Oral Answers to Questions

Ellie Reeves Excerpts

Tuesday 27th February 2018 Commons Chamber

[Mel Stride]

I am delighted to inform the House that considerable progress has been made in reducing the level of tax evasion, avoidance and non-compliance in the corporate sector. We have been at the forefront of initiatives launched with the OECD—the base erosion and profit shifting initiative, the profit diversion tax we brought in in 2015—and, as a consequence of clamping down in this area, we have brought in £53 billion from big business since 2010.

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

T7. Members have already raised the insufficient funding of local authorities by this Government. A recent campaign in Lewisham prevented local children’s and adolescents’ mental health services from being cut, but they are still facing a 5% loss in funding from national Government. When will the Government finally take this seriously and reverse the cuts to children’s mental health services?

[Elizabeth Truss]

We are putting additional funding and support into children’s mental health services and the Department for Education has recently announced additional support for children’s mental health issues in schools.

Financial Guidance and Claims Bill [ Lords ] (Third sitting)

Ellie Reeves Excerpts

Tuesday 6th February 2018 Public Bill Committees

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

It is a pleasure to serve under your chairmanship, Mr Rosindell, on my first Bill Committee.

New clause 9 would introduce a much-needed ban on cold calling by claims management companies, including in relation to personal injury. Although the Government have previously stated that they are committed to introducing a ban, new clause 6 simply does not go far enough.

It is estimated that claims management companies make around 51 million personal injury-related calls and texts each year and that most people have received one. Not only are such calls a nuisance, they also exploit vulnerable people. Not surprisingly, 67% of people are in favour of a ban on personal injury cold calling. It is worth noting that solicitors are already banned from cold calling in personal injury claims, but the fact that claims management companies are not risks bringing the sector into disrepute.

Cold calling can generate the false perception that obtaining compensation is easy, even where there is no injury. It can put pressure on people to pursue unmeritorious or, at the very worst, fraudulent claims, which they otherwise may not do. It may never have been the intention of someone to make a claim, but if they receive a text promising them thousands of pounds, it might seem very tempting. As my hon. Friend the Member for Birmingham, Erdington has already spoken about, there is evidence to suggest that cold calling has led to a rise in holiday sickness claims.

There is a context. The Government are proposing to reform compensation rules for whiplash claims and to increase the small claims limit in road traffic accidents from £1,000 to £5,000, and in public liability and employers’ liability claims from £1,000 to £2,000. The Government say that that is to cut down on fraudulent claims and bring down insurance premiums. However, many, including myself, are concerned that it will have a significant impact on access to justice, with people not being able to access proper legal advice in such claims, which can often be complex. Surely a better solution would be to have an outright ban on cold calling in personal injury claims by claims management companies, which is what new clause 9 seeks to do. The new clause is clear—it would result in a ban on all cold calling by claims management companies and would also ban other methods of approach, such as texting.

In contrast, new clause 6 creates confusion. It would ban cold calling unless someone has given consent. What amounts to consent in this context may not always be clear and people, especially the most vulnerable, may struggle to understand that they have consented to being cold called or may not appreciate what they have consented to. My hon. Friend the Member for Harrow West has raised concerns about the elderly and infirm. The Minister has not today been able to give any comprehensive answer on how those fears will be dealt with. Put simply, new clause 6 does not go far enough to ban the scourge of cold calling.

Earlier this month, Lord Keen stated in evidence to the Justice Committee that

“effectively stopping cold calling is an immensely complex process, because cold calling nowadays is carried out by unregulated entities from outwith the United Kingdom. We have instances of it being carried on in south America to target the UK. They then spoof their telephone numbers...so that it is impossible to trace the origins of the call.”

Will the Minister therefore assure me that more will be done to tackle such complex instances of cold calling, notwithstanding the measures in the Bill, so that the problem does not simply carry on under a different guise and vulnerable people do not continue to be exploited in this way?

[John Glen]

Opposition new clause 9 is identical to the Lords amendment and seeks to compel the FCA to ban unsolicited direct approaches by, on behalf of or for the benefit of companies providing claims management services. It also seeks to ban those companies from using data obtained through those methods. Unfortunately, it would give the FCA a duty it cannot enforce under its current regime.

I assure the hon. Member for Birmingham, Erdington and the hon. Member for Lewisham West and Penge that the Government are committed to tackling the issue properly and have consulted with the FCA, the claims management regulation unit and the Information Commissioner’s Office to ensure that Government new clause 6 does so in the most effective way—it will amend the Privacy and Electronic Communications (EC Directive) Regulations 2003 to prohibit direct marketing calls by claims management services unless an individual has given their consent. I was challenged on that matter, and I will clarify by letter.

The provision will be implemented by the ICO as the regulator responsible for the enforcement of the regulations. It has considerable powers and can issue fines of up £500,000. Under the incoming general data protection regulation, the unlawful use of personal data can attract fines of up to £17 million or 4% of annual turnover. The ICO is committed to enforcing the sanctions in the Privacy and Electronic Communications (EC Directive) Regulations 2003 and has issued nearly £3 million in monetary penalties for breaches of direct marketing since January last year. We have worked with the ICO in developing the new clause, and it is confident that it will be able to enforce it in conjunction with the FCA.

The FCA will of course have a role to play and will use all the tools available to take action where it discovers behaviour causing consumer harm. I acknowledge the cases that both Members raised, which are unacceptable. I am also confident that the FCA will work closely with the ICO where breaches are identified. I am sure members of the Committee will agree that it is better to include a new clause that will work—Government new clause 6—than to include new clause 9. As such, I encourage both Members not to press their new clause to a vote.

Finance Bill

Ellie Reeves Excerpts

Tuesday 31st October 2017 Commons Chamber

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

I am grateful for the opportunity to speak once again in the debate about the taxation of termination payments.

Before entering this place, I was an employment rights lawyer for more than decade, so this issue is very important to me. I have represented employees who had been dismissed and discriminated against day in, day out. Very often, this would involve negotiating termination packages or settlement agreements for them. The Bill seems to make it harder for people to get proper compensation for their ill treatment. Having seen at first hand the devastating effect that dismissal and discrimination can have on someone’s life, I am deeply concerned that the Bill seeks to narrow the scope of termination payments.

An employee can currently receive up to £30,000 in tax-free compensation as part of a settlement package. The figure already excludes from the tax-free amount things that would generally be considered as pay, such as accrued but untaken holiday pay, any unpaid wages or bonuses due, and pay in lieu of notice that is provided for in the contract of employment. However, sums for future loss of earnings or for injury to feelings are generally not subject to tax, provided they do not exceed £30,000.

Far from this being about tax avoidance, it is about properly compensating people who have been wrongly treated rather than treating them as a means to top up the coffers. Despite this, the Government wants to give themselves the power to decrease the tax-free amount that can be paid to an employee upon termination. Under the proposals, the threshold could be reduced using secondary legislation, without the full and proper scrutiny of parliament. The Minister says that the Government have no intention to reduce the threshold.

[Mr Jim Cunningham]

The previous Conservative Government changed the redundancy legislation. The purpose of redundancy money is to tide people over until they can get another job, so it should not be taxed at all.

[Ellie Reeves]

We know that redundancy payments and the way in which they are capped means that they often do not adequately compensate people after they have been dismissed from work. The fact that the Government want to give themselves the power to decrease the threshold prompts a question: why do they want to do it if they do not want to exercise that power? It seems that they would treat those who have suffered wrong treatment in the workplace as a source of revenue rather than as victims worthy of support. This is all the more important when taking into account the fact that the tax-free threshold has not increased since 1988.

[Eddie Hughes]

Even given the fact that, as the hon. Lady said, the threshold has not increased for some time, it still covers 85% of payments made in this country. Surely that is an acceptable amount.

[Ellie Reeves]

The amount should reflect someone’s loss of earnings, their ability to get back on their feet and the injury they have suffered after redundancy, so it is not good enough to tell 15% of these people, “We don’t care about you.”

If the threshold had risen in line with prices, it would be £71,000 today. Surely the Government should be going after the billions hidden in tax havens and the corporations that avoid paying tax, as well as properly resourcing HMRC, rather than going after those who have been treated badly at work. Being dismissed or discriminated against at work can have a catastrophic effect on someone’s life, so the Government should not be attacking those who might be at their most vulnerable.

[Vicky Ford]

Will the hon. Lady give way?

[Ellie Reeves]

I will make some progress.

It seems curious that the Government want to make it a priority to enshrine it in statute that compensation for injury to feelings awards connected to the termination of employment should be taxed as earnings. This is yet another example of how the Government, rather than going after the big corporations that are avoiding tax, would penalise those who have been unlawfully discriminated against at work.

When we last debated the Bill in Committee on 11 October, it was suggested by Government Members that injury to feelings was some sort of new concept that Labour was trying to introduce to create a tax loophole. Yet injury to feelings is a well-established head of damage, enshrined in the Equality Act 2010 and in the various pieces of anti-discrimination legislation that preceded it, including the Sex Discrimination Act 1975. Guidance on the level of awards was given in the case of Vento some years ago, and it has just been upgraded. The highest award is £42,000 for the most serious acts of discrimination, which usually involves a course of conduct over many years, and the lowest award is £800—usually for a one-off comment. That is established legal principle.

Under these proposals, however, such awards would be taxed as a matter of routine when the £30,000 threshold is exceeded. Not only does that seem inherently unfair to victims of discrimination, but in practical terms it will lead to all sorts of litigation and drafting issues about whether an award is in connection with the termination or a previous act of discrimination unconnected to the termination. For example, a woman is subjected to sexual harassment at work over a sustained period. She subsequently tells her employer she is pregnant and is dismissed as a result. She pursues a claim for sexual harassment, unfair dismissal and maternity discrimination. She is awarded £30,000 for loss of earnings, which takes her up to the tax-free threshold. She is awarded another £10,000 for injury to feelings. Who determines what part of the award is for the harassment, which is unconnected to the termination of her employment and therefore not taxable, and what part is in relation to the pregnancy-related dismissal and therefore taxable?

Moreover, because personal injury claims will be exempt from tax but injury to feelings will not be, we are likely to see more employment tribunal claims pleading personal injury—for example, psychiatric damage—which will inevitably lead to complex medical evidence and longer hearings. With strains already on the employment tribunal system and on HMRC, that is surely not the route we should be going down. Or is this just the start of a slippery slope, with the Government ultimately wanting to tax all injury to feelings awards and all personal injury awards?

For those reasons, I urge the Government to accept our amendments and to go after the real tax avoiders, not hard-working individuals who have been treated unlawfully at work.

[Mel Stride]

Following our vigorous and constructive debate during the Committee of the whole House last month, I welcome the opportunity to reiterate the importance of the changes we are making to the taxation of termination payments today. In doing so, I thank the hon. Members for Oxford East (Anneliese Dodds), for Lewisham West and Penge (Ellie Reeves) and for Aberdeen North (Kirsty Blackman) and acknowledge their contributions.

Before I respond to some of the detailed points raised, let me begin by briefly reiterating the objectives of the changes we are making. As I have outlined previously, the current rules on the taxation of termination payments can be unclear and complicated. Unfortunately, this complexity has led to a small minority of individuals and employers—particularly those with the most generous pay-offs—seeking to manipulate the rules to avoid paying the tax that is owed. They do so by characterising large pay-offs as termination payments rather than earnings, so that they qualify for the £30,000 tax exemption and an unlimited employee national insurance contributions exemption. As Members on both sides of the House have agreed, this situation is clearly unfair for the vast majority of employees, who are unable to manipulate their payments in this way. The purpose of this clause is to tighten and clarify the tax treatment of termination payments to make the rules fairer and prevent manipulation.

As we have heard, amendments 1 and 2 would remove the power to reduce the £30,000 tax exemption threshold for termination payments by regulations. As I have said several times in this House, the Government have no intention of reducing this tax-free amount, despite the best efforts of Labour Members to suggest otherwise. Let me assure the House again: any reduction in the threshold would be subject to a statutory instrument and the affirmative procedure, so the House would have to approve any such proposal. The House rejected this amendment in Committee of the whole House, and I urge it to do so again.

Amendment 3 would exempt from taxation all termination payments for injured feelings. As the House heard earlier this month, this amendment would present further opportunities for those seeking to manipulate the system by opening a large loophole for payments to be routinely reclassified on account of an injury to feelings, without any medical evidence, simply to pay no tax. This is hard to prove or disprove, and it would be very difficult for HMRC to regulate. In any case, payments for injured feelings will of course continue to qualify for the £30,000 tax exemption like any other normal termination payment. The House wisely rejected this amendment earlier this month, and I urge it to do so again.

The changes being made by clause 5 are a fair and proportionate way to close a loophole in the rules that has unfortunately been open to manipulation in the past. The Government have repeatedly shown that many of the concerns raised by Labour Members are unfounded —and, frankly, give the appearance, at least, of misconstruing an important tax avoidance measure as some kind of attack on those losing their jobs. This politicking is unworthy of the Opposition. I have heard no new arguments or evidence today to convince me of the need to reconsider this clause. I therefore urge the House to reject the amendment.

Question put, That the amendment be made.

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.