Draft Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2021

James Murray Excerpts

Wednesday 8th December 2021 General Committees

[James Murray (Ealing North) (Lab/Co-op)]

Thank you very much, Mr Davies, for the opportunity to respond to this delegated legislation on behalf of the Opposition.

As we have heard, the draft regulations relate to the customs safety and security procedures that apply to the import of goods to the UK from the EU following the end of the transition period. The draft regulations seek to waive temporarily—I use that word with caution—certain customs requirements for goods entering the UK. They extend a previous waiver of the requirement to lodge an entry summary declaration for goods coming into the UK from the EU, and other countries for which a declaration was not required before the UK’s exit from the EU.

We recognise that the waiver may help businesses to avoid extra administrative burdens for now, and that the Government may feel that they need to take action to mitigate delays and avoid disruption to the import of goods to the UK, particularly as so many businesses are feeling the effects of the supply chain crisis and depleted workforces. However, the legislation sits in the context of a series of waivers and waiver extensions on customs oversight that raise serious questions about not only the Government’s competence but their commitment to keeping our borders secure.

After we left the EU and the transition period ended, new security requirements were supposed to be in place for goods entering the UK. The new arrangements were supposed to require pre-arrival safety and security entry summary declarations in respect of goods arriving in Great Britain from the EU’s customs territory; however, the Customs Safety and Security Procedures (EU Exit) Regulations 2019 waived that requirement for six months, from 1 January 2021 until 30 June 2021. The Government’s explanatory memorandum to those regulations clearly acknowledged that the information on the safety and security declarations would be

“analysed by our border agencies to…prevent illegal goods from entering.”

Yet, as the June 2021 end of the waiver approached and the security measures were supposed to come into force, I was in Committee with the previous Financial Secretary to the Treasury, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), debating the new Customs Safety and Security Procedures (EU Exit) Regulations 2021, which sought an extension of the waiver on security measures by another six months to 1 January 2022. I questioned him on whether that would be the last extension. He responded that

“it is absolutely not the plan that the regulations should be further extended, and we send that strong and firm signal to international neighbours and industry.”—[Official Report, Fourth Delegated Legislation Committee, 23 June 2021; c. 6.]

Yet here we are again, this time debating the draft Customs Safety and Security Procedures (EU Exit) (No. 2) Regulations 2021, through which the Government now seek to further extend the waiver for safety and security declarations for another six months, until 30 June 2022.

The repeated extension of the waiver is not the only way in which the Government’s seemingly cavalier approach to customs is having an impact on security at our borders. In December last year, my right hon. Friend the Member for Wolverhampton South East (Mr McFadden) was in Committee to consider the Customs Safety and Security Procedures (EU Exit) Regulations 2020, which provided a six-month waiver extension on exports from the UK to the EU. The Government’s explanatory memorandum to those regulations warned:

“There may be risks associated with using these powers to implement any temporary waivers; for example, to border security.”

The truth is that the Government’s own documents recognise that the security declarations being pushed aside today are needed by our border agencies to monitor what goods are coming across the UK border and to prevent illegal goods from entering; yet Ministers have been prepared to waive the need for those declarations again and again. It is astonishing that today is the third time that Ministers have had to waive border security requirements for goods coming into our country. As I said, it raises questions about not only the Government’s competence but their approach to national security.

Perhaps people have forgiven the Government for a few months’ delay introducing the measures after the end of the transition period, but today the Government are rubber stamping at least a year and half of delay to putting the safety and security declarations in place. The Government are leaving our border agencies without the tools they need to prevent illegal goods entering our country. That is a careless approach to national security and another broken promise.

In the explanatory memorandum, the Government try hard to downplay the impact of the extension. I note that it no longer mentions the threat of illegal goods entering our country. It says that no impact assessment has been prepared because the instrument simply extends existing arrangements. I would be grateful if the Financial Secretary set out whether she believes safety and security declarations are important. Does she agree with the following phrase from the Government’s explanatory memorandum to the Customs Safety and Security Procedures (EU Exit) Regulations 2019? It states:

“Goods imported to the UK from the EU and other nations will require a safety and security declaration. The information on the declaration can then be risk analysed by our border agencies to monitor what goods are coming across the UK border and prevent illegal goods from entering.”

Assuming she still believes that safety and security declarations are important, and assuming she stands by that phrase from the 2019 explanatory memorandum, I would be grateful if she acknowledged that the repeated extension of waivers on the requirement of safety and security declarations is having an impact on border agencies’ work. Will this extension be the very last?

--- Later in debate ---

[Lucy Frazer]

Let me respond briefly. The hon. Member for Ealing North spent some time talking about security. He will note that these requirements were not in place before, so this waiver simply maintains the status quo. There is therefore no additional risk in continuing it. I am sure that he is aware, from having listened to my predecessor in previous debates, that Border Force will continue to undertake intelligence-led risk assessments of imports into GB, as it has done during the current waiver period. I am happy to give him that reassurance.

[James Murray]

I must press the Minister on that point. Surely she cannot have it both ways. To follow on from the point made by the right hon. Member for Maldon, either the requirements are necessary, in which case their delay is having an impact, or they are not necessary, which raises the question of why we are here at all.

[Lucy Frazer]

I am happy to answer that point and those made by my right hon. Friend at the same time. We need to bring in the checks, as well as the staged controls, which we committed to in January, because we are required to do so for customs in the round under the terms of our arrangements. I was addressing the element of security risk. As we are simply maintaining the status quo, there is no additional risk in continuing that arrangement.

I will touch on border security more broadly in terms of migration. Border Force regularly reviews its capacity, plans and resources, and it deploys and recruits staff when necessary to maintain border security. The reason why we are not bringing in and extending those arrangements at this time is simply to do with timing and the disruption that has hit businesses so far.

The hon. Member for West Dunbartonshire mentioned a whole range of issues that really relate to Brexit as a whole. That decision has passed; we have left the EU and we are now dealing with the arrangements that we need to bring in as a result of that decision.

Oral Answers to Questions

James Murray Excerpts

Tuesday 7th December 2021 Commons Chamber

[John Glen]

My hon. Friend knows a lot about this matter and the industry, and I take her concerns very seriously. Although the Government will never insist on individual lending decisions and behaviours of banks, we will engage closely. I will meet her, and the Association of Brokers and Yacht Agents, and I will write to UK Finance to ensure that the guidance that is posted is being used effectively in the circumstances that she has raised.

[James Murray (Ealing North) (Lab/Co-op)]

The Pandora papers show how overseas shell companies secretly buy up luxury property in the UK. In 2018, the Government published draft legislation for a new register of such entities to crack down on the use of UK property for money laundering. This is a matter of law and order. Ministers promised to deliver that register in 2021, yet for some reason, since the current Prime Minister took office, that commitment seems to have been abandoned. Will the Minister now, four years since the UK anti-corruption strategy was published, finally admit that the promise of delivering a register in 2021 has been broken, and will he give us a firm date by which the register will be in place?

[John Glen]

I draw the hon. Gentleman’s attention to the financial action taskforce report in December 2018 that gave the UK the best ever evaluation in terms of anti-money laundering. There are two or three areas where we have taken action.

[James Murray]

Where is the register?

[John Glen]

The hon. Member keeps asking “Where is the register?” I will answer the question in a moment. What the Government have done is put in an additional £63 million in the last Budget to deal with Companies House reform, which is one of the areas. We have been the world’s leader in terms of common reporting standards. We were the first country, five years ago, to raise the standard in terms of transparency. We will implement that register when legislative time becomes available.

Finance (No. 2) Bill

James Murray Excerpts

Committee stage
Wednesday 1st December 2021 Commons Chamber

I will not take up any more time. These measures support a fairer, simpler tax system that is globally competitive in an environment that allows businesses to continue to grow. I therefore move that clauses 4, 6, 7, 8 and 12 stand part of the Bill, and that schedule 1 be the first schedule to the Bill.

[James Murray (Ealing North) (Lab/Co-op)]

The economy the British people need is one that works for all parts of the country, that meets the goal of net zero, and that improves people’s quality of life. To achieve that, we need strong economic growth, yet we have a Chancellor who is failing at this most fundamental of tasks. In the first decade of this century, Labour grew the economy by 2.3% a year. In the past decade to 2019, however, even before the pandemic, the Tories grew it by just 1.8% a year, and now the Office for Budget Responsibility has said that by the end of this Parliament the UK’s economic growth will have fallen to just 1.3% a year. If we had an economy that was growing strongly, we could create new jobs with better wages and conditions in every part of the country, but without that growth it gets ever harder to meet the challenges we face—and the truth is that low growth means that the Conservatives have had to put up taxes.

The tax burden in our country is set to reach its highest level in 70 years. Faced with the decision over which taxes to put up, where have the Tories chosen to let that tax burden fall? It is falling on the backs of working people who face a national insurance hike from this Chancellor at the same time as he cuts taxes for banks. In power, the Conservatives are showing themselves to be the party of low growth, high taxes, and the wrong choices for this country. The Tories are making the wrong choice by pressing ahead with clause 6, which cuts the rate of the banking surcharge and raises its allowance. That cut will see the corporation tax surcharge for banking charges slashed from 8% to 3%, with the allowance for the charge raised from £25 million to £100 million. It will cost the public finances £1 billion a year by the end of this Parliament.

We will oppose this clause and we have tabled new clause 2 to make sure that Members of this House do not forget why the banking surcharge was introduced in the first place. Let us not forget that following the financial crisis of the late 2000s, there was recognition that banks have an implicit state guarantee thanks to their central position in the UK economy. At the time, the Government seemed to realise that this guarantee should be underpinned by a greater tax contribution. Indeed, this has been a critical justification behind both the bank levy and the banking surcharge. The Government’s own policy paper published alongside the October Budget clearly stated:

“Since 2010, banks have been subject to sector-specific taxes. As a result they have made an additional contribution to public finances, reflecting the risks that they pose to the UK financial system and wider economy and recognising the costs arising from the financial crisis.”

Yet despite appearing to acknowledge the justification behind this surcharge, the Government are today pushing ahead with slashing it by nearly two thirds.

That is why our new clause 2 would require the Government to publish a review that considers the total revenue raised by the banking surcharge since its introduction, alongside the total public expenditure on supporting the banking sector since 2008, and an assessment of risks to the banking sector in the future, including the likelihood of further public support being required. I would welcome the Government’s support for such a review, but if it is not forthcoming, perhaps the Minister could explain why the need for banks to make an additional contribution to public finances is suddenly less now than it has been for the past decade. Without clear evidence from the Government, we can only go on what others say. Tax Justice UK has pointed out that

“it appears that the bank levy and bank surcharge will not even have fully repaid the public expenditure on the banking sector at the financial crisis; let alone provided any insurance against a future crash, before being cut”.

It is clear that cutting this tax on banks is the wrong choice at the wrong time. At a time when the Government are being forced to raise taxes, it tells us everything we need to know about the Conservatives’ instincts—that they have decided to cut taxes for banks while raising them for working people.

Elsewhere in the Bill, clause 4 also draws to our attention other choices the Government are making on taxes. Although the clause increases the rate of tax on dividend income, let us make no mistake over the context of this measure. When the Prime Minister set out the Government’s plans for their new health and social care levy in September, he was rightly criticised by Members in all parts of the House for funding it overwhelmingly through taxes on working people and their jobs. At the time, the Prime Minister tried to soften the blow by claiming that the Government’s tax plans were fair because the tax rise on working people would be accompanied by a tax rise on income from dividends. He said that a rise in dividend tax rates would mean the Government

“will be asking better-off business owners and investors to make a fair contribution too.”—[Official Report, 7 September 2021; Vol. 700, c. 154.]

The Prime Minister was desperate to give the impression that this tax rise is not falling overwhelmingly on working people and their jobs.

Now, I am sure the Prime Minister would never be loose with his language, nor the truth, but let us look at the facts. The reality is that the dividend tax rise in clause 4 would raise just 5% of the total revenue needed for the health and social care levy. The rest of that tax bill—95% of its total, or £11.4 billion a year—will land on working people and their jobs. The Government do not seem to have considered asking those receiving income from dividends to take a greater share of the burden, the impact of which our new clause 1 asks them to assess.

--- Later in debate ---

These measures will ensure that the Government can continue to crack down on economic crime. I therefore urge Members to support clauses 27 and 28, 53 to 66, 84 to 90, 91 and 92, as well as schedules 12 and 13 standing part of the Bill. I also support Government amendments 2 and 3 to clause 28.

[James Murray]

I rise to speak in support of the new clauses in my name and those of the Leader of the Opposition and the shadow Chancellor.

Key principles of our tax system are that everyone should pay their fair share and that, in turn, the Government should treat everyone fairly. On the first of those two principles, the fact that large multinationals avoid paying their fair share of tax in the UK is one that rightly angers people across the country. This behaviour means that the UK misses out on vital revenue that could support our public services and it leaves British businesses that play fair at a disadvantage.

As the Minister will know, we were very disappointed that the Government recently allowed the global minimum corporate tax rate, which seeks to limit profit shifting and tax avoidance, to fall from the initial 21% proposed by President Biden to just 15%, but this is still progress. Before I turn directly to clauses 27 and 28, which relate to profit shifting, I ask the Minister to briefly confirm when she next speaks exactly what the timetable is for the Government putting the global minimum rate into UK law.

Clauses 27 and 28 amend the operation of the diverted profits tax, which was introduced in 2015 to try to limit multinationals from entering into profit-shifting arrangements through which they could avoid paying tax. As we have heard, clause 27 amends UK law on double tax treaties to allow mutual agreements between the UK and the other relevant tax state to take effect in relation to the diverted profits tax. Clause 28 is also technical, although it raises an important question about this Government’s willingness to hold companies to account for tax fraud. I would like to press the Minister on that point. TaxWatch has highlighted that HMRC’s annual accounts, published in November, show that HMRC is currently carrying out 100 investigations into multinational companies that may be diverting profits away from the UK, and HMRC’s statements clearly imply that a number of these investigations relate to fraudulent conduct.

In 2019, HMRC introduced a new profit diversion compliance facility, which allows multinationals to come forward and pay the taxes that they should have paid, plus any penalties, without having to pay the diverted profits tax. The changes in clause 28 appear to facilitate the settlement of disputes without diverted profits tax being charged, by extending the time period for which a company can amend previous tax returns in order to get out of having to pay it. Will the Minister confirm whether any company that is currently under investigation for fraudulent conduct involving diverting profits away from the UK may have the investigation of their fraudulent conduct dropped if they make use of the profit diversion compliance facility? It is an important question about how robust the Government’s approach to tax avoidance really is. As TaxWatch has put it,

“the Profit Diversion Compliance Facility should not become an amnesty for tax fraud.”

More widely, it is critical that the Government take more action on economic crime. We therefore support the principle behind the levy introduced by clauses 53 to 66, and hope that the funding from the levy will go some way towards increasing much needed capacity for the Government to tackle economic crime. We question, however, whether it will be enough, so our new clause 5 would require the effectiveness of the levy to be reviewed. This concern is evidently shared across the House, as new clause 15 in the name of my right hon. Friend the Member for Barking (Dame Margaret Hodge) and some Government Members would require the Government to assess the effectiveness of the proposed levy rates, and of levy rates twice and three times as high.

We also question why the Government are failing to make critical changes to the law that everyone agrees would strengthen the UK’s ability to fight economic crime. At the top of the list must be finally putting in place a public register of the beneficial owners of overseas entities that own UK property, to which our new clause 5 refers. A new public register would bring much needed and much delayed transparency to the overseas ownership of UK property, and help to stop the use of UK property for money laundering.

Plans to introduce a register were first announced by the Conservatives in 2016. Legislation was first published in 2018. We were promised that it would be operational by 2021, yet with just one month of this year left to go, this has become another broken promise from the Conservatives. It is very hard to conclude anything other than that the Government are, under the leadership of the current Prime Minister, deliberately abandoning their commitment to the register. We need only look at the language in the annual written statements on progress toward its introduction to see a clear pattern emerge.

In May 2019—two months before the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) became Prime Minister—a ministerial update on the register reported:

“Over the past year, significant progress has been made towards the introduction of the register... the Government intends that the register will be operational in 2021”.

Yet a year after the current Prime Minister took office, the next ministerial update, in July 2020, took a different tone, saying rather more cautiously:

“This register will be novel, and careful consideration is needed before any measures are adopted”.

By November 2021, the latest ministerial update simply said:

“The overseas entities register is one of a number of proposed corporate transparency reforms... The Government intend to introduce legislation to Parliament as soon as parliamentary time allows.”

Those statements do not sound like a toughening of resolve.

What is more, the ministerial statements themselves have only been published because the Government have been required, by section 50 of the Sanctions and Anti-Money Laundering Act 2018, to publish three reports on progress toward the register—one in each of the years 2019, 2020 and 2021. That is why our new clause 5 would require the Government to continue publishing annual updates on 31 December each year on progress towards implementing the register. We are determined not to allow the Prime Minister to let this commitment slip out of sight.

As I said on Second Reading, it is astonishing that the Government feel that the need for this register is becoming less urgent. The Pandora papers confirmed how overseas shell companies secretly buy up luxury property in the UK and how much transparency is needed to help to tackle money laundering. Ministers did not respond to my questions on Second Reading, but I did receive a letter from the Exchequer Secretary yesterday, where she wrote:

“While these measures have full Treasury support, they are not Treasury led.”

It is quite astonishing that Treasury Ministers are now trying to blame their colleagues in the Department for Business, Energy and Industrial Strategy for the delay in bringing in the register, when every indication is that the lack of determination comes directly from the Prime Minister. The truth is that concerns over Russian donations to the Conservative party and the use of high-end property in the UK for Russian money laundering mean that putting in place the register of overseas owners without delay is a key part of restoring the trust in politics that Conservative MPs and the Prime Minister have done so much to erode.

Clauses 84 to 92 and schedules 12 and 13 relate to tax avoidance. Our new clause 7 requires an independent assessment of HMRC’s approach to the loan charge scheme and recommendations for altering that approach. In my opening remarks on the previous group of amendments, I said that a key principle of our tax system was that the Government should treat everyone fairly. We fear that with their approach to the loan charge the Government are sorely failing in that duty. The Government’s approach to the loan charge means that ordinary people who are victims of mis-selling are facing huge bills that are causing untold distress and personal harm. It was truly shocking to read reports only last week of eight cases of suicide among those facing demands for payments. A new approach to the loan charge is urgently needed.

That is why our new clause would require the Chancellor to commission an independent review to consider HMRC’s approach to the loan charge scheme and make recommendations on how it should be altered. This new review must finally offer a truly independent assessment, which is why we would require the Government to make a statement to the House of Commons on what efforts have been taken to guarantee its independence. Once recommendations have been made, we would then require the Government to explain which of them they will accept, and why, and to report on progress towards implementing them every six months.

It is clear that something is very wrong with the Government’s approach on the loan charge scheme and that efforts until now to find a solution have fallen far short. Our proposal would finally offer a way forward. I urge Members on both sides of the Committee to support our new clause on this matter when it comes to a vote. I also urge them to support our new clause to make sure that the register of the beneficial owners of overseas entities that own UK property does not get forgotten. We have already seen that the promise to have this register operational by this year has been broken. We must now ensure that the Government do not allow it to disappear altogether.

[Alison Thewliss (Glasgow Central) (SNP)]

On 10 November, the Prime Minister said that the UK is

“not remotely a corrupt country”.

One can believe or disbelieve things that the Prime Minister says, but it is clear from the Bill that the UK is certainly not a transparent country when it comes to taxes. Efforts in the Bill to tackle economic crime are of course welcome, but, as ever, this Government are not going far enough to do so. The Minister mentioned the economic crime plan. On Monday, we had the Minister for Security and Borders at the Treasury Committee, where he set out that 34 of the 52 actions have been completed, while the rest are in progress and a few of them appear to be some way from being completed. It worries me that priority is not being given to these actions.

Clauses 53 to 66 provide for the Economic Crime (Anti-Money Laundering) Levy, which the Government estimate will raise approximately £100 million per year to help to fund anti-money laundering and economic crime reforms. SNP Members are concerned that this part of the Bill is not well targeted and could potentially act as an additional tax on businesses that are not breaking the rules. For example, the Association of British Insurers is concerned that insurers will be disproportionately hit, because they present very little risk to the Treasury of tax avoidance and money laundering. The Chartered Institute of Taxation has expressed concern that smaller tax adviser firms may be driven from the market because of the increasing costs and reducing choices for consumers. It has also said that the measure could increase the tax gap by incentivising de-professionalisation. If it becomes too costly for firms to meet compliance, they may just choose to de-register from professional bodies altogether. De-professionalisation can result in less ethical behaviour and increased costs of supervision by HMRC, neither of which is particularly in keeping with the aims of this legislation. I understand that more than 32,000 firms are already supervised directly by HMRC, and the staffing to cover that does not nearly match the size of the job.

--- Later in debate ---

The hon. Gentleman suggested that we have abandoned the commitment to bring in a register of beneficial ownership. I wholly refute that. We have not abandoned it. As he rightly said, the Exchequer Secretary to the Treasury, my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) wrote to him yesterday setting out the position, which is that a draft Bill underwent pre-legislative scrutiny in 2019. Since last updating Parliament in July 2020, the Government have published their response to the consultation on reforming Companies House. Three further consultations were published in December 2020, seeking further views on the finer details of the reform package. Not only that, in the letter my hon. Friend, the Exchequer Secretary pointed out that under the UK’s leadership all G7 countries have now committed to strengthening and implementing their beneficial ownership registers.

[James Murray]

Will the Minister give way?

[Lucy Frazer]

I am not going to give way because I want to make a number of points and the hon. Member has had an opportunity to put forward his points.

The hon. Gentleman also mentioned the loan charge and asked for a review. He will have heard in my speech and will know that we had a review less than two years ago. I know that this is an issue that concerns many Members. We did legislate as a result of that. We legislated on 3 December 2020. As a result of the review, 30,000 individuals benefited. In fact, 11,000 were removed from the loan charge.[Official Report, 6 December 2021, Vol. 705, c. 2MC.]

--- Later in debate ---

[Lucy Frazer]

VAT is our third-biggest tax. It raised £130 billion in 2019-20, making a major contribution to the public finances. It helps to pay for our schools, hospitals and police throughout the UK.

Now that we have left the EU, we are free to set our own VAT rules and are already using that freedom to create a fairer, more robust tax system. We have altered how VAT is paid on low-value consignments from overseas suppliers. We have also implemented changes to passengers’ policy and introduced a zero rate on women’s sanitary products. On top of all that, we are reviewing the UK funds regime, including the VAT treatment of fund management fees. We are establishing an industry working group to review how financial services are treated for VAT purposes. As I have illustrated, this Government are focused on using our new freedoms to create a VAT system that is ready for the future, and the measures in the Bill build on that work.

Some clauses being discussed today will be of most relevance to businesses and consumers in Northern Ireland. The UK has implemented the Northern Ireland protocol in a way that seeks to protect the UK internal market. Today’s clauses play a part in achieving that objective by allowing Northern Ireland businesses and consumers to have the same economic opportunities as those in the rest of the UK.

Finally, as Members will be aware, freeports are an important part of the Government’s levelling-up agenda. We see them as central to our goal of sparking regeneration, creating jobs and inspiring innovation throughout the country. One of the clauses that we are debating today supports the delivery of their VAT benefits.

Let me turn to the clauses themselves. The second-hand car sector in Northern Ireland relies heavily on sourcing vehicles in Great Britain for resale in Northern Ireland. Clauses 68 to 70 will together ensure that second-hand car dealers in Northern Ireland can continue to sell cars and other motor vehicles sourced in Great Britain and the Isle of Man on an equal footing with their counterparts in the rest of the UK.

Under the Northern Ireland protocol, the VAT second-hand margin scheme is not available for goods in Northern Ireland if they were purchased in Great Britain or the Isle of Man. This means that motor vehicle dealers in Northern Ireland must account for VAT in full on sales of these vehicles rather than on the profit margin. That would disrupt the UK’s internal market, potentially increase prices for consumers or costs for businesses and risk undermining the trade in motor vehicles in Northern Ireland altogether. It is only right that the Northern Ireland used car industry has the same economic opportunities as that of the rest of the country. That is why the Government are actively discussing arrangements with the EU to enable the margin scheme to continue in Northern Ireland for cars sourced from Great Britain.

Clause 68 provides the legislative basis for an interim arrangement that allows dealers in Northern Ireland to continue to use the VAT second-hand margin schemes for vehicles sourced in Great Britain once an agreement is reached with the EU. This interim arrangement will be available for motor vehicles first registered before 1 January 2021. It will end once the second-hand export refund scheme is introduced.

Clause 69 introduces a power to bring in an export refund scheme, which the Government intend to apply to second-hand motor vehicles. The aim of this permanent scheme, once introduced, is to give dealers in Northern Ireland a comparable financial outcome to the margin scheme. The clause achieves this by enabling businesses to claim a refund equivalent to VAT on the price they paid on used vehicles. The scheme will be available for used motor vehicles moving to Northern Ireland and the EU from Great Britain. Legislation to implement the scheme will be introduced once we have held further discussions with the industry.

Clause 70 simply makes some consequential changes to VAT to limit the zero rate for export or removal of goods where they are subject to the margin scheme. This is a technical measure that will ensure that businesses are not at an advantage compared with before the end of the transition period. Businesses will still be able to export goods at zero rate outside the margin scheme. This ensures consistency of treatment across the UK.

These clauses are necessary to ensure that the motor vehicle sector and consumers in Northern Ireland are not disadvantaged. Taken together, they will benefit the 500 businesses that trade in used cars in Northern Ireland.

Clause 71 makes changes to extend a VAT exemption to the importation of dental prostheses. Before the end of the transition period, such prostheses were supplied by registered dentists or dental technicians between Great Britain and Northern Ireland, and were exempt from VAT because an exemption applies to domestic sales. However, following the end of the transition period, the exemption no longer applies to the movement of these goods between GB and Northern Ireland. As the VAT that is due cannot be recovered by the registered dentist, there is a risk that it might be passed on to patients. The changes made by clause 71 extend the current domestic UK VAT exemption to include dental prostheses imported into the UK, including those moving between GB and Northern Ireland, ensuring that we meet our international obligations, and that VAT treatment between GB and Northern Ireland is consistent.

Clause 93 and schedule 14 concern the treatment of goods in the customs-free zones, which are located in freeports. Freeports will help to regenerate areas across the country and bring prosperity to the regions. The Government have already legislated for a beneficial VAT regime on certain business-to-business transactions while in the free zone of a freeport. Clause 93 makes additional VAT elements to freeports by introducing an exit charge to ensure that VAT is collected on goods that have benefited from a zero rate of VAT in a free zone to prevent tax losses or unintended VAT advantage. It therefore maintains a level playing field for UK businesses.

The clause also amends existing VAT legislation to remove any conflict with the new free zone rules. Finally, the clause gives HMRC the power through regulations to adapt the exit charges provisions as necessary. This will ensure that the exit charge is correctly targeted—for instance, to prevent any abuse of the VAT zero rate. Clause 93 and schedule 14 therefore prevent tax loss by introducing an exit charge, and provide clarity to free zone rules by amending existing legislation that may conflict with them.

Our VAT measures take advantage of the opportunities following our exit from the EU to allow our businesses to prosper. I urge the Committee to ensure that clauses 68 to 71, and 93, stand part of the Bill, and that schedule 14 be the fourteenth schedule to the Bill.

[James Murray]

Thank you, Mr Evans, for the opportunity to respond on behalf of the Opposition to the clauses selected for this debate on particular aspects of the operation of VAT. As the scope of these clauses is quite limited, I suspect that you will not allow me to speak in detail about our call on the Government immediately to cut VAT to zero on domestic energy bills.

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

That’s right.

[James Murray]

Of course, we believe that such a change would offer immediate help now for people struggling with the cost of living over the winter ahead. I therefore urge the Chancellor to reconsider the Government’s refusal of our suggestion, even at this late stage.

Let me turn to the specific measures in the Bill. As we have heard, clauses 68 to 71 make a number of changes to the operation of VAT as it relates to Northern Ireland. Clause 68 allows motor dealers in Northern Ireland to continue to sell vehicles under the second-hand margin scheme, provided that they were sourced in Great Britain or the Isle of Man. This is a temporary measure before a more permanent scheme comes into place. It is, in effect, a technical change to reduce VAT on car dealers in Northern Ireland, and we do not oppose it. We understand that clauses 69 and 70 are necessary consequences of clause 68 to avoid the interim provisions being created for second-hand car sales in Northern Ireland leading to a distortion in the UK market, so we do not oppose them either.

Clause 71 similarly means that registered dentists or dental care professionals, or those importing on their behalf, can exempt from VAT the importation of dental prostheses—medical devices to replace broken or missing teeth. Domestic supplies of such goods are exempt from VAT when made by a registered dental professional. However, under the Northern Ireland protocol, movements of goods between Great Britain and Northern Ireland will technically be treated as exports and imports for VAT purposes. Applying the same VAT treatment to domestic supplies and imports will ensure the equal treatment of dental prostheses supplied within the UK. Again, we do not oppose this measure, as we do not want to see businesses or other workers in Northern Ireland at a disadvantage compared with those in other parts of the UK.

Clause 93 and schedule 14 relate to free zones—secure customs sites within a wider freeport area. Existing regulations already provide for the zero rating of certain supplies of goods and services in free zones, and the purpose of the clause is to put in place an exit charge to ensure that businesses do not gain unintended advantage from the zero rate. Again, we recognise the role this measure plays and we will not be opposing it.

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

James Murray Excerpts

Thursday 25th November 2021 General Committees

The Financial Secretary to the Treasury (Lucy Frazer)

- - Excerpts

I beg to move,

That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Taiwan) Order 2021.

It is a pleasure to appear before you again, Ms Rees.

The draft order will give effect to a protocol that was agreed in August to amend the existing double taxation agreement, or DTA, with Taiwan. The order inserts into legislation important provisions recommended by the Organisation for Economic Co-operation and Development and the G20’s project on base erosion and profit shifting, or BEPS, to prevent abuse of the DTA and to improve dispute resolution.

The draft order also includes the latest exchange-of-information provisions following the OECD model tax convention, which informs bilateral treaty negotiations and is largely followed by the UK. Furthermore, the order adds a rule to protect the UK’s taxing rights over dividends paid from investment vehicles linked to land and property such as UK real estate investment trusts, or REITs.

I will now give a brief explanation of the draft order’s context before talking in more detail about the changes that it makes. As Members may recall, the BEPS project was an international effort co-ordinated by the OECD to tackle tax avoidance and improve the operation of double taxation agreements generally. It recommended a range of provisions that could be adopted in DTAs to ensure that they continued to fulfil their main purpose of supporting global trade and investment while limiting the opportunity for the agreements to be used for tax evasion or avoidance.

The draft order includes all the minimum standards that were recommended by the BEPS project to prevent avoidance through the abuse of tax treaties and to improve dispute resolution in relation to the Taiwan DTA. Specifically, the order gives effect to the minimum standard on preventing treaty abuse by adding a rule known as the principal purpose test. This ensures that the DTA does not provide opportunities for non-taxation or reduced taxation through evasion or avoidance, including through so-called treaty shopping arrangements, where transactions are routed through particular jurisdictions to take advantage of benefits provided by its DTA. Furthermore, the order changes the preamble of the DTA to make it clear that the contracting parties do not intend it to be used to avoid tax.

The draft order gives effect to the minimum standard on improving dispute resolution set out in the final recommendations of the BEPS project by changing the provisions that govern how disputes involving the application of the DTA are resolved. Those changes mean that, where a taxpayer considers that the DTA has not been applied correctly, they can present their case to either tax authority, rather than just that of the territory where they are resident. It will also ensure that any resolution of the dispute must be implemented even if the time limits in the domestic law of either territory would otherwise prevent that.

The draft order includes other changes that were optional recommendations of the BEPS project. Such provisions clarify the treatment of fiscally transparent entities and insert a so-called saving clause, which makes it clear that the DTA cannot be used to sidestep domestic anti-avoidance rules. In addition, the order updates the tiebreaker rule, which determines the residence of dual resident companies under the DTA. Furthermore, a new provision ensures that, where a dividend is paid out of investment vehicles linked to land and real property, such as UK real estate investment trusts, the UK has the right to withhold tax at 15% on the dividend. That is an important provision included in recent UK DTAs and it protects the UK’s taxing rights over income from land and property situated in its territory.

Finally, the draft order updates the provision relating to capital gains. This allows the UK to tax gains on shares and comparable interests that derive at last 50% of their value from immovable property. I hope hon. Members have found this explanation of the context and detail of the order helpful. To sum up, the order implements improvements to the DTA in relation to Taiwan to tackle tax avoidance and evasion and to improve dispute resolution in line with current international standards. I commend the order to the Committee.

James Murray (Ealing North) (Lab/Co-op)

-

Thank you for the opportunity to respond on behalf of the Opposition, Ms Rees, as we consider this order on double taxation relief and international tax enforcement with the territory of Taiwan. It is a pleasure to serve under your chairmanship again.

The schedule to the order contains a protocol that amends an agreement in relation to the territory of Taiwan dealing with the elimination of double taxation with respect to capital gains tax, corporation tax and income tax, the prevention of tax avoidance and evasion and international tax enforcement. The agreement aims to eliminate the double taxation of income gains arising in one territory and paid to residents of another territory. As we have heard, that is done by allocating the taxing rights that each territory has under its domestic law over the same income and gains, and by providing relief from double taxation. There are also specific measures combating discriminatory tax treatment and providing for assistance in international tax enforcement.

As we can see, the amendments to the agreement are relatively minor and technical in nature, mostly updating terminology to bring about consistency with similar bilateral agreements with other states and territories. Various articles within the schedule replace outdated terminology, and further technical amendments are added to the schedule, relating to persons covered, taxes covered, general definitions, residents, dividends, interest, royalties, capital gains, limitation of relief, non-discrimination, mutual agreement procedure and exchange of information. An article relating to entitlement of benefits is also added to the agreement.

The Opposition will not oppose this order. It is, of course, important that bilateral agreements concerning taxation are clear and up to date, and that revenue generated from taxation is neither inappropriately drawn nor inappropriately allocated. Similarly, we support the measure to reduce the administrative burden on Her Majesty’s Revenue and Customs, which would otherwise have to process rebate applications.

While we are on the matter of international taxation, however, I would like to briefly ask the Minister, as this is the first time we have had the chance to discuss the matter, her view on the global minimum corporation tax rate that the OECD and G20 recently agreed. In her response, I would be grateful if the Minister could confirm whether 15% is the rate the Government had hoped for, or whether they had hoped it might be higher or lower.

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.

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

James Murray Excerpts

Thursday 25th November 2021 General Committees

[James Murray (Ealing North) (Lab/Co-op)]

Thank you for the opportunity to respond on behalf of the Opposition, Ms Rees, as we consider this order on double taxation relief and international tax enforcement with the territory of Taiwan. It is a pleasure to serve under your chairmanship again.

The schedule to the order contains a protocol that amends an agreement in relation to the territory of Taiwan dealing with the elimination of double taxation with respect to capital gains tax, corporation tax and income tax, the prevention of tax avoidance and evasion and international tax enforcement. The agreement aims to eliminate the double taxation of income gains arising in one territory and paid to residents of another territory. As we have heard, that is done by allocating the taxing rights that each territory has under its domestic law over the same income and gains, and by providing relief from double taxation. There are also specific measures combating discriminatory tax treatment and providing for assistance in international tax enforcement.

As we can see, the amendments to the agreement are relatively minor and technical in nature, mostly updating terminology to bring about consistency with similar bilateral agreements with other states and territories. Various articles within the schedule replace outdated terminology, and further technical amendments are added to the schedule, relating to persons covered, taxes covered, general definitions, residents, dividends, interest, royalties, capital gains, limitation of relief, non-discrimination, mutual agreement procedure and exchange of information. An article relating to entitlement of benefits is also added to the agreement.

The Opposition will not oppose this order. It is, of course, important that bilateral agreements concerning taxation are clear and up to date, and that revenue generated from taxation is neither inappropriately drawn nor inappropriately allocated. Similarly, we support the measure to reduce the administrative burden on Her Majesty’s Revenue and Customs, which would otherwise have to process rebate applications.

While we are on the matter of international taxation, however, I would like to briefly ask the Minister, as this is the first time we have had the chance to discuss the matter, her view on the global minimum corporation tax rate that the OECD and G20 recently agreed. In her response, I would be grateful if the Minister could confirm whether 15% is the rate the Government had hoped for, or whether they had hoped it might be higher or lower.

[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.

Value Added Tax (Distance Selling and Miscellaneous Amendments No. 2) Regulations 2021 Customs Tariff (Establishment and Suspension of Import Duty) (EU Exit) (Amendment) (No. 2) Regulations 2021

James Murray Excerpts

Thursday 18th November 2021 General Committees

[James Murray (Ealing North) (Lab/Co-op)]

Thank you, Ms Rees, for the opportunity to respond on behalf of the Opposition as we consider the two statutory instruments.

The Value Added Tax (Distance Selling and Miscellaneous Amendments No. 2) Regulations 2021 amends certain provisions in the Value Added Tax Act 1994 relating to the application of VAT on goods in Northern Ireland, pursuant to the United Kingdom’s obligations under the Northern Ireland-EU protocol. The Opposition can see that this SI makes a minor correction and goes on to make amendments to provisions set out in the Finance Act 2021 relating to the application of two new VAT schemes in Northern Ireland.

The intra-community distance-selling OSS scheme and the IOSS scheme seek to simplify VAT accounting for the sale of goods direct to consumers by suppliers based in the EU and by suppliers who import goods into the EU for sale. Other amendments to the 1994 Act involve the rectification of minor errors, the removal of superfluous wording and edits to bring about consistency in terminology across the relevant schedules.

Finally, we see that this instrument makes amendments to confirm that certain references to Great Britain are also applicable to the Isle of Man. This addresses the issue and risk of double taxation of goods moved between the Isle of Man and Northern Ireland. The Opposition will, of course, not oppose this instrument, as it is important that regulations are clear, and it is right that these errors are corrected through the SI. For the sake of clarity, however, can the Financial Secretary set out what, if any, negative impact the legislation has had in its unamended state?

The Customs Tariff (Establishment and Suspension of Import Duty) (EU Exit) (Amendment) (No. 2) Regulations 2021 are made in relation to part 1 of the Taxation (Cross-border Trade) Act 2018 and seeks to amend the Customs Tariff (Suspension of Import Duty Rates) (EU Exit) Regulations 2020 and the Customs Tariff (Establishment) (EU Exit) Regulations 2020. This second instrument we consider today amends the definition of

“Suspensions of Import Duty Rates Document”

in the Customs Tariff (Suspension of Import Duty Rates) (EU Exit) Regulations 2020 to refer to a revised document: the “Tariff Suspension Document”.

The Customs Tariff (Establishment and Suspension of Import Duty) (EU Exit) (Amendment) (No. 2) Regulations 2021 goes on to amend a typographical error and revise the definition of

“Tariff of the United Kingdom”

to refer to another separately published document, which contained a number of errors and inconsistencies. We will not oppose this instrument, as it is important that tariffs are applied accurately and fairly and that the law concerning those tariffs is unambiguous and that its language is appropriate and accurate.

I have sat in Committees considering statutory instruments that sought to amend errors, and I dare say that I may again. Impact notes routinely describe a negligible impact arising from such amendments, but I am concerned that errors keep piling up. I would be grateful if the Financial Secretary could consider committing to a cumulative impact study of all these errors, perhaps to be reported when we inevitably next sit in this Committee room to correct further errors.

Finance (No. 2) Bill

James Murray Excerpts

2nd reading
Tuesday 16th November 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I beg to move the amendment in my name and those of hon. and right hon. Friends including the Leader of the Opposition and the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves):

That this House declines to give a Second Reading to the Finance (No. 2) Bill because it does nothing to help people who are struggling with the rising costs of living, who are being hit by the cut to universal credit, or who are facing a rise in National Insurance Contributions and a freeze in the Income Tax Personal Allowance from next April, because it nonetheless cuts taxes for banking companies and derives from a Budget that will see the tax burden rise to its highest level in 70 years and announced cuts in air passenger duty for UK domestic flights, and because it fails to set out a plan to grow the UK’s economy, fundamentally reform business rates, and create better jobs for the future.

I am grateful to have the opportunity to set out the view of the Opposition on the Second Reading of the Bill, which comes at a time when people across the UK are seeing the cost of living, from electricity to food prices, going up and up; when businesses are trying to get back on their feet after 18 months of struggle; and when our country needs leadership to build a new net zero economy with jobs for the future. Yet let us look at what the Government are doing: putting up taxes on working people while cutting them for banks; giving up on fundamental reforms to business rates that would give our high streets the backing they need; and failing to invest in the new jobs of the future that would turn the challenge of net zero into an opportunity for our country’s economy to grow.

The truth is the Tories will never put working people first. I stood here two months ago arguing that the Government were wrong to hike up taxes on working people with their national insurance rise when those with the broadest shoulders should be paying more, and yet what we have before us today is a tax cut for banks. That tells us everything we need to know about the Tories when in power. They do not seem to care whether something is fair for people in this country, except of course when they think something is unfair to one of their own, and then they simply change the rules to suit themselves. The British people are seeing through the Government’s approach: people are seeing that this Government are more concerned with protecting themselves than with protecting the economy and people’s quality of life.

The foundation of any Government’s approach to the economy must be a plan for growth. With a growing economy, we have the chance to create new jobs with better wages and conditions in every part of the country, but without growth it gets ever harder to meet the challenges we face. Let us look at the record of this Government. As the shadow Chancellor my hon. Friend the Member for Leeds West told the Chancellor right after the Budget, it is clear what direction we are going in under the Conservatives. In the first decade of this century, despite the financial crisis, Labour grew the economy by 2.3% a year. In the last decade to 2019, however, even before the pandemic, the Tories grew the economy at just 1.8% a year. In the future, things look even worse. The Office for Budget Responsibility has said that by the end of this Parliament the UK economy will be growing by just 1.3% a year. This low growth is hitting people in their pockets: data from the Office for National Statistics show that average yearly wage growth has fallen from 1.6% in the decade to 2010 to 0.5% in the decade since 2010. We do not have much to look forward to, either, with the Institute for Fiscal Studies saying that over the next five years, real household disposable income is expected to grow by just 0.8% a year, well below the historical average.

Low growth is becoming a hallmark of the Tories in power. What they fail to realise is that with the right investment, the challenges we face can become opportunities for growth. In no part of our lives is that more evident than our response to climate change. Labour has said that we would invest an additional £28 billion every year for the rest of this decade in transforming our economy—from new jobs building batteries for electric vehicles, to manufacturing and maintaining wind turbines, and finally insulating our homes to get energy bills down. With investment on the scale we need, and with Labour’s pledge to buy, make and sell more in Britain, we would turn an urgent, critical response to the climate emergency into an opportunity for new jobs with decent pay and conditions in every part of our country.

In every part of our country, too, we see shops and high streets struggling to get back on their feet after the last 18 months. We should turn their urgent need for support into a chance to fundamentally overhaul the system of business rates, which has had its day. Business on high streets across the country know that the business rates system is broken and that fundamental change is long overdue. We know that, too, which is why we have pledged to scrap business rates and replace them with a new system of business taxation fit for the 21st century, which would incentivise investment, reward businesses moving into empty premises and encourage environmental improvements. Crucially, under our new system, no public services or local authorities would lose out, and online businesses would pay a fairer share.

We thought the Conservatives also knew that change on that scale was needed. We thought they might understand the need for an overhaul of the system, as their 2019 manifesto promised to reduce business rates through

“a fundamental review of the system.”

We thought they might even have meant it: in 2020, the Treasury began a consultation on what it said would be the fundamental review that its Ministers had promised. Yet in last month’s Budget, the Chancellor decided to ditch any prospect of fundamental reform under this Government.

Measures in the Budget for next year may be welcome, but no matter how the Chancellor tries to spin it, the promise of fundamental reform from this Government is over. As the chief executive of the British Retail Consortium put it, what the Government have offered

“falls far short of the truly fundamental reform that is needed and was promised”.

That manifesto promise of a fundamental reform of business rates has been broken, just as the promise not to raise national insurance was broken a month before.

We have a Government who are breaking their promises and failing to set out a plan to grow the UK’s economy and create better jobs for the future. Growing our economy would mean more jobs and higher tax revenues to invest in public services, but if the UK economy had grown at the same rate as other advanced economies over the last decade, we could have had £30 billion more to invest in public services without needing to raise taxes. Yet under the Tories, lower growth means that taxes need to go up. Last month’s Budget saw taxation rise to its highest level for 70 years.

Crucially, the decisions about who should shoulder the burden of tax rises tell us everything we need to know about the Tories when they are in power. The Tories are making life harder for half the population through their personal allowance freeze, for all working people through their national insurance tax rise, and for struggling families through their cut to universal credit, yet they are making life easier for bankers by cutting taxes on banking companies, and for frequent flyers by cutting air passenger duty on domestic flights. A banker flying between London and Leeds is getting a double tax cut, but someone working in the airport where that flight lands is getting a double tax rise.

[Rushanara Ali]

Does my hon. Friend agree that it is scandalous that the Government have only just agreed to restore schools expenditure to its 2010 level, despite a shortfall of £10 billion for catch-up notwithstanding requests from the former catch-up tsar? If we are serious about improving productivity in this country, we need to invest in our kids and in skills. Government expenditure falls far too short, and that will damage the future of our economy.

[James Murray]

As my hon. Friend rightly points out, investing in education is critical to the future of our country and the next generation. We heard the Minister say how uncomfortable she feels talking about cuts, but that is the reality of 11 years of Conservative government. No matter how they try to massage the announcements they are making now, the truth is that if we compare 2021 with 2010, we can see the impact that 11 years of the Tories has had on our public services.

At a time when working people are facing rising prices and flatlining wages, it shows the Tories’ true colours that they are prioritising a tax cut for bankers. To rub salt in the wound, as the IFS has pointed out, the cut in air passenger duty will flow through the UK emissions trading scheme and push up electricity prices at home. It was shocking to hear the Chancellor announce a cut in air passenger duty just days before COP26, and it is shocking that his tax cut for banks will cost the public finances £1 billion a year by the end of this Parliament.

That cut will see the corporation tax surcharge for banking companies slashed from 8% to 3%, with the allowance for the charge raised from £25 million to £100 million. It is worth reminding ourselves why that sector-specific tax was first introduced. As the policy paper published alongside the Budget—I am sure the Minister has read it—sets out clearly, the charge has been levied on banks to reflect

“the risks that they pose to the UK financial system and wider economy”

and to recognise

“the costs arising from the financial crisis.”

When the surcharge was introduced 10 years ago, in the wake of the financial crisis, the Government at the time seemed to recognise that banks had an implicit state guarantee due to their central position in the UK economy, and that that guarantee should be underpinned by greater tax contributions. Yet, as Tax Justice has pointed out, the Office for Budget Responsibility found in 2019 that £27 billion of Government expenditure on bailing out the banks was still outstanding. It seems that the Government are determined to push ahead with a cut to the surcharge, despite the fact that it will not even have fully repaid the public money spent on banks during the financial crisis, let alone provided any insurance against a future crash. We will question Ministers on that further in Committee.

We will also use that chance to press Ministers on other parts of the Bill, including those that introduce the residential property developer tax and measures relating to money laundering and tax avoidance. We support the principle behind the residential property developer tax, which will be levied on the largest developers in the residential property sector. It is right that those responsible for putting dangerous materials on buildings should pay towards the very significant costs of removing unsafe cladding, but it would be a mistake to assume that levying that tax alone will mean that the cladding scandal will in any way come to an end.

The tax is expected to raise £2 billion over 10 years, yet the Housing, Communities and Local Government Committee has estimated that addressing all fire safety defects in every high-rise or high-risk residential building could cost up to £15 billion. What is more, extreme pressures on labour and materials mean that the cost of fire safety works could rise significantly, all but wiping out the money raised from the new tax proposed in the Bill.

The bottom line is that leaseholders living in buildings with potential fire risks and facing huge remediation costs need to know how those costs will be met in full and that the necessary work will be done without delay. There are plenty of people involved in this scandal who should be paying to fix it, but leaseholders are absolutely not among them.

We also support the principle behind the economic crime levy to raise money from the anti-money laundering regulated sector to pay for measures in the economic crime plan to help tackle money laundering. As the director of the Centre for Financial Crime and Security Studies has said, a

“key challenge for the UK Government’s response to financial crime is a lack of investment in capabilities to respond to its policy ambition.”

We hope that the funding from the levy will go some way towards increasing the capacity in government to tackle economic crime, although we will press Ministers on whether it is enough.

[Peter Grant]

Does the shadow Minister agree that, as part of the drive to deal with money laundering, there is also a need for significantly greater transparency so that the people who buy up huge swathes of property in London, for example, are openly identified and any illegal money that has been laundered in that way is much harder to hide?

[James Murray]

The hon. Gentleman makes an important point. Alongside funding, of course, there are also changes to the law that would strengthen the UK’s ability to fight economic crime. Top of the list must be putting in place a public register of the beneficial owners of overseas entities that own UK property. Such a register would bring much needed transparency to the overseas ownership of UK property and help to stop the use of UK property for money laundering.

So, where is the register? In 2016, Prime Minister David Cameron first announced plans to make it a reality. In 2017, the “National Risk Assessment of Money Laundering and Terrorist Financing” confirmed that property continued to be an attractive vehicle for criminal investment, particularly high-end money laundering. In 2018, a draft Bill to set up a register of overseas entities was published. In 2019, a Joint Committee of MPs and Lords published their pre-legislative scrutiny of the Bill and the Government published their response. In that response, published in July 2019, the Minister responsible, the hon. Member for Rochester and Strood (Kelly Tolhurst), said:

“Knowing who ultimately owns and controls a company is an important part of the global fight against corruption, money laundering and terrorist financing.”

We agree. The Minister committed to

“turn this Bill into an Act, and to deliver an operational register in 2021.”

However, since that Government response was published in July 2019—and since, as it happens, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) became Prime Minister, at the end of that very month—the desire to see the register put into place seems to have lost its energy.

Ministers are legally required by the Sanctions and Anti-Money Laundering Act 2018 to report to Parliament annually on the progress that has been made toward putting such a register in place. In 2020, a ministerial statement was indeed published, but any commitment to the register being operational by 2021 had by then been dropped. This year’s ministerial statement, published on 2 November, barely mentioned the register, arguing:

“The overseas entities register is one of a number of proposed corporate transparency reforms”.

The statement focused mainly on other changes and, in fact, barely mentioned the register, ending with that dreaded phrase:

“The Government intends to introduce legislation to Parliament as soon as parliamentary time allows.”

It is astonishing that the Government feel that the need for the register is becoming less urgent. The Pandora papers confirmed how overseas shell companies secretly buy up luxury property in the UK, and how much transparency is needed to help to tackle money laundering.

What are we meant to conclude from the fact that the appointment of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) as Prime Minister in July 2019 coincided perfectly with a change in direction by the Conservatives away from a commitment to make transparent the ownership of overseas companies buying up UK property? What could possibly be the connection between overseas individuals investing in UK property through anonymous companies and the current occupant of 10 Downing Street? Why on earth would anyone in Government not want to introduce the transparency that their own colleagues have said in the past is crucial to tackling high-end money laundering?

I am sure that later in the consideration of the Bill, we will return to the matter of anti-money laundering. At later stages, we will also consider the effectiveness of measures in the Bill to tackle tax avoidance, as that is an important matter for us and the public. In the Opposition, we have long been pushing for the Government to do more to tackle tax avoidance, and while any action on that is welcome, including the measures in the Bill, we do not believe they go far enough. Crucially, as well as the regulations that are needed, the Government must invest in the resources that Her Majesty’s Revenue and Customs needs to tackle the problem effectively.

The Budget papers confirm that HMRC is set to receive a

“£0.9 billion cash increase over the Parliament”.

However, as TaxWatch has pointed out,

“the vast majority of this will not go towards tackling tax fraud, but rather to deal with the additional complexities surrounding the UK’s departure from the European Union.”

We know that effective investment in tackling tax avoidance can bring in much more than is spent, so it is crucial to make sure that that is not ignored by the Government. We will return to this important matter in later stages of the Bill. We will return to that point because the principle at the heart of our tax system must be that everyone plays by the rules and pays their fair share. That principle needs to be stated and supported, as under this Government, with this Budget and this Finance Bill, our country is moving further and further away from that ideal.

Labour’s vision of the economy is this: invest in good modern jobs with decent pay and conditions in every part of the country; support small businesses and high streets from being undercut by large multinationals who do not pay their fair share of tax; and buy, make and sell more in the UK to use every lever we have to support British industries to succeed. That is how we begin to rebuild and strengthen our economy after a decade of low growth, with no end in sight. That is how we make sure people have more money in their pockets for them and their families, and how we increase tax revenues to invest in public services.

But that is not what we are getting from this Government. The low growth they are responsible for means that taxes have had to go up. Faced with a choice of which taxes to raise, the Tories have shown the British people their true colours. Millions of families across the country are already being hit by the Tories’ decision to cut universal credit. From next April, working people across the country will pay more, as their income tax personal allowance is frozen and their national insurance contributions are hiked up. Yet from the April that follows, banks will see the tax they have paid since the financial crisis cut by £1 billion a year by the end of this Parliament. That is the choice the Tories have made: taxes on working people will go up, while taxes on banks will be cut. For people who are working hard but finding things tough, the Tories have nothing to offer except a tax rise.

Fairness is the one of most British values there is, yet it is one this Government just do not get. The Tories are spending all their time protecting themselves, when they should be looking out for the British people. Labour would grow the economy. We would invest in the future. We would make sure working people were never again the first to feel the brunt of tax rises that this Tory Government are forcing on their shoulders.

--- Later in debate ---

[Helen Whately]

The answer to that question is 33%, but the fact is that the rate is going up, from 27% to 28%. That is an increase in tax; it really is quite simple maths.

While supporting investment and competitiveness in our key industries, we must also continue to fund our crucial public services and strengthen our public finances. To keep this Government on the path of discipline and responsibility, the new charter for budget responsibility sets out two key fiscal rules. First, underlying public sector net debt, excluding the impact of the Bank of England, must, as a percentage of GDP, be falling. Secondly, in normal times the state should only borrow to invest.

That is the context for the introduction of the health and social care levy, which we have already voted on, and the 1.25% increase to tax rates on dividend income, delivered through this Bill. This funding is to provide a new long-term funding stream for health and social care, raising more than £12 billion a year over the spending review period, of which £5 billion is earmarked for social care—that picks up on the question from the hon. Member for Gordon (Richard Thomson). I would be delighted to tell him more about the plans involved in that, but I would be digressing too much from the context of the Bill and that is probably one for another occasion. However, what I will say to Opposition Members who want to scrap that extra funding is that they have no other plan to finance getting down the NHS backlog or social care reform, other than through borrowing—they would pass the cost on to future generations. The Government are taking a responsible, fair and progressive way to raise revenue. Additional and higher-rate taxpayers are expected to contribute more than three quarters of the revenue from this increase in 2022-23. Those with the broadest shoulders will pay more.

A number of hon. Members asked about the funding of net zero. Taking a step back for a moment, let me say that the net zero strategy sets out our path to net zero by 2050. Overall, we have earmarked £30 billion-worth of investment in net zero, but that is a long-term investment. Net zero funding in this spending review and Budget specifically includes £1.3 billion of energy innovation funding, £1.4 billion of public sector decarbonisation funding, £1.8 billion to help low-income households to transition to net zero, £620 million extra for the transition to electric vehicles and up to £1.7 billion for large-scale nuclear energy. So, as hon. Members can see, there is funding for net zero in the spending review and Budget. In addition, the revised Green Book means that all policy objectives need to align with net zero.

Let me turn to measures in the Bill that tackle economic crime, and tax avoidance and evasion. The Government are committed to making the UK a hostile place for illicit finance and economic crime, helping to protect our security and prosperity. In recent years, we have taken a series of steps to combat economic crime, including the creation of a new National Economic Crime Centre to co-ordinate the law enforcement response, as well as passing the Criminal Finances Act 2017, which introduced new powers for enforcement authorities to investigate cash believed to be derived from criminal proceeds. The Bill builds on those steps by introducing the new economic crime levy, which will help fund further action on money laundering, including the ambitious reforms that the Government announced in the 2019 economic crime plan, and help safeguard the UK’s global reputation as a safe and transparent place to conduct business. It is a proportionate measure, which will be paid by entities that are regulated for anti-money laundering purposes.

We are also taking action through the Bill to clamp down on promoters of tax avoidance schemes. In response to the question from the hon. Member for Brentford and Isleworth (Ruth Cadbury), we are giving HMRC new powers: to freeze and secure a promoter’s assets; to introduce a new penalty on UK entities who support offshore promoters; to petition the courts to close down companies or partnerships that promote avoidance schemes; and to share more information on promoters to support taxpayers to steer clear of such schemes.

[James Murray]

Will the Minister explain when the register of overseas entities owning UK property will be in place?

[Helen Whately]

I am happy to write to the hon. Member on that question.

Finally, I turn to the administration of the tax system. Only last year, the Government published a 10-year tax strategy that seeks to improve the tax system and its support for taxpayers. The House will recall that the Chancellor was clear in his Budget speech that we must deliver a simpler, fairer tax system that supports consumers and is also competitive for business, and we have, for example, the most radical simplification of alcohol duties for more than 140 years. As part of that, community pubs can look forward to a new and simpler system of alcohol duties, including draught relief, which will cut duty on beer and cider served in pubs by 5%, as celebrated in the contribution of my hon. Friend the Member for Broadland (Jerome Mayhew). Alcohol duties will also be reformed around the simple, common-sense principle that the stronger the drink, the higher the rate. That will be legislated for next year after a detailed consultation.

In the meantime, the Bill does more to build a simpler and more sustainable tax system. Basis period reform, for example, will remove the existing highly complex requirements around basis period rules, including double taxation of early years of trading. Anyone who, like me, has studied accountancy will appreciate that.

As my right hon. and learned Friend the Financial Secretary said at the beginning of the debate, the Bill comes before us when we are seeing significant improvements in the economic situation. The Government are rightly focused on economic recovery, and let there be no doubt that our plan is working. A year ago, the country was experiencing the deepest recession on record, but thanks to our plan for jobs, which the Office for Budget Responsibility has called “remarkably successful”, we are recovering fast. The OBR expects the economy to return to pre-pandemic levels at the turn of the year, several months earlier than it thought in March. We do still have historically high levels of debt, but new fiscal rules together with measures in the Bill will ensure that the public finances remain on a sustainable path.

It is a Bill that encourages business investment, delivers stronger public finances, tackles tax avoidance and evasion, contributes to a simpler and more sustainable tax system and fundamentally delivers a stronger economy for the British people. For those reasons and more, I commend it to the House.

Question put, That the amendment be made.

Health and Social Care Levy Bill

James Murray Excerpts

2nd reading
Tuesday 14th September 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I beg to move an amendment, to leave out from “That” to the end of the Question and add:

“this House declines to give a Second Reading to the Health and Social Care Levy Bill because, notwithstanding the need to increase funding for health and social care, the Bill raises money for an approach announced by the Government that fails to set out a plan to fix the crisis in social care, improve pay and conditions for social care workers, or clear the NHS waiting list backlog by the end of this Parliament, while breaking the Prime Minister’s promise that no one will have to sell their home to pay for care; because it lacks a guarantee that Parliament will vote on a social care plan before spending the money it raises; and because it breaks the Government’s promise not to increase National Insurance, raising taxes on employment that will disproportionately hit working families, young people, those on low and middle incomes and businesses trying to create more jobs in the wider economy, whilst leaving income from other sources untouched.”

Today, the Government are pushing through a new tax on working people and their jobs. All scrutiny by the House of Commons of the Government’s manifesto-breaking plans has been squeezed into a single day. As Conservative Members have said, we have just a few hours of scrutiny on this entire Bill, just one week after the Government first revealed their intentions. Why the sudden rush? The truth is that the Prime Minister and the Chancellor are desperate to avoid giving their own side enough time to push back. They want to make sure that, by the time it sinks in with their own MPs what a mistake this tax rise is, it will be too late for their Back Benchers to mount any opposition.

Perhaps it is also sinking in with Conservative Back Benchers that the Prime Minister and the Chancellor are pushing through these plans for a tax rise without having a plan for social care. If we are to believe the Prime Minister, and there is absolutely no reason why we should, he had a plan for social care two years ago. We are still waiting to see it. All we have today is a tax rise for working people and for businesses that are creating jobs.

[Catherine West]

Does my hon. Friend agree that these problems began in 2010? The NHS’s satisfaction rate in 2009 was 80%, and now it is way lower. In fact, they might have got rid of all the satisfaction surveys so that we do not know what people really think.

[James Murray]

My hon. Friend makes an important point about the Conservative Government’s impact on the national health service over the last decade, running it into the ground and leaving it in such a state when the covid pandemic hit.

As my hon. Friend the Member for Leeds West (Rachel Reeves), the shadow Chancellor, said last week:

“There are two tests for the package announced yesterday. First, does it fix social care? Secondly, is it funded fairly?”—[Official Report, 8 September 2021; Vol. 700, c. 327.]

Looking at the Bill, it is clearer than ever that the answer to both those questions remains a resounding no.

[Gary Sambrook (Birmingham, Northfield) (Con)]

On the basis of those two tests, which tax would the hon. Gentleman increase to pay for social care?

[James Murray]

We are clear that taxes will have to rise to pay for social care, but we are also clear that this increase in national insurance contributions is not the way to raise the money fairly. When it comes to funding the NHS, social care and all our public services, we are clear that those with the broadest shoulders should be asked to contribute more.

This five-page Bill contains nothing at all about a plan to fix social care; it does not even mention a plan. Put simply, there is no guarantee that a plan for social care will be in place even when the levy comes into force.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

I was going to pose this question to the Minister, but he would not take my intervention. Last week I was told by the insurance arm of a major bank that the Government are actively encouraging it to produce insurance products specifically for health and social care. Is my hon. Friend as concerned as I am not only about who is encouraging such developments but about what it means for the acceleration of privatisation not only in social care but in the health service?

[James Murray]

My hon. Friend makes us think about what we have read recently about what the hon. Member for Yeovil (Mr Fysh) has been saying about a rebate from this tax for those who take out private insurance. Make no mistake, that is a slippery slope towards a two-tier healthcare system.

[Dr Andrew Murrison (South West Wiltshire) (Con)]

The hon. Gentleman has been speaking for some time, but he has not said what taxes he would raise. Why was it okay for Labour to raise national insurance to pay for healthcare in 2003, when there was not a pandemic and we did not have the scale of social care need that we have today? If it was right then, why is it not right now?

[James Murray]

The right hon. Gentleman speaks about a tax rise 20 years ago, following a decade of wage growth, and it came with a plan for how the money would be invested. In stark contrast, this Government’s tax rise hits working people after a decade of stagnating wages, after we have been hit by a global pandemic and after years during which where people get their money from has changed. Above all, the Conservatives’ tax rise comes with no promise that it will clear the NHS waiting list backlog in this Parliament and no promise that any money will be seen by the social care sector.

Despite all that has been said, there is no guarantee in the Bill that social care will benefit from the Government’s tax rise. In fact, the Bill explicitly rules out any money going towards social care in the first year, and there is nothing to guarantee that a single penny of this new levy will ever go into the social care sector.

The Association of Directors of Adult Social Services realises this, and it said on Monday that

“it is not clear that there is any new money for adult social care to help improve care and support from April 1st next year… It will not add a single minute of extra care and support, or improve the quality of life for older people, disabled people and unpaid carers.”

As the association rightly points out, this could leave councils with no option other than to raise council tax. Indeed, the Government have admitted that they expect councils to cover increasing need and rising costs. Despite £8 billion having been cut from local council care budgets by a decade of Conservative Government, there is no money for councils that need it now.

In truth, this levy does not set out to fix the crisis in social care. It seeks only to be a political fix for the Prime Minister. I suspect Conservative Members know that, and I suspect the Prime Minister is noticing that his attempt at a political fix is quickly becoming a political headache.

Although some Conservative Members may be worried about how to explain to their constituents that they have broken their manifesto promise and still failed to fix social care, others have a different agenda. The hon. Member for Yeovil, as I mentioned earlier, has been reported as saying that he wants people with private social care insurance to get a rebate from the new tax. As my right hon. Friend the Member for Leicester South (Jonathan Ashworth), the shadow Health Secretary has said, this looks very much like a “slippery slope” towards a two-tier healthcare system and privatisation.

[Mr Marcus Fysh (Yeovil) (Con)]

My comments have been misreported. The origins of the Labour movement and the Liberal movement are in trade unions, co-operatives and friendly societies that came together to look after each other. What I am suggesting is that we get money into such systems to help people look after and pay for themselves in older age. There are myriad ways in which the system can be made much more progressive, and I am on their side in trying to make this more progressive than it is at the moment.

[James Murray]

As the hon. Gentleman is on our side, I look forward to him joining us in the Lobby this evening.

Will the Chief Secretary to the Treasury or the Financial Secretary to the Treasury put it unequivocally on the record that no rebate from the health and social care levy for those with private insurance will ever be entertained? A two-tier healthcare system is the very last thing we need. What the social care sector desperately needs is guaranteed funding and a plan to transform the sector. This Bill delivers neither.

[Craig Mackinlay (South Thanet) (Con)]

The hon. Gentleman is talking about a two-tier system. Is he saying that the millions of people in the public sector and the not-for-profit sector who have auto-enrolled pensions are rather daft to have a sensible pot under their own name, with the flexibility that it brings? Are you calling millions of taxpayers daft?

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. The hon. Gentleman is experienced enough to know that he should not speak directly to another Member.

[James Murray]

The hon. Member for South Thanet (Craig Mackinlay) knows full well that his question is not relevant to this discussion. We are talking about the NHS and the social care system, and we need reassurance from Ministers that they will not entertain a two-tier healthcare system on the back of comments made by Conservative Members.

We need to transform social care into the service that people want, need and deserve, which is why our plan for social care would include: enshrining the principle of home first; making a fundamental shift in the focus of support towards prevention and early intervention; getting care workers the pay, terms and conditions they deserve—at the very least, a real living wage of £10 an hour—while transforming training to improve the quality of care; and, crucially, making sure that England’s 11 million unpaid family carers get proper information, advice, breaks and the workplace flexibility they need to balance work and caring responsibilities.

Of course, today we are not discussing how to transform social care. We are debating a Bill that introduces a tax rise that may never go towards helping social care, and one that is raised on the backs of working people and businesses that are creating jobs.

[Dame Andrea Leadsom (South Northamptonshire) (Con)]

What would the hon. Gentleman do about the backlog of 5 million people, as a result of covid, waiting for procedures and operations in the NHS? Does he not want that backlog to be dealt with?

[James Murray]

The right hon. Lady raises points about the backlog in the NHS. We have had 10 years of a Conservative Government, of whom she has been a key part. She is responsible for the backlog, along with all her colleagues on the Conservative Benches. They should take some responsibility for the mess they have caused.

We know that social care desperately needs more funding, but are the Government raising taxes for those with large portfolios of stocks and shares? No. Are they increasing taxes on landlords who rent out multiple properties? No. Are they going further to tackle large online multinationals that shift their profits overseas? No. The Government have gone for a tax rise on working people and businesses creating jobs.

Last week, the Government tried to soften the blow by claiming that their tax plans are fair because this tax rise on working people is accompanied by a tax rise on dividends. So where is the tax rise on dividends? The Government’s proposal documents last week admitted that that might be legislated for in the next Finance Bill, and indeed there is nothing on raising taxes on dividends in the Bill in front of us today. They are pulling out the stops to increase taxes on working people as quickly as possible, ramming this legislation through in one day, but when it comes to dividends and a tax that the Prime Minister acknowledged last week would affect

“better-off business owners and investors”—[Official Report, 7 September 2021; Vol. 700, c. 154.]

suddenly there is no rush. Let us not fall for the claim that the dividend tax rise will make the Government’s proposals fair. The dividend tax—if it ever happens; we have only the Prime Minister’s word for that, after all— would raise only 5% of the total revenue. Some 95% of the tax bill would land on employment.

If we want to understand the impact of this tax rise on people and their jobs, let us start by looking at the Government’s own view. Their own tax information and impact note on this tax rise was signed off personally by the Financial Secretary to the Treasury and published on 9 September—curiously, this was a couple of days after the Government’s proposals were announced. It says in no uncertain terms:

"There may be an impact on family formation, stability or breakdown as individuals, who are currently just about managing financially, will see their disposable income reduce.”

Five years ago, the Prime Minister’s predecessor began her time in office claiming to be an ally for people who are “just about managing”. Now we have the Government’s own report admitting that they are the ones who will suffer.

The report is blunt too about the impact of this tax rise on businesses. It makes it clear:

“Behavioural effects are likely to be large, and these will include...business decisions around wage bills and recruitment.”

It is there in the Government's own analysis: this will be a tax blow to jobs and wages. Others agree, with the chair of the Federation of Small Businesses saying last week:

“Breaking a manifesto promise by increasing National Insurance Contributions just at the moment when firms are struggling to get back on their feet would be devastating for small businesses and the local communities they serve...If this hike happens, fewer jobs will be created by the UK’s small business community over the crucial months ahead.”

The British Chambers of Commerce agrees, warning:

“A rise in National Insurance Contributions would represent a hammer blow to jobs growth at this crucial point in the UK's economic recovery.”

The CBI president said:

“National Insurance increase will directly hurt a business’s ability to hire staff, at a time when businesses have faced a torrid 18 months and are now fighting crippling labour shortages.”

Do the Financial Secretary and the Chief Secretary think the Federation of Small Businesses, the British Chambers of Commerce and the CBI are all wrong? Perhaps the Financial Secretary will get up to tell me the answer to that. [Interruption.] Sorry, I thought the Financial Secretary was keen to get to his feet to respond to my question. He does not want to, no. He does not want to answer whether he thinks the FSB, the BCC and the CBI are all wrong. Do other Members from his party think they are wrong?

[Andrew Griffith (Arundel and South Downs) (Con)]

rose—

[James Murray]

Perhaps the hon. Gentleman would like to intervene to answer that question.

[Andrew Griffith]

I am just wondering whether the hon. Gentleman’s tax primer in low corporate taxes has enlightened him with any ideas of his own as to how his party would propose to fund this. The proposal on the table is a broad-based tax. How would he fund this?

[James Murray]

We have been absolutely clear that when it comes to funding the NHS and social care, those with the broadest shoulders should pay the most. The idea that this is a “broad-based” tax rise is completely wrong. The hon. Gentleman knows that, we know that and the British public know that. I note that when he got to his feet, he did not answer the question as to whether he thought the FSB, the BCC and the CBI are all wrong. Next time another Conservative Member gets to their feet, I would like to hear their answer to that. I would also like to know whether they think TUC general secretary Frances O’Grady was wrong when she said last week:

“We know social care needs extra funding. But the prime minister is raiding the pockets of low-paid workers, while leaving the wealthy barely touched.”

That is the fundamental unfairness at the heart of this Government’s tax rise.

The Prime Minister and Chancellor are desperate to pretend this is the only way to raise the money, but that simply is not true. A fairer approach would see funding for the NHS, social care and all our public services borne by those with the broadest shoulders—this would include those with incomes from large financial assets, multiple rental properties, and other income from wealth contributing more. But they have not been considered by this Government, who would prefer to hit workers instead.

This Government are landing a tax rise, which they claim will go toward social care, on low-paid social care workers themselves. The truth is that this is a tax on working people and their jobs. This tax rise tells us nothing about how the Government plan to fix social care, but it tells us everything we need to know about the instincts of the Tories when they are in power. That is why it is wrong. That is why we will be voting against this Bill. And that is why Conservative MPs would do well to join us tonight if, come the next election, they want to be able to look their constituents in the eye.

Health and Social Care Levy Bill

James Murray Excerpts

Committee stage & 3rd reading
Tuesday 14th September 2021 Commons Chamber

[Mr Deputy Speaker (Mr Nigel Evans)]

I would just like an indication of who will want to make independent speeches by bobbing—thank you.

[James Murray]

As we turn to the Bill’s Committee stage, I will address the new clauses tabled in my name and the name of my hon. Friend the Member for Erith and Thamesmead (Abena Oppong-Asare).

We know that social care desperately needs more funding and the Government claim that their Bill today will help to raise some of that money, but the truth is that there is nothing in this Bill that will guarantee a penny going towards social care. I will return to that point when I address new clause 6, but first I want to look at the core measure that this Bill introduces—the unfair tax rise on working people and their jobs. Our new clause 3 would require the Government to report to the House of Commons on the impact that the Bill will have on tax revenue derived from different sources of income. On the one hand, there is income from employment and self-employment, which the Government have chosen to tax hard. On the other hand, as new clause 3 mentions, there is income from dividends, rental properties and other sources of wealth, which the Government have left untouched. We know that the Government have chosen not to raise taxes for those with large portfolios of stocks and shares, and for landlords renting out multiple properties, but the Bill even lacks any mention of taxes on dividends, despite the Prime Minister saying that they would be taxed more. Perhaps when the Financial Secretary to the Treasury responds, he could explain why the Government have chosen to delay implementing a tax rise in dividends until the next Finance Bill or beyond. Will he give us his word that the increase in tax on dividends will definitely go ahead?

--- Later in debate ---

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

I am someone who has believed in getting cross-party consensus on the future of social care funding, and who has been calling for a health and social care levy since 2016. Does the hon. Member recognise that there has actually been cross-party consensus on this issue, and that the shadow Care Minister, the hon. Member for Leicester West (Liz Kendall), called for a health and care levy in 2018? How does he reconcile that with his comments just now?

[James Murray]

Let us be really clear about what the shadow Care Minister, my hon. Friend the Member for Leicester West (Liz Kendall), proposed, because it was entirely different from what is being discussed now. She proposed that the tax should be raised from unearned income, and that it should be progressive and fair between generations, which fundamentally differentiates it from what we are discussing today. If the Government had truly sought to build cross-party consensus, does the hon. Gentleman not think that they would have done better to take some time over the Bill, rather than rushing it through within a week of the proposals first being announced, with limited ability for scrutiny and without any discussion of cross-party consensus about how to proceed?

[Dr Poulter]

Will the hon. Member give way?

[James Murray]

I am going to make some progress now; I have given way to the hon. Gentleman already.

As I said, although new clause 8 has not been selected today, I hope that Government Back Benchers have seen it on the amendment paper and will perhaps raise the matter with their colleagues on the Front Bench.

I hope, however, that there will be a vote this evening on new clause 5, and I urge Government Members to join us in voting for this crucial review of how the Bill will make inequality worse. We know how widespread and deep rooted inequality has become in our country. The latest bulletin from the Office for National Statistics on household income inequality in the UK for the financial year ending 2020 confirms what we all know: the income gap between the richest in society and the rest of the population has widened over the last decade. A tax rise that singles out income from employment can only make this inequality worse, and new clause 5 seeks to expose this.

Not only does inequality manifest between people who may live in the same area, it also creates divides between different nations of a country and the regions within them. In areas where average wages are lower and fewer people get income from other assets, the impact of the national insurance rise and the levy will be more acutely felt. Recent analysis in the New Statesman suggested that within the regions of England, it is people in the north-west and the west midlands who will take the greatest hit to their disposable income as a result of the Bill.

Data from the Office for National Statistics’ wealth and assets survey shows that the south-east is home to well over 3 million adults living in families with net wealth per adult of more than £250,000. That is roughly six times the number in the north-east. A tax increase that ignores income from renting out properties and selling financial assets, and that seeks to fund a plan that ignores differences in house prices and care costs between different regions, is destined to make inequality worse.

[Dr Murrison]

We are getting more granularity in the proposals that Opposition Front Benchers have in their heads for funding the uplift, which I think we all agree is necessary for health and social care, but can I probe the hon. Gentleman to describe the nature of the landlords or property-based businesses he has in his crosshairs for the levy of the moneys that he has in mind? Does he mean, for example, the mom and pop organisation that has bought a small residential property because it has no public sector pension, for example, and is relying on that for income in old age, or does he have in mind a business like any other business that has large numbers of commercial properties? How much does he think he is going to raise from the alternative that he has suggested?

[James Murray]

I thank the right hon. Gentleman for his intervention, but I do feel that there is a broad consensus across this country that those with the broadest shoulders should make more of a contribution. It is quite clear from the reaction that people have had to the Government’s proposed increase in national insurance and new levy that this is falling on working people and jobs rather than taking other sources of income from wealth into account.

I have just spoken about the massive impact that this will have on inequality between different regions of the country. I therefore ask Conservative Members to guess how many times last Tuesday, when the Prime Minister announced his approach here in the House of Commons, he used the phrase “levelling up” in that 90 minute statement. It was zero. Last Wednesday, when the Financial Secretary had to take the rap here on this tax rise, how many times did he use the phrase “levelling up” in a six-hour debate? Zero. The truth is that we are a very long way from the levelling-up agenda that we hear, or at least used to hear, so much about.

Of course it is not just workers and the self-employed who will feel the direct impact of the Government’s tax rise in this Bill. This tax rise will hit businesses that want to create jobs too. That is why we have tabled new clause 4 to show the impact it will have on businesses, and on small and medium-sized businesses in particular. There will be no point in the Financial Secretary denying the impact of this measure on businesses creating jobs: it is set out starkly in the Government’s own tax information impact note that he approved last week and that we have referred to several times today. I set out earlier how this note admits that the Government’s approach will impact business decisions around wage bills and recruitment. It goes on to explain how this measure

“is expected to have a significant impact on over 1.6 million employers who will be required to introduce this change.”

No wonder the Government have managed to unite business groups, workers and trade unions against their plans. At just the time when we need to see job growth, and when furlough is ending, the Government impose an extra flat cost on getting people into work. The Federation of Small Businesses has shown that this move could lead to 50,000 more people being left out of work. Yet again, small and medium-sized businesses least able to afford this tax rise will be hit hardest while online multinationals continue to dodge their tax on this Government’s watch.

The Government’s justification for much of the Bill is that they claim the levy will fix the crisis in social care. As we made clear on Second Reading, however, there is no plan to fix social care, nor even a mention of or reference to one, in this Bill. Fundamentally, despite all the rhetoric from the Prime Minister and the Chancellor, there is no guarantee that social care will benefit from the Government’s tax rise in any way at all. In the first year, the Bill explicitly rules out any money raised going toward social care. Beyond that, when the levy comes into force, it is entirely possible that not a single penny of any money raised will ever go towards the social care sector. I know that Treasury Ministers will deny that this is the case, so we ask them and Conservative Members to back our straightforward new clause 6. I note the Financial Secretary’s comment that the new clause would simply require the Chancellor to report transparently and straightforwardly on the share of the levy spent on social care each year so that we can all see what proportion of the money raised is going to the social care sector.

Finally, I turn to our new clause 7. Nothing could sum up the intrinsic unfairness at the heart of this Bill more than the case that this new clause points towards. The unfairness of the Government’s approach is impossible to ignore when we realise that this tax rise, raising money the Government claim will go towards social care, will not see those with the broadest shoulders paying their fair share but instead hit low-paid social care workers themselves. Our new clause asks the Government to be transparent and honest about this by requiring the Chancellor to report on how much revenue the levy raises from those working in the social care sector. This Government’s choices to raise national insurance, to cut universal credit and to freeze personal allowances mean that a social care worker will pay £1,108 more in tax a year. The Chancellor once clapped for key workers; now he is taxing key workers. This will hit working people hard, and we will not let voters forget it.

[Mr Fysh]

My intention with amendment 7, which I have tabled with esteemed colleagues, was to try to get the Government to focus on a way of looking at the future costs of social care and how to finance them more creatively. I have to ask: if not now, when?

We know that the most powerful way to address costs in the future is to provide for them in the present and to have the power of compounding investment returns over a period of years to meet the liabilities that people have. I am passionate about encouraging the Government to look at ways to encourage people across the board, with progressive incentives in different ways, to make provision for themselves with support from the state.

People think that they pay a contribution into national insurance that rolls up over time and gives them an entitlement to a pot of money—I have heard constituent after constituent talk about that—when we in this place know that that is not in fact the case. In fact, my right hon. Friend the Minister confirmed that that is not the Treasury’s view and that national insurance is a tax collected in-year that must be spent in-year.

There is a big opportunity for reform and innovation that could be useful and get very much back to the ethos behind the Beveridge report and the origins that I spoke to in the Second Reading debate. There was a radical movement trying to help individuals and groups provide for each other. Lloyd George and the Liberal Government’s 1911 Act was about getting national aid into the system in a creative way. I think there is an opportunity for us to talk as one whole House about innovating for the modern world in that way. What was wrong with some of those older schemes and co-operatives, friendly societies and such things in the old days was that sometimes people ran off with the money. That was one reason why there was a need to put more of a national embrace around it and administer it that way. In the modern world, we can do it differently.

All I was trying to do with the amendment was give scope for the Government to think about applying some of the funds from an element of national insurance or something related to it—that is, the levy, which clause 2 sets out—to help incentivise such pooled saving schemes. That is not necessarily insurance or private insurance with a middleman; it could be national schemes or community schemes that are properly co-operative and very low-cost. There are many modern approaches to that in the digital world, such as digital autonomous organisations, where there are no middlemen at all and people do not have to rely on a contract.

That was the pure intent of my amendment, so I am a little disappointed that the Government do not seem to want to engage with it. I urge my right hon. Friend and those on the Treasury Bench to think about ways we might do that in the future, because I can see it as a useful evolution of the policy that might bring people from all parts of the House together in the way I have been describing.

--- Later in debate ---

[Jesse Norman]

I thank colleagues for their contributions to the debate. It has been very wide ranging—especially the last speech—occasionally touching on the subject of the Bill and the clauses and amendments in it.

Let me start with the hon. Member for Ealing North (James Murray) who speaks for the Opposition. He asked why the dividend tax has not been brought in. The answer to that question is that it does not fall under a national insurance contributions Bill. Dividends are subject to a separate dividend tax regime. That is a tax that is already in existence and it will be handled, as the Government have already made clear, in the course of the forthcoming Finance Bill.

The hon. Gentleman asked questions about levelling up and multinationals’ tax avoidance. I think he is aware that the Government’s approach to levelling up is extremely manifest, most recently in the work that we have done with the UK Infrastructure Bank, which is specifically dedicated to net zero and levelling up and which has just recruited a world-class new chief executive. On the case of multinationals, he has obviously forgotten that the Government have been in the vanguard of the G20 and the G7 in arranging and leading on a new settlement on Pillar One and Pillar Two multinationals’ tax avoidance.

The hon. Gentleman repeated his untrue claim from the earlier debate that these measures contain no new funding for social care. In fact, as the Chief Secretary to the Treasury said a few minutes before he first said that, the measures contain £5.4 billion to support social care, which is in the plan. In case he missed it, it is in paragraph 36 of the plan. It is no wonder that those on the Labour Front Bench do not think that we have a plan if they cannot be bothered to read the plan that we have actually published.

[James Murray]

To be absolutely clear, the question that I was putting to the Minister was: where in the Bill is there a guarantee that a single penny of this new levy will go to social care?

[Jesse Norman]

The Bill is designed to fund the plan and the plan has been published. The plan is perfectly explicit as to where the money is going with regard to social care and how much is going to social care. It is in paragraph 36. The hon. Gentleman only needs to look at the plan to see it.

My hon. Friend the Member for Yeovil (Mr Fysh) tabled a probing amendment and explained the background to his own amendment 7, and I thank him for that. I mean him no disrespect when I say that the Government have taken the amendment on board, and will take it on board, but I still ask him to withdraw his amendment.

The hon. Member for Aberdeen South (Stephen Flynn) talked airily about unfunded social care plans controlled, as it were, by England over Scotland. Nothing could be further from the truth. The truth is that Scotland has social care plans that are underfunded. Audit Scotland said that more money was needed. The Independent Review of Adult Social Care in Scotland said that more money will need to be spent over the longer term. Unfortunately, he also ignores what has been accurately described by the Prime Minister as the Union dividend from which all the devolved Administrations will benefit.

My hon. Friend the Member for Amber Valley (Nigel Mills) asked the important question of why a new tax. It is important to focus on this. The reason there is a new tax is that this is a fundamental change in how we have been thinking about social care. Andrew Dilnot himself has said that he does not think it inappropriate to have a new tax funded to support this.

My right hon. Friend the Member for Wokingham (John Redwood) talked about Treasury concern with hypothecation, which remains intact. There is already an existing level of hypothecation within the national insurance contributions system and this plays off that. The hon. Member for Nottingham East (Nadia Whittome) went into a long diatribe, in which she accused the Government of seeking to protect the richest people in society, to which the only simple answer is that that is absolute nonsense. I think she missed the debate on Second Reading, but if she read the distributional analysis, she would see that this package means that the 20% of highest income households will contribute 40 times the amount contributed by the least well off 20% of households. It is also worth pointing out that the highest earning 14% will pay roughly half of all revenues. Even the Wealth Tax Commission, which is independent of Government and dedicated to the idea of arguing for a wealth tax, acknowledged that the UK is on par with G7 countries as regards a wealth tax. Under a more inclusive definition—one that includes, for example, stamp duty land tax—the UK is near the top of the G7 countries in terms of a wealth tax.

My right hon. Friend the Member for Wokingham talked about hypothecation; I perfectly understand that. He also mentioned gross net revenues. These are net revenues—revenues that have been calculated net of the effects. The detail is set out in the technical annex to the published plan.

The hon. Member for Leeds East (Richard Burgon) revisited some of the themes set out by the hon. Member for Nottingham East, but I am afraid no more persuasively.

My hon. Friend the Member for Christchurch (Sir Christopher Chope) went on a glorious canter, or possibly a ramble, around various public spending concerns. I fully appreciate his concerns. Very little of what he said actually bears direct relation to the levy, but let me address the parts that do. He asked why there is no distinct social care levy. Of course, it is possible to claim, as I did, that there is a need for greater integration between healthcare and social care, without suggesting that the funding for those things needs to be handled in exactly the same way across both. This provision blends the funding in a way that is felicitous for both elements.

My hon. Friend argued vigorously for co-payment. I take his arguments as I am sure he means them and look forward to seeing his Bill. He also mentioned millionaires in hospitals. He is right that maths is eternal; our noble Friend Lord Bethell may have been referring to the fact that calculations are not eternal, but may be in time and premature.

--- Later in debate ---

[James Murray]

I thank the Clerks for their excellent and particularly rapid help with amendments to the Bill.

Today, the Government have been determined to push through their tax rise on working people and their jobs as quickly as they possibly can. The Bill contains nothing at all—not even a reference or mention—about a plan to fix social care, and it fails to guarantee that a single penny of the new levy will ever go towards the social care sector.

On Second Reading, the Opposition attempted to push for a guarantee that Parliament would vote on a social care plan before spending the money that the Bill raises. The Government rejected our attempt, and I am sure there are many Conservative Members who feel deeply uncomfortable about the position in which they find themselves.

While the Bill lacks a plan for social care or any commitment that a plan will ever be in place, or even that any of the money that the levy raises will ever go to social care, it does include a tax rise—a tax rise that hits working people and businesses creating jobs. We know what that will mean for people across the country: combined with the cut to universal credit and the freeze in personal allowances, hospitality workers, teaching assistants, supermarket workers and social care workers stand to lose more than £1,000 next year.

Members do not have to take my word for it. The Financial Secretary admitted the impact that this tax rise will have in his own tax information and impact note, which set out in no uncertain terms that people who are just about managing financially will see their disposable incomes fall. The Conservative party has united the Federation of Small Businesses, the British Chambers of Commerce and the CBI against its plans. They all agree that this represents a blow to jobs growth at a crucial point in the UK’s economic recovery. Last night, the Financial Times published its view that the “Tories must regain trust as the party of business”—which seems to be an understatement, to say the least.

The Government’s approach will hit businesses creating jobs, and it will disproportionately hit working families and young people. It will hit those on low and middle incomes. It will hit people in some parts of the country more than others. But when we tried to push Ministers in Committee to come clean about the unequal impact of their tax rise on different people and across the country, or to be transparent about how it would hit social care workers themselves, they refused. The Prime Minister, the Chancellor and the Conservative party simply have their fingers in their ears.

Finally, the Government have refused to accept throughout today’s debates, and indeed throughout the last week, that there is any alternative to their tax rise. The Prime Minister and the Chancellor are desperate to pretend that this is the only way to raise the money, and that simply is not true. A fairer approach to funding the NHS, social care and all our public services would see those with the broadest shoulders—including those with incomes from large financial assets and multiple rental properties, and other income from wealth—contributing more. The Government have refused to consider those options, and would prefer to hit workers instead.

The simple truth is that there is no plan to fix the crisis in social care. There is no plan to improve the pay and conditions of care workers, no guarantee that any of the money will go toward social care, no guarantee that people will not have to sell their homes for care, and no plan to clear the NHS waiting list backlog during the present Parliament. All that we have is a tax on working people and their jobs. It tells us everything we need to know about the instincts of the Tories when they are in power, and that is why we will be voting against this Bill.

Oral Answers to Questions

James Murray Excerpts

Tuesday 7th September 2021 Commons Chamber

[Jesse Norman]

I thank the hon. Lady for her question. Taxation is often a difficult matter for the relatively small number of individuals who may be affected by particular pressures. Of course the Government recognise and understand that, but it is nevertheless the case—it is indeed a foundational principle of the tax system—that people should be responsible for their own tax returns. If I may, I would like to refer the hon. Lady to the very wise words of the former shadow Chancellor, the hon. Member for Oxford East (Anneliese Dodds), who said in 2018 that

“we would obviously welcome tightening in the area of disguised remuneration schemes…We are concerned that the measures in the Bill do not go far enough…There should be no excuse”—

these are her words—

“for people not to be aware of the situation”.––[Official Report, Finance (No. 2) Public Bill Committee, 9 January 2018; c. 30.]

I am afraid that she was right about that.

[James Murray (Ealing North) (Lab/Co-op)]

The Conservative Government’s approach to the loan charge means that ordinary people who are victims of mis-selling are suffering financial ruin and personal harm. Ministers will have heard some harrowing accounts of people pushed to the very brink and worse, some even tragically taking their own lives. This cannot be what the Government envisaged and a new approach is urgently needed. Will the Treasury now review the loan charge scheme and the approach of HMRC to prevent further devastating consequences?

[Jesse Norman]

As I have said, both the Government and Her Majesty’s Revenue and Customs take these cases extremely seriously, which is why HMRC has put in place extra care and support for people who may be affected by tax issues of this and other kinds. The fact remains that we have had a review. I might refer the hon. Gentleman to the words of his colleague, the hon. Member for Ilford North (Wes Streeting), who said of Sir Amyas Morse who did the review that it was

“a thorough piece of work…we thank him…He has done a great service to Parliament and to the wider public debate.––[Official Report, Finance Public Bill Committee, 4 June 2020; c. 33.]

He was right about that and the Labour party has been right not to have opposed this policy at any point during its passage through Parliament.