Finance (No. 3) Bill (First sitting)

Kirsty Blackman Excerpts

Tuesday 27th November 2018 Public Bill Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment (a), leave out—

“(b) at 11.30 am and 2.00 pm on Thursday 29 November”.

[The Chair]

With this it will be convenient to discuss the following:

Amendment (b), after “Tuesday 11 November;” insert—

“(1A) The Committee shall hear oral evidence in accordance with the following Table—

[Kirsty Blackman]

It is a pleasure to make the first substantial speech in this Finance Bill Committee—the first of many, I am sure.

Once again, the Scottish National party has tabled an amendment to the programme motion. It has concerned me for a long time that Finance Bill Committees do not take evidence and I think it would be better for the quality of debate if they did. This year, there are specific issues relating to the lack of consultation on the draft clauses and to the tight timescale for considering the Bill. I raised in Committee of the whole House my concerns about the fact that paper copies of the Bill were published on a Wednesday and we had to debate them on the Monday, which did not give us enough time given that the House was in recess. External organisations have also raised concerns about the lack of time for scrutiny, particularly for the unusually high number of clauses that were not consulted on in draft form. Glyn Fullelove of the Chartered Institute of Taxation, whom I quoted in Committee of the whole House, has been a particular critic of the process.

The SNP asks that, on Thursday, instead of having two normal sittings as planned, we take evidence from the Treasury, Her Majesty’s Revenue and Customs, the Office for Budget Responsibility, the Institute for Fiscal Studies and the Chartered Institute of Taxation. They all know more about the legislation than we do, so it would be incredibly useful to hear from them.

I must also point out that the Government have included several clauses to make changes to previous legislation that was deficient. If Government legislation is deficient, I contend that more consultation must be a good thing.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Given that, as I understand it, the Committee in the other House is taking evidence on elements of the Bill, surely the hon. Lady agrees that we should be afforded that opportunity in this House.

[Kirsty Blackman]

Absolutely. It is odd that the House of Lords is more democratic than this place in relation to the Bill.

The Finance Bill Committee should take evidence. I know that it is a long-standing convention that it does not, but having served on the Public Bill Committee on the Taxation (Cross-border Trade) Act 2018 and heard the evidence taken, I know how useful it was for Committee members and how many of them referred to it in subsequent debate. It was an incredibly useful exercise and the legislation that came forward was better as a result.

As I flagged up in last year’s Finance Bill debates, it is very good that external organisations have submitted written evidence, but I guarantee that the majority of hon. Members in this Committee have not read it all because of how little time we have had. Allowing us to question witnesses on the evidence that they provide on the Finance Bill Committee would be incredibly useful. The Government might not accept that this year, but can we consider taking evidence in future years? I am not the only one calling for this. The “Better Budgets” report produced by the Chartered Institute of Taxation and various other organisations called for the Finance Bill Committee to take evidence two and a half years ago, so external organisations have requested it, not just the SNP.

[Peter Dowd (Bootle) (Lab)]

It is a pleasure to serve under your chairmanship, Ms Dorries. I hear what the hon. Lady says. Some of us have not been in the House for a great deal of time. I sat on the Housing and Planning Bill Committee, which lasted for 20 sittings, with a marathon sitting just before Christmas three years ago. We heard a great deal of evidence that significantly informed the debates. Some members of this Committee might have been on that one. Interestingly, some of the evidence we took proved to be absolutely spot on, because the Government subsequently ended up changing some of their housing policies. The Government made the same argument at the time: “No, we have thought this through. We have consulted”, but the ability to hear from experts who live and breathe these issues was beneficial.

It was the same on the Criminal Finances Bill, which covered a pretty niche area. The job of Parliament is to scrutinise legislation, so we need the tools to do that. Whichever party is in control, it has the full back-up of the civil service, who are themselves experts and, to their credit, know their work, but it is important that the Opposition are able to get independent assessment and adjudication of what the Government tell us. That does not mean I do not believe a word that Ministers say—I believe everything they say. It is just that we do not necessarily get the full facts. I have found it very useful in the past to have evidence sessions, and the Government should give serious consideration to that.

I think this is the fourth Finance Bill I have sat on in the past two years, although my recollection is not what it used to be. We have also had the customs Bill, which is also a finance Bill, so we have had effectively five finance Bills in a short period of time and in a time of incredible turbulence and change. There might not be a convention or a tradition to take evidence in Finance Bills, but there comes a time when we think, “This is as good a time as any to take evidence because the circumstances have changed substantially.”

We have also had what amounts to movement on the convention in relation to the amendment of the law. As everybody knows, it has been used only about half a dozen times since 1929 when Winston Churchill introduced it. It has been used six or seven times, including three times by the Government in less than that period in years. That is a substantive and significant change. The Minister kindly responded to my letter about that and indicated that it was not necessarily a significant change, but it is. If we as a Committee—as a House—have done something only six or seven times in the best part of 90 years, changing that convention is significant. For that reason as well, we need to take a step back and decide that perhaps we need evidence sessions to tease out some of those important things.

It would also give assurance to the House, to Back-Bench Members and to the public in general that we take those matters seriously and that it is not business as usual—that just because we have done something for years or decades, we do not carry on doing it regardless. It would send a message that, in these turbulent times, the House takes the country’s finances seriously.

Therefore, we should seriously consider taking evidence. After all, we are all open to public scrutiny in one fashion or another—in fact, there is no doubt that we welcome it, and I do not suggest that the Government do not welcome it too. If we do not object to that scrutiny, why do we not institutionalise it, do what other Committees have done in the past and take evidence? Let experts in their field challenge us, and let us challenge them.

[Kirsty Blackman]

One of the Government’s arguments against taking evidence is the fact that the Bill is split between the Committee of the whole House and the Bill Committee, but does the hon. Gentleman agree that we in the Bill Committee tend to consider the more technical amendments on which we most need evidence to make good legislation?

[Peter Dowd]

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

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

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[Sir Robert Syms (Poole) (Con)]

I have just a few points about where we are going. There are a number of events in Parliament that get quite a lot of public interest; the Queen’s Speech is normally one and the Budget is another. People make representations to the Treasury in advance of the Budget, but afterwards the Financial Times and almost every insurance company, bank and accountancy firm produce reams of information on what changes have occurred. The one sure thing about the Budget is that a number of trees will be cut down, to supply information to the great British public on what changes have already occurred. Actually, I do not think that this is one of those Committees that needs to take lots of information, because most of us will have lots of information already.

One could substitute vested interests for the point about experts, because there are an awful lot of vested interests in this country. As a large Committee of the House of Commons, we sometimes have to navigate our way through that, so we could sit for months listening to vested interests on a whole range of subjects and not actually make any decisions. The purpose of this Committee is to look at what the Government have done, maybe make some decisions and then report back to the House.

[Kirsty Blackman]

On that point, is the hon. Gentleman seriously suggesting that both the Treasury and HMRC have vested interests other than trying to make good law?

[Sir Robert Syms]

Out in the big wide world, there are an awful lot of people who would come to this Committee, given the chance. The biggest difficulty we would have would be deciding who to invite, and we could be sitting in this Committee for months. I think it is quite clear that most people understand the key points of the Budget, because lots of information has been produced. When I was in opposition and the Labour party was in government, I probably made a similar speech to the one made by the Opposition spokesman. The Minister will probably make the same speech that Labour Ministers made when we raised the same point. The only point of having additional information is that it helps the Opposition in tabling amendments. That is the only reason normally stated.

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[Sir Robert Syms]

We could have a general rule that every single Committee of the House should take evidence on every single mater, but the problem is that Committee sittings would then last considerably longer. They would need to be staffed up and we would have difficulty getting Members to serve on the Committees and listen to all that evidence. Ultimately, governing is about taking decisions. There has to be a balance in understanding what points of view people take. We can sit here endlessly listening to advice, but we have to make choices.

[Kirsty Blackman]

We cannot sit hear endlessly listening to advice, because the Committee has to end by 11 December. We are talking about one day of taking information from people so that we can be better informed in the debates that we will have up until 11 December, at which point this Committee will end, because that is what the House has decided.

[Sir Robert Syms]

Members of the Committee have a mandate to scrutinise the Government. If we take one day out of that scrutiny, we are reducing our ability to question the Minister on some very important matters. Personally, I would like to take all the time to question the Minister on why decisions have been taken, and I am sure I will get very good answers.

[The Financial Secretary to the Treasury (Mel Stride)]

It is a pleasure to serve under your chairmanship, Ms Dorries, and a pleasure to serve on my third Finance Bill Committee—I think that it is the fourth such Committee for the hon. Member for Bootle, but it is reassuring to see broadly the same team arrayed. We were a fairly jovial and decent lot in the last Committee, so I am pleased to be serving alongside them again. The hon. Member for Bootle said that he always believes everything that the Minister says, which is a fine start to our deliberations over the coming weeks. My hon. Friend the Member for Poole said that I was probably dusting off the previous Labour Government’s speech from when they were faced with the same questions. Indeed I have, so I hope that will be acceptable to Opposition Members.

Amendments (a), (b) and (c), tabled by the hon. Member for Aberdeen North, seek to revise the programme motion by introducing a day of oral evidence and extending the time spent in Committee. It is of course important that the provisions of the Bill receive sufficient parliamentary scrutiny. The Government’s tax policy making framework ensures that that occurs, and I do not think that evidence to a Public Bill Committee would effectively further that aim.

The amendments would introduce a day of oral evidence from, among others, the Institute for Fiscal Studies, the Chartered Institute of Taxation and the Office for Budget Responsibility. Let me be clear that I agree that effective parliamentary scrutiny of this and any other Finance Bill is crucial, and I am always open to considering how that can be improved. However, for the following reasons, I am not persuaded by the merits of delaying the Committee in order to allow oral evidence to be taken. We accept that any additional evidence sessions would certainly increase the amount of scrutiny of the Bill, but that is not the same as saying that, in the absence of such sessions, the scrutiny of the Bill would be insufficient—as my hon. Friend the Member for Poole has set out, there has been very considerable scrutiny already—or indeed that additional days of evidence would provide a proportionate response to the need for scrutiny.

First, in line with the new approach to tax policy making set out in the Government’s 2010 framework, the Government already undertake extensive consultation with stakeholders before legislating in the Finance Bill.

[Kirsty Blackman]

On that point, does the Minister not accept that this year that “extensive consultation” has not been as extensive as it has been in previous years, and nor as extensive as it should be?

[Mel Stride]

I do not accept that. As I will argue, there is a process that we go through, which starts with the Budget announcement. We then go into formal consultation, which is applied to a number of measures within the Bill. We also of course publish draft clauses—I think that was on 6 July this year. I believe that around 226 pages of draft legislation were published at that time out of a total Bill length of 315 pages. It is considerable. We have received written evidence, the Bill will go through this Committee, it was considered by Committee of the whole House, we will then have Report stage, and we will examine amendments all the way through. The level of scrutiny received by a Finance Bill is well in excess of most Bills that come before the House.

My second point, which was raised by the hon. Member for Aberdeen North, relates to the fact that the Bill was considered in Committee of the whole House. Were the amendments to prevail, any evidence session in this Committee would not capture the important issues debated in Committee of the whole House. The Committee should be aware that Committee of the whole House is, I would argue, where the more important measures are considered, and they are put to the whole House rather than simply the members of this Committee.

[Mel Stride]

I am not going to be drawn into what may or may not happen in future—the usual channels and the Government of the day take those decisions—other than to say that this is not a unique occurrence. As the hon. Gentleman recognises, this has happened in the past. Indeed, the very argument that just because it has not happened in the past does not mean it should not happen now, which is being applied to the seeking of an additional day, could also apply to the amendment of the law resolution. It has happened in the past and this is not the first time with a Finance Bill. In fact, the two I have taken through the House to date have been subject to those provisions.

The IFS, the OBR and others produce analysis of Budget measures before or after the event. They also typically give oral evidence to the Treasury Committee on the Budget as a whole before the Committees on the Finance Bill. Oral evidence at a Public Bill Committee will replicate that analysis while limiting its scope to those parts of the Bill not selected for the Committee of the whole House.

Finally, the programming of business is a matter for business managers and the usual channels. Those channels establish the programme motion that was agreed by the Programming Sub-Committee, which is made up of Government and Opposition Members. They were not persuaded that oral evidence sessions would be beneficial and, I am afraid, neither am I. As such, I urge the Committee to reject the amendments.

[Kirsty Blackman]

The Minister’s argument does not make sense in relation to the things that are most important being discussed in the Committee of the whole House. I would contend that clause 1 is probably the most important in the Bill given that it allows Government to charge income tax for future years. I suggest that the ones discussed in the Committee of the whole House are the most political, as they are agreed between the usual channels, and ones where the Opposition tend to think they might be able to get a win out of the Government, as was adeptly proven last week with the number of amendments accepted by the Government. I take the opportunity to say that I am pleased about that, because our amendments are not often accepted—I am quite chuffed about that one.

The Public Bill Committee debates are on the more technical aspects. This is less political and less likely to be chewed over by the Financial Times on its front page because it is immensely technical. The tax code has changed significantly and increased massively in the past few years. There is a huge volume of tax legislation and lots of it is incredibly technical. The stuff we are discussing in the Public Bill Committee is immensely technical and I disagree with the Minister on how external organisations have raised concerns about how few of the draft clauses were consulted on.

[Mel Stride]

The hon. Lady is absolutely right that this Committee will debate a number of technical clauses. Surely if they are technical, does that not lend itself to an examination based on written evidence based on, for example, approaching me with written questions or discussions or indeed a meeting, or perhaps a meeting that I can facilitate with officials present to get into the detail, rather than a broad brush quick day with various advisers and organisations that we quiz?

[Kirsty Blackman]

The Minister makes a slightly circular argument. He suggests that questioning him would help us to improve the legislation and that questioning external experts who have to apply tax changes would be less useful.

[Peter Dowd]

Does the hon. Lady agree that there is an issue? The Labour party tabled a number of amendments, 10 or 11 of which were ruled out of scope. I do not criticise that at all. There is no criticism—

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[Kirsty Blackman]

I hope the Minister can answer my question in the positive. In the clauses, the devolved and reserved aspects are split. They are considered separately, which makes a huge amount of sense. I asked the Minister earlier whether he would consider doing that in future years for all clauses, particularly those similar to clause 5. I am not expecting a positive, definite answer that he will do that in future years, but will he commit to considering splitting the devolved and reserved aspects on income tax in future years, so that the House can better scrutinise legislation?

[Mel Stride]

I thank the hon. Lady for her question, which we touched on in the Committee of the whole House. She will be aware that clause 3 is subject to the English votes for English laws process because non-savings earnings are devolved to Scotland, so that clause only applies to Northern Ireland, Wales and England, while clause 4 on the savings and dividend rates applies UK-wide. I understand her point and we will be happy to look at that in the future. As things stand, we support where we are at the moment in the division of those particular clauses.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Corporation tax charge for financial year 2020

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[Kirsty Blackman]

I will speak relatively briefly on clause 2 and the amendment. To begin with, it is clear that the SNP supports clause 2 and we are not going to argue against the Government having the ability to charge corporation tax next year. It is quite important they do that for a number of reasons. One is that, of all the taxes levied upon businesses, corporation tax is one of those better liked by them. It depends not just on fixed assets, like business rates, but on the profit businesses are making, so they feel less unhappy about paying as it is more of a fair tax than some of the others. It is only a fair tax, however, if it is charged and if the companies are paying the corporation tax they are due to pay.

As for the asks being put forward from the Opposition Front Bench on this, the Government should not be scared of publishing more extensive data than they do currently on the tax gap, particularly around corporation tax in this instance. If the Government were to do that, they would be incredibly transparent and, if they are as good at collecting corporation tax as they suggest, that would dissuade other people from trying to dodge the tax in the first place. This would be both transparent and good for scrutiny, while also dissuading those who are looking to see where they can dodge the system. If people knew that corporation tax was difficult to dodge—if the Government put forward that information—they would be less likely to try and dodge it.

On the issue of multinational corporations and what a small minority—by far a small minority, not all of them—do in trying to not pay the tax they owe in certain countries, the Government have made great play of trying to be global Britain and saying that after Brexit this is going to be, apparently, an outward-looking country. Where better to start being global Britain than by making multinational agreements on improving the tax system? That would be good for everybody.

Every country benefits if more of the tax owed by corporations is taken. Coming together with other countries across the world and making that something that the UK Government set out to do in this new global Britain landscape would be really good. This is about not just the Government trying to make trade deals and seeing what we can do to benefit us, but trying to make these multinational agreements where everybody would benefit. Companies looking to avoid tax would know it would be incredibly difficult to do that because countries across the world would come together. If the Government want to lead the world in anything, I suggest that reducing tax dodging is an area where they should try and think about doing so.

The comments from Opposition Front Benchers about HMRC staff were incredibly important. The SNP has consistently made the case against HMRC offices being closed on the basis that expertise is being reduced. I raised this issue during consideration of the Taxation (Cross-border Trade) Act 2018. We can see where expertise is being reduced in areas such as Border Force, which previously had immigration-related staff and HMRC-related staff, who dealt with tax issues. Due to the Government’s political priorities, the two were put together. They particularly looked at immigration-related staff and improving Border Force’s capacity in that regard, rather than looking at improving capacity with regard to HMRC staff. In that instance, the Government chose not to increase the capacity to crack down on tax dodging and tax avoidance in relation to customs.

I am concerned that the changes to HMRC offices will result in more issues being overlooked. If the Government think they are doing a good job, they should not be scared to come forward with as much information as possible about this. That would achieve two things. First, it would allow them to be transparent and allow us to scrutinise them and ask the necessary questions, particularly about the tax gap and tax avoidance issues. Secondly, it would mean that people who were thinking of coming here to avoid tax would have that information and would see that the UK was not a good place for that.

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[Mel Stride]

I shall come to the issue of the amendments momentarily. I would just say in conclusion to this debate on tax that it is a dangerous position for the Opposition to adopt. They are telling large businesses and entrepreneurs and the 5 million small businesses up and down the country that a significant tax hike is in theirs and the economy’s best interest when it clearly is not. The clause introduces the ability further to relieve that element of taxation.

The hon. Members for Bootle and for Oxford East spoke at some length about avoidance. The Government have an exemplary record on clamping down on avoidance, evasion and non-compliance. There have been 100-plus measures since 2010, bringing in and protecting some £200 billion in revenue, a vital amount of money for our public services.

As the Committee will be aware, we have one of the lowest tax gaps in the world at 6% for 2015-16, the last year for which figures are available. That compares very favourably with the record of the last Labour Government—in 2005-06, the figure was well above 7%. The difference would fund every policeman and woman in England and Wales. We recognise that bringing in tax receipts is extremely important.

On HMRC staffing, 28,000 full-time equivalents in HMRC are engaged in tax inspection. We have invested an additional £2 billion in HMRC since 2010 for that purpose. The fruits are already being seen in near record lows in the tax gap.

The hon. Member for Bootle urged us to work closely with the EU on tax avoidance. The Committee of the whole House debated clauses 20, 23 and 19 on control of foreign companies, exit taxation rules and certain anti-hybrid rules, all of which emanate from the EU anti-tax avoidance directive. We have been in the vanguard of the base erosion and profit shifting project, as the Committee will know, to clamp down on avoidance.

The hon. Members for Bootle and for Aberdeen North mentioned digital businesses. We need to understand the important point that, when we look at profits generated by companies through digital platforms and the interaction of UK consumers with them, we are not referring specifically to avoidance—the hon Member for Bootle may have suggested that. We are looking at the current international tax regime and whether it is fit for purpose in taxing that form of profit generation. The current regime basically assigns taxation rights to the jurisdiction when there is economic activity in that jurisdiction, as defined by the buildings, where the intellectual property rests, whether people are employed, where the risks are taken, where the management is domiciled and so on. We want to move to a situation where we are able to tax those businesses because of the profit generation—the value generation—that they are creating, as I have described.

[Kirsty Blackman]

It would be useful if, after this meeting, the Minister could write to us with details of countries with which he or his team have had discussions. Any other information about the nature of those discussions would be incredibly useful. so that we can be sure that the Government are taking this seriously on a multinational level.

[Mel Stride]

I would be very happy to do that. The hon. Member for Bootle specifically asked me what meetings I had had about the digital service tax measure. I have had personal interactions with a number of countries. I attended the OECD meeting in Paris some months ago where I furthered and put forward the UK’s position, which is broadly that we should work on a multilateral basis with the OECD and the EU so that we come to a collective agreement. The value of doing that is not limited to the fact that we would iron out any risks of double taxation that would result from going on a unilateral basis. However, we have also made very clear, as the Chancellor announced in the Budget, that we will unilaterally bring in just such a tax by 2020 in the absence of multilateral arrangements. I would be very happy to write to the hon. Lady with further detail on her specific question.

Amendments 8 and 9 seek to make the clause contingent on a report on how the corporation tax receipts of multinational companies and technology companies compare with their respective UK-based revenue. Like most countries, the UK taxes companies on their UK profits and not their UK revenues to reflect their ability to pay. Therefore, the proposed report would have limited relevance to policy. However, the Government have not been complacent about taking action within the rules of the international corporate tax system, as I have described.

Amendment 10 seeks to make the clause contingent on a review of HMRC’s effectiveness in applying the general anti-avoidance principles in relation to corporation tax collection. The Government apply a wide range of anti-avoidance measures, as I have set out, bringing in some £200 billion since 2010. The general anti-abuse rule, or GAAR, has been operational since 2013. Although the GAAR works principally as a deterrent, it has enabled HMRC to counteract the tax advantages that people try to gain by using abusive arrangements. An additional review of the GAAR’s effectiveness would not add significant value. The GAAR advisory panel provides an important safeguard by ensuring that HMRC’s decisions on GAAR cases are informed by its independent opinion.