Autumn Statement

Jesse Norman Excerpts

Wednesday 22nd November 2023 Commons Chamber

[Jeremy Hunt]

I think that the hon. Lady should be careful with her language when she is saying things like that. I am very clear when it comes to growth. We have grown faster than any major European economy since 2010. Yes, while interest rates are higher—as they need to be, because we are bringing down inflation—growth is more subdued, but if the hon. Lady listens to, for example, those in the International Monetary Fund, who are independent commentators, she will hear them say that when we have got inflation back down to target, we will have higher growth than France, Italy and Germany. When it comes to the NHS, we put an extra £3.3 billion into the NHS budget in the autumn statement last year. With doctors’ strikes happening in most of the period since then, it has been difficult to make progress on waiting lists, and I hope that the hon. Lady will address her comments to those doctors if she is going to be consistent.

[Jesse Norman (Hereford and South Herefordshire) (Con)]

It is a pleasure to speak from the Back Benches for the first time in a while. I massively welcome the statement, and particularly the emphasis that the Chancellor has given to skills and the superb work that has been done by the Department for Education at the same time. In Herefordshire, we worry about the pollution in our River Wye. Will he consider talking further with the Secretary of State for Environment, Food and Rural Affairs about whether some package could be put in place to support the long-term improvement of that river?

[Jeremy Hunt]

I congratulate my right hon. Friend on his sterling work as a Minister. When it comes to pollution in the River Wye, he will know that the Government have made changes requiring the water companies to invest more than £50 billion in the years ahead, but he, like me, wants to see faster progress and I will happily give him any support I can.

Health and Social Care Levy Bill

Jesse Norman Excerpts

2nd reading
Tuesday 14th September 2021 Commons Chamber

[Jesse Norman]

I thank everyone who has taken part in what has been, with one or two exceptions, a generally constructive debate. I will start with the contribution of the hon. Member for Erith and Thamesmead (Abena Oppong-Asare). She said rightly that politics is about choices, but what choice has Labour given the people of this country? Has it given the people of this country a healthcare plan or a social care plan? Has it given the people of this country any indication of what taxes it would raise? Again and again, the Opposition have been asked by Members not just on the Government Benches, but elsewhere, what taxes they would raise and what their plan is, and there is no plan.

[Helen Hayes]

Will the Minister give way?

[Jesse Norman]

There have been 27 speeches, so, if I may, I will continue for a while. I may take an intervention later if we have made a bit more progress.

I feel particularly badly for the hon. Member for Erith and Thamesmead because, when the hon. Member for Hornsey and Wood Green (Catherine West) was asked what Labour’s plan was, she said that her Front-Bench colleagues would address that in their remarks. We waited with bated breath for the moment when they would address the question of what the plan was or what taxes would fund it. I can tell you, Mr Deputy Speaker, that it will need a lot more than £12 billion of health and social care funding to repair the damage from that hospital pass from the hon. Member for Hornsey and Wood Green.

[Catherine West]

I am grateful to the Minister for giving way, as he mentioned me. The UK economy has seen enormous asset price bubbles, yet not much appears to be getting back from those who have made quite a lot of money over the years through real estate. Why is he taking more money from working people instead of those who have gained enormous amounts—millions—from the asset bubble?

[Jesse Norman]

I am desperately sad, because I thought the hon. Lady was going to answer my questions about Labour’s plan or the taxation for it. Of course, we would expect people earning that income to pay property and income taxes in the proper way, and, if they are receiving dividends, their tax will go up as a result of the changes that we have made. [Interruption.] I am asked on what basis I say that. It is on the basis of a distribution analysis of the overall package of measures published by the Treasury in the last week, which is available for all Members to read and consult. If they do, they will see that this is a very redistributive package, with the highest-income 20% of households contributing 40 times that of the poorest 20% of households. It is a genuinely progressive policy, and the distribution analysis makes that clear.

[Paul Holmes (Eastleigh) (Con)]

I do not think that the Minister will mind me saying that he has served in the House for slightly longer than me. In his time, has he ever known a situation in which the Labour party—a supposed party of the NHS—has voted against billions of pounds of investment in the NHS?

[Jesse Norman]

It is a desperate shame that the Labour party has decided to take this party political position, because this area above all is one where we would expect it to back its own policy priorities. I remind the House that these measures are more progressive than the national insurance contribution rise of 2003 for which Labour Members enthusiastically voted, yet they are not supporting them. I find that extraordinary—[Interruption.] I am asked where my plan is. It is written down, and it is called “Build Back Better: Our Plan for Health and Social Care” That is a plan. The void that exists on the Opposition side is not just a void of a plan but a void of a tax package to pay for it.

Colleagues throughout the House have made the right and proper suggestion and implored the Government to look carefully at how the funds that we are raising can be appropriately spent. We must be careful about that. No Conservative wants to raise taxes, and indeed no Conservative would like to waste money. I want hon. Members to understand that Ministers very much take that on board. As hon. Members will know, we have a health and social care plan coming forward in a White Paper, and legislation is in place to put it on the statute book. That is the position.

My hon. Friend the Member for North Norfolk (Duncan Baker) and the hon. Member for Liverpool, Riverside (Kim Johnson) rightly made a point about younger people and support for care workers. Of course, we have not just the already published plan for jobs but £500 million of new money pledged to support social care workers, including through new qualifications, progression, and wellbeing and mental health support. That is an important part of what we are doing.

There was one Opposition Member who had genuine ideas for taxation that would support social care: the right hon. Member for Barking (Dame Margaret Hodge). She presented a whole raft of ideas. I do not accept the ideas she put forward, for different reasons, and I think the proposal that the Government have put forward is superior as a single, broad-based package of measures that has this progressive, distributional effect, but she came forward with ideas. What a void, what an emptiness, what a vacuity sat around her from the Labour Front Bench and from the rest of her party. I congratulate her on at least trying to answer the question put by the hon. Member for Erith and Thamesmead that politics involves choices; and what was the choice? The right hon. Member for Barking gave us one.

In doing so, however, I think the right hon. Lady erred. There has been some discussion about the tax information and impact note that the Treasury put out last week. Let us be perfectly clear: that is a technical document that relates only to this levy. It does not relate to the overall effect of the package of measures that it funds; macroeconomically, we expect that overall effect to be broadly economically neutral. That is the picture we are presenting, so just to look at the tax side, as the right hon. Lady did, is I am afraid to miss half the point of it. The point was made very well by Ben Broadbent, a member of the Monetary Policy Committee of the Bank of England. He said that

“one should not ignore one half of that policy announcement as far as the effects on the economy concerned”,

and he was absolutely right about that. So what we have is a balanced policy: we have a health and social care plan with a funding package that the House is considering at the moment.

Let me talk a little more about colleagues. I very much support the comments of my right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning) about the concern that other Members across this House have about the increase in pay at hospital trusts and in some parts of the NHS. That is a matter of concern, and we have to be absolutely clear that that money is being properly spent in the NHS and across hospital trusts. It is a very strong concern of my right hon. Friend the Chief Secretary, because he—like us, like me—is concerned to support not just our NHS, but the taxpayer in making sure that that money is properly spent.

I very much supported the points made by my hon. Friend the Member for Arundel and South Downs (Andrew Griffith) when he celebrated the adult social care workforce. He was absolutely right to do that, and I hope he will be pleased at the £500 million that we have mentioned in that regard.

May I remind the House that, in grasping this nettle, the Government have not just moved forward on an issue that has been outstanding before this House for many years, but have shown how inadequate the Labour party response was to its own royal commission of 1999, from which, as we can see, virtually no social care—no enduring social care—package followed? If you do not like that, Mr Deputy Speaker, let me direct you to the Wanless report of 2006, on the basis of which no sustainable social care package was developed. That situation is changing now. This Government are putting that sustainable social care funding in place. We are doing it with a levy that tracks many other countries that have social care levies in place. This is a progressive, long-term way to address a problem that has remained in front of us, but unaddressed, for far too long, and I commend this measure to the House.

Question put, That the amendment be made.

Health and Social Care Levy Bill

Jesse Norman Excerpts

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

[Jesse Norman]

It is a great pleasure to be here today to explain the clauses in this Bill.

The Social Security Contributions and Benefits Act 1992 sets out the earnings and profits on which employees, employers and the self-employed are liable to pay national insurance contributions. Clause 1 of the Bill introduces a new tax, to be known as the health and social care levy, which will be charged on the same basis as national insurance contributions. The levy will be set at 1.25%, and will affect earnings from 6 April 2023 onwards. When individuals or employers are liable for a qualifying national insurance contribution, they will also be liable for the levy. The levy will be payable on the earnings and profits on which those contributions are payable. The qualifying national insurance contributions in question are primary class 1 NICs that employees pay on their earnings, secondary class 1 NICs that employers pay on the earnings of their employees, class 1A and class B NICs that employers pay on benefits in kind received by their employees, and class 4 NICs paid by the self-employed.

This new levy has been introduced to raise funds for health and social care, so it is only right that individuals of all ages who are able to pay should do so. Therefore, individuals over state pension age who would be liable for those contributions were they not exempt will be liable for this levy.

[Sir Edward Leigh (Gainsborough) (Con)]

If we are talking about an insurance system, can the Government explain why they have ruled out state-sponsored insurance? I can understand why they cannot rely entirely on private insurance—the risk is too great—but Dilnot originally came up with the idea that people could take out insurance when they retired which would be a charge on their house, and they would have to pay it back when they died on the basis of the value of their house. I am not asking the Government to accept these ideas now; I am simply asking whether they have an open mind and are prepared to look at them. This is a complicated matter, and we want to have a real insurance system.

[Jesse Norman]

In the collective sense, this is a state insurance system, because it is making long-term provision for catastrophic outcomes in people’s health and social care, but the point that my right hon. Friend has made is an acute one. He will be aware that both the King’s Fund and the House of Lords Economic Affairs Committee have looked at private insurance models and concluded that they have severe limitations that would not make them appropriate. Indeed, no country in the world has a purely private insurance model. It has certainly been contemplated by Professor Dilnot, and it is compatible with the thrust of this legislation, that there should then arise a private insurance market, now that some of these catastrophic risks have been removed from the calculus that individuals have to make about their own social care. I hope that that addresses my right hon. Friend’s point.

As I was saying, individuals over state pension age who would be liable for those contributions were they not exempt will be liable for this levy. That means that pensioners in work will now contribute 1.25% of their “NIC-able” earnings, or profit, to health and social care in the same way as working-age employees and self-employed individuals.

Clause 3 discusses in more detail how NICs legislation applies to the levy. However, clause 1 also ensures that when an employer benefits from a zero rate of secondary class 1 NICs, such as employers of people under 21, of apprentices who are under 25, of veterans or of employees in freeports, those earnings that are subject to the zero rate will not be liable for the levy. That will ensure that businesses continue to invest in young people developing strong skill sets, and in those who have served this country.

[John Redwood]

As I understand it, it is the Government’s wish that the social care levy should appear as a separately identified line item, with that phrasing, on a payslip. Could it also be clear on a payslip that it would represent only a small fraction of social care costs and a tiny fraction of health costs? Otherwise, it could be very misleading.

[Jesse Norman]

That is a helpful suggestion. I do not think there will be any ambiguity in the language on the slip, but of course it might not be clear that it is not the totality of the funding that goes through Government. If I may, I will take what my right hon. Friend has said as a suggestion and refer it to colleagues.

[Sir William Cash (Stone) (Con)]

I would like to ask the Minister, as he has such responsibilities across the board, whether he has contemplated the question of public waste in the context of, for example, HS2? If we were to cut that back and to cut back waste generally throughout Government, would that not send an enormously powerful message to the British people that we are not only concentrating on this aspect of public expenditure but balancing it off by making real savings in other areas, given that the Treasury or its economic advisers have said that they have put phase 2a of the HS2 legislation on red watch because it is so impossible to achieve its objectives?

[Jesse Norman]

My hon. Friend has successfully dragooned a topic that has nothing to do with national insurance contributions or the levy into the debate, but let me reassure him that the Treasury seeks to exercise a hawk-like vigilance over all public spending. I do not think it would be appropriate to think of the response to the pandemic of the past two years as characteristic of the Treasury’s overall largesse, and we look very closely at the spending on HS2, which is the specific responsibility of my right hon. Friend the Chief Secretary to the Treasury and one that I know he takes with great seriousness.

[Dr Murrison]

The fact that the social care levy will be introduced in 2023 and not 2022, and that in the interim we will have to rely on national insurance, suggests that creating it will involve quite a lot of work and expense. How much is it going to cost to introduce the levy, beyond national insurance? Based on that, we will need to make an assessment as to whether it is worth while putting the 1.25% levy on people who are past state retirement age. If it is costly, we should not do it and simply rely on national insurance contributions. Allied to that, how much does my right hon. Friend think the 1.25% levy is going to raise from people who are beyond state retirement age?

[Jesse Norman]

That was a series of questions. The payslips that people are given will be generated by their own companies in the large part, and it is therefore important to think not only about the changes that HMRC will have to make but about the changes to be made by companies in order to reflect the amendment to payslips. In the case of HMRC, the Government have clarified in a letter to the Treasury Committee that, although it is very early days, HMRC provisionally estimates the operational costs of implementing the levy at between £50 million and £60 million, which is not nothing but it is not substantial in the context of the overall amount to be raised. I think the final part of my right hon. Friend’s question related to the amount that would be attributed to the over-65s. One would expect that to be relatively modest, because the number of qualifying people will not be enormous and because they generally have a high propensity to manage their work-life balance, meaning that there might be a dynamic effect from the levy. I am not aware that we have put that number into the public domain, but if we have it, I will see if we can publish it, probably at a future fiscal event—at the Budget or thereafter.

--- Later in debate ---

[The Second Deputy Chairman]

Order. Just before Dr Murrison makes a further intervention, can I ask the Minister please to face the microphone? Otherwise, Members will not be able to hear his responses; I have found it difficult to hear him.

[Jesse Norman]

I do apologise, Mr Evans.

[Dr Murrison]

Just to clarify my thinking on this matter, is that £50 million to £60 million a one-off or a recurring feature?

[Jesse Norman]

I think it is the set-up cost, although it may be incurred over more than one year. As I say, it is a very preliminary number that we have tried to get for the purposes of responding to the Treasury Committee’s inquiry.

[Nigel Mills (Amber Valley) (Con)]

My right hon. Friend talks about the advantages of having clarity on payslips about what people are paying for with the health and social care levy. Has he thought about combining the existing national insurance contributions that are allocated directly to the NHS and do not go into the National Insurance Fund? They are around £26 billion each year, which would effectively treble the amount of money in the levy. That would make it much clearer that people are paying all of it towards the health system, rather than having two different taxes doing exactly the same thing in slightly different ways.

[Jesse Norman]

My hon. Friend rightly points out that an element of NICs is already hypothecated, which is sometimes forgotten by people who are concerned about the hypothecation in the levy. I will take his remarks as a suggestion and reflect on them further. I recognise his expertise in this area, so I am grateful for the intervention.

Serendipitously, I will now address my hon. Friend’s amendment. This amendment asks that HMRC should publish a forecast of the estimated costs of collecting the levy. The published tax information impact note sets out clearly that the operational costs of the levy are being quantified. I have given a preliminary indication, but we will publish the final estimates before the levy comes into effect in April 2022. This amendment is therefore not necessary and I would ask him to consider not pressing it to a vote.

[Matt Hancock (West Suffolk) (Con)]

Building on the point made by my right hon. Friend the Member for Wokingham (John Redwood), is not one of the advantages of having a separate health and social care levy that, as people’s representatives, we can explain more clearly that if we want to put more money into the system, it has to be paid for? Will that advantage not ultimately help connect people to where their money goes and, therefore, enrich the debate?

[Jesse Norman]

I think it will, which is why the Government have decided to make this rather important change. It may well be that this is not the end of the story, and in due course the desire for clarity about how money is spent, which is expressed elsewhere in the tax system, might manifest itself in other ways. I do not want to speculate on that, but my right hon. Friend has outlined the importance of accountability, clarity and perspicuity in how money is spent.

[Sir Christopher Chope (Christchurch) (Con)]

Would it not be even simpler and more transparent if we had a social care levy standing on its own? Is it not the case that the Government do not want to have a social care levy on its own because they know that, if there were transparency, it would be obvious that we were reneging on our manifesto commitment of two years ago?

[Jesse Norman]

I do not think that is true at all. The reason for putting it on the payslip is so that taxpayers can see that this new tax is clearly represented. If they need reassurance that the support for social care, in their own life and in the life of their family and community, will be long standing and enduring, they need only look at their payslip.

[Sir Christopher Chope]

If it is about social care, why do we not have an exclusive levy relating to social care? Would that not be much clearer and more transparent?

[Jesse Norman]

My hon. Friend invites us to think of social care as a completely separate thing, but of course there is a tremendous overlap between social care and some aspects of health. It is important to make sure that the system, which I think all hon. Members realise is too disjointed, is more joined up. This treatment therefore appears to be more appropriate to an area where we want to see more integration.

[Clive Lewis (Norwich South) (Lab)]

Will the Minister give way?

[Jesse Norman]

The hon. Gentleman has not featured in the debate so far, so I will make a bit more progress before happily taking his intervention.

Amendment 7, tabled by my hon. Friend the Member for Yeovil (Mr Fysh), seeks to ensure that proceeds from the levy can be used in any tax year. As the Committee will be aware, the levy is designed to mirror the approach of the national insurance system, which has always operated on a pay-as-you-go basis. Indeed, that has been the case since the NHS and the National Insurance Fund were established in 1948. This means that national insurance contributions collected in one year are used to pay for the NHS and contributory benefits paid out in the same year. The pay-as-you-go basis provides a clear precedent for how the levy should operate and that also ensures simplicity and consistency across the NICs system. So I hope that my hon. Friend will not press his amendment, for the reasons I have outlined.

[Clive Lewis]

On the point made by the hon. Member for Christchurch (Sir Christopher Chope), one reason the Government have used the term “health and social care” is that they have established a principle that people pay at the point of delivery. As we see health and social care begin to integrate, the fear for many Labour Members is that this is a Trojan horse for introducing those payments for healthcare—for the NHS. One of my fears when the Prime Minister spoke of this delivering “profoundly Conservative” outcomes was just that danger.

[Jesse Norman]

It is helpful to have a diagnosis of why Labour Members might be opposed to or worried by this, but the fear is entirely without foundation. There is no suggestion that the Government wish to create a system that is anything other than free at the point of delivery, and that is the basis on which the Government have always proceeded and proceed now. We are trying to put a longer-term arrangement in place for social care that allows us to bring the same kind of clarity to it that people have enjoyed for many years with the NHS.

[Nadia Whittome (Nottingham East) (Lab)]

If the Government believe in a social care system that is free at the point of use, why are they not delivering a social care system like that, one like the NHS, which is universal and available to everyone?

[Jesse Norman]

I do not know whether the hon. Lady heard, but I was talking about the NHS and that has been a founding principle of the NHS, one the Conservative party have always adhered to, and rightly so. What we are doing with the levy is funding an expansion and a development of an existing set of arrangements, and, as I have discussed in relation to the question from my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), the potential to expand that through the use of other mechanisms of support, now that these catastrophic risks have been removed, or will be removed, from people’s lives.

Let me turn to the amendments tabled by the Scottish National party and Plaid Cymru which look to require a joint agreement between the Treasury and the Governments of Scotland, Wales and Northern Ireland as to how the levy proceeds are to be shared between the four parts of the UK, and between healthcare and social care. As for how the levy revenue will be split between the four parts of the UK, this legislation mirrors existing legislation on how NHS allocation is divided between England, Scotland, Wales and Northern Ireland. It is right and appropriate that we should follow that established precedent. The Government will work closely with the devolved Administrations on the implementation of the levy, including on the process for allocating revenues across the UK and on the split between health and social care from April 2023 onwards. It is also worth bearing in mind that the devolved Administrations’ overall funding will continue to be determined by the Barnett formula, so that this process will just determine the element provided by the levy. I hope that the Members concerned will not press their amendments, for the reasons I have outlined.

[Alison Thewliss]

I do not know whether the Minister has read the note from the Hansard Society on this, but it is concerned by some of the implications for the devolution settlement. It says:

“There is also no requirement in the Bill for the Treasury or the Health Secretary to consult the devolved administrations about any aspect of the process.”

Is that not a cause for concern?

[Jesse Norman]

The Treasury already consults the devolved Administrations very closely on many aspects of tax policy and there is no reason to think, and the Bill does not suggest, that there should be any other reason for handling this. On the contrary, following an existing hypothecation gives direct support to devolved Administrations that they will be able to receive the Union dividend, which is generated and delivered by this policy.

Clause 2 creates a legally binding obligation to use the funds raised by this levy for the purposes of health and social care, and sets out that HMRC will direct funds to the Secretary of State to be used for the cost of health and social care in England, Wales, Scotland and Northern Ireland. The funds from the levy will be shared between healthcare and social care, and will be shared between each nation in a proportion determined by the Treasury. The Treasury has used the long-standing Barnett formula to fund devolved Administrations and will continue to do so for the proceeds of this measure. Clause 2 goes further and ensures that any interest or penalties that can be attributed to the levy will also be used to fund health and social care. However, any expenses incurred by HMRC in collecting the levy will be deducted from the proceeds, which ensures that HMRC has the ability to collect and police this levy properly. I therefore ask Members to allow clause 2 to stand part of the Bill.

[Dr Murrison]

On clause 2, in 2014 we passed the Care Act and accepted the Dilnot proposals; slightly less than two years later, we canned the central part of the Dilnot proposals, in that it was decided that local government should in fact have the social care uplift, which had been anticipated in 2014. What certainty do we have that the measures we are passing today will not be dealt with in a similar way if, in two or three years’ time, we find that the pressures on local government are so acute, which they may well be, that we have to can some of the measures we discussed earlier?

[Jesse Norman]

I thank my right hon. Friend for his question. I think the point is perfectly clear: this levy is intended to be and will be a long-term, permanent funding arrangement to support health and social care. The plan includes a component that is designed to support local government in the delivery of care services without distorting markets that are already in existence. There is no reason to think, and we do not anticipate, that there will be specific issues that cannot be addressed at the time. The commitment to provide a longer-term funding settlement that can be reviewed and considered by individuals when they pay their national insurance contributions, and to do so in a way that gives them comfort that that same settlement will be in place, in a way similar to the state pension system, so that they can plan against it, is manifest. The Government have made that clear.

Clause 3 specifies that any provisions that apply to a qualifying national insurance contribution are to apply to equivalent payments in respect of the health and social care levy. It also sets out the limitations of such provisions applying to the levy.

Clause 4 provides for regulations for the purposes of the health and social care levy to be made under the Bill and specifies the parliamentary procedure that will apply to those regulations.

Clause 5 sets out the transitional arrangements for the measure and specifies that they will apply only for the 2022-23 tax year. Its effect will be to increase temporarily the rates of classes 1, 1A, 1B and 4 NICs by 1.25% for one year. There will be a corresponding temporary increase in the amount of contributions allocated to the NHS by the same amount.

Clause 6 defines various terms used in the Bill. Clause 7 specifies the short title of the Act as the Health and Social Care Levy Act 2021 and states that the levy is payable by or in relation to employees of the Crown. I commend all those clauses to the House.

Let me turn to new clauses 1 and 2, tabled by the SNP, and clauses 3 to 5, tabled by Labour. These new clauses ask the Government to review and report on the impact of the revenue effects of the levy, its impact on business and its impact on equality. I wish to explain why they are unnecessary.

The Government have already provided a number of assessments of the levy’s impact, including a distributional analysis of the impact of the combined tax and spending announcements that shows that lower-income households will be large net beneficiaries from the package, with the poorest households gaining most as a proportion of income. It also shows that the 20% of highest-income households will contribute more than 40 times the contribution of the 20% of lowest-income households.

There is a further assessment in a technical annex in the Government’s plan for health and social care. It sets out the impact on the Exchequer, individuals and businesses and shows that 70% of the money raised from businesses will come from the largest 1% of businesses, while 40% of all businesses will pay nothing extra.

The tax information impact note is a third form of assessment. It sets out the equality impact of the levy specifically rather than of the overall package of measures.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

As well as on businesses, the levy will have a large effect on the bills of public services. For instance, West Yorkshire Police is looking at having to pay an extra £3 million of national insurance, and for Leeds City Council the amount for directly employed services is also in the region of £3 million. Somewhat ironically, many of the social care services that the council uses are outsourced, so the NICs will push up the cost of those services. What assessment has the Minister made of the effect of the levy on local government and the police?

[Jesse Norman]

The plan is clear that, to the extent that national insurance contributions are incurred by public bodies, they will be met. The funding is set up on that basis. In respect of local government, extra pressures other than those already contemplated are matters for discussion in the spending review. That is the normal fiscal procedure and the one the Government are following.

I turn now to address the Opposition’s new clauses 6 and 7 on reporting the levy expenditure shares and the revenue derived from those in the social care sector. First, on the share of levy spent on health and social care, the Government already routinely publish data on departmental spending throughout the year, including at main and supplementary estimates, through public expenditure, statistical analyses and in departmental annual reports and accounts as well as data on the revenue raised from individual taxes.

At present, this reporting shows, for example, exactly how much revenue NHS England receives from national insurance contributions. In future, this will show the contribution that this levy makes to the budgets of the Department of Health and Social Care and the Ministry of Housing, Communities and Local Government. There is no need for additional reporting in that context as all the relevant information will readily be publicly available. The Government have already published the amounts that will go to the NHS and to adult social care over the next three years as a result of this levy and will confirm final allocations at the spending review.

Finally, on the levy revenue derived from those in the social care sector, existing data sources do not include or reliably collect data on employment by sector. It is not known which sector an individual works in, only their income types and amounts. I hope that, given these considerations, Opposition Members will not press their new clauses for the reasons that I have outlined.

Let me turn to new clause 10 tabled by my hon. Friend the Member for Amber Valley (Nigel Mills). This would require the Office for Tax Simplification to publish an assessment of the merits of the levy. As outlined in the Finance Act 2016, the statutory role of the OTS is to advise on the simplification of the tax system. To assess fully the advantages and disadvantages of introducing the health and social care levy would require the OTS to consider and comment on choices with far broader policy considerations, including on health and social care, which sit well beyond its remit and expertise.

The OTS functions as an adviser to the Chancellor rather to Parliament and it is for the Chancellor to commission work for the OTS or for the OTS to advise the Chancellor on its own initiative as it sees appropriate. It is not the role of Parliament to commission work from the OTS, though I have no doubt that the Treasury will have taken on board this new clause, and I thank my hon. Friend for tabling it.

The published tax information and impact notes set out clearly that the operational costs for the levy are being quantified and the Government will publish these estimates before the measure comes into effect in April 2022.

[Nigel Mills]

Does my right hon. Friend have any rough estimate of the cost to business of having to comply with the rules of paying, in effect, a third payroll tax? Does he have any idea of the costs of changing the software to include that levy and of redesigning payslips? All those costs will have to be borne. Does he have any estimate for us before we decide whether we want a new tax or just to increase national insurance as we are doing for the first year?

[Jesse Norman]

It is true that, just in relation to the levy, business will bear some cost and the existing tax information and impact notes outline that there will be costs to be borne, as one would expect with any tax, let alone a broad-based tax of this kind. The package goes well beyond this, and businesses will be large beneficiaries in many ways from aspects of the package because they will benefit from having a healthier and more secure workforce than they would otherwise have. How one measures that I am not entirely clear, but I take the point that my hon. Friend makes and will, of course, refer it to colleagues. Having said that, I hope that he will not press his new clause for the reasons that I have outlined.

--- Later in debate ---

I am not at all clear what the justification is for creating a whole new tax. I was keen to know how much that was going to cost. The Minister has neutralised my amendment 8 by setting out in a letter to the Treasury Committee that he thinks HMRC will spend about £60 million to create the systems to collect this tax.

[Jesse Norman]

I am afraid that I must correct myself. It is actually £40 million to £50 million, rather than £50 million to £60 million. I was relying on an imperfect memory.

[Nigel Mills]

Perhaps the Minister was building in some optimism bias, as the Treasury normally does to other people’s forecasts, and going for £50 million to £60 million to make sure. I do not know whether that is the cost of building the systems to enable the returns to be made, or to enable the systems to collect or chase the money, or whether there is going to be some ongoing annual cost; I assume that there will be some ongoing annual cost in trying to chase compliance too. However, we do not have an estimate for how much we are going to be imposing on business to pay this tax.

I imagine that this will be a separate tax that is not collected in the same way—the same box—as national insurance. I assume that there will have to be different parts of the payroll returning different calculations, which will require every software provider to change all their software coding to cope with it and to add in the new amount that is being paid by people over retirement age who do not normally pay national insurance. All that will cost time and money and need testing and compliance, and then we will have to check whether employers are following it and chase them for the money.

I suspect that there will be quite a large up-front cost for all that work to be done, and then a reasonable annual cost to ensure compliance, so there is a first-order question whether we are raising more by quite rightly taxing people over retirement age on their earned income—this 1.25%—than we are having spent on obtaining that. From the Minister’s remarks, I am not convinced that the answer will be positive, so in actual fact, we are creating a whole new tax to raise less money than it costs to collect it, for no real advantage other than a presentational one.

--- Later in debate ---

[Jesse Norman]

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

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

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

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

[James Murray]

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

[Jesse Norman]

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

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

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

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

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

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

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

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

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

[Sir Christopher Chope]

In the Conservative party manifesto almost two years ago, we promised that we would reform social care at the same time as promising that we would not increase VAT, national insurance or any other taxes. If it had not been for the pandemic, how would we have dealt with the challenge of reforming social care without raising taxes? Surely one way of doing it would have been to reduce public expenditure elsewhere.

[Jesse Norman]

It is very hard for me to comment on such a remote hypothetical, but the fact of the matter is, as the Prime Minister said, no political party had a pandemic in their manifesto and we have to deal with the situation—

[The Chairman of Ways and Means (Dame Eleanor Laing)]

Order. I would be grateful if the Minister would address the Chair.

[Jesse Norman]

I am so sorry, Dame Eleanor. I am rightly chastised and thank you for that point.

My hon. Friend the Member for Christchurch asked why the Barnett formula applies and what will happen once it is abolished, but once again he takes the Committee to the outer reaches of speculation. The fact is that it does apply and it has thoroughly beneficial effects for the devolved Administrations as regards this piece of legislation.

With that, I ask those who have tabled amendments and new clauses to withdraw them. I commend the Bill to the House.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Destination of proceeds of health and social care levy

Amendment proposed: 4, page 2, line 29, leave out from “as” to end of line 30 and insert “determined jointly by the Treasury and the devolved governments of Scotland, Wales and Northern Ireland.”

The amendment would require joint agreement between the Treasury and the governments of Scotland, Wales and Northern Ireland as to how the levy proceeds are to be shared between the four areas and between health care and social care.—(Alison Thewliss.)

Question put, That the amendment be made.

--- Later in debate ---

[Jesse Norman]

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

I am grateful to all right hon. and hon. Members who have participated in the passage of this landmark legislation. I would like to remind the House, if I may, of the Bill’s provisions and its overarching goals. We may talk loosely of it as being based on national insurance contributions, or indeed as being a national insurance contributions Bill, but it is of course a separate Bill to introduce a 1.25% health and social care levy based on national insurance contributions.

The levy will be introduced in 2022. In 2022-23, it will be delivered through a temporary increase in NICs rates of 1.25% for one year only, with all revenues generated being ring-fenced and paid to NHS England, NHS Scotland, NHS Wales and the equivalent in Northern Ireland. Then, from April 2023, a formal legal surcharge of 1.25% will replace the temporary increase in NICs rates, with revenue ring-fenced for health and social care only. The levy will also then apply to those working who are over the state pension age.

The levy will enable the Government to tackle the backlog in the NHS. It will provide a new, permanent way to pay for the Government’s reforms to social care and will allow the Government to fund our vision for the future of health and social care in this country over the longer term.

I reiterate my sincere thanks to all Members who have engaged in our series of stimulating debates on the measure. I commend the Bill to the House.

Health and Social Care Levy

Jesse Norman Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That provision may be made for, and in connection with, the following—

(a) the imposition of a tax on earnings and profits in respect of which national insurance contributions are payable, or would be payable if no restriction by reference to pensionable age were applicable, the proceeds of which are to be paid (together with any associated penalties or interest) to the Secretary of State towards the cost of health and social care but where expenses incurred in collecting the tax are to be deducted and paid instead into the Consolidated Fund, and

(b) increasing the rates of national insurance contributions for a temporary period ending when the tax becomes chargeable and applying the increases towards the cost of the National Health Service.

Supporting health and social care in the aftermath of a pandemic and amid the worst health crisis for 100 years, laying the long-term basis for social care for generations to come—there are few if any greater peacetime challenges for any Government, and that is why it is an honour to be opening this debate today.

As the House will know, yesterday the Prime Minister announced a plan to tackle the NHS backlog, put the adult social care system on a sustainable long-term footing and end the situation in which those who need help in their old age risk losing everything to pay for it. The Government’s plan will make a difference to the lives of millions of people across this country, and it will be funded with a record £36 billion investment into the NHS and social care.

[Sir Desmond Swayne (New Forest West) (Con)]

What estimate has the Minister made of the impact of these measures on the ease or indeed the difficulty of securing continuing NHS care?

[Jesse Norman]

That is an extraordinarily wide-ranging question, and there are many ways in which impacts could be assessed. My right hon. Friend will be aware that the Government will be bringing forward a social care Bill, and there will be a Budget at which this measure, fiscal measures in general and the wider consideration of the fiscal position will be considered. In the documents published in relation to today’s debate, there is of course a sustainability analysis of the impact of the measure on different parts of the country, by background and socioeconomic income, and there is also a substantial plan published by the Government in relation to the Health and Care Bill.

[Several hon. Members rose—]

[Jesse Norman]

If I may, I will just proceed a little bit further, and then I will be happy to give way.

In order to pay for a significant increase in spending in a responsible and fair way, the Government have announced a new 1.25% health and social care levy based on national insurance contributions. This Ways and Means motion enables the Government to introduce the levy and temporarily to increase national insurance contribution rates until it takes effect.

[Jake Berry (Rossendale and Darwen) (Con)]

Will my right hon. Friend tell the House how much the 1.25% increase in national insurance will cost the NHS on top of its current payroll?

[Jesse Norman]

My hon. Friend will be aware that public sector bodies have been adjusted for in the numbers that have been published, and therefore the numbers that have been published are net of the impact on the public sector.

[John Redwood (Wokingham) (Con)]

I understand that for a couple of years this tax revenue goes to the NHS, not to care, to get the waiting lists down. By how many will the waiting lists be reduced, and what is the plan for using this money to actually cut them?

[Jesse Norman]

Of course, it is impossible to say in advance what the impact will be, but I would direct my right hon. Friend to the remarks of the Institute for Fiscal Studies where it said that

“based on detailed analysis to be published later this week…this could be enough to meet the pandemic-related pressures on the NHS.”

I think that is a fairly—

[Chris Bryant (Rhondda) (Lab)]

Will the Minister give way?

[Jesse Norman]

No. I have already taken a few, and I will go on a bit further, if I may, and then I will take some more interventions. [Interruption.] Well, the hon. Gentleman has had a fairly substantial go at points of order already, and I welcome his later intervention.

The levy will apply UK-wide to taxpayers liable to class 1 employee and employer, class 1A, class 1B and class 4 self-employed NICs. However, it will not apply where taxpayers pay class 2 NICs or class 3 NICs. It will be introduced from April 2022, and then from April 2023 the levy will also apply to those working over the state pension age. As my hon. and right hon. Friends will understand, it takes time for Her Majesty’s Revenue and Customs to prepare its systems for such a major shift. That is why, in 2022-23, the levy will be delivered through a temporary increase in NICs rates of 1.25% for one year only. All revenues generated by this increase will be ring-fenced and paid to NHS England, NHS Scotland, NHS Wales and the equivalent in Northern Ireland.

[Rachael Maskell (York Central) (Lab/Co-op)]

Does the Minister not recognise the burden he is placing on small businesses, many of which the Government completely excluded and failed to support during the pandemic, in their now having to pay this extra levy, as opposed to making a fair taxation system that falls on those who can pay the most?

[Jesse Norman]

The hon. Lady will be aware that, because of the employment allowance, the bottom 40% of businesses will pay nothing and the next 40% will pay an average of £450. So this does not fall heavily on the bottom end of businesses, and of course it comes in a context in which the Government have provided over £400 billion of support to business and to the nation as a whole in the course of fighting the pandemic. In that sense it is, and it has been recognised to be by reputable independent commentators, a broad-based approach.

From April 2023, once HMRC systems have been updated, a formal legal surcharge of 1.25% will replace the temporary increase in NICs rates, which will return to their previous level. Again, this revenue will be ring-fenced in law for health and for social care only. As the Chancellor stated yesterday, this levy is no stealth tax. That is why the exact amount that each employee pays will also be visible as a separate line on their payslip. Finally, the levy will be administered by HMRC, and collected by the current reporting and collection procedures for NICs—pay-as-you-earn and income tax self-assessment.

[Mr Clive Betts (Sheffield South East) (Lab)]

I want to ask the Minister: how much money is actually going to get to local authorities to deliver social care at the frontline? Can I refer him to paragraph 36 of the Government’s document, which we got yesterday? It says that £5.4 billion in adult social care will be provided from this levy, but that will be spent on the reforms that are in the document. It also says that all the other pressures on social care that local authorities have now, demographic and otherwise, will be paid for from council tax and the social care precept, which is council tax by another name. So are we expecting the pressures on social care to be funded not from this document, but actually from further rises in council tax? Is that the honest situation?

[Jesse Norman]

I am grateful to the hon. Gentleman, and I am also very grateful to him for actually reading the document, which many of his colleagues may not have done, and he is absolutely right to draw attention to that section. What the levy does, of course, is to provide a very substantial form of funding for social care. The question of the capacity of local authorities, which is of course a matter of great interest to Government and an area that we have supported significantly in the last year or two, will be considered in the Budget in the normal course of things.

If I may, I will now set out why a levy based on national insurance is the best way to raise the funds needed for the Government’s plan for health and social care. The first reason is that there is already a clear precedent. Indeed, in 2003 the then Labour Government increased these same NICs rates by 1% specifically to put more funding into the NHS. Within the NICs system there is, as Members across the House will know, already a long-standing ring-fenced proportion of receipts directed to the NHS.

The second reason is that this is a fair method. Businesses will play their part. In fact, the largest 1% of businesses will contribute 70% of the revenue. However, existing NICs reliefs and allowances will also apply to the levy. That will mean, as I have said, that 40% of all businesses will not be affected due to the employment allowance. When it comes to individuals, those earning more will pay more. Conversely, at least 6.2 million people earning less than the NICs primary threshold will not pay the levy at all.

The third reason why a levy based on NICs is the right approach is that it has worked elsewhere. France, Germany and Japan have all increased social security contributions to fund social care provision. Finally, the question of how to fund health and social care is one that applies to a whole nation. NICs are set on a UK-wide basis, and the levy therefore provides a clear UK-wide solution.

[Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

Would the right hon. Gentleman put on the record for the House the consequentials for public bodies that are employers? They would normally be expected to pay this, but I understand there are some mitigations. Perhaps he could explain that, because in the time we have had we have not been able to get to the bottom of it.

[Jesse Norman]

The overall fiscal approach is set out in detail in the document that has already been referenced by the hon. Member for Sheffield South East (Mr Betts). We will be presenting a Bill in due course, which will have further explanatory notes and a tax information and impact note associated with it, and of course we have a Budget in which the wider fiscal position will become clear, so the House is not going to be short of information about how this will land.

Finally, if I may, I will just remind the House why this levy is so important. As the Prime Minister and the Chancellor set out yesterday, the levy will enable the Government to tackle the backlog in the NHS. It will provide a new, permanent way to pay for the Government’s reforms to social care, and it will allow the Government to fund our vision for the future of health and social care in this country over the longer term.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

I thank the Minister for giving way. I have two points. He talks about the Government’s vision for health and social care, but with their obsession with outsourcing, that does not match the Scottish vision for health and social care. This is a devolved area. Why is the Minister not using tax, which the Scottish Government control? We have already been slagged for three years in this place for putting a penny on income tax bands to fund health and social care in Scotland. Why is he hitting Scottish taxpayers again, and taking power away from the Scottish Government?

[Jesse Norman]

Nothing could be further from the truth. All parts of the UK need a long-term solution to fund this health and social care position sustainably, including Scotland and the Scottish Government. Scotland’s own Audit Scotland has said that more money is needed in the Scottish social care system, and an independent review of adult social care said that more money needs to be provided. Of course, there is a Union dividend from that policy, in that Scotland, Wales and Northern Ireland will benefit by an average of 15% more than is generated by their residents. That is £300 million a year on average.

The Government have acknowledged that this policy involves a breach of the manifesto. They have done so directly, they have done so plainly, and they have done so honestly. But I would put it to the House that, in a deeper sense, this measure serves to redeem a promise and discharge an obligation. It is a profoundly Conservative thing to do, to provide for future generations without increasing our borrowing, without increasing spending, and in way that is sustainable and grips a nettle that for too many years has been ignored by the Labour party. With that in mind, I commend the motion to the House.

--- Later in debate ---

[Rachel Reeves]

We should be looking at all forms of income, not just income from people who go out to work. A landlord who rents out a number of properties will pay nothing, whereas his tenants in work will. That is not fair, and that is why we cannot support the motion this evening. The Minister told us three important things today.

[Jesse Norman]

Will the hon. Lady give way?

[Rachel Reeves]

I would be very happy to.

[Jesse Norman]

The hon. Lady has accused the Government, who have published a plan, of having no plan, when in fact the Labour party has absolutely nothing to offer on this topic. On the question she raises, the Resolution Foundation said in its report that the cap will offer support that will recognise higher care costs in different parts of the country, and the increased generosity of the means test will have relatively more impact in lower-wealth regions, in the north-east and other parts of the country.

[Rachel Reeves]

With all respect to the Minister, I asked how he would suggest that one of his constituents with a house worth £186,000, and no other savings, will pay £86,000 for their care without selling their home. It is clear that he does not have an answer to that question, because there isn’t one.

[Jesse Norman]

rose—

[Rachel Reeves]

The Minister has had a chance and he did not manage it. I will take an intervention from my hon. Friend.

[Rachel Reeves]

My hon. Friend makes the point very well. People will still have to sell their homes to pay for care under these plans. There were three important points—

[Jesse Norman]

Will the hon. Lady take an intervention?

[Rachel Reeves]

I have already taken an intervention from the Minister, and he did not answer the question. [Interruption.] Okay, I will take the intervention on the basis that he answers the question that I and my hon. Friend the Member for Rhondda (Chris Bryant) have asked: how on earth does someone pay £86,000 when their house is worth £98,000 or £186,000? Let’s have the answer.

[Jesse Norman]

I am surprised that the hon. Lady did not recognise the point about geographic impact that I made in my last intervention, but let me just point out that the Government have published a Build Back Better plan, which contains specific case studies of the impact of this measure. That is where she should look for an answer to her question.

[Rachel Reeves]

The Minister is wasting the House’s time, because he is not answering the question.

There were three important points in the Minister’s opening speech. The first was that it is impossible to say what the impact of these proposals will be on waiting lists. The second was that spending for local authorities will be considered in the Budget. There is no detail at all about what money local authorities will get, and we are being asked to vote for a tax increase without a plan to fix social care. The third point the Minister made, in answer to the Chair of the Public Accounts Committee, my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier), was that councils will pay this levy as employers, so they will face increased costs but without any guarantee that they will get additional money to fund care. This is not a plan to fix social care.

There is no plan for care workers, who were underpaid and undervalued before the pandemic—before being sent out on to the frontline by this Government without the personal protective equipment that they needed. Some £8 billion was cut from social care by Tory Governments in the years before the pandemic, ignoring the rising demand, with care workers paid less than they can live on. This Government are not interested in bringing employers and unions together for a positive plan for the future of social care. They are not interested in making the care sector a career of choice, with decent pay and conditions and proper investment in skills.

We know that half a million care workers are needed by 2030. There were 100,000 vacancies in social care before the pandemic. That is only set to increase, with the GMB predicting 170,000 vacancies for care workers by the end of the year—one in 10 jobs unfilled. Labour’s plans will prioritise older and disabled people, shifting the focus of support towards preventive early help, and our guiding principle will be “home first”, because that is what the overwhelming majority of people want.

Oral Answers to Questions

Jesse Norman Excerpts

Tuesday 7th September 2021 Commons Chamber

[Mr Speaker]

I call the Minister.

[The Financial Secretary to the Treasury (Jesse Norman)]

Good morning to you, Mr Speaker. It is great to be in a Chamber that is 100% full strength after so many months. If I may make a personal note without undue deference, Mr Speaker, I will say that I thoroughly appreciated your remarks about standards within the Chamber.

To date, Her Majesty’s Revenue and Customs has not initiated insolvency proceedings against any taxpayer for a loan charge debt. No estimate can be provided for the number of people who have fallen into debt or who have been declared bankrupt and are subject to the loan charge because, where debts arise, HMRC is not always the only creditor. Some individuals are declared bankrupt as a result of a non-HMRC debt and some may choose to enter insolvency themselves based on their overall financial position.

[Ruth Cadbury]

We know that there are many, many thousands of nurses, social workers and other public sector workers who have been caught up in the loan charge. They took work via agencies that basically told them, “Sign here or you don’t get the work.” Checking to see whether they would be liable for the loan charge was not an option. Last week, the Yorkshire Post reported that a number of former services personnel had been affected and that one is feeling suicidal as a direct result. What does the Minister say to this veteran and the thousands of other public servants whose lives have been turned upside down by this retrospective taxation?

[Jesse Norman]

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

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

these are her words—

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

I am afraid that she was right about that.

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

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

[Jesse Norman]

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

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

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

[Mr Peter Bone (Wellingborough) (Con)]

The problem that Members have on both sides of this House is that ordinary people were duped into something and it has effectively become a retrospective piece of legislation. I thought the way that the shadow Minister, the hon. Member for Ealing North (James Murray), approached this was very reasonable. HMRC is not taking the right approach. Perhaps the Government could look at that again.

[Jesse Norman]

I thank my hon. Friend for his question. I have mentioned the extra care and support that HMRC has put in place. I have mentioned the extremely careful approach that it has taken with people who may be facing the loan charge. As he will be aware, it has not initiated insolvency proceedings against any taxpayer for a loan charge debt and that in itself is emblematic of the care and attention that it is taking with this subject.

[Sammy Wilson (East Antrim) (DUP)]

It is not enough for the Minister to say that people had to take responsibility for their own tax affairs when the information that they were given by HMRC was that there was nothing wrong with these schemes initially, when HMRC passed and signed off tax years for people, and when the head of HMRC has admitted that, in recent months, he had repeatedly tried—this was the outcome of a freedom of information request—to obtain legal analysis to understand the strength of a claim with “very little success”. There is not even a legal standing for this. How then can the Minister say that it is right to pursue people for things that they were led into, and, indeed, for payments that HMRC was regularising by allowing contractors to use as a means of paying their employees?

[Jesse Norman]

The right hon. Gentleman raises a whole bunch of questions. Let me address them. There were some contractors working through agencies for HMRC. Where it was discovered that they had used disguised remuneration, those relationships were ended and strong measures have been put in place to prevent recurrence. That is an unfortunate feature of the extended way in which these contract arrangements sometimes work. I do not think that there is any evidence that HMRC has signed off or positively approved the use of any disguised remuneration scheme. If the right hon. Gentleman has an example, he is welcome to send it to me. The right hon. Gentleman will be aware that the chief executive of HMRC has specifically written to the loan charge and taxpayer fairness all-party parliamentary group to make it perfectly clear that it has taken those remarks out of context and that what he was doing—as every chief executive of a public agency should do—was putting his own officials under some pressure to provide the justification needed, and rightly so.

[Owen Thompson (Midlothian) (SNP)]

2. What recent assessment he has made of the effect of his policies on living standards.

National Insurance Contributions Bill

Jesse Norman Excerpts

3rd reading
Monday 6th September 2021 Commons Chamber

[James Murray]

Thank you for that clarification, Mr Deputy Speaker. In that case, let me decide where in my speech to pick up. Forgive me for the slight procedural difficulty—if it is okay, I shall reserve my right to speak later.

[The Financial Secretary to the Treasury (Jesse Norman)]

I am sorry that the hon. Member for Ealing North (James Murray) was not able to revisit his greatest hits from Committee or other previous stages of the Bill, but unfortunately he is required to speak to the new clauses and amendments before us, which is what I will do.

The Scottish National party has tabled new clauses that would create a new zero rate of secondary class 1 NICs for employers classed as “green manufacturing companies”, including those that produce wind turbines and electric vehicles. As the House will know, the Government take support for the green economy extremely seriously. For example, since 2013 the Government have provided £150 million per annum to the Aerospace Technology Institute—investment match-funded by industry—including £84.6 million of investment to develop zero-emission flights and further support for other potential zero-emission aircraft concepts.

In addition, the Government are to spend nearly £500 million in the next four years to support the UK’s electric vehicle manufacturing industry as part of our commitment to provide up to £1 billion for the development and mass production of electric vehicle batteries and the associated supply chains. The funding is available UK-wide and will boost investment in the UK’s strong manufacturing base.

Of course, the Government have also stated their ambition to deploy 40 GW of offshore wind capacity by 2030, alongside a commitment to invest £160 million in ports and manufacturing infrastructure. The goal of that investment will be to encourage up to £20 billion of much-needed private investment in coastal areas and to support up to 60,000 green manufacturing jobs by 2030. The Government’s commitment to support green manufacturing is therefore quite clear.

Unfortunately, new clause 1 would introduce a major change to the tax system of a magnitude that would require the careful consideration of costs and benefits and, in fact, goes far beyond what should be included via amendment in a Bill such as this one. The design of a sector-focused tax relief is not straightforward and would add complexity to the tax system. By contrast, there has been no consultation on, costing of or impact assessment made in relation to the measure proposed in new clause 1. For those reasons, I urge the House to reject it.

On new clause 3, covid-19 has proven to be the biggest health and economic threat faced by the UK in decades. Key workers, including NHS staff and social care workers, have done extraordinary things, as the House recognises, to keep the public safe in the continuing fight against the virus. For their part, the Government hugely value and appreciate such important contributions to the covid-19 response. However, as I will explain, the Government do not believe that the new clause is appropriate or necessary. Under long-standing rules, any payments made in connection with an employment incur income tax and national insurance contributions. Such payments also count as income for the purposes of calculating entitlement to certain benefits.

[Jim Shannon (Strangford) (DUP)]

In Northern Ireland, we have done something just a wee bit different. It is a £500 bonus, and if the 20% of tax and the national insurance at 12% are added in, that means that the Northern Ireland Executive is paying £735 per individual. Is the Minister aware of that, and would he replicate it in the rest of the UK?

[Jesse Norman]

I think the hon. Gentleman knows that the £500 payment has been offered across devolved Administrations. It is important that he has made that point, and I recognise it, but that does not really affect the point at issue in relation to the new clause, which is about the £500 payments that the Scottish Government are making to health and social care workers, which they are using to function as a top-up to wages. We therefore consider that these payments are taxable as earnings under the normal rules.

--- Later in debate ---

[Jesse Norman]

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

Mr Deputy Speaker, I must say that I too am delighted that this Bill has been the occasion for our return to proper voting procedures in this House.

I am very grateful to all hon. and right hon. Members who have participated in the passage of this legislation, particularly in Committee. I also thank the Committee’s Chairs, my right hon. Friend the Member for Romsey and Southampton North (Caroline Nokes) and the hon. Member for Makerfield (Yvonne Fovargue), for helping the Committee to take the Bill through its scrutiny so effectively.

I begin by reminding the House of the Bill’s provisions and overarching goals. It contains four measures: an employer NICs relief for employees in freeports; an employer NICs relief for employers of veterans; an exemption for Test and Trace support payments from self-employed NICs; and changes to disclosure of tax avoidance schemes legislation with regard to NICs. In addition to those measures, the Government tabled a minor technical amendment to ensure that the policy intent is met in the Bill.

As you will be aware from your intimate scrutiny of the Bill, Mr Deputy Speaker, the employer NICs relief applies to employees in freeports. The measure will support the delivery of the Government’s freeports programme. In so doing, it will help to attract new businesses to freeports and regenerate communities by creating jobs, boosting investment and spreading prosperity. It is the Government’s intention to designate freeports in all four devolved nations. Therefore, while the legislation currently provides for a relief in England, Wales and Scotland, it is the Government’s intention to legislate for this relief in Northern Ireland as soon as it is practicable. In fact, the Bill gives the Government the power to set out the detail of the employer NICs relief in Northern Ireland in secondary legislation once engagement with the Northern Ireland Executive is complete.

Secondly, the Bill contains an employer NICs relief for employers of veterans. I do not need to tell you, Mr Deputy Speaker, that our veterans provide an extraordinary national service, as recent events have reminded us, but we know that some of them face difficulties in obtaining secure and fulfilling employment. It is only right that we do all we can to change this situation. This measure provides full employer NICs relief on earnings up to £50,270 in a veteran’s first full year of civilian employment. It amounts to a saving of up to £5,500 per hired veteran and it will constitute a real boost to their employment prospects.

Thirdly, there is the exemption for test and trace support payments for self-employed NICs. As Members will recall, and as we have recapitulated already, last September the Government announced a £500 support payment for low-income individuals told to self-isolate but who could not work from home and would lose income as a result. Shortly afterwards, the Scottish and Welsh Governments announced similar schemes. Last year we introduced regulations to exempt payments under support schemes from employee and employer class 1 and class 1A NICs. This Bill will extend the exemption to the self-employed. It will ensure that these workers are treated consistently with their employed counterparts and that they do not have to pay NICs on support payments. It will retrospectively exempt test and trace support payments from class 2 and class 4 NICs to the 2021-22 tax year and it will ensure that in future these test and trace support payments will not be included in profits liable to class 2 and class 4 NICs.

Finally, the Bill includes a measure that makes changes to the disclosure of tax avoidance schemes regime for NICs. Legislation in the Finance Act 2021 enhanced the operation of the DOTAS regime, and the Bill includes changes to an existing regulation-making power in the Social Security Administration Act 1992. This will ensure that HMRC can act decisively when promoters fail to provide information on suspected avoidance schemes. It will also enable HMRC to warn taxpayers about suspected avoidance schemes at an earlier stage than at present.

As I have outlined, this Bill contains a range of relatively small yet significant measures that will advance this Government’s policy objectives. It supports the levelling-up agenda and regional growth, it boosts the prospects of our armed services veterans, and it strengthens the Government’s powers to tackle promoters of avoidance schemes. I reiterate my very strong and sincere thanks to Members who have engaged in the series of stimulating discussions and debates that we have had on these measures over the past few weeks. On that note, I commend the Bill to the House.

Covid-19: Contingencies Fund Advance

Jesse Norman Excerpts

Thursday 22nd July 2021 Written Statements

[The Financial Secretary to the Treasury (Jesse Norman)]

Her Majesty’s Revenue and Customs will incur new expenditure in connection with the Government’s response to the covid-19 pandemic in 2021-22.

Parliamentary approval for resources of £4,206,110,000 for this new expenditure will be sought in a Supplementary Estimate for Her Majesty’s Revenue and Customs. Pending that approval, urgent expenditure estimated at £4,206,110,000 will be met by repayable cash advances from the Contingencies Fund.

Further requests to the Contingencies Fund may be made as necessary to fund covid-19 activity delivered by Her Majesty’s Revenue and Customs.

[HCWS239]

Finance Bill 2021-22: Draft Legislation and Tax Documents

Jesse Norman Excerpts

Tuesday 20th July 2021 Written Statements

[The Financial Secretary to the Treasury (Jesse Norman)]

In line with the tax policy-making framework, the Government are publishing draft legislation to be included in Finance Bill 2021-22. This allows for technical consultation and provides taxpayers with predictability over future tax policy changes. Alongside this, the Government are making announcements in a number of areas of tax policy.

Publication of draft legislation

The Government are publishing draft legislation and associated documents, further to previous announcements, including at Budget or in “Tax Policies and Consultations” (CP 404, published on 23 March 2021):

Sanctions to tackle tobacco duty evasion: The Government are publishing a summary of responses to the consultation on “sanctions to tackle tobacco duty evasion” alongside draft legislation. Respondents to the consultation indicated broad support for tougher sanctions to tackle small scale repeated tobacco duty evasion and for the concept of extending the use of these new sanctions to trading standards authorities. The draft legislation will introduce a package of sanctions, including a new penalty of up to £10,000 for repeated contraventions. The legislation will also grant HMRC the power to make future regulations for the operation of these sanctions, including provisions to extend their use to trading standards.

Clamping down on promoters of tax avoidance: As announced in November 2020, the Government are bringing forward a package of measures to clamp down on promoters of tax avoidance. Proposals include ensuring HMRC can protect their position by freezing a promoter’s assets so that the penalties they are liable for are paid, tackling offshore promoters and the UK entities that support them, closing down companies that promote avoidance schemes, and supporting taxpayers to identify and exit avoidance schemes. This package of measures builds on the promoters strategy, announced at Budget 2020, and the measures to strengthen existing anti-avoidance regimes which were legislated for in Finance Act 2021.

Hybrid and other mismatches: The draft legislation will make a technical change to the rules governing hybrid and other mismatches. The change will ensure that the legislation applies to certain types of entities that are seen as transparent in their home jurisdictions, including US limited liability corporations, in the same way as it does to partnerships.

Capital allowances—Technical amendment to allowance statement requirements for structures and buildings allowance (SBA): The draft legislation will amend the requirements for SBA allowance statements, to include the date qualifying expenditure is incurred or treated as incurred when the allowance period commences from this date. Without this change, subsequent owners of an asset on which SBA is being claimed may sensibly assume the date the allowance period commences is the date the asset is brought into use. Clarity for businesses on the remaining length of the allowance period means they will not be adversely affected by failing to claim the full relief to which they are entitled.

Powers to tackle electronic sales suppression (ESS): This draft legislation will introduce new powers to tackle electronic sales suppression. The new ESS-specific powers and penalties will make offences of possessing, making, supplying and promoting ESS software and hardware. There will also be ESS-specific information powers allowing HMRC investigators to identify developers and suppliers in the ESS supply chain; and access software developers’ source code and the locations of code and data.

Scheme pays deadlines: The draft legislation will extend the reporting and payment deadline for individuals to ask their pension scheme to settle their annual allowance charges from previous years by reducing their future pension benefits in the process known as “Scheme Pays”. This will resolve a technical issue that arises within the pension tax framework as a result of the Government’s planned remedy for addressing the age discrimination found in the 2015 public service pension reforms (the “McCloud case”). The Government will make further technical updates to pension tax rules as necessary to remove any other anomalies as a result of the remedy.

Increasing normal minimum pension age (NMPA): The draft legislation will increase the normal minimum pension age from 55 to 57 in April 2028. This is the age at which most members of registered pension schemes can draw benefits without incurring unauthorised payment charges. Members of uniformed public service pension schemes and those with unqualified rights to take their pension below age 57 will be protected from these changes. After considering consultation responses, individuals will be able to keep their protected pension age if they transfer their pension.

Notification of an uncertain tax treatment by large businesses: The Government are publishing a summary of responses and draft legislation to implement a new requirement for large businesses to notify HMRC where they have adopted an uncertain tax treatment. This will apply to returns due to be filed on or after 1 April 2022. This requirement to notify will provide HMRC with accurate and timely information to encourage earlier identification and resolution of uncertain tax treatments. This will help address the legal interpretation portion of the tax gap, estimated to be £4.9 billion in 2018-19. The Government will also publish accompanying draft guidance in due course.

Tax treatment of asset holding companies (AHCs): The Government are responding to their second stage consultation on, and publishing initial draft legislation relating to, the tax treatment of AHCs. These targeted reforms are designed to enhance the UK’s attractiveness as a location for AHCs, and represent a balanced approach in response to stakeholder representations.

The Government are also publishing draft legislation and associated documents in the following areas which have not been previously announced:

Basis period reform: Under the current system, tax returns filed by the self-employed and partnerships are based on a business's set of accounts ending in the tax year. A set of complex rules can apply to allocate the profits of those businesses to a tax year, which can cause confusion and error. The Government have announced a reform and consultation on how to simplify the system.

Location of risk regulation: Under current legislation, the determination of the location of a risk for insurance premium tax (IPT) purposes is unclear. The Government have therefore published draft legislation to clarify the rules for determining the location of a risk by placing the criteria into the primary legislation governing IPT. This will ensure clarity for taxpayers and HMRC, and retain the principles initially set out in legislation in 2001.

All draft legislation is accompanied by a tax information and impact note (TIIN), an explanatory note (EN) and, where applicable, a summary of consultation responses document.

Policy announcements

London capital and finance compensation payments: The Government will legislate in the autumn to ensure that payments made by the London capital and finance compensation scheme will not be subject to capital gains tax. This will provide certainty to bondholders that these payments will be free from income tax and capital gains tax. This measure will apply retrospectively from the date payments are made. The Government will also ensure that the compensation scheme terms enable bondholders who receive compensation in respect of a subscription to an ISA to return the money to an ISA without it contributing to their annual subscription limit.

Income tax exemption of new social security payments in Scotland: The Government will legislate in the autumn to ensure that two new social security payments made by the Scottish Government will not be subject to income tax (as provided for in the 2016 fiscal framework). This legislation will apply to the child winter heating assistance (introduced in November 2020) and the short-term assistance (introduced in July 2021). The legislation will be retrospective, from November 2020 and July 2021 respectively. HM Revenue and Customs will not collect any income tax that may have been due on payments made from November 2020 to the date the legislation takes effect.

Covid local grant scheme payments: The Government will legislate in the autumn to ensure that payments made by local authorities to families through the covid winter grant scheme and covid local grant scheme, and similar schemes operated by the devolved Administrations, are not subject to income tax. This will provide certainty to those who have benefited from the additional funding provided to local authorities. The legislation will be retrospective and cover payments made from 2020-21 onwards.

Other publications

The Government are also publishing summaries of responses to the following consultations:

“Modernisation of the stamp taxes on shares framework”

“VAT grouping—Establishment, eligibility and registration”

“VAT and the public sector: Reform to VAT refund rules”

“VAT and the sharing economy”

“VAT and value shifting”

Finally, the Government are also publishing a research report titled “Impact of making tax digital for VAT”. This considers the impact of making tax digital (MTD) across those taxpayers that have been required to operate it for VAT from April 2019 and further demonstrates that taxpayers are experiencing benefits in operating MTD.

All publications can be found on the gov.UK website. The Government’s tax consultation tracker has also been updated.

[HCWS204]

Draft Major Sporting Events (Income Tax Exemption) (2021 UEFA Super Cup) Regulations 2021

Jesse Norman Excerpts

Monday 19th July 2021 General Committees

[The Chair]

Being a very old-fashioned bloke, I entirely disapprove, but on this particular occasion, I am happy to allow the hon. Gentleman to remain improperly dressed. I am grateful to him for his courtesy in raising the matter with the Committee.

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That the Committee has considered the draft Major Sporting Events (Income Tax Exemption) (2021 UEFA Super Cup) Regulations 2021.

The draft regulations provide an income tax exemption for accredited overseas individuals—however they may be dressed, Mr Gray—who participate in the annual UEFA super cup football match. The exemption will apply to any UK income that a non-UK resident receives for playing in the match or for duties and services performed in connection with the game.

The Committee will be aware of the severe impact of coronavirus on all sporting competitions since March 2020. Numerous large-scale events in this country and around the world have been cancelled or postponed to protect public health. It was very good to hear, then, that the Irish Football Association was successful in bidding to host the annual UEFA super cup game, which this year features Chelsea, winners of the Champions League, and Villareal, winners of the Europa League, in Belfast on 11 August. It would be wrong for me to display any partiality about the outcome of that game, but Villareal beat my team, Manchester United, in the final of the Europa League, and we are not at all sore about it. I am sure Members on both sides of the Committee will agree that the hosting of such a high- profile match will be a further welcome sign that the UK is returning to a more normal sporting environment.

Let me turn to the specific legal changes being made. As a fundamental condition of hosting the 2021 UEFA super cup game, the UK is required to provide an income tax exemption for competitors and officials who are not tax resident in this country. In previous years, the Government have opted to provide statutory tax exemptions for a range of similar sporting competitions, including the 2017 UEFA Champions League final, the 2017 world athletics championships and, of course, the 2020 UEFA European football championship. As that list illustrates, a tax exemption is reserved for only the top sporting events, and any decisions are made case by case.

To be considered for a tax exemption, an event must satisfy three policy conditions: it must demonstrate the highest level of world sport; it must be internationally mobile; and the granting of an exemption must be a necessary condition of a bid to host the event. I hope the Committee agrees that it is consistent with Government policy to provide a similar exemption now for the UEFA super cup game.

The statutory instrument makes use of the powers introduced in the Finance Act 2014 to provide a tax exemption through secondary legislation. The exemption from UK income tax will apply to non-resident players, officials and individuals designated by UEFA on income earned in connection with the super cup match. The exemption will run from 10 to 12 August 2021.

I conclude by acknowledging that the past 18 months have been difficult for sport. The regulations will help to support the sector and provide a welcome boost for Northern Ireland.

--- Later in debate ---

[Jesse Norman]

I thank the hon. Gentleman very much for his question and for his party’s support for the legislation.

Of course, I am speaking as a Minister in the debate. From that point of view, it would be in appropriate for me to be volunteering personal views that might be taken to be indicative of the Government’s position. The Government certainly recognise the situation of the people the hon. Gentleman describes. It is important to say that although the instrument may not affect them, it certainly affects a wide range of people involved in the staging of the event who may not necessarily be plutocratic or have great incomes, as many footballers do.

The hon. Gentleman’s point that people should be properly paid is an important one, and it was recognised by the Government in the way that the last Chancellor but two or three—the former right hon. Member for Tatton—took specific measures to raise the minimum wage and support people on the lowest incomes. That has also been reflected in the ways that tax policy has evolved with the raising of the threshold for income tax.

The hon. Gentleman is right to point to the status of those people and to the situation of people on modest incomes. It is right for the Government to continue to support those people through the tax system. Although those issues have little direct bearing on the instrument before us, I think it is important that they are often taken in public, and I am grateful to him for raising them.

Question put and agreed to.

Customs Tariff (Establishment) (EU Exit) (Amendment) (No. 2) Regulations 2021 Value Added Tax (Miscellaneous Amendments and Repeals) (EU Exit) Regulations 2021

Jesse Norman Excerpts

Monday 19th July 2021 General Committees

[The Chair]

Before we begin, I remind hon. Members that Mr Speaker has stated that the wearing of masks is encouraged. Hansard colleagues would be most grateful if Members could send their speaking notes to hansardnotes@ parliament.uk.

[The Financial Secretary to the Treasury (Jesse Norman)]

I beg to move,

That the Committee has considered the Customs Tariff (Establishment) (EU Exit) (Amendment) (No. 2) Regulations 2021 (S.I. 2021, No. 661).

[The Chair]

With this it will be convenient to discuss the Value Added Tax (Miscellaneous Amendments and Repeals) (EU Exit) Regulations 2021 (S.I. 2021, No. 714).

[Jesse Norman]

It is a delight to serve under your chairmanship, Mr Hollobone. As the names of the statutory instruments may suggest, these are two extremely technical and small instruments, but they are important because they correct errors and omissions identified in EU exit legislation. They ensure that the law applies as intended and that businesses across the UK are treated fairly by VAT legislation.

I would like to turn first to the Value Added Tax (Miscellaneous Amendments and Repeals) (EU Exit) Regulations 2021. This instrument, together with the Value Added Tax Amendment (EU Exit) Regulations 2021, corrects errors and omissions identified by Her Majesty’s Revenue and Customs in a review of VAT EU exit legislation. The instrument makes those changes in relation to the Value Added Tax Act 1994 and the Taxation (Cross-border Trade) Act 2018.

The amendments are needed to ensure that the VAT system continues to operate as required. First, the instrument removes an inadvertent extension of the zero rate to the transport of goods moving between Great Britain and Northern Ireland. It also confirms that the VAT zero rate applies only to the transport of goods exported from or imported into the UK. Secondly, the instrument ensures that businesses moving their own goods from Great Britain to Northern Ireland for non-business purposes are not hit with double taxation on those goods.

Thirdly, the instrument ensures that EU businesses selling goods that are delivered to Great Britain via Northern Ireland are liable for VAT, giving parity of treatment with goods delivered from the EU to Great Britain or from Northern Ireland to Great Britain. That approach is consistent with HMRC’s published VAT guidance on Northern Ireland. Fourthly, the legislation corrects minor errors that do not obscure the legislative intent but need to be remedied. Finally, the instrument repeals powers in preparation for a no-deal scenario that are no longer required.

It is important to add that there was an error in the original commencement date for this instrument, which was rectified by an amendment SI that was laid before the instrument took effect. As was always intended, the instrument will take effect from 1 August, alongside the Value Added Tax (Amendment) (EU Exit) Regulations 2021.

I now turn to the Customs Tariff (Establishment) (EU Exit) (Amendment) (No. 2) Regulations 2021. This instrument amends a minor part of a package of tariff legislation that was laid before the House on 16 December. The package ensured that the UK had a functioning customs regime in place at the end of the transition period. This instrument, which came into force on 10 June, corrects five tariff lines—relating to chemical products, vulcanised rubber gaskets and tropical fruit—in the reference document associated with the Customs Tariff (Establishment) (EU Exit) Regulations 2020. The errors mainly concerned missing tariff duties on goods omitted in the original tariff reference document. This SI resolves the issue by inserting the tariff rates. Traders were charged rates on the relevant goods as intended and as traders expected, although this was inadvertently achieved without a proper legal basis. HMRC will contact any traders who were charged those rates before this legislation came into effect. However, it is worth noting that the majority of those lines saw little or no trade. The vast majority of customs duties are being collected as intended.

The measures contained in these instruments are small yet significant changes that will play a critical part in ensuring that the tariff and customs regimes operate as required in future, and I commend them to the Committee.

--- Later in debate ---

[Jesse Norman]

I thank the hon. Member very much for his comments and for supporting this legislation. He correctly noted that the explanatory memorandum sets out—as, indeed, does the tax information impact note—that there was not expected to be any impact for the different bodies that he described, but he also raised the question of the tax impact. We are not aware of any, or any significant, tax impact, but as he might imagine, this is something over which HMRC will continue to keep a watching brief. As he will be aware, VAT is typically claimed through the chain of the system of value-added tax, so it is not a straightforward matter to assess whether there may have been some revenue loss. However, I take the point he raises, and he is right to ask the question.

On the issue of customs tariffs, I wish I could assure him that there will never be any mistakes of this kind in the future. With a body of tariffs of the scale that we are talking about—16,000 lines, in which a handful of mistakes have been discovered on this occasion—I do not think that will be possible. We have to be grown up about it and recognise that, with human error and an evolving situation, there may be moments when mistakes occur. Of course, it is absolutely the Government’s intention, and that of the Department for International Trade and the Treasury, that they should be kept to an absolute minimum.

The hon. Member is right to ask whether there might be some cumulative impact. The numbers concerned are likely to be extremely modest, as we have described in this case and a previously, but whether there may have been a cumulative impact is a proper concern. I would certainly expect that, in the review of the policy by HMRC and the Department concerned, they would ask themselves whether the cumulative impact may be significant or, indeed, targeted in some area that was hitherto unsuspected. I am grateful to the hon. Member for raising the question and will make sure that it is pursued, after giving enough time for any possible impact to become quite substantial. I do not think we should expect that within a few months, or even potentially a year or two, but it is appropriate to ask the question when it looks as though the impacts may be substantial or—this is not a point he raised, but it is an important point—unexpectedly focused in some area that could lead to an unnecessary effect on that area, even if the overall impact was quite modest.

Question put and agreed to.

VALUE ADDED TAX (MISCELLANEOUS AMENDMENTS AND REPEALS) (EU EXIT) REGULATIONS 2021

Resolved,

That the Committee has considered the Value Added Tax (Miscellaneous Amendments and Repeals) (EU Exit) Regulations 2021 (S.I. 2021, No. 714).—(Jesse Norman.)