Finance Bill

David Mowat Excerpts

Tuesday 28th June 2016 Commons Chamber

[Mr Gauke]

We are in quite a fast-moving area, and the progress that has been made in recent months has been considerable. Just at the beginning of this year, it looked unlikely that a deal would be possible, but now it looks as though the EU is heading in that direction. As I have said, the EU Commissioner has said that something is likely to happen by the end of this year. I must add the slight caveat that we will have a new Prime Minister by then, but it is certainly my view that if we have not made progress by this time next year on reaching a multilateral agreement, we will need to look carefully at the issue once again. I do not want to make a full commitment on this because—I am standing here desperately with the Dispatch Box as a source of support—I might no longer be in this position by then. I make that caveat, but I believe that there is every chance of an agreement. I would be disappointed if we did not make progress, but in the event of that happening—I hope it is unlikely—we would need to look at this again. I suspect that there is agreement between us here that it would be better for us to get a multilateral agreement than for us to go off alone.

[David Mowat (Warrington South) (Con)]

I think I have heard the Minister say that there will not be a multilateral agreement that includes the United States. So is it the Government’s position that we do not want to act unilaterally for the UK, but we will act unilaterally within the EU—even if we are not in it—even though the EU itself contains only 20% of the world’s multi- nationals? Is he saying that this does not need to be multilateral, and that it just needs to be EU-lateral?

[Mr Gauke]

I do not think that this has to be universal, but there would be disadvantages for the UK if we were the only country to do it. There is a sense that UK companies would be criticised for failing to pay very much tax in jurisdictions where they did not have a lot of activities but had a lot of sales. This comes back to the point about educating the public about how corporation tax works. I think it would be an awful lot easier if there were just a few examples of other countries doing this. I do not think it needs to involve every other country, but if, for example, Germany, France and Italy had the same type of system, every time a UK company was criticised we could say, “What about that French company? What about that Italian company? The same principles apply to them.”

We do not have to move at the pace of the slowest, but if we adopt an isolated position on this, there would be a reputational risk for UK businesses. We do not need to run that risk, particularly as good progress is being made, and I urge the House not to accept this amendment. Instead, I hope that we will be able to implement a measure over the next few months.

[David Mowat]

I suppose it depends which multinationals are in which segment of competition, but is the Minister saying that as long as, say, two or three other countries were to do this, the UK would join in?

[Mr Gauke]

I do not want to put a precise number on this. There is a threshold, and it depends on which countries those might be, but if I thought that three or four significant economies were going in the same direction, the case for doing this would be much stronger. Or, to put the reverse argument, if I were standing here next year and two or three other countries had gone down this route, the concerns that I am expressing from the Dispatch Box today would clearly carry less weight than I think they do today.

--- Later in debate ---

[Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)]

In the light of our debate this morning, an appropriate opening remark would be to point out that I believe that in the next hour we are debating the most important part of this year’s Finance Bill. Many amendments have been spoken about already this morning, and I am sure that Members will forgive me if I try to make my remarks brief and to focus only on three matters: the appropriate changes discussed in amendment 1, tabled by the right hon. Member for Don Valley (Caroline Flint) and others; new clause 8, tabled by me; and new clause 9, tabled by the right hon. Member for Barking (Dame Margaret Hodge). Let me say at the outset that the Scottish National party supports both that amendment and that new clause.

I will be brief, because I want to allow more time for the right hon. Ladies to present their case as fully as they can. Let me say something in general about why we are concerned. We all know that there is huge concern among the public about the extent of tax evasion and hidden wealth. It was a growing concern before the release of the Panama papers, and I remember discussing it in this House in the first week in February. It has been fuelled by concerns as people become more aware of the hiding of money in tax havens by individuals, corporations and trusts.

Let us put this debate into a broader context. According to Jason Hickel of the London School of Economics, tax havens hide one sixth of the world’s total private wealth. He has estimated that at about $20 trillion. Whether that is very accurate or not, all observers would agree that the total amount of money involved is absolutely staggering in scale. Indeed, the Panama papers from Mossack Fonseca are just the tip of the iceberg as regards what we face in the world today.

Many issues need addressing. Neither this debate nor the proposed amendment and new clauses address them all, but they are a start. I have been very disappointed by some of the Minister’s reasoning, particularly that on amendment 1. It struck me that he started to redefine on at least three occasions what he meant by multinational. First, he seemed, in my view, to be speaking as though it was almost global in nature, then it became EU-specific, then it became about just a few countries. It struck me that it is not amendment 1 that has not been thought through thoroughly, but the Government’s response to it. If the right hon. Member for Don Valley proposes to press it to a vote, the SNP will certainly follow her into the Lobby.

We know that many different groups are involved. The amendments specifically refer to corporations, but more than corporations are involved. If we had tabled our own amendment, we might have chosen slightly broader amendments to encompass trusts, for example. Being reasonable, we must put ourselves in a position where we make the first step. Sometimes somebody needs to make the first step.

When the Minister was talking, he reminded me of the days when I used to trod through the library at Stirling University, taking students and showing them back copies of Hansard. We could look at back copies of Hansard from the 18th and 19th centuries, and the subject that arose more than any other in debates in the House was slavery. One of the arguments continually used against doing something to make slavery illegal was that it would not create a level playing field.

Somebody has to be first. This is not just about finance and technical considerations, but about fundamental ethical considerations. Those ethical considerations are why we hope that these matters will be pressed to a vote and we will support the right hon. Ladies in that.

[David Mowat]

The hon. Gentleman is right that somebody has to go first. I have one thought for him, and I would be interested in his view. His country relies quite heavily on the oil industry. Is he absolutely certain that it is right to impose something on Shell or BP that the Italian Government will not impose on Eni and the French Government will not impose on Total?

[Roger Mullin]

I thank the hon. Gentleman for being interested in my view. Although I understand the point that is being made as well as that being made by the Minister, I think that in these matters, for all large corporations that operate nationally, taking the first step puts them at a reputational advantage because they are seen to lead the way even though there might be occasions on which doing that appears to put them at some short-term commercial disadvantage. So this is not as simple as saying that anyone is necessarily incurring a commercial disadvantage. For those reasons, we would welcome these new clauses, and we are aware that they would also apply to important sectors of the Scottish economy.

I shall briefly say something about the Scottish National party’s new clause on whistleblowing. I am particularly grateful to the right hon. Member for Barking for asking the Minister why he would not support that new clause. Indeed, as she spoke, I thought that, rather than our pressing the new clause to a vote here, it might be best to engage in cross-party discussions on how best to construct a thorough way forward. I agree wholeheartedly with the right hon. Lady, because when we look at the number of cases that have involved taking whistleblowers to court, one wonders where the balance of the scales of justice lie.

I recognise that changes have been made to the requirements on whistleblowing, some of which come into effect this September in the banking sector, but the requirements oblige companies to do things such as appoint their own whistleblowers champions and report the amount of whistleblowing to their boards. Those things require a culture of willingness in companies. If the will is not there, the current processes will have next to no effect. We are not saying that we know precisely how to secure effective whistleblowing. That is why it would be useful to have some cross-party discussions, in which I am sure the right hon. Lady would be happy to engage. In that spirit, although we believe in the new clause, we will not press it to a vote and look forward to supporting the votes led by the right hon. Ladies.

Budget Resolutions and Economic Situation

David Mowat Excerpts

Monday 21st March 2016 Commons Chamber

[David Mowat (Warrington South) (Con)]

I want to speak about two issues: the northern powerhouse and devolution. Neither of those initiatives is perfect, and I have some thoughts and suggestions on both, but they are an awful lot better than anything we have seen for the last 20 years. The Opposition might want to remember that.

I also want to talk about the direction of travel of the Budget. When we came into office, £1 was being borrowed for every £4 that was spent. We are trying to fix that. Labour Members are right; it has taken us longer than we thought. Perhaps they wanted us to cut harder. This evening, however, we have heard that as well as the bedroom tax being wrong, every single cut that has been made was wrong. The NHS apparently needs more, and the police need more. We have even heard from the right hon. Member for Birmingham, Hodge Hill (Liam Byrne)—this is a new one—that the pension age should not have been changed. The hon. Member for Harrow West (Mr Thomas) has told us that the schools funding formula is wrong. I was waiting for an intervention, but it did not come. The hon. Member for Copeland (Mr Reed) talked about the need for credibility. Labour Members would be credible if they occasionally said, “That cut is reasonable,” instead of just saying, “It is all wrong.”

[Robert Neill]

Does my hon. Friend agree that the real lack of credibility is in the failure to recognise that some public services can be based only on sound economics, and that unfunded costings and more and more debt constitute cruelty, not compassion?

[David Mowat]

It comes back to credibility. The hon. Member for Copeland made a plea for credibility from his Front-Bench team—a plea that, I fear, has fallen on deaf ears. It is true that we have had to make cuts, and I do not think that anybody likes to do that. I do not think that the cuts are ideological, but they are necessary to get from that 4:1 ratio to something close to balanced. It looks as though we made a mistake in this Budget; that has been acknowledged, and it will be fixed. The Labour party’s contribution has not been to say, “That was a mistake,” but to say, “Everything is a mistake.” That is an extraordinary position.

We had a lecture this evening from the Scottish National party, which was particularly interesting, because it is the progressive party in this place. We heard about what the Scottish Government are doing on homelessness, and how much better that is than what we are managing in England. If the SNP was progressive, and if it really cared about homelessness in England, its members would look at the Barnett formula and say, “We will go for a formula based on need. We will not just take everything that we can get, as our major policy initiative, and still call ourselves the progressive party.”

Before I move on to talk about the northern powerhouse, I have a point to make about tax cuts. “Tax cuts for millionaires”—we have heard that, have we not? Capital gains tax has been cut from 28% to 20%. I do not particularly approve of that, but at 20% that rate is still 2% higher than it was for the entire period of the last Labour Government. One could not make it up.

I said that I was going to talk about the northern powerhouse. I will not talk about it for very long, other than to say this. The problem that the northern powerhouse is trying to fix is the difference in gross value added between the north of our country, the English regions, and London, in particular. We are very London-centric. That difference reached a peak in 2009, in the last year of the previous Labour Government, when the City was allowed to run berserk. It is right that that has been fixed. I see that the Secretary of State is in his place, and I have got time to make one final point. I would like clear metrics to be assigned to the northern powerhouse initiative for GVA and transport infrastructure. It is rather hard to equate the money being spent on Crossrail 2—£28 billion—with any sort of real intent around the northern powerhouse.

Equitable Life

David Mowat Excerpts

Thursday 11th February 2016 Commons Chamber

[Antoinette Sandbach]

I am sure that the Exchequer Secretary has listened to the hon. Gentleman’s submission and I have no doubt that he will pay due regard to it. The Government have announced that payments to non-profit annuity policyholders who are on pension credit will be doubled, so some action has been taken, but we will not get to the heart of the unfairness until the regulatory failure has been properly addressed. That is what I am arguing for on behalf of my constituents.

We know that there are difficult spending decisions to be made, but these people trusted the system and paid in, in good faith, over many years, only to find that there has been consistent, repeated and unwarranted failure of regulation, and that it was so bad that there was found to be maladministration. In such circumstances, our constituents should not be having to pay the price for the failure of Government.

[David Mowat (Warrington South) (Con)]

My hon. Friend has mentioned difficult spending decisions—which is true, to an extent—and the £139 million, which has already been voted through by Parliament. It would be completely wrong for that not to be used for additional policyholders, if they can be found. Indeed, if it were not used for that purpose, it would represent a windfall for the Treasury in this fiscal year, which cannot be the right answer. I am as interested as my hon. Friend is to hear the Exchequer Secretary explain the plans for that £139 million.

[Antoinette Sandbach]

The Exchequer Secretary would be in danger of undoing all the good work the coalition Government did in setting up the fund in the first place if he were seen to be mealy-mouthed, if I may put it that way—I know he most certainly is not—and were to withhold those funds and to seek to bring them back into the Treasury, given the huge injustice suffered by the policyholders.

I am not going to take up much more time, Minister, because I know that you have other Members to hear from. I urge you please to look at the settlement and at what you can do to support those who are in desperate straits, including constituents of mine, and to do the right thing.

Sports Clubs: HMRC Status

David Mowat Excerpts

Tuesday 9th February 2016 Westminster Hall

[David Mowat (Warrington South) (Con)]

I beg to move,

That this House has considered multi-sports clubs and HMRC changes to community amateur sports club status.

It is a pleasure to serve under you, Mr Bone. In many ways the context of the debate is the rather disappointing Olympic legacy, with participation reducing in sports. In the past four years, the number of people doing more than half an hour of sports a week has declined from 25 million to 23 million; and as has been widely reported, obesity has increased by something like two thirds since 1993. In the context of joined-up government, it is therefore somewhat surprising that the Government have chosen to increase taxes on a number of amateur sports clubs, which will almost certainly lead to some detrimental impact on participation.

I will use Warrington sports club as my example, but I could have used many others. In particular, I have been contacted by a large number of golf clubs that are also being hit by the tax changes that Her Majesty’s Revenue and Customs is in the process of bringing in, which will have an impact on participation. Warrington sports club has 750 members, of whom 400 are junior members. That high ratio of junior members is one of the factors that has led it to fall foul of HMRC. Another factor is that it is a multi-sports club that does six major sports: rugby, cricket, hockey, squash, tennis and archery. The club was founded in 1852, so it has been going for a long time. It costs £220 a year for a multi-membership and £130 for a single membership, so it is not a major, lucrative money-making venture. The two issues that have taken the club the wrong side of the legislation are that it is a multi-sports club and that it has a relatively high number of junior members.

In terms of the club’s financials, membership brings in something like £50,000 a year and the bar brings in £290,000 a year of which £140,000 a year is from non-members. Non-member income is the issue that the Revenue is trying to address. One of the reasons for the large non-member income is that the club has a significant number of junior members, so parents take juniors to play rugby, cricket, hockey and whatever and have a drink while their offspring are playing. That counts as non-member income, which is the crux of the HMRC requirements. In terms of profit and loss, in the past two years on a turnover of about £300,000 a year the club has made a total profit of just under £2,000. The club is run to break even; it is not a profit-making club.

The legislation from which the club and many others have benefited was introduced in 2002 to attempt to increase participation in sport by making concessions for amateur sports clubs. The concessions were an 80% relief on rates, some corporation tax relief and gift aid status if they registered to be a community amateur sports club. Something like 6,000 sports clubs registered as CASCs. The valuable part of that concession for Warrington is that it saves about £14,000 a year in business rates, which may not be huge in terms of its turnover, but that is a reasonable chunk for a club that broadly breaks even. It comes to something like £20 a member, which is about 15% of the membership fee.

The legislation brought in by the Government in 2002 had numerous sensible criteria. The club had to be open to the whole community—it could not be a private, restricted club—it had to be amateur and its main purpose had to be the promotion and participation of an eligible sport. Clearly that was the case for Warrington and up until now that has worked fairly harmoniously.

In 2013, HMRC started a consultation. Its concern was apparently that the existing legislation was complex and confusing. There was clearly potential that organisations that are not really sports clubs whose primary purpose is not sport could register for CASC and take the benefits, which would not be fair to aspects of the hospitality industry. I can see that and the people at Warrington sports club can see that. If abuse was taking place, it is reasonable that HMRC should look at how it might wish to stop that. That seems to me an easier loophole to close than some of the other issues it grapples with on our behalf, such as double Irish, Facebook, Google and all that goes with that, but the focus in 2013 was amateur sports clubs.

HMRC sent out a consultation with a number of options and I think it would be fair to say—I am sure the Minister will agree—that it was trying to develop quantitative criteria by which it could judge whether an entity should be CASC-registered. It would not be a judgment on whether something was a sports club; HMRC could say, “It is a sports club because of these quantitative criteria, so we can tick a box. This one clearly passes and that one doesn’t.” One can only imagine that it was trying to remove uncertainty and dialogue, with people arguing, “His club should be if mine is” and vice versa.

At the time of that consultation, there was no mention whatever of state aid being one of the drivers of what HMRC was trying to do. At no point was the reason given that there was concern that some sports clubs might have an issue with state aid, but I say that because recent correspondence with HMRC has given that as the reason for not changing some limits. The consultation ran its course and at the end HMRC decided to impose two quantitative criteria. One was a £100,000 a year maximum on non-member income. As I said, the club had £140,000 non-member income, which put it outside that limit. One reason why the club is outside the limit—this is why the debate is about multi-sports clubs—is that the club runs six sports, so it is a relatively big club. If it were six separate clubs, they would be beneath the limit, but that structure would be onerous to go to and difficult to achieve. The £100,000 limit discriminates against multi-sports clubs.

The other quantitative criterion that HMRC imposed was that 50% of members had to participate actively in a sport. I guess the reason for that is that it wants to ensure that CASCs are real sports clubs and that people are not joining just to enjoy the benefits of the £14,000 a year that the club enjoys. That has caused Warrington an issue, because roughly speaking—it is only an estimate—its non-member income is about £140,000 because it is a multiple sports club. The other point is that because it has a large junior membership—400 of the 750 members are juniors, which I would submit is a good thing—parents will sometimes join the club socially or whatever. Those who have to take their children to the club will have a drink. They may or may not be members. If they are members, they may not do sport 12 times a year, so they would fall outside that criterion. In any event, the criterion appears to be a complex one, with 16 measurements for participation.

The impact on the club is £16,000 a year. I do not suppose that that will close it. It is a material issue, but it will not break it. HMRC tells the club that if it wants to it can set up a trading subsidiary. That would involve accountants and lawyers, and all the rest of it. Obviously, the bar income would go into the trading subsidiary. The estimated cost would be several thousand pounds, and the trading subsidiary would pay corporation tax. Perhaps that is what the Revenue wants, but it is quite onerous, and it is unclear what the saving would be. The other possibility would be to split the sports club into six separate sport clubs—one for each sport. There would clearly need to be a method of checking which club people who bought drinks were in, and so on, because of the de minimis limit. The consequence would probably be something like a 20% increase in membership fees—£25 a year. Presumably, because everything in economics happens at the margin, that would cause a reduction in participation, which is not really what the Government want.

The club put a request to HMRC. It said, “Okay, we kind of understand the direction of what you are trying to do. We understand the abuse that you are trying to tighten up on, and the clarity that you want. Let’s change the £100,000 de minimis thing, given that this is a multi-sports club, to £150,000.” Obviously there is self-interest there, because the Warrington club would be under that, and would save £14,000. We got the answer from HMRC that—I paraphrase—it would be happy to help, but its hands are tied by state aid rules. That is the first mention we have had of state aid rules, and no one would think that Warrington sports club was the first entity to create a state aid issue for the Government—a Government, by the way, while we are on the subject of state aid, who have difficulty in stopping the German Government reducing electricity prices for their heavy industry by a factor of two, so that their steel companies do not close while ours do. Nevertheless, Warrington sports club was informed that HMRC could not help and that £100,000 was the highest the figure could be, because of state aid rules.

I have good news for the Minister, however, because in the past few days I have read the Department for Business, Innovation and Skills state aid manual, which came out in July 2015. It is a rattling good yarn, and explains that there is a de minimis limit on state aid of €200,000 over a three-year period. In the view of BIS that would not distort competition in the European market. We thought we were home and dry, because obviously the £14,000 or €20,000 that Warrington sports club and other sports clubs enjoy is clearly a factor of three or four below that state aid amount. It would appear to me from the BIS manual that we have found a way out for HMRC. It will no longer have to be concerned about being dragged through the European Court on matters of state aid and the rest, because of the de minimis limit and its impact on Warrington sports club. I am informing HMRC of that point in this debate, and I look forward to the Minister’s response.

I have five questions for the Minister. Why does the correspondence that we have received from HMRC—most recently the Lin Homer letter of November 2015—rest its case on state aid, when state aid was not mentioned at all in the initial consultation? Given that we now have the BIS state aid manual and know that there are minimum state aid thresholds, can we incorporate what we know into HMRC policy? Presumably the handbook applies to HMRC. In the opinion of the Minister, have the changes to the entire area that have taken place in the past three years, which will raise very small amounts of tax, if any, increased or decreased complexity? Does the Minister have an estimate of the number of clubs that are deregistering, and has there been any discussion with DCMS of the decline in sports participation that will be a consequence of that? Does he agree with me that instead of engaging in a drive to find a quantitative criterion for evaluating clubs it should have been possible, given all the value judgments that HMRC inspectors must make, to tell whether x or y is a sports club? That would not be beyond HMRC; it is something that could have been left to the judgment of tax officers.

[The Exchequer Secretary to the Treasury (Damian Hinds)]

It is a pleasure to see you in the Chair, Mr Bone, and to have the opportunity to respond to my hon. Friend the Member for Warrington South (David Mowat) in this important debate. I commend and congratulate him on bringing it to Westminster Hall.

Successive Governments have recognised the benefits of sporting activity in improving people’s health and wellbeing, and in strengthening community cohesion. I welcome the opportunity to express the Government’s continued support for community amateur sports clubs, which, among other things, play an important part in consolidating our Olympic legacy, as my hon. Friend mentioned. It is right that the Government should use the tax system, as well as other forms of support, to encourage the benefits offered by those clubs.

There are about 7,115 community amateur sports clubs, and they certainly deserve the Government’s backing. The new regulations for CASCs continue to ensure that support through the tax system is correctly targeted at them. The community amateur sports club tax scheme provides a number of vital charitable tax reliefs to support local amateur sports clubs. Following a detailed review by HMRC of how the scheme was operating under the old rules, which showed that they were confusing and difficult to understand, the new CASC regulations came into effect on 1 April 2015. They included, as my hon. Friend said, a new income ceiling of £100,000 for non-member income.

Extensive consultation took place before the new rules were formulated. The Government formally consulted on outline proposals for reform of the scheme in June 2013 and published their response that November. Between November 2013 and September 2014 officials were engaged in regular and intensive dialogue with representative bodies individually, as well as establishing a forum for representatives of the sports sector.

The forum has a membership drawn from several sports’ national governing bodies and representative organisations. It met regularly during development of the new policy and the drafting of the new regulations. Particular issues of interest to members were aired at the forum and more detailed working group meetings ensured that HMRC understood specific issues for different sports as it developed the rules. As a result, changes were put in place to address the genuine concerns of some members of the forum, and the draft regulations were amended to increase the generosity of the social membership rule. Throughout the consultation process HMRC worked closely with officials from the Department for Culture, Media and Sport and its agency, Sport England.

The new regulations have made the scheme more generous than it was, which makes membership more attractive. However, the scheme works by providing tax advantages only to those that need them, and it is of course important that taxpayers’ money should be spent wisely. To take an extreme contrast as an example, clearly a youth football club with a tuck shop should get the tax advantages, but a pub with a darts team should not. That said, the new rules were developed to enable as many clubs as possible to remain within the scheme. Eighty-five per cent of existing CASCs are not affected by the new rules, as they operate fully within both the old and new rules.

It is worth noting that HMRC has not received evidence that the rules significantly increased the administrative costs for clubs within the scheme. However, some clubs inevitably are disappointed that the rules are not more generous. HMRC has continued to give help and guidance to clubs to help them remain within the scheme, and the dedicated HMRC charities helpline remains available to CASCs. If my hon. Friend or the club in his constituency wish to have a further conversation, they can do so by calling the helpline on 0300 123 1073. I would also be happy to arrange for either him or representatives of Warrington sports club to meet with officials to discuss the situation.

Some clubs may decide that complying with the new regulations is not financially viable and decide to leave the scheme instead. While we will not know the numbers involved accurately until after the 12-month grace period expires on 1 April 2016, we know that clubs are applying for CASC status at approximately the same rate as in 2014-15, before the rules changed.

The main purpose of a CASC must be the promotion of sport by providing facilities for the whole community. Clubs that generate a disproportionate amount of their revenue from non-sporting activities may be primarily social or commercial clubs. If a club’s main purpose is not sporting, it is obviously not eligible to be a CASC. It is important that the generous tax reliefs available only go to genuine amateur sports clubs. The Government recognise that many sports clubs raise funds from social functions and other non-sporting activities to subsidise membership fees and consider that the £100,000 income threshold provides sufficient flexibility to do that.

The consultation document was clear that the tax reliefs afforded to CASCs are not meant to support clubs that could be seen as competing with other commercial businesses such as pubs and restaurants, as my hon. Friend said. A higher limit could increase the risk of a state aid challenge because clubs could be seen to be engaging in economic activity. I must make it clear that in the event of a successful state aid challenge, HMRC would have no alternative but to seek to recover what would then be deemed underpaid tax from each club—a situation that all of us would want to avoid. The stakes when considering any potential state aid challenge case are therefore really quite high.

When considering the state aid threshold of €200,000 over three years—my hon. Friend was right to raise this important point—the relevant rules require all forms of potential state aid provided to be taken into consideration. As well as the tax reliefs provided by the CASC regime, CASCs also benefit from lower business rates and may in addition receive grants or other forms of financial assistance. The amounts in question will vary from club to club. The income limit is set at a level that seeks to ensure the de minimis limits will not be breached once business rates and any other form of financial assistance are taken into consideration.

I reiterate that the main purpose of a CASC must continue to be the provision of facilities for an eligible sport or sports, and the encouragement of participation in those sports. If a club has a lot of non-sporting income, it is unlikely to be primarily a sports club. The new CASC regulations allow clubs to earn up to £100,000 a year from non-member trading and property income. There is no limit at all on the amount of income clubs can generate from members, apart from property income from members, which also counts towards the £100,000 cap.

During consultation, representations were made for a more flexible approach and perhaps a more bespoke income limit. However, that would greatly increase the complexity of the regime and regulations. Different rules for different sports or sizes of club would increase the administration for both clubs and HMRC, and that approach was rejected on these grounds.

If clubs that are already registered as CASCs have high levels of non-member trading income and/or property income and do not want to be deregistered, they may choose, as my hon. Friend said, to consider setting up a trading subsidiary in the same way as many charities have trading subsidiaries. This is important: any income generated by a trading subsidiary will not count towards the club’s income threshold.

Trading subsidiaries should be owned and controlled by the CASC, allowing the subsidiary to trade but not be entitled to CASC reliefs. However, the trading company may gift-aid its otherwise taxable profits to the CASC and not pay corporation tax. Similarly, separate supporters’ clubs may be set up to assist clubs with high levels of junior membership—another important point that my hon. Friend raised—in meeting new rules for participation levels where it is a requirement that a non-sporting parent or guardian is also a member.

HMRC cannot register clubs that do not meet the income condition. It expects all clubs affected to take steps to reduce their level of non-member trading and property income, and in many cases that will be by setting up a trading subsidiary. The new income condition provides a sound regulatory foundation for the CASC scheme going forward that is fair and in keeping with one of the founding principles of the scheme: to support small volunteer-run community amateur sports clubs.

[David Mowat]

I listened carefully to the Minister’s point on state aid. The fact that the de minimis limit applies to all forms of aid is, of course, reasonable. I make the point again, though, that my local club—I do not believe there is any reason to think Warrington sports club is atypical—would be under the current de minimis state aid limit by a factor of four or five. It is hard to see that the figure of £100,000 is, in fact, responsive to that de minimis state aid limit.

[Damian Hinds]

To reiterate, the de minimis limit is €200,000, which applies over three years.

[David Mowat]

To actual aid?

[Damian Hinds]

To actual aid, in all its forms. Officials had to, appropriately, make a judgment in designing a scheme that would apply across the sector on the safe level of non-member income, as a generally applicable rule that would keep clubs safely under that limit. The figure they arrived at for the limit was £100,000. In the particular case of my hon. Friend’s local club, which he rightly and ably represents today in Westminster Hall, I would be happy to arrange for further discussions on appropriate avenues forwards.

The vast majority of clubs currently in the scheme have been unaffected by the new income condition, and detailed guidance is available to them and to those considering joining the scheme in the future. That means the tax reliefs available under the CASC scheme continue to be a vital element in supporting small clubs within the scheme to deliver the benefits of participating in sport.

The new non-member income threshold continues to encourage and support community sports clubs. The Government believe the cap is set at an already generous level and strikes the correct balance between the interests of the CASCs to raise extra funds and the interests of local businesses. The scheme should not provide tax reliefs to clubs that derive significant amounts of income from non-member social and commercial activities, as that was not what it was designed for. I close by thanking my hon. Friend once again and commending him for bringing this important debate to the House.

Question put and agreed to.

Tax Avoidance and Multinational Companies

David Mowat Excerpts

Wednesday 3rd February 2016 Commons Chamber

[Mr Gauke]

There is a whole host I could draw attention to, but in the interests of time, I will not run through that lengthy list. I have it here, and there are quite a number of cases—there are 40 I can identify straightaway—where there were loopholes, and we have tried to address that.

The diverted profits tax—I will come back to this again in detail in a moment—is designed to ensure that, where companies divert their profits away from the UK, and where the economic activity is happening in the UK, we get some of the tax yield.

[David Mowat (Warrington South) (Con)]

The difficulty with the economic activity test the Minister talks about is that it is intrinsically judgmental, and that gives us many of the issues that we try to grapple with. The test came in in the 1920s, way before the internet. Might it not be a way forward to move more towards taxing sales and, if necessary, dividends, with less on corporation tax, which would take these judgments away?

[Mr Gauke]

The first point to make is that this is a debate on the operation of the tax law as it stands, not on how people might want it to be, and to be fair to HMRC, it can only collect the tax that is due under the law as it stands, not as how people might want it to be. On reform of this area, there is no reason why we should not debate these matters. However, with regard to a move towards taxing profits on the basis of sales—there is a perfectly respectable case for reform in that direction—I would be worried about the impact on, for example, the UK’s creative and scientific sectors. I have mentioned the video games sector, and one could also look at pharmaceuticals. There are a number of areas where the UK—businesses in our constituencies—would lose out in those circumstances, so I would be a little wary about it.

HMRC and Google (Settlement)

David Mowat Excerpts

Monday 25th January 2016 Commons Chamber

[Mr Speaker]

If we are finished by then, the Minister will be on time for the Westminster Hall debate. If we are not, he can make a grand entrance at a later stage. We look forward to that with eager anticipation.

[David Mowat (Warrington South) (Con)]

When it is in the public domain that one technique used by Google, Facebook and others is the so-called double Irish arrangement, by which profits in the first instance leave the UK and go to Ireland, is there not more that we can do with our European partners to use state aid rules on countries such as Ireland and Luxembourg, which undermine our tax base in that way?

[Mr Gauke]

My hon. Friend raises an important point. There is a need for international co-operation at an OECD level, which is the principal focus, and at an EU level. He will be aware of action that the European Commission has taken in respect of other member states that have had concerns about state aid.

HMRC Office Closures

David Mowat Excerpts

Tuesday 24th November 2015 Commons Chamber

[Mr Gauke]

To return to that point, I gave the statistic that 4,000 of the current 58,000 people employed by HMRC will be outside a reasonable daily travel distance by 2027, as HMRC has acknowledged. I am afraid that there will have to be redundancies for those people, assuming that they are still working for HMRC, over the course of that period. I would make the point that the vast majority of HMRC staff—I recognise that this is difficult for those who are not in such a position—will clearly be able to work in the regional centres I have mentioned.

[David Mowat (Warrington South) (Con)]

Does the Minister agree that the current level of customer service in HMRC is unacceptable? The speech of the hon. Member for Livingston (Hannah Bardell) would have made sense were it not for the fact that, currently, about 40% of calls are never answered. It is not even that they are answered after 40 minutes; they are never answered. Does he agree that regional centres enabling us to flex the number of staff must form a coherent approach to getting calls answered, which cannot be done with 190 centres?

--- Later in debate ---

[David Mowat]

I am listening carefully to the hon. Gentleman’s argument. Perhaps he could tell us, on behalf of the Opposition, how many tax offices he thinks we should have. Do we go back to 310, or whatever the number was, or is 170 about right, or should it be even lower? What is the hon. Gentleman’s number?

[Rob Marris]

This is a classic case of this Government putting the cart before the horse. They announce the closure programme before they have got adequate information. We need a public consultation on this kind of change; we need a business consultation; and we need parliamentary scrutiny, by the Public Accounts Committee and the Treasury Select Committee, for example. Only when that process has been gone through, could I—or, I would venture, other hon. Members—form a view about how many HMRC offices should be distributed around the United Kingdom, given the changes brought about by technology and the desire for efficiency, and, balanced against that, the desire for a customer-facing service.

Oral Answers to Questions

David Mowat Excerpts

Tuesday 27th October 2015 Commons Chamber

[Greg Hands]

The hon. Gentleman needs to know that over many years a large number of local authorities have been calling for precisely this kind of devolution of the tax base so that they have control over their own decisions and the funding given towards them. Many of the local authorities calling for these additional powers have been the Labour authorities in inner-city areas, particularly in the north and the northern powerhouse. We intend to deliver on that to make sure that there is devolution in this area.

[David Mowat (Warrington South) (Con)]

11. What progress his Department has made on implementing ring-fencing proposals to enhance the stability of major banks.

[The Economic Secretary to the Treasury (Harriett Baldwin)]

The Government are fully committed to implementing a robust and effective ring-fencing regime, and we remain firmly on track for the separation of banks by January 2019. We passed the last legislation implementing the Independent Commission on Banking ring-fencing recommendations this year, and the Prudential Regulation Authority is currently consulting on the second tranche of implementation rules before publishing the final rules this year.

[David Mowat]

I thank the Minister for that answer. In 2012, the then Governor of the Bank of England said that unless these regulations were tightly specified there was a risk of their being watered down before implementation in 2019. We now see Barclays joining RBS and Lloyds in requesting significant waivers. Will the City Minister reconfirm the Government’s commitment to Vickers and the design principles within the legislation?

Greece

David Mowat Excerpts

Monday 29th June 2015 Commons Chamber

[Mr Osborne]

The hon. Gentleman is right to say that Britain has been a long-standing friend of Greece and the Greek people. There is huge affection in Britain for the country and its people, as evidenced by the fact that so many people choose to spend their holidays there. There is such solidarity and friendship with Greece, but Greece has to make its own decisions.

On our contacts with the Government—I was asked about them earlier—I have of course spoken over the past few months with the Greek Finance Minister and our Prime Minister spoke to the Greek Prime Minister just a week or two ago.

[David Mowat (Warrington South) (Con)]

One aspect of all this is the amount of money that the IMF might be about to lose. That money was subscribed by some of the poorest countries in the world, including countries poorer than Greece. Does the Chancellor agree that it would be quite wrong for places such as India to take a hit for any of this? Has he had any discussions to that effect with the IMF?

[Mr Osborne]

As I said earlier, the IMF has preferred creditor status and it has precautionary balances—in other words, it can withstand losses—and no one has ever lost money by providing support to the IMF, so we should bear that in mind as we have these discussions.

Productivity

David Mowat Excerpts

Wednesday 17th June 2015 Commons Chamber

[Chris Leslie]

As I said earlier, different sectors face different productivity challenges. Ultimately, if we think that this is just a problem in one or two sectors, we would be wrong. We need to address this forensically and make sure that we look from sector to sector to assess the problem in a mature, evidence-led way. That is what we need to do.

I am aware that many Members want to join the debate because they believe that productivity is an important topic. I respect them for that, but it is important not to let this issue pass without seeing the connection between productivity and the health of our public finances. We still have a £75 billion deficit in this country and I would like the new Chief Secretary to at least acknowledge in his response to the debate the truth that stronger productivity is crucial for repairing the public finances.

We need sensible savings across non-protected Departments to reduce levels of public expenditure, but if the Chancellor makes the wrong fiscal choices in the forthcoming emergency Budget he could make the situation far worse. There is a hard-headed business case for protecting and prioritising those services that enhance investment, skills and innovation. That is the responsible fiscal approach the Chancellor should take. Productivity should not be adversely affected by his fiscal choices and that is the point that I hope the Chancellor will understand. Whether he does and whether he can see through his political ambitions to the economic consequence of the decisions he takes are the important issues.

I have written to Robert Chote, the director of the Office for Budget Responsibility, to see whether we can make some progress, working across parties, to try to get a better evidence-led approach to the impact of the choices the Chancellor faces on productivity and on levels of public investment. I think that an OBR review would acknowledge the centrality of the productivity challenge and would help to make the right choices for the country. It would be better to have that evidence-led understanding of the consequences of alternative fiscal choices.

[David Mowat (Warrington South) (Con)]

When my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) intervened and mentioned the oil industry, which has become significantly less material to the national accounts and is massively productive in value-added for numbers of people, the shadow Chancellor did not answer the question properly. One of the productivity challenges is the significant relative demise of the oil industry, and the hon. Gentleman should not use words such as “forensic” without recognising that.

[Chris Leslie]

As one industry declines, others will have to fill the gap. It is also important to recognise that multiple aspects of energy activity and energy markets are coming on stream and we need to ensure that we develop them and exploit new opportunities for our country, for energy security and for our future economic prosperity.