Economic Growth and Environmental Limits

Debate between Clive Lewis and Robert Jenrick

Wednesday 10th July 2019 Westminster Hall

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for tabling this debate and other hon. Members who intervened or who came to listen to and support her. I am always partial to a good Robert Kennedy quote, so I am sorry to see that the hon. Lady’s thunder was stolen at the end of her speech, but I enjoyed it none the less.

As the hon. Lady eloquently set out, it is now more important than ever that the Government and institutions such as the Treasury, which is at the heart of this debate, confront head on the question of how we continue to grow the economy while protecting our environment and tackling climate change with all the vigour and urgency that she and others would like. I believe that the two can and will be done together, and can be mutually beneficial.

The UK is a world leader in this area, but I appreciate that many people—me included—would like us to go further. Between 1990 and 2016, the UK reduced its greenhouse gas emissions by 42% while growing the economy by more than two thirds, demonstrating that environmental action need not come at the cost of economic prosperity.

The Government are determined to continue to build concern for the environment into our economic model. In a moment, I will explain some of the workstreams that we have already undertaken and where we could go further. We want to ensure that environmental policies are well considered and that the Treasury as an organisation is leading them, as I believe it is. The hon. Lady argued that it is time fundamentally to change economic models if we want to address the climate emergency. She questioned in particular whether GDP is a sensible measure of our economic wellbeing, so I will begin by addressing that.

GDP remains one of the most important economic indicators, but it is by no means the only one that is of concern to us or which is used by other major economies around the world. It is closely correlated with employment, incomes and tax receipts, which makes it perhaps the most useful indicator currently available to us. It is used by the Government, the Treasury, and the Bank of England to set economic policy and manage the public finances and, as the system of national accounts framework is set at UN level, GDP is easily comparable across countries and time periods, both historically and in the future. It is important that any changes in the economic modelling that we use are made internationally, and the UK needs to show leadership on that.

The Government recognise, however, that GDP undoubtedly has its limitations and should not be seen as an all-encompassing measure of welfare and wellbeing, and we entirely accept that it was never designed to be. Former Chancellor George Osborne commissioned Sir Charles Bean to undertake an independent review of economic statistics. The review acknowledged some of those limitations, such as the challenge of capturing activities where no market transaction takes place, the challenge posed to GDP and to some of our existing modelling by technology, transforming the way that we measure welling and productivity and, as the hon. Lady mentioned, the fact that GDP estimates make no allowance for the depletion of natural resources,

The Government fully supported the recommendations of the Bean review, which we commissioned, and we have provided the ONS with an additional £25 million to help improve UK economic statistics and implement the Bean review. That was the “Beyond GDP” initiative that the hon. Lady mentioned, which aims to address the limitations of GDP by developing a broader measure of welfare and activity. In response to the hon. Lady’s question about the publication of statistics, the ONS is an independent organisation, so we do not control it in that respect, but I am happy to pass on her comments and ask the ONS to respond.

In the time left, I will briefly mention a number of other steps that the Government have taken. The Treasury’s Green Book, our guidance on the appraisal and evaluation of infrastructure and other investments, is essential to a number of decisions that are made by the Government. In 2018, we refreshed the Green Book to include additional environmental values, such as greenhouse gases, air quality and noise pollution. We also included a social cost-benefit analysis, which I hope is making a significant difference. It will be very important in the upcoming spending review. That work is well perceived internationally. My right hon. Friend the Chancellor of the Exchequer has now convened international Finance Ministers, and the area that the UK will likely lead on internationally is that of economic modelling and how we can do that better on a global scale.

[Clive Lewis]

The Minister spoke about the Green Book, which is still—despite the changes—essentially a neoclassical economic model based on equilibrium economics. Most scientists and economists on the fringes of economic thinking would tell us that we are moving into a disequilibrium position in our economic model. The two are completely incompatible and the Green Book is not fit for purpose as we enter a climate crisis in which many of its assumptions are no longer credible.

[Robert Jenrick]

I do not agree with the hon. Gentleman, but the theme behind his remarks is one of the reasons why we have amended the Green Book. We have created this concept of social value, so we now take into account negative externalities to the environment and to people’s lifestyles as a result of greenhouse gas emissions, for example. I am happy to have a further conversation with him on that after the debate, as there is very little time left.

We are working closely with Dieter Helm’s review and recommendations. I met him to discuss the issue of natural capital accounts, which we are taking seriously—it is a big endeavour. We are working with the ONS and the Department for Environment, Food and Rural Affairs to bring that forward. I hope that we will be one of the first countries in the world to take the issue forward.

Following the report by the Committee on Climate Change, the Chancellor and I met Lord Deben and accepted his recommendation over the summer that the Treasury should do a major and urgent piece of work on how we can fund in a fair way the changes that we need to make as a society as a result of the Committee’s recommendations. That work is under way. I am very happy to meet the hon. Lady to give her more detail on some of those initiatives, which are extremely important. We want to take them forward with gusto in the months ahead.

Question put and agreed to.

Oral Answers to Questions

Debate between Clive Lewis and Robert Jenrick

Tuesday 9th April 2019 Commons Chamber

[Robert Jenrick]

The UK Government are supporting tidal energy. We have looked at any schemes that have become available to us. We have to balance the interests of the ratepayer, the taxpayer, to ensure that the schemes that we do support are the right strategic technology and the right value for money for the UK.

[Clive Lewis (Norwich South) (Lab)]

Will the Minister join me in paying tribute to one of this country’s most successful publicly funded renewable energy programmes ever? I am of course talking about the last Labour Government’s export tariff, the feed-in tariff scheme, the biggest single democratisation of energy that the UK has ever seen, cutting 700,000 tonnes of carbon. This month, however, in an act of supreme national and international self-harm, the Government killed it off—kaput, finito, game over. In the real world, how can anyone, anywhere believe that this Government take their climate change obligations seriously?

[Robert Jenrick]

The facts speak for themselves. The UK is on track to over-deliver comfortably on the first three carbon budgets out to 2022. The clean growth strategy sets out how we will meet our fourth and fifth carbon budgets, which take us to 2032, while keeping down costs for consumers, creating good jobs in the clean energy market and growing the economy.

Finance (No. 3) Bill (Eighth sitting)

Debate between Clive Lewis and Robert Jenrick

Thursday 6th December 2018 Public Bill Committees

[Clive Lewis]

Thank you, Mr Howarth, for that clarification, which was clearly needed.

As I was saying, it would be neither socially fair nor environmentally effective if ordinary people taking occasional family holidays or visiting relatives abroad were made the priority for any policy designed to curb demand growth. Therefore, as amendments 120 and 121 would provide, the Government need to make an assessment of the distributional impact of increasing aviation tax rates on specific groups who could be disproportionately affected.

The Opposition fully accept that, ultimately, APD may not be the right instrument to bring aviation growth into line with the planning assumption of the Committee on Climate Change. However, without the reviews we are calling for in amendments 120 and 121, it will be all but impossible to know whether it can play a role, or whether there are better alternatives. There have, for instance, been proposals for a per-plane tax, which would more closely link taxation to carbon emissions, and be a better incentive for more efficient use of passenger capacity in planes. Alternatively, there could be a frequent flyer levy designed to protect access to a reasonable amount of flying for low-income households, while targeting the most frequent flyers with an incrementally rising tax, thus addressing the elasticity of demand for air travel in relation to low prices or high income—or the fact that the key determinant of the propensity to fly is income, not ticket price.

I take no view of those options today, because we simply need to understand more about how they would work; but that is precisely why we need the Government to undertake formal assessments that allow us to compare the impact of potential options on the factors set out in the amendment. Small changes in price have little impact on demand for flights, so increasing the cost of flights to a level that exerts significant downward pressure on demand is difficult to do fairly via the taxes that the clause deals with, and could mean pricing the poor out of the skies when the richest air travellers cause most of the environmental damage. In any event, without the Government carrying out the necessary assessments, which our amendments would require, we cannot know what APD rates are required to meet the planning assumption of the Committee on Climate Change, or the relative efficacy of APD and alternative fiscal approaches, such as a per-plane tax or a frequent flyer levy, for achieving this policy goal.

Let me end with a sobering fact. As the widely respected naturalist David Attenborough warns the world at COP 24 that the collapse of our civilisation is on the horizon, the two largest aircraft manufacturers in the world—Boeing and Airbus—have more than 13,000 new fossil fuel-powered planes on order. Given the long operational lifespan of passenger jets, most of those planes will still be in the air in 2050, as will many of the 23,000 already in use. Given what is at stake, can the Minister, hand on heart, genuinely say that the Government’s policies, future techno-fixes aside, are really up to the existential challenge that we all face?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I will respond to as many comments as I can. I will come to the amendment tabled by the hon. Member for Aberdeen North, but we agreed and legislated to devolve air passenger duty to the Scottish Government. The delay in so doing is unfortunate—it is not what we wished to happen—but it is a result of the Scottish Government’s asking us to postpone the implementation of devolution. They did so for the perfectly understandable reason that they wished to pursue the measure with respect to the highlands and islands, but it was essentially their decision, which we respected in agreeing to postpone the turning on of devolution, if that is the right phrase, at their suggestion.

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[Robert Jenrick]

I will write to the hon. Lady again to set out some of the information. I discussed the matter with my officials in preparing for this Committee, and they listed some of the international meetings they have attended, where they represented the United Kingdom exactly as she would like us to have done.

I hope I have addressed amendment 104 in my earlier comments. This is a matter that the Scottish Government could take forward themselves, given that we have already legislated for the devolution of APD. The impacts of any future reductions in Scotland are a matter for the Scottish Government, and they will clearly become more so once we proceed to the long-term arrangement that the hon. Lady wishes for.

The changes being made by clause 60 ensure that the aviation sector continues to play its part in contributing towards the funding of our vital public services, raising £3.4 billion a year. I therefore commend the clause to the Committee.

[Clive Lewis]

I want to raise a couple of things before we vote on amendments 120 and 121. The Committee on Climate Change has clearly stated that we are heading towards a substantial breach of the generous headroom that has been provided for aviation in the UK. The Government are going to overshoot that, to use a pun. There is a pressing climate emergency on this planet. As we speak, millions of people—many of them in the world’s poorest countries—are already being affected by climate change. My dad is from Grenada, and he has retired there. People there, and in the West Indies generally, cannot get insurance as a result of the hurricanes that destroy vast swathes of the islands year in, year out, because of climate change. I feel as though we are hearing once again from the Government about business as usual, even though a climate emergency is taking place.

I understand the APD. It is not designed as an environmental tax or a demand management tool; it is a revenue raiser. Given that we find ourselves heading towards a breach of the headroom that the Committee on Climate Change has provided, surely the Government should be looking at ways to control and push down demand for flights, so that we can begin to make a real impact on our commitments to tackling climate change. Will the Minister tell the Committee whether he plans to join our French counterparts in lobbying for tax reform on kerosene, as they will shortly talk about with the EU Commission? It seems to me that the aviation industry has enjoyed these 70-year-old tax perks and is now an established sector, but one that has yet to fully play its part in tackling climate change. This country can show leadership on that, starting with the Treasury.

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[Robert Jenrick]

Clause 63 makes changes to the definition of mineralogical processes in the climate change levy exemption for energy used in mineralogical and metallurgical processes, to ensure that the exemption remains operable following the UK’s departure from the EU. In response to representations, it also clarifies that tenants can benefit from the exemption where they are supplied with energy via a landlord.

The changes will come into effect following Royal Assent to the Bill. They are minor, technical changes designed to maintain the status quo and to provide continuity for businesses. Overall, we judge that they will have a negligible impact, as we set out in the relevant tax information impact note published in July.

The clause does two things. First, it removes “by a person” and “to a person” from the current wording of the exemption, to clarify that it is the energy used in mineralogical and metallurgical processes that qualifies for exemption, rather than the person carrying out the process, as the current drafting suggests. This means that all firms using energy to carry out these processes can claim the exemption. I believe this will be widely welcomed by those who have approached us previously.

Secondly, the clause replaces the reference to the energy taxation directive in the definition of mineralogical processes with a reference to the appropriate NACE code. These codes are an internationally recognised system for classifying economic activity and are of UN origin. This aligns the definition with the way metallurgical processes are defined, which already refers to NACE codes. I hope that is clear.

Amendments 124 and 128 would require the Government to assess the impact of these changes on small and medium-sized enterprises, tenants, revenue, carbon budgets and greenhouse gas emissions reduction targets. Amendment 127 would require the Government to publish an annual statement listing the companies that have benefited from these changes.

While the first change that the clause makes will have a negligible impact, as set out in the relevant tax information impact note earlier this year, the second change will have no impact on these businesses and sectors. Indeed, if we did not make these changes, there would be an impact as we leave the European Union.

Amendment 125 would require the Government to review the effect of these changes in both a no-deal and a negotiated exit from the EU. Amendment 126 would require the Government to review the effect of those changes on any divergence between the exemption in the UK and similar exemptions in the rest of the European Union. Both changes made by the clause will ensure the exemption continues to operate exactly as intended now and after the UK leaves the EU.

The changes introduced by the clause do not affect how the exemption works in the UK compared with other European countries; they apply equally while we remain in the EU, if we were to leave the EU with a negotiated deal or in the event that we leave with no deal. I therefore urge hon. Members to reject the amendments. The information required to fulfil the requests made in the amendments is either already in the published impact assessment or, for the reasons I have just described, unnecessary.

There was a question from the hon. Member for Norwich South about how the Government know that the impact on revenue from landlords and tenants is negligible. We do not have data in terms of specific numbers, because the tax is paid to HMRC by energy suppliers, not tenants and landlords, but this issue has not resulted in any lobbying or representations to us, which suggests that the numbers are extremely low, if not negligible.

This clause maintains the current scope of the exemption processes following the UK’s departure from the EU and, in response to representations from stakeholders, ensures that businesses entitled to the exemption are not precluded from benefiting, purely because they are tenants. I therefore move that the clause stand part of the Bill.

[Clive Lewis]

I thank the Minister for that response. All I will say is that, if I understand it correctly, the reason he is confident of those numbers is that no one is complaining. That is an interesting statistical analysis on which to base it, but I will accept it for now. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 128, in clause 63, page 45, line 13, at end insert—

“(6) The Chancellor of the Exchequer must carry out an impact assessment of the exemption for mineralogical and metallurgical processes under paragraph 12A of Schedule 6 to the Finance Act 2000, as amended by this section, considering the impact on—

(a) tenanted businesses that carry out mineralogical and metallurgical processes,

(b) revenue effects,

(c) the UK’s ability to meet its third, fourth and fifth carbon budgets,

(d) the UK’s ability to meet its greenhouse gas emission targets.

(7) The Chancellor of the Exchequer must lay the impact assessment under subsection (6) before the House of Commons within two months of the passing of this Act.”—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to carry out an impact assessment of the changes made by Clause 63 and their impact on tenants, HMRC revenues, the UK’s national carbon budgets, and carbon and other greenhouse gas emission reduction targets.

Question put, That the amendment be made.

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[Clive Lewis]

I thank the hon. Lady—her point is taken on board.

Such a beneficial undertaking would help both businesses and households to reduce drastically their waste streams and so cut their work-related and living costs. It would also go a very long way to helping the UK to meet its energy and greenhouse gas emission targets on the way to becoming a zero-waste, zero-carbon economy. As well as securing existing jobs and helping to create many new ones in the reuse, repair and recycling sectors, adopting the amendments that we are calling for would undoubtedly help to protect urban, suburban and natural environments where illegal waste dumping continues.

Will the Minister tell us how he means to address the very serious concerns of the Environmental Industries Commission and its members about the growing gap between the lower rate and the higher rate of this tax? The existing gap is already causing significant problems in the industry, with some operators presenting for the lower rate inert waste that actually contains asbestos fibres and therefore should be subject to the higher rate. How does the Minister intend to address that imbalance? In the EIC’s view, which is shared by Labour and a number of prominent environmental and countryside non-governmental organisations, the gap should be closed and not made wider, so that the tax acts as a deterrent to illegal waste disposal of all types and so benefits the public purse and society at large in significant environmental ways.

That being the case, in the absence of significant assurances from the Minister, we will struggle to support the clause as it stands. However, I would like to give the Minister the opportunity to provide us both with those assurances and some answers to the questions that we have posed. I look forward to his response.

[Robert Jenrick]

Like the hon. Gentleman, I get all the glamorous jobs, so I will endeavour to answer all his questions about landfill.

Clause 64 increases the standard and lower rates of landfill tax in line with inflation from April 2019, as announced in Budget 2017. Landfill tax has been immensely successful. Since its introduction, the amount of waste disposed of at landfill sites has fallen by more than 70%—of course, we would like to go further—and the benefits of that reduction are twofold. The first is to the economy: we have made better use of scarce resources rather than simply tipping them into holes in the ground across the country. Secondly, greenhouse gas emissions from decomposing waste are reduced. When waste is diverted from landfill, we promote more sustainable waste treatment, such as recycling. We are committed to moving towards a more circular economy, and we are working together with business, industry, civil society and the public to achieve that valuable aim. Landfill tax is an important fiscal lever that we can use to achieve it.

The hon. Gentleman asked why the Government are not doing more to meet their recycling target. The Government are very committed to meeting the target of recycling 50% of household waste by 2020. Through the Waste and Resources Action Programme, we are providing guidance and support to local government to help it to improve recycling services and to communicate with householders so that they recycle more. The next milestone in our campaign is the upcoming resources and waste strategy, on which we at the Treasury have been working closely with the Environment Secretary and the Department for Environment, Food and Rural Affairs. That will outline a number of further measures to increase recycling across the UK.

The hon. Gentleman and others will have noticed other important measures in this regard, including the announcement of a forthcoming consultation with respect to a deposit return scheme and other measures in the Budget—for example, a plastic packaging tax, which is to be consulted on, with the aim of increasing the amount of recycled content in all the plastic packaging that we use in our daily lives.

Landfill tax continues to provide an incentive to reduce waste from landfill and ensure it is recycled and reduced: as landfill is the most expensive form of waste disposal, that makes perfect sense. We have also noted in the Budget that we would be willing to consider a future incineration tax once further infrastructure has been put in place to reduce, for example, the amount of plastics that are incinerated, further improving the environment and reducing the amount of throwaway single-use plastics.

The waste infrastructure delivery programme is providing some £3 billion in grant funding over its lifetime to a number of long-term local authority waste management projects, which has helped to increase recycling rates from 36% in 2008 to 45% in 2017. I hope the hon. Member for Norwich South will await the future resources and waste strategy, which will provide a number of important measures. Those will include further information on the reform of the producer responsibility system, which will play a crucial role in improving recycling capacity and infrastructure in all parts of the country.

The clause also changes the tax on disposal at landfill sites. Each tonne of standard-rated material is currently taxed at £88.95, and lower-rated material draws a tax of £2.80. Those rates per tonne will change to £91.35 and £2.90 respectively from 1 April 2019, which maintains the strong current signal to move waste away from landfill.

Amendment 130 would require a review of the revenue effects of the proposed changes. HMRC published tax information impact notes when the rates were announced at the autumn 2017 Budget.

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[Robert Jenrick]

We do fund the Environment Agency correctly, and it is stepping up its enforcement of these sites. We urged it to do so—that was part of the purpose of the waste crime review. We have also increased the powers available to local authorities. For example, since May 2016, they have been able to issue fixed penalty notices for smaller scale fly-tipping. Fly-tipping is a criminal offence punishable by a fine of up to £50,000 or 12 months’ imprisonment. We wish to see more successful prosecutions, because this is a significant area of criminality that is linked to serious organised crime and other important types of criminality, such as the drug trade and human trafficking, against which we wish to take serious action. That is why fly-tipping was included in the Government’s review of serious organised crime in the waste sector, to which I have already referred.

Amendment 131 seeks to review the effect of these changes on the Government’s ability to meet the waste framework directive target of recycling 50% of waste by 2020, and amendment 132 seeks to review their impact on the amount of waste exported for treatment abroad. As the clause maintains the rates of landfill tax in real terms, we do not expect significant changes to the strong behavioural incentives the tax already provides. Landfill tax continues to play an important role in our meeting our targets for recycling and encouraging alternative forms of waste treatment, and the clause will ensure that landfill remains the most expensive form of waste treatment. Furthermore, I assure the Committee that the Government are committed to meeting the 50% household waste recycling target through the Waste and Resources Action Programme and the upcoming resources and waste strategy, on which we at the Treasury worked extremely closely with the Department for Environment, Food and Rural Affairs. I hope the Committee sees that amendments 131 and 132 are therefore unnecessary.

Amendment 133 would require a review of the expected effect of these changes on the quantity of waste that is sent to landfill. The uprating of landfill tax rates in line with the retail prices index ensures that those rates remain stable in real terms, and means that the tax can continue to help the Government meet their objective. Figures published regularly—annually, I think—by Her Majesty’s Revenue and Customs show a consistent decrease in the amount of waste sent to landfill as a result of increases to the capacity of alternative waste treatment, such as recycling, which is encouraged by our policy on landfill tax rates. As the clause will keep the rates the same in real terms, that decrease is expected to continue. I trust that provides the Committee with sufficient information, and I ask that amendment 133 not be pressed to a vote.

Amendment 134 would require a review of the expected impact on the environment of increasing the difference between the standard and lower rates of landfill tax. The clause seeks to increase landfill tax rates in line with inflation. That is the equivalent of maintaining the rates in real terms, which means there will be no real-terms change to the difference between the standard and lower rates. Although we appreciate there may be concerns about illegal dumping or breaking of the rules, we do not anticipate the clause making any material difference to those. The issues the hon. Member for Norwich South legitimately raised about individuals or companies dumping waste on which the higher rate should be paid, and seeking to pay the lower rate, are exactly the kinds of matters that were considered in the waste crime strategy. I hope that reassures the Committee, and I ask that amendment 134 not be pressed to a vote.

[Clive Lewis]

I thank the Minister for his answers. I also thank my hon. Friend the Member for Oxford East for her timely and useful interventions, which shed light on this issue.

Waste management is often the poor relation when it comes to policy making. It is not sexy, but it is critical. We have spoken about the environment and climate change today. Scientists say that it is entirely possible that we could save ourselves from climate change and its effects, only to destroy ourselves by breaching other planetary boundaries. Recycling and waste management are critical, if we are really to reap the benefits of improved recycling and technological processes that ensure we use resources as efficiently as possible. As we move through the 21st century, and population increases, that will become critical.

I will withdraw amendment 130, and will not press amendments 132, 133 and 135, but will press the remaining amendments to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 131, in clause 64, page 45, line 22, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effect of the changes made by this section to section 42 of the Finance Act 1996 on the UK’s ability to meet the Waste Framework Directive target of recycling 50% of waste by 2020, and lay a report of that review before the House of Commons within six months of the passing of this Act.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 64 on the UK’s ability to meet the target of recycling 50% of waste by 2020.

Question put, That the amendment be made.

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[Clive Lewis]

It is a pleasure to address the Committee on behalf of the Opposition for the final time today—I am sure to the great disappointment of all. The two clauses both address the soft drinks industry levy, often known colloquially as the sugar tax, which came into force in the current tax year. Given the scope of the two clauses, you will be relieved to hear, Mr Howarth, that I will not attempt to have a general debate on the basic principle of the tax—as tempted as I was. Nor do the Opposition disagree in principle with the Government’s broad intention in the clauses.

As the Minister said, clause 66 allows penalties to be imposed on businesses eligible to pay the soft drinks industry levy where they fail to submit the required quarterly return by the due date. It also ensures that similar penalties can be imposed for non-payment of the levy, contingent on certain provisions in the Finance (No. 3) Act 2010 being enacted. For context, will the Minister clarify the Government’s plans in relation to the enactment of these provisions? Will he explain why they have come to be made now, rather than during the passage of previous legislation?

On the substantive point, let me start by asking the Minister for some clarity about the number and types of business that might be affected. How many companies are now registered for the soft drinks industry levy, and what analysis can he give us of their size and scale? How does that compare with the number and composition originally anticipated? Will he outline for the Committee what kind of penalties a business might face, first, for failing to submit a quarterly return and, secondly, for non-payment? Is he convinced that the penalties are sufficient to deter tax evasion, while not being so high that genuine errors are disproportionately punished?

To put this in context, will the Minister tell us what level of evasion, late or non-payment, and failure to submit quarterly returns has been recorded to date? What estimate has the Treasury undertaken of any revenues lost to tax evasion? Has HMRC been able to give him any idea of the scale of the failure to submit returns? Is that related to evading payment, or is it simply down to administrative failures? How many returns are submitted late, and how many are not submitted at all?

On a related question, will the Minister tell us how much he expects to be raised through the imposition of these penalties and—perhaps more significantly—through any deterrent effect on tax evaders? Will the penalties, particularly for non-payment, form part of the revenue take for the tax, or will they be considered separately for purposes such as the intended link to funding for child health?

The Minister will be aware that the projected tax take from the levy has declined precipitously since the former Chancellor’s original estimates when he announced the levy. The original forecast was for £520 million in the current fiscal year. The latest “Economic and fiscal outlook” from the Office for Budget Responsibility, produced for last month’s Budget, anticipated that just £240 million will be raised. I assume the Minister stands by that figure, unless it has declined even further in the past few weeks. How much of that difference is down to the kind of deliberate evasion that clause 66 addresses, and how much is simply down to error in Treasury forecasts or—being generous—to changing economic circumstances and the impact of behavioural change? I should say for the record that, in the case of this tax, behavioural change is welcome, because it effectively means less sugar in soft drinks, with consequent benefits for public health. As I will touch on later, the dramatic shortfall in tax receipts has had some less desirable consequences.

I note that this measure comes into force at Royal Assent, rather than in the next tax year. We do not object to that, as measures to tackle tax evasion and avoidance should not be delayed. However, what steps have the Treasury and HMRC taken to ensure that businesses are alerted and that tax collectors can take full advantage? When does the Minister expect the first quarterly returns to be due under this measure?

Perhaps the Minister can explain what will happen should Royal Assent occur around the due date for a quarterly returns. If, for example, a quarterly return is due on 1 February—let us say, for argument’s sake, for the final quarter of the current financial year—and Royal Assent was achieved on 2 February, would the penalties be enforceable on a company that failed to submit, or would they not be retrospectively enforceable? Indeed, it would be helpful if the Minister could tell us what the due dates are for quarterly returns over the next year, what returns are required at the end of the financial year, and whether this measure applies to those or simply to returns at the end of each quarter.

Of course, the Minister is not responsible for the allocation of parliamentary time, so he may not be able to predict when Royal Assent is likely. When it comes to this Government, things are, to put it mildly, a bit unpredictable. Given the apparent trouble with their supply and confidence agreement, in which confidence seems to be somewhat lacking, the passage even of the Finance Bill may be a bit choppy when we go back downstairs to the main Chamber. [Interruption.] I apologise if I am keeping the Government Whip awake. Perhaps the Minister can tell us what the impact of different dates might be, and what consideration the Treasury has given to that in its assumptions and planning?

Clause 67 is designed to facilitate the movement between the UK and Isle of Man of soft drinks on which the industry levy has been paid, without that being designated as an import or export respectively for the purposes of the levy. It also adds the levy, and the Manx equivalent proposed by the Isle of Man Government, to the list of common duties in the Isle of Man Act 1979. After the introduction of the levy in April, eligible soft drinks that were brought into the UK from the Isle of Man were chargeable under section 33 of the Finance Act 2017, and those removed from the UK can attract an export credit. The Isle of Man, however, is introducing Manx SDIL from the next tax year, which is equivalent.

As the UK and Manx Governments have now agreed, in principle, to treat soft drinks that have been levy-paid in the one as being levy-paid in the other, and to share revenue, administration and enforcement of the respective levies, I understand from the Minister that the Government’s view is that those arrangements are, in effect, being superseded. The levy will therefore be treated as a common duty under the 1979 Act, with a commencement date to coincide with the introduction of the levy in the Isle of Man—in other words, at the start of the next tax year in April 2019. The Opposition have no objection to those arrangements, but I would ask the Minister to clarify a few points—before we lose the light completely.

First, the Manx SDIL is described in the Government’s accompanying notes as “modelled” on the UK version. Can the Minister clarify what that means? Is it identical or are there significant differences? The rates are presumably the same, but are there any variations in design? Have the Manx Government made any improvements in the structure or implementation, from which we could learn? Are we confident that they will be able to enforce the levy in a consistent way that does not create any incentives for producers to relocate from one jurisdiction to the other?

In the meantime, can the Minister assure us that we are not missing out on revenue that should be owed, due to failures of collection and enforcement at the point of import? Does he have any figures on the total revenue raised from charges on imported soft drinks from the Isle of Man?

I must confess that my knowledge of the Manx soft drinks industry is sadly limited, so perhaps the Minister can give us a sense of its scale and tell us whether there is a revenue impact. I would hazard a guess that it is likely that our import and export of soft drinks to and from the Isle of Man are not of identical value, but perhaps he can confirm that to the Committee either way.

Before I conclude, I want to return to the point about the overall revenue impacts of the two clauses in the context of the soft drinks industry levy. This is important, because when the levy was created, it was linked directly to investment in projects that would improve the health of our children. A ring-fenced sum was put aside for the healthy pupils capital fund, which would fund schools to create facilities for better physical and mental health, or for disability access. At the time that was announced by the then Secretary of State for Education, the right hon. Member for Putney (Justine Greening), the Government

“pledged to ensure that the amount schools receive will not fall below £415 million regardless of the funds generated by the levy.”

That solemn pledge, still available on the Department for Education website, did not last the year. Instead, the fund was cut by more than three quarters, to just £100 million for the year, when the Government desperately tried to plug their own gap in the main schools’ budget for one year only, by raiding the money that was meant to be ring-fenced for children’s health.

As a constituency MP, I know just how desperate schools in Norwich South are for funding. Schools have had to fire teaching assistants because of the budget constraints they find themselves in, and that money could have been very useful to them in helping our children and their educational attainment. I also know the impact that austerity has had on the health of our children.

When I represented the Opposition in February this year on the Delegated Legislation Committee implementing the levy, I pressed the Minister, and he assured us that

“regardless of how much is raised, the Government remain committed to funding the Department for Education with the £1 billion that we originally expected, and providing the devolved Administrations with the full amount that we promised at the time.”

He went on to say:

“Every penny of England’s share of the spending raised by the levy will go towards improving children’s health”.—[Official Report, Sixth Delegated Legislation Committee, 7 February 2018; c. 3.]

Perhaps he can confirm today whether that remains the case, and that the Government are not counting the £350 million that was cut from the healthy pupils fund towards the latter commitment. Secondly, I hope he can clarify that that applies to any additional revenue raised by the two clauses before us. If he can give us an expected amount, will he indicate how that will be allocated?

[Robert Jenrick]

I will respond to as many of those questions as I can; if I omit any answers, I will write to the hon. Gentleman.

With respect to the Isle of Man’s SDIL in clause 67, I am sorry to disappoint the hon. Gentleman, but no one currently produces soft drinks on the Isle of Man—so there is a business opportunity, should any of us need one in the near future. The Manx soft drinks industry levy is expected to be identical to the existing one in the rest of the United Kingdom. We do not expect that there will be any issues on enforcement, although we will of course continue to monitor that closely.

On the number of registered businesses, 450 have already registered. The top four of those by volume pay 90% of receipts, as one would perhaps expect.

In terms of publicising the changes to businesses, we have not specifically publicised those—we have taken a light touch in the first year of operation—but we do not anticipate any difficulties, given that there is only a small number of registered businesses.

The hon. Gentleman had a particular interest in the duty periods. The duty period runs from April to June, and that is due on 1 August. The July to September duty period is due on 1 November.

In terms of why we are taking this action now, we always intended to be as light touch as possible, but it is sensible to proceed with this housekeeping on behalf of HMRC to ensure the full range of compliance and penalty powers are available to combat non-compliance. We do not have evidence to date of any material degree of fraud or non-compliance, and certainly nothing that should make the hon. Gentleman or any other hon. Member concerned, but it is sensible and prudent for us to take this action, should circumstances change in the future.

The hon. Gentleman asked about some specific details, including how much the penalty will be for late returns. It will be £100 in the first instance, rising to £400 for four or more offences. The first late return will incur that fixed amount of £100. The penalty will then rise to £200 for a second late return within a 12-month period, to £300 thereafter, and eventually to £400. We think that is proportionate given that there has not been a significant problem to date, and that gives HMRC the powers it requires.

Where a return for a particular period is still not filed within 12 months, a further penalty will be issued, in the amount of 5%, 70% or 100% of the liability for the return period, depending on whether HMRC believes there has been a deliberate and concealed effort to withhold information, or £300—whichever is greater. Those are not excessive sums, but they give HMRC the powers it requires.

--- Later in debate ---

[Clive Lewis]

Does the Minister think a £400 fine is really a deterrent for a major international soft drinks manufacturer?

[Robert Jenrick]

That is a fair challenge, but given that we have no evidence of non-compliance or fraud, it is sensible to proceed on a relatively light-touch basis. If there were evidence of larger manufacturers being fraudulent or non-compliant, we might change things, but at the moment there is no such evidence. With those reassurances, I commend the clause to the Committee.

Question put and agreed to.

Clause 66 accordingly ordered to stand part of the Bill.

Clause 67 ordered to stand part of the Bill.

Finance (No. 3) Bill (Seventh sitting)

Debate between Clive Lewis and Robert Jenrick

Committee Debate: 7th sitting: House of Commons
Thursday 6th December 2018 Public Bill Committees

[Clive Lewis]

Yes, I do. I do not think that there is a lack of ambition from the Mayor of London or from local authorities around the country; ultimately what holds them back is a lack of resources. Will the Minister commit to using the revenue to offer London the same air quality funding that is being made available to other parts of the country, to ensure that ultra low emission zones are a success?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is good to be back, Mr Howarth. As we have heard, clause 57 will make changes to vehicle excise duty rates for cars, vans and motorcycles with effect from 1 April 2019. As announced in the Budget, those rates will increase in line with the retail prices index from that date. As a result, they will have remained unchanged in real terms since 2010, with additional significant incentives for ultra low and zero emission cars. That comes on top of the Government’s decision to freeze fuel duty rates for the ninth successive year, which by April 2020 will have saved the average car driver £1,000 compared with the pre-2010 escalator.

Cars first registered on or after March 2001 pay VED based on their carbon dioxide emissions; 87% of those cars will pay no more than £5 extra in 2019-20. From April 2017, a reformed VED system was introduced that strengthens the environmental incentives when cars are first purchased, with all cars paying a standard rate in subsequent years. The standard rate will increase by £5 only. Expensive cars with a list price of more than £40,000 pay an additional supplement for five years of paying the standard rate. That will increase from £310 to £320, so it is only a modest increase, and it will affect about 7% of new car purchases. Finally, the flat rate for vans will increase by £10, and for motorcyclists there will be no more than a £3 increase in rates. We believe that those are modest, incremental changes, which protect the public finances but also pay careful attention to the cost of living for motorists.

--- Later in debate ---

[Robert Jenrick]

I take the hon. Lady’s point, but the information is mostly already in the public domain. It is not clear to me what information is not available. With respect to air quality, the Government will very shortly publish our ambitious clean air strategy. I encourage her and other hon. Members who, perfectly understandably, want to scrutinise our clean air commitments to pay attention to that document and scrutinise the Environment Secretary at that point. No doubt he will come to the House to make an announcement on the strategy.

The hon. Member for Norwich South also mentioned London. London already has a separate comprehensive funding settlement from the Department for Transport, which includes measures to deliver compliance with legal air quality limits. The Mayor has significant powers to take additional measures. Londoners also receive further funding for ultra low emission vehicles such as taxis. Indeed, measures in the Bill support the uptake of ultra low emission taxis. We took those measures a year early, as we will discuss later, and they have had a significant impact on the number of taxis on the streets of London. There are now between 500 and 600 electric or ultra low emission taxis that did not exist at the beginning of the year, incentivised by the measures taken by the Treasury. We are also supporting low emission buses and charging infrastructure. The Committee has already discussed the £200 million public investment in charging infrastructure, which we hope will spur at least a further £200 million of private investment. That will support charging infrastructure in all parts of the United Kingdom.

I hope hon. Members respect the fact that we consider the funding settlement for London’s roads as separate from that for the rest of the United Kingdom. That is a long-standing convention. We occasionally provide additional money. For instance, in the Budget the Chancellor provided more than £400 million for potholes. He included London in that, so London boroughs are able to take advantage of that money, but in general the funding settlement for London’s roads is separate from the negotiation with respect to Highways England.

I urge the Committee to reject the amendments, as I believe the reports they would require are unnecessary. The changes outlined in the clause will ensure that the Government continue to support motorists with the cost of living while ensuring that they continue to make a fair contribution to the public finances. As a result of our decision to hypothecate VED revenues, we will see a major increase in investment in our strategic roads, which I hope will benefit everyone in all parts of the United Kingdom. I therefore commend the clause to the Committee.

[Clive Lewis]

I thank the Minister for trying to answer some of our questions, but I still find myself with questions. It seems that there is a basic issue of transparency here. If, as he is saying, the Department for Transport has given certain funding to London—I am sure that is true—it would do no harm to make transparent what other funding is going to other parts of the country, so that the figures can be compared and contrasted to ensure that London is getting its fair share. The Mayor of London clearly does not believe that it is getting its fair share. It is the capital city—it has a large population, many vehicles on the road and a high population density—and all that is being asked for here is transparency.

On the issue of there being no assessment of the impact of the clause on road congestion on traffic levels, the Minister said that VED has a limited impact on that, but that is quite an arbitrary statement. Taxes have two effects: they can raise revenue and they can change behaviour. It is normally one or the other, but there are variations and it is sometimes a bit of both. I do not think it is beyond the ken of the Government to assess the potential impact of the VED increases on congestion levels, given that we have all agreed that air quality in this country is in a pretty poor state. Tens of thousands of people are dying prematurely or are adversely affected every single year.

To echo the sentiment of the hon. Member for Aberdeen North, it would not be too much trouble to write a report along the lines that we have asked for and make it available to Parliament. So go on, please.

--- Later in debate ---

[Robert Jenrick]

My hon. Friend makes a very important point. It is certainly important to me, as a midlands and northern MP. The Government have made a significant effort both to increase the levels of public investment in infrastructure over the course of this Parliament to the highest levels in my lifetime—the highest level since the 1970s—and to redress the regional imbalance. Over the course of this Parliament, for example, investment in transport will be highest in the north-west of England, and London and the south-west will be among the lowest. There is a great deal more to do, not least because London has the ability to raise significant amounts of money from local government, which has co-funded projects such as Crossrail. My hon. Friend makes an extremely valid point.

[Clive Lewis]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 57 ordered to stand part of the Bill.

Clause 58

VED: taxis capable of zero emissions

--- Later in debate ---

[Clive Lewis]

My hon. Friend makes a very good point; that is one lost year of support.

To include electric vehicles—ah, I have already said that. I will recap, though. [Laughter.] To include electric vehicles in that policy was clearly a major oversight by the Treasury in last year’s Budget. The correction, although somewhat late in the day, is none the less welcome and, indeed, essential if we are to seriously encourage the uptake of electric vehicles, specifically taxis.

That is particularly pertinent as local regulations are tightening around clean air and greenhouse gas emissions, as we have seen with the implementation of the ultra low emissions zone in London. Amendments 112 to 114 require the Government to undertake a review that we believe is essential to understand the consequences of the clause, which range over the impact that it is likely to have on the Exchequer, on the taxi and private car rental industry, and on CO₂ emissions and climate change targets. Amendments 112 and 113 focus on the economic impact of the clause, both on the Exchequer and on taxi and private car rental companies. Can the Minister provide an assessment of the revenue implications of the measure?

Similarly, while we understand from the published documents relating to the clause that industry response to the Government consultation was supportive, will the Treasury do further analysis of the potential economic impact on taxi companies and the private car rental industry, should the change come into effect? The Minister may wish to resist the amendments, but regardless of any legal obligation, will he commit to conducting such an analysis and presenting it to the House in due course?

Amendment 114 refers to carbonisation and improving air quality. It would seem, in that respect, that taxis are low-hanging fruit. They are used frequently, often in urban areas with poor air quality. Similarly, according to the Mayor of London, drivers stand to benefit from lower fuel costs—by around £2,800 a year—and from avoiding present and future congestion and air quality charges. We believe, however, that the Government have failed to put in place necessary fiscal incentives to encourage the transition to the electric vehicles needed to ensure a reduction in CO₂ emissions. Simply removing the excess tax for luxury vehicles, as the clause would do, does not go far enough to encourage the uptake of zero-emission vehicles.

The primary driving forces behind the reluctance to take up electric vehicles are cost and an anxiety about range. The costs of electric vehicles are explained by high manufacturing costs, specifically of their batteries. The anxiety about range affects taxi drivers far more than private vehicle owners or private car hire companies, as they do not have access to the range in the ultra-low emissions vehicle segment of the market for mid-range to luxury. That is due to licensing conditions, as they need to fulfil accessibility requirements. In London, for example, that means that many drivers are mandated to buy a London-style hackney taxi in many districts. Will the Minister agree to assess the impact of clause 58 on CO₂ emissions and the UK’s climate change targets, and whether that policy goes far enough in encouraging the purchase of zero-emissions taxis?

I have a few questions on the clause. At present, a grant of £7,500 is available for new zero-emissions taxis. We believe that the Government should be looking to increase available grants and encourage the transition to electric vehicles, specifically taxis, in areas outside Greater London. There are currently only a few limited pots of funding, not all of which are available for taxis, and they are largely skewed towards Greater London.

Similarly, the Government have yet to invest a penny of the £400 million charging fund announced in the 2017 Budget, half of which should be public money, with the other half contributed by the private sector, as we have already heard. Will the Minister tell us whether the issue that the clause seeks to rectify will aid the Government in finally setting up the charging fund that they promised to deliver to encourage the use of zero-emissions vehicles? Will he give us a clear timetable of when that fund will be operational? Will he commit that he or another relevant Minister will come back to the House with more detail when it is due to launch?

Available charging infrastructure is a requirement of accelerating the transition. Outside London and a few select places, availability is poor. Drivers face a postcode lottery that is a barrier to electric vehicle growth. For example, there are more chargers available in the Orkney Islands than in Blackpool, Grimsby and Hull combined. Even if grants are available, drivers in some areas will be unable to perform their work using EVs, due to the unavailability of charging infrastructure. It could therefore be argued that even if the Government increased grants and ensured that availability, poverty of EV infrastructure would mean that a majority of taxis would not be in a position to benefit from the change suggested in clause 58. Will the Minister comment on that? What assessment has been undertaken of the availability and adequacy of the infrastructure, and what steps are being taken to ensure that it does not undermine the good intentions behind the clause? Although the current situation is a mistake, it should not have happened in the first place. The measure is important in seeking to undo the bias created by classing zero-emissions taxis as luxury vehicles, and in encouraging the uptake of zero-emissions vehicles.

We will support the clause—we ask only that the Government assure us that the right analysis will be done to assess the impact of the measure on the Exchequer, the companies that will be affected, and the environment. We urge the Government to take such matters into consideration. I hope the Minister can give us some assurance on those points.

[Robert Jenrick]

I thank the hon. Gentleman for those questions. I hope that I can answer them all and reassure him. Clause 58, as we have heard, makes changes to ensure that purpose-built taxis that are capable of zero emissions do not have to pay the VED supplement applicable to expensive vehicles, which are those with a list price of more than £40,000. Having listened to representations on the issue, the Government announced in March that the exemption for such taxis would be brought forward a year earlier than planned.

We do not believe that the purchases of many vehicles, if any, were adversely affected. For example, the London Electric Vehicle Company, which manufactures these vehicles, had sold almost no vehicles by the time of the announcement and has subsequently sold more than 500 vehicles—I do not have the exact figures but I am happy to supply them to the hon. Gentleman—so from the time of our announcement in early March to the present day, the incentives have clearly made a significant difference in stimulating the market. We do not believe that many purchases, if any—I will confirm that point—were disadvantaged as a result of this matter, which was an unintended consequence of the earlier policy.

An exemption will encourage the transition to ultra-low and zero-emissions taxis. The figures show that, certainly in London, there has already been a significant take-up in vehicles, although it is less in other parts of the United Kingdom. I believe that the manufacturers are now targeting other cities, including Manchester and Nottingham—my nearest city—to improve their air quality. We want to see that rolled out as soon as possible in all part of the United Kingdom.

It will make the system fairer. The Government recognise that a number of technical requirements exist for purpose-built taxis, including, as the hon. Gentleman said, access for disabled passengers and turning circles, meaning that only a limited number of options are available. Most other motorists have a range of vehicles available to them, many costing less than £40,000, and can therefore choose not to pay the supplement.

In passing, the hon. Gentleman mentioned other private hire vehicles. Our argument—a valid one, I think —has always been that there are a range of other options available to drivers of private hire vehicles. They do not have to purchase a vehicle costing over £40,000. That would be a choice because they want to enter a particular segment of the market. Those driving a registered London taxi do not have that discretion. Therefore, it would not be right for drivers buying a taxi capable of zero emissions to pay the VED supplement targeted at cars at the luxury end of the market. As the supplement is only due from the second licence onwards, this means that almost all taxi drivers who have purchased an eligible taxi from April 2018 will never have to pay the supplement. This will save those drivers up to £1,600 in total.

The changes made by the clause will provide the power to exempt purpose-built zero-emissions taxis from the supplement for expensive cars, through regulations. This will enable the Government to apply the exemption to further models as they become available in the future.

I will turn briefly to the amendments tabled by the hon. Member for Norwich South. Amendment 112 would require the Government to review the revenue effects of the changes made by the clause. The Government have already published a tax information impact note, in line with normal practice, which sets out that the revenue impact of the changes will be negligible. Amendments 113 and 114 would require the Government to review the effect of the clause on the taxi and private hire sectors, and the impact on carbon dioxide emissions and our carbon budgets. The measure applies to purpose-built taxis only, enabling a quicker switch to greener models by saving drivers that £1,600. It is not expected to have an impact on the number of taxis on the roads, but it is intended to increase the proportion of those that are capable of zero emissions. By strengthening the incentive to purchase such taxis over conventionally fuelled alternatives, the measure is expected to have a small positive impact on our ability to meet our fourth and fifth carbon budgets, although isolating its impact would be challenging and uncertain. I am not sure what value, if any, that analysis would provide. Again, these impacts were covered in the published tax information and impact note. I respectfully urge the Committee to reject the amendments, on the grounds that they are unnecessary.

The hon. Gentleman asked important questions about electric vehicle charge points. Clearly it is important for taxi drivers in London, and indeed in any other part of the United Kingdom, to know that the relevant charge points are available to them. Range anxiety is just as valid, if not more so, for a taxi driver as it is for a private citizen. Significant investment is underway in London, particularly for fast charge points, which are critical for taxi drivers, so they do not have to spend hours waiting to recharge or top-up their vehicle. The Mayor of London is leading that effort and making good progress.

With regard to the charge point infrastructure fund, which I spoke about in relation to the previous clause, we are close to appointing a fund manager and expect it to be launched in January or February. I am happy to write to him with more details and to inform him when it is launched, but I expect that to be at the very beginning of the new year.

[Clive Lewis]

There is £200 million in public money and £200 million in private money. Will the Minister confirm whether the £200 million in private funding has actually arrived and is available for the Treasury to spend on EV infrastructure?

[Robert Jenrick]

The answer is that the fund has not actually been launched yet. We are committed to the £200 million, but we will not know until the fund is launched the amount of private capital we are able to crowd in as a result of that. I am happy to write to the hon. Gentleman with more detail about that. As I said, I expect in the first two months of the new year to be in a position to launch the fund and to inform hon. Members across the House of its detail, should they wish to direct businesses in their constituencies that are interested in this area to it. With that, I commend the clause to the Committee.

[Clive Lewis]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 114, in clause 58, page 41, line 16, at end insert—

“(6) The Chancellor of the Exchequer must review the effects on levels of CO₂ emissions and the UK’s ability to meet its fourth and fifth carbon budgets of the changes made to the Vehicle Excise and Registration Act 1994 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the impact of this measure on CO₂ emissions and climate change targets.

Question put, That the amendment be made.

--- Later in debate ---

[Robert Jenrick]

I shall try to respond to the many points that have been raised. My hon. Friend the Member for Poole in part answered the challenge from the hon. Member for Norwich South as to whether hauliers pay their fair share. It is worth remembering that they pay a range of taxes, as my hon. Friend pointed out. They pay the levy that we are discussing and vehicle excise duties. They also pay tax on fuel. Taken as a package, hauliers pay a considerable amount of tax. British hauliers as an industry are highly taxed, going by European and international comparisons. The reforms mean that some hauliers will pay more. The VED system is based on both weight and axles, so to some extent it reflects wear and tear on the roads, although I appreciate the point made by the hon. Member for Norwich South that HGVs make a significant impact on the roads. I did not realise it was 100,000 times that of a Ford Focus, but that puts things in perspective.

The hon. Gentleman asked whether the HGV levy was specifically hypothecated to tackle such issues as potholes and strategic roads. It is not. However, as I have described, the VED system will be, which will significantly increase the amount of investment that the country makes in roads at every level: £28.8 billion is the spending envelope for roads investment announced by the Chancellor in the Budget, and £25 billion of it will be spent on strategic roads in the road investment strategy that will be announced later next year. That will be about 170% of the first road investment strategy, so there is almost double the amount of investment going into roads to tackle congestion and improve strategic roads in all parts of the country.

The hon. Member for Aberdeen North made a valid point about the European standards. It is our intention to remain closely aligned to those. That seems sensible and it is our intention in a number of respects, such as climate change, emissions and carbon budgets, as is indeed set out elsewhere in the Bill. For example, we have not yet made a final decision on carbon trading, but we shall monitor it and review the matter. If I can give the hon. Lady any further information I will write to her to set out the position of the Department for Transport.

On the broader question of why we are not using the VED system for HGVs to encourage greater take-up of zero-emission or ultra-low emission HGVs, it comes back to the point made by the hon. Lady: currently there are very few commercially available ultra-low emission alternatives for HGV drivers, which prevents the broad uptake of new vehicles. Clearly, we would like to do all we can to stimulate the market and see rapid progress, but we have to be mindful of that. Through the Road to Zero strategy that was published earlier this year, the Government have committed to working with the industry to reduce HGV greenhouse gas emissions significantly by 2025. The strategy sets out the Government’s plans to use a variety of different tools to meet that commitment.

The hon. Member for Norwich South made a number of important points about HGVs and road safety. I will write to him on that and find out what information I can about DFT’s work, because it is important that we take note and see what can be done to improve road safety, particularly as the number of vehicles going down smaller roads and country lanes as a result of online shopping is becoming more important. Through the Road to Zero strategy and other initiatives, DFT is paying attention to how we can improve the last mile of delivery to tackle air quality and reduce the number of vehicles on our roads.

The clause introduces a lower rate of HGV levy for vehicles that meet the latest emission standard, and a higher rate for vehicles that do not. As we have discussed, the change will incentivise hauliers to move to cleaner, less-polluting vehicles. It is only right that everyone plays their part in protecting our natural environment so that we leave a cleaner, greener Britain for our children. HGVs currently account for approximately 20% of harmful nitrogen oxide emissions from road transport but only 5% of total miles travelled, so they will play an important part in tackling the problem.

The changes made by the clause will reduce HGV levy rates by 10% for vehicles that meet the latest emission standards, reflecting the fact that they generate 80% less NOx emissions than the older HGVs. The clause will also increase rates by 20% for HGVs that do not meet those standards. Many hauliers will pay less as more companies move to cleaner lorries—we have introduced it to improve air quality and not to raise revenue.

On amendments 115 to 118, to which the hon. Member for Norwich South spoke, the Government have published a tax information impact note outlining the impact assessment of these reforms, including the forecasted revenue effects, which have been certified by the Office for Budget Responsibility. I believe those amount to £25 million over the scorecard period. These reforms to the HGV levy are part of wider action by the Government to tackle challenges in the areas highlighted by the amendments. Isolating the impact of the HGV levy reforms would be extremely challenging and, I suspect, of limited use, as they cannot be separated from other actions the Government is taking in these areas.

The Government’s draft clean air strategy sets out an annual reporting process for the monitoring of air pollution, which is the appropriate mechanism for assessing the effectiveness of those changes and others over time, rather than introducing a new method to review it, as proposed by the amendments. I therefore urge the Committee to reject the amendments. The changes outlined in the measure will ensure that both foreign and domestic HGVs play their part in meeting the Government’s air quality targets.

[Clive Lewis]

I thank the Minister for his contribution. I note that he was unaware of the 100,000 figure between the damage caused by an HGV compared with the damage caused by a Ford Focus. Have the Government made any assessment of whether HGVs currently cover the cost of the impact they have on UK road infrastructure? It sounds like they have not, but the Treasury should be able to amend VED or the taxation system that it will use in order to better reflect that.

To pick up on some of the comments made by the hon. Member for Poole, we are talking about externalities. Everyone wants to see everybody pay their fair share, and I am aware that haulier companies pay not just the excise for HGVs, but road tax and fuel tax. So do drivers of Ford Focuses: they also pay their fair share of tax, including income tax and other taxes as well. We all pay our fair share of tax, but if HGVs are damaging the roads to that extent and having such an impact in terms of road traffic accidents, that calls into question whether they are paying excise duty appropriately, and whether that excise duty is a genuine reflection of the cost that those HGVs are exacting on society and on our road systems.

Finance (No. 3) Bill (Sixth sitting)

Debate between Clive Lewis and Robert Jenrick

Tuesday 4th December 2018 Public Bill Committees

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

If I may, I will conclude the remarks I was making earlier—[Hon. Members: “Hear, hear!”]—to widespread acclamation. Clause 36 will establish transferable tax history, which is widely supported across the industry and will help to protect and increase the number of jobs in the oil and gas sector in the whole of the United Kingdom and, in particular, in north-east Scotland. We see this as a great step forward for this important national asset. We believe that it is fiscally responsible, as was certified by the Office for Budget Responsibility. It will bring in revenues to the Exchequer of £65 million, and reports to the contrary are misguided.

[Clive Lewis (Norwich South) (Lab)]

Given that we know that the decommissioning costs could come to around £24 billion and that there is provision in the Bill to double that to £48 billion—I asked this question in my opening remarks, but I will ask it again—what money has the Treasury put aside specifically to cover these costs for future Governments, a little bit further into the future?

[Robert Jenrick]

Decommissioning costs will be covered by future Governments over the course of decades to come. We estimate that the costs will run into something in the region of £24 billion, as the hon. Gentleman says, although, as I said in my remarks earlier, we are working closely with the industry to bring down those costs. We hope the UK will become a world-leading market for decommissioning and that we will see at least a 35% reduction in those costs over time. The measure before us will help the situation by increasing revenues to the Exchequer, which could be set against future decommissioning costs if required.

[Clive Lewis]

We have said that the costs could be up to £48 billion—no insignificant sum of money. If we do not ring-fence some of the petroleum revenues to pay for this, it will fall entirely on future Governments further down the line, and nothing is being done now to prepare for that. That is a lot of money that could hit a future Government and a future Exchequer in goodness knows what economic conditions.

[Robert Jenrick]

The hon. Gentleman is arguing that we should ring-fence revenues from the oil and gas sector, whether through petroleum revenue taxation, the supplementary charge or whatever it might be in the future. That is not what we have done in the past. It is a peculiar argument to make when opposing the transferable tax history measure, which will increase revenue to the Exchequer, extend the life of a number of fields and make decommissioning easier and more affordable in the future. With that, I commend clause 36 to the Committee and ask hon. Members to reject the amendments.

Question put and agreed to.

Clause 36 accordingly ordered to stand part of the Bill.

Schedule 14

Oil activities: transferable tax history

Amendment proposed: 84, in schedule 14, page 260, line 15, leave out sub-paragraph (d).—(Clive Lewis.)

The provision as drafted allows companies to transfer TTH worth double the value of anticipated decommissioning costs. This reduces the incentive for companies towards efficiencies in decommissioning costs and paves the way for decommissioning-related tax repayments far bigger than the companies are currently acknowledging. This amendment removes that provision.

Question put, That the amendment be made.

Finance (No. 3) Bill (Fifth sitting)

Debate between Clive Lewis and Robert Jenrick

Tuesday 4th December 2018 Public Bill Committees

[Robert Jenrick]

It is pretty clear from the evidence I have just laid out that the current tax reliefs do not work. We are making the changes required to ensure that smaller businesses, through the increased annual investment allowance, will have the allowance they need to make these investments. We will now work closely with other businesses, through the design of the industrial energy transformation fund, and a full consultation on that will be launched at the beginning of next year. We encourage the hon. Lady, businesses and other members of the Committee to take part in that consultation, as we design the successor fund to these reliefs.

The Government remain committed to increasing environmental efficiency, and the savings from ending first-year allowances and tax credits will be used to fund the industrial energy transformation fund. That fund will help businesses with high energy use to cut their energy bills and reduce their carbon emissions, by supporting investment in energy efficiency and other innovative decarbonisation technologies that may become available in the years ahead. Those could include, for example, investment in carbon capture and storage, or fuel-switching technologies. However, decisions on the scheme design, including eligibility and the technologies that will be supported, will be subject to the consultation with industry that I have just described. Establishing the scheme will fulfil our manifesto commitment to establish an energy efficiency scheme for industry, and that has been widely welcomed, including by groups such as EEF, the manufacturers’ organisation; UK Steel and the Energy Intensive Users Group. Since the Budget, I have spoken to a number of heavy users of energy, including car manufacturers, who all welcome this measure.

[Clive Lewis (Norwich South) (Lab)]

Is the Minister aware that some businesses are concerned that the Government are ending one scheme without having another in place? That causes uncertainty for business at a time when they need more certainty than they have had for a long time.

[Robert Jenrick]

I hear that concern, and that was the reason we chose not to end the scheme immediately. The scheme will end in April 2020. Until then it will continue as it does today, and be regularly updated with new technologies. If a company that makes use of it knows of a new technology that it wants to be part of the scheme, it will be possible for that to be added. The scheme will continue exactly as is until April 2020, by which time the new one will be in place. As a result of this year’s Budget, the annual investment allowance will also go up to £1 million, so additional allowances will be available to those businesses.

Amendments 73 and 74 would require the Government to publish a review of the cost of extending first-year allowances to 2030 and 2022. As set out in the policy costings document that we published alongside the Budget, ending the allowances will save £160 million by 2021-22. As we announced in the Budget, savings from ending the allowances will be invested in an industrial energy transformation fund of up to £315 million. Our primary motivation is finding a better way to help businesses be more energy-efficient—not saving money for the Exchequer, as was suggested—and we believe that our approach makes more efficient use of public funds. We anticipate that the average annual cost of extending first-year allowances would remain at around the same level until 2030. The figures are already known and in the public domain, so I urge the Committee to reject amendments 73 and 74 because the information that they request is already available.

Amendments 75 and 76 would require the Government to publish a review of the impact of clause 32 on the energy and water technology sectors. I hope that I have already provided the Committee with an answer to those points, removing the necessity of such reports. As I have set out, there is little evidence that the first-year allowances lead to a greater uptake of environmental technology, so the Government do not believe that such reports would provide any significant additional information. Furthermore, the Government support business investment in other, more efficient and dynamic ways, through the increase in the annual investment allowance and the creation of the industrial energy transformation fund.

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[Robert Jenrick]

I have described it; that is the rationale for replacing the first-year allowance with the energy transformation fund. Had we chosen simply to remove the allowances and replace them solely with the increase in the annual investment allowance, the hon. Gentleman would be correct: 99% of businesses could proceed broadly as they do today, but they would not have a specific incentive to choose environmental equipment, plant and machinery or energy efficiency measures. However, by coupling the increase in the annual investment allowance with the transformation fund, we hope to shift the dial in favour of technology that helps the environment.

Amendment 77 would require the Government to review the impact of clause 32 on the UK’s ability to meet its carbon budgets. I assure the Committee that there are already robust requirements to report on progress towards the UK’s emissions reduction targets. When the measures in the Budget and the Bill become law, they will become part of that regime.

The Climate Change Act 2008 provides a world-leading governance framework that ensures that progress towards carbon targets is robustly monitored and reported to Parliament. First, the Government are required to prepare and lay before Parliament an annual statement of emissions that sets out the total greenhouse gases emitted to and removed from the atmosphere across the UK, and the steps taken to calculate the net UK carbon account. Secondly, the independent Committee on Climate Change is required to prepare and lay before Parliament an annual report, to which the Government are required to respond, on the Government’s progress towards meeting the UK’s carbon budgets. I would expect the committee to take the changes made by clause 32 into account in their deliberations. Thirdly, the Government are required to prepare and lay before Parliament a statement that sets out performance against each carbon budget period and the 2050 target.

[Clive Lewis]

I thank the Minister for his patience. As I understand it, having requested an analysis from the Minister responsible for carbon budgets on whether the Government were going to take into account the recent evidence from the Intergovernmental Panel on Climate Change on the 1.5° warming, the fourth and fifth carbon budgets do not currently do that. I have been told that there will be no assessment of the 1.5° warming until after 2030 when the fifth carbon budget concludes. Was the Minister aware of that and will he comment on the fact that that could have a severe impact on our ability to be able to achieve the targets?

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[Robert Jenrick]

In the few minutes that remain, I wish to thank the hon. Member for Aberdeen North for her comments and her helpful exposition of the purposes of this policy, which is to create jobs and wealth for the whole country, and particularly for the area that she represents. We would be concerned, as the hon. Lady said, if we created a two-tier system where new entrants—predominantly smaller and often innovative businesses that want to enter the market—had to live up to higher standards than the predominantly larger and more established businesses that they are trying to take on. As she has done, I thank some of the stakeholders who have helped us to develop this policy, including Oil & Gas UK, which has been excellent throughout the preparation of this measure.

Rather like my hon. Friend the Member for Poole, I am surprised by the Labour party’s position in this area. There has been a broad, cross-party consensus throughout my lifetime that North sea oil and gas are of benefit to the United Kingdom and an important asset to the country. Political risk will deter new investment into that field, if international companies that would like to invest in the North sea oil and gas sector believe that the Opposition in the United Kingdom are likely to increase their taxes, make those taxes more complex and disincentivise future investment.

[Clive Lewis]

We would like to put on the record that we are not giving up on North sea oil. Rather, we have an appreciation for the climate emergency that is taking place, and we ask for a reassessment of how we can sustainably recover those assets. That is all we are asking for.

Finance (No. 3) Bill

Debate between Clive Lewis and Robert Jenrick

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

[Robert Jenrick]

As a parent and as a citizen I am concerned, like the hon. Gentleman is, about the amount of gambling advertising on television and elsewhere, but that is not a matter for the Finance Bill; it is a matter for the Department for Digital, Culture, Media and Sport and for the Gambling Commission.

As I have just described, new clause 12 would achieve only the Treasury producing a very limited analysis of the public health impact of the change in accounting period set out in the Finance Bill. I therefore urge the Committee not to press new clause 12.

New clause 13 proposes a report on the consultation undertaken on the detail of clause 61 on remote gaming duty and of schedule 18 on gaming duty. Although we have had much debate on the content and implications of clause 61, it is in fact very simple: it is a rate change, and the Government would not normally consult on such a change. I reassure the Committee that we have gone over and above the usual convention in such cases. The increase was originally proposed in May 2018, and my officials, alongside the Department for Digital, Culture, Media and Sport, have since worked with interested parties on its detail. We believe we are in a good position.

I fully reassure the Committee that the change made by clause 61 was consulted on last year. In addition, schedule 18 was published as a clause in the draft Finance Bill in July 2018. It has therefore been subject to scrutiny and comment by stakeholders ever since. I hope my comments will reassure the Committee that there is no need for a further report into our consultation on these issues, and I therefore ask that new clause 13 not be pressed.

New clause 16 returns to an issue with which I began this debate. The new clause asks for a review of the feasibility of bringing forward the rise in remote gaming duty in clause 61 to April 2019. As I have tried to reassure right hon. and hon. Members, we have already covered these matters—they were considered before my right hon. Friend the Chancellor tabled amendments 16 and 17, which will bring forward the date to April 2019—and I therefore respectfully ask that new clause 16 not be pressed.

I look forward to listening to the contributions of right hon. and hon. Members to this debate. The Government amendments to these clauses represent the action on FOBTs that the country demanded and for which Members on both sides of the House have campaigned assiduously over many years. The changes will now be delivered as expeditiously as possible and in a fiscally responsible manner that protects public services. I commend these changes to the Committee.

[Clive Lewis (Norwich South) (Lab)]

Well, where to begin? I can sum up the Minister’s speech as, “Nothing to see here.”

Before I move on to the detail of this issue, I want to pay tribute to Members on both sides of the House who forced the Government to bring forward the FOBT stake reduction from October 2019 to April 2019, which will be implemented through the amendment before the Committee. Particular recognition goes to my hon. Friend the Member for Swansea East (Carolyn Harris), who is to be warmly congratulated on her tireless work for social justice, in all its incarnations, and to my hon. Friend the Member for West Bromwich East (Tom Watson), the shadow Secretary of State, who is not in the Chamber, but has spoken about this issue many times from the Dispatch Box.

Draft Soft Drinks Industry Levy (Enforcement) regulations 2018

Debate between Clive Lewis and Robert Jenrick

Wednesday 7th February 2018 General Committees

[Robert Jenrick]

I am grateful to the hon. Gentleman for his support for the levy, which will play an important part in tackling childhood obesity. As I was at pains to stress in my opening speech, the levy is only one element of a much wider Government strategy. The Opposition and other right hon. and hon. Members will have seen the childhood obesity plan that was published. Nobody pretends that the soft drinks industry levy contains all the elements of that plan, but it is a significant element and, again, I am grateful to the hon. Gentleman for his support.

The levy is working, and we have seen that in the large number of suppliers of soft drinks that have already reformulated their products. As a result, the tax will raise less revenue than was previously expected. It was never designed as a tax-raiser; it was always designed to stimulate improvements in public health. In the autumn Budget of 2017, we laid out our expectation that the levy would raise around £275 million, yet the Treasury remains 100% committed to the original promise of over £1 billion of extra money for the Department for Education.

[Clive Lewis]

While we welcome the £1 billion—the extra funding—to plug those gaps, if the Government then cut 3.9% of spending on public health and, it is predicted, millions by 2020, does the Minister not concede that they are giving with one hand and taking with the other?

[Robert Jenrick]

I dispute the hon. Gentleman’s analysis of our funding of the NHS, which has risen in every year of this Parliament. In the autumn Budget of 2017, the Chancellor committed to providing more money for both the NHS and adult social care.

The levy is an example of where the Government are taking action. We are using the tax code to change behaviours for the public benefit, and we are committed to significant increases in spending for school sports, breakfast clubs and all the other important things that will benefit from the funds coming from the levy. Every single penny raised by the levy will go to support school sports and the public health initiatives that I mentioned, plus the additional revenue that the Treasury committed to and is in no way backing down on, despite the success of the levy.

[Clive Lewis]

rose—

[Robert Jenrick]

If the hon. Gentleman does not mind, I will press ahead on this occasion; I have given way to him in the past.

As for the capacity of HMRC, this is a task that HMRC is very used to and has expertise in. It uses that capacity for all forms of alcohol excise duties, such as those that apply to the spirits industry and so on. There is no reason to question whether HMRC can do this work. Indeed, the powers that we are considering today are those that HMRC has requested. The levy has been fully subject to a public consultation with the industry. HMRC’s voice has been heard in that consultation and we believe that HMRC will be effective in enforcing this levy and in ensuring that there is no criminality, or only minimal criminality, involved with it.

As for the question of whether or not we have reviewed, or will review, the impact of the levy, we have committed to such a review—in 2020, I think—so that will be the point at which we can clearly see the impact of the levy on both public health and the industry. With that, Sir Edward, I commend the regulations to the House.