David Davis
Main Page: David Davis (Conservative - Goole and Pocklington)
Mr David Davis (Haltemprice and Howden) (Con)
It is a pleasure to follow the hon. Member for Scunthorpe (Nic Dakin), who is a near neighbour of mine. He and I represent seats in the north of England that are not full of city slickers and billionaires avoiding taxes with expensive lawyers. I pay tribute to the APPG for the work it has done on this, representing constituents up and down the country who have suffered dreadfully under this arrangement.
US Supreme Court Judge Marshall once said,
“the power to tax involves the power to destroy”.
This, I am afraid, is a good example of that—a tax policy that is destroying families, homes, mental health and even lives.
Andrew Rosindell (Romford) (Con)
My right hon. Friend is making a pivotal point. This is a deeply un-Conservative action by a Conservative Government. Surely the mood of the House is clear: nobody wants to see this loan charge implemented. It is devastating people’s lives, and the Government need to act immediately.
Mr Davis
My hon. Friend makes a powerful point. I am not going to make a political point out of this, but I will make a policy point. When I was the Public Accounts Committee Chairman 20 years ago, it would not be true to say that the Inland Revenue behaved like a charity. It was always pretty tough, but in the last 20 years it seems to me that the exercise of its judgment has become more and more oriented to cash and less to justice. That is what we are addressing today. Part of the reason for that is that successive Chancellors have blurred the distinction between tax avoidance and tax evasion, one of which is illegal and one of which is a matter of judgment. That has put a huge burden on HMRC’s judgment, so that we see it effectively making the law through its judgment and in ways that are deleterious to our constituents.
Mr Sam Gyimah (East Surrey) (Con)
My right hon. Friend is making a very powerful case about how the tax system is developing and about the issue of justice. Does he agree with me that there are a number of people in this situation whose employers came up with schemes and they had no choice but to sign up to them? In some cases, they left the employment of these companies decades ago and are being pursued for funds, but the employers can actually wash their hands of the whole thing. It is not just for them to be pursued retrospectively, and it was not fair for them to have no choice but to sign up to schemes if they wanted to be employed by such a company.
Mr Davis
My hon. Friend is absolutely right, and I will come back to that point in a second.
This also rests on this point of judgment: how does an ordinary lay person forecast what HMRC will decide in 10 or 20 years’ time? We see this—unlike others, I am not going to butter up the Treasury Bench today—even in the responses of Ministers in previous debates and even in the letter we received from the Financial Secretary this morning. He talked about the reason for the definition of this scheme, and said it was for the
“sole purpose of avoiding tax”.
Well, I have news for the House: I have at least a couple of ISAs—individual savings accounts—which are there for the sole purpose of avoiding tax. Are they now illegal? Is that the criterion we should apply? Well, plainly not.
There is a real issue about the approach of HMRC, and I am going to be rather harder than the all-party group in my recommendations. I think it is being just a little bit too reasonable, and I will come back to that in a second. [Interruption.] I think a number of Conservative colleagues are threatening to sue me for calling the right hon. Member for Kingston and Surbiton (Sir Edward Davey) reasonable.
Before I come to my main point, I want to go back to the report on this subject carried out by the House of Lords Economic Affairs Committee. We all have very emotional cases impacting on our judgment, but we cannot say that about the House of Lords. The House of Lords looked at this incredibly dispassionately. Its Members do not have constituents, so they can in a way be viewed as much more dispassionate than us. Let me remind the House of a few of the Committee’s findings.
The Committee found that the Public Bill Committee for the Finance (No. 2) Bill in 2017
“did not adequately scrutinise the loan charge.”
That is incredibly important for something that will be retrospective, but it did not properly scrutinise the loan charge. I think it was spoken about only by the Minister and the Opposition spokesman, and by nobody else.
The Committee said that many witnesses told it that they had joined these schemes—this is the point made by my hon. Friend the Member for East Surrey (Mr Gyimah)—without being aware of HMRC’s attitude towards them. Many were assured by employers or promoters that these schemes were above board and, indeed, as he said, they could not have had the jobs if they had not accepted the terms.
George Eustice (Camborne and Redruth) (Con)
Will my right hon. Friend give way?
Mr Davis
No, I am afraid not.
That is why we find not city slickers, bankers or finance specialists, but nurses, doctors, locums and careworkers caught up in this. All those people will never have the resources to pay back this money. It does not matter whether it is over two, five, seven or 10 years, they will just never have it.
Many witnesses said they had declared the schemes to HMRC. This really is the criminal aspect of this: someone declares a scheme, and then 20 years later or 10 years later, HMRC comes back and says, “Sorry, we haven’t closed your year, and you can pay now”. They are being asked to pay not a small amount, but £20,000 or £30,000 in the case of some my constituents.
What the Committee found is very important because, again, where does the blame lie? I think part of the blame lies with HMRC, but part of the blame lies with the employers. Many people have said that that is where HMRC should focus its effort, but the House of Lords Committee found
“little evidence of action taken against those who promote disguised remuneration schemes.”
It went on to say that
“HMRC appears to be prioritising recovery of tax revenue over justice”.
That point is central to today.
The Committee noted that the people involved were unusual subjects of this sort of recovery, because of the nature of their employment and so on. It said that of course these disguised remuneration schemes are “unacceptable tax avoidance”, but it also said:
“The loan charge is, however, retrospective in its effect.”
This House was formed in order to challenge the King, in his day, on the justice of the taxes he was demanding, and to put their own concerns back to the King to get them corrected before we paid the taxes. We should not forget the fundamental reason for this House’s existence, which is to look after our constituents in the face of demands from the state.
The Committee made a recommendation that HMRC should in future make clear public statements when it is looking at avoidance schemes. Because of the fact that so much of the burden of the decision falls on HMRC, it should make it clear to the public at large and anybody in those schemes when it is investigating them.
Rushanara Ali (Bethnal Green and Bow) (Lab)
Will the right hon. Gentleman give way?
Mr Davis
No, I am afraid not. I have a couple of minutes left and I am going to come to an end in a second. That is the House of Lords’ view, and it was very critical. For a House of Lords report, it was an incredibly critical report.
Let me turn to the motion and the all-party group’s approach. As I say, it is incredibly reasonable: let us have a review—a judge-led review or whatever—and take some time to sort this out. I am afraid I think that that is altogether too reasonable in the light of the pressure that is being created by this policy. People who are under this policy now are suffering mental strain day in, day out. They are not people who are ever going to find £20,000, and to say to them that they have five years to pay if they are—as one of my constituents is—on a minimum pension, is meaningless. It just means his house or his car has to go, and his family is breaking up under the strain.
My view is very simple: this should not be retrospective at all before 2017—at all—because there is no reason for it whatsoever, given the behaviour of HMRC. If we do not get something like that—I say this to the Treasury, and they can add this into their accounting—I, and I suspect many others in this House, will start to pursue a right in law for every citizen that limits the extent to which the state, and particularly HMRC, can take any retroactive action whatsoever against persons, not companies such as the Vodafones, but against individuals, because it seems to me that we owe a duty to our constituents to have some certainty from the state in relation to the taxes they pay.
Several hon. Members rose—