Ways and Means

Anneliese Dodds Excerpts

Ways and Means resolution: House of Commons
Wednesday 6th September 2017 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Sadly, today’s debate on the Ways and Means resolutions has confirmed in the field of taxation something that many of us feared about the Government’s general approach to public policy: no genuine attempt is being made to face up to the enormous challenges facing our country, from our yawning productivity and investment gaps to the haemorrhage of public funds caused by tax dodging and, as many have noted, the uncertainty caused by the Government’s shambolic approach to Brexit.

We end this debate with new revelations, hot off the press, that the Government have been pleading with businesses to publicly back their Brexit negotiating strategy—pleas that have been met with “fury” and “incredulity” from business. Against that backdrop, rather than the wide-ranging changes that are required, we have a clutch of measures that I would describe as piecemeal, although I have to say that I liked the epithets used by my hon. Friend the Member for Ilford North (Wes Streeting), who described them as thin and patchy. Many of the measures are, sadly, ill thought through, and they could have a range of negative consequences.

The process is also flawed. Despite repeated calls from tax experts for more detailed scrutiny of tax measures, the House is being rushed into Second Reading of the Bill containing these measures just next week. I accept the Minister’s comments that all these measures were published previously. However, several of them have been pulled, some at very short notice. As my hon. Friend the Member for North Durham (Mr Jones) set out—at length, I must say—some of those measures were important ones.

Such is the lack of coherence in this package of measures that some might describe the current coalition of chaos as rudderless, but I would say that is unfair, because the resolutions show that the Government’s shaky ship tends to list in one direction: towards the protection of the most privileged. As so many of my hon. Friends have mentioned, we see that first of all in the Government’s approach to non-dom status. That anomalous and old-fashioned status was created by William Pitt the younger, and it provides for some of the very richest in society privileges of which British mere mortals cannot avail themselves. Rather than fundamental abolition or reform, here we have the introduction of more and more complex rules.

We heard repeatedly today from the Government that they are closing the front door to tax avoidance from non-doms, but, as others have mentioned, that front door will close at a glacially slow pace. It will be open for another 15 years. In any case, while the Government maintain that they will—albeit very slowly—close the front door to tax avoidance, some of the measures proposed here open up new, hidden back doors through which non-doms can shift their tax responsibilities.

Many Labour Members have talked about the mechanism of business investment relief, which will be extended substantially beyond its initial remit. We have asked repeatedly for evidence of its efficacy, but evidence came there paltry little, and only very late in the day. It was only last Friday that we received a statistical commentary providing some very basic figures on the use of business investment relief, and the figures that we were initially given were rounded up to the nearest hundred. That is surely rather unusual when we are talking about fewer than 450 new individuals taking up that relief in 2014-15. In fact, according to my calculations, less than 1% of non-doms currently appear to be taking it up.

Furthermore, as many others have mentioned, the Government have provided no indication of which sectors or businesses are benefiting from this relief. Without that information, it is unclear why the Government have chosen to extend its remit. As my hon. Friend the Member for High Peak (Ruth George) mentioned, we also need to know why the Government are now enabling non-doms to buy shares traded in secondary markets, not just new shares, under the remit of the relief. How exactly will that benefit the real economy and generate the investment that we desperately need?

The new measures have been proposed in a context where, according to a statistical release we have only just received, more than 54,600 non-doms have been in the UK for seven of the past nine years, but only 5,100 seem to have admitted remitting income to the UK. Having said that, the exact number of non-doms in Britain seems to go up or down by 200 depending on which table is looked at in the statistical release, so we should perhaps take some of the figures with a pinch of salt. I must say that I struggle to understand how exactly all the remaining non-doms are surviving and living here. It is all very well trumpeting the funds obtained through the non-dom charges—we heard the same again today—but for high net worth individuals claiming non-dom status, those charges might be dwarfed by the taxes they would have paid if they were treated like ordinary Brits. Furthermore, while the Financial Secretary claimed that the proposals would end permanent non-dom status, that, as many Labour Members have mentioned, is not the case for those whose parents are non-doms.

It is difficult to avoid the conclusion of firms aiding individuals to attain non-dom status, such as the Tax Advisory Partnership, that non-dom status is, in its words, “generally advantageous to taxpayers”, although not of course to British ones. The firm also notes that

“trust planning is a valuable option for many non-doms”,

yet the Government’s new measures protect income that is already locked into trusts. As my hon. Friend the Member for Ilford North said, this is big business for the many firms engaged in enabling people to avoid tax.

I am very sorry that rather than promoting investment in our country, the non-dom system seems for many just to be a mechanism for tax avoidance. Now more than ever, we really need more business investment in Britain. Several Labour Members made the case for that today. I have looked at the figures provided by the OECD: last year, the increase in investment in Britain was half the G7 average, a third of the OECD average and a sixth of the EU average. Labour Members have heard nothing in this debate to convince us that the Government’s measures presented in the resolutions will provide the investment that our country desperately needs.

Generally, we find that while the Government may talk the talk on tax avoidance, the measures they produce are frequently watered down and insipid in practice. Just as with their measures on non-doms, we find that their commitment to crack down on those enabling aggressive tax avoidance fails to include the really strong deterrents called for by experts. Indeed, the Government initially proposed such measures, but they have now been watered down.

As several Labour Members have said, the treatment in these measures of non-doms and enablers of tax avoidance contrasts with the treatment of people who have been discriminated against in employment cases or made redundant. I must say that I share the concerns of my hon. Friend the Member for Birmingham, Selly Oak (Steve McCabe) about the fact that the Financial Secretary did not mention those issues in his opening speech, and I very much hope that he will cover them in his concluding remarks. They are incredibly important for many people in Britain, particularly as we see more employment cases being brought and more people being made redundant. Take the issue of injury to feelings payments becoming taxable. I have looked at the figures and seen that we are not necessarily talking about very large awards. In 2014, the median award for injury to feelings across all categories of discrimination was £6,600. Over the three years to 2014, median awards for discrimination on the basis of sexual orientation actually diminished to just £1,000, and awards on the basis of other characteristics have generally come in at about the £6,000 mark.

I must say that I find it churlish of the Government to focus on the people who, after all, as my hon. Friend the Member for High Peak detailed, have been forced to pursue their case at many different levels, often at considerable expense to themselves and causing considerable concern to themselves and their families. When they are found genuinely to have had a case—because their age, race, religion, sexual orientation, disability or pregnancy has been used against them—they then find out at that stage that any award is taxable. We find penny pinching that is focused on discriminated-against workers and those made redundant rather than an attempt to tackle large-scale tax avoidance head-on.

Colleagues have asked many other questions, to which we have not received adequate responses. One of the most important issues, which many colleagues mentioned, is the resourcing of HMRC, particularly with new cuts on the horizon through the removal of local offices. I am concerned that we find no commitment by the Government to grasp the nettle and properly resource HMRC so that it can feasibly assess whether high net worth individuals and multinational corporations will comply with the new rules.

I remind the Financial Secretary that there are still 10,000 fewer HMRC staff than in 2010—a 16% cut, despite the Government’s professed concern about tax avoidance. In that context it is no surprise that, as the hon. Member for Aberdeen North (Kirsty Blackman) said, proposed new powers for HMRC to enter premises and inspect goods, as well as to search vehicles or vessels, have not been repeated in the resolutions despite discussion of them before the election. In this matter as in others, an ideological commitment to reducing the size of HMRC can lead to a focus on punishing smaller businesses that have transgressed minor rules, while some of the biggest players escape their liabilities. As my hon. Friend the Member for Ilford North said, the principle of proportionality is already under pressure. That could become an even bigger problem with additional cuts.

The matter is also deeply concerning in the context of Making Tax Digital. We welcome the fact that the Government have ceded to pressure and that they are climbing down on making tax digital to an accelerated timetable, but I am worried that the Financial Secretary said that electronic reporting would be extended only when it had been shown to work well. I remember similar discussions on the introduction of digital reporting for services that suddenly had to pay VAT when the system changed to operating on the basis of where the buyer rather than the seller was. The Government said then that all the arrangements would be in place; businesses would know how to pay their VAT, and there would not be concerns about testing the system—the so-called VAT MOSS system. Many Opposition colleagues will remember it as the VAT mess system, because that is what we got.

Cuts to HMRC resources are incredibly important. One Conservative Member shouted, “With digitalisation, we don’t need HMRC staff.” In some cases, we need those staff precisely to help people through the digital process. Those staff were not there for VAT mess, and I am worried that they will not be there for elements of Making Tax Digital if the Government go ahead with their plans.

Ways and Means resolutions may be technical, as the Chancellor said in his brief intervention in the discussion, but they offer an opportunity to deal with some of the fundamental problems with the British economy. Fiscal matters are incredibly important—Opposition Members accept that, and that is why so many of us have been present, intervened in the debate and posed questions. Sadly, instead of the genuine engagement that we should have had with many of our concerns, they have not been dealt with seriously. Overall, the measures imply that the very best-off people are likely to be rewarded, with little left for everyone else.