Draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2020
Jesse Norman Excerpts(4 years, 8 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Committee has considered the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-Rating Regulations 2020.
As hon. Members will know, the Government are committed to delivering a fair welfare system for claimants and taxpayers while providing a strong safety net for those who need it the most. The regulations will ensure that tax credits, child benefit and guardian’s allowance will increase in line with the consumer price index, which set inflation at 1.7% in the year to September 2019.
The effect is to meet the Government’s manifesto commitment to end the benefits freeze, with most elements and thresholds of tax credits and both rates of child benefit being increased. The Government will spend an additional £800 million to support tax credit, child benefit and guardian’s allowance claimants. The proposed legislation increases the rates of those benefits in line with prices. I hope hon. Members will join me in supporting the regulations.
Jesse Norman
I am very grateful to the hon. Member for Inverclyde and of course I understand the concerns that he has placed on the record. They do not bear directly on this uprating, which I think he will support, but he has made his position clear and it is well understood.
May I focus on the more substantive comments made by the hon. Member for Stalybridge and Hyde? He suggested that the original benefits freeze was politically motivated. Nothing could be further from the truth. The fact is that the economy had a very long period of recovery—I am pleased to say that it has recovered under this Government and their predecessors—and the view was taken that the whole of Government spending ought to be constrained. The reason for that was that between 1997 and 2010 welfare spending had risen by 65%—£84 billion in real terms—and unfortunately, combined with the mishandling of the financial sector that caused the damage from the crisis, when it took place, to be so bad, it cast a very long and quite painful shadow.
The hon. Gentleman mentioned food banks, but may I offer two or three reminders? One is that poverty, as I am sure he would agree—he is a very thoughtful man—is a complex issue. It is not just a matter of income; it is also a matter of costs, such as fuel costs and housing costs, and of childcare. The approach that the Government have taken in many cases is to pinpoint specific concerns—childcare being an obvious example. I am pleased to see that work is being done to assess whether the correct measure of poverty has been adopted, because there is a question not just about the level but about the composition. The Government are looking quite closely at that.
On food banks, let me simply point out that Germany, which on many accounts we would regard as having not merely a much richer Exchequer and more robust economic growth over the last few years—although not at the moment—than this country, and which has a more generous benefits system, has an escalating food bank problem that is every bit as bad as the one that we find in this country.
Jess Phillips (Birmingham, Yardley) (Lab)
Will the right hon. Gentleman give way?
The Chair
Order. Although food banks are obviously related to poverty, I remind all hon. Members of the narrowness of the instrument we are debating. I do not want us all to be tempted into a very worthy, but probably lengthy beyond the time allocated to us, debate on poverty and the definition of it. Can we keep to the narrow confines of the regulations, please?
Jesse Norman
Thank you, Mr Pritchard. I am delighted to give way to the hon. Lady, who I know has views on these issues.
Jess Phillips
I do not know whether I have to declare an interest as somebody who, in the era that we are talking about, lived on tax credits. With regard to the Minister’s assertions about Germany as a comparator, does he think that the people who come to my office every single day to ask for food bank vouchers would get much comfort from hearing, “It’s worse in Germany”?
Jesse Norman
Of course not, but the point that I was making was that there is no simple link between income, poverty and food bank usage, and Germany is the example that gives the lie to that claim.
As for an assessment, legislation is of course given an impact assessment when it is introduced, and that is the case here as elsewhere. I remind the hon. Member for Stalybridge and Hyde that more than 700,000—I think it is 730,000—fewer children are living in workless households than were in 2010, and that there are more than 1 million fewer people in workless households overall? The Government’s focus on employment and the benefits of employment has delivered that achievement, which is a very important improvement not merely to economic wellbeing, but to people’s social and emotional wellbeing.
Question put and agreed to.
Draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020
Jesse Norman Excerpts(4 years, 8 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Committee has considered the draft Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020.
It is an honour to see you in the Chair, Mr Hosie. The regulations set the national insurance contributions rates, limits and thresholds for the 2020-21 tax year. They will allow the Government to deliver their manifesto commitment to cut national insurance contributions for 31 million people across the United Kingdom.
National insurance contributions are social security contributions. Payment of NICs determines eligibility for the state pension and other contributory benefits. NICs receipts go towards funding the NHS and those same contributory benefits.
I will first outline the changes to the class 1 primary threshold and class 4 lower profits limit. The primary threshold and lower profits limit indicate the points at which employees and the self-employed start to pay class 1 and class 4 NICs, respectively. These thresholds will rise from £8,632 to £9,500 a year. These changes, promised in the Conservative’s 2019 manifesto, underline the Government’s commitment to ensure that work pays, putting more money into the pockets of hard-working people. They will benefit about 31 million taxpayers, with a typical employee £104 better off compared with 2019-20. Legislating now ensures that taxpayers will benefit from April 2020.
Increases to the primary threshold and lower profits limit do not affect eligibility for a state pension. That is determined by the lower earnings limit for employees and payment of class 2 NICs for the self-employed. The lower earnings limit will rise in line with inflation, from £6,136 to £6,240 a year. The upper earnings limit, where employees start to pay 2% NICs, is aligned with the higher rate threshold. As announced at the 2018 Budget, it will be frozen and remain at £50,000 per year.
The self-employed pay both class 2 and class 4 NICs. The rate of class 2 NICs will rise in line with inflation, from £3 to £3.05 a week. The small profits threshold is the point above which the self-employed must pay class 2 NICs. This will rise with inflation, from £6,365 to £6,475 a year. For class 4 NICs, as already outlined, the lower profits limit will rise to £9,500. The upper profits limits is where the self-employed start to pay 2% NICs. This is also aligned with the higher rate threshold and will remain at £50,000 a year.
For employers, the secondary threshold determines where they start to pay employer NICs. This will rise with inflation, from £8,632 to £8,788 a year. The level at which employers of people under 21 and of apprentices under 25 start to pay employer NICs will remain frozen at £50,000 a year.
Finally, class 3 contributions allow people to top up their national insurance record voluntarily. The rate for class 3 NICs will increase in line with inflation, from £15 to £15.30 a week.
The regulations also make provision for a Treasury grant of up to 5% of forecasted annual benefit expenditure to be paid into the national insurance fund, if needed, during 2020-21. A similar provision will be made in respect of the Northern Ireland national insurance fund.
I trust that that is a useful overview of the changes that we are making to bring rates of support and contributions to the Exchequer in line with inflation, and I commend the draft regulations to the Committee.
Jesse Norman
I thank the shadow Minister for her remarks. She raised a range of issues, and touched first on what she described as lack of targeting. Of course it is the nature of the legislation that it is universal in its applicability. It is not designed to be a targeted benefit, and that is not its function. Its job is to improve the national insurance situation of 31 million people, which it does. The question of targeting is better addressed to many other aspects; it is not actually relevant to national insurance contributions, which for years have been legislated for on a universal basis.
I do not think that the hon. Lady is correct that this change is regressive in the way that it will operate. It is certainly not a tax cut for higher earners. All employees earning above £9,500 will benefit by the same amount, and some 1.1 million people will no longer pay NICs as a result. Those are important properties.
Anneliese Dodds
I am grateful to the Minister for his generosity in giving way. I do not believe that I used the word “regressive”. I made clear that the impact on those at the higher level of the income distribution will be larger, in terms of the absolute amount that they will not pay, compared with those at the bottom of the income distribution. Surely he is not contesting that.
Jesse Norman
If we look in full at the 31 million people affected, we will see that those in employment and earning above £9,500 will receive the same amount. The hon. Lady rightly mentions universal credit, and she understands that its effect is to smooth, via tapering, various cliff edges. That is a helpful and good property—I am sure she does not regret it—and it interacts with this measure. The broad picture, however, is the one I describe.
As the hon. Lady has acknowledged, the measure has elements of a contributory scheme, so it will have effects on people who do not have a full contributions record. On the Government’s future ambitions, she will understand that a statutory instrument debate is not the place to unveil such a strategy, and certainly not in the lee of a Budget two days away. It is the Government’s ambition to increase the threshold to £12,500, and decisions will be taken at future fiscal events. Increasing the NICs threshold to £9,500 this year is a first step towards that ambition. The hon. Lady also mentioned additional measures and statutory sick pay. It would be foolish in the extreme for me to comment on that matter two days before a fiscal event, and I therefore think we should leave it for a future discussion in the House.
Question put and agreed to.
VAT (Listed Properties)
Jesse Norman Excerpts(4 years, 8 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
It is a great pleasure to speak under your chairmanship, Sir Christopher. I think the debate has shown that this topic is of great interest in different parts of the country and to different parts of our community. There is widespread interest in it throughout the House, but also in parts well outside it. I thank my hon. Friend the Member for South Thanet (Craig Mackinlay), who is indefatigable and is learned in matters of tax, for calling the debate, and all other hon. Members who contributed to it.
My hon. Friend is known for his expertise in tax. I had suspected he was a Burkean in matters of preservation of our assets, our national heritage and the priceless inheritance of previous generations, and it was good to hear that Burkeanism in action. I salute him for it. I also salute him for his timing; he managed to secure the debate in the lee of a fiscal event that is due at some point in the not-too-distant future. I have found the debate engrossing.
I think we all agree that listed buildings are an integral part of the shared history of our British life and culture, and that they greatly enrich that history. The Government absolutely recognise—as, I know, does every Member of the House—the importance of protecting and making the most of that UK heritage. It is important not merely socially and culturally but economically.
As my hon. Friend will know, the Government released a heritage statement in 2017 setting out many ways in which they support this sector. It is important to remind ourselves that the Government write a cheque of £80 million or more towards heritage organisations. The listed places of worship grant scheme was discussed at some length. That and the UK heritage organisations do valuable preservation work. We also have Historic England and the Heritage Lottery Fund to fund and support general advice and assistance for the conservation of heritage, including listed buildings.
The Government recognise, however, the very specific challenges faced by private owners of listed properties in planning regulations. That is why the Government introduced measures to streamline the listed buildings consent regime in 2013, including by removing the need for specific applications for minor works to listed buildings and giving local authorities the power to grant a general consent.
My hon. Friend highlighted several mechanisms by which the goal he seeks could be achieved, one of which is to extend the reduced rate—or possibly a nil rate—to more goods and services, and so to reduce the up-front costs associated with the refurbishment and renovation of listed buildings. As he pointed out, we have some experience of a comparable relief in the past. Previously, approved alterations to listed buildings were zero-rated when used for residential use or by a charity. That relief was introduced to reduce the costs associated with restoring or enhancing the unique character of a listed building or prolonging its active life.
Importantly, however, that is not actually what happened. The majority of work carried out under that relief was for extension purposes rather than for maintenance, and the relief did not deliver the original point and purpose of the legislation. I am afraid that, in so doing, it deployed large amounts of taxpayers’ money in ways that were not contemplated by Parliament when it passed the legislation. That is why that legislation was withdrawn as part of the 2012 Budget.
Wera Hobhouse
Would not it therefore make sense just to define a little more what the VAT relief is for, rather than scrapping it for everybody?
Jesse Norman
Of course those are two entirely separate things. To remove a relief is to remove a very blunt and general instrument that is, by its bluntness and generality, open to abuse. In this case, it had the contradictory effect of potentially disincentivising repairs, because people focused on extensions, which was directly contrary to the purpose of the legislation. However, as has been recognised with the listed places of worship fund, there can be scope for a more targeted intervention through funds rather than tax reliefs. That is the other option we were given by my hon. Friend the Member for South Thanet.
As my hon. Friend knows better than probably any other Member, VAT is a broad-based tax on consumption, and the standard rate of 20% applies to the vast majority of goods and services. There are exceptions to the standard rate, but they are strictly limited by domestic law as well as by fiscal considerations. Hon. Members will appreciate that we are not short of requests for VAT relief in the Treasury. We have VAT reliefs for repairs and improvements, but of course that includes repairs to damage caused by floods or by the desperate events that have necessitated re-cladding of buildings for health and safety reasons. In total, we are presently dealing with about £40 billion of requests for relief, many of them triggered by the recognition that we are leaving the EU and seeking to exploit that fact for other purposes. We must place this proposal in that category.
It is estimated that introducing a relief for the repair and maintenance of all buildings would cost the Exchequer something like £4 billion a year. We do not have an estimate for listed buildings, but, as was pointed out, there are more than 450,000 of them in the UK, so such a relief would undoubtedly be very substantial in quantum. Of course, that is a constraint on what we can do.
Let me address the remarks by the hon. Member for Oxford East (Anneliese Dodds), who was commendably direct and straight about what exists: the 5% rate for the recovery of properties that have been empty for two years. She is absolutely right to point out the target issue versus the dead-weight cost, which I also highlighted. She is also right about our concerns, reflecting wider considerations on the state of the economy, and the need for a better understanding of the factual base for reliefs. Perhaps I can give her some comfort.
As the hon. Lady pointed out in response to my right hon. Friend the Member for Ludlow (Philip Dunne), who is no longer in his place, there is a relief available for the installation of energy-saving materials on residential properties, whether listed or unlisted. As she mentioned, we have measures to incentivise the use of listed buildings for residential purposes, as well as to increase the overall number of dwellings. Those measures cover listed buildings, so there is scope to support them in some circumstances.
I turn to some of the specific points made. My hon. Friend the Member for South Thanet pointed out that the relief is not directly comparable to its predecessor. The question of targeting is therefore central to what we have discussed. There is fairness, because listed and unlisted buildings are treated in the same way. The hon. Member for Glasgow Central (Alison Thewliss) said that the task for us all is to protect the homes that people live in, and of course an enormously larger number of people live in unlisted homes than in listed homes. The tax system tries to respect and acknowledge that intuition. It would be difficult to narrow the scope of a relief. Therefore, if one was to go down the path of a fund—my hon. Friend could raise that for a future fiscal event—such an approach could be a much closer fit and be accommodated within existing planning frameworks.
A point was made about anomalies. Of course, the tax system is full of anomalies and the question in many ways is which anomalies one seeks to eliminate—my hon. Friend wryly chuckles. Many of those anomalies exist in the nature of reliefs, and it would be an odd Financial Secretary indeed who wished to resolve an anomaly by creating another relief.
As a Government, we are committed to supporting the preservation of historic buildings and homes and the social and cultural contribution they make to our shared history. It is boilerplate but important to say that the Treasury keeps all taxes under review and is always willing to hear the case for what can be improved and refined. Even though we do not, at this time and for the reasons given, plan to change the VAT treatment of renovations or repairs, I thank everyone who has contributed to the debate.
Van Benefit and Car and Van Fuel Benefit Order 2020
Jesse Norman Excerpts(4 years, 8 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
The van benefit charge and fuel benefit charges for cars and vans will be uprated by the consumer prices index from 6 April 2020. The uprate will take effect as follows:
Van benefit charge will uprate from £3,430 to £3,490.
Car fuel benefit charge multiplier will uprate from £24,100 to £24,500.
Van fuel benefit charge will uprate from £655 to £666.
This measure is being announced outside of the normal fiscal process to ensure employers and HMRC are given enough time to prepare for the uprate, ahead of the 2020-21 tax year.
The Government will lay the statutory instrument to uprate these charges before the House today. A tax information and impact note (TIIN) will be published at: www.gov.uk/government/collections/tax-information- and-impact-notes-tiins.
[HCWS137]
Draft Employment Allowance (Excluded Persons) Regulations 2020
Jesse Norman Excerpts(4 years, 8 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Committee has considered the draft Employment Allowance (Excluded Persons) Regulations 2020.
It is a delight to see you in the Chair, Ms Buck. This draft legislation allows the Government to target the national insurance employment allowance to businesses that need it most. Employers pay class 1 national insurance contributions on employee earnings above the secondary threshold, which is set at £8,632 this year. Those contributions are charged at 13.8% and constitute the largest business tax by revenue in the UK.
The employment allowance was introduced in 2014 to help businesses with the cost of employment and to encourage them to grow and to hire more staff. More than 1 million employers claim the employment allowance to reduce their employer NICs bill by up to £3,000 and, since its introduction, it has taken 590,000 businesses out of paying national insurance contributions altogether.
The employment rate is at an all-time high of 76.2%. Since 2010, youth unemployment has been halved and 3.7 million more people are in employment. That is a nationwide phenomenon; in the last year, three quarters of employment growth was outside London and the south-east.
All businesses—from greengrocers to Goldman Sachs; from butchers to Barclays; from pubs to Primark—are currently eligible for Government relief of up to £3,000 of their total employer NICs bill. Big businesses get the same benefit as small ones, but for larger businesses, that £3,000 is a small—perhaps tiny—amount relative to their total employment costs, so it is unlikely to encourage them to take on more staff, contrary to the purpose of the policy. It is right therefore to target the support at smaller businesses, for which the £3,000 relief makes a real difference to the cost of doing business.
That is why the Government decided to restrict the employment allowance to smaller businesses in the 2018 Budget. As a result, from April 2020, only businesses with an employer national insurance contributions bill below £100,000 will be eligible for the employment allowance. More than 99% of microbusinesses with fewer than 10 employees and 93% of small businesses with fewer than 50 employees will remain eligible for the employment allowance. Of the businesses that currently receive the employment allowance, around 8%—all of which will have a pay bill above £700,000 per year—will lose the allowance.
Targeting the employment allowance at smaller businesses means that it falls under EU de minimis state aid regulations. De minimis state aid refers to small amounts of aid that can be given without notifying the European Commission. Most businesses can receive up to €200,000 of de minimis state aid cumulatively in a three-year period. Under the de minimis regime, to claim the employment allowance, businesses need to notify Her Majesty’s Revenue and Customs annually as part of the existing claims process and confirm that they can receive the employment allowance without exceeding their cap. After consulting widely, the Government have removed the requirement to specify exactly how much state aid businesses have received, to make it easier for them to claim the reformed employment allowance.
As the Prime Minister announced, the Government will develop a separate independent UK policy on subsidies, for use when the transition period has ended. That will be a modern system designed to support businesses in a way that fulfils British interests. Although the employment allowance supports small businesses, I hope that the Committee agrees that giving every large business with a wage bill of £700,000 or more £3,000 off its national insurance contribution bill is not good value for money. The Government are committed to furthering their support for small businesses as we look to level up opportunity and growth across the country.
Over the course of this Parliament, this reform is projected to raise more than £1 billion that can be used to fund important public services and to target support for small and medium-sized businesses.
Jesse Norman
I am delighted to answer the questions put to me. In response to the hon. Member for East Dunbartonshire, I think I am right in saying that SNP policy was to double the employment allowance, rather than to restrict it. I think that would have had the effect of continuing the mis-targeting, which we have identified, on the largest companies. Therefore, we do not think that would be a good policy and we think it is much better to have the support targeted where it will have an effect on increasing the marginal appetite to retain or hire employees.
In relation to the questions from the hon. Member for Stalybridge and Hyde, I mentioned in my speech that some 8% of current businesses—about 80,000 businesses —would not be eligible for the employment allowance, as it is now proposed to be targeted. He will appreciate that it is designed in such a way that there should be a reduction in paperwork, because we have managed to avoid the situation that would have been mandated otherwise under EU rules, in which the specific amount of state aid received would have to be indicated. There was feedback in the consultation on the question of paperwork. The decision was taken that the application would be put through payroll software and should be as light touch and straightforward as possible.
The hon. Gentleman also asked about state aid. The trouble is that by restricting the scope of the allowance and by targeting a group, it automatically engages in EU state aid rules, and looks like preferential treatment. The Government have no option if they wish to introduce it. I do not detect any difference in the policy goal between us and the Opposition. It is a necessary part of doing that. I hope he can take some comfort from the fact that at the end of the transition period we expect to at least assess the scope for redesign of the policy if there is serious evidence of any adverse impact on those it is meant to support.
I have indicated that the allowance will be paid through payroll and will be communicated through the usual channels online, through public media support, and with the active collaboration of stakeholders, small business groups and other relevant organisations to make sure that it has the widest possible take-up. Since this is a universally understood allowance already, I expect take-up to be high from the beginning.
Question put and agreed to.
Loan Charge Review
Jesse Norman Excerpts(4 years, 9 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
In September 2019, the Government commissioned Sir Amyas Morse to lead the independent loan charge review. The loan charge is designed to tackle disguised remuneration avoidance schemes. These are tax avoidance arrangements that seek to avoid income tax and national insurance contributions by paying scheme users their income in the form of loans, usually via an offshore trust, with no expectation that the loans would ever be repaid.
On 20 December 2019, the Government published the independent review and the Government’s response, accepting all but one of the review’s recommendations (HCWS14). On 20 January 2020, HM Revenue and Customs (HMRC) published draft legislation giving effect to the changes to the loan charge following the review (HCWS45).
Today HMRC has published the following:
Additional draft legislation covering the Government’s commitment to refund certain payments made by individuals and employers for unprotected years which will no longer be subject to the loan charge where tax was paid voluntarily, together with details of the repayment scheme, https://www.gov. uk/government/publications/implementation-of-changes-to-the-loan-charge.
A tax information and impact note and explanatory note to support this legislation. https://www.gov.uk/government/publications/implementation-of-changes-to-the-loan-charge.
Guidance for employers who are either subject to the loan charge themselves or have employees who are. https://www.gov. uk/government/publications/disguised-remuneration-independent-loan-charge-review/guidance; https://www.gov.uk/guidance/report-and-account-for-your-disguised-remuneration-loan-charge.
All measures will be legislated for in the forthcoming Finance Bill.
[HCWS136]
Tax Avoidance and Evasion
Jesse Norman Excerpts(4 years, 9 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I am delighted to wind up the debate for the Government. It has been a fascinating debate. There has, of course, been extensive discussion of the issues of tax avoidance and evasion, but we have also heard about lemon meringue pie and West Bromwich Albion, and we have heard two sparkling maiden speeches, for which I thank my new hon. Friends. It has been a cornucopia of joy for everyone interested in these issues.
Before I deal with the debate itself, may I dwell for a second on the Tax Justice Network report, which is central to the motion? We are repeatedly enjoined to trust it as an authoritative assessment of the UK’s position, but I suggest that nothing could be further from the truth. Those who look closely at the report will see that it generates absurd outcomes. In its list of 133 jurisdictions, we supposedly come 12th in terms of offensiveness, yet near the bottom we see Brunei, Vanuatu and Liberia. Is anyone seriously suggesting that this country is a less robust and effectively transparent tax jurisdiction than those?
The reason for that mistake is the fact that the findings are based on an entirely flawed methodology which accepts the proposition that the UK is one of the least secret jurisdictions in the world. I believe it is the eighth least secret, according to the report. Because its authors have some fudge factor, or financial multiplier, they have somehow able to deduce this extraordinary further conclusion. In fact, it is bogus. As was pointed out by a partner at Clifford Chance, the excellent Mr Dan Neidle— [Hon. Members: “That is not an answer.”] He is a tax partner at Clifford Chance who was offering his view, but that was a nice try from the Opposition Front Bench. He is quoted as saying that
“Britain still scored badly despite making significant strides ahead of its global peers on fostering greater”
—tax—
“transparency.
This, he said, was because the report calculates its final secrecy score based on the volume of financial activity conducted by non-residents.”
That is, of course, further to the issue of the core secrecy of the regime, and, as I have said, ours is one of the most transparent.
The report is bogus. It is based on a flawed methodology, and one that is itself secret to the point of being hard to scrutinise. However, I will say one more thing about it: although bogus in many respects, it does accurately place much of the blame for the current situation on the very soft-touch regulatory regime initiated under the Labour Government of 1997. That much, at least, is accurate.
Let me now deal with the main topic of the debate. Of course it is right to focus on the size of the tax gap —the gap between tax owed and tax paid—and I am delighted that it has fallen to a near record low of 5.6%. In his excellent speech, my hon. Friend the Member for Amber Valley (Nigel Mills) asked whether we could introduce a target. It is, of course a retrospective measure. HMRC’s attempt to get close to this point involves the concept of compliance yield, amounting to £34.5 billion this year, which is itself a stretching target. However, the good news is that the 5.6% target is some 0.7% below the average of the last five years of the Labour Administration. That is about £4 billion of tax which we, I am pleased to say, are collecting, and which, had they stayed in office, they would not have collected. It has also rightly been pointed out that at the last Budget the Government announced 21 new measures to tackle avoidance, but of course they were voted down by the Opposition. Last year, these compliance activities brought in some additional £34 billion, and since 2010 compliance activities have secured and protected more than £200 billion of tax revenue. That is a record of which we can all be proud.
It is an interesting fact that, when he came to consider the loan charge, Sir Amyas Morse focused on the earliest date on which he believed the charge could be properly validated in law. That date was December 2010. In other words, we supposedly had 10 years of loan charge non-compliance under the Labour party, which received no legal justification or support. I do not actually believe that that is true. HMRC was correct in chasing those people as it did, and that will be proved, but the fact is that Sir Amyas himself has pointed to the slapdash manner in which the last Government addressed this whole issue.
Let me pick on some of the important comments that have been made in the debate. My right hon. Friend the Member for East Hampshire (Damian Hinds) was absolutely right to highlight the importance of the quality of data in our system. He was also right to focus on the diverted profits tax and the digital services tax as examples of activities that we are undertaking in order to improve compliance. The right hon. Member for Barking (Dame Margaret Hodge) raised a series of important points, and I want to spend time on those. We have discussed them in an Adjournment debate, and it is interesting that she has come back to them today. She is absolutely right to say that the centrality of the tax system should be one of fairness. It should not be one of penalising any particular section of the public—rich or poor, wherever they live, whatever they might be doing.
The right hon. Lady asked about public registers of beneficial ownership. It is important for me to say that the law enforcement agencies need to have access to the information they need to tackle money laundering. That is what really matters at the core of this. The Government have ensured that the recently established register of trusts is specifically designed to capture overseas trusts for that reason. She is right to focus, as did the hon. Member for Oxford East (Anneliese Dodds), on the progress that has been made on public registers of beneficial information. The right hon. Member for Barking raised the question of beneficial owners of overseas entities. She will know that that register will be the first of its type in the world, and we will go further to increase transparency in the UK property market. The Department for Business, Energy and Industrial Strategy is the lead Department on this, and it has published a draft Bill that has undergone pre-legislative scrutiny.
The right hon. Lady also raised the question of creative sector tax relief. She will understand that in order to qualify for film and high-end tax reliefs, businesses have to incur a proportion of their production costs in the UK and pass a test for cultural content administered by the British Film Institute. I cannot comment on the specific circumstances of individual companies, but she ought to be aware that HMRC carries out a detailed check of each claim for creative sector tax relief, and that large businesses are subjected to an exceptional level of scrutiny. The point is that large businesses, like all other taxpayers, should pay the taxes due under UK law and implement compliance checks where necessary.
The right hon. Lady talked about country-by-country registration. Private country-by-country registration is of course in place. The problem lies in securing the international agreement required to roll out the public registration. It demands a measure of international agreement, and that is something that we continue to focus on. That is a Conservative act of leadership that we are still in the process of taking forward. She is right to pick on some other areas. I would just point out that the disclosure of tax avoidance schemes, the promoters of tax avoidance scheme rules—which can lead to significant penalties—and the enabler penalties that we put in place are all important, and I anticipate that will be strengthening them further over time. Let me pick up a couple of other quick points—
Jesse Norman
I am afraid that there is no time at all to do that, but I will pick up a couple of further points. Colleagues quite rightly had concerns about HMRC resourcing, and they are welcome to write to me if they want to discuss specific topics.
I mentioned the important point made by my hon. Friend the Member for Amber Valley, and I am pleased that he offered his qualified support for IR35. He is right that it is an important measure, and it will collect something like £1 billion of tax a year by the end of the period. As he will be aware, the Government are preparing to legislate to clarify the status of employment from a business standpoint, which is proper and correct.
I am surprised that the right hon. Member for North Durham (Mr Jones) was told that he could not be told anything. Of course, HMRC cannot discuss specific issues, but I hope that he will have a more interesting conversation than that.
I thanked my hon. Friend the Member for Delyn (Rob Roberts) for his constructive attitude, and he was right to focus on the privilege of paying tax. There is an element of truth in that, and we should properly defend it. With that in mind, let me sit down.
Question put.
Finance Bill
Jesse Norman Excerpts(4 years, 9 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
The Finance Bill will be published on 19 March. Explanatory notes on the Bill will be available in the Vote Office and the Printed Paper Office and placed in the Libraries of both House on that day. Copies of the explanatory notes will also be available on www.gov.uk.
As usual, a full copy of the Budget resolutions will be made available after the Chancellor’s Budget statement on 11 March. This includes resolutions made under the Provisional Collection of Taxes Act 1968 for those measures that are expected to come into effect ahead of Finance Bill Royal Assent.
In line with the approach to tax policy making set out in the Government’s documents “Tax Policy Making: a new approach”, published in 2010, and “The new Budget timetable and the tax policy making process”, published in 2017, the Government published draft legislation for Finance Bill 2020 on 11 July 2019, which is available at: https://www.gov.uk/government/collections/finance-bill-2019-20.
The Government remain committed to legislating those measures published in July 2019, subject to confirmation at Budget 2020.
[HCWS122]
Oral Answers to Questions
Jesse Norman Excerpts(4 years, 9 months ago)
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Kate Green (Stretford and Urmston) (Lab)
The Financial Secretary to the Treasury (Jesse Norman)
The review of the off-payroll working rules reform was announced on 7 January 2020. The reform is due to be extended to medium and large-sized organisations in all sectors from 6 April. It is determining whether any further steps can be taken to ensure smooth and successful implementation, and a series of roundtables with stake- holders has already been conducted. The review will conclude by mid-February, after which recommendations will be made public.
Jessica Morden
With the roll-out of IR35 in the private sector fast approaching, there is already concern that companies are making blanket determinations, forcing genuine contractors into contracts that tax them as employees but with no employment rights. Ahead of the protest here tomorrow, will the Government listen, pause the process and work with the industry to do a proper review?
Jesse Norman
The hon. Lady may be aware that we have already made a small but important change to the roll-out as a result of the review. We are not aware of blanket determinations being made, although it must be said that many firms are choosing to acknowledge disguised employment and bring those contractors in-house. The hon. Lady should also be aware that there are various routes by which determinations can be challenged, including, if necessary, a submission under the income tax self-assessment process, for a final determination.
Kate Green
We all want to crack down on tax avoidance but legitimate contractors in my constituency face uncertainty about their status and tax liability thanks to unclear HMRC guidance and the unreliability of CEST—check employment status for tax—and the firms they work for are cancelling contracts because of the confusion. What is the Minister doing to address their concerns?
Jesse Norman
We are conducting a review to ensure that this is as smooth as possible. We recognise that there is difficulty here. Some 18 months have passed since the original reform of status determination was announced and in that process we have had a consultation, draft legislation and further discussions and consultation, and we are having a further review now to make sure it is properly and smoothly rolled out.
Sir Desmond Swayne (New Forest West) (Con)
Against how many of the pillars of taxation did the Economic Affairs Committee in the other place judge the 2010 legislation on the loan charge to have failed?
Jesse Norman
We have a question about the loan charge later on, so I look forward to my right hon. Friend’s further question then. He can answer on the number of pillars because I am sure he has scrutinised the Committee’s hearings very carefully. What I can tell him is that the fundamental principle of tax is that it should be properly collected from people who owe it and who may be avoiding it, and that is what this is designed to do.
Martyn Day (Linlithgow and East Falkirk) (SNP)
The Financial Secretary to the Treasury (Jesse Norman)
I thank the hon. Gentleman for his question about e-publications and see by the way, Mr Speaker, that your predecessor Speaker Bercow’s book, aptly named “Unspeakable: the Autobiography” has just been published. Apparently it is an online bestseller in the rather surprising, slightly niche category of blues musician biographies. Unlike many other e-books, it is considerably cheaper than the book itself; whether that will remain so is not clear. I do not know whether you have had a chance to peruse the work, Mr Speaker, but if you have, I am sure you will agree that no reader would have their appetite to read it affected by a reduction in tax. What this brings out is that the pricing of e-books is a commercial decision, and it is far from clear whether changing the tax would affect that decision.
Martyn Day
I thank the Minister for his entertaining answer. Scottish National party Members are very disappointed that the last Government refused to back our demands to remove VAT from electronic publications. So with the Budget only a month away, will he consider a change of policy so that at the very least, online children’s books and academic journals can become more affordable?
Jesse Norman
The hon. Gentleman is absolutely right that there are benefits associated with extending the zero rate of VAT in this area, as in others. The task for Government is to work out what is the right thing to do, all things considered. All I can say is that we have responded to the Cairncross review in part of this area, and we continue to keep all taxes under review, especially in the lee of a budget.
Michael Fabricant (Lichfield) (Con)
While agreeing with the point made for the SNP by the hon. Member for Linlithgow and East Falkirk (Martyn Day), does the Minister not find it somewhat ironic that the only way we can reduce the rate of VAT to zero is through Brexit, yet the SNP wishes to remain in the EU, and we would therefore not be able to reduce VAT if that were the case?
Jesse Norman
That is a very telling point, and I draw the House’s attention to the parallel issue of sanitary products for women, on which I am pleased to say we will be able to act after we have left the EU.
Bambos Charalambous (Enfield, Southgate) (Lab)
Mr Laurence Robertson (Tewkesbury) (Con)
The Financial Secretary to the Treasury (Jesse Norman)
Of the estimated 50,000 individuals affected by the loan charge, the Government currently estimate that more than 30,000 will benefit from the changes. That includes about 11,000 people who will be taken out of paying altogether. In addition, individuals who have settled or who are settling their tax liability with Her Majesty’s Revenue and Customs will be out of scope of the charge.
Seema Malhotra
Neither the law nor HMRC made clear the position regarding loans and self-employed people. Indeed, it was not until 2016 that it was announced that the law would be changed to include the self-employed and others who did not even find out until a year or two later, such as my constituent Dhruv Salotra. Will the Financial Secretary do the obvious thing, get rid of all retrospection and apply the loan charge from when the law was clear and applied to everyone, including the self-employed, and, in addition, clamp down on those who promoted these disguised renumeration schemes in the first place?
Jesse Norman
The hon. Lady is absolutely right that it is important to crack down on promoters, and at the Budget we will bring forward a package about how to do that. Her wider point, however, is wrong: this is not a retrospective measure. It is also true that the Government have to some extent been vindicated by Sir Amyas Morse, who found that the loan charge was an appropriate way to respond to tax avoidance and, after detailed argumentation, suggested a date in December 2010 as the correct date from which to date the legality of it.
Mr Robertson
But even 2010 is 10 years ago, so if the law was clear then, as the report suggests, why did HMRC not act then? Surely this matter is its responsibility.
Jesse Norman
HMRC did pursue these cases quite vigorously. Sir Amyas found, on the basis of detailed consideration, that the law was clear then, and therefore HMRC rightly believed that people would accommodate it. Of course, it pursued people who had been avoiding tax through disguised renumeration schemes for many years before that, and it will continue to do so for those that have been carved out by the loan charge review.
Ruth Cadbury (Brentford and Isleworth) (Lab)
The Treasury has accepted some of Sir Amyas Morse’s recommendations, but there is confusion about some of them. A constituent of mine got caught in a disguised renumeration scheme before 2010, and yet he is still not convinced that he is in the clear and has that fear hanging over him. What does the Financial Secretary have to say about that?
Jesse Norman
The hon. Lady is quite wrong. We accepted all but one of Sir Amyas’s recommendations, and we did not accept that one because the issue he raised was already being handled very well within the system. If the hon. Lady has a specific concern, she is very welcome to raise it with tax commissioners or, indeed, with me, although on an anonymised basis because obviously I cannot deal with specifics.
Alan Mak (Havant) (Con)
Rating and Valuation
Jesse Norman Excerpts(4 years, 9 months ago)
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The Financial Secretary to the Treasury (Jesse Norman)
I beg to move,
That the Local Government Finance Act 1988 (Non-Domestic Rating Multipliers) (England) Order 2019, which was laid before this House on 4 November 2019, in the last Session of Parliament, be approved.
This order makes a small but important technical change to business rates. Specifically, it changes the annual inflationary increase in the business rates multiplier from the retail prices index to the lower consumer prices index for the coming financial year. As hon. Members may know, the multiplier is effectively the tax rate applied to the calculation of business rates, be it through the standard multiplier or the small business multiplier. Historically, these multipliers would rise in line with the preceding year’s RPI figure. On this basis, the multipliers were due to increase to reflect the September 2019 RPI figure, which was 2.4%. In Budget 2016, the Government announced that they would switch the multiplier uprating from RPI to CPI indexation from April 2020. [Interruption.]
Madam Deputy Speaker (Dame Rosie Winterton)
Order. Will Members leaving the Chamber do so quietly, please?
Jesse Norman
The autumn Budget 2017 brought forward this implementation date to April 2018. The switch makes a reduction to business rates that is estimated to be worth more than £6 billion over the next five years, and the benefit to business will continue to grow as the business rates multipliers are uprated by the lower rate of inflation year on year. The Government introduced regulations to make this change for previous years, and we are bringing forward this order to do the same for 2020-21.
Before I proceed to outline the detail of the order itself, I would like to set out some of the background for the benefit of the House. The Government recognise that business rates can represent a high fixed cost for some businesses—indeed, many businesses—and we have taken repeated steps to reduce the burden of the tax. Reforms since Budget 2016 include, first, making 100% small business rate relief permanent and doubling the threshold of this relief from April 2017. As a result, more than 675,000 of the smallest businesses do not pay business rates at all. Secondly, increasing the threshold for the standard multiplier to £51,000 from April 2017 has removed many properties from the higher rate of the tax. Thirdly, moving to more frequent valuations by bringing the next revaluation forward one year to 2021 and moving to three-year revaluations after that will make bills fairer by ensuring they more closely reflect properties’ current rental values.
Finally, introducing a new retail discount has cut the business rates bills of small retailers by one third for two years from April 2019. This is providing up-front support to the retail sector at what is proving to be a challenging time for many retailers, and it is worth about £1 billion to businesses.
Looking forward, as confirmed in the statement I made on 27 January, from 1 April this year the Government will increase the retail discount to 50% in 2020-21, and extend eligibility to independent cinemas and grassroots music venues for the first time. We will provide additional support to pubs through a £1,000 discount for pubs with a rateable value of less than £100,000. We will extend the duration of the £1,500 discount for local newspaper office space for a further five years. However, it is important to be clear that the Government recognise that concerns remain about the impact of the tax. That is why we are committed to a further review of business rates, details of which will be announced in due course.
The order before the House is the necessary secondary legislation required to effect the change in the inflationary increase for business rates from RPI to CPI in the financial year 2020-21. It sets out the new equation for setting the business rates multipliers for the coming financial year, so that the September 1.7% CPI figure is used instead of the 2.4% RPI figure.
Given the difference in the multiplier from uprating this year, the small business multiplier in 2020-21 will be 49.9p, rather than 50.3p. The standard multiplier in 2020-21 will be 51.2p, rather than 51.6p. That change represents a cut in business rates every year, benefiting all rate payers and freeing up cash for businesses. The order applies to England—unlike in the last debate, Madam Deputy Speaker, there has not been quite the same interest from Scottish nationalists about this measure, although both provisions apply to England. The Government will provide the devolved Administrations with funding to enable them to offer similar support if they wish, and they will fully compensate local authorities for the income they will lose as a result of this measure.
This measure should not be viewed in isolation, and as I have said, it is one of many introduced by this Government, and their predecessor Governments, to support business. I have mentioned numerous cuts to business rates, including the two-year business rates relief for small retailers. Looking more widely, the UK corporate tax regime remains highly competitive, with the Government having lowered corporation tax from 28% in 2010 to 19% today—the lowest rate in the G20. Beyond that, businesses are benefiting from enhanced tax incentives, including the introduction of the new 2% structures and buildings allowance, and a temporary increase in the annual investment allowance to £1 million.
The statutory instrument that we are legislating for today will contribute to the Government’s efforts to reduce the burden of business rates and make them fairer for taxpayers. As I outlined, on top of the reliefs already in place, the Government are committed to a review of the business rates system, details of which will be announced in due course. In conclusion, this order will change the annual inflationary increase in business rates from the retail price index to the consumer prices index in financial year 2020-21, thereby reducing costs for all business rate payers in England and giving the economy a further boost. I commend the order to the House.
Jesse Norman
Let me start by responding to the comments from the Opposition Front Bencher, the hon. Member for Oxford East (Anneliese Dodds), who raised a series of questions of a technical nature. She asked why the Government are continuing to use RPI versus CPI, and I was grateful that she acknowledged that the policy has been one of slow alignment. In September 2019, the Chancellor announced that the Government and the UK Statistics Authority would jointly consult on proposals to address shortcomings in RPI. We expect that consultation to launch at the time of the Budget.
I am sure the shadow Minister is aware—I think she hinted at this—that since 2010 the Government have been reducing the use of RPI, and we will continue to do so where practicable. She asked why primary legislation had not been used in the context of this instrument. The answer is that the Government have made a commitment that this will be permanent and that they will use CPI for the uprating of business rates. We have also said—if we have not, let me say it now—that we will consider introducing primary legislation in due course, but the parliamentary timetable is very congested and we have to make sure it can fit alongside many other items, including items to which I am sure she is thoroughly committed.
The shadow Minister talked about raising thresholds. As I think she will acknowledge, we have increased the rate for the retail discount, and the pubs discount has been set at a high level and so includes a great number of pubs. She asked about the review. We have said we will launch a review in due course. I will not go further than that, although at this time of the year it does not require the application of rocket science to see when “in due course” might ultimately land.
Finally, the shadow Minister talked about local government. Of course, she is right to focus on the importance of business rates to local government funding. I had the British Retail Consortium in to see me only recently, and I talk closely with all those affected by the rate. As she will be aware, the Secretary of State for Housing, Communities and Local Government published the provisional 2020-21 local government finance settlement in December, which set out an additional £2.9 billion in core funding, as announced in the spending review 2019. As she also knows, however, it is not just a matter of what funding is provided by central Government; it is also a matter of what core spending power is available to local authorities.
I am pleased to welcome the hon. Member for Liverpool, Wavertree (Paula Barker), who made her maiden speech. I congratulate her and welcome her to her place in the House. She got wonderful support from her colleagues on the Opposition Benches, which is always a comfort when doing one’s maiden speech, so I congratulate her on that as well. She described herself as a woman with an opinion. In this House, anyone who can describe themselves like that will go a long way, so I congratulate her again. Just to correct the public record, however, I hope she will recognise that Tory support for Liverpool goes back a long way. Michael Heseltine was recently given the freedom of the city in recognition of his support, and I think that everyone can see the difference and the energy the city has at the moment. The Government are seeking to support it and the mayoralty in many different ways.
Question put and agreed to.
Rachael Maskell (York Central) (Lab/Co-op)
On a point of order, Madam Deputy Speaker. I wonder if you could assist me. When we have a public health scare, we expect the Government to be in control. Yesterday, I raised the serious issue of how information about the coronavirus infection was being shared and how getting communications right was crucial to alleviating public concern while also protecting the public. Today we have learnt that the information provided concerning those infected with coronavirus was incorrect. The student did access student accommodation—Vita Student accommodation—despite our being told they had not. There is confusion over how information is being gathered and shared, which could have a serious impact on public confidence in how the coronavirus is being managed. The Government need to get a grip as we may be in the early stages of the management of this infection. Could you, Madam Deputy Speaker, advise the House on whether the Secretary of State for Health and Social Care intends to make a further statement to the House, in particular to address the management of communications surrounding coronavirus, in the light of the latest developments?