Better Jobs and a Fair Deal at Work
Damian Hinds Excerpts(3 years, 8 months ago)
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Damian Hinds (East Hampshire) (Con)
I strongly welcome the focus in the Gracious Speech on jobs, skills, progression and careers. Since 2012, at the peak of unemployment, we had something of a jobs miracle before the start of the pandemic as a result of the creativity of British business, the favourable investment conditions, our flexible labour markets and our effective labour market policies. Now our focus, quite rightly, is on keeping people in jobs, as far as possible, and helping those out of work to return as soon as possible. To call the most recent projections from the Monetary Policy Committee encouraging would be something of an understatement: they are really quite dramatic if they can be realised. All the support that has had to be put in place to make that possible has obviously been very expensive, but it looks as though the record will come to show that that investment will have paid off fiscally as well as in reducing the human cost on individuals, families and firms.
Like my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell), I hope that we will soon be able to return to our 0.7 % commitment, not only for the reasons he rightly set out, but also in terms of our shared prosperity as a world because of the effect that co-ordinated ODA can have on areas such as improving health outcomes, reducing conflict and general economic development.
Despite the good projections we have seen, we are not out of this yet. We are rightly especially focused on youth unemployment because of its potential scarring effect, and I very much welcome programmes such as kickstart. However, as we look beyond the very short term, we should reflect that the one problem we never cracked in the jobs miracle, despite the great growth, was productivity. The productivity problem did not just exist in the 2010s, or under Tony Blair, or under Margaret Thatcher; we have had a yawning productivity gap against the United States, Germany and France since before I was born. Academics used to talk about a low skills, low wage equilibrium, although we do not hear so much about that now: firms design jobs around the skills that they think are available, and then there is little incentive for individuals to upskill because there are not the jobs available for them to upskill into. We need to break that cycle, and I am confident, with the momentum from this programme, that that can be done.
There have been important reforms such as universal credit, with progression at its heart and removing things like the 16-hour rule, as well as the national living wage, the apprenticeship levy and the growth of high value-added industries, and the plan for growth can help in that, but we need to ensure that growth and opportunity are evenly spread. We have significant challenges to address. Some 11 million adults in England have missed out on A-levels or their equivalent, and a much lower proportion of people reach what is called in the technical jargon levels 4 and 5, which are the higher-level technical qualifications—people not going on to do a degree, but doing those qualifications that can be worth so much.
There is so much change going on in the world, with, for instance, robotics, artificial intelligence, machine learning and voice computing. Any one of these things on their own could constitute an industrial revolution, but right now they are all happening together, and on top of that we have the opportunities and changes that come from leaving the European Union, what we have to do around the net-zero ambition and then of course the new challenges that we face as a result of this pandemic.
I am therefore pleased that skills and investment in human capital are at the heart of this approach. Quality standards and intensiveness of courses were already being addressed through steps like apprenticeship reform, the creation of the Institute for Apprenticeships and Technical Education and the institution of T-levels, and I am pleased that that is going to be taken further with a statutory role for employers in the design of qualifications and in the skills accelerators. I also very much welcome the bold plan to significantly reform student finance, which up until now has been very much centred on traditional three-year, away-from-home undergraduate degrees, by making it much more flexible and enabling people to do things in manageable chunks so as to work with their careers and to do more learning from where they live.
We clearly need to go further and build on all of this, and although we are of course focused on young people we must not forget older people: whenever there is a slowdown, there is always the danger that people leave the labour market earlier than they would otherwise have done. We can do more on returnships and helping people get back into the labour market. Sometimes a short, intensive type of training is all that is required, and I would finally just reflect from my time as an Employment Minister and also when we were doing the national retraining scheme that what we heard most in terms of the things that hold people back was not some specific skill but confidence, and helping people through that journey has to be at the heart of what we do.
Tax Avoidance and Evasion
Damian Hinds Excerpts(4 years, 11 months ago)
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Damian Hinds (East Hampshire) (Con)
This is an important subject for debate this afternoon, first because we need tax receipts to fund our public services and, secondly, because as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) said, people expect to see fairness. They expect to see everyone and every entity shouldering their fair share of the burden. Sadly, there are people who have an interest in trying to get round the system and to cheat the system, and they strive harder and harder every year to do so. We live now in a more complex world and a more complex new economy that is more multinational, more digital, more services-based, and that can create new opportunities for those organisations and people.
However, the gap is much bigger and older than that. According to HMRC’s own estimates, the biggest part of the tax gap is about individuals and organisations failing to take reasonable care, followed by legal interpretation, illegal tax evasion and then the exploitation of loopholes through avoidance. It is important to note that all economies suffer a tax gap. According to a UN World Institute study in 2017, the world loss from tax avoidance was estimated at $500 billion. That is not the whole tax gap; it is the element that results from avoidance. Proportionally, the countries that suffer most are not wealthy countries such as ours but low income and lower middle income countries. According to analysis by Statista of the total loss, the countries that suffer the biggest loss are the United States, with more than $180 billion; Japan, with somewhere around $50 billion; and France and Germany, with between $15 billion and $20 billion. According to the analysis, the UK was at that time down at somewhere below $2 billion. One can quibble about the detail of the methodology, but it would take a massive error and correction to put the UK close to some of those comparable countries.
Overall, the UK tax gap is less than 6%, as my right hon. Friend the Chief Secretary to the Treasury said, and one of the lowest in the world. It is also one of the most accurately measured in the world. Some members of the Opposition Front-Bench team—they have gone now—were muttering earlier, “You’ve been in government for 10 years. What have you been doing?” Well, we have been bringing down the tax gap. If we compare the tax gap in 2005-06 with 2015-16, it has come down from somewhere close to 8% to somewhere under 6%. It is still a big issue to be tackled, and I am pleased and proud that this Government are redoubling their efforts and leading internationally in that regard.
All countries do some degree of tax competition, either explicitly or implicitly, and our tax regime is one reason why we have attracted many international companies to base themselves here, create jobs and grow our economy. However, I am afraid to say that many companies do try to reduce their tax. Sometimes, they say that they have a fiduciary duty to their shareholders to do so, but Governments also have a fiduciary duty to their shareholders: our citizens and our taxpayers. We simply cannot have the sort of aggressive tax avoidance that we have seen from some companies, because our public services rely on tax receipts. There will be battles over what constitutes economic activity and over what is a legitimate location for intellectual property, but our argument is simple: “If you benefit from our economy, you must contribute to our economy.”
Since 2010, more than 100 measures have been taken on evasion, avoidance and non-compliance. On enforcement, HMRC’s litigation and settlement strategy was refreshed in 2011. The office of the Tax Assurance Commissioner was established in 2012. Now, we are committed to new anti-avoidance measures, including increasing the maximum prison term, a single beefed-up unit in HMRC and a new package of anti-evasion measures.
Just as important—in fact, it is probably more important —is the work that this country has been doing internationally under Conservative Governments. That started with the 2012 joint statement with France and Germany calling for reform of international tax rules, given that our current system effectively dates back to the 1920s. We used our G8 presidency in 2013 to drive forward the G20 OECD agenda on base erosion and profit shifting—the so-called BEPS project. We were the first country to commit to the country-by-country reporting template and the first to adopt OECD rules to address hybrid mismatch.
I was proud of the 25% diverted profits tax in 2015, and I am proud now that this Government are pushing ahead with the digital services tax. We have always been clear that we would prefer international agreement, but if that is not possible, we will go it alone. If international progress now makes the digital services tax obsolete, great. That would be the best outcome of all, but if it does not, unless and until that is the case, we are right to proceed.
There is important work on avoidance, evasion and non-compliance, but what we cannot do, as we sometimes hear from Opposition Members, is to pretend and mislead people that overcoming this kind of cheating and making the system work better will solve all our fiscal challenges. The same goes for pretending that it is possible for just about anything to be paid for by “the rich” and “corporations”. In the end, all taxes are taxes on individuals. On company taxes—corporation tax is part of a suite of taxes alongside VAT, national insurance and business rates—it is right to offer companies an attractive rates of corporation tax that reward investment and job creation, but they must invest in their people’s skills, which is why we have the apprenticeship levy. We must also ensure that people are paid properly, and that is why we have the national living wage.
I commend the Government for their world-leading work. There is always more to be done, but I will vote against this misleading motion.
Treasury
Damian Hinds Excerpts(4 years, 11 months ago)
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Damian Hinds (East Hampshire) (Con)
Creditor enforcement action can greatly exacerbate the problems that people going through mental health crises can experience. May I commend the Chancellor and the Economic Secretary for the breathing space initiative, which will help to ease the pressure on those people and so many more?
John Glen
I thank my right hon. Friend for his comments, and I am very pleased that the breathing space scheme is moving forward. We published the impact assessment last week, and 700,000 people will benefit from the scheme next year when it comes into force. That number will rise to 1 million in the following year.
[Official Report, 11 February 2020, Vol. 671, c. 707.]
Letter of correction from the Economic Secretary to the Treasury, the hon. Member for Salisbury (John Glen).
An error has been identified in the response I gave to my hon. Friend the Member for East Hampshire (Damian Hinds).
The correct response should have been:
Oral Answers to Questions
Damian Hinds Excerpts(4 years, 11 months ago)
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Sajid Javid
With respect, I think the hon. Gentleman is confusing cutting spending and tackling waste, and we know that the previous Labour Government was good at neither of those, with overspending and loads of waste. It is right that as a Government we look carefully at every single pound that is spent and make sure it is done so appropriately.
Damian Hinds (East Hampshire) (Con)
The Economic Secretary to the Treasury (John Glen)
I thank my right hon. Friend for his comments, and I am very pleased that the breathing space scheme is moving forward. We published the impact assessment last week, and 700,000 people will benefit from the scheme next year when it comes into force. That number will rise to 1 million in the following year.[Official Report, 24 February 2020, Vol. 672, c. 2MC.]
Apprenticeship Levy
Damian Hinds Excerpts(4 years, 11 months ago)
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Damian Hinds (East Hampshire) (Con)
It is a great pleasure to speak in this debate. I congratulate my hon. Friend the Member for Gloucester (Richard Graham), who, along with my right hon. Friend the Member for Harlow (Robert Halfon), has done so much to promote apprenticeships and to ensure they are a regular subject of debate here in Parliament. There have always been very high quality apprenticeships in this country. Multinational companies in engineering and automotive have long offered apprenticeships that compete and are comparable with the very best in the world, but not all apprenticeships have been very high quality. Within sectors there have always been companies that have seen it as part of their duty, responsibility or mission to invest in the next generation coming through, but there have also always been companies that have not seen that imperative and benefit instead from the training provided by competitors.
The levy must be seen in the context of a package of measures introduced in the 2015 summer Budget and autumn statement, which included the reductions in corporation tax and included the national living wage and this third arm, the apprenticeship levy. With that package, the Government effectively said to companies, “We will give you a very competitive corporation tax regime, which will lower the hurdle for investment. It will mean that businesses can grow, but we need to make sure that people are paid properly and fairly, and we need to ensure that everybody invests in the next generation of talent coming through.”
There have been some difficulties with the levy, some of which have been referred to. One is the speed of approval of certain standards, which has got better over time but needs to carry on getting better. Fundamentally, there has been a great quality uplift in apprenticeships. Thanks to the levy, the amount of cash in apprenticeships has doubled over the decade in cash terms. We have seen a move to longer, higher level apprenticeships, and the move from so-called frameworks to standards. That is all a bit jargonistic, but it basically means that there is a more exacting standard for the apprenticeship, with a greater degree of employer approval. Effectively, business has voted for a higher standard of apprenticeship, which creates some tension against a numerical target.
I want to talk briefly about each of the three main objections to the apprenticeship levy: first, it is just a tax; secondly, it is too inflexible; and thirdly, “I can’t manage to use the whole amount.” On the first point, the apprenticeship levy is a non-optional deduction levied by Government, so it does bear some tax-like features, but it is not exactly the same as a tax. Of course, money is extracted from business as part of the overall Exchequer requirement.
Something that I discovered when I worked at the Treasury was that for every tax, there is a really good argument against it. Corporation tax? Too many companies avoid it. Business rates are a fixed cost, as we all know, and that can be difficult for certain companies. National insurance is a tax on employment. Sales tax, or VAT, may apply at an early stage of development. Even excise duty, which is based on volume, inevitably involves problems with whatever system is set up and whatever threshold is set.
It is right that we rebalance the approach over time and right that we look again at business rates and introducing a digital sales tax, because there are concerns about some companies being able to avoid corporation tax, and, conversely, there is the strain on some of our shops on the high street and elsewhere,. Fundamentally, in that suite of taxes and ways of getting money out of business, the levy solves the free rider problem when it comes to investment in skills and, relatively speaking, rewards the companies that make a greater investment. I suggest that, as part of a suite of approaches, it has an important role to play.
The second big argument is that the levy is too inflexible. As my right hon. Friend the Member for Harlow mentioned, there is always a question of re-tagging: of training that would happen anyway, or re-accrediting skills that exist already, and it is always a strain. The apprenticeship levy already covers quite a lot. Let us compare what the apprenticeship levy in the UK covers compared with the German apprenticeship system, which is commonly regarded as the gold standard in apprenticeships. The minimum specification for our apprenticeships is lower in terms of duration; the age range that it covers is considerably wider than is common practice in Germany and some other countries; and, as has been alluded to, it covers apprenticeships at numerous different levels.
We can argue legitimately that there are more things that it should be possible to use levy money for, such as pre-apprenticeship programmes, and so on, but the mathematical reality is that if we were to do that, other things being equal, we would need a higher levy or we would need to take something else out of eligibility for levy spend.
Finally, there is the objection, “I cannot spend it all.” It is worth bearing in mind, of course, that some companies do spend it all, or almost all of it. It is also true, and relevant, that sectors vary. In the engineering sector, for example, there is typically a very high apprenticeship spend. In retail and hospitality, it is typically lower. Again, we need to recognise the mathematical reality, which is that the levy is designed so that levy payers cover the apprenticeships in their own companies but also cover the cost of apprenticeships for non-levy payers. To change the system, it would be necessary to extend the scope of the levy or raise its level.
I think it is right at this point to review and reform the levy. It is legitimate to look at such things as coverage of MBAs, although it turns out that it is hard to define where the line should be drawn on post-level 6 qualifications. I think we could look more at tailoring the specifications of difference to different age groups and sectors, and I think there is an argument around pre-apprenticeships and that particular social justice agenda. The overall principle, however, is good. It has increased the amount of money and investment available for apprenticeships and skills and protected it, and it solves the free rider problem. I would say that, along with T-levels, higher level technical qualifications and our school reforms, apprenticeships are key to reforming productivity, and they deserve our support.
Caroline Nokes (in the Chair)
I now call John Howell. Please can comments be kept to four minutes, so that the Minister and Front-Bench spokesmen have time?
Finance Bill (Sixth sitting)
Damian Hinds Excerpts(8 years, 7 months ago)
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Rebecca Long Bailey
I will be very brief. Clauses 130 and 131 increase the rates of landfill tax in line with retail prices index inflation from 1 April 2017 and 1 April 2018. We have no issues with that change and support the clauses. However, it would be helpful if the Minister could provide the latest figures for the levels of waste being sent to landfill in comparison with last year. After all, the purpose of the tax is to reduce the amount of waste sent to landfill, so it would be good to know if it is working in practice.
On a similar note, the 2016 Budget announced a consultation on landfill tax reform over the summer. I understand that there is an intention to consult on amending the definition of a taxable disposal of waste at a landfill site and clarifying the scope of the tax. According to the ENTRUST website, full proposals are being set out in a document later in 2016 and any changes legislated for in the Finance Bill 2017. Will the Minister confirm the exact timetable, if he is aware of it, for that consultation?
Finally, as the Financial Secretary and the Exchequer Secretary will no doubt be aware, the Government carried out a consultation on reforming the landfill communities fund last year. The LCF provides funding for certain specified projects in an area affected by a landfill site. Draft regulations were then published that would make a detrimental change to the way the fund operates. The regulations proposed the removal of provisions for third parties to contribute 10% of landfill operators’ contributions to projects, and instead make it compulsory for landfill operators to fund the 10% themselves.
As the scheme is voluntary, stakeholders were rightly concerned that landfill operators would simply withdraw from the scheme and that an important funding stream would be lost. I wrote a submission to the consultation on the regulations, and I am pleased to say that the Government withdrew that particular part of the regulations, which were subsequently laid before the House on Budget day. I would like to take this opportunity to thank the Ministers for taking my advice.
The Exchequer Secretary to the Treasury (Damian Hinds)
It is a pleasure to serve under your chairmanship once again, Mr Howarth. As the hon. Lady said, clauses 130 and 131 increase both the standard and lower rates of landfill tax in England, Wales and Northern Ireland in line with RPI from April 2017 and again from April 2018. She asked how successful landfill tax has been in reducing the amount of waste sent to landfill. Although I do not have the year-on-year figures in front of me, since 1996, when landfill tax was introduced, the amount of waste disposed of at landfill sites has nearly halved, while recycling rates have increased threefold. Of course, reducing landfilling of waste benefits the economy, as we make better use of valuable resources rather than throwing them away. At the same time it helps us reduce greenhouse gas emissions from decomposing waste and meet our climate change targets.
When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £84.40. Less environmentally damaging waste pays the lower rate of £2.65 per tonne. The clauses make amendments to the Finance Act 1996 to increase the standard and lower rates of landfill tax in line with inflation, based on the RPI, rounded to the nearest 5p. The changes will therefore see rates per tonne of £86.10 and £2.70 respectively from 1 April 2017 and £88.95 and £2.80 respectively from 1 April 2018.
Landfill tax already provides a disincentive to landfill by making it an expensive waste treatment method compared with alternatives. By increasing rates in line with inflation, we maintain the incentive for industry to continue the move towards a more sustainable circular economy. In addition, we know that certainty is important to the waste management industry. The clauses will mean that businesses can have the confidence to invest in new facilities and technology, knowing that those will offer a long-term, economically viable alternative to landfill. That is why the changes will set rates as far ahead as March 2019. The clauses provide certainty on both the standard and lower rates of landfill tax, confirming that they will not be eroded by inflation and maintaining the incentives to invest in more sustainable waste treatment.
I note the hon. Lady’s comments on the landfill communities fund. Of course, the Government decided to retain and reform that fund, and she is correct about the changes made and then adapted on the 10% contribution. The guidance from ENTRUST does encourage operators to make that type of contribution. The hon. Lady also asked about the consultation on the definitions for types of waste. The consultation runs from 26 May until 18 August.
Christian Matheson (City of Chester) (Lab)
It is a pleasure to see you in the chair once again, Mr Howarth. I wish to speak only briefly. My hon. Friend the Member for Salford and Eccles reminds us that the Scottish National party Government in Scotland have chosen to reduce APD. It is nice to hear that for once they have actually done something with the tax powers they have been given, because of course they have been dodging other tax powers despite having the authority to exercise them.
May I echo the words of my hon. Friend the Member for Salford and Eccles? The tourism industry across the UK is crying out for clarity on APD, because of the devolution issues. The differences in air passenger duty now make it financially viable for a family of five to drive from the north-west of England, the area that I—and your good self, Mr Howarth—represent, up to Scotland to save money. Those price differentials now mean that that makes sense, so they are damaging the tourism industry and the airport sector outside London.
The impression of the tourism industry—fairly held, I think—is that Treasury Ministers have been kicking the issue into the long grass for a long while. They have been looking for a solution, not finding one and then having a further review. My hon. Friend has outlined some of that. I therefore stress to Ministers again that there has to be a long-term and sustainable answer to those variables in air passenger duty. The existing situation is not sustainable, so the sooner we get a consistent and sustainable balance that the tourism industry can live with, the better for our economy as a whole.
Damian Hinds
Clause 137 makes changes to ensure that the rates of APD for 2016-17 increase in line with RPI, so that the aviation sector continues to play its part in contributing towards general taxation and reducing the deficit.
As the hon. Member for Salford and Eccles rightly said, APD raises a little more than £3 billion annually, so it is an important part of Government revenue. The increase in rates has effect from 1 April this year and was announced at Budget 2015 to give the industry sufficient notice of the change in rates. The low level of inflation and the rounding of APD rates to the nearest £1 mean that short-haul rates will remain frozen for a fifth year in a row, which will be to the benefit of about 80% of passengers.
The hon. Members for Salford and Eccles and for City of Chester raised the important subject of APD devolution and the options that the Government have been considering. To be clear, APD will be under the control of the Scottish Parliament, but the Scottish Government are still consulting, so no change has yet been made. The three options in the discussion paper published at summer Budget 2015 were correctly identified by the hon. Lady: to devolve the setting of APD within England; to vary the rates within England; or to provide aid to regional airports. The issues are complex and we continue to consider the various options. I am not in a position to give a specific date, but we will of course respond in due course.
APD is a fair and efficient tax, where the amount paid corresponds to the distance and class of travel of the passenger. The changes under the clause will ensure that the aviation sector continues to play its part in contributing towards general taxation.
Question put and agreed to.
Clause 137 accordingly ordered to stand part of the Bill.
Clause 138
VED: rates for light passenger vehicles, light goods vehicles, motorcycles etc
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
The clause increases the rate of vehicle excise duty on certain vehicles in line with RPI for the financial year 2016-17. This is standard practice, as VED rates have increased in line with inflation since 2010. Labour has not opposed that and I have no intention of doing so today, but I have some issues to take up with the Minister.
I want to repeat on the record how opposed we were to the last raft of changes to VED made in the previous Finance Bill. These changes put a stop to the link between the level of carbon dioxide emissions and the rate of vehicle excise duty. There is now simply a flat rate after the first year, with a surcharge on cars that cost more than £40,000. We simply do not see the Government’s justification for removing incentives for lower-polluting cars. I would be grateful if the Minister clarified that. Aside from that issue, I am happy for this clause to stand part of the Bill.
Damian Hinds
Clause 138 makes changes to vehicle excise duty rates for cars, vans and motorcycles, with effect from 1 April 2016. For cars first registered prior to 1 March 2001, vehicle excise duty is based on the car’s engine size. The rates of duty for those cars and vans before 1 March 2001 increase by £5 only as a result of this clause. For cars first registered on or after 1 March 2001, vehicle excise duty is based on the car’s carbon dioxide emissions. There are currently 13 CO2 bands. One rate is payable in the first year, and a separate, standard rate is payable in all subsequent years. For about 98% of those cars, the payment will be no more than £5 extra in 2016-17. That means that a motorist already owning a popular family Ford Focus will pay only £5 more.
First-year rates influence the purchasing choices of drivers buying brand-new cars. They act as a signal at the point of purchase that people can save money by choosing a cleaner car. In response to what the hon. Lady said about the 2017 reforms, it is not true that we have removed the incentives on CO2. First-year rates have an extra effect: the so-called “sticker price” effect. There is also the zero rate for zero-emission cars.
We had a fairness and a sustainability challenge on vehicle excise duty. The sustainability challenge was due to the projected decline in revenues as more and more cars come into the lowest charging bands, and the fairness challenge was due to the fact that people who can afford only an older, second-hand car would pay more than those who can afford to change their car every couple of years.
This measure will mean that the highest-emitting new cars will pay first-year rates of £1,120—an increase of £20—and rates for the cleanest cars will remain unchanged at zero. The clause also increases the standard rate of duty for vans first registered from March 2001 onwards by £5 only. Finally, rates for motorcycles will also increase in line with inflation. Motorcyclists will see an increase of no more than £2.
Question put and agreed to.
Clause 138 accordingly ordered to stand part of the Bill.
Clause 139
VED: extension of old vehicles exemption from 1 April 2017
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
This clause extends the exemption from vehicle excise duty to vehicles constructed 40 or more years ago on an automatic rolling basis on 1 April each year. The VED exemption is intended to support classic vehicles, which the Government consider—and I agree—to be an important part of the nation’s heritage. It appears to be a simple legislative change to create a rolling 40-year exemption, rather than requiring separate legislation year by year. We did not oppose the equivalent measure in the Finance Act 2014 when the Budget 2014 proposal for a rolling exemption was debated, and we do not oppose this clause today.
However, the Minister is not going to get off that lightly. I would like him to address a couple of my concerns. The policy paper indicates that the clause has no Exchequer impact, but the tax information and impact note for the original measure in Budget 2014 projected an impact of £5 million in 2016-17, £10 million in 2017-18 and £15 million in 2018-19. Will the Minister clarify whether there has been a change in the Treasury’s assessment of the impact of the measure, or whether the zero impact assessment relates purely to the technical change to the legislative mechanism, rather than the underlying policy?
Furthermore, the original note stated that in 2014-15 the measure will
“have an advantageous impact for the owners of around 10,000 classic vehicles...Every year thereafter, the number of classic vehicles will increase as additional cohorts of vehicles are included in the exemption. It is estimated that an additional 10,000 classic vehicles will be affected in each year of the scorecard.”
As of 30 September 2011, 162,734 cars and 152,836 other vehicles were exempt from VED on the grounds of age. Will the Minister confirm that the figure of 10,000 vehicles in the HMRC policy paper is additional to the figures in previous years, and will he give us an update on the total number of vehicles, either today or later in writing?
Damian Hinds
I rise to speak to a fairly uncontroversial clause on the exemption of classic vehicles from VED. The Government believe that classic vehicles are an important part of the nation’s heritage. According to the Historic Vehicle Research Institute, the historical car industry employs about 28,000 people in the UK. The VED exemption is designed to support the maintenance and use of classic vehicles.
The classic vehicles VED exemption was first introduced under the Conservative Government in 1996 on a rolling 25-year basis. The Labour Government froze the exemption in 1998 so that it applied only to vehicles built after 1 January 1973. The Government announced in Budget 2013 that they would extend the exemption to vehicles built before 1 January 1974. Budget 2014 went further, announcing the introduction of a new rolling 40-year VED exemption for all vehicles, which extended the exemption to vehicles constructed before 1 January 1975 and 1 January 1976, to come into effect on 1 April 2015 and 1 April 2016 respectively.
Clause 139 places the VED exemption on a permanent basis so that, from 1 April each year, vehicles constructed more than 40 years before 1 January of that year will be automatically exempt from paying VED. In 2016-17, the exemption is worth £145 or £235 depending on the vehicle’s engine size. As the hon. Lady said, the Government estimate that about 10,000 owners of classic vehicles will benefit each year, and that is additional to previous figures.
The operational cost of the programme to the DVLA is the negligible cost of updating its IT systems, which will need to be done each year. The standard in the financial statements and in setting out projections rounds down to the nearest £5 million, which means that the cost of a single year is less than £5 million and is therefore classed as negligible. However, the tax information and impact note refers to a rolling programme, so we have to add up the less than £5 million each time.
This measure ensures administrative and legislative efficiency by automatically extending the classic car exemption on a permanent basis. I hope the clause stands part of the Bill.
Question put and agreed to.
Clause 139 accordingly ordered to stand part of the Bill.
Clause 140 ordered to stand part of the Bill.
Clause 141
Fuel duties: aqua methanol etc
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss that schedule 17 be the Seventeenth schedule to the Bill.
Damian Hinds
The clause will introduce a reduced duty rate for aqua methanol that is set aside for use as fuel in any engine, motor or other machinery. Aqua methanol is a new, greener fuel that is 95% methanol and 5% water. The reduced duty rate is intended to incentivise the uptake of aqua methanol, as the hon. Lady said, as a greener alternative fuel to petrol and diesel.
The Government are committed to improving air quality in the UK through the reduction of carbon dioxide and nitrogen dioxide emissions. Every year, around 50,000 people die prematurely due to poor air quality. Road vehicles account for around 92% of UK transport carbon dioxide emissions and 80% of nitrogen dioxide emissions in roadside locations.
Successive Governments will need to de-carbonise the road transport sector in the UK if we are to deliver on our commitments to reduce greenhouse gas emissions —as I know both the hon. Lady and I are committed to doing. Indeed, the fourth carbon budget requires successive Governments to reduce greenhouse gas emissions by 51% relative to their 1990 levels by 2027. Any action to meet those targets will need to include the deployment of new greener alternative fuels, and aqua methanol is one of those. Incentivising its use has the potential to contribute to the UK meeting its air quality targets through reductions in the use of diesel, which is the largest source of nitrogen dioxide emissions.
In the 2013 autumn statement, the Government announced that the differential between the lower duty rate for alternative road fuel gases and the main duty rate for petrol and diesel would be maintained until 2024. In the 2014 Budget the Government went further, announcing that we would also apply a reduced fuel duty rate to aqua methanol. The clause follows through on that commitment. It introduces a reduced duty rate of 7.9p per litre for aqua methanol to the main rate of 57.95p per litre. The decisions on aqua methanol were outlined in the autumn statement in 2014 and the costings of the policy remain consistent with our forecasts at that time, although the delay to the introduction of the new rate means costs to the Exchequer have also been delayed.
The reduced duty rate was recalculated based on fuel duty changes and the energy content. The clause legislates for the reduced rate of excise duty for aqua methanol, which will incentivise the uptake of that alternative fuel and help us to deliver on the commitment to reduce greenhouse gas emissions and improve air quality in our towns and cities.
Question put and agreed to.
Clause 141 accordingly ordered to stand part of the Bill.
Schedule 17 agreed to.
Clause 142
Tobacco products duty: rates
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
The Committee will be pleased to hear that I have just a few sentences to say about this clause. For the benefit of the Committee, the clause simply deals with increases in the rates of tobacco duty. I will not go into detail because I am sure the Minister will cover the specifics, but I want to illustrate some of the issues I noticed in the HMRC policy paper. The policy paper refers only to the 5% increase for hand-rolling tobacco and states that this measure alone is expected to raise £10 million each year to 2020-21. Will the Minister provide us with the expected Exchequer impact for all the measures in the clause, either now or later in writing?
Alistair Darling announced in the last Labour Government’s final Budget that tobacco duty would rise by 1% above inflation in 2010 and by 2% above inflation for the following four years thereafter. The Opposition therefore support the introduction of the escalator in the Finance Act 2014 and we will certainly support this clause today.
Damian Hinds
Clause 142 makes changes to ensure that the tobacco duty regime continues to work as part of the Government’s wider health agenda to reduce smoking prevalence. The clause implements tobacco duty increases of 2% above the RPI rate of inflation for all products and an additional 3% increase for hand-rolling tobacco, meaning a 5% increase in total for hand-rolling tobacco. The Government are committed to reducing smoking rates, especially among young people. Smoking is the single largest cause of preventable illness and premature death in this country. It accounts for around 100,000 deaths a year and kills around half of all long-term users. Reducing the affordability of tobacco products through taxation is widely acknowledged to be effective in reducing smoking prevalence.
The changes that have already come into effect have added 21p to a packet of 20 cigarettes and 44p to a 30g pouch of hand-rolling tobacco. Research shows that, as well as establishing high tobacco duty rates, maintaining those high rates is also important in reducing smoking prevalence. That is why, as was announced in the 2014 Budget, annual duty increases of 2% above inflation will continue until the end of the Parliament. I should clarify for the hon. Lady that that means they are already in the projections for the public finances and that the overall impact of the two changes is as published in the Budget scorecard. The clause implements the tobacco duty rate increase of 2% above inflation and an additional 3% for hand-rolling tobacco, which supports our wider health agenda.
Question put and agreed to.
Clause 142 accordingly ordered to stand part of the Bill.
Clause 143
Alcoholic liquor duties: rates
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
The clause increases the rates of alcohol duty on wine and some ciders and perries in line with inflation. The changes took effect on 21 March. In discussing the clause, I want to touch on one type of alcohol duty that is notably not being increased in line with inflation.
Damian Hinds
Clause 143 sets out changes to alcohol duty rates from 21 March this year. It was announced in the Budget that the duty on beer, spirits and most ciders would be frozen this year and that the duty on most wines and higher-strength sparkling cider would rise with inflation. With those changes, we continue to support the pub industry, which plays such an important part in British cultural life. To respond to the hon. Lady’s point about what is most advantageous to the on-trade—to pubs—beer is considered to have a greater price sensitivity effect than wine, by a number of estimates.
The British Beer and Pub Association estimates that about 30 million adults visit a pub at least once a month. As I think all hon. Members would acknowledge, pubs are important community assets that promote responsible drinking in a generally friendly atmosphere. In the Budget, the Government therefore took further action to support the sector. Given that about two thirds of alcohol sold in pubs is beer, we froze duty on a typical pint of beer, following three consecutive beer duty cuts that were widely welcomed. The Government’s support for pubs means that a typical pint of beer is now 10p cheaper than it would have been if we had not ended the beer duty escalator in 2013. I am sure that is welcome news to many, many pub goers. In the BBPA’s assessment, the three beer duty cuts have created 19,000 jobs. The duty freeze will offer further support to pubs. The duty on high and low-strength beer will also be frozen, which offers the sector a continued incentive to expand the choice of those drinks to consumers.
The Government’s key priority for this Parliament is to restore the public finances to a sustainable position. We outlined in the Budget our commitment to fiscal sustainability, and the decisions taken on duty rates must, of course, reflect that.
The clause provides for duty on most wines to increase by RPI only. Under these changes, the duty on beer and wine will remain broadly similar, and the duty rate on wine above 22% ABV will continue to be the same as that for spirits. The hon. Lady may have a particular interest in this point: the price of a bottle of wine is now 7% lower than it would have been if we had not ended the wine duty escalator in 2014.
The clause also sets out that duty on high-strength sparkling cider is increased by RPI only, which means that it continues to be the same as for sparkling wine of equivalent strength. It was also announced in the Budget that the duty on all other ciders would be frozen. That means that a typical litre of cider is now 4p cheaper than it would have been if we had not ended the cider duty escalator in 2014. The freeze in cider duty supports the industry, which has high production costs and plays an important role in many local economies, particularly in some of our rural areas.
The Budget also froze duty on spirits. As Scottish National party Members and others will acknowledge, Scotch is one of the great British success stories. Its exports are estimated to be worth nearly £4 billion, and account for about 20% of total food and drink exports. The freeze in spirits duty will provide further support to the Scotch industry. It means that a 70 cl bottle of whisky is now 87p lower in price than it would have been if we had not ended the spirits duty escalator.
The freeze will help elsewhere, too, including by supporting the global thirst for British gin. According to the Wine and Spirit Trade Association, 140 million bottles were exported in 2014, which is an impressive 37% increase in five years. Government statistics also show that between 2010 and 2015 a total of 174 new spirit distilleries opened in the UK, with 56 new licences issued in the past year alone. The announcements made in this year’s Budget and in 2014 and 2015 have increased the confidence in the sector.
The changes to alcohol duty rates in the clause ensure that responsible drinkers are not penalised. It is right to point out the Government’s continuing care and concern for the wider health agenda on alcohol consumption, but it is important not to penalise responsible drinkers. We recognise that not everyone is a responsible drinker, and we have taken a targeted approach to tackling alcohol-related harm. For example, to encourage the consumption and production of lower-strength beer, the Government place higher duties on super-strength beer and cider. Licensing rules are also in place to help to tackle irresponsible alcohol consumption. For example, local authorities can now introduce early morning restriction orders more easily.
The clause reaffirms the Government’s commitment to supporting the pubs industry and responsible drinkers.
Question put and agreed to.
Clause 143 accordingly ordered to stand part of the Bill.
Clause 155
Simple assessments
Question proposed, That the clause stand part of the Bill.
The Chair
Having considered alcoholic liquor duties, we now stagger towards clause 155, with which we will consider the following:
That schedule 23 be the Twenty-third schedule to the Bill.
Clauses 156 and 157 stand part.
Rebecca Long Bailey
The clause relates to gift aid and will allow HMRC to impose penalties on intermediaries that fail to comply with new requirements on gift aid declarations, as set out in secondary legislation that has not yet been published. A technical consultation on those draft regulations is apparently being carried out later this year. To understand the clause, therefore, the Committee might find some background useful.
The Government want to make it easier to claim gift aid on donations given through digital channels. At the moment, a charity requires a gift aid declaration from a donor in order to be able to claim gift aid. Where donations are made by an intermediary—through a website such as justgiving.com, or by text—the situation is difficult, because the intermediary has to collect the declaration from the donor and then pass it on to the charity.
The Government therefore carried out a consultation on digital giving, which ran from July to September 2013, and published their response in April 2014. The consultation received more than 100 responses, and I understand that meetings have been held with representatives of both charities and intermediaries. The Government’s intention, as I understand it, is to allow gift aid declarations to be made by intermediaries representing individuals, and to allow charities to use such declarations to claim gift aid. The primary legislation that gave the Government the power to do that was enacted in the Finance Act 2014. Clause 161 simply amends that legislation so that the regulations, when published, may also include a penalty for intermediaries who fail to comply with the requirement, as well as a right of appeal against those penalties. Regulations for the requirements and penalties will be published later this year.
According to the policy paper, the Exchequer impact of the changes are not known, but the measure is expected to decrease net receipts, as there will be a higher level of gift aid on donations. The paper also states that the measure will affect only intermediaries who fail to comply with legislation, and that they may incur one-off costs to put systems in place to implement the changes. However, estimates of the impact will be made when details of the measure have been finalised.
We completely agree with making it easier for gift aid to be claimed on donations where it is complicated to do so, and we are happy to support the clause, but perhaps the Minister will provide more detail of what the regulations will contain and what the requirements on intermediaries will be.
Damian Hinds
I am grateful to the hon. Lady for this opportunity to put on the record a little more of the detail and some of the reasoning behind the measure. Clause 161 gives HMRC the power to impose penalties on intermediaries operating in the charity sector if they fail to comply with new requirements to be set out in regulations. These regulations are designed to make it easier for charities to claim gift aid through digital channels, and draft regulations have been made available to the Committee.
Clause 161 lays the groundwork for delivering the Government’s commitment to giving intermediaries working in the charity sector a greater role in administering gift aid, which allows charitable donations to be made tax-free. Donors can now give through multiple digital channels, including SMS text donations, online portals and, more recently, Twitter. Gift aid legislation has not always kept up with these developments, so in autumn statement 2013, the Government announced plans to explore ways in which charity intermediaries could be given a greater role in administering gift aid. We have worked closely with representatives of charities and intermediaries to develop proposals to give additional flexibility in claiming gift aid through digital channels. The clause is a necessary step in delivering those proposals. It gives HMRC the ability to charge penalties to intermediaries that do not operate within the new rules. This will help to ensure that the additional flexibility for claiming gift aid is not misused, and so help to protect the income and reputation of charities throughout the country.
It may be helpful if I briefly set out how the new proposals will work. Before a charity can claim gift aid on a donation it has received, the donor must have completed a declaration stating both that the donation is eligible for gift aid and that they want the charity to be able to reclaim the tax paid on that donation. Essentially, this allows the donor to give an intermediary permission to complete a gift aid declaration on his or her behalf in respect of donations made through that intermediary. That permission will last for the rest of the tax year, negating the need to complete a gift aid declaration every time a donation is made. Donors will, of course, have the right to cancel that permission at any time. As with any tax relief, the Government must ensure that the gift aid is claimed only when it is right to do so, and clearly rules must be in place to ensure that.
These rules are in everyone’s best interests. They protect the use of taxpayers’ money and the reputation of those charities that benefit from gift aid relief, and encourage intermediaries to act responsibly. For example, it is only right that intermediaries should let donors know the total value of gift aid claimed on their donations over the course of a tax year, as this could affect their tax liability. Consequently, there will be new obligations on intermediaries who choose to offer the new process set out in regulations. Failure to comply with those obligations could result in intermediaries facing a penalty.
If a penalty is imposed, it will be £50 per failure to comply, up to a limit of £3,000 a year. I should stress that although there must be a sanction against those who are careless or negligent, it is not anticipated that HMRC will charge these penalties routinely. There will be scope to suspend them to enable intermediaries to rectify any shortcomings in processes, and of course there will be a right of appeal against a decision to impose a penalty. I want to make it clear that the Government do not propose applying new penalties on charities; they will apply only to intermediaries.
Clause 161 amends the Income Tax Act 2007 to set out when a penalty may be imposed, and the maximum amount that can be imposed for failure to comply, and it confers appeal rights. It also provides that the clause will take effect from a date appointed in regulations. The Government recognise that intermediaries can and indeed do play an important role in assisting charities to get the benefit of gift aid. It is necessary to ensure that the processes under which they operate are robust and not misused to the detriment of charities or their generous donors.
Question put and agreed to.
Clause 161 accordingly ordered to stand part of the Bill.
Clause 162
Proceedings under customs and excise Acts: prosecuting authority
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
Clause 162 amends part XI of the Customs and Excise Management Act 1979 to remove reference to the commissioners from the definition of “prosecuting authority” for Scotland and Northern Ireland. It will also insert the Director of Public Prosecutions for Northern Ireland as the relevant prosecuting authority for Northern Ireland.
We see the clause as a minor amending clause that tidies up the measures in the 1979 Act relating to Scotland and Northern Ireland. We believe that it is sensible to ensure that the time limit for summary offences does not start to run before the date at which the prosecuting authority has knowledge of sufficient evidence to warrant the proceedings.
We have no concerns about the clause and are happy to support it, but I will stray slightly from the exact detail of the clause and ask the Minister what initial consideration the Treasury has given to the future of customs checks on the border between Northern Ireland and the Republic of Ireland following the EU referendum. I am sure that he is aware that the Irish border has been free of customs checks since 1993 as a result of the single market. A return to customs checks would be damaging to the British and Irish economy, and may well have implications for the Office of the Director of Public Prosecutions for Northern Ireland. Perhaps the Minister can address that concern, either today or in writing at a later date.
Damian Hinds
As the hon. Lady and all members of the Committee know, a number of issues will have to be addressed in due course. The clause does not relate to the subject of the question she asked.
Clause 162 amends the Customs and Excise Management Act 1979 to correct outdated references to the prosecuting authorities in Northern Ireland and Scotland. By doing so, it will ensure that time limits for starting proceedings will apply only to the correct authorities. The clause is purely technical and is not a change of policy.
Question put and agreed to.
Clause 162 accordingly ordered to stand part of the Bill.
Clause 163
Detention and seizure under CEMA 1979: notice requirements etc
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
Again, I have just got a few comments, because the clause is largely uncontroversial. It simply amends the 1979 Act to permit Border Force officers to treat the driver of a vehicle or someone comparable as if they were representatives of the goods being seized. It seems uncontroversial, but it has implications for vehicle drivers, including road haulage drivers. I am not aware of any concerns expressed by potential stakeholders, but what consultation has taken place with the Road Haulage Association in particular, the British International Freight Association and the office of the independent chief inspector of borders and immigration?
Damian Hinds
Clause 163 makes provision for an officer of HMRC to treat a person, when seizing or detaining goods, as if they are a representative of the owner of the goods, wherever that person has or appears to have possession or control over those goods.
Under current legislation, when detaining or seizing goods, there is no requirement for an officer to serve a notice of detention or notice of seizure on the person present if the officer believes that that person is a servant or agent of the owner of those goods. Whether a driver can be considered an agent or servant of the owner affects the processes that the officers seizing or detaining goods must follow. However, drivers of vehicles carrying such goods often claim distance from the owner, making it difficult for HMRC successfully to consider them to be an agent or servant of the owner. That leaves HMRC trying to find an owner in what is usually a complex, fraudulent supply chain.
The changes made by clause 163 will allow officers to treat the driver, or a person in a comparable position, as if he or she were a representative of the owner and, therefore, not legally entitled to a notice of detention or a notice of seizure. It will make the operational duties of officers of Her Majesty’s Revenue and Customs more effective. Currently, those who purport to be owners are arguing that they have not had their legal right to appeal because they were not served with a notice.
HMRC has a duty to take robust action to deal with those who smuggle illicit goods of any description into the UK. By making explicit provision for the driver to be treated the same as an agent or servant, it will reduce the resource required in trying to identify the owner of the goods in what is usually a fraudulent and potentially complex supply chain.
The measure was consulted on in December 2015 for eight weeks. One response was received, and an individual reply was sent. The main thrust of the response was a request for clarification on the rights of appeal, and on whether the legislation would affect the rights of the owner to appeal against the seizure. HMRC was able to explain that the legislation would not affect those rights; appeal rights were not compromised. It was a consolidated response from industry, including hauliers.
To conclude, the measure removes the need for an officer to serve a notice on someone who has, or appears to have, possession or control of anything that is detained or seized. By doing that, the measure clarifies procedure for officers and those from whom the goods are detained or seized. It also removes significant operational barriers for HMRC in its pursuit of reduced excise tax gaps.
Question put and agreed to.
Clause 163 accordingly ordered to stand part of the Bill.
Clause 164
Data-gathering powers: providers of payment or intermediary services
Question proposed, That the clause stand part of the Bill.
Rebecca Long Bailey
Clause 167 introduces a raw tobacco approval scheme for users of and dealers in raw tobacco. Raw tobacco is not subject to excise duty or possession controls when it is not yet in a smokable form. The Government state that tobacco duty evasion is becoming increasingly prevalent through raw tobacco, which is freely and legally imported and either processed into smoking products in unregistered premises or sold in small quantities to consumers for home processing. To try to combat that, the Government carried out a consultation on the control of raw tobacco, and proposed an approval scheme.
The clause introduces a raw tobacco approval scheme that requires a person undertaking any activity involving raw tobacco to be approved and registered with HMRC. If a person is found to be undertaking an uncontrolled activity without registering with HMRC, the penalties that can be issued are either £250 or an amount equal to the duty that would have been charged on the relevant quantity of smoking tobacco at the lowest rate of duty. On that point, will the Minister confirm why the Government set the penalty at the lowest rate of duty? They could have gone for the hand-rolling rate, which would have doubled the penalty.
The clause allows exemptions to be granted to those who have a legitimate use of raw tobacco that does not involve the manufacturing of smoking products. HMRC expects that 20 to 24 businesses—mainly tobacco product manufacturers, importers, brokers and testing centres—will register. I understand that the Government are going to undertake a post-implementation review, which we welcome.
The aim is to address tobacco duty evasion by prohibiting the use of raw tobacco by unapproved persons to prevent the illegal manufacture of tobacco products. The clause will also make it a lot easier for border forces to seize tobacco and check whether it is destined for an approved person.
I understand that the new scheme will be largely built on existing registration processes, minimising the administrative impact on legitimate users of raw tobacco. For example, tobacco manufacturers already have duty approval, which will just be extended to include raw tobacco approval. Does the Minister feel that that addresses the Tobacco Manufacturers Association’s concerns that the measure will place additional burdens on legitimate users of raw tobacco?
The Labour party welcomes any measures to crack down on tax evasion and avoidance. We will therefore support the clause.
Damian Hinds
Clause 167 makes changes prohibiting any unapproved person from carrying out any activity involving raw tobacco. That will reduce the risk of evasion of tobacco excise duty and prevent the illegal manufacture of tobacco products. The approval scheme will be set out in regulations made under powers in this clause, and tailored to reflect a proportionate response to the risk presented. It will build on existing approval processes where appropriate to minimise the impact on legitimate users of raw tobacco.
Raw tobacco that is not yet in a smokable form is not subject to excise duty and the associated movement controls in the UK. There is a significant risk of tobacco products duty evasion through raw tobacco being freely and legally imported. It can be processed into illicit tobacco products in unregistered premises or sold in small quantities to consumers for home processing. We have identified no legitimate use for significant quantities of raw tobacco in the UK, other than for the manufacture of smoking products.
The Government are aware that raw tobacco is occasionally used in very small quantities for non-smoking purposes, such as beekeeping, pigeon bedding and fertiliser production. We have identified no significant non-smoking uses for large volumes of raw tobacco in the United Kingdom. Dialogue has been sought with the representatives of the potential niche uses, and the scheme has been designed with an understanding of those alternative uses and the extent of the risk presented.
The illicit manufacture of cigarettes and hand-rolling tobacco in the UK from raw tobacco deprives the Exchequer of the duty that should be paid, upon which we rely to fund our public services. It also makes cheaper illicit tobacco products more accessible, undermining the Government’s public health objectives.
The clause will assist in preventing the evasion of excise duty through the use of raw tobacco. It amends the Tobacco Products Duty Act 1979, prohibiting any person from carrying out any activity involving raw tobacco unless the person holds approval from HMRC. The changes will give HMRC powers to set out the details of the approval scheme in regulations, including how to apply for approval and what conditions and restrictions might apply to an approval. The clause will enable HMRC and Border Force officers to identify and seize raw tobacco if there is no evidence to show that the raw tobacco is destined for either an approved person or a premises that is specified in an approval. It also provides appropriate sanctions, including penalties and forfeiture, where any unapproved person has any involvement with raw tobacco.
From the consultation responses, it is expected that between 20 and 40 businesses will apply for approval. The one-off costs of familiarisation with the scheme and of making the application will be negligible. The raw tobacco scheme will protect £10 million of revenue per year by 2017-18, as certified by the Office for Budget Responsibility. The tobacco rate that applies to other smoking tobacco can be charged only until a tobacco product is produced, and if that happens, the correct tobacco rate will of course apply from that point. The clause will reduce the risk of evasion of excise duty by prohibiting activities involving raw tobacco by an unapproved person, to prevent the illegal manufacture of tobacco products.
Question put and agreed to.
Clause 167 accordingly ordered to stand part of the Bill.
Clause 168
Powers to obtain information about certain tax advantages
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
That schedule 24 be the Twenty-fourth schedule to the Bill.
Clauses 169 and 170 stand part.
Finance Bill (Third sitting)
Damian Hinds Excerpts(8 years, 7 months ago)
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The Chair
With this it will be convenient to discuss the following:
Clauses 55 to 59 stand part.
Clause 128 stand part.
New clause 3—Corporation tax treatment of the oil and gas industry—
‘The Chancellor of the Exchequer shall, within six months of the passing of this Act, commission a comprehensive review of the corporation tax rates and investment allowances applicable to companies producing oil and gas in the UK or on the UK continental shelf, and publish the report of the review.’
New clause 6—Oil and gas: decommissioning contracts—
‘(1) The Chancellor of the Exchequer shall commission a review of the ways in which the tax regime could be changed to increase the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure.
(2) In undertaking the review, the Chancellor shall consult the Department for Business, Innovation and Skills, the Oil and Gas Authority; Scottish Ministers; and any other stakeholders that the Chancellor thinks appropriate.
(3) The Chancellor shall report to Parliament on the results of his review within six months of the passing of this Act.’
The Exchequer Secretary to the Treasury (Damian Hinds)
It is a pleasure to serve under your chairmanship once again, Mr Howarth. These measures bring into statute a £1 billion package of fiscal reforms for the UK’s oil and gas sector. These changes will deliver the next stage of the Government’s reform plan for the oil and gas fiscal regime, and they will give much-needed support to an industry facing exceptionally challenging conditions. They will provide the right conditions in which to maximise the economic recovery of the UK’s oil and gas resources by lowering sector-specific tax rates, updating the current system of allowances and expanding the types of activity that can generate financial relief. The Government are making these changes to protect jobs, encourage investment in new projects and infrastructure, and safeguard the future of one of our most vital national assets.
I will provide hon. Members with some background to the changes. Almost 200 companies are currently in production in the UK oil and gas industry. They support 30,000 jobs directly and 250,000 in the wider supply chain. As hon. Members know, since 2014 the industry has experienced highly challenging conditions. Oil prices have fallen to less than half their 2014 value, putting thousands of jobs at risk. In the 2014 autumn statement, the Government set out our plan to reform the oil and gas fiscal regime in the publication “Driving investment”. That document recognised the need to reduce the future oil and gas tax burden in order to maximise economic recovery and keep the UK basin attractive to investors as it further matures. We delivered on that plan by reducing the rate of the supplementary charge and the petroleum revenue tax in 2015. As announced in the March 2016 Budget, we will lower both those rates further.
Between 2013 and 2015 the Government introduced the investment, onshore and cluster area allowances, which replaced the old suite of field allowances with a simplified and expanded relief system to generate greater investor certainty in the sector. The Government intend to include tariff income—income from third-party access to oil and gas infrastructure—in the scope of the investment and cluster area allowances. We will introduce secondary legislation later this year to facilitate that. Clauses 55 to 59 update the investment, onshore and cluster area allowances to align them with that piece of future legislation and ensure that the allowances are not generated twice.
The changes made by clause 54 will halve the rate of the supplementary charge from 20% to 10%. That will make the sector more attractive to future investors, thereby providing much-needed support for jobs and supply chain opportunities across the industry. As I said, clauses 55, 57 and 58 update the disqualifying conditions of the investment, onshore and cluster area allowances to prevent allowances being generated twice and to limit opportunities for avoidance. Clause 55 amends the investment allowance to update the conditions that disqualify expenditure incurred before a field is determined. This will protect the Exchequer and ensure the legislation works as intended.
Similarly, clause 57 updates the onshore allowance to introduce certain disqualifying conditions. This will provide parity with the other allowances available to the sector. Clauses 55 and 58 insert leasing into the disqualifying conditions for the investment and cluster area allowances. Together these three clauses will align the investment, cluster area and onshore allowances with future legislation while ensuring the allowance is not open to avoidance opportunities.
Clauses 56 and 59 amend the investment and cluster area allowances and introduce a power to expand the meaning of “relevant income”. The Government intend to enable tariff income to activate the investment in cluster area allowances and incentivise owners to maintain investment in the sector’s infrastructure, including key pipelines. These measures will encourage further investment in exploration and appraisal projects, which are the lifeblood of the industry.
Finally, clause 128 changes the petroleum revenue tax by reducing its rate from 35% to zero. Our commitment is effectively to abolish this tax by zero-rating it on a permanent basis. This change will simplify the tax regime for investors and level the playing field between investment opportunities in older oil fields and infrastructure and new developments across the North sea. Furthermore, clause 128 will update the Oil Taxation Act 1975 to reflect the new zero-rated nature of the petroleum revenue tax and amend the cap on interest carried on its repayments. The clause will work in tandem with clauses 54 to 59 to deliver the next stage of fiscal reforms to support the oil and gas sector.
New clause 3, tabled by the hon. Member for Kirkcaldy and Cowdenbeath, calls for the Government to review the taxes and allowances that apply to oil and gas-producing companies in the UK within six months of the Bill receiving Royal Assent. However, a further review into oil and gas taxes is not required because the Government already carried out a broad review of the fiscal regime in 2014. The outcome of that review, as I mentioned, was the publication “Driving investment”, which sets out our long-term plan to ensure that the fiscal regime continues to support the objective of maximising economic recovery while ensuring a fair return on those resources for the nation.
The principles in “Driving investment” recognise the need for the oil and gas tax burden to fall as the basin matures, and the need to factor wider commercial opportunities when making judgments about future fiscal policy. The March 2015 Budget delivered on many of the reforms set out in that plan by reducing the rate of both the supplementary charge and the petroleum revenue tax. The package announced in the March 2016 Budget delivers the next stage of our plan for reform.
The Government understand now, as we did in 2014, that certainty and stability are crucial to providing the right conditions for companies to continue investing in this vital industry. Another review could create further uncertainty for the industry and delay investment, particularly in the current environment. Therefore, given the volume and range of work that has been done in this area recently, an additional review is unnecessary, so I urge the hon. Gentleman not to press his new clause or, failing that, I urge Members to reject it.
New clause 6, which was also tabled by the hon. Member for Kirkcaldy and Cowdenbeath, calls for a review into how the tax regime could increase the competitiveness of UK-registered companies in bidding for supply chain contracts associated with decommissioning. Decommissioning in the UK continental shelf brings significant opportunities for UK business and we want to maximise those. The Government fully support the vision of Sir Ian Wood to establish the north-east of Scotland as
“a global centre of knowledge and excellence in offshore mature basin technology and decommissioning”.
That is why the Government support the creation of an oil and gas technology centre in Aberdeen as part of the Aberdeen city deal. It is also why the Oil and Gas Authority will soon be publishing a decommissioning plan for the continental shelf. This will be focused on enabling the £15 billion service sector in Aberdeen to become the centre of a new global market for decommissioning and will help UK firms to capitalise on the huge opportunities that will become available. It is of course important that we have a tax regime that supports that ambition, and the package being delivered in the Bill will ensure that the UK has one of the most competitive tax regimes in the world for oil and gas. In addition, the Government have cut the rate of corporation tax to 20%—the lowest in the G20—and we are committed to going further.
With a competitive tax system in place and the OGA’s focus on realising the opportunities of decommissioning, I firmly believe that UK businesses are in a strong position to benefit. Certainty and stability are vital, and I do not believe that these would be supported by a further review. I therefore urge the hon. Gentleman not to press new clause 6.
The changes brought about by these clauses will deliver the £1 billion package of fiscal reforms announced in the March 2016 Budget by cutting tax rates, encouraging investment in infrastructure and updating the oil and gas allowances. These measures will send a strong signal to the global investment community that the UK’s oil and gas sector is open for business and ready for investment.
Damian Hinds
It is a pleasure to respond to the pertinent questions put by the Opposition and SNP Front Benchers. They both asked about exploration, which is the lifeblood of the industry’s future. We had a choice: introduce a complex system of reliefs and incentives relating to exploration, or have a simple, straightforward tax cut across the board. We chose the latter. Reducing the tax payable on the economic activity lowers the hurdle point for investments, improves the net present value of projects, and means that more will take place. It is cutting the headline rates of tax, rather than anything else, that provides a clear incentive to invest in the continental shelf. The Government have also twice provided £20 million for seismic surveying to help kick-start those processes.
Allowances came up a number of times. Over the past few years, the Government have been simplifying that system. Allowances mean that projects that are economic, but not commercial at the higher rates of tax, can go ahead. That is good for the Exchequer, as it brings in more income, and good for the companies concerned. The hon. Member for Salford and Eccles, who speaks for the Opposition, asked when the Government would finalise the secondary legislation expanding the definition of qualifying expenditure for the investment cluster area allowances. Draft legislation was published at the end of last year and the technical consultation ended in January. HMRC has been analysing the responses to that and liaising with the Treasury and the OGA to ensure that the legislation works as intended. We plan to lay the new regulation before the House after the summer recess. It will apply to all qualifying expenditure incurred after 8 October 2015.
The hon. Lady also asked about the power to extend the definition of relevant income and the timing. The Treasury will consult with industry shortly, and will ask it to provide information and evidence to inform the design of the inclusion of tariff income in the investment cluster area allowances. It is a complex area, with a range of commercial arrangements that we need to understand if we are to ensure that infrastructure owners and users can benefit from the allowances. The power has been drafted in such a way as to ensure that the inclusion of tariff income can have a retrospective effect. That measure will not delay the introduction of the extension to qualifying expenditure.
The hon. Member for Coatbridge, Chryston and Bellshill rightly asked about the crucial opportunity area of decommissioning. Decommissioning across the shelf is expected to become a multibillion-pound industry, and there are significant export opportunities as other basins around the world become more mature. Decommissioning costs here could be more than £40 billion. As I said earlier, the Government support Sir Ian Wood’s vision of establishing north-east Scotland as a real centre of excellence. That is why we support the creation of an oil and gas technology centre in Aberdeen as part of its city deal. As the hon. Gentleman will know, the OGA will soon publish its United Kingdom continental shelf decommissioning plan.
The hon. Gentleman and the hon. Member for Salford and Eccles asked about late-life assets and asset transfers. We are in constant discussion with the OGA and industry to understand what impediments there may be to value-creating deals going ahead, and we retain an absolutely open mind on that. The hon. Gentleman also asked about Government guarantees. Again, that is something on which the Government have an open mind, in recognition of the importance of the sector. The Government are willing to consider proposals for using the UK guarantee scheme for infrastructure where that could help to secure new investment in assets of strategic importance to maximise economic recovery. Any proposals would need to meet the scheme’s criteria, including those relating to commerciality and financial credibility.
The Government have recognised the exceptionally challenging conditions that the industry faces, and in response announced a £1 billion package of fiscal reforms in the March 2016 Budget, which built on the extensive package from the previous year. The package includes halving the rate of the supplementary charge, permanently zero-rating the petroleum revenue tax, and extending the scope of key allowances to incorporate leasing and to encourage investment across the North sea. The Government have also committed £20 million of funding to a second round of seismic surveys to encourage development in under-explored areas.
Despite the extremely challenging conditions, this remains a sector of opportunity for Scotland and the UK; it is estimated that somewhere between 11 billion and 21 billion barrels of oil and oil equivalents are still to be had. More than £11 billion was invested in the sector last year. I am constantly encouraged by the positive attitude of the industry, and all the work that it is doing to get its cost base down and continue to look for new opportunities. I assure you, Mr Howarth, and all hon. Members, of the Government’s absolute commitment to the very positive tripartite approach between the industry, the Oil and Gas Authority, which is really more than a regulator, and the Government, who include the Scotland Office, the Department of Energy and Climate Change and the Treasury.
Christian Matheson (City of Chester) (Lab)
There is no doubt that the UK offshore oil and gas sector has a world lead, provides huge revenue and technical expertise to the UK, and needs to be protected, but my hon. Friend the Member for Salford and Eccles raised the spectre of onshore fracking. Can the Minister give reassurance that our efforts to support the offshore oil and gas industry will not be used as a back-door way of giving tax breaks to onshore fracking?
Damian Hinds
Mr Howarth, you would not want me to stray on to topics that are not strictly in the scope of the Finance Bill. The Government believe that there is significant potential for unconventional oil and gas—for fracking—and I think that we owe it to future generations, to ourselves and to British industry to make sure that we discover what opportunities are there. Exactly how the regime develops, in fiscal terms, is to be determined, but we know that there will be an absolutely robust safety regime. In the initial phase, the important thing is to find out on how big a scale that opportunity may be.
I had reached the conclusion of my remarks, having reiterated the very firm commitment across Government to supporting this industry. This is a bold package of support in the Budget. We know of no other country in the world that has responded on quite such a scale to the extremely challenging conditions presented by the world oil price. I commend the clause to the Committee.
Question put and agreed to.
Clause 54 accordingly ordered to stand part of the Bill.
Clauses 55 to 59 ordered to stand part of the Bill.
The Chair
I remind the Committee that I will put the question on clause 128—and new clauses 3 and 6, if required—without further debate when we reach them.
Clause 60
Profits from the exploitation of patents etc
Finance Bill
Damian Hinds Excerpts(8 years, 7 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Temporary Chair (Sir Roger Gale)
With this it will be convenient to discuss clauses 133 and 134 stand part.
Amendment 183.
Clauses 135 and 136 stand part.
The Exchequer Secretary to the Treasury (Damian Hinds)
Clauses 132 to 136 set out changes to the climate change levy, or CCL, which is a tax levied on the supply of energy to businesses and the public sector. It was introduced in 2001 to incentivise industrial and commercial energy efficiency. The Finance Act 2015 removed the climate change levy exemption for renewable electricity generated on or after 1 August 2015. A consultation was then held to seek views from industry on the appropriate length of time for the transitional period.
Clause 132 sets the length of the transitional period during which electricity suppliers can continue to exempt from the climate change levy renewably sourced energy generated before 1 August 2015. The clause provides for an end date for the transitional period of 31 March 2018. Setting a transitional period will minimise the administrative impact on electricity suppliers by giving them time to retain the benefit of renewably sourced electricity acquired before the date of the change.
Following a review of the business energy tax landscape and consultation with industry, it was announced at Budget 2016 that the Government would abolish the complex and unduly burdensome carbon reduction commitment energy efficiency scheme and move to a single tax—the existing climate chance levy—from 2019. Moving to one tax will provide a clearer price signal for business energy use, incentivising energy efficiency while reducing administrative burdens.
Clauses 133 and 134 set the main rates of the CCL from 1 April 2017 and 1 April 2018 to increase by the retail prices index. Legislating for those increases now provides certainty for businesses before the wider business energy market reforms take place.
Clause 135 will increase the climate change levy rates above RPI from 1 April 2019, to recover the revenue that will be lost from abolishing the CRC. Increasing climate change levy rates will strengthen the incentive for businesses with the greatest potential to save energy. At the same time, rebalancing the rates for different taxable commodities from 1 April 2019 will update an outdated ratio and more closely reflect the carbon content of the energy used. That will help to deliver on our commitment to achieve greater carbon savings.
Clause 136 will increase the levy discount for energy intensive sectors with climate change agreements. That will ensure that businesses in those sectors will pay no more in the climate change levy than the expected RPI increase in April 2019, thereby enabling them to maintain their international competitiveness. Those reforms will take place in 2019, providing a three-year lead-in time for businesses to adjust to the new business energy tax landscape.
Several hon. Members have in the past voiced concern over the impact of the clause to remove the climate change levy exemption from renewably sourced electricity, so allow me, if you will, Sir Roger, to repeat the reasoning for the removal of that exemption. There is no doubt that the exemption was increasingly providing poor value for money for British taxpayers. Without action, the exemption would have cost almost £4 billion over the course of this Parliament, providing only indirect support to renewable generators.
Other Government support for UK low-carbon generators demonstrates this Government’s commitment to renewable energy. Since 2010, nearly £52 billion has been invested in renewables, and that has led to a trebling of the UK’s renewable electricity capacity. There was another record year in 2015, with £13 billion invested in renewable electricity. Removing the exemption will provide better value for money for UK taxpayers, contribute to fiscal consolidation and maintain the climate change levy price signal necessary to incentivise business energy efficiency.
The Government’s consultation with industry showed that the current business energy tax landscape was too burdensome and complex. Clauses 132 to 136 demonstrate the Government’s commitment to simplify and improve the effectiveness of business energy taxes in order to meet our environmental targets.
Amendment 183 stands in the name of the hon. Member for Salford and Eccles (Rebecca Long Bailey) on behalf of the Opposition. If I may pause for a moment, I want to take this opportunity to congratulate her on her elevation today. It is an extremely well-deserved promotion and we wish her all the best in her new role. On this occasion, however, I am afraid that her amendment has slightly less merit. It would require the Chancellor to publish a report detailing the impact of the climate change levy in reducing carbon emissions within 12 months from the passing of the Finance Bill, but such a review is unnecessary.
Following a hearing on the 2015 summer Budget, the Chancellor wrote to the Treasury Committee on the impact of the removal of the CCL exemption. He made it clear that the exemption would not directly affect our commitment to reduce carbon emissions. In addition, the Department of Energy and Climate Change already intends to publish a consultation on a simplified energy and carbon reporting framework later this year. That will be accompanied by an impact assessment, which will examine the removal of the carbon reduction commitment and propose adjustments to reporting requirements.
The impact of ending the exemption from the climate change levy for renewable electricity has been discussed at length over the course of debates. It has been confirmed to Parliament in writing by the Chancellor that removal of the exemption will not impact on the UK’s ability to meet its carbon budget targets. I therefore urge the hon. Lady to withdraw the amendment, but should she be minded not to do so, I urge the Committee to reject it.
Rebecca Long Bailey (Salford and Eccles) (Lab)
I thank the Minister for his kind comments and for being a fantastic duelling partner in these debates. He has been nothing less than respectful and I have enjoyed debating with him.
I rise to speak to clauses 132 to 136, which make various changes to the climate change levy, and to amendment 183, which stands in my name and those of my hon. Friends the Members for Hayes and Harlington (John McDonnell), for Feltham and Heston (Seema Malhotra), for Wolverhampton South West (Rob Marris) and for Leeds East (Richard Burgon).
Clause 132 relates to the removal of the exemption for electricity from renewable sources. Since the climate change levy’s inception in 2001, electricity from renewable sources has been exempt when supplied under a renewable source contract agreed between an energy supplier and its customer. In Budget 2015, the Chancellor announced that that exemption for renewable electricity would be removed from 1 August 2015 and that there would be a
“transitional period for suppliers...to claim the CCL exemption on any renewable electricity that was generated before that date.”
Following an informal consultation, which received 18 responses, the Government announced that the transitional period would end on 31 March 2018, legislated for in this Finance Bill.
The House will be aware that we, along with several Government Members, opposed the removal of that exemption in the Finance Act 2015, and we maintain that position. We will therefore abstain on the clause, but I would like the Minister to address one particular point. In answer to written questions, the Government have refused to publish a summary of responses to the informal consultation, as they contained “commercially sensitive information”, and they refuse to publish an average of suggested timescales. Will the Minister give us an assurance that the length of the transitional period was, in fact, in line with the recommendations of the respondents?
Clauses 133 and 134 will increase the main rates of the climate change levy in line with inflation in April 2017 and again in April 2018. It has been standard practice to increase the rates in line with inflation in each year’s Finance Bill since 2007 and, as the explanatory notes set out, wider changes to the CCL from 2019 are being legislated for in this Bill, so it makes sense to make provision for the next two years at the same time.
Those wider changes are the subject of clause 135, which significantly increases the main rates of the climate change levy to recover Exchequer revenue lost from the abolition of the carbon reduction commitment. In doing so, the ratio of electricity to gas is rebalanced somewhat to 2.5:1, and it is the Government’s intention to rebalance the ratio further to 1:1 by 2025, to reflect the fall in gas prices and the expected increase in consumption as a result.
The following clause increases the CCL discount available to energy intensive businesses subject to climate change agreements, to compensate equivalently for the increase to the main rates. The CCL discount for electricity will increase from 90% to 93%, and the discount for gas will increase from 65% to 78% from 1 April 2019. That provision mitigates a knock-on effect from clause 135.
Our amendment to clause 135 would require the Government to conduct a review of the impact of the climate change levy on carbon emissions. The review will have particular reference to the removal of the exemption for electricity generated from renewable sources, the abolition of the carbon reduction commitment and the reporting requirements for companies and public sector bodies.
Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)
I will focus on clauses 132 to 136, in part 9, and amendment 183, which pertain to the climate change levy. Both the hon. Member for Salford and Eccles (Rebecca Long Bailey) and my hon. Friend the Member for Aberdeen North (Kirsty Blackman) have spoken comprehensively on this subject, so I will keep my speech relatively short.
I have particular concerns about the removal of the exemption for electricity generated from renewable sources. I believe that this counterproductive decision will grossly undermine the development of the UK’s energy sector. The long-term future of our energy market is in renewables. The UK, and Scotland in particular, has extraordinary potential in the renewables sector
Scotland has 25% of the wind and tidal potential in all of Europe, and 10% of the wave potential in Europe. For a small country—in both landmass and population, although it none the less represents a third of the UK landmass—these figures represent enormous potential not just for leading the world in renewable energy production, but in creating tens of thousands of jobs and ushering in substantial economic growth.
However, this Conservative UK Government seem determined to tear down any progressive policies that are designed to encourage and incentivise the production of green energy. Just this year, the Government have begun the process of privatising the Green Investment Bank, as the hon. Lady said. In addition, this Government have cut subsidies for small-scale solar panels by 65%, which is a massively damaging blow to the industry that can save households a few pounds.
As the hon. Lady and my hon. Friend the Member for Aberdeen North did, I will mention the scrapping of support for onshore wind, the removal of the biomass renewables obligation subsidy level guarantee, the killing of the flagship green homes scheme and the cancellation of the carbon capture initiative, which I was heavily involved in. What about the future? What hope is there for the Swansea Bay tidal programme, given the track record of this Government?
The climate change levy was a positive step in the right direction. It was a policy designed to provide a disincentive for polluting technologies. It is perverse that the climate change levy has been applied to green, clean energies. That is not what it was intended for. This change will have a disproportionate impact on Scotland, which despite having under 10% of the UK population, as my hon. Friend said, produces a third of the UK’s renewable energy.
Despite the austerity implemented by this UK Government, Scotland has continued to drive forward in reducing its carbon footprint and increasing the use of green electricity. As my hon. Friend also said, earlier this month it was announced that we in Scotland had reached our target of making a 42% reduction in carbon emissions by 2020, which is six years earlier than expected. The SNP Scottish Government have now set a more ambitious target of a 50% reduction in carbon emissions by 2020. However, I fear that despite our progress, unfortunate choices by the Conservative UK Government —both their ill-advised and counterproductive austerity obsession and the mishandling of the EU referendum, leading to a vote for Brexit—will mean regression, rather than progress on climate change and the promotion of renewable energy.
For those reasons, I wholeheartedly support amendment 183, in the name of the hon. Member for Salford and Eccles.
Damian Hinds
The climate change levy makes a significant contribution to the Exchequer’s revenues. It had been on a declining path, but with the changes that have come in, its path has been stabilised. It had been providing increasingly poor value for money, partly because a third of its value was going to generators overseas: that generation does not contribute to UK targets, and quite often benefits from subsidies and other benefits at home.
There was also only indirect support for renewables. This is a really important point that goes to the heart of what the hon. Members for Aberdeen North (Kirsty Blackman) and for Coatbridge, Chryston and Bellshill (Philip Boswell) were saying. The renewables obligation and contracts for difference are much more effective at providing direct support, at a higher level than the £5.54 per hour, to bring on the generation that we need.
The success of the deployment of renewables in this country paradoxically has an adverse impact on the effectiveness of the CCL exemption, such that by the early 2020s it would not be effective in stimulating new capacity to come on stream. Its value to generators would be declining, because the supply of renewables and therefore of the levy exemption certificates would exceed in volume the total potential demand from eligible customers in business and the public sector.
Kirsty Blackman
If the Minister is saying that the exemption will not be effective after 2020, does he concede that it would therefore be effective to keep it in place now?
Damian Hinds
Sir Roger, he does not. As I was trying to say, this is not a cliff-edge thing. Its effectiveness has been declining over time and a lot of the value leaks overseas. Most important of all, there are other ways of directly stimulating new renewables provision. Without getting too far into the weeds and the details of what goes where, those other ways make sure that the benefit goes directly to the generators rather than being split between different parts of the value chain. CfDs stabilise the price relative to some of the fluctuations of the wholesale market, which in turn increases investor confidence and can help drive investment.
The hon. Member for Salford and Eccles (Rebecca Long Bailey) asked about the transitional period, and her various parliamentary questions about the responses received to the informal consultation on that. Suppliers were invited to respond; of those that did, only one requested a transitional period in excess of three years. All others were content with an end date of 31 March 2018. Most said that they would have used their levy exemption certificates within a year. We have not published the results of that consultation because, as she rightly said, it included commercially sensitive information. The size of the sample and the number of responses mean that it does not make sense to speak in terms of the average period that was called for.
I turn to the abolition of the carbon reduction commitment and changes to the climate change levy main rates. Those are major simplifying moves. We had extensive consultations—both written consultations and meetings, a number of which I sat in on—and businesses said loud and clear that they wanted to simplify how it all worked. They valued the discussions that had taken place and the elevation of the role and salience of energy efficiency within their companies. But the CCL as a single tax will be a straightforward price signal. We will also be removing some of the additional administrative burden.
The Government will also consult on a simplified reporting framework this year, to encourage large businesses to identify energy efficiency savings. In addition to the tax changes, that will further enhance the UK’s ability to reduce its carbon emissions. The Department of Energy and Climate Change intends to publish an impact assessment of the changes later this year, alongside its consultation on a simplified reporting framework. That will include analysis of the impact on carbon emissions. Rebalancing CCL rates towards gas will better incentivise emissions reductions from that fossil fuel, as well.
I will finish by restating, lest there be any doubt, the very firm commitment and strong track record of this Government on reducing emissions. Since 2010 we have reduced the UK’s greenhouse gases by 14% and outperformed our closest European counterparts with the largest cuts in greenhouse gas emissions since 1990. As the hon. Member for Aberdeen North mentioned, we secured the first truly global, legally binding agreement, the Paris agreement, COP21, with our Secretary of State playing a key role. Annual support for renewables will more than double, to more than £10 billion in 2020-21. We are the first major developed economy in the world to commit to phasing out unabated coal, the dirtiest fossil fuel, by 2025. We are the world’s leading player in offshore wind, with just over 5 GW installed, a figure that is forecast to double by the end of the Parliament.
There can be no doubt about the Government’s credentials when it comes to our commitment to reduce emissions. With these tax changes, we have reformed a tax that was proving less effective, over time, with regard to its original aim as stated in 2001, when of course the proportion of renewable electricity generation was so much lower—I believe it was 2.5% in those days. With the changes to business taxation we are keeping the price signal very firm—indeed, making it sharper—by reducing administrative burden. I encourage all hon. Members to support the clauses but not amendment 183.
Question put and agreed to.
Clause 132 ordered to stand part of the Bill.
Clauses 133 and 134 ordered to stand part of the Bill.
Clause 135
CCL: main rates from 1 April 2019
Amendment proposed: 183, page 189, line 13, at end add—
‘(3) The Chancellor of the Exchequer shall conduct a review of the impact of the Climate Change Levy in reducing carbon emissions within 12 months of the passing of this Act.
(4) The report shall have particular reference to—
(a) the removal of the exemption for electricity generated from renewable sources;
(b) the abolition of the Carbon Reduction Commitment; and
(c) reporting requirements by companies and public sector bodies for energy usage and carbon emissions.”—(Rebecca Long Bailey.)
Oral Answers to Questions
Damian Hinds Excerpts(8 years, 8 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Michael Tomlinson (Mid Dorset and North Poole) (Con)
9. What assessment he has made of recent trends in the level of employment.
The Exchequer Secretary to the Treasury (Damian Hinds)
We have the highest employment rate on record, a record number of women in work, and the lowest claimant count since 1974. That means millions more opportunities for our fellow citizens. We must not now put at risk the security that has been brought about by our long-term economic plan.
Chris Green
From April to June 2014 to April to June 2015, the employment of British workers in the UK increased by a welcome 84,000, but the figures are three times higher for EU nationals. With respect to the national living wage, what assessment has been made of anticipated job growth in the UK? Does my hon. Friend believe that that will benefit the UK or EU citizens most?
Damian Hinds
Almost two thirds of the increase in employment over the past five years is accounted for by UK nationals. Today, nine in every 10 people in a job in the UK are UK nationals. As my right hon. Friend the Chancellor has said, Britain deserves a pay rise and the national living wage delivers it.
Michael Tomlinson
I am sure the Minister and the whole House welcome the latest unemployment figure in my constituency—it stands at only 361, or less than 1%—but what more can be done to ensure that that trend continues, given that we are down to the last few and the most difficult cases, especially bearing in mind the over-50s and those in the 18 to 24-year-old bracket?
Damian Hinds
I welcome that news from Mid Dorset and North Poole, and by further increasing support for the hardest to help we share my hon. Friend’s keenness to ensure that no one is left behind. We have announced the new youth obligation and made it more cost-effective for employers to hire young people and apprentices. We are also helping older jobseekers to retrain through pilot schemes that began in April 2015.
Helen Goodman (Bishop Auckland) (Lab)
This morning, the head of Hitachi warned that a Brexit vote means that jobs will be lost. What is the Treasury’s estimate of the number of jobs that will be at risk if we leave the European Union?
Damian Hinds
Our projection is that, following the immediate economic shock that would follow from Brexit, 500,000 jobs would be lost and there would be an increase in unemployment. Part of that is from the initial impact on foreign direct investment, but that effect continues thereafter.
Stephen Timms (East Ham) (Lab)
It is a concern not just of Hitachi but of any non-European company that has its European headquarters in the UK. The UK is much the most attractive location for them currently, and they would be in great difficulty if we left the European Union. Has the Department made an assessment of what that group of employers contributes and will contribute in future to UK employment, which would be at risk if we left the EU?
Damian Hinds
We have modelled the effect on foreign direct investment. One does not have to believe that people currently in the UK would leave. All one has to consider in relation to the detrimental impact on the UK is what will happen to foreign direct investment in the future. There are many good reasons to invest in Britain, but we know that 72% of firms that invest in this country say that our membership of the European Union is a key factor.
Andrew Percy (Brigg and Goole) (Con)
Alongside genocide and war, we hear all about the threat to jobs of leaving the European Union. Will my hon. Friend tell me what will be done if we vote to stay in and continue to have unlimited immigration from 27 foreign countries? What will be done to protect my constituents, low-paid workers who have seen their wages flatline because of unlimited immigration?
Damian Hinds
We have already taken steps to ensure that people cannot just come here and claim benefits from day one. The renegotiation the Prime Minister secured addressed the unnatural draw of our in-work benefits system. I should also say that one should not assume that the effect on immigration would be quite as great as is sometimes supposed, particularly when we look at the other models of agreements with the European Union, a number of which include free movement.
Ms Margaret Ritchie (South Down) (SDLP)
Does the Minister agree that a vote to leave the European Union on 23 June could have a negative effect on employment trends, particularly in Northern Ireland where 50,000 jobs are related to exports to the EU? The Chancellor saw the effect of that directly yesterday in Warrenpoint in my constituency.
Damian Hinds
I know that my right hon. Friend was in the hon. Lady’s constituency yesterday. Northern Ireland is of course in a particularly sensitive position because of the land border with the Republic of Ireland, which would be a land border with the EU if we left. There are more people in work in Northern Ireland than ever before and we need to protect that.
Robert Jenrick (Newark) (Con)
5. What fiscal steps he is taking to support business.
Mr Jim Cunningham (Coventry South) (Lab)
12. What assessment he has made of the potential effect of the UK leaving the EU on the economy of (a) Coventry and (b) the west midlands.
The Exchequer Secretary to the Treasury (Damian Hinds)
The projected rise in unemployment of 500,000 that I mentioned just now includes 24,000 people in Wales and 44,000 people in the west midlands. In the long term, the Treasury’s central estimate is that GDP would be lower by around £4,300 per household by 2030 than it would be otherwise.
Mr Hanson
The head of the World Trade Organisation said yesterday that the process of negotiating deals outside Europe would take decades. Is that not one of the reasons why confidence would be hit, currency would fall and jobs would be lost, including the 24,000 in Wales that the Minister has mentioned, and why companies such as Hitachi have mentioned today that they would pull out of the United Kingdom? Do we not agree on this one, Minister?
Damian Hinds
I think we do agree on the turmoil that uncertainty can bring, and the uncertainty about future trade deals that the right hon. Gentleman raises is part of that. There is much more uncertainty as well, of course, for businesses that currently trade with other European countries and people who are employed in those countries or might be thinking of going to them. All these things generate uncertainty, which creates economic turmoil in the short run. There is a real danger of missing out on a very large number of third-party trades in the long run, when all the EU trade deals currently under negotiation are finished, which will account for some 80% of our trade.
Mr Cunningham
Can the Minister say what the economic benefits are of us being in the European Union, particularly in places such as Coventry and the west midlands, and more importantly what the impact on manufacturing is?
Damian Hinds
The automotive sector in the hon. Gentleman’s constituency and elsewhere is particularly important. It is a high value-added sector that has been a great British success story in recent years and it has complex cross-border supply chains, so it is unsurprising that those speaking out in favour of remain include the chief executives of Jaguar Land Rover and Rolls-Royce and the chairman of the Coventry and Warwickshire local enterprise partnership.
Mr David Nuttall (Bury North) (Con)
Considering that the UK has been a member of the EU for over 40 years and we still do not even have a trade deal with the United States of America, the largest economy in the world, does my hon. Friend not agree that our economy would benefit from the United Kingdom being able to negotiate our own free trade deals?
Damian Hinds
The businesses that I speak to say overwhelmingly that they feel they would get a better deal with the increased economic clout—five times the economic weight—that comes from being a member of the EU as opposed to Britain being on its own. All these trade deals take a long time, but when all the current EU negotiations are completed, the EU will have more trade deals with the rest of the world—so we will, too—than the United States and Canada combined.
Mr Philip Hollobone (Kettering) (Con)
The living wage is a very attractive economic policy, especially in eastern Europe. Given the extensive financial modelling that my hon. Friend has conducted, can he tell the House his official estimate of the number of unskilled migrants coming to this country from eastern Europe in the first five years after a vote to remain?
Damian Hinds
The national living wage makes sure that British workers who are low paid cannot be undercut by people coming from other countries. It will be of great benefit to our economy. It is also the case that as our legal minimum pay increases, we will still be within the middle range internationally.
Sammy Wilson (East Antrim) (DUP)
Yesterday the Chancellor told the people of Northern Ireland that house prices would fall by 18% if we voted to leave the EU, even though the day before he said that housing costs would go up by 9%. He told us that 14,000 jobs would be lost in export industries, even though the exchange rate, which would help exports, was set to plummet, and made an uncanny prediction about incomes in 14 years’ time. Does the Minister not realise that the Chancellor is expending his own credibility and that of the Government, given the panic that has now set in, by trying to sell the threadbare economic case for remaining in the EU?
Damian Hinds
Saying that house prices would come down but housing costs would go up is not inconsistent at all, as the cost of borrowing would go up. Northern Ireland is a special case when it comes to the housing market, but in many parts of the country people might say that while it would be a good thing for house prices to come down, that should not be a result of crashing the economy and making it more difficult for people to borrow.
As for the long-term forecast, it is, of course, difficult to predict what will happen 15 years hence. What the Treasury analysis seeks to do is say, other things being equal, what will happen to the 15-year forecast whether we are in or out of the European Union, and the answer is clear: in the central scenario, GDP will be hit to the tune of £4,300 per household.
Neil Carmichael (Stroud) (Con)
Does the Minister agree that, given that so many international firms—including, most recently, Hitachi—have made it very, very clear that being in the European Union and in a single market means that this is a good country in which to invest, the obvious thing to do for the purposes of investment and jobs is remain in the European Union?
Damian Hinds
I do agree with that. The United Kingdom has the third highest stock of foreign direct investment in the world, coming behind only the United States and China. We are the biggest recipient of foreign direct investment in the European Union, and also from the EU. The experience of accession countries shows that the move into the European Union really does make a difference, and that it is not just about tariffs, but about membership of a customs union. Some, indeed most, of the alternative models do not include that, but it is very important in relation to, for example, the cross-border supply chains about which the right hon. Member for Delyn (Mr Hanson) asked earlier.
Geraint Davies (Swansea West) (Lab/Co-op)
Only two countries, Germany and the Netherlands, run a surplus with Britain; the rest run a deficit. Does the Minister agree that in the event of a Brexit, those other countries would vote for tariffs—as, indeed, would Germany, in order to stop Japanese car imports? Has he created a model to assess what impact those tariffs would have on employment levels in the short and medium terms, and on inward investment? I suggest that the impact would be disastrous.
Damian Hinds
Different countries will have different interests, and no doubt they would come to the surface during the two years of the article 50 negotiations. A very large majority of other countries using enhanced qualified majority voting would be needed to agree a deal. Fundamentally, however, I do not think that this is about the deficit that one country has with the EU, or vice versa; I think that it is about the relative size of the export market to that country. While 44% of our exports go to the EU, the EU figure is 8% in the other direction, which means that in any negotiation, the other side will have the better hand.
Philip Davies (Shipley) (Con)
Can the Minister explain why we are paying more than £10 billion net this year for a £68 billion trade deficit with a declining part of the world’s economy, when anyone with even an ounce of common sense knows that it is possible to have a £68 billion trade deficit with a declining part of the world’s economy for nothing?
Damian Hinds
I think that I detected a revised figure in my hon. Friend’s assessment of our net contribution to the European Union. The fact is that for every pound that is paid in tax in this country, a little over a penny goes to the European Union. That is a cost—it is not a trivial cost, and I do not belittle it—but what comes with it are the trade benefits, the enhancement of our economy and the protection of jobs and investment that we want to see.
Alan Brown (Kilmarnock and Loudoun) (SNP)
7. What steps he is taking to increase exports.
Barbara Keeley (Worsley and Eccles South) (Lab)
11. What steps he is taking to ensure that disabled people are not disproportionately affected by reductions in government expenditure.
The Exchequer Secretary to the Treasury (Damian Hinds)
The Government have protected the value of disability benefits, exempting such payments from the uprating freeze and exempting those in receipt of them from the benefit cap. Disability spending will be higher in every year to 2020, relative to both 2010 and today.
Barbara Keeley
That may the case, but a 40% reduction in core Government funding to local authorities has led to cuts that affect services. Local authorities are required to provide short breaks for children with disabilities, but 58% of local authorities have cut their short break funding by 15% or more. It is Carers Week. What will Treasury Ministers do to reverse the trend and ensure that there is money for local authorities to fund those important short breaks?
Damian Hinds
We have provided funding for respite breaks. The hon. Lady is right to identify this as an important thing for carers in this, Carers Week. There are 200,000 more people now receiving carer’s allowance in this country. The Care Act 2014 extends rights to assessments, and the Government are launching the new carer strategy in recognition of how important a role this is for millions of people throughout the country.
Mr David Burrowes (Enfield, Southgate) (Con)
Recognising the risks of homelessness for disabled people, may I welcome the financial commitment in the Budget to prevent homelessness? But does the Minister recognise the risks of a local housing allowance cap on supported housing?
Damian Hinds
I, in turn, acknowledge my hon. Friend’s welcome for the additional money for tackling homelessness that was in the Budget—and, indeed, that has been provided previously. On the LHA cap, we now have a joint evidence review being conducted by the Department for Communities and Local Government and the Department for Work and Pensions, and the one-year exception, to make sure that we get this right, so that we can have a long-term, sustainable funding solution for this sector.
Diana Johnson (Kingston upon Hull North) (Lab)
13. In what circumstances the use of his Department’s Contingencies Fund is authorised.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
The Government have made significant public spending cuts affecting disabled people, including nearly £30 billion of cuts in social security to 3.7 million disabled people. Given that disabled people are twice as likely as the general population to be living in poverty, how many more disabled people will be living in poverty by 2020?
The Exchequer Secretary to the Treasury (Damian Hinds)
In fact, spending on disability benefits is going up, not down. There are many more personal independence payments claimants getting the highest rate than there were under disability living allowance; 200,000 more people are getting carers allowance; 22,000 more people are getting help through Motability, and we have a firm commitment to work towards halving the disability employment gap, which is so important for driving up incomes. The gap has remained stubbornly wide, but the most recent quarter showed a small decrease.
David Morris (Morecambe and Lunesdale) (Con)
In 1945 there was a dream of a link road from what is now the M6 to Heysham port, through which 10% of our GDP comes in. That link road will soon be opening. Does my right hon. Friend the Chancellor agree that part of the long-term economic plan is to show that this area of Lancashire will be regenerated? More to the point, would he, diary permitting, like to open the road?
Oral Answers to Questions
Damian Hinds Excerpts(8 years, 9 months ago)
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Caroline Lucas (Brighton, Pavilion) (Green)
The Exchequer Secretary to the Treasury (Damian Hinds)
We are continuing our support for solar, keeping the small-scale feed-in tariff scheme open beyond January 2016, setting tariffs on a path to help transition the industry to a sustainable, subsidy-free future.
Caroline Lucas
I thank the Exchequer Secretary for that very short answer. Given that the EU’s VAT reform action plan will give Governments discretion in applying rates of VAT, including on solar power, will he confirm categorically to solar installers in my constituency that the UK has officially and permanently dropped the proposal to hike solar VAT to 20%?
Damian Hinds
The reduced rate of VAT remains in place on all 11 of the categories of energy saving materials. Following the decision by the European Court, we have consulted interested parties on the issue and, given the complexities involved, we are still considering the responses.
Sir Oliver Heald (North East Hertfordshire) (Con)
Does my hon. Friend agree that about 90% or more of the solar-powered energy available in Britain has been put in place under this Government? Does he also agree that, in order for intermittent renewable power to provide a steady baseload, the investment with which the Government are supporting battery technology is absolutely key?
Damian Hinds
My hon. and learned Friend is, of course, right on multiple counts. Solar has been a great British success story: more than 99% of the installed solar PV capacity has happened since May 2010. He is also correct to say that the development of battery technology here and elsewhere is incredibly important for the future.
Mary Creagh (Wakefield) (Lab)
I am sure that the Exchequer Secretary will welcome the report published today by the Environmental Audit Committee, which finds that membership of the European Union has been overwhelmingly positive for the UK’s environment. Our Committee is also conducting an inquiry into the Treasury’s approach to sustainability and the environment. Will he encourage his colleague the Chancellor to come before the Committee to discuss the Treasury’s approach to solar power, offshore wind, waste and recycling policy?
Damian Hinds
I look forward to reading the hon. Lady’s report. The Treasury takes a balanced approach to making sure that we stay on target to meet our commitments. We are on target to meet our commitment of 15% of renewable energy by 2020, but we must do so in a cost-effective way, recognising that the subsidies to early stage technologies can only be paid for by taxpayers.
Nigel Huddleston (Mid Worcestershire) (Con)
Will the Exchequer Secretary join me in congratulating the UK solar power industry on being one of the top 10 in the world? It is larger than that in Australia and slightly smaller than that in Spain, despite having a rather less advantageous climate.
Damian Hinds
Indeed. Were it only the case that the sun would always shine. Under Labour, we had the highest dependency on fossil fuels in the G8 and the lowest contribution from renewable energy of any major EU country. As I said earlier, the deployment of solar power has been a great success story since 2010.
Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)
One of the big things this Government could do to help solar and, indeed, all renewables is to remove the double charge on storage, whereby storage is charged when it takes on the power and charged again when it gets rid of the power and puts it back in the grid. Will the Treasury consider changing its approach and helping storage? It could do so with a stroke of a pen and it would make a huge difference. I urge the Treasury to stroke that pen and make sure that that change happens.
Damian Hinds
The tariffs are designed to make sure that there is a reasonable and appropriate return to investors. They have to be adjusted periodically when costs come down. Of course, one of the great parts of the success story of solar is the fact that costs have come down by about two thirds since 2010.
Rebecca Long Bailey (Salford and Eccles) (Lab)
According to the Solar Trade Association:
“Government will be spending just 1% of new expenditure under the Levy Control Framework supporting solar power…yet mainstream analysts expect solar power to dominate future energy supply.”
With that in mind, will the Chancellor promise to do much more to ensure that Britain becomes a market leader in the industry, or are we going to let China take the lead yet again?
Damian Hinds
Britain does have a leadership position in the industry, but we need a balance. We need a portfolio of energy sources and to recognise the importance of baseload power. That is why the development of new nuclear is also so important.
Maggie Throup (Erewash) (Con)
Judith Cummins (Bradford South) (Lab)
The Exchequer Secretary to the Treasury (Damian Hinds)
As we covered earlier, the tariff system in place to encourage renewable energy has to deliver a balanced portfolio of energy, and it does so. Of course, we encourage energy firms always to pass price cuts that they benefit from on to their customers.
Mr Alan Mak (Havant) (Con)
Lucy Frazer (South East Cambridgeshire) (Con)
I welcome the fairer funding consultation that has just closed. When taking into account figures for growth in pupil numbers, will the Minister consider the actual numbers for the new school year, rather than the previous one, to ensure that we have a truly fairer funding formula?
Damian Hinds
The national funding formula will address historical unfairness. As now, school budgets will be set on the basis of the pupil census in the October prior to the start of the funding year, giving schools the certainty they need. The Department’s consultation also proposes to include a new factor to recognise in-year growth, targeting funding to schools with significant increases in pupil numbers.
Tom Elliott (Fermanagh and South Tyrone) (UUP)
Nobody has ever accused me of a lack of stamina, Mr Speaker. Am I right and accurate in my assessment that LIBOR funds can be used only for charitable purposes and will not go to a Department?