Finance (No. 2) Bill

Ruth Cadbury Excerpts

Committee stage & Committee of the Whole House (Day 2)
Tuesday 20th April 2021 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

It is a pleasure to speak in this part of the debate, and I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

It was probably 15 years after we set up our business that our own accountants came to us—we were making reasonable profits by then—and suggested that we take advantage of a tax avoidance measure, and a pretty aggressive one in our view. This was not a particularly unusual accountants—it had a decent reputation locally— but so much money potentially runs through these schemes that some promoters inevitably see an opportunity for themselves.

I must tell the House that we told our adviser that we did not want to take part in such a scheme, and there were two reasons: we believed that people should pay their tax—that we should all pay a fair amount of tax—but also that any person who takes up such measures should be afraid that HMRC will one day come along and say, “Those measures were not appropriate.” By that time, a lot of the money that they think they have saved has gone out in costs to promoters and the rest of it, and they are left with a huge bill.

Had the person who promoted that scheme to us—our accountant—thought that he would potentially end up on jail, I do not think he would have come to us and told us about it. This was a reputable local person, and perhaps he did not even think that tax avoidance at that point was fraud. Nevertheless, it certainly can be fraud, and in many cases it is. If we are willing to hold people to account, ultimately through a criminal prosecution—as HMRC can, of course, as the Minister pointed out earlier—there would be a lot less of this kind of promotion and a lot fewer of these activities.

Before I talk in more detail about that, I want to tackle some of the shadow Minister’s points. It is a little churlish not to recognise the steps that the Government have taken since 2010. There have been 150 measures to tackle tax avoidance; that was at a cost of £2 billion to the taxpayer, but it brought in £250 billion in contributions to our public services. Of course, the Minister said that we need to go further, but it is wrong to simply say that the Government are not doing enough. Some of those measures, such as the digital services tax and the diverted profits tax, are very significant internationally.

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

I acknowledge the point that the hon. Gentleman makes and the amount of money brought into the Revenue by the measures, but is he not also conscious that the sheer number of different measures has, for many taxpayers, added to the complexity? We have one of the most complex tax regimes in the world and that complexity often catches people unawares, and costs them lots of money and sometimes their businesses and their homes.

[Kevin Hollinrake]

I absolutely accept that our tax system is very complex, and I have proposed a number of measures on the Floor of this House to try to simplify it. For example, abolishing business rates and replacing them with an increase in VAT would simplify the tax system, instead of having an online sales tax. However, in terms of this debate I do not think it is the complexity of the issues that catches people out. We can see that 99% of tax avoidance schemes in the UK involve disguised remuneration—these are very contrived schemes. We should look at amendment 77 carefully. As to whether it is unfair on a person who is a promoter of what I would say is an extremely contrived tax avoidance measure, I am not totally sold that that should be a problem.

One of the biggest problems we have is faith in the system. This Government have done a huge amount to reduce the tax gap, which is at a record low of 4.7%, but if there is a £20 billion tax gap from fraud, the person in the street might reasonably say, “Why should I pay my tax?” This creates an incentive then for people to look at ways of avoiding tax. As to whether tax avoidance is fraud, the Government’s own call for evidence last month says clearly:

“The Government recognises that the design of arrangements that are sold as avoidance schemes may in fact enable fraud.”

So there is a good case for being able to take these further measures, as the Government are doing through stop notices, further civil penalties and stopping individuals hiding behind corporate structures.

The trouble is that, as we see in many areas, not least the banking sector, which I am pretty active in through my work in the all-party group on fair business banking, these kinds of organisations see a fine—a civil penalty—as a cost of doing business; the real deterrent for people is a criminal penalty. One of the best examples of this is to be found in a completely different sector, with the personal liability for a director in the construction industry. As soon as that personal liability came in and there was the potential for someone to go to jail if they did not make sure their sites were safe or they did not put measures in place, there was a huge decrease in the number of injuries and fatal incidents in the workplace in construction. That speaks to the point that if there are real criminal sanctions that we are willing to take forward and people think that that is going to happen, this promotion of avoidance schemes will start to drop significantly.

We probably have better resourced areas in terms of the prosecution of avoidance; I believe there are about three and a half times this number of people in the Department for Work and Pensions looking at benefit fraud, despite the fact that it is a much lower level of fraud—the level of benefit fraud is about 10% of that seen by HMRC. A beefing up of the resources in HMRC is therefore something we should consider. We have seen very famous schemes. I believe the Ingenious film scheme cost the taxpayer £1.6 billion, but not a single promoter has been held to account for it. We need more resources, but we should also look at legislation. This country does not have a great record on prosecuting serious fraud. There are a number of examples where the Serious Fraud Office has failed to make charges stick—I think, for example, of cases involving Tesco and Barclays. That is why the SFO wants to bring in more legislation, which the Government have agreed to do, to create a corporate offence of failing to prevent economic crime. This would be a personal sanction on the directors of a corporation that failed to do that. Of course, in banking we now have the senior managers regime that the Financial Conduct Authority put in place following some of the scandals there, when nobody was held to account for the disgraceful abuse of both consumers and businesses through the past couple of decades in the sector. The excellent Minister might say that amendment 77 is not the right vehicle for this, but some beefing up of the legislation to make it easier to prosecute fraud—criminal activity—is something that we should seriously consider.

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[Catherine West]

I thank the hon. Member, and it is always lovely to have an accountant in the room. If there are some improvements, we are very grateful for them.

[Ruth Cadbury]

If I may intervene, London is one of the few cities that has no residency or nationality rule for owning residential property, and many very high-cost cities for residents to live in, such as Vancouver and Auckland, have such rules. Could this Government consider such rules, because this issue has helped to trigger the explosion in housing prices, particularly in London, but also in our other large cities?

[Catherine West]

My hon. Friend makes a very important point. I am sure it has not escaped the Treasury’s attention that prices of the top 1% of properties in the country—mainly in London—have been skyrocketing, when everybody else’s house prices have been going up by a little. That differential is quite frightening. In this terrible time when our economy has shrunk by 11%, who can afford to buy properties worth several million pounds, and do we know enough about these individuals? We know that there are big gaps in the way that Companies House operates, in terms of simply understanding who owns what, and simplifying that is the sort of thing that would make the work of HMRC much more streamlined.

I would also like to put on record the wonderful work being done by civic society groups to spread information and education about the importance of understanding taxation, what it does and what it purchases. It is through these campaigns—often outside this House—that we can understand how to change things.

Aside from our international reputation often being questioned on the issue of Russian oligarchs, we know that the lack of action on questioning some people’s contacts with the Kremlin is costing us over £30 billion every year in lost revenue from taxes. That is a lot of money, and it would be better used to pay for the furlough, eliminate child poverty, vaccinate more children in the third world, or pay and equip our NHS staff for the heroic job that they do every single day.

The Government must act without delay and begin by supporting amendment 77 and new clause 29, which are a significant improvement on the weaker proposals put forward by the Government. That would send a signal that the UK will no longer be silent in the face of tax evasion and tax avoidance and is no longer a welcome home for the oligarchs and agents who see the UK as the destination of choice for their ill-gotten gains. I urge the Minister to do the right thing.

[Ruth Cadbury]

I speak in support of new clause 29 in the name of Her Majesty’s Opposition and cross-party amendment 77. I congratulate my hon. Friend the Member for Ealing North (James Murray), my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the right hon. Member for Sutton Coldfield (Mr Mitchell) on their speeches.

Addressing tax avoidance and evasion is, of course, an important objective of the Treasury, and Finance Bills and other legislation are the vehicles to do that, but as with all tax changes, Government must assess and respond to the unintended consequences of any changes. This Government have a terrible track record on tackling tax evasion and aggressive tax avoidance. They have consistently stood in the way of Labour’s calls to clamp down on loopholes and have failed to collect over £30 billion in taxes every year. They have promised to legislate on these issues, but the proposals in the Bill fall far short of any substantive change. Instead, they have been responsible for an increasingly complex system of payment, fraught with difficulties and risks for the unsuspecting worker.

A growing number of working people need to work on a contractor basis, either for personal reasons or because it is the only way of getting work in their sector or with their professional skillset. Increasingly, the alternative to being a contractor is to be a PAYE freelancer—to pay tax in full but without any of the rights of being an employee and all the costs of being self-employed. This is zero-rights employment, and it is unfair.

We need an effective tax avoidance policy that criminalises those promoting tax avoidance, rather than going for the workers inadvertently caught up in them, as this Government and HMRC have been doing with the loan charge in particular. That is the wrong target. While ordinary people who are victims of mis-selling are facing ruin and bankruptcy, the Government have done too little, too late to go after those who promoted the schemes.

I acknowledge that the Bill contains measures to tackle the promoters of tax avoidance and changes the system of penalties, but those measures are extremely limited in scope. Indeed, those changes are not even included in the Budget report costings, which suggests that their financial impact must be minimal. IR35 was enacted 21 years ago to stop the practice of those who, in reality, were permanent, generally full-time workers being paid as contractors through personal services companies, as many were paying much less tax than if they had been employees. It was right to address that tax avoidance, but the Government must address the unintended consequences for workers and the labour market that have followed since then.

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[Jesse Norman]

I have been held to account by my right hon. Friend and I am grateful to him for that, because that power—if I have any power—should always be held to account. Let me put the record straight: my hon. Friend the Member for Thirsk and Malton is an estate agent, and yet with that estate agency genius he combines the forensic skills of an accountant in holding to account, indirectly, members of the Government and, directly, the Opposition. I thank him for that.

My hon. Friend the Member for Thirsk and Malton pointed out that these disguised remuneration schemes are highly contrived. It is terribly important to remind ourselves of that. It is all very well to complain about the loan charge, but these are highly contrived schemes. My hon. Friend reminded us—as, indeed, did my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) —of the general rule that all taxpayers are responsible for their own tax, and that if, by implication, a scheme looks too good to be true, it almost certainly is too good to be true. Those are important messages and no Government should wish to weaken that important principle that people are responsible for their own tax.

[Ruth Cadbury]

I understand what the Minister has said. Of course, most of us are aware of our own tax bands. But how can the Minister expect basic rate taxpayers—a nurse, an IT contractor, somebody working in the film industry, even somebody on minimum wage—to do due diligence when nothing they read or have been sent ever mentions loans, and when they are given a convincing narrative that their tax is being paid for and they do not need to worry? Should not HMRC and the Treasury be addressing this issue, because it is a growing part of the employment market?

[Jesse Norman]

HMRC is addressing these issues. That is why this Bill has so many measures in it that are focused on the disclosure of tax avoidance schemes, toughening up that regime and improving the regime against the promoters of tax avoidance. But let me say to the hon. Lady that I thought her remark was dripping with condescension towards the ordinary taxpayers of this country. The fact of the matter is that people, from whatever walk of life, are perfectly competent—they do not need to be patronised by Labour Members of Parliament—at working out when something looks too good to be true. That is why so many—such a high percentage; well over 90% of people—do manage to work out what is too good to be true and behave on that basis. To suspect otherwise, when HMRC is absolutely working as hard as it can to make sure that the truth is out there and well understood, and is closing down opportunities for misleading advertising, in a recent initiative with the Advertising Standards Authority and a whole host of other things, is completely wrong.

I am grateful to my hon. Friend the Member for Burnley (Antony Higginbotham) for what I thought was a very robust and thoughtful contribution. He is absolutely right to highlight that HMRC has not been slow in this area. He was right to pick up the point about VAT on online platforms, but, of course, that is merely the tip of the iceberg. The hon. Member for Ealing North (James Murray) somehow suggested that we were failing to tackle this issue. The tax gap, as he pointed out, is 4.7%—a historic low. Let me remind the House and him of some of the actions that the Government have taken—leadership on base erosion and profit shifting over many years, the diverted profits tax, the corporate interest restriction, the tax charge on offshore receipts, hybrid mismatch rules, our new digital services tax.

Finance (No. 2) Bill

Ruth Cadbury Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

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

I welcome and endorse all the points made by my hon. Friend the Member for Ealing North (James Murray) about the Opposition’s deep concerns about the Finance Bill; I will be voting against it.

I want to focus on measures relating to contractors. The all-party parliamentary loan charge group has just published a comprehensive report, “How Contracting Should Work”, which found that the unintended consequences of IR35 or off-payroll legislation has been a proliferation of umbrella companies, some of which have pushed people into disguised remuneration schemes. The report also exposed significant malpractice, including withholding of holiday pay, kickbacks for recommending or passing on contractors, and even the provision of fitted kitchens and holidays for recruitment agency directors. We concluded that we need legislative changes in and beyond the Bill, including aligning tax and employment law. There is a real opportunity in this Finance Bill to address some specific concerns.

Clause 21 deals with “Workers’ services provided through intermediaries”. It has been described in the explanatory notes as addressing

“an unintended widening of the conditions which determine when a company is an intermediary”.

But, actually, this is a change following lobbying efforts by umbrella companies. The legislation as originally drafted would have meant that recruitment agencies had to put workers on their own payroll, where they would also have enjoyed the protections offered by existing agency legislation. That would also have meant closing the door on tax avoidance schemes. Now that door has swung wide open again, which is a very odd thing for the Government to be doing when at the same time they claim they intend to clamp down on tax avoidance schemes.

The Government could simply strike out clause 21. Doing so would ensure that workers got the agency rights they should be getting. Agencies can run their own payroll; they do for their own staff anyway. They do not need umbrella companies and neither do their contractors. Alternatively, the Government could redraft clause 21 to seek to stop the exploitation. They must do one or the other.

As the Government and HMRC are well aware, schemes are still being sold—mis-sold—to people including mid and low-paid public sector workers, nurses, NHS doctors and other clinical specialists, teachers and social workers. Such schemes are also being sold to many in the private sector, including in IT, business services and so on. We in the APPG support more action through the Bill against promoters of such schemes, but we want to see some detail in this legislation. Schemes must be stopped now, rather than trying to go after promoters when the damage has been done—many are offshore anyway.

I urge the Government to accept that there still needs to be a fair resolution for those facing the loan charge. The vast majority of people facing the loan charge and those duped into schemes since 2017—often lower-paid people—are victims of mis-selling by promoters and operators who gave and still give assurances of compliance and legitimacy, and did not make any mention of the risk of being pursued by HMRC. The reality is that people are simply not able to pay the loan charge, and enforcing it will lead to bankruptcy, hardship and worse. It is time that the Government and HMRC sought a compromise—a way to resolve this without destroying lives and families, and without making people unable to work through their being declared bankrupt. I urge the Government to look again at the APPG’s proposal last year for a final settlement opportunity.

We in the all-party parliamentary loan charge group welcome action to tackle promoters of schemes, but we want to see the details from the Government. We have seen very little so far. At the same time, we need legislative action to stop these schemes in the first place and the misery that they cause, and we want a fair resolution for those facing the loan charge. The Finance Bill gives the Government an opportunity do this, to clean up the supply chain, and to stamp out tax avoidance schemes and other malpractice. Given the importance of these workers to the economy and our public services, this is an opportunity that the Government must take now.

Covid-19: Ethnic Minority Disparities

Ruth Cadbury Excerpts

Monday 1st March 2021 Commons Chamber

[Kemi Badenoch]

I agree with my hon. Friend, and that is one of the reasons we are discouraging the use of the term “BAME” when talking about these issues, as this conflates lots of different communities. We must be very specific about who we are talking about, and what their individual needs are. Various different initiatives will be tackled, based on the specific needs of community groups, and I am pleased that it looks as if there is successful vaccine take-up in her constituency.

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

Will the Minister outline the application process for, and the distribution of, community champion funding? How will highly diverse boroughs like Hounslow which did not receive funding benefit from that investment in the future?

[Kemi Badenoch]

Our methodology drew on a wide range of data sources, including long-term data from the DHSC and Public Health England on covid-19 incidence, data on social integration, and evidence on the prevalence and specific support needs of, for example, disabled people in an area. The methodology was tested across the Government, and with many colleagues in the local government sector, before the funding was announced. To reach disproportionately impacted communities beyond those 60 areas, the Ministry of Housing, Communities and Local Government has funded two voluntary community and social enterprises to carry out national communication and engagement activities, including health promotion and encouraging vaccine uptake.

We are trying to ensure that best practice is shared across local community areas. It is not just the presence of ethnic minority communities that means they are at risk—indeed, I spoke earlier about what places a specific individual at risk. We consider multiple factors, and those are what end up determining which communities get the funding. I assure the hon. Lady that her community will benefit, even if it does not get specific money under this scheme.

Lockdown: Economic Support

Ruth Cadbury Excerpts

Tuesday 3rd November 2020 Commons Chamber

[Steve Barclay]

As the Prime Minister has already set out, we put in place a £750 million package of support for the charity sector, as part of the more than £200 billion of support that we have given. As he has also said, and clearly demonstrated over recent months, he will continue to listen and adapt as circumstances require.

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

In response to earlier questions, the Minister said the Government were reluctant to extend additional financial support to the self-employed because of the need for strict financial controls, so why are the Chancellor’s team not as concerned about financial discipline when committing £12 billion of public sector money to the private sector for covid programmes, and doing so without basic procurement disciplines around proven competency, value for money and minimum performance targets?

[Steve Barclay]

That is simply not correct because the Department of Health, to which we have allocated funding for Track and Trace, is subject to managing public money rules in the same way as any other Department. It is subject to the decisions of its accounting officer and its Ministers in the usual way, so the normal managing public money rules would apply.

Black History Month

Ruth Cadbury Excerpts

Tuesday 20th October 2020 Commons Chamber

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

I am pleased to follow the right hon. Member for Chipping Barnet (Theresa Villiers) who, like me, represents a constituency in outer London. I would also like to thank my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare) for introducing this debate on Black History Month, and the Backbench Business Committee for allowing the debate to take place.

We have heard excellent contributions from many hon. Members. Many of my constituents feel deeply about black history. I have received over 50 emails asking me to support the campaign to make black and colonial history compulsory in school. Almost 1,000 of my constituents signed the e-petition, which has now secured over 250,000 signatures. On student who wrote to me said that they had never studied any of these topics in any detail other than their being simply mentioned “in passing”. Topics as important as colonialism and slavery, along with the contribution of black people to our country, have shaped our society so much that they should be taught in our schools. My hon. Friend the Member for Ilford North (Wes Streeting) showed in his contribution that, by not making those topics a compulsory part of the GCSE curriculum, few students are learning those vital parts of our history.

That lack of education trickles up. Both the Macpherson report into the murder of Stephen Lawrence and the Wendy Williams review into the Windrush scandal mentioned that the lack of understanding about cultural diversity and colonial history in the curriculum had influenced the policies and practices that enabled the shameful episodes of Stephen Lawrence’s murder and the Windrush scandal to take place. Those reports were published 20 years apart. Surely that should be a call for action now.

Some schools have been working hard to teach colonial history, which is really important, particularly in a constituency such as mine, one of the most diverse in the country. Last year, we celebrated with the “Our Hounslow” films about four different Hounslow people. Torron was born and brought up locally in Brentford and went to school with my sons. He set up the Alliance Dance Unit, which is keeping young people active, off the streets and out of trouble by being involved in creative dance. Goitom is a retired man who came here from Eritrea. He spent most of his working life as a foster carer and a Home Office interpreter and is now a respected community leader.

Ciya was doing her A-levels. She was a member of the Youth Parliament and spoke in this Chamber. She came here as a very young child and spoke of her hope for the future. Very differently, Richard and Christine, who I would describe as the archetypal English home counties couple, sold their comfortable house in the country and moved to Hounslow, not just to be near their family and growing grandchildren, but to contribute actively to Hounslow town and its diverse community.

In terms of our schools, Sam Jones works at Bolder Academy in Isleworth in my constituency. He told me that with his year 8 students, he focuses almost exclusively on colonial history and what the empire means to different people in different places, and all in the context of the story of migration to Britain from the Roman period to the present day. He is also the chair of Be Bold History, which is a free national network for history teachers that pools resources and improves teaching. He said, “By teaching more diverse histories, we not only better reflect the communities that we teach, we can also reflect core British values: tolerance, shared community and the rule of law.”

Making black and colonial history compulsory in our schools, particularly the GCSE curriculum, is a first step, but clearly a vital one, and it resonates with students in my constituency whose parents, grandparents or great-grandparents came from all over the world—as well as down the road. Their history is our borough’s history. Their history is Britain’s history. We should make black history an integral part of the school curriculum to enable all young people to be proud of their heritage here and confident that they have a future in our country and in their community.

Support for Self-employed and Freelance Workers

Ruth Cadbury Excerpts

Thursday 17th September 2020 Commons Chamber

[Caroline Lucas]

I thank the hon. Lady for making that point. She is of course absolutely right, and it would be a simple measure to do this if the political will were there.

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

Would these things not be able to be thrashed out one to one in the meeting that still has not taken place that the hon. Lady mentioned?

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

Following the powerful debate on the coronavirus job retention scheme that has just taken place, this debate is on an equally unfair injustice. I am glad to speak in today’s debate on behalf of the hundreds of freelancers and self- employed workers in my constituency who have contacted me because they fall outside the various covid support schemes. They include high and low earners, working across many sectors, including those that have been devastated, such as the arts and culture, and aviation. They include those working in TV and media. They are minicab drivers and supply teachers. They work in events, IT and other transport sectors. They include those who have set up a company and employ others, contractors, those who work part time and those in the gig economy.

These people generate economic growth. Except for the very low earners, they pay taxes. They train others. They enrich our cultural life. Yet despite the explosion of self-employed and freelance workers in the UK to around 3 million, too many Government policies, tax arrangements and HMRC processes still see the world through the lens of PAYE and permanent workers. The covid recovery scheme is no different from all the others. I think that is why too many freelancers and self-employed taxpayers have fallen through the gap, and fallen for the cultural block of the Treasury and HMRC.

Despite many of us writing letters and submitting petitions, the Treasury is not listening. A number of solutions have been proposed by those affected and we have heard examples of them today. For those in limited companies—those in the TV and creative sector in my constituency have been particularly hard hit—it has been suggested that the Government could use dividend certificates as a form of proof. For those on maternity leave, SEISS calculations could calculate the time spent on maternity and shared parental leave and exclude that. For those who are self-employed, HMRC could use evidence such as the UTR—unique taxpayer reference—to calculate a rough income. For those who earn less than 50% of their income from self-employed work, a taper beyond £50,000 would be appropriate.

Like others, I have not had anything more than a generic response from the Government on this. I acknowledge that many self-employed people have been helped, and the Minister will no doubt reel off the list of how many millions of pounds of taxpayers’ money has been spent, and on how many thousands of people, but what the House and our constituents want to hear is what those in other nations across the world are providing: honesty, acknowledgement that they are listening and, where appropriate, adaptation. Finally, I want to address the issue of universal credit. With rents over £2,000 in my constituency, too many people are excluded from any benefits.

Finance Bill

Ruth Cadbury Excerpts

Report stage & Report stage: House of Commons & Report: 1st sitting & Report: 1st sitting: House of Commons
Wednesday 1st July 2020 Commons Chamber

[Dr Huq]

My hon. Friend is completely right. HMRC needs to show some humanity in these cases. The scheme was obviously badly implemented, with inadequate impact assessment. The word “scandal” is frequently used and often misapplied, but in this case, all the elements needed are there. People have been pushed into bankruptcy; families have been fractured; people are facing financial ruin and losing their homes. As we have heard, there have been seven suicides. The all-party parliamentary loan charge group, which is very active—I am sure it is in everyone’s inbox all the time—has sent round a letter from the daughter of one of the people who sadly took their own life about the impact that has had on everyone involved.

The Morse review is a start, although the APPG feels that it could do better and go much further. All of us have seen these cases; my hon. Friend the Member for Liverpool, Wavertree (Paula Barker) described the situation movingly.

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

Does my hon. Friend and neighbour agree that the reason why people are driven to suicide, and why a high proportion of those affected are so stressed about the loan charge, as has been mentioned, is that there is no right of appeal to a tax tribunal, or right to negotiate, as there is with all normal forms of tax business with HMRC?

[Dr Huq]

I completely agree, and I pay tribute to the work that my hon. Friend has done on the APPG, together with the right hon. Member for Hemel Hempstead (Sir Mike Penning); they have done brilliant stuff, and it is disappointing that we will not vote on new clause 31 today.

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[Dr Huq]

I completely concur with the right hon. Gentleman. It is very disappointing that even the crumbs of the Morse review are not being fully implemented in a transparent and fair way. Again, we have heard so much about these reviews. There are 200 recommendations on all the race relations stuff that have never been implemented. Another review is not what we need now; we need action.

My hon. Friend the Member for Reading East (Matt Rodda) described some of the people in IT who have come to see him. Those affected are not actually all in IT or accountants. Some of those who have come to me are from the public sector, including Eugene Nicholson in the NHS and Abigail Watts. I have had a supply teacher and a social worker. Some people are terrified and do not want their cases raised because of repercussions. As has already been said, the real culprits are the promoters of the schemes—individuals who are still practising today. They duped our constituents, who are now facing a nightmare of private debt collection and all sorts of things.

I will briefly turn to IR35, where there is some overlap, because it has caused enormous pain and strain. People got into these schemes innocently—in this case, their employers told them to do it. Many are individuals on low incomes who do not have deep pockets. The assumption is that they are all tax dodgers or whatever. Catherine Qian said that she was a one-woman band. These are micro-businesses. It is not like the discussion earlier where we were talking about going after multinationals. She has no employment rights. She has an accusation of being a hidden employee, but she gets no sick pay, stability or pension. Needless to say, she is not eligible for furlough. The Conservative manifesto at the election we recently fought said that there would be a review of self-employment, so I ask the Minister directly: when will that see the light of day? Will it be another one of these reviews that just sits on a dusty shelf?

How do we solve all of this? At the very least, HMRC should give those who fell prey to the loan charge more time and favourable conditions to reach an amicable solution. It has been said that no one will lose their home, and that is good, but HMRC must accept its share of responsibility.

[Ruth Cadbury]

My hon. Friend is right that HMRC has said it will not be taking people’s homes, but is she aware, as I am, that bailiffs on behalf of HMRC are locking people out of their own homes and refusing to let them back in until they make payment?

[Dr Huq]

My hon. Friend is so much more knowledgeable than me. Lots of my constituents cannot afford to buy their own home and are in rented accommodation, so that does not even apply to them. They are in beds in sheds—maybe I should not dob them in, but that is a phenomenon in the London Borough of Ealing.

Again, HMRC must accept responsibility for not communicating regularly with people. It could have acted sooner to avoid this sizeable group of people who went into these remuneration schemes having to pay back sometimes hundreds of thousands of pounds at a time. IR35 is being rolled out now, so the deferral is obviously welcome, because these things can be fixed in real time, as long as the deferral is not just pushing punitive measures further away. The Government need to urgently commit to a full review of tax reliefs.

While the debate is about job creation, I want to flag, as my hon. Friend the Member for Liverpool, Wavertree pointed out, that the global pandemic we are in seems to be a bit of a cover for certain companies to behave badly. British Airways and Virgin spring to mind as using the coronavirus job retention scheme—the clue is in the name—to do the very opposite. Having accepted furlough funds from the public purse, they are now using coronavirus as a cover for restructuring plans—plans they were always itching to execute—while they believe the eyes of the world are diverted elsewhere. I say to the Minister that we need a sector-specific deal for aviation.

The situation is the same for the creative, cultural and arts sector. I represent many constituents who work in it. Not for nothing was Ealing long-called a BBC borough. The Questors theatre—the jewel in our crown—is the biggest amateur dramatic venue in the country and it has written to me. It is about to go under. Its rateable value is too high to get any of the reliefs. That is another plea to the Minister.

We were told that, when we left the EU, we would be world-beating on employment rights, and that our rights could exceed those of the bloc after Brexit, but now, with IR35, we are heading for zero employment rights. The Government always said that this would not be a race to the bottom, so they need to put their money where their mouth is. There is nothing like a global pandemic to concentrate the mind. We have heard slogans such as, “We’re all in this together”. To stop all these Government utterances from being just hollow words, we need action. Snappy slogans are not enough.

--- Later in debate ---

[Jesse Norman]

I take my hat off to the astonishing hon. Member for Bradford South (Judith Cummins), who brought so much content into such a short presentation, and I thank her for that. We have an enormous body of material to get through quickly, so I shall deal initially with the question relating to new clause 26 on job creation and related measures. The new clause would require the Government to conduct an assessment of the effect of the Act on job creation. As the House will know, the Government have announced unprecedented support through the coronavirus job retention scheme, the self-employed scheme and the like. The Office for Budget Responsibility has said that those actions will directly help to support the incomes of individuals. The Treasury does not produce economic forecasts and the OBR does, publishing them twice a year. For that reason, I ask Members to reject the new clause.

New clause 12 relates to a matter previously considered in the Public Bill Committee, the impact on regions and nations. The new clause would require the Chancellor, within one month, to review the impact of the Act. As I emphasised in Committee, the provisions in this Bill have already been developed with careful consideration. Analysis of Government decisions on GDP is also carried out by the independent OBR. Again, we will continue to monitor the impact of the crisis, but I ask Members to reject the new clause. SNP new clause 18 would require a review of the impact of the Act on investment, productivity and employment. Again, it would require the Government to look at hypothetical scenarios, whereas the OBR is required by law to produce its forecasts based on stated Government policy, so I ask Members to reject the measure.

I come now to IR35 and the off-payroll working rules. I have been pressed vigorously on this issue by my hon. Friends the Members for Milton Keynes North (Ben Everitt), for Guildford (Angela Richardson), for Workington (Mark Jenkinson) and for Barrow and Furness (Simon Fell). Amendments 16 and 17 seek to remove the reform of these rules from the Bill, which would be a serious mistake, costing the country many hundreds of millions of pounds. The level of non-compliance at the moment with the rules is scheduled to cost the country £1.3 billion in 2023-24 if not addressed. As I do not believe the SNP really wants that, I encourage Members to vote against it.

I come now to the cross-party amendments framed by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), as it is important to engage with several of the things he said. He said that contractors could be pushed into a state of no benefits employment. It is important to note the contractors already receive a number of benefits funded by the Government when they are employees of their own personal service companies. Such benefits include statutory maternity, paternity, adoption, parental bereavement and shared parental pay, and they are provided by PSCs, which are then able to claim 100% of those payments plus 3% compensation from the Government. My right hon. Friend said that at least seven people have taken their own lives as a result of the loan charge. It is important to put on the public record that of course every single death of an individual is a tragedy. The circumstances surrounding those deaths have been considered by the coroner, the Independent Office for Police Conduct and HMRC’s own internal independent investigations. None of them has suggested, in these four reports, that HMRC is to blame for these deaths; no conduct issues have identified either by the independent office or internal investigations that would warrant disciplinary actions.

[Ruth Cadbury]

Will the Minister give way?

[Jesse Norman]

I am afraid that I just have to press on, because I have no time. My right hon. Friend raised the issue of a review on the loan charge. These are some of the most egregious and clearest forms of tax avoidance in the tax system. In reaction to my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), let me say that it is hard to see how simplification of the tax system would prevent the kind of abuse we have seen through the loan charge or indeed potentially through IR35. The all-party group on the loan charge published a report rubbishing the independence of the Morse review. I can do no better than refer its members to the remarks made by my right hon. Friend the Member for Haltemprice and Howden, who described Sir Amyas Morse as

“principled and highly respected”

That was true then and it is true now.

New clause 31 would drive a coach and horses through long-standing principles of taxation, because the tax system relies on people being responsible for their own tax and there being as little discretion as possible in the system. Both principles would be overturned, as my hon. Friend the Member for Wimbledon (Stephen Hammond) hinted. For that reason, I urge the House to reject the new clause, if it comes to a vote.

Question put, That the clause be read a Second time.

Oral Answers to Questions

Ruth Cadbury Excerpts

Tuesday 24th March 2020 Commons Chamber

[Rishi Sunak]

My hon. Friend is absolutely right about the importance of cash flow, which is why we have targeted our interventions specifically at smaller businesses by providing extra cash flow support. We have done so through the £10,000 grant to every business in receipt of small business rate or rural rate relief and, indeed, through the deferral of VAT, which starts from today for the quarter. As my right hon. Friend the Financial Secretary to the Treasury said earlier, that represents more than £35 billion, or 1.5% of GDP-worth of tax deferral, providing immediate cash-flow support. We have done the same thing for self-assessment payments that are due in the coming months and have also, as of yesterday, launched a business interruption loan scheme, which my hon. Friend has done fantastic work developing. It will provide 12-month interest-free loans to small businesses, again, to help provide them with the liquidity that they need to get through this.

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

T2. I acknowledge that the Government are dealing with an incredible number of challenges at this time and pay tribute on behalf of all MPs to the work that has been done by Ministers, by those on the Front Benches and by the people behind the scenes who are supporting them in this work. The financial challenges of families with children have not yet been specifically addressed, so will the Treasury listen to the Child Poverty Action Group and work with the Department for Work and Pensions on a fairly simple solution that will put money directly into the pockets of families with children, which is temporarily to increase child benefit?

[The Financial Secretary to the Treasury (Jesse Norman)]

I am very grateful to the hon. Lady for the suggestion, and we will certainly look closely at the Child Poverty Action Group’s recommendation.

Loan Charge 2019: Sir Amyas Morse Review

Ruth Cadbury Excerpts

Thursday 19th March 2020 Commons Chamber

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

I thank the Backbench Business Committee for allowing the debate when I know they had a backlog of requests on many important issues. I also thank my fellow sponsors of this debate, my fellow chairs of the loan charge APPG, particularly the right hon. Member for Kingston and Surbiton (Sir Edward Davey), and the right hon. Member for Hemel Hempstead (Sir Mike Penning), who cannot attend today because he is dealing with a family medical emergency. We wish him well.

I also thank the officers of the loan charge APPG and the action group. I can confirm that the three co-chairs of the APPG, from three different parties, all endorse the APPG report that was released tonight and is on our website. It is a pleasure to follow so many Members who have described in vivid terms the experiences of their constituents, so I will not dwell on those too much. I have similar experiences.

This is a time of incredible worry for most people in this country for their loved ones, their neighbours and themselves, and many of our constituents—perhaps most of them—are facing catastrophic and even absolute loss of income. While this debate is wholly unrelated to the covid-19 virus, for the victims of the loan charge scandal, who are already worried about their financial futures, the coronavirus outbreak only heaps more agony on top.

I agree with the points that others have made about tax avoidance, but this is not about tax avoidance, which we abhor and would like to see closed down. This debate is about natural justice, as has been said by so many. When the APPG started, the Treasury and former members of the Government said there was no problem with the loan charge and it was a perfect piece of Government policy. They said there was no need for a review of the policy. The right hon. Member for Kingston and Surbiton tabled an amendment calling for a review, we had a debate in the Chamber almost a year ago and a Treasury report that was a whitewash, frankly. Meanwhile, more and more Members were being contacted by worried taxpayers describing the bullying of HMRC and their fears for themselves, their families and their work. We kept standing up, we kept asking questions and we kept lobbying Ministers.

The Prime Minister, in his leadership bid, promised to hold a full review of the loan charge. We have had the review, led by the highly respected Sir Amyas Morse, whose report was released on 20 December, and on the same day, HMRC released its response. For taxpayers, the Morse review means that they are looking to the future, but I have heard several extremely troubling cases from my constituents who face the loan charge. This is about HMRC behaviour. In one case, my constituents provided all the information asked for and heard nothing back for two years. They received a note from HMRC saying they were facing the loan charge with interest added, including for the two years when they had had complete radio silence from HMRC. How is that justified or proportionate? Based on evidence to us, and I assume to Sir Amyas, along with casework and conversations with colleagues, including some casework wholly unrelated to the loan charge, it feels as though HMRC is just not capable of providing a competent service.

Others today have rightly mentioned the anxiety and uncertainty of taxpayers as they are chased for almost immediate payment of sums that they just do not have, and without any justification for the amount demanded. Usually, any previous information that they may have sent to HMRC is completely ignored.

I just want to touch briefly on poorly paid and vulnerable people. The Morse review recommended that, after 10 years, the loan charge should no longer apply to people who earn less than £30,000 a year, but the Government rejected that recommendation. Let us remember that many of these people are working in the public services—in the NHS and local authorities—and many of them do not have accountants. Many were effectively in a position where they were told that, if they wanted this work, they had to sign up to this umbrella scheme. The head clients will now no longer contract with personal services companies, so these umbrella schemes are all that is available to them.

We have social workers, junior doctors, nurses, cleaners and so on facing many charges year after year. To address this injustice, Sir Amyas made a reasonable request. It was that HMRC should not chase loan charge payments between 2010 and 2016 if the individual made a reasonable disclosure, but the words “reasonable disclosure” were changed by the Treasury to “full disclosure”—a term which, according to tax experts, has little or no relevance in tax law.

Where do we go from here? For months and months, we have heard the Government say that this is not a retrospective matter, yet they made an agreement with Sir Amyas Morse and shifted the date that the loan charge applied from 1999 to 2010. If they can change their mind once, surely they can do it again. If the Government can defer the roll-out of IR35 to the private sector, as they did earlier this week following extensive concerns, they can change their mind on the loan charge, I hope. The new suggested cut-off date of 29 December 2010 is based on the law being clear, yet we know now that this was not the case. If the law was clear then why did we need the loan charge and another change in legislation in 2016?

I would like very briefly to list some of the concerns that are in our report but that have not yet been raised in this debate—[Interruption.] Madam Deputy Speaker is coughing at me, so I urge anyone reading Hansard or watching this debate to please look at the report that we released last night. It is on the loan charge action group and the loan charge all-party group website.

In finishing, let me return to a core question. Is applying the loan charge from 2010 justified and proportionate? The answer to that from the all-party group is, no, it is not. I would go further and ask: is HMRC abiding by Adam Smith’s principles of fair taxation, which were mentioned at the beginning of this debate. Furthermore, are HMRC and the Treasury abiding by the Nolan principles of public service, particularly selflessness, objectivity, accountability, openness, honesty and leadership? I urge the Government to listen to the strong opposition to this retrospective, unjust and unfair tax and, quite simply, to do the right thing.

--- Later in debate ---

[Jesse Norman]

I am very grateful to the hon. Gentleman, but if I may say so, I do not think that has been true. I think the conclusion colleagues have been pushing in this debate is that they disapprove thoroughly of tax avoidance, and their view is that this is not tax avoidance in many cases. If they accept that this is tax avoidance and that the issue is merely as to the remedy, that is of course a slightly different position, and one that I am happy to respond to.

I just want to make it clear that this is a form of tax avoidance. It goes to the wider issue as to whether people should have known what it was. The point is that it is tax avoidance, and it costs the Exchequer hundreds of millions of pounds a year. That has two effects: it deprives public services of the money they need to operate; and it forces other taxpayers to pay more to make up the shortfall.

The purpose of the loan charge was to combat this form of abusive tax avoidance. The loan charge was introduced as a new measure in 2017. Following a public campaign last year, we asked Sir Amyas Morse, as has been noted, to conduct a review of whether it was an appropriate policy response to the use of the disguised remuneration scheme. He had full control of the review’s management and recommendations. He took evidence from a very wide range of individuals affected, and he spoke to interest groups, MPs, tax specialists and many other stakeholders.

Again, the facts are not in doubt. Sir Amyas Morse, as has been recognised by colleagues today, is an individual of huge experience and great independence of mind, and he is widely respected across the House. He was independent in his review, and he was given wide scope in expert support. He produced a thorough and exacting piece of work—a 76-page, 30,000-word report—that drew on over 700 individual testimonies and impact statements, and which painstakingly worked through the issues before recommending notable changes to the policy, including substantial carve-outs as to who was affected. Sir Amyas was clinical and at times unsparing in his criticisms, including of Her Majesty’s Revenue and Customs and, be it said, of the Loan Charge Action Group. All but one of these recommendations were accepted by the Government.

Among those recommendations were two to which I want to draw the House’s particular attention. The first is Sir Amyas’s insistence, as we have heard across the House today, on the need for the Government to go further in going after and bringing to justice people who enable or promote tax avoidance schemes. I am therefore delighted that, as part of the Budget documentation we have produced today, we have published a policy document on “Tackling promoters of mass-marketed tax avoidance schemes”, and I draw the attention of all colleagues to it. It is a sober and thorough piece of work that looks at lots of different approaches as part of an integrated strategy.

The other thing that Sir Amyas pointed to—again, I think rightly, but also picking up on a widely anticipated and understood gap—is the importance of raising standards in the tax advice market. Again, I am pleased to say that, as part of the Budget documentation, we have published a call for evidence on this very topic, “Raising standards in the tax advice market”. I encourage all colleagues and their constituents to contribute to that approach.

[Ruth Cadbury]

I thank the right hon. Member for the points he is making about advice and information. However, I again come back to the fact that the low-paid and the averagely-paid—generally public sector workers—are still being sold these schemes. They cannot be paid through a personal services company, but they need to work freelance and locum, and this is still happening to them. If the Government see these schemes as contrived, why are they not doing more to stop the mass marketing of them, such as by making the promoters personally liable for defeated schemes and similar?

[Jesse Norman]

I have in my hand a detailed document designed to address this very issue. It goes through a whole range of different approaches and integrates them into a strategy. I would be delighted to have any input that she would like to make about other ways in which that can be improved and developed. We work on the basis of the law as it presently stands, and which we have inherited. It is itself the result of previous Parliaments, including of course the parliamentary consideration of the loan charge. We have to work with the hand we have got, and improve it as fast and as comprehensively as we can.

I will now address the motion directly and then, in the limited time I have, turn to the comments that have been made. Is the loan charge retrospective? Again, I think it is clear that it is not. It was introduced as a new measure in 2017. It taxes a loan outstanding at a future date. It does not change any law previously on the statute book.

It has been asked why the loan charge was introduced. In the words of Sir Amyas Morse, it

“offers an expedited means of collecting tax that is due”.

Is the loan charge unjust? Again, I would suggest not. If one asks the average man or woman in this country, I think they would say, “Everyone should pay their fair share of taxes. People are responsible for their own tax affairs. Real loans get repaid; if someone offered you a loan for which no repayment, no tax and no interest was due, it would probably be too good to be true.” And so it is.

The numbers seem to bear that out. More than 99.8% of the tax-paying population have never used a scheme. Even among the freelance population, the take-up has been only 2.5%. It is notable that Sir Amyas Morse was clear that he supported the essential purpose of the loan charge and that it should remain in force.

We have heard a lot about how the law was not settled in 2017. Again, as I said, I can do no better than refer colleagues to section A of the Morse review, which carefully reconstructs the history of the past 20 years of disguised remuneration.

Let me quickly turn to the many excellent contributions that have been made. I will start with the excellent contribution made as a point of order by my right hon. Friend the Member for New Forest West (Sir Desmond Swayne), who pointed out the excellence of my book on Adam Smith—I thank him for that, although I defer to the hon. Member for Kirkcaldy and Cowdenbeath (Neale Hanvey), as Kirkcaldy was, of course, Smith’s home town. My right hon. Friend the Member for New Forest West will recall—he taught economics so he must know about these things—that Smith not only set out the ideals of a well-functioning tax system, which we all aspire to achieve, but was, for the last 12 years of his life, a practising commissioner of customs, attempting to wrestle with an ever-evolving customs market and seeking to extract duty and tax due, and rightly so.

I would like to touch on the statesmanlike comments of the hon. Member for Bootle, the shadow Chief Secretary, which perhaps reflected his imminent expectation of taking my seat on this side of the aisle. He recognised that what people do not pay in tax due, someone else must. He is right about that. He noticed that if it looks too good to be true, it probably is. He is right to focus, as others have, on the enablers and promoters.

Budget Resolutions

Ruth Cadbury Excerpts

Monday 16th March 2020 Commons Chamber

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

Thanks to the 10 years of austerity Budgets and spending statements, our key public services have been cut to the bone and beyond, which means that they and the amazing people who work in them, who are already struggling with the day job, will now face incredible pressure and uncertainty in the weeks ahead. Although pouring money into the NHS is essential at this time, the crisis has exposed significant gaps after years of inadequate annual spending rounds. It has also exposed the state-sanctioned poverty policies of this Government.

The Government could learn from France, where households and businesses are being protected from going under with a €300 billion package. In Hounslow, after £140 million of cuts over 10 years, our council, like all local authorities, has simply no headroom available to address the covid-19 crisis in social care, in public health or through support for volunteering to ensure the safety of vulnerable people in self-isolation.

In the short and ever-diminishing time available, I will cover issues that have dominated my postbag and that, unless the Government address them, will continue to do so and continue to be relevant, even once we are over this crisis. There was nothing in the Budget to enable councillors or the London Mayor to properly serve our communities at this time. The growing number of children with special educational and development needs have no or inadequate additional specialist support, which could make a difference for their future. There was nothing in the Budget to address mental health, and specifically young people’s mental health, an issue raised with me at just about every secondary school I visit and in my constituency survey last year. The Government need to end the postcode lottery of mental health treatment and provide adequate funding for child and adolescent mental health services and for local early intervention services.

Another missed opportunity in the Budget was tackling violent crime, especially among young people, given the loss of 20,000 police officers, who are not going to be replaced quickly, and the new recruits who do have the innate knowledge of preventing and addressing crime that can only be learned over many years on the job. Alongside policing, council funding cuts mean that youth services have been cut by 70% since 2010, with the loss of the vast majority of experienced youth workers.

Although I welcome the £1 billion in the Budget to address cladding, I regret that there is nothing for those at the sharp end of the housing crisis. Purchase and even private rent are out of reach for many thousands of my constituents. More than 2,000 households are homeless in Hounslow and more are living in overcrowded or unsuitable housing. They will get permanent and adequate housing only with substantial and sustained Government action.

The elephant in the room in the Budget was the climate crisis. Billions for new roads were found and the freeze on fuel duty was upheld, but there was nothing for active travel or for solar, tidal or hydro power, which scream out for investment. I of course appreciate the fact that the Budget was delivered at a time of extreme uncertainty and that funding has gone to the NHS, but this is not a Budget for the people of this country and did not address the continuing underlying problems facing our society.