Finance (No. 2) Bill (Fourth sitting)

Douglas Chapman Excerpts

Committee stage
Thursday 18th May 2023 Public Bill Committees

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

New clause 5 would require the Chancellor of the Exchequer to publish an assessment of the impact of the Bill on the Government’s ability to meet their duties under the Climate Change Act 2008 and commitments under the 2015 Paris agreement. The UK Government need to walk the walk as well as talk the talk on climate change. We had an extremely successful conference of the parties in Glasgow in 2021. The UK Government COP President secured the historic inclusion of coal in the climate pact, even if that commitment was not quite as explicit as he originally wished.

Scotland is taking that very seriously. We have ambitious climate change targets to become a net zero greenhouse gas-emitting nation by 2045, with interim targets of 75% by 2030 and 90% by 2040. We are taking positive action to realise those goals. The UK Government’s action has stalled, however, and has not been helped by the series of changes of Prime Minister, each of whom has had a wholly different attitude to the urgency of climate change.

In reality, the UK Government talk about climate change when they are forced to do so, but they do not take the action required to meet their obligations. Is the Minister confident that the measures in the Bill will get targets back on track? In every single policy that comes from the UK Government and every piece of legislation enacted by this Parliament, the climate change impact should be evaluated, and this Bill is no exception. We should be leading from the front and considering the impact of each policy on the targets that have been set.

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[Victoria Atkins]

On the case cited by the hon. Member for Ealing North, clearly we would like banks to enter into the public-spirited nature of the Help for Ukraine scheme and other refugee schemes. I will take that issue away and reflect on it with my ministerial compadre in the Treasury, the Economic Secretary, to see what we can do. Of course, the first port of call for anyone in that situation is their constituency MP. We are, I hope, good constituency MPs, and we can draw these matters to banks’ attention and can often get answers that our constituents sadly cannot, but I will take this matter away and mull it over.

The hon. Member for City of Chester mentioned other refugee schemes. I am not aware that the Afghan scheme has quite the same system of payments as the Ukrainian scheme, but I am happy to reflect on that issue. It is probably not a matter for this Bill, but I will think that one over.

Question put and agreed to.

Clause 345 accordingly ordered to stand part of the Bill.

Schedule 24 agreed to.

Clause 346

Abolition of the Office of Tax Simplification

[Douglas Chapman]

I beg to move amendment 2, in clause 346, page 264, line 31, at end insert—

“(9) This section shall not come into force until the Chancellor of the Exchequer has published—

(a) a response to the letter from the Chair of the House of Commons Treasury Committee, dated 2 March 2023, on the closure of the Office of Tax Simplification, and

(b) a statement of his assessment of the costs and benefits of abolishing it.”

This amendment would prevent the Office of Tax Simplification from being abolished until the Chancellor has replied to outstanding correspondence from the Treasury Committee on the subject, and published a cost/benefit analysis of the policy.

[The Chair]

With this it will be convenient to discuss the following:

Clause stand part.

New clause 1—Reports to Treasury Committee on measures to simplify tax system—

(1) The Treasury must report to the Treasury Committee of the House of Commons on steps taken by the Treasury and HMRC to simplify the tax system in the absence of the Office of Tax Simplification.

(2) Reports under this section must include information on steps to—

(a) simplify existing taxes, tax reliefs and allowances,

(b) simplify new taxes, tax reliefs and allowances,

(c) engage with stakeholders to understand needs for tax simplification,

(d) develop metrics to measure performance on tax simplification, and performance against those metrics.

(3) A report under this section must be sent to the Committee before the end of each calendar year after the year in which section 346 (abolition of the Office of Tax Simplification) comes into force.”

This new clause would require the Treasury to report annually to the Treasury Committee on tax simplification if the Office of Tax Simplification is abolished.

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[Douglas Chapman]

I am sure that Members gathered here agree on the importance of data gathering, impartial analysis and evidence-based decision making. We can make informed decisions only if the facts are laid out in front of us in black and white. It would seem wise, then, that data be gathered on the costs and benefits of doing away with the Office of Tax Simplification before a final decision is made.

I will also be so bold as to point out that the recommendation to abolish the OTS came from a rather short-lived and now infamous Chancellor in his ironically named growth plan Budget of September 2022. Suffice it to say that the growth plan went down like a lead balloon after weeks of market turbulence, with unprecedented condemnation from the International Monetary Fund. That is not to mention the important—indeed, massive—£60 billion fiscal hole left in its wake. The then Chancellor and his Prime Minister swiftly exited stage left before more damage was done to the economy, our global reputation and citizens’ livelihoods.

Interestingly, of the many gung-ho announcements made in that growth plan, abolition of the OTS is one of the few that has not been reversed. When it comes to gathering evidence and data for making evidence-led decisions, and listening to experts and a broad group of stakeholders on tax simplification, we still have a long way to go, if this still seems to the Government to be a wise decision. One such expert is George Crozier, head of external relations at the Association of Taxation Technicians and the Chartered Institute of Taxation. He has argued that the OTS achieved a significant amount during its 12 years of existence and, with greater ministerial support for its proposals, could have achieved much more. Mr Crozier and the CIOT argue that among the OTS’s achievements since it was established in 2010 are the abolition of more than 40 unnecessary tax reliefs that were “clogging up” the tax system, as well as

“useful reforms to employee expenses and inheritance tax reporting,”

which have all had a positive impact. In fact, the CIOT informs us that

“every Finance Act of the last decade has had measures in it which owe their genesis to the OTS, and which have made navigating the tax system easier for one group or another.”

Does the Minister not believe that is a good thing?

Importantly, the ATT believes that there are many benefits to maintaining independent advice to the Government on tax simplification; for example, the OTS drew directly and effectively on the skills and expertise of tax professionals, professional bodies and taxpayers when making its recommendations for simplification. The ATT believes that the OTS maintained that level of engagement only due to the trust and belief that the OTS would treat its comments and views impartially and fairly. The ATT’s concern is that without the perceived independence of the OTS, taxpayers and professionals will be more reluctant to come forward with relevant evidence and experience. Does the Minister not believe that relevant evidence and experience are good things?

If analysis leans in the direction of abolishing the OTS, it seems fair to back up calls from Mr Crozier and his colleagues to question the UK Government on how they will deliver the promise to embed tax simplification in the institutions of government. Will the Minister confirm that he will at least give the OTS a stay of execution until further evaluation is carried out, or will the OTS baby be thrown out with the bath water? In the run-up to an election, it may be popular with the public if the Government of the day were seen to be taking the thoughtful and sensible decision to retain the services of the OTS.

[Dame Angela Eagle]

New clause 1 is also part of this group. As a member of the Treasury Committee, which fairly collectively signed new clause 1, I will speak to the new clause, as well as to the Scottish National party amendment to clause 346.

It came out of the blue that the Office of Tax Simplification was to be abolished as part of the mini-Budget—the catastrophic event last September that created the worst of all events in the Treasury. Interesting times. As an ex-Treasury Minister, I can assure you, Mr Stringer, that boring times are the best; interesting times, when bond markets soar and pension funds teeter, are not the best. We were thrown into that situation with the mini-Budget, out of which came the sudden announcement that the Office of Tax Simplification would be abolished. The reason given for that abolition was that we would boost economic growth and simplify the tax system by having tax simplification in house. That is one of the more Orwellian reasons for abolishing something that I have heard. It was set up by a previous Conservative Chancellor, George Osborne; I can use his name because he is no longer a Member of this House and has gone on to other—I will not say better—things.

When the OTS was set up, the idea was to identify areas where complexities in the tax system for business and taxpayers could be reduced. We need only look at the thickness of this modest Bill to realise how complex financial legislation can be. This is the Finance (No. 2) Bill, and others will be along soon, I am sure. Yesterday, we had a hearing of the Treasury Committee on tax reliefs and cliff edges, and we were told that there were 1,180 tax reliefs in the system. Of them, 841 are structural, and 339 are non-structural, which apparently means that they are aimed at behaviour. That is a lot of tax reliefs. Every relief, whether for a good or a bad reason, creates a complexity. I am not arguing at all that tax systems should be completely simple—complexity is sometimes important and inherent to the way that a tax works—but as with all these things, it is possible to have too much of a good thing. It tends to go beyond complexity for a good reason and become complexity for complexity’s sake.

I do not know why—perhaps the Minister could enlighten us—it was suddenly decided that the Office of Tax Simplification was such a thorn in the side of the Treasury that it could be abolished forthwith without much notice, and that a job that has not really been done routinely in the Treasury could suddenly be done in house without any kind of preparation. When the Treasury Committee had staff from the Office of Tax Simplification give evidence in a hearing, they did not really know why it had been abolished, either. Nobody likes to be abolished. I cannot think that they were enamoured of the idea, but they were very diplomatic. They did not really have any confidence that the more systematic look at how taxes could be simplified over time would continue once the office had been abolished.

Could the Minister give us some insight as to why the abolition was announced? Why was it reconfirmed by the new Administration—one of the four that we have had in the last year—when they came into office that they would go ahead with the abolition? It is one of the few things that the previous Prime Minister and her Administration inaugurated that has survived the shake-up of the system.

The Institute for Government argues that the Office of Tax Simplification should not be abolished, but that if it is, it should be replaced with a body with a wider remit that can make extensive recommendations on tax administration beyond just simplification. It points to the utility of having an independent body that provides options for tax reform.

Our political structures are littered with huge, all-encompassing reviews, such as the Mirrlees review of the entire taxation system. They are always so controversial, but it is rare that their recommendations are implemented. Having a body that could undertake some of this work in smaller bites may help us to reduce the complexity of our system while not compromising on fairness.

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[Victoria Atkins]

That is a fair challenge. It is one that we will meet through the meetings that we are already having, and that I am personally having, with organisations to discuss simplification. Of course we will discuss other matters in the future as well, but that is the No. 1 issue I am raising with those organisations. Also, I am very lucky to be able to work in the Treasury with incredibly talented officials. They do not hold back from giving Ministers of any Government proper advice on the tax system and other parts of the economy, so through all of this—as well as mulling over how we are ourselves able to check the progress we are making, as I say—I am confident that we will be able to make real progress in this area.

[Douglas Chapman]

On that point, I think the Labour party spokesperson, the hon. Member for Wallasey, was also alluding to the fact that it was that element of independence that really made the Office of Tax Simplification stand out from anything that can be provided in-house. That is the real danger of Government Departments, and Governments in general, marking their own homework. That is what it sounds very much like, and that is how it will be seen outside the bubble we inhabit here in Westminster. I sincerely ask the Minister to reconsider her stance and have a really long think about not making that decision just now, but instead doing a full evaluation of the benefits and value of the Office of Tax Simplification to see how it might be either enhanced or supported in future.

[The Chair]

Order. I remind Committee members of the point I made to the hon. Member for Blaydon earlier: interventions should be short. They are getting longer.

[The Chair]

In which case, I call the hon. Gentleman to respond to the debate, and ask him to tell me whether he wishes to push the amendment to a Division.

[Douglas Chapman]

I think that the overall message we have heard today—certainly from Opposition Members—is that the Office of Tax Simplification should be retained, as it provides a very important independent view of the very complicated and complex system of tax takes and tax reliefs throughout the United Kingdom. I am hoping that that position will win support, and I am prepared to push it to a Division.

Question put, That the amendment be made.

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Brought up, and read the First time.

[Douglas Chapman]

I beg to move, That the clause be read a Second time.

Hopefully we can all get off to lunch quite soon. The UK Government may still be driving the big red Brexit blunder-bus towards the sunny uplands, merrily in denial of the catastrophic damage that leaving the EU has wrought on the country, but British citizens and businesses are in no doubt about the serious lack of any tangible benefits from Brexit. In reality, the UK Government may have got Brexit done, but unfortunately we all got done at the same time. Not a week goes past without a Brexit myth-busting news headline. This week, we discovered that one of the world’s largest car manufacturers believes that Brexit is a threat to our export business, and the sustainability of UK manufacturing options. Stellantis, which owns Vauxhall and Fiat, warned the Government to reverse Brexit, or it will have to close down its factories. Just today, Jaguar Land Rover described the Brexit deal as “unrealistic and counterproductive” for electric vehicle manufacturing.

The Minister mentioned all the fantastic innovation-based opportunities that she could see in the future, but those two companies join a chorus of other manufacturers in the UK that have advised the Government to look again at the Brexit trade deal. Brexit was sold to us as a chance to reduce red tape, to free us up from the so-called constraints of EU bureaucracy, and to negotiate bigger and better trade deals across the globe. Instead, it has freed us from success, growth, productivity and competitiveness—so quite the opposite. Brexit has meant that we are fighting a war on all fronts, with not a unicorn or rainbow in sight, and no sign of the much-promised £350 million a week for the NHS, or an end to stagnant wage growth, the crippling cost of living and the energy crisis in the UK.

That brings me to this important new clause on exiting the European Union—an attempt to pin down the UK Government, shine some light on the well-hidden Brexit benefits, and require the Chancellor of the Exchequer to provide us with proper information and analysis to back up the Government’s claims. We are asking the Chancellor to publish a report on which of the policies included in the Bill could not have been introduced while the UK was a member of the EU. We are also asking for that report to include an evaluation of the costs and benefits of each provision.

Here is the thing: the Government might believe in Brexit. They might be convinced of the benefits of it, alongside their Opposition colleagues on the Labour Benches, but no matter what myths are busted every week in the real world, it is people in the UK who are bearing the brunt. That is the thin end of the wedge for our constituents, who want to know whether the Brexit-induced or Brexit-exacerbated hardships they face day to day—the astronomical levels of food inflation, the difficulties with European travel, and the closure of their exporting businesses due to jams and chaos at Dover—has all been worth it. Really, has it all been worth it?

[Gareth Davies]

I am happy to respond to new clause 4. The Government are committed to taking full advantage of the opportunities arising from the UK’s exit from the European Union, and we will make the most of our Brexit freedoms. Indeed, we have already set in motion a number of measures that capture those freedoms, whether it is the VAT relief on women’s sanitary products, cutting VAT on the supply of energy-saving materials or, as we have heard, measures in this Bill to reform our alcohol duty system. None of that could have been implemented had we remained in the European Union, and we will go further over the course of the months and years ahead.

As those reforms develop, we will routinely publish the impacts that they have, in exactly the same way as we do now and always have. An additional report is not necessary. Information on all changes is available in the Budget documents and the tax information and impact notes, outlining those impacts. I therefore urge the Committee to reject the new clause.

[Douglas Chapman]

I thank the Minister for his response. I have no intention of pursuing this new clause any further, but I hope the Government have taken these views on board and, if those broad and sunlit uplands are still there in their heads, let us make them a reality. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Victoria Atkins]

I thank you, Mr Stringer, for your superb chairmanship of this Committee and Ms McVey for hers. I thank my ministerial colleague, my hon. Friend the Member for Grantham and Stamford, who did very well on his first Bill Committee; it has been a pleasure. I thank all Back-Benchers for lively debates and their attention to these important matters, and those on the shadow Front Bench for their important contributions.

I thank the Doorkeepers—Monty—the Clerks and of course our Hansard reporters, who help to make our words look more polished than perhaps they are in real life. Of course I must also thank the Whips, who have an incredibly difficult job arranging such a huge piece of legislation and have done so with great skill—and I thank them for the wine gums.

Finally, I thank the massive team of officials, primarily in the Treasury, but also in other Government Departments. There is so much work that goes into preparing a Bill for Committee. This is such an important stage of its scrutiny, and we take it very seriously. I offer my sincere thanks to each and every one of the officials who have been kind enough to brief me and my hon. Friend.

Finance (No. 2) Bill (Third sitting)

Douglas Chapman Excerpts

Committee stage
Thursday 18th May 2023 Public Bill Committees

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Stringer. The hon. Member for Wallasey just asked about the length of the funding. As MPs, we all have hard cases to deal with involving refugees from other parts of the world. What funding will be given to Scotland, Wales and Northern Ireland so that the devolved Administrations can implement their own schemes?

[Victoria Atkins]

I can answer yes to the question that the hon. Member for Ealing North asked about the £250 million.

On the question that the hon. Member for Wallasey asked about the number of houses, DLUHC has estimated that it will be about 1,300 homes. She will understand—indeed, we discussed this when I was Minister for Afghan Resettlement—that one of the complexities with Afghan families is that their larger family sizes mean that there is not the availability of housing stock that there is for slightly smaller families. That is why it is taking a bit of time.

The hon. Member for Dunfermline and West Fife asked about Scotland, and I commit to write to him. This is across the board, so I imagine the scheme will be UK-wide, but I will get that confirmation for him by the end of the sitting.

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[Dame Angela Eagle]

Obviously, the VAT rules account for some of the most complex parts of the duties and excise that the Minister has to wrestle with on a day-to-day basis. When one talks to businesses of all sizes, often one of the biggest complaints is about the complexity of the VAT rules. Given how much revenue VAT brings in and how all-encompassing it is, perhaps that is not surprising, but I wonder whether the Minister is happy with increased complexity that the changes bring. Perhaps she could give us a flavour of her thoughts and considerations in dealing with the issue of deposit schemes and the complexity of the VAT rules.

Given that VAT will be levied only on the first seller, the Minister has clearly tried to make the rules as simple as possible. But how much complexity does she think the clause will introduce, given that it will be applicable to plastic and cans—presumably aluminium—both of which are easily recyclable, but not to glass? I assume that she is not introducing glass straight away because of the sheer number of glass bottles and the size of the task. Again, perhaps she could give us a flavour of the thinking behind excluding glass, and tell us whether the intention is to include it at a later stage. How complex does she think doing that might be?

I am old enough, as I am sure—I am going to put this politely—you are, Mr Stringer, to remember when we had deposit return schemes for glass, long before anyone thought about digitally scanning anything or any of the computer-based structures that I assume will facilitate the VAT inspectors’ task. Perhaps the Minister could give us some indication of that. Again, how much revenue does she think will have to be forgone?

What assumptions have His Majesty’s Revenue and Customs and the tax inspectors made about the actual cost of schemes such as this in revenue forgone? Clearly, the idea—to incentivise good behaviour that will assist in increasing recycling—is one we would all support. We all want that to work, but if it is not done properly, it could be an enormous fiddling thing that does not really have much effect at all. All of us would applaud the decision not to impact the customer and, clearly, we want to see the containers for recycling brought back.

Can the Minister say a little about whether she has considered how the scheme might interact with the packaging regulations? Again, they are a moveable feast, given that we have left the EU and they have had to be changed as well, but there is clearly a direct connection between the two. We must make certain that the way the packaging regulations work increases, if possible, the incentive for the recycling to work.

There is also the landfill tax, which might have an impact on behaviour. I am sure that the Minister has had a towel on her head thinking all that through to try to make certain that it works as intended. It is currently due to come into effect in 2025. Given the complexity, is she confident that that will happen, given that there have already been delays and the scheme itself is now smaller than most people want it to be, because it excludes glass?

Given the complexity of VAT—when it must be done, when the returns must be made and how difficult that can be for businesses—does the Minister think that moving on without a set timescale, and the uncertainty created by that, give the best background for a successful introduction? The delivery of the scheme in Scotland seems to have run into trouble. I do not know whether the hon. Member for Dunfermline and West Fife has insights that he can share with us—it is almost as late as a TransPennine Express train.

I am interested in what the Minister has to say about some of my questions. The scheme might seem to be a fiddling little thing, but it fiddles with a very complex tax and interacts with many other things. A bit more insight into the Minister’s thinking and her confidence about whether the scheme can be delivered on time would be really welcome.

[Douglas Chapman]

I will take the towel off my head before I reply. There have been difficulties in Scotland with the implementation of the deposit return scheme. In general, I am reading that this is a simplification, and it maybe brings a bit of clarity to what is possible in a DMS scheme. The important point is that, as pointed out by the previous speakers, it would be fantastic if we could operate across the whole UK. It is not often I say that, but there are opportunities with such a big environmental project that we could all share in.

Although this is not for debate as part of the Finance Bill, I hope that the Minister will take the opportunity to listen to some of the comments made and see whether we can work with other Departments—and Wales, Northern Ireland and Scotland—to see what combinations can be brought to bear. I notice that the Nordic Council, for example, had a discussion session not so long ago where it talked about operating almost a Scandi food waste policy, which would cover all the various countries in the Nordic Council. I do not see why we cannot be working in a positive way like that across the whole UK, albeit that we in the SNP have other ambitions to take our country in a slightly different direction.

[Samantha Dixon]

Clearly, this is a complex piece of work that has taken a great deal of time, but I get the sense that the Government may be kicking the proverbial recyclable can down the road. Taking it piecemeal without a comprehensive view across the whole UK does not seem to be the best approach. Could the Minister speak to that?

[Victoria Atkins]

On the last point, I gently redirect the hon. Member’s observation about a piecemeal approach. That is probably more for the Scottish Government to answer because we would very much like to be acting in tandem. By the way, I am responsible for only the VAT elements, so questions about the wider design of the scheme, including whether glass is included, must be directed to the Department for Environment, Food and Rural Affairs.

I have been holding that wet towel over my head at night thinking about this. For example, what happens if somebody buys their bottle of drink just north of the border, pops over to visit Newcastle for the day and wants to get rid of that bottle? There are practical considerations. With some of this—and the Scottish Government are in this position as well—we will have to see how consumers behave. I hope that the scheme will be an enormous success and that the producers will pay the VAT on returned bottles, but it will take us a bit of time to get used to it.

[Douglas Chapman]

Would it not be a good idea to have a consistent approach that the UK Government could get behind? We have had to push on with our DRS to actually achieve some of our net zero targets and a better environment for our citizens, so the Government could back us up on that and bring in their own scheme.

[Victoria Atkins]

Again, I am trying to be terribly tactful about how I put this. There has been so much discussion between officials behind the scenes. Scotland has wanted to run ahead with its scheme. Frankly, there were some significant intellectual debates about how VAT is dealt with in this scenario. If the hon. Member—I am not pressing him because I know this is not his portfolio—or others in the Scottish Government want a little breathing space to check that we are all going in the right direction, that is of course a matter for them.

We are committed to implementing the scheme in 2025, but it will need a lot of publicising as to the impacts for consumers. We will all want to encourage our constituents to either use their own drinking vessels wherever possible or to return their bottles and cans when they can, but we have tried to simplify the VAT so that the larger producers will be the target of that first stage of VAT accounting.

On the complications, as I say, we have tried to simplify the scheme. One can imagine the scenario where if we were accounting for VAT at every single stage of the transaction process, that would be a nightmare for the tiny retail shops that we all care so much about. That is a good example of two of the three objectives that I set His Majesty’s Revenue and Customs and the Treasury to ensure taxes are fair and simple so that there is a little tension between them, but we have tried to ensure it is as simple as possible for consumers and smaller businesses.

Just to make it clear, we are not making any money from this scheme. Indeed, we hope that tiny amounts of VAT will be paid to us, because that would mean that the overwhelming majority of people were returning their bottles. I hope we make as little money out of this as possible, which is perhaps unusual for me to say.

We will deal with the plastic packaging tax later in the Bill. The latest figure is just over £200 per tonne. As with the landfill tax, it will sit alongside this scheme and the whole point is to, first, cut down on plastic and secondly, make sure that less of it goes to landfill. I very much hope that people will see this as a holy trinity of environmental measures to try and achieve the ends that we are all so keen to achieve. Unless there are any further takers, I will sit down.

Question put and agreed to.

Clause 314 accordingly ordered to stand part of the Bill.

Clause 315

Dumping, subsidisation and safeguarding remedies

Question proposed, That the clause stand part of the Bill.

Public Bodies and VAT

Douglas Chapman Excerpts

Wednesday 17th May 2023 Westminster Hall

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Betts. I thank the right hon. Member for Camborne and Redruth (George Eustice) for securing this important debate. I think we all want an active, high-skill economy that further education colleges play a leading role in developing, not just in his constituency and south-east England, but across the UK.

I start by talking about some of the general issues we have experienced in Scotland with regard to VAT. The SNP’s 2021 manifesto said:

“A re-elected SNP Government will use the fiscal framework review to push for an urgent increase to Holyrood’s devolved financial powers, including…Strengthening…Scotland’s tax powers with the devolution of VAT, and full powers over income tax and National Insurance contributions.”

I can imagine Treasury Ministers squirming at that potential change in taxation across the UK. VAT is a huge part of the UK’s tax income, and it is forecast to raise £162 billion in this financial year. Only income tax and national insurance contributions raise more; income tax accounts for £268 billion, and the three represent two thirds of total tax receipts across the UK. We are talking about massive sums of money. Compared with the massive income that comes in through VAT, the right hon. Member for Camborne and Redruth is asking for a tiny speck of financial support for FE colleges.

The Office for Budget Responsibility notes that around half of household expenditure is subject to VAT at the 20% rate, and around 3% of expenditure is subject to the 5% rate. Although public bodies may account for VAT on supplies, goods and services, like any other business, they often make the point that their non-business activities can be outwith the scope of VAT.

HMRC’s guidance for local authorities and other public bodies says that the general rule is:

“where a public body is funded by way of public expenditure…to do something for the public good, it’s unlikely to be engaging in business activities for VAT purposes.”

That definition should include FE colleges, as the right hon. Member for Camborne and Redruth has said. Public bodies such as Government Departments, non-departmental public bodies, NHS bodies, local government, the police and fire and rescue services should all fall within that scope. VAT incurred in the course of non-business activities is not generally recoverable, although special provision is made for local authorities and certain other specified bodies to recover that VAT. I believe that what the right hon. Member is promoting this morning fits with Treasury rules. It even fits with previous EU rules. Indeed, VAT was introduced under the auspices of the European Commission, and public bodies are generally not regarded as taxable persons under EU VAT law for most of their activities.

When it comes to VAT on FE colleges, we in Scotland feel the pain of the right hon. Member for Camborne and Redruth. The Tories’ dreadful and shameful treatment of Police Scotland and Scottish fire and rescue services cannot be forgotten. In 2011, the Scottish Tories campaigned to unify the police forces into a single force, supporting SNP policy at the time. However, after that happened, the UK Treasury refused to extend to Scotland’s police service, operating under its new name, the same VAT exemptions that it had had for many years prior to the change. The same was true when Scottish fire and rescue services were amalgamated into a single body. Despite emergency services in England having relief from VAT, the UK Government failed to deliver the same relief for Police Scotland and the Scottish Fire and Rescue Service. That cost Scottish taxpayers more than £175 million over five years.

In 2013, when the services were formed, right through to 2017 when the then Chancellor of the Exchequer, Philip Hammond, finally caved in, in the Budget, those emergency services paid around £170 million in VAT. Maybe this Minister and this Chancellor can also cave in and give that right to England’s FE colleges.

Many hon. Members from across the House will remember my former colleague Roger Mullin, who campaigned on this throughout his time in Parliament. It is a shame that there was not immediate action from the UK Government to make sure that the Scottish Fire and Rescue Service and Police Scotland were not disadvantaged. However, it has to be said that 318 Tory MPs, including the right hon. Member for Camborne and Redruth, voted on 26 October 2015 against Roger’s amendment to remove VAT from those vital services in Scotland. I regard that as a shameful act. We had to find £170 million in the Scottish budget to make up the difference. That shows that we got through and won the argument eventually, and that SNP MPs stand up for Scotland. Perhaps something similar can be said of the right hon. and hon. Members with us today from the Conservative party: they are standing up for England’s FE colleges.

The controls that Westminster retains over devolution are still quite strong. We cannot know with certainty that future decisions will not disadvantage Scotland again. For example, we do not know whether the national care service, which is being introduced in Scotland as we speak, will be VAT-exempt. I hope we get clarity from the Minister this morning on that.

The right hon. Member for Camborne and Redruth talks about the FE sector, and the uneven playing field when it comes to VAT. We in Scotland could say, “Welcome to our world,” because we have lots of experience of that. I have great sympathy with his arguments. As I said at the start, FE colleges support skills, young people, small and medium-sized enterprises and, above all, exports. Those are areas we cannot ignore. We should try to give FE colleges every single advantage that we can, so that they can train more people, and work more closely with small businesses across different parts of the country. FE colleges are a critical building block of successful high-skill economies. I hope that the Minister will support the right hon. Member’s ambitions, and also ensure that VAT is devolved from the Treasury to other Parliaments across the UK.

Finance (No. 2) Bill

Douglas Chapman Excerpts

Committee of the whole House
Tuesday 18th April 2023 Commons Chamber

[Emma Hardy]

I never for one moment suggested we should scrap the tax relief entirely, but we definitely need to do something about fraud. When we have businesses ripping off the taxpayer for £1.1 billion—money that is desperately needed for our public sector, hospitals and infrastructure—we need to take the issue seriously and not brush it under the carpet. R&D claim firms continue to hard sell opportunities to claim refunds, often to companies that should not qualify.

We have issues with the tax gap, which is around £32 billion. That tax gap continues to increase and the tax fraud gap stands at £14.4 billion. That is a heck of a lot of money. If they were serious about wanting to reduce taxes, I would have thought Government Members would want to tackle tax fraud. I have raised the issue with the Minister in a previous debate and I know she is aware of it, so will she outline the steps being taken by HMRC and HM Treasury on the important work of reducing tax fraud and simplifying our tax system?

While we are talking about tax simplification, and as a teaser for the debate tomorrow, it seems strange that the Government wish to abolish the Office of Tax Simplification. That seems a rather strange thing to do when they seem so keen on having tax simplification, but maybe we can continue that discussion tomorrow.

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

I always wondered how the Conservative party did its policy development, but I think the right hon. Member for North East Somerset (Mr Rees-Mogg) has helped me to come to a conclusion. My sympathies therefore go to the Minister.

This Finance Bill is yet another glaring example of the UK Government trying to shove a square peg into a round hole for the people of Scotland. They are desperately trying to fix economic problems of their own making, but their Bill will do the square root of zero to fix the enormous productivity and labour supply challenges that our nation faces as a result of their mismanagement.

I know that the SNP is often seen as a force for positive general happiness around this Chamber, but there is a great black cloud of gloom and doom overhanging the Bill. It relates to Brexit: the unwelcome guest at the wedding, the elephant in the room, the truth that dare not be spoken by its instigators. Brexit has brought us headlines such as “Economy in decline”, “No-growth Britain”, “Bottom of the class at the G7” and “Export exodus”—hardly what we would call sunlit uplands, and not a unicorn in sight.

Did Scotland vote for this? No, we did not. We did not want Brexit, but it was forced upon us. Meanwhile, the Prime Minister seems to be contradicting his own ideology by remarking on all the special and exciting opportunities for Northern Ireland from access to the EU and UK markets. He does not even realise the irony of his comments or the gross unfairness to Scotland, which has been left in the lurch, with our democratic mandate ignored.

The Scottish people know that this is a Government in denial, with a double whammy of Tory ineptitude on the economy and a damaging Brexit that cannot be fixed by a Finance Bill produced by the same team who were behind that not-so-winning combination. With the economy contracting, according to the International Monetary Fund, and with the Chancellor failing to meet his two main fiscal targets of a falling public debt burden and borrowing below 3% of GDP by 2028, we now know that workers in old Blighty are £1,300 worse off as a result of Brexit. The IFS has stated that our productivity and economic output will fall by 4% as a result of leaving the single market, leaving workers significantly worse off and public services at the thin end of the wedge again, with less money in their budgets. We need less “Better Together for Scotland” and more “I’m Scottish…Get Us Out of Here PDQ!”

I turn to our amendments. I hear from small and medium-sized businesses in my constituency and across Scotland that they are struggling as a result of the economic decline. They are fighting a war on all fronts with energy costs and the costs of doing business, not to mention that they are still trying to get back on their feet after the pandemic and are dealing with the new red tape generated by Brexit.

I am happy to support SNP new clause 8 on extending relief of R&D expenditure for our excellent and important data and cloud computing services. On research and development, the refrain that I hear on repeat from businesses is that they are keen to invest but have their hands tied behind their back. Looking at the clauses before the Committee today, it is easy to see why the Conservatives have lost their “party of business” strapline. So many businesses are reporting that they feel abandoned by this Government and left to float alone, without a life raft to get them out of the swirling morass of the economy and into better times. If the Government want growth and prosperity, they need to listen—really listen—to the people at the coalface who do business every day and who have faced years of knocks and challenges.

On corporation tax, the Government do not seem to know whether they are coming or going. One minute, corporation tax rises seem to be in vogue; the next minute, they are not. The Government swither and dither, but the business community desperately needs stability, security and some long-term plans that will give it the space to breathe and grow.

The ever-present climate crisis is a threat not just to business, but to people’s livelihoods. The UK Government have not shown their best colours when it comes to ensuring that their legislation is in line with the climate challenges. Despite the climate-induced weather events in the UK and abroad, the Prime Minister left out tackling climate change and reaching net zero from his core priorities for his growth strategy. With the number of elephants in the room, No. 10 and No. 11 are getting pretty crowded.

We cannot pretend that Brexit and climate change are not devastatingly bad for business and for people’s finances. Without acknowledging the catastrophic damage that they bring, we cannot move forward with a comprehensive plan. The Chancellor can present as many Finance Bills to Parliament as he wishes, but these are people’s real lives, real livelihoods and real futures, uncushioned by wealth and privilege, and catastrophically unsupported by a tin-eared Government who refuse to look at the reality of the situation that they themselves face. It is time for Scotland to make a swift exit, and I hope that in the coming months we can achieve just that.

[The Second Deputy Chairman of Ways and Means (Mr Nigel Evans)]

I call the Financial Secretary to the Treasury to wind up the debate.

High Income Child Benefit Charge

Douglas Chapman Excerpts

Thursday 2nd February 2023 Westminster Hall

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I thank my hon. Friend the Member for Linlithgow and East Falkirk (Martyn Day) for securing this debate, which is timely because many families are concerned about their finances and are struggling to make ends meet in the current financial crisis.

There are three key measures or themes have emerged in the debate. The first is that the changes introduced by George Osborne way back in 2013 are unfair and flawed. Secondly, Members from across the Chamber have said that they can help the Minister make the child benefit system fit for purpose. Thirdly, we are asking the Government to implement changes. Even a Conservative Government can introduce the concept of universality again and see whether that is a better solution than the one we have at the moment.

On the first point, like other hon. Members I cannot understand for the life of me why a family with two parents both earning £40,000 a year—a total of £80,000 between them—can claim child benefit unhindered by any other consideration, yet another family in which the main earner’s salary is £50,000 is penalised and the children get less benefit or no benefit at all. How is that fair? How is that equitable?

Claimants whose earnings rise above £50,000 have their benefit clawed back through the tax system, which means that they are exposed to the self-assessment system—in many cases, for the very first time—and incur additional costs in hiring an accountant or tax specialist. How is that fair? How is that equitable?

The £50,000 threshold has never been uprated since 2013 to reflect wage inflation during that period, so more and more families are being unwittingly sucked into the tax trap set by Mr Osborne all those years ago. To compound the situation, taxpayers have been charged penalties for failing to register their liability. It is like the WASPI scandal mark 2: people are not given sufficient information about the changes made by the Treasury, so parents get trapped in the tax liability net without even knowing it.

For many parents, it is simply not worth the hassle of having to navigate through our clunky system, so more than half a million people have elected not to receive child benefit. I thought that might be a win-win for the Government—they save on all those admin costs, get off scot-free by not having to pay child benefit at all and, of course, they do not have to worry about these pesky kids—but my hon. Friend the Member for Linlithgow and East Falkirk has raised some questions that put those assumptions under some scrutiny. Again, I urge the Minister to reply to him so that we can get some clarity about that.

As my hon. Friend the Member for Linlithgow and East Falkirk pointed out, not claiming has some serious ramifications for both the parents and the child. As the hon. Member for Rutherglen and Hamilton West (Margaret Ferrier) alluded to in her intervention, for many parents—particularly women, or the lower earner—it means losing out on vital national insurance contributions, which could impact their state pension entitlement. As for the child, my hon. Friend has already highlighted the issue about national insurance cards for 16-year-olds.

The case is clear. The Government need to scale up the threshold from £50,000 to reflect pay inflation from 2013, but also to iron out some of these anomalies to ensure that child benefit is not only fair and equitable, but seen to be fair and equitable for all those families who are currently being penalised.

My second point is about the system being fit for purpose, which, from today, becomes a challenge for the Minister. I genuinely want to hear the solutions that are within her gift. Will she uprate the threshold beyond £50,000 in line with pay inflation from 2013, for example? If the clunky system has to remain, will she look carefully and sympathetically at the inequity of the families I have talked about, where family No. 1 is on £80,000 and has full child benefit, while family No. 2, on £50,000, is caught in the tax trap and offered limited or no benefit?

Will the Minister also consider devolving child benefit to the Scottish and Welsh Governments? Tackling child poverty is a national mission in Scotland. As part of our delivery plan, we already invest £8.5 billion to support families, a huge amount of which—£3.3 billion—is specifically targeted at supporting children. To help to mitigate the effects of the current cost of living crisis on households, our Government have also introduced the Scottish child payment, which they have uprated on one occasion. Better solutions can be found, and I hope the Minister is open to working with the Scottish Government and others to see where further devolution of budgets can take place. Will the Minister also solve the inequity of parents, especially women, who remove themselves from the child benefit tax trap but suffer other consequences, as other hon. Members have already highlighted?

I have left one issue until the end, which is universality. This policy is being driven by the needs of the Treasury, when it should be the needs of children and families. This is not just a challenge for the current Government, but, as the next election looms, a question for the Opposition, who aspire to be in Government. Is it therefore the policy of the Opposition to introduce universality to child benefit? It would be wonderful if that could be confirmed and a firm commitment given today in the summing up.

--- Later in debate ---

[The Financial Secretary to the Treasury (Victoria Atkins)]

It is a pleasure to serve under your chairmanship, Mr Stringer. I congratulate the hon. Member for Linlithgow and East Falkirk (Martyn Day)—I hope that I pronounced that correctly—on securing this important debate. I say from the very outset that I understand the experiences of his constituents that he described, and I hope that in previous correspondence we have acknowledged the tension—I suppose that is the word—of these points in the tax system, not just in the context of child benefit but across the tax system. There are points of tension where the next rating, if you like, of taxation falls, and those have repercussions. I promise him that I spend a great deal of my time considering that, not just in this context but, as he will appreciate, across many other forms of taxation.

Child benefit is an incredibly important form of state assistance. Historically, many decades ago, in previous generations when women did not tend to work or were not permitted to work in the way that, thankfully, we are nowadays, child benefit was often the way in which they could feed and clothe their children. Although our working economy has, thankfully, changed in so very many ways since then, we as a Government want to maintain that link between the state and helping families to raise children who need the help.

We genuinely understand that, for the lowest paid or the poorest of families, child benefit payments are vital to help families pay for clothing, food and other essentials. Some 7.7 million families are helped with the cost of raising their sons and daughters, and the Government are keen to continue that tradition. That is why, when we had to make difficult decisions in the autumn statement, we protected child benefit in real terms, which means that from April this year, subject to us approving it in due course in the Finance Bill, child benefit will rise in line with the consumer prices index, or 10.1%.

Of course, there are other ways in which the Government and local authorities offer support to parents with childcare responsibilities and costs, including for example early education through the Department for Education’s free hours entitlements and financial support for childcare through tax-free childcare and universal credit childcare offers. We all want to ensure the very best start in life for our beloved children.

The difficult challenges that we face in the wider economy, not just domestically but internationally, are having an impact on families up and down the country. Many of the worries circle around rising prices, or inflation. That is precisely why, in his new year speech, the Prime Minister pledged to halve inflation by the end of the year. We understand that if prices are rising, our money does not go as far. We want to ensure that we can halt the pace at which prices are rising, so that our hard-earned money goes further.

We have also taken decisive action to support households with those pressures over this year and the next, including by helping millions of the most vulnerable households through the additional cost of living payments over this year and next; the energy price guarantee, which will save households £900 this year and £500 next year; and the support for all UK households provided through the £400 energy bill support scheme. But we need to continue with our plan for stability and fiscal prudence and to be responsible with the nation’s finances. That is why we want to ensure that welfare spending remains sustainable and focused on those who most need the help. We continue to support the vast majority of families with child benefit payments, but the high income child benefit charge allows us to maintain that sustainability.

The charge affects a small proportion of child benefit claimants—namely, those who have relatively high incomes. The hon. Member for Strangford (Jim Shannon) questioned the threshold. I hope that I can offer him some reassurance, on a national scale. In 2019-20—the last year for which I have been provided with figures—about 373,000 individuals in the UK declared a HICBC liability, HICBC being the acronym that the Treasury uses; I prefer what the hon. Member for Linlithgow and East Falkirk said—“the charge”. However, the vast majority of those 373,000 individuals have incomes above the UK higher rate income tax threshold of £50,270. That is in the context, as I have said, of 7.7 million families being assisted with the cost of raising children.

Many of the individuals who earn above the £50,270 mark will earn between £50,000 and £60,000, so they will not be required to pay back the entire value of their child benefit, because it is tapered in that £10,000 spectrum. We have, I am told, never aligned the threshold for the charge with the UK higher rate threshold or, indeed, other thresholds for income tax. Of course, I note that in Scotland the Scottish Government have set the higher rate threshold for Scottish income tax at a lower rate of over £43,000. We are very concerned that raising the threshold above the £50,000 figure would come at a significant cost to the Government at a time when support is needed for vital public services.

[Douglas Chapman]

Will the Minister give way?

[Victoria Atkins]

I was just about to come to the hon. Gentleman’s question about universality, if that is the point on which he is seeking to intervene. He raised the issue of universality, and my response to that would be that he and others are rightly focusing on the challenge of people just over the £50,000 mark or, indeed, making comparisons with couples who individually earn under the £50,000 mark but together obviously earn nearly £100,000. I do not quite know how I would justify extending child benefit to couples who earn significantly in excess of £50,000 each. Perhaps a mile or two down the river, in the City, there may be couples in banking, the finance sector and so on who are earning not just hundreds of thousands of pounds but even more. I for one would much rather that the tax paid by our constituents —those of the hon. Member for Dunfermline and West Fife and mine—was focused on those constituents on whom we have rightly focused, namely the poorest paid, rather than those earning astronomical salaries.

[Douglas Chapman]

The point that I wanted to make was actually about whether we could get a view on the example that I gave of family 1 and family 2 and the inequity that there is for certain families. It may be that both parents or partners are under the limit but in total they earn a lot more than £60,000. I think that that is something that the Government could look at a bit more generously.

[Victoria Atkins]

I very much understand this point. I do not know whether the hon. Gentleman was involved at all in the scrutiny of the Bill that became the Domestic Abuse Act 2021, which I had the privilege of taking through the House a year or two ago. Interestingly, one of the challenges that his SNP colleagues put to me, in the context of universal credit, was that universal credit is paid per household. They made the point that, particularly for victims of domestic abuse, they would prefer it to be paid to the individual. The reason why I raise that is that we have a long-standing tradition—since, I am told, the 1990s—of individual taxation. I, as a feminist, am entirely comfortable with being—indeed, demand the right to be—taxed on my income, rather than that of my husband. The system of independent taxation being what it is, every individual, including each partner in a couple, is treated equally and independently within the income tax system. That means that the child benefit charge, sitting as it does within the income tax system, must adhere to those principles; that is the idea behind it. I acknowledge the tensions that the hon. Members for Dunfermline and West Fife and for Linlithgow and East Falkirk have raised regarding those families where people fall just below the threshold, but Governments of all colours must do that kind of balancing when setting thresholds and rates of taxation, and so on. That is why the charge is set as it is.

Draft Financial Services (Miscellaneous Amendments) Regulations 2022

Douglas Chapman Excerpts

Tuesday 8th November 2022 General Committees

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Robertson.

The SI is evidence of the continuing shambles and uncertainty that we have as a result of Brexit. I say to the Government and His Majesty’s official Opposition that making Brexit work is indeed hard work. We are seeing a continual number of different fixes to what is Brexit, and the SI is yet another.

Unfortunately, last week Mark Carney said that Brexit is a contributor to soaring inflation and the cost of living crisis. That is what the rest of the country is having to put up with in our daily lives. Although I have no inclination to vote against the SI, because it is a technical measure, perhaps the Government should be charged with wasting parliamentary time, because we should not have to be considering such issues.

Draft Major Sporting Events (Income tax Exemption) (2022 Birmingham Commonwealth Games) Regulations 2022 Draft Major Sporting Events (Income Tax Exemption) (UEFA Women's EURO 2022 Finals) Regulations 2022 Draft Major Sporting Events (Income Tax Exemption) (Finalissima Football Match) Regulations 2022

Douglas Chapman Excerpts

Wednesday 20th April 2022 General Committees

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

The SNP is generally supportive of the measures proposed today and, in particular, of that on the women’s football competition. To use a pun, it puts the women’s game on a level playing field with all the other events, which is a great step forward.

It is remarkable, however, that the Government are much more quick off the mark when it comes to legislation on tax exemptions than they are to legislate against money laundering, for example, which props up the London property market. For example, we are still waiting for the economic crime Bill, four years on from the original consultation. That is some gestation period for any Bill, but I hope we will be able to make progress on that.

We do not want to make any further comment on today’s proceedings, but I hope the Government can make progress with the other legislation that could benefit the economy. As far as the other competitions are concerned, we hope that all goes well and wish all the very best to the competitors involved.

Draft Double Taxation Relief and International Tax Enforcement (Taiwan) Order 2021

Douglas Chapman Excerpts

Thursday 25th November 2021 General Committees

The Chair

I am not sure that question is quite in scope, but it is at the Minister’s discretion whether she responds to it.

Douglas Chapman (Dunfermline and West Fife) (SNP)

-

I have a quick question; I do not think there are any complications on the Opposition side of the House regarding the order, but I am looking at paragraph 14.2 of the explanatory memorandum, on monitoring and review, which says:

“The instrument does not include a statutory review clause.”

The OECD might in future decide to review the OECD model used here in light of experience. Can the Minister give a commitment today that, should the OECD review the model and recommend changes to or strengthening of the legislation, the Government would be willing to support that same level of commitment?

Lucy Frazer

- - Excerpts

I thank both Opposition Members for their contributions; it is helpful to hear from the hon. Members for Dunfermline and West Fife and for Ealing North that they will not be opposing the instrument today. The hon. Member for Ealing North gave a very clear summary, and he will know that on matters of international taxation we are very grateful to work with our international partners. I am very happy to discuss those wider matters of international taxation with him on another occasion. I am also happy to take up the point that the hon. Member for Dunfermline and West Fife mentioned. He will know that we always review our laws at appropriate times.

To sum up, the order strengthens the integrity of our network of DTAs, which play such an important part in facilitating the UK’s cross-border trade and investment. This legislation will ensure that our DTA with Taiwan continues to meet the latest international standards on preventing treaty abuse and improving dispute resolution. In doing so, it will further support the already warm relationship we share with Taiwan.

Question put and agreed to.

Draft Double Taxation Relief and International Tax Enforcement (Taiwan) Order 2021

Douglas Chapman Excerpts

Thursday 25th November 2021 General Committees

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

I have a quick question; I do not think there are any complications on the Opposition side of the House regarding the order, but I am looking at paragraph 14.2 of the explanatory memorandum, on monitoring and review, which says:

“The instrument does not include a statutory review clause.”

The OECD might in future decide to review the OECD model used here in light of experience. Can the Minister give a commitment today that, should the OECD review the model and recommend changes to or strengthening of the legislation, the Government would be willing to support that same level of commitment?

Oral Answers to Questions

Douglas Chapman Excerpts

Tuesday 20th October 2020 Commons Chamber

[Allan Dorans (Ayr, Carrick and Cumnock) (SNP)]

[Douglas Chapman (Dunfermline and West Fife) (SNP)]

[The Financial Secretary to the Treasury (Jesse Norman)]

[Jesse Norman]

[Douglas Chapman [V]]

[Jesse Norman]