Oral Answers to Questions

Debate between Kemi Badenoch and Abena Oppong-Asare
Tuesday 7th September 2021

(2 years, 5 months ago)

Commons Chamber
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Kemi Badenoch Portrait Kemi Badenoch
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I thank my hon. Friend for that question. The Government recognise the important role of financial markets in supporting the UK’s transition to a net zero economy. The British Business Bank is a Government-owned economic development bank that makes finance markets for smaller businesses work more effectively, and its remit includes venture capital. I note her point about a meeting and believe that my hon. Friend the Economic Secretary is happy to meet her on this issue.

Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
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It is only 55 days until COP26 in Glasgow and households, consumers and businesses urgently need clarity and certainty about how the costs and benefits of our transition to net zero will be shared. Labour’s approach to tackling the climate crisis would have fairness at its heart, because we know that while some are planning to build personal heated swimming pools in their homes, millions of others are struggling with energy bills. The net zero review is supposed to consider fairness. At the last Treasury questions, the Chancellor told my hon. Friend the Member for Leeds West (Rachel Reeves) that the final report would

“of course be published imminently”—[Official Report, 22 June 2021; Vol. 697, c. 750.]

That was 11 weeks ago. Where is it?

Kemi Badenoch Portrait Kemi Badenoch
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As I said, the report will be published in advance of COP26, but we have published other things that the hon. Member does not seem to have heard of or read. We have set out ambitious plans about the net zero target and published the energy White Paper, the industrial decarbonisation strategy, the transport decarbonisation plan, which has not happened anywhere else in the world—we are the first country to do a transport decarbonisation plan—and a hydrogen strategy. We will publish the heat and building strategy in due course. The Government have been busy setting out plans on net zero, and we would appreciate it if Opposition parties took some time to read them.

Oral Answers to Questions

Debate between Kemi Badenoch and Abena Oppong-Asare
Tuesday 27th April 2021

(2 years, 10 months ago)

Commons Chamber
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Kemi Badenoch Portrait Kemi Badenoch
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I reassure the hon. Gentleman that that is something that we are doing. As I mentioned in my earlier answer, we have already spent £500 million across the sector specifically to deal with that point. Further, we are taking a number of steps to support the decarbonisation of the UK steel industry. For example, we announced the £250 million clean steel fund to support the decarbonisation of the steel sector, including its transition to new low-carbon technologies and processes.

Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
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Jobs in the steel industry are crucial to the people of Hartlepool. In June, the first instalment of the EU research fund for coal and steel will be returned to the UK. Are the Government planning to ring fence that money to support the decarbonising and modernising of the industry, given the vital importance of protecting steel jobs for the future?

Kemi Badenoch Portrait Kemi Badenoch
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I thank the hon. Lady for her question. I mentioned in my answer to the hon. Member for Aberavon (Stephen Kinnock) the steps that we are taking to decarbonise the UK steel industry. As I said, there are global challenges in the industry and we have been supporting various companies. For example, last year, we provided a £30 million loan to Celsa, safeguarding a key supplier to the UK construction industry and securing more than 1,000 jobs, including more than 800 positions at the company’s main sites in south Wales. The Government will continue working with businesses to understand the issues that they are facing, including continuing to engage business sectors that are affected by covid and our changing relationship with the EU.

Finance (No.2) Bill (Third sitting)

Debate between Kemi Badenoch and Abena Oppong-Asare
Tuesday 27th April 2021

(2 years, 10 months ago)

Public Bill Committees
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Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch)
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Clause 98 and schedule 20 reform the use of polluting diesel fuel by reducing the number of businesses that benefit from red diesel tax breaks from April 2022. Those changes will mean that most businesses across the UK will use diesel fuel taxed at the standard rate for diesel from April 2022, bringing them in line with ordinary motorists. That more fairly reflects the negative environmental impact of the emissions produced. It also ensures that the tax system incentivises users of polluting fuels such as diesel to improve the energy efficiency of their vehicles and machinery and to invest in cleaner alternatives, or just use less fuel.

Red diesel is a dye-marked diesel currently used mainly for off-road purposes, such as to power bulldozers and cranes in the construction industry. It accounts for around 15% of all diesel used in the UK and is responsible for the production of nearly 14 million tonnes of CO2 a year, as well as noxious gases such as nitrogen oxide and particulate matter. Red diesel is subject to a rebated rate of fuel duty of 11.14p per litre, which is 46.81p less than the tax due on standard diesel used by ordinary motorists. Businesses that use red diesel are therefore paying far less for the harmful emissions that they produce.

The Government have previously received feedback from developers of alternative fuels and technologies that they view the low cost of running a diesel engine as a barrier to entry for greener alternatives. Clause 98 and schedule 20 will amend the Hydrocarbon Oil Duties Act 1979, to reform the entitlement to use red diesel in most sectors from April 2022. As announced at Budget 2020 and confirmed at Budget 2021, the Government will grant entitlements to use red diesel for the following purposes: for vehicles and machinery used in agriculture, forestry, horticulture and fish farming; to propel vehicles designed to run on rail tracks and for heating non-commercial premises, which includes the heating of homes and buildings such as places of worship, hospitals and town halls.

In addition, following consultation last year on these tax changes, for which the Government received more than 400 written responses, the Government decided at Budget 2021 to grant further entitlements to use red diesel after April 2022 for the following purposes: electricity generation in non-commercial premises; maintaining community amateur sports clubs and golf courses; as fuel for all commercial water vessels refuelling and operating in the UK, including fishing and water freight industries; for private pleasure craft in Great Britain; and powering machinery and caravans of travelling fairs and circuses. The Bill will also extend fuel duty to biodiesel, bioblends and fuel substitutes used in heating.

In response to concerns raised by red diesel users during the consultation about their ability to run down fuel stocks in back-up generators, the Bill provides for secondary legislation to give HMRC officers the power to disapply the liability to seize vehicles or machinery where they are satisfied that those who are no longer entitled to use red diesel are acting within the new law.

New clause 3, which was tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon (Richard Thomson) and for Midlothian (Owen Thompson), would require the Government to publish a report on the effects of clause 98 on progress towards the UK Government’s climate emissions targets

“within six months of the passing of this Act.”

Clause 98 will make changes to remove the entitlement to use red diesel from most sectors from April 2022; such a report could not meaningfully assess the impact of the changes within six months.

As the Government set out in our summary of responses to the red diesel consultation:

“As these tax changes are introduced, the government will monitor fuel duty receipts of red and white diesel to evaluate the extent to which current users of red diesel that have lost their entitlement to use red diesel are switching to greener alternatives. The Treasury will also work closely with the Department for Business, Energy and Industrial Strategy to evaluate the extent to which these tax changes are accelerating the development of greener alternatives and how this interacts with the work of the government’s energy innovation programmes, like the Net Zero Innovation Portfolio.”

The Government continue to take our world-leading environmental commitment seriously and remain dedicated to meeting our climate change and wider environmental targets, including improving the UK’s air quality; that is why we are reforming the use of red diesel from April 2022. Reducing tax breaks on red diesel will mean that approximately 3.6 billion litres of diesel, equivalent to 9.5 million tonnes of CO2, will now be taxed at the standard diesel rate. I ask the Committee to agree that clause 98 and schedule 20 should stand part of the Bill and to reject new clause 3.

Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
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It is a pleasure to serve under your chairship, Dame Angela. I thank the Minister for her explanation of clause 98, which restricts the entitlement to use red diesel and related biodiesel for most sectors from April 2022.

We support the Government’s intention behind the measure, which was first announced in the 2020 Budget. There is a clear need to ensure that fuel duty rebates are as limited as possible in order to meet our net-zero commitment. I note that several sectors retain their entitlement to use red diesel, including agriculture, rail transport and permanently moored houseboats. More recently, the Government have announced further exemptions, including generating power from non-commercial premises for amateur sports clubs and for travelling fairs and circuses.

I have a couple of questions for the Minister about the impact on individual sectors. I know that the waste sector made a representation to the Treasury arguing that removing its red diesel entitlements

“could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.”

Would the Exchequer Secretary assure us that that issue was looked at carefully and that the impact on recycling was considered? Would she also say a little about compliance in the industries where the entitlement is being removed? She mentioned that the Treasury had been working closely with the Department for Business, Energy and Industrial Strategy to ensure that compliance was followed, but what monitoring and enforcement will the Government use to ensure that red diesel is used only for approved purposes?

May I turn briefly to recreational boat owners in Northern Ireland? The Government have confirmed that private pleasure craft in Northern Ireland will have to use white diesel from June this year in order to implement a ruling of the European Court of Justice. The Royal Yachting Association, British Marine and the Cruising Association have raised concerns about the practical effects of the decision, including the limited supply of white diesel for private pleasure craft users in Northern Ireland. Would the Minister reassure us that HMRC and the Treasury will work closely with those organisations to minimise disruption? Would she give us more information on the steps that have been taken so far to ensure that? Finally, will the Government take any further action to encourage the growth of cleaner fuel alternatives in sectors such as the construction industry?

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
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It is a pleasure to serve under your chairmanship, Dame Angela. I could repeat much of what I have to say about new clause 3 when we debate new clause 5, but in the interests of brevity I will not make the same comments again at that point.

We welcome the fact that the tax system is used to encourage individuals and businesses to operate in a more environmentally responsible and sustainable way, but it is important that when we make changes we are prepared to look at them afterwards to see whether they are having the expected impact. That can be quite difficult with Government changes to tax policy, because the policy aim is not always immediately obvious. How much of this change is an income-raising exercise for the Treasury, and how much is designed to reduce the use not only of severely environmentally damaging hydrocarbon fuels, but of other fuels which, although they may be less damaging, are damaging none the less?

Biofuels are not a guilt-free pass. Even though they may appear to be renewable, their use has an impact on the environment, for example where the resources of less well-off countries are used to grow biofuels for us to use instead of food to eat for the people who live there. We should not fool ourselves into thinking that simply by converting our excessive use of fuel to use of renewable fuels, we are somehow doing all we need to.

The second reason why regular reviews are needed is that as well as unintended consequences, there will be mistakes. One third of the Government amendments in Committee of the whole House were introduced to correct drafting mistakes, either in the Bill itself or in related legislation. People make mistakes—hon. Members may even have noticed the drafting mistake in the wording of our new clause 3, which the Exchequer Secretary so kindly pointed out. However, given that her objection to new clause 3 is that the timing does not work, I would appreciate a commitment from her that the Government will comply with the spirit of the new clause in a more appropriate timescale when the impact of the changes can be measured.

The Scottish National party supports the Government’s stated aim of encouraging a more environmentally sustainable and responsible approach to use of the earth’s resources; we just think that they should acknowledge that they might not always get it right the first time. They should build in a process by which we can review the policy after a reasonable time and make the changes that may be needed, sooner rather than later.

Kemi Badenoch Portrait Kemi Badenoch
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Clause 99 consolidates changes announced and implemented in November 2020 concerning tobacco duty rates. The increases made then ensured that the duty charged on all tobacco products rose in line with the tobacco duty escalator, with additional increases for hand-rolling tobacco and to the minimum excise on cigarettes.

Smoking rates in the UK are falling. However, smoking remains the biggest cause of preventable illness and premature death in the UK, killing around 100,000 people a year and about half of all long-term users of tobacco. All these factors mean that we need to continue to encourage more people to kick the habit. We have already set out ambitious plans to reduce the number of smokers from 14% of the population to 12% by 2022, as set out by the Department of Health and Social Care in its tobacco control plan, and we have announced that we aim to curb smoking once and for all by 2030 in England. This includes a commitment to continue the policy of maintaining high duty rates for tobacco products to improve public health.

According to Action on Smoking and Health, smoking costs society almost £14 billion a year in England, including £2 billion in costs to the NHS for treating disease caused by smoking. In November 2020, my right hon. Friend the Financial Secretary announced increases to tobacco duty that, in the absence of an autumn Budget, were implemented by a Treasury order. The order was made under existing powers in the Tobacco Products Duty Act 1979 and helped to protect revenues. However, the life span of an order made under these powers is time-limited to one year, so this clause consolidates those increases. This will ensure that the duty charged on all tobacco products increases in line with the escalator, which is 2% above retail price index inflation. In addition, duty on hand-rolling tobacco increases by a further 4% to 6% above RPI inflation. The clause also increases the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—by an additional 2% to 4% above RPI inflation.

These new tobacco duty rates took effect on 16 November 2020. Recognising the potential interactions between tobacco duty rates and the illicit market, the Government recently consulted on tougher penalties for tobacco tax evasion. This includes proposals for £10,000 fixed penalties and escalating fines for repeat offenders. The responses indicate that there is broad support for tougher sanctions and, as announced on 23 March, we intend to legislate in the next Finance Bill. The Government have committed to strengthening trading standards and Her Majesty’s Revenue and Customs, so that these organisations can combat the illicit tobacco business even more effectively. This work includes creating a UK-wide HMRC intelligence-sharing hub.

The clause will continue our tried-and-tested policy of using high duty rates on tobacco products to make tobacco less affordable, to continue the reduction in smoking prevalence. and to reduce the burden that smoking places on our public services. I therefore move that the clause stand part of the Bill.

Abena Oppong-Asare Portrait Abena Oppong-Asare
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As the Minister said, this clause incorporates the legislation on changes in tobacco duty that the Government introduced in the Tobacco Products Duty (Alteration of Rates) Order 2020. I spoke during the debate on that order, so I will not repeat the points that I made then. However, I do have a few questions for the Minister.

First, why did the Government not raise the tobacco duty at Budget 2021? I note that the Minister has quoted data from Action on Smoking and Health. After the Budget, it said:

“ASH is disappointed that the Chancellor hasn’t increased taxes on cigarettes by per cent above inflation as we recommended. The Government says it is willing to take bold action to make smoking obsolete, which we welcome, but that has to include further tax rises. Making tobacco less affordable is crucial to discouraging children from starting to smoke and delivering the Smokefree generation the Government has said it wants to see by 2030.”

I hope the Minister can respond to the concerns from ASH and clearly set out what the Government’s approach to tobacco duty will be going forward.

9.45 am

More broadly, I want to press the Minister on the issue of smoking and public health. We have seen the importance of public health more than ever over the past year. Many people are concerned that the dismantling of Public Health England will have an adverse effect on the nation’s health, including action on preventing harm through smoking. We need reassurances that the new Office for Health Protection will be able to fulfil that important role effectively. Of course, that is partly from funding, but the Government have cut the public health grant by more than a fifth since 2015-16, despite a growing and urgent need for investment in public health and prevention.

ASH has called on the Government to increase the public health budget by £1.2 billion in order to reverse the cuts that have taken place since 2015 and then to provide additional investment in the most deprived areas with the greatest need. Can the Minister update us on the Government’s plan for the public health budget? Finally, can the Minister tell us whether the Government will provide further funding to local authorities to support local smoking cessation services?

Kemi Badenoch Portrait Kemi Badenoch
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I thank the hon. Lady for her questions. What I would say about the Office for Health Protection is that it is being set up to improve the work that Public Health England was doing. I am assured by health Ministers that it will continue to tackle issues such as tobacco smoking and its health implications.

The current smoking prevalence rate is 13.9%, which is the lowest level on record and a great public health success story. The UK is seen as a global leader on tobacco control, and over the last two decades we have implemented regulatory measures to stop youth smoking, prevent non-smokers from starting, and offer support to help smokers quit. Local authorities are responsible for delivering local “stop smoking” services and support to meet their population’s needs and to address inequalities. The Government set the national policy through the current tobacco control plan, and we will publish the next tobacco control plan this summer in order to outline our ambition for a smoke-free society by 2030.

Given the success that we have had in reducing smoking, we believe that the duty rates have been set at the right level. We review our duty rates at each fiscal event to ensure that they continue to meet our two objectives of protecting public health and raising revenue for vital public services. The tax information and impact note published alongside the Budget announcement sets out the Government’s assessment of the expected impact.

We are committed to improving public health by reducing smoking prevalence. We co-ordinate our efforts through DHSC’s “Tobacco Control Delivery Plan 2017 to 2022”, and we will continue our tried and tested policy of using high duty rates to make tobacco less affordable and continue the reduction in smoking prevalence, which should reduce the burden that smoking places on public services, as I mentioned earlier.

The hon. Lady asked why we are introducing clause 99, given that no increase in tobacco duties was announced in the spring Budget. Although the autumn Budget was cancelled, the Government proceeded with the uprating of tobacco duties in order to safeguard revenues, maintain our commitment to the duty escalator and protect health objectives. The Tobacco Products Duty (Alteration of Rates) Order 2020, implementing the duty increases, took effect on 16 November 2020. However, the hon. Lady should note that although an order may be used to alter tobacco duty rates, the changes expire after one year, which is why the increases need to be consolidated into the Finance Bill. It is not the first time that a Treasury order has been used to increase tobacco duties; the same method was used in 2008. I hope I have answered all her questions.

Question put and agreed to.

Clause 99 accordingly ordered to stand part of the Bill.

Clause 100

Rates for light passenger of light goods vehicles, motorcycles etc

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

Kemi Badenoch Portrait Kemi Badenoch
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Clauses 100 to 102 make changes to vehicle excise duty and the heavy goods vehicle road user levy. Clauses 100 and 101 relate specifically to vehicle excise duty, which is paid on vehicle ownership. The Government have uprated VED, as it is known, for cars, vans and motorcycles in line with inflation every year since 2010, which means that rates have remained unchanged in real terms during that time.

Since April 2017, cars with a list price exceeding £40,000 pay an additional supplement as well as paying the standard rate of VED, which means those who can afford the most expensive cars pay more than the standard rate imposed on other drivers. The expensive car supplement is paid in addition to the standard rate for a period of five years from the start of the second vehicle licence, but for a period of no longer than six years from when the vehicle was first registered. As a vehicle can change hands or be declared off-road through a statutory off-road notification, or SORN, the vehicle licence end date and the expensive car supplement end date will not always align.

Clause 102 relates to the HGV road user levy. That is an annual charge paid by UK hauliers alongside their VED, as well as a daily, weekly or monthly charge for HGVs from outside the UK accessing the UK road network. The levy was introduced in 2014 to ensure that all HGVs, which are heavy and can damage the road surface, contribute to the public finances and to reducing the wear and tear of the road network. In the light of the impacts of covid-19, the Government decided to suspend the levy last August for 12 months to support the haulage sector by reducing their costs.

Clause 100 makes changes to uprate VED rates for cars, vans and motorcycles in line with the retail prices index from 1 April 2021, meaning VED liabilities will not increase in real terms for the 11th successive year. The standard rate of VED for cars registered after 1 April 2017 will increase by £5 only. The flat rate for vans will increase by £10 and motorcyclists will see an increase in rates of no more than £3.

Clause 101 makes changes to ensure that registered keepers of cars with a list price of over £40,000 are issued with the correct annual VED refund, if they sell their vehicle or make a statutory off-road notification in the last year of the vehicle being liable to pay the expensive car supplement. Clause 101 will amend VED legislation, so that the rebate amount is equal to the number of months remaining at the higher rate of duty under the expensive car supplement and the number of months remaining at the standard rate of VED. This change in law will apply from 1 April 2021. Individuals and businesses will not need to do anything differently from what they do now, and this measure will not affect the amount of VED they pay.

Clause 102 will make changes to suspend the HGV road user levy for a further period of 12 months from 1 August 2021, to support the haulage industry and help the covid-19 pandemic recovery efforts. That means that UK-registered keepers of HGVs will save between £76.50 and £1,200 per vehicle again, as they will not have to pay the HGV road user levy when they renew their vehicle licence. Non-UK-based hauliers will also not need to pay the levy during this period.

In conclusion, the changes outlined in clause 100 will ensure that the Government continue to support motorists with the cost of living, while ensuring they continue to make a fair contribution to the public finances. The changes outlined in clause 101 will ensure that VED refunds are issued as intended when the expensive car supplement was introduced in 2017. Finally, the haulage sector supports many other industries, so the changes outlined in clause 102 to ease their financial burden temporarily will support them and help the economy to recover from the impacts of covid-19.

Abena Oppong-Asare Portrait Abena Oppong-Asare
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I will briefly respond to each clause in the group. Clause 100 would increase the rate of vehicle excise duty for a variety of vehicles, as mentioned by the Minister. We support the Government’s general approach to incentivise the use of greener and more environmentally friendly vehicles. We do, however, believe that we need to see more action from the Government on increasing the availability and affordability of green and electric vehicles.

The Society of Motor Manufacturers and Traders described the 2021 Budget as falling

“short of the support needed to transform the industry and market to the net zero future to which both the Government and industry aspires.”

If UK car manufacturing is to survive the covid crisis and thrive as part of a net zero future, it needs the Government to develop a long-term strategy to support the sector. Labour urges the Government to do just that by implementing a strategy that accelerates the electrification process in a manner that provides a lifeline to the industry, stimulates investment and ensures the future of the automotive sector in the UK for the communities that rely on it. We have called on the Government to create new gigafactories by 2025, make electric vehicle ownership affordable by offering interest-free loans for those on low and middle incomes and accelerate the rollout of charging points, particularly in the areas that have lagged behind. That is the support the automotive industry needs.

Clause 101 is a simple change to allow for the rebate of the additional rate of vehicle excise duty where the vehicle was sold or declared off road, and we support that. As the Minister said, clause 102 extends the suspension of the HGV road user levy for a further year. We support the measures as the logistics and haulage sector continues to recover from the pandemic, as the Minister has just mentioned, and to ensure that vital supply chains continue to function.

I am concerned that the Minister has not mentioned the serious concerns that haulage firms have about the Brexit deal. Specialist haulage firms, such as concert trucks that service UK music tours, have been left in an extremely difficult position by the Government’s Brexit deal, as it allows for three stops in total across the entire European Union before they must return to the UK. That will have serious knock-on effects on other businesses that rely on the haulage firms to transport their equipment across the continent. Other haulage companies have felt the knock-on effect of the Brexit deal too, including having to prepare last minute for changes in customs requirements and a lack of trained staff at customs. While we welcome the extended suspension of the HGV levy, I urge the Government to do more to support the sector.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

The Government are doing a lot to support the haulage sector. We have provided unprecedented support for businesses and individuals throughout the national restrictions, including the coronavirus job retention scheme and a number of access-to-finance schemes. We have decided to temporarily maintain support for the haulage industry as it plays a critical role in the functioning of our economy and supports many other industries, including our supermarkets and shops. Suspending the levy for a further 12 months is a significant measure to help not just pandemic recovery efforts, but also the industry as a whole. As the hon. Lady made reference to the point by the Society of Motor Manufacturers and Traders, that is something that the haulage sector specifically has received, but not every other industry has.

On the question of the impact of Brexit negotiations, I am afraid that is not a matter for the Treasury. I am sure officials will note her concerns and pass them on to the relevant Department. On the question of why the Government are not doing enough to incentivise the uptake of zero-emission vehicles, we use the tax system to encourage the uptake of cars with low carbon dioxide emissions to help us to meet our legally binding climate change target. Zero-emission cars and electric vans are liable to pay no VED. Furthermore, users of zero and ultra-low emission cars have beneficial company car tax rates in comparison with conventionally fuelled vehicles. From April 2021, the Government are applying a nil rate of tax to zero-emission vans within the van benefit charge. We believe that we are doing quite a lot to incentivise the uptake of zero-emission vehicles and electric cars.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

I thank the Minister for her comments. I want to go back to the point I raised about the haulage firms and the Brexit deal. I am concerned about how the Minister mentions that Brexit concerns are not a matter for the Treasury, because they are, particularly as clause 102 extends the suspension of the HGV road user levy for a further year. The Government need to look at the impact of that on haulage firms, in particular specialist haulage firms such as concert trucks that service UK music tours. They have been left in an extremely difficult position. The Government need to take that seriously, so I would like the Minister to take that forward and to ensure that such individuals get support.

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Kemi Badenoch Portrait Kemi Badenoch
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The clause makes changes to ensure that the long-haul rates of air passenger duty for the tax year 2022-23 increase in line with the retail price index. The change will ensure that the aviation sector continues to play its part in contributing towards the funding of vital public services.

Aviation plays a crucial role in keeping Britain open for business, and the Government are keen to support its long-term success. The Government recognise the challenging circumstances facing the aviation industry as a result of covid-19. Firms experiencing difficulties can draw upon the unprecedented package of measures announced by the Chancellor, including schemes to raise capital and flexibility with tax bills.

As APD is a per passenger tax, airlines’ liabilities have considerably reduced following the decline in passenger demand caused by the pandemic between April and September 2020, by 87% when compared with the previous year. Aviation fuel incurs no duty and tickets are VAT-free, so APD ensures that the aviation sector makes a fair contribution to the public finances. Uprating APD rates in line with inflation is routine and has occurred every year since 2012. The Government announce the rates one year in advance, in order to give airlines sufficient notice of any changes.

The changes to be made by the clause will increase the long-haul APD tax rates for 2022-23 by RPI. The clause increases the long-haul reduced rate for economy class nominally, by just £2; and the standard rate for all classes above economy by £5—a real-terms freeze. The rates for long-haul travel by private jets will increase by £13. The rounding of APD rates to the nearest £1 means that short-haul rates will remain frozen in nominal terms for the 10th year in a row. That benefits more than 75% of all airline passengers.

APD is a fair and efficient tax, with the amount paid corresponding to the distance and class of travel of the passenger, and it is only due when airlines are flying passengers. The changes made by the clause ensure that the aviation sector continues to play its part in contributing towards funding our vital public services.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

As the Minister said, the clause will increase, from April 2022, the rates of long-haul air passenger duty in line with inflation while leaving the short-haul duty at its current rate.

As we all know, the aviation sector has struggled enormously during the pandemic, as international travel has in effect shut down. The industry is important to the UK economy and supports 250,000 jobs across the country. The sector’s recovery will be prolonged. Any restructuring must be supported with a transitional strategy for workers and our regional economies that capitalises on the opportunities to grow industry into green technology.

We believe that part of any aviation support must include a clear commitment to tackling climate change and leading the industry to use cleaner fuel and other cutting-edge low or zero emission technologies. Government support should be contingent on airlines retiring old and inefficient aircraft, so that they meet the new industry standards in accordance with the framework of the Paris agreement and the UK’s Climate Change Act 2008.

Several smaller airports, including Teesside and Newquay, were forced to shut their doors at the height of the pandemic. This is an uneven playing field between small and large airports, as staff wages and business rates make up a bigger proportion of costs for regional airports. Without further specific support, regional airports may no longer be viable. The sector has made clear its disappointment with the recent Budget, which failed to set out either the support or the vision for future aviation needs. Will the Minister update us on the aviation support package that the Government promised but which has yet to materialise?

Finally, we know that the Government are currently consulting on a new low band for domestic air passenger duty, and we will watch the outcome of that consultation closely. Will the Minister tell us how that will fit in with our environmental commitments?

--- Later in debate ---
Kemi Badenoch Portrait Kemi Badenoch
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Clause 104 increases the thresholds for the gross gaming yield bands for gaming duty in line with inflation. Gaming duty is a banded tax paid by casinos in the UK, with marginal tax rates varying between 15% and 50%. To ensure that operators are not brought into higher tax bands because of inflation, gaming duty bands are increased in line with RPI inflation. That means that casinos continue to pay the same level of tax in real terms. The clause uprates the bands of gaming duty in line with inflation. That is expected by the industry and assumed in the public finances. The rates of gaming duty themselves will remain unchanged. The change will take effect for the accounting period starting on or after 1 April 2021.

New clause 4 seeks to place a statutory requirement on my right hon. Friend the Chancellor to review and publish a report on the impact of the increase in the gaming duty thresholds on the volume of gambling. The Gambling Commission publishes annually statistics on gambling participation, spend and gross gaming yield for each part of the sector, so an additional report would merely duplicate information that is already available. There is no change to the tax rate in the provision. Accordingly, the Government do not expect the change to have an impact on gambling participation, spend or gross gaming yield.

It is also important to say that new clause 4 is impractical, as the proposed publication deadline, together with the continued lockdown of casinos, would deliver an inconclusive report based on receipts data from a single shortened accounting period. I hope that the Committee is reassured by that and will therefore reject the new clause.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

Clause 104 increases the bands for gaming duty in line with inflation, in effect freezing gaming duties for casinos. It is a relatively small measure, but clearly the taxation and regulation of gambling is extremely important. The Minister will know that hon. Members across the House have taken a keen interest in the issue. Will she therefore update us on the Treasury’s plans for gambling taxation more widely, including for online operators? In particular, what role does she see for taxation in this area as a way of tackling the adverse health effects that problem gambling can lead to?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

rose—

--- Later in debate ---
None Portrait The Chair
- Hansard -

The question is that the clause stand part—

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

Dame Angela, I just have some questions for the Minister on gambling taxation more widely, particularly for online operators. Could she elaborate on that? What work is being done to tackle the adverse effects that problem gambling can lead to?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

On the hon. Lady’s second question, that is a matter for DCMS. On her first question, I referred to that in relation to the tax rate. That is something that we in the Treasury will look to do along with DCMS as part of its review.

--- Later in debate ---
Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

I believe that a significant amount of it is due to the landfill tax. We have been looking at the rate in comparison year on year, and our analysis shows that the landfill tax is having a significant impact. There will always be fly-tipping, irrespective of what the tax rate on landfill is.

Clauses 105 and 106 make changes to the climate change levy rates for 2022-23 and 2023-24, to continue the rebalancing of electricity and gas rates announced in Budget 2016. The 2022-23 and 2023-24 rates were announced in Budget 2020 in order to give businesses plenty of notice to prepare for the changes. At Budget 2020, it was also announced that rates for liquified petroleum gas would be frozen to 31 March 2024.

To limit the economic impact of the tax rate changes on energy-intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only. That protects the competitiveness of more than 9,000 facilities from energy-intensive industries across some 50 sectors.

When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £94.15, and lower-rate material draws a tax of £3.00 per tonne. These changes will see rates per tonne increase to £96.70 and £3.10 respectively from 1 April 2021. By increasing rates in line with RPI, we maintain the crucial incentive for the industry to use alternative waste treatment methods and continue the move towards a more circular economy. The changes made by clause 108 will repeal the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced.

New clause 5, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, would require the Government to publish a report, within six months of the passing of the Act, on the effects of what would then be sections 105, 106 and 108 on progress towards the Government’s climate emissions targets. As clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, such a report would not be able meaningfully to assess the impact of these changes within six months of the passing of the Act. The Government currently assess and monitor environmental impacts across existing tax measures, and do that alongside other, complementary measures, such as regulation and spending, to understand the impact of policy making in the round. That alludes to the point made by the hon. Member for Glenrothes about landfill tax.



Clause 108 repeals the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax, which was not commenced because the Government decided that a UK emissions trading scheme administered by the Department for Business, Energy and Industrial Strategy would be the best replacement for the EU emissions trading system from 1 January 2021.

As it was not commenced, the carbon emissions tax’s role in meeting the Government’s climate emissions targets cannot be measured. However, Opposition Members should be reassured that the UK ETS, a market-based measure covering a third of UK emissions, will help to deliver a robust carbon price signal. The energy White Paper committed to exploring expanding the UK emissions trading scheme to other sectors and set out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26. The Treasury will continue to work closely with BEIS on the introduction of the UK emissions trading scheme and will keep all environmental taxes under review to ensure that they continue to support the Government’s climate commitments.

In conclusion, the changes made by clauses 105 and 106 will update the climate change levy main and reduced rates for 2022-23 and 2023-24, as announced at Budget 2020 and to deliver on previous Budget announcements. Clause 107 will increase the two rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 will ensure that the statute book is up to date by repealing the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax that were not commenced. I therefore commend the clauses to the Committee and ask that the Committee rejects new clause 5.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

If I may, I will address the clauses in reverse order. Clause 108 repeals the carbon emissions tax. As the Minister said, the Government introduced this legislation when deciding what to replace the EU emissions trading system with. We welcome the fact that the Government have decided to implement a UK emissions trading system, rather than a carbon emissions tax. The Minister and I recently debated regulations relating to the UK ETS, and I will not repeat the points I made then. However, I stress that our belief is that the UK ETS must be linked with the EU ETS in order to achieve a robust system of carbon pricing to meet our net zero target.

Clause 107 increases the landfill tax in line with inflation. We welcome this small, uncontroversial measure. We talked at considerable length about waste and recycling during our discussion of the plastic packaging tax. I repeat only the point that the Government should invest the revenue from these taxes into recycling facilities and technology. Finally, clauses 105 and 106 make a number of changes to the climate change levy over the coming years, including raising the gas levy and adjusting the climate change agreement rates. Could the Minister set out whether the Government intend to keep the climate change agreement scheme beyond its current period, and if not, what they will replace it with?

As we come to the end of the group of environmental clauses, I will make a few points about tax and our net zero commitment. In February, the National Audit Office published a report into environmental tax measures. The NAO criticised the Treasury and Her Majesty’s Revenue and Customs for failing to properly consider and evaluate the impact of these taxes on the Government’s environmental targets.

Does the Minister agree that we need information on the environmental impact of all taxes and reliefs? Will she commit to working with HMRC and other bodies to publish this information regularly? Currently, UK taxes with a positive environmental impact account for only 7% of tax revenue, and those with an explicit environmental purpose, such as the climate change levy or landfill tax, account for only 0.5%. So far, and particularly in the last Budget, we have seen a lack of vision from the Chancellor on the environment. We await the Treasury net zero review, but will the Minister set out what steps the Government will take in the short, medium and long term to ensure that our tax system plays a role in meeting our net zero commitment?

Finance (No.2) Bill (Third sitting)

Debate between Kemi Badenoch and Abena Oppong-Asare
Tuesday 27th April 2021

(2 years, 10 months ago)

Public Bill Committees
Read Full debate Read Hansard Text Read Debate Ministerial Extracts
Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch)
- Hansard - -

Clause 98 and schedule 20 reform the use of polluting diesel fuel by reducing the number of businesses that benefit from red diesel tax breaks from April 2022. Those changes will mean that most businesses across the UK will use diesel fuel taxed at the standard rate for diesel from April 2022, bringing them in line with ordinary motorists. That more fairly reflects the negative environmental impact of the emissions produced. It also ensures that the tax system incentivises users of polluting fuels such as diesel to improve the energy efficiency of their vehicles and machinery and to invest in cleaner alternatives, or just use less fuel.

Red diesel is a dye-marked diesel currently used mainly for off-road purposes, such as to power bulldozers and cranes in the construction industry. It accounts for around 15% of all diesel used in the UK and is responsible for the production of nearly 14 million tonnes of CO2 a year, as well as noxious gases such a nitrogen oxide and particulate matter. Red diesel is subject to a rebated rate of fuel duty of 11.14p per litre, which is 46.18p less than the tax due on standard diesel used by ordinary motorists. Businesses that use red diesel are therefore paying far less for the harmful emissions that they produce.

The Government have previously received feedback from developers of alternative fuels and technologies that they view the low cost of running a diesel engine as a barrier to entry for greener alternatives. Clause 98 and schedule 20 will amend the Hydrocarbon Oil Duties Act 1979, to reform the entitlement to use red diesel in most sectors from April 2022. As announced at Budget 2020 and confirmed at Budget 2021, the Government will grant entitlements to use red diesel for the following purposes: for vehicles and machinery used in agriculture, forestry, horticulture and fish farming; to propel vehicles designed to run on rail tracks and for heating non-commercial premises, which includes the heating of homes and buildings such as places of worship, hospitals and town halls.

In addition, following consultation last year on these tax changes, for which the Government received more than 400 written responses, the Government decided at Budget 2021 to grant further entitlements to use red diesel after April 2022 for the following purposes: electricity generation in non-commercial premises; maintaining community amateur sports clubs and golf courses; as fuel for all commercial water vessels refuelling and operating in the UK, including fishing and water freight industries; for private pleasure craft in Great Britain; and powering machinery and caravans of travelling fairs and circuses. The Bill will also extend fuel duty to biodiesel, bioblends and fuel substitutes used in heating.

In response to concerns raised by red diesel users during the consultation about their ability to run down fuel stocks in back-up generators, the Bill provides for secondary legislation to give HMRC officers the power to disapply the liability to seize vehicles or machinery where they are satisfied that those who are no longer entitled to use red diesel are acting within the new law.

New clause 3, which was tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon (Richard Thomson) and for Midlothian (Owen Thompson), would require the Government to publish a report on the effects of clause 98 on progress towards the UK Government’s climate emissions targets

“within six months of the passing of this Act.”

Clause 98 will make changes to remove the entitlement to use red diesel from most sectors from April 2022; such a report could not meaningfully assess the impact of the changes within six months.

As the Government set out in our summary of responses to the red diesel consultation:

“As these tax changes are introduced, the government will monitor fuel duty receipts of red and white diesel to evaluate the extent to which current users of red diesel that have lost their entitlement to use red diesel are switching to greener alternatives. The Treasury will also work closely with the Department for Business, Energy and Industrial Strategy to evaluate the extent to which these tax changes are accelerating the development of greener alternatives and how this interacts with the work of the government’s energy innovation programmes, like the Net Zero Innovation Portfolio.”

The Government continue to take our world-leading environmental commitment seriously and remain dedicated to meeting our climate change and wider environmental targets, including improving the UK’s air quality; that is why we are reforming the use of red diesel from April 2022. Reducing tax breaks on red diesel will mean that approximately 3.6 billion litres of diesel, equivalent to 9.5 million tonnes of CO2, will now be taxed at the standard diesel rate. I ask the Committee to agree that clause 98 and schedule 20 should stand part of the Bill and to reject new clause 3.

Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
- Hansard - - - Excerpts

It is a pleasure to serve under your chairship, Dame Angela. I thank the Minister for her explanation of clause 98, which restricts the entitlement to use red diesel and related biodiesel for most sectors from April 2022.

We support the Government’s intention behind the measure, which was first announced in the 2020 Budget. There is a clear need to ensure that fuel duty rebates are as limited as possible in order to meet our net-zero commitment. I note that several sectors retain their entitlement to use red diesel, including agriculture, rail transport and permanently moored houseboats. More recently, the Government have announced further exemptions, including generating power from non-commercial premises for amateur sports clubs and for travelling fairs and circuses.

I have a couple of questions for the Minister about the impact on individual sectors. I know that the waste sector made a representation to the Treasury arguing that removing its red diesel entitlements

“could increase the cost of recycling, which may result in waste being diverted to landfill instead and the cost of recycled goods increasing relative to virgin materials.”

Would the Exchequer Secretary assure us that that issue was looked at carefully and that the impact on recycling was considered? Would she also say a little about compliance in the industries where the entitlement is being removed? She mentioned that the Treasury had been working closely with the Department for Business, Energy and Industrial Strategy to ensure that compliance was followed, but what monitoring and enforcement will the Government use to ensure that red diesel is used only for approved purposes?

May I turn briefly to recreational boat owners in Northern Ireland? The Government have confirmed that private pleasure craft in Northern Ireland will have to use white diesel from June this year in order to implement a ruling of the European Court of Justice. The Royal Yachting Association, British Marine and the Cruising Association have raised concerns about the practical effects of the decision, including the limited supply of white diesel for private pleasure craft users in Northern Ireland. Would the Minister reassure us that HMRC and the Treasury will work closely with those organisations to minimise disruption? Would she give us more information on the steps that have been taken so far to ensure that? Finally, will the Government take any further action to encourage the growth of cleaner fuel alternatives in sectors such as the construction industry?

Peter Grant Portrait Peter Grant (Glenrothes) (SNP)
- Hansard - - - Excerpts

It is a pleasure to serve under your chairmanship, Dame Angela. I could repeat much of what I have to say about new clause 3 when we debate new clause 5, but in the interests of brevity I will not make the same comments again at that point.

We welcome the fact that the tax system is used to encourage individuals and businesses to operate in a more environmentally responsible and sustainable way, but it is important that when we make changes we are prepared to look at them afterwards to see whether they are having the expected impact. That can be quite difficult with Government changes to tax policy, because the policy aim is not always immediately obvious. How much of this change is an income-raising exercise for the Treasury, and how much is designed to reduce the use not only of severely environmentally damaging hydrocarbon fuels, but of other fuels which, although they may be less damaging, are damaging none the less?

Biofuels are not a guilt-free pass. Even though they may appear to be renewable, their use has an impact on the environment, for example where the resources of less well-off countries are used to grow biofuels for us to use instead of food to eat for the people who live there. We should not fool ourselves into thinking that simply by converting our excessive use of fuel to use of renewable fuels, we are somehow doing all we need to.

The second reason why regular reviews are needed is that as well as unintended consequences, there will be mistakes. One third of the Government amendments in Committee of the whole House were introduced to correct drafting mistakes, either in the Bill itself or in related legislation. People make mistakes—hon. Members may even have noticed the drafting mistake in the wording of our new clause 3, which the Exchequer Secretary so kindly pointed out. However, given that her objection to new clause 3 is that the timing does not work, I would appreciate a commitment from her that the Government will comply with the spirit of the new clause in a more appropriate timescale when the impact of the changes can be measured.

The Scottish National party supports the Government’s stated aim of encouraging a more environmentally sustainable and responsible approach to use of the earth’s resources; we just think that they should acknowledge that they might not always get it right the first time. They should build in a process by which we can review the policy after a reasonable time and make the changes that may be needed, sooner rather than later.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

Clause 99 consolidates changes announced and implemented in November 2020 concerning tobacco duty rates. The increases made then ensured that the duty charged on all tobacco products rose in line with the tobacco duty escalator, with additional increases for hand-rolling tobacco and to the minimum excise on cigarettes.

Smoking rates in the UK are falling. However, smoking remains the biggest cause of preventable illness and premature death in the UK, killing around 100,000 people a year and about half of all long-term users of tobacco. All these factors mean that we need to continue to encourage more people to kick the habit. We have already set out ambitious plans to reduce the number of smokers from 14% of the population to 12% by 2022, as set out by the Department of Health and Social Care in its tobacco control plan, and we have announced that we aim to curb smoking once and for all by 2030 in England. This includes a commitment to continue the policy of maintaining high duty rates for tobacco products to improve public health.

According to Action on Smoking and Health, smoking costs society almost £14 billion a year in England, including £2 billion in costs to the NHS for treating disease caused by smoking. In November 2020, my right hon. Friend the Financial Secretary announced increases to tobacco duty that, in the absence of an autumn Budget, were implemented by a Treasury order. The order was made under existing powers in the Tobacco Products Duty Act 1979 and helped to protect revenues. However, the life span of an order made under these powers is time-limited to one year, so this clause consolidates those increases. This will ensure that the duty charged on all tobacco products increases in line with the escalator, which is 2% above retail price index inflation. In addition, duty on hand-rolling tobacco increases by a further 4% to 6% above RPI inflation. The clause also increases the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—by an additional 2% to 4% above RPI inflation.

These new tobacco duty rates took effect on 16 November 2020. Recognising the potential interactions between tobacco duty rates and the illicit market, the Government recently consulted on tougher penalties for tobacco tax evasion. This includes proposals for £10,000 fixed penalties and escalating fines for repeat offenders. The responses indicate that there is broad support for tougher sanctions and, as announced on 23 March, we intend to legislate in the next Finance Bill. The Government have committed to strengthening trading standards and Her Majesty’s Revenue and Customs, so that these organisations can combat the illicit tobacco business even more effectively. This work includes creating a UK-wide HMRC intelligence-sharing hub.

The clause will continue our tried-and-tested policy of using high duty rates on tobacco products to make tobacco less affordable, to continue the reduction in smoking prevalence. and to reduce the burden that smoking places on our public services. I therefore move that the clause stand part of the Bill.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

As the Minister said, this clause incorporates the legislation on changes in tobacco duty that the Government introduced in the Tobacco Products Duty (Alteration of Rates) Order 2020. I spoke during the debate on that order, so I will not repeat the points that I made then. However, I do have a few questions for the Minister.

First, why did the Government not raise the tobacco duty at Budget 2021? I note that the Minister has quoted data from Action on Smoking and Health. After the Budget, it said:

“ASH is disappointed that the Chancellor hasn’t increased taxes on cigarettes by per cent above inflation as we recommended. The Government says it is willing to take bold action to make smoking obsolete, which we welcome, but that has to include further tax rises. Making tobacco less affordable is crucial to discouraging children from starting to smoke and delivering the Smokefree generation the Government has said it wants to see by 2030.”

I hope the Minister can respond to the concerns from ASH and clearly set out what the Government’s approach to tobacco duty will be going forward.

9.45 am

More broadly, I want to press the Minister on the issue of smoking and public health. We have seen the importance of public health more than ever over the past year. Many people are concerned that the dismantling of Public Health England will have an adverse effect on the nation’s health, including action on preventing harm through smoking. We need reassurances that the new Office for Health Protection will be able to fulfil that important role effectively. Of course, that is partly from funding, but the Government have cut the public health grant by more than a fifth since 2015-16, despite a growing and urgent need for investment in public health and prevention.

ASH has called on the Government to increase the public health budget by £1.2 billion in order to reverse the cuts that have taken place since 2015 and then to provide additional investment in the most deprived areas with the greatest need. Can the Minister update us on the Government’s plan for the public health budget? Finally, can the Minister tell us whether the Government will provide further funding to local authorities to support local smoking cessation services?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

I thank the hon. Lady for her questions. What I would say about the Office for Health Protection is that it is being set up to improve the work that Public Health England was doing. I am assured by health Ministers that it will continue to tackle issues such as tobacco smoking and its health implications.

The current smoking prevalence rate is 13.9%, which is the lowest level on record and a great public health success story. The UK is seen as a global leader on tobacco control, and over the last two decades we have implemented regulatory measures to stop youth smoking, prevent non-smokers from starting, and offer support to help smokers quit. Local authorities are responsible for delivering local “stop smoking” services and support to meet their population’s needs and to address inequalities. The Government set the national policy through the current tobacco control plan, and we will publish the next tobacco control plan this summer in order to outline our ambition for a smoke-free society by 2030.

Given the success that we have had in reducing smoking, we believe that the duty rates have been set at the right level. We review our duty rates at each fiscal event to ensure that they continue to meet our two objectives of protecting public health and raising revenue for vital public services. The tax information and impact note published alongside the Budget announcement sets out the Government’s assessment of the expected impact.

We are committed to improving public health by reducing smoking prevalence. We co-ordinate our efforts through DHSC’s “Tobacco Control Delivery Plan 2017 to 2022”, and we will continue our tried and tested policy of using high duty rates to make tobacco less affordable and continue the reduction in smoking prevalence, which should reduce the burden that smoking places on public services, as I mentioned earlier.

The hon. Lady asked why we are introducing clause 99, given that no increase in tobacco duties was announced in the spring Budget. Although the autumn Budget was cancelled, the Government proceeded with the uprating of tobacco duties in order to safeguard revenues, maintain our commitment to the duty escalator and protect health objectives. The Tobacco Products Duty (Alteration of Rates) Order 2020, implementing the duty increases, took effect on 16 November 2020. However, the hon. Lady should note that although an order may be used to alter tobacco duty rates, the changes expire after one year, which is why the increases need to be consolidated into the Finance Bill. It is not the first time that a Treasury order has been used to increase tobacco duties; the same method was used in 2008. I hope I have answered all her questions.

Question put and agreed to.

Clause 99 accordingly ordered to stand part of the Bill.

Clause 100

Rates for light passenger of light goods vehicles, motorcycles etc

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

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

Clauses 100 to 102 make changes to vehicle excise duty and the heavy goods vehicle road user levy. Clauses 100 and 101 relate specifically to vehicle excise duty, which is paid on vehicle ownership. The Government have uprated VED, as it is known, for cars, vans and motorcycles in line with inflation every year since 2010, which means that rates have remained unchanged in real terms during that time.

Since April 2017, cars with a list price exceeding £40,000 pay an additional supplement as well as paying the standard rate of VED, which means those who can afford the most expensive cars pay more than the standard rate imposed on other drivers. The expensive car supplement is paid in addition to the standard rate for a period of five years from the start of the second vehicle licence, but for a period of no longer than six years from when the vehicle was first registered. As a vehicle can change hands or be declared off-road through a statutory off-road notification, or SORN, the vehicle licence end date and the expensive car supplement end date will not always align.

Clause 102 relates to the HGV road user levy. That is an annual charge paid by UK hauliers alongside their VED, as well as a daily, weekly or monthly charge for HGVs from outside the UK accessing the UK road network. The levy was introduced in 2014 to ensure that all HGVs, which are heavy and can damage the road surface, contribute to the public finances and to reducing the wear and tear of the road network. In the light of the impacts of covid-19, the Government decided to suspend the levy last August for 12 months to support the haulage sector by reducing their costs.

Clause 100 makes changes to uprate VED rates for cars, vans and motorcycles in line with the retail prices index from 1 April 2021, meaning VED liabilities will not increase in real terms for the 11th successive year. The standard rate of VED for cars registered after 1 April 2017 will increase by £5 only. The flat rate for vans will increase by £10 and motorcyclists will see an increase in rates of no more than £3.

Clause 101 makes changes to ensure that registered keepers of cars with a list price of over £40,000 are issued with the correct annual VED refund, if they sell their vehicle or make a statutory off-road notification in the last year of the vehicle being liable to pay the expensive car supplement. Clause 101 will amend VED legislation, so that the rebate amount is equal to the number of months remaining at the higher rate of duty under the expensive car supplement and the number of months remaining at the standard rate of VED. This change in law will apply from 1 April 2021. Individuals and businesses will not need to do anything differently from what they do now, and this measure will not affect the amount of VED they pay.

Clause 102 will make changes to suspend the HGV road user levy for a further period of 12 months from 1 August 2021, to support the haulage industry and help the covid-19 pandemic recovery efforts. That means that UK-registered keepers of HGVs will save between £76.50 and £1,200 per vehicle again, as they will not have to pay the HGV road user levy when they renew their vehicle licence. Non-UK-based hauliers will also not need to pay the levy during this period.

In conclusion, the changes outlined in clause 100 will ensure that the Government continue to support motorists with the cost of living, while ensuring they continue to make a fair contribution to the public finances. The changes outlined in clause 101 will ensure that VED refunds are issued as intended when the expensive car supplement was introduced in 2017. Finally, the haulage sector supports many other industries, so the changes outlined in clause 102 to ease their financial burden temporarily will support them and help the economy to recover from the impacts of covid-19.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

I will briefly respond to each clause in the group. Clause 100 would increase the rate of vehicle excise duty for a variety of vehicles, as mentioned by the Minister. We support the Government’s general approach to incentivise the use of greener and more environmentally friendly vehicles. We do, however, believe that we need to see more action from the Government on increasing the availability and affordability of green and electric vehicles.

The Society of Motor Manufacturers and Traders described the 2021 Budget as falling

“short of the support needed to transform the industry and market to the net zero future to which both the Government and industry aspires.”

If UK car manufacturing is to survive the covid crisis and thrive as part of a net zero future, it needs the Government to develop a long-term strategy to support the sector. Labour urges the Government to do just that by implementing a strategy that accelerates the electrification process in a manner that provides a lifeline to the industry, stimulates investment and ensures the future of the automotive sector in the UK for the communities that rely on it. We have called on the Government to create new gigafactories by 2025, make electric vehicle ownership affordable by offering interest-free loans for those on low and middle incomes and accelerate the rollout of charging points, particularly in the areas that have lagged behind. That is the support the automotive industry needs.

Clause 101 is a simple change to allow for the rebate of the additional rate of vehicle excise duty where the vehicle was sold or declared off road, and we support that. As the Minister said, clause 102 extends the suspension of the HGV road user levy for a further year. We support the measures as the logistics and haulage sector continues to recover from the pandemic, as the Minister has just mentioned, and to ensure that vital supply chains continue to function.

I am concerned that the Minister has not mentioned the serious concerns that haulage firms have about the Brexit deal. Specialist haulage firms, such as concert trucks that service UK music tours, have been left in an extremely difficult position by the Government’s Brexit deal, as it allows for three stops in total across the entire European Union before they must return to the UK. That will have serious knock-on effects on other businesses that rely on the haulage firms to transport their equipment across the continent. Other haulage companies have felt the knock-on effect of the Brexit deal too, including having to prepare last minute for changes in customs requirements and a lack of trained staff at customs. While we welcome the extended suspension of the HGV levy, I urge the Government to do more to support the sector.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

The Government are doing a lot to support the haulage sector. We have provided unprecedented support for businesses and individuals throughout the national restrictions, including the coronavirus job retention scheme and a number of access-to-finance schemes. We have decided to temporarily maintain support for the haulage industry as it plays a critical role in the functioning of our economy and supports many other industries, including our supermarkets and shops. Suspending the levy for a further 12 months is a significant measure to help not just pandemic recovery efforts, but also the industry as a whole. As the hon. Lady made reference to the point by the Society of Motor Manufacturers and Traders, that is something that the haulage sector specifically has received, but not every other industry has.

On the question of the impact of Brexit negotiations, I am afraid that is not a matter for the Treasury. I am sure officials will note her concerns and pass them on to the relevant Department. On the question of why the Government are not doing enough to incentivise the uptake of zero-emission vehicles, we use the tax system to encourage the uptake of cars with low carbon dioxide emissions to help us to meet our legally binding climate change target. Zero-emission cars and electric vans are liable to pay no VED. Furthermore, users of zero and ultra-low emission cars have beneficial company car tax rates in comparison with conventionally fuelled vehicles. From April 2021, the Government are applying a nil rate of tax to zero-emission vans within the van benefit charge. We believe that we are doing quite a lot to incentivise the uptake of zero-emission vehicles and electric cars.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

I thank the Minister for her comments. I want to go back to the point I raised about the haulage firms and the Brexit deal. I am concerned about how the Minister mentions that Brexit concerns are not a matter for the Treasury, because they are, particularly as clause 102 extends the suspension of the HGV road user levy for a further year. The Government need to look at the impact of that on haulage firms, in particular specialist haulage firms such as concert trucks that service UK music tours. They have been left in an extremely difficult position. The Government need to take that seriously, so I would like the Minister to take that forward and to ensure that such individuals get support.

--- Later in debate ---
Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

The clause makes changes to ensure that the long-haul rates of air passenger duty for the tax year 2022-23 increase in line with the retail price index. The change will ensure that the aviation sector continues to play its part in contributing towards the funding of vital public services.

Aviation plays a crucial role in keeping Britain open for business, and the Government are keen to support its long-term success. The Government recognise the challenging circumstances facing the aviation industry as a result of covid-19. Firms experiencing difficulties can draw upon the unprecedented package of measures announced by the Chancellor, including schemes to raise capital and flexibility with tax bills.

As APD is a per passenger tax, airlines’ liabilities have considerably reduced following the 87% decline in passenger demand caused by the pandemic between April and September 2020, when compared with the previous year. Aviation fuel incurs no duty and tickets are VAT-free, so APD ensures that the aviation sector makes a fair contribution to the public finances. Uprating APD rates in line with inflation is routine and has occurred every year since 2012. The Government announce the rates one year in advance, in order to give airlines sufficient notice of any changes.

The changes to be made by the clause will increase the long-haul APD tax rates for 2022-23 by RPI. The clause increases the long-haul reduced rate for economy class nominally, by just £2; and the standard rate for all classes above economy by £5—a real-terms freeze. The rates for long-haul travel by private jets will increase by £13. The rounding of APD rates to the nearest £1 means that short-haul rates will remain frozen in nominal terms for the 10th year in a row. That benefits more than 75% of all airline passengers.

APD is a fair and efficient tax, with the amount paid corresponding to the distance and class of travel of the passenger, and it is only due when airlines are flying passengers. The changes made by the clause ensure that the aviation sector continues to play its part in contributing towards funding our vital public services.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

As the Minister said, the clause will increase, from April 2022, the rates of long-haul air passenger duty in line with inflation while leaving the short-haul duty at its current rate.

As we all know, the aviation sector has struggled enormously during the pandemic, as international travel has in effect shut down. The industry is important to the UK economy and supports 250,000 jobs across the country. The sector’s recovery will be prolonged. Any restructuring must be supported with a transitional strategy for workers and our regional economies that capitalises on the opportunities to grow industry into green technology.

We believe that part of any aviation support must include a clear commitment to tackling climate change and leading the industry to use cleaner fuel and other cutting-edge low or zero emission technologies. Government support should be contingent on airlines retiring old and inefficient aircraft, so that they meet the new industry standards in accordance with the framework of the Paris agreement and the UK’s Climate Change Act 2008.

Several smaller airports, including Teesside and Newquay, were forced to shut their doors at the height of the pandemic. This is an uneven playing field between small and large airports, as staff wages and business rates make up a bigger proportion of costs for regional airports. Without further specific support, regional airports may no longer be viable. The sector has made clear its disappointment with the recent Budget, which failed to set out either the support or the vision for future aviation needs. Will the Minister update us on the aviation support package that the Government promised but which has yet to materialise?

Finally, we know that the Government are currently consulting on a new low band for domestic air passenger duty, and we will watch the outcome of that consultation closely. Will the Minister tell us how that will fit in with our environmental commitments?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

The clause seeks to set APD rates for April 2022, so it will not take immediate effect. It will increase long-haul air passenger duty rates only in nominal terms, while short-haul rates will remain frozen at current rates, benefiting more than 75% of passengers.

With regard to the issues affecting the aviation industry, air passenger duty is marginal—a £2 increase on economy flights is not what will make or break the industry. We recognise the challenging circumstances faced by the industry as a result of covid-19, and all the firms experiencing difficulties can and have drawn upon the unprecedented package of measures announced by the Chancellor, as I mentioned earlier, including schemes to raise capital and flexibility with their tax bills. We have also provided bespoke support to the sector via the airport and ground operator support scheme. The majority of beneficiaries have been the smaller airports that the hon. Lady mentioned. At the end of the day, APD is a per-passenger tax. Airlines’ liabilities have reduced significantly since the start of covid, with receipts between April and September 2020 down 87% compared with the same period in 2019, so suspending APD would not be appropriate.

On the wider issues that the hon. Lady mentioned on the transition to net zero, we have introduced a wide range of scheme to support the decarbonisation of the aviation sector, including a £15 million competition to support the UK production of sustainable aviation fuel, and the inclusion of aviation in the UK’s emissions trading scheme, which we discussed in the last sitting. The Government will also consult on the overall strategy for the sector’s transition to net zero later this year.

Question put and agreed to.

Clause 103 accordingly ordered to stand part of the Bill.

Clause 104

Amounts of gross gaming yield charged to gaming duty

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

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

Clause 104 increases the thresholds for the gross gaming yield bands for gaming duty in line with inflation. Gaming duty is a banded tax paid by casinos in the UK, with marginal tax rates varying between 15% and 50%. To ensure that operators are not brought into higher tax bands because of inflation, gaming duty bands are increased in line with RPI inflation. That means that casinos continue to pay the same level of tax in real terms. The clause uprates the bands of gaming duty in line with inflation. That is expected by the industry and assumed in the public finances. The rates of gaming duty themselves will remain unchanged. The change will take effect for the accounting period starting on or after 1 April 2021.

New clause 4 seeks to place a statutory requirement on my right hon. Friend the Chancellor to review and publish a report on the impact of the increase in the gaming duty thresholds on the volume of gambling. The Gambling Commission publishes annually statistics on gambling participation, spend and gross gaming yield for each part of the sector, so an additional report would merely duplicate information that is already available. There is no change to the tax rate in the provision. Accordingly, the Government do not expect the change to have an impact on gambling participation, spend or gross gaming yield.

It is also important to say that new clause 4 is impractical, as the proposed publication deadline, together with the continued lockdown of casinos, would deliver an inconclusive report based on receipts data from a single shortened accounting period. I hope that the Committee is reassured by that and will therefore reject the new clause.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

Clause 104 increases the bands for gaming duty in line with inflation, in effect freezing gaming duties for casinos. It is a relatively small measure, but clearly the taxation and regulation of gambling is extremely important. The Minister will know that hon. Members across the House have taken a keen interest in the issue. Will she therefore update us on the Treasury’s plans for gambling taxation more widely, including for online operators? In particular, what role does she see for taxation in this area as a way of tackling the adverse health effects that problem gambling can lead to?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

rose—

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None Portrait The Chair
- Hansard -

The question is that the clause stand part—

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

Dame Angela, I just have some questions for the Minister on gambling taxation more widely, particularly for online operators. Could she elaborate on that? What work is being done to tackle the adverse effects that problem gambling can lead to?

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

On the hon. Lady’s second question, that is a matter for DCMS. On her first question, I referred to that in relation to the tax rate. That is something that we in the Treasury will look to do along with DCMS as part of its review.

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Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

I believe that a significant amount of it is due to the landfill tax. We have been looking at the rate in comparison year on year, and our analysis shows that the landfill tax is having a significant impact. There will always be fly-tipping, irrespective of what the tax rate on landfill is.

Clauses 105 and 106 make changes to the climate change levy rates for 2022-23 and 2023-24, to continue the rebalancing of electricity and gas rates announced in Budget 2016. The 2022-23 and 2023-24 rates were announced in Budget 2020 in order to give businesses plenty of notice to prepare for the changes. At Budget 2020, it was also announced that rates for liquified petroleum gas would be frozen to 31 March 2024.

To limit the economic impact of the tax rate changes on energy-intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only. That protects the competitiveness of more than 9,000 facilities from energy-intensive industries across some 50 sectors.

When disposed of at a landfill site, each tonne of standard-rated material is currently taxed at £94.15, and lower-rate material draws a tax of £3.00 per tonne. These changes will see rates per tonne increase to £96.70 and £3.10 respectively from 1 April 2021. By increasing rates in line with RPI, we maintain the crucial incentive for the industry to use alternative waste treatment methods and continue the move towards a more circular economy. The changes made by clause 108 will repeal the provisions in the Finance Acts 2019 and 2020 relating to carbon emissions tax, which were not commenced.

New clause 5, tabled by the hon. Members for Glasgow Central, for Glenrothes, for Gordon and for Midlothian, would require the Government to publish a report, within six months of the passing of the Act, on the effects of what would then be sections 105, 106 and 108 on progress towards the Government’s climate emissions targets. As clauses 105 and 106 make changes to ensure that the climate change levy’s main and reduced rates are updated for years 2022-23 and 2023-24, such a report would not be able meaningfully to assess the impact of these changes within six months of the passing of the Act. The Government currently assess and monitor environmental impacts across existing tax measures, and do that alongside other, complementary measures, such as regulation and spending, to understand the impact of policy making in the round. That alludes to the point made by the hon. Member for Glenrothes about landfill tax.

Clause 108 repeals the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax, which was not commenced because the Government decided that a UK emissions trading scheme administered by the Department for Business, Energy and Industrial Strategy would be the best replacement for the EU emissions trading system from 1 January 2021.

As it was not commenced, the carbon emissions tax’s role in meeting the Government’s climate emissions targets cannot be measured. However, Opposition Members should be reassured that the UK ETS, a market-based measure covering a third of UK emissions, will help to deliver a robust carbon price signal. The energy White Paper committed to exploring expanding the UK emissions trading scheme to other sectors and set out our aspirations to continue to lead the world on carbon pricing in the run-up to COP26. The Treasury will continue to work closely with BEIS on the introduction of the UK emissions trading scheme and will keep all environmental taxes under review to ensure that they continue to support the Government’s climate commitments.

In conclusion, the changes made by clauses 105 and 106 will update the climate change levy main and reduced rates for 2022-23 and 2023-24, as announced at Budget 2020 and to deliver on previous Budget announcements. Clause 107 will increase the two rates of landfill tax in line with inflation from 1 April 2021, as announced at Budget 2020. Clause 108 will ensure that the statute book is up to date by repealing the provisions in Finance Acts 2019 and 2020 relating to a carbon emissions tax that were not commenced. I therefore commend the clauses to the Committee and ask that the Committee rejects new clause 5.

Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

If I may, I will address the clauses in reverse order. Clause 108 repeals the carbon emissions tax. As the Minister said, the Government introduced this legislation when deciding what to replace the EU emissions trading system with. We welcome the fact that the Government have decided to implement a UK emissions trading system, rather than a carbon emissions tax. The Minister and I recently debated regulations relating to the UK ETS, and I will not repeat the points I made then. However, I stress that our belief is that the UK ETS must be linked with the EU ETS in order to achieve a robust system of carbon pricing to meet our net zero target.

Clause 107 increases the landfill tax in line with inflation. We welcome this small, uncontroversial measure. We talked at considerable length about waste and recycling during our discussion of the plastic packaging tax. I repeat only the point that the Government should invest the revenue from these taxes into recycling facilities and technology. Finally, clauses 105 and 106 make a number of changes to the climate change levy over the coming years, including raising the gas levy and adjusting the climate change agreement rates. Could the Minister set out whether the Government intend to keep the climate change agreement scheme beyond its current period, and if not, what they will replace it with?

As we come to the end of the group of environmental clauses, I will make a few points about tax and our net zero commitment. In February, the National Audit Office published a report into environmental tax measures. The NAO criticised the Treasury and Her Majesty’s Revenue and Customs for failing to properly consider and evaluate the impact of these taxes on the Government’s environmental targets.

Does the Minister agree that we need information on the environmental impact of all taxes and reliefs? Will she commit to working with HMRC and other bodies to publish this information regularly? Currently, UK taxes with a positive environmental impact account for only 7% of tax revenue, and those with an explicit environmental purpose, such as the climate change levy or landfill tax, account for only 0.5%. So far, and particularly in the last Budget, we have seen a lack of vision from the Chancellor on the environment. We await the Treasury net zero review, but will the Minister set out what steps the Government will take in the short, medium and long term to ensure that our tax system plays a role in meeting our net zero commitment?

Peter Grant Portrait Peter Grant
- Hansard - - - Excerpts

The reason why a regular report to Parliament is needed on these taxes is that despite the optimistic assessment that the Exchequer Secretary set out, there are far too many taxes, including the landfill tax. With far too many of the officially designated environmental taxes, and an awful lot of taxes that are not officially environmental but that have an impact on the environment, the Government do not have a very clear handle on what is going on.

In February, the National Audit Office report “Environmental tax measures” stated:

“The exchequer departments do not specify how they will measure the impact of environmental tax measures.”

Before the tax has even been introduced, nobody is clear about what environmental impact they want it to have. The report also states:

“HMRC’s approach to evaluation provides it with limited insight into the environmental impact of taxes.”

Whether those taxes’ main intention is to influence behaviour rather than raise money, or whether they are introduced as a revenue-raising measure that we hope will also have beneficial environmental impacts, the Government’s track record has been that they do not really know what they intend the environmental impact to be before they start, and they usually do not collect information to give a reliable assessment of what the environmental impact has been once the tax is in place. In fact, the revenue consequences of the very small number of taxes that are officially environmental taxes are dwarfed by those of tax reliefs against other forms of taxation for reasons of environmental sustainability.

I will not press new clause 5 to a vote just now, and we will not oppose clauses 105 to 108, but I want to give a message to the Government about their forward setting of objectives and their monitoring of the environmental impact of taxes of all kinds: they really have to do better, and they have to start doing better very quickly.

Finance (No.2) Bill (Second sitting)

Debate between Kemi Badenoch and Abena Oppong-Asare
Thursday 22nd April 2021

(2 years, 10 months ago)

Public Bill Committees
Read Full debate Read Hansard Text Read Debate Ministerial Extracts
Abena Oppong-Asare Portrait Abena Oppong-Asare (Erith and Thamesmead) (Lab)
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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.

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Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.”

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Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

None Portrait The Chair
- Hansard -

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

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Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Alison Thewliss
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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.

--- Later in debate ---
Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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.

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

None Portrait The Chair
- Hansard -

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.

Peter Grant Portrait Peter Grant
- Hansard - - - Excerpts

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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.

--- Later in debate ---
Abena Oppong-Asare Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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 Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

--- Later in debate ---
Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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 Portrait Kemi Badenoch
- Hansard - -

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.

--- Later in debate ---
Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

None Portrait The Chair
- Hansard -

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

Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

None Portrait The Chair
- Hansard -

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 Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

None Portrait The Chair
- Hansard -

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 Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.

--- Later in debate ---
Kemi Badenoch Portrait Kemi Badenoch
- Hansard - -

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 Portrait Abena Oppong-Asare
- Hansard - - - Excerpts

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.