Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2018 Draft Tax Credits and Guardian’s Allowance Up-rating etc. Regulations 2018

Anneliese Dodds Excerpts

Wednesday 7th February 2018 General Committees

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

It is a pleasure to serve on the Committee with you in the Chair today, Sir David.

I am grateful to the Minister for what was indeed a useful overview of the changes. As he explained, the first set makes it possible to increase certain tax credit and child benefit rates as well as the guardian’s allowance rate. Those changes were prefigured in the Budget, as were the changes to national insurance contributions that we have been talking about—the annual re-rating of NIC rates, limits and thresholds—and provision for a Treasury grant to be paid into the national insurance fund.

I want to speak briefly about both sets of regulations. As to NICs, given the impact of inflation on incomes, which has been compounded by an exceptionally long period of sluggish wage growth, we support moves to ensure that NIC thresholds are increased in line with changes in the consumer prices index. Of course thresholds for the best-off people will be increasing by much more than inflation, with the Government’s commitment to increase the top band threshold eventually to £50,000. We feel that that is a move—along with many other Government changes to the tax system, and particularly to income tax—that should not be prioritised now. However, on their own terms the threshold increases in the regulations, at least for NICs, appear sensible.

The same applies to the increases by CPI in the Tax Credits and Guardian’s Allowance Up-rating etc. Regulations 2018. As the Minister explained, those cover the disabled worker and severe disability elements of working tax credit, the disabled and severely disabled child elements of child tax credit, and the guardian’s allowance. Of course, something of great concern is what the Minister did not talk about: the elements that are not being uprated, which is the majority of them.

The regulations fail to cover any other elements of working-age social security support that come under the aegis of the Treasury and HMRC. Given that those elements have been frozen at their 2015-16 rates until 2020, the practical impact of the freeze is predicted to be a 5% fall in the value of social security support for some of the poorest families in Britain by 2020. Coupled with additional cuts to tax credits and the lower levels of support available through universal credit, that is pushing large numbers of people in Britain into poverty—especially children.

The Joseph Rowntree Foundation has noted that the social security freeze is the

“single biggest policy driver behind rising poverty, hitting families in and out of work”.

The freeze has also been criticised by the End Child Poverty coalition. I was disturbed to hear from the coalition that now almost a third of children in my constituency are growing up in poverty. The Institute for Fiscal Studies also recently noted that the Government’s changes to social security, including the freeze, have left many families ill-prepared for another economic slowdown, should there be one.

The Minister suggested that those changes somehow, overall, protect the most vulnerable in society, and I find that difficult to understand. I normally find him persuasive on many issues, but on that matter I am afraid we cannot concur, because the most vulnerable in society are unfortunately being badly let down. In the circumstances, the regulations should be condemned for what they leave out—adequate support for struggling families to make ends meet. Often the people concerned are not those seeking work; they are among the growing number who are in work but living in poverty.

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[Mel Stride]

When looking at the impact of inflation on potential savings such as the hon. Gentleman describes, we have to bear in mind that many costs are going up for the Government as a consequence of increased levels of inflation. It is not simply something that can be looked at in isolation.

[Anneliese Dodds]

I am grateful to the Minister for giving way; he is being very generous. Is he aware that analysis by groups such as the Women’s Budget Group has shown that any benefits, particularly for the worst-off families, that might have come through the increase in the personal allowance and the national living wage are cancelled out by the social security changes? When those changes are taken into account, people’s incomes have been falling. Furthermore, the very worst-off families often do not benefit from the changes, because they are simply unable to accrue enough hours to reach the threshold in the first place.

[Mel Stride]

As I have been explaining, the national living wage increases and the rise in the personal allowance are clearly elements of this. We are also now rolling out universal credit, which will increasingly make sure that work pays. We believe that that is the best way out of poverty and the best way to improve living standards. To make some broader points, as a responsible Government we need to balance the costs of benefits with the compelling need to look after and support the most vulnerable in our society. I argue that that is why today’s measures effectively exempt from the freeze the categories of individuals whom we are discussing today, who are indeed among the most vulnerable in our society.

Between 2008 and 2015, jobseeker’s allowance rose by about 21%, child tax credits by about 33%, but earnings by only about 12%. The total spend on benefits in 1980-81 was £30 billion in real terms. By 2014-15, that had risen to £96 billion. We have to place this debate within the context of that overall fiscal framework.

[Anneliese Dodds]

I am very happy to talk about how the overall balance of benefits has changed over time. The most significant difference between the 1980s and now, when we look at the overall balance of social security, is the gigantic increase in housing benefit that has occurred over the period, particularly over the last seven years. We have seen a radical increase in the cost of housing, which has left many families struggling when their wages have not been increasing. That is the major difference.

If we were to look at a pie chart of social security in those two periods, housing benefit has driven most of the change—certainly not increases in support for unemployed people, where the amount of support that people get in relation to wages has fallen precipitously. It has fallen more in the UK than in most comparable countries. I am very pleased to put the debate in that context; it is important that we do so, and remind ourselves that changes in the overall burden of social security payments have often been the result of a failure to deal with structural problems, such as the arguably overheated housing market that we have at the moment.

The Minister mentioned increases in different tax credits and JSA. I do not believe that they have been above inflation. Certainly, unemployment support has gone down substantially. The element of JSA that is linked to contribution-based national insurance has substantially decreased over time. It is simply not the case that we are moving towards a more contributory system. Most analysts would suggest that we have actually had a residualisation over recent years.

[The Chair]

Order. Interventions should be short. I think that was about three interventions.

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[Mel Stride]

My hon. Friend is entirely right, and he will know that prior to the very recent figures, which still show that the level of income inequality is the lowest since 2010, it was the lowest in 30 years.

[Anneliese Dodds]

rose—

[Mel Stride]

I know that the hon. Lady is itching to tell me about it excluding housing and raise various points, but it is a recognised measure within the Gini coefficient. I do believe that this Government have a record of which they can be truly proud. There is more to be done, but I think we can all agree on these measures, to the extent that they are relieving measures for particular categories of individuals whom we all, on both sides of the Committee, seek to support. I hope that on that basis we can approve these measures.

Question put and agreed to.

DRAFT TAX CREDITS AND GUARDIAN’S ALLOWANCE UP-RATING ETC. REGULATIONS 2018

Resolved,

That the Committee has considered the draft Tax Credits and Guardian’s Allowance Up-rating etc. Regulations 2018.—(Mel Stride.)

Taxation (Cross-border Trade) Bill (Seventh sitting)

Anneliese Dodds Excerpts

Thursday 1st February 2018 Public Bill Committees

[Kirsty Blackman]

If the Government amended the Bill to specify “appropriate data protection legislation”, rather than “the Data Protection Act 1998”, that would fix the problem and ensure that the correct legislation is used. I am sure that the Minister has listened, so I will not press the amendment to the vote, but I hope the Government will make reasonable changes on Report or at another stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 25 ordered to stand part of the Bill.

Clauses 26 to 29 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clause 30

General provision for the purposes of import duty

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

I beg to move amendment 81, in clause 30, page 18, line 9, at end insert—

“(2) No regulations may be made under this section after the end of the period of two years beginning with exit day.

(3) In this section, “exit day” has the meaning given by section 14(1) (interpretation) of the European Union (Withdrawal) Act 2018 and subsections (2) to (5) of that section apply to the term under this section as they apply to the term in that Act.”.

This amendment limits the duration of the delegated power under Clause 30 to the period ending two years after the United Kingdom leaves the European Union.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 131, in clause 30, page 18, line 9, at end insert—

“(2) No regulations may be made under this section unless a draft has been laid before, and approved by a resolution of, the House of Commons.”.

This amendment requires regulations under Clause 30 to be subject to the affirmative procedure.

Clause stand part.

Amendment 132, in clause 32, page 19, line 32, after “regulations” insert “under section 30 and”.

This amendment is consequential on Amendment 131.

[Anneliese Dodds]

It is a pleasure to see you in the Chair, Ms Buck, and a pleasure to see the rest of the Committee.

Our amendments would qualify the powers in clause 30 that enable the Treasury to make, by regulation, a wide range of provisions relating to the imposition of import duty. In particular, amendment 81 advocates the inclusion of a sunset clause, whereby no regulations can be made under clause 30 after the end of the two-year period, beginning with exit day, when the UK is set to leave the EU.

The Government suggested on Tuesday that the Opposition’s contributions had been on the theme of greater parliamentary accountability, for which I suspect many of our constituents would thank rather than criticise us. Today, one of our themes will be the use of sunset clauses where appropriate. I hope the Minister will listen to our arguments with an open mind.

It is not just the Opposition who have argued for the use of sunset clauses in the Bill and more generally. The House of Lords Committee that examined the subject also recommended their greater use. My hon. Friends will elaborate on that point later. I will point out the Government’s inconsistent approach to this Bill compared with the use of sunset clauses in other areas.

The European Union (Withdrawal) Bill commits to ensure that delegated powers in many of the areas it covers will not be available in perpetuity but only for the period necessitated by leaving the EU, and yet even that approach is not adopted here. The Enterprise and Regulatory Reform Act 2013—not necessarily an Act that I would otherwise support, because of its negative impact on health and safety regulation—appropriately suggested that sunset clauses could be a helpful mechanism to ensure that provisions are kept up to date. That commitment was placed into guidance on the conduct of impact assessments, which advocates that

“opportunities to use sunset clauses should be explored where appropriate.”

The use of sunset clauses was a core element of the better regulation agenda. In theory, the Government are still committed to that, although I was pleased to hear from the Prime Minister that she will remove some elements of it, such as the one in, two out rule.

There are many other historical parallels. Sunset clauses applied to legislation used during the first and second world wars, and to legislation dealing with a heightened terrorist threat. The lack of a time limit on some temporary legislation passed in the second world war exposed Governments to legal action in the late 1970s, when they tried to implement new control orders on the export of goods using the temporary legislation that had never been repealed.

I am not saying that sunset clauses are never abused. Arguably, in the US, President Bush sprayed them around routinely and inserted them into tax-cutting measures to try to hide the magnitude of revenue that the US Government would lose over time. However, they can play an important role when they are used appropriately, especially in trade and customs policy. The OECD’s policy framework for investment explicitly mentions the need to consider including sunset clauses in trade facilitation measures.

Antonios Kouroutakis published an interesting book a couple of years ago on sunset clauses. He shows that they have been used for centuries as a means of balancing the powers of the Executive with those of the legislature, especially when there is a need to develop parliamentary consensus and accelerate decision making when time is tight.

I am not sure about other Committee members, but I cannot imagine an epoch that fits those characteristics more fully than this one. The Government should aim to build trust across Parliament, not diminish it, and to achieve parliamentary consensus. I hope they will heed our call for a sunset clause in clause 30 and take it as the constructive suggestion that we intend it to be.

[Mel Stride]

Clause 30 allows the Treasury to make regulations for the purposes of import duty, which will prove necessary to ensure that the UK’s import duty regime operates effectively. As the Committee will be aware by now, the Bill contains several new powers to make regulations. As I have explained, although the Bill sets out the requirements for import duty, the need for more detailed rules will likely arise once the new regime is implemented. That is what the power in the clause allows for.

The clause permits regulations to be made to deal with administrative matters, the needs of which cannot be identified at this time because, for example, of unforeseeable changes in business practice. It is worth noting that the Union customs code, which establishes the current customs regime, provided powers to the Commission to make implementing and delegated Acts to supplement the rules set out in that code.

Amendment 81 seeks to limit the period in which the power to make regulations under clause 30 can be exercised to two years after exit day, as the hon. Lady outlined. The power will ensure that the UK can make the regulations necessary to deliver an effective import regime into the future. It allows the Treasury to respond as necessary to any future developments that might have a bearing on import duty.

The power will play an important part in ensuring we have the ability to address any circumstances that arise in the future that might require modification in the UK’s import duty regime, conceivably beyond the term of the period that the hon. Lady has suggested. It is for that reason that the power in the clause is not subject to a time limit. Amendment 81 seeks to impose just such a time limit of two years following exit day. If it were accepted, there would be a risk of limiting the Treasury’s capacity to make or require changes to the UK’s import duty regime in the future.

To pick up on a specific point raised by the hon. Lady about the Lords Committee and its assessments around sunsetting, it should be noted that the aims of this Bill are somewhat different from some of the other Brexit Bills that were referred to in that report. For example, while the European Union (Withdrawal) Bill makes provision for day one, with the understanding that further primary legislation will be made to supplement it, this Bill will be required in order to maintain a functioning customs regime and effective VAT and excise regimes on an ongoing basis. That is a key point. For those reasons, I urge the hon. Lady to withdraw the amendment.

Amendments 131 and 132 seek to apply the draft affirmative procedure to regulations under clause 30. As I set out to the Committee previously, the Bill ensures that the scrutiny procedures that apply to the exercise of each power are appropriate and proportionate, taking into account what could be covered by the regulations and the frequency and speed at which changes may need to be made. The Government believe that the negative procedure for regulations made under clause 30 provides an appropriate level of parliamentary scrutiny. The Government need to be able to administer the tax system effectively, for example to collect the right amount of tax from the right person at the right time. That clearly applies to the collection of real-time taxes such as import duties. Changes in circumstances, for example the emergence of a new category of goods or the proliferation of one means of importing goods, may need to be addressed in real time. Therefore, application of the draft affirmative procedure to regulations made under clause 30 is inappropriate. Unlike the negative procedure, the draft affirmative procedure will not be capable of implementing those essential policy changes immediately. Before the UK joined the EU, none of the provisions that could be made in secondary legislation in relation to import duty were subject to the draft affirmative procedure. For those reasons, the Government do not support the amendments.

[Anneliese Dodds]

I am grateful to the Minister for that explanation. However, I wonder if I could probe a little further. First, will it be possible for the Government to legislate in order to extend some of the provisions if necessary? Is that a theoretical or actual possibility? It is my understanding that it would be both. Therefore, it is not clear to me why he does not accept the sunset clause.

Secondly, the Minister referred to the need to insure that the Government can respond to calls for frequency and speed in processing new measures. He appeared to imply that that need might go beyond two years after the Government’s planned exit day. I wonder how many years exactly he envisages that we might need the last-minute decision-making proposed in the Bill. Will it continue indefinitely? If that is the plan, it might concern many constituents.

[Mel Stride]

The hon. Lady knows the answer to her theoretical question—whether in theory Parliament could, in the absence or with the existence of a sunset clause, none the less extend the provisions in the Bill—as well as I do. It is, of course, yes: Parliament can decide to do broadly that which it wishes to do in the legislative sphere.

How long we expect to rely on the provisions in the Bill and whether that will be beyond two years depends on a wide variety of circumstances, some of which will almost certainly necessarily be completely unknown at the current time. We do not actually know for certain whether there will be an implementation or transition period with the European Union and what the length of that would be, for example. That situation and the fact that, on an ongoing basis, we will need to make adjustments to regulations, potentially into the future, justify the measure.

The final point is that the clause and its powers do not amend primary legislation. They introduce new secondary legislation and the scope is restricted solely to those matters in relation to import duty. I hope that, on that basis, the hon. Lady might consider withdrawing her amendment.

[Anneliese Dodds]

We are willing not to have a vote on the amendment, but we hope that the Government have listened to our concerns, particularly on the need to ensure that there is appropriate review. The intention behind much of the push for greater use of sunset measures is the concern that these provisions could be extended to cover other areas potentially not directly connected to the UK leaving the EU, as the Government have said they wish to do. I hope the Government continue to be mindful that there are concerns that the measure is part of a wider attempt to allocate more power to the Executive, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 30 ordered to stand part of the Bill.

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[Kirsty Blackman]

Amendments 89 to 96 would have a number of different effects. If the Committee will allow me, I will talk through all of them, and all the surrounding details.

Amendment 89 would subject regulations made under certain provisions of schedule 4 to the made affirmative procedure, rather than the negative procedure, and would ensure a higher level of parliamentary scrutiny. Particularly in schedules 4 and 5, which amendment 90 relates to, the Government have left an awful lot to regulation. I understand that the Bill is a framework Bill, but we could really do with a bit more information around it. If there had been more information, we would not need to make these calls to move things up the agenda, in terms of requesting more scrutiny.

We have concerns about how the Trade Remedies Authority will operate, and how it will decide things such as the amount of injury that has been sustained. The Government have not yet provided enough information on that. It is not reasonable for the Government to do such things by the negative procedure, rather than either the made affirmative procedure or the super-affirmative procedure. Amendments 91 and 92 would subject certain regulations to the super-affirmative procedure, instead of leaving them subject to the negative procedure.

We heard concerns during the evidence sessions about how trade remedies would work. As I have said previously, the Government are asking us to trust them an awful lot on this, but because they have not been responsible for this area in recent years, as the UK has been part of what the EU has done, they do not have a track record. We cannot just take it on trust that they will do the right thing; in fact, we have already criticised their choice to have the lesser duty rule, for example. Clearly, the UK Government are already making decisions that we would not like them to make.

The Government are asking us to trust them, and to accept negative procedure, which makes it very difficult for parliamentarians to be involved in the scrutiny of legislation. That is a real concern. Amendments 89 to 92 would therefore subject regulations under schedules 4 and 5 to a higher level of scrutiny. I do not consider that an unreasonable ask in the light of the importance of this issue, particularly to industries such as steel and chemicals that rely on trade remedies to continue producing, selling and competing in the domestic market. Amendment 93 is consequential on amendment 92.

Amendment 94 would delete clause 42(1) and thus remove from the Bill the proviso that direct EU legislation on VAT would no longer have effect in the UK. It would ensure that EU legislation affecting VAT and the operation of the common VAT area would continue to have effect in the UK for the transitional period. The amendment is important because it would address concerns raised by the British Retail Consortium about replacing acquisition VAT with import VAT.

Losing membership of the EU VAT area in just over a year’s time would cause major problems for businesses, including with cash flow, because they would end up having to pay VAT on goods before they were released. Businesses planning for the future are having to make projections now without having all the information about what the VAT position will be. If the Minister makes it clear that the Government will continue with their apparent intention to replace acquisition VAT with import VAT, significant changes will be required, either in how businesses operate or in how HMRC ensures businesses pay VAT.

We do not suggest in any way that businesses should not be liable for VAT. Our concern relates to cash flow. We suggest that businesses should not have to pay VAT on goods the second they hit UK shores. Perhaps they should be able to roll it up and pay it quarterly or in some other way that makes cash flow easier.

The UK Government have not been as clear as they could be on this. If the Minister is unequivocal in his desire for us to move to import VAT, and if he states unequivocally that there will be no scheme for VAT deferral, businesses will be incredibly unhappy, but at least we will have more clarity. It would be pretty devastating for businesses in a number of ways, but at least they will able to factor it into their projections. It would be useful to have more clarity on whether we are leaving the EU VAT area and whether, if we move from acquisition VAT to import VAT, there will be more opportunities for deferral.

It would be better for the Government to keep open the possibility of remaining in the EU VAT area, which clause 32 seems to rule out. If we leave the EU VAT area, we will lose the triangulation simplification exemption—I am glad to have my teeth in this morning so that I can say that. The exemption currently provides a simplification mechanism that means that UK-based businesses do not have to register for VAT in various EU countries. If we leave the EU VAT area, not only will they have to contend with cash flow issues and moving from acquisition VAT to import VAT; they will also have to register for VAT in those other European countries, as well as in the UK. It seems to me that that issue has not been adequately discussed.

We do not have enough clarity about the Government’s intentions. I have made this case before, but it would be useful to know the Government’s desired direction of travel, even if the eventual outcome of negotiations is different. Do the Government intend to leave the EU VAT area but retain some elements of triangulation simplification?

[Anneliese Dodds]

It might be useful to mention the enormous problems faced by microbusinesses when they had to comply with the reduction in the threshold for VAT applied to digital services within the EU. Even without having to register in those different countries, but simply paying the VAT, that was a huge adjustment that many firms had to make. Would it not be much more of a problem if we had the approach that the hon. Lady describes?

[Kirsty Blackman]

Absolutely. For a number of businesses, particularly those that are quite small and do a lot of exporting and importing, VAT is a major part of their costs and they have to deal with that on a regular basis. There would be a disproportionate impact particularly on smaller businesses were there to be changes without sufficient notice.

The effect of amendment 95 would be to ensure that the UK Government do not exclude aspects of the UK’s participating in the EU VAT area or in the EU’s principal VAT directive by delegated legislation. The amendment would ensure that there is more parliamentary scrutiny around any changes. We have been clear that we want more parliamentary scrutiny. The evidence sessions that we had were useful because we had people here talking about actual impacts on actual businesses and not just the impacts that the policy makers might think will take place. It was useful to learn about some of the technicalities.

We might have legislation and changes made in future by delegated legislation with no ability for us to have written and oral evidence and all of those people coming together to ensure that those of us in Parliament who make the laws are as well briefed as possible and able to make the best possible decisions. That is one of the most important things specifically in the area of VAT. I do not think many people in the House of Commons are expert in VAT. I am sure there are some, but not a huge number. We would have to be incredibly lucky to have all of them on a delegated legislation Committee and to have enough knowledge in the room to make reasonable decisions.

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The hon. Lady also raised, quite rightly, the move from acquisition VAT to import VAT and the repercussions of that in the context of the 122,000—or thereabouts—companies that trade only intra-European Union. I can reassure her that in the Value Added Tax Act 1994 powers are already available that will allow us to make the kind of changes we are likely to be considering as we make sure we move forward in a positive way and do not penalise the businesses she rightly mentions.

[Anneliese Dodds]

I will respond briefly, if I may, to the Minister’s comments. I do not want to get into a semantic discussion about precisely what the speaker from the Hansard Society did or did not say. Ultimately, he was trying to preserve the independence of the Hansard Society. Therefore, when he was being pushed about the Bill more globally, he resisted. I can understand that, because he wished to protect the independence of the Hansard Society, but to my memory, he did not comment directly on the proposals that have been put forward by the Opposition. I do remember him commenting directly, for example, on the cumbersome and difficult nature of the negative procedure and the fact that it operates through early-day motions and all those kinds of things. I cannot remember him specifically saying that he felt that the suggestions being put forward by the Opposition were incorrect. He resisted being pulled towards a global assessment of the Bill, but I can understand why he did that, given his need to retain independence.

[Peter Dowd]

I can remind my hon. Friend of what Mr Blackwell said. In relation to the 150 delegated powers, he said:

“Some of the justifications I am struggling with, particularly as regards the use of urgency and non-urgency. I think time is an issue here, particularly if you do not have the backstop of further scrutiny by a Chamber—the second House—that is usually very good at looking at delegated legislation”.—[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 53, Q77.]

He was absolutely clear and unambiguous that this really was not a way to do matters of this nature.

[Kirsty Blackman]

It has been an interesting debate, and I am glad to have had the opportunity to start it. I really do appreciate some of the clarification that has been given by the Minister, particularly around moving from acquisition to import VAT. As I said earlier, I do not want to press any of these amendments, because I would like to return to them at Report stage. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Anneliese Dodds]

I beg to move amendment 121, in clause 32, page 19, line 33, at end insert—

‘(5A) Subsections (2) and (5) are subject to section (Affirmative procedure: further provisions).’

This amendment, together with New Clause 14, provides that the made affirmative procedure under Clause 32 is only used in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 122, in clause 40, page 28, line 8, at end insert—

“(5A) Subsections (2) and (5) are subject to section (Affirmative procedure: further provisions).”

This amendment, together with New Clause 14, provides that the made affirmative procedure under Clause 40 is only used in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

Amendment 123, in clause 48, page 33, line 32, at end insert—

“(6A) Subsections (2) and (6) are subject to section (Affirmative procedure: further provisions).”

This amendment, together with New Clause 14, provides that the made affirmative procedure under Clause 48 is only used in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

Amendment 124, in clause 51, page 35, line 26, at end insert—

“(7A) Subsections (4) and (7) are subject to section (Affirmative procedure: further provisions).”

This amendment, together with New Clause 14, provides that the made affirmative procedure under Clause 51 is only used in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

Amendment 125, in clause 54, page 37, line 44, at end insert—

“(11A) Subsections (8) and (11) are subject to section (Affirmative procedure: further provisions).”

This amendment, together with NC14 , provides that the made affirmative procedure under Clause 54 is only used in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

New clause 14—Affirmative procedure: further provisions—

“(1) The appropriate Minister may only make regulations under the powers specified in subsection (2) if the condition in subsection (3) or the condition in subsection (4) is met.

(2) The powers specified in this subsection are those under—

(a) section 32(2),

(b) section 40(2),

(c) section 48(2),

(d) section 51(4), and

(e) section 54(8).

(3) The condition in this subsection is that the instrument contains a declaration that the appropriate Minister concerned is of the opinion that, by reason of urgency, it is necessary to make the regulations without a draft of the instrument being laid before, and approved by a resolution of, the House of Commons.

(4) The condition in this subsection is that the instrument contains a declaration that the appropriate Minister concerned is of the opinion that it is necessary to make the regulations without a draft of the instrument being laid before, and approved by a resolution of, the House of Commons in order to secure—

(a) the protection of the public revenue, or

(b) continuity in the administration of the tax system.

(5) In any case where neither the condition in subsection (3) nor the condition in subsection (4) is satisfied, no regulations may be made in exercise of the powers specified in subsection (2) unless a draft has been laid before, and approved by a resolution of, the House of Commons.”

This new clause provides that the made affirmative procedure is only used in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

[Anneliese Dodds]

These amendments and the new clause focus specifically on the made affirmative procedure. We have tabled them because we want to ensure that the made affirmative procedure provided under clause 32 is used only in specified circumstances and that, in other circumstances, the draft affirmative procedure is used.

There have been consistent calls, even before the Government’s current enthusiasm for the made affirmative procedure, for it to be used judiciously. This is not a partisan point. In 2009 the Lords Constitution Committee maintained:

“Whilst accepting that in a very limited number of circumstances there may be grounds for seeking to fast-track parliamentary procedure of draft affirmative instruments, we take this opportunity to remind the Government of the importance of executive self-restraint.”

When made affirmative procedures have been used in the past, there appears to have been a strong commitment by the Government of the day to restrict their use as much as possible. That is certainly my impression having looked at some of the commitments made by the then Government in relation to the Banking Act 2009. Similarly, with the new approach to financial regulation that came in in 2011, the then Government stated that the made affirmative procedure would be used as a last resort. They said it would

“rarely—if ever—need to be used”.

Hon. Members will surely agree that the financial crisis required action just as rapid as is currently necessitated by the Government’s approach to leaving the EU. However, in the former case, there seems to have been a commitment to be sparing in the use of the made affirmative procedure that we do not have in this case. Because of that, this approach has received significant criticism in the House of Lords. We have already referred to the Lords’ general criticisms, and I hope that the Government will heed our concerns.

I do not want to repeat the debate that we had previously on whether we are in an unprecedented period, but there have been situations in the past when Government have had to speedily enact different types of policy making. However, as I said, in those situations, Government appear to have been more restrained in their use of these kinds of procedure, particularly in their use of the made affirmative procedure. We cannot understand why the Government are so wedded to this procedure, without further qualifications, that enables the Executive to make law that is binding from the moment it is laid down, without any parliamentary engagement whatever.

[Mel Stride]

New clause 14 and amendments 121 to 125 seek to add further parliamentary scrutiny of the way that certain powers in the Bill to make secondary legislation can be exercised. The Bill allows the powers in question to be exercised under the made affirmative procedure; the amendments would change that in certain circumstances to the draft affirmative procedure.

The Committee is aware that the Bill contains a range of powers to make regulations on a number of different aspects of VAT, customs and the excise regime, which will come into effect after the UK leaves the EU. New clause 14 is concentrated on a small subset of these powers, namely those that apply with respect to setting or increasing tariff rates, charging export and excise duty, some of the general rules for excise duty, and provisions under clauses 51 and 54, to the extent that they amend or repeal primary legislation. All those powers are subject to the made affirmative procedure.

In each case, the amendment would require a Minister who wished to exercise a power using the made affirmative procedure to make, on each occasion, a declaration that such a procedure is warranted, either for reasons of urgency, revenue protection or security continuity in the administration of the tax system. When a Minister does not make such a declaration, the regulation in question would default to the draft affirmative procedure.

I fully understand concerns about the inappropriate use of parliamentary procedures, but there is a compelling case for using the made affirmative procedure for the powers referred to in the amendments. We must not lose sight of the fact that the Bill is primarily concerned with the charging of tax and duty. Usual procedure when giving effect to changes in tax policy is the made affirmative procedure—that is a very important point in the context of the other examples I appreciate the hon. Lady making in this regard. The reasons for that are that any changes need to come into effect quickly—in some cases immediately. The made affirmative procedure is the standard mechanism for achieving that aim.

It is generally accepted that change in tax policy—such as when the Government change a rate of tax—should come into effect immediately. The use of the made affirmative procedure allows the Government to give effect to such changes immediately, in order to avoid a gap in UK legislation. The same principle will apply for matters covered by the Bill. At some point in the future, the Government might wish to amend the customs tariff quickly to reflect a change in international trade. That is vital for tax matters, and the reason why the made affirmative procedure is the norm for tax legislation. Because tax entails financial consequences for both taxpayers and the Exchequer, clarity and certainty are essential.

Although the intention of the amendments may be to improve parliamentary scrutiny, if they were adopted, they would create uncertainty for businesses, and that uncertainty would be in nobody’s interest. On that basis, I hope that the hon. Lady will not press new clause 14 and amendments 121 to 125. If not, I urge the Committee to resist them.

[Anneliese Dodds]

I am grateful to the Minister for his explanation. I question, however, whether the circumstances he just described as appropriate for the use of the made affirmative procedure do not fall precisely within the circumstances we ask the Government to demonstrate are in place within the declaration we are asking for. We say that it is possible for the made affirmative procedure to be used, provided the Government make clear that these measures are necessary for the protection of the public revenue or continuity in the administration of the tax system. Those are exactly the kinds of circumstances that the Minister has referred to, so it is not clear to us why he would not accept our amendment. We are saying that we do accept the use of the procedure in such circumstances as he just described: it is when things go beyond them into other areas that we are not satisfied with the use of the procedure.

[Mel Stride]

I understand the hon. Lady’s argument, but the matter comes down ultimately to the relevant level of scrutiny. The argument is strong that the circumstances that we are discussing, of a quick response and the ability immediately to set the tariff or change duties—things of that kind—lend themselves to the approach in question. If the central argument is about scrutiny, the question is whether the made affirmative procedure provides sufficient scrutiny. I maintain that it does. It requires in-depth scrutiny by the House, which would be subject to a Division if there were differences of opinion on the matter in hand.

Perhaps I may briefly pray in aid Joel Blackwell, the witness from the Hansard Society, who is getting a lengthy outing in our discussions today. I take on board the Opposition points about its being important, from his perspective, to maintain impartiality in the deliberations of the Hansard Society; we all respect it, which is why we were pleased to have him in particular as a witness. However, he did state that

“the Brexit Bills are going to have to be framework Bills—based on the fact that the legislation for Brexit is going to need some speed and flexibility”—[Official Report, Taxation (Cross-Border Trade) Public Bill Committee, 23 January 2018; c. 47, Q63.]

That is at the heart of our arguments that we are putting on these matters in general.

[Anneliese Dodds]

I shall not return to what the witness did or did not say. I think there may be a difference of opinion there. I am afraid I do not agree with the Minister’s description of the made affirmative procedure. In practice, of course, that procedure means that measures are in place from the moment they are laid, so they are immediately enacted. There need be no effective scrutiny by way of discussion by the House or other bodies, to allow them to stay in place over time. We are talking about a mechanism very different from what would usually be applied.

I shall not push the point. I appreciate the Minister’s comments. I just hope that the Government will heed our call for them to restrict the use of the measure to exactly the kinds of areas that the Minister just described—only those where the procedure is necessary to protect public revenue, or for continuity in the administration of the tax system. If its use goes beyond that, we fear we shall be in tricky waters. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Jonathan Reynolds]

I beg to move amendment 140, in clause 32, page 20, line 8, leave out subsection (9).

This amendment limits the powers with respect to public notices.

Taxation (Cross-border Trade) Bill (Eighth sitting)

Anneliese Dodds Excerpts

Thursday 1st February 2018 Public Bill Committees

[Mel Stride]

I will respond because, as ever, the hon. Lady made some helpful comments.

On taking into account sustainable development and the interests of producers, I refer the hon. Lady to the point that she made herself, which is that the clause does not prohibit any of those matters being taken into account. The point I made earlier was that the Government certainly do not see the need to specifically reference those matters—or, indeed, the many other matters that the Committee and individual parliamentarians may feel are important in this context—in order that we do not have an exhaustive list, but rely on the common sense and good public policy making of the people who make such decisions.

Duties, whether they are import duties or export duties, which are potential though unlikely, are a slightly strange instrument to use in the food safety context. It would be much more appropriate for the Department for Environment, Food and Rural Affairs to look at those issues and use its powers to take action where clear breaches of food safety have occurred or are likely to occur.

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

It is a pleasure to see you in the chair, Mrs Main. I am grateful to the Minister for those remarks. I want to focus on amendment 79 and press him a bit on sustainable development.

There is an important consideration here, which relates to our discussion earlier about what will happen if the UK leaves the EU without a deal and falls back on World Trade Organisation provisions—something I hope will not happen, but that the Government have not ruled out. The hon. Member for Aberdeen North asked the Under-Secretary of State for International Trade exactly where the powers are to create WTO schedules. I do not know if the Minister has the answer yet—perhaps we will find out later. There is a pertinent issue when it comes to laying those schedules if we have to accede to the WTO as a new member—that is, if we do not conclude a customs and trade arrangement that means we do not need to join separately. A number of the countries that have joined the WTO recently have found it difficult to apply the provisions of the general agreement on tariffs and trade that enable sustainable development, environmental considerations, human health and so on to outweigh having low or non-existent tariffs. When that has been offered to one country, it should therefore be offered to all.

China’s recent dispute about raw materials is a pertinent example. As with all the most recent accessions to the WTO, when China acceded, it was required to submit commitments on export duty that bound it to keep export duty at its current rate or to reduce it in relation to different product lines. If that had been part of the general agreement on tariffs and trade, China would have been able to invoke the WTO’s GATT provisions that say that human health can trump those other considerations, but because there were separate agreements, it was not allowed to invoke environmental considerations.

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[Mel Stride]

I thank the hon. Members for Aberdeen North and for Oxford East for their contributions. On the issue of sustainable development, I can provide the Committee with reassurance that the Government take that area of policy extremely seriously. As the Committee will know, the UK Government have stated their commitments to the UN sustainable development goals that were agreed in September 2015. A publication released on 14 December 2017 outlined the Government’s response to the UN SDGs and their relevance to individual departmental plans. Trade policy is explicitly referenced in five of those 17 goals.

The hon. Member for Oxford East asked me about the letter regarding WTO scheduling, upon which I believe she may still be waiting.

[Anneliese Dodds]

I am so sorry—I think it has been received.

[Mel Stride]

Oh, it has been received. I was going to say that if it had not been, she would receive it imminently. I am pleased that my desire has already been put into effect. I would also be very happy to write to the hon. Member for Aberdeen North about the various issues she raised regarding WTO accession.

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[Jonathan Reynolds]

All the amendments relate, as ever, to the lack of detail in the Bill. The Minister has provided some words of reassurance, which are appreciated, but in the end it comes back to the point that very important details, which industry needs to plan, are missing from the Bill. However, I think that that point has been made, and for that reason I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Anneliese Dodds]

I beg to move amendment 14, in clause 39, page 27, line 20, at end insert—

“() by a relevant select committee of the House of Commons, or

() contained in a resolution of the House of Commons.”

This amendment requires the Treasury to have regard to recommendations of any relevant select committee of the House of Commons or contained in a resolution of the House of Commons in considering whether to exercise the power to impose export duty.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

Amendment 15, in clause 40, page 27, line 35, leave out subsections (2) to (4).

This amendment is consequential on NC8.

Amendment 16, in clause 40, page 28, line 6, leave out

“other than regulations to which subsection (2) applies”.

This amendment is consequential on NC8.

Clause 40 stand part.

New clause 8—Setting export duty: enhanced parliamentary procedure—

“(1) This section applies to—

(a) the first regulations to be made under section 39, and

(b) any other regulations to be made under that section the effect of which is an increase in the amount of export duty payable.

(2) No regulations to which this section applies may be made by the Treasury in exercise of the power in section 39(1) except in accordance with the steps set out in this section.

(3) The first step is that a Minister of the Crown must lay before the House of Commons a draft of the regulations that it is proposed be made.

(4) The second step is that a Minister of the Crown must make a motion for a resolution in the House of Commons setting out, in respect of proposed regulations of which a draft has been laid in accordance with subsection (3)—

(a) the rate of export duty applicable to goods specified in the resolution;

(b) any proposed export tariff (within the meaning given in section 39(3)(a)); and

(c) any measure of quantity or size by reference to which it is proposed that the duty be charged.

(5) The third step is that the House of Commons passes a resolution arising from the motion made in the form specified in subsection (4) (whether in the form of that motion or as amended).

(6) The fourth step is that the regulations that may then be made must, in respect of any matters specified in subsection (4)(a) to (c), give effect to the terms of the resolution referred to in subsection (5).”

This new clause establishes a system of enhanced parliamentary procedure for regulations setting export duty, with a requirement for the House of Commons to pass an amendable resolution authorising the rate of export duty on particular goods and related matters.

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[Anneliese Dodds]

I am sorry about the complexity of all the different amendments, but they reflect the Members’ concerns about the Bill as it stands in these particular clauses. I will not speak at length, because many of the issues have already been covered in our previous discussions.

In relation to amendment 14, my hon. Friend the Member for Stalybridge and Hyde has already detailed why we think it would be appropriate to use the expertise and the opportunities for consensus building provided by the Select Committee system in the Bill. I will not go over those arguments again; suffice to say, I hope the Government will consider the arguments that my hon. Friend made, take the opportunity afforded by the Select Committee system and apply it here when it comes to setting export duty and scrutinising the setting of it.

We have covered many of the principles underlying amendments 15 and 16 and new clause 8. Again, we are asking for greater parliamentary scrutiny—this time in the area of export duties. I was thinking about how else I could try to persuade the Government of our arguments, and one issue I decided to focus on was that we have often heard the word “technical” applied to many of these measures. Of course, they are technical when they are about minimal changes to rates, or just alignments between different measures, but we need to appreciate that they can have a significant impact on our constituents, because there are winners and losers when we change the parameters of trade.

Capital is largely mobile, but workers often are not. Academic evidence shows that there can be considerable dislocation when there are changes to trade rules. It may well be the case that, in the past, those matters were often seen as technical, but they have had real-world implications. That is particularly important in our country, where the kind of active labour market measures that might have enabled labour to be more mobile when there are changes to duties that affect working patterns do not exist to the same extent that they do in many countries. Recent research by the Resolution Foundation suggests that people have become less mobile in their jobs, potentially because they do not have that help to alter jobs. It is important to consider these issues carefully when there are not those compensatory measures there for people who might be negatively affected by trade measures that alter the pattern of economic activity in our country.

It is absolutely right and proper that we seek appropriate parliamentary scrutiny of measures that could have a significant impact on the availability of manufacturing jobs, especially in our constituencies. I hope that the Government will bear that in mind. Yes, some of the measures could be described as technical, but they will certainly have impacts on our constituents, and we should all be aware of that while we discuss them.

[Mel Stride]

Clause 39 enables the UK to establish an export duty if it is considered appropriate to do so. Clause 40 sets the parliamentary procedure for doing so. An export duty is, as the name suggests, a tax on goods leaving the country. I used the term “considered appropriate to do so” quite deliberately. The EU has no standing export duty. Indeed, I believe the last time the EU imposed an export duty was in the late 1990s, in respect of wheat.

However, the revised Union customs code, which came into force only in 2016, maintained the EU’s ability to impose an export duty. The EU decided it still needed to maintain the option to impose one in the future. Therefore, in an implementation period, where the UK may be following the EU’s common external tariff for a limited period of time, we may need to retain the ability to impose an export duty in case the EU chooses to apply one. In the longer term, it is right to maintain at least the option to establish one if the circumstances demand, just as the EU retained that flexibility when it overhauled its customs code. In allowing for an export duty, but not introducing one, these clauses reflect the status quo, except with a stronger role for Parliament in approving any future export duty.

Clause 39 allows for the imposition of a new export duty tax and for replication of any part of the customs regime in part 1 as may be necessary to administer it. In recognition of the exceptional nature of export duties, clause 40 specifies that the first regulations made under clause 39, imposing an export duty, are subject to the affirmative resolution procedure.

Amendment 14 would require the Treasury to consider recommendations about the imposition and rate of export duty made by a relevant Select Committee or contained in a resolution of the House of Commons when considering whether to impose export duty. The Treasury will listen closely to recommendations from a range of interested parties, including relevant Select Committees and Members of the House. In addition, Select Committees already have the power to question Ministers on the policy within their departmental remit. The Treasury will answer any questions from the relevant Select Committees.

The Bill will ensure that the Government can respond quickly to exceptional circumstances and impose an export duty, while still giving the House a vote through the made affirmative procedure. Therefore, the Government believe that it is not necessary to include this additional requirement in the Bill.

New clause 8 and consequential amendments 15 and 16 seek to put in place additional parliamentary processes for the introduction of, and any increase to, the rate of export duty. For indirect tax matters, it is common to have a framework in primary legislation supplemented by secondary legislation. The Bill introduces a comprehensive framework for a new stand-alone customs regime, which will be underpinned by the detailed and technical secondary legislation.

The Bill ensures that the scrutiny procedures applied to the exercise of each power are appropriate and proportionate, taking into account the technicality of the regulations and the frequency with which they are likely to be made. As currently drafted, the House of Commons would have a vote on regulations introducing export duty under the made affirmative procedure. The Government believe that to be appropriate and proportionate.

To sum up, although an export duty should be applied only in exceptional circumstances, it is right that the UK has the ability to impose one if it becomes necessary, including if the EU decides to impose one for a limited period while we may be aligned with the common external tariff.

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[Anneliese Dodds]

I am grateful to the Minister for his commitment to respond to any questions that are levelled by Select Committees in this area. That is a positive commitment. It is an area that we will keep an eye on, but after the discussion we have just had, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 39 ordered to stand part of the Bill.

[Peter Dowd (Bootle) (Lab)]

On a point of order, Mrs Main. I indicated earlier that I wanted to speak on amendments 142 to 145 to clause 39, on animal welfare and sentience. I have tried to get in, but if the opportunity has passed, so be it. We may therefore have to pursue it on Report. I want the Committee to recognise that I did wish to speak and did indicate that.

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[Mel Stride]

I am grateful to the hon. Gentleman for his invitation to do some gymnastics, but I do not think they will be necessary, because his questions are easily answered. He referred to my cut and paste button in respect of “appropriate” and “proportionate” and he is right; there is a cut and paste button for those terms, because they are extremely important. At the heart of this is his cut and paste button, in which he regularly says something along the lines of, “All we are asking for is appropriate scrutiny on these important matters.” So the argument has gone back and forth over every area of the Bill as we have ranged across the various clauses.

Moving on to the hon. Gentleman’s remarks about the House of Lords Delegated Powers and Regulatory Reform Committee and its comments on sunset clauses, and his specific question about why we would have sunset clauses in the context of the European Union (Withdrawal) Bill but they would not be appropriate in the case of this Bill, the answers are clear and require no gymnastics at all. They are that the aims of this Bill are different from those of other Brexit Bills.

For example, while the European Union (Withdrawal) Bill makes provision for day one, with the understanding that further primary legislation will be made to supplement it, this Bill will be required in order to maintain a functioning customs regime, an effective VAT regime—as we are currently discussing in the context of these clauses—and an excise regime on an ongoing basis. There is a fundamental distinction between bringing the EU acquis into UK law and handling that process, which is the principal rationale for the European Union (Withdrawal) Bill, and what is happening on a dynamic, ongoing basis in terms of a customs, VAT and excise regime.

[Anneliese Dodds]

Can I read from the Minister’s remarks that the European Union (Withdrawal) Bill does not seek to create new institutions in, for example, environmental policy or other areas, which potentially need to be just as flexible in many ways as the taxation and customs system? I am struggling to grasp the essence of the Minister’s distinction here. Maybe he could provide more information.

[Mel Stride]

I have made the point about the day one situation with the European Union (Withdrawal) Bill and the primary legislation, and so on, that will follow. I will resist the urge to start debating another Bill, other than to repeat the points I have made about this Bill. We are of necessity in the context of customs, customs duties, export duties, import duties, VAT, excise regimes and excise duty. We are dealing with a rapidly changing set of measures going forward. We are in the middle of a complex negotiation, the outcome of which is not clear at this particular moment. That is why in many instances in this Bill where we have had these ongoing repeated debates about whether a stiffer, tougher form of scrutiny is necessary, we feel that a balance has to be struck, which is appropriate and proportionate—to use my cut and paste button again—between the needs of parliamentary scrutiny where it is appropriate, and the ability to get on with the job and ensure that this country is match fit for life outside of the European Union in terms of its imports, exports and trade.

[Anneliese Dodds]

I am grateful to the Minister for his response. However, we have been informed that the reason why sunset clauses are appropriate in the EU (Withdrawal) Bill and not in this Bill is because this Bill needs a more dynamic system—if I understand the Minister’s comments correctly—whereas that is not necessary in the EU (Withdrawal) Bill. I am still struggling, because if we look at an area such as environmental legislation, we have the institutions that are created, the overall framework and then the calibration within it that would respond to scientific information—levels of pollution, for example. There is also an international context with different treaties. Perhaps this is something we could correspond about another time, but I am struggling to discern the fundamental qualitative difference between this policy area, which apparently cannot be amenable to sunset clauses, and those contained in the EU (Withdrawal) Bill.

[Mel Stride]

I will be brief, because we are beginning to go around in circles, but I am very happy to discuss any of these matters offline, or to receive a letter from the hon. Lady, on the points she has raised.

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[Jonathan Reynolds]

There is clearly a fundamental difference of opinion about these clauses. We absolutely support the right and ability of the Government to possess the requisite powers on exit to set the regime that is required. What is in dispute is whether those powers should remain on the statute book for a long time.

It seems entirely reasonable that the Government could come back to legislate for the power that they need in future, rather than giving themselves such a fundamental transfer that changes the balance of power between Parliament and the Government, but we may have to return to that question. Further groups of amendments are on the selection list that cover sunset clauses, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 45 ordered to stand part of the Bill.

Clause 46 ordered to stand part of the Bill.

Clause 47

EU law relating to excise duty

[Anneliese Dodds]

I beg to move amendment 134, in clause 47, page 33, line 7, at end insert—

“(5) No regulations may be made under this section after the end of the period of two years beginning with exit day.

(6) In this section, “exit day” has the meaning given by section 14(1) (interpretation) of the European Union (Withdrawal) Act 2018 and subsections (2) to (5) of that section apply to the term under this section as they apply to the term in that Act.”

This amendment limits the duration of the delegated power under Clause 47 to the period ending two years after the United Kingdom leaves the European Union.

[The Chair]

With this it will be convenient to discuss the following:

Clause 47 stand part.

Clauses 49 and 50 stand part.

That schedule 9 be the Ninth schedule to the Bill.

[Anneliese Dodds]

We have already discussed clause 47 to an extent, so I will just offer a couple of brief observations in relation to amendment 134. My reading of clause 47 is that it disapplies the European Union (Withdrawal) Bill provision that EU legislation should be copied into UK law, and empowers the Treasury to make alternative provisions on excise duty.

Some of our witnesses suggested that that could result in an unnecessarily complicated approach, and I do not feel that the Minister explained why the Government will not just retain the EU customs code during the transition period. The Minister has referred to a cut-and-paste approach. Yes, there is a lot of cutting, but then there is some spraying about of some elements and not others. It is perhaps not as well thought through as we might have hoped.

As with many Opposition amendments, amendment 134 asks the Government to include a sunset clause of two years for the application of these measures. We seek to ensure that the empowerment of the Treasury in these provisions is time limited. As my hon. Friend the Member for Stalybridge and Hyde said in relation to the sunset clause he discussed, the measures could be extended by Parliament if that was felt necessary, but having a sunset clause would prevent the inappropriate extension of the powers that the clause grants.

[Mel Stride]

Clause 47 makes changes that ensure that the status of EU law in relation to excise is clear. The European Union (Withdrawal) Bill lays out the Government’s general approach to EU legislation after EU exit. We need to ensure the consistency and certainty of the existing excise and VAT regimes to ensure that they work effectively after exit.

Excise is an important contributor to national revenue—receipts for 2016-17 were around £48 billion—so it is important that we have clarity on the rules, including the status of EU law in relation to excise. The approach adopted by this clause is consistent with the European Union (Withdrawal) Bill. It results in EU legislation being retained only where it is sensible to do so in respect of excise. There is a similar provision for VAT in clause 42.

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Additionally, the clause defines the term “HMRC Commissioners”. For the operation of part 4, it is necessary to define these terms. The limited definition of excise duty ensures that the provisions in this part go no further than is necessary and relate only to excise duties on goods that are most affected by EU exit. I therefore urge that the clause stands part of the Bill.

[Anneliese Dodds]

I am grateful to the Minister for those helpful clarifications. I note in particular his determination that the provisions should foster continuity with existing provisions in the short term. That seems very sensible. I hope that, even if the Government are not willing to accept Labour’s call for sunset clauses, they will at least take on board our concerns that there must be appropriate ongoing scrutiny of the measures. Above all, they must not go beyond the scope of ensuring that there is an operable regime following whatever negotiations they have.

Many of those areas are very important for our constituents. I am sure that the Minister will remember the discussion that we had around tobacco excise recently in the Finance Bill. I had concerns about the stripping away of public health support for people to stop smoking, at the same time that duties are going up, and about the implications there might be for low-income people. We need to make sure when there is a fundamental change that we have the ability to properly debate and discuss it in the House. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clauses 48 to 50 ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 51

Power to make provision in relation to VAT or duties of customs or excise

[Kirsty Blackman]

I beg to move amendment 120, in clause 51, page 34, line 39, leave out second “appropriate” and insert “necessary”.

This amendment provides that the power to make regulations about VAT, customs duty and excise duty in consequence of UK withdrawal from the EU is only exercised when it is necessary to do so.

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[Anneliese Dodds]

Surely in that case it would be possible to specify that one of the two options will be chosen and that that is a necessary choice between the two. I am struggling to grasp the need to avoid the word “necessary”.

[Mel Stride]

The point I would make to the hon. Lady is that if we had more than one option, one of them may be appropriate but not necessary, because if we chose that particular option there would necessarily be another option that could be chosen. The essential point is that the word “necessary” is not necessary, but in fact unhelpful—[Interruption.]

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[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 54 ordered to stand part of the Bill.

Clause 55

Commencement

[Anneliese Dodds]

I beg to move amendment 17, in clause 55, page 38, line 15, leave out

“on the day on which this Act is passed”

and insert

“when the condition in section (Pre-commencement review: resource implications for HMRC) is met”

This amendment is consequential on NC9.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 20, in clause 55, page 38, leave out line 23 and insert—

‘(1A) Section (Pre-commencement review: resource implications for HMRC)and this Part come into force on the day on which this Act is passed.”

This amendment is consequential on NC9.

New clause 9—Pre-commencement review: resource implications for HMRC—

‘(1) The condition in this section is met when—

(a) HMRC Commissioners have carried out a review in accordance with the provisions of this section, and

(b) the Chancellor of the Exchequer has laid a report of that review before the House of Commons.

(2) The review by the Commissioners under this section must consider—

(a) the staff requirements for implementation of the provisions of this Act,

(b) the extent to which provision has been made to meet those requirements;

(c) the information technology requirements for implementation of the provisions of this Act, and

(d) the level of certainty about the meeting of the requirements considered in accordance with paragraph (c).

(3) The review shall have regard to information provided by the Treasury and the Secretary of State about the likely outcome of negotiations between the United Kingdom Government and the European Union.”

This new clause requires HMRC to provide an assessment of the staffing and IT requirements for implementing the provisions of the Bill, and the prospects of those requirements being met prior to commencement of the main provisions of the Bill.

[Anneliese Dodds]

To make things totally clear, amendments 17 and 20 are consequential on new clause 9, so I will focus on that. The new clause would insert provision for pre-commencement review into the Bill. That relates to clause 55, which is about the conditions for commencement. We have asked for the HMRC commissioners to carry out a review that the Chancellor of the Exchequer would then lay before the House. We have asked for that review to examine a number of areas, such as whether the appropriate staffing requirements have been met for the Bill to be implemented properly, the extent to which information technology is ready for implementing the Bill’s provisions and the extent to which the Government believe that all the requirements in the Bill have been met.

The new clause is necessary for a variety of reasons; I will not go through all of them, because we covered some of the material when we talked on Tuesday about a review of resources in relation to the authorised economic operators scheme and the SNP amendment. None the less, there are matters that it is important this Committee covers before we finish. We heard some compelling evidence from witnesses last week who talked about changes that have occurred within HMRC and the resourcing of the customs element of HMRC. In particular, they talked about how a helpline for businesses with customs problems had been removed, the potential impacts of the new regionalised system for HMRC, and how the removal of local offices would mean that HMRC staff will no longer have a physical presence in Scotland north of Glasgow and Edinburgh, and none on the whole south coast of England. The Minister responded by saying that of course customs officials would be able to travel. Yes, that is definitely the case, but as someone who has frequently had to get to Dover by road and by public transport, I can say that that is often not easy. There are significant concerns about that.

There are also continuing worries about whether staff numbers are appropriate. We had a little bit of discussion about that at close of play on Tuesday, again in relation to an SNP amendment. The Minister said then that it was possible that, to deal with the requirements of the Government’s approach, the number of customs officers might increase from 5,000, according to figures submitted to the World Customs Organisation, by between 3,000 and 5,000. Let us say that they increase by 5,000 to 10,000, doubling the current number. I have redone the calculations that I did last Tuesday. That would mean that every British customs officer would still be required to process about 7,700 customs declarations a year. That is still substantially more than their counterparts in other countries: 20 times more than in Australia, six times more than in America, almost twice as many as in Norway and about 20% more than their Swiss counterparts, who seem to process the largest number after the UK, by my calculations on comparable countries. That is without the many additional declarations that might come if the Government decide not to form part of a customs union with the rest of the EU. Therefore, there are legitimate questions to ask about whether HMRC really has the capacity to deliver what is being asked of it.

That is particularly important today. I understand that there are leaked documents suggesting that the EU is concerned that the UK might seek to undercut standards, particularly on taxation requirements. I am not sure whether it mentions customs in that regard, but it is important for the UK to send out a strong message that we want to uphold standards—particularly on something like customs, where there is the potential for a large amount of fraud that could affect other countries, but also on many allied problems mentioned by our witnesses, such as phytosanitary measures, veterinary standards, control of illegal trafficking of goods and so forth. I hope that the Government will give us a strong commitment to properly review resources. We need more than what we have already.

[Kirsty Blackman]

I completely agree with everything that the hon. Lady is saying. It is important for businesses to have certainty about how the extra resourcing will work—if there is extra resourcing—so that they will know how to interact and have confidence that the system will work after exit or implementation day.

[Anneliese Dodds]

I am grateful for the hon. Lady’s support. Due to the changes to the deployment of HMRC in Scotland, the issue is very relevant to many of her constituents. I am pleased that the Government seem to be moving in the right direction. We have a commitment to more staff, which is positive, and the Minister’s responses to my written questions seem to focus more on additional numbers and less on redeployment, as they did in the concerning responses previously. Surely, given the potentially increased amount of activity that a new customs regime would necessitate, we need to be on stronger ground if we are to avoid a difficult time for British businesses and retaliatory measures from the rest of the EU if it feels that we are not upholding our obligations.

[Mel Stride]

Amendments 17 and 20 and new clause 9 seek to require HMRC to review its staffing and IT requirements, with the Chancellor to report that to Parliament before commencement. The Government oppose the amendments. It is not appropriate to legislate to require such a review, because HMRC staffing and IT requirements largely depend on the outcome of the negotiations with the EU and the details of the new customs regime, which will be set out in secondary legislation.

I assure the Committee that the Government are preparing for every possible outcome, and the activities required by the amendments are already happening as part of HMRC’s business planning. I am in discussions with HMRC on a regular basis, including with the head of HMRC, on the details of how we will ensure we have the technology in place.

We have had a number of conversations in Committee about the customs declaration service and the challenges of all the additional declarations that that system may yet have to handle, as well as the hon. Lady’s points on personnel. I am aware of the points she made on access to the various ports, given the changes to the structure of offices in the transformation programme that HMRC is undergoing. She is correct that the figure we will be looking at in terms of additional personnel is between 3,000 and 5,000. I suspect it will be nearer the upper limit than the lower limit, but those decisions are imminent. I hope that those reassurances will lead her not to move her new clause and to withdraw the consequential amendments.

[Anneliese Dodds]

I am grateful to the Minister for those clarifications and commitments, particularly on staffing. It is good to hear that the Government are considering ensuring that there are sufficient human resources. However, as I hopefully made clear in my remarks, I am concerned that, from an international perspective, we will still be under capacity. There may be reasons for that, but I would like the Government to explain them. We seem to be radically below par compared with other comparable nations.

When it comes to IT, the Government have now accepted that there are many challenges, and I understand that the CHIEF—customs handling of important and export freight—system will now be run on for a period. That is sensible, but it would have been good to get that agreement earlier, because not having that assurance before caused business some concern. Obviously, the CDS programme was announced before the European referendum—it has been a long-running process—but it is important that we recognise the additional pressure that that switchover will put on services at the very time a new customs regime might be coming in. I will not press the amendment, but we may move the new clause, as with a number of other new clauses. I am grateful to the Minister for those clarifications, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Peter Dowd]

I beg to move amendment 18, in clause 55, page 38, line 15, leave out

“on the day on which this Act is passed”

and insert

“when the condition in section (Pre-commencement review: effects on frictionless trade with European Union) is met”.

This amendment is consequential on NC10.

Local Government Finance Act 1998 (Non-Domestic Rating Multipliers) (England) Order 2017

Anneliese Dodds Excerpts

Monday 29th January 2018 General Committees

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

It is a pleasure to see you in the Chair, Mr Austin. As always, it is good to sit across the Committee Room from the Minister—we have a lot of dealings with each other at the moment.

As the Minister explained, the order enables the Government to uprate the business rates multiplier by the consumer prices index, rather than by the retail prices index. Labour welcomes that change. In fact, we argued for it long before the 2017 Budget, and it has been a matter of some frustration that it has taken the Government so long to enact it. However, we are concerned that the change in and of itself does not tackle the other major problems with the business rates system, including the problems caused by the delayed revaluation that led to rates rising by up to 500% for half a million businesses and the average small shop seeing its rates bills increase by £3,663. That of course dwarfs the £1,200 saving that the Minister mentioned some firms will get because of the changes we are discussing. I appreciate that those rises should not occur again to the same extent, given the Government’s commitment to have a revaluation every three years instead, as the Minister mentioned. That commitment is not as positive as Labour’s commitment to yearly revaluations, but it is better than nothing. As of December last year, 200,000 appeals were still outstanding, and it would be helpful to know what that number is now.

In addition, it is all very well applying a different method of calculation for inflation to the hereditament, but I am deeply concerned that the Government are pushing ahead with changes to the Valuation Office Agency that are likely to reduce the reliability of calculations of the hereditament’s value in the first place. Valuation office staff already report having to make assessments using Google Earth, of all things, rather than building up strong contacts with local stakeholders and local experience, as used to be the case. The situation will surely be exacerbated if the Government go ahead with their planned 50% cut to valuation office staff numbers. Will the Minister explain to us now how he will ensure that the accuracy of valuations is maintained with such a swingeing cut to staff numbers?

Finally, those things are all occurring in a context where the Government appear to have no long-term vision of where business rates and local government finance are headed. Despite apparent disincentive effects arising from the parameters of the current system, new plant and machinery investment are still included within the hereditament. Furthermore, we still have no clear answers as to how any redistribution measure will work with 100% business rate retention. That was not really referred to by the Minister, but it is proceeding apace in pilot form without any indication of how base values might be calculated in future.

In that regard, it is worth quoting from the Key Cities Group. In response to the Government’s proposals around local government finance—to the extent that they exist— it said:

“There is clear evidence that the gap between affluent and poorer authorities is widening with authorities with relatively high needs and low resources being left behind. A prime example is Blackpool, the most deprived area in England which has seen reductions in its core funding from Revenue Support Grant, Business Rates and Council Tax of 12.4% between 2010/11 and 2016/17, equivalent to £126 per head of population—by contrast, Wokingham, an area with significantly less deprivation, has over the same period seen its core funding increase by 8.9% or £56 per head of population.”

I mention that because the Minister referred to the fact that the Government will compensate local authorities that might lose out from the calculation of the multiplier changing from RPI to CPI. Surely any compensation through that route will be dwarfed by the 40% cuts to local government that we have seen over the past few years.

While Labour Members support the order, we urge the Government to adopt our commitment to properly and thoroughly review local government finance. That is surely essential now more than ever as we find many local authorities struggling to deliver even statutory services, such as child protection.

Taxation (Cross-border Trade) Bill (Third sitting)

Anneliese Dodds Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 25th January 2018 Public Bill Committees

In terms of the money required to ensure that we are ready, in the Budget the Chancellor allocated £3 billion—£1.5 billion for each of the next two years—to ensure that we are sufficiently resourced. We are currently in conversation with HMRC to establish what further additional financial assistance it requires.

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

I am grateful to you for being in the Chair, Ms Buck. If I may, I will question the Minister on his explanation. I am grateful for it, but on Tuesday we learned that after HMRC’s ongoing restructuring programme there will not be a single HMRC hub north of Edinburgh and Glasgow, nor will there be one anywhere along the south coast, including Dover. We heard ample evidence in the witness sessions that that is the busiest and most concerning port from the point of view of customs procedures going wrong. In the light of that evidence, should we reconsider that HMRC reorganisation programme?

[Mel Stride]

I welcome the hon. Lady to the Committee. She mentions the location of the new HMRC hubs as they are rolled out, and I will make two important points. First, Border Force, which is very much part of the frontline, is in the Home Office’s remit, not HMRC’s. Secondly, proximity to the hubs or otherwise is not critical in determining whether HMRC provides the support that Border Force and other agencies require. The absence of a hub close to a need does not mean that HMRC staff cannot be in proximity to that point; they do not need to be based constantly at any one hub.

--- Later in debate ---

[Mel Stride]

I thank the hon. Lady for that intervention and I fully appreciate that she is taking up recommendations made by the Law Society of Scotland, but let me comment on the two fundamental points she has raised.

First, relating to the relevance—that relevant considerations should be taken into account. The relevance of having the word “relevant” in there, prompts the question whether anybody would ever take decisions based on things that were entirely irrelevant, or at least not relevant. If one went down the road suggested by the hon. Lady, the word “relevant” would probably be inserted in multiple places throughout all the legislation that we ever pass in this House. It is understood that rational Ministers and others would take relevant decisions, rather than irrelevant decisions.

Secondly, before I go too far down this tongue-twisting route—

[Anneliese Dodds]

rose—

[Mel Stride]

Will the hon. Lady indulge me for a second? Parliament—through secondary legislation and in many cases in this Bill—will have the opportunity to test whether any of these measures are being taken on the basis not only of relevant considerations, but of all sorts of other considerations that will be taken into account as to whether these measures that come forward should proceed.

As to the specific point about the amendment relating to the insertion of the numbers, that clause already refers to reference or consideration being made of the quantity of the goods concerned. I think the meaning of the word “number” is, in that context, subsumed by the meaning of the word “quantity”. The Government have received the opinion that the clause already does that which the hon. Lady would like to see it do, namely ensure that the number of goods is also relevant to the function of that particular clause in the legislation.

[Anneliese Dodds]

It is just a brief—the Minister may feel, facetious—comment, but in the Help-to-Save regulations that we recently discussed there is reference to sufficient proof of death from a GP being required. The Government apparently felt that the word “sufficient” was necessary in that context, but most people would think it was not necessary if there is proof of death. Therefore, if an expert body such as the Law Society of Scotland feels that a word such as “relevant” is required, perhaps I would take its word for it.

[Mel Stride]

I am not a legal expert. I obviously appreciate that different words have different meanings in different legal contexts, but from the Government’s point of view, we are satisfied that there is not a requirement to have the word “relevant” inserted. That would be superfluous—to throw in another term—as would be the insertion of the word “number”, for reasons I have given to the hon. Member for Aberdeen North, because it would not affect the functioning or meaning of that clause.

--- Later in debate ---

[Anneliese Dodds]

I shall speak to amendment 78, which has already been referred to. To be clear, we already have a list in the Bill of different considerations that ought to apply when calculating the rate of import duty for goods in a standard case, which includes,

“the interests of consumers…maintaining and promoting the external trade…maintaining and promoting productivity…the extent to which the goods concerned are subject to competition.”

That is why we suggest that we should have a holistic look at other matters that should be considered.

That is particularly important when it comes to the calculation of import duties with a view to environmental sustainability. When the current chief co-ordinator at the World Trade Organisation, Christiane Kraus, was at the World Bank, she spelled out reasons why environmental considerations might be relevant to the setting of trade parameters, in the absence of other mechanisms for promoting global environmental common goods. We may well be entering a period where it is very difficult to get international agreements on environmental matters, not least because of the direction of the American Administration, so it seems sensible to retain the possibility of so-called eco-tariffs in the Bill.

In addition, even inside the EU’s customs regime, there is evidence of illegal waste trading. Revelations from the Environmental Investigations Agency concerning the toxic trade in cathode ray tubes from the UK to Nigeria and Ghana make for very disturbing reading.

It is absolutely appropriate that we refer to sustainable development in relation to import duties, and to refer to it in this clause would rectify the fact that there is no mention in the rest of the Bill—I was very surprised by this—of the many factors relating to sustainable development that are otherwise covered by the EU customs regime. There is no mention of the environment, aside from the competitive environment; of forestry, aside from in relation to trading stamp schemes; or of chemicals, waste or wildlife. That is a significant departure from the EU customs regime.

The EU’s rules around authorised economic operators indicate that, for a company to become a member of that scheme, it needs to show that it does not have a record of serious infringements, including infringements against environmental legislation. EU legislation is clear that that status can be suspended if there is a threat to public safety, the protection of public health or the environment.

Many other areas in the customs regime that reference or have cross-connections with accompanying EU legislation are not picked up in the Bill. EU forest law enforcement, governance and trade—FLEGT—covers a licensing scheme for timber. That is relevant to import duty costs, because the importer is liable for the cost of the verification of any licences and of the translation of any paperwork related to its enforcement. Illegal, unreported and unregulated fishing is strictly controlled through EU regulation. Trans-boundary shipments of waste must comply with the 2006 EU waste shipment regulation.

The CITES treaty applies to wildlife, so we would still be covered by that when we leave the EU, but the EU goes further—that is incorporated in the overall customs regime. For example, there are regulations about documentation and labelling and a longer list of species upon which import controls are applied for the EU compared with under CITES. Finally, when it comes to measures about trade in environmentally-damaging chemicals, we have EU-level quotas on ozone-depleting substances and carbon-producing F-gases, and a notification procedure for other potentially dangerous chemicals.

I accept that in all those areas we could be asking for lots of different amendments to try to rectify some of these problems—I am sure Members will try—but having that environmental sustainability criterion for assessing import duties in the Bill, and placing it near the start, will raise its profile, which the Government sadly seem not to have considered at all when putting the Bill together. That is worrying given the prominence of these matters within the EU’s existing customs regime.

[Peter Dowd]

It is a pleasure to serve under your stewardship, Mrs Buck. I hope that, as in the sessions on the Finance Bill, we will have a major climbdown—the Minister and other members of the Committee will note that from that Bill.

The SNP amendment 106 would require the Government to have regard to the public interest in considering the rate of customs tariffs on our exit. It would add a public interest test to the four existing conditions that the Bill requires the Treasury to have regard to when deciding to apply customs tariffs to goods entering the United Kingdom. Those existing conditions in the Bill are the interests of consumers, the desirability of promoting external trade, the desirability of promoting productivity in the UK and the extent to which goods are subject to competition.

Members will note that, throughout the passage of the Bill, we have been seeking to ensure parliamentary scrutiny. We will continue to do so. In one of the evidence sessions, we heard from one witness, Kathleen Walker Shaw, the European officer of the GMB union, who said that she spent many evenings drafting her union’s response to the trade White Paper only to find eight hours later that the Bills had been published. I think that it is fair to say that that was not a particularly isolated view in the session.

The Opposition have concerns about the specifics of the SNP amendment, which means we take a slightly different approach. We believe that, in key sections of the Bill, the public interest is being used as a mechanism to widen the powers of the Secretary of State. That is perhaps most pronounced in schedule 4, which empowers the Secretary of State to reject a recommendation of the Trade Remedies Authority based upon a belief that it is not in the public interest. I respect people’s beliefs, but in this forum they have to be based on evidence, and I am not sure that we will get much of that. We have tabled a number of amendments of our own, and I want to dwell on them.

It is incumbent on me to point out that public interest is not defined in the Bill. That leaves a good deal of room for manoeuvre for the Secretary of State to determine the public interest, without appropriate parameters about precisely what it means. Precision is not one of the endearing features of the Bill. We are happy for the Government to have powers to take the public interest into account in certain circumstances, but only on the basis that it is concretely defined in primary legislation. That is yet another lacuna in the Bill, and a stubborn point that will be addressed time and again in these proceedings.

The Minister used the example of national security in the evidence session on Tuesday. That does seem a useful definition of public interest, and we believe that national security should provide an explicit limit to the definition of public interest in the Bill. We know, after all, that the Secretary of State has some novel ideas about what the public interest might be. They are views that ostensibly focus on the needs of the consumer over the producer. However, it has to be said that that is a one-dimensional approach taken by the Government, which was laid bare in the witness session. In response to the Financial Secretary’s question about consumers potentially being disadvantaged compared to producers, Ms Crawford responded:

“Consumers are also workers who are employed in some of these industries, and they will not benefit from having unfair trade practice disadvantage them and the quality of their goods. That is something we must bear in mind.”––[Official Report, Taxation (Cross-border Trade) Public Bill Committee, 23 January 2018; c. 42, Q53.]

That is a more sophisticated definitional approach than the Government’s.

Although we support the efforts of the Scottish National party to introduce checks and balances, we have concerns at this stage. In that regard, we cannot support the amendment. I hope the hon. Member for Aberdeen North will take our statement in good faith.

Taxation (Cross-border Trade) Bill (Fourth sitting)

Anneliese Dodds Excerpts

Thursday 25th January 2018 Public Bill Committees

[Mel Stride]

Current trading partners and others. Obviously, as an EU member, we are bound not to enter into any other arrangements prior to our departure, but I am confident that we are having appropriate conversations at this stage of our withdrawal.

In addition, as set out in the trade White Paper, after leaving the EU, the UK will have the opportunity to

“look to forge new and ambitious trade relationships with our partners around the world”.

Clause 9 provides a basis for those aims.

The clause enables the UK to implement preferential import duties on goods originating in territories covered by a preferential arrangement. That will cover arrangements made bilaterally with a Government of another territory. A recent example is the comprehensive economic and trade agreement between the EU and Canada.

The Bill refers to making arrangements to allow preferential rates of import duties to apply before an agreement is ratified. That is common when implementing FTAs and is the case under the comprehensive economic and trade agreement, which has been provisionally adopted but is not yet fully ratified.

The clause will also enable the UK to continue to provide preferential tariff treatment to those British overseas territories, including the British Virgin Islands and the Falkland Islands, that currently receive that access under the EU via the overseas association decision.

As I was looking through new clause 2 during the hon. Member for Bootle remarks, my eagle eye spotted what I think is an error. Although subsection (1)(a) of the new clause would do what is intended—that the first regulations to be made under clause 9 will be subject to the provisions of the new clause—the explanatory statement and the points made in his speech suggest that subsection (1)(b) should relate to instances where there has been a lowering of import duties. In fact, as currently drafted, subsection (1)(b) refers to

“the effect of which is an increase in the amount of import duty”.

I can only imagine that that is a drafting error or has been lifted from new clause 1, which does refer to the increase in import duties. However, I fully understand what the hon. Gentleman intended, and I will deal with new clause 2 on the basis of its intention and of the way in which he describes it in the explanatory statement.

The new clause would put in place an additional parliamentary process for regulations giving preferential import duty arrangements to other countries. As I previously set out, for indirect tax matters, it is common to have framework primary legislation supplemented by secondary legislation. The Bill introduces a comprehensive framework for a new stand-alone customs regime. It ensures that the scrutiny and procedures that apply to the exercise of each power are appropriate and proportionate, taking into account the technicality of the regulations, the frequency with which they are likely to be made and how quickly the law may need to be changed.

Clause 9 allows the Treasury to give effect to the tariff section of trade arrangements once they have been negotiated. It is therefore appropriate and proportionate for the negative procedure to apply. Any delays in implementing preferential duties in trade arrangements could have significant impacts on UK supply chains or exporters who rely on the arrangements. As set out in the trade White Paper the Government are considering how to ensure that the process for negotiating new trade deals is transparent, efficient and effective, and we will ensure that Parliament is engaged throughout.

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

It is a pleasure to see you in the Chair, Mrs Main. I have a couple of questions for the Minister. I am grateful for his comments. He seemed to suggest that the appropriate time to consider these matters might be at the time of ratification of any preferential trade agreement and that the provisions are merely enabling. How will we be able to scrutinise at that stage? Will we be able to have a developed and involved discussion at that stage? My understanding is that we would not be able to do that.

In his opening remarks—perhaps this is unfair—the Minister referred to the existing preferential trade arrangements that we have with the overseas territories and the EU and those between the EU and other countries, but, as many others have mentioned, we could be concluding new trade arrangements, particularly with the US, and there are all the concomitant problems that that might cause as well as potential opportunities. Have the Government considered whether the scope of the clause could be reduced so that it relates only to areas where we already have preferential trade arrangements?

[Mel Stride]

There are a couple of important points to make here. This particular clause enables the Government to put into effect the tariff-related elements of an FTA, for example. When it comes to the points that the hon. Lady understandably makes about treaties that we may enter into with other countries or with countries with which we already have existing arrangements that we wish to continue on our departure from the European Union, those kinds of debates and issues do not rest within this clause. As the trade White Paper sets out, they rest with the Government whose duty it is to make sure that we consult during the negotiation of those treaties so that we conclude them in an appropriate manner.

[Anneliese Dodds]

I find that very helpful because it has clarified that there is not a detailed parliamentary process for us to consider the matters that are covered by the clause. We believe that they will not be scrutinised in an appropriate and thoroughly democratic manner. Also, there will not be much opportunity for parliamentarians to engage with the issues raised by free trade agreements.

[Mel Stride]

I do not think my response to the hon. Lady earlier suggested that there would not be any parliamentary scrutiny of the provisions in clause 9. Indeed there will be, as she knows. If we are going to change duties or introduce tariffs, such matters will be subject to secondary legislation and statutory instruments in the normal manner.

[Anneliese Dodds]

I did not say “any”. I said that there would not be scrutiny of the type that is necessary and of an appropriate thoroughness, which would not be of a one-shot nature whereby it is difficult to have the kind of debate that we all think is necessary, given the impact that the provisions could have on major sectors of our industry.

Question put and agreed to.

Clause 9 accordingly ordered to stand part of the Bill.

Clause 10

Preferential rates given unilaterally

[Kirsty Blackman]

I beg to move amendment 108, in clause 10, page 6, line 35, at end insert—

“(1A) The Secretary of State must consult on a proposed version of any regulations to be made under this section before making them.”

This amendment requires the Treasury to consult prior to making regulations establishing preferential rates for developing countries.

The amendment is about consulting on a proposed version of any regulations to be made under the section before making them. This would make sure that relevant people are consulted in advance, specifically in the case of unilateral preferences. The Minister previously argued about the processes that are gone through in advance of the signing of international agreements, but those are slightly different in relation to this clause. We are specifically talking about consultation. Again, we have been clear that there is not enough consultation throughout, and more consultation would be appropriate.

As amendment 108 is about unilateral preferences, we think that consultation is necessary. It is absolutely clear that unilateral preferences, particularly those relating to these provisions, and the reasons for unilateral preferences, are good—they are sensible in relation to our least developed countries—but we must also ensure that relevant stakeholders are consulted.

[Anneliese Dodds]

I agree with much of what the hon. Lady said. We heard on Tuesday some of businesses’ concerns about consultation even relative to the Bill. It is important, when we move on to its exact provisions, that we have proper consultative mechanisms. I have certainly benefited hugely from the input into the process around the Bill and information from the Fairtrade Foundation and Traidcraft. If this Government are truly committed to policy coherence for development, it is important that they ensure that non-governmental organisations with expertise on the ground in international development can comment on preferential trade decisions, which could have a significant impact on different nations.

I was encouraged by what the Minister said to me when we talked about ensuring policy coherence for development when it comes to tax treaties. We need to ensure that that is the reality for our preferential trading regimes as well. One way to do that is by having appropriate consultation with experts in the area.

Finally, the Library note to the Bill, which was enormously useful as always, says that,

“the Government argues that the negative procedure is appropriate here as regulations might be lengthy, technical, frequently changed, not yet known and/or administrative.”

The note goes on to indicate what the EU process is for such schemes. It is quite different from what the Government propose:

“The regulations setting out the current EU scheme…were adopted by the EU Parliament and Council”,

meaning that there was debate within both those organisations. Our country is represented in the Council, and our MEPs represent us in the European Parliament. Then there are

“provisions allowing technical/routine updates through Commission delegated regulations.”

Again, delegated regulations can involve thorough scrutiny. I suggest that in many ways, it is far easier for an MEP to trigger a debate on a piece of delegated legislation on the Floor of the European Parliament than for an MP to do so in the British Parliament, certainly when the negative procedure is used, but also, potentially, when the affirmative procedure is used, given the arithmetic of Committees mentioned by the hon. Member for Aberdeen North. It is enormously important that we have proper scrutiny of such provisions. One way of embedding that is by having appropriate consultation. We support the amendment.

[The Parliamentary Under-Secretary of State for International Trade (Graham Stuart)]

It is a great pleasure to serve under your chairmanship, Mrs Main. It is an intimidating task that falls to me. I see many familiar faces, all pretty experienced and used to being in Bill Committees, as well as the Rolls-Royce Minister to my left. Fortunately, I am backed by the most extraordinary sea of talent behind me, as well as having on my right a much improved Treasury Whip, compared with his predecessor.

Amendment 108 seeks to create a statutory duty to consult on regulations relating to unilateral trade preferences for developing countries. The Government sought views on unilateral preferences as part of the trade White Paper and proposed creating a trade preference scheme that, as a minimum, maintains the preferential market access of countries in the EU’s generalised scheme of preferences, or GSP. The Government regularly engage with stakeholders on the issue, and—I can undertake—will continue to do so in future.

--- Later in debate ---

[Kirsty Blackman]

I beg to move amendment 109, in clause 10, page 7, line 5, at end insert “and—

(c) may make provision about the restoration or reinstatement of the nil rate band.”

This amendment places beyond doubt that regulations may reinstate the nil rate band after suspension or withdrawal.

This amendment comes from the Law Society of Scotland. It was a kind of tidying-up exercise that we suggest would be helpful in the clause. Clause 10(3)(b) allows the trade preference scheme to

“make provision about the suspension and withdrawal of the application of the nil rate.”

I am sure this is unintentional, but it does not make provision to reinstate or restore the nil-rate band, if it is necessary to do so. It is just a slight technical change suggested by the Law Society of Scotland, allowing for the restoration of the nil-rate band if that is what the Government need to do.

[Anneliese Dodds]

This seems like a sensible amendment, particularly because accessing that nil rate is crucial for so many nations. If there is ambiguity around the conditions, they need to be clarified. Definition, initially, as a least-developed country, is partly with reference to vulnerability to economic shocks. Inability to access that nil-rate, or inability have it reinstated when it should be, could cause economic shocks. As we know, the value of access to the nil-rate to UK markets for least-developed countries is incredibly important—it is £323 million a year. It is important that we have no ambiguity and are absolutely crystal clear.

[Graham Stuart]

As we have heard, the amendment seeks to clarify that the regulations may provide for the restoration or reinstatement of the nil rate of import duty to least-developed countries where this has been suspended or withdrawn. It is clearly important that we can reinstate preferential rates of import duty after they have been suspended or withdrawn, but the Government do not believe that the amendment is required. The existing power enables the withdrawal or suspension of preferences to least-developed countries to be partial and reversible. That is in line with the general principles relating to regulation-making powers. It goes to show that even when you deal with lawyers as eminent as those at the Law Society of Scotland, they sometimes get it wrong, even technically.

The Government intend to use the power to suspend sparingly and, if used, we will work with the relevant country with a view to reinstating preferences as soon as is appropriate. For trade preferences to be effective, they must be relatively stable, so that businesses have confidence to make decisions to import from beneficiary countries. I therefore ask the hon. Member for Aberdeen North to withdraw the amendments and give a categorical assurance that a provision to do what they suggest is already in place.

--- Later in debate ---

By creating the trade preference scheme, the Government are providing certainty to businesses and our developing country partners as we leave the EU.

[Anneliese Dodds]

It is a pleasure to see the Minister in such a prominent role now. In his role as a Whip, he was of course fundamental to the operation of all the discussions that we have had in this Committee room, but it is good to see him speaking on these issues.

As the Minister intimated, the amendment relates to part 4 of schedule 3, which sets out the conditions under which amendments can be made to parts 2 and 3, including the lists of least developed countries and other countries eligible for preferential trading schemes. Colleagues will be aware that those schemes arose out of the work of the United Nations Conference on Trade and Development, which from the 1960s onwards argued for improved market access for developing countries as a means of fostering their economic development. The so-called generalised system of preferences was adopted in 1968.

The whole point about that—the Minister alluded to it—is that a generalised system of preference, just as with a customs union like that of the EU, is allowed as an exemption from the most favoured nation rules within the WTO. Those rules stipulate that no country can have a preferential trade agreement with any other country that is not offered to every other member of the WTO. It is therefore enormously important to have the ability to deviate from WTO rules to promote development.

As the Minister suggested, the arrangements have over time developed at EU level into, effectively, three different layers of preferential scheme for developing countries: the everything-but-arms approach, which applies to the least developed countries; the generalised system of preferences—GSP—and then GSP-plus which, as the Minister said, offers additional favourable terms to those countries fulfilling environmental and good governance requirements.

Will the Minister clarify one issue relating to GSP-plus, and my reading of the existing Bill, with regard to classification as another eligible developing country under part 3 of schedule 3? I thought that the Bill referred to the Secretary of State developing regulations with a view to

“among other things…classification by the World Bank”

and that those “other things” were not just economic factors but human rights and environmental considerations, as is the case with the GSP-plus system in the EU. I think that was what he intended to say, but it was not crystal clear and it would be helpful if he would clarify it.

Our amendment is focused not on the arrangements for GSP and GSP-plus countries, which I believe are all gathered under part 4 but, in practice, on the least-developed country regime—the successor to everything-but-arms, which the Government say they want us to take on board. It is positive that the Bill provides the possibility for a three-year transition period, so that countries currently described as least-developed countries can remain in the scheme for another three years, as a graduation period. However, particularly with regard to current EU developments, it seems that in the Bill, the Government are missing out on an important opportunity.

The Minister was correct to say that the current everything-but-arms regime does not explicitly include reference to human rights and the environment or other criteria, but there is pressure at EU level for those factors to be taken much more closely into account. Our country could play a key role in that. That is very important when we look at how the everything-but-arms process has worked in practice.

A very good case study is the sugar trade in Cambodia. The sugar industry in Cambodia has grown exponentially over recent times due to changes in the overall sugar price, but also due to the imposition of a preferential trading regime. That has not led to sustainable development. Instead, very large global conglomerates have captured much of the market. Ninety seven per cent. of Cambodia’s sugar exports went to the EU in 2012. Tate & Lyle bought 99% of those, and companies linked to it—or some of those which it has now sold off—were controlling much of the new sugar plantations in Cambodia.

Those plantations have been enormously controversial because they have involved the wholescale removal of families from their smallholdings. Many people illegally transferred into Thailand because the sugar plantations forced them off the land. The growth in the industry has not led to an increase in people’s incomes. In fact, the opposite has happened: it has led to many people becoming destitute who formerly were able to live at subsistence level at least. Some families from Cambodia have even taken cases against Tate & Lyle to our High Court because they were dispossessed of their land and are no longer able to live sustainably.

Other changes occurred around sugar in the EU—minimum pricing and its removal—but surely, given that example, we should think about whether we need to do more to try to stop developments of the kind that existed under the everything-but-arms initiative from occurring in any UK-specific schemes. There is certainly an argument in the development community about whether it is appropriate for human rights matters to be taken into account in trade deals. Particularly in the sugar market, very large corporations are making a huge benefit, but that has not led to a more sustainable income for ordinary people—quite the opposite.

In addition, it is important that other factors can be taken into account in these classifications and in determining whether countries should be on the list. Three years is a good graduation period but it may be necessary for some countries to have longer, especially if they are subject to a particular economic or other problem.

Furthermore, I understand that there are cases where countries have used additional considerations in relation to classification under these kinds of regimes. Norway has said that if a country is not classified as a least-developed country but is part of a customs union with other least-developed countries, it is a good thing because it promotes regional integration. That nation is also likely to share many trade characteristics with the least-developed countries, and therefore should be able to be allotted trade preferences on the same basis. Norway at least believes that it does not need a waiver from the WTO for that—not only is that not being actioned by the WTO, but Norway believes that it does not even need to approach the WTO for a waiver. We could be more ambitious in that regard, and I hope that as a result the Minister takes our suggestion on board.

[Graham Stuart]

I thank the hon. Lady for her passionate espousal of a number of interesting issues. I will respond as best I can, but my three weeks in this post probably does not match her many years of expertise.

As highlighted, clause 10 and schedule 3 ensure that the UK can operate a unilateral trade preference scheme when the UK leaves the EU, supporting our long-standing commitment to support developing countries. The group of least-developed countries, as set out in schedule 3, are among the poorest in the world. As I said, providing nil-rate import duty access to goods from those countries helps them to reduce poverty through trade and is part of the UN’s sustainable development goals. Clause 10 enshrines that in UK law, ensuring that the commitment will be maintained in future. The clause is not prescriptive about the level of import duty for other eligible developing countries—they are listed in part 3 of schedule 3—that are not designated as least developed. However, as I have mentioned and as the Government set out in the trade White Paper, the Government’s policy intention is to ensure continuity at the point of exiting the EU by replicating the market access of all countries currently part of the EU’s generalised scheme of preferences.

I take on board the fact that the hon. Lady talked about being more ambitious. We have said that, as a Government, we wish to be more ambitious, but we need to bring into place in this country continuity from the existing system and give assurance and confidence that we are not opening up. If we open up the issues more widely, we will create uncertainty as to what we will continue—we may be strengthening in some areas; we might weaken in others. I therefore ask the hon. Lady to accept that I need to think and talk to her over time about some of the issues that she has raised. We do want to be more ambitious in the future, but for now, we believe that the right thing to do is to have continuity with the existing system and bring that as effectively as we can into UK law.

The amendment proposes that changes to schedule 3 be done by the affirmative procedure. As I have mentioned, eligible developing countries will be determined with regard to the classification by the World Bank or UN. The Government need to be able to react promptly to a country’s change in economic circumstances. Similarly, the power to specify the meaning of the term “arms and ammunition” is intended to allow the preference scheme to adopt the same nomenclature enabled through clause 8 for the customs tariff, which will itself be constrained by international nomenclature.

As I said, our intention is closely to replicate the EU’s preference scheme, including the GSP-plus tier. That is the enhanced tier of preferences available for economically vulnerable countries that ratify the international conventions I have mentioned. We expect beneficiary countries to continue to respect the conditions in GSP-plus, including meeting those international obligations. Those conditions will be set out in secondary legislation, as clause 10(2)(b) allows.

The question is asked why we would give preference to Cambodia even though land disputes have occurred following the EU’s everything-but-arms access. A key objective of the UK is building the UK’s prosperity by increasing exports and investment and promoting sustainable global growth. Greater prosperity leads to greater stability. We are aware that the Government of Cambodia have taken steps to improve their issue of economic land concessions, such as introducing a compensation process. Furthermore, the Ministry of Environment cancelled more than 20% of all economic land concessions. For now, therefore, we continue to work through the EU’s GSP monitoring system, and we seek to bring the existing system into UK law.

Taxation (Cross-border Trade) Bill (First sitting)

Anneliese Dodds Excerpts

Tuesday 23rd January 2018 Public Bill Committees

[The Chair]

I would love to call Grahame Morris, but I cannot, because he has lost his voice. Anneliese will ask a question for him.

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

Thank you, Ms Buck. The question that Mr Morris asked me to ask on his behalf is, if anything, even more pertinent after something that Mr Bain said. In the general area of customs—we are talking not only about duties, charges and processes strictly for customs, but about issues to do with migration, security, veterinary checks and haulage—I wondered, on behalf of Mr Morris, whether members of the panel would expand on what changes might be needed there. Are those being taken sufficiently in the round with matters strictly dealt with in the Bill?

William Bain: It is particularly important for food retailers because we deal with perishable items. I will use the anecdote, which is true, that a retailer can put in an order for orange juice. It comes via Zeebrugge and Dover and is on the shelves the following day. Our companies deal with just-in-time supply contracts and sourcing mechanisms. If you put friction into that process, you can introduce a day’s delay. For example, at Tilbury, I understand that if your crate has not arrived by 3 o’clock, it is processed the next day. You have to refrigerate it overnight. Those things add extra costs. They increase the possibility of food waste. They increase the possibility of having gaps on the shelves and products not being there when consumers want to buy them.

Meat products are a particularly huge issue. If we leave the European Union sanitary and phytosanitary rules system, you have to check meat items as they leave the country they are being exported from—let us say from France—and you also have to check them when they arrive in the UK. That will add huge friction into the process, and that is something that the food retail sector in particular has been very critical of. It also affects non-foods.

There are many furniture stores among our membership that import items—flat-packs—from the rest of the EU. If there are long delays at customs, that affects the ability of those goods to get to consumers as well. So non-food and food are concerned about the possibilities of more friction in the system.

Anastassia Beliakova: There are two considerations here: what businesses need to prepare for and what happens at the border. A lot has been said about CDS, which is a critical part of the picture, but that is just one element. We have been trying to draw attention to the fact that origin declaration, which is separate from customs declaration, also needs to be clarified.

When it comes to getting goods through the border—the just-in-time, the ferry coming in and so on—you need several systems working together. You need the customs declaration in place and already authorised. That needs to happen before the truck arrives and rolls off. There needs already to be an interlink with the relevant agencies—whether for food, plant and so on—who have already approved all this. This needs various means of declaration, and several IT systems need to work together and be integrated with the relevant port systems and make sure that there are no further delays. So we think there are some other elements that have not been covered sufficiently in the debate.

Peter MacSwiney: We have some pretty slick systems in place now for traditional freight. We do not really have any port systems in the ro-ro ports. We do not have any space and any procedures that lend themselves to goods being stopped and looked at this side of the channel. I think absolutely it has to work on advance information on a permission to load basis on the other side. Once you have that, the goods would have to roll freely through the ro-ro ports specifically on the basis that they are eligible to be entered into the UK, and the fiscal processes should take place after that. After they have gone through the border, they are accounted for separately.

Gordon Tutt: In terms of the systems we have currently for undertaking customs procedures, we probably have some of the most advanced systems in the world for doing these transactions. We have a lot of advantages over other countries in that we have got integration with our community systems providers in the ports, who can provide advance information. Customs and the Border Force to some extent use that information now. We have advance notification through the various systems internationally.

Where we seem to fail in this country is not with the revenue and the customs systems; it is actually with the other Government Departments. It might surprise you that within the airline arrivals, some of the notifications are still done on paper. That is not because trade and the port and community systems do not have the systems to provide this information—it is purely that those Departments do not have the ability to accept that information electronically. If we are to avoid delaying goods unnecessarily, where we have known, trusted traders bringing goods which present no risk fiscally or from a security point of view, that information should be passed freely to these other Government Departments, thereby avoiding any unnecessary delays.

Peter MacSwiney: The processes at Heathrow and Gatwick—both are run by the same community system provider—are different, and within the specific airports the transit sheds operate different procedures as well, so it absolutely could do with being streamlined.

[Julian Sturdy (York Outer) (Con)]

Q Ms Beliakova, I want to take you back to an earlier comment that you made, and which you put in your written evidence as well. You said that no clarification on the continuity of country of origin declaration is a concern. Could you outline the potential implications of that, as you, or your customers, see it?

Anastassia Beliakova: There are two considerations. The first is ensuring that businesses know that in future they can continue to rely on what they currently use to declare origin. At the British Chambers of Commerce, we facilitated 650,000 shipments through the use of certificates of origin last year. That is worth £22 billion to the UK economy—it is really critical. In the future, we do not know whether the existing means of declaring origin will continue. It is really important that businesses are told that they can.

It is also important from a strategic perspective for the UK Government, when we perhaps enter into new negotiations. If other countries ask for their means of declaring origin to be written into the agreement, that would cause significant compliance issues and would mean that there were far too many complicated rules for businesses to comply with. If there were provision in the legislation for the existing means of declaring origin, there would be a much stronger basis for the UK in future negotiations to make a case for the existing means to continue.

--- Later in debate ---

[Anneliese Dodds]

Q I will be quick and roll two things into one because I see that we are running out of time. We touched on the issue of trusted trader schemes and potential new impediments to that given the need for pre-approval of software. Is there anything else that prevents the further expansion of those trusted trader approaches? Some have suggested that they would be one way of facilitating processes.

Secondly, regarding HMRC capacity, we have obviously seen a big reduction in headcount and changes with all the offices becoming regional hubs. Are there other alterations that you would make to HMRC’s set-up to facilitate the big challenges coming down the road with these new systems?

Gordon Tutt: May I begin by answering the first question? Within the UCC legislation, which is carried over into the new UK legislation, there is a recognition of the role of the authorised economic operator. That is quite important, but it means that there will be potentially hundreds, if not thousands, of UK companies that may wish to become AEOs to gain the benefits once we leave the EU.

The problem is that unless you have a proven record of customs transactions, you cannot apply to become an AEO, so in some ways we are going to disadvantage traders that are probably acting completely in accordance with regulations, are good taxpayers and are honest and trustworthy companies. None of that is taken into consideration. We have had some discussions with HMRC and it is almost as though we might need something like a provisional AEO status so that those companies, which pose no risk, can take on some of the benefits, such as guarantee waivers and being able to operate the self-assessment schemes, where there is no risk either to the Treasury or to the safety and security of the country. That is a key point.

I would add that the provisions of the self-assessment scheme, which are part of the UCC regulations and will be carried over into UK law, can also perhaps provide some answers to some of the problems that we have not successfully been able to find solutions to.

Anastassia Beliakova: On AEO, the issue is actually your second point of HMRC capacity, and the way the process is run in the UK. AEO is an international system. It is recognised by standards at the World Customs Organisation, so there are certain aspects that a country that has this scheme must adhere to.

However, the process of approving companies—just how long that takes, and all those practical aspects—is up to the customs authority of each country to implement. We have heard time and again from our members that that takes far too long. I have an example of a company that had already been approved for AEO but it took 12 months for them to get the reapproval, although they did not have to go through the exact same process again. It should have been much faster.

I have spoken to customs authorities in other countries such as Austria. There, owing to their much more customer-service-focused approach—and, it has to be said, they do have many more customs officers—it takes a company about three months from the start to the very end of the process. Yet they are no less rigorous than we are. We are very stringent in our approach, and if we want to help more companies achieve this status, the practicalities need to be rethought.

William Bain: That is a key issue. AEO status is part of the solution, but it is no silver bullet for the customs issues that companies are likely to face. There are 10 times fewer AEO companies in the UK compared with Germany; penetration among small and medium-sized enterprises is particularly low. There is a lot of work that Government could do to make the process of applying easier but, as was said earlier, there has to be a history of previous customs transactions. I believe it is three years before companies can apply.

The other thing that is necessary in any withdrawal agreement solution is that there should be mutual recognition between the UK and EU AEO systems. The EU has already done that with America, China and some other countries. That is critical.

On HMRC resources, I revert to an earlier point: that Dover and Eurotunnel do not have capacity to conduct SPS—Sanitary and Phytosanitary Certificate—checks. If we end up outside of the EU SPS regime and we have to check fresh meat and plant products coming into the country, there is not the capacity to do that at Dover. You have to find an offsite solution and that will draw further on HMRC resources—to have veterinary staff in position to perform these checks. That will increase the burden on the HMRC budget.

[The Chair]

Emma Hardy has a quick, mini-supplementary, four people want to ask another question, and we have 14 or 13 minutes—just to give you an idea of how to manage the time.

--- Later in debate ---

[The Chair]

Thank you. We will bring you in to questions from now.

[Anneliese Dodds]

Q Many thanks to Mr White for setting out quite a different approach to how the Bill could have been structured. It has been quite salutary for the Committee to hear that. In the comments that you made, Helen Dennis, about the proposed system for least developed countries, you said that you felt that the Government have taken the best bits of the existing approach. Certainly, the exclusion of arms is retained here. There is a question about the extent of conditionality, because in the European system there is conditionality about good governance and environmental sustainability. Could you comment on that? I understand that that is not replicated to the same extent.

I have an additional question about the distorted economies. We have very little detail about how distorted economies will be dealt with in the Bill. Do you have any comments on that, given that there are severe human rights concerns in many of those economies about certain elements of production, including modern slavery?

Helen Dennis: You are right to say that the three tiers of the EU preference scheme are not cited in the legislation. At the moment, in the Generalised Scheme of Preferences, there is Everything But Arms duty-free and quota-free access for the least developed countries, and there is broad GSP and something called GSP-plus, which countries can access if they have ratified certain human rights agreements and conventions. That highlights that the Bill is being kept incredibly loose. We have had discussions with officials at the Department for International Trade about this, and the stated intention is probably to cut and paste the preference scheme.

At one point, I thought that there would probably be some wider discussions about the shape of the preference scheme: whether we would go for one tier, two tiers or three tiers, whether we wanted to roll over the human rights conditionality, and more. I do not know whether it is to do with the time, resources and everything that needs to be done in the next year, but the preference seems to be, essentially, to cut and paste for now, and to look at those improvements later. You are right to say that that is not in the legislation, so the detail of rules of origin and the different tiers of a preference scheme are just more issues that the Secretary of State would bring forward in regulations. It was implied in the first question whether that is satisfactory. Do members want to have a say in shaping a preference scheme and on whether there should be human rights conditionality? That is an important question that needs considering.

On your second question about distorted economies, there probably are divergent opinions—certainly in civil society and non-governmental organisations—about the use of trade agreements and tools to enforce human rights obligations. Obviously, everyone wants to see that, but trade is quite a blunt tool for doing that. Its application at EU level is still fairly recent, so there probably is not enough evidence yet to see whether the GSP-plus has the desired effect. I am not an expert, but I know that after the Rana Plaza tragedy in Bangladesh, the United States was able to use trade policy to move forward some of those conversations about labour conditions and rights in Bangladesh. There are ways in which trade policy can be used for those discussions, but whether they are applied as conditions in trade agreements is a question for discussion.

[Chris Davies]

Q May I go back to Mr White’s response? I would have thought that you would be very happy with what the Government have come up with, because you may be able to produce yet another volume of your book. You have certainly given the first volume great marketing—many points to you for that. The previous panel seemed, in general, to approve of the Bill. They liked its flexibility and agreed that it is an enabling Bill. They are the ones whose members will have to implement it. You, as a lawyer, do not seem as happy with it. Forgive me for saying this, but every lawyer I have encountered in an evidence session since we decided to trigger article 50 has seemed very dismissive and upset about the way we are going forward. Is this lawyer-speak, or is it something that will cause problems for the Bill?

Jeremy White: Good lawyers—and even good editors—work only for their clients, not for themselves. Barbara is a colleague of mine, and you should ask her that question, too. We are interested only in making sure that the Bill is fit for purpose. Our charity is made up of lawyers and consultants, and we all agree that although the Bill is not designed to do something bad, it tries to do too much. We applaud its ambition and, to a point, its flexibility, but let me make a couple of pleas for special items.

On the replacement of VAT on acquisitions being dealt with in a VAT return, we see flexibility in the Bill and in the announcements of HMRC and the Treasury. That can be replaced by postponed accounting of import VAT. That kind of flexibility is good. When we look at the flexibility that we would like to see in respect of some of the special procedures and information systems, we think, “Yes, that will be good.” In particular, guarantee waivers—taking a different view from the EU on guarantees—are a good thing. The Bill would give us that structure, and we applaud that.

Our problem is with the cost that would follow, both in terms of parliamentary scrutiny and for the trade, if we commenced a UK recast. Having to look at both the UK recast and the Community law would create an unnecessary cost. As I said, we are not concerned about parts of the current law such as tariff schedules and trade instruments, which we know will have to be recast. Each paragraph of the Chartered Institute of Taxation report is quite dense—a number of people were fighting to get their arguments in, and some of it is a bit too dense—but one talks about international obligations. We do not want the flexibility of a UK approach that is inconsistent with our international obligations, because that would just lead to more cost. Although we might, in individual cases, obtain a result that we liked based on a simple reading of the English recast, it might be incompatible with either a Community obligation or an international obligation, and we would end up with everything having to be reversed on appeal and the whole enterprise being more expensive.

The problem with an unnecessary recast is that it would produce an amount of uncertainty. It is that, not the flexibility, that we object to. If I put my own hat on, you are right that I would never be able to retire, because, instead of being paid once for reading this version, I would have to be paid twice—once for reading this version and once for reading the English recast—in any case I was involved in.

Taxation (Cross-border Trade) Bill (Second sitting)

Anneliese Dodds Excerpts

Tuesday 23rd January 2018 Public Bill Committees

[The Chair]

I have Anneliese Dodds, Jonathan Reynolds and Peter Dowd, and we must finish by 2.45 pm.

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

Q Thank you, Mrs Main, for chairing the session. I share concerns that there is very little in the Bill on the issue of distorted economies. It would be helpful if you could indicate what provisions you think might be necessary to remedy that current deficiency.

Rosa Crawford: A step forward would be to use as a baseline the new rules that the EU has adopted, whereby non-market economies are not regarded as reliable in having a price indication for the goods that they export. Rather, an analogue country of a similar level of development would be used to judge whether an unfair pricing practice was used. We hope that that will allow the EU to take stronger measures against countries—not just China, but Vietnam and other countries that are using undue levels of Government influence to set prices at a low level.

In the current UK legislation, we do not see any approach like that. Indeed, we know that the UK Government have been holding back EU attempts to take stronger measures against China and other non-market economies. I think we can be forgiven for not quite believing it when we are told that in the secondary legislation we will have adequate measures to deal with non-market economies. We do not have an indication that the Government are likely to introduce secondary legislation on that.

Ben Richards: A key new development within the European Union is that, when they are assessing an analogue country, where there is more than one, they can now also take social and environmental factors into account. That is obviously absolutely crucial, because if a country is abusing labour rights or environmental regulations, that is also trade distortion, and should be taken into account in our trade remedies regime.

Kathleen Walker Shaw: There are two more points that are vital in terms of dealing with the distortions in the UK within the Bill framework, the first of which is the timing of it. To expedite these procedures at a time when they can actually help the companies while they remain competitive and able to see off the challenge was a problem that we had in the steel crisis, as some of you will be aware. Even the EU timetables at that time were dragging on too long and exacerbating some of the problems that we had across the steel industry, so the speed with which we can move the procedures is vital. The placing of the economic interest test in there makes me doubt that we will be able to do that.

Again, setting the tariffs at a level at which they will have the effect of adding the effective protection that we need was something that we struggled with agreement on at European level. The European Commission was going to set the levels on certain types of steel much higher than the UK Government. In the end, it became a political process rather than an economic process of what was required to protect and maintain the competitiveness of British industries and other European industries in that case.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Q During the steel crisis, I sat in this very room as a member of the Business, Innovation and Skills Committee taking quite a lot of evidence from some of you as well. It is clear that if this bit on trade remedies is got wrong, the consequences will be severe.

My worry on the public and economic tests is that, even in something like the steel crisis, there were people arguing for the benefits of very cheap steel coming into UK for construction and so forth. If those tests are not drafted correctly, frankly, we do not have any trade remedies at all. If we are going to have them in the Bill, how can we draft them to ensure that they are robust and fair? Who should be involved in the Trade Remedies Authority to ensure that that is the case?

Ben Richards: We need an opportunity to have that debate, which we will not have at all with the Bill as it is currently drafted. It will simply be written into secondary legislation—we will not have that ability. We have four or five minutes left to have a discussion about how it should be drawn up. It would take us another couple of hours. That is what we want, as a trade union movement: an involvement in these discussions and debates.

We have huge concerns about the way in which the appointments are being made to the Trade Remedies Authority. In effect, in the way that the Bill is currently written, we are not seeing one economic interest test but three. To give you a one-sentence answer about how it should be is very difficult: we want to engage in that debate. We want to have a role in that process in the future to ensure that our members are confident that those decisions are being taken with their interests in mind.

Kathleen Walker Shaw: On the Trade Remedies Authority, its structure is very important. We would like to see it set up in line with the Health and Safety Commission, where we have three employers, three trade unions and three other interests. I am a bit concerned that we are limiting that to nine, because I have a strong concern that devolved Administrations need to be involved in that process as well.

I would also like to see the Bill developed to give a role for parliamentary scrutiny—for the TRA to be liaising with structures within wider parliamentary scrutiny—on the European economic area IT, and on the decisions of the TRA, and to remove the power of the Secretary of State to veto a decision of the collective scrutiny of Parliament and the TRA on remedies. In that way, we might be some way to getting to the bottom of a justified and effective remedy.

--- Later in debate ---

[Anneliese Dodds]

Q Thank you, Mrs Main. In response to the points already made, surely it is not just about the preparedness of parliamentarians, but also the preparedness of the Government and Ministers to answer questions that are asked about the detail of the legislation that they are meant in theory to be ready to defend.

The question that I wanted to ask was, do you think there might be a role for sunset clauses in relation to some pieces of delegated legislation?

Joel Blackwell: I warmly welcome the House of Lords Delegated Powers and Regulatory Reform Committee report, which took the unusual step of publishing its report on this Bill while it was still in the Commons, as it did with the European Union (Withdrawal) Bill. Usually it waits until its introduction in the Lords. The report raised the issue of sunset clauses, which are very important in terms of the links between making changes to EU law in the European Union (Withdrawal) Bill and doing that through clauses 42, 45, 47 and 51. It makes valid comments on the potential of those powers. The powers are not required to be used in perpetuity, and sunset clauses, such as the ones inserted for clauses 7, 8 and 9, would bring some consistency, and that makes perfect sense. We would support the view of the Delegated Powers Committee on that point.

[Kirsty Blackman]

Q On the different procedures for delegated powers—the negative procedure, the made affirmative, the draft affirmative and the super-affirmative procedures—in this Bill specifically, do you feel the balance is right? Or do you feel, for example, that there are too many negative procedures, which are quite difficult for parliamentarians to get involved with?

Joel Blackwell: The negative procedure is the default procedure for scrutiny of delegated legislation, and in this Bill that represents that fact; the majority are subject to the negative procedure. Again, referring to the Delegated Powers Committee report, we would agree with the clauses they highlight that they think are negative and should be affirmative, particularly the ones that are what we call Henry VIII powers amending primary legislation. That Committee has always said that there needs to be a compelling reason why a negative procedure would be adequate for Henry VIII powers. Reading the delegated powers note, I cannot see a compelling reason; I think they should be made affirmative.

--- Later in debate ---

[Kirsty Blackman]

Q With all the issues that have been raised, especially about the negative procedure and the ways in which the House of Commons can scrutinise this, given it is not going to the Lords particularly, do you think this is a good way to do things or would there be a better way?

Joel Blackwell: I think that the Hansard Society would like to see an equivalent Delegated Powers and Regulatory Reform Committee, first off, in the lower House—or some MP in the composition of a Joint Committee or what have you. That would be a good opportunity.

I think that delegated powers notes are extremely useful documents. This one is 174 pages long. There are well over 150 delegated powers in the Bill. Some of the justifications I am struggling with, particularly as regards the use of urgency and non-urgency. I think time is an issue here, particularly if you do not have the backstop of further scrutiny by a Chamber—the second House—that is usually very good at looking at delegated legislation and has taking the lead on it in the past.

When we were doing a similar Bill, which became the Welfare Reform Act 2012, a call by many MPs on the Public Bill Committee at the time was that it would be really useful if they had draft regulations alongside the scrutiny of the Bill. You could do things like that to improve scrutiny of delegated powers but, fundamentally, the lack of representation, the fact that you would have to wait for the Bill to get to the House of Lords for a report to be published, is an issue.

Perhaps one way around that is that the House of Lords Delegated Powers Committee does what it has done for this Bill and the European Union (Withdrawal) Bill, and publishes, as usual practice, the Bill as soon as it enters the House of Commons.

[Anneliese Dodds]

Q I have two quick questions. One is to ask you to comment on the use of not just secondary but tertiary legislation in this Bill on public notice law. That would be helpful for us. Secondly, in our previous discussion we talked a lot about the new Trade Remedies Authority, and some of the witnesses suggested that the Secretary of State will be able to overrule its suggestions, without, it appears, any parliamentary process underlying that. I wonder whether the Hansard Society has any comments on that.

Joel Blackwell: On the first point, with regards to sub-delegation or tertiary legislation and this use of public notice, the fact that they will not be subject to any parliamentary scrutiny is concerning. We basically reiterate the points made in the Delegated Powers and Regulatory Reform Committee: that if public notices can do the same as regulations they should be subject to parliamentary scrutiny, just as regulations would be. Sub-delegation is an issue for us because there is a lack of parliamentary scrutiny. In some cases it might not be appropriate, but it should still be considered as usual practice, and at the moment it appears not to be.

With regard to the Trade Remedies Authority, the Hansard Society has not really considered that yet. My colleague Brigid has probably, as I speak, just finished on the Trade Bill, so I am happy to write to the Committee about our points on that.

[Peter Dowd]

Q On the point about tertiary, are you saying that you have fundamental issues with tertiary legislation?

Joel Blackwell: The fact that it is usually not subject to any parliamentary scrutiny is of concern to us.

--- Later in debate ---

[Kirstene Hair (Angus) (Con)]

Q As a follow-on from that point, how feasible would it be to ensure that smaller ports, such as Montrose port in my constituency, have dedicated customs officers? Would there be a detrimental impact for these smaller ports, whether in Scotland or in any other part of the United Kingdom, if customs support was not provided on site?

Richard Ballantyne: It is a concern. You can imagine that a lot of the Government’s attention is on the Dover corridor, and probably rightly so—that is where the main challenge is.

Going back to my opening statements, if we remove ro-ro for one minute, for a lot of bulk shipments—Robert may correct me if I am wrong—where there is one commodity on a shipment, there is a bit more time, and the environment is one where shipping agents are usually helping out, submitting information that then is facilitated to HMRC. We hope that either those agents or inventory linking as part of the Union customs code, which is coming forward, would mean that smaller ports such as Montrose are not disadvantaged.

There are concerns that there could be certain delays at the border—we would not want to see that, but perhaps the sensitivity at a bulk handling port or a port with break bulk is less than at a ro-ro terminal, where lorries basically want to get out as soon as possible. If they are stuck in a terminal, backlogs and queues start and the operational challenges associated with that.

[Anneliese Dodds]

Q My first question relates to the point just made by Kirstene Hair, about the staffing at different ports and the availability of HMRC staff. We have seen quite significant ongoing changes and consolidation of staff into regional and specialist centres. We have heard that the Border Force relies on those HMRC staff on certain occasions. I wonder whether any of your members are raising problems with you that might be arising due to that change in the availability of HMRC staff.

Robert Windsor: My members are very concerned about that. The Dover straits corridor is causing particular concern because it is a 24/7 activity—those lorries are coming in all the time. There have been issues with staffing at those areas. You have to differentiate between Border Force activity, which tends to be frontier, and the work done at the national clearance hub based in Salford. They provide 24/7 cover but, in air and sea, you could basically say that from about 6 o’clock or 7 o’clock in the evening there is a noticeable decline in the workload. If you put ro-ro coming in through Dover with a customs declaration, there will be less of a decline in the work being undertaken there.

It is not just Border Force that we have to consider. A lot of foodstuffs potentially could do with some sort of inspection. Even if there is a risk-based system, a certain proportion of that may still require inspection. Multiple Government agencies at a national level and a local level will face this impact. It will have an impact on my members because you will require more people to work in what is regarded as an out-of-hours situation. That will have a considerable impact on costs.

--- Later in debate ---

[Kirsty Blackman]

Q We heard earlier that some suppliers are leaving their supply chains, for example, in order not to have to go through a border process, particularly for things that come in and then go out again from the UK. Are you seeing that from people and organisations that you are in touch with, or is that just an “out there” thing that is not really happening very much?

Tim Reardon: We hear a lot of talk about it, but I think on every route that has published its traffic stats for last year the freight volumes have risen from what they were in 2016. First, of course, that is a national success story; it is an indication of economic health. It is great for all the businesses that we all represent, which handle that traffic, but of course it means that the system overall is increasingly full. There is not a great deal of spare capacity cumulatively across the UK.

The issue is more than just space on the terminal. The road network serves two or three main gateway points into and out of the UK. There needs to be a really good-quality landside connection from the terminal, to enable it to flourish; it needs more than just space on the berth. It would be very, very difficult to flick a switch and say, “Actually, the traffic will go somewhere else”.

Richard Ballantyne: Towards the end of last year, there was a new direct service from Zeebrugge to Dublin for roll-on roll-off traffic, and there was a lot of noise about, “Look! That’s a consequence of Brexit”, but when you actually looked into that investment, it was probably made before the referendum. There may be people looking at further direct calls from the Republic of Ireland to continental Europe, but as of yet we have not seen them.

Robert Windsor: Many of my members are multinationals —European-based forwarders. I know that there are discussions about this issue, which is inevitable given the situation, but we have not seen anything move yet, as such. What we are receiving is a lot of inquiries from European-based freight forwarders with no UK base who are inquiring whether they can establish in the UK because they obviously see an opportunity the other way round.

Richard Ballantyne: The warehousing industry is looking at potential new sites because they see that there could be further interruptions to trade flows, where they would need more storage.

[Anneliese Dodds]

Q I have a question related to what happened back in 2015 with the first major Operation Stack problems in Kent. They were not caused initially by developments on the British side; it was due to problems on the French side. The capacity issues on the French side were very relevant. To what extent are you aware of activity happening in our partner ports to prepare for a no-deal scenario? Are you discovering that talking to your colleagues in other countries? Are you aware of the UK Government doing anything to promote that preparedness?

Richard Ballantyne: The British Ports Association is part of the European Sea Ports Organisation, which has a meeting tomorrow on Brexit that I am going to. It includes some of the main UK-facing ports, such as Dublin, Zeebrugge, Calais and beyond. It has been quite difficult. Some of those ports are state-owned, and it is quite difficult for the UK Government to talk with them, although there have been a number of information-type visits looking at customs arrangements as they are and what the operational situation will look like post-Brexit. We have good conversations.

In terms of what is going on with the customs authorities in those countries, it is varied. There is a French customs taskforce—that is an internal taskforce—that I think the ports there are plugged into. I went to see the French ports association to talk about Brexit, and it seemed on top of things, but it is a difficult one. There is a lot of mystery there. Just as the UK Government cannot divulge all the discussions they are having, the ports cannot divulge everything to us. They have to remember that negotiations are being led through the European Commission, so that is the correct avenue.

[Peter Dowd]

Q On the point of infrastructure, which you raised before—interestingly, you raised a point about state-owned ports—our ports are fully privatised. That makes it more difficult in a sense for the Government to control their development, which is understandable. Have you got any evidence that the Government have taken proactive action to improve the infrastructure around the ports in the light of the potential challenges you are facing? I say that as a Member of Parliament who has a pretty big port in his constituency.

Richard Ballantyne: As you know, the ports industry in the UK is market-led and market-driven. We have three types of port: local authority-owned ports, which operate on a commercial basis in competition with private ports; full private sector ports, or equity ports; and the trust ports, which are Dover, Aberdeen, London and so on, and they are still run on a private basis and pay corporation tax on any profits they make. Significantly, all of them are financially and strategically independent of Government decisions. That has worked. Effectively, the Government have delegated the authority to run the ports because they understand that you need technical experts to manage such things as safety and the commercial arrangements.

In terms of what is going on at the moment, the Government do influence the connections to ports. Ports have publicly owned road and rail connections. Following a lot of lobbying from my association and others, the Department for Transport is undertaking a port connectivity study, which is not about spending any money on connections but about assessing the state of the road and rail connectivity of the UK ports industry, and how we get ports more on the radar when big investment decisions like the road investment strategy and rail strategies are made and Treasury spending budgets are allocated. It is about us, perhaps, rising up. There has been a lot of big-ticket passenger-focused spend, such as HS2, Heathrow and Crossrail. Freight has felt a bit of a poor relation. We are working to improve that, but unfortunately freight does not vote, so it is a challenge for us.

--- Later in debate ---

[The Chair]

I am going to Anneliese Dodds next. We must finish at 5 o’clock and I am conscious that there are several people wanting to get in.

[Anneliese Dodds]

Q I will be brief. That has been enormously helpful for clarifying some of the situation. One of the issues that came up in the previous panel was around the lack of measures in the Bill generally relating to the distorted economies. Obviously, they would be covered by some of the measures that we have been talking about to a lesser or greater degree, but I wondered whether you had any suggestions about whether there should be more explicit recognition of the problem of distorted economies within the Bill or any measures taken beyond those that we have just been talking about.

Dr Laura Cohen: Particularly on the methodology, I will suggest two provisions that are not mutually exclusive; the UK needs to alter the Bill to include them both. The first provision is how the dumping margin will be calculated in highly distorted economies such as China. The UK should be stating clearly that there should be a special methodology for non-market economies. That would allow the UK to keep that option open for China until the WTO jurisprudence is clear. Indeed, that needs to be in place anyway for countries such as Tajikistan and Vietnam.

The second provision is a methodology that constructs what is called a normal value wherever price distortions occur. That is the EU’s new approach, which takes into account a number of price distortions, including several non-market economy indicators and an absence of labour or environmental standards. That can be used against a country, including former non-market economies such as Russia, which I know has been a problem in the chemicals sector. Indeed, the pasting in of EU legislation is an important principle of Brexit, as is being done in the EU (Withdrawal) Bill, and this part should be done as a default.

Gareth Stace: In the EU, that became law on 20 December. The UK Government are saying that they will broadly follow it. It would be the easiest thing to say, “That is what happens in the EU on those sorts of economies, and we will do the same”—done! They do not need to invent anything else.

Ian Cranshaw: It is a theoretical debate that we have been having with the DIT about where the risk is. Is the risk in following the new methodology that the EU is introducing or in the approach that the DIT are now taking in going with something that we have been delivering for x number of years, so that they believe they are following something we already have? The EU is moving in a different direction. From our industry the concern was that many of our companies here are EU-based or EU-headquartered, so they want something consistent. Then you have the political debate that we are leaving the EU because we want more flexibility. That is more of a political decision.

[Emma Hardy]

Q This is more of a clarification question, so forgive me if you have answered it in other ways and I have not taken in all the information you have just given me. You are talking about the economic test and the public interest test. How would you propose improving those systems of tests as is set out in the legislation at the moment?

Dr Laura Cohen: First, do you need them at all? It is not compulsory under the World Trade Organisation. Secondly, we should definitely have the text that is in the EU: weighing and balancing the competing interests, and special consideration to the need to eliminate the trade-distorting effects of injurious dumping and to restore effective competition. That would help.

Draft Help-to-Save Accounts Regulations 2018

Anneliese Dodds Excerpts

Monday 22nd January 2018 General Committees

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

I am grateful to the Minister for his helpful explanations. I am not going to comment on the principles underlying the Savings (Government Contributions) Act 2017 and regulations. However, we need urgent clarification of several issues in relation to whether the professed intent of the Act will be carried out in the regulations.

My first question is about the eligibility criteria for Help-to-Save accounts, which the Minister referred to. Colleagues will remember that they were described as enabling low-income people to prepare for a rainy day. I accept that the Act stated that regulations would ensure that

“specified conditions relating to working tax credit are met in relation to the individual”

and therefore implied that only those eligible for working tax credit, including those receiving it at a nil rate, would be eligible for the Help-to-Save scheme. On that point, by the way, the Minister said that he believed it would not just be working families who would benefit. It would be helpful if he provided the evidence for that, as it does not appear to be the case.

It is peculiar that a mechanism intended to aid low-income people includes what seems to be an income floor, rather than a ceiling, especially given what seems to have been the near-complete removal of the social fund after its devolution to local authorities. However, at least that restriction was indicated in the Act. I find it harder to explain the eligibility criteria for universal credit claimants as specified in the regulations.

There has recently been much ill-informed criticism of working tax credits, and of them involving a cliff edge of 16 hours’ work a week. In practice, however, individuals can obtain working tax credits while working more than 16 hours a week, albeit with consequent changes to their eligibility for child tax credits. I am surprised that the 16-hours requirement has been so criticised by Government Members, and crowbarred into arrangements to ensure that universal credit claimants are eligible for Help-to-Save accounts. The Minister said that this is a simple process, but for universal credit applicants it is not, and some indication of the Government’s thinking on that would be helpful.

I am sorry that I did not give the Minister more advance notice—I spent Saturday night enjoying myself reading through all this, and I did not have a chance to contact him during working time—but there seems to be a drafting error, or at least an ambiguity, in the regulations regarding the benefit condition for those on universal credit. The same introductory text is used for those on universal credit as for those on working tax credit—applicants have to meet eligibility criteria, which will be specified later, for both eligibility reference dates. The text for the benefit condition that follows for UC claimants indicates that income conditions should be assessed for the months preceding the first reference date only. That income condition is that applicants should have received an income equal to, or above, working an average of 16 hours a week for a month on the national minimum wage.

Will the Minister clarify that the intention of the universal credit benefit criterion is to require individuals to have that income qualification for the months preceding the date of application for their Help-to-Save accounts, and not for the date on which their application is accepted—the second eligibility reference date? That is enormously important given the extent to which the income of many low-income people can vary over time. It would be perfectly possible for someone to earn above the income requirement in one month but then, due perhaps to slow processing by their account provider, to have their income assessed for a different month and be found not to have worked sufficient hours or on a sufficient wage to qualify for that account. As the Minister said, there are penalties if someone is found to have submitted the wrong information about eligibility, so it is important to get this right.

Two questions arise about the provisional arrangements for Help-to-Save accounts. The first relates to undertakings made by the former Financial Secretary to the Treasury, the former hon. Member for Battersea, who said that the Government were open minded about credit unions becoming involved in the provision of Help-to-Save accounts in the future once the national system had bedded in, and if it could be shown to be appropriate and value for money. She also said that regulations would be tabled with sufficient flexibility for that to be possible. Indeed, the possibility of different authorised account providers is referred to in section 13 of schedule 2 to the Savings (Government Contributions) Act 2017.

As a responsible Minister, the former Financial Secretary said in a Third Reading debate on the Bill that nothing in it would preclude expanding the provider model in future. However, there is next to no reference in these regulations to the Government’s conducting a review into the possibility of additional providers providing Help-to-Save accounts. Instead, we are told only that if a decision is made in future to move to a multi-provider model, the regulations will be amended accordingly. The regulations provide no mechanism for that move, which I find peculiar given the tenor of those previous debates in the House. The regulations contain a reference to a five-year period for the authorised provider. Will the Government conduct a review into the possibility of credit unions providing Help-to-Save accounts, at least before the end of that five-year period?

My second point is about sub-contracts and procedures. We are informed in section 11 of the regulations that

“the authorised account provider shall satisfy itself that any person to whom it delegates any of its functions or responsibilities under the agreed terms is competent to carry out those functions or responsibilities.”

Last week I had the pleasure of debating with the Minister—it was good to talk about tax-free childcare arrangements in Westminster Hall, and he will remember that we spoke about how NS&I had outsourced the provision of the portal used to access tax free childcare to Atos. He will remember the many cases referred to in that debate regarding parents who had been frustrated not just because of a simple bug, but because of serious system errors, and to the extent that they were considerably out of pocket. Will the Minister assure us that the Government will aim to satisfy themselves that the arrangements will operate properly, and not leave that to the authorised account provider? The authorised account provider’s mechanism of childcare service does not seem to have operated satisfactorily. I hope the Minister can say how the trial period that he mentioned will ensure that any potential problems due to outsourcing are ironed out.

Finally, I would like the Minister to clarify that the Government have altered the regulations concerning working tax credits, as undertaken by the former Financial Secretary to the Treasury, so that income from Help-to-Save accounts will definitively not count for assessing the value of working tax credits for claimants. I have not been able to find out whether that undertaking has been fulfilled.

I apologise for this long set of questions, but in the context of considerable cuts to other forms of help for low-income people, it is important that there is clarity and certainty about this scheme if it is to succeed, even on its own terms.

--- Later in debate ---

[John Glen]

Today’s debate has been an interesting one, and I am grateful to hon. Members who have contributed. Before I deal with the detailed points that have been raised, I want to thank the many groups of individuals who have given their views on the proposals, including hon. Members, many of whom are here, who participated in debates during the passage of the Savings (Government Contributions) Act 2017.

On eligibility, the hon. Member for Oxford East suggested broadly that the passporting of eligibility rules excludes many people who could benefit from the scheme. I think the hon. Member for Glasgow Central mentioned people under 25, carers, and those who support themselves without claiming benefits. In essence, she was asking why we did not have bespoke rules. The eligibility rules balance simplicity and certainty for individuals and the aim of supporting low-income working families to become regular savers. Passporting the scheme in this way will ensure that it targets effectively those on low incomes, and is a well-established means of targeting Government support across a range of policies. There is a five-year window to enter the Help-to-Save scheme and applicants need to meet the eligibility criteria only at the time they register.

The hon. Lady mentioned eligibility rules in regulation 3(3), which refers to each date, and regulation 3(3)(b), which mentions the first date. The point is that the condition remains satisfied on each eligibility reference date. Respondents to the consultation were overwhelmingly in favour of keeping the eligibility criteria as simple as possible. Keeping in line with eligibility for other benefits and credits will keep the administrative burden on the customer to a minimum, therefore encouraging take-up and maximising the benefit of the scheme. Adding different thresholds for different groups would greatly complicate the scheme. The scheme has been designed in this way to create equality between applicants claiming working tax credits and universal credit.

In response to the point about different providers and the incentivisation of credit unions, using NS&I to build the accounts ensures national coverage of the scheme, as I said in my opening remarks. That is necessary for there to be confidence in the scheme when it starts. NS&I has a proven record in delivering a range of savings products. The hon. Member for Oxford East referenced our exchange last week on the performance of the voucher scheme.

[Anneliese Dodds]

It was tax-free childcare.

[John Glen]

Tax-free childcare; I am sorry. I met with NS&I this morning to discuss the need to get things right and the improvements that have been made, but the hon. Lady raised a legitimate point. During the trial period, we will try to draw out any errors before the scheme is fully rolled out in October. We will use our expertise and what we have learned from the introduction of tax-free childcare to ensure that we provide a service that meets customers’ needs. We are always looking for opportunities to partner with others and we are open to ideas surrounding how we best ensure that as many people as possible benefit from the scheme.

The hon. Member for Glasgow Central referred to the number of people who might sign up. I thought it would be helpful for her to know that based on the take-up of previous schemes, our estimate is that 400,000 people will sign up to the accounts. I welcome the question on how customers will access the Help-to-Save accounts and our plans for the digitally excluded. Help-to-Save is an online savings account. All transactions, including checking the balance and paying in savings, can be managed online through gov.uk. Digitally excluded customers and people with particular needs will be able to manage their accounts through telephone banking. I offer reassurance that that will be through a 03000 number at the standard rate. That will also apply to calls that are transferred to NS&I. Paper statements will be issued to digitally excluded customers.

In terms of the future of the single provider, the regulations would need to be changed to provide for more than one provider. At this point, it would be sensible to monitor things as the scheme goes on. If there is evidence to suggest that additional providers would be helpful and would assist in the take-up, that is certainly something that the Government and I would be willing to look at.

--- Later in debate ---

[Anneliese Dodds]

I am sorry to intervene, but I wanted to double-check something with the Minister. I was encouraged to intervene because I think this is the only chance I will have. On the exact issue of eligibility, it was not totally clear whether applicants currently claiming universal credit will need to have fulfilled the income criterion and earned the equivalent of at least 16 hours a week at the national minimum wage only when they apply, which is what it looks like from paragraph 3(b), or also when their application is accepted. I share the Minister’s concern about having simplicity. I cannot get my head around this, and I have been able to look at all the different debates. Can he confirm that it is paragraph 3(b) that is right and not the introduction to that regulation, which suggests that the criteria will apply at the point of application and at the point of acceptance?

[John Glen]

I am very sorry for the lack of clarity in my remarks. The criteria will be fulfilled at the point of application. If that is satisfied, that is it for the duration. Many apologies for my ambiguity on that.

I want to deal with Help-to-Save’s impact on entitlement to benefits and credits. Help-to-Save is intended to help people build up a rainy day fund. The Government bonus will not count as income for means-testing purposes when assessing eligibility for housing benefit. The bonus and any savings accumulated in a Help-to-Save account will not affect tax credit awards and would start to impact on universal credit awards only if the customer had savings of £6,000 or over, including the money in their Help-to-Save account.

The hon. Member for Glasgow Central asked about access in the case of broken or abusive relationships. I would be happy to take representations on that issue and to look at it.

I hope that I have dealt with most of the points that have been raised. I acknowledge the broader point that the scheme does not solve every problem. It would be wrong for me to say that it will target everyone, but it is a step in the right direction. It will have a positive effect and it will deliver a change in behaviour with respect to savings that the work by the Money Advice Service two years ago showed is very much needed.

The Government’s vision is to empower working families with the confidence, skills and opportunity to manage their personal finances. The regulations will bolster people’s ability to save by giving a boost to what they manage to put aside each month. Help-to-Save will encourage such families to become regular savers and give them a financial buffer to protect them from income shocks. The ensuing financial resilience will benefit us all. Our economy is the sum of its parts, and the Government are committed to ensuring that every part of it and every person has the support they need. I commend the regulations to the Committee.

Question put and agreed to.

Resolved,

That the Committee has considered the draft Help-to-Save Accounts Regulations 2018.

Oral Answers to Questions

Anneliese Dodds Excerpts

Tuesday 16th January 2018 Commons Chamber

[John Glen]

My hon. Friend is right. The Government do not take anything for granted and will look very closely at what is happening with the poorest in our society.

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

Does the Minister acknowledge that the reasons why a quarter of people on low incomes are currently experiencing significant problems with arrears or debt repayment include, first, his Government not taking on board Labour’s programme to rein in credit card debt and, secondly, the fact that their changes to the tax threshold have been outweighed for the poorest people by alterations to social security?

[John Glen]

The hon. Lady needs to acknowledge the transformation that the national living wage has brought to so many people and this Government’s willingness to increase it above inflation. It is also worth noting that interest payments as a proportion of income are currently at the lowest on record.