Finance (No. 3) Bill Debate

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Department: HM Treasury
The Conservative Government are shifting policy on exit charge payment plans in the interests of the firms and individuals who benefit from that deferral of tax, but they are not changing policy to make trusts more transparent, which will soon be required by the EU. That amounts to yet another contradiction within the Government’s proposed relationship with the EU, but perhaps that was predictable, given the Conservatives’ long-term determination to protect trusts from scrutiny by tax authorities and those with a legitimate interest in their beneficial ownership. It is most explicit in David Cameron’s personal intervention to try to block EU action in this area.
Helen Goodman Portrait Helen Goodman (Bishop Auckland) (Lab)
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My hon. Friend is making a fantastically good forensic case this afternoon, but I am still not sure whether I fully grasp the point. Is she saying that the Government have still not set out how they intend to collaborate with the European Union on information sharing for tax purposes, and/or is she saying that this will be an excuse for a lighter tax regime in this country and in the other EU member states, which will no doubt be taken into account when the future framework is being negotiated?

Anneliese Dodds Portrait Anneliese Dodds
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I am very grateful to my hon. Friend for her comments. In fact, I will go on to say both, because that is precisely our concern. So far, the Government have been incredibly vague about what commitments they will make on tax matters in relation to preventing avoidance and evasion. Furthermore, we have had some very, very unhelpful comments—to put it extremely mildly—from the Government about whether they might seek to undercut the rest of the EU on tax matters. I know that my hon. Friend follows these matters very closely, as she does money laundering matters, where I argue that we have not been clear enough about how we will collaborate with others into the future.

Our new clause 5 is directed at another Government blank spot: the distributional impact of their tax measures. It would require an equality impact assessment of the Government’s tax avoidance measures in relation to child poverty, household income levels, people with protected characteristics, and our nations and regions. That assessment is necessary because of the continuing leakage from our tax system owing to avoidance as well as evasion. Failure to deal with avoidance has put pressure on the rest of the tax system, which, as I have just mentioned, has been exacerbated by unnecessary tax cuts to the very best-off people and to profitable corporations. As many independent observers have noted, these tax cuts have tended to benefit the very best-off people and often men rather than women, while £4 out of every £5 cut from Government budgets has fallen on women’s shoulders. The Women’s Budget Group has shown how, out of all household types, lone mothers have been the hardest hit by cuts to services and tax and benefit changes, followed by lone fathers and single female pensioners. Among lone mothers, it is black and minority ethnic women who have lost the most.

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Kevin Foster Portrait Kevin Foster
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It is a pleasure to speak in this debate, which is not the first I have ever taken part in on tax avoidance. We have all had some enjoyable banter across the Chamber, but I think it is worth paying tribute to the hon. Member for Oxford East (Anneliese Dodds) for the sheer number of interventions she was prepared to take when she knew they would be challenging. Not many Front Benchers are happy to do that, so it is worth putting it on record.

I spent two years as a member of the Public Accounts Committee, which looked at the details of HMRC’s performance and in particular what work was being done to ensure that the taxes we set by law in this Parliament are collected. We need to be clear about what we are talking about when we talk about tax avoidance. In theory, someone who has an ISA savings account avoids some tax. That is not what we are talking about. What we are talking about is those who seek to use lawful methods, but stretch them to the point of incredulity.

Helen Goodman Portrait Helen Goodman
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The hon. Gentleman has just made the absolutely ludicrous and childish suggestion that buying an ISA is engaging in tax avoidance. For the avoidance of doubt, does he believe that HMRC includes ISAs in its calculation of the tax gap?

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The SNP supports action and accountability on this. We need to make sure that all possible measures to review our tax system are taken so we know that the UK Government’s system is effective and doing what it is meant to do and that we close these loopholes, which allow people to get away with not paying the tax that is rightfully due.
Helen Goodman Portrait Helen Goodman
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I congratulate my hon. Friend the Member for Oxford East (Anneliese Dodds) on a tour de force. I know she really is on top of this subject, having worked with her on the Sanctions and Anti-Money Laundering Act 2018. I thought her speech this afternoon was very impressive.

I will speak to new clauses 5 and 6, which stand in the name of my right hon. Friend the Leader of the Opposition and deal with tax avoidance and evasion. I am sure Members on both sides of the Committee recall what happened on 1 May 2018, when there was a cross-party move, spearheaded by Back Benchers, to introduce public registers in the overseas territories. The Government, in the form of the Minister for Europe and the Americas, conceded that this was a change that should be made. We had tabled an amendment that would have required similar public registers in the Crown dependencies, but the right hon. Gentleman said he would prefer to take a voluntary approach and asked me not to press the amendment. In the spirit of co-operation I agreed not to do so. Today I ask the Government what progress they have made with the Crown dependencies on that voluntary approach. In public, the Crown dependencies are going around saying how delighted they are that the pressure is completely off and how nobody in this House is interested in having similar public registers for the Crown dependencies as for the overseas territories.

That is relevant to this tax debate because the OECD has estimated that, across the OECD countries, the tax lost to the secret jurisdictions is between $100 billion and $240 billion. An independent researcher, Tax Research LLP, has estimated that this country’s tax loss is £18.5 billion a year, which is a significant sum. I know the Treasury thinks everything is going well, but it is not so flush that it can just wave away £18.5 billion.

I thought I had better follow up with Ministers and ask what they were doing, so about three months later I asked the Foreign Office what discussions it was having with the Crown dependencies. This is the answer I received:

“The Foreign and Commonwealth Office is not responsible for UK engagement with the Crown Dependencies regarding existing beneficial ownership arrangements, and has therefore not had any discussions with the Crown Dependencies on this issue.

The Ministry of Justice is the UK Government Department responsible for the UK’s wider constitutional relationship with those jurisdictions.”

So obviously I asked the Ministry of Justice what it is doing to pursue public registers of beneficial ownership with the Crown dependencies. It said:

“The Crown Dependencies are not part of the UK.”

Okay, even I have latched on to that one. It continued by saying that they are self-governing and that:

“The Ministry of Justice manages the constitutional relationship between the UK and the Crown Dependencies. Ministers and officials routinely discuss a range of matters…but it is not my Department’s role to make specific recommendations”

on company registers of beneficial ownership. It went on to say:

“The Ministry of Justice also liaises with the Home Office as the lead UK Department for arrangements on sharing beneficial ownership information”

Blah-de-blah. Finally, it said:

“The Government intends to use its best endeavours, diplomatically”

—by which is meant, “Let’s hit the ball back over to the Foreign Office”—

“and with international partners, to promote public registers of company beneficial ownership as the global standard.”

That will not do. We were made a promise by Ministers on 1 May. This move would help us significantly to reduce tax avoidance.

I also asked Ministers at Treasury oral questions what their estimate was of the amount of money that would flow in from the changes we had made on the overseas territories—this was the part where we had a consensus. I asked that because I could not see anything in the Red Book on it. The Minister said, “Oh well, this was all pie in the sky. We have not done any work on it.” This is why new clauses 5 and 6 are really sensible. The fact is that if Ministers stand up and offer legislation or make promises but do not follow through, there is no point in this House doing anything. That is why requiring impact assessments in the legislation will enable us to keep track of what Ministers are doing and where they have got to. That is why I urge them to do this. It is in their interests, as they will be able to use the impact assessments to keep track and to manage their officials, who are doubtless beavering away to the best of their ability, given the political direction that they are getting.

Earlier, we debated distribution and the impact of the Budget. It is disappointing not to get information about the distributional impact of the Chancellor’s measures. For many years, the Treasury Committee was instrumental in ensuring that distributional analyses were undertaken. I am not clear where we are on this, but I urge Ministers to publish the proper distributional analyses. That will facilitate informed public debate, rather than the exchange of prejudices. I am sure that that is ultimately what Ministers want.

Eddie Hughes Portrait Eddie Hughes
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It is a pleasure to follow the hon. Member for Bishop Auckland (Helen Goodman), although I have to say that the contribution from the hon. Member for Glasgow Central (Alison Thewliss) was the speech by an Opposition Member that most excited me, not least because I wrote a paper on blockchain for the think tank Freer, where I considered the merits of the technology and how it might help us to improve the efficiency of government. I am delighted to say that on Thursday I am going to have lunch with Dr Craig Wright, one of the people associated with the creation of bitcoin, which celebrated its 10th birthday recently. I understand that the Government and the Treasury Committee have given some consideration to the use of crypto-currencies and crypto-assets and how they might be appropriately governed in the future. That is the job of the Government. They have to keep pace with improvements and diversity in technology and understand where money is being used and created, to make sure that their tax take is optimised while observing the general principle of low taxation. The second Roman emperor, Tiberius, said that a good shepherd shears his sheep but does not skin them. I think that is an appropriate maxim for us to follow, but sometimes the Government’s problem is that they need to find the sheep in order to shear them.