Finance Bill (Ninth sitting)

Alison Thewliss Excerpts

Committee stage & Committee Debate: 9th sitting: House of Commons
Thursday 18th June 2020 Public Bill Committees

[Wes Streeting (Ilford North) (Lab)]

It is a pleasure to be here for what is likely to be our final day of line-by-line scrutiny of the Bill. It is important to remember that the reason why we are discussing clause 99 is in no small part, as the Minister alluded to, due to the Windrush compensation scheme, which is the culmination and inevitable consequence of the appalling circumstances of the aggressive and deeply destructive hostile environment pursued by the Government over the course of the past 10 years. As Wendy Williams said in her review, the Windrush scandal, which saw so many people’s lives completely disrupted, and in many cases ruined, was the result of “foreseeable and avoidable” systematic operational failings, so it is right that the Windrush compensation scheme was established. The House has considered those issues many times.

It is a source of deep regret, to put it mildly, that fewer than one in 20 people who have made claims under the Windrush compensation scheme have been paid so far. I want to take the opportunity, as we are discussing clause 99, to restate again our view that the Government must act much more quickly. People are owed that compensation, although the financial compensation will never fully compensate for the emotional and mental trauma that British citizens suffered as a result of the Windrush scandal.

It is appalling that we have added insult to injury by moving so slowly on compensation claims, even where they have been made. Of course, as the Minister outlined, the clause improves conditions for people accessing such schemes, whether the Windrush compensation scheme or the troubles permanent disablement payment scheme, so we have no objection to the clause.

[Alison Thewliss (Glasgow Central) (SNP)]

It is regrettable that so many people are still waiting for their money through the Windrush compensation scheme. I urge the Minister to do everything he can to make sure that the money gets out the door.

It is useful that the clause allows for future schemes so that there will, hopefully, be fewer delays and less confusion for people in future about the impact of those schemes. We want to make sure that, where wrongs have been done, people can get the money that they are entitled to in compensation as swiftly as possible.

[Jesse Norman]

I thank both hon. Members for their comments. To pick up on the last point, the hon. Lady is absolutely right about the value of building in capacity to respond more quickly in future. It is noticeable that the Chartered Institute of Taxation, which is well respected across the Committee, commented that,

“This is a sensible move from the government to help… It is also encouraging to see that the bill…will make it easier in the future for payments…to be made tax-free, without the need for fresh legislation.”

That very much remakes the point she made, and I thank her for that.

On the point about the numbers paid out, I completely understand the concern and I know that other Ministers do as well. There is a balance between due process and speed. Of course, the compensation claims have to be agreed on both sides—the offers have to be accepted—for them to be payable. It is important that the hon. Members have put their concerns on the record, and I fully share them.

Question put and agreed to.

Clause 99 accordingly ordered to stand part of the Bill.

Schedule 14 agreed to.

Clause 100

HMRC: exercise of officer functions

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

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[Alison Thewliss]

I want to raise some of the concerns expressed to us by the Institute for Fiscal Studies’ Tax Law Review Committee, which sent an extensive note earlier in the week. It is looking for ministerial reassurance that the powers will not be used without proper consultation and discussion of safeguards to replace the discretionary decisions, especially about penalties, currently made by human officers. It is the discretionary point that I am most worried about. We must not get to a situation where computer says no and that is the end of the story, because sometimes it can be quite difficult for businesses to get the decision pulled back and unpicked, and reconsidered.

I will highlight the case of uploading real-time information, because businesses in my constituency had serious issues with the technology for uploading RTI prior to coronavirus and now find themselves unable to claim under the job retention scheme, for example. That has been an issue with technology, and it has been very difficult to resolve it. Meanwhile, those businesses are on the brink, on the point of going bust, with employees whom they are struggling to pay. That is because in an emergency it is difficult to unwind a technical, computer-based decision, made months ago.

I ask for reassurance about the automating of discretionary decisions. What safeguards will be put in place to ensure sure that no businesses find themselves in a situation where they cannot unpick a decision made by a computer, and to ensure that they will be able to speak to a human who has discretion and is able to exercise it effectively?

[Jesse Norman]

Again, I thank Opposition colleagues. Let me pick up a couple of the points raised. The hon. Member for Glasgow Central asks for safeguards, and of course she makes a very important wider point. In a rule of law society we want as little discretion as possible to be exercised—and, in particular, personal discretion—so it is important that within HMRC there is baked in a culture of accountability for decisions. From that point of view, nothing is changing. This measure is ratifying an existing set of arrangements by putting them on a legal basis. However, I can reassure her that the issue of safeguards and the balance of powers between HMRC and taxpayers is taken very seriously, and I have specifically commissioned work within HMRC to ensure that that balance is appropriately maintained, not just at customer level but more generally.

The hon. Lady and the hon. Member for Ilford North raised the question of decision making more generally. I think I have, in a way, spoken to that, but I recognise that there is a distinction between the automated exercise of a decision and the capacity to make a decision itself. Of course, HMRC does increasingly rely on computerised systems, and it is absolutely right for our purposes as a nation that it should do so. It is, for example, inconceivable that we could have responded to coronavirus with either the self-employed scheme or the furlough scheme without heavy reliance on computing. It is to HMRC’s enormous credit that it was able to commission and bring into effect a platform and an approach to those schemes in a matter of weeks, using that computing expertise. I also agree with the hon. Gentleman when he points out that there are benefits not merely in terms of customer service, but in freeing up people and, we hope, improving the quality of work by taking HMRC staff away from the more routine operations and more towards higher quality work that can give more professional satisfaction.

Question put and agreed to.

Clause 100 accordingly ordered to stand part of the Bill.

Clause 101

Returns relating to LLP not carrying on business etc with view to profit

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

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The Government very much value the important role that contractors play in the labour market and want businesses to be able to design their workforces, and work with those workforces, in a way that makes sense for them. This reform does not change that.

[Alison Thewliss]

Will the Minister give way?

[Jesse Norman]

I am winding up, so perhaps I could let the hon. Lady introduce her point in her speech.

When their engagement meets the tests of an employment relationship, contractors should not pay less tax than those who are directly employed. I therefore move that new clause 1 and new schedule 1 stand part of the Bill.

[Stephen Flynn]

Before I get into the substantive detail of this issue, I want to touch on the process and where we find ourselves at this moment in time with the new clause that has been tabled by the Minister. It is simply not acceptable that such a contentious tax matter was first introduced through a 45-minute money resolution debate in the House, instead of being subject to the full scrutiny of the Budget process.

The money resolution debate took place after the Finance Bill was published, meaning that the Government were able to introduce the detailed IR35 tax law as a Finance Bill amendment. The result of what can only be described as a procedural whizz is that Opposition parties cannot do what they were elected to do and amend the proposals as the Bill goes through its line-by-line scrutiny. Frankly, that is not good enough. I certainly thought better—perhaps wrongly—of the Government in that regard. Of course, that entire process missed out those MPs who have been disenfranchised from taking part in the House as a result of the Government’s shocking processes in recent weeks.

        On the substantive issue at the heart of this, let us be clear that IR35 is creating a new group of zero-hours employees paying full taxation but without receiving the associated employment rights. What is just and fair about that? Speaking as a Member with a constituency that is dominated by the oil and gas sector, I have been inundated—inundated—with correspondence from contractors outraged by the decisions that the Government are seeking to take, particularly so given that we are in the middle of a global pandemic. I hope that the huge concern that I and others have about the long and, frankly, short-term sustainability of the oil and gas sector, and the impact that that has on employees, has not escaped the Government’s notice. To then add a further layer of complexity into their employment status is simply unforgivable.

        In the north-east of Scotland, we are witnessing job losses hand over fist. Barely a day goes by when companies are not shedding staff. That is applicable to most sectors at the moment, be it hospitality, tourism or aviation, but it is very rare for a sector of such scale to be so dominant in one city, as is the case in Aberdeen. What the Government are seeking to do in relation to IR35 is a slap in the face to those workers who are having to deal with the most difficult of challenges.

Not only are the Government hitting those contractors—many of whom went down that path in good faith—with IR35, but they are failing to deliver any sectoral support to the oil and gas industry. Not a single penny of sector-specific support has been provided by the UK Government for the oil and gas sector, irrespective of the fact that the Treasury has lined its pockets with North sea oil and gas revenue for decades. It is time to give back, not time to double down on the damage, so I urge the Government to reconsider what they are putting forward.

[Alison Thewliss]

My hon. Friend makes an excellent point about contractors in the north-east of Scotland. In my constituency of Glasgow Central, it is IT contractors, many of whom came to live in Glasgow from India. They work in the IT sector and have found that their contracts have not been renewed with companies that they have been working for, and they are now really struggling to find employment, causing them a huge deal of uncertainty at this time, particularly with the coronavirus crisis.

[Stephen Flynn]

I welcome the intervention from my hon. Friend, which goes to the nub of the issue that we are discussing. The Government’s policy is, frankly, to turn their back on those people who need support at this time.

        If the Minister is not willing to take my word for that, perhaps they will listen to the salient words of one of their own. The hon. Member for West Aberdeenshire and Kincardine (Andrew Bowie) said late last year in a letter to the then Chancellor:

If the proposed changes—making every medium and large sector private business responsible for setting the tax status of any contractor they use—were to come into effect, I would worry for the industry”—

the oil and gas industry—

“and its ability to attract the highly skilled workers they need. It is also predicted that changes could see a worker’s income reduced by up to 25 per cent. Many of these workers are my constituents.”

Many of those workers are also my constituents, and it is simply not good enough. I am glad that there is cross-party support in north-east Scotland for opposing what the Government are seeking to do, and I sincerely hope that that cross-party ethos will be found in this room today, before the Government do more damage.

        I just want to pick up on one final point. I think the Minister said in his opening remarks that he listened carefully—that the Government have listened carefully. They have not listened to the House of Lords—I do not say that with any joy, being a member of the Scottish National party—which has been clear that they need to pause this policy and go back to the drawing board. I urge them to do just that.

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[Jesse Norman]

We are obviously very concerned about the effects of coronavirus, which is precisely why we have delayed the implementation of the reform by a year. The message I would give is that we absolutely respect and support the work that those individuals are doing and understand the position they are in. The Government have rapidly made available very important sources of support for the economy across a whole range of different areas and sectors of work and, indeed, in the benefits system, both for businesses and families and the sustaining of jobs. Therefore, there is no absence of respect or support for the people the hon. Gentleman describes.

The hon. Member for Ilford North mentioned the diverse nature of these different forms of employment. He referred to the self-employed, but actually the self-employed are not taxed by this. The genuinely self-employed are not affected by the reform. The reform is designed merely to change the way in which the status of someone who is latently employed—actually employed, but perhaps unaware of it or not behaving on that basis—is determined. The hon. Member asks us to use the additional time appropriately. We have got before April 2021. I have said already, but let me say again that we are in the process of commissioning external research into the effect of the public sector reform. As he will be aware, the early research immediately after the public sector reform did not bear out the dire predictions regarding flexibility or reduction of income, but we will make sure that external research into the longer-term effects of the public sector reform is completed and placed in front of the House before April next year.

[Alison Thewliss]

Can I ask the Minister about the impact assessments that will be done? What monitoring is his Department doing of the chilling effect that this is having on contracts right now? What I am hearing from contractors in my constituency is that those contracts are not being renewed now and it is already having a chilling effect, regardless of when the measure is coming in. What monitoring is he doing of the situation?

[Jesse Norman]

As I have said, in relation to public sector reform, the external research did not detect any great chilling effect. We will be looking at the longer-term effects of public sector reform. On this reform, it is undoubtedly true that the measure is nudging some companies to consider whether people they had thought of as contractors are not, in fact, employees. In some cases, they are having to review the structure of their workforces. I do not think that is a chilling effect on the status of those contracts, because those people were always latently employed. It is then for the contractor and the company to work out what future arrangement they wish to have.

[Alison Thewliss]

The IT contractors from India who I mentioned earlier can choose to go anywhere in the world. They have chosen to locate in Glasgow because the work is there, the skills are there and they have a good community in my constituency. If the contracts are not there, they will take their skills and their money and go somewhere else. What is the Minister doing to mitigate against that?

[Jesse Norman]

That is a claim that the hon. Lady makes and we will be able to test it over time through external research. It is not a view that has been validated so far in the roll-out to the public sector. It is a diverse and vibrant area of our life and it may well have more resilience overall than she is giving it credit for, but we will not know until we have seen the effects of the reform.

The final point, raised by the hon. Member for Ilford North, is to do with rights. Of course, the measure is to do with the determination of tax due, but the Government have put in the Queen’s Speech a substantial commitment to bring forward a Bill in that area following the Taylor review. I know that my colleagues in the Department for Business, Energy and Industrial Strategy take that very seriously.

Question put and agreed to.

New clause 1 accordingly read a Second time, and added to the Bill.

New Clause 2

Review of geographical effects of provisions of Sections 27 to 30

‘The Chancellor of the Exchequer must within twelve months of the passing of this Act lay before both Houses of Parliament a report assessing the differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections 27 to 30 of this Act.’—(Alison Thewliss.)

This new clause would require a geographical impact assessment of the clauses of the Bill relating to reliefs for business.

Brought up, and read the First time.

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[Alison Thewliss]

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

My understanding was that we were breaking after the previous clause, so I will scramble to find my notes. We think it is important to look at the geographical impact of the Bill. I support the new clause tabled by Plaid Cymru, which has suggested that we have a report assessing the

“differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections…of this Act.”

What is lacking in this House—I have said this before and I have no hesitation in returning to it—are real mechanisms to explore how effective the measures in the Finance Bill are in reality. My colleagues and I have supported work on a Budget Committee, which has been before the Procedure Committee to look at it as well. We do not understand the effectiveness of the policies and the ideas that the Government have, so we end up with things being proposed in Bills that turn out to be completely ineffective or we find out that they have differential effects from what the Government expected, so they have to come back later to amend things and try to fix their mistakes.

We feel that requiring the Government to consider the geographical effects of the changes to the reliefs, including research and development expenditure credit, would give a better understanding of how effective they are across the different regions and nations and of whether those incentives actually contribute to the continuing inequalities that we see across the UK. We think this is an issue of real importance to Scotland and to Wales for the measures where we do not necessarily have particular control ourselves and where the devolved nations do not have competence. It is important to understand what the Government are about with the legislation they are proposing as well as its impact, and whether the measures are truly seen to be effective.

[Wes Streeting]

The hon. Member for Glasgow Central makes a reasonable case—that will be a running theme throughout a number of new clauses, not least when we turn to new clause 3 in the afternoon session. I will make the points I want to make about the importance of reviewing the geographical impact of measures in the Finance Bill at that point, but I concur with her remarks.

[Jesse Norman]

I thank colleagues who have spoken. New clause 2 would require the Government to assess and report on the geographical effects of changes to business tax reliefs made by clauses 27 to 30 within 12 months. That relates specifically to the research and development expenditure credit, the structures and buildings allowance, and the treatment of intangible fixed assets.

Her Majesty’s Revenue and Customs does not routinely require businesses to provide geographical information about where expenditure is incurred as part of their claims for RDEC, SBA or intangible fixed assets treatment. In order to do so, changes would need to be made to the CT600 form, which would create a burden for businesses. In addition, those claiming the reliefs would only provide information after the year-end. For that reason, it does not make sense. It is not possible for Her Majesty’s Revenue and Customs to have that information within the 12 months stipulated in the amendment. HMRC does in fact already publish annual statistics on many tax reliefs, including a detailed breakdown of R&D tax relief claims, which analyses, by region and sector, the number of claims and the amount of relief received. However, the regional analysis is based on the company’s registered office, not necessarily where expenditure is incurred.

Although the next set of annual R&D tax relief statistics will be published by HMRC in the autumn, companies can claim R&D tax relief up to two years after the end of their accounting period. For that reason, the 2020 statistical release will include claims only until 2018-19, and will therefore not include claims for the increased 13% RDEC rate. The Government do, of course, remain committed to levelling up every region and nation of the UK to spread opportunity and to ensure that everyone benefits from growth. For example, the spring Budget provided a £1.14 billion increase to block grants for devolved Administrations to spend on their own priorities. That is in addition to the £2.7 billion that the Government are investing in city deals across Scotland, Wales and Northern Ireland, with £800 million of funding being provided to support four deals in Wales alone, and a further £1.4 billion being provided across 10 deals in Scotland.

As we look to our economic recovery from the impact of covid-19, that levelling-up agenda will be more important than ever. Given that the Government already publish detailed analyses and that regional information is collected and held as part of HMRC’s tax returns, asking business to record further information would represent a significant additional business burden. I ask the Committee to reject the new clause.

[Alison Thewliss]

The Treasury Select Committee is also looking at regional imbalances. Part of the Committee’s work has identified that the data collected by the Government on a range of areas is not sufficient. It is not good enough for the Minister to say, “Oh, it’s difficult to do that.” I accept that money is not necessarily spent where an office is based, but it is a start in understanding where that money is going. If lots of organisations based in London are taking in the money and perhaps it is going somewhere else, the Government ought to be aware of that and ought to be looking at it to make sure that if somebody based in London is taking in the money but it is being spent somewhere else, then perhaps they should be based where the money is being spent. Perhaps they should be moving their offices to where the money is being spent. That puts it back on to those businesses, to add to that consideration, so I do not buy the Minister’s argument that it is awfully difficult and that we should not do it. It is a first step into looking at how it might be done, so I would like to press clause 2.

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