North East Investment Zone
Gareth Davies Excerpts(1 year ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
On Friday, the Government and the forthcoming north-east mayoral combined authority jointly announced that the north-east investment zone will focus on advanced manufacturing and green industries, building on the region’s long-standing sectoral strengths and increasing prominence as an international hub for clean energy. Aligned to the arc of innovation—running from Northumberland down to Sunderland and Durham, with opportunities along the Tyne corridor—the north-east investment zone builds on the trailblazer deal announced for the north-east and will bring benefits to businesses and local communities across the whole of the region.
Furthermore, a new Nissan-led investment worth £2 billion is being made into the north-east to develop two new electric vehicle models. This will create demand for a major expansion in the local electric vehicle supply chain, which the investment zone could support.
Building on the region’s existing strengths, including as a world leader in automotive and advanced manufacturing, electric vehicle production, battery manufacturing, the offshore wind sector and advanced low-carbon materials, together with its strong natural assets and strategic geographic location, the north-east investment zone will bring opportunity into the region through a total funding envelope of £160 million over 10 years, following the extension of the investment zones programme that was confirmed at autumn statement 2023. The investment zone has been developed with strong support from the region’s universities and Catapult centres and is aligned to their existing research and innovation excellence. Local partners expect that the investment zone will help leverage significant private funding, including the £2 billion Nissan-led investment announced on Friday, and help support more than 4,000 jobs over the first five years of the programme.
The Government, the forthcoming north-east mayoral combined authority and other local partners will continue to work together on the investment zone to jointly agree the outstanding elements of the programme, including the breakdown of how the north-east investment zone’s funding envelope will be deployed, with a view to setting out further details in due course.
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Investment Support
Gareth Davies Excerpts(1 year, 1 month ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
The Chancellor is announcing new measures to drive innovation and help pension funds and other investors to invest in high-growth businesses.
This includes new vehicles tailored to the needs of pension funds to help them invest the capital unlocked through the Mansion House compact. The Government will provide £250 million to support successful bidders under the long-term investment for technology and science (LIFTS) initiative, subject to contract, and is confirming plans to launch a new growth fund within the British Business Bank to give pension funds access to investment opportunities in the UK’s most promising businesses,
In addition, the Chancellor is announcing new measures to support innovative businesses to access the finance they need to start and scale up. These include:
At least £50 million of additional funding for the British Business Bank’s successful ‘Future Fund: Breakthrough’ programme—that will provide direct investment to support the UK’s promising pipeline of R&D-intensive firms;
A venture capital fellowship scheme to support the next generation of world-leading investors in our renowned VC funds, similar to the successful US Kauffman fellowship; and
A £20 million investment to foster more spin-out companies that are created using research done in universities.
Spin-outs are start-up companies that are created based on intellectual property (IP) generated through a university’s research. The Government are announcing the publication of the independent review of spin-outs.[1] The review has been led by two leaders in the field of academia and venture capital—Irene Tracey, vice-chancellor of Oxford University, and Andrew Williamson, managing partner of Cambridge Innovation Capital—and makes a series of recommendations to improve the performance of UK universities at spinning out companies.
The recommendations include best practice licensing deal terms—10-25% university equity for life sciences spin-outs, as per recently published guidance, and 10% or less for less IP-intensive sectors. The Chancellor is accepting all the recommendations and announcing £20 million for a new cross-disciplinary proof-of-concept research fund. This will help prospective founders in our universities demonstrate the commercial potential of their research. The full Government response will be published as part of the autumn statement.
[1] https://www.gov.uk/government/publications/independent-review-of-university-spin-out-companies.
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Investment Zones and Freeports
Gareth Davies Excerpts(1 year, 1 month ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
The Government are announcing that the investment zones programme in England will be extended from five to 10 years. Each investment zone will be provided with a £160 million envelope from 2024-25 to 2033-34, which can be used flexibly between spending and tax incentives, subject to ongoing co-design of proposals and agreement of delivery plans with the Department for Levelling Up, Housing and Communities and His Majesty’s Treasury.
The Government are also announcing that the window to claim freeport tax reliefs in England will be extended from five to 10 years until September 2031, conditional on each freeport developing a satisfactory delivery plan agreed by the Department for Levelling Up, Housing and Communities and HM Treasury. This extension will provide long-term support to businesses looking to invest, delivering growth and jobs, and levelling up the country.
The Government will work with the Scottish and Welsh Governments with the intention of delivering the same extension for freeports and investment zones in Scotland and Wales, and will continue to work with stakeholders on how best to deliver the benefits of the investment zones and freeports programmes in Northern Ireland.
Alongside this, the Government and the West Yorkshire Mayoral Combined Authority have jointly announced that the West Yorkshire investment zone will focus on life sciences, and digital and tech, building on existing local strengths in these sectors. This will bring benefits to local communities and businesses across West Yorkshire, including in Huddersfield, Bradford and Leeds.
Paxman Scalp Cooling, a pioneering health tech company, and digital healthcare company Dedalus have committed the first new investments into the investment zone worth a total of £26 million. Paxman Scalp Cooling is investing £5 million to bring its innovative health tech products to global markets and Dedalus is investing £21 million to deliver digital and diagnostic tools for the NHS.
Building on the region’s research strengths and its existing base of businesses in life sciences, digital and technology, the West Yorkshire investment zone will bring opportunity into areas that have historically underperformed economically through a total funding envelope of £160 million over 10 years. It is expected that the investment zone will help leverage more than £220 million of private funding and help support more than 2,500 jobs over the next five years.
The Government and the West Yorkshire Mayoral Combined Authority will continue to work together on the investment zone to jointly agree the outstanding elements of the programme, including the breakdown of how West Yorkshire’s envelope will be deployed, with a view to setting out further details in due course.
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Advanced Manufacturing: Funding
Gareth Davies Excerpts(1 year, 1 month ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
On Friday 17 November, the Government announced £4.5 billion in funding for manufacturing to support private sector investment in eight strategic sectors across the UK. Together with our existing manufacturing support and plans for the net zero transition, the funding will level up communities across the country with higher-paid jobs and improve our energy security.
The funding will be available for high-quality proposals from 2025 for five years and therefore help unlock private investment by providing longer-term certainty. It is targeted at the UK’s strongest, world-leading sectors, and where the industry is undergoing fundamental changes as the world transitions to net zero.
Over £2 billion has been earmarked for the automotive industry, supporting the manufacturing and development of zero-emission vehicles, their batteries and supply chain.
The sum of £975 million has been earmarked for aerospace, supporting investment in energy-efficient and zero-carbon aircraft equipment.
Further, we have committed to £960 million for a green industries growth accelerator to support clean energy manufacturing, and £520 million for life sciences manufacturing to build resilience for future health emergencies and capitalise on the UK’s research and development strengths.
The green industries growth accelerator investment will support the expansion of strong, homegrown, clean energy supply chains across the UK, including: carbon capture, utilisation and storage; electricity networks; hydrogen; nuclear; and offshore wind. This will enable the UK to seize growth opportunities through the transition to net zero, building on our world-leading decarbonisation track record and strong deployment offer.
More information, including on the application processes, will be made available by the Government in due course.
The funding forms part of the Prime Minister’s pledge to grow the economy, and his focus on making decisions for the long term. It does not just focus on the most successful sectors today but looks ahead to how we keep pace internationally and build the UK’s expertise for the industries of the future. The funding will also help to ensure that the UK remains at the forefront of the global transition to net zero and can seize growth opportunities in the new green economy.
This approach is part of the UK’s wider offer for advanced manufacturing. The Government have also published Professor Dame Angela McLean’s pro- innovation regulation of technologies review on advanced manufacturing and the Government’s response[1], and announced commitments to extend the connected and automated mobility research and development programme and expand the Made Smarter adoption programme for manufacturing SMEs. The Government will shortly set out more on their actions to support investment and growth in the manufacturing sector with the publication of the advanced manufacturing plan and UK battery strategy.
[1] https://www.gov.uk/government/publications/pro-innovation-regulation-of-technologies-review-advanced-manufacturing.
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Oral Answers to Questions
Gareth Davies Excerpts(1 year, 1 month ago)
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David Duguid (Banff and Buchan) (Con)
The Exchequer Secretary to the Treasury (Gareth Davies)
Since March 2021, the Government have committed a total of £30 billion in public investment for the green industrial revolution. Since then, the Chancellor has announced £6 billion for clean heat and improving energy efficiency, and £20 billion for carbon capture, usage and storage. Alongside the launch of Great British Nuclear and the small modular reactor competition, the Government have also invested £1 billion in Sizewell C.
David Duguid
According to a recent survey, 90% of North sea oil and gas operators have reduced spending since the energy profits levy was introduced. I therefore welcome recent announcements on new North sea licences and the announcement before the summer of the energy security investment mechanism, by which the EPL will be removed when appropriate. Can my hon. Friend tell me when we can expect a response to the consultation on the ESIM and what plans this Government have to legislate for the mechanism? Will he meet me to discuss how investor confidence in our home-grown industry can be assured further?
Gareth Davies
Introducing the price floor for the oil and gas industry comes from the principle that, while it is right that oil and gas companies pay a higher share of tax during exceptional times, it is also right that when prices fall to normal levels, so do their tax rates. That is why we introduced the price floor in June and we have extensively engaged with the industry since then. I know that legislating will provide some certainty; we are looking carefully at that and will respond soon. I will always be happy to meet with my hon. Friend.
Jim McMahon (Oldham West and Royton) (Lab/Co-op)
The Labour party and the Co-operative party have set out a shared ambition for more community-owned energy. That is not new: in Denmark, 52% of wind energy is community owned, and in Germany half of all onshore wind is community owned. Will the Government do far more to join that ambition of community-owned energy here in Britain?
Gareth Davies
We have ambitious plans for energy generation and our energy security. We want to bring communities with us, and we look at all options as we do so.
Rachael Maskell (York Central) (Lab/Co-op)
Mr Alistair Carmichael (Orkney and Shetland) (LD)
The Exchequer Secretary to the Treasury (Gareth Davies)
The Government have taken significant action to help households with rising energy prices and the costs of living by providing one of the largest packages of support in Europe, totalling £94 billion.
Mr Carmichael
Orkney and Shetland have the worst rates of fuel poverty of anywhere in the country. Provisional figures show that, for last winter, both Orkney and Shetland recorded record levels of winter mortality. In his new office, will the Minister bring his colleagues together from across Government to hear from agencies such as THAW—Tackling Household Affordable Warmth —in Orkney that are working to tackle fuel poverty, because if we can tackle fuel poverty in Orkney and Shetland, we can tackle fuel poverty?
Gareth Davies
We are incredibly sympathetic to the right hon. Gentleman’s constituents, who have suffered a very difficult time. That is why we introduced the energy price guarantee, which will remain in place until March 2024 as a safety net. We continue to engage with lots of stakeholders and we are very happy to include the ones he suggests.
Nick Fletcher (Don Valley) (Con)
The Exchequer Secretary to the Treasury (Gareth Davies)
The Government continue to stand by households with one of Europe’s largest support packages, amounting to some £3,300 a household on average across 2022-23 and 2023-24.
Ben Lake
The Minister will be aware that a big concern for rural constituencies is the cost of fuel. The RAC has found that the margin enjoyed by the big supermarkets on fuel sales in October was double the figure for the year to date at 14p per litre. That reflects concerns raised by the Competition and Markets Authority that although wholesale fuel prices fell in September and October, retail prices did not. What is the Treasury’s assessment of the impact that these higher margins will have on households in the coming winter?
Gareth Davies
Fuel duty is a major cost for households and businesses. We recognise that. That is why in the spring Budget 2023, the Chancellor extended the 5p temporary duty cut. That was a £5 billion saving for motorists, worth £100 for the average motorist, but we always keep these things under review.
Priti Patel (Witham) (Con)
Julian Sturdy (York Outer) (Con)
The Exchequer Secretary to the Treasury (Gareth Davies)
Life sciences are one of the Chancellor’s key growth priority areas. In May, he announced a significant new policy package, backed by more than £650 million of funding, reaffirming the Government’s commitment to supporting a thriving life sciences industry.
Julian Sturdy
I thank my hon. Friend for that answer. Life sciences are incredibly important, so will he focus investment on them in projects such as BioYorkshire on the edge of my constituency, which brings together private, public and academic institutions for huge benefits right across the board?
Gareth Davies
My hon. Friend is absolutely right to highlight the benefits and importance of life sciences to the country. We are genuinely a world leader: I was out in Boston in the United States seeing the other world-leading area for life sciences, and it is not a patch on ours. That is why, as an example, we are looking to support life sciences through the investment zone programme, but, as I said, they are a key priority for the Chancellor as part of his growth agenda.
Marco Longhi (Dudley North) (Con)
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
I know that the Chancellor is aware of just how important the whisky industry is to the economy of rural Scotland. It was very disappointing that the policy of a duty freeze was not continued in the Budget. Can he offer any reassurance that we will return to the policy of duty freeze in the autumn statement, and in next year’s Budget?
The Exchequer Secretary to the Treasury (Gareth Davies)
We are incredibly supportive of the Scotch whisky industry. In fact, the Scotch Whisky Association was my first meeting in post. In nine out of 10 previous fiscal events we either cut or froze duty on whisky, and we have acted to remove punitive tariffs on Scotch whisky in the US market. It will not be a surprise to my right hon. Friend that all taxes remain under review and he will not have long to wait until the next fiscal event.
Richard Burgon (Leeds East) (Lab)
Peter Gibson (Darlington) (Con)
I thank the Exchequer Secretary to the Treasury, my hon. Friend the Member for Grantham and Stamford (Gareth Davies) for his recent visit to Darlington, where he opened a new branch of Darlington Building Society. He will know from that visit the impact that Treasury jobs are having locally, including an additional £80 million of spending in our local economy. Does he agree with me that Darlington Economic Campus is a fantastic levelling-up project, ensuring that people can stay local but go far?
Gareth Davies
It was a great pleasure to visit my hon. Friend and open the Darlington Building Society in his town, a very prominent business that is important for in-service banking facilities. The Darlington campus is an important part of our Treasury levelling-up agenda and long may that continue.
Stephanie Peacock (Barnsley East) (Lab)
Environmental, Social and Governance Developments
Gareth Davies Excerpts(1 year, 1 month ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
I congratulate my hon. Friend the Member for Rother Valley (Alexander Stafford) on securing the debate, not least because, amazingly, it is the House’s first dedicated debate on this subject, which is remarkable—it will certainly not be the last. I know that he cares a great deal about this subject, not only as the chair of the APPG on ESG, but from his career. He speaks with great authority and knowledge of the subject, and I am grateful to him for the opportunity to set out the Government’s position on the important issues that he raised.
My hon. Friend will be aware of our steadfast commitment, enshrined in law, to reach net zero greenhouse gas emissions by the year 2050. We already lead the world on tackling climate change: we have decarbonised faster than any other major economy since 1990, reducing our emissions by nearly half while growing our economy by some two thirds. Renewables have gone from less than 7% of our electricity supply in 2010 to 48% in the first quarter of this year, which is fantastic progress. However, as the Prime Minister has said recently, we will not stop there. The Chancellor has set out his view that the UK’s green industries are key to creating growth across this United Kingdom and our whole economy, and the Prime Minister’s announcements have outlined how the Government are working to unblock key barriers to investment and decarbonisation.
Growing the sustainable finance sector to support the transition to net zero is a major priority for this Government, and in March we published our green finance strategy. The strategy sets out the policies, regulatory changes and frameworks that we will be focusing on and taking forward in the next two to three years, helping businesses to have more certainty. It includes, for example, our commitment to deliver a useful and usable UK green taxonomy—an important evidence-based classification tool that will clearly define what is meant by “green” so that the market knows where to channel investment. As the hon. Member for Strangford (Jim Shannon) rightly highlighted, that supply of relevant and reliable information will help guide us all in financing activities that actually support our net zero and environmental objectives, while making clearer where damaging greenwashing is taking place.
Businesses that claim to be delivering green outcomes while doing no such thing not only continue to damage our environment, but damage our collective efforts to reduce the impact on the natural world by undermining the efforts of their competitors and the confidence of the public. This is clearly something that we need to tackle. The Competition and Markets Authority has led a crackdown on greenwashing advertising; the green taxonomy will go much further, making it easier to test and verify claims across the board. I can tell my hon. Friend the Member for Rother Valley that our next step towards delivering that taxonomy—something that he has directly asked for—is direct consultation, as he would expect. That consultation will take place this autumn, ensuring that we gain market views. It is right that we do so, as that will help build trust in the process and build on lessons learned in other parts of the world.
Alexander Stafford
I am pleased that my hon. Friend is speaking so passionately from the Dispatch Box about the importance of building up trust. Does he agree that if we get this wrong, ESG greenwashing could be the next payment protection insurance scandal—something that everyone signed up for decades ago, for which we are still paying the price even now? If we get this wrong, we will face huge financial disadvantages and penalties down the line, so we must get the taxonomy right.
Gareth Davies
One of the reasons why we are looking at a UK taxonomy and being clear that we want to introduce one is to ensure that there is great transparency and clarity for investors; that, when they buy an investment product, they know what they are getting. One of the things that has historically been lacking in the market is an understanding of what fund managers mean by “green”, so investors are put at a disadvantage and at risk of not purchasing what they believe to be a green product. We will see how that consultation goes, but I assure my hon. Friend that it will take place this autumn.
On a global scale, the markets for ESG ratings and data are rapidly developing, and they are increasingly relied on by investors to guide their decision making. The growth of the integration of ESG into the investment process is expected to continue across all jurisdictions. However, ESG ratings providers currently fall outside the regulatory perimeter. This raises the risk of harm with unrated ratings, which often lack transparency, directing capital flows towards some companies and projects, and away from others. We are therefore exploring action to address these growing ESG investment trends, to ensure that this activity is robust, and that it protects UK markets and, ultimately, consumers. Alongside the updated green finance strategy, the Treasury has published a consultation seeking views for a potential future regulatory scheme for ESG ratings providers. The consultation closed on 30 June, with 94 responses received from industry, and we are reviewing those responses to inform the next stages of our work.
Any potential regulation would be aligned with recommendations made by the International Organisation of Security Commissions on how ESG data and ratings providers could improve their activities, such as improving transparency and mitigating conflicts of interest. It would also seek to be aligned with other jurisdictions, including those of Japan, Singapore and the EU, which are putting forward initiatives in this space. More transparent ESG ratings would build confidence in these products and the wider sustainable investment market, as investors would be better able to understand how their money is put to use.
Since the UK is at the forefront of international efforts on this issue, we have the opportunity to shape the approach of other jurisdictions. If they are to follow us, it is incumbent on us to set a good example, so we must recognise and address where ESG principles are misapplied. As my hon. Friend has pointed out, we have seen concerns around banking raised recently. We have been clear that, as a matter of public policy, it is wrong to remove someone’s bank account simply because of their political views. Free speech and the legitimate expression of differing views are essential British principles, just as much as is ESG.
Let me conclude by saying that I hope that, in the time I have been given, and in the time we had listening to my hon. Friend, he and other hon. Members can now appreciate that this country has built a sustainable finance market, product set and industry of which we should all be proud. We are one of the world’s great democracies, a country that advocates for the fair and considerate treatment of the environment and the people of this world, and one that practises what it preaches. We are determined to carry that on, making conscientious decisions that work for our country, supporting our finance industry to play an important role in our economy and, of course, in society.
Question put and agreed to.
Plastic Packaging Tax on Imports: HMRC Enforcement
Gareth Davies Excerpts(1 year, 2 months ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
It is a great pleasure to see you in the Chair, Mr Davies.
Let me congratulate my hon. Friend the Member for Amber Valley (Nigel Mills) on securing this debate on the plastic packaging tax. This world-leading environmental tax is designed to incentivise businesses to use more recycled plastic packaging in their production. As has been said, the manufacturers and importers of plastic packaging that does not contain at least 30% recycled plastic are liable for a new tax.
The plastic packaging tax is one of a series of measures to drive more collection and recycling of plastic waste, helping us to reach our ambitious target to eliminate all avoidable plastic waste by 2042. However, I recognise that some people make false claims about recycled content in packaging and do not pay the taxes they owe, and they not only undermine important environmental objectives, but create an unfair and uneven playing field for businesses that are trying to do the right thing. That was why we consulted extensively to get all aspects of the tax design right, including taxpayer obligations and the evidence required to back up claims of recycled content. It is also why, since the plastic packaging tax was introduced in April last year, HMRC has been actively helping businesses to understand their obligations, and developing a comprehensive enforcement and compliance response to identify and tackle any non-compliance.
As I have mentioned, the tax applies to plastic packaging that is either manufactured in or imported into the United Kingdom, including plastic packaging that is already filled at the time of importation. Following extensive consultation, the tax includes a de minimis threshold of 10 tonnes of packaging per year, which is intended to avoid placing a disproportionate administrative burden on businesses that would outweigh the environmental benefits. This means that many small importations of plastic packaging will be out of scope of the tax.
I want to address some points about evidence requirements. In designing the tax, it was important that we struck the right balance to ensure that claims were credible, while avoiding placing a disproportionate burden on businesses. Essentially, the challenge is that there is no scientific test to determine the recycled plastic content of packaging. For that reason, businesses are legally required to hold a body of evidence that shows the origin and content of recycled material, the details of manufacture or import of the individual plastic packaging components, and the proportion of recycled plastic in the outputs from the recycling process. As there is no one-size-fits-all approach, the type of evidence required is not prescribed—there is not one certificate. There can be a range of evidence, such as contracts, certificates and purchase orders.
Let me directly address some of the specific comments made by my hon. Friend the Member for Rugby (Mark Pawsey), who spoke about importers, as did the shadow Minister, the hon. Member for Ealing North (James Murray). We recognise that importers are a higher risk and must demonstrate the same standard of record keeping as UK manufacturers. Where businesses do not have or hold sufficient evidence for us to inspect, they must not declare that their packaging contains at least 30% recycled plastic, and they must pay PPT.
In addition, HMRC has a range of enforcement and inspection powers at its disposal, as well as sanctions and penalties, but the Government have also gone further by improving the legislative environment to introduce criminal offences for businesses that evade PPT. In a minute, I will come on to what action HMRC has already taken in that area, because several colleagues have asked for that information.
Mark Pawsey
The Minister has acknowledged that, for reasons of safety, food contact applications cannot, by their very nature, include recycled material. I wonder whether he would accept that the plastic packaging tax should automatically apply to any imports of material used where food contact is involved.
Gareth Davies
To be clear, the presumption is that businesses need to demonstrate that they meet the threshold to have relief from the tax. If they cannot do that, they must pay the tax. That is clear, and I hope that that answers my hon. Friend’s question.
Businesses are also required to carry out due diligence on their supply chains and to demonstrate to HMRC what checks have been carried out in their supply chains. HMRC can and will challenge claims from businesses, and is doing so, and anyone in the supply chain can be held liable. When assessing that liability, HMRC will consider due diligence checks undertaken to ensure that the supply chain has taken appropriate steps.
My hon. Friends the Members for Rugby and for Amber Valley both talked about false and fraudulent claims. We are alive to that issue, particularly as it relates, as they pointed out, to the content of recycled plastic. We understand that that is a serious impact for businesses that are just trying to do the right thing, as I said at the beginning.
To embed the tax, HMRC delivered a wide-ranging communications programme that targeted both domestic manufacturers and importers of packaging. It focused on making them aware of the requirements and supporting them to comply with those. Recognising that some businesses may need more time to fully understand their obligations under the new tax, HMRC went even further and allowed a 12-month soft landing period, during which the focus was on education and support for businesses.
Now that that period has ended, businesses must ensure that they have gathered appropriate evidence, filed their returns and paid on time. Although HMRC continues to support businesses, it is now also focusing its efforts and targeting its resources on the areas of highest risk and non-compliance. The tax has been in place for 18 months, so HMRC now holds more data from tax returns to inform risk profiling and emerging trends. Its data-driven approach will help to identify and target instances of error and non-compliance. I will come on to what action has been taken in a second.
As with general taxation, HMRC’s compliance activity for PPT draws on a test and learn approach. That moves through various phases, and approaches can change depending on what HMRC learns along the way. Largely, it has concentrated on targeting unregistered businesses that may have a liability and on developing a better understanding of the plastic packaging tax population, particularly given the tax is so new, to build a risk compliance approach.
I want to address the question of registration. To reiterate, over 4,000 businesses have registered for the tax in 2022-23. We concede that that is lower than the initial estimate of 20,000, but that estimate was made before the final policy decisions on the tax were made. We were very clear that the estimate was always subject to a lot of uncertainty. HMRC continues to engage with businesses and hold them to account. I am pleased to say that, since the tax was launched, 250 additional businesses have now registered with HMRC.
Businesses found to be negligent or cheating the system will incur penalties in addition to the tax due and can face liabilities of up to 100% of the tax due. They can also face legal action to recover the tax; in the most serious cases, as I have said, criminal prosecution may take place. My hon. Friend the Member for Amber Valley asked for statistics on this. I can tell him that so far HMRC has contacted 2,000 businesses proactively and conducted 400 interventions on compliance since the tax went live. So far, £3 million has been recovered as a result of that action. I point out that HMRC will always be open to receiving any information or evidence where businesses or individuals feel that compliance is not in order.
Nigel Mills
I do not know whether the Minister knows this, but was the enforcement action against the importer or against somebody further up the supply chain?
Gareth Davies
I had anticipated the question, but was unable to obtain the information in time. If we have that information, I will be happy to follow up and write to my hon. Friend on the breakdown, because he is focused on importers and it is a reasonable question.
I will finally address the point on mass balance and chemical recycling. I should point out that we have launched a consultation on this matter. We are looking at it carefully and will respond to that soon, so watch this space on that point.
As in other areas of tax fraud, the Government are committed to taking strong action across the tax system to address any activity that is unfair and that undermines businesses that are doing the right thing. The plastic packaging tax revenues in the first year, as has already been said, were £276 million, which is broadly in line with the Office for Budget Responsibility’s forecasts. That indicates that the amount of plastic packaging subject to the tax is in line with expectations. However, as hon. Members will have heard, work to ensure that all obligated businesses are registered and compliant with the tax continues to this day. If a business or individual has specific concerns or, I reiterate, intelligence about tax non-compliance, I encourage them to report it to HMRC through the normal channels, so that we can ensure a level playing field for everyone. Everybody in this Chamber has expressed a desire to achieve that.
Oral Answers to Questions
Gareth Davies Excerpts(1 year, 3 months ago)
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Wera Hobhouse (Bath) (LD)
The Exchequer Secretary to the Treasury (Gareth Davies)
The Treasury’s 2021 net zero review noted that unmitigated climate change damage has been estimated to be the equivalent of losing between 5% and 20% of global GDP each year. The costs of global inaction significantly outweigh the costs of action, and McKinsey estimates that there is a global market opportunity for British businesses worth £1 trillion.
Nadia Whittome
A recent report from Carbon Tracker found a huge disconnect between what scientists expect from climate change and what our financial system is prepared for, with flawed economic modelling leading pension funds and others to seriously underestimate the risks. Meanwhile, Energy UK warns that we are lagging behind on green energy investments. Surely the Minister agrees that to revive our economy and avert climate catastrophe we must rapidly phase out fossil fuels and invest in a green new deal to reach net zero.
Gareth Davies
It is important to point out that we are the fastest decarbonising economy in the G7. Since 1990, we have decarbonised by 48% while growing our economy by 65%, but the hon. Lady is right: this will take a balanced approach involving both public spending and private investment, including pension fund investment. The recent pension fund reforms, for example, should unlock some new assets for green infrastructure.
Wera Hobhouse
I agree with the question about the Carbon Tracker report. It has found that policy decisions are being based on 1990s literature. That is 30 years old. Will the Chancellor review the data and the thinking that the Government are using to make sure that all strands are in line with the climate science of the 21st century?
Gareth Davies
The data that I look at shows that last year 40% of our electricity was generated from renewables. That is an amazing achievement, but we are alive and present when it comes to decarbonising our economy. We have great plans and we are building on our great track record. We will continue to do that.
Steve Tuckwell (Uxbridge and South Ruislip) (Con)
Thank you, Mr Speaker. Does my hon. Friend agree with my Uxbridge and South Ruislip constituents that Mayor Khan’s ultra low emission zone expansion hits families and businesses without any significant environmental benefit?
Gareth Davies
Let me welcome my hon. Friend to his place. He has wasted no time whatsoever in advocating for his constituents against a Labour tax that is hitting households and businesses in his constituency and throughout the south-east. It is a massive tax bombshell at a time when families just do not need it. It is simply not right, and we would urge the Leader of the Opposition to tell his Mayor of London to stop it.
Richard Fuller (North East Bedfordshire) (Con)
The shadow Chancellor has said that she will not rule out mandating the use of pension fund money for the pet schemes that the Labour party thinks will achieve net zero, putting at risk the savings of many pensioners in this country. What does my hon. Friend think the impact of that will be on the British economy?
Gareth Davies
Pension funds have a fiduciary responsibility to deliver a financial return but also to be mindful of the values of their pensioners. I have every confidence that pension funds will continue to invest in line with the risk that is presented by climate.
Abena Oppong-Asare (Erith and Thamesmead) (Lab)
This Tory Government effectively banned new onshore wind, which is vital for net zero, energy security and getting bills down. We now learn this could change because one fine group of Tory rebels is shouting louder than another group of Tory rebels. There is no leadership, just a Government led by their Back Benchers. Can we finally get an answer from the Government on whether they will dither and delay or join Labour in leading the way and acting on onshore wind?
Gareth Davies
Onshore wind has an important part to play, and we are already deploying 14 GW of energy from onshore wind. The cost of onshore wind has come down significantly. It is one of our cheapest energy sources. The hon. Lady does not have long to wait for the Energy Bill, which we are considering later today.
Fleur Anderson (Putney) (Lab)
The Exchequer Secretary to the Treasury (Gareth Davies)
In April this year the Government announced that we would conduct a formal review of the plastic packaging tax through analysis of environmental and tax data and customer research to assess the impact of the measure. More information about the evaluation will be published later this year.
Caroline Ansell
I am pleased to share that a business in my Eastbourne constituency has made many important changes in the way it operates in order to meet its own environmental ambitions, but when it comes to the transportation of food and pharmaceutical products, industry standards linked to public health regulations require such products to be transported in sterile packaging, which necessitates the use of virgin plastics and brings the containers that the business produces into scope for the plastic packaging tax. Is there a new direction I can share with that business, or will ongoing policy reviews look at such cases?
Gareth Davies
The aim of the plastic packaging tax is to provide a clear incentive for businesses to use more recycled plastic in packaging. Following extensive consultation, we looked at a range of possible exemptions and decided to limit those exemptions because we want to encourage innovation in the industry. Put simply, the more exemptions, the less innovation. However, all taxes remain, of course, under review.
Kerry McCarthy (Bristol East) (Lab)
A proactive approach to a circular economy could create hundreds of thousands of jobs and cut our consumption emissions. What circular taxation measures is the Treasury looking at to help us achieve those outcomes?
Gareth Davies
We are clear that we want all taxes relating to the environment to have an impact. The plastic packaging tax, for example, will clearly have an impact on the amount of recycling that takes place and on the amounts put into landfill. Those are all things that we assess as part of evaluations, and the plastic packaging tax will be evaluated this year.
Nigel Mills (Amber Valley) (Con)
Alison Thewliss (Glasgow Central) (SNP)
The Exchequer Secretary to the Treasury (Gareth Davies)
We stepped in during the energy crisis with £94 billion of support, including the energy price guarantee, which effectively paid for half of people’s energy bills. That was important while energy prices were high; wholesale gas prices have now come down.
Craig Tracey (North Warwickshire) (Con)
South Yorkshire Advanced Manufacturing Investment Zone
Gareth Davies Excerpts(1 year, 5 months ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
On Friday, the Government and the South Yorkshire Mayoral Combined Authority announced the creation of a new South Yorkshire investment zone focused on advanced manufacturing, building on the region’s long-standing research strengths and existing commercial operations in the area. Local communities and businesses across South Yorkshire, including in the Sheffield-Rotherham corridor, Barnsley and Doncaster, will benefit.
The Government also announced that Boeing, Spirit AeroSystems, Loop Technologies and the University of Sheffield Advanced Manufacturing Research Centre (AMRC) have partnered to support the first investment within the zone, leading a portfolio of major new R&D projects into the future of aerospace. This investment will be worth over £80 million partially funded from the joint public-private sector Aerospace Technology Institute programme.
The South Yorkshire investment zone will be co-designed with the University of Sheffield and Sheffield Hallam University. By harnessing the region’s local sector strengths, significant innovation assets and existing talent, the Investment Zone will catalyse further investment to boost productivity and deliver sustainable growth that benefits local communities. The investment zone will increase commercial opportunities in areas that have historically under-performed economically through a total funding envelope of £80 million over 5 years. It is expected that the investment zone will support more than £1.2 billion of private investment and the creation of more than 8,000 jobs by 2030.
The Government will continue to work with the South Yorkshire Mayoral Combined Authority, the University of Sheffield, Sheffield Hallam University and other local partners to co-develop the plans for their advanced manufacturing investment zone, including agreeing priority sites and specific interventions to drive cluster growth, over the summer ahead of final confirmation of plans.
[HCWS957]
Draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023
Gareth Davies Excerpts(1 year, 5 months ago)
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The Exchequer Secretary to the Treasury (Gareth Davies)
I beg to move,
That the Committee has considered the draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023.
It is a great pleasure to see you in the Chair, Ms McVey. I thank right hon. and hon. Members for attending. This daft statutory instrument will enable trading standards to exercise their investigative powers fully to check compliance with the Tobacco Products (Traceability and Security Features) Regulations 2019.
Smoking is the single leading cause of preventable death and disease in the UK, accounting for approximately 76,000 deaths each year. Half of all smokers will die as a result of smoking-related illnesses. It is estimated that smoking costs the NHS in England alone £2.6 billion per year. The Government are committed to addressing the harms of tobacco. In April, the Department of Health and Social Care announced a package of measures intended to cut smoking rates, including expanding access to new treatments, rolling out a national incentive scheme to help pregnant women quit, and using a new approach to health warnings.
Alongside that approach, His Majesty’s Revenue and Customs has a role to play, first, in charging duty on tobacco products to deter smoking and to raise revenue to cover the cost to the NHS. Theory and evidence alike show that high duty rates reduce the affordability of tobacco products and so support the Government’s public health objective to reduce smoking prevalence. Meanwhile, revenues from tobacco duty were approximately £10 billion in 2022-23.
HMRC has another key role in tackling the illicit market. One of the main challenges to dealing with smoking prevalence, aside from the addictive nature of nicotine, is the illegal trade in tobacco products, which increases both the affordability and the health risks for smokers. The evasion of tobacco duty also has significant negative impacts on the economy, public health, legitimate businesses and overall public safety. It cheats the Exchequer of revenues and blunts the effectiveness of tobacco duty as a tool for reducing smoking.
The tobacco track and trace system introduced in 2019 helps to prevent the illegal trade in tobacco products by making it more difficult for smugglers and counterfeiters to operate.
Sir Greg Knight (East Yorkshire) (Con)
May I refer the Minister to the explanatory memorandum, which his office has kindly produced? Paragraph 7.6 states:
“The provisions in the Tobacco Products Duty Act 1979 provide powers to make regulations to issue penalties of up to £10,000; to seize product involved in a contravention of applicable law and to exclude retailers from the TT&T registration system, therefore restricting their ability to buy duty paid tobacco for retail purposes.”
Is there, or will there be, a right of appeal should there be mitigating circumstances in a particular case? For example, if a rogue employee brought in the contraband, but the owner of the corner store were not aware, it would seem very unfair to prevent that store from being able to sell legitimate cigarettes in future.
Gareth Davies
My right hon. Friend makes an important point and he is right to seek clarification. My understanding is that, yes, it is right that people may appeal. All penalties are subject to review. There is a process of appeal to HMRC should that circumstance that he describes happen.
As I was pointing out, the 2019 track and trace system provides a way to verify the authenticity of tobacco products and ensures that they have legally procured distribution. The tobacco products are tracked from the point of manufacture to the point of retail, and at all stages in between. Failure to comply with the requirements of the tobacco track and trace regulations in the UK may result in an issue of financial penalties, the seizure of tobacco products found at non-compliant premises, and the exclusion of retailers from the TT&T registration system.
These sanctions are part of a Government commitment to introduce new anti-evasion measures. In 2019, our election manifesto contained a pledge to consolidate and introduce new anti-evasion measures. The measures I have outlined today achieve that. This statutory instrument will bolster the Government’s efforts to tackle the illicit tobacco market and reduce tobacco duty fraud. I therefore commend the order to the House.
Gareth Davies
Many excellent points have been raised, and I will do my best to address as many of them as possible.
First, the Labour party spokesperson, the hon. Member for Erith and Thamesmead, asked about the timing of the measure. One of the reasons for the timing of the measure is that the track and trace system that was implemented in 2019 needed time to bed in. We wanted it to get working. It was only in 2020 that we started the consultation on sanctions, and, now that the track and trace system is in place, we are in a position to execute on that.
The hon. Lady asked about the £1 million grant, which was to launch Operation CeCe. The money was provided in the 2020 Budget, and it has resulted in £7 million of illicit tobacco products coming off the streets of the UK. It has been a tremendous success, and we have now committed to extending the operation to 2025 with additional funding of £800,000.
The hon. Lady asked about resourcing, which was a common theme in the contributions of my right hon. Friend the Member for North West Hampshire and the hon. Member for Walthamstow. I will come to the powers of trading standards in a minute, but the key aim of the draft order is to change how trading standards operates with HMRC. Trading standards will gather information and refer cases to HMRC for sanctions to be administered, and HMRC will administer all the penalties. We are not giving trading standards additional powers. It is not required even to execute on the track and trace regulations. It is up to trading standards, but we are asking it to gather information that could then be provided to HMRC. That is why we feel that there is no additional burden on trading standards; if anything, much of the burden of administering the penalties is on HMRC.
The hon. Member for Erith and Thamesmead asked about the review of the policies. All policies remain under review, but HMRC and Border Force will be producing a new strategy on tackling illicit tobacco later this year, and I expect this policy and the success of Operation CeCe to form part of it.
As usual, my right hon. Friend the Member for North West Hampshire makes some incredibly insightful points that are based on his extensive experience. As I pointed out, trading standards is already covered by schedule 5 to the Consumer Rights Act. The draft order is about changing the approach to enforcement so that it is focused on track and trace. To date, it has been focused on the amount of illicit tobacco that has been found, and we have found that organisations and individuals have been holding a small amount of illicit tobacco to avoid significant penalties. The measure will change the approach so that new measures and regulations are tied to the 2019 track and trace regulations, and it will provide additional penalties and enforcement mechanisms for HMRC.
Kit Malthouse
I am no lawyer, and maybe I am reading this wrong. I acknowledge that schedule 5 already includes local weights and measures authorities. That is not necessarily the full extent of the powers of trading standards. I accept that, in legislation, it has the powers to smash its way into premises in pursuit of weights and measures issues, but it do not have those powers in anything else. My reading of the legislation is that it expands that power beyond weights and measures and into the regulation of tobacco. Its current ability to demand documents and enter without a warrant is being expanded so as to include enforcement of tobacco regulations. I do not think that that part of its work is currently included. If it were, why is the measure necessary?
Gareth Davies
This measure is necessary, first, to increase the penalty up to £10,000 for HMRC; secondly, to give trading standards the ability to share data with HMRC, which was not previously the case; and, thirdly, to shift the focus on to track and trace and away from the amount of illicit tobacco that is found. Trading standards is empowered to gather information and refer cases to HMRC for further investigation. I can write to my right hon. Friend on his specific point on weights and measures—he will forgive me for not having the same mastery of detail as him on that point. I hope the three points I mentioned clarify what we are seeking to do with this specific measure.
My right hon. Friend quite rightly asked about the border, where typically a lot of illicit tobacco enters our country. HMRC and Border Force work very closely together. As I mentioned in response to the hon. Member for Erith and Thamesmead, a new strategy will be published this year to outline how HMRC and Border Force interact and what more they can do to tackle illicit tobacco coming into our country. I can tell my right hon. Friend that 8 million cigarettes were seized between 2015 and 2021, and so there is a reasonably effective operation in place, but they can always do more.
Kit Malthouse
I recall that Border Force ran a competition looking for fast scanning technology. It awarded some money to a series of companies and there was some prize—I have in mind £1.5 million—for whoever could come up with this ability to whizz parcels through and scan them at speed. When I visited Langley, there were just two standard airport scanners, one of which was on the blink, for something like 1 million parcels a day, which is nuts. When he writes to us, will the Minister also update us on where that competition has got to?
Gareth Davies
I am very happy to do that. I am not familiar with that particular case.
The principle is right, in terms of ensuring that tobacco is tracked. We have a similar system for alcohol. The whole point of track and trace is to ensure that, from the point of manufacture to the point of sale, we are tracking and monitoring where illicit tobacco is going. We believe that will be an important way of bringing down the illicit trade that riddles our country and many countries in the world.
My right hon. Friend also asked about tackling smoking. That is an issue that unites the whole House. We all want to see smoking rates come down. He may describe the measures we have taken to date as piecemeal—I do not want to put words in his mouth—but they have had success. We have a prevalence rate of 13%, which means that 13% of our country smoke. That is lower than many countries and has come down quite significantly in recent years.
Some of the measures we are taking are based on the Khan review, which recommended the use of vaping to bring people off tobacco smoking. We are providing 1 million vaping kits for those who wish to come off smoking. Duty, as I said in my opening remarks, is a key way in which we can disincentivise the smoking of tobacco. We can always go further and I welcome the challenge.
Gareth Davies
I very much welcome the challenge, and I can imagine that my right hon. Friend will be right there with us as we announce further measures in the Department of Health and Social Care.
Finally, the hon. Member for Walthamstow asked about the powers. I hope that I have addressed many of those points already, in terms of trading standards not gathering additional powers but seeking to work more closely on data sharing with HMRC, which will have the burden of executing and administering the additional penalties that we are able to operate today.
The hon. Lady quite rightly asked how we are keeping trading standards officers safe. We are in constant discussions with Border Force. We have not had discussions with the National Crime Agency, but I will write to her on what discussions have taken place across Government. The safety of trading standards officers is not directly related or relevant to this order, but the hon. Lady is right to raise it at any opportunity, because we want those who are gathering information with a view to prosecution and penalty execution to be as safe as possible. I expect them to work closely with local police officers wherever they deem a danger to exist.
The sale of illicit tobacco undermines public health policy by offering a cheaper option to those who might otherwise see price as a reason to stop smoking. It damages legitimate businesses and makes tobacco more accessible to children. The evasion of tobacco duty also has a significant impact on our economy and a negative impact on public health, legitimate businesses and overall public safety. It cheats the Exchequer of revenues of billions of pounds each year, and it blunts the effectiveness of tobacco duty as a tool to reduce smoking. This amendment to the Consumer Rights Act is important in tackling the trade in illicit tobacco. These changes will facilitate the UK Government in their objectives to protect public health, raise revenue and combat organised crime.
I hope that the Committee has found today’s sitting informative. I am certainly grateful for the interventions made and speeches contributed. I commend the order to the Committee.
Question put and agreed to.
Resolved,
That the Committee has considered the draft Consumer Rights Act 2015 (Enforcement) (Amendment) Order 2023.