VAT: Building Repairs and Maintenance

Viscount Brookeborough Excerpts

Wednesday 19th April 2023 Lords Chamber

[Baroness Penn (Con)]

My Lords, I would not want to interfere with an ongoing police investigation. My answer was not quite as the noble Lord termed it, but it may have reflected that his question goes slightly beyond the scope of this Question.

[Viscount Brookeborough (CB)]

My Lords, this is not a devolved issue, and it therefore affects Northern Ireland as well. Does the Minister not agree that conservation of the countryside and the built environment is a very high priority? The effect of continued government policy along this line, especially in Northern Ireland, is that a lot of older houses—nice heritage houses—are ignored, and people simply build new houses beside them. When visitors come to Northern Ireland, they say, “What is this? It is bungalow blight”. There are new houses everywhere, and no wonder, because of successive government policies. Will the Minister please assure us that the Government will look at this anew?

[Baroness Penn (Con)]

My Lords, the Government keep all taxes under review, but there are no plans to change the VAT treatment of repair and maintenance. The noble Viscount made the important point that we need to ensure that the maintenance of heritage and other older buildings in particular is supported, and we do that through a number of ways other than VAT relief. For example, approximately £206 million of the £2 billion culture recovery fund supported heritage sites and organisations through the pandemic, and several other sources of funding from government arm’s-length bodies are available for historic buildings in need.

EU: Financial Transaction Tax (EUC Report)

Viscount Brookeborough Excerpts

Tuesday 17th December 2013 Grand Committee

[Viscount Brookeborough (CB)]

My Lords, we are, as you see, very critical of the proposed FTT, for the reasons laid out in both reports, that of March 2012 and now this one.

I, too, have never seen such criticism of a Government’s response to an inquiry as can be found in paragraphs 12 to 20. I asked the Minister to explain why such a detailed and well researched report from a parliamentary committee was treated in such a dismissive way for so long. The lack of recognition and acceptance of the issues raised at the time have left us where we are now, and it is an example of the UK’s lack of engagement on what may become EU policy.

This brings me to the perceived attitude of our Government to the EU. All too often, we are prepared to say that our main interest is the single market and we are far too negative about most other things when we should not be. For example, regardless of whether we stay in the EU, amend the treaties, or get out, the success of the eurozone is important, not only to us but to the rest of the world. Suffice to say, a little more diplomacy, and less barracking from the sidelines, would not go amiss. Government ambitions for their future in the EU may be difficult, or even impossible, to achieve currently. However, that makes its lack of engagement in such issues as the FTT even more inappropriate. The adoption or otherwise of this tax will not sink the EU, but we could have had much more influence on what is now happening.

I wish to comment on this tax from the perspective of the majority of our citizens, who, like me, are lay people as far as finance is concerned. This is a direct tax and a bad precedent, not only on businesses but on individuals, which will affect most financial transactions, not only for the millions who own or trade shares but for those who have pensions. Almost everyone will be affected directly or indirectly. This is the thin end of the wedge, the slippery slope: a direct tax on individuals. Even worse, it is 11 countries attempting to tax individuals—nationals of countries outside their group and their own jurisdiction—entirely against their will and with no democratic mandate.

When a nation taxes its population, the Government must have a mandate and justify the purpose of doing so in a budget. There is no mandate or legal basis for this daylight robbery. Even worse than that, it is most inappropriate at present. I ask the Minister what the Government will do to ensure that this country and our citizens will not be adversely affected. I will just have time to address this if I borrow a little of the time of the noble Lord, Lord Flight. Box 1 of our report gives the objectives—I will not read them all—as laid out. On objective (a), as far as I am aware, there is currently no fragmentation to worry about. Objective (b) talks about the costs of the recent crisis. None of what we are talking about, or the bank resolution fund—which we are not talking about today, but which is important—refers to the current crisis and the cost. It is all about the future. Objective (c) adds:

“To create appropriate disincentives for transactions which do not enhance the efficiency of the financial markets and thus trigger overinvestment in activities which are not welfare enhancing”.

That is the woolliest rubbish of which one could possibly conceive. How on earth is an inert tax going to differentiate between actions which may not be welfare enhancing? That is absolutely ridiculous. Luckily, one other objective was dropped: namely, a new revenue stream that could gradually displace national contributions. Does anybody in this Room or anywhere else think that our contributions will ever be reduced by anything?

--- Later in debate ---

[Lord Newby]

My Lords, I completely agree with it.

[Viscount Brookeborough]

Perhaps I may ask a simple question. I think the Minister said that the majority of politicians in Europe wanted this tax and therefore it would be difficult. Can he explain how 11 out of the total of the member states comes out as a majority?

[Lord Newby]

I apologise if I said that. What I meant to say was that there was not a qualified majority against the proposal. There was not a sufficient weight to prevent the proposal going through. I think that that was borne out by what happened at the relevant Council meeting.

EUC Report: MiFID II

Viscount Brookeborough Excerpts

Tuesday 26th March 2013 Grand Committee

[Viscount Brookeborough]

My Lords, as a member of Sub-Committee A, chaired by the noble Lord, Lord Harrison, I pay him due credit for producing this report on such a complex issue. I also commend the clerk and our policy adviser who have managed to produce a document that, although complicated, is just readable by those who are fairly fanatical about it.

During the past 25 years, I have served on several EU sub-committees, including those on agriculture, environment, industry and transport. Controversial and tricky subjects they may be, but they are nothing like as complicated as those that we are dealing with in Sub-Committee A on economic and financial affairs. As our chairman pointed out, although it may not have been in his draft, you have only to look at the glossary at the back to see what we all need—seven pages of unheard of and unspeakable letters and descriptions. I joined the committee only last year and, after attending my first meeting, I left feeling numb and as if my brain had been scrambled. The subject was incomprehensible and it took me a while to get my head around it. I am afraid that I still lag somewhat behind.

Simply put, MiFID II is about two things, regulation and transparency. The latter includes greater understanding of the markets by everyone; but, most importantly, it relates to those who invest, insure and trust others with their funds. There are perhaps two groups. First, there are the very large pension funds, corporate businesses and plcs, among others. Then there are individuals—Joe public. During the past 40 years, millions of people have become small shareholders, encouraged by government privatisations, including those of the rail industry and BT. In addition, availability of private health insurance and private pension plans have become the norm. Some of these people can afford brokers and have access and the ability to understand the working of the financial markets. However, the majority numerically are small investors—private individuals ranging from those in lower income groups to the wealthy.

I should like to consider them for a moment, especially those who use independent advisers rather than City brokers. It is most important that this is a reliable and easy-to-understand service for those who cannot afford anything else. For one moment, I will assume that Christian Krohn of the Association for Financial Markets in Europe was correct when he said that MiFID I provides adequate small-investor protection.

However, I should like to discuss the proposed ban on inducements and commissions to independent advisers alone. Guy Sears of the Investment Management Association questions the effect of the proposal, and I am inclined to agree and, indeed, report that we do not think that it is workable. In addition, I am not quite sure that the inducement/commission is important, providing that the product is genuine and the client knows that he or she may go elsewhere to compare prices and, most importantly, compare potential outcomes. Surely the commission is no more important to a client whether he or she is buying a financial product or a car. It is the results of the deal as a whole as they appear to him or her that count. When you buy a car, you decide on a product, shop around and get the best deal, which may include free servicing or whatever. You do not ask the salesman what his bonus is or what margin the garage is making. It may be that it remains a cheaper or better option to buy from him, even though his bonus and margin are higher than that of the garage next door. Banning inducements or declaring them in every case may upset the market—the only market available to the group of people of whom I am talking. It is a people’s market. If this market fails or becomes more difficult to access, where will ordinary citizens in the EU, including the majority of the 70 million individuals in the UK, be able to go for this service? We must be conscious of this. We know that the national pension schemes and provision of healthcare will be insufficient with our increasingly aged population. Our Government must focus on this and the future problems arising from it.

The problem with much financial services business is that it is so complicated and, unlike other businesses, takes place in the ether, rather than in the practical trading of normal products such as grain, mining products or manufactured products. Those involved work on, oblivious to the fact that the industry is incomprehensible to most people outside their world. Europe adds bureaucracy to this and thinks that “one size must fit all” means that Germany’s size is the one that must fit.

The magic word seems to be “harmonisation”—do it my way rather than compromise and use delegated regulations. Look at the financial transactions tax. We had Herr Bergmann, the director of the EU tax department, in front of our committee the other day. When asked what the main objectives of the FTT were, he said, first, harmonisation and, secondly, raising money. They are hiding behind the soundbite of harmonisation; it would be good for us all, they say. Surely the first objective of any tax before you can even think of harmonisation is to raise money. That is the next stage, papering over the cracks later on, but they have put it first because of the way that it sounds. The initial deal for the Cyprus bailout just demonstrates how confident and secure one of our nations feels to put such a proposal on the table. Next they will call for the harmonisation of this tax—and where next? Incidentally, as a colleague of mine said, the only people who have taken money out of the bank in that way were the IRA in Belfast. Charles Moore wrote in the Telegraph yesterday:

“Cyprus is only the first victim of a one-size-must-fit-all-policy that is made in Berlin”.

In conclusion, my impression after being on the committee for a year is that this area is highly complex and few people outside the City could begin to understand it. In other committees that I have sat on, witnesses invariably feel that they have the right answers. In our deliberations, however, our witnesses have said that they hope so, they do not know the full answer for sure or, “This will not necessarily stop a future crisis”. It is pretty unnerving to listen to experts in that frame of mind.

The City of London, one of the big three, is crucial to our nation. Our invisible earnings are such a high percentage of our GDP, yet my impression is that the City is too busy keeping up with the speed of its trading and recession management to look forward to the unintended consequences of developments in Brussels. Yet the Government seem far too relaxed and are doing little to fight London’s corner. In contrast, I am delighted to see that the Government are putting £2 million towards aerospace research and development at Bombardier in Belfast, but surely they must wake up and get cracking on the financial world and support it as they should. I have not asked specific questions but our chairman has done so, and I look forward to the answers.

--- Later in debate ---

[Lord Newby]

My Lords, I am conscious of the time. Much as I would like to go on until eight o’clock on this subject, I think that we are going to have to return to it.

I shall turn to some of the other points that have been made in the debate. I would say to the noble Viscount, Lord Brookeborough, that one person’s harmonisation is another person’s single market rules. Sometimes harmonisation works very much to the benefit of the UK and sometimes it does not. We have to take this on a case-by-case basis, but let us remember that by common consent the single market has been very beneficial to the UK. If we can, we want to strengthen it even if, as inevitably will be the case, some of that strengthening includes common rules.

[Viscount Brookeborough]

I did not say that harmonisation was not a good thing, rather I looked at the way this tax is being brought forward. They were talking about harmonisation before they started raising the money. They did not like to talk about why they were raising the money and doing it only over a certain number of countries.

[Lord Newby]

I am grateful to the noble Viscount for that clarification. The noble Lord, Lord Kerr, asked about the benefit of the EU to the City as a whole, and both whether the Government recognise that and whether are doing anything to promote it. There is no doubt in my mind, having watched the Government in action, that they absolutely understand the role of the City and how having a strong financial services sector is immensely valuable to the UK and to the EU. The Government themselves are working very hard, as noble Lords have said, on this directive and others to make sure that we end up with proposals which are compatible with the ongoing success of the City.

One of the frustrations I felt before I was a Minister and which, to a lesser extent, I still feel, is that the City is not always its own best advocate. Although things have improved considerably with the formation of TheCityUK, and there is now a much wider recognition that the financial services sector needs to get its act together, as it were, to promote itself, there is still some way to go. Although the UK Government are active in the Council and in the European Parliament, they need the UK financial services sector to be independently active in those institutions as well. There was a period when a lot of senior people in the City felt so battered with the experience that they had following 2008 that they were not willing to put their heads above the parapet and make the arguments. I think that that phase is over, to a certain extent at least, and the Government are encouraging them very much to do that. I am very grateful to the noble Lord, Lord Kerr, for quoting Lord Thomson of Monifieth. He, of course, was from that great tradition of canny Scots who could fully understand the benefits of engaging with the EU.

I will make just two points before I finish in response to the noble Lord, Lord Liddle. First, he talked about asymmetries. There are a number of asymmetries. Looking at the future of this directive, we are talking about the possibility of making considerable progress while Ireland still has the presidency. However, the amount of financial services expertise which Lithuania is going to bring to the party in the second half of the year is relatively limited. It is a terrible burden on the officials and Ministers from small member states who have to grapple with what, by common consent and as anybody who has read the report knows, is an immensely technical subject. Virtually the only people other than members of your Lordships’ committee who understand it are the people who work in it every day. The truth is that there are not many of them in small member states, which is an asymmetry. Clearly, there is also an asymmetry between the Commission and the UK. There is one asymmetry that we can benefit from by using our expertise. I was extremely interested that, despite the fact that we are not in the euro, a group of Treasury officials went to Cyprus at the weekend in order to help sort out that problem. It will be very interesting when they get back to see what they have learnt from it.

The final point is about how we exercise influence in an environment where we are not part of the euro-in group. In my view, the model—which I have seen in operation—is that adopted by my colleague in another place, Ed Davey, when he was in BIS, who established something called the “like-minded growth group” for promoting the single market. At every point, Mr Davey carried in his pocket a little laminated piece of paper which showed the voting strength of every member of the 27, and he was forever working out how you got that qualified majority or majority. He worked very hard, and succeeded, at getting a majority of member states, both euro-ins and euro-outs, to co-operate to promote the single market. That is a model that I think is still pursued within BIS. We have got to, as the noble Lord, Lord Kerr, said, be very active working out where we can form alliances, which we can do on many things. One of the ironies about the current financial circumstances is that we, as a euro-out, have much more in common with some of the northern European countries that are trying to impose fiscal discipline. For good or ill, we are now something of an expert on that in this country and we need to make the most of it. There are no permanent alliances; you have to rebuild and refresh them. One of the challenges for the Government—or any Government—is to do that as best they may.

Finally, reverting to the splendid report that we have been discussing this afternoon, the Government welcome it and agree with all the points it raises. We accept, as I have attempted to explain, that the devil is in the detail. The Government will continue to negotiate carefully so that MiFID II does, indeed, get it right for the City and, most importantly, for the users of financial services.