Decommissioning Relief Deeds
Robert Jenrick Excerpts(6 years, 3 months ago)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
At Budget 2013, the Government announced it would begin signing decommissioning relief deeds. These deeds represent a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.
Since October 2013, the Government have entered into 86 decommissioning relief deeds.
Oil and Gas UK estimates that these deeds have so far unlocked more than £5.7 billion of capital, which can now be invested elsewhere. In compiling this estimate, Oil and Gas UK discovered a clerical error in their previous estimate. As a correction, the figure reported for 2015-16 should have read £5.5 billion. Independent checks have been made to ensure the error has not been repeated.
The Government committed to report to Parliament every year on progress with the deeds. The report for financial year 2016-17 is provided below.
Number of decommissioning relief agreements entered into: the Government entered into 11 decommissioning relief agreements in 2016-17.
Total number of decommissioning relief agreements in force at the end of that year: 83 decommissioning relief agreements were in force at the end of the year.
Number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: two payments were made under a decommissioning relief agreement in 2016-17, totalling £5.4 million. These were made in relation to the provision recognised by HM Treasury in 2015, as a result of a company defaulting on their decommissioning obligations.
Total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: two payments have been made under any decommissioning relief agreement as at the end of the 2016-17 financial year, totalling £5.4 million.
Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2015-16 accounts recognise a provision of an aggregate £327 million in respect of decommissioning expenditure incurred as a result of a company defaulting on their decommissioning obligations. The majority of this is expected to be realised over the next five years.
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The Economy
Robert Jenrick Excerpts(6 years, 3 months ago)
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Vicky Ford (Chelmsford) (Con)
It is a great honour to follow the hon. Member for Shannon, which is a beautiful part of our United Kingdom, and it is great to hear so much positive news. [Hon. Members: “Strangford!”] I mean the hon. Member for Strangford (Jim Shannon). I know the area well.
I have frequently said that the economy must come first, because only with a strong economy can we maintain our public purse and fund our other ambitions for healthcare, welfare, education and security. That is why it is such excellent news that the deficit is under control, the debt is falling, employment is at record highs, unemployment is at record lows, inflation is coming back down, real wages are set to rise, and our economic performance is outstanding. Manufacturing output is up for, I think, the ninth month in a row. It is almost impossible to open a newspaper today without seeing yet another good-news story about our economic statistics. [Interruption.] I hear Labour Members laughing, but let us not forget the state in which they left the economy.
A strong economy, however, must be a strong economy for all, and that is why I am also pleased that wealth inequalities are shrinking and the gap between the richer and the poorer is becoming less enormous.
As I said in my maiden speech, innovation drives growth, and science and research are at the heart of that innovation. I am a member of the Science and Technology Committee. We are in the middle of a digital revolution, the world’s fourth industrial revolution. We are world leaders in science and technology, and it is key to our success that we maintain that status. I am therefore delighted that science and research are at the heart of the Government’s industrial strategy, and that the commitment to increasing investment in research and development to a massive 2.4% of GDP is coupled with the largest investment in research and innovation by any Government in 40 years.
Vicky Ford
Is it now the largest ever? I thank my hon. Friend.
Those are phenomenal targets, ambitions and spending, but they are coupled with specific, targeted actions to unlock some of the most innovative sectors. It has been great to be in the House when we have been discussing how to unlock investment in the next generation’s batteries so that we can get the automated vehicles sector up and running and leading the world. My constituency is the home of radio. The first ever radar messages were sent out to the world from Chelmsford. The Space Industry Bill will mean that this country can not only make satellites and be part of their manufacture, but actually launch them.
I also spoke about productivity in my maiden speech, because it is key to our success. I said then that the people of Chelmsford spent too much time sitting in traffic jams and waiting for delayed trains, that it was a waste of their personal time, and that it hit the nation’s productivity. I was so pleased yesterday when the Government identified 44 parts of the country that would receive a further £4.4 billion of investment in our roads, railways and infrastructure. My part of Essex is a key element of that. The infrastructure in which the Government are investing will help not just to deliver new housing for the future, but to unlock our productivity and enable people to get on with their lives.
I want to say something about taxation, because it is part of the big picture of how we get the economy working. Under the last Labour Government, I was working as a volunteer chairing the local free school. I recall one of my best members of staff coming to me and saying that she had to hand in her notice because she simply could not afford to work any more: she would be better off claiming benefits. Ensuring that the tax system works for those who are on the lowest incomes, and ensuring that work pays, has been key to the Government’s success. That is why I am so proud that 4 million people have been taken out of tax altogether, and 24 million, I believe—the figure may have increased—have benefited from tax cuts. The tax gap has in fact narrowed, and those on the lowest incomes are now paying the lowest tax, with those on the highest paying more.
The Exchequer Secretary to the Treasury (Robert Jenrick)
I thank all right hon. and hon. Members for their contributions today. We have heard a succession of Opposition Members espousing doom and gloom. There was one honourable exception—the hon. Member for Strangford (Jim Shannon). In that cocktail was mixed a dose of collective amnesia about the legacy of the last Labour Government. The shadow Minister, the hon. Member for Oxford East (Anneliese Dodds), could not even acknowledge the incredible, unprecedented economic success of her own constituency, where, thanks to this Government, we have seen record jobs levels and record levels of low unemployment. In the spring statement, we heard about further progress with the great Oxford to Cambridge and Milton Keynes corridor, one of the greatest growth and prosperity generators this country has ever seen. The shadow Chief Secretary, the hon. Member for Bootle (Peter Dowd), a proud Liverpudlian, could not bring himself to acknowledge the investment we are seeing in Liverpool. Well, this son of a Liverpudlian will tell him that there is unprecedented foreign and domestic investment being made into Liverpool’s ports. We even heard an unprovoked attack on Tigger by the shadow Chief Secretary—this time, of course, I do not mean on the Chancellor of the Exchequer.
What a difference we heard in the contributions from Conservative Members. My right hon. Friend the Member for Witham (Priti Patel) set out a bold plan—a vision for economic renewal as we leave the EU. My right hon. Friend the Member for Wokingham (John Redwood) invoked the legacy of Margaret Thatcher, going further than she ever went, exhorting us to take advantage of the opportunities presented by Brexit. We believe that Brexit will not determine the future of this country—rather, it is about the choices we make next. We are going to ensure that those choices are the right ones and that they are pro-innovation and pro-growth.
What infectious enthusiasm my hon. Friend the Member for Clacton (Giles Watling) shows for his constituency. What a difference a Conservative representative makes. I knew I was making a good investment in Clacton when I went there to support him in 2014. I am afraid it took him a little longer to come to this place, but we in the Conservative party believe in making long-term rather than short-term investment. He could not be a member of the class of 2014, but he did get in a few years later.
We heard from my hon. Friend the Member for Angus (Kirstene Hair) a devastating critique of the SNP’s failing economic record and about the fact that the greatest, most enduring and important single market that this country has ever known is the single market of the United Kingdom, which we will always support.
Six themes emerged in the debate. First, of fundamental importance to us all—our central mission since the Conservatives arrived at the Treasury in 2010 and found that note on the desk saying that there was no money left—has been to restore the public finances so that we can live within our means and provide the confidence and credibility that every economy requires. We need that confidence to create the jobs, which have been created, to secure the inward investment, which is at record levels, and to keep interest rates low so that people can stay in their homes and continue to have economic security. We will continue to work towards that, today and in future.
As my right hon. Friend the Chancellor said at the spring statement, debt is now forecast to be nearly 1% lower than at the autumn Budget, and we will see the first sustained fall in debt for 17 years. That is a turning point in the nation’s recovery from the financial crisis that was left to us in 2010.
We have heard today about manufacturing, which is enjoying its longest period of sustained growth for a generation. UK foreign direct investment is leading Europe—it is third in the world behind only the United States and China—and is continuing to grow, even after the Brexit referendum. What do we hear from Labour Members on that? That they have learned nothing. We heard a series of bad puns and jokes with which the shadow Chief Secretary, the hon. Member for Bootle, managed to outdo his usual record. The Labour party would destroy the credibility that we have built up over the past few years. It does not know how to manage an economy. The last time the shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell), managed anything was before I was even born—and then he was sacked by Ken Livingstone for being too left wing.
Secondly, we have heard how, as a result of our hard-won economic credibility, we have secured the prize of record high levels of employment and record low levels of unemployment. Nothing matters more to our constituents than the dignity and security of a job. More young people, women and disabled people are enjoying employment. Some 3 million more jobs have been created and there are more jobs in every region and nation of the United Kingdom.
Anneliese Dodds
Does the Minister acknowledge that under his Government, record levels of in-work poverty are affecting children?
Robert Jenrick
I am surprised that the hon. Lady cannot bring herself to welcome what I have just described, even in her own constituency, where jobs and employment are booming—
Robert Jenrick
I will come to the hon. Lady’s point.
It is not just important to us to create a country of working people; it is our mission to create a nation of well-paid people in secure and fulfilling careers. We are doing that by tackling the root causes of our low national productivity as no Government have done before. We are seeing some positive signs. Inflation is falling—it fell from 3% to 2.7% in February—and the OBR has said that it will keep falling, leading to real wage growth.
Alison Thewliss
Two thirds of children in poverty are in working families. Does the Minister regard that as a positive sign?
Robert Jenrick
I am proud of the fact that more people are in work. When I go back to my constituency, Newark in the north midlands, where unemployment is currently at 1%, I am proud of our record and that more families are enjoying the key ingredients of economic security: a job and a reliable wage.
John Redwood
Did the Minister notice that the hon. Members for Oxford East (Anneliese Dodds) and for Glasgow Central (Alison Thewliss) on the Opposition Front Benches failed to remind the House that many people on lower incomes have been taken out of income tax altogether, that the living wage has been raised so we are dealing with this issue of low pay, and that inequality, as normally measured, has come down? Why do they never mention those things?
Robert Jenrick
My right hon. Friend makes a series of important points. Let us look at them. By increasing employment and reducing unemployment, we have sought not just to increase employment, but to tackle those people who are on the lowest wages and secure a better tax environment for them. The living wage will rise to £7.83 next month, which is £2,000 more for the average person in full-time employment.
David Linden
I am most grateful to the Minister for giving way. I hope that he will clarify to the House that that rise in the national living wage—and indeed the national living wage itself—does not apply to those under 25. Will he clarify that for Hansard?
Robert Jenrick
Our priority is to ensure that younger people in the workplace gain the skills that they need in good and secure employment and then, in time, they will benefit from the living wage, which did not exist before this Government created it. We have increased the personal allowance; we have taken 4 million British people out of tax altogether; and we have reduced the tax of 31 million of our fellow citizens.
On the subject of fair taxation, which was raised, the top 1% are paying 27% of the income tax in this country. On the subject of enforcing tax and reducing avoidance and evasion, the tax gap in this country is at its smallest ever level. It is one of the smallest of any developed country in the world and it is certainly smaller than the previous Labour Government left it. The bottom 20% of earners—this is an important statistic—have seen real wages increase by 7% since 2015. We have high levels of employment and we are working hard to support the lowest paid in society.
Thirdly, we have addressed productivity by investing in skills to ensure that our workers and fellow citizens have the skills that they need for the jobs of the future. We have seen that in many of the measures that we have discussed today: in increasing vocational and technical education; in our apprenticeships; in the advent of T-levels, one of the greatest innovations in our secondary education system since the creation of the A-level; in increasing numeracy and digital skills in schools with maths teachers, with IT teachers and with coding at primary level; and in the creation of the national retraining partnership—a partnership between the Government, the private sector, the CBI and the TUC, which was launched last month by the Chancellor—to ensure that workers have the skills that they require as the world of work changes in the years to come.
For small businesses and family businesses, we have increased management training and skills training, so that the greatest innovation in our economy is diffused throughout the regions and to the smallest businesses, we are backing people such as Sir Charlie Mayfield with his Be the Business movement, and we are undertaking a review of the long tail of British businesses, which was announced by the Chancellor in the spring statement. All of that will help to ensure that productivity increases in all parts of the United Kingdom and in all parts of the economy. What are the early results of those efforts? We have 2 million more children in good or outstanding schools than in 2010.
Fourthly, addressing productivity also requires us to invest in our infrastructure. The level of infrastructure investment—both public and private—by the end of this Parliament will be greater than at any time since the 1970s.
Peter Dowd
I thank the hon. Gentleman for mentioning my constituency earlier. I would like to mention his if he does not mind. Roger Blaney, the leader of Newark and Sherwood District Council, was speaking in response to a report that ranked the district near the foot of the social mobility league table. He put Newark and Sherwood
“323rd out of 324 local authority areas based on factors such as education outcomes, employability and housing prospects.”
Does the Minister still think that he is doing a good job for his own area?
Robert Jenrick
I most certainly do. That report revealed decades of underinvestment and neglect by Labour councils in Nottinghamshire, which let down their old former coalfield communities—the communities that they have taken for granted for too long. We are changing that, and the policies of this Government have seen, in my constituency, 40% more young people in good or outstanding schools, and a new free school in Newark, which I have created and of which I am proud to be a governor. Those are the practical changes that will transform the lives of local people. In the midlands and the north, we do not take them for granted; we get things done for them.
We are making long-term investments in infrastructure —road, rail, broadband and mobile—in all parts of the United Kingdom. The Infrastructure and Projects Authority, which measures our spending in those areas, said that there will be more central Government investment in the north of England over the course of this Parliament than in London or the south-east. We have created a pipeline of £600 billion of investment in construction and other infrastructure. The challenge now is less about money and more about ensuring that we have the construction workers and skills that we need to deliver on those projects. We are backing the midlands engine, the northern powerhouse and the Oxford-Milton Keynes-Cambridge opportunity. We are creating new deals in Sheffield, hopefully in the borderlands between England and Scotland, in north Wales and in other parts of the United Kingdom, where we believe in allowing local people to have greater say over their own lives. The Mayors whose positions we created—including Andy Street and, in the Tees Valley, Ben Houchen—are already making a huge impact and putting their own areas on the map.
Fifthly, we are embracing new technology, not turning away from it. We want to ensure that the United Kingdom leads the world in the technological revolution, but we also want to ensure that that works for everyone as the world of work changes profoundly. The pace of change has never been faster, but it will never be so slow again. The tech entrepreneurs and investors I meet are not preoccupied by Brexit. Their eyes are fixed on the horizon and so are ours. This is true of companies in FinTech, life sciences, artificial intelligence, autonomous vehicles and electric cars, and green growth, all of which we are taking seriously in our industrial strategy and in other policies. At least 15 UK tech companies could float today for in excess of $1 billion—companies that did not exist five or 10 years ago, including Citymapper, Deliveroo and Farfetch. This country is on the cusp of something great and we do not want the Labour party to lose that.
Peter Dowd
Does the Minister agree with Councillor Blaney that his constituency is the “Cinderella of regional funding”? What is he doing about that?
Robert Jenrick
Well, we have been investing in all parts of the United Kingdom, including the east midlands. We created the midlands engine, which I just mentioned and which is designed to unleash the economic potential of the midlands. In the west midlands, we have seen the huge potential that Andy Street has now given to a city that has been run by the Labour party for too long.
What are we doing to invest in new technology? As my hon. Friend the Member for Chelmsford (Vicky Ford) described, we are investing more in research and development than has been invested since the 1970s, when the statistics were first recorded, so we are probably investing more than has ever been invested in modern times. We have made the R&D tax credits more generous. We are investing in the enterprise investment scheme and the entrepreneurs’ relief that are so important to crowd in investment to the United Kingdom from all over the world. The Chancellor is today at the FinTech summit that the Treasury is hosting, with 600 investors from all over the world coming to the United Kingdom to see some of our most exciting business that are creating 60,000 new jobs in the FinTech sector alone.
What have we done to create a business environment? We have lowered capital gains tax and corporation tax, and committed to lowering it still further. Labour would reverse those changes. Our reductions in corporation tax have actually resulted in more tax revenue for the Treasury and more money for public services. That is prosperity over ideology.
Anneliese Dodds
I am sure that the Minister wants to be accurate on these matters. Therefore, perhaps he will slightly correct his suggestion that the increased revenue was due to the reduction in corporation tax. So many commentators—including, I believe, the IFS—have said that the increase in revenue is due to, for example, banks returning to profitability, and it should not be connected with the reduction in rate.
Robert Jenrick
In the Treasury we try to deal in facts, rather than in comments, and the effect of reducing corporation tax has been an increase in revenue.
The Chief Secretary and other Conservative Members have said that we must make the case once again for free markets—something we thought we might never have to do again. However, as Margaret Thatcher and, I think, Tony Benn—an unusual pairing—used to say, “There are no final victories in politics, and if you want to continue to win important arguments, you have to keep making them and restating them over and over again.” The case for free markets is threatened as never before by the hard-left, heirloom policies and personalities of Labour Front Benchers. As someone who used to work in the auction business, I can spot an antique a mile away.
The central battle on this conflicting vision of our society is being fought again. That matters for two reasons. First, just as our parents and grandparents paid the price for this ideology last time it was employed in this country, we do not want our children and grandchildren to pay the price for its resurrection today. Last time, it left us a weak country saddled with debt and high taxes, unable and unwilling to embrace new technology or to invest in public services—and working people paid the price.
Secondly, to paraphrase Robert Kennedy, living in a democracy is not merely about the absence of tyranny but the presence of freedom. A free market matters to us and our constituents not just because we have learned that it is the best way to run an economy but because it underpins all our other freedoms. That is why we will continue to defend it as we build an economy and a country that works for everyone.
Mr Deputy Speaker (Sir Lindsay Hoyle)
Let me just say to the Front Benchers that if they agree 10 minutes, they should stick to that, because I do not want it to break down in future with people taking advantage by allowing the Opposition to have 10 minutes and then you carry on for 17 minutes. I think we have to be fair to both sides. If we make agreements, let us please stick to them. If it is 15 minutes, I do not mind, but at least let us be honest with each other when we make those decisions.
Question put and agreed to.
Resolved,
That this House has considered the economy.
CERN Pensions: UK Tax Treatment
Robert Jenrick Excerpts(6 years, 3 months ago)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
I can always count on my hon. Friend the Member for Spelthorne (Kwasi Kwarteng) to put me in my place.
I thank my hon. Friend the Member for Poole (Sir Robert Syms) for highlighting this issue. I want to say how proud we are of the pioneering work carried out at CERN and of the work of all those who have retired and returned to the UK. Poole is a beautiful place to retire to, by the seaside.
It seems appropriate to be talking, if only tangentially, about CERN’s work in the week in which we lost that great physicist, Stephen Hawking. One of the few scientific bets that he lost in his career was that the Higgs boson would never be found, so even somebody of his genius can get things wrong every now and again.
The Government are committed to a fair and consistent tax system. This is especially important in pensions, as the Government promote saving through tax incentives and allowances. We want those incentives to work and to be fairly distributed. My hon. Friend outlined the history of the issue before us today. As he said, the Government reviewed this regime at autumn statement 2016, and announced that the UK tax treatment of foreign pensions would be changed to be closely aligned with that of UK pensions. Following that, the Finance Act 2017 legislated so that, with effect from 6 April 2017, 100% of income from foreign pensions has been liable to UK tax; it was previously 90%. This aligns the tax treatment of UK pensioners with the treatment of those who earn their pension overseas, ensuring a fair system. At the outset when contributions are made towards a pension—whether that pension is UK or foreign—they are usually free of any tax paid in the UK. With this change, the tax treatment of contributions and payments are now consistent.
My hon. Friend raised a series of points on which I hope to provide some clarity. He was kind enough to speak to me before this debate and mention a number of international organisations where British citizens work and make a valuable contribution, including the OECD, NATO, the United Nations and others. My hon. Friend noted that pensioners from these international organisations or organisations of a similar type are reimbursed, for example, 50% of their income tax payments. It important to say that this does not arise as a result of any country’s tax rules. It is not because of a particular deal made by the United Kingdom with any of these organisations, but because of the specific provisions within the pension scheme of that international organisation.
It would be CERN’s decision whether it wanted to make a similar provision in its pension scheme either for the future, or to reopen and reassess their past practice for CERN pensioners who had retired, were drawing on their pensions and are now my hon. Friend’s constituents. Any payments received by UK residents are subject to UK tax, including reimbursement. That is the case for all international organisations. I will return to the EU, which, as is so often the case, has special treatment.
The UK only supports special tax treatment for international organisations when the employees have worked for the organisation in the UK, which I hope my hon. Friend will understand is a somewhat different situation for tax purposes. Aside from the EU, the UK has no bilateral agreements in relation to the tax treatment of international organisations with other countries. We do with the EU, which is our only exception, and that is common practice across the Union.
My hon. Friend mentioned international comparisons. We understand that other major economies are typically taking a similar approach to the UK with respect to taxing pensions. Countries such as France, Germany and Switzerland all tax occupational pensions such as CERN’s and the foreign income of their residents. There may be other examples such as those that he raised and spoke to me about earlier. Of course, I am happy to look into that. It may be a topic that we could discuss were we to meet. Certainly, our major international competitors and the countries from which, one presumes, a majority of CERN’s employees are drawn take an approach similar to the one that we have taken.
In our correspondence prior to this debate, my hon. Friend suggested that the Government could introduce a 25% tax relief on CERN pensions to mirror the tax-free lump sum. I understand that that would be an attractive proposition for CERN pensioners. However, the tax-free lump sum is not an allowance. If a qualifying lump sum is not paid, this relief is not available. These lump sums can be paid free of UK tax whether built up in a foreign or a UK pension if the qualifying conditions are met. Allowing for 25% tax relief outside of these circumstances would, we believe—I hope that my hon. Friend will understand this—undermine these qualifying conditions, which apply to all pensioners.
I hope that my comments have at least explained the rationale behind the Government’s policy. I appreciate the concerns that my hon. Friend raises. I assure him that the Government have not sought to target individuals unfairly or to impact on the work undertaken by those at CERN or, indeed, by any other of our citizens who choose to live and work abroad. As he says, this is an incredibly important and increasingly prevalent aspect of the modern labour force, with increasing globalisation and a global market for the most talented individuals, certainly in the scientific and research world.
The changes we made in 2017 stopped people from transferring their pensions abroad to avoid UK tax. That was a consideration, but it was not the primary motivation. Our primary motive was to do this as part of a wider move towards consistency and fairness in pensions and taxation. The Government recognise that those in receipt of foreign pensions do face additional costs in accessing their pension. That was the original motivation behind the 90% rate that was introduced, I believe, in the 1970s. However, we have taken the view that it is not for Government to compensate these individuals for their choice to work outside the UK or to enable them to use this as a UK tax break. It is the Government’s role to encourage a fair and sustainable tax regime in the UK. The changes that we made have equalised the system, from which only overseas-based employees were previously able to benefit.
I again thank my hon. Friend for raising this issue. I also thank his constituents and others who may be paying attention to this debate for the ground-breaking work that they have done at CERN, which the Government and, I think, all Members are rightly proud of. We are proud that UK citizens have played a part in that and that they have chosen to return home to the UK for their well-earned retirement. The Government are delighted to welcome home British expatriates who have worked abroad to spend their retirement in places such as Poole. We recognise that that plays an increasingly important part in our economy.
I hope that my hon. Friend’s constituents will appreciate the Government’s rationale for making these changes over the past few years. We took a decision to treat all UK pensions consistently. Such judgments are difficult ones, and do involve winners and losers, but we appreciate the views of his constituents, and I would be happy to meet him and them in person, if it would help to further the conversation, and to listen to their specific concerns and see what, if anything, we can do.
Sir Robert Syms
I thank the Minister for that offer. This is a complex area, and I think that my constituents would be grateful for at least a brief meeting just to go through some of their concerns, outside the public spotlight.
Robert Jenrick
I thank my hon. Friend. This is a complicated area. I hope that my comments today have provided some answers to him and his constituents, but of course I would be happy to meet him and to bring along Treasury officials, who might be able to shed further light on this matter and answer their questions in greater detail. They are understandable and important questions, because they concern the financial security his constituents can enjoy in later life.
I hope that this evening’s debate has provided some answers and that the meeting that follows will provide more. We believe that the previous approach was fair. It was driven by a desire for consistency and fairness for all British pensioners, and we hope that right hon. and hon. Members can support that as a principle. Once again, I thank my hon. Friend for raising this important matter.
Question put and agreed to.
Draft Financial Services And Markets Act 2000 (Carrying On Regulated Activities By Way Of Business) (Amendment) Order 2018
Robert Jenrick Excerpts(6 years, 3 months ago)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
I beg to move,
That the Committee has considered the draft Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) (Amendment) Order 2018.
It is a real pleasure to serve under your chairmanship, Sir David. The draft order, which was drafted in consultation with the Financial Conduct Authority and the Prudential Regulation Authority, will set out the circumstances in which a business needs a deposit-taking licence to borrow via a peer-to-peer lending platform. Peer-to-peer lending platforms allow any investor, including a consumer, to lend money directly to businesses or to other consumers, but the draft order applies only to business borrowers.
Peer-to-peer lending is still a relatively new financial service: the world’s first peer-to-peer loan originated here in the UK in 2005. At the industry’s request, the Government legislated in 2014 to bring peer-to-peer lending platforms within the scope of financial services regulation. Running a peer-to-peer lending platform is a discrete activity—it is not another type of asset management service, for example—so we introduced bespoke legislation to regulate it as such.
We sought to balance consumer protection, which is extremely important to us, with allowing the sector to grow and evolve, to ensure that we lead the world in peer-to-peer lending and in creating a bespoke regime for it. This approach, which is typical of our commitment to ensuring that regulatory frameworks remain fit for purpose in the face of rapid technological change, has led us to be rated as the best place in the world to establish a FinTech business. The FCA is conducting a full and planned review of peer-to-peer lending and the industry more generally, to deepen our understanding and inform future regulation, should further steps be required.
Let me briefly set out what the draft order seeks to achieve. For a professional lender, there is a degree of responsibility involved in taking deposits from members of the public, who—perfectly understandably—may not have the same degree of financial literacy. A business that wishes to accept deposits from the public to wholly or materially finance its activities must be authorised and regulated by the FCA and the PRA. Such activity is considered as accepting deposits by way of a business, and regulatory permission for it is known colloquially as a banking licence. Requiring businesses to obtain such a licence ensures that depositors are protected from financial harm or loss.
The existing legislation, which was inherited by the industry, could be interpreted as implying that a business that borrows money via a peer-to-peer lending platform is, technically, accepting deposits from the public in the same way that a bank might. Such a business could be deemed to be accepting deposits by way of business and therefore to require a banking licence. In reality, such borrowers do not accept deposits as their core business; for the vast majority of commercial borrowers, using peer-to-peer lending is simply a new way of finding capital to finance working capital requirements, to fund investment in research and development, new equipment or premises, and to drive growth forward.
The current legislation has left some peer-to-peer lending platforms unsure whether a business borrowing via their platform requires a banking licence. The practicalities of obtaining and maintaining a banking licence just to borrow via a peer-to-peer platform are burdensome both for the borrower and for the platform. The requirement for a banking licence increases costs and ultimately risks making peer-to-peer lending unviable for most businesses as a source of finance.
The draft order will provide the clarity for peer-to-peer lending platforms and business borrowers that the industry and businesses require. We believe that it will be welcomed by all sides. It will make it clear that a peer-to-peer borrower that uses deposits solely to finance its other business activity should not need a banking licence. However, it will ensure that regulated financial institutions —those for which accepting deposits is the essence of their business—will still need a banking licence to accept funds from the public, regardless of whether they do so from a peer-to-peer lending platform or another means.
The certainty that the order provides will ensure that legislation that predates the invention of peer-to-peer lending does not place undue burdens on the sector or impede its growth. As such legislation focuses solely on business borrowers, this is a business borrower-facing piece of legislation. It does not affect the existing regulatory protections for consumers, which we agree are extremely important, as consumers increasingly turn to peer-to-peer platforms.
The Government’s approach underlines our commitment to ensure that businesses can access the finance they need to grow and expand and can enhance competition in the financial services industry, while ensuring that we in the UK have a forward-looking regulatory regime adapting to new technology and continuing to lead the world.
Robert Jenrick
I am grateful to the hon. Gentleman, who represents the Opposition, for his positive comments with respect to peer-to-peer lending. We believe it is an important development in financial services, and it is one we want to support, but we must ensure it is appropriately regulated to protect consumers and businesses of all scales, as well as to ensure that the industry has the clarity in regulations and law it deserves so that it can operate with confidence within the law.
That is the essence of the order. It will ensure that the industry can move forward with confidence, knowing that the law is clear and that those who want to use such services—smaller businesses in particular—can have clarity that they are not in breach of the law. It is a question not of deregulation or changing the law but of clarifying it so that everyone benefiting from the peer-to-peer lending industry today and in the future can understand that they are in compliance with the law.
To give a practical example of how the present situation might confuse or concern a business, a manufacturing business seeking to borrow money from a peer-to-peer lender—perhaps to purchase new equipment to help it grow and develop—might be concerned about whether the current law required it to have a banking licence. The industry has come to us proactively and said that it is important that the Government provide the greatest possible clarity for businesses that seek to raise money for perfectly legitimate purposes and are not engaged in financial services—businesses for which taking out money through a peer-to-peer lending platform would be not their sole, or even the majority of their, business function, but purely to service the future growth of their primary activity. We want to clarify the position for that kind of business in particular.
In terms of the future, I point the hon. Gentleman to the FCA’s review. I am sure that it would welcome his comments and his involvement in that review if he or the Opposition had further points to make about the future of peer-to-peer lending.
Question put and agreed to.
Future of ATMs
Robert Jenrick Excerpts(6 years, 3 months ago)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
May I begin by wishing you, Madam Deputy Speaker, and other hon. Members a happy St David’s day? As the subject of today’s debate is cash and its availability, I wish the same to the staff of the Treasury’s Royal Mint in snowy Llantrisant today. I had the pleasure of visiting them last month for the appointment of the Royal Mint’s first ever female deputy master and chief, Anne Jessopp. Anne is the first woman to hold that post since the Mint was founded in 886 AD. It has taken just over 1,000 years, but a woman is now finally in charge at the Mint, and as my hon. Friend the Member for North Dorset (Simon Hoare) said, a woman is the chief cashier at the Bank of England.
One of Anne Jessopp’s first tasks as deputy master of the Mint was to launch the 50p piece that the Mint has created for the 100th anniversary of female suffrage. Unfortunately, although those coins are available online at www.royalmint.com and can be purchased by visiting the Royal Mint, not many of them will enter circulation. That is because there is limited demand for new coinage. Therefore, the Mint, over the course of this year, is unlikely to require new 50ps. Therein lies part of the heart of today’s debate: the use of coinage and notes is in decline, and digitisation is transforming the way we use cash and spend money, as it is every other aspect of our lives.
I am grateful to my hon. Friend for raising this important issue. The relatively few Members who were able to join us today due to the poor weather is no reflection of the importance of this issue to either the Government or Members of Parliament. First and foremost, I want to assure Members that the Government recognise the importance of widespread access to free cash, and we will do everything we can, with the industry, the regulators and LINK, to ensure that access is maintained.
I want to address three areas, which I hope will allay some of the concerns that my hon. Friend raised and speak to how important this is to the Government. The Treasury and I personally will be following this extremely closely as it develops in the months and years to come.
First, as my hon. Friend laid out well, the increasing digitisation that we are experiencing across society is having a major impact on cash. It has been important already, and I think its impact will be quite profound in years to come. That plays into a wider debate that the Treasury is interested in and in which all parts of Government have to engage, which is how we can embrace the new and ensure that the United Kingdom makes the most of new technology and does not shy away from it. We cannot stop the world and get off it, but we have to protect the vulnerable in society and ensure that the benefits of new technology work for all people in all parts of the United Kingdom, whether in great cities such as London or in rural areas such as Dorset, Nottinghamshire, Cornwall and the others represented here today.
The use of cash has fallen from 62% of all payment volumes in 2006 to 40% in 2016, the last year for which we have reliable figures, and it is predicted that, by 2026, it will make up just 21% of all our payments. As my hon. Friend rightly pointed out, however, claims that we will move any time soon to a completely cashless society are off the mark. The use of cash—both coinage and notes—will continue to decline significantly in the years ahead, but it seems unlikely that any of us will live in a country without any form of cash. That poses an important challenge to Government on how we can manage this period of transition in a way that works for everyone.
Cash remains extremely important in the day-to-day lives of UK consumers and businesses. It is still the form of payment that the UK public reach for the most, and 5% of the adult population rely either entirely or almost entirely on cash to make all their day-to-day payments. Many of them, of course, are the most vulnerable, the most financially excluded and the most elderly members of society.
To provide free access to cash, the UK has one of the most extensive free-to-use ATM networks in the world. Compared with our major international competitors, including the United States, our network is extensive and generally free, and those are important things that we want to continue. There are more ATMs in the UK than ever before, about 54,000 of which are free to use, which represents an increase of 50% in the past decade alone.
Ged Killen
Is not the Minister concerned that the LINK decision on the interchange fee might reverse free access to cash? The problem is that LINK is relying on the ATM operators themselves to tell it when cash machines are no longer financially viable. Is it not the case that many machines may already have closed after the event?
Robert Jenrick
The hon. Gentleman raises an important point, which I hope I will be able to answer over the course of my speech. One of the motivations for LINK and the industry’s actions is to reduce modestly the number of ATMs in those areas with the greatest density, including cities such as London, but their pledge to the Government and to consumers, which I will go on to talk about, is that that will not be to the detriment of those in rural areas, market towns or harder-to-serve areas, which are not exclusively rural but could be areas of greater deprivation, even in cities such as London. We have had a fairly strong promise from LINK and from the regulator that there will be no detriment to rural areas. I will come on in a moment to how that will be enforced in practice.
We all recognise that there is a decline in the use of cash, which is making it harder to maintain our current level of free access to cash. That is the challenge that the changes hope to address. I appreciate that we have to view the issue through the lens of bank branch closures, which affects my constituents and those of most Members across the House. The Government, the financial services industry and the regulator therefore have to act to ensure that the needs of the consumer continue to be met. My comments, on behalf of the Government, represent consumers, not the regulator or LINK. My hon. Friend the Member for North Dorset is absolutely right that we in this House represent the consumers, and their interests must be our primary concern.
Secondly, I wish to address exactly how we do that, which brings me to the particular role played to date by the Payment Systems Regulator and the role it will play in the future, if it lives up to the Government’s expectations. In November, LINK—the main payment scheme behind the UK’s ATM network—launched a consultation on reducing interchange fees by 20%. As I have said, that was designed to reduce the duplication of cash machines in city centres while protecting the more isolated machines. That is the organisation’s stated objective, to which we will hold it to account. At the time, the Government and many Members of this House were clear that any changes must not have a harmful impact on consumers. If machines are lost in cities, the impact should be generally imperceptible, and if they are lost in rural and harder-to-serve areas, they should be replaced, wherever possible.
Simon Hoare
I agree with my hon. Friend about the overprovision of ATMs in a city centre environment, but I just want to make sure that he is alert to the fact that ATM providers—the Cardtronics of this world—often use the moneys they secure from such machines to subsidise rural provision. In effect, they are cross-accounting. The opportunity to use that cross-subsidy spare fund will, in effect, disappear as a result of a diminution of ATMs in large cities. That is one of the big problems.
Robert Jenrick
My hon. Friend raises an important point to which the regulator must pay close attention, but it estimates that the impact of the changes will be modest, even in city centres with a heavy density of ATMs. The main operators of card machines—the companies he mentioned earlier—are generally financially successful. This industry has more than £1 billion of revenue a year, and its market caps are between £500 million and £1.5 billion. Generally speaking, these sizable businesses are in sound financial health. There is no reason to believe that the changes will alter that, although the regulator must bear that factor in mind.
The PSR, which the Government established to deal with such difficult issues, has taken the lead in examining the area. It has engaged with LINK and held a consultation. My hon. Friend raised concerns about the scope of that consultation, but the PSR believes that it has engaged with MPs, although perhaps not as much as it could have done. It has spoken to a number of different parties across the country—indeed, future consultations could learn lessons from the number of individuals and parties to whom it chose to reach out.
The PSR has come back with three requirements that LINK’s proposals must fulfil. First, there is a commitment by LINK to do “whatever it takes”—we must remember those words—to protect the broad geographical spread of free-to-use ATMs. Secondly, any cuts in the interchange must be incremental, and at just 5% in the first year. There will be a review after one year, so in July next year there will be a review before the next cut of 5% could, or would, be implemented. I have received assurances from LINK and the PSR that no further cuts will take place unless they are satisfied that there has been no significant material detriment to the rural and harder-to-serve areas. Thirdly, there will be a greater than ever focus on financial inclusion, and LINK will continue filling gaps in the network and protecting those ATMs in areas that are harder to serve.
LINK will maintain all free-to-use ATMs that are a kilometre or more from the next or nearest free-to-use ATM, including where a community loses ATM access because of a branch closure. LINK will increase the subsidy for ATMs in areas with poor cash access to keep free-to-use machines going. It will conduct an annual review not just in the first year but, if the changes continue, every year thereafter. That review will consider the impact of the interchange fee reduction on the provision of free-to-use ATMs as phased in over the four-year period, and take action as and when required.
LINK has promised to place a page on its website from 1 July that will have sufficient specificity for every Member of the House to look at their constituency. It will show every free ATM across the country, so MPs will be able to view availability in their part of the world. The website will highlight any areas where free ATM availability is in danger of being lost and state what action is being taken to tackle that. For example, my hon. Friend will be able to look up the ATM that we have heard about in his constituency and see whether it is in danger and what action is being taken to address that. That is important to ensure that MPs and people across the country—including those local councillors who were mentioned—can continue to monitor and ensure that LINK lives up to its promises.
Finally, the way that the PSR will police LINK’s commitments can, and should, be stringent. We set the PSR up in 2015 with a specific statutory objective to ensure that the interests of the users of payment systems—not those of the banks—are promoted, with robust powers to enforce that. We expect the PSR to step in and act if needed. I have spoken to the PSR and to LINK, and the PSR understands the importance that the Government place on free access to cash, and the strength of feeling in Parliament and the country. Both organisations have made an explicit commitment to do whatever it takes to maintain the network and provide an additional subsidy per ATM at whatever level is required, to ensure that any machine that is in danger of being lost is replaced by another within a reasonable distance.
In conclusion, I again thank my hon. Friend the Member for North Dorset for raising this important issue that affects my constituents and people across the country. I have been assured by LINK and the PSR that the motivation for these changes is to ensure that the proliferation of ATMs in urban areas is sustainable, and that we continue to have a free-to-use ATM network—an important issue for the whole country and one that sets it apart from many others—but not at the cost of harder-to-serve areas: the rural areas and the market towns. The promise made to me by LINK is that it will do whatever it takes. The pledge has been made to me by the regulator that it will robustly hold LINK to account for that. The Treasury and I will be watching both very hard to ensure that those pledges are fulfilled on behalf of the people of the country.
Question put and agreed to.
Oral Answers to Questions
Robert Jenrick Excerpts(6 years, 4 months ago)
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Damien Moore (Southport) (Con)
The Exchequer Secretary to the Treasury (Robert Jenrick)
This Government have put raising our national productivity at the heart of our mission. From the national productivity investment fund, we have already announced over £50 million of investment in road and rail in the north-west, and this is in addition to the transforming cities allocations to Manchester of £243 million and to Liverpool of £135 million.
Damien Moore
Does my hon. Friend agree that the £31 billion national productivity investment fund, targeted at transport, digital communications, research and development and housing, will boost the infrastructure of the UK economy?
Robert Jenrick
The latest statistics show that we have had the best run of productivity growth since before the financial crisis, but we are certainly not complacent. The national productivity investment fund is improving passenger journeys, our roads and our broadband connections and delivering more homes, all of which are key to raising the wages and living standards of people in Southport and across the country.
Derek Twigg (Halton) (Lab)
The problem is that the national productivity investment fund is not doing anything to stop the disrepair on our roads and motorways. The Government are simply not putting in enough money for local councils and the national agency to make sure that repairs on motorways and local roads are brought up to standard. We now have a greater crisis than we have seen for some time.
Robert Jenrick
I am afraid that I do not agree with the hon. Gentleman’s analysis. The Government have put a record amount of investment into our roads and rail. As the Chancellor announced in the autumn, there is further money for transport projects in the north. There is £13 billion in total to improve transport across the north of England.
Bill Esterson (Sefton Central) (Lab)
This Government have done nothing to deliver local rail infrastructure in the north-west, which is vital for jobs and the economy. When are they going to invest in decent local rail services, including those used by my constituents from Southport to Manchester? If the Government will not do it, they should stand aside and let us get on with the job.
Robert Jenrick
The Government have been investing more in railways across the country than any Government since Victorian times, including in the north of England. Across the country, the Government have invested £0.25 trillion in infrastructure projects since 2010, 4,500 of which have already been completed.
Julian Sturdy (York Outer) (Con)
Mike Amesbury (Weaver Vale) (Lab)
The Exchequer Secretary to the Treasury (Robert Jenrick)
As the Institute for Fiscal Studies has confirmed, under our plan, public investment will reach levels not sustained since the late 1970s by the end of this Parliament. We want to see that investment across the United Kingdom. We are delivering £13 billion of transport investment in the north and have launched a £1.7 billion transport fund to transform our great cities.
Mike Amesbury
Devolution in the Labour-controlled Liverpool city region and Greater Manchester is beginning to unlock opportunities for investment in infrastructure, research and development, and innovation in the north-west, allowing facilities such as the Daresbury campus in my constituency to develop and prosper. Does the Minister agree that if we are to be able to realise the full potential of our regions, devolution needs to extend to the many of my constituents and not the few?
Robert Jenrick
I am delighted to hear the positive story that the hon. Gentleman has given to the devolution that we have created as a Government. In the past week I have met the Mayors of Liverpool and Greater Manchester. We are committed to working with anyone who shares our commitment to the economic growth and prosperity of the north of England.
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
Sir Patrick McLoughlin (Derbyshire Dales) (Con)
I am very much in favour of gift aid, but some large charities say that they receive no direct support from Government but do receive gift aid and the Exchequer will not publish those figures. Will the Chancellor reconsider this?
The Exchequer Secretary to the Treasury (Robert Jenrick)
The Revenue does not disclose the sums that individual charities receive from gift aid due to its obligations to respect taxpayer confidentiality under the 2005 legislation. Of course, some large charities do so voluntarily. Cancer Research is one example, and receives £31 million in this way. I am sympathetic to my right hon. Friend’s argument and will take the matter forward.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
Ryanair has announced the slashing of more than 20 Glasgow airport routes, a cut of more than 1 million passengers and the loss of up to 300 jobs. The high level of APD and the delay in introducing the air departure tax—caused by this Government’s not notifying the European Commission regarding the ongoing exemption for the highlands and islands—have been cited as a reason. Another is the Brexit uncertainty in the aviation sector. With more routes and jobs likely to go, what are the Chancellor and his colleagues doing to support the aviation sector during Brexit negotiations?
Draft Soft Drinks Industry Levy (Enforcement) regulations 2018
Robert Jenrick Excerpts(6 years, 4 months ago)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
I beg to move,
That the Committee has considered the draft Soft Drinks Industry Levy (Enforcement) Regulations 2018.
It is a pleasure to serve under your chairmanship, Sir Edward. The draft regulations will help to complete the legislative framework for the soft drinks industry levy, which is well known to right hon. and hon. Members and will take effect from 6 April this year, as they may be aware. The levy is an important part of the Government’s childhood obesity plan, and the aim is for it to be a significant element in reducing the problem over the next 10 years. As well as encouraging children and families to make healthier dietary choices, the plan will help children to enjoy an extra hour of physical activity every day.
Children in the UK are consuming far too much sugar—three times the recommended level. The soft drinks industry produces our favourite soft drinks, which are a major source of sugar for children and teenagers, as well as adults. The levy, which has been introduced to encourage soft drinks manufacturers to reduce their sugar content, is already working, even before it comes into force in April: we estimate that approximately half the soft drinks that were above the sugar threshold when the levy was announced in 2016 have been reformulated to reduce their sugar content. We have seen the reformulation from major brands and household names that we are all aware of—Sprite, Fanta and Tango, to name just a few—and other producers have announced plans to reduce the size of larger packs.
All of this is good news for our nation’s children and adults, our health, our teeth, our waistlines and the cost to the national health service. The reformulations have meant that our original revenue forecasts have been lowered, but as we set out clearly when the policy was mooted, our objective was never to raise money from the taxpayers as an end in itself; it was always to improve public health. The revenue will be less than first suggested, but 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.
Every penny of England’s share of the spending raised by the levy will go towards improving children’s health, including by doubling the primary sports premium to improve the quality of PE in schools. We will also provide extra funding for school breakfast clubs, which can help the most disadvantaged children in society to have a healthier start to the day. Finally, we will provide £100 million in 2018-19 for the healthy pupils capital fund, which helps schools to upgrade their sports grounds, playing fields and changing rooms.
To continue to deliver our objectives, it is vital that we have the enforcement measures we need to ensure that the levy works, and that Her Majesty’s Revenue and Customs has effective compliance powers to prevent evasion, if that proves necessary further down the line. The primary legislation behind the levy is the Finance Act 2017, section 54 of which enables the draft regulations to provide HMRC with the same powers that it uses to tackle every excise duty evasion, including alcohol duty. That makes sense because the supply chains for alcohol and soft drinks are comparable and often involve the same people and similar risks. Enforcement is expected to come under the control of the very experienced compliance teams at HMRC.
The draft regulations specify that, of the enforcement powers in the Customs and Excise Management Act 1979, only those powers that are really useful and relevant will be available for enforcing the levy. That includes powers of entry, search of premises and seizure of drinks, all of which are essential for tackling excise duty evasion and ensuring that legitimate suppliers are not adversely affected by those who engage in criminality. As with the enforcement of other excise duties, the powers will be used only where there are reasonable grounds to suspect non-compliance, and all use will be subject to strict governance procedures. Were HMRC not to have these powers, the risk of fraud would increase significantly and the legitimate businesses that manufacture soft drinks would not be able to compete on a level playing field.
In summary, the Government believe that the soft drinks industry levy is a vital part of our plan to tackle childhood obesity. It is only one of a number of measures being taken by the Government today, and we would like to take more in future. It has had a proven impact. We are seeing that impact in all household brands of soft drinks on the shelves; they will contain less sugar and provide a healthier drink for our children and adults. The regulations provide HMRC with enforcement powers that are proportionate and have been well scrutinised through extensive public consultation, so I hope colleagues will join me in supporting the regulations, which I commend to the Committee.
Robert Jenrick
I am grateful to the hon. Gentleman for his support for the levy, which will play an important part in tackling childhood obesity. As I was at pains to stress in my opening speech, the levy is only one element of a much wider Government strategy. The Opposition and other right hon. and hon. Members will have seen the childhood obesity plan that was published. Nobody pretends that the soft drinks industry levy contains all the elements of that plan, but it is a significant element and, again, I am grateful to the hon. Gentleman for his support.
The levy is working, and we have seen that in the large number of suppliers of soft drinks that have already reformulated their products. As a result, the tax will raise less revenue than was previously expected. It was never designed as a tax-raiser; it was always designed to stimulate improvements in public health. In the autumn Budget of 2017, we laid out our expectation that the levy would raise around £275 million, yet the Treasury remains 100% committed to the original promise of over £1 billion of extra money for the Department for Education.
Clive Lewis
While we welcome the £1 billion—the extra funding—to plug those gaps, if the Government then cut 3.9% of spending on public health and, it is predicted, millions by 2020, does the Minister not concede that they are giving with one hand and taking with the other?
Robert Jenrick
I dispute the hon. Gentleman’s analysis of our funding of the NHS, which has risen in every year of this Parliament. In the autumn Budget of 2017, the Chancellor committed to providing more money for both the NHS and adult social care.
The levy is an example of where the Government are taking action. We are using the tax code to change behaviours for the public benefit, and we are committed to significant increases in spending for school sports, breakfast clubs and all the other important things that will benefit from the funds coming from the levy. Every single penny raised by the levy will go to support school sports and the public health initiatives that I mentioned, plus the additional revenue that the Treasury committed to and is in no way backing down on, despite the success of the levy.
Robert Jenrick
If the hon. Gentleman does not mind, I will press ahead on this occasion; I have given way to him in the past.
As for the capacity of HMRC, this is a task that HMRC is very used to and has expertise in. It uses that capacity for all forms of alcohol excise duties, such as those that apply to the spirits industry and so on. There is no reason to question whether HMRC can do this work. Indeed, the powers that we are considering today are those that HMRC has requested. The levy has been fully subject to a public consultation with the industry. HMRC’s voice has been heard in that consultation and we believe that HMRC will be effective in enforcing this levy and in ensuring that there is no criminality, or only minimal criminality, involved with it.
As for the question of whether or not we have reviewed, or will review, the impact of the levy, we have committed to such a review—in 2020, I think—so that will be the point at which we can clearly see the impact of the levy on both public health and the industry. With that, Sir Edward, I commend the regulations to the House.
Stamp Duty Reform
Robert Jenrick Excerpts(6 years, 5 months ago)
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The Exchequer Secretary to the Treasury (Robert Jenrick)
It is a pleasure to speak under your chairmanship, Mr Streeter—I almost said Mr Speaker there; perhaps that is a Freudian slip. I am grateful to my hon. Friend the Member for Carlisle (John Stevenson) for organising this debate and for bringing to it his customary thoughtful style and experience as a solicitor. I was also a solicitor before coming to this House, although not a property one. I am aware of some of the experiences that he has had and in my prior life, before being appointed as a Minister, I was very interested in the property market and some of the questions that he has raised today. I will try to respond to as many of those as possible, but let me first raise some of the background to stamp duty and the Government’s recent reforms, because it is fair to say that there has been a great deal of activity in the area over the last few years.
Stamp duty as we know it was introduced in 2003. It replaced the former stamp duty regime, which my hon. Friend will remember from his time as a solicitor and required the physical stamping of documents. It raises over £11 billion a year, which makes an important contribution to our public services, as he said—we should remember that in the context of this debate—including £8.6 billion a year from residential property transactions. Although we continue to seek ways to reform stamp duty, we have to bear in mind its importance to the Treasury and our public services.
Over the last few years, stamp duty has played a significant part in a number of different budgets, and the Government’s objectives when considering it and its impact on residential property purchases have been above all to support first-time buyers, and to sustain the tax base. We are trying to keep the tax as simple as possible and to reduce it where possible. We are aware of the distortions that the tax can inevitably lead to, which deters people from moving home, from downsizing and from upscaling, and the effect that has on quality of life. Buying a home and changing where a person lives is obviously one of the most important decisions that they make, and we want to make sure that, where possible, the tax system does not interfere in that. We see it as an important lever in the housing market, but not the only lever. The housing market requires supply-side reforms as well as tax changes, and any reform of stamp duty can only be one potentially small element in our housing policies.
With those priorities in mind, the Government have taken a succession of significant actions to reform how stamp duty works. In 2010, the stepped structure of stamp duty through the most widely applicable price bracket created distortions in the housing market, which everyone was familiar with, particularly people such as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) who have worked as estate agents. We wanted to iron out some of those problems for both sellers and buyers. The stepped increases in rates meant, for example, that those moving up the housing ladder were met with large increases in tax when properties fell into higher brackets.
In 2014, we took action to reform stamp duty on residential properties at the autumn statement, which many hon. Members will remember. We changed the stepped increases to a variable rate that increased with the price of the property purchased. That was an important and successful reform and led to about 98% of people liable for stamp duty finding their bills reduced. There were new, higher rates for properties of the highest value, which increased the tax paid by so-called prime and super-prime properties particularly focused on areas of central London, but the vast majority of homebuyers in our constituencies across the country were better off as a result of the changes.
Since becoming a Minister, I have asked to see the figures on transactions in the higher price brackets. There has been quite a significant amount of press coverage of that. At present, the Treasury does not believe that there has been a material change in the number of transactions at the highest price brackets, but we will continue to keep that under review, bearing in mind the public interest.
In April 2016, we introduced higher rates of stamp duty on additional properties, which was designed to tip the scales in favour of first-time buyers and away from those who want to purchase second homes or invest in buy-to-let. Of course, it is perfectly acceptable for people to want to do that. We understand that and do not want to make it impossible for people to enjoy a second home or to invest in buy-to-let property for their pension and their future or for their children and grandchildren, but we did believe that it was important to make changes to help others to get on the property ladder.
Since those changes were introduced, more than 400,000 people have bought their first home and first-time buyers make up an increasing proportion of those in the mortgaged property market. However, it remains very challenging for young people to get on the property ladder—we all acknowledge that—and therefore in 2017 we made the largest change so far, which was to remove stamp duty for first-time buyers.
At the autumn Budget, we permanently abolished stamp duty for first-time buyers who were purchasing a property for £300,000 or less. First-time buyers purchasing a house for between £300,000 and £500,000 will save £5,000 and, to ensure that the relief is targeted at those who need it the most, purchases above £500,000 will not benefit. We appreciate that in parts of the country properties are of such a high value that the benefit is more limited, but even in London the average amount of stamp duty paid by first-time buyers has been halved, so the change is still significant and an improvement for anyone trying to get into the property market for the first time.
To turn specifically to the points made by my hon. Friend the Member for Carlisle, his suggestion about transferring stamp duty from the buyer to the seller was thoughtful and one that, he will not be surprised to hear, the Treasury has given thought to. We have done considerable research into it. It would be a significant step and therefore one that we should take only if the benefits are clear. The legal liability for stamp duty rests with the purchaser, but evidence suggests that the cost of stamp duty is reflected in the value of the property. That is of particular concern with respect to my hon. Friend’s suggestion, because it means that switching the formal liability to the seller would be likely to have a limited effect on the overall cost of purchasing a house. My hon. Friend’s argument would have been stronger before we changed stamp duty for first-time buyers. Now the vast majority—80%—of first-time buyers have no stamp duty and 95% benefit from our changes. Before those changes, of course his proposal would have made a significant difference.
Another point, made by the hon. Member for Brighton, Kemptown (Lloyd Russell-Moyle), with respect to those downsizing, would be of concern to us, because there might be a reason for people not to downsize when we want those who are a bit older with larger homes to consider moving into smaller homes—if they wish to, of course—freeing up properties for the next generation. We will give the suggestion thought, and I am happy to meet anyone about it, but it is not something that we are considering at present.
The other suggestion made by my hon. Friend the Member for Carlisle, on the stamp duty land tax form, was interesting. I would like to take it up with him and hear more. I am happy to meet him with my officials to take it forward. I think Her Majesty’s Revenue and Customs would be interested in considering the idea.
I have only a minute or so remaining, so I will conclude. The Treasury is extremely committed to improving the housing market. Members on all sides of the House appreciate the fact that our housing market is broken and needs fundamental reform. We see tax as an element of that, and I hope that over the past several years right hon. and hon. Members have seen a number of significant interventions to make that better. One argument is that we now need to move into a period of stability with respect to stamp duty, so that those selling and buying homes and those operating in the market have the confidence to make choices in the future. We will, however, consider future options, and we will do everything we can with the Ministry of Housing, Communities and Local Government to ensure that we continue to increase the supply of homes throughout the country, particularly focused on first-time buyers.
Question put and agreed to.
Oral Answers to Questions
Robert Jenrick Excerpts(6 years, 5 months ago)
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Sir Hugo Swire (East Devon) (Con)
The Exchequer Secretary to the Treasury (Robert Jenrick)
Her Majesty’s Treasury regularly engages with the airline industry on air passenger duty. At the autumn Budget, we froze 2019-20 APD rates at 2018-19 levels for all short-haul passengers and for long-haul economy passengers. That provided a freeze for 95% of passengers.
Sir Hugo Swire
May I congratulate my hon. Friend on his appointment? He has done extremely well.
Airlines such as Flybe, which is based at Exeter airport in my constituency, undertake a disproportionate number of domestic flights. As my hon. Friend will be aware, domestic flights, unlike international ones, are currently hit twice by APD—at both take-off and landing. Treasury officials, of course, will tell a new Minister that any change is impossible and hide behind EU rules, but as we exit the EU, will my hon. Friend look at addressing that anomaly?
Robert Jenrick
I am grateful to my right hon. Friend for his kind remarks. I pay tribute to my predecessor, my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones), who was well regarded across the House.
As my right hon. Friend says, the Government are unable to exempt the return leg of a domestic flight. Of course, as we leave the European Union that could change, and the Treasury will keep the issue under consideration. We certainly recognise the economic significance of regional airports such as my right hon. Friend’s in Exeter. For that reason, we have kept short-haul rates frozen since 2012. In 2015, of course, we took the significant step of exempting children.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
The Government’s own figures show that Newcastle airport will be most affected by any cuts to air passenger duty or air departure tax in Scotland. The continued uncertainty about this issue is also incredibly damaging. From his newly elevated position, will the Minister tell us what progress has been made on the issue? Is he in a position to confirm how English regional airports will be protected from the effects of any cuts?
Robert Jenrick
The hon. Lady is right to raise this issue, as Newcastle airport and others are very important to the economy of the north-east. As she heard during my response to the previous question, EU rules prevent us from changing the rules regarding the return leg of a domestic flight. We will keep the matter under consideration. We have, of course, taken other important steps, such as keeping the rates frozen and exempting children. It is worth saying that air passenger duty raises more than £3 billion a year, so it makes an important contribution to public services.
Sammy Wilson (East Antrim) (DUP)
There would be substantial benefits from reducing or removing air passenger duty, including GDP growth, job creation, and an impact on trade, foreign direct investment and tourism. The duty particularly distorts trade between airports in Northern Ireland and the Irish Republic. There was a commitment in the Budget to have a review of air passenger duty. Will the Minister give us an update on where that review is?
Robert Jenrick
I am grateful to my hon. Friend for that question. As he knows, in the autumn statement we committed to a review of not just air passenger duty, but the impact of VAT on tourism in Northern Ireland. That review is under way and will report back in time for this year’s autumn Budget.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The Exchequer Secretary to the Treasury (Robert Jenrick)
Decisions announced by the Chancellor in the autumn Budget resulted in an increase of £1.2 billion to the Welsh Government’s budget. For the first time, this included more than £65 million thanks to the new Barnett boost agreed with the Welsh Government’s fiscal framework. This ensures that the Welsh Government’s block grant will increase in real terms over the spending review period.
Jonathan Edwards
The headline-grabbing announcement in the Budget was the alleged £1.2 billion uplift to the Welsh public finances, which the Minister has just repeated in his answer. It was an example of financial trickery best suited to the Foreign Secretary’s big red buses. Is it not the case that more than half that money will be in the form of repayable loans—in other words, financial transactions?
Robert Jenrick
I do not agree with the hon. Gentleman’s analysis or with his slightly cavalier attitude to £650 million of taxpayers’ money. This money is at the disposal of the Welsh Government and can be used for important things such as helping to support businesses and helping people to get on to the property ladder through Help to Buy.
Michael Fabricant (Lichfield) (Con)
Given that the tolls on the Severn crossing went down last week for the first time ever, there is going to be greater demand for use of the M4. However, since 2012 the Labour Welsh Government have done nothing about using the public money available to them to extend the M4. Is it not the case that public money should be spent on that, and that it has been made available to Wales from this Government?
Robert Jenrick
My hon. Friend makes a good point. As I said in my answer to the previous question, we have increased the budget for the Welsh Government. How they choose to spend that money, and how wisely they do that, is another question.
Mr Bob Seely (Isle of Wight) (Con)
Finance (No. 2) Bill
Robert Jenrick ExcerptsMonday 18th December 2017
(6 years, 6 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 18 December 2017 - (18 Dec 2017)
Robert Jenrick (Newark) (Con)
In 2010, tax receipts from the financial services sector amounted to about £53 billion; today they amount to £71 billion. We are making the banks and the wider financial services sector pay their fair share, but we do not want a race to the bottom. We want the sector to be competitive, because tens of thousands of well-paid, highly skilled jobs throughout the country—not just in London but in cities like Nottingham, near my constituency—depend on it.
Mel Stride
My hon. Friend is entirely right. The additional tax raised from the banks amounts to £9 billion between 2010 and the present time, and a further £25 billion is projected over the current forecast period. Far from taxing the banks less over time—as, no doubt, the Opposition will shortly have us believe we have done—we are securing more tax revenues than we did in the past.
Robert Jenrick
Will the Minister re-emphasise the point he has just made: that the practical effect for our constituents of the move he is making today will make it much more attractive for important British international banks such as HSBC and Standard Chartered, who have a choice of locations in which to be registered—HSBC recently considered whether to move to Hong Kong or even mainland China—to remain in the City of London?
Mel Stride
As is so often the case, my hon. Friend has hit an important nail on the head: in terms of improving our competitiveness, it is clearly deeply unattractive to have a situation where UK-domiciled banks are being taxed on their foreign operations whereas foreign banks are not being taxed by us on their foreign operations, but are only being taxed on their operations in the UK. He is right that the future of HSBC, Standard Chartered, Barclays and other banks, who make a huge contribution to our tax-take and our economy, are much more secure if they are not being disadvantaged by being taxed on overseas operations unlike their foreign counterparts. As part of these changes, the schedule also provides for a reduction in the amount on which the levy is chargeable for certain investments a UK bank makes in an overseas subsidiary.
I shall now briefly turn to the amendments tabled by Opposition Members. For the reasons I have described, we believe that a combination of taxing profits and balance-sheets is the most effective and stable basis for raising revenue from the banking sector. The bank payroll tax was intended as a one-off tax; even the last Labour Chancellor pointed out that it could not be repeated without significant tax avoidance. I can assure the House that information about the bank levy will continue to be published as part of the normal Budget cycle. Official statistics are published on the pay-as-you-earn income tax and national insurance contributions, bank levy, bank surcharge, and corporation tax receipts from the banking sector as a whole. The Government have published a detailed tax information and impact note on the proposed changes introduced by part 1 of the schedule. We have also published information about the overall Exchequer impact of the 2015 package of measures for banks, and these figures have been certified by the Office for Budget Responsibility.
Finally, new clause 2 proposes that HM Revenue and Customs should publish a register of tax paid by individual banks under the levy. Taxpayer confidentiality is an essential principle for trust in the tax system, and HMRC does not publish details of the amount of tax paid by any individual business. While this Government continue to consider measures to support transparency over businesses’ tax affairs, we must balance that with maintaining taxpayer confidentiality in order to sustain public confidence in our tax system.
Peter Dowd
I thank my hon. Friend for his advice, which I will take.
In 2017, we are still feeling the effects and economic consequences of the actions of the banks. Every day we are told by the Government that there is no money to invest and that austerity must continue, yet the Government have gone out of their way to undermine any remuneration from the banks that caused this sorry state of affairs in the first place.
Once again, the Opposition’s ability to amend this Bill is hamstrung and limited by the Government’s continued use of arcane and outdated parliamentary procedure. In football parlance, not only have they moved the goalposts but they have put boards across the goalmouths so that the Opposition cannot score any goals—a recreant act, if ever there was one, from a pusillanimous Government frightened of their own shadow.
By tabling new clause 1, we seek, first, to require the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims—Sir Roger, you will be glad that we are back on the bank levy. Secondly, we seek to establish the extent of the revenue effects of the cuts made in 2015. Thirdly, we seek to calculate how much would have been raised if the Government had stuck with Labour’s bankers bonus tax. Let us have the comparisons.
Such a report would shine a light on the Government’s malpractice in cutting frontline services while offering tax giveaways to the banks. It would require the Minister to reassure the House directly that certain banking practices are not simply in hibernation. “Once bitten, twice shy” is a fair assessment of most people’s views, including many in the sector itself. A by-product of the process would be to show that far more would have been raised under Labour’s bankroll tax.
We are also calling for a separate review of the changes introduced by clause 33 and schedule 9 and their overall impact on revenue and risky behaviour. That review would make the Treasury explain the rationale for further limiting the scope of the bank levy and forgoing billions of pounds while, at the same time, pushing for more cuts to departmental budgets and frontline services.
It is, of course, unsurprising and indicative of the Government that they have failed to keep track of the banks that regularly pay the levy and a full list of what they have paid. That is why, in the name of transparency—a very novel concept for the Government—we would ensure fiscal accountability. The Opposition have tabled an amendment that seeks to create a public register for the bank levy.
The Minister talks about commercial sensitivity. Well, that old chestnut is brought out time after time. When we supported the banks with billions upon billions of pounds, nobody talked about commercial sensitivity then. In this particular case, I am sure many in the banking sector would be happy to have such transparency. It is shocking that the Government consider this tax cut for the wealthy few to be a good use of nearly £5 billion.
Alongside demanding that the Government change course, we must also understand the impact of the lower levy rate introduced in 2011, as well as the revenue effects of lowering the levy in 2015. That, among other things, is what our amendment seeks to tease out.
Robert Jenrick
I am confused by the hon. Gentleman’s position on the bank levy. He says that he voted against it in 2011 because it was set at too low a threshold, but between 2011 and 2015 the then Chancellor raised the bank levy seven times and, on each occasion, the Labour party voted against it. Why did it do that?
Peter Dowd
I suggest that the hon. Gentleman goes back and reads Hansard when it is printed to see exactly what I said.
Once we can see the true costs of the Government’s policies, we can grasp the extent of the choices they have been making and how they have favoured a small, wealthy group over the many citizens of this country time and again. Let us look at the example of children’s services. Only a week before the Budget, the chief executive of Action for Children, Sir Tony Hawkhead, described the “devastating cost” of cuts to children’s services, which he said have been left on a “dangerous and unstable” footing. These prevention and protection services are vital to provide proper care for our nation’s children, and the banking levy could help with that, yet we have seen deep cuts of 55% of funding for local government and a gap of £2 billion in funding by 2020.
There is widespread talk and reports of local councils having to seek permission from the Government to raise council tax to cover the costs, in effect, of cuts to the bank levy—this money may have been available for children. So cuts to bankers and council tax up seems to be what we are being told today. As these services have been decimated over the past seven years, we have seen a doubling of serious child protection cases and twice the number of children put into care protection plans. Last year, 70,000 children were placed into care. The support for foster care, adoption and Sure Start children’s centres has all been reduced. Youth centres are closing and parenting classes are being axed. Short breaks for disabled children, provided by local councils to give their parents a little respite from full-time care, are being taken away and are under strain.
Taken together, those cuts mean that some of the most vulnerable children in our country are paying the price for seven years of failing economic strategy. When are the Government going to change their strategy? It is still shocking to see the Government put the needs of others ahead of those of our youngest citizens, who are picking up the bill for austerity