Balanced Budget Rule

Robert Jenrick Excerpts

Wednesday 23rd January 2019 Westminster Hall

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

Thank you, Mr McCabe—it is a pleasure to serve under your chairmanship. When I saw that so few colleagues from both sides of the House had attended this debate, I thought that my hon. Friend the Member for North East Derbyshire (Lee Rowley) had rather made his point without having had to get to his feet. Of course, he continued with his speech for an hour, in three parts—a structure that all the best screenwriters tell people to use. He made some important points, and I do not demur from many, if any, of them.

Like my hon. Friend, I came to this House with the conviction that this country must live within its means, that it is the responsibility of our generation to be more fiscally responsible than those who came before us, that it is a moral imperative to do so, and that we must not leave the country in a weaker state, saddled with debt for the next generation to cope with. That is the task that the Chancellor, like his predecessor before him, and all of us at the Treasury have to take forward.

As my hon. Friend eloquently said, that task will also preserve what we care about in this country’s democracy. This is not unique to the United Kingdom; it is a feature of almost all liberal democracies that, unchecked, the constant desire of politicians to promise more and more and to borrow more and more may turn out to be one of those democracies’ gravest weaknesses. We want to leave the next generation a strong country, not one that is saddled with debt. The latter course would leave our economy, as my hon. Friend said clearly, at an unacceptable level of risk were there another macro- economic shock, which inevitably there will be. The Office for Budget Responsibility sensibly predicts that there is a 50% chance of one within the next five years.

As my hon. Friend also said, that latter course would leave us in an unacceptable position in terms of our competitiveness, our ability to invest in public services and in the economic infrastructure that will drive the economy forward, and our ability to reduce taxes—all of which we want to do.

[Ian C. Lucas (Wrexham) (Lab)]

Will the Minister confirm that he agrees that there was a macroeconomic shock in 2008?

[Robert Jenrick]

Of course there was a macroeconomic shock in 2008, but what I think the hon. Gentleman is asking is whether the then Government had prepared for that shock. Of course they had not: all the estimates and analysis suggest that public spending significantly overran growth in the years leading up to the macro- economic shock. That is exactly what this Government have set out to avoid.

[Ian C. Lucas]

Will the Minister give way again?

[Robert Jenrick]

The hon. Gentleman was not here for the debate—he has come at the last minute—but I am happy to give way.

[Ian C. Lucas]

Did not the then shadow Chancellor, George Osborne—who is in Davos today, finding out how poor people live—actually tell us at the time that we were not investing or spending enough in the economy?

[Robert Jenrick]

I will not comment on the previous Chancellor, but he came into office to restore our public finances.

[Ian C. Lucas]

And he didn’t do that either.

[Robert Jenrick]

As we have already heard today, a great deal of progress has been made in that respect. Of course there is more to do, but we have to recognise the considerable progress that we have made. In 2010, as my hon. Friend the Member for North East Derbyshire said, we inherited a very severe situation: debt had nearly doubled in two years and was snowballing, while the deficit soared to a near record level—the highest in 50 years. Of course the financial crisis had contributed to that, but so had poor management of the public finances in the years leading up to it. We have made progress, and we are nearing a turning point in the public finances. Debt has begun its first sustained fall in a generation and the deficit has been reduced by four fifths—from 9.9% of GDP to 2% at the end of 2017-18. That is an important step forward, but there is a great deal more to do.

[Stewart Hosie]

Does the Minister not accept that his party has any responsibility for slowing down the recovery? Does he not recognise that in 2010 the UK was one of only two countries—the other was Argentina—to completely end the fiscal stimulus, weakening the recovery and ensuring that the downturn lasted far longer than it ought to have?

[Robert Jenrick]

No, I do not accept that for one minute. It is exactly as a result of this Government’s fiscal responsibility in that period that the public finances have now improved, credibility has been restored in the market and business has continued to invest. For those reasons and others, we now have continued record levels of employment, record low levels of unemployment and an economy that remains remarkably resilient. Let us not forget that public spending is £200 billion higher today than it was in the last year of the last Labour Government.

We are not complacent about the debt or the deficit. The fiscal outlook may be brighter, but the need for fiscal discipline continues, as my hon. Friend the Member for North East Derbyshire made very clear. The debt is still more than 80% of GDP, which is equivalent to approximately £65,000 per household, and we want to reduce that figure, for a number of reasons. We are concerned to ensure that if there is a future economic shock, the economy is resilient, and we want to improve fiscal sustainability. In the most recent Budget, the Chancellor set aside £15 billion of headroom for economic shock, out of concern for any further uncertainty that might arise as a result of Brexit.

There is a broader point, however: servicing debt is costly. If our spending on debt interest were a Ministry, it would be the third largest, after health and education. Our spending merely on servicing our debt is equivalent to what we spend on the police and the armed forces. As my hon. Friend made clear, that has an opportunity cost, because that spending has no economic or social value and reduces our ability to spend on our priorities and keep personal and corporate taxes as competitive as possible. The debt burden of interest is merely being passed to future generations.

The foundations of the Government’s approach are our fiscal rules: first, to reduce the cyclically adjusted deficit to below 2% by 2020-21, and secondly to have debt fall as a percentage of GDP in the same year. Sticking to those rules will guide the UK towards a balanced budget by the middle of the next decade. The OBR’s economic and fiscal outlook, which was published in October and was quoted from earlier, shows that the Government are forecast to have met both our near-term fiscal targets in 2017-18, three years earlier than predicted. Sensibly, given uncertainties in the fiscal outlook, the Chancellor took the view that we should retain the £15 billion of headroom against the fiscal mandate in the target year and £73 billion against the target of getting debt to fall. The forecast also shows that borrowing will fall to 0.8% of GDP by 2023-24, its lowest level since 2001.

[Peter Dowd]

If the Chancellor and his predecessor have been so wonderful at economic management, why have they missed every single target that they have set over the past eight years?

[Robert Jenrick]

The hon. Gentleman rather makes the point that my hon. Friend the Member for Cheltenham (Alex Chalk) made. He cannot have it both ways. Either the hon. Gentleman supports debt falling—in which case he should support continued fiscal responsibility, which is one of the Government’s guiding missions—or he wishes to spend more and more. His speech argued that we should spend even more, getting us into further debt and making the situation more difficult for future generations.

[Peter Dowd]

rose—

[Robert Jenrick]

I will give way one last time, but then I must make progress.

[Peter Dowd]

First, I did not make the latter point. The Tories can make up their own policies on the hoof—but don’t make up ours. Secondly, the Minister still has not answered the question. It has nothing to do with the outcome; it is about why the Government, if they are so economically capable and confident, have missed all their targets.

[Peter Dowd]

No, he hasn’t.

[Robert Jenrick]

I have tried to answer. We are meeting our fiscal rules, as the OBR states—in fact, we are meeting them three years early. That has given us room in the Budget to invest at record levels, with £20.5 billion a year for the NHS, for example—its largest injection—and reserve headroom in the event of fiscal shock. However, the hon. Gentleman is arguing for £500 billion of additional public spending. As my hon. Friend the Member for Cheltenham said, that makes no sense whatever.

In the little time I have left, let me answer the question asked by my hon. Friend the Member for North East Derbyshire about how we can create better architecture to ensure that we and future Governments can be more fiscally responsible. We have done so in a number of ways. Our greatest step was the creation of the OBR, an institution that is now maturing and respected and will be retained on a cross-party basis in the future. It has enabled commentators and Members to have greater confidence in the figures—of course, there may be more that could be done in that respect. This year, we will institute the first zero-based spending review, which will look at all Government spending. We have taken account of the parallel with Chile, which has adopted that model in that past.

On longer-term spending, we have created the National Infrastructure Commission, which was designed to ensure that the Government think about the long-term challenges and invest appropriately within a defined spending envelope, guiding investments in our infrastructure according to a clear economic strategy. We have also taken action to ensure that our public accounts are among the world’s most transparent—they have been certified as such by the International Monetary Fund, for example. Most recently, the Chancellor announced the retirement of the private finance initiative, so that we continue to ensure that when our accounts are scrutinised, they are as clear and transparent as possible and we are always seeking to derive the greatest value for money for the taxpayer.

We have also sought to distinguish clearly between day-to-day consumption—important though such investment is for the future of the economy, whether it is in the police, in education or in the health service—and the long-term economic infrastructure investments that will really drive the economy forward. Over this Parliament, we will make the greatest investment in such economic infrastructure—our roads, our railways, our digital infrastructure—by any Government since the 1970s.

I thank my hon. Friend the Member for North East Derbyshire for his remarks. This is an extremely important and timely debate. He made his case in his usual eloquent way, as one of the great champions in this House of smaller Government, lower taxes and fiscal responsibility. If only there were more colleagues who followed his example.

Cashless Transactions

Robert Jenrick Excerpts

Tuesday 22nd January 2019 Westminster Hall

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is a pleasure to serve under your chairmanship, Mr Gray, and to respond to the debate secured by my hon. Friend the Member for Boston and Skegness (Matt Warman). I thank him for his suggestion that I get a chip implanted in my arm—I have only just started paying with my Apple watch, so that might be some way off. I will suggest it to the Chancellor as something that he might like to do.

As my hon. Friend laid out, all the evidence suggests that people are increasingly turning to digital payment methods. In 2017, debit cards overtook cash as the most frequently used payment method in the UK. The Government support digital payments, which, as we have heard in the debate, can offer consumers and businesses convenient, tailored and flexible ways of purchasing goods and services. Increasingly, they can also offer additional services, such as ways to help budget, keep a record of transactions and manage financial affairs, which can play an important role for those who, traditionally, would be considered more vulnerable and harder to serve.

As my hon. Friend also mentioned, the public support and trust our historic currency in cash and notes—perhaps to a surprising extent. We have seen that over the course of the past 12 months, with campaigns to save the penny and for a Brexit coin, and the Royal Mint sees it every day with the demand for collector’s coins, both on its website and at its south Wales shop. The pace of technological change has never been faster, and it will never seem so slow again as it continues to accelerate. Like my hon. Friend, we want the UK to be at the forefront of technological change, to embrace the opportunities and, as we have heard from the tenor of the debate, to ensure that that change works for as many people in society as possible. That includes taking a lead in supporting the Competition and Markets Authority’s open banking initiative, which aims to make it cheaper and easier for innovative new firms to provide financial products.

Building on that, the Government have tried to lead on FinTech with our FinTech sector strategy, which was published last year and sets out our plans for ensuring that the UK remains the best place in the world to start and grow a FinTech firm. Nearly 100,000 people in the UK now work in the FinTech sector; almost none of those jobs existed just 10 years ago. The UK genuinely is a market leader in this field. We have already heard examples of those firms, which are transforming the financial services sector. TransferWise, which set up in London eight years ago, is another. It now serves more than 4 million customers and transfers more than £3 billion of funds every month.

The wider payments industry is also embracing new technology. For example, as a result of legislation brought in by this Government, UK banks and building societies have been able to introduce cheque imaging. That innovation offers people the additional option of paying in a cheque through their smartphone rather than having to go to a bank. That benefits people who are harder to serve, such as those my hon. Friend mentioned—people in rural areas and those with limited mobility.

As my hon. Friend said, digital payment technologies offer considerable opportunities for everyone, including vulnerable people. Ensuring that the UK leads in this area offers opportunities for new FinTech businesses and jobs, and exports, which I just mentioned. It also provides extra flexibility and convenience for businesses and consumers, such as those who travel by bus or taxi in London or, as we heard, by bus in Bristol. If we get the technology right and ensure it is sufficiently competitive, it may provide lower transaction costs for consumers and small businesses. As we heard, it also offers us the opportunity to lower the tax gap, which would mean lower taxes for all the rest of us who pay our fair share of taxes, and there will be public safety benefits if we can ensure correct enforcement and increased public trust. A number of shops and music festivals have suggested they may go cash free to reduce criminality.

[Darren Jones]

I referred to my constituent who was defrauded via an online method. She contacted the police, Action Fraud and the bank, but no one was able to help her and she lost her money. Will the Minister set out what his Department is doing with the Home Office to ensure that the police are properly equipped and resourced to tackle these issues?

[Robert Jenrick]

We work closely with the Home Office on economic crime. In fact, last week the Chancellor and the Home Secretary launched a new taskforce on economic crimes, which will include cyber-security and digital payments. Of course, we work across the full range of financial institutions and authorities to ensure that they take this issue seriously. The Government’s cyber-security strategy, in which we have invested almost £2 billion, is designed to increase capability and awareness among financial institutions and police forces across the country. Police forces need to take this issue very seriously as crime changes.

It is also worth mentioning the societal benefits of developments in other parts of the world, particularly in Africa and the developing world, where organisations and companies that have taken the lead on mobile payment services, such as M-Pesa, have been truly transformational in opening up new opportunities for entrepreneurship and person-to-person payments. We have seen that happen in those parts of the world, and we want it to happen in this country, too.

We heard about some of the challenges associated with the increase in digital payments and the falling use of cash. It is worth noting that cash payments fell from 61% of all payments in 2007 to 34% in 2017. However, 34% is still a significant proportion, and about 2.7 million people in the UK remain entirely reliant on cash. We must ensure that those who rely on cash are not excluded as digital payments become more prevalent. We can of course play a role in guiding them to see some of the benefits and opportunities of digital payments. My hon. Friend the Member for Boston and Skegness mentioned examples of people for whom digital payments may be very useful indeed, such as those on lower incomes and migrant workers.

We launched a call for evidence last year to better understand the role of cash and digital payments in the new economy, to explore questions such as how we can maintain access to cash for those who need it, and to better understand the trajectory of cash use. We concluded that although we are probably heading towards a cashless society, we should seek to facilitate and encourage that. Cash—our coins and notes—will be with us for a long time to come, so its continued availability in all parts of the country for all groups needs to be planned carefully by the Government, financial institutions such as the Royal Mint and the Bank of England, and the payments industry.

We are working closely with the industry, which recognises the challenges. Last year, LINK, the UK’s ATM network, announced an independent review of access to cash, chaired by Natalie Ceeney, in response to some of the concerns and criticisms raised over the course of 2018 about the decline in the number of ATMs, particularly in rural areas. It is true that there are probably too many ATMs in some of our urban areas, but there is real concern about the number of ATMs in smaller market towns, on the smaller high streets of larger cities such as Bristol, and particularly in villages. The review is exploring the risks of leaving people behind as we increasingly utilise digital payments. As we heard, its interim report found that many consumers still value having cash.

The wholesale cash industry is also considering the infrastructure required to continue to service cash use as it declines. That will be a serious challenge in the years to come, and we want to be prepared for it. How can we ensure that every shop, restaurant, post office and community in every part of the country, including rural areas, continues to be able to obtain the cash it needs? How can that business model be either profitable or supported by the rest of the economy? In addition, the payments industry is progressing initiatives such as Request to Pay, which can help increase and promote financial inclusion. The Request to Pay service aims to give payers more control over outgoing payments and to help people avoid the cliff edges that can be created by irregular incomes or unexpected bills.

The rise in digital payments has been remarkable. It is not unique to this country; it is happening in all parts of the world, including in perhaps unexpected places such as Africa and the developing world. Contactless payments in this country grew by 99% in 2017, and we expect that trajectory to continue. We welcome proposals to enable the UK to embrace that change. There are no simple solutions, but we look at international examples, such as Singapore, Hong Kong and other parts of the world that are particularly engaged with this question. Hon. Members from across the House with proposals and ideas are very welcome to come to see me or other Treasury Ministers as we consider how we can continue to engage with this issue and drive the sector forward.

We need to consider the impact of the increasingly digital world on society and our economy and find ways to overcome the challenges it presents. Cash use remains important, with more than one third of payments in the UK made in cash. However, like my hon. Friend the Member for Boston and Skegness, we want to guide the economy and the public through the undoubted and probably irreversible journey to a cashless society, and we want to ensure that the UK is at the forefront of new technology while protecting the most vulnerable in our society.

Question put and agreed to.

Long-term Capital for Business

Robert Jenrick Excerpts

Tuesday 15th January 2019 Westminster Hall

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I thank my hon. Friend the Member for Stirling (Stephen Kerr) for raising this important issue and for exhorting the United Kingdom Treasury to look to all parts of our Union. If my history of the Treasury serves me correctly, I think the last Treasurer of Scotland was in 1708; he was sent to the Tower and then to the House of Lords, as happened in those days. But since then, the Treasury has firmly been an institution of the whole of the United Kingdom and long may it continue to be.

My hon. Friend made some very important points this afternoon, encouraging us above all to look to the long term and to ensure that both Government and the private sector are constantly trying to ensure the free flow of long-term capital, which will grow the economy and drive the country forward.

Since we came to power in 2010, we have made it easier for people in this country to found a business and grow it, scaling up British businesses so that the UK is one of the best places in the world to be an entrepreneur. A new business is created in this country every 75 seconds and there are now 1.2 million more businesses in the UK than in 2010, creating jobs and prosperity.

However, we are not complacent. We understand the need to increase access to long-term capital, to address the structural challenges facing the British economy, including our productivity gap, and to make the UK more globally competitive. So I thank my hon. Friend for his comments today, particularly his thoughts on a national investment bank, to which I will return shortly.

It is important to remember that in the UK we already have a strong equity finance market. It is one of the engines of the economy, and a national and indeed international asset for the UK. We continue to be the top destination for venture capital investment in Europe, attracting around a third of total European VC investment in 2018.

There was the patient capital review of 2017, which my hon. Friend referenced and which we commissioned and reported back on in 2017, and the Budget in 2017. We updated it again in the most recent Budget with a one-year-on update. They provided the response that he has referred to, with the panel and the experts at the Treasury who we commissioned to investigate this issue. That review concluded that there is more for the UK to do to close the funding gap and help our most innovative firms to reach their true potential.

At the Budget in 2017, my right hon. Friend the Chancellor unveiled a plan to unlock over £20 billion of additional finance for those innovative firms over the next 10 years. Since then, we have launched British Patient Capital, the vehicle that my hon. Friend the Member for Stirling referred to, and seeded it with £2.5 billion of public money. We have expanded the investment limits for venture capital trusts and for the Enterprise Investment Scheme, doubling the amount of money that the UK’s most innovative businesses can raise. And we have announced the creation of a knowledge-intensive EIS fund structure, to help stimulate further investment in research and development-intensive firms, and to concentrate our incentives on those firms that we think will be of the greatest benefit to the British economy.

We have worked with representatives across the industry to unlock pensions investment in patient capital, through our pensions investment taskforce. With total assets under management in the UK expected to exceed £1 trillion by 2025, we know that defined contribution, DC, pension schemes are set to be one of our most important institutional investors, which is why, in this year’s Budget, the Chancellor announced a pensions investment package to enable DC pension providers to invest in long-term innovative UK companies, as part, of course, of a balanced portfolio. We do not believe that it is the Government’s role to instruct independent pension trustees on how to invest on behalf of the pension holder, but we do believe that encouraging them and breaking down barriers will ensure a greater flow of capital for venture capital and for long-term and somewhat higher-risk investments that will drive the economy forward.

We have done a number of things to take forward that agenda. First, we announced that the Financial Conduct Authority would carry out a consultation on small tweaks to its permitted links rules, which was published in December 2018. We also announced that the Department for Work and Pensions would consult this year on making the pension charge cap flexible enough to accommodate the performance fees that are often associated with patient capital investment. Finally, we announced that some of the largest DC pension providers in the UK would now work with the British Business Bank to develop a blueprint for pooled investment in patient capital. That will enable those who are perhaps too small, or do not yet have the appetite required, to take part in this important form of illiquid investment. We believe that those measures will have a great impact in the years ahead.

We are not limiting our efforts to equity funding, however. We are also committed to ensuring that businesses can seek the right finance for their growth needs, which is exactly why the British Business Bank, which we have heard about today, was launched some time ago. The bank is rolling out a UK network, including in Scotland, to resolve regional issues and increase its cut-through with businesspeople and entrepreneurs throughout the Union. It operates through partners, such as high street banks, business angels and venture capital, and it will be doing that, as it should, in all parts of the UK. To give hon. Members some of the most recent statistics, as of November 2018, in Scotland the bank had provided almost £900 million of finance to more than 9,000 small and medium-sized enterprises, in Northern Ireland the figure was £114 million to more than 2,200 SMEs, and in Wales almost £500 million was provided to more than 6,000 such businesses. We hope that that will continue and that the bank will take its responsibility to operate in all parts of the UK seriously. I encourage hon. Members to engage with the British Business Bank, if they have not done so already.

On infrastructure, which we have heard about today, as a Government we have made an important decision—one of the Chancellor’s first decisions on taking up his position two and a half years ago—to significantly increase public investment in our economic infrastructure. Over this Parliament, such investment, including in digital and transport, will reach levels not seen in this country since the early 1970s. We want to ensure that that feeds through into the private sector, and if we want to deliver on those plans—we now have a £600 billion pipeline of infrastructure investment—there will need to be a partnership with the private sector, financed and delivered privately. So a thriving private sector is extremely important, and we need to consider that when taking into account some of the comments we heard earlier about political risk in this country, due to both a break-up of the Union and also the Opposition’s policies of nationalising utilities.

The Government support investment using a range of tools, including stable, independent regulation, of which we have some of the best and most admired in the world—there are, of course, ways in which we can improve it. In the Budget, we commissioned the National Infrastructure Commission to consider how we can make our independent regulators more innovative, and improve the regulatory model without throwing it aside. We use contracts for difference in renewable energy, and the £40 billion Treasury UK guarantee scheme plays an important role. As we announced in the Budget, we are now reviewing our existing support for infrastructure finance, to ensure that as we leave the European Union we continue to guarantee that good projects in the UK receive the finance they deserve. We are also making a number of interventions to support new technologies, in which we believe the public and private sectors can work together, with the public investing to crowd in private sector investments. Two notable examples are a recent intervention on digital infrastructure, and also one on electric car charge points, in which the Government have invested £200 million. We believe that there is more scope for that in the future.

On the European Investment Bank, the EIB, it is important to remember that a significant funding gap has not emerged since the referendum. We have very mature markets in the UK for infrastructure investment, for privatised utilities for example, but the Chancellor has made it clear, and we noted this again in the political declaration, that we are actively exploring options for a future relationship with the EIB, just as the bank does with other third countries. One cannot be a member of the bank if one is not a member state. We are interested in the proposal to create a UK infrastructure investment bank, for which my hon. Friend the Member for Stirling laid out some of the arguments. We think that there are important arguments there, and we will consider the proposal as part of the review of infrastructure finance announced in the Budget, about which we will give more details shortly. We think that that can play an important role and, although I would not overstate the EIB’s impact on the British economy or our infrastructure finance, there are reasons to believe that it played an important role. We believe that we can find our own way forward as we leave the European Union.

On smaller businesses, helping them to scale up is extremely important, as we have heard. The UK has a good record of creating start-up businesses, but not as good a record as we would like of ensuring that they scale up and create jobs and prosperity for all parts of the UK. That is a challenge that we have set the British Business Bank, of working to support investment such as creating regional pools of capital, which we have done with the midlands engine and the northern powerhouse, and there may be further scope for doing that in the future. We are very engaged with such questions. We are engaged also with the question of the geographical spread of venture capital and business angels, as was mentioned by my hon. Friend the Member for Ochil and South Perthshire (Luke Graham), to ensure that individuals and entrepreneurs have access to capital wherever they choose to set up their business and do not feel the need to come to London or the south-east.

Finally, through the tax system, we continue to make the UK the most competitive environment we can for entrepreneurs and investors. We are doing that through entrepreneurs’ relief, the seed enterprise investment scheme, the enterprise investment scheme and venture capital trusts, which we are continually trying to improve, to ensure that in the UK we have the most competitive market we can, directly comparing ourselves, and renewing those comparisons, with the US, France and Germany.

I am grateful to my hon. Friend the Member for Stirling and to other Members who participated in the debate. I hope that they can recognise the Government’s commitment to the agenda, and the intense work we have done over the past two years, and will continue to do in the months and years ahead. We will continue to welcome thoughts and contributions to inform those future decisions.

Draft Investment Allowance and Cluster Area Allowance (Relevant Income: Tariff Receipts) Regulations 2018

Robert Jenrick Excerpts

Wednesday 9th January 2019 General Committees

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I beg to move,

That the Committee has considered the draft Investment Allowance and Cluster Area Allowance (Relevant Income: Tariff Receipts) Regulations 2018.

It is always good to start the day with a Treasury statutory instrument. The draft regulations will amend the investment allowance and cluster area allowance to expand the meaning of “relevant income” to include tariff receipts. The aim is to incentivise operators in the North sea to continue investment in their infrastructure, which is critical to protecting oil and gas production in the UK and bringing new projects on stream.

The UK’s oil and gas sector is a national asset—a foundation stone of our economy, supporting more than 280,000 jobs across the UK, particularly in north-east Scotland, and meeting approximately half of our primary energy requirements. High-quality infrastructure is vital to the industry, and encouraging the industry to work together is important to its future. Sharing pipelines, terminals and other offshore infrastructure brings efficiencies that can benefit everyone involved and ensure continued competitiveness.

The draft regulations will help to ensure that infrastructure is well maintained and well utilised by encouraging continued and healthy investment. Under existing legislation, the investment allowance and cluster area allowance offer relief for oil and gas companies operating on the UK continental shelf that can be offset against ring-fenced profits taxed by the supplementary charge. At present, however, the allowance can be activated only by income derived directly from oil and gas production, not by tariff income—income from third parties for access to infrastructure. This runs the risk of the UK continental shelf experiencing a lack of investment in core infrastructure, possibly leading to the early decommissioning of assets, which would undermine the Government’s objective of maximising economic recovery of North sea oil and gas reserves.

In the 2016 Budget, the Government addressed the issue by committing to extend the scope of the investment and cluster area allowances to include tariff receipts. The Finance Act 2016 introduced a power to enable that expansion to be delivered through regulations, and the Government published a draft for consultation in July 2018, which was very well received by the industry.

The draft regulations will widen the definition of relevant income that can activate the investment and cluster area allowances and provide further relief for profits subject to the supplementary charge. This will promote investment in the 14,000 km of pipeline that connects the sector’s oil and gas platforms and wider production infrastructure. The additional tax relief given to owners of the infrastructure will help to ensure the protection of existing production, the development of new projects and the prevention of early decommissioning —all objectives that we can agree on.

In conclusion, the draft regulations will stimulate investment in the UK’s oil and gas infrastructure and provide support to the wider industry by including tariff income within the investment and cluster area allowances. I commend them to the Committee.

--- Later in debate ---

[Robert Jenrick]

I shall try to respond briefly to the questions put to me. On the Government’s support for the oil and gas industry, particularly in Scotland, it would be difficult for the Government to do more than we are doing at the moment. The oil and gas industry is extremely supportive of the actions that the Government have taken in successive Budgets. The driving investment principles were established by the former Chancellor of the Exchequer and restated at autumn Budget 2018 by the present Chancellor, who made it clear that we would be maintaining the headline tax rates at their current level. We have taken forward and legislated for—in fact, it passed its final stage last night—the transferable tax history, an important and innovative tax measure, supported by the Scottish National party. It will help to extend the life of a number of oilfields and put decommissioning further into the future. Of course, in terms of the headline tax rates, we reduced the supplementary charge from 32% to 10% and petroleum revenue tax—PRT— to 0%. The Government have therefore been extremely generous towards the oil and gas sector, appreciating that it is a national asset that supports so many jobs throughout the United Kingdom, that the oil price remains lower than it has been historically—but volatile—and that the industry remains weak, particularly in parts of the supply chain in critical areas of the country, such as around Aberdeen. I and other Treasury Ministers have a very good and productive relationship with the industry, regularly visiting Aberdeen and other stakeholders to ensure that they are getting all that they require from the Government.

We think that we are striking exactly the right balance. In fact, last night, on Third Reading of the Finance Bill, the Scottish National party spokesperson, the hon. Member for Aberdeen North (Kirsty Blackman), praised the Government for our cross-party work to support oil and gas. We are in a good place, and I am pleased that there is a general cross-party consensus on that.

The hon. Member for Stalybridge and Hyde asked about the retrospective nature of the measures. They will be backdated to September 2016, and we estimate that the cost to the Exchequer will be £60 million over the next five years. We think that maximising economic recovery is important, and I believe it remains the Labour party’s position to support that. I think that that is right for the UK. It does not contradict our broader commitment to climate change and to meeting our targets for reducing carbon emissions.

We have done a full analysis of the impacts arising from this measure and found no evidence to support the suggestion that it will result in increased carbon emissions. The oil and gas industry is a very important part of our industrial strategy. It contributes to the diverse energy mix that our economy requires, but we remain absolutely committed to supporting a wide range of energy sources, including renewable energies. In the Budget and the Finance Bill that we have just legislated for are a range of interventions to support renewable energies and associated technologies, such as electric vehicles.

In the future we will continue to work closely with the oil and gas sector to ensure that, as it recovers from the oil price dip in around 2008, it receives the support that it requires from the Government. With that, I urge the Committee to support the draft regulations.

Question put and agreed to.

Finance (No. 3) Bill

Robert Jenrick Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Mr Chris Leslie (Nottingham East) (Lab/Co-op)]

I will be brief, Mr Speaker. I will want to move amendment 8, which stands in my name and in those of many hon. Members on both sides of the House. In many ways, it complements amendment 7, which was tabled by my right hon. Friend the Member for Normanton, Pontefract and Castleford (Yvette Cooper).

Amendment 8 would institute a commencement motion for the powers that the Treasury is seeking. Clause 89 might have been wrapped up as fairly minor and inconsequential, but essentially the Government are asking for pretty whopping permission to start legislating for no-deal arrangements. At this stage in the game, I really do not think that right hon. and hon. Members should be delegating our powers entirely to Ministers in this way without question. I know it is difficult for the right hon. Member for West Dorset (Sir Oliver Letwin) to rebel for a second time, on amendment 7, but I would like to persuade him to do so for a third time on amendment 8. A commencement motion is an important adjunct so that we can give the House and hon. Members the chance to express how they wish Brexit to go forward—so that we have the opportunity to express our view. A commencement motion would allow hon. Members the chance to do just that.

As things stand—certainly if the Government’s Brexit proposal is negatived next week—there could be 21 days or perhaps another seven days before anything is voteable on in this place. My own view is that before we start delegating powers to Ministers on these issues, or indeed on others, we need to start saying that enough is enough. Hon. Members need a chance to help to guide the way forward. There are many different views on these particular issues—the hon. Member for Grantham and Stamford (Nick Boles) has his particular preference and I have mine—but we need to provide for ourselves the time and the space to express them. Amendment 8 would simply provide for a commencement motion.

I hope that the Minister will recognise there is a strong cross-party opinion that we need now to give voice to Parliament. We cannot just drift into a no-deal situation. Parliament does want to take back control. He should concede and accept the amendment now.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I am grateful to all right hon. and hon. Members for the debate.

Delivering the deal negotiated with the EU remains the Government’s central priority. It is neither our preference nor our expectation that we will leave the EU without a deal. However, as a responsible Government, we must prepare for all scenarios. In the Budget, we furthered that commitment by confirming an additional £500 million of funding in 2019-20, taking the total Government investment on preparing for EU exit to over £4 billion. At the Budget, to help to ensure that the tax system can continue to function under any EU exit outcome, we announced a series of modest, sensible provisions, which included a power to make necessary minor technical amendments to UK tax legislation. It also allowed, as we have heard, for the Government to introduce a carbon emissions tax to replace the EU emissions trading system in the event of no deal. By including those measures in the Finance Bill, our foremost motivation is to provide certainty to taxpayers—the kind of certainty that one would expect from any responsible Government.

Let me turn to amendment 7, which was tabled by the right hon. Member for Normanton, Pontefract and Castleford (Yvette Cooper). Prior to proceedings in the Committee of the whole House, which considered clause 89, I placed a list of changes envisioned under the clause in the House of Commons Library. Right hon. and hon. Members who have taken the trouble to review the list will see that they are indeed minor technical changes, and out of minor and technical changes, these are the most minor and technical. Since then, we have received no indication from any Member to the contrary. Clause 89 is simply prudent preparation to provide our taxpayers with the certainty they deserve.

As I made clear, the Government do not want or expect a no-deal scenario. That was why we negotiated the withdrawal agreement, which will see us leave the EU in a smooth and orderly way on 29 March and sets the framework of our future relationship. As we heard from my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and my hon. Friend the Member for Grantham and Stamford (Nick Boles), the best way of avoiding a no-deal scenario, if that is of grave concern to Members, is to support the withdrawal agreement next week.

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[Dr Sarah Wollaston (Totnes) (Con)]

Will the Minister clarify his last sentence? Is he saying that if the deal is voted down next week, it will become the Government’s stated objective to deliver no deal?

[Robert Jenrick]

The point I have just made is that the law of the land is that the UK will leave the European Union on 29 March, and nothing contained in amendment 7 will change that. As I will come on to say, the only difference that the amendment will implement is to make the UK somewhat less prepared for that eventuality. The purpose of clause 89 is to provide taxpayers and—

[Sir Oliver Letwin]

rose—

[Robert Jenrick]

I give way to my right hon. Friend.

[Sir Oliver Letwin]

I am grateful to my hon. Friend, who is doing a valiant job—I do not envy him. Does he accept that although, as he says, the law at present is that we will leave on 29 March, the House of Commons, with the House of Lords and Her Majesty, has the ability to change that provision?

[Robert Jenrick]

The House of Commons has the right to make the law, but the law as it is today is that we will leave on 29 March. The point I am making is that, whatever the intentions of the right hon. Member for Normanton, Pontefract and Castleford and those who may wish to support amendment 7, all that will be achieved by supporting it is denying our citizens and taxpayers the degree of certainty that we wish to give them.

[Sir Oliver Letwin]

rose—

[Mr Kenneth Clarke]

rose—

[Robert Jenrick]

I will give way one last time, but I have only a couple of minutes.

[Mr Clarke]

I, too, extend my sympathies to my hon. Friend, who drew the short straw of responding to the debate. He is trying very eloquently to minimise the significance of the whole thing, but of course he realises there are big issues behind this. Can he tell us what contingency arrangements the Treasury has made for the fiscal impact of leaving with no deal, and its likely impact on our trade, our manufacturing industry and so on? He must concede that the published figures for future deficits, debts and so on will be made utterly meaningless if we leave with no deal, and a fiscal crisis will occur. Is the Chancellor planning the emergency Budget he will probably require?

[Robert Jenrick]

My right hon. and learned Friend and constituency neighbour tempts me to go into areas that I should not, but the Chancellor has said that we will be prepared and that we have fiscal room available—that was what he stated in the Budget, as certified by the Office for Budget Responsibility. My right hon. and learned Friend appears to be making the case for prudent preparations in case of a no-deal scenario, which is all that clause 89 seeks to achieve.

[Yvette Cooper]

rose—

[David T. C. Davies (Monmouth) (Con)]

rose—

[Robert Jenrick]

I will give way one last time to my hon. Friend—I apologise to the right hon. Lady, but I only have a couple of minutes.

[David T. C. Davies]

With all due respect to my hon. Friend’s Department, is it not the case that it published a series of figures about the economic disaster that was allegedly going to occur if we voted to leave the European Union, although none of that has happened, and that what we have here is an attempt to blackmail the Government into not going ahead with a decision that was taken after a majority of the population voted to leave the European Union?

[Robert Jenrick]

We are leaving the European Union. We wish to do so with a deal. The House will vote on the deal next week, but we must and will prepare for all scenarios.

[Yvette Cooper]

rose—

[Robert Jenrick]

I give way to the right hon. Lady because, of course, amendment 7 is hers.

[Yvette Cooper]

Will the Minister confirm that he will still be able to use clause 89 powers if he either gives the House a chance to vote on no deal or, alternatively, takes the opportunity to apply for an extension of article 50?

[Robert Jenrick]

Clause 89 would give the Government the ability to provide certainty to taxpayers now. That is what we want to ensure. We do not want to inhibit the ability of HMRC and the Government to provide that critical certainty. Who would want to do that? Who would want to diminish certainty for taxpayers at this time? The right hon. Lady listed a number of businesses. Those businesses want certainty, and by supporting her amendment, we would diminish that certainty and our preparedness—admittedly only modestly—for a no-deal scenario.

We will not be deterred from making sensible preparations—the public expect us to do so—and using the Finance Bill to prevent or frustrate preparation for any eventuality is unwise and irresponsible. I therefore urge the House to reject all the amendments and new clauses tabled against clauses 89 and 90 so that we give our constituents and taxpayers across the country the degree of certainty they deserve.

[Sir Vince Cable (Twickenham) (LD)]

rose—

Draft Payment Accounts (Amendment) (EU Exit) Regulations 2018

Robert Jenrick Excerpts

Wednesday 19th December 2018 General Committees

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I beg to move,

That the Committee has considered the draft Payment Accounts (Amendment) (EU Exit) Regulations 2018.

There is no better way to round off the year than with another statutory instrument. As the Committee will be aware, the Treasury has been undertaking a programme of legislation to ensure that if the UK leaves the EU without a deal or an implementation period, there continues to be a functioning legislative and regulatory regime for financial services in the UK. This instrument will fix deficiencies in UK law on the regulation of payment accounts. The approach taken in the instrument aligns with that taken in other SIs being laid under the European Union (Withdrawal) Act 2018—providing continuity by maintaining existing legislation at the point of exit, but amending it where necessary to ensure that it works effectively in a no-deal context.

The payment accounts directive had three main objectives: to improve the transparency and comparability of fees related to payment accounts; to facilitate switching of those accounts; and to ensure access to payment accounts with basic features for all EU residents. The Payment Accounts Regulations 2015 transposed that directive into UK law. Colleagues will be familiar with payment accounts—they are the day-to-day bank or building society accounts we all use to make and receive payments and to withdraw and deposit cash. In the UK, the most common form of payment account is of course a current account.

In a no-deal scenario, the UK would be outside the EU’s legal, supervisory and financial regulatory framework. The 2015 regulations therefore need to be updated to ensure that the provisions work appropriately in that scenario. These draft regulations are mostly concerned with removing EU references, so the impact on consumers and businesses will be minimal. However, I will go into a little more detail about the changes governing payment accounts with basic features—“basic bank accounts”, as they are more commonly known in the UK—because the Secondary Legislation Scrutiny Committee and the House of Lords Grand Committee drew particular attention to them.

It is important to emphasise that the draft regulations retain the requirement for the UK’s nine largest current account providers to provide basic bank accounts free of charge, in sterling, to customers legally resident in the UK, regardless of their nationality, if they do not hold a current account at a UK bank or are not eligible for a standard current account. However, as the UK will no longer be part of the EU’s single market in financial services after exit day, the instrument removes the requirement on those nine basic bank account providers to offer those products to customers resident in the EU or to offer EU currency services as a standard feature on any basic bank account.

It will be at the discretion of the nine providers whether to continue to offer basic bank accounts to customers resident in the EU after exit day, or to keep existing basic bank accounts of EU residents open. Although firms will no longer be compelled to provide non-sterling services on basic bank accounts, conversations with the industry suggest that they are very unlikely to withdraw those services.

The SLSC and Members in Grand Committee in the other place asked for reassurances that, should the nine providers choose to close the bank accounts of customers resident in the EU, those customers would not be placed in financial difficulty as a result. There was particular concern that although that might not affect many customers, it could have a significant impact on the small number of individuals affected. Taking into account the comments made in the Lords debate, I will explain briefly why the Government do not expect that these changes will significantly disadvantage customers.

First, the nine providers must give customers at least two months’ written notice if they plan to close an account, which should give customers adequate notice to open another account. Secondly, a customer’s right to a basic bank account is EU-wide, so customers should be able to open another basic bank account in the member state in which they reside. To be clear, the right of access to a basic bank account depends on residency alone, not nationality.

Under the 2014 payment accounts directive, a customer legally resident in the EU, regardless of their nationality, still has the legal right of access to a basic bank account within the EU. What may change is the cross-border right of access to a basic bank account, which under this SI will no longer be mandated on the UK side because the UK will no longer be part of the single market.

The Treasury worked very closely with the Financial Conduct Authority and the Payment Systems Regulator when drafting the regulations. It has engaged the financial services industry and leading consumer groups, and of course it will continue to do so.

In summary, the Government believe that the draft regulations are necessary to ensure that the Payment Accounts Regulations 2015 continue to function appropriately if the UK leaves the EU without a deal or an implementation period. Most importantly, they mean that fee-free basic bank accounts, which are a key financial inclusion product, will remain robustly regulated and available to all eligible customers legally resident in the UK. I hope colleagues will join me in supporting the draft regulations, and I commend them to the Committee.

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[Robert Jenrick]

I am grateful to the hon. Members for Oxford East, and for Glasgow Central, for their comments. I will try to respond to as many as possible.

As we have heard, it is only prudent of the Government to make sensible contingency plans for no deal. Frankly, I would be surprised if any hon. Member did not wish us to do so, given that, although our preference is to leave with a deal, leaving without one is the default position—it is the legal position—and is entirely possible, if not necessarily desirable. In this statutory instrument, we are making modest preparations to ensure that equivalent provisions are in place in the event of no deal.

[Sir Paul Beresford (Mole Valley) (Con)]

It is interesting; if the Opposition Members who have been protesting actually supported the deal, we would not be in this situation and would not have to worry about this. I must use this opportunity to congratulate and thank the hon. Member for Glasgow Central, because I understood every word she said.

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[Robert Jenrick]

Well, let me answer the questions asked by the hon. Member for Oxford East. She mentioned the gap in reporting between exit day and 2022. That is because the Money Advice Service reports to the Treasury, which then reports to the European Commission, and it is that provision that is deficient. I assure the hon. Lady that there are no changes to the requirement for the Money Advice Service to host a price comparison website—that has already been launched—so to answer the question that she perfectly understably asked, there should not be an issue.

There is no reduction in the requirement for transparency on fees. The only change is that the FCA is taking over responsibility for the regulation of the documents from the European Banking Authority. We have of course worked with the FCA, so I can say in answer to the hon. Member for Glasgow Central that it is willing and ready to take on those responsibilities.

On the wider question about UK citizens living in the EU27, we expect the number of individuals affected by the measure to be very small. We have had conversations with banks on the arrangements that we will put in place; the hon. Member for Oxford East mentioned the subject. It is worth remembering, as I said in my opening remarks, that any individual legally resident in an EU27 country will have the right, under EU law, to access a basic bank account in that country. If they had been using their basic bank account from the United Kingdom solely, and then no longer had access to that—an unlikely scenario, and one that would affect a very small number of individuals—they could, as of right, open a basic bank account in the country in which they are legally resident. We see no reason why they would not be able to do that.

[Anneliese Dodds]

I am grateful to the Minister for that explanation, but surely the question is not whether certain people would become completely unbanked as a result of the changes, but whether they could still carry out the kind of transactions that are very difficult to do, in whatever country, unless one has a domestic bank account. If one does not, it can be very difficult to pay certain kinds of bills and make certain kinds of transactions and so on—and there are normally additional charges involved.

[Robert Jenrick]

Those people would be able to open a bank account in the UK at the commercial discretion of a UK bank. We do not think there will be many, if any, examples of individuals having their bank account withdrawn, but of course it is technically possible that a bank might choose to do that. We think it is unlikely that these individuals would continue to use their UK-based bank account as their sole current account. If, say, a Spanish student came to study in the United Kingdom, opened a UK basic bank account and then returned to Spain, it would be a costly bank account for them to continue to use as their current account, because they would have to pay currency charges whenever they transferred money. The situation that the hon. Lady alludes to would apply only in a limited number of circumstances. I take her point that there could be such circumstances, but we do not think there will be a substantial number.

It is worth remembering that our duty in this instance—I am sure the hon. Lady would support this—is to maintain equivalence, not make policy changes. We are ensuring that any individual resident in the UK will have access to a basic bank account, but we are not making a change to ensure that UK citizens resident in third countries can have access to a UK basic bank account; that would be a policy change, because it would of course be applicable beyond the EU27 to any country in the world in which a UK citizen might choose to reside. I hope that she is reassured that our intention is to act within the confines of the law—not to go beyond it and take action that might apply to a British citizen resident in, for example, Canada or the United States who wished to maintain or open a UK basic bank account.

The hon. Lady also asked a question about consumer organisations and industry consultation. In drafting the statutory instrument, the Treasury engaged confidentially with industry representatives to make them aware of these changes, and to allow them the opportunity to comment on any of them. We have not received any queries or comments on the proposed changes from those groups, or from any consumer groups, since publication, so we can only assume that they are content, but of course we will continue to work, and to be open to comments, should any come forward in the weeks and months ahead.

I think that I have answered most of the questions posed by the—

[Anneliese Dodds]

The Minister is being very generous with his time. I believe that I asked when the impact assessment would be forthcoming.

[Robert Jenrick]

The hon. Lady is absolutely right, and I will come on to that as my final comment. First, I will answer what I think was the final comment from the hon. Member for Glasgow Central, in respect of potential discrimination against EU nationals resident in the UK. What she suggests is not the case under this statutory instrument. Any resident of the United Kingdom who is legally resident in the United Kingdom will have access to a basic bank account, just as they would if they were living elsewhere in the EU.

[Alison Thewliss]

This is the very point that I was making, though. The issue is the “legally resident” part. I have many non-EU national constituents who end up in dispute with the Home Office, and who could fall foul of being not seen to be legally resident. The Government are now throwing EU nationals into that pot as well, and there is every risk that they could be not legally resident in the eyes of the bank or in the eyes of the Home Office. That is the problem with this situation.

[Robert Jenrick]

With respect, the hon. Lady is not correct. The position under this statutory instrument will be exactly the same as the position today. Anyone legally resident in an EU country and anyone legally resident in the United Kingdom after exit day will have access to a basic bank account, so nobody will be disadvantaged as a result of the SI. The Treasury is working very carefully to ensure, for example, that bank accounts are available to those who are homeless and to ex-offenders as they leave prison. The Government are working carefully with difficult and vulnerable groups to ensure that they have basic bank accounts, but people must be legally resident in the UK. It goes without saying that we cannot legislate for those people who are illegal. We have to work on the premise that this will apply only to those who are legally resident in the UK, just as the existing EU rules do.

The hon. Member for Oxford East asked about the impact assessment. We have prepared an impact assessment, as she would expect, and we hope to publish it shortly. The impact assessment is with the Regulatory Policy Committee for consideration, along with a series of other statutory instruments. Together, they form the second tranche of statutory instruments coming from the Treasury. This is the first one, as I understand it, from that tranche that has come before the House. We will publish the assessment once the committee’s opinion has been received. We have tried to ensure that impact assessments have completed all the usual processes in time to be published before debates, but that has not always been possible, for the reasons that the hon. Lady helpfully gave. The sheer quantity of statutory instruments coming forward is placing pressure not just on the civil service, but on the Regulatory Policy Committee, which is a relatively small organisation. These statutory instruments are being prepared at pace, to ensure that we have a robust stand-alone regime in place before March 2019.

This statutory instrument is needed to ensure that consumers in the UK continue to benefit from the regulation of the payment account market, and that the legislation functions appropriately if the UK leaves the EU without a deal or an implementation period. I hope that the Committee has found this afternoon’s sitting informative and will join me in supporting the regulations.

Question put and agreed to.

Oral Answers to Questions

Robert Jenrick Excerpts

Tuesday 11th December 2018 Commons Chamber

[Derek Thomas (St Ives) (Con)]

1. If he will take steps to increase funding for sporting infrastructure in Cornwall.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Government’s investment in sport is delivered through Sport England, which has invested £9 million in sport and physical activity in Cornwall since 2013, including £3 million for sports facilities.

[Derek Thomas]

Dare I say, Mr Speaker, that your tie today is a fine one?

The Minister will be aware that I have been working with stakeholders in Cornwall for 10 years now to deliver a stadium for Cornwall. A stadium is not only about sport, although we should celebrate Cornish sport, it is also about the health and wellbeing of children and adults right across the county of Cornwall. We have been working hard and we are nearly there with the money; what more can the Treasury do to deliver on this fantastic opportunity?

[Robert Jenrick]

I know that my hon. Friend has campaigned for a new stadium for Cornwall since even before he was elected. At his instigation, I met the Cornwall Council officer responsible for the project last week. With the Department for Digital, Culture, Media and Sport, we will continue to work closely with partners in Cornwall and Sport England to seek a means to bring this exciting project to a successful conclusion. We appreciate that, as the most remote team on the mainland, the Cornish Pirates deserve a fitting home for the future.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

rose—

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[Robert Jenrick]

That was very tenuous. Once a new stadium has been built in Truro, perhaps people will not need to go to Plymouth to support Argyle. We are supporting grassroots sports in several ways—for example, the soft drinks industry levy has ensured that more than £500 million of additional funding has gone into school sport and into the health and wellbeing schemes that are delivered, along with breakfast clubs, in our primary schools.

[Maria Caulfield (Lewes) (Con)]

2. What fiscal steps he is taking to support the high street.

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[Sir Hugo Swire (East Devon) (Con)]

11. What recent discussions he has had with the airline industry on air passenger duty on UK domestic flights.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Government meet regularly with the airline industry to discuss a range of issues, including the future of air passenger duty and the domestic aviation market. I met a number of UK-based airlines earlier in autumn prior to the Budget.

[Sir Hugo Swire]

I make no apologies for continuing to lobby Treasury Ministers on the iniquity of air passenger duty and the discriminatory application of it to Flybe, based in my constituency at Exeter airport, which is the UK’s largest domestic carrier. Will the Treasury look again at Flybe and its particular set of circumstances?

[Robert Jenrick]

My right hon. Friend is nothing if not persistent, but we are not able to vary air passenger duty under EU state aid rules for different regions of the United Kingdom, including the south-west. That will change, or may, depending on the final state of things once we have left the European Union, but we have taken action in government: we have frozen short-haul rates for eight years in a row and exempted children going on family holidays, including to the south-west.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his response. He is well aware of the issue for Northern Ireland—the disadvantage that we have and the advantage that the Republic of Ireland has. Dublin airport has grown tremendously over the last period of time, so has he had any opportunity to speak to those in charge of Belfast International airport or Belfast City airport to gauge their opinion on how we can grow the economy?

[Robert Jenrick]

My right hon. Friend the Financial Secretary visited Northern Ireland earlier in the year and met representatives of the aviation sector. We announced at the Budget that we will be proceeding with a technical working group to look into and analyse further the remaining issues with respect to the hon. Gentleman’s proposal to devolve air passenger duty in Northern Ireland.

[Julie Elliott (Sunderland Central) (Lab)]

13. What assessment he has made of the fiscal effect of the EU withdrawal agreement on the manufacturing sector.

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[Jack Brereton (Stoke-on-Trent South) (Con)]

15. What steps he is taking to support businesses and entrepreneurs.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

This Government are determined to make the UK the best place in the world to start a business. We are keeping taxes low and helping businesses and entrepreneurs to access the support that they need. We have cut corporation tax to the lowest rate in the G20 and made changes to business rates that will be worth over £13 billion by 2023.

[Jack Brereton]

I thank the Minister for that response. Walker’s Nonsuch, a family business in my constituency since 1894 and England’s finest toffee producer, enthusiastically welcomed the increased annual investment allowance. Does he agree that it is essential to continue to reduce tax on companies so that they invest in new equipment, increase productivity and create more jobs?

[Robert Jenrick]

My hon. Friend is absolutely right. While the Labour party wants to increase taxes on business, including on small businesses, we are cutting them, and the increased annual investment allowance will enable businesses such as the one in his constituency to invest in plant, machinery and new technology to drive it to future success.

[Rachael Maskell (York Central) (Lab/Co-op)]

The broken business rates system is having a seriously detrimental impact on our high streets, and that is seen right across York. Will the Minister meet me and York Retail Forum to discuss the impact it is having on York and, in particular, the proposals it wants to see on turnover tax?

[Robert Jenrick]

I would be happy to meet the hon. Lady. We announced in the Budget that 90% of smaller retailers, including many in her constituency, would see a 30% reduction in their business rates, and the future high streets fund is designed exactly for communities such as the one she represents.

[Robert Courts (Witney) (Con)]

Does my hon. Friend agree that keeping the VAT threshold at £85,000 demonstrates that the Government are firmly on the side of West Oxfordshire’s small businesses?

[Robert Jenrick]

My hon. Friend is absolutely right. The VAT threshold in this country is high by international standards. We have retained it at that level to support small businesses, which this Government will always champion.

[James Frith (Bury North) (Lab)]

Small businesses and subcontractors are still carrying the can for the collapse of Carillion. In the light of Interserve’s latest trouble, can the Minister update us on his Department’s liaison with it as a client, and say what level of risk the taxpayer and small businesses have been put to by Interserve’s latest attempts to stay afloat by refinancing its debt for equity?

[Robert Jenrick]

The hon. Gentleman raises an important question. My right hon. Friend the Minister for the Cabinet Office is working closely on this matter, as he did with respect to Carillion. We want a wider base of companies supplying the Government and the public sector, to ensure that we have a resilient public sector in the eventuality that such situations happen again.

[Liz McInnes (Heywood and Middleton) (Lab)]

17. What discussions he has had with Cabinet colleagues on the adequacy of funding allocated to local authorities for children’s services.

Finance (No. 3) Bill (Seventh sitting)

Robert Jenrick Excerpts

Committee Debate: 7th sitting: House of Commons
Thursday 6th December 2018 Public Bill Committees

[Clive Lewis]

Yes, I do. I do not think that there is a lack of ambition from the Mayor of London or from local authorities around the country; ultimately what holds them back is a lack of resources. Will the Minister commit to using the revenue to offer London the same air quality funding that is being made available to other parts of the country, to ensure that ultra low emission zones are a success?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is good to be back, Mr Howarth. As we have heard, clause 57 will make changes to vehicle excise duty rates for cars, vans and motorcycles with effect from 1 April 2019. As announced in the Budget, those rates will increase in line with the retail prices index from that date. As a result, they will have remained unchanged in real terms since 2010, with additional significant incentives for ultra low and zero emission cars. That comes on top of the Government’s decision to freeze fuel duty rates for the ninth successive year, which by April 2020 will have saved the average car driver £1,000 compared with the pre-2010 escalator.

Cars first registered on or after March 2001 pay VED based on their carbon dioxide emissions; 87% of those cars will pay no more than £5 extra in 2019-20. From April 2017, a reformed VED system was introduced that strengthens the environmental incentives when cars are first purchased, with all cars paying a standard rate in subsequent years. The standard rate will increase by £5 only. Expensive cars with a list price of more than £40,000 pay an additional supplement for five years of paying the standard rate. That will increase from £310 to £320, so it is only a modest increase, and it will affect about 7% of new car purchases. Finally, the flat rate for vans will increase by £10, and for motorcyclists there will be no more than a £3 increase in rates. We believe that those are modest, incremental changes, which protect the public finances but also pay careful attention to the cost of living for motorists.

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[Kirsty Blackman (Aberdeen North) (SNP)]

I appreciate that the Minister is providing all this information in answer to issues raised by the amendments. Given that he has all the information, it would be great if he just put it into a review, as the amendments would require, so that we could see it written down in six months’ time.

[Robert Jenrick]

I take the hon. Lady’s point, but the information is mostly already in the public domain. It is not clear to me what information is not available. With respect to air quality, the Government will very shortly publish our ambitious clean air strategy. I encourage her and other hon. Members who, perfectly understandably, want to scrutinise our clean air commitments to pay attention to that document and scrutinise the Environment Secretary at that point. No doubt he will come to the House to make an announcement on the strategy.

The hon. Member for Norwich South also mentioned London. London already has a separate comprehensive funding settlement from the Department for Transport, which includes measures to deliver compliance with legal air quality limits. The Mayor has significant powers to take additional measures. Londoners also receive further funding for ultra low emission vehicles such as taxis. Indeed, measures in the Bill support the uptake of ultra low emission taxis. We took those measures a year early, as we will discuss later, and they have had a significant impact on the number of taxis on the streets of London. There are now between 500 and 600 electric or ultra low emission taxis that did not exist at the beginning of the year, incentivised by the measures taken by the Treasury. We are also supporting low emission buses and charging infrastructure. The Committee has already discussed the £200 million public investment in charging infrastructure, which we hope will spur at least a further £200 million of private investment. That will support charging infrastructure in all parts of the United Kingdom.

I hope hon. Members respect the fact that we consider the funding settlement for London’s roads as separate from that for the rest of the United Kingdom. That is a long-standing convention. We occasionally provide additional money. For instance, in the Budget the Chancellor provided more than £400 million for potholes. He included London in that, so London boroughs are able to take advantage of that money, but in general the funding settlement for London’s roads is separate from the negotiation with respect to Highways England.

I urge the Committee to reject the amendments, as I believe the reports they would require are unnecessary. The changes outlined in the clause will ensure that the Government continue to support motorists with the cost of living while ensuring that they continue to make a fair contribution to the public finances. As a result of our decision to hypothecate VED revenues, we will see a major increase in investment in our strategic roads, which I hope will benefit everyone in all parts of the United Kingdom. I therefore commend the clause to the Committee.

[Clive Lewis]

I thank the Minister for trying to answer some of our questions, but I still find myself with questions. It seems that there is a basic issue of transparency here. If, as he is saying, the Department for Transport has given certain funding to London—I am sure that is true—it would do no harm to make transparent what other funding is going to other parts of the country, so that the figures can be compared and contrasted to ensure that London is getting its fair share. The Mayor of London clearly does not believe that it is getting its fair share. It is the capital city—it has a large population, many vehicles on the road and a high population density—and all that is being asked for here is transparency.

On the issue of there being no assessment of the impact of the clause on road congestion on traffic levels, the Minister said that VED has a limited impact on that, but that is quite an arbitrary statement. Taxes have two effects: they can raise revenue and they can change behaviour. It is normally one or the other, but there are variations and it is sometimes a bit of both. I do not think it is beyond the ken of the Government to assess the potential impact of the VED increases on congestion levels, given that we have all agreed that air quality in this country is in a pretty poor state. Tens of thousands of people are dying prematurely or are adversely affected every single year.

To echo the sentiment of the hon. Member for Aberdeen North, it would not be too much trouble to write a report along the lines that we have asked for and make it available to Parliament. So go on, please.

--- Later in debate ---

[Robert Jenrick]

The hon. Gentleman tempts me, but on this occasion I will resist his request. On the two issues he raises, the clause is not increasing VED; it is simply allowing it to rise with RPI, so the clause has no revenue impact; the public finances assume that VED and many other duties will rise with RPI, so its impact will be negligible. This is not a substantial or material increase in VED. I really do not think there would be any value in having a review.

On the wider question of roads funding, all this information is in the public domain. The settlement with respect to roads for London is in the public domain, as is the settlement for the roads fund. Which roads will then be funded through the roads investment strategy, which will be set out in the middle of next year, will be in the public domain. All these investments are highly transparent, as one would expect. That information is available to all hon. Members, should they wish to view it.

[Sir Robert Syms (Poole) (Con)]

My observation is that an awful lot of money is spent in London, compared with the regions of this country, whether the north-west or south-west. There may be a very good reason for that—London is a very important city for our nation—but I would not be inclined to vote even more money to London, bearing in mind that it has the biggest infrastructure project in Crossrail, to which the Government have already given £300 million extra. If there is any special pleading, it really ought to be for the shires and counties of this country, which probably need a bit more money for potholes, rather than clean air.

[Robert Jenrick]

My hon. Friend makes a very important point. It is certainly important to me, as a midlands and northern MP. The Government have made a significant effort both to increase the levels of public investment in infrastructure over the course of this Parliament to the highest levels in my lifetime—the highest level since the 1970s—and to redress the regional imbalance. Over the course of this Parliament, for example, investment in transport will be highest in the north-west of England, and London and the south-west will be among the lowest. There is a great deal more to do, not least because London has the ability to raise significant amounts of money from local government, which has co-funded projects such as Crossrail. My hon. Friend makes an extremely valid point.

[Clive Lewis]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57 ordered to stand part of the Bill.

Clause 58

VED: taxis capable of zero emissions

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[Clive Lewis]

My hon. Friend makes a very good point; that is one lost year of support.

To include electric vehicles—ah, I have already said that. I will recap, though. [Laughter.] To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.

That is particularly pertinent as local regulations are tightening around clean air and greenhouse gas emissions, as we have seen with the implementation of the ultra low emissions zone in London. Amendments 112 to 114 require the Government to undertake a review that we believe is essential to understand the consequences of the clause, which range over the impact that it is likely to have on the Exchequer, on the taxi and private car rental industry, and on CO₂ emissions and climate change targets. Amendments 112 and 113 focus on the economic impact of the clause, both on the Exchequer and on taxi and private car rental companies. Can the Minister provide an assessment of the revenue implications of the measure?

Similarly, while we understand from the published documents relating to the clause that industry response to the Government consultation was supportive, will the Treasury do further analysis of the potential economic impact on taxi companies and the private car rental industry, should the change come into effect? The Minister may wish to resist the amendments, but regardless of any legal obligation, will he commit to conducting such an analysis and presenting it to the House in due course?

Amendment 114 refers to carbonisation and improving air quality. It would seem, in that respect, that taxis are low-hanging fruit. They are used frequently, often in urban areas with poor air quality. Similarly, according to the Mayor of London, drivers stand to benefit from lower fuel costs—by around £2,800 a year—and from avoiding present and future congestion and air quality charges. We believe, however, that the Government have failed to put in place necessary fiscal incentives to encourage the transition to the electric vehicles needed to ensure a reduction in CO₂ emissions. Simply removing the excess tax for luxury vehicles, as the clause would do, does not go far enough to encourage the uptake of zero-emission vehicles.

The primary driving forces behind the reluctance to take up electric vehicles are cost and an anxiety about range. The costs of electric vehicles are explained by high manufacturing costs, specifically of their batteries. The anxiety about range affects taxi drivers far more than private vehicle owners or private car hire companies, as they do not have access to the range in the ultra-low emissions vehicle segment of the market for mid-range to luxury. That is due to licensing conditions, as they need to fulfil accessibility requirements. In London, for example, that means that many drivers are mandated to buy a London-style hackney taxi in many districts. Will the Minister agree to assess the impact of clause 58 on CO₂ emissions and the UK’s climate change targets, and whether that policy goes far enough in encouraging the purchase of zero-emissions taxis?

I have a few questions on the clause. At present, a grant of £7,500 is available for new zero-emissions taxis. We believe that the Government should be looking to increase available grants and encourage the transition to electric vehicles, specifically taxis, in areas outside Greater London. There are currently only a few limited pots of funding, not all of which are available for taxis, and they are largely skewed towards Greater London.

Similarly, the Government have yet to invest a penny of the £400 million charging fund announced in the 2017 Budget, half of which should be public money, with the other half contributed by the private sector, as we have already heard. Will the Minister tell us whether the issue that the clause seeks to rectify will aid the Government in finally setting up the charging fund that they promised to deliver to encourage the use of zero-emissions vehicles? Will he give us a clear timetable of when that fund will be operational? Will he commit that he or another relevant Minister will come back to the House with more detail when it is due to launch?

Available charging infrastructure is a requirement of accelerating the transition. Outside London and a few select places, availability is poor. Drivers face a postcode lottery that is a barrier to electric vehicle growth. For example, there are more chargers available in the Orkney Islands than in Blackpool, Grimsby and Hull combined. Even if grants are available, drivers in some areas will be unable to perform their work using EVs, due to the unavailability of charging infrastructure. It could therefore be argued that even if the Government increased grants and ensured that availability, poverty of EV infrastructure would mean that a majority of taxis would not be in a position to benefit from the change suggested in clause 58. Will the Minister comment on that? What assessment has been undertaken of the availability and adequacy of the infrastructure, and what steps are being taken to ensure that it does not undermine the good intentions behind the clause? Although the current situation is a mistake, it should not have happened in the first place. The measure is important in seeking to undo the bias created by classing zero-emissions taxis as luxury vehicles, and in encouraging the uptake of zero-emissions vehicles.

We will support the clause—we ask only that the Government assure us that the right analysis will be done to assess the impact of the measure on the Exchequer, the companies that will be affected, and the environment. We urge the Government to take such matters into consideration. I hope the Minister can give us some assurance on those points.

[Robert Jenrick]

I thank the hon. Gentleman for those questions. I hope that I can answer them all and reassure him. Clause 58, as we have heard, makes changes to ensure that purpose-built taxis that are capable of zero emissions do not have to pay the VED supplement applicable to expensive vehicles, which are those with a list price of more than £40,000. Having listened to representations on the issue, the Government announced in March that the exemption for such taxis would be brought forward a year earlier than planned.

We do not believe that the purchases of many vehicles, if any, were adversely affected. For example, the London Electric Vehicle Company, which manufactures these vehicles, had sold almost no vehicles by the time of the announcement and has subsequently sold more than 500 vehicles—I do not have the exact figures but I am happy to supply them to the hon. Gentleman—so from the time of our announcement in early March to the present day, the incentives have clearly made a significant difference in stimulating the market. We do not believe that many purchases, if any—I will confirm that point—were disadvantaged as a result of this matter, which was an unintended consequence of the earlier policy.

An exemption will encourage the transition to ultra-low and zero-emissions taxis. The figures show that, certainly in London, there has already been a significant take-up in vehicles, although it is less in other parts of the United Kingdom. I believe that the manufacturers are now targeting other cities, including Manchester and Nottingham—my nearest city—to improve their air quality. We want to see that rolled out as soon as possible in all part of the United Kingdom.

It will make the system fairer. The Government recognise that a number of technical requirements exist for purpose-built taxis, including, as the hon. Gentleman said, access for disabled passengers and turning circles, meaning that only a limited number of options are available. Most other motorists have a range of vehicles available to them, many costing less than £40,000, and can therefore choose not to pay the supplement.

In passing, the hon. Gentleman mentioned other private hire vehicles. Our argument—a valid one, I think —has always been that there are a range of other options available to drivers of private hire vehicles. They do not have to purchase a vehicle costing over £40,000. That would be a choice because they want to enter a particular segment of the market. Those driving a registered London taxi do not have that discretion. Therefore, it would not be right for drivers buying a taxi capable of zero emissions to pay the VED supplement targeted at cars at the luxury end of the market. As the supplement is only due from the second licence onwards, this means that almost all taxi drivers who have purchased an eligible taxi from April 2018 will never have to pay the supplement. This will save those drivers up to £1,600 in total.

The changes made by the clause will provide the power to exempt purpose-built zero-emissions taxis from the supplement for expensive cars, through regulations. This will enable the Government to apply the exemption to further models as they become available in the future.

I will turn briefly to the amendments tabled by the hon. Member for Norwich South. Amendment 112 would require the Government to review the revenue effects of the changes made by the clause. The Government have already published a tax information impact note, in line with normal practice, which sets out that the revenue impact of the changes will be negligible. Amendments 113 and 114 would require the Government to review the effect of the clause on the taxi and private hire sectors, and the impact on carbon dioxide emissions and our carbon budgets. The measure applies to purpose-built taxis only, enabling a quicker switch to greener models by saving drivers that £1,600. It is not expected to have an impact on the number of taxis on the roads, but it is intended to increase the proportion of those that are capable of zero emissions. By strengthening the incentive to purchase such taxis over conventionally fuelled alternatives, the measure is expected to have a small positive impact on our ability to meet our fourth and fifth carbon budgets, although isolating its impact would be challenging and uncertain. I am not sure what value, if any, that analysis would provide. Again, these impacts were covered in the published tax information and impact note. I respectfully urge the Committee to reject the amendments, on the grounds that they are unnecessary.

The hon. Gentleman asked important questions about electric vehicle charge points. Clearly it is important for taxi drivers in London, and indeed in any other part of the United Kingdom, to know that the relevant charge points are available to them. Range anxiety is just as valid, if not more so, for a taxi driver as it is for a private citizen. Significant investment is underway in London, particularly for fast charge points, which are critical for taxi drivers, so they do not have to spend hours waiting to recharge or top-up their vehicle. The Mayor of London is leading that effort and making good progress.

With regard to the charge point infrastructure fund, which I spoke about in relation to the previous clause, we are close to appointing a fund manager and expect it to be launched in January or February. I am happy to write to him with more details and to inform him when it is launched, but I expect that to be at the very beginning of the new year.

[Clive Lewis]

There is £200 million in public money and £200 million in private money. Will the Minister confirm whether the £200 million in private funding has actually arrived and is available for the Treasury to spend on EV infrastructure?

[Robert Jenrick]

The answer is that the fund has not actually been launched yet. We are committed to the £200 million, but we will not know until the fund is launched the amount of private capital we are able to crowd in as a result of that. I am happy to write to the hon. Gentleman with more detail about that. As I said, I expect in the first two months of the new year to be in a position to launch the fund and to inform hon. Members across the House of its detail, should they wish to direct businesses in their constituencies that are interested in this area to it. With that, I commend the clause to the Committee.

[Clive Lewis]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 114, in clause 58, page 41, line 16, at end insert—

“(6) The Chancellor of the Exchequer must review the effects on levels of CO₂ emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the impact of this measure on CO₂ emissions and climate change targets.

Question put, That the amendment be made.

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[Kirsty Blackman]

If we are going to disincentivise people from using HGVs or charge them more for using HGVs, we need to make sure that we have a positive route with alternative methods of transport. There has been a massive increase in the number of light goods vehicles, which is negative if we end up with older diesel models.

We could develop the rail freight network. I understand that it is pretty difficult for those who are looking to increase rail freight to get time on the lines because of the number of passenger trains. Solutions to assist that would be very helpful in ensuring that freight is moved around the UK in the least carbon-emitting way possible.

Subsection (6)(b) relates to Euro 6. It describes the definition of Euro 6, saying that it is as in the EC directive. I am keen for the Government to lay out what would happen about the development of new standards after Brexit and any transition period. Is it their intention that we would have our own standards on vehicle emissions? If so, how much does the Minister believe it will cost to assess vehicles? What would be the cost of UK-EU regulatory divergence, which will result in issues for car manufacturers?

Alternatively, do the Government intend that we should not diverge from using the European Commission directive standards? Obviously technology is developing and there will be new standards to which we should peg our decisions on tax rates. If the UK Government plan not to have their own assessment centre, with regulatory divergence, do they plan to continue to follow EC directives? What preparation are the Government making in that case to scrutinise or comment on the directives, given that we will not be in the room after Brexit, and will therefore not be able to influence the standards, either to support our car manufacturers or secure the best standards for the British public and get improved air quality?

I understand that the Minister may not have the answer at his fingertips, but I hope he can say something.

[Robert Jenrick]

I shall try to respond to the many points that have been raised. My hon. Friend the Member for Poole in part answered the challenge from the hon. Member for Norwich South as to whether hauliers pay their fair share. It is worth remembering that they pay a range of taxes, as my hon. Friend pointed out. They pay the levy that we are discussing and vehicle excise duties. They also pay tax on fuel. Taken as a package, hauliers pay a considerable amount of tax. British hauliers as an industry are highly taxed, going by European and international comparisons. The reforms mean that some hauliers will pay more. The VED system is based on both weight and axles, so to some extent it reflects wear and tear on the roads, although I appreciate the point made by the hon. Member for Norwich South that HGVs make a significant impact on the roads. I did not realise it was 100,000 times that of a Ford Focus, but that puts things in perspective.

The hon. Gentleman asked whether the HGV levy was specifically hypothecated to tackle such issues as potholes and strategic roads. It is not. However, as I have described, the VED system will be, which will significantly increase the amount of investment that the country makes in roads at every level: £28.8 billion is the spending envelope for roads investment announced by the Chancellor in the Budget, and £25 billion of it will be spent on strategic roads in the road investment strategy that will be announced later next year. That will be about 170% of the first road investment strategy, so there is almost double the amount of investment going into roads to tackle congestion and improve strategic roads in all parts of the country.

The hon. Member for Aberdeen North made a valid point about the European standards. It is our intention to remain closely aligned to those. That seems sensible and it is our intention in a number of respects, such as climate change, emissions and carbon budgets, as is indeed set out elsewhere in the Bill. For example, we have not yet made a final decision on carbon trading, but we shall monitor it and review the matter. If I can give the hon. Lady any further information I will write to her to set out the position of the Department for Transport.

On the broader question of why we are not using the VED system for HGVs to encourage greater take-up of zero-emission or ultra-low emission HGVs, it comes back to the point made by the hon. Lady: currently there are very few commercially available ultra-low emission alternatives for HGV drivers, which prevents the broad uptake of new vehicles. Clearly, we would like to do all we can to stimulate the market and see rapid progress, but we have to be mindful of that. Through the Road to Zero strategy that was published earlier this year, the Government have committed to working with the industry to reduce HGV greenhouse gas emissions significantly by 2025. The strategy sets out the Government’s plans to use a variety of different tools to meet that commitment.

The hon. Member for Norwich South made a number of important points about HGVs and road safety. I will write to him on that and find out what information I can about DFT’s work, because it is important that we take note and see what can be done to improve road safety, particularly as the number of vehicles going down smaller roads and country lanes as a result of online shopping is becoming more important. Through the Road to Zero strategy and other initiatives, DFT is paying attention to how we can improve the last mile of delivery to tackle air quality and reduce the number of vehicles on our roads.

The clause introduces a lower rate of HGV levy for vehicles that meet the latest emission standard, and a higher rate for vehicles that do not. As we have discussed, the change will incentivise hauliers to move to cleaner, less-polluting vehicles. It is only right that everyone plays their part in protecting our natural environment so that we leave a cleaner, greener Britain for our children. HGVs currently account for approximately 20% of harmful nitrogen oxide emissions from road transport but only 5% of total miles travelled, so they will play an important part in tackling the problem.

The changes made by the clause will reduce HGV levy rates by 10% for vehicles that meet the latest emission standards, reflecting the fact that they generate 80% less NOx emissions than the older HGVs. The clause will also increase rates by 20% for HGVs that do not meet those standards. Many hauliers will pay less as more companies move to cleaner lorries—we have introduced it to improve air quality and not to raise revenue.

On amendments 115 to 118, to which the hon. Member for Norwich South spoke, the Government have published a tax information impact note outlining the impact assessment of these reforms, including the forecasted revenue effects, which have been certified by the Office for Budget Responsibility. I believe those amount to £25 million over the scorecard period. These reforms to the HGV levy are part of wider action by the Government to tackle challenges in the areas highlighted by the amendments. Isolating the impact of the HGV levy reforms would be extremely challenging and, I suspect, of limited use, as they cannot be separated from other actions the Government is taking in these areas.

The Government’s draft clean air strategy sets out an annual reporting process for the monitoring of air pollution, which is the appropriate mechanism for assessing the effectiveness of those changes and others over time, rather than introducing a new method to review it, as proposed by the amendments. I therefore urge the Committee to reject the amendments. The changes outlined in the measure will ensure that both foreign and domestic HGVs play their part in meeting the Government’s air quality targets.

[Clive Lewis]

I thank the Minister for his contribution. I note that he was unaware of the 100,000 figure between the damage caused by an HGV compared with the damage caused by a Ford Focus. Have the Government made any assessment of whether HGVs currently cover the cost of the impact they have on UK road infrastructure? It sounds like they have not, but the Treasury should be able to amend VED or the taxation system that it will use in order to better reflect that.

To pick up on some of the comments made by the hon. Member for Poole, we are talking about externalities. Everyone wants to see everybody pay their fair share, and I am aware that haulier companies pay not just the excise for HGVs, but road tax and fuel tax. So do drivers of Ford Focuses: they also pay their fair share of tax, including income tax and other taxes as well. We all pay our fair share of tax, but if HGVs are damaging the roads to that extent and having such an impact in terms of road traffic accidents, that calls into question whether they are paying excise duty appropriately, and whether that excise duty is a genuine reflection of the cost that those HGVs are exacting on society and on our road systems.

--- Later in debate ---

HGVs are significant contributors to pollution and to greenhouse gas emissions, so I argue that the Treasury needs to accept the amendments. It needs to take on board the impact that HGVs have on our road networks, greenhouse gas emissions and noxious fumes, and the fact that the system in place is inefficient. Sixty-four per cent. of HGVs on the road are either empty or partially full, so the Opposition have suggested basing excise duty not on time on the road, but on distance travelled by HGVs. That would incentivise road hauliers to increase efficiencies and invest in vehicles to ensure that they are as efficient as possible. It would also ensure that logistical runs are as efficient as possible, which they clearly are not currently. I look forward to the Minister writing to me on those issues, but we will be pressing both amendments to a vote.

[Robert Jenrick]

In my earlier remarks, I did not respond to the hon. Gentleman’s questions on the calls for evidence. We did a call for evidence before we introduced the levy in 2014 and, at that point, the time-based levy was the preferred method among those who responded. That was the reason why we alighted on that methodology. The call for evidence on the reforms, which he also asked me about, will be published next month—further information that he may wish to scrutinise when it is published. As I said earlier in response to my hon. Friend the Member for Poole, we believe that HGV drivers pay their fair share through the levy, through VED and through fuel duty. However, we will of course keep the matter under review.

[Sir Robert Syms]

If a road haulier sends a vehicle with a load to a city in the north, the profit it makes is on the load back. If that vehicle runs empty, the haulier has higher costs. Therefore, if that vehicle is empty, the road haulier’s manager is not doing his job properly—they have not been able to find a load—or the vehicle is going from one factory or depot to another to pick up a load. It is inevitable that there will be some empty vehicles, but that is not the fault of the road haulage industry. They would love their vehicles to be full.

[Robert Jenrick]

My hon. Friend makes an important point. Technology will improve that situation in time, as he said in his earlier remarks, but we will keep this matter under review. However, we respectfully ask that the amendments be rejected.

Question put, That the amendment be made.

Finance (No. 3) Bill (Eighth sitting)

Robert Jenrick Excerpts

Thursday 6th December 2018 Public Bill Committees

[Clive Lewis]

Thank you, Mr Howarth, for that clarification, which was clearly needed.

As I was saying, it would be neither socially fair nor environmentally effective if ordinary people taking occasional family holidays or visiting relatives abroad were made the priority for any policy designed to curb demand growth. Therefore, as amendments 120 and 121 would provide, the Government need to make an assessment of the distributional impact of increasing aviation tax rates on specific groups who could be disproportionately affected.

The Opposition fully accept that, ultimately, APD may not be the right instrument to bring aviation growth into line with the planning assumption of the Committee on Climate Change. However, without the reviews we are calling for in amendments 120 and 121, it will be all but impossible to know whether it can play a role, or whether there are better alternatives. There have, for instance, been proposals for a per-plane tax, which would more closely link taxation to carbon emissions, and be a better incentive for more efficient use of passenger capacity in planes. Alternatively, there could be a frequent flyer levy designed to protect access to a reasonable amount of flying for low-income households, while targeting the most frequent flyers with an incrementally rising tax, thus addressing the elasticity of demand for air travel in relation to low prices or high income—or the fact that the key determinant of the propensity to fly is income, not ticket price.

I take no view of those options today, because we simply need to understand more about how they would work; but that is precisely why we need the Government to undertake formal assessments that allow us to compare the impact of potential options on the factors set out in the amendment. Small changes in price have little impact on demand for flights, so increasing the cost of flights to a level that exerts significant downward pressure on demand is difficult to do fairly via the taxes that the clause deals with, and could mean pricing the poor out of the skies when the richest air travellers cause most of the environmental damage. In any event, without the Government carrying out the necessary assessments, which our amendments would require, we cannot know what APD rates are required to meet the planning assumption of the Committee on Climate Change, or the relative efficacy of APD and alternative fiscal approaches, such as a per-plane tax or a frequent flyer levy, for achieving this policy goal.

Let me end with a sobering fact. As the widely respected naturalist David Attenborough warns the world at COP 24 that the collapse of our civilisation is on the horizon, the two largest aircraft manufacturers in the world—Boeing and Airbus—have more than 13,000 new fossil fuel-powered planes on order. Given the long operational lifespan of passenger jets, most of those planes will still be in the air in 2050, as will many of the 23,000 already in use. Given what is at stake, can the Minister, hand on heart, genuinely say that the Government’s policies, future techno-fixes aside, are really up to the existential challenge that we all face?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I will respond to as many comments as I can. I will come to the amendment tabled by the hon. Member for Aberdeen North, but we agreed and legislated to devolve air passenger duty to the Scottish Government. The delay in so doing is unfortunate—it is not what we wished to happen—but it is a result of the Scottish Government’s asking us to postpone the implementation of devolution. They did so for the perfectly understandable reason that they wished to pursue the measure with respect to the highlands and islands, but it was essentially their decision, which we respected in agreeing to postpone the turning on of devolution, if that is the right phrase, at their suggestion.

[Kirsty Blackman]

Yes, but the UK Government were trying to hand APD over in such a way that the highlands and islands exemption would no longer exist, so it would have been completely deficient and would not have operated in the way we hoped or, presumably, the way it was intended to work when its devolution was first mooted.

--- Later in debate ---

[Robert Jenrick]

As I understand it, we handed it over in accordance with EU law. Negotiation has subsequently taken place between the Scottish Government and the EU, with the support of the UK Government, to try to find a satisfactory resolution. I assure the hon. Lady—I do not think she implied otherwise—that we are working as hard as we can to support the Scottish Government in that respect. In fact, my officials at the Treasury were in Edinburgh in the past couple of weeks to continue working with the Scottish Government in that regard. I hope she takes our assurance that we will continue to work productively together.

Because APD is essentially a devolved matter—although, as a result of the request, we have not yet turned it off—the Scottish Government could of course choose to carry out the review that the hon. Lady requests themselves. Alternatively, they could choose not to pursue the measure with respect to the highlands and islands and to continue with their plans for their own version of air passenger duty. I appreciate that they do not wish to do that. However, I hope that I can allay the hon. Lady’s concerns by saying we are going to work as closely as possible. I do not think a review by the United Kingdom Government is necessary when the Scottish Government could proceed with one if they wished.

The hon. Lady and the hon. Member for Norwich South asked what evidence and reports we had, and what studies we had done, on the impact of reducing air passenger duty on Treasury receipts or its wider benefits to the economy and society. We reviewed the 2016 PwC report, which the hon. Lady may be aware of. We did not agree with all its conclusions in terms of cutting or abolishing APD. Its principal claim was that that would pay for itself, and we did not agree with that. APD raises £3.4 billion a year, so it is a significant revenue raiser for the Exchequer. Cutting it would put pressure on other public finances, although I appreciate that it would have some benefits in different parts of the country. Recently, our limited study on devolving air passenger duty for long-haul flights in Northern Ireland acknowledged that there could be some benefits, but it also raised a number of further questions and concerns that require further study.

The Department for Transport will publish its aviation strategy shortly. That will, I hope, answer some of the broader questions that the hon. Member for Norwich South asked about our long-term strategy and plan for this country, whether it is in technology, aviation and airport capacity or the environmental concerns he expressed.

Air passenger duty was never designed to be an environmental tax. One might argue that it could be used as an environmental tax, but that was never its primary purpose; it was a tax designed to raise revenue for the Exchequer to pay for public services. It is already the highest tax of its kind in Europe, and one of the highest in the world, so it is not clear whether increasing it substantially would make any significant difference, and doing so would, of course, come at significant cost to our competitiveness as a country. Many would like us to reduce the tax substantially, rather than to increase it materially, as the hon. Gentleman seems to suggest. I will come on to his point about the international perspective and the Chicago convention, and what progress the Government are making.

To summarise the clause, it makes changes to ensure that long-haul rates of air passenger duty for the tax year 2020-21 increase in line with the retail prices index. The change will ensure that the aviation sector continues to play its part in contributing towards funding public services. APD, as I have described, raises £3.4 billion in revenue annually, so it is an important part of our public finances. Aviation plays a crucial role in keeping Britain open for business, and the UK Government are keen to support its ongoing success. Passenger numbers travelling via UK airports have grown by more than 15% over the past five years, and the UK has the highest direct connectivity score in Europe, according to an Airports Council International Europe report. Of course, we continue to measure our competitiveness, and we want the UK to continue to have hub airports and to be as well connected to emerging markets as it can be.

The clause increases the long-haul reduced rate—economy class—by just £2; and it increases the standard rate, which is for all classes above economy, by £4. The rounding of APD rates to the nearest £1 means that short-haul rates will remain frozen for the eighth year in a row, which benefits about 80% of all airline passengers, including many of those whom the hon. Gentleman mentioned, who are on lower incomes and trying to enjoy cheaper holidays and less expensive business travel. The changes made by clause 60 will increase the long-haul APD rates for the tax year 2020-21 by RPI.

On amendments 120 and 121, which were tabled by the hon. Member for Norwich South for the Labour party, the Government recognise the importance of understanding the impact of changes to tax policy on the aviation industry. I reassure the Committee that that is done as a matter of course by the Government as we consider carefully how to proceed at every Budget. Furthermore, isolating the impact of APD on the areas highlighted in the amendments is challenging. It is better to consider such issues in a more holistic way.

As I have said, the upcoming aviation strategy to be published by the Department for Transport will be the opportunity to consider the aviation industry’s impact on and role in addressing issues in such areas. I encourage the hon. Gentleman and others who take an interest in those matters to pay careful attention to that. They will have the opportunity to scrutinise the Secretary of State for Transport and other Ministers following that.

On the issue of those at the higher end of the distributional scale, in Government we have tackled that through the introduction of the additional rate for private jets. The Government are confident that those flying in that way will now pay a fairer share of tax. We were the first Government to introduce the private jet rate, and the rate for individuals flying by private jet is six times that of someone flying in economy on a commercial jet.

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[Anneliese Dodds]

I am grateful to the Minister for being willing to give way. He will probably remember that I asked for the concrete ways in which Government are engaging with international partners around that convention. I have not received any concrete details aside from the general aspiration to change things. Can he provide some details now?

[Robert Jenrick]

The hon. Lady and I discussed this in a Westminster Hall debate earlier in the year. I believe I wrote to her afterwards to set this out, but perhaps she was not satisfied with the response. I am happy to revert to her with more information, but I made the point in that letter that the UK Government are committed to this, and we play a leading role internationally in discussing the future of the Chicago convention. As I also set out in the letter, several of the leading aviation nations—including the United States and Australia—have limited interest in changing the current regime, which makes it rather difficult to make the kind of progress that I suspect she would like us to make.

[Anneliese Dodds]

The Minister is being generous in giving way. It might help the Committee to know what meetings the Government have called, which Governments they have contacted to discuss the matter and what public pronouncements they have made on the subject. I have been unable to find evidence of any.

[Robert Jenrick]

I will write to the hon. Lady again to set out some of the information. I discussed the matter with my officials in preparing for this Committee, and they listed some of the international meetings they have attended, where they represented the United Kingdom exactly as she would like us to have done.

I hope I have addressed amendment 104 in my earlier comments. This is a matter that the Scottish Government could take forward themselves, given that we have already legislated for the devolution of APD. The impacts of any future reductions in Scotland are a matter for the Scottish Government, and they will clearly become more so once we proceed to the long-term arrangement that the hon. Lady wishes for.

The changes being made by clause 60 ensure that the aviation sector continues to play its part in contributing towards the funding of our vital public services, raising £3.4 billion a year. I therefore commend the clause to the Committee.

[Clive Lewis]

I want to raise a couple of things before we vote on amendments 120 and 121. The Committee on Climate Change has clearly stated that we are heading towards a substantial breach of the generous headroom that has been provided for aviation in the UK. The Government are going to overshoot that, to use a pun. There is a pressing climate emergency on this planet. As we speak, millions of people—many of them in the world’s poorest countries—are already being affected by climate change. My dad is from Grenada, and he has retired there. People there, and in the West Indies generally, cannot get insurance as a result of the hurricanes that destroy vast swathes of the islands year in, year out, because of climate change. I feel as though we are hearing once again from the Government about business as usual, even though a climate emergency is taking place.

I understand the APD. It is not designed as an environmental tax or a demand management tool; it is a revenue raiser. Given that we find ourselves heading towards a breach of the headroom that the Committee on Climate Change has provided, surely the Government should be looking at ways to control and push down demand for flights, so that we can begin to make a real impact on our commitments to tackling climate change. Will the Minister tell the Committee whether he plans to join our French counterparts in lobbying for tax reform on kerosene, as they will shortly talk about with the EU Commission? It seems to me that the aviation industry has enjoyed these 70-year-old tax perks and is now an established sector, but one that has yet to fully play its part in tackling climate change. This country can show leadership on that, starting with the Treasury.

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We deeply regret Government decisions over the last few years, including axing the fund to support work on carbon capture and storage, which could have helped to make us a world leader in a growing new industry, as well as in tackling climate change. However, similar objectives can be achieved through the Bill by offering clear incentives, through the tax system, to clean up these sectors, and not by offering tax breaks like this levy exemption to continue down the high-emission path. For that reason, we must question the wisdom of this measure. Unless the Minister gives a clear assurance that the measure is in the context of other steps to reduce climate change emissions, we will not be able to support the clause.

[Robert Jenrick]

Clause 63 makes changes to the definition of mineralogical processes in the climate change levy exemption for energy used in mineralogical and metallurgical processes, to ensure that the exemption remains operable following the UK’s departure from the EU. In response to representations, it also clarifies that tenants can benefit from the exemption where they are supplied with energy via a landlord.

The changes will come into effect following Royal Assent to the Bill. They are minor, technical changes designed to maintain the status quo and to provide continuity for businesses. Overall, we judge that they will have a negligible impact, as we set out in the relevant tax information impact note published in July.

The clause does two things. First, it removes “by a person” and “to a person” from the current wording of the exemption, to clarify that it is the energy used in mineralogical and metallurgical processes that qualifies for exemption, rather than the person carrying out the process, as the current drafting suggests. This means that all firms using energy to carry out these processes can claim the exemption. I believe this will be widely welcomed by those who have approached us previously.

Secondly, the clause replaces the reference to the energy taxation directive in the definition of mineralogical processes with a reference to the appropriate NACE code. These codes are an internationally recognised system for classifying economic activity and are of UN origin. This aligns the definition with the way metallurgical processes are defined, which already refers to NACE codes. I hope that is clear.

Amendments 124 and 128 would require the Government to assess the impact of these changes on small and medium-sized enterprises, tenants, revenue, carbon budgets and greenhouse gas emissions reduction targets. Amendment 127 would require the Government to publish an annual statement listing the companies that have benefited from these changes.

While the first change that the clause makes will have a negligible impact, as set out in the relevant tax information impact note earlier this year, the second change will have no impact on these businesses and sectors. Indeed, if we did not make these changes, there would be an impact as we leave the European Union.

Amendment 125 would require the Government to review the effect of these changes in both a no-deal and a negotiated exit from the EU. Amendment 126 would require the Government to review the effect of those changes on any divergence between the exemption in the UK and similar exemptions in the rest of the European Union. Both changes made by the clause will ensure the exemption continues to operate exactly as intended now and after the UK leaves the EU.

The changes introduced by the clause do not affect how the exemption works in the UK compared with other European countries; they apply equally while we remain in the EU, if we were to leave the EU with a negotiated deal or in the event that we leave with no deal. I therefore urge hon. Members to reject the amendments. The information required to fulfil the requests made in the amendments is either already in the published impact assessment or, for the reasons I have just described, unnecessary.

There was a question from the hon. Member for Norwich South about how the Government know that the impact on revenue from landlords and tenants is negligible. We do not have data in terms of specific numbers, because the tax is paid to HMRC by energy suppliers, not tenants and landlords, but this issue has not resulted in any lobbying or representations to us, which suggests that the numbers are extremely low, if not negligible.

This clause maintains the current scope of the exemption processes following the UK’s departure from the EU and, in response to representations from stakeholders, ensures that businesses entitled to the exemption are not precluded from benefiting, purely because they are tenants. I therefore move that the clause stand part of the Bill.

[Clive Lewis]

I thank the Minister for that response. All I will say is that, if I understand it correctly, the reason he is confident of those numbers is that no one is complaining. That is an interesting statistical analysis on which to base it, but I will accept it for now. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 128, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must carry out an impact assessment of the exemption for mineralogical and metallurgical processes under paragraph 12A of Schedule 6 to the Finance Act 2000, as amended by this section, considering the impact on—

(a) tenanted businesses that carry out mineralogical and metallurgical processes,

(b) revenue effects,

(c) the UK’s ability to meet its third, fourth and fifth carbon budgets,

(d) the UK’s ability to meet its greenhouse gas emission targets.

(7) The Chancellor of the Exchequer must lay the impact assessment under subsection (6) before the House of Commons within two months of the passing of this Act.”—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to carry out an impact assessment of the changes made by Clause 63 and their impact on tenants, HMRC revenues, the UK’s national carbon budgets, and carbon and other greenhouse gas emission reduction targets.

Question put, That the amendment be made.

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[Clive Lewis]

I thank the hon. Lady—her point is taken on board.

Such a beneficial undertaking would help both businesses and households to reduce drastically their waste streams and so cut their work-related and living costs. It would also go a very long way to helping the UK to meet its energy and greenhouse gas emission targets on the way to becoming a zero-waste, zero-carbon economy. As well as securing existing jobs and helping to create many new ones in the reuse, repair and recycling sectors, adopting the amendments that we are calling for would undoubtedly help to protect urban, suburban and natural environments where illegal waste dumping continues.

Will the Minister tell us how he means to address the very serious concerns of the Environmental Industries Commission and its members about the growing gap between the lower rate and the higher rate of this tax? The existing gap is already causing significant problems in the industry, with some operators presenting for the lower rate inert waste that actually contains asbestos fibres and therefore should be subject to the higher rate. How does the Minister intend to address that imbalance? In the EIC’s view, which is shared by Labour and a number of prominent environmental and countryside non-governmental organisations, the gap should be closed and not made wider, so that the tax acts as a deterrent to illegal waste disposal of all types and so benefits the public purse and society at large in significant environmental ways.

That being the case, in the absence of significant assurances from the Minister, we will struggle to support the clause as it stands. However, I would like to give the Minister the opportunity to provide us both with those assurances and some answers to the questions that we have posed. I look forward to his response.

[Robert Jenrick]

Like the hon. Gentleman, I get all the glamorous jobs, so I will endeavour to answer all his questions about landfill.

Clause 64 increases the standard and lower rates of landfill tax in line with inflation from April 2019, as announced in Budget 2017. Landfill tax has been immensely successful. Since its introduction, the amount of waste disposed of at landfill sites has fallen by more than 70%—of course, we would like to go further—and the benefits of that reduction are twofold. The first is to the economy: we have made better use of scarce resources rather than simply tipping them into holes in the ground across the country. Secondly, greenhouse gas emissions from decomposing waste are reduced. When waste is diverted from landfill, we promote more sustainable waste treatment, such as recycling. We are committed to moving towards a more circular economy, and we are working together with business, industry, civil society and the public to achieve that valuable aim. Landfill tax is an important fiscal lever that we can use to achieve it.

The hon. Gentleman asked why the Government are not doing more to meet their recycling target. The Government are very committed to meeting the target of recycling 50% of household waste by 2020. Through the Waste and Resources Action Programme, we are providing guidance and support to local government to help it to improve recycling services and to communicate with householders so that they recycle more. The next milestone in our campaign is the upcoming resources and waste strategy, on which we at the Treasury have been working closely with the Environment Secretary and the Department for Environment, Food and Rural Affairs. That will outline a number of further measures to increase recycling across the UK.

The hon. Gentleman and others will have noticed other important measures in this regard, including the announcement of a forthcoming consultation with respect to a deposit return scheme and other measures in the Budget—for example, a plastic packaging tax, which is to be consulted on, with the aim of increasing the amount of recycled content in all the plastic packaging that we use in our daily lives.

Landfill tax continues to provide an incentive to reduce waste from landfill and ensure it is recycled and reduced: as landfill is the most expensive form of waste disposal, that makes perfect sense. We have also noted in the Budget that we would be willing to consider a future incineration tax once further infrastructure has been put in place to reduce, for example, the amount of plastics that are incinerated, further improving the environment and reducing the amount of throwaway single-use plastics.

The waste infrastructure delivery programme is providing some £3 billion in grant funding over its lifetime to a number of long-term local authority waste management projects, which has helped to increase recycling rates from 36% in 2008 to 45% in 2017. I hope the hon. Member for Norwich South will await the future resources and waste strategy, which will provide a number of important measures. Those will include further information on the reform of the producer responsibility system, which will play a crucial role in improving recycling capacity and infrastructure in all parts of the country.

The clause also changes the tax on disposal at landfill sites. Each tonne of standard-rated material is currently taxed at £88.95, and lower-rated material draws a tax of £2.80. Those rates per tonne will change to £91.35 and £2.90 respectively from 1 April 2019, which maintains the strong current signal to move waste away from landfill.

Amendment 130 would require a review of the revenue effects of the proposed changes. HMRC published tax information impact notes when the rates were announced at the autumn 2017 Budget.

[Anneliese Dodds]

As far as I understand it, that note did not look into the impact of differential tax rates on waste crime. The picture is very worrying: the number of illegal waste sites that the Environment Agency is dealing with had risen to 1,485 at the end of 2017-18, compared with 1,425 the previous year. The number of those illegal waste sites that were active had also risen—to 673—and there were eight fires at those sites last year, so why is the Minister not considering those factors? Surely a broader review is necessary.

[Robert Jenrick]

The hon. Lady raises an important question about waste crime, which affects many constituents across the country, including my own. We have taken a number of significant steps. The Secretary of State for Environment, Food and Rural Affairs has conducted with the Home Secretary a review of waste crime, which looked at many of these questions—I believe that review was published recently. We also included a measure in the Budget whereby local authorities, or those responsible for clearing up illegal waste sites, could receive support from the Treasury to enable them to do so if the site met certain criteria, essentially providing support equivalent to the cost of the landfill tax itself. A number of hon. Members from across the House approached us to ask for that support, and we have delivered it as a £10 million pilot.

[Anneliese Dodds]

I am very grateful to the Minister for giving way. However, in the previous Budget, landfill tax was applied to illegal waste sites, so surely that measure is more than a pilot. As I understand it, it came into practice in April this year, because I have been trying to find out whether or not it has been applied to any sites. Surely that money should already be coming into the Exchequer?

[Robert Jenrick]

Perhaps I did not explain myself correctly to the hon. Lady. The measure that she speaks to was in the Budget last year, and has since been implemented via a statutory instrument that went through the House. That measure ensures that the landfill tax is payable on illegal waste sites. The measure that we have included in the Budget enables innocent parties—local authorities that take on, and wish to clean up, a site that has been left by criminals—to apply through the Environment Agency as part of the pilot for a sum of Treasury funding equivalent to the landfill tax, instead of having to pay that tax in addition to all the other costs involved in cleaning up the site. We hope that that will help local authorities with sites that are among the worst and most dangerous to public health to meet the costs of doing so. That measure was requested by a number of Members from across the House.

[Anneliese Dodds]

I am very grateful to the Minister for giving way yet again. Surely Committee members are scratching their heads and thinking, “Would it not be more efficient and effective just to fund the Environment Agency properly so it can actually do some prosecutions, rather than going through this very complex system?”

[Robert Jenrick]

We do fund the Environment Agency correctly, and it is stepping up its enforcement of these sites. We urged it to do so—that was part of the purpose of the waste crime review. We have also increased the powers available to local authorities. For example, since May 2016, they have been able to issue fixed penalty notices for smaller scale fly-tipping. Fly-tipping is a criminal offence punishable by a fine of up to £50,000 or 12 months’ imprisonment. We wish to see more successful prosecutions, because this is a significant area of criminality that is linked to serious organised crime and other important types of criminality, such as the drug trade and human trafficking, against which we wish to take serious action. That is why fly-tipping was included in the Government’s review of serious organised crime in the waste sector, to which I have already referred.

Amendment 131 seeks to review the effect of these changes on the Government’s ability to meet the waste framework directive target of recycling 50% of waste by 2020, and amendment 132 seeks to review their impact on the amount of waste exported for treatment abroad. As the clause maintains the rates of landfill tax in real terms, we do not expect significant changes to the strong behavioural incentives the tax already provides. Landfill tax continues to play an important role in our meeting our targets for recycling and encouraging alternative forms of waste treatment, and the clause will ensure that landfill remains the most expensive form of waste treatment. Furthermore, I assure the Committee that the Government are committed to meeting the 50% household waste recycling target through the Waste and Resources Action Programme and the upcoming resources and waste strategy, on which we at the Treasury worked extremely closely with the Department for Environment, Food and Rural Affairs. I hope the Committee sees that amendments 131 and 132 are therefore unnecessary.

Amendment 133 would require a review of the expected effect of these changes on the quantity of waste that is sent to landfill. The uprating of landfill tax rates in line with the retail prices index ensures that those rates remain stable in real terms, and means that the tax can continue to help the Government meet their objective. Figures published regularly—annually, I think—by Her Majesty’s Revenue and Customs show a consistent decrease in the amount of waste sent to landfill as a result of increases to the capacity of alternative waste treatment, such as recycling, which is encouraged by our policy on landfill tax rates. As the clause will keep the rates the same in real terms, that decrease is expected to continue. I trust that provides the Committee with sufficient information, and I ask that amendment 133 not be pressed to a vote.

Amendment 134 would require a review of the expected impact on the environment of increasing the difference between the standard and lower rates of landfill tax. The clause seeks to increase landfill tax rates in line with inflation. That is the equivalent of maintaining the rates in real terms, which means there will be no real-terms change to the difference between the standard and lower rates. Although we appreciate there may be concerns about illegal dumping or breaking of the rules, we do not anticipate the clause making any material difference to those. The issues the hon. Member for Norwich South legitimately raised about individuals or companies dumping waste on which the higher rate should be paid, and seeking to pay the lower rate, are exactly the kinds of matters that were considered in the waste crime strategy. I hope that reassures the Committee, and I ask that amendment 134 not be pressed to a vote.

[Clive Lewis]

I thank the Minister for his answers. I also thank my hon. Friend the Member for Oxford East for her timely and useful interventions, which shed light on this issue.

Waste management is often the poor relation when it comes to policy making. It is not sexy, but it is critical. We have spoken about the environment and climate change today. Scientists say that it is entirely possible that we could save ourselves from climate change and its effects, only to destroy ourselves by breaching other planetary boundaries. Recycling and waste management are critical, if we are really to reap the benefits of improved recycling and technological processes that ensure we use resources as efficiently as possible. As we move through the 21st century, and population increases, that will become critical.

I will withdraw amendment 130, and will not press amendments 132, 133 and 135, but will press the remaining amendments to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 131, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the UK’s ability to meet the Waste Framework Directive target of recycling 50% of waste by 2020, and lay a report of that review before the House of Commons within six months of the passing of this Act.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 64 on the UK’s ability to meet the target of recycling 50% of waste by 2020.

Question put, That the amendment be made.

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[The Chair]

With this it will be convenient to consider clause 67 stand part.

[Robert Jenrick]

The clause makes changes to ensure that penalties may be raised against businesses registered for the soft drinks industry levy that do not submit a quarterly return or fail to submit a quarterly return on time. The changes ensure that a penalty can still be raised for non-payment of the soft drinks industry levy in the event that certain provisions in the Bill are enacted.

The soft drinks industry levy was announced at Budget 2016. The levy commenced on 6 April 2018 and has been successful in its stated objective of driving reformulation, to such an extent that over half of all drinks by volume that would have been in scope of the levy have now been reformulated, and in fact were reformulated even before the tax came into effect. This measure will support that success by allowing penalties to be issued for late returns and non-submission of returns for accounting periods ending after 1 April 2019, should they be required.

[Kirsty Blackman]

I appreciate what the Minister says about the effects of the soft drinks industry levy, but it still does not apply to milk-based drinks. Will the Government consider extending the levy to milk-based drinks, given that it has been so successful?

[Robert Jenrick]

The hon. Lady makes a valid point. When we announced the policy, we said that we would consider milk-based sugary drinks in 2020, which is when more information, including Public Health England data, will be available to inform that decision. We have reiterated that commitment, so there will be a review in just over a year, which could lead to such a decision, although we have no plans to extend the levy at this moment.

The changes made by the clause will help to provide a proportionate and fair penalty regime and to drive compliance. The changes will affect only soft drinks industry levy-registered businesses that do not submit a quarterly return and payment by the due date. Furthermore, although the clause gives us the powers to act, at present there is no evidence of fraud or non-compliance with the soft drinks industry levy on any material scale.

Clause 67 makes changes to amend section 1 of the Isle of Man Act 1979, to add the soft drinks industry levy to the list of common duties. It will ensure that the movement of liable soft drinks between the UK and the Isle of Man will not be seen as either an import or an export under the levy, as long as the levy rates of the UK and the Isle of Man remain aligned. This change will have effect from 1 April next year.

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[Clive Lewis]

It is a pleasure to address the Committee on behalf of the Opposition for the final time today—I am sure to the great disappointment of all. The two clauses both address the soft drinks industry levy, often known colloquially as the sugar tax, which came into force in the current tax year. Given the scope of the two clauses, you will be relieved to hear, Mr Howarth, that I will not attempt to have a general debate on the basic principle of the tax—as tempted as I was. Nor do the Opposition disagree in principle with the Government’s broad intention in the clauses.

As the Minister said, clause 66 allows penalties to be imposed on businesses eligible to pay the soft drinks industry levy where they fail to submit the required quarterly return by the due date. It also ensures that similar penalties can be imposed for non-payment of the levy, contingent on certain provisions in the Finance (No. 3) Act 2010 being enacted. For context, will the Minister clarify the Government’s plans in relation to the enactment of these provisions? Will he explain why they have come to be made now, rather than during the passage of previous legislation?

On the substantive point, let me start by asking the Minister for some clarity about the number and types of business that might be affected. How many companies are now registered for the soft drinks industry levy, and what analysis can he give us of their size and scale? How does that compare with the number and composition originally anticipated? Will he outline for the Committee what kind of penalties a business might face, first, for failing to submit a quarterly return and, secondly, for non-payment? Is he convinced that the penalties are sufficient to deter tax evasion, while not being so high that genuine errors are disproportionately punished?

To put this in context, will the Minister tell us what level of evasion, late or non-payment, and failure to submit quarterly returns has been recorded to date? What estimate has the Treasury undertaken of any revenues lost to tax evasion? Has HMRC been able to give him any idea of the scale of the failure to submit returns? Is that related to evading payment, or is it simply down to administrative failures? How many returns are submitted late, and how many are not submitted at all?

On a related question, will the Minister tell us how much he expects to be raised through the imposition of these penalties and—perhaps more significantly—through any deterrent effect on tax evaders? Will the penalties, particularly for non-payment, form part of the revenue take for the tax, or will they be considered separately for purposes such as the intended link to funding for child health?

The Minister will be aware that the projected tax take from the levy has declined precipitously since the former Chancellor’s original estimates when he announced the levy. The original forecast was for £520 million in the current fiscal year. The latest “Economic and fiscal outlook” from the Office for Budget Responsibility, produced for last month’s Budget, anticipated that just £240 million will be raised. I assume the Minister stands by that figure, unless it has declined even further in the past few weeks. How much of that difference is down to the kind of deliberate evasion that clause 66 addresses, and how much is simply down to error in Treasury forecasts or—being generous—to changing economic circumstances and the impact of behavioural change? I should say for the record that, in the case of this tax, behavioural change is welcome, because it effectively means less sugar in soft drinks, with consequent benefits for public health. As I will touch on later, the dramatic shortfall in tax receipts has had some less desirable consequences.

I note that this measure comes into force at Royal Assent, rather than in the next tax year. We do not object to that, as measures to tackle tax evasion and avoidance should not be delayed. However, what steps have the Treasury and HMRC taken to ensure that businesses are alerted and that tax collectors can take full advantage? When does the Minister expect the first quarterly returns to be due under this measure?

Perhaps the Minister can explain what will happen should Royal Assent occur around the due date for a quarterly returns. If, for example, a quarterly return is due on 1 February—let us say, for argument’s sake, for the final quarter of the current financial year—and Royal Assent was achieved on 2 February, would the penalties be enforceable on a company that failed to submit, or would they not be retrospectively enforceable? Indeed, it would be helpful if the Minister could tell us what the due dates are for quarterly returns over the next year, what returns are required at the end of the financial year, and whether this measure applies to those or simply to returns at the end of each quarter.

Of course, the Minister is not responsible for the allocation of parliamentary time, so he may not be able to predict when Royal Assent is likely. When it comes to this Government, things are, to put it mildly, a bit unpredictable. Given the apparent trouble with their supply and confidence agreement, in which confidence seems to be somewhat lacking, the passage even of the Finance Bill may be a bit choppy when we go back downstairs to the main Chamber. [Interruption.] I apologise if I am keeping the Government Whip awake. Perhaps the Minister can tell us what the impact of different dates might be, and what consideration the Treasury has given to that in its assumptions and planning?

Clause 67 is designed to facilitate the movement between the UK and Isle of Man of soft drinks on which the industry levy has been paid, without that being designated as an import or export respectively for the purposes of the levy. It also adds the levy, and the Manx equivalent proposed by the Isle of Man Government, to the list of common duties in the Isle of Man Act 1979. After the introduction of the levy in April, eligible soft drinks that were brought into the UK from the Isle of Man were chargeable under section 33 of the Finance Act 2017, and those removed from the UK can attract an export credit. The Isle of Man, however, is introducing Manx SDIL from the next tax year, which is equivalent.

As the UK and Manx Governments have now agreed, in principle, to treat soft drinks that have been levy-paid in the one as being levy-paid in the other, and to share revenue, administration and enforcement of the respective levies, I understand from the Minister that the Government’s view is that those arrangements are, in effect, being superseded. The levy will therefore be treated as a common duty under the 1979 Act, with a commencement date to coincide with the introduction of the levy in the Isle of Man—in other words, at the start of the next tax year in April 2019. The Opposition have no objection to those arrangements, but I would ask the Minister to clarify a few points—before we lose the light completely.

First, the Manx SDIL is described in the Government’s accompanying notes as “modelled” on the UK version. Can the Minister clarify what that means? Is it identical or are there significant differences? The rates are presumably the same, but are there any variations in design? Have the Manx Government made any improvements in the structure or implementation, from which we could learn? Are we confident that they will be able to enforce the levy in a consistent way that does not create any incentives for producers to relocate from one jurisdiction to the other?

In the meantime, can the Minister assure us that we are not missing out on revenue that should be owed, due to failures of collection and enforcement at the point of import? Does he have any figures on the total revenue raised from charges on imported soft drinks from the Isle of Man?

I must confess that my knowledge of the Manx soft drinks industry is sadly limited, so perhaps the Minister can give us a sense of its scale and tell us whether there is a revenue impact. I would hazard a guess that it is likely that our import and export of soft drinks to and from the Isle of Man are not of identical value, but perhaps he can confirm that to the Committee either way.

Before I conclude, I want to return to the point about the overall revenue impacts of the two clauses in the context of the soft drinks industry levy. This is important, because when the levy was created, it was linked directly to investment in projects that would improve the health of our children. A ring-fenced sum was put aside for the healthy pupils capital fund, which would fund schools to create facilities for better physical and mental health, or for disability access. At the time that was announced by the then Secretary of State for Education, the right hon. Member for Putney (Justine Greening), the Government

“pledged to ensure that the amount schools receive will not fall below £415 million regardless of the funds generated by the levy.”

That solemn pledge, still available on the Department for Education website, did not last the year. Instead, the fund was cut by more than three quarters, to just £100 million for the year, when the Government desperately tried to plug their own gap in the main schools’ budget for one year only, by raiding the money that was meant to be ring-fenced for children’s health.

As a constituency MP, I know just how desperate schools in Norwich South are for funding. Schools have had to fire teaching assistants because of the budget constraints they find themselves in, and that money could have been very useful to them in helping our children and their educational attainment. I also know the impact that austerity has had on the health of our children.

When I represented the Opposition in February this year on the Delegated Legislation Committee implementing the levy, I pressed the Minister, and he assured us that

“regardless of how much is raised, the Government remain committed to funding the Department for Education with the £1 billion that we originally expected, and providing the devolved Administrations with the full amount that we promised at the time.”

He went on to say:

“Every penny of England’s share of the spending raised by the levy will go towards improving children’s health”.—[Official Report, Sixth Delegated Legislation Committee, 7 February 2018; c. 3.]

Perhaps he can confirm today whether that remains the case, and that the Government are not counting the £350 million that was cut from the healthy pupils fund towards the latter commitment. Secondly, I hope he can clarify that that applies to any additional revenue raised by the two clauses before us. If he can give us an expected amount, will he indicate how that will be allocated?

[Robert Jenrick]

I will respond to as many of those questions as I can; if I omit any answers, I will write to the hon. Gentleman.

With respect to the Isle of Man’s SDIL in clause 67, I am sorry to disappoint the hon. Gentleman, but no one currently produces soft drinks on the Isle of Man—so there is a business opportunity, should any of us need one in the near future. The Manx soft drinks industry levy is expected to be identical to the existing one in the rest of the United Kingdom. We do not expect that there will be any issues on enforcement, although we will of course continue to monitor that closely.

On the number of registered businesses, 450 have already registered. The top four of those by volume pay 90% of receipts, as one would perhaps expect.

In terms of publicising the changes to businesses, we have not specifically publicised those—we have taken a light touch in the first year of operation—but we do not anticipate any difficulties, given that there is only a small number of registered businesses.

The hon. Gentleman had a particular interest in the duty periods. The duty period runs from April to June, and that is due on 1 August. The July to September duty period is due on 1 November.

In terms of why we are taking this action now, we always intended to be as light touch as possible, but it is sensible to proceed with this housekeeping on behalf of HMRC to ensure the full range of compliance and penalty powers are available to combat non-compliance. We do not have evidence to date of any material degree of fraud or non-compliance, and certainly nothing that should make the hon. Gentleman or any other hon. Member concerned, but it is sensible and prudent for us to take this action, should circumstances change in the future.

The hon. Gentleman asked about some specific details, including how much the penalty will be for late returns. It will be £100 in the first instance, rising to £400 for four or more offences. The first late return will incur that fixed amount of £100. The penalty will then rise to £200 for a second late return within a 12-month period, to £300 thereafter, and eventually to £400. We think that is proportionate given that there has not been a significant problem to date, and that gives HMRC the powers it requires.

Where a return for a particular period is still not filed within 12 months, a further penalty will be issued, in the amount of 5%, 70% or 100% of the liability for the return period, depending on whether HMRC believes there has been a deliberate and concealed effort to withhold information, or £300—whichever is greater. Those are not excessive sums, but they give HMRC the powers it requires.

--- Later in debate ---

[Clive Lewis]

Does the Minister think a £400 fine is really a deterrent for a major international soft drinks manufacturer?

[Robert Jenrick]

That is a fair challenge, but given that we have no evidence of non-compliance or fraud, it is sensible to proceed on a relatively light-touch basis. If there were evidence of larger manufacturers being fraudulent or non-compliant, we might change things, but at the moment there is no such evidence. With those reassurances, I commend the clause to the Committee.

Question put and agreed to.

Clause 66 accordingly ordered to stand part of the Bill.

Clause 67 ordered to stand part of the Bill.

[The Chair]

I hope everyone has a wonderful weekend studying the terms of the withdrawal agreement.

Ordered, That further consideration be now adjourned.—(Craig Whittaker.)

Finance (No. 3) Bill (Fifth sitting)

Robert Jenrick Excerpts

Tuesday 4th December 2018 Public Bill Committees

[Jonathan Reynolds]

It is lovely to see you again in the chair, Ms Dorries, as we reconvene for this Committee’s second week. It is particularly good to see the Minister still here—I am never quite sure at the minute who will turn up on behalf of the Government.

I speak to Opposition amendments 73, 74 and 78 to clause 32, which focuses on first-year allowances and first-year tax credits. This measure would end the first-year allowance for all products on the technology and energy list and on the water technology list. Before I move on to why the Opposition feel strongly that the Government are wrong to end the first-year allowance, it is important to establish the extent of the allowance, its qualifications and the logic behind its introduction.

Enhanced capital allowances legislation was introduced in 2001 to encourage the use of energy-saving plant and machinery, low-emission cars, natural gas and hydrogen refuelling infrastructure, water conservation plant and machinery construction projects and so on. Under the relief, businesses that pay income or corporation tax can claim 100% of the first-year capital allowance on investment in ECA qualifying items. In addition, adoption of ECA qualifying items improve a project’s building research establishment environmental and assessment method—the BREEAM rating—and contribute to an improved energy performance certification rating.

To qualify, the item acquired must qualify as plant and machinery and satisfy the following criteria: it must not be second hand; the expenditure must have occurred after 1 April 2001; and the plant must either be a listed product or meet the energy saving or water conservation criteria specified by the Carbon Trust. Energy-saving technologies are things such as air-to-air energy recovery, automatic monitoring, boilers including biomass, combined heat and power units, compressed air equipment and so on. Water conservation technologies include efficient showers, taps and toilets, energy-efficient washing machines and more.

The Department for Business, Energy and Industrial Strategy describes enhanced capital allowances as different from standard capital allowances. It estimates that enhanced capital allowances are between 5.5 and 12.5 times greater than ordinary capital allowance relief. This accelerated cost saving further shortens the period of time and builds the business case for investment in energy-efficient equipment.

It is clear that this allowance encourages businesses to mitigate their environmental footprint and is designed to help the UK transition to a green and low-carbon economy. It is therefore disappointing that at a time when, as we have already discussed in this Committee, the United Nations Intergovernmental Panel on Climate Change has warned that climate change is at the point of becoming irreversible, the Government would choose to end such an effective relief.

Despite the positive steps that national Governments are taking all over the world to get citizens to recognise and limit their personal carbon footprint, businesses clearly have a role to play, too. We feel that the best way is to incentivise businesses, making it worth their while to use energy-saving and water-conserving technologies through tax relief. Taking away first-year allowances with little notice would only further alienate business at a time when we all need to do what we can to transition our economy to deal with the realities of climate change.

Although in its policy notes the Treasury suggests that small and medium-sized businesses will be shielded and the vast majority will be able to claim relief under the separate annual investment allowance, it concedes that large businesses will face additional costs and some level of disruption. Similarly, the Chancellor has stated that the revenue saved will be used to fund the industrial energy transformation fund. However, details about the fund remain scant, aside from the fact that it will be targeted at smaller businesses and funded through the end of these first-year allowances.

From the Opposition’s perspective, the change appears to be little more than a rebranding exercise designed to take an effective relief—first-year allowances—away and simply redirect that revenue into the Chancellor’s new fund. It is far from the radical industrial strategy that the UK needs to ensure that businesses and citizens are equipped to deal with climate change and the evolving energy market.

In the Budget, the Chancellor announced a consultation on a new business energy efficiency scheme, yet there appears to be little mention of whether businesses were consulted about ending this vital relief. Opposition amendment 78 would therefore require the Chancellor to report on what consultation has taken place.

The Government’s decision to end first-year allowances for energy-saving and water conservation technologies raises a further question about the effectiveness of this relief. Put simply, it is not broken, so the Government need to explain why they are planning to scrap it. That is certainly the sentiment behind Opposition amendments 74 and 73, which would require the Chancellor to undertake a review of the cost of extending the allowance to the end of this Parliament, and to 2030, respectively.

The reality is that the changes made by the Government in clause 32 appear to be revenue-led. They put the short-term priorities of the Treasury ahead of the UK’s long-term obligation to tackle climate change. Rather than empowering businesses to do their part and invest in energy-saving and water conservation technologies, it appears likely to deter them. We cannot see the logic of that. If the Government are sincere in their desire to create a better-targeted and more effective relief, they need to offer the Committee further details about the supposed industrial energy transformation fund to replace first-year allowances. If the Committee is being asked to endorse that change, let us have all the details first.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is a pleasure to serve under your chairmanship, Ms Dorries. After two days in the reassuring embrace of the Financial Secretary to the Treasury, the Committee has a brief interlude.

Clause 32 will make changes to end, from April 2020, first-year allowances for all products on the energy technology list and the water technology list, including the associated first-year tax credit. The environmental first-year allowances aimed to encourage greater take-up of environmentally friendly technology. Capital expenditure by businesses on plant and machinery normally qualifies for tax relief by way of capital allowances. Environmental first-year allowances allow 100% of the cost of an investment in qualifying plant and machinery to be written off against taxable income in the year of investment, providing a cash-flow benefit. The first-year tax credit provides a tax credit for loss-making businesses that invest in qualifying items.

The first-year allowance was introduced in 2001 for products on the energy technology list, and in 2003 for products on the water technology list. However, the allowances have made the tax system more complex, and there is very limited evidence that they have driven greater uptake of such technologies. A report by the Office of Tax Simplification found significant barriers to accessing the allowances, including the administrative burden of making claims. Government analysis suggests that less than 25% of energy managers would increase investment in energy-saving technology because of the allowances, while fewer than 20% of manufacturers report a positive impact on sales.

[Kirsty Blackman (Aberdeen North) (SNP)]

The Minister makes an interesting case, but it is what I would have expected as part of the report required by amendment 75. Will the Government accept the amendment and provide us with the information in report form, rather than having the Minister stand up here and tell us?

[Robert Jenrick]

I will come to the amendment in a moment, but I hope I will be able to reassure the hon. Lady and the hon. Member for Stalybridge and Hyde that we have already given the matter a great deal of thought and spoken to a number of stakeholders in the sector. Our actions are led by precisely the businesses that benefit from the existing reliefs.

For 99% of businesses, all plant and machinery is already eligible for full relief under the annual investment allowance, so the enhanced capital allowances provide no additional incentive. Smaller businesses such as those to which the hon. Gentleman refers have little if any reason to make use of those reliefs. The Government therefore believe that there are better ways to support energy efficiency.

The changes made by clause 32 will end the first-year allowances and the first-year tax credits from April 2020. In answer to the hon. Gentleman’s question about little notice, there is a significant amount of notice, beginning with the Budget this year, and these first-year tax rates not ending until April 2020. That is the point at which the industrial energy transformation fund will be available. Those rates will still be available until then, which will give businesses the time they need to prepare for change. The Government will look to lay secondary legislation in 2019 and update the lists of eligible technology, so that they can still be used and will be updated to include the most efficient technologies in the meantime. There is no sense in which those measures will fall behind with technological change.

To give some extra detail on some of the flaws with the current first-year allowance for energy technology, we found very low levels of awareness, as I have already described. Manufacturers estimate that less than a quarter of their customers are even aware of the scheme, and it provided little additionality. As I have set out, fewer than 25% of energy managers reported that the scheme influenced their investment decisions, and fewer than 20% of manufacturers reported that, if they did use it, it made a positive impact on their sales and businesses.

Many tax advisers reported to us that their clients decided to make claims after they had chosen to invest in efficient technology, so it did not have the impact that we would have hoped. Small companies are much less likely than larger companies to benefit, and 99% of companies would already be able to make such investments under the annual investment allowance. A 2017 survey by the Federation of Small Businesses found that only a quarter of small business owners were even aware of the scheme.

[Kirsty Blackman]

Is the Minister not making the case for more consultation in advance of any tax changes? Clearly, this tax change did not achieve what the Government thought it would. The consultations and information asked for are even more vital if the Government are making mistakes and not achieving what they had hoped.

[Robert Jenrick]

It is pretty clear from the evidence I have just laid out that the current tax reliefs do not work. We are making the changes required to ensure that smaller businesses, through the increased annual investment allowance, will have the allowance they need to make these investments. We will now work closely with other businesses, through the design of the industrial energy transformation fund, and a full consultation on that will be launched at the beginning of next year. We encourage the hon. Lady, businesses and other members of the Committee to take part in that consultation, as we design the successor fund to these reliefs.

The Government remain committed to increasing environmental efficiency, and the savings from ending first-year allowances and tax credits will be used to fund the industrial energy transformation fund. That fund will help businesses with high energy use to cut their energy bills and reduce their carbon emissions, by supporting investment in energy efficiency and other innovative decarbonisation technologies that may become available in the years ahead. Those could include, for example, investment in carbon capture and storage, or fuel-switching technologies. However, decisions on the scheme design, including eligibility and the technologies that will be supported, will be subject to the consultation with industry that I have just described. Establishing the scheme will fulfil our manifesto commitment to establish an energy efficiency scheme for industry, and that has been widely welcomed, including by groups such as EEF, the manufacturers’ organisation; UK Steel and the Energy Intensive Users Group. Since the Budget, I have spoken to a number of heavy users of energy, including car manufacturers, who all welcome this measure.

[Clive Lewis (Norwich South) (Lab)]

Is the Minister aware that some businesses are concerned that the Government are ending one scheme without having another in place? That causes uncertainty for business at a time when they need more certainty than they have had for a long time.

[Robert Jenrick]

I hear that concern, and that was the reason we chose not to end the scheme immediately. The scheme will end in April 2020. Until then it will continue as it does today, and be regularly updated with new technologies. If a company that makes use of it knows of a new technology that it wants to be part of the scheme, it will be possible for that to be added. The scheme will continue exactly as is until April 2020, by which time the new one will be in place. As a result of this year’s Budget, the annual investment allowance will also go up to £1 million, so additional allowances will be available to those businesses.

Amendments 73 and 74 would require the Government to publish a review of the cost of extending first-year allowances to 2030 and 2022. As set out in the policy costings document that we published alongside the Budget, ending the allowances will save £160 million by 2021-22. As we announced in the Budget, savings from ending the allowances will be invested in an industrial energy transformation fund of up to £315 million. Our primary motivation is finding a better way to help businesses be more energy-efficient—not saving money for the Exchequer, as was suggested—and we believe that our approach makes more efficient use of public funds. We anticipate that the average annual cost of extending first-year allowances would remain at around the same level until 2030. The figures are already known and in the public domain, so I urge the Committee to reject amendments 73 and 74 because the information that they request is already available.

Amendments 75 and 76 would require the Government to publish a review of the impact of clause 32 on the energy and water technology sectors. I hope that I have already provided the Committee with an answer to those points, removing the necessity of such reports. As I have set out, there is little evidence that the first-year allowances lead to a greater uptake of environmental technology, so the Government do not believe that such reports would provide any significant additional information. Furthermore, the Government support business investment in other, more efficient and dynamic ways, through the increase in the annual investment allowance and the creation of the industrial energy transformation fund.

[Jonathan Reynolds]

I am listening carefully to the Minister, but if the increase in the annual investment allowance replaces the first-year allowances or mitigates their loss, it seems that there is no fiscal incentive to invest in energy-efficient or climate change-relevant technology. The Opposition believe that we should try to operate the policy as a fiscal instrument to direct investment into the technologies that we need, but I do not see that described in the Minister’s answer.

[Robert Jenrick]

I have described it; that is the rationale for replacing the first-year allowance with the energy transformation fund. Had we chosen simply to remove the allowances and replace them solely with the increase in the annual investment allowance, the hon. Gentleman would be correct: 99% of businesses could proceed broadly as they do today, but they would not have a specific incentive to choose environmental equipment, plant and machinery or energy efficiency measures. However, by coupling the increase in the annual investment allowance with the transformation fund, we hope to shift the dial in favour of technology that helps the environment.

Amendment 77 would require the Government to review the impact of clause 32 on the UK’s ability to meet its carbon budgets. I assure the Committee that there are already robust requirements to report on progress towards the UK’s emissions reduction targets. When the measures in the Budget and the Bill become law, they will become part of that regime.

The Climate Change Act 2008 provides a world-leading governance framework that ensures that progress towards carbon targets is robustly monitored and reported to Parliament. First, the Government are required to prepare and lay before Parliament an annual statement of emissions that sets out the total greenhouse gases emitted to and removed from the atmosphere across the UK, and the steps taken to calculate the net UK carbon account. Secondly, the independent Committee on Climate Change is required to prepare and lay before Parliament an annual report, to which the Government are required to respond, on the Government’s progress towards meeting the UK’s carbon budgets. I would expect the committee to take the changes made by clause 32 into account in their deliberations. Thirdly, the Government are required to prepare and lay before Parliament a statement that sets out performance against each carbon budget period and the 2050 target.

[Clive Lewis]

I thank the Minister for his patience. As I understand it, having requested an analysis from the Minister responsible for carbon budgets on whether the Government were going to take into account the recent evidence from the Intergovernmental Panel on Climate Change on the 1.5° warming, the fourth and fifth carbon budgets do not currently do that. I have been told that there will be no assessment of the 1.5° warming until after 2030 when the fifth carbon budget concludes. Was the Minister aware of that and will he comment on the fact that that could have a severe impact on our ability to be able to achieve the targets?

[Robert Jenrick]

The IPCC will report in the usual way. It will not necessarily update its methodology, but it will lay before Parliament its usual statement and the Government will have to respond, as they have in every case. The Committee on Climate Change will hold the Government to account for the changes that we make, such as the ones in the Bill. That does not entirely answer the hon. Gentleman’s question on future targets. The mechanisms in place are strong and will ensure monitoring and reporting to Parliament of greenhouse gas emissions and of the Government’s responses. I therefore urge Members to reject amendment 77.

Amendment 78 would require the Government to report on any consultation undertaken on the provisions in clause 32. The Government consult stakeholders on an ongoing basis to inform all their policies. The provisions in clause 32 are no different. This includes, for example, surveys of relevant manufacturers and a call for evidence on helping businesses to improve the way they use energy, which was conducted by the Department for Business, Energy and Industrial Strategy. It would therefore not make sense to report further on the consultation that the Government have already undertaken on first- year allowances. Her Majesty’s Treasury Ministers meet manufacturers regularly, as I have said. I have met automotive manufacturers since the Budget and they welcome the changes.

The legislation was not released in draft because this is a simple abolition and does not constitute a measure that we would consult on normally. The Government stated in the new budget timetable and the tax-making process, which was published last year, that they will generally not consult on straightforward rates, allowances and threshold changes because they do not benefit from that process. I therefore urge Members to reject amendment 78.

The removal of the first-year allowances and associated first-year tax credits will allow the Government more effectively to support businesses to cut their energy bills and reduce carbon emissions. It will enable us to redirect the funds to the industrial energy transformation fund, which has been widely welcomed. I hope Members who are interested will take part in the consultation next year so that we can ensure it meets the requirements of industry and those who care about the environment. I therefore commend this clause to the Committee.

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Robert Jenrick]

After that excellent start, I will continue. Clause 33 extends the life of the first-year allowances for electric vehicle charge points until April 2023. In the UK, the continued use of high-emission vehicles creates pollution and increases health issues. This measure was first introduced on 23 November 2016 to support the transition in the UK to cleaner vehicles with zero or ultra-low emissions. The measure allows businesses that invest in charge points to reduce their taxable profits by 100% of the cost of their investment in the year it is made. That provides accelerated tax relief compared with normal capital allowances, and so encourages greater investment in these assets. The allowance is currently due to expire in April 2019. The clause enables the first-year allowance to continue as part of the Government’s ambition for all new cars and vans to be zero emission by 2040.

[Bim Afolami (Hitchin and Harpenden) (Con)]

Yesterday evening, for some light relief, I was going through emails from constituents. One constituent runs a business that installs electric charging points. Will the Minister illustrate for the Committee how he thinks that business will flourish as a result of these measures?

[Robert Jenrick]

The Government have taken two measures, the first of which was in the last Budget. That created an electric charge point investment fund— £200 million of public investment—which is designed to spur an extra £200 million of private investment. A business such as the one my hon. Friend describes could be part of that. The measure could enable the business to partner with the public sector and gain the capital that it needs to develop, and will be able to take advantage of the allowance and invest early. There are now two opportunities for such a business to take advantage of tax reliefs and public investment in order to grow rapidly and enter the market.

[Peter Dowd (Bootle) (Lab)]

I do not deny the Minister’s point per se. Is there any implication that businesses that have chargers could be subject to a rating revaluation, which would put the cost of their business rate up? Perhaps the Minister could clarify that important point.

[Robert Jenrick]

The hon. Gentleman makes a valid point and I will reply—the powers that be will return to me in a moment.

The changes made by clause 33 will extend the current 100% first-year allowance for expenditure incurred on electric charge point equipment for a further four-year period until April 2023. That will encourage the increased use of electric vehicles by supporting the vital development and installation of charging infrastructure for such vehicles, to which drivers will look when deciding whether to buy them.

[Sir Robert Syms (Poole) (Con)]

Will the Minister give way?

[Robert Jenrick]

Perhaps I could reply to the hon. Member for Bootle before taking a further intervention.

[Peter Dowd]

Providing inspiration arrives.

[Robert Jenrick]

Or not, as the case may be. We will have to write to the hon. Gentleman, I am afraid. He has outfoxed our officials.

[Sir Robert Syms]

Is the funding available to businesses also available to local authorities, because many of them put in charging points, or does that not apply to councils?

[Robert Jenrick]

I understand that this would apply only to private businesses. Other interventions help the public sector, such as the charging infrastructure investment fund, which local authorities can become involved in if they wish to develop infrastructure in their area. There were a number of wider measures in the Government’s Road to Zero strategy, including consulting on changes to the planning system to ensure that new business and residential properties, as well as public sector projects such as new council offices, hospitals and so on, are built with the infrastructure in place to support these vehicles.

The allowance will expire on 31 March 2023 for corporation tax purposes and on 5 April 2023 for income tax purposes. This extension is expected to have a negligible impact on the Exchequer. There are no anticipated costs to Her Majesty’s Revenue and Customs and neither will there be any significant economic impact nor any additional ongoing costs for businesses beyond the investment that will be generated.

In conclusion, this extension will incentivise the use of cleaner vehicles by encouraging companies to invest in electric vehicle charge points, giving confidence to drivers to shift away from current combustion propelled options in the knowledge that the further roll-out of charge points will continue and accelerate in the years ahead, and reduce all the damage to the environment and public health that follows. I commend this clause to the Committee.

[Jonathan Reynolds]

Having just passed clause 32, which ended first-year allowances on the basis they were little known about and ineffective, I cannot help but comment how clause 33 extends the first-year allowance for another technology for four years on the basis it will provide the incentives and drive Government policy in that direction. Forgive me for pointing out that there are mixed messages from Ministers on these clauses.

It is disheartening that this is one of the relatively few mentions of environmental issues in the Finance Bill. We were all at Mansion House in June when the Chancellor gave a speech about how we would lead the way on green finance, yet there have been no legislative measures to follow up on that promise. We still lag behind our European counterparts on things such as mandatory climate disclosure laws or sovereign green bonds, but we should welcome any measures we like the look of when we see them.

Transport is a major source of emissions and we agree that we rapidly need to shift away from fossil fuels towards electricity and renewable sources and, to a certain extent, hydrogen for heavier vehicles. Thankfully, electric vehicles are coming through the system quickly and are expected to move rapidly through their cost curves, getting cheaper and cheaper. I have been hugely impressed by the electric vehicles I have experienced. Some estimates have cost parity for purchasing an electric vehicle as soon as 2022, after which buying an electric vehicle will become cheaper than buying a fossil fuel powered car.

The transition to a decarbonised, clean and smart economy will offer the UK many advantages, particularly considering how tech-savvy and early adopting much of the UK population is. The Nissan LEAF is the most-sold electric vehicle in the world. I say with some local pride, as someone born in Sunderland, that Sunderland has been the sole producer in Europe of the Nissan LEAF, creating over 50,000 vehicles. Of course, electric vehicle and hybrid production in the UK has provided a £3 billion trade surplus.

With a growing list of countries setting a date to ban combustion vehicles and modelling showing strong uptake curves, the global move to electric vehicles will be rapid. The first mover advantage to capture supply chains and jobs in this coming market will be considerable.

--- Later in debate ---

[Robert Jenrick]

I hope I can reassure the hon. Gentleman on those points. The first point was about why we would choose to extend this measure at the same time as bringing another to an end. We chose to bring the other one to an end because the evidence was not there to support its continuation. Having given the matter careful analysis, we believed that there was a better way forward.

We are still at a very early stage in the process. It is too early to assess the precise impact of this measure. We know that the total number of electric charge point connections has increased from more than 13,000 in November 2017 to more than 18,000 in October 2018—a 38% increase. Clearly, we would like that to accelerate even further, because that is still a small number across the whole of the country. We believe, anecdotally, that the measure is working and that it has been welcomed by the industry, but it is too early to assess that precisely. We are placing an extension in the Bill to ensure it can continue and to give certainty to the market. We will review this measure in time, as we have done with other measures, to determine its effectiveness. If it is not working correctly, we will take action accordingly.

The hon. Gentleman asked why the Budget did not do more for the environment. Of course, I contest that. The Budget did set out a wide range of measures to help the environment, from the new plastics tax, which will be consulted on and legislated on in the next Finance Bill—we hope it will be one of the world’s first plastic packaging taxes—to the measures already set out in the Finance Bill, such as this one and the vehicle excise duty measure on taxis, which we brought into effect a year early, and which has ensured that cities such as London and Manchester are seeing a great increase in low emission taxis.

We have already spoken about the industrial energy transformation fund, which we hope will put heavy users of energy on a more sustainable path. These things build on recent announcements, whether it is the industrial strategy and its commitment to the environment and to clean growth, or the Road to Zero strategy with respect to electric vehicles. Across Government, we are taking a wide range of measures to support the environment and to help businesses and individuals to cut their energy bills and lower carbon emissions.

The hon. Gentleman asked about the electric vehicle charging infrastructure fund. This was announced at the Budget last year, and we have now progressed the fund. We are in the final stages of selecting a fund manager, and once they are appointed we expect the fund to be formally launched and to start investing in early 2019. I hope to be able to give the hon. Gentleman and others more information on that very shortly so that businesses that wish to participate in it can start to access that £200 million and we can increase public and private investment in charging infrastructure very rapidly.

Small businesses, which the hon. Gentleman raised, will be able to claim under the annual investment allowances, which we have debated on a number of occasions. As I have said before, 99% of businesses will be able to claim under the annual investment allowances, which is a considerable increase as a result of the Budget and will help businesses that want to invest in this area.

On solar, the feed-in tariff scheme has supported over 800,000 small-scale installations, generating enough electricity to power 2 million homes. The scheme has helped to drive down the cost of renewable electricity, including small-scale solar photovoltaic. We therefore think it is right to protect consumers and to review the incentives as costs begin to fall. The Government—and indeed the Government before us—have made significant interventions in this area. With those reassurances, I hope the hon. Gentleman will support the clause.

Question put and agreed to.

Clause 33 accordingly ordered to stand part of the Bill.

Clause 34

Qualifying expenditure: buildings, structures and land

[Jonathan Reynolds]

I beg to move amendment 79, in clause 34, page 19, line 38, at end insert—

“(4) The Chancellor of the Exchequer must lay before the House of Commons a report on any consultation undertaken on the provisions in this section within two months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to report on any consultation undertaken on the provisions in this clause.

--- Later in debate ---

[The Chair]

With this it will be convenient to discuss the following:

Amendment 84, in schedule 14, page 260, line 15, leave out sub-paragraph (d).

The provision as drafted allows companies to transfer TTH worth double the value of anticipated decommissioning costs. This reduces the incentive for companies towards efficiencies in decommissioning costs and paves the way for decommissioning-related tax repayments far bigger than the companies are currently acknowledging. This amendment removes that provision.

Amendment 81, in schedule 14, page 261, line 29, at end insert—

“(aa) assessing the impact on employment, skills and the Exchequer from the asset’s production life and planned decommissioning phase, and”

Amendment 89, in schedule 14, page 261, line 42, at end insert—

“(d) includes an assessment of the impact on the Exchequer from the amount spent on directly employed and contracted staff by the seller over the production life of the asset to date; and the impact on the Exchequer from the buyer’s plans for employed and contracted staff up to and including the decommissioning stage.”

This amendment requires a decommissioning security agreement to include an assessment of the impact on the Exchequer from the amount spent on staff, in order for that agreement to be qualifying for the purposes of this Schedule.

Amendment 85, in schedule 14, page 268, line 40, at end insert—

“(aa) the amount spent by the purchaser in post-acquisition periods on new capital investment, major maintenance work, retraining of redundant staff, initiatives to reduce methane emissions or initiatives to introduce carbon-capture techniques into the operations in relation to the relevant TTH assets (‘post-acquisition qualifying investment’)”.

This amendment, and amendments 86 and 87 incentivize capital investment by new purchasers in job creation and emissions reductions. Combined, the amendments limit the TTH which may be claimed to an amount equal to such investment.

Amendment 86, in schedule 14, page 269, line 3 at end insert—

“(c) the amount by which total post-acquisition qualifying investment exceeded the higher of excess decommissioning expenditure and the total TTH amount as calculated for the first activation period under paragraph 35.”

See explanatory statement for Amendment 85.

Amendment 87, in schedule 14, page 269, line 40, at end insert—

“(c) provided that the total activated TTH amount may never exceed the purchaser’s post-acquisition qualifying investment for the relevant TTH assets or TTH oil fields.”

See explanatory statement for Amendment 85.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 37 stand part.

[Robert Jenrick]

Clause 36 and schedule 14 introduce a transferable tax history—TTH, as it has become known—mechanism, and clause 37 amends the petroleum revenue tax rules for retained decommissioning costs. Both measures will apply to oil and gas companies operating on the UK continental shelf, and to transactions that receive approval from the Oil and Gas Authority or relevant regulator on or after 1 November 2018.

These measures are designed to encourage investment in late-life oil and gas assets that are approaching the point of decommissioning, prolonging the life of the basin and sustaining jobs across the UK, but in particular in north-east Scotland. Decommissioning costs are generally incurred at the end of a field’s productive life, when taxable profits are not being generated. To provide tax relief for those costs, oil and gas companies within the UK’s ring fence tax regime can carry them back against taxable profits generated since 2002. That prevents decommissioning from being performed early for tax purposes, thereby helping to achieve the Government’s goal of maximising economic recovery of oil and gas.

When a new entrant without a history of taxable profits acquires an old field, there is a risk that the decommissioning costs of the field will exceed the taxable profits generated by the new owner, preventing effective tax relief via the traditional carry-back mechanism and leaving the buyer in a worse position than the seller would have been in. That can make old fields unattractive to new entrants and deter much-needed investment in this important industry. That is a growing problem in an ageing basin, but one that we now believe can be resolved by our innovative TTH measure.

The change to the PRT rules addresses the increasingly common scenario of a seller retaining some or all of a decommissioning liability after selling a field. The PRT system currently requires the seller to remain on the relevant production licence to receive tax relief for any retained costs. However, doing so often requires complex tax structuring that serves no particular purpose other than to protect the seller’s tax position.

The changes made by these measures will create the right environment for much-needed new investment in our older fields. They will introduce a TTH mechanism that provides new investors with the certainty that they require about the tax relief they will receive for decommissioning costs. That will allow new deals to proceed, injecting new energy into a basin that still has 10 billion to 20 billion barrels of oil remaining. Initial feedback from the industry has been extremely positive—this change is already well received internationally and is helping new deals to continue.

TTH will allow companies selling oil and gas fields to transfer some of their tax payment history to the buyers of those fields. The buyers will then be able to set the costs of decommissioning the field against the TTH to generate a repayment. It should be noted that that should not be an extra cost to the Exchequer, as the repayment only replaces what would otherwise have been made by the seller. It will level the playing field between sellers and buyers of oil and gas fields, encouraging investment by providing new entrants with certainty on the tax relief available for their decommissioning costs. The new investment into the basin as a result of TTH is expected to increase tax receipts from the sector by £75 million over the scorecard period.

The clause also makes changes to enable petroleum revenue tax relief when a seller retains a decommissioning liability. A tax deduction will now become available to the buyer where the seller subsequently incurs decommissioning expenditure or where the seller contributes to the buyer’s decommissioning costs. That will simplify the way that older oilfields can be sold to new investors and help to prolong their productive lives. Before turning to the amendments, I thank all hon. Members, including the hon. Member for Aberdeen North, who participated in the discussions that led to this important measure, which we believe will help the community around Aberdeen in particular, but also those across the country.

Amendments 81 and 89 seek to amend the definition of a decommissioning security agreement within the TTH legislation in schedule 14. Decommissioning security agreements are specific commercial agreements that provide assurance to partners in a field for which funds will be available for decommissioning. The proposed changes to the definition would make the decommissioning security agreement required for a TTH election incompatible with the industry standard decommissioning security agreement, which, in our opinion, would make TTH elections impracticable and unworkable for the vast majority of our oil and gas fields, which rely on the well-established and respected industry standard agreement. TTH has been carefully designed to leverage estimates of decommissioning costs, which are already used in decommissioning security agreements, taking note of the history of the agreements. The agreements are confidential and, as one might imagine, highly commercially sensitive and are typically shared only between the joint venture partners and HMRC, in accordance with taxpayer confidentiality.

[Kirsty Blackman]

Will the Minister tell us a little bit about the process that the Government went through in creating the Bill, and the work done between the Government and industry to ensure that the legislation works?

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[Robert Jenrick]

Yes, I will turn to that. As the hon. Lady knows—she participated in and attended at least one meeting I held in Aberdeen with the Oil and Gas Authority and stakeholders—we have carried out a great deal of careful consideration and consultation with the industry, because TTH will succeed only if it works for both the buyers and the sellers. Our sole objective is not to raise revenue for the Exchequer but to extend the life of the basin and to create jobs and investment for an important part of the United Kingdom.

The new investment encouraged by TTH will prolong the life of the basin, which has 10 billion to 20 billion more barrels left, helping to protect the hundreds of thousands of jobs I have already mentioned. We believe that the amendments would introduce counterproductive additional requirements and inhibit the use of TTH. I urge the Committee to reject them. They may be well intentioned, but they would be contrary to the objective of the measure.

Amendment 84 would limit the maximum amount of tax history that a seller can transfer under a TTH election. The TTH legislation currently caps the maximum amount of tax history that can be transferred under a TTH election to double the decommissioning cost estimate agreed for a decommissioning security agreement. Decommissioning costs are inherently uncertain and can increase significantly for reasons outside the control of the operator and for reasons that were unknown at the time of the sale. For that reason, they are typically subject to a very large range of accuracy. For fields still years away from decommissioning, the range often includes a 100% cost increase. TTH has been designed to be compatible with this regularly accepted range of estimates and to ensure that the buyer cannot end up in a worse position than the seller.

[Kirsty Blackman]

I agree with the Minister’s point about fluctuations. Does he agree that the cost of hiring boats has fluctuated massively over the past five years? If we had looked at this in 2010, we could not have predicted the fluctuations in just that small but nevertheless incredibly expensive area for oil and gas companies.

[Robert Jenrick]

The hon. Lady speaks from her deep knowledge of this area. It is absolutely right that some costs have fallen, particularly since the fall in the oil price, which has driven significant efficiencies in the sector, but other costs are rising. New technologies are coming on board. Taking on a project that entails such uncertainty while being tied to a single estimate of decommissioning costs, without a wide range as we have allowed in the measure, would be a major disincentive for a buyer coming in to one of these projects.

Let me address the concern inherent in the amendments about disincentivising cost-reduction, or that the measure, in providing such a wide field, would make it unlikely for buyers to try to reduce the cost and therefore would gain higher tax relief as a result. I think the buyer will retain a strong incentive to minimise total costs, as they will be liable for meeting the remainder of the decommissioning costs. The amendment is therefore unnecessarily restrictive and would harm TTH.

Amendments 85, 86 and 87 and schedule 14 would change the TTH activation mechanism to restrict decommissioning tax relief on a field, so that it could not exceed the level of new capital investment made by a purchaser. Decommissioning costs generally occur at the end of a field’s life, when its reserves are exhausted and new capital investment will not result in further economic recovery of oil or gas reserves. For many purchasers it would therefore not be practical to make significant capital investment during the decommissioning process.

Furthermore, requiring the purchaser to match what can be very high decommissioning costs with an equal level of new capital investment could easily bankrupt many of the smaller operators that we want to take part in the industry. The best way to ensure that we get new investment into the industry, to protect jobs and create new ones, and to maximise economic recovery of our natural resources, is to have an effective TTH mechanism. That is exactly what we believe we have achieved, as a result of the deep consultation that we have conducted with industry, which I will explain in a moment. The amendments would make TTH completely unattractive and ineffective. I therefore urge the Committee to reject them.

In answer to the hon. Member for Aberdeen North, I will briefly summarise the steps that we have taken to consult with the industry since TTH was announced at Budget 2017. Even prior to Budget 2017, the topic had been discussed with stakeholders for some time. We have built on numerous discussions held between July and December 2016, by issuing at the time of the Budget a discussion paper on tax issues affecting late-life oil and gas assets. We received 28 detailed responses and then held an expert panel, working with the industry to design the measure. I myself held two meetings in Aberdeen this year with the Oil and Gas Authority and stakeholders. Draft legislation was published over the summer on L-day, for technical consultation with the industry. We received further feedback as a result and much of that has been incorporated into the final legislation. Although there are always ways to take the measure further, we believe we have reached a point where the industry is satisfied and welcomes the steps we have taken.

[Peter Dowd]

Trade unions have argued that more conditions need to be attached to TTH to bring it in line with OGA and maximising economic recovery objectives, and for broader commercial behaviours, which should include minimum compliance with UK employment law—workers being paid and employers paying tax and national insurance. Did that form any part of the discussions with the industry and stakeholders?

[Robert Jenrick]

I do not think we spoke specifically with trade unions but we did speak with a wide range of industry stakeholders. To return to TTH, its purpose is not to give an incentive to industry that it would not ordinarily have. The owner or operator of one of those fields would already be able to take advantage of those tax reliefs to set aside decommissioning costs, but they would be difficult to sell on to a new operator. This measure will make it much easier for new entrants to enter the market, for fields to continue or be developed further, and for jobs to be created that would not ordinarily be created. We believe that this is a win-win for all involved: for the Exchequer, which will make modest additional receipts as a result, for industry, and for all those employed in north-east Scotland—I see the hon. Member for Aberdeen North nodding. I believe this measure will be widely welcomed and well received by all stakeholders in the industry.

The best way to get new investment into our industry is, as I described, to protect jobs and maximise the economic recovery, and we believe that we have reached that point with this measure. The Government take their environmental responsibilities seriously, as we described when debating the previous clause. We have legally binding commitments to reduce greenhouse gas emissions under the Climate Change Act 2008 and the system of carbon budgets it sets out, as well as the Paris agreement that we ratified in November 2016. Nothing in this measure takes away from our efforts elsewhere, but we want the UK oil and gas industry to continue to thrive. It has been through a difficult period following a significant reduction in the price of oil, and that price has fallen once more since the Budget. That industry makes an important contribution to the UK economy, supports more than 280,000 jobs, and provides around half our primary energy needs. To date, it has paid around £330 billion in production taxes. By introducing these changes for late-life oil and gas assets, we hope to encourage new investment in the UK continental shelf, and I commend the clause to the House.

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[Sir Robert Syms]

In my lifetime, the greatest British success story has been the development of North sea oil. As the Minister set out very clearly, billions of pounds of taxation have been generated. Under successive Governments we have had a tax regime that has been balanced against the risk of the investment that companies have had to take. It is therefore perfectly sensible at this stage of the maturity of the oilfields to use tax policy to ensure that the oilfields continue longer and continue to create jobs and to support, as the hon. Member for Aberdeen North said, the worldwide oil services sector based in Aberdeen.

I thank the Minister for what he is doing, which is perfectly sensible. It will generate more tax revenue. I hope we will oppose the amendments because they would make an intended simplification of the tax system more complicated. At the end of the day, we want people to continue to pump oil in the North sea and keep the jobs rolling. The Government’s policy supports that.

[Robert Jenrick]

In the few minutes that remain, I wish to thank the hon. Member for Aberdeen North for her comments and her helpful exposition of the purposes of this policy, which is to create jobs and wealth for the whole country, and particularly for the area that she represents. We would be concerned, as the hon. Lady said, if we created a two-tier system where new entrants—predominantly smaller and often innovative businesses that want to enter the market—had to live up to higher standards than the predominantly larger and more established businesses that they are trying to take on. As she has done, I thank some of the stakeholders who have helped us to develop this policy, including Oil & Gas UK, which has been excellent throughout the preparation of this measure.

Rather like my hon. Friend the Member for Poole, I am surprised by the Labour party’s position in this area. There has been a broad, cross-party consensus throughout my lifetime that North sea oil and gas are of benefit to the United Kingdom and an important asset to the country. Political risk will deter new investment into that field, if international companies that would like to invest in the North sea oil and gas sector believe that the Opposition in the United Kingdom are likely to increase their taxes, make those taxes more complex and disincentivise future investment.

[Clive Lewis]

We would like to put on the record that we are not giving up on North sea oil. Rather, we have an appreciation for the climate emergency that is taking place, and we ask for a reassessment of how we can sustainably recover those assets. That is all we are asking for.

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[Robert Jenrick]

I will briefly answer some of those points. There has been a misunderstanding about the cost of the policy to the Exchequer. We believe, as is set out quite clearly, that over the scorecard period the measure will raise £65 million of revenue for the Exchequer. Because of the nature of the oil and gas industry and oil price fluctuations, that is a difficult assessment to make. However, we see no evidence for the more outlandish estimates in the press of a £3 billion cost to the Exchequer. Neither did the independent OBR, which checked our figures in relation to the measure and agreed that £65 million was an appropriate estimate over the forecast period. We believe that the measure is fiscally responsible because no additional tax relief will be due until the field is decommissioned. That will enable more fields to be developed, and decommissioning costs will be as they always were.

We see no evidence that the measure will disincentivise efficiency savings and productivity increases. As the hon. Member for Aberdeen North said, there is a great incentive on all parties to reduce the cost of decommissioning. The industry has signed up with Government to a target of reducing the costs of decommissioning by 35%. We would like them to go even further in the years ahead, and there is a lot of work going on to achieve that. We believe that the United Kingdom, particularly the area around Aberdeen, could be a world centre for decommissioning, and we are investing in facilities and training in that regard. We would like to work on that with the industry, because we see it as creating knowledge, new technology and jobs, which would then be exported to other fields around the world.

[Kirsty Blackman]

I am really pleased to hear the Government make that commitment in relation to the world centre for decommissioning. We are talking about one of the first oil and gas fields to decommission on a mass scale. It is important that the lessons that we learn from that are used to improve and export the technology.

[Robert Jenrick]

I think I have answered those points. There was a misunderstanding about decommissioning security agreements, which I hope I have answered. Decommissioning security agreements are confidential and commercially sensitive documents. Amendment 89 would not achieve the aim that the hon. Member for Norwich South set out, because such agreements will not be in the public domain. The documents will be received by HMRC, and decommissioning costs are regulated by the Offshore Petroleum Regulator for Environment and Decommissioning.