Value Added Tax Bill

Anne-Marie Trevelyan Excerpts

Friday 8th February 2019 Commons Chamber

[Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

I want to highlight the point my hon. Friend is making. When the income tax rate went up to 50%, I had small businessmen come to me saying, “I’m not going to work any harder if I have to hand over 50%. I’ll work four days a week and play golf on Fridays. I’m not going to invest my capital in a business if the Treasury doesn’t understand the pressures of running a small business,” and they stepped away from increasing their productivity—indeed, went backwards—until we started to reduce the rate. Too often, we fail to understand the consequences of tax policy on behavioural patterns.

[Sir Christopher Chope]

My hon. Friend makes a brilliant point. This used to be at the heart of Conservative thinking and policy making on the Treasury Bench. It was that dynamic thinking that was behind past decisions to significantly reduce the top rates of tax. I hope we can rediscover that much more dynamic approach to the behavioural consequences of high taxes and artificial thresholds.

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[Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

It is a pleasure to follow my hon. Friend the Member for Christchurch (Sir Christopher Chope), although I would highlight that I am a chartered account—and proud to be so. My training perhaps gives me a different perspective on politics, and I often from myself thinking in a different way from Members who are lawyers—not in a good or a bad way, but simply in a different way. Such training offers a breadth of policy, planning and thinking that we need to bring together. I am thrilled to speak on my hon. Friend’s important Value Added Tax Bill, and about how we might start to make significant improvements to this regressive and most punitive of taxes on the poorest, and on small businesses’ growth and productivity, after we leave the EU—very shortly, I hope—and are free to make such improvements once again.

I will address three areas of policy change proposed by the Bill, although there is much more I could discuss: VAT thresholds for small businesses; the flexibility of VAT rates on energy; and the big, thorny question of the sanitary products challenge that we have to solve. The first area on which this Bill offers an excellent improvement to our present VAT rules is the threshold for paying VAT. A small business whose main activity is one of human endeavour—the “services” part of goods and services—must monitor its monthly sales on a rolling 12-month basis these days, and must register to pay VAT as soon as the cumulative total reaches £85,000. Most small businesses that have many VAT-charged goods, such as plumbing businesses, are more likely to be VAT registered from the beginning, so such monitoring does not have to happen—those businesses are already in the VAT system because they want to reclaim the VAT on goods they have to use.

The threshold means that, overnight, a business suddenly goes from not being VAT registered to being VAT registered and having to charge an extra 20% on its bills. Imagine going in for a monthly haircut that used to cost £20 and suddenly finding that it costs £24. That business will then find that a smaller, non-VAT registered business down the road is more competitive, and it will immediately risk losing customers, so what does it do? Does it hold down prices by employing another staff member, at great speed, to increase business and grow the volume of sales, or does it stop accepting custom in order not to hit the threshold in the first place? My hon. Friend gave the example of cafés, but in Northumberland, there are tourism businesses that see the threshold coming and therefore slow down or close their doors early not to make further sales. This arrangement is simply anti-competitive and surely it is not the sort of business driver that any Conservative Government would mean to be encouraging.

A real-life example that highlights the problem is that of a young businesswoman with exactly this dilemma in my constituency. This young woman owns a small hairdressing business in a small town, and employs two stylists full time and one part time. Her turnover is about £100,000—above the £85,000 threshold—and she is therefore VAT registered. Her VAT payments to the Treasury are in the region of £16,000, leaving her with net sales of £84,000. A number of competitors have set up business in the area and purposely kept their audited income below the £85,000 threshold to avoid paying VAT, while still charging prices comparable to VAT-registered retailers. Of course, the clients do not know whether a business is VAT-registered in that small business environment, but there is a 20% advantage in favour of that non-VAT-registered business—20% more for doing less work. This young woman does not make any profit worth mentioning, but she pays herself a wage and keeps three trainees employed, and she enjoys her work. Her father, who is also a constituent, has advised her to close the business and save all the hassle that goes along with self-employment and running a business. Is it not a tragedy that a father feels he has to say that to his energetic and business-focused daughter?

Let us look at this woman’s options and the consequences. She could follow her father’s advice and close her business, putting four people out of work. That would involve vacating the premises and creating an empty shop on one of the small high streets in my constituency. She could lay off a member of staff to reduce the income to below the threshold and de-register for VAT, although perhaps still charge the VAT-hiked prices and see whether clients will pay. This is a simple but brutal example of the anti-business growth of our present VAT rules. I have been frustrated by this for a long time—as an accountant and in politics—because we have been trapped in this position. We have no control over it because we are operating under the EU VAT directive.

I would go further than my hon. Friend has proposed in his Bill so far. It is wonderful to have a Treasury Minister in the Chamber, because I have written a number of times to a number of Chancellors on this subject, and I have the opportunity to make my argument again verbally today. Where other thresholds exist, such as for income tax, national insurance and stamp duty, there is an exemption on charges for amounts up to the threshold, with payments made only against the remaining amount over the threshold limit. If, in the case of any small business, we made VAT payable only on income above the threshold, we would offer a sliding scale of price increases or sales volume that would support the business and encourage the employment of more staff, unlike with the disincentive of the dramatic cliff edge at £85,000. Whether we are talking about £100,000 or £20,000, the effect is the same: there is a cliff edge from paying no VAT to entering the VAT world, with all the commensurate costs, stress and extra time spent dealing with it. It seems odd that there is no threshold step for VAT, just a cliff edge.

In the context of small business as a whole, the threshold is very low, despite the fact that it is one of the higher ones in the EU. It is an excellent start to see the Bill’s proposal of, in the first instance, raising the threshold to £104,000. Should this excellent Bill gain Government support and make progress, however, I would propose to go further and call on the Treasury to make all income below the threshold exempt from VAT, with further turnover up to a certain point—for example, £150,000—having VAT charged only on that marginal trading activity. Businesses could then carry the sales tax burden across all sales without having to force it on the customer in the hard way that happens now. This is important for the small business cohort; we are not talking about businesses whose turnover has reached £1 million and are employing 10, 15, 20 or more people. We are talking about the small business that suddenly falls under the complex and heavy burden of VAT, which is genuinely having an anti-competitive effect on them. We are doing ourselves and our businesses no favours at all.

The approach I am setting out would give small businesses a window of growth and investment opportunity, and the chance to take on more staff, before being hit with a 20% surcharge on all sales. Such a fairer, graduated system would level the playing field between small below-the-threshold firms and those growing businesses. It would stimulate growth in the small independent retail sector and might even be a policy that could help to revitalise our empty high street shops.

The Bill offers much more besides increasing the threshold for VAT for small businesses, as it takes up the long-overdue opportunity to exempt some critical goods from VAT altogether once we have left the EU and the limitations that the EU’s VAT directive forced upon us in 2006. The directive aimed to harmonise VAT across the European Union. Although it makes cross-border sales activity easier and has some merit for the simplification of sales taxes, it has limited any individual country’s ability to determine whether or not to exempt goods from VAT. VAT on fuel has been a matter of contention for years. To his credit—everyone take note, because I am not going to say that very often—the then Chancellor, Gordon Brown, brought that tax levy down to 5%, which was a very creditable decision, but under the EU directive, he had no independent authority to scrap it completely.

Let us consider the position for my poorest constituents in rural Northumberland—“deepest, darkest rural Northumberland”, as my mother refers to some of my more wonderful and hard-to-reach communities. In these areas, the choice in heating solutions is limited to wood, coal, expensive electric heating, which often does not work when the weather is really bad, or oil tanks, assuming the snow does not prevent the tanker from getting to a farm in the first place. There is no mains gas, so people do not have the opportunity of consumers in more urban areas of choosing a supplier from a competitive range of offers. The 5% VAT levy adds to their already higher than average heating cost burden, because all those other products are just more expensive. It would be a wise Government, after Brexit, who at last agreed that rural poverty—it has been ignored for far too long by Whitehall, in my humble opinion—could be alleviated in the first instance by removing this tax. As my hon. Friend identified, there might be an initial cost to the Exchequer of up to £1.6 billion, but the policy would have a broad range of principled and practical social and health benefits. The Government’s commitment to those is clear by their words, but such a change would make that clear by their actions, too.

If my rural constituents are disadvantaged by VAT on fuel supplies to keep their families warm, how much worse is it that our own Government could not unilaterally determine—nor indeed manage to persuade the EU while we have still been within its laws—that a 5% tax on sanitary products is a direct discriminatory charge against all women of menstruating age? A friend said to me on learning that I was going to speaking in support of my hon. Friend’s Bill today that

“women really ought to have tax deductions for being female—what with tampons and tights that ladder, being expected to wear makeup and have changes of wardrobe, you all should get a discount from the Government”

I concur wholeheartedly, as I am sure you do, Madam Deputy Speaker, although that might be a step too far for the Treasury. A small and immediately helpful step in that direction would be to scrap VAT on all sanitary products, and indeed on incontinence products, which are also listed in the Bill. This outrageous tax puts these things into the “luxury items” category of products and reminds me that we have far to go to make sure that policy making has common sense at its heart.

It is wonderful that, as in the battles for women’s voting rights 100 years ago, there are men like my hon. Friend leading the charge to change the law in support of women’s rights and fairness. There have been excellent campaigns from across this House in recent years to push the Government to effect change, and the Bill is the next step to get this VAT discrimination sorted out. By scrapping VAT on sanitary products and making them exempt, as is the case for food and children’s clothes, this Government would be sending a clear message that they understand that the tax system can be an incentiviser or a punisher. For too long, I have been shocked that the EU has chosen to continue to ignore this call for fairness, allowing—no, forcing—women to have to pay more for sanitary products, which are an indispensable part of our daily lives, to boost Treasury coffers across Europe. I look forward to hearing from the Treasury in the Budget that follows our departure from the EU that it has understood and will immediately remedy this discriminatory tax.

[Sir Christopher Chope]

Does my hon. Friend share my concern that if we do not leave on 29 March without a deal, people will have had their expectations raised that we will have left the EU, but will be frustrated by knowing that such issues cannot be resolved by this Parliament?

[Anne-Marie Trevelyan]

My hon. Friend is absolutely right. Personally, I would rather leave with a deal that ensures that the bucket of issues that have to be sorted out are dealt with as we move forward from our legacy relationship into a new relationship, because that would make things easier for everybody, but the approach has to be right. The reality is that until we have left the EU, we have to follow the VAT directive, which means that we are not able to control that part of our tax law. I am grateful that we are leaving and that we will not move into the whole area of tax that the EU is looking to take control of across the board, which is a terrifying issue of taxation without representation. I am very glad that the British people have decided to step off the EU train before we move into that part of its policy making.

It would be a shocking failure not to remedy the discriminatory tax on sanitary products, so I hope that, in the most visible and practical of senses, the Government appreciate that constituents feel we have lost the ability to make good choices. We must take the opportunity, as soon as possible, to set the train in the right direction on this issue.

The VAT directive may not sound sexy or dramatic, but it has long been one of my most hated of all the directives under which we have had to work as members of the EU, as it emasculates Chancellors of whatever political colour in critical policy areas and disenfranchises us from being able to support small business, our poorest and, indeed, the female 52% of our population. It has meant that in a major area of tax policy, we have had to suffer taxation without representation for far too long. We will be able to send the clear message to the senior people in the EU Commission who determine, without oversight, what EU laws should be, that as in so many policy areas, the UK will lead the way in improving our citizens’ lives. I commend the Bill to the House and wish it every success in reaching deep into the Treasury’s conscience, which I know is there, so that we can make these proposals a reality after 29 March.

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[James Cartlidge (South Suffolk) (Con)]

It is a great pleasure to follow my hon. Friend the Member for Erewash (Maggie Throup). She has highlighted how the VAT rules do somewhat take the biscuit when it comes to gingerbread men. My hon. Friend the Member for Christchurch (Sir Christopher Chope) has shown that, on Europe, we really cannot have our cake and tax it.

I wanted to clarify one point that my hon. Friend the Member for Christchurch made earlier in reference to me. He very kindly referred to me as a former senior Treasury adviser. In fact, I did serve a brief apprenticeship after leaving university at the Policy Research Unit when it was founded, but I then started my own business. I was never at the Treasury—although it can feel like that when running a business.

Interestingly, when I was a mortgage broker, I found that mortgages were exempt—mortgage commissions are exempt from VAT. We were very much of the belief that mortgages would one day be done online—this was back in 2004—and, of course, many of them now are. When we invested for the first time in a new souped-up piece of IT kit, we received a very expensive bill with VAT on it, which we could not offset, and that created many problems for us. Since then, we have diversified. Most of our income is VATable: we run a big home show at the QE2 and a property portal for shared ownership properties. It is a good business. The great frustration that I have with VAT is that it is very unpredictable in those quarterly comings and goings, particularly as we have a home show every six months. As my hon. Friend said, we should run our businesses as if we are reviewing them quarterly to make sure that we can fund them.

The key point that I wanted to touch on with this Bill is the issue of unfunded tax commitments—a central point on which, in effect, my hon. Friend the Member for Christchurch and I debated through interventions. We were joined by my hon. Friend the Member for Harborough (Neil O'Brien) who was here earlier. That is not to say that any of the measures in this Bill would not be desirable. As I said earlier, I represent a rural constituency. Most of my constituents are on heating oil, so why would I object to cutting the VAT on heating oil? Of course I would not do so on principle. The same is true for sanitary products. My hon. Friend the Member for Berwick-upon-Tweed (Anne-Marie Trevelyan) made a very good case for reducing the VAT on those to zero, which I am sure the Treasury will do once it has the power. The question is not necessarily about desirability, but, of course, about affordability.

[Anne-Marie Trevelyan]

My hon. Friend and I both have rural constituencies and constituents who do not keep their houses as warm as they should because the cost is too high. The question is one of breaking the silos of government to assess the differential in loss to the Treasury compared with the saving to the NHS for those health and lung issues that would not end up in the health service at all. The challenge, if we need to prove it before we make a change in policy, is how we do that across departmental boundaries.

[James Cartlidge]

Of course. Although that is a very good point, it does assume a competitive marketplace where that tax change would be passed on in full to the consumer, and it remains to be seen whether that would be the case.

The point that I was trying to make is that when the Labour party makes unfunded commitments, we talk about the magic money tree. I have to say that I was trying to keep a tally as my hon. Friend the Member for Christchurch was speaking, and he seems to have opened up something that we might call a wondrous wonga arboretum of revenues. At one point, we were looking at £7.6 billion, once we added in the heating exemptions and the potential increase in the threshold to half a million pounds. These are not inconsiderable sums of money. The key thing that we have to remember is that, yes, there are those who argue about dynamic effect on behaviour, which means that these things are revenue-neutral. Perhaps I am a small c conservative, like a former great Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke), whom I admire greatly. He was talking about this very Budget. He used to take the view that we should never rely on forecasts; everything has to be paid for. If we make a commitment, we have to find a corresponding item to fund it. I take that view as well. That is how one should run a business. It is cautious—one always assumes that there is a downside and an upside. Unfortunately, we now live in an era in which we cannot talk about downsides, because there is this “Project Fear” thing, but that is the sensible way of politics and prudence.

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[James Cartlidge]

That is a good point. I was simply trying to make the point that we are talking about the impact of VAT on the consumer, yet if the no-deal scenario that some Members wish for happens, consumers will face onerous costs. By the way, even if we decided that we wanted to cut tariffs unilaterally, we could not; we are not taking back control of France, Germany and the rest. We cannot cut tariffs on our exports, and we would have far less leverage in trade deals. That is an extremely serious prospect, and we need to think about it.

[Anne-Marie Trevelyan]

I have a large number of lamb farmers in my constituency—the finest lamb comes from Northumberland, of course—and the challenge for them is: what are the Government preparing to do in the case of no deal? I certainly would not prefer that outcome; it would be much more constructive to have a deal. Should we leave without one, however, I hope very much that my Government will be prepared, and that there will be plans—contingency plans, if we want to call them that—in place to support the farming industry.

One of the great challenges has been the lack of communication from the Treasury and DEFRA. That is quite understandable, because we are still making our best endeavours to reach a deal, but there is a real difficulty in suggesting that it is therefore better to say we cannot have a no-deal scenario because of the risk. That leaves the business community at the greatest risk of facing challenges without knowing the answers.

[James Cartlidge]

I am grateful to my hon. Friend for that intervention. It will be the last intervention that I take, because I am a strong supporter of the Bill promoted by my right hon. Friend the Member for Chipping Barnet (Theresa Villiers), and I want her to be able to speak to it shortly.

I want to finish with a point about productivity and investment, which has been made by several people. Going back to what I said earlier about IT and so on, the key to productivity is investment, and as a country we under-invest, relatively speaking. For most of the larger companies that want to invest, the ability to offset VAT is fundamental. If I had a wondrous wonga arboretum and I was told that I could cut some money for business tomorrow, I would go for business rates. I would do so because business rates are an on-cost that directly hits investment in small businesses, and I am convinced that they are what is holding back productivity in the SME sector. I will stop there, because I think the next Bill is an excellent one. I hope that if the Bill promoted by my hon. Friend the Member for Christchurch makes progress, we will find a prudent and responsible way of implementing it.

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[Anne-Marie Trevelyan]

I agree with the Minister that the consultation was difficult and did not seem to come up with a solution, but will the Treasury seriously consider having a sliding scale for VAT registration, as is the case for other taxation systems?

[Robert Jenrick]

That suggestion, which my hon. Friend set out so eloquently in her speech, has been discussed on many occasions. It is an interesting proposal, but it would have significant fiscal implications, and it would mean that any business would be able to take advantage of that; large multinational corporations would benefit, not just small and medium-sized businesses. However, it is something we might consider in future.

European Union (Withdrawal) Act

Anne-Marie Trevelyan Excerpts

Thursday 6th December 2018 Commons Chamber

[Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

It is always a pleasure to follow the right hon. Member for East Ham (Stephen Timms), who made the point about becoming a rule taker in a very good area of policy.

I have not spoken in the numerous debates over the past year on Brexit as my views are well known to my constituents and others on what I believe delivering a new relationship with the EU should mean, if it is to be respected as a real Brexit. Delivering a new economic partnership with good relationships in sectors of mutual interest and benefit was always going to be a huge job. Forty years of intertwinement takes some time to unknot, as anyone who has ever tried to disentangle string knows.

The critical challenge was always going to be how the EU chose to engage in these negotiations for a new relationship and, most importantly, what its attitude to the devolved settlement would be. Would it work on a fair and equitable basis, or would it feel the need to show its strength and authority as a Commission—that overarching legal entity whose purpose is to drive forward the EU integration project to create an economic, political and military union? To those who say that the EU is somehow an ogre or bully working against UK ambitions, I say that is unfair. Its sole mission in any negotiation should be, and always is, the self-interest for the project’s success. Jean de La Fontaine’s poem about the cat, the weasel and the little rabbit, which my mother used to read to me, reminds us all that the strong are apt to settle disputes to their own advantage, but the UK should not acquiesce to an unreasonable new relationship.

The British people asked us to reboot our trading relationship so that we could be free to be a global-facing sovereign nation once again. I will not be able to endorse the withdrawal agreement—this proposed treaty that sets the new legal relationship with the EU, alongside this non-binding political declaration, which sets out a broad-brush picture of the new relationship the Prime Minister and the EU would like. I fundamentally disagree with some of those plans, both the unacceptable unlimited Northern Ireland backstop protocol, much discussed already today, and the many proposals that limit our nation’s future success and opportunities as a sovereign nation once more, with economic advantage restored to us. Nowhere is that clearer than the Prime Minister’s proposal for building our defence and security in the new relationship.

It is a constant concern and surprise to me that, for all the modelling the Treasury has done, the risk to our economic flows due to the closure of waterways has not been modelled—perhaps no one wants to think about that. We must look very closely at the proposed post-Brexit relationship with the EU. We must consider whether to accept what is clearly beneficial to the EU and whether it carries a significant risk of detriment to the UK, our defence industry, our control of our own defence and security forces and our ability, independently and with sovereign capability, to protect our economy our and constituents’ security in the decades ahead.

The language of the political declaration does not fill me with confidence. The reality is that we must be able to maintain our sovereign capability, industrial autonomy and freedom to protect our defence industry as we believe necessary and beneficial. This has not been an issue historically because the military union was only an idea. That is no longer the case. I am profoundly concerned that the proposal in the political declaration poses unacceptable risks to the United Kingdom’s defence and security flexibility, tying us into European projects when we might prefer to choose wider global partners. I am afraid that the supplicatory and subservient nature of the proposed treaty and future relationship cannot command my support.

Oral Answers to Questions

Anne-Marie Trevelyan Excerpts

Tuesday 11th September 2018 Commons Chamber

[John Glen]

We have made several interventions since we responded in 2014 with bailiff law reform. I have spoken to the Ministry of Justice, and we continue to look carefully at the matter. We have arrangements in place through the Her Majesty’s Revenue and Customs time to pay scheme, and the Cabinet Office has its fairness group as well.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

Next year, we move into a post-Brexit economy with new global trading opportunities for UK economic growth. Will the Chancellor update the House on his commitment to investing further in the Royal Navy, which is a vital tool for maintaining safe seas and oceans, so that trade coming out of north-east and other ports can be sustained and can underwrite economic growth?

[Mr Philip Hammond]

I certainly agree with my hon. Friend that the Royal Navy is vital to the defence of Britain’s interests around the world, and in peacetime it is the principal way in which we can project our power and military influence around the world. We are waiting for the conclusion of the modernising defence review that is being undertaken by the Defence Secretary with the Cabinet Office. Once we have received that, we will be able to work with the Ministry of Defence to find a way forward out of the very considerable budgetary challenges that that Ministry faces.

Spring Statement

Anne-Marie Trevelyan Excerpts

Tuesday 13th March 2018 Commons Chamber

[Mr Hammond]

I suspect that now is not the moment for a long debate about the structural funding challenges of the NHS, but the hon. Gentleman is right. We have an ageing population. Technology is driving an ever-wider array of interventions that can and should be made to support people with medical conditions—particularly chronic medical conditions—and we have to look at how to ensure that our NHS remains sustainable in the future. Of course we are looking at that issue. I will not give him a commitment today at the Dispatch Box on how we will do that, but it is absolutely something that we need to do. I very much hope, as he suggests, that this could be done on a serious, cross-party basis, but I fear that his Front Benchers would not be able to resist the temptation to try to play politics with any such serious discussion.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

It was excellent to hear the Chancellor talk about educational investment and our human capital. Further to the comments made by my right hon. Friend the Member for Putney (Justine Greening), will he explain further whether the Treasury will create standards that will technically value human capital across our Government Departments? That can then drive decision making so that taxpayers’ money is best spent to maximise the human capital that we invest in so much through education and training, rather than being wasted.

[Mr Hammond]

We have asked the ONS to look at this and to consider the metrics that we could use. The objective is to be able to assess clearly where the marginal pound of capital investment should go to achieve the best effect on the economy. Without wanting to pre-empt the outcome of that work, I suspect that in the future, in a very rapidly changing economy, we will find that retraining and upskilling will be a very large part of our investment requirement.

Class 4 National Insurance Contributions

Anne-Marie Trevelyan Excerpts

Wednesday 15th March 2017 Commons Chamber

[Mr Hammond]

On the last point, we will, of course, consult people widely over the course of the summer as we carry out the review. The hon. Gentleman will know that it is intrinsic in the Budget process that it is difficult to have any kind of proper consultation when preparing a Budget. He asked about measures in the autumn Budget. I said that all spending measures in the spring Budget would be fully funded by revenue raises or reductions in spending elsewhere in that Budget, so that it was broadly fiscally neutral. As a result of the decision I have announced today, the spring Budget is no longer broadly fiscally neutral, but I am committed to addressing that issue in the autumn. The intention remains to balance the measures that we are delivering between spending and taxation.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

I thank the Chancellor for listening to the voices of colleagues and deciding to reverse the proposals. The genuinely self-employed carry real financial risk by working for themselves. I know that a Conservative Government really want a tax system that will support risk-takers and growth-creators, so will the Chancellor commit to working over the coming months with colleagues who believe it is time to take a holistic and simplifying view on personal taxation for the self-employed that will support wholeheartedly those who build new businesses and take a risk?

[Mr Hammond]

Yes, I can assure my hon. Friend that this Government will always be on the side of those who genuinely strive to take risks, to innovate, to grow businesses and to contribute in that way to the economy. However, the right hon. Member for Hayes and Harlington, in his response to the statement, addressed the issue of bogus self-employment, and he is right: there is a problem of bogus self-employment. There is a problem of employers who are refusing to employ people, requiring them to be “self-employed”. There is a problem of individuals being advised by high street accountants that they can save tax by restructuring the way they work. We do believe that people should have choices, and we do believe that there should be a diversity of ways of working in the economy—we just do not believe that that should be driven by unfair tax advantages.

HMRC Estate

Anne-Marie Trevelyan Excerpts

Tuesday 10th January 2017 Commons Chamber

[Jane Ellison]

No, that is not right; I cannot agree with the hon. Gentleman. The factors driving the programme—the reasons we want to transform HMRC into the most modern and digital tax authority in the world—all still stand. We have always been open about the fact that this is an ambitious transformation, and as with any major programme, a number of which are running at the same time, it is right that it be looked at regularly. Of course HMRC will respond in detail to the NAO report, but the principle driving the plan stands good, for all the reasons I have talked about—it is better for customers, better for staff and better for the taxpayer.

The hon. Gentleman mentioned the STEPS programme, but the NAO report noted how much better HMRC had been managing it. There were problems with the programme, which was initiated under the last Labour Government, but the report compliments HMRC on the way it is managing it and got some of the private finance initiative costs under control, and so on. It is right that we constantly re-evaluate programmes of this importance, but I do not agree with the thrust of his question. It is also worth noting that while Scotland accounts for 8% of the UK’s population, 12% of the HMRC workforce will remain there, so Scotland remains a very important part of the HMRC estate.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

It is good to hear the Minister make the point that the telephone answering is improving. On the Public Accounts Committee, we have been looking at this on an ongoing basis, and we have probably had more information on it from MPs across the House than on any other issue. We support the programme, but with the digital world moving forward will the Minister set out how we will make sure that the staff on the end of the phone have the right qualifications to support businesses and individuals who need information?

[Jane Ellison]

I thank my hon. Friend for her comments. Given her membership of the PAC, it is important and nice to have them on the record. Much work has gone into improving customer service levels. At the moment, they are very good and improving and remain a key focus. She made a point about supporting staff with training and so on. That will be much easier in regional centres. For example, at the moment we have a large number of offices, and owing to the nature of the tasks being undertaken and the number of people working in them, it is not possible to provide easy and effective training programmes or to plan career progression in the way it is when a large number of people are concentrated together. As is reflected across both Government and the private sector, we can do a lot more for people when we can concentrate a different range of skills so that people have a chance to plot a career within the same office. That goes to the heart of how we intend to improve the service to customers.

Oral Answers to Questions

Anne-Marie Trevelyan Excerpts

Tuesday 29th November 2016 Commons Chamber

[Mr Hammond]

No, not necessarily at all. We spend our ODA in different ways, and different Departments have relatively small pools of ODA. Of course, the great majority of it goes through DFID. Where GNI contracts and the ODA budget needs to be trimmed accordingly, we will look to take away the lowest-value ODA spending. I think that that is the way the taxpayer would expect it to be done.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

Further to the Chancellor’s answer to my hon. Friend the Member for Fareham (Suella Fernandes), could he set out how QuestUAV in Amble, a manufacturer of mapping and survey drones, and other high-tech north-east businesses will be able to access the R and D funding that he talks about?

[Mr Hammond]

Public R and D funding will take two principal forms. There will be further funding to the science base in our universities, and there will be funding through Innovate UK, which is accessible by companies to support innovation. We already have an excellent base in basic science. What we need to do now is to up our game in innovation and the application of that science.

Budget Resolutions and Economic Situation

Anne-Marie Trevelyan Excerpts

Wednesday 16th March 2016 Commons Chamber

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

I expect the Chancellor had great hopes for today’s Budget announcement, but the backdrop to the Budget has not been good for him, with growth forecasts going down. Today he has set out a Budget that bets the bank on an uplift in 2019. I have not yet had a chance to go through the Red Book, but I bet that there is more hidden pain for many of my constituents in the depths of this Budget.

I want to touch on a couple of the Chancellor’s points that I broadly welcome. On tax changes, the Public Accounts Committee, which I chair, has looked closely at the issue of multinational tax avoidance. Only recently, we were looking at the issue of VAT avoidance on marketplace platforms. I therefore welcome the Chancellor’s announcement that these issues are finally going to be tackled. He has also announced that he is reducing corporation tax to attract more multinationals to this country. Despite his promises, however, it is not at all clear that multinationals will pay more tax.

What we really need is tax transparency, and I echo the comments by the hon. Member for Amber Valley (Nigel Mills) on that point. I also commend to the Chancellor the 10-minute rule Bill unveiled yesterday by my right hon. Friend the Member for Don Valley (Caroline Flint). We as citizens and Members of Parliament cannot tell whether we will secure more tax from multinationals unless we have more information. I commend that Bill to the House, not just because the Chancellor should, if he has any sense, be listening to my right hon. Friend, but because the whole of the cross-party Public Accounts Committee has looked into this matter in great detail and supports her proposal. The Bill proposes a small change that would be well worth implementing.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

Does the hon. Lady agree that the Chancellor’s decision to reduce the ability for debt interest to be taken off corporation tax bills from 100% to 30%, which is the German level of interest reduction, is a good thing and should help us to make some of our larger multinationals and British companies pay more corporation tax?

[Meg Hillier]

That certainly looks like a step in the right direction, but my point is that we need to be able to see exactly what companies are doing. Transparency is the other side of that coin. I know that the hon. Lady broadly agrees with that position.

One thing that the Chancellor did not mention in his speech today was the national health service, which we know is in financial crisis. Only yesterday, the Public Accounts Committee’s report on acute hospital trusts was published, but two other inquiries have taken place since we held that hearing and they show the real deep-seated financial problems in the NHS. There is a £22 billion black hole ahead, and the financing of our health service is all the wrong way round. In our hearing, we uncovered the fact that hospitals are setting their structures, budgets and staffing to meet the financial settlement that is passed down to them by the Department of Health. Then, inevitably, they have to backfill to meet the growing needs of patients by, for example, employing far more temporary staff on higher rates. They are therefore struggling to maintain their budgets.

That is being exacerbated by the push five years ago by the Chancellor—the self-same man who was at the Dispatch Box today—for 4% efficiency savings year on year in the NHS which has now come home to roost. In 2014-15, our acute trusts had a net deficit of £843 million. More than three quarters of our acute trusts are in deficit this year. Great work is being done to try to bring that figure down, but promises that NHS Improvement will bring in efficiencies to resolve the problems within a year are over-optimistic. Even the head of NHS England told our Committee that that was too steep an efficiency saving. He said that around 1% to 2% might be the right amount.

It is time that we had a national conversation and reached an agreement about how we are to fund our NHS. It is not good enough for Chancellors to treat it as a political football. The matter must be resolved. Demand is growing, and yet we are expecting so-called efficiency savings, which are undeliverable. I am unconvinced that the NHS is on a secure footing for the future. My Committee will continue to look rigorously at that and will provide reports to the Chancellor and the Secretary of State for Health so that they get the message. I hope that they take our comments as seriously as we mean them.

On education, we heard in a leak or trail for the Budget, which seems to be the common approach nowadays, that all schools in England will become academies. My borough of Hackney is no stranger to academies. When they were first unveiled, Hackney’s schools were among the worst in the country. I pay tribute to the Mayor of Hackney, Jules Pipe, who took what was on offer from the Government and turned it into something that realises the ambitions of Hackney’s young people. With the huge work of Hackney’s heads and teachers, our schools are now among the very best in the country.

In spite of our embracing academies, among other school models, they are not a simple solution. The structure is not what makes education good. We need good teaching and good leadership. That is what gets results. The constant recent changes to schools—curriculum change, structural change, funding change—mean more upheaval. Academy status is unsustainable in practice for small primary schools, which will force them into chains. That is a concern of not only the Public Accounts Committee, but the chief inspector of schools, Sir Michael Wilshaw, who has warned that academy chains are not a solution to the problem in their own right and can actually mask problems.

The Committee is also concerned about the many risks involved, particularly around accountability. For example, the Durand Academy has become a cause célèbre for how a lack of accountability can lead to bad management of the taxpayer pound. If a chain goes bust, that has a wider ripple effect. Even at this late stage, I ask the Secretary of State for Education to abandon this monolithic approach to school provision. It sounds like freedom of choice, but the Government are imposing a model that will absorb energy and take time away from the real issue: educating children for the future.

The Chancellor paraded his devolution credentials. I started my time in politics believing and have always believed that power should be devolved to and exercised by the most appropriate level. This is another area of concern for the Public Accounts Committee and I offer the Chancellor a word of caution. We need to follow the taxpayers’ money to ensure that they and Parliament know how it is being spent. As the money is devolved down the system, unless there are clear accountability frameworks and assurances from Government about how it is spent, that can provide a cover for waste and mismanagement. It can also be a cover for the Government’s underfunding of major regions of the country and major policy areas. For example, as health funding is devolved through devo-Manc, how do we know that the Government are giving enough money to Manchester to deliver healthcare for its people? How can we know that in any area of the UK? That is the problem, and it presents a challenge to the National Audit Office, a servant of Parliament, in helping us to do our job.

As for accountability, I visited Bristol with my hon. Friend the Member for Bristol South (Karin Smyth) and met the local enterprise partnership, an interesting body made up of many private sector individuals doing many good things in Bristol. The LEP covers five local authority areas, so if any projects fail in delivery, where does that risk fall? It falls on the council tax payers of each authority, not on the private sector partners who give up their time to try to support economic development in that area. I am not knocking people who want to contribute to the growth of their area, be they from the private sector, the public sector or wherever, but it is important to remember that taxpayers’ money is being spent and that it must be followed and well spent. Risk and accountability must be combined.

That brings me on to infrastructure. Again, the Chancellor paraded several measures, including Crossrail 2, which will be coming to my borough. I welcome the fact that the Hackney to Chelsea line will finally be delivered. However, on 1 January the Major Projects Authority merged with Infrastructure UK to create the Infrastructure and Projects Authority. The Public Accounts Committee has long been a champion of major project management, which is vital in the delivery of our future infrastructure. The MPA began to do a job on that, but if we do not have someone watching how projects are delivered, there is a big risk of waste along the way, particularly with long- running projects that can stretch across many Parliaments. The Public Accounts Committee has expressed its concern about the merger and worries that it represents a down- grading of project management over the importance of infrastructure development. While I want such development, I look to the Chief Secretary to the Treasury and urge him to watch the merger closely, because the MPA was an ally of the Treasury, the taxpayer and those of us with an interest in watching taxpayers’ money.

It does not pay to be poor under this Government. I represent one of the most divided authorities in the country. There is some great wealth, but a high level of poverty too. In reality, the Chancellor’s jobs growth relates to far too much low-wage, part-time work, which is just not enough to live on in Hackney, where the average house price is £500,000 and where private sector rents are soaring through the roof. Thanks to Government policy, even social housing will be out of the reach of many following the imposition of pay to stay and the bedroom tax on households that may have no financial resilience and uncertain work patterns, meaning that they may be in and out of claiming housing benefit. Such households can suddenly be hit by a tax on their extra bedroom of £14 a week, which can accumulate over time and cause real problems.

On childcare, many local childminders are finding that providing the places that the Government are requiring them to supply is unaffordable on the money that they are paying. Even when the Government say that they are helping, they are not helping many households in my borough.

Returning to education, the national funding review is important, but we must not cut funding to London schools and their pupils because those schools will then decline. We have seen success and must not jeopardise it. Bursaries for nursing students have been lost and we now have loans for further education, so the next rung of the ladder for the aspirant people at the bottom—they are aspirant in Hackney—has been knocked out by the Government, making getting on in life harder to do. The Government must start ruling for the entire nation. It is a tale of two nations and this Budget simply underlines that.

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

I am delighted to have caught your eye, Madam Deputy Speaker, and to welcome my right hon. Friend the Chancellor’s Budget and some of the excellent things it contains. I want to pick out important two statistics. First, as of today, we have a record number of people in employment. Contrary to what is often said, 62.66% of that has come from the high-skilled sector, so we are creating high-skilled jobs in this country. Secondly, I welcome the fact that in this tax year we will again become the highest-growth country of all the world’s major economies. That is a significant achievement by my right hon. Friend.

Having spent many hours on the Select Committee on the High Speed Rail (London – West Midlands) Bill over the past year, I have become something of a convert to the Chancellor’s way of thinking about the merit of transport infrastructure projects that are good value for money. I welcome to the Front Bench the Minister of State, Department for Transport, my hon. Friend the Member for Scarborough and Whitby (Mr Goodwill), who is in charge of the HS2 project and who will no doubt pilot the Bill through the House in an excellent manner next week.

If this country is to compete in the 21st century, it needs a 21st-century system of transport. Through HS2 and other transport infrastructure projects, such as Crossrail 2, which the hon. Member for Hackney South and Shoreditch (Meg Hillier) mentioned, and the trans-Pennine rail tunnel, we are easing the burden on our congested roads and building some serious national expertise in areas such as tunnelling. That has enabled us to undertake some projects that we would not have been able to do just a year or two ago. As we have seen with the Thames tideway project in London, we have been able to bring the cost of such major projects down considerably. Competitiveness is the key to a successful economy. We are constantly competing in the global marketplace, whether we like it or not, and the economic decisions that the Chancellor has taken today reflect that reality.

I welcome some of the announcements to simplify our tax system, although we could go further. I particular welcome the measures to abolish class 2 national insurance contributions. However, as income tax and national insurance revenues are slightly larger than the sum required to pay the entire benefits bill, national insurance is still a big burden, particularly for the low-paid. I welcome my right hon. Friend’s measures today to accelerate taking the low-paid out of the tax system, moving the threshold from £11,000 to £11,500 and then to our goal of £12,000.

I come to a slightly discordant note, so I hope my colleagues on the Front Bench will bear with me on it. The VAT system that the Government have inherited is overly complicated. We zero-rate flapjacks but not cereal bars. We zero-rate paper books but not e-books. It was considered a productive use of somebody’s energy to write into the Government’s VAT guidelines—this is true, as hon. Members will see if they go online—that VAT must be applied to gingerbread men covered in chocolate at the standard rate unless

“this amounts to no more than a couple of dots for eyes”.

As some Members in the Chamber will be old enough to recall, the standard rate when VAT was introduced, following the old purchase tax rules, was 8%. It was then increased to 25% for certain items under Denis Healey, and today we find it at 20%. I say to my Front-Bench colleagues that the whole VAT situation needs a thorough review. The problem is that we are governed by the rules of the EU, believe it or not, and the VAT sixth directive, which makes this very difficult. We need to have a conversation with those in Europe if the British people vote to remain in the EU, which I hope they will not.

I sincerely welcome measures in the Budget to make us more competitive, particularly the fact that the Chancellor is going to accelerate the reduction of corporation tax so that it will be reduced to 17% by 2020. That is a really useful measure. Interestingly, chart 1.11 in the Red Book shows that America’s corporation tax is 40%, so it is amazing that its businesses are as competitive as they are. However, it is clear that our corporation tax is not moving quickly enough to keep up with the rapidly changing global nature of modern corporations, and that is leading to perverse outcomes that generate public concern, such as Google’s recent announcement that it was paying only £130 million in back tax. I hope that the newly announced diverted profits tax will improve the situation. As has been said, a number of other measures in the Budget are there to improve the tax generated by some of our big corporations, and I hope that my right hon. Friend the Chancellor is right that those measures will generate £9 billion by the end of this Parliament.

We need to invest more to support small and medium-sized enterprises and encourage them to start exporting. The balance of payments figures in the Red Book are worrying. We could rethink how the Government support companies that want to export for the first time, especially given that we are reducing corporation tax. Bearing in mind that it probably costs a minimum of £50,000 for a company to consider exporting to a new market, we could give companies a complete break on corporation tax for any activity that relates to exporting for the first time. We need to rethink the role of UK Trade & Investment, as our approach is clearly not working. We are not getting enough small and medium-sized companies exporting, so we need to rethink its role under the new chief executive. In some years UKTI’s budget has increased whereas in other years it has reduced, and we need to give it a stable environment in which to operate.

I welcome the Chancellor’s announcement on broadband. The Government plan to invest so that superfast broadband covers 90% of the UK by early 2016 and 95% by December 2017. The trouble is that those are national averages, and rural constituencies such as mine have a disproportionate number of homes and businesses that are not getting a realistic broadband speed to deal with both their business and their leisure in the 21st century.

[Mrs Trevelyan]

We face a challenge on the universal service obligation, which has been committed to but which is currently weakly defined, and those of us who have constituents in very rural parts of England will struggle to see that commitment met. We need to continue to push the Chancellor and the Treasury to understand that a commitment will be required to make sure that every household in the UK has superfast broadband.

[Geoffrey Clifton-Brown]

My hon. Friend has an even more rural constituency than I do, but we both have very rural constituencies, and she is spot on in what she says. We need to make sure that every house and every business gets a reasonable broadband speed as quickly as possible. I was coming on to say that we need to provide support for bespoke solutions, and I am sure that applies in her constituency, as it does in mine, where the Gigaclear contract, which was the first such contract in the country, will enable another 6,495 homes to have a reasonable broadband speed by 2017.

The Chancellor had a free shot about the EU, so I feel that I, as a humble Back Bencher, am entitled to have one, too. While I am talking about competitiveness, I must briefly mention our EU membership, as the issue has been receiving a small amount of attention lately. As a nation, we face a choice between remaining part of an institution that is fundamentally anti-competitive and is collapsing under the weight of its own bureaucracy, and seizing our own destiny and becoming a great trading nation once again, being fleet of foot, free of excessively burdensome regulation and able to make our own deals around the world.

As my right hon. Friend the Member for Wokingham (John Redwood) said, we will have an additional £10 billion net to spend if we leave. We will be part of a free and fair immigration system that allows us—this country, this Parliament—to attract and retain the best and brightest from countries such as India and China, without having to put in place arbitrary caps and restrictions simply to counteract the number of people coming from Europe, over which we currently have no control. Britain should be a place of equal opportunity for anyone who wants to come here with something to contribute, not simply a place for anyone who happens to reside in the EU. The recent EU deal with Turkey threatens to exacerbate the situation.

We live in uncertain times, as the OBR’s growth forecasts clearly show. The Chancellor has said that there are storm clouds gathering, both at home and abroad. The Government are right to push ahead with reducing the deficit. There are naysayers who tell us that a national deficit at 4% of GDP is sustainable, but I say to them that a national debt at 82% of GDP certainly is not. We inherited from the previous Government a rate that was higher than it had been at any time since the 1960s, so I welcome the measures taken in this Budget to reduce it to 74% of GDP by the end of this Parliament. Our debt interest payments alone are equal to the annual budget of the Ministry of Justice and the Home Office combined. Just imagine how much extra we would have to spend, or we could save on taxes, if we did not have to pay that debt. The high level of debt leaves us extremely vulnerable to global shocks that could put up interest rates. Serious efforts to tackle the deficit, so that we can start to bring down our debt, must be accompanied by a sustained effort to continue to reduce regulation, to simplify our outdated tax system, to reduce public expenditure, to get the best possible value for money, and to give us infrastructure fit for the 21st century and for one of the world’s best performing economies, if not the best performing.

Enterprise Bill [Lords]

Anne-Marie Trevelyan Excerpts

Wednesday 9th March 2016 Commons Chamber

[Brandon Lewis]

We have made it clear from the beginning that this is a package. If Members vote for amendment 1, they will be voting against the improvement in workers’ rights.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

I am deeply concerned about this issue, and my name is attached to amendment No. 1. I listened to what the Minister said this morning, when we spoke at some length about the proposed pilot. I would be willing to support that pilot if the Minister would give us a clear assurance that it will not just involve looking at economic drivers, but will take account of the overall impact, and apply the family test. A great many people who work shifts are put on the bottom of the list and end up working on Sundays because they cannot get to the top. We must make sure that that does not happen in this instance. [Interruption.]

[Mr Speaker]

Order. First, may I appeal for as orderly an atmosphere as possible? The Chair seeks to facilitate as many contributors as possible. Secondly, Members are of course free to say what they like, but I would gently point out that no amendment or new clause on the subject of pilots is to be taken today. There is material before the House, but that subject is not among it.

HMRC Office Closures

Anne-Marie Trevelyan Excerpts

Tuesday 24th November 2015 Commons Chamber

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

As a newly elected member of the Public Accounts Committee, I recently had the opportunity to look closely at HMRC’s efforts to increase the amount of tax it collects and how it plans to do better. Our latest report, published on 3 November, made it clear that it is our opinion that HMRC has continued to fail in its customer service standards, and that if it is to collect much more of the tax due to the Treasury, modern, fit-for-purposes systems that support the Government’s “Digital by default” agenda must be in place.

At the moment, HMRC’s 58,000 employees are spread across 170 offices, many a legacy of the 1960s and 1970s. Their staff numbers range from fewer than 10 to some 6,000 people. To meet the customer service standards and increase tax revenues, the service needs to be providing its customers with modern services, at a lower cost to the taxpayer. As the Minister mentioned, this year HMRC recruited 3,000 additional staff to customer-facing teams. Those staff are providing services in the evenings and at weekends, building capacity outside normal working hours, which helps the taxpayer who is trying to sort out her tax payments. That is a great step forward: a major government body is changing its working practices to meet its customer demand. Many more customers now want to work out their tax payments online, at a time of their choosing. HMRC’s investment in digital services, simpler and more user-friendly portals and work with accountancy software designers to make small business financial packages automatically link into HMRC’s reporting systems is freeing up staff to deal with more complex tax problems.

[Rebecca Pow]

Are not 80% of customers already filling in their tax forms online? That proves exactly what my hon. Friend has been saying about modernising being the right approach.

[Mrs Trevelyan]

I thank my hon. Friend for her intervention, because what she says is exactly right. We have to be mindful of that situation as HMRC moves forward in this digital world. HMRC collected £518 billion from UK taxpayers in 2014-15, an increase of £12 billion on the previous year. Over the past five years, a continuously increasing tax take has been matched by a reduction in running costs from £3.4 billion to £3.1 billion. I believe the Chancellor is totally committed to supporting HMRC to do its job better, and the Budget in July gave it a further £800 million to invest in compliance work over the next five years and collect an additional £7 billion in tax take.

There will, however, remain a tax gap, and challenging and overcoming that will continue to need the most modern systems and highly qualified staff. In search of such, the move to modern, regional centres across the UK will bring together the skills and the efficiency of resource and talents to maximise tax collection. HMRC expects the majority of its existing staff to be able to move to the regional centres, with a 10-year phasing to minimise redundancies. There will eventually be a modern, digitised organisation with fewer staff, but I have every hope that the programme of change is being well managed—I will be continuing to monitor it, as will the PAC.

I have some concerns about the regional centre plans. For example, I question the need for two London-based sites, in Stratford and Croydon, given that there is no base in East Anglia, where I would have thought running costs were lower. In the north-east, we already have a major HMRC centre at Longbenton in Newcastle, which supports a wide variety of tax-collecting divisions. The changes in staffing levels and working hours are starting to improve customer service there, and it is key that we make sure HMRC maximises the investment in its quality of staff and effectiveness across the UK to get the maximum benefit. HMRC’s modernisation of its efficiency and digital service provision is vital if the service is to continue to reduce that tax gap in order to help us to pay for the public services—the goodies, as the hon. Member for Wolverhampton South West (Rob Marris) called them—we all want to see, to transform its services to customers and to be able to clamp down further on the minority who are still trying to cheat the system.