Covid-19 Antigen Tests: Tax and National Insurance
Jesse Norman Excerpts(3 years, 9 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
The Government are introducing an income tax exemption and national insurance (NICs) disregard to ensure that coronavirus antigen testing provided to employees outside the Government’s national testing scheme will not attract tax and NICs liabilities.
The Government recognise the importance of covid-19 testing. Currently, regular tests are available through the Government testing programme to a wide range of employees, including NHS workers. If an individual is tested through the Government testing programme, no tax liability will arise.
Under normal rules, the provision of a test by an employer to an employee, either directly or by purchasing tests that are carried out by a third party, would constitute a benefit in kind, and the cost of providing the test would be subject to income tax and class 1A NICs as a result. However, the Government will introduce an exemption to ensure that no tax liabilities arise.
This exemption will ensure that income tax and NICs will not be due on employer-provided antigen tests carried out during the current tax year 2020-21.
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Oral Answers to Questions
Jesse Norman Excerpts(3 years, 10 months ago)
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Sir Edward Leigh (Gainsborough) (Con)
The Financial Secretary to the Treasury (Jesse Norman)
Inheritance tax makes an important contribution to the Exchequer. The current threshold of up to £1 million for a qualifying married couple or civil partnership means that 96% of all estates in 2020-21 are forecast to be able to pass on their assets without any inheritance tax liability. Any reform or simplification of inheritance tax would be considered as part of the usual Budget process.
Sir Edward Leigh
When are we going to fulfil numerous promises made as long ago as before the 2010 election, by George Osborne, to help middle-class people pass on more of their property to the young? After all, that is a priority for the young. While we are about it, can we hear from the Chancellor and the Prime Minister less about high-spending lefties like President Roosevelt and more about good Conservatives like Ronald Reagan and Margaret Thatcher—less about subsidies and more about tax cuts and tax simplification?
Jesse Norman
I hesitate to give my right hon. Friend a history lesson, but he will recall that Ronald Reagan was a deep admirer of FDR and quite a heavy spender in his own right. Inheritance tax is paid on only one in 25 estates, and therefore it is not quite as large an issue in terms of the number of people affected as my right hon. Friend suggests. We take these issues very seriously and return to them recurrently at fiscal events.
Dave Doogan (Angus) (SNP)
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
The Financial Secretary to the Treasury (Jesse Norman)
The Government recognise the current challenges facing commercial landlords. That is why we have worked very closely with lenders to ensure that support and flexibility is being shown to commercial borrowers. This forms part of a much wider picture of unprecedented support to businesses affected, including via business rates holidays, grants and Government-backed loans—and of course those, in turn, give access to cash to pay for rents and salaries or suppliers.
Stephen Metcalfe [V]
May I draw Members’ attention to my entry in the register?
While many tenants welcome the steps the Government have taken to protect them from eviction, for many small private landlords the rental income on shops, offices and residential property is their only form of income, which in many cases is completely tied up. Will my right hon. Friend therefore work with the sector to explore how to provide financial support to individuals who find that they have no income and no access to any of the other very impressive schemes that the Government have introduced?
Jesse Norman
My hon. Friend will know, of course, that we published a code of practice to encourage all parties involved in a landlord-tenant situation to work together to ensure equity and swift recovery. More widely, we have made available over £330 billion of guarantees through the coronavirus business interruption loan scheme, the large business interruption loan scheme, and the corporate financing facility. But of course I would be happy to continue to discuss this issue with him.
The Financial Secretary to the Treasury (Jesse Norman)
As Members will know, the Chancellor has announced an unprecedented package of support for high-street businesses affected by the pandemic. In particular, the Government are giving retail, hospitality and leisure businesses a year’s business rates holiday; protecting commercial tenants from eviction and debt recovery; offering grants of up to £25,000 to eligible businesses; and making sure that businesses have access to the financing they need as quickly as possible. We stand ready to take further steps, as necessary.
Robbie Moore
I thank my right hon. Friend for that response. I recently visited a brilliant independent furniture store, Rooms, right in the centre of Keighley, which is run by Andrew Foster, his wife Janine and son Joe. They and many others welcome the 100% business rate relief this year but are concerned about next year and indeed about the fairness of the business rate structure when we consider pure online businesses and those based in premises. Will my right hon. Friend continue to review this area in the light of covid and look more closely to create a fairer business rate structure?
Jesse Norman
I am delighted to hear about Rooms, and many businesses in my constituency have reopened. Reopening the economy is the central step we need for our national recovery. As my hon. Friend will know, we have committed to a fundamental review of the business rates systems and published some comprehensive terms of reference for the review at the spring Budget. In the meantime, we are committed to supporting businesses and have taken actions to reduce the burden of rates, which will save businesses more than £13 billion in the next five years.
Karl MᶜCartney [V]
It is no secret that Chancellors have an overarching influence across all Departments. Within my Lincoln constituency’s county of Greater Lincolnshire we are faced with major local government reorganisation. Does the Treasury take the view that for the UK’s second largest county a single unitary authority would be in the best financial interests of my constituents when enforcing forthcoming local government reform and devolution?
Jesse Norman
It would be wrong for me, as a Minister, to offer a view on this, but I can tell my hon. Friend that my personal experience has been that the more streamlined, the clearer the lines of authority and the more integrated and shared approach that is taken, the more effective the infrastructure delivery is likely to be.
David Johnston
I have been visiting high-street businesses in Wantage, Didcot, Faringdon and elsewhere, and they are hugely grateful for the furlough scheme, the grant scheme and the business rates holiday, but what they most want now is footfall. Does my right hon. Friend agree that that should be the priority? Will he confirm that he is considering all measures to increase footfall on the high street?
Jesse Norman
I absolutely confirm that. The reason we have backed high-street firms so strongly all the way through is precisely that we recognise the central importance of these sectors to getting Britain’s high streets back firing on all cylinders. My hon. Friend will know that we have also introduced the Business and Planning Bill to help businesses in England get back on their feet, and we have accelerated nearly £100 million of investment in town centres and high streets, through the towns fund this year, to the same end.
Sarah Owen (Luton North) (Lab)
Margaret Ferrier (Rutherglen and Hamilton West) (SNP) [V]
The Financial Secretary to the Treasury (Jesse Norman)
As the hon. Lady will know, the Treasury is in constant communication with the FCA on these and other issues. If she would like to bring the specific details to my attention, I will make sure that they are examined by Ministers.
Douglas Ross (Moray) (Con)
Jesse Norman
I am sure my hon. Friend understands that the desire for bespoke deals across every sector is extremely great. Our view has been that what is required is to lift all boats by a general support for the economy, and that is the approach we have taken, which is why the interventions we have made so far include almost £300 billion of guarantees—worth roughly 15% of UK gross domestic product.
Tim Farron (Westmorland and Lonsdale) (LD)
Jesse Norman
As the hon. Gentleman will be aware, an enormous amount of support is already in the system. I am delighted that shops and other organisations are opening up in his constituency; we look to see more of that over time as the support feeds through into the system.
Robert Halfon (Harlow) (Con) [V]
Jesse Norman
No one who knows my beautiful right hon. Friend would be surprised that he knows these beauty salons as well as he does, and I salute him for it. On the serious point, he is absolutely right about the importance of these businesses to all our constituencies. He did not mention this, but we should also mention that many of these businesses are run and staffed by women, and it is important that we should pay attention to the equalities impact in that respect. The key thing is that we get these businesses, including beauty salons, open. That is what the Treasury has focused on.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
Kate Osamor (Edmonton) (Lab/Co-op) [V]
Jesse Norman
I entirely agree with the hon. Lady about the importance of credit unions. I am a member of Money Box Credit Union in Hereford and can vouch for their importance, especially for people on low incomes. She makes a very valid point, and it is one that we will continue to consider as we move forward.
Coronavirus: Job-Support Schemes
Jesse Norman Excerpts(3 years, 10 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I thank my right hon. Friend the Member for Central Devon (Mel Stride), who chairs the Treasury Committee, and the Backbench Business Committee for using this estimates day debate to shine a light—in many ways a warm light—on the performance of Her Majesty’s Revenue and Customs during this extraordinarily testing and difficult period. I am grateful to all Members who have contributed to this interesting and lively debate.
I welcome the hon. Member for Liverpool, Walton (Dan Carden) to his first debate as my opposite number, which I hope will be the first of many, although I do think that he slightly missed the tenor of the argument in calling the Government too slow, given that most other Members who have commented have been concerned about the sheer speed of our delivery and whether people might have been missed out in this set of measures.
The coronavirus has the potential to spread with extraordinary speed across a population.
In March, the Government took the unprecedented step of asking businesses and employees to halt their normal activity for an extended and, at that time, indeterminate period of time. At the same time, or shortly afterwards, the Government unveiled an extensive package of support that included a business rates holiday, VAT and income tax deferrals, and Government-backed and guaranteed loans worth £300 billion.
At the heart of that response was, as has been highlighted in the debate, not one but two major schemes that between them covered the vast majority of the working population. As right hon. and hon. Members from all parties have mentioned—my great friend the Member for Wycombe (Mr Baker) in particular highlighted this—had that been done in normal circumstances, it might have taken months or, more likely, years to deliver just one of the schemes, let alone two. My hon. Friend was absolutely right to highlight what an extraordinary achievement it was to bring in both schemes at the speed at which they were introduced. He used the phrase “extraordinary achievement”, and he was right.
Meg Hillier
It was an achievement, but although there was a planning exercise—there have been many planning exercises for pandemics—the Treasury has told us that in 2016 there was no economic planning for a pandemic. Was the Minister aware of that and does he think that should change?
Jesse Norman
I have not gone into the arrangements for pandemic that the Treasury had in 2016, at the time the hon. Lady mentions, so I cannot comment on that. What I can say is that when pandemic struck, the two schemes were put in place with astonishing speed and capability. I do not think that is contested in the Chamber; it is well understood.
The coronavirus job retention scheme was announced by the Chancellor on 20 March and opened for applications just one month to the day afterwards. Six days later, the Government announced the self-employment income support scheme, with a target of making the first payments by the middle of June. In fact, the online portal opened for applications on 13 May, weeks ahead of schedule, with the first grants being paid into bank accounts on 25 May and within six days of application thereafter. That was achieved with more than 80% of HMRC staff working from home. Silos disappeared and timelines were condensed to extraordinarily short lengths of time as officials from across Whitehall came together to solve the problems. In so doing, they set up a kind of exemplar of what a really effective 21st century civil service would look like. It is a model that we are looking at very closely in our thinking about how we might change the tax administration system to make it more resilient in response to the concerns.
The achievements I have outlined have been widely welcomed in this debate, and rightly so. There cannot be any Member who has not walked down their local high street in the past week or two and spoken to those at the shops that are reopening who have had the benefit of the furlough scheme, or to traders who have had the benefit of the self-employment scheme. I am massively proud—we should be proud as a House—of HMRC’s efforts to design and deliver the schemes so quickly and with such effect.
The CJRS—the furlough scheme—has helped 1.1 million employers throughout the United Kingdom to furlough 9.3 million jobs, while 2.6 million self-employed individuals have applied for grants worth more than £7.7 billion. As has been said often, I do not pretend today for one moment—I do not think any one of us does—that the schemes are a panacea. Right hon. and hon. Members have rightly highlighted instances of groups and individuals who are very regrettably and unfortunately not eligible under the scheme rules. It is important to say that under no circumstances and at no point have those people been in any way forgotten by the Government; we have listened carefully to Members, as well as to employers, and refined both schemes to include more people where possible. For example, those returning to work after periods of parental leave and reservists who return to their jobs after active service in the armed forces are now able to access the flexible version of the furlough scheme, and similar accommodations have been made with respect to the self-employment scheme.
Together, the measures I have outlined represent an economic intervention unmatched in recent history. Nevertheless, the practicalities are such that the Government have not—I recognise this—been able to support everyone in exactly the way they would want. If I may, I shall address some of the specific points raised in the debate in a moment, but first it is important to understand the principles that guided the Government’s response.
Ms Angela Eagle
It is not that we wish the Minister to support people in the way that they want. He has to recognise that there are 1 million people who have been given no support at all; we want some consideration for them. Their businesses and livelihoods have been affected because of Government decisions that—understandably, for health reasons—closed down the economy. Will he please address that?
Jesse Norman
I will be coming to some of the points that the hon. Member raises later in my remarks. We are focusing on the furlough scheme and the self-employment scheme, but of course these schemes have been a small percentage of the overall response, which has included a vast array: £300 billion of loans, tax deferrals, grants, reliefs and the rest of it, as well as support under universal credit and other forms of benefit. It has been a very, very comprehensive system of support, of which we can be proud.
Let me push on. I was talking about the principles involved. The scale and urgency of the crisis were such that the Government’s overwhelming and overriding motivation was to deliver the greatest help to the greatest number of people as quickly as possible. That was the driver behind the schemes. Both were designed to make use of existing processes and verifiable data precisely in order to make the implementation happen in the fastest possible time and to minimise the risk of fraud, error and delay. Any delay would have meant that millions of people who benefited from the schemes would not have received the support when they needed it most.
It has not been possible to extend the self-employment scheme to individuals who became self-employed after 2018-19, because although self-employed taxpayers can file returns for 2019-20, this would have created an opportunity for fraudulent operators and criminals to file fake returns. It does not take an enormous amount of mental mathematics to calculate that a relatively small percentage of additional fraud would equal quite a lot of additional schemes that would have to have been assessed and worked through the system. That is what makes it so difficult. As the House knows, these problems have been highlighted in testimony to the Treasury Committee. It is also important to be clear that these are just two measures within a much larger package of Government support.
I only have one minute left, so let me turn quickly to the points that have been raised. My right hon. Friend the Member for Central Devon raised the question of fairness to individuals. I understand his point. I think he is aware that the schemes are targeted at those who need them most, and the self-employment scheme is most reliant on people’s self-employment income. He has had an explanation of the 95% figure that we have used—that is, those who get more than half their income from self-employment and who could be eligible for the scheme. Of course, many of those people are also entitled to claim other benefits.
The hon. Member for Hackney South and Shoreditch (Meg Hillier) said that it cannot be beyond the wit of the Government to address these issues. Of course, it is true that people have found groups that have been left out, but I put it to her that this has been extraordinarily difficult. We have been able to make changes at the margins but not at the core, precisely in order to deliver the benefits we wanted.
Let me finally say, in response to my hon. Friend the Member for Wycombe, that the OBR has projected some £60 billion in total for the current schemes and £15 billion for supplementary estimates. That may be the order of magnitude that we are talking about. I wish that I could speak for longer.
Finance Bill
Jesse Norman ExcerptsThursday 2nd July 2020
(3 years, 10 months ago)
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Ben Lake (Ceredigion) (PC)
Diolch, Madam Deputy Speaker, for calling me to contribute to this important debate, the importance of which is perhaps not reflected in the attendance in the Chamber today, but as the shadow Minister, the hon. Member for Houghton and Sunderland South (Bridget Phillipson) rightly said in her opening remarks, reviews of tax reliefs tend to be important not just for improving the transparency of their effectiveness but, as the hon. Member for Thirsk and Malton (Kevin Hollinrake) said in relation to the enterprise investment scheme and the future fund, for their transformative impacts on policy. I agree with him that one of the key things that we need to consider as we move ahead is how we can encourage greater investment, especially equity investment, in regions other than London. I hope to dwell a little on that point later in my remarks.
It is a pleasure to follow my hon. Friend the Member for Aberdeen South (Stephen Flynn), who not only laid out effectively the inefficiencies of the tax reliefs system but raised the important question, which I would like to address, of whether reliefs achieve their economic objectives in the current climate and context, as we try to rebuild or at least begin to consider how we can rebuild after covid-19. Tax reliefs will have an important part to play, and it will be vital that they are channelled to those who will rebuild the economy.
I wish to speak at greater length to amendment 1 and new clause 17, both of which are tabled in my name. Both are probing amendments. I seek to probe the Government’s commitment to levelling up every nation and region of the UK by requiring them to report on the differential territorial impacts of the changes that the Bill introduces to certain reliefs and tax incentives.
Most hon. Members will welcome the Conservatives’ efforts to see balanced economic growth throughout the UK and in particular to move away from what I consider to be a hub-and-spoke approach to economic development. Over the past decade, the Government have mainly concentrated on improving connectivity between rural areas and smaller towns and the supposed economic engines of the larger cities, as opposed to incentivising and supporting economic growth in those areas themselves.
Such a centralised model has inevitably concentrated economic activity in London and the south-east. As a consequence, Wales’ potential and that of other regions and nations of the UK has been overlooked. That is perhaps most apparent when we consider the way in which public funding for certain development has been allocated. Between 2001 and 2017, London R&D funding per head totalled almost twice the UK average— £3,900 per head compared with a national average of £2,300. What is more, the trend worsened in that time. The share of the core research budget spend across the three cities of Oxford, Cambridge and London—also known as the golden triangle—rose from 42.1% in 2002-03 to 46% in 2017-18.
Perhaps just as relevant to this debate is how public spending on transport infrastructure is allocated. I note that per-head spending in London in the past decade has averaged nearly three times that spent in the rest of the UK. During the same period, the city has received five times the average per-head spend on culture. It is perhaps unsurprising, therefore, given that disparity, that the golden triangle of London, the south-east of England and the east of England also attracts the lion’s share of venture capital. Indeed, the region received 73% of all venture capital between 2016 and 2018, according to the British Private Equity and Venture Capital Association. When we reflect on this concentration of venture capital in one region of the UK, as with R&D, not only are the failings of past economic development policy laid bare, but it is difficult to deny a popular saying in Ceredigion, “I’r pant y rhed y dŵr”—or in English, “To the hollow the water runs”.
It is clear that as the world moves increasingly to a knowledge-driven economy, expenditure on R&D will be vital not only as a source of innovation that can be commercialised to form the basis of the next generation of business, but as a means of equipping people with the requisite skills for the new economy and, as my hon. Friend the Member for Aberdeen South said, the post-covid economy. It follows, therefore, that the economy of any nation or region that does not receive the right level of support will be hindered in its attempt to adjust to the challenges of tomorrow. Government support for R&D is essential for Wales in particular, to address problems that range from a low-wage economy to a looming demographic time bomb, while also building an economic platform to take advantage of trends, including automation, that could otherwise cause quite a serious long-term social risk.
New clause 17 would require the Chancellor to report on the geographical impact of changes to several tax rules, including R&D expenditure credit. It would ensure that the UK Government consider how different geographic areas benefit from taxpayer-funded reliefs so that the financial incentives can be better tailored to overcome the UK’s chronic regional inequalities. I have previously drawn attention to the concentration of R&D funding in the golden triangle, but assessments might also provoke a debate within Government about how public spending on other priorities is allocated.
In a similar vein, my amendment 1 would require the Government to consider the unsustainable concentration of private investment in one region of the UK at the expense of the devolved nations and other regions of England. As the UK Government narrow the applicability of the enterprise investment scheme, they need to consider how that will affect firms in different areas of the UK. The EIS benefits us in a great many ways—the hon. Member for Thirsk and Malton outlined them effectively in his remarks. The ways in which the UK Government can encourage the establishment in the devolved nations of venture capital funds, and therefore private investment, is so important. The geographic disparities to which I have already referred are reflected in the EIS. To pick just one example, between 2015 and 2018, only 210 Welsh firms benefited from EIS, receiving just 1.3% of the total investment. By contrast, to pick on the golden triangle again, that area received 67% of all investment. The average UK business angel investment per firm has been some 40% greater than that in Wales.
Modern advanced economies such as Germany, the Netherlands and even the USA have ensured a better geographic spread of economic prosperity, so the Government’s intention to address this policy failure is to be welcomed. However, we must make sure that the rhetoric is backed up by the reality and that the measures designed to realise such lofty ambitions are fit for purpose. My amendment and new clause would require the Government to report on the effectiveness of some tax relief schemes in this regard, and I hope that the Minister can give them some serious consideration.
The Financial Secretary to the Treasury (Jesse Norman)
I am grateful to everyone who has contributed to this short but interesting debate. As colleagues have noted, when we think about tax transparency, we are in what might these days be referred to as a niche area of taxation—technical, but no less important. In some respects, it is more important that we do not get lost in the detail but can come back and talk about the issues more widely. If I may, I will address the different clauses and then come to the specific points raised in the debate.
New clause 27 would require the Government to review all
“tax reliefs contained in this Act”.
It states that the review must contain
“the number of tax reliefs…the effect on taxation revenue of each of the tax reliefs…and…an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of the tax reliefs.”
It asks the Government to publish the number of tax reliefs in the Bill and their effect on taxation revenue.
As the House may be aware, the Government already publish tax changes and estimates of the Exchequer impacts of policy changes in the Budget documents at each fiscal event. Moreover, Her Majesty’s Revenue and Customs monitors the effect on taxation revenue of tax reliefs after they are introduced and issues an annual tax relief statistics publication—I am sure that is closely scrutinised by all Members—which includes estimates of the costs of tax reliefs. Building on this, HMRC is also undertaking a project to expand its published costs information. I remind the House that in May HMRC published cost estimates for a further 47 previously uncosted reliefs.
New clause 27 also asks for an assessment of the efficacy of systems for designing, monitoring and evaluating the effect of a relief. As the House will know, the Government consult on new tax reliefs and proposed changes to tax reliefs, bringing in external expertise as part of the policy making cycle wherever possible. Officials are constantly working on ways to improve the policy on development, administration and continuing management of reliefs. As colleagues will know, the Government, and particularly the Treasury, keep all reliefs under review.
The Government also do evaluations of different forms. This work has included evaluations of a number of significant reliefs—some 15 since 2015. These include our R&D tax credits and entrepreneurs relief, on both of which I will say a few words later. In 2015, HMRC published an evaluation of R&D tax credits. In 2017, it commissioned an evaluation of entrepreneurs relief that led to a series of reforms, most recently the significant reduction of its lifetime at spring Budget 2020, which is legislated for in this Bill. The hon. Member for Aberdeen South (Stephen Flynn) picked up on the point about entrepreneurs relief, which he somehow regards as “the tail wagging the dog”. What he calls “the tail wagging the dog” other people would call consultation across Parliament and discussion with stakeholders. Since the measure resulted in a 90% reduction in the scope of the relief, I do not think he can claim that there is any lack of ambition in it.
HMRC will continue to monitor and evaluate reliefs and will bring forward a pipeline of further evaluations in due course. It will also consider a proposal to which I have already said I am quite sympathetic—I thank the hon. Member for Houghton and Sunderland South (Bridget Phillipson); we have discussed this before: a more systematic evaluation programme for reliefs. In the light of all this, the Government do not believe that the new clause is necessary.
New clause 2 would require the Chancellor of the Exchequer to review the impacts of the reduction in the lifetime of entrepreneurs relief that is being legislated for in this Bill within six months of Royal Assent, and specifically to review the impacts on business investment, employment and productivity in the constituent nations and English regions of the United Kingdom. I would first highlight to hon. Members that the Government have already conducted an internal review of this relief that built on the 2017 independent research commissioned by HMRC. That review considered the distributional effects and benefits of the relief against its cost in order to better understand the targeting of the relief. This, in turn, has been used to inform the reform that is being legislated for in this Bill. It ensures that the majority of entrepreneurs are unaffected. A lot of the concern about entrepreneurs relief historically has been that it is not well targeted, and this measure greatly improves the targeting. Unfortunately, the effects of the changes to the relief will not be visible in six months’ time, and for that reason I urge the House to reject new clause 2.
New clause 4 concerns the structures and buildings allowance. It would require the Chancellor to review the impacts of clause 30, which makes miscellaneous amendments to the SBA, within six months of the passing of the Finance Act. Specifically, it would require the Chancellor to review the impacts on business investment, employment, productivity and energy efficiency. Again, I reassure Members that both HMRC and the Treasury already monitor tax reliefs according to the level of risk that they are deemed to pose. It is in the nature of a structures and buildings allowance that it is configured to reflect the fact that it can take many years to erect new buildings. Claims under the SBA are ordinarily settled when businesses bring buildings into use and submit tax returns at year end. For that reason, it would be neither possible nor appropriate to try to draw conclusions on the productivity or energy efficiency impacts of these changes within such a short period.
New clause 17 would require the Government, within 12 months, to assess and report on the geographical effects of changes to business reliefs across a variety of areas. There is a concern, which I recognise, that there are geographical disparities that reflect the historical evolution of our economy in different areas. It is by no means a uniform picture, even outside London.
HMRC does not routinely require businesses to provide geographical information about where expenditure is incurred as part of claims for the R&D expenditure credit, structures and buildings allowance or intangible fixed assets. To do that, changes would be required that would create additional burdens on businesses. Those claiming the reliefs, of course, could only provide information after the year end. For that reason, it would not be possible for HMRC to have information within the 12 months stated in the amendment, even if the amendment were passed. It is not capable of being fulfilled.
Jesse Norman
With permission, Madam Deputy Speaker, I will give way to my hon. Friend.
Kevin Hollinrake
I declare an interest as somebody who has benefited from entrepreneurs’ relief in the past. Is the Minister considering extending the reduction in entrepreneurs’ relief, which I support, to investors’ relief, which currently stands at the same figure as entrepreneurs’ relief used to stand at—£10 million?
Jesse Norman
If my hon. Friend is asking questions, he ought to stay for the next debate, because he is abusing the privilege of this debate. I thank him for his suggestion of a revenue-raising possibility for the Government; we take all those in great heart.
Bridget Phillipson
Could the Minister say a little more about the social investment tax relief? I am not aware that he responded on that point.
Jesse Norman
The hon. Lady is absolutely right. Let me address that. As she knows, the relief remains in place until next year. Even its doughtiest supporters would agree that so far it has not been anything like as effective as anyone would have liked or as had been projected or anticipated. Only £11.2 million has been raised under it in the period 2014 to 2018-19.
We are looking at it closely. As I mentioned in Committee, I am in discussions with leading figures across the social investment world about whether we can get some more visibility on the sources of funds that would use such a relief and the sources of projects that those funds would support. If we do not get that and we cannot have that in a slightly more concrete form, it looks like quite an empty request, but there may be other things that we can do to support social investment. As the hon. Lady knows, I have written a book on the big society. It is an area that I care deeply about, so I am happy to respond and I am grateful for her question.
Bridget Phillipson
We do not intend to divide the House on the new clause, but I will make a few brief points in response to what the Minister has said. I am glad that he shares our assessment that the current situation and system are unwieldy, and therefore we look forward to seeing real progress in that area. Frankly, it is not good enough that of those 362 tax reliefs, only 15 have had published evaluations since 2015, at a time when costs have risen.
During these extraordinary times, we need to see much more from the Government, not just on tackling tax avoidance, as we discussed at some length yesterday. There needs to be a renewed focus on taxpayer value for money, with greater opportunities for scrutiny of tax reliefs in this place and from external experts. Although we are not seeking to divide the House, I hope that we will see progress in that area. It is an issue to which we intend to return. I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Madam Deputy Speaker (Dame Rosie Winterton)
With this it will be convenient to discuss the following:
Government new clause 20—Protected pension age of members re-employed as a result of coronavirus.
Government new clause 21—Modifications of the statutory residence test in connection with coronavirus.
Government new clause 22—Future Fund: EIS and SEIS relief. Government new clause 23—Interest on unpaid tax in case of disaster etc of national significance.
Government new clause 24—Exceptional circumstances preventing disposal of interest in three year period.
Government new clause 25—HGV road user levy. Government new clause 32—Enterprise management incentives: disqualifying events. Government new schedule 1—Taxation of coronavirus support payments.
New clause 29—Review of impact of Act on poverty—
‘(1) The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on poverty and lay this before the House of Commons within six months of Royal Assent.
(2) This assessment must consider—
(a) the impact on absolute poverty,
(b) the impact on relative poverty, and
(c) whether such a study should in future be a regular duty of the Office for Budget Responsibility.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on poverty and consider whether the OBR should conduct such assessments as a regular duty.
New clause 10—Impact of provisions of the Act on child poverty—
‘(1) The Chancellor of the Exchequer must review the impact of the provisions of this Act on child poverty and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the impact on—
(a) households at different levels of income,
(b) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010,
(c) different parts of the United Kingdom and different regions of England, and
(d) levels of relative and absolute child poverty in the United Kingdom.
(3) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on child poverty.
New clause 3—Review of changes to capital allowances—
‘(1) The Chancellor of the Exchequer must review the effect of the changes to chargeable gains with respect to corporate capital losses in this Act in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within two months of the passing of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment
(b) employment, and
(c) productivity.
(3) A review under this section must consider the effects in the current and each of the subsequent four financial years.
(4) The review must also estimate the effects on the changes in the event of each of the following—
(a) the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement,
(b) the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union, or
(c) the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.
(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.
(6) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause requires a review of the impact on investment, employment and productivity of the changes to chargeable gains with respect to corporate capital losses over time; in the event of a free trade agreement with the USA; and in the event of leaving the EU without a trade agreement, with an agreement to retain single market and customs union membership, or with a trade agreement that does not include single market and customs union membership.
New clause 6—General anti-abuse rule: review of effect on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of section 99 and Schedule 14 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review under sub-paragraph (1) must consider—
(a) the expected change in corporation and income tax paid attributable to the provisions in this Schedule; and
(b) an estimate of any change, attributable to the provisions in this Schedule, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The review under subparagraph (2)(b) must consider taxes payable by the owners and employees of Scottish Limited Partnerships.’
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Clause 99 and Schedule 14, and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 7—Call-off stock arrangements: sectoral review of impact—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of section 79 on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of the passing of this Act.
(2) The sectors to be assessed under (1) are—
(a) leisure,
(b) retail,
(c) hospitality,
(d) tourism,
(e) financial services,
(f) business services,
(g) health/life/medical services,
(h) haulage/logistics,
(i) aviation,
(j) transport,
(k) professional sport,
(l) oil and gas,
(m) universities, and
(n) fairs.’
This new clause would require the Government to report on the effect of Clause 79 on a number of business sectors.
New clause 8—Review of effects on measures in Act of certain changes in migration levels—
‘(1) The Chancellor of the Exchequer must review the effects on the provisions of this Act of migration in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement,
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects of—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects on the measures in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require a Government review of the effects on measures in the Bill of certain changes in migration levels.
New clause 9—Review of effects on migration of measures in Act—
‘(1) The Chancellor of the Exchequer must review the effects on migration of the provisions of this Act in each of the scenarios in subsection (2) and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) Those scenarios are that—
(a) the UK leaves the EU withdrawal transition period without a negotiated future trade agreement
(b) the UK leaves the EU withdrawal transition period following a negotiated future trade agreement, and remains in the single market and customs union, and
(c) the UK leaves the EU withdrawal transition period following a negotiated trade agreement, and does not remain in the single market and customs union.
(3) In respect of each of those scenarios the review must consider separately the effects on—
(a) migration by EU nationals, and
(b) migration by non-EU nationals.
(4) In respect of each of those scenarios the review must consider separately the effects in each part of the United Kingdom and each region of England.
(5) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a Government review of the effects of the measures in the Bill on migration levels.
New clause 11—Assessment of equality impact of measures in Act—
‘(1) The Chancellor of the Exchequer must lay before the House of Commons a report assessing the effects on equalities of the provisions of this Act within 12 months of the passing of this Act.
(2) The review must make a separate assessment with respect to each of the protected characteristics set out in section 4 of the Equality Act 2010.
(3) Each assessment under (2) must report separately on the effects in in each part of the United Kingdom and each region of England.
(4) In this section—
“parts of the United Kingdom” means—
(a) England,
(b) Scotland,
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.’
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on equalities.
New clause 15—Sectoral review of impact of Act—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of this Act on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of Royal Assent.
(2) The sectors to be assessed under (1) are—
(a) leisure,
(b) retail,
(c) hospitality,
(d) tourism,
(e) financial services,
(f) business services,
(g) health/life/medical services,
(h) haulage/logistics,
(i) aviation,
(j) transport,
(k) professional sport,
(l) oil and gas,
(m) universities, and
(n) fairs.’
This new clause would require the Government to report on the effect of the Bill on a number of business sectors.
New clause 16—Review of effect of Act on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of the Act and lay a report of that review before the House of Commons within six months of Royal Assent.
(2) The review under (1) must contain an estimate of any change attributable to the provisions in this Act in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The estimate under (2) must report separately on taxes payable by the owners and employees of Scottish Limited Partnerships.’
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the Bill; and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
New clause 30—Review of rates of air passenger duty—
‘(1) The provisions of section 88 shall not come into effect until the Treasury has carried out and published a review of the likely effect of changes to rates of air passenger duty on the aviation sector.
(2) The review must take into account the effects of Covid-19 on the sector.
(3) The review must be published no later than 1 October 2020.’
This new clause would require that the changes to APD in clause 88 not come into force until a review of the effect of changes to APD has been published by the Treasury.
Amendment 2, in clause 80, page 68, line 2, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.’
This amendment would require the Government to review the impact of the proposed changes to alcohol liquor duties on public health.
Amendment 3, in clause 81, page 68, line 21, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the TPDA 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.’
This amendment would require the Government to review the expected impact of the revised rates of duty on tobacco products on public health.
Amendment 4, in clause 86, page 73, line 20, after “supplies” insert “, including human breastmilk”
This amendment would ensure that vehicles carrying human breastmilk would benefit from the exemption from Vehicle Excise Duty.
Amendment 5, page 77, line 10, leave out Clause 95
Amendment 6, in clause 95, page 77, line 14, at end insert—
‘(2) The Government must lay before the House of Commons by 9 September 2020 a statement of the conditions under which it would consider it appropriate to vary rates of import duty under this Section.’
This amendment would require the Government to state the conditions under which it would consider it appropriate to vary rates of import duty in an international trade dispute.
Amendment 7, page 77, line 14, at end insert—
‘(2) No regulations under this section may be made unless a draft has been laid before and approved by a resolution of the House of Commons.’
This amendment would require the Government to seek the approval of the House before making regulations varying rates of import duty in an international trade dispute.
Amendment 8, page 77, line 14, at end insert—
‘(2) The Chancellor of the Exchequer must, no later than a month before any exercise of the power in subsection (1), lay before the House of Commons a report containing the following—
(a) an assessment of the fiscal and economic effects of the exercise of the powers in subsection (1);
(b) a comparison of those fiscal and economic effects with the effects of the UK being within the EU Customs Union;
(c) an assessment any differences in the exercise of those powers in respect of—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland; and
(d) an assessment of any differential effects in relation to the matters specified in paragraphs (a) and (b) between—
(i) England,
(ii) Scotland,
(iii) Wales, and
(iv) Northern Ireland.’
This would require a review of the economic and fiscal impact of the use of the powers in clause 95 including comparing those effects with EU Customs Union membership.
Amendment 9, in clause 96, page 77, line 26, after “tax” insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 10, page 77, line 27, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 11, page 78, line 11, after “tax”, insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 12, page 78, line 12, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 13, page 78, line 35, after “tax”, insert
‘which is due at the relevant date from the debtor and which became due in the 12 months immediately preceding that date, and/’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 14, page 78, line 36, after “deduction”, insert
‘from a payment made by the debtor in the period of 12 months immediately preceding the relevant date.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Amendment 15, page 79, line 10, at end insert—
‘(8) The amendments made by this section do not apply to any debt secured by a floating charge in respect of monies were advanced to the debtor before 1 December 2020.’
This amendment seeks to limit the extent of HMRC’s status as a preferential creditor in insolvencies by preventing the policy from being applied retrospectively and by limiting that preference to only those taxes which became due in the 12 months before the relevant date as given in the Bill (1st December 2020).
Jesse Norman
The Government have tabled eight new clauses to the Bill, the majority of which are in response to the covid-19 pandemic. I would like to start by offering Members an explanation for why these new clauses are being brought forward on Report. The Government have been working very hard to combat the pandemic, as the House will know, and these measures are just a small part of a much more extensive and wide-ranging response. I am sure that colleagues across the House will appreciate that Ministers and civil servants have been working in extraordinary circumstances in the past three months. As I often do, I again pay great tribute to officials at the Treasury and Her Majesty’s Revenue and Customs. Without their work, it would not have been possible to deliver many, if any, of these aspects of this extremely comprehensive response, let alone in such a rapid timeframe as, for example, with the coronavirus job retention scheme.
We have brought forward these new clauses at the earliest possible opportunity, and for technical reasons, it is on Report. We have also been slightly limited by the fact that to table each new clause requires a new Ways and Means resolution to be agreed by the House. Report was the first amendable stage of the Bill to take place after the Government had been able to agree the necessary Ways and Means resolution on the Floor of the House. I hope the House will agree that there is a clear need for each of these new clauses to stand part of the Bill.
I will touch on each new clause briefly. New clause 19 seeks to do two things. First, it confirms that grants made under covid-related schemes—for example, the furlough scheme, the self-employment scheme, the small business grant fund, the retail, hospitality and leisure grant fund, the local authority discretionary grant fund and schemes corresponding to those grants within the devolved Administrations—are subject to tax. The new clause also includes a delegated power to add or remove further grant schemes through a statutory instrument, which provides sensible flexibility, so that the Government can continue to support the economy in their response to the pandemic.
The second part of the new clause ensures that HMRC has appropriate and proportionate compliance and enforcement powers in relation to the furlough scheme and the self-employment income support scheme. To ensure that taxpayer money is going only to those who are eligible, the new clause gives HMRC powers to recover overpayments and to impose penalties where there is deliberate non-compliance. HMRC has given a clear undertaking that these powers will not be used to penalise taxpayers who may be going through difficult times but make honest mistakes in their applications. As previously stated, the powers are designed to be proportionate, and they balance the fact that we are in unprecedented and uncertain times with the need to ensure that HMRC has sufficient powers to enforce the schemes according to eligibility criteria set out and to protect the Exchequer.
New clause 20 seeks to mitigate potential pensions impacts for those with a protected pension age returning to work to help in the battle against the pandemic. Its purpose is to provide certainty for those people by temporarily suspending rules that would otherwise see the pension income of recently retired people reduced if they were to return to work in crucial workforces at this important time. These retirees have been and will remain critical to the Government’s response to covid, and this new clause temporarily removes restrictions that might impede a flexible response.
New clause 21 temporarily relaxes the statutory residence test so that highly-skilled individuals from across the world are not discouraged from coming to the UK and helping this country to respond to the unprecedented health emergency. The actions and presence of normally non-resident individuals in the UK could have inadvertently affected their tax residence status. The measure is to be restricted, however, to ensure that it applies only between 1 March and 1 June 2020 for time spent in the UK by individuals who worked specifically on coronavirus disease-related activities in specified sectors. That time will not count towards the residence test.
Jesse Norman
I am grateful to the hon. Gentleman for his question. As the House will be aware, HMRC is often responsive and generally extremely responsive to such issues. I will happily look at any correspondence he wants to send me, and I will ensure that there is a properly engaged response to the extent that my limited powers over HMRC permit me. I hope that will be effective.
New clause 23 enables the Treasury to specify in an order made under section 135 of the Finance Act 2008 which payments of tax and other liabilities will not attract late payment interest or surcharge as a result of being deferred by agreement during a period of national disaster or emergency. It also enables the Treasury to set specific relief periods for different deferred taxes or liabilities. As the House will know, the Government have announced an unprecedented package of economic support for businesses and individuals affected by covid. The new clause ensures that late payment interest that would normally accrue automatically where tax is paid late does not apply, supporting taxpayers further and in ways in which I am sure the whole House will support. The payment deferral for VAT that we have announced provides taxpayers with a much-needed cash flow boost. HMRC is using its existing powers as set out in the Commissioners for Revenue and Customs Act 2005 to defer those payments of tax.
New clause 24 allows a refund of the additional 3% higher rate of stamp duty where exceptional circumstances prevented the sale of the previous main residence in the three-year window within which a sale must ordinarily take place. The new clause applies to those whose refund window ended on or after 1 January 2020. It is to ensure that responsible actions taken by people do not lead to negative tax implications and that those who would otherwise have received a stamp duty land tax refund are still able to receive it, despite the pandemic.
New clause 25 suspends the heavy goods vehicle road user levy for a period of 12 months, cutting fixed operational costs to the logistics and haulage industries as the economy begins to recover from the pandemic. These industries support many other industries, and temporarily easing their financial burden will support the haulage sector, reducing fixed costs as the economy recovers over time.
I turn finally to new clause 32, which makes minor changes to the existing enterprise management incentives legislation, introducing a time-limited exception to the disqualifying event rule so that EMI option holders who can no longer meet the EMI working time requirement due only to the pandemic are not forced to forfeit their options or to exercise them earlier than planned. This has the effect of protecting employees furloughed under the coronavirus job retention scheme or who have taken unpaid leave and had their working hours reduced. The measure means that affected employees will not forfeit their options or be forced to exercise them within the statutory 90 days normally required.
Since the point of EMI schemes is to help high-growth small and medium-sized enterprises recruit and retain skilled employees by giving them tax-advantaged share options, I am sure the House will understand that the measure supports a very important sector that is also likely to be important to our recovery. The changes will be effective from 19 March to ensure that employees who were furloughed or had to reduce their hours do not lose out. I hope the House will accept the need for the new clauses in these highly uncertain and unusual times. I commend them to the House.
Wes Streeting (Ilford North) (Lab)
I thank the Financial Secretary for making the case for the Government’s new clauses this afternoon. Throughout the coronavirus pandemic, the Labour party has made clear as the official Opposition that we seek to work constructively with the Government in response to this unprecedented public health crisis which, as we have seen, has brought about an economic crisis to follow it. In that spirit, and to ensure the smooth passage of legislation, we have helped to expedite the progressive measures taken by the Government, and this afternoon will be no exception.
I wish to speak to new clause 29, which has been tabled in the name of my hon. Friend the Member for Oxford East (Anneliese Dodds), the shadow Chancellor, and other hon. and right hon. colleagues. Yesterday afternoon, I addressed the Government’s poverty of ambition on climate change. This afternoon, I want to address their poverty of ambition on tackling poverty itself.
The Conservative party has now been in government either alone or in coalition for a decade. Over the past 10 years, their record on poverty in this country and on tackling poverty in this country has been absolutely lamentable. According to the Government’s own Social Mobility Commission, 600,000 more children are now living in relative poverty than in 2012, and that is projected to increase further due to benefit changes and the obvious economic impact of covid-19. As of 20 February this year, some 14 million people were in poverty, according to the Joseph Rowntree Foundation, including 2 million pensioners and 4 million children. We know that the impacts of poverty are felt disproportion- ately among different communities. Children from black and minority ethnic groups, for example, are more likely to be in poverty, with 45% of BAME children living in poverty, as compared with 26% of children in white British families.
We believe that the Government are failing on something that should be the most basic of priorities for any Government. That is not just our view as the Opposition party; the Government’s own Social Mobility Commission has said:
“The government should be more proactive in addressing poverty overall.”
It is worth bearing in mind that behind every statistic is a child, and 30 years ago I was one of those children in the child poverty statistics, growing up on a council estate in London’s east end, sandwiched between the bright lights of the City of London and the glistening lights of what was then the blossoming London Docklands Development Corporation land, which has become Canary Wharf. Today, they are two global financial centres at the centre of our global city. In between is a vista of poverty that was bad then and remains bad now.
One of the things I find most frustrating about the experience I had growing up in a council flat in the east end in the 1980s is that I look back, and I think about the conditions of the council flat I lived in and the embarrassment of not wanting to bring friends home from school because the conditions were not ones that we were proud of. It was a source of shame and embarrassment. I think about the experience of relying on free school meals, and the stigma that arises from having to collect a dinner ticket while other children go and pay for their food quickly—and get the best food, I hasten to add, while handing over their cash. I think about the difficulties my mum had as a single mum, balancing the challenge of bringing up a child while relying on the benefits system, and having to make compromises in choosing how she spent the family budget: the choice between putting food in the fridge or some extra money in the electricity meter.
One of the things that makes me most angry is that, when I think about my experience, which I thought was bad in the 1980s, and compare it with that of children growing up in the same circumstances today, as seen in my own constituency casework, things have got worse for children in the decades following my childhood, when things ought to be getting better. Whereas I had the stability of a council flat—albeit not a nice one—and a roof over my head, children in my constituency today, and no doubt in those of so many others across the Chamber, are growing up in temporary bed-and-breakfast accommodation, being moved from pillar to post and living in substandard accommodation, with disruptive consequences for their education and their schooling, and the inability for them to form lasting friendships and for their families to build supportive networks and family relationships.
When I think about the enormous strides that were made, particularly by the last Labour Government, in tackling educational disadvantage, I think it is outrageous that, in this country in the 21st century, children still today arrive at school at the age of five with their life chances already limited and in many cases predetermined, because we failed to get early years right. Sure Start centres have closed, and the support for families is no longer there. As a result, children arrive at school, at five, less prepared than their peers from more affluent backgrounds. It makes me angry that, for all the difference made to my education through programmes under the last Labour Government and the impact they have had on children since—the London Challenge and Excellence in Cities—today children are leaving school at 16 at a time when the attainment gap between children from the most advantaged backgrounds and the least advantaged backgrounds is actually widening, and where the further education system in which many working-class young people go on to study has been described by the Government’s own Social Mobility Commission as “undervalued and underfunded”. This is at a time when the changing nature of our economy and the changing nature of the world of work make post-16 adult education delivered in further education settings more important, not less. We should be making progress, but we are in reverse gear.
Jesse Norman
the hon. Gentleman is making a powerful speech, but he did not say whether the Blair Government hit their target of halving child poverty by 2010. Did they or not?
Wes Streeting
I am delighted that the Minister asked that question, because I am about to lay out, in full, the record of the previous Labour Government. According to the London School of Economics and its Centre for Analysis of Social Exclusion, by the end of the new Labour Government’s period in office, child poverty and pensioner poverty had fallen considerably, in circumstances where child poverty would have risen without those reforms, and pensioner poverty would have fallen less far. In terms of absolute poverty, child poverty fell by more than 2 million from 1997-98 to 2009-10, and pensioner poverty fell by almost 3 million in the same period. In terms of relative poverty, child poverty fell by 800,000 between 1997-98 and 2009-10, and the number of pensioners in relative poverty fell by more than 1 million in the same period.
That Labour Government oversaw an £18 billion annual increase in spending on social security for families with children, as well as an £11 billion rise in payments for pensioners by 2010. Those rises were supported by other anti-poverty policies, including Sure Start, the national minimum wage, increased childcare support, and increases in education spending, which rose from £56 billion in 1996-97, to £103 billion in 2009-10—a real-terms increase of 83%. The last Labour Government pretty much eradicated homelessness and made ending insecure housing a priority, reducing the number of households in priority need of housing from 135,000 in 2003-04 to just 40,000 in 2009. They pursued the decent homes standard to boot, ensuring that children were growing up in far better conditions than I did. That is a record to be proud of—a record of a Government who got their priorities right.
It took a celebrity footballer to get this Government to do the right thing on something as basic as ensuring that children who would otherwise have gone hungry were fed this summer. It is not just that the Government do not have their head in the right place; they do not have their heart in the right place either. Unfortunately, we cannot rely on Marcus Rashford being on speed dial to get the Prime Minister to do the right thing on every occasion, and we cannot rely on the Chancellor to do the right thing on every occasion either. That is why it is important, as we have laid out in new clause 29, that we ensure that what counts is what is measured.
New clause 29 would require the Chancellor to conduct a review of the impact of this Bill—no doubt, very soon, this Act—on poverty in the United Kingdom. As with the Government’s environmental ambitions, I doubt that this Bill will move the dial on poverty much, if at all.
The Government’s own Social Mobility Commission has asked for the Office for Budget Responsibility to conduct assessments of all the fiscal statements that it usually does, but this time to look at child poverty and anti-poverty measures in particular. I urge Ministers to look carefully at this issue again. We raised it in Committee and were not successful in persuading the Minister of the case then, but I hope that we can persuade him of the case now. If Treasury Ministers and officials know that the OBR will be looking at those numbers in the same way that it does the other numbers in its assessments of Government fiscal events, perhaps it will concentrate the minds of people in the Treasury to get their priorities right.
Next week, the Chancellor will be coming before the House to deliver an economic update. After the Prime Minister’s statement this week, I think he needs to do a lot better than his apparent boss did when making a speech that was trailed as a new deal. It was not a new deal. Its ambitions were modest and much of the content was re-announcement. It certainly was not a green new deal. Perhaps when the Chancellor here next week, he can do the opposite of the Prime Minister. The Prime Minister over-promised and under-delivered. Given the way in which the economic update has been trailed, perhaps the Chancellor can under-promise and over-deliver next week, because he has a golden opportunity in the wake of this crisis to think seriously and substantially about the way in which our economy works and whose interests it serves.
I hope that when he comes forward next week, he does so with the full Budget that the shadow Chancellor has called for—a back-to-work Budget that is focused on jobs, jobs, jobs, that can actually tackle the gross inequalities and injustices of our society, and that puts us back on track to eradicate child poverty within a generation and to eradicate poverty for everyone because, for all the challenges of the last decade and all the challenges that we are living through now, this remains one of the wealthiest countries in the world.
This also happens to be a great country that is full of opportunities for so many people—in education, industry, arts, science and imagination—but those opportunities are not available to everyone. That should keep Ministers awake at night. It keeps me awake at night. But having listened to our Prime Minister only weeks ago in this Chamber, when it comes to tackling child poverty in this country, I do wonder whether his heart is really in it at all.
Jesse Norman
As is customary at the conclusion of Report stage, I will speak to the issues that have been raised, rather than the full content of the Bill. Let me start by saying how much I enjoyed the splendidly generous and warm speech by my great and hon. Friend the Member for Workington (Mark Jenkinson). As Members across the House noted, Workington will have a fine voice in the Chamber for many years to come. I was impressed by his ability to smuggle some Cumbrian dialect into the Chamber—I do not know whether it counts as a foreign language, but it was certainly unintelligible to me, which may be true for other colleagues. I take my hat off not only to Mr Harris for identifying his prime ministerial potential but to my hon. Friend for his robust sense of self-confidence. Colleagues normally play down their prime ministerial potential early in their political careers, and I admire his chutzpah, to use a different piece of dialect, in bringing our attention to that. He also acknowledged his predecessor’s capacity to align himself with the Opposition rather than the Whip; I am grateful to him for that. He made some valuable points, and I congratulate him on his maiden speech.
Labour’s new clause 29 and the SNP’s new clause 10 would require the Chancellor to review the impact of provisions in the Bill on child poverty and total poverty and to lay a report before Parliament within six months of Royal Assent. We were treated to a moving and personal speech from the hon. Member for Ilford North (Wes Streeting). I congratulate him on his achievement in getting to Cambridge University on the back of that personal experience. Of course, he is right to focus on the importance of combating educational disadvantage—a cause that every Member of the House believes in. I found it surprising that he did not go on to acknowledge the achievement of this Government in raising the number of good or outstanding schools from 68% in 2010 to 86% today, or the fact that the proportion of 18-year-olds from disadvantaged backgrounds going to university went from only 13% in 2009-10 to 21% in 2019.
The hon. Member talked about pensioner poverty but neglected to mention that there are 100,000 fewer pensioners in poverty now than there were in 2010. He talked about jobs but without acknowledging that, at least until the pandemic, which has struck us all and will have had unfathomable effects, as we know, 3.9 million more people were in employment. Specifically, the employment of the poorest 20% was 9% higher under this Government than in 2009-10.
The hon. Member was right to say that the tragedy of an economic crisis is that it hits the least well off the hardest, and that is precisely the inheritance that this Government’s predecessors left to us in 2009-10. As I never cease to remind the House, the financial crisis of 2007-08 was brought about because bank leverage was allowed to rise from 20 times, where it had been for the previous 40 years, to 50 times in seven years under the Blair Government. If hon. Members do not believe me, they can look at the independent report on banking published under Professor Vickers.
I should, however, return to new clauses 29 and 10, some of which are not necessary because the information they seek is largely already in the public domain, including on the distributional effect of tax, welfare and spending policies, on the equalities impacts of tax measures and on poverty rates.
I thank my hon. Friend the Member for Altrincham and Sale West (Sir Graham Brady) for his probing new clause 30. I admire his range of references. I thought he was going to reference Stephen Colbert, the American talk show host, but tragically it was Jean-Baptiste Colbert, who produced the line about plucking the feathers from the goose. He is absolutely right. No one would describe him as a hisser, but we do pay careful attention to the points he has made, and I am very grateful to him for raising them. I would also single out my hon. Friend the Member for Arundel and South Downs (Andrew Griffith), who rightly pointed out that the configuration between APD and the environmental performance of flights is a very blunt relationship indeed, so I thank him for that.
Colleagues across the House will know that new clause 30 would ask the Treasury to review the effect of proposed rate changes on APD. We are working closely with the sector and are closely attuned to its concerns in the face of the pandemic, and of course we have paid close attention to the points my hon. Friend raised. I am sure colleagues will be aware that, even as it is, the current rate will only take effect in April 2021 and will rise by only £2 for a long-haul economy flight, which is the cost of a rather inexpensive coffee at airport prices. It may not be quite as urgent, but the point about the wider need to look at this is well made.
I turn quickly to amendment 4, which seeks to extend the exemption from vehicle excise duty for medical courier charities in clause 86 explicitly to include vehicles carrying human breast milk. The hon. Member for Glasgow Central (Alison Thewliss) will know that this amendment is not necessary because the clause already provides for the transportation of human breast milk. The purpose-built vehicles used by the medical courier charities, which are exempt from VED, do not merely transport blood; they transport a wide range of medical product, including X-rays, MRA scans, plasma and human breast milk.
There are many other things I could say in response to other comments, but I will leave it there.
Question put and agreed to.
New clause 19 accordingly read a Second time, and added to the Bill.
New Clause 20
Protected pension age of members re-employed as a result of coronavirus
“(1) In FA 2004, in Schedule 36 (pension schemes etc), paragraph 22 (rights to take benefit before normal minimum pension age) is amended as follows.
(2) In sub-paragraph (7F), at the end of paragraph (b) insert “, and
(c) that the member is or was employed as mentioned in sub-paragraph (7B)(a) where—
(i) the employment began at any time during the coronavirus period, and
(ii) the only or main reason that the member was taken into employment was to help the employer to respond to the public health, social, economic or other effects of coronavirus.”
(3) After sub-paragraph (7J) insert—
“(7K) In sub-paragraph (7F)(c)—
“coronavirus” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);
“the coronavirus period” means the period beginning with 1 March 2020 and ending with 1 November 2020.
(7L) The Treasury may by regulations amend the definition of “the coronavirus period” in sub-paragraph (7K) so as to replace the later of the dates specified in it with another date falling before 6 April 2021.
(7M) The power in sub-paragraph (7L) may be exercised on more than one occasion.”
(4) The amendments made by this section are treated as having come into force on 1 March 2020.”—(Jesse Norman.)
In certain circumstances, people who have a protected pension age under a pension scheme (i.e. a right to receive pension benefits at an age below the normal minimum pension age) can lose it on being re-employed. This new clause prevents that happening for people re-employed as part of the response to coronavirus.
Brought up, read the First and Second time, and added to the Bill.
New Clause 21
Modifications of the statutory residence test in connection with coronavirus
“(1) This section applies for the purposes of determining—
(a) whether an individual was or was not resident in the United Kingdom for the tax year 2019-20 for the purposes of relevant tax, and
(b) if an individual was not so resident in the United Kingdom for the tax year 2019-20 (including as a result of this section), whether the individual was or was not resident in the United Kingdom for the tax year 2020-21 for the purposes of relevant tax.
“Relevant tax” has the meaning given by paragraph 1(4) of Schedule 45 to FA 2013 (statutory residence test).
(2) That Schedule is modified in accordance with subsections (5) to (13).
(3) Paragraph 8 (second automatic UK test: days at overseas homes) has effect as if after sub-paragraph (5) there were inserted—
“(5A) For the purposes of sub-paragraphs (1)(b) and (4), a day does not count as a day when P is present at a home of P’s in the UK if it is a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(4) Paragraph 22 (key concepts: days spent) has effect as if—
(a) in sub-paragraph (2), for “two cases” there were substituted “three cases”;
(b) after sub-paragraph (6) there were inserted—
“(7) The third case is where—
(a) that day falls within the period beginning with 1 March 2020 and ending with 1 June 2020,
(b) on that day P is present in the UK for an applicable reason related to coronavirus disease, and
(c) in the tax year in question, P is resident in a territory outside the UK (“the overseas territory”).
(8) The following are applicable reasons related to coronavirus disease—
(a) that P is present in the UK as a medical or healthcare professional for purposes connected with the detection, treatment or prevention of coronavirus disease;
(b) that P is present in the UK for purposes connected with the development or production of medicinal products (including vaccines), devices, equipment or facilities related to the detection, treatment or prevention of coronavirus disease.
(9) For the purposes of paragraph (7)(c), P is resident in an overseas territory in the tax year in question if P is considered for tax purposes to be a resident of that territory in accordance with the laws of that territory.
(10) The Treasury may by regulations made by statutory instrument—
(a) amend sub-paragraph (7)(a) so as to replace the later of the dates specified in it with another date falling before 6 April 2021;
(b) amend this paragraph so as to add one or more applicable reasons related to coronavirus disease.
(11) The powers under sub-paragraph (10) may be exercised on more than one occasion.
(12) A statutory instrument containing regulations under sub-paragraph (10) is subject to annulment in pursuance of a resolution of the House of Commons.”
(5) Paragraph 23 (key concepts: days spent and the deeming rule) has effect as if after sub-paragraph (5) there were inserted—
“(5A) For the purposes of sub-paragraph (3)(b) and (4), a day does not count as a qualifying day if it is a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(6) Paragraph 28(2) (rules for calculating the reference period) has effect as if—
(a) in paragraph (b) the “and” at the end were omitted;
(b) after paragraph (b) there were inserted—
“(ba) absences from work at times during the period specified in an emergency volunteering certificate issued to P under Schedule 7 to the Coronavirus Act 2020 (emergency volunteering leave), and”;
(c) in paragraph (c), for “or (b)” there were substituted “, (b) or (ba)”.
(7) Paragraph 29 (significant breaks from UK or overseas work) has effect as if in sub-paragraphs (1)(b) and (2)(b), for “or parenting leave” there were substituted “, parenting leave or emergency volunteering leave under Schedule 7 to the Coronavirus Act 2020”.
(8) Paragraph 32 (family tie) has effect as if after sub-paragraph (4) there were inserted—
“(4A) But a day does not count as a day on which P sees the child if the day on which P sees the child would be a day falling within the third case in paragraph 22(7) (if P were present in the UK at the end of it).”
(9) Paragraph 34 (accommodation tie) has effect as if after sub-paragraph (1) there were inserted—
“(1A) For the purposes of sub-paragraph (1)—
(a) if the place is available to P on a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day), that day is to be disregarded for the purposes of sub-paragraph (b), and
(b) a night spent by P at the place immediately before or after a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day) is to be disregarded for the purposes of sub-paragraph (c).”
(10) Paragraph 35 (work tie) has effect as if after sub-paragraph (2) there were inserted—
“(3) But a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it) does not count as a day on which P works in the UK.”
(11) Paragraph 37 (90-day tie) has effect as if—
(a) the existing text were sub-paragraph (1);
(b) after that sub-paragraph, there were inserted—
“(2) For the purposes of sub-paragraph (1), a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of it) does not count as a day P has spent in the UK in the year in question.”
(12) Paragraph 38 (country tie) has effect as if after sub-paragraph (3) there were inserted—
“(4) For the purposes of sub-paragraph (3), P is to be treated as not being present in the UK at the end of a day that would fall within the third case in paragraph 22(7) (if P were present in the UK at the end of that day).”
(13) Paragraph 145 (interpretation) has effect as if at the appropriate place there were inserted—
““coronavirus disease” has the same meaning as in the Coronavirus Act 2020 (see section 1(1) of that Act);”.”—(Jesse Norman.)
This new clause modifies the statutory residence test in Schedule 45 to the Finance Act 2013 so that the presence of certain individuals in the UK for purposes connected with coronavirus is discounted for the purposes of determining whether they are resident in the UK in the tax years 2019-20 and 2020-21.
Brought up, read the First and Second time, and added to the Bill.
New Clause 22
Future Fund: EIS and SEIS relief
“(1) This section applies if an individual to whom shares in a company have been issued—
(a) enters into a convertible loan agreement with the company under the Future Fund on or after 20 May 2020, and
(b) subsequently receives value from the company under the terms of the agreement.
(2) If, as a result of the receipt of value, any EIS relief attributable to shares issued before the relevant time would (apart from this subsection) be withdrawn or reduced under section 213 of ITA 2007, the value received is to be ignored for the purposes of that section.
(3) If, as a result of the receipt of value, any SEIS relief attributable to shares issued before the relevant time would (apart from this subsection) be withdrawn or reduced under section 257FE of ITA 2007, the value received is to be ignored for the purposes of that section.
(4) If, as a result of the receipt of value, shares issued before the relevant time would (apart from this subsection) cease to be eligible shares by reason of paragraph 13(1)(b) of Schedule 5B to TCGA 1992, the value received is to be ignored for the purposes of that paragraph.
(5) In this section—
“the Future Fund” means the scheme of that name operated from 20 May 2020 by the British Business Bank plc on behalf of the Secretary of State;
“the relevant time” means the time when the individual enters into the convertible loan agreement.”—(Jesse Norman.)
This new clause prevents EIS and SEIS relief from being withdrawn or reduced for the purposes of income tax and capital gains tax in cases where an individual enters into a convertible loan agreement under the Future Fund with a company and subsequently receives value from the company under the agreement.
Brought up, read the First and Second time, and added to the Bill.
New Clause 23
Interest on unpaid tax in case of disaster etc of national significance
“(1) Section 135 of FA 2008 (interest on unpaid tax in case of disaster etc of national significance) is amended as follows.
(2) In subsection (2), for the words from “arising” to the end substitute “that—
(d) arises under or by virtue of an enactment or a contract settlement, and
(e) is of a description (if any) specified in the order.”
(3) In subsection (4)—
(a) after “relief period” insert “, in relation to a deferred amount,”;
(b) in paragraph (b), after “revoked” insert “or amended so that it ceases to have effect in relation to the deferred amount”.
(4) In subsection (10)—
(a) at the end of paragraph (a), omit “and”;
(b) at the end of paragraph (b) insert “, and
(c) may specify different dates in relation to liabilities of different descriptions.”
(5) The amendments made by this section have effect from 20 March 2020.”—(Jesse Norman.)
This new clause amends section 135 of the Finance Act 2008 to enable the Treasury to specify in an order under that section which payments of tax and other liabilities that are deferred by agreement during a period of national disaster or emergency will not attract interest or surcharges.
Brought up, read the First and Second time, and added to the Bill.
New Clause 24
Exceptional circumstances preventing disposal of interest in three year period
“(1) In FA 2003, Schedule 4ZA (stamp duty land tax: higher rates for additional dwellings etc) is amended as follows.
(2) In paragraph 3 (single dwelling transactions)—
(a) in sub-paragraph (7)(b) for “the period of three years beginning with the day after the effective date of the transaction concerned” substitute “a permitted period”;
(b) after sub-paragraph (7) insert—
“(7A) For the purposes of sub-paragraph (7)(b), the permitted periods are—
(a) the period of three years beginning with the day after the effective date of the transaction concerned, or
(b) if HMRC are satisfied that the purchaser or the purchaser’s spouse or civil partner would have disposed of the major interest in the sold dwelling within that three year period but was prevented from doing so by exceptional circumstances that could not reasonably have been foreseen, such longer period as HMRC may allow in response to an application made in accordance with sub-paragraph (7B).
(7B) An application for the purposes of sub-paragraph (7A)(b) must—
(a) be made within the period of 12 months beginning with the effective date of the transaction disposing of the major interest in the sold dwelling, and
(b) be made in such form and manner, and contain such information, as may be specified by HMRC.
(7C) Schedule 11A (claims not included in returns) does not apply in relation to an application made in accordance with sub-paragraph (7B).”
(3) In paragraph 8 (further provision in connection with paragraph 3(6) and (7))—
(a) in sub-paragraph (3), after “paragraph 3(7)” insert “by virtue of paragraph 3(7A)(a)”;
(b) in sub-paragraph (4), after “paragraph 3(7)” insert “by virtue of paragraph 3(7A)(a)”;
(c) after sub-paragraph (4) insert—
“(5) Where HMRC grant an application made in accordance with paragraph 3(7B)—
(a) the land transaction return in respect of the transaction concerned is treated as having been amended to take account of the application of paragraph 3(7) by virtue of paragraph 3(7A)(b), and
(b) HMRC must notify the purchaser accordingly.”
(4) The amendments made by this section have effect in a case where the effective date of the transaction concerned is on or after 1 January 2017.”—(Jesse Norman.)
This new clause amends Schedule 4ZA to the Finance Act 2003 to provide that where a person purchases a dwelling intending it to be their only or main residence, the three-year period within which a major interest in the previous dwelling must be disposed of to be able to obtain a refund of the higher rate stamp duty land tax may be extended to a longer period if, because of exceptional circumstances, the interest was not disposed of in that three-year period.
Brought up, read the First and Second time, and added to the Bill.
New Clause 25
HGV road user levy
“(1) Section 5(2) of the HGV Road User Levy Act 2013 (HGV road user levy charged for all periods for which a UK heavy goods vehicle is charged to vehicle excise duty) does not apply where the period for which a UK heavy goods vehicle is charged to vehicle excise duty is a period that begins in the exempt period.
(2) Section 6(2) of the 2013 Act (HGV road user levy charged in respect of non-UK heavy goods vehicle for each day on which the vehicle is used or kept on a road to which the Act applies) does not apply in respect of any day in the exempt period.
(3) The exempt period is the period of 12 months beginning with 1 August 2020.
(4) Section 7 of the 2013 Act (rebate of levy) has effect as if, after subsection (2A), there were inserted—
“(2B) A rebate entitlement also arises where HGV road user levy has been paid in respect of a non-UK heavy goods vehicle in accordance with section 6(2) in respect of any part of the exempt period within the meaning of section (HGV road user levy)(3) of the Finance Act 2020.””—(Jesse Norman.)
This new clause provides that HGV road user levy is not chargeable in respect of the period of 12 months beginning with 1 August 2020. It provides that where the levy has been paid in respect of a non-UK heavy goods vehicle in respect of the exempt period a rebate can be claimed (no equivalent provision being required for UK heavy goods vehicles which will benefit from the exemption in respect of any period for which the levy would otherwise be paid that begins during the exempt period).
Brought up, read the First and Second time, and added to the Bill.
New Clause 32
Enterprise management incentives: disqualifying events
“(1) The modifications made by this section apply for the purposes of determining whether a disqualifying event occurs or is treated as occurring in relation to an employee in accordance with section 535 of ITEPA 2003 (enterprise management incentives: disqualifying events relating to employee).
(2) Paragraph 26 of Schedule 5 to ITEPA 2003 (requirement as to commitment of working time) has effect as if, in sub-paragraph (3)—
(a) the “or” at the end of paragraph (c) were omitted, and
(b) at the end of paragraph (d), there were inserted “, or
(e) not being required to work for reasons connected with coronavirus disease (within the meaning given by section 1(1) of the Coronavirus Act 2020).”
(3) Paragraph 27 of that Schedule (meaning of “working time”) has effect as if, in sub-paragraph (1)(b), for “(d)” there were substituted “(e)”.
(4) Section 535 of ITEPA 2003 has effect as if, in the closing words of subsection (3), for “(d)” there were substituted “(e)”.
(5) The modifications made by this section have effect in relation to the period—
(a) beginning with 19 March 2020, and
(b) ending with 5 April 2021.
(6) The Treasury may by regulations made in the tax year 2020-21 amend subsection (5)(b) by replacing “2021” with “2022”.”—(Jesse Norman.)
This new clause provides that a disqualifying event does not occur in relation to an individual as regards enterprise management incentives as a result of the individual taking leave, being furloughed or working reduced hours because of coronavirus disease.
Brought up, read the First and Second time, and added to the Bill.
New Schedule 1
Taxation of coronavirus support payments
Accounting for coronavirus support payments referable to a business
1 (1) This paragraph applies if a person carrying on, or who carried on, a business (whether alone or in partnership) receives a coronavirus support payment that is referable to the business.
(2) So much of the coronavirus support payment as is referable to the business is a receipt of a revenue nature for income tax or corporation tax purposes and is to be brought into account in calculating the profits of that business—
(a) under the applicable provisions of the Income Tax Acts, or
(b) under the applicable provisions of the Corporation Tax Acts.
(3) Subject to paragraph 2(5), sub-paragraph (2) does not apply to an amount of a coronavirus support payment if—
(a) the business to which the amount is referable is no longer carried on by the recipient of the amount, and
(b) the amount is not referable to activities of the business undertaken at a time when it was being carried on by the recipient of the amount.
(4) If an amount of the coronavirus support payment is referable to more than one business or business activity, the amount is to be allocated between those businesses or activities on a just and reasonable basis.
(5) Paragraph 3 contains provision about when, in certain cases, an amount of a coronavirus support payment is, or is not, referable to a business for the purposes of this paragraph and paragraph 2.
(6) In this Schedule “business” includes—
(a) a trade, profession or vocation;
(b) a UK property business or an overseas property business;
(c) a business consisting wholly or partly of making investments.
Amounts not referable to activities of a business which is being carried on
2 (1) This paragraph applies if a person who carried on a business (whether alone or in partnership) receives a coronavirus support payment that—
(a) is referable to the business, and
(b) is not wholly referable to activities of the business undertaken while the business was being carried on by the recipient of the payment.
(2) So much of the coronavirus support payment as is referable to the business but which is not referable to activities of the business undertaken while the business was being carried on by the recipient of the payment is to be treated as follows.
(3) An amount referable to a trade, profession or vocation is to be treated as a post-cessation receipt for the purposes of Chapter 18 of Part 2 of ITTOIA 2005 or Chapter 15 of Part 3 of CTA 2009 (trading income: post-cessation receipts), and—
(a) in the application of Chapter 18 of Part 2 of ITTOIA 2005 to that amount, section 243 (extent of charge to tax) is omitted, and
(b) in the application of Chapter 15 of Part 3 of CTA 2009 to that amount, section 189 (extent of charge to tax) is omitted.
(4) An amount referable to a UK property business or an overseas property business is to be treated (in either case) as a post-cessation receipt from a UK property business for the purposes of Chapter 10 of Part 3 of ITTOIA 2005 or Chapter 9 of Part 4 of CTA 2009 (property income: post- cessation receipts), and—
(a) in the application of Chapter 10 of Part 3 of ITTOIA 2005 to that amount, section 350 (extent of charge to tax) is omitted, and
(b) in the application of Chapter 9 of Part 4 of CTA 2009 to that amount, section 281 (extent of charge to tax) is omitted.
(5) In any other case, for the purposes of paragraph 1(3)—
(a) the recipient of the amount is to be treated as if carrying on the business to which the amount is referable to at the time of the receipt of the amount, and
(b) the amount is to be treated as if it were referable to activities undertaken by the business at that time.
(6) Where the recipient of the amount has incurred expenses that—
(a) are referable to the amount, and
(b) would be deductible in calculating the profits of the business if it were being carried on at the time of receipt of the amount,
the amount brought into account under paragraph 1(2) by virtue of sub-paragraph (5) is to be reduced by the amount of those expenses.
(7) But sub-paragraph (6) does not apply to expenses of a person that arise directly or indirectly from the person ceasing to carry on business.
Amounts referable to businesses in certain cases
3 (1) An amount of a coronavirus support payment made under an employment-related scheme—
(a) is referable to the business of the person entitled to the payment as an employer (even if the person is not for other purposes the employer of the employees to whom the payment relates), and
(b) is not referable to any other business (and no deduction for any expenses in respect of the same employment costs which are the subject of the payment is allowed in calculating the profits of any other business or in calculating the liability of any other person to tax charged under section 242 or 349 of ITTOIA 2005 or section 188 or 280 of CTA 2009 (post-cessation receipts)).
(2) A coronavirus support payment made under the self-employment income support scheme is referable to the business of the individual to whom the payment relates.
(3) Where an amount of a coronavirus support payment made under the self-employment income support scheme is brought into account under paragraph 1(2), the whole of the amount is to be treated as a receipt of a revenue nature of the tax year 2020-21 (irrespective of its treatment for accounting purposes).
(4) But sub-paragraph (3) does not apply to an amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of a firm where the amount is distributed amongst the partners (rather than being retained by the partner).
(5) An amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of a firm that is retained by the partner (rather than being distributed amongst the partners) is not to be treated as a receipt of the firm.
(6) Accordingly—
(a) the receipt is not to be included in the calculation of the firm’s profits for the purposes of determining the share of profits or losses for each partner of the firm (see sections 849 to 850E of ITTOIA 2005 and sections 1259 to 1265 of CTA 2009), and
(b) the receipt is then to be added to the partner’s share.
Exemptions, reliefs and deductions
4 (1) An amount of a coronavirus support payment that relates only to mutual activities of a business that carries on a mutual trade is to be treated as if it were income arising from those activities (and accordingly the amount is not taxable).
(2) A coronavirus support payment is to be ignored when carrying out the calculation—
(a) in section 528(1) of ITA 2007 (incoming resources limit for charitable exemptions);
(b) in section 482(1) of CTA 2010 (incoming resources limit for charitable companies);
(c) in section 661CA(1) of CTA 2010 (income condition for community amateur sports clubs).
(3) A coronavirus support payment made under an employment-related scheme is to be ignored when carrying out the calculation—
(a) in section 662(2) of CTA 2010 (exemption from corporation tax for UK trading income of community amateur sports clubs);
(b) in section 663(2) of that Act (exemption from corporation tax for UK property income community amateur sports clubs).
(4) No relief under Chapter 1 of Part 6A of ITTOIA 2005 (trading allowance) is given to an individual on an amount of a coronavirus support payment made under the self-employment income support scheme brought into account under paragraph 1(2) as profits of that tax year.
(5) For the purposes of that Part, such an amount is to be ignored when calculating the individual’s “relevant income” for that tax year under Chapter 1 of that Part.
(6) Neither section 57 of ITTOIA 2005 nor section 61 of CTA 2009 (deductions for pre-trading expenses) (including as they apply by virtue of sections 272 and 272ZA of ITTOIA 2005 and section 210 of CTA 2009) apply to employment costs where an amount of a coronavirus support payment made under an employment-related scheme relates to those costs.
Charge where employment costs deductible by another
5 (1) Income tax is charged on an amount of a coronavirus support payment made under an employment-related scheme if conditions A and B are met.
(2) Condition A is that the amount is neither brought into account under paragraph 1(2) in calculating the profits of a business carried on by the person entitled to the payment as an employer nor treated, by virtue of paragraph 2(3) or (4), as a post-cessation receipt arising from the carrying on of such a business.
(3) Condition B is that expenses incurred by another person in respect of the same employment costs which are the subject of the coronavirus support payment and to which the amount relates are deductible—
(a) in calculating the profits of a business carried on by that other person (for income or corporation tax purposes), or
(b) in calculating the liability of that other person to tax charged under section 242 or 349 of ITTOIA 2005 or section 188 or 280 of CTA 2009 (post-cessation receipts).
(4) Tax is charged under sub-paragraph (1) on the whole of the amount to which that sub-paragraph applies.
(5) The person liable for tax charged under sub-paragraph (1) is the person entitled to the coronavirus support payment as an employer.
(6) Section 3(1) of CTA 2009 (exclusion of charge to income tax) does not apply to an amount of a coronavirus support payment that is charged under this paragraph.
Charge where no business carried on
6 (1) Tax is charged on an amount of a coronavirus support payment, other than a payment made under an employment-related scheme or the self-employment income support scheme, if—
(a) the amount is neither brought into account under paragraph 1(2) in calculating the profits of a business nor treated as a post-cessation receipt by virtue of paragraph 2(3) or (4), and
(b) at the time the coronavirus support payment was received, the recipient did not carry on a business whose profits are charged to tax and to which the payment could be referable.
(2) In this paragraph “tax” means—
(a) corporation tax, in the case of a company that (apart from this paragraph) is chargeable to corporation tax, or to any amount chargeable as if it was corporation tax, or
(b) income tax, in any other case.
(3) Tax is charged under sub-paragraph (1) on the whole of the amount to which that sub-paragraph applies.
(4) The person liable for tax charged under sub-paragraph (1) is the recipient of that amount.
(5) Where income tax is charged under sub-paragraph (1), sections 527 and 528 of ITA 2007 (exemption and income condition for charitable trusts) have effect as if sub-paragraph (1) were a provision to which section 1016 of that Act applies.
(6) Where corporation tax is charged under sub-paragraph (1), sections 481 and 482 of CTA 2010 (exemption and income condition for charitable companies) have effect as if sub-paragraph (1) were a provision to which section 1173 of that Act applies.
Modification of the Tax Acts
7 The Treasury may by regulations modify the application of any provision of the Tax Acts that affects (or that otherwise would affect) the treatment of—
(a) receipts brought into account under paragraph 1(2),
(b) amounts treated as post-cessation receipts under paragraph 2(3) or (4), or
(c) amounts charged under paragraph 5(1) or 6(1).
Charge if person not entitled to coronavirus support payment
8 (1) A recipient of an amount of a coronavirus support payment is liable to income tax under this paragraph if the recipient is not entitled to the amount in accordance with the scheme under which the payment was made.
(2) But sub-paragraph (1) does not apply to an amount of a coronavirus support payment made under a coronavirus business support grant scheme or the coronavirus statutory sick pay rebate scheme.
(3) For the purposes of this Schedule, references to a person not being entitled to an amount include, in the case of an amount of a coronavirus support payment made under the coronavirus job retention scheme, a case where the person ceases to be entitled to retain the amount after it was received—
(a) because of a change in circumstances, or
(b) because the person has not, within a reasonable period, used the amount to pay the costs which it was intended to reimburse.
(4) Income tax becomes chargeable under this paragraph—
(a) in a case where the person was entitled to an amount of a coronavirus support payment paid under the coronavirus job retention scheme but subsequently ceases to be entitled to retain it, at the time the person ceases to be entitled to retain the amount, or
(b) in any other case, at the time the coronavirus support payment is received.
(5) The amount of income tax chargeable under this paragraph is the amount equal to so much of the coronavirus support payment—
(a) as the recipient is not entitled to, and
(b) as has not been repaid to the person who made the coronavirus support payment.
(6) Where income tax which is chargeable under this paragraph is the subject of an assessment (whether under paragraph 9 or otherwise)—
(a) paragraphs 1 to 6 do not apply to the amount of the coronavirus support payment that is the subject of the assessment,
(b) that amount is not, for the purposes of Step 1 of the calculation in section 23 of ITA 2007 (calculation of income tax liability), to be treated as an amount of income on which the taxpayer is charged to income tax (but see paragraph 10 which makes further provision about the application of that section), and
(c) that amount is not to be treated as income of a company for the purposes of section 3 of CTA 2009 (and accordingly the exclusion of the application of the provisions of the Income Tax Acts to the income of certain companies does not apply to the receipt of an amount charged under this paragraph).
(7) No loss, deficit, expense or allowance may be taken into account in calculating, or may be deducted from or set off against, any amount of income tax charged under this paragraph.
(8) In calculating profits or losses for the purposes of corporation tax, no deduction is allowed in respect of the payment of income tax charged under this paragraph.
(9) For the purposes of this paragraph and paragraphs 9(4) and 14, a firm is not to be regarded as receiving an amount of a coronavirus support payment made under the self-employment income support scheme in respect of a partner of that firm that is retained by the partner (rather than being distributed amongst the partners).
Assessments of income tax chargeable under paragraph 8
9 (1) If an officer of Revenue and Customs considers (whether on the basis of information or documents obtained by virtue of the exercise of powers under Schedule 36 to FA 2008 or otherwise) that a person has received an amount of a coronavirus support payment to which the person is not entitled, the officer may make an assessment in the amount which ought in the officer’s opinion to be charged under paragraph 8.
(2) An assessment under sub-paragraph (1) may be made at any time, but this is subject to sections 34 and 36 of TMA 1970.
(3) Parts 4 to 6 of TMA 1970 contain other provisions that are relevant to an assessment under sub-paragraph (1) (for example, section 31 makes provision about appeals and section 59B(6) makes provision about the time to pay income tax payable by virtue of an assessment).
(4) Where income tax is chargeable under paragraph 8 in relation to an amount of a coronavirus support payment received by a firm—
(a) an assessment (under sub-paragraph (1) or otherwise) may be made on any of the partners in respect of the total amount of tax that is chargeable,
(b) each of the partners is jointly and severally liable for the tax so assessed, and
(c) if the total amount of tax that is chargeable is included in a return under section 8 of TMA 1970 made by one of the partners, the other partners are not required to include the tax in returns made by them under that section.
Calculation of income tax liability
10 (1) Section 23 of ITA 2007 (calculation of income tax liability) applies in relation to a person liable to income tax charged under paragraph 8 as if that paragraph were included in the lists of provisions in subsections (1) and (2) of section 30 of that Act (amounts of tax added at step 7).
(2) For the purposes of paragraph 7(2) of Schedule 41 to FA 2008, a relevant obligation relating to income tax charged under paragraph 8 of this Schedule relates to a tax year if the income tax became chargeable in that tax year.
(3) But this paragraph does not apply to a company to which paragraph 11 (companies chargeable to corporation tax) applies.
Calculation of tax liability: companies chargeable to corporation tax
11 (1) This paragraph applies where a person liable to income tax charged under paragraph 8 is a company that is chargeable to corporation tax, or to any amount chargeable as if it was corporation tax, in relation to a period within which the income tax became chargeable.
(2) Part 5A of TMA 1970 (payment of tax) applies in relation to that company as if—
(a) the reference to “corporation tax” in subsection (1) of section 59D (general rule as to when corporation tax is due and payable) included income tax charged under paragraph 8 of this Schedule;
(b) an amount of income tax charged under paragraph 8 of this Schedule were an amount within subsection (6) of section 59F (arrangements for paying tax on behalf of group members);
(c) any reference in section 59G (managed payment plans) to “corporation tax” included income tax charged under paragraph 8 of this Schedule.
(3) Part 9 of that Act (interest on overdue tax) applies in relation to that company as if—
(a) the references in section 86 (interest on overdue income tax and capital gains tax) to “income tax” did not include income tax charged under paragraph 8 of this Schedule;
(b) in subsection (1) of section 87A (interest on overdue corporation tax) the reference to “corporation tax” included income tax charged under paragraph 8 of this Schedule.
(4) Schedule 18 to FA 1998 (company tax returns etc.) applies in relation to that company as if—
(a) any reference in that Schedule to “tax”, other than the references in paragraph 2 of that Schedule (duty to give notice of chargeability), included income tax charged under paragraph 8 of this Schedule, and
(b) in paragraph 8(1) of that Schedule (calculation of tax payable), at the end there were inserted—
“Sixth step
Add any amount of income tax chargeable under paragraph 8 of Schedule (Taxation of coronavirus support payments) to the Finance Act 2020.”
(5) But the modifications of that Schedule are to be ignored for the purposes of the Corporation Tax (Instalment Payments) Regulations 1998 (S.I. 1998/3175).
(6) Schedule 41 to FA 2008 applies in relation to that company as if —
(a) the references to “income tax” in paragraph 7(2) did not include income tax charged under paragraph 8 of this Schedule;
(b) the reference to “corporation tax” in paragraph 7(3) included income tax charged under paragraph 8 of this Schedule;
(but see paragraph 13(5) of this Schedule which has the effect that paragraph 7 of that Schedule does not apply in certain circumstances).
(7) For the purposes of paragraph 7(3) of Schedule 41 to FA 2008 (as modified by sub-paragraph (6)), a relevant obligation relating to income tax charged under paragraph 8 of this Schedule relates to an accounting period if the income tax became chargeable in that period.
Notification of liability under paragraph 8
12 (1) Section 7 of TMA 1970 (notice of liability to income tax and capital gains tax) applies in relation to income tax chargeable under paragraph 8 as provided for in sub-paragraphs (2) to (5).
(2) Subsection (1) has effect as if paragraph (b) (and the “and” before it) were omitted.
(3) Subsection (1) has effect as if the reference to “the notification period” were to the period commencing on the day on which the income tax became chargeable and ending on the later of—
(a) the 90th day after the day on which this Act is passed, or
(b) the 90th day after the day on which the income tax became chargeable.
(4) Subsection (3)(c) has effect as if after “child benefit charge” there were inserted “or to income tax under paragraph 8 of Schedule (Taxation of coronavirus support payments) to the Finance Act 2020”.
(5) In relation to income tax chargeable under paragraph 8 in relation to an amount of a coronavirus support payment received by a firm, the duty in subsection (1) (as it has effect by virtue of sub-paragraphs (2) and (3)) is taken to have been complied with by each of the partners if one of the partners has complied with it.
(6) The reference in section 36(1A)(b) of TMA 1970 (20 year period for assessment in a case involving a loss of income tax) to a failure to comply with an obligation under section 7 of that Act is not to be taken as including a failure arising by virtue of the modification of that section by this paragraph, unless the failure is one to which paragraph 13 applies.
Penalty for failure to notify: knowledge of non-entitlement to payment
13 (1) This paragraph applies to a failure of a person to notify, under section 7 of TMA 1970 (as modified by paragraph 12), a liability to income tax chargeable under paragraph 8 where the person knew, at the time the income tax first became chargeable, that the person was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable.
(2) Schedule 41 to FA 2008 (failure to notify) applies to a failure described in sub-paragraph (1) as follows.
(3) The failure is to be treated as deliberate and concealed.
(4) Accordingly, paragraph 6 of that Schedule has effect as if the references to a penalty for “a deliberate but not concealed failure” or for “any other case” were omitted.
(5) For the purposes of that Schedule (except in a case falling within paragraph 14 of this Schedule), the “potential lost revenue” is to be treated as being the amount of income tax which would have been assessable on the person at the end of the last day of the notification period (see paragraph 12(3)).
Penalties: partnerships
14 (1) This paragraph applies to a failure to notify, under section 7 of TMA 1970 (as modified by paragraph 12), a liability to income tax chargeable under paragraph 8 by a partner of a firm that received the amount of the coronavirus support payment in relation to which the tax is chargeable.
(2) For the purposes of paragraph 13(1) of this Schedule, each partner is taken to know anything that any of the other partners knows.
(3) Where a partner would be liable to a penalty under Schedule 41 to FA 2008 (whether in a case falling within paragraph 13 or otherwise), the partner is instead jointly and severally liable with the other partners to a single penalty under that Schedule for the failures by each of them to notify.
(4) In a case not falling within paragraph 13, if the failure of at least one of the partners—
(a) was deliberate and concealed, the single penalty is to be treated as a penalty for a deliberate and concealed failure;
(b) was deliberate but not concealed, the single penalty is to be treated as a penalty for a deliberate but not concealed failure.
(5) For the purposes of Schedule 41 to FA 2008, the “potential lost revenue” is to be treated as being the amount of income tax which would have been assessable on any one of the partners (see paragraph 9(4)(a))—
(a) in a case falling within paragraph 13, at the end of the last day of the notification period, or
(b) in any other case, at the end of 31 January following the tax year in which the amount of coronavirus support payment was received by the firm.
(6) Paragraph 22 of that Schedule (limited liability partnerships: members’ liability) does not apply.
Liability of officers of insolvent companies
15 (1) This paragraph—
(a) provides for an individual to be jointly and severally liable to the Commissioners for Her Majesty’s Revenue and Customs for a liability of a company to income tax charged under paragraph 8, where a notice under sub-paragraph (2) is given to the individual, and
(b) applies paragraphs 10 to 15 and 17 of Schedule 13 (joint liability notices: tax avoidance, tax evasion and repeated insolvency and non-payment) to such a notice.
(2) An officer of Revenue and Customs may give a notice under this sub-paragraph to an individual if it appears to the officer that conditions A to D are met.
(3) Condition A is that—
(a) the company is subject to an insolvency procedure, or
(b) there is a serious possibility of the company becoming subject to an insolvency procedure.
(4) Condition B is that the company is liable to income tax under paragraph 8.
(5) Condition C is that the individual was responsible for the management of the company at the time the income tax first became chargeable and the individual knew (at that time) that the company was not entitled to the amount of the coronavirus support payment in relation to which the tax is chargeable.
(6) Condition D is that there is a serious possibility that some or all of the income tax liability will not be paid.
(7) For the purposes of sub-paragraph (5) the individual is responsible for the management of a company if the individual—
(a) is a director or shadow director of the company, or
(b) is concerned (whether directly or indirectly) in, or takes part in, the management of the company.
(8) A notice under sub-paragraph (2) must—
(a) specify the company to which the notice relates;
(b) set out the reasons for which it appears to the officer that conditions A to D are met;
(c) specify the amount of the income tax liability;
(d) state the effect of the notice;
(e) offer the individual a review of the decision to give the notice and explain the effect of paragraph 11 of Schedule 13 (right of review);
(f) explain the effect of paragraph 13 of that Schedule (right of appeal).
(9) An individual who is given a notice under sub-paragraph (2) is jointly and severally liable with the company (and with any other individual who is given such a notice) to the amount of the income tax liability specified under sub-paragraph (8)(c).
For provision under which the amount so specified may be varied, see—
(a) paragraph 10 of Schedule 13 (modification etc),
(b) paragraphs 11 and 12 of that Schedule (review), and
(c) paragraphs 13 and 14 of that Schedule (appeal).
(10) Paragraphs 10 to 15 and 17 of Schedule 13 apply to a notice under sub-paragraph (2) as they apply to a joint liability notice (see paragraph 1(2) of that Schedule) as if—
(a) the references in those paragraphs to “relevant conditions” were to conditions A to D in this paragraph;
(b) sub-paragraphs (3) and (4) of paragraph 10 were omitted (and references to sub-paragraph (3) in that paragraph were omitted);
(c) in paragraph 10(6)(a), after “or (9)” there were inserted “or paragraph 15(8)(c) of Schedule (Taxation of coronavirus support payments)”;
(d) in paragraph 12(6)(b) after “5(9)” there were inserted “or paragraph 15(8)(c) of Schedule (Taxation of coronavirus support payments)”.
(11) Expressions used in this paragraph and in Schedule 13 have the same meaning in this paragraph as they have in that Schedule (subject to the modification made by sub-paragraph (10)(a)).”—(Jesse Norman.)
This new Schedule makes provision about the taxation of payments made under various coronavirus related business support schemes, including the coronavirus job retention scheme (“CJRS”) and the self-employment income support scheme (“SEISS”). Paragraphs 1 to 7 clarify how payments under those schemes are to be subject to tax, following (with some exceptions) the normal principles for taxing receipts of a business. Paragraph 8 provides that where a person receives an amount to which they were not entitled under CJRS or SEISS, or misapplies an amount paid under CJRS, the person will be liable to income tax at the rate of 100% in relation to so much of that amount as was not repaid to HMRC. Paragraphs 9 to 15 make provision in connection with that charge (for example in relation to assessments and penalties).
Brought up, read the First and Second time, and added to the Bill.
Third Reading
Jesse Norman
I beg to move, That the Bill be now read the Third time.
This Finance Bill stands in the shadow of a pandemic unprecedented in its scale and reach. We are keenly aware of the immense challenges and pressures that that has placed on us. These conditions—this situation—cannot and will not be ignored. The Government are working flat out to alleviate the impact of covid-19 on the economy, on the public finances, and, most importantly, on the health and wellbeing of every person and family in the United Kingdom.
My right hon. Friend the Chancellor has announced numerous measures over the past few months in response to the virus, including the job retention scheme, the business interruption loan scheme, and the self-employment income scheme. Together, this represents, contrary to many of the comments made in the previous debate, an economic intervention by Government on a scale hitherto unseen in peacetime, and necessarily so. At such a difficult time for millions of people around the United Kingdom, the Government have worked to protect businesses and are specifically focused on the wellbeing of the most vulnerable in society.
Of course we recognise, and the House must recognise, that this is a still a work in progress and there is a way to go. The crisis is not over. The pandemic continues. People around this country are still suffering and may do so for many months yet. The Government will continue to work to lessen the impact, but it remains the responsibility, the duty and the important role of businesses, families and individuals to play their part, too, in this colossal collective national effort. Together, we must work to bring ourselves through and out of this crisis.
The Bill supports the emergency services as they go about their vital duties and exempts from vehicle excise duty vehicles that have been purpose-built to transport NHS products. The Government have introduced new clauses that were considered today to ensure that workers who have returned to public sector jobs to help fight the effects of the pandemic will face no adverse pensions consequences from doing so. The Bill reforms the tapered annual allowance so that doctors can spend more time treating patients without facing precipitous tax bills. This pandemic has brought out, in many ways, the best in our society, and I am certain that the Britain that emerges from it will be stronger and fairer.
The Bill provides tax exemptions specifically for those who receive payments under the Windrush compensation scheme, the troubles permanent disablement payment scheme and the Kindertransport fund, as well as for care leavers who are starting apprenticeships, and rightly so.
The necessary focus on the here and now must not come at the expense of tomorrow. In the words of the Prime Minister, our great national hibernation is coming to an end, and we must and will now at last look to the future. Now is the time to start to rebuild the economy and to restore our public finances. Our police, our teachers, our armed forces and many other public sector workers have all played their part in combating this pandemic alongside the NHS. I would also single out, as I have said, our public servants in the civil service, particularly in my own area of HM Treasury and within HMRC.
This public sector support cannot be provided for if the public finances are not supported, in turn, with a fair and sustainable tax system. That is a key fact. We do that while seeking to remain competitive internationally, and maintaining the corporation tax rate at 19% is therefore the right approach. Even at that level, it is still the lowest headline rate in the G20, and it reminds the world of UK strength as a location for inward investment.
But we have also been clear about fairness. Everyone must pay their fair share of tax. That is one reason we have introduced the digital services tax, for which this Bill also legislates. A tax set at a rate of 2% on revenues from digital services will ensure that digital businesses pay a fairer share of UK tax that more accurately reflects the significant value that they derive from their UK users. As we look to recovery, we want business to receive the support that it needs. That is why we have delayed the extension of the off-payroll working reforms in the private sector to April 2021.
Businesses need time to prepare for the reforms, and it would have been burdensome to ask them to do so during the pandemic.
We focus on innovation in the Finance Bill. We wish to go further to support enterprise in this country, which will be desperately needed in the coming months. This country has a proud history of innovation, and increasing the research and development expenditure credit rate to 13% will allow that to continue. The structures and buildings allowance rate increase will also aid investment in new shops, factories and agricultural buildings, which will help to stimulate capital investment across the nation. As ever, we are committed to levelling up across the United Kingdom.
As has been pointed out, covid-19 is not the only crisis that we face. The Government have committed to reducing the United Kingdom’s carbon emissions to net zero by 2050. The Bill is another step towards that target. Not only does it pave the way for the forthcoming plastic packaging tax, but it removes the vehicle excise duty expensive car supplement for zero-emissions vehicles and ensures that, now we have left the European Union, a carbon price will remain in place. Those measures will help to ensure that our post-covid-19 economy is greener than before.
At the end of 10 hours of debate in the last two days, for which I thank all my colleagues and the Opposition Front-Bench team, we understand that the world during the passage of the Bill has changed. Its impact on this House, our daily lives and our economic outlook has radically altered. To some extent, we have made changes on the fly to shore up and support our public services and our response to the pandemic. As a result, the Bill is a firm foundation—indeed, firmer than it was originally framed—on which we can rebuild our economy and protect our public finances as we recover from this devastating virus. The Bill supports businesses, the vulnerable and our key workers, and I commend it to the House.
Alison Thewliss
Like everybody, I acknowledge these extraordinary times. The world has changed since the Budget was announced in March. All the certainties that we used to rely upon are gone, and things that we thought that the Government would never do, never say or never spend money on are suddenly things that are no barrier whatever. That goes some way to show that the Government can do a lot more when they want to, and that should give us some hope that they may go back on things they have said before.
I wish to take this opportunity to thank everybody who has contributed to debates on the Bill. I thank the Clerks and the Bill team, who have been so incredibly helpful; I thank you, Madam Deputy Speaker, for your sage advice; and I thank my hon. Friend the Member for Aberdeen South (Stephen Flynn), whose first Finance Bill this is and who has done a fantastic job representing both his constituents and the party.
I also thank our researchers, Scott Taylor and Jonathan Kiehlmann, who have supported us so well throughout this process—with all the amendments that we tabled and having to learn about everybody else’s amendments, it has been a huge challenge to keep up but they have risen to it admirably—and Mhairi Love in my office, who has also done an incredible job while studying for her exams and completing a dissertation. She has provided support to me throughout all that and I thank her for it. I thank the people on Twitter who think I talk too quickly. I swear that I am making an effort to slow down; this is just how I speak.
I repeat the call for evidence that I made at the start of the Bill’s progress. A Finance Bill Committee should be able to take evidence. Other Bill Committees in this House have the practice—for example, the Domestic Abuse Bill Committee for England and Wales took evidence from experts. It seems absolutely ludicrous that Finance Bills, which affect so many different aspects of everybody’s lives, do not take evidence from experts at the start and instead rely on getting written evidence and us scrutinising that written evidence, rather than being able to ask questions about the Government’s policies and find the best way through. I also reiterate that some kind of standing committee on the Budget is very much required to keep an eye on what the Government are doing and how effective their policies and proposals are.
Many questions remain at the end of this Budget process, and I suppose the first of those is whether we will be back here for another Budget in the autumn. Issues such as the loan charge and IR35 are not going away, as much as the Government would like them to. We cannot predict the course of the coronavirus, but we do know that the UK Government’s handling of it has been far from impressive. As I said yesterday, I fear a return to mass unemployment. The Treasury has the toughest of decisions to make, but it ought to put wellbeing and people first, because if we do not have that, we will not have much else to go with afterwards.
Jesse Norman
The hon. Lady has raised the loan charge; we did not really get a sense of it yesterday, but is the SNP in favour of the loan charge as a substantive matter or against it?
Alison Thewliss
We believe that there are still many questions to be answered on the loan charge, not least the revelations in the press during the week over the FOI request that have raised more questions. We want to see further probing on the issue and further support for those people who have ended up losing not only their livelihoods but their homes—and some have lost their lives. It is no light-hearted matter to be considered in such a flippant way.
If the Financial Secretary to the Treasury wants to prevent scarring in the economy, he must encourage his colleague the Chancellor to be bolder next week. He must keep the job retention scheme and the self-employment support scheme going, and he must fill the gaps in those schemes when he makes his announcement next week, because too many people have lost out and too many sectors are not yet back to full strength. When that change comes—when people have to pay more of the wage costs themselves—we will see more and more employers doing what many employers have done this week and simply deciding to hand back the keys, fire their staff and wind up their companies. And the unemployment figures will soar.
Finance Bill
Jesse Norman ExcerptsWednesday 1st July 2020
(3 years, 10 months ago)
Commons ChamberRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 1 July 2020 - large font accessible version - (1 Jul 2020)
Dr Huq
Yes, I think we should be working closely with the EU, but we can even beat them to it. Already on the EU Council there are countries such as France—which was called “cheese-eating surrender monkeys” on “The Simpsons”—that have agreed to it. This could be a bit of a trick for our Government if they pipped them to the post—I think we abstained when it last came up in the European Council. Yes, I completely agree that we should be in harmony with those countries, but this is an opportunity to beat them. By the way, not that I endorse “The Simpsons”, obviously—I do not want to cause a scandal—but, for those who are insistent, this presents opportunities. We have now left, after all.
The measure has cross-party support, and Oxfam, Christian Aid, CAFOD, the Churches and a list of development charities as long as your arm are all for it. They are spurred on by the fact that, as has been said, developing countries lose three times as much as they gain from development aid due to tax avoidance.
Regaining the respect of the aid sector, after the cruel surprise of the DFID merger was sprung on it the other day; delivering progressive taxation to ensure that corporations pay their fair share; rebalancing towards ordinary people; levelling up, so that our high street traders are not undercut by online giants with lax morals; levelling the playing field with multinationals, which is good for British business; bringing in billions and leading the way to be genuinely world-beating, which sadly the track and trace app was not; and beating the EU to it, when we have got Brexit done, and reinforcing the role of our sovereign Parliament—what is not to like?
The Nobel prize-winning economist Professor Joseph Stiglitz has remarked:
“It is time for countries to take both unilateral and multilateral actions to tax multinationals.”
Let the UK not drag its feet any more, but be a leader. It was David Cameron who said that sunlight was “the best disinfectant”, and the Conservative West Midlands Metro Mayor said when he was managing director of John Lewis:
“If you think of two companies making the same profit, one of them pays corporation tax at the UK rate, one does not because it claims to be headquartered somewhere else—that is not fair.”
Anyway, that is enough Conservative quotes in a Rupa speech—this is quite unusual for me. The Government should now set a date.
The Financial Secretary to the Treasury (Jesse Norman)
May I say how much I am enjoying the thoroughly Conservative nature of much of what the hon. Lady is saying?
Dr Huq
I think that is the point. The Minister should recognise that this has cross-party support. I started by praising the right hon. Member for Sutton Coldfield; I am ending with the Metro Mayor, the John Lewis man. These are all reasons why the Minister should adopt this measure forthwith. It is time to act. The time is now.
Kevin Hollinrake
It is a pleasure to follow my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates), who made some very important points. She made the critical point that the digital services tax is a temporary, short-term measure, and we need something more encompassing to replace it. That is why I want to speak to new clause 33, which proposes a radical reshaping of how tax affairs would be disclosed. If we are going to tackle this fundamental problem, it is essential that we have country-by-country reporting. I therefore do not secretly support this new clause; I openly support it, even though it is not going to be pushed to a vote today. The principle behind the clause is absolutely right, and I pay tribute to my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) and the right hon. Member for Barking (Dame Margaret Hodge) for their work on it and in many other areas to tackle tax avoidance and corruption.
The other key element of the digital services tax is that it tries to level the playing field in corporation tax, but it does not level the playing field for business rates. That is a completely different discussion and it is one that we definitely need to have.
When I first came to the House, I attended one of those breakfasts; I think it was run by the Industry and Parliament Trust, of which I am a trustee. The subject of that seminar was the values of business—I have been in business for 30 years, and in my view business is a force for good in the vast majority of cases—and it was addressed by a vice-president of Kellogg’s, who talked about the values of business to the economy and the inherent values of some businesses. As examples, he talked about the great values and corporate social responsibility of businesses such as Facebook, Google and Amazon.
While the speaker was addressing us I googled, “Do Kellogg’s pay corporation tax in the UK?” My search came up with a Daily Mail article saying that Kellogg’s turns over £650 million in the UK and does not pay any corporation tax. When he got to the end of his comments, I asked him, “How can you square the circle—saying that you have great corporate social responsibility policies and put money into good causes in the UK, which might cost you a few pence or percentage points in terms of cost and contribution, when you are not paying corporation tax? Your customers are taxpayers. You are trading and turning over a significant amount of money in the UK. And yet you are not contributing back to the bills and the vital public services that your customers rely on. I think it is a cynical approach.”
This Kellogg’s vice-president was clearly quite stunned by my question. I quoted to him that Kellogg’s is one of those companies that does not pay corporation tax. When pressed for an answer, the only one that he could come up with was, “Well, we’ve got a duty to shareholders to minimise our tax burden.” That is an old chestnut. I hear lots of big shareholders of big companies in the US—people such as Warren Buffett—absolutely reject that notion. In my mind it cannot be right that businesses seek to avoid fair taxation rates in this world and, as many hon. Members have said, we have a duty to stand up for small and medium-sized enterprises that cannot benefit from these kinds of devices. The vast majority of us pay tax through pay-as-you-earn anyway, so we pay our fair share of tax—and most people do so willingly.
Jesse Norman
My hon. Friend raises an interesting point. Does he share my view—I think it is also the view of the people who really know the law in this area—that in Britain a corporation exists to maximise the interests of all its members, rather than merely the shareholders, and that the shareholder entitlement is to the residual that is left after satisfying other claims on the company?
Kevin Hollinrake
I absolutely agree. Any businessperson starts off on the premise that they have responsibilities not just to their shareholders, but to their customers and other stakeholders.
Due to the scale of the problem and the lack of country-by-country reporting, it is difficult to establish exactly what some of these companies are making in the UK, but let us look at Google as an example. In 2018, Google turned over $137 billion and had net revenues— so a profit—of $31 billion. The whole organisation internationally works on a profit margin of about 22%. The company turned over around $10 billion in the UK in the same year, and makes about $2.2 billion of profit from UK activities each year. If we applied 19% corporation tax to that amount, we would come up with a figure of £420 million in corporation tax that Google should have paid. It actually paid £67 million that year. This is happening on a huge scale and is multiplied by many other companies.
The Financial Secretary to the Treasury (Jesse Norman)
It has been a fascinating and lively debate, and I am grateful to all Members who have taken part. As Members will be aware, this Finance Bill introduces legislation to enact the digital services tax and to set the scope of the tax.
I will talk about the various clauses and amendments in front of us, and then will turn to the contributions Members have made. I start with something that I think I caught the hon. Member for Houghton and Sunderland South (Bridget Phillipson), the shadow Chief Secretary to the Treasury, say: “We support any proposals to combat tax avoidance.” I thought that was an important statement of principle, and I look forward to her exemplifying that view when we get to the loan charge. It bore out what the hon. Member for Ilford North (Wes Streeting) said in Committee:
“the Labour party takes a dim view of tax avoidance. We believe that tax is the price we pay for a civilised society…and that when people contrive to avoid their tax, they rob and short-change all of us of the revenues needed for the state to do the essential things it needs to do”.––[Official Report, Finance Public Bill Committee, 4 June 2020; c. 33.]
Jesse Norman
The hon. Gentleman is congratulating himself heartily from a sedentary position. I wish I had his self-confidence. I noted those comments because they help to shape this conversation, but it is important to be clear that the digital services tax is not an anti-avoidance measure, although there is a tendency to think of it in those terms. It is a new tax aimed at a new revenue base. It will levy a 2% charge on revenues that groups receive from providing specific digital services to UK users.
The services that are in scope of the charge are search engines, social media and online marketplaces. DST will apply only to groups with annual global revenues from these services of over £500 million, and it will be charged only on those revenues attributable to UK users, and only on amounts above £25 million. Additionally, online financial services marketplaces will be excluded from the definition of an online marketplace.
By seeking to tax UK user contributions, the charge breaks new ground in what a tax is. I very much share the views uttered by many of my colleagues, notably my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who described it as a pioneering tax. The same was rightly said by others, including my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones).
The digital services tax was announced in Budget 2018 as a response to changes brought about by the rapid development of our digital economy, the many strengths and weaknesses of which have been noted in this debate. That digital economy brings many benefits, some of which we have seen on display during the covid crisis, but it has posed a significant challenge for international corporate tax rules. The hon. Member for Islwyn (Chris Evans) brought this out very well when he spoke about the contrast between the international bodies that we are seeking to tax through DST and what might be called the ordinary shopkeeper in his constituency.
Under current rules, digital businesses can derive significant value from UK users but pay little UK tax. That is because international corporate tax rules do not recognise this user-generated value when allocating the right to tax profits between jurisdictions. That undermines the fairness and sustainability of our tax system, and it is therefore widely accepted, certainly across this House, that the rules need to be updated.
As I have mentioned, the Government remain at the forefront of international efforts to secure a comprehensive, long-term solution to this issue, and we are absolutely serious about continued, detailed engagement with OECD and G20 partners, and of course the EU nations among them, on long-term solutions.
The hon. Member for Glasgow Central (Alison Thewliss) talked about the importance of international co-operation. She is absolutely right about that. As has been mentioned, we have been a leader on base erosion and profit shifting work. The same is true of diverted profits tax, and tax of intangible assets; it is important to recognise that, in the spirit of fairness that Members have shown in this debate. That is the basis for our saying that while we welcome recent progress towards global solutions, there are still a number of difficult and important issues that we need to resolve. That is what we are trying to do on UK user-generated value, but we are trying to do it in a fair and proportionate manner. We are introducing a new tax but we expect it to be only temporary, until appropriate global reform is in place.
Clause 71 already requires the Government to review the DST in 2025 and submit the review to Parliament. It is important to note that the review is intended to be broader than the narrow construction that would be placed on it by the proposed new clause. Should the DST remain in place in 2025, the review will consider whether it continues to meet all its objectives and whether international reform means that it is no longer required. Importantly, it will look not only at the net amount of cash brought in by the tax—although that is of course important—but at whether the tax continues to be necessary to ensure fairness across the UK tax system, in so far as it bears on that. As I have said, it is a Government priority to try to secure a global solution, but we do so not merely for the receipt of revenue but in the spirit of fairness. Once that solution is in place, the DST will be removed.
Amendment 18 would require the Government to produce a review of the DST annually rather than in 2025, and amendment 19 would require the review to include an assessment of the effect of the DST on tax revenues. A review in 2025 will ensure that, if the DST remains in place at that point, its continuing relevance will be given a full and proper consideration against the relevant circumstances at that time. It thereby underlines the fact that it is the Government’s strong preference to agree and implement an appropriate global solution—indeed, it places some impetus behind such an agreement—and, once that agreement is secured, to remove the DST as soon as possible, and certainly ideally before 2025.
As regards the need for amendment 19, it is important to note that Her Majesty’s Revenue and Customs already reports regularly on the taxes which it is responsible for collecting and the revenue they generate. The DST will be no exception to that. It goes without saying that, as with all taxes, the Government will keep the DST under review through the annual Budget processes and at other times. I suggest that the amendments are therefore not necessary.
New clause 5 would require the Government to report to the House, within six months of the Act’s passing, on the effect of the DST on tax revenues, and particularly on the effect on the tax payable by the owners and employees of Scottish limited partnerships. However—I think I am right in saying that my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) picked this up very well—the report suggested by the new clause would not provide useful information, for several reasons. The first is that the DST is a tax on groups, not on individuals, whether those are individual employees or individual owners. Secondly, DST payments will not be required until after the end of the relevant accounting period of each liable group. For that reason, payments will not be required until 2021. Finally, the reporting deadlines in the legislation mean that very few groups will have needed to register, and no groups will have been required to send in their return, within six months, so such a report would not give useful information about DST receipts during the period.
I now come to the clause with which the House has been most preoccupied: new clause 33, tabled by the right hon. Member for Barking (Dame Margaret Hodge) and my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell). It would require all groups subject to the digital services tax to publish an annual group tax strategy and, alongside that, their country-by-country report.
As I have said, the DST is not an anti-avoidance measure; it is intended as a temporary response to concerns that the international corporate tax system has not adequately responded to digitisation. In other ways, as the House will be aware, the Government have already championed tax transparency, both at home and abroad. Some of those ways were highlighted by my right hon. Friend in his speech and have been previously by the right hon. Member for Barking in many other contexts. They are illustrated by the requirement, introduced in 2016, for large businesses to publish their annual tax strategy, containing detail on the business’s approach to tax and on how it works with Her Majesty’s Revenue and Customs. That requirement applies to UK companies with a turnover of more than £200 million or a balance sheet of more than £2 billion, and it is not limited to automated digital services businesses or to groups with a UK headquarters. UK subsidiaries of foreign headquartered groups can also be required to produce such a report if that group has revenues exceeding €750 million and reports under the OECD country-by-country reporting framework.
The effect is that many large businesses subject to the digital services tax will already be compliant with the UK requirement to publish an annual tax strategy. Therefore, this new requirement would in practice have little or no impact on them, at least. While thresholds may mean that some are not required to publish a strategy, that is an existing easement and it is unaffected by the digital services tax.
Currently, as has been highlighted by many hon. Members across the Chamber, we do not require large businesses to publish their country-by-country report alongside their tax strategy, but of course they can provide additional information, such as country-by-country reports, alongside that strategy on a voluntary basis. Nothing prevents them from doing that, and some have chosen to do so. It is notable that in this country, UK headquartered groups such as Shell and Vodafone have taken an important lead in this area.
I always pay very careful attention to what my right hon. Friend the Member for Sutton Coldfield says and I always pay careful attention to what the right hon. Member for Barking says. I have a great deal of respect for the principles that he and she have outlined through this new clause, but regarding the voluntary strategy, at least, I am actively exploring ways in which the Government can encourage other businesses, over and above Shell, Vodafone and the like to follow suit.
Kevin Hollinrake
I am surprised that my right hon. Friend says that this is not a method to try to bring companies that are avoiding tax to the tax table. The previous Chancellor, Philip Hammond, said in a speech that these measures would effectively insist that,
“global internet giants…contribute fairly to funding our public services.”
Is that not reflective of a position where he felt those companies were avoiding tax?
Jesse Norman
I think one could put it a slightly different way, which is to say, “You do not have to take a position on avoiding tax to come to the view that this is a base of tax revenue that has not been adequately taxed and should be taxed, and if you do follow that approach,” —here I will defer to the hon. Member for Wirral South (Alison McGovern)—“ipso facto you are going to be levelling the playing field to a degree.” Anti-avoidance measures are measures used in separate contexts to level the playing field as well.
Mr Mitchell
The Minister is getting to the meat of the matter in what he is saying now, but while he rightly extols the virtues of some very good companies that he has named, which voluntarily publish whereabouts in the world their activity is taking place, where their profits are declared and where they are paying tax, by definition, if it is voluntary, those who are up to no good probably will not comply. That is one of the reasons why publishing that information in the way I set out in my earlier remarks is so important, because there is greater pressure on them if they do not comply, including the sanction of the law.
Jesse Norman
My right hon. Friend is absolutely right. My point was a slightly different one. I have not yet come to the thrust of what he is suggesting about mandation, but in the first instance Government should be seeking to support, promote, energise and activate more voluntary compliance, precisely in order to increase a public norm of voluntary reporting, which then does a lot of the job and perhaps isolates the groups that decide not to do it. There are plenty of other contexts in which that approach of voluntary, then moving to mandatory, has been quite successful, including in tax.
Bridget Phillipson
The Minister talks about the voluntary nature of compliance, but it is my understanding that EU rules require some element to be reported. Could he clarify? Is that the position, or is reporting entirely voluntary?
Jesse Norman
The answer is that what I am talking about is a voluntary disclosure by those companies. I am not aware of a separate EU requirement for them to do so. Certainly, it is the voluntary disclosure that is the thrust of what I am talking about. Many other companies have the capacity to make voluntary declarations, and I am indicating in response to my right hon. Friend the Member for Sutton Coldfield my support for more of those companies doing that. I am only doing that, however, as a preliminary to coming to his point about mandation. We have taken the view that for the time being this approach should remain voluntary and that further legislation will not be needed until and unless we can get public country-by-country reporting agreed on a multilateral basis.
Steve Brine
I have sat quietly listening to this whole debate and I understand what the Minister is saying. I actually think he is right. Could he then give us briefly a sense of what work Her Majesty’s Treasury is doing to achieve the unilateral position he says he wants?
Jesse Norman
If I have given that impression, I have been misunderstood. We are pushing for a multilateral approach, as I have indicated, through the OECD and the G20, and also in consultation and collaboration with the EU. The purpose is to achieve a sustainable approach that does not run the risk of creating incentives to restructure out of this country and thereby reducing tax transparency and effectiveness. It might also reduce the impetus for tax transparency, because the more countries there are that require it and so have firms relocating or restructuring to avoid it, the less impetus there could be to secure a multilateral solution.
Alison McGovern
Would the Minister be so kind as to give a rough deadline for the multilateral approach?
Jesse Norman
It is in the nature of these beasts that I cannot give a deadline, and I am not sure anyone can. It is a continuing debate. That does not mean, however, that progress cannot be made. As we have seen, for example in some of the work done with the OECD on minimum taxation levels, there has been clear evidence of progress in discussions within the OECD, which is a matter of public record.
Steve Brine
Clearly, I meant to say “multilateral” in my last question. I know from having attended G7 and G20 summits in a health context, when I was in the Health Department, that the agenda for those meetings is decided by who has the chair at the time. Could the Minister give us any sense of optimism that it is even on the agenda of those meetings to make the progress I know he wants to see?
Jesse Norman
My hon. Friend will be aware that the different organisations have different ways of working—the G20 tends to work towards summits, and the OECD often has a more continuous process. The most important work is always done in between, in the official interactions that then set the terms. Often one does not know exactly what will be on the agenda until the last minute, so it is hard to give a specific undertaking. I am not avoiding that; I simply do not think it is possible to give that undertaking. I can tell him that we are extremely keen to promote voluntary compliance, and we continue to press for a multilateral approach.
Mr Mitchell
I am most grateful to my right hon. Friend for giving way; he is being very generous. This is an ingenious argument that he is putting to the House about restructuring, and it might be helpful to flesh that out in correspondence. The argument about the unilateral and multilateral approach was clear in relation to open registers of beneficial ownership, when the House obliged the Government to accept that there was a case for going through the unilateral approach in order to get a multilateral approach. I understand what he is saying, but I think it would be helpful to flesh out the point about restructuring.
Jesse Norman
If my right hon. Friend wants to raise some specific questions, I would be delighted to respond to them. There is a slight tension in his argument, because it contains the following two claims: first, that these international organisations are shape-shifting amoebas that constantly mutate to avoid tax, and secondly, that that shape-shifting and amoebic quality will stop when it comes to thinking about how to react to a unilateral tax transparency initiative.
Jesse Norman
I am sorry, but I have been really generous in giving way. I have to allow the hon. Member for Houghton and Sunderland South (Bridget Phillipson) time to speak, and I have an awful lot of material remaining, including on new clauses and amendments and contributions made by colleagues. I do not know how many minutes she wants, but perhaps she could give me a bit more time.
Dr Huq
The information is already collected—this is just about making it transparent, open and public. As I said in my speech, we could give companies time to readjust if they wanted to move things around. What is the incentive for any multinational through the voluntary approach?
Jesse Norman
We know that the incentive exists for all the reasons why we get voluntary compliance in a whole variety of areas—that is to say, groups with particular concerns, press organisations and companies. We know that there has been a revolution in corporate social responsibility, although it has not in many ways been an adequate revolution, because it does not extend in some respects to paying tax, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) highlighted. There is a role that Government can play, in terms of improving the norms and setting a bar. This is a reasonable, staged approach.
It is important to have a level playing field for the reasons that I have described, and that applies to tax transparency as it does elsewhere. If a multinational group exceeding the country-by-country reporting threshold operates in the UK, HMRC will, in the vast majority of cases, already receive the report and is already using it for risk assessment purposes. Given that, we do not believe that it is appropriate to introduce these new requirements at this stage, but I understand the principles set out by my right hon. Friend the Member for Sutton Coldfield and the right hon. Member for Barking, and the debate has shown that those are widely shared. The argument we are having is over the nature of the approach and the implementation of a broad set of principles with which Members across the House generally concur.
I will turn to the comments made by Members in the debate. The hon. Member for Houghton and Sunderland South has been very generous with her time, and I have covered most of her remarks. The debate rightly touched on the issue of business rates. My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) will know that we are publishing a business rates review, which will specifically include online forms of taxation and invite public discussion on those. That is another part of the same process of trying to engage more widely and not just recruit information and knowledge but set expectations and norms about the way in which firms should be paying tax.
The hon. Member for Ealing Central and Acton (Dr Huq) talked about sunlight being the best disinfectant. She is right, but she was quoting Louis Brandeis from 1914, who was dealing with forms of corporate thuggery that make what we see today modest by comparison.
The hon. Member for Wirral South talked about the distinction between justice in principle and justice in fact. Of course, she is absolutely right. There is a view at the moment of the nature of the corporation, and it is very widespread—more in America than in this country even—that companies are run in the exclusive interest of their shareholders. That is not true in the UK. That is not, as a matter of legal fact, true in this country. The shareholders are entitled to the residual proceeds but companies are run—it is in the Companies Act 2006—in the interest of their members.
Finally, the hon. Member for Strangford (Jim Shannon) made a very good point. I think I am right in saying that “nation of shopkeepers” was coined by Adam Smith—but then I would say that, wouldn’t I?
Bridget Phillipson
Having listened to the debate, we are keen to see greater scrutiny and transparency in this area, so I seek to press the amendment to a Division.
Question put, That the amendment be made.
The House proceeded to a Division.
Jesse Norman
It is a great pleasure to be able to speak to the very interesting debate that we have just had. It ranged very wide and far indeed, but I will speak now to the specifics of the clauses.
New clause 28 would require the Chancellor to assess the impact of the Bill on the environment, and new clause 34 would require the Chancellor to review its impact on human and ecological wellbeing, including that of future generations. New clause 13 would require the Chancellor to assess the impact of the Bill on the UK meeting the UN sustainable development goals. New clause 14 would require an assessment of the Bill’s impact on the UK meeting its Paris climate change commitments.
I could do no better than the hon. Member for Ilford North (Wes Streeting) in rehearsing many of the achievements of the Government set out in his speech, so I am very grateful to him for doing that. He rightly highlighted the achievements that we have made in terms of offshore wind, but it was left to my right hon. Friend the Member for South Northamptonshire (Andrea Leadsom) to mention the 42% reduction in emissions since 1990 while the economy grew by two thirds, so I do not need to dilate too much on that topic.
Let me merely speak to these amendments to the legislation. These amendments are not necessary and they should not stand part of the Bill. Tackling climate change is a top priority for the Government, with the UK becoming the first major economy to pass legislation committing to reach net zero emissions by 2050. The Government remain committed to meeting this milestone and have consistently demonstrated the UK’s world leadership in clean growth and development. For example, the 2019 spending round included additional funding for biodiversity measures to support the maintenance and restoration of vital habitats for wildlife and to deliver the 25-year environment plan. Following that, the spring Budget reinforced our track record in the area, announcing at least £800 million for carbon capture and storage—that should be of great interest to the hon. Member for Weaver Vale (Mike Amesbury), who is no longer in his seat—and more than £1 billion of further support for ultra low emission vehicles. That Budget also announced that we will at least double funding for energy innovation.
The Bill highlights the progress we are making towards our commitment to tackling climate change, as well as towards sustainable low-carbon development and meeting international agreements. The Bill provides significant incentives to support the continued decarbonisation of transport. Clause 83 establishes tax support for zero-emission vehicles, exempting them from the vehicle excise duty expensive car supplement.
The Bill also ensures that Her Majesty’s Revenue and Customs can prepare for the introduction of the plastic packaging tax. That was rightly highlighted by my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) and will incentivise businesses to use 30% recycled plastic instead of new material in plastic packaging. The Government are also reopening and extending the climate change agreement scheme to support energy-intensive businesses to operate in a more environmentally friendly and sustainable way.
Jesse Norman
If I may, I will speak to the clauses and then take up the points made by Members in the debate.
New clause 28 would require the Chancellor to assess the impact of the Bill on the environment, specifically considering the impact on achieving net zero emissions by 2050, on meeting carbon budgets and on air quality standards and biodiversity. The Government are committed to meeting our net zero milestone. The net zero review continues to make progress, although, let us be clear, like everything else the capacity to consult a wider group of stakeholders has been affected by covid. Many resources have been devoted to covid-related matters given the position we are in, but the review continues to make progress and we will publish a call for evidence, which will allow businesses and stakeholders the chance to engage seriously ahead of publication.
Carbon pricing has already contributed to emissions reductions in the power sector, as the share of coal-based electricity fell from 40% in 2012 to 5% in 2018, which is something everyone should be proud about. Future climate strategies will be set out in due course, including as part of the national infrastructure strategy.
The Government have also created skills advisory panels to help local areas understand their current and future skills needs, including in low carbon industries, and to tailor provision accordingly. The Government will assess the impact of potential interventions against the contribution they make to our environmental goals, including on climate change and air quality targets.
New clause 13 would require an impact assessment of how the Bill is meeting the UN sustainable development goals within six months of Royal Assent. It is important to realise that it is already a requirement for UN member states to review their progress towards meeting the global goals at least once, and we as a country have been proactive in assessing that and reporting back to the UN.
New clause 14 would require a review of the Bill’s impact on the UK meeting its UN Paris climate change agreements. Under the Paris agreement, the Government must maintain and report on their emissions reduction commitments in the form of a nationally determined contribution. The UK’s legally binding commitment to reduce emissions to net zero by 2050 is among the most stringent in the world, and the system of governance that implements that commitment under the Climate Change Act 2008 is world-leading.
New clause 34 would require the Chancellor to review the impact of the Bill’s provisions on human and ecological wellbeing, including on future generations. The Environment Bill is designed to ensure that the environment is at the heart of all environmental policy making. This Government and future Governments are held to account if they fail to uphold their environmental duties through a newly established Office of Environmental Protection, including legally binding, long-term targets on biodiversity, air quality, water, resource efficiency and waste management on top of the net zero target.
Turning to some of the comments that I thought were of great interest, my right hon. Friend the Member for South Northamptonshire was absolutely right to highlight the Government’s record in this area. The hon. Member for Aberdeen South (Stephen Flynn) raised a challenge on top-ups. My view here, as elsewhere, is that we will look with great interest to see whether the policy is effective. If it is effective, we will look even more closely at whether our policy as the UK Government needs to be changed, but it is obviously far too early to be able to say that. If he believes, as we believe, that actions matter, not just words, I am sure he will agree. If the Scottish Government want to do more in that area, they have received an additional £3.8 billion through covid funding, and they can divert some of that if they wish.
Jesse Norman
I am afraid I just do not have any time. I will come back to the hon. Gentleman at the end if I do.
I want to respond to the hon. Member for Hornsey and Wood Green (Catherine West), who rightly highlighted the importance of local authorities for cycling, walking and tree planting. I agree with her about that. She asked about the replacement strategy for the emissions trading system. I think she is aware that we have framed two alternatives. The first is a UK ETS, and the second is a carbon emissions tax. We are open to a negotiated agreement, but we have the resources, through either of those options, to implement a scheme that addresses the issues that she is concerned about.
Finally, the hon. Member for Cardiff North (Anna McMorrin) called for leadership not rhetoric. I wonder whether she was referring to the Welsh Government, whose tree planting plans have been disastrous. They seem to be way behind, according to their own tree planting estimates.
The hon. Lady specifically picked out the Swansea Bay tidal lagoon. As my right hon. Friend the Member for South Northamptonshire said, that project would not provide value for money. It would be a terrible waste of public money. That money could be spent much better.
Jesse Norman
I spent a lot of time looking at it when I was a Minister at the Department for Business, Energy and Industrial Strategy, and the right hon. Gentleman, who is chuntering from a sedentary position, is quite wrong about that. It would provide terrible value for money.
It is also fascinating that the project is not an environmentally wise idea. The hon. Member for Cardiff North may not be aware that the Wildlife Trust of South and West Wales specifically highlighted the major impact on biodiversity, the loss of intertidal habitat and the impact on local ecology, and National Resources Wales talked of a “major adverse impact”. I agree with the hon. Lady that actions matter, not words, and that leadership matters, not rhetoric, and we are seeing that by turning down this very bad project.
The Government are committed to tackling climate change and to being the first generation to leave the environment in a better condition than we inherited it. These measures go towards making that happen.
Wes Streeting
We have had an excellent debate, particularly Opposition Members’ contributions. May I congratulate, on behalf of all of us, the hon. Member for Strangford (Jim Shannon) on the birth of his latest grandchild? He will be a proud grandfather. My proud father wrote to me during the debate to say two things: first, that my hon. Friend the Member for Hove (Peter Kyle) needs a haircut, and secondly, that it is good to see the Government Benches full, taking social distancing to the nth degree. However, what they lacked in quantity they made up for with quality, although I must take up a point with the right hon. Member for South Northamptonshire (Andrea Leadsom), who said that all I did was criticise the Government. That is not true. As the Minister acknowledged, I listed all of their achievements. It is not my fault that the Committee on Climate Change has said that those achievements do not go far enough to help the country achieve its net zero ambition. They are going to have to do better.
I must say that it was a shame for the Minister to end what has otherwise been a rather consensual debate on the importance of tackling climate change with his outburst on the Swansea Bay tidal lagoon. That is a great missed opportunity and another reason why so many campaigners are right to say that the Green Book ought to be reformed so that when the Treasury makes spending decisions on major projects, it properly takes into account the net zero benefits; otherwise, we end up being penny-wise but, ultimately, planet-foolish.
Jesse Norman
The challenge for the hon. Gentleman is to explain how the money saved might not be better deployed on greener projects with better carbon performance. That is the question.
Wes Streeting
The Minister would be far more persuasive if the Government made any announcements about how they are investing more. In fact, what we got from the Prime Minister this week was a damp squib. I genuinely hoped and expected that the Prime Minister would announce major programmes. For example, retrofitting homes across the country would deliver environmental benefits and job creation, including jobs that would compensate those who will imminently find themselves out of work.
Jesse Norman
I take my hat off to the astonishing hon. Member for Bradford South (Judith Cummins), who brought so much content into such a short presentation, and I thank her for that. We have an enormous body of material to get through quickly, so I shall deal initially with the question relating to new clause 26 on job creation and related measures. The new clause would require the Government to conduct an assessment of the effect of the Act on job creation. As the House will know, the Government have announced unprecedented support through the coronavirus job retention scheme, the self-employed scheme and the like. The Office for Budget Responsibility has said that those actions will directly help to support the incomes of individuals. The Treasury does not produce economic forecasts and the OBR does, publishing them twice a year. For that reason, I ask Members to reject the new clause.
New clause 12 relates to a matter previously considered in the Public Bill Committee, the impact on regions and nations. The new clause would require the Chancellor, within one month, to review the impact of the Act. As I emphasised in Committee, the provisions in this Bill have already been developed with careful consideration. Analysis of Government decisions on GDP is also carried out by the independent OBR. Again, we will continue to monitor the impact of the crisis, but I ask Members to reject the new clause. SNP new clause 18 would require a review of the impact of the Act on investment, productivity and employment. Again, it would require the Government to look at hypothetical scenarios, whereas the OBR is required by law to produce its forecasts based on stated Government policy, so I ask Members to reject the measure.
I come now to IR35 and the off-payroll working rules. I have been pressed vigorously on this issue by my hon. Friends the Members for Milton Keynes North (Ben Everitt), for Guildford (Angela Richardson), for Workington (Mark Jenkinson) and for Barrow and Furness (Simon Fell). Amendments 16 and 17 seek to remove the reform of these rules from the Bill, which would be a serious mistake, costing the country many hundreds of millions of pounds. The level of non-compliance at the moment with the rules is scheduled to cost the country £1.3 billion in 2023-24 if not addressed. As I do not believe the SNP really wants that, I encourage Members to vote against it.
I come now to the cross-party amendments framed by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), as it is important to engage with several of the things he said. He said that contractors could be pushed into a state of no benefits employment. It is important to note the contractors already receive a number of benefits funded by the Government when they are employees of their own personal service companies. Such benefits include statutory maternity, paternity, adoption, parental bereavement and shared parental pay, and they are provided by PSCs, which are then able to claim 100% of those payments plus 3% compensation from the Government. My right hon. Friend said that at least seven people have taken their own lives as a result of the loan charge. It is important to put on the public record that of course every single death of an individual is a tragedy. The circumstances surrounding those deaths have been considered by the coroner, the Independent Office for Police Conduct and HMRC’s own internal independent investigations. None of them has suggested, in these four reports, that HMRC is to blame for these deaths; no conduct issues have identified either by the independent office or internal investigations that would warrant disciplinary actions.
Jesse Norman
I am afraid that I just have to press on, because I have no time. My right hon. Friend raised the issue of a review on the loan charge. These are some of the most egregious and clearest forms of tax avoidance in the tax system. In reaction to my right hon. Friend the Member for Gainsborough (Sir Edward Leigh), let me say that it is hard to see how simplification of the tax system would prevent the kind of abuse we have seen through the loan charge or indeed potentially through IR35. The all-party group on the loan charge published a report rubbishing the independence of the Morse review. I can do no better than refer its members to the remarks made by my right hon. Friend the Member for Haltemprice and Howden, who described Sir Amyas Morse as
“principled and highly respected”
That was true then and it is true now.
New clause 31 would drive a coach and horses through long-standing principles of taxation, because the tax system relies on people being responsible for their own tax and there being as little discretion as possible in the system. Both principles would be overturned, as my hon. Friend the Member for Wimbledon (Stephen Hammond) hinted. For that reason, I urge the House to reject the new clause, if it comes to a vote.
Question put, That the clause be read a Second time.
Finance Bill (Ninth sitting)
Jesse Norman ExcerptsThursday 18th June 2020
(3 years, 10 months ago)
Public Bill CommitteesRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
The Financial Secretary to the Treasury (Jesse Norman)
It is a delight to see you in the Chair, Ms McDonagh. Welcome to day six of our deliberations—or is it day five? It feels like many more. At the start of the Committee, I said that we were like pilgrims in “The Pilgrim’s Progress”, and that hopefully we would get through the slough of despond. I venture to say that we have made it over the hill of difficulty, but perhaps not quite reached Calvary or the place of deliverance.
Clause 99 and schedule 14 exempt payments made under the Windrush compensation scheme and the troubles permanent disablement payment scheme from income tax, capital gains tax and inheritance tax. The Government deeply regret what happened to many members of the Windrush generation. The Windrush compensation scheme was launched in April 2019 and is a key part of the Government’s righting those wrongs. It compensates individuals who have suffered loss by being unable to demonstrate their lawful status in the United Kingdom. The compensation covers a number of areas, including loss of income, denial of access to social security benefits and incorrect detention. Similarly, the troubles permanent disablement payment scheme makes payments in acknowledgment that, during the troubles, many individuals suffered permanent injury through no fault of their own. It also aims to address the adverse financial impact that troubles-related disablement can have on individuals and families.
Payments made under schemes such as these are often made entirely free of income tax without the need for legislation, but there are circumstances where income tax may apply. Payments could be taxable if they were made to reinstate taxable social security benefits or in respect of a terminated employment. All types of payments could be subject to inheritance tax or capital gains tax if they exceed the relevant thresholds. Clause 99 and schedule 14 will ensure that payments made under the Windrush compensation scheme and the troubles permanent disablement payment scheme are exempt from income tax, capital gains tax and inheritance tax.
The changes reaffirm the Government’s commitment to the Windrush generation and to those who suffered as a result of the troubles, and give certainty about compensation to claimants. The clause also introduces a new power to allow the Government to extend the definition of “qualifying payment” to other compensation schemes, allowing the Government to act more quickly to clarify the tax treatment of any necessary future compensation schemes, including those set up by foreign Governments. As we have seen, payments from such schemes can begin before it is possible to pass legislation in a Finance Act to exempt them from those taxes. Exempting such payments from tax in the past has not been controversial, and I hope it will not be so today and in the future.
The clause provides tax exemptions and gives clarity to those eligible for payments under the Windrush compensation scheme and the troubles permanent disablement payment scheme. I therefore commend the clause and the schedule to the Committee.
Wes Streeting (Ilford North) (Lab)
It is a pleasure to be here for what is likely to be our final day of line-by-line scrutiny of the Bill. It is important to remember that the reason why we are discussing clause 99 is in no small part, as the Minister alluded to, due to the Windrush compensation scheme, which is the culmination and inevitable consequence of the appalling circumstances of the aggressive and deeply destructive hostile environment pursued by the Government over the course of the past 10 years. As Wendy Williams said in her review, the Windrush scandal, which saw so many people’s lives completely disrupted, and in many cases ruined, was the result of “foreseeable and avoidable” systematic operational failings, so it is right that the Windrush compensation scheme was established. The House has considered those issues many times.
It is a source of deep regret, to put it mildly, that fewer than one in 20 people who have made claims under the Windrush compensation scheme have been paid so far. I want to take the opportunity, as we are discussing clause 99, to restate again our view that the Government must act much more quickly. People are owed that compensation, although the financial compensation will never fully compensate for the emotional and mental trauma that British citizens suffered as a result of the Windrush scandal.
It is appalling that we have added insult to injury by moving so slowly on compensation claims, even where they have been made. Of course, as the Minister outlined, the clause improves conditions for people accessing such schemes, whether the Windrush compensation scheme or the troubles permanent disablement payment scheme, so we have no objection to the clause.
Alison Thewliss (Glasgow Central) (SNP)
It is regrettable that so many people are still waiting for their money through the Windrush compensation scheme. I urge the Minister to do everything he can to make sure that the money gets out the door.
It is useful that the clause allows for future schemes so that there will, hopefully, be fewer delays and less confusion for people in future about the impact of those schemes. We want to make sure that, where wrongs have been done, people can get the money that they are entitled to in compensation as swiftly as possible.
Jesse Norman
I thank both hon. Members for their comments. To pick up on the last point, the hon. Lady is absolutely right about the value of building in capacity to respond more quickly in future. It is noticeable that the Chartered Institute of Taxation, which is well respected across the Committee, commented that,
“This is a sensible move from the government to help… It is also encouraging to see that the bill…will make it easier in the future for payments…to be made tax-free, without the need for fresh legislation.”
That very much remakes the point she made, and I thank her for that.
On the point about the numbers paid out, I completely understand the concern and I know that other Ministers do as well. There is a balance between due process and speed. Of course, the compensation claims have to be agreed on both sides—the offers have to be accepted—for them to be payable. It is important that the hon. Members have put their concerns on the record, and I fully share them.
Question put and agreed to.
Clause 99 accordingly ordered to stand part of the Bill.
Schedule 14 agreed to.
Clause 100
HMRC: exercise of officer functions
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Clause 100 is a technical measure that makes changes to put it beyond doubt that tasks that are being done by an individual officer of Her Majesty’s Revenue and Customs may be carried out by HMRC using a computer or other means. It ensures that the intention of Parliament is appropriately reflected in the legislation and confirms that the rules work as they have been widely understood and applied over many years. No new charges or obligations for taxpayers will result. The changes merely clarify legislation.
If I may explain the context for the introduction of the clause, the Government announced by written ministerial statement on 31 October 2019 that it would legislate retrospectively and prospectively to confirm notices to file tax returns and penalty notices issued by HMRC through automated processes as valid. That long-standing practice has been challenged in the courts on the basis that the legislation states that some tasks are to be carried out by
“an officer of the Board.”
The relevant legislation in the Taxes Management Act 1970 is 50 years old and was designed to support a paper-based manual tax system.
The way in which HMRC administers the tax system has evolved over time, in line with taxpayers’ expectations for a modern and digital system. Decisions made by HMRC officers are often given effect by computer-driven processes, so that HMRC can assess and collect taxes in the most efficient and cost-effective way.
Harriett Baldwin (West Worcestershire) (Con)
As he expatiates on the value of digital technology to tax collection, will my right hon. Friend share with the Committee his thoughts on making tax digital and how the recent opportunity to make furlough payments has shown the value of a digital tax system?
Jesse Norman
My hon. Friend makes an acute comment. The response to covid has undoubtedly highlighted the need for greater investment in digitisation within the tax system, and specifically put a greater emphasis on the ability to reach taxpayers quickly to respond to a national emergency and to improve resilience.
As my hon. Friend will be aware, we are introducing making tax digital for VAT, but it is widely thought that there is a case for taking it further. We have it under close consideration. As her question highlights, taxpayers—and people more generally—expect nothing less than to have a tax system that is digital, effective and integrated, and not one where the lack of digitisation can be exploited for the purposes of legal suit.
To avoid any doubt, the clause clarifies the legal basis for the existing policy, which has been in place for many years, allowing for the use of automated processes. It puts beyond doubt that the law operates in the way Parliament intend it to and as it has been widely understood to work to date. It does not introduce new or additional obligations, and will help to ensure the tax system applies fairly to all, while preventing loopholes opening up in tax law that could be exploited by people who do not wish to pay their proper share of taxes.
The changes made by the clause will clarify that tasks being done by an individual officer of HMRC may be carried out by HMRC using a computer or other means. The legislation is treated as always having been in force. The effect of that is to protect over £100 billion in tax revenue, already collected. Failure to legislate would result in enormous disruption and uncertainty for taxpayers and HMRC alike. For these reasons, I commend the clause to the Committee.
Wes Streeting
The Government have brought forward clause 100 for obvious reasons. As we have heard from the Minister, it is patently absurd that we would be in position where HMRC was dragged through legal processes simply because section 8 notices were issued used automated processes, for example.
There is obviously a good case to be made for applying ever-changing technology to improve the efficiency of processes within HMRC’s systems, to try to improve the customer experience of HMRC customers, which, as we know as constituency MPs, can sometimes be very good and sometimes be absolutely abysmal. Where HMRC can automate processes to free up people time, the focus should be on redeploying those people to try to give people and the state overall a better service. There is nothing to quibble about there.
It is important to lay down a cautionary note about how automated processes and algorithms are used, particularly when it comes to decision making that can have substantial impact on citizens, organisations and businesses. Writing in Tax Journal, Catherine Robins and Steven Porter of Pinsent Masons were critical of the Government’s announcements, arguing that:
“Some of HMRC’s powers can have very serious consequences for taxpayers and the fact that a human being has to decide to exercise them is an important safeguard, which should not be eroded.”
I share their concern, up to a point. I think it is important that there are safeguards, checks and balances and, ultimately, opportunities for people to appeal to human judgment, to account for technical error and to appeal technical error. As the capacity and scope of technological change continues to widen, it is even more important that Ministers and civil servants think very carefully about the application of technology and whether it is indeed right and proper for a decision to be made by an automated process rather than a human being.
Those are much bigger, wider principled and ethical considerations. For the reasons that the Minister has outlined, clause 100 is a perfectly reasonable and sensible provision, and it is one that we are happy to support.
Alison Thewliss
I want to raise some of the concerns expressed to us by the Institute for Fiscal Studies’ Tax Law Review Committee, which sent an extensive note earlier in the week. It is looking for ministerial reassurance that the powers will not be used without proper consultation and discussion of safeguards to replace the discretionary decisions, especially about penalties, currently made by human officers. It is the discretionary point that I am most worried about. We must not get to a situation where computer says no and that is the end of the story, because sometimes it can be quite difficult for businesses to get the decision pulled back and unpicked, and reconsidered.
I will highlight the case of uploading real-time information, because businesses in my constituency had serious issues with the technology for uploading RTI prior to coronavirus and now find themselves unable to claim under the job retention scheme, for example. That has been an issue with technology, and it has been very difficult to resolve it. Meanwhile, those businesses are on the brink, on the point of going bust, with employees whom they are struggling to pay. That is because in an emergency it is difficult to unwind a technical, computer-based decision, made months ago.
I ask for reassurance about the automating of discretionary decisions. What safeguards will be put in place to ensure sure that no businesses find themselves in a situation where they cannot unpick a decision made by a computer, and to ensure that they will be able to speak to a human who has discretion and is able to exercise it effectively?
Jesse Norman
Again, I thank Opposition colleagues. Let me pick up a couple of the points raised. The hon. Member for Glasgow Central asks for safeguards, and of course she makes a very important wider point. In a rule of law society we want as little discretion as possible to be exercised—and, in particular, personal discretion—so it is important that within HMRC there is baked in a culture of accountability for decisions. From that point of view, nothing is changing. This measure is ratifying an existing set of arrangements by putting them on a legal basis. However, I can reassure her that the issue of safeguards and the balance of powers between HMRC and taxpayers is taken very seriously, and I have specifically commissioned work within HMRC to ensure that that balance is appropriately maintained, not just at customer level but more generally.
The hon. Lady and the hon. Member for Ilford North raised the question of decision making more generally. I think I have, in a way, spoken to that, but I recognise that there is a distinction between the automated exercise of a decision and the capacity to make a decision itself. Of course, HMRC does increasingly rely on computerised systems, and it is absolutely right for our purposes as a nation that it should do so. It is, for example, inconceivable that we could have responded to coronavirus with either the self-employed scheme or the furlough scheme without heavy reliance on computing. It is to HMRC’s enormous credit that it was able to commission and bring into effect a platform and an approach to those schemes in a matter of weeks, using that computing expertise. I also agree with the hon. Gentleman when he points out that there are benefits not merely in terms of customer service, but in freeing up people and, we hope, improving the quality of work by taking HMRC staff away from the more routine operations and more towards higher quality work that can give more professional satisfaction.
Question put and agreed to.
Clause 100 accordingly ordered to stand part of the Bill.
Clause 101
Returns relating to LLP not carrying on business etc with view to profit
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Again, this is a technical measure. Clause 101 makes changes to put beyond doubt that where an LLP is found not to trade for profit, HMRC can continue to amend LLP members’ tax returns using income tax rules as it has always done, in the same way that it does for general partnerships. It ensures that, as with the previous clause, the intention of Parliament is appropriately reflected in the legislation, and it confirms that the rules work in the way they are widely understood to work, and as they have been applied since they were introduced in 2001. To ensure that this is plainly and unequivocally understood, the measure is introduced with prospective and retrospective effect back to that date—2001—with the result that the changes simply clarify and support the legislation and continue to meet taxpayers’ expectations. Again, they do not result in any new charges or obligations for taxpayers.
By way of context, limited liability partnerships are a legitimate means of structuring business activity. They are used successfully by the vast majority of partnerships: for example, by many large law and accountancy firms that operate for profit. Since the LLP rules were introduced in 2001, HMRC has always treated LLPs and their members’ tax returns under income tax rules on the same basis as any other partnership. That is widely understood and accepted by the vast majority of taxpayers, but it has been challenged in the courts on the basis that where an LLP is found not to trade for profit in line with its partnership tax return, the law does not support its treatment under income tax rules. The upper tax tribunal recently confirmed that HMRC’s long-held tax treatment of LLPs is correct. This decision overturned an earlier decision of the first-tier tribunal that had judged it incorrect. However, as the matter is still in litigation, putting the matter beyond doubt in legislation will provide certainty for LLP taxpayers.
Such legal challenges come from a small minority who are intent on avoiding paying their tax and looking for technical loopholes to do so. They seek to use limited liability partnerships to create losses and to share and then offset them unfairly against their members’ personal income in their own tax returns. That is not fair either to the Exchequer or to the vast majority of honest limited liability partnerships. The Government are legislating to prevent such practice.
The measure introduces three conditions that clarify the position and apply where an LLP delivers a partnership return; where the basis of that return is trading with a view to profit; and where it is found that the LLP was not trading with a view to profit. This clarifies the legal basis relating to LLPs that submit partnership returns where they are subsequently found not to be trading for profit, allowing HMRC to amend LLP members’ tax returns in such circumstances, as it has always done, to remove any unfair tax advantage. The clarification does not introduce any new or additional obligations or liabilities for taxpayers and it prevents loopholes from opening up in tax law that could be exploited in future by those seeking to avoid paying their fair share.
The changes made by the clause clarify the treatment of LLP partnership returns where the LLP is found to be operating without a view to profit. It permits HMRC to amend such returns using income tax rules, as it has always done. The legislation is introduced with retrospective effect, treating it as always having been in force. This is necessary in order to maintain the status quo, provide certainty for taxpayers, and protect about £2 billion of tax revenue that has already been collected. It also ensures that people seeking to avoid tax do not secure unfair and advantageous treatment due to the exploitation of perceived loopholes in legislation.
The policy is not new and nothing will change for taxpayers. No new or additional liabilities will be created and HMRC’s policy and processes will continue to operate in the way that they have for many years. It provides clarity for taxpayers and ensures that there is a fair and level playing field for all. I therefore commend the clause to the Committee.
Wes Streeting
Limited liability partnerships are a legitimate way of structuring business activity that is used successfully by the vast majority of LLPs that operate for profit. There is no doubt about any of that, but as we heard from the Minister this morning, there have been too many examples of LLPs being used for the purposes of minimising people’s tax liabilities, effectively to avoid tax. Of course, Opposition Members take a very dim view of that.
Clause 101 seems to be a sensible provision, intended to help HMRC to close down tax-avoiding structures that use LLPs to generate and spread losses that the partners use to offset against their other personal income. Let the message go out that people ought to act within not just the letter but the spirit of the law, and if they cannot find in themselves the moral scruples to do that, this House will have no hesitation whatsoever in changing the letter of the law to make sure that people do the right thing and pay their fair share.
Jesse Norman
The hon. Gentleman has made the point extremely well, and with his support I hope the Committee will agree to the clause.
Question put and agreed to.
Clause 101 accordingly ordered to stand part of the Bill.
Clause 102
Preparing for a new tax in respect of certain plastic packaging
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Clause 102 ensures that Her Majesty’s Revenue and Customs can make preparations to introduce a new tax in respect of certain plastic packaging. The new tax will apply to plastic packaging that is manufactured in or imported into the UK and that contains less than 30% recycled plastic.
Plastic waste is a very serious global issue. Often, it does not decompose. Indeed, it can last for centuries in landfill, or it ends up littering the streets or polluting the natural environment. More than 2.2 million tonnes of plastic packaging are produced in the UK each year. The vast majority is made from new plastic, rather than recycled material, because recycled plastic is often more expensive to use than new plastic.
To tackle this problem, the Conservative manifesto reaffirmed the commitment to introduce, from April 2022, a world-leading new tax on the manufacture and import of plastic packaging that does not contain at least 30% recycled plastic. The tax will provide a clear economic incentive for businesses to use recycled material in the production of plastic packaging, which will create greater demand for this material, and in turn stimulate increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.
This follows an initial announcement of the tax at Budget 2018 and consultation on the high-level design in 2019. In its response to the consultation framework, the Chartered Institute of Taxation welcomed the Government’s measured approach to the implementation of the tax. Many respondents agreed with the initial proposals on the tax design, although there were areas where some respondents disagreed.
The Government took this feedback into consideration, announcing in response that we would extend the scope of the tax to include imported filled plastic packaging that contains less than 30% recycled plastic, given concerns about the impact on UK competitiveness without that adjustment. The Government are currently holding a further consultation on the detailed design and implementation of this tax, to ensure that it works as intended and so that businesses have time to prepare for it.
Clause 102 is a technical provision to ensure that HMRC can make preparations for the introduction of the new tax, such as incurring expenditure on the development of an IT system. Alongside this, HMRC is developing the detailed legislation to introduce the tax. We expect that this will be published in draft for technical consultation later this year, before being implemented in a future finance Bill.
In conclusion, the clause forms the first part of the legislation needed to introduce the plastic packaging tax. I therefore commend it to the Committee.
Jesse Norman
I thank the hon. Gentleman for his comments. As he will know, the introduction of any new text requires great care and attention, which is why, as he rightly highlighted, we have taken such a deliberate approach to consultation. However, I thank him for his support and note his suggestion. With that, I commend clause 102 to the Committee.
Question put and agreed to.
Clause 102 accordingly ordered to stand part of the Bill.
Clause 103
Limits on local loans
Question proposed, That the clause stand part of the Bill.
Jesse Norman
This is another small, technical measure. Clause 103 makes changes to ensure that Public Works Loan Board lending is available to local authorities in order to support worthy capital endeavours that benefit their residents. There is a statutory limit on the total amount that may be lent to local government through the PWLB, a limit that is governed by section 4 of the National Loans Act 1968. That Act allows for two future levels of that limit to be specified in advance through primary legislation and activated through secondary legislation.
The legislation would be exercised through HM Treasury. A date to exercise these powers has not been, and would not usually be, set in advance. The Treasury considers this clause to be a high priority because of the central role the PWLB plays in the capital finance system, supporting local authorities to deliver public services and, still more urgently, supporting communities through the pandemic as the need may arise.
The changes made by clause 103 will amend the predetermined legislated figures in the 1968 Act. The limit is currently £95 billion, and the clause resets the two future amounts to £115 billion and £135 billion. Clause 103 thus ensures the continuity of PWLB lending, which is a key stream of funding for local authorities across the country.
Harriett Baldwin
I know that Worcestershire County Council finds the Public Works Loan Board very useful. Can the Minister update the Committee on the interest rate charged on that facility?
Jesse Norman
That is a very helpful question. I cannot update the Committee at the moment, because, as my hon. Friend will know, that is a matter for consideration within the Treasury. However, she has usefully put the issue on the record, and I thank her for doing so.
Wes Streeting
Clause 103 gives me an opportunity to speak to some of the challenges facing local authorities and the role that the Public Works Loan Board can play. I also want to knock on the head some of the assertions that have been made about local government finances and the sensible use of borrowing by local authorities across the country to invest in local infrastructure and works that benefit their residents. I speak not just as my party’s shadow Treasury spokesperson, but as a former deputy leader of the London Borough of Redbridge and a current vice-president of the Local Government Association.
Local authorities have done a remarkable job managing their finances sensibly and effectively during a very difficult decade. Not only was the public sector broadly hit by cuts, but local authorities felt the brunt because those cuts were both deep and front-loaded. The local authority response to those challenges over the course of the past decade has, to be frank, been remarkable. The same can be said for the ingenuity of many local authorities in making sensible and wise investments that not only improve the lives of their residents but generate income that can then be ploughed back into frontline services and mitigate the impact of central Government cuts. I think I speak for people right across the Local Government Association, regardless of their party, in saying that, as well as devolving power without resources, the Government have too often devolved blame. I hope that Ministers will consider that. I will address the issue this afternoon, when debate the new clauses.
There have been some rather unhelpful and misleading headlines about local authorities borrowing to invest in local projects. Of course, as with central Government, we will always be able to point to decisions that, though made with the best of intentions, do not work and incur a liability for the public purse. If public funds are not used widely, it is absolutely right that there should be scrutiny, lessons learned and accountability. It is fair to say, however, that in the vast majority of cases where local authorities have drawn on the Public Works Loan Board, their approach has been sensible, effective and well deployed. It is important that the facility continues to be made available to local authorities in the same way.
When Ministers consider not just this Bill but impending decisions by the Treasury, I urge them to recognise the awful impact of covid-19 on local authorities. In responding to the Secretary of State’s plea to do whatever it takes to get their communities through the crisis, not only have their costs risen; their income has also fallen significantly. I urge Ministers to think carefully about the demands they place on local authorities, particularly in terms of loan repayments during this period, and to consider whether more could be done.
Wes Streeting
I am grateful to the hon. Gentleman for his intervention. The Government have to look very carefully at the liabilities facing local authorities and how they are having to balance them against other demands and challenges. As I have said, in addition to creating cost pressures, the pandemic has had an impact on local authority income, too. In that respect, local authorities really are all in this together, whether they are Labour, Conservative or SNP. There are challenges for local authorities right across the United Kingdom. As we will discuss when we come to the new clauses, some communities have been affected more than others. None the less, the challenges are universal.
I hope that Ministers will take that on board and that they will listen very carefully to the representations from the Local Government Association, which is cross-party but Conservative controlled. We will do our best to remedy that in next May’s local elections. I hope that the representations Ministers receive from Conservative LGA leaders—and not just Opposition party representatives —will help them understand the challenges that local authorities are facing, particularly as they have been unable to collect around £1 billion in combined business rates and council tax income during the crisis so far.
I also impress upon Ministers the importance of Government keeping their word to local government. When local authorities were asked to do whatever it takes—and whatever it took—to get communities through the covid-19 pandemic, they took the Secretary of State for Housing, Communities and Local Government at his word and they delivered. Now, they expect to be reimbursed, as was promised. The Government have given some additional funding to local authorities, but it is a drop in the ocean when compared with the cost pressures they face and the fall in income.
With that, I am content to support the clause, and I hope that the wider points that it has enabled me to make have been heard and well understood by the Treasury, and not just the Ministry of Housing, Communities and Local Government.
Jesse Norman
I will just move the clause, if I may.
Question put and agreed to.
Clause 103 accordingly ordered to stand part of the Bill.
Clauses 104 and 105 ordered to stand part of the Bill.
New Clause 1
Workers’ services provided through intermediaries
“Schedule (Workers’ services provided through intermediaries) makes provision about workers’ services provided through intermediaries.”—(Jesse Norman.)
This new clause introduces the new Schedule inserted by NS1.
Brought up, and read the First time.
The Chair
With this it will be convenient to discuss Government new schedule 1—Workers’ services provided through intermediaries.
Jesse Norman
The new clause and new schedule 1 make changes to ensure that the off-payroll working reform is extended to medium and large-sized organisations in all sectors outside the public sector from April 2021.
The reform moves the responsibility for determining whether the off-payroll working rules apply from an individual’s personal service company to the client engaging them. It also requires the client, or the party paying the individual’s personal service company to account for and deduct employment taxes where they are due, rather than that responsibility resting with the individual’s personal service company. The change is not the imposition of a new tax, but is focussed on improving compliance with the already existing off-payroll working rules.
The off-payroll working rules have been in place for nearly two decades. They are designed to ensure that individuals who work like employees but through their own personal service company pay broadly the same income tax and national insurance contributions as those who are directly employed. Without those rules, nothing prevents individuals from being engaged off-payroll simply to reduce the tax and national insurance contributions rightfully due.
Personal service companies have traditionally had to self-assess whether the rules apply. Unfortunately, non-compliance with the off-payroll working rules outside the public sector is widespread. The public sector reform has demonstrated that organisations engaging individuals are better placed to assess the employment status for tax of that individual.
There have been several attempts to tackle non-compliance with the rules in recent years. In November 2015, the Government carried out a consultation on how to improve the effectiveness of the off-payroll working rules. Since then, the Government have carried out three further consultations on reforming the rules. During this period, several alternatives to the original off-payroll working rules were suggested. The Government fully considered alternative proposals as part of the extensive consultation process on the reform.
In general, the approaches suggested would create a group of people who are exempt from the employment status tests and subject to a separate and advantageous tax regime, which the Government did not consider to be fair to the majority of working individuals who are subject to the existing boundary between employment and self-employment. Options such as administrative changes and strengthening HMRC’s compliance response were also discussed, but the consultation found that those would not be sufficient to tackle the problem.
The off-payroll working rules were reformed in the public sector in April 2017, shifting the responsibility for determining whether the off-payroll working rules apply from an individual’s personal service company to the public sector client engaging them. That was because organisations are better equipped to make the correct employment status for tax assessments than are individual contractors, and HMRC is better able to monitor their compliance. This reform is effective in reducing non-compliance with rules: it raised an estimated £250 million in additional revenue in the first 12 months, with independent research showing that it did not damage the flexibility of the labour market.
Jesse Norman
I am winding up, so perhaps I could let the hon. Lady introduce her point in her speech.
When their engagement meets the tests of an employment relationship, contractors should not pay less tax than those who are directly employed. I therefore move that new clause 1 and new schedule 1 stand part of the Bill.
Wes Streeting
Our position on IR35 has been well rehearsed in previous and recent debates on the Floor of the House, but let me revisit some of those points, because this debate is closely followed outside Parliament and matters to people across the country. Self-employment is a vital part of the UK economy. People who are genuinely self-employed deserve to be properly supported while also ensuring that everyone pays the right amount of tax. Historically, the tax arrangements for self-employed people have differed from those for people on payroll, reflecting the fact that self-employed people have lower levels of protection in areas such as holiday pay, sick pay and other rights and benefits that people would enjoy if they were employed on payroll. Clearly the system has also been subject to abuse, and it is right that we tackle that abuse.
Some of the anxiety arises from concerns that the Treasury, and the Government more broadly, sometimes have a tendency to think of the self-employed as if they fell into only two categories of people. The first is the very wealthy, who use self-employment status to avoid paying their fair share of tax, which should obviously be clamped down on. The second is the very low paid, who work in parts of the economy that are deemed unproductive—even to the extent that some people would think it desirable that such workers were not engaged in those forms of employment, as if that were the best way to tackle the UK’s poor productivity statistics. The true picture of self-employment in the country is a lot more complicated than that, and huge numbers of self-employed people make an enormous contribution to the economy and who provide a whole range of services that benefit citizens across the country and businesses more generally.
It is right that the Government have taken the decision to delay the implementation of the roll-out until April 2021 due to coronavirus. The Opposition would again impress on the Government the need to use the additional time ahead of implementation to provide an additional review and to learn from the mistakes of the public sector roll-out and the continuing anxieties about the planned private sector roll-out. Those concerns were expressed in the House of Lords report entitled, “Off-payroll working: treating people fairly”, which concluded that the Government must address IR35’s inherent flaws and unfairness, a point that was supported by the ICAEW.
The Opposition urge the Government to use this time wisely. We believe it is necessary for the Government to take a broader approach in order to modernise the law on employment status and to look at how it interrelates with tax status, so that we have a genuinely joined-up approach that brings together the issues of tax and employment law. Notwithstanding the planned roll-out of IR35, the Chancellor made it very clear, when he announced the self-employment income support scheme, that there will be consequences for future Treasury policy and future tax arrangements for Britain’s self-employed. That message was heard loud and clear by the self-employed, but if we are asking them to pay a greater contribution, we also have to address the inherent challenge and, in many cases, the injustice around their employment protections and the levels of social protection and social insurance that people enjoy if they are employed, as opposed to self-employed.
As the shadow Chancellor has said, having addressed this issue many times both in her current role and in her previous role:
“We really need a joined-up approach to the issues that brings together the consideration of tax and employment law and levels up protections for the self-employed, as well as dealing with the current implications of the tax system that boost bogus self-employment.”—[Official Report, 4 April 2019; Vol. 657, c. 489WH.]
She made those remarks back in April 2019; it is now June 2020. I am not sure that, in the year that has passed since she made those comments, the situation has changed particularly and that things have improved. The delayed roll-out is something that has been widely welcomed, but it is crucial that the Government use this time wisely. It is not clear from the year that has just passed that the Government will use the next year any better.
Miriam Cates (Penistone and Stocksbridge) (Con)
I refer hon. Members to my entry in the register of Members’ interests. This is clearly a contentious issue, but the majority of employers and contractors I have spoken to agree that some kind of reform is necessary.
Our tax system must be fair, but it should also support those who take risks to grow businesses and innovate in a way that benefits our whole economy. It should not offer advantages to those who are using PSCs to create wealth only for themselves. I am certainly not saying that it is wrong to create personal wealth, just that our tax system should not offer particular advantages in doing so and tax should not be avoided as a result. We must balance flexibility with fairness and it is not fair that two people doing the same job in broadly the same conditions pay different rates of tax. We must recognise that those who are genuine contractors do not have the same benefits as employees—they do not have the same job security—but where someone is to all intents and purposes an employee, they and their employer should pay their fair share of tax and national insurance.
I have personal experience of running a small business in the tech sector and I believe that current practices discourage people from becoming employees in some sectors. For example, in the tech industry, people with certain programming skills can command such high day rates as contractors that there is very little incentive to become an employee in a small company. That is a particular issue in a sector where there is a shortage of talent and a great demand for skills.
While there is and always will be a role for contractors, contracting costs can be prohibitively high for start-ups and scale-ups, and those businesses find it difficult to recruit employees with the right skills. Start-ups and scale-ups need employees—people who are committed to the company, who can help shape its culture and, importantly, who can pass on their knowledge and skills to new employees as the company grows. Labour market flexibility has to work for employers and employees. At the moment, the very businesses that we most need to grow and innovate are struggling to recruit skilled employees, especially in areas outside London and the south-east, such as Sheffield and Barnsley, which I represent.
I believe that the reforms will make employment and the benefit that it brings more attractive. As I said, we should be using the tax system to support those who create wealth not only for themselves, but for our whole economy. In that way, any tax saving to an individual or company is an investment for the taxpayer, not just lost revenue. A great example of that is the research and development tax reliefs, which I am delighted have been increased in the Bill and will encourage the kind of innovation that the UK really needs to boost growth and productivity. They are incentives that help to create wealth for us all.
In contrast, using a personal service company to reduce an individual’s tax burden does not benefit the taxpayer. The individual’s income tax and national insurance savings are not used to create other jobs or to invest in technology or create products, and so the taxpayer does not receive any return on the lost revenue. Where a worker is genuinely self-employed, facing additional risks, with none of the benefits of employment, there should be no change, but where someone is to all intents and purposes an employee, improving compliance should make sure the taxpayer does not lose out.
I understand that any changes bring risks and uncertainty and I am pleased that the changes to IR35 have been delayed for a year to give our economy some chance to stabilise after covid-19, but fairness should be the foundation of our tax system and properly applied, the regulations will help to achieve that aim.
Jesse Norman
I will respond to the many important points raised by hon. Members, who I thank for raising them.
My hon. Friend the Member for Penistone and Stocksbridge is absolutely right to highlight the importance of making employment attractive. It is vital that best practice be spread throughout the economy as rapidly as possible and if the effect of that is to create a more level playing field between two sides of a particular divide, that would be a very valuable thing. The Government’s concern is that there is an unfairness in that someone can be, as it were, latently employed, although working for a personal service company, and that is the concern that the Government seek to address.
My hon. Friend the Member for Harrogate and Knaresborough is absolutely right to emphasise the importance of having a flexible and nimble economy. He is right, and the hon. Member for Ilford North is right, to focus on the effect of the self-employment and self-employed contractors in making this happen. For reasons I will come on to, this reform does not tax the self-employed. It does not tax anyone. What it does is to change the determination for people who are not self-employed but who are in fact employed, and to determine whether they are or not.
The hon. Member for Aberdeen South made a series of comments that I am afraid are simply not true. He was very rude about the Government’s decision to introduce this via a separate resolution, but the details of the change were announced as part of the Budget resolutions. They were not moved. They could and may well have been discussed—I do not recall the details—during the Budget debates. Therefore, it was perfectly open to the House to scrutinise those details, although the resolution was not itself moved. If the resolution had been moved, it would not have been possible for us to legislate with anything like the same straightforwardness for the move to an April 2021 deadline. That was the purpose of delaying moving the resolution. The effect was that the resolution was debated on the Floor of the House of Commons in and of itself—given a separate debate to that resolution in order to discuss that. Therefore, the idea that there has been any short-circuiting of due process is entirely wrong.
Of course amendments can still be tabled on Report, and the hon. Gentleman may seek to do that. He was very rude about the reform, saying it would lead to zero-hours contractors, and calling it shocking, but is he planning to support it? Will he vote in favour of it or against it? That will be the true measure of his and the SNP’s position on this important reform.
Finally, the hon. Gentleman talks about the Lords Economic Affairs Committee, but of course he is entirely wrong about that. We have yet to respond to the Lords Committee—we will do so in due course—but we have engaged very closely with it on a whole variety of different areas. If he speaks to Lord Forsyth, he will know that I approached Lord Forsyth personally, having just become Financial Secretary, to reopen the relationship and make it flourish. Indeed, I volunteered to appear in front of the Lords Economic Affairs Committee last year precisely to hold myself and the Treasury accountable in this area.
Stephen Flynn
The Minister has gone through a number of the points I made, but one that he did not touch upon was the impact that the proposal will have upon contractors working in the oil and gas sector, given the huge challenges facing those workers at the moment. What message would he give those contractors, whose future is uncertain in any case, but who are facing this change on top of an already devastating situation?
Jesse Norman
We are obviously very concerned about the effects of coronavirus, which is precisely why we have delayed the implementation of the reform by a year. The message I would give is that we absolutely respect and support the work that those individuals are doing and understand the position they are in. The Government have rapidly made available very important sources of support for the economy across a whole range of different areas and sectors of work and, indeed, in the benefits system, both for businesses and families and the sustaining of jobs. Therefore, there is no absence of respect or support for the people the hon. Gentleman describes.
The hon. Member for Ilford North mentioned the diverse nature of these different forms of employment. He referred to the self-employed, but actually the self-employed are not taxed by this. The genuinely self-employed are not affected by the reform. The reform is designed merely to change the way in which the status of someone who is latently employed—actually employed, but perhaps unaware of it or not behaving on that basis—is determined. The hon. Member asks us to use the additional time appropriately. We have got before April 2021. I have said already, but let me say again that we are in the process of commissioning external research into the effect of the public sector reform. As he will be aware, the early research immediately after the public sector reform did not bear out the dire predictions regarding flexibility or reduction of income, but we will make sure that external research into the longer-term effects of the public sector reform is completed and placed in front of the House before April next year.
Alison Thewliss
Can I ask the Minister about the impact assessments that will be done? What monitoring is his Department doing of the chilling effect that this is having on contracts right now? What I am hearing from contractors in my constituency is that those contracts are not being renewed now and it is already having a chilling effect, regardless of when the measure is coming in. What monitoring is he doing of the situation?
Jesse Norman
As I have said, in relation to public sector reform, the external research did not detect any great chilling effect. We will be looking at the longer-term effects of public sector reform. On this reform, it is undoubtedly true that the measure is nudging some companies to consider whether people they had thought of as contractors are not, in fact, employees. In some cases, they are having to review the structure of their workforces. I do not think that is a chilling effect on the status of those contracts, because those people were always latently employed. It is then for the contractor and the company to work out what future arrangement they wish to have.
Alison Thewliss
The IT contractors from India who I mentioned earlier can choose to go anywhere in the world. They have chosen to locate in Glasgow because the work is there, the skills are there and they have a good community in my constituency. If the contracts are not there, they will take their skills and their money and go somewhere else. What is the Minister doing to mitigate against that?
Jesse Norman
That is a claim that the hon. Lady makes and we will be able to test it over time through external research. It is not a view that has been validated so far in the roll-out to the public sector. It is a diverse and vibrant area of our life and it may well have more resilience overall than she is giving it credit for, but we will not know until we have seen the effects of the reform.
The final point, raised by the hon. Member for Ilford North, is to do with rights. Of course, the measure is to do with the determination of tax due, but the Government have put in the Queen’s Speech a substantial commitment to bring forward a Bill in that area following the Taylor review. I know that my colleagues in the Department for Business, Energy and Industrial Strategy take that very seriously.
Question put and agreed to.
New clause 1 accordingly read a Second time, and added to the Bill.
New Clause 2
Review of geographical effects of provisions of Sections 27 to 30
‘The Chancellor of the Exchequer must within twelve months of the passing of this Act lay before both Houses of Parliament a report assessing the differential geographical effects, broken down by nation and NUTS 1 statistical region, of the changes made by sections 27 to 30 of this Act.’—(Alison Thewliss.)
This new clause would require a geographical impact assessment of the clauses of the Bill relating to reliefs for business.
Brought up, and read the First time.
Wes Streeting
The hon. Member for Glasgow Central makes a reasonable case—that will be a running theme throughout a number of new clauses, not least when we turn to new clause 3 in the afternoon session. I will make the points I want to make about the importance of reviewing the geographical impact of measures in the Finance Bill at that point, but I concur with her remarks.
Jesse Norman
I thank colleagues who have spoken. New clause 2 would require the Government to assess and report on the geographical effects of changes to business tax reliefs made by clauses 27 to 30 within 12 months. That relates specifically to the research and development expenditure credit, the structures and buildings allowance, and the treatment of intangible fixed assets.
Her Majesty’s Revenue and Customs does not routinely require businesses to provide geographical information about where expenditure is incurred as part of their claims for RDEC, SBA or intangible fixed assets treatment. In order to do so, changes would need to be made to the CT600 form, which would create a burden for businesses. In addition, those claiming the reliefs would only provide information after the year-end. For that reason, it does not make sense. It is not possible for Her Majesty’s Revenue and Customs to have that information within the 12 months stipulated in the amendment. HMRC does in fact already publish annual statistics on many tax reliefs, including a detailed breakdown of R&D tax relief claims, which analyses, by region and sector, the number of claims and the amount of relief received. However, the regional analysis is based on the company’s registered office, not necessarily where expenditure is incurred.
Although the next set of annual R&D tax relief statistics will be published by HMRC in the autumn, companies can claim R&D tax relief up to two years after the end of their accounting period. For that reason, the 2020 statistical release will include claims only until 2018-19, and will therefore not include claims for the increased 13% RDEC rate. The Government do, of course, remain committed to levelling up every region and nation of the UK to spread opportunity and to ensure that everyone benefits from growth. For example, the spring Budget provided a £1.14 billion increase to block grants for devolved Administrations to spend on their own priorities. That is in addition to the £2.7 billion that the Government are investing in city deals across Scotland, Wales and Northern Ireland, with £800 million of funding being provided to support four deals in Wales alone, and a further £1.4 billion being provided across 10 deals in Scotland.
As we look to our economic recovery from the impact of covid-19, that levelling-up agenda will be more important than ever. Given that the Government already publish detailed analyses and that regional information is collected and held as part of HMRC’s tax returns, asking business to record further information would represent a significant additional business burden. I ask the Committee to reject the new clause.
Alison Thewliss
The Treasury Select Committee is also looking at regional imbalances. Part of the Committee’s work has identified that the data collected by the Government on a range of areas is not sufficient. It is not good enough for the Minister to say, “Oh, it’s difficult to do that.” I accept that money is not necessarily spent where an office is based, but it is a start in understanding where that money is going. If lots of organisations based in London are taking in the money and perhaps it is going somewhere else, the Government ought to be aware of that and ought to be looking at it to make sure that if somebody based in London is taking in the money but it is being spent somewhere else, then perhaps they should be based where the money is being spent. Perhaps they should be moving their offices to where the money is being spent. That puts it back on to those businesses, to add to that consideration, so I do not buy the Minister’s argument that it is awfully difficult and that we should not do it. It is a first step into looking at how it might be done, so I would like to press clause 2.
Question put, That the clause be read a Second time.
Finance Bill (Tenth sitting)
Jesse Norman ExcerptsThursday 18th June 2020
(3 years, 10 months ago)
Public Bill CommitteesRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 18 June 2020 - (18 Jun 2020)
Wes Streeting
I am grateful for that intervention. I was very encouraged by the recent policy position published by the leader of the Scottish Labour party and excitedly relayed to the rest of us by the shadow Secretary of State for Scotland, my hon. Friend the Member for Edinburgh South (Ian Murray). Scottish Labour has come out with some really bold proposals for how devolution could go even further, extending to home rule in Scotland. I know that that is not a position shared by the separatists in the Scottish National party. We could spend the rest of the afternoon discussing the merits or otherwise of Scottish independence, but, to allow SNP Committee members to get back home at the end of the day, perhaps we should not dwell on that this afternoon.
The Financial Secretary to the Treasury (Jesse Norman)
It is too tempting for me not to ask the hon. Member to share a few of his views on Unionism in Scotland and whether he thinks that is a good idea.
Alison Thewliss
People can promise things in the never-never—perhaps that will happen, but we do not quite know. But how Scotland ends up getting governed should not be down to whether votes in England sway one way or the other. We would do a far better job of governing ourselves, as many small independent countries around the world do. Many small independent countries are also making a much better fist of dealing with the coronavirus crisis than the UK is—in fact, most countries in the world are, never mind small ones. Look at how well New Zealand has managed the crisis, and how well it has been able to come out of it, under the brilliant leadership of Jacinda Ardern. We have a lot to learn from other countries about how to do things better in so many ways.
We are very supportive of Labour’s new clause 3 and of the complementary new clauses 18 and 21, which I tabled. New clause 18 seeks assessments of the impact of the Bill within a month on various economic variables, comparing situations in which the Treasury ceases or continues its covid-19 support schemes for the next year.
The likely reality is that when the schemes are discontinued, as planned, the economy and people’s living standards will be sent reeling. We know that from the many studies that have been done of people who have taken up the coronavirus job retention scheme—the majority of uptake of the scheme in the hospitality and tourism industries is significant. YouGov polling out yesterday suggested that a huge number of people would lay off their staff if the schemes were withdrawn. The Government need to listen carefully to the experience of people in those sectors on the impact of withdrawing too early.
We feel it is important that that is looked at in the context of the Finance Bill. As everyone has seen, as the Finance Bill progressed from the Budget to where we are now, the world in which we are living changed—changed dramatically—for so many people and their living standards. For the Government to have such a review seems wise.
The schemes covered by new clause 18 are the job retention scheme, the business interruption loan scheme, the bounce-back loan scheme and the self-employed support scheme. We know that the Chancellor has said that he will do “whatever it takes” to protect jobs, but we also know—I am a member of the Treasury Committee, and we have found that from the evidence received from many—that more than 1 million people have fallen through the gaps in the schemes. We need to understand what impact that and the measures in the Finance Bill will have on those groups.
Earlier, the Office for National Statistics revealed that in April the UK’s economy suffered its biggest monthly slump in GDP on record—20.4%—due to the pandemic. We therefore think that it would be wise for the Government to expand the support schemes, rather than winding them down. That is also critical for the devolved nations, which are moving at a slightly different pace, due to the circumstances in which we find ourselves, hence why we want to look at the different nations as well.
In new clause 21, we ask the Government to report on the effects of the Bill in a number of different business sectors. Different sectors will be differently affected. The sectors mentioned in the new clause include leisure, retail, hospitality and tourism, all of which we know from our constituency experiences have been severely hit, with retailers having real problems and many in the leisure sector perhaps falling outwith some of the schemes and finding it very difficult to get started up again. As I mentioned earlier, some businesses in my constituency were unable to access the support for various technical reasons. Financial services, business services, health life/medical services, haulage and logistics and aviation have also been severely impacted. Many bus firms and tour firms are struggling to keep going, which will impact on schools as they return. Many are rural schools and so rely on the transport sector to move pupils around. Those factors need to be considered as well.
My hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black) has spoken a great deal about the impact on the aviation sector, which, in turn, will have a huge impact on the behaviour of BA. The way it is currently treating its staff is absolutely appalling.
We also want to talk about professional sport and oil and gas, which my hon. Friend the Member for Aberdeen South covered so well earlier. Universities will be hugely impacted by the number and ability of foreign students to come here to work, study and live. Those universities have been in contact with me—indeed, several are based in my constituency and several neighbour my constituency —saying that they are very concerned about their future, which the Government have not really talked about to any great extent. Fairs, too, face problems. I have many show people based in my constituency, and they are also very concerned about the loss of their season and their ability to continue trading, because they do rely on that public-facing role—opening up the funfair to people, taking money and exchanging cash. Without that, they have no income at all. They have very few alternatives. Many may operate things such as snack bar vans, which, again, have not been operating to the same extent as previously.
We are keen to press the Government on these things and to understand the impact of what has been proposed here and to see what schemes are running. I am very happy to move these new clauses in my name and the names of my hon. Friends.
Jesse Norman
I rise to urge the Committee to reject these new clauses. Let me say a few things about them and then I will turn to the comments that have been made.
New clause 1 would require the Chancellor to conduct an impact assessment on the effect of household incomes on GDP in each part of the United Kingdom and in each region of England. New clause 18 would require the Government to conduct a review within one month of Royal Assent, of the effect of the Bill on the nations and regions of the United Kingdom if the Government’s main coronavirus support schemes continue for the next year—a hypothetical case if that be so—or if they were ended or changed in any way by a Minister of the Crown. The SNP’s new clause 21 would require the Chancellor to make an assessment of the impact of the legislation on a large number of different sectors and to lay a report of that assessment before the House of Commons within six months of Royal Assent.
We do not think that any of those clauses are necessary. I should remind the Committee that, apart from the provisions relating to the main rates of income tax, provisions in this Bill will apply across the whole of the United Kingdom and will directly benefit households and businesses in every part of the country. They have been developed with careful consideration of their impact on all regions and sectors of the United Kingdom. It is worth just saying that Ministers assess individual measures as well as the package as a whole for the differential impacts that they may have on each part of the UK throughout the policy development process, and they are under a statutory duty to assess the equalities impact of the provisions contained in the Bill, and those have been analysed and published.
In addition, the Treasury publishes extensive distributional analysis of the impacts of this Bill, together with the impact of the Government’s decisions on welfare and public services. What that amounts to is a rigorous and detailed record of the impact of the Government’s policies on households. The Office for National Statistics also publishes monthly estimates of GDP, and analysis of the impact of Government decisions on GDP is also carried out by the Office for Budget Responsibility, which is itself independent.
Therefore, between those checks and balances and that degree of inbuilt institutional consideration and the packages of support that we have offered, I think that it should be fairly plain that these new clauses are not required. We continue to monitor the impact of the coronavirus crisis closely as well as the response to the schemes that have been put in place. It is right that we should do so alongside the general continuous review of tax and the economy in relation to policy.
Let me remind the Committee that the Government have a commitment to consult—and they do consult—regularly on new tax policy and tax legislation in order to make sure that as wide a range of views and impacts as possible are captured during the tax policy-making process. We have touched on that matter in a previous discussion.
Let me come quickly to the points raised by the hon. Members opposite. The hon. Member for Ilford North rightly highlighted the levelling-up agenda, and he was fully justified in doing so. He said that London was a global city and should be understood as such, but that the Government’s attention should properly be on all the regions and nations of the country, and of course I share that view.
The hon. Gentleman talked about centralisation within the Treasury. I have been a trenchant critic of centralisation in the Treasury historically and on the public record, and I think it reached a bit of an apogee under the last Labour Government—I would say that, wouldn’t I? But I still think it is true—there was a tendency to view every problem as potentially soluble by tweaking the marginal costs and benefits of a system. In some respects, we have had to counteract that tendency in order to give us more of an inclusive view of what ultimately are a set of devolved settlements as well as a UK picture.
The hon. Member for Glasgow Central said something that I thought was quite bold: that the Scottish Government would do a far better job of governing Scotland than the UK Government do within a UK national framework. Of course, the UK does not govern Scotland; it has areas that are reserved and areas that are devolved, and many areas, including higher education, are devolved in Scotland.
I must say that I share the high regard that the hon. Member for Ilford North has for the history of higher education in Scotland. He will know that for many hundreds of years there were two universities in England and five in Scotland, which represented and reflected a high-quality orientation and a commitment to higher education. Unfortunately, it is in the record that Scottish higher education has not made the same kind of progress under the Scottish National party Government, particularly in relation to minorities and equalities, which is a terrible, terrible shame. I wish it were otherwise. So I would not accept the suggestion made by the hon. Member for Glasgow Central, but I will invite the Committee to reject these clauses.
Alison Thewliss
I agree wholeheartedly with the hon. Member for Houghton and Sunderland South. She has gone into extensive detail, and I am sure everybody will be glad to know that I do not aim to repeat what she said, but the notion of the tax gap, and the fact that money is not coming in that our public services desperately need, particularly at this time, is very serious. The UK Government should be seized of the significance of this, and should do everything they can to eliminate the tax gap.
In many cases, the tax gap arises because of the complexity of our tax system. Those who are looking for loopholes—who are looking not to pay their taxes, and to divert and dodge—find ample opportunity to do so. It is not acceptable that this and successive Governments have played whack-a-mole with all these tax schemes as they have appeared. As soon as one appears, the Government shut it down, and then another one, or several more, emerge. A whole lot more needs to be done on anti-avoidance, rather than our being reactive to all this. A comprehensive anti-avoidance rule, and measures to make sure that the tax that is supposed to come in does so, ought to be a priority for the Government.
Our new clause—it is similar to Labour’s new clause, which we fully support—states:
“The Chancellor…must review the effects on tax revenues”
of the measures in the Act and bring that review before the House of Commons. It asks that
“any change attributable to the provisions in this Act in the difference between the amount of tax required to be paid…and the amount paid”
be reported on.
However, I want to touch more on Scottish limited partnerships, because this issue is not going away. The Government have failed to deal with it comprehensively. There is a continuing problem, both in respect of Companies House and in respect of how the partnerships are dealt with; that includes fines not being enforced and collected. Again, that money should be in the Government’s bank account, but if they are not going to enforce the rules, they will not get the fines. The fines would have been quite substantial had they been enforced since the measures came into place a couple of years ago.
The system allows those with an intent to conceal or deceive to do so easily by registering in secret as an SLP. These vehicles have a legal personality that makes them quite different from English limited liability partnerships. It means that individuals can make agreements in the name of the financial product without ever having to name the person or the people who control it. They have been used for years to funnel millions of pounds of dirty money created by illicit business activities, and this is still ongoing.
I can quote headlines to the Committee. There is, “How a Scots council house was secret base for criminals busting Putin sanctions”. There is one about Scotland’s firms and bribes to Argentina and Uzbekistan. There is, “Russian gang leader jailed for faking metal exports to Scotland”, and “Ukrainian mercenaries are using Scottish ‘tax haven’ firm as front”. There are headlines about money coming through Baltic banks, the effect on issues in Peru and a private war in Libya funded by Scottish funds. These are all current or previous issues in which Scottish limited partnerships have been involved. As I said in a previous debate, this is having an impact on Scotland’s reputation in the world. Most recently, just last month, David Leask and Richard Smith, who have been brilliant campaigners on this issue, revealed that more than 700 British firms have been blacklisted in Ukraine for suspicious activity related to money laundering across the former Soviet Union, and all involve Scottish limited partnerships.
That is why we in the SNP keep pushing on this issue; that is why it is so important to us. There is dirty money going around the world, fuelled in part by SLPs and the way in which they work. Also, the Government are not collecting tax on any of this money, and that contributes to the tax gap—the money that is not going to the Exchequer—as well as to global criminality.
If the Minister will not accept the new clause—given all the new clauses that the Government have not accepted, I suspect that they will not accept this one either—I urge him, at the very least, to listen to my concerns and those of campaigners about SLPs, and to take action to close the loopholes, including by fining the companies that are still flouting the rules, which the Government are not doing, and making sure that the money collected goes to the Exchequer, where it can be spent for the benefit of all our constituents.
Jesse Norman
I thank the hon. Members for Houghton and Sunderland South, and for Glasgow Central, for their comments, which I will respond to in due course.
New clause 6 would require the Government to review all tax reliefs in the Bill within a year, while new clause 22 would require the Government to review the effect on tax revenue of the Bill within six months of it being passed into law. These amendments are not necessary. Let me deal first with new clause 6 and then turn to new clause 22.
As Members will know, the Government keep all tax reliefs under review, to ensure that they strike the right balance between simplicity, effective targeting and overall yield. When a new tax relief is announced at a fiscal event, the Government publish estimates of the Exchequer impacts of the policy change in the Budget document.
The Government also consult on new tax reliefs and proposed changes to tax reliefs, bringing in external expertise as part of the policy-making cycle. Officials are constantly working on ways to improve policy development and administration, and management of reliefs.
The Government also conduct evaluations, including of a number of quite significant reliefs, such as research and development expenditure credit, or R&D tax credits, and entrepreneurs’ relief. In 2015, Her Majesty’s Revenue and Customs published an evaluation of R&D tax credits. In 2017, it commissioned an evaluation of entrepreneurs’ relief that led to a series of reforms—most recently, in Budget 2020, a significant reduction in the lifetime limit. HMRC will continue to monitor and evaluate reliefs, and it will bring forward a pipeline of further evaluations in due course.
HMRC is also considering—very much at my insistence—a proposal for a more systematic evaluation programme for tax reliefs, which would respond to the concern raised by the hon. Member for Houghton and Sunderland South, and it already monitors the effect of tax reliefs on taxation revenue.
HMRC issues an annual tax reliefs statistics publication, which includes estimates of the costs of tax reliefs. It is also undertaking a project to expand its published cost information, and I am pleased to remind the Committee that in May HMRC published cost estimates for a further 47 previously uncosted tax reliefs.
New clause 22 would require the Government to review the impact of the Bill on tax revenues within six months of it receiving Royal Assent. As I have said, the Government keep all taxes under review, and will continue to measure and publish annual statistics on the tax gap.
HMRC’s annual “Measuring tax gaps” report estimates the difference between the amount of tax due to be paid to HMRC and what is actually paid. It provides a breakdown of different kinds of behaviour, taxpayer groups and changes over time. However, the tax gap report is retrospective, with some time lag, due to the dates on which data become available. For example, estimates for 2018-19 are due for publication in July 2020, with some components projected in this year.
In addition, data limitations mean the tax gap is not suitable for evaluation at a granular level. For this reason, it would not be possible to disaggregate the impact of the compliance, for example, of SLPs. Furthermore, the tax gap may rise or fall due to a number of external factors that are unrelated to the actions of the Government.
HMRC also publishes annual reports and accounts, which include detailed information on revenue collection and on additional yield from compliance activity. It is committed to providing transparency to taxpayers about its activities, and these publications are important in demonstrating that commitment.
I now come to some of the points made by the hon. Members for Houghton and Sunderland South, and for Glasgow Central. The hon. Member for Houghton and Sunderland South, who I welcome back to the Committee after her period of absence, is absolutely right that tax reliefs can play a valuable role. However, she is also right that there are reliefs that can and should be reduced. That is, as I have said, a matter on which the Government are closely focused.
Wes Streeting
Based on how the pattern of voting is going this afternoon, we can guess how the discussion of this proposal will turn out, unless the Government Members have a Damascene conversion and decide to swing behind it.
I am conscious of the clock, but we have had plenty of opportunity recently to debate Government immigration policy; I think the Opposition’s views are very well known. The economic debate about immigration is an important one, and it is important to remind people not just in the House but across the country that it remains a positively good thing for this country that the UK remains a destination to attract talent from around the world to come and work and study on these shores. That is a national strength. Of course, it is also important that we have immigration rules that are widely understood and fairly applied, and enforced where necessary.
Jesse Norman
I will keep my remarks brief, in keeping with the spirit of Opposition Members’ comments. These clauses would require the Chancellor to review the effect of measures in the Finance Bill relating to changes in migration under several different EU exit scenarios.
I must emphasise that those scenarios are entirely hypothetical; that in itself is a highly questionable aspect of these new clauses. However, in any case, these new clauses are not necessary. I agree entirely with the hon. Member for Ilford North that immigration policy should be fair and seen to be fair. It is absolutely right that the Government have committed to ending free movement by January 2021; that will not change. The Immigration Bill delivers on that commitment but, in the spirit that the hon. Gentleman identified, it also lays the foundations for a firmer and fairer immigration system that welcomes people—the best and the brightest, to use the phrase in vogue—wherever they come from, and that is a good thing.
The Government commissioned the independent Migration Advisory Committee to advise on the role of the future immigration system and the appropriate salary thresholds for the policy, and the Migration Advisory Committee recommended against regional variation across the UK. As I have said, and given that recommendation, it would be disproportionately burdensome to create additional reporting requirements focused specifically on the migration impacts of policies in the Bill.
Wes Streeting
I am grateful for that intervention because, having had our knockabout between the Labour party and the SNP, we can now unite in common cause against this terrible Tory Government in Westminster.
Turning briefly to the facts, we know that wealth and income inequalities in the UK are stark: the richest 10% of households own 45% of the nation’s wealth, while the poorest 50% own less than 10%. The average FTSE 100 chief executive is paid 145 times more than the average worker, and Britain’s top 1% have seen their share of household income triple in the past four years, while ordinary people have struggled. Over the past decade, when Governments have been led by the Conservatives, we have seen the slowest growth in living standards since the second world war.
Shockingly, hard work does not necessarily guarantee even a basic standard of living. Wages have failed to keep up with living costs, and 14 million people live on incomes below the poverty line, including 4 million children. It should never be the case that where people are going out to work, doing the right thing and earning money for themselves and their families, they should still find themselves living in conditions of poverty, and yet that is the situation we find in our country today.
Inequality and the poverty it creates have led to an increasing number of what economist Sir Angus Deaton called “Deaths of Despair”, caused by drug and alcohol abuse due to financial hardship and hopelessness. The rate of such deaths among men has more than doubled since the early 1990s, so the human consequences of economic inequality are clear in Government statistics. People are dying needlessly as a result of the inequality that blights our nation.
Earlier this week, I was struck by the exchange at Prime Minister’s Question Time between my right hon. and learned Friend the Leader of the Opposition and the man who tries to the give the impression that he is our Prime Minister. Extraordinarily, the Prime Minister did not seem to recognise the description offered to him of child poverty in our country. I do not expect the Prime Minister of the country to have instant recall of every piece of data held by his Government, but on something as fundamental as the number of children living in poverty—or the trends of those numbers, at least—I would have expected that the Prime Minister might have some understanding of what is going on.
When my right hon. and learned Friend described poverty in Britain, he was not talking about forecasts or future expectations of growth in child poverty; he was talking about the situation today, and he was citing the Government’s own Social Mobility Commission. On page 17 of its June 2020 report “Monitoring social mobility 2013 to 2020: Is the government delivering on our recommendations?”— a question that lends itself to quoting the title of John Rentoul’s book, “Questions to which the answer is ‘No!”—it says very clearly:
“In the UK today, 8.4 million working age adults live in relative poverty; an increase of 500,000 since 2011/12. Things are no better for children. Whilst relative child poverty rates have remained stable over recent years, there are now 4.2 million children living in poverty—600,000 more than in 2011/12. Child poverty rates are projected to increase to 5.2 million by 2022. This anticipated rise is not driven by
forces beyond our control”.
That is the significant point: this is not about population changes or even, until very recently, the conditions in the economy, but is a direct result of Government policy. The commission notes on page 8 of the report:
“There is now mounting evidence that welfare changes over the past ten years have put many more children into poverty.”
Of the many great achievements of the last Labour Government, the thing I am most proud of is the number of children they lifted out of poverty. That was the result of a deliberate political choice—of public policy pulling in the right direction—and it is a stain on the conscience and character of this Government that their own Social Mobility Commission says:
“There is now mounting evidence that welfare changes over the past ten years have put many more children into poverty.”
On the same page, the commission says:
“Too often also there is little transparency concerning the impact spending decisions have on poverty. The Treasury has made some efforts in this direction, but has so far declined to give the Office for Budget Responsibility…a proper role to monitor this. There should be more independent scrutiny to help ensure policy interventions across Whitehall genuinely support the most disadvantaged groups.”
Because of the limitations on what we are able to do to amend the Finance Bill, new clause 23 does not go so far as to give the OBR formal responsibility for measuring the impact of fiscal events and policies on poverty and child poverty across the board, but at least it makes a start by asking the OBR to look at the impact of the Finance Bill. Regrettably, that is wholly necessary. When the Government’s own independent Social Mobility Commission point to the need for this, Government Members should take that seriously. When their own Prime Minister does not seem to have a clue about what is going on in terms of child poverty, it might be good to produce at least a fresh and independent set of numbers to wake him up.
Just in case Government Members are not alive to the challenges of child poverty in our country, let us look at the latest statistics from HMRC and DWP, via Stat-Xplore. In Saffron Walden, the number of children aged from zero to 15 who are in poverty is 2,261, which means the child poverty rate is 10%; in West Worcestershire, the figure is 2,176, which means a child poverty rate of 14%; in South Cambridgeshire, the figure is 2,051, which means a child poverty rate of 9%; in Kensington, the figure is 1,731, which means a child poverty rate of 9%—those children are not going to Harrods. In Penistone and Stocksbridge, 2,010 children live in poverty, which means a child poverty rate of 13%. In Harrogate and Knaresborough, 1,699 children live in poverty, which means a child poverty rate of 9%.
Jesse Norman
Could the hon. Gentleman tell the Committee what the rate is in Ilford, North?
Wes Streeting
The Minister asks a very good question; I do not have instant recall of that—[Laughter.] I will hold my hands up and say that he has got me there. However, I will tell him that in Aberconwy, the figure is 1,469, which means a child poverty rate of 16%. In Hereford and South Herefordshire, the figure is 3,054, which means a child poverty rate of 17%. In Macclesfield, it is 1,749, which means a child poverty rate of 11%. And in Montgomeryshire, it is 2,046, which means a child poverty rate of 20%.
I do not really need persuading of the need to act on child poverty in my constituency. It has been a campaigning issue that I have taken up since I was first elected to this House. However, it is a deep source of regret that, even when the Government’s own Social Mobility Commission highlights the impact of Government policies on child poverty, the Government still refuse to act.
Jesse Norman
I thank Opposition Members for their comments. This Government will always be committed to reducing poverty and child poverty. There is no difference in our view and the Opposition’s view of the importance of these issues: they are very, very important.
The hon. Member for Ilford North has been free with statistics. Let me give him a couple that he might find of interest regarding households with a below average income. The Department for Work and Pensions has shown that 200,000 fewer people were living in absolute poverty in 2018-19 than in 2009-10, including 100,000 children. The record also shows that Government policies continue to be highly redistributive. Distribution analysis of the most recent Budget shows that the poorest 60% of households receive more in public spending than they contribute in tax. In 2021, households in the lowest income decile will receive more than £4 in public spending for every £1 that they pay in tax, on average.
No one thinks that the present situation is such that a Government of any stamp could rest easy. We need to continue to press for lower poverty and greater equality in our society. That is an important theme for this Government. I remind the Committee that, in the past few months, the Government have been focusing on supporting lower income families through the pandemic outbreak—through the schemes that we have discussed and through increases to universal credit and working tax credit. Much of the information that the new clauses ask for is already in the public domain, including with regard to the distributional effects of tax, welfare and spending policy, and data on poverty rates, as the hon. Member for Ilford North highlighted.
I hope that the Committee enjoyed, as I did—how sharper than a serpent’s tooth—the moment when the hon. Member for Ilford North turned on his erstwhile partner and highlighted some of the weaknesses in the Scottish National party Government’s own activity. The hon. Member for Glasgow Central said that the Scottish Government will do everything they can to take action in this area. They now have a significant amount of devolved power, through the tax system and other means, and we will look at what impact they make on the issue. How they exercise that responsibility will be a very interesting matter for further scrutiny.
Stephen Flynn
The Scottish Government announced a £10 per week child benefit supplement for the poorest families in Scotland, which is expected to lift 30,000 children out of poverty by 2023-2024. Will the Minister’s Government do the same?
Jesse Norman
We will look at the effects of that and at whether it will be adequate to meet the challenge the Scottish Government have laid down for themselves.
We have now reached the end of this process. I have found it very exciting, and I thank all colleagues for the work that they have done. With that in mind, I reject the new clauses.
Alison Thewliss
I wish to press the new clause to a vote.
Question put, That the clause be read a Second time.
Jesse Norman
On a point of order, Mr Rosindell. On behalf of the Exchequer Secretary and myself, I thank you and your co-Chair, the excellent folks at Hansard, our Whips, our Parliamentary Private Secretaries and the officials who have supported us throughout the Committee. Of course, they wrote this note, so I hope they will be aware of the generous terms in which I single out, in particular, Edward Ferguson and Charlie Grainger; our Bill team at the Treasury, consisting of Kate O’Donoghue, the Bill manager, as well as Helena Forrest, Nye Williams-Renouf and Samuel Fenn; and a host of other people. The Opposition do not have access to the same level of resources; it would be astonishing if they could replicate the expertise to which we have access, and I am profoundly grateful for that expertise.
I thank all the members of Committees, on both sides of the Chamber, for making this such an energised and productive Committee, especially considering the great difficulties under which it has had to operate.
Bridget Phillipson
Further to that point of order, Mr Rosindell. I would also like to put on record my thanks to you and Ms McDonagh for being so fair and generous in allowing us to speak at some length about our concerns on the Finance Bill. You were exceptionally generous—at times, and arguably today, a little too generous—when it came to some of the wider conversations we had around interesting and irrelevant matters around Scottish separatism. Doubtless we will return to that at a later stage.
I put on record our thanks to the Clerks for all the help that they have offered us, particularly around amendments and the order of proceedings—their expertise at this time is particularly appreciated by us—and to the Hansard reporters.
This is the first opportunity I have had to lead on the Finance Bill in Committee. It has been made much easier thanks to the wonderful support of Members on the Opposition side, not least our wonderful Whip, my hon. Friend the Member for Manchester, Withington.
I thank all members of the Committee for their contributions. I am sure the Financial Secretary has enjoyed talking to more technical aspects of the Bill, although he did particularly relish opportunities to elucidate on Adam Smith and Edmund Burke, and on the transcendental nature of what might be regarded as temporary, or otherwise, when pressed by my hon. Friend the Member for Streatham.
I also thank those individuals and stakeholders who have been very generous in providing advice and information to the Opposition, and, of course, the House of Commons Library, whose staff are, as ever, very prompt and professional in their response to all research requests.
Although this is a small Finance Bill, compared with some recent efforts, I thank my staff and those in the office of my hon. Friend the Member for Ilford North for their dedication and hard work, and for allowing us to hold the Government to account. We have had a wide-ranging debate, and I look forward to returning to some of these issues on Report.
Economic Outlook and Furlough Scheme Changes
Jesse Norman Excerpts(3 years, 10 months ago)
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Anneliese Dodds (Oxford East) (Lab/Co-op)
(Urgent Question): To ask the Chancellor of the Exchequer, if he will make a statement on the economic outlook for the UK and the Government’s strategy to protect jobs and the economy in light of upcoming changes to the furlough scheme.
The Financial Secretary to the Treasury (Jesse Norman)
Before I start, may I join with all the words that have been said in praise of Jo Cox during the proceedings so far? I know that many more such words will be said today. One thing that colleagues may not know, amid all the many things that they have been told about her, is that she was very fond of visiting Symonds Yat in my constituency in Herefordshire. I look forward to the day when many other people can do that, following lockdown.
From the onset of this pandemic, the Government’s top priority has been to protect the NHS and to save lives, but we have also made it clear that we will do whatever is needed to support people, jobs and businesses through the present period of disruption, and that is what we have done. On Friday, the Office for National Statistics published its first estimate of April GDP and showed the economy contracting sharply by a record 20.4% on the month. It is clear that restrictions introduced during the lockdown, while necessary, have had a severe impact on output.
However, it is important to note that the OECD, the Office for Budget Responsibility and other external forecasters have all highlighted that the cost to the economy would have been significantly higher were it not for the swift and decisive action that the Government have taken. Measures such as the coronavirus job retention scheme—the CJRS—which has protected almost 9 million jobs and more than 1 million businesses, have helped to limit the adverse impact of the crisis. It is also important to note that the OECD forecast the UK to have the strongest recovery of all the large countries that it looked at, with an unemployment rate projected to be lower than that in France and Italy by the end of 2021.
As we are reopening the economy, the Government are supporting putting people back into work. Last month, my right hon. Friend the Chancellor announced that the CJRS would be extended for four months, until the end of October. From July to October, employers currently using the scheme will be able to bring furloughed employees back part-time. That will ensure that the CJRS will continue to support all firms so that no employer faces a cliff edge.
This remains a very uncertain and worrying time for businesses and employees alike. The Government have set out separately the five principles that must be satisfied before we make further changes to the lockdown rules, which we based on advice received from Scientific Advisory Group for Emergencies. However, I can assure the House that the thoughts, energies and resources of the Government are focused increasingly on planning for the recovery. We will develop new measures to grow our economy, to back businesses and to boost skills. I am confident that the United Kingdom can continue to thrive in a post-covid world.
Anneliese Dodds
The OECD’s global outlook suggested that the reduction in GDP in the UK due to the current hit of coronavirus will have been the largest out of all developed economies. The enormity of the economic impact appears confirmed by the claimant count and other unemployment data out today. It seems that the slow and confused health response is being followed by a slow and confused response to saving jobs, despite the huge long-term costs of unemployment. Labour has called for an exit strategy, but what we seem to have is an exit without a strategy, including on jobs.
Will the Treasury change its one-size-fits-all approach to the furlough and self-employed schemes, which risks additional waves of unemployment? Will it act to encourage young people to stay in education and training, and out of unemployment? Will it build on previous schemes such as the future jobs fund to support the young unemployed, and provide tailored help for other hard-hit groups such as older workers?
Although more support for apprenticeships is desperately needed, it will not be enough. Will the Treasury act now to create the extra support that cannot currently be delivered by Department for Work and Pensions staff, who are occupied with huge numbers of extra claims? Will the Government catch up with other countries that have already announced their stimulus packages, given that many employers are deciding now on whether to retain staff? Will they apply conditions to Government investment to include requirements to promote upskilling and re-employment? Above all, rather than a limited Budget statement in July, will the Government set out the back-to-work Budget that we need, with a focus on jobs, jobs, jobs?
Jesse Norman
I thank the hon. Lady for her questions and comments. Of course, the issues that she highlights are of great importance and receive an enormous amount of attention in the Government and in the Treasury, but I am a little surprised by some of the things that she said. I remind her that the OECD report, in addition to forecasting the strongest recovery, also highlighted the quick and comprehensive response that the Government put in place to deal with covid. It also noted the relative robustness of the UK’s public finances relative to those of other countries. Colleagues are entitled to decide whether they accept what the OECD says, but they cannot discount the bits they do not like and accept the bits that they do.
The hon. Lady refers to the Government’s response as “slow and confused”, but I find that very odd. She said to the CBI in April that “this scheme was about preventing mass unemployment”, and “undoubtedly it has prevented a worse situation, there’s no question about that”. She congratulated the Government, business and trade unions, and said that we saw with the job retention scheme “an excellent example of tripartite working”. I think she is right about that, but I do not think she can take the line she takes now and disavow those other things that she said, when Labour was being a bit more bipartisan than it is at the moment, in praise of the Government’s schemes.
Finally, the hon. Lady talks about the Government adopting a one-size-fits-all approach, but I would remind her of what she said in The Guardian on 20 May 2020:
“A more differentiated approach”—
that is, not a one-size-fits-all approach—
“would, admittedly, pose challenges for the government. Hard choices would need to be made, including how to deal with difficult boundary issues”.
She is right. It is also true that the Government have adopted a more differentiated approach than she gives us credit for, as witness all the work we have done with the hospitality and leisure industries.
So I am a little confused, but I do think it is important to focus on the positive achievements of the job retention scheme and the self-employment scheme, which, as the hon. Lady rightly notes, have prevented a much worse alternative and have been brought into place with great speed and ability by Her Majesty’s Revenue and Customs.
Mel Stride (Central Devon) (Con) [V]
My right hon. Friend will be aware that, yesterday, the Treasury Committee published its report into the gaps that there are in the Government’s support for the self-employed and those employed up and down our country. I do recognise the very considerable approach that the Government have taken to support people through these difficult times. However, there remain over 1 million people who should qualify for furlough or self-employed support who are not receiving it. Could I ask my right hon. Friend to look very closely at the recommendations of the Select Committee report, and to take action so that these hard-working self-employed and employed people up and down our country can get the support not just that they desperately need, but that they deserve?
Jesse Norman
I am very grateful to my right hon. Friend the Chairman of the Treasury Committee both for what he says today and for his report. He will know, and he took considerable evidence on, the constraints that the Government were under in bringing the different schemes into play. I am the last person to decry the energy and the effectiveness either of the businesses that have been supported by the job retention scheme or the self-employed people and businesses that have been supported by the self-employed scheme. Of course, we will take very carefully into consideration the report that he gives, and any positive and constructive suggestions that are contained in that report about how we can improve matters, and we continue to review the situation within the Treasury.
Mr Speaker
We now come to the SNP spokesperson, Alison Thewliss, with one minute.
Alison Thewliss (Glasgow Central) (SNP)
I thank the Minister for the comments he has made. While the support under the schemes, including the coronavirus job retention scheme, is welcome, many of the comments I made on 17 March and 27 April about those who have not been supported still stand. The Treasury Committee would agree that the 1 million who have been left out of this support have been left out of support because of the Government’s own choice—the Government have decided not to support these people—and further issues remain about maternity, the derisory 26p extra given to refugees and those with no recourse to public funds.
The Cabinet Secretary for Economy, Fair Work and Culture, Fiona Hyslop, has written to the Government, identifying tourism, arts and culture, oil and gas, childcare, retail, and rural and island communities as being particularly at risk, so will the Minister now accept that winding up the furlough scheme and putting the costs on to employers is a significant risk and will put people out of jobs? Will he extend it beyond October for sectors that are particularly pressed? Will he look at extending the self-employed support scheme, as many of those people will still require support on an ongoing basis because the work they did is no longer there? Will he look at VAT cuts to tourism and hospitality, which will support those sectors that have seen so much pressure and get them back on their feet at a time when they are really struggling? Lastly, does he agree with Lord Forsyth that there will be a tsunami of job losses, with 3 million people left without work?
Jesse Norman
I thank the hon. Lady for her questions. In the middle of a crisis, with emergency responses being brought out almost every other week, it would be a brave person who could commit to any sensible forecast with a degree of accuracy of what the future may bring. We have already seen astonishing changes to levels of GDP even in a month.
On the points the hon. Lady raises, I just remind her that the job retention scheme has so far supported nearly 9 million people—8.9 million people—and 1.1 million businesses. The self-employed scheme has supported 2.3 million individuals at a cost of £6.8 billion. Both schemes were brought in at record speed precisely to address the critical need to get the vast majority of people the support they would need, and to target that, wherever possible, on the most vulnerable. I do not think that those were mistakes. I do not think it would have been right to delay the process. I think it has been recognised by Opposition Members across the piece that a delayed response—which, on advice received from experts within HMRC and elsewhere, would have been the inevitable result—would have been a mistake and we took the view that we should proceed. I put it to the hon. Lady that the two schemes in question, together with a plethora of other support, have been extremely effective.
Richard Graham (Gloucester) (Con)
Getting skills is the key to employment opportunities for the young. Both the Prime Minister and the Chancellor have made encouraging noises about recognising the importance of apprenticeships. I propose that the Government shoulder the entire costs of the first year of all new apprenticeships awarded this autumn—[Interruption.]
Richard Graham
I will start again. Skills are the key to employment opportunities for the young. Both the Prime Minister and the Chancellor have made encouraging noises about recognising the role that apprenticeships can play in that. My proposal is that the Government shoulder the entire first-year costs of all new apprenticeships awarded this autumn. The key point is that further education colleges, other trainers and businesses need to be able to plan ahead so that they can market those apprenticeships. Will my right hon. Friend today give some reassurance and commitment on the support the Government might give apprentices, so that bounce-back Britain’s new apprentices know there are lots of opportunities ahead?
Jesse Norman
I thank my hon. Friend for his question. I am in awe of his ability, without notes, to recall exactly the same wording of his question when asked to give it a second time. That is magnificent. He was obviously an actor in a previous life.
Let me respond to the point my hon. Friend made. He is absolutely right about apprenticeships. He will know that, because he will know of all the work we are doing in Hereford to set up a new model in technology and engineering; a university combining higher education and further education specifically in order, in due course, to be able to extend to degree and degree apprenticeships. He will also know that the Budget—people have forgotten this—and the spending round before it have been very supportive of further education. That is a commitment of this Government. As he will know, the Education and Skills Funding Agency published guidance in this area, and the job retention scheme provides funding for businesses. We will continue to look closely at the issue he describes, and I thank him for his question.
Sir Edward Davey (Kingston and Surbiton) (LD)
May I, like others, pay tribute to and remember our much-missed colleague Jo Cox?
Ministers hint that their recovery plan will at last see real climate action. Liberal Democrats advocate a massive green economic recovery plan and I hope the Government will match it. Will the Treasury Minister confirm that the Government are considering reversing their previous opposition to onshore wind farms in England and Wales, tidal power investment, zero-carbon homes regulation and the many other green economic policies advocated by my party and opposed, abolished and voted against by this Prime Minister and the Conservative party?
Jesse Norman
I do not agree with that characterisation of the Government at all. We have done an enormous amount to support the green economy, but I do agree with the right hon. Gentleman that this provides an opportunity for a big recalibration—a big opportunity for all people across the country to think about whether there is more we can do in terms of green. Those of us with responsibility for the national infrastructure strategy are thinking very hard with colleagues in the Treasury about how we can improve green infrastructure, to go alongside all the measures we have taken to improve and support green businesses.
Sir David Amess (Southend West) (Con)
Some 290,000 people in the theatre and performing arts are really struggling financially at the moment. Will the Treasury look at extending the job retention scheme at least until October, and at extending the self-employed income support scheme, which would particularly help those who have freelance work?
Jesse Norman
My hon. Friend will be aware that the job retention scheme runs until October and the self-employed scheme covers that period as well. This is a source of great concern to us, and the arts have been well supported by the schemes so far. There has also been a separate package through the Department for Digital, Culture, Media and Sport specifically targeted at supporting arts and other organisations. We have this issue very much in our minds.
Chris Elmore (Ogmore) (Lab)
May I first pay tribute to my late friend Jo Cox? We mark today not because of how she was taken and the hate that took her, but to celebrate her life and legacy that we all work towards every day.
May I press the Minister, in that vein, for support for the aviation sector? There will be a £1.6 billion impact on the south Wales economy if British Airways is to keep on cutting jobs across three sites in the region. The Chancellor and the Minister say they will do whatever it takes, so please Minister, for these highly skilled, well-paid jobs across the UK, announce a specific sector deal for the aviation sector, and please do it quickly.
Jesse Norman
I am very grateful to the hon. Gentleman for his warm remarks in relation to Jo Cox, which will be shared by everyone.
The hon. Gentleman will be aware that the aviation sector has already received quite a lot of support through the Bank of England’s covid corporate financing facility and through the large business loan scheme. Colleagues across the Department for Business, Energy and Industrial Strategy continue to engage closely with the sector. I fully understand the hon. Gentleman’s concern both in terms of the strategic nature of the industry and also its relevance to his own constituency, and indeed the UK as a whole.
Dr Kieran Mullan (Crewe and Nantwich) (Con)
The Government can rightly be proud of the rapid and effective steps they have taken to save so many jobs in constituencies such as Crewe and Nantwich, but there are some sectors and businesses that will not be able to open in the near or even medium term—for example, Good Time Charlies, a children’s play centre in my constituency, and Crewe Lyceum theatre. Will my right hon. Friend agree to look at whether some businesses and sectors will need more support in the medium and long term?
Jesse Norman
That may well be true, but I would highlight and remind my hon. Friend that one scheme, the bounce back loan scheme, is specifically targeted at small and medium-sized enterprises, and indeed micro-enterprises. Those loans are on very concessionary terms and do not require personal guarantees up to a threshold, so the organisations that my hon. Friend mentions should be able to benefit.
Caroline Lucas (Brighton, Pavilion) (Green)
May I add my voice to many others in paying tribute to our much-missed colleague, Jo Cox?
The pandemic has further highlighted the deep connection between human health and thriving ecosystems, with the destruction of nature both increasing pandemic risk and driving climate change. With the news of record job losses, will the Minister prioritise the job creation potential of nature restoration at a national level and agree that not one single shovel-ready project will end up indiscriminately destroying nature? Secondly, will his Department establish a new taskforce on jobs for nature, to maximise the number of people employed in protecting the natural world, rather than destroying it? He says the Treasury will recalibrate whether there is more to be done on the green economy; I assure him that there is, and he just needs to get on and do it.
Jesse Norman
Having been an energy Minister, I am extremely aware of the many good things that we have done and continue to do, but I thank the hon. Lady for her contribution.
Miss Sarah Dines (Derbyshire Dales) (Con)
As my right hon. Friend will know, businesses in the hospitality and events sector—including wedding venues, bed and breakfasts and hotels, which are part of the lifeblood of this country and the economy—have been helped tremendously by the Government’s support and furlough scheme. As the furlough scheme winds down in the autumn, will he push for those sectors of the economy to be able to open fully as soon as it is safe for both them and their customers, to help us maintain Britain’s rightful place as one of the most attractive tourist venues in the world?
Jesse Norman
My hon. Friend will know that we have put significant support in place already. I share—as the Government do, and as I suspect the entire Chamber does—her desire for us to emerge from lockdown as swiftly and safely as we can, so I certainly support what she said.
Mr Toby Perkins (Chesterfield) (Lab)
I associate myself with the remarks that others have made about our colleague Jo Cox.
The Chairman of the Treasury Committee, the right hon. Member for Central Devon (Mel Stride), was right about those people who are missing out on the self-employed scheme. We recognise that the scheme was put together urgently. My hon. Friends and I on the shadow Front Bench were calling for the scheme, so of course we welcomed it. But alongside the 1 million people who are unable to work and are missing out on the scheme, the scheme also means that if people continue to work and are unaffected because of their self-employment, they are benefiting from the scheme, while others who need it are not able to. Would it not be sensible for the Government to accept the comments that have been made and scrutinise the scheme? Let us try to make it better and work together, rather than say that it does not need any improvement at all.
Jesse Norman
Actually, we have not said that. We remain interested in positive, detailed suggestions for improvement of the scheme. We have received some that do not appear workable. I will remind the Chamber of what the problem is. Let us not forget that the £50,000 trading profit margin implies average sales of £200,000, so these are not that small businesses compared with many sole proprietorships around the country. With these businesses, it is impossible to tell by any rule-based system the source of any dividends that they are paying, what may be the pay component of them and what may be simply earned from other sources but routed through the company. It has not been possible to devise a system that could operate on this million-person scale or more in the time available, while meeting our central need to act comprehensively and swiftly.
Paul Bristow (Peterborough) (Con)
The Government have done a huge amount to support jobs in Peterborough, with around one in four workers protected through the furlough scheme. Peterborough remains a city on the up, with a new university, city centre regeneration and new businesses coming to us. With that optimism in the air, will the Minister assure me that he will continue to support businesses and workers in Peterborough as we move beyond the furlough scheme?
Jesse Norman
I can of course give my hon. Friend that assurance. I suspect that there is not a Member of this House who, if they look down the lists, will not see the positive benefits of the CJRS and the self-employment income support scheme in support of employed people on furlough and self-employed people in their constituencies. That is a tremendous thing that we can all be proud of.
Dr Rupa Huq (Ealing Central and Acton) (Lab)
As a Labour member of the class of 2015, may I echo the remarks made about Jo Cox? She is much missed, and was murdered in cold blood while doing an advice surgery, which we all do every week in normal times.
I must say that I am disappointed by the Minister’s response. I wrote to the Chancellor on 24 April identifying a number of holes in his safety net, including brand new start-ups, people on dividend pay and the forgotten freelancers in the arts. I have had a make-up artist and a BBC contractor write to me in the last couple of days. Initially, he was thought eligible for furlough pay, but now, as he is not an employee per se, he cannot have it, and he has too many savings to get universal credit. I had no reply—not a sausage. Does the Minister not agree with the OECD’s analysis that, with these overly ungenerous levels of social security support, he is just storing up productivity problems and record unemployment for further ahead?
Jesse Norman
I am surprised that the hon. Lady should say that. As I recall, she and I have had two telephone conversations with colleagues in which we have discussed in detail the strengths and weaknesses and the potential to improve both the self-employed scheme and the job scheme. I do not recognise the view that she takes at all. It is in the nature of these schemes to seek to be as comprehensive and swift as possible, which, I think I recall, was exactly the language used by the OECD in describing the Government’s response.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
Scotland has benefited from the broad shoulders of the United Kingdom, with well over £10 billion of resources coming to Scotland to help fight this pandemic, from the furlough scheme to Barnett consequentials. Will the Minister commit to continue a UK-wide approach in tackling the pandemic, which will have to recognise that different parts of the United Kingdom will see recovery on different timescales and, of course, will see different sectors needing different levels of support?
Jesse Norman
My right hon. Friend is right. I defer to no one in my admiration for Scotland as a country and for its history and people. It is true that in this crisis, as in the crisis of 2007-08, there has been enormous benefit to Scotland from being embedded within a wider Union, where the collective security and financial strength of all can be drawn on. In the case of Scotland, the self-employment scheme alone has 146,000 claims and the job scheme some 628,000 claims, and that amounts to an enormous package of UK Government support for the people in Scotland, and I am very proud of that.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
With more than 600,000 jobs lost between March and May, it would be nothing short of a social catastrophe to end the furlough scheme before businesses start rehiring. France and Germany are continuing their support for as long as it takes. With the right hon. Gentleman’s Government denying Scotland the borrowing powers to take her own action—powers that even councils have—can he now see why Scots are concluding that Britain is not working and why support for independence continues to rise and rise?
Jesse Norman
I do not think that the Scots are concluding that at all. Any rational person looking at the position would understand that Scotland had been immensely strengthened by its relationship and its position within the United Kingdom, and rightly so, because of the hundreds of thousands of people who have been supported. The hon. Gentleman is absolutely right that there is a serious concern about the economic effects of the pandemic, but it is a concern, as the OECD and others have recognised, that we are squarely meeting, and Scotland has been a huge beneficiary and I am sure that it will continue to be so.
Gareth Davies (Grantham and Stamford) (Con)
I thank the Minister and all his colleagues for protecting 13,400 furloughed jobs in my constituency, as well as for the £27 million in grant funding to 2,261 businesses. Does he agree that the best way of getting the Lincolnshire economy back on track is to reopen as many businesses as possible as quickly and as safely as possible?
Jesse Norman
My hon. Friend is of course absolutely right. The whole point of the strategy that we have adopted is to cushion the immediate shock, protect the vulnerable, and then move as swiftly and safely as we can towards economic growth. As he says, we need businesses flourishing, functioning and working together as effectively as possible. The quicker we get that, the more we can support people back into jobs. The tailored approach that we have taken is designed to help them do that.
David Johnston (Wantage) (Con)
Does my right hon. Friend agree that one thing all Members of the House could do is to encourage their constituents to support local independent businesses, such as those we have in Wantage, Didcot and everywhere else in the country, to give them the best chance of survival?
Jesse Norman
Of course I agree with my hon. Friend on that. One of the great sadnesses of this has been the extent to which it is often the smallest and most local businesses—the most independent—that are most adversely affected by the coronavirus.
As he will know, between our job retention scheme, bounce back loans and reliefs and tax exemptions, we have given a huge amount of support in that area, and we will continue to do what we can to support it.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
In my constituency, around 25% of the population, aged 16 to 64, are being furloughed or are receiving universal credit. The additional support for people on the self-employment scheme probably takes the figure to 30%. We recognise, therefore, the scale of the Government’s intervention, but there are many freelancers on short-term contracts or on different ways of working for freelance industries who are not getting a penny, many of whom have a strong and detailed track record with HMRC, so the reverse engineering that took place with the main scheme could be applied to them. The Minister repeatedly keeps talking about the generosity of the scheme, which suggests no shift I assume. Will he be categoric now and tell us whether there is any hope for these forgotten freelancers?
Jesse Norman
What I have said is simply that international and national bodies recognise the comprehensiveness and the relative generosity of our schemes—[Interruption.] They have done that, so that is the fact of the matter. The point that the hon. Lady raises is one on which we continue to reflect. As I have said, we take this very seriously. We want to support all sections of the economy, including self-employed people who have not been able to qualify. There are, of course, other ways in which they may be able to qualify for support within the wide package of support that we have given, but the self-employment scheme at the moment is not one, in some cases, that they are able to use, and that is something on which we will continue to reflect.
Mr Gagan Mohindra (South West Hertfordshire) (Con)
The latest figures show that almost 9 million jobs have been furloughed, including 12,500 in my own constituency—jobs that would undoubtedly have been lost. As we begin to rebuild and reopen our economy, will my right hon. Friend assure me that he will continue to support both businesses and workers as they transition away from Government schemes?
Jesse Norman
As my hon. Friend points out, we are working very hard to protect people in employment. That is what the latest numbers recognise, with the employment number as opposed to the unemployment number. But we must be realistic about this. We are in the middle of a pandemic crisis and there will be further losses; we have to understand that. The key thing is to make sure that we are as robust, energetic and inclusive as we possibly can be in supporting people in employment and supporting them back into employment when they come out of the jobs market.
Jim Shannon (Strangford) (DUP)
First, I thank the Financial Secretary very much for his help on many issues that we have brought to his attention. Will he further outline what steps have been taken to mitigate the scale of redundancies in manufacturing, with special reference to Bombardier and the aerospace industry? Will he agree to meet the working group to discuss this viable industry made up of many local businesses and suppliers, such as Bombardier in my own constituency of Strangford, to save thousands of jobs in the UK in the long term?
Jesse Norman
I fully recognise the strategic importance of Bombardier in the hon. Gentleman’s constituency and, indeed, in Northern Ireland. I have visited it myself, and that is well understood. It would not be appropriate for me to talk about specific companies in terms of the support and assistance that we offer. However, as he will know, across Government we are in constant negotiation and discussion with many different sectors on many different concerns that they have, and we will continue to do that.
Rehman Chishti (Gillingham and Rainham) (Con)
Like many small and medium-sized enterprises around the country, Copper Rivet Distillery in Medway transformed its business overnight during the crisis, working day and night to help with the provision of personal protective equipment, including sanitiser. Many of these small businesses will face economic hardship as the new normal arrives, with cheap and often subsidised imports. Will the Government be using their substantial buying power to consolidate our procurement spending on Britain’s SME sector so that it can invest and compete internationally?
Jesse Norman
My hon. Friend is absolutely right. One of the really heartening things about the early phases of the crisis was precisely the response from distilleries in producing hand sanitiser. I was delighted to be able to make very quickly the changes to the tax regime that supported that. As we go forward, we will continue to review and seek to address the concerns that he raises. It is not by any means a straightforward matter, but the key thing is to continue to push, on a very wide variety of fronts, as rapidly and forcefully as we possibly can.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
Many companies have used the job retention scheme to save cash while they planned redundancies, British Airways being one. BA has threatened over 40,000 staff with redundancy but about 30,000 would be rehired on vastly reduced terms and conditions. Last week I introduced a Bill to make that form of employment practice illegal to protect all employees. Does the Minister think it is fair that any employer should be allowed to make employees redundant from roles that are clearly not redundant and then rehire them on reduced pay— yes or no?
Jesse Norman
I will refrain from commenting on a specific situation; the hon. Gentleman has identified one. But I will say, having not been aware of it, that I will look at his Bill with great interest, and I thank him for drawing attention to it.
Gareth Johnson (Dartford) (Con)
Bluewater in my constituency reopened its doors yesterday and did so in a cautious and responsible manner. It was fantastic to see so many shops there welcoming back customers for the first time. Does the Minister agree that centres like Bluewater should be praised not only for getting our economy back on track but for allowing us to get back to some form of normality?
Jesse Norman
I absolutely do think that. I pay particular tribute to shops, malls and shopping centres that go the extra mile to be particularly safe and careful, within more than the spirit of the regulations, in ensuring that people can use them. I congratulate Bluewater on the extent to which it has done that. If that helps to communicate a wider sense of confidence in the ability to shop, then all the better.
Kerry McCarthy (Bristol East) (Lab)
The Minister is actually giving quite comprehensive answers to most people in this Chamber, which makes it all the more striking how curt he was in replying to the hon. Member for Brighton, Pavilion (Caroline Lucas). Let me have another try. Yesterday, 57 charities wrote to the Government urging them to pursue a green recovery, which could support at least 210,000 jobs, while a report from the Office for National Statistics has just said that vacancies are at a record low. I am not interested in hearing what the Minister did when he was an Energy Minister; I want to know what the strategy is now. What will he do now to ensure we build back better and that it is a green recovery?
Jesse Norman
Of course I have no interest in being curt—the hon. Member for Brighton, Pavilion had discussed green issues and the green recovery just before and we were picking up from that. I and my colleague the Exchequer Secretary, who is the lead Minister on this in the Treasury, remain extremely interested in what we can do to ensure a green recovery. I am obviously not going to announce actions from the Dispatch Box in response to an urgent question, but I can reassure the hon. Lady that I and my colleagues are giving a great deal of attention to these issues.
Damian Green (Ashford) (Con)
My right hon. Friend is correct that the job retention scheme and the self-employed scheme are two of the successes of the Government’s response to covid-19. He will also be aware that preserving as many of those jobs as possible when the schemes are withdrawn is a central and difficult economic task for the Government. To that end, can I urge him to put the full weight of the Treasury behind a move, as soon as it is as safe as possible, from a 2-metre to a 1-metre gap, because that is the single most important act we could take to preserve those jobs?
Jesse Norman
My right hon. Friend will be aware that this is a topic of great topicality. The Prime Minister has launched a review of this and within weeks the matter will be decided. I cannot go any further than that, but he will see the direction of travel quite soon.
Dame Margaret Hodge (Barking) (Lab) [V]
I add my voice to those who are remembering Jo Cox today and continuing to celebrate her contribution.
I chair one of Britain’s precious theatres, the Theatre Royal Stratford East. Like theatres up and down the country, we are only surviving because of the furlough scheme. For as long as any social distancing measures are in place, theatres simply cannot put on performances. Even with a 1-metre distancing rule, only one in four seats can be either marketed or occupied. If we are not allowed to furlough beyond October, our theatres cannot survive and will close forever. What will the Minister do to save our theatres?
Jesse Norman
I massively welcome the right hon. Lady’s support for and chairmanship of the Stratford East. It is a phenomenal theatre, as anyone will know who has acted in Joan Littlewood’s theatre workshop or “Oh! What a Lovely War”. It is a foundational place. She will be aware that many theatre companies have benefited from some of the schemes already launched and that the Government have already made a substantial commitment of support to this sector through the Department for Digital, Culture, Media and Sport, but of course we continue to look closely at it, and it is right that she raised the issue, on behalf not just of the Stratford East and other theatres but of performing art spaces more widely, because the problem with coronavirus is not just the safety aspect; it is also the fear aspect that goes with a pandemic crisis of this kind.
Douglas Ross (Moray) (Con)
Because of the UK’s support, 11,700 jobs in Moray were furloughed and 2,600 self-employed benefited from a share of £7.8 million, but a Scottish Government report has identified Moray as the area in Scotland potentially at risk of the highest number of job losses following this pandemic. What will the UK Government do with the Scottish Government to help businesses and individuals in Moray in the weeks and months ahead?
Jesse Norman
As my hon. Friend will be aware, we have always taken Moray very seriously. We have made a significant investment in the oil and gas sector, from which it is a massive beneficiary, and have supported the city of Aberdeen. We have been very engaged indeed and will continue to look at the sectoral and geographical impacts of the pandemic, but I am grateful to him for highlighting the enormous impact in his constituency of our work so far.
Rushanara Ali (Bethnal Green and Bow) (Lab)
We remember our dear friend Jo Cox today and deeply miss her voice in this House. She was a powerful voice for those who desperately need our support.
Can the Minister commit urgently to support the 1 million people who have fallen through the gaps in provision? The provision that the Government have made is welcome, but we need a focus and a commitment to support the new starters, self-employed and freelancers, as identified by the Treasury Committee, and we need that commitment today. With the spectre of 9 million people facing unemployment, including 1 million young people, what assessment has the Minister made of the number of additional jobs that are likely to be lost with employers being required to pay 20% of employees’ wages?
Jesse Norman
In response to the latter point, we think that a graduated return to employers paying for their own staff and being subject to the usual economic laws of supply and demand is an essential precondition for a proper economic recovery and, therefore, for the sustainability of not just jobs but the economy as a whole. In regard to the wider issues, it would be absurd for me to offer any response from the Dispatch Box to the Treasury Committee report that was filed yesterday, but as I have said to the Chair, we will look very carefully at it and the issues that it raises.
Virginia Crosbie (Ynys Môn) (Con)
I thank the Jo Cox Foundation for all it does.
My constituency is dependent on tourism and hospitality, a sector that was first to be hit by the crisis and is likely to be last to open up. Will the Minister confirm that his Department is looking at new additional measures to support businesses, such as Church Bay Cottages and Catch 22, that have worked so hard to support their community at this exceptional time?
Jesse Norman
I thank my hon. Friend for bringing to the House’s attention and mine the delights of Ynys Môn. As a Herefordian, I am as acutely aware of the importance of tourism to many of our most beautiful areas as she is, but we continue to look at the sectoral inputs, as I have described. In fact, as she will be aware, tourism, hospitality and leisure have already received quite a substantial amount of additional support from the Government. We continue to keep the situation under review.
Sir Graham Brady (Altrincham and Sale West) (Con)
As businesses get back to work, there is a cap on the number of employees who can be furloughed. Would it not make more sense to cap the number of hours or the total cost to the Treasury for each firm instead?
Jamie Stone
Further to the previous questions, when the highlands tourism industry eventually reopens, it is likely that very few businesses will make enough money to see them through the dark winter months. In the spirit of the Minister’s previous answers, would he agree to meet me to discuss how the furlough scheme and other support schemes can be fine-tuned to make sure that those businesses survive to next year?
Jesse Norman
Nothing could silence the hon. Gentleman’s voice; I am glad to have been able to hear his question. I would be very happy to talk to him. I suspect that there are several hundred miles between us, but I will make sure that we find some way to talk to each other.
Ms Angela Eagle (Wallasey) (Lab)
I congratulate the Minister on getting through the entire UQ without making a single commitment, although he has made many observations. As a member of the Treasury Committee, I look forward to the Government’s formal response to our report on the 1 million people who are currently missing out on the Government’s schemes. Will he see if he can at least make a commitment before today’s UQ ends? What is he doing as a Treasury Minister to ensure that, as we move from the acute stage of the pandemic to furlough schemes beginning to end, the furlough scheme is not remembered as a waiting room for unemployment rather than the job saving scheme that it should have been?
Jesse Norman
The hon. Lady will recall that the topic of the UQ is the job retention scheme and the self-employment scheme, and their relation to the UK economy in the face of covid, and that is what I have focused on. Of course, as a former member of the Treasury Committee myself for five years, I will take its report very seriously, as she suggests. In many ways, it may well be that people will look back on the job retention scheme and conclude, as the shadow Chancellor has, not only that it was considerably better than any possible alternative or inaction, but that it saved an enormous number of jobs.
Sara Britcliffe (Hyndburn) (Con)
The figures released last week showed just how much of an impact the Treasury’s measures are having. In Hyndburn and Haslingden 11,200 people benefited from the furlough scheme and 3,300 claims were made under the self-employment income support scheme, saving so many jobs and livelihoods in my constituency. As we begin to reopen our economy, will the Minister assure me that he will continue to support both people and businesses in the difficult months ahead?
Jesse Norman
Of course my hon. Friend is right that there will be difficult months ahead. There is no doubt about that. We specifically gave forward guidance on the two schemes in order to give people the reassurance that there would be that tailored support in place for a number of further months, and we will continue to keep the situation under review.
Olivia Blake (Sheffield, Hallam) (Lab)
As we know, regional disparities will occur as a result of this economic downturn. I am proud to say that Labour Mayors and local authorities, in Sheffield and up and down the country, are making regional plans to bring more people out of unemployment. They will not be able to deliver that if they do not have sufficient powers and resources. Has the Minister met local authority leaders, and will he make those powers and resources available?
Jesse Norman
That is a very important question. Of course it is not just Labour Mayors; there are plenty of Conservative Mayors of cities who are—[Interruption.] Well, Andy Street for one. They have been taking a lead in this area too. One of the great things of which this Government and their predecessors can be proud is the extent to which devolution permitted those mayoralties to come into being. The hon. Lady is right about that. As she will be aware, we have made a significant amount of support available already to local authorities as spending bodies. It is for Mayors to work with them, as well as with the substantial amount of infrastructure money that was made available through things such as the transforming cities fund, to help to create an integrated response to the coronavirus crisis at local level.
Steve Brine (Winchester) (Con)
Given the amount of work that continues to take place on making workplaces covid secure, I wonder whether the Minister thinks that we need to revisit the “work from home if you can” message. Is that under review in the context of the furlough scheme being phased out through its taper? If so, on what sort of timetable does he envisage that being done?
Jesse Norman
As a former Health Minister, my hon. Friend will understand very well the importance of this issue, and I thank him for raising it. This question is very much one that is being discussed across Government at the moment. One of the few silver linings to this crisis has been the understanding that, actually, the nature of work is changing as between home and work. One of the things that has not received much notice but I am intensely proud of is the way in which HMRC has been able to organise itself into much more of a disaggregated place in order to support from home all the services that it continues to deliver.
Mr Ben Bradshaw (Exeter) (Lab)
I warmly welcome the Government’s U-turn a moment ago on school meals and any role the Treasury might have played in that decision. Given its devastating impact on jobs, the wider economy and, indeed, Treasury receipts, and as the rest of Europe is opening up, may we please have a U-turn on the Government’s ridiculous quarantine policy?
Jesse Norman
I am afraid I am not qualified to comment on the ridiculousness or no of the quarantine policy. It remains in place in order to protect people, and it will be for colleagues to make a decision about that in due course.
Mrs Maria Miller (Basingstoke) (Con)
Under this Government we have record numbers of women in work in our country, and under the lockdown around 140,000 women—maybe more—will have become pregnant. We are already hearing that some businesses are routinely making pregnant women redundant, despite the law and the furloughing scheme. What message does the Treasury have for those businesses?
Jesse Norman
Clearly, that is an abhorrent practice. My right hon. Friend is right to highlight it, to the extent that it is going on, and, as she says, it is illegal. I am very proud of the support the Government have given to women, as she has said, including through the national living wage and many other matters. I am also pleased that we have been able to make sure that the structure of the jobs scheme goes over enough years so that any impact on maternity is mitigated, so that those women are not affected, or are affected as little as possible, by the decisions they may have made—
Catherine West (Hornsey and Wood Green) (Lab)
The economic outlook is predicted to be 10 times worse than the 2008 global financial crash. In this House, we all know the devastating impact that crash had, but this could be 10 times worse. What urgent measures can be taken to protect people in the creative sector, thousands of whom have been in touch with me, as the Member for Hornsey and Wood Green, desperate to save themselves from penury in the coming months?
Jesse Norman
We do not know how much worse this will be than the 2007-08 crash, if indeed it is worse, and over what period of time we are talking about. We can be more precise about the causation, because the crash was caused by overleveraging in the banking sector and so the UK was hit harder by the crisis than other countries as a result. That was a result of Government inaction. We have touched on the position of people in the creative sectors and there is not much more I can add in the time available, but I am very supportive of the situation and we are trying to assist them.
Huw Merriman (Bexhill and Battle) (Con)
The Select Committee on Transport’s report on aviation has noted that British Airways is looking to make almost a third of its workforce redundant, while taking the job retention scheme for more than half of its employees and at the same time looking to invest £1 billion in a new airline. Will the Minister consider changing the job retention scheme so that companies cannot behave in this manner and rip off the taxpayer at the same time?
Jesse Norman
My hon. Friend will know that I cannot possibly comment on any specific circumstances, but I recognise the work he has done in putting this so squarely in the public mind.
Lucy Allan (Telford) (Con)
I thank the Treasury team for the incredibly agile and decisive support they have given to workers and businesses during this pandemic—across my constituency, we are very grateful. As part of the transition to the new covid economy, will the Minister consider supporting a network of innovative technology accelerators, in Telford and across the country, to create jobs and new start-ups? Will he meet me to discuss this further?
Jesse Norman
I am very interested in my hon. Friend’s suggestion. It is not squarely a Treasury matter—it is more an industrial strategy and Department for Business, Energy and Industrial Strategy matter—but I would be delighted to meet her on the topic.
Stella Creasy (Walthamstow) (Lab/Co-op) [V]
May I associate myself with my many colleagues in remembering our dear lost friend Jo Cox today? On 11 May, the Prime Minister told us:
“If people cannot…get the childcare that they need, plainly they are impeded from going to work, and they must be defended and protected on that basis.”—[Official Report, 11 May 2020; Vol. 676, c. 29.]
A survey by Pregnant Then Screwed shows that 71% of women trying to return to work in the next three months cannot do so because of childcare. So will the Minister set out exactly what he is going to do to protect and defend those women from redundancy and discrimination in the workplace?
Jesse Norman
I thank the hon. Lady for her question. I have not seen the survey that she describes. but I will look at it and discuss it with the Minister for Equalities, my colleague the Exchequer Secretary. Of course there can be no shying away from this issue and if it is as the hon. Lady describes, we will look closely at it. I thank her for that.
Stephen Metcalfe (South Basildon and East Thurrock) (Con) [V]
I thank the Minister and all his team for the extraordinary work they have done to support our economy during the first phase of this crisis. As we look towards the future and our recovery, may I ask him to continue to make bold and innovative interventions in our economy to protect as many jobs and businesses as possible, in both Basildon and Thurrock?
Jesse Norman
I almost did not recognise my hon. Friend with his new coronavirus growth, but I very much accept and recognise the point he makes. I thank him for it, and we will continue to work hard in this area.
Rachel Hopkins (Luton South) (Lab)
Aviation and associated businesses create stable jobs and economic growth in Luton. Coronavirus will impact the industry for the foreseeable future and recovery is going to be much longer. Does the Minister recognise that replicating the French Government’s commitment to ensuring that short-term work schemes and support are available for longer—for, say, two years—would support those long-term affected sectors, retain key skills in those industries and avoid redundancies?
Jesse Norman
We are of course looking closely at other countries to see if they are doing things from which we can learn and benefit. I would have some doubts about a scheme that went on as long as that precisely because we need to return businesses and people working in them to normality as swiftly and safely as we possibly can. This might have the effect of counteracting that, but the point is well made and we will continue to review these alternative arrangements.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
Many of my constituents, such as those working in the creative industries, navigate between self-employment and PAYE—working, yet not qualifying for either scheme. Given that we are extending our support schemes, will the Minister look into how we can support those who, due to nimble working practices as part of a flexible workforce, miss out on both schemes?
Jesse Norman
I recognise that there are some people in that situation, and it is very unfortunate that they may not be able to qualify for either scheme. To be clear, that would mean that they could not have been on a PAYE scheme within the past three years, as described by the rules, or indeed qualify under the self-employment scheme for other reasons. However, we take the point that my hon. Friend makes. We have discussed this in detail and I have explained to the House, again in some detail, why it is hard to reach those people, but we continue to look at that very closely.
Andrew Gwynne (Denton and Reddish) (Lab) [V]
Today’s unemployment data shows that 11,400 across Denton and Reddish are furloughed. There are 3,950 claimants— 2,000 higher than in March—and 800 of those are now under 24. In Greater Manchester, Diane Modahl has been appointed as chair of the new young persons taskforce, which will help to develop a young persons guarantee, but what more can the Government do nationally to help ensure that our young people are not left behind?
Jesse Norman
Again, I almost did not recognise the hon. Gentleman—I congratulate him on his coronavirus hair growth. I think the point that he raises is absolutely right. We are of course looking at the differential impact of the pandemic across the age spectrum, as well as regionally and across other dimensions. It has been well recognised and recommended by many that energetic action in the labour market to support young people and those making a transition between one job and another, or going back into work, will be very much something for us to focus on over the next few years.
Selaine Saxby (North Devon) (Con)
Tourism businesses have been under immense pressure. In particular, smaller hospitality businesses, as in my constituency, need certainty to be able to survive. While I welcome the introduction of part-time furlough for workers, for these businesses to reopen on 4 July, some staff must be taken off furlough now. With part-time furloughing not starting until July, will my right hon. Friend confirm whether there is to be a phased unlocking of the industry, or can part-time furlough commence sooner?
Jesse Norman
No, the rules are as laid out in the guidance on gov.uk. They have a start date at the end of the month and we are in the final three-week coronavirus job retention scheme period, but as my hon. Friend says, we are very much hoping for and working towards a much wider reopening after or around the first week of July. That will potentially be a critical move forward for the country in its response to the pandemic.
Owen Thompson (Midlothian) (SNP)
The Chancellor stated that his priority was
“to support people, protect jobs and businesses through this crisis”,
yet businesses are on a financial cliff edge. Given today’s employment and vacancy rates, and the OECD prediction that the UK is likely to suffer one of the worst slumps in the developed world, does the Minister share my concern that ending support schemes too early will simply push many off a precipice?
Jesse Norman
Of course we want to ensure that there is a phased return to normality. That is what the delay and the extension of the two schemes is designed to do, so we do recognise that concern. I remind the hon. Gentleman that the OECD has predicted the strongest bounce back for this country. That may well be because of our extremely flexible labour markets, from which I hope we continue to benefit as we come out of this dreadful situation.
Laura Trott (Sevenoaks) (Con)
I am sure that the whole House will welcome the remarkably stable unemployment figures this morning, which are testament to the huge amount of support that the Treasury has put into retaining employment. May I urge my right hon. Friend to put the same amount of effort into creating jobs during the recovery, including encouraging inward investment and tech hubs—including some in Sevenoaks?
Jesse Norman
Tech hubs in Sevenoaks are my regular reflection; I thank my hon. Friend very much for her question. Of course, she is absolutely right. As we think about a more sustainable, greener and more productive economy, we need to be thinking about how our whole industrial strategy and posture will change, and I have no doubt that it will involve continued investment and support for technology in all its manifestations across the UK.
Mr Speaker
In order to allow the safe exit of hon. Members participating in this item of business and the safe arrival of those participating in the next, I will now suspend the House for five minutes.
Finance Bill (Seventh sitting)
Jesse Norman ExcerptsTuesday 16th June 2020
(3 years, 10 months ago)
Public Bill CommitteesRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 16 June 2020 - (16 Jun 2020)
The Chair
With this it will be convenient to discuss clause 73 stand part. I call the Minister, Kemi Badenoch. [Interruption.] Sorry—Jesse Norman.
The Financial Secretary to the Treasury (Jesse Norman)
Thank you, Mr Rosindell. My hon. Friend and I are sharing the duties on the Front Bench today, and it is I who rises to speak to clauses 72 and 73. The clauses make changes to ensure that additions of assets made by UK domiciled or deemed-domiciled individuals to trusts made when they were non-domiciled cannot be treated as excluded property. As that explanation indicates, it is a somewhat technical measure, which means that such additions are within the scope of inheritance tax.
The clauses have been introduced following a decision by the Court of Appeal. To give some background, the inheritance tax treatment of trusts depends on the domicile status of the person setting up the trust when it was made, known as the settlor, and the location of the assets. If the settlor is UK domiciled, inheritance tax is chargeable on their worldwide assets. By contrast, non-domiciled individuals do not pay inheritance tax on assets in trusts situated outside the UK.
The long-established position of Her Majesty’s Revenue and Customs has been that a settlement is made when a trust is created, and that a settlement is also made when assets are added to that trust. That means that assets would be within the scope of inheritance tax if they were added to a trust by an individual who is currently UK domiciled, even if the trust was set up when the same individual was non-UK domiciled. The Court of Appeal decision created uncertainty by ruling that a settlement was made only when assets were first added to the trust. That ruling meant that the domicile of the settlor for later additions to the trust would not matter. In turn, all subsequent settlements of assets into the trust would not be liable for inheritance tax in the UK. The measure was announced in the autumn Budget 2018, and stakeholders have had nearly two years’ notice of the change.
In July 2019, the draft legislation was published, which provided an opportunity to give feedback to Her Majesty’s Revenue and Customs. HMRC received feedback from a range of bodies including the Chartered Institute of Taxation, the Society of Trust and Estate Practitioners, the Institute of Chartered Accountants in England and Wales, the Tax Faculty and PricewaterhouseCoopers by the deadline for responses. HMRC then made a number of amendments based on the feedback provided, and stakeholders have since provided further feedback regarding the legislation.
Together, the measures will confirm that additions of non-UK assets by UK domiciled or deemed-domiciled individuals to trusts are chargeable for inheritance tax, even when the trust was originally set up while that individual was non-domiciled. The measures will also ensure that transfers between trusts made by a UK-domiciled individual are chargeable for inheritance tax. That will affect UK-domiciled or deemed-domiciled individuals who created an offshore trust when they were previously non-UK domiciled and have subsequently made additions of assets to that trust.
Although the measure will apply only to a small number of individuals, the tax saving for them could have been significant, and there have been claims for tax repayments as a result of the case. The clauses will ensure that the legislation is applied as intended and all tax is collected as expected. The changes introduced by the clauses will add clarity and remove any doubt from the legislation by confirming HMRC’s published and widely accepted views. I commend the clauses to the Committee.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
It is a pleasure to see you back in the Chair, Mr Rosindell. We regard the measure as a welcome imposition to provide for a fairer tax system. HMRC figures indicate that the number of individuals who live in the UK but pay no tax on their offshore income has fallen, with the number of UK-based individuals with non-domiciled tax status falling by 13% on the previous year. HMRC believes that that is explained by individuals switching to domiciled status and other individuals leaving the UK tax system. Thus the clauses reflect that particular change. However, there are some issues reported by stakeholders.
Responding to clauses 72 and 73, the Chartered Institute of Taxation states that among its members transfers between trusts are most commonly undertaken for family or related reasons, and without any intention to avoid inheritance tax or to circumvent the excluded property rules. It argues that the main thrust of the legislation should be to limit additions by the settlor after they become deemed or actually UK domiciled.
The institute expresses concern about some scenarios in which property could inadvertently be brought into the scope of inheritance tax because a change is made to a trust, not an addition of assets, that could be treated as a resettlement, or trustees make a transfer between two settlements, both set up when the settlor was non-domiciled. In neither case is inheritance tax avoidance being attempted. There are some situations where trustees, not the settlor, are involved in transferring between two settlements, both set up when the settler is foreign domiciled, or when the second is set up by the trustees of the first. We believe that there should be no loss of excluded property status because of the changing status of the settlor. I would be interested to hear the Minister’s assessment of those concerns.
Secondly, both the Institute of Chartered Accountants in England and Wales and the London Society of Chartered Accountants were critical of the potential for retrospection. The former argued that if clause 72 is
“to be treated as always having been in force, this will result in unexpected IHT charges arising as a result of past events.”
The institute says:
“Given that the clause is not countering avoidance but is changing long-standing rules that are familiar to trustees and are clearly stated in the existing law…new legislation on this point should not affect events that happened earlier than the measure is enacted, ie Royal Assent.”
Similarly, the London Society of Chartered Accountants believes that this
“clause changes the IHT status of trusts to which assets are added. This change will have effect from the time that the trust was set up, so is retrospective. However, as the clause is not an anti-avoidance measure but is just a change to the law, retrospection is not appropriate and the clause therefore does not follow Parliamentary convention.”
I understand that these comments presume that the individuals in question do not seek to avoid tax when transferring assets between trusts, but I would be grateful if the Minister responded to these concerns.
Last, I heard the Minister’s comments, but the Institute of Chartered Accountants in England and Wales has raised the lack of a consultation period or of any follow-up, despite being led to believe that that would happen after a meeting with HMRC in November 2018. It reported that
“trustees of offshore trusts are unlikely to have considered these changes in the necessary detail”
and had concerns that there would be
“insufficient time for trustees to take advice to help them understand the full implications and…whether they want to take any action to unwind structures.”
In working with the intention of the measures the Government have introduced, I would be grateful if the Minister responded to those concerns and addressed the lack of a consultation period.
Jesse Norman
I am grateful to the hon. Lady for her questions and for her support on this technical but important measure.
The hon. Lady asks about unanticipated negative effects. I am happy to put on the record that HMRC has given reassurance that it will adopt a cautious approach if there is a case in which a taxpayer may accidently taint a trust that contains a mixture of excluded and non-excluded property. Hopefully, that will address many of the concerns about unexpected consequences that she touched on.
The hon. Lady asks whether this measure is retrospective. As she will be aware, we do not believe that it is retrospective. The key point is that HMRC’s application of the legislation, and therefore the legal position, was widely accepted in practice before the Court of Appeal decision put that position in doubt. The effect of it is going to be that individuals have been liable to the tax owed in the spirit of the legislation. Formally, clause 72 is not retrospective because it does not create any new changes pre-Royal Assent, but we recognise the concern that is raised. It is true that in some cases there may be what I would describe retroactable, and not retrospective, effects. That is precisely because HMRC and the Government are seeking to restore what might be referred to as the position as it had always been understood previously. That is the intended effect of the legislation.
The hon. Lady asks whether there should have been more consultation. As I outlined in my speech, the Government have had this in the public domain for a considerable period and discussed it, with plenty of occasion for people to conform their tax affairs to what is, after all, only a reaffirmation of existing tax law through legislation. There is also the counterpart problem, which the hon. Lady will understand: if the clause is not introduced now, it may allow opportunities for individuals to avoid paying inheritance tax on assets they put into trust or on properties transferred between trusts. I am sure she would not wish to abet or support those opportunities and that she would wish, overall, to join us in protecting revenue and providing certainty to taxpayers.
Question put and agreed to.
Clause 72 accordingly ordered to stand part of the Bill.
Clause 73 ordered to stand part of the Bill.
Clause 74
Relief for payments to victims of persecution during Second World War era
Question proposed, That the clause stand part of the Bill.
Jesse Norman
This is a small measure, but a very important one. The clause exempts compensation payments received under the Kindertransport fund from an inheritance tax liability. In late 2018, the German Government agreed to provide compensation payments for child survivors of the Kindertransport. As you will know, Mr Rosindell, the Kindertransport was an organised rescue effort for Jewish children, who were transported unaccompanied from Germany to escape persecution from the Nazi regime. I must say, it is one of the most shining examples of effective humanitarian action in Germany’s history—and in our history—in a very difficult time.
The Kindertransport fund, launched in January 2019, awarding one-off payments of €2,500 to survivors is subject to specified criteria as set out by the German Government. The measure will ensure that Kindertransport payments are not subject to inheritance tax. Changes made by clause 74 will be backdated to take effect so that no inheritance tax is paid on payments from the scheme from its opening date on 1 January 2019.
The clause provides reassurance to the original survivors of the Kindertransport that any payment made in connection with or under this compensation scheme will not be subject to IHT. While no amount of money could ever remove the suffering those children and their families experienced, the Government remain committed to supporting survivors of Nazi persecution. I trust that all agree that it is fundamental that the clause stand part of the Bill.
Bridget Phillipson
The Opposition welcome the provision. As the Minister says, it is a very important measure. Exempting from inheritance tax compensation payments made to the survivors of the Kindertransport is a just measure for those who had to face the devastating experience of being torn from their families as children in order to escape persecution. The House of Commons Library states that around 100,000 children were brought to the UK under the Kindertransport scheme, but of course many of those survivors have since passed away. It is only right that in the spirit of the Kindertransport fund all survivors receive their compensation payment in its fullest form and that that remains the case if the compensation is inherited.
According to the claims conference, to be eligible for payment survivors have to have been under 21 when the Kindertransport took place, between November 1938 and September 1939. However, the UK set an age limit of 17 for those transported. The oldest would therefore be born around 1921 or 1922, suggesting that they would be nearly 100 if they were alive today. The average age of the children who were transported was nine, so many would be in their mid-nineties today. Given those figures, we know that many people claiming compensation from the compensation fund will be survivors’ inheritors, so it is welcome that the payment is not subject to inheritance tax. However, I gently urge the Government to consider the issues that child refugees face today, and I urge Ministers to show the same level of commitment and dedication today that our country demonstrated in the past.
The Kindertransport survivor and incredible campaigner Lord Dubs worked tirelessly to protect child refugees following our withdrawal from the European Union, but the Government’s amendment of clause 37 watered down the UK’s commitment to protect unaccompanied child refugees in Europe who seek to reunite with their families in the UK. I hope that the Government will review their approach to child refugees and take seriously their commitment to protect child refugees fleeing violence and persecution in our present, just as they have taken seriously compensating child refugees of the past. Meaningful dedication to supporting child refugees requires both.
Jesse Norman
I thank the hon. Lady for her comments. She spoke very well about the Kindertransport scheme. As the Committee knows, the Government stand by our position on child refugees, and this country has a proud record in that area.
Question put and agreed to.
Clause 74 accordingly ordered to stand part of the Bill.
Clause 75
Stamp duty: transfers of unlisted securities and connected persons
Question proposed, That the clause stand part of the Bill.
Jesse Norman
In the spirit of proper scrutiny of legislation, we should chew carefully on clauses 75 and 76. They are quite technical clauses, which address the use of contrived arrangements involving the transfer of unlisted securities to connected companies for an artificially low consideration in order to minimise stamp duty and stamp duty reserve tax liability on company reorganisations.
In the Finance Act 2019, the Government introduced a targeted market value rule to prevent the artificial reduction of the stamp tax due when listed shares are transferred to a connected company. That was introduced with immediate effect to prevent forestalling. The Government consulted on extending the rule to unlisted shares, to ensure that we fully understood the potential effect of the change on small businesses. That is why draft legislation is narrowly targeted only at companies that enter into contrived arrangements that are used to minimise stamp tax on reorganisations.
The Finance Bill 2020 therefore extends the market value rule to the transfer of unlisted shares to connected companies. This form of avoidance seeks to exploit the way stamp duty and stamp duty reserve tax are currently charged: on the payment given as consideration, rather than on the value of what is received. Some taxpayers have been using contrived arrangements that reduce the value of the consideration paid when they transfer unlisted shares to a company with which they are connected as part of a company reorganisation.
The changes made by clauses 75 and 76 will mean that when unlisted shares are transferred to a company and the person transferring the shares is connected with the company, the tax charge is based on the value of the consideration for the transfer or the market value of the shares transferred, whichever is higher. The new rule will apply only when there is an issue with shares by way of consideration, narrowly targeting the measures to the circumstances where contrived arrangements are used to minimise the share of the tax on the transfer of unlisted shares. The measures will have effect for stamp duty in relation to instruments executed on or after Royal Assent of this Bill, and for stamp duty reserve tax in relation to agreements to transfer made on or after Royal Assent.
Clauses 75 and 76 prevent the artificial reduction of the stamp tax due on share acquisitions when unlisted shares are transferred to connected companies. It is expected to raise £25 million over the scorecard, and I commend the clauses to the Committee.
Bridget Phillipson
The Opposition welcome the measures implemented by these clauses to minimise the scope of continuing avoidance of stamp duties by extending the stamp duty and stamp duty reserve tax market value rule to the transfer of unlisted securities to connected companies. However, I raise a point regarding the impact of the clauses.
HMRC’s impact assessment of the policy notes that there will be a negligible impact on 250 to 350 businesses in the first year, disproportionately affecting small and microbusinesses. It estimates that the arrangements are most likely to affect private companies with a small number of stakeholders, such as owner-manager businesses, with an average value of £2.5 million. These may include family businesses, many of which we understand to be struggling in the face of the current pandemic. What assessment has the Minister made of this, and who is really the intended target of these clauses?
The Chartered Institute of Taxation expressed concern that unintended consequences could arise from clause 76 due to significant additional costs that are disproportionate to the tax at stake in many cases. It goes on to say that this
“may in some situations prevent commercially advantageous transactions, with no avoidance motive, from going ahead. The…vague description of policy rationale and the contrived arrangements being targeted has prevented stakeholders from assisting in designing a targeted rule so as to reduce the unintended consequences.”
Similarly, legal firm Cleary Gottlieb notes that
“the new rule is not limited to cases of stamp duty or SDRT avoidance, and it should not be assumed that transactions driven entirely by commercial considerations will fall outside its scope.”
I will be grateful if the Minister explains how the Government will seek to minimise unintended consequences of this measure being the targeting of businesses that are not seeking to avoid stamp duties.
Respondents to the consultation suggested that it would be preferable to introduce a targeted anti-avoidance rule into the legislation, or to extend the general anti-abuse rule or the disclosure of tax avoidance scheme provisions. What consideration have the Government given to inserting a targeted anti-avoidance rule into the legislation?
Last, the Chartered Institute of Taxation points out that, in relation to clause 77, there are a number of circumstances in which a shareholding of 25%—required for this exception to section 77A of the Finance Act 1986 to apply—will be an excessive hurdle, reasoning that it is not uncommon for a company to be owned equally by five or six entrepreneurs or a family group. It suggests that a requirement that the relevant shareholding is at least 10% would be more appropriate to cover a wide range of commercial scenarios. I will grateful if the Minister will address those concerns.
Jesse Norman
I am very grateful to the hon. Lady for the questions she raises. Let me take them in order.
On whether these measures will affect most small businesses or organisations, as the hon. Lady highlights, a relatively small number of organisations will be affected. The measures were subject to consultation, and interestingly the respondents were satisfied that there would be little impact on commercial activity as the measures were suitably targeted, and expressed some pleasure that the concerns they raised during the policy consultation about the impact of a more wide-ranging measure had been heard. This is, of itself, a tightly focused measure. It falls—where it falls—on a relatively small number of organisations, as I said.
However, it is important to pick out the logic of what I think the hon. Lady is saying. We all recognise the importance of combating the pandemic. She will be aware that the Government have spent many tens of billions of pounds on supporting businesses, families and jobs during this process. This measure is about something else: avoid a form of tax avoidance, or rather heading off a form of tax avoidance; curbing and preventing it. I do not think people’s concerns about the pandemic should be allowed to obtrude on that.
The hon. Lady asked a question about unintended effects. Our analysis is that precisely because of the targeting that was noted during the consultation phase, unexpected effects, while they can never be ruled out, should be limited and minimal. It is also important to say that there will be a modest additional administrative burden that will decline over time as people become accustomed to the new rules.
The hon. Lady asked whether it would be better to address this with a more targeted anti-avoidance rule, but this is quite a targeted anti-avoidance rule. It picks out particular forms and is restricted to company reorganisations of a certain kind, and it builds on the existing approach for listed shares. I therefore think that it addresses her concerns.
Question put and agreed to.
Clause 75 accordingly ordered to stand part of the Bill.
Clause 76 ordered to stand part of the Bill.
Clause 77
Stamp duty: acquisition of target company’s share capital
Question proposed, That the clause stand part of the Bill.
Jesse Norman
Clause 77 prevents a double stamp duty charge from arising on some company reorganisations, and follows on from clauses 75 and 76. During the consultation on extending the market value rule to unlisted securities, it was put to the Government that a double charge could arise on a type of company reorganisation known as a capital reduction partition demerger. We are very heavily in the long grass of tax intricacy. Such a demerger is where shares in a company are cancelled and shareholders are compensated with shares in a new company, rather than with cash. A corporate group may pursue this strategy where, for commercial reasons, it wants to split a group and ensure that the companies in that group are held separately by the original shareholders.
Currently, taxpayers who follow the rules can incur two stamp duty charges on such demergers, while other taxpayers use contrived arrangements to avoid paying any stamp duty on the same reorganisation. This clause, together with clause 75, ensures that one charge arises on most capital reduction partition demergers by more tightly targeting existing anti-avoidance provisions related to company reorganisations.
Stamp duty is a transaction tax. When a company is split using a demerger arrangement, there are a number of steps, two of which are potentially subject to stamp duty unless a relief applies. Usually relief applies on one step only, so that there is just one charge on the overall transaction. In some demergers, known as capital reduction partition demergers, relief is unavailable on both steps due to anti-avoidance provisions. Clause 77 will prevent a stamp duty double charge from arising, so that only one charge will arise on most capital reduction partition demergers. It does this by better targeting the existing anti-avoidance provisions. The measure applies to stamp duty instruments that are executed on or after Royal Assent.
Clause 77 works together with clause 75 to ensure that one charge will apply on most capital reduction partition demergers. This increases fairness and consistency. I therefore commend the clause to the Committee.
Bridget Phillipson
I raised these points in an earlier debate, but I will do so again so that the Minister can respond.
On clause 77, the Chartered Institute of Taxation points out that there are a number of circumstances in which a shareholding of 25%, which is required for the exception to section 77A of the Financial Act 1986 to apply, will be an excessive hurdle. Its reasoning is that it is not uncommon for a company to be owned equally by five or six entrepreneurs or a family group. It suggests that a requirement that the relevant shareholding be at least 10% would be more appropriate to cover a wide range of commercial scenarios. I would be grateful to hear the Minister’s response on that issue.
Jesse Norman
The hon. Lady raises a very specific circumstance. It would be appropriate for me to write to her about the specifics of the decision about percentages, rather than try to go through the argument here.
The discussion has already been had between HMRC and stakeholders, and therefore it has to some extent already been addressed through the consultation process, but I am happy to revisit the issue.
Question put and agreed to.
Clause 77 accordingly ordered to stand part of the Bill.
Clause 78
Call-off stock arrangements
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss new clause 13—Call-off stock arrangements: sectoral review of impact—
‘(1) The Chancellor of the Exchequer must make an assessment of the impact of section 78 on the sectors listed in (2) below and lay a report of that assessment before the House of Commons within six months of the passing of this Act.
(2) The sectors to be assessed under (1) are—
(a) leisure,
(b) retail,
(c) hospitality,
(d) tourism,
(e) financial services,
(f) business services,
(g) health/life/medical services,
(h) haulage/logistics,
(i) aviation,
(j) transport,
(k) professional sport,
(l) oil and gas,
(m) universities, and
(n) fairs.”
This new clause would require the Government to report on the effect of Clause 78 on a number of business sectors.—(Alison Thewliss.)
Jesse Norman
Clause 78 simplifies the rules for accounting for VAT on goods moving from the UK to member states of the EU or vice versa in advance of goods being “called off”, as it is known, for delivery. This is known as “call-off stock”. These changes represent a simplification for businesses that use call-off stock arrangements and provide common rules across the EU. They apply to goods removed from or to the UK from 1 January 2020, and will apply for the remainder of the UK’s transition period with the EU. We expect the changes to have a negligible effect on businesses that adopt them.
The clause transcribes EU call-off stock law—new article 17A to the principal VAT directive—into UK legislation. It sets out the conditions for the rules to apply and provides sellers with statutory obligations to adhere to strict record keeping and reporting requirements. These changes are an administrative easement; the primary benefit is to UK businesses that will no longer have to register and account for VAT in the customer’s country, and vice versa. However, the quid pro quo is additional reporting requirements as well as EU regulations, which have direct effect, that set out new record keeping requirements, as I have indicated.
There is no obligation on a business to restructure transactions so as to meet the conditions and fall within the new rules. We expect that they would use the simplification only because they might derive a benefit for their business. Businesses that do not meet the conditions and so do not fall within the new rules should continue with the current VAT accounting mechanisms for EU cross-border transactions.
The Government published the draft legislation and guidance on the operation of the rules in December. The legislation was laid before the House in the Finance Bill at Budget earlier this year. A resolution under the Provisional Collection of Taxes Act 1968 means that the legislation currently has effect.
Call-off stock are goods that are bulk-shipped by a supplier across a border to a warehouse from where they will be supplied, or called off, as the customer requires. Different EU member states previously had different VAT accounting rules for call-off stock. Some required the seller of the goods to register and account for VAT in the country where the goods were to be called off. The UK avoided the need for the overseas supplier to register for VAT here. We allowed the customer to account for the VAT when the goods first arrived and in advance of being called off. The measure implements the changes adopted by ECOFIN on 4 December 2018, which were designed to simplify the rules and make them more consistent within the single market.
In normal circumstances the new rules, like the existing UK rules, do not require the seller to register and account for VAT in the country where the goods are called off. The new rules delay accounting for VAT until the goods are called off. To avoid VAT fraud, suppliers are required to report the initial movement of the goods to their tax authority, and both the supplier and the customer are required to keep additional records of the stock. When the goods are called off, normal VAT accounting and reporting procedures will apply and the customer will account for the acquisition of VAT. The Government had some concerns over the potential burden on business of keeping the new records required under the new rules and pushed for the right of business to continue using the existing rules if they so wished. A business is not required to arrange its affairs such that the new rules must be used. A supplier and their customer can agree to continue to use the existing UK rules for goods called off in the UK.
HMRC has produced guidance reflecting the introduction of the changes, and the measure is expected to be revenue neutral. It constitutes a simplification for UK businesses. The measure updates UK law to take account of the approach in the EU. It simplifies the VAT rules for call-off stock transactions and avoids the requirement for the supplier to register in the destination state.
New clause 13 would require the Government to conduct a review on the impact of the new call-off stock rules on a variety of different sectors within six months of the Bill receiving Royal Assent. The new legislation provides a simplification for businesses that choose to meet the conditions for it to apply. With that in mind, we expect it would have a negligible impact on businesses. I can inform the Committee that recent figures show that fewer than 200 UK businesses have reported that they are using the new rules, and we are not aware of any being in the sectors mentioned in the amendment. I therefore ask the Committee to reject the amendment and commend the clause to the Committee.
Wes Streeting (Ilford North) (Lab)
Let me begin by picking up on a point made by the Member for Glasgow Central about the provenance of clause 78. As we heard from the Financial Secretary, the clause transposes into UK law an EU directive that provides for simplified VAT treatment of call-off stock.
To begin, it is tempting to make the same point, and I know that repetition is not a novelty. Let me put it this way: it is very welcome to hear from the Treasury that divergence from EU rules and regulations is not considered by the Government to be an end in and of itself. I was curious last night, as I walked past the Annunciator in the Tea Room, to see the right hon. Member for Wokingham (John Redwood) making a lengthy speech on a fairly straightforward statutory instrument on electricity. I reviewed his speech this morning in Hansard, because it piqued my curiosity, and I received in passing from my hon. Friend the Member for Hove (Peter Kyle) a precis of the thrust of the right hon. Gentleman’s argument. It seems that a number of Conservative Members consider divergence from EU rules and regulations to be an aim in and of itself. Regardless of the merits of the case and the merits of continued co-operation, it is clear that, for a section of the House, there is a virtue in divergence.
I am glad that the Treasury does not share that view, although of course the Treasury looks at the numbers. We may not have had an impassioned exposition from the Financial Secretary of the arguments in favour of this particular alignment with EU rules and regulations, but what we did hear was a very clear argument from Her Majesty’s Treasury that, even having left the European Union, there are still benefits to be found for UK businesses from continued alignment, co-operation, simplification, axing bureaucracy and making things simpler.
I hope that that common-sense approach to our future relationship with the European Union prevails. As much as those of us who campaigned in a different direction in the referendum accept the result and the outcome, and accept that this is a settled political question, it is in all our interests and in our national interest that we maintain a future relationship with the European Union that is based on co-operation, where that is in the interest of our own country.
I turn to the specifics of clause 78. The Financial Secretary’s speech seemed to me to address some of the concerns expressed by businesses and chartered tax advisers, but I will raise them for the sake of clarity. Writing in Taxation, Angela Lang-Horgan, a German and British chartered tax adviser and lawyer, said:
“If businesses have continued to operate under the old simplification rule after 31 December 2019, VAT returns must be corrected once the new legislation is in place. This will add additional confusion to the situation. So far, HMRC has not indicated whether it would apply a soft-landing period. There is no transition period either because under EU law the UK was obliged to introduce the changes from the beginning of this year.”
Could I get some clarity from the Financial Secretary on those points? Will HMRC provide a soft landing period for the implementation of the new rules, or is a soft landing period not even necessary? If I understood him correctly—I may have misunderstood, in which case he will clarify—it seems that there is a degree of flexibility and choice on the part of businesses over whether to adopt this approach. Some clarity in direct response to the concern expressed by Angela Lang-Horgan would be welcome.
What efforts have the UK Government made to communicate with affected businesses in anticipation of the rules, which are effectively already in place? It is worth saying, although it is a mild digression from clause 78, that concern has been expressed—particularly by colleagues in the shadow Business team—that the Government are not communicating with businesses in a timely way with respect to changes in Government policy and their impact on businesses. I think that for some time there has been a cultural problem in government of not giving businesses long enough to anticipate and adjust to new rules; I wonder whether in this case that communication has been a bit more proactive.
The explanatory notes state that
“businesses could structure transactions to remain outside the scope of the new rules if businesses found them onerous.”
What proportion of businesses are expected to exercise that discretionary power?
Jesse Norman
I am grateful to hon. Members for their comments. The hon. Member for Glasgow Central regards it as an irony that the Government are bringing forward this rule. I would not describe it as an irony; it is a simplification for those companies that wish to use it, and it is optional. Some companies will prefer the current arrangements as more settled and simpler, while others may not—I do not think that there is anything more to it than that. So far, 200 companies have already taken it up; of course, we cannot say in advance how many may have chosen to do so by the end of the transition period, but it is a relatively small number of companies, as I have indicated.
Alison Thewliss
Can the Financial Secretary tell us how many companies are using the previous rules?
Jesse Norman
I certainly do not know the number of companies operating under the previous rules, but I would be happy to drop the hon. Lady a letter with any number that HMRC may have that can be publicly disclosed. The point is that there is a relatively small number of companies; they have seen this coming and it is an optional advantage for them. In reply to the point raised by the hon. Member for Ilford North, it applies only during the transition period, which will end at the end of this year.
We will be leaving the transition period on 1 January, which is not only stated by Government but is commonly understood. That goes to the question of divergence, which was raised by the hon. Member for Ilford North. We are bound by EU law while we are in the transition period. The Government certainly do not have any interest in divergence for the sake of divergence; the Government have an interest in the ability to set our own law, including our own tax law, as we as a sovereign nation see fit. That might or might not involve divergence, but this measure will not apply after the transition period.
The hon. Member for Ilford North also raises an important question about whether there is enough time for business to accommodate rules. I cannot comment on behalf of other Departments, but it certainly is a concern that has been raised in relation to the creation of tax law. Wherever possible, the Government try to abide by rules that we introduced after 2010 in order to have a more effective tax process. As he knows, it involves several stages and periods of consultation. We are coming up to an L day for legislation to be considered for the 2020 Budget, for the autumn Budget—if there is one—and for a Finance Bill next year. There is an orderly process, but I take his point about the importance of ensuring that it is as orderly and well structured as possible.
Question put and agreed to.
Clause 78 accordingly ordered to stand part of the Bill.
Clause 79
Post-duty point dilution of wine or made-wine
Stephen Flynn (Aberdeen South) (SNP)
I beg to move amendment 10, in clause 79, page 67, line 25, at end insert—
‘(3) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this Section and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Government to review the impact of the proposed changes to alcohol liquor duties on public health.
It is a pleasure to serve under your chairmanship, Mr Rosindell. The amendment is quite simple and would require the Government to review the impact of alcohol duties on public health. It should come as no surprise, given that the SNP has long called for duty to reflect content, but we do not have the powers in Scotland to do that. Instead, we have to rely once again on the Westminster system in that regard. That is a real pity, because where we have powers in Scotland in relation to public health and alcohol, we have made great strides. For instance, we have seen the banning of irresponsible promotions and the lowering of the drink-drive limit. We ended multi-buy discounts, something that was certainly contentious at the time. As a young student, I was not overjoyed about the fact that I could not buy three crates of Tennent’s for £20. None the less, it was an important measure that no doubt changed the behaviour of many people, including myself at that time.
Of course, we have seen the overwhelming success of minimum unit pricing in Scotland. That was, again, an extremely contentious measure at the time, whereby we placed a 50p-per-unit charge on units of alcohol. The cumulative effect of all those measures has seen something that we all wanted to see in Scotland, where we have a difficult relationship with alcohol—one that was challenging to confirm but that we needed to confirm. We saw off-duty sales fall by 3.6% in the first year since minimum unit pricing was introduced. In England and Wales during the same period, off-duty sales increased by 3.2%. That is a very telling figure.
When I first came to Parliament, one of the very first debates that I took part in was in Westminster Hall. I cannot remember which hon. Member secured the debate, but it was about alcohol duty. I think the purpose of the debate was to galvanise hon. Members to stop the Government increasing alcohol duty and, hopefully, to reduce it. There was extreme passion in that Chamber and there were a lot of hon. Members present—more than are often seen debating any given matter in the main Chamber. There was a lot of passion about pints, but we cannot be passionate about pints without also having passion for public health and the consequences of the decisions being made. The stark reality is that the two are inextricably linked, and the UK Government need to be mindful of that fact. Supporting the amendment would be a good, positive first step on that journey to a more sensible approach that takes into account public health.
Finance Bill (Eighth sitting)
Jesse Norman ExcerptsTuesday 16th June 2020
(3 years, 10 months ago)
Public Bill CommitteesRead Full debate Finance Act 2020 View all Finance Act 2020 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 16 June 2020 - (16 Jun 2020)
The Chair
With this it will be convenient to discuss the following:
That schedule 10 be the Tenth schedule to the Bill.
The Financial Secretary to the Treasury (Jesse Norman)
It is lovely to see you in the Chair, Ms McDonagh. I apologise to hon. Members who have had the pain of seeing me do the urgent question in between our two Public Bill Committee sittings; I can only admire their strength and resilience.
Clause 86 introduces schedule 10, which enables changes to be made to the Hydrocarbon Oil Duties Act 1979 to require white diesel to be used for filling private pleasure craft such as yachts and canal barges, to meet our international obligations under the EU withdrawal agreement. It is an enabling power, and it follows consultation with private pleasure craft users and fuel suppliers in 2019.
There is no current timetable for commencement of these changes. Details of implementation via future secondary legislation will be set out in due course, after the consultation that the Government are planning this summer on wider changes to red diesel that were announced at Budget 2020. Once commenced, the changes will affect only the type of fuel that private pleasure craft can use and not the amount of fuel duty users pay. They already pay the standard white diesel rate for propelling their craft, and they are entitled to use rebated red diesel for other, non-propulsion purposes, such as heating and cooking. The changes will not affect that. Where craft have a shared tank for propulsion and non-propulsion purposes, such as heating, the Government will explore options that prevent users from paying more duty for their non-propulsion use than they would otherwise have to pay.
In 2018, the Court of Justice of the European Union ruled that the use of red diesel to propel private pleasure craft breached the fuel marker directive, which is designed to ensure, given the variation in duty treatment in member states, that any misuse of diesel crossing EU internal borders can be detected. Over the summer of 2019, the Government consulted on how they intended to implement the Court judgment by requiring private pleasure craft to use white diesel for propulsion. More than 1,600 replies were received. At the present time, private pleasure craft use the lower-duty red diesel for both propulsion and non-propulsion, but pay a top-up to the white diesel rate on the proportion of fuel that they use to propel their craft.
Last year’s consultation saw evidence on the impact that requiring private pleasure craft to use white diesel propulsion would have on users of diesel-propelled craft operating in UK inland waterways and along the coast, and on the companies that supply diesel to them. The responses are informing implementation issues for suppliers, known as registered dealers in controlled oils, or RDCOs, and users of diesel fuel.
The changes made by schedule 10, once commenced by secondary legislation, will amend sections 12 and 14E of the Hydrocarbon Oil Duties Act 1979, to disallow the rebates that apply to diesel, biodiesel and bioblend not used for road vehicles on the fuel used for propelling private pleasure craft. In practice, such craft have not been benefiting from the rebated rate on fuel use for propulsion, as they have been paying the additional duty to ensure that they pay the full rate as required while we are in the transition period.
Schedule 10 creates new penalties for using marked fuel for propelling a private pleasure craft, similar to those that exist when marked fuel is used in road vehicles, and also gives Her Majesty’s Revenue and Customs powers to take samples. It also provides for secondary legislation to mitigate the impact of the measure on houseboats and permanently moored residential craft; as they do not use fuel to propel their houseboat, they should be entitled to continue to use red diesel.
Finally, the schedule amends schedule 7A to the Value Added Tax Act 1994, to provide for the removal, if necessary, of the reference to marked fuel used in private pleasure craft in respect of which a declaration has been received. It provides that the changes will be brought into force on the days and in the areas appointed in secondary legislation at a future date.
This clause and schedule will ensure that we respect our international commitments, by enabling us to make changes to legislation covering fuel use by a private pleasure craft to the extent required to meet those commitments. I therefore commend the clause and the schedule to the Committee.
Wes Streeting (Ilford North) (Lab)
I should have said this morning that, although those on the Government Front Bench are doing a joint effort today to give each other a break, this is my penance for the shadow Chief Secretary, my hon. Friend the Member for Houghton and Sunderland South, handling the digital service tax single-handedly last week, so I am afraid that Members will be getting even more tired of my voice than the Financial Secretary’s voice.
I want to raise a few points on clause 86. First, as the Minister said, this clause and schedule are intended to enact the judgment of the European Court of Justice and to make sure we abide by our obligations under the withdrawal agreement. The challenge for various industry bodies is that this proposal effectively means that we are going to have to go through a number of changes, unless the Government intend this to be a permanent change in approach.
It is a significant disruption for the industry. British Marine, the main leisure boating industry body, said the change would present
“severe problems for boat users and the industry”,
and that was the position of all representative bodies. Given the issues raised by industry bodies and the strength of objections, why has the Minister sought to implement the judgment of the Court of Justice of the European Union when we will have left the European Union and, at some point in the not too distant future, these sorts of judgments will not have to be abided by?
Suppliers and industry bodies have deemed the switch as not viable due to its being uneconomical and impractical to change waterside fuelling locations from red to white diesel. What will the Minister do to support suppliers in this transition and to ensure that commercial users, such as fishing boats, are not negatively impacted by the switch?
Jesse Norman
I thank the hon. Gentleman for his questions. We fully appreciate the degree of concern that has been shown by the industry. As he will be aware, we are under an obligation to abide by EU judgments while we remain under the withdrawal agreement. The proposal underlines how seriously we take legal obligations that have been incurred in the EU withdrawal agreement, and that includes implementing the result of the European Court of Justice judgment.
It should be made clear that, during the transition period, if the Commission were not convinced that necessary steps had been taken to implement the judgement, it could, in principle, refer the case back to the European Court and ask it to levy fines for non-compliance. Those fines can be pretty substantial—up to €792,000 a day plus a potential one-off fine of at least €10 million—so we are very focused on communicating the seriousness of our intent in passing this enabling legislation. We do not believe that paying fines to the EU, especially as we have now left the EU, would be an effective or good use of taxpayers’ money, not least when we are making broader changes to reduce the entitlement to use red diesel more widely.
It is worth pointing out one other thing: we have not set an implementation date. The reason is that we recognise that it is important for Government to continue to work with users of private pleasure craft and with fuel suppliers to understand how they can implement the changes, precisely to make sure that those changes are as little onerous and as easy to enact as they can be. It is only once we have seen that consultation, gone through that process, reflected further on it and had a chance to consider how the legislation could be framed that we will be able to return to this issue.
Question put and agreed to.
Clause 86 accordingly ordered to stand part of the Bill.
Schedule 10 agreed to.
Clause 87
Rates of air passenger duty from 1 April 2021
Question proposed, That the clause stand part of the Bill.
The Exchequer Secretary to the Treasury (Kemi Badenoch)
Clause 87 makes changes to ensure that the long-haul rates of air passenger duty for the tax year 2021-22 increase in line with the retail price index. The change will make sure that the aviation sector continues to play its part in contributing towards funding our vital public services.
Aviation plays a crucial role in keeping Britain open for business, and the UK Government are keen to support its long-term success. Indeed, the UK has one of the highest direct connectivity scores in Europe, according to the latest Airports Council International Europe report. The Government appreciate the difficulties that the airline industry currently faces as a result of coronavirus. That is why the Chancellor provided a comprehensive package for all businesses affected by the virus on 20 March. However, as air passenger duty is paid on a per passenger basis, the recent decline in passenger demand will have resulted in a reduction in air passenger duty liabilities for airlines. As the industry returns to health, it is right that the revenue raised from air passenger duty should continue to remain in line.
The clause increases the long-haul reduced rate for economy class nominally by only £2 and the standard rate for all classes above economy by £4—a real-terms freeze. The rounding of air passenger duty raised to the nearest £1 means that short-haul rates will remain frozen in nominal terms for the eighth year in a row, which benefits about 80% of all airline passengers. More broadly, the Government will consult on aviation tax reform. As part of the consultation, we will consider the case for changing the air passenger duty treatment of domestic flights, such as reintroducing the return leg exemption, and for increasing the number of international distance bands.
The changes made by the clause will increase the long-haul APD rates for the tax year 2021-22 by the RPI. Air passenger duty is a fair and efficient tax, where the amount paid corresponds to the distance and class of travel of the passenger and is due only when airlines are flying passengers. The changes ensure that the aviation sector will continue to play its part in contributing towards funding our vital public services. I therefore commend the clause to the Committee.
Bridget Phillipson (Houghton and Sunderland South) (Lab)
The Opposition have considerable sympathy with the hon. Lady’s arguments and the amendments tabled by the SNP. We have many concerns about clause 94, which seems buried, given that it is of such considerable importance for the years ahead.
The change to the language in section 15 of the Taxation (Cross-border Trade) Act 2018 has worrying implications for the Government’s adherence to the World Trade Organisation’s dispute settlement system. Replacing the requirement for authorisation under international law with the more nebulous consideration of appropriateness is extremely concerning, and implies that the Government may seek to sidestep international law regarding trade disputes. The matters set out in section 28 of the 2018 Act already give the Government considerable flexibility over what they consider to be appropriate action in the light of international law. It is effectively up to the Secretary of State to decide which international agreements are relevant to the exercise of the function. Loosening up the language even further in this clause is thus highly questionable.
The proposed changes seemingly downgrade the Secretary of State’s responsibilities when it comes to their international obligations. Having regard is nowhere near as onerous as having authorisation. That would allow the Secretary of State to operate at a much lower standard of requirement, and move away from recognised EU standards. We therefore seek to understand the reasoning behind the change. What is wrong with the current provisions regarding the variation of import duties in trade disputes?
There are further questions to which we seek answers from the Government. What will they use the clause for? It does not detail what kind of dispute is in question. How might the Trade Remedies Authority be involved in the decision-making process? Could this be an upshot of the digital services tax? The US has already found similar measures by France to be trade-restrictive, leaving the office of the United States trade representative to authorise retaliatory tariffs, as we discussed last week in Committee with reference to the digital services tax. While both parties are in the process of reaching a deal over the matter, it is possible that the Government wish to introduce this clause in preparation for a similar confrontation with the US. I hope the Minister can assure us that that is not the case, but why do the Government wish to reduce their responsibilities in adhering to international law?
The amendments tabled by the hon. Member for Glasgow Central and her colleagues go some way towards responding to that. The production of a report by the Chancellor no later than a month before any exercise of the power regarding the economic impact of such an action might enable Parliament to better scrutinise the actions taken through the clause. As it stands, other than through the scrutiny of primary legislation, Parliament has little say over international trade. I welcome the amendment to seek approval of any regulations deriving from the clause by resolution of the House of Commons, in the spirit of parliamentary scrutiny. However, the Government hold a considerable majority, and therefore I question how far the amendment would go in practice towards ensuring that the Government act in accordance with international law.
I welcome the amendment regarding the requirement for the Government to detail the conditions under which they would consider it appropriate to vary the rates of import duty under the clause. However, I believe that the implications of the wider clause are of significance and that the Government ought to provide these details during debate, rather than by September, although we are sympathetic to the intention behind the amendment. I stress that I would like the Minister, when he responds to the hon. Lady’s concerns, to explain the reasoning behind this change, what kinds of disputes the clause would cover, and whether the Trade Remedies Authority will be involved.
If the changes in the clause are in anticipation of a dispute with the US over the digital services tax, does this not involve giving the Government permission to ignore international trade rules when disputes arise, undermining the authority of the WTO in the process? I hope that the Minister will provide assurances on the issue of appropriateness and respond to the concerns that the hon. Lady and I have, because this is a significant change. We have reservations about the measure that the Government are putting forward, and we would like to understand much more about their intentions.
Jesse Norman
I thank hon. Members for their comments, and pay tribute to my colleague the Exchequer Secretary for rattling through the clauses we debated earlier with such effectiveness. The hon. Member for Glasgow Central has raised important questions, which I want to address properly, so I will give this issue quite a considerable amount of discussion because it is an important aspect of the Bill.
Clause 94 makes a change to the criteria in section 15 of the Taxation (Cross-border Trade) Act 2018 to ensure that the UK can vary the amount of import duty in the context of an international trade dispute. Provisions in various international trade agreements allow for the UK to vary the amount of import duty applied to goods in the context of an international trade dispute. There is existing provision in section 15 of the 2018 Act that gives the Secretary of State the power to
“make regulations varying the amount of import duty”
where
“a dispute or other issue has arisen between Her Majesty’s government…and the government of a country or territory”.
Currently, section 15 of the 2018 Act is worded in a way that could be interpreted to mean that a binding ruling of the World Trade Organisation is needed before the UK can impose a duty, which would be restrictive. In certain circumstances, countries are within their WTO rights to impose additional tariffs quickly in relation to the actions of other WTO members and, where necessary, outside of WTO dispute proceedings.
In addition, since section 15 of the 2018 Act was enacted, there have been developments in the wider sphere of trade policy, including increasing trade protectionism and problems with the WTO dispute settlement system. The WTO appellate body has stopped functioning, and it has now become possible for final and binding resolution of a WTO dispute to be blocked by a party to the dispute by appealing a panel report. That means it may not be possible to apply retaliatory duties, even where a panel report has found in the complaining body’s favour and the respondent has failed to bring itself into compliance.
Against this background, it is essential to ensure that the UK has the appropriate tools to respond to any unilateral measure or action taken by a WTO member that is not compatible with its obligations to the UK and that harms UK interests. Clause 94 therefore amends the original provision to ensure that, after having regard to relevant international arrangements, the Government may deal with such an issue by varying the amount of import duty. The EU is seeking similar powers, it should be noted, through amendments to its enforcement regulation, because it too recognises the importance of being able to respond quickly in the event of illegal measures being taken against it. What we are talking about is therefore in parallel to a process seeking similar powers within the EU.
At present, section 15 of the 2018 Act permits variation of import duty only where the UK is authorised under international law to deal with the issue. Clause 94 will amend section 15 to allow the Government to vary import duty where they consider it appropriate, having regard to relevant matters, including the UK’s international obligations, as set out in section 28 of the 2018 Act. That amendment will allow the UK to respond more effectively to developments in the international trading system, in line with international laws and our rights as an independent WTO member.
To come to the question asked by the hon. Member for Glasgow Central, there are a number of situations in which it would be appropriate to vary rates of import duty. The most likely situation is that in which the UK has successfully challenged another WTO member’s measures in the WTO dispute settlement system, and the other member has failed to bring itself into compliance. The UK could then impose retaliatory measures, including higher import duty against the other member. That is not contrary to and does not undermine the international rule of law; it insists on the international rule of law, in the face of measures that could disable it.
Import duty variations might also be imposed following a dispute brought under a free trade agreement or in the context of a WTO member applying a safeguard measure but failing to agree an adequate level of trade compensation for the adverse effects caused by the measure. It is also possible that the UK could lose a dispute under a free trade agreement and could agree compensation with another country. The compensation could take the form of lower import duty on certain goods.
In each of those circumstances, the Government are still required by the 2018 Act to have regard to our international arrangements that are relevant to the exercise of this power. It need hardly be said that the UK strongly supports the rules-based international trading system and appropriate enforcement of WTO agreements. It is because appropriate enforcement would be otherwise lacking that this clause is being brought into effect.
Amendment 14 would require the Government to state the conditions in which they would consider it appropriate to vary rates of import duty. As you will know, Ms McDonagh, international trade disputes are broad and varied, depending on the nature of the international agreement under which they are conducted and on the subject matter of the dispute. It would limit the Government’s ability to respond effectively in a particular dispute if they were required to list in advance conditions for varying import duty in a dispute. I have already set out several situations in which it would be appropriate to vary rates of import duty. Examples have also been provided in the explanatory notes to both the Taxation (Cross-border Trade) Act 2018 and the Finance Bill.
Amendment 15 would require the Government to seek the approval of the House of Commons before making regulations varying rates of import duty in an international trade dispute. It is important to say that clause 94 is not an unchecked power. Any specific tariff measure introduced under section 15 of the 2018 Act would require secondary legislation, as is prescribed in that Act. The requirements set out in amendment 15 are therefore not necessary. Secondary legislation will involve the public passage of a piece of legislation. The Government need flexibility to respond effectively to state-to-state disputes, but with the understanding that they must have regard to the international arrangements to which the UK is party.
Amendment 16 would require the Chancellor of the Exchequer to lay before the House of Commons a report containing an assessment of the economic and fiscal effects of the exercise of the powers in clause 94, including a comparison of those fiscal and economic impacts with the effect of the UK being within the EU customs union, and an assessment of any differences in the exercise or effects of those powers in respect of England, Wales, Scotland and Northern Ireland.
Information on the expected impacts of import duty variations will be provided in the documentation accompanying any and each statutory instrument. However, it would not be appropriate to publish extensive detail, because doing so could undermine the effectiveness of the UK’s response. It would also not be appropriate to compare the economic and fiscal impact of the use of the powers in clause 94 with EU customs union membership. First, the EU may not itself have a dispute with the WTO member against which the UK has brought an action. Secondly, even if the EU were applying retaliatory measures against that WTO member, the EU’s retaliatory tariffs would be based on the impact on the EU27 and would not take into account impacts on UK industries and sectors. The amendment would therefore invite the Governments and others to compare apples with oranges.
Anthony Browne
As somebody who used to run the British Bankers Association, which turned into UK Finance, I was very involved in some of those earlier lobbying efforts. I must say that in this case, I simply do not believe it. I do not think this measure would have any impact on business lending; it is quite clear that the tax has already been paid by employers or customers, and it would have a very limited impact—virtually no impact—on the actual risk of a loan or the risk of default. I fully support the Government on this.
Jesse Norman
I am grateful to colleagues for their comments. I will talk about the clauses in a moment, but I will first enjoy this moment in Committee: a senior Opposition Member of Parliament says that he is resistant to financial sector lobbying, which I am thrilled about; and on the other side, someone who headed up the lobbying organisation says that, from an inside standpoint, we are talking about irrelevant minutiae. Let us enjoy for a second that rare moment of harmony and joy in Committee.
The Chair
With this it will be convenient to discuss, That schedule 12 be the Twelfth schedule to the Bill.
Jesse Norman
Clause 97 and schedule 12 introduce a new power to allow HMRC to tackle the behaviour of tax avoiders and evaders who seek to reduce their tax bill unfairly through the misuse of company insolvency. This measure tackles the small minority of people who use insolvency intentionally to sidestep tax liabilities. It does so by allowing HMRC to issue notices that make directors and other persons connected to the company jointly and severally liable for the company’s avoidance, evasion or phoenixism debts, as they are described, if insolvency is threatened. It is not linked to clauses 95 and 96, which make HMRC a secondary preferential creditor for certain tax debts.
The Government announced our intention to consult on tax abuse and insolvency at Budget 2017. The consultation ran from April to June in 2018, and the Government published a response document in November 2018. The Government also published draft finance Bill legislation for technical consultation in July 2019.
As I made clear when I discussed earlier clauses, it is the Government’s aim to support companies and help them to avoid insolvency, particularly at this very difficult and challenging time, and the measures recently announced to restructure the UK’s insolvency framework support this aim. This legislation will not impede those restructuring plans, and the measure focuses firmly on those who misuse insolvency in connection with tax avoidance or evasion, or who run up repeated liabilities that they then step away from.
In ordinary times, insolvency is a highly unfortunate but necessary part of commercial life. However, a small minority of people misuse insolvency for their own ends. They hide behind a company to engage in tax avoidance or evasion, or repeatedly build up tax debts, and then strip out the assets, liquidate the company and leave nothing to meet outstanding tax liabilities. Not only does this deprive the Exchequer of funds for important public services, but it undermines the insolvency process and adversely affects creditors and other businesses, and it casts the whole reputation of insolvency into disrepute. It is only right that we should act to discourage such misuse, and that is what this measure is designed to do.
Clause 97 introduces schedule 12, which contains details of the new regime and sets out conditions that must be met before the legislation will apply. First, paragraph 2 sets out the conditions that must apply before HMRC can issue a notice to an individual connected to a company that has engaged in tax avoidance or evasion. The conditions are: that the company has begun an insolvency procedure, or there is a serious risk that it will; and that the person was responsible for, facilitated or knowingly benefited from the avoidance or evasion.
Paragraph 3 sets out the conditions that must apply before HMRC can issue a notice to an individual who is connected to companies that repeatedly go insolvent with significant outstanding debts. Such companies are often referred to as phoenix companies, and it is widely agreed across the House that they are a blight on commercial life. The conditions are: that the person must have had a connection in the previous five years to at least two companies that began insolvency; that the person has a connection to a new company that carries out the same trade as the old ones; and that the amounts due to HMRC from the old companies total at least £10,000 and at least 50% of the amount due to unsecured creditors overall. That is an important safeguard to ensure that the measure focuses on catching those who play fast and loose with their tax. Paragraph 4 allows the amounts to be varied by a statutory instrument.
Alison Thewliss
I want to comment briefly on the huge gap that exists within Companies House as part of this process. If we go after companies and directors that are involved in phoenixing, why can that not be stopped at source when those companies are registered at Companies House? Why is there no link to the Government’s Verify scheme for those who wish to register companies there? Companies House is obliged only to register the information, not to check whether any of the information is accurate, correct or related to any other kind of activity. It is not involved in anti-money laundering obligations, but it really should be. Will the Minister look carefully at the question of Companies House? That could be a key part of preventing phoenixing in the first place. For example, I have a friend who employed a builder to do work on his house for his disabled son. The builder went bust and phoenixed, as he has done on several occasions. My friend is out of pocket, and that company continues to trade. It is employing sub-contractors who lost out last time because there is nobody else to hire them in that small community. There needs to be a stop on those types of people and behaviours, and I urge the Minister to consider ensuring that Companies House is a big part of that.
Jesse Norman
I thank both hon. Members for their comments. I draw from them strong support for the clause, although it was caveated in the way they described. Let me address the issues that they raised.
The hon. Member for Ilford North asked, “Why not do this earlier?” There is a long-standing principle in company law that the corporate veil should not be pierced, and limited liability should exist in place. As he will recall, there was a moment not so long ago when HMRC had Crown preference and was always the first, or close to the first, creditor to get paid out. It then got moved to the back of the queue.
As we think about the current insolvency and abuse regime, there has been a process of further reflection on all the different aspects of it, and that inevitably includes the phenomenon that we have seen. My impression—I do not know whether it is true—is that phoenixism is a better recognised phenomenon and a more widely understood problem than it has been. This is part of a much wider effort that has been made—particularly since I have been Financial Secretary to the Treasury, but before that, too—to really push on the issue of avoidance and evasion, and that is what we are doing.
The hon. Gentleman also asked about process. It is a perfectly good, important question, and I have been through it myself with HMRC officials. I will not read out the conditions in each case, but there are central cases for the issuance of avoidance and evasion notices, avoidance and evasion facilitation notices, and repeated insolvency notices. Each has some quite specific criteria sitting underneath it. For avoidance and evasion facilitation notices, a company must have begun an insolvency procedure or given assurance that it will; it must have incurred a penalty for facilitating tax avoidance or evasion; there must be a serious risk that some or all of that liability will not be paid; and the person must have a relevant connection to the company at the time that the behaviour leading to the penalty occurs. There are important threshold tests that must be met, and there are appeals processes against notices that have been filed, which are designed to provide safeguards, for all the reasons that one might imagine.
I have a degree of sympathy for the point that the hon. Member for Glasgow Central makes about Companies House. In the promoter strategy, which we published at the time of the Budget, we looked to create a more integrated approach to trying to crack down on abusive avoidance and evasion, and the promotion of avoidance and evasion. It has been in part about pulling together different entities, one of which might be Companies House and another of which might be the Advertising Standards Authority, if the two had been outside the purview of a more traditional approach. I take the hon. Lady’s point, and I thank both hon. Members for their support for this important clause and schedule.
Question put and agreed to.
Clause 97 accordingly ordered to stand part of the Bill
Schedule 12 agreed to.
The Chair
With this it will be convenient to discuss the following:
New clause 12—General anti-abuse rule: review of effect on tax revenues—
‘(1) The Chancellor of the Exchequer must review the effects on tax revenues of section 98 and Schedule 13 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review under sub-paragraph (1) must consider—
(a) the expected change in corporation and income tax paid attributable to the provisions in this Schedule; and
(b) an estimate of any change, attributable to the provisions in this Schedule, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.
(3) The review under subparagraph (2)(b) must consider taxes payable by the owners and employees of Scottish Limited Partnerships.
This new clause would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of Clause 98 and Schedule 13, and in particular on the taxes payable by owners and employees of Scottish Limited Partnerships.
That schedule 13 be the Thirteenth schedule to the Bill.
Jesse Norman
One more clause unto the breach, dear friends; or close the wall up with our English dead, and possibly our Scottish dead as well—our British dead. We will rephrase the bard.
Clause 98 makes minor procedural and technical changes to the general anti-abuse rule referred to as the GAAR to strengthen its procedural efficiency and ensure that it operates as originally intended. The clause tackles a small minority of taxpayers who deliberately avoid, in this case, providing information and thereby frustrate HMRC’s ability to pursue inquiries into abusive tax arrangements under the GAAR.
The clause also introduces some minor amendments to remove ambiguity and to ensure that, where HMRC decides not to pursue a case using the GAAR, inquiries can continue using other arguments. This measure was announced at Budget 2018 and the Government published draft legislation for technical consultation in July 2019. The changes will help to protect over £200 million in tax revenue by ensuring that the GAAR works effectively.
As I have often said, the Government take a firm line against those who seek to avoid tax and try to circumvent the rules. The GAAR was introduced in July 2013 and it has become an important part of the Government’s strategy to clamp down on tax avoidance; to deter individuals from engaging in it in the first place; and to prevent promoters from marketing and selling such arrangements.
The GAAR focuses on tackling abusive tax avoidance. By abusive, I mean the sort of arrangements that push the boundaries of the law and are clearly not within the spirit of what Parliament intended. The GAAR legislation asks whether a specific tax arrangement is abusive and applies what is known as the “double-reasonableness” test. Tax arrangements are considered abusive if they cannot reasonably be regarded as a reasonable course of action. An independent advisory panel provides an opinion to HMRC on whether a tax arrangement constitutes a reasonable course of action.
The clause will strengthen procedural changes made to the GAAR previously in 2016 which tackle mass-marketed tax avoidance schemes. The changes in 2016 introduced provisional counter-action notices, which allowed HMRC a 12-month window to gather information and consider whether to continue a GAAR challenge or pursue a different approach.
Some taxpayers and advisers, I am sorry to say, have deliberately refused to co-operate with HMRC during that window, deliberately withholding information to prevent HMRC from making an informed decision. In effect, those people are seeking to run down the clock and it is right the Government take action to prevent this. At the moment, HMRC has no recourse against such people. Once that window closes, no further GAAR action is possible and HMRC is unable to pursue any alternative non-GAAR approaches.
The clause replaces the provisional counter-action notices introduced in 2016 with a simpler protective GAAR notice. This will enable HMRC to carry on its investigations beyond 12 months and it mirrors the way normal tax inquiry notices work. The amendments will also confirm that where HMRC decides not to pursue the GAAR, cases can still be pursued using a technical non-GAAR argument. That has always been the intention of the legislation.
The changes remove the incentive not to co-operate with requests for information and ensure that appropriate safeguards, such as appeal rights and the oversight exercised by the independent GAAR advisory panel remain in place. Given that the GAAR targets the abusive end of the avoidance spectrum, the changes proposed here will only affect a small minority—those who persistently go to extreme lengths to sidestep the rules. These changes are needed now to ensure that HMRC can take action against those who are constantly looking for new ways to avoid paying their fair share of tax.
New clause 12 in the name of the SNP requires the Chancellor of the Exchequer to review the impact of clause 98 and schedule 13 within six months of the Bill receiving Royal Assent. Specifically, it would require the Chancellor to review the effect on public finances and on reducing the tax gap, particularly on taxes payable by earners and employees of Scottish limited partnerships.
In response, I highlight to hon. Members that amendments to the GAAR are minor procedural changes designed to ensure the policy operates as originally intended. The effects of these changes to the regime will not be visible within six months’ time. As with all tax measures, however, we will continue to review and monitor the effect of this change, as is standard.
HMRC already publishes the “Measuring the tax gap” report annually which shows how the tax gap has changed year on year for different forms of behaviour and different taxpayer groups. HMRC also publishes an annual report and accounts that provide specific information on the impacts of the GAAR, including the number of GAAR opinion notices issued. For that reason, I ask the Committee to reject new clause 12.
To sum up, these amendments ensure that the GAAR remains an effective tool in HMRC’s armoury for tackling abuse of tax avoidance. I therefore commend the clause and the schedule to the Committee.
Alison Thewliss
In new clause 12, we mention the issue of Scottish limited partnerships. I make no apology for doing so, as they are still a problem. We only need to look at the ongoing campaign journalism by Richard Smith and David Leask on this issue to know that Scottish limited partnerships are being used in nefarious ways to move money and goods around the world. They have been involved in war crimes and all kinds of things. The loopholes existing in Scottish limited partnerships and Companies House must be closed by the Government. They are harming not only individuals who suffer the effects of these crimes, but Scotland’s reputation. They are called Scottish limited partnerships, but Scotland really has no part in it; they are an historic arrangement, but they are governed here.
There are still people not doing the simplest things such as registering persons of significant control. The answer to my recent parliamentary question suggested that 948 companies have still not registered a person of significant control. That is dramatically down from where it was, but it tells me that people are using other means to hide their money, rather than going through Scottish limited partnerships, and that no Government fines have been levied on the 948 companies that have not registered a person of significant control. That is money that the Government could have in their pocket. They are deciding that they do not want to pursue that for their own reasons. It really does stick in my craw that this is a continual issue: I have to raise it on the Finance Bill and the Scottish National party has to raise it in this House.
We are also concerned about the tax gap. The tweaks being made here are not really going to change that significant gap. In June 2019, HMRC published revised estimates, which put the tax gap at £35 billion for 2017-18, representing 5.6% of total tax liabilities. The Minister, no doubt, will say that the tax gap has fallen—it has—but that does not disguise the fact that it still exists, and that tax is money that could be coming into the revenues. It could be supporting businesses and individuals across the country and we could be abolishing policies such as the two-child limit, because the money would be there in the Government’s bank account. The Government could use that money rather than not collecting it. I could go into great detail, which I have here, about all the anti-avoidance mechanisms that have happened. I am sure other hon. Members are as warm as I am and would like to get some fresh air, so I will skip that in the interest of the patience of all colleagues.
We do need workable general anti-avoidance rules. They must tackle tax avoidance in all its forms. They must not exempt existing established abuse from action being taken. They must include international tax abuse within their scope. They must give the right to the tax authority to take action against tax avoidance, defined in an objective fashion capable of being numerically assessed, without the consent of the unelected authority. They must increase the burden of proof on this issue on to the taxpayer.
In 2014, the coalition Government announced the introduction of a system of follower notices and accelerated payment notices. In cases where someone is in dispute over their assessment, HMRC may issue a follower notice if this arises from the use of an avoidance scheme that is the same or similar to arrangements that HMRC has successfully challenged in court. In July 2017, HMRC reported that it issued over 75,000 such notices worth in excess of £7 billion and managed to collect nearly £4 billion. That is still a significant gap of £3 billion. HMRC must be able to collect the taxes it is due in real time instead of waiting for those judicial decisions.
With Scottish limited partnerships, the extent of the abuse of the current system is laid bare in the Global Witness report “Getting the UK’s house in order”, which highlights the deficiencies at Companies House that have been going on for many years. This needs to be dealt with soon. Reviews have been carried out, things have been talked about, but there has not really been any action. It makes no sense to me that we have such a system but do not allow it to catch the people it should be catching.
I sat on the pre-legislative Joint Committee for the Registration of Overseas Entities Bill in the last Parliament. That Bill seems to have disappeared completely. It would help to tackle some of the money laundering that goes on with property registered in the UK. People across the country, particularly in many London boroughs, see blocks of flats with nobody living in them. People could live in those flats. They are being used for money laundering and moving money about. We need to bring that Bill back and ensure those people are held to account. We should close these loopholes in the system and ensure that the tax that is due is collected for the benefit of all of us.
Jesse Norman
I am grateful to colleagues for their contributions. I want to take up some of the points made by the hon. Member for Ilford North. The delicacy and agility in his ability to pivot from detailed scrutiny to a swingeing extension of tax powers, and new taxes galore, is interesting to watch, but the fertility of his invention is great, and I will read his suggestions with some care, in the record. I am grateful to him for that.
The ugly truth of the matter is that tax avoidance and, in particular, the promotion of it, is an amoebic activity that tends to flow into empty spaces and to be parasitic, if amoebas can be parasitic—I am not sure whether they can—on good activity. So, right next to where we see good or lawful and legal activity, we can see some unpleasant, nasty and abusive tax avoidance.
The hon. Gentleman is right to focus on how we see new forms emerging. It means that the battle against tax avoidance and evasion is never fully won. I hope that he will take some comfort from all the work we are doing on the promoter strategy. It is designed not merely for potential new powers, but for a different way of thinking about disrupting the economics of the supply chain. To pick up on a point that he raised about effectiveness, the GAAR can lead to a fine of 60% of the counteracted advantage. It can be pretty substantial, and it has genuine teeth.
I hope what I say in responding to the point made by the hon. Member for Glasgow Central on Scottish limited partnerships falls within the framework of the Bill. The issue is well understood, and there is public concern about it, which is shared across the House. She will be aware that BEIS introduced some new reporting requirements for Scottish limited partnerships in June 2017. Since then, new registrations have declined sharply. Of course, there is a sump of existing partnerships and, as she will be aware, BEIS is consulting on wider reforms to prevent the criminal misuse of those partnerships but retain their core and, in many ways, effective and important other purpose. It announced reforms in that area as of December 2018, and the Government have made clear that they will legislate when parliamentary time admits. So although the matter does not, in its preponderance, fall directly within the clause, she is right to raise it and the Government are fully sighted in that regard, and fully seized of it.
Question put and agreed to.
Clause 98 accordingly ordered to stand part of the Bill.
Schedule 13 agreed to.
Ordered, That further consideration be now adjourned. —(David Rutley.)