Finance Bill (Seventh sitting)

Alison Thewliss Excerpts

Committee stage & Committee Debate: 7th sitting: House of Commons
Tuesday 16th June 2020 Public Bill Committees

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Rosindell. I take what the Minister says about the measure affecting relatively few businesses at the moment, but as this develops, that might not remain the case. There is a certain irony in the EU providing mechanisms for simplifying and harmonising these rules and trading across the EU—people moving their goods around the place—when the UK stands to come out of the EU and lose some of those benefits for businesses in all our constituencies.

There is an irony as well that the Government have decided to adopt these new rules. I am sure the Brexiteers in the room are no less keen on being rule takers, but that seems to be what the Government are doing in this case. We want to see as much harmonisation and simplification for businesses, because that is to their benefit. That is why we think it is important to stay in the EU in the first place.

Figures from the Scottish Government suggest that Scottish GDP could be 1.1% lower after two years, on the current cumulative loss of economic activity from leaving the EU, and up to £3 billion over those two years, on top of the devastating effects of the coronavirus outbreak. There will be an impact without having a free trade deal or an extension, at least for Scotland’s agriculture, fisheries and manufacturing sectors.

We want to see a comprehensive assessment of how all the sectors listed in the amendment will be affected—leisure, retail, hospitality, tourism, financial services, business services, health, life and medical services, logistics, aviation, transport, professional sport, oil and gas, universities—because they could all be affected by this clause. It would be wise for the Government to look at the impact of what they are proposing. It is always wise for the Government to look at the impact of their proposals on anything, I suppose, and we encourage them to do that.

Because the measure is retrospective, will the Minister say what notifications have gone out to business that may be affected and what guidance has been given? He said that companies can opt to use these rules or not. How does that work, and how does the guidance ensure that people know what they have to carry out, whether they decide to use the rules or not? It sounds quite confusing from what the Minister said. Finally, because he did not make it clear, will he say what happens to these measures after the transition period?

[Wes Streeting (Ilford North) (Lab)]

Let me begin by picking up on a point made by the Member for Glasgow Central about the provenance of clause 78. As we heard from the Financial Secretary, the clause transposes into UK law an EU directive that provides for simplified VAT treatment of call-off stock.

To begin, it is tempting to make the same point, and I know that repetition is not a novelty. Let me put it this way: it is very welcome to hear from the Treasury that divergence from EU rules and regulations is not considered by the Government to be an end in and of itself. I was curious last night, as I walked past the Annunciator in the Tea Room, to see the right hon. Member for Wokingham (John Redwood) making a lengthy speech on a fairly straightforward statutory instrument on electricity. I reviewed his speech this morning in Hansard, because it piqued my curiosity, and I received in passing from my hon. Friend the Member for Hove (Peter Kyle) a precis of the thrust of the right hon. Gentleman’s argument. It seems that a number of Conservative Members consider divergence from EU rules and regulations to be an aim in and of itself. Regardless of the merits of the case and the merits of continued co-operation, it is clear that, for a section of the House, there is a virtue in divergence.

I am glad that the Treasury does not share that view, although of course the Treasury looks at the numbers. We may not have had an impassioned exposition from the Financial Secretary of the arguments in favour of this particular alignment with EU rules and regulations, but what we did hear was a very clear argument from Her Majesty’s Treasury that, even having left the European Union, there are still benefits to be found for UK businesses from continued alignment, co-operation, simplification, axing bureaucracy and making things simpler.

I hope that that common-sense approach to our future relationship with the European Union prevails. As much as those of us who campaigned in a different direction in the referendum accept the result and the outcome, and accept that this is a settled political question, it is in all our interests and in our national interest that we maintain a future relationship with the European Union that is based on co-operation, where that is in the interest of our own country.

I turn to the specifics of clause 78. The Financial Secretary’s speech seemed to me to address some of the concerns expressed by businesses and chartered tax advisers, but I will raise them for the sake of clarity. Writing in Taxation, Angela Lang-Horgan, a German and British chartered tax adviser and lawyer, said:

“If businesses have continued to operate under the old simplification rule after 31 December 2019, VAT returns must be corrected once the new legislation is in place. This will add additional confusion to the situation. So far, HMRC has not indicated whether it would apply a soft-landing period. There is no transition period either because under EU law the UK was obliged to introduce the changes from the beginning of this year.”

Could I get some clarity from the Financial Secretary on those points? Will HMRC provide a soft landing period for the implementation of the new rules, or is a soft landing period not even necessary? If I understood him correctly—I may have misunderstood, in which case he will clarify—it seems that there is a degree of flexibility and choice on the part of businesses over whether to adopt this approach. Some clarity in direct response to the concern expressed by Angela Lang-Horgan would be welcome.

What efforts have the UK Government made to communicate with affected businesses in anticipation of the rules, which are effectively already in place? It is worth saying, although it is a mild digression from clause 78, that concern has been expressed—particularly by colleagues in the shadow Business team—that the Government are not communicating with businesses in a timely way with respect to changes in Government policy and their impact on businesses. I think that for some time there has been a cultural problem in government of not giving businesses long enough to anticipate and adjust to new rules; I wonder whether in this case that communication has been a bit more proactive.

The explanatory notes state that

“businesses could structure transactions to remain outside the scope of the new rules if businesses found them onerous.”

What proportion of businesses are expected to exercise that discretionary power?

[Jesse Norman]

I am grateful to hon. Members for their comments. The hon. Member for Glasgow Central regards it as an irony that the Government are bringing forward this rule. I would not describe it as an irony; it is a simplification for those companies that wish to use it, and it is optional. Some companies will prefer the current arrangements as more settled and simpler, while others may not—I do not think that there is anything more to it than that. So far, 200 companies have already taken it up; of course, we cannot say in advance how many may have chosen to do so by the end of the transition period, but it is a relatively small number of companies, as I have indicated.

[Alison Thewliss]

Can the Financial Secretary tell us how many companies are using the previous rules?

[Jesse Norman]

I certainly do not know the number of companies operating under the previous rules, but I would be happy to drop the hon. Lady a letter with any number that HMRC may have that can be publicly disclosed. The point is that there is a relatively small number of companies; they have seen this coming and it is an optional advantage for them. In reply to the point raised by the hon. Member for Ilford North, it applies only during the transition period, which will end at the end of this year.

We will be leaving the transition period on 1 January, which is not only stated by Government but is commonly understood. That goes to the question of divergence, which was raised by the hon. Member for Ilford North. We are bound by EU law while we are in the transition period. The Government certainly do not have any interest in divergence for the sake of divergence; the Government have an interest in the ability to set our own law, including our own tax law, as we as a sovereign nation see fit. That might or might not involve divergence, but this measure will not apply after the transition period.

The hon. Member for Ilford North also raises an important question about whether there is enough time for business to accommodate rules. I cannot comment on behalf of other Departments, but it certainly is a concern that has been raised in relation to the creation of tax law. Wherever possible, the Government try to abide by rules that we introduced after 2010 in order to have a more effective tax process. As he knows, it involves several stages and periods of consultation. We are coming up to an L day for legislation to be considered for the 2020 Budget, for the autumn Budget—if there is one—and for a Finance Bill next year. There is an orderly process, but I take his point about the importance of ensuring that it is as orderly and well structured as possible.

Question put and agreed to.

Clause 78 accordingly ordered to stand part of the Bill.

Clause 79

Post-duty point dilution of wine or made-wine

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In that Westminster Hall debate, in which numerous Government Members spoke, not a single person mentioned public health, despite the consequences of alcohol in our communities. That is not good enough.

[Alison Thewliss]

Does my hon. Friend agree that the minimum unit pricing introduced in Scotland had the effect of removing from our shelves some of the most harmful drinks, including the high-strength industrial ciders that cause so much harm to so many people in our communities?

[Stephen Flynn]

Absolutely. My hon. Friend makes an excellent point. We did not have to walk far to find a shop in Scotland that sold ciders. White Lightning is incredibly strong. Often, individuals would buy it early in the morning, and by the afternoon the remnants were across our city. We were able to stop that, and that was important because it was having an impact on every single person who lived and worked there. This amendment gives the Government the opportunity to make sensible strides in recognition of the fact that public health and alcohol are inextricably linked.

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

Clause 79 makes changes to alcohol duty legislation to introduce prohibitive sanctions for anyone who dilutes wine or made-wine once that product has passed a duty point. It will ensure fairness by providing equity of treatment across the drinks industry and will tackle future revenue risks for the Exchequer.

Post duty point dilution is a practice that enables wine and made-wine producers to reduce the excise duty that they pay by diluting the product after duty has been paid. Because the dilution increases the volume of wine and made-wine for sale, with no additional duty being paid, less duty is paid than would otherwise be due. UK legislation does not expressly prevent post duty point dilution for wine and made-wine, although it is prohibited for all other alcohol products. The practice gives certain wine or made-wine producers a tax advantage over those who produce other categories of alcohol, of which dilution is not permitted, and over others in their own sector who cannot make use of the practice.

Clause 79 will introduce new prohibitive sanctions for anyone who dilutes wine or made-wine once that product has passed a duty point on or after 1 April 2020. Introducing new sanctions to prevent the practice will maintain the principle that excise duty is calculated only on a finished product when it is released from production premises or on import. It will ensure fairness by providing equity of treatment across the drinks industry and will tackle future revenue risks for the Exchequer.

A review of the practice was launched at autumn Budget 2017, during which HMRC engaged extensively with industry and gathered a large amount of evidence to inform a decision. At Budget 2018, the Government announced the findings of the review and their intention to stop the practice being used for wine and made-wine, as is already the case for other types of alcohol. However, the Government also announced that that would not take effect until April 2020. That has given those businesses affected almost three years to prepare for the change, allowing them time to reformulate or diversify into the production of new lines.

Amendment 10 would require the Chancellor to review the public health effects of the post duty point dilution sanctions. When making changes to the alcohol duty system, the Government take into account a wide range of factors, including economic inequalities and health impacts. The new sanctions follow an extensive review by HMRC in 2017. Draft legislation was published in July 2019, alongside which a tax information and impact note was published on the gov.uk website, detailing the various factors that the Government have considered. The amendment is therefore unnecessary, as the Government have already published our assessment of the effect on public health. For the convenience of the Committee, I will reiterate that assessment. The Government expect that

“wine or made-wine may become slightly more expensive…there may be a positive health impact with less wine being consumed. However, this benefit may be offset if any increase in price leads to consumers switching to higher strength products.”

[Alison Thewliss]

I am sure the Minister has seen the graph that sets pence per unit against alcohol by volume. To say that it looks as though it was drawn by a child with a crayon is being generous to children with crayons. Will she consider a wider review of the duty per unit of alcohol by product type, because at the moment it makes absolutely no sense?

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[Miriam Cates (Penistone and Stocksbridge) (Con)]

I welcome the measure. The Moto-Trek manufacturer in my constituency makes exclusive hand-built motorhomes, so I know that the clause is very much welcomed by the industry. It certainly makes sense to tax motorhomes as vans, since they are mostly built on van chassis and do not do many miles, although they do, of course, emit carbon dioxide. It is right that we incentivise the manufacture of low emission vehicles, but motorhome users are very much committed to UK holidays and do not fly as a result, which is very positive for the environment. As we come out of covid, it is really important that we do everything that we can for UK manufacturers, for UK motorhome vehicle sales and, of course, for tourism. I therefore very much welcome the clause.

Question put and agreed to.

Clause 84 accordingly ordered to stand part of the Bill.

Clause 85

Exemption in respect of medical courier vehicles

[Alison Thewliss]

I beg to move amendment 12, in clause 85, page 72, line 33, after “supplies” insert “, including human breastmilk”.

This amendment would ensure that vehicles carrying human breastmilk would benefit from the exemption from Vehicle Excise Duty.

I am delighted to continue my personal journey to ensure that breastfeeding is mentioned in every possible place in this House. I am chair of the all-party group on infant feeding and inequalities, so I declare that interest up front.

The measure I seek to add to the Bill would cost the Government very little, if anything at all, but would send a very strong signal that the Government support and recognise breast milk banks across the UK. Sub-paragraph 2(b) of proposed new paragraph 6A to schedule 2 to the Vehicle Excise and Registration Act 1994 refers to

“medicines and other medical supplies”.

I am not quite sure whether that would capture breast milk. I seek clarification from the Minister on that, because I do not think it is clear enough, which was why I tabled the amendment.

Human breast milk banks exist across the UK. Some do not exist quite to the size and scale that we would like, so the amendment would help to encourage them that there is Government support for what they are doing. I mention the Human Milk Foundation, the Northwest Human Milk Bank, Hearts Milk Bank and Milk Bank Scotland, which is based in Glasgow and the one that I know best. Having spoken to Debbie Barnett, its donor milk bank co-ordinator, I know that Milk Bank Scotland does not have its own vehicles at the moment, but relies on the Glasgow Children’s Hospital Charity volunteers, who transport the milk, after picking it up from donors, and take it out to those who need it. Having its own vehicles would be something for a future point, but the amendment would certainly support the milk bank, and others across the UK, in doing that.

Like blood, breast milk has to be properly processed, and there are procedures in place for doing so. Like blood, it needs special carriage to take it from donors to the milk banks for processing, and back out again. The National Institute for Health and Care Excellence guideline 93 on donor breast milk banks says that, when transporting milk to the milk bank, critical conditions for transport include

“temperature and time limit, to ensure that donor milk remains frozen during transport.”

The guideline also states that donor milk should be transported

“in secure, tamper-evident containers and packaging”

and that a range of procedures are in place for achieving that.

In chapter 33 of its guide to the quality and safety of tissues and cells for human application, on the distribution of and transport conditions for human milk, the European directorate for the quality of medicines states:

“During transport, milk should remain frozen and dry ice may be used for this purpose.

The use of validated, easily cleaned, insulated transport containers is recommended.

The transport procedure should be validated, and the temperature of the transport container monitored during transportation.”

All those measures are relatively similar to how blood and other blood products are transported around the UK, and would fit quite well with the medical courier vehicles exemption set out in the Bill. Many of these organisations are charities, and they would very much appreciate support in moving milk around the country.

I appeal to the Government to accept the amendment, which is uncontentious—and indisputable, really. Doing so would send a good signal that the UK Government support milk banks, the people across the UK who wish to use them, and the science behind them. They are particularly important in supporting premature babies in their earliest days. The World Health Organisation recently indicated the significance of breast milk during coronavirus, and that women should be supported whenever possible to feed their babies with human breast milk. Covid-19 is not present in breast milk, and the milk is therefore of huge benefit in supporting babies in their earliest days. I encourage Ministers to take on the amendment, if they can take on anything at all, and to show support for milk banks across the UK.

[Kemi Badenoch]

Amendment 12 would extend the exemption so that it applied to people carrying human breast milk. I do not think that any of us would disagree with that, but clause 85 already covers the transportation of human breast milk. The purpose-built vehicles used by medical courier charities, which are exempted from VED by the measure, transport not just blood, but a wide range of medical products, including X-rays, MRI scans, plasma and human breast milk.

The inclusion of the amendment in the Bill would make things more difficult. Its wording is quite vague, it does not clearly define the vehicles that it is trying to capture, and it would create the risk of abuse. We believe that the matter is already covered by clause 85. Although the Government fully support the sentiment of the amendment, as breast milk is already captured under the clause, I ask the Committee to reject the it.

[Alison Thewliss]

I would like to press the amendment to a vote, to add to the clarity of the clause.

Amendment 12 negatived.

Clause 85 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(David Rutley.)