Oral Answers to Questions

Debate between Jesse Norman and Andrew Jones

Thursday 20th April 2023 Commons Chamber

[Andrew Jones (Harrogate and Knaresborough) (Con)]

10. What assessment he has made of the availability of apprenticeships in the transport sector.

[The Minister of State, Department for Transport (Jesse Norman)]

I congratulate my hon. Friend on the brilliant work he has done on apprenticeships in Harrogate and Knaresborough over the last few years. I note that some 12,430 new apprenticeships have been created there since 2010. As he knows, the Department is committed to working with the transport industry to create high-quality apprenticeships so that the sector has the skilled workforce it needs. I work closely with the transport employment and skills taskforce to see what we can do to promote apprenticeships still further in the industry.

[Andrew Jones]

I thank my right hon. Friend for that answer. I have been meeting representatives of bus companies that run apprenticeship schemes. They tell me that the rules governing the number of hours per month in the classroom can be problematic for smaller companies when it comes to rostering, and that if there was some flexibility—a change not in the total number of hours, but in the delivery pattern—they would be able to take on more apprenticeships, which they want to do. Will he consider that idea?

[Jesse Norman]

As my hon. Friend knows, the Department for Education published fresh guidance last year on how apprenticeship training can be delivered flexibly to fit business needs. My hon. Friend the Member for North West Durham (Mr Holden), the Roads Minister, has been to talk to him and, I believe, has visited the classroom in Harrogate with him, so he can take it from us that we are very much seized of the issue of flexibility and the importance of improving it.

Finance Bill (Fifth sitting)

Debate between Jesse Norman and Andrew Jones

Committee stage & Committee Debate: 5th sitting: House of Commons
Thursday 11th June 2020 Public Bill Committees

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I am also not usually somebody who likes to find new ways to tax people in the UK. The digital services tax is totally new, but it is the right thing to do. The clauses detail the scope and the mechanisms for the tax and its collection. We even have a clause with an algebraic formula, which should certainly raise an eyebrow. [Laughter.]

The main thing to note is that the economy is changing fast and the tax is a part of that change. The Government’s response is to work internationally as we plot the course to a digital economy. Such economies are by definition international, so it is right to respond in a multinational way. I also know that it is very hard and takes a long time to achieve the objectives, so it is clearly right to proceed in the short term with this measure. Digital firms must pay their fair share.

It is increasingly hard for Governments to raise revenue from their traditional routes. The Government obviously have to raise revenue to fund the public services that we want. There is therefore an underlying, fundamental challenge for the Treasury. Work and consumption patterns change. I recognise that I possibly view this through the prism of somebody who has had responsibility for raising Government revenue—once a Treasury Minister, always a Treasury Minister—but this tax and the thinking behind it are the shape of things to come. Tax has to evolve to reflect the way the economy evolves.

The rise of the digital economy means different things for different companies. The opportunities for productivity and environmental gains are absolutely immense, so we must do all that we can to encourage the shift into a digital economy. Most people encounter it through social media search engines and online retail, which are the target areas for the tax. The growth of online retail has placed ever greater pressure on traditional high street retail businesses: a trend compounded, as colleagues have said, by the current crisis.

There have been concerns about the nature of competition and whether there has been a level playing field between online and offline: the argument between bricks and clicks. We should make every effort to level the playing field and the tax is a part of that. High streets have a role beyond their traditional economic role. They have a social role and bring people together. They create hubs for communities, but they also have to evolve to reflect the changing nature of competition, and a more level playing field in taxation will help give them the space to evolve.

I had some concerns that the tax may discourage digital start-ups; we have seen a good period for start-ups in the UK and I think that we have led Europe in this sector. However, I think those concerns have been dealt with by the threshold at which the tax becomes payable, which will only capture the very largest of businesses.

So, we have a very interesting new area for taxation, which I do not think any Government can enter into lightly. The Minister is an old friend—we have worked together for many years—and I commend him, because this is not easy stuff; it is pioneering for the UK and indeed for the world. But we have found a way forward that updates our taxation system and introduces more fairness to it, and through the operation of the new system we will learn how future taxation may work. So, as we go through further clauses in detail today, perhaps he could comment on how any learnings from this tax might influence and develop future taxation thinking.

[Jesse Norman]

All I can say to my colleagues on the Government Benches who have made their speeches is,

“soft, what light through yonder window breaks? It is the east”—

and my hon. Friends the Members for South Cambridgeshire, and for Harrogate and Knaresborough. What could be finer? I thank them very much for their interventions. If I may, I will start by responding to those interventions and then come on to the very detailed thrust of commentary from the shadow Chief Secretary.

My hon. Friend the Member for South Cambridgeshire rightly made the point that taxes are, of their nature, potentially distortive, and revenue taxes, of their nature, in particular. It is therefore appropriate to proceed with a degree of caution in considering how to introduce a tax, and to acknowledge that. He also made the point that many taxes start modestly. I could not possibly comment on the future direction of this tax, but I will say that I do not think that £2 billion is a trivial sum of money to raise from a new tax. I think the tax has been set at an appropriate level, and officials and the Government believe that, too.

My hon. Friend also asked whether businesses affected by the tax will have to collect a vast array of new information, and whether that may be burdensome to them. This is one area where, on reflection, he may be able to take a degree of comfort, because we are only talking about very large businesses, and about businesses for whom tracking users and extracting revenue from them is what they do for a living. So, it is not our expectation that there should be any enormous additional informational burden; there may be a selection process of pulling information out, but not an enormous informational burden.

I will also point out that the approach taken is one of self-assessment, which is to say that we expect businesses that have UK user-generated content revenue to come forward and self-assess. In a way, that relates to the question put by the hon. Member for Houghton and Sunderland South about whether HMRC has enough resources. I am pleased to tell her that it already has a digital team in place, whose job is to monitor this process of self-assessment. And as with other taxes, I have no doubt that they will become increasingly expert in doing that and evaluating the submissions that are made; of course, submissions will vary in their quality and I am sure that evaluating them will be, in turn, an educative process for tax officials at HMRC.

My hon. Friend the Member for Harrogate and Knaresborough, a beloved former Treasury Minister, made a couple of important points. Of course, he is absolutely right that we are talking about a dynamic market or sector. All markets are intrinsically dynamic and we are talking about an intrinsically highly dynamic sector of activity, perhaps never more so than at this particular moment in our history, when we are seeking—internationally and nationally—to find a whole range of new solutions to support people and maintain the economy. So, it is a very dynamic sector.

My hon. Friend is also right to highlight—in a way entirely unscripted and unprepared with me—the “pioneering” nature of this tax. It is a new form of tax, which seeks to tax UK user-generated content. Therefore, it is an important démarche in our history to consider whether this is an appropriate way in which to tax. I believe it is, and I believe that Parliament will think it is, but we will of course continue to review and take feedback on it. I point out that there have been two sets of consultations on this already—an original, principal set and then a more technical one.

--- Later in debate ---

[Jesse Norman]

That is, of course, a proper question to ask, but we have taken the view that this is a tax that we would like to take off the books in due course, when there is an OECD agreement. That agreement may take a variety of different forms; it may raise more tax or less. Different countries have different overall tax systems and seek to address different forms of corporate behaviour in deriving revenue. In the UK, there are plenty of businesses deriving revenue from user-generated content. Some of them will be over the thresholds that we are talking about, and those are the ones that are within the scope of the tax.

It is absolutely open to other parties to disagree about how they would put it, but the Government have taken the view that this is the appropriate level for a new tax—it is on revenue and, as I have said, is therefore potentially distortive. We have had feedback and consultations that reflect concerns on both sides of the issue.

[Andrew Jones]

My right hon. Friend makes a valuable point about the multi-channel operations of many retailers. I came to Parliament from a business background that had a mixture of high street and online retailers. From a business perspective, the key thing is to reach customers in the way that is right for them. By choosing either the high street or online, businesses miss out. Customers are open to trading in whichever way is convenient for them, as this crisis has shown.

I want to make a comment about the taxation. Higher taxation rates do not necessarily mean higher tax collected. We also have to recognise that having a tax environment that is conducive to creating a business-friendly environment is a critical part of the economic growth that we have seen over the past few years. We should certainly be looking around the world to see how other countries operate their tax systems, but drawing comparisons with countries that are not creating wealth or jobs might not be the way forward.

[Jesse Norman]

I thank my hon. Friend for that comment. In a way, he leads me on to my next remarks in response to the hon. Member for Streatham. He is right. The dynamic market that we are seeking to tax is one where revenues are not absolutely predictable; they may be higher or lower than estimated. The tax therefore stands in contrast to a well-established tax such as VAT, because we can be much more certain about how much that tax will raise.

It is also important to understand that this is not a tax designed to penalise certain companies. The strength of our online sector in the UK has been a very important part of the response to coronavirus, as I have mentioned. There is no attempt to pick out companies and target them with the tax. There is a concern about failings in the international tax rules, and that is what the Government seek to address.

The hon. Member for Houghton and Sunderland South raised the issue of multilateral action and asked whether adequate leadership had been exercised. It has been recognised that the OECD has made some good progress in this area recently, which has been achieved with a lot of urging and support from this country. Ultimately, we all agree that international and corporate tax needs to be addressed in a global and inclusive way. That would be the Government’s strong preference, but we have not waited—I do not think the hon. Lady would want us to wait—because we think it is important to take a lead.

It is also important to say that when we have done that, we have tried—as one might expect with a new tax—to target an area where there is a very clear rationale or justification for the tax that is being levied. UK user-generated content is a strong basis on which to levy a tax. There is a contrast with, for example, media streaming. The hon. Lady talks about how much she has enjoyed various media streaming services, and I welcome that, but we can all be relatively certain that she has not contributed a lot of UK user content to them—[Interruption.] Unless delight and shock are forms of UK-generated content.

I want to reassure the hon. Lady a bit about the apportionment of revenue. She is absolutely right that, as the history of base erosion and profit shifting around the world shows, many companies have found it only too easy to move the effective location where tax is generated. In part, this tax, by taxing revenue overall, is designed to sidestep a lot of the temptations that might exist to work round the edges. A very wide definition of revenue has been adopted, and we can go into that in more detail. As I said earlier, we require companies to do it. It is a self-assessment scheme, and we ask companies to designate, evidence and disclose the UK user-generated revenue of the different kinds that we have touched on.

On GDPR, which is the relative question, the legislation has been written so that businesses are expected to use information that they already have to make the determination. We believe that it is compatible with GDPR, and that it draws on data that is already collected. We are not inviting the groups to collect new information that might be in some sense at odds with people’s rights or in contravention of the law, and of course they will have their own GDPR processes to follow. As I have said, many of them collect a great deal of information, including IP addresses, delivery addresses, billing addresses and so on. To come to a point that the hon. Lady made earlier, that is another reason why the use of virtual private networks is more of an in-principle worry than an actual worry, because famously, so much other information is collected about the users of those services from multiple sources. That should help them to make those disclosures.

The hon. Lady asked about double taxation. It is true that some businesses will pay both UK corporation tax and the digital services tax. For reasons of international law, we are not capable in law of discriminating in favour of UK businesses, and we are not going to. The point, though, is to design a proportionate tax with a low rate, and another reason why we have chosen that rate is that we do not wish to be any more distortive or invoke any more double taxation than is absolutely necessary. As I said, our preference is to move to a global solution.

The hon. Lady talked about international leadership. We look forward to a day when the OECD will be able to pass an agreed set of rules with multinational support that give a proper basis for the levying of tax. As she is aware, a number of proposals are under discussion. They and the processes that generated them are well described in the House of Commons Library note, and I encourage any Members who want more detail to look at that. The Government are clear that we will maintain this tax until the OECD passage of agreement—there may be other supervening factors—causes us to remove it. I commend the clause to the Committee.

Question put and agreed to.

Clause 38 accordingly ordered to stand part of the Bill.

Clauses 39 to 44 ordered to stand part of the Bill.

Clause 45

Meaning of “the threshold conditions”