Debates between Kemi Badenoch and Wes Streeting

There have been 5 exchanges between Kemi Badenoch and Wes Streeting

1 Thu 17th September 2020 Support for Self-employed and Freelance Workers
HM Treasury
2 interactions (1,405 words)
2 Thu 18th June 2020 Finance Bill (Tenth sitting)
HM Treasury
5 interactions (1,401 words)
3 Tue 16th June 2020 Finance Bill (Eighth sitting)
HM Treasury
21 interactions (4,366 words)
4 Tue 16th June 2020 Finance Bill (Seventh sitting)
HM Treasury
24 interactions (5,736 words)
5 Thu 4th June 2020 Finance Bill (First sitting)
HM Treasury
2 interactions (961 words)

Support for Self-employed and Freelance Workers

Debate between Kemi Badenoch and Wes Streeting
Thursday 17th September 2020

(3 days, 22 hours ago)

Commons Chamber
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HM Treasury
Wes Streeting Portrait Wes Streeting - Hansard
17 Sep 2020, midnight

That is absolutely true. One of the things I find most worrying about the trends we have seen is that—as if the inequality that has gripped this country was not bad enough entering the crisis—there have been two very different experiences of the pandemic. If people are in a job with stable employment and have had money coming in every month, they may well be one of the households who has contributed to a record rise in savings. They may well feel that their outgoings have gone down and that they can start planning for home improvements or a decent family holiday. However, if people have lost their job, or were self-employed or freelance and their business activity went completely down to zero, this has been an absolutely terrible experience. I do not think that any of us, unless we have been in that position, can really understand what those people are going through.

In conclusion, I say to the Minister, whose task in responding to the debate I do not envy—with the notable and honourable exception of the hon. Member for South Cambridgeshire (Anthony Browne), I think she has found herself pretty alone in this debate—that the cross-party calls for the Government to listen, even to meet, are overwhelming. The privilege of being able to govern comes with the responsibility of taking action, of seeing people through difficult times. We know that the Government have a difficult job. We would not have wished this pandemic on anyone, but so many of us on both sides of the House simply do not understand the Chancellor’s intransigence, stubbornness and unwillingness to listen on this issue. So please, I beg the Minister, on behalf of millions of people across this country who have felt unheard or excluded: it is time to act.

Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch) - Hansard
17 Sep 2020, 12:02 a.m.

I congratulate the hon. Member for Brighton, Pavilion (Caroline Lucas) on securing the debate and acknowledge the many and varied contributions of right hon. and hon. Members across the House. The Government understand the crucial role that the self-employed, including members of partnerships and freelancers, play in this country’s economy. They are part of the lifeblood of British enterprise and they, too, have suffered during the months of the pandemic. We have not forgotten them, but we recognise that we have not been able to help everyone in the country exactly as they would have liked. However, what the Government have done has been unprecedented.

Since the launch of the self-employment income support scheme earlier this year, designed and implemented at speed, claims totalling £7.6 billion have been paid out to support more than 2.5 million people. That represented a first grant and we did not stop there. As of 17 August, individuals have been able to claim for a second and final self-employment scheme grant. This further grant is open to anyone who meets the eligibility criteria and whose business was adversely affected by covid-19 on or after 14 July 2020. Importantly, applicants do not need to have claimed the first grant and they can receive the support while continuing to work.

The eligibility criteria have been raised by many Members. The criteria for the scheme are fair and rightly aimed at delivering support to those who need it most. Self-employed individuals, including members of partnerships, are eligible if they submitted their tax return for the tax year 2018-19, continue to trade and have been adversely affected by covid-19. To qualify, their self-employed trading profits must be no more than £50,000 and at least equal to their non-trading income. Many Members have said that this is not enough, so I would like to pick up on those points.

My hon. Friend the Member for North East Bedfordshire (Richard Fuller) said that there is a discrepancy between the 3 million who are not served and the 95% that the Treasury is talking about. We are talking about people for whom at least half their income comes from being self-employed. Ninety-five per cent. of those people are covered—that is about 3.4 million people who were mainly self-employed in 2018-19 who should be eligible for this scheme. The statistics show that the scheme has helped individuals across the UK in all sorts of different sectors. The extension of the scheme also means that eligible individuals whose businesses are adversely affected, from or after 14 July, can claim a second and final grant until 19 October. That is a taxable grant worth 70% of their average monthly trading profits paid out in a single instalment. Like the first grant, the second grant will be based on three months’ worth of trading profits and capped at a maximum of £6,570. We are listening. Many different requests are coming through and we are trying to get a package that works, but that is balanced towards businesses, the consumers and the taxpayer.

Very many Members, including the hon. Member for Hammersmith (Andy Slaughter), my hon. Friend the Member for Hastings and Rye (Sally-Ann Hart), the hon. Member for Belfast South (Claire Hanna) and others, have raised the case for those working in the arts. We do recognise that. The Government know the challenge facing creative organisations and practitioners as a result of the pandemic and the disruptive impact of the necessary measures on cultural and creative activity. We have announced a £1.57 billion cultural recovery fund to protect the cultural sectors through the covid-19 pandemic, and that money will also go to help those self-employed individuals who may not have been able to access schemes. None the less, as the economy opens, we believe that the situation will improve.

The self-employed, including freelancers, benefit not only from Government support specifically designed for their needs, but from schemes that we have created that will cover them, but that are not specifically targeted at them. They benefit, like so many others, from schemes such as bounce back loans, tax deferrals, rental support, increased levels of universal credit, mortgage holidays and other business support grants. The Government have spent £160 billion in support on interventions—as much as we have spent on the NHS and schools. That is alongside many other Government measures that will help support people and kickstart the economic recovery. The plan for jobs, for instance, will make up to £30 billion available to assist in creating, supporting and protecting jobs. I am pleased that hon. Members from across the House have acknowledged that the UK has one of the most generous self-employed support schemes in the world. However, today’s debate is about the concerns and not about the successes.

Several Members, including the hon. Member for Brighton, Pavilion (Caroline Lucas), are particularly interested in the eligibility of individuals who receive income from dividends issued by their own limited company. Although the Government understand that some business owners choose to pay themselves in the form of dividends, it has not been possible to include them in this scheme. The Government have worked closely with stakeholders and carefully considered the case for providing a new system for those who pay themselves through dividends, but it would be so much more complex than other existing income support schemes. My hon. Friend the Member for South Cambridgeshire (Anthony Browne) was very perceptive in raising the operational difficulties that it would entail. That is because, under current reporting mechanisms, it is just not possible for HMRC to distinguish between dividends derived from an individual’s own company and dividends derived from other sources. Unlike existing support schemes that use information that HMRC already holds, such a scheme would require individuals to make a claim and submit information that HMRC may not efficiently or consistently verify. Such verification would be essential to ensure that payments were made to eligible companies for eligible activity.

Many Members have talked about comparing notes with Companies House. I do not think that people really understand just how difficult that would be. It is not simply a matter of looking at Companies House. It would require so many manual compliance checks: those people who need money would have to send information to HMRC, which would then need to be cross-checked. That would be extremely arduous and due regard would have to be given to the opportunity cost for that resource—where compliance activity would have to be reduced elsewhere. In other words, the many checks that Members are asking for would make it even harder for us to help those people who are most at need. It is important that the House—

Finance Bill (Tenth sitting)

(Committee Debate: 10th sitting: House of Commons)
Debate between Kemi Badenoch and Wes Streeting
Thursday 18th June 2020

(3 months ago)

Public Bill Committees
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HM Treasury
Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch) - Hansard
18 Jun 2020, 2:50 p.m.

New clauses 4, 19 and 20 would require the Chancellor to review the environmental impact of the Finance Bill and its impact on the UK’s meeting the UN sustainable development goals and UN Paris climate change commitments. The new clauses are not necessary and should not stand part of the Bill. Tackling climate change is a top priority for the Government, as demonstrated by the UK becoming the first major economy to pass legislation committing to reach net-zero emissions by 2050. The Bill builds on the UK’s existing strong environmental record and commitments by delivering new policies to reduce carbon emissions and enhance the environment, and it provides significant incentives to support the continued decarbonisation of transport.

Clause 83 establishes tax support for zero-emissions vehicles, exempting them from the vehicle excise duty expensive car supplement. From April 2020, vehicle excise duty and company car tax will also be based on a new, improved laboratory test known as the worldwide harmonised light vehicle test procedure, or WLTP, which aims to help reduce the 40% gap between the previous lab tests and real-world carbon dioxide emissions.

The Bill will ensure that HMRC can make preparations for the introduction of the plastic packaging tax, which will incentivise businesses to use 30% recycled plastic instead of new material in plastic packaging from April 2022, stimulating increased recycling. The Government are also reopening and extending the climate change agreement scheme to support energy-intensive businesses to operate in a more environmentally friendly way.

Clause 93, which establishes a UK emissions trading system, and clause 92, which updates legislation relating to the carbon emissions tax, ensure that polluters will continue to pay a price for their emissions once our membership of the EU and the emissions trading system ends following the transition period.

New clause 4 would require an impact assessment of the Bill on the environment to be laid before Parliament within six months of Royal Assent. Where tax policies have a particular environmental impact, the Government will take that into account during the tax policy making process and, where appropriate, publish a summary of the impact in the relevant tax information and impact note, or TIIN, as it is otherwise known. The Bill’s clauses demonstrate our progress towards tackling climate change as well as towards international deals and agreements, without the need for an additional environmental impact review.

The hon. Member for Ilford North made several comments about our spending more money on coronavirus than on climate change and about our not being on track to meet our net zero targets. All I can say to him is that many of the actions that we need to take to deliver our climate targets also help the UK’s economy to recover from the impacts of covid-19. We do not look at those issues separately. He must remember that between 1990 and 2017 the UK reduced its emissions by 42% while growing the economy by more than two thirds. It is simply wrong to say that we are not doing enough on climate change.

Building on our ambitious announcements in the Budget, such as the £800 million fund for carbon capture and storage, we are developing ideas for how we can go further using clean, sustainable and resilient growth as a guiding principle for our strategy to recover from the impact of the virus.

New clauses 19 and 20 would require a review of the impact of the Bill on the UK’s meeting the UN sustainable development goals and Paris climate change agreements. The UK published a voluntary national review setting out in detail our progress towards the sustainable development goals and identifying areas of further work in June 2019. We remain committed to supporting implementation of the sustainable development goals, including to help us build back better from the covid-19 crisis. By working to achieve the sustainable development goals, we will also be better placed to withstand future crises.

Under the Paris agreement, the Government must maintain and report on their emissions reduction commitments in the form of a nationally determined contribution. The UK’s legally binding commitment to reduce emissions to net zero by 2050 is among the most stringent in the world, and the system of governance implementing the commitment under the Climate Change Act 2008 is world leading.

The Committee on Climate Change, established under the CCA 2008, provides independent evidence-based advice to the UK Government on how to achieve the targets. It reports to Parliament annually on progress made in reducing greenhouse gas emissions and on preparing for and adapting to the impacts of climate change. The Government are committed to tackling climate change. The measures in the Bill already demonstrate that, as well as highlighting our progress towards achieving net zero emissions by 2050, which is one of the most ambitious climate change commitments in the world. In this context, a separate review of the environmental impact of the Bill and how it meets international agreement is unnecessary. I therefore ask the Committee to reject the amendments.

Wes Streeting Portrait Wes Streeting - Hansard

I am concerned by the complacency of the speech that we have just heard from the Exchequer Secretary. I do not think it is sufficient to say that the UK is doing enough to tackle climate change and to meet our net zero ambition when all of the evidence suggests that that is not the case. That reinforces even further the case to run a proper impact assessment on the Bill.

Question put, That the clause be read a Second time.

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard
18 Jun 2020, 3:16 p.m.

No, I am not giving way; Opposition Members have had their time. I ask the hon. Lady, instead of trying to give me lectures, to take some time to learn a little more about what is going on. Even the phrase she talks about—“people with protected characteristics”—is wrong; we all have protected characteristics. The Equality Act is for everybody and not for specific groups of people.

On that note, neither of the new clauses would be useful in finding out more about the impact on equality, because the Government regularly publish in summary form the equality impact assessments for the legislation that we introduce. The reports required by the new clauses would not add any genuine value, so I ask the Committee to reject them.

Wes Streeting Portrait Wes Streeting - Hansard
18 Jun 2020, 3:18 p.m.

That speech was really quite extraordinary and incendiary itself in response to what has been said. We are giving voice to the statistics and the data. Speaking for myself—I imagine this is also true for the SNP spokesperson—I am particularly giving voice to the concerns of my constituents. I represent one of the most ethnically and religiously diverse constituencies in the country. People who have written to me in recent weeks have not done so simply out of anger or emotion, and certainly not because they have read something that I have said in Hansard—that would be a novelty—but because of their own lived experiences. That is the frustration for me.

It would be one thing had the Government said this afternoon, “This is what we have done, but we recognise that there are big challenges, so this is what we still plan to do,” but their response to the protests of recent weeks has been tone deaf, for the most part, and actively irresponsible in other respects. It is regrettable that we do not seem to be seizing the moment, either in Government or as a Parliament, to reassure people throughout the country that we will leap on this moment. If we look throughout history, we see that sometimes events occur and there are big moments that can positively shift the dial in the most remarkable way. That is what we should be seeking to do here. I have actually seen a better response in that respect from the private sector than from our own Government. The private sector does not have a democratic accountability to the people—it has a commercial one and a profit motive; if companies are doing these things out of a sense of corporate social responsibility, that is good for them—but the Government have democratic accountability.

The Government’s efforts on equalities do not match the rhetoric we heard from the Minister. The Treasury has a particular leadership role to play, particularly on tackling economic inequalities that have an impact on people from a range of characteristics, for a range of reasons, and in different ways. With that in mind, I want to press new clause 5 to a vote.

Question put, That the clause be read a Second time.

Finance Bill (Eighth sitting)

(Committee Debate: 8th sitting: House of Commons)
Debate between Kemi Badenoch and Wes Streeting
Tuesday 16th June 2020

(3 months ago)

Public Bill Committees
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HM Treasury
Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch) - Hansard
16 Jun 2020, 2:09 p.m.

Clause 87 makes changes to ensure that the long-haul rates of air passenger duty for the tax year 2021-22 increase in line with the retail price index. The change will make sure that the aviation sector continues to play its part in contributing towards funding our vital public services.

Aviation plays a crucial role in keeping Britain open for business, and the UK Government are keen to support its long-term success. Indeed, the UK has one of the highest direct connectivity scores in Europe, according to the latest Airports Council International Europe report. The Government appreciate the difficulties that the airline industry currently faces as a result of coronavirus. That is why the Chancellor provided a comprehensive package for all businesses affected by the virus on 20 March. However, as air passenger duty is paid on a per passenger basis, the recent decline in passenger demand will have resulted in a reduction in air passenger duty liabilities for airlines. As the industry returns to health, it is right that the revenue raised from air passenger duty should continue to remain in line.

The clause increases the long-haul reduced rate for economy class nominally by only £2 and the standard rate for all classes above economy by £4—a real-terms freeze. The rounding of air passenger duty raised to the nearest £1 means that short-haul rates will remain frozen in nominal terms for the eighth year in a row, which benefits about 80% of all airline passengers. More broadly, the Government will consult on aviation tax reform. As part of the consultation, we will consider the case for changing the air passenger duty treatment of domestic flights, such as reintroducing the return leg exemption, and for increasing the number of international distance bands.

The changes made by the clause will increase the long-haul APD rates for the tax year 2021-22 by the RPI. Air passenger duty is a fair and efficient tax, where the amount paid corresponds to the distance and class of travel of the passenger and is due only when airlines are flying passengers. The changes ensure that the aviation sector will continue to play its part in contributing towards funding our vital public services. I therefore commend the clause to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 2:13 p.m.

The industry has stated that the proposed changes do not support it and its net zero plans. The news that the airline industry does not like air passenger duty will come as a surprise to no one. As we are debating air passenger duty under clause 87, and as Treasury Ministers declined to come to the House in response to an urgent question from the Chair of the Transport Committee, this is an opportunity for me to raise concerns directly with Treasury Ministers about support for the airline industry in the light of the challenges it faces because of covid-19.

The Minister said that the airline industry has benefited from Government support. In so far as any industry and employer has benefited from the general schemes made available—the job retention scheme, the self-employment income support scheme, the various business grants and loans that are available—that is true. However, back in March, the Chancellor referred to specific support for the aviation industry. It is now June and that support has not yet materialised. In fact, we do not even have any outline of what that support could entail or whether it will materialise at all.

Let us bear in mind that the industry contributes £22 billion a year to the British economy. It supports 230,000 jobs in aviation and throughout the manufacturing supply chain. If we take into account the broader sweep of jobs based around the supply chain, airports and travel, we are probably looking at something closer to 500,000 jobs.

Ministers, whether in the Treasury or the Department for Transport, ought to be embarrassed by the fact that, only a matter of weeks ago, a leading figure in the airline industry told the Transport Committee that the Government have been “asleep at the wheel”. That is not the way that the Treasury should approach a major industry. Of course, the airline industry has a lot to change in order to meet our country’s net zero ambitions, but I am sure we would all agree that we would prefer it if the aviation industry got to that point through research, innovation, sensible application of technology, change of consumer behaviour and a just transition to support the workforce as the industry changes, rather than because airlines go bust and people lose their jobs.

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:19 p.m.

Clause 88 increases the thresholds for the gross gaming yield bands for gaming duty in line with inflation. This is a very small change, which is assumed by public finances.

Gaming duty is a banded tax paid by casinos in the UK, with marginal tax rates varying between 15% and 50%. Public finances assume that the bands are uprated with inflation each year to prevent fiscal drag. Without an annual uprating, over time, casinos would pay gaming duty at higher rates, so the change made by clause 88 uprates the bands of gaming duty in line with inflation. That is expected by the industry and assumed in public finances. Rates of gaming duty will remain unchanged. The change will take effect for accounting periods starting on or after 1 April 2020. I therefore commend the clause to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 2:20 p.m.

We have heard representations from the chief executive of the Betting and Gaming Council, Michael Dugher, who will be known to many hon. Members across the House. The council is calling for reform of business rates and casino taxation. In the light of its representation, which, unsurprisingly, makes the industry case, and reflecting on some of our earlier conversations about alcohol duties, tobacco and smoking, what plans does the Treasury have, if any, to look at reform of gambling taxation generally and at the specific reforms Mr Dugher is calling for of business rates and casino taxation?

We have also heard strong representations from hon. Members across the House, such as my hon. Friend the Member for Swansea East (Carolyn Harris) and the right hon. Member for Chingford and Woodford Green (Sir Iain Duncan Smith), about their work to highlight the impact that gambling has on people’s lives. Irresponsible gambling blights people’s lives. In the light of our conversation this morning about the positive role that Treasury decisions can play in promoting good public health outcomes, is the Treasury minded to look at those issues in the round as part of a wider review of the gaming duty and gambling taxation more generally?

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:22 p.m.

The answer is to look at what the duty is designed to do. It is a change to gambling taxation; it is not related to the regulation of gambling activity, which, as we know, is the remit of the Department for Digital, Culture, Media and Sport.

The Government continue to monitor the effectiveness of existing gambling controls. As the December 2019 election manifesto set out, we intend to review the Gambling Act 2005. We will always consider the potential impact of tax changes at the same time.

We should remember that freezing the duty bands would have a small impact on public finances, while pushing smaller, generally regional, casinos into higher duty bands. The casino industry paid about £220 million in duty in the last financial year. The Government believe that the sector already makes a fair contribution to the public finances. I do not believe it is the small regional casinos that we would be looking to affect in terms of problem gambling.

Question put and agreed to.

Clause 88 accordingly ordered to stand part of the Bill.

Clause 89

Rates of climate change levy until 1 April 2021

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

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:24 p.m.

Clauses 89 and 90 ensure that the climate change levy main and reduced rates are updated for the years 2020-21 and 2021-22 to reflect the rates announced at Budget 2018. The climate change levy came into effect in April 2001. It is a UK-wide tax on the non-domestic use of energy from gas, electricity, liquefied petroleum gas and solid fuels. It promotes the efficient use of energy to help to meet the UK’s international and domestic targets for cutting emissions of greenhouse gases. Energy-intensive businesses that participate in the climate change agreements scheme run by the Department for Business, Energy and Industrial Strategy qualify for reduced rates in return for meeting energy efficiency or carbon reduction targets.

Budget 2016 announced that electricity and gas rates would be equalised by 2025, because electricity is becoming a much cleaner source of energy than gas as we reduce our reliance on coal and use more renewable resources instead. These changes give effect to rate changes announced in 2018 and reaffirm the commitment to equalise the main rates for gas and electricity. The reduced rates will be subject to increases in line with inflation, as in previous years. In order to ensure better consistency in the tax treatment of portable fuels and the off-gas grid market, it was announced in the 2017 Budget that the climate change levy rate for liquefied petroleum gas would be frozen at the 2019-20 level in the years 2020-21 and 2021-22. For that reason, the reduced rate for liquefied petroleum gas that applies to CCA participants will remain set at 23% for the years 2020-21 and 2021-22.

Clauses 89 and 90 will update the climate change levy’s main and reduced rates for 2020-21 and 2021-22, as announced in the 2018 Budget, to reflect that electricity is now a cleaner energy source than gas. The electricity main rate will be lowered, whereas the gas main rate will increase so that it reaches 60% of the electricity rate in 2021-22. The rates were announced over two years ago, to give businesses plenty of notice to prepare for the rate changes. To limit the impact on the CCA scheme, participants will see their climate change levy liability increase by retail price index inflation only. That protects the competitiveness of over 9,000 facilities in energy-intensive industries across 50 sectors. I therefore commend the clause to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 2:26 p.m.

The Chancellor suggested that pollution taxes would increase as a result of his Budget, but Jayne Harrold, PwC’s UK environmental tax leader, said that under the 2020 Budget:

“There was not really an increase in pollution taxes as the Chancellor suggested with the climate change levy (CCL) changes announced. In fact, freezing CCL rates on electricity to level up the gas rate faster based on carbon emissions will reduce the amount of pollution tax applied. Extending climate change agreements for two years is equally minor good news for energy intensive businesses who get significant CCL reliefs.”

Can the Minister give us a sense of what more the Treasury will do to ensure that taxes from polluting behaviour increase?

I also want to probe on the green gas levy. The 2020 Budget promised the introduction of a green gas levy to help fund the use of greener fuels, to work in conjunction with the rise in the climate change levy. When and how do the Government plan to introduce the levy?

Kemi Badenoch Portrait Kemi Badenoch - Hansard

I missed the hon. Member’s last question, but I can write to him on this issue, if he is happy with that. I go back to the question whether we are doing enough to achieve net zero. The answer is that we are going as far as we can, but we must also ensure that we protect the competitiveness of businesses throughout the UK. As announced in 2016, the changes to the climate change levy rates will see electricity and gas main rates equalised. That is being done incrementally—not because we do not want to go far enough, but in order to protect the tax liability of businesses. The Treasury review on the cost of transitioning to net zero will consider the role of tax in the transition. Does that answer the question?

Wes Streeting Portrait Wes Streeting - Hansard

My question was specifically about the changes that the Government plan to make in relation to the green gas levy, which had been announced in the Budget. When and how do the Government plan to introduce the green gas levy?

Kemi Badenoch Portrait Kemi Badenoch - Hansard

I cannot give the hon. Member an answer to that, but I will definitely write to him. I think officials will be able to brief him on the green gas levy. I cannot talk about it in the context of the climate change levy, which is what we are discussing, but I take his point. It is a good question. It is a Department for Business, Energy and Industrial Strategy competency, which is why I do not have an answer from a Treasury perspective, but I can speak to my counterparts in that Department and get back to him.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 2:29 p.m.

Thank you.

Question put and agreed to.

Clause 89 accordingly ordered to stand part of the Bill.

Clause 90 ordered to stand part of the Bill.

Clause 91

Rates of landfill tax

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

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:32 p.m.

The clause increases both the standard and lower rates of landfill tax in line with inflation from 1 April 2020, as announced at Budget 2018.

Landfill tax has been immensely successful in reducing the amount of waste sent to landfill. Landfill tax provides a disincentive to use landfill and has made it the most expensive waste treatment method in terms of average gate fees. The success of the tax has contributed to a 70% decrease in waste sent to landfill since 2000. Household recycling has increased to 45%, from 18%, over the same period. The benefits of this reduction are twofold: first, there are economic benefits as valuable resources are used better, rather than being simply tipped into a hole in the ground, and secondly, there are environmental benefits, not only from the increased efficiency in the use of our precious resources, but through a reduction in greenhouse gas emissions from decomposing waste.

When waste is diverted from landfill we promote more sustainable waste treatment practice, such as recycling. The Government want to move towards a more circular economy and we are working together with business, industry, civil society and the public to achieve that aim. Landfill tax is one of the Government’s primary levers in achieving this.

When disposed at a landfill site, each tonne of standard-rated material is currently taxed at £91.35 and lower-rate material draws a tax of £2.90 per tonne. These changes will see rates per tonne increase to £94.15 and £3 respectively from 1 April 2020. 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 increase in landfill tax will affect businesses and local authorities that send waste to landfill, but by continuing the positive trend of managing waste more sustainably businesses and local authorities will be able to reduce their landfill tax liabilities.

In conclusion, clause 91 increases the two rates of landfill tax in line with inflation from 1 April 2020, as announced in the autumn Budget in 2018. The clause maintains the incentives in the landfill tax for businesses and local authorities to divert waste treatment away from landfill and to continue to invest in sustainable methods of waste disposal, helping the Government meet their environmental objectives. I therefore commend the clause to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard

Aside from paying tribute to my own local authority, the London Borough of Redbridge, and other local authorities for the efforts they have made to reduce the amount of waste going into landfill, there is only so much that can be said about an inflationary increase in landfill tax. I am happy for us to support the clause.

Question put and agreed to.

Clause 91 accordingly ordered to stand part of the Bill.

Clause 92

Carbon emissions tax

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

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:36 p.m.

At Budget 2020 the Government announced that they would make the necessary legislative changes to the carbon emissions tax in Finance Bill 2020 to ensure that this policy remained a viable option to maintain carbon pricing in the UK after the transition period, in the event that a trading system proves undesirable. If the Government decide to use the tax as their carbon pricing policy after the transition period, the tax would be commenced, by secondary legislation laid in late 2020, from 1 January 2021.

The clause and schedule strengthen the effectiveness of the carbon emissions tax by ensuring that penalties can be issued for non-compliance and late payment and the legislation is updated to reflect developments since the tax was established in the Finance Act 2019. In line with the withdrawal agreement, the UK will remain in the EU emissions trading system, known as the EU ETS, until the end of the transition period on 31 December 2020. The UK will continue to have legally binding carbon reduction targets after leaving the EU.

As set out in the UK’s approach to the negotiation, the UK would be open to considering a link between any future UK emissions trading system and the EU ETS, if it suited both the UK’s and the EU’s interests. If a linked trading system between the UK and the EU is not agreed, the UK would introduce an alternative carbon pricing policy. The Government are therefore preparing both a UK standalone emissions trading system and a carbon emissions tax.

Budget 2020 announced that legislation would be included in this Finance Bill to provide a charging power to establish a UK ETS linked to the EU ETS or a standalone UK ETS, and update the existing legislation relating to carbon emissions tax. This schedule amends the Finance Act 2019 to ensure that the tax will be ready to be operational from the end of the transition period, if needed. The clause and schedule deal with the latter.

Clause 92 introduces schedule 11, which makes amendments to part 3 of the Finance Act 2019, which established the carbon emissions tax. Schedule 11 will amend the Finance Act 2019 so that the carbon emissions tax is ready to commence from 1 January 2021 if needed.

I will briefly highlight the most significant changes in what is a fairly technical schedule. Paragraphs 9 and 10 add provisions to the tax for a penalty for failure to make payments of tax to HMRC on time. That would be achieved by adopting the existing provisions on late payment penalties in schedule 56 to the Finance Act 2009. The penalty would be commenced by appointed day regulations if the tax were introduced.

Similarly, paragraph 4 allows for provisions to be made for the imposition of civil penalties for failure to comply with a requirement of the regulations; the review of, and a right of appeal against, a specified decision relating to the tax; and the modification of domestic and EU regulations relating to the monitoring and regulation of emissions.

Paragraph 8 amends the commencement and transitional provisions to ensure that the regulations needed to operate the tax may be made before the tax has commenced. It also removes provisions that were needed when we were planning to commence the tax partway through an emissions reporting period. Those are no longer needed, as we would now start the tax on 1 January, the first day of an emissions reporting period.

Paragraph 3 allows the Treasury, by regulations, to exclude regulated installations of a specified description from the charge to tax. That enables the Government, for example, to exclude Northern Ireland power generators from the tax, were they to continue to participate in the EU ETS as provided for in the Northern Ireland protocol. Paragraph 6 ensures that regulators will be able to recover costs incurred in doing work connected with carbon emissions tax, even if that work is done before regulations are made.

In conclusion, the clause and schedule ensure that the carbon emissions tax is ready to commence from 1 January 2021 if needed. It would provide a stable carbon price and help the UK to meet its carbon reduction commitments. I therefore commend the clause and schedule to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 2:37 p.m.

The clause and schedule that we are discussing make perfect sense in light of the impact of our exiting the European Union. I just have a few questions for the Minister.

This clause gives the Government the power to introduce a UK emissions trading scheme or carbon tax via a statutory instrument. As we have already heard from the Minister, and as we have heard from public statements on both sides of the channel this week, we will leave the EU emissions trading scheme on December 31 2020, when we leave the transition period.

I think the Minister alluded to the fact that so many of the questions that stakeholders have remain unanswered. I accept that this is just an enabling clause in anticipation of the further detail, and I appreciate that some of these questions may relate to responsibilities in the Department for Business, Energy and Industrial Strategy, so I will accept it if she sends me in that direction, but does she know when the Government plan to respond to chapters 1 to 3 of the consultation on the future of UK carbon pricing? Can she give assurances that there will be time to scrutinise Government proposals and implement a new scheme by the end of the year, bearing in mind that the proposals will have an impact on a wide range of organisations?

Touching on a theme I raised this morning about support for businesses as they undertake a transition to new frameworks, how do the Government intend to support UK companies during the transition, bearing in mind that, just as we are feeling the impact on Government business of disruption caused by the pandemic, many businesses are feeling exactly the same disruption? Is it realistic or desirable for companies across the country to be adapting to a new scheme that is not yet known and that may need to take force by the end of this year?

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:39 p.m.

We published a consultation response on 1 June, and the carbon emissions tax consultation is due to be published shortly. I will say to the hon. Gentleman, “Watch this space.”

In terms of the impact on businesses, the carbon emissions tax would have an impact on around 1,000 installations that currently participate in the EU emissions trading system, most of which are operated by large businesses. Businesses whose emissions exceeded their allowance would need to familiarise themselves with the tax and pay a bill once a year, in lieu of surrendering trading allowances under the EU emissions trading system. It must be said, however, that the administrative burdens of complying with this tax are not expected to be more than what they would have been under the EU emissions trading system.

Question put and agreed to.

Clause 92 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Clause 93

Charge for allocating allowances under emissions reduction trading scheme

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

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 2:41 p.m.

The clause provides the power to auction carbon emissions allowances, to establish a UK emissions trading system, which could be linked to the EU’s or operate independently. Alongside clause 92, to update the carbon emissions tax, this clause ensures that a strong carbon price remains in all scenarios, while supporting the ongoing negotiations.

The UK’s membership of the EU emissions trading system will end following the transition period. As mentioned in the previous clause, the EU ETS covers around a third of UK emissions, including the power sector, heavy industry and aviation. It has been an important tool, alongside other taxes and regulations, in helping to reduce emissions.

Following the UK’s exit from the EU, we have choices about how best to put a price on carbon, tailoring our approach to the UK economy. Carbon pricing will continue to play an important role to help meet the UK’s legally binding carbon budgets and net zero. The Government are preparing an independent UK emissions trading scheme, which could be linked to the EU ETS. As set out in the UK’s approach to negotiations, we are open to considering a link if it suited both sides’ interests.

Clause 93 is essential to the establishment of a UK ETS, as it provides the power for Government to auction emissions allowances and intervene in the market to deal with any price volatility. As I mentioned earlier, the Government are also preparing a carbon emissions tax and a possible alternative in clause 92. Introducing legislation to support potential negotiated options, as well as legislating for alternative approaches to carbon pricing after the transition period, will provide certainty that we maintain an effective carbon price in all scenarios, continuing to drive reductions in emissions on our journey to net zero.

The changes made by clause 93 introduce a charging power. This means that through regulations, emissions allowances can be auctioned by the Government in any future UK ETS, ensuring that participants pay a price for their pollution. The clause will also enable regulations to be made for additional market stability mechanisms, to operate in an independent UK emissions trading scheme. That will ensure a smooth transition for businesses. First, a price rule, known as the auction reserve price, will maintain a carbon signal when allowance prices are low. Secondly, a cost containment mechanism will respond to in-year price fights, protecting the competitiveness of UK business when allowance prices are high. Further detail on these measures has been set out in the Government’s recent response to our consultation on the future of UK carbon pricing.

This clause is a prudent and sensible one to legislate for. It will pave the way for an emissions trading scheme, which could be linked to the EU ETS, if that is in our interests. It also ensures that a stand-alone emissions trading scheme could be implemented as an alternative policy, should a link not be agreed. Alongside that, legislation will be updated related to the carbon emissions tax, so we are keeping all options on the table for maintaining a carbon price signal from 1 January 2021.

Wes Streeting Portrait Wes Streeting - Hansard

The Minister asked us to watch this space. We will certainly do that and wait to see how discussions progress. We look forward to seeing the details of future arrangements in the not-too-distant future.

Question put and agreed to.

Clause 93 accordingly ordered to stand part of the Bill.

Clause 94

International trade disputes

Finance Bill (Seventh sitting)

(Committee Debate: 7th sitting: House of Commons)
Debate between Kemi Badenoch and Wes Streeting
Tuesday 16th June 2020

(3 months ago)

Public Bill Committees
Read Full debate Read Hansard Text Bill Main Page
HM Treasury
Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 12:05 a.m.

I shall begin by addressing the SNP’s amendment 10. It is important to look carefully at the relationship between alcohol taxation and public health. We have seen in other areas of taxation, notably the sugar tax, the huge impact that decisions taken by the Treasury can have on public health and public health outcomes. It is long past time for us to look seriously and sensibly at whether more can be done to reduce the impact of alcohol and alcoholism on people’s lives and communities.

Turning to clause 79, I have had the opportunity to do a much deeper dive into some of the issues, not least because of the determined efforts of my hon. Friend the Member for Chesterfield (Mr Perkins). Anyone who has ever been lobbied by him will know that when it comes to standing up for his constituents and for businesses in his constituency, there is no more determined, stubborn and irrefutable representation than that which he provides. He has raised serious concerns about the impact of the clause on businesses in his constituency. I shall outline some of those concerns, in the hope that Ministers will consider their bearing on Government policy.

We understand perfectly what the Government are trying to achieve with clause 79. The clause amends the Alcoholic Liquor Duties Act 1979, to introduce sanctions for post duty point dilution of wine or made-wine, which, if carried out before the duty point, would have resulted in a higher amount of duty being payable. That change has, in effect, already come into force and we are legislating for it this morning. The change is perfectly understandable. It is designed to bring more revenue into the Treasury that would otherwise be, and is being, lost. I understand the Government’s position that post duty point dilution carries significant legal and revenue risk for the Exchequer.

The Wine and Spirit Trade Association is against the legislation, claiming it would put hundreds of jobs at risk and place more pressure on the industry. Recently, thanks to the initiative of my hon. Friend the Member for Chesterfield, I had the opportunity to speak to Global Brands, a business based in his constituency that makes VK and Hooch, among other products. We know that covid-19 is having a huge impact on the licensed trade industry and on alcohol sales in particular, affecting not only pubs but the producers of wines, spirits and other beverages. Global Brands is concerned that, because of the financial burden placed on its business by the clause, combined with the impact of covid-19, it expects to make 50% of its workforce redundant, putting 200 jobs at risk as a result of this change. If I can characterise our discussions in this way, it would be accurate to say that Global Brands accepts that this change is inevitable, and that the Treasury has a settled view on it, but it hopes that the Treasury might consider a 12-month delay in implementation—from April 2020 to April 2021—arguing that this would give it time to recover from the covid-19 shock, leaving it better able to absorb the change.

Global Brands makes other arguments that the Treasury may want to take into account. In particular, Global Brands sells what were commonly known as alcopops, a low alcohol by volume product—typically around 4% ABV. It is concerned that the impact of the change will be that, ironically, its low alcohol product would be taxed higher per unit of alcohol than much higher strength products, which flies in the face of the Government’s stated policy of discouraging high-strength alcohol and its impact on public health.

It is also worth highlighting that the Government have already announced their intention to conduct a wider review of alcohol taxation. I wonder whether it makes sense, from the point of view of business resilience and of giving companies such as Global Brands more time to cope with the covid-19 shock before absorbing this change, for the Treasury to consider this delay alongside the range of other issues that it will consider as part of its wider review of alcohol taxation. We might have been minded to table an amendment to probe the 12-month delay, but we were advised that such an amendment would not be in scope because the foundation resolution is clear about the date on which this change takes effect.

That is another reason why—I gently make this point again to Ministers—we feel strongly about the way in which the Treasury has restricted the scope of amendments and the debate by not introducing an amendment of the law resolution, as has been the case historically. As well as denying Opposition Members the opportunity to table broad, sweeping, political amendments to the Finance Bill, that also has practical implications. I impress on Ministers and the usual channels the need to reconsider that for future Finance Bills.

Finally, when my hon. Friend the Member for Chesterfield and I spoke to Global Brands just the other week, I was particularly impressed not just by the jobs and economic activity it provides in Chesterfield, but at the fact that its wider supply chain is virtually entirely British. Its ingredients, packaging and labelling are all derived from a British supply chain. I do wonder whether the Treasury has really thought through the timing of the change, the impact that it will have on businesses such as Global Brands, and where it might position such businesses in relation to their international competitors that are not providing jobs in this country and do not have a supply chain rooted here.

Given the unemployment statistics out today, we know that structural unemployment will become one of the biggest political issues and economic challenges in our country. Structural unemployment in Britain will become a feature of our life in a way that, frankly, it was not 10 years ago, in the wake of the financial crisis, and has not been for decades. The Government must do everything they can to protect jobs, which is why we have called today for them to come forward not just with fiscal measures in July, but a full-on, jobs-first Budget—because we are worried about the impact of covid-19 on unemployment.

The representations on clause 79 from Global Brands and from my hon. Friend the Member for Chesterfield remind us of the risk of the unintended consequences of Government policy. Given the impact on jobs and the supply chain and the fact that the Treasury is in any case preparing to undertake a review of alcohol taxation, I wonder whether the call for the Government to delay the measure by 12 months is not eminently reasonable—and whether they might come forward with their own change to the Bill on Report.

Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch) - Hansard
16 Jun 2020, 12:09 a.m.

Clause 79 makes changes to alcohol duty legislation to introduce prohibitive sanctions for anyone who dilutes wine or made-wine once that product has passed a duty point. It will ensure fairness by providing equity of treatment across the drinks industry and will tackle future revenue risks for the Exchequer.

Post duty point dilution is a practice that enables wine and made-wine producers to reduce the excise duty that they pay by diluting the product after duty has been paid. Because the dilution increases the volume of wine and made-wine for sale, with no additional duty being paid, less duty is paid than would otherwise be due. UK legislation does not expressly prevent post duty point dilution for wine and made-wine, although it is prohibited for all other alcohol products. The practice gives certain wine or made-wine producers a tax advantage over those who produce other categories of alcohol, of which dilution is not permitted, and over others in their own sector who cannot make use of the practice.

Clause 79 will introduce new prohibitive sanctions for anyone who dilutes wine or made-wine once that product has passed a duty point on or after 1 April 2020. Introducing new sanctions to prevent the practice will maintain the principle that excise duty is calculated only on a finished product when it is released from production premises or on import. It will ensure fairness by providing equity of treatment across the drinks industry and will tackle future revenue risks for the Exchequer.

A review of the practice was launched at autumn Budget 2017, during which HMRC engaged extensively with industry and gathered a large amount of evidence to inform a decision. At Budget 2018, the Government announced the findings of the review and their intention to stop the practice being used for wine and made-wine, as is already the case for other types of alcohol. However, the Government also announced that that would not take effect until April 2020. That has given those businesses affected almost three years to prepare for the change, allowing them time to reformulate or diversify into the production of new lines.

Amendment 10 would require the Chancellor to review the public health effects of the post duty point dilution sanctions. When making changes to the alcohol duty system, the Government take into account a wide range of factors, including economic inequalities and health impacts. The new sanctions follow an extensive review by HMRC in 2017. Draft legislation was published in July 2019, alongside which a tax information and impact note was published on the gov.uk website, detailing the various factors that the Government have considered. The amendment is therefore unnecessary, as the Government have already published our assessment of the effect on public health. For the convenience of the Committee, I will reiterate that assessment. The Government expect that

“wine or made-wine may become slightly more expensive…there may be a positive health impact with less wine being consumed. However, this benefit may be offset if any increase in price leads to consumers switching to higher strength products.”

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard

I thank the hon. Lady for her intervention. I am not quite sure which chart she is referring to, and I do not accept her comments. We must remember that the purpose of the clause is primarily to close a tax loophole.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 10:29 a.m.

I understand what the Minister says about closing a loophole and about the time that businesses have been given to prepare for the change, but does she not think that the impact of covid-19 has a bearing here? Given the representations that are being made about the impact of the double whammy, would she at least go away and consider the merits of a 12-month delay, and write to me and my hon. Friend the Member for Chesterfield to set out her thinking once she has had a chance to do that?

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 10:31 a.m.

I thank the hon. Gentleman for that question. That is something that I have considered. I have had representations from the hon. Member for Chesterfield, Global Brands and other Members of Parliament, and I will take into account the points made by the hon. Member for Ilford North made in his speech.

On job losses, the announcement was made with enough time for people to prepare. We may not have been aware of covid, but postponing implementation any further would mean that the companies that adapted to the announcement about prohibiting post duty point dilution would be disadvantaged compared with companies that have not prepared since the announcement. We do not believe that that is fair.

On the point about the low alcohol value and moving the measure to stronger products, that is something that we have factored in. We will have a wider alcohol duty review—the hon. Gentleman referenced that. The Treasury has considered all those things, and we still do not feel that they are appropriate.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 10:29 a.m.

I am grateful to the Minister for being generous in giving way again. She will be pleased to hear that I will not labour the previous point.

As part of the Treasury’s review, will the Minister take into account the case for minimum unit pricing for alcohol? We have already heard the positive case from Scotland, and there is an active campaign for it. It would be useful for all of us involved in policy making if the Treasury review looked at the merits and the arguments against so that Parliament can make informed decisions.

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 10:33 a.m.

The Government are monitoring the emerging evidence from the introduction of minimum unit pricing in Scotland and, recently, Wales, and we have addressed public health concerns in the duty system. For example, in February 2019, duty rates on white ciders were increased to tackle consumption. We must remember that the UK operates a single excise regime, so it is not possible to devolve duty rates. It is worth noting that many of the problems that have been raised are actually caused by EU rules, according to officials. I can write to the hon. Gentleman and other Members who want further clarification on that point.

Break in Debate

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 12:05 a.m.

If the hon. Member for Kensington does not think that there should be a relationship between public health and taxation, I am afraid she is really going to hate what I have to say on clause 80 and the Scottish National party amendment. For the same reason as before, I think there is a real case for looking at these issues in a joined-up way, and ensuring that our public health objectives are reinforced by the Treasury.

In its January 2020 Budget submission, the UK Centre for Tobacco and Alcohol Studies, in partnership with Action on Smoking and Health, recommended that the minimum excise tax should be updated annually to ensure that the minimum tax for tobacco products is the rate due for products sold at the weighted average price. In the light of those representations, I wonder whether the Government will consider the advice of public health experts, and what consideration they have given to committing to updating the MET on an annual basis from the date of the passing of this legislation.

As the all-party parliamentary group on smoking and health has noted, the covid-19 crisis means that reducing tobacco-related health inequalities should be a priority, now and in the longer term, to improve population health and resilience to any future disease outbreaks. Differences in smoking prevalence and smoking-related diseases are an important factor in the differences in morbidity and mortality from covid-19. If we are not going to think seriously about some of these public health challenges in the middle of a public health crisis, when will we, frankly?

There has also been a rise during lockdown in people’s exposure to second-hand smoke in the home. Households with children are twice as likely to report second-hand smoke in the home. We have already heard about the Scottish Government’s determination in that respect, but the Government’s prevention Green Paper set the target of the UK being smoke-free by 2030, which is defined as a prevalence of 5% or less. If we are going to do that, we really have to commit to doing it and make changes across the board to support that important goal, which we across the House share.

The argument that public health and taxation are not intertwined does not hold water. It is not fashionable to be nice about George Osborne in today’s Conservative party—it is even less fashionable in the Labour party, but I already have a cross to bear in my own party—and his sugar tax was hugely controversial when it was introduced. I do not mind saying that as I sat watching the announcement in the Budget I was a big cynic, not least because I am generally in favour, as a point of principle, of progressive taxation. I worry about any new charges or levies that have flat implications for people and households with different levels of income.

Taxation by its nature ought to be progressive wherever possible, but the sugar tax has been shown, over the fullness of time, to have had a really positive impact on sugar consumption in this country. The evidence shows that a public health epidemic, which I think is what obesity is, particularly affects those from the poorest backgrounds. The same is probably true of smoking and its health consequences not just for smokers, but for the people—particularly children—who breathe the smoke around them.

The all-party parliamentary group on smoking and health, ASH, the British Heart Foundation, Cancer Research UK, the Royal College of Physicians and many others are calling on the Government to adopt their road map to a smoke-free 2030. That would include the creation of a smoke-free 2030 fund, into which tobacco manufacturers would be legally required to give funds to finance the action needed to achieve the smoke-free 2030 goal.

What consideration have the Government given to the road map to a smoke-free 2030 and, in particular, the proposal that there should be some kind of levy on tobacco manufacturers? In the same way as the sugar tax was hypothecated to tackle obesity, what consideration have the Government given to introducing a hypothecated levy to take action to eliminate smoking?

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 10:47 a.m.

Clause 80 increases the duty charge on all tobacco products by RPI inflation plus 2% in line with the tobacco duty escalator. In addition, the duty on hand-rolling tobacco will rise by an additional 4% to 6% above RPI inflation this year.

Smoking rates in the UK are falling, but they are still too high. Around 14% of adults are smokers. We have ambitious plans to reduce that still further, as set out by the Department of Health and Social Care in its tobacco control plan. That includes a commitment to continue the policy of maintaining high duty rates for tobacco products to improve public health. The UK has comprehensive tobacco control legislation, which is the envy of the world. However, smoking is still the single largest cause of preventable illness and premature death in the UK. It accounts for around 100,000 deaths per year and kills about half of all long-term users. According to Action on Smoking and Health, smoking costs society almost £14 billion per year, including £2 billion in costs to the NHS of treating disease caused by smoking.

At the Budget, my right hon. Friend the Chancellor announced that the Government were committed to maintaining the tobacco duty escalator until the end of the Parliament. The clause therefore specifies that the duty charged on all tobacco products will rise by 2% above RPI inflation. In addition, duty on hand-rolling tobacco will rise by an additional 4% to 6% above RPI inflation this year. The clause also specifies that for the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—the specific duty component will rise in line with cigarette duty.

The new tobacco duty rates will be treated as taking effect from 6 pm on the day they were announced: 11 March 2020. Recognising the potential interactions between tobacco duty rates and the illicit market, the Government announced at the Budget that they would publish a consultation on proposals for strengthened penalties for tobacco tax evasion as part of the track and trace system, including a £10,000 fixed penalty and a sliding scale for repeat offenders. In addition, the Government will strengthen the resources of trading standards and HMRC to help to combat the illicit tobacco trade, including the creation of a UK-wide HMRC intelligence-sharing hub. I hope the hon. Member for Ilford North will support that. I believe I have addressed quite a number of the points that he has raised.

I turn to amendment 11, which is designed to place a statutory requirement on my right hon. Friend the Chancellor to review the public health effects of changes to tobacco duty. The Chancellor assesses the impact of all potential changes in his Budget considerations every year. The tax information and impact note published alongside the Budget announcement sets out the Government’s assessment of the expected impacts. The Government are committed to improving public health by reducing smoking prevalence, and we co-ordinate these efforts through the tobacco control delivery plan 2017 to 2022, which also provides the framework for robust and ongoing policy evaluation. Accordingly, 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.

I hope that reassures the Committee, and I ask Members to reject the amendment. The clause will continue our tried and tested policy of using high duty rates on tobacco products to make tobacco less affordable and continue the reduction in smoking prevalence, thus reducing the burden that smoking places on our public services.

On the point about a tobacco levy, I believe the Government laid out their position on introducing a levy in 2015. We do not believe a levy is an effective way to raise revenue or protect public health.

Amendment 11 negatived.

Clause 80 ordered to stand part of the Bill.

Clause 81

Rates for light passenger or light goods vehicles, motorcycles etc

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

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard

I thank my hon. Friend for her intervention, and I agree with her.

Wes Streeting Portrait Wes Streeting - Hansard

Following a previous theme, we support this approach to incentivising the use of greener and more environmentally friendly vehicles. It shows how decisions taken at the Treasury can support the public policy aims of other Departments and promote positive consumer change. Clearly, we have to do a lot more to ensure that people are using environmentally friendly vehicles, which produce fewer emissions and have a less detrimental impact on air quality and the wider environment than other vehicles do. I, in common with many stakeholders, welcome the reduced rate applied to alternatively fuelled light passenger vehicles, including hybrids and those powered by bioethanol and liquid petroleum gas.

Kemi Badenoch Portrait Kemi Badenoch - Hansard

I think that is a point we can all agree on. The Government are doing a lot to encourage the uptake of low emission and zero emission vehicles. As I mentioned earlier, the reformed VED system was introduced in 2017 for new cars. To elaborate, on first registration the owners of zero emission models pay nothing, while those of the most polluting pay more than £2,000. In subsequent years, most cars move to a standard rate, which is currently set at £145. The exceptions are electric cars, which attract a zero rate, and hybrids, which receive a £10 discount.

In the Budget, the Government announced a number of further steps to reduce zero emission vehicle costs, including exempting zero emission cars from the vehicle excise duty expensive car supplement; extending low company car tax rates for 2024-25, as we discussed earlier; and extending the plug-in grant scheme for zero emission cars and ultra-low emission vans, taxis and motorcycles until 2022-22.

Question put and agreed to.

Clause 81 accordingly ordered to stand part of the Bill.

Clause 82

Applicable CO2 emissions figure determined using WLTP values

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

Kemi Badenoch Portrait Kemi Badenoch - Hansard

Clause 82 makes changes that ensure that CO2 emissions figures for vehicle excise duty will be based on the world harmonized light-duty vehicles test procedure—WLTP—for all new cars registered from 1 April 2020. Until 1 April 2020, the owners of new cars were liable to pay VED based on CO2 emissions figures provided under the new European driving cycle test procedure, which is otherwise known as the NEDC. That test underestimates real-world driving emissions by up to 40%. In the 2018 Budget, it was announced that from April 2020, VED would be based on WLTP, which closely reflects real-world driving emissions. Consequently, vehicle excise duty liabilities for new cars purchased from April 2020 may change.

In the 2018 Budget, the Government announced a review of the impacts of WLTP on vehicle taxes. In July 2019, the Government announced that as mitigation to help the industry manage the transition to WLTP, company car tax rates would be temporarily reduced, and that the Government would publish a call for evidence on vehicle excise duty. Draft legislation for the Finance Bill was published on L day 2019 to switch on WLTP from April 2020 and to implement the new CCT rates.

Clause 82 confirms that CO2 emissions figures for vehicle excise duty will be based on WLTP for all new cars registered from 1 April 2020, and that all cars registered before 1 April 2020 will continue to use existing NEDC CO2 values for VED purposes. As WLTP is more representative of real-world driving conditions, this measure ensures that VED is based on a more robust regime for measuring CO2 emissions. It will also allow motorists to make more informed purchasing decisions when considering the CO2 impact of their new car.

Wes Streeting Portrait Wes Streeting - Hansard

I do not think that we need to dwell too long on this, but it is worth exploring a few points that were made during the Government’s consultation and to test some stakeholders’ arguments. Assertions are sometimes made, but it is important to revisit the arguments and see whether they stand up to the scrutiny of evidence. It will be interesting to hear the Treasury’s view on that.

There was a concern that the WLTP charging rates could lead to distortion ahead of April 2020, because consumers might bring forward purchasing decisions to avoid potential tax increases on new cars. Given that April 2020 has passed, it would be interesting to know whether such distortion has actually occurred. What assessment has the Treasury made of that?

On the environmental impact, some respondents stressed that company cars were more environmentally friendly than private cars. The argument goes that it is important to keep people in that market by adjusting company car taxation to reflect the lower impact. What analysis has the Treasury done of that claim? Does the Treasury think that that is a valid argument, or simply an assertion?

Finally, some concern was raised that under WLTP values, there could be an above-average increase in the reported CO2 emissions of cars with smaller engines, whereas cars with higher CO2 emissions would not be affected by the change to the same extent. How much does that argument hold water with the Minister?

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 10:58 a.m.

On the question of why we are treating cars registered before 6 April 2020 differently and whether that would create a distortion, the WLTP testing standards were introduced in 2017 and EU legislation required manufacturers to record the CO2 emissions for both regimes. We have not sought to change the tax treatment of existing cars; we aim to encourage people who purchase new cars to choose low-CO2-emitting models.

On the analysis that the hon. Gentleman asks for, it is probably too soon to tell. The impact is linear, and we published some findings in July 2019 when we set rates. I can have that information provided to him, and I can write to him on that point. I do not have the full answers for the analyses that he is asking for.

Question put and agreed to.

Clause 82 accordingly ordered to stand part of the Bill.

Clause 83

Electric vehicles: extension of exemption

Break in Debate

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 11:01 a.m.

Clause 83 makes changes to exempt all zero-emission cars from the vehicle excise duty supplement that applies to cars with a list price exceeding £40,000 from 1 April 2020. The background is that the Government use vehicle taxes, including vehicle excise duty, to encourage the take-up of cars with low carbon dioxide emissions to help to meet our legally binding climate change targets. Vehicle excise duty incentives help to reduce the cost of zero-emission cars, which is one of the most significant barriers to uptake. From April 2017, on first registration, zero-emission cars paid no vehicle excise duty, while the most polluting cars paid more than £2,000. In subsequent years, while most cars move to a standard rate—£150 in 2020-21—electric vehicles attract a zero rate. Previously, however, all vehicles with a list price exceeding £40,000, including electric vehicles, paid a vehicle excise duty supplement of £325 in 2020-21 from years two to six following registration.

Under the changes made by clause 83, from 1 April 2020, all zero-emission light passenger vehicles registered from 1 April 2017 until 31 March 2025 will be exempt from the vehicle excise duty expensive car supplement. That will reduce vehicle excise duty liability for almost a third of zero-emission cars by an estimated £1,625. This demonstrates that the Government will continue to incentivise the uptake of zero-emission cars through the 2020s. The measure will incentivise uptake by reducing tax liabilities and aid the Government in achieving net zero. I therefore commend the clause to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 11:02 a.m.

Clause 83 is obviously a welcome measure; we have heard from industry representatives that removing the VED surcharge for electric vehicles will encourage uptake. The RAC’s head of policy, Nicholas Lyes, states:

“Our research suggests that cost is one of the biggest barriers for drivers who want to switch to an electric vehicle and the steps taken”

by the Government

“will provide clarity and certainty for both consumers and manufacturers.”

I wonder whether the Government are looking at what more they can do to reduce the cost burden for people switching to electric vehicles. People make choices all the time about the purchase of new vehicles, and price sensitivity is one of the biggest aspects of that. If someone uses their car every day for regular journeys—to commute to and from work, for example—and has access to charging points at home, at work or in the vicinity, switching to an electric vehicle will make a real difference. It can be cost-effective as well as an environmentally friendly choice, particularly in the light of the clause.

However, for lots of people who do not commute regularly but have a family car for use at weekends and perhaps over the summer holidays, the financial choice is not always as straightforward. Although the environmental factors may be compelling and people might want to switch to an electric vehicle, the financial barrier is still too high. I wonder what more the Government can do, through industry support or other means, to further incentivise the switch to electric vehicles, as it would make a real difference.

On infrastructure, it is important that more is done to ensure that electric vehicle charging points are readily available for use—that is really an issue for the Department for Transport and local authorities, but at some point they will come knocking at the Treasury’s door. The Minister is smiling; I am sure that she is very familiar with that experience. I wonder how favourably she is looking on those arguments, because although progress is being made to expand electric charging points—the Mayor of London cares strongly about the issue, and I discussed it recently with the Mayor of Greater Manchester, Andy Burnham—much more progress can still be made in all parts of the country, so Treasury support would be very welcome.

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 11:06 a.m.

The hon. Gentleman makes a point that we hear again and again about the cost of low emission vehicles. These changes are part of a wider package of tax and spend incentives—I have mentioned company car tax rates and the plug-in car grant.

On the question of what more we can do, the best mechanism is the call for evidence that the Government published at the Budget, which includes how vehicle excise duty can further incentivise the uptake of zero-emission cars. That is probably the best way for the industry and Parliament to suggest what more we can do to make low emission vehicles more affordable.

The hon. Gentleman is right that we get asked a lot about infrastructure and what more we can do to provide charge points. We understand that access to high-quality, convenient charging infrastructure is critical if drivers are to make the switch to electric vehicles confidently. That was why, at the Budget, we announced £500 million over the next five years to support the roll-out of a fast charging network for electric vehicles, ensuring that drivers will never be more than 30 miles from a rapid charging station.

Question put and agreed to.

Clause 83 accordingly ordered to stand part of the Bill.

Clause 84

Motor caravans

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

Kemi Badenoch Portrait Kemi Badenoch - Hansard
16 Jun 2020, 11:08 a.m.

Clause 84 reduces vehicle excise duty liability for new motorhomes to support British motorhome manufacturers and UK holidaymakers. From 12 March 2020, most new motorhomes pay a flat rate of VED at £270 annually. To ensure that, in the future, motorhome vehicle excise duty liabilities reflect environmental impact and to incentivise the development and uptake of lower emission motorhomes, from 1 April 2021, motorhome VED liabilities will be aligned with graduated van vehicle excise duty.

From September 2019, EU regulatory changes have required motorhomes to record carbon dioxide emissions on the vehicle type approval document. Previously, the majority of motorhomes attracted a flat rate of £265, but from September 2019, due to their high emissions, new motorhomes saw a significant increase in their first-year vehicle excise duty liabilities. Motorhome dealerships and the main industry body, the National Caravan Council, expressed concern about the changes. The sector argued that, as motorhomes are generally derived from vans, their VED liability should be aligned with vans, rather than passenger vehicles.

The changes made by clause 84 mean that, from 12 March 2020, new motorhomes are more closely aligned with vans for VED purposes. Manufacturers are no longer required to provide a CO2 emissions figure when they register the vehicle with the Driver and Vehicle Licensing Agency. As a result, all new motorhomes will move to a flat rate of vehicle excise duty. Most new motorhome vehicles will be included in the private light goods vehicle tax class, with the minority that weigh more than 3,500 kg included in the private heavy goods class. As a result, new motorhomes’ first-year VED liabilities will be reduced by up to £1,905. The change will affect owners of motorhomes first registered from 12 March 2020. There are typically about 15,000 motorhomes registered in the UK annually.

The change will reduce new motorhome vehicle excise duty liabilities, and better align them with vans, rather than passenger vehicles. It will support British motorhome manufacturers and holidaymakers using motorhomes throughout the UK. I therefore commend the clause to the Committee.

Wes Streeting Portrait Wes Streeting - Hansard
16 Jun 2020, 11:08 a.m.

This debate is particularly timely, given last night’s Adjournment debate, which was led by my hon. Friend the Member for Kingston upon Hull West and Hessle (Emma Hardy), who told the House that Hull is the capital of caravan manufacturing. Along with my hon. Friends the Members for Kingston upon Hull North (Dame Diana Johnson) and for Kingston upon Hull East (Karl Turner), she has been a doughty champion of the industry. That industry has been particularly hard hit by covid-19 because it relies so much on the leisure and tourism industry, which is still effectively shut down. Industry bodies and users were looking for this change, so I am happy to indicate that we support the clause.

Finance Bill (First sitting)

(Committee Debate: 1st sitting: House of Commons)
Debate between Kemi Badenoch and Wes Streeting
Thursday 4th June 2020

(3 months, 2 weeks ago)

Public Bill Committees
Read Full debate Read Hansard Text Bill Main Page
HM Treasury
Kemi Badenoch Portrait The Exchequer Secretary to the Treasury (Kemi Badenoch) - Hansard
4 Jun 2020, 12:23 p.m.

It is a pleasure to serve under your chairmanship, Ms McDonagh. Clauses 7 to 9 make changes to set company car tax—CCT—appropriate percentages that favour zero and ultra-low emission cars until April 2023. As confirmed at Budget, these rates will be extended until April 2025. The clause also confirms that that the CO2 emissions figure for the purposes of the CCT will be based on the worldwide harmonised light vehicle test procedure—WLTP—for all new cars first registered on or after 6 April 2020.

CCT is a benefit in kind for employer-provided cars that are available for private use. Although part of the income system, the appropriate percentages that determine the rate of tax paid by individuals are based on CO2 emissions. There are currently around 900,000 company car drivers in the UK, and the benefit raises approximately £2.3 billion per annum. In July 2019, the Government announced that, for CCT, new cars first registered on or after 6 April 2020 will report CO2 emissions using the WLTP, which is an improved emissions testing regime that aims to reduce the 40% gap that exists between current emissions reporting and real world driving. The Government announced that to smooth the transition to the WLTP, for cars first registered on or after 6 April 2020, CCT rates will be reduced by 2 percentage points in 2020-21 before returning to planned rates over the following two years.

To support decarbonisation, the Government also announced that all zero-emission company cars would attract a reduced CCT rate of 0% in 2020-21 and 1% in 2021-22, before returning to the planned 2% rate in 2022-23. To give certainty to company car drivers, leasing companies and manufacturers, the recent Budget announced the extension of 2022-23 rates for an additional two years until April 2025.

The changes made by clauses 7 to 9 will confirm that all new cars provided to employees and available for private use that are first registered on or after 6 April 2020 will be taxed according to the CO2 emissions figure measured under the WLTP. It is also clarified that cars first registered before 6 April 2020 will continue to be taxed on the basis of the CO2 emissions figure measured under the new European driving cycle—NEDC—procedure.

The clauses also introduce reductions in the appropriate percentages for 2020-21 and 2021-22 for zero-emission cars and all cars registered on or after 6 April 2020. In addition, they make a number of minor technical amendments—for example, by clarifying that where the electric range figure is converted from kilometres to miles, the value should be rounded up to the nearest whole mile.

I urge that the clauses stand part of the Bill. The changes they introduce will aid decarbonisation by confirming the introduction of the WLTP and beneficial CCT rates for ultra-low and zero-emission cars. They will also provide welcome certainty to company car drivers, leasing companies and manufacturers on the future taxation of company cars until April 2025.

Wes Streeting Portrait Wes Streeting - Hansard
4 Jun 2020, 12:26 p.m.

As this is our first exchange across a chamber, may I say how much I look forward to working with the Exchequer Secretary—and occasionally giving her the runaround—during our time together in these roles?

Let me begin with an overall observation, which is that this Parliament has declared a climate emergency. The country understands the extent to which irreversible, catastrophic climate breakdown is an existential threat to life on Earth and means serious disruption to our way of life. Actually, given the disruption that the pandemic is inflicting on all of us at the moment, lots of people are reflecting on the serious longer term disruption were we to allow such a catastrophic climate breakdown to take place. But here we are with this Finance Bill, dealing with one of the few areas in which the Bill tries to make any progress at all towards tackling the climate emergency by talking about car tax percentages. This is entirely reasonable and entirely straightforward, but it falls way short of meeting the challenge facing our country.

When Greta Thunberg addressed parliamentarians here in our own Parliament, she said:

“Avoiding climate breakdown will require cathedral thinking. We must lay the foundation while we may not know exactly how to build the ceiling.”

I am pretty sure that when Greta Thunberg talked about foundational measures, she did not have car tax at the forefront of her mind. Yet here we are with a Bill that, as we have already heard from the hon. Member for Glasgow Central, falls way short of meeting the challenge.

It is disappointing because the Treasury has a crucial role to play in promoting efforts to tackle destructive climate change. This ought to be a national mission for our country. As one of the largest financial centres in the world economy, the UK has a clear responsibility to provide international leadership through the greening of our financial system. But we also know that the tentacles of the Treasury reach into every Department and can compel all sorts of behavioural change, can incentivise and disincentivise all sorts of policy change, right across the breadth of Government. I would like to see Her Majesty’s Treasury showing far stronger leadership in that regard.

It is also the case that through taxation, either tax incentives or disincentives, created through punitive tax measures, we can effect behavioural change across the country. I therefore hope that the scope and ambit and the ambition of future Finance Bills live up to the challenge.

If Ministers are not persuaded by the exhortations of Greta Thunberg, perhaps they will tune in to the interview given by His Royal Highness the Prince of Wales just this morning. As someone who has been committed for decades to tackling climate change and to supporting biodiversity and the natural environment, he too makes a compelling case. I hope Ministers will take that on board.