Finance (No. 2) Bill

Jane Ellison Excerpts

3rd reading: House of Commons
Tuesday 25th April 2017 Commons Chamber

[The Financial Secretary to the Treasury (Jane Ellison)]

I will speak briefly, as we have a fair amount to get through this afternoon. Obviously, I shall attempt to address any points that are made during the debate.

The Bill is progressing on the basis of consensus and therefore, at the request of the Opposition, we are not proceeding with a number of clauses. However, there has been no policy change. These provisions will make a significant contribution to the public finances, and the Government will legislate for the remaining provisions at the earliest opportunity, at the start of the new Parliament. The Government remain committed to the digital future of the tax system, a principle widely accepted on both sides of the House. We recognise the need for the House to consider such measures properly, as called for by my right hon. Friend the Member for Chichester (Mr Tyrie) and his Treasury Committee. That is why we have decided to pursue those measures in a Finance Bill in the next Parliament, in the light of the pressures on time that currently apply.

Clauses 1 and 3 provide for the annual charging of income tax in the current financial year and maintain the basic, higher and additional rates at the current level. The annual charge legislated for in the Finance Bill is essential for its continued collection, and it will enable the funding of vital public services during the coming year. Maintaining these rates, while increasing the tax-free personal allowance and the point at which people pay the higher rate of tax, means that we are delivering on important manifesto commitments. On top of that, as of April this year, increases in the personal allowance since 2010 will have cut a typical basic-rate taxpayer’s income tax bill by more than £1,000, taking 1.3 million people out of income tax in this Parliament alone.

Clause 4 will maintain the starting-rate limit for savings income—applied to the savings of those with low earnings—at its current level of £5,000 for the 2017-18 tax year; clause 6 will charge corporation tax for the forthcoming financial year; and clauses 17 and 18 will make changes in the taxation of pensions. Clause 18 legislates for a significant anti-avoidance measure announced at the spring Budget. It will make changes to ensure that pension transfers to qualifying recognised overseas pension schemes requested on or after 9 March 2017 will be taxable. The charge will not apply if the individual and the pension savings are in the same country, if both are within the European economic area or if the pension scheme is provided by the individual’s employer.

Before the changes were announced in the spring Budget, an individual retiring abroad could transfer up to £1 million in pension savings, without facing a charge, to a pension scheme anywhere in the world provided that it met certain requirements. Overseas pension transfers had become increasingly marketed and used as a way to gain an unfair tax advantage on pension savings that had had UK tax relief. That was obviously contrary to the policy rationale for allowing transfers of UK tax-relieved pension savings to be made free of UK tax for overseas schemes. This charge will deter those who seek to gain an unfair tax advantage by transferring their pensions abroad. Exemptions allow those with a genuine need to transfer their pensions abroad to do so tax-free.

Clause 17 will make various changes in the tax treatment of specialist foreign pension schemes to make it more consistent with the taxation of domestic pensions.

Clause 21 will simplify the payment of distributions by some types of investment fund. Following the Government’s introduction of the personal savings allowance, 98% of adults have no tax to pay on savings income. In line with that, the clause will remove the requirement to deduct at source tax that must subsequently be reclaimed by the saver.

Clauses 45 to 47 provide for the removal of the tax advantages of employee shareholder status for arrangements entered into on or after 1 December 2016, in response to evidence suggesting that companies were not using the status for its intended purpose and that it therefore was not delivering value for money. The status was introduced to increase workforce flexibility by creating a new class of employee, but it became apparent that it was being widely used as a tax planning device, rather than for its intended purpose of helping businesses to recruit.

Evidence suggests that companies, particularly those owned by private equity funds, were using employee shareholder status as a tax-efficient way to reward senior staff. In many cases, contract provisions were used to replace the statutory rights that had been given up, which was undermining the purpose of the status. That continued to be the case despite the introduction of the £100,000 lifetime limit on capital gains tax-exempt gains in the 2016 Budget. The Government therefore announced in the 2016 autumn statement that they would remove the tax reliefs associated with the status and close the status itself to new arrangements at the next legislative opportunity. The action that we are taking tackles abuse and increases the fairness of the tax system.

[Peter Dowd (Bootle) (Lab)]

I thank the Minister for her opening remarks about consensus, with which I fully concur. We are here today to debate what is effectively a condensed version of the Bill for which my colleagues and, indeed, everyone else had been preparing, with a view to taking part in a number of Public Bill Committee sittings over a number of weeks to scrutinise properly the longest Finance Bill that has ever been produced. That is the context in which I shall make my comments.

The Prime Minister’s announcement outside No. 10 and the subsequent vote mean we do not have sufficient time in this Parliament to give the full Bill the proper parliamentary oversight it requires and deserves, as I am sure Members will understand. It is clear that the Treasury was unaware of the Prime Minister’s plans for a snap election—otherwise, it would not have introduced the longest ever Finance Bill—but the Opposition recognise the unique scenario we are in and the Government’s responsibility to levy taxes, and I am sure the Minister recognises our responsibility to scrutinise the Bill in as open and transparent a manner as we possibly can. That is why we have acted in good faith to ensure that a version of the Bill can pass before Parliament is dissolved.

Our approach to the pre-election process and the presentation of the condensed version of the Bill has been underlined by two concerns: fiscal responsibility balanced against parliamentary scrutiny. The Opposition have a responsibility to taxpayers to ensure as little economic disruption as possible; we will therefore not attempt to block any measure in the Bill that has to be passed to ensure business as usual for our public services, such as on income tax, and nor will we obstruct tax that is already in the process of collection. But of course we cannot give the Government carte blanche, as we have made clear.

There are many clauses in the Bill that we can and should wait to deal with until after the general election, as that would provide the opportunity for them to be properly scrutinised. The one exception is the soft drinks levy, which I will speak about later.

In relation to alcohol duty, the Bill includes measures that have already been implemented but that we opposed in the Budget resolutions. They include the Government’s decision to raise alcohol duty in line with inflation, raising the price of a pint of beer by 2p, a pint of cider by 1p and a bottle of Scotch whisky by 36p. As I said on Second Reading, rising business rates and rising inflation are creating a perfect storm for many small businesses. Therefore, the decision to raise this duty is a risk.

Another measure that we would have liked to avoid but that is included as a result of the necessity of the compressed process that this Bill is going through is the rise in insurance premium tax. It has already been doubled and this raises it further. Had there been a longer process, we would have sought to challenge that, as we did at the Budget resolution stage, so there is no surprise in this, but the reality is that the measure is already in effect due to the resolutions.

On tax avoidance, it is time for a wholesale shift in how we approach taxation and the treatment of self-employment given the rise of the gig economy in recent years. The Bill originally contained a number of initiatives, and no doubt we will come back to them in due course.

I welcome the Minister’s statement on the digitalisation of tax. It will be a great relief to many small businesses given the onerous requirements for quarterly reporting. No one is against a move to a digital tax system, but we do not agree with the rush to implement it.

A large portion of the Bill relates to the introduction of the soft drinks industry levy, which the Government have consulted on heavily and on which they have cross-party support in this House. The levy has popular public support, too, as a poll has indicated. I want to take this opportunity to pay particular tribute to Jamie Oliver and the Obesity Health Alliance, who have campaigned tirelessly on this issue and on the need for a joined-up Government obesity strategy, and I must compliment the Minister, who in her current and previous roles has been a strong advocate for the levy. We would like to see a review of the sugar tax levy in due course, if possible. The Minister might well wish to comment on that. I am sure that a range of issues, such as in relation to multi-buy discounts, could form part of this.

In conclusion, as a responsible Opposition, we will not stand in the way of passing a Finance Bill before the election, as that is a necessity. There are some measures that a Labour Government would bring back, and we will have an opportunity to scrutinise them in due course, but we need to get this through and we need to be responsible, and we will support the Government where required.

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[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Clauses 8 to 15 stand part.

Government amendment 4.

Clauses 48 to 51 and 124 to 127 stand part.

Government motion to transfer clause 127.

Clauses 128 and 129 stand part.

Government amendment 10.

That schedule 1 be the First schedule to the Bill.

Government amendments 11 and 12.

That schedule 2 be the Second schedule to the Bill.

Government amendment 57.

That schedules 16 to 18 and 27 to 29 be schedules to the Bill.

New clause 1—Review of international best practice in relation to tax avoidance and tax evasion—

‘(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of international best practice by Governments and tax collection authorities in relation to—

(a) the prevention and reduction of tax avoidance arrangements, and

(b) combatting tax evasion.

(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.

(3) In this section, “tax avoidance arrangements” mean arrangements broadly comparable in their effect to arrangements in the United Kingdom which have the obtaining of a tax advantage as the main purpose, or one of the main purposes, of the arrangements.”

[Jane Ellison]

Before I say something about this group, I wish to comment on the maiden speech and on the retirement speech that we just heard. It was a real honour to be here in the Chamber for the maiden speech by my hon. Friend the Member for Copeland (Trudy Harrison). She told us what inspired her, but she also reminded many Conservative Members of how she inspired us to make the journey up to her beautiful constituency in the knowledge that we were supporting an outstanding woman who is rooted in and passionate about her community. She was generous about her predecessor, which was nice to hear. I had many friendly dealings with Jamie Reed when he was a Labour shadow Health Minister and I was in the Department of Health, so I welcome her comments. It was a wonderful maiden speech and I look forward to many more speeches from her in the future, and I wish her and her long-suffering family well for the weeks ahead. She spoke with conviction about the contribution of nuclear power, but I think that in the forthcoming campaign it will be girl power to the fore.

It is always nice to hear Members reflect on their time in this House and the way they have served. As the right hon. Member for Oxford East (Mr Smith) noted, he has had a nice bookending, with a Finance Bill debate at the start and a final contribution on Treasury matters. Of course, he also paid tribute to his constituents. I am sure that in these circumstances one has a bit less time than one thought to do a round of goodbyes, but I am sure he will continue to be active in his community. I congratulate him on his speech and thank him, on behalf of all hon. Members, for his service to the House.

This group deals with the taxation of employment income, and contains some clauses addressing tax avoidance and evasion. There are a number of clauses and schedules in this group, including a new clause from the hon. Member for Aberdeen North (Kirsty Blackman), but I am going to focus my remarks on clause 7 and schedule 1, which refer to workers’ services provided to the public sector through intermediaries and which might be of interest to Members. I will, of course, address any other areas in the course of the debate.

Clause 7 and schedule 1 reform the off-payroll working rules—also known as the intermediaries legislation, or IR35—for individuals working in the public sector. The tax system needs to keep pace with the different ways in which people are working. As the Chancellor set out at both the autumn statement and the spring Budget, the public finances face a growing risk from the cost of incorporations. Indeed, the Government estimate that by 2021-22 the cost to the Exchequer from people choosing to work through a company will be more than £6 billion. A not insignificant part of that cost comes from people who are working through their own personal service company but who would be classed as employees if it were not for that company. The off-payroll working rules are designed to ensure that where individuals work in a similar way to employees, they pay broadly the same taxes as employees. However, non-compliance with these rules is widespread, and Her Majesty’s Revenue and Customs estimates that less than 10% of those who should operate these rules actually do so. As a result, more than £700 million is lost each year across the economy, of which about 20% relates to non-compliance in the public sector. This is neither sustainable nor fair, and we believe that public authorities, in particular, have a responsibility to taxpayers to ensure that the people working for them are paying the right amount of tax.

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[Kirsty Blackman]

People have told me that no matter what information they have put in, they have always been told that they have to pay more tax than they were expecting. Concerns have been raised with me about that online tool and its shortcomings, and about the fact that HMRC is always asking people to pay a level of tax that they think is wrong or too high.

[Jane Ellison]

Given where we are in this Parliament, the best thing the hon. Lady can do is to send details on that, immediately and before Dissolution, so that HMRC can look at the factual issues. I am surprised by what she says, but let us ask HMRC to look at the practical issues she raises—while we are off doing other things, it can perhaps look at those if she supplies the information in the next few days. HMRC has worked with the Cabinet Office Crown Commercial Service to produce guidance for public authorities and has supported them to implement the changes.

Government amendment 10 is a technical one to ensure that the reform only applies to the public sector, as set out in the Government’s original announcement.

In conclusion, the Government believe it is essential to ensure that public funds are used correctly and that those in receipt of them are paying the correct amount of tax. The changes being made by clause 7 and schedule 1 will improve compliance with the tax rules, raising a substantial amount of revenue by 2021-22. I therefore ask Members to support this clause and schedule, along with clause 8, schedule 2, clauses 11 and 48, schedule 16 and clause 127.

[Kirsty Blackman]

I wish to discuss the issues raised in this group, including by my new clause 1. The Minister has covered the IR35 issues in some detail, but the Scottish National party still has real concerns about these changes. Just the other day somebody told me that they are no longer bidding for public sector contracts as a result of the tax changes made on IR35. That is a real concern, which we have raised before, particularly in the context of rural communities. In some of our most rural communities, people such as teachers, doctors and nurses are employed through intermediaries, and for very good reasons: it is sometimes difficult to get people to come to some of the most rural parts of Scotland. We are concerned that this move is going to have a real disadvantageous effect, particularly for rural communities that rely on teachers, doctors and other individuals working in the public sector who are employed through intermediaries. I understand that it is already having an effect, but it would be interesting, and I would very much appreciate it, if the Government let us know what difference it has made, not only to the tax take, but to our communities. Having read through the Government’s document on the impact of the tax changes, called OOTLAR—the overview of tax legislation and rates—I do not think they have recognised the impact the changes could have on communities, so it would be interesting to see what that impact is. The change has already been made and people are now working under it, so I imagine that within six months or so we will be able to see the outcomes and whether or not there is a disadvantage.

New clause 1 is on tax avoidance, which the Scottish National party has spoken about at length in this Parliament, and about which we will continue to speak at length. Tax avoidance is a real concern and contributes to the UK tax gap, which is £36 billion. Back in 2014, Credit Suisse published a report suggesting that larger countries such as the United Kingdom struggle to get people not to avoid tax. Smaller countries are much better at it—I am just pointing that out. The new clause would require the Chancellor of the Exchequer to review within two months international best practice in relation to the prevention and reduction of tax avoidance arrangements and combating tax evasion, and to publish a report of the review. We are asking for that because we do not think that the United Kingdom is the best place in the world at tackling tax avoidance. It is certainly not the best place in the world at all the different ways of tackling tax avoidance; we could learn a huge amount from what different countries are doing. The new clause would be a sensible way forward, so I hope the Government are keen to accept it.

Something else we have mentioned in relation to tax avoidance is the protection of whistleblowers. Some whistleblowers tend towards having poor health as result of their whistleblowing. It is really important that people are encouraged to come forward if they see problems, and that we are making it as easy as possible for them to do so, because we need people to be whistleblowers. We need them to tell us where practice is going wrong and where tax dodging is happening. We would support the Government in any action they take to encourage whistleblowers and to create a better environment in which they can come forward.

Lastly, there has been talk of the possibility of the United Kingdom becoming a tax haven after Brexit. We absolutely reject the notion that after Brexit the United Kingdom should reduce all taxes to nearly nothing. For a start, that just does not work if we want to have public services such as the NHS—

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[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

That schedule 19 be a schedule to the Bill.

New clause 2—Review of VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service—

“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service, including but not limited to—

(a) an analysis of the impact on the financial position of Police Scotland and the Scottish Fire and Rescue Service arising from their VAT treatment, and

(b) an estimate of the change to their financial position were they eligible for a refund of VAT under section 33 of the VAT Act 1994.

(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”

[Jane Ellison]

No VAT is charged for the buying of an adapted vehicle by or on behalf of a disabled wheelchair user. Unfortunately, this scheme, which supports disabled wheelchair users to live independently, has been fraudulently abused by unscrupulous individuals who make purchases under this relief and then sell the vehicles on for additional profit. For example, HMRC discovered that one person purchased 30 BMWs under the scheme in one day, while another individual bought 100 vehicles that I would describe as high-performance sports cars and the like in under two years. This is clear abuse of the scheme, and its integrity is being brought into question by such behaviour.

Clause 57 will tackle abuse of the relief, while ensuring that it remains available for those with disabilities. The changes made by clause 57 will restrict the number of vehicles that an individual, or someone on behalf of that individual, may purchase under the scheme to one every three years. That will stop fraudsters from purchasing multiple vehicles in one day, or over a prolonged period. The legislation recognises that, in some circumstances, a replacement vehicle may genuinely need to be purchased within the three-year period. In addition, the clause makes it mandatory for vehicle dealers to submit a declaration of eligibility for each car purchased under the scheme to HMRC and applies penalties to those found to abuse the scheme.

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[Kirsty Blackman]

rose—

[Jane Ellison]

Let me just complete the exposition of why these bodies do not qualify.

Both those new bodies are funded centrally rather than through local taxation and therefore do not meet the eligibility criteria for section 33 VAT refunds. The Treasury warned the Scottish Government in advance that making these changes would result in the loss of VAT refunds. In deciding to go ahead, the Scottish Government fully considered the costs and benefits of doing so, including the loss of VAT refunds. Therefore, there is no additional benefit to be had from the Government committing resource and time to produce a report on this issue. I therefore urge the Committee to reject new clause 2.

[Kirsty Blackman]

Just on that, can the Financial Secretary tell us how London Legacy and Highways England are funded?

[Jane Ellison]

Again, those are matters that have been covered before. I refer the hon. Lady to comments that I have made previously in response to very similar interventions. These measures have been discussed not just in Finance Bills, but during the passage of the Scotland Bill. Again, the message was the same that this was a decision taken in the full knowledge of the VAT consequences. Once again, I urge the House to reject the new clause that calls for a review.

[Kirsty Blackman]

If the Minister changes the VAT treatment of the Scottish police and the fire and rescue service, I promise not to raise the matter again in the House. I can see that she is fed up with discussing it, but, frankly, so am I. If the Government were to move on this, we would not have to raise it again.

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[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to consider clause 59 stand part.

[Jane Ellison]

Clause 58 legislates for the increase in the standard rate of insurance premium tax from 10% to 12% as the Chancellor announced in the autumn statement 2016. This change will be effective from 1 June this year. Clause 59 will make minor changes to anti-forestalling provisions, so that insurers cannot artificially avoid paying the new rate of insurance premium tax by adjusting contract dates.

The Government remain committed to our fiscal mandate of eliminating the deficit. Much has already been achieved. The Government are forecast to reduce the deficit by more than two thirds by the end of this year, and in 2018-19, debt will fall for the first time in 16 years. However, we cannot be complacent. The Office for Budget Responsibility’s recent fiscal sustainability report highlights the challenges posed by an ageing population, projecting debt almost trebling to 234% over the next 50 years, if no further action is taken.

[Stephen Pound]

I am so sorry to interrupt the hon. Lady, but I speak on behalf of the 4th Perivale scout group, which is most concerned about the impact that insurance premium tax increases are having on not just scout groups but other charities. Has she considered this matter since my hon. Friend the Member for Bootle (Peter Dowd) raised it, and does she have any good news if not for the whole charity sector, at least for the 4th Perivale scout group?

[Jane Ellison]

I am delighted that the hon. Gentleman has had the opportunity to put his local scout group on the record. These issues have been discussed in general terms. In particular, I spoke at the Charity Tax Group conference recently. The point that I made there was that although we are not making exceptions for a number of reasons—some of them logistical—there are many different ways in which the Government exempt tax for charities and try to support them in other ways. The existing tax reliefs that go to charities and community groups in this country are worth many billions, and many are not taken up as much as they should be. In particular, the issue of scout groups got a very thorough airing during the passage of the gift aid small donation scheme measures that we took through the House last autumn. Those measures are designed to help such groups that do a lot of their fundraising outside their headquarters. Although I cannot give him comfort on this issue, I draw his attention to the fact that there are many other ways in which we help to relieve worthy groups. In particular, I refer to that recent change, which I encourage him to discuss with the Perivale scout group, because, as I have said, that was made very much with it in mind, especially with regard to how it collects donations.

[George Kerevan]

Essentially, this is one of the taxes that the Government are keeping in. It is the third insurance premium tax rise in 18 months. Will the Minister justify why the Government are proposing this third increase, which actually increases the rate by 20%—well above the rate of inflation?

[Jane Ellison]

I am coming to that, but the Chancellor was admirably clear when he laid the change out for the House when it was announced.

The Government have worked to eliminate the deficit and to invest in Britain’s future. We want to ensure that the public finances remain sustainable and to build resilience to future shocks. We have prioritised tax changes to help ordinary working families, and encouraged businesses to invest in the UK. We are supporting jobs and helping people’s money to go further through increases to the personal allowance and the national living wage. We have committed to investing £23 billion for infrastructure in the national productivity investment fund and an extra £2 billion for social care, which will ease pressures on the national health service.

By increasing insurance premium tax, we will ensure that we can maintain the balance between that investment and controlling the deficit. The additional revenue gives the Government the flexibility to invest. IPT is a tax on insurers. They are not in any way obliged to pass on the tax through higher premiums. However, if insurers do choose to pass on the increase, it will be spread thinly across a wide range of people and businesses. In line with the informal agreement between the Government and the Association of British Insurers, firms have been given more than six months’ notice, which gives time to implement the change. The agreement aims to give insurers proper warning of a rate change and to ensure that the correct rate of tax on a policy is known when the policy is arranged.

The changes made by clause 58 will raise approximately £840 million each year to reduce the deficit, while ensuring that we can fund spending commitments. That really is the answer to the intervention by the hon. Member for East Lothian (George Kerevan). Insurance premium tax is a tax on insurers, not consumers. It will be insurance companies’ choice whether to pass on the 2% rate increase. Even if the increases were passed on in full, the impact would be modest, costing households less than 35p a week on average.

The changes made by clause 59 will protect revenue by ensuring that insurers cannot artificially avoid paying the new rate of IPT by adjusting contract dates. As I have said, the Government are committed to reducing the deficit, while still investing in the UK. This requires some difficult decisions, including this 2% increase to the standard rate of IPT. The change will be invaluable in funding vital public spending, such as the additional £2 billion committed to social care.

[Kirsty Blackman]

It is really interesting to hear the Minister say that the change will only cost an average of 35p a week. That is quite a lot, particularly for people who do not have an extra 35p a week. The director general of the ABI said:

“UK consumers and businesses already pay relatively high levels of IPT… It cannot be right that people are being forced to pay an increasingly high price for doing the responsible thing”.

As my hon. Friend the Member for East Lothian (George Kerevan) said, this is the third increase. At the start of this Parliament, IPT was at something like 3%. It was then increased to 6.5% and then to 9.5% during this Parliament. This is a tax on people doing the right thing by insuring their homes and properties. I agree with the hon. Member for Ealing North (Stephen Pound), who spoke about a scout group, that this is also a tax on charities and organisations providing a brilliant experience for young boys and girls going through scouting. The change has not been considered in the round; the Government have seen another opportunity to get a few extra pennies in.

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[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to consider the following:

Clauses 61 to 64 stand part.

Amendment 1, in clause 65, page 73, line 4, leave out subsection (2).

Clauses 65 to 70 stand part.

New clause 3—Review of oil and gas corporation tax rates and investment allowances—

“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the corporation tax rates and investment allowances applicable to companies producing oil and gas in the UK or on the UK continental shelf.

(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”

New clause 4—Review of tax regime relating to decommissioning of oil and gas infrastructure—

“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the ways in which the tax regime could be changed to increase the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure or the development of new fields in the UK continental shelf.

(2) In undertaking the review under subsection (1), the Chancellor of the Exchequer must consult—

(a) the Department for Business, Energy and Industrial Strategy;

(b) the Oil and Gas Authority;

(c) Scottish Ministers; and

(d) such other stakeholders as the Chancellor of the Exchequer thinks appropriate.

(3) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”

[Jane Ellison]

I plan to focus my comments in this part of the debate on alcohol duties, which I anticipate will be of greatest interest to hon. Members. Other clauses within the group provide for other duty changes, and a new clause has been tabled by the hon. Member for Aberdeen North (Kirsty Blackman) on the oil and gas decommissioning regime, which we may come to.

Clause 65 sets out changes to alcohol duty rates that took effect on 13 March 2017. We announced in the 2017 Budget that the duty rates on beer, cider, wine and spirits will be kept flat in real terms, uprating by retail price index inflation. This is in line with policy and previous forecasts. As hon. Members will probably be aware, the public finances assume that alcohol duties rise by RPI inflation each year, so there is a cost to the Exchequer from freezing or cutting alcohol duty rates. If alcohol duty rates had been frozen or cut at Budget 2017, the Government would instead have had to raise taxes in other areas of the economy, to cut public spending or to increase the public deficit. Consumers and businesses continue to benefit from the previous alcohol duty changes, which initial estimates suggest will save them around £3 billion in duty between fiscal years 2013 and 2017. I will now briefly set out how past duty changes and other Government policies have affected different drinks and the sector.

I will start with spirits duty. The Government recognise the important contribution that Scotch whisky makes to the economy and local communities. The Scotch Whisky Association, which I had a meeting with and had the chance to hear from directly, estimates that Scotch whisky adds over £5 billion overall to the UK economy and supports more than 40,000 jobs, some 7,000 of which are in the rural economy. Distilleries provide an important source of employment in rural communities. The Scotch Whisky Association estimates that exports to nearly 200 countries in every continent were worth nearly £4 billion last year and accounted for about 20% of all UK food and drink exports. Single malt Scotch whisky exports exceeded £1 billion for the first time last year, and more Scotch whisky is sold in France in just one month than cognac in an entire year.

The Government are committed to supporting this great British success story. Scotch whisky was one of the first food and drink products to feature in the GREAT campaign, giving it high visibility internationally in key markets. More recently, the Scotch Whisky Association joined my right hon. Friend the Prime Minister on her trade mission to India last year. Scotch whisky is currently just 1% of the Indian spirits market, but it has the potential to grow to 5% with the right trade agreement. That would be equivalent to a 10% increase in the current global trade in Scotch.

The spirits duty escalator was ended in 2014, and the tax on a bottle of Scotch whisky is now 90p lower than it would otherwise have been. The hon. Member for Aberdeen North has tabled an amendment to reverse the uprating as applied to spirits. To be clear, that would not help exports, because the £4 billion of exports a year are unaffected by the duty change, as no duty is paid on exported spirits. Instead, it would help those selling in the UK market. The amendment would cost the Exchequer, and so increase the deficit by, around £100 million this year. For the reasons I have indicated—not least the bottom line scorecard cost—the Government reject the amendment, which would not help exporters of whisky or other spirits and which is unfunded. Clause 65 will keep spirit duty rates flat in real terms, so consumers will continue to benefit from the previous change to spirit duty rates.

While we are on spirits, I should touch on another great British success: the UK gin industry. When I met the Wine and Spirit Trade Association, it informed me that, in 2016, gin sales exceeded £1 billion for the first time in the UK. I suspect that many of us will be partaking of a number of these products in the weeks ahead. [Interruption.] I said many of us. We will be partaking perhaps in celebration or perhaps for sustenance —who knows what reason. It is good that we put these British success stories on record.

I was also told that the number of gin brands has more than doubled since 2010. [Interruption.] Yes, doubles all round. The price of a typical bottle of gin remains 84p lower than it would have been now that we have ended the spirits duty escalator. As with Scotch whisky, no UK duty is payable on exported gin.

As well as ending the spirits duty escalator, we also ended the beer duty escalator to help pubs. Pubs play an important role in promoting responsible drinking, providing employment and contributing to community life—that sentiment is expressed regularly on both sides of the House. Brewers also make an important contribution to local economies. The increase in the number of small breweries in recent years has increased diversity and choice in the beer market. By promoting interest in a larger range of beers, that has benefited all brewers.

The clause will not undo the previous beer duty cuts or freezes. The Government cut the tax on a typical pint by one penny at Budgets 2013, 2014 and 2015 and then froze duty rates last year. As a result, drinkers are paying 11p less in tax on a typical pint this year than they otherwise would have paid.

On wine duty, the Government are committed to supporting the UK wine industry. The first joint industry and Department for Environment, Food and Rural Affairs wine roundtable last year resulted in a set of industry targets, including to increase wine exports tenfold and to double production to 10 million bottles by 2020. The wine sector will continue to benefit from the previous changes to wine duty rates.

Cider makers, too, play an important role in rural economies, using over half the apples grown in the UK. The duty on a typical pint of cider remains around half the duty on a typical pint of beer. The tax on a typical pint remains 3p lower than it would otherwise have been, as a result of the Government’s changes to cider duty rates since Budget 2014.

To conclude, we fully recognise the importance of the alcohol industry to the economy and local communities. I have talked with and met various representatives from across the industry, and I will, of course, continue to engage with them. The cuts and freezes in duty rates since the ending of the alcohol duty escalators continue to deliver great benefits. They will save consumers and businesses around £3 billion in duty between fiscal years 2013 and 2017. However, allowing alcohol duties to fall every year in real terms would be unsustainable in the long term. If alcohol duties had been frozen or cut at Budget 2017, the Government would instead have had to raise taxes in other areas of the economy, cut public spending or increase the public deficit. The clause simply increases duties in line with inflation, as assumed in the fiscal forecasts. This is not a return to the real-terms increases year after year imposed by the alcohol duty escalator. I therefore suggest that the clause stand part of the Bill.

[Kirsty Blackman]

I will start by talking about alcohol and whisky, and then I will move on to talk about oil and gas. Specifically on whisky, I appreciate the Minister taking the time to talk about the contribution of the Scotch whisky industry. It does, indeed, contribute to our economy; of particular note are the 40,000 jobs it provides, including the 7,000 in the rural economy, which are really important for Scotland’s rural communities.

The positive changes the UK Government previously made to spirit duty meant there was confidence in the industry again, and we have seen a real change in the industry over the last couple of years, with a dozen new distilleries opening and 14 in various stages of planning, but the changes that have been made this year will put 36p on a bottle of whisky and mean that £4 of every £5 spent on whisky goes to the UK Government’s coffers.

My hon. Friend the Member for Argyll and Bute (Brendan O'Hara), who is the chair of the all-party group on Scotch whisky, spoke about this issue on Second Reading, although not at enough length—he got only four minutes. He is really concerned about distilleries. I appreciate the Minister talking about the success story that the gin industry has been for new distilleries—it takes a long time to mature Scotch whisky but not to mature gin, so distilleries can be up and running pretty quickly. The issue is the context in which things are seen. I understand that, as the Minister said, the change will not affect those selling abroad, but given that most producers sell whisky in the domestic market, it will obviously have an effect on those who also sell abroad.

In the wider context of Brexit, where the trade deals we currently have will no longer exist and we will have to negotiate new trade deals, including with the EU, if we are to sell whisky to France, as the Minister mentioned, we will need to have a trade deal. We will need to have trade deals with all the countries we trade with under the EU’s free trade agreements.

A major concern for those of us who represent constituencies involved with whisky is the protected geographical indication. The EU has protected geographical indication status, so people are not allowed to bottle whisky somewhere else and call it Scotch whisky. We are set to lose that protection when the UK leaves the EU, and it is important that the UK Government do what they can to ensure that the Scotch whisky industry can continue to trade and protect its brand—but I do not see that coming through. If the Government had not raised duty in this Budget on spirits and on whisky in particular, the industry would have known that it had the confidence of the UK Government and been in a much better position to take decisions.

Moving on to oil and gas, we have two new clauses on the amendment paper. New clauses 3 and 4 on behalf of the SNP are in my name, and I particularly thank my hon. Friend the Member for Aberdeen South (Callum McCaig) for his input into them. New clause 3 is about investment allowances. This Tory Government have come up with a line that we are one of the most competitive fiscal regimes for oil and gas, which is all well and good, but we also have one of the most mature fields in the world. In the North sea and on the UK continental shelf, we are also having to do things and implement technologies we have never seen before. A huge amount of innovation from our companies is having to go on in order for them to be able to achieve the UK Government’s and Sir Ian Wood’s maximising economic recovery strategy.

New clause 3 is about investment allowances and corporation tax rates on companies producing oil and gas. The UK Government have put the tax up and put it down, but they have not at any stage sat down and looked at the entire taxation regime for the oil and gas industry and said, “We are operating in a new scenario.” They have kept the level of taxes that we have had since oil and gas began to be taken out of the North sea. It is time for the UK Government to look at that tax structure and those tax regimes to see how they can incentivise companies to ensure that they are getting the best out of the North sea and securing jobs in the north-east of Scotland, and beyond, for as long term a future as possible.

--- Later in debate ---

[The Chairman of Ways and Means (Mr Lindsay Hoyle)]

With this it will be convenient to discuss the following:

Clauses 72 to 75 stand part.

Amendment 2, in clause 76, page 81, line 15, leave out paragraph (a).

Amendment 3, page 81, line 20, leave out subsection (2).

Clauses 76 to 107 stand part.

That schedules 20 to 23 be schedules to the Bill.

[Jane Ellison]

Clauses 71 to 107 contain provisions for a new tax called the soft drinks industry levy to be introduced from April 2018. This is a key pillar in the Government’s childhood obesity plan, and it has been welcomed by a wide range of public health experts and campaigners. Tackling obesity is a national challenge—indeed, an international challenge. The UK has one of the highest obesity rates in the developed world, and childhood obesity in particular is a major concern. Today nearly a third of children aged two to 15 are overweight or obese, and we know that many of these children will go on to become obese adults. Obesity drives disease, as we are reminded at the moment as we come through Westminster underground station by the Cancer Research UK posters. It increases the risk of heart disease, type 2 diabetes, stroke, and some cancers. The NHS spends over £6 billion a year across the UK in dealing with obesity-related costs, and the overall costs to our economy are estimated at between £27 billion and £46 billion a year. This cannot go on.

Health experts have identified sugary drinks as one of the biggest contributors to childhood obesity and a source of empty calories. A 330 ml can of full-sugar cola typically contains nine teaspoons of sugar. Some popular drinks have as many as 13 teaspoons. This can be more than double a child’s daily recommended added sugar intake in just a single can of drink. The Government recognise that this is a problem, and so have many others, with over 60 public health organisations calling for a tax on sugary drinks and many thousands signing a petition in favour. I am delighted that this issue has also received a high level of cross-party support.

Indeed, some soft drinks producers had recognised that sugar levels in their drinks were a problem too, and had started to reduce the sugar content, move consumers towards diet and sugar-free variants, and reduce portion sizes for high-sugar beverages. Nevertheless, reducing the added sugar in soft drinks is now a public health priority, and this new levy is needed to speed up the process. It is specifically designed to encourage the industry to move faster. We gave the industry two years to make progress on this before the levy begins, and we can see that it is already working. Since the Government announced the levy last March, a number of major producers have accelerated their work to reformulate sugar out of their soft drinks and escape the charge. These include Tesco, which has already reformulated its whole range of own-brand soft drinks so that they will not pay the levy. Similar commitments have come from the makers of Lucozade and Ribena, and the maker of Irn-Bru, A. G. Barr. In fact, we now expect more than 40% of all drinks that would otherwise have been in scope to have been reformulated by the introduction of the levy. We see international action too. In recent months, countries such as Ireland, Spain, Portugal, Estonia and South Africa have brought forward similar proposals to our own.

As a result of such reformulation before the levy begins, we now expect the levy to raise around £385 million per year, which is less than the £520 million originally forecast—but we are clear that this is a success. The Government will still fund the Department for Education’s budget with the £1 billion that the levy was originally expected to raise over this Parliament, including money to double the primary schools sports premium and deliver additional funding for school breakfast clubs, and £415 million to be invested in a new healthy pupils capital programme. The devolved Administrations will receive Barnett funding in the usual way. The Secretary of State for Education has made recent announcements about how some of the money will be spent, particularly on the healthy pupils capital programme.

The levy has shown that the Government mean business when it comes to reducing hidden sugar in everyday food. That willingness to take bold action underpins another major part of our childhood obesity plan, namely Public Health England’s sugar reduction programme, which is a groundbreaking programme of work with industry to achieve 20% cuts in sugar by 2020 across the top nine food categories that contribute the most to children’s sugar intake. It has been acknowledged, not least by industry, that that is a challenging target, but one that industry is committed to working with Government to achieve. The sugar reduction programme will cover some of the drinks products that are not part of the levy, such as milk-based drinks. The programme is already bearing fruit: there have been announcements and commitments to reduce the levels of sugar in some of the products.

I know that some would like the levy to go further. In particular, the hon. Member for Aberdeen North (Kirsty Blackman) has tabled amendments 2 and 3, which would remove the exclusion from the levy of high milk content drinks containing at least 75% milk. We oppose those amendments. Milk and milk products are a source of protein, calcium, potassium, phosphorous and iodine, as well as vitamins B2 and B12. One in five teenage girls do not get enough calcium in their diet, and the same is true for one in 10 teenage boys. It is essential for children’s health that they consume the required amount of those nutrients, which aid bone formation and promote healthy growth as part of a balanced diet. Health experts agree that the naturally occurring sugars in milk are not a concern from an obesity perspective, and they are not included in the definition of free sugars, which Public Health England now applies.

Of course, we want milk-based drinks to contain less added sugar, so they will be part of Public Health England’s sugar reduction programme. Producers of the drinks will be challenged and supported to reduce added sugar content by 20% by 2020. Public Health England has committed to publishing a detailed assessment of the food and drink industry’s progress against the 20% target in March 2020, and today I make a commitment to the House that we will also review the exclusion of milk-based drinks in 2020, based on the evidence from Public Health England’s assessment of producers’ progress against their sugar reduction targets. In the light of that assurance, I urge hon. Members to reject amendments 2 and 3, and allow us to review the evidence in 2020, two years after the levy has begun, and to decide at that point whether milk-based drinks should be brought within scope.

Obesity is a problem that has been decades in the making and we are not going to solve it overnight. The soft drinks levy is not a silver bullet, but it is an important part of the solution. This Government’s childhood obesity plan, with the levy as its flagship policy, is the start of a journey and it marks a major step towards dealing with our national obesity crisis.

[Kirsty Blackman]

The Minister is absolutely correct about the huge amount of cross-party support for the general thrust of the soft drinks industry levy and the move towards tackling obesity, particularly childhood obesity. However, we are concerned that the levy does not go far enough and that the Government could have chosen to close certain loopholes when drafting the Bill.

The single biggest cause of preventable cancer is obesity. More than 18,100 cancers a year are associated with excess weight. Cancer Research says that sugary drinks are the No. 1 source of sugar for 11 to 18-year-olds, which is a pretty terrifying statistic, and I appreciate that the Government have chosen to take action.

I am concerned about the Government’s response on milk-based drinks and about the fact that they are excluded from the levy.

--- Later in debate ---

[The Temporary Chair (Sir David Amess)]

With this it will be convenient to discuss the following:

Clauses 109 to 123 and 130 to 133 stand part.

Government amendments 5 to 9.

Clauses 134 and 135 stand part.

That schedules 24 to 26 be schedules to the Bill.

[Jane Ellison]

These are consequential amendments and I want to move them formally.

[Kirsty Blackman]

I appreciate the Government withdrawing the making tax digital provisions. I understand their commitment to making tax digital, but the changes are reasonable.

--- Later in debate ---

[The Temporary Chair]

That is certainly news to me, but the hon. Gentleman’s tribute is most appropriate and I thank him for it.

[Jane Ellison]

On a point of clarity, may I make it clear that the Government do not support clause 108? I apologise for not making that clear before. On making tax digital, I refer colleagues to my statement at the beginning of our debate on the first group.

Question put and negatived.

Clause 108 accordingly disagreed to.

Clauses 109 to 126 disagreed to.

Clause 127 ordered to stand part of the Bill.

Ordered,

That clause 127 be transferred to the end of clause 69.—(Jane Ellison.)

Clauses 128 to 133 disagreed to.

Clause 134

Interpretation

Amendments made: 5, page 126, leave out line 17.

Amendment 6, page 126, leave out line 20.

Amendment 7, page 126, leave out lines 22 to 24.

Amendment 8, page 126, leave out line 30.

Amendment 9, page 127, leave out lines 1 and 2.—(Jane Ellison.)

Clause 134, as amended, ordered to stand part of the Bill.

Clause 135 ordered to stand part of the Bill.

Schedule 1

Workers’ services provided to public sector through intermediaries

Amendment made: 10, page 129, line 32 , at end insert—

‘(3) Subsection (1) is subject to subsection (4).

(4) A primary-healthcare provider is a public authority for the purposes of this Chapter only if the primary-healthcare provider—

(a) has a registered patient list for the purposes of relevant medical-services regulations,

(b) is within paragraph 43A in Part 3 of Schedule 1 to the Freedom of Information Act 2000 (providers of primary healthcare services in England and Wales) by reason of being a person providing primary dental services,

(c) is within paragraph 51 in that Part of that Schedule (providers of healthcare services in Northern Ireland) by reason of being a person providing general dental services, or

(d) is within paragraph 33 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002 (providers of healthcare services in Scotland) by reason of being a person providing general dental services.

(5) In this section—

“primary-healthcare provider” means an authority that is within subsection (1)(a) or (b) only because it is within a relevant paragraph,

“relevant paragraph” means—

(a) any of paragraphs 43A to 45A and 51 in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or

(b) any of paragraphs 33 to 35 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002, and

“relevant medical-services regulations” means any of the following—

(a) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations 2004 (S.I. 2004/906),

(b) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Wales) Regulations 2004 (S.I. 2004/1017),

(c) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Scotland) Regulations 2004 (S.S.I. 2004/162), and

(d) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations (Northern Ireland) 2004 (S.R. (N.I.) 2004 No. 477).

(6) The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend this section in consequence of—

(a) any amendment or revocation of any regulations for the time being referred to in this section,

(b) any amendment in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or

(c) any amendment in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002.’—(Jane Ellison.)

Schedule 1, as amended, agreed to.

Schedule 2

Optional remuneration arrangements

Amendments made: 11, page 160, line 14, at end insert—

“() section 307 (death or retirement provision), so far as relating to provision made for retirement benefits;”

Amendment 12, page 160, line 26, at end insert—

‘( ) In subsection (5) “retirement benefit” has the meaning that would be given by subsection (2) of section 307 if “or death” were omitted in both places where it occurs in that subsection.”—(Jane Ellison.)

Schedule 2, as amended, agreed to.

Schedule 3

Overseas pensions

Amendments made: 13, page 166, line 18, leave out from beginning to “in” in line 23 and insert—

“(a) that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;

(aa) that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement;

(b) that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement; and

(c) that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—

(i) no contributions are made under the arrangement on or after 6 April 2017, and

(ii) there is no increase on or after 6 April 2017.”

Amendment 14, page 166, line 24, at end insert—

‘(6AA) For the purposes of subsection (6A)(aa)—

(a) whether there is an increase in the value of a person’s rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but

(b) in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.’

Amendment 15, page 166, line 30, leave out

“ignore increases in the value of a person’s”

and insert

“in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the”.

Amendment 16, page 166, line 31, at end insert—

‘(6BA) For the purposes of subsection (6A)(c)(ii), regulations made by the Commissioners for Her Majesty’s Revenue and Customs may make provision—

(a) for determining whether there is an increase in the value of a person’s rights,

(b) for determining the amount of any increase, and

(c) for ignoring the whole or part of any increase;

and regulations under this subsection may make provision having effect in relation to times before the regulations are made.’

Amendment 17, page 166, line 32, leave out “subsection (6B)(b)” and insert “this section”.

Amendment 18, page 167, leave out lines 5 to 7.

Amendment 19, page 167, line 8, after “subsection” insert “(6BA) or”.

Amendment 20, page 167, line 10 , leave out from “(7)” to end of line 16 and insert—

‘(a) for “In this section—” substitute “For the purposes of this section—

‘arrangement’, in relation to a member of a superannuation fund, means an arrangement relating to the member under the fund;

a money purchase arrangement relating to a member of a superannuation fund is a ‘cash balance arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance benefits;

an arrangement relating to a member of a superannuation fund is a ‘defined benefits arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are defined benefits;

an arrangement relating to a member of a superannuation fund is a ‘money purchase arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are money purchase benefits;

‘cash balance benefits’, ‘defined benefits’ and ‘money purchase benefits’ have the meaning given by section 152 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;

‘member’, in relation to a superannuation fund, has the meaning given by section 151 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;”;

(b) at the end insert—

“‘the valuation assumptions’ has the meaning given by section 277 of the Finance Act 2004.”’

Amendment 21, page 167, line 16, at end insert—

‘( ) After subsection (10) insert—

(11) Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“the actual fund”)—

(a) any disqualifying contributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),

(b) any disqualifying increase in the value of a person’s rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and

(c) any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—

(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or

(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.

(12) For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.

(13) For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—

(a) any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and

(b) any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.

(14) For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“the transferor fund”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—

(a) the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and

(b) none of the sums and assets transferred—

(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or

(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.’

Amendment 22, page 167, line 19, leave out sub-paragraphs (6) to (8).

Amendment 23, page 169, line 13, leave out “Subsection (4) does not” and insert “Subsections (7A) and (7B)”.

Amendment 24, page 169, line 20, at end insert—

‘(7A) If the lump sum is wholly in respect of rights which have accrued on or after 6 April 2017, there is no reduction under subsection (4).

(7B) If the lump sum is wholly or partly in respect of rights which accrued before 6 April 2017, the amount of any reduction under subsection (4) is given by—

R x A/LS

where—

A is so much of the lump sum as is in respect of rights which accrued before 6 April 2017,

LS is the amount of the lump sum, and

R is the amount which (ignoring this subsection) is given by subsection (4) as the amount of the reduction.’

Amendment 25, page 170, line 22, at beginning insert—

“Where the lump sum is paid under a pension scheme that was an employer-financed retirement benefits scheme immediately before 6 April 2017, deduct so much of the lump sum left after Step 1 as is deductible in accordance with subsection (5A).

Where the lump sum is paid otherwise than under such a scheme,”

Amendment 26, page 170, line 23, leave out

“rights, which accrued before 6 April 2017,”

and insert—

“the value immediately before 6 April 2017 of rights, accrued by then,”.

Amendment 27, page 170, line 39, at end insert—

‘(5A) These rules apply for the purposes of the first sentence of Step 2—

(a) “the post-Step 1 amount” means so much of the lump sum as is left after Step 1;

(b) “the relevant amount” means so much of the post-Step 1 amount as is paid in respect of rights specifically to receive benefits by way of lump sum payments;

(c) “reckonable service” means service in respect of which the rights to receive the relevant amount accrued (whether or not service in the same employment or with the same employer, and even if the rights originally accrued under a different employer-financed retirement benefits scheme established in or outside the United Kingdom);

(d) “pre-6 April 2017 reckonable service” means reckonable service that is service before 6 April 2017;

(e) “pre-6 April 2017 reckonable foreign service” means pre-6 April 2017 reckonable service that is foreign service;

(f) the deductible amount is the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service if—

(i) at least 75% of pre-6 April 2017 reckonable service is made up of foreign service, or

(ii) the period of pre-6 April 2017 reckonable service exceeds 10 years and the whole of the last 10 years of that period is made up of foreign service, or

(iii) the period of pre-6 April 2017 reckonable service exceeds 20 years and at least 50% of that period, including any 10 of the last 20 years, is made up of foreign service;

(g) otherwise, the deductible amount is the appropriate fraction of the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service;

(h) “the appropriate fraction” is given by—

F/R

where—

F is the period of pre-6 April 2017 reckonable foreign service, and

R is the period of pre-6 April 2017 reckonable service.’

Amendment 28, page 170, line 42, at end insert—

‘“foreign service” has the meaning given by section 395C,’

Amendment 29, page 171, line 17, at end insert—

‘Relief from tax under Part 9 of ITEPA 2003 not to give rise to tax under other provisions

13 (1) In section 393B(2)(a) of ITEPA 2003 (tax on benefits under employer-financed retirement benefit schemes: “relevant benefits” do not include benefits charged to tax under Part 9), after “646E” insert “or any deductions under section 574A(3)”.

(2) The amendment made by this paragraph has effect in relation to benefits by way of lump sums paid on or after 6 April 2017.’—(Jane Ellison.)

Schedule 3, as amended, agreed to.

Schedule 4

Pensions: offshore transfers

Amendments made: 30, page 172, line 23, after “sub-paragraph” insert “(6C) or”.

Amendment 31, page 174, line 21, at end insert—

‘(4A) In sub-paragraph (4) (power to specify whether payments by scheme are referable to relevant transfer fund), after “payments or transfers made (or treated as made) by” insert “, or other things done by or to or under or in respect of or in the case of,”.’

Amendment 32, page 176, line 28, leave out “with the next 5” and insert—“immediately before the next 6”.

Amendment 33, page 177, line 1, leave out “with the next 5” and insert—

“immediately before the next 6”.

Amendment 34, page 178, line 8, leave out

“for the purposes of sections 244L and 254”.

Amendment 35, page 178, line 28, leave out

“for the purposes of sections 244L and 254”.

Amendment 36, page 178, line 48, leave out

“for the purposes of sections 244L and 254”.

Amendment 37, page 179, line 18, leave out

“for the purposes of sections 244L and 254”.

Amendment 38, page 180, line 19, leave out “was” and insert “has been”.

Amendment 39, page 180, line 21, leave out “was” and insert “has been”.

Amendment 40, page 183, line 17, leave out from beginning to fourth “the”.

Amendment 41, page 184, leave out lines 30 to 38.

Amendment 42, page 188, line 8, at end insert—

“17A In Schedule 32 (benefit crystallisation events: supplementary provision), after paragraph 2 insert—

‘Avoiding double counting of refunded amounts of overseas transfer charge

2A (1) This paragraph applies where an amount of overseas transfer charge is repaid (whether or not under section 244M) to the scheme administrator of one of the relevant pension schemes.

(2) The amount crystallised by the first benefit crystallisation event that occurs in respect of the individual and a benefited scheme after receipt of the repayment is to be reduced (but not below nil) by the amount of the repayment.

(3) If the amount of the repayment exceeds the reduction under sub-paragraph (2), the excess is to be set sequentially until exhausted against the amounts crystallised by subsequent benefit crystallisation events occurring in respect of the individual and a benefited scheme.

(4) In sub-paragraphs (2) and (3) “benefited scheme” means—

(a) the scheme to which the repayment is made, and

(b) any other pension scheme if as a result of a recognised transfer, or a chain of two or more recognised transfers, sums or assets representing the repayment are held for the purposes of, or represent rights under, that other scheme.’”

Amendment 43, page 188, line 38, at end insert—

‘(1A) In those Regulations, after regulation 13 insert—

“14 Claims for repayments of overseas transfer charge

(1) This regulation applies where the scheme administrator of a registered pension scheme becomes aware that the scheme administrator may be entitled to a repayment under section 244M of the Act in respect of overseas transfer charge on a transfer.

(2) The scheme administrator must, no later than 60 days after the date on which the scheme administrator becomes aware of that, make a claim for the repayment to the Commissioners for Her Majesty’s Revenue and Customs.

(3) The claim must provide the following information—

(a) the member’s name, date of birth and principal residential address,

(b) the date of the transfer and, if different, the date of the event triggering payability of the charge on the transfer,

(c) the date on which the scheme manager accounted for the charge on the transfer,

(d) why the charge on the transfer has become repayable, and

(e) the amount in respect of which the claim is made.

(4) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 14 November 2017, paragraph (2) is to be treated as requiring the claim to be made no later than 14 November 2017.”’

Amendment 44, page 188, line 39, leave out “this paragraph” and insert “sub-paragraph (1)”.

Amendment 45, page 188, line 42, at end insert—

“( ) The amendment made by sub-paragraph (1A) is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the powers to make regulations conferred by section 244M(8) of FA 2004.”

Amendment 46, page 190, line 3, at end insert—

‘(4A) In regulation 3(3)(a) (reporting duty under regulation 3(2) expires after 10 years from creation of relevant transfer fund), after “beginning” insert “—

(i) if the payment is in respect of one or more of the relevant member’s ring-fenced transfer funds (whether or not it is also in respect of anything else), with the key date for that fund or (as the case may be) the later or latest of the key dates for those funds, and

(ii) if the payment is not to any extent in respect of the relevant member’s ring-fenced transfer funds,”.’

Amendment 47, page 191, line 26, after “take” insert “place”.

Amendment 48, page 192, line 26, at end insert—

“3AEA  Information provided by member to QROPS: inward and outward transfers

(1) Paragraph (2) applies where—

(a) a recognised transfer or onward transfer is made to a QROPS, or an onward transfer is made by a QROPS or former QROPS, and

(b) either—

(i) the overseas transfer charge arises in the case of the transfer, or

(ii) the transfer is required by section 244B or 244C to be initially assumed to be excluded from the overseas transfer charge by that section.

(2) Each time during the relevant period for the transfer that the member—

(a) becomes resident in a country or territory, or

(b) ceases to be resident in a country or territory,

the member must, within 60 days after the date that happens, inform the scheme manager of the QROPS or former QROPS that it has happened.

(3) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 30 June 2017, paragraph (2) is to be treated as requiring the information to be given no later than 30 June 2017.”

Amendment 49, page 194, line 23, at end insert—

“3AK Claims for repayments of charge on subsequent excluding events

(1) Repayment under section 244M (repayments of overseas transfer charge) to the scheme manager of a QROPS or former QROPS is conditional on making a claim to HMRC.

(2) Such a claim in respect of overseas transfer charge on a transfer—

(a) must be in writing,

(b) must be made no later than 12 months after the end of the relevant period for the transfer, and

(c) must provide the following information—

(i) the member’s name, date of birth and principal residential address,

(ii) the date of the transfer and, if different, the date of the event triggering payability of the charge on the transfer,

(iii) the date on which the scheme manager accounted for the charge on the transfer,

(iv) why the charge on the transfer has become repayable, and

(v) the amount in respect of which the claim is made.”

Amendment 50, page 194, line 38, leave out “regulation 3AE(1) to (5)” and insert—

“regulations 3AE(1) to (5) and 3AEA”.

Amendment 51, page 195, line 3, at end insert

“, and

( ) are, so far as they insert new regulation 3AK, to be treated as having been made by the Commissioners under the powers to make regulations conferred by section 244M(8) of FA 2004.”

Amendment 52, page 196, line 28, leave out “potentially excluded” and insert “overseas”.

Amendment 53, page 196, line 32, at beginning insert

“either—

(i) the overseas transfer charge arises in the case of the transfer, or

(ii) ”

Amendment 54, page 196, line 4, at end insert—

‘(3) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 30 June 2017, paragraph (2) is to be treated as requiring the information to be given no later than 30 June 2017.’

Amendment 55, page 198, line 41, after “Regulations,” insert—

“and the amendments in regulation 11BA of the Registered Pension Schemes (Provision of Information) Regulations 2006,”

Amendment 56, page 198, line 46, at end insert—

“if it would otherwise be considered for those purposes as charged in an earlier period.”—(Jane Ellison.)

Schedule 4, as amended, agreed to.

Schedules 5 and 6 disagreed to.

Schedule 7 agreed to.

Schedules 8 to 15 disagreed to.

Schedule 16

Employment income provided through third parties

Amendment made: 57, page 607, line 18, leave out from ‘“step”)’ to ‘insert’ in line 19 and insert ‘at the end’.—(Jane Ellison.)

Schedule 16, as amended, agreed to.

Schedules 17 and 18 disagreed to.

Schedule 19 to 23 agreed to.

Schedules 24 to 29 disagreed to.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Bill, as amended in the Committee, considered.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. Under the Order of the House of yesterday, we shall now move to the remaining stages, with no amendments on consideration. I shall now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motion, copies of which will be made available in the Vote Office and distributed by the Doorkeepers.

--- Later in debate ---

[Madam Deputy Speaker (Mrs Eleanor Laing)]

I can now inform the House of my decision about certification. For the purposes of Standing Order No. 83L(2), I have certified clause 2 of the Finance (No. 2) Bill as relating exclusively to England, Wales and Northern Ireland and within devolved legislative competence. Under Standing Order No. 83L(4), I have also certified the following amendment as relating exclusively to England, Wales and Northern Ireland—the omission of clause 60 of the Bill in Committee of the whole House. Copies of my certificate are available in the Vote Office and on the parliamentary website.

Under Standing Order Nos. 83M and 83S, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and have been made available to Members in the Chamber. Does the Minister intend to move the consent motion?

[Jane Ellison]

indicated assent.

The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).

[Mrs Eleanor Laing in the Chair]

[The First Deputy Chairman of Ways and Means (Mrs Eleanor Laing)]

The consent motion for England, Wales and Northern Ireland will now be considered. I remind hon. Members that all Members may speak in the debate, but if there is a Division, only Members representing constituencies in England, Wales and Northern Ireland may vote on the consent motion.

Resolved,

That the Committee consents to the following certified clauses of the Finance (No. 2) Bill and certified amendments made by the House to the Bill—

Clauses certified under Standing Order No. 83L(2) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland and being within devolved legislative competence

Clause 2 of the Bill (Bill 156).

Amendment certified under Standing Order No. 83L(4) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland

The omission in Committee of Clause 60 of the Bill (Bill 156).—(Jane Ellison.)

Question agreed to.

The occupant of the Chair left the Chair to report the decision of the Committee (Standing Order No. 83M(6)).

The Deputy Speaker resumed the Chair; decision reported.

Third Reading

[Jane Ellison]

I beg to move, That the Bill be now read the Third time.

Before I briefly comment in summary of the Bill, may I beg your indulgence, Madam Deputy Speaker, in making some remarks about a couple of colleagues?

The right hon. Member for Oxford East (Mr Smith) was present earlier and made a valedictory speech. I referred to that in my subsequent speech, but I was not then in a position to mention his record of service to the country. Not only has he been a parliamentarian since 1987, but he was a Minister of State for Education and Employment between 1997 and 1999, Chief Secretary to the Treasury between 1999 and 2002 and, indeed, Secretary of State for Work and Pensions between 2002 and 2004. He is no longer in his place, but I ask his party’s Front-Bench spokesman to confer my sentiments to him and to draw to his attention the fact that I—on behalf of the Government and, I am sure, of all colleagues—have placed on record our thanks for his service to the country as a Minister during that period.

With the House’s indulgence, I will pay tribute to a second Member. I have very recently been informed that my right hon. Friend the Member for Chichester (Mr Tyrie) is not seeking re-selection at this election, so I want to make a few comments about him. He has been the MP for Chichester since 1997. He is a former adviser to Nigel Lawson—Lord Lawson—when he was Chancellor, as he was to John Major when he was Chancellor. Members may be aware that my right hon. Friend was a senior economist at the European Bank for Reconstruction and Development before he entered Parliament. He is of course a very senior parliamentarian, and when we moved to electing our Select Committee Chairs, it was no surprise that he was elected overwhelmingly by the House with cross-party support. In recent times, he has served in one of the most senior positions in Parliament, if not the most senior position, as Chairman of the Liaison Committee. In all those roles across his life of public service, governmental service and service to this House, he has been enormously distinguished, and I think I speak for everyone in saying that he is very well liked. I have known him during the years I have been in Parliament, but as a Treasury Minister, I have of course come to know him better in recent months. Indeed, I have responded to his letters on many occasions, and discussed them with him on the sidelines on many other occasions. Throughout those dealings, I have seen all his experience and qualities being brought to bear. I just want to say that to me, as a Minister, he has been kind and wise, and I will miss him enormously.

To move on to my Third Reading speech, the economy is fundamentally strong, and with this Finance Bill we are taking yet another step forward in building a stronger economy and a healthier society. As we have discussed, the Bill is proceeding on the basis of consensus. A number of key policy changes to the tax system, such as measures to tackle tax avoidance, are not being proceeded with now, but will be brought forward in a Finance Bill at the first opportunity after the election.

Even in its shortened form, the Bill takes action in three areas that have been consistent priorities for us in making changes to the tax system. First, the measures in this Bill take further action to reduce the deficit and secure the nation’s public finances, and the Bill raises much-needed revenue to fund the public services we all value. Secondly, the Bill takes the next steps to achieve this Government’s aim of a fairer and more sustainable tax system. It makes it clear that the tax system must keep pace with the different ways in which people choose to work, and ensure fair treatment between individuals. It also demonstrates our continued commitment to tackling tax avoidance and evasion to level the playing field for the honest majority of businesses and individuals who pay the tax they owe. Finally—this cause is particularly close to my heart, as a former Minister for Public Health—the Bill marks an important step in tackling childhood obesity by legislating for the soft drinks industry levy. As I noted earlier, we have achieved a great deal of cross-party consensus on the levy, which will help to deliver a brighter and healthier future for our children. I am delighted that we will be able to put it on the statute book.

In conclusion, this Finance Bill supports our commitment to a fair and sustainable tax system, one that offers support for our critical public services and will get the country back to living within its means. In that regard, it sits with this Government’s long-term commitment to improving the strength of our economy, and I commend it to the House.

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Before I call the Opposition spokesman, may I echo on behalf of the whole House the Minister’s kind words about the right hon. Members for Oxford East (Mr Smith) and for Chichester (Mr Tyrie)? We extend those kind words to all other hon. Members who are present this afternoon, who have taken part in the debates on this Bill and many similar Bills assiduously and brilliantly on behalf of their constituents, and who will not be here during the next Parliament. The whole House wishes them all very well indeed.

Draft Major Sporting Events (Income Tax Exemption) Regulations 2017

Jane Ellison Excerpts

Monday 24th April 2017 General Committees

[The Financial Secretary to the Treasury (Jane Ellison)]

I beg to move,

That the Committee has considered the draft Major Sporting Events (Income Tax Exemption) Regulations 2017.

It is a pleasure to serve under your chairmanship, Mr Gray. The regulations will help us to complete one aspect of the preparations for one of the world’s most prestigious sporting events: the UEFA Champions League final. In just under a couple of months’ time, over 180 million people in over 200 nations will be turning their eyes to Cardiff and the National Stadium of Wales—and, dare I say it, tearing themselves away from the general election coverage—to hopefully watch some excellent football. For the first time ever, Wales is playing host to the match that decides European club football’s champions, and if we think of the 1999 rugby world cup or the Ryder cup in Newport back in 2010, we can be sure that Wales will put on a great show.

In readiness for that, I am here to present the regulations that mean that we can provide the usual income tax exemption for non-UK residents who are making this match happen. Providing such a tax emption is a usual condition of world-class events such as this, supported by successive Governments. We provided an exemption for the fantastic Olympics that we hosted here in London in 2012, and there are other examples, such as Glasgow’s Commonwealth games and the athletics world championships coming up in London this August.

The regulations will enable us to provide a similar exemption for the Champions League final on 3 June. We have made that exemption before previous Champions League finals in England and should do the same thing now, as Wales takes on the role of host. The regulations exempt from UK tax any income arising to non-resident players and officials of the visiting clubs and to individuals designated by UEFA in connection with the final. The exemption runs from 1 to 5 June, allowing two days either side of the event for the exemption to cover any duties performed in connection with the final.

The draft regulations make use of the powers in the Finance Act 2014 to allow tax exemptions for international sporting events to be provided by means of secondary legislation. This will be the second occasion on which the powers have been used. The UEFA final qualifies for the same tax exemption on the same basis as the previous occasion, which was the world athletics championships. It is a top-flight sporting event that moves location, and providing such an exemption is a necessary precondition of hosting the event.

The tax preparations that the regulations put in place may be regarded as one of the less exciting aspects of the much anticipated Champions League final, but they are a necessary one. As the UK has established an outstanding reputation for hosting world-class sporting events, we will continue to take steps to support all four nations in doing so. In that spirit, I hope that colleagues will join me in welcoming the regulations and wishing Cardiff well as it finalises all its other preparations to make this a great show for a truly global Britain. I commend the regulations to the Committee.

--- Later in debate ---

[Jane Ellison]

If I am unable to answer colleagues’ questions today, I will obviously get in touch with them after the debate to clarify. The criteria for granting tax exemptions has been set out on a number of occasions, but I am happy to repeat them. They are that the events should be world class and internationally mobile and where a tax exemption by the host country is a requirement of a bid to host the event. For those who are concerned, it is worth noting that the cost of these exemptions to the Exchequer is negligible and in any case is likely to be offset by the benefits of hosting such high-profile events—something that I am sure comes into the minds of those bidding to host them.

The Opposition Front-Bench spokesman raised gender equality. It is certainly not the case that the Government give tax emptions only for all-male events. If the organisers of an all-female event approached the Government, basically the same policy criteria would apply when deciding whether a tax emption was appropriate. The majority of events that have been granted exemptions, such as the Olympics and the forthcoming world athletics championships, actually feature male and female competitors. With regard to the specific event that he named, I understand that an exemption was not requested. However, the criteria would have been applied equally. I accept that, in the world of sport, the decision might sometimes come out differently depending on the nature of the event, but it is dictated not by the gender of the participants in the sport but by nature of the occasion.

[Jeff Smith]

When the Minister says the exemption was not requested, was that for the 2017 women’s Champions League final?

[Jane Ellison]

I believe that is the case, yes. We do all the normal assessments with regard to impact. As I said, the policy is effectively gender-neutral in that regard, because the criteria are linked not to gender but to other things.

I will look for inspiration with regard to the more technical question I was asked, but if I cannot find any, I might have to drop the hon. Member for Paisley and Renfrewshire North a line to clarify the need for a legislative consent motion. If it is all right, Mr Gray, I will come back to him subsequent to the debate.

[The Chair]

It is quite all right if the Minister wishes to do that, although of course technically speaking it is beyond the scope of this statutory instrument anyhow, as we are simply discussing the UEFA Champions League final in Wales. None the less, that is a matter between the Minister and the hon. Member for Paisley and Renfrewshire North.

Question put and agreed to.

Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017

Jane Ellison Excerpts

Thursday 20th April 2017 General Committees

[The Financial Secretary to the Treasury (Jane Ellison)]

I beg to move,

That the Committee has considered the Corporation Tax Act 2010 (Part 8C) (Amendment) Regulations 2017 (S.I., 2017, No. 364).

It is a pleasure to serve under your chairmanship, Mrs Gillan, on this perhaps unusual day for Parliament.

The amendments make important changes to the 45% tax charge on restitution interest to exclude two particular groups from the rules and strengthen provisions to help stop avoidance. They will therefore enjoy broad support.

Restitution interest comes into play if a company wins its claim under common law to get tax back that it should not have had to pay to Her Majesty’s Revenue and Customs. In that situation, firms could receive compound interest on the amount overpaid and, where any such amount of money is to be paid back to firms, the restitution interest income is subject to corporation tax in the normal way at a rate of 45%. However, the system also needs to recognise the particular circumstances of two groups that are exceptions to the normal rule: charities and life insurance companies. The regulations therefore introduce exceptions to the rules as well as amendments to strengthen provisions to stop avoidance.

Charitable companies and life insurance companies that have brought a claim against HMRC for a mistake of law will be affected by regulations 5 and 6 in the case of charitable companies and regulations 8 and 9 in the case of life insurance companies. Claims for restitution interest brought by a charitable company as well as those brought by a life insurance company, which is attributable to a policy holder of a with-profits fund, will now be outside the scope of the 45% corporation tax. Those will have effect from 21 October 2015, when the primary legislation came into force.

I can confirm that this issue was raised with me at a recent charity tax conference. It is something that charities have been talking to us about for some time.

Regulations 7, 10 and 11 in part 2 relate to the anti-avoidance provisions. We are strengthening the rules with effect from 21 October 2015 in various ways. I am happy to take questions and go into more detail about each of those regulations. As I say, they fall under the broad category of strengthening anti-avoidance.

Regulation 12 in part 2 deals with the treatment of tax already withheld. HMRC is required to withhold tax from the restitution at the time of its payment. This regulation makes it clear that the tax that has been withheld by HMRC can be offset against a company’s self-assessment. Again, the change will have effect from 21 October 2015. Regulations 13 to 18 in part 3 make minor amendments to ensure that the wording of the legislation is consistent and clear.

In summary, the amendments we are making to the legislation through these regulations represent a tightening of both the wording and the provisions to help stop avoidance. The key change that they make to exempt charities and certain income of life insurance companies is a fundamental issue of fairness. I hope that the regulations enjoy broad support. I commend them to the Committee.

--- Later in debate ---

[Jane Ellison]

Those are all reasonable questions. There has been a lot more discussion with charities than just the recent conference, which illustrated that the issue remains current for charities. I held a roundtable on charitable taxation a few months ago. The concern obviously arose from the primary legislation, and there have been discussions since it came into force, because we are keen to give reassurance.

We think that fewer than 0.5% of claimant groups will be affected by the changes. As the amendments are to corporation tax and restitution interest, only charities with trading operations would be paying it, not the majority. It is fair to say that their concern is about being caught in future rather than resolving immediate issues.

It is worth noting that the corporation tax regime exempts charitable companies if the income is applied for charitable purposes. The amendment was made for very specific circumstances of commercial operations. This is about ensuring that we remain within the spirit of the corporation tax treatment of charities and bringing the regulations back within the spirit of that treatment. I hope that my comments have been helpful.

Question put and agreed to.

Oral Answers to Questions

Jane Ellison Excerpts

Tuesday 18th April 2017 Commons Chamber

[Rob Marris (Wolverhampton South West) (Lab)]

5. What representations he has received on the Government’s proposals to increase probate registry fees.

[The Financial Secretary to the Treasury (Jane Ellison)]

As the hon. Gentleman may be aware, the Ministry of Justice recently ran a consultation on this issue and received 853 responses in total. The Government response to the consultation was published on 17 March and is on gov.uk. They have since laid the statutory instrument to implement the changes set out in that response.

[Rob Marris]

The majority of the responses to the consultation were against the proposals because, in a civilised democracy, access to justice should not depend on being rich. Unfortunately, this Government do not agree; they are intent on lessening access to justice by greatly increasing court fees. The increase in probate fees is another stealth tax and one that will affect almost half the estates in England and Wales. It is an attempt by the Government to hide the massive cut in inheritance tax for their rich friends. Will this dying, cut-and-run Government abandon their tax on access to justice?

[Jane Ellison]

I certainly do not recognise that characterisation of the fee structure. These fees are about helping to sustain an effective justice system that supports some of the country’s most vulnerable people and victims. It is fair to ask those who can afford to do so to support it. In fact, more than half the estates in England and Wales will pay no probate fees at all.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

6. What discussions he has had with the Secretary of State for Exiting the European Union on the provisions of the EU anti-money laundering directive in the UK’s negotiations on leaving the EU; and if he will make a statement.

--- Later in debate ---

[The Financial Secretary to the Treasury (Jane Ellison)]

As the hon. Lady would expect, given the emphasis that we have placed on tackling avoidance and evasion during this Parliament and indeed since 2010, the subject is regularly discussed among Cabinet colleagues. With regard to Treasury Ministers’ discussions with their European counterparts, I can confirm that this is something that we discuss with them on a regular basis. Most recently, the Chancellor spoke at an informal ECOFIN in Valletta as part of his regular ongoing dialogue with EU colleagues.

[Susan Elan Jones]

I am glad that everyone seems to be having a nice time having conversations, but as my 2015 Conservative opponent discovered when he came up from Chelsea to fight the Clwyd South constituency, most people in our part of the world work hard and pay their taxes. Will the Minister try again and give us a proper answer as to what is being done about this on an international level?

[Jane Ellison]

The question was about what meetings had taken place, and I plead guilty to answering it as asked. If the hon. Lady wants details, she can look at the many measures that have been put through since 2010, and, indeed, already in this Parliament. In fact, if she sticks around for the Second Reading of the Finance Bill, she will hear about even more things that the Government have planned to crack down on avoidance and evasion across the spectrum.

[Robert Jenrick (Newark) (Con)]

Had the tax gap continued on the trajectory left by the last Labour Government, it would be £47 billion, and the public purse would be £11 billion poorer. Instead, as a result of the policies of this Government, the tax gap is at £6 billion, which is its lowest level ever. Does my hon. Friend agree that talk is the best that some parties can offer on tax evasion and avoidance, and that it takes a Conservative Government to get something done about those problems?

[Jane Ellison]

That is exactly right, and this is something that we have taken extremely seriously. The UK’s tax gap is one of the lowest in the world, and it is certainly one of the most transparent and best documented. Since 2010, Her Majesty’s Revenue and Customs has secured £140 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance. As I have said, the Government are ambitious to do more.

[Maria Caulfield (Lewes) (Con)]

10. What steps he is taking to support economic growth on the south-east coast of England.

--- Later in debate ---

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

12. What assessment he has made of the potential effect on the tourism industry of a reduction in the rate of VAT.

[The Financial Secretary to the Treasury (Jane Ellison)]

The Government have carefully considered the evidence for applying a 5% reduced rate of VAT on accommodation and visitor attractions, which has come up several times in the House, but we believe, on balance, that the costs of doing so outweigh the benefits. We keep all such things under review, but there are no plans for a reduction in the rate of VAT on tourism activity.

[Mr Carmichael]

That is a disappointing answer. The campaign for a reduced rate of VAT for tourism estimates that a 5% rate would produce a higher tax take and could create 121,000 jobs across the country. That would be of particular benefit to many economically fragile coastal and island communities. Will the Minister meet campaigners to discuss things in more detail?

[Jane Ellison]

I am familiar with the right hon. Gentleman’s figures, and Treasury officials have met campaigners over several years to look at them. We will always look at the evidence, but we disagree with the campaign’s economic assessment. Together with HMRC, the Treasury assesses that such a cut would cost around £10 billion a year—approximately £7 billion for restaurants and bars, and about £3 billion for leisure and accommodation.

[Steve Double (St Austell and Newquay) (Con)]

What further steps are being taken to support the tourism industry, particularly in places such as Cornwall, where tourism is so important to our local economy?

[Jane Ellison]

We look to support the tourism sector in a whole range of ways, and the sector is doing very well. We have seen great increases in the number of tourists, and my hon. Friend is a great advocate for his region. Tourism is one of the highest performing sectors in the economy. For example, the UK has one of the highest VAT registration thresholds in the EU— [Interruption.] The highest. That helps many small businesses that are providing goods and services to tourists without charging VAT at all.

[Mr Speaker]

We can now hear about tourism in South Down as well. I call Ms Margaret Ritchie.

[Ms Margaret Ritchie (South Down) (SDLP)]

With particular reference to that, does the Minister recognise the additional disadvantage faced by the tourism industry in Northern Ireland, particularly in border constituencies such as mine, given that the VAT rate on tourism in the Republic of Ireland sits at 9% and ours sits at 20%?

[Jane Ellison]

We explored those issues when I gave evidence to the Select Committee on Northern Ireland Affairs, so I know what the hon. Lady is alluding to. One example is that the Government’s decision in last year’s autumn statement to focus on investment in infrastructure will result in an increase of more than £250 million to the Northern Ireland Executive’s capital budget, which gives them the means to boost productivity and promote regional growth in Northern Ireland.

--- Later in debate ---

[Mr Adrian Bailey (West Bromwich West) (Lab/Co-op)]

23. What assessment his Department has made of the potential economic effect of alternative trade agreements after the UK has left the EU.

[The Financial Secretary to the Treasury (Jane Ellison)]

As the Chancellor mentioned, the Government have undertaken a significant amount of work to assess the economic impacts of leaving the EU. It is part of our continuing programme of rigorous and extensive analytical work, covering a range of scenarios, as the hon. Gentleman would expect, sector by sector.

[Mr Bailey]

Small businesses manufacturing car components in my constituency are hugely concerned that, post-Brexit, this country may have to revert to the World Trade Organisation agreements, which would mean increased tariff costs and further regulation, and could have an impact on the viability of the booming motor industry. What assessment has the Chancellor made of that impact?

[Jane Ellison]

Treasury Ministers, and indeed Ministers right across government, are speaking to individual businesses and sectors all the time to understand their concerns about issues of this sort. Obviously, we are seeking the best possible deal for the UK, and all the work being done reflects that, including in respect of understanding how we can respond to those concerns and get a great deal.

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

T1. If he will make a statement on his departmental responsibilities.

[Dr Poulter]

Farms and other agricultural businesses are often deterred from making investments in new buildings and infrastructure because of a complex system of capital allowances, including agricultural buildings relief. Will my right hon. Friend examine this issue, particularly in respect of giving the agricultural sector a boost in the wake of Brexit?

[The Financial Secretary to the Treasury (Jane Ellison)]

Agricultural land and buildings are, of course, exempt from business rates, although I know my hon. Friend was talking in particular about some of the capital allowances. We are committed to a capital gains tax system that supports investment and growth right across the economy, which is why at Budget 2016 we reduced CGT rates from 28% to 20%, and from 18% to 10% for gains on most assets. Owners of agricultural businesses benefit from the same CGT rates and reliefs as other business owners.

[John McDonnell (Hayes and Harlington) (Lab)]

As you know, Mr Speaker, this morning the Prime Minister called a general election. She is breaking her commitment not to hold an early election, which was made only weeks ago. She has blamed Brexit, she has blamed our European neighbours and she has blamed the Opposition parties, but the real truth is that after seven wasted years of failure the Tories have failed to close the deficit; they have added £700 billion to the national debt; pay has fallen behind prices; 4 million children are growing up in poverty; our schools are in crisis; more people than ever are on NHS waiting lists; more families are homeless; and more elderly people are not getting the care they need. Will the Chancellor use this last opportunity before the election to apologise to the British people for the utter failure of this Government’s economic policies and for the pain he has inflicted on this country?

--- Later in debate ---

[Sir Henry Bellingham (North West Norfolk) (Con)]

T5. Given the large proposed increase in probate fees, and bearing in mind that deceased people’s bank accounts are frozen, will the Chancellor or the Chief Secretary look at allowing the fees to be paid after probate has been granted and the estate has been wound up?

[Jane Ellison]

In most cases, the Ministry of Justice expects that banks will be able to release enough cash from the estate to pay the probate fee, and we know from HMRC that the average estate is 25% cash. The MOJ is working with the British Bankers Association and others to put arrangements in place.

--- Later in debate ---

[Chris Stephens (Glasgow South West) (SNP)]

Can the Chancellor confirm that HMRC takes eight months to fill a vacancy in the national minimum wage compliance unit? If that is so, what will he do properly to resource that service so that workers can get a decent day’s pay for a decent day’s work?

[Jane Ellison]

I will look into the specific issue that the hon. Gentleman raises, but I want to make it very clear that HMRC investigates absolutely every report of national minimum wage violations. We take the matter very seriously, and we do enforce it.

[David Morris]

In my constituency I held a public consultation on creating an enterprise zone or a business park. The Labour county council has blocked it considerably and constantly. Would my right hon. Friend the Chancellor like to come to my constituency and listen to what my constituents are saying about having an enterprise zone?

Finance (No. 2) Bill

Jane Ellison Excerpts

2nd reading: House of Commons
Tuesday 18th April 2017 Commons Chamber

[The Financial Secretary to the Treasury (Jane Ellison)]

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

This Government have long demonstrated that they can deliver a stronger, more secure economy. The economy is demonstrating robust growth, the employment rate is at a record high and the deficit has been brought down by almost two thirds since its pre-financial crisis peak.

We are in a much stronger position now than we were in 2010, but there is no room for complacency. Indeed, as we begin the formal process of exiting the European Union, we have an even greater incentive to provide a strong and stable platform for the future. Both the debt and the deficit are still too high, so we remain focused on getting the public finances in order, not continuing to endlessly borrow and jeopardise future generations, as some would have us do.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Will the Financial Secretary give way?

[Jane Ellison]

I will make a little more progress and then I will happily give way.

Before setting out the Bill’s contents in more detail, I should of course refer to the fact that the Prime Minister has today announced her intention to lay before this House a motion calling for an early general election.

[Peter Dowd (Bootle) (Lab)]

When?

[Jane Ellison]

Members should be paying more attention. Earlier today the Leader of the House updated right hon. and hon. Members on how that motion, if it is passed, will impact on the business of the House. We hope to hold constructive discussions with the Opposition, through the usual channels, on how this Bill will proceed.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

We are always here to help.

[Jane Ellison]

It is good to hear that Opposition Front Benchers are here to help.

To return to the matter under discussion, I will lay out the themes of the Bill and then I will allow the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards) to intervene. We are very clear that our taxes and the system underpinning them need to be fair and competitive and, critically, they must be paid. This Bill will take the next steps in helping to deliver a fairer and more sustainable tax system, one that can support our critical public services and get the country back to living within its means.

The Bill implements changes that respond to the challenges that our tax system and, indeed, our society face. It delivers on intergenerational fairness by tackling inequality of health outcomes across and within age groups, and it delivers changes that better reflect the different ways in which individuals choose to work, enabling people to earn money and create wealth, whatever their chosen business structure, but at the same time ensuring that those choices are not distorted. The Bill also delivers vital revenues to put our public finances on a sustainable footing, secure the future of public services that we all value and help to further bring down the deficit.

[Jonathan Edwards]

Will the Financial Secretary confirm that the Office for Budget Responsibility report that accompanied the most recent Budget downgrades growth forecasts for each year in the forecasting period, by comparison with that which accompanied last year’s Budget?

[Jane Ellison]

I do not know whether the hon. Gentleman was in the House earlier, but the International Monetary Fund has today upgraded its growth forecast. All the economic indicators are pointing to robust growth, despite the acknowledged challenges of the negotiating period ahead.

[George Kerevan (East Lothian) (SNP)]

In the interests of this potentially more consensual period in the run-up to Prorogation, as we try to work out what will remain in the Bill, could the Financial Secretary tell the House where the £2 billion per annum to replace the non-raising of the national insurance contribution is going to come from, if she is so wedded to balancing the books?

[Jane Ellison]

The Chancellor was clear at the time and in our statements about the Budget and subsequent decisions that we are looking to balance the budget across the period. Clearly, if we are going into a general election campaign, we will have more to say about that in the manifesto. We will lay that out there; this is not the place for that.

[George Kerevan]

This is the Finance Bill!

[Jane Ellison]

Well, there are measures in the Bill that are immediately and openly about revenue raising, and we will come to some of those. The Chancellor was very direct about that when he made his Budget statement and, indeed, at the time of the autumn statement.

Let me say a bit about what the Government have done to support fairness between the generations. An essential priority for this Government is that everyone should have access to our NHS when they need it, and that everyone should enjoy security and dignity in old age. That is why we announced in the spring Budget an additional £2 billion—that has just been referred to—in funding for adult social care. This means that councils in England will have access to, in total, £9.25 billion more dedicated funding for social care over the next three years as a result of changes introduced by this Government since 2015.

On top of that, in the last two fiscal events we have done much to help to build a better future for our younger generation by helping people to save more of the money they earn; by investing in education and skills, which was a key theme of the autumn statement and of the Budget; and by building more affordable homes. The Finance Bill will build on this work, particularly by helping to tackle childhood obesity and to deliver a healthier future for our children.

[Kirsty Blackman (Aberdeen North) (SNP)]

Recent studies have shown that the youngest people in our society who are working, those aged 22 to 29, are earning less than previous 22 to 29-year-olds have ever earned, or certainly less than they have earned in recent times. They are also less likely to own a home and are more likely to rent, and they are disadvantaged by comparison with previous generations. What is the Minister doing to ensure that that stops and is reversed now?

[Jane Ellison]

I have just talked about some of the things we are doing. Some of these long-term trends need to be addressed through things such as investing in people’s skill levels. Ultimately, if we want to have a low welfare, high wage, high skill economy, we need to invest in people right from the earliest days. The package on skills in particular, which was unveiled recently, is intended to make the generational step change to ensure that people can get high skill, well paid jobs. That is exactly what we are talking about in relation to things such as affordable housing: we acknowledge that there are challenges for younger people and, indeed, we are looking to address them.

Let me talk about the issue of childhood obesity—an issue close to my heart, as a former Minister for Public Health. The UK has one of the highest obesity rates among developed countries, with soft drinks still one of the biggest sources of sugar in children’s diets. That is a cost not only to the productivity of our economy but to the public purse; indeed, there is also a great cost to individuals. The direct cost to the NHS of treating ill health due to people being overweight and to obesity totals over £6 billion a year.

The Bill will legislate for a new soft drinks industry levy to encourage producers to reduce added sugar in their drinks. The levy is working already: there have been reformulation announcements by Tesco, by the makers of Lucozade and Ribena, and of course by A. G. Barr relatively recently. I have had discussions with several companies during recent months, and I understand the effort and investment they are putting into changing their product and portfolio mix.

Even though revenues from the levy will be lower as a result of the earlier than expected reformulations—unusually, we in that sense welcome the fact that predicted revenues will be lower, because the policy is working early—we will maintain the full £1 billion funding for the Department for Education during this Parliament that we pledged to make. That is further evidence that the Government are committed to tackling childhood obesity. It is part of a programme of work being carried on across Departments to deliver fairer outcomes for future generations.

[Joanna Cherry (Edinburgh South West) (SNP)]

Cancer Research UK ambassadors like my constituent Sue Spencer have helped to highlight the fact that obesity is the second highest risk factor for cancer after smoking, so I welcome what the Minister has said about the provisions in the Bill for a soft drinks levy. May I ask her to confirm that the provisions will be part of a package of measures to tackle childhood obesity, including help for parents to protect their children from junk food advertising and steps to tackle high-sugar milk-based drinks, which are at present excluded from the Bill?

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[Jane Ellison]

The hon. and learned Lady tempts me to talk about a subject from a previous portfolio that is very close to my heart, but it is clearly a matter on which, for the most part, the Department of Health leads. We are committed to tackling this right across the Government. To take one aspect—she mentioned products that are not within the scope of the levy—Public Health England, working very closely with manufacturers, is leading a very ambitious programme of work, which is well under way, to set ambitious targets. When we look at the progress this country has made in our world-leading salt reduction programme, we can see that it was all done through such close working, as well as by being ambitious and by pushing the industry. Alongside the levy, which has turbo-charged that work, that is a very substantial element of the plans. The Department of Health is doing other things, in particular working with schools, and with the money from the levy more can be done.

Let me turn to another theme of the Finance Bill, which we have talked about as a strategic challenge not just for this country but for many developed countries: the different ways in which people are now working. The Bill takes important steps within the tax system to adjust to and reflect the changing ways in which people are choosing to work. For example, individuals who work through a company currently pay significantly less tax than individuals who are self-employed or work as employees. This is true even in many cases where individuals are doing very similar work. Indeed, the Office for Budget Responsibility estimates that the faster growth of new incorporations compared with the growth of employment would reduce tax receipts by an additional £3.5 billion in 2021-22. The Government are committed to helping all businesses, large and small, in all parts of the UK to succeed, but we are clear that the tax system must ensure fair treatment between individuals working in different ways, and of course it must be sustainable.

The Bill will take some initial steps to help to address this issue and deliver a tax system that is fair and works for everyone. First, the off-payroll working rules will be amended for public sector engagements, with responsibility for administering the relevant tax rules moving to the body for whom the individual is working. This change will help to tackle widespread non-compliance with the current rules, which costs more than £700 million each year across the economy. Secondly, from April 2018 the Bill will reduce the dividend allowance from £5,000 to £2,000. This change will help to reduce the tax differential between individuals working for their own company and those working as employees or self-employed. Crucially, it will raise much needed revenue to invest in our public services, including adult social care, as the Chancellor explained at the Budget.

I want to assure right hon. and hon. Members that there will still be a healthy environment for investors. The allowances that the Government have introduced or raised mean that a general investor will still be able to invest about £50,000 without paying any tax on the resulting dividend income. For example, we have increased the amount that individuals can save or invest tax-free through an ISA by the largest ever amount: up to £20,000 this tax year. This and other allowances mean that 80% of all general investors will still pay no dividend tax on their investments. As I have set out, this change will help to address the rising cost to the public finances of the growth in incorporation. It is in that context that the change to the dividend allowance should be considered.

The Bill will further modernise the tax system by legislating for making tax digital. Just as taxation must adjust to the world around it, so must the administration of the tax system. With millions of businesses already banking, paying bills and buying services online, making tax digital is a natural extension of this reality. The Government have brought large swathes of government services into the digital age, including within the tax system, and we need to go on to complete that journey. Businesses will feel the benefit too, being helped to get their tax right first time and cutting down on excessive administrative burdens over the long term. Simultaneously, making tax digital will help to tackle the tax gap, as error alone cost the Exchequer £8.7 billion in 2014-15.

[Sammy Wilson (East Antrim) (DUP)]

Does the Minister not accept that all the studies conducted so far indicate that this will present an additional cost burden to small businesses, which will have to give returns four times a year? In many parts of the country, small businesses do not even have good access to the digital economy to make those returns.

[Jane Ellison]

On the latter point, I looked at this matter in detail recently. On what would be required of people in terms of the digital uploading of data, the vast majority of people in the country—in percentage terms, in the high 90s—have access to the right broadband speed.

As for what the change will mean for the smallest businesses, we do not recognise some of the figures that have been put in the public domain by some representative bodies. The Treasury has conducted its own analysis and published it, including the methodology behind it. We acknowledge that this will be a big change for the smallest businesses, particularly for those below the VAT threshold, which is why the Chancellor announced plans to defer for an additional year those businesses coming into the system. Given that the pilot has now started, that means that the system will be piloted for two years before some of the smaller businesses enter it.

However, we cannot sustain the current level of error and the size of the SME tax gap in the long term; we must begin to tackle those problems. A number of developed countries are increasingly digitising their tax systems, and that will have long-term benefits for business. I accept that the transition may involve challenges, but we shall try to provide support during that period.

[Nigel Mills (Amber Valley) (Con)]

I fully accept the need to tackle the tax gap, but if the advantages for the very smallest businesses are as my hon. Friend has described them, would she be willing to consider allowing such businesses to opt into the system, rather than making it compulsory for those with very low levels of turnover? Might they be allowed to see how the system works over a period of, perhaps, five years?

[Jane Ellison]

My right hon. Friend the Chancellor has already announced that businesses with a turnover below the VAT registration threshold will have an additional year, until April 2019, before digital record-keeping quarterly updates are made mandatory. I am sure that we shall debate the issue in more detail later, so I will not be drawn into it too much now. Suffice it to say that some of the alternative proposals do not tackle the level of error and the tax gap. We need to address that, because it is part of the general challenge relating to the sustainability of the tax base.

We believe that this change will benefit more than 3 million small businesses in the United Kingdom, the vast majority of which are banking online. We are going with the flow and following the direction in which society is moving. As I have said, however, a package of support will be available to the smallest businesses. We may have a chance to explore that a little further, but it will depend on how much time we have to debate the Bill over the coming days. HMRC will ensure that the needs of businesses are best met by enabling them to learn from the ongoing pilot phase, which, as I said earlier, will now be longer for the smaller businesses. We want to make sure that these much needed reforms are implemented smoothly at the operational level.

I have talked about the way in which the Bill can support the health of the next generation and about how it can help us to adapt our tax system to the modern realities of working life, but I also want to talk about how we can create a fairer, more sustainable tax base and raise much-needed revenue in the process. As I have said, the Government remain committed to their fiscal mandate of reducing the deficit. That is why, for instance, they made the difficult decision to increase the standard rate of insurance premium tax from 10% to 12% in the autumn statement, thus raising vital revenues that were required to support public services. The Chancellor set out very directly the need to raise additional revenue.

As I have made clear, the Government recognise that taxes must be fair. They should also be competitive, which is particularly important as we enter the critical next phase of the negotiations on our exit from the European Union. We need to ensure that our economy retains its competitive edge, and remains an attractive place for both business start-ups and ongoing inward investment. Some excellent decisions in that regard have been made in recent months. However, taxes need to be paid. That should go without saying, but, although ours is one of the narrowest tax gaps in the developed world, and although we are, in my view, one of the most transparent countries when it comes to the way in which we measure and report on it, we need to tackle tax avoidance at all levels to ensure that everyone—big business, small business and individuals—pays the right amount at the right time.

The Bill provides for further action to ensure that we receive the tax revenues that are due by continuing our work to tackle tax avoidance and evasion. We already have a strong track record. Since 2010, HMRC has secured about £140 billion in additional tax revenue as a result of tackling avoidance, evasion and non-compliance. The UK has also shown international leadership: it is at the forefront of many of the international discussions about tackling those issues. Indeed, some of the thorniest avoidance and evasion issues that we face, particularly where they involve complex multinational structures and businesses, can be tackled only in international forums. We have worked closely through the OECD and other international bodies and we will continue to do so and to lead the discussions to tackle those issues. This Bill will build on that work by introducing more than 10 policies that are forecast to raise over £5.5 billion by 2021-22.

First, the Government will update the rules on how companies claim tax deductions for interest expenses and losses. From this month, large businesses will no longer be able to reduce their UK taxable profits by deducting a disproportionate amount of interest expense in the UK. Nor will they be able to offset all their tax liability with past losses in years when they make substantial profits. Taken together, those measures will raise nearly £7 billion from large companies over the next five years.

Secondly, the Bill will continue the Government’s crackdown on the use of artificial disguised remuneration schemes by putting beyond doubt the existing rules and by introducing a new charge on outstanding loans from 5 April 2019. Those changes will ensure that scheme users pay their fair share of tax and will bring in £2.5 billion by 2020-21.

Thirdly, to deter those who gain financially from enabling tax avoiders, the Government will introduce a new penalty for those who enable the use of tax avoidance schemes that are later defeated by HMRC. That is an area on which we have worked closely and where policy development has benefited from a focus on quality tax policy making. We have worked closely with representative bodies to ensure that all people working within the spirit of their professional guidelines have nothing to fear from the new rules. However, it is important that we tackle the enablers.

I think we have all as constituency Members of Parliament heard from people who feel that they were given advice that was later revealed to have been poor advice. However, we have not had a system whereby we were able to pursue in the way we wanted those people who enabled the tax avoidance. That cannot be right. Therefore, the Bill will mean that enablers of abusive arrangements can be held accountable for their activities, while ensuring, as I say, that the vast majority of professionals who provide advice on genuine commercial arrangements will not be impacted. The Bill will also bring an end to a long-standing imbalance in the tax system by abolishing permanent non-dom status. That will raise £400 million each year by the end of this Parliament.

As a package, those measures will ensure that our tax system remains fundamentally fair and that people and businesses pay the taxes they owe. We have introduced them not only because it is important to sustain the tax base—that is important for the revenue we need for vital public services—but because it is important that people feel that everyone is contributing as they should be and that we are asking everyone to work within the rules. The quid pro quo for having a competitive and fair tax system is that taxes should be paid.

The Bill will help to deliver a fairer and more sustainable tax system, one fit for the digital age and responsive to the different ways in which people choose to work. It will continue our work to tackle tax avoidance and evasion. It will help to deliver improvements to the nation’s finances, to pay for critical public services and, by taking a significant step to address the issue of child obesity, to deliver a better future for our younger generation. The Bill delivers on the Government’s plan for Britain, a stronger economy and a fairer society. I commend it to the House.

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[Peter Dowd]

If that suggestion came from the Government side, I would say that I would listen to the representations, and we would listen to any representations, so to speak, that would help small businesses.

Moving on to alcohol duty, the Finance Bill will only further undermine our local pubs, which are already under threat, with 29 pubs closing every week. While we welcome plans to make tax digital, the Government’s plan will shift huge administrative burdens on to small businesses and the self-employed, who are just trying to pay the taxes they owe—so much for the Conservatives being the party of small business. There is no reason businesses should have to submit quarterly digital tax returns, particularly when they lack the time, resources and capacity to convert records into digital standards on a frequent basis. All that comes when they are under stress from business rates. That is why we support the view of the Treasury Committee and of small business owners and the self-employed that it is better to exempt the smallest taxpayers from quarterly reporting and to phase in making tax digital to ensure that implementation is right for all, rather than the Conservative party wasting taxpayers’ money and time by correcting mistakes further down the line.

Making tax digital will also place new burdens on HMRC, which is already teetering on the edge after the constant slashing of its resources over the past few years. Thousands of hard-working staff have already been dismissed, and taxpayers are waiting on the phone for hours, which costs far more than the cuts have saved. The closure of dozens of tax offices across the country is still to come, putting thousands of jobs at risk in my constituency alone. How will HMRC cope with the ever-increasing complexity of its responsibilities with just a skeleton staff? How will any of the “reduction in errors” expected from making tax digital actually come about? How will we ever close the tax gap when there are no tax inspectors left to help taxpayers get their returns right and when HMRC has been filched of the resources it needs to run a service? It is a total false economy.

[Jane Ellison]

I am sorry, but I rise to defend HMRC. What the shadow Minister just said is the most outrageous attack on the hard-working men and women of HMRC. Far from people hanging on the phone for hours and the various other exaggerations that we just heard, I suggest that he look at the publicly available figures for HMRC performance in a range of areas, where he will see that what he said is far from the truth. HMRC’s performance has been excellent in recent years in many areas, as shown not least by the £140 billion extra raised since 2010 from avoidance and evasion.

[Peter Dowd]

That attempt at plausibility has gone amiss yet again. The reality is that we are constantly contacted by people about HMRC. Those on the frontline, such as the thousands in my constituency, are doing a damn fine job. The idea that I would attack thousands of people from my constituency is complete nonsense. They are struggling against the odds, which have been stacked against them by this Government. That is the reality. The Finance Bill was a failure before it was even started. It is a busted flush.

The Minister referred earlier to helping homeowners. If the Government are setting aside resources to help homeowners, such as through lifetime ISAs, they should also tackle the threat to the stability of the housing market from organisations such as Bellway, which is tying people to their homes through its leaseholds. That is a scandal and an outrage. The housing market is in danger if such scams are allowed to continue. The Government are quite rightly putting in resources to fund the housing market, so if we are to deal with the issues in it, they should be calling those organisations in, getting a grip on them and telling them to stop ripping off the people who bought homes from them.

The Bill is making income tax payers, small and medium-sized businesses, and the self-employed pay the bill for the endless stream of tax cuts for corporations and the super-rich. It takes no serious action to tackle tax avoidance, putting in place get-outs and workarounds that mean it is just another smokescreen.

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[Nigel Mills]

I welcome more funding to help children to be healthy and more funding for sports. I especially welcome the fact that the largest employer in my constituency, Thorntons, as part of the Ferrero group, gives big funding to school sports. More funding for healthy activities for children has to be a good thing. I am a little nervous about hypothecating taxes for individual spending, because there is a real risk that it would lead to a complicated tax system. It is a little like giving with one hand and taking away with the other. I welcome the fact that we are raising such spending, although I would not want to link it directly to a tax.

[Jane Ellison]

Just to clarify, one reason why the levy is on producers is that we want to drive the reformulation of products. Drawing on my previous role as public health Minister, every study that has ever been done across the world has shown that reformulating products at source is probably the most effective way of helping people to tackle obesity. I have spoken to supermarkets and producers for many months and, in their own research, they are getting the message back from consumers that tackling the problem at source through reformulation is what people want to see.

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[Steve McCabe]

The hon. Gentleman may be reading from one of those notes that the Whips have been passing around, but I have not got around to mentioning the NHS yet. I will come to it.

I want to comment on the points made by the hon. Member for Vale of Clwyd. I agree that high-sugar diets are associated with a large number of serious conditions, including tooth decay, cardiovascular disease and type 2 diabetes. I will not repeat the figures, but I am grateful to him for giving the stats for five to nine-year-olds and for saying that such diets are the leading cause of hospital admissions for that age group. Of course, that imposes a considerable cost on our already overstretched NHS. He also rightly said that sugar is a leading cause of tooth decay for 15-year-olds, whose permanent teeth are being damaged. That is all preventable, as he said.

I think we are agreed that excessive sugar consumption is the main cause of tooth decay, so in principle I am in favour of a soft drinks levy. However, I am worried that it is an isolated policy and that it will fail to bring about the lasting change we hope for in the consumption habits of the public.

The hon. Gentleman gave the example of Mexico. If he looks carefully at what actually happened, however, he will see that, after an initial dip in sales of soft drinks, they subsequently rose and are now slightly higher than their pre-tax levels. The risk of such an isolated policy is that it may not have the long-lasting effect we seek. Indeed, it is debatable whether there is any robust evidence that an isolated levy on soft drinks will actually reduce the prevalence of any of the health conditions associated with high-sugar diets.

[Jane Ellison]

I am happy to comment on a couple of things. First, the provision is designed slightly differently from the Mexican initiative and others around the world. It is deliberately a producer levy, to drive reformulation of product. Secondly, to recap what I said in my opening speech, it is not happening in isolation. I entirely agree that it would not be enough in isolation, but it sits alongside a very ambitious body of work, not least in relation to reformulation across a range of different food groups, particularly those focused on children’s diets, on which Public Health England will lead over the next few years, working closely with manufacturers.

[Steve McCabe]

I am grateful to the Minister. Obviously, we cannot cite Mexico as evidence in favour of the policy and then dismiss it when there is contrary evidence. That was the point I was making. I do not disagree with some of the stuff for which she is arguing, but I and a lot of other people want a broader public health approach. We need to do a bit more to promote healthy eating and improve awareness of the risks associated with unhealthy diets.

I ask the Minister to think again about an industry comprehensive code, because that might be much better and enforceable. If that was to work in conjunction with a soft drinks levy, it might make a much more significant difference. The obesity strategy has been mentioned, but the truth is that most people were pretty disappointed with it when it came out. I remember her in her previous incarnation being much more optimistic about it than appears to be the case now.

With the NHS—this is for the benefit of the hon. Member for Peterborough—significantly extending waiting times for those needing operations for hip and knee replacements, and in the absence of any announcement of additional funding for the NHS, and with the Government continuing, as we have just heard, not to recognise that a funding crisis is engulfing the NHS, the need for a comprehensive set of preventive health measures to complement any soft drinks levy has become all the more pressing. I simply make the point that a tax to plug a hole in yet another failed Tory Budget simply will not be enough. We all know how we arrived at this tax, but it will not be enough by itself.

I do not know how much of this Bill will ever see the light of day, but I do know that it does not address the funding crisis in our schools and our NHS; the impact of cuts in policing, which are now resulting in predicted rises in crime; or the sense in my constituency of Selly Oak that, when it comes to fairness and those who are just about managing, this Government’s economic plans and other policies do not help them. With unemployment in Selly Oak at 4.5%, against 2.4% nationally, this Government simply are not working for Selly Oak.

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[Mr Rees-Mogg]

There is indeed an advertising industry, but we live in a free country and people ought to be able to advertise products. We have a lot of misinformation, have we not? We now learn that fat is not as bad for people as it was said to be, and that people have put sugar into products from which they have removed the fat in order to make them taste nicer because fat-free products without sugar taste disgusting. Advice that turned out to be wrong has led to manufacturers doing things that then turn out to be unhealthy. I am suspicious of the advice that comes from Government and their ability to get it right. If they end up getting it wrong, force us to change our behaviour and tax us, we get the worst of all possible worlds.

A little bit of sugar does nobody any harm at all—only taking it to excess does so—and the only justification, which has indeed been made, is for children. However, I think that ignores the responsibility of parents, most of whom are responsible, and puts up the cost for responsible parents of giving their children what may, in many households, be an occasional treat rather than a regular habit. It is a tax that falls hardest on the poorest in society, who may occasionally be giving their children something that they like, because of the excesses of others. I do not really think that that is the job of the Government.

That leads me to the issue of hypothecated taxation. Ministers should write out 100 times a day, “Hypothecation is a bad idea.” That has been the Treasury orthodoxy for as long as there has been a Treasury. Hypothecated tax does not work because it produces the wrong amount of money for what it is seeking. We see that with the prospect of putting money from the sugar tax into schools. We now discover that not enough money is likely to come from the sugar tax to meet the obligations given to schools, and that money will therefore have to come out of general taxation.

If it were a good idea to put the money into schools in the first place, it ought to have come out of general taxation in the normal way. If it was not a good idea, but just a clever way of spending the money, taxpayers’ money should not have been used. If we get into the position that something is now being done that did not need to be done because it was promised as money from a tax that has not arisen, that is not a good way of carrying out Government policy. All hypothecation of taxation should be struck off: it simply leads to the wrong amounts.

That leads me to the broader point I want to make about this Finance Bill and the Budget that preceded it. It is very good news that an election has been called, because the Budget has become so hemmed in by the number of promises on taxation and revenue expenditure that have quite rightly been kept. Governments ought to keep their promises, and this Government have been absolutely rigorous in doing so, even ones that I do not like. For instance, I am not in favour of the 0.7% going on overseas aid, which I think has been a wasteful and extravagant promise when money is needed elsewhere. However, the justification was that it was in our manifesto, and in manifestos parties make a pact with the electorate that they ought to continue with except under the most extraordinary circumstances that have not arisen.

Such an approach has led to very many areas of expenditure being fixed, while taxation has been limited at the same time. The deficit has been brought down to a third of what it was when this Government came in—a very substantial achievement, of which this Government and their predecessor ought to be proud—but it has become very hard to take that any further because of the encapsulating commitments that are limiting the Chancellor’s freedom of action. That is why the Finance Bill, for all that it has 700 pages, will not lead to a great deal of fundamental reform. It is tweaking things at the edges—looking at little bits of money here and little bits there—rather than taking a fundamental or basic approach to our tax system.

Our tax system has become overly complex and, from the pressure of having to find little bits of money, it is becoming even more complex, which makes it difficult for taxpayers to pay the right amount of tax. We can see that more anti-avoidance legislation has come in to stop avoidance, because we have overcomplicated the tax system in the first place and a corrective measure has therefore had to be taken to try to prevent revenue from seeping away. A good example is the discussions we are having about perceived employment as opposed to self-employment. The Government were extremely proud of their achievement in making self-employment easier, but a constituent who came to see me explained that the £3,000 national insurance contributions exemption for small businesses had led to all the people working for him having to become individual companies, whereby it cost £3,000 a year less to pay them than if they were directly employed or were employed through one subsidiary company.

Very good ideas come into individual Budgets—particular tax breaks to encourage particular forms of behaviour to lead to certain outcomes that the Government wish to see—but they then have to be corrected by anti-avoidance measures because they get taken and used in a way that was not intended under the initial legislation. That is why the election will be a great opportunity to stand on a platform of tax simplification, and I hope we will achieve the sort of majority that will help to push that through. To achieve tax simplification, it will be necessary to ensure that avoidance is removed at source, rather than by anti-avoidance measures. That means taking away some of the existing exemptions and incentives that encourage people to set up more complex systems than they need to minimise the amount of tax they pay.

I am a defender of people taking such an approach. If Parliament legislates for tax to be collected in a certain way, with certain exemptions and thresholds, the individual taxpayer is completely and legitimately entitled to use them to their fullest extent. The approach is the fault not of the taxpayer, but of Parliament for putting exemptions into or leaving them in legislation. We should always be very careful to distinguish avoidance from evasion. Evasion is straightforwardly criminal—not paying the amount of tax that is, by law, due. Avoidance is looking at the tax system and saying, “I do not owe that tax, and I do not have to pay it because Parliament has not legislated for me to pay it.” As individual taxpayers, we are all entitled, as are all our constituents, to pay the tax Parliament requires, not a penny less or a penny more. If we had a system that was simpler overall, that would be hugely beneficial.

There is a lot about anti-avoidance in the Finance Bill, including the new rules for non-doms, about which I would be very careful. We live in a world where some very rich people want to come to the United Kingdom, and when they are here they employ people, spend money and pay taxes. We have a system that has barely changed since the days of Pitt the Younger—I cannot say I remember them, but I wish I did—and that broadly unchanged system was actually very beneficial for our economy because it brought into this country wealthy individuals who then provided economic activity. It is absolutely right to ensure that people who are obviously domiciled here in all normal senses of the word should be seen as being domiciled here, but we do not want such a difficult regime that people who might come here and contribute to our economy feel that they cannot do so.

[Jane Ellison]

I want to give my hon. Friend a degree of reassurance. A new measure in the regime advanced as part of the non-doms reforms will make it easier for anyone to invest in the real economy—business investment —which I hope he will welcome. I entirely take his point that we want to make sure that people can come to this country from anywhere and invest in the real economy.

[Mr Rees-Mogg]

Absolutely. That is an important part of the reforms, but there has perhaps been a tone—more from the previous Chancellor than from the current Chancellor—that the non-doms were using the system. A lot of them could actually go anywhere in the world, but they come here because of the great virtues of investing in the UK: we have clear rights of property; we have an effective rule of law; and we have had simple regulations that have allowed them to be here. However, we have now increased the charges on them and increased their eligibility for certain taxes, and I think we should be very cautious about that because one never knows, with these sorts of things, where the tipping point will come. It may be that the annual charges applied to non-doms seem quite small compared with their wealth, but when we consider that they have families—the charges have to be multiplied for the wife, the number of children and grandparents, or whoever—we may find that the charges become quite high. The people bringing such wealth into the country have enormous mobility: they can go elsewhere. I know that standing up for non-doms six weeks before an election is not necessarily going to be a great rallying call for North East Somerset, but ultimately I think good economics leads to good politics rather than the other way around. A lot of what was done with regard to non-doms was much more about politics and perception than the contribution non-doms make to this country. In the context of Brexit, we want to show that we are genuinely open to the rest of the world. We want people to come here to invest and to spend their money, because that is so important to our long-term economic prosperity.

There is a broad challenge with this Finance Bill, as there will be with its successor which will no doubt come. I have a feeling that this will be one of those happy years where we get more than one Finance Bill. Finance Bill debates are particularly enjoyable parliamentary occasions because they have no time limit. The hon. Member for Aberdeen North (Kirsty Blackman) said that we might go right through the night and not be able to have our debate tomorrow. I look forward to that happening at some point in the future, but I have a feeling it is not going to happen today. Finance Bill debates are the best debates because of their fluidity and flexibility.

When we get to the second Finance Bill, a fundamental choice will still have to be made. This relates to the answer we had from the hon. Member for Bootle (Peter Dowd) on the Opposition Front Bench. There is an absolutely key point at the heart of this Finance Bill, as there will be at the heart of any new Finance Bill. When I intervened on him and said that the tax rate as a percentage of GDP was at its highest since the days of Harold Wilson, his answer to me was that under Labour it would be even higher.

--- Later in debate ---

[George Kerevan]

I was very careful to say that I was not anticipating who would actually be in government. I was giving the present incumbents in the Treasury a chance to say what they might do should they be re-elected.

Let me move on now, because I think it important to analyse the contents of the Bill. I think that it contains two sets of structural weaknesses. The first reflects what I consider to be a change in the pulse of the economy, which has occurred since the end of 2016 and is embedded in all the latest data that we have—data that have emerged in the last month, since the start of the Easter break. I fully accept that the Government have presided over a period of economic growth since 2010. I do not want to dismiss the figures—in a number of years, our growth rate has been higher than those in other large industrialised countries—but what has underpinned that growth? All the figures suggest that it has been underpinned by consumer spending, largely funded by the rise in consumer debt.

I do not gainsay the growth, but, in her opening remarks, the Minister placed a great deal of emphasis on the Government’s success in that regard. If economic growth is founded merely on consumer spending, and that consumer spending is based on borrowing, it is not sustainable, and I think it entirely legitimate to question how long the Government can go on relying on consumer debt to fund growth. In fact, we are now approaching the end of that period. What worries me is that the fiscal plan embedded in the autumn statement and the March Budget assumes the continuation of growth that is beginning to falter.

Let me make a point that I raised after the autumn statement, and also during the Budget debate. It seems to me that the Chancellor gave himself plenty of fiscal fire power in the autumn statement through increased borrowing—or, at least, the removal of some of the more over-optimistic projections of the previous Chancellor, and some of his more egregious games with time limits in relation to when income would arrive. The current Chancellor, in the autumn statement, clearly borrowed sufficient money in order to give himself some fire power should the economy slow. The trouble is that in the autumn statement all that spending power was delayed until post-2019, which is when we will see what the Brexit deal actually is. If the economy slows between now and 2019, it will be too late to use the fiscal fire power. That was the criticism of the autumn statement that was made by me, and by other Opposition Members.

The March Budget was fiscally neutral, by and large, but it has run into some headwinds. If the incoming Government, whoever they are, post-8 June, do not make up the projected shortfall from the proposed rise in national insurance contributions by the self-employed, there is a hole of a couple of billion pounds to fill. That aside, as I have said, the March Budget was fiscally neutral. If we put together the autumn statement and the March Budget, the Chancellor has a nest egg that he can bring to bear on a slowing economy, but it is pencilled in for 2019. For the next two years, he is relying on economic growth funded by consumer debt. However, all the latest numbers show that that is no longer happening.

[Jane Ellison]

The hon. Gentleman is making an interesting speech and I welcome the consensual tone that he has struck on a number of measures. I have to push back on the charge that fiscal firepower will be delayed beyond 2019. The Chancellor was explicit in the autumn statement that we borrowed to invest in greater productivity and some of that is happening now. Some of the national productivity investment fund is for short-term investment. In addition, as the hon. Gentleman knows, Barnett consequentials of £800 million for the Scottish capital budget are there for the Scottish Government to spend as they see fit.

--- Later in debate ---

[Jane Ellison]

With the leave of the House, I will close today’s debate, and it is a pleasure to do so. It has been an interesting and wide-ranging debate, and I thank all hon. Members for their contributions. I will try to touch briefly on their contributions, but I suspect, with the time being rather against me, that I will not be able to answer all their questions. As I said in my opening speech, we no doubt have several discussions ahead of us about the next steps on the Finance Bill.

The Finance Bill takes the next steps in helping Britain to succeed both now and in the future. What was lacking from the rather opportunistic speech we have just heard was any willingness to face up to the economy’s strategic challenges. Many are touched on in the Bill and I will refer to some of them now. One theme that emerged—in the speech by the hon. Member for Bootle (Peter Dowd) at the beginning of the debate and in other speeches—was a focus on productivity. Nobody could have been clearer about facing up to the country’s productivity challenge than the Chancellor. I think everyone should be able to support the measures we have laid out to respond to the long-term challenge as a priority, and to take targeted action to invest in innovation and infrastructure.

We are also introducing measures on setting corporation tax to make our economy more competitive. I wholeheartedly reject the comments we hear from the Opposition that try to set small business against large business against medium-sized business. All businesses, over 1 million of them, large and small, will benefit from our cuts to corporation tax. We want to ensure that we offer SMEs enhanced research and development tax relief, and other measures that will help them to grow. I welcome the emphasis placed by my hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) towards the end of the debate on that very issue of how we help businesses to grow. I find it extremely disappointing that the Labour party seeks to pass judgment. We want small businesses to become big businesses and we want to ensure that we help that to happen.

There have been a number of comments, not least from both Opposition Front-Bench spokesmen, about HMRC resourcing. I sprang to the defence of HMRC’s record. It has made sustainable cost savings of more than £1 billion over this Parliament while improving performance. Over the same period, it has collected a record level of tax revenue, reducing the tax gap to a historic low of 6.5% in 2014-15. Measures in the Bill will build on the measures already passed by both this Government and the coalition Government to close the tax gap. I would be very disappointed to think that Opposition Members are not supportive of those measures.

Turning to Back-Bench contributions, my hon. Friend the Member for Amber Valley (Nigel Mills) made an excellent and typically thoughtful speech. It was wide-ranging and I will not be able to respond to all the points he made, but he was supportive of the soft drinks industry levy. He rightly focused on measures to tackle the tax gap in VAT and important new steps we are bringing forward. He spoke about a number of other issues. He asked me about when we might look to turn on the power we took last year with regard to country-by-country reporting. We have always said that we want to make the case at various international forums to work through that in an international context. We will continue to raise the issue and pursue international agreement on public country-by-country reporting.

My hon. Friend also sought reassurance on the compressed interest restriction, a measure that, along with the loss relief measures in the Bill, stands to raise £7 billion across the period in question—very significant sums of money from large corporations. He wanted reassurance that that would not be a block on growth and investment. I think I can give him that reassurance. We have a very open and competitive economy, and we have a very competitive tax system, but we expect businesses to pay the right amount of tax. We are not the only country with an interest restriction: for example, Germany, Italy and Spain have similar rules, and other European countries will be introducing similar rules over the coming years. I hope that gives him a degree of reassurance.

My hon. Friend the Member for Vale of Clwyd (Dr Davies) gave a very thoughtful speech on the soft drinks industry levy. I very much welcome his support, drawn from his experience not just on the Health Committee but professionally. He gave a tour de force speech outlining the reasons for providing a prescription to tackle obesity. Obesity offers a considerable threat to the long-term finances of the NHS. I welcome his support for the levy.

The hon. Member for Dundee East (Stewart Hosie) expressed a degree of scepticism about the work that we have done to support the oil and gas industry. I do not think that that scepticism can be justified. We have worked very closely with the industry, and we now have one of the world’s most competitive fiscal regimes for oil and gas, although we intend to go further. At the time of the 2017 Budget, we published a discussion paper on how taxation could better support the transfer of older late-life assets—an important issue for the basin—and ensure that we could put them into the hands of companies that wished to invest. I have met industry stakeholders to discuss the issue, and I know that the announcement has been welcomed. I think it should also be welcomed by Members in all parts of the House, not least members of the Scottish National party—including the hon. Member for Aberdeen North (Kirsty Blackman), who raised similar issues.

The hon. Member for Dundee East also mentioned insurance premium tax. When we made announcements about the proposed new rate, the Chancellor made clear that it was intended to raise vital revenue to fund our public services. Those who oppose such a rise must themselves make clear where they would find the sizeable revenues that we need to invest in our front-line public services and generate income for our economy. I did not hear many answers to that question during today’s debate.

The hon. Member for Birmingham, Selly Oak (Steve McCabe) spoke mostly about the NHS. Let me respond by saying that a strong NHS needs a strong economy, and that is what we are trying to build.

The hon. Member for East Lothian (George Kerevan) made a thoughtful speech, and I agree with him about the need for long-term investment to address the productivity challenge. He gave a degree of support to the soft drinks industry levy, and sought a number of reassurances—not all of which I can give him tonight—about some of the steps that would be taken in the weeks ahead. I was glad to hear that he thought there was much to be commended in the measure. I expect that we shall return to the issue of the productive growth agenda, but let me repeat what I said to him in an intervention: £800 million of additional capital will flow, in Barnett consequentials, to the Scottish Government as a result of the announcements in the autumn statement about the national productivity infrastructure fund. The hon. Gentleman also talked about household debt. I merely note that the debt interest to income ratio is at a record low: it was 4.5% in 2016, compared to 10.1% in 2008.

Although I was not in the Chamber at the time, I believe that my hon. Friend the Member for North West Hampshire (Kit Malthouse) made a typically robust speech in which he supported all measures to promote investment. He talked about science, the need to encourage entrepreneurs, and the challenge of taxing the gig economy, which the Chancellor has acknowledged to be one of the strategic challenges facing not just our economy but developed economies throughout the OECD area. We are contributing to the international debate on that subject. There is more to be said about it, but measures in the Bill begin to address, for example, how some online trading platforms deliver in terms of VAT. That missing VAT represents one of the big parts of the tax gap, and we hope that there will be widespread support for our measures.

The hon. Member for Aberdeen North referred to the scrutiny of tax policy. I think that she and I can agree about many aspects of the announcement of the move to a single fiscal event. As for her other points, we have worked extremely closely with a number of industry stakeholders on some of the more complex measures in the Bill. I think that those measures have been greatly improved as a result, and the stakeholders have given the Government credit for that. We heard another rerun of the argument about VAT refunds for the Scottish police and fire and rescue services, and once again—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. It is a little impolite to make so much noise that the House cannot hear the Minister. While there may be other matters that Members need to discuss, there is nothing more important than the Minister’s summing up of a debate on the Finance Bill.

--- Later in debate ---

[Jane Ellison]

What could be more exciting and important to talk about? I wonder.

I reiterate that the Government warned Scottish Government officials at the time that the new funding model that they proposed would lead to the loss of eligibility for VAT refunds. I expect the SNP will raise the matter again, but it will continue to get that straightforward response to the issues that it has raised.

There was a cluster of pithy and important speeches towards the end of the debate. My hon. Friend the Member for Louth and Horncastle (Victoria Atkins) spoke about the need for sound finances and about reducing borrowing. She made a welcome contribution. My hon. Friend the Member for Fareham (Suella Fernandes) put a welcome emphasis on the increase in personal allowances. How little we heard about that from some Opposition Members. Since 2010, there has been a huge increase in what people can earn before they are taxed.

My hon. Friend the Member for Richmond (Yorks) (Rishi Sunak) drew on his experience and gave voice to the entrepreneurial spirit of Yorkshire. He focused on early-stage finance for growing businesses. He is right that there are things that are helpful in that regard in the Bill, but we are always happy to hear more ideas about how we can support entrepreneurs and businesses to grow.

Fittingly, my hon. Friend the Member for Taunton Deane (Rebecca Pow) ended with the message that we need to keep the economy on track to greater growth and stability. That brings me to my conclusion.

The changes that the Bill is introducing are significant in a number of regards. They will raise significant revenue to support the public services on which our nation depends by tackling tax avoidance and evasion. The Labour party has been a little opportunistic in some of the things it has said in the debate. In the coming weeks, it will have to answer questions about how it would close the tax gap and balance the books to gain any credibility in the eyes of the electorate. It will also have to address in the coming weeks questions on the strategic challenges that this Government have been prepared to face up to—the challenge to look at a tax system that works however people choose to work, and the challenge to address the erosion of the tax base in a serious, long-term, strategic way. The Government are prepared to face up to those challenges, and measures in the Bill begin to address some of those head on.

We are also addressing head on the critical issue of childhood obesity. We are tackling it with our game-changing soft drinks industry levy; that is just one of the measures being taken across Government to tackle childhood obesity. It was welcome to hear support on all sides for that measure. I hope that we are able to make good progress with that because it is a game changer.

The Bill demonstrates the Government’s commitment to a stronger, more secure, more productive economy. I am therefore delighted to commend it to the House.

Question put, That the amendment be made.

Sanitary Products

Jane Ellison Excerpts

Thursday 30th March 2017 Commons Chamber

[The Financial Secretary to the Treasury (Jane Ellison)]

I congratulate the hon. Member for Dewsbury (Paula Sherriff) on her continuing and committed work in ensuring the affordability of sanitary products. During the passage of last year’s Finance Bill, she and I had reason to discuss this issue on several occasions, not least in relation to her successful amendment to reduce the level of VAT on sanitary products. I of course stand by the pledges the Government made at the time. Those pledges have been legislated for, as she knows and has acknowledged. I recognise, as I think all hon. Members do, the clear and evident passion with which she spoke, and we know how sincerely she campaigns for the rights of women and girls. I hope to be able to respond to some extent, if not to all her wider points, at least to some of the specific points she made.

Before I narrow down to the specific points, let me turn to the broader ones. The Government have been clear that tackling disadvantage is a priority for us. That includes taking action to help the most disadvantaged, with a real focus on tackling not the symptoms but the root causes of poverty. We are determined to reform the welfare system to incentivise work and to help people to achieve their potential. We believe that, as we have seen during the past six years, our reforms have helped to improve lives and living standards for some of the most vulnerable in our country, most prominently by helping people to get back into work.

That is why in our approach to general taxation we are increasing the personal allowance to £12,500 by the end of this Parliament. Next week, increases in the personal allowance and higher rate threshold will have cut taxes for 31 million people and taken 1.3 million of the lowest paid out of income tax altogether, compared with 2015-16. A significant proportion of them will of course be women. Next week, we will increase the national living wage to £7.50 an hour, which marks a £1,400 a year increase in earnings for a full-time worker on the national minimum wage since the introduction of the national living wage in April 2016. It is also why we are reducing the universal credit taper to 63% from April, so people who progress into work can keep more of what they earn, which will enhance the support provided to working families in meeting day-to-day costs; why we will double free childcare to 30 hours a week, which is worth up to £5,000 a year for eligible working parents of three and four-year-olds; and why we will introduce tax-free childcare in the coming month. These are just some of a range of measures that we are taking to ensure that work always pays and that hard-working families can earn more and keep more of the money they earn. It is by taking these steps that we are supporting ordinary working families, including the women about whom the hon. Lady spoke.

Let me turn to the tampon tax fund, because we have had a timely update from the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), who is the Minister for Civil Society. I will take a moment—I think I have enough time—to update the House on some of the work that the fund is going to support. That is important, not least in the light of the hon. Lady’s successful campaign to change the law so that we reduce VAT, as soon as we practically can, as has been mentioned, within the constraints of EU law. In the meantime, we have established the £15 million a year tampon tax fund, which, as hon. Members will know, is equivalent to the amount of VAT paid on sanitary products each year.

Since the 2015 autumn statement, £32 million of tampon tax funding has been allocated to women’s charities. The majority of that funding is through grants to frontline charities that aim to improve the lives of disadvantaged women and girls. Those include health, wellbeing and education initiatives and support services for vulnerable women. A significant proportion of this round’s funding will focus on initiatives that help to tackle violence against women and girls—something that all of us across this House want to see borne down on—alongside a broader criterion to support disadvantaged women and girls.

[Jason McCartney]

I saw today’s update on where the tampon tax funds have gone. Rather than point scoring, I want something positive to come from this debate. Will the Minister please consider using some of those funds to help with supplies of sanitary products for schools, to make sure that all girls, no matter what their economic background, have access to tampons, pads and towels?

[Jane Ellison]

I will certainly draw my hon. Friend’s comments to the attention of my hon. Friend the Member for Reading East, the Minister for Civil Society, and I will come to some of the support available in schools and the work already under way as a response to recent questions in Parliament.

My hon. Friend the Minister for Civil Society has today announced the full list of funding for charities from the latest round of the tampon tax fund. That means that more than 90 charities are now set to benefit from the fund over this Parliament. The fund continues to benefit organisations in every corner of the UK, from Children North East to the Women’s Rape and Sexual Abuse Centre in Cornwall. It is helping to improve the lives of women and girls who suffer disadvantage, supporting our wider ambition to create a fairer society for everyone.

[Paula Sherriff]

I recognise that some excellent charities are receiving funds from the tampon tax, including Jo’s Cervical Cancer Trust, which I have been working with very closely. How will those charities be provided for when we finally see the abolition of the tampon tax, which I hope will come very soon?

[Jane Ellison]

Indeed; that is something we have explored in debates. We said at the time that while this is inevitably a time-limited fund by its nature, we will look at all those issues in the round. It is, of course, only one of a number of sources from which we support civil society organisations. I am glad that the hon. Lady picked out Jo’s Cervical Cancer Trust, a charity that I greatly enjoyed working with when I was at the Department of Health and that does excellent work.

A number of worthwhile organisations are going to benefit from the money, and the Government have committed to continuing the fund until EU rules allow a zero rate of VAT to be applied on women’s sanitary products, or until the UK leaves the EU—whichever comes first within the legal framework. The hon. Lady mentioned this in her speech, but I note that she has recently championed national retailers in her constituency to support the cause through charitable means, as she has outlined today, for those least able to afford sanitary products. I noted her work with her local Boots on that.

Turning to practical matters, like hon. Members on both sides of the House, I, too, heard the same BBC Radio Leeds report that has been referred to. It was a distressing listen. It was very difficult to hear about the girls in Leeds who were unable to attend school because they could not afford sanitary products. Of course, if this country is going to work for everyone, we clearly need an education system that enables people to achieve their potential. That is the Government’s clear aspiration. If someone cannot attend school on the days that they are having their period, it is obviously much harder for them to reach their potential.

My hon. Friend the Member for Colne Valley (Jason McCartney) talked about school funding. Schools do have discretion over how they use their funding. The Department for Education does not currently give schools guidance on this specific issue, as we believe that headteachers should be able to use their professional judgment. However, we do encourage all schools to use their resources to support their pupils to be safe, healthy and ready to learn each day, so schools are free to support girls in this way if they need to. The evidence is clear—we have all seen that every extra day of school missed can affect a pupil’s chances of achieving good GCSEs, with a lasting effect on their life chances. We therefore strongly encourage all parents and schools to do everything they can to support children to attend schools.

The hon. Member for Dewsbury made a number of suggestions about funding. As one would expect, that question has been raised in recent days by a number of hon. Members. In fact, in response to the hon. Member for Leeds North West (Greg Mulholland), the Secretary of State for Education acknowledged the importance of the issue and said that she is looking carefully at it, and she has undertaken to write to him. I think there is more to be said by the Department for Education on this subject. The Secretary of State was very clear about the seriousness with which she takes the issue and her own commitment to gender equality is well documented.

We touched on the support available through the education system and the wider welfare system. We talked about the legal commitment we have made to zero-rating sanitary products as soon as possible, fully recognising the importance of the issue. In the meantime, we are using the VAT we receive to benefit women’s charities. I hope those responses go some way towards addressing the issues raised in the debate.

More widely, I believe the Government can hold their head up high on supporting women. The gender pay gap is at a record low and the number of women in work is close to a record high. We are one of the first countries in the world to introduce gender pay gap reporting, but we always acknowledge that we can go further. As I mentioned earlier, the national living wage will be increased to £7.50 an hour from next month. We expect that two thirds of those who will benefit from the rise in the national living wage will be women.

As well as continuing our efforts to get more women back into the workplace, we are providing an additional £20 million of funding over this Parliament to support organisations working to tackle domestic violence and abuse—a strong personal priority for the Prime Minister. She has committed to bringing forward a domestic violence and abuse Bill. The funding I have just mentioned increases the total funding for the Government’s violence against women and girls strategy to £100 million over this Parliament.

The hon. Lady raised the additional vulnerability of homeless women, which I think we all acknowledge. In October, the Prime Minister announced a new £40 million programme to provide an innovative approach to tackling homelessness, with prevention at its heart, looking at the complex underlying causes that I think all of us as constituency MPs acknowledge can lead to a person losing their home. That includes a £10 million rough sleeping prevention fund and £20 million for local authorities to trial new initiatives for those most at risk. I will draw the hon. Lady’s particular concerns about the additional vulnerabilities of homeless women to the Under-Secretary of State for Communities and Local Government, my hon. Friend the Member for Nuneaton (Mr Jones).

All in all, the Government are committed to supporting those who are struggling to get by. I congratulate the hon. Lady on bringing this important issue to the attention of Parliament. We feel that by taking steps to improve the living standards of ordinary working families across the country, committing to eliminating the VAT charge on sanitary products, and striving to provide greater equality more generally for women, the Government are showing they are sensitive to these issues. There are 200,000 fewer children in low-income households than in 2010, which is one of the ways in which we have demonstrated our commitment to tackling the root causes of disadvantage. I hope that in my response today I have shown that the Government take these issues seriously. We are looking carefully at the points raised today and will aim to respond further to them.

In closing, I echo the words of the hon. Lady in paying tribute to the actions of many of the staff of the House in recent days, and in wishing you, Madam Deputy Speaker, as well as hon. Members on all sides and all staff of the House, a restful Easter recess.

Question put and agreed to.

National Spitfire Project

Jane Ellison Excerpts

Tuesday 28th March 2017 Westminster Hall

[The Financial Secretary to the Treasury (Jane Ellison)]

It is a pleasure to serve under your chairmanship, Mr Davies. What a wide-ranging, erudite and evocative debate we have had. It is always a pleasure to hear colleagues on both sides of the House speak with passion about issues they really care about. I particularly congratulate my hon. Friend the Member for Southampton, Itchen (Royston Smith), who, as we heard, is an RAF man himself, on the vigour with which he promoted the National Spitfire Project.

We have heard from many colleagues with connections to both the RAF and the Spitfire. The shadow Minister, the hon. Member for Bootle (Peter Dowd), had an anecdote, and I came very close to having my own Spitfire anecdote to contribute. I visited Dover last Monday, which was the 100th birthday of Dame Vera Lynn. It was planned that that anniversary of a very British icon would be marked with a fly-past by two other British icons: two Spitfires. Sadly, that was put off for 24 hours by similarly iconic British weather, which closed in at the last minute and prevented anything from leaving the ground, so it all happened on Tuesday and I missed it. That is a shame, because although, as a London MP, I have seen Spitfires go overhead on several occasions on days of national commemoration, it would have been nice to be a little closer.

The National Spitfire Project is of particular significance in the constituency of my hon. Friend the Member for Southampton, Itchen and, as we have heard, across the city of Southampton, which played such an integral part in the birth of that iconic fighter plane. But its significance is not limited to Southampton—as many colleagues said, R. J. Mitchell’s exceptional design, powered by the mighty Merlin engine, was instrumental in winning the battle of Britain—so I endorse everything that my hon. Friend and others said about the national and international importance of remembering the plane.

I represent a very international constituency, so I welcome the comments from both sides of the House about the plane’s significance, not just to the British but in Europe and across the Commonwealth. It was wonderful to hear many people remind us of the multinational nature of the corps that took to the skies to defend Britain. Friends and allies joined British pilots in flying these planes with such courage and bravery. We also heard from my hon. Friend about the courage and bravery of the people of Southampton, who displayed great stoicism in the face of the Nazi onslaught on the city as they continued to produce this plane that was so integral to our war effort. I admire him for his involvement in the National Spitfire Project and congratulate everyone who got it to where it is today. I wish them continued success.

Let me turn to the money and the call that my hon. Friend made for money to be granted from the proceeds of LIBOR fines. As hon. Members will be aware, LIBOR funding has been allocated to supporting a wide range of armed forces and emergency services charities and good causes. Since 2012, in fact, more than £700 million of LIBOR funding has been allocated. That includes nearly £20 million at the last autumn statement alone, which is being used to support museums and memorials.

The shadow Minister mentioned doing our heroes proud. It is worth noting that more than £15 million has been allocated towards RAF museums and memorials, including the Battle of Britain memorial, the Lincoln Bomber Command memorial, Bentley Priory Museum and the Battle of Britain bunker at Uxbridge.

At the autumn statement, my right hon. Friend the Chancellor confirmed that, to mark the 100-year anniversary of the RAF, £2.4 million of LIBOR money is being provided to the RAF for its RAF100 programme, allowing many other events to take place. Some of that money is being committed to the RAF Museum to prepare for 2018 to tell the compelling story of those 100 years of the Royal Air Force, helping to share that story with more and more people as the human connection in terms of the generation of people who were around at the time is gradually lost. It was touching to hear some of the personal memories from within people’s families of those connections. It will be more and more important that we support the RAF in telling the story and keeping it alive, to ensure that down the generations people are aware of the RAF’s role in guaranteeing us the security and freedom that we are privileged to enjoy today and perhaps have had cause to reflect on more in the past few days than in usual times.

That is alongside a wide range of other projects. Money has also gone towards helping former and current armed forces personnel and their families, air ambulances and children’s hospitals. All in all, more than £260 million has been committed in this Parliament, and more than £700 million in total since 2012. As the Chancellor confirmed in August 2016, any further money from LIBOR will continue to be used to support military and emergency services charities and other related good causes that demonstrate the very best value.

Let me turn to the application process for those funds, if I may take the debate in a more prosaic direction for a moment. With regard to the possibility for further applications to the fund, the last round ran in August and September last year and generated more than 550 expressions of interest. The Chancellor has yet to confirm whether there will be further opportunities to apply for support from LIBOR fines. With £700 million paid out to date, the funds remaining are dwindling and we do not anticipate further significant receipts from the Financial Conduct Authority. However, if there are, we will publish any future LIBOR public funding opportunities in the usual way. I know that my hon. Friend the Member for Southampton, Itchen and those he is working with on the project will want to monitor the usual channels, such as gov.uk, for such opportunities carefully.

Despite the inspiring flights of oratory this afternoon, my Treasury feet are—predictably, perhaps—very much on the ground, and never more so than when I turn to the issue of governance and how funds are allocated, which is important to touch on. The allocation of LIBOR funding follows a robust governance process and adheres strictly to the mandated minimum standards for Government grants, which were introduced last year following the Government’s response to the report by the Public Administration and Constitutional Affairs Committee on Kids Company. We all remember the nature of that news at the time.

Under the current LIBOR governance process, each applicant is required to submit an application form, which is assessed by an independent team of grant-making experts, checked with the Charity Commission and reviewed by the Government’s new grants advice panel before final consideration by the Treasury. Each application is considered both individually and holistically for any impact across its particular sector. Specifically, the assessment team examines the governance of the charity or organisation, working closely with the Charity Commission to do so. The team also does a full assessment of the feasibility of a project, its value for money and any risks to its delivery.

I know that some of that has been touched on in conversations between Treasury officials and my hon. Friend. We are always happy to give more information about how the process can be followed and helpful steers on how that path can be taken, if that is of use to those involved with the project. In summary, I want to thank my hon. Friend.

[Sir Gerald Howarth]

The LIBOR fund, which was developed by our right hon. Friend the Member for Tatton (Mr Osborne), was a splendid initiative that has done a tremendous amount of good work. I was rather involved in the Bomber Command memorial, which was put together by a tiny group of people. This is a stunning and long overdue memorial to commemorate the 55,573 men who gave their lives in Bomber Command. In the end, Prime Minister David Cameron knocked a few heads together in Whitehall and we got some money to cover the costs of policing on that day of three quarters of a million pounds, which otherwise would have had to have come from the charity itself.

I suggest to my hon. Friend the Minister that it might be a good idea to be slightly ahead of the game. This is quite an emotional and iconic issue. It is not just a question of pounds, shillings and pence; it is also a question of our national identity and, in the centenary of the Royal Air Force, marking what was a special, iconic contribution to the maintenance of the freedom of these islands.

[Jane Ellison]

I assure my hon. Friend that that has not been lost on me this afternoon. Rarely have I sat through a debate with such genuine passion felt across the House. His point about timeliness and the anniversary is well made, and as I said, we have already made moneys available to mark that for the RAF. I look forward to seeing some of those projects come to maturity. His point is extremely well made. I assure him that I will make the Under-Secretary of State for Culture, Media and Sport, my hon. Friend for Chatham and Aylesford (Tracey Crouch), who is responsible for sport, tourism and heritage, fully aware of both the project—I am sure she is aware of it already—and the ambitious plans to mark our heritage; and, indeed, of the passion expressed for the project today in Westminster Hall.

I hope that all hon. Friends will understand that the process for allocating LIBOR funding must be transparent and objective. There is a process that all bids must take, so although I know that friends and colleagues would wish me to go further, sadly I cannot commit further at this stage.

[Dr Whitehead]

I appreciate that the Minister is in some difficulty as far as allocating funds off the cuff is concerned, and I would not advocate a further banking scandal in order to try to release more funds for that purpose. Will she indicate, today or in future, and in particular to my colleague the hon. Member for Southampton, Itchen (Royston Smith), whether she can think of any other avenues in her area of competence that might be used to facilitate the process of, shall we say, coughing up for this monument? I am sure that she will be happy to undertake that with the hon. Gentleman for the good cause that we have all talked about this afternoon.

[Jane Ellison]

I am more than happy to commit to talk to my colleague in the Department for Culture, Media and Sport, who is the lead Minister on heritage, about the debate and to relay that request. I will reflect on whether there is more we can do in due course to direct my hon. Friend the Member for Southampton, Itchen to other sources of funding that might be available. I will reflect on whether it is possible for me to do that subsequent to the debate, or indeed to ask another Minister to do that from sources other than LIBOR funding.

However, I reassure all colleagues that, should further LIBOR funding opportunities arise, any application from the National Spitfire Project that falls within the published scope will be given full consideration along with other applications. In the meantime, I extend my good wishes to my hon. Friend and all involved with this project in its noble aim of creating a lasting memorial to a truly British icon.

Draft Enactment of Extra-Statutory Concessions Order 2017

Jane Ellison Excerpts

Thursday 23rd March 2017 General Committees

[The Financial Secretary to the Treasury (Jane Ellison)]

I beg to move,

That the Committee has considered the draft Enactment of Extra-Statutory Concessions Order 2017.

It is a pleasure to serve under your chairmanship, Ms Buck, on this rather sombre day, but we meet as scheduled to carry on the work of the House.

As some Committee members may be aware, Her Majesty’s Revenue and Customs continues to review its extra-statutory concessions following clarification of HMRC’s administrative powers by the courts in the Wilkinson case in 2008. The order before us is another step in that process and will put three ESCs on a statutory footing. The concessions legislated for in the order, although not affecting a great number of taxpayers, exist to ensure that the tax rules operate fairly and consistently. The order will ensure that reliefs continue to be available in the scenarios covered by the original concessions.

The order has been fully consulted on, and I am grateful to those who took the time to help the Government to improve the legislation. I will give a little detail for each ESC.

ESC D40 concerns the charge to capital gains tax in respect of gains made by trustees of a non-resident trust. It makes a minor modification to the scope of the anti-avoidance legislation that applies a capital gains tax charge on individuals who settle a property into an offshore trust, and on individuals who are beneficiaries of offshore trusts. The capital gains tax legislation has rules that prevent a tax charge from being avoided if payments to and from the trust are made through a company controlled by the individuals. ESC D40 does not change those rules, but it prevents them from applying to individuals who are treated as controlling the company only because they are beneficiaries of the trust, not because they actually own shares in the company.

ESC F15 provides some relief from inheritance tax on transfer of a property that includes woodlands benefiting from a deferred estate duty charge. When a property containing such woodlands is transferred between owners, inheritance tax is charged on the whole property. The ESC mitigates that by providing that inheritance tax applies only to the woodlands portion of the transfer, rather than to the transfer as a whole. The remaining portion of the transferred property is treated as a potentially exempt transfer for inheritance tax purposes.

ESC 3.20 is designed to ensure fairness for the general body of creditors in an insolvency. Without the concession, certain VAT debts incurred pre-insolvency would be payable ahead of any fees or charges incurred by the insolvency practitioner. That could deter practitioners from acting in some cases and lead to all creditors losing out. I will explain a little about the mechanics of the VAT provision, including why the concession and this legislation are necessary.

The law allows taxpayers to claim bad debt relief on certain supplies that they make if they have not received payment themselves, but where the taxpayer’s customer is a taxable person for VAT purposes, that customer must repay to HMRC the VAT that they themselves have already recovered in respect of such purchases. That is known as clawback. The clawback provision is designed to maintain the integrity of the VAT system and to counter avoidance by preventing manipulation of the bad debt relief rules by associated suppliers and customers, but as I have explained, in insolvency cases the usual operation of the law prejudices the general body of creditors, because any clawback in respect of the insolvent trader’s unpaid debts pre-insolvency becomes due from the insolvency practitioner post insolvency ahead of any other costs.

Should the Committee pass the draft ESC order, it will be made and come into force on 1 April 2017. I am grateful for the cross-party support to date for the rolling programme of legislating for concessions and the valuable benefits that the ESCs provide. This order will ensure that concessionary treatments continue to provide relief as originally intended, so I am pleased to commend it to the Committee.

Draft Crown Estate Transfer Scheme 2017 Draft Scotland Act 2016 (Income Tax Consequential amendments) Regulations 2017

Jane Ellison Excerpts

Monday 20th March 2017 General Committees

[The Financial Secretary to the Treasury (Jane Ellison)]

I beg to move,

That the Committee has considered the draft Crown Estate Transfer Scheme 2017.

[The Chair]

With this it will be convenient to consider the draft Scotland Act 2016 (Income Tax Consequential Amendments) Regulations 2017.

[Jane Ellison]

It is a pleasure to serve under your chairmanship, Sir David.

The Government are committed to making sure that we work for all parts of the UK. In particular, we believe in the enormous benefits that devolution can unlock. That is why we have already taken action to give a range of new powers to the Scottish Government under the Scotland Act 2016. The statutory instruments will make necessary changes to support that Act; one relates to setting Scottish income tax rates and thresholds, and the other is about keeping any revenues raised from Scottish assets in the Crown Estate in Scotland.

I will address the income tax issues first. The amendments in the regulations will ensure that decisions taken by the Scottish Parliament are fully reflected in wider income tax rules. Last year, the Scottish Parliament was given extensive powers to influence the level of funding available to the Scottish Government, and it now has the power to set income tax rates and thresholds on the non-savings income and non-dividend income of Scottish taxpayers. However, those Scottish income tax powers have implications for a number of areas of wider income tax legislation, particularly those that operate by reference to specific rates or thresholds. We have conducted a detailed consultation on the technical changes needed to support those powers and the regulations will introduce the necessary amendments.

Let me give the Committee a brief overview of the proposed changes. The first relates to pensions relief. The regulations amend the rules that govern arrangements for relief at source, so that they can accommodate any rates and bands of income tax set by the Scottish Parliament. This will ensure that Scottish taxpayers continue to get the right amount of tax relief for their pensions, based on the Scottish rates and thresholds that apply to their earnings.

The second change relates to the pension annual allowance charge. The pension annual allowance rules charge tax on an individual when they make pension contributions over a set threshold in a year; the rate of charge that they pay on their excess contribution is based on the rate of tax to which they are subject. The regulations insert references to Scottish rates and thresholds into the rules to ensure that the charge on a Scottish taxpayer relates to rates and thresholds set by the Scottish Parliament.

The third change relates to the residuary income from a deceased person’s estate. The regulations amend the rules that provide, in certain circumstances, for a reduction in the residuary income of the deceased’s estate and a tax credit where a person other than the settlor receives an annual payment from a settlor-interested trust. The reduction in residuary income and level of tax credit are calculated by reference to income tax rates and thresholds. The regulations will ensure that when the individual concerned is a Scottish taxpayer, the right rates and thresholds will be used in that calculation.

The fourth change relates to social security. Under the Finance Act (No. 2) 2005, people who become entitled to a social security lump sum must pay a charge to income tax. Under the regulations, if they are Scottish taxpayers, the charge that they pay will be based on the Scottish basic rate or any other higher rate set.

Lastly, on gift aid, the regulations will amend section 414 of the Income Tax Act 2007 so that if Scottish taxpayers make donations that qualify for gift aid, the tax relief they get back will be in line with the tax rates that they are paying. The regulations will insert references to Scottish rates and thresholds into the gift aid rules to ensure that the relief available to a Scottish taxpayer who makes a donation is based on the rates and thresholds set by the Scottish Parliament. All in all, across these different areas, the amendments made by the regulations will ensure that the income tax system can fully accommodate the decisions taken by the Scottish Parliament as it exercises new income tax powers as it sees fit.

Let me turn to the Crown Estate Transfer Scheme. It is important to Scottish citizens that revenues raised in Scotland from Scottish assets are accounted for and spent in Scotland. The Smith commission agreement therefore recommended that we should transfer to Scotland the management of any Crown Estate assets that are wholly and directly owned in Scotland, including rural and urban holdings and mineral and salmon-fishing rights. It includes an area that incorporates around half the coastal foreshore and almost all the seabed, covering all the Crown Estate’s activities up to the 200 nautical miles limit.

We have now agreed the draft scheme with the Scottish Government, under which all rights and liabilities connected to managing those Scottish assets will be transferred to Crown Estates Scotland (Interim Management). All revenues will go to the Scottish Consolidated Fund and the commissioners who are currently in charge will have no further role in the management of those assets. Meanwhile, as required by the Scotland Act 1998, assets will continue to be managed on behalf of the Crown and maintained as an estate in land, which ensures that any sale receipts must be reinvested.

Key protections are also provided for under this instrument, which safeguards citizens across the UK by ensuring that the transfer is not detrimental to defence or national security. It also protects other UK-wide interests, for example, by ensuring that there is a consistent approach to telecommunications throughout the UK, ensuring that pipeline rental increases represent market value so our oil and gas industry is not held back, and helping to ensure that what British customers pay for electricity is fair. Finally, the draft scheme protects the rights of existing of staff as they transfer to Crown Estates Scotland. Provisions are in place to cover dismissal, contract variation and pensions.

The two instruments make a range of technical amendments that are important to ensure the smooth and effective transfer of powers to Scotland. I therefore hope that hon. Members will support them.

--- Later in debate ---

[Jane Ellison]

If you will forgive me, Sir David, I will write to the hon. Member for Stalybridge and Hyde specifically on the latter point.

On the point made by the hon. Member for Rutherglen and Hamilton West about Fort Kinnaird, the discussion was settled as part of the Scotland Act 2016 and the management of all the Crown Estate’s wholly and directly owned Scottish assets will be transferred under the transfer scheme. Fort Kinnaird is not wholly and directly owned by the Crown. It is held by an English limited partnership in which the Crown Estate commissioners manage an interest alongside other commercial investors, and the partnership also owns property in other parts of the UK.

Fort Kinnaird has never been wholly or directly owned by the Crown. It was brought into the partnership by the commissioners’ joint venture partner, Hercules Unit Trust, and is managed by British Land. Revenues from the Crown Estate’s interest in Ford Kinnaird will therefore continue to be passed to the UK Consolidated Fund for the benefit of the UK as a whole, including, of course, Scotland.

What has become obvious in our brief debate is that all parties in the House acknowledge that these regulations, given their technical nature, will help us to make the powers we have transferred or are transferring to Scotland work more smoothly. Whether they are to income tax or Crown Estate assets, we want to ensure that any changes are effective and that is what these instruments achieve, taking the necessary steps to allow for the full implementation of new Scottish powers. I commend them both to the Committee.

Question put and agreed to.

DRAFT SCOTLAND ACT 2016 (INCOME TAX CONSEQUENTIAL AMENDMENTS) REGULATIONS 2017

Resolved,

That the Committee has considered the draft Scotland Act 2016 (Income Tax Consequential Amendments) Regulations 2017.—(Jane Ellison.)

Draft Individual Savings Account (Amendment No.2) Regulations 2017

Jane Ellison Excerpts

Wednesday 15th March 2017 General Committees

[The Financial Secretary to the Treasury (Jane Ellison)]

I beg to move,

That the Committee has considered the draft Individual Savings Account (Amendment No. 2) Regulations 2017.

It is a pleasure to serve under your chairmanship, Mr Evans. Much of the detail under discussion will be familiar to the Committee. At Budget 2016, the Government announced a new lifetime individual savings account to help incentivise young people to save for the future. I will refresh hon Members’ memories on a few of the details. It is designed for adults under 40 and lets them save for up to two things in one ISA—for their first home and for later life—but there is no need to choose which at the time of opening the account. It is therefore a flexible way of saving that will be a welcome addition to the range of savings options open to younger people.

The lifetime ISA, with its introduction secured by the Savings (Government Contributions) Act 2017, will be available from 6 April. The regulations will amend existing ISA regulations to take the lifetime ISA into account. The schedule to the regulations sets out the detail of how the lifetime ISA will operate and be administered, dealing with questions of eligibility and qualification for the Government bonus. It also details how people can transfer funds from other types of ISA to the lifetime ISA.

It is worth pointing out that during the 2017-18 tax year there will be something of a special transfer window. Any funds built up previously in a help to buy ISA can be transferred into a lifetime ISA without that counting towards the lifetime ISA annual contribution limit. As with all new products, the Government will keep the window under review throughout the first year.

As we launch the lifetime ISA, we know that there will be a small number of providers. We wanted to give people the opportunity to take advantage of the product as soon as possible and to start building their accounts. We can expect the number of providers to grow steadily as more join over the course of the year after developing their products and internal systems. That is also something that we will watch carefully.

We are close to the start of the lifetime ISA, which will be a positive new option for any younger person looking to save responsibly for the future. I therefore hope that hon. Members will support the draft regulations.

--- Later in debate ---

[Jane Ellison]

I am grateful for Members’ contributions. I will respond to some of them. Some of the issues raised relate to the principles that we explored during the passage of the 2017 Act, so I will not spend too much time on them, although I note that those concerns have been expressed.

There is widespread agreement on both sides of the House that encouraging saving is good. The idea behind the lifetime ISA emerged from a widespread consultation on long-term savings that was conducted a few years ago.

Before I move on to some of the more detailed questions, let me say that this statutory instrument is narrow in nature and about just the lifetime ISA, so I am going to confine my comments to that and not be tempted down the route of commenting on some of the other issues that were raised, important though they are.

On the advice and information for consumers, the Government absolutely want to ensure that people have the information they need to make important financial decisions. I recognise that that is a priority for Members. We published factual information about the lifetime ISA on gov.uk. That website went live recently, and we will publish more in the run-up to the launch. We will also work with the Money Advice Service and its successor to ensure that it makes appropriate and impartial information available.

It is, of course, the independent Financial Conduct Authority’s role to regulate account providers, including how they sell the products to consumers. We now have the final regulatory framework for the LISA, based on that for other ISAs, with some exceptions. Those include that providers give people information about automatic enrolment in workplace pensions.

That important subject came out in the debate on the 2017 Act, and I hope I can give some comfort to the hon. Members for Bootle and for Paisley and Renfrewshire South. Let me stress again that we are fully committed to supporting people through the pension system. Automatic enrolment will help 10 million people to be newly saving or saving more by 2018. The lifetime ISA is designed to complement that. It gives young people more choice in how they save for the long term. It is not a replacement for the pension system.

The Government’s policy towards employers reflects that. Employers have a statutory obligation to contribute to pensions under automatic enrolment, as well as a direct incentive. Neither of those apply to the lifetime ISA. Our impact assessment, based on the Office for Budget Responsibility-certified costing note, is clear that we do not assume that anybody will opt out of a workplace pension to save into a lifetime ISA.

Let me deal with the accusation from the hon. Member for Paisley and Renfrewshire South that this is not a product for every man and woman. It is certainly not just a product for wealthy people or higher earners who aspire to own a home or save for later life. Everybody who works hard should have the chance to achieve those goals. If we take the example of the help to buy ISA, against which similar accusations were made, we will see that more than 720,000 accounts have already been opened, and the average house purchase price through that scheme has been below the UK average. We have not set a minimum amount that people can save into a lifetime ISA. They will get the 25% bonus on any contributions up to £4,000 of savings a year.

The hon. Member for York Central asked about the issue of age, which we also debated to some extent during the passage of the Act. The average self-employed person is in their 50s and she asked whether this product is for them. We have been clear: this product is specifically targeted at supporting younger people more. It is a mass-market product. We expect a wide range of people to find it attractive, and some younger self-employed individuals may find it particularly useful as a savings vehicle for later life, depending on their tax status.

There are, of course, a range of other savings products for people over the age of 50, including the self-employed. Those include other ISAs, where they will be able to make use of the much-increased allowance, which is going up to £20,000 from next year. They will also benefit from the personal savings allowance, which for basic rate taxpayers means that the first £1,000 of income from savings returns is tax-free. That has taken the vast majority of people out of paying tax on their savings interest.

This product is aimed at a particular market. One always has to draw a line in terms of age somewhere, and we think we have struck the right balance. We look forward to the start of the lifetime ISA on 6 April. It is a positive new choice for young savers planning for their future and it provides flexibility. People can save for their first home as well as for later life. It also provides an alternative; for some people, it will be a better way to save than other routes available to them. I am pleased to present the regulations and commend them to the Committee.

Question put.