Finance Bill

Ellie Reeves Excerpts

Committee: 1st sitting: House of Commons
Wednesday 11th October 2017 Commons Chamber

[James Cleverly]

Although, as I am reminded, there is an NI implication. Again, I have heard a number of anecdotes about conversations with departing employees from not the most honourable of companies in which things have been said such as, “If this complaint were to gently disappear, I am sure we can squeeze a little more money into your severance payment, using this route or that one.” This is one of the areas where simplicity and clarity are important, because companies may be using massaging methods to try to get a bit more money into the pocket of a departing employee, so that employee does not to have recourse to the law where inappropriate behaviour has taken place. Dangling some cash in front of them may be being used as an enticement not to take a constructive dismissal case, for example, and that is exactly the kind of thing we want to avoid.

In conclusion, I will be generous in spirit and assume that these amendments are just poorly thought through, rather than anything that is attempting to be more damaging. They would undermine the core direction of travel of the Bill, so I will not support them.

[Ellie Reeves (Lewisham West and Penge) (Lab)]

I am grateful for the opportunity to speak in this debate. Before entering this place, I was an employment rights lawyer for more than a decade, so this issue is very important to me. I represented dismissed and discriminated against employees for many years, and saw at first hand the devastating effect that the way they had been treated had on their lives. The Bill clearly seeks to narrow the scope of termination payments. Of course tax avoidance should be clamped down on, but the Government’s own consultation did not reveal evidence of widespread abuse. The hon. Member for Dover (Charlie Elphicke) said that there was tax avoidance on an industrial scale in this area, but that simply is not borne out by the evidence or indeed my experiences as an employment rights lawyer.

[Charlie Elphicke]

The hon. Lady is a making a strong and passionate case. My concern was industrial-scale tax avoidance, because big corporates were allowed to game the tax system without any action being taken to stop them doing that, largely because of the Brownite prawn cocktail circuit that was pursued in the early 2000s. In the last Parliament, I fought a campaign to get a lot of the law in this area tightened, and I am glad to say that a lot of that was taken forward.

[Ellie Reeves]

This is not about big corporates; I am talking about adequately compensating people who have been sacked or discriminated against at work. In my experience, a sacked worker’s priority is to receive a fair settlement, not to avoid tax. It seems to me to be another example of the Government hounding people when they are at their most vulnerable, when instead they should be helping and supporting them.

The introduction of measures that will allow the Government to reduce the £30,000 tax-free threshold via the backdoor of delegated legislation could lead to profound effects on people’s lives without there being any proper scrutiny in Parliament. That is even more important given the fact that the threshold has not been increased since 1988; had it risen in line with prices, it would be £71,000 today. Amendment 2 would mean the threshold could only be increased, not decreased.

[Catherine West]

Does my hon. Friend agree that it is curious that, between 2010 and 2014, such a large company as Thames Water paid zero corporation tax, yet here we are talking about sums of £30,000? It is estimated that there is £6 trillion in tax havens, yet we are quibbling the amounts that go to individuals who have had a difficult time in the workplace.

[Ellie Reeves]

I absolutely agree. The clause will penalise people who have lost their jobs and people who have been discriminated against—

[Rachel Maclean]

Will the hon. Lady give way?

[Ellie Reeves]

May I deal with the intervention I am currently dealing with first?

People who have lost their jobs and been discriminated against often get small amounts of money in the wider scheme of things, but it makes a huge difference to their lives while they are looking for another job, getting back on their feet and getting their confidence back after the treatment they have been through.

[Rachel Maclean]

The hon. Lady is talking about people who have lost their jobs who have been discriminated against. All our hearts would go out to someone in that situation, but is she aware that the tax-free threshold for people who have been discriminated against is not affected by the provisions in the Bill? Such awards will be wholly tax-free under the Bill, so does she agree that discrimination is not relevant to the debate?

[Ellie Reeves]

Discrimination is relevant to the debate, because the Bill would introduce legislation that would tax injury-to-feeling awards on termination. Discrimination can of course have a devastating effect on a worker’s life and career, yet the Government seem to treat victims of discrimination as a way to top up the Government coffers.

[Rachel Maclean]

Will the hon. Lady give way?

[Ellie Reeves]

I have already given way several times; I wish to make some progress.

Consider the example of a mother who has been discriminated against and dismissed for taking maternity leave. Rather than enjoying her time at home with her baby, she feels stressed and anxious about the future and her capacity to provide for her family.

[Rachel Maclean]

The hon. Lady is being extremely generous in giving way. I just wish to put on the record that discrimination awards will not be affected by the Bill. I have a copy of the Bill here: there is full exemption for compensation awarded by an employment tribunal relating to discrimination awards. She is talking about a case of a mother who is discriminated against, and none of us would wish to see that—I am a mother myself and I have employed mothers—but that is not what the Bill is about.

[Ellie Reeves]

The hon. Lady is talking about discrimination awards in employment tribunals; I am talking about discrimination awards as part of termination payments. They are two distinct things. As I understand it, the Bill would tax as earnings discrimination awards as part of termination settlements. For example, were someone to settle with their employer rather than go to tribunal, any injury-to-feelings element of the settlement that was above the £30,000 threshold would be taxed. That is a significant change for people who suffer discrimination. It might affect the mum who settles with her employer following her dismissal after having a child, or the disabled worker whose employer would rather sack them and make a termination payment than make adjustments for them. Such people will be worse off because that element of their award will be taxable.

It cannot be right that, rather than supporting victims of discrimination, the Government seem to want to use them as a source of revenue. These people need protections, not to be used to provide a revenue stream, so I urge all Members to vote for the Labour amendments.

[Neil O'Brien (Harborough) (Con)]

The shadow Minister said that the measures in the Bill are part of a wider pattern of Government behaviour. Indeed they are: they follow in the footsteps of the 75 different measures we have already taken to clamp down on tax avoidance and the £160 billion we have already raised for our public services by doing so. They follow in the footsteps of the changes we have made to capital gains tax, which have increased the amount we have raised and ended the disgraceful situation in which hedge fund bosses were famously paying less tax than their cleaners. They follow in the footsteps of the changes we have made to corporation tax to prevent international avoidance—the so-called Google tax. They follow the changes we have made to the taxation of non-doms to create more balance and end the situation whereby people could be here for 25 years and still claim to be non-doms. So the Bill is part of a wider pattern of behaviour: it is part of an ongoing war on tax avoidance that the Government are waging.

On the specifics of the amendments, it seems to me that the Opposition are incredibly well intentioned. We all want the same things—we all want to drive down tax avoidance—but the problem with amendment 1 is that, in the real world, the Treasury is constantly engaged in a war of attrition with people who are constantly trying to create new loopholes and ways to avoid tax. As quickly as the Treasury closes one loophole, there are people trying to create others.