Finance (No.2) Bill (Fourth sitting)

Kemi Badenoch Excerpts

Tuesday 27th April 2021 Public Bill Committees

[James Murray]

Clause 126 enables HMRC and Border Force officers to use a civil penalty to combat the unauthorised removal of things that have been seized in situ. When HMRC seizes goods, they are normally kept, as we heard, in Border Force-controlled warehouses. When goods that have been seized are kept on the trader’s premises, the seizure is known as seizure in situ. Currently, the law does not refer to seizure in situ; therefore, if seized goods are removed without prior authorisation, no penalty can be issued. We recognise that the clause will amend that.

We want HMRC to take robust action to deal with those who import illicit items into the UK or seek to bring in things on which duty has not been paid. We want the detention and seizure of things to be a valuable tool in the fight against duty evasion. We therefore do not oppose the clause.

Question put and agreed to.

Clause 126 accordingly ordered to stand part of the Bill.

Clause 127

Temporary approvals etc pending review or appeal

Question proposed, That the clause stand part of the Bill.

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

Clause 127 makes changes to customs and excise review and appeals legislation, to safeguard the right to appeal. To do this, HMRC will be given the power to temporarily approve a business, on application and subject to meeting certain criteria, in order that the business may continue to conduct controlled activities until the conclusion of its appeal into an earlier decision.

As Committee members may be aware, businesses in a number of regimes operated by HMRC require approval before they may conduct certain controlled activities. These include the alcohol wholesaler registration scheme, which regulates the sale of alcoholic drinks, and the raw tobacco approval scheme, which requires the approval of anyone conducting activities involving raw tobacco.

Approval is dependent on a business continuing to satisfy certain fit and proper criteria, which are defined in law. Where evidence shows that the business is no longer fulfilling those criteria, HMRC may, as a last resort, revoke its approval. As with all HMRC decisions, the recipient may request an internal review by an independent officer and, ultimately, has the right to appeal to a tribunal and higher courts.

On receipt of HMRC’s decision to revoke, a business must cease the controlled activity, even where it contests the decision. HMRC currently has no power to pause or suspend its decision, or to allow the business to continue with the controlled activities while it pursues its right of appeal.

Previously, it was believed that where a business sought relief from the courts, such a suspension could be granted. However, comments made by the Supreme Court in 2019 in OWD Ltd v. HMRC highlighted that that may not be the case. If neither HMRC nor the courts have the power to suspend revocation, it could, in theory, cause a business to fail before its appeal has been concluded, fundamentally undermining the right of appeal. It is in order to protect this right that changes are being made. To be clear, the process of temporary approval would apply only in appeals involving civil cases. Those cases where revocation of an approval is linked to criminal prosecution would not be considered.

The changes made by the clause create a new power for HMRC to issue temporary approvals in respect of the control schemes covered by this clause, as they all contain similar fit and proper criteria. Temporary approval would be conditional on the business providing sufficient evidence to support its case that, without that temporary approval, its appeal right is ineffective.

The clause also creates a new appeal right in relation to HMRC’s decision on whether to grant temporary approval. That will ensure that a business has every opportunity to seek protection following a decision by HMRC. The business must demonstrate that it would suffer irreparable harm—rather than just inconvenience—by not being able to conduct the controlled activity in the period between revocation and the outcome of its appeal. That does not alter HMRC’s position that it has judged the business to no longer satisfy the requirements to hold approval; the object of the change is to safeguard appeal rights and not to allow unfit businesses to gain extended periods to trade before an appeal is heard.

The evidential requirements for gaining a temporary approval are intentionally high, to protect revenue and ensure compliance. Any temporary approval would be issued with strict conditions, allowing HMRC to monitor activity closely; any new evidence of unacceptable trading would result in removal of this temporary approval, to protect revenue. HMRC will specify through its public notices the evidence that must be submitted with a temporary approval application, along with details of timings and other relevant matters. The legislation will come into force at a future date to be determined by HMRC and will be brought in by regulations made by statutory instrument.

In conclusion, the clause gives HMRC the power to grant businesses a temporary approval to conduct controlled activities in appropriate circumstances. This power does not currently exist, and it is right that we remedy that situation to provide fairness to taxpayers appealing a decision to revoke their right to trade.

Finance (No.2) Bill (First sitting)

Kemi Badenoch Excerpts

Thursday 22nd April 2021 Public Bill Committees

[Alison Thewliss]

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

[James Murray (Ealing North) (Lab/Co-op)]

[James Murray]

[Kemi Badenoch]

[Jesse Norman]

--- Later in debate ---

[Alison Thewliss]

[Kemi Badenoch]

[James Murray]

Government Equalities

Kemi Badenoch Excerpts

Thursday 22nd April 2021 Ministerial Corrections

The following are extracts from the oral statement on the Commission on Race and Ethnic Disparities report.

[Kemi Badenoch]

This is a good time to remind the House that the current chair of the Runnymede Trust applied to be the Labour candidate for Poplar and Limehouse in 2019, but failed to make the shortlist. I would be keen to know whether the shadow Minister condemns those sorts of remarks, or believes that they are acceptable so long as they are targeted at people she disagrees with.

[Official Report, 20 April 2021, Vol. 692, c. 876.]

Letter of correction from the Minister for Equalities, the hon. Member for Saffron Walden (Kemi Badenoch).

An error has been identified in the response I gave to my hon. Friend the Member for Ipswich (Tom Hunt).

The correct response should have been:

[Kemi Badenoch]

This is a good time to remind the House that the current director of the Runnymede Trust applied to be the Labour candidate for Poplar and Limehouse in 2019, but failed to make the shortlist. I would be keen to know whether the shadow Minister condemns those sorts of remarks, or believes that they are acceptable so long as they are targeted at people she disagrees with.

[Kemi Badenoch]

We did not go to the race relations industry to ask people to tell us the same things they have been telling us for a long time; we went to people who work in the field such as doctors, teachers, policemen, scientists, economists and journalists—including, I might add, a former chair of the Runnymede Trust—to find out what we can do to improve disparities in this country.

[Official Report, 20 April 2021, Vol. 692, c. 880.]

Letter of correction from the Minister for Equalities, the hon. Member for Saffron Walden (Kemi Badenoch).

An error has been identified in the response I gave to my hon. Friend the Member for Aylesbury (Rob Butler).

The correct response should have been:

[Kemi Badenoch]

We did not go to the race relations industry to ask people to tell us the same things they have been telling us for a long time; we went to people who work in the field such as doctors, teachers, policemen, scientists, economists and journalists—including, I might add, a former director of the Runnymede Trust—to find out what we can do to improve disparities in this country.

[Kemi Badenoch]

I thank the hon. Lady for her question and note her comments about the former Runnymede Trust. We on the Conservative Benches have worked well with people such as Trevor Phillips, and one of the commissioners, Samir Shah, is also a former chair of the Runnymede Trust, but I cannot accept the behaviour of the current chair and some staff members.

[Official Report, 20 April 2021, Vol. 692, c. 883.]

Letter of correction from the Minister for Equalities, the hon. Member for Saffron Walden (Kemi Badenoch).

An error has been identified in the response I gave to the hon. Member for Vauxhall (Florence Eshalomi).

The correct response should have been:

[Kemi Badenoch]

I thank the hon. Lady for her question and note her comments about the former Runnymede Trust. We on the Conservative Benches have worked well with people such as Trevor Phillips, and one of the commissioners, Samir Shah, is also a former chair of the Runnymede Trust, but I cannot accept the behaviour of the current director and some staff members.

[Kemi Badenoch]

It is interesting that the hon. Lady raises that point. The Runnymede Trust has said, according to a letter from the chair of the Equality and Human Rights Commission, that the EHRC should not have funding. It implied that the EHRC should be defunded, so if she wants to talk about people who want to defund charities and organisations working on racial equality, she should ask the chair of the Runnymede Trust why she made that statement.

[Official Report, 20 April 2021, Vol. 692, c. 885.]

Letter of correction from the Minister for Equalities, the hon. Member for Saffron Walden (Kemi Badenoch).

An error has been identified in the response I gave to the hon. Member for Liverpool, Riverside (Kim Johnson).

The correct response should have been:

[Kemi Badenoch]

It is interesting that the hon. Lady raises that point. The Runnymede Trust has said, according to a letter from the chair of the Equality and Human Rights Commission, that the EHRC should not have funding. It implied that the EHRC should be defunded, so if she wants to talk about people who want to defund charities and organisations working on racial equality, she should ask the director of the Runnymede Trust why she made that statement.

Finance (No.2) Bill (First sitting)

Kemi Badenoch Excerpts

Thursday 22nd April 2021 Public Bill Committees

[Alison Thewliss]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15 ordered to stand part of the Bill.

Clause 16

Meaning of “general decommissioning expenditure”

Question proposed, That the clause stand part of the Bill.

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

It is a pleasure to serve under your chairmanship, Sir Gary. The clause makes changes to ensure that decommissioning expenditure incurred by oil and gas companies in anticipation of the approval of an abandonment programme, a condition imposed by the Secretary of State or an agreement made with the Secretary of State qualifies for decommissioning tax relief.

Companies operating oilfields in the UK and the UK continental shelf have always been required to decommission the wells and infrastructure at the end of a field’s life. The tax relief for decommissioning expenditure is an important part of the UK’s overall oil and gas fiscal regime, which is balanced to maximise economic recovery of the nation’s national resources while ensuring that the nation receives a fair return for those natural resources. The changes made by the clause will clarify that appropriate expenditure on decommissioning incurred in anticipation of the approval of an abandonment programme, a condition imposed by the Secretary of State or an agreement made with the Secretary of State qualifies for decommissioning tax relief.

The clause does not have any Exchequer costs and does not alter the original policy intent of decommissioning tax relief. It will provide certainty for the UK oil and gas sector, which supports approximately 260,000 jobs, around 40% of which are in Scotland, and which has paid approximately £350 billion in production taxes to date. The clause will provide certainty that all appropriate decommissioning expenditure qualifies for decommissioning tax relief.

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to be back in Parliament physically and to lead on a Public Bill Committee for the first time under your chairmanship, Sir Gary.

[James Murray]

You will not be saying that by the end, Sir Gary.

We recognise that this clause makes a largely technical amendment to the Capital Allowances Act 2001, meaning that certain types of expenditure incurred by oil and gas companies on decommissioning plant and machinery before the formal approval of an abandonment programme will qualify for decommissioning expenditure relief. We will not oppose the clause. However, I want to ask the Minister about subsection (9), which introduces a clawback mechanism. It seems to apply when the anticipated abandonment programme has not been approved and the anticipated condition has not been imposed by the Secretary of State, or an anticipated approval has not been given by the Secretary of State within a specified period—namely, five years from the last day of the accounting period during which the expenditure was incurred.

In such cases, there is an obligation on the beneficiary of the relief to notify Her Majesty’s Revenue and Customs of the situation and to set out how any relevant returns are to be amended. Clearly, as with all tax reliefs, there is a risk that some companies might seek to exploit or use them inappropriately. I would therefore welcome the Exchequer Secretary setting out whether she thinks there is any potential risk of the relief being misused. If so, what actions will HMRC take to reduce the risk? What proactive investigations will HMRC make to verify that those taking advantage of the relief are doing so legitimately, and what penalties or other enforcement action will be taken if instances are uncovered where that is not the case?

[Kemi Badenoch]

I thank the hon. Gentleman for his questions. He raises an interesting point. We have been discussing industry’s concerns for some time over the lack of clarity on decommissioning expenses incurred prior to the approval of an abandonment programme. Industry already supports the measure. We consulted it on the draft legislation, and the clause takes account of comments received, particularly on the clawback mechanism that the hon. Gentleman refers to. We have now excluded the ongoing maintenance costs of assets waiting to be decommissioned from the clawback.

On clawbacks specifically, where expenditure is claimed on decommissioning in anticipation of an approval, the legislation allows five years for that approval to be in place before the clawback is triggered. We listened to industry’s comments during our consultation, and adjustments have been made to the clawback to exclude maintenance costs from the mechanism. The Department for Business, Energy and Industrial Strategy is responsible for overseeing decommissioning work on the UKCS. Where the anticipated approval condition or agreement is not approved by BEIS in the five-year period, it is appropriate for any relief to be clawed back. The legislation ensures that only legitimate decommissioning expenses qualify, and the clawback provides an important protection for the Exchequer.

Question put and agreed to.

Clause 16 accordingly ordered to stand part of the Bill.

Clause 17

Extensions of plant or machinery leases for reasons related to coronavirus

Question proposed, That the clause stand part of the Bill.

[Jesse Norman]

The clause makes provision for an easement for plant and machinery leases caught by anti-avoidance legislation when extended due to coronavirus. The easement has the effect of turning off the anti-avoidance legislation under specific circumstances. The reason for that is that HMRC has identified an issue where some plant or machinery leases could be adversely affected by the Government’s anti-avoidance legislation. This relates to specific circumstances where a lease is extended due to covid-19, and creates unexpected and unwelcome outcomes for many lessors and lessees. Therefore, at the Budget, the Government announced changes to ensure that the anti-avoidance mechanism is not unnecessarily triggered by legitimate commercial activity.

The measure will affect leases where a relevant change in consideration is implemented between 1 January 2020 and 30 June 2021. It is an easement, restoring eligibility to claim capital allowances to the position as originally intended immediately prior to the date of the change in consideration due under the lease. If not deemed appropriate, either party may choose not to apply this treatment, ensuring that no one will be left worse off by the change. The Government expect that the services, construction, manufacturing and agricultural sectors, in particular, will be positively affected by the changes.

The measure is important in assisting businesses that have been badly hit in their legitimate activity by the effects of the pandemic and in ensuring that they are not struck by unexpected tax charges. I therefore move that the clause stand part of the Bill.

--- Later in debate ---

[Alison Thewliss]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 22 ordered to stand part of the Bill.

Clause 23

Cash equivalent benefit of a zero-emissions van

Question proposed, That the clause stand part of the Bill.

[Kemi Badenoch]

Clause 23 makes changes to reduce the van benefit charge—the VBC—to zero for employees who are provided with a company van that produces zero carbon emissions. The van benefit charge applies where an employee is provided with a company van by their employer that they use privately, other than for ordinary home-to-work commuting.

At Budget 2014, the Government announced that the van benefit charge for zero-emission vans would be a percentage of the flat-rate van benefit charge for conventionally fuelled vehicles until April 2020. Those changes were legislated for in the Finance Act 2015. At Budget 2015, the Government announced that the planned increases to the percentages for 2016-17 and 2017-18 would be deferred to 2018-19, and the percentages would increase by 20% for each subsequent tax year, rising to 100% in 2021-22. Those changes were legislated for in the Finance Act 2016.

The changes made by clause 23 will reduce the van benefit charge to zero from 6 April 2021 for all company vans that emit zero carbon emissions, giving those vehicles preferential tax treatment over conventionally fuelled vehicles. The Government announced the measure at Budget 2020 to incentivise the uptake of zero-emission vans and to help the UK to meet its legally binding climate change targets.

Transport is now the largest sector for domestic UK greenhouse gas emissions, and a significant proportion of that is accounted for by road transport. Moreover, vans tend to do more mileage and are more polluting than cars. By reducing the level of the tax charge that would otherwise be applicable, the change outlined in the clause will incentivise the uptake of zero-emission vans and support the Government’s environmental commitments.

[James Murray]

As we have heard, clause 23 seeks to amend the law in relation to the van benefit charge, a taxable benefit that arises when an employee is provided with a company van that is also used at times for personal journeys. We know that from 2021-22 the cash equivalent of the van benefit charge for zero-emission vans is nil. This applies only to those vans that cannot emit carbon dioxide under any circumstances when being driven.

The Government announced their intention to introduce the policy change in the 2020 spring Budget. As the measure seeks to incentivise the uptake of zero-emission vans, we support it standing part of the Bill.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 27

Optional remuneration arrangements: statutory parental bereavement pay

Question proposed, That the clause stand part of the Bill.

Finance (No.2) Bill (Second sitting)

Kemi Badenoch Excerpts

Thursday 22nd April 2021 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Clauses 43 to 46 stand part.

New clause 8—Report on Part 2—

“(1) The Secretary of State shall, before 1 April 2023, publish a report on the impact of the provisions in Part 2 of this Act.

(2) The report in subsection (1) shall include consideration of the impact on—

(a) the rate of plastic recycling in the UK generally,

(b) the rate of PET plastic recycling in the UK,

(c) the rate of Polypropylene plastic recycling in the UK, and

(d) the rate of HDPE plastic recycling in the UK.

(3) The report in subsection (1) shall include consideration of the impact on—

(a) the volume of plastic used in the UK,

(b) the volume of PET plastic used in the UK,

(c) the volume of Polypropylene plastic used in the UK, and

(d) the volume of HDPE plastic used in the UK.

(4) The report in subsection (1) shall include consideration of the impact on—

(a) the volume of plastic stockpiling in the UK,

(b) the volume of PET plastic stockpiling in the UK,

(c) the volume of Polypropylene plastic stockpiling in the UK, and

(d) the volume of HDPE plastic stockpiling in the UK.

(5) The report in subsection (1) shall consider whether—

(a) £200/tonne provides an economic incentive to change the content of packaging for those types of plastic specified in subsection (2),

(b) the economic incentive in subsection (5)(a) remains in the event of lower than average oil prices, and

(c) a tax escalator might be more efficacious.”.

This new clause seeks a review of the efficacy of the proposed plastic packaging tax, with respect to whether the proposals will (a) increase use of certain plastics and (b) provide an incentive to recycle in the event of low oil prices.

New clause 11—Rate review (plastic packaging tax)—

“(1) The Chancellor of the Exchequer must review the impact of section 45 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must estimate the expected impact of section 45 on—

(a) plastic packaging tax revenue,

(b) levels of recycled material (plastic and non-plastic) in packaging, and

(c) levels of reusability and recyclability of packaging material (plastic and non-plastic).

(3) A review under this section must also estimate the expected impact of increasing the rate set out in section 45 by £50 each year.”.

New clause 13—Annual review (plastic packaging tax)—

“(1) The Chancellor of the Exchequer must review the impact of sections 42 to 85 and schedules 9 to 15 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

(2) A review under this section must estimate the expected impact of sections 42 to 85 and schedules 9 to 15 on—

(a) levels of recycled material (plastic and non-plastic) in packaging,

(b) levels of reusability and recyclability of packaging material (plastic and non-plastic),

(c) the waste hierarchy,

(d) levels of carbon emissions, and

(e) progress towards a circular economy.”.

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

As the Committee will know, the Government are deeply committed to greening our economy and being the greenest Government ever. As part of our resources and waste strategy, published in 2018, we committed to reducing waste and incentivising more sustainable production. The introduction of this world-leading tax on plastic packaging is a key part of that strategy.

Plastic waste is a pressing global issue. It often does not decompose and can last centuries in landfill, or ends up littering the streets or polluting the natural environment. More than 2.2 million tonnes of plastic packaging are manufactured in the UK each year. The vast majority is made from new plastic, rather than recycled material, because recycled plastic is often more expensive to use than new plastic. To tackle this, our 2019 manifesto reaffirmed the commitment to introduce a world-leading new tax on plastic packaging from April 2022. The tax will apply to the manufacture and import of plastic packaging that does not contain at least 30% recycled plastic.

The tax charge will arise on unfilled packaging manufactured in the UK and to unfilled or filled packaging imported into the UK. Including imported filled packaging in the tax will prevent any potential disadvantage to the UK packaging industry and means that packaging around imported products—for example, the bottle a drink comes in—will be within the scope of the tax.

The tax will provide a clear economic incentive for businesses to use recycled material when manufacturing plastic packaging. That will help to tackle the problem of plastic pollution, creating greater demand for this material and in turn stimulating increased levels of recycling and collection of plastic waste, diverting it away from landfill or incineration.

Clauses 42 to 46 set out the introduction of the plastic packaging tax. They provide the high-level principles around the charging of the tax, including key definitions needed to give businesses clarity about whether they are liable to the tax on packaging they manufacture or import. The Bill also provides powers to make secondary legislation that will provide further clarity to these definitions. That will be supported by guidance, which will also be published later this year.

Clause 42 introduces the PPT and sets out that Her Majesty’s Revenue and Customs will be responsible for its collection and management, in line with its wider responsibilities for the collection and management of taxes. Clauses 43 and 44 set out that the tax will be paid on packaging manufactured in the course of business in the UK, as well as on imported plastic packaging. For packaging manufactured in the UK, the manufacturer will be liable for the tax. For imported packaging, the person on whose behalf the packaging is imported will be liable, as they are better placed to know about the packaging than those providing customs and transport services to import goods.

Clause 45 sets out that the tax will be charged at a rate of £200 per metric tonne of chargeable plastic packaging. We will come later to the clause that sets out the 30% threshold for recycled plastic, below which the tax will be charged. A £200 rate provides a clear economic incentive for businesses to use recycled material when manufacturing plastic packaging. The clause specifies that this rate applies to a single plastic packaging component, such as bottles, lids and wrappers. This will mean that manufacturers and importers have incentives to include 30% recycled plastic in each type of plastic packaging component that they manufacture or import. If this is part of a tonne, the amount is reduced proportionately. For example, 0.5 tonnes would equate to £100 in tax. Clause 46 provides the high-level principles for the payment of the tax in relation to the relevant accounting periods. Further detail on this will be set out in regulations.

I now turn to new clause 8, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, and new clauses 11 and 13, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. These new clauses suggest that the Government conduct future reviews into the tax and the impact that it has, including after six months of passing the Bill for the tax rate and for all aspects of the tax in the year after introduction, or annually after an initial report.

The Government have already set out a large amount of detail about the expected impact of the tax, and a National Audit Office report on environmental taxes recently concluded that Her Majesty’s Treasury and HMRC

“had undertaken extensive work to understand the possible impact of the tax.”

The tax information and impact note published in March this year set out that, as a result of the tax, the use of recycled plastic in packaging could increase by around an estimated 40%—equal to carbon savings of nearly 200,000 tonnes—with expected revenue from the tax ranging from £210 million to £235 million a year between 2022-23 and 2025-26. Further detail on modelling to assess the impacts of the plastic packaging tax was set out by the Office for Budget Responsibility in its economic and fiscal outlook published in March 2020. Most significantly, that included the increase in recycled plastic in packaging and more marginal impacts, such as switching to alternative plastics or materials.

The aim of the tax is to incentivise the use of more recycled plastic, rather than new plastic, in plastic packaging. The tax will complement the reformed packaging producer responsibility regulations, which will encourage businesses to design and use plastic packaging that is easier to recycle, and discourage the creation of plastic packaging that is difficult to recycle. They will also make businesses responsible for the cost of managing the packaging they place on the market when it becomes waste. Given that, the Government have focused analysis of the plastic packaging tax on the objectives rather than wider issues such as the reuse and recyclability of packaging, as suggested in new clause 13.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review, including the level of the tax, to ensure that it remains effective in increasing the use of recycled plastic. Given the substantive information already published and the fact that limited new information is likely to be available before the tax is introduced, six months after the passage of the Bill would not be the right time to conduct and publish a review into the impact of the tax rate and chargeable packaging components.

As regards evaluating the tax annually after its introduction, being able to accurately isolate the impact of particular policy measures alongside other external factors is inherently difficult, and the Government will carefully consider those issues. As set out in the tax information and impact note published in March this year, consideration will be given to evaluating aspects, including the rate, threshold and exemptions, of the policy after at least one year of monitoring data has been analysed and collected.

The Government agree that it is important to understand the efficacy and impacts of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, we do not think new clauses 8, 11 and 13 are necessary. The clauses in the Bill form the first part of the legislation needed to introduce the plastic packaging tax in April 2022. I therefore move that they stand part of the Bill.

[Alison Thewliss (Glasgow Central) (SNP)]

I rise to speak to new clause 8, tabled in my name and that of my colleagues. I remain interested in the idea of a plastic packaging tax, and I will support it because too many of our natural resources are being wasted. We know from looking around that things are often thrown away that could be used again. We certainly broadly support what the Government are trying to do here, and it is a shame that it does not align with the deposit return scheme, which has been delayed in England but will move ahead in Scotland, because doing these things at the same time would have made a lot of sense and would make for a cohesive and coherent policy.

We tabled our new clause because there are aspects of the Bill where we need a wee bit more detail and aspects where the Government could be more ambitious. It is an ambitious new policy, but I think that more could be done. For example, we understand from the consultation that Her Majesty’s Treasury has closed a loophole that would have allowed people to switch to bringing in packaging from abroad, but there are still questions around the operation of the paperwork and the audit trail that will be required to ensure the success of the scheme. We also understand that the provisions are to be made by regulation under the negative procedure, and we urge the Government to be as clear as possible about how that will work, because it is important. Those in the industry will want to know how that will operate, and it falls to us as elected representatives to scrutinise that as much as we can to ensure that it is done properly.

Having spoken to stakeholders, there are concerns that I want to set out. The first is about the 30% threshold. Last night, I went to pick up a bottle of brand-name lemonade from the supermarket as part of my dinner. It proudly proclaimed on the side that it was 50% recycled, which is already above the 30% threshold—they were already doing more.

Some plastics lend themselves more to a higher level than others. PET, which is used in fizzy juice bottles such as my lemonade bottle, can be commonly and easily recycled up to 100%, so 30% is quite low for that type of plastic. The new clause seeks to look at different types of plastic and the scope for recycling them.

Polypropylene, which is used for food-grade plastics, is much more difficult to recycle. Just before lunchtime, a briefing from the Food and Drink Federation reached me. It queries what will happen about food-grade plastics and whether food businesses can avoid paying the plastic packaging tax when they cannot legally increase the recycled content of packaging in certain polymer types and formats for food contact. There are different regulations for food-grade plastics than for other plastics.

HDPE, which is used in milk bottles, could reach 30%. The dairy industry road map suggested that it was aiming for 50% of recycled material in opaque milk bottles. Again, we are not quite sure what the 30% makes possible. It would be good to be more ambitious in the areas where we can do more recycling, so that we can storm ahead. In areas where it is more difficult, it makes sense to look at things slightly differently.

The Association of Accounting Technicians commented on the international context. Brands such as Kraft Heinz have committed to make 100% of packaging worldwide recyclable or compostable by 2025. The American Chemistry Council’s plastics division is working towards 100% of plastic packaging being recyclable and recoverable by 2030. The European Commission and the Australian Government are also pushing ahead and say that 30% appears to lack ambition on a global scale.

I gently urge the Government to see if there is a differentiated approach that might be a bit more ambitious and a bit more detailed, to allow those areas where more speed is possible to push ahead. The Green Alliance believe that a differentiated obligation would be useful, because there is potential there. While we want all areas to be recycling 100% if possible, there are real technical difficulties in doing so at the moment.

The Green Alliance is also concerned about perverse outcomes from the Bill around packaging composed of multiple materials, such as card coated in a plastic or other such elements. Such items are very difficult and specialist to recycle. We would not want people to switch to those items rather than plastics; that would make the recycling situation worse because those items cannot be recycled and recovered as easily. Our new clause also addresses that point, as well as ensuring the reporting of recycling rates and the volume use of the relevant plastics.

It is important to note that the price of plastics, both recycled and virgin material, is very volatile, fluctuating with the oil price, which as we all know has moved considerably in recent years. We are worried that the scheme will not deliver the desired outcome in the event of low oil prices. Some experts suggest that plastics recycling is unviable if the oil price is under £65 a barrel. An HMT analysis of the tax level required to balance that volatility and reduce exposure would seem logical.

The £200 per tonne levy could be set higher, and there should be further analysis. At £200 per tonne, it might be more viable for businesses to pay the tax, rather than recycle the materials, which is not the Government’s very laudable aim. It would be useful to understand that fully, as low oil prices will have an impact on the viability of recyclers. Some have attributed the failures of recycling plants in London and Lincolnshire in 2015 and 2017 to that oil-price volatility. We want to ensure that those recyclers are viable businesses. We want to give a future to this sector and to ensure that these businesses can thrive, because they do good work.

A contrast has been drawn with the landfill tax, which has a clear trajectory and clear predictability, allowing people to plan a way for the market to shift to alternatives. We need to make it as easy as possible for businesses to do that. An escalator, as suggested by the Green Alliance, would be useful, so that people can plan and, if behaviour changes or other prices play into that, there is a clear sense of where we are going.

--- Later in debate ---

[Abena Oppong-Asare (Erith and Thamesmead) (Lab)]

It is a pleasure to serve under your chairship, Sir Gary—for the second time this week for me.

I begin my discussion of the plastic packaging tax by saying that we welcome the new tax in principle. As members of the Committee can see, we have tabled a number of amendments to the clauses in this part of the Bill. We hope to encourage the Government to make improvements where they are needed. I will make some general remarks and be brief about the other proposals.

Plastic pollution is one of the biggest threats to our environment. In the UK, an estimated 5 billion tonnes of plastic are used every year, nearly half of which is packaging, and 67% of plastic waste comes from packaging. A report from the World Wildlife Fund calculated that total plastic waste generation in the UK could increase to about 6.3 million tonnes by 2030. As the Minister rightly mentioned, the vast majority of the plastic packaging used in the UK is from new rather than recycled plastic. We also know that far too much of that plastic waste goes to landfill or is incinerated, rather than being recycled or reused, so there is a dual problem: the environmental impact of producing new plastic, and the waste that is created by the failure to recycle plastic.

As the Green Alliance, to which I am grateful for its briefing on the issue, has said, solving those problems without increasing other environmental burdens will require an approach that tackles wider concerns about unsustainable resource use. It is a challenge that businesses, Government, and the whole of society must face together. The new plastic packaging tax is an opportunity to use the tax system to reduce the production of new plastics, encourage the use of recycled plastic, and divert plastic away from landfill or incineration.

However, we have a number of concerns about the detail and operation of the tax set out in these clauses. As the Exchequer Secretary mentioned, clause 45 sets a rate of £200 per metric tonne of chargeable plastic packaging components. We are concerned that this low flat rate tax will not provide enough of an incentive to encourage plastic manufacturers and importers to move to a greater use of recycled plastic at the speed we need them to. I echo comments made by the hon. Member for Glasgow Central, which the Green Alliance and others have also noted, that the relative effectiveness of the flat tax is likely to change according to market conditions, including seasonal variations in plastic prices and fluctuations in oil prices. Over the past year, low oil prices have impacted on the competitiveness of recycled plastic versus new plastic.

Our new clause 11 is a probing amendment to get the Government to review the impact of the £200 rate, and to consider a rate escalator through which the per tonne charge would increase each year. Of course, we understand that further work is required to set this at an appropriate level, but an escalator would set a clear expectation on the industry over the coming year. The SNP’s new clause 8 makes a similar point about whether the proposed rate provides the right incentive to remove non-recycled plastic from packaging as much as possible. The Food and Drink Federation has also asked whether the Government will consider ringfencing funds from the plastic packaging tax, to be reinvested in the UK’s plastic recycling infrastructure. I hope that when the Exchequer Secretary replies, she can respond to a number of the concerns that we have raised.

I will just add that our new clause 13, which is also in this group, is more of a general review on the impact of tax overall on levels of recycled material in packaging. That includes non-plastic material, the waste hierarchy, levels of carbon emissions, and progress towards a circular economy. Again, I hope the Exchequer Secretary can pick up on some of those points.

[Kemi Badenoch]

I will go through the points that hon. Members have raised, and I think I will be able to answer quite a few of their questions. On the point about the 30% recycled plastic threshold being too low to be effective, I would say to the hon. Member for Glasgow Central that a £200 per tonne rate for plastic packaging that does not contain at least 30% recycled plastic will provide a clearer economic incentive for businesses to use more recycled plastic in the production of packaging—at the moment, it is just about 10%—and, in many cases, will make it more cost effective. We as a Government believe that setting the threshold for the level of recycled packaging at 30% is ambitious, reflects the pressing need to act on this issue and is achievable in the foreseeable future for many types of packaging. There is no point setting a threshold that we do not think people will be able to meet.

On the question of consultation with industry representatives and stakeholders, we consulted extensively. All regulations under this part of this Bill will also go through a public technical consultation before they are finalised. We will seek comments from interested stakeholders. HMRC has also set up the plastic packaging tax industry working group and conducted meetings with it to support the implementation of the tax and aid the process of drafting regulations and guidance. I take the point that the hon. Lady has made about the clarity of that guidance, and I am sure—because HMRC is working with the industry working group—that it will get there. The group consists of an independent expert and trade organisations that cover the wide range of sectors affected by the tax, ensuring that a broad range of views are taken into account.

To date, the Government have conducted extensive engagement with the industry on the design of the tax, and held two policy design consultations and one technical consultation about the clauses of this Bill. HMRC also continues to have regular contact with the devolved Administrations, non-Government departmental bodies, and other interested stakeholders about all activity regarding the tax.

[Alison Thewliss]

I am glad to hear that that engagement is ongoing. Can I ask whether the Food and Drink Federation is included within that? I am a wee bit concerned that its concerns came through this afternoon, just before we were due to discuss this issue. Perhaps the timetable that we have gone through with the Bill has surprised people who thought that they had a couple of days longer to get their submissions in, and I would like to know whether the Food and Drink Federation was part of that.

[Kemi Badenoch]

The Food and Drink Federation is part of the industry working group. The other members are WRAP, the British Plastics Federation, the Chartered Institution of Wastes Management, the Foodservice Packaging Association, the Grantham Institute, the Chartered Institute of Logistics and Transport, Inkpen, the British Retail Consortium, the Packaging Scheme Forum, the Association of the British Pharmaceutical Industry and the Forum of Private Business.

I was asked whether there is evidence that the tax will cause any change because of the level that it has been set at, but I think I answered that in my previous answer.

The hon. Members for Erith and Thamesmead and for Glasgow Central asked about the oil price. The Government recognise that the price of oil may impact on the demand for virgin and recycled plastic, which is why we are putting in place a number of reforms to transform the economics of recycling. A stabilisation fund to protect against changes to the oil price would be highly complex to administer and would carry a risk to public finances. We are not going with that, but tax measures are being introduced by the Department for Environment, Food and Rural Affairs, including extended producer responsibility reforms and a deposit scheme. The hon. Member for Glasgow Central mentioned that there is one in Scotland, and we will be introducing one in England as soon as is practical. We are seeking feedback on proposed timelines from DEFRA’s consultations. All of that will help increase the supply and quality of recycled plastic, making it a cheaper and more viable alternative to virgin plastic. That will also make demand for recyclable plastic less susceptible to changes in the oil price.

There was a similar question about complex multi-material packaging. We are not making an exemption for that, because during the consultation on the treatment of multi-material packaging, the Government decided that all packaging in which plastic is the largest material by weight should be within the scope of the tax. This will make it easier for businesses to administer the tax, and it will also rightly focus on packaging components that use the most plastic as a proportion of all material. We are confident that a reformed producer responsibility system for packaging will complement the tax and incentivise businesses to design and use packaging that can be recycled more easily.

[Alison Thewliss]

One of the things that has been raised with me is that, if someone gets a traditional coffee cup from any high street coffee chain, the coffee cup would not be within the scope of the Bill, but the lid would be. Does that not seem a wee bit perverse?

[Kemi Badenoch]

I am not sure that is the case. HMRC and the members of the working group could give specific details on exactly how that would work, but we are having the public technical consultation. That is the sort of question that can be raised there; hopefully, it will receive an answer.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clauses 43 to 46 ordered to stand part of the Bill.

Clause 47

Chargeable plastic packaging components

[Abena Oppong-Asare]

I beg to move amendment 20, in clause 47, page 26, line 4, at end insert—

“(6) Before making regulations under subsection (5), the Commissioners must consult—

(a) industry representatives,

(b) environmental NGOs, and

(c) any other relevant individuals or organisations.”

--- Later in debate ---

Can the Minister address these concerns directly? What will the Government do to encourage recycling of this type of material? How will they ensure that the plastic packaging tax does not inadvertently increase the use of plastic? Finally, will they consider bringing the materials that I have just talked about within the scope of the tax in the future?

[Kemi Badenoch]

Clauses 47 to 50 set out key high-level definitions for the plastic packaging tax, which between them define the meaning of “plastic packaging”, when packaging is in scope of the tax and at what point packaging becomes chargeable. These are important definitions that give businesses clarity about whether their packaging will be liable to the tax, so I will go through them thoroughly. I will add that they will be supported by regulations and guidance later this year, to give further clarity to businesses.

Clause 47 determines the minimum threshold for the recycled plastic content that packaging must meet to be out of scope of the tax. For packaging that comes under this threshold, clause 47 also sets out at what point this packaging becomes chargeable. For imported plastic packaging, clause 50, which I will turn to shortly, also needs to be considered when determining the tax point. The tax will be charged on plastic packaging that contains less than 30% recycled plastic when measured by weight, and once it has gone through its “last substantial modification”. The concept of “last substantial modification” was introduced following stakeholder feedback that the packaging supply chain is complex and packaging is not always completed by a single manufacturer. By moving the tax point to after the last substantial modification, we reduce the risk that UK manufacturers will be disadvantaged by the tax by bringing the tax point to when the packaging is finished, as it is for imported packaging. This also keeps the tax point as close to the manufacturer of the packaging as possible, where there is most knowledge and evidence about what recycled plastic it contains. I hope that that answers the questions from the hon. Member for Erith and Thamesmead.

Let me turn briefly to amendment 20, which was tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. It would require the Government to consult industry representatives, environmental non-governmental organisations and other relevant organisations prior to making regulations under subsection (5) of this clause. Since the Budget announcement in 2018, my officials have conducted two policy consultations on the design of the tax and a further technical consultation on the draft legislation in this Bill. These responses were analysed to inform and validate policy decisions for the design of the tax. The Government are currently developing regulations and will continue to consult industry representatives, both through Her Majesty’s Revenue and Customs’ plastic packaging tax industry working group, which I mentioned and, more broadly, through a technical consultation on these regulations, as with all other regulations that are required to support the implementation of this tax. Given that comprehensive consultation with external stakeholders, such as that detailed in this amendment, has and continues to be a major feature of the design and implementation of this tax, the amendment is not necessary.

Clause 48 defines what a “packaging component” is—a product designed to be suitable for use for the containment, protection, handling, delivering or presentation of goods in the supply chain. This includes items such as plastic wrap, drinks bottles, and food packaging such as yoghurt pots and ready-meal trays. The scope of this definition includes packaging that does not fulfil its packaging function until it is used by the end consumer. This definition was revised following a technical consultation to ensure that only items designed to be suitable for use as packaging in the supply chain of the goods from the producer—in other words, the manufacturer—to the consumer are in scope; but to provide clarity to the person liable for the tax, who may not know the eventual use of the packaging, it does not matter whether the packaging is used in a supply chain or by an end consumer for packaging such as cling film or bubble wrap.

Clause 49 defines key terms relating to plastic, including the meanings of “plastic” and “recycled plastic”. The definitions in this clause determine whether a packaging component is plastic, and whether any of the plastic within that packaging component is recycled. The definition of plastic includes alternative plastics, such as biodegradables and compostables, putting them in scope of the tax. Although alternative plastics can play a role in addressing plastic waste, further evidence of their impact is required. For this reason, work is ongoing in this area and we will keep their tax treatment under review. The hon. Member for Erith and Thamesmead asked why the definition of plastic packaging in the Bill does not align with packaging regulations terminology. We recognise that there are differences between the definition of plastic packaging for the tax and packaging producer responsibility obligations, an issue that the British Plastics Federation raised. However, differences between the design of the tax and these responsibility obligations mean that a different approach is required. For example, the tax will have quarterly reporting periods, whereas businesses have longer to determine use and report their annual packaging producer responsibility obligations—these are often known as packaging recovery notes, or PRNs. Furthermore, PRNs adopt the EU definition of packaging, and now that we have left the EU we do not feel it appropriate to use this, especially as we are aware that the EU definition is under review and therefore subject to change.

Clause 50 establishes the time of importation. It ensures that, where there is a customs formality in place, such as customs warehousing, the tax will become chargeable only after the plastic packaging has cleared the customs processes where these apply. That will ensure that the tax does not act as a barrier to international trade and gives clarity to businesses about when the tax becomes due for imported plastic packaging.

I turn to new clause 12, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Manchester, Withington. The new clause suggests that the Government conduct a future review into the impact of clause 47, including the impact of increasing the 30% threshold for recycled content and having different thresholds for different types of plastic packaging. A £200 per tonne rate for plastic packaging that does not contain at least 30% recycled plastic will provide a clear economic incentive for businesses to use more recycled plastic in the production of packaging. In many cases, it will make using recycled plastic the most cost-effective option. Following consultation, the Government concluded that a single threshold will make the tax simpler for businesses to administer, minimise the compliance risks associated with multiple threshold levels and reduce the risk of lowering incentives for some types of packaging to include more recycled plastic.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review, including the level of the tax, to ensure that it remains effective in increasing the use of recycled plastic. As I pointed out when discussing the previous set of new clauses tabled by Opposition Members, given the substantive information already published and the fact that limited new information is likely to be available before the tax is introduced, six months after the passage of the Bill would not be the right time to conduct and publish a review into the impacts of the recycled threshold for chargeable packaging components. The Government agree that it is important to understand the efficacy and impacts of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, the Government do not think that new clause 12 is necessary.

In conclusion, this group of clauses define key terms needed for the plastic packaging tax to work. They will be supported by secondary legislation and guidance, to provide further clarity on these terms.

[Abena Oppong-Asare]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.

Clauses 48 to 50 ordered to stand part of the Bill.

Clause 51

Plastic packaging components intended for export

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to consider clauses 52 and 53 stand part.

[Kemi Badenoch]

Clauses 51 to 53 set out the circumstances when plastic packaging tax can be deferred or exempted and when tax paid packaging is eligible for a tax credit. As I explained before, the rationale of the tax is to encourage the use of recycled plastic instead of new material within plastic packaging. To maximise the incentive for businesses to use recycled plastic, the Government, as a general rule, believe it is important to include types of plastic packaging even where it may be challenging to increase the level of recycled plastic. That will encourage further investment in the recycling infrastructure and innovation required to overcome these challenges.

These clauses provide for the deferral of PPT and the provision of tax credits for packaging that is exported. They also exempt packaging used in the immediate packaging of licensed human medicines; aircraft, ship and train stores; and packaging used to transport imported goods. I will go through the rationale for each of these in turn. These and other clauses in the plastic packaging tax legislation use the term “plastic packaging component”. However, for ease, from this point onwards I will use the term “plastic packaging” instead.

Clause 51 sets out that plastic packaging imported into or manufactured in the UK that is intended for export within 12 months is not chargeable. Based on consultation feedback, the clause requires that the export must be made within 12 months of when a plastic packaging component is manufactured or imported. The packaging must always have been intended for export. This relief will not apply to transport packaging used to export goods such as plastic pallets and wrap, given the administrative challenges of tracking and evidencing that this packaging has been exported. Clause 52 provides for exemptions from PPT for certain plastic packaging.

[Peter Grant (Glenrothes) (SNP)]

I apologise for my late arrival, Sir Gary; I was held up in another Committee. Could the Minister expand more on the rationale behind exempting plastic packaging that is manufactured for export? The whole problem with plastics is that plastics that are manufactured here end up in the stomachs of animals in the south Atlantic and the south Pacific. Has she considered, for example, exempting only materials being exported to countries where it is known that there is a similar tax system in place when they are imported? I can understand that we do not want a double tax if the plastic is being exported to a country where there is also an import tax, but is she concerned that the environmental impact of the tax will be reduced if companies can manufacture this stuff and then export it anywhere in the world without having to pay the tax?

[Kemi Badenoch]

We have considered extensively the issue around managing export and one of the things that we did not want to do is to disadvantage UK companies, which would be competing with companies that did not have to pay a similar tax. This measure will encourage other countries into which plastic is being imported to have their own regimes, which would make sure that we have a balanced global system. So, that is why. I think the hon. Gentleman is speaking specifically on the export of packaging, rather than on transport packaging, which is what I was actually talking about.

I think I have said this before, but I will repeat it just in case I did not. This relief will not apply to transport packaging used to export goods, such as plastic pallets and wrap, given the administrative challenges of tracking and evidencing that the packaging has been exported. That is still on clause 51.

Clause 52 provides for exemptions from the plastic packaging tax for certain plastic packaging. The clause exempts transport packaging used to import goods to the UK. There are limited records of transport packaging used on imports, such as pallets, crates and pallet wrap, and the importer will often have little to no control over, or knowledge about, the amount or type of transport packaging used. As a result, the Government believe that the burden of including this packaging in the scope of the tax would be disproportionate to the environmental impact of the packaging for both businesses and HMRC.

Clause 52 also exempts aircraft, ship and train stores, as defined under section 57 of the Customs and Excise Management Act 1979. This is similar to the operation of other taxes, notably excise duties that offer relief for stores on aircraft, ship and train stores, where products will be sold for retail or consumed on board.

Finally, clause 52 sets out a narrow exemption for plastic packaging used in the immediate packaging of licensed human medicines. Testing requirements mean there are greater barriers to including recycled plastic in this packaging, which go beyond sourcing concerns for other packaging such as food contact packaging. As a result, the tax may have unavoidable impacts on patients and vulnerable people. The Government recognise that this is a complex and difficult issue, but based on evidence that has been provided we are confident that it is feasible to operate this exemption.

The Government have carefully considered the case for providing exemptions for other types of packaging where it is challenging to include recycled plastic. The Government believe that including these types of packaging maintains the incentive to find new ways to overcome these challenges, but will keep exemptions from the tax under review. Clause 52 includes a power to create further exemptions from the tax where appropriate.

Clause 53 introduces powers for the Government to make regulations for tax credit where a person has already paid PPT on the packaging. This credit would be available where packaging is subsequently exported from the UK. That will support the competitiveness of UK businesses selling their products abroad. The credit would also be available where the packaging is subsequently converted into a different packaging component and prevents the tax from being charged twice. The Government will provide further guidance about when the tax is due, to minimise the circumstances where credit for subsequent conversion is necessary.

In conclusion and to reiterate, to maximise the incentive for businesses to use recycled plastic, the Government believe that, as a general rule, it is important to include types of plastic packaging even where it may be challenging to increase the level of recycled plastic. However, these clauses ensure that UK manufacturers are not disadvantaged by having to pay the tax on exports. They also provide exemptions to prevent risk to human health, to ensure similar treatment of aircraft, ship and train stores to that of other taxes, and where the administrative burden of controlling transport packaging used on imported goods would be disproportionate to the environmental benefits.

I therefore move that these clauses stand part of the Bill.

[Abena Oppong-Asare]

As we are now getting into some of the more technical details of the plastic packaging tax, I shall keep my remarks brief.

Clause 52 makes a number of sensible exemptions from the tax, including for packaging of medicines or other medical products. We welcome this exemption, of course, but it would be good to have reassurance from the Minister that the list of exemptions will be kept as short as possible. Clause 53 introduces tax credits for situations in which a person becomes no longer liable to pay the tax. At this point, could the Minister confirm that HMRC will have the resources that it needs to undertake the considerable administration involved in this new tax?

[Kemi Badenoch]

I think that I can reassure the hon. Lady on those points. We have kept the exemptions as small as possible. Industry would have liked there to be many more exemptions, but we think that this is the right place. And we of course recognise that HMRC requires resources for any new regulations. That is something that we continue to address, as I am sure my right hon. Friend the Financial Secretary to the Treasury will attest.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

Clauses 52 and 53 ordered to stand part of the Bill.

Clause 54

The register

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss that clauses 55 to 58 stand part.

[Kemi Badenoch]

Clauses 54 to 58 make provision and set out the registration requirements for businesses liable to plastic packaging tax—or PPT, as it will henceforth be known—including the threshold that businesses must exceed before they are required to register for the tax. As I set out in my previous remarks, the tax applies to UK manufacturers of plastic packaging and importers of packaging. The Government announced at Budget 2020 that PPT would exclude businesses that manufacture or import less than 10 tonnes of plastic packaging. The Government believe that, by taking this approach, we will retain the vast majority of plastic packaging within the scope of the tax, while limiting the disproportionate burden on small business. The Government still expect businesses below the de minimis threshold to work towards increasing the recycled plastic content in their packaging.

Clauses 54 and 55 require HMRC to keep a register for the purposes of administering the tax, and establish the circumstances in which manufacturers and importers are liable to be registered. These clauses set out two tests to determine whether a person will exceed the de minimis threshold in either the coming 30 days, the forward look test, or over the past 12 months, the backward look test. This is a similar approach to that for other taxes, for example the VAT de minimis threshold, which is well tested. Packaging imported or manufactured in the UK before 1 April 2022 will not count towards either test.

Clause 56 provides for the period within which a person must notify HMRC of their liability to register for the tax. It also allows HMRC to make regulations about the information required and how it is provided. Clauses 57 and 58 provide for when a registration can be cancelled and corrected. HMRC may deregister a person if it is satisfied that the person was never liable to the tax, or has not been liable for 12 months. Clause 58 also allows HMRC to make further regulations regarding corrections of the register.

These clauses provide the essential framework for the administration and registration of businesses liable for the tax. The inclusion of a de minimis threshold ensures that the tax captures businesses only where the revenue and environmental benefit exceed the administrative burden of the tax. I therefore urge that the clauses stand part of the Bill.

[Abena Oppong-Asare]

Again, I have relatively little to say on the clauses, which in this case relate to registration. I do note that firms do not have to register or pay the tax if they manufacture or import less than 10 tonnes of plastic packaging. Is the Minister concerned that that is quite a sharp threshold, whereby producing just over 10 tonnes could bring a firm into the scope of the tax? Has the Treasury given any consideration to a more gradual threshold? Also—I am struggling to talk, because I have a mask on my face—let me ask the Minister what monitoring will be undertaken to ensure that all the individuals and firms that are required to be on the register are in fact registered?

[Alison Thewliss]

In practical terms, how many additional staff will be brought into HMRC to deal with compliance? Does the Exchequer Secretary have an estimate of the cost to the Government? Is there any estimate of the cost to firms of complying with the additional paperwork? Firms are already having to do quite a lot of additional paperwork following Brexit.

[Kemi Badenoch]

I believe that the first question from the hon. Member for Erith and Thamesmead was about avoidance risk because of where we have set the de minimis threshold. As with other taxes, the Government intend to implement measures to prevent abuse—including anti-avoidance measures covered in later clauses, which I will come to—and, where appropriate, to enable HMRC to take action to tackle the artificial splitting of a business. Connected persons will also be treated as a single organisation in assessing whether they exceed the de minimis threshold.

On business readiness, awareness and the amount of support and guidance provided, which the hon. Member for Glasgow Central referred to, we have consulted extensively to ensure that businesses are ready. We have been discussing the measure for several years now, as the hon. Lady will remember from previous Finance Bills; it will be introduced in 2022. We are raising awareness through consulting on the tax, including through the technical consultation on draft legislation and through work with industry, which will help us to ensure that the regulations are fit and ready.

On administrative cost, we think that 20,000 manufacturers and importers of plastic packaging will be affected by PPT. For plastic packaging manufactured in the UK, the manufacturer must register for and pay the tax; for plastic packaging imported into the UK, the person on whose behalf the packaging is imported must register and pay. They will usually be the consignee on import documentation, but where a consignee or co-signee can demonstrate that they are acting on behalf of another business that owns the goods, as in the case of freight forwarders, the owner must register an account for the tax.

We have looked at all the measures to ensure that businesses are ready and that costs are proportionate, and we feel that we have struck the right balance.

[Abena Oppong-Asare]

I appreciate that the Government are looking into this to ensure that businesses are ready, but I would like a bit more clarification on what they are doing to monitor that businesses are registered.

[Kemi Badenoch]

That is a point that we will come to in later clauses.

Question put and agreed to.

Clause 54 accordingly ordered to stand part of the Bill.

Clauses 55 to 58 ordered to stand part of the Bill.

Clause 59

Notices imposing secondary or joint and several liability

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss that schedule 9 be the Ninth schedule to the Bill.

[Kemi Badenoch]

Clause 59 and schedule 9 set out secondary liability and joint and several liability for the plastic packaging tax. As with any tax, there is a risk of fraud and non-payment; the Bill introduces measures to enable HMRC to effectively tackle non-compliance.

Clause 59 will introduce secondary liability notices and joint and several liability notices. Schedule 9 contains powers to make a person operating with non-compliant businesses jointly or severally liable for the tax, or hold them secondarily liable where the tax has not been paid. While secondary liability is retrospective, joint and several liability is prospective; a secondary liability notice makes a person liable for tax that has previously not been paid, whereas a joint and several liability notice makes the person liable for future tax after the notice is given. Both notices will work in tandem to enable HMRC to tackle non-compliance with the PPT through recovery of the tax from other people in the supply chain, as is common in other tax regimes.

Use of the provisions will be limited to situations in which a person knows or ought to have known that tax should be paid, but where it has not been paid or is at risk of not being paid, on chargeable plastic packaging. This includes situations in which a person has previously been notified by HMRC of non-compliance by another person in their supply chain. Decisions in respect of secondary liability and joint and several liability notices, such as their issue and revocation, will be appealable to tribunal and may also be reviewed by HMRC.

Secondary liability and joint and several liability are essential compliance tools that enable HMRC to recover unpaid tax from another person in the supply chain when certain conditions are met. They have been successfully used in other taxes to ensure compliance.

[Abena Oppong-Asare]

Clause 59 and schedule 9 make provision for secondary liability or joint and several liability, as mentioned by the Minister. We do support these measures to prevent the avoidance of this tax by companies, but concerns have been raised by the Chartered Institute of Taxation and others that additional administrative and financial burdens for businesses may arise out of this joint liability. Businesses in the supply chain, including retailers and manufacturers of products that use plastic packaging, will not necessarily know whether the supplier of plastic packaging has accounted for the appropriate amount of tax. Can the Minister reassure us that there will be a straightforward way for businesses to check that the correct amount of tax has been paid and that they do not bear joint and several liability?

[Kemi Badenoch]

On that question, there is general support for this proposal, on the basis that it will be applied only where a person knew or had reasonable grounds to suspect that the tax had not been accounted for. For example, if an overseas seller confirms that the tax is not due and the business purchasing the goods in the UK has taken reasonable steps to verify this, it will not be held liable.

This approach is used effectively in other tax provisions; it is not a new thing that we will be doing. Businesses will be considered secondarily liable or jointly and severally liable for the tax in certain situations only where they knew, or had reasonable grounds to suspect, the tax had not been paid. The Government will continue to work with the sector on what constitutes due diligence in establishing whether the tax has been properly accounted for, and will publish further guidance on this.

Question put and agreed to.

Clause 59 accordingly ordered to stand part of the Bill.

Schedule 9 agreed to.

Clause 60

Measurement of weight etc

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clause 61 stand part.

That schedule 10 be the Tenth schedule to the Bill.

Clause 62 stand part.

That schedule 11 be the Eleventh schedule to the Bill.

Clauses 63 and 64 stand part.

That schedule 12 be the Twelfth schedule to the Bill.

Clauses 65 to 67 stand part.

[Kemi Badenoch]

I now turn to clauses 60 to 67. Among other things, they provide for how HMRC will enforce and administer the tax, which was the question asked by the hon. Member for Erith and Thamesmead.

These are technical clauses that grant powers to make regulations on the detailed operation of certain aspects of the tax. The amount of tax due is determined by the weight of the plastic packaging component, so a provision is needed to ensure that the weights used are accurate and can be assessed, to ensure that all businesses liable for the tax are treated fairly.

It is also essential to have mechanisms in place to collect the tax from businesses and to take action to recover tax when it is not paid, as required by the legislation. To ensure that the revenue is protected, businesses will need to keep appropriate records in respect of their tax liability. These provisions grant powers to set out what records they are required to retain and for how long, so all relevant information is available in the event of a later query.

The measures in schedule 12 are necessary to ensure that HMRC can take samples of plastic packaging to verify that the right amount of tax is paid, share information with other named public bodies and take effective action to protect the revenue. Clause 65 enables HMRC to require a person to give security for the payment of any tax likely to be due, to protect the revenue in certain circumstances. Clauses 66 and 67 provide for the treatment of unincorporated bodies and for how anything required to be given to businesses liable to the tax is sent to them.

Clause 60 gives the commissioners of HMRC powers to make regulations setting out how the weight of plastic packaging will be measured and assessed for the purposes of the tax. The power will be used to require the weight of components to be taken as an average over a production run, and businesses will need to keep records of the measurements and calculations. There will be scope for businesses to agree methods of measurement with HMRC in particular cases. Where HMRC suspects that inaccurate weights are being used, it will be able to inspect and weigh samples of the packaging components, to use assumptions about weights if necessary and to override any agreement with this information.

Clause 61 and schedule 10 give the commissioners powers to make regulations covering record keeping, the mechanics of making tax returns and payments, and recovering tax owed. These powers mirror the powers in this area for other taxes and will be used in the same way.

Clause 62 introduces schedule 11, which establishes which decisions are appealable. It sets out a system of reviews and appeals using procedures long established in the tax system and the existing tribunals system. As with other taxes, businesses contesting a decision or assessment will have the right to a review by HMRC and an appeal to a tribunal, should they wish to pursue the matter.

Clause 63 grants regulation-making powers to require businesses to keep specified records for a specified period that does not exceed six years. This is consistent with other taxes. The powers will be used to require businesses to keep records relating to the calculation of their liability for PPT. The records will include the weight and the quantities of materials used in the packaging.

Clause 64 introduces schedule 12. The first part of schedule 12 provides for someone authorised by the commissioners to take samples of plastic packaging where this is necessary to ensure that tax is being properly accounted for, to share and receive information from other public bodies and to provide information to the courts on registration and returns, and for evidence to remain acceptable when those providing it have had their penalties reduced for doing so. For example, HMRC may want to test a sample of packaging to validate the evidence provided about its weight and make-up.

The second part of the schedule provides for HMRC to share information obtained in connection with PPT with other named public bodies to assist them in their functions, and to receive information from the same bodies to assist with the administration of the plastic packaging tax. The final part of the schedule provides for the courts to accept certificates from the commissioners indicating whether a business is registered and whether returns have been made as sufficient proof of these matters. The schedule also makes provision that where evidence of non-compliance is provided by a taxpayer who has themselves been subject to a non-compliance penalty, that evidence will remain valid, even if the latter’s penalty is to be reduced as a result of their assistance in protecting the revenue.

Clause 65 gives a power to make regulations requiring security to be provided against liability for PPT, for the purposes of protecting revenue. We do not intend to use this power initially, but it is important that it is provided in case it is required to act against fraud in the future. Clause 66 allows HMRC to make regulations for determining who is responsible for fulfilling the obligations of unincorporated bodies in respect of PPT. Clause 67 provides that anything required to be given to a person as part of the requirements for PPT is given to that person or their representative by post to that person’s last known address.

These clauses and schedules set out important mechanics for the technical operation of the tax and for recovering tax due to the Crown. I therefore move that they stand part of the Bill.

[Abena Oppong-Asare]

Again, these are largely technical clauses on the administration and enforcement of the plastic packaging tax. Most of the clauses give the commissioners the power to make regulations—for example, on how the weight of the packaging is to be determined and how records should be kept. My only point here—we have tabled amendments on this that we will come to later—is that we believe that the Government should consult fully with relevant businesses and environmental groups before making such regulations. We also believe that all such regulations should be subject to proper scrutiny in Parliament. That will ensure that the Government have the best chance of making sure that the tax works effectively and with the minimum additional burden for businesses, which I am sure we all want.

[The Chair]

I look forward to coming to those points later on this afternoon.

Question put and agreed to.

Clause 60 accordingly ordered to stand part of the Bill.

Clause 61 ordered to stand part of the Bill.

Schedule 10 agreed to.

Clause 62 ordered to stand part of the Bill.

Schedule 11 agreed to.

Clauses 63 and 64 ordered to stand part of the Bill. 

Schedule 12 agreed to.

Clauses 65 to 67 ordered to stand part of the Bill. 

Clause 68

Statements for business customers

Question proposed, That the clause stand part of the Bill.

[Kemi Badenoch]

The clause sets out requirements relating to the inclusion of a PPT statement on certain invoices and allows for further regulations specifying what the statement must contain. In consultations, stakeholders told us that customers often have influence over the specification and design of plastic packaging. Including the amount of PPT on invoices will help encourage the behavioural shift towards using more recycled plastic. It will also increase the visibility of the tax and show businesses how much more they are paying for their plastic packaging by not switching to using more recycled plastics. The clause assists with the environmental behaviour shift that is sought by the tax, and I therefore recommend that it stands part of the Bill.

[Peter Grant]

I have just a few points on the clause. I can certainly understand the thinking behind it, but I note that it applies when the goods are first supplied—it applies to the person who is liable to pay the tax. Has the Minister considered what happens if there is a chain of supply but the intermediaries do not do anything that makes them liable to pay the tax? My reading of the clause is that the final user—the final customer—does not necessarily get the statement of how much tax has been paid. If the intention is to affect the behaviour of not only the manufacturers but customers, we are missing a trick, in that the customer might not realise how much of the final cost has been covered in the plastic packaging tax.

My second point is very simple. Is it envisaged that the statement of plastic packaging tax would be required to be printed on the face of the invoice, or could it simply be attached as a separate document? It is not clear what the commissioners are likely to put into any regulations. My concern is partly that if it is required to be put on the face of the invoice, that potentially requires quite a lot of changes to software by companies that use accounting software. Alternatively, if it is supplied as a separate document, are there not enforcement difficulties? It could be difficult to establish afterwards that it was not attached, whereas if somebody provides an invoice without accounting for VAT, it is quite clear to anybody that the requirement to give a VAT invoice has not been complied with. Have those two issues been considered by the Government in the precise wording of the clause?

[Abena Oppong-Asare]

The clause sets out the requirement for the PPT statement on certain invoices. The only point I want to make is to urge the Treasury and HMRC to work with businesses to ensure that they understand the requirement and implement it with the least burden possible.

[Kemi Badenoch]

On the question of liability, businesses that are liable for the tax will be required to include the amount of plastic packaging tax on the sales invoices to their customers. This will make the tax visible and help incentivise customers to choose recycled plastic packaging. The Government are not requiring the amount of PPT to be included on sales invoices further down the supply chain, such as the invoice from a wholesaler to a retailer, as such customers have less influence over the type of packaging and it may disproportionately increase the burden on businesses. However, businesses further down the supply chain can still choose to show the tax previously paid on their sales invoices.

Question put and agreed to.

Clause 68 accordingly ordered to stand part of the Bill.

Clause 69

Tax representatives of non-resident taxpayers

Question proposed, That the clause stand part of the Bill.

[Kemi Badenoch]

The clause is about tax representatives of non-resident taxpayers. It enables HMRC to make regulations requiring non-UK residential taxpayers to appoint tax representatives. The regulations may also include administrative matters—for example, provisions on the notification of being a non-resident taxpayer and naming tax representatives on the register against those whom they represent. The clause will help to ensure that liable overseas businesses register and comply with the tax. I therefore commend that it stand part of the Bill.

[Abena Oppong-Asare]

Clause 69 gives commissioners the power to make provisions requiring that every non-resident taxpayer appoint a person resident in the UK to act as a tax representative for the plastic packaging tax.

The Chartered Institute of Taxation made a number of comments about the clause in its briefing. It would like future regulations to consider whether exceptions could apply—for example, if the non-resident taxpayer has a history of a prescribed period of compliant behaviour with other UK taxes, or has an internationally recognised accreditation, such as being an authorised economic operator. It also points out that it could be common for non-resident taxpayers to outsource the completion of UK tax returns to UK tax agents to ensure good compliance with UK obligations. It should be noted, though, that for the majority of UK tax agents it will not be usual business practice to act with joint and several liability for the taxes that they administer, so the requirement to be a tax representative would be a barrier to taking on such business.

Where a non-resident business has outsourced its VAT or customs duty compliance to a UK tax agent, it would appear sensible to similarly outsource the PPT compliance to the same tax agent, as they will have the details of the imports into the UK. However, the mandatory tax representation responsibilities will be a barrier to that. That will be an increased opportunity for areas where UK tax compliance must be provided by separate tax agents and tax representatives.

On subsection (8)(a), the Chartered Institute of Taxation would like to see greater explanation of what constitutes an “established place of business” in future regulations. For example, if a large non-resident business has a presence in the UK, be it a large or small sales office, will the presence be enough to remove the obligation to appoint a UK tax representative? Businesses will require clarity on the definition of an “established place of business” with regard to this tax.

[Kemi Badenoch]

In terms of the requirements for businesses without a presence in the UK to appoint a UK-based representative, whether those requirements will work, and the additional burden that the hon. Lady refers to, the person on whose behalf the packaging is imported will be liable for the tax. The Government do not envisage that many businesses without a UK presence will be liable for PPT. The Government therefore intend to commence but not exercise the power initially. However, including the power in the Bill means that we can protect the revenue and maintain a level playing field for UK-compliant businesses if there is evidence of significant non-compliance with the tax by overseas businesses. The additional burden will therefore arise only if it is required to ensure compliance, protecting the revenue and ensuring a level playing field for UK-based businesses. In the absence of exercising that power, businesses without a presence in the UK will need to register for the tax in the same way as UK-based businesses. I am sure that HMRC officials will have taken note of some of the further questions, which I think will be addressed during later consultations.

Question put and agreed to.

Clause 69 accordingly ordered to stand part of the Bill.

Clause 70

Adjustment of contracts

Question proposed, That the clause stand part of the Bill.

[Kemi Badenoch]

Clause 70 provides for businesses to adjust existing contracts in respect of the plastic packaging tax. That covers two scenarios: first, adjusting the payment amount for a contract where PPT previously was not factored, or there is a change in the tax chargeable; and, secondly, adjusting a contract where chargeable plastic packaging is further processed into different packaging.

The latter case recognises the complexity of supply chains and avoids a double charge of tax. The Government expect that to be used in a very limited number of cases, given that the tax applies to substantially finished packaging. The clause helps businesses to take account of the tax within existing contracts. I therefore commend that it stand part of the Bill.

[Abena Oppong-Asare]

The clause is a technical measure that provides for the adjustment of contracts in respect of the plastic packaging tax. We have no questions for the Minister on that.

[The Chair]

With this it will be convenient to discuss that schedule 13 be the Thirteenth schedule to the Bill.

[Kemi Badenoch]

Clause 71 and schedule 13 concern groups of companies. To make the reporting requirements for the tax less burdensome, clause 71 and schedule 13 set out when and how two or more corporate bodies may be treated as a group in respect of the plastic packaging tax. When used, PPT is charged to the representative of the group, rather than all members individually. This includes where a group member is found liable through secondary or joint and several liability. Schedule 13 contains further details on how the provision will operate, for example defining who is eligible to apply for group treatment and the limited grounds on which Her Majesty’s Revenue and Customs may refuse an application. The clause and schedule provide an administrative saving to businesses that choose this option and are eligible.

[Abena Oppong-Asare]

The clause and schedule allow two or more corporate bodies to form a group for plastic packaging tax purposes, so they can report and account for the plastic packaging tax as a single body with joint and several liability. I just want to know whether the Minister had seen the submission from the Chartered Institute of Taxation on this issue. It points out that the requirement for a group member to be a corporate body for VAT grouping rules was changed by schedule 18 of the Finance Act 2019, which extended it to individuals and partnerships that control other bodies in a VAT group with effect from 1 November 2019. Could the Minister explain why the updated rules for VAT do not apply to the plastic packaging tax?

[Kemi Badenoch]

I am afraid that I have not seen the note to which the hon. Lady refers so I am not able to answer the question, but I am sure we can get an answer from officials before the next sitting.

[The Chair]

Happy with that?

--- Later in debate ---

[Kemi Badenoch]

Clauses 72 and 73 prevent businesses artificially splitting in order to come under the tax’s 10 tonne per year registration threshold and avoiding paying PPT. The clauses protect PPT against avoidance in the form of the business artificially splitting to come under the tax’s 10 tonne per year de minimis threshold. Where HMRC determines that such avoidance is happening, the clauses allow it to issue a direction that means the persons named are treated as a single person liability for tax. The clauses are important for preventing attempts to circumvent the tax.

[Abena Oppong-Asare]

Clauses 72 and 73 introduce measures to prevent avoidance of plastic packaging tax by artificially separating business activities. We welcome the measures to prevent avoidance of this tax.

Question put and agreed to.

Clause 72 accordingly ordered to stand part of the Bill.

Clause 73 ordered to stand part of the Bill.

Clause 74

Death, incapacity or insolvency of person carrying on a business: regulations

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss clause 75 stand part.

[Kemi Badenoch]

Clauses 74 and 75 set out how the tax is dealt with in the event of a liable business changing ownership, or the unfortunate circumstances of an owner dying, or becoming incapacitated or insolvent. The clauses provide for further regulations to be made that will deal with how changes in a business due to a change of ownership, death, incapacity or insolvency are handled within the tax. Such provisions are a common part of many taxes and are important to ensure the protection of revenues owed to the Crown. The clauses are a necessary feature of most taxes needed to help the tax function properly. I therefore ask that they stand part of the Bill.

[Abena Oppong-Asare]

Clauses 74 and 75 make provisions for situations in which businesses are transferred. We welcome these sensible clauses, which I believe were suggested by the Chartered Institute of Taxation during an earlier consultation.

[The Chair]

Why cannot Parliament always be like this?

Question put and agreed to.

Clause 74 accordingly ordered to stand part of the Bill.

Clause 75 ordered to stand part of the Bill.

Clause 76

Isle of Man: import and export of chargeable plastic packaging components

Question proposed, That the clause stand part of the Bill.

[Kemi Badenoch]

Clause 76 sets out the tax treatment of plastic packaging imported from or exported to the Isle of Man. For imports from the Isle of Man to the UK, if in the future the Isle of Man were to have a corresponding tax on plastic packaging, and the Isle of Man PPT rate is equal to or greater than the UK rate, the UK tax is not charged. For imports where the Isle of Man rate is lower than the UK rate, the UK tax is charged as the difference between the two rates. Where there is no corresponding Isle of Man tax, the UK tax is charged at the full rate on imports to the UK. Where plastic packaging is exported from the UK to the Isle of Man, these are not treated as exports for the purposes of the UK tax. This clause provides clarity on tax treatment of imports and exports to and from the Isle of Man.

[Abena Oppong-Asare]

Clause 76 relates to the import and export of plastic packaging in respect of the Isle of Man, as the Minister said. Once again, this seems like a sensible clause, and we have no questions for the Minister.

Question put and agreed to.

Clause 76 accordingly ordered to stand part of the Bill.

Clause 77

Fraudulent evasion

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Clauses 78 to 80 stand part.

That schedule 14 be the Fourteenth schedule to the Bill.

Clause 81 stand part.

[Kemi Badenoch]

These clauses and the schedule set out a number of criminal offences in respect of fraudulent activities connected with the plastic packaging tax and the penalties and proceedings associated with these. It is essential that any tax is applied fairly and collected from all those liable to pay it. These clauses make provisions for necessary sanctions for non-compliance with the requirements for PPT, in a manner consistent with those applied in other taxes.

Clause 77 creates a criminal offence for knowingly being involved in the fraudulent evasion of PPT, including through fraudulent claiming of tax credits or repayments, and sets out the maximum penalties for doing so. Clause 78 creates a criminal offence for supplying false information and documents, with an intention to deceive, and sets out the maximum penalties for doing so. Clause 79 creates a criminal offence for conduct involving evasion or misstatements in respect of obligations under, and liability for, PPT. The specifics of those offences need not be known, and maximum penalties are set out.

Clause 80 and schedule 14 make provision to collect penalties for specified breaches of the requirements of PPT, such as those on record keeping obligations and requirements to keep a registration up to date. Clause 81 provides that the Customs and Excise Management Act 1979 applies in relation to PPT offences, in the same way that it applies to offences under the Customs and Excise Acts.

These measures are necessary both as a deterrent against avoidance and evasion of the payment of PPT, and to ensure that proportionate action can be taken where offences are committed. This is the case as elsewhere in the tax system. I therefore move that these clauses and the schedule stand part of the Bill.

[Abena Oppong-Asare]

Clauses 77 to 81 and schedule 14 outline offences and penalties attached to the PPT, including new criminal offences of being involved in the fraudulent evasion of the PPT or supplying false information with an intention to deceive, as the Minister mentioned. We have already discussed tax evasion at considerable length during the various stages of the Bill, so I shall simply say that we support these measures and hope to see them robustly enforced.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clauses 78 to 80 ordered to stand part of the Bill.

Schedule 14 agreed to.

Clause 81 ordered to stand part of the Bill.

Clause 82

Minor and consequential amendments

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

That schedule 15 be the Fifteenth schedule to the Bill.

Clause 83 stand part.

Amendment 22, in clause 84, page 47, line 20, leave out subsections (5) to (11) and insert—

“(4A) Any statutory instrument containing regulations under this Part may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.”

Amendment 21, in clause 84, page 48, line 3, at end insert—

“(12) Before making regulations under this Part the Commissioners must consult with—

(a) industry representatives,

(b) environmental NGOs, and

(c) any other relevant individuals or organisations.

(13) Regulations made under this Part must pay regard to the principles of waste hierarchy and circular economy.”

Clauses 84 and 85 stand part.

[Kemi Badenoch]

Clauses 82 to 85 and schedule 15 enable minor amendments to be made to other legislation as a result of the plastic packaging tax. They also enable regulations to be made in respect of PPT. Clause 82 simply introduces schedule 15, which allows minor amendments to be made to other areas of legislation. Primarily, they make provision for certain existing penalties to apply to persons who fail to comply with their obligations for PPT.

Clause 83 sets out the meaning of various key terms used in the Bill relating to PPT. Clauses 84 and 85 allow regulations to be made in respect of PPT. They set out general provisions about making these regulations, including where they are subject to affirmative procedures in the House of Commons. They also give the Treasury the power by regulations to appoint the commencement date of clauses in the Bill relating to PPT.

Amendments 21 and 22, tabled by the hon. Members for Ealing North, for Erith and Thamesmead, and for Manchester, Withington, would require all regulations in part 2 of the Bill to be subject to the affirmative procedure and mandate that the Government consult industry representatives, environmental NGOs and other relevant organisations on all the regulations. I have previously outlined, when addressing their amendment to clause 47, how the Government have consulted and continue to consult with industry representatives and environmental groups, so I shall not go over that again.

With regard to amendment 22, which would make all the regulations in this part of the Bill subject to the affirmative procedure, it is right that Parliament has the opportunity to scrutinise legislation, but it is also right that we find an appropriate balance, given the volume of legislation that this House must make. The Government have therefore selected the most fundamental regulations to be subject to the affirmative procedure, which includes regulations that impact on the scope of the tax. We must also not forget that this House has Commons financial privilege, and it is important that we maintain that. I therefore strongly contest the amendment on those grounds. These final clauses and schedule are general in nature.

[Abena Oppong-Asare]

It is good to have reached the end of the plastic packaging tax clauses. I will speak briefly to our two amendments. Amendment 22 would amend clause 84 to improve scrutiny by making all regulations subject to the affirmative procedure and to prevent use of the made affirmative procedure. Amendment 21 would require consultation on all regulations and require that, in exercising powers, regard must be had to the principles of the waste hierarchy and the need to promote the circular economy.

These amendments simply make the point that I made earlier: much of the detail of this tax will be determined by regulations, and the Government must ensure that they are open to as much scrutiny as possible. The packaging industry will need to be consulted at all stages to ensure that the technical details of the tax work effectively. Environmental groups also need to be consulted, to ensure that the tax fulfils its purpose: to encourage the use of recycled plastic, to increase levels of recycling, to reduce the amount of waste going to landfill and to protect our natural environment. I hope that the Government will take on board the points we have made in Committee as they take this forward in the next year.

--- Later in debate ---

[Kemi Badenoch]

I note the points that have been made. The fact is that no single set of policies will please consumers, businesses and environmental NGOs, but we think we have struck the right balance, and I hope the Opposition will not press their amendments.

Question put and agreed to.

Clause 82 accordingly ordered to stand part of the Bill.

Schedule 15 agreed to.

Clauses 83 to 85 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(David Rutley.)

Commission on Race and Ethnic Disparities

Kemi Badenoch Excerpts

Tuesday 20th April 2021 Commons Chamber

[The Minister for Equalities (Kemi Badenoch)]

With permission, Mr Deputy Speaker, I would like to make a statement on our work to examine inequality across the population and set out a new, positive agenda for change.

The Government are committed to building a fairer Britain and taking the action needed to promote equality and opportunity for all. We do, however, recognise that serious disparities exist across our society, and are determined to take the action that is required to addressed them. Following the events of last summer, our nation has engaged in a serious examination of the issue of race inequality, and the Government have been determined to respond by carefully examining the evidence and data. We need to recognise progress where it has been made, but we also need to tackle barriers where they remain. That was why, last summer, the Prime Minister established the independent Commission on Race and Ethnic Disparities. It was tasked with informing our national conversation on race by carrying out a deeper examination of why disparities exist and considering how we can reduce them.

After careful study, the commission made evidence-based recommendations for action across Government, the private sector and other public bodies. The commission was established with 10 experts drawn from a variety of fields, spanning science, education, economics, broadcasting, medicine and policing. With one exception, all are from ethnic minority backgrounds. The chair, Dr Sewell, has dedicated his life to education and to supporting young people from socially deprived backgrounds to reach their full potential. This distinguished group was tasked with reviewing inequality in the UK, and it focused on education, employment, crime and policing, and health.

As this House will be aware, on 31 March, the commission published its independent report. I will now turn to its findings. It is right to say that the picture painted by this report is complex, particularly in comparison with the way that issues of race are often presented. The report shows that disparities do persist, that racism and discrimination remain a factor in shaping people’s life outcomes, and it is clear about the fact that abhorrent racist attitudes continue in society, within institutions and increasingly online. It calls for action to tackle this.

However, the report also points out that, while disparities between ethnic groups exist across numerous areas, many factors other than racism are often the root cause. Among these are geography, deprivation and family structure. For example, a black Caribbean child is 10 times more likely than an Indian child to grow up in a lone parent household. Disparities exist in different directions. People from south Asian and Chinese ethnic groups have better outcomes than the white population in more than half of the top 25 causes of premature death.

The report also highlights the progress that Britain has made in tackling racism, and the report’s data reveal a range of success stories. For example, it underlines the significant progress achieved in educational attainment, with most ethnic minority groups now outperforming their white British peers at GCSE level. The report also delves into the causes and drivers of some of the most persistent and enduring issues. For example, the commission has identified the disproportionate rate of black men convicted of class B drug offences.

Let me be clear: the report does not deny that institutional racism exists in the UK. Rather the report did not find conclusive evidence of it in the specific areas it examined. It reaffirms the Macpherson report’s definition of the term, but argues that it should be applied more carefully and always based on evidence.

The commission made 24 evidence-based and practical recommendations. These have been grouped into four broad themes: to build trust; promote fairness; create agency; and achieve inclusivity.

There are many things that unite this House. A shared commitment to making Britain fairer for everyone is one of them. In the light of that fact, I urge right hon. and hon. Members to take the time to read the report’s 258 pages. There is also another thing that I am sure unites this House, which is abhorrence of the appalling abuse meted out to the commissioners and the false assertions made about their work in the past three weeks. It is true that this landmark analysis challenges a number of strongly held beliefs about the extent and influence of racism in Britain today. The commissioners have followed the evidence and drawn conclusions that challenge orthodoxy, and they were prepared for a robust and constructive debate. However, they were not prepared for the wilful misrepresentation of the report that occurred following its publication, such as false accusations that they denied racism exists, or that they wished to put a positive spin on the atrocities of slavery, or false statements that commissioners did not read or sign off their own report, or that they are breaking ranks. I have been informed by the chair and by individual members that the commission remains united and stands by its report.

This Government welcome legitimate disagreement and debate, but firmly reject bad-faith attempts to undermine the credibility of this report. Doing so risks undermining the vital work that we are trying to do to understand and address the causes of inequality in the UK, and any other positive work that results from it. For that reason it is necessary to set the record straight. This report makes it clear that the UK is not a post-racial society and that racism is still a real force that has the power to deny opportunity and painfully disrupt lives. That is why the first recommendation of the commission is to challenge racist and discriminatory actions. The report calls on the Government to increase funding to the Equality and Human Rights Commission to make greater use of

“its compliance, enforcement and litigation powers to challenge policies or practices that…cause…unjust racial disadvantage, or arise from racial discrimination.”

The Government even more firmly condemn the deeply personal and racialised attacks against the commissioners, which have included death threats. In fact, one Opposition Member presented commissioners as members of the Ku Klux Klan—an example of the very online racial hatred and abuse on which the report itself recommended more action be taken by the Government.

It is, of course, to be expected that Members will disagree about how to address racial inequality and the kinds of policies that the Government should enact. However, it is wrong to accuse those who argue for a different approach of being racism deniers or race traitors. It is even more irresponsible—dangerously so—to call ethnic minority people racial slurs like “Uncle Toms”, “coconuts”, “house slaves” or “house negroes” for daring to think differently.

Such deplorable tactics are designed to intimidate ethnic minority people away from their right to express legitimate views. This House depends on robust debate and diversity of thought. Too many ethnic minority people have to put up with this shameful treatment every day, as some of my fellow MPs and I know too well. The House should condemn it and reprimand those who continue with such behaviour.

The commissioners’ experience since publication only reinforces the need for informed debate on race based on mutual respect and a nuanced understanding of the evidence. The Government will now consider the report in detail and assess the next steps for future policy. In recognition of the extensive scope of recommendations, the Prime Minister has established a new inter-ministerial group to review the recommendations. It will ensure that action is taken to continue progress to create a fairer society. As sponsoring Minister, I will provide strategic direction with support from my officials in the Race Disparity Unit. The group will be chaired by the Chancellor of the Duchy of Lancaster.

On that note, on behalf of the Prime Minister, I would like to thank the commissioners once again for all that they have done. They have generously volunteered their time, unpaid, to lead this important piece of work, and the Government welcome their thoughtful, balanced and evidence-based findings and analysis.

The Government will now work at pace to produce a response to the report this summer. I assure the House that it will be ambitious about tackling negative disparities where they exist and building on successes. It will play a significant part in this Government’s mission to level up and unite the country, and ensure equality and opportunity for all, whatever their race, ethnicity or socioeconomic background. I commend this statement to the House.

[Marsha De Cordova (Battersea) (Lab)]

I thank the Minister for advance sight of her statement. It is only right that such a contentious report finally receives time for debate in this House. I have read the report, despite having to wait two weeks for an accessible version to arrive.

Following the Black Lives Matter movement, the commission had an opportunity meaningfully to engage with structural racism in the UK. Instead, it published incoherent, divisive and offensive materials that appear to glorify slavery, downplay the role of institutional and structural racism, and blame ethnic minorities for their own disadvantage. If left unchallenged, the report will undo decades of progress made towards race equality in the UK.

Since publication, the report has completely unravelled. Far from bad-faith actors, this report has been discredited by experts, including the British Medical Association, Professor Michael Marmot, trade unions representing over 5 million workers, human rights experts at the UN and Baroness Lawrence, who said it gives a “green light to racists”. Its cherry-picking of data is misleading and incoherent, and its conclusions are ideologically motivated and divisive.

It is absolutely clear to all Opposition Members and those across civil society that this report has no credibility, so I am disappointed to hear the Minister double down on it here today. How can she stand before us in this House and defend the indefensible? I want to ask one simple question to start: who wrote this report? Four weeks ago, she stood at the Dispatch Box and said:

“It is not the Prime Minister but an independent commission that will be publishing the report.”—[Official Report, 24 March 2021; Vol. 691, c. 906.]

Despite what she says about unity, can she explain why multiple commissioners have disclosed that No. 10 rewrote parts of the report? What precedent does this cronyism set for future independent commissions? Furthermore, will the Minister explain how the Government came to publish claims that there is a “new story” to be told about slavery and empire, and will she distance herself from those abhorrent remarks?

The Minister says that commissioners followed the evidence, but this report marks a major shift away from the overwhelming body of data on institutional and structural racism. The Office for National Statistics finds that the unemployment rate for black people is now 13.8%—triple the rate for white people—so why does the report conclude that young black people should

“examine the subjects they are studying”,

instead of addressing the systemic inequalities within the labour market? Black women are four times more likely to die in pregnancy and childbirth, but the report says that these numbers are so low that it is “unfair” to focus on this disparity. Does the Minister agree with those findings? Even the example about class B drug use, which she repeated today, is inaccurate, with the Cabinet Office admitting that there was a mistake. I was especially interested to hear the Minister highlight the recommendation to increase funding to the EHRC, given that her Government have slashed its funding by £43 million since 2010.

This report is part of the story that Government Members would like to try to tell about fairness. They say that they are interested in addressing inequalities of geography and class, but the truth is that they are not interested in ending inequality at all. In stark contrast, the Labour party believes in ambition and potential for all, including black and ethnic minority people, but we recognise that we often start from a position of systemic disadvantage.

It is our job as elected representatives to level the playing field, so I want to end by giving the Minister the chance to reject this report and tell the House instead what she is doing to implement the 231 recommendations in the Timpson, McGregor-Smith, Williams, Angiolini and Lammy reviews. What is she doing to comply with the public sector equality duty, and why is she not publishing equality impact assessments? This is what her Government would be focused on if they were serious about ending structural racism. Instead, they have published a shoddy, point-scoring polemic which ignores evidence and does not represent the country that I know and love. It is reprehensible, and I hope the Minister will reject it today, so that we get on with the task of tackling institutional and structural racism, which is the lived experience of many.

[Kemi Badenoch]

It is quite clear that the hon. Lady did not read the statement, which I sent to her in advance, and she clearly did not listen to it as I read it out. She is clearly determined to create a divisive atmosphere around race in this House and this country, and we will not stand for it. We continue to push for a fairer Britain and for levelling up. Labour Members continue to look for division. They continue to stoke culture wars and then claim that we are the ones fighting them.

I completely reject all the assertions that the hon. Lady has made—many of them false and many of them hypocritical. Whose party has been determined to be institutionally racist by the Equality and Human Rights Commission? It is not my party; it is hers. She and many of her colleagues are the ones who are complaining about their party’s Forde inquiry and claiming that their party has anti-black racism. Why do they not look at resolving the problems in their own house, instead of trying to spread them around the rest of the country?

I will acknowledge some of the questions the hon. Lady has raised and seek to answer them. She asked who wrote the report. The commissioners wrote the report; that is because they were independent. It is simply not true to claim that other people wrote the report. The commissioners have put statements on the—[Interruption.] I am afraid I cannot hear myself speak because of the hon. Member for Brent Central (Dawn Butler). It would be nice if she stopped heckling from a sedentary position. Her mouth is covered, so I cannot even hear what she is saying.

If we look at the statements that the commissioners have made on the gov.uk website, they have been united. They have not broken ranks. They have not chosen to dissociate themselves from the report. The only thing that is happening is that Labour Members in particular continue to misrepresent what is happening. Why, for instance, will the shadow Minister not condemn the racist abuse faced by the commissioners? Why will she not condemn her own colleague, the hon. Member for Norwich South (Clive Lewis), who posted a picture of the KKK in response to the commissioners? Does she think that that is appropriate behaviour? It is the subject of a complaint to the Parliamentary Commissioner for Standards.

We should go back to the substance of what this report is saying, rather than continuing to try to slander the people who have written it. These are professionals and distinguished individuals who gave up their time, and I commend them for their work. I am very proud of it, and of course we will not be withdrawing the report.

It is clear that today’s Labour party is functionally innumerate and does not like to see statistics and evidence, so rather than focus on the numbers and the data, they run away. They just want to continue having discussions on racism, which is where they think they are strong, but I am afraid that they are not strong on this issue. We will not sit back and allow divisive rhetoric and misrepresentation to be the story on race. We are determined to create a positive national conversation about this issue based on facts and evidence, fraternity and fairness, not on nonsensical accusations.

So I reject the hon. Member for Battersea’s assertions. We will not withdraw the report. We will look at what recommendations to take forward. The Government have still not provided a response, but there are many issues around that structural inequality that we want to have dealt with. However, I reiterate that, just because there is a disparity, it does not mean that discrimination is the cause. If we continue to identify discrimination right from the beginning without looking at the root cause, we will continue to offer solutions that do not improve the situation. I am very happy to commend the commissioners and I reject the hon. Lady’s very divisive rhetoric and assertions to the House today.

[Sir Peter Bottomley (Worthing West) (Con)]

The House and the country will be glad that the Government have come forward with this positive statement in support of Tony Sewell’s and the other commissioners’ report.

The commission had to put out a statement on 2 April contradicting most of the ill-informed criticisms. At the end, it said:

“The 24 recommendations we have made will, in our view, greatly improve the lives of millions of people for the better if they are all implemented.”

The second sentence of the first paragraph said that the report

“stated categorically that ‘we take the reality of racism seriously and we do not deny that it is a real force in the UK.’”

That seems plain and clear.

I came into politics in 1971, when the ethnic minorities in the area where I lived in south London were denied the chance to take O-levels because left-wing goodies asked why people should be forced to take O-levels in the fifth form. I said it was so that they could go on to university. With two West Indian mothers on the governing body, within three years, the first of our black pupils went on to medical school. I think we can dedicate ourselves to making life better.

I say to the Minister that later—not today—I would like to come and talk to her about the treatment of Gurpal Virdi, a very good Sikh officer who four times was badly treated by the Metropolitan police. The fourth time, he was prosecuted for a week and a half for something that could not have happened, following an investigation that should not have happened.

That is one of the things that would help to give weight to the recommendations of the Sewell commission —if things are treated fairly, when they go wrong, they are investigated properly.

[Kemi Badenoch]

I thank the Father of the House for his question and for his comments, which I completely agree with. The issue he describes around education back in the day is actually something I experienced myself. There is still much to do, but we have come a long way from 25 years ago when I first immigrated to this country. On Gurpal Virdi, I am happy to meet my hon. Friend to fully understand what happened and to see what the Government can do.

[Kirsten Oswald (East Renfrewshire) (SNP) [V]]

I thank the Minister for advance sight of her statement. A United Nations working group strongly rejected this report, saying that it

“further distorted and falsified historic facts”,

could fuel racism and twists data, among other pointed criticisms. The Minister just spoke about the lack of evidence of institutional racism, but the Runnymede Trust rightly points out that evidence of institutional racism was submitted to the commission. Twenty thousand people joined the Runnymede Trust and Amnesty International in calling for the report’s withdrawal, and 36 trade union general secretaries have repudiated the report.

In contrast to the Prime Minister, who said that the report contains “interesting observations”, Scots campaigner Talat Yaqoob called the report a “whitewash of reality” produced only to let the UK Government abdicate responsibility for tackling institutional racism. How can the Minister justify a report that says policies such as the hostile environment were not deliberately targeted at the UK’s ethnic minorities? Leading clinicians have said the report will worsen systemic health inequalities. The NHS Race and Health Observatory has declared that institutional racism exists in the UK, the health and care system and across wider public bodies. In the light of those responses, will the Minister repudiate the report’s glossing over of the impact of covid on ethnic minority groups?

The SNP will always work hard for Scotland to be a global leader in diversity and inclusion. If re-elected, we will introduce a Scottish diversity and inclusion strategy, focusing on institutional barriers and providing education on colonial history. The Scottish Tory manifesto is silent on these issues, but in bringing forward this report, it certainly looks like the UK Government are going in the opposite direction. So can the Minister tell us specifically what the Tories are doing to tackle institutional inequality and to deal effectively with colonial history? Can she understand why so many people will be deeply disappointed with this response, which feels, at best, like a bunch of cans being kicked down the road?

[Kemi Badenoch]

Before I begin to answer the hon. Lady’s questions, I would like to point out that the PM wrote to devolved Administrations shortly after the commission was established to invite them to engage with this work. It is noticeable that Northern Ireland was keen to take part, and hosted the commission on crime and policing matters. However, the Scottish National party Administration did not engage, so I believe that the words the hon. Lady is now saying about how dedicated they are to fighting racial inequality are completely hollow. When the commission was set up, I am afraid that they did very little indeed to engage.

Regarding the statement by the UN experts, the group grossly misrepresented the commission’s report; the statement is clearly born of the divisive narratives perpetrated by certain media outlets and political groups that are seeking to sow division in our ethnic minority communities. It is also quite clear that the UN experts did not read the commission’s report, judging from some of their statements, which seem to have been cut and pasted from a Labour party press release. The obvious flaw in their critique is that there is no comparison to be drawn with peer countries in Europe, especially because they do not even collect data on race and ethnicity. As such, I share the commission’s disappointment in, and rejection of, yesterday’s statement by the working group of experts on people of African descent, and I will be writing back to them in the strongest of terms.

It is no surprise that the hon. Lady has listed a lot of left-wing groups that disagree with the report. Disagreement and debate is part of politics. We have no issues with people disagreeing with the substance of the report; what we do have an issue with is people misrepresenting it. This report was tasked with finding out why disparities exist. It was not supposed to define where exactly we are seeing institutional racism, but to call racism out where it exists, and it did that. Perhaps if the hon. Lady spent some time reading the report, rather than remarks on Twitter, she would be better informed about what it actually says.

[Mrs Theresa May (Maidenhead) (Con)]

The chief economist of the Bank of England has said that

“Published pay gaps are a starting point for corporate and national accountability”.

Business groups have called for mandatory reporting of ethnicity pay gaps. The commission recommended investigating the causes of pay disparities, but then did not recommend mandating the reporting that would identify those disparities, so will the Minister now commit to taking a different approach from the commission, and commit to mandatory reporting of ethnicity pay gaps?

[Kemi Badenoch]

I thank my right hon. Friend for her question, and I pay tribute to her for setting up the Race Disparity Unit, which has allowed us to carry out so much forensic research.

On the issue of ethnicity pay reporting, the commission pointed to statistical and data issues that affect ethnicity pay reporting, and makes a recommendation as a way for employers to overcome these challenges and report ethnicity pay accurately. As I say, the Government will consider the report in detail, and we will work with colleagues in the Department for Business, Energy and Industrial Strategy to assess the implications of this recommendation for future Government policy and respond in due course. However, I take my right hon. Friend’s comments into account, and will make sure that they are addressed in the Government response.

[Ms Diane Abbott (Hackney North and Stoke Newington) (Lab) [V]]

The Minister has accused people of criticising the report in bad faith. Is she really saying that Professor Michael Marmot, a world-renowned expert in public health, is acting out of bad faith? Is she really saying that the British Medical Association and other professional associations are speaking in bad faith? It would reflect better on the Minister if she were prepared to engage with genuine criticism by experts.

Nobody denies that there has been progress on racial justice in this country. My parents left school in rural Jamaica aged 14; I am a British Member of Parliament. However, this is widely seen—particularly by people who have been quoted and misquoted—as a shoddy, cynical report that, to quote the UN working group,

“repackages racist tropes and stereotypes into fact, twisting data”.

I say to the Minister that surely black and brown British people who have contributed so much to this country deserve better than this report.

[Kemi Badenoch]

What black and brown British people like myself deserve is better treatment from the Opposition Members who continue to stoke division. Of course I am not accusing Professor Sir Michael Marmot or the BMA of bad faith. The people I accuse of acting in bad faith are the right hon. Lady and her colleagues who are posting pictures of the KKK, and being advertised, as the shadow equalities Minister was, at an event preparing to denounce the report a week before it was even published.

On Professor Sir Michael Marmot and the British Medical Association, I have had meetings with them and we engage with them. We take criticism from them—they are not there to endorse every single thing the Government say; they are there to provide helpful criticism and suggestions where necessary. Sometimes we agree, and sometimes we disagree. Disagreement is not a problem. What we do not want is misrepresentation, which is what the right hon. Lady and her colleagues continue to do.

[Mr Deputy Speaker (Mr Nigel Evans)]

Before I call Caroline Nokes, may I remind everybody, whether they are virtual or physical, that this is an opportunity to ask the Minister questions about the statement, not to make speeches?

[Caroline Nokes (Romsey and Southampton North) (Con) [V]]

I thank my hon. Friend for her statement. She has focused a great deal on evidence. Does she agree that narrative is also important, and that when the Government respond, it is essential that they do so in full to the 24 recommendations and get the tone right? The Women and Equalities Committee has invited Tony Sewell to come and give evidence to us, alongside other commissioners. I hope my hon. Friend will encourage him to do so, so that the Committee can hear at first hand the evidence that was presented to him and how the report was written.

[Kemi Badenoch]

I thank my right hon. Friend for her question. I agree with her that narrative is important, not just evidence. We in this House have to ask ourselves what story we are trying to tell. In the case of Conservative Members, it is a story of a shared history, shared values, shared culture and a shared future. We want to make sure that we create a sense of belonging for young people in this country, not an environment where they believe they will never be able to succeed because other people continue to tell them so despite the evidence. I will find out about the request she has made to the commissioners, and I am sure that they will respond in due course.

[Dawn Butler (Brent Central) (Lab)]

This is gaslighting on a national scale.

“The New Age of Empire”, page 95, tells us exactly what is happening. On page 103, “This is Why I Resist”, by Dr Shola, explains about racial gatekeepers, which Musa Okwonga from Byline Times talks about. My question to the Minister is this. The Government briefed a clear message well in advance of this report landing. Why did they do that?

[Kemi Badenoch]

I think it is disgusting that a Member of this House will stand up and accuse people of being racial gatekeepers. This is the same nonsense we have heard time and time again—calling people Uncle Toms, calling them house negroes and house slaves, and calling them racial gatekeepers. The fact that the hon. Lady is able to stand here and use that phrase without any shame whatsoever just shows how far the Labour party has fallen.

[Dawn Butler]

Answer the question!

[Kemi Badenoch]

I will answer the question, but we in this House have a responsibility to speak about this issue with nuance and responsibility, and the way the hon. Lady has carried out the debate is disgraceful. In fact, she is one of the many people who continue to stoke division in this country, and I am very sad to hear her remarks. The fact of the matter is that this report was written by professionals and experts who have a view that is different from hers. If she has a view that is not acknowledged by others, she should engage in a sensible debate, not call them racial gatekeepers.

[Dawn Butler]

On a point of order, Mr Deputy Speaker. The Minister has a responsibility to Parliament to answer the question. The Minister has given a statement, and she is supposed to answer the question. She has not answered this question.

[Tom Hunt (Ipswich) (Con)]

I want to raise with the Minister concerns about certain organisations prejudging the Sewell report for political ends without fairly assessing the findings. One concerning example was the Runnymede Trust, which organised a campaign against the report over a week before it was published and broadcast a live-streamed event with Patrick Vernon, chair of Labour’s racial equality advisory group, where they argued that the report’s authors were equivalent to holocaust deniers who had been asked to develop a strategy on antisemitism. Does the Minister agree that not only does that kind of bad faith political action undermine the Runnymede Trust’s charitable objective of improved race relations, but that the shameful treatment of the report’s commissioners might actually discourage ethnic minorities from contributing to public life and public debate? I also thank her for her statement.

[Kemi Badenoch]

I completely agree with my hon. Friend. What he has described is part of the climate of intimidation surrounding the report’s authors, which I condemned in my statement and which has just been demonstrated by the hon. Member for Brent Central (Dawn Butler).

I read in today’s paper that the Runnymede Trust is now the subject of a complaint to the Charity Commission. One complaint refers to the behaviour of the trust’s CEO and staff towards ethnic minorities who have a different approach to racial equality. Some of that behaviour includes calling a black Conservative a “house negro” and horrific views on mixed-race relationships expressed by one staff member, comparing white people having relationships with black people to slave masters sleeping with their slaves. I do not believe that these actions are appropriate for a charity committed to racial equality.

This is a good time to remind the House that the current chair of the Runnymede Trust applied to be the Labour candidate for Poplar and Limehouse in 2019, but failed to make the shortlist. I would be keen to know whether the shadow Minister condemns those sorts of remarks, or believes that they are acceptable so long as they are targeted at people she disagrees with.[Official Report, 22 April 2021, Vol. 692, c. 5MC.]

[Wera Hobhouse (Bath) (LD)]

Ethnic minority communities have suffered disproportionate numbers of deaths from covid-19. The Sewell report fails to recognise that structural racism underlies many socioeconomic inequalities. There is an interconnectivity between different forms of disadvantage and discrimination but, at the heart of it, is structural racism. It is important for the Government to recognise that. Will the Government commit to working with organisations such as Operation Black Vote to implement a covid-19 race equality strategy that looks in particular at health inequalities and makes sure that the lived experience of people from ethnic minority backgrounds is listened to?

[Kemi Badenoch]

The hon. Lady will know that I have been reporting to this House quarterly on the very work that she describes—the effect that covid-19 has had on ethnic minority people and other vulnerable groups. We have explained the reasons for the causes of those disparities. The Public Health England report had a qualitative review, which talked about people’s experiences of racism in the system.

What we have to do now, however, is to ensure that we protect people. Our strategy at the moment is around vaccines. We have been doing everything we can to increase vaccine uptake, including significant amounts of work—which I reported to the House in February—on increasing vaccine uptake among ethnic minority groups where a large percentage of vaccine hesitancy remains, again much of it caused by misrepresentation and misinformation. I hope that the hon. Lady and members of her party will work with us in government on tackling misinformation and disinformation and will encourage those vulnerable groups to get vaccinated.

[Chris Green (Bolton West) (Con)]

The BBC has now said that, in terms of race and culture, you are what you eat. That clearly has a narrowing implication for playwrights and authors who increasingly feel that they may write only about their personal racial and ethnic experience. Does my hon. Friend agree that that is a rather chilling thing in terms of the values that are now being put out?

[Kemi Badenoch]

My hon. Friend makes an interesting point. I believe in freedom of expression. It is important that authors, playwrights and other artists feel free to write about and represent a broad range of people, regardless of their race or ethnicity. That is what we would see in a truly diverse society with a shared culture, rather than a “stay in your lane” approach that assumes our society consists of mutually antagonistic identity groups.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

The commission’s report used the phrase “Caribbean experience” as a euphemism for the slave trade. In Scotland, if the SNP is re-elected, it will fund the development of an online programme in Scotland and the UK on colonial history throughout the world. It will be able to be used in schools as an educational tool. Does the Minister agree that countries still have to face their colonial history for what it was and to have a mature discussion about its consequences and impacts?

[Kemi Badenoch]

I agree that we need to have a mature discussion, but I should let the hon. Gentleman know that the commission and its chair have been misrepresented on the comments about slavery. They have stated that any suggestion that they downplayed the history of slavery is “absurd” and deeply “offensive”:

“The report merely says that, in the face of the inhumanity of slavery, African people preserved their humanity and culture.”

The hon. Gentleman might be interested in the commission recommendation on new curriculum resources better to teach this complex history of the people of Britain.

[Sir John Hayes (South Holland and The Deepings) (Con)]

I wish to report to the House and to you, Mr Deputy Speaker, that 20 Members of the House, including my hon. Friends the Members for Ipswich (Tom Hunt), for Bassetlaw (Brendan Clarke-Smith) and for Broxtowe (Darren Henry), have written to the Charity Commission complaining about the Runnymede Trust’s treatment of the commissioners and its response to the report, which, frankly, reflects the outrage of those who have had their long-standing bourgeois liberal prejudices challenged. It is important that the Minister give me an assurance today that she will make representations across Government to stop the worthless work—often publicly funded—of organisations that are promulgating weird, woke ideas and that, in doing so, are seeding doubt and fear and, more than that, disharmony and disunity.

[Kemi Badenoch]

My right hon. Friend is right. It is important that we in Government do not inadvertently promote people who are pushing divisive narratives, and I will look into his request and see what we can do across the House and across Government.

It is interesting that my right hon. Friend, too, raises the Runnymede Trust. He might not be aware of this, but the Equality and Human Rights Commission has written an open letter to the Runnymede Trust. In its letter of 12 April, its chair states that the Runnymede Trust made “unsubstantiated allegations” about the EHRC, questioned its “impartiality and impact” and impugned its credibility. The letter also said that the Runnymede Trust showed “an apparent misunderstanding” about the EHRC’s

“mandate as set out in statute”.

I was really shocked to read the commissioners’ letter and to learn that the Runnymede Trust had even asked—or certainly implied—that the EHRC should be defunded, which is surely the opposite of what a charity focused on improving race relations should want, and the complete opposite of its objectives, which goes to the point that my right hon. Friend made.

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

In the light of the job statistics released this morning indicating that young people and London have been particularly hard hit over the past 12 months, the issue of ethnic minority employment and pay prospects is pressing for many of my constituents. The report paints a largely positive story of an overall convergence between minorities and the white majority when it comes to employment and pay, yet the official data makes it perfectly clear that the situation has not markedly improved when viewed over decades. For example, the unemployment rate for black people has consistently been more than double the rate for white people over the past 20 years. How, then, does the Minister believe that the report’s claims in this area can be squared with what the available evidence clearly illustrates, which is that structural racial inequalities remain a stubborn feature of our labour market?

[Kemi Badenoch]

I thank the hon. Gentleman for his question and for engaging with some of the contents of the report rather than in divisive rhetoric. The answer to part of the question is that many of those statistics do not control for age. In this country, black people are much younger than the rest of the population, and that often ends up skewing some of the statistics. The report paints a picture of a continuing improvement and convergence, but the employment section is the bit that highlights the most significant problems, and there is quite a lot to do on that front. I encourage the hon. Gentleman to look at some of the recommendations and to let us know whether he agrees or disagrees. Before Government respond, I would encourage Members to put forward their suggestions, based on the evidence that the commission has produced, for what we should be doing.

[Mr Deputy Speaker (Mr Nigel Evans)]

Video link—Liz Saville Roberts.

[Liz Saville Roberts (Dwyfor Meirionnydd) (PC) [V]]

Diolch yn fawr iawn, Mr Dirprwy Lefarydd. While of course the commissioners must be respected, their report should undergo scrutiny. They say they did not find conclusive evidence of institutional racism in the areas examined. Dr Robert Jones of Cardiff University provides Wales-specific evidence that 36 black people in every 1,000 experience stop and search, compared with five white people; that 91 black people for every 10,000 are in prison, compared with 14 white people; and that prison sentences for black people stand at an average of 30 months, rising to 35 months for mixed people, compared with an average of 20 months for white people. To what other institutional factors does the Minister ascribe the greatest part of those disparities? Will she work with the next Welsh Government to implement Plaid Cymru’s manifesto commitment of a race equality action plan to address this issue?

[Kemi Badenoch]

I thank the right hon. Lady for her question. I think I should again clarify what the commission says on the existence of racism. It states:

“Overt and outright racism persists in the UK. Examples of it loom larger in our minds because we witness it not just as graffiti on our walls or abuse hurled across our streets,”

but even in private settings.

On the over-representation of minority groups in stop-and-search, the commission looks at the causes and at where stop and search happens. It happens in London, which is where the vast majority of ethnic minorities live, compared with the rest of the country. That does have an impact on the data. The commission also puts forward recommendations on things we can do to build trust in the police to reduce the number of stop-and-searches that are required. I have forgotten the second point that the right hon. Lady raised, but I think it was in a similar vein.

Discrimination is not explained by disparities alone. Sometimes it is the case; sometimes it is not. Where it is the case, the commission has identified that; where it is not, it has put forward other potential explanations.

[Neil O’Brien (Harborough) (Con) [V]]

One of the refreshing things about the report is the careful balance between acknowledging the challenges that are still very real and the progress that is happening. Here in Leicestershire, that progress is very visible on wages and employment. Does my hon. Friend agree that if we are to make further progress it is essential to acknowledge the progress that has been made and to understand the causes—how, why and where this is happening—so that we can go further and make more progress?

--- Later in debate ---

[Kemi Badenoch]

Yes, that is absolutely right: I do agree. We need to focus on what works and why, as well as what does not and why, so that we can target our resources where they will be most effective. The report looks at why certain groups that are very similar end up with completely different outcomes, which is why institutional racism cannot be the defining reason. When black African and black Caribbean groups, and Indians and Pakistanis, have diverging outcomes, it is clear that something else is going on. I hope that my hon. Friend will work with Government to try to find out what measures we can put in place to address these disparities.

[Rachel Hopkins (Luton South) (Lab) [V]]

The report talks about creating agency so that individuals can take greater control of decisions that impact their lives. In response, will the Minister recommend that English for speakers of other languages funding, which has been cut by more than 50% since the Conservatives came to power in 2010, be reinstated?

[Kemi Badenoch]

If the hon. Lady has a comprehensive proposal about that, she can write to me and we will consider it in the light of the Government response.

[Rob Butler (Aylesbury) (Con) [V]]

I served on the Youth Justice Board with the chairman of the Commission on Race and Ethnic Disparities, Dr Tony Sewell. My experience was that he always acted with integrity and that he had the courage to challenge the conventional wisdom when he found evidence to suggest an alternative perspective. Does my hon. Friend share my abhorrence at how he and his fellow commissioners have been vilified, abused and threatened? Does she share my concern that such a response risks putting off other people from carrying out important work that can help to improve our society for all communities?

[Kemi Badenoch]

I completely agree with my hon. Friend and I thank him very much for telling us about his personal experience working with Dr Tony Sewell. I believe that Keith Fraser, one of the other commissioners, is also a member of the Youth Justice Board. One reason why I believe there has been much push-back against the report is that it has not come from the usual suspects. We did not go to the race relations industry to ask people to tell us the same things they have been telling us for a long time; we went to people who work in the field such as doctors, teachers, policemen, scientists, economists and journalists—including, I might add, a former chair of the Runnymede Trust—to find out what we can do to improve disparities in this country.[Official Report, 22 April 2021, Vol. 692, c. 5MC.] We went to the people who actually had the experience in doing things rather than just talking, and I am very proud of the commission and the work it has done.

[Darren Henry (Broxtowe) (Con) [V]]

Covid-19 has highlighted the importance of family units and their critical role in our communities up and down the UK. That is why I welcome, in particular, recommendation 19, which outlines seminal plans to understand and take action to address the underlying issues facing families across all backgrounds. Will my hon. Friend put those words into actions and ensure that our local authorities support the most vulnerable families who are experiencing disadvantage and discrimination?

[Kemi Badenoch]

My hon. Friend is right that local authorities have a very important role to play in this space. I am very pleased that he has actually read the recommendation and not just the reports about the report. Local authorities have played an important part in mitigating the disproportionate impact of covid on some ethnic minorities via the community champion scheme, for which we announced funding last autumn. With regard to his other comments, the Government response is not yet prepared; it will be coming in due course in the summer. We will consider the recommendation that he has made in the light of the full report.

[Bell Ribeiro-Addy (Streatham) (Lab) [V]]

In her responses, the Minister repeatedly conflates disagreement with this report with misrepresentation or not having read the report, so let us draw a line under that—we have read it, but we know that institutional racism is still felt across every area of the UK and that there is no new story to tell about slavery and colonialism. She may disagree, but does she at least recognise and understand why people—more specifically the people this report is about—overwhelmingly see this report as steeped in denial and why it is viewed as a complete insult to those who have been the victims of institutional racism, such as black women, who are four times more likely to die in pregnancy and childbirth? Does she recognise that denial is a core mechanism of institutional racism? Can she explain how she plans to push ahead with this report when it is so widely rejected by those it impacts?

[Kemi Badenoch]

If the hon. Lady reads beyond The Guardian and perhaps statements in the Morning Star, she will realise that the report has been welcomed by many, many organisations, not just the Equality and Human Rights Commission, but even the Royal College of Physicians and many more. I am not here to reel out a list of who supports the Government. It is interesting that she says that I confuse disagreement with divisiveness, because it was her colleague the hon. Member for Brent Central (Dawn Butler) who just stood up there and called people “racial gatekeepers”. I wonder whether the hon. Lady agrees with that comment, which is unbelievably divisive rhetoric. What I would say to her is that she does not speak for all ethnic minorities. Ethnic minorities are not uniquely left wing, and to claim that a report about black and brown people can only talk about issues from her perspective completely ignores the fact that there are many of us, of various skin colours—she can see my face and she knows I am a black woman, just like her—who disagree. We disagree. She raises the point about maternal health, and I would like to take the opportunity to make this point: in a debate on 11 March, she said that

“one in four black women dies in childbirth”.—[Official Report, 11 March 2021; Vol. 690, c. 1089.]

That statistic, which thankfully she has now corrected, is completely wrong. The actual figure is not 25% of black women, but 0.34%. It is a very confusing statistic because we often represent the numbers in terms of numbers per 800,000.[Official Report, 27 April 2021, Vol. 693, c. 2MC.] What I have been doing is working on maternal health. I have spoken to the chief midwifery officer and to Dame Donna Kinnair, the head of the Royal College of Nursing; we in government have had conversations and they all accept that because the numbers are so small, it will often be very hard to target effectively, but that does not mean we will not try. We do have a maternal health strategy, which I know the hon. Lady has seen, and I wish that for once she would acknowledge the work that the Government have done, rather than repeating false statistics and pretending that nothing is happening, when that is far from the truth.

[Mrs Maria Miller (Basingstoke) (Con) [V]]

I thank my hon. Friend for her statement. The commission’s report rightly sets how geography, family make-up and socioeconomics contribute to inequality, but the report is also clear that that does not mean that racism does not exist in our country today. Echoing the McGregor review, the reports shows, for example, racism that people experience when applying for a job. Will the Government include specific policies to tackle racism at work in the response that my hon. Friend talked about in her opening statement, as well as tackling the more general economic inequality, which can affect everyone in society?

[Kemi Badenoch]

I thank my right hon. Friend for that question. Everyone has a part to play. I cannot outline the Government response now; we are still working on it, as I announced in my statement. However, the report makes recommendations not just for Government, but for the public sector, the private sector, businesses and individuals. There will be plenty that we can do to address those issues, and we will see what the Government have to say on them in their response in the summer.

[Andy Slaughter (Hammersmith) (Lab) [V]]

The commission’s chair says that it found no evidence in Britain of institutional racism, which it defines as

“racist or discriminatory processes, policies, attitudes or behaviours in a single institution.”

How does the Minister for Equalities square that with the policy of holiday park operator Pontins to ban Gypsies and Travellers from its premises? Is not deliberate discrimination on the grounds of race, whether by arms of the state or private corporations, institutional racism in plain sight?

[Kemi Badenoch]

The commission looked at specific areas; it did not examine Pontins. It did not say that there is no institutional racism in Britain; as I said in my statement, it said that about the areas it looked at. I do not believe that the holiday sector was one of the areas it examined. For what it is worth, no business should discriminate against people on the basis of their ethnicity or background. I am sure that the hon. Gentleman and I share that view. I do not know the full details of the Pontins situation, but that is exactly the kind of thing that we want to address in Government, so that we can make sure that communities get fair treatment. What is good about the commission’s report is that, unlike many reports that look at race and racism, is actually looks at the Gypsy, Romany and Traveller community, especially in respect of education—many people ignore them because they are classified as white, which I do not think is the right way to go. That is one reason why it is important to disaggregate BAME and talk about specific groups.

[Elliot Colburn (Carshalton and Wallington) (Con) [V]]

May I thank my hon. Friend the Minister personally for reaching out after the threat that my fiancé and I received last week?

Since the report was published, many Carshalton and Wallington residents have asked to see the Government’s response and what action is now going to be taken. Will my hon. Friend confirm that once a response has been issued and work has begun on implementing recommendations, the GEO will begin to establish mechanisms to measure the success of measures and provide regular updates to the House?

[Kemi Badenoch]

I wholeheartedly agree with my hon. Friend. This is very much part of the ethos of the equality hub: there is no point in enacting policy and then not checking to see whether it is successful. In fact, too many resources have probably been spent on creating activities but not necessarily checking whether they are generating the benefits that we expect. I thank my hon. Friend for that question and assure him that that is the way we intend to approach these issues.

[Florence Eshalomi (Vauxhall) (Lab/Co-op) [V]]

I put on record my thanks for the work of the Runnymede Trust and declare an interest as a former member of staff there, working as its public affairs manager. The Runnymede Trust is a leading race equality think-tank and has, through some of its quality work and research, helped to identify issues in respect of addressing race equality in this country.

I wish to focus on the commission and the issues around education. The commission focuses a lot on the educational experience of young black and minority ethnic students, but I hope the Minister will agree with me on this. A few years ago a Runnymede Trust article highlighted the fact that when a number of black and minority ethnic students who do well at GCSE and A-level go to university, their degree classifications are much lower, which has a big impact on them securing work when they leave university. Will the Minister agree to look at this issue and not just accept the commission’s report in terms of saying that for all black and minority ethnic students educational attainment is going in the right direction?

[Kemi Badenoch]

I am pleased that the hon. Lady has actually read the report. As I said, I am happy to debate and disagree, but not to be misrepresented.

The hon. Lady raises an interesting point about what is happening in education. I should clarify that the good news that the report highlights is around GCSEs; it probably agrees with her about what is going on in higher education. The report talks about black students being more likely to take poorer quality courses at less prestigious universities, and there is a big disparity in the fact that black students are the least likely to go to a high tariff provider and are 1.7 times more likely than their white peers to attend what the report describes as “low tariff institutions”. Part of the difference is due to the high progression rate into higher education for black students, but the report also talks about the sort of advice that they are given. It is very much an issue that we should explore further and I will encourage colleagues from the Department for Education to look into it. If the hon. Lady wants to write to them directly, I encourage her to do that.

I thank the hon. Lady for her question and note her comments about the former Runnymede Trust. We on the Conservative Benches have worked well with people such as Trevor Phillips, and one of the commissioners, Samir Shah, is also a former chair of the Runnymede Trust, but I cannot accept the behaviour of the current chair and some staff members.[Official Report, 22 April 2021, Vol. 692, c. 6MC.]

[David Simmonds (Ruislip, Northwood and Pinner) (Con) [V]]

The Sewell report recognises that issues of mistrust and unfairness, whether they are real or perceived, really matter, especially in policing. Will my hon. Friend engage with her Home Office colleagues to develop proposals to build on the good work that has been done to make local police forces more representative of the communities that they serve and introduce more community oversight of local policing?

[Kemi Badenoch]

Yes, that is one of the recommendations in the report and it is clear from what it says that trust and fairness are key issues for ethnic minority communities, particularly when it comes to policing, as my hon. Friend has just highlighted. I understand that my right hon. Friend the Minister for Crime and Policing is already engaging with the commission to discuss its recommendations in that regard and I welcome his early initiative in doing so.

[Janet Daby (Lewisham East) (Lab) [V]]

Thank you, Mr Deputy Speaker. [Inaudible.]

[Janet Daby]

…to address structural inequalities of race and ethnicity in the social security system.

[Kemi Badenoch]

I am afraid that I did not hear most of the question. If the hon. Lady writes to me, I shall send her a comprehensive response in a letter.

[Mr Deputy Speaker]

Sorry, Janet, the volume went for whatever reason.

[Brendan Clarke-Smith (Bassetlaw) (Con) [V]]

Does my hon. Friend agree that, because the children’s commissioner for England and the Royal College of Physicians have welcomed recommendations in their respective fields, it is clear that the Commission on Race and Ethnic Disparities was motivated by outcomes rather than outrage?

[Kemi Badenoch]

Absolutely. I welcome the support shown by those leading experts in their respective fields and I thank them for their positive engagement with the report’s findings and recommendations that pertain to them. The Sewell commission, as I understand it, adopted an approach that was driven by a need for better outcomes, not better process, which is testament to its strong desire to effect change for all, not for a selected few. I am very happy to accept that there will probably never be a race report in this country that everyone will get behind. We have very different views on it, but what we do need is to hear from those people who have different views from what we constantly hear reported.

[Kim Johnson (Liverpool, Riverside) (Lab) [V]]

Minister, is it common sense to want to ignore the difficult part of our history and withdraw funding from charitable organisations, including the National Trust and the Runnymede Trust, which highlight the consequences of institutional racism, as members of the so-called Common Sense Group is proposing? Is that not divisive rhetoric that stokes culture wars?

--- Later in debate ---

[Kemi Badenoch]

It is interesting that the hon. Lady raises that point. The Runnymede Trust has said, according to a letter from the chair of the Equality and Human Rights Commission, that the EHRC should not have funding. It implied that the EHRC should be defunded, so if she wants to talk about people who want to defund charities and organisations working on racial equality, she should ask the chair of the Runnymede Trust why she made that statement.[Official Report, 22 April 2021, Vol. 692, c. 6MC.]

[Steve Double (St Austell and Newquay) (Con) [V]]

May I begin by commending the Minister for her appearance at the Dispatch Box today, which has been rightly and appropriately robust at times? I very much welcome this report as it is one of the first reports on race that acknowledges the disadvantage experienced by many white working class boys in our country and also acknowledges the geographical disparities that exist. Will she ensure that the recommendations in the Sewell report are brought forward as part of the Government’s levelling-up agenda?

[Kemi Badenoch]

I thank my hon. Friend for highlighting the importance of this report and the opportunity it provides for the Government to make Britain a fairer society for all. This report is the first attempt to grip the complex reality of ethnic advantage and disadvantage. Unlike many other reports on race and ethnicity, it is also the first to include some of the profound disparities experienced by the race and ethnic majority in this country. Educational outcomes for children in this group are a critical part of the commission’s deliberations and its approach to the 24 recommendations is one that stands to benefit all, regardless of their race, ethnicity or socio-economic background. We want a country that is fair for everyone. The Government are now actively considering this report and the recommendations that it makes and look forward to publishing their full response in due course.

[Mr Deputy Speaker]

I thank the Minister for her statement and for responding to 28 questions.

Draft Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021 Draft Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021

Kemi Badenoch Excerpts

Wednesday 14th April 2021 General Committees

[The Chair]

Before we begin, I remind Members to observe social distancing and to sit only in places that are clearly marked. I also remind Members that Mr Speaker has stated that masks should be worn in Committee. Hansard colleagues will be most grateful if Members could send their speaking notes to [e-mail].

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

I beg to move,

That the Committee has considered the draft Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021.

[The Chair]

With this it will be convenient to consider the draft Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021.

[Kemi Badenoch]

It is a pleasure to serve under your chairmanship, Mrs Murray. The two draft instruments relate to the UK emissions trading scheme or ETS.

At the end of the transition period, the UK ceased to participate in the European Union’s emissions trading scheme. However, the Government remain committed to maintaining an ambitious carbon price to ensure that polluters continue to pay for their emissions, as they should. At the start of the year, we launched the UK ETS, which has been legally established under the Climate Change Act 2008. It is a UK-wide greenhouse gas emissions trading scheme designed to encourage emissions reductions when most cost-effective. It applies to energy generation, energy-intensive industries and aviation.

Reducing emissions while supporting UK industry is central to the Government’s mission to deliver our world-leading net zero target. The UK ETS is key to achieving that goal. The new scheme provides a smooth transition for businesses while reducing our contribution to climate change from day one.

Emissions trading schemes work on the cap-and-trade principle. A cap is set on the total amount of greenhouse emissions covered by the scheme and, within that cap, participants receive or buy emission allowances, which may be traded with other participants as required. The cap is reduced over time, so that total emissions fall. Participants are required to monitor their emissions and to surrender one emission allowance for every tonne of carbon dioxide equivalent emitted. An ETS is therefore underpinned by the creation of a market for emission allowances. Auctioning and trading such allowances leads to the discovery of a market price for greenhouse gas emissions.

The UK ETS was established by the Greenhouse Gas Emissions Trading Scheme Order 2020. That GGETS order was made under the Climate Change Act 2008 on 11 November 2020. It set up a UK-wide emissions trading scheme, as launched on 1 January 2021. The GGETS order regulates the emission of greenhouse gases in the United Kingdom, permits the creation of allowances to emit 1 tonne of carbon dioxide equivalent and sets a cap on the number of allowances that may be created in any scheme year.

The draft regulations we are debating today relate to the auction of emissions allowances as part of the UK ETS. The first of the statutory instruments is the draft Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021. It creates an oversight role for the Financial Conduct Authority, the FCA, in the UK ETS and emission allowance market. It was laid under the European Union (Withdrawal) Act 2018 and makes consequential amendments to financial services law and related matters to provide for the safe and effective operation of the market for UK emission allowances as part of the UK ETS.

The SI amends existing financial services legislation so that it works in the context of a UK-only ETS. In doing so, it ensures that the Financial Conduct Authority can oversee the auctioning and trading of emission allowances and can ensure the soundness and integrity of the market. The instrument has been introduced now so that it may receive parliamentary approval in time for the first auctioning of UK emission allowances in May 2021.

The draft SI establishes the activity of bidding in an emission allowance auction as a regulated activity and establishes UK emission allowances as financial instruments. That means that the FCA has oversight of bidding in allowance auctions, and ensures that the allowances themselves are subject to the appropriate regulatory treatment with regard to issues such as market abuse. The instrument also amends financial promotion legislation, so that the promotion of investments in UK emission allowances can be undertaken only by persons with the correct permissions.

To properly empower the FCA to oversee the regime, the SI also updates rules around the disclosure of confidential information so that the FCA can correctly discharge its functions with regard to the disclosure of information relating to the UK ETS and emission allowance holdings. It ensures that the FCA has the investigation and enforcement powers to fulfil its duties with regard to preventing financial misconduct in the context of the auctioning and trading of emission allowances.

Finally, the SI amends the UK market abuse regulation, known as UK MAR, so that it covers the primary and secondary market trading of UK emission allowances and the secondary market trading of EU emission allowances when those activities are within the territorial scope of UK MAR. In summary, the instrument will ensure the integrity of the UK carbon emission allowances market, in turn facilitating the contribution that the new UK ETS will make as the UK’s leading carbon pricing policy instrument. That will encourage cost-effective emission reductions, and therefore help us to achieve our net zero goal.

Alongside the draft Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021 are the draft Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021, which were laid before the House on 11 February 2021. A correction slip was laid on 15 February 2021 for a minor amendment clarifying that the UK ETS will have an auction reserve price of £22 per tonne of carbon dioxide equivalent, as announced alongside the publication of the draft regulations on 11 February.

The instrument provides for the auctioning of emission allowances to emit 1 tonne of carbon dioxide equivalent under the UK emissions trading scheme and introduces mechanisms to support market stability in the new scheme. The draft regulations are made under the power in section 96 of the Finance Act 2020 to make regulations on the allocation of emission allowances in exchange for payment. The draft regulations make provision under the Act for auctions of allowances to emit 1 tonne of carbon dioxide equivalent created under the Greenhouse Gas Emissions Trading Scheme Order 2020.

Part 1 contains the interpretation provisions. Part 2 provides for the products to be auctioned and sets out how bids are to be submitted and withdrawn, and how the auction clearing price is to be determined. Part 3 makes provision for the auction calendar and when the calendar may be adjusted. It sets out what happens to the volume of allowances at cancelled auctions, what volume of allowances are to be auctioned annually, and provides for a cost containment mechanism, enabling the Treasury to adjust the distribution or volume of allowances to be auctioned in any one year if the carbon price exceeds specified limits.

Part 4 provides for access to auctions. Parts 5, 6 and 7 provide for the appointment and functions of the auctioneer and the auction platform, and their appointment requirements. Part 8 provides for the reporting of transactions. Part 9 provides for the payment and transfer of the auction proceeds. Part 10 provides for the delivery of the auctioned allowances. Part 11 provides for the management of collateral. Part 12 provides for fees and costs.

Part 13 provides for monitoring of auctions, remedial measures and sanctions. Part 14 provides for the publication of auction results and protection of confidential information. Finally, Part 15 makes provision for a right of appeal and the correction of errors. The instrument therefore provides the rules covering both auctions and secondary markets for emission allowances as part of the UK ETS. It also introduces mechanisms to support market stability.

The two instruments will ensure the functionality and integrity of the auctioning and trading of emission allowances due to begin next month, thereby preserving the soundness of the UK ETS market. Together, they are fundamental to the Government’s ambitions to encourage cost-effective emission reductions and ultimately to achieve our goal of net zero.

--- Later in debate ---

[Kemi Badenoch]

I thank the hon. Lady for her contribution to the debate and for the Opposition’s broad support for carbon pricing and the draft instruments. She asked whether we are still interested in linking the UK ETS to the EU ETS. The UK is open to linking the UK ETS internationally in principle. We are considering a range of options, but no decisions on preferred linking partners have yet been made. We are already looking to innovate and create schemes suited to the UK and our climate commitments. We have started by reducing the cap on emissions by 5% compared with what it would have been within the EU, and we will set out further plans ahead of COP26. Having our own scheme means that we can be flexible, now that we are a sovereign nation, and can go further and faster than the EU.

Regarding which option we took, whether a stand-alone UK ETS, a carbon emissions tax and so on, the Government carefully considered the important economic and environmental aspects of each policy ahead of making a decision for a UK ETS. That included the certainty of carbon price, simplicity of the policy and the cost to business. On balance, however, the Government felt that the UK ETS—with a cap on emissions, which we will consult on to enable it to align with net zero, and the continuity it offers participants—offers a better basis for businesses to decarbonise. It is right that, at the moment of leaving the EU, we took the time to prepare properly and consider both a UK ETS and a carbon tax, given that the chosen mechanism will be crucial to meeting our climate ambitions over the coming decades. Preparations for a carbon emissions tax were already advanced due to the contingency planning that took place for the scenario whereby the UK left the EU without a deal and thereby ceased to participate in the EU ETS. As such, additional costs to develop this option further were minimal. I remind the hon. Lady that payment will not be due until April 2022, so I do not accept the assertion that businesses have been left with uncertainty; we have actually given them quite a lot of time to prepare for changes.

The hon. Lady also asked what we will do with the auction reserve price. We have set a floor for that. The Government would be prepared, should prices become exceedingly high, to intervene, but at the moment we will let the market run its course. She also asked about the tax implications for sectors such as agriculture. I say to her that the Treasury keeps all taxes under review.

The draft Recognised Auction Platforms (Amendment and Miscellaneous Provisions) Regulations 2021, laid under the European Union (Withdrawal) Act 2018, will make amendments to financial services law to provide for the safe and effective operation of the UK emissions allowances market, as part of the UK ETS. The draft Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021, laid under the Finance Act 2020, will provide for the auctioning of emissions allowances under the UK ETS. It will also introduce mechanisms to support market stability in the new scheme. Together, these two instruments will ensure the integrity of the market that will underpin our carbon pricing goals and are vital to ensuring that the UK ETS can function as planned.

I thank the hon. Lady for her contribution, and I greatly appreciate the support that has been shown for the draft instruments, which will ensure that the UK has a domestic carbon pricing policy that is fit for the net zero future we have committed to.

Question put and agreed to.

Draft Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021

Resolved,

That the Committee has considered the draft Greenhouse Gas Emissions Trading Scheme Auctioning Regulations 2021.—(Kemi Badenoch.)

Finance (No. 2) Bill

Kemi Badenoch Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

On behalf of my constituents, I join Members across the House in expressing my deepest sympathies to Her Majesty the Queen and the royal family on the death of His Royal Highness the Prince Philip, the Duke of Edinburgh. I would also like to briefly take the opportunity to pay tribute to my colleague, Dame Cheryl Gillan, who passed away over the recess. We worked closely together on the 1922 committee between 2017 and 2019. She was an unflappable lady and always good humoured. I cannot quite believe that she has left us, and it goes to show that we often do not know how much people mean to us until they are gone.

I turn to the matter of today’s debate, which it is a privilege to close on behalf of the Government. I thank all Members for their contributions. We have heard some excellent speeches, and in particular, I thank Members such as my right hon. Friend the Member for Wokingham (John Redwood) and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) for the many deeply considered reflections they have shared based on the significant knowledge and experience they have gained outside the House. I will address as many points as I can, and I am sure we will consider in Committee those that I do not get to.

The Bill’s first purpose is to protect jobs and livelihoods threatened by covid-19 by providing tax support to businesses and individuals. It boosts some of the hardest hit industries through extending the VAT reduction for the hospitality and tourism sectors. It provides extra security for workers in the housing sector by maintaining the temporary cut in stamp duty until the end of June. My hon. Friend the Member for Wimbledon (Stephen Hammond) raised the issue of businesses that are ineligible for support, such as English language schools in his constituency. The Finance Bill supports struggling businesses by allowing them to carry back up to £2 million of losses and receive refunds for tax paid in additional previous years further to the one year provided at present.

In addition, the Bill contains a number of other measures that will provide a helping hand to businesses and individuals at this most difficult of times. I thank the hon. Member for Weaver Vale (Mike Amesbury), my hon. Friend the Member for North Norfolk (Duncan Baker), the hon. Members for Brentford and Isleworth (Ruth Cadbury), for Belfast South (Claire Hanna), for Bethnal Green and Bow (Rushanara Ali) and for Gordon (Richard Thomson), and all other Members who raised points on their constituents’ behalf on this issue.

The Bill has a second important purpose: to support the Government’s efforts to rebuild the nation’s finances, as eloquently expressed by my right hon. Friend the Member for Central Devon (Mel Stride), so that we have the fiscal flexibility to respond to new crises. As the Chancellor said at the Budget,

“our approach to fixing the public finances will be fair”,

asking those who can afford to contribute to play their part, while

“protecting those who cannot.”—[Official Report, 3 March 2021; Vol. 690, c. 256.]

That is why the Bill maintains the income tax personal allowance and the higher rate threshold at their current levels from next year, and why it maintains the pensions lifetime allowance, the threshold for capital gains tax and the threshold for inheritance tax at 2020-21 levels.

As my right hon. Friend the Financial Secretary to the Treasury said, businesses have received over £100 billion of support through this crisis; it is only right that we ask the firms with the broadest shoulders to support our recovery. Therefore the rate of corporation tax will increase to 25%, but only from 2023. I was very pleased to hear the faintest of praise for that measure from the hon. Member for Walthamstow (Stella Creasy). Those Members who have reservations about the impact on small businesses should know that small businesses with profits of £50,000 or less, which make up 70% of actively trading companies, will be protected from that rise. Let me also remind the House that a 25% corporation tax rate is still the lowest in the G7.

My right hon. Friend the Member for Central Devon asked why the diverted profits tax is maintained, not widened. This tax is charged at a higher rate than corporation tax to discourage the diversion of profits that should be taxed in the UK to another country. The six-point differential between the main rate and the DPT rate has proven an effective deterrent, and that is why the diverted profits tax is being increased from 25% to 31% from April 2023 to maintain the current differential.

My hon. Friend the Member for Mid Norfolk (George Freeman), the hon. Member for Richmond Park (Sarah Olney) and my hon. Friend the Member for Hertford and Stortford (Julie Marson) all raised the important issue of investment and productivity, and I thank my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami) for praising our Help to Grow scheme.

The measures in the Bill support the Government’s goal of an investment-led recovery from coronavirus. Our super deduction will allow companies to claim 130% capital allowances on qualifying plant and machinery investment from this month until 2023. That is the biggest two-year business tax cut in modern history, and it will support firms to make a transformative investment in the UK’s future growth and prosperity.

HMRC assessed the potential for fraud and tax avoidance—something which some Members raised. There are a number of safeguards in the legislation to prevent such abuse, such as the exclusions of connected party transactions and second-hand assets. The legislation introduces a new anti-avoidance provision that applies to counteract arrangements that are contrived, abnormal or lacking a genuine commercial purpose.

In addition, the Bill enables the Government to designate tax sites in freeports in Great Britain, as referenced by the hon. Members for Glenrothes (Peter Grant) and for Bootle (Peter Dowd) and my hon. Friends the Members for Redcar (Jacob Young) and for North West Durham (Mr Holden), where, once approved, eligible businesses will be able to benefit from a number of tax reliefs, including capital allowances and relief from stamp duty. I am particularly grateful to my hon. Friend the Member for North West Durham for his rebuttal to the hon. Member for Ealing North (James Murray), who sought to link, incredibly, freeports to organised crime. I reassure my hon. Friend the Member for Waveney (Peter Aldous) that we do expect freeports to enhance the incentives in place in areas like his that already have enterprise zones.

I acknowledge the issues raised by the right hon. Member for East Antrim (Sammy Wilson), including about steel imports into Northern Ireland under the Northern Ireland protocol, and I welcome his remarks on clause 97. He is right to point out what the effect of 25% tariffs would be on engineering firms in Northern Ireland. The Government have been working closely with the steel sector to address that issue, and clause 97 is an example which shows that we are very much committed to ensuring that the protocol works for the people of Northern Ireland.

Let me remind the House that the Finance Bill also has a number of purposes beyond this crisis. As the Financial Secretary outlined earlier, it continues the Government’s work of building a fairer and sustainable tax system. The hon. Member for Strangford (Jim Shannon) raised air passenger duty. The Bill seeks to set air passenger duty rates for April 2022, and so will not take immediate effect. It will only increase long-haul APD rates in nominal terms, while short-haul rates will remain frozen at current rates, which will benefit over 75% of passengers. Long-haul economy rates, for example, will increase by only £2.

The Bill improves tax transparency by paving the way for the UK to implement the OECD’s international reporting rules for digital platforms, stops tax cheats by strengthening our existing anti-avoidance regimes and tightening the rules designed to tackle promoters and enablers of tax avoidance schemes, and provides even more certainty to taxpayers by setting out a more consistent, fairer penalty regime across VAT and income tax self-assessment. In addition, it will help to deliver a low-carbon future, as highlighted by my hon. Friends the Members for Arundel and South Downs (Andrew Griffith) and for Stoke-on-Trent Central (Jo Gideon) and the hon. Member for Ceredigion (Ben Lake), with the introduction of a plastic packaging tax and by removing most sectors’ entitlement to use red diesel from April next year. I know that my hon. Friend the Member for St Austell and Newquay (Steve Double) raised concerns about the policy. I will ensure that officials continue to engage with the sector, and he should receive a letter from me shortly. We recognise that it will be a big change for some businesses. They have another year before changes take effect, and we are doubling the funding provided for energy innovation through the new £1 billion net zero innovation portfolio, which will support the development of alternatives that businesses can switch to.

As every Member of the House will be all too aware, the past year has been a time of deep economic challenge. The Bill plays a major part in allowing us to meet those challenges today while readying the country for a better tomorrow. For that reason, I cannot support the reasoned amendment, and I commend the Bill as it stands to the House.

Question put, That the amendment be made.

Oil and Gas Decommissioning Relief Deeds

Kemi Badenoch Excerpts

Tuesday 23rd March 2021 Written Statements

[The Exchequer Secretary to the Treasury (Kemi Badenoch)]

At Budget 2013, the Government announced they would begin signing decommissioning relief deeds. These deeds represented a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.

Since October 2013, the Government have entered into 98 decommissioning relief deeds.

Oil and Gas UK estimates that these deeds have so far unlocked approximately £8.1 billion of capital, which can now be invested elsewhere.

The Government committed to report to Parliament every year on progress with the decommissioning relief deeds. The report for financial year 2019-20 is provided below.

1. Number of decommissioning relief agreements entered into: the Government entered into four decommissioning relief agreements in 2019-20.

2. Total number of decommissioning relief agreements in force at the end of that year: 96 decommissioning relief agreements were in force at the end of the year.

3. Number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: two payments were made under a decommissioning relief agreement in 2019-20, for £54.6 million in total. These were made in relation to the provision recognised by HM Treasury in 2015, as a result of a company defaulting on its decommissioning obligations.

4. Total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: six payments have been made under any decommissioning relief agreement as at the end of the 2019-20 financial year, totalling £148.6 million.

5. Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2020-21 accounts will recognise a provision of £258.1 million in respect of decommissioning expenditure incurred as a result of a company defaulting on their decommissioning obligations¹. The majority of this is expected to be realised over the next three years.

¹ This figure takes into account payments made subsequent to the financial year covered by this written ministerial statement.

[HCWS872]

Women and Equalities

Kemi Badenoch Excerpts

Monday 15th March 2021 Ministerial Corrections

[The Minister for Equalities (Kemi Badenoch)]

I am also aware that waiting times for gender identity services are currently very long. We are taking meaningful actions to address the historical problems that have resulted in long waiting times, and I am pleased that we will establish at least three new gender identity clinics over 2021, with the first of these opened by the Chelsea and Westminster NHS Foundation Trust in July.

[Official Report, 8 March 2021, Vol. 690, c. 50WH.]

Letter of correction from the Minister for Equalities, the hon. Member for Saffron Walden (Kemi Badenoch).

An error has been identified in my response to the debate.

The correct response should have been:

[The Minister for Equalities (Kemi Badenoch)]

I am also aware that waiting times for gender identity services are currently very long. We are taking meaningful actions to address the historical problems that have resulted in long waiting times, and I am pleased that we have established three new gender identity clinics throughout 2020 and 2021, with the first of these opened by the Chelsea and Westminster NHS Foundation Trust in July 2020.