Covid-19: Government Support

Abena Oppong-Asare Excerpts

Wednesday 7th July 2021 Westminster Hall

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to serve under your chairship, Mr Mundell. I congratulate the hon. Member for Midlothian (Owen Thompson) on securing this important debate and thank all hon. Members for their contributions. My hon. Friends the Members for Edmonton (Kate Osamor), for York Central (Rachael Maskell), for Coventry North West (Taiwo Owatemi), for Worsley and Eccles South (Barbara Keeley) and for Hornsey and Wood Green (Catherine West) all made passionate speeches on behalf of their constituents. I hope the Minister will address their specific points.

For nearly 16 months, Labour has argued that public health measures and economic support must go hand in hand. We have called on the Government to address the gaps in support and ensure that no one is left behind. We have called on the Government to do more to support businesses and workers in the most affected industries. Time after time, we have called on the Government to fix the broken self-isolation system and ensure that no one is financially penalised for doing the right thing. Too often during the past year and a half, the Government have either ignored those calls or acted too slowly.

We are at a critical moment in the pandemic and the economic recovery. Thanks to our scientists and NHS staff, the vaccine roll-out is providing a route back to normality. We all hope that that will arrive sooner rather than later. In the meantime, businesses and working people face an uncertain future. Many companies worry about how they will clear covid debts over the coming years. Workers on furlough worry about whether they will have a job to return to. Millions of people who have gone without support simply worry about how they will make ends meet.

As hon. Members have said, a variety of groups have been repeatedly left out of the various covid support schemes. Those groups include people who make less than half their income from self-employment, company directors of small businesses, and people who regularly move between jobs in common creative industries. I want to use this opportunity to pay tribute to the many organisations that have made their voices heard on the issue—ExcludedUK and the trade unions, including Community, Prospect and the Musicians’ Union. Many of those excluded face mounting debts, which have been building during the pandemic. Therefore, will the Minister set out the Government’s plans to address both personal and business debt?

When asked what support is available for people who have been unable to access various covid schemes, Ministers have pointed to universal credit and the £20 uplift, but the Government propose to cut that very uplift completely in September. On Monday, six former Work and Pensions Secretaries—all Conservatives—called on the Government to rethink cutting universal credit for 5 million households. I truly hope that the Government will think again about that disastrous decision.

Let me turn to the winding down of the covid support schemes for businesses. Last week, the House of Commons Library produced new analysis showing that just under 400,000 businesses in England—400,000 businesses—will be affected by the cut in business rates relief for retail, hospitality and leisure businesses from 1 July. Many of those businesses will face significant restrictions on their ability to trade until 19 July. At the very moment those businesses need support, the Government are sending them a bill.

We have called on the Government to learn lessons from the Welsh Government, who have given the majority of businesses 100% rate relief for the financial year. At the same time, the Government have increased employer contributions despite the fact that many businesses remain closed and most people who are still on furlough are employed in the sector affected by ongoing restrictions. I urge the Government not to repeat the mistakes of the past, when too many people fell through the gaps, and to introduce a comprehensive system of self-isolation support without delay.

Oral Answers to Questions

Abena Oppong-Asare Excerpts

Tuesday 22nd June 2021 Commons Chamber

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

Independent experts have told the Government 12 times that the failure to provide adequate financial support to people self-isolating has contributed to the spread of covid, endangering lives and livelihoods. We now know that the Treasury instructed Government officials actively to supress information about the furlough scheme that was to be used by employers to financially support people self-isolating. Will the Chancellor explain why that instruction was issued by the Treasury? Will he appear in front of the parliamentary Committee’s inquiry into covid to explain why the Government chose not to improve self-isolation support, despite repeated warnings?

[Rishi Sunak]

The hon. Lady is wrong, because the Government did no such thing. Indeed, guidance on usage of the furlough scheme was there in black and white—I am looking at it—and plain for everyone to see from the start. At the beginning of this crisis we improved the way that statutory sick pay works to deal with self-isolation. That was one of the earliest steps we took. We then introduced a rebate scheme for small and medium-sized businesses, to claim back the cost of statutory sick pay for isolating employees from the Government. We also introduced a £500 self-isolation payment, which once the isolation period reduced from 14 to 10 days increased in value by 30% and is now worth at least the national living wage to a worker, if not 20% or 30% more, depending on how many days they isolate for. That shows that the Government are supporting those who need to self-isolate. They did so at the beginning of this crisis, and they will continue to do so until the end.

National Insurance Contributions Bill

Abena Oppong-Asare Excerpts

2nd reading
Monday 14th June 2021 Commons Chamber

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to respond to this debate on behalf of the official Opposition. As my hon. Friend the Member for Ealing North (James Murray) said earlier, we will not be opposing this Bill today. We support the intention behind it and many measures within it.

I thank all hon. Members from across the House for their contributions to the debate. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about his concerns about how freeports will operate, which were shared by the hon. Members for Gordon (Richard Thomson) and for Richmond Park (Sarah Olney).

I will now make a few brief points about the different elements of the Bill and echo the questions asked by my hon. Friend the Member for Ealing North in the hope that we can get some clear answers from the Minister. On freeports, which we debated at length over the course of the passage of the Finance Act 2021, we have consistently said that we support and protect British businesses and want every region in the nation of the UK to thrive. We have asked important questions about exactly how freeports will operate. On my hon. Friend’s specific questions about the national insurance relief being introduced for freeports, we need clarity on why the relief is conditional on employment beginning after April 2022 given that freeports are expected to begin operating in 2021, and why the level of the relief is set at £25,000, which is below both median pay in the freeport areas and the rate for those employing under-21s and apprentices.

My hon. Friend asked the Minister for some transparency about the Government’s approach to the global minimum corporation tax rate. Specifically, why did the Chancellor support the weakening of the proposals and the reduction from the 21% rate to the 15% rate? The Government must be ambitious and argue for a higher rate in order to level the playing field for British businesses and build a strong economic recovery.

I turn now to the measures related to veterans. I pay tribute to all those who have served in our armed forces and all those who currently do so. They make great sacrifices on behalf of this country and they deserve nothing but the best from this Government. Clearly, an important part of this is supporting veterans as they transition into civilian employment. We therefore welcome the new relief on employers’ national insurance contributions for veterans. I hope the Minister can answer my hon. Friend’s specific points about the length of the relief and why it is shorter than the freeport relief, and on what the upper secondary threshold for the veterans’ relief will be.

The second part of the Bill exempts self-isolation payments for national insurance contributions for the self-employed. Again, we welcome this measure. We have consistently called for the Government to do more to ensure that people do not have to choose between self-isolating and paying the bills. Recent figures show that still only about half the people who should be self-isolating are doing so. Clearly, this will not be about the financial element alone, but there is clear evidence that the system is not working as it should. First, only about one in eight of the workforce are eligible for the £500 payment. Of those who apply, only 30% succeed, and of those who apply for the discretionary scheme, only about 20% succeed. We urgently need some action from the Government to improve this. Although we welcome the small step in the Bill to reduce the administrative burden associated with self-isolation payments, will the Minister set out what more the Government intend to do to support people to self-isolate in the coming months?

We welcome the anti-tax avoidance measure in clause 11. My hon. Friend asked what action the Government will take to clamp down on the most active promoters of tax avoidance schemes, and I hope the Minister will address this.

We will not oppose the Bill today. We support the measures to boost jobs across the country, to help veterans to find employment, to ensure that people can self-isolate, and to tackle tax avoidance. We will of course use further stages of the Bill to seek to improve it. I hope the Minister can respond to the specific questions that I and other hon. Members have asked.

Finance Bill

Abena Oppong-Asare Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

Brought up, and read the First time.

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

I beg to move, That the clause be read a Second time.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to consider the following:

Amendment 24, page 63, line 9, leave out clause 109.

This and the other amendments relating to clauses 109 to 111 would prevent the creation of freeport tax sites in the UK.

Amendment 25, page 63, line 31, leave out clause 110.

This and the other amendments relating to clauses 109 to 111 would prevent the creation of freeport tax sites in the UK.

Amendment 26, page 64, line 1, leave out clause 111.

This and the other amendments relating to clauses 109 to 111 would prevent the creation of freeport tax sites in the UK.

[Abena Oppong-Asare]

I rise to speak to new clause 25, tabled in my name, and those of the Leader of the Opposition and my hon. Friends. The new clause sets out a number of tests that we believe the Government must apply to each and every freeport created in the UK. Before I come to the detail of those tests, I will make a couple of brief points about the Government’s intentions behind freeports. As I said in Committee, Labour wants every area to succeed, whether or not it has a freeport. We want good new jobs to be created right across the country, and our great British industries to be protected and supported. We want to see the UK at the forefront of new green manufacturing and technology, and we want a genuine re-distribution of power and opportunity to places that have been denied that for so long.

The Government clearly believe that freeports are a silver bullet for solving regional inequalities, and I simply remind them that they have been in power for 11 years now. Let me repeat that: 11 years. They must own the choices they have made, such as abolishing regional development agencies, cutting local authority funding, and pulling opportunities away from young people in some of the most deprived regions of the UK. Just recently, they scrapped the industrial strategy altogether. We need a proper plan that creates jobs and opportunities for everyone, regardless of where they live.

I will now turn to the new clause, and to the tests against which we believe our freeports should be judged if they are to succeed. First, freeports must create jobs, not simply move them from elsewhere. Too often, attempts at regional rebalancing have simply shuffled jobs around rather than creating them in the places that need them. We must end the scandal of people being forced to move to the other end of the country to find a decent job. Our test will be this: if someone lives near a freeport, will new opportunities be opened to them that did not exist before? Conversely, if an area does not have a freeport, can we be confident that it will not lose jobs as a result of this policy? Of course, any new jobs must be secure and well paid, with trade union rights—the kind of jobs we have not seen anywhere near enough of over the last decade.

Secondly, freeports must deliver improvements in training and skills for local residents. As we begin to recover from the pandemic, the need for re-training will become even more acute. We need a genuine skills guarantee for everyone, and freeports must play their part in that. Labour will be looking to see how companies operating in freeports work with their local communities to provide skills and training opportunities. Rather than a race to the bottom, freeports should be helping to boost skills and open opportunities.

Thirdly, freeports must produce tangible transport and infrastructure improvements beyond the port itself. Too many places still lack basic transport infrastructure, and too many people still find it difficult to get around. The investment that the Government are making in freeports must go towards boosting connectivity for everyone in those areas. We want every community to benefit from affordable and reliable public transport.

--- Later in debate ---

I am confident that Opposition Members do not want to delay the investment associated with the relevant clauses. The implementation of that investment will help to unlock employment and stimulate growth in areas that have too often been left behind, so I urge the House to reject amendments 24 to 26 and new clause 25.

[Abena Oppong-Asare]

I thank all Members who have spoken for their contributions. In particular, I thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell), who raised a number of concerns—including on tax avoidance and the potential damage to nearby areas—about how freeports will operate.

The Government Members who spoke in the debate are obviously more optimistic about the potential impacts of freeports on the communities that they represent. In respect of the comment made by the hon. Member for Redcar (Jacob Young), let me say that no one is talking Teesside down. I am very clear that we want to make sure that everyone will succeed, whether or not they have a freeport in their area. Why is that a bad thing?

We believe that our new clause and the tests it contains set out a reasonable way to assess the impact of freeports on their local areas and the country as a whole. We on the Opposition Benches are ambitious for our country, but we need to see clear evidence that freeports are going to be effective in meeting the challenges that we face. I therefore call on Members to support our new clause, because it is the right thing to do.

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

--- Later in debate ---

Brought up, and read the First time.

[Abena Oppong-Asare]

I beg to move, That the clause be read a Second time.

[Mr Deputy Speaker (Mr Nigel Evans)]

With this it will be convenient to consider the following:

New clause 1—Equality impact analysis—

‘(1) The Chancellor of the Exchequer must review the equality impact of sections 87 to 89 and schedule 16 and 17 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the impact of those sections on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and

(d) equality in England, Northern Ireland and in different regions of England.

(3) A review under this section must provide a separate analysis in relation to each of the following matters—

(a) the temporary period for reduced rates on residential property,

(b) increased rates for non-resident transactions, and

(c) relief from higher rate charge for certain housing co-operatives etc.

(4) In this section “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of sections 87 to 89 and schedules 16 and 17 of the Bill on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a geographical basis.

New clause 24—Review of impact of 2% non-resident surcharge—

‘(1) The Chancellor of the Exchequer must review the impact of section 88 and schedule 16 of this Act on tax revenues, residential property prices, affordability of residential property, and the volume of property purchases by non-residents, and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

(2) The review under this section must include an assessment of what those impacts would have been if the provisions in the Draft Registration of Overseas Entities Bill had been in force.’

This new clause would require the Government to report on the effect of the 2% stamp duty land tax non-resident surcharge on tax revenues, property prices and affordability, and the volume of property purchases by non-residents, and also to assess what the impacts would have been if the Draft Registration of Overseas Entities Bill were in force.

Government amendments 4 to 6.

Government new clauses 17 to 20.

New clause 3—Review into the effects of replacement of LIBOR—

‘(1) The Chancellor of the Exchequer must undertake a review within six months of the passing of this Act of the effects of sections 128 and 129.

(2) This review must consider—

(a) the implications for tax revenue,

(b) effects on financial stability, and

(c) effects on businesses that use LIBOR as a benchmark, including businesses offering supply chain finance.’

This new clause would require a review into the effects of the provisions of the Bill about replacing LIBOR.

New clause 4—Assessment of environmental impact of Act—

‘(1) The Chancellor of the Exchequer must review the effectiveness of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must assess the effects of the provisions on—

(a) the achievement of the Government’s targets to reduce carbon emissions, and

(b) the United Kingdom’s progress towards net-zero emissions.’

New clause 5—Equality impact analyses of provisions of this Act—

‘(1) The Chancellor of the Exchequer must review the equality impact of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the impact of those provisions on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Government’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and

(d) equality in different parts of the United Kingdom and different regions of England.

(3) A review under this section must include a separate analysis of each section of the Act, and must also consider the cumulative impact of the Act as a whole.’

New clause 7—Analysis of effectiveness of provisions of this Act on tax avoidance and evasion—

(1) The Chancellor of the Exchequer must review the effectiveness of the provisions of this Act in accordance with this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must—

(a) assess the effects of the provisions in reducing levels of artificial tax avoidance,

(b) assess the effects of the provisions in combating tax evasion and money laundering, and

(c) estimate the role of the provisions of this Act in reducing the tax gap in each tax year from 2021 to 2024.’

New clause 8—Review of public health and poverty effects—

‘(1) The Chancellor of the Exchequer must review the public health and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the effects of the provisions of this Act on the levels of relative and absolute poverty in the UK,

(b) the effects of the provisions of this Act on socioeconomic inequalities and on population groups with protected characteristics as defined by the 2010 Equality Act,

(c) the effects of the provisions of this Act on life expectancy and healthy life expectancy in the UK, and

(d) the implications for the public finances of the public health effects of the provisions of this Act.’

New clause 9—Review of changes to coronavirus support payments etc—

‘(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to coronavirus support payments etc by this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the coronavirus job retention scheme and the self-employment income support scheme are continued until 30th September 2021, and

(b) the coronavirus job retention scheme and self- employment income support scheme are continued until 31st December 2021.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a report comparing the effect of (a) the coronavirus job retention scheme and the self-employment income support scheme being continued until 30 September 2021 and (b) the coronavirus job retention scheme and self-employment income support scheme being continued until 31 December 2021 on various economic indicators.

New clause 10—Review of changes to VAT—

‘(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to VAT by this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the extension of temporary 5% reduced rate for hospitality and tourism sectors is continued until 30th September 2021, and

(b) the extension of temporary 5% reduced rate for hospitality and tourism sectors is continued until 31st December 2021.

(4) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a review comparing (a) the extension of temporary 5% reduced rate for hospitality and tourism sectors being continued until 30 September 2021 and (b) the extension of temporary 5% reduced rate for hospitality and tourism sectors being continued until 31 December on various economic indicators.

New clause 11—Review of effect on tax revenues—

‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of the provisions of this Act, and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must—

(a) consider the expected change in corporation and income tax paid attributable to the provisions, and

(b) make an estimate of any change attributable to the provisions in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.

(3) The reference to tax required to be paid in subsection 2(b) includes taxes payable by the owners and employees of Scottish limited partnerships.’

This new clause would require a report on the impact of the provisions of the Bill on narrowing the tax gap, assessing the impact of: (a) the expected change in corporation and income tax paid attributable to the provisions and (b) any change, attributable to the provisions, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid. In particular, this includes taxes payable by the owners and employees of Scottish limited partnerships.

New clause 13—Review of impact on GDP—

‘(1) The Chancellor of the Exchequer must review the impact in parts of the United Kingdom and regions of England of the changes made by this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must compare estimated GDP in each of the next five years under the following scenarios—

(a) these provisions are enacted,

(b) these provisions are not enacted, and

(c) the UK fiscal stimulus package, as a percentage of GDP, mirrors that of the United States.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a report on the impact on GDP of the provisions in the Bill, comparing them with the impact of copying the level of fiscal intervention in the US.

New clause 14—Report on Part 2—

‘(1) The Secretary of State shall, before 1 April 2023, publish a report on the impact of the provisions in Part 2 of this Act.

(2) The report in subsection (1) shall include consideration of the impact on—

(a) the rate of plastic recycling in the UK generally,

(b) the rate of PET plastic recycling in the UK,

(c) the rate of Polypropylene plastic recycling in the UK, and

(d) the rate of HDPE plastic recycling in the UK.

(3) The report in subsection (1) shall include consideration of the impact on—

(a) the volume of plastic used in the UK,

(b) the volume of PET plastic used in the UK,

(c) the volume of Polypropylene plastic used in the UK, and

(d) the volume of HDPE plastic used in the UK.

(4) The report in subsection (1) shall include consideration of the impact on—

(a) the volume of plastic stockpiling in the UK,

(b) the volume of PET plastic stockpiling in the UK,

(c) the volume of Polypropylene plastic stockpiling in the UK, and

(d) the volume of HDPE plastic stockpiling in the UK.

(5) The report in subsection (1) shall consider whether—

(a) £200/tonne provides an economic incentive to change the content of packaging for those types of plastic specified in subsection (2),

(b) the economic incentive in subsection (5)(a) remains in the event of lower than average oil prices, and

(c) a tax escalator might be more efficacious.’

This new clause would require a review of the efficacy of the proposed plastic packaging tax, with respect to whether the proposals will (a) increase use of certain plastics and (b) provide an incentive to recycle in the event of lower than average oil prices.

New clause 15—Review of impact on climate emissions—

‘(1) The Chancellor of the Exchequer must review the impact on climate emissions in parts of the United Kingdom and regions of England of the changes made by this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions of the Act on progress towards the Government’s climate emissions targets.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a report on the effects of the Bill on progress towards the UK Government’s climate emissions targets.

New clause 16—Review of impact of section 104—

‘(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made by section 104 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on the volume of gambling, including—

(a) the number of people who take part in gambling,

(b) the amount of money spent on gambling, and

(c) the gross gaming yield.

(3) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.’

This new clause would require a report on the effects of section 104 on the volume of gambling.

New clause 21—Impact of Act on human and ecological health and wellbeing—

‘The Chancellor of the Exchequer must review the impact of the provisions of this Act on human and ecological health and wellbeing, including the wellbeing of future generations, and lay a report of that review before both Houses of Parliament within six months of the passing of this Act.’

This new clause would require the Chancellor of the Exchequer to review the impact of the Finance Bill on human and ecological health and wellbeing, including the wellbeing of future generations.

New clause 26—Review of coronavirus job support schemes—

‘(1) The Chancellor of the Exchequer must lay before Parliament within three months of the passing of this Act a report on the impact of sections 31 to 33 of this Act.

(2) The report must consider the effects of the following two scenarios—

(a) the coronavirus job retention scheme and the self-employment income support scheme are continued until 30th September 2021, and

(b) the coronavirus job retention scheme and self- employment income support scheme are continued until 31st December 2021, and the following categories of workers are made eligible for the schemes—

(i) limited company directors,

(ii) self-employed workers earning more than 50% of their income from employment, and

(iii) self-employed workers with profits over £50,000.

(3) A review under this section must consider the effects of the provisions on—

(a) employment,

(b) GDP growth,

(c) personal debt, and

(d) poverty.’

New clause 27—Review of effect on small businesses—

‘(1) The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review considering the effects of this Act on small businesses that have been subject to restrictions on trading as a result of the pandemic.

(2) The review must consider the following issues—

(a) debt,

(b) rent arrears,

(c) solvency, and

(d) the ability of small businesses to employ individuals.’

New clause 28—Review of effect on carbon emissions—

‘The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review on the effect of the provisions of the Act on—

(a) a transition towards zero-carbon domestic flights by 2030,

(b) any reduction in the share of the UK’s carbon emissions coming from international flight travel, and

(c) the number of individuals booking more than three international flights a year.’

New clause 29—Review of effect on supply chain and other workers—

‘(1) The Chancellor of the Exchequer must lay before Parliament within six months of the passing of this Act a review considering the effects of the provisions of this Act on the following categories of—

(a) workers, employees and self-employed individuals in the supply chain sector,

(b) employees on zero-hours contracts and agency workers, and

(c) office workers in different income deciles that have worked remotely since March 2020.

(2) The review must include an assessment with regard to—

(a) employment income, and

(b) socioeconomic inequalities.’

New clause 31—Review of section 21—

‘(1) The Chancellor of the Exchequer must review the impact of section 21 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the impact of section 21 on levels of tax avoidance,

(b) the impact of section 21 on levels of tax avoidance if section 61O of ITEPA 2003 were amended to prohibit the operation of umbrella companies, and

(c) the impact of section 21 on levels of tax avoidance if section 61O of ITEPA 2003 were amended to mean that an umbrella company would not be an intermediary but would still be able to operate, provided that the following conditions were met—

(i) the worker had no material interest in the umbrella company;

(ii) the umbrella company received the monies from the agency and used the entire amount to process as earnings, including the total cost of employment, less a transparent intermediary margin;

(iii) at the end of the engagement, any outstanding holiday pay was paid;

(iv) all employment rights, including agency workers’ rights, were maintained; and

(v) no payment was given to any other party.’

Amendment 23, page 2, line 15, leave out clause 5.

This amendment would ensure that the thresholds for the personal allowance and for the higher rate of income tax rise in line with inflation as per the Income Tax Act 2007.

Amendment 27, in clause 15, page 9, line 16, at end insert—

“(3) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons a report—

(a) analysing the fiscal and economic effects of Government relief under the annual investment allowance scheme and the changes in those effects which it estimates will occur as a result of the provisions of this section, in respect of—

(i) each NUTS 1 statistical region of England and England as a whole,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland, and

(b) assessing how the annual investment allowance scheme is furthering efforts to mitigate climate change, and any differences in the benefit of this funding in respect of—

(i) each NUTS 1 statistical region of England and England as a whole,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland.”

This amendment would require the Chancellor of the Exchequer to analyse the impact of changes proposed in Clause 15 in terms of impact on the economy and geographical reach and to assess the impact of the investment allowance scheme on efforts to mitigate climate change.

Amendment 28, in clause 19, page 13, line 12, at end insert—

“(3) The Chancellor of the Exchequer must, no later than 5 April 2022, lay before the House of Commons a report—

(a) analysing the fiscal and economic effects of Government relief in relation to R&D tax credits for SMEs and the changes in those effects which it estimates will occur as a result of the provisions of this section and schedules 3 and 4, in respect of—

(i) each NUTS 1 statistical region of England and England as a whole,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland, and

(b) assessing how R&D tax credits for SMEs are furthering efforts to mitigate climate change, and any differences in the benefit of this funding in respect of—

(i) each NUTS 1 statistical region of England and England as a whole,

(ii) Scotland,

(iii) Wales, and

(iv) Northern Ireland.”

This amendment would require the Chancellor of the Exchequer to analyse the impact of changes proposed in Clause 19 in terms of impact on the economy and geographical reach and to assess the impact of R&D tax credits on efforts to mitigate climate change.

Amendment 32, in clause 21, page 13, line 33, after “(1B)” insert “or (1C)”.

Amendment 33, page 14, line 9, at end insert—

“(1C) This subsection is satisfied where—

(a) the worker has no material interest in the intermediary,

(b) the worker—

(i) has received,

(ii) has rights which entitle, or which in any circumstances would entitle, the worker to receive, or

(iii) expects to receive,

a chain payment from the intermediary.

(c) If any of the conditions A, B or C in this subsection apply, then this exempts the person within the chain from being an intermediary.

(d) Condition A is that the services are supplied by or through a third person (“the agency”) where all income received and receivable for those services wholly constitutes employment income subject to Chapter 7 of Part 2 of ITEPA 2003.

(e) Condition B is that the worker is employed under a contract of employment within the meaning of section 230(2) of the Employment Rights Act 1996 and is ordinarily or habitually employed by the intermediary prior to being engaged by the Client, either directly or via an agency, and has been engaged by the Client on a secondment basis.

(f) Condition C is that all of the following apply—

(i) the worker is employed by the intermediary under a contract of employment within the meaning of section 230(2) of the Employment Rights Act 1996,

(ii) the worker, if engaged via an agency, has not given notice of an agreement with the intermediary that paragraphs (1) to (8) of regulation 32(9) of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 shall not apply,

(iii) all income received and receivable by the worker wholly constitutes employment income from the intermediary,

(iv) the total of the payment elements paid to the worker during the entire engagement are equal to or greater than the sums of chain payments made to the intermediary during the engagement,

(v) the intermediary is not in breach of Section 54 of the Pensions Act 2008, and

(vi) the intermediary is not in breach of Paragraph 3A of Schedule 1 of the Social Security Contributions and Benefits Act 1992.

(g) A “payment element” means any of the following—

(i) secondary Class 1 National Insurance Contributions, as defined by section 6 of the Contributions and Benefits Act,

(ii) apprenticeship Levy as defined by Part 6, section 98, of the Finance Act 2016,

(iii) pension contributions, which shall mean contributions paid into registered pension schemes by their employers that are subject to the exemption provided by Section 308 of ITEPA 2003,

(iv) intermediary margin, which shall mean a fixed fee deducted from the chain payment, the amount of which has been declared to the contractor prior to becoming an employee,

(v) holiday pay, which means any amounts paid to the worker under the Working Time Regulations 1998 either during or upon termination of the engagement,

(vi) net employment income, which shall mean employment income paid to the worker after deduction of Income Tax under PAYE, Class 1 primary National Insurance Contributions, and Student Loans deductions,

(vii) allowable expenses, which shall mean any reimbursement of expenses to the worker by the intermediary permitted as per Chapter 2 of Part 5 of ITEPA 2003.

(h) In (1C)(g) “secondment” shall mean the provision of any worker by means of a resource augmentation service or temporary transfer of an official or worker to another position or employment away from their primary job with the Intermediary.

(i) Where the fee-payer, defined in 61N(2), has been provided with information from the intermediary that gives them reasonable belief that any of the Conditions A to C are met, then section 61N(5) does not apply, and the client cannot become the fee-payer under 61NA subsections (3) and (4).

(j) The amendments made by this subsection (1C) have effect in relation to deemed direct payments treated as made on or after 6 April 2022.”

Amendment 34, page 14, line 9, at end insert—

“(1C) This subsection is satisfied where—

(a) the worker has no material interest in the intermediary,

(b) the worker—

(i) has received,

(ii) has rights which entitle, or which in any circumstances would entitle, the worker to receive, or

(iii) expects to receive,

a chain payment from the intermediary.

(c) If any of the conditions A, B or C in this subsection apply, then this exempts the person within the chain from being an intermediary.

(d) Condition A is that the services are supplied by or through a third person (“the agency”) where all income received and receivable for those services wholly constitutes employment income subject to Chapter 7 of Part 2 of ITEPA 2003.

(e) Condition B is that the worker is employed under a contract of employment within the meaning of section 230(2) of the Employment Rights Act 1996 and is ordinarily or habitually employed by the intermediary prior to being engaged by the Client, either directly or via an agency, and has been engaged by the Client on a secondment basis.

(f) In (1C)(e) “secondment” shall mean the provision of any worker by means of a resource augmentation service or temporary transfer of an official or worker to another position or employment away from their primary job with the Intermediary.

(g) Where the fee-payer, defined in 61N(2), has been provided with information from the intermediary that gives them reasonable belief that either of the Conditions A to B are met, then section 61N(5) does not apply, and the client cannot become the fee-payer under 61NA subsections (3) and (4).

(h) The amendments made by this subsection (1C) have effect in relation to deemed direct payments treated as made on or after 6 April 2022.”

Government new schedule 1.

Government amendment 3.

Government amendments 7 to 22.

[Abena Oppong-Asare]

I rise to speak to new clauses 2 and 24, tabled by the Leader of the Opposition, other hon. and right hon. Friends and myself.

New clause 2 draws attention to the announcement made by the Chancellor in 2019, when he was Chief Secretary to the Treasury, on implementing a non-resident stamp duty surcharge at 3%. As hon. Members will have noted, the Finance Bill introduces a non-resident surcharge at 2% rather than 3%. In Committee, I asked the Minister why the Government had watered down that commitment; I do not believe I have received an answer. We believe that this means that the Government will lose out on about £52 million a year in revenue, which they said they would have spent on tackling homelessness and rough sleeping. Perhaps the Minister could use his closing speech to clear up any confusion. Why have the Government moved from a 3% to 2% non-resident surcharge, and what assessment has been made of the impact on tax revenues and the housing market?

I turn to new clause 24. In Committee of the whole House, my hon. Friend the Member for Ealing North (James Murray) asked the Financial Secretary to the Treasury to explain whether the Government will meet their own deadline of introducing legislation to set up a register of overseas entities by 2021. The Minister’s response was that

“the Government plan to introduce the Bill in due course.”—[Official Report, 20 April 2021; Vol. 692, c. 914.]

Since that debate in Committee of the whole House, we have had the Queen’s Speech—the Government’s opportunity to lay out their legislative plans for the year ahead. I listened carefully to that speech and read the accompanying notes, but I heard no mention of the registration of overseas entities Bill.

It is now more than five years since David Cameron first announced proposals to introduce a beneficial ownership register for UK property owned by overseas companies and legal entities. Since then, we have had more announcements, consultations and draft Bills, but still no indication from the Government of when they intend to introduce this vital piece of legislation. The failure to include it in this year’s Queen’s Speech means that it is now beyond doubt that the Government will miss their 2021 deadline.

It is worth considering what that means more broadly. First, let us look at the scale of the problem. In 2014, the National Crime Agency received around 14,000 reports of transactions that were believed to involve illicit activity. By 2020, that had risen to over 62,000 reports. Of course, the true scale of the problem is extremely hard to quantify, given the lengths that individuals and organisations go to hide their illegal activities.

In 2019, Transparency International UK said:

“The London property market is highly vulnerable to corrupt wealth flowing into it.”

Its analysis found that since 2008, £100 billion of properties have been bought in London alone by overseas companies in secrecy jurisdictions and high-risk corruption countries—both indicators for illicit wealth. In 2017, it identified that 160 properties worth over £4 billion were purchased by high-corruption risk individuals. The tidal wave of dirty money is poisoning the housing market for ordinary people. There is growing evidence that the purchase of UK property to launder illicit finance from abroad has a direct impact on housing prices. As Transparency International UK—among others—has shown, attempts to clamp down on corruption around the world have led to a rise in property prices here as illicit finance flows into the UK market to avoid detection in its home country.

This is not just about luxury properties. There is a ripple effect, where activity at the top causes a rise in prices throughout the market. As demand outstrips supply in high-value areas, buyers look out to more affordable places. This leads to a cycle of rising housing prices—my hon. Friends know this story very well. Illicit finance also distorts the supply of housing as developers increasingly focus on luxury property targeted at international investors, who have no intention of living in the properties. So dirty money, from crime and corruption abroad, is pricing people out of their local communities in cities across the country.

This has a direct effect on the housing crisis. The Government know this, of course. They have committed to act and set up a register of beneficial ownership for UK property owned by overseas entities. This would let the disinfectant of sunlight into the murky world of high-end property bought by shell companies and overseas bodies. As the Government stated:

“It is intended to act as a deterrent to those who would seek to hide and launder the proceeds of bribery, corruption and organised crime in land in the UK.”

The fact the Government are aware of the problem but are still failing to act is inexplicable.

Our new clause 24 requires the Government to review how the Registration of Overseas Entities Bill could work alongside the non-resident surcharge to mitigate the housing crisis. But what we really need is for the Government to introduce this Bill as soon as possible and begin the process of implementing this important legislation. I will end by paying tribute to the Members from across the House who have campaigned on this issue relentlessly. I know they will share our disappointment that the Government are still not taking the action that we all agree is needed. I urge the Government to correct this wrong and get on with doing what they have committed to do.

[Mr David Davis (Haltemprice and Howden) (Con)]

I rise to speak to amendments 32 to 34 and new clause 31 tabled in my name and those of other right hon. and hon. Members. The Government’s historic IR35 policy has dated from long before this Minister was in his office. Far from rationalising the collection of tax from contractors, it has created and has now unwittingly extended a wild west of umbrella companies that operate without regulation and where malpractice is rife. This malpractice has seen contractors forced to operate through non-compliant umbrella companies that maximise their profits by using sleight-of-hand tactics. This includes: misrepresenting tax thresholds; skimming off pension contributions and other payments such as the apprenticeship levy; forcing contractors to opt out of their rights as agency workers; and withholding billions in holiday pay that is legally due.

The Government policy to date has triggered the increased proliferation of mini umbrella companies. BBC Radio 4’s “File on 4” found that 48,000 of these companies had been created in the past five years. The fact that policies in this area are flawed is proven beyond doubt by the fact that HMRC is having to de-register 22,000 of these umbrella companies. The frauds involved here cost the taxpayer hundreds of millions of pounds every year in lost tax, but as well as that, the boom of these non-compliant companies means that legitimate umbrella firms are being run out of business by them. The illegitimate umbrella companies making most of their profits through appropriating funds through tax scams, withholding holiday pay, skimming from the apprenticeship levy and the like are driving those honest firms out of business. There exist comparison websites for contractors to see which umbrella company they can do best with, and of course the ones that look best to them are the ones that make them money through illegitimate mechanisms.

--- Later in debate ---

[Jesse Norman]

No, the Government have been clear that there needs to be an extension of the employment agency standards inspectorate in this area, and there may well be operational measures that HMRC needs to continue to undertake. My right hon. Friend will be aware that the Bill contains very considerable additional measures designed elsewhere in the tax system to curb the promotion of tax avoidance schemes, to improve the disclosure of those schemes and to combat organisations that would attempt to derive an unfair advantage of the kind that he has described, so we are absolutely not unaware of the importance of ensuring that people across the board pay appropriate levels of tax.

It is also worth saying that none of this really falls within the context of a Finance Bill, let alone the one that we have laid out in front of us. It is also worth saying that HMRC has used real time information in ways that were contemplated and discussed earlier in the debate in order to try to be more forward-leaning in this area. We recognise the concern and HMRC is highly active in it, but in many cases these umbrella companies do have a legitimate function, and it is important to recognise that.

I think that is it—thank you very much.

[Abena Oppong-Asare]

Once again, I thank all Members who have spoken. This has been a varied and wide-ranging debate, with Members focusing on different aspects of the Bill.

My hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) spoke about the impact of overseas buyers buying properties in her community in bulk. My hon. Friend the Member for Hornsey and Wood Green (Catherine West) spoke about the impact that dirty money is having on her local area and how other countries, such as the USA, are using sanctions to target corrupt individuals. Both are excellent champions for their constituents, who are too often at the sharp end of the housing crisis.

[Sir Geoffrey Clifton-Brown (The Cotswolds) (Con)]

Will the hon. Lady give way?

[Abena Oppong-Asare]

I am afraid that we have to make haste.

My hon. Friend the Member for Oldham East and Saddleworth (Debbie Abrahams) spoke passionately about the impact of the Bill on poverty and public health. She is absolutely right to draw attention to the Government’s failure in this area. My right hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about the measures in the Bill that are hurting the lowest earners in our society. He has always been a champion for the lowest paid.

Other hon. Members, including the right hon. Member for Haltemprice and Howden (Mr Davis), spoke about the exploitation of workers through umbrella companies. As my hon. Friend the Member for Ealing North (James Murray) said earlier, we are extremely concerned about the Government’s approach to workers’ rights, including their broken promise to include an employment Bill in the Queen’s Speech. We also share Members’ concerns about people being forced into umbrella companies and losing rights as a result. I urge the Government to look carefully at this issue.

I thank the Minister for his answer to my question on the non-resident stamp duty surcharge. I am aware of the consultation in 2019 to seek views on the decision on 1%, which led to the 2% stamp duty surcharge. I also point out that the Chancellor made an announcement in that same year, when he was Chief Secretary to the Treasury, in relation to implementing a non-resident stamp duty surcharge at 3%, so this commitment has been watered down.

I am sure that we will return to this issue during future debates and I thank Members for the points they have raised today. I will end by returning to the issue of the register of overseas ownership. As I said earlier, the Government’s failure to introduce this legislation is extremely disappointing. We will push new clause 24 on this issue to a vote, but I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 24

Review of impact of 2% non-resident surcharge

‘(1) The Chancellor of the Exchequer must review the impact of section 88 and schedule 16 of this Act on tax revenues, residential property prices, affordability of residential property, and the volume of property purchases by non-residents, and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

(2) The review under this section must include an assessment of what those impacts would have been if the provisions in the Draft Registration of Overseas Entities Bill had been in force.’—(Abena Oppong-Asare.)

Brought up, and read the First time.

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

Finance (No.2) Bill (Third sitting)

Abena Oppong-Asare Excerpts

Tuesday 27th April 2021 Public Bill Committees

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

[Peter Grant (Glenrothes) (SNP)]

[Kemi Badenoch]

[Abena Oppong-Asare]

[Kemi Badenoch]

[Kemi Badenoch]

[Abena Oppong-Asare]

[Kemi Badenoch]

[Abena Oppong-Asare]

Question put and agreed to.

--- Later in debate ---

[Kemi Badenoch]

[Abena Oppong-Asare]

[Kemi Badenoch]

[Kemi Badenoch]

[Abena Oppong-Asare]

[Kemi Badenoch]

--- Later in debate ---

[The Chair]

[Abena Oppong-Asare]

[Kemi Badenoch]

--- Later in debate ---

[Kemi Badenoch]

[Abena Oppong-Asare]

[Peter Grant]

Oral Answers to Questions

Abena Oppong-Asare Excerpts

Tuesday 27th April 2021 Commons Chamber

[Kemi Badenoch]

I reassure the hon. Gentleman that that is something that we are doing. As I mentioned in my earlier answer, we have already spent £500 million across the sector specifically to deal with that point. Further, we are taking a number of steps to support the decarbonisation of the UK steel industry. For example, we announced the £250 million clean steel fund to support the decarbonisation of the steel sector, including its transition to new low-carbon technologies and processes.

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

Jobs in the steel industry are crucial to the people of Hartlepool. In June, the first instalment of the EU research fund for coal and steel will be returned to the UK. Are the Government planning to ring fence that money to support the decarbonising and modernising of the industry, given the vital importance of protecting steel jobs for the future?

[Kemi Badenoch]

I thank the hon. Lady for her question. I mentioned in my answer to the hon. Member for Aberavon (Stephen Kinnock) the steps that we are taking to decarbonise the UK steel industry. As I said, there are global challenges in the industry and we have been supporting various companies. For example, last year, we provided a £30 million loan to Celsa, safeguarding a key supplier to the UK construction industry and securing more than 1,000 jobs, including more than 800 positions at the company’s main sites in south Wales. The Government will continue working with businesses to understand the issues that they are facing, including continuing to engage business sectors that are affected by covid and our changing relationship with the EU.

Finance (No.2) Bill (Third sitting)

Abena Oppong-Asare Excerpts

Tuesday 27th April 2021 Public Bill Committees

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

Clause 98 and schedule 20 reform the use of polluting diesel fuel by reducing the number of businesses that benefit from red diesel tax breaks from April 2022. Those changes will mean that most businesses across the UK will use diesel fuel taxed at the standard rate for diesel from April 2022, bringing them in line with ordinary motorists. That more fairly reflects the negative environmental impact of the emissions produced. It also ensures that the tax system incentivises users of polluting fuels such as diesel to improve the energy efficiency of their vehicles and machinery and to invest in cleaner alternatives, or just use less fuel.

Red diesel is a dye-marked diesel currently used mainly for off-road purposes, such as to power bulldozers and cranes in the construction industry. It accounts for around 15% of all diesel used in the UK and is responsible for the production of nearly 14 million tonnes of CO₂ a year, as well as noxious gases such as nitrogen oxide and particulate matter. Red diesel is subject to a rebated rate of fuel duty of 11.14p per litre, which is 46.81p less than the tax due on standard diesel used by ordinary motorists. Businesses that use red diesel are therefore paying far less for the harmful emissions that they produce.

The Government have previously received feedback from developers of alternative fuels and technologies that they view the low cost of running a diesel engine as a barrier to entry for greener alternatives. Clause 98 and schedule 20 will amend the Hydrocarbon Oil Duties Act 1979, to reform the entitlement to use red diesel in most sectors from April 2022. As announced at Budget 2020 and confirmed at Budget 2021, the Government will grant entitlements to use red diesel for the following purposes: for vehicles and machinery used in agriculture, forestry, horticulture and fish farming; to propel vehicles designed to run on rail tracks and for heating non-commercial premises, which includes the heating of homes and buildings such as places of worship, hospitals and town halls.

In addition, following consultation last year on these tax changes, for which the Government received more than 400 written responses, the Government decided at Budget 2021 to grant further entitlements to use red diesel after April 2022 for the following purposes: electricity generation in non-commercial premises; maintaining community amateur sports clubs and golf courses; as fuel for all commercial water vessels refuelling and operating in the UK, including fishing and water freight industries; for private pleasure craft in Great Britain; and powering machinery and caravans of travelling fairs and circuses. The Bill will also extend fuel duty to biodiesel, bioblends and fuel substitutes used in heating.

In response to concerns raised by red diesel users during the consultation about their ability to run down fuel stocks in back-up generators, the Bill provides for secondary legislation to give HMRC officers the power to disapply the liability to seize vehicles or machinery where they are satisfied that those who are no longer entitled to use red diesel are acting within the new law.

New clause 3, which was tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon (Richard Thomson) and for Midlothian (Owen Thompson), would require the Government to publish a report on the effects of clause 98 on progress towards the UK Government’s climate emissions targets

“within six months of the passing of this Act.”

Clause 98 will make changes to remove the entitlement to use red diesel from most sectors from April 2022; such a report could not meaningfully assess the impact of the changes within six months.

As the Government set out in our summary of responses to the red diesel consultation:

“As these tax changes are introduced, the government will monitor fuel duty receipts of red and white diesel to evaluate the extent to which current users of red diesel that have lost their entitlement to use red diesel are switching to greener alternatives. The Treasury will also work closely with the Department for Business, Energy and Industrial Strategy to evaluate the extent to which these tax changes are accelerating the development of greener alternatives and how this interacts with the work of the government’s energy innovation programmes, like the Net Zero Innovation Portfolio.”

The Government continue to take our world-leading environmental commitment seriously and remain dedicated to meeting our climate change and wider environmental targets, including improving the UK’s air quality; that is why we are reforming the use of red diesel from April 2022. Reducing tax breaks on red diesel will mean that approximately 3.6 billion litres of diesel, equivalent to 9.5 million tonnes of CO₂, will now be taxed at the standard diesel rate. I ask the Committee to agree that clause 98 and schedule 20 should stand part of the Bill and to reject new clause 3.

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to serve under your chairship, Dame Angela. I thank the Minister for her explanation of clause 98, which restricts the entitlement to use red diesel and related biodiesel for most sectors from April 2022.

We support the Government’s intention behind the measure, which was first announced in the 2020 Budget. There is a clear need to ensure that fuel duty rebates are as limited as possible in order to meet our net-zero commitment. I note that several sectors retain their entitlement to use red diesel, including agriculture, rail transport and permanently moored houseboats. More recently, the Government have announced further exemptions, including generating power from non-commercial premises for amateur sports clubs and for travelling fairs and circuses.

I have a couple of questions for the Minister about the impact on individual sectors. I know that the waste sector made a representation to the Treasury arguing that removing its red diesel entitlements

“could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.”

Would the Exchequer Secretary assure us that that issue was looked at carefully and that the impact on recycling was considered? Would she also say a little about compliance in the industries where the entitlement is being removed? She mentioned that the Treasury had been working closely with the Department for Business, Energy and Industrial Strategy to ensure that compliance was followed, but what monitoring and enforcement will the Government use to ensure that red diesel is used only for approved purposes?

May I turn briefly to recreational boat owners in Northern Ireland? The Government have confirmed that private pleasure craft in Northern Ireland will have to use white diesel from June this year in order to implement a ruling of the European Court of Justice. The Royal Yachting Association, British Marine and the Cruising Association have raised concerns about the practical effects of the decision, including the limited supply of white diesel for private pleasure craft users in Northern Ireland. Would the Minister reassure us that HMRC and the Treasury will work closely with those organisations to minimise disruption? Would she give us more information on the steps that have been taken so far to ensure that? Finally, will the Government take any further action to encourage the growth of cleaner fuel alternatives in sectors such as the construction industry?

[Peter Grant (Glenrothes) (SNP)]

It is a pleasure to serve under your chairmanship, Dame Angela. I could repeat much of what I have to say about new clause 3 when we debate new clause 5, but in the interests of brevity I will not make the same comments again at that point.

We welcome the fact that the tax system is used to encourage individuals and businesses to operate in a more environmentally responsible and sustainable way, but it is important that when we make changes we are prepared to look at them afterwards to see whether they are having the expected impact. That can be quite difficult with Government changes to tax policy, because the policy aim is not always immediately obvious. How much of this change is an income-raising exercise for the Treasury, and how much is designed to reduce the use not only of severely environmentally damaging hydrocarbon fuels, but of other fuels which, although they may be less damaging, are damaging none the less?

Biofuels are not a guilt-free pass. Even though they may appear to be renewable, their use has an impact on the environment, for example where the resources of less well-off countries are used to grow biofuels for us to use instead of food to eat for the people who live there. We should not fool ourselves into thinking that simply by converting our excessive use of fuel to use of renewable fuels, we are somehow doing all we need to.

The second reason why regular reviews are needed is that as well as unintended consequences, there will be mistakes. One third of the Government amendments in Committee of the whole House were introduced to correct drafting mistakes, either in the Bill itself or in related legislation. People make mistakes—hon. Members may even have noticed the drafting mistake in the wording of our new clause 3, which the Exchequer Secretary so kindly pointed out. However, given that her objection to new clause 3 is that the timing does not work, I would appreciate a commitment from her that the Government will comply with the spirit of the new clause in a more appropriate timescale when the impact of the changes can be measured.

The Scottish National party supports the Government’s stated aim of encouraging a more environmentally sustainable and responsible approach to use of the earth’s resources; we just think that they should acknowledge that they might not always get it right the first time. They should build in a process by which we can review the policy after a reasonable time and make the changes that may be needed, sooner rather than later.

[Kemi Badenoch]

Clause 99 consolidates changes announced and implemented in November 2020 concerning tobacco duty rates. The increases made then ensured that the duty charged on all tobacco products rose in line with the tobacco duty escalator, with additional increases for hand-rolling tobacco and to the minimum excise on cigarettes.

Smoking rates in the UK are falling. However, smoking remains the biggest cause of preventable illness and premature death in the UK, killing around 100,000 people a year and about half of all long-term users of tobacco. All these factors mean that we need to continue to encourage more people to kick the habit. We have already set out ambitious plans to reduce the number of smokers from 14% of the population to 12% by 2022, as set out by the Department of Health and Social Care in its tobacco control plan, and we have announced that we aim to curb smoking once and for all by 2030 in England. This includes a commitment to continue the policy of maintaining high duty rates for tobacco products to improve public health.

According to Action on Smoking and Health, smoking costs society almost £14 billion a year in England, including £2 billion in costs to the NHS for treating disease caused by smoking. In November 2020, my right hon. Friend the Financial Secretary announced increases to tobacco duty that, in the absence of an autumn Budget, were implemented by a Treasury order. The order was made under existing powers in the Tobacco Products Duty Act 1979 and helped to protect revenues. However, the life span of an order made under these powers is time-limited to one year, so this clause consolidates those increases. This will ensure that the duty charged on all tobacco products increases in line with the escalator, which is 2% above retail price index inflation. In addition, duty on hand-rolling tobacco increases by a further 4% to 6% above RPI inflation. The clause also increases the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—by an additional 2% to 4% above RPI inflation.

These new tobacco duty rates took effect on 16 November 2020. Recognising the potential interactions between tobacco duty rates and the illicit market, the Government recently consulted on tougher penalties for tobacco tax evasion. This includes proposals for £10,000 fixed penalties and escalating fines for repeat offenders. The responses indicate that there is broad support for tougher sanctions and, as announced on 23 March, we intend to legislate in the next Finance Bill. The Government have committed to strengthening trading standards and Her Majesty’s Revenue and Customs, so that these organisations can combat the illicit tobacco business even more effectively. This work includes creating a UK-wide HMRC intelligence-sharing hub.

The clause will continue our tried-and-tested policy of using high duty rates on tobacco products to make tobacco less affordable, to continue the reduction in smoking prevalence. and to reduce the burden that smoking places on our public services. I therefore move that the clause stand part of the Bill.

[Abena Oppong-Asare]

As the Minister said, this clause incorporates the legislation on changes in tobacco duty that the Government introduced in the Tobacco Products Duty (Alteration of Rates) Order 2020. I spoke during the debate on that order, so I will not repeat the points that I made then. However, I do have a few questions for the Minister.

First, why did the Government not raise the tobacco duty at Budget 2021? I note that the Minister has quoted data from Action on Smoking and Health. After the Budget, it said:

“ASH is disappointed that the Chancellor hasn’t increased taxes on cigarettes by per cent above inflation as we recommended. The Government says it is willing to take bold action to make smoking obsolete, which we welcome, but that has to include further tax rises. Making tobacco less affordable is crucial to discouraging children from starting to smoke and delivering the Smokefree generation the Government has said it wants to see by 2030.”

I hope the Minister can respond to the concerns from ASH and clearly set out what the Government’s approach to tobacco duty will be going forward.

9.45 am

More broadly, I want to press the Minister on the issue of smoking and public health. We have seen the importance of public health more than ever over the past year. Many people are concerned that the dismantling of Public Health England will have an adverse effect on the nation’s health, including action on preventing harm through smoking. We need reassurances that the new Office for Health Protection will be able to fulfil that important role effectively. Of course, that is partly from funding, but the Government have cut the public health grant by more than a fifth since 2015-16, despite a growing and urgent need for investment in public health and prevention.

ASH has called on the Government to increase the public health budget by £1.2 billion in order to reverse the cuts that have taken place since 2015 and then to provide additional investment in the most deprived areas with the greatest need. Can the Minister update us on the Government’s plan for the public health budget? Finally, can the Minister tell us whether the Government will provide further funding to local authorities to support local smoking cessation services?

[Kemi Badenoch]

I thank the hon. Lady for her questions. What I would say about the Office for Health Protection is that it is being set up to improve the work that Public Health England was doing. I am assured by health Ministers that it will continue to tackle issues such as tobacco smoking and its health implications.

The current smoking prevalence rate is 13.9%, which is the lowest level on record and a great public health success story. The UK is seen as a global leader on tobacco control, and over the last two decades we have implemented regulatory measures to stop youth smoking, prevent non-smokers from starting, and offer support to help smokers quit. Local authorities are responsible for delivering local “stop smoking” services and support to meet their population’s needs and to address inequalities. The Government set the national policy through the current tobacco control plan, and we will publish the next tobacco control plan this summer in order to outline our ambition for a smoke-free society by 2030.

Given the success that we have had in reducing smoking, we believe that the duty rates have been set at the right level. We review our duty rates at each fiscal event to ensure that they continue to meet our two objectives of protecting public health and raising revenue for vital public services. The tax information and impact note published alongside the Budget announcement sets out the Government’s assessment of the expected impact.

We are committed to improving public health by reducing smoking prevalence. We co-ordinate our efforts through DHSC’s “Tobacco Control Delivery Plan 2017 to 2022”, and we will continue our tried and tested policy of using high duty rates to make tobacco less affordable and continue the reduction in smoking prevalence, which should reduce the burden that smoking places on public services, as I mentioned earlier.

The hon. Lady asked why we are introducing clause 99, given that no increase in tobacco duties was announced in the spring Budget. Although the autumn Budget was cancelled, the Government proceeded with the uprating of tobacco duties in order to safeguard revenues, maintain our commitment to the duty escalator and protect health objectives. The Tobacco Products Duty (Alteration of Rates) Order 2020, implementing the duty increases, took effect on 16 November 2020. However, the hon. Lady should note that although an order may be used to alter tobacco duty rates, the changes expire after one year, which is why the increases need to be consolidated into the Finance Bill. It is not the first time that a Treasury order has been used to increase tobacco duties; the same method was used in 2008. I hope I have answered all her questions.

Question put and agreed to.

Clause 99 accordingly ordered to stand part of the Bill.

Clause 100

Rates for light passenger of light goods vehicles, motorcycles etc

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

[Kemi Badenoch]

Clauses 100 to 102 make changes to vehicle excise duty and the heavy goods vehicle road user levy. Clauses 100 and 101 relate specifically to vehicle excise duty, which is paid on vehicle ownership. The Government have uprated VED, as it is known, for cars, vans and motorcycles in line with inflation every year since 2010, which means that rates have remained unchanged in real terms during that time.

Since April 2017, cars with a list price exceeding £40,000 pay an additional supplement as well as paying the standard rate of VED, which means those who can afford the most expensive cars pay more than the standard rate imposed on other drivers. The expensive car supplement is paid in addition to the standard rate for a period of five years from the start of the second vehicle licence, but for a period of no longer than six years from when the vehicle was first registered. As a vehicle can change hands or be declared off-road through a statutory off-road notification, or SORN, the vehicle licence end date and the expensive car supplement end date will not always align.

Clause 102 relates to the HGV road user levy. That is an annual charge paid by UK hauliers alongside their VED, as well as a daily, weekly or monthly charge for HGVs from outside the UK accessing the UK road network. The levy was introduced in 2014 to ensure that all HGVs, which are heavy and can damage the road surface, contribute to the public finances and to reducing the wear and tear of the road network. In the light of the impacts of covid-19, the Government decided to suspend the levy last August for 12 months to support the haulage sector by reducing their costs.

Clause 100 makes changes to uprate VED rates for cars, vans and motorcycles in line with the retail prices index from 1 April 2021, meaning VED liabilities will not increase in real terms for the 11th successive year. The standard rate of VED for cars registered after 1 April 2017 will increase by £5 only. The flat rate for vans will increase by £10 and motorcyclists will see an increase in rates of no more than £3.

Clause 101 makes changes to ensure that registered keepers of cars with a list price of over £40,000 are issued with the correct annual VED refund, if they sell their vehicle or make a statutory off-road notification in the last year of the vehicle being liable to pay the expensive car supplement. Clause 101 will amend VED legislation, so that the rebate amount is equal to the number of months remaining at the higher rate of duty under the expensive car supplement and the number of months remaining at the standard rate of VED. This change in law will apply from 1 April 2021. Individuals and businesses will not need to do anything differently from what they do now, and this measure will not affect the amount of VED they pay.

Clause 102 will make changes to suspend the HGV road user levy for a further period of 12 months from 1 August 2021, to support the haulage industry and help the covid-19 pandemic recovery efforts. That means that UK-registered keepers of HGVs will save between £76.50 and £1,200 per vehicle again, as they will not have to pay the HGV road user levy when they renew their vehicle licence. Non-UK-based hauliers will also not need to pay the levy during this period.

In conclusion, the changes outlined in clause 100 will ensure that the Government continue to support motorists with the cost of living, while ensuring they continue to make a fair contribution to the public finances. The changes outlined in clause 101 will ensure that VED refunds are issued as intended when the expensive car supplement was introduced in 2017. Finally, the haulage sector supports many other industries, so the changes outlined in clause 102 to ease their financial burden temporarily will support them and help the economy to recover from the impacts of covid-19.

[Abena Oppong-Asare]

I will briefly respond to each clause in the group. Clause 100 would increase the rate of vehicle excise duty for a variety of vehicles, as mentioned by the Minister. We support the Government’s general approach to incentivise the use of greener and more environmentally friendly vehicles. We do, however, believe that we need to see more action from the Government on increasing the availability and affordability of green and electric vehicles.

The Society of Motor Manufacturers and Traders described the 2021 Budget as falling

“short of the support needed to transform the industry and market to the net zero future to which both the Government and industry aspires.”

If UK car manufacturing is to survive the covid crisis and thrive as part of a net zero future, it needs the Government to develop a long-term strategy to support the sector. Labour urges the Government to do just that by implementing a strategy that accelerates the electrification process in a manner that provides a lifeline to the industry, stimulates investment and ensures the future of the automotive sector in the UK for the communities that rely on it. We have called on the Government to create new gigafactories by 2025, make electric vehicle ownership affordable by offering interest-free loans for those on low and middle incomes and accelerate the rollout of charging points, particularly in the areas that have lagged behind. That is the support the automotive industry needs.

Clause 101 is a simple change to allow for the rebate of the additional rate of vehicle excise duty where the vehicle was sold or declared off road, and we support that. As the Minister said, clause 102 extends the suspension of the HGV road user levy for a further year. We support the measures as the logistics and haulage sector continues to recover from the pandemic, as the Minister has just mentioned, and to ensure that vital supply chains continue to function.

I am concerned that the Minister has not mentioned the serious concerns that haulage firms have about the Brexit deal. Specialist haulage firms, such as concert trucks that service UK music tours, have been left in an extremely difficult position by the Government’s Brexit deal, as it allows for three stops in total across the entire European Union before they must return to the UK. That will have serious knock-on effects on other businesses that rely on the haulage firms to transport their equipment across the continent. Other haulage companies have felt the knock-on effect of the Brexit deal too, including having to prepare last minute for changes in customs requirements and a lack of trained staff at customs. While we welcome the extended suspension of the HGV levy, I urge the Government to do more to support the sector.

[Kemi Badenoch]

The Government are doing a lot to support the haulage sector. We have provided unprecedented support for businesses and individuals throughout the national restrictions, including the coronavirus job retention scheme and a number of access-to-finance schemes. We have decided to temporarily maintain support for the haulage industry as it plays a critical role in the functioning of our economy and supports many other industries, including our supermarkets and shops. Suspending the levy for a further 12 months is a significant measure to help not just pandemic recovery efforts, but also the industry as a whole. As the hon. Lady made reference to the point by the Society of Motor Manufacturers and Traders, that is something that the haulage sector specifically has received, but not every other industry has.

On the question of the impact of Brexit negotiations, I am afraid that is not a matter for the Treasury. I am sure officials will note her concerns and pass them on to the relevant Department. On the question of why the Government are not doing enough to incentivise the uptake of zero-emission vehicles, we use the tax system to encourage the uptake of cars with low carbon dioxide emissions to help us to meet our legally binding climate change target. Zero-emission cars and electric vans are liable to pay no VED. Furthermore, users of zero and ultra-low emission cars have beneficial company car tax rates in comparison with conventionally fuelled vehicles. From April 2021, the Government are applying a nil rate of tax to zero-emission vans within the van benefit charge. We believe that we are doing quite a lot to incentivise the uptake of zero-emission vehicles and electric cars.

[Abena Oppong-Asare]

I thank the Minister for her comments. I want to go back to the point I raised about the haulage firms and the Brexit deal. I am concerned about how the Minister mentions that Brexit concerns are not a matter for the Treasury, because they are, particularly as clause 102 extends the suspension of the HGV road user levy for a further year. The Government need to look at the impact of that on haulage firms, in particular specialist haulage firms such as concert trucks that service UK music tours. They have been left in an extremely difficult position. The Government need to take that seriously, so I would like the Minister to take that forward and to ensure that such individuals get support.

--- Later in debate ---

[Kemi Badenoch]

The clause makes changes to ensure that the long-haul rates of air passenger duty for the tax year 2022-23 increase in line with the retail price index. The change will ensure that the aviation sector continues to play its part in contributing towards the funding of vital public services.

Aviation plays a crucial role in keeping Britain open for business, and the Government are keen to support its long-term success. The Government recognise the challenging circumstances facing the aviation industry as a result of covid-19. Firms experiencing difficulties can draw upon the unprecedented package of measures announced by the Chancellor, including schemes to raise capital and flexibility with tax bills.

As APD is a per passenger tax, airlines’ liabilities have considerably reduced following the decline in passenger demand caused by the pandemic between April and September 2020, by 87% when compared with the previous year. Aviation fuel incurs no duty and tickets are VAT-free, so APD ensures that the aviation sector makes a fair contribution to the public finances. Uprating APD rates in line with inflation is routine and has occurred every year since 2012. The Government announce the rates one year in advance, in order to give airlines sufficient notice of any changes.

The changes to be made by the clause will increase the long-haul APD tax rates for 2022-23 by RPI. The clause increases the long-haul reduced rate for economy class nominally, by just £2; and the standard rate for all classes above economy by £5—a real-terms freeze. The rates for long-haul travel by private jets will increase by £13. The rounding of APD rates to the nearest £1 means that short-haul rates will remain frozen in nominal terms for the 10th year in a row. That benefits more than 75% of all airline passengers.

APD is a fair and efficient tax, with the amount paid corresponding to the distance and class of travel of the passenger, and it is only due when airlines are flying passengers. The changes made by the clause ensure that the aviation sector continues to play its part in contributing towards funding our vital public services.

[Abena Oppong-Asare]

As the Minister said, the clause will increase, from April 2022, the rates of long-haul air passenger duty in line with inflation while leaving the short-haul duty at its current rate.

As we all know, the aviation sector has struggled enormously during the pandemic, as international travel has in effect shut down. The industry is important to the UK economy and supports 250,000 jobs across the country. The sector’s recovery will be prolonged. Any restructuring must be supported with a transitional strategy for workers and our regional economies that capitalises on the opportunities to grow industry into green technology.

We believe that part of any aviation support must include a clear commitment to tackling climate change and leading the industry to use cleaner fuel and other cutting-edge low or zero emission technologies. Government support should be contingent on airlines retiring old and inefficient aircraft, so that they meet the new industry standards in accordance with the framework of the Paris agreement and the UK’s Climate Change Act 2008.

Several smaller airports, including Teesside and Newquay, were forced to shut their doors at the height of the pandemic. This is an uneven playing field between small and large airports, as staff wages and business rates make up a bigger proportion of costs for regional airports. Without further specific support, regional airports may no longer be viable. The sector has made clear its disappointment with the recent Budget, which failed to set out either the support or the vision for future aviation needs. Will the Minister update us on the aviation support package that the Government promised but which has yet to materialise?

Finally, we know that the Government are currently consulting on a new low band for domestic air passenger duty, and we will watch the outcome of that consultation closely. Will the Minister tell us how that will fit in with our environmental commitments?

--- Later in debate ---

[Kemi Badenoch]

Clause 104 increases the thresholds for the gross gaming yield bands for gaming duty in line with inflation. Gaming duty is a banded tax paid by casinos in the UK, with marginal tax rates varying between 15% and 50%. To ensure that operators are not brought into higher tax bands because of inflation, gaming duty bands are increased in line with RPI inflation. That means that casinos continue to pay the same level of tax in real terms. The clause uprates the bands of gaming duty in line with inflation. That is expected by the industry and assumed in the public finances. The rates of gaming duty themselves will remain unchanged. The change will take effect for the accounting period starting on or after 1 April 2021.

New clause 4 seeks to place a statutory requirement on my right hon. Friend the Chancellor to review and publish a report on the impact of the increase in the gaming duty thresholds on the volume of gambling. The Gambling Commission publishes annually statistics on gambling participation, spend and gross gaming yield for each part of the sector, so an additional report would merely duplicate information that is already available. There is no change to the tax rate in the provision. Accordingly, the Government do not expect the change to have an impact on gambling participation, spend or gross gaming yield.

It is also important to say that new clause 4 is impractical, as the proposed publication deadline, together with the continued lockdown of casinos, would deliver an inconclusive report based on receipts data from a single shortened accounting period. I hope that the Committee is reassured by that and will therefore reject the new clause.

[Abena Oppong-Asare]

Clause 104 increases the bands for gaming duty in line with inflation, in effect freezing gaming duties for casinos. It is a relatively small measure, but clearly the taxation and regulation of gambling is extremely important. The Minister will know that hon. Members across the House have taken a keen interest in the issue. Will she therefore update us on the Treasury’s plans for gambling taxation more widely, including for online operators? In particular, what role does she see for taxation in this area as a way of tackling the adverse health effects that problem gambling can lead to?

[Kemi Badenoch]

rose—

--- Later in debate ---

[The Chair]

The question is that the clause stand part—

[Abena Oppong-Asare]

Dame Angela, I just have some questions for the Minister on gambling taxation more widely, particularly for online operators. Could she elaborate on that? What work is being done to tackle the adverse effects that problem gambling can lead to?

[Kemi Badenoch]

On the hon. Lady’s second question, that is a matter for DCMS. On her first question, I referred to that in relation to the tax rate. That is something that we in the Treasury will look to do along with DCMS as part of its review.

--- Later in debate ---

[Kemi Badenoch]

I believe that a significant amount of it is due to the landfill tax. We have been looking at the rate in comparison year on year, and our analysis shows that the landfill tax is having a significant impact. There will always be fly-tipping, irrespective of what the tax rate on landfill is.

Clauses 105 and 106 make changes to the climate change levy rates for 2022-23 and 2023-24, to continue the rebalancing of electricity and gas rates announced in Budget 2016. The 2022-23 and 2023-24 rates were announced in Budget 2020 in order to give businesses plenty of notice to prepare for the changes. At Budget 2020, it was also announced that rates for liquified petroleum gas would be frozen to 31 March 2024.

To limit the economic impact of the tax rate changes on energy-intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only. That protects the competitiveness of more than 9,000 facilities from energy-intensive industries across some 50 sectors.

When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £94.15, and lower-rate material draws a tax of £3.00 per tonne. These changes will see rates per tonne increase to £96.70 and £3.10 respectively from 1 April 2021. By increasing rates in line with RPI, we maintain the crucial incentive for the industry to use alternative waste treatment methods and continue the move towards a more circular economy. The changes made by clause 108 will repeal the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced.

New clause 5, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, would require the Government to publish a report, within six months of the passing of the Act, on the effects of what would then be sections 105, 106 and 108 on progress towards the Government’s climate emissions targets. As clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, such a report would not be able meaningfully to assess the impact of these changes within six months of the passing of the Act. The Government currently assess and monitor environmental impacts across existing tax measures, and do that alongside other, complementary measures, such as regulation and spending, to understand the impact of policy making in the round. That alludes to the point made by the hon. Member for Glenrothes about landfill tax.



Clause 108 repeals the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax, which was not commenced because the Government decided that a UK emissions trading scheme administered by the Department for Business, Energy and Industrial Strategy would be the best replacement for the EU emissions trading system from 1 January 2021.

As it was not commenced, the carbon emissions tax’s role in meeting the Government’s climate emissions targets cannot be measured. However, Opposition Members should be reassured that the UK ETS, a market-based measure covering a third of UK emissions, will help to deliver a robust carbon price signal. The energy White Paper committed to exploring expanding the UK emissions trading scheme to other sectors and set out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26. The Treasury will continue to work closely with BEIS on the introduction of the UK emissions trading scheme and will keep all environmental taxes under review to ensure that they continue to support the Government’s climate commitments.

In conclusion, the changes made by clauses 105 and 106 will update the climate change levy main and reduced rates for 2022-23 and 2023-24, as announced at Budget 2020 and to deliver on previous Budget announcements. Clause 107 will increase the two rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 will ensure that the statute book is up to date by repealing the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax that were not commenced. I therefore commend the clauses to the Committee and ask that the Committee rejects new clause 5.

[Abena Oppong-Asare]

If I may, I will address the clauses in reverse order. Clause 108 repeals the carbon emissions tax. As the Minister said, the Government introduced this legislation when deciding what to replace the EU emissions trading system with. We welcome the fact that the Government have decided to implement a UK emissions trading system, rather than a carbon emissions tax. The Minister and I recently debated regulations relating to the UK ETS, and I will not repeat the points I made then. However, I stress that our belief is that the UK ETS must be linked with the EU ETS in order to achieve a robust system of carbon pricing to meet our net zero target.

Clause 107 increases the landfill tax in line with inflation. We welcome this small, uncontroversial measure. We talked at considerable length about waste and recycling during our discussion of the plastic packaging tax. I repeat only the point that the Government should invest the revenue from these taxes into recycling facilities and technology. Finally, clauses 105 and 106 make a number of changes to the climate change levy over the coming years, including raising the gas levy and adjusting the climate change agreement rates. Could the Minister set out whether the Government intend to keep the climate change agreement scheme beyond its current period, and if not, what they will replace it with?

As we come to the end of the group of environmental clauses, I will make a few points about tax and our net zero commitment. In February, the National Audit Office published a report into environmental tax measures. The NAO criticised the Treasury and Her Majesty’s Revenue and Customs for failing to properly consider and evaluate the impact of these taxes on the Government’s environmental targets.

Does the Minister agree that we need information on the environmental impact of all taxes and reliefs? Will she commit to working with HMRC and other bodies to publish this information regularly? Currently, UK taxes with a positive environmental impact account for only 7% of tax revenue, and those with an explicit environmental purpose, such as the climate change levy or landfill tax, account for only 0.5%. So far, and particularly in the last Budget, we have seen a lack of vision from the Chancellor on the environment. We await the Treasury net zero review, but will the Minister set out what steps the Government will take in the short, medium and long term to ensure that our tax system plays a role in meeting our net zero commitment?

Finance (No.2) Bill (Second sitting)

Abena Oppong-Asare Excerpts

Thursday 22nd April 2021 Public Bill Committees

There is certainly a lot of scope here to change public behaviour and to make a real difference to plastic pollution across the UK. I commend the Government for looking at the issue, but very much urge them to look at the secondary details and to give some answers on exactly how this will work.

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to serve under your chairship, Sir Gary—for the second time this week for me.

I begin my discussion of the plastic packaging tax by saying that we welcome the new tax in principle. As members of the Committee can see, we have tabled a number of amendments to the clauses in this part of the Bill. We hope to encourage the Government to make improvements where they are needed. I will make some general remarks and be brief about the other proposals.

Plastic pollution is one of the biggest threats to our environment. In the UK, an estimated 5 billion tonnes of plastic are used every year, nearly half of which is packaging, and 67% of plastic waste comes from packaging. A report from the World Wildlife Fund calculated that total plastic waste generation in the UK could increase to about 6.3 million tonnes by 2030. As the Minister rightly mentioned, the vast majority of the plastic packaging used in the UK is from new rather than recycled plastic. We also know that far too much of that plastic waste goes to landfill or is incinerated, rather than being recycled or reused, so there is a dual problem: the environmental impact of producing new plastic, and the waste that is created by the failure to recycle plastic.

As the Green Alliance, to which I am grateful for its briefing on the issue, has said, solving those problems without increasing other environmental burdens will require an approach that tackles wider concerns about unsustainable resource use. It is a challenge that businesses, Government, and the whole of society must face together. The new plastic packaging tax is an opportunity to use the tax system to reduce the production of new plastics, encourage the use of recycled plastic, and divert plastic away from landfill or incineration.

However, we have a number of concerns about the detail and operation of the tax set out in these clauses. As the Exchequer Secretary mentioned, clause 45 sets a rate of £200 per metric tonne of chargeable plastic packaging components. We are concerned that this low flat rate tax will not provide enough of an incentive to encourage plastic manufacturers and importers to move to a greater use of recycled plastic at the speed we need them to. I echo comments made by the hon. Member for Glasgow Central, which the Green Alliance and others have also noted, that the relative effectiveness of the flat tax is likely to change according to market conditions, including seasonal variations in plastic prices and fluctuations in oil prices. Over the past year, low oil prices have impacted on the competitiveness of recycled plastic versus new plastic.

Our new clause 11 is a probing amendment to get the Government to review the impact of the £200 rate, and to consider a rate escalator through which the per tonne charge would increase each year. Of course, we understand that further work is required to set this at an appropriate level, but an escalator would set a clear expectation on the industry over the coming year. The SNP’s new clause 8 makes a similar point about whether the proposed rate provides the right incentive to remove non-recycled plastic from packaging as much as possible. The Food and Drink Federation has also asked whether the Government will consider ringfencing funds from the plastic packaging tax, to be reinvested in the UK’s plastic recycling infrastructure. I hope that when the Exchequer Secretary replies, she can respond to a number of the concerns that we have raised.

I will just add that our new clause 13, which is also in this group, is more of a general review on the impact of tax overall on levels of recycled material in packaging. That includes non-plastic material, the waste hierarchy, levels of carbon emissions, and progress towards a circular economy. Again, I hope the Exchequer Secretary can pick up on some of those points.

[Kemi Badenoch]

I will go through the points that hon. Members have raised, and I think I will be able to answer quite a few of their questions. On the point about the 30% recycled plastic threshold being too low to be effective, I would say to the hon. Member for Glasgow Central that a £200 per tonne rate for plastic packaging that does not contain at least 30% recycled plastic will provide a clearer economic incentive for businesses to use more recycled plastic in the production of packaging—at the moment, it is just about 10%—and, in many cases, will make it more cost effective. We as a Government believe that setting the threshold for the level of recycled packaging at 30% is ambitious, reflects the pressing need to act on this issue and is achievable in the foreseeable future for many types of packaging. There is no point setting a threshold that we do not think people will be able to meet.

On the question of consultation with industry representatives and stakeholders, we consulted extensively. All regulations under this part of this Bill will also go through a public technical consultation before they are finalised. We will seek comments from interested stakeholders. HMRC has also set up the plastic packaging tax industry working group and conducted meetings with it to support the implementation of the tax and aid the process of drafting regulations and guidance. I take the point that the hon. Lady has made about the clarity of that guidance, and I am sure—because HMRC is working with the industry working group—that it will get there. The group consists of an independent expert and trade organisations that cover the wide range of sectors affected by the tax, ensuring that a broad range of views are taken into account.

To date, the Government have conducted extensive engagement with the industry on the design of the tax, and held two policy design consultations and one technical consultation about the clauses of this Bill. HMRC also continues to have regular contact with the devolved Administrations, non-Government departmental bodies, and other interested stakeholders about all activity regarding the tax.

--- Later in debate ---

[Kemi Badenoch]

I am not sure that is the case. HMRC and the members of the working group could give specific details on exactly how that would work, but we are having the public technical consultation. That is the sort of question that can be raised there; hopefully, it will receive an answer.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clauses 43 to 46 ordered to stand part of the Bill.

Clause 47

Chargeable plastic packaging components

[Abena Oppong-Asare]

I beg to move amendment 20, in clause 47, page 26, line 4, at end insert—

“(6) Before making regulations under subsection (5), the Commissioners must consult—

(a) industry representatives,

(b) environmental NGOs, and

(c) any other relevant individuals or organisations.”

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Clauses 48 to 50 stand part.

New clause 12—Plastic packaging components review—

“(1) The Chancellor of the Exchequer must review the impact of section 47 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must estimate the expected impact of section 47 on—

(a) plastic packaging tax revenue,

(b) levels of recycled material (plastic and non-plastic) in packaging, and

(c) levels of reusability and recyclability of packaging material (plastic and non-plastic).

(3) A review under this section must also estimate the expected impact of—

(a) raising the 30% threshold in section 47 by 5% each year, and

(b) introducing a power to vary the 30% threshold in section 47 depending on the type of plastic packaging.”

[Abena Oppong-Asare]

I rise to speak to amendment 20 and new clause 12, as well as to the Government clauses. Clause 47 sets out the plastic packaging tax that will be charged on plastic packaging in which less than 30% of the plastic is recycled. Again, we are concerned that the Government’s ambition is too low. The UK plastic cap is already targeting an average of 30% recycled content across all plastic packaging by 2025.

New clause 12 is another probing amendment, to get the Government to consider creating an escalator in the amount of material that must be recycled in order to avoid the tax. An escalator that would be used effectively to reduce landfill would signal the Government’s commitment in this area and would also help businesses to plan for an increase in their use of recycled material over time, rather than being locked into unsustainable supply chains. It would also encourage the development of technology to overcome barriers to higher recycled content use. Further work would be needed on the precise percentage increase that would be needed each year to achieve the optimal reduction in non-recycled plastic.

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[Kemi Badenoch]

Clauses 47 to 50 set out key high-level definitions for the plastic packaging tax, which between them define the meaning of “plastic packaging”, when packaging is in scope of the tax and at what point packaging becomes chargeable. These are important definitions that give businesses clarity about whether their packaging will be liable to the tax, so I will go through them thoroughly. I will add that they will be supported by regulations and guidance later this year, to give further clarity to businesses.

Clause 47 determines the minimum threshold for the recycled plastic content that packaging must meet to be out of scope of the tax. For packaging that comes under this threshold, clause 47 also sets out at what point this packaging becomes chargeable. For imported plastic packaging, clause 50, which I will turn to shortly, also needs to be considered when determining the tax point. The tax will be charged on plastic packaging that contains less than 30% recycled plastic when measured by weight, and once it has gone through its “last substantial modification”. The concept of “last substantial modification” was introduced following stakeholder feedback that the packaging supply chain is complex and packaging is not always completed by a single manufacturer. By moving the tax point to after the last substantial modification, we reduce the risk that UK manufacturers will be disadvantaged by the tax by bringing the tax point to when the packaging is finished, as it is for imported packaging. This also keeps the tax point as close to the manufacturer of the packaging as possible, where there is most knowledge and evidence about what recycled plastic it contains. I hope that that answers the questions from the hon. Member for Erith and Thamesmead.

Let me turn briefly to amendment 20, which was tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. It would require the Government to consult industry representatives, environmental non-governmental organisations and other relevant organisations prior to making regulations under subsection (5) of this clause. Since the Budget announcement in 2018, my officials have conducted two policy consultations on the design of the tax and a further technical consultation on the draft legislation in this Bill. These responses were analysed to inform and validate policy decisions for the design of the tax. The Government are currently developing regulations and will continue to consult industry representatives, both through Her Majesty’s Revenue and Customs’ plastic packaging tax industry working group, which I mentioned and, more broadly, through a technical consultation on these regulations, as with all other regulations that are required to support the implementation of this tax. Given that comprehensive consultation with external stakeholders, such as that detailed in this amendment, has and continues to be a major feature of the design and implementation of this tax, the amendment is not necessary.

Clause 48 defines what a “packaging component” is—a product designed to be suitable for use for the containment, protection, handling, delivering or presentation of goods in the supply chain. This includes items such as plastic wrap, drinks bottles, and food packaging such as yoghurt pots and ready-meal trays. The scope of this definition includes packaging that does not fulfil its packaging function until it is used by the end consumer. This definition was revised following a technical consultation to ensure that only items designed to be suitable for use as packaging in the supply chain of the goods from the producer—in other words, the manufacturer—to the consumer are in scope; but to provide clarity to the person liable for the tax, who may not know the eventual use of the packaging, it does not matter whether the packaging is used in a supply chain or by an end consumer for packaging such as cling film or bubble wrap.

Clause 49 defines key terms relating to plastic, including the meanings of “plastic” and “recycled plastic”. The definitions in this clause determine whether a packaging component is plastic, and whether any of the plastic within that packaging component is recycled. The definition of plastic includes alternative plastics, such as biodegradables and compostables, putting them in scope of the tax. Although alternative plastics can play a role in addressing plastic waste, further evidence of their impact is required. For this reason, work is ongoing in this area and we will keep their tax treatment under review. The hon. Member for Erith and Thamesmead asked why the definition of plastic packaging in the Bill does not align with packaging regulations terminology. We recognise that there are differences between the definition of plastic packaging for the tax and packaging producer responsibility obligations, an issue that the British Plastics Federation raised. However, differences between the design of the tax and these responsibility obligations mean that a different approach is required. For example, the tax will have quarterly reporting periods, whereas businesses have longer to determine use and report their annual packaging producer responsibility obligations—these are often known as packaging recovery notes, or PRNs. Furthermore, PRNs adopt the EU definition of packaging, and now that we have left the EU we do not feel it appropriate to use this, especially as we are aware that the EU definition is under review and therefore subject to change.

Clause 50 establishes the time of importation. It ensures that, where there is a customs formality in place, such as customs warehousing, the tax will become chargeable only after the plastic packaging has cleared the customs processes where these apply. That will ensure that the tax does not act as a barrier to international trade and gives clarity to businesses about when the tax becomes due for imported plastic packaging.

I turn to new clause 12, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. The new clause suggests that the Government conduct a future review into the impact of clause 47, including the impact of increasing the 30% threshold for recycled content and having different thresholds for different types of plastic packaging. A £200 per tonne rate for plastic packaging that does not contain at least 30% recycled plastic will provide a clear economic incentive for businesses to use more recycled plastic in the production of packaging. In many cases, it will make using recycled plastic the most cost-effective option. Following consultation, the Government concluded that a single threshold will make the tax simpler for businesses to administer, minimise the compliance risks associated with multiple threshold levels and reduce the risk of lowering incentives for some types of packaging to include more recycled plastic.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review, including the level of the tax, to ensure that it remains effective in increasing the use of recycled plastic. As I pointed out when discussing the previous set of new clauses tabled by Opposition Members, given the substantive information already published and the fact that limited new information is likely to be available before the tax is introduced, six months after the passage of the Bill would not be the right time to conduct and publish a review into the impacts of the recycled threshold for chargeable packaging components. The Government agree that it is important to understand the efficacy and impacts of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, the Government do not think that new clause 12 is necessary.

In conclusion, this group of clauses define key terms needed for the plastic packaging tax to work. They will be supported by secondary legislation and guidance, to provide further clarity on these terms.

[Abena Oppong-Asare]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clauses 48 to 50 ordered to stand part of the Bill.

Clause 51

Plastic packaging components intended for export

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

[The Chair]

With this it will be convenient to consider clauses 52 and 53 stand part.

--- Later in debate ---

[Kemi Badenoch]

We have considered extensively the issue around managing export and one of the things that we did not want to do is to disadvantage UK companies, which would be competing with companies that did not have to pay a similar tax. This measure will encourage other countries into which plastic is being imported to have their own regimes, which would make sure that we have a balanced global system. So, that is why. I think the hon. Gentleman is speaking specifically on the export of packaging, rather than on transport packaging, which is what I was actually talking about.

I think I have said this before, but I will repeat it just in case I did not. This relief will not apply to transport packaging used to export goods, such as plastic pallets and wrap, given the administrative challenges of tracking and evidencing that the packaging has been exported. That is still on clause 51.

Clause 52 provides for exemptions from the plastic packaging tax for certain plastic packaging. The clause exempts transport packaging used to import goods to the UK. There are limited records of transport packaging used on imports, such as pallets, crates and pallet wrap, and the importer will often have little to no control over, or knowledge about, the amount or type of transport packaging used. As a result, the Government believe that the burden of including this packaging in the scope of the tax would be disproportionate to the environmental impact of the packaging for both businesses and HMRC.

Clause 52 also exempts aircraft, ship and train stores, as defined under section 57 of the Customs and Excise Management Act 1979. This is similar to the operation of other taxes, notably excise duties that offer relief for stores on aircraft, ship and train stores, where products will be sold for retail or consumed on board.

Finally, clause 52 sets out a narrow exemption for plastic packaging used in the immediate packaging of licensed human medicines. Testing requirements mean there are greater barriers to including recycled plastic in this packaging, which go beyond sourcing concerns for other packaging such as food contact packaging. As a result, the tax may have unavoidable impacts on patients and vulnerable people. The Government recognise that this is a complex and difficult issue, but based on evidence that has been provided we are confident that it is feasible to operate this exemption.

The Government have carefully considered the case for providing exemptions for other types of packaging where it is challenging to include recycled plastic. The Government believe that including these types of packaging maintains the incentive to find new ways to overcome these challenges, but will keep exemptions from the tax under review. Clause 52 includes a power to create further exemptions from the tax where appropriate.

Clause 53 introduces powers for the Government to make regulations for tax credit where a person has already paid PPT on the packaging. This credit would be available where packaging is subsequently exported from the UK. That will support the competitiveness of UK businesses selling their products abroad. The credit would also be available where the packaging is subsequently converted into a different packaging component and prevents the tax from being charged twice. The Government will provide further guidance about when the tax is due, to minimise the circumstances where credit for subsequent conversion is necessary.

In conclusion and to reiterate, to maximise the incentive for businesses to use recycled plastic, the Government believe that, as a general rule, it is important to include types of plastic packaging even where it may be challenging to increase the level of recycled plastic. However, these clauses ensure that UK manufacturers are not disadvantaged by having to pay the tax on exports. They also provide exemptions to prevent risk to human health, to ensure similar treatment of aircraft, ship and train stores to that of other taxes, and where the administrative burden of controlling transport packaging used on imported goods would be disproportionate to the environmental benefits.

I therefore move that these clauses stand part of the Bill.

[Abena Oppong-Asare]

As we are now getting into some of the more technical details of the plastic packaging tax, I shall keep my remarks brief.

Clause 52 makes a number of sensible exemptions from the tax, including for packaging of medicines or other medical products. We welcome this exemption, of course, but it would be good to have reassurance from the Minister that the list of exemptions will be kept as short as possible. Clause 53 introduces tax credits for situations in which a person becomes no longer liable to pay the tax. At this point, could the Minister confirm that HMRC will have the resources that it needs to undertake the considerable administration involved in this new tax?

[Kemi Badenoch]

I think that I can reassure the hon. Lady on those points. We have kept the exemptions as small as possible. Industry would have liked there to be many more exemptions, but we think that this is the right place. And we of course recognise that HMRC requires resources for any new regulations. That is something that we continue to address, as I am sure my right hon. Friend the Financial Secretary to the Treasury will attest.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clauses 52 and 53 ordered to stand part of the Bill.

Clause 54

The register

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

[Kemi Badenoch]

Clauses 54 to 58 make provision and set out the registration requirements for businesses liable to plastic packaging tax—or PPT, as it will henceforth be known—including the threshold that businesses must exceed before they are required to register for the tax. As I set out in my previous remarks, the tax applies to UK manufacturers of plastic packaging and importers of packaging. The Government announced at Budget 2020 that PPT would exclude businesses that manufacture or import less than 10 tonnes of plastic packaging. The Government believe that, by taking this approach, we will retain the vast majority of plastic packaging within the scope of the tax, while limiting the disproportionate burden on small business. The Government still expect businesses below the de minimis threshold to work towards increasing the recycled plastic content in their packaging.

Clauses 54 and 55 require HMRC to keep a register for the purposes of administering the tax, and establish the circumstances in which manufacturers and importers are liable to be registered. These clauses set out two tests to determine whether a person will exceed the de minimis threshold in either the coming 30 days, the forward look test, or over the past 12 months, the backward look test. This is a similar approach to that for other taxes, for example the VAT de minimis threshold, which is well tested. Packaging imported or manufactured in the UK before 1 April 2022 will not count towards either test.

Clause 56 provides for the period within which a person must notify HMRC of their liability to register for the tax. It also allows HMRC to make regulations about the information required and how it is provided. Clauses 57 and 58 provide for when a registration can be cancelled and corrected. HMRC may deregister a person if it is satisfied that the person was never liable to the tax, or has not been liable for 12 months. Clause 58 also allows HMRC to make further regulations regarding corrections of the register.

These clauses provide the essential framework for the administration and registration of businesses liable for the tax. The inclusion of a de minimis threshold ensures that the tax captures businesses only where the revenue and environmental benefit exceed the administrative burden of the tax. I therefore urge that the clauses stand part of the Bill.

[Abena Oppong-Asare]

Again, I have relatively little to say on the clauses, which in this case relate to registration. I do note that firms do not have to register or pay the tax if they manufacture or import less than 10 tonnes of plastic packaging. Is the Minister concerned that that is quite a sharp threshold, whereby producing just over 10 tonnes could bring a firm into the scope of the tax? Has the Treasury given any consideration to a more gradual threshold? Also—I am struggling to talk, because I have a mask on my face—let me ask the Minister what monitoring will be undertaken to ensure that all the individuals and firms that are required to be on the register are in fact registered?

[Alison Thewliss]

In practical terms, how many additional staff will be brought into HMRC to deal with compliance? Does the Exchequer Secretary have an estimate of the cost to the Government? Is there any estimate of the cost to firms of complying with the additional paperwork? Firms are already having to do quite a lot of additional paperwork following Brexit.

[Kemi Badenoch]

I believe that the first question from the hon. Member for Erith and Thamesmead was about avoidance risk because of where we have set the de minimis threshold. As with other taxes, the Government intend to implement measures to prevent abuse—including anti-avoidance measures covered in later clauses, which I will come to—and, where appropriate, to enable HMRC to take action to tackle the artificial splitting of a business. Connected persons will also be treated as a single organisation in assessing whether they exceed the de minimis threshold.

On business readiness, awareness and the amount of support and guidance provided, which the hon. Member for Glasgow Central referred to, we have consulted extensively to ensure that businesses are ready. We have been discussing the measure for several years now, as the hon. Lady will remember from previous Finance Bills; it will be introduced in 2022. We are raising awareness through consulting on the tax, including through the technical consultation on draft legislation and through work with industry, which will help us to ensure that the regulations are fit and ready.

On administrative cost, we think that 20,000 manufacturers and importers of plastic packaging will be affected by PPT. For plastic packaging manufactured in the UK, the manufacturer must register for and pay the tax; for plastic packaging imported into the UK, the person on whose behalf the packaging is imported must register and pay. They will usually be the consignee on import documentation, but where a consignee or co-signee can demonstrate that they are acting on behalf of another business that owns the goods, as in the case of freight forwarders, the owner must register an account for the tax.

We have looked at all the measures to ensure that businesses are ready and that costs are proportionate, and we feel that we have struck the right balance.

[Abena Oppong-Asare]

I appreciate that the Government are looking into this to ensure that businesses are ready, but I would like a bit more clarification on what they are doing to monitor that businesses are registered.

[Kemi Badenoch]

That is a point that we will come to in later clauses.

Question put and agreed to.

Clause 54 accordingly ordered to stand part of the Bill.

Clauses 55 to 58 ordered to stand part of the Bill.

Clause 59

Notices imposing secondary or joint and several liability

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

--- Later in debate ---

[Abena Oppong-Asare]

Clause 59 and schedule 9 make provision for secondary liability or joint and several liability, as mentioned by the Minister. We do support these measures to prevent the avoidance of this tax by companies, but concerns have been raised by the Chartered Institute of Taxation and others that additional administrative and financial burdens for businesses may arise out of this joint liability. Businesses in the supply chain, including retailers and manufacturers of products that use plastic packaging, will not necessarily know whether the supplier of plastic packaging has accounted for the appropriate amount of tax. Can the Minister reassure us that there will be a straightforward way for businesses to check that the correct amount of tax has been paid and that they do not bear joint and several liability?

[Kemi Badenoch]

On that question, there is general support for this proposal, on the basis that it will be applied only where a person knew or had reasonable grounds to suspect that the tax had not been accounted for. For example, if an overseas seller confirms that the tax is not due and the business purchasing the goods in the UK has taken reasonable steps to verify this, it will not be held liable.

This approach is used effectively in other tax provisions; it is not a new thing that we will be doing. Businesses will be considered secondarily liable or jointly and severally liable for the tax in certain situations only where they knew, or had reasonable grounds to suspect, the tax had not been paid. The Government will continue to work with the sector on what constitutes due diligence in establishing whether the tax has been properly accounted for, and will publish further guidance on this.

Question put and agreed to.

Clause 59 accordingly ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 60

Measurement of weight etc

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

[Kemi Badenoch]

I now turn to clauses 60 to 67. Among other things, they provide for how HMRC will enforce and administer the tax, which was the question asked by the hon. Member for Erith and Thamesmead.

These are technical clauses that grant powers to make regulations on the detailed operation of certain aspects of the tax. The amount of tax due is determined by the weight of the plastic packaging component, so a provision is needed to ensure that the weights used are accurate and can be assessed, to ensure that all businesses liable for the tax are treated fairly.

It is also essential to have mechanisms in place to collect the tax from businesses and to take action to recover tax when it is not paid, as required by the legislation. To ensure that the revenue is protected, businesses will need to keep appropriate records in respect of their tax liability. These provisions grant powers to set out what records they are required to retain and for how long, so all relevant information is available in the event of a later query.

The measures in schedule 12 are necessary to ensure that HMRC can take samples of plastic packaging to verify that the right amount of tax is paid, share information with other named public bodies and take effective action to protect the revenue. Clause 65 enables HMRC to require a person to give security for the payment of any tax likely to be due, to protect the revenue in certain circumstances. Clauses 66 and 67 provide for the treatment of unincorporated bodies and for how anything required to be given to businesses liable to the tax is sent to them.

Clause 60 gives the commissioners of HMRC powers to make regulations setting out how the weight of plastic packaging will be measured and assessed for the purposes of the tax. The power will be used to require the weight of components to be taken as an average over a production run, and businesses will need to keep records of the measurements and calculations. There will be scope for businesses to agree methods of measurement with HMRC in particular cases. Where HMRC suspects that inaccurate weights are being used, it will be able to inspect and weigh samples of the packaging components, to use assumptions about weights if necessary and to override any agreement with this information.

Clause 61 and schedule 10 give the commissioners powers to make regulations covering record keeping, the mechanics of making tax returns and payments, and recovering tax owed. These powers mirror the powers in this area for other taxes and will be used in the same way.

Clause 62 introduces schedule 11, which establishes which decisions are appealable. It sets out a system of reviews and appeals using procedures long established in the tax system and the existing tribunals system. As with other taxes, businesses contesting a decision or assessment will have the right to a review by HMRC and an appeal to a tribunal, should they wish to pursue the matter.

Clause 63 grants regulation-making powers to require businesses to keep specified records for a specified period that does not exceed six years. This is consistent with other taxes. The powers will be used to require businesses to keep records relating to the calculation of their liability for PPT. The records will include the weight and the quantities of materials used in the packaging.

Clause 64 introduces schedule 12. The first part of schedule 12 provides for someone authorised by the commissioners to take samples of plastic packaging where this is necessary to ensure that tax is being properly accounted for, to share and receive information from other public bodies and to provide information to the courts on registration and returns, and for evidence to remain acceptable when those providing it have had their penalties reduced for doing so. For example, HMRC may want to test a sample of packaging to validate the evidence provided about its weight and make-up.

The second part of the schedule provides for HMRC to share information obtained in connection with PPT with other named public bodies to assist them in their functions, and to receive information from the same bodies to assist with the administration of the plastic packaging tax. The final part of the schedule provides for the courts to accept certificates from the commissioners indicating whether a business is registered and whether returns have been made as sufficient proof of these matters. The schedule also makes provision that where evidence of non-compliance is provided by a taxpayer who has themselves been subject to a non-compliance penalty, that evidence will remain valid, even if the latter’s penalty is to be reduced as a result of their assistance in protecting the revenue.

Clause 65 gives a power to make regulations requiring security to be provided against liability for PPT, for the purposes of protecting revenue. We do not intend to use this power initially, but it is important that it is provided in case it is required to act against fraud in the future. Clause 66 allows HMRC to make regulations for determining who is responsible for fulfilling the obligations of unincorporated bodies in respect of PPT. Clause 67 provides that anything required to be given to a person as part of the requirements for PPT is given to that person or their representative by post to that person’s last known address.

These clauses and schedules set out important mechanics for the technical operation of the tax and for recovering tax due to the Crown. I therefore move that they stand part of the Bill.

[Abena Oppong-Asare]

Again, these are largely technical clauses on the administration and enforcement of the plastic packaging tax. Most of the clauses give the commissioners the power to make regulations—for example, on how the weight of the packaging is to be determined and how records should be kept. My only point here—we have tabled amendments on this that we will come to later—is that we believe that the Government should consult fully with relevant businesses and environmental groups before making such regulations. We also believe that all such regulations should be subject to proper scrutiny in Parliament. That will ensure that the Government have the best chance of making sure that the tax works effectively and with the minimum additional burden for businesses, which I am sure we all want.

[The Chair]

I look forward to coming to those points later on this afternoon.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.

Clause 61 ordered to stand part of the Bill.

Schedule 10 agreed to.

Clause 62 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clauses 63 and 64 ordered to stand part of the Bill. 

Schedule 12 agreed to.

Clauses 65 to 67 ordered to stand part of the Bill. 

Clause 68

Statements for business customers

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

[Peter Grant]

I have just a few points on the clause. I can certainly understand the thinking behind it, but I note that it applies when the goods are first supplied—it applies to the person who is liable to pay the tax. Has the Minister considered what happens if there is a chain of supply but the intermediaries do not do anything that makes them liable to pay the tax? My reading of the clause is that the final user—the final customer—does not necessarily get the statement of how much tax has been paid. If the intention is to affect the behaviour of not only the manufacturers but customers, we are missing a trick, in that the customer might not realise how much of the final cost has been covered in the plastic packaging tax.

My second point is very simple. Is it envisaged that the statement of plastic packaging tax would be required to be printed on the face of the invoice, or could it simply be attached as a separate document? It is not clear what the commissioners are likely to put into any regulations. My concern is partly that if it is required to be put on the face of the invoice, that potentially requires quite a lot of changes to software by companies that use accounting software. Alternatively, if it is supplied as a separate document, are there not enforcement difficulties? It could be difficult to establish afterwards that it was not attached, whereas if somebody provides an invoice without accounting for VAT, it is quite clear to anybody that the requirement to give a VAT invoice has not been complied with. Have those two issues been considered by the Government in the precise wording of the clause?

[Abena Oppong-Asare]

The clause sets out the requirement for the PPT statement on certain invoices. The only point I want to make is to urge the Treasury and HMRC to work with businesses to ensure that they understand the requirement and implement it with the least burden possible.

[Kemi Badenoch]

On the question of liability, businesses that are liable for the tax will be required to include the amount of plastic packaging tax on the sales invoices to their customers. This will make the tax visible and help incentivise customers to choose recycled plastic packaging. The Government are not requiring the amount of PPT to be included on sales invoices further down the supply chain, such as the invoice from a wholesaler to a retailer, as such customers have less influence over the type of packaging and it may disproportionately increase the burden on businesses. However, businesses further down the supply chain can still choose to show the tax previously paid on their sales invoices.

Question put and agreed to.

Clause 68 accordingly ordered to stand part of the Bill.

Clause 69

Tax representatives of non-resident taxpayers

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

--- Later in debate ---

[Abena Oppong-Asare]

Clause 69 gives commissioners the power to make provisions requiring that every non-resident taxpayer appoint a person resident in the UK to act as a tax representative for the plastic packaging tax.

The Chartered Institute of Taxation made a number of comments about the clause in its briefing. It would like future regulations to consider whether exceptions could apply—for example, if the non-resident taxpayer has a history of a prescribed period of compliant behaviour with other UK taxes, or has an internationally recognised accreditation, such as being an authorised economic operator. It also points out that it could be common for non-resident taxpayers to outsource the completion of UK tax returns to UK tax agents to ensure good compliance with UK obligations. It should be noted, though, that for the majority of UK tax agents it will not be usual business practice to act with joint and several liability for the taxes that they administer, so the requirement to be a tax representative would be a barrier to taking on such business.

Where a non-resident business has outsourced its VAT or customs duty compliance to a UK tax agent, it would appear sensible to similarly outsource the PPT compliance to the same tax agent, as they will have the details of the imports into the UK. However, the mandatory tax representation responsibilities will be a barrier to that. That will be an increased opportunity for areas where UK tax compliance must be provided by separate tax agents and tax representatives.

On subsection (8)(a), the Chartered Institute of Taxation would like to see greater explanation of what constitutes an “established place of business” in future regulations. For example, if a large non-resident business has a presence in the UK, be it a large or small sales office, will the presence be enough to remove the obligation to appoint a UK tax representative? Businesses will require clarity on the definition of an “established place of business” with regard to this tax.

[Kemi Badenoch]

In terms of the requirements for businesses without a presence in the UK to appoint a UK-based representative, whether those requirements will work, and the additional burden that the hon. Lady refers to, the person on whose behalf the packaging is imported will be liable for the tax. The Government do not envisage that many businesses without a UK presence will be liable for PPT. The Government therefore intend to commence but not exercise the power initially. However, including the power in the Bill means that we can protect the revenue and maintain a level playing field for UK-compliant businesses if there is evidence of significant non-compliance with the tax by overseas businesses. The additional burden will therefore arise only if it is required to ensure compliance, protecting the revenue and ensuring a level playing field for UK-based businesses. In the absence of exercising that power, businesses without a presence in the UK will need to register for the tax in the same way as UK-based businesses. I am sure that HMRC officials will have taken note of some of the further questions, which I think will be addressed during later consultations.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.

Clause 70

Adjustment of contracts

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

[Kemi Badenoch]

Clause 70 provides for businesses to adjust existing contracts in respect of the plastic packaging tax. That covers two scenarios: first, adjusting the payment amount for a contract where PPT previously was not factored, or there is a change in the tax chargeable; and, secondly, adjusting a contract where chargeable plastic packaging is further processed into different packaging.

The latter case recognises the complexity of supply chains and avoids a double charge of tax. The Government expect that to be used in a very limited number of cases, given that the tax applies to substantially finished packaging. The clause helps businesses to take account of the tax within existing contracts. I therefore commend that it stand part of the Bill.

[Abena Oppong-Asare]

The clause is a technical measure that provides for the adjustment of contracts in respect of the plastic packaging tax. We have no questions for the Minister on that.

[The Chair]

That is what we like to hear.

Question put and agreed to.

Clause 70 accordingly ordered to stand part of the Bill.

Clause 71

Groups of Companies

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

[Kemi Badenoch]

Clause 71 and schedule 13 concern groups of companies. To make the reporting requirements for the tax less burdensome, clause 71 and schedule 13 set out when and how two or more corporate bodies may be treated as a group in respect of the plastic packaging tax. When used, PPT is charged to the representative of the group, rather than all members individually. This includes where a group member is found liable through secondary or joint and several liability. Schedule 13 contains further details on how the provision will operate, for example defining who is eligible to apply for group treatment and the limited grounds on which Her Majesty’s Revenue and Customs may refuse an application. The clause and schedule provide an administrative saving to businesses that choose this option and are eligible.

[Abena Oppong-Asare]

The clause and schedule allow two or more corporate bodies to form a group for plastic packaging tax purposes, so they can report and account for the plastic packaging tax as a single body with joint and several liability. I just want to know whether the Minister had seen the submission from the Chartered Institute of Taxation on this issue. It points out that the requirement for a group member to be a corporate body for VAT grouping rules was changed by schedule 18 of the Finance Act 2019, which extended it to individuals and partnerships that control other bodies in a VAT group with effect from 1 November 2019. Could the Minister explain why the updated rules for VAT do not apply to the plastic packaging tax?

[Kemi Badenoch]

I am afraid that I have not seen the note to which the hon. Lady refers so I am not able to answer the question, but I am sure we can get an answer from officials before the next sitting.

[The Chair]

Happy with that?

[Abena Oppong-Asare]

Yes.

Question put and agreed to.

Clause 71 accordingly ordered to stand part of the Bill.

Schedule 13 agreed to.

Clause 72

Prevention of artificial separation of business activities: directions

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

[The Chair]

With this it will be convenient to consider clause 73 stand part.

--- Later in debate ---

[Kemi Badenoch]

Clauses 72 and 73 prevent businesses artificially splitting in order to come under the tax’s 10 tonne per year registration threshold and avoiding paying PPT. The clauses protect PPT against avoidance in the form of the business artificially splitting to come under the tax’s 10 tonne per year de minimis threshold. Where HMRC determines that such avoidance is happening, the clauses allow it to issue a direction that means the persons named are treated as a single person liability for tax. The clauses are important for preventing attempts to circumvent the tax.

[Abena Oppong-Asare]

Clauses 72 and 73 introduce measures to prevent avoidance of plastic packaging tax by artificially separating business activities. We welcome the measures to prevent avoidance of this tax.

Question put and agreed to.

Clause 72 accordingly ordered to stand part of the Bill.

Clause 73 ordered to stand part of the Bill.

Clause 74

Death, incapacity or insolvency of person carrying on a business: regulations

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

[The Chair]

With this it will be convenient to discuss clause 75 stand part.

[Kemi Badenoch]

Clauses 74 and 75 set out how the tax is dealt with in the event of a liable business changing ownership, or the unfortunate circumstances of an owner dying, or becoming incapacitated or insolvent. The clauses provide for further regulations to be made that will deal with how changes in a business due to a change of ownership, death, incapacity or insolvency are handled within the tax. Such provisions are a common part of many taxes and are important to ensure the protection of revenues owed to the Crown. The clauses are a necessary feature of most taxes needed to help the tax function properly. I therefore ask that they stand part of the Bill.

[Abena Oppong-Asare]

Clauses 74 and 75 make provisions for situations in which businesses are transferred. We welcome these sensible clauses, which I believe were suggested by the Chartered Institute of Taxation during an earlier consultation.

[The Chair]

Why cannot Parliament always be like this?

Question put and agreed to.

Clause 74 accordingly ordered to stand part of the Bill.

Clause 75 ordered to stand part of the Bill.

Clause 76

Isle of Man: import and export of chargeable plastic packaging components

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

[Kemi Badenoch]

Clause 76 sets out the tax treatment of plastic packaging imported from or exported to the Isle of Man. For imports from the Isle of Man to the UK, if in the future the Isle of Man were to have a corresponding tax on plastic packaging, and the Isle of Man PPT rate is equal to or greater than the UK rate, the UK tax is not charged. For imports where the Isle of Man rate is lower than the UK rate, the UK tax is charged as the difference between the two rates. Where there is no corresponding Isle of Man tax, the UK tax is charged at the full rate on imports to the UK. Where plastic packaging is exported from the UK to the Isle of Man, these are not treated as exports for the purposes of the UK tax. This clause provides clarity on tax treatment of imports and exports to and from the Isle of Man.

[Abena Oppong-Asare]

Clause 76 relates to the import and export of plastic packaging in respect of the Isle of Man, as the Minister said. Once again, this seems like a sensible clause, and we have no questions for the Minister.

Question put and agreed to.

Clause 76 accordingly ordered to stand part of the Bill.

Clause 77

Fraudulent evasion

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

[The Chair]

With this it will be convenient to discuss the following:

Clauses 78 to 80 stand part.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 81 stand part.

[Kemi Badenoch]

These clauses and the schedule set out a number of criminal offences in respect of fraudulent activities connected with the plastic packaging tax and the penalties and proceedings associated with these. It is essential that any tax is applied fairly and collected from all those liable to pay it. These clauses make provisions for necessary sanctions for non-compliance with the requirements for PPT, in a manner consistent with those applied in other taxes.

Clause 77 creates a criminal offence for knowingly being involved in the fraudulent evasion of PPT, including through fraudulent claiming of tax credits or repayments, and sets out the maximum penalties for doing so. Clause 78 creates a criminal offence for supplying false information and documents, with an intention to deceive, and sets out the maximum penalties for doing so. Clause 79 creates a criminal offence for conduct involving evasion or misstatements in respect of obligations under, and liability for, PPT. The specifics of those offences need not be known, and maximum penalties are set out.

Clause 80 and schedule 14 make provision to collect penalties for specified breaches of the requirements of PPT, such as those on record keeping obligations and requirements to keep a registration up to date. Clause 81 provides that the Customs and Excise Management Act 1979 applies in relation to PPT offences, in the same way that it applies to offences under the Customs and Excise Acts.

These measures are necessary both as a deterrent against avoidance and evasion of the payment of PPT, and to ensure that proportionate action can be taken where offences are committed. This is the case as elsewhere in the tax system. I therefore move that these clauses and the schedule stand part of the Bill.

[Abena Oppong-Asare]

Clauses 77 to 81 and schedule 14 outline offences and penalties attached to the PPT, including new criminal offences of being involved in the fraudulent evasion of the PPT or supplying false information with an intention to deceive, as the Minister mentioned. We have already discussed tax evasion at considerable length during the various stages of the Bill, so I shall simply say that we support these measures and hope to see them robustly enforced.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clauses 78 to 80 ordered to stand part of the Bill.

Schedule 14 agreed to.

Clause 81 ordered to stand part of the Bill.

Clause 82

Minor and consequential amendments

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

--- Later in debate ---

[Kemi Badenoch]

Clauses 82 to 85 and schedule 15 enable minor amendments to be made to other legislation as a result of the plastic packaging tax. They also enable regulations to be made in respect of PPT. Clause 82 simply introduces schedule 15, which allows minor amendments to be made to other areas of legislation. Primarily, they make provision for certain existing penalties to apply to persons who fail to comply with their obligations for PPT.

Clause 83 sets out the meaning of various key terms used in the Bill relating to PPT. Clauses 84 and 85 allow regulations to be made in respect of PPT. They set out general provisions about making these regulations, including where they are subject to affirmative procedures in the House of Commons. They also give the Treasury the power by regulations to appoint the commencement date of clauses in the Bill relating to PPT.

Amendments 21 and 22, tabled by the hon. Members for Ealing North, for Erith and Thamesmead, and for Manchester, Withington, would require all regulations in part 2 of the Bill to be subject to the affirmative procedure and mandate that the Government consult industry representatives, environmental NGOs and other relevant organisations on all the regulations. I have previously outlined, when addressing their amendment to clause 47, how the Government have consulted and continue to consult with industry representatives and environmental groups, so I shall not go over that again.

With regard to amendment 22, which would make all the regulations in this part of the Bill subject to the affirmative procedure, it is right that Parliament has the opportunity to scrutinise legislation, but it is also right that we find an appropriate balance, given the volume of legislation that this House must make. The Government have therefore selected the most fundamental regulations to be subject to the affirmative procedure, which includes regulations that impact on the scope of the tax. We must also not forget that this House has Commons financial privilege, and it is important that we maintain that. I therefore strongly contest the amendment on those grounds. These final clauses and schedule are general in nature.

[Abena Oppong-Asare]

It is good to have reached the end of the plastic packaging tax clauses. I will speak briefly to our two amendments. Amendment 22 would amend clause 84 to improve scrutiny by making all regulations subject to the affirmative procedure and to prevent use of the made affirmative procedure. Amendment 21 would require consultation on all regulations and require that, in exercising powers, regard must be had to the principles of the waste hierarchy and the need to promote the circular economy.

These amendments simply make the point that I made earlier: much of the detail of this tax will be determined by regulations, and the Government must ensure that they are open to as much scrutiny as possible. The packaging industry will need to be consulted at all stages to ensure that the technical details of the tax work effectively. Environmental groups also need to be consulted, to ensure that the tax fulfils its purpose: to encourage the use of recycled plastic, to increase levels of recycling, to reduce the amount of waste going to landfill and to protect our natural environment. I hope that the Government will take on board the points we have made in Committee as they take this forward in the next year.

[Alison Thewliss]

I very much agree with the Opposition’s amendments. It is clear that, even with all the consultation that the Government say they have done and all the extensive behind-the-scenes work, concerns will still be raised. It is important that, as we move forward with the regulations and other things, we continue the scrutiny in this House to ensure that we get it right and that those who have concerns about the policy can raise them through elected Members in a public forum. I very much agree with that.

I also very much agree with the point relating to environmental non-governmental organisations and other relevant organisations that may still have concerns that have not yet been addressed, despite the extensive discussions that we have had this afternoon. Involving them as we go forward is crucial.

Finance (No. 2) Bill

Abena Oppong-Asare Excerpts

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

Temporary Period For Reduced Rates On Residential Property

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

I beg to move amendment 81, in page 49, leave out lines 14 to 27.

This amendment would mean that the Stamp Duty Land Tax (Temporary Relief) Act 2020 no longer applies to additional dwellings.

[The Temporary Chair (Siobhain McDonagh)]

With this it will be convenient to discuss the following:

Clauses 87 to 89 stand part.

That schedules 16 and 17 be the Sixteenth and Seventeenth schedules to the Bill.

Clauses 90 and 91 stand part.

New clause 26—Equality impact analysis (No. 2)—

“(1) The Chancellor of the Exchequer must review the equality impact of sections 87 to 89 and schedule 16 and 17 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the impact of those sections on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and

(d) equality in England, Northern Ireland and in different regions of England.

(3) A review under this section must provide a separate analysis in relation to each of the following matters—

(a) the temporary period for reduced rates on residential property,

(b) increased rates for non-resident transactions, and

(c) relief from higher rate charge for certain housing co-operatives etc.

(4) In this section “regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of sections 87 to 89 and schedules 16 and 17 of the Bill on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a geographical basis.

New clause 27—Fiscal and economic impact of 2% non- resident surcharge—

“(1) The Chancellor of the Exchequer must review the impact of section 88 and schedule 16 and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

(2) A review under this section must estimate the expected impact of section 88 and schedule 16 on—

(a) Stamp Duty Land Tax revenue at the increased rates of 2%, and what the revenue impact would have been if the rate had been 3%,

(b) residential property prices, and

(c) affordability of residential property.”

This new clause would require the Government to report on the effect of the 2% stamp duty land tax non-resident surcharge on tax revenues and on the price and affordability of property.

[Abena Oppong-Asare]

It is a pleasure to speak for the Opposition on this group of amendments and new clauses relating to stamp duty. I rise to speak on those in my name and those of my right hon. and hon. Friends.

Amendment 81 will prevent the extension of stamp duty holiday from being used for second homes, buy-to-lets and investment properties. New clause 26 would require the Government to review the equalities impact of this group of clauses, including their impact on households with different income levels and on people with protected characteristics, their compliance with the public sector equality duty and their impact on the different regions and nations of the United Kingdom. New clause 27 would require the Government to review the impact of a non-residential surcharge of 2%, which it is set at in the Bill, and 3%, which, as I shall come on to, the Conservative party previously committed to.

Before I come on to the amendments in more detail, let me say a little about the stamp duty holiday extension. Clause 87 extends the £500,000 nil rate band until 30 June. From July until the end of September, the nil rate band will be £250,000, double its normal level; it will return to the usual level of £125,000 from 1 October. It is estimated that the total cost of this extension will be £1.5 billion by the end of 2021-22. That is on top of the £3.2 billion cost of the initial stamp duty land tax holiday announced in July 2020.

The extension will of course be welcome news for those people in the process of buying a new home who face a cliff edge at the end of March. We know that many people have struggled to complete purchases in time due to the coronavirus restrictions and the significant backlog of pending transactions. In previous debates, Members raised issues of cyber-attacks on council services in Hackney that impacted the planning department and delayed people’s securing mortgages.

However, we have concerns about the broader effects of the policy. Our new clause 26 is intended to encourage the Government to be honest about the impact of the stamp duty holiday on the housing market. The Resolution Foundation says that the lower stamp duty liabilities have contributed to house price rises over the last eight months. House prices in England grew 7% between July and December 2020, which is highly unusual behaviour during a recession. In many cases, the rise in house prices over the period will have cancelled out the benefit of the stamp duty holiday. As the Institute for Fiscal Studies, the Resolution Foundation and others have pointed out, the stamp duty holiday has also had the perverse effect of temporarily removing the advantage that first-time buyers had in the market compared with existing homeowners. This, coupled with rapidly rising house prices, has meant that many first-time buyers continue to be priced out of the market. The Bill does nothing to address the housing crisis that affects millions of families across the country—yet again, a wasted opportunity from this Government.

I turn now to clause 88 and our amendment 81. It is unbelievable that, at the same time as the Chancellor is pressing ahead with a £2 billion council tax rise, he has given another tax break to second-home owners and buy-to-let landlords. This half a billion pound tax break for second-home owners and landlords is the wrong priority in the middle of an economic crisis that is hitting family incomes. Instead, this money could have been used to build nearly 3,000 socially rented homes, which is half the total built in England last year. In Wales, the equivalent tax relief has not been extended to property acquired as investment or as a second home. Labour’s amendment 81 would ensure that the extended stamp duty holiday in England and Northern Ireland followed that approach. I turn to the non-residential surcharge introduced under clause 88. During the 2019 general election campaign, the Chancellor, who was then Chief Secretary to the Treasury, said:

“Evidence shows that by adding significant amounts of demand to limited housing supply, purchases by non-residents inflate house prices.”

He went on to announce a Conservative manifesto commitment to introduce a non-resident stamp duty surcharge of 3%, which would have been spent on programmes aimed at tackling rough sleeping. But clause 88 introduces a non-resident surcharge of 2%, rather than 3%. As yet, we have had no explanation from the Government as to why they have watered down that commitment. We estimate that this means the Government could miss out on £52 million a year in revenue that should have been spent on tackling homelessness and rough sleeping.

Our new clause 27 would require the Government to review the difference between the 2% charge and the 3% charge and to reveal the lost income as a result of that decision. When the Minister stands up, perhaps he will tell us why the Government have moved from 3% to 2%.

We welcome clauses 89 to 91, which provide relief from the annual tax on enveloped dwellings and the 15% stamp duty charge for the ownership and transfer of property by housing co-operatives that do not have transferable share capital. The Treasury has listened to the co-operative housing sector on the issue and that is welcome.

To conclude, we do not believe that the Government’s clauses in this group would do anything to solve the housing crisis we face in this country. Year after year, Government have failed to build the homes we need, especially social and affordable homes. The Government are on track to miss their target of building 300,000 homes by almost a decade. The number of new social rented homes has fallen by over 80% since 2010 and home ownership is down sharply among young people, with 800,000 fewer households under 45 owning their home than in 2010. Without urgent action the housing crisis in the UK will deepen. Instead the Government have decided to give a tax break to landlords and failed to meet their own commitment on the non-residential surcharge. Our amendments will remedy these wrongs.

[Jesse Norman]

Last spring, we were only just beginning to understand as a nation what the full impact of the coronavirus might mean for us. We were told to stay at home and, for many people, that meant postponing plans that they might have made to move, creating considerable uncertainty. It was evident that the housing market was affected by that and it was made much worse when, on 26 March, buying and selling a property was largely put on hold. While business was enabled to resume from 13 May, there was concern about what the pandemic would mean for the market and for the jobs that rely on the sector.

The Chancellor announced that he would support the housing market through the stamp duty land tax holiday, quadrupling the starting threshold for SDLT to £500,000. That was designed to give a boost—indeed, the boost to the housing market that it needed to thrive through the pandemic. It has thrived: transactions in the last quarter of 2020 were 16% higher than in the same period in 2019. In other words, the SDLT holiday has given hundreds of thousands of families the confidence to buy and to sell their homes at a particularly difficult time. In turn, it has supported the livelihoods of people—tens of thousands of them, or more than that—whose businesses and jobs rely on trade with, through and from the housing market.

Towards the end of last year, it became apparent that the housing industry was struggling to meet the additional demand to move home and that there were delays in processing transactions. That meant that some of those moving home would not be able to complete the transactions that they had entered into until after the holiday ended, through no fault of their own. The Bill therefore extends the stamp duty land tax holiday in order to allow those buyers still to receive the relief. In addition, the nil rate band will be £250,000, double its standard level, until the end of September, in order to allow the market to return smoothly to its normal rates.

The Bill also introduces a non-residential SDLT surcharge. The surcharge will apply to property purchases by non-UK residents who do not come to live and work here, helping to ease house price inflation and to keep housing free for UK residents to buy. Revenue raised from the surcharge will be used to help address the issue of rough sleeping.

The hon. Member for Erith and Thamesmead (Abena Oppong-Asare) raised the question about the non-resident surcharge. She may not be aware that, at Budget 2018, the Government announced that a consultation for a 1% non-UK resident surcharge would be published. Following the announcement of the surcharge, HMRC and the Treasury carried out a public consultation in spring 2019. That included questions on whether a 1% rate was set at the right level to balance the Government’s objectives on home ownership with those of the UK remaining an open and dynamic economy. Having listened to stakeholders, the Government believe that the 2% surcharge—twice the original amount contemplated—strikes the right balance in this area. That is the basis on which the surcharge has been set.

The Bill will also relieve the 15% rate of SDLT and the annual tax for enveloped dwellings for qualifying housing co-operatives. That change ensures that these measures are fairly targeted at companies that use so-called envelopes in order to avoid tax on their properties.

Amendment 81 would disapply the SDLT holiday to purchases of additional dwellings. As the Committee will know, the SDLT holiday was intended to give a boost to the entire property market, of which developers and landlords are important parts. Although those buying second homes or buy-to-let properties will benefit from that tax change, they will continue to pay an additional 3% on top of the standard SDLT rates.

The Government have maintained the relative advantage that buyers of main homes had before the tax change. For example, the purchaser of a second home worth £500,000 will still pay £15,000 in SDLT, compared with nothing for the purchase of a main residence. It was a Conservative Government who introduced the phasing out of finance cost relief, and the higher rates of SDLT for the purchase of additional property—all steps towards a more balanced tax treatment between homeowners and landlords.

On new clause 26, HMRC routinely publishes information about SDLT, collected by house price bands and by region. Of course, a full tax impact assessment, including equalities impacts, has been published for each measure.

Extending the SDLT holiday ensures that buyers who were affected by delays in the industry will still be able to receive the tax relief.

In the longer term, the Bill introduces a new surcharge that will help more people on to the housing ladder through the new non-UK residents’ surcharge. It also ensures that stamp duty and the annual tax on enveloped dwellings remain fair by making certain that only those who the Government intend to pay corporate rates of tax are captured.

--- Later in debate ---

[Jesse Norman]

I do not think I will ever give a more popular speech than the one I am going to give now, because I just want to thank everyone who has made comments. I thank the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) for her remarks, which I have already answered. I thank colleagues for the speeches they have made to explore the effects, purpose and potential limits, even, of the stamp duty land tax and the holiday. I ask Members to support the clauses, and I will sit down.

[Abena Oppong-Asare]

This has been a good debate, and I too thank Members on both sides of the House for their contributions. Members on both sides have spoken on behalf of their constituents about the impact of the stamp duty holiday, the challenges of buying a home and the need for more action to make affordable housing a reality.

As I said in my opening contribution, the Opposition simply do not believe that the Government should be handing a half a billion pound tax break to buy-to-let investors and second home buyers. Once again, this is the wrong priority from a Government who are letting families down. Labour’s amendment 81 would end that unfairness, and I want to press it to a vote.

Question put, That the amendment be made.

Finance (No. 2) Bill

Abena Oppong-Asare Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

Clauses 109 to 111, schedules 21 to 22, and amendments 43 to 52 will support the development of freeports by encouraging new private investment in each of the eight freeport locations in England. These constitute major aspects of the Government’s freeports programme, which will attract large-scale investment across every region of the UK and make significant contributions to the recovery from the pandemic and to levelling up across the regions. I therefore move that these clauses, schedules and amendments stand part of the Bill.

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to speak for the Opposition on the clauses relating to freeports. I will speak to new clause 25 in my name and the names of my hon. and right hon. Friends. Before I turn to the detail of our new clauses in this group, I would like to say a little about Labour’s position on freeports and regional economic policy more generally.

Labour wants to see good new jobs created in every region and nation of the United Kingdom. We want to see genuine levelling up that hands power and opportunity to areas that have been deprived of them for too long. We want an economic policy that addresses the fundamental challenges facing our country and our constituents: ever widening regional inequality, low productivity and low wages in too many places; a social care crisis that threatens the dignity of older people; and an environmental crisis that threatens us all.

I am afraid that the Government’s approach to levelling up has been far less ambitious. We have seen regions and areas pitted against each other to bid for pots of money, only to find that Conservative Ministers overruled officials and handed funding to already wealthy areas. We have seen nothing to make up for the 11 years of a Conservative Government who have sucked funding and opportunities out of areas that they now say need levelling up. We have seen a total lack of ambition from the Government on supporting a recovery from the coronavirus crisis to build a stronger and more resilient economy. That brings me to freeports and the clauses that we are considering today.

I think we were all a little underwhelmed when the rabbit pulled from the hat at the end of the Chancellor’s Budget speech last month was the reannouncement of his freeports policy. The Opposition simply do not believe that freeports are the silver bullet for our post-Brexit economy that the Chancellor clearly hopes they are. In fact, the evidence is that freeports are likely to have relatively little impact on overall job creation and are far more likely to move jobs from one place to another. We want every area to flourish, whether or not they have a freeport. We know that Ministers are aware of this problem because they asked potential freeports operators to address it in their bids. Our new clause 25 would require the Government to produce an annual review of the impact of the freeports policy on job creation in freeport sites and across the country as a whole.

[Jesse Norman]

I would be grateful if the hon. Lady could tell us whether the Labour party’s position is to support freeports or not to support freeports.

[Abena Oppong-Asare]

I thank the Minister. I will approach that later in my speech, so I thank him for already guessing what I was going to say.

We really need some honesty and transparency from the Government on this. The estimates of the job creation benefits of freeports made by their advocates so far have been flimsy to say the least. We also need a proper assessment of the risk of job displacement. If freeports simply move existing economic activity around, they risk doing harm to the economic fortunes of neighbouring areas, with no net benefit to the country as a whole. Indeed, a 2019 report by the UK Trade Policy Observatory found that the main effect of freeports was to divert businesses into a port from a surrounding area, rather than creating new jobs, so it is not just Labour saying this; it is the experts saying it too. That may be especially problematic in areas where freeports are situated near a local authority, or regional or even national borders.

Our new clause would require the Government to report on tax avoidance and evasion and criminal activity in freeports and to set out the level of additional staffing and resources required by HMRC and other Government bodies. There are long-standing concerns that freeports allow or encourage tax avoidance and evasion, and there is international evidence that freeports have been used for criminal activity. For example, the OECD has stated that there is

“clear evidence that free trade zones are being used by criminals to traffic fake goods”.

The Financial Action Task Force has said that the lack of scrutiny can facilitate trade-based money laundering through relaxed oversight and a lack of transparency. The TUC and others have warned of the dangers to workers’ rights from deregulation in freeports. We need to take these concerns seriously. As a minimum, the Government should commit to trade union representation in the governance of freeports at local and national levels.

I will now make a few points about the clauses we are considering. First, on the cost of the tax reliefs being introduced, the Government have provided some information on the expected operational costs of HMRC but, as recently as last month, they were unable to estimate the reduced revenue that the Exchequer will receive as a result of these reliefs. I hope the Minister can address that. Clause 110 includes the enhanced capital allowance for plant and machinery spending at 100%, but that is less generous than the 130% super deduction. Presumably, for the period that they overlap, companies will need to consider whether they can claim the super deduction rather than this allowance.

The Chartered Institute of Taxation has raised a number of concerns about the operation of the stamp duty relief in clause 111. One issue is how exactly freeport tax sites will be designated and whether particular buildings can be identified as either in or out the boundary of the tax site. Can the Minister provide some clarity on joint ventures where there is both commercial and residential development? The Chartered Institute of Taxation points out that the clause, as currently drafted, excludes a common commercial arrangement from that relief. Finally, there is the issue of withdrawal of relief for subsequent non-qualifying activity. A small amount of non-qualifying use can potentially lead to withdrawal of all the relief. Is the Minister concerned that the risk of loss of the full relief in such circumstances could discourage investment?

To conclude, the Opposition have real concerns about the Government’s freeports policy. If it is going to succeed and bring the sorts of benefit that those on the Government Benches claim, we need to see more detail on the operation of freeports and how the Government plan to mitigate the risks. We need regular monitoring of the effectiveness and the impact on the country as a whole over the years to come, which is exactly what new clause 25 would require the Government to do. If the Government are confident in their policy, they should be confident in allowing scrutiny of how it works in practice. I call on them to support our new clause.

[Richard Thomson]

I would like to add my support for the Opposition amendments and to seek a commitment from the Government, while the Minister is here, to allow the Scottish Government after the Scottish elections to move ahead with their greenports adaptation of the freeports concept. Freeports do not require Brexit in order to be brought about, and legitimate questions remain about how much additional economic activity they will actually generate, rather than simply displace from other areas of the economy.