Double Taxation Convention (United Kingdom and Israel)
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The Financial Secretary to the Treasury (Mel Stride)
A protocol to the double taxation convention with Israel was signed on 17 January 2019. The text of the protocol is available on HM Revenue and Customs’ pages of the gov.uk website and will be deposited in the Libraries of both Houses. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
[HCWS1266]
Draft Crown Dependencies Customs Union (Guernsey) (Eu exit) Order 2018
Draft Crown Dependencies Customs Union (Isle of Man) (Eu exit) Order 2018
Draft Crown Dependencies Customs Union (Jersey) (Eu exit) Order 2018
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The Chair
I call the Minister to move the first motion and to speak to all the instruments. At the end of the debate, I will put the question on the first motion and then ask the Minister to move the remaining motions.
The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the draft Crown Dependencies Customs Union (Guernsey) (EU Exit) Order 2018.
The Chair
With this it will be convenient to consider the draft Crown Dependencies Customs Union (Isle of Man) (EU Exit) Order 2018 and the draft Crown Dependencies Customs Union (Jersey) (EU Exit) Order 2018.
Mel Stride
May I say what a pleasure it is, Mr Stringer, to serve under your chairmanship and to speak to all three orders? Today marks an important step in meeting the Government’s commitment that the UK’s departure from the EU delivers for the whole UK family, including the Crown dependencies. Before we move on to the orders, it is worth my briefly setting out their context with regards to the Crown dependencies and the UK’s withdrawal from the European Union.
The Crown dependencies are currently part of the EU customs union. This provides the legal framework necessary for goods to move between the United Kingdom and the Crown dependencies. The Crown dependencies will therefore leave the EU’s customs union alongside the United Kingdom. The three Orders in Council tabled in draft today will give effect to new customs union arrangements that will maintain our current customs relationships with the Crown dependencies after our European Union exit. Crucially, the arrangements provide that goods moving between the UK and the Crown dependencies will not be subject to import duty.
I will now move on to clarify the new customs arrangements the UK has entered into with each of the Crown dependencies. On 26 November, the Government signed new arrangements with each of the Crown dependencies, together forming a new UK-Crown dependencies customs union. These arrangements have been designed to ensure continuity for UK-Crown dependency trade when the UK leaves the EU, and impose no new direct costs or additional information requirements on businesses in the UK or the Crown dependencies. The two Channel Islands arrangements are identical in all material respects and are new agreements, whereas the new Isle of Man arrangement updates customs aspects of the existing 1979 UK-lsle of Man customs and excise agreement.
Under the UK-Crown dependencies customs union, traders moving goods between the UK and the Crown dependencies, or between the Crown dependencies themselves, will continue to pay no customs duty and face the same customs processes as they do now. It will also mean that the UK and the Crown dependencies will apply the same tariff as the UK, just as they do now under the EU customs union.
The making of these orders is a prerequisite for the making of separate regulations to implement the customs union arrangements. Once the orders are made, we will lay the regulations required to comply with the commitments made in the new arrangements—for example, a regulation to ensure that importers bringing goods into the Crown dependencies can apply for tariff information rulings. While the new customs arrangements to which these orders give effect are compatible with any future customs agreement reached with the EU, these orders and the implementing regulations must be in place when the obligations in the EU treaties cease to apply to the UK.
In summary, the orders deliver on the shared objectives of the UK Government and the Governments of the Crown dependencies to ensure the continuation of our current customs relationships outside the European Union customs union. They will place our customs relationships with the Crown dependencies on a firm footing for the future, and they underline the positive collaboration that has taken place between the UK and the Crown dependencies since the 2016 referendum. I therefore commend the orders to the Committee.
Mel Stride
I thank the hon. Gentleman for his contribution and questions. At the heart of this, it is important to understand the process of what is occurring. The whole process begins with the Taxation (Cross-border Trade) Act 2018. Of course, the hon. Gentleman will be very familiar with that Act and with the provisions section 31 makes for setting in train the process for entering into renewed customs union arrangements with the Crown dependencies.
The process operates broadly as follows: having entered into a political agreement with the Crown dependencies, we are required to approve the draft orders, which will then go to the Privy Council. The relevant statutory instruments will then be laid under the negative procedure in the latter part of February, setting out the details of the arrangements with the Crown dependencies.
As for the hon. Gentleman’s suggestion that there has been a lack of scrutiny—I think that is a fair way of summarising his position—I must strongly point out that the primary legislation to which the orders relate went through full parliamentary scrutiny, including on the Floor of the House. Indeed, he may recall that section 31 was amended to restrict our ability to enter into a customs union with the European Union by any method other than primary legislation.
I do not think there is any ambiguity about the purpose of the orders or the statutory instruments that will follow, which is to ensure that, after our exit from the European Union in late March, we are in a position to maintain customs relationships with the Crown dependencies.
The hon. Gentleman asked why there are separate statutory instruments for each of the Crown dependencies. The answer is that there are separate agreements; the Crown dependencies are jurisdictions in their own right, so it is only right and proper that there be a statutory instrument for each. In the case of the Isle of Man, as he will know, we are effectively amending an arrangement that was entered into in 1979—a distinct approach from the arrangements with the other Crown dependencies.
Mel Stride
I thank the hon. Gentleman for his further points. However, it is important to note that the scope of section 31, which he referred to early in his remarks, is in respect of measures relating to the Crown dependencies. These orders give effect to arrangements entered into with Crown dependencies, and therefore they obviously do not affect the overseas territories.
Some of the points that the hon. Gentleman has made in this debate were made at the time the 2018 Act went through this House. At that time, I made it very clear that one of the uses to which we would almost certainly put the powers under section 31 was exactly what we are doing today: to enter—under certain circumstances—into customs union arrangements with the Crown dependencies.
As to the latter part of the hon. Gentleman’s points around whether we should or should not remain a member of the European Union’s customs union, that is, once again, probably outside the scope of our considerations today, but there has been, and no doubt will continue to be, considerable debate about it outside of this Committee.
Question put.
Draft Double Taxation Relief and International Tax Enforcement (Austria) Order 2018
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The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Austria) Order 2018.
May I say what a pleasure it is to serve under your chairmanship, Mrs Main? The order gives effect to a replacement double taxation agreement with Austria. DTAs remove barriers to international trade and investment, and provide a clear and fair framework for taxing businesses that trade across borders. By doing so, they benefit both businesses and the economies of the countries signed up to them.
Our current DTA with Austria dates from 1969 and is therefore in need of a comprehensive update to reflect changes to the OECD’s model tax convention and the domestic tax laws and treaty preferences of both states. The new DTA also introduces a number of improvements for businesses, individuals and Her Majesty’s Revenue and Customs. The new agreement will first create certainty for businesses, boosting vital trade between our two countries. Cross-border dividends between group companies in the European Union are currently exempted from source state taxation under the EU’s parent-subsidiary directive. The new agreement ensures that UK businesses with subsidiaries in Austria will not be affected by the UK’s exit from the European Union.
Our current DTA permits Austria to tax dividends paid to UK residents at a rate of 5% for amounts paid in respect of direct investment, and 15% on portfolio holdings. The new DTA reduces the rate on direct holdings to zero, and that on portfolio holdings to 10%. At the same time, our right to tax distributions from UK real estate investment trusts at a rate of 15% is preserved. In addition, dividends received by UK pension schemes will be exempt from taxation in Austria. These reductions will ease the flow of cross-border investment between our two countries, to the benefit of both.
The new DTA also brings the mutual agreement procedure up to the minimum standard on improving dispute resolution agreed under the OECD-G20 base erosion and profit shifting—BEPS—project. In addition, the new agreement provides for mandatory binding arbitration, which will ensure that disputes are always resolved and that double taxation is avoided. Our current DTA with Austria was not listed as one that either state wished to be covered by the BEPS multilateral instrument—MLI—because this new agreement contains all of the provisions that would have been introduced by the MLI, taking into account the respective reservations made by the UK and Austria.
These provisions include the statement in the preamble that a purpose of a DTA is not to create opportunities for tax evasion and avoidance, and a principal purpose test that denies treaty benefits in cases of abuse. Together, these provisions ensure that the agreement complies with the BEPS minimum standard on preventing treaty abuse and supports this Government’s agenda of fair and transparent international tax standards. Other anti-avoidance rules in the new treaty include a tiebreaker provision for determining corporate residence, based on competent authority agreement.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
The Minister is gabbling through this at a rate of knots. I have had to come here at 6 o’clock on a Monday evening, when I should be somewhere else along the corridor. The impact assessment states that there will be no significant impact on businesses, charities or voluntary bodies. What the hell is this all for if there is no impact on anyone?
Mel Stride
Well, I am not sure that I would use quite the terminology that the hon. Gentleman has just introduced to the Committee. The purpose of any DTA is clearly to ensure that those entities that are trading across international boundaries do not suffer double taxation—so they are not taxed in both jurisdictions—and to ensure that trade is facilitated.
Mr Sheerman
Can the Minister explain to me why this relates only to Austria? I know of countries around the world where there are real concerns about double taxation, about people dodging tax and all those other things, but one country that would never enter my imagination when thinking about that is Austria.
Mel Stride
The hon. Gentleman might not be aware that we have double taxation agreements with a whole variety of countries. In fact, he has missed some of the best debates ever held in the House of Commons, because in this very Committee Room we have recently discussed DTAs with countries such as Lesotho—that was a fairly feisty debate between myself and the hon. Member for Oxford East. It is not a treaty in isolation, but one of many that we have entered into with other jurisdictions.
The provision in the capital gains article preserves UK taxing rights on gains from shares that derive their value from property in the United Kingdom. Finally, the new DTA provides for mutual assistance in the collection of tax debts. Together, those features strengthen both countries’ defences against tax avoidance and evasion.
In summary, the agreement protects UK revenue and provides a stable framework in which trade and investment between the UK and Austria can continue to flourish. I therefore commend the order to the Committee.
Mel Stride
I thank the hon. Lady as usual for her thorough set of questions, and I will endeavour to do my best to answer them. She asked which other treaty negotiations we are currently engaged in. I can inform her that DTA discussions are under way with Greece, Luxembourg and Romania. On her general point that it would be useful for her and others to have sight of the programme of discussions—she did not use that terminology—that we might have, I would be happy to provide that to the best of my knowledge at this point. Perhaps I could do that outside this Committee.
The hon. Lady raised the differences between the double taxation agreement and the OECD model and asked about the reason for some of the choices that may have been made around those differences. First, clearly, a negotiation between two parties will typically lead to some divergence from the model—that is a standard situation, so there is nothing unusual in this case. Secondly, if the hon. Lady will write to me to highlight the particular differences from the model and where there were choices within the model, I will be happy to provide answers. I also point out that, as she may know, a review of our policy on DTAs is being conducted. It will report back soon and, as the relevant Minister, I will look at its conclusions in some detail.
The hon. Lady raised a specific point about the lack of a reference to stateless persons in the agreement. I took particular note of the various issues that she understandably raised about that. She asked whether I would write to her with further information on that point, and I will be glad to do so.
Question put and agreed to.
Taxation of Low-income Families
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Andrew Selous
Yes, I completely agree. I think that it comes back to choice and recognising that families face different challenges at different times of their lives, particularly regarding the needs of children, the frailties of elderly parents and so on. I hope that our social care reforms, which are forthcoming, will go some way towards addressing that situation, but the tax system absolutely has a huge role to play in addressing these important issues, which my hon. Friend quite rightly raises.
Effectively, what we are saying through the tax system is that, despite praising with warm words family members who choose to stay at home if they can make the financial choice to do so—not every family has members who can make that choice, but there are families in which one person makes the sacrifice to stay at home, to be with their children or to look after elderly relatives—we think they are making the wrong choice, because we penalise them for doing so; there is no recognition of what they do.
The Centre for Policy Studies, which was referred to earlier, has made a proposal that we should consider, which is to look at the transfer of unused personal allowances. The Child Poverty Action Group—the report that we are considering today looked across the political spectrum; I have great respect for CPAG—made some suggestions about perhaps increasing child benefit for children under five in lower income families. One way that we might be able to fund that—it is a golden rule with me that if anyone calls for an increase in expenditure, my next question is, “Where is the money coming from?”
Andrew Selous
I see that the Treasury Minister is nodding; let me give him a suggestion, as I have made a call on the public purse. At the moment, we give child benefit to families that have an income of £100,000, where both members of a couple are earning £50,000, whereas that stops at £62,000 when there is only one earner in a family. So there is £38,000 worth of income in respect of child benefit to play with.
The Minister will have to go back to the Treasury and get all his super-clever officials to run those figures through the Treasury modelling system, but there will be some money there that could perhaps be better targeted at child benefit or the transfer of unused personal allowances. We are not being prescriptive here; we want Ministers to go back and look carefully, and reflect carefully, on these matters.
In respect of the work that parents do within the home—looking after children, or looking after frail or elderly relatives—last October the Office for National Statistics said that unpaid household work had a value to the British economy of £1.24 trillion. That is a big figure, as the Minister will appreciate, and just some recognition of the good that is done to society by that work—the costs that are not accruing to the public purse because of it—would be welcome. I think that on average that work comes down to a value of £18,932 per person, which is a significant amount.
The Financial Secretary to the Treasury (Mel Stride)
It is a great pleasure to serve under your chairmanship, Sir David. I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for securing this debate and my hon. Friend the Member for Congleton (Fiona Bruce) for her insightful contribution. I also thank my hon. Friend the Member for Bolton West (Chris Green) for his involvement in the important report issued this morning. I can assure all present that it will be carefully digested by Ministers in the Treasury.
At the heart of the matter lies the issue of fairness in the taxation system and the way in which the benefits system operates in our country. Also at the heart lies the central point that many speakers have made this morning as to whether the tax and benefits system appropriately incentivises aspiration—a Conservative ideal—and effectively incentivises employment, including incentivising people to go out and get jobs. And of course there is the impact of all those matters on the crux of the issue, which is the social impact of these measures on the stability of the family unit. I, the Treasury and the Government more broadly certainly recognise that all those points are of critical importance. I am particularly proud that Conservative Members chose to secure this debate and were instrumental in producing such a thoughtful and detailed report. It is the Conservative party that believes most strongly and passionately in the issues that lie at the centre of the matters we are debating today.
Having accepted that the matters are important, I also accept the many examples given in the debate today on the way in which the system does not work effectively. The most important has been the very high level of marginal tax rates. Several examples were chosen of particular circumstances involving individuals and children and the make-up of families to illustrate that we can, under certain circumstances, have marginal tax rates as high as 73% or even beyond. I accept that that is deeply undesirable. That is not the same thing as suggesting that the entire system is broken. If we chose different examples we might get far lower marginal tax rates than those that have been rightly highlighted in the report and in the debate today. Indeed, the OECD has indicated that across the universe of low-income families in this country, we are above average when it comes to making sure that net income is received by those families. However, there will always be more to do, which is why this debate is important.
We should not overlook the fact that we have a very progressive tax system. Some 28% of all income tax is paid by the top 1% of earners. In the previous Budget, we met our manifesto commitment to increase the personal allowance to £12,500 one year early. It will come in next year and take millions of the lowest paid out of tax altogether. In case it is felt that only the lower paid face very large rates of marginal income tax, we must bear in mind that, under the current system, once someone earns beyond the large amount of £100,000, the personal allowance is tapered away at a rate of £1 for every £2 earned. At that point in the income distribution, wealthy people pay a marginal rate if we include national insurance of 63%. A necessarily complicated tax system, because it tries to do many things at the same time, throws up all sorts of deeply unsatisfactory anomalies. The complexities of the tax system and the interaction with the benefits system means a complicated challenge ahead.
Low tax matters. My hon. Friend the Member for South West Bedfordshire (Andrew Selous) put it eloquently. Low taxes matter for reasons other than fairness. They drive the economy, jobs and entrepreneurship. They make sure that we have, for example, halved the level of youth unemployment since 2010. He cited the very good example of Greece and other countries where they have taken a different way and have paid the consequences. The Government remain committed to lower taxes and to simplifying them to the extent possible and to making sure that the anomalies raised today are addressed.
On the benefits system, much has been said about universal credit. We all recognise that when the Labour party was in government, its benefits system was overly complicated. People had to go to the DWP, to the local housing authority and to HMRC to qualify for a variety of benefits, but we have simplified that to one benefit. When it comes to making work pay, which lies at the heart of many of the arguments, universal credit does exactly that. People no longer have the 16-hours-of-work cliff edge, beyond which they lose all their entitlement.
Alison Thewliss
Does the Minister accept the research by the Church of England that a single mum with three kids will have to work 45 hours to make up for his cuts?
Mel Stride
The point I was coming on to was the taper. In 2016, we announced a reduction in the taper rate from 65% to 63%. My hon. Friend the Member for Congleton called for it to be reduced further to 50%. That is a deeply desirable move if it can be achieved, but we must recognise the cost of doing so. The cost of having gone from 65% to 63% is £1.8 billion across the scorecard period. I do not have the figure to hand, but it would be absolutely enormous if we went to 50%. With great respect to Members, even the examples of where we could do more, such as tax relief on higher-rate pensions or the changes to child benefit and the way in which that might operate, would be dwarfed by any such move. We have to recognise, as my hon. Friend the Member for South West Bedfordshire explicitly did, the costs of making the changes that have been proposed.
The Conservative party introduced the national living wage. We should be enormously proud of that fact. It goes up by 4.9% in April, so those in full-time employment will take home £2,750 more than they did in 2010[Official Report, 31 January 2019, Vol. 653, c. 6MC.]. The marriage allowance is an example of exactly what the report calls for. Among the measures are a transferability of allowance to make provision for those who stay at home to look after children or elderly relatives. It transfers at a rate of 10%, provided the person is not a higher or additional-rate taxpayer. Once again, it is focused on the lowest paid in our society. We spent time reflecting on child support. We will spend £6 billion more per year by 2020, and we brought in tax-free childcare. If someone is on universal credit, they are able to claim back up to 85% of the cost of childcare.
In the remaining couple of minutes, I will respond directly to the overarching request made of me this morning, which is that I go back to the Treasury with the report and the comments made in this debate and look genuinely and deeply at the issues raised. I can give an unequivocal commitment to do precisely that because, despite what is going on in the House at the moment and the important vote tonight, certain things must continue uninterrupted. Our essential quest for social justice and the Conservative party’s commitment to the family and a society that is at ease and at one with itself, must not be diminished. The House has my commitment to do exactly as I have said. I will engage in the form that my hon. and right hon. Friends wish me to to make sure that we push forward on the important issues raised today.
Pubs: Business Rates
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The Financial Secretary to the Treasury (Mel Stride)
It is a pleasure to serve under your chairmanship, Mr Bailey. I thank my hon. Friend the Member for St Albans (Mrs Main) for securing the debate, and I do so for two reasons. First, this is an important matter; pubs lie at the heart of our local communities and the Government’s view is that we should do whatever we can to assist and support them, although, as my hon. Friend the Member for Henley (John Howell) pointed out, there are issues other than rates at play when one looks at the pressures that pubs are under. Secondly, I know that my hon. Friend is a strong campaigner on these matters, and this debate is yet another reflection upon the assiduous approach she takes to her duties as a Member of Parliament.
Undoubtedly there are great pressures on pubs, as we have heard. At the same time we should recognise that there are some rays of light in the overall story. The Office for National Statistics has published data showing that the number of larger pubs—those that employ 10 or more—has grown since 2011. In fact, we now have the largest number since 2011. If we look at the pub and bar sector in total, we see that employment has grown by some 6% since 2008, to 450,000 employees. That does not mean that pubs are not under pressure, as my hon. Friend set out at length and in detail, so the Government have taken action, and she has recognised the things that we have done.
For example, in the Budget last year we introduced a discount of one third to the business rates for retailers, including pubs and bars that have a rateable value below £51,000. I know that my hon. Friend’s constituency is in a relatively high-value property area and that the discount will not have had the same impact as it has had on the estimated 90% of all pubs and bars across the country. The figure for her constituency is 63%, so it is certainly the case that the majority of the pubs in her constituency are at least entitled to the discount of one third that we announced.
Mrs Main
I encourage the Minister to come and see my pubs. Many of them are in historic listed buildings within a conservation area. They have small square footage and it is difficult to grow a business beyond the growth it has already seen. They are in areas where the house prices drive up their rates to an unsustainable level. I appreciate that some of the bigger ones—not the independent ones—have been helped, but I want to help all the pubs, and particularly the ones I have referred to.
Mel Stride
As I said, 63% of pubs and bars in my hon. Friend’s constituency—typically those with lower rateable values, which probably correlates to the kind of pub she describes—will benefit from the one-third reduction that we announced in the Budget. That reduction will be worth about £900 million to the sector over the next two years. She also rightly referred to what we have done in freezing beer duty and spirit duty. In 2013 we withdrew the beer duty escalator, so the price of a pint is now some 14p less than it would have been otherwise, and we froze beer duty yet again in the last Budget. Across the country, around half of the income of pubs is driven by beer sales alone, so those are important measures. The further reliefs that we have been introducing come on the back of a great deal of activity, particularly since 2016. We have introduced a total of about £13 billion-worth of reliefs across the business rates terrain. That includes making 100% small business rates relief permanent, and doubling the threshold for small business rates relief in 2017.
My hon. Friend asked what we are doing for all the pubs in her constituency. That is a valid point. We have changed the uprating from the retail prices index to the consumer prices index. We initially announced that that would come in from 2020, but in the recent Budget it was brought forward by two years. That will lower the level of business rates right across the pub sector, irrespective of the size of the particular establishment. That is worth about £5 billion in additional relief over the next five years. We have doubled the level of rural rate relief to 100% from 2017.
My hon. Friend referred to specific examples of where there have been very large increases in rateable value—I think she quoted a figure in excess of 60% in one case. In 2017, at the time of the revaluation, we introduced the transitional relief scheme, which was worth some £3.6 billion of relief, to ensure that we smoothed out some of those increases. I would be happy to meet her at some point to look in detail at one or two of the examples she raised, which might be useful for us both. An increase in one year of more than 60%, given the transitional relief that would be available, would be on the high side, but I would be very interested to look at that with her in detail.
Dr Cameron
I thank the Minister for all the work that he is doing for the sector, which needs as much support as possible. Does he agree that it cannot be right that the rateable value of our Glassford Inn, for instance, is so high that even if it sold beer every night of the week to every single person in the village, it still could not pay the rates that have been set? Will he agree to look at that issue for me?
Mel Stride
I thank the hon. Lady for her intervention. Of course, I am not familiar with that particular establishment—although I would probably like to be—or with its current trading conditions. My point is that a pub, or any business for that matter, will be under pressure for a variety of reasons—my hon. Friend the Member for Henley raised, for example, the change in drinking habits as one factor. Importantly, the Government have a responsibility on the tax front to ensure that we ease those pressures to the greatest extent that we can, while taking a balanced and responsible approach to the economy.
Tonia Antoniazzi (Gower) (Lab)
I want to raise the plight of some of the Gower pubs. Owing to the rural nature on the peninsula, many are closing and have great challenges ahead. As the Minister mentioned, those challenges are for a range of reasons, but several members of the community and I have set up a working party to address that. I look forward to informing the Minister of the good work that we will do.
Mel Stride
I thank the hon. Lady for that intervention. I would be very interested in hearing from her and her working group when she is ready.
It is important to say that pubs are typically central to high streets. It is an issue not only of providing whatever support we can in terms of reliefs, many of which I have outlined, but of assisting high streets, and pubs as part of high streets, to evolve and transition. The high street is under a huge amount of pressure, not least through the online retail marketplace, which takes around 18% of all retail sales. A decade ago, it would have been a fraction of that.
The high street, and pubs at the heart of it, will therefore have to transition. That is why we made an important announcement in the Budget about the future high streets fund—£675 million to assist local areas to develop plans to ensure that they transition their high streets into a format that works more effectively. That includes the review being conducted at the moment into the change-of-use regime, and how it operates to allow certain businesses to change to different businesses, or to retail premises.
Mrs Main
May I ask the Minister in the few minutes that are left specifically to discuss anomalies such as fair maintainable trade—where the rates of one pub are hugely increased and those of another, which is not making so much investment and effort in the community, are cut? It cannot be right that businesses that are trying their best are penalised. Fair maintainable trade is an undeliverable anomaly, as is the fact that it takes three years to challenge the rates.
Mel Stride
My hon. Friend has astutely pre-empted my very next set of remarks, which relate to the fair maintainable trade approach to valuations. The British Beer and Pub Association has looked at that approach with us and is broadly comfortable with it. We recognised the importance of revaluations in the Budget. We have talked about bringing forward the next revaluation, and having more frequent revaluations so that we have fewer changes of a more dramatic nature.
On the way in which the system works, I think it is broadly a fair approach, because it does not take into account the actual value of the property; it recognises, however, the turnover that a pub can achieve if run appropriately. If a pub is extremely well run and is a very successful business, the Valuation Office Agency is not out to penalise the owners or tenants of that particular establishment in its valuations. There is an established check challenge appeal process through the VOA that can ultimately lead to an independent assessment of the VOA’s decision.
I would like to discuss the three-year point that my hon. Friend raised with her after the debate. If there are cases where it is the fault of the VOA that we are not responding across that period of time—of course, there are many reasons for delays that may come from either party—that would be of concern to me. With the VOA, we are in a position where the backlog of valuations, from when we had speculative valuations, before we changed the process, should all be cleared by September this year—and 1 million had to be gone through.
Mrs Main
I thank the Minister for making various offers to talk outside the debate. Of course, the debate is being watched hotly by people in my constituency and outside it. I ask that the Minister commits to coming to St Albans, because those conversations need to take place with the people who are running the businesses. They are beginning to think that whatever they say is not listened to. I would like him to come and put to them the same arguments that he might put to me. I am not that closely involved, and would be unable to reply in the way that they could, so please will he come to St Albans?
Mel Stride
The commitment that I will give my hon. Friend is that I would certainly be very happy to meet with publicans from her constituency, if she would like to arrange such a meeting. I have some very fond memories from many years ago of having many a very satisfying pint in Ye Olde Fighting Cocks. Perhaps we could discuss it afterwards. Whether I go on a pub crawl with her in her constituency is another matter, but I am certainly happy to meet her and the constituents to whom she refers.
Once again, I thank my hon. Friend for introducing this extremely important debate. She has once again ensured that it is very much at the forefront of the Government’s agenda. I hope that she will accept that we have done a great deal in this area to do what we can. Of course, we keep all taxes under constant review, and I will certainly bear in mind her representations at future fiscal events.
Motion lapsed (Standing Order No. 10(6)).
Draft Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2018
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The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the draft Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2018.
It is a pleasure, as always, to serve under your chairmanship, Mr Hosie. The order changes the annual inflationary increase in the business rate multiplier from the retail price index to the lower consumer price index for the coming financial year. The Government are committed to permanently switching to the use of CPI as an uprating measure for the business rate multiplier.
The multiplier is effectively the tax rate applied to the calculation of business rates. There are two business rate multipliers: the small business multiplier and the standard multiplier. Historically, those multipliers would rise in line with the preceding year’s RPI figure. On that basis, the multipliers were due to increase to reflect the September 2018 RPI figure, which was 3.3%. The Budget 2016 committed to switching the multiplier uprating from RPI to CPI indexation from April 2020, and in the autumn 2017 Budget, the Chancellor brought forward the implementation date to April 2018, to deliver a key ask of the business sector.
That measure reaffirms the Government’s commitment to supporting British businesses, of all sizes and from all sectors, to achieve their potential by reducing their tax burden. The switch is worth more than £5 billion to businesses over the next five years, and the benefit to business grows every year as the rate multipliers are uprated by the lower rate of inflation year on year. The Government introduced regulations to make the change for 2018-19, and the order will do the same for 2019-20.
The Government recognise that business rates can represent a high fixed cost for some businesses and that is why we have taken repeated action in recent years to cut the burden of rates for all businesses and make the system fairer. Since Budget 2016, the Government have announced reforms to the system worth more than £13 billion to businesses over the next five years.
The order is the secondary legislation required to effect the change in the inflationary increase of business rates from RPI to CPI for 2019-20. It sets out the new equation for setting the multipliers for the coming financial year so that the figure used is 2.4% instead of the 3.3% that I referred to earlier. That represents a cut in business rates every year, which benefits all ratepayers and frees up cash for businesses.
In conclusion, the order will change the annual inflationary increase in business rates from RPI to CPI, and I commend it to the Committee.
Mel Stride
I have nothing further to add, Mr Hosie, other than to thank the hon. Lady.
Question put and agreed to.
Double Taxation Convention: UK and Cyprus
Mel Stride Excerpts(5 years, 10 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
A protocol to the double taxation convention with Cyprus was signed on 19 December 2018. The text of the protocol is available on HM Revenue and Customs’ pages of the gov.uk website and will be deposited in the Libraries of both Houses. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
[HCWS1234]
Finance (No. 3) Bill
Mel Stride ExcerptsTuesday 8th January 2019
(5 years, 10 months ago)
Commons ChamberRead Full debate Finance Act 2019 View all Finance Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 8 January 2019 - (8 Jan 2019)
Kirsty Blackman
We have not had taxation powers for 10 years, and we do not have the full range of powers. For example, we do not have the full range of powers over public health, so we do not have in Scotland powers such as the public health taxation measures—the sugar tax—that were brought forward in the previous Budget. We do not have the full range of powers, and if Scotland were to be an independent country, with the full range of powers, we would be putting the things we are discussing today at the heart of our Government’s agenda. Our Government have done this and we will continue to do this—we are pushing for fairness.
I will wrap up, because I am aware that I am relatively short of time, but I want to talk about the people who are the poorest and, by the way, the most disadvantaged by the way in which this society is set up. Following the changes to universal credit, those in the bottom 30% of incomes will gain less from the work allowance than they will lose in the benefit freeze. The benefit freeze is costing them more than the changes to the work allowance will give them. Those people, who have no recourse to public funds, are the poorest individuals I see coming through my door, and this Government have caused that situation. This Government have caused a situation in which asylum seekers have got absolutely nothing. This is about the very poorest people, who have got the worst life chances as a result, and this Government are completely failing to do anything to support them or to improve their life chances. This is about people on disability benefits, who are really struggling, and at every turn, this Government have made their lives worse, rather than better. This is about lone parents, who are disadvantaged as a result of universal credit. This is about the increases in food bank usage.
The Government talk about people working their way out of poverty. I do not understand how people can have hope when they do not have enough to eat.
The Financial Secretary to the Treasury (Mel Stride)
I thank everybody who has made a contribution in this very important debate. There have been some extremely passionate and well-argued speeches.
Part of the debate has been exemplified by the hon. Member for Gedling (Vernon Coaker) and my hon. Friend the Member for North Dorset (Simon Hoare), who spoke in effect about who cares about these issues. We need to recognise that Members on both sides of this House—I include the Opposition in my remarks—care very deeply about whether our fellow citizens in our great nation are impoverished, are in dire straits, do not have enough to make ends meet, do not have enough to feed their children, or have children who do not have the opportunities in life that we wish for our children in turn. Those things matter considerably, and I congratulate my hon. Friend on the quality of the speech he delivered, particularly in that respect.
Something else that lay at the heart of the debate between the hon. Member for Gedling and my hon. Friend the Member for North Dorset, is whether the numbers matter. Do the figures matter? I think it was the contention of the hon. Member for Gedling that, in a sense, the figures do not matter. In a curious way, that is rather at odds with the notion of supporting new clause 1, because it calls for more figures to inform our decisions. In one sense, of course, the figures do not matter, because what matters is the condition of the people who live in our country. However, figures do matter when it comes to formulating the policy responses we need to address the situation, and if we are, in any meaningful way, to chart the progress, or otherwise, that Governments—ours and the Labour Governments who preceded us—have made on this extremely important issue.
Debbie Abrahams
I do not know whether the Minister is aware of this, but the European Commission does this sort of analysis every year on its programme of policies, so it is not that this cannot be done. Its work covers not just quantitative but qualitative data, which relates to the points my hon. Friend the Member for Gedling (Vernon Coaker) made. There needs to be more than what the Government are doing—they do not know what the impacts of their policies will be.
Mel Stride
I think I have been misunderstood, and I apologise to the hon. Lady if I was not clear enough. I am certainly not saying that data does not matter—quite the opposite. What I am saying is that we need to have the right kind of data for the exercise to be meaningful and worth while.
New clause 1 would require the Chancellor to report on the impact of changes to the personal allowance and the higher rate threshold on households of different levels of income, on child poverty, on equality and on those individuals with protected characteristics. New clause 5 would require the Chancellor to report on the Bill’s effect on child poverty, life expectancy and public health.
Let me first address the question of the Treasury’s compliance with its public sector equality duty, as referenced in new clause 1(2)(c). Equality and fairness continue to lie right at the heart of the Government’s agenda, and we take our compliance with this duty deeply seriously while deciding policy. That means that Government decisions are explicitly informed by the evidence available of the implications of those decisions for those sharing protected characteristics. I have no hesitation in saying that the Treasury complies with the public sector equality duty.
Further provisions in new clauses 1 and 5 call for the publication of different forms of analysis for clause 5 and for the whole Bill in turn. The Government have been, and continue to be, transparent—more transparent than any other. Changes to the tax system are always accompanied by a tax information and impact note, and each Budget is accompanied by detailed distributional analysis.
TIINs, in particular, are relevant to the questions discussed today. These notes provide Parliament and taxpayers with information on the expected effects of changes to the tax system, and form a vital part of the Government’s commitment to transparency and accountability around tax decisions. In the context of clause 5, for example, the TIIN already sets out the impact on groups of taxpayers according to their age, gender and income tax band, and this data is readily available to HMRC through tax returns.
Vernon Coaker
That is the point: the assumptions on distributional analysis are assumptions. What we want is to see whether those assumptions turn into reality.
Mel Stride
I will come to the very issue that the hon. Gentleman rightly raises.
Clause 5 will benefit households across the UK. Due to the information collected by HMRC through tax returns, we have various pieces of information on geographical distribution, as sought under new clause 1(2)(d). That is an important point, because much of the information being requested is actually already available.
In addition, the distributional analysis published by the Treasury already sets out the impact of tax changes on households with different levels of income. To be completely clear, the analysis shows how the living standards of households in each tenth of the income distribution will be affected by the decisions the Chancellor and Prime Minister have taken since they took office in 2016. Not only does the analysis meet the intention of new clause 5(2)(a) regarding the effects of the Government’s tax changes on different households, it actually goes beyond that by including changes to welfare and spending on public services, and by considering changes in addition to those announced at each fiscal event since the autumn statement in 2016.
There is, as I suggested at the outset of my remarks, much that we can agree on across the House. Child poverty, public health, life expectancy and inequality are among the greatest issues of our age. We have got on with the job. Absolute poverty rates are at record lows. One million fewer people are in poverty now than under Labour. I say to the hon. Member for Gedling that 1 million is indeed a number, but for every one of those million, their lives have been enhanced. That includes 300,000 fewer children in poverty than under Labour. As we know, the best route out of poverty is through work. There are 3 million more people in work now than in 2010, with 637,000 fewer children in workless households. That is a record of which we should be proud. I urge the House to reject the new clauses.
Peter Dowd
If I may rephrase St Augustine, who said “O Lord, make me chaste, but not yet,” what we have here is a Government saying, “O Lord, make me charitable and compassionate, but not just now. Let’s do it in the future.” It comes to something when the British Government, with an expenditure of approximately £840 billion a year, say that it will be difficult to get statistics, either qualitative or quantitative, from which they can make policy. That is how it seems to me, but I tell you what: every day when I am in my constituency I see people who are homeless. What have the Government done about that? Nothing. I see food banks opening up all the time. What are the Government doing about that? Absolutely nothing. What are the Government doing about the 24% of homeless people who are from the LGBT community? Absolutely nothing. And then we heard the dross coming out—that is what it is, dross—about intergenerational worklessness. The Joseph Rowntree Foundation—through evidence, through statistics, through analysis—found that that was not a significant factor in homelessness. So we hear all this talk about charity, compassion and working together, but I am afraid it does not wash when it comes from the mouths of Tories.
Question put, That the clause be read a Second time.
Mel Stride
Given the limited time that is available to me to summarise a debate that has covered a large number of amendments and new clauses, I shall confine my remarks principally to the issue that has been raised most frequently, which relates to new clause 26. The new clause requires the Government to lay before the House a report reviewing the effects of changes made by clauses 79 and 80 no later than 30 March 2019. While I should note that such a report will come too soon for the measures to have had a real effect, the Government of course remain committed to setting out the rationale for their policies as well as their impact, and in that spirit we will not oppose the new clause.
I do, however, echo many of the comments made by Members about what these schemes are truly about, which is gross aggressive tax avoidance. The way in which disguised remuneration typically works is that, instead of an employer’s paying an employee by way of a salary in the normal way, which attracts PAYE income tax and employees’ and employers national insurance, the payment is made as a loan. Typically, those so-called loans, which are not really loans at all—there is no intention of ever repaying them—are routed out via an offshore trust in a low or no-tax jurisdiction, and then routed back to the United Kingdom to be received by the end recipient. That is extremely unfair. It is unfair to our public services, because we have a duty as a Government to collect the tax that is due to fund them, and it is unfair to the vast majority of taxpayers who do the right thing, which is not to get involved in aggressive tax avoidance schemes in the first place and to pay their fair share of tax.
One issue that has been raised on a number of occasions is the question of whether HMRC’s loan charge arrangements are themselves retrospective. They are not retrospective because, critically—this is where I take issue with the right hon. Member for Kingston and Surbiton (Sir Edward Davey)—at the time when they were entered into they were defective. No matter how far we go back, the scheme typically—I have described the way it works—was defective. It did not work then, it does not work now and the tax is due.
These schemes have been taken through the courts on many occasions. A scheme used to the benefit of Rangers Football Club was taken to the Supreme Court—the highest court in the land—and was found to be defective.
Mel Stride
I will not, simply because I have two minutes and 30 seconds left and I want to cover some of the other issues raised this evening.
However, as I have said, the Government will accept this new clause. It is absolutely right that, when HMRC deals with the public, it has a strict duty of care, a duty of proportionality and a duty to be as sympathetic as it can be relevant to the circumstances of those with whom it is dealing. In my dealings with HMRC, I have made those points forcefully clear. As the right hon. Gentleman will know, HMRC has recently come forward to say that those earning £50,000 or less—which is over twice the average national salary of somebody working in our country—will automatically be granted, without requirement for additional paperwork, a minimum of five years’ time to pay as an arrangement to settle their affairs. Of course for those who come forward before April there is effectively in most cases no penalty as such; they will simply be required to pay that tax which was due in the past—and it was always due in the past—plus the interest that is rightly applied.
I have less than a minute left and want to say a little about amendment 12, tabled by the hon. Member for Aberdeen North (Kirsty Blackman), on the national minimum wage lock. She will know that, because we have increased the personal allowance now to £12,500 for every year of the forecast period, there will be no necessity for that lock to be in place. She makes the point that there could be a projection beyond that point. That will be a matter for a future Government of course and it is not for this Parliament to bind its successors.
I conclude on the suggested entrepreneurs’ relief review and new clause 2, which the hon. Member for Oxford East (Anneliese Dodds) spoke to. We had a review that was published in December 2017, which reported on this particular matter, and it showed that a third of those using entrepreneurs’ relief went on to reinvest in new businesses and half of those who were aware of entrepreneurs’ relief said that it significantly influenced their decision to enter into an entrepreneurial activity. It is an important element of the business tax landscape and we will of course, as we do with all taxes, keep that relief under review.
In the six seconds I have left, I urge that the House accepts the Government new clauses and, with the exception of new clause 26, rejects the Opposition amendments.
Mel Stride
I beg to move, That the Bill be now read the Third time.
Eight years ago, our country’s finances were in peril. For far too long, Labour had spent and borrowed more than our country could afford. The deficit was at a peacetime high and debt was spiralling out of control. [Interruption.] I would not keep repeating it if Labour Members had learned their lesson, but they clearly have not, so they need to be told. This Government came into office knowing that we had to rise to the challenge of working with the British people to bring expenditure back under control and to once again live within our means, and we have done just that, with the deficit now four fifths lower than it was when we came into office and debt beginning its first sustained fall in a generation.
But bringing down the deficit alone was not the limit of our endeavour. The manner in which we did so was equally important: reducing the deficit, yes, but remaining committed to funding our vital public services, giving tax cuts to millions of strivers right up and down the country, and building a tax system that rewards and incentivises business and growth—prudent but pro-business, and deeply invested in the idea that those who work hard should be rewarded. The results are clear to see: 3.3 million more people in work since 2010, unemployment at its lowest level since the 1970s, wages growing, and the rate of absolute poverty at a record low. This Bill continues that work.
At the heart of the Conservative ideal is the firm belief that people know how to spend their money better than Government do, and that those who work hard deserve to be rewarded. The best way for Government to serve that ideal is to cut taxes, especially for those on low and middle incomes—to get out of the pockets of the British people and let them decide what they do with the money that they have worked so hard to earn. When this Government came into office, the personal allowance was at £6,475 and the higher rate threshold was at £43,875. We were elected to raise those thresholds to £12,500 and £50,000 respectively. In this Bill, we deliver on that commitment not just in line with our manifesto but a full year early—at the earliest affordable opportunity. Those changes mean that, compared with 2015, we have cut taxes for 32 million people, with an additional 1.7 million people paying no tax at all, and nearly a million fewer people having to pay the higher rate of income tax. We are also making sure that the extra money in people’s pockets goes further. It is for that reason that we are freezing fuel duty, freezing air passenger duty on short-haul flights in real terms, and freezing the duty on beer, cider and spirits.
Also central to the mission of this Government is our steadfast support for business—our instinctive and deep-rooted understanding that it is never Government who generate the wealth and taxes that fund our vital public services, but the innovation and hard work of millions of people right up and down our country. The achievements of our businesses have been very significant, yet despite that, productivity has been subdued since the financial crisis, and business investment in our country, while strong, is lower than we would like it to be to make the most of the opportunities that lie ahead.
That is why in this Bill we are taking substantial action to boost private sector investment. We have introduced, at the request of the CBI, a new capital allowance for qualifying non-residential structures and buildings that will support business investment and improve the international competitiveness of the UK tax system. From 1 January, we are increasing the annual investment allowance to £1 million for two years, providing additional support for firms to invest and grow. Not least because of the relentless lobbying of my Conservative colleagues who represent constituencies in Scotland, we are legislating for a groundbreaking transferable tax history mechanism for late-life oil and gas fields.
A core pillar of this Government’s approach to taxation is a belief in fairness—that everyone should pay what they owe when they owe it. This Government have an outstanding record in this area. We have protected more than £200 billion in revenue that would otherwise have gone unpaid since 2010, and we have introduced more than 100 avoidance and evasion measures since that time.
In this Bill, we continue that work, taking action against multinationals that keep their intangible property in low-tax jurisdictions in order to avoid UK tax; tackling profit fragmentation, whereby companies reduce their tax burden by artificially shifting their revenue; and cracking down on multinationals that attempt to erode the tax base—a tax system where enterprise is rewarded but everyone pays their fair share and our public services get the funding that they need.
I have been proud to take this Bill through the House. It provides a tax cut for 32 million people. It backs British businesses, introducing with measures to boost private sector investment and support jobs and growth, to ensure that our country is the country in which enterprise can thrive. I understand that the Labour party does not agree with every aspect of the Bill but will not divide the House on Third Reading, which is positive. Those on the Government Benches support tax cuts for millions of hard-working people. We support business growth and investment. We support job creation, and we are the side of the House to ensure that taxes are fair and paid. I commend the Bill to the House.
Finance (No. 3) Bill: EVEL
Mel Stride Excerpts(5 years, 11 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
I have today published a written submission outlining the Government’s analysis of how the English votes for English laws principle relates to all Government amendments tabled for the Report stage of the Finance (No.3) Bill.
The Department’s assessment is that the amendments do not change the territorial application of the Bill. The analysis holds if all the Government amendments are accepted.
I have deposited a copy of the submission in the Libraries of both Houses.
[HCWS1227]
Oral Answers to Questions
Mel Stride Excerpts(5 years, 11 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Nicky Morgan (Loughborough) (Con)
I thank the hon. Member for Batley and Spen (Tracy Brabin) for mentioning the Treasury Committee report published this morning. The Treasury Committee is about more than Brexit, as I hope this House is too, and next week we will be holding a joint Committee session with the Housing, Communities and Local Government Committee on business rates. I am sure that the Financial Secretary is looking forward to his evidence session greatly.
Nicky Morgan
I see the right hon. Gentleman nodding.
Business rates are an issue for retailers, and there are some simple things that could be changed now. Does the Chancellor agree, for example, that, for many retailers, their busiest period is Christmas when they could perhaps agree to pay more in business rates and then pay less in periods when they are less busy, so, overall, the same amount is paid, but there is flexibility in payment?
Alison Thewliss (Glasgow Central) (SNP)
The Financial Secretary to the Treasury (Mel Stride)
The Government are committed to delivering a deal that works for the whole of the United Kingdom—for every country and region within it, including Scotland—and Treasury Ministers of course have regular discussions with the Secretary of State for Scotland on just these matters.
Alison Thewliss
The Fraser of Allander Institute reports today that many firms are still ill prepared for a no-deal Brexit, that the worst-case scenario is the equivalent of making 100,000 people in Scotland unemployed, and that we face a recession double the size of that which Scotland experienced in the crash. Does the Minister not agree that the only way out of this Government shambles is to accept that staying in the single market and the customs union is the best compromise we can get?
Mel Stride
The best deal for the country, and indeed for Scotland, is the one that the Prime Minister has brought forward, and which she is now looking at with our European partners in Brussels: one that sees a free trade area right at the heart of our arrangements; that has no tariffs between ourselves and the EU27; that gives us control of our borders; that makes sure we put an end to sending vast sums of money to the European Union; that gives us control of our laws; and that enables us to conduct our own international trade affairs.
John Stevenson (Carlisle) (Con)
Does the Minister agree that what is of equal importance are the economic relationships within the UK, and that initiatives such as the borderlands growth initiative are a priority for the people of the borderlands region?
Mel Stride
My hon. Friend is entirely right. That is why in the last Budget, Scotland benefited from £950 million in additional Barnett funding, and why we are investing £1 billion in up to six new city deals, including in the borderlands area—some of those deals have been concluded and some are under discussion.
Owen Smith (Pontypridd) (Lab)
One of the many flaws in the Government’s analysis of the impact of Brexit on the regions and nations of the UK is that they did not tell us precisely what the GDP reduction would be compared with the status quo. Will the Minister now correct that and tell us how much worse off in GDP terms Scotland will be if we pursue the Brexit deal compared with the present day?
Mel Stride
These are estimates, of course, not forecasts. I can tell the hon. Gentleman that there would be no impact on output in Scotland in the long term—15 years from the end of the implementation period—if we compare the White Paper deal with the situation as it stands today.
Chris Philp (Croydon South) (Con)
According to the Scottish Government’s own website, 61% of Scottish exports come to the rest of the UK and only 17% go to the European Union. Does the Minister therefore agree that Scotland’s economic interests are best served by remaining part of the United Kingdom?
Mel Stride
My hon. Friend is entirely right. The Scottish National party would like the country to stay in the EU, which would, for example, severely disadvantage the Scottish fishing industry. We have negotiated a very advantageous situation in terms of having control of our fishing as an independent coastal state. The point my hon. Friend makes is also entirely right: if Scotland were to be independent there would be frictions at the border between ourselves and Scotland, which would not assist with trade.
Kirsty Blackman (Aberdeen North) (SNP)
On 19 November, the Exchequer Secretary told us that the Government’s analysis would contain a comparison between the Prime Minister’s deal and the status quo, and that it would contain insight from external stakeholders. It contains neither of those things. The Treasury Committee this morning produced a report that expresses disappointment that the Prime Minister’s deal has not been analysed. Yesterday, businesses lost 2% of their value. UK firms have no sympathy for a UK Government who are feart to put their shoddy deal before the House. Will the Chancellor stand by the words he said previously that
“remaining in the European Union would be a better outcome for the economy”?
Will he find some backbone and make that case in Parliament?
Mel Stride
The cross-government departmental analysis shows clearly that the outcome of no deal would see the United Kingdom disadvantaged by 8% of GDP compared with the deal negotiated at the moment in the withdrawal agreement. The best option identified in the analysis is the current deal.
Kirsty Blackman
The analysis does not model the deal. That is what the Treasury Committee says and that is what we are saying. It models Chequers; it does not model the Prime Minister’s deal. The Minister cannot stand there and make that case to the House.
Because the Prime Minister pulled the vote this week, businesses are accelerating their contingency no-deal Brexit plans. They are heightening their preparations for an emergency no deal. The legacy of this Government will be lost investment, lost growth and lost jobs. Surely the Chancellor cannot think it is acceptable that, just to save the Prime Minister’s job, hundreds of other people have to lose theirs?
Mel Stride
The hon. Lady suggests that the analysis does not model the White Paper deal. It does exactly that, but it does it in terms of the future relationship and the political declaration which, as she will know, is a range of potential outcomes—so that is entirely what the analysis does. As I say, what it shows is that the deal we have negotiated with the European Union is the best deal available for the things that she and I hold dear: growth across our economy, growth in Scotland, jobs in Scotland and even lower unemployment in Scotland. The Scottish National party should now row in behind this deal to make sure that we do the best for the whole of the United Kingdom.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Scotland, just like the rest of the UK, has a substantial and successful financial services sector that is heavily dependent on market access to the EU. Will the Financial Secretary confirm that under the terms of the Government’s Brexit deal the financial sector gets no greater degree of market access than the equivalence arrangements that are already on offer to any third country, including for sectors such as insurance where no comprehensive equivalence regimes exist at all?
Mel Stride
I can enlighten the hon. Gentleman, although it is contained in the documentation that has come out of the negotiations. There will be an enhanced equivalence regime in respect of financial services. It is there in black and white. I am very happy to speak to him after questions and take him through the relevant paragraphs.
Sir Hugo Swire (East Devon) (Con)
Alex Chalk (Cheltenham) (Con)
The Financial Secretary to the Treasury (Mel Stride)
I thank my hon. Friend for that very important question. The Government recognise that the current international tax regime is not fit for purpose when it comes to taxing certain types of digital platform-based businesses—the types to which my hon. Friend has referred—and we are therefore working with the OECD and the European Union to arrive at a multilateral solution to ensure that the right tax is paid. However, we have made it clear, and the Chancellor made it clear in the Budget, that in the event that we do not secure a multilateral agreement, we will move ahead unilaterally by 2020 to ensure that those businesses pay a fair share of tax.
Peter Dowd (Bootle) (Lab)
The merely synthetic construct that is before the House has nothing to do with the real concerns of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Huddersfield (Mr Sheerman). It is the dodgy deal—the tuppence-ha’penny Brexit deal—of the Prime Minister. I am led to believe that the Chancellor has ostensibly, but forlornly, attempted to mitigate the Prime Minister’s disastrous handling of Brexit. If that is the case, will he continue his endeavours by using the powers in section 31 of the Taxation (Cross-border Trade) Act 2018 to maintain the UK in a customs union with the EU?
Priti Patel (Witham) (Con)
Mel Stride
I entirely agree with my right hon. Friend about the importance of low taxes. Under this Government, corporation tax has been reduced from 28% to 19% and will be further reduced to 17%; and through the increase in the personal allowance that was announced in the Budget, we have taken about 4 million of the lowest-paid out of tax altogether. As for my right hon. Friend’s specific point about aligning national insurance and income tax, that is a very complex thing to do. There would be a considerable number of losers, as well as some gainers. However, the Office of Tax Simplification has looked into it in the past, and we will keep it under review.
Sandy Martin (Ipswich) (Lab)
Zac Goldsmith (Richmond Park) (Con)
When criticising a Labour Budget in 2005, my right hon. Friend the Chancellor said that the taxpayer
“is entitled to be protected from retrospective or retroactive legislation.”—[Official Report, 7 June 2005; Vol. 434, c. 1139.]
but through the 2019 loan charge, that is precisely what HMRC is now doing to thousands of people who acted in good faith and in accordance with the rules at the time. May I urge my right hon. Friend once again not to backdate the charge to before 2017?
Mel Stride
I thank my hon. Friend for his question, but I have to fundamentally disagree with him. The arrangements entered into around disguised remuneration, for which the loan charge is being applied, were always defective at the time they were being used. They have been taken through the courts many times over many years by HMRC and been found to be defective. They also went through, in a particular case, the Supreme Court—the highest court in the land—and the scheme was found to be defective. So this is not a retrospective measure, but it is a question of tax fairness, and of course those who are involved can come forward and have discussions with HMRC, who, where there are difficulties around payment, will be sympathetic and enter into time-to-pay arrangements to make sure those people are protected as well as paying the right tax.
Graham P. Jones (Hyndburn) (Lab)