Ways and Means

Baroness Morgan of Cotes Excerpts

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

[Nicky Morgan (Loughborough) (Con)]

This is the first time that I have spoken in a debate in which you have been in the Chair, Madam Deputy Speaker, so may I welcome you to your role? It is a real pleasure to see you in the Chair, and I thank you for calling me in this important debate.

First, let me welcome my right hon. Friend the Member for Central Devon (Mel Stride) to his new role as Financial Secretary to the Treasury. I know that he has already spoken at Question Time, but I think that this is his first formal debate. It is just about right to say that he has already been in that post for longer than I was before I was moved on to the Department for Education. As I shall explain shortly, and as we have already heard this afternoon, my right hon. Friend has already made a positive impact through his decision on the Making Tax Digital work. I look forward to working constructively with him and other Treasury Ministers over the next few months and years.

This is my first speech in the Chamber as the incoming Chair of the Treasury Committee, so it is right that I should pay tribute to my predecessor, the former Member for Chichester, the indefatigable Andrew Tyrie. During his seven years as Chairman, he took Select Committee scrutiny into new territory, successfully pressing for new powers over appointment hearings, securing fundamental reform of the Bank of England’s governance and accountability to Parliament, and conducting forensic cross-examination of Ministers, officials and senior figures in the financial services industry. His work on the Parliamentary Commission on Banking Standards led directly to vital reforms to restore public trust and personal accountability in our banking industry. I know that he will be a hard act to follow, but I will try my best to maintain his rigorous standards of scrutiny and to increase further the reputation and influence of the Treasury Committee.

It is unfortunate that we are having the debate before the Treasury Committee has been formally constituted. After a four-month hiatus, many of the incoming Select Committee Chairs are impatient for the normal business of Select Committee scrutiny to resume. I should note that until the other members of the Treasury Committee have formally been appointed, my remarks are made in a personal capacity.

The economic context for the resolutions is complex and uncertain, and some of it has already been highlighted. Employment is at record levels, but productivity is in the doldrums. Consumer spending and confidence seem resilient, but unsecured borrowing is rising rapidly. The deficit continues to fall, thanks to the efforts of the Chancellor and his predecessor, but the fiscal rules have had to be relaxed to insure against rising economic uncertainty. I am sure that over the coming months the Treasury Committee will consider this complex picture in detail, and we will want to hear from the Governor of the Bank of England and the Chancellor as part of that process. However, with the terms on which the UK will leave the EU as uncertain as they are, nobody can predict with confidence the path for our economy and public finances.

There is one thing that we can be certain about: the country’s economic success and fiscal credibility depend on the Government sustaining their commitment to economic openness—openness to trade, openness to investment and openness to migration. Leaving the European Union must not become a retreat into economic nationalism and isolationism. Global Britain must not just be a slogan.

Let me turn to the resolutions. In 2011, the Treasury Committee set out some principles of tax policy, and I expect that the new Committee will want to hold the Treasury to account for its adherence to them. In fact, I hope that we will be very interested in how future tax policy is made and the Treasury’s work on the overall tax base, given the changing nature of our economy and employment patterns.

Two of the principles identified in 2011 were that tax should provide certainty and stability, as was highlighted in an intervention by the hon. Member for North Down (Lady Hermon), who is not in the Chamber at the moment. It is alarming to see that 27 of the 48 Ways and Means resolutions are marked as

“including provision having retrospective effect”

because the principle of retrospective taxation undermines the certainty and stability of our tax system, so it should be deployed sparingly and only with good reason.

I acknowledge that in this case—the Minister has highlighted this—the Government have been quick to confirm their intentions. The previous Finance Bill was originally published in March, before the start of the tax year but, because many of its provisions were not passed before the June general election, they are coming back before the House in September. The shadow Minister complained that what is promised to be published in the summer comes forward in September. Well, it has always seemed rather strange to me that an autumn statement happens in December. There are always rather odd vagaries regarding when Government announcements are made, but perhaps that will be solved by our having just one major fiscal event in any one year.

The Financial Secretary stated in July that a number of the provisions from the original Bill would apply retrospectively to the start of this tax year when they were reintroduced in

“a Finance Bill as soon as possible after the summer recess”—[Official Report, 13 July 2017; Vol. 627, c. 11WS.]

It is therefore true to say that the retrospection in this case is not as bad as it might appear. The provisions were outlined before the start of the tax year and have been reiterated as soon as possible after the election.

As we heard from one of the former members of the Treasury Committee, my hon. Friend the Member for North West Hampshire (Kit Malthouse)—I am delighted to say that he has been re-elected—the Committee also had a strong interest in Making Tax Digital, to which resolutions 38 and 39 apply. It produced a valuable report on the subject in January, shortly before the Government announced their plans following a consultation. No one I have spoken to objects in principle to the idea of digital interaction with HMRC over tax, but widespread concerns were raised about the speed with which Making Tax Digital was being implemented and the fact that it would be mandatory for even the smallest businesses.

[Mr Kevan Jones]

Like the right hon. Lady, I think that the digital movement is an improvement, but has she come across examples—I have one in my constituency—of when there is a problem and small businesses particularly need to speak to somebody? Following the closure of tax offices, it takes a long time before one is actually able to speak to someone on the phone. Although the digital movement is welcome for many businesses, does she think we also need an element of personal interaction?

[Nicky Morgan]

The hon. Gentleman is absolutely right. We have agreed that people want more digital interactions. They are now much more used to them, and that is how people do their banking and lots of ordering. However, when there is a problem—we have seen this with the introduction of free childcare, which was the subject of the urgent question earlier today—people do need to speak to someone. That is particularly true for the smallest businesses, for which dealing with HMRC can be stressful and something they want resolved as quickly as possible. HMRC will want to consider whether that is done through face-to-face contact at offices, or by ensuring that there is a really good phone helpline system or another way of speaking online to people who are able to respond rapidly. I do not want to pre-empt what the Committee will look at, but as constituency Members of Parliament, we have all heard about cases when people have found getting hold of HMRC frustrating. HMRC is aware of that, and it has done a lot of work to improve customer service, but that is something that Members of Parliament could certainly look at further.

I welcome the deferral that the Financial Secretary announced on 13 July. It means that digital record-keeping and reporting for income tax and national insurance will not become mandatory until at least 2020. Although his statement kept open the possibility that Making Tax Digital would never be made mandatory for income tax and national insurance, resolution 38 suggests that that remains the Government’s medium to long-term ambition. His statement confirmed that the process will start with VAT in 2019. Most businesses already file their VAT returns quarterly and online, so it is sensible to start with a tax for which Making Tax Digital will not require such a significant change in businesses’ practice. Smaller businesses in particular will have breathed a huge sigh of relief when the concession was announced in July, so I thank the Minister for that.

[Kit Malthouse]

I congratulate my right hon. Friend on her election as the Chair of the Treasury Committee. Does she think it would be sensible for the Government—notwithstanding the fact that they are not planning at the moment to include income tax for sole traders in Making Tax Digital—to make provision for voluntary participation, so that they would see the popularity of the scheme if people did volunteer in numbers, as they did with the introduction of online self-assessment? The Government might find that 60% or 70% of businesses participate anyway within the timeframe they are proposing, so making participation mandatory would become relatively painless.

[Nicky Morgan]

I thank my hon. Friend very much for that suggestion. What he says has much merit, and it may well be something we want to explore in Committee. It would be fair to say that a common view among Conservative Members, and the reason why we are on this side of the House, is that we believe in encouraging, not compelling, people to do something that the Government and the state want them to do. If there are ways of encouraging and incentivising people to get online and to use this system, and if it becomes clear at some stage in the future that that is the way forward, many businesses and sole traders will already be online and used to using the system.

Deferring the change for some taxes for a couple of years or more will give everybody welcome time to prepare, but it will not solve all the problems. I therefore suspect that the new Committee will want to explore the costs and benefits fully, as its predecessor had started to do. There is definitely scope to scrutinise the Government’s published estimates for the administrative costs to business and for the supposed reduction in the tax gap as a consequence of businesses making fewer mistakes because they are reporting digitally and quarterly. But that, you will be pleased to hear, Madam Deputy Speaker, is for another day.

Meanwhile, the forthcoming Finance Bill, which the House will consider shortly, will pave the way for the implementation of Making Tax Digital. The Bill that was introduced before the election was called did little more than pave the way; nearly every paragraph in the relevant schedule contained a regulation-making power. This meant that the Bill would have delegated nearly all the key details to secondary legislation under the negative procedure. Compounded by the fact that the draft statutory instruments were not published for consultation, that does not make for good parliamentary scrutiny, and the House will return to the overall principle of the scrutiny of secondary legislation when we consider the European Union (Withdrawal) Bill tomorrow, before we even get to the Finance Bill.

At a more general level, I suspect that the new Committee will also want to scrutinise Budgets, Finance Bills and possibly even spring statements in a similar way to its predecessor. It is important that tax policy gets adequate parliamentary scrutiny, and I hope that the new Treasury Committee and Public Bill Committees will get more chance to scrutinise the Treasury’s proposals at autumn Budgets than the Select Committee did with the last spring Budget, given the circumstances of the general election.

[Kirsty Blackman (Aberdeen North) (SNP)]

Organisations have suggested that Finance Public Bill Committees should be able to hear evidence, which has not happened in the past. What is the right hon. Lady’s view on that? Will she consider looking at it?

[Nicky Morgan]

I might be guided by you on this, Madam Deputy Speaker, but I suspect that that is actually a matter for the House authorities, the usual channels and the Front Benches, although the House and Ministers will have heard the hon. Lady. Obviously, the more constructive evidence that can be given on legislation, the better legislation we have.

I will finish by saying that I look forward to seeing the Minister before the Treasury Committee. He might not be looking forward to it so much, but I promise that we will be firm but fair in our questioning of him. I wish him all the very best as he embarks on his first Finance Bill.