Finance Bill

Lord Mackinlay of Richborough Excerpts

Tuesday 31st October 2017 Commons Chamber

[Bim Afolami]

Yes, I did have the huge pleasure of serving on the Finance Bill Committee and it was fascinating. The Finance Bill is undoubtedly a whopper; it is huge. There is a good case—I am sure the Minister will come to this in his remarks—for saying that we need to think more actively about ways to make measures shorter and more easily digestible for hon. Members. I say that without detracting from the substance of what the Government are doing, which I completely support.

[Craig Mackinlay (South Thanet) (Con)]

The UK tax code is now 22,000 pages long and involves 10 million words. Does my hon. Friend agree that we need to lessen that level of complexity if we are to be globally competitive in the future?

[Bim Afolami]

I agree with my hon. Friend. Being in government is a complicated matter, and Rome was not built in a day. This Bill can continue the work that Treasury Ministers have already begun on how we address the difficulty involved in making things fairer and simpler, while also making sure that we have the right incentives for businesses to come to our country, and grappling with that in the context of trying to make sure that the tax code is simpler.

Finance Bill

Lord Mackinlay of Richborough Excerpts

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

[Kirsty Blackman]

I appreciate having the opportunity to speak in this second part of our debate on the Finance Bill.

The matter in hand now has been discussed a number of times over the past few months, specifically around business investment relief. Some aspects of it were discussed while tackling the Ways and Means resolutions and on Second Reading. We are still not clear what impact this will have; the Government have still not told us. An overview of tax legislation was produced at the tail end of last year, when the Bill was first in draft form. It said there was likely to be a negligible impact on the public finances, but that does not explain what is actually going to happen. It also says that between 200 and 400 individuals a year benefit from business investment relief, but again that does not really explain the impact of this relief.

We do know, however, that everybody who benefits from the relief is a non-dom. The Government claim that they are changing the way non-doms are considered and are making it less easy for them to get away with dodging taxes, but this serves to increase the ability of non-doms to get away with not paying tax. The Government suggest this is about increasing investment, but they have not been able to produce any evidence of how much investment has been created as a result of business investment relief.

I am concerned about the amount of time and energy that the House is spending on this matter. It is spending a significant amount of time: we put this measure in place, presumably, at some point in the past few years, yet only 200 to 400 individuals have taken it up. Despite the fact that the numbers are so small, however, we are again debating the matter; this is the third time that we have done so this year, when there are many very important other items on the agenda.

[Craig Mackinlay (South Thanet) (Con)]

The amount of investment that has come to the UK from non-doms is £1.6 billion since 2012. I hope that is of some assistance to the hon. Lady.

[Kirsty Blackman]

Is that through business investment relief or from non-doms in general? We asked for those figures before, at the last stage of this discussion, and they were not forthcoming from the Front Bench. It would be nice to have those figures in writing from the ministerial team.

The hon. Member for Walsall North (Eddie Hughes) talked about why we should trust the Tories and what he would tell his constituents about that. He included things such as the living wage and increasing employment, both of which have happened, but the living wage is not a living wage, because people cannot actually live on the current living wage. If he made that proposition to his constituents, what he would actually have to say is that their wages have not gone up in a decade, that household debt is spiralling and that their savings are going down. If the Tories are doing such a good job, why are people poorer as a result?

One of our concerns is that we are facing a hard Brexit that will significantly damage the economy, but measures such as this one, which is projected to bring in only a small amount of investment from non-doms, will not undo the damage created by a hard Brexit; this will not undo the 5% reduction in GDP that Scotland is set to experience as a result of Brexit.

Finance Bill

Lord Mackinlay of Richborough Excerpts

Tuesday 12th September 2017 Commons Chamber

[Mr Harper]

I agree with my hon. Friend. Indeed, that is why the Financial Secretary to the Treasury set out a number of important areas in the Bill that deal with those issues.

I want to pick up on an issue that, interestingly, has been referred to by a number of colleagues. My right hon. Friend the Member for Wokingham (John Redwood) touched on the question of public sector productivity, and the hon. Member for Aberdeen North, who speaks for the SNP, also alluded to productivity. I think the hon. Lady got it a little wrong, however, when she talked about improving productivity by giving people higher pay. It is actually the other way round. We all want our constituents to get a pay rise—I think that that unites everyone in the House—but the only sustainable way to drive up pay in the public and private sectors is to improve productivity in both sectors. I shall set out a few areas in which we could do that.

First, however, I want to make a slightly humorous point to the Financial Secretary to the Treasury. I do not want to see an increase in the productivity of the parliamentary draftsmen in Her Majesty’s Treasury. Producing Finance Bills as thick as this one is perhaps not what we ought to be doing. I understand the complexity of these matters—I declare an interest as a non-practising chartered accountant—but I know from talking to colleagues in the business that they do not enormously welcome Finance Bills this thick. Much as this might upset them, I have to say that creating jobs for tax accountants is also perhaps not something that we ought to be doing. Slimmer Finance Bills with simpler, less complex legislation introducing lower tax rates from which we collect more revenue are the way to go. If we were to do that, we would be doing everyone a service, and those in the tax business could perhaps find more productive things to do. This gentle chiding is perhaps directed less towards my right hon. Friend the Financial Secretary to the Treasury than towards officials in his Department.

[Craig Mackinlay (South Thanet) (Con)]

rose—

[Mr Harper]

I shall give way to a fellow chartered accountant.

[Craig Mackinlay]

I declare an interest: I am a practising chartered accountant, when I have the time. My right hon. Friend said that lower rates can produce more revenue. Is that not exactly what has happened since 2010 with our reduction in corporation tax rates, which is paying the dividend of a greater return for the Treasury?

[Mr Harper]

My hon. Friend makes a very good point, and he is exactly right. This was one area in which the debate about corporation tax rates during the general election campaign became rather confused. The Opposition kept saying that we were cutting corporation tax, and making it sound as though we were therefore going to collect less revenue. What we were doing, of course, was to reduce corporation tax rates. The purpose of doing so was to collect more corporation tax revenue, both to attract more businesses to locate in the United Kingdom and to enable the businesses that are already here to be more successful. That is an admirable aspiration but it is, as my hon. Friend said, what has happened in practice.

One of my concerns about the Labour party’s plans is that an increase in corporation tax rates would lead to the collection of less corporation tax revenue; and we would have less money, rather than more, to spend on our public services and our hard-working public sector workers. [Interruption.] I see Opposition Members, including those on the Front Bench, shaking their heads, but since we cut corporation tax rates, we have collected more corporation tax—

--- Later in debate ---

[Craig Mackinlay (South Thanet) (Con)]

I know you have just taken the Chair, Mr Deputy Speaker, and I am afraid that we have not have heard too much good news this afternoon, so I want to bring that good news to Members.

We have closed the tax gap. We are raising more tax than ever before by closing down some of the more ambitious and egregious tax systems that Labour did nothing about over the 13 years that it was in power. We have got unemployment down to the lowest level since 1975. We are doing more to close the tax gap—it is very difficult to assess what a tax gap is; by its very nature, it is very difficult to put one’s finger on—than ever before. Thirty million people are saving £1,000 in tax due to the massive increase in personal allowances from £6,500 a year in 2010 to £11,500 a year today. That is a real benefit to the lowest paid across this country. We can add to that increases in the living wage, with another £1,400 going to everybody in this country. For pensioners, we have raised the level of state pension, again adding more for those who need it.

My hon. Friend the Member for Newark (Robert Jenrick) made a very clear point about how the wealthiest in this country are now paying a higher amount of tax than ever before because we are doing what we can to close down the inefficiencies in our tax system. It is strange that Labour Members have always talked big about the wealthy not paying their share, but the Conservatives are actually making them do so. We have reduced the inequality in pay grades between the sexes. Apparently, for people in their 20s that pay inequality is now down to zero. All that is being achieved by this Government.

[Lady Hermon (North Down) (Ind)]

If everything is going so swimmingly for this Government and they have achieved so much, why on earth should they not lift the 1% pay cap for all public sector workers?

[Craig Mackinlay]

We will be having a debate about that tomorrow, I believe. The fact is that we had a £150 billion per year deficit when we came into power with our then Lib Dem partners in 2010, and we have got that down to just a little over £50 billion a year. A GDP borrowing requirement of 10% in 2010 is now down to 3%. I certainly hope that as we grow this economy we will be able to look at public sector pay in a more reasonable and appropriate way in future, but that is a debate for tomorrow and for years ahead.

I was very taken by the maiden speech made by my hon. Friend the Member for Moray (Douglas Ross) and especially by his story about the previous Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), putting a seal on that barrel of cask whisky. Let us hope that he put a seal on it meaning that it may be opened tax free, for the benefit of all, in due course.

The statistics on what we have achieved speak for themselves. The one that bears the most fruit is that on the lowering of corporation tax. We generally tax things that are bad. We put high rates of tax on things such as cigarettes or alcohol because we want to stop their use to some extent because of their perilous health effects—particularly those of cigarettes. Why would we want to follow Labour’s proposal to raise the tax on corporates? It seems to me that unless we want to supress profit and jobs and to do entirely the opposite of what we actually want to achieve, raising tax on corporates is the worst thing we can do—and it has been shown to be the worst thing. Members should not take my word for it. The Institute for Fiscal Studies took the Labour party’s spending plan to pieces before the election.

That is the good news. I am not always in favour of Finance Bills, and I am particularly not always in favour of one of this size. As I have said before, I am a chartered accountant and chartered tax adviser, and I still work as that from time to time. I am afraid that it does no good for UK competitiveness that we now have one of the most complex tax systems in the world. It now runs to 22,000 pages and 10 million words. Compare that with the entire tax system of Hong Kong, which runs to 350 pages in its entirety. In the early days of my training, in the late ’80s, the tax law rewrite was being discussed. We then had the Office of Tax Simplification, run for a time by John Whiting CBE, a man I know well and a fellow member of the Chartered Institute of Taxation. It is time to do what we can to slim down legislation and make it fit for purpose.

Much of what we have been doing of late is going in the right direction. Let me canter through various parts of the tax system and give my comments thereon. On inheritance tax, the proposals to give an increasing exemption for the family home must be the right way forward. For many people, the reason their property has become of such high value is often not to do with their circumstances. It might have been caused by quantitative easing resulting from the 2008 failure and the inflation of prices. Of course, the north-south divide and the sheer desirability of London and the south-east, as well as restrictions on planning, have caused a huge asset bubble.

One area that has much to say for itself and has been discussed a lot this afternoon is the extension of inheritance tax to non-domiciles. The situation has been daft for a long time as non-doms have benefited from tax exemptions across vast parts of our tax code, but we should strike a note of caution this afternoon. Clause 33, expanded in schedule 10, deals with non-doms who use a company or trust to hold UK residential property. There is perhaps a flaw in the Bill as drafted that needs clearing up, and that could be done in Committee.

The situation as it is designed deals with non-doms who own a residential property through a foreign company. Let us say that that non-dom is a New Zealander, who owns a property portfolio through a New Zealand company. If that were the case, he could now be subject to inheritance tax on that UK property.

That in itself is not an issue, but my worry is that if an alternative non-dom had provided the financing to the non-resident company for that UK property purchase—this could involve a vehicle that had never had anything to do with the UK—there is potential under the Bill as drafted for that loan to be caught under UK inheritance tax rules. I am not entirely sure that that was the intention. For example, a Swiss investment company owner—or even a foreign discretionary trust—providing finance for a non-dom company to buy UK residential property could find itself within the inheritance tax net even though it had never set foot in the UK. A foreign discretionary trust could even find itself facing 10-year principal charges. Again, I am not sure that that was the intention. We have done much—starting some years back with the annual tax on enveloped dwellings and the extension to stamp duty for properties purchased that way—to try to unwind corporate structures that own property in the UK. No other party has tried to make the playing field level for UK citizens in this country who are doing the right thing, but we are now rightly extending those measures to include non-doms.

I know that we have had the election, and circumstances have brought us to where we are today. There are no surprises in the Bill, and it is not retrospective, but I believe that we should avoid the practice of proposals coming into force, many of them on 1 April this year, before the legislation has been agreed in this House. For instance, if the proposals on non-doms owning a residential property through a foreign company become law, a situation could arise in which a person who had died sometime after 1 April was subject to a law that had not yet been enacted because it had not received Royal Assent. We should avoid situations such as that.

My concern about some parts of the inheritance tax extension to non-doms—I am not saying that it is not right at all—is that we need to get the balance right. My right hon. Friend the Member for Wokingham (John Redwood) highlighted the fact that there is a balance to be struck between making Britain an appealing place for business and deterring non-doms from coming here at all. Many of those who come will be spending out on improvements and jobs as well as contributing to the VAT take. There is a balance to be struck and, unlike Labour, we know where that balance is. My hon. Friend the Member for Newark (Robert Jenrick) put it rather well when he said that we would rather see more people becoming wealthy than see the poor suffering as long as the rich did too.

Pensions have gone through what can rightly be called a revolution over the past few years, starting with the pension freedoms that came into play in 2015. The way in which we took our pensions was very restrictive. We accumulated our funds, but we had no choice but to put them into annuities that could, depending on the interest rate at the time, have provided a rather poor outcome. It is therefore absolutely right that we now have pension freedoms. We can do what we like with the pot that we have accumulated. We can have draw-down income, and we can use it far more flexibly.

It is recognised that massive amounts of tax relief are available in the area of pensions. There is nothing wrong with the current annual allowance of £40,000; that is the right level. However, I do have some problem with the lifetime allowance of £1 million, because I do not think a senior nurse aged 45 to 50 in the NHS pension scheme was ever intended to be knocking on the door of lifetime allowances. If somebody with their own self-invested personal pension or defined contribution scheme has a good fund manager and has done well during their working life, is it fair for them to be penalised by comparison with somebody who has not had such a good fund manager and whose returns have not been quite so good? I am not in favour of the lifetime allowance, but I am certainly in favour of the annual allowance.

Auto-enrolment has been one of the great successes, because I do not think that anybody is saving enough towards their pension.

[Sir Greg Knight (East Yorkshire) (Con)]

I am reflecting on what my hon. Friend said about allowances. Is he arguing for allowances to be automatically uprated to take account of inflation?

[Craig Mackinlay]

There is an uprating coming into place to allow the floor to increase from £1 million in due course. There used not to be a lifetime allowance, but it started at £1.8 million some years ago and has come down to £1 million.

The flexibility of SIPPs and the success of auto-enrolment are essential if we are to rebalance our savings rates, which have been fairly poor by comparison with those of other G20 countries. I am looking forward to seeing how lifetime ISAs will plug any holes in the pension market. We have had a lot of change, and even though much of it has been to the good, we are in danger of losing stability. People become rather unsure about what will happen in the pension market and whether the changes will affect them. The last thing we want to do is to deter people from saving for their pensions.

On IR35, much has changed in the last year, particularly in terms of personal service companies that provide services to public sector bodies. It has long been known that personal service companies and the IR35 rules have been abused—that was recognised in the House of Lords’ report—and so I welcomed the change that came in from April this year. It is not right that personal service companies, which are, by any other measure, a disguised form of employment, are not being taxed in the right way. I fully support what is happening, but I do think that we need greater clarity over employment status.

The rather complex process of recognition of whether a person is properly self-employed or properly employed is quite confusing for a small employer. That is still somewhat vague, and there is some gold-plating in the public sector because of worry about people’s status. I regularly see people who work through a proper personal service company and who are clearly self-employed, not in an employment situation. Out of fear, the public sector is tending to move everybody who works in such a way to an IR35 status, which adds to costs in the sector. It is a very difficult balance.

Termination payments have been discussed this afternoon. My worry about them is that the £30,000 level has been in place since the early 1990s. If it were more realistically upgraded in accordance with inflation to today’s values, it would be in the region of £70,000. Other changes are likely to bring more termination payments—most likely correctly—into tax.

I turn to the dividend tax changes. Dividend tax has been subject to huge change over the last few years. Just two years ago, it was announced that the first £5,000 would be completely free of tax, after which an individual enters the regime of 7.5% while they are within the basic rate band. I am concerned that we have moved so quickly to cut the allowance from £5,000 to £2,000. In doing so, we have not provided a stable playing field for people to get used to. I can certainly understand, from the Treasury’s point of view, that this has been an area of tax loss. It has long been known that owner-managers probably give themselves the lowest level of salary, but then pay themselves through a dividend route. People recognise that the situation has perhaps been too good for too long and that things now have to change, but I am concerned that it did not take very long for the allowance to be reduced from £5,000 to £2,000.

I realise that much of the Finance Bill—the provisions amount to some 300 pages— concerns the corporation tax loss regime and the restriction of interest. I will canter through this as fast as I possibly can. Brought-forward losses may now be used very flexibly, which is very good for the smaller company. The one complexity that the Bill will bring in is that there will be two lots of losses: old losses, which have to be used in the old way; and new losses, arising after 1 April 2017, which will be used in the new way. For the smaller company, that will add a level of complexity that we perhaps do not need. I therefore seek from the Treasury Bench some change, if possible, to allow smaller companies some degree of exemption.

All in all, we are in a very good place with our tax system. There could be more simplification, and I have previously raised with Treasury Ministers my concerns about various aspects of the system. I hope that we can look again at one concern that turns up regularly in my inbox, which is the restriction on landlord’s interest. That has been ill thought out and could be looked at again.

My hon. Friend the Member for North West Hampshire (Kit Malthouse) and I often discuss enterprise investment schemes and seed EISs. The sad fact is that the number of seed EISs, which should be a very flexible way of getting small amounts of capital into small start-ups, have not really been used as widely as they should have been. From my perspective of having tried to put them in place professionally, it is very unlikely that a smaller business can afford even the modest professional fees necessary for raising such a small amount of capital. Some flexibility is needed if we are to encourage seed EISs.

We need to continue to debate tax policy. Much was said by my hon. Friend about how we have a tax system that was designed with the 19th and 20th centuries in mind—trying to tax things or recognisable services—but the new digital economy means that the playing field is rather different. We need to think rather carefully, perhaps on a cross-party basis, about how we can tax the digital economy properly. We also need to discuss what our tax policy is trying to achieve. For too long, whenever we have tried to make a small change, it has either been howled down or the media have got involved, and I am afraid that we have become somewhat fearful of change. It is now time for cross-party working on what we are trying to achieve in raising the appropriate amounts of tax in the modern age.

Much has been said about productivity, but it is very difficult to measure—I am sorry to be so technical—especially in services, which are rather more prevalent in our economy than in those of other OECD countries. I know, however, that I would rather have lower levels of productivity and higher levels of employment than the massively high youth unemployment seen in other countries in the EU, which—by whatever measure—have managed to have higher productivity among those actually in work. I put that down to the more laissez-faire system under which we operate in the UK, where the employment rules are slightly more liberal. In France and Germany, employers dare not get it wrong, because they have very little flexibility in getting it right when they need to shed staff.

I will leave my thoughts on the tax system there, and I look forward to supporting the Second Reading this evening.

Tax Credits: Concentrix

Lord Mackinlay of Richborough Excerpts

Wednesday 14th September 2016 Commons Chamber

[Jane Ellison]

I thank the right hon. Gentleman for his comments on the priority given to resolving problems of this nature. It is worth reiterating that, through the contract, we have secured more than £280 million of identified savings in terms of error and fraud. There continues to be considerable fraud, particularly with regard to whether people live singularly in a household. It is important to recognise that the contract has brought important benefits to the taxpayer.

I recognise the right hon. Gentleman’s challenge on the nature of the contract. Such contracts have their place, but they must work appropriately. The contract must work to do the thing it set out to do, but it must at all times work for taxpayers and, above all, for the vulnerable. I will reflect on his wider point if I may, but I give him reassurance on that general point.

[Craig Mackinlay (South Thanet) (Con)]

All hon. Members will have received a deluge recently of harrowing cases of people who have had calls from and interaction with Concentrix. They were unsure at first whether the company existed and whether they had received a scam letter, which we see far too often. There has been a poor delay in opening post, and getting through on the telephone has been next to impossible. That service level is unacceptable in the public sector. Will the Minister confirm that her very strong announcement today, which is welcome, shows that the Government are committed to helping the vulnerable immediately and accurately?

[Jane Ellison]

I hope we have shown that. We have important contracts across the Government with people to provide services, but clearly they need to be provided to an acceptable standard. The decision is not to renew the contract. In taking that decision, HMRC has clearly taken into account operational performance. The focus for all of us—Ministers, HMRC and individual Members acting in their constituency capacities—is to ensure that our most vulnerable constituents are supported as soon as possible to ensure that the money to which they are correctly entitled hits their bank accounts and they do not have the stress of wondering where the money will come from.

Oral Answers to Questions

Lord Mackinlay of Richborough Excerpts

Tuesday 19th July 2016 Commons Chamber

[Mr Hammond]

We have already had this question from the shadow Chancellor. Of course, we have introduced the national living wage, which will make a difference to people on low earnings at the bottom of the income scale. Interestingly, the hon. Lady perhaps hints at something else—questions of inter-generational fairness. The Prime Minister signalled early on in her tenure of office that that is one of the areas that she wishes to address.

[Craig Mackinlay (South Thanet) (Con)]

I congratulate my right hon. Friends and indeed the entire new Treasury team.

With some softening of the market in house sales, will my right hon. Friend commit to looking at the data and consider whether the 3% additional stamp duty on second property purchases is necessary, desirable or indeed raises any additional revenue at all?

[Mr Hammond]

I can certainly commit to looking at the data, and I can tell my hon. Friend that my approach to taxation is that it is there for a simple purpose: to raise revenue for the Exchequer. I expect the taxes we put in place to achieve that.

Fixed Odds Betting Terminals

Lord Mackinlay of Richborough Excerpts

Tuesday 26th April 2016 Westminster Hall

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

It is a pleasure to serve under your chairmanship today, Sir Alan. I congratulate the hon. Member for Strangford (Jim Shannon) on securing this important debate and setting out an extremely detailed position. I declare an interest, having worked in addiction services as a psychologist for a number of years.

It is true that gambling has been a problem in society for many years. However, problem gamblers have told me that the fact that it is possible to gamble at all hours of the day and night exacerbates their difficulties. The description of fixed odds betting terminals as the crack cocaine of gambling has already been referred to. Patients have described addiction to those machines to me: the loss of large sums of money—hundreds of pounds in an instant—and the insufferable pain that relapses of such magnitude cause to families and children, who can become impoverished because of debt and instability.

Gambling, like many other addictions, also causes people to engage in behaviour that they might not otherwise. Those who have had periods of problem gambling have spoken about stealing from society and from their families to support their habit. That has an impact on social services and the criminal justice system. The machines we are discussing are among the most addictive set-ups, because they involve repetitive behaviour, random reward and very high stakes, so problem gamblers are soon chasing their tail and trying to recoup money they have lost. The availability of the machines, virtually on the high street, is a cause for grave concern. People who are vulnerable to gambling addiction describe seeing them everywhere, finding it difficult to abstain, and relapsing even if they pop out to the shops for bread and milk.

I would argue that debt causes depression and mental health problems, and we have heard that at worst it can cause suicide. Those issues have an impact on the health service. Other types of gambling have been mentioned, such as the national lottery, but I have had discourse with patients who have stated that betting on the lottery is not as addictive, because they have to wait some time to get the result. The issue with these machines is their instantaneous and repetitive nature.

I will not speak for too long, because I wish everyone to be able to speak. I have significant concerns about the availability of these machines, the number of them in shops and the number of shops that have them, the level of the stakes and the level of supervision of vulnerable individuals. I ask the Minister to look at that.

[Craig Mackinlay (South Thanet) (Con)]

Will the hon. Lady give way?

[Dr Cameron]

I cannot give way, because I want others to have the chance to speak.

I support a responsible gambling industry. We all like to have a flutter occasionally or pop into a casino on a night out—very occasionally, I add—but I urge the Minister to act. We need a balance. Vulnerable individuals are being gravely affected by these machines, and we need to address that through independent research and by developing safe and responsible policy.

Domestic Politically Exposed Persons: Money Laundering Rules

Lord Mackinlay of Richborough Excerpts

Wednesday 20th January 2016 Commons Chamber

[Mr Walker]

That is an outrageous act by banks. The banks would argue that they are not public utilities, but my response would be that they are, because it is taxpayers and us who have bailed them out. They have a responsibility to behave responsibly, whether it be to Members of Parliament, small businesses or our constituents.

We are now faced with the somewhat laughable situation that not only Members of Parliament are being assessed as high risk in regards to money laundering, but their extended families are, too. On the basis of this Chamber alone, that puts nearly 10,000 people in the frame.

In common with all parts of the population, Members of Parliament can, of course, do bad and stupid things. That has always been the case and always will be the case. When it comes to our elected politicians, however, it is impossible to imagine a more scrutinised group. Not only do we have to register details of our commercial activities with the Register of Members’ Financial Interests—under pain, in extremis, of being dismissed from this place if we fail to do so—but we have the likes of The Daily Telegraph, the Daily Mail and Channel 4’s “Dispatches” breathing down our necks in the hope of catching the slightest whiff of wrongdoing.

Indeed, it often comes as a great disappointment to our pursuers that so few of us cavort with international despots and criminal masterminds. The much less glamorous truth is that most Back Benchers indulge in far more mundane but worthy pursuits, such as trying to sort out our constituents’ housing and street-lighting problems. Indeed, the tiny fraction of Back-Bench colleagues who lead altogether more politically racy lifestyles are well known to the media, with their activities well reported. It must be remarked, “Oh, what a friend the banks’ compliance departments have in Fleet Street and the House of Commons Press Lobby.”

That, of course, leaves Ministers, but again the Executive discretion Ministers have in relation to contracts is minimal. The tendering process is conducted by civil servants, with the Minister passed a single name to sign off on or, if they are lucky, perhaps the option of two names, with the chance to exercise a smidgeon of discretion given only under the careful watch of the permanent secretary.

In concluding my comments, I say this to the Minister and the banks: regulation needs to be proportionate to the risk.

[Craig Mackinlay (South Thanet) (Con)]

I would like to put my experience on the record. The 81-year-old mentioned in my hon. Friend’s speech a few moments ago was indeed my father. He has been with the same bank for over 50 years. He was asked into the bank to answer detailed probing questions about his banking and other activities. Understandably, my father told the bank that he was not going to do so. As for my own experience, I had a two-hour interview with a banking institution that required information about everything about every bank account I have owned for the last two years. This is simply over-gold plating, and we are seeing it too often in the money laundering regulations.

[Mr Walker]

I thank my hon. Friend for his useful intervention. In response, I would say that regulation needs to be proportionate to the risk, with the highest-risk bank customers attracting the most scrutiny from their compliance departments and the Financial Conduct Authority.

It may well be the case that intelligence suggests that an individual MP is up to no good, and, of course, that MP should be investigated thoroughly, but the banks and the FCA seem to be eschewing an intelligence-led approach in favour of an unfocused tick-box exercise.

Oral Answers to Questions

Lord Mackinlay of Richborough Excerpts

Tuesday 19th January 2016 Commons Chamber

[Greg Hands]

As I mentioned earlier, the UK has a good future in terms of the trade deficit and improving statistics. UKTI will also be playing an important role here. On the announcements we made today on trade policy, one of the most important things we can do is adopt a whole-of-government approach to improving the approach we take to trade and boosting our exports.

[Craig Mackinlay (South Thanet) (Con)]

My constituency contains a niche amusement machine manufacturer, Harry Levy Amusement Contractor Ltd, which supplies global export markets. What help and support can my right hon. Friend offer to exporters so that we can really achieve the new, cross-government approach to exports launched today by the Business Secretary and the Trade Minister Lord Maude?

[Greg Hands]

I have been to my hon. Friend’s constituency quite a few times over the past year and a half, but I do not think I have had the particular pleasure of meeting the company he mentions. I am very happy to meet him and that company, or perhaps to meet Lord Maude, if that is more appropriate, to see what could be done to help exporters in South Thanet.

Spending Review and Autumn Statement

Lord Mackinlay of Richborough Excerpts

Wednesday 25th November 2015 Commons Chamber

[Mr Osborne]

There is additional support for disabled people who want to get into work. There is help for people who have been unemployed for 18 months through our help to work scheme. The additional conditionality that the hon. Gentleman refers to relates to people who are currently on housing benefit but do not face that conditionality. Housing benefit is becoming part of universal credit, so that is one category of people we can extend the conditionality to.

[Craig Mackinlay (South Thanet) (Con)]

May I follow my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) in offering words of thanks from the people of Kent for the £250-million commitment to find a permanent solution to Operation Stack? Kent MPs should go and see the Chancellor more regularly. Does he agree that Kent, which is on the frontline of cross-border trade and movement of people, deserves special treatment and, at times, spending?

[Mr Osborne]

Kent is a very special place as the garden of England. My hon. Friend and other hon. Friends from Kent came to see me and made a compelling argument about what happens to local roads when the channel tunnel is blocked and how that affects his constituents and people in Folkestone near the tunnel mouth. We are making a quarter of a billion pound commitment to finding a permanent solution to that problem. I congratulate him and other Kent MPs on a successful campaign.

Common System of VAT (Vouchers)

Lord Mackinlay of Richborough Excerpts

Monday 2nd November 2015 General Committees

[Craig Mackinlay (South Thanet) (Con)]

It may help the Committee if I take a few moments to explain the background to the document and the reason that the European Scrutiny Committee in the previous Parliament recommended it for debate—it has been some time coming. The 2006 principal VAT directive consolidates the legislation governing VAT in the European Union to ensure smooth operation of the single market and equal treatment for all businesses trading across the EU.

The directive lays down rules to ensure a consistent approach to the questions about how much VAT is charged, when it should be declared and to which tax jurisdiction the tax should be paid. However, vouchers can present difficulties in relation to all those questions. The increase in cross-border use and distribution of vouchers, and the differences in treatment between member states, are some of the main causes of double or, indeed, non-taxation.

In May 2012, the Commission issued the proposal for a directive to amend the principal VAT directive to clarify and harmonise the rules on the VAT treatment of vouchers. The entitlements of the holder of a voucher are typically for goods or services or to receive a discount or a rebate in relation to a sale or a supplier. The issuer assumes an obligation to supply goods or services, to give the discount or to pay the rebate. In defining a voucher that way, the draft directive identifies it as an object in itself that can itself be supplied, meaning that the extensive distribution services in place for vouchers would be subject to VAT.

At the same time, a system for vouchers needs to recognise that, although VAT on any distribution service is captured, there is only one payment for the underlying goods or services for which the voucher acts as evidence of the right to receive. Thus, the draft directive would define supplying of the right to receive as a supply and would have subsequent supply viewed as a single transaction.

Negotiations in the Council of this complex—I think the Committee has gathered that so far—and somewhat technical proposal has been long drawn out. It has not been clear what the final shape of the amending directive might be. Accordingly, the previous European Scrutiny Committee recommended this debate to enable Members to explore the details of the proposed solutions to a complex problem, and the possible consequences for UK businesses. The current Committee endorses that recommendation.

--- Later in debate ---

[Mr Gauke]

It would be fair to say that there is some complexity in the current system because of inconsistency. The hon. Gentleman asks whether the draft directive will disrupt businesses because they will have to deal with a new regime. I would argue that it will not cause major disruption to businesses here. The most likely to be affected would be large, high street chains. High street shops that issue vouchers through distributors to other businesses would be most affected. Those that issue vouchers direct to their customers would be least affected.

Whether a business will be affected significantly will depend on the balance between the two types of operation within the same business. Some high street retailers issue both types of voucher. Some distributors might want to change their business model from buying or selling vouchers to arranging the sale of vouchers. That is quite possible.

Officials have had wide-ranging discussions with UK businesses on the changes. Although there may be some changes and disruption, the general feedback that officials have received from businesses is that they would welcome certainty on the matter in the future. Again, I make the point that, for the first time, VAT law would have a specific provision for VAT treatment of vouchers, which would mean that EU member states would have the same rules, making cross-border trading using vouchers far easier. Businesses would no longer have to set up different systems for different countries.

To give a topical example, the provisions would also make the collection of VAT on mobile phone roaming charges far simpler. The new rules would allow the UK to make changes to our law to make it easier to collect the right amount of tax on what the customer pays when using a voucher. Yes, there will be some disruption to and impact on high street retailers but, on balance, if an agreement can be reached, this is a favourable change.

[Craig Mackinlay]

To try to put into context the type of transaction that might be caught, I am thinking particularly of business-to-business transactions. I am not quite sure whether there is a voucher, but there must be one somewhere along the line. A reverse charge could come into play for some voucher that represents goods that could be redeemable elsewhere.

The rules for business-to-consumer transactions are obviously different. I would have thought that the most relevant example relates to the new digital services one-stop-shop rules that have applied since 1 January. I am thinking about an Apple iTunes or Google Play voucher, which I assume could be used on a computer in Germany to get a service delivered in Germany. The string of transactions could be complicated, but I am trying to understand how that might work under the scheme. I would assume that the German supplier of an iTunes service—whatever it is—would then be deemed to come under the German one-stop-shop arrangements.

I am also thinking about unusual transactions such as a restaurant discount voucher. Many companies in the UK offer diners the opportunity to join for a certain amount a year what is almost a club that allows a discount in restaurants. That would not cause difficulties in the UK, because I would imagine that joining the club is a chargeable supply, as is actually paying the reduced amount in a restaurant. It is just VAT. However, I am struggling to get my head around how it would work across borders. I am sorry to cause difficulties, but I want to understand how things might work in transactions, which makes the issue rather more important.

[Mr Gauke]

In part, I would go back to the principles that I set out in my opening remarks. As for business-to-business transactions for promotion purposes, to the extent that the reverse charge applies, that would operate as normal. The one-stop shop referred to by my hon. Friend is for business-to-consumer transactions only. There are some issues relevant to the one-stop shop, but I do not think that anything in particular arises as consequence of VAT on vouchers; the two things stand by themselves. To clarify an earlier remark, discount vouchers, to which the hon. Member for Wolverhampton South West referred, were removed from the proposal by member states, so the measure applies to face-value vouchers only. I hope that that is clear.

Resolved,

That the Committee takes note of European Union Document No. 9926/12 and Addenda 1 and 2, a draft Council Directive amending Directive 2006/112/EC on the common system of value added tax, as regards the treatment of vouchers; welcomes the objective of harmonised VAT rules for vouchers to support a smooth operation of the Single Market and fewer possibilities of double and non-taxation; and further notes that the Government is keen that any solution ensures that the right amount of tax is collected on what the customer pays, in line with the principles of taxation of consumption.—(Mr David Gauke.)