Finance Bill

Greg Clark Excerpts

Monday 1st July 2013 Commons Chamber

[The Financial Secretary to the Treasury (Greg Clark)]

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

New clause 6 is a technical amendment designed to give a belt-and-braces protection to prevent any possible attempt to avoid the incidence of the bank levy on the part of banks in a particular respect. Paragraph 70 of schedule 19 of the Finance Act 2011 specifies that high-quality liquid assets held by banks are not liable for the levy. This is to make sure that there is no disincentive for banks to hold assets that give liquidity protection in the event of a crisis. By their nature, the return on such assets is small, and without relief the bank levy would reduce the margins, making it uneconomic to hold such assets. It was always envisaged that the definition of assets covered would be the same as that of the high-quality liquid assets recognised by the regulator —now the Prudential Regulation Authority.

It has come to the attention of HMRC that some banks were contemplating arguing that a wider definition of assets might apply, against the intention of the original legislation. In fact, the Government do not believe that the current legislation can be interpreted in this wider way, and HMRC could and would make a legal challenge against any bank engaging in this. However, such a challenge would take some time to be heard, and in the meantime other banks could follow suit and attempt to use a wider interpretation. I hope that the House will agree that the most straightforward way to proceed is to amend the relevant Act to put the matter beyond doubt by defining high-quality liquid assets explicitly as

“assets that are eligible for inclusion in a firm’s regulatory liquid assets buffer”.

It is right that the new clause should be applicable from the introduction of the bank levy in 2011, as the Government have been clear from the outset that this was the intention. For example, the Government’s consultation document in October 2010 stated that the deduction would be for those assets

“which meet the FSA definition of high quality liquid assets for the purposes of inclusion in the liquidity buffer”.

I hope that the House will agree that it is right to move quickly to close the scintilla of a possibility that ingenious lawyers could help any bank to avoid paying its full contribution to the levy.

[Chris Leslie]

It is good to see the Minister popping up in the debates on the Finance Bill for the first time, at the eleventh hour. [Interruption.] That is not true; I apologise. He took part in Committee of the whole House, although he did not do the heavy lifting in Committee upstairs. Perhaps it seems now as though it never happened.

This is an interesting little Government new clause. Because of the hour, it would not be surprising if hon. Members’ eyes glazed over and they did not necessarily spot what is going on, but this is an admission from the Government that their bank levy has not been successful. In fact, they are having retrospectively to adjust the rules around the bank levy to make sure that they can net in the supposed £2.5 billion of revenue that the Prime Minister, no less, promised it would yield.

Let us recall the facts about the bank levy. In the last financial year, 2012-13, the bank levy did not bring in £2.5 billion, it did not even bring in £2 billion—it brought in a pathetic £1.6 billion. We should not forget that that does not include the cut in corporation tax that the Chief Secretary and others collaborating in the coalition gave away to the banks at that time. In other words, it raised a net £1.4 billion—a shortfall of over £1 billion on the amount that the Government said that it was supposed to produce. My hon. Friend the Member for Bassetlaw (John Mann), and others in the Chamber, could certainly think of ways in which £1 billion of revenue could be put to good use. That was the giveaway that the design of the bank levy set in train for the banks. It raised not £2.5 billion but just £1.4 billion in the last financial year.

It is worse than that, because in the previous financial year, 2011-12, the bank levy raised just £1.8 billion. Deducting from that the £100 million in corporation tax, it raised a net £1.7 billion. The levy has not brought in the money it should have. The Government said that it would raise £2.5 billion, but in total it has brought in £1.9 billion—nearly £2 billion—which is less than they said it would raise.

If any other Department promised to bring in £5 billion over those two financial years but raised only £3 billion, there should and would be outrage. However, given that the Treasury hide a lot of these issues in the complex lexicon of bank taxation, many would be forgiven for not spotting that this is an absolute scandal.

--- Later in debate ---

[Greg Clark]

I am glad to respond to this short debate.

I do not think that the hon. Member for Nottingham East (Chris Leslie) listened to my remarks earlier, in which I said that the purpose of the new clause was not to raise additional revenue, but to protect the assumptions that were there from the outset. It was always envisaged, going right back to the consultation documents that the Government published before introducing the levy, that the deduction had to be in line with the regulatory requirement. It was a rumour that legal advice was being taken on whether liquid assets could be deducted that went beyond that regulatory buffer which caused us, in anticipation, to close off that possibility and to emphasise that this definition was always what was intended and that there should be no possibility of wriggling out of it. I hope he would acknowledge that that is sensible.

The new clause is not one of the measures that we are taking to increase the yield of the levy. That is dealt with elsewhere. It will protect the yield that was always assumed would be made by the levy. As the hon. Gentleman raises the question of the yield, he will recall our debates in Committee of the whole House on the new clauses that I moved to increase the rate of the bank levy, reflecting our commitment to raise £2.5 billion from it. He will know that in the Budget earlier this year, the Office for Budget Responsibility made its assessments on the basis of the proposed increase in the levy that we have set out. This year, rather than raising £2.5 billion, the OBR forecasts that we will raise £2.7 billion. Next year and for every subsequent year, the OBR estimates that the levy will raise £2.9 billion. That means that we will recoup the under-collection of the bank levy. It is a new levy and it is not always possible to know exactly what such a levy will raise. It has always been clear that the Government intend it to raise at least £2.5 billion. The OBR’s central estimate is that we will more than recoup the requirement that we set out.

[Chris Leslie]

The Minister has said that there will be a £200 million increase above the £2.5 billion for this financial year. However, we have established that the Government are £2 billion behind the curve. There is £2 billion to be recouped. The Minister is culpable for the loss of significant sums of money. He has not given any commitments on that. It would be wrong if he did not go back to the drawing board and think again about this issue.

[Greg Clark]

Our commitment is clear that we will raise £2.5 billion a year. The amendments that we have made to the Bill will do precisely that. We have introduced a permanent bank levy, in contrast to the one-off tax that the Labour party imposed on the banks. During 13 years in government, the only bank levy that the Labour party introduced was, in effect, a levy by the banks on the taxpayer. This levy is the opposite of that: the taxpayer is benefiting from revenue from the banks.

It is right that we target the £2.5 billion yield that we have always had in mind. In addition, when we spot opportunities that might be taken to avoid the levy, we should close them. That is what the new clause does.

Question put and agreed to.

New clause 6 accordingly read a Second time, and added to the Bill.

New Clause 12

Anti-abuse measures

‘(1) Her Majesty’s Revenue and Customs shall review the possibility of bringing forward measures as part of the GAAR to work in conjunction with other G8 countries to require multi-national companies to publish a single easily comparable statement of the amount of corporation tax they pay in the UK.

(2) The Chancellor of the Exchequer shall review the effect of incorporating a global standard for public registration of ownership of companies and trusts via a convention on tax transparency, including a requirement on companies to publish a single easily comparable statement of the amount of corporation tax they pay in the UK, on Treasury tax receipts.

(3) The Chancellor of the Exchequer shall consider, when counteracting tax advantages arising from tax arrangements that are abusive, what steps HM Government could take, working alongside developing country governments, to assess how UK companies could report their use of tax schemes that have an impact on developing countries, and how the UK could assist in the recovery of that tax.

(4) Within six months of the passage of Royal Assent, the Chancellor of the Exchequer shall place copies of the review in the House of Commons Library, and consult with G8 countries on their effectiveness.’.—(Catherine McKinnell.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

The House divided: Ayes 231, Noes 300.