IR35 Tax Reforms

Ruth Cadbury Excerpts

Thursday 4th April 2019 Westminster Hall

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

It is a pleasure to serve under your chairmanship, Mr Gapes. As hon. Members may know, I am vice-chair of the all-party parliamentary loan charge group. I was approached by an agency that employs doctors, nurses and healthcare assistants purely for the NHS, because there is an interconnection with the loan charge—the unintended consequences of IR35’s creation are why we have the whole problem with the loan charge.

Loan schemes were set up as a way of enabling people who are self-employed and freelancers not to be disbenefited and not to have to pay more tax than if they had gone through pay-as-you-earn. For many people, it was intended to remove the administrative burden of setting up their own companies. As the debate going on now in the main Chamber will show, many hon. Members from both sides of the House have lots of examples of the many distressing consequences of the way the loan charge has been handled by HMRC, particularly in the last three or four years.

I want to relay the concerns of the managing director, owner and founder of what was a significant recruiter of NHS workers, whose business has declined by more than 60% in recent years. The particular issue he has concerns about—I hope I can express it clearly, and I apologise if I do not get this entirely right—is the confusion in the NHS about whether freelance workers are PAYE or not. There is mixed communication, which is causing him difficulty in his business, but it is also causing difficulties for the workers concerned. These are low-paid, or medium-paid, people—some earn less than £30,000, and most less than £50,000 per annum.

Because of the inflexibility of NHS employment, those people choose to work on a freelance basis, day by day. London-based people could be sent to Southampton one day, Bath the next day and maybe somewhere in London the day after. They incur travel expenses. For long days, they incur costs that they would normally be able to claim against the company. However, if they are PAYE, they cannot claim those costs. They therefore make themselves unavailable to the NHS.

I also learned that this situation is one of the major causes—in addition to Brexit—of chronic shortages of clinicians, medical staff, nurses and nursing assistants in the NHS. For people who need to work flexibly, the work is just not worthwhile when they are being forced to go through PAYE. They are therefore working in the private health sector, where there is more flexibility and the restrictions do not apply, they are leaving the country, or they are leaving health and working in another, more flexible, sector, where they are better off.

I have been told that 99% of the firm’s agency workers are being unlawfully blanket-assessed in IR35 and forced into unlawful employment, without a fair assessment—approved NHS framework operators are enforcing the blanket assessment. NHS Improvement has stated that a fair and individual IR35 assessment must be carried out, but that is not happening; blanket assessments are not compliant with the legislation.

Under the new rules, the fee payer, which is the agency or third party paying the worker’s personal service company, is not allowed to carry out an IR35 status assessment to determine the proper IR35 status of the worker—I apologise for reading this out, but I will get it wrong if I do not. The fee payer is the closest party in the contractual chain to the worker’s personal service company. This is despite HMRC guidance that states that, where a public authority, agency or third party makes a payment to a worker’s intermediary on or after 6 April 2017, it decides if the rules apply and then deducts tax and primary NICs from the payment it makes and pays the employer’s NICs, and that is included in calculating the apprenticeship levy.

The HMRC check employment status for tax tool that is used to assess workers assumes mutuality of obligation, which is one of the main tests that has to be assessed in all engagements via IR35 determination. As a result of the assumption, the CEST tool is flawed. The importance of mutuality of obligation is demonstrated by the recent tribunal case of Dr R Narayan v. Community Based Care Health Ltd—I can make the details available. In the supply of people to NHS trusts, there appears to be no mutuality of obligation. The worker can cancel a shift at any time and will not be paid, which is key to that case. The NHS trust can cancel a shift at any time, and the worker will not be paid, as confirmed in the contracts of the agency I mentioned. However, 99% of the agency workers are blanket-assessed inside IR35 and forced into unlawful employment.

It appears that HMRC does not understand the IR35 rules. Apparently, it recently lost a tax case against Lorraine Kelly. If HMRC has lost approximately 50% of IR35 tax cases that it has brought against contractors, how can it implement an online tool to get a correct IR35 result? HMRC gets that right only 50% of the time when it goes to court, which has to be worrying.

I am very concerned about what I have heard from this agency, which is trying to do the right thing. Incidentally, it warns all its staff about the loan charge. It is an umbrella company but does not use the loan charge. I am absolutely convinced that the company is trying to do the right thing, but it is really concerned about the impact that the confusion between HMRC and the NHS is having on the ability to supply appropriately qualified staff to the NHS, as and when needed.

--- Later in debate ---

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Gapes, even though it looks as though that will be brief. I congratulate the hon. Member for Rutherglen and Hamilton West (Ged Killen) on securing the debate. Those of us in the Chamber today share common ground on the problems of IR35. The hon. Gentleman said that we all wanted to see what was due to be collected in taxes being collected to pay for the services from which we all benefit. That is an important point to bear in mind, and we share that view, but that is not to take away from the difficulties that have been presented in the Chamber so eloquently today.

The hon. Gentleman referred to the Taylor review and the need to get the recommendations in play with some speed, and to the conflict between agencies and contractors. He also made a good point, on which we need to reflect, about our future relationship with the EU—the crisis that we currently face over EU membership. That should be food for thought for Ministers in relation to a possible delay to the further roll-out of IR35. The hon. Gentleman talked about his constituent and mentioned that large companies often have sophisticated tax systems and resources that are not available to those who are often affected.

[Sir David Amess in the Chair]

The hon. Member for Brentford and Isleworth (Ruth Cadbury) talked about the unintended consequences of IR35, moving on to the loan charge, which I will touch on in a few moments, and in particular the confusion in the NHS and other public bodies. She mentioned those working flexibly with the NHS to meets its needs. Another point that I agreed with was that the effect of rolling IR35 into Brexit is to increase the unattractiveness of going into such jobs and accelerate chronic staff shortages by trying to force into the PAYE system people who do not want to be in it.

The hon. Member for Clwyd South (Susan Elan Jones) also talked about public sector damage, but she reflected on it in terms of IR35 being applied to the private sector. She expressed concerns that this was the wrong time, given Brexit as well as IR35. She quoted her constituents’ worries about additional costs, shrinking talent pools, legal challenges, investment losses and the expenses incurred. She mentioned the impact on IT businesses specifically, which is to make some unviable or unable to operate at all.

The hon. Member for Glasgow North East (Mr Sweeney) talked about how, when IR35 was introduced, the issues around it became relevant and very present, showing up as a genuine concern for many people. He highlighted the real extra costs to businesses and, as was said earlier, the number of IR35 court cases lost by HMRC. The Government must reflect on that when they look at this. The hon. Gentleman also rightly talked about the lack of advice, warning or assistance from HMRC, moving on to the risk of the penalties incurred and of further extension of IR35 making it even less attractive to do business throughout the UK, especially in current circumstances.

The SNP has expressed concerns about the extension of IR35 since it was proposed in 2017. The UK Government must pay close attention to their own technical review and rule out extending IR35 rules until contractors’ concerns have been addressed. HMRC has been described as using a hammer to crack a nut, but this UK Government have had to be dragged kicking and screaming into tackling major, systematic tax avoidance and evasion. The extension was proposed through the Finance Act 2017, and since then the SNP concern has been about the key effect on contractors supplying public sector bodies. It is only right for such contractors to pay their fair share of tax, but they have been left with an unfairly high level of bureaucracy, making it even more difficult for them to play their flexible role within the economy, as those in the sector have confirmed. Experts have expressed concerns that IR35 does not even achieve its stated aim of equalising tax between those in its scope and employees.

IR35 has also made things more difficult for public sector organisations in rural communities, something I know a lot about, being a highland MP. In rural areas, we often rely on contractors to fill vacancies and to employ key staff—teachers, doctors, nurses and such key people in our communities—so we have great concerns about the further impact on contractors if IR35 is extended for the private sector in April 2020, as proposed.

We have expressed such concerns repeatedly. Indeed, my hon. Friend the Member for Aberdeen North (Kirsty Blackman) first warned the Chancellor about the risks of the expansion of IR35 during the April 2017 finance debate. The UK Government failed to listen then and, when we raised it again, later in 2017 and in 2018. Here we are in 2019, once again asking the Minister to listen. Will this be the day when ears are unblocked? I hope so. Will this be the day when the message gets through? Let us hope that as well. The UK Government should use the 2019 Budget and Finance Bill to address IR35’s negative impact on contracted staff and our public services.

Earlier today, in the main Chamber, the loan charge was being debated. That is distinct from IR35, but some tax advisers have reportedly informed clients that IR35 required them to utilise tax vehicles now being tackled by the loan charge. For tax professionals to advise clients to use such loopholes is plainly wrong. People should of course pay their fair share of tax to support public services, but the UK Government must now pursue organisations that facilitated such loans. For those caught up in loan charge issues, there is great concern that HMRC has failed to work constructively with those seeking a loan charge repayment.

[Ruth Cadbury]

I thank the hon. Gentleman for giving way, and my hon. Friend the Member for Rutherglen and Hamilton West (Ged Killen) for securing the debate—I am sorry, I should have done that earlier. I was in the loan charge debate, which has been suspended because rain is penetrating the main Chamber, so I came over to this debate. I want to add something now that I said in the other debate. Until the past three or four years, many of the early adopters of the loan charge were doing so with the strong advice of chartered accountants. In my earlier speech, I included at least two pieces of evidence to show that there was no uncertainty about the loan charge—it was legitimate. One was a memo written by an HMRC staff member in 2006 about loan arrangements being legitimate, fine and approved; the other was the Rangers case.

[Sir David Amess (in the Chair)]

Order. I am not sure whether the hon. Lady is making an intervention or a separate speech.

[Ruth Cadbury]

I hope that the hon. Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) will have a look at some of the contributions made during the other debate. Having done so, he will be able to agree with me that there is a lot of confusion and that people were not behaving illegally.

[Drew Hendry]

I thank the hon. Lady for that intervention, which allows me to agree with her—I too attended the early part of the main Chamber debate before coming here—and to say what a pleasure it is to serve under your chairmanship as well, Sir David. It is a particular problem that the companies that gave such advice are not being pursued, and the Minister must do something. As a final comment on the hon. Lady’s intervention, given the state of politics in this place, it is hardly surprising that the roof has fallen in on Westminster.

Among those caught up in the loan charge issues, there is great and heartfelt concern that HMRC has failed. It has failed to work constructively with those seeking a loan charge repayment plan to pay the taxes demanded. Often, that is bundled up with fines and additional costs. It cannot be right that people are pushed into desperation, or face the threat of losing their family home or of bankruptcy when a more thoughtful, flexible and fair approach should and must be taken. My hon. Friend the Member for Aberdeen North tabled early-day motion 2241, and I encourage Members to sign it. We hope that the UK Government and the Minister will force HMRC to change tack and work constructively with those seeking reasonable treatment of people due to pay fair tax payments for unpaid amounts and to remove the threat of bankruptcy and homelessness.

In conclusion, IR35 is not in a state to be further expanded at the moment. That has been clear throughout, in the comments by Members in this debate and from what we have heard about those who have experienced the effects, such as contractors and the people trying to deal with IR35 in our public services. It cannot be right for the Government to steam ahead without taking that into consideration.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to serve under your chairmanship, Sir David. I congratulate my hon. Friend the Member for Rutherglen and Hamilton West (Ged Killen) on securing this debate. It is also a pleasure to sit opposite the Minister. I had withdrawal symptoms after the end of the no-deal statutory instruments. I am afraid this subject has a similar level of complexity as the subjects we discussed in relation to no-deal preparations.

As many hon. Friends and Members have mentioned, IR35 arrangements are designed to operate in relation to workers involved in so-called off-payroll working. They cover situations where people work for a client through their own intermediary, often a personal service company. We have heard many examples in the debate. If people were providing their services directly, they would be classified as an employee. However, as a result of the arrangements, IR35 workers pay income tax and national insurance contributions in a different way to an employee. Individuals who work in such a manner benefit from increased flexibility and reduced tax liability, but the IR35 rules are intended to ensure that they pay broadly the same tax and national insurance contributions as an employee.

As we have discussed, the rules have applied to public sector bodies since 2017, and the Government confirmed at the 2018 Budget that they would extend the change to the private sector. The Government have just launched a technical consultation about the new arrangements.

Self-employment and contractual arrangements are a vital part of the UK economy. People who are genuinely self-employed deserve to be properly supported, while also ensuring that everyone pays the right amount of tax. However, there are real concerns that workers are being forced into self-employment by unscrupulous employers to avoid costs and their duties to workers. Both the law and the Exchequer are struggling to keep up on this issue—a point that has been made by various speakers today. HMRC estimates that it loses about £3 billion a year because of self-employment in name only.

There is a problem, but at the root of it is the gap between how work is characterised for tax purposes and how it is characterised for the purposes of employment legislation. The Taylor review was meant to clarify at least the latter, as was mentioned by my hon. Friend the Member for Clwyd South (Susan Elan Jones) in a speech that was characteristic of all the speeches today when she spelled out the experiences of her constituents, and appropriately so. The Taylor review had many flaws. I will not go into all of them now, but it suggested that, for example, sick pay could be traded for a weakening of minimum wage rules—certainly not something that I would support—and that came at the same time as the courts were recognising that many alleged self-employed workers were anything but.

However, the review did offer a number of recommendations that the Government have sadly been extremely slow to consider. The lack of clarity over the implementation of Taylor where it is warranted is leading to a huge number of problems, including the ones we have talked about, for genuinely self-employed contractors and for what we might call bogusly self-employed contractors, as well as for their employers, as they adapt to coverage by IR35, knowing that even the IR35 rules may be subject to change because of future alterations to employment law in the wake of the Taylor review.

It looks as though we will not see an immediate change, so HMRC is engaging in a process of what I call bricolage to try to bridge the gap, and the consequences are complicated and very confusing. The confusion was described appropriately by my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury), who talked about a constituency case. She was kind enough to share the details of the case with me before the debate. She was absolutely right to raise the concerns of her constituent.

[Ruth Cadbury]

May I clarify that it was not a constituency case? The case was raised with me as a result of the work that I did on the loan charge.

[Anneliese Dodds]

I am grateful for that clarification. Regardless of where the individual was based in the country, the case was revelatory. In theory, with a levelling of the playing field upwards when the private sector is covered by IR35, some of the concerns about the leakage of highly skilled contractor staff from the public sector could be removed by the extension. However, the other problems that hon. Friends and Members have rightly referred to are still there, not least the problems that arise for small, often one-man or one-woman-band contractor companies that are trying to provide specialist skills on this basis, who may well end up being disadvantaged in relation to much larger providers of those specialist services. Surely we do not want that; surely we want to continue to have the innovation that exists in the complex ecology of different firms and freelancers offering such services.

We really need a joined-up approach to the issues that brings together the consideration of tax and employment law and levels up protections for the self-employed, as well as dealing with the current implications of the tax system that boost bogus self-employment. In the absence of that, we have the issues that we have been talking about today, and employers themselves are trying to find a third way through all of this, as we have seen with the GMB-Hermes deal recently, where a new employment classification has been created in the absence of any other way to improve the situation.

We do not have a coherent approach. It is unfortunate that, as Members have mentioned, the lessons have not been learned from the roll-out of IR35 to the public sector before it is rolled out to the private sector. I will not go through all of them now, as they were appropriately described by my hon. Friends, but one that I want to underline again is the concern about the finance and time that has to be spent by the self-employed who face uncertainty because of the new rules.

The kind of experience that individuals have had with the HMRC online tool, which has already been explained, is a common one. The tool is not based on all of the case law, and the case law itself is not very clear in how it directs us to determining the status of many different contractors, so it does not resolve the situation for many users. It puts an additional strain on contractors, including many individuals who, as has been mentioned, might be on quite low incomes and cannot absorb additional costs. The Government need to look at the issue at a legislative level, rather than the onus being on HMRC to try to deal with it in a technical and procedural manner. It simply cannot. A different approach needs to be taken. As we established in our previous general election manifesto, the burden of proof should be with the employer, so that the law assumes a worker is an employee unless the employer can prove otherwise. We need to be clear on that.

Concerns about the appeals process have been mentioned. I will not go into them in detail, but I will underline the questions asked by hon. Members. How can we be sure that the process will be fair when it is led by those who employ contractors effectively marking their own homework, in the memorable words of one hon. Friend?

The Institute of Chartered Accountants has stated that tax and benefit differentials between different types of work need to be addressed. There needs to be further consultation on what, if any, tax incentives are offered to the self-employed. That is one view from industry and it coincides with what was outlined in the Taylor report:

“Over the long term, in the interests of innovation, fair competition and sound public finances we need to make the taxation of labour more consistent across employment forms while at the same time improving the rights and entitlements of self-employed people.”

That brings me back to the fundamental issue that I will close with, Sir David.

It is a fact that the tax and legal status of work is not aligned, not certain and not comprehensible. It is impossible for many of those caught up in it to understand the right way forward. My party has said that we need a proper commission to look at it in detail, to modernise the law around employment status and to look at how it interrelates with tax status. We have presented a 20-point plan for security and equality at work. We need to build on that through a consultation that includes the voices of the people affected. We have heard so many of them in the short time that we have had today.

--- Later in debate ---

[John Glen]

I am not aware of any distribution analysis, but I will check with officials, and if I can give clarification on that, I will do so by letter.

Non-compliance in the private sector remains a persistent and growing problem that, if left unchecked, will cost the taxpayer as much as £1.3 billion by 2023-24, according to the Government’s estimates. In last year’s Budget, the Government announced that we will extend the reform of off-payroll working rules to all sectors, including the private and voluntary sectors. That will help to address the issue of non-compliance and to ensure there is a level playing field for the public sector and other sectors when hiring contractors.

The Government have listened to the views of individuals and businesses and have decided that the reform will apply only to medium and large organisations. It will not extend to the smallest 1.5 million businesses. In addition, it will take effect from April 2020, to give businesses and other organisations time to prepare. The Government are consulting on the detailed design of the planned reform, and we are listening carefully to the representations made. Our aim is to provide the individuals and organisations concerned with greater certainty about how the off-payroll working rules will operate from April 2020 in all sectors, including about the actions they can take to prepare for the changes.

Hon. Members talked about HMRC’s check employment status for tax—CEST—tool and raised some questions about its effectiveness. CEST was developed in consultation with stakeholders, including tax specialists and contractors, to assist individuals and public authorities in making the correct determinations. HMRC will stand by the result of CEST, provided the information entered is accurate and in line with HMRC guidance. It gives an answer in 85% of cases, and where it does not, more detailed guidance and support are available through a telephone number for individuals.

To support organisations in applying the rules, HMRC will continue to review and improve CEST. HMRC has already held user research sessions, and will continue to work with stakeholders over the coming months to ensure that the tool and the wider guidance suit the needs of all sectors, and to address specific points raised during the consultation. Enhancements will be tested and rolled out before the reforms are introduced in 2020. I asked officials for greater clarity on what that is likely to mean, and we are talking about improved guidance, better phraseology and improved language that gives greater certainty to individuals who make inquiries.

The hon. Member for Brentford and Isleworth (Ruth Cadbury) mentioned the issue of blanket decisions in the example she gave. Members have expressed concern that businesses might take a blanket approach to applying the off-payroll working rules to contractors without looking at the facts of individual cases. Independent research suggests that has not generally been the case in the public sector, where the reform has been in place since April 2017. I cannot account for every case, but research was done to evaluate the issue because it was a legitimate area of concern. The vast majority of public bodies are making assessments on a case-by-case basis. I have looked into how that research was done— HMRC commissioned an external independent organisation to speak to central Government Departments, the NHS and local government departments to ascertain that.

Having listened to people’s concerns, we included proposals in our recently published consultation to help to ensure that processes are put in place for individuals to resolve disputes with their engagers directly and in real time. The proposals would put a legal requirement on engagers to have a status disagreement process in place, and would require them to consider evidence provided by an individual contractor and review their status determinations accordingly. HMRC is committed to working with organisations to ensure they make the correct status determinations, and will publish detailed support and guidance to help organisations prepare well ahead of April 2020.

[Ruth Cadbury]

I thank the Minister for his response. We look forward to that research. I hope he checks it with bodies such as the NHS and ensures that the different levels and layers of the NHS are looked at. I have been given evidence that different trusts are doing different things and that NHS Improvement and the framework providers in the NHS are providing conflicting advice, which of course causes a problem for agencies and for workers themselves.

[John Glen]

I am very happy to look into that and to see that that work is forensic enough to give a reliable read-out on actual behaviour.

Members also questioned whether there might be an additional burden on businesses that hire contractors, and raised concerns about introducing the reform at this time of uncertainty. As I mentioned, the reform simply enforces legislation that was introduced in 2000. Fundamentally, I believe it is fair that two people who work in a similar way pay broadly the same tax, and the businesses that hire individuals are best placed to determine whether these rules apply. Medium-sized and large organisations will have until April 2020 to implement the changes, and we will keep the existing rules for the smallest organisations, minimising administrative burdens for the vast majority of businesses and other organisations.

I turn now to employment rights, which the hon. Member for Oxford East (Anneliese Dodds) mentioned. I, too, have missed our exchanges in Delegated Legislation Committees, but it is good to be talking about another topic. Falling within the off-payroll working tax rules does not currently change an individual’s status for employment rights, as there is currently no direct link between employment taxes and those rights.

The Matthew Taylor review took place in summer 2017, and the good work plan was published in December 2018. As set out in that plan, the Government agree that reducing the differences between the tax and rights frameworks for employment status to a minimum is the right ambition. We will bring forward detailed proposals this year—I recognise the need for this to happen quickly—for how those frameworks could be aligned. In the meantime, it is right that the Government take action to improve compliance with existing rules. Those who wish to challenge their employment status for rights can take their case to an employment tribunal, regardless of their tax status.

Members suggested that there is a link between the off-payroll working rules and disguised remuneration schemes. Disguised remuneration arrangements have nothing to do with the off-payroll working rules; individuals are able to comply with those rules without entering into contrived avoidance. Trying to get around rules that are designed to ensure that everyone pays their fair share is not an excuse to use a tax avoidance scheme.

There was mention of some celebrated court cases. It is not appropriate for me to comment on individual cases. Obviously, many of those cases are very complex; only the very complicated cases make it to court. HMRC will work with businesses to ensure they are equipped to make the right determinations.

I want to be clear that this reform does not introduce a new tax but seeks to strengthen compliance with existing tax rules. The Government value immensely the contribution of the self-employed and flexible workers—various Members have made the point that they make up a much larger proportion of the UK workforce—and intend to protect them, but there are many legitimate commercial reasons for people to work through limited companies and for businesses to engage those companies, and that should not need to change. The off-payroll working rules exist to ensure that those individuals pay a fair amount of tax, and the Government believe it is right that we address non-compliance through these reforms.

I hope I have addressed the points that were raised. If there are any points I have not dealt with, I would be very happy to take on board the final remarks by the hon. Member for Rutherglen and Hamilton West and to write to any Member in lieu of responding appropriately.

Tax Avoidance, Evasion and Compliance

Ruth Cadbury Excerpts

Monday 4th March 2019 Commons Chamber

[Mel Stride]

I am sorry if the hon. Gentleman formed that opinion. We are certainly not going to prejudge any review on any aspect of tax, whatever it may be. I gently say to him, and to those who got involved in these schemes, that by and large when something looks too good to be true, it is too good to be true. Where hon. Members refer to very large demands for tax, we are, of necessity, looking at situations where very large amounts of money went through tax avoidance schemes. We have had debates in this House in which Members have raised tax demands, on behalf of their constituents, of up to £900,000. In those circumstances, about £2 million-worth of income would need to go through one of those schemes in order to result in an unpaid tax bill of that magnitude.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

The Minister needs to clarify whether he is just writing a report or whether he will genuinely do a serious review. He says that the bulk of the loan charge tax by volume has already been collected. However, 50,000 ordinary, hard-working people are in despair and living in limbo, waiting to know whether the tax returns they put to bed years ago are to be reopened.

I am the vice-chair of the all-party loan charge group, and last week we heard from the family of a man who committed suicide over a small amount. It was the shame and fear that he would go to prison that sent him over the edge. The Sunday Telegraph has reported on a leaked HMRC letter from 2011 that clearly shows that it knew it was out of time for pursuing these cases back then, so will the Financial Secretary now admit that the real reason for the loan charge is HMRC’s failure to act when it was legally entitled to do so and that that is no good reason to undermine the rule of law by retrospectively rewriting the rules?

[Mel Stride]

May I correct one thing the hon. Lady said? She said I suggested that the bulk of the money due under the disguised remuneration measures has already been collected, but I am pretty certain I said that, of the £1 billion that has been collected thus far, some 85% has come from companies, as opposed to individuals. HMRC will go for the company before the individual. We have to get back to the reasons for this charge, which I have just set out. As for whether it is retrospective as the hon. Lady says, I can assure her that there has been no time in our history as a taxing nation when this kind of structure—this kind of contrived arrangement, which is set up simply for the avoidance of taxation—has ever fallen appropriately within our tax code. It has never been right. These schemes have been taken through the courts, not just the general courts, but the Supreme Court, over a number of years and they have always been found to be defective and not to work.

Finance (No. 3) Bill

Ruth Cadbury Excerpts

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

[Sir Edward Davey (Kingston and Surbiton) (LD)]

I thank the hon. Member for St Albans (Mrs Main) for her passionate speech. I also thank the right hon. Member for Loughborough (Nicky Morgan), who chairs the Treasury Committee, and right hon. and hon. Members from across the House, who have campaigned as a Parliament against this measure and supported new clause 26. It is my wish to divide the House on the new clause if the Minister does not accept it.

Let me make it crystal clear from the start that I support the Treasury’s aim of closing tax loopholes and stopping tax avoidance. The introduction of loan charges in the Finance Act 2017 to stop future abuse was correct, and the review my new clause proposes would not seek to prevent the Treasury from stopping that abuse from the 2016 Budget announcement. Instead—somewhat inelegantly, due to the rules of Finance Bill debate—new clause 26 aims to focus the minds of Treasury Ministers on the gross unfairness of the way the 2017 Act went about closing an unacceptable tax loophole.

I believe that the review envisaged in the new clause would reveal the unfairness of the retrospective nature of the current loan charge legislation in two ways. First, it would show how that retrospective nature is even more severe than non-retrospective but backward-looking proceedings for the recovery of lost tax elsewhere in our tax legislation. Secondly, it would show that the test of reasonableness included in proposed new section 36A, if applied to the loan charge, would in fact prevent any retrospective tax collection from the loan charge.

Let me remind the House why the Treasury should, after the review, ditch the retrospective nature of this measure, delay April’s implementation and amend the charge so it focuses only on payments made after 2016. It is because the loan charge, as introduced, offends against the rule of law. It is the sort of taxation that led the barons to rebel against King John and gave birth to Magna Carta. It is simply not acceptable for a Government to introduce a law that makes illegal something someone did years ago, when that action was considered legal. That is a clear principle.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

I thank the right hon. Gentleman for giving way— I realise time is short—and for tabling new clause 26, which I, too, support. Does he agree that it is unreasonable for people to be expected to have kept records going back 20 years when they were reassured at the time that the scheme was legitimate?

[Sir Edward Davey]

The hon. Lady is absolutely right, and I thank her for her support. Let us remember that these people—our constituents—were given professional tax advice and behaved in a way they thought was right and lawful at the time.

Oral Answers to Questions

Ruth Cadbury Excerpts

Tuesday 3rd July 2018 Commons Chamber

[John Glen]

I have not personally had any such discussions, but the Exchequer Secretary will have done. We are supporting that business, and many others up and down the country, through the comprehensive industrial strategy that we are rolling out in different sectors.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

10. What recent discussions he has had with the Secretary of State for Education on changes in the level of funding per pupil in schools since 2010.

[The Chief Secretary to the Treasury (Elizabeth Truss)]

We have protected schools’ budgets in real terms since 2010, and through our reforms to schools and the curriculum children’s results have improved, particularly in reading.

[Ruth Cadbury]

Will the Minister confirm that the additional £1.3 billion announced a year ago does not address the £1.5 billion shortfall in school budgets? So what advice does she have for the 88% of schools in this country facing real-terms budget cuts, despite the new funding formula?

[Elizabeth Truss]

I suggest the hon. Lady reads last week’s edition of Schools Week, which said that the unions had admitted that they had their sums wrong and in fact per-pupil funding was being protected in real terms in 2018-19 and 2019-20.

Customs and Borders

Ruth Cadbury Excerpts

Thursday 26th April 2018 Commons Chamber

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

I welcome this debate and I support all the excellent points raised by those who, like me, support the motion—I will try hard not to repeat them. I am not alone in being somewhat bemused that the party in government is the party that generally prides itself on being pro-business and anti-bureaucracy. Nevertheless, the Government appear to be ignoring the pleading of businesses large and small, and they are leading this country towards a tsunami of additional paperwork as we move towards leaving the customs union and the EU, given the implications of all that paperwork for trade deals that we will now have to put in place for our trade with the EU. Leaving the customs union means the introduction of tariffs and non-tariff barriers to trade in goods with our largest trading partner. That involves 40% of our trade, and it means, as businesses tell us again and again, added delay and costs for manufacturers.

Before the recess I had the pleasure of visiting Honda in Swindon with the Industry and Parliament Trust. It said that

“outside a customs union, there is no such thing as a frictionless border.”

Motor manufacturers will be subject to 10% tariffs on cars, and 4.5% on components and parts, plus additional delay. Currently, if someone takes their car to the dealer because they need a new exhaust pipe, the order goes in today, and tomorrow the dealer will have that part and be able to fit it. I understand that once we are outside the customs union there will be a wait of up to five days for that new exhaust pipe. That is not just inconvenient for the car owner—it has an economic cost for the owner of a van who uses that van for business.

It was also good to see how Honda’s presence in Swindon has transformed that town since I was last there many years ago. There is no doubt that Swindon’s low unemployment rate and well-paid jobs—not just at Honda but at all its suppliers—are directly based on Honda being there, which is probably linked to the message that, as we have heard, Margaret Thatcher gave to the Japanese Government many years ago when she said that Britain would never leave the customs union. Now all that is at risk.

We will not see big-bang announcements by big manufacturers in those key sectors—not just the automotive industry, but pharmaceuticals and many others. Instead, we will see incremental decisions and loss of capacity, and incremental elements of production going to Europe where the biggest market will be. That will be a long-term cost for our economy. We cannot afford that.

Briefly, on borders and Northern Ireland, many of us will have seen in our Twitter feed the map of Switzerland and the hundreds of customs points. I remember County Fermanagh in the old days, before the Good Friday agreement, and we cannot go back to that.

I support the motion, calling on the Government to establish an effective customs union with the EU, and like other Members I believe we should stay in the single market as well, because 80% of our economy is in services.

[Mr Speaker]

Order. A three-minute limit now applies.

Oral Answers to Questions

Ruth Cadbury Excerpts

Tuesday 17th April 2018 Commons Chamber

[Elizabeth Truss]

I thank my hon. Friend for his question. There is indeed money that will be released as a result of our leaving the European Union. We are working on the spending review, which will take place next year, and part of the job of that spending review will be looking at how we allocate that money domestically.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

24. Many of my constituents work in the financial sector —the financial services sector, specifically. Does the Chancellor not recognise that the closest possible alignment with the single market is the best possible outcome for this vital sector?

European Affairs

Ruth Cadbury Excerpts

Thursday 15th March 2018 Commons Chamber

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

It is a pleasure to follow so many eloquent—and some long—contributions.

I wonder how many arch-Brexiteers have actually spoken to people who work in or run businesses to learn about the impacts of not only Brexit but uncertainty about Brexit, and how it is affecting decisions in their constituencies at this moment. I have done that, and I am going to share just two examples with the House. One is a specific small company, and the other is in a major sector. I would have covered more, but have had to cut and cut my speech as the second half of the afternoon has progressed.

The owner of a small and medium-sized enterprise, a research company, wished to remain anonymous, but wanted me to know his position. He wrote to me:

“I run a small business and have already lost out because of Brexit (due to the drop in sterling putting up the cost of our cloud computing by 20% and uncertainty over future research funding). There are lots of detailed questions for my business that I have no idea how to answer, and I don’t have armies of lawyers and accountants to work out for me. So much for the Tories cutting red tape. Such as, if there is a hard Brexit, will there be an uninterrupted service from all the cloud computing currently supplied via companies based in Ireland? Will I be able to access all my data and information on day one—or need new customs clearance or change my data protection set up? Will cloud computing be treated as an import with tariffs—and therefore add to my operating costs and accounting costs as I grapple with new HMRC rules? These are things that could tip my very small, struggling, business over the edge. I’m sure we’re not the only vulnerable SME.”

He goes on:

“More generally, MPs say they will protect jobs. In my sector income”—

rather than jobs—

“is already moving judging by conversations I am having with partners and in my networks. Contingency plans are already being enacted by SMEs. I know of companies who have set up offices in mainland EU and are starting to channel work through there, even if it is UK-based staff doing it, for now. I am being paid in Euro for some work that previously would have been in sterling, which exposes me to risks I can’t offset. This is all completely legal. Two of my most talented EU colleagues have left the UK because they ‘don’t feel welcome’—they both lived here as children but having become parents themselves believe the situation is too uncertain to keep their roots here…In my view, the loss to Britain will be this invisible drip-drip of lost talent and money rather than announcements of big job losses by big employers and will only become apparent when it is too late.”

Secondly, my constituency is home to a large number of broadcast organisations—household names such as Sky, and myriad others, many whose main market is not even in the UK—and many of my constituents work in broadcasting, including a few household names. The UK dominates Europe’s broadcasting sector due to the availability of skilled employees and English being the dominant language in the industry. Thanks to the country of origin principle, hundreds of international media organisations are based here and can broadcast to anywhere in the EU without restriction. The trade organisation COBA—the Commercial Broadcasters Association—fears:

“International broadcasters based here would, reluctantly, be forced to restructure their European operations”,

particularly with a hard Brexit. It said a month ago that Brexit could cost the TV market £1 billion per year in investment, put at risk thousands of jobs in the UK broadcasting sector, and undermine the sector’s long-term global competitiveness. It says:

“Like many sectors, broadcasters cannot wait until the cliff edge of March 2019 to make decisions about the future of their European businesses.”

So even if no deal is not the Government’s intention now, these companies are having to make a risk assessment, divert management resources into contingency planning and make a decision on whether the risk of no deal is too great—they will jump ship anyway, taking jobs and investment with them. This means additional cost on otherwise unnecessary contingency planning and diversion of management time and energy, or just cutting and running.

These are the real impacts of Brexit now. If we multiply this by tens of sectors and hundreds of thousands of businesses making millions of decisions about their future, we see that this is what is leading to the UK tumbling down the international growth tables. It undermines Government income that funds our vital public services and, as looks increasingly likely, makes our constituents poorer. The Government must wake up, and focus not on the outliers in their own party, but on the economic prospects of the UK and its place in the world.

Budget Resolutions

Ruth Cadbury Excerpts

Thursday 23rd November 2017 Commons Chamber

[Sajid Javid]

I am very pleased to hear that from my hon. Friend. I, too, have received emails overnight from members of the public who have welcomed the change. I am sure the Leader of the Opposition has received similar emails, and I am sure he is all excited about sharing them with us at Prime Minister’s Question Time next week.

Not everyone is lucky enough to have a home. One person living on the street is too many, but the latest figures are simply unacceptable. It is clear to anyone who walks around any of our major cities that the current approach to tackling homelessness is not enough. It is time for a bold new way of doing things, and this Budget provides some of the resources required to do just that.

I have been a fan of the Housing First approach for some time. It does exactly what it says on the tin: it involves getting people off the street and into a safe and secure home first, and then dealing with the problems that may have forced them on to the streets in the first place. That sounds obvious, but it is a complete reversal of the traditional way of doing things under successive Governments. Earlier this year, I saw for myself how that approach has eliminated rough sleeping in Helsinki, and I want to see whether we can make it just as effective in our own country. That is why the Chancellor announced yesterday £28 million for Housing First pilots in the west midlands, Greater Manchester and the Liverpool city region.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

Does the Secretary of State not realise that that is not particularly innovatory and that Labour did end the obscenity of rough sleeping in less than 10 years when we were in government? If the Government had not removed the safety net of support services and housing, we would not have had people sleeping rough on our streets in the past seven years.

[Sajid Javid]

I know that the hon. Lady means well and that on this issue, at least, there is usually a welcome cross-party approach, but she is wrong to suggest that rough sleeping was ended at any time, under any Government. In fact, under the last Labour Government, statutory homelessness peaked in 2007. Since then, it is down by more than 50%. I hope that she agrees that we can all work together to do more to combat homelessness. For that reason, I hope that she will welcome the announcement of the new homelessness reduction taskforce, which will pilot a number of new ideas to help to cut rough sleeping by 2022 and to eliminate it altogether—working together—by 2027.

Homes are only part of the picture. Communities need roads, railways, schools, GP surgeries and much more besides. Investing in infrastructure can unlock a huge range of new sites and avoid putting too much pressure on existing communities that already feel squeezed. That is why we are committing a further £2.7 billion to more than double the size of the housing infrastructure fund, investing not just in houses but in the services that we all depend on.

Of course, our support for public services is not limited to new communities. We are putting an additional £6.3 billion of new funding into the NHS, upgrading facilities, improving care, improving A&E performance, reducing waiting times and treating more people this winter.

--- Later in debate ---

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

The spin ahead of yesterday’s Budget announcements kept repeating that the Chancellor had no wriggle room, but why, after seven years, have the Government got no wriggle room? The Conservatives cannot keep blaming the Labour Government—not that they ever should have done, given that we had just come out of a global financial crisis in 2010 and that the UK came out of that global financial crash in better shape than many other countries. But here in the UK the Conservatives blew it all away with their fiscally illiterate austerity policy, which hampered the country’s growth and damaged our public services.

Seven years later, wages are down and growth is down. We now have the lowest growth of all the G7 countries. Productivity is also down—it is embarrassingly poor compared with that of our competitor countries—and borrowing and debt are up. Yesterday, we saw the further downgrading of growth projections and of productivity, thanks to the disaster that Brexit is to our economy. In seven years, cuts have had to be made to virtually all our public services, and there are deeper cuts still to come. Over 80% of the burden of those cuts has fallen on women’s shoulders. What of the little titbits on welfare benefits, housing and other public services that the Chancellor dropped into yesterday’s Budget? They make big headlines, but small beer.

Given the pressure on time, I will address just a few of the Chancellor’s proposals. Housing policies need to be evidence-based. All policies should be evidence-based, but never are they less so than in the bit about housing in the Chancellor’s Red Book. It states:

“The government is determined to fix the dysfunctional housing market, and restore the dream of home ownership for a new generation.”

That is fine, but in my west London constituency many people just dream about having a home, let alone owning one. Young and even not-so-young people are unlikely to be able to leave their parents’ homes. Families are in poor-quality temporary accommodation that they can hardly afford, and they are always at risk of having to move—often for years on end. There is no hope for them. The Red Book correctly goes on to state that average house prices in London are 12 times the average worker’s salary, but then it says:

“The only sustainable way to make housing more affordable over the long term is to build more homes in the right places.”

There is not a jot of evidence to show that building more homes in London would bring prices down in the current distorted housing market. Even if it did, shaving a few thousand off the asking price of a new home would not help my constituents earning less than £100,000 or who do not have a six-figure deposit from the bank of mum and dad.

The Chancellor expects to provide at least 25,000 new affordable homes through the affordable homes programme. Does he mean affordable homes, or does he mean homes for social rent? That is a drop in the ocean. Hounslow Council alone has 10,000 families registered as needing affordable homes, and most of them can afford only a social rented home. The last time that this country built more than 250,000 homes a year was in the 1970s, and 40% of them were council homes. We need to aspire again to building good-quality homes that are affordable to all, providing stable homes, a reduced benefit bill and help for productivity.

The Chancellor’s Red Book says that councils will need support to ensure homes get built as soon as possible. If he is serious, a monetary figure needs to be attached to that. He can start by making the lifting of the borrowing cap applicable to all authorities without them having to go through as-yet-unspecified hoops to be allowed to invest in new council housing, and give them the ability to reinvest receipts from council house sales in building new council homes.

The £3.2 billion stamp duty giveaway will benefit 3,500 buyers by about £2,000—nice for them—but that is a cost to the taxpayer of £924,000. How many council homes would that money buy? It puts up prices for those struggling first-time buyers; it mainly benefits those already on the housing ladder; and it will not help anyone earning less than £150,000 in west London.

In conclusion, the Budget only scratches the surface of the issues of those who are struggling as a result of the Government’s failed fiscal policies over the past seven years. It does nothing for those on low wages or insecure zero-hours contracts, nothing for those who need substantial growth in council house building and nothing for our councils and other local services or for those who work in them. The Chancellor brought little or nothing for the many and took nothing away from the few.

Duties of Customs

Ruth Cadbury Excerpts

Ways and Means resolution: House of Commons
Monday 20th November 2017 Commons Chamber

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

I thank the Minister for his full responses to the questions on ro-ro. I wish to ask similar questions about our biggest port by value: Heathrow airport. With respect to the IT systems and other processes, will Heathrow be ready for this process?

[Mel Stride]

Yes, absolutely. In the case of Dover, most of the traffic is intra-EU trade, whereas a high proportion of the traffic going into Heathrow is more international than simply the EU, so there is already greater engagement with third-country trading. We are therefore confident that Heathrow will be ready.

--- Later in debate ---

[Chris Bryant (Rhondda) (Lab)]

Will the hon. Gentleman give way?

[Ruth Cadbury]

Will the hon. Gentleman give way?

[Kirsty Blackman]

Will the hon. Gentleman give way?