Health and Social Care Levy Bill

Lord Redwood Excerpts

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

[Jesse Norman]

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

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

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

[John Redwood]

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

[Jesse Norman]

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

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[Nigel Mills]

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

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

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

[John Redwood]

My hon. Friend is such an expert on this. Has he probed or got anywhere with finding out how much consequential tax loss there might be from the national insurance rise, or the care tax rise, itself? Presumably, there are some losses that will have to be offset, so gross will not necessarily be net.

[Nigel Mills]

I assume that my right hon. Friend is right that, if we reduce the number of people in work or reduce their pay rises, that will work its way through the system. The Minister may be better placed than I am to work out an answer to that question.

The nub of my argument, and the reason for amendment 8 and new clause 10, is that we have 18 months before the new levy comes into force—we accept that we cannot bring it into force in six months’ time, presumably because it is so hard to get the systems in place, and that we have to raise national insurance for the first year and move to the levy after that—so perhaps if we had all the information in front of us in the next six months or year, we could make a choice whether to go ahead with the new levy for the small amount of extra income, or whether to stick with the national insurance rise and find other ways to explain to people what they are paying their taxes for.

I think the Minister accepted that HMRC will publish its estimate, and I am sure we could find a way of getting an accurate estimate of the cost to business of complying with the levy. We could then take an informed decision before we finally introduced the levy. I think that would be a positive step in tax policy. However, if we really believe that we want a separate levy to show what people are paying directly for health and social care, I think that we should move the existing 2% of national insurance that goes directly to the health service into the levy, so there is one hypothecated payroll tax that goes to the NHS on people’s payslips, rather than it being hidden in a part of national insurance. I cannot see any reason why, if we go down the line of introducing a new health and social care tax, we would not want to have all the hypothecated payroll taxes going into the NHS or social care to get any of the advantages of that.

I will not be pressing my two new clauses to a Division, but I urge the Minister to give some serious consideration—I suspect he did not know about this new levy until around about last weekend, when it was probably dreamt up in No. 10 as a way of selling a tax rise—to using the 18 months he has before the levy comes in to try to work out whether the costs of collecting it are worth the small change. If he really does think there is a compelling argument for charging people over retirement age national insurance if they stay in work and are earning, let us charge them the full rate, rather than 1.25%. I cannot see how we can justify that they do not pay the existing 2% that goes to the NHS but they do pay the 1.25%. There seems to be no logic in that at all to me, so perhaps we should think properly and coherently about the tax system. Let us have the full rate in that situation.

Let us have a decision when we get around to the Budget in 2022. Is going ahead with this levy going to raise more money than it costs? If it is not, let us just leave it on national insurance where it will be sat at that point. That would be a more coherent way of running our taxes.

[Nadia Whittome]

With your permission, Dame Eleanor, I will speak to new clauses 3 and 5, tabled my hon. Friends the Members for Ealing North (James Murray) and for Erith and Thamesmead (Abena Oppong-Asare). New clause 3 requires the Chancellor to assess the impact of the Act on tax revenue from different sources of income and new clause 5 calls on the Government to publish an equality impact assessment of the Act.

Dame Eleanor, given that even in Committee this has been a wide-ranging and broad debate, I hope you will allow me to set out the context of those new clauses. It is people in poorly paid jobs who will bear the brunt of the national insurance increase, at a time when in-work poverty is already at a record high. How can it be right to ask those who are already saddled with extortionate housing costs, poverty wages and mountains of debt to pick up the tab for this Government’s failures on social care? To put it simply, the Government are choosing to protect the interests of the wealthy who fund them at the expense of low-income workers and renters. While landlords and the super-rich who are hoarding wealth and housing pay nothing under this new tax, my constituents will be having their pockets raided.

Since 2010, under this Government’s watch, £7.7 billion has been cut from social care budgets. If I could sum up this policy—if we can call it a policy—in one word, it would be “unfair”: unfair on the working people who are funding the tax rise; unfair on the care workers who will not see their pay and conditions improve; and unfair on those relying on social care, whose needs will continue to be unmet. Figures released this week show that nearly 70,000 people in England could die waiting for social care before these changes even come into force.

If the Government were interested in fairness, they would tackle the soaring housing costs, low-paid jobs and inadequate benefits that my constituents are facing. Instead, their policy agenda is fuelling inequality and impoverishment. As we heard from the hon. Member for Aberdeen South (Stephen Flynn), 2.5 million working households will be hit by the cut to universal credit and the increase in national insurance. Working families will be losing, on average, over £1,000 next year. Meanwhile, the furlough scheme is ending and evictions are resuming.

There is, however, a group of people who have benefited from the pandemic—who have done very well, in fact: British billionaires. They have increased their wealth by over £100 billion. That is why now is the time to get serious about taxing wealth. The Chair of the Health and Social Care Committee, the right hon. Member for South West Surrey (Jeremy Hunt), said earlier in the debate that this tax hike would raise more than a wealth tax, but I am afraid that that is not true on any measure. City A.M.—this is City A.M., not “Das Kapital”—calculated that one wealth tax option would be to tax wealth progressively between £1 million and £10 million, with all wealth beyond £10 million taxed at 3%. That would bring in a total of £55 billion over five years. Alternatively, the economist Richard Murphy calculated that, if wealth was taxed at the same rate as income, that could raise up to £174 billion a year.

Will the Minister explain why none of those options was considered and what the Treasury makes of those calculations? And perhaps the Chancellor could explain to us, as a multimillionaire, why he cannot dig deep into his own pockets and why it has to be my constituents—in fact, all our constituents—instead. I think that this House and working people across the country deserve to know why a wealth tax was dismissed in favour of a tax on the poorest and the lowest paid, and what is more, to fund a plan that will not even work.

We have heard during this Committee that the Government’s excuse for not ring-fencing the money raised for social care is that health and social care are interlinked. I agree, to an extent, and that is why, to fix our social care system, we need a national care service, like our national health service, which is free at the point of use. We need to redesign the system so that the needs of care users, for want of a better word, and care workers are at its heart. The money to do that is there but it is in the pockets of the richest and it is the political will from this Government that is sorely lacking. Anything less than a national care service, funded by a tax on wealth, not on workers, would be a great disservice to the people we are elected to this place to represent.

[John Redwood]

I have worries about hypothecation. I thought the Treasury used to be against it and it is a difficult doctrine to make work well, because it is not always the case that a particular tax just happens to raise the right amount of revenue for a particular purpose, or if it does in one particular year, that may not be true in a future year because the revenue may grow too slowly for the purpose, or the purpose may become less popular and the revenue may exceed what is needed. I have always favoured the Treasury orthodoxy—I am not always someone to support Treasury orthodoxy—that it is better that we have a very big general pot into which we collect the taxes, and then we have general distribution based on tightly argued issues between Government Ministers and Departments on what their spending priorities are and the minimum amounts that they need to spend to get good results in their leading areas.

However, now that Ministers are treading the boards of hypothecation for the first time in this interesting way, I advise them that it is a very good rule, if they wish to sell the idea of hypothecation, that the tax revenue that they collect should pay for the thing that they are attaching to the hypothecated revenue. My big worry about this hypothecation is that the sum of money for social care—when we eventually get to that point after three years—collected by the so-called social care tax will be only about one fifth of the actual costs of social care to the public sector. Of course, there are additional costs to private individuals as well and I would not want my constituents to be misled. I have already had emails from constituents saying, “As the Government seem to be pressing ahead with this social care levy, I assume that I will no longer be asked to make any contribution through my council tax to social care”. Being an honest man, I have written back and said, “No, you can’t assume that at all. Social care is going to need a lot of money and I don’t think the idea is that the council tax levy part of it, or the need for that, will suddenly disappear.” So I think one does need to look again at hypothecation. If, for example, we wish to have hypothecated taxes to pay for the current costs of health, as identified by the Treasury for the current financial year, we would need to say that all income tax, all capital gains tax, all inheritance tax and all stamp duty—in other words, all income and wealth taxation—were already going to pay the large sums required for health in this year’s public budgets. Maybe we could start by renaming income tax and all the wealth taxes as a health tax, which would give people some idea of the scale of expenditure that we are talking about. There might then be a more interesting and useful debate to be had.

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[Dr Murrison]

I am listening carefully to my right hon. Friend. Does he share my concern that there may be an element of gaming by the social care sector, in so far as hotel costs are clearly exempted? Our constituents who may be listening might not be fully aware of that. There is a real possibility and risk that the sector will seek to enhance and embellish those costs so that they become a bigger and bigger proportion of the total take. Does that not need to be made explicit? Does my right hon. Friend think that in the White Paper process that we are about to embark on, there would be merit in limiting that cost in some way to ensure that the potential market exploitation of the Bill’s proposals is avoided?

[John Redwood]

I was with my right hon. Friend until his last recommendation. He had pre-empted what I was going to say next: that we need greater clarity about the three different kinds of costs that an elderly person can face.

All of us in this House agree that we believe in a health service that is free at the point of need, so that any elderly person, like anyone else, has complete entitlement to completely free healthcare if they need GP or hospital treatment. That is not in dispute. However, as my right hon. Friend has just reminded the Committee, it looks as though these proposals also say that if an elderly person is living in a care home, the board and lodging, or the hotel costs or whatever we like to call it, are not part of that kind of treatment, so if the person has money, they will have to pay for those.

I find it difficult to say that we need to pre-empt the possibility of care homes wishing to charge a bit more for that hotel accommodation, because there could be good reasons for their needing to do so, and the law is a very clumsy instrument when it comes to intervening in thousands of decisions that individuals and businesses have to make about what is a fair price. I do not think that there should be absolute price control, because it might be a period when wage costs or food costs had gone up, which the care home needed to pass on—or the care home might be improving the quality of what it was offering, in which case it would be mutually beneficial, or at any rate perfectly reasonable, for it to pass on that cost.

[Dr Murrison]

My right hon. Friend is being very generous in giving way. May I just clarify my intent? It would be reasonable to have an indicative cost. After all, in the case of most of our constituents who are living in a residential set-up—we are talking, basically, about a bedsit—what is usually involved, in my experience, is fairly basic food and some heating. The cost of that is not enormous, and it is the sort of thing that we would be expected to fund in any event were we living in our own homes; probably rather more so. Would it not be reasonable to have an indicative amount that it is felt reasonable for homes to be charging people—particularly, I have to say, if they are being funded through local government?

[John Redwood]

I do not think that that is possible at all. Property costs vary to an incredible degree across the country. Levels of staff provision are different in different homes, the quality and level of service are different, and the needs of individual residents are different. Some are in relatively good health, and do not need to find the back-up or assistance that others require. What I want to see—and I think that we need to debate this more than we have so far—is better quality for everyone who needs end-of-life care or time in a nursing home. My right hon. Friend has suggested that some are quite basic, and I think we need to worry about that and work at it.

For me, the big care problem is whether it is adequate. I am not quite as worried about the family finances as I am about the experience of the elderly person and whether it is good enough, and, where the state is the sole funder or a substantial funder of the care, whether we are doing a good enough job in allowing a reasonable quality of care in terms of staffing numbers, training of staff and staff wages. When elderly relatives in my family have been in care, we have always wanted to make sure that the staff were well remunerated, rewarded and motivated, and had proper training, support and back-up from the care home, because I wanted them to be well looked after.

There is a much happier environment if the people working in the home are proud of it and have, for instance, a decent career structure. I therefore think that we need to be very careful about a cost-down or standard-cost approach. We need to understand the variety of life, but we also need to make sure that those who rely entirely on state support, or who may be becoming more reliant on it under the Government’s likely policy, will none the less look forward to a reasonable standard of care, and that the people who work with them and for them are treated well by employers who respect them and offer them a career structure, proper training, decent support and all those other good things.

In conclusion, I hope the Government will look again at some of these points to ensure that there is no muddle over the true costs of these services and the contribution that the tax will make, if they insist on it, because it will be quite a small contribution as a proportion of the whole. Will they also look at a big care issue that does not get enough attention in the Bill, which is the quality of the care? That leads immediately into the quality of the experience for the employees, their career structure and their ability to create good atmospheres in care homes that are of a high standard. Can we also have a bit more thought and more information on what this will mean for individuals going into care homes and their supporting families? I am afraid that I still do not have a clear explanation to offer my constituents as to what their experience would be under these proposals.

[Richard Burgon (Leeds East) (Lab)]

I am speaking in support of new clause 3, which would require the Chancellor to look at different taxes to raise income. There are many other ways to raise this money and, in particular, I believe that we need to look at ways to tax wealth rather than taxing working people. Wealth in this country is concentrated among the top 1%, so instead of imposing a tax bombshell of £12 billion a year on working people, the Government could focus on the wealthy. They choose not to; instead, we have a tax system rigged in favour of those who already have wealth. They pay lower taxes than the millions who have to go out to work to make a living. The truth is that the Government’s proposal makes that situation even worse, and that is not right. The Government could reform capital gains tax, so that instead of lower taxes for wealthy people, that money could be used to fund social care, but they choose not to do so. They could raise many more billions of pounds by a direct wealth tax on the richest 1% with assets of more than £5 million, but they choose not to do so.

I am backing new clause 3, because there is always an alternative. That the Government refuse to back such alternatives speaks volumes. Aneurin Bevan once said that socialism was the language of priorities, but conservatism is the language of priorities too: the priority of safeguarding the wealth of the super-rich and sticking the boot into working people. This is the same old Tory party, attacking working people and defending the wealthy. We have heard a lot in this debate about so-called tough choices, but when politicians speak the language of tough choices, it usually means that they are taking the path they think is easiest. The truth is that the Government are taking the easy choice: not levelling up but kicking down and taking a hands-off approach to the wealth of the super-rich. There are alternatives, and that is why I am backing new clause 3.

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[Sir Christopher Chope]

I thought that might be the hon. Gentleman’s response. Today we are talking about social care as well as healthcare, and the principle of universalism does not apply to social care because it is and will continue to be the subject of means-testing.

The Government talk the talk of integrating health and social care, and I had an exchange with my right hon. Friend the Minister on this subject. He justifies having a health and social care levy on the basis that they are interdependent. If they are interdependent and we are moving towards an integrated scheme, why do we not apply the same principles to both NHS healthcare and social care? We could have means-testing for healthcare, in the same way as we have for social care, or we could not have any means-testing for social care, in the same way as we do not have any means-testing for healthcare. If we are going to merge the two schemes, we need to resolve those anomalies. I am afraid that everything that has come out of this short debate shows that the Bill is a muddled fudge that perpetuates the distinction between health and social care but does not meet the challenge I put to the Minister: why not have a distinct social care levy?

Is it reasonable that we should have co-payment in the NHS? If so, it would generate an enormous amount of additional income. We essentially have co-payment on prescription charges, ophthalmology services, dentistry and, increasingly, audiology services. The idea that we should have co-payment more widely, so that people who can afford it contribute, say, half the cost of an orthopaedic operation, seems to be anathema to the Government. I do not understand why, if they want to get more money into the system.

Our system differs from most overseas systems. We are not spending more on healthcare in this country, but we are spending more on publicly funded healthcare and not enough on privately funded healthcare. I would like to see a Government strategy to encourage more investment by ordinary individuals in the healthcare system. I have a private Member’s Bill on co-payment coming up in the new year, but perhaps before that we might be able to get some movement from the Government on these principles. We have co-payment in the social care sector. If it is all right in the social care sector, why is it not all right in the healthcare sector? We are excluding hotel costs—the board and lodging costs—from the £86,000 social care threshold, but we do not charge any hotel costs to rich people who are in hospital. Why not? There does not seem to be any logic in that.

I am glad it looks like the Minister will have a long time to answer these points and the other important points raised by my hon. and right hon. Friends. If we are going to have a complete review and fundamental change of outlook on health and social care, we need to meet those challenges. What is the answer as to why we do not charge hotel costs for millionaires in hospital? That would introduce more income into the service and bring it into line with what happens with social care.

Those questions remain to be answered, but there are a whole lot more besides. I was looking at the Official Report of an exchange in the other place yesterday evening. The Parliamentary Under-Secretary of State for Health and Social Care, Lord Bethell, said that

“we recognise that family carers play a vital role. When we announced an additional £4.5 billion over three years for social care, it included a commitment to take steps to ensure unpaid carers have the support, advice and respite they need.”

We know that there are about 1.6 million unpaid carers, and that was leading them to believe that there was some sort of dividend around the corner for them. However, Lord Lilley picked up on that point and asked the Minister to

“confirm that…there would be only £1.5 billion a year going to social care from the large increase in national insurance”.

Obviously, that is correct. He then asked the Minister to

“confirm that nearly half of that will be absorbed by the need to pay for the extension of free social care to those with valuable homes…That means that nothing will be left to help domestic carers.”

That was a perfectly straightforward question, and as it was not answered in the other place last night, I hope that the Financial Secretary can answer it tonight. The answer that that Health Minister gave—perhaps the Treasury has a better view on this—was that

“the maths that my noble friend has done is a little bit premature.”

I did not think that maths could ever be premature. He continued:

“The White Paper will come out later this year; it will spell out the precise financial arrangements, and I am looking forward to that.” —[Official Report, House of Lords, 13 September 2021; Vol. 814, c. 1130.]

The Minister was implying that he did not really have a clue as to what was going to be in it when it came out. That is an example of the muddled thinking, the failure of the Government to answer precise questions and the very dangerous policy of raising expectations among our constituents that somehow they are all going to be able to relax and spend all their hard-earned savings and use their houses for themselves without having to contribute much towards the long-term costs of social care.

May I throw out a suggestion arising from that exchange in the other place last night? If we have 1.6 million people providing free care for their loved ones, why are we choosing to impose upon them an extra levy, an extra tax? Surely it would be reasonable—clause 4 enables this to be done by subsidiary legislation—to exclude those who are looking after their loved ones, doing the right thing and saving the state a lot of money. We could say, “In return for doing that, you will be exempt from the 1.5% levy.”

[John Redwood]

indicated assent.

[Sir Christopher Chope]

I am delighted to see that my right hon. Friend thinks that is a good idea. I hope we will get some nodding soon from those on the Front Bench, but I have looked there in vain so far.

Anybody who speaks in a debate such as this is open to the challenge as to how they would pay for this. That challenge was put across the Dispatch Box today by Conservative Members to Opposition Members, and answer came there none. I have an anecdote to share with the House. Probably around a fortnight ago I was talking to a former very senior aide at No. 10. He said that one great thing that has come out of the covid-19 emergency is the sure knowledge that we can manage with 25% fewer civil servants in government without any detriment to the quality of government. That came from a senior adviser at No. 10. How many fewer civil servants does my right hon. Friend the Minister think we can have without any detriment to the public service?

[John Redwood]

My hon. Friend is making an interesting speech. Does he think that as a lot of civil servants now find they can work pretty well from home, we do not need all these expensive offices and perhaps ought to be surrendering leases?

[Sir Christopher Chope]

That is another excellent idea. I am grateful to my right hon. Friend for the suggestion, but I fear that the Government are so focused on spending money that they have lost any incentive to try to control expenditure, which I thought was the Treasury’s job. It takes me back to Geoffrey Howe’s first Budget. The Conservatives had become a national Government on the back of very high socialist spending and a popular rebellion against socialist waste and high taxation. In his first Budget, Geoffrey Howe emphasised: “Finance must determine expenditure”. That message has now been lost by the Government, who are saying that expenditure must determine finance. Our Government—I say “our Government” advisedly—have reverted to the old socialist tax and spend philosophy in which expenditure determines finance. I hope that my right hon. Friend on the Front Bench will explain why he thinks that to change our philosophy fundamentally is consistent with Conservative values.

My final point is about the Barnett formula. The Bill recites a restatement of the fact that the Barnett formula is there and says, “Isn’t it fair?” My constituents are incensed at the unfairness of the Barnett formula, which results in their paying higher taxes so that the people of Scotland can receive higher public services, with much more spent on those services in Scotland than is spent in England, financed by our constituents in England. Why, when we should be looking at issues that relate to expenditure, are we just saying that the Barnett formula is going to apply? Will my right hon. Friend the Minister say what will happen when the Barnett formula is reviewed or abolished, as surely it must be because it has outlived its usefulness? The House of Lords did a comprehensive demolition job on the Barnett formula, which was brought in years ago as a stopgap—a plastering over of some cracks—and has now almost reached the status of some religious doctrine.

My right hon. Friend the Minister will not be able to persuade me to do other than vote against this Bill’s Third Reading, because introducing it is a chronic mistake by the Government, and it is even worse that we should be imposing taxes without explaining how we are to spend them. But let me leave that on one side. I hope that my right hon. Friend, wearing his Treasury hat, will be able to explain exactly what the Government are doing to help to constrain and reduce waste in public expenditure, whether it be by getting rid of leases on surplus buildings; by sacking staff who are not productive; by introducing the long-promised cap on exit payments; by stopping the obscene salaries that are paid in much of the public service; or by addressing the problem of all these bureaucrats in the health service who seem to squeeze out productive activity, for whom we are having to pay dearly and are going to have to pay the highest taxes in our lifetimes. Those are the challenges that the Government must face up to if they are to be able to recover not just my support, but the support of so many Conservative activists up and down the country.

Health and Social Care Levy Bill

Lord Redwood Excerpts

2nd reading
Tuesday 14th September 2021 Commons Chamber

[Steve Barclay]

Again, this is why, as is standard practice, my right hon. Friend the Financial Secretary to the Treasury has published the tax information and impact note on the tax change. Of course, that will be dynamic because it will interact with the fiscal forecast that the Office for Budget Responsibility will set out alongside the Budget on 27 October. So that is dealt with in the normal way for measures such as this—

[John Redwood (Wokingham) (Con)]

rose—

[Geraint Davies]

rose—

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[Jeremy Hunt]

First, we passed the Care Act 2014, which put in place the legislative foundations for the proposals that we are now going to fund. Secondly, I happen to agree with the hon. Gentleman: the social care system has needed more money for some time. That is why it is so extraordinary that his party is to vote against this Bill.

If we are going to take £12 billion a year out of people’s pockets, we need to avoid falling into three traps—and I say this as someone who has fallen into more traps in this policy area than anyone else in this House. The first trap that we need to be careful of is the workforce. If we put an extra £8 billion into the NHS but we do not have £8 billion-worth of additional doctors and nurses to do the extra treatments, the risk is that that money will hit the ground without touching the sides. That is why we need a workforce plan.

The Health Foundation says that the backlog will require 4,000 more doctors and 18,000 more nurses, but we have not had any workforce plan from the DHSC. I suspect that in the short term we will have to relax all the immigration requirements for doctors and nurses. That will not be great for developing countries, but it may well be our only choice. In the medium term, the best suggestion is what my Select Committee and many others have proposed: we should give Health Education England the statutory responsibility to produce independent workforce estimates and create a discipline, a bit like the OBR does for Budgets, to make sure that we are training enough doctors and nurses. That is the first trap.

[John Redwood]

rose—

[Jeremy Hunt]

I will make some progress, if I may.

The second trap is that we must not inadvertently sleepwalk into another Mid Staffs. People forget that when Mid Staffs happened, NHS budgets were actually going up. There was huge pressure to reduce waiting times and that ended up creating a targets culture in which numbers matter more than people. We have to be very careful that we do not make the same mistake again. I know that my right hon. Friend the Chief Secretary to the Treasury, who worked with me at the Department of Health and Social Care, understands that because of his commitment to patient safety.

The third trap involves social care funding. Although the settlement we are discussing is generous, if we are honest, in the next three years social care will not actually get as much money as it needs. The truth is that there is a risk that the NHS will continue to gobble up the lion’s share after that, which is why it is essential to ring-fence the amount of money that goes to social care after those three years.

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[John Redwood]

Does my hon. Friend share my surprise that the Treasury can be precise in saying that it needs £12 billion from a new tax when it overstated the budget deficit by £90 billion last year, which shows that it does not have a clue about how much money will come in anyway?

[Mr Fysh]

My right hon. Friend makes a good point. Yes, it would have been great to have had more detailed context of where we can get to in this economic recovery so that we could know where we were in terms of revenue before we make such momentous changes that affect the aspirations and potential of so many people within the economy. We also need to look at whether this measure will increase costs and cost pressures within the system that we are trying to help. Many local authorities outsource provision of social care to private contractors, and these private businesses will be very much affected by these plans for the tax. We have also heard that the plan will mean that private providers cannot cross-subsidise their state provision of residential care places with private places, which could risk taking capacity out of the system at exactly the wrong moment when we want to get health and social care operating correctly. There are ways of making this measure more intergenerationally fair and I look forward to trying to work with the Government on different and innovative ways of doing that.

Going back to my original point, I think that we marry in haste and repent at leisure. Let me be clear that I am not referring to my own marriage; it is a very successful one and I love my wife dearly. None the less, it would have been much better to have had more time to think about all the ramifications of this Bill and the associated plan. I hope the Government will engage positively with our ideas about how we can evolve things whatever the outcome today.

--- Later in debate ---

[John Redwood (Wokingham) (Con)]

I urge the Government to think again about the health plans. On the Treasury figures, this year the health budget in the public sector overall is £230 billion—£64 billion higher than the 2019-20 budget pre-pandemic. I understand that there were lots of one-off and special costs in setting up and dealing with procedures for tackling the pandemic, and I, like everybody else, am very grateful for the work that went in from health staff and experts. But that cost will drop away, so what happens to that money when it is no longer pre-empted by the special costs of the pandemic, and can it not be applied?

I hope the Government will listen to the Chairman of the Health Committee, my right hon. Friend the Member for South West Surrey (Jeremy Hunt), about the need for a manpower plan, because if we wish to clear the backlogs it is quite obvious that more nurses and doctors are going to have to carry out more treatments and procedures. Some of that will be possible through reallocation and improved working of the staff we already have, but a lot of it will require additional recruitment.

I am also very worried about the lack of a detailed social care plan, particularly for my own area of Wokingham. We have a large number of self-payers at the moment. How could I be sure that if we went for this levy scheme, which is still not properly detailed, sufficient money would come from it to a local authority like Wokingham, already under enormous pressure on its social care budget?

I am very suspicious of hypothecated levies. It is particularly dangerous to hypothecate a levy that is a tiny fraction of the budget one is trying to improve. That will give some people the misleading impression that the social care levy will pay for social care, whereas, on the numbers, the levy would be able to match under one fifth of the total public social care budget. Pitted against the huge numbers for the NHS and wider public health budget, that is just over 4% of the total, so it is a very insignificant amount in relation to the huge sums we are already talking about for the health budgets. However, it is a big sum of money when it is broken down and becomes a tax burden on people on quite modest incomes and those struggling in self-employment or trying to get their little businesses going. The last thing they need, when we need rapid growth and a faster recovery, is a tax rise.

The economy does not need sandbagging with austerity economics; it needs promoting for faster growth. It is still below the levels of output before the pandemic hit. Up until this point, the Treasury has been magnificent in making an avalanche of money available to get us through a most difficult time. We have got away with it. It has been borrowed at very close to zero interest. In these unique circumstances, it was possible to take extraordinary monetary measures that one would not normally be able to rely on and would not want to, and I am very grateful that that was done.

I say to the Government: it is too soon to start braking the economy. The growth rate almost disappeared in the last month. I am hoping it is going to look a bit better in the next month or two when we get more opening. But before the economy is completely opened up, and people have stabilised their businesses and repaired some of the balance sheet damage that the pandemic measures did, is not the right time to take money off them. We need more spending power, not less; more demand, not less. If the Government back that, the revenues will come tumbling in to a much greater extent than if we put rates up. Do they not understand that they were £90 billion wrong last year because there was more recovery than expected? They are already £26 billion under this year because there was a fast recovery in the first few months. Do not kill the recovery and you will get the money.

Health and Social Care Levy

Lord Redwood Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[Jesse Norman]

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

[John Redwood (Wokingham) (Con)]

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

[Jesse Norman]

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

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

I think that is a fairly—

--- Later in debate ---

[Mel Stride]

I will come back to the hon. Gentleman’s point, but let me just stick with the options. The second option was to lean into growth, to assume that we could grow our way out of this problem. We have just had a huge contraction of the economy. We are not yet back up to the pre-pandemic level, although the Bank of England thinks that we may arrive at that point some time towards the end of the year, and we have many headwinds to growth ahead of us, not least the bottlenecks in supply chains, the labour shortages that we have witnessed in certain areas, and many other issues.

The third thing that the Treasury could have done is to borrow more money, and that is probably what the Opposition would have done in this situation. Despite the fact that the Bank of England now seems to feel that there is more money—I suspect that the Office for Budget Responsibility will confirm that around the time of the Budget— because the economy is doing a bit better than we expected, probably to the tune of about £25 billion, it would be a very brave Chancellor who started to borrow yet more and more, knowing that one day it is possible that the markets might turn around and look at the United Kingdom and decide that they no longer have confidence to lend to us. That would be a very dark day.

[John Redwood]

Will my right hon. Friend give way?

[Mel Stride]

I will not, actually, because I am very low on time.

That is the sword of Damocles that hangs regularly over the head of our Chancellor, so that leads us to taxation. If we look at taxation and the amounts involved here, there are only three taxes that we could consider. About two thirds of all tax is raised through income tax, national insurance and VAT. We then ask ourselves, “What criteria are we going to apply to the tax measures to test whether they are the right ones or not?” There are at least two. One is that we should look after the least advantaged in our society—the lowest-paid—and the second is that we should look after those who are the youngest, who have borne the greatest brunt of the economic consequences of the pandemic.

Northern Ireland Protocol

Lord Redwood Excerpts

Thursday 15th July 2021 Commons Chamber

[John Redwood (Wokingham) (Con) [V]]

As long ago as 2016, the British people voted to take back control. We voted to re-establish our sovereignty. The last Parliament sought to subvert and undermine that view, so in 2019, given the opportunity, the British public voted again, by a substantial margin, to take back control. They elected, with a decent majority, a Government of a party pledged to do just that, and this Government moved with speed and purpose to take back control. Unfortunately we still need to debate this matter today because of the conduct of the European Union. There is outstanding business. We still have not taken back proper control in Northern Ireland or over our fishing grounds. I am glad to take the opportunity provided by this Back-Bench debate to urge the Government to fully implement the mandate of the British people given to them both in the referendum and in the general election to take back that control.

I have been angered, but not surprised, by the conduct of the European Union. There is a long history of the European Union antagonising neighbours and potentially friendly states and attempting to use distorted, twisted or simply wrong legal arguments to force things in its own direction against the interests of its neighbours. The EU, in the long negotiations with the UK, always said that it respected the UK’s wish to restore its sovereignty and did not wish to deny it, and yet here we have a case where the EU is trying to wrestle our sovereignty away from us in an important part of our country. The EU always promised to respect our internal market, as is reflected in the agreements that we are currently discussing, yet now it wishes to hijack it. It wishes to divert a substantial proportion of GB-to-Northern Ireland trade to the EU for its purposes against the spirit and the letter of the agreement.

Above all, the EU promised to respect the peace agreement. It went on and on about an imaginary border that the UK had no intention of making more complicated or more difficult, and denying the actual border that was already there that was necessary for its purposes and the UK’s purposes for taxation, currency and regulatory matters. It has gone out of its way to antagonise the loyalist majority community in Northern Ireland. That is the very opposite of working with us to promote the peace and to reduce the tensions within those important communities.

So what should we do now? Our Government have shown enormous tolerance, restraint and flexibility. I make no secret of the fact that I would not have shown as much flexibility or restraint as they have done, because I am already very angry about the EU’s conduct. But they are right that we need to show that we have tried to negotiate a settlement, and I hope they will have one more go at trying to get the EU to agree to a common-sense approach to these border issues whereby proper trade can be sustained and promoted so that GB-NI trade is also restored and not interfered with by the EU, because that was never part of the idea behind the original agreement.

I hope the Government will have success in these matters, but we do need to be ready now, as soon as possible, to make our own decisions and to make our own moves if the EU is not yet ready to negotiate a sensible solution, of which there are several on offer in this debate and in the discussions that have been held over the years. The agreement makes it clear that we can indeed move unilaterally and assert our sovereignty where our internal market is being violated and trade is being diverted, and where there are other failures by the EU to comply with the agreement, which are now several and manifest.

I say to the Government: do not delay over the whole of this summer. Take action now. The trade is being diverted now. The community sentiments are being disrupted now. The peace agreement is being wobbled now. The sovereignty of the United Kingdom is being deeply infringed now. There is plenty of evidence for that, and a good case can be made in the court of world opinion for those who are interested. But this is, above all, a matter between the Government and the British people—the people of the United Kingdom as a whole. We, the Parliament of the United Kingdom, owe it to the people of Northern Ireland to ensure that they are fully part of our single market and country, just as we wish them, with us, to have friendly and good trading relations with the EU.

But if there has to be a choice between peace and our internal matters on the one hand, and our trade with the EU on the other, of course we must put Northern Ireland, peace and the integrity of our country first, whatever threats the EU may make. The EU is the disrupter of trade; the UK is the promoter of free trade worldwide. The EU is the one that is doing harm to the constitutional arrangements in Northern Ireland. We must be rock-fast in our support for the people of Northern Ireland, for the constitution of Northern Ireland within the United Kingdom, and for a good solution that allows the restoration of our internal market.

Finance (No. 2) Bill

Lord Redwood Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[The First Deputy Chairman]

I think what we should probably do is go to our next speaker and come back to Seema. We will go now to Sir John Redwood.

[John Redwood (Wokingham) (Con) [V]]

Dame Rosie, I have declared my business interests in the register.

Of course, I am not going to vote against this Budget and I wish the Government well with it, but I would like them to pause a little, think through where we are and recognise that they may need to revisit some of these decisions in the months ahead. My worry is that they are being too tough in their tax measures and too tough on people’s incomes at a time when we need to build confidence and recovery, and they are doing so at a time when it is really impossible for their expert advisers and other economic forecasters to give them a clear steer of what the public finances will look like in two years’ time, let alone in three or four years’ time.

The Government seem to think that their experts can define a given amount of money that will be a shortfall in order to hit their longer-term Government targets, and therefore say that we need to make these tax changes for the next few years in order to fill the alleged black hole. It may be that they are trying to fill a hole that does not exist. It may be that we will have a much better recovery than the forecasters are thinking. It may be that the economy responds much better over the next two or three years or, indeed, over the next two or three months, as the relaxations kick in.

We can see the difficulty that the official forecasters have if we look at the numbers they gave us as recently as November 2020. Then, the OBR, forecasting the budget deficit—the amount of extra borrowing—for the year 2020-21, said that it would be £394 billion, an enormous amount. Bear in mind that it was having to forecast for only four months, as two thirds of the year had already gone. When we got the 11-month figures, up to February, recently, we discovered that they had come in at just £278 billion and so, subject to what happened in March, it may be that the OBR was the best part of £100 billion out on the deficit for the year in question when it tried to forecast, already knowing quite a lot of what had happened. It was, of course, massively too pessimistic. It is great news that we will have borrowed so much less than we feared, although clearly we are still borrowing far too much on an unsustainable basis, which is why we need to promote a strong recovery to get the deficit down.

I therefore say to the Government: let us show a little humility. The experts and advisers are not able to give us anything like accurate figures—I can sympathise with them, because extreme things have happened in response to the pandemic—so are we sure that we need to make these moves over the next three or four years?

There is also a case for showing a bit of humility and thinking ahead about whether we might need to show a bit more flexibility because the Government themselves have rightly said, now that we are out of the European Union and the economic world has been stood on its head, that they want to set out a new framework for guiding the economy. I encourage them to do that, and I hope it is a framework that promotes growth and considers real issues such as the increase in the number of jobs, the rise in real incomes and the productivity growth that can be achieved.

We need to get away from the Maastricht criteria, which have governed our policy for many years and still seem to be behind the architecture of this Bill. We seem to be driven by the need to get state debt falling as a percentage of our national output by the end of the period that we are talking about today for the tax changes. State debt is now a pretty useless figure to try to target in the way that the Maastricht criteria did. We now live in this age of monetary experimentation, where great banks such as the Bank of England, as well as the European Central Bank, have bought in very large quantities of state debt—indeed, they still are doing so. Surely, where that happens in a single sovereign country with its own central bank, owned on behalf of the taxpayers by the state, we should treat the debt that we have bought back in rather differently from the debt on which we owe money by way of interest to people outside—some our own citizens, some foreigners—who have been financing the Government. That makes state debt a very difficult number to use to guide the economy. Of course, the future system must have some control over the build-up of actual interest charges that we have to pay to third parties, but it should concentrate much more on promoting growth.

May we therefore have just a few words from the Government, accepting that these numbers are very difficult and that the current forecasts are likely to be very wrong? No one can say exactly how wrong they are going to be, because so many things will happen over the next two or three years and nobody has been through a bounce back of the kind of pace that is possible from such a big hole in our economy, created by necessary health measures to cure the pandemic.

We need a policy that is very supportive of more jobs, of higher incomes and of encouraging investment, enterprise, saving and, above all, self-employment and more small business activity. My worry is that the Government are being a bit mean with people and with small businesses in the name of controlling state debt at a time when we have no idea what the state debt will be in two or three years’ time, and when the state debt number is now very different because of the purchase of state debt by the state itself.

I would hope that the Government recognise that we may need to revisit all this, and I would want them to be on the side of people keeping more of the money they earn and, above all, of a much better deal for small business and the self-employed, where I think they are too tough.

[The First Deputy Chairman]

We are having one or two technical issues, so we will go straight to Richard Burgon.

Finance (No. 2) Bill

Lord Redwood Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[John Redwood (Wokingham) (Con) [V]]

I have declared my business interests in the Register of Members’ Financial Interests. I strongly support those MPs from Northern Ireland who are urging the Government to move on and make sure that we can restore the important trade between Great Britain and Northern Ireland. It has been damaged. The EU is being too intrusive. The Northern Ireland protocol clearly sets out that the United Kingdom is a whole and has its own internal market. It states that Northern Ireland should be fully part of that market, and that is not true today, so I urge the Government to take control over all trade that is internal—trade from GB to Northern Ireland and not going on to the Republic of Ireland, therefore not of concern to the European Union—and to ensure that it runs smoothly.

That is just one part of a much bigger picture that we need to fuel a strong recovery. Of course I agree with the Government that the current level of deficit is unacceptably high and we cannot go on with deficits on that scale indefinitely. I also agree with the Government that it must be a one-off, and the Government did need to be very generous, given all the damage being done to individual livelihoods and businesses by the health measures being taken to combat the pandemic. But all the time that restrictions and adverse measures are in place for health reasons, the Government should continue to be generous. People and business need support. We want people to be available to go to work and businesses to be available to produce goods and services as soon as they are legally allowed to do so.

It is a big cost, but it is manageable. We are seeing around the world that many Governments are having to do the same thing, interest rates have stayed very low and, so far, the debt has remained affordable. I encourage the Government to understand that the deficit will collapse very rapidly as soon as the controls are off and all those policies in place to promote a fast economic recovery take effect. We are going to have a much faster recovery than normal once the controls are off, because we had a much bigger fall thanks to the controls themselves, which, in an unprecedented way, stopped people working and stopped businesses trading.

The Government should take some encouragement from the United States’ example. The United States’ monetary stimulus and fiscal stimulus are huge. If we adjust for the size of the economies, the stimulus under the Federal Reserve Board’s actions and President Trump and now President Biden is about twice the scale of the UK stimulus in monetary terms and is considerably higher in fiscal terms. Perhaps the US is taking more risks with inflation than we would like. I am not suggesting that we need to match the American numbers, but I am saying to the Government that we are nowhere near the American numbers, so worry not. This is the time for stimulus—this is the time to make sure that the economy is properly supported and people can get back to work.

With that in mind, I urge the Government to look again at the idea that we need tax rises in the years ahead. If we threaten too many tax rises, it will damage confidence. We will put people off investing here and make people nervous about spending and make them want to save more. This is the time when we need people to spend, to recreate those jobs and get businesses going again. This is the time when we really need businesses to want to come to the United Kingdom or to stay and grow in the United Kingdom, because we need that massive investment. We are short of capacity in all sorts of areas. We have had too much deindustrialisation over the last few decades, and now is a great opportunity to promote it. The Government recognise that with their short-term measures to boost investment, but they may need to show that we are going to have a very benign climate on business tax after the initial impetus and stimulus is offered. If people think that we are going to gravitate to the average or to a higher tax regime, it will put them off.

I pray in aid our neighbour the Republic of Ireland, which has been extraordinarily successful by having an extremely low corporation tax rate. It is 12.5%—a knockout low rate—and what has happened? First, the Republic of Ireland collects far more as a proportion of its total tax revenues from business than us or other European Union countries, because so many great companies have gone there and book a lot of profit there, since the rate is obviously agreeable and favourable.

The Republic of Ireland also has a much higher GDP per head. It is more than twice the EU average, and it is considerably higher than the United Kingdom’s. That is entirely because the Republic of Ireland has this extremely attractive tax policy, which has been so successful in attracting a lot of inward investment, a lot of jobs based on that, and a lot of turnover and profit booking, particularly from great American corporations.

I do not know how that will work out now that President Biden is encouraging a minimum rate, which would mean almost doubling the Irish rate; we will have to see. However, in the meantime, if anyone doubts the power of lower rates to generate prosperity, greater GDP per head and, above all, greater tax revenue, they should look at the Irish example, which is very vivid.

I would like to see the Government speed up with their freeports and be very generous with both the number of freeports and the areas they cover. I also urge the Government to be as friendly as possible to business on taxation and on permits over what to do with the land and how to create all those extra jobs we wish to see. It is an interesting initiative, and the sooner it is rolled out the better. Surely, this is the time we need it—when we need to promote recovery.

I also say to the Government that we need our small business community to get back on its feet and to be able to trade again successfully. Small businesses have had a lot hurled at them, and some of them did not manage to benefit from all the schemes that the Government put forward, so they have been particularly hard hit by up to a year of lockdown or impediments to their trading and their normal work.

I do not think this is the time to be looking at new taxes on small businesses and the self-employed. I do not think the IR35 idea is a particularly good one. It would be good if there were more forthcoming to promote small businesses, which we are going to need. They will have flexibility and the ability to respond. If every self-employed person were able to take on an extra employee, it would transform the employment position, but that requires patient work on ensuring that it is affordable and that the administrative burden is not too great, obviously without undermining important protections for individuals as employees, which we rightly value.

We need flexibility and support from the Treasury and the rest of the Government to understand how important small businesses and the self-employed will be to trigger this revival and to build back in a different way—to build back better, as they are saying on both sides of the Atlantic and as this Government are saying. That implies doing different things, and it requires the innovation and the productivity-driving measures that can come from small companies and the self-employed, who need to be flexible.

There is a huge amount to be done, but the Government should be of good cheer. There can be a very rapid recovery. They have not done too much on the deficit or the monetary stimulus and have fallen quite a long way behind America in the size of the stimulus. They should be ready to do more, be generous if the controls have to go on longer than we would like, and work with the small business community and the big business community on what is a sensible tax regime. There are issues still to be solved on business rates and VAT. The whole purpose of the reviews should be to promote a strong recovery—better jobs, more better-paid jobs, more small business—and then the revenue will flow. Think of the jobs, the incomes and the prosperity, and the revenue follows. Thinking too much about the revenue first, in the mood of putting everybody’s taxes up, will be a great dampener on the recovery we need.

Leaving the EU: Impact on the UK

Lord Redwood Excerpts

Wednesday 17th March 2021 Commons Chamber

[John Redwood (Wokingham) (Con) [V]]

I have declared my business interests in the Register of Members’ Financial Interests.

I welcome the opportunity to debate the many opportunities that Brexit presents. It was always the case that, once we had achieved Brexit, the Government needed to use the freedoms it brings to promote the greater health and prosperity of United Kingdom citizens. We meet today with a success already as a result of these freedoms. The United Kingdom Government decided last year not to join the common vaccine procurement system of the European Union. They went their own way. They had confidence in British science and in British medicine, and they had confidence in great companies based in the United Kingdom and in our great universities.

It is tremendous news that, as a result, the United Kingdom helped pioneer one of the first successful vaccines. The United Kingdom pre-ordered a very large number of vaccines for United Kingdom people on the basis that some of these vaccines would be good and would be available for use, and that put the United Kingdom in the position to vaccinate much earlier, saving more lives than those countries can that were not in the happy position of having early supplies of vaccine. Even our regulators were quicker and more agile. Our regulators gave regulatory approval to the first vaccines some weeks before the European regulator, though the European regulator came to the same view in due course.

I think this is a model for how we can use our freedoms more widely to promote our health and better prosperity. I would draw the Government’s attention to a very important policy initiative from President Biden. They may find it surprising to see me recommending something from a Democrat President, but I think his 24 February Executive order—looking at America’s supply chains, and saying that America can do much better at developing its own technology, putting in its own industrial capacity and creating many better-paid jobs by having more capacity in the United States—is a model we should follow. Indeed, it is the model we have been following with the development of the vaccine, which has led to more good jobs in the United Kingdom and more United Kingdom productive capacity.

The Biden initiative starts with a very rapid—100-day —attempt to fix the need for the United States of America to have a much bigger presence in pharmaceuticals, batteries, rare earths and minerals, and semiconductors. There is then an annual programme, involving all the relevant Departments of Government, of going through the supply chains and asking what can be done to use innovation funding, Government procurement and Government regulation to encourage more onshoring and more exciting technical developments. Of course, a country needs to have strong competition law and not to abuse state aids, but many good things can be done with the massive procurement programmes of the British Government, like those of the American Government, to encourage competitive responses in the United Kingdom and to encourage that increasing capacity.

I hope the Government will do more on both the Northern Ireland border issue, where I think we need to be firm—and I support their recent action—and on the fishing industry, where I think we need more rapid progress to build up our fleet and to take back control of more of our fish. That was the promise and that is clearly the intended journey, but I wish the Government would be firmer, because I do not think that at the moment we have the right deal to promote that industry. If we wish to develop our green policies, as we do, we need to do more at home, cut the food miles, cut the fish miles and have more value added in the United Kingdom.

Exiting the European Union (Value Added Tax)

Lord Redwood Excerpts

Wednesday 3rd February 2021 Commons Chamber

[John Redwood (Wokingham) (Con) [V]]

I have declared my business interests in the Register of Members’ Financial Interests.

As the Minister has told us, these are two important statutory instruments for the facilitation of trade generally and for the facilitation of trade within Northern Ireland and between GB and Northern Ireland, and to the extent that they make things easier and allow zero rating of important services and goods, I welcome them wholeheartedly. But, of course, as others have said in this debate, we meet today against the background of clear difficulties and problems in the implementation of the Northern Ireland protocol, where it appears that a number of important impediments to GB-Northern Ireland trade have been inserted, and it is crucial that the talks go well and we get rid of them as quickly as possible.

So when we look at the administration of VAT, which is an important part of the trade process, I would like an assurance from the Minister that these regulations, and all the other VAT and excise rules applying in Northern Ireland and throughout the United Kingdom, will be solely administered and enforced by United Kingdom authorities, because I have much more confidence in them. Will he also assure me that the aim of these statutory instruments, and the wider VAT legislation that they add to and amend, is to ensure that the movement of goods from Great Britain to Northern Ireland, or the other way, will be as smooth and easy as the movement from London to Surrey or from Manchester to north Wales, because that is what I thought we had agreed and signed up to—that Northern Ireland was a fully integrated part of the United Kingdom single market, under our single market and taxation rules? I would like the reassurance through these statutory instruments that we are intending for that to be true.

Will the Minister also confirm that there has for many years during our period in the European Union been an important VAT border between the United Kingdom and the Republic of Ireland, but that it has always worked very smoothly and was not enforced at the physical border, in accordance with the spirit of agreements and not wanting barriers at the land border? It was an electronic border and adjustments were made by computer or by correspondence so that these things could be sorted out in a sensible and decent manner without having to have people queuing at borders to make complex calculations and submissions. If that is the case, does the Minister agree that it is in that spirit that we need to find the answer to the current impositions and difficulties affecting our trade across those borders? It seems very odd that we cannot replicate that success of our past trading, where electronic manifests, trusted trader schemes and so forth, and proper electronic VAT registration worked very well. Surely the UK authorities, if we are the proper and sole enforcement authority in Northern Ireland, can work with trusted traders, VAT-registered hauliers and ferry companies and so forth, and we can accept their certification or word that the goods on their load are entirely GB-Northern Ireland or Northern Ireland-GB. We can then accept, therefore, that there are no other considerations and the loads can then move as smoothly as from London to Guildford or Manchester to north Wales. It would be very helpful to hear the Minister’s views on how that can be achieved and how quickly we can get to that point.

It is absolutely crucial to the people of Northern Ireland, as we have heard from their representatives, that they can trade smoothly with the rest of the United Kingdom. That was fundamental to the spirit of the agreements that the United Kingdom entered into with the European Union over the issue of trade with and between Great Britain, Northern Ireland and the Republic of Ireland. I hope the Minister will have good news for us and that these things can be sorted out quickly.

Taxation (Post-transition Period) Bill

Lord Redwood Excerpts

3rd reading & 3rd reading: House of Commons
Tuesday 15th December 2020 Commons Chamber

[Sir William Cash]

The clauses before us are directly related to what was originally in the United Kingdom Internal Market Bill, and they were there for a very good reason. They were there because it is absolutely essential that we maintain our sovereignty, and the decisions must be taken by Parliament, and should not be taken by the House of Lords, whose Members are unelected. We are the House of Commons, and that part of the House of Commons which is elected has a Government who were elected in December 2019, almost exactly one year ago. In that general election, it was made quite clear that the decision before the British people was effectively to be decided in line with what was decided in the referendum. There are therefore two things joining together, in conjunction with one another: the referendum in 2016, followed by a whole series of enactments of Parliament. That includes the decision on the notification of withdrawal, which was accepted by the Labour party and was voted through in the House of Commons by 499 to around 120. It is not as if anybody could say that the supremacy of Parliament was not made manifest in the light of the referendum.

There was then a series of other enactments, and we eventually ended up with a confirmation of Acts of Parliament, including the European Union (Withdrawal Agreement) Act 2020, which was passed after the general election. Section 38 of that Act made it abundantly clear that we had the right to insist—as a matter of constitutional principle and through the enactment of an Act of Parliament—that the United Kingdom was sovereign, and, furthermore, that we would be allowed to override the withdrawal agreement. That was contained in section 38(2)(b), which specifically refers to section 7A and in turn therefore directly relates, through the use of the word “notwithstanding”, to the overriding direct effect. That is a very important point—a point that is conveniently overlooked by some people, who continually assert that somehow or other the Government have been out of order, breaking international law or breaking constitutional principles. But they never come forward with any arguments; as I said in a recent speech in the House regarding the attitude of the House of Lords, they were basically strong on assertion and empty in argument.

[John Redwood (Wokingham) (Con)]

Does my hon. Friend agree that those of us who could only vote for the withdrawal legislation because it contained clause 38 understood fully that it was a conditional agreement to the withdrawal agreement, because the EU always said that nothing is agreed until everything is agreed, and we wished to see the full package before deciding whether to allow it to be untrammelled?

[Sir William Cash]

Yes, indeed. I sometimes find that Lewis Carroll has some very useful ways of putting things. There was the famous exchange between Alice and Humpty Dumpty, in which Humpty Dumpty says: “Words mean what you choose them to mean. The question is who is to be master, that is all.” Words can be used in all kinds of different ways to try to justify propositions that are unsustainable.

I say with respect, but none the less very firmly, that in this particular case it is absolutely clear that when the decision has been taken by the British people—the voters—in the referendum and has then been endorsed by an Act of Parliament and a whole series of other Acts of Parliament, including section 38, it really is not down to the unelected House of Lords to resist it on the scale that they have, and to claim that they can override the House of Commons. We have just had a whole series of agreements and disagreements going backwards and forwards on the UKIM Bill alone.

As Lord Bingham made absolutely and abundantly clear in chapter 12 of his magisterial book “The Rule of Law”, it is for Parliament to make law and pass Acts of Parliament; it is not for the judges to intervene, to seek to make law and to impugn the sovereignty of Parliament. Anyone who wants to get the full flavour of it should read chapter 12 of “The Rule of Law”, because it is the most explicit and clear statement that one could possibly imagine.

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[Sir William Cash]

Interestingly, I made some reference to the principles that are under discussion in the current negotiations. Of course, we do not know the outcome of those negotiations as we speak—as I said in the previous debate, I wish them well—but it has to be made clear that, certainly as far as I and those of my friends who agree with me are concerned, one of the most crucial questions is that of state aid, because that issue is right at the heart of the discussions and negotiations this week. I asked the Secretary of State for Business, Energy and Industrial Strategy to assure the House that nothing in any treaty text or subsequent Act of Parliament will prevent the UK from having its own sovereign state aid rules, including on energy, so that we are not subjugated to EU state aid rules, nor to the European Court, given that the EU intends, as it has stated over the past week or two—in very bad faith, in my opinion—to impose and enforce its rules against us. Ultimately, of course, that would be done by a majority vote in the Council of Ministers, behind closed doors, without our even being at the table after 31 December. The fact is that we have to assert our sovereignty in the negotiations so that any treaty that emerges from them—if one does—must comply with the assertion of the sovereignty of this House, this country and this Parliament, and must at the same time apply whether in respect of direct or indirect effect.

[John Redwood]

Is it not also the case that the agreement with the European Union is muddled and contradictory? The EU has always said that it understands that the UK is going to be sovereign, so if this House simply asserts our sovereignty, as it can do, that is, in a way, our fair interpretation of the agreement.

[Sir William Cash]

Yes, absolutely. Sovereignty is also a question of fact. I do not want to get into the intricacies of 15th century history, but there was a chap called Henry VII who made it abundantly clear that as far as he was concerned he won the battle of Bosworth and that was it. I do not think we need to pursue that one too much, because sovereignty is quite a simple thing when it comes down to it: it is called political will and legal arguments of the kind I am addressing.

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“Notwithstanding” cannot be a get-out-of-jail card for the country to escape its obligations. We would never get away with that in everyday life. Let us imagine telling a police officer, “Notwithstanding the law on theft, I thought I’d just take the goods out of the shop without paying for them.” I do not think we would get very far if we did that. We cannot set aside our obligations through a clever-sounding word. An agreement is an agreement. A deal is a deal. That is the whole point. If the hon. Member for Stone presses his amendment, I have to tell him, in the friendliest tones, that we will certainly oppose it.

[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests.

I rise to support what may be an amendment that we are going to vote on or may be a probing amendment from my hon. Friend the Member for Stone (Sir William Cash), because I think there has been a deliberate misunderstanding by the EU and its friends over what Brexit is about and what we need to do in order to achieve a proper Brexit. A proper Brexit is taking back control; it is recreating the sovereignty of the people of the United Kingdom through their Parliament.

My hon. Friend has a distinguished career in this place trying to rebuild that sovereignty and watching, year after year, more and more of our powers taken away by successive treaties, by successive directives and regulations, many of them automatic ones over which the UK had little or no influence, and by court judgments which, again, we had precious little ability to shape. He is right that, as we come to legislate for our new arrangements as a sovereign country from 1 January next year, we need to make quite sure that we have back under the control of people and Parliament all those powers that we need to regulate, to govern and to take wise decisions on behalf of the United Kingdom.

I am very worried about some elements of the withdrawal agreement. I was told, as we were all told, that nothing was agreed until everything was agreed, and that that meant the future relationship as well as the withdrawal agreement. The EU decided for its own convenience to sequence things and say, “You have to sign the withdrawal agreement first and then the future relationship agreement will follow.” A bit of flesh was put on the bones of the future relationship in the so-called political declaration, which one would have thought there was a lot of moral pressure to go along with even if it was not as strictly legally binding as they hoped the withdrawal agreement would be.

I now think there has been a lot of bad faith, because, according to both sides, the central feature of the future relationship was always going to be a free trade agreement, and where is the free trade agreement? We now discover that the EU wishes to take all sorts of other powers away from us as the price for the free trade agreement, which we have already overpaid for in the withdrawal agreement and which one would have thought, in good faith, the EU would now grant. It is very much in its interests—even more than it is in our interests—given the huge imbalance in trade, and above all in the trade that would attract tariffs if we had no free trade agreement: the trade in food.

That is really what we are talking about: are there going to be tariffs on food or not? We, the United Kingdom, run a colossal £20 billion trade deficit with the EU on food. We have to impose pretty high tariffs on food from the rest of the world—that makes absolutely no sense where we could not grow any of it ourselves; it may have some benefit for some of our farmers some of the time—but we are not allowed to put any similar tariffs on EU-sourced produce where we could produce it ourselves.

The EU system is to try to use tariffs to buttress domestic production, but it has not worked for the United Kingdom; it has worked the other way. The tariffs have been taken off in order to benefit the Dutch, Spanish, French or Irish suppliers of our market with food at zero tariffs. The EU already has rather more interest in tariff withdrawal than we do, because we could have a range of tariffs that would probably achieve the aims both of cutting food prices by having a lower average tariff and of having a bit more protection on the things that we really could make and grow for ourselves here, which we are not allowed to protect against continental products at the moment.

I therefore think that the Bill could be improved by reminding the EU that we will not be pushed around and we will not suffer too much bad faith from those original negotiations or from the withdrawal agreement itself. I think it was a very imperfect agreement. It is pretty ambiguous in places; it is imprecise in places. I have never felt that anything the Government have done, or thought of doing, was in any way illegal. Lawyers could make a perfectly good case under the withdrawal agreement treaty terms themselves, and anyway, we have the protection of my hon. Friend’s section 38, which made it very clear that this Parliament’s acceptance of the withdrawal agreement was conditional. Why else would anyone have put section 38 in the withdrawal agreement Act unless they were making a point?

[Sir William Cash]

Does my right hon. Friend appreciate that it was the Prime Minister who, after an eight-hour meeting I had in No. 10 that day—17 October 2019—insisted that section 38 was necessary and appropriate?

If we go back to the previous Administration, just imagine where we would be when we consider the Chequers arrangements, and then imagine what it would have been like if we had not decided to vote against that dreadful withdrawal agreement in its original shape. There were provisions that needed to be rectified, and section 38 provides the mechanism that enables us to do that.

[John Redwood]

Indeed. I think my hon. Friend has confirmed that under the previous Prime Minister, when those of us who could not vote for her agreement said that we needed a sovereignty escape clause, we were told that that would not be permissible because it would not be effective implementation of the agreement; which was then reassuring to us, not liking the withdrawal agreement very much and realising that it was a provisional agreement and would be completed only were there to be a satisfactory outcome to the total range of talks. It was a totally artificial constraint that the EU invented that it had to be sequenced, when up until that point everybody had always rightly said that nothing was agreed until everything was agreed.

I would like to hear from the Minister a little more explanation on the detail of the Bill. As I understand it, the Northern Ireland protocol would apply only to goods that are passing from Great Britain to Northern Ireland and then on to the Republic of Ireland, or the reverse—goods coming from the Republic to Northern Ireland and then passing on to Great Britain. Am I right in thinking that that is a very small proportion of the total trade? In what ways will the Government ensure that it is properly defined, so that we do not catch up most goods in those more elaborate procedures? The bulk of the trade will be GB to Northern Ireland and back, or Republic of Ireland to Northern Ireland and back, and it should not in any way be caught up in any of these proposals. I am not sure that we do have a de minimis way of dealing with the so-called things at risk.

It is not clear how the system will work for items at risk where we agree that they are at risk—and I hope it is a UK decision about what is a risk, not some other kind of decision with EU inspectors. It would be helpful to me and the wider community interested in this debate to know how a business would proceed if it had such a good at risk, to whom it would answer, and what decisions would be made about such a good in Excise, because it sounds a rather complicated and difficult arrangement, both for the business concerned and for those who are trying to enforce.

I am trying to tease out from the Minister, in pursuit of the interests of my hon. Friend the Member for Stone and myself on sovereignty, whether we are really in control if the trade has started off from GB and is going to Northern Ireland. What kind of external intervention can the EU or the Republic of Ireland engineer—how is that fair, and how will it be determined? I think that is what we are most worried about in this piece of legislation, and we would be more reassured if there were the override that my hon. Friend proposes. I should be grateful for some explanation.

[Alison Thewliss (Glasgow Central) (SNP)]

I come to this debate with many of the same concerns as I had last week. I shall not repeat them because I think everybody is quite clear on what they were. We come to this debate with the clock ticking louder and louder, and with uncertainty ahead.

I must agree with the right hon. Member for Wokingham (John Redwood) when he says that this is a complex, complicated and difficult arrangement. Yes it is, and it is absolutely baffling why we are still not certain what will happen, with such a close deadline looming. It is impossible for businesses to know what to plan for and how they will manage this, because so much is still uncertain. The Institute for Government’s Jess Sargeant went through some of the outstanding issues in the Northern Ireland protocol still to be agreed, and these are not small things but quite significant things in many cases. There is still great uncertainty about the grace period that was talked about last week, what will happen at the end of it, and what the Government are going to do between then and now, whenever this finishes. What work will they be doing in the meantime? It does feel, quite often, that this Government put things off and leave things, and then say, “Oh gosh, suddenly I have to do that at the last minute.” They do that quite regularly.

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[Kevin Hollinrake]

I am grateful for my hon. Friend’s intervention. I have great sympathy with his points. The difficulty is that when we are in an international agreement, there is a judgment as to whether they are “acting in bad faith” or “prattling on”, and they are subjective judgments he makes. All international trade agreements need an independent body to decide who is breaching the agreement. If Parliament is simply sovereign and is able to say, “In our judgment, you are breaking the agreement”, all trade agreements would fall apart. We saw that in the case of the Mexican Government and the breaching of the terms of GATT, where that judgment was made unilaterally. The independent body, which was the arbitration council of the North American free trade agreement, settled the dispute. That is an international body; it is not subject to one national jurisdiction or the other. There has to be someone who adjudicates; we cannot simply have national sovereignty making a judgment on these points. That is why we have these investor-state dispute settlement bodies.

[John Redwood]

All too often in international trade agreements it does come down to power and sovereignty. President Trump has regularly used national security as a good reason to impose tariffs and override World Trade Organisation rules. The EU, for years, ignored state aid rules to promote Airbus. I can perfectly understand what it was trying to do. It took a long time to catch up with it and in practice the damage, from the WTO point of view, was done.

[Kevin Hollinrake]

Therein lies the difficulty, does it not? As soon as a nation, however powerful, is allowed to make a subjective judgment, it leads to international chaos. We can have international agreements that people sign and adhere to, with independent resolution. My point is that as soon as we have done that, we have handed over the settlement of the issues and disputes to another body, and we are, in effect sharing some of our sovereignty. We do not have total sovereignty at that point. We have sovereignty to sign the agreement and to exit the agreement, but I cannot see how using sovereignty to override an agreement works. I think it would result in chaos.

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[John Redwood]

Does the hon. Gentleman not understand that, from 1 January, the EU and the UK are both full members of the World Trade Organisation, which does not allow its members to charge to trade, controls what tariffs can be levied and says to each of its members that they have to offer most favoured nation status to any other member of the WTO? That is how we do our trade with the whole of the rest of the world, which is bigger than our trade with the EU. Why can we not do that for everything?

[Matt Western]

Our biggest and nearest customer is the EU. It is a critical customer and supplier to so many businesses in the UK, particularly in our manufacturing sector.

Let me briefly turn to the Northern Ireland protocol. We were told that there would be no checks, but as of last week, we have seen the need to implement new checks and controls for goods moving from Great Britain to Northern Ireland and, to a lesser extent, from Northern Ireland to Great Britain. The Government have said rather vaguely that a significant majority of internal UK trade will be tariff-free. I would be interested to know what assessment the Government have made of the precise percentage of GB-Northern Ireland trade that will be and the volume and value that will be subject to tariffs.

That is why these amendments are important. They are aimed at injecting urgency, with just 16 days until the transition period ends. Businesses want clarity and certainty, and they need it urgently. The intention of new clause 3 and amendments 1 and 2 is simply to demand that the Government make clear when they will propose the secondary legislation flowing from the Bill, to help those businesses. The Food and Drink Federation has said that the guidance is being published too late, and 43% of its members that supply Northern Ireland have said that they will not be able to do so in the first three months of next year. Our amendments are very similar to those proposed and, sadly, voted down in Committee. They are vital to assist our businesses and are business-friendly, as the Opposition are.

I cite the disruption that we are in danger of allowing. We have seen what happened with Honda—one of the most efficient companies on the planet. That should be the canary in the mine. If Honda is not able to get parts from its supply chain here to the UK, what hope is there for small and medium-sized businesses across the UK? Whether they are a clothes retailer or a car manufacturer, they just want clarity and certainty. They want an uninterrupted supply of goods into the first quarter of next year. Given the damage already done by the pandemic, we cannot afford further economic disruption. The Government need to move swiftly. That is why new clause 3 and amendments 1 and 2 are so important, and that is why I am supporting them.

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[Jesse Norman]

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

We have had some good debates in the course of the Bill. I thank right hon. and hon. Members for their contributions, but there are two in particular whom I would like to thank. First, the right hon. Member for Wolverhampton South East (Mr McFadden) has truly been the workhorse of the shadow Front Bench throughout the Bill. For a shadow Economic Secretary, as he is supposedly designated—he should of course be much higher—he has done a wonderful job, and I salute him for it. Secondly, I thank my hon. Friend the Member for Stone (Sir William Cash), who is sadly no longer in his place. I think he should be referred to as the ancient mariner of Brexit. As you may recall, Mr Deputy Speaker, Coleridge says:

“It is an ancient Mariner,

And he stoppeth one of three.

‘By thy long grey beard and glittering eye,

Now wherefore stopp’st thou me?”

Although my hon. Friend does not, tragically, present us with a long grey beard, he has something of a glittering eye where matters of Brexit are concerned. We can only salute the energy and indefatigability with which he has attacked the topic over many years, while perhaps devoutly hoping that this may be the moment at which, at the end of this year, a hiatus or pause may be reached.

In just over two weeks’ time, the transition period will end. The UK and its tax system must be ready to support the smooth continuation of business across this country. In that regard, the Bill is a cornerstone of those preparations. In addition, it will play an important part in helping to implement the Northern Ireland protocol and to safeguard the Belfast/Good Friday agreement. It introduces a framework for charges on goods arriving in Northern Ireland and enables the Government to put in place decisions made by the Joint Committee for goods deemed to be at risk of moving into the EU. It also includes mechanisms to ensure that, in so far as is possible, VAT will be accounted for in the same way as it is today in Northern Ireland.

Let me once again assure the House that HMRC will remain the tax authority for the whole of the UK, and let me remind hon. and right hon. Members that businesses will continue to submit only one UK VAT return to account for VAT on all supplies of goods and services. The Bill also amends current legislation for excise duty to be charged when excise goods are removed to Northern Ireland from Great Britain, as required by the protocol. However, that does not mean additional costs for Northern Ireland businesses and consumers, because the Government will be introducing a mechanism to offset any excise duty already paid on those goods in Great Britain.

The Bill introduces a small increase in the rate of duty on aviation gasoline, which will apply across the UK to ensure consistency between Great Britain and Northern Ireland. Finally, the Bill includes a small number of other taxation measures, including measures to ensure the Government retain their ability to prevent insurance premium tax evasion.

[John Redwood]

I think the Minister needs to be a little more forthcoming. What is the EU’s enforcement mechanism if it thinks UK authorities have not fulfilled the remit? What percentage of trade are we expecting to be caught up in this double jurisdiction?

[Jesse Norman]

As I have already said to my right hon. Friend, without venturing a percentage, the test for at-risk goods is those where there is a “genuine and substantial risk”, and therefore those are expected to be a smaller proportion of goods, but trade of course is a flexible and ever-changing thing, so whatever numbers there are may change over time.

My right hon. Friend also asked a question about the EU. I am not going to speculate on what the EU does, but I can assure him that there will be no EU customs, embassy or the like and no joint control over customs in Northern Ireland. HMRC will remain the tax authority for Northern Ireland, as it is for the whole of the UK.

The Bill also includes new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period 2013 to 2018. Lastly, to help level the playing field for UK businesses, the Bill also moves VAT collection on certain imported goods away from the border and removes VAT relief on low-value consignments to clamp down on VAT abuse and to protect our high streets.

The Bill gives businesses throughout the UK certainty about the arrangements that will apply from 1 January of next year. Above all, it helps the Government to safeguard what we all prize and desire, or should all prize and desire: the unity and integrity of the United Kingdom. I commend the Bill to the House.

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[John Redwood]

I have declared my business interests in the Register of Members’ Financial Interests.

The Bill is a great missed opportunity. It should have been the Bill in which we started to cut and reorganise the taxes, celebrating our new freedoms as we leave the European Union. There is so much good we could do by remodelling and reducing the incidence of VAT, for example, or by having excise duties and tariffs that make sense for British business and for British importers, because we need to balance the two. Instead, it is a rather technical Bill.

I think it is a pity that this House has not been given a detailed account of what the Chancellor of the Duchy of Lancaster has agreed so far, and a detailed account of what still remains to be agreed, because I believe that there were outstanding issues. On behalf of Northern Ireland within the United Kingdom, we need to know the extent of this possible dual jurisdiction and how it actually works.

The Minister has kindly assured me on more than one occasion that the VAT regime in Northern Ireland will be the UK VAT regime and will be enforced by normal UK enforcement. That is very good, but cannot be the whole story, because we know that there is this overlapping jurisdiction for certain types of goods. We are still not privy to how big an issue that is. I presume it is a small proportion of trade, but we have not been given any indication of that, and we have not been told—perhaps the Joint Committee has not yet agreed it, or does not want to share it with us yet—exactly how that might work. It is a pity that we do not have more of that detail.

I am also concerned that we should not get drawn into the state aid issue, which is clearly part of the wider discussion between our Ministers and negotiators, and those in the European Union. We know that the European Union takes a very wide definition of state aids. State aids definitely include all taxation, which is the subject of this piece of legislation, and grants, subsidies, the competition framework and general industrial policy. It is very wide ranging, and there is no way we can say we have Brexit if the EU will have powers over our state aid policies, because that would be tentacles stretching into this Bill and the powers of the Treasury, Customs and Excise, and the Business Department and its competition and industrial policies, as well as into energy and practically every other major area one can imagine. I therefore hope my right hon. Friends and the UK negotiators are firm on that in their discussions.

We must have control of taxation and state aids as a fundamental part of our Brexit departure. We would have taken more confidence from the Government if they had used this Bill to show just how much better a UK-based taxation policy could be. We need a taxation policy that promotes more fishing and farming at home, promotes more industry and manufacturing at home, and promotes that green revolution they want by stripping the VAT off the green products that the EU has imposed on them—a policy that allows small businesses to flourish and does not overburden them with compliance and red tape. That is what we wanted from Brexit, and the sooner Ministers bring it forward, the better.

Taxation (Post-transition Period) Bill

Lord Redwood Excerpts

2nd reading & 2nd reading: House of Commons
Wednesday 9th December 2020 Commons Chamber

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

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

It is a delight to speak under your chairmanship, Madam Deputy Speaker.

In three weeks’ time, the transition period will end and this country will take its place as a fully sovereign trading nation once more. It is a very important moment in our nation’s history, one that will undoubtedly provide us with great opportunity in the years ahead, but the Government are acutely aware that at this time they also have a great responsibility to provide certainty to people and businesses and to preserve this nation’s unity, and the fundamental purpose of this Bill is to achieve those goals. It seeks to ensure that businesses in every part of the UK can continue to trade smoothly after the end of the transition period, but its particular focus is on businesses based in Northern Ireland or those that work with Northern Ireland companies.

The Government have always been clear that we must deliver on our pledge to provide unfettered access for Northern Ireland’s businesses to the rest of the UK internal market, and we have been equally unstinting in our determination to uphold our commitments to the people of Northern Ireland under the Northern Ireland protocol and to protect the progress made under the Belfast Good Friday agreement. This Bill will help us support those commitments by providing legal certainty for the customs, VAT and excise systems in Northern Ireland after the end of the transition period.

If I may, I will start with the customs elements of the Bill. The House will know that the UK is a single customs territory, with article 4 of the Northern Ireland protocol giving a clear legal commitment to this. However, the protocol also requires a new and unique set of arrangements to be put in place for goods moving from Great Britain to Northern Ireland. Under these arrangements, the only circumstance in which there should be charges on goods moving between Great Britain and Northern Ireland is if those goods are destined for the EU single market or there is a clear and substantial risk that they may be.

[John Redwood (Wokingham) (Con)]

I am grateful to the Minister for giving way in this Second Reading debate before we get to Committee. Will he confirm that under the proposals in this last legislation the European Court of Justice will be the ultimate arbiter of excise and VAT arrangements within Northern Ireland, and that the European Union will be placing staff in our country to supervise this?

[Jesse Norman]

VAT in Northern Ireland will be subject to the EU principal VAT directive, and for that purpose the ECJ will be the judicial body. I cannot comment as to whether or not there will be anything more than staff, except to say that excise processes in Northern Ireland will be carried out by Her Majesty’s Revenue and Customs.

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[Jesse Norman]

I thank the hon. Gentleman for his question and, yes, the legal basis on which VAT is charged will change. I will spare him the details of the difference between import VAT and acquisition VAT, but it will change. The experience of those who pay VAT will be very similar, if not identical, to the system we have in place at the moment. HMRC and the Government have identified flexibilities, which allow that to be put in place. Of course, there will continue to be the normal processes of enforcement that one would expect to see from HMRC in order to make sure that VAT is properly paid in the usual way.

[John Redwood]

These are urgent and important issues. We heard earlier from the Chancellor of the Duchy of Lancaster that there are various delays to the full implementation of trade arrangements into and out of Northern Ireland as a result of his negotiations. Will they be incorporated into this legislation, and do they provide a brake on the immediate introduction of these complex double-taxation arrangements?

[Jesse Norman]

I have no doubt that the Chancellor of the Duchy of Lancaster will be updating the House over time as the different provisions he has negotiated come into force but, from our point of view, the position remains as stated, that is to say that VAT will become chargeable by a slightly different legal means, but in substantially the same way in Northern Ireland as it is at the moment. The mechanisms we have put in place are designed to ensure that, as far as possible, VAT will be accounted for in the same way as it is today.

Existing rules in relation to movements of goods between Northern Ireland in the EU, including the rules relating to acquisitions and distance selling, will continue to apply. Goods entering Great Britain from Northern Ireland will be subject to VAT as though they were imports under the relevant UK legislation. Similarly, goods entering Northern Ireland from Great Britain will also be subject to VAT as though they were imports and relevant EU or UK legislation will apply, but let me add that the Government are adopting an approach that minimises any changes for goods moving between Northern Ireland and Great Britain.

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[John Redwood (Wokingham) (Con)]

I have declared my business interests in the Register of Members’ Financial Interests.

The origins of this legislation lie in the negotiations under the previous Prime Minister that introduced the whole idea of a Northern Ireland protocol. I regretted those negotiations very much. I opposed them at the time and did not vote for the deals that my right hon. Friend the Member for Maidenhead (Mrs May) came forward with, because I thought they were designed by the EU as a lever to try to delay, dilute or damage Brexit.

When the current Government asked me to support their version of the withdrawal agreement, I still had considerable reservations about the Northern Ireland protocol. I put those to Ministers, who reassured me and said, “This is only an outline operation in the withdrawal agreement as currently drafted. None of the detail has been done. We will negotiate very strongly. We will get rid of the offensive features that you don’t like.” They said that they shared some of my concerns and that they would come back with something much better. I am always trusting of colleagues, so I said that that was very good to know but that I did not have the same confidence in the EU.

I thought it was unlikely that the EU would want to facilitate that in the way that I and the Government would like. so with some friends, I backed my hon. Friend the Member for Stone (Sir William Cash) in saying that the way through this was to put clause 38 into the European Union (Withdrawal Agreement) Bill. Under that clause, were the EU to act in bad faith and not come up with a workable solution for Northern Ireland and the other problems, we would have asserted UK sovereignty in our version of the treaty, and so in good law we could use clause 38 to legislate in Britain for what we intend to do, overriding the agreement.

It was quite clear from the drafting of that Bill that we wanted that override, and I would not have dreamt of voting for the thing without the override. The Government were saying that they did not think we would need to use it, but we could use if we had to, which is why I was pleased to support them earlier this week in a very modest override. It is entirely legal; it is the assertion of British sovereignty. We need to keep that in reserve, because without seeing all the detail from the Chancellor of the Duchy of Lancaster, I am not satisfied yet that we have a working operation for the Northern Ireland border and the matters that we are discussing today—more precisely, who controls the taxation.

What I do not like about these proposals is that it is extremely difficult for individuals and businesses to have to respond to two legal jurisdictions on tax in the same place, yet we seem to have both an EU VAT system and a UK VAT system. I hope that the UK VAT system will deviate rather more from the EU one and be friendlier, lower and apply to different things, but the more that that happens, the more difficult it will be if we are trying to enforce two different VAT systems in one part of the United Kingdom.

I am also concerned about the enforcement mechanisms. We are led to believe that it will be handled by HMRC, but we are also told that the ultimate authority on the EU part of VAT and excise will be the European Court, and therefore there are likely to be inspectors and invigilators—electronic or in person—interfering in the process within what should be sovereign United Kingdom territory. I hope the Government will think again and push back again.

We need more of the detail that the Chancellor of the Duchy of Lancaster has so far withheld from the House. It may be that he does not yet know it all or that his agreement is high level, in principle, but there are details that we need to know—indeed, details that it would be better to know before we legislate today. For example, the Chancellor of the Duchy of Lancaster says that delay periods for adjustment will be necessary for supermarkets and some meat products and so forth. Does that not require some kind of recognition in this legislation? Does it not mean that these jurisdictions do not kick in during the period of grace that we are told will be available?

We need to have more detail from the Government on what exactly happens at the border. I have always explained to the House and others who are not very interested that VAT and excise take place electronically across the borders at the moment, so we are talking largely about an electronic border. We need to know how this electronic border will be programmed to deal with the competing jurisdictions and competing incidences of taxation, and how the product codes and shipment codes will correctly identify the products by category that will be suborned by the EU jurisdiction as well as, properly, by the UK jurisdiction, which ideally would be handling the whole thing.

We do not have nearly enough time to discuss the fundamentally big issues of principle that the Bill brings before us and we have had precious little time to go into the detail. It is all very sad that this rush job is being done like this, but I hope before the Government finish the debate today they will have done a better job of explaining to someone like me why we need to have this dual jurisdiction; how the EU control is going to be limited; how it is going to operate; how, in the early days, the “transitional arrangements”, which we are told about, are going to apply; and why they are not reflected in the current text of this rather unfortunate piece of legislation.