be the Twenty-first schedule to the Bill.
Gareth Davies
Clause 320 and schedule 21 legislate to amend part 2 of the Finance Act 2017 to bring into scope the soft drinks industry levy on liquid flavour concentrates used in fountains, also known as dispensing machines, which combine added sugar with the concentrate when the soft drink is dispensed to produce a soft drink with at least 5 grams of sugar per 100 ml. The change takes effect from 1 April 2023.
The Government launched a consultation on the design and implementation of the soft drinks industry levy in August 2016 and set out a response confirming the broad policy approach. The soft drinks industry levy came into effect in April 2018 and supports the Government’s strategy to tackle obesity by encouraging reformulation at manufacturer level. The soft drinks industry levy applies to packaged soft drinks containing at least 5 grams per 100 ml of added sugar. Producers, manufacturers and importers of liable soft drinks must register a report and pay the soft drinks industrial levy on the volume of liable soft drinks packaged in and imported into the UK.
The soft drinks industry levy has driven substantial reformulation, resulting in a sugar reduction in soft drinks of 46% between 2015 and 2020 and the reformulation of more than 50% of sugary soft drinks in response to the levy. The changes made by clause 320 and schedule 21 will close a minor technical loophole within the soft drinks industry industrial levy, improving the consistency of its application. The changes are in line with the intent of the original legislation. The measures extend the definition of a soft drink liable to the soft drink industry levy to include packaged concentrates that are mixed with sugar when dispensed from a soft drink fountain machine. Other fountain machines used in the restaurant, retail and leisure industry that use a packaged syrup or concentrate containing added sugar are already in scope of the soft drinks industry levy.
The change will bring consistency across the soft drinks industry by ensuring that all packaged concentrates used in fountain machines, regardless of the stage when the sugar is added, are captured by the soft drinks industry levy. Existing soft drinks industry levy rules, including registration, rates, accounting and payment will apply to manufacturers and importers of flavour concentrates manufactured to be mixed with sugar in a dispensing machine. The change takes effect from 1 April 2023 and will bring consistency across the soft drinks industry by ensuring that all packaged concentrates used in fountain machines, regardless of the stage at which sugar is added, are captured by the soft drinks industry levy.
James Murray
I will speak briefly to clause 320 and schedule 21, which relate to the scope of the soft drinks industry levy. As the Exchequer Secretary set out, the result of these measures is that the levy will now apply to liquid flavour concentrates that are manufactured in, or imported into, the UK. The concentrates are products that are mixed with added sugar in a dispensing machine to dispense a soft drink for the final consumer.
The soft drinks industry levy was announced at Budget 2016 and came into force in April 2018. It has been targeted at producers, manufacturers and importers of soft drinks containing added sugar by encouraging the reformulation of drinks to reduce levels of added sugar and portion sizes, and the marketing of low-sugar alternatives and so on. We recognise that this technical change will bring liquid flavour concentrates within scope of the levy, and we will not oppose the clause.
Victoria Atkins
Out of an abundance of caution, I refer Members to my entry in the Register of Members’ Financial Interests and my ministerial interests. I am recused from this subject matter in a ministerial capacity.
Dame Angela Eagle
I wonder which sugary drinks the Minister is addicted to—perhaps she will tell us when we are not sitting in public.
We are dealing here with a technical change to the successful sugar tax, if we can call it that. Again, when we are dealing with Ministers whose job is to get money into the Exchequer, it is strange to have to congratulate them for the declining level of soft drinks industry levy receipts. The tax has successfully delivered on the intention behind the policy, and receipts are down by £21 million for April 2022 to March 2023. That is an awful lot of ruined teeth and extra weight avoided, often for children, whose life chances can be negatively impacted by becoming addicted to sugar.
The consensus among public health officials is that the sugar tax has caused a decline in sugary drink sales, and the total amount of sugar in soft drinks sold by retailers and manufacturers decreased by 35.4% between 2015 and 2019, from 135,500 tonnes to a mere 87,600. That is a success as far as things go, but perhaps the Minister might assure the Committee that the Government will take credit for the success and that they intend to continue to push for lowering even further the 87,600 tonnes of sugar that are currently put in drinks, because there is uncertainty about the Government’s direction.
Two previous Prime Ministers have challenged the existence of sugar taxes. The right hon. Member for Uxbridge and South Ruislip said that, on the current evidence, it is ambiguous whether they work, but I have just raised some evidence that shows unambiguously that they do. Similarly, the Prime Minister’s immediate and very short-lived predecessor, the right hon. Member for South West Norfolk (Elizabeth Truss), said that
“taxes on treats hit those on the lowest incomes.”
If I may say so, they might also account for the development of a trend that is quite shocking when one thinks about it. There is now a positive correlation being between poor and being obese. As a society, we ought to tackle that, partially by using such methods, so that we can ensure that the correlation does not survive. We could bring to bear a range of other measures to ensure that happy outcome, but they would be completely outwith the scope of the Bill, so I will not talk about them.
We must, however, congratulate the Government on their introduction of sugar taxes. Since the current Prime Minister’s position is unclear, because he has both supported and rejected furthering a sugar tax, will the Exchequer Secretary tell us what the Government’s position is? Is he willing to stand up and take unambiguous credit for the success of the sugar tax and confirm to us that the Government’s intention is to continue making progress in this area in an appropriate way, with more than just technical changes for drinks fountains?
Gareth Davies
I am always grateful for the hon. Lady’s comments. I can answer her quickly. We are committed to the SDIL—the soft drinks industry levy—and we share her positive recognition of the sugar decline. With any tax considerations, however, we have to achieve a balance; we have to balance tax against cost of living concerns, as she pointed out, so all taxes remain under review.
Question put and agreed to.
Clause 320 accordingly ordered to stand part of the Bill.
Schedule 21 agreed to.
Ordered, That further consideration be now adjourned. —(Andrew Stephenson.)
Finance (No. 2) Bill (Fourth sitting)
Thursday 18th May 2023
(11 months, 3 weeks ago)
Public Bill CommitteesRead Full debate Finance (No. 2) Act 2023 View all Finance (No. 2) Act 2023 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 May 2023 - (18 May 2023)
The Committee divided: - Ayes: 10 / Noes: 7 - Question accordingly agreed to.
The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 2 / Noes: 9 - Question accordingly negatived.
The Exchequer Secretary to the Treasury (Gareth Davies)
Clause 321 introduces a new domestic air passenger duty band for flights within the UK to bolster connectivity within the Union and a new ultra-long-haul band to further align the tax with the Government’s environmental objectives. The clause also sets the 2023-24 rates for both the new bands and the two existing bands that are operated by the retail price index.
Clause 322 enables the Northern Ireland Assembly to set the rate for the new ultra-long-haul band for direct flights departing Northern Ireland. The primary purpose of air passenger duties is to ensure that the aviation sector contributes to public finances, since tickets are VAT-free and aviation fuel incurs no duty.
Following a consultation on aviation tax reform in 2021, the Government announced a package of APD reforms at the autumn Budget 2021. First, the reforms will bolster air connectivity within the Union through a 50% cut in domestic APD. Some of the nations and regions of the UK are separated by sea so aviation has a critical role to play in facilitating the necessary links across our Union.
Secondly, by adding a new ultra-long-haul distance band, the reforms further align APD with the Government’s environmental objectives, recognising that aviation is responsible for 8% of the UK’s greenhouse gas emissions. In particular, emissions from international aviation have more than doubled since 1990, and we were responsible for 96% of the sector’s greenhouse gas emissions in 2019.
The new ultra-long-haul band, which covers flights that are greater than 5,500 miles from London, will ensure that those who fly furthest and have the greatest impact on emissions incur the greatest duty. The annual uprating for APD rates in line with RPI to the nearest pound is routine and has occurred every year since 2012. To give airlines sufficient notice, the Government announce the rates at least one year in advance.
The changes made by clause 321 implement the APD reforms and the 2023-24 rates announced at autumn Budget 2021. APD for domestic flights, except private jets, will be reduced by 50%, from £13 to £6.50 for passengers flying economy class. Overall, the Government expect that more than 10 million passengers will benefit from the reform.
The new ultra-long-haul band will be set at £91 for passengers flying in economy—a £4 increase compared with the existing long-haul band. That is expected to affect less than 5% of passengers. For the remaining 2023-24 rates where the standard uprating applies, the clause increases the long-haul rate by a nominal increase of just £3 for economy class. The rounding of APD rates to the nearest pound means that short-haul rates will remain frozen in normal terms for the 10th year in a row. That benefits more than 70% of passengers.
Clause 322 enables the Northern Ireland Assembly to set the rates for the new ultra-long-haul band for direct flights departing Northern Ireland. The rates for direct long-haul flights from Northern Ireland are already devolved. The reforms to air passenger duty will bolster Union connectivity and further align the tax with our environmental objectives. These are a routine uprating of existing rates, which represents a real-terms freeze and ensures that airlines continue to make a fair contribution to our public finances. I therefore move that the clauses stand part of the Bill.
James Murray (Ealing North) (Lab/Co-op)
As we heard from the Minister, clause 321 will introduce a new domestic band for flights within the UK and a new ultra-long-haul band covering destinations with capitals located more than 5,500 miles from London. Until the end of March 2023, there were two destination rate bands for air passenger duty: band A included those countries whose capital city is less than 2,000 miles from London, with band B covering all other destinations. From 1 April, there have been four destination bands: the domestic band for flights within the UK; band A for non-domestic destinations whose capital is up to 2,000 miles from London; band B for destinations whose capital is between 2,001 and 5,500 miles from London; and band C for all other destinations.
As the Minister explained, clause 322 makes consequential amendments to the provisions that devolve to the Northern Ireland Assembly the power to set the direct long-haul rates of APD. I understand that the changes in the clause do not impinge on the devolved powers, and the devolved rates are not affected. Rather, it updates the provisions to reflect the introduction of clause 321 and the ultra-long-haul band.
Before I address our concerns about this measure, I would be grateful if the Minister could help the Committee to understand what the situation would be if the clause passed by confirming what rates of air passenger duty would apply in a few specific instances. First, if someone were to travel by helicopter around the UK—for instance, from London to Southampton—would that be subject to air passenger duty? Secondly, if someone travelled on a private jet around the UK—say, from London to Blackpool—that was, for argument’s sake, a Dassault Falcon 900LX, what rate of air passenger duty would apply? Finally, if someone lives in the UK but was travelling to another home of theirs—say, in Santa Monica, California—what rate of air passenger duty would apply? I would be grateful if the Minister could answer those three questions.
I turn to our concerns about the clause. As the Minister might know, when this measure was first announced at autumn Budget 2021, we raised our concerns about it during the debates on the subsequent Finance Bill. We pointed out then—it is even truer today—that it could not be right for the Government to prioritise a tax cut that would be of greatest benefit to people who are able to be frequent flyers in the UK at a time when working people across the country have been hit again and again by tax rises.
As well as being the wrong priority for public money, the Chancellor announced the cut in air passenger duty just days before COP26. What is more, as the Institute for Fiscal Studies pointed out at the time, the cut in air passenger duty would in fact flow through the UK emissions trading scheme and push up electricity prices for people at home. The Government have pointed out that the introduction of a reduced domestic rate of air passenger duty has been accompanied by the introduction of an ultra-long-haul rate. However, when taken together, all the changes in the clause are still set to cost the taxpayer an additional £35 million a year. We cannot support this as a priority for spending public money, so we will oppose the clause.
Dame Angela Eagle (Wallasey) (Lab)
Will the Minister tell us how clause 322(4), which devolves these issues to the Northern Ireland Assembly, will work, given that the Assembly is not sitting at the moment? Does it mean that this will be decided centrally at Westminster? What arrangements are made for that, since, if there was no change in these areas, in the absence of the Assembly sitting, there would be a divergence between air passenger duty in one place and the other? How has the Treasury modelled that divergence, given that air passenger duty is a devolved issue, even though the devolution settlement is not working at the moment because the Assembly is not sitting?
Will the Minister update the Committee on where we are with the aviation treaties that zero-rate aviation fuel? It is an ongoing issue, given the nature of the environmental damage that is done—particularly by aviation fuel—in the higher atmosphere when airplanes fly at higher levels, which they normally do on long-haul flights. How will private jets be treated and affected, if at all, by the reduction in domestic air passenger duty, since we have a Prime Minister who seems to think that public transport is chartering a private jet for short-haul flights?
Craig Whittaker (Calder Valley) (Con)
May I declare a loose interest?
I have an elderly mother who lives in Australia. As she is elderly, I am spending more and more time going down there. That aside, has the Minister done any evaluation of air passenger duty and the economic competitiveness of the UK versus our European partners?
I ask that because I know from previous years travelling down to Australia that it has been much more viable for me to catch a flight to Amsterdam, Oslo or wherever and pick up a flight from there, because the cost of flights from the UK has been phenomenally more expensive than those from our European partners. From speaking to people, I know that more and more people are doing that. APD has the adverse effect of making us uneconomical and perhaps at some future point even taking a reduced rate because more and more people will be doing that. Has the Minister or anybody in the Treasury done any evaluation of our air passenger duty versus those of our European counterparts?
Gareth Davies
Let me try to answer those questions in order. Just to clarify for the Committee, there is no APD other than on fixed-wing aircraft. Private jets pay a higher rate than any other flight domestically, and they are not, to answer the hon. Member for Wallasey, subject to the 50% cut that we are talking about here. Any ultra-long-haul flights will face a new band, as I described in my opening remarks.
To answer the excellent and reasonable question from my right hon. Friend the Member for Calder Valley (Craig Whittaker), I understand there was a review in 2021 of the economic impact of APD. As I said in my opening remarks, all factors are considered as part of that process, but I am happy to provide more detail in due course if that is warranted.
The point on Northern Ireland that the hon. Member for Wallasey raised is a good one. It is a devolved matter, as she points out, and Northern Ireland has the ability to set the rate for ultra-long-haul flights. Let me look into the matter of the arrangements we are putting in place, given the specific circumstances that we find ourselves in with the Executive. It is a fair question, and it deserves a fair answer, so I will come back to her.
Dame Angela Eagle
I thank the Minister for undertaking to let us have that information, given the particular circumstances that prevail in Northern Ireland. Can he say a little bit about whether there is any progress with the aviation treaties? I know how difficult it is, but it is a complete anomaly that there is no taxation of aviation fuel simply because most flights pass through an international area, given the worse damage that use of aviation fuel does when aeroplanes are travelling at high altitude. Something that we aspired to do when I was in the Treasury was to get some kind of agreement in international treaties to bring that matter into tax. Has any progress been made in the ever-elongated period between when I was in the Treasury and the present day?
Gareth Davies
First, let me apologise to the hon. Lady. I had that in my notes to address, and I did not. She is referring to the Chicago convention, which basically is an international agreement whereby we have agreed not to tax aviation fuel. That was, as I understand, enacted in the 1940s. I was told in a briefing yesterday that it may have been updated some eight times since then, but she raises an interesting point. We are committed to all current international agreements, but it is certainly something that I will look into. I still regard myself as fairly new in this job, but I commit to look into it in due course.
Question put, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Government amendment 9.
Clause 324 stand part.
Government amendment 10.
That schedule 22 be the Twenty-second schedule to the Bill.
Clause 325 stand part.
Gareth Davies
Clauses 323 to 325 and schedule 22 provide for the 2023-24 vehicle excise duty rates and the new, reformed heavy good vehicle levy from August 2023.
The clause sets the 2023-24 vehicle excise duty rate. Since 2010, rates of VED have changed only in line with inflation, which means that drivers have not seen a real-terms increase. The clause will result in nine in 10 car drivers seeing a change to their VED liability of £20 or less next year. The Government continue to support drivers who will benefit from the extended cut and will freeze fuel duty in 2023-24, worth £100 to the average driver.
Clause 324 and schedule 22 introduce the new, reformed HGV levy from August 2023, following the end of the levy suspension period. The reforms are a further step towards reflecting the environmental performance of heavy goods vehicles. Given that the HGV levy suspension period is coming to an end, HGV VED will remain frozen for 2023 to 2024 to support the haulage sector. Finally, clause 325 removes certain circumstances in which the levy suspension period for a given HGV is extended longer than intended.
I will now go through the measures in detail. A long-standing feature of VED is that it is uprated in line with inflation, using a measure based on the retail price index. Since 2010, rates for cars, vans and motorcycles have increased only in line with inflation. The standard annual rate of VED for cars first registered since April 2017—the most common annual rate—will increase by £15, from £165 to £180. Drivers will continue to benefit from the extended cut and freeze to fuel duty in 2023-24, which taken together represent a saving of £100 per average motorist.
As for the HGV levy, which applies to all HGVs of 12 tonnes or more, it was introduced in 2014 to ensure that all hauliers, both UK and non-UK, make a contribution when they drive on UK roads. The levy was suspended in August 2020 to support the haulage sector and aid the covid-19 pandemic recovery efforts. The suspension is due to end in August 2023.
In June 2022, the Government consulted on HGV levy reform options. The consultation sought views on proposals to align a reformed HGV levy with the environmental performance of the vehicle, ensuring that levy liability is as closely aligned as possible to when a foreign vehicle is used on a major road. Having considered views on the subject, the Government decided to take forward the proposals, as announced at the Budget.
Clause 323 will result in changes to some drivers’ vehicle excise duty liabilities. That includes changes to first-year rates of VED for cars. The most polluting vehicles will pay up to £2,605, while those with lower emissions will pay nothing. Rates for vans, motorcycles and motorcycle trade licences will also change in line with RPI.
Clause 324 and schedule 22 will increase the new reformed HGV levy. That is effective from August 2023. On average, UK HGVs will pay around 20% less than under the previous HGV levy, with both UK and non-UK hauliers benefiting from a much simplified levy structure based on weight proxying CO2. The number of rates will reduce from 22 to 6, which will make administration easier. For non-UK hauliers, the reforms also ensure that the levy is focused on road usage and is more clearly aligned with the Government’s international obligations. The most common type of HGV hauliers will pay £576 per year. The second most common type will pay £150—less than the cost of a tank of fuel. For many types of HGVs, operating costs are more than £100,000 a year; the HGV levy represents a small fraction of that.
Clause 325 is a technical anti-avoidance change. In the final year of the three-year levy suspension period, each vehicle should benefit from only up to 12 months of levy-free period. The clause ensures that by providing for a transitional payment where a vehicle has benefited from additional months of levy-free period.
The Government have tabled amendments 9 and 10 to those clauses, which address minor legislative errors to ensure that vehicle excise duty for rigid HGVs pulling trailers continues to apply as intended following the introduction of the new reformed levy. Where VED was partly set according to the vehicle weight bands of the previous HGV levy, the amendments specify the same weight bands independently of the new reformed levy. As a result, the VED due for HGVs pulling trailers does not change, in line with the Government’s policy intention.
In conclusion, a new reformed HGV levy will ensure that all hauliers continue to make a contribution when they use UK roads after the levy suspension period ends. VED has been frozen for HGVs, and for other vehicles it is rising in line with RPI only, so drivers will not see a real-terms increase in their VED liabilities. I therefore commend the clauses, the schedule and amendments 9 and 10 to the Committee.
James Murray
As we have heard from the Minister, clause 323 provides for changes to certain rates of vehicle excise duty by amending schedule 1 to the Vehicle Excise and Registration Act 1994. As we know from announcements in the spring Budget, vehicle excise duty rates for light passenger and light goods vehicles and motorcycles will increase in line with inflation, based on RPI. We understand that the changes to rates will take effect for vehicle licences taken out on or after 1 April this year.
Clause 324 and associated schedule 22 change the HGV road user levy; they amend, as the Minister said, how it is calculated and the rates. They also remove the requirement to provide a register of HGV levy paid. The HGV levy was introduced in 2014, and is payable by both UK and non-UK HGVs when using UK roads. The Government suspended the levy in August 2020, and it will return in August this year. The Department for Transport consulted on changes to the HGV levy in June 2022. The reforms implemented by the clause and the accompanying schedule move the levy towards better reflecting the environmental performance of vehicles.
On a minor point of clarification, the explanatory note to the clause states:
“For non-UK HGVs, the reforms also ensure that the levy is…more clearly aligned with the government’s international obligations.”
Could the Minister explain what international obligations the note refers to, and how the reforms better align the UK with them? Finally, clause 325 operates alongside clause 324. It deals with circumstances where the levy’s suspension period for a given HGV is extended longer than the Government intended. As the explanatory notes on the clause make clear, in the final year of the three-year levy suspension period, which ends in August this year, each vehicle should benefit from only another 12 months of levy-free period. I understand that the clause ensures that that is the case by providing for a transitional payment where a vehicle has benefited from additional months of levy-free period, so Labour will not oppose the clause.
Gareth Davies
I am grateful to the Opposition for not opposing clause 325. The hon. Member rightly asked about the international aspect of the provisions on international hauliers. Perhaps I can offer additional clarification. The measures will apply only to A roads and motorways, which is in line with what happens in many other countries. On the specific international obligations that he asked about, I do not have the exact detail to hand, but I am happy to follow up on that. However, what we propose is in line with what is done by many other countries around the world. Revenue weight of vehicle 2 axle vehicle 3 axle vehicle 4 or more axle vehicle Exceeding Not exceeding kgs kgs Band Band Band 11,999 15,000 B(T) B(T) B(T) 15,000 21,000 D(T) B(T) B(T) 21,000 23,000 E(T) C(T) B(T) 23,000 25,000 E(T) D(T) C(T) 25,000 27,000 E(T) D(T) D(T) 27,000 44,000 E(T) E(T) E(T)”.
We are often asked why the levy is restricted to certain roads. It has been assessed that rerouting to avoid the levy would not be cost-effective for hauliers. We have every confidence that the Driver and Vehicle Licensing Agency, the police and our extensive automatic number plate recognition technology will enable us to enforce this measure. On the question about international obligations, I understand that the obligations may be those under the trade and co-operation agreement. I will confirm that to him later.
Question put and agreed to.
Clause 323 accordingly ordered to stand part of the Bill.
Clause 324
Reform of HGV road user levy
Amendment made: 9, in clause 324, page 245, line 34, after “provision” insert “(including consequential provision)”.—(Gareth Davies.)
See the explanatory statement for Amendment 10.
Clause 324, as amended, ordered to stand part of the Bill.
Schedule 22
Reforms of HGV road user levy
Amendment made: 10, in schedule 22, page 449, line 25, at end insert—
‘10A “(1) In consequence of the amendments made by paragraph 10, in Part 8 of Schedule 1 to VERA 1994 (annual rates of duty: goods vehicles), paragraph 10 (relevant rigid goods vehicles) is amended as follows.
(2) After sub-paragraph (2) insert—
“(2A) In this paragraph, references to “the tables” are to the tables mentioned in sub-paragraph (6).”
(3) In sub-paragraph (3)—
(a) in the opening words omit “following”;
(b) in paragraph (c), for “appropriate HGV road user levy band” substitute “vehicle excise duty band”.
(4) For sub-paragraph (5) substitute—
“(5A) The “vehicle excise duty band” in relation to a vehicle is determined in accordance with the following table—
(5) In each of the tables after sub-paragraph (6), in the headings to column 1, for “Appropriate HGV road user levy band” substitute “Vehicle excise duty band”.’—(Gareth Davies.)
This amendment and Amendment 9 would make consequential amendments to ensure that vehicle excise duty remains chargeable on certain HGVs on the same basis, and in the same amounts, as it is chargeable before the amendments to the HGV road user levy in the Bill have effect.
Schedule 22, as amended, agreed to.
Clause 325 ordered to stand part of the Bill.
Clause 326
Rates of landfill tax
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 327 to 329 stand part.
New clause 5—Assessment of impact of the Act on compliance with the climate change target—
“The Chancellor of the Exchequer must, within one year of this Act coming into force, publish an assessment of the impact of this Act on the Government’s ability to meet—
(a) the duty under section 1 of the Climate Change Act 2008 (the target for 2050), and
(b) its obligations and commitments under the Paris Agreement of 2015.”
This new clause would require the Chancellor to publish an assessment of the impact of the Act on the UK Government’s ability to meet its duty to achieve Net Zero by 2050 and its obligations under the Paris Agreement.
Gareth Davies
Clauses 326 to 328 make changes to the rates of several taxes to support our environmental and climate change objectives. Clause 329 makes technical changes to ensure that the aggregate levy is fairer and simpler for businesses. I will talk through the clauses in turn.
Landfill tax aims to encourage the diversion of waste away from landfill and towards more environmentally friendly waste-management options, such as recycling. Clause 326 maintains the real-terms value of the price incentive to divert waste away from landfill by increasing the lower and standard rates of landfill tax in line with the RPI. The clause increases the lower rate from £3.15 per tonne to £3.25 per tonne and increases the standard rate from £98.60 per tonne to £102.10 per tonne, with effect from 1 April 2023.
The Financial Secretary to the Treasury (Victoria Atkins)
Again, out of an abundance of caution, I refer hon. Members to my entry in the ministerial register of interests. I am recused from any consideration, in a ministerial capacity, of this levy.
James Murray
As we have heard, clause 326 increases both rates of the landfill tax in line with inflation, rounded to the nearest 5p. The increased rates apply to any disposal of relevant materials made, or treated as being made, at a landfill site in England or Northern Ireland on or after 1 April.
The landfill tax was introduced in 1996. It increased the cost of waste disposal at landfill to encourage waste producers and the waste management industry to switch to a more sustainable way of disposing of waste material. The tax was originally UK-wide, but it was devolved in Scotland from April 2015 and in Wales from April 2018. We will not oppose the clause, but I ask the Minister to fill us in on the wider context of the landfill tax, and specifically landfill tax fraud. In a Backbench Business Committee debate on landfill tax fraud in January, my hon. Friend the Member for Cambridge (Daniel Zeichner) said:
“Landfill tax fraud is a blight on communities across the country. It causes lasting damage to the environment and, of course, deprives the Exchequer of revenue.”—[Official Report, 12 January 2023; Vol. 725, c. 793.]
As Members discussed during that debate, according to His Majesty’s Revenue and Customs’ most recent annual estimate of the tax gap, the gap between landfill tax due and revenue collected in 2021 is £125 million. That is a gap of 17.1%—much higher than the overall tax gap for that year. According to HMRC’s report, the uncertainty rating for the landfill tax gap estimate is high. The then Exchequer Secretary, the hon. Member for South Suffolk (James Cartlidge), conceded in the debate that “non-compliance is high.” In responding to the debate, he set out some details of the operational resource dedicated to landfill tax non-compliance; however, I do not think that he directly answered a question that the shadow Minister, my hon. Friend the Member for Cambridge, put to him: how much of the £125 million tax gap identified in 2021 has been recovered by HMRC? I would be grateful if the current Exchequer Secretary could address that point.
Clause 327 amends the main rates of the climate change levy on gas and other taxable commodities, and the reduced rate percentages on those commodities paid by participants in the climate change agreement scheme from 1 April next year. The climate change levy is a tax on the non-domestic use of gas, electricity, liquefied petroleum gas and solid fuels. Energy-intensive businesses that participate in the climate change agreement scheme run by the Department for Energy Security and Net Zero pay reduced rates expressed as a percentage of the four main rates of the climate change levy on the taxable commodities supplied to them.
We understand that the changes introduced by the clause were announced in the 2022 autumn statement, which froze the electricity rate, and in which it was confirmed that the climate change levy rate for LPG will continue to be frozen until 31 March 2025. It was further announced that the reduced rates of the levy for 2024-25 on gas and other taxable commodities paid by qualifying businesses in the climate change agreement scheme would be amended, so that participants will not pay more under the levy than they would have if the rates had increased in line with the retail price index.
Clause 328 increases the plastic packaging tax in line with the CPI. The plastic packaging tax was introduced in April 2022 to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging. That was expected to create greater demand for the material, which would in turn stimulate increased recycling and collection of plastic waste, diverting it from landfill or incineration. I understand that the new rate maintains the real-terms value of the incentive to include 30% or more recycled plastic and plastic packaging components in a product by increasing the rate of tax in line with the CPI. As that tax has now been in place for a year, what evaluation have the Government made of it? In particular, can the Minister tell us what impact the tax had in 2022-23, in terms of fulfilling its stated aim of stimulating increased recycling and collection of plastic waste?
Clause 329 makes changes to the aggregates levy exemptions for some types of aggregate from construction sites. We understand that it replaces four exemptions for by-product aggregate arising from certain types of construction with a broader and more general one. The explanatory notes state:
“Following a review of the levy in 2019, some concerns about the operation of the levy were raised by different stakeholder groups.”
I understand that the changes were consulted on in 2021. Draft legislation was published in July 2022 for technical consultation, which has now concluded. On that basis, we will not oppose the clause.
Aaron Bell (Newcastle-under-Lyme) (Con)
It is a pleasure to serve under your chairmanship, Sir Gary. I will confine my remarks to clause 326. I am grateful to the hon. Member for Ealing North for raising landfill tax fraud and the debate on 12 January, which I contributed to at some length. As Members may know, I have the worst landfill in the country in Walleys Quarry in my constituency of Newcastle-under-Lyme. The Opposition Whip, the hon. Member for Blaydon, also has some experience in this area, because her constituents have suffered at Blaydon Quarry. She contributed to that debate, too.
The hon. Member for Ealing North mentioned that the tax was introduced in 1996. The differential between the rates for regular waste and inert waste has grown immensely. Now, they are £3.25 and £102.10 respectively; back in 1996, they were £2 and £7. Just as the hon. Member for Wallasey said earlier in relation to tobacco, that has increased the incentive for people to break the rules, and unfortunately, many people in the waste industry are breaking the rules. What goes on at Walleys Quarry causes misery for my constituents, as fly-tipping and everything else that goes on in the waste industry does for people around the country.
The responsibility falls primarily on the Environment Agency, which I continue to press to do more about Walleys Quarry, as well as about Staffordshire Waste Recycling Centre, which is just over the border in the constituency of my hon. Friend the Member for Stoke-on-Trent North (Jonathan Gullis), who mentioned it just yesterday at Prime Minister’s questions. Will the Minister focus on the role of HMRC in helping the EA to do its work, because prosecutions for fraud may ultimately have more effect than prosecutions under environmental regulations?
Liz Twist (Blaydon) (Lab)
It is a pleasure to speak with you in the Chair, Mr Stringer. As the Opposition Treasury Whip, talking about landfill tax is becoming an annual ritual for me.
Landfills are a blight on our society. It is not pleasant to live near one—even a well-regulated one—and it is good that we are considering how to pursue landfill taxes. My particular concern is, as it was previously, about the effectiveness and enforcement of the rates and the recovery of the taxes. As we heard from my hon. Friend the Member for Ealing North, there is still a considerable gap in collection rates, and that must be addressed if we are to treat people properly and minimise the impact of landfill sites.
The Minister may know about Operation Nosedive, which HMRC pursued with great fanfare in my constituency only to drop it quietly six years later. Earlier this year, on 12 January, we had a debate to consider that operation and the wider implications of landfill tax fraud. The joint unit for waste crime was established following the failure of Operation Nosedive, which, incidentally, cost HMRC £3.5 million in public money. There are huge tax implications here. Will the Minister comment on what is being done to close that tax gap?
As I said, landfill sites are not good, and it is good that we do all we can to reduce their environmental impact, but there is also the matter of reducing the gap between what is collected and the expectation, by ensuring that those moneys are recovered. Will the Minister comment on that and on how many enforcement actions and prosecutions have resulted from the work of the joint unit for waste crime on landfill tax?
Douglas Chapman (Dunfermline and West Fife) (SNP)
New clause 5 would require the Chancellor of the Exchequer to publish an assessment of the impact of the Bill on the Government’s ability to meet their duties under the Climate Change Act 2008 and commitments under the 2015 Paris agreement. The UK Government need to walk the walk as well as talk the talk on climate change. We had an extremely successful conference of the parties in Glasgow in 2021. The UK Government COP President secured the historic inclusion of coal in the climate pact, even if that commitment was not quite as explicit as he originally wished.
Scotland is taking that very seriously. We have ambitious climate change targets to become a net zero greenhouse gas-emitting nation by 2045, with interim targets of 75% by 2030 and 90% by 2040. We are taking positive action to realise those goals. The UK Government’s action has stalled, however, and has not been helped by the series of changes of Prime Minister, each of whom has had a wholly different attitude to the urgency of climate change.
In reality, the UK Government talk about climate change when they are forced to do so, but they do not take the action required to meet their obligations. Is the Minister confident that the measures in the Bill will get targets back on track? In every single policy that comes from the UK Government and every piece of legislation enacted by this Parliament, the climate change impact should be evaluated, and this Bill is no exception. We should be leading from the front and considering the impact of each policy on the targets that have been set.
Dame Angela Eagle
This is a group of clauses on environmental taxes, and the Minister has taken us through some of the technical changes and some of the upratings that are required by law. There is a gap on the landfill tax, as my hon. Friend the Member for Ealing North pointed out from the Front Bench, which implies that people are avoiding it rather than paying it. What comfort can the Minister give us that HMRC and the tax authorities are on to that issue? We have heard from both sides of the House, particularly on landfill tax, about the fraud that is perpetrated. I suspect that all of us in this room regularly spend our time as constituency MPs phoning various authorities to try to get the evil effects of fly-tipping in our constituencies dealt with.
The Minister has not said anything about enforcement of the tax and anti-fraud measures. He has said a little about how some of the taxes will be redesigned to try to design out some fraud, and I suspect he has done that particularly with the aggregates levy and his attention on so-called borrow pits. Perhaps he will correct me if I have got that wrong, but, having listened to what he had to say on that, I suspect it is about avoidance issues, focusing the aggregates levy on taking away the incentives to use virgin aggregate rather than recycling existing aggregates, and filling in other loopholes.
We all know from our constituencies that the landfill tax is not working as well as it should. Many of us have closed and managed landfill sites in or close to our constituencies. Not all of us have quarries, with the difficulties that occur there, but we all see the baleful effects of fly-tipping and people who save money by dumping rubbish, and sometimes far worse things, into the environment.
Clearly, HMRC and those who collect taxes have a role to play in dealing with fraud, but so has the Environment Agency. Perhaps the Minister will give us some comfort on this, but the weakening of enforcement authorities over the past few years is a real problem. We could have the perfect law, with the perfect text, designed perfectly so that incentives are fantastic, but if it is not enforced properly, it fails. We are certainly seeing that happen with the landfill tax.
Can the Minister give us some comfort that he is on to the issue and that the Treasury knows that it has to spend to save? The Treasury has to enforce the taxes that it levies, but it also has to empower other regulators and agencies that have a policing role, such as the Environment Agency and local authorities, to ensure that enforcement on these very important issues, which have a huge bearing on quality of life in all our constituencies, is properly resourced. Will the Minister give us some guarantees on that? At the moment, particularly with respect to the landfill tax, it is failing.
Gareth Davies
First, let me acknowledge that the landfill tax has been an overarching success, with local authority waste into landfill down by some 90% since 1990. I think we can all agree that that is a very good thing for England. I want to emphasise that, because it is a great success story.
A number of questions have been asked about waste crime. I completely agree that any type of waste crime is a blight on all our communities. As constituency MPs, we see the damage that it does, whether it is fly-tipping or other waste crime. That is why we have the joint unit for waste crime.
There have been questions about the effectiveness of the unit and the actions it has taken. I can tell the Committee that the unit is actively engaged in seeking to tackle waste crime. In particular, a special operation was undertaken from April 2020 to November 2022, in which some 100 partner agencies were engaged with the JUWC, and some 2,500 illegal waste sites were closed and a number of criminals engaged. But this is an ongoing problem and something we take very seriously. Of course, the Environment Agency has a role to play. The Government are engaged with all the agencies, not least the joint unit for waste crime, and we will continue to be so for some time to come.
There was a series of questions about the tax gap. For clarity, that is the difference between the amount that should be paid in theory and the amount that is collected by the Exchequer. The overall tax gap was 7.5% in 2005. It reduced to 5.1% in 2020-21. Any percentage of tax gap is too much, so it is important that we keep pressing HMRC to do everything that it can. I am confident that HMRC is tackling businesses that it suspects of waste crime that are not registered with it but could be liable for tax. The Government have given powers to HMRC to compulsorily register those businesses and, if necessary, issue penalties.
Dame Angela Eagle
I am fascinated by the work of the joint unit for waste crime. I am slightly horrified that 2,500 illegal waste sites were closed. It is good that they are closed, but it is horrifying that there were so many of them to begin with. I wonder what estimates there are for how many remain. Could the Minister give us some information about what fines were levied and what prosecutions have been successfully undertaken by the joint unit for waste crime?
Gareth Davies
I am grateful for the question. I can tell the hon. Lady that in the period I referenced with the 2,500 waste units, 51 arrests were made as a result of that action. I apologise that I do not have further details to hand, but I am happy to provide them later.
As I was saying—this goes back to what my hon. Friend the Member for Newcastle-under-Lyme talked about—HMRC does have powers to intervene and issue penalties if necessary.
Liz Twist
I have two points for the Minister. First, my specific question was whether any prosecutions had taken place as a result of the work of the joint unit for waste crime. Like my hon. Friend the Member for Wallasey, I am pleased to hear that a number of sites have been shut down, although it is worrying that there were so many.
Secondly, will the Minister comment on the landfill tax gap? The issue was discussed in the Public Bill Committee on what became the Finance Act 2022. The then Exchequer Secretary to the Treasury, the hon. Member for Faversham and Mid Kent (Helen Whately), wrote to me following the Committee with an estimate of £200 million—22.7%—for the landfill tax gap for England and Northern Ireland in 2019-20. That was a decrease from the previous year.
If I heard him correctly, the Minister—
The Chair
Order. Interventions should be brief and to the point. The hon. Lady and other members of the Committee will not have any difficulty catching my eye if they want to make another contribution.
Gareth Davies
I completely understand the hon. Lady’s passion. I know that she is a long-standing campaigner in this area, so it is no surprise that she wants to discuss the issue; I completely understand why that is. I can tell her that the tax gap has fallen, I believe, in the period that I talked about by £125 million, from £200 million in 2019-20. To reiterate, in 2005 the tax gap stood at 7.5% and in 2020-21 it stood at 5.1%. As I say, we are not complacent. We must tackle the issue, and we continue to make great efforts to do so. I put on the record my thanks to HMRC for all the work that it does to get the number down, but it is a live issue.
Let me mop up the question asked by the hon. Member for Ealing North about a review of the plastic packaging tax. He is right to raise that. We will be conducting a review very soon, but we are clear that we would like a decent period in which to conduct it so that we can see a clearer picture of the impact the tax is having. I can assure him that a review will be conducted very soon.
Liz Twist
I apologise for my previous lengthy intervention, Mr Stringer. May I return to the issue of the tax gap? As the Minister himself said, it was £200 million in 2019-20, a 22.7% gap. I am interested to hear the Minister say that it has reduced so much. If it has, I am hugely pleased, as it means that enforcement action is being taken. [Interruption.] Would he care to comment on the huge gap in the figures and how it might have reduced?
Gareth Davies
I apologise, but will the hon. Lady make that last point again? I did not hear her because of the noise in the background.
Gareth Davies
I am grateful for that clarification. As I mentioned, HMRC is actively targeting businesses and is able to tackle businesses that are not registered but that it believes are liable. In addition, HMRC has powers of compulsory registration.
I should clarify that those figures give the overall tax picture. The most recent figures for the landfill tax gap for England and Northern Ireland are estimated at 17.1% for 2020-21. I was giving figures for the overall tax picture, but the hon. Lady makes a very good point of inquiry. I hope that that clarifies the situation.
James Murray
I thank the Minister for his commitment to a review of the effectiveness of the plastic packaging tax and for his clarification of some of the statistics around the tax gap. Comparing the figures that he cited with the figure of 17.1% for landfill tax fraud shows just how big the tax gap is for landfill tax fraud, and how important it is that specific action be taken. Will he explain what specific action, rather than just talk about generalities, is being taken on landfill tax fraud, which we all agree is a problem that must be tackled?
May I also remind the Minister about a question I asked earlier? I am sorry if I missed it, but I do not think he responded to my question about the £125 million tax gap identified in 2020-21 and what has been done to recover that money.
Gareth Davies
As I have laid out, the Joint Unit for Waste Crime is a very effective organisation. It works with more than 100 agency partners to tackle all types of waste crime, including the type that we are talking about. HMRC is targeting businesses and has the powers to compulsorily register and to issue penalties. That action is being taken by not just HMRC, but by the JUWC.
I will get back to the hon. Member on his last point; I do not have the information in front of me right now.
Question put and agreed to.
Clause 326 accordingly ordered to stand part of the Bill.
Clauses 327 to 329 ordered to stand part of the Bill.
Clause 330
Designation of sites
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clause 331 stand part.
That schedule 23 be the Twenty-third schedule to the Bill.
Victoria Atkins
Clauses 330 and 331 will make changes to ensure that tax sites in investment zones can benefit from an optional single five-year offer of tax reliefs, identical to those available in freeports. That will mean that businesses within the tax sites can benefit from tax and national insurance reliefs to incentivise investment and reduce the cost of hiring employees.
The Government have set out an ambitious plan for growth and prosperity, rooted in boosting the UK’s potential as an innovation nation, growing strengths in key industries to support national priorities and levelling up communities across the country. At the spring Budget, the Chancellor confirmed that the investment zones programme will catalyse 12 high-potential, knowledge-intensive growth clusters around the UK, including four across Scotland, Wales and Northern Ireland. Each investment zone will bring together local partners to drive the growth of our key future sectors, bringing investment into areas that have traditionally underperformed economically. Each English investment zone will be able to benefit from access to interventions of £80 million over five years, which can be used flexibly between spending and a single, optional five-year tax offer. The changes made by clauses 330 and 331 will enable special tax sites in English investment zones to have access to that single, optional five-year tax offer.
Clause 330 will amend existing legislation to allow investment zone tax sites to be designated via secondary legislation in the same way as freeport tax sites. Clause 331 will allow the sunset date for the investment zones, tax reliefs and special tax sites to be set in that secondary legislation. Businesses investing or hiring new employees in investment zone tax sites will have access to the following tax reliefs: first, a full stamp duty land tax relief for land and buildings bought for commercial use or development for commercial purposes; secondly, a 100% relief from business rates on newly occupied business premises, and certain existing businesses where they expand in investment zone tax sites; and thirdly an enhanced capital allowance, a 100% first-year allowance for companies’ qualifying expenditure on plant and machinery assets for use in tax sites.
Furthermore, there is an enhanced structures and buildings allowance, which provides accelerated relief to allow businesses to reduce their taxable profits by 10% of the cost of qualifying non-residential investment per year, relieving 100% of their cost of investment over 10 years. [Interruption.] It is always delightful to hear from the Speaker.
Finally, there is employer national insurance contributions relief—zero-rate employer national insurance contributions on salaries of any new employee working in the tax site for at least 60% of their time, on earnings up to £25,000 per year, with employer NICs being charged at the usual rate above that level. The relief applies for 36 months per employee. The precise costs of tax sites will vary by site; however, the estimated value of 600 hectares of tax reliefs is £45 million, to be deducted from the overall £80 million funding envelope available to an investment zone.
These clauses will help to enable the investment zones tax offer to operate in special tax sites in England. That will drive private sector activity in investment zone tax sites, which will be key to catalysing the agglomeration of businesses in high-potential, knowledge-based sectors in investment zones across England.
James Murray
As we have heard, clause 330 and its associated schedule, schedule 23, will extend the power to designate special tax sites to allow designation of such sites in or connected with investment zones located in Great Britain, while clause 331 makes provision related to the sunset date for tax reliefs available in special tax sites.
We know that these provisions are being introduced effectively to extend the tax reliefs available in freeport tax sites to such sites in or connected with investment zones. We know that those tax reliefs include an enhanced capital allowance for qualifying expenditure and plant machinery; enhanced structures and buildings allowance for qualifying expenditure on non-residential buildings and structures; and a stamp duty land tax relief for certain acquisitions of land. Furthermore, a secondary class 1 national insurance contributions relief for eligible employers on the earnings of eligible employees up to £25,000 per annum, which is available in freeport tax sites, is also being extended to special tax sites in or connected with investment zones.
It is worth being clear that the investment zones with which the Government are currently proceeding are different from the investment zones that the right hon. Member for South West Norfolk (Elizabeth Truss) announced when she was Prime Minister. A significant number of councils put in bids for investment zones when they were announced under her premiership. According to the Association of Local Authority Chief Executives, councils had to spend an average of £20,000 to £30,000 on each bid, and may well have lost staff hours to work on preparing the submissions. Since then, investment zones have been relaunched, but it seems clear that the process for proceeding with the relaunched investment zones is entirely separate from the bidding process in operation for their former incarnation.
I would be grateful if the Minister confirmed how much money is estimated to have been wasted by councils, and indeed by central Government civil servants, on the now-abandoned bidding process for the original incarnation of investment zones. I assume that councils will be left out of pocket with respect to any money that they have spent on bids, and that the Government will not be considering refunding any of those costs, but I would be grateful if the Minister at the very least apologised to taxpayers for the money wasted as a result of this aborted policy.
I know that apologies can be hard to come by. Just last night, in fact, we heard the former Chancellor, the right hon. Member for Spelthorne (Kwasi Kwarteng), brazenly denying the harm that the mini-Budget last autumn caused to family finances. He refused to take responsibility for the impact of soaring rates on mortgage payers across the country and on renters, who are seeing higher costs passed on to them. However, I urge the Minister to do the right thing and take this opportunity to apologise more generally for the harm caused by the mini-Budget last autumn, and indeed by Conservative failures over the past decade.
Mark Jenkinson (Workington) (Con)
Would the hon. Gentleman like to clarify whether it is Labour party policy to intervene in Bank of England decisions?
The Chair
Order. I did not realise that that was an intervention; I thought the hon. Gentleman wished to make a speech. The shadow Minister had sat down. If the hon. Gentleman wants to make a contribution, I will be happy to call him, but otherwise I will call Angela Eagle.
Dame Angela Eagle
There is an ongoing issue in this country, and in our economy, with investment and with the ability to ensure that we can remake our prosperity as a country and make our way in the 21st century as we did in previous centuries, thereby maintaining our position in the G7, perhaps, as the rise of other economic powers in other parts of the globe puts that under pressure. [Interruption.] Everybody cheers for that, Mr Stringer. Everybody on this Committee wants to see positive progress in this area.
This Bill is enacting some of the Budget—that is why we are in Committee, considering this legislation—but the OBR report on it had a pretty grim picture to show us of how investment has stalled in our country. On page 48, at chart E, it states that
“business investment stalled…after the EU referendum”.
By the time this document was published, investment was at fully 16.2% below the OBR’s pre-referendum expectations. Those who have sat in the main hot seat in No. 10, and those who have been progressing all too rapidly through the Chancellor’s hot seat, have been aware of that and have tried to do something about it. Most notably, there was the current Prime Minister’s super deduction, which paid people to invest in plant and machinery. It not only deducted the entire cost, but gave even greater tax incentives for them to invest. Effectively, it failed: it made no difference whatever to the stalling levels of investment in plant and machinery in our economy. That has now been replaced.
Craig Whittaker
It is interesting to hear what the hon. Lady says about levels of investment in plant and machinery. From the point of view of my patch, Calder Valley, where we have 19.2% of people working in manufacturing, the super deduction has been a huge boost to manufacturing. Will the hon. Lady acknowledge the huge investment of £17.7 billion that has been achieved only this week by the Prime Minister’s trip to Japan? That is an amazing boost to our economy.
Dame Angela Eagle
I am glad that there are positive examples of investment, but what I am talking about is the macroeconomic levels, which demonstrate that we are not where we should be. Essentially, investment has “stalled”—that is the OBR’s word, not mine. That stalling is not disproved by individual examples of investment in particular places. I congratulate the right hon. Gentleman and all the people who have been involved in doing whatever has happened in Calder Valley—no problem—but I am talking about the macroeconomic effects. The investment zone policy that we are discussing is presumably designed to kick-start investment in particular areas where the zones are marked out, which hopefully will create local prosperity. That is my understanding of what the Minister said.
Samantha Dixon (City of Chester) (Lab)
To illustrate to the Minister why I support the request of my hon. Friend the Member for Ealing North for an apology from the Government, I draw attention to my borough of Cheshire West and Chester, which made a bid for an investment zone last year. That zone would have been a real game changer for our region. It was in the constituency of my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders), and the business case specifically referred to a company called Stellantis—hon. Members may have heard of it. Unfortunately, that investment zone bid, into which council officers put a considerable amount of time and energy, has vanished like Scotch mist.
The right hon. Member for Calder Valley is fortunate that his investment zone was taken forward, but in my borough, the fact that the bid was not successful may have prompted some difficult decisions for the companies that were going to be located in the proposed investment zone. The leader of the council, Councillor Louise Gittins, wrote to the Chancellor asking for an explanation of why the investment zone was not taken forward. I am not aware that she has received a response.
Shaun Bailey (West Bromwich West) (Con)
I will keep my comments incredibly brief. There is a running theme to the debate. I thank my hon. Friend the Financial Secretary to the Treasury, because my area of the west midlands and the fantastic advocate that we have in Mayor Andy Street secured significant investment as part of the Budget. I put on record my thanks for the £22.5 million investment in Tipton town centre that the Chancellor announced in his Budget statement.
I appreciate what the hon. Member for Wallasey said about the broader parts of this discussion, and I defer to her much more considerable knowledge of the issue. But in terms of the more regional aspects of investment, it is a really important part of the investment package and strategy that we put confidence into our communities and that we say to those who want to bring inward investment into our areas—particularly post-industrial areas such as mine—that there is a case to do so. That £22.5 million, combined with the £60 million transport investment that my right hon. Friend the Chancellor also announced in the Budget as part of his broader package of resources, shows the confidence we need to see. Let us not forget that the west midlands has had a tough time, particularly post pandemic, and our productivity is still 3% down on pre-pandemic levels, so what this investment means for bringing in the inward investment that secures support for industry will be key to addressing the challenges that we face.
The efficacy and efficiency of this investment is key. We need to make sure that we set out tangible metrics of success so that not only the public, but industry can measure the effect of this important investment. As we go forward, particularly on the regional investment front, I ask the Minister and her officials to make sure that dialogue continues so we can make sure that areas such as the west midlands can see the money’s true benefit. It is all well and good talking about abstract figures of billions and millions of pounds, but we need to get across the real-life, tangible results for our constituents. We see that in the increased productivity, increased employment opportunities and upskilling in our areas.
We are very grateful for the investment that we have seen in our region, and I agree somewhat with the broader points raised by the hon. Member for Wallasey, but the key point in this broader debate is tangible, real results on the ground. We can have all the economic debates we want, but it is about delivery for real people.
Victoria Atkins
I thank my hon. Friend for his comments, with which I agree. I will not pretend that the Labour party is in politics for different reasons from us. I genuinely believe that most Members of Parliament are in politics to do good for their local residents and for the country as a whole. The point of contention is on how we achieve that.
I am interested in the contrast between the submission of the hon. Member for Ealing North and the submission of the hon. Member for Wallasey. She represents part of Liverpool, and I grew up in the north-west, so I know Liverpool and Manchester very well. I think we would all agree that Liverpool and Manchester have seen a revitalisation over many decades. It takes a village to raise a child, as the old saying goes, and I fully accept that the previous Labour Administration may have done a great deal to help those areas. Going back a long way—a little before my time, perhaps—Lord Heseltine played his part in helping both Liverpool and Canary Wharf. We are trying to revitalise areas in the same way that Liverpool, Manchester and Canary Wharf, and indeed many other areas, have been revitalised.
Dame Angela Eagle
The Minister would be very, very unpopular in my constituency if she referred to it as Liverpool. I represent the Wirral, which is over the river, where the Mersey ferry goes when it ferries across the Mersey. People can still listen to Gerry singing “Ferry Cross the Mersey” on the ferry as it goes from Liverpool to the Wirral. I appreciate her comments, but the people of the Wirral regard themselves as a bit different from those in Liverpool.
Victoria Atkins
I apologise to the hon. Lady. I meant to refer to the wider area. I thoroughly respect the independence of the good people of the Wirral.
We saw the regeneration and revitalisation of the great city of Liverpool in the wonderful displays at last weekend’s Eurovision celebrations. The regeneration of that great city has, of course, had a much wider ripple effect.
We want to channel the focus and private sector investment to which the hon. Lady rightly refers in revitalising these areas. We want to do that in a way that takes notice and full advantage of the opportunities of the 21st century. The Chancellor set out the sectors that we will concentrate on, because we want to build that investment for the future. There is some extraordinarily good news in our economy in terms of innovative technologies, life sciences and advanced manufacturing. Indeed, I saw in a WhatsApp group only this morning that Rolls-Royce has just unleashed its latest aircraft engine, to great acclaim, here in the UK. That is an extraordinary achievement, which we want replicate across the country. That is the thinking behind investment zones.
When the shadow Minister talked about these exciting proposals, he said nothing about the principles of the investment or the enormous opportunities for communities outside London. I know that he is a Member of Parliament for London, so perhaps he does not have the natural affinity with constituencies outside London that Conservative MPs have, and which I certainly have as a proud Lincolnshire MP. We really want to focus on the excitement for what we can achieve around the rest of the country. The shadow Minister, however, just focuses on process.
Samantha Dixon
The point I want to make to you—[Interruption] Sorry, the point I want to make to the Minister is that the areas that have been referenced have mayoral combined authorities. My borough sits in a sub-region of Cheshire and Warrington, which, despite strenuous efforts, has not managed to get those powers devolved to it. Under this Government, it appears to have lost out on an investment zone. Upper-tier authorities were encouraged to submit bids. They did so, but none of them were successful and they have not been given an explanation of why.
Victoria Atkins
The work on the new investment zones is ongoing. The Department for Levelling Up, Housing and Communities has begun discussions on hosting investment zones with local partners and the Treasury. That is because we want those areas to operate at a regional level, as has happened in the past with other examples. We want them to be regional examples, as I said. We are looking forward to Scotland, Wales and Northern Ireland having their investment areas. From that, many other measures will flow. Investment zones will also sit alongside freeports. Some investment zones may include freeports, but some freeports may stand independently of them. We want to ensure that we spread innovation and a drive for growth across the country.
Shaun Bailey
I want to add to the Minister’s response to the hon. Member for City of Chester. I do not necessarily disagree with some of the hon. Member’s frustrations. However, as a Member who sits within a combined authority area, I know that even when the combined authority is involved in those bids, the upper-tier authority does not just vanish from the picture; it is very much involved. The investment we had came from upper-tier authority submissions that went into the Government. I appreciate what the hon. Member said about the assistance that a combined authority might give, but it is still very much on the upper-tier authority to be in the game with some of this stuff. It does not just vanish with the creation of a combined authority area.
Victoria Atkins
I am grateful to my hon. Friend for his intervention. This is about teamwork across the various authorities, and working with local businesses. We are very open to the idea that different investment zones will focus on different sectors and specialisms. We want them to be driven at a local level by people who know their areas best. For example, they know what their local university specialises in, what local manufacturing there may be and so on. This must be driven from local areas.
Samantha Dixon
At the risk of repeating myself, the bid put in by my local authority, in partnership with two other upper-tier authorities, was fully cognisant of both the business interests in the sub-region and the HE factor. It was an excellent bid. It vanished, and no explanation has been given. It is extremely frustrating.
Victoria Atkins
I will commit to our trying to get an answer to the hon. Lady’s local authority about that. She will appreciate that other bids are run by other Departments. I am not intimately involved in what happens after a bid has been announced, but I will certainly try to get some answers for her. For the future, that is how we can ensure that the investment zones and other investment opportunities best work for local people. I am happy to commit to trying to get her an answer, although it will probably come from another Department.
Question put and agreed to.
Clause 330 accordingly ordered to stand part of the Bill.
Clause 331 ordered to stand part of the Bill.
Schedule 23 agreed to.
Clause 332
Right to repayment of income tax to be inalienable
Question proposed, That the clause stand part of the Bill.
Victoria Atkins
I hope that clause 332 will be of real interest to hon. Members and their constituents. In recent years, there has been a growth in what are commonly called repayment agents. Hon. Members may have received a great deal of correspondence from their constituents about such agents. They are paid tax agents who specialise solely in making claims for income tax relief on behalf of their clients.
Repayment agents can provide a useful service to taxpayers by helping them to claim reliefs or allowances to which they are entitled from HMRC, but last year HMRC received around 2,800 complaints about repayment agents from taxpayers who were unclear about the terms or conditions to which they had signed up. Those taxpayers were unaware that they were claiming through a third party and that they would be charged a fee of up to 50% of the repayment, and they were unaware of the use of assignments. Clause 332 prohibits the assignment of income tax repayments and, where such rights have been assigned, renders the assignment void. It is a consumer protection measure that is aimed at ensuring that taxpayers have better control over their income tax repayments, and I hope that hon. Members will advertise the measure to their constituents.
I turn to clauses 333 to 335. New late payment penalty and interest legislation was approved by Parliament in 2021. The new system is built on fairness and proportionality. In implementing penalty reform and interest harmonisation for VAT, we have identified some minor defects in the legislation that the clauses seek to correct. Clause 333 ensures that, for customers who use the VAT annual accounting scheme, late payment interest will not be charged on interim instalments of VAT that are paid late. Clause 334 ensures that late payment penalties do not apply to instalments payable under the VAT annual accounting scheme, and clause 335 makes a minor technical change to repayment interest on VAT to ensure that the rules operate as intended.
Clause 336 gives HMRC a power to move insurance premium tax administration forms out of secondary legislation and into a public notice. Currently, whenever administration forms need to be updated, a statutory instrument needs to be passed. Moving administration forms out of that regime will enable them to be updated without the need to pass legislation each time an update is required. That will simplify the administration of tax and support HMRC in keeping pace with developments in tax policy and insurance industry practices.
Finally, clause 337 relates to the plastic packaging tax. Currently, late payments in respect of plastic packaging tax by liable businesses and businesses that are held secondarily liable or joint and severally liable incur the same penalties. In contrast, late payments of assessments made by HMRC where a business has failed to submit a return incur different penalties. Clause 337 addresses that anomaly and amends schedule 56 to the Finance Act 2009, so that all late payments of plastic packaging tax incur the same penalties.
James Murray
As we heard, clause 332 introduces a new provision that renders void assignments of income tax repayments. We understand that the clause removes the ability of a taxpayer to legally transfer their entitlement to an income tax repayment to a third party such as an agent. It enables HMRC to disregard assignments when issuing income tax repayments, although we understand that it does not remove a taxpayer’s ability to use a non-legally binding nomination where they wish their repayment to be made to a third party. The decision to prohibit assignments seems to have been driven largely by the practices of Tax Credits Ltd, which ultimately led to HMRC having to issue tax refunds directly to 60,000 affected taxpayers.
The changes in the clause have been broadly welcomed by groups including the Low Incomes Tax Reform Group, which pointed out that they mean that taxpayers will no longer be able to assign their rights to an income tax repayment to a third party repayment agent, and that includes taxpayers who have been tricked or misled into doing so by an unscrupulous agent. However, LITRG highlights that issues remain around the nomination process—the alternative way that I mentioned of enabling an agent to receive a payment. It is concerned that the provisions in the clause will not stop taxpayers being tricked or misled into nominating an unscrupulous agent to receive an income tax repayment. LITRG also raised its concern that responsible repayment agents, who were not misusing assignments, may exit the market, given the risk of non-payment for their work. LITRG therefore suggests that HMRC carefully monitors the impact of the provision on taxpayers and their ability to obtain refunds.
I am sure that the Minister will try to assure us that HMRC carefully monitors all its operations, but I would press her to give a more specific commitment in response to LITRG’s concerns. In particular, will she commit to publishing certain metrics proposed by LITRG, such as the total number of refund claims made and the total number made by third party companies?
Clauses 333 to 335 amend legislation governing a new penalty regime and rules on interest for VAT, which the Government announced at spring Budget 2021. As we heard, clause 333 makes two technical changes to the late payment interest rules. The first change ensures that late payment interest does not apply to instalments payable under the VAT annual accounting scheme. The second change means that when HMRC is recovering a VAT payment, the late payment interest start date is the date from which HMRC paid that amount. Clause 334 amends the Finance Act 2021 to ensure that late payment penalties do not apply to instalments payable under the VAT annual accounting scheme. Clause 335 amends the Finance Act 2009 to remove a restriction on the accrual of repayment interest on VAT paid by HMRC to the taxpayer. We will not oppose these clauses.
We understand that clause 336 will broaden existing powers, thereby enabling HMRC to move insurance premium tax forms from secondary legislation and into a public notice by way of a statutory instrument. As the Minister outlined, these technical changes are intended to reduce the administrative burden and make it easier to make administrative updates to the forms without the need for legislation. We also understand that this provides a necessary step for future legislation allowing HMRC to further digitise the insurance premium tax forms. We will not oppose the measure.
Finally, clause 337 amends schedule 56 to the Finance Act 2009, to align inconsistent late payment penalty provisions and ensure that all businesses liable for a late payment penalty in respect of the plastic packaging tax are charged the same penalty, however that liability arises. As we discussed earlier, the plastic packaging tax was introduced from 1 April last year to provide an economic incentive for businesses to use recycled plastic in the manufacture of plastic packaging, which was intended in turn to create greater demand for that material. The clause introduces a technical, administrative change and we will not oppose it.
Victoria Atkins
We are pleased that LITRG is one of the many groups that we work closely with. We listen to them very carefully. Indeed, I met the head of the group only last week, I think, to listen to their concerns or thoughts about the tax system.
Just to reassure hon. Members, some people want to nominate tax agents to reclaim their taxes, and we do not want to shut down that route if people want to use it and do so in a fully informed and consenting manner. That is why we are moving from the assignment process through to nominations, and taxpayers will be able to withdraw easily from nominations. The point is that nominations are not permanent; they can be changed if taxpayers should wish to do so.
That is a really critical consumer protection. It is why we have put it in the Bill. It took immediate effect, because we wanted to apply it as soon as possible to prevent taxpayers from being tied into agreements that they could not rescind. Repayment agents were made aware of the Government’s intentions to legislate in January and we would say that they will have had time to adjust to the new forms, if you like, by the time that this Bill receives Royal Assent.
In relation to the other matters, I understand that the Opposition are not challenging them, so I will stop there.
Question put and agreed to.
Clause 332 accordingly ordered to stand part of the Bill.
Clauses 333 to 337 ordered to stand part of the Bill.
Clause 338
Approval of aerodromes
Question proposed, That the clause stand part of the Bill.
Victoria Atkins
These clauses make changes to strengthen HMRC’s framework for approving aerodromes and excise businesses. Clauses 338 and 339 deal with aircraft carrying passengers or goods into and out of the United Kingdom. These aircraft are required to land at or depart from a designated customs and excise airport, unless permitted by HMRC to use an aerodrome.
There are approximately 540 aerodromes in the UK, which may handle small private jets with passengers and goods under a duty allowance, with very limited movements of freight. The typical requirements placed upon customs and excise airports are not appropriate for these smaller locations.
The Government currently agree the certificate of agreement with aerodrome operators and that provides the permission required to land at these locations. The changes made by these clauses will strengthen the legal basis for the aerodrome approval process. First, clause 338 will allow HMRC to issue approvals to aerodromes for customs purposes, to attach conditions and restrictions to these approvals and to vary or revoke approvals where necessary. Secondly, this clause provides a power to allow HMRC to make regulations about approval conditions for aerodromes and civil penalties for non-compliance with approval conditions and restrictions. Finally, the clause will require operators of unapproved aerodromes to take reasonable steps to ensure that pilots and importers do not depart from or arrive at their aerodrome in contravention of legal requirements on aircraft movements into and out of the United Kingdom.
Clause 339 makes minor and consequential amendments.
Clause 340 concerns excise regimes. Colleagues may be aware that businesses in a several excise regimes operated by HMRC require approval to conduct certain controlled activities. Those include the alcohol wholesaler registration scheme and the raw tobacco approval scheme. Approval is dependent on a business continuing to satisfy certain fit and proper criteria. Where evidence shows that the business is no longer fulfilling that criteria, HMRC may as a last resort revoke its approval. The business may request an internal review of the decision by an independent officer and ultimately has the right to appeal to tribunal and higher courts, in which case a temporary approval may be given so that the business can carry on trading until the matter is finally determined.
James Murray
As we heard from the Minister, clauses 338 and 339 relate to regulated aerodrome approvals. Clause 338 introduces a power for HMRC to grant approvals to aerodromes for the purposes of the customs and excise Acts and to amend and revoke those approvals. The clause also introduces a requirement that operators of aerodromes take reasonable steps to ensure that no aircraft lands or departs in contravention of the Customs and Excise Management Act 1979.
Clause 339 introduces consequential amendments following the provisions of clause 338. The clauses together aim to strengthen aerodrome operator accountability by establishing an approval regime for aerodromes, which handle movements of people and goods and are not designated as customs and excise airports. We will not oppose the clauses.
Moving on to clause 340, excise businesses must be approved by HMRC to conduct certain controlled activities. HMRC can revoke a business’s approval where it fails to meet HMRC’s fit and proper criteria. Current legislation allows a temporary approval to be granted pending a review or appeal, and the temporary approval automatically ends once that review or appeal has finally been determined. We recognise, however, that that may cause hardship to an affected business as, after the final determination, there is at present no time for such a business to wind down its operations without incurring a penalty.
The measure has a new discretionary power to allow HMRC to extend a temporary approval following a final determination of a decision to revoke an approval, or a temporary approval granted during the review or appeals process. That will enable a business to wind down its operations without incurring a penalty, so we will not oppose this clause, either.
Question put and agreed to.
Clause 338 accordingly ordered to stand part of the Bill.
Clauses 339 and 340 ordered to stand part of the Bill.
Clause 341
Licensing authorities: requirements to give or obtain tax information
Question proposed, That the clause stand part of the Bill.
Victoria Atkins
Clause 341 makes the renewal of certain licences to trade conditional on licence applicants completing tax checks in Scotland and Northern Ireland from 2 October 2023. Clause 342 makes amendments to licensing legislation in Scotland, which are consequential on clause 341
This is an extension of existing principles of conditionality that already apply to renewal applications in England and Wales for taxis and scrap metal dealer licences. The checks will confirm applicants are registered for tax and have notified HMRC of their income tax or corporation tax liability. This will make it harder for traders to operate in the hidden economy. It will also help licence holders get their tax affairs right and give honest businesses confidence that their competitors are playing by the same rules. New licence applicants will be supported and directed to HMRC’s guidance on tax obligations.
James Murray
We know that the Finance Act 2021 made provision for tax conditionality connected to the application for certain licences issued in England and Wales, namely licences to drive taxis, licences to drive and operate private-hire vehicles and licences to deal in scrap metal. We understand that clauses 341 and 342 extend the existing tax conditionality legislation to similar licences issued in Scotland and Northern Ireland. In Scotland, this applies to licences to drive taxis and private-hire cars, operate a booking office, and be a metal dealer, while in Northern Ireland it applies to licences to drive taxis.
We will not be opposing these clauses, but I would be grateful to the Minister if she can explain what, if any, additional resources will be made available to HMRC to effectively implement this extension of tax conditionality legislation.
Victoria Atkins
I wrote to the hon. Gentleman to set out the amounts and estimates that HMRC has given in its annual report and accounts about the collection protection in compliance yield, and this includes the compliance officers that would be put forward to help reduce the tax gap. They are changes to existing tax exemptions, reliefs and policies that HMRC is already resourced to administer, and it undertakes compliance interventions based on risk, with investigations normally covering multiple taxes and duties, as opposed to narrowly focusing on a single area of taxation. For example, we do not have a compliance team solely dedicated to investigating cases relating to the HGV levy, but if HMRC opened a tax inquiry into an HGV business, this would be one of many areas of taxation that it would look into to ensure that the business is compliant with its total tax obligations.
Question put and agreed to.
Clause 341 accordingly ordered to stand part of the Bill.
Clause 342 ordered to stand part of the Bill.
Clause 343
Definition of “charity” restricted to UK charities
Question proposed, That the clause stand part of the Bill.
Gareth Davies
Clauses 343 and 344 will restrict UK tax reliefs to UK charities and community amateur sports clubs. Having left the EU, it is right that UK taxpayer money should support UK charities and community amateur sports clubs.
The UK is a world leader in the charitable sector. This reflects many factors, including our geography, our connectivity and our recognised legal and regulatory expertise, but also because our tax regime for charities is among the most generous of anywhere in the world. As a result, there is a thriving UK charity sector, which includes numerous charities working across the globe, comprising both UK-based charities and UK branches of international charities.
Charitable tax reliefs in the UK are given in the following areas: income tax; capital gains tax, corporation tax, VAT, inheritance tax, stamp duty, stamp duty land tax, stamp duty reserve tax, annual tax on enveloped dwellings, and diverted profits tax. Additionally, charities and CASCs can also claim gift aid of 25p for every £1 of eligible donations made by UK taxpayers. In 2021-22, UK charitable reliefs were worth £5.5 billion to the sector, up from £4 billion in 2013-14. That has remained strong despite covid-19, with the value of reliefs remaining at about £5.5 billion from 2019-20 until 2021-22.
Before the introduction of that measure, charities based in the EU or European economic area could qualify for UK tax reliefs. Now it is time to take advantage of the UK’s exit from the European Union and to restrict UK tax reliefs so that they are available only to UK charities and community amateur sports clubs. That will protect the integrity of the tax system, as UK charities and community amateur sports clubs that are located outside the UK are harder for HMRC to police.
Clauses 343 and 344 will restrict UK tax reliefs to UK charities and community amateur sports clubs. Importantly, they do not discriminate between UK charities undertaking charitable activity here in the UK or abroad. The key factor is that the charity must be governed by a UK court. The measure took effect from Budget day, but the Government have allowed a short transition period until April 2024 for those charities that HMRC has recognised will be affected by the change. That provides a window for them to register in the UK if they are eligible or, if not, to reformulate their affairs.
The measure will ensure that UK taxpayer money will be used to support UK charities and community amateur sports clubs, and the effective policing of charitable reliefs through HMRC compliance activities. I commend the clauses to the Committee.
James Murray
As the Minister set out, clauses 343 and 344 introduce a restriction on the availability of tax reliefs so that only UK charities and UK community amateur sports clubs can gain access to UK charity tax reliefs. UK charitable tax reliefs were extended to organisations equivalent to charities and community amateur sports clubs in the EU and in the EEA countries of Norway, Iceland and Liechtenstein following a judgment of the European Court of Justice in January 2009. Following the UK’s exit from the EU, however, the Government are progressing to restrict UK tax relief to UK charities and community amateur sports clubs. We will not oppose the clauses.
Question put and agreed to.
Clause 343 accordingly ordered to stand part of the Bill.
Clause 344 ordered to stand part of the Bill.
Clause 345
Exemptions from tax
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to consider that schedule 24 be the Twenty-fourth schedule to the Bill.
Victoria Atkins
The clause and schedule 24 confirm that income tax and corporation tax exemptions will apply to “thank you” payments made to sponsors under the Homes for Ukraine sponsorship scheme. They also introduce legislation for temporary reliefs from the 15% rate of stamp duty land tax and the annual tax on enveloped dwellings for dwellings owned by companies when they are made available to Ukrainian refugees under the sponsorship scheme.
In March last year, we announced the Homes for Ukraine sponsorship scheme, which supports those who generously open their homes to Ukrainians arriving in the UK. As part of that scheme, sponsors receive a monthly “thank you” payment for housing an individual or family. Without specific legislation, those payments could be subject to tax. Likewise, ATED and the 15% may also have presented barriers to those who wish to provide homes for Ukrainian refugees. We therefore committed to legislate to exempt “thank you” payments from income tax and corporation tax, and to provide temporary reliefs from ATED and the 15% rate of stamp duty. We thank those public-spirited people and I commend the clause to the Committee.
James Murray
As we heard, the clause and schedule introduce income tax and corporation tax exemptions for thank-you payments made by local authorities to sponsors under the Homes for Ukraine sponsorship scheme. They also introduce temporary reliefs on the annual tax on enveloped dwellings and on the stamp duty land tax in connection with the provision of accommodation under the scheme.
The reliefs and exemptions were announced by the Financial Secretary to the Treasury in a written ministerial statement on 31 March 2022. In that statement, she explained that
“those companies that currently qualify for the existing reliefs available from the annual tax on enveloped dwellings (ATED) and the 15% rate of stamp duty land tax (SDLT) for dwellings used in a property development or property trading business or let on a commercial basis will continue to be able to claim the relief while the dwellings are being used under the Homes for Ukraine Scheme.”
Since March 2022, many people across the country have volunteered to sponsor Ukrainians fleeing the war in their home country, and have warmly opened their homes and hosted them accordingly, and it is right that the Government support them.
Samantha Dixon
I welcome this measure, and it is really important that these provisions be extended, but will the Minister consider extending them to the Afghan citizens resettlement scheme and the Afghan relocations and assistance policy? This morning, we talked about the number of Afghan refugees who have come to the country under those schemes and are currently accommodated in hotels. The Minister may be aware that charitable organisations, such as Refugees at Home, put sponsors in touch with refugees. Will she ask her officials to consider whether there are opportunities for similarly public-spirited people who are willing to use their accommodation to assist Afghan families in this country?
Victoria Atkins
On the case cited by the hon. Member for Ealing North, clearly we would like banks to enter into the public-spirited nature of the Help for Ukraine scheme and other refugee schemes. I will take that issue away and reflect on it with my ministerial compadre in the Treasury, the Economic Secretary, to see what we can do. Of course, the first port of call for anyone in that situation is their constituency MP. We are, I hope, good constituency MPs, and we can draw these matters to banks’ attention and can often get answers that our constituents sadly cannot, but I will take this matter away and mull it over.
The hon. Member for City of Chester mentioned other refugee schemes. I am not aware that the Afghan scheme has quite the same system of payments as the Ukrainian scheme, but I am happy to reflect on that issue. It is probably not a matter for this Bill, but I will think that one over.
Question put and agreed to.
Clause 345 accordingly ordered to stand part of the Bill.
Schedule 24 agreed to.
Clause 346
Abolition of the Office of Tax Simplification
Douglas Chapman
I beg to move amendment 2, in clause 346, page 264, line 31, at end insert—
“(9) This section shall not come into force until the Chancellor of the Exchequer has published—
(a) a response to the letter from the Chair of the House of Commons Treasury Committee, dated 2 March 2023, on the closure of the Office of Tax Simplification, and
(b) a statement of his assessment of the costs and benefits of abolishing it.”
This amendment would prevent the Office of Tax Simplification from being abolished until the Chancellor has replied to outstanding correspondence from the Treasury Committee on the subject, and published a cost/benefit analysis of the policy.
The Chair
With this it will be convenient to discuss the following:
Clause stand part.
New clause 1—Reports to Treasury Committee on measures to simplify tax system—
(1) The Treasury must report to the Treasury Committee of the House of Commons on steps taken by the Treasury and HMRC to simplify the tax system in the absence of the Office of Tax Simplification.
(2) Reports under this section must include information on steps to—
(a) simplify existing taxes, tax reliefs and allowances,
(b) simplify new taxes, tax reliefs and allowances,
(c) engage with stakeholders to understand needs for tax simplification,
(d) develop metrics to measure performance on tax simplification, and performance against those metrics.
(3) A report under this section must be sent to the Committee before the end of each calendar year after the year in which section 346 (abolition of the Office of Tax Simplification) comes into force.”
This new clause would require the Treasury to report annually to the Treasury Committee on tax simplification if the Office of Tax Simplification is abolished.
Douglas Chapman
I am sure that Members gathered here agree on the importance of data gathering, impartial analysis and evidence-based decision making. We can make informed decisions only if the facts are laid out in front of us in black and white. It would seem wise, then, that data be gathered on the costs and benefits of doing away with the Office of Tax Simplification before a final decision is made.
I will also be so bold as to point out that the recommendation to abolish the OTS came from a rather short-lived and now infamous Chancellor in his ironically named growth plan Budget of September 2022. Suffice it to say that the growth plan went down like a lead balloon after weeks of market turbulence, with unprecedented condemnation from the International Monetary Fund. That is not to mention the important—indeed, massive—£60 billion fiscal hole left in its wake. The then Chancellor and his Prime Minister swiftly exited stage left before more damage was done to the economy, our global reputation and citizens’ livelihoods.
Interestingly, of the many gung-ho announcements made in that growth plan, abolition of the OTS is one of the few that has not been reversed. When it comes to gathering evidence and data for making evidence-led decisions, and listening to experts and a broad group of stakeholders on tax simplification, we still have a long way to go, if this still seems to the Government to be a wise decision. One such expert is George Crozier, head of external relations at the Association of Taxation Technicians and the Chartered Institute of Taxation. He has argued that the OTS achieved a significant amount during its 12 years of existence and, with greater ministerial support for its proposals, could have achieved much more. Mr Crozier and the CIOT argue that among the OTS’s achievements since it was established in 2010 are the abolition of more than 40 unnecessary tax reliefs that were “clogging up” the tax system, as well as
“useful reforms to employee expenses and inheritance tax reporting,”
which have all had a positive impact. In fact, the CIOT informs us that
“every Finance Act of the last decade has had measures in it which owe their genesis to the OTS, and which have made navigating the tax system easier for one group or another.”
Does the Minister not believe that is a good thing?
Importantly, the ATT believes that there are many benefits to maintaining independent advice to the Government on tax simplification; for example, the OTS drew directly and effectively on the skills and expertise of tax professionals, professional bodies and taxpayers when making its recommendations for simplification. The ATT believes that the OTS maintained that level of engagement only due to the trust and belief that the OTS would treat its comments and views impartially and fairly. The ATT’s concern is that without the perceived independence of the OTS, taxpayers and professionals will be more reluctant to come forward with relevant evidence and experience. Does the Minister not believe that relevant evidence and experience are good things?
If analysis leans in the direction of abolishing the OTS, it seems fair to back up calls from Mr Crozier and his colleagues to question the UK Government on how they will deliver the promise to embed tax simplification in the institutions of government. Will the Minister confirm that he will at least give the OTS a stay of execution until further evaluation is carried out, or will the OTS baby be thrown out with the bath water? In the run-up to an election, it may be popular with the public if the Government of the day were seen to be taking the thoughtful and sensible decision to retain the services of the OTS.
Dame Angela Eagle
New clause 1 is also part of this group. As a member of the Treasury Committee, which fairly collectively signed new clause 1, I will speak to the new clause, as well as to the Scottish National party amendment to clause 346.
It came out of the blue that the Office of Tax Simplification was to be abolished as part of the mini-Budget—the catastrophic event last September that created the worst of all events in the Treasury. Interesting times. As an ex-Treasury Minister, I can assure you, Mr Stringer, that boring times are the best; interesting times, when bond markets soar and pension funds teeter, are not the best. We were thrown into that situation with the mini-Budget, out of which came the sudden announcement that the Office of Tax Simplification would be abolished. The reason given for that abolition was that we would boost economic growth and simplify the tax system by having tax simplification in house. That is one of the more Orwellian reasons for abolishing something that I have heard. It was set up by a previous Conservative Chancellor, George Osborne; I can use his name because he is no longer a Member of this House and has gone on to other—I will not say better—things.
When the OTS was set up, the idea was to identify areas where complexities in the tax system for business and taxpayers could be reduced. We need only look at the thickness of this modest Bill to realise how complex financial legislation can be. This is the Finance (No. 2) Bill, and others will be along soon, I am sure. Yesterday, we had a hearing of the Treasury Committee on tax reliefs and cliff edges, and we were told that there were 1,180 tax reliefs in the system. Of them, 841 are structural, and 339 are non-structural, which apparently means that they are aimed at behaviour. That is a lot of tax reliefs. Every relief, whether for a good or a bad reason, creates a complexity. I am not arguing at all that tax systems should be completely simple—complexity is sometimes important and inherent to the way that a tax works—but as with all these things, it is possible to have too much of a good thing. It tends to go beyond complexity for a good reason and become complexity for complexity’s sake.
I do not know why—perhaps the Minister could enlighten us—it was suddenly decided that the Office of Tax Simplification was such a thorn in the side of the Treasury that it could be abolished forthwith without much notice, and that a job that has not really been done routinely in the Treasury could suddenly be done in house without any kind of preparation. When the Treasury Committee had staff from the Office of Tax Simplification give evidence in a hearing, they did not really know why it had been abolished, either. Nobody likes to be abolished. I cannot think that they were enamoured of the idea, but they were very diplomatic. They did not really have any confidence that the more systematic look at how taxes could be simplified over time would continue once the office had been abolished.
Could the Minister give us some insight as to why the abolition was announced? Why was it reconfirmed by the new Administration—one of the four that we have had in the last year—when they came into office that they would go ahead with the abolition? It is one of the few things that the previous Prime Minister and her Administration inaugurated that has survived the shake-up of the system.
The Institute for Government argues that the Office of Tax Simplification should not be abolished, but that if it is, it should be replaced with a body with a wider remit that can make extensive recommendations on tax administration beyond just simplification. It points to the utility of having an independent body that provides options for tax reform.
Our political structures are littered with huge, all-encompassing reviews, such as the Mirrlees review of the entire taxation system. They are always so controversial, but it is rare that their recommendations are implemented. Having a body that could undertake some of this work in smaller bites may help us to reduce the complexity of our system while not compromising on fairness.
James Murray
It is a pleasure to follow my hon. Friend the Member for Wallasey, who spoke to new clause 1. I will address some of the points she raised, as well as amendment 2 and clause 346.
As several Members have said, the Office of Tax Simplification was set up in July 2010. It was an independent office in the Treasury before being placed on a statutory footing by the Finance Act 2016. As we have heard, on 23 September last year, the right hon. Member for Spelthorne (Kwasi Kwarteng) announced that it would be abolished. He said:
“Instead of having a separate arms-length body oversee simplification, the government will embed tax simplification into the institutions of government.”
I will return to that quote in a moment.
As hon. and right hon. Members have said, the policy was announced during the tenure of the previous Prime Minister and is being continued under the current leadership. That makes the abolition of the OTS one of the few elements of the so-called growth plan of that premiership to survive. In an earlier sitting of this Bill Committee, I commented:
“There is at the very least something ironic about a Government who use one clause of a Finance Bill to implement a recommendation of the Office of Tax Simplification and another clause of the same Bill to abolish that institution.”––[Official Report, Finance (No. 2) Public Bill Committee, 16 May 2023; c. 47.]
As was mentioned, the Chartered Institute of Taxation has pointed out that almost every Finance Act of the last decade has included measures that owe their genesis to the OTS.
To return to the reason originally cited for abolishing the OTS, the right hon. Member for Spelthorne said that the Government wanted to
“embed tax simplification into the institutions of government.”
We therefore have great sympathy with amendment 2, which was tabled by the hon. Member for Aberdeen North and has been spoken to. It would at least require the Chancellor to publish an analysis of the cost and benefit of the policy. That has been entirely lacking so far.
If the Government press ahead with abolishing the OTS, it is important that they make clear how they will deliver on their commitment to tax simplification. As was mentioned by my hon. Friend the Member for Wallasey, the Chartered Institute of Taxation sent a joint letter with the Low Incomes Tax Reform Group, the Association of Taxation Technicians, the Institute of Chartered Accountants in England and Wales, and the Institute of Chartered Accountants of Scotland to the Financial Secretary to the Treasury on 5 April. The letter covered identifying the characteristics of tax simplification; ensuring that someone is accountable for the delivery of tax simplification; including simplification declarations in tax information and impact notes; gaining external input on policy design and implementation; seeking feedback from a broad range of stakeholders; ensuring that HMRC and Treasury engagement groups have tax simplification as a standing objective; increasing awareness and improving guidance; allowing time for the development and integration of systems; and adopting a consistent approach across tax regimes.
I would be grateful if the Minister updated us on her response to the specific points set out by the Chartered Institute of Taxation. I also ask her again to set out clearly what costs and benefits, including the cost impact of any proposed new operational arrangements, she believes the abolition of the OTS will have, so that members of the Committee can consider this matter with all the relevant information to hand.
Victoria Atkins
For ease and convenience, I will speak to all the amendments and new clauses as well as clause 346. First, I thank the OTS—
Victoria Atkins
Thank you, Mr Stringer
I thank the members of the Office for Tax Simplification for their contribution to the tax debate over the years. I had the pleasure of meeting some of them just after I was appointed. As I said to them at the time, although the OTS will longer exist once the Bill has passed, their expertise will none the less not be lost to the Government, and I very much look forward to working with its members in different ways over the coming months and years.
The closure of the OTS does not mean that simplifying tax is no longer a priority. In fact, I have set three criteria for tax policy across the Treasury and HMRC: for any document or proposal that I am given, officials must tell me, first, how it meets the expectation that it will make tax fairer; secondly, how it meets the expectation that it will make tax simpler; and, thirdly, how it meets the expectation that it will help to support growth. Having that in the document—I have said this many times, because it was a very early commitment that I put down—has really helped our discussion of those principles when forming tax policy.
As I have mentioned in Budget debates and so on, one of the tensions between those first two criteria is that to make a tax fairer, sometimes we end up making it more complicated—for example, when we talk about tapering schemes, as we are doing in the Bill more widely. We have a scheme whereby we are tapering the rise in corporation tax for businesses that have smaller profits. That makes it more complicated but also fairer, so there is sometimes a trade-off between the interests and wishes of those involved in administering tax or helping taxpayers. With the best will in the world, the OTS, as an arm’s length body set up to comment on simplification alone, could not help with those sorts of balancing acts, which is why the Chancellor has set a clear mandate for officials in the Treasury and HMRC to focus on simplicity in tax policy design as part of our decision-making process.
Dame Angela Eagle
There is clearly a difference between the accrued complexity across a particular tax from end to end, which can gather barnacles over time, and a ministerial decision on whether to opt explicitly for a bit more complexity to achieve fairness, which is not a design issue but a political choice. Surely the Office for Tax Simplification was good at looking at the former, while leaving decisions on the latter to those who ought to be making them: the Ministers in charge at the time.
Victoria Atkins
Of course, pretty much every decision that comes across my desk is political in nature. Officials have very much taken on board their responsibilities in this regard.
The hon. Member for Ealing North asked about a letter sent to me in April from important tax specialists and organisations. In fact, I met them last week to discuss that very letter. I wanted to meet the organisations to discuss, for example, how to make tax simpler for the lowest paid in society and how we can try to help tax agents to navigate their way around the tax system, because that will help not just taxpayers but also, importantly, HMRC. We really have begun to embed this in our decision-making process.
The reason we want to make this change is that people were concerned that there was a tendency to rely on the OTS to look at simplification because that was its job, and we wanted to bring it very much into the Treasury. Of course, that does not mean that there is never going to be any commentary or analysis or observations about simplicity. My goodness me, I do not think anyone could claim that the world of tax lacks analysis, commentary and often criticism—hopefully constructive—of the tax system. I do not perhaps have quite the same concerns about us being accountable for the political decisions we make.
Victoria Atkins
If I may, I will make some progress, because I want to deal with new clause 1 and amendment 2, which are important.
On new clause 1, the Chancellor committed to Select Committee colleagues that he is asking officials about tax simplification ahead of every Budget and fiscal event. That will mean that hon. Members will have the opportunity to scrutinise the Government’s progress. In the last Budget, we were able to bring forward measures such as the cash basis for business, which will help enormously by helping more than 4 million sole traders to calculate and pay their income tax. We also introduced the permanent £1 million limit to the annual investment allowance, which will simplify the tax treatment of capital expenditure for 99% of businesses. There are also other measures.
In relation to the point about measuring and metrics in simplification, the Government are genuinely considering how to develop a suite of metrics to measure progress on simplification, working with businesses and representative bodies to ensure that measures reflect the real-world experience of taxpayers.
On amendment 2, it is right that the Chancellor has responded to the Committee, having written on 20 March to explain the rationale for the decision. I hope that helps to answer some of the questions that the hon. Member for Dunfermline and West Fife may have had. I refer again to the point that simplification is a vital principle to bear in mind when looking at the tax system, but it is not the only one. As the hon. Member for Wallasey rightly says, I have to make political decisions on a host of matters.
Dame Angela Eagle
I agree about that and I am glad to hear that the Minister is making decisions on a host of issues, although politically we may not always have the same approach to them. She was talking about there being plenty of commentary on tax issues. There always is, but the point about the Office of Tax Simplification was that it was not doing it from a set stance. For example, one will get plenty of commentary from accountants about particular things, and it will tend to be mainly about the interests of the people who use accountants—their clients. That comes from a particular space, as a user of the tax system, or someone that helps comment or advise on the tax system. The Office of Tax Simplification could look at a tax from its start all the way through its process—look at what it was intended to do and whether it would be possible to administer it in a different way, for simplification purposes, without coming from a particular viewpoint. If the OTS goes, I do not think there is anybody out there now that will do that in a neutral way. As such, a lot of the commentary that one gets on the tax system comes from a very particular, interested place, which often gives a bigger voice to small groups of taxpayers than to larger numbers of taxpayers. Is the Minister not worried that by making this decision, she is going to lose objective oversight of a system that is not coming from a biased place, but is looking purely at the criterion of simplicity?
Victoria Atkins
That is a fair challenge. It is one that we will meet through the meetings that we are already having, and that I am personally having, with organisations to discuss simplification. Of course we will discuss other matters in the future as well, but that is the No. 1 issue I am raising with those organisations. Also, I am very lucky to be able to work in the Treasury with incredibly talented officials. They do not hold back from giving Ministers of any Government proper advice on the tax system and other parts of the economy, so through all of this—as well as mulling over how we are ourselves able to check the progress we are making, as I say—I am confident that we will be able to make real progress in this area.
Douglas Chapman
On that point, I think the Labour party spokesperson, the hon. Member for Wallasey, was also alluding to the fact that it was that element of independence that really made the Office of Tax Simplification stand out from anything that can be provided in-house. That is the real danger of Government Departments, and Governments in general, marking their own homework. That is what it sounds very much like, and that is how it will be seen outside the bubble we inhabit here in Westminster. I sincerely ask the Minister to reconsider her stance and have a really long think about not making that decision just now, but instead doing a full evaluation of the benefits and value of the Office of Tax Simplification to see how it might be either enhanced or supported in future.
The Chair
Order. I remind Committee members of the point I made to the hon. Member for Blaydon earlier: interventions should be short. They are getting longer.
Victoria Atkins
I do not feel there is anything I can add to what I have already said, but I thank the hon. Gentleman for his intervention.
The Chair
In which case, I call the hon. Gentleman to respond to the debate, and ask him to tell me whether he wishes to push the amendment to a Division.
Douglas Chapman
I think that the overall message we have heard today—certainly from Opposition Members—is that the Office of Tax Simplification should be retained, as it provides a very important independent view of the very complicated and complex system of tax takes and tax reliefs throughout the United Kingdom. I am hoping that that position will win support, and I am prepared to push it to a Division.
Question put, That the amendment be made.
Victoria Atkins
Clause 347 makes changes to support the expansion of the dormant assets scheme to a wider range of assets, including insurance assets, pension assets, investment assets, client money assets and security assets such as shares. The Government estimate that up to a further £880 million will be made available for good causes across the UK thanks to the expansion of the scheme to the new sectors.
James Murray
As we know, under the UK’s dormant assets scheme, dormant asset funds are transferred to an authorised reclaim fund, Reclaim Fund Ltd. People can reclaim from that fund what they otherwise would have owned if their asset had never been transferred into the scheme. In some cases, it will be the monetary value of the dormant asset that will be transferred into the RFL rather than the original asset.
We understand that clause 347 ensures that the payments from an authorised reclaim fund are treated, for the purposes of income tax, as if they were from a pension asset that was initially transferred. We understand that it also seeks to ensure that, where an asset has been transferred from an authorised reclaim fund and its owner was alive at the time but subsequently dies before the asset has been reclaimed, the owner will be treated for inheritance tax purposes as still owning the original asset. We do not oppose the clause.
Question put and agreed to.
Clause 347 accordingly ordered to stand part of the Bill.
Clause 348
International arrangements for exchanging information
Question proposed, That the clause stand part of the Bill.
Victoria Atkins
Clause 348 introduces technical and administrative changes to four powers used to implement international tax arrangements relating to the exchange of information. Clause 349 introduces a 13-year time limit on funds paid into the Court Funds Office as civil claims that remain unclaimed, after which the right to claim will be extinguished.
Clause 350 clarifies HMRC’s functions regarding payment obligations in relation to individuals and organisations subject to UK financial sanctions. The measure clearly sets out which payments HMRC is prohibited from making in accordance with financial sanctions, namely all payments, repayments and set-offs to or for the benefit of designated persons subject to financial sanctions. Clauses 351 and 352 simply set out the Bill’s legal interpretation and short title in the usual way.
James Murray
As we have heard, clause 348 consolidates existing automatic exchange of information powers that allow the Treasury to implement the domestic requirements of certain international instruments, relating to, among other things, the automatic exchange of information between tax authorities. We recognise that the purpose of the consolidation is to create a general power to allow the Treasury to give effect to existing and future international exchange of information instruments. We understand that once the Bill is enacted, the previous powers will be repealed. We do not oppose the clause.
We understand that clause 349 will allow the transfer of moneys that have remained unclaimed in the Courts Fund Office account for many years, despite attempts to trace the beneficiaries and the account titles being available to the public via the unclaimed balances database on gov.uk. We recognise that at present such moneys are being held in perpetuity unless claimed. I also noted that some moneys have apparently been held since 1726. Does the Minister know what rate of interest those moneys have been earning for the last 300 years, and how much money is expected to be earned from that interest at the point of transfer?
Clause 350 defines how HMRC’s payment functions across the taxes, duties and benefits it administers interact with financial sanctions regulations and seeks to ensure that relevant changes to UK financial sanctions regulations are automatically reflected in HMRC’s functions. I understand that subsection (1) prohibits the making of a payment, whether directly or indirectly,
“to or for the benefit of a person who is, at that time, a designated person for the purposes of financial sanctions regulations.”
We will not oppose the clause. However, the fact that subsection (1) is necessary could be seen to imply that payments have in fact been made to, or the benefit of, a person who was at the time
“a designated person for the purposes of financial sanctions regulations.”
Will the Minister confirm whether that was the case, and tell us how many payments have been made to such people, what the total value of such payments was in each of the last 10 years and under which financial sanctions regulations the people involved have been designated? Clauses 351 and 352 relate to the interpretation and short title, and we will not oppose them.
Very briefly, Mr Stringer, may I take this opportunity to thank people? I thank all Ministers and Committee members, particularly my hon. Friends the Members for Wallasey, for City of Chester, for West Lancashire, for Ilford South, for Erith and Thamesmead, and for Blaydon. I thank the Clerks, parliamentary authorities and third parties, including the Chartered Institute of Taxation. I also thank you, Mr Stringer, and of course Ms McVey, who chaired the sitting on Tuesday.
Victoria Atkins
The shadow Minister asked about the amount of money that is expected to be paid into the consolidated fund in 2024-25. It is some £50 million. I am afraid that I do not know the interest rate charged in 1726; I obviously have room to improve on that—apologies. I suppose that in an idle moment we may put our minds to it and see whether we can come up with something, but I do not commit to that. I regret that I did not hear the detail of his questions on financial sanctions.
James Murray
I thank the Minister for giving way. The fact that clause 350(1) is necessary could be seen to imply that payments have in fact been made
“to or for the benefit of a person who is, at that time, a designated person for the purposes of financial sanctions regulations.”
My question was, if that is the case, will the Minister tell us how many payments have been made to such people, the total value of such payments in each of the last 10 years and which financial sanctions regulations the people involved were designated under?
Victoria Atkins
I am in the situation that I find myself in from time to time, which is that, although I am extremely conscious of the desire for transparency, there is still the principle of taxpayer confidentiality. Given the sensitivities of the subject matter, and given that, I suspect, a small group of individuals would be subject to the measure, I regret that I am unable to give those details. I have to give that answer from time to time, and I know that it is frustrating for hon. Members, because I can understand why they want answers. I regret that I cannot assist the hon. Member for Ealing North on this occasion.
Question put and agreed to.
Clause 348 accordingly ordered to stand part of the Bill.
Clause 349 to 352 ordered to stand part of the Bill.
New Clause 1
Reports to Treasury Committee on measures to simplify tax system
“(1) The Treasury must report to the Treasury Committee of the House of Commons on steps taken by the Treasury and HMRC to simplify the tax system in the absence of the Office of Tax Simplification.
(2) Reports under this section must include information on steps to—
(a) simplify existing taxes, tax reliefs and allowances,
(b) simplify new taxes, tax reliefs and allowances,
(c) engage with stakeholders to understand needs for tax simplification,
(d) develop metrics to measure performance on tax simplification, and performance against those metrics.
(3) A report under this section must be sent to the Committee before the end of each calendar year after the year in which section 346 (abolition of the Office of Tax Simplification) comes into force.”—(Dame Angela Eagle.)
This new clause would require the Treasury to report annually to the Treasury Committee on tax simplification if the Office of Tax Simplification is abolished.
Brought up, and read the First time.
Douglas Chapman
I beg to move, That the clause be read a Second time.
Hopefully we can all get off to lunch quite soon. The UK Government may still be driving the big red Brexit blunder-bus towards the sunny uplands, merrily in denial of the catastrophic damage that leaving the EU has wrought on the country, but British citizens and businesses are in no doubt about the serious lack of any tangible benefits from Brexit. In reality, the UK Government may have got Brexit done, but unfortunately we all got done at the same time. Not a week goes past without a Brexit myth-busting news headline. This week, we discovered that one of the world’s largest car manufacturers believes that Brexit is a threat to our export business, and the sustainability of UK manufacturing options. Stellantis, which owns Vauxhall and Fiat, warned the Government to reverse Brexit, or it will have to close down its factories. Just today, Jaguar Land Rover described the Brexit deal as “unrealistic and counterproductive” for electric vehicle manufacturing.
The Minister mentioned all the fantastic innovation-based opportunities that she could see in the future, but those two companies join a chorus of other manufacturers in the UK that have advised the Government to look again at the Brexit trade deal. Brexit was sold to us as a chance to reduce red tape, to free us up from the so-called constraints of EU bureaucracy, and to negotiate bigger and better trade deals across the globe. Instead, it has freed us from success, growth, productivity and competitiveness—so quite the opposite. Brexit has meant that we are fighting a war on all fronts, with not a unicorn or rainbow in sight, and no sign of the much-promised £350 million a week for the NHS, or an end to stagnant wage growth, the crippling cost of living and the energy crisis in the UK.
That brings me to this important new clause on exiting the European Union—an attempt to pin down the UK Government, shine some light on the well-hidden Brexit benefits, and require the Chancellor of the Exchequer to provide us with proper information and analysis to back up the Government’s claims. We are asking the Chancellor to publish a report on which of the policies included in the Bill could not have been introduced while the UK was a member of the EU. We are also asking for that report to include an evaluation of the costs and benefits of each provision.
Here is the thing: the Government might believe in Brexit. They might be convinced of the benefits of it, alongside their Opposition colleagues on the Labour Benches, but no matter what myths are busted every week in the real world, it is people in the UK who are bearing the brunt. That is the thin end of the wedge for our constituents, who want to know whether the Brexit-induced or Brexit-exacerbated hardships they face day to day—the astronomical levels of food inflation, the difficulties with European travel, and the closure of their exporting businesses due to jams and chaos at Dover—has all been worth it. Really, has it all been worth it?
Gareth Davies
I am happy to respond to new clause 4. The Government are committed to taking full advantage of the opportunities arising from the UK’s exit from the European Union, and we will make the most of our Brexit freedoms. Indeed, we have already set in motion a number of measures that capture those freedoms, whether it is the VAT relief on women’s sanitary products, cutting VAT on the supply of energy-saving materials or, as we have heard, measures in this Bill to reform our alcohol duty system. None of that could have been implemented had we remained in the European Union, and we will go further over the course of the months and years ahead.
As those reforms develop, we will routinely publish the impacts that they have, in exactly the same way as we do now and always have. An additional report is not necessary. Information on all changes is available in the Budget documents and the tax information and impact notes, outlining those impacts. I therefore urge the Committee to reject the new clause.
Douglas Chapman
I thank the Minister for his response. I have no intention of pursuing this new clause any further, but I hope the Government have taken these views on board and, if those broad and sunlit uplands are still there in their heads, let us make them a reality. I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Victoria Atkins
I thank you, Mr Stringer, for your superb chairmanship of this Committee and Ms McVey for hers. I thank my ministerial colleague, my hon. Friend the Member for Grantham and Stamford, who did very well on his first Bill Committee; it has been a pleasure. I thank all Back-Benchers for lively debates and their attention to these important matters, and those on the shadow Front Bench for their important contributions.
I thank the Doorkeepers—Monty—the Clerks and of course our Hansard reporters, who help to make our words look more polished than perhaps they are in real life. Of course I must also thank the Whips, who have an incredibly difficult job arranging such a huge piece of legislation and have done so with great skill—and I thank them for the wine gums.
Finally, I thank the massive team of officials, primarily in the Treasury, but also in other Government Departments. There is so much work that goes into preparing a Bill for Committee. This is such an important stage of its scrutiny, and we take it very seriously. I offer my sincere thanks to each and every one of the officials who have been kind enough to brief me and my hon. Friend.
The Chair
That is quite out of order, but thank you.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Data Protection and Digital Information (No. 2) Bill (Fifth sitting)
Thursday 18th May 2023
(11 months, 3 weeks ago)
Public Bill CommitteesRead Full debate Data Protection and Digital Information Bill 2022-23 View all Data Protection and Digital Information Bill 2022-23 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 18 May 2023 - (18 May 2023)
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 6 - Question accordingly agreed to.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 6 - Question accordingly agreed to.
The Chair
I remind the Committee that with this we are discussing the following:
Amendment 105, in clause 25, page 44, line 6, leave out “must consult the Commissioner” and insert
“must apply to the Commissioner for authorisation of the designation notice on the grounds that it satisfies subsection (1)(b).”
This amendment seeks to increase independent oversight of designation notices by replacing the requirement to consult the Commissioner with a requirement to seek the approval of the Commissioner.
Clauses 25 and 26 stand part.
The Minister for Data and Digital Infrastructure (Sir John Whittingdale)
When the Committee last adjourned, I had already spoken to clauses 24 to 26 and was responding to amendment 105, which was tabled by the hon. Member for Barnsley East. However, let me give a quick recap.
Clauses 24 to 26 are essentially designed to enable better joined-up working between the intelligence services and law enforcement. To that end, they will allow qualifying authorities to use part 4 of the data protection regime, but the Secretary of State will be required to issue a designation notice. We believe that enabling qualifying competent authorities to jointly process data under one regime in authorised, specific circumstances will allow better control over data in a way that is not possible under two different data protection regimes.
Amendment 105 seeks to increase the role of the Information Commissioner’s Office by requiring it to judge whether the designation notice is required for the purposes of safeguarding national security. The Bill requires the Secretary of State to consult the ICO as part of the Secretary of State’s decision whether to grant a notice, but it is not the function of the ICO in its capacity as a regulator to assess national security requirements. The ICO’s expertise is in data protection, not in national security, and it would be inappropriate for it to decide on the latter; that decision should be reserved to the Secretary of State. We believe that clause 25 provides significant safeguards through proposed new sections 82B and 82E, which provide respectively for legal challenge and annual review of a notice. In addition, should the notice no longer be required, the Secretary of State can withdraw it. For that reason, we cannot accept the amendment.
Stephanie Peacock (Barnsley East) (Lab)
I spoke to amendment 105 in our last sitting. In summary, the Bill contains a requirement to consult the commissioner. The amendment seeks to formalise some of the independent oversight of the designation notice process so that the power does not lie solely in the Secretary of State’s hands. The matter of the Secretary of State’s power is obviously something with which we take issue throughout the Bill. The amendment would not stop any designation notice being issued where it is genuinely necessary; it would simply add a safeguard for its approval where it is not. For that reason, I will press the amendment to a vote.
Question put and agreed to.
Clause 24 accordingly ordered to stand part of the Bill.
Clause 25
Joint processing by intelligence services and competent authorities
Amendment proposed: 105, in clause 25, page 44, line 6, leave out “must consult the Commissioner” and insert
“must apply to the Commissioner for authorisation of the designation notice on the grounds that it satisfies subsection (1)(b).”—(Stephanie Peacock.)
This amendment seeks to increase independent oversight of designation notices by replacing the requirement to consult the Commissioner with a requirement to seek the approval of the Commissioner.
Question put, That the amendment be made.
Sir John Whittingdale
We now come to the provisions in the Bill relating to the powers of the Information Commissioner. Clause 27 will introduce a new strategic framework for the Information Commissioner when carrying out his functions under data protection legislation. The framework contains a principal data protection objective and a number of general duties.
The legislation does not currently provide the commissioner with a framework of strategic objectives to help to prioritise activities and resources, evaluate performance and be held accountable by stakeholders. Instead, the commissioner is obliged to fulfil a long list of tasks and functions without a clear strategic framework to guide his work.
The clause introduces a principal objective for the commissioner, first to secure an appropriate level of protection for personal data, taking into account the interests of data subjects, controllers and others along with matters of general public interest, and secondly to promote public trust and confidence in the processing of personal data. This principal objective will replace section 2(2) of the Data Protection Act 2018.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
How does the Minister think the words
“an appropriate level of protection for personal data”
should be understood by the Information Commissioner? Is it in the light of the duties that follow, or what?
Sir John Whittingdale
Obviously that is a matter for the Information Commissioner, but that is the overriding principal objective. I am about to set out some of the other objectives that the clause will introduce, but it is made very clear that the principal objective is to ensure the appropriate level of protection. Precisely how the Information Commissioner interprets “appropriate level of protection” is a matter for him, but I think it is fairly clear what that should entail, as he himself set out in his evidence.
As I have said, clause 27 introduces new duties that the commissioner must consider where they are relevant to his work in carrying out data protection functions: the desirability of promoting innovation and competition; the importance of the prevention, investigation, detection and prosecution of criminal offences; the need to safeguard public security and national security; and, where necessary, the need to consult other regulators when considering how the ICO’s work may affect economic growth, innovation and competition. There is also the statement of strategic priorities, which is introduced by clause 28. However, as I have indicated to the hon. Member for Newcastle upon Tyne Central, the commissioner will be clear that his primary focus should be to achieve the principal objective.
Clause 27 also introduces new reporting requirements for the commissioner in relation to the strategic framework. The commissioner will be required to publish a forward-looking strategy outlining how he intends to meet the new principal objective and duties, as well as pre-existing duties in the Deregulation Act 2015 and the Legislative and Regulatory Reform Act 2006.
Finally, the commissioner will be required to publish a review of what he has done to comply with the principal objective, and with the new and existing duties, in his annual report.
Carol Monaghan (Glasgow North West) (SNP)
I wonder whether part of the strategy might include a list of fees that could potentially be charged for accessing data. This idea of fees seems to be quite vague in terms of amounts and levels, so it would be useful to have some more information on that.
Sir John Whittingdale
I think we will come on to some of the questions around the fees that are potentially payable, particularly by those organisations that may be required to provide more evidence, and the costs that that could entail. I will return to that subject shortly.
The new strategic framework acknowledges the breadth of the ICO’s remit and its impact on other areas. We believe that it will provide clarity for the commissioner, businesses and the general public on the commissioner’s objectives and duties. I therefore commend clause 27 to the Committee.
Stephanie Peacock
The importance to any data protection regime of an independent, well-functioning regulator cannot be overstated. The ICO, which is soon to be the Information Commission as a result of this Bill, is no exception to that rule. It is a crucial piece of the puzzle in our regime to uphold the information rights set out in regulation. Importantly, it works in the interests of the general public. The significance of an independent regulator is also recognised by the European Commission, which deems it essential to any adequacy agreement. The general duties of our regulator, such as those set out in this clause, are therefore vital because they form the foundations on which it operates and the principles to which it must be accountable.
Although the duties are more an indicator of overarching direction than a prescriptive list of duties, they should still aim to reflect the wide range of tasks that the regulator carries out and the values with which they do so. On the whole, the clause does this well. Indeed, the principal objective for the commissioner set out in this clause, which is
“to secure an appropriate level of protection for personal data, having regard to the interests of data subjects, controllers and others and matters of general public interest, and…to promote public trust and confidence in the processing of personal data”
is a good overarching starting point. It simply outlines the basic functions of the regulator that we should all be able to get behind, even if the Bill itself does disappointingly little to encourage the promotion of public trust in data processing.
It is particularly welcome that the principal objective includes specific regard to
“matters of general public interest.”
This should cover things like the need to consider sustainability and societal impact. However, it is a shame that that is not made explicit among the sub-objectives, which require the commissioner to have regard to the likes of promoting innovation and safeguarding national security. That would have ingrained in our culture a desire to unlock data for the wider good, not just for the benefit of big tech. Overall, however, the responsibilities set out in the clause, and the need to report on fulfilling them, seem to reflect the task and value of the regulator fairly and accurately.
Sir John Whittingdale
I think that was slightly qualified support for the clause. Nevertheless, we welcome the support of the Opposition.
Question put and agreed to.
Clause 27 accordingly ordered to stand part of the Bill.
Clause 28
Strategic priorities
Sir John Whittingdale
Clause 28 provides a power for the Secretary of State to prepare a statement of strategic priorities relating to data protection as part of the new strategic framework for the Information Commissioner. The statement will contain only the Government’s data protection priorities, and the Secretary of State may choose to include both domestic and international priorities. That will enable the Government to provide a transparent statement of how their data protection priorities fit in with their wider agenda, giving the commissioner, we hope, helpful context.
Although the commissioner must take the statement into account when carrying out his functions, he is not required to act in accordance with it. That means that the statement will not be used in a way to direct what the commissioner may and may not do. Once the statement is drafted, the Secretary of State will be required to lay it before Parliament, where it will be subject to the negative resolution procedure before it can be designated. The commissioner will need to consider the statement when carrying out functions under the data protection legislation, except functions relating to a particular person, case or investigation.
Once designated, the commissioner will be required to respond to the statement, outlining how he intends to consider it in future data protection work. The commissioner will also be required to report on how he has considered the statement in his annual report. I commend the clause to the Committee.
Stephanie Peacock
Clause 28 requires that every three years the Secretary of State publish a statement of strategic priorities for the commissioner to consider, respond to, and have regard to. The statement would be subject to the negative resolution procedure in Parliament, and the commissioner would be obliged to report on what they have done to comply with it annually. Taken in good faith, I see what the clause was intended to achieve. It is, of course, important that the Government’s data priorities are understood by the commissioner. It is also vital that we ensure that the regulator functions in line with the most relevant issues of the day, given the rapidly evolving landscape of technology.
A statement of strategic priorities could, in theory, allow the Government to set out their priorities on data policy in a transparent way, allowing both Ministers and the ICO to be held accountable for their relationship. However, there is and must be a line drawn between the ICO understanding the modern regulatory regime that it will be expected to uphold and political interference in the activities and priorities of the ICO. The Open Rights Group, among others, has expressed concern that the introduction of a statement of strategic priorities could cross that line, exposing the ICO to political direction, making it subject to culture wars and leaving it vulnerable to corporate capture or even corruption.
Although the degree to which those consequences would become a reality given the current strength of our regulator might be up for debate, the very concept of the Government setting out a statement of strategic priorities that must be adhered to by the commissioner at the very least sets out a need for the ICO to follow some sort of politically led direction, something that seems counterintuitive with respect to independence. As I have already argued, an independent ICO is vital not only directly, for data subjects to be sure that their rights will be implemented and for controllers to be sure of their obligations, but indirectly, as a crucial component of our EU adequacy agreement.
Even though the clause may not be intended to threaten independence, we must be extremely careful not to unintentionally embark on a slippery slope, particularly as there are other mechanisms for ensuring that the ICO keeps up with the times and has a transparent relationship with Government. In 2022, the ICO published its new strategic plan, ICO25, which sets out why its work is important, what it wants to be known for and by whom, and how it intends to achieve that by 2025. It describes the ICO’s purpose, objectives and values and the shift in approach that it aims to achieve through the life of the plan, acknowledging that its work is
“complex, fast moving and ever changing.”
The plan was informed by extensive stakeholder consultation and by the responsibilities that the ICO has been given by Parliament. There are therefore ways for the ICO to communicate openly with Government, Parliament and other relevant stakeholders to ensure that its direction is in keeping with the most relevant challenges and with updates to legislation and Government activity. Ministers might have been better off encouraging transparent reviews, consultations and strategies of that kind, rather than prompting any sort of interference from politicians with the ICO’s priorities.
Sir John Whittingdale
We agree about the importance of the independence of the Information Commissioner, but I do not think that the statement, as we have set out, is an attempt to interfere with that. I remind the hon. Lady that in relation to the statement of strategic priorities, she asked the Information Commissioner himself:
“Do you perceive that having any impact on your organisation’s ability to act independently of political direction?”,
and he replied:
“No, I do not believe it will undermine our independence at all.”––[Official Report, Data Protection and Digital Information (No. 2) Public Bill Committee, 10 May 2023; c. 6, Q3.]
Stephanie Peacock
The Minister is right to quote the evidence session, but he will perhaps also remember that in a later session Ms Irvine from the Law Society of Scotland said that she was surprised by the answer given by the Information Commissioner.
Sir John Whittingdale
Ms Irvine may have been surprised. I have to say that we were not. What the Information Commissioner said absolutely chimed with our view of the statement, so I am afraid on this occasion I will disagree with the Law Society of Scotland.
Question put, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss:
Clause 30 stand part.
Amendment 111, in clause 31, page 56, line 30, leave out lines 30 and 31 and insert—
“(6) If the Commissioner submits a revised code under subsection (5)(b), the Secretary of State must approve the code.”
This amendment seeks to limit the ability of the Secretary of State to require the Commissioner to provide a revised code to only one occasion, after which the Secretary of State must approve the revised code.
Clause 31 stand part.
Sir John Whittingdale
Given the significant number of ways in which personal data can be used, we believe that it is important that the regulator provides guidance for data controllers, particularly on complex and technical areas of the law, and that the guidance should be accessible and enable compliance with the legislation efficiently and easily. We are therefore making a number of reforms to the process by which the Information Commissioner produces statutory codes of practice.
Clause 29 is a technical measure that ensures that all statutory codes of practice issued under the Data Protection Act 2018 follow the same parliamentary procedures, have the same legal effect, and are published and kept under review by the Information Commissioner. Under sections 121 to 124 of the Data Protection Act, the commissioner is obliged to publish four statutory codes of practice: the data sharing code, the direct marketing code, the age-appropriate design code, and the data protection and journalism code. The DPA includes provisions concerning the parliamentary approval process, requirements for publication and review by the commissioner, and details of the legal effect of each of the codes. So far, the commissioner has completed the data sharing code and the age-appropriate design code.
Section 128 of the Act permits the Secretary of State to make regulations requiring the Information Commissioner to prepare other codes that give guidance as to good practice in the processing of personal data. Those powers have not yet been used, but may be useful in the future. However, due to the current drafting of the provisions, any codes required by regulations made by the Secretary of State and issued by the commissioner would not be subject to the same formal parliamentary approval process or review requirements as the codes issued under sections 121 to 124. In addition, they do not have the same legal effect, and courts and tribunals would not be required to take a relevant provision of the code into account when determining a relevant question. Clearly, it is not appropriate to have two different standards of statutory codes of practice. To address that, clause 29 replaces the original section 128 with new section 124A, so that codes required in regulations made by the Secretary of State follow a similar procedure to codes issued under sections 121 to 124.
New section 124A provides the Secretary of State with the power to make regulations requiring the commissioner to produce codes of practice giving guidance as to good practice in the processing of personal data. Before preparing any code, the commissioner must consult the Secretary of State and other interested parties such as trade associations, data subjects and groups representing data subjects. That is similar to the consultation requirements for the existing codes. The parliamentary approval processes and requirements for the ICO to keep existing codes under review are also extended to any new codes required by the Secretary of State. The amendment also ensures that those codes requested by the Secretary of State have the same legal effect as those set out on the face of the DPA.
Clauses 30 and 31 introduce reforms to the process by which the commissioner develops statutory codes of practice for data protection. They require the commissioner to undertake and publish impact assessments, consult with a panel of experts during the development of a code, and submit the final version of a code to the Secretary of State for approval. Those processes will apply to the four statutory codes that the commissioner is already required to produce and to any new statutory codes on the processing of personal data that the commissioner is required to prepare under regulation made by the Secretary of State.
The commissioner will be required to set up and consult a panel of experts when drafting a statutory code. That panel will be made up of relevant stakeholders and, although the commissioner will have discretion over its membership, he or she will be required to explain how the panel was chosen. The panel will consider a draft of a statutory code and submit a report of its recommendations to the commissioner. The commissioner will be required to publish the panel’s response to the code and, if he chooses not to follow a recommendation, the reasons must also be published.
Clause 30 also requires the commissioner to publish impact assessments setting out who will be affected by the new or amended code and the impact it will have on them. While the commissioner currently carries out impact assessments when developing codes of practice, we believe that there are advantages to formalising an approach on the face of the legislation to ensure consistency.
Given the importance of the statutory codes, we believe it is important that there is a further degree of democratic accountability within the process. Therefore, clause 31 requires the commissioner to submit the final version of a statutory code to the Secretary of State for approval.
On that basis, I commend the relevant clauses to the Committee, but I am aware that the hon. Member for Barnsley East wishes to propose an amendment.
Stephanie Peacock
I turn first to clauses 29 and 30. Codes of practice will become increasingly important as the remit of the ICO expands and modernises. As such, it is important that the codes are developed in a way that is conducive to the product being as effective and useful as possible.
Although the ICO already carries out impact assessments for new codes of practice, that is only done as best practice and currently does not have any statutory underpinning. It is therefore pleasing to see clauses that will require consistency and high standards when developing new codes, ensuring that the resulting products are as comprehensive and helpful as possible. It is welcome, for example, to see that experts will be consulted in the process of developing these codes, including Government officials, trade associations and data subjects. It is also good to see that the commissioner will be required to publish a statement relating to the establishment of the expert panel, including how and why members were selected.
Sir John Whittingdale
I welcome the support of the Opposition for many of the principles contained in the clauses. I turn to amendment 111, tabled by the hon. Lady. As the clause originally sets out, once the commissioner is issued the final version of the code, the Secretary of State decides whether to approve it. If they do approve the code, it will be laid before Parliament for final approval. If they do not, they are required to publish their reasons.
The amendment would place a limit on that, so that the Secretary of State would be able to reject the final version of the code only once. If the code is revised by the commissioner in the light of the comments of the Secretary of State and resubmitted, under the amendment the Secretary of State would have to lay the code in Parliament for final approval. Although I understand the concern behind the amendment, we do not believe it to be justified. I understand that the hon. Lady does not want a code to be rejected multiple times, but we regard this as a final safeguard and it will be fully transparent. We are absolutely committed to maintaining the commissioner’s independence, but we think it also important that the Government have the opportunity to give a view before the code is laid before Parliament and for Parliament to give final approval. The amendment would unduly limit the Government’s ability to provide as necessary that further degree of democratic accountability.
The hon. Lady referred to the importance of maintaining adequacy, which we have already touched on. I fully share her view on its importance to the wider functioning of the economy, but when she raised the matter with the Information Commissioner he did not believe that it posed any risk. Indeed, he went on to point out:
“A failure of the Secretary of State to table and issue a proposed code would not affect the way in which the commissioner discharges his or her enforcement functions. We would still be able to investigate matters and find them in breach, regardless of whether that finding was consistent with the Secretary of State’s view of the law.”––[Official Report, Data Protection and Digital Information (No. 2) Public Bill Committee, 10 May 2023; c. 6-7, Q4.]
On that basis, we think that there should be the ongoing ability for the Secretary of State—and, through the Secretary of State, Parliament—to approve the final version of the code, but we do not feel that this interferes with the Information Commissioner’s ability to carry out his functions, nor does it represent any view as to our adequacy agreement.
Stephanie Peacock
The problem is that the Government are operating on the basis that everyone is acting in good faith, and although I am sure that the Minister and the current Secretary of State are doing so, we do not know what the future holds. It was incredibly encouraging that throughout the evidence sessions a number of witnesses said they did not feel that adequacy was at threat. That is welcome and reassuring, but only the EU Commission can give us adequacy. I am afraid the Minister simply has not done enough to alleviate my concerns about the independence of the ICO. I understand that the Minister disagrees with the Law Society of Scotland, but the full quote was:
“The ICO is tasked with producing statutory codes of conduct, which are incredibly useful for my clients and for anyone working in this sector. The fact that the Secretary of State can, in effect, overrule these is concerning, and it must be seen as a limit on the Information Commissioner’s independence.”––[Official Report, Data Protection and Digital Information (No. 2) Public Bill Committee, 10 May 2023; c. 74, Q156.]
As such, I will push my amendment to a vote.
Question put and agreed to.
Clause 29 accordingly ordered to stand part of the Bill.
Clause 30 ordered to stand part of the Bill.
Clause 31
Codes of practice: approval by the Secretary of State
Amendment proposed: 111, in clause 31, page 56, line 30, leave out lines 30 and 31 and insert—
“(6) If the Commissioner submits a revised code under subsection (5)(b), the Secretary of State must approve the code.”—(Stephanie Peacock.)
This amendment seeks to limit the ability of the Secretary of State to require the Commissioner to provide a revised code to only one occasion, after which the Secretary of State must approve the revised code.
Question put, That the amendment be made.
Sir John Whittingdale
Taking advantage of your invitation, Mr Hollobone, I shall speak only briefly. The UK’s data protection framework allows a data subject or data protection officer to make a request to the Information Commissioner for information concerning the exercise of their data protection rights. The commissioner is expected to respond to a data subject or data protection officer and make no charge in the majority of cases, but the commissioner can refuse to respond or charge a reasonable fee for a response to a request when it is “manifestly unfounded or excessive”. Clause 7 changes the “manifestly unfounded or excessive” threshold for all requests from data subjects across the UK data protection framework to “vexatious or excessive”. Clause 32 replicates that language, inserting the same new threshold into section 135 of the Data Protection Act 2018, to ensure that the Information Commissioner’s exemption is consistent across the legislation. I urge the Committee to agree to the clause.
Stephanie Peacock
The new threshold contained in the clause has been discussed in debates under clause 7, and I refer hon. Members to my remarks in those debates, as many of the same concerns apply. The guidance that will be needed to interpret the terms “vexatious” and “excessive” should be no less applicable to the Information Commissioner, whose co-operation with data subjects and transparency should be exemplary, not least because the functioning of the regulator inherently sets an example for other organisations on how the rules should be followed.
Question put and agreed to.
Clause 32, as amended, accordingly ordered to stand part of the Bill.
Clause 33
Analysis of performance
Question proposed, That the clause stand part of the Bill.
Sir John Whittingdale
Clause 33 introduces the requirement for the Information Commissioner to prepare and publish an analysis of their performance, using key performance indicators. The regulator will be required to publish that analysis at least annually. The commissioner will have the discretion to decide which factors effectively measure their performance.
Improving the commissioner’s monitoring and reporting mechanisms will strengthen their accountability to Parliament, organisations and the public, who have an interest in the commissioner’s effectiveness. Performance measurement will also have benefits for the commissioner, including by supporting their work of measuring progress towards their objectives and ensuring that resources are prioritised in the right areas. I urge that clause 33 stand part of the Bill.
Stephanie Peacock
I welcome the clause, as did the majority of respondents who supported the proposal in the “Data: a new direction” consultation. As recognised by the Government’s response to their consultation, respondents felt the proposal would allow for the performance of the ICO to be assessed publicly and provide evidence of how the ICO is meeting its statutory obligations. We should do all we can to promote accountability, transparency and public awareness of the obligations and performance of the ICO. The clause allows for just that.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Clause 34
Power of the Commissioner to require documents
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Clauses 35 to 38 stand part.
Government amendment 47.
Clause 42 stand part.
Sir John Whittingdale
This is a slightly chunkier set of clauses and amendments, so I will not be as brief as in the last two debates.
Clause 34 is a clarificatory amendment to the Information Commissioner’s powers in section 142 of the Data Protection Act to require information. Its purpose is to clarify the commissioner’s existing powers to put it beyond doubt that the commissioner can require specific documents as well as information when using the information notice power. Subsections (3) to (7) of the clause make consequential amendments to references to information notices elsewhere in the Data Protection Act.
Clause 35 makes provision for the Information Commissioner to require a data controller or processor to commission a report from an approved person on a specified matter when exercising the power under section 146 of the Data Protection Act to issue an assessment notice. The aim of the power is to ensure that the regulator can access information necessary to its investigations.
In the event of a data breach, the commissioner is heavily dependent on the information that the organisation provides. If it fails to share information—for example, because it lacks the capability to provide it—that can limit the commissioner’s ability to conduct a thorough investigation. Of course, if the organisation is able to provide the necessary information, it is not expected that the power would be used. The commissioner is required to act proportionately, so we expect that the power would be used only in a small minority of investigations, likely to be those that are particularly complex and technical in nature.
Clause 36 grants the Information Commissioner the power to require a person to attend an interview and answer questions when investigating a suspected failure to comply with data protection legislation. At the moment, the Information Commissioner can only interview people who attend voluntarily, which means there is a heavy reliance on documentary evidence. Sometimes that is ambiguous or incomplete and can lead to uncertainty. The ability to require a person to attend an interview will help to explain an organisation’s practices or evidence submitted, and circumvent a protracted and potentially fruitless series of back-and-forth communication via information notices. The power is based on existing comparable powers for the Financial Conduct Authority and the Competition and Markets Authority.
Clause 37 amends the provisions for the Information Commissioner to impose penalties set out in the Data Protection Act. It will allow the commissioner more time, where needed, to issue a final penalty notice after issuing a notice of intent. At the moment the Act requires the commissioner to issue a notice of intent to issue a penalty notice; the commissioner then has up to six months to issue the penalty notice unless an extension is agreed. That can prove difficult in some cases—for instance, if the organisation under investigation submits new evidence that affects the case at a late stage, or when the legal representations are particularly complex. The clause allows the regulator more time to issue a final penalty notice after issuing a notice of intent, where that is needed. That will benefit business, as it means the commissioner can give organisations more time to prepare their representations, and will result in better outcomes by ensuring that the commissioner has sufficient time to assess representations and draw his conclusions.
Clause 38 introduces the requirement for the Information Commissioner to produce and publish an annual report on regulatory activity. The report will include the commissioner’s investigatory activity and how the regulator has exercised its enforcement powers. That will lead to greater transparency of the commissioner’s regulatory activity.
Clauses 34 to 37, as I said, make changes to the Data Protection Act 2018 in respect of the Information Commissioner’s enforcement powers. Consequential on clauses 35 and 36, clause 42 makes changes to the Electronic Identification and Trust Services for Electronic Transactions Regulations 2016, known as the EITSET regulations. The EITSET regulations extend and modify the Information Commissioner’s enforcement powers to apply to its role as the supervisory body for trust service providers under the UK regulations on electronic identification and trust services for electronic transactions, known as the UK eIDAS. Clause 42 amends the EITSET regulations to ensure that the new enforcement powers introduced by clauses 34 to 37 are available to the Information Commissioner for the purposes of regulating trust service providers.
The new powers will help to ensure that the Information Commissioner is able to access the evidence needed to inform investigations. The powers will result in more informed investigations and, we believe, better outcomes. Clause 42 ensures that the Information Commissioner will continue to be able to act as an effective supervisory body for trust service providers established in the UK.
Government amendment 47 amends schedule 2 to the EITSET regulations. The amendment 2 is consequential to the amendment of section 155(3)(c) of the Data Protection Act made by schedule 4 to the Bill. The amendment to schedule 2 will remove the reference to consultation under section 65 of the Data Protection Act when section 155 is applied. It is necessary to remove reference to section 65 of the Data Protection Act when section 155 is applied with modification under schedule 2, as consultation requirements under that section are not relevant to the regulation of trust service providers under the UK eIDAS.
I hope that that is helpful to Members in explaining the merits of our approach to ensuring that the Information Commissioner has the right enforcement tools at its disposal and continues to be an effective and transparent regulator. I commend the clauses and Government amendment 47 to the Committee.
Stephanie Peacock
I will speak to each of the relevant clauses in turn. On clause 34, I am satisfied that the clarification that the Information Commissioner can require documents as well as information is necessary and will be of use to the regulator. I am pleased therefore pleased to accept the clause as drafted and to move on to the other clauses in this part.
Clause 35 provides for the commissioner to require an approved person to prepare a report on a specified matter, as well as to provide statutory guidance on, first, the factors it considers when deciding to require such a report and, secondly, the factors it considers when determining whom the approved person might be. That power to commission technical reports is one that the vast majority of respondents to the “Data: a new direction” consultation supported, as they felt it would lead to better informed ICO investigations. Any measures that help the ICO to carry out its duties rigorously and to better effect, while ensuring that relevant safeguards apply, are measures that I believe Members across the Committee will want to support.
In the consultation, however, the power was originally framed to commission a “technical report”, implying that it would be limited to particularly complex and technical investigations where there is significant risk of harm or detriment to data subjects. Although the commissioner is required to produce guidance on the circumstances in which a report might be required, I would still like clarification from the Minister of why such a limit was not included in the Bill as drafted. Does he expect it to be covered by the guidance produced by the ICO? Such a clarification is necessary not because we are against clause 35 in principle, just in acknowledgement that ICO’s powers—indeed, enforcement powers generally—must always be proportionate to the task at hand.
Furthermore, some stakeholders have said that it is unclear whether privilege will attach to reports required by the ICO and whether they may be disclosable to third parties who request copies of them. Greater clarity about how the power will operate in practice would therefore be appreciated.
Turning to clause 36, it is a core function of the ICO to monitor and enforce the UK’s data protection legislation and rules, providing accountability against the activities of all controllers, processors and individuals. To fulfil that function, the ICO may have to conduct an investigation to establish a body of evidence and determine whether someone has failed to comply with the legislation. The Government’s consultation document said that the ICO sometimes faces problems engaging organisations in those investigations, despite their having a duty to co-operate fully, especially in relation to interviews, as many people are nervous of negative consequences in their life or career if they participate in one. However, interviews are a crucial tool for investigations, as not all the relevant evidence will be available in written form. Indeed, that may become even more the case after the passing of this Bill, due to the reduced requirements to keep records, conduct data protection impact assessments and assign data protection officers—all of which contribute to a larger pool of documentation tracking data processing.
Clause 36, which will explicitly allow the ICO to compel witnesses to comply with interviews as part of an investigation, will, where necessary, ensure that as much relevant evidence as possible is obtained to inform the ICO’s judgment. That is something that we absolutely welcome. It is also welcome to see the safeguards that will be put in place under this clause, including the right not to self-incriminate and exemptions from giving answers that would infringe legal professional privilege or parliamentary privilege. That will ensure that the investigatory powers of the ICO stay proportionate to the issues at hand. In short, clause 36 is one that I am happy to support. After all, what is the purpose of us ensuring that data protection legislation is fit for purpose here today if the ICO is unable to actually determine whether anyone is complying?
On clause 37, it seems entirely reasonable that the ICO may require more than the standard six months to issue a penalty notice in particularly complex investigations. Of course, it remains important that the operations of the ICO are not allowed to slow unduly in cases where a penalty can be issued in the usual timeframe, but where the subject matter is particularly complicated, it makes sense to allow the ICO an extension to enable the investigation to be concluded in the proper, typically comprehensive manner. Indeed, complex investigations may be more common as we adjust to the new data legislation and a rapidly evolving technological landscape. By conducting the investigations properly and paying due attention to particularly technical issues, new precedents can be set that will speed up the regulator’s processes on the whole. Clause 37 is therefore welcomed by us, as it was by the majority of respondents to the Government’s consultation.
Turning to clause 38, as we have said multiple times throughout the progress of this Bill and in Committee, transparency and data protection should go hand in hand. Requiring the ICO to publish information each year on the investigations it has undertaken and the powers it has used will embed a further level of transparency into the regulatory system. Transparency breeds accountability, and requiring the regulator to publish information on the powers it is using will encourage such powers to be used proportionately and appropriately. Publishing an annual report with that information should also give us a better idea of how effectively the new regulatory regime is working. For example, a high volume of cases on a recurring issue could indicate a problem within the framework that needs addressing. Overall, it is welcome that Parliament and the public should be privy to information about how the ICO is discharging its regulatory functions. As a result, I am pleased to support clause 38.
Finally, the amendments to clause 42 are of a consequential nature, and I am happy to proceed without asking any further questions about them.
Sir John Whittingdale
I am most grateful to the hon. Lady for welcoming the vast majority of the provisions within these clauses. She did express some concern about the breadth of the powers available to the Information Commissioner, but I point out that they are subject to a number of safeguards defining how they can be used. The commissioner is required to publish how he will exercise his powers, and that will provide organisations with clarity on the circumstances in which they are to be used.
As the hon. Lady will be aware, like other regulators, the Information Commissioner is subject to the duty under the Legislative and Regulatory Reform Act to exercise their functions
“in a way which is transparent, accountable, proportionate and consistent”,
and,
“targeted only at cases in which action is needed.”
There will also be a right of appeal, which is consistent with the commissioner’s existing powers. On that basis, I hope that the hon. Lady is reassured.
Question put agreed to.
Clause 34 accordingly ordered to stand part of the Bill.
Clauses 35 to 38 ordered to stand part of the Bill.
Clause 39
Complaints to controllers
The Chair
With this it will be convenient to discuss the following:
Clauses 40 and 41 stand part.
That schedule 8 be the Eighth schedule to the Bill.
Sir John Whittingdale
These three clauses, together with schedule 8, streamline and clarify complaint routes for data subjects by making the respective rights and responsibilities of data controllers and data subjects clear in legislation. The measures will reduce the volume of premature complaints to the Information Commissioner, and give an opportunity to controllers to resolve complaints before they are escalated to the regulator.
Clause 39 enables data subjects to complain to a data controller if they believe that there has been an infringement of their data protection rights, and creates a duty for data controllers to facilitate the making of complaints by taking appropriate steps, such as providing a complaints form. The requirement will encourage better conversations and more dialogue between data subjects and data controllers. It will formalise best practice, and align with the standard procedures of other ombudsman services, which require complainants to seek to resolve an issue with the relevant organisation before escalation. The clause also introduces a regulation-making power for the Secretary of State to require controllers to notify the Information Commissioner of the number of complaints made to them in circumstances specified in the regulations.
Clause 40 provides the Information Commissioner with a new power to refuse to act on certain data protection complaints if certain conditions are met, specifically if the complaint has not been made to the relevant controller; the controller has not finished handling the complaint and less than 45 days have elapsed since it was made; or the complaint is considered vexatious or excessive, as defined in the Bill. For example, that could be the case with a complaint that repeats a previous complaint made by the data subject to the commissioner. The power is in addition to the discretion that the commissioner can already exercise to “take appropriate steps” to respond to a complaint and investigate it “to the extent appropriate.” The clause requires the Information Commissioner to publish guidance about how it will respond to complaints and exercise its power to refuse to act on complaints. Finally, the clause also outlines the process for appeals if the commissioner refuses to act on a data protection complaint.
Clause 41 introduces schedule 8, which contains miscellaneous minor and consequential amendments to the UK General Data Protection Regulation and the Data Protection Act relating to complaints by data subjects.
Schedule 8 makes consequential amendments to the UK GDPR and the DPA relating to complaints by data subjects, which will ensure consistency across data protection legislation in relation to the changes to the complaints framework under clauses 39 and 40.
Stephanie Peacock
I will focus most of my remarks on the group on clauses 39 and 40, as clause 41 and schedule 8 contain mostly consequential provisions, as the Minister outlined.
There are two major sections to the clauses. First, they require a complainant to issue their complaint to the controller directly, through allowing the commissioner to refuse to process their complaint otherwise. Secondly, they require the commissioner to refuse any complaint that is vexatious or excessive. I will speak to both in turn.
As the ICO grows and its remit expands, given the rapidly growing use of data in our society, it makes sense that its resources should be focused where they are most needed. Indeed, when giving evidence to the Committee, the Information Commissioner and Paul Arnold of the ICO stated that their current duty to investigate all complaints is creating a burden on their resources. Therefore, the proposal to require that complainants reach out to their data controller first, before contacting the ICO, seems to make sense, as it will allow the regulator to move away from handling low-level complaints, or complaints that are under way but not yet resolved. Instead, it would be able to refocus resources into handling complaints that have been mishandled or that offer a serious threat to data rights and public trust in data use.
Though that may be seen by some businesses and controllers as shifting an extra requirement on to them, the move should be viewed overall as a positive one, as it will require controllers to have clear processes in place for handling complaints and hopefully incentivise against conducting the kind of unlawful processing that prompts complaints in the first place. Indeed, the ICO already encourages that type of best practice, with complainants often encouraged to speak directly with the relevant data controller first before seeking help from the regulator. The clause would therefore simply formalise the arrangement, providing clarity on three levels. First, it would ensure that data subjects are clear on their right to complain directly to the controller. Secondly, it would ensure that controllers are clear on their duty to respond to such complaints. Finally, the ICO would be certain of its ability to refuse a request if the complainant refuses to comply with that model.
Although it is vital that the ICO is able to modernise and direct efforts where they are most needed, it is also vital that a healthy relationship is kept between the public—as data and decision subjects—and the ICO. The public must feel that the commissioner is there to support them in exercising their rights or seeking redress where necessary, not least because lodging a complaint can already be a difficult and distressing process. Indeed, even the commissioner himself said, when he first assumed his role, that he wanted to
“make it easy for people to access remedies if things go wrong.”
As such, it is pleasing to see safeguards built into the clause that ensure a complainant can still escalate their complaint to the ICO, and appeal any refusal from the commissioner to a tribunal.
Data rights groups, such as the Open Rights Group, hold much more serious concerns about the ability to refuse vexatious and excessive requests. Indeed, they worry that the new power will allow the ICO to ignore widespread and systemic abuses of data rights. As was the case with subject access requests, the difference between a complaint made in anger—which is quite likely, given that the complainant believes they have suffered an abuse of their rights—and a vexatious one must be clearly distinguished. The ICO should not be able to reject complaints of data abuses simply because the complainant acts in ways caused by distress.
As the response of the Government to their consultation reveals, only about half of respondents agreed with the proposal to set out criteria by which the ICO can decide not to investigate a complaint. The safeguard to appeal any refusal from the commissioner is therefore crucial in ensuring that there is a clear pathway for data subjects and decision subjects to dispute the decision of the ICO. It is also right that they should be informed of that safeguard, as well as told why their complaint has been refused, and given the opportunity to complain again with a more complete picture of information.
Overall, the clauses seems to strike the right balance between ensuring safeguards for data and decision subjects while helping the ICO to modernise. However, terms such as “vexatious” and “excessive” must be clearly defined to ensure that the ICO is able to exercise this new power of refusal proportionately and sensibly.
Carol Monaghan
I am looking for some clarification from the Minister. Under clause 39, it says:
“A controller must facilitate the making of complaints…such as providing a complaint form which can be completed electronically and by other means.”
Can the Minister clarify whether every data controller will have to provide an electronic means of making a complaint? For many small data controllers, which would include many of us in the room, providing an electronic means of complaint might require additional expertise and cost that they may not have. If it said, “and/or by other means”, which would allow a data controller to provide a paper copy, that might provide a little more reassurance to data controllers.
Sir John Whittingdale
Let me address the point of the hon. Member for Glasgow North West first. The intention of the clause is to ensure that complainants go first to the data controller, and the data controller makes available a process whereby complaints can be considered. I certainly fully understand the concern of the hon. Lady that it should not prove burdensome, particularly for small firms, and I do not believe that it would necessarily require an electronic means to do so. If that is not the case, I will tell her, but it seems to me that the sensible approach would be for data controllers to have a process that the Information Commissioner will accept is available to complainants first, before a complaint is possibly escalated to the next stage.
With regard to the point of the hon. Member for Barnsley East, we have debated previously the change in the threshold to “vexatious” and “excessive”, and we may continue to disagree on that matter.
Question put and agreed to.
Clause 39 accordingly ordered to stand part of the Bill.
Clauses 40 and 41 ordered to stand part of the Bill.
Schedule 8 agreed to.
Clause 42
Consequential amendments to the EITSET Regulations
Amendment made: 47, Clause 42, page 72, line 12, at end insert—
“(7A) In paragraph 13 (modification of section 155 (penalty notices)), in sub-paragraph (3)(c), for “for “data subjects”” there were substituted “for the words from “data subjects” to the end”.”.—(Sir John Whittingdale.)
This amendment inserts an amendment of Schedule 2 to the EITSET Regulations which is consequential on the amendment of section 155(3)(c) of the Data Protection Act 2018 by Schedule 4 to the Bill.
Clause 42, as amended, ordered to stand part of the Bill.
Clause 43
Protection of prohibitions, restrictions and data subject’s rights
Question proposed, That the clause stand part of the Bill.
Sir John Whittingdale
Clause 43 is a technical measure that creates a presumption that our data protection laws should not be overridden by future laws that relate to the processing of personal data, but it respects parliamentary sovereignty by ensuring that Parliament can depart from this presumption in particular cases if it deems it appropriate to do so. For example, if new legislation permitted or required an organisation to share personal data with another for a particular purpose, the default position in the absence of any specific indication to the contrary would be that the data protection legislation would apply to the new arrangement.
Damian Collins (Folkestone and Hythe) (Con)
Will my right hon. Friend confirm that the provision will also apply with trade agreements? Certainly in the early stages of the negotiations for a UK-US trade agreement, the United States Government sought to include various provisions relating to tech policy. In such a scenario, would this legislation take precedence above anything written into a trade agreement?
Sir John Whittingdale
That would certainly be my interpretation. I do not see that a trade agreement could possibly overturn an Act of Parliament unless Parliament specifically sets out that it intends that that should be the case. This is a general protection, essentially saying that in all future cases data protection legislation applies unless Parliament specifically indicates that that should not be the case.
Until now, ensuring that any new data protection measures are read consistently with the data protection legislation has relied either on inclusion of express provision to that effect in new data processing measures, or on general rules of interpretation. There are risks to that situation. Including relevant provisions in each and every new data processing provision is onerous and could be inadvertently omitted. General rules of interpretation can be open to different interpretations by courts, particularly in the light of legal challenges following our exit from the European Union. This can create the potential for legal uncertainty and as a result could lead to a less effective and comprehensive data protection legislative framework.
Clause 43 creates a presumption that any future legislation permitting the processing of personal data will be subject to the key requirements of the UK’s data protection legislation unless clear provisions are made to the contrary. This is a technical but necessary measure and I commend it to the Committee.
Stephanie Peacock
I understand that the clause contains legal clarifications relating to the interaction of data protection laws with other laws. On that basis, I am happy to proceed.
Question put and agreed to.
Clause 43 accordingly ordered to stand part of the Bill.
Clause 44
Regulations under the UK GDPR
Question proposed, That the clause stand part of the Bill.
Sir John Whittingdale
The clause outlines the process and procedure for making regulations under powers in the UK GDPR. Such provision is needed because the Bill introduces regulation-making powers into the GDPR. There is an equivalent provision in section 182 of the Data Protection Act. Among other things, the clause makes it clear that, before making regulations, the Secretary of State must consult the Information Commissioner and such other persons as they consider appropriate, other than when the made affirmative procedure applies. In such cases, the regulations can be made before Parliament has considered them, but cannot remain as law unless approved by Parliament within a 120-day period.
Sir John Whittingdale
I am sure that the Committee will be pleased to learn that we have now completed part 1 of the Bill. [Hon. Members: “Hear, hear!”]
Clause 46 provides an overview of the provisions in part 2 that are aimed at securing the reliability of digital verification services through a trust framework, a public register, an information gateway and a trust mark.
Clause 47 will require the Secretary of State to prepare and publish the digital verification services trust framework, a set of rules, principles, policies, procedures and standards that an organisation that wishes to become a certified and registered digital verification service provider must follow. The Secretary of State must consult the Information Commissioner and other appropriate persons when preparing the trust framework; that consultation requirement can be satisfied ahead of the clause coming into force. The Secretary of State must review the trust framework every 12 months and must consult the Information Commissioner and other appropriate persons when carrying out the review. I commend both clauses to the Committee.
Stephanie Peacock
Clause 46 defines digital verification services. Central to the definition, and to the framing of the debate on part 2, is the clarification that they are
“services that are provided at the request of an individual”.
That is a crucial distinction: digital verification services and the kinds of digital identity that they enable are not the same as any kind of Government-backed digital ID card, let alone a compulsory one. As we will discuss, it is important that any such services are properly regulated and can be relied on. However, the clause seems to set out a sensible definition that clarifies that all such services operate at individual request and are entirely separate from universal or compulsory digital identities.
I will speak in more depth about clause 47. As we move towards an increasingly digitally focused society, it makes absolute sense that someone should be able, at their own choice, to prove their identity online as well as in the physical world. Providing for a trusted set of digital verification services would facilitate just that, allowing people to prove with security and ease who they are for purposes including opening a bank account or moving house, akin to using physical equivalents like a passport or a proof of address such as a utility bill. It is therefore understandable that the Government, building on their existing UK digital identity and attributes trust framework, want to legislate so that the full framework can be brought into law when it is ready.
In evidence to the Committee, Keith Rosser highlighted the benefits that a digital verification service could bring, using his industry of work and employment as a live case study. He said:
“The biggest impact so far has been on the speed at which employers are able to hire staff”––[Official Report, Data Protection and Digital Information (No. 2) Public Bill Committee, 10 May 2023; c. 52, Q112.]
In a study of 70,000 hires, the digital identity route took an average time of three minutes and 30 seconds, saving about a week compared with having to meet with an employer in person to provide physical documents. That has benefits not only to the individuals, who can start work a week earlier, but to the wider economy, since the same people will start contributing to taxation and their local economy a week earlier too.
Secondly, Keith identified that digital verification could open up remote jobs to people living in areas where employment opportunities are harder to come by. In theory, someone living in my constituency of Barnsley East could be hired in a role that would previously have been available only in London, thanks to their ability to prove who they are without ever having to meet their employer in person.
In the light of those benefits, as well as the potential reduction in fraud from cutting down on the usability of fake documents, in principle it seems only logical to support a framework that would allow trusted digital verification services to flourish. However, the key is to ensure that the framework breeds the trust necessary to make it work. In response to the digital identity call for evidence in 2019, the Government identified that a proportion of respondents were concerned about their privacy when it came to digital verification, saying that without assurances on privacy protections it would be hard to build trust in those systems. It is therefore curious that the Government have not accompanied their framework with any principles to ensure that services are designed and implemented around user needs and that they reflect important privacy and data protection principles.
Can the Minister say why the Government have not considered placing the nine identity assurance principles on the statute book, for example, to be considered when legislating for any framework? Those principles were developed by the Government’s own privacy and consumer advisory group back in 2014; they include ensuring that identity assurance can take place only where consent, transparency, multiplicity of choice, data minimisation and dispute resolution procedures are in place. That would give people the reassurance to trust that the framework is in keeping with their needs and rights, as well as those of industry.
Furthermore, can the Minister explain whether the Government intend to ensure that digital verification will not be the only option in any circumstance, making it mandatory? As Big Brother Watch points out, digital identity is not a practical or desired option, particularly for vulnerable or marginalised groups. Elderly people may not be familiar with such technology, while others might be priced out of it, especially given the recent rise in the cost of broadband and mobile bills attached to inflation. Although we must embrace the opportunities that technology can provide in identity verification, there must also be the ability to opt out and use offline methods of identification where needed, or we will risk leaving people out of participating in key activities such as jobseeking.
Finally, I look forward to hearing more about the governance of digital verification services and the framework. The Bill does not provide a statutory basis for the new office for digital identities and attributes, and there is therefore no established body for the functions related to the framework. It is important that when the new office is established, there is good communication from Government about its powers, duties, functions and funding model. After all, the framework and the principles it supports are only as strong as their enforcement.
Overall, I do not wish to stand in the way of this part of the Bill, with the caveat that I am keen to hear from the Minister on privacy protections, on the creation of the new office and on ensuring that digital verification is the beginning of a new way of verifying one’s identity, not the end of any physical verification options.
Chi Onwurah
It is a pleasure to follow my hon. Friend the Member for Barnsley East. I have some general comments, which I intend to make now, on the digital verification services framework introduced and set out in clause 46. I also have some specific comments on subsequent clauses; I will follow your guidance, Mr Hollobone, if it is your view that my comments relate to other clauses and should be made at a later point.
Like my hon. Friend, I recognise the importance of digital verification services and the many steps that the Government are taking to support them, but I am concerned about the lack of coherence between the steps set out in the Bill and other initiatives, consultations and activities elsewhere in Government.
As my hon. Friend said, the Government propose to establish an office for digital identities and attributes, which I understand is not a regulator as such. It would be good to have clarity on the position, as there is no discussion in the Bill of the duties of the new office or any kind of mechanisms for oversight or appeal. What is the relationship between the office for digital identities and attributes and this legislation? The industry has repeatedly called for clarity on the issue. I think we can all agree that a robust and effective regulatory framework is important, particularly as the Bill confers broad information-gathering powers on the Secretary of State. Will the Minister set out his vision and tell us how he sees the services being regulated, what the governance model will be, how the office—which will sit, as I understand it, in the Department for Science, Innovation and Technology—will relate to this legislation, and whether it will be independent of Government?
Will the Minister also help us to understand the relationship between the digital verification services set out in the Bill and other initiatives across Government on digital identity, such as the Government Digital Service’s One Login service, which we understand will be operated across Government services, and the initiatives of the Home Office’s fraud strategy? Is there a relationship between them, or are they separate initiatives? If they are separate, might that be confusing for the sector? I am sure the Minister will agree that we in the UK are fortunate to have world leaders in digital verification, including iProov, Yoti and Onfido. I hope the Minister agrees that for those organisations to continue their world-leading role, they need clarification and understanding of the direction of Government and how this legislation relates to that direction.
Finally, I hope the Minister will agree that digital identity is a global business. Will he say a few words about how he has worked with, or is working with, other countries to ensure that the digital verification services model set out in this legislation is complementary to other services and interoperable as appropriate, and that it builds on the learnings of other digital verification services?
Sir John Whittingdale
I am grateful to the hon. Member for Barnsley East for setting out the Opposition’s general support for the principle of moving towards the facilitation of digital verification services. She set out some of the benefits that such services can provide, and I completely echo her points on that score. I reiterate the central point that none of this is mandatory: people can choose to use digital verification services, but there is no intention to make them compulsory.
The trust framework has been set out with a wide number of principles and standards, to which privacy is central. The hon. Member for Barnsley East is right that that will be necessary to obtain trust from people seeking to use the services. She and the hon. Member for Newcastle upon Tyne Central have both set out detailed questions about the operation of the new office and the work alongside other Government Departments. I would like to respond to their points but, given that we are about to break, we could accept the general principle of this clause and then discuss them, no doubt in greater detail, in the debate on subsequent clauses. Will the Committee accept this clause with the assurance that we will address a lot of the issues just raised as we come to subsequent clauses in this part of the Bill?
Question put and agreed to.
Clause 46 accordingly ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Steve Double.)
Data Protection and Digital Information (No. 2) Bill (Sixth sitting)
Thursday 18th May 2023
(11 months, 3 weeks ago)
Public Bill CommitteesRead Full debate Data Protection and Digital Information Bill 2022-23 View all Data Protection and Digital Information Bill 2022-23 Debates Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 18 May 2023 - (18 May 2023)
The Minister for Data and Digital Infrastructure (Sir John Whittingdale)
Clauses 48 to 52 provide the Secretary of State with powers and duties relating to the governance and oversight of digital identities in the UK. Those functions will be carried out by the office for digital identities and attributes. I can tell the hon. Member for Newcastle upon Tyne Central that the office is a team of civil servants in the Department for Science, Innovation and Technology. The office will oversee certified organisations that provide trusted digital verification services, to ensure that the purpose of the legislation is being upheld as the market develops.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
I appreciate the Minister’s clarification that the office will be a group of civil servants, but I do not see that set out in the Bill, in the clause that we are currently debating. Am I wrong?
Sir John Whittingdale
As the office is an internal body, within the Department, I do not think that it would necessarily be specifically identified in the legislation in that way. If there is any more information on that, I will be happy to provide it to the hon. Lady in a letter, but the office is not a separate body to the Department.
Chi Onwurah
I thank the Minister for providing greater clarification, but if the office is not a separate body, it cannot be claimed to be independent of Government, which means that the governance of digital verification services is not independent. Will he confirm that?
Sir John Whittingdale
This is a function that will operate within Government. I do not think that it is one where there is any specific need for particular independence, but as I said, I am happy to supply further details about precisely how it will operate if that is helpful to the hon. Lady.
Let me move on from the precise operation of the body. Clause 53 sets out requirements for certified digital verification service providers in relation to obtaining top-up certificates where the Secretary of State revises and republishes the DVS trust framework.
Clause 48 provides that the Secretary of State must establish and maintain a register of digital verification service providers. The register must be made publicly available. The Secretary of State is required to add a digital verification service provider to the register, provided that it has met certain requirements. To gain a place on the register, the provider must first be certified against the trust framework by an accredited conformity assessment body. Secondly, the provider must have applied to be registered in line with the Secretary of State’s application requirements under clause 49. Thirdly, the provider must pay any fee set by the Secretary of State under the power in clause 50.
The United Kingdom Accreditation Service accredits conformity assessment bodies as competent to assess whether a digital verification service meets the requirements set out in the trust framework. That, of course, is an arm’s length body. Assessment is by independent audits, and successful DVS providers are issued with a certificate.
The Secretary of State is prohibited from registering a provider if it has not complied with the registration requirements. An application must be rejected if it is based on a certificate that has expired, has been withdrawn by the issuing body, or is required to be ignored under clause 53 because the trust framework rules have been amended and the provider has not obtained a top-up certificate in time. The Secretary of State must also refuse to register a DVS provider if the provider was removed from the register through enforcement powers under clause 52 and reapplies for registration while still within the specified removal period.
Clause 48(7) provides definitions for “accredited conformity assessment body”, “the Accreditation Regulation”, “conformity assessment body” and “the UK national accreditation body”.
Clause 49 makes provision for the Secretary of State to determine the form of an application for registration in the digital verification services register, the information that an application needs to contain, the documents to be provided with an application and the manner in which an application is to be submitted.
Clause 50 allows the Secretary of State to charge providers a fee on application to be registered in the DVS register. The fee amount is to be determined by the Secretary of State. The clause also allows the Secretary of State to charge already registered providers ongoing fees. The amount and timing of those fees are to be determined by the Secretary of State.
Clauses 51 and 52 confer powers and duties on the Secretary of State in relation to the removal of persons from the register. Clause 51 places a duty on the Secretary of State to remove a provider from the register if certain conditions are met. That will keep the register up to date and ensure that only providers that hold a certificate to prove that they adhere to the standards set in the framework are included in the register. Clause 52 provides a power to the Secretary of State to remove a provider from the register if the Secretary of State is satisfied that the provider is failing to provide services in accordance with the trust framework, or if it has failed to provide the Secretary of State with information as required by a notice issued under clause 58. Clause 52 also contains safeguards in respect of the use of that power.
Clause 53 applies where the Secretary of State revises and republishes the DVS trust framework to include a new rule or to change an existing rule and specifies in the trust framework that a top-up certificate will be required to show compliance with the new rule from a specified date.
I hope that what I have set out is reasonably clear, and on that basis I ask that clauses 48 to 53 stand part of the Bill.
Stephanie Peacock (Barnsley East) (Lab)
As has been mentioned, a publicly available register of trusted digital verification services is welcome; as a result, so is this set of clauses. A DVS register of this kind will improve transparency for anyone wanting to use a DVS service, as they will be able to confirm easily and freely whether the organisation that they hope to use complies with the trust framework.
However, the worth of the register relies on the worth of the trust framework, because only by getting the trust framework right will we be able to trust those that have been accredited as following it. That will mean including enough in the framework to assure the general public that their rights are protected by it. I am thinking of things such as data minimisation and dispute resolution procedures. I hope that the Department will consider embedding principles of data rights in the framework, as has been mentioned.
As with the framework, the detail of these clauses will come via secondary legislation, and careful attention must be paid to the detail of those measures when they are laid before Parliament. In principle, however, I have no problem with the provisions of the clauses. It seems sensible to enable the Secretary of State to determine a fee for registration, to remove a person from the register upon a change in circumstances, or to remove an organisation if it is failing to comply with the trust framework. Those are all functions that are essential to the register functioning well, although any fees should of course be proportionate to keep market barriers low and ensure that smaller players continue to have access. That facilitates competition and innovation.
Similarly, the idea of top-up certificates seems sensible. Members on both sides of the House have agreed at various points on the importance of future-proofing a Bill such as this, and the digital verification services framework should have space for modernisation and adaptation where necessary. Top-up certificates will allow for the removal of any organisation that is already registered but fails to comply with new rules added to the framework.
The detail of these provisions will be analysed as and when the regulations are introduced, but I will not object to the principle of an accessible and transparent register of accredited digital verification services.
Chi Onwurah
I thank the Minister for clarifying the role of the office for digital identities and attributes. Some of the comments I made on clause 46 are probably more applicable here, but I will not repeat them, as I am sure the Committee does not want to hear them a second time. However, I ask the Minister to clarify the process. If a company objects to not being approved for registration or says that it has followed the process set out by the Secretary of State but the Secretary of State does not agree, or if a dispute arises for whatever reason, what appeal process is there, if any, and who is responsible for resolving disputes? That is just one example of the clarity that is necessary for an office of this kind.
Will the Minister clarify the dispute resolution process and whether the office for digital identities and attributes will have a regulatory function? Given the lack of detail on the office, I am concerned about whether it will have the necessary powers and resources. How many people does the Minister envisage working for it? Will they be full-time employees of the office, or will they be job sharing with other duties in his Department?
My other questions are about something I raised earlier, to which the Minister did not refer: international co-operation and regulation. I imagine there will be instances where companies headquartered elsewhere want to offer digital verification services. Will there be compatibility issues with digital verification that is undertaken in other jurisdictions? Is there an international element to the office for digital identities and attributes?
Everyone on the Committee agrees that this is a very important area, and it will only get more important as digital verification becomes even more essential for our everyday working lives. What discussions is the Minister having with the Department for Business and Trade about the kind of market that we might expect to see in digital verification services and ensuring that it is competitive, diverse and across our country?
Sir John Whittingdale
I look forward to debating the detail of the framework with the hon. Member for Barnsley East when it comes forward, but the hon. Member for Newcastle upon Tyne Central raised a couple of specific points. As I said, the new office for digital identities and attributes will be in the Department for Science, Innovation and Technology, and it will work on a similar basis to that of the office for product safety and standards, which operates within the Department for Business and Trade.
However, I should make it clear that the office for digital identities and attributes is not a regulator, because the use of digital identities is not mandatory, so it does not have investigatory or enforcement powers. It is not our intention for it to be able to levy fines or resolve individual complaints. Further down the line, as the market develops, it may be decided that it should be housed permanently in an independent body or as an arm’s length body, but that is for consideration in due course. It will start off within the Department.
I will come back to the hon. Member for Newcastle upon Tyne Central with more detail about dispute resolution. I take her point; I am not sure how often what she describes is likely to happen, but clearly it is sensible at least to take account of it.
The Chair
With this it will be convenient to discuss the following:
Clauses 55 and 56 stand part.
Government amendments 6 and 7.
Government new clause 3—Information disclosed by the Welsh Revenue Authority.
Government new clause 4—Information disclosed by Revenue Scotland.
Sir John Whittingdale
Clause 54 creates a permissive power to enable public authorities to share information relating to an individual with registered digital verification service providers. That the power is permissive means that public authorities are not under any obligation to disclose information. The power applies only where a digital verification service provider is registered in the DVS register and the individual has requested the digital verification service from that provider. Information disclosed using the power does not breach any duty of confidentiality or other restrictions relating to the disclosure of information, but the power does not enable the disclosure of information if disclosure would breach data protection legislation. The clause also gives public authorities the power to charge fees for disclosing information.
All information held by His Majesty’s Revenue and Customs is subject to particular statutory safeguards relating to confidentiality. Clause 55 establishes particular safeguards for information disclosed to registered digital verification service providers by His Majesty’s Revenue and Customs under clause 54. The Government will not commence measures to enable the disclosure of information held by HMRC until the commissioners for HMRC are satisfied that the technology and processes for information sharing uphold the particular safeguards relating to taxpayer confidentiality and therefore allow information sharing by HMRC to occur without adverse effect on the tax system or any other functions of HMRC.
Clause 56 obliges the Secretary of State to produce and publish a code of practice about the disclosure of information under clause 54. Public authorities must have regard to the code when disclosing information under this power. Publication of the first version of the code is subject to the affirmative resolution procedure. Publication of subsequent versions of the code is subject to the negative resolution procedure. We will work with the commissioners for HMRC to ensure that the code meets the needs of the tax system.
New clauses 3 and 4 and Government amendments 6 and 7 establish safeguards for information that reflect those already in the Bill under clause 55 for HMRC. Information held by tax authorities in Scotland and Wales—Revenue Scotland and the Welsh Revenue Authority—is subject to similar statutory safeguards relating to confidentiality. These safeguards ensure that confidence and trust in the tax system is maintained. Under these provisions, registered DVS providers may not further disclose information provided by Revenue Scotland or the Welsh Revenue Authority unless they have the consent of that revenue authority to do so. The addition of these provisions will provide an equivalent level of protection for information shared by all three tax authorities in the context of part 2 of the Bill, avoiding any disparity in the treatment of information held by different tax authorities in this context. A similar provision is not required for Northern Irish tax data, as HMRC is responsible for the collection of devolved taxes in Northern Ireland.
Stephanie Peacock
Many digital verification services will, to some extent, rely on public authorities being able to share information relating to an individual with an organisation on the DVS register. To create a permissive gateway that allows this to happen, as clause 54 does, is therefore important for the functioning of the entire DVS system, but there must be proper legal limits placed on these disclosures of information, and as ever, any disclosures involving personal data must abide by the minimisation principle, with only the information necessary to verify the person’s identity or the fact about them being passed on. As such, it is pleasing to see in clause 54 the clarification of some of those legal limits, as contained in the likes of data protection legislation and the Investigatory Powers Act 2016. Similarly, clause 55 and the Government new clauses apply the necessary limits on sharing of personal data from HMRC and devolved revenue authorities under clause 54.
Finally, clause 56, which seeks to ensure that a code of practice is published regarding the disclosure of information under clause 54, will be a useful addition to the previous clauses and will ensure that the safety of such disclosures is properly considered in comprehensive detail. The Information Commissioner, with their expertise, will be well placed to help with this, so it is pleasing to see that they will be consulted during the process of designing this code. It is also good to see that this consultation will be able to occur swiftly—before the clause even comes into force—and that the resulting code will be laid before both Houses.
In short, although some disclosures of personal data from public authorities to organisations providing DVS are inevitable, as they are necessary for the very functioning of a verification service, careful attention should be paid to how this is done safely and legally. These clauses, alongside a well-designed framework—as already discussed—will ensure that that is the case.
Question put and agreed to.
Clause 54 accordingly ordered to stand part of the Bill.
Clauses 55 and 56 ordered to stand part of the Bill.
Clause 57
Trust mark for use by registered persons
Question proposed, That the clause stand part of the Bill.
Sir John Whittingdale
Clause 57 makes provision for the Secretary of State to designate a trust mark to a DVS provider. The trust mark is essentially a kitemark that shows that the provider complies with the rules and standards set out in the trust framework, and has been certified by an approved conformity assessment body. The trust mark must be published by the Secretary of State and can only be used by registered digital verification service providers. The clause gives the Secretary of State powers to enforce that restriction in civil proceedings.
Stephanie Peacock
Trust marks are useful tools that allow organisations and the general public alike to immediately recognise whether or not a product or service has passed a certain testing standard or criterion. This is especially the case online, where due to misinformation and the prevalence of scams such as phishing, trust in online services can be lower than in the physical world.
The TrustedSite certification, for example, offers online businesses an earned certification programme that helps them to demonstrate that they are compliant with good business practices and maintain high safety standards. This is a benefit not only to the business itself, which is able to convert more users into clicks and sales, but to the users, who do not have to spend time researching each individual business and can explore pages and shop with immediate certainty. A trust mark for digital verification services would serve a similar purpose, enabling certified organisations that meet the trust framework criteria to be immediately recognisable, offering them the opportunity to be used by more people and offering the public assurance that their personal data is being handled by a verified source.
Of course, as is the case with this entire section of the Bill, the trust mark is only worth as much as the framework around it. Ministers should again think carefully about how to ensure that the framework supports the rights of the individual. Furthermore, the trust mark is useful only if people recognise it; otherwise, it cannot provide the immediate reassurance that it is supposed to. When the trust mark is established, what measures will the Department take to raise public awareness of it? In the same vein, to know the mark’s value, the public must also be aware of the trust framework that the mark is measured against, so what further steps will the Department take to increase knowledge and understanding of digital verification services and frameworks? Finally, will the Department publish the details of any identified unlawful use of the trust mark, so that public faith in the reliability of the trust mark remains high?
Overall, the clause is helpful in showing that we take seriously the need to ensure that people do not use digital verification services that may mishandle their data.
Sir John Whittingdale
I am grateful to the hon. Lady for her support. I entirely take her point that a trust mark only really works if people know what it is and can look for it when seeking a DVS provider.
Regarding potential abuse, obviously that is something we will monitor and potentially publicise in due course. All I would say at this stage is that she raises valid points that I am sure we will consider as the new system is implemented.
Question put and agreed to.
Clause 57 accordingly ordered to stand part of the Bill.
Clause 58
Power of Secretary of State to require information
Amendments made: amendment 6, in clause 58, page 84, line 5, after “55” insert
“or (Information disclosed by the Welsh Revenue Authority)”
This amendment prevents the Secretary of State requesting a disclosure of information which would contravene the new clause inserted by NC3.
Amendment 7, in clause 58, page 84, line 5, after “55” insert
“or (Information disclosed by Revenue Scotland)”—(Sir John Whittingdale.)
This amendment prevents the Secretary of State requesting a disclosure of information which would contravene the new clause inserted by NC4.
Question proposed, That the clause, as amended, stand part of the Bill.
Sir John Whittingdale
Clauses 58 to 60 set out powers and duties conferred upon the Secretary of State in relation to the exercise of her governance and oversight functions under part 2.
Clause 58 enables the Secretary of State to issue a written notice that requires accredited conformity assessment bodies or registered DVS providers to provide information reasonably required by the Secretary of State to exercise functions under part 2. The notice must state why the information is required. It may also state what information is required, the form in which it should be provided, when it should be provided and the place to which it should be provided. Any notice given to a provider must also inform the provider that they may be removed from the DVS register if they fail to comply with the notice.
The power is subject to certain safeguards. Information does not have to be disclosed if to do so would breach clause 55 in relation to HMRC data or data protection legislation, or if disclosure is prohibited by the relevant parts of the Investigatory Powers Act 2016. Information does not need to be disclosed if doing so would reveal an offence that would expose a person to criminal proceedings. That does not apply to offences mentioned relating to false statements.
Clause 59 gives the Secretary of State the power to make regulations specifying that another person is able to exercise her functions under part 2. This clause enables us to move the governance and oversight functions of the Secretary of State to a third party if appropriate.
Chi Onwurah
I thank the Minister for giving way. Before he moves on to clause 60, can he set out, perhaps giving an example, where it might be appropriate to use the power in clause 59 to make arrangements for another person to take on these functions, or in what circumstances he envisages it being used?
Sir John Whittingdale
We are obviously at a very early stage in the development of this market. At the moment, it is felt right that oversight should rest with the Secretary of State, but it may be that as the market grows and develops there will need to be the oversight via a separate body. The clause keeps the power available to the Secretary of State to delegate the function if he or she chooses to do so.
Clause 60 requires the Secretary of State to publish an annual report on the functioning of this part. The first report must be published within 12 months of clause 47, the DVS trust framework clause, coming into force. The reports will help to ensure that the market continues to meet the needs of DVS providers, public authorities, regulators, civil society and individuals. I commend the clauses to the Committee.
Stephanie Peacock
To oversee the DVS register, it is understandable that the Secretary of State may in some cases need to require information from registered bodies to ensure that they are complying with their duties under the framework. It is good that clause 58 provides for that power, and places reasonable legal limits on it, so that disclosures of information do not disrupt legal professional privilege or other important limitations. Likewise, it is sensible that the Secretary of State be given the statutory power to delegate some oversight of the measures in this part in a paid capacity, as is ensured by clause 59.
As I have mentioned many times throughout our scrutiny of the Bill, the Secretary of State may not always have the level of expertise needed to act alone in exercising the powers given to them by such regulations. The input of those with experience and time to commit to ensuring the quality of the regulations will therefore be vital to the success of these clauses. Again, however, we will need more information about the establishment of the OfDIA and the governance of digital identities overall to be able to interpret fully both the delegated powers and the power to require information, and how they will be used. Once again, therefore, I urge transparency from the Government as those governance structures emerge.
That leads nicely to clause 60, which requires the Secretary of State to prepare and publish yearly reports on the operation of this part. A report of that nature will offer the chance to periodically review the functioning of the trust framework, register, trust mark and all other provisions contained in this part, thereby providing an opportunity to identify and rectify any recurring issues that the system may face. That is sensible for any new project, particularly one that, through its transparency, will offer accountability of the Government to the general public, who will be able to read the published reports. In short, there are no major concerns regarding any of the three clauses, though further detail on the governance of digital identities services will need proper scrutiny.
Question put and agreed to.
Clause 58 accordingly ordered to stand part of the Bill.
Clauses 59 and 60 ordered to stand part of the Bill.
Clause 61
Customer data and business data
Sir John Whittingdale
I beg to move amendment 46, in clause 61, page 85, line 24, after “supplied” insert “or provided”.
The definition of “business data” in clause 61 refers to the supply or provision of goods, services and digital content. For consistency with that, this amendment amends an example given in the definition so that it refers to what is provided, as well as what is supplied.
Sir John Whittingdale
We move on to part 3 of the Bill, concerning smart data usage, which I know is of interest to a number of Members. Before I discuss the detail of clause 61 and amendment 46, I will give a brief overview of this part and the policy intention behind it. The provisions in part 3 allow the Secretary of State or the Treasury to make regulations that introduce what we term “schemes” that compel businesses to share data that they hold on customers with the customer or authorised third parties upon the customer’s request, and to share or publish data that they hold about the services or products that they provide. Regulations under this part will specify what data is in scope within the parameters set out by the clauses, and how it should be shared.
The rest of the clauses in this part permit the Secretary of State or the Treasury to include in the regulations the measures that will underpin these data sharing schemes and ensure that they are subject to proper safeguards—for example, relating to the enforcement of regulations; the accreditation of third party businesses wanting to facilitate data sharing; and how these schemes can be funded through levies and charging. Regulations that introduce schemes, or significantly amend existing schemes, will be subject to prior consultation and parliamentary approval through the affirmative procedure.
The policy intention behind the clauses is to allow for the creation of new smart data schemes, building on the success of open banking in the UK. Smart data schemes establish the secure sharing of customer data and contextual information with authorised third parties on the customer’s request. The third parties can then be authorised by the customer to act on their behalf. The authorised third parties can therefore provide innovative services for the customer, such as analysing spending to identify cost savings or displaying data from multiple accounts in a single portal. The clauses replace existing regulation-making powers relating to the supply of customer data in sections 89 to 91 of the Enterprise and Regulatory Reform Act 2013; those powers are not sufficient for new smart data schemes to be effective.
Clause 61 defines the key terms and concepts for the powers in part 3. We have tabled a minor Government amendment to the clause, which I will explain. The definitions of data holder and trader in subsection (2) explain who may be required to provide data under the regulations. The definitions of customer data and business data deal with the two kinds of data that suppliers may be required to provide. Customer data is information relating to the transactions between the customer and supplier, such as a customer’s consumption of the relevant good or service and how much the customer has paid. Business data is wider contextual data relating to the goods or services supplied or provided by the relevant supplier. Business data may include standard prices, charges or tariffs and information relating to service performance. That information may allow customers to understand their customer data. Government amendment 46 clarifies that a specific example of business data—information about location—refers to the supply or provision of goods or services. It corrects a minor inconsistency in the list of examples of business data in subsection (2)(b).
Subsection (3) concerns who is a customer of the supplying trader, and who can therefore benefit from smart data. Customers may include both consumers and businesses. Subsection (4) enables customers to exercise smart data rights in relation to contracts they have already entered into, and subsection (5) allows the schemes to function through provision of access to data, as opposed to sending data as a one-off transfer.
Stephanie Peacock
The clause defines key terms in this part of the Bill, such as business data, customer data and data holder, as well as data regulations, customer and trader. These are key to the regulation-making powers on smart data in part 3, and I have no specific concerns to raise about them at this point.
I note the clarification made by the Minister in his amendment to the example given. As he outlined, that will ensure there is consistency in the definition and understanding of business data. It is good to see areas such as that being cleaned up so that the Bill can be interpreted as easily as possible, given its complexity to many. I am therefore happy to proceed with the Bill.
Damian Collins (Folkestone and Hythe) (Con)
I rise to ask the Minister a specific question about the use of smart data in this way. A lot of users will be giving away data a device level, rather than just accessing individual accounts. People are just going to a particular account they are signed into and making transactions, or doing whatever they are doing in that application, on a particular device, but there will be much more gathering of data at the device level. We know that many companies—certainly some of the bigger tech companies—use their apps to gather data not just about what their users do on their particular app, but across their whole device. One of the complaints of Facebook customers is that if they seek to remove their data from Facebook and get it back, the company’s policy is to give them back data only for things they have done while using its applications—Instagram, Facebook or whatever. It retains any device-level data that it has gathered, which could be quite significant, on the basis of privacy—it says that it does not know whether someone else was using the device, so it is not right to hand that data back. Companies are exploiting this anomaly to retain as much data as possible about things that people are doing across a whole range of apps, even when the customer has made a clear request for deletion.
I will be grateful if the Minister can say something about that. If he cannot do so now, will he write to me or say something in the future? When considering the way that these regulations work, particularly in the era of smart data when it will be far more likely that data is gathered across multiple applications, it should be clear what rights customers have to have all that data deleted if they request it.
Sir John Whittingdale
I share my hon. Friend’s general view. Customers can authorise that their data be shared through devices with other providers, so they should equally have the right to take back that data if they so wish. He invites me to come back to him with greater detail on that point, and we would be very happy to do so.
Amendment 46 agreed to.
Clause 61, as amended, ordered to stand part of the Bill.
Clause 62
Power to make provision in connection with customer data
Stephanie Peacock
I beg to move amendment 112, in clause 62, page 87, line 2, at end insert—
“(3A) The Secretary of State or the Treasury may only make regulations under this section if—
(a) the Secretary of State or the Treasury has conducted an assessment of the impact the regulations may have on customers, businesses, or industry,
(b) the assessment mentioned in paragraph (a) has been published, and
(c) the assessment concludes that the regulations achieve their objective without imposing disproportionate, untargeted or unnecessary cost on customers or businesses.”
The Chair
With this it will be convenient to discuss the following:
Amendment 113, in clause 62, page 87, line 12, at end insert—
“(5) The Secretary of State or the Treasury may invite a relevant sectoral regulator to contribute to, or to conduct, any impact assessment conducted in order to enable the Secretary of State or the Treasury to fulfil their obligation under subsection (4).”
This amendment would allow the Secretary of State or the Treasury to enable a relevant sectoral regulator to contribute to, or conduct, any impact assessments on smart data regulations.
Amendment 114, in clause 62, page 87, line 12, at end insert—
“(5) The Secretary of State or the Treasury must consult representatives of the relevant business or industry sector to inform their decision whether to make regulations under this section.”
This amendment would require the Secretary of State or the Treasury to consult representatives of the relevant business or industry sector before making smart data regulations.
Amendment 115, in clause 62, page 87, line 12, at end insert—
“(5) Within six months of the passage of this Act, the Secretary of State must—
(a) publish a target date for the coming into force of the first regulations under this section, and
(b) make arrangements for the completion of an assessment of the impact of those regulations.”
This amendment would require Government to identify a target for a first smart data scheme within 6 months, and make arrangements for an impact assessment for these regulations.
Stephanie Peacock
Of all the provisions in the Bill, the ones on smart data are those that I am most excited about and pleased to welcome. The potential of introducing smart data schemes is immense: they can bring greater choice to consumers, enable innovation, increase competition and result in the delivery of better products and services. I will address amendments 112 and 113, but I look forward to the opportunity to speak in support of this part more widely.
Most of the detail on how and where smart regimes will be regulated in practice through this Bill will follow in secondary legislation and regulation. That is deliberate and welcome, as it ensures that smart data schemes are built around the realities of the sectors to which they apply. Given that they cannot be included on the face of the Bill, however, it is important that the regulations are prepared in the way that any good data-related law is. There must be a committee of consultation to ensure that the outcome works effectively for consumers and businesses, with the appropriate data protection safeguards.
Indeed, there may be certain sectors in which the costs simply outweigh the benefits of introducing such a regime. Sky believes that there is currently no evidence that a smart data scheme in the communications sector would bring clear and tangible additional benefits to customers. Ofcom consulted on the proposal in 2020 and came to a similar conclusion. Sky argues that the communications sector already has
“a very high bar for supporting consumers to use data to find the best deal for them. For example, in 2020 Ofcom introduced End of Contract Notifications”,
which tell customers when their current contract is ending and what they could save by signing up to another deal. Sky says that Ofcom is
“also in the process of introducing One Touch Switching for fixed broadband which will make it easier for customers to move between providers who operate on different networks”.
As BT identifies, smart data initiatives require significant time and investment to implement. The Government’s impact assessment estimates that the implementation cost for the telecoms sector for a smart data initiative could be anywhere between £610 million and £732 million. That is not to say that the cost outweighs the potential benefits for all industries, including telecoms, but it is important that the Government weigh that up before making any regulations, particularly given that large costs be passed on to consumers, or that there may be less investment in other areas. In the telecoms industry, it could lead to a reduction in investment in full-fibre broadband and 5G. It is imperative, therefore, to ensure that all costs remain targeted, proportionate and necessary to bring about an overall benefit that outweighs the costs. An impact assessment would provide assurance that this has been taken into consideration before any new schemes are introduced.
When conducting such an assessment, sectoral regulators, which can provide expert insight into the impact of smart data in any particular industry, will be well placed to assess the costs and benefits in the detail needed. That is something the Government themselves recognise, as they have placed a requirement in the Bill to consult those regulators. The amendments I propose would strengthen that commitment, allowing relevant sectoral regulators the opportunity, where appropriate, to be formally involved in the process of conducting an impact assessment.
Sir John Whittingdale
I assure the hon. Lady that I and, no doubt, the whole Committee share her excitement about the potential offered by smart data, and I have sympathy for the intention behind her amendments. However, taking each one in turn, we feel amendment 112 is unnecessary because the requirements are already set by the better regulation framework, the Small Business, Enterprise and Employment Act 2015 and, indeed, these clauses. Departments will conduct an impact assessment in line with the better regulation framework and Green Book guidance when setting up a new smart data scheme, and must demonstrate consideration of their requirements under the Equality Act 2010. That will address the proportionality, targeting and necessity of the scheme.
Moreover, the clauses require the Government to consider the effect of the regulations on matters including customers, businesses and competition. An impact assessment would be an effective approach to meeting those requirements. However, there is a risk that prescribing exactly how a Department should approach the requirements could unnecessarily constrain the policymaking process.
I turn to amendment 113. Clause 74(5) already requires the Secretary of State or the Treasury to consult with relevant sector regulators as they consider appropriate. As part of the process, sector regulators may be asked to contribute to the development of regulatory impact assessments, so we do not believe the amendment is necessary.
On amendment 114, we absolutely share the view of the importance of Government consulting businesses before making regulations. That is why, under clause 74(6), the Secretary of State or the Treasury must, when introducing a smart data scheme, consult such persons as are likely to be affected by the regulations and such sectoral regulators as they consider appropriate. Those persons will include businesses relevant to the envisaged scheme.
On amendment 115, we absolutely share the ambition to grab whatever opportunities smart data offers. In particular, I draw the hon. Lady’s attention to the commitments made last month by the Economic Secretary to the Treasury, who set out the Treasury’s plans to use the smart data powers to provide open banking with a sustainable regulatory framework, while the Under-Secretary of State for Business and Trade, my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), chaired the inaugural meeting of the Smart Data Council last month. That council has been established to support and co-ordinate the development of smart data schemes in a timely manner.
With respect to having a deadline for schemes, we should recognise that implementation of the regulations requires careful consideration. The hon. Member for Barnsley East clearly recognises the importance of consultation and of properly considering the impacts of any new scheme. We are committed to that, and there is a risk that a statutory deadline for making the regulations would jeopardise our due diligence. I assure her that all her concerns are ones that we share, so I hope that she will accept that the amendments are unnecessary.
Stephanie Peacock
I am grateful to the Minister for those assurances. I am reassured by his comments, and I am happy to beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Sir John Whittingdale
Clause 62 provides the principal regulation-making power to establish smart data schemes in relation to customer data. The clause enables the Secretary of State or the Treasury to make regulations that require data holders to provide customer data either directly to a customer, or to a person they have authorised, at their request. Subsection (3) of the clause also allows for an authorised person who receives the customer data, to exercise the customer’s rights in relation to their data on their behalf. We call that “action initiation”.
An illustrative example could be in open banking, where customers can give authorised third parties access to their data to compare the consumer’s current bank account with similar offers, or to group the contracts within a household together for parents or guardians to better manage children’s accounts. Subsection (3) could allow the authorised third party to update the customer’s contact details across the associated accounts, for example if an email address changes.
Clause 63 outlines the provisions that smart data scheme regulations may contain when relating to customer data. The clause establishes much of the critical framework that smart data schemes will be built on. On that basis, I commend clauses 62 and 63 to the Committee.
Stephanie Peacock
As previously mentioned, and with the caveats that I expressed when I was discussing my amendments, I am extremely pleased to be able to welcome this part of the Bill. In essence, clauses 62 and 63 enable regulations that will allow for customer data to be provided to a third party on request. I will take the opportunity to highlight why that is the case by looking at some of the benefits that smart data can provide.
Since 2018, open banking—by far the most well known and advanced version of smart data in operation—has demonstrated what smart data can deliver over and over again. For the wider economy, the benefits have been remarkable, with the total value to the UK economy now amounting to more than £4.1 billion, according to Coadec, the Coalition for a Digital Economy. Consumers’ experience of banking has been revolutionised if they have consented of their own accord to have third-party applications access their financial data.
Indeed, a whole host of money management tools and apps can now harness people’s financial data to create personalised recommendations based on their spending habits, including how to budget or save. During a cost of living crisis, some of those tools have been extremely valuable in helping people to manage new bills and outgoings. Furthermore, online retailers can now connect directly to someone’s bank so that, rather than spending the time filling in their card details each time they make a purchase, an individual can approve the transaction via their online banking system.
It is important to reiterate that open banking is based on consent, so consumers participate only if they feel it is right for them. As it happens, millions of people have capitalised on the benefits. More than seven million consumers and 50% of small and medium-sized enterprises have used open banking services to gain a holistic view of their finances, to support applications for credit and to pay securely, quickly and cheaply.
Though open banking has brought great success for both consumers and the wider economy, it is also important that the Government learn lessons from its implementation. We must pay close attention to how the introduction of open banking has impacted both the industry and consumers and ensure that any takeaways are factored in when considering an expansion of smart data into new industries.
Further, given that the Government clearly recognise the value of open data, as shown by this section of the Bill, it is a shame that the Bill does not go further in exploring the possibilities of opening datasets in other settings. Labour has explicitly set out to do that in its industrial strategy. For example, we have identified that better, more open datasets on jobs could help us to understand where skills shortages are, allowing jobseekers, training providers and Government to better fill those gaps.
The provisions in clauses 62 and 63 to create new regimes of smart data are therefore welcome, but the Bill unfortunately remains a missed opportunity to fully capitalise on the opportunities of open, secure data flows.
Question put and agreed to.
Clause 62 accordingly ordered to stand part of the Bill.
Clause 63 ordered to stand part of the Bill.
Clause 64
Power to make provision in connection with business data
Question proposed, That the clause stand part of the Bill.
Sir John Whittingdale
Clause 64 provides the principal regulation-making power for the creation of smart data schemes relating to business data. Regulations created through this clause allow for business data to be provided to the customer of a trader or a third-party recipient. Business data may also be published to be more widely available.
These regulations relating to business data will increase the transparency around the pricing of goods and services, which will increase competition and benefit both consumers and smaller businesses. To give just one example, the Competition and Markets Authority recently highlighted the potential of an open data scheme that compared the prices of fuel at roadside stations, increasing competition and better informing consumers. It is that kind of market intervention that the powers provide for.
Clause 65 outlines provisions that regulations relating to business data may contain. Those provisions are non-exhaustive. The clause largely mirrors clause 63, extending the same protections and benefits to schemes that make use of businesses data exclusively or in tandem with customer data. The clause differs from clause 63 in subsection (2), where an additional consideration is made as to who may make a request for business data. As action initiation relates only to an authorised person exercising a customer’s rights relating to their data, clause 65 does not include the references to that that are made in subsections (7) and (8) of clause 63.
Stephanie Peacock
The measures in these clauses largely mirror 62 and 63, but they refer to business data rather than customer data. I therefore refer back to my comments on clause 62 and 63 and the benefits that new regulations such as these might be able to provide. Those remarks provide context as to why I am pleased to support these measures, which will allow the making of regulations that require data holders to share business data with third parties.
However, I would like clarification from the Minister on one point. The explanatory notes explain that the powers will likely be used together with those in clauses 62 and 63, but it would be good to hear confirmation from the Minister on whether there may be circumstances in which the Department envisages using the powers regarding business data distinctly. If there are, will he share examples of those circumstances? It would be good for both industry and Members of this House to have insight into how these clauses, and the regulatory powers they provide, will actually be used.
Sir John Whittingdale
I think it is probably sensible if I come back to the hon. Lady on that point. I am sure we would be happy to provide examples if there are ones that we can identify.
Question put and agreed to.
Clause 64 accordingly ordered to stand part of the Bill.
Clause 65 ordered to stand part of the Bill.
Clause 66
Decision-makers
Sir John Whittingdale
Clauses 66 to 72 contain a number of provisions that will allow smart data regulations to function effectively. They are provisions on decision makers who approve and monitor third parties that can access the data, provisions on enforcement of the regulations and provisions on the funding of smart data schemes. It is probably sensible that I go through each one in more detail.
Clause 66 relates to the appointment of persons or accrediting bodies referred to as decision makers. The decision makers may approve the third parties that can access customer and business data, and act on behalf of customers. The decision makers may also revoke or suspend their accreditation, if that is necessary. An accreditation regime provides certainty about the expected governance, security and conduct requirements for businesses that can access data. Customers can be confident their chosen third party meets an appropriate standard. Clause 66 allows the decision maker to monitor compliance with authorisation conditions, subject to safeguards in clause 68.
Clause 67 enables regulations to confer powers of enforcement on a public body. The public body will be the enforcer, responsible for acting upon any breaches of the regulations. We envisage that the enforcer for a smart data scheme is likely to be an existing sectoral regulator, such as the Financial Conduct Authority in open banking. While the clause envisages civil enforcement of the regulations, subsection (6) allows for criminal offences in the case of falsification of information or evidence. Under subsections (3) and (10), the regulations may confer powers of investigation on the enforcer. That may include powers to require the provision of information and powers of entry, search and seizure. Those powers are subject to statutory restrictions in clause 68.
Clause 68 contains provisions limiting the investigatory powers given to enforcers. The primary restriction is that regulations may not require a person to give an enforcer information that would infringe the privileges of Parliament or undermine confidentiality, legal privilege and, subject to the exceptions in subsection (7), privilege against self-incrimination. Subsection (8) prevents any written or oral statement given in response to a request for information in the course of an investigation from being used as evidence against the person being prosecuted for an offence, other than that created by the data regulations.
Clause 69 contains provisions relating to financial penalties and the relevant safeguards. It sets out what regulations must provide for if enabling the use of financial penalties. Subsection (2) requires that the amount of a financial penalty is specified in, or determined in accordance with, the regulations. For example, the regulations may set a maximum financial penalty that an enforcer can impose and they may specify the methodology to be used to determine a specific financial penalty.
Clause 70 enables actors in smart data schemes to require the payment of fees. The circumstances and conditions of the fee charging process will be specified in the regulations. The purpose of the clause, along with clause 71, is to seek to ensure that the costs of smart data schemes, and of bodies exercising functions under them, can be met by the relevant sector.
It is intended that fees may be charged by accrediting bodies and enforcers. For example, regulations could specify that an accrediting body may charge third parties to cover the cost of an accreditation process and ongoing monitoring. Enforcers may also be able to charge to cover or contribute to the cost of any relevant enforcement activities. The regulations may provide for payment of fees only by persons who are directly affected by the performance of duties, or exercise of powers, under the regulations. That includes data holders, customers and those accessing customer and business data.
Clause 71 will enable the regulations to impose a levy on data holders or allow a specified public body to do so. That is to allow arrangements similar to those in section 38 of the Communications Act 2003, which enables the fixing of charges by Ofcom. Together with the provision on fees, the purpose of the levy is to meet all or part of the costs incurred by enforcers and accrediting bodies, or persons acting on their behalf. The intention is to ensure that expenses can be met without incurring a cost to the taxpayer. Levies may be imposed only in respect of data holders that appear to be capable of being directly affected by the exercise of the functions.
Clause 72 provides statutory authority for the Secretary of State or the Treasury to give financial assistance, including to accrediting bodies or enforcers. Subsection (2) provides that the assistance may be given on terms and conditions that are deemed appropriate by the regulation maker. Financial assistance is defined to include both actual or contingent assistance, such as a grant, loan, guarantee or indemnity. It does not include the purchase of shares. I commend clauses 66 to 72 to the Committee.
Stephanie Peacock
Clauses 66 to 72 provide for decision makers and enforcers to help with the operation and regulation of new smart data regimes. As was the case with the digital verification services, where I agreed that there was a need for the Secretary of State to have limited powers to ensure compliance with the trust framework, powers will be needed to ensure that any regulations made under this part of the Bill are followed. The introduction in clause 67 of enforcers—public bodies that will, by creating fines, penalties and notices of compliance, ensure that organisations follow regulations made under part 3—is therefore welcome.
As ever, it is pleasing to see that the relevant restrictions on the powers of enforcers are laid out in clause 68, to ensure that they cannot infringe upon other, more fundamental rights. It is also right, as is ensured by clause 69, that there are safeguards on the financial penalties that an enforcer is able to issue. Guidance on the amount of any penalties, as well as a formalised process for issuing notices and allowing for appeal, will provide uniformity across the board so that every enforcer acts proportionately and consistently.
Decision makers allowed for by clause 66 will be important, too, in conjunction with enforcers. They will ensure there is sufficient oversight of the organisations that are enabled to have access to customer or business data through any particular smart data regimes. Clauses 70, 71 and 72, which finance the activities of decision makers and enforcers, follow the trend of sensible provisions that will be required if we are to have confidence that regulations made under this part of the Bill will be adhered to. In short, the measures under this grouping are largely practical, and they are necessary to support clauses 62 to 65.
Question put and agreed to.
Clause 66 accordingly ordered to stand part of the Bill.
Clauses 67 to 72 ordered to stand part of the Bill.
Clause 73
Confidentiality and data protection
Question proposed, That the clause stand part of the Bill
Sir John Whittingdale
Clauses 73 to 77 relate to confidentiality and data protection; various provisions connected with making the regulations, including consultation, parliamentary scrutiny and a duty to conduct periodic reviews of regulations; and the repeal of the existing regulation-making powers that these clauses replace.
Clause 73(1) allows the regulations to provide that there are no contravening obligations of confidence or other restrictions on the processing of information. Subsection (2) ensures that the regulations do not require or authorise processing that would contravene the data protection legislation. The provisions are in line with the approach taken towards pension dashboards, which are electronic communications services that allow individuals to access information about their pensions.
Clause 74(1) allows the regulation-making powers to be used flexibly. Subsection (1)(f) allows regulations to make provision by reference to specifications or technical requirements. That is essential to allow for effective and safe access to customer data, for instance the rapid updating of IT and security requirements, and it mirrors the powers enacted in relation to pensions dashboards, which I have mentioned. Clause 74(2) provides for limited circumstances in which it may be necessary for regulations to modify primary legislation to allow the regulations to function effectively. For instance, it may be necessary to extend a statutory alternative dispute resolution scheme in a specific sector to cover the activities of a smart data scheme.
Clause 74(3) states that affirmative parliamentary scrutiny will apply to the first regulations made under clauses 62 or 64; that is, affirmative scrutiny will apply to regulations that introduce a scheme. Affirmative parliamentary scrutiny will also be required where primary legislation is modified, where regulations make requirements more onerous for data holders and where the regulations confer monitoring or enforcement functions or make provisions for fees or a levy. Under clause 74(5), prior to making regulations that will be subject to affirmative scrutiny, the Secretary of State or the Treasury must consult persons who are likely to be affected by the regulations, and relevant sectoral regulators, as they consider appropriate.
The Government recognise the importance of enabling the ongoing scrutiny of future regulations, so clause 75 requires the regulation maker to review the regulations at least at five-yearly intervals. Clause 76 repeals the regulation-making powers in sections 89 to 91 of the Enterprise and Regulatory Reform Act 2013, which are no longer adequate to enable the introduction of effective smart data schemes. Those sections are replaced by the clauses in part 3 of the Bill. Clause 77 defines, or refers to definitions of, terms used in part 3 and is essential to the functioning and clarity of part 3. I commend the clauses to the Committee.
Stephanie Peacock
Many of the clauses in this grouping are supplementary to the provisions that we have already discussed, or they provide clarification as to which regulations under part 3 are subject to parliamentary scrutiny. I have no further comments to add on the clauses, other than to welcome them as fundamental to the wider part. However, I specifically welcome clause 75, which requires that the regulations made under this part be periodically reviewed at least every five years.
I hope that such regulations will be under constant review on an informal basis to assess how well they are working, but it is good to see a formal mechanism to ensure that that is the case over the long term. It would have been good, in fact, to see more such provisions throughout the Bill, to ensure that regulations that are made under it work as intended. Overall, I hope it is clear that I am very supportive of this part’s enabling of smart data regimes. I look forward to it coming into force and unlocking the innovation and consumer benefits that such schemes will provide.
Question put and agreed to.
Clause 73 accordingly ordered to stand part of the Bill.
Clause 74 to 77 ordered to stand part of the Bill.
Ordered, That further consideration be now adjourned. —(Steve Double.)