Finance Bill

Anneliese Dodds Excerpts

Tuesday 31st October 2017 Commons Chamber

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

I beg to move amendment 1, page 14, line 15, leave out “different” and insert “higher”.

This amendment removes the power for the Treasury to reduce the £30,000 threshold in connection with the taxation of termination payments by regulations.

[Madam Deputy Speaker (Dame Rosie Winterton)]

With this it will be convenient to discuss the following:

Amendment 2, page 14, leave out lines 20 to 23.

This amendment is consequential upon Amendment 1.

Amendment 3, page 14, leave out lines 27 and 28 and insert—

“(2) “Injury” in subsection (1) includes—

(a) psychiatric injury, and

(b) injured feelings.”

This amendment explicitly includes (rather than excludes) injured feelings within the definition of “injury” for the purposes of payments which are excluded from the provisions of Chapter 3 of Part 6 of the Income Tax (Earnings and Pensions) Act 2003 (payments and benefits on termination of employment).

[Anneliese Dodds]

Labour’s amendments on redundancy payments focus, first, on ensuring that there is proper democratic scrutiny of any attempt to reduce the £30,000 threshold for the taxation of termination payments, rather than the power to do so residing merely in regulations and, secondly, on ensuring that injured feelings are included in, rather than removed from, the definition of injury for the purpose of tax-excluded payments.

It is frustrating to be back in the Chamber to debate these issues again, with, again, no indication from the Government of any change in their position. The discussions in the Bill’s previous stages, including in Committee, detailed many ways in which provisions against aggressive tax avoidance and evasion could be tightened. Yet, rather than heed those reasonable suggestions for the removal of loopholes, the Government seem keen to target those made redundant as a potential source of revenue.

The changes in clause 5 are occurring in the context of the Government being determined to rush headlong into reducing corporation tax rates, despite the Institute for Fiscal Studies and others being clear that there is no automatic link between lowering rates and increasing revenue. In fact, I would hazard to suggest that in this case the opposite might be true. The Government’s previous cuts to corporation tax have manifestly not increased business investment.

The changes in the clause are also occurring when, as we have discussed, many loopholes have been retained for non-doms and, furthermore, while new measures for corporations exempt some of those firms that appear to have the most labyrinthine business arrangements, designed for tax purposes—not least some public infrastructure companies.

One might, then, wonder exactly why the Government have decided to stick to their guns and focus tax increases on those who are made redundant, which is effectively the idea that the provisions in the clause promote. We have been told by the Minister repeatedly that there are no immediate plans to reduce the threshold beyond which termination payments are taxable. If that is the case, why create the power to reduce it?

[Mel Stride]

rose—

[Anneliese Dodds]

If I may finish, I will be more than happy to take an intervention.

To use an appropriate analogy on Halloween, I would not have bought a pumpkin last weekend if I expected it to sit on the shelf when I brought it home. I would have bought it because I expected to carve it, although not very artistically, for my children. I would not purchase something if I did not think I was going to use it, so why are we spending valuable parliamentary time debating a measure that will never be used?

[Mel Stride]

I simply wish to point out that, as I think the hon. Lady will know, the statutory instrument on changing the £30,000 threshold would have to be passed by the House under the affirmative procedure. It would be an affirmative SI, so it would have to be voted on by the House.

[Anneliese Dodds]

The Minister’s point exemplifies exactly what I anticipated might happen. I was just about to say that the second line of defence from the Government, after proclaiming that they would abstain from using the powers that they are so keen to give themselves, is that, in any case, they would have to bring any change to the House for a vote. Indeed, that is what has occurred just now. We are all aware of the difference between passing a measure through the ordinary legislative procedure, with the amount of scrutiny that that receives, and passing a measure through the type of approach that the Minister has mentioned just now. I regret that this appears to be part of a piece, with a broader trend to exempt new policies from the parliamentary scrutiny that they deserve and that the British public have rightly come to expect from its elected representatives.

Arrangements for those facing redundancy are not, and should not be, a matter of purely technocratic interest. The Government’s failure to raise the tax-free threshold for statutory redundancy pay has meant that it has already lost much of its original real value. That perhaps explains why, when the Government consulted on this issue, there was no conclusive evidence in the consultation either of widespread abuse in this area or of a clamour for a reduction in the threshold.

We are also asking the Government to reconsider their plans on injury to feelings payments as part of termination payments.

[Mr Tanmanjeet Singh Dhesi (Slough) (Lab)]

My hon. Friend is making an excellent speech. Does she agree that the watering down of injury to feelings compensation is just another part of this Government’s plans to undermine and erode workers’ rights?

[Anneliese Dodds]

The concern is that this could be part of a piece of a broader movement to erode some rights that have existed for working people in the past.

[Antoinette Sandbach (Eddisbury) (Con)]

Some 85% of payments under the £30,000 threshold are not touched by these changes. Where there is the potential for manipulation of amounts above £30,000, does the hon. Lady not agree that that potential tax avoidance loophole should be closed?

[Anneliese Dodds]

I am grateful to the hon. Lady for her comments, but I must tell her that the consultation on the measure did not reveal widespread evidence of such manipulation of the rules. It was quite clear in that regard. Indeed, when advice was sought about appropriate measures in this area in the future, a range of different views came from stakeholders and consultees about the way forward. She is right to say that we are not talking about these changes affecting everyone who is made redundant. They apply to a minority of people, but it could be people who have had a very difficult time and who really rely on that redundancy payment for sustaining some kind of quality of life into the future. It is absolutely important that we have a proper debate about, and parliamentary scrutiny of, any changes, which is exactly what our amendments are intended to do.

I was talking about the new plans for injury to feelings payments as part of termination payments. I noted that there were many claims from the Government on this topic on First and Second Readings of the Bill, not least that payments allotted via tribunals would not be affected by these measures, but it is not the case that employment tribunals can decide whether payments are subject to tax or otherwise. That is not within their power. Yes, in some cases, some types of employment tribunal award are “grossed up” to take account of the tax that will be due, but that is very different from deciding whether an award is in and of itself taxable, which seemed to be implied in some of the previous debates on this issue.

In addition, the measures proposed in the Bill would cover the far more common payments made directly by an employer to settle discrimination complaints as part of a redundancy or other dismissal.

[Mel Stride]

The hon. Lady asserts that those awards made by tribunals are not necessarily non-taxable, but those made for discrimination, for example, are completely non-taxable.

[Anneliese Dodds]

If we are talking about payments made for discrimination in the context of a redundancy payment, yes, they are. That is our exact point, which is why we are discussing this matter about injury to feelings. We have had some comments in this House which appear to misunderstand the nature of injury to feelings payments. In some cases, these have been trivialised, almost suggesting that these payments are made because an employees’ nose has been put out of joint rather than something potentially more serious. But “injury to feelings” is a substantive legal category. Where there is genuine evidence of misuse of this category, that should be stamped out, but we have not been provided with such evidence as part of our deliberations on the Bill. Injury to feelings is related directly to discrimination experienced by a person because of their characteristics as an individual—their age, gender, sexual orientation, disability status or ethnicity. This should be taken seriously and it should not be a focus for penalising individuals, as is the case under these proposals. Again, as my hon. Friend suggested, this appears to be part of a piece, with more general measures watering down the protection to individuals suffering from discrimination at work, whether or not they take that discrimination to a tribunal. Clearly, tribunal fees have been struck down because of their discriminatory impact. Now measures are popping up that water down individuals’ protections in other ways.

[Robert Jenrick]

Just so that our constituents appreciate what is happening in the broader context, does the hon. Lady welcome the announcement that was made in September by the presidents of the employment tribunals of England and Wales that, in each of the three bands for injury to feelings, the maximum award is rising?

[Anneliese Dodds]

Again, I would be very careful to separate out tribunal awards that are made in the context of discrimination at work, which is not what we are talking about, from awards that might relate to redundancy, which is what we are focused on. In relation to discrimination generally, there has been a long-running discussion about what the rates should be for different bands. If one looks at the average award, or, even better, the median award, we are not talking about massive sums of money. It is very important that the public receive that message. For example, someone who has experienced discrimination on the basis of sexual orientation is generally receiving much less than £10,000—I regret that I cannot recall the exact figure. It is very important that we do not give the impression that people are somehow holding companies to ransom in this area. Indeed, that is perhaps underlying some of the change that has been forced on the Government through the court decision that we should not have tribunal fees, because these tribunals are being used not vexatiously, but purposely for people to protect their rights at work.

In conclusion, Labour’s message on this Finance Bill is clear. We felt that it offered an opportunity to reboot our economy, to deal with our massive productivity challenges and our cost of living crisis, and to shore up public finances by sealing loopholes for the very best-off people and biggest multinational companies. Instead, we have a series of missed opportunities and measures focused on soft targets, rather than on those who can afford expensive accountants and engage in complex schemes to avoid tax.

[Kirsty Blackman]

The House will be delighted to know that I do not intend to speak for very long. We have discussed this matter a number of times before. It is important to note that this measure is a revenue-raising one; the aim is to make £430 million for the Government. However we paint it, these workers are facing redundancy. They are receiving the pay-out at the same time as losing their jobs, so they are vulnerable by their very nature, and are having to think carefully and reassess how they go forward. This additional money will go to the Government, rather than to these workers who are being made redundant. For that reason, the Scottish National party will support the Labour party’s calls, particularly those regarding termination payments.