Budget Resolutions

Debate between Lord Beamish and Robert Jenrick

Wednesday 31st October 2018 Commons Chamber

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

This Budget demonstrates yet again that careful stewardship of the economy and meeting serious challenges in a serious way, thereby creating an environment for wealth creators to succeed, is always the right course. Now, the hard work of the British people is paying off. We see that in the record numbers in employment, with 3 million more jobs since 2010. We see it in rising real wages, with the fastest rises in real pay among the lowest paid in society. Above all, we see it in our strengthening public finances.

We see in the Budget how a stronger economy enables us to support the NHS, which will receive, as my hon. Friend the Member for Chelmsford (Vicky Ford) said, that record-breaking £20.5 billion real-terms per-year increase. Furthermore, a stronger economy has enabled us to cut taxes and to freeze the important duties—whether on fuel, spirits or beer—so that millions of people throughout the country can enjoy more of the money that they have earned. Those achievements did not fall into the Government’s lap—apologies to the Chief Secretary—they were hard won by the people of this country, and we will not be complacent. This is an optimistic, future-facing Budget, and a Budget for economic growth.

Having listened to much of the past three days of Budget debate, I could summarise the contributions from Opposition Members as wanting more spending and higher taxes. With some notable exceptions, they have had very little to say about how we grow the economy and create wealth. When asked recently, the shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell), could not name a single businessperson whom he admired. We on the Government Benches understand that behind every business is a story worth knowing—that cafés and gyms and restaurants do not come out of nowhere. We respect and admire these people, and this Budget is for them.

The Federation of Small Businesses, the CBI, the retailers, the convenience stores, the pubs, the oil and gas industry that supports so many thousands of jobs in north-east Scotland, and the manufacturing groups such as the EEF all support the Budget. Of course there are challenges. Of course we are in a moment of high uncertainty as we enter a pivotal stage in the Brexit negotiations, but each of those groups—and more—that I have spoken to since the Chancellor sat down believed that we were listening to them and acting. We are delivering for businesses and job creation throughout the country.

As my right hon. Friend the Member for Sevenoaks (Sir Michael Fallon) argued at the beginning of the debate, the Budget recognises that the UK has to pay its way in the world. It must be an attractive place for people to invest. To ensure that it is, we have cut corporation tax from 28% to 19%, and receipts have risen by 55%. We have reaffirmed the incentives for entrepreneurs that are attractive for people—including those in the constituency of the hon. Member for Hampstead and Kilburn (Tulip Siddiq)—who come here from all over the world. They are attracted here because it is a great place to create businesses, and that is driving the unicorns and tech businesses of this country.

We are extending the start-up loan scheme, and as we have already heard, we have increased the annual investment allowance from £200,000 to £1 million. We have listened to manufacturing businesses, particularly in the midlands and the north, that want to invest in plant, machinery and digital technology. This is about not just the sexy technologies that we heard about earlier but ensuring that manufacturing in this country can continue to thrive.

For working people, we are increasing the national living wage from April and thereby contributing to rising real wages, and we are giving a tax cut to 32 million people throughout the country by increasing the personal allowance and the higher-rate threshold. As we heard at Prime Minister’s questions, it is still unclear whether the Labour party supports that tax cut. The shadow Chancellor reluctantly says he agrees with it, the shadow Foreign Secretary, the right hon. Member for Islington South and Finsbury (Emily Thornberry), says otherwise, and the Mayor of Greater Manchester says that shadow Chancellor’s views send a shiver down his spine—and that was before Halloween.

We believe that everyone in this country should pay their fair share of tax. There are measures, which we have heard about from right hon. and hon. Members in this Budget debate, to continue to close the tax gap. It is at a near record low, and lower than it was in any year of the previous Labour Government. This Budget does create the world’s first digital services tax.

[Mr Kevan Jones]

On a point of order, Mr Deputy Speaker. We have had a very good debate this afternoon, and there have been some great contributions from all parts of this House. Members can call me old-fashioned, but I thought that the role of the Minister replying to the debate was to address the issues that have been raised in this debate. He has now been on his feet for nearly six minutes, and apart from some reference to two Conservative Members, he is making just a general speech, which he could have done in an opening speech.

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

The Minister has got time to address the issues, and I am sure that that is where he will take us now.

[Robert Jenrick]

That was unfair, because I am addressing the points that have been raised by Members from all parts of the House. [Interruption.] The right hon. Member for North Durham (Mr Jones) may not like the answers, but I am providing them. With respect to the digital services tax—it is a tax that has been mentioned by numerous Members across the House—we are the first major country to do this, and it will raise in excess of £1.5 billion, ensuring that, in our thriving economy, our tech-friendly economy, those who generate value from UK users will pay a fair contribution to tax. We look forward to publishing more information and to the consultation on that, which, clearly, hon. Members may wish to take part in.

We chose in this Budget to invest in the long-term economic infrastructure of the country—a subject that has been raised by a number of my colleagues—raising investment levels in this country to the highest sustained level in my lifetime. That is the mark of a mature economy, which is not just spending everything on immediate consumption, but spending money for long-term investment. Public capital investment in this country will be £460 million a week higher under this Government than it was under the previous Labour Government. We have heard some of the ways that we will spend that. We will spend it by increasing investment in our roads—in every type of road. A number of colleagues from across the House—

[Mr Kevan Jones]

Which Members?

[Robert Jenrick]

Well, there was my hon. Friend the Member for Chelmsford (Vicky Ford), for example. She made a representation for the Chelmsford flyover, and we will deliver on that. Let me say one other thing in response to the right hon. Member for North Durham: we listened to those Labour Members who came to see us at the Treasury with genuine representations to grow the economy, but they were few and far between. There was the hon. Member for Bassetlaw (John Mann), for example, and we responded to his requests—[Interruption.]

--- Later in debate ---

[Robert Jenrick]

We are investing in a whole range of different infrastructure projects, which will make a huge difference to the future of this country, from the productivity pinchpoints to investing in potholes. We did hear from a number of Members today a slightly snobbish attitude to investing in potholes, but these things matter to ordinary people. They matter to people in my northern constituency of Newark. They matter to people in Walsall, in Halesowen, in Stoke-on-Trent, in Mansfield and in towns that we have heard about here and, in fact, in towns across the whole country, including in the right hon. Gentleman’s constituency.

[Mr Kevan Jones]

Where is it?

[Robert Jenrick]

In North Durham. [Hon. Members: “Ah!”] Yes, there you go. Incidentally, the last time that the right hon. Gentleman and I sparred was over cleaning up illegal waste sites.

[Mr Jones]

You have done nothing about that either.

[Robert Jenrick]

Well, you have not read the Red Book, because we put £10 million—[Interruption.]

Ways and Means

Debate between Lord Beamish and Robert Jenrick

Ways and Means resolution: House of Commons
Wednesday 6th September 2017 Commons Chamber

[Mr Kevan Jones (North Durham) (Lab)]

I begin by welcoming you to the Chair, Madam Deputy Speaker. I know that you were in the Chair before the recess, but it is the first time that I have had the honour of speaking when you are in the Chair and I wish you all the best in the coming years.

I would like to speak rubbish—[Interruption.] Somebody asks, “What’s new?” I could not possibly comment on my contributions in the Chamber. I actually want to talk about landfill tax and why it has not been included in the resolutions. It is a serious matter, and the Financial Secretary alluded to the reason for its omission. I want to put some of my concerns on record.

In the 2016 Budget and after consultation last summer, provisions were earmarked to be included in the 2017 Finance Bill through secondary legislation to amend taxable disposal for landfill tax purposes. The Financial Secretary explained that many things had been disrupted because of the general election. We cannot change that and I accept that certain matters were taken out of the Budget in the wash-up, which is standard practice. However, the measure on landfill tax was not. It was included until last week. The Financial Secretary said that the consultation on landfill tax will be included, but will now be published in September.

I will explain why landfill tax is so important in the context of the tax avoidance and fraud agenda that the Government say they wish to progress. I am not making party political points: the position is not all the fault of the current Conservative Government; it is as a result of the way in which successive Governments have implemented landfill tax. However, there are things that we can and must do, because the problem is not just that people do not pay the tax that they should to the Exchequer; it is that, in some areas, avoidance funds organised crime and leads to huge costs for local authorities and the taxpayer in cleaning up some of the issues.

The Government estimate in a 2014-15 report that some £150 million a year is not being paid in landfill tax. The Environmental Services Association reckons that the figure is nearly £1 billion a year. From my work in looking at the sector, £150 million seems a conservative figure. If we take HMRC’s figure, that represents 12% of lost revenue, which is on a par with tobacco and alcohol tax avoidance. One would think that it was easier to track landfill tax avoidance than alcohol and tobacco tax avoidance—so it should be. I accept that issues affect tobacco and alcohol sales that sometimes make it difficult to claim tax. However, with landfill tax, we are talking about large consignments of domestic and commercial waste, and its destination should not be hard to track.

The system was introduced as an environmental measure. The policy that Labour and Conservative Governments have pursued to try to reduce the amount of rubbish going to landfill and increase recycling is right. I will come on to the policy in Scotland, which creates a problem in England. The Scots are now dumping their rubbish in England to avoid the SNP Government’s so-called PR stunt in introducing 100% recycling, which we all know is impossible.

At present there are two rates of landfill tax: the standard rate of £84.40, which is due to rise to £88.95 in the 2018 Budget, and the lower rate of £2.65, which is due to rise to £2.80 in 2018. Successive Governments have, I think rightly, increased landfill tax over time—to generate revenue, obviously, but also to try to encourage people to recycle more. There is nothing wrong with that, and I do not criticise it at all; the problem lies in how the tax is avoided. It is paid by those who collect and dispose of waste. Some operators own not just the collection system, but the hole in the ground where the waste will go. That leads to clear cases of fraud, in which what actually goes into the ground is not declared to HMRC or to anyone.

Another issue is the type of tax that landfill operators pay. Some claim that tax on inert waste should be paid at the lower rate and pay that rate, although the tax should, in fact, be paid at the higher rate. What has made the situation worse is the mistake that was made in 2015, when the Government basically gave the industry a licence to print money by making it responsible for determining what type of waste was involved by means of something called the loss on ignition test. If a pile of rubbish, or a sample of rubbish, has a loss on ignition of 10% or less, it is classified as being subject to the £2.65 rate; otherwise, it will be subject to the full standard rate. There is thus a clear incentive for operators to declare waste to be subject to the lower rate, which means that the tax avoidance amounts to a little over £80 per tonne.

I am told that, in most areas where that is going on, if inspectors are looking around, operators will have a sample box of rubbish. In the majority of cases, what actually goes into the landfill site could be anything, and the higher rate of tax that the operator should be paying is being completely avoided because HMRC has extracted itself from the process and left the decision to the industry. It may be said that the aim is to attack red tape, which would be fine if the people concerned were responsible and law-abiding.

Let me put it on record that I am not accusing everyone in the industry of this practice. Some are clearly behaving correctly. However, there are a great many rogues, and, in some cases, not rogues but criminals, who have become involved in the practice because they see it as a good way of doing two things: making easy cash, and laundering money through what is a very high-volume business, given the amount of cash that goes through it. I shall say more about that shortly, but giving the responsibility to landfill operators, with no checks, is basically saying, “You decide what tax you pay.”

Another aspect that concerns me, and should concern everyone, is the issue of what is going into landfill sites. What is being classed as inert waste, or as waste that will not catch fire or is not dangerous, is paid for at a certain tax rate. That is declared as going into landfill sites, but what is in fact going in could be very different. I have a simple question: what records do people check? Again, it is very much a matter of self-regulation: the operators fill them in, and a toothless tiger of an organisation called the Environment Agency does spot checks on them. I have been told that one operator deliberately sent in the previous year’s returns and they were just accepted. That is what this comes down to: a lack of co-ordination in the way the HMRC and other Government agencies are tackling the problem.

The other way of avoiding tax entirely is for someone to buy a hole in the ground, to set themselves up as a landfill tax operator and to go around advertising their wares by asking for tenders from organisations, and when the process gets to the weighbridge to determine the amount, to bypass it and just put the waste straight in—paying no tax at all, not even the lower rate. There are quite a few examples of that happening, but again there are no HMRC checks. I will come on to some proposals that I hope the Minister will consider.

[Robert Jenrick (Newark) (Con)]

The hon. Gentleman is making a valuable contribution. I want to emphasise a point he made at the beginning of his remarks: the rise of serious organised crime from this tax. In Nottinghamshire—which I know he knows very well, as a son of Worksop—there have been large-scale frauds where huge rubbish dumps have been put on private property, often with the agreement of the owner, who of course denies it to the police, and the Environment Agency provides absolutely no prosecutions. A number have fallen down; multimillion pound prosecutions have collapsed. It is becoming one of the easiest ways to conduct serious organised crime in this country.

[Mr Jones]

The problem is not only that the hon. Gentleman’s constituents have to live next door to those illegal dumps, but that there is the expense of clearing them up, which falls back on the taxpayer.

There is another widespread scam. This morning I tried to find the figure for the number of fires at waste transfer stations, but I could not. For the uninitiated, I will explain. Having been a chair of public health in Newcastle, I could bore on about waste: when waste is being transferred, it usually does not go straight to the actual site, but goes first to a waste transfer station where it is either sorted or graded into different things. The number of fires that occur at waste transfer stations is out of all proportion to the probability of that happening. The reason for that is that once there is just a pile of ash, there is nothing to dispose of. That is the problem, and, again, organised crime is involved in that.

We have had some instances in County Durham of the point raised by the hon. Member for Newark (Robert Jenrick). There are frauds such as those he describes—to be fair to Durham police, they have cracked down on some of the individuals concerned—but there are some people who have bought into this business. If we look back at what they did or how they got their money, we find serious questions about whether they should be allowed anywhere near the waste industry.

We all know why, for example, in the 1970s the mafia got control of waste in New York: because there is money to be made in it. It is the same in this country, but unfortunately we are not taking the robust approach needed to address that.

One of the issues is about who is responsible for that. The hon. Gentleman mentioned the Environment Agency. It is a good organisation in one respect; it is full of some very good and committed people, but they do not have the killer instinct to be enforcers. The agency needs to have a certain mindset and to take robust action, rather than just looking at the odd illegal site. It needs to closely monitor some of the existing organisations. Without that mindset and enforcement, this will never succeed.

This is also a matter that falls between the Environment Agency and HMRC. I give credit to Durham police for taking a lead in trying to get people together and for saying, “Look, wait a minute. We know that the people behind this are involved in x, y and z, which has mostly nothing to do with rubbish. It is to do with other serious organised crime.” The police have worked with HMRC and others and tried to concentrate on these issues.

I have a concern about HMRC’s approach to this problem, and the Minister might want to reflect on it. I shall not go into details because the case is ongoing, but when I raised one particular matter with HMRC, I was told that no enforcement action would be taken because the fraud was not worth more than £20 million a year. That seems like a lot of money to me. Another case that is ongoing at the moment involves fraud totalling £78 million a year. I wonder whether these decisions are the result of a lack of resources. I have spoken to a lot of the investigators in HMRC and I pay tribute to them for the work they do. Some of the people they are dealing with are very dangerous, and it is a complex matter to put these cases together. What we need in this country is a joined-up approach by HMRC, the Environment Agency and the police. I had a meeting earlier this year with the Minister for Security, the right hon. Member for Wyre and Preston North (Mr Wallace), to discuss where all this money goes. The amounts being generated are huge, and I have seen evidence that it is going into the drugs trade or other illicit organisations. That has an impact on society.

There are some things that could be done. As I have said, we need to adopt a joined-up approach—dare I say the Eliot Ness approach—and take a robust line on this. As the hon. Member for Newark has just said, the people who have to pay for the clear-up are the taxpayers. In many cases, that involves local authorities that are already under a lot of pressure. We need to adopt a hard-headed approach, and the Minister needs to look at the figure of £150 million. I think that the figure is way more than that.

Self-certification and the loss on ignition test just need to be binned. I know that there are pressures, and people have talked about cuts in HMRC—[Interruption.] Oh, there is more yet, don’t worry! The hon. Member for Chelmsford (Vicky Ford) is looking exasperated. What is needed is one single rate for landfill, whatever it is. That test is not enforceable; every shipment going into a landfill site would have to be tested. People have talked about leaving this up to the industry, and I am not besmirching the reputation or integrity of any particular party, but it is open to anyone who wants to do so to abuse the system. I therefore think that those tests need binning, and that we need one single rate.

People ask whether landfill sites could be monitored. Yes, we have the technology. I have raised the matter with the Minister’s policy people and asked whether we could have a system similar to those at weighbridges and slaughterhouses in which cameras can record how many vehicles are going into a site. In one case that I have examined, the owner was clearly not paying the landfill tax despite the fact that a ridiculous number of vehicles were going into the site. If we had people in Revenue and Customs checking these things, I think it would pay back very quickly.

The other thing is the checking of sites. The Environment Agency has responsibility for most of the checks, but I do not get the sense from HMRC that there is robust enforcement even when questions are asked. The right hon. Member for Loughborough (Nicky Morgan) raised the issue of retrospection. Can I suggest to the Minister, if he wants to get some back tax in, how he might do it? Once a landfill operator has finished with a site, it puts a cap on it, and that is the end of it. I have been told of an operator in the north-east that has done that, and I know from evidence I have seen that it did not pay the right tax. The question was raised with the Environment Agency and HMRC of how to make sure the right tax is paid. The easiest thing is to put a borehole through and check what is actually in there. If we did that on a few sites, I think we would find that what incurs the lower rates is not what is there. That is an important point.

In policy terms, as I have said to the Minister’s policy officer, we need to make the producers of the waste responsible for where it goes. At the rates that some waste collection organisations advertise, they could not possibly make a profit if they were paying landfill tax. The problem is that because local government and others are being squeezed, many local government organisations have got into bed with these operators because they charge the lowest rates, but they can do that only because they are either not paying landfill tax or paying it at the incorrect rate. The onus should be on large organisations to take responsibility for what happens to their waste; their responsibility should not end once the waste operator has taken it away. The rates being paid by quite a few public bodies in the north-east of England make one wonder how these organisations can be making any money, if they are paying landfill tax.

Operators are also making claims that are completely unachievable, such as 100% or 98% recycling of commercial waste, which is not possible. If that is the case and they are collecting at a certain price, what is happening to the 10% or 15% they cannot recycle? Its collection would be completely uneconomic if they were paying landfill tax. If HMRC had its eyes open and looked at some adverts, it would be thinking, “Wait a minute. There’s something wrong here.”