Finance (No. 3) Bill (Ninth sitting)

Debate between Jonathan Reynolds and Peter Dowd

Committee Debate: 9th sitting: House of Commons
Tuesday 11th December 2018 Public Bill Committees

[Jonathan Reynolds]

It is lovely to see you in the chair again today, Ms Dorries. I will speak to clause 84 and our amendments which, as you described, also cover clause 85, which is a supplementary clause.

Clause 84 relates to a somewhat historic issue—the payment of advance corporation tax known as ACT. ACT was payable when companies distributed dividends to shareholders before main corporation taxes were due. These payments could then be offset in profit and loss calculations potentially to reduce the overall tax bill. ACT was abolished under Gordon Brown’s tenure as Chancellor in 1999 to prevent its abuse mitigating revenues to the Exchequer, and to encourage reinvestment rather than excessive dividend payments.

However, there are some legacy cases relating to ACT claims. The clauses are the result of a legal judgment from the Supreme Court test case that impacts those claims—that of Prudential Assurance Company Limited and HMRC on 25 July 2018. This case gave rise to a number of judgments in relation to ACT. I will not read it in full—

[Peter Dowd]

Oh!

Finance (No. 3) Bill (First sitting)

Debate between Jonathan Reynolds and Peter Dowd

Tuesday 27th November 2018 Public Bill Committees

[Peter Dowd]

That is a perfectly fair point. Inevitably, when we get into Committee, the clauses that we discuss are very technical and it is those technical clauses for which we need some evidence.

At the end of the day, we have had written evidence from the Chartered Institute of Taxation on clauses 7, 11, 81 and several others, which I read with great interest. Some of the comments were very pertinent. It would have been a good opportunity to tease out some of the issues in those clauses in more detail. As I said, none of us are concerned about challenge—that is why we came into Parliament. We are here to be challenged, and that is the nature of our democracy.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

My hon. Friend has hit the centrality of the issue. The failure to move the amendment of the law resolution means that this Bill Committee becomes much less of a political conversation and more of a technical one. We can see on the programme motion the amendments that have been ruled out of order—reasonably, by applying the rules that the Government have put on the Committee. It has not been permitted for us to have a political conversation about different approaches to income tax, and if the Committee cannot have the political analysis, we should surely have the technical one, which has to involve experts.

[Peter Dowd]

My hon. Friend has a laser-like focus. In that regard, the Government cannot have it both ways. They cannot tell us that, on the one hand, we are dealing with all these technical issues and we should not be dealing with those wider issues, hence the amendment of the law, but in the same breath tell us that we cannot have any face-to-face consultation or oral evidence.

I give credit to the Government in so far as they have consulted pretty widely on these matters, but I have been involved in lots of consultations that have been paper exercises. I do not mean that lightly—they have been genuine attempts at consultation where people have written in to express this or that view—but during the process, I have certainly been in situations where we have decided, in the light of the evidence that we have and of the information provided to us through that consultation process, that we were going to say, in an open and transparent fashion, “Okay, let’s stop. We have all this consultation. We’ve read it. We’ve listened to it. Why don’t we just tease it out a bit more with some of the people who have taken the time to write back to us?” Organisations have indicated to us that they would welcome evidence sessions. The hon. Member for Aberdeen North has indicated some people we could see, but there are lots more. Frankly, we could have three days of evidence sessions, which would not be a bad thing per se. The idea that we focus it down to one day, with the organisations that hon. Lady has identified, is not, in the grand scheme of things, a difficult process, issue or onus. I exhort the Government to listen carefully to what we have said in the genuine spirit of trying to make this a better Bill. There may be agreement and we may have a better Bill where there is no agreement. I exhort the Government to listen carefully and accede or acquiesce—not capitulate—to our request.

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[Peter Dowd]

Yes, but there is not necessarily a causal link there. The reality is—[Interruption.] Let me tease that out. The evidence does not suggest that, as I have tried to point out. The German economy is 35% more productive, because investment in it is significantly better than investment in this country’s economy. We are having a debate at the moment about the question of uncertainty in relation to Brexit, which is probably having a more significant effect than the hon. Gentleman suggests.

The bottom line is that the idea that cutting corporation tax per se will lead to growth in the economy has not proven to be the case. The economy is still flatlining, despite those cuts to corporation tax. The best part of half a billion pounds is still sitting in corporate bank accounts not being invested, despite corporate tax cuts.

[Jonathan Reynolds]

This is exactly the sort of conversation that we should have, and exactly what the Finance Bill should talk about. International competitiveness is not only an issue of tax rates; I think we all agree on that. We absolutely recognise that the tax rates on corporate taxation are part of that, but there is at the minute a very poor argument for the UK’s being such an outlier among developed nations and continually cutting its rate of corporation tax for diminishing returns, as my hon. Friend has said, when our public services are in dire need, our infrastructure needs are huge and our skills base is being eroded. All of those impact on competiveness as well. It is the balance that we have to get right.

Finance (No. 3) Bill

Debate between Jonathan Reynolds and Peter Dowd

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Peter Dowd]

I suggest that the hon. Gentleman reads the shadow City Minister’s article on LabourList, which sets that out very clearly.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I’ll send you a copy.

[Peter Dowd]

My hon. Friend will send the hon. Gentleman a copy and he will sign it—and Conservative Members might actually learn something. I know it is difficult for my hon. Friends to grasp the concept that Conservative Members might learn something, but they actually might.

Entrepreneurs’ relief costs £2.7 billion a year alone, and benefits only 52,000 people. This bloated relief—and it is bloated—is overwhelmingly spent on a small number of wealthy individuals, with 6,000 claimants receiving relief on gains of over £1 million. I will repeat that: 6,000 claimants receive relief on gains of £1 million. It is no wonder then that the IFS and the Resolution Foundation have called for it to be scrapped. Clause 38 and schedule 15 represent yet another Conservative half-measure.

Taxation (Cross-border Trade) Bill (Eighth sitting)

Debate between Jonathan Reynolds and Peter Dowd

Thursday 1st February 2018 Public Bill Committees

[Jonathan Reynolds]

Two buttons.

[Peter Dowd]

Yes, two buttons: control and whatever it is. As I have mentioned, we are not alone in this view, which is shared by the Delegated Powers and Regulatory Reform Committee. The Government ought to respond to our genuine concerns in this matter, and we will persist in asking them until they do respond to our genuine concerns and those of other agencies, bodies, organisations and people.

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[Peter Dowd]

It is important that we deal with the question raised by the amendment regarding sunset clauses. The Government originally did not want any of the sunset clauses in the European Union (Withdrawal) Bill, but they were required or forced—people can call it what they will—by hon. Members from across the parties to put in sunset clauses. We were told at the time that the inclusion of a sunset clause in that Bill would result in the end of civilisation as we know it. Of course, someone threw a bucket of water over the Government, and they freshened up and realised that they were not going to get away with not having sunset clauses.

The Government have persisted in Committee—they might be doing the same with the Trade Bill—to argue against sunset clauses. They would have us believe that sunset clauses are some foreign or alien concept in parliamentary democracies. Well, they are not. There were even sunset clauses in the nuclear deal with Iran. Sunset clauses exist in all sorts of legislation, including treaties—and we have some 3,000 treaties. They exist right across the piece in legislation. Indeed, the coalition Government, when introducing the Enterprise and Regulatory Reform Act 2013, basically insisted on sunset clauses to reduce the legislative burden. When it suits the Government to have a sunset clause, they will have a sunset clause; in fact, they introduced an Act to have sunset clauses. They are now telling us that sunset clauses are outrageous, and will somehow mess up the whole VAT regime.

Other countries have sunset clauses. For example, sunset clauses in Texas mean that, after 10 or 12 years, some agencies will cease to exist unless they can prove their appropriateness, consistency and status. They have to go through that process. Even organisations have sunset clauses applied to them and they have to show how relevant they are.

The Prevention of Terrorism Act 2005 had a sunset clause. In the past, sunset clauses have been applied to the effectiveness of legislation, and yet we are now being told today that they are somehow outrageous and that the whole Government will grind to a halt if we have them.

Some Canadian legislation—in fact, a whole range of Canadian legislation—has an automatic five-year sunset clause. The Canadians manage perfectly well with sunset clauses. The question is: are this Government so fearful of a sunset clause, so fearful of challenge and so fearful of scrutiny, particularly in relation to this amendment, that they do not want sunset clauses?

There are even sunset clauses in Australia, and they seem to manage. Australia has general sunset clauses; they are not even specific. They have sunset clauses for whole swathes of legislation and they manage perfectly well. South Korea also has sunset clauses. Perhaps that is why it has such a booming economy—because the sunset clauses mean that, time after time, they test and challenge. The only sunset clause in North Korea, no doubt, is the sunset on democracy. We do not want that; we want sunset clauses for the powers this Government have taken for themselves.

[Jonathan Reynolds]

My hon. Friend is making a fantastic speech about the applicability of sunset clauses around the world. Again, however, we have to get back to this point: if the Government still need these powers after the sunset clause is done and the powers no longer exist, they simply have to come back to Parliament. It is not the case that they do not have the power to deal with things; a strong, united Government, with a parliamentary majority, would quite easily be able to come back and put on the statute book anything they needed. That argument simply has not been addressed by the Government.

Taxation (Cross-border Trade) Bill (Sixth sitting)

Debate between Jonathan Reynolds and Peter Dowd

Tuesday 30th January 2018 Public Bill Committees

[Peter Dowd]

I started to listen to the Minister out of a morbid sense of curiosity, but he became far more plausible as time went on. Do I smell a rat? No, I do not at the moment, but there is some concern. The new clause provides for a review of the case for the continued effect on the UK of EU trade remedies after the introduction of the new standard import tariff, and pending full implementation of the new arrangements under schedule 4. It seeks a review of the case for continued use of EU trade remedies between the UK’s exit from the EU and its negotiation of a new relationship.

I am conscious of the statements made yesterday by Michel Barnier. I do not want to poke into that issue—I think hon. Members will be grateful for that olive branch—but there are wider concerns about which EU regulations and rules the UK will follow in the transition period. Will we continue to be a member of the EU in all but name, or will Ministers seek to pick and choose? I will have to look at Hansard, but I got the impression from the reply given to my hon. Friend the Member for Scunthorpe that, unless there are egregious breaches, we will remain for all intents and purposes virtually as we are, which is quite helpful.

Naturally, the outstanding questions about transitional measures are causing great confusion and concern among UK manufacturers currently protected by EU trade remedies. I take some comfort from the Minister’s reassurances, but in evidence to the Committee last week, UK Steel, the British Ceramic Confederation and the Chemical Industries Association were all less than convinced about the Government’s intentions. They all made the case that the trade remedies outlined in schedules 4 and 5 are not only weaker than those currently in place in the EU, but in some instances worse than those used by other WTO countries. It will be important to tease that out a little more in due course.

New clause 15 would require the Government to undertake a review of the advantages and disadvantages of the new trade remedies outlined in schedules 4 and 5. The reality is that such a review may relate to issues of policy or of practice. I am quite flexible about that, as I am sure the Government are—let us have a look at both, if need be, on a case-by-case basis.

Outlining the potential benefits to UK manufacturers of continuing to use EU trade remedies throughout the transition is also crucial. The new clause should not be too controversial, because if the new trade remedies are as robust and thorough as the Minister suggests, a review will show that. However, if the review showed the new trade remedies to be inferior to the current EU measures, that would not be good news. It would clearly show that the Government were content with laxer trade remedies and were not on the side of UK manufacturers, which are some of the largest employers in the country.

I have a number of questions for the Minister about transitional measures. Can he offer assurances to UK manufacturers that the Government will honour the trade remedies currently in place for the UK? He appears to have indicated that—I think that is what he said—but I do not want to put words in his mouth, so I would like to tease that out a little more. Will the Government consider extending the current trade remedies where necessary?

Does the Minister accept that the trade remedies framework outlined in the Bill may not be up and running by the time Britain leaves the European Union? How confident is he that UK manufacturing will be sufficiently protected from state-sponsored dumping throughout the transition period? Have the Government set a date for members of the Trade Remedies Authority to be selected and a date for the TRA to be fully functional? I think the Bill implies that UK trade remedies will apply during the transition period, but how does that fit with the tone of the statement made by Mr Barnier?

It is clear that the Government have huge questions to answer about the effectiveness of the trade remedies in the Bill, and about how they will work throughout the transition period. The devil is in the detail, so I hope that the Government have listened carefully and will try to answer our concerns and those of many people out there.

Question put and agreed to.

Schedule 4 accordingly agreed to.

Schedule 5

Increase in imports causing serious injury to UK producers

[Jonathan Reynolds]

I beg to move amendment 65, in schedule 5, page 81, line 31, leave out from “application” to end of line 32

This amendment removes the requirement for a preliminary adjustment plan.

Taxation (Cross-border Trade) Bill (Second sitting)

Debate between Jonathan Reynolds and Peter Dowd

Tuesday 23rd January 2018 Public Bill Committees

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Q During the steel crisis, I sat in this very room as a member of the Business, Innovation and Skills Committee taking quite a lot of evidence from some of you as well. It is clear that if this bit on trade remedies is got wrong, the consequences will be severe.

My worry on the public and economic tests is that, even in something like the steel crisis, there were people arguing for the benefits of very cheap steel coming into UK for construction and so forth. If those tests are not drafted correctly, frankly, we do not have any trade remedies at all. If we are going to have them in the Bill, how can we draft them to ensure that they are robust and fair? Who should be involved in the Trade Remedies Authority to ensure that that is the case?

Ben Richards: We need an opportunity to have that debate, which we will not have at all with the Bill as it is currently drafted. It will simply be written into secondary legislation—we will not have that ability. We have four or five minutes left to have a discussion about how it should be drawn up. It would take us another couple of hours. That is what we want, as a trade union movement: an involvement in these discussions and debates.

We have huge concerns about the way in which the appointments are being made to the Trade Remedies Authority. In effect, in the way that the Bill is currently written, we are not seeing one economic interest test but three. To give you a one-sentence answer about how it should be is very difficult: we want to engage in that debate. We want to have a role in that process in the future to ensure that our members are confident that those decisions are being taken with their interests in mind.

Kathleen Walker Shaw: On the Trade Remedies Authority, its structure is very important. We would like to see it set up in line with the Health and Safety Commission, where we have three employers, three trade unions and three other interests. I am a bit concerned that we are limiting that to nine, because I have a strong concern that devolved Administrations need to be involved in that process as well.

I would also like to see the Bill developed to give a role for parliamentary scrutiny—for the TRA to be liaising with structures within wider parliamentary scrutiny—on the European economic area IT, and on the decisions of the TRA, and to remove the power of the Secretary of State to veto a decision of the collective scrutiny of Parliament and the TRA on remedies. In that way, we might be some way to getting to the bottom of a justified and effective remedy.

[Peter Dowd]

Q Everybody in the Committee shares concerns about democratic oversight, industry protection, consumer protection, worker protection, the whole question of resources for HMRC, and sunset clauses or the lack of them. Taken together, it is of concern—not just at an individual level. In relation to your role in all this, I do not get the sense that you have had any substantive or significant consultation with the Government as a legitimate group of organisations. Is that a fair assessment of the situation?

Kathleen Walker Shaw: You are picking at a wound there. I was the poor person that drafted our response to the trade White Paper. I spent a lot of evenings doing that and I was more than a little concerned when I submitted that paper—less than eight hours later, the Bills were published. For people who take policy and their engagement with Government and Parliament very seriously, it was difficult not to feel the contempt with which that response that I spent hours sweating over to place before Parliament was received.

Consultation over the trade and customs Bills is vital because the Government have to get this right. There is no margin for getting this wrong. The future of Brexit hangs on these two bills: trade and the taxation cross-border. That is what our success or failure post-Brexit will hang on. I am very nervous about it, but I am more nervous about the fact that the Government are pretending that they are consulting us and they are not. We are very serious people and we want to be taken seriously. We want to help you to get the trade Bill and the cross-border trade Bill right, but we can do that only if we are a serious part of the process.

We have been engaging, but we have not been listened to. It is not enough for the Government to say, “We have consulted”, because if you miss off, “But we haven’t listened to a word you’ve said”, the quality and the integrity of that consultation is brought into severe question. It will not stop us from being delighted at being invited to come and have these conversations with you—we are not making this up, particularly Alan, who works for HMRC.

Alan Runswick: On delivery, my union wrote to Jon Thompson, the chief executive of HMRC, immediately after the referendum result to say that it was a game changer, that he needed to pause the office closure programme, stop making people redundant and evaluate this new situation. We have not even mentioned, and we will not get to, the issue of import VAT for business and for delivery. As well as customs duties, there will be a big increase in import VAT transactions. They will need to be processed, and staff will need to run a compliance regime under the new situation, to counter evasion and avoidance.

We also feel that we have not been properly consulted. We have been trying to engage the Department in serious talks about delivery, how staff can be recruited and trained and how we can retain the existing skills. We most definitely feel that we have not had those serious discussions about how HMRC can be made fit for purpose in the new Brexit position.