Good Parliament Report

Kirsty Blackman Excerpts

Wednesday 2nd November 2016 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move,

That this House has considered the Good Parliament report.

“The Good Parliament” report was published in July and during my speech I will quote a couple of sections from it. The first is this:

“Parliamentary reform is too often the result of individual MPs expending significant time and political capital.”

For me, that is the key reason why this report is important.

The intention behind the report was to try to ensure that Parliament is a more representative place, so that it is more representative of society, has a better division between the genders, has a better representation across classes, so that it is not quite so middle class, male and of a certain age, and so that it has greater diversity.

Another line from the report is this:

“2018 is a timely reminder of the promise of equality in parliamentary participation and representation in the UK.”

The report comes in the run-up to 2018 and hopes to make changes in advance of both 2018 and the 2020 election. This is absolutely the perfect time for it to come out. I recognise the incredibly hard work that Professor Sarah Childs, who is in the Public Gallery today, put into it, and the good intentions that the House and Mr Speaker in particular had in commissioning it, which are hugely appreciated.

Before I talk about the report’s recommendations, I will talk a bit about who I am, why my circumstances matter and why the report is so relevant to me and people like me in Parliament. I am not from a wealthy background. Nobody in my family has a degree. I am absolutely not from that kind of traditional privileged background that people imagine politicians come from. I am not saying at all that I grew up on the breadline, but my family were certainly not affluent in any way.

I am also an MP from quite far away. My constituency is 500 miles away from here, so I am tackling geographical issues. I am not unique in that. My Scottish National party colleagues are similarly from far away places. We tackle geographical issues that London MPs, for example, cannot even imagine. It is really quite difficult to tackle them.

I am also a female MP. Women are still very much in the minority in the House of Commons and we still face— I do not want to say “discrimination”—barriers because of our gender.

I am also a relatively young MP. I was 29 when I was elected, which in House of Commons terms—we could include the House of Lords in that—is incredibly young. In House of Commons terms, 29 is still pretty young to be elected.

I am also a parent of young children. I have a three-year-old and a five-year-old. When I was elected, they were obviously even younger than that. It is unusual, particularly for female MPs, to be parents of pre-school children, because it is incredibly hard to do this job if you have them, particularly when tackling all the other issues that people like me face. I am so far from home. I also suddenly have to finance this role. Obviously we get paid, but coming into this House without having a salary beforehand and having to pay back all of the money spent during election campaigns is hard to begin with. It is not easy. I feel that there are a lot of barriers in my way. I am from the SNP. I am no big fan of Westminster. I am not about this place being wonderful, but even if Scotland gets its independence, or when Scotland gets its independence, future generations of parliamentarians should not have to face the barriers that I have had to face in becoming an MP and in being an MP.

[Caroline Lucas (Brighton, Pavilion) (Green)]

The hon. Lady is very kind to give way so early on. I commend her for what she is saying and I agree with everything she has said so far. Does she agree that one way to address one of those barriers is to consider the possibility of MPs job sharing? The report does not consider it, but a future one might. One way to keep one foot solidly in our constituency, perhaps to provide the kind of family care that she is talking about, and represent people here is job sharing.

[Kirsty Blackman]

I will come to that. First, I am going to talk about some of the recommendations in the report and the reasons why they are so good. I will also talk about a few things that are not in the recommendations but that I feel would have benefits—job sharing is one of those.

[Ms Harriet Harman (Camberwell and Peckham) (Lab)]

I, too, commend the hon. Lady for securing this debate and for what she has said about the report. On the point she so strongly made about her being a young person in Parliament, a mother of young children and a woman living miles away from her constituency, does she agree that essentially what is important is that people such as herself can be in Parliament to make it more representative and fundamentally do the job that it is supposed to do? We therefore need her and others to get over those barriers so that Parliament can be the sort of institution that it needs to be for this country.

[Kirsty Blackman]

I absolutely agree and will say why Parliament being representative is so important. Part of it is so that we can inspire people, so that young people who look at Parliament are not as disengaged as some currently are. A lot of young people look at Parliament and think, “There’s nobody there who’s like me”, or, “There are not enough people there who are like me. I can never achieve that.” If young people do not see people like themselves in Parliament, why would they bother to become engaged? Why would they think, “I can become an MP”, if we are not living that and showing that, and if we are not destroying the barriers I have mentioned, so that they can become Members of this Parliament or of others?

The other reason why it is really important that this place is representative is the role that we have as Westminster parliamentarians in a world-leading Parliament. We have not done very well recently at being a world- leading Parliament. I am quite embarrassed to go into Commonwealth Parliamentary Association meetings or Inter-Parliamentary Union meetings to talk to groups of parliamentarians from other countries and tell them about how wonderfully democratic Westminster is, because it is not. There are too many issues with this place, so that I find it really hard to say to people from other Parliaments, “You should follow our rules”, because our rules are not great.

If we were genuinely reforming this place and if we were genuinely a 21st century Parliament, it would be much easier for us to work with other Parliaments, help other Parliaments and trailblaze. If we were such a Parliament, that would be a better place for us to be.

I will go through some of the report’s recommendations and say why they are important. One of the first recommendations is about standards of behaviour. That recommendation is really important, not only because of the farce that is Prime Minister’s questions but because of some of the quieter things that people do not hear so much about. Some of my colleagues have had their outfits commented on by male MPs. That is not appropriate. People should not be making odd comments about outfits. That behaviour is not tackled enough in the House of Commons and there is not enough of an argument made when people face that kind of behaviour. Not enough people are standing up about it.

The next recommendation I will discuss is collecting statistics by gender and other characteristics. Basically, the intention behind that recommendation is that the Speaker should keep account of how many people are speaking, what percentage of women are speaking, what percentage of women are asking questions in debates and what percentage of people from working-class backgrounds are asking questions in debates. It is all well and good to get us elected to Parliament but if we are encountering barriers, or if our Whips Office does not let us talk often enough, for example, or if we are not managing to catch the Speaker’s eye, or if any of those types of things happen, they are issues. If we examine the statistics and try to work out what barriers are in place, we can work out how to overcome those barriers. Such statistics would be really useful information for us to have in the future as a House, so that we can consider tackling those issues.

The biggest section in the report is on procedural and timing changes, which would make the biggest difference. There are a huge number of recommendations. One of them is that the Government should announce recess dates at least one Session in advance, which is about making business in the House of Commons a bit more predictable. We had the ridiculous situation this year when the Whitsun recess in May was not announced until February or March. We did not know when the summer recess would be. People in the House of Lords could not tell their staff when their summer holiday would be.

In some ways, it is all well and good for MPs—we signed up to this—but for the staff, it is not fair and there is no good reason behind it. The only reason it happens is that the Government do not want to cede power. I am not blaming this Government any more than previous Governments. All Governments have been in control of the recess dates. It would be easy for them to announce the recess dates a bit further in advance than they currently do. Even if they said we will definitely be off for the whole of August and then tinkered with the other dates a bit later, that would be helpful. A move towards explaining the recess dates further in advance would be better for everyone.

I have already said my constituency is 500 miles away. I have to fly to get here. I cannot get the train. Some of my colleagues from Glasgow and Edinburgh occasionally get the train, but I am three hours past them. My constituency is really far away. The lack of business predictability means that my flights are more expensive. I am costing the taxpayer more money because I do not know when the Government will have votes far enough in advance to book anything. If I had more predictability —if the Government parted with that information a little further in advance—that would be cheaper for the taxpayer, which surely would be a good thing.

The thing about business predictability is that the Government do not have to go the whole way. They do not have to say, for example, “We will definitely be having Third Reading of the housing Bill on 15 November.” What they could say is, “That day will definitely be Government business, and that day will definitely be Back-Bench business.” That much they could tell us a good month in advance, and it would help with the cost and constituency engagements. If there is a vote on a Wednesday night, I cannot get home, and my constituents lose out on my presence. If I had a better understanding, because the Government told me further in advance, it would be better for my constituents and for taxpayers’ money.

One of the other recommendations is to abolish the party conference recess and sitting Fridays. We have been over the issues with private Members’ Bills in the past few weeks. There has been uproar about the way they work. I understand that some Members are particularly positive about the way private Members’ Bills work because they relish the opportunity to talk them out, but for me, being so far away from London, sitting Fridays mean I have to commit too much of my week to being here. I cannot just pop home of an evening to a constituency engagement. I already have problems representing my constituents as well as I would like, and committing to sitting Fridays makes things even more difficult. It is not just me. I am speaking from my point of view, but many colleagues are affected, whether they are in Scotland, Wales or Northern Ireland. For anywhere without very easy access, sitting Fridays are hard.

There are a couple of other things in the report about procedure and timing changes. It suggests that when the restoration work goes ahead, a couple of things should be trialled. One is remote voting, so that Members on the Parliamentary Estate can vote remotely. I am from Aberdeen. The previous Member for Aberdeen South was Anne Begg, who uses a wheelchair, and she missed a vote because the lift did not come. How was it fair for her constituents that she could not physically be there because the lift was not working? She should not have been in that position, and the ridiculous voting system we have continues to make the situation worse. Remote voting on the Parliamentary Estate would be an interesting thing to trial. I am not sure exactly how it would work, but we should look at trialling it.

Another trial suggested in the report is a new format for PMQs. There is a lot of agreement in all parts of the House that PMQs is not the best way to showcase our Parliament. I do not know how we could do it better—less bad-tempered, less vicious and in a more collegiate manner—while still holding the Government to account, but I am pretty sure that the current system does not work very well.

The last thing on procedure and timing changes is dress codes. We have some bizarre rules about dress codes in “Erskine May”. Women are allowed to wear hats and men have to wear jackets and ties unless the Speaker tells them that they can take them off. In the midst of summer, the Speaker rarely tells Members that they are allowed to take their jackets off. That does not seem all that fair.

[Chris Bryant (Rhondda) (Lab)]

The Speaker has never allowed that.

[Kirsty Blackman]

I did not want to say “never” because I was not sure whether there was a precedent. The report suggests that the dress codes should be changed to business dress or national dress. That is much clearer for people than the current oddities in “Erskine May”, which allows me to wear a hat, but not my hon. Friends who are male. If we could improve that, things would be better.

The next section of the report is about gender quotas, and it puts responsibility for that on a number of people. It is not just about political parties needing to have gender quotas. It talks about a number of different areas where there are issues with the under-representation of women. We do not have enough women giving evidence as Select Committee witnesses. We do not have enough women standing for Parliament for political parties. We have so few women among the lobby journalists. The report makes a call for that to change.

[Mr Gregory Campbell (East Londonderry) (DUP)]

On gender quotas, does the hon. Lady agree that it might be a good idea to look at best practice across the United Kingdom? For example, in Northern Ireland, in a short timeframe and against a backdrop that is, for a variety of reasons, difficult in terms of female representation, our only MEP is female, our First Minister is female and almost 50% of all our Ministers and Statutory Committee Chairs are female. I am not saying that is unique, because Scotland and Wales have made similar advances, but does the hon. Lady agree that replicating best practice should be looked at before we move to quotas, which I and my party would not be in favour of?

[Kirsty Blackman]

There are ways that different parties have done it without quotas, but the party that seemed to be most successful in making the biggest change here in Westminster was the Labour party, which had women-only shortlists. I have an automatic dislike of women-only shortlists. I do not like the idea. I just have an issue with it, but it is one of the few things that has been proven to work really well. Despite that gut reaction, if I think about it with my head, I realise that there are positive benefits. Looking at best practice across the UK and the world is an interesting and sensible way to go. Political parties will approach the issue in their own way, and it would be sensible for them to be allowed the leeway to do that. As the hon. Gentleman suggested, in Scotland we have made great changes. We have a gender-balanced Cabinet in the Scottish Parliament, and that is a positive step forward.

[Hannah Bardell (Livingston) (SNP)]

I congratulate my hon. Friend on securing this fantastic debate. The points she has made are so relevant. On the matter of gender—she will correct me if I am wrong—is it not still the case that there are more men in Parliament today than there have ever been women since they were allowed to become MPs? As Rabbie Burns said:

“O wad some Power the giftie gie us

To see oursels as ithers see us!”

People look at this Parliament and do not see society reflected back. We need a multi-pronged attack. Making some of the changes that Sarah Childs suggests in her report will encourage women, but we have to look at the issue across the board.

[Kirsty Blackman]

Absolutely. It is pretty dire that the number of women ever elected is less than the number of current male MPs. It does not make sense. Although we have made positive changes, it is not enough. We need to go further. I do not think that is entirely within the gift of political parties; everybody needs to take responsibility. That is one of the really good things about the report: it gives the whole House the responsibility for a lot of its recommendations. Some specific responsibility is given to two political parties, and they will interpret that in their own ways, but the whole House needs to take ownership.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

I thank the hon. Lady for giving way. I also thank Professor Childs for her work, and the Speaker for his long-standing commitment to these issues and on moving the debate forward.

The hon. Lady makes a very important point about the flexibility that political parties should have to take their own measures. I was not elected on an all-women shortlist, but I am a massive advocate for them and the change that they have brought about. I also believe that were they to be removed, we would see a roll backwards. It is very important to find ways to put stakes in the ground so that we do not see a rolling back on the progress that we have achieved. I also support the hon. Lady’s point that we need to see a shift in representation of MPs and elected politicians and around the culture of politics, which includes representation in the staff of the House as well as in the media.

[Kirsty Blackman]

Absolutely. The report recommends looking at the gender balance of the House of Commons Commission, as well as in Select Committees and other Committees across the House, but this is not just about gender. We still do not have enough people from working-class backgrounds, from black, Asian and minority ethnic backgrounds, or from minority religions or non-Christian religions in the House of Commons. Political parties can achieve some change in all of those areas, but changing the culture of the House and the barriers to becoming an MP could support change.

The report makes suggestions for changes to the buildings. If the renovation work is going to go ahead, there is a real opportunity to make real changes. One suggestion is that we have more toilets, which seems eminently sensible. I do not think anybody would disagree with that and I am hoping that the Minister will stand up and say, “Yes, we’ll accept that one.” That would be great. There is a recommendation on artwork, which suggests that more women are depicted in the artwork hanging around the House of Commons, and that there is more work from women artists. That would be hugely positive.

[Hannah Bardell]

On the matter of artwork, I could not agree with my hon. Friend more. She will be aware of the work that I and other colleagues have done on this issue. Walking around the palace, it is full of mainly dead men of a different era, not even of today. The famous cupboard that Emily Wilding Davison hid in is hidden away from the public. There is no public representation of it. My hon. Friend makes a valid point about women being properly represented in all parts of Parliament.

[Kirsty Blackman]

Absolutely. There are only two statues of females that I can remember seeing around here—one of Queen Victoria and one of Margaret Thatcher. If that is it, we are not doing a very good job.

[Chris Bryant]

There are more.

[Kirsty Blackman]

Even if there are, they are not in very prominent positions. It would be nice to have more female artwork.

Members probably expect me to talk about the report’s recommendation to look into a crèche. The fact that I took my children to a Select Committee meeting was fairly publicly discussed. There is a real issue with the lack of flexible childcare here. I phoned the House of Commons nursery and asked them if they could take my children for the afternoon, and they said, “We can take your children for six weeks of afternoons.” I said, “Well, they live in Aberdeen. What use is that?” There is a real problem with childcare provision.

There is such a contrast with the Scottish Parliament. Someone who is giving evidence to a Committee of the Scottish Parliament or who has come to see their MSP can leave their children in the Scottish Parliament crèche while they have that difficult conversation for an hour with the MSP, perhaps about problems they are experiencing with housing—conversations that they might not want to have in front of their children. Members of the public can use the crèche for free, and MSPs and passholders pay for its use. That is a really good system and one that we should consider adopting if we are going forward with renovations in the building as it is. I get that the nursery was a massive step forward and everybody was hugely supportive, or was convinced to be supportive, of the nursery taking over a bar, and I understand that a number of MPs still seem quite upset that the nursery took over a bar, but that is only a step on the way forward; it is not the flexible childcare that those of us from further away and those of us who choose not to base our children in London require.

My last point about the recommendations is about the promotion of the role of an MP. I have been really clear that I am not a fan of Westminster, but I think it is incumbent on me and people like me, who are not from that traditional male group of politicians, to say to young people, “You can do this. You can get involved in this place. You can get involved in politics. You can get involved in making a difference in your country.” A number of my colleagues and I have tried to be really honest about what our job involves. It is not just about sitting in PMQs and people shouting at each other and then being on BBC News or wherever. It is not just about those things. It is about all of the casework that we do. It is about all of the everyday things such as about doing five minutes on a bike for the Poppy Appeal and getting comprehensively beaten—I will do better next year. It is about all of those things that we do that are not mentioned in the media, but that are fabulous experiences for someone coming into this who has never experienced anything like it before.

The number of things that we are privileged enough to do is absolutely unbelievable, as is the number of amazing things that we get to do and the amount of change that we get to achieve for people in their everyday lives. If we are better able to promote that and to explain to people how being an MP actually works, people would be more likely to come into this role with a better attitude and intentions.

[Seema Malhotra]

The hon. Lady makes a very important point about understanding the reality of our lives as Members of Parliament. I have six years’ experience since I set up the Fabian Women’s Network mentoring scheme, which does a lot of political education and mentoring for those who might seek to come forward in political life. Does the hon. Lady think that there might be an opportunity for Members of Parliament to be engaged slightly more formally in ways to promote and help people understand the role of parliamentarians?

[Kirsty Blackman]

Yes, absolutely. One of the report’s recommendations uses the phrase

“a diversity of people are, and can be, MPs”

and recommends having case studies on the House of Commons website about a range of different people and the backgrounds that we come from, so that young people in particular can understand what it is that we do. There is also a suggestion of a residential course, which would be a really good idea because it would give people hands-on experience.

I am going to the Patchwork Foundation awards tonight. The Patchwork Foundation tries to get under-represented groups more involved in politics. It does absolutely fabulous work—again, not in formal structures but more informally, through mentoring and similar things. It is quite difficult for me to get involved in some of those programmes from Aberdeen. I cannot take patchworkers out and about in my constituency, because they are not going to come 500 miles to do that, so there are some issues. It might be better if there were more formal structures.

There are some other points not mentioned in the report that are worth considering. I mentioned the financial barriers to becoming an MP. It is expensive to stand for election and it is difficult to make the change after being elected. As a newly elected MP, it was difficult for me to suddenly be able to finance the five extra dresses that I needed and to pay for things out of my own pocket before being set up properly with the Independent Parliamentary Standards Authority. It is hard to come up against those barriers and to begin that life.

I took a £50,000 pay rise when I became an MP; I had never earned more than £26,000 a year and I had debts to pay off when I was first elected. It was very difficult in that initial period. There is not enough recognition of the circumstances that people find themselves in. I am not saying that MPs’ salaries should be increased—I definitely do not think they should be—but the institutional barriers for people from less affluent backgrounds should be considered more carefully in the future.

I do not think geography is given enough consideration, even though there are quite a few of us from far away—perhaps we just have not shouted loudly enough about it. Five hundred miles is a very long way and I cannot just drop everything to come here for a vote. It is even worse for my colleagues from the highlands who have to get two aeroplanes or drive for four hours and then get an aeroplane down, when there are only two a day. There are something like five or six aeroplanes a day from Aberdeen, so it is not as bad for me as it is for some of my colleagues. Because of the way the business of the House works, there is a lack of understanding about and recognition of the geographical challenges for MPs from further away. The boundary review will compound that, because MPs from the furthest away constituencies will be representing a wider geographical area. In addition to doing a large amount of travelling, they will have to represent a constituency that takes six hours to drive across, or even longer in some cases, so the boundary changes will create some real issues.

Job sharing, which the hon. Member for Brighton, Pavilion (Caroline Lucas) mentioned, and maternity leave go hand in hand. The Green party has talked about job sharing for MPs, which is a really interesting concept. I do not think it would be possible for a single parent of young children to do this job. I cannot imagine a way in which they could do it, but a job share that enabled two MPs to be elected on half the salary and staff costs, with one office that they run together—the MPs would actually end up working for more than their allotted hours—would make the job more flexible and accessible for single parents and people from caring backgrounds. I do not see how somebody with caring responsibilities for, say, an elderly relative or a disabled family member could be an MP at the same time, but a job-sharing option would make that much more possible.

We do not have maternity leave. I was a local councillor when I had both my children. I had the first one, Harris, at the end of April, I was back in the office within four weeks and I took a promotion in the local authority in June. What was I supposed to do? There was not another option. My constituents would not have been represented if I had not been there. It is not fair for constituents to be disadvantaged because their MP happens to have a baby. If I had a baby right now—it is not going to happen today, obviously, and hopefully not any time soon—I would not have been able to fly for four weeks before having it, and I would not be able to fly for two weeks afterwards because I would have to have a caesarean section. Why would it be fair for my constituents not to have somebody to vote for them when it is not their fault that I had a baby? We need to think better and smarter about this. It could be easily overcome with a bit of sense. I do not think it is fair for constituents to have that issue. I think changes should be made to voting in particular when Members have children.

The attitudes, the misogyny and the abuse that some people from non-traditional backgrounds face are a real barrier. I have spoken to people who have said, “I could never be an MP because you get so much abuse.” I know that those things are an issue for people from all backgrounds—they are an issue for 45-year-old males from a privileged background—but I think they are more of an issue for those of us from less traditional backgrounds. Adopting the recommendations in “The Good Parliament” report would inspire the cultural change that would make the difference. It would make the House of Commons a more positive place to work, with fewer barriers. It would make this a more representative Parliament.

[Several hon. Members rose—]

--- Later in debate ---

[Philip Davies (Shipley) (Con)]

It is a pleasure to serve under your chairmanship, Mrs Moon, and to follow the hon. Member for Aberdeen North (Kirsty Blackman). We may not agree on much, but she has made a strong start to her time in Parliament and should be proud of that. She is a very good role model for other people—women, young people and whoever else—who want to enter Parliament, and she is doing an excellent job in representing her constituency, for which I have a great affinity. I think Dyce is in her constituency.

[Kirsty Blackman]

It is further north.

[Philip Davies]

Is it a bit further north? I used to spend a lot of time in Dyce when I worked for Asda. I am sorry it is not in the hon. Lady’s constituency, because it is a fine place.

When I first saw that this debate was taking place, my first question was, what is “The Good Parliament” report? After reading it, I rather wish I had not asked. It could be referred to as the “less accountable Parliament report” or the “dumbed-down Parliament report”, and it would certainly be better titled the “politically correct Parliament report”. There is not time to go into all the things that are wrong in the report, but I will pick out a few points in the limited time that I have.

The hon. Lady made the point that it is absolutely terrible that she cannot get up to her constituency on a Wednesday evening, and said that everything should be changed to allow her to do so. I checked, and in the 2015-16 Session of Parliament this House sat for 158 days out of 365. When people complain to me about Parliament, they say that none of us seems to be here when debates are taking place. I have never heard the complaint from the public that we are spending too much time here or that there are too many of us here during debates. I suggest to the hon. Lady that having 158 days to represent her constituency in Parliament is not too much to expect.

I am completely opposed to all-women shortlists and quotas. I could not care less if every single MP were a woman, if every position in Parliament were held by a woman or if everybody in the Cabinet were a woman. It is of no interest to me. As far as I am concerned, as long as they are there on merit, their gender is irrelevant. We should be gender-blind. I really think that the true sexists are the people who see everything in terms of gender. We should judge people not on the basis of their gender, but on the basis of their ability.

One thing I very much agree with the hon. Lady about is that we need more people from a working-class background in Parliament. One of the points I always made to the Conservative party when we were looking at things such as all-women shortlists—fortunately, we did not go down that route—was that replacing Rupert from Kensington and Chelsea with Jemima from Kensington and Chelsea does not do an awful lot for diversity in the House of Commons. Replacing Rupert from Kensington and Chelsea with Jim from Newcastle would do an awful lot more for diversity in the House of Commons than a tokenistic approach to diversity that sees things only in terms of simplistic diversity—gender or race.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mrs Moon. I am delighted to be able to speak in this debate. I commend my hon. Friend the Member for Aberdeen North (Kirsty Blackman) for calling it. I welcome the work of Professor Childs and everyone else who participated in “The Good Parliament” report. I wish to touch on a few recommendations around the way the House operates and the impact that that has on democracy more widely. I want to stress that the report is not about us as MPs, but about democracy and giving people access to Parliament. It is about Parliament showing leadership and about demonstrating that, by deeds not words, we are as representative as we possibly can be.

It will come as no surprise to my hon. Friends that, as chair of the all-party group on infant feeding and inequalities, I want first to mention the issue of breastfeeding. It is a vital public health issue that, despite the efforts of many committed people, does not get the prominence that it should. In the UK, we have the lowest breastfeeding rates in the world. This is not about the choices of individual mothers, but about society’s attitudes. I would talk at length on the matter if I were not short of time, but I recommend people read Dr Amy Brown’s book, “Breastfeeding Uncovered”, which highlights a lot of the issues.

There has been a lot of talk about breastfeeding in the response to “The Good Parliament” report, but it is a tiny aspect of the report. It is clear that even in the House there are various opinions on breastfeeding in Parliament. The hon. Member for East Antrim (Sammy Wilson) called it exhibitionism; certain journalists were surprised when I tweeted a picture of myself breastfeeding; and some people said that if women could not breastfeed while driving a tank, they should not be allowed to do it in Parliament. Those are ridiculous arguments. “The Good Parliament” report recognises that

“permitting entry to infants would have symbolic benefits—showcasing the Commons as a role-model parent-friendly institution.”

That is where we wish to be as a Parliament. I think we could all agree on that. In showing that leadership, it would also encourage businesses across the country to consider their own practices.

Yesterday, a friend who works at SNP headquarters in Edinburgh posted a photo of the breast pumps belonging to her and her colleague, both of whom have been supported by the SNP to express milk at work. As my hon. Friend the Member for Aberdeen North said, we both breastfed our babies in council meetings. Councillor Fay Sinclair is doing so in Fife. It is happening in Australia, Iceland and Scotland, and in the European Parliament. There is no reason why we in the mother of Parliaments should not embrace it, too.

I mentioned at the start that “The Good Parliament” report is not just about us, but about how Parliament does its business. The way we do our business excludes women from the life of this building, and that has a negative impact on our decision making. I attended an interesting event yesterday that was organised by Sense About Science. It was called “Evidence matters”, which of course it does, but which evidence and are we getting it from the right source? I am deeply concerned that the evidence we receive as a Parliament is not good enough because it excludes the views and experiences of women.

Dr Marc Geddes has produced interesting research on witnesses at Select Committees, from which it is clear that they are very much male, pale and stale. Out of the 3,228 witnesses who gave evidence to the 1,241 Select Committee sessions in Session 2013-14, only 792 were women. That is just shy of 25%. No Committee came close to calling an equal number of women and men to give evidence, and for some Committees—Defence, Energy and Climate Change, and Communities and Local Government—more than 80% of witnesses called were men. For the Treasury Committee, it was more than 90%.

I do not believe that there are only men with expertise in these areas, and we need to understand why this imbalance exists. Dr Geddes’ research also highlighted that 67% of witnesses are coming from London and the south of England, even when Government witnesses are excluded. “The Good Parliament” report suggests we consider gender thresholds, but I believe Select Committees must also look at when they meet so that people can get to them. We should look at building into the parliamentary timetable a more considered way for when Committees meet. Committees need to recognise it is difficult for people to get here, as my hon. Friend the Member for Aberdeen North mentioned. For Committees that meet in the morning, such as the Treasury Committee, it is really hard for people to get here to give evidence.

A 10 am meeting means an early flight or train or an overnight stay, rearranging the school run and making arrangements for childcare. Late-night meetings might end up the same way. We should consider building a system that takes into account the needs of people, rather than the needs of London-based Committees. I would encourage Select Committees to get out and travel outside London. The best meeting of the Communities and Local Government Committee was when we took public evidence on devolution in Manchester and actually heard from people in Manchester. It was useful to be able to hold to account other witnesses who came late in the day because we had heard evidence first hand.

I want to briefly mention the crèche issue that my hon. Friend the Member for Aberdeen North mentioned. Joeli Brearley from Pregnant Then Screwed came to listen to a debate in this room and had to sit at the back juggling a wee one and popping in and out because there was no crèche provision for her.

[Kirsty Blackman]

Will my hon. Friend give way?

[Alison Thewliss]

Of course.

--- Later in debate ---

[Kirsty Blackman]

I very much appreciate the Front Benchers giving me a little bit of time at the end. I thank everyone who has taken part in the debate. I will not name them all because of time constraints, but I thank them for coming along and, in the main, supporting the recommendations in “The Good Parliament” report, or at least the direction of travel in the report.

I want to mention briefly the Procedure Committee, because a number of its members said they were sad that they could not come today because a Committee meeting clashed with the debate. I am sure they would have been keen to see some of the changes to procedures that have been suggested. I am looking forward to the Commons reference group on representation and inclusion, which I understand is due to meet for the first time this month. That is a great thing, and I am really pleased that it is getting off the ground.

I am keen that all the recommendations in the report are considered. As individuals, we might dislike certain recommendations, but the House as a whole and those people who are tasked with taking them on need to consider all of them seriously, and look at evidence for and against adopting each of them.

More widely than that, all of the under-represented groups need to have more of a voice in this place, whether it is people who support gender equality, on which the report mainly focuses, or people who support disabled candidates such as Jamie Szymkowiak in the SNP. The SNP is the gayest parliamentary group, and changes such as that are being made in positive, more inclusive political parties. I have an internship scheme specifically aimed at people from poorer backgrounds who would struggle to come to parliamentary offices in the main. Any such changes are to be welcomed. We need to work together to make them.

On what the Minister talked about, I do not think we can say, “Look at the wonderful things we have done.” We should have been doing all of that before. We cannot in any way rest on our laurels until we have genuine 50:50 representation and remove those barriers to under-represented groups coming into this place. We cannot rest. We need to keep working until we make this place better.

Question put and agreed to.

Resolved,

That this House has considered the Good Parliament report.

House of Lords Reform and Size of the House of Commons

Kirsty Blackman Excerpts

Wednesday 19th October 2016 Commons Chamber

[Chris Elmore (Ogmore) (Lab/Co-op)]

rose—

[Kirsty Blackman (Aberdeen North) (SNP)]

Will the Minister give way?

[Michael Ellis]

I need to make some progress. There are a number of people who wish to speak and I have given way several times.

The reforms have already been delayed once by the Opposition parties and it is vital that they are not waylaid again by mixing them up with a discussion about reform of the House of Lords.

--- Later in debate ---

[Michael Ellis]

I recognise that—the Ministerial and Other Salaries Act 1975, I think—but that relates to the maximum, not the minimum. However, the appointment of Ministers is a matter for the Prime Minister.

There are many different views on what form the House of Lords should take and we have heard some of them this afternoon. Without consensus, as I have said, there is no practical possibility of taking such reform forward, and this was clear from the attempted passage of the House of Lords Reform Bill in 2012. It was withdrawn not for lack of commitment from the Government, but because there was no overall agreement about what that reform should look like. When there are so many pressing constitutional reforms, not least devolving more powers to Scotland and Wales and delivering all that is necessary for the UK’s exit from the European Union, it is on those subjects that we should focus our attention in this Parliament. It would not be right to distract from or derail important reforms elsewhere by making House of Lords reform a priority. That is why we do not support the motion.

[Kirsty Blackman]

Will the Minister—

[Mr Speaker]

Order. I am not entirely clear whether the Deputy Leader of the House concluded his oration or whether he was giving way.

[Mr Speaker]

Very well, but it is very unusual. I do not think the word exists to “unconclude” one’s speech, but if it possible to do so, the hon. Gentleman has done it. Let us hear the hon. Lady’s intervention.

[Kirsty Blackman]

Thank you very much, Mr Speaker.

The Conservative party manifesto said that the Conservatives would

“address issues such as the size of the House of Lords”.

Why does the Minister think that the electorate thought that was less important than some of the other things in the manifesto? How can he get into the heads of the electorate? This was front and centre of the manifesto.

[Michael Ellis]

The Government have decided that it is not a priority for this Parliament to address that issue. The fact of the matter is that attempts were made during the last Parliament, as I have said, and there is no consensus. There are high priorities, including exiting the EU and further devolution for Scotland and Wales. Those are the priorities. That is why we do not support the motion, as I said. That, Mr Speaker, is the conclusion.

--- Later in debate ---

[John Penrose (Weston-super-Mare) (Con)]

It is always a pleasure to follow the hon. Member for Edinburgh East (Tommy Sheppard), and I should probably start with a declaration of interest, as my wife is a recently appointed life baroness in the Lords. I should add, for the benefit of Members opposite, that I believe she is now reconciled to the fact that before she was appointed I had voted repeatedly to abolish people like her, so it would be rather self-serving if I changed my mind now, as I hope everyone would agree. I am happy to inform the House that we are still talking even so. Although I instinctively support Lords reform, I oppose this motion. Why? It is because it uses Lords reform not as a dead cat, but as an excuse to delay boundary reform, a much-needed and overdue improvement to the plumbing of our democracy.

As we have heard, our current constituency boundaries are based on voter data that are already 15 years old or more. If we do not reform the boundaries now, they will be 20 years out of date by the next general election. As the old boundaries produced constituencies that varied tremendously in size, votes in one part of the country carried far more, or far less, weight than votes in another. It is a fundamental principle of our democracy that everybody’s vote must count the same as that of their neighbour. It does not matter whether you are rich or poor, what colour your skin may be or what god you worship, my vote carries no more weight than yours, Mr Deputy Speaker, and yours is worth no more than Nicola Sturgeon’s. Without that, our elections will not be fair.

[Kirsty Blackman]

Will the hon. Gentleman give way?

[John Penrose]

I am happy to give way once—

[Kirsty Blackman]

Is the hon. Gentleman in fact making an impassioned plea for proportional representation?

[John Penrose]

Not at all. I am making an impassioned plea for equal-sized constituencies and for votes to weigh the same. I can think of nothing more dangerous for our democracy, and nothing more corrosive of trust in politicians and the political system, than a sense that some favoured voters get a better deal than others in other parts of the country.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

This has been a really interesting and wide-ranging debate. We have heard a number of people propose changes to the House of Lords and ways in which we can go forward. What we have not heard is anybody saying that they think the House of Lords is wonderful and that we should keep it as it is. I think there is a general feeling across the House and across the country that, in the absence of abolishing the House of Lords, we need to reform the House of Lords.

I particularly enjoyed the contributions of my hon. Friends the Members for Perth and North Perthshire (Pete Wishart) and for Edinburgh East (Tommy Sheppard). The hon. Member for Weston-super-Mare (John Penrose) was typically thoughtful in his contribution on this matter—I have previously enjoyed his contributions—and the speech from the right hon. Member for Surrey Heath (Michael Gove) was, erm, interesting.

[Michael Gove]

I am very grateful that a fellow Gordonian has given way. Can the hon. Lady clear up for me an area of doubt and uncertainty? The hon. Member for West Dunbartonshire (Martin Docherty-Hughes) said that the SNP spoke with one voice on the issue of House of Lords reform. He said that the hon. Member for Perth and North Perthshire (Pete Wishart) was an abolitionist and that that was SNP policy. However, the hon. Member for Edinburgh East (Tommy Sheppard) said he did not want to abolish the House of Lords, but merely wanted to reform it. What is SNP policy? If it is abolition, is the hon. Member for Edinburgh East out of line?

[Kirsty Blackman]

The manifesto we stood on said that the SNP would abolish the House of Lords and replace it with a fully elected second chamber. The motion we are putting forward today gives the Government a slightly more gentle way forward. It does not suggest full abolition at this stage. It suggests making positive changes.

I want to talk about a few things that were mentioned during the debate today.

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

One of the rotten things about the House of Lords and the system of patronage is the fact that Ministers who are unaccountable to the electorate can be appointed by the Prime Minister. One recent example is Baroness Ros Altmann, who campaigned on behalf of the WASPI women. She then became a pensions Minister and suddenly had selective amnesia. Is that not just typical of the system that exists?

[Kirsty Blackman]

I thank my hon. Friend for that intervention. I will come on to the make-up and appointments system of the Lords.

My hon. Friend the Member for Perth and North Perthshire pretty much had those of us on the SNP Benches weeping in hysterics at some of the things he pointed out. He was just highlighting the ridiculous nature of the House of Lords. It is absolutely ridiculous that in 2016 deference and fawning are required. We have people dressed in ermine robes and we are expected to genuflect to them. It is absolutely ridiculous that we live in a society where that is still okay.

The hon. Member for Weston-super-Mare said that everybody is equal in this country when we vote. Everybody is not equal in this place. Those people in the other Chamber are somehow above the rest of us and that is not right. They have not been democratically elected to those positions and they should not have preferential treatment as a result of the appointments system.

The appointments system is—well, it is frankly ridiculous. We have a Prime Minister who was not elected to be Prime Minister. She was elected to Parliament—absolutely —but she was not elected to be Prime Minister of this country. Now, because of the appointments system to the House of Lords, she has the power to choose the people who will legislate. She has the power to choose the people who will sit in that other Chamber and make laws for this country. It is ridiculous that somebody can have this power without being elected to that position.

As has been stated by a number of my colleagues and Members across the House, appointments to the House of Lords are not always made on the basis of the people who best know what they are talking about. One Member mentioned that people may be experts in their field when they are elected, but their expertise very quickly disappears. I suggest that somebody who was a teacher 20 years ago is no longer the best person to be an expert on the education system, unless they have been particularly good at keeping up with changes. We have a whole House full of former experts—of ex-experts—and it is very difficult for us because we cannot get rid of them.

[Alison Thewliss (Glasgow Central) (SNP)]

My hon. Friend is making some excellent points. Does she agree that there are plenty of other ways in which these experts can give their opinion, without being appointed for life?

[Kirsty Blackman]

Absolutely. I have been a member of a Select Committee in this House, so I am well aware that we are able to bring people who are genuine and current experts before such Committees to give evidence. We also have a great system whereby people can submit evidence in respect of legislation.

Let me make a couple more points on the make-up of the House of Lords. As of last year, there were only two Members of the House of Lords who were under 40, which is totally unreflective of society. On the cost, the Minister mentioned that there is an average attendance of about 500 each day. At £300 a day, that is £150,000 a day just on the allowances. Let us be clear that those allowances are totally tax free. They are not salary, but tax-free allowances—and the Treasury does not even get a cut of that £150,000. Most of those Members should be paying at least 40% tax. When it comes to making changes to the cost of Government and Parliament, I suggest that that might be a good place to start.

I want to be clear about the link in the motion between reform of the House of Lords and the Boundary Commission review. If the Government are serious about reducing the cost of Parliament and about making the UK and the nations that make it up more democratic, their attempt to reduce the number of MPs—comprising the truly elected Chamber—is completely the wrong place to start. To begin with, we have the first-past-the-post system, which, as my hon. Friend the Member for Edinburgh East mentioned, is not democratic. There are so many wasted votes. A number of them do not count because people are voting for someone who can never get elected in the seat. A system of proportional representation would be a much better way of extending democracy than trying to equalise the numbers in each constituency.

If the aim is to make the political system in this and other countries more democratic, it would be possible to make the Government a bit more transparent. The Cabinet Office is tasked with making government more transparent, but it has failed spectacularly—and I do not mean only this Government; I am not blaming this one alone, because previous Governments have spectacularly failed, too. Governments like to be in power; they like to keep power for themselves, so they like to make sure that people are not very clear about what is going on.

There are a couple more things that could be done to reform the House of Lords. We could get rid of the hereditary peers and the bishops. We could also—I think this would be a great thing to do—stop the House of Lords being able to introduce primary legislation. Why is the so-called “revising Chamber” able to introduce primary legislation? That Chamber is appointed, not elected. Members of the House of Lords should not be lawmakers in the countries of the UK. They are supposed to be part of a revising Chamber, so they should spend their time revising, not bringing legislation forward.

I appreciate the opportunity to speak in the debate, and the wide-ranging contributions that we have heard from across the House. I am particularly grateful for the support we have received from some Conservative Members, which is unusual and welcome. I thank all Members who have contributed, and I hope the House will support the motion.

Small Charitable Donations and Childcare Payments Bill

Kirsty Blackman Excerpts

Committee Debate: House of Commons
Tuesday 18th October 2016 Public Bill Committees

[Rebecca Long Bailey]

Clause 2 amends the types of donations eligible under the small donations scheme to include those made by contactless payment. Only cash payments under £20 are currently considered eligible donations. The Opposition support the clause but we question why contactless payments have been singled out in that way.

Amendment 1 would widen the scheme to include donations by text, by cheque or via the internet. A survey carried out by the Charity Finance Group for the National Council for Voluntary Organisations, the Institute of Fundraising and the Small Charities Coalition found that only 36% of the 340 charities surveyed wanted contactless payments to be included in the scheme. It also found that cheques were the method favoured for inclusion: more than 75% of respondents wanted them to be included. Half wanted text donations and two thirds wanted one-off online donations to be eligible. The amendment, which would include all those methods, is supported by the organisations mentioned and by the Charity Tax Group.

The Government’s likely response is that the methods do not need to be included in the scheme because a gift aid declaration can be provided, but the same logic applies to a bucket collection of cash donations: the fundraiser holding the bucket would simply need to hand over a pen and a piece of paper and—voilà—they have a gift aid declaration. However, the point is that it is difficult, albeit not impossible, to get the declaration. Most people send a donation via text in a spur-of-the-moment decision. A follow-up text is then required to ascertain whether the donation is eligible for gift aid, and most people are not as responsive as we would like, so it makes sense to include donations via text in the scheme. As for cheques, I understand that someone who is able to sign a cheque is probably able to sign a gift aid declaration at the same time, but 75% of charities surveyed said that including cheques would increase the efficacy of the scheme for them, so I would be interested to hear the Minister’s reasons for not doing so.

Amendments 2 and 3 would include SMS or text messages in the scheme. For the same reasons that I have already outlined, we see the logic in tabling them and we support them. I hope the Minister will accept our amendment or explain more fully her reasons for not accepting it, but I will not press it to a vote.

[Kirsty Blackman (Aberdeen North) (SNP)]

We support the amendments. As has been stated, a number of charitable organisations have got together and have come back with a really comprehensive survey that says that charities are hugely in favour of such an approach.

The gift aid small donations scheme is a really good Government initiative that has done part of the job it was set up for, but we can see from the number of people making a claim that it has probably not done as well as was intended—it has not quite reached the number of claims that were expected. That is partly because the way the world works has changed: people are giving through other methods. I rarely put money in a bucket, but I quite regularly make text donations or online donations, and I am as guilty as anyone of not following up with that second text with my name and address for the gift aid. In a world that is moving forward, we need to consider that.

I understand the Government’s reluctance to take on cheques, but it has been really clear from the groups that have come forward, particularly church groups, that they receive an awful lot of their funding from small cheques. It would be much better for them if they were able to claim for cheques under the gift aid small donations scheme. Although that may seem almost a backward step, we need to ensure that the gift aid small donations scheme works as best it can, particularly for small charities that do not have the staff—the people power—to fill in all the forms, which is still a requirement. Widening the gift aid small donations scheme would make it better, particularly for small charities.

[Nigel Mills (Amber Valley) (Con)]

It is a pleasure to speak in this debate. I spoke on a similar clause four years ago when this Bill first went through Committee; I think that the hon. Member for Clwyd South was here as well. Looking back, many of the Members who served back then appear to have moved on to far greater things than I have, so they will not be repeating this debate.

It is worth looking back at the debate four years ago, when the topic was whether restricting the measures to cash was appropriate and whether we should include different technologies or different means of giving impulse donations for which getting a gift aid declaration is hard, in order to achieve the objectives of the scheme. The current scheme is worthy. It is meant to give a level of support equivalent to gift aid to small donations, in order to give hard-pressed charities extra money. It is regrettable that four years into the scheme, the amounts claimed are much lower than we thought. Ideas to help charities claim and achieve the £100 million that Government thought this would originally cost are to be welcomed.

Four years ago, I was perhaps a bit prescient on this point; I even referred to contactless payments in that debate. I thought that the world might move on, that cash would become less common and that we would all find different ways of donating, whether by making contactless payments on terminals or by clicking buttons in an app. The Bill risked becoming out of date quickly if we were not careful. I suggested at that point that perhaps the Government should take the power in the Bill to amend by statutory instrument the definition of “cash or cash equivalent” in that situation, so we could keep up to speed with technology and not have to keep coming back every few years to primary legislation to fix it.

Here we are four years on, trying to fix contactless payments. That is quite right, and I will happily support it. We have even included Android Pay and Apple Pay, again quite sensibly, but we cannot predict where we will be in four years’ time. How will impulse donations be made? Will it still be by text message, by app, by cash in a bucket or contactless payments, or will we have found some new technology, perhaps fingerprint swipe? It is hard to imagine where we will be in four years’ time. If we are to keep the Bill as effective as we want it to be, why not have that power available so that the Government can say quickly, “Let’s make a tweak here, and allow this to fall within the scheme”?

--- Later in debate ---

[Jane Ellison]

We are keen to extend the scheme to cover contactless as well as cash payments, but as those who were here in 2012 will know, the scheme augments what we expect charities to raise through gift aid donations and covers means such as bucket collections that it is just not feasible to do gift aid on. The scheme is capped. We actually want charities to claim as much as possible under gift aid, which is not capped and allows them to form a long-term relationship with donors, as many of us probably know from charities that we give to. From the simple point of view of a charity, a wholesale switch to claiming through this scheme rather than gift aid would move it away from such long-term relationships and limit what it could claim. The scheme is meant to be a complement to gift aid, not an alternative or a lighter-touch version of it, and it would be to many charities’ disbenefit if that were the case.

As I explained on Second Reading, the small donations scheme was never intended to cover methods of donations for which well-established and well-used processes for claiming gift aid already exist, such as donations made by SMS or online. It may help if I explain in a bit more detail the processes for claiming gift aid on electronic donations. As the Minister for Civil Society, the Under-Secretary of State for Culture, Media and Sport, my hon. Friend the Member for Reading East (Mr Wilson), outlined on Second Reading, there is a simple and well-established process that allows charities to solicit gift aid declarations from donors who make SMS donations. I take the point that the hon. Member for Aberdeen North made about the way people respond to that, but it is a pretty straightforward and well-established process none the less. The donor sends a short code word to a six-digit number—for example, “Dog” to 606060—to donate a set amount through their phone bill. A reply is then sent to the donor thanking them for their donation and asking them for their name, house number and postcode and confirmation that they are a UK taxpayer. Once the donor provides that information, the charity can claim gift aid.

I think that is a straightforward process, and I hope that hon. Members would agree that, in circumstances such as that, where a donor provides a charity with a ready means of making direct contact—their mobile phone number—it is feasible for the charity to solicit a gift aid declaration, and indeed many charities regularly do so.

[Kirsty Blackman]

Does the Minister not recognise that people generally see text messages as the same kind of thing as putting money in a bucket? They do not want to hang around or have to give their name and address. The two things are really parallel.

[Jane Ellison]

I have been stressing the point that this scheme was intended to work where it is not practical to establish such a relationship—where someone is passing in the street, is in a rush or whatever, and throws something into a bucket. That is not the same as an SMS donation. Yes, the motivation for an SMS donation might be quite instantaneous—perhaps someone has seen an advert or a documentary, or there is an appeal on the television, or whatever—but in terms of someone’s ability to respond to the gift aid query that follows, the relationship has been established, because they have given their mobile phone number. That is not comparable with a person rushing past someone with a bucket outside the supermarket and throwing something in, where that person is already on their way and cannot be pulled back to fill in a form.

--- Later in debate ---

[Jane Ellison]

I reiterate the comments I have already made. This is about how we make this scheme, which was always designed to be a complement to gift aid, work. We are separately consulting on some changes to regulations around gift aid, which are designed to make it easier. We are seeing an evolution in the way people are able to donate. The question is whether the amendments are suitable for this scheme, which was always meant to deal with the issue of cash or cash-like transactions—instantaneous donations, bucket collections and donations from people walking by in the street.

I am unpersuaded that a review in six months’ time would add anything to the information we have before us today. It goes without saying that all these things remain under constant review, and this small donations scheme is no exception. It is kept under review in the Treasury—the Treasury keeps charity and tax law under review—and the team there has regular meetings with key stakeholders. The Minister for Civil Society also has extremely regular contact with stakeholders, and I look forward to having contact with charities on charity taxation.

I hope to persuade the hon. Lady that there are already data out there. HMRC publishes a national statistics package every year, which contains an absolute wealth of data, including on the total amount claimed under the gift aid small donations scheme. That is a transparent approach and it allows interested parties to monitor constantly the take-up and the effectiveness of charitable tax reliefs. Of course there is more to do to encourage charities to take up such measures, but the answer lies more in the things I mentioned—the outreach I talked about and the work being done by the Minister for Civil Society—than in some of the changes that have been proposed today.

[Kirsty Blackman]

I appreciate the fact that the Government have consulted on the gift aid small donations scheme and received a variety of responses. Does the Minister not feel that charities and charitable organisations have largely spoken with one voice in calling for the methods under the scheme to be increased, at least a bit? I understand that things are under review, but do the Government not accept that it might be better to listen to people on this matter? I acknowledge that they have listened with regard to some of the other things they are doing.

[Jane Ellison]

Picking up on the hon. Lady’s last point, the Government have listened. There is always a bit of scepticism in politics—I think we have all felt it—on whether things change as a result of consultations, but the consultation in question was really open. We consulted and asked for ideas and, as a result the responses we received, made further liberalisations in the regime. I think that we have listened and that I have given good reasons why we do not want to go in the proposed direction for this scheme because of the nature of what it was designed to do. We are looking to future proof it for contactless payments.

On gift aid more generally, as I said, changes are already being proposed and there is a lot more we can do to increase charitable take-up. I am unpersuaded that the issues being advanced in this debate are the ones that will aid take-up without having unforeseen consequences. Perhaps we will debate those issues later in our discussions of other clauses.

--- Later in debate ---

[Jane Ellison]

I will of course draw the hon. Lady’s wider comments about childcare to the attention of the relevant Ministers.

[Kirsty Blackman]

I feel that as someone who is likely to be using the tax-free childcare scheme for eight or nine years, it is sensible for me to make some comments. The current childcare voucher scheme is quite cumbersome—particularly given the paper methods that are used—and difficult for people to access, so I am pleased that the Government have listened to comments about the need to change how parents can access the scheme and ensure that there is consistency. I am pleased that the Government have piloted online access and listened to parents about making changes to that.

I have a couple of questions. First, I would like to check that the Minister is committed to ensuring that during the scheme’s roll-out, which I understand will happen next year, it is kept under constant review and feedback from parents is looked at. A relatively small group of 400 or 1,000 parents may not cover all the circumstances that we might see once the scheme is completely rolled out, so it would be useful if the Government were to continue in listening mode, and I would very much appreciate that assurance.

My other question relates to the conversations about the scheme with the Scottish Government. At the SNP conference at the weekend, announcements were made about changes that the SNP Government will make to some of the ways in which parents in Scotland can access childcare. What discussions have the UK Government had with the Scottish Government about how this Government’s new tax-free childcare scheme will link into the Scottish Government’s consultations on and proposed changes to the types of childcare that parents can access with their free hours? The Scottish Government are looking at making changes to the flexibility of the free hours that are provided to parents in Scotland and the settings that parents can access with that childcare provision. How will that scheme in Scotland link to the tax-free childcare scheme? Have the UK Government had any conversations yet about that with the Scottish Government? If not, will they commit to doing so?

[Jane Ellison]

I thank the hon. Lady for her comments. Of course we want the tax-free childcare scheme to work for parents. It is designed to make their lives easier, and that must be central to the way we approach the roll-out, which will be gradual, robust and extensively trialled with a variety of parents, to ensure that we replicate as many different circumstances as possible, as she said.

On the hon. Lady’s second point, we always deal with issues that relate to the devolved Administrations as appropriate. I will look at her broader point about how different childcare policies interact, but I do not think that that is directly relevant to the clause. In general terms, I reassure her that we are always assiduous in ensuring that where there are issues of interaction with the devolved Administrations that pertain to Bills, those are sorted out at official level ahead of proceedings such as these.

Question put and agreed to.

Clause 5 accordingly ordered to stand part of the Bill.

Clause 6

Extent

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

--- Later in debate ---

[Kirsty Blackman]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss new clause 2—Review of anti-fraud measures in relation to Gift Aid Small Donations Scheme—

“(1) The Chancellor of the Exchequer shall, within six months of the passing of this Act, publish an assessment of the efficacy of anti-fraud measures designed to regulate the Gift Aid Small Donations Scheme, including, but not limited to, the Gift Aid donations threshold.

(2) The assessment shall have particular reference to the efficacy of the matching requirement.”

This new clause would require the government to publish an assessment of anti-fraud measures designed to regulate the Gift Aid Small Donations Scheme.

--- Later in debate ---

[Kirsty Blackman]

I appreciate having the opportunity to move the new clause. Two of the three pieces of evidence that the Committee accepted today strongly support its inclusion in the Bill, one from the Churches’ Legislation Advisory Service and the other from the Charity Tax Group. The other submission is not against the new clause, it just does not mention it. As was mentioned earlier, a paper produced by the National Council for Voluntary Organisations, the Charity Finance Group, the Institute of Fundraising and the Small Charities Coalition says that it is vital that the matching requirement is changed or removed.

I take Members back to when the gift aid small donations scheme was first brought in. I was not present, but the Library has kindly produced a briefing that covers some of the matters that were discussed, and particularly the matching requirement. The right hon. Member for Bromsgrove (Sajid Javid) was the Minister at the time, and I want to quote what he said in the course of the debate on that legislation. Government amendment 30 was added to the Small Charitable Donations Bill, and it allowed the Government to make changes to the matching requirement. He said:

“It will allow us to remove the matching provision entirely…Even so, charities would always need to claim some gift aid in each year to ensure that they can claim under the scheme…It is something that many charities have asked us to introduce”.—[Official Report, 26 November 2012; Vol. 554, c. 98.]

So back then, charities were in favour of flexibility in the matching requirement and argued for it, and ultimately, the Government accepted that.

Having read the comments of Members at that time, I think the reason for that amendment was that the figures are arbitrary. The gift aid small donations scheme was amended fairly heavily during its progress through Parliament, particularly in relation to the matching requirement. When the scheme was introduced, it was suggested that top-up payments should be claimed only for amounts up to £5,000, but that was increased to £8,000. It was also suggested that the ratio of claims through the small donations scheme to gift aid claims should be 1:1 to begin with. The Government moved on that and changed the ratio to 10:1. Both those figures are fairly arbitrary, and the fact that the Government moved so dramatically shows that the figures are not necessarily set in stone.

Small charities have to receive £800 in donations under the gift aid scheme in order to claim the maximum allowance under the gift aid small donations scheme. Some very small charities will not receive £800 in donations that they can claim under the gift aid scheme, but they might receive £8,000 in very small donations, whether through church collections, people writing cheques or people making contactless payments. Unless they have that matching £800, they cannot claim the full allowance under the scheme.

The new clause, which is in my name and is supported by my hon. Friend the Member for Glasgow Central, would get rid of the matching requirement. It asks the Chancellor of the Exchequer to carry out an assessment. Because the change does not need to be made under primary legislation, the Government can carry out the assessment and make the change without being required to bring the matter back before the House in the spectacular way that they have to do with some other things.

Our proposal is widely supported by charities and would very much help the smallest charities, which feel strongly about it. As Members of all parties have stated today, take-up of the scheme has not been as high as expected. I argue that that is because some of the smallest charities are not able to manage the paperwork that is required.

I am not suggesting that we get rid of the requirement to claim gift aid in general. It is reasonable, given the Government’s desire to prevent fraud, that they have charities make at least one claim and fill in the full version of the forms. It is not, however, reasonable for the Government to expect the smallest of charities to go through that cumbersome process to claim the full amount of £800 in gift aid on small donations. That view is strongly supported by the organisations that have taken the time to write to us.

I intend to press the new clause to a vote. I understand that the Government might not want to accept it today, but I would very much appreciate it if they would seriously consider before Report the fact that a 10:1 ratio is possibly not the right arbitrary level. If they will not consider abolishing the matching requirement, will they consider making the ratio 20:1 or 50:1? That would be hugely beneficial to the smallest of charities, which benefit most from the gift aid small donations scheme and do not have the people power to fill in many of the relevant forms. I want them to continue to fill in forms, but not so many.

[Rebecca Long Bailey]

New clauses 1 and 2 both get to the most important issue for the charity sector: the so-called matching requirement. The requirement is that to make a claim under the small donations scheme, a charity must receive a certain amount of gift aid donations in the same tax year. The total of eligible donations on which a charity can claim a top-up payment is restricted to an amount between equal and 10 times the net donations on which gift aid is claimed for the year.

New clause 1 would require the Government to carry out a review of the impact of abolishing the matching requirement within six months of the passing of the Bill, and Labour’s new clause 2 would require the Government to conduct a review into the efficacy of anti-fraud measures designed to regulate the gift aid small donations scheme, with particular reference to the matching requirement. On Second Reading, the Minister said that the requirement is

“to protect from fraud the small donations scheme, which has substantially fewer record-keeping requirements than gift aid—an important factor that was looked at when the scheme was first designed back in 2012. It is by retaining the rule that donations under the scheme must be matched with gift aid donations that we best can do that.”—[Official Report, 11 October 2016; Vol. 615, c. 215.]

However, as far as I am aware, she did not produce any evidence that the matching requirement is an effective anti-fraud measure.

As we have heard, the sector says that the requirement is a huge barrier for many small charities. They would like it to be significantly reformed, if not scrapped entirely. For instance, the Churches’ Legislation Advisory Service has suggested extending the requirement to 20:1. Given the Government’s reasons for not proposing any amendments to the requirement, the Opposition think that we should simply have a chance to see the evidence that the requirement works.

We agree, of course, that preventing fraud in the scheme is of paramount importance, but if the measure is simply adding a layer of red tape and is not effective, the Government should review it. The Charity Finance Group has highlighted the fact that only 275 reports of suspicious activity were shared between HMRC and charity regulators in 2015, which represents a rate of one suspicious activity per 500 charities. The group considers that to be a sign that fraud in the scheme is not of a high enough level to justify the effects of the matching requirement. That might well be the case, or it could be that the requirement is an effective caveat to the scheme, but we would only know that if there was a publicly available assessment of the effectiveness of all the measures in the scheme designed to combat fraud and of where the requirement sits within that. I can see no reason why the Government would not want to carry out such an assessment, and I hope that the Minister will accept our new clause 2, or work with us to table a Government amendment on Report that deals with any issues or concerns with our wording.

Finally, I would welcome the Minister’s comments in response to evidence produced by the Charity Finance Group, which welcomes the intention behind our new clause but believes that the Government should focus on increasing punishments for those who commit abuse and providing more opportunity for charities to report on suspicious organisations.

--- Later in debate ---

[Jane Ellison]

I think that is right, and I thank my hon. Friend for that intervention. We are really trying to make this as simple and straightforward as possible, but we need some safeguards. That is why the matching rule is important. I would suggest that requiring HMRC to publish a detailed analysis of compliance activities and the efficacy of anti-abuse rules could be unhelpful. I would hate us inadvertently to provide a roadmap for fraudsters. If there was a requirement to publish that information, it would provide valuable information to that dishonest minority whom the Government are trying to root out.

I would like to reassure the Committee that HMRC works with charity regulators to ensure that charities are properly regulated, the abuse of charities is properly and robustly dealt with, and the tax reliefs claimed are used for charitable purposes. If a charity is suspected of fraud, HMRC will share that information with the Charity Commission, which can consider further action, including removal from the charities register. We have made it easier to report fraud. I hope that it goes without saying that all tax policy remains under constant review, and this scheme is no exception. The Government will of course continue to monitor the effectiveness of the small donations scheme, as they do with all charitable tax relief.

We are very keen to make sure that the good name of all those charities that do wonderful work at international, national and local level is not abused. I will give the Committee just one example. In May this year, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. I am afraid that there are more examples of large sums of money where that is true. Those people are out there and, as the report I cited earlier pointed out, they are very quick to spot loopholes, however well intentioned.

HMRC publishes a comprehensive national statistics package, to which I alluded earlier, which allows anyone to scrutinise the efficacy of the Government’s support for charities. However, requiring in legislation that the Government publish separate assessments within six months of the passage of the Bill is both arbitrary and unnecessary and, for the reasons I explained, in the case of one of the reviews it is likely to be impossible to prove what it seeks to prove. I therefore urge hon. Members not to press their new clauses to a vote.

[Kirsty Blackman]

Regarding the new clause that I tabled, I have asked the Government to undertake an assessment of the differential impact on charities of different sizes. As I have tried to make clear, both on Second Reading and today, my concern is particularly about the very smallest charities, some of which find that this is a barrier. I am slightly bothered by some of the conversation both today and on Second Reading. Perhaps I am naive, but I do not think that charities generally set out to defraud the Government. That is pretty unusual, and it bothers me how much of this conversation has been slanted towards concern about issues relating to fraud. I appreciate that some people try to commit fraud, but they are a small minority. It is only in relation to the largest amounts of money that we should be particularly concerned about that.

[Jane Ellison]

I want to clarify my remarks, which were principally centred on the fact that there are people out there who are fraudsters and who would seek to exploit loopholes in charity law and in gift aid rules. My comments were not focused so much on charities themselves being defrauders, although there have been one or two examples of this. Predominantly, this is about people exploiting charity law and the reliefs available in the same way that they exploit other loopholes.

[Kirsty Blackman]

I am really grateful for that clarification. I was concerned about the tone of some of the conversation that had been taking place. In relation to the new clause that I have tabled, I am asking the Chancellor of the Exchequer to look at the differential impact on different charities of removing the 10% matching requirement. The Government have made it clear, and it has been suggested by charities, that this could be changed to a different level of matching requirement.

The Government have accepted that this is a relatively arbitrary figure. It is good because it is a nice round number, but that is not necessarily helpful, particularly for the smallest of charities. I would very much appreciate it if the Government would consider accepting new clause 1, which looks at an assessment, and which would help those very small charities which most need this matching requirement to be removed.

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

Small Charitable Donations and Childcare Payments Bill

Kirsty Blackman Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons
Tuesday 11th October 2016 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I am a fairly new Member of Parliament and was not here when the Small Charitable Donations Act 2012 was passed, so it is interesting to hear some of the history of how the small donations scheme started and how it has got to where it is just now. It was also interesting to hear about some of the changes being made as a result of looking back, three years in, and thinking about how the scheme has worked. I am pleased that the Government have taken on board some of the suggestions charities have made, to ensure that the scheme works as well as possible for those charities using it and for the Government, who have to administer it.

Some of the measures in the Bill are welcome. The SNP welcomes the removal of the eligibility criteria for new charities. That is a sensible way to go—it is sensible to make changes particularly in respect of the two-in-four-year criteria. The inclusion of contactless payment is to be welcomed. There was an interesting comment about text donations. I am not entirely sure how they fit in, but I would be keen for text donations to be included in the small donations part of gift aid and not just in the general part of gift aid, because so many people nowadays give by text message—it is a very easy way for people to give—but do not follow up with a text about their address. I have done the same thing.

I could be wrong, but from my reading of the Library briefing, I understand that the UK Government have the ability to change the matching requirement without the need for further primary legislation, as introduced in the Small Charitable Donations Act 2012.

Like the hon. Member for Salford and Eccles (Rebecca Long Bailey), we have concerns about the 10:1 ratio. My hon. Friend the Member for West Dunbartonshire (Martin Docherty-Hughes) mentioned charities that are run solely by volunteers. Some of those charities do not do gift aid because the paperwork is far too cumbersome. Doing general gift aid and gift aid small donations claims paperwork would be doubly cumbersome, particularly for those that do not have staff. Those are among our smallest charities. In some cases, they never get donations of more than £20. They work in our most deprived communities and therefore are most in need of those donations—they get £3 here and there but it is just too complicated for them to jump through the hoops of any of those schemes. They believe that they are unable to deal with the small donations scheme because of the requirement additionally to take part in the matching for the gift aid scheme.

It would therefore be good for the Government to consider the impact on small charities. As was mentioned, for those small charities, it will not involve huge sums of money and people spending thousands of pounds sending their children to private schools. For example, a local organisation in my constituency buys shovels so that people can clean the pavements in the winter time—they are smaller-use pavements that the council does not get to. It receives a very small amount of money, but is most in need of access to those schemes and is being excluded because it does not have the staff and the ability to fill in the paperwork. If the Government could consider that and the matching requirement, it could have an impact on small charities.

[Dr Poulter]

The hon. Lady is making a thoughtful and constructive speech and highlights some of the challenges for smaller charities that are mostly comprised of volunteers, who do not always have the understanding of and expertise in complex legislation when they are in post. That will clearly be the challenge of this and other legislation in the field. In that respect, is she saying—there may be merit if she is—that some of the anti-fraud measures are too restrictive and add complexity in respect of the funding requirements? Given the other anti-fraud measures in charities legislation, is there an argument for scrapping some of those measures altogether?

[Kirsty Blackman]

I would worry about the unintended consequences for anti-fraud legislation—I would not want to scrap those measures for very large charities that deal with large sums of money. We need to consider how very small charities, which cannot defraud the Government out of thousands of pounds in gift aid claims because they get donations of only £500 in total in a whole year—they will not break the bank—will access both the gift aid small donations scheme and the gift aid scheme in general. That is the majority of what I wanted to say on the gift aid small donations scheme.

On tax-free childcare, I cannot declare an interest in having set up a charity. As the parent of a five-year-old and a three-year-old, however, I can declare an interest in the current childcare voucher scheme and I am likely to be a beneficiary of tax-free childcare from next year when it is introduced. The childcare voucher scheme has been useful but limited, so I welcome some of the changes that will come in through the tax-free childcare scheme. These schemes will be easier to access for parents from less traditional employment backgrounds. That is a positive benefit, as is the uplift in the amount of money they will be able to claim. However, the UK Government’s proposals do not go far enough.

The Bill’s proposals on flexibility of dates and the ability to make requests digitally are hugely positive. The childcare voucher scheme has sometimes fallen down because of the inability to make some changes digitally. I know parents who have not changed the amount they claim when they needed to because it takes 15 days or so to make a change, and it involves a lot of printing out, posting and so on. The three-month rule is much clearer.

The UK Government’s proposals on childcare and inequality are not universal enough. The Scottish Government pledged in their manifesto to almost double the free early learning and childcare to 30 hours a week. Both my children have benefited from the uplift in free childcare and nursery places, and that has been hugely positive. Nursery places are now for three hours and 10 minutes a day. That is a length of time one can do something with, whereas two-and-a-half hours is not. By the time you get home and make a cup of tea, your morning has gone, whereas you can pop out and do a full shop in three hours and 10 minutes. Having those extra few minutes makes the biggest difference. The additional changes will make even more of a difference, with full days for two, three and four-year-olds. It is important that the changes are not just for three and four-year-olds, but some two-year-olds too. The changes mean that some three and four-year-olds will receive free school meals. Primary and one, two and three-year-old children in Scotland already receive free school meals. Again, that is a huge benefit. Again, I declare an interest as someone whose child receives free school meals—they are absolutely brilliant and he loves them. Nursery children will now also receive these meals.

The benefits that families in Scotland receive are universal, not means-tested. There is not a complicated means-testing system to decide which families receive them. There is no requirement for both parents to be working. Children across the board receive the benefits, which benefit both children and families. All children, whatever their demographic or socioeconomic background, are benefiting from high-quality free childcare.

We are also introducing baby boxes, again on a universal basis. They are an import from Finland and they have been hugely successful. The issues with the tax-free childcare scheme relate to it not being universal and not being provided to enough families. Some of the families most in need will not benefit from access to free childcare, particularly if they are going through the process of job seeking or anything like that. They are the ones who would benefit most from free childcare, which would enable them to access appointments, interviews and interview preparation, so the lack of universality is a concern.

We are largely supportive of the specific proposals in the Bill. We have concerns about gift matching and we will likely return to that next week, but I appreciate the opportunity to speak today.

--- Later in debate ---

[Mr Wilson]

I have not had a chance to look into it myself, but I am sure that the Financial Secretary will be happy to speak to my hon. Friend after the debate.

After business rates relief, gift aid is the most highly valued tax relief available to the sector. Since its introduction in 1990, it has grown substantially. It is now worth £1.3 billion a year to the sector, and robust and well-used processes have been developed to facilitate gift aid claims on most forms of donation. That includes text message, online and direct debit donations, and even the donation of goods to charity shops. The gift aid small donations scheme is a natural complement to gift aid, covering circumstances in which it is not feasible to obtain a gift aid declaration. I am particularly proud that the importance of the scheme to the charity sector has been acknowledged, and that the principles of the Bill have been welcomed throughout the House.

The changes in the Bill will make the gift aid small donations scheme significantly more flexible and generous. HMRC’s provisional estimates suggest that the reforms could benefit charities by up to £15 million a year, given that the 9,000 new charities that apply for recognition by HMRC each year are now entitled to claim top-up payments much sooner. Those figures will be certified by the Office for Budget Responsibility as part of the autumn statement.

Questions have been asked today about poor take-up and a lack of awareness of the small donations scheme. I can tell the House that 21,300 charities took advantage of the scheme last year, claiming a total of £26 million of Government support. We recognise that that is less than was forecast, but we want as many charities as possible to benefit from the scheme. That is why we are removing a number of the eligibility requirements and relaxing the community building rules, which will make it much simpler and easier for smaller charities to claim.

[Kirsty Blackman]

The changes in the eligibility criteria will make things easier for the charities that already claim, but I think that things will become more difficult for the established charities that have no staff support and must rely on volunteers. I do not think that they will benefit from the changes.

[Mr Wilson]

I think that the proof of the pudding will be in the eating. We constantly keep these matters under review.

As my hon. Friend the Financial Secretary said earlier, an outreach team in the Treasury is working on face-to-face presentations. So far, 650 charities have taken up that opportunity, and it has increased take-up. The feedback from the sector has been extremely positive, but we will continue to work on awareness and take-up with representative bodies in the charity sector. We are also launching a local charities day, which we hope will take place in December. That will provide a good opportunity to profile what local charities are contributing, and to ensure that awareness of the small donations scheme is at the forefront of their minds.

The Bill is a culmination of months of consultation and constructive discussion with the charity sector, and I would like to take this opportunity to pay tribute to the hundreds of charities, umbrella bodies and others that took the time to engage with the Government during the development of the Bill. Our engagement with the sector will not end with the conclusion of this review, however. A number of charities told us that a lack of understanding can contribute to unclaimed gift aid. We will therefore continue to work closely with charities and sector representatives to raise awareness of both gift aid and the small donations scheme, to maximise the relief claimed on eligible donations.

A number of hon. Members raised the matching rule, and I would like to take the time to go through that in a little more detail. I know that the hon. Member for Salford and Eccles (Rebecca Long Bailey) was particularly exercised by the proposed changes. This tax relief rightly benefits charities established and run by honest, committed people who are motivated to do good and who work hard for their beneficiaries. Unfortunately, the generous nature of these tax reliefs also attracts a dishonest minority who seek to exploit charitable status for criminal purposes. HMRC works closely with the Charity Commission for England and Wales, the Charity Commission for Northern Ireland and the Office of the Scottish Charity Regulator to protect our charity sector from those unscrupulous individuals. In 2015, more than 275 suspicious activity referrals were passed between HMRC and the charity regulators for further investigation.

Unlike gift aid, the gift aid small donations scheme does not provide a full audit trail to allow HMRC to link donations back to a specific named donor. The gift aid small donations scheme is therefore much more vulnerable than gift aid to fraud. That is why it is necessary to operate gift aid alongside the small donations scheme, so that we can best protect the scheme against fraud and exploitation by ensuring that funds are used only to support the important work done by bona fide charities. Public trust in charities has already declined due to poor fundraising practices. We really must ensure that, with the small donations scheme, we do not leave the door open to any future scandal and its consequent impact on public trust and confidence. I am sure that all hon. Members across the House will agree with me on that.

[Kirsty Blackman]

On the point about charities acting fraudulently, does the Minister not see that the charities that could benefit the most from the change to the matching rule are those that earn very small amounts of money, such as £500 or £1,000 a year? That is not going to cost the Treasury a massive amount of money, and there would not be a risk of massive financial fraud.

[Mr Wilson]

I want to stay on the subject of fraud, because we must guard carefully against it in the legislation. It might sound as though we are opening up quite small pockets of money, but when we put them all together, they add up to a much bigger total. The figures relating to the gift aid small donation scheme are not available in isolation. However, it is an unfortunate fact that unscrupulous individuals seek to exploit charitable status for criminal purposes. In May this year, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. In April this year, three individuals were jailed for a total of 11 years for submitting fraudulent gift aid claims totalling £340,000. In January this year, two individuals were jailed for a total of five years for attempting fraudulently to claim £500,000 in gift aid from HMRC. That is a really important point to make. We must make sure that this small donations scheme is not open to fraudulent activities.

The Bill removes two of the existing eligibility criteria that help HMRC to assess compliance with the wider gift aid scheme—the two-year registration requirement and the gift aid history requirement. The Government initially consulted on relaxing the gift aid history requirement to only one year rather than two. However, after listening to the views of the sector we have taken the decision to remove that requirement entirely, which is a significant simplification for charities. It is therefore necessary to retain the match-funding rule as a means of protecting the integrity of the scheme. As the Financial Secretary said in her opening comments, the scheme was always intended to be linked with the wider gift aid scheme, and the Government made that clear in 2012 and that remains the case today.

It is important to be clear that the gift aid matching requirement is not intended to disadvantage smaller charities. That is why the rule is progressive and is set at a modest ratio of 10:1. This means that a charity needs only to claim gift aid on donations of £10 to gain a small donations scheme allowance of £100. To benefit from the maximum small donations allowance, a charity must collect gift aid donations of just £800. Most would see that as a reasonable position to take. Requiring charities to match a proportion of their small donations with a small amount of gift aid donations incentivises charities to maximise their gift aid claims.

Unlike the small donations scheme, gift aid relief is not capped, relief can be claimed on donations of any size and it is not limited to small cash donations. Furthermore, the process of obtaining a gift aid declaration allows charities to develop ongoing relationships with their donors and can lead to a more resilient funding stream in the longer term. In terms of awareness for charities as well, the Government have funded the small charities fundraising training programme, which is worth more than £100,000. The Government appointed the Foundation for Social Improvement in partnership with the Small Charities Coalition and GlobalGiving UK as training providers to help charities with an annual income of up to £1 million to fundraise much more effectively than they have done in the past.

The hon. Member for Clwyd South asked why the matching ratio was set at 10:1. During the passage of the Bill in 2012, the matching rule was originally set at 1:1, but that was reduced to 10:1 after listening to representatives from the sector.

My right hon. Friend the Member for Meriden asked about gift aid and SMS donations. SMS text giving is a really easy way for donors to give to charity. Donors simply send a short code to a six-digit number to donate a set amount via their phone bill. There is an established process for donors’ gift aid SMS donations. Following the initial message, a reply is sent to the donor thanking them for their donations and asking for their name, house number, postcode and confirmation that they are a UK taxpayer. If the donor replies with that information, gift aid is added to the donation.

We also had a question about why cheques were not allowed. The aim of the gift aid small donations scheme is to allow charities and community amateur sports clubs to claim a gift aid style payment on cash donations received in circumstances where it is difficult or impractical to collect donors’ details. Giving by cheque means that the donor is giving their details to the charity and the extra amount of information needed to make a gift aid declaration is therefore relatively small. If it is practical for a donor to write a cheque, it seems reasonable to assume that it is practical for a donor to make a gift aid declaration.

I will briefly cover contactless debit and credit cards, because those donations face the same fundamental problem—a lack of opportunity for charities to stop and engage with their donors. Anyone who has passed through a tube station ticket barrier at rush hour will be able to attest to the speed of contactless technology, allowing individuals to tap their card to pay and walk through without breaking their stride.

I am very grateful to representatives of Cancer Research UK who took the time during the Government’s recent consultation to demonstrate a prototype contactless donation terminal currently being piloted by a number of large UK charities. These terminals, which are set to fixed donation amounts, allow individuals to donate quickly and easily in a similar way to donating cash. Extending the small donations scheme to include these types of donation will future-proof the scheme, allowing more charities to benefit as the technology becomes widely available.

We had a fairly lively discussion about the cost of child care and the importance of Government support for hard-working families. I hope that we can all agree that the amendments within the Bill are positive, making it easy for parents to access help with the cost of child care. I also hope that my right hon. and hon. Friends from all parties in the House can join me in welcoming the imminent introduction of tax-free child care. This new scheme will provide much-needed support with child care costs for the first time to working parents who are self-employed as well as those who are employed.

The Bill will make the gift aid small donations scheme more flexible and generous so that it can benefit a greater number of charities and donations. It will also make it easier for parents to access tax free child care. It is good news for civil society and good news for working parents, and I hope that all hon. Members will join me in supporting it. It is a Bill to make life simpler and easier for charities and working parents, and I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Small Charitable Donations and Childcare Payments Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Small Charitable Donations and Childcare Payments Bill:

Committal

The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 18 October 2016.

The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

Any other proceedings on the Bill (including any proceedings on consideration of Lords Amendments or on any further messages from the Lords) may be programmed.—(Jane Ellison.)

Question agreed to.

Small Charitable Donations and Childcare Payments Bill (Money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Small Charitable Donations and Childcare Payments Bill, it is expedient to authorise the payment out of money provided by Parliament of any increase attributable to the Act in the sums payable under any other Act out of money so provided.—(Jane Ellison.)

Question agreed to.

Finance Bill

Kirsty Blackman Excerpts

Tuesday 6th September 2016 Commons Chamber

[Rishi Sunak (Richmond (Yorks)) (Con)]

I know that when I mention the word “investor” in this House, some Opposition Members get a little a bit excited: their pupils dilate, their pulses quicken and their minds race with images of plutocrats rolling the dice of financial speculation. The reality, however, is a little different. I have spent my own career investing in businesses, and in this country private equity-backed businesses now account for almost 1 million people in employment. The latest research shows that in the run-up to the last crisis, those companies’ sales, investment in research and development, and, indeed, exports grew at a faster rate than the national average.

Furthermore, I am sure that everyone in the House would welcome more money for charities, more research funds for scientists, more scholarships for students who need them and lower insurance premiums, and that is indeed what the private equity industry delivers. The funds that private equity companies manage benefit all of us through university endowments, charitable foundations, pension funds and the floats of insurance companies. When the private equity industry does well, the pensioner, the scientific researcher and the scholar from a disadvantaged background all benefit.

This is a Finance Bill from a Government who value their investors and will not demonise an industry, and who know that no contribution, however great, should be allowed to skew the scales of social justice. The clauses that involve changes to carried interest will ensure that the rewards that investment managers receive for their efforts are taxed not only correctly, but fairly. The clauses will introduce a 40-month holding period to ensure that capital gains tax treatment is reserved for genuinely long-term investments, as it should be. I know that Members on both sides of the House support the welcome change to remove the base cost shift loophole, which allowed costs to be advantageously offset against gains. The Bill will also consolidate Government action on disguised fee income that was introduced in the last Finance Bill and ensure that fund managers are paying income tax when appropriate. All in all, the measures will raise in the order of £200 million in the next financial year.

Those new arrangements are not only fair for British taxpayers and society; they will also ensure that we remain competitive internationally. Our general treatment of carried interest, which has been the subject of much debate in this House and various Committees, is actually in line with the treatment carried out in the United States, Germany, Australia and France. All those countries agree with the notion that carried interest is capital in nature and should be treated as such. If we look across Europe, we will see that our rate for carried interest will sit in the middle of those for comparable countries: it will be a little bit above that in Switzerland and Germany, and a little bit below that in France.

The clauses reflecting changes to capital gains tax will ensure that the UK remains a pro-enterprise, pro-growth nation. Small and medium-sized businesses of the kinds that I used to invest in account for more than half of private sector employment in the UK. They are responsible for three quarters of all jobs created since 2008, yet I know from first hand that small and medium-sized British enterprises still struggle to attract enough equity capital to grow. Adjusted for GDP, the size of the UK’s venture capital market is a seventh of that of the United States. Just 3% of British companies manage to expand from three employees up to 10, which is half the rate in America.

When I hear about changes to capital gains tax rates, I think about how they will benefit all those small businesses, helping them get the capital they need to grow and to increase investment and employment. Indeed, investors’ relief and the other changes to capital gains tax included in the Bill will build on the success of the seed enterprise investment scheme, the enterprise investment scheme, the funding for lending scheme and the British Business Bank, all of which are providing British companies with the capital that is necessary for growth.

The changes will ensure that Britain remains a competitive prospect for investment without compromising Government revenue. The hon. Member for Salford and Eccles (Rebecca Long Bailey) mentioned the state of our finances and the need for revenue. I am sure that she welcomes the fact that the Office for Budget Responsibility projects that capital gains receipts will top £7 billion this year and increase to £9 billion next year, which is higher than in any other year in the past decade and a half. Rather than being a sweet deal for the rich, our capital gains tax rate actually sits in the middle of the OECD league tables of capital gains tax rates. Ten countries have rates of 0%, and our rate of 20% will sit two points above the average.

As we contemplate leaving the European Union, it will be vital that Britain’s economy remains dynamic, open and competitive to attract the investment we need and maximise the opportunities afforded to us. The clauses relating to capital gains tax and carried interest will ensure that the UK does exactly that, and I will support them later today.

[Kirsty Blackman (Aberdeen North) (SNP)]

I want to speak to the Labour party’s new clause 14 and amendment 174, which, as has been ably pointed out by the hon. Member for Salford and Eccles (Rebecca Long Bailey), would remove clause 82 and the increased nil-rate band for inheritance tax.

I will focus first on the entrepreneurs’ relief proposed by new clause 14, which makes a key point about the lack of Government transparency. When UK Governments of all colours introduce a tax change, they often do not return with the evidence to show that the policy has worked. They will implement the policy and say that it is wonderful, but they will not bring back the proof. The Minister was asked yesterday how many companies have benefited from the loan guarantee fund in relation to oil and gas, but she was unable to provide a detailed answer. I do not know whether she just did not have the answer at her fingertips or whether the Government have not actually sat down and worked it out. If Governments are going to make grand claims about what they are doing and how good their policies are, they really need to bring back their work and show it to us.

[Mark Field (Cities of London and Westminster) (Con)]

It is important, particularly in relation to entrepreneurial relief, to point out that the last thing we want is an economy where there are quick-fire gains. One of the criticisms of the tax treatment in the area of private equity and venture capital is that there have been too many incentives for people to sell out too quickly.

The corollary of that surely must be that if an entrepreneurs’ relief is designed to encourage entrepreneurs to hang on to their businesses in the longer term, it is difficult for the Treasury to bring back, in a shortish period of time, figures that suggest that a scheme has been a success. We have to look at the general tenor of an economy such as the UK. To that extent, I think that positive changes are being proposed, but I do not think that it is realistic or fair to expect the Treasury to come back in double-quick time and say, “This has been a great success.”

[Kirsty Blackman]

To be fair, the new clause does not ask the Treasury to come back in such a short time; it asks for a six-month review period. Instead of just saying that they will not do a review, the Government could quite easily say, “We will do a review, but we will do it in 18 months.” I would find that acceptable. I would like to see how the schemes are working. I am not necessarily saying that any of them are particularly bad, but the Government need to come back with their workings and tell us how those things are performing.

The UK tax system is incredibly, massively complicated, and there are tax reliefs and taxes for all sorts of things. I am not convinced that the majority of them are working as they were intended to, particularly those put in place 20 or 25 years ago. The whole thing needs looking at, and considering individual things is a sensible place to start. The new clause is about Government transparency, and anything we can to do increase Government transparency around tax reliefs, in particular, is great. It would be very good if the Government considered this for some point in the future, even if not exactly in the terms suggested.

The other thing I want to talk about is inheritance tax. The Conservative manifesto said that the party intended to

“take the family home out of tax for all but the richest”.

As I mentioned in Committee, I have a real issue with regarding £1 million homes, or homes that are worth close to £1 million, as normal family homes and not the preserve of the very richest. In Scotland, the average sale price in 2015 for a detached house was £238,000. In Edinburgh, which is at the higher end of the market in terms of price, the detached average sale price was £382,778. Those are detached homes—not family homes, necessarily—so they are specifically at the higher end of the market. In the most expensive place in Scotland to buy, we are looking at homes costing £382,778.

I have been looking at what someone could get for £1 million. In Orkney—fair enough, it is probably not the best example—they could get a six-bedroom home with an attached three-bedroom lodge and a guest wing for less than £1 million. Nobody would call that a normal family home. In Ayr, they could get a 10-bedroom detached category B listed mansion for less than £1 million. Also in Ayr, they could get a six-bedroom home, which seems relatively modest, in these terms, with a swimming pool for under £1 million. None of those could be classed as normal family homes. They are, in the main, homes that have been inherited—[Interruption.] Very few people will have just picked up these homes.

The other thing that the Conservatives said in their manifesto was, essentially, “You have worked hard for your money; we would like you to keep it.” The vast majority of the homes in question will not be first-generation owned. They will have been sold by the second or third generation because they have been owned by the family for a long time. They are not, by any stretch of the imagination, normal family homes. Even in the centre of Edinburgh someone could manage to get an eight-bedroom, detached, very large house for £1 million, and that is the most expensive place in Scotland to buy a home.

The problem—this applies to a huge amount of the Conservative manifesto—is that the Conservatives think that what happens in the south-east of England is normal for the rest of the UK. It is not normal for the rest of the UK. I know that the south-east is where the majority of the population are based, but some thought needs to be given to this. Members will expect me to say this as a Scottish National party politician who supports independence, but if decisions were made closer to home, they would be more appropriate for people in Scotland.

[Mark Field]

I appreciate that my constituency is hardly typical as far as these matters are concerned —nor, indeed, is the Minister’s constituency on the other side of the river—but the logic of what the hon. Lady is saying is that we should move towards a regionalised tax system. I guess that she would quite like it to be a nationalised system, with the nation beginning on the other side of Hadrian’s Wall, but does she not recognise that the Barnett formula gives particular incentives to the nations of the United Kingdom, rather than to London and the south-east? I can understand the irritation that she feels about the fact that perhaps too much thinking is done for London and the south-east, but £1 million buys virtually nothing not only in my constituency but in many of the 73 constituencies in London, as well as those in the home counties. Short of regionalising our tax system, surely this is, at least, a sensible step forward to ensuring that those who have been able to bring up a family in a home are not forced to sell the home when a relative dies.

[Kirsty Blackman]

The right hon. Gentleman makes a good point. Perhaps we need to think about having differential policies across the UK, and possibly further devolution. That would be fantastic, and if he wants to support us in that cause, he is welcome to join us at any time.

This policy highlights a major difference between the south-east of England and the rest of the UK. The problem with Government being so far from people who are outside London is that policies are made for the benefit of the majority of the population—the people who live around here. That is really unfortunate for people in the north of England and in Wales, because the policies made by the national Government do not make sense for us.

[Mark Field]

Will the hon. Lady give way?

[Kirsty Blackman]

I will not take another intervention; I am sorry. I just want to mention briefly the Prime Minister’s statement that she will take “bold action” on tax. We have a big problem—we will still have a big problem after the changes that will be made by the Finance Bill, including the tax changes that we discussed yesterday—with the lack of parity and fairness in tax. Nurses, carers and people who work in all sorts of professions pay 20% tax. I acknowledge that the personal allowance has been raised, and that is very much appreciated, but those people pay the tax that is due on the majority of their income.

There are still too many loopholes in the rest of the system. I understand the point that was made about carried interest, and we need to see how that works going forward. I would love to see the Government’s working on that, and whether the policy has the effects that the Government intend. However, unearned income is still taxed at different rates from earned income. I understand the point that was made about private equity supporting our economy and supporting some of our community organisations, for example. However, the people in question are not paying the level of tax that they should be paying to the Government, so the Government do not have the funds to disburse that they should have to disburse.

We need to do something a bit more radical than tinkering around the edges. We need to look at making changes that actually bring about parity. We need to look at ensuring that the people who are making the megabucks in the City of London pay at least as much tax, and as high a percentage of tax, as our nurses and carers pay.

[Mark Field]

I will speak briefly in favour of amendment 151 on carried interest. In my time as a Member of Parliament, I have sometimes been critical of elements of the tax regime that applies in the private equity and venture capital world. It seems to me that the generous tax regime, although it has been justified to support entrepreneurs, has often been misused by those in the industry—inadvertently; I am not suggesting that anything untoward or nefarious has taken place. I believe that many in the private equity field have, particularly in good times, in effect been financiers rather than risk takers. As such, it would surely be more equitable for their rewards to be treated more like income than capital gains. That has been at the heart of the whole debate about carried interest.

The Government have been aware of this issue. Let us give them some credit for that. To some extent, we are trying to play catch-up on it. Inevitably, there has been controversy about the treatment of private equity firms’ carried interest, which is levied as a capital gain, rather than as income. There was a time—pre-2010—when the difference between those two things was rather greater than it is today. That may be because capital gains tax has been raised, but the starkness of the problem is to some extent less pronounced now than it was during the time of the last Labour Administration in the noughties.

It is clear that the Treasury is doing the right thing in trying to provide a more favourable regime that is intended to reward genuine entrepreneurs. In principle, that must mean that where carried interest looks like income, it should be treated as such for taxation purposes. That is what we are slowly doing with amendment 151.

--- Later in debate ---

[Jane Ellison]

As a number of Ministers have made clear in the House, we need to consider a huge range of issues as we proceed, but, as I have said, we are clear about the matter for the present. No doubt the hon. Gentleman will raise his point again during debates about our future outside the European Union.

New clause 16, tabled by Liberal Democrat Members, would require the Government to publish a review. I do not think that any Liberal Democrat Members are present, so I shall speak briefly before moving on swiftly to deal with new clauses and amendments tabled by members of other parties who are present.

The Government already undertake equality assessments of all new measures, which includes considering age as a protected characteristic. I am sure the whole House welcomes the fact that the Prime Minister has now launched an unprecedented audit of public services to reveal—among other things—racial disparities, and to look at the way in which public services serve people throughout the country. The Treasury will, of course, play its part in the audit, and no doubt some of these issues can be considered as part of that important exercise.

New clause 19 would require the Government to review the impact of measures in the Bill on different levels of income. In every Budget and autumn statement since 2010, the Treasury has published distributional analyses showing the impact of Government policy on the share of tax paid and spending received across household income distribution. Since 2010, the Government have published far more distributional analyses than their predecessors. As the Prime Minister has made clear on many occasions since taking office, we are determined to make Britain a country that works for everyone, and our policy choices and actions stand as proof of our commitment. The Government have received representations on this matter, not just from Opposition Members but from my right hon. Friend the Member for Chichester, on behalf of his Committee. We will consider the appropriate format of documents to be published at future fiscal events at a time closer to the date of the autumn statement.

[Kirsty Blackman]

When does the Minister think the autumn statement will be delivered?

[Jane Ellison]

The Chancellor will make that clear in due course.

--- Later in debate ---

One solution would be to make legal aid available for employment tribunals. Another would be to make the tribunals less complex, but that would lead to rough and ready justice. The same would apply to the tax measures in this country. I urge the Government to consider monitoring and getting evidence on the 1,200 or so tax reliefs and on the distributional analysis to which some of the new clauses refer. I also urge them to take the bull by the horns and have the guts—I salute them for having had the guts to take measures on tax avoidance—to go for a simplification that would help business, even if it occasionally resulted in a somewhat rough and ready system.

[Kirsty Blackman]

In the absence of the Government showing any willingness to take the bull by the horns on tax simplification, how can we get them to part with the information that they say they have on the continual review on tax reliefs? I have not been an MP for very long, but it strikes me that there is a failure in the system if we are not seeing the transparency that we need. If the Government are actually doing these reviews but not providing their working to the Committees or to Opposition MPs, that strikes me as a failure in the system. How can we get them to part with that information?

[Rob Marris]

I quite agree with the hon. Lady. Sadly, I am unlikely ever to be a Minister, but I am hoping that the Minister will stand up this afternoon and say, “The hon. Member for Aberdeen North has made a jolly good point.” She has said that the Government keep all policies under review all the time, so let us have the transparency. I salute what the Government did for transparency yesterday in accepting amendment 145, tabled by my right hon. Friend the Member for Don Valley (Caroline Flint). I urge them to go that bit further today by publishing the evidence that they have and by marshalling more evidence and disclosing it. They must have the courage to seriously go for simplification, which would be better for business and employment in this country, even though there would be a cost to be borne by society in the form of less nuanced decision making and systems becoming more monochromatic and rough and ready. Some of that would of course rebound on Members of the House, because we would get constituents writing to us saying, “I have a particularly nuanced situation here, and you guys have made all these laws that are a bit monochromatic and do not help me.” We have to have the guts to say that that is a price worth paying, and as legislators we should be prepared to do so.

--- Later in debate ---

I encourage the Government not to look at the marriage tax allowance in isolation as simply a commitment that we have delivered. It needs to be seen in a wider context as part of an international tax comparison. CARE showed that the UK tax burden placed on a one-earner married couple with two children on an average wage is 25% greater than the average across the OECD. By looking at that broader context we can see that we need to support the transferable allowance. The previous Prime Minister thought it was a staging post and that we should increase it. I think we should increase it in terms of money and the percentage of transferability. If we cannot go that far immediately, let us focus on those who would particularly benefit and feel the impact—couples with young children.

[Kirsty Blackman]

On that point, and particularly on the point about whether parents choose to stay at home or to work, despite the measure that has been put in, I support anything that allows parents to have a choice, or more of a choice, over whether they stay at home to look after their children or put them in childcare. However, we still have a massive problem with families not being able to make those choices, because childcare is not affordable for them, particularly for those caring for under-fives. Parents are still forced into being stay-at-home parents or taking low-wage jobs at strange hours because of the lack of affordable childcare. Does the hon. Gentleman support measures to change the childcare regime as well as the tax regime relating to this issue?

[Mr Burrowes]

The hon. Lady tempts me into a wider debate. If the Minister were to respond on this, she would certainly point to the measures on childcare. When one looks at supporting couples with young children, there are other things the Government have been very much involved in to improve the offer. There is work to do on access and affordability, not least, in my constituency, in relation to poor households accessing childcare.

I appreciate the fact that the hon. Lady talked about choice. There is also an issue about choice in that the Government are rightly encouraging as many people as possible to work and to exercise that choice, but it is sometimes an invidious choice for those who would want to stay at home, and the fiscal incentive to do that is not currently there.

There is a huge impact generally across the tax system on single-earner couples, which is not getting sufficient attention, and this proposal for the transferable allowance addresses that. There are lots of other measures across the tax and benefits system that seek to focus support on children, but we must particularly support the benefits of this allowance, which is around couples, marriage and the commitment to marriage and civil partnership.

In conclusion, following the cause of new clause 3 can be a win-win situation for the Government. It not only, obviously, recognises what we do already on marriage in the tax system, but it allows us to get the maximum effect from the Government’s original commitment, which I believe was welcome, but which was somewhat partial in terms of its original intentions. Recognising the financial challenges, I think new clause 3 would ensure that we can seek to remove some of the disincentives to marriage for those who wish to marry; it would help us to support social resilience and help with transferability; and it is also fiscally conservative. In short, new clause 3 is about getting more bang for our buck in supporting marriage and social justice.

--- Later in debate ---

[Kirsty Blackman]

The Finance Bill was devised prior to the vote to leave the European Union. The measure under discussion will have a disproportionate effect on microbusinesses, so does my hon. Friend agree that the Government should accept our new clause and review the measure in the light of Brexit?

[Philip Boswell]

I must admit that I have sympathy with all who have reservations about any position taken in this Bill, given that, as my hon. Friend has said, it seeks to implement measures devised prior to the EU vote and therefore fails to provide for an economy that faces the harsh reality of Brexit. I am sure that we all look forward to the autumn or winter statement—whenever it will be—and the redress it will contain, imaginary or otherwise. We will then see, I presume, whether the new Chancellor is as good with imaginary numbers as the previous one was not.

The Federation of Small Businesses has raised serious concerns. It has highlighted that the changes are particularly acute for members of organisations who are on modest incomes. It has further submitted extensive evidence regarding member feedback on the proposed changes. A number of responses have highlighted concerns from the owners of small and microbusinesses that the changes may mean that they will not be able to continue to employ their small workforces.

In addition, evidence was submitted to the Committee by Jason Kitcat of Crunch Accounting, who has produced excellent work on the matter. I acknowledge that Mr Kitcat has been referenced several times in discussions about the proposed changes, but his analysis is significant and, as such, ought to be raised again. Crunch Accounting has highlighted how the changes as proposed hit lower-earning microbusinesses the hardest. The Government have stated that the changes in dividend income will be offset by planned future changes both to the way in which Her Majesty’s Revenue and Customs treats corporations and to personal allowances. However, Crunch has highlighted how those anticipated changes will not fully offset the impact of changes to HMRC’s treatment of dividend income for microbusinesses, as proposed by the Bill. In addition, Crunch has highlighted how measures cited by Ministers, such as changes to employment allowances and the annual investment allowance, are rarely available to microbusinesses, as they have little capital investment requirements.

I stress that the importance of small and medium-sized enterprises to the Scottish and UK economy cannot be overstated. There are few things on which I agree with the Prime Minister, but I do agree with her statement last month that

“small and medium sized businesses are the backbone of our country.”

I further welcome her indication in the same speech that she intends to listen to smaller firms. However, I am concerned that, despite that profession from the Prime Minister, the regressive changes to dividend income will not only disincentivise new SMEs from forming, but have the potential to cause existing microbusinesses to fail.

It is essential to note the number of SMEs that are categorised as microbusinesses. The UK is home to 5.2 million microbusinesses, which employ 8.4 million people. In Scotland, microbusinesses play an essential role in the economy. According to recent Scottish Government statistics, 99% of businesses in Scotland are categorised as SMEs, the vast majority of which are microbusinesses. Overall, microbusinesses comprise 81.5% of the businesses in Scotland. The figures are similar for the UK as a whole. According to House of Commons Library research in late 2015, 99% of businesses UK-wide are categorised as SMEs, 95% of which are microbusinesses.

Microbusinesses are essential and central to the functioning of both local and national economies. Given that microbusinesses make up the vast majority of businesses in Scotland and UK-wide, I find it absolutely staggering that HMRC does not make an assessment of microbusinesses as a separate group. Given the prevalence of microbusinesses throughout the economy, it does not seem on this matter as though the Government have listened to the concerns of smaller firms, despite last month’s proclamations from the Prime Minister.

When my hon. Friend the Member for Kirkcaldy and Cowdenbeath (Roger Mullin) introduced the original SNP amendment regarding the proposed changes to the way in which HMRC treats dividend income, the response he received to his concerns about microbusinesses was that

“the Government have considered the general economic impact of the changes…the measure is not expected to have any significant macroeconomic impacts.”––[Official Report, Finance Bill Public Bill Committee, 30 June 2016; c. 18.]

This statement taken alone is staggering, given that, as I have stated, 94% of businesses in the UK are categorised as microbusinesses. I fail to see how introducing a change that principally impacts microbusinesses would not be expected to have any significant macroeconomic impact.

The Minister stated in her introductory remarks that we do not yet know the impact of such legislation. I would like to highlight oral evidence given to a Committee of the other place on 8 February 2016 by Cerys MacDonald, the deputy director of personal tax at HMRC. When asked by the Chairman about the impact of these changes on microbusinesses, Ms MacDonald stated:

“I can assure the Committee that we recognise that the dividend tax changes will mean that a lot of people in owner-managed businesses are now paying a higher level of tax than previously, despite the benefit that they will see in the reduction of the corporate tax rate.”

Those two statements seem to me to be at variance with each other. Do the Government believe, as indicated by the Chief Secretary to the Treasury that the proposed changes to dividend income will not significantly impact on microbusinesses? Or do they believe, as indicated by Ms MacDonald of HMRC, that the changes will impact on owner-managed businesses, despite the planned future change to the corporate rate?

Given the uncertainty surrounding the inconsistent responses from Government, coupled with substantial evidence from the Federation of Small Businesses, Crunch Accounting and others, it seems as though the Government have not fully and comprehensively considered the impact of the proposed changes on small and microbusinesses—the backbone of our economy, as I am sure we all agree.

New clause 8 would require the Government to conduct a review of the impact of the changes on microbusinesses, including the impact on the failure rate of microbusinesses and the options for minimising the impact of the changes on directors who are on low incomes. I therefore advise hon. Members that we will press new clause 8 to a Division.

Finance Bill

Kirsty Blackman Excerpts

Monday 5th September 2016 Commons Chamber

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move, That the clause be read a Second time.

[Mr Speaker]

With this it will be convenient to discuss the following:

New clause 10—Review of the operation of the Patent Box—

“(1) The Chancellor of the Exchequer shall, within six months of the passing of this Act, lay an independent report of the value for money provided by, and the efficacy of, the Patent Box legislation before both Houses of Parliament.

(2) The report shall—

(a) assess the size and nature of the companies taking advantage of the Patent Box legislation;

(b) assess the impact of the Patent Box legislation on research and innovation in the UK, including supporting evidence; and

(c) assess the cost effectiveness of the Patent Box legislation in incentivising research and development compared to other policy options.”

New clause 11—Assessment of taxation regime for securitisation companies—

“The Chancellor of the Exchequer shall, within six months of the passing of this Act, commission an independent assessment of the efficacy of the taxation regime to which securitisation companies are subject and lay the assessment before both Houses of Parliament.”

Amendment 177, page 87, line 6, leave out clause 44.

Amendment 162, page 87, line 8, ‘leave out clause 45.

Government amendments 152, 153, 1 to 29, 154, 31, 155, 33 to 59, 156, 61 to 113, 157, 115 to 117, 158, 159, 119 to 128, 160, 129 to 131.

[Kirsty Blackman]

I rise to speak to new clause 5, which is in my name and the names of my hon. Friends, but I wish briefly to mention amendment 162, which has been proposed by the Labour party. I look forward to hearing from its Front-Bench Members. If they intend to push the amendment to a vote, we will join them in the Lobby.

New clause 5 is about the corporation tax treatment of the oil and gas industry. The House will not be surprised to hear me speaking on this subject as I have done so a number of times. What we want is a comprehensive review of the corporation tax rates and investment tax allowances applicable to companies producing oil and gas in the UK, or on the UK continental shelf. This is a timeous ask from us for a number of reasons. For a start, this Bill implements measures that were put in place and discussed first in February and March, before the EU vote, and there have not been any substantive changes by the Government to the Bill as a result of the Brexit vote.

Substantive changes to the Bill are needed because we find ourselves in a completely different situation as a result of the fall-out from Brexit. It is unfortunate that changes have not been made and that there have not been more announcements from the Government about how they intend to manage the financial situation going forward. We want to know about the impact on Aberdeen, which I represent, and on the UK’s tax take and the Treasury. It is important that we seriously consider making changes to the Bill.

We have repeatedly asked for changes to the tax rates and for a comprehensive strategic review. We appreciate that the Government made changes earlier this year, but we do not think they go far enough. Alex Kemp, a renowned petroleum economist, and his long-term research partner, Linda Stephen, are both at Aberdeen University, where they have been working on sophisticated modelling tools. If the Minister has not read the article that appears in Energy Voice today, it is worth reading, together with the report that accompanies it. The work that they have done suggests that corporation tax of 30% is too high, and it is far above the non-North sea rate. They said:

“From the analysis of the economics of new field investments and exploration in current circumstances in the UKCS it is clear that, at $50 and $60 prices, there are many ‘marginal project investment situations’.”

That is key. It is what we have been arguing, and now it is backed up by renowned experts.

The position in which the industry finds itself bears repeating. Estimates vary, but we have lost around 125,000 jobs—from 425,000 we are down to about 300,000. That implies a huge reduction in the tax take for the Treasury and it is a massive hit for the local area, particularly Aberdeen and across Scotland and other oil and gas-producing areas. Because of the reduction in the oil price, we have seen changes in the behaviour of companies. As well as making people redundant, they have changed shift patterns and terms and conditions. They have also managed to reduce production costs, which is a good thing.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

Brexit casts further uncertainty over the oil and gas industry, which under this Conservative Government has seen the legislative goalposts moved almost continuously, thereby hindering vital investment. Does my hon. Friend agree that given that the Bill implements measures devised prior to the EU vote and, as such, fails to provide for an economy that is facing the harsh reality of Brexit, more must be done to mitigate investor uncertainty in the oil and gas sector?

[Kirsty Blackman]

Indeed. Brexit compounds the issues that we have seen in the oil and gas industry, particularly in the North sea, and affects investment. This year we are expecting less than £1 billion-worth of new capital projects to be agreed. In each of the past five years we have seen an average spend of £8 billion. There has been a massive drop-off. Much of that is linked to the global oil price, but the Government have not done enough to increase investor confidence, especially in the light of Brexit. New projects are not being sanctioned because of companies’ negative cash flow. Jobs are consequently being lost all the way along the supply chain. We are losing contracts, expertise and people working in the industry in and around Aberdeen, Scotland and the UK.

Exploration and development activity is at an all-time low. Oil and Gas UK produced a report in February this year which predicted that if the current trajectory of low investment and new projects not being approved continues, we will see a fall in production in 2020. We are not ready for that. Our strategy has been to maximise income and recovery, and the Oil and Gas Authority’s main aim is to ensure that we get as much out of the North sea as we can. Because of the lack of investor confidence and the inability to sanction new capital projects, that is becoming increasingly difficult.

I have asked various Ministers about the Government’s intentions. We are not seeing investor confidence. We are seeing a major drop-off in investment, as the figures show. I welcome some of the changes that the Oil and Gas Authority has made. It is working on making it easier to transfer assets that have reached the end of their life. We do not want decommissioning to take place now. I understand entirely that if there is sufficient UK spend, there will be a financial benefit to UK companies from decommissioning, as long as we can ensure that the supply chain for decommissioning is based in the UK.

However, some of the assets that have been in the North sea for 30 years are at the end of their useful life and need to be decommissioned. I welcome the OGA’s push to ensure that as much of that spend as possible is in the UK, and I welcome its efforts to ensure that assets can be transferred so that as much oil as possible can be recovered from each of those fields. The OGA has been focusing on enhanced oil recovery, but the Government have not done enough in that respect. Changes are necessary to the tax regime to encourage companies to undertake enhanced oil recovery.

[Rob Marris (Wolverhampton South West) (Lab)]

I hear the hon. Lady standing up doughtily for her constituency and for the oil and gas industry in Scotland. What bemuses me is that if the independence vote had gone through, in spring 2016, Scotland would have had income of £100 billion and expenditure of £120 billion— a structural deficit of 20%. Now the hon. Lady is advocating increasing that black hole. How would she bridge that gap?

[Kirsty Blackman]

We are under a Westminster Government; we do not have full control of our own economy. That is a damning indictment of the way that the Westminster Government are running the economy of Scotland. It is incredibly important that we get independence and that we are therefore able to make decisions, particularly in the oil and gas industry, where the Government have not moved quickly enough or been flexible enough in the changes they have made. It is important that we make the decisions and grow our economy, because the Westminster Government are failing to do so.

On the future for energy and for the North sea, Statoil produced a report entitled “Energy Perspectives”. It is important to consider the future for the North sea and the UK continental shelf in that context. Statoil predicts that up to 2040, total primary energy demand will grow between 5% and 35%. That is a wide range because a number of different scenarios have been analysed. In all scenarios there is an increase in total energy demand. Statoil predicts that energy demand in 2040 will be between 78 million barrels a day and 116 million barrels a day. We currently use over 90 million barrels a day. It is important to note that as we think about the move towards renewables and different forms of energy generation, but by 2040, even if we have a huge number of renewables, we will still see a massive demand for oil and gas across the world. Oil and gas will still need to be produced in order to support the economies of the world. It is vital that we ensure that the UK continues to be involved in that and to benefit financially from it.

[George Kerevan (East Lothian) (SNP)]

On that point, is my hon. Friend aware that more than half of the oil supply and support companies in the UK are located in England, and that the amendment affects all oil companies across the UK, not just in Scotland?

[Kirsty Blackman]

I appreciate that point. I was not aware of the numbers. However, from talking to colleagues across the House who have been very supportive of companies and industries in their constituencies, it is clear that the number of companies is substantial. We are discussing UK spend and, whether we like it or not, we are part of the UK, and the tax changes will help all the companies in the oil and gas industry throughout the UK, whether they are in Aberdeen, Wales or the south of England.

The Oil and Gas Authority has been very good at talking positively about UK supply chain spend, which is one of the most vital aspects. Although I have talked about energy demand and oil and gas demand out to 2040, we will see, at some point, a reduction in the amount of oil and gas being produced by the UK. It is key to note that we are world leaders in terms of our oil and gas expertise. We are very good at what we do, and we are respected across the world. In sub-sea technology, for example, we are 20 years ahead of America. America has not done very much when it comes to Gulf of Mexico extraction. We will be there teaching the Americans how to use sub-sea technology and exporting that technology to them. Even when the oil and gas in the UK eventually run out, we will see that our expertise is able to be exported. It is really important that the Government act now to ensure that we keep that expertise base and do not lose it in the current downturn.

--- Later in debate ---

[Kirsty Blackman]

The hon. Gentleman should listen to what I said. Statoil’s “Energy Perspectives” report reckons that even if we have a huge push towards renewable technologies and towards reducing carbon emissions, we will still need between 78 million and 116 million barrels of oil a day—and that is while taking on board, and increasing, the very best of these technologies. We will still continue to need, for example, road surfaces that are made from heavy oil. We will still continue to need these things, so we will always need oil, or at least for a long way into the future until we come up with credible alternatives. It is not just about energy or about electricity generation; it is about all the different things that we use oil for, including plastics.

It is very important to make sure that we have a great future in exporting. I have never been to Houston, but I am told that one cannot go there without hearing an Aberdeen accent. That is because we have the links and we send our experts over there, and those experts are making money for companies here by whom they are still employed. They are devising the technology that is being spent on and used in America and in other places across the world. In the North sea, we are operating in a super-mature field. This is one of the first fields in the world that is reaching that super-mature status. We have a proud history of exporting, getting incredibly good at what we do and teaching the rest of the world how to do it.

We also have a proud history of being respected around the world. Our oil and gas industry is respected throughout the world. If you say to somebody in an oil company in a different country, “This technology is used in the UKCS in the North sea”, it is automatically seen as a gold standard that is recognised around the world. In order for us to continue to generate tax revenues from this and to sustain jobs, we need to make sure that our companies have enough cash to innovate. Although the Government have been vaguely supportive in what they have done, they have not been supportive enough. Companies are still struggling to get venture capital and assistance from banks. I am aware that Ministers have spoken to banks, but it is still not enough. The confidence is still not there to the degree that we need it to be.

As I said, we are one of the first countries operating in this super-mature situation. What we really need now is a review of the taxes across the oil and gas industry. The system was devised many years ago in a totally different situation. It has had bits lumped on and bits lopped off, but it has never been looked at as a whole, and that is what we need to do now. I strongly urge the Minister to have a look at the entire tax regime for the oil and gas industry so that it can have a better future.

[Mark Field (Cities of London and Westminster) (Con)]

The hon. Member for Aberdeen North (Kirsty Blackman) will be glad to know that she can also come to my constituency and hear a few Aberdonian accents from time to time, without having to go out to the middle of Texas.

I have a lot of sympathy for the situation that the hon. Lady finds herself in. Inevitably, there has been a lot of tinkering with tax rates in oil and gas. In my 15 years in the House, it has seemed that barely a year goes by without many paragraphs of any Finance Bill being part and parcel of this. Clearly, we are not yet to know whether the gas price and oil price will be stabilised at $50 to $60 a barrel or will go in different directions. I am sure that the Treasury has this whole issue under constant review.

--- Later in debate ---

[Kirsty Blackman]

The hon. Gentleman may have heard my hon. Friend the Member for East Lothian (George Kerevan) say that 50% of the supply chain companies that would be affected are actually based south of the border. This would benefit companies across the UK. The Scottish Government have been incredibly good at reaching their climate change targets. They have worked very hard on renewable electricity. The only problem is that the Conservative Government are getting in our way.

[Rob Marris]

I did hear the hon. Gentleman say that, and I also heard the hon. Lady say, when she was moving new clause 5, that she did not even realise that that was the case. Paradoxically for them, I support the new clause and I hope it is agreed to. It looks attractive to me because such a review could lead to a situation in which taxation on oil and gas is increased appropriately. We will not know until we have the evidence, so let us have the review.

--- Later in debate ---

[Jane Ellison]

Given the SNP’s track record on predicting the oil price, the hon. Gentleman should think carefully before digging—

[Kirsty Blackman]

Will the Minister give way?

[Jane Ellison]

No, I will continue because I want to move on to the points made by the hon. Member for Salford and Eccles.

On amendment 177, I note the comments made by the hon. Member for Wolverhampton South West (Rob Marris). He was quite correct in his analysis of what the amendment would do. I accept the point made by the hon. Member for Leeds North West (Greg Mulholland) that it is a probing amendment, but it would indeed cancel the charge for corporation tax in the 2017-18 financial year, depriving the Government of over £45 billion of corporation tax receipts in that year alone. I of course take the point that he wants support for small business and so on, but we are doing a great deal—for example, the business rates package, which will come into effect next spring. For fairly obvious reasons, we cannot support such a loss to the Exchequer.

New clause 5 was tabled by the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin), but moved by the hon. Member for Aberdeen North (Kirsty Blackman). It calls on the Government to publish a review of corporation tax rates and investment allowances applicable to oil and gas-producing companies in the UK. The UK Government remain 100% behind the oil and gas sector and the thousands of workers and families it supports, but a further review into oil and gas taxes would not serve any useful purpose at this time because the Government have recently carried out such an exercise. In 2014, the Government published “Driving investment: a plan to reform the oil and gas fiscal regime”. It set out the Government’s long-term plan to ensure that the fiscal regime continues to support the objective of maximising the economic recovery of oil and gas, while ensuring a fair return on those resources for the nation. The Government have remained consistent in their approach.

--- Later in debate ---

[Jane Ellison]

That issue was explored in some detail in Committee, so I will not respond on it now.

I want to make the important point that the changes introduced by the Finance Bill will provide the right conditions to maximise the economic recovery of the UK’s oil and gas resources by lowering sector-specific tax rates, updating the current system of allowances and expanding the types of activity that can generate financial relief. Another important point often stated—indeed, it has been made by many people who work in the sector and by investors in it—is that stability and certainty in the tax regime are major factors in making investment decisions. For that reason, we do not think it is right to have another review. Such a review could create further uncertainty at a time when it is not right for the industry, and it could delay investment. I therefore urge Members to reject new clause 5.

[Kirsty Blackman]

Will the Minister give way?

[Jane Ellison]

No. I am sorry, but I want to move on to new clause 11, tabled by the hon. Member for Salford and Eccles. It proposes an independent review into the efficacy of the taxation of securitisation companies. The Government do not consider that necessary. Regulations introduced under a Labour Government in 2006 applied specific corporation tax rules to the profits of securitisation companies. The regulations contain several anti-avoidance tests. As announced in the Budget, HMRC is reviewing these regulations to reflect recent changes to accounting standards and market developments. A consultative working group, made up of independent professional advisers specialising in securitisations, HM Treasury officials and HMRC technical specialists, has met four times since September 2015 and is looking carefully at a range of issues. Revised regulations developed with the group are expected to be published in draft for public consultation later this year or early next year. As this review is already under way, a further assessment is not required.

On Government amendments 152 and 153, clause 63 and schedule 9 make changes to ensure that the patent box operates in line with the newly agreed international framework resulting from the OECD’s base erosion and profit shifting action plan. As currently drafted, the changes in the Bill could result in different definitions of the term “qualifying residual profit” applying to the same parts of the patent box legislation. The amendments address that problem by providing a coherent and consistent definition for that phrase.

I will comment briefly on Opposition new clause 10. The new clause would require the Chancellor of the Exchequer to publish within six months of the passing of the Bill an independent report giving an assessment of the value for money and efficacy of the patent box. The Government do not support the new clause. We only now have full data for the first year of the patent box, and as such the report required by the new clause would not take into account the revisions to the regime made by the Bill. The proposed one-off publication would also fall short of the plans the Government already have in place to publish annual official statistics on the patent box.

The hon. Lady mentioned that she wished to see more evidence of the impact of the patent box. It is worth noting that, for example, GSK recently attributed a £275 million investment to the UK’s competitive tax regime and specifically mentioned the patent box as a reason to invest.

A number of Government amendments have been tabled to clause 65 and schedule 10, which legislate to counteract avoidance involving hybrid mismatches. The amendments make changes to the legislation to ensure that it works as intended and does not create unintended impacts in terms of its interaction with other areas of the UK tax system. The amendments are necessary to secure the forecast yield from the measures.

My right hon. Friend the Member for Cities of London and Westminster (Mark Field) made a typically thoughtful intervention. He mentioned turnover tax versus profits tax—I suspect that is a theme to which he might return. It is worth noting that a turnover tax can produce unfair outcomes, such as penalising businesses that make a loss and those in competitive markets. As I say, I am sure it is an issue to which he may well return.

The Government are committed to making our tax system fundamentally fair, ensuring that people and businesses pay what they owe and contribute to our nation’s success. I therefore once again urge the House to reject the amendments and new clauses tabled by the Opposition.

[Kirsty Blackman]

I will press new clause 5 to a vote.

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

--- Later in debate ---

Last month, the Government launched a consultation to look at partnership taxation, including proposals to clarify the tax treatments of varied types of partnership. We will obviously welcome the SNP’s engagement in that exercise, and I would like to offer some reassurance regarding the recent allegations in the media about the use of SLPs by criminal organisations. The Government take extremely seriously the points raised and are working collaboratively across Departments and law enforcement agencies to tackle crime and fraud robustly.

[Kirsty Blackman]

It is not entirely clear. Will the Minister let us know whether she will support the inclusion of new clause 7 on the basis that, as she has just made clear, it would be a good idea and important to do so? If she is not willing to support it, will she justify why the Government are willing to leave the loophole undiscussed and in place?

[Jane Ellison]

As I have just laid out, consultation is under way, which provides an opportunity to look at those precise issues. As I said, I invite the SNP to engage with that consultation.

Turning to deal with the lengthy speech and case made for Labour’s new clause 13, which provides for a report on the UK tax gap, the tax gap is an official statistic published each October and it is produced in accordance with a code of practice for official statistics, which assures objectivity and integrity. The methodology is judged by independent third parties to be robust, and it has been intensively reviewed and given a clean bill of health by both the International Monetary Fund and the National Audit Office. There is therefore no need for a report on the tax gap. Furthermore, HMRC publishes a methodological annexe alongside the tax gap publication, which provides details of the data and methodology used to produce estimates of the gap.

I think it fair to say that, in speaking about new clause 13, the hon. Member for Salford and Eccles painted a picture which, on the Government of the House and, I suspect in other parts as well, could be regarded as at the very least ungenerous and in many ways inaccurate, unfair and, indeed, unrecognisable, given the way in which the she downplayed the efforts made by the Government. To call that tinkering at the edges is simply nonsense.

Since 2010, the Government have given HMRC £1.8 billion to tackle evasion, avoidance and non-compliance, and, as I said earlier, over that period HMRC has secured £130 billion in additional tax revenues. We have shown considerable ambition, and, as other Opposition Members have been generous enough to acknowledge, international leadership. I therefore do not accept the criticisms that were voiced from the Opposition Front Bench. It is also worth noting that in the summer Budget of 2015, the Government invested a further £800 million to fund additional work to tackle tax evasion and non-compliance.

No Government, particularly the last Labour Government, have come close to being as ambitious as we have been since 2010 in respect of this important agenda. The fact that there was considerable agreement across the House in the earlier part of the debate, and the fact that the Government have accepted the amendment tabled by the right hon. Member for Don Valley, gives some weight to our claim that we are beginning to strike a UK consensus about the need to tackle this problem, and we have a chance to continue to make progress. I know that there is an appetite to return to these issues. There is a real desire to see the Government continue to lead internationally on avoidance and evasion, and the House can be reassured that that is exactly what we intend to do.

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[Mr Chope]

My right hon. Friend is absolutely right. It sounds wonderful, does it not, Mr Speaker: an EU VAT action plan? We were led to believe that the action would provide more flexibility, but when one looked at the small print in the action plan, one could see that the whole thing was steered towards more rigidity, harmonisation and uniformity, exactly as my right hon. Friend has pointed out. Again, is it not fantastic that we will now be able to take responsibility for these things ourselves? I hope that my hon. Friend the Financial Secretary, who will be responding to the debate, will take the opportunity to state that from now on the Treasury will be a lot more open in the way it does its business, both with this House and with the people, and that it will not use disingenuous statements to create an impression that is inconsistent with reality.

It does not seem to me that we will be able to make this change lawfully unless and until we have negotiated our exit. I wish that we could, but as somebody who believes in the rule of law, I think that that is the position we are in. But how different it is from the position that we were led to believe we were in prior to the referendum. I wonder why that is!

[Kirsty Blackman]

I promise that I will speak only briefly, because I know that everybody is keen to get away.

I thank the Government for their movement on this issue already. In my short time as an MP, there has been a major change in VAT on sanitary products, and I appreciate the Government taking that on. We owe huge thanks to the women who have campaigned about this, not only those in the House—such as my hon. Friend the Member for Glasgow Central (Alison Thewliss), the hon. Member for Dewsbury (Paula Sherriff) and other Members from across the House—but all the other women who have put their time and effort into campaigning.

I would like to highlight briefly some of the anomalies that continue in relation to sanitary products and VAT. VAT is still levied on incontinence products. Unless someone fits a very narrow definition of “disabled” under the law, they pay VAT on incontinence products. In the UK, between 3 million and 6 million people suffer from incontinence, and the UK Government receive the VAT from the sale of those products. I do not think that that is right; I think that those individuals should be able to get incontinence products VAT-free, because they are a necessity for those 3 million to 6 million people.

The other anomaly in the system concerns breast pads. If someone who is breastfeeding has an excess supply of milk and is therefore leaking milk, they require breast pads. There are no two ways about it. They absolutely require those pads, or they will be covered in milk. Having done that a number of times myself, I am well aware of the pitfalls.

[Alison Thewliss]

Having breastfed my children, I well know that circumstance and how it can arise. This points to the need for a wider review of VAT—perhaps at the point of Brexit, or even starting now—on items that have emerged into the market. Breast pumps, for example, are still liable for VAT, whereas formula is not. That has a disproportionate effect on people who choose breastfeeding over formula feeding.

[Kirsty Blackman]

I absolutely agree with my colleague. If we are to encourage breastfeeding and to make it as accessible as possible for people, we need to ensure that the products they require to breastfeed well, and without making too much mess, are appropriately VAT-rated. The interesting thing is that the zero-rating guidance was written a long time ago, and it is not appropriate for today’s society. If the Government were, as my hon. Friend suggests, to commit to undertake a proper review and making sure that people are not unfairly penalised for buying essential, necessary products, I would very much appreciate it.

Finance Bill (Fifth sitting)

Kirsty Blackman Excerpts

Thursday 7th July 2016 Public Bill Committees

[Mr Gauke]

Clause 114 makes changes to ensure that charities subject to the jurisdiction of the High Court of the Isle of Man are able to obtain the same VAT release as charities in the United Kingdom. As the hon. Lady says, it is a largely technical clause, and I am not surprised that it is uncontroversial.

The hon. Lady raises the perfectly fair issue of the future of VAT in the light of the Brexit vote. That is indeed one of the issues that we will have to wrestle with. All I can say at the moment is that it is something that we will have to consider. It will depend very much on the nature of the relationship that we have with the European Union, and of course that will be a matter for negotiation, and for decision by the next Prime Minister. Although the hon. Lady raises a fair question, and her point is well made, I fear at this point I am not able to provide any clarity for her.

Question put and agreed to.

Clause 114 accordingly ordered to stand part of the Bill.

Clause 115

VAT: women’s sanitary products

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 1, in clause 115, page 162, line 8, leave out from “liners” to end of line 9.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 2, in clause 115, page 162, line 10, at end insert—

“(d) products that are designed, and marketed, as being solely for use for absorbing breastmilk”.

Amendment 5, in clause 115, page 162, line 14, after “after” insert

“1 April 2017, or on any prior”.

Clause stand part.

[Kirsty Blackman]

I want to start by thanking the Government. I am pleased that it is hoped that clause 115 will stand part of the Bill; it is a good move by the Government. I welcome the huge amount of hard work done last year by my hon. Friend the Member for Glasgow Central (Alison Thewliss) and by Members across the House on raising this matter. I appreciate the work that was done, and the fact that the Government have included this clause in the Bill.

I want to talk about our intention. In amendment 1 we are looking at the removal of the exemption from the zero rate for incontinence products. I understand that the Government’s proposal does not include incontinence products. There is some technical language in VAT legislation relating to people with disabilities and their ability to claim zero-rate VAT on incontinence products. However, that does not apply across the board to everybody who has incontinence problems; it applies only to those who meet the specific criteria that were drafted.

We have real concerns about that. Just because somebody is not registered disabled does not mean that they do not need to use incontinence products. That is a serious issue and the Government should not charge VAT in that case. If somebody has problems with incontinence, these products are necessary for their wellbeing and in their everyday life. The Government need to look again at the earlier legislation.

If we could have broadened the clause to include men’s incontinence products as well as women’s, we would have done that. However, because the clause was titled “VAT: women’s sanitary products”, we could not. That is why we are broadening it to include only women’s incontinence products. For clarity, we are talking about incontinence products that women are required to use but that do not fall into the exemption categories in the original VAT legislation.

Amendment 2 concerns products for the absorption of breast milk. I assume neither of the Ministers here has breastfed, so they may not know all the ins and outs of how this works. I breastfed both my children for about three years in total, so I have some experience. The amendment proposes that

“products that are designed, and marketed, as being solely for use for absorbing breastmilk”

be zero-rated for VAT.

Breastfeeding is incredibly important and has huge health benefits for mother and child. It is completely and totally natural and is what a woman’s body expects to happen after she has had a child. When breastfeeding a child, it takes a while for the milk supply and the child’s feeding to balance. There is a period where the mother has too much or too little milk—usually too much, so there is an awful lot of leaking of milk. People do not usually talk about this in public, but there are stories about it all over the internet. In one case, a woman was at a job interview, at which somebody mentioned children, and suddenly there was a let-down, which means milk coming out at speed. Absorption products are absolutely necessary. It is vital for women to have breast pads that go inside the bra and absorb breast milk when that let-down happens. That happens not to all women, but to a huge number.

These products are required; they are not in any way a luxury. They are not something that women could do without, unless they were willing to bring several changes of clothes with them, which is not particularly practical when they are already doing absolute heaps of washing because they have a new baby.

--- Later in debate ---

I cannot provide any more clarity than that, as the decision will have to be made in the future. I hope that is helpful to the Committee. The differences between the various parties are not particularly significant. I think that there is an acceptance that we want to introduce a zero rate for sanitary products and that we need to do so in a way that is compliant with EU law. There is every prospect that we can do both things by 1 April next year. I hope that clause 115 will stand part of the Bill.

[Kirsty Blackman]

I am not 100% sure of the protocol here. Given the Minister’s suggestion that a future Government might look into the matter, and as he has listened to what we have said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 115 ordered to stand part of the Bill.

Clause 116

SDLT: calculating tax on non-residential and mixed transactions

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

[The Chair]

With this it will be convenient to discuss clause 121 stand part.

[Kirsty Blackman]

On a point of order, Sir Roger. We were sent a list of various territories to which these provisions apply. Some are for Scotland only, some are for Scotland and Northern Ireland, and some are for England and Wales. I am unsure how we proceed to consider this in terms of English votes for English laws. Any guidance you can give us, Sir Roger, would be hugely appreciated.

[The Chair]

I am advised that English votes for English laws does not apply in Committee. If such issues arise, they will be addressed on the Floor of the House. I hope that is satisfactory.

Finance Bill (Sixth sitting)

Kirsty Blackman Excerpts

Thursday 7th July 2016 Public Bill Committees

[The Financial Secretary to the Treasury (Mr David Gauke)]

As we have heard, clauses 126 and 127 make changes to stop the avoidance of stamp duty on shares, which will raise £155 million over the rest of this Parliament. They will ensure that the tax system operates fairly by closing an increasingly exploited loophole in which deep-in-the-money options are used to transfer shares to financial institutions or clearance services that then issue depository receipts that represent those shares and can be traded. The measure was announced by the Chancellor in the autumn statement. Stamp duty or stamp duty reserve tax, together referred to as stamp tax on shares, are charged on the purchase of shares in UK companies at 0.5% of their price. When shares are transferred to a depository receipt issuer or clearance service, a higher rate of 1.5% applies, reflecting the fact that subsequent transactions will no longer be taxed.

HMRC has become aware of a practice of deep-in-the-money options being used to avoid the higher rate charge and the Government have acted to stop it. A call option over shares gives their holder the right to buy the shares at a given price—the strike price—on or before a specified date. The price paid for the option is its premium. Deep-in-the-money call options have a strike price significantly below their market value and a high premium, which means the premium reflects the vast majority of the underlying value of the shares. When shares are transferred using an option, stamp tax is currently charged on the strike price and not on the premium, with the result that when purchasing shares using a deep-in-the-money option, tax could be based on the strike price of only a few pence when each share is really worth much more.

Deep-in-the-money options are being artificially created and then exercised immediately to transfer shares to depository receipt issuers or clearance services, avoiding a significant tax charge. Clearly that is not fair. As a result of the changes being made, the 1.5% higher rate stamp tax charge now applies to either the market value of the shares or the option strike price, whichever is greater. The measure applies to all options entered into on or after 25 November 2015 if they were exercised on or after 23 March 2016. This is a targeted response that will apply to a relatively small number of transactions where HMRC has identified clear evidence of tax avoidance. The change will apply only to transfers of shares to clearance services or depository receipt issuers and only when options are settled with shares, not cash. HMRC carried out public consultation following the autumn statement and no wider market impacts were identified.

The technical consultation was open from 9 December 2015 to 3 February 2016 and received three responses. Stakeholders questioned whether there was evidence of avoidance and the magnitude of the costing. HMRC has clear evidence that the Office for Budget Responsibility certified the costing so no changes were made as a result. Separately, meetings with industry bodies and depository receipt issuers have not indicated wider issues with the measure.

The rationale for costs for the differential rates is that stamp duty and stamp duty reserve tax apply the same rates to paper and electronic share transfers. I hope that that provides some clarity.

In conclusion, the Government have acted quickly to close a new tax loophole. Clauses 126 and 127 will stop avoidance of stamp tax on shares, raising a significant sum for the Exchequer and ensuring that the tax rules operate fairly.

Question put and agreed to.

Clause 126 accordingly ordered to stand part of the Bill.

Clauses 127 and 128 ordered to stand part of the Bill.

[Kirsty Blackman (Aberdeen North) (SNP)]

On a point of order, Mr Howarth. Should we not be dealing with new clauses 3 and 6 with clause 128, or will we vote on them at the end? You have taken clauses 127 and 128 together.

[The Chair]

The hon. Lady is quite right and I beg her pardon. The script I am reading from slightly misled me.

[Kirsty Blackman]

We debated the new clauses on Tuesday morning, but I would appreciate it if we could withdraw new clause 3 and have a vote on new clause 6, or will we do that at the end? That is what I am trying to ascertain.

[The Chair]

The vote on new clause 3 will be at the end. We will now move on, with the greatest clarity available to me, to clause 130.

Clause 130

Landfill tax: rates from 1 April 2017

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

--- Later in debate ---

Brought up, and read the First time.

[Kirsty Blackman]

I beg to move, That the clause be read a Second time.

My apologies for causing confusion earlier. If I am ever lucky enough to be on a Finance Bill again, I promise to try hard not to cause so much confusion.

The Government will not be surprised that we have tabled this new clause, because it concerns an ongoing issue between the Scottish and UK Governments. We feel that it still requires attention. To give a little background, before the incorporation of the police and fire authorities, regional authorities were gifted VAT exemption for the fire and rescue and police services. In 2013, when the single Scottish police force and the fire service were brought in, the VAT exemption failed to be carried over to the new services.

The Government argue that the exemption should not apply because national non-departmental public bodies are outside the exemptions under the Value Added Tax Act 1994. Since the issue has arisen, however, HMRC and HM Treasury have decided that tax breaks should be given to the new transport agency Highways England, which is a national non-departmental public body, and that the exemption should be given to the UK-wide Olympic legacy organisation, London Legacy Development Corporation. Those are comparable organisations in terms of territorial extent and they are national bodies, but they have been given the exemption. The Conservative Government can no longer say that the issue is one of fairness, when it is clearly one of unfairness.

The VAT charge, which is being levied unfairly, is costing Scotland’s emergency services tens of millions every year. We would appreciate the opportunity to spend the money on front-line services instead. We have tabled the new clause in the hope that the Government will look at the issue, particularly in the light of the fact that they have permitted exemptions for Highways England and London Legacy. The Government should consider fairness and parity.

[Mr Gauke]

This is a familiar debate. The new clause requests that the Treasury reviews the VAT treatment of the Scottish police and fire and rescue services, reporting the cost of VAT and what the change would be if they were eligible for a refund. I am tempted to refer the Committee to the speech I have given on numerous occasions previously, as well as to the history of this. Furthermore, the Scottish Government made the decision to reform their public services knowing full well about the VAT implications.

As was explained last year, any use of Treasury resource to review and produce a report into the financial position of Police Scotland and the Scottish Fire and Rescue Service would be unjustified. Neither is eligible to receive VAT refunds under existing legislation, and the Treasury has no intention of amending principles of the VAT refund scheme to change that. I recognise that the SNP has raised the issue before, and I dare say that it will again. However, we cannot support the new clause and, if pressed to a vote, I recommend that the Committee rejects it.

[Kirsty Blackman]

We wish to return to the matter on Report, so I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 4

Fuel duty regulator regime

‘The Chancellor of the Exchequer shall undertake a review of fuel duty to establish the form of fuel duty regulator regime which would best ensure stability of pricing, and report to Parliament within six months of the passing of this Act.’—(Philip Boswell.)

Brought up, and read the First time.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

I beg to move, That the clause be read a Second time.

I understand that we are going to be running through new clauses 1 to 6. If it is your pleasure, Mr Howarth, I will speak to new clause 4, as advised.

[The Chair]

New clauses 2 and 3 have already been debated. We are now dealing with new clauses 4 and 5, which are open to debate. Is that helpful?

[Kirsty Blackman]

So we do not vote on new clauses 2 and 3 now.

[The Chair]

You could do if you wanted to. If there is a desire to have Divisions on them, the procedure allows for it.

[Kirsty Blackman]

Apologies. It was our intention to withdraw them but we are unsure as to the stage at which we should do that.

[The Chair]

They do not need to be moved.

--- Later in debate ---

Brought up, and read the First time.

[Kirsty Blackman]

I beg to move, That the clause be read a Second time.

The new clause would allow the taxation of allowances payable to Members of the House of Lords to be reviewed. Members of the House of Lords receive a tax-free allowance of £300 for every day that they pitch up and sign in. They do not all claim it, but many of them do. In 2014-15, the House of Lords sat for 126 days. That was a low number of days—normally they sit for more—but I have done some calculations on the basis of that. If one peer was there for all 126 days, they would receive £37,800 tax-free for that year. If we imagine that a lot of peers are on the 40% tax rate—many will be in the 45% bracket; not many will be on a lower tax rate—we are looking at a tax loss to the Treasury of £15,120 per peer. If 798 peers pitched up on all those days, that is a tax loss to the Treasury of £12 million.

Most peers do not turn up every day. The average attendance last year was 483 peers on any given day, which means that the loss to the Treasury is more like £7 million every year. That is quite a lot of money, and considering that the majority of those who sit in the House of Lords probably do not have a huge need for that money, I believe, as a member of a progressive party, that it would be better for some of that wealth to be redistributed. Will the Government seriously consider examining whether those people sitting in the House of Lords should, in times of austerity, receive a tax-free payment? The Treasury could easily do something on this issue; it could decide to tax the £300-a-day allowance at the appropriate level, depending on what the Member earns in other income. This is not a good use of taxpayers’ money. The money could come to the Treasury, but we are using it instead for a tax-free allowance for peers.

[Mr Gauke]

The Government oppose new clause 5. We are committed to ensuring a fair and more sustainable tax system for everyone, but the Finance Bill is not the appropriate vehicle to review the system of financial support for Members of the House of Lords. The new clause says that the Chancellor of the Exchequer

“shall undertake a review of the tax-free status of allowances payable to members of the House of Lords”.

The Government recognise the importance of keeping the general system of tax reliefs and allowances under review. That is done routinely by the Treasury and HMRC, who consult on changes to the tax system as part of the policy-making process, but the House of Lords introduced the present system of financial support in 2010. That system and its basis have not changed, and therefore we do not consider that the tax treatment needs to be re-examined at this time. In addition, such a review could not be carried out in isolation; the system would need to be considered as a whole, and the Finance Bill is not the vehicle to consider such constitutional reform.

Finally, this cannot be a matter solely for the Commons; we must respect the constitutional position. For the Commons to intervene on House of Lords reform without any involvement of the other House would not be the right process. It is simply not the place of the Finance Bill to legislate for such a review.

[Kirsty Blackman]

Given that we are asking for a review, it is quite possible that peers and the House of Lords could be consulted and have input into that review. I think the very place to discuss taxation and allowances in taxation is the Finance Bill. That is what we did with respect to workers who work through intermediaries. This is a totally sensible place to discuss this issue.

[Mr Gauke]

As I said, this has to be looked at in the context of the system of financial support for Members of the House of Lords in the round; we cannot look at the tax system in isolation, which is what a review under the Finance Bill would have to do. This is not the right way in which to consider the system of financial support for Members of the House of Lords. Any review of that system would need to be done in the round, and the new clause is not appropriate for the Finance Bill. I therefore urge hon. Members to oppose new clause 5, if it is pressed to a Division.

[Rebecca Long Bailey]

I understand that the Review Body on Senior Salaries published a review of financial support for Members of the other place in November 2009. Our position is that there needs to be a broader review of House of Lords salaries and allowances. We are happy to support the Scottish National party if the new clause is pressed to a vote; it certainly deserves consideration.

[Kirsty Blackman]

A number of my colleagues would love to speak on this issue on Report. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 6

Oil and gas: decommissioning contracts

“(1) The Chancellor of the Exchequer shall commission a review of the ways in which the tax regime could be changed to increase the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure.

(2) In undertaking the review, the Chancellor shall consult the Department for Business, Innovation and Skills, the Oil and Gas Authority; Scottish Ministers; and any other stakeholders that the Chancellor thinks appropriate.

(3) The Chancellor shall report to Parliament on the results of his review within six months of the passing of this Act.”.—(Philip Boswell.)

Brought up, and read the First time.

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

Finance Bill (Fourth sitting)

Kirsty Blackman Excerpts

Tuesday 5th July 2016 Public Bill Committees

[Mr Gauke]

I am disappointed that this clause and the approach that the Government are taking do not have cross-party support, but I am sure that my hon. Friends on the Government side will support the measures.

The first point I have to make in response to the criticism of the clause is that, of course, the Government were elected and one of our manifesto pledges was to take forward measures to take the family home out of inheritance tax. We also have to bear it in mind that not doing anything on inheritance tax is not a neutral option, because the consequence of leaving inheritance tax alone is that, in a period in which property prices increase, more and more households and estates fall within inheritance tax and inheritance tax receipts will go up. It is worth pointing out that inheritance tax receipts in cash terms will continue to be higher under this Government than at any time since the introduction of inheritance tax in 1986, including the period of the last Labour Government between 1997 and 2010, when receipts peaked at £3.8 billion in 2007-08. Let us remember that.

Regarding the impact of not doing anything, do remember that relatively modest properties have increased in value. In 2015, the average house price in London was £552,000 and in the south-east it was £375,000. That means that relatively modest households were potentially finding themselves with an inheritance tax bill, which had not previously been the case under Governments of different colours.

Some technical points were made by Opposition Members. I was asked whether the downsizing rules will apply when the former house was held in a trust. Amendment 19 caters for such situations. The measure will apply only where the former home was held in a type of trust that was set up for the benefit of a person during their lifetime and that person had a right to the trust assets. It does not apply to former homes held in discretionary trusts because they would not qualify for the residence nil-rate band in those circumstances.

I was asked whether the estate would qualify for the allowance if the home is left in trust for a spouse and on their death passes to the children. The answer to that is no. If the home is transferred on death to a life interest trust to the benefit of the surviving spouse, the deceased’s estate will not qualify for the residence nil-rate band because the home is not inherited by a direct descendant at that time. However, the unused portion of the residence nil-rate band can be transferred to the surviving spouse’s estate to be used on their death. If the home subsequently passes to a direct descendant on the death of the surviving spouse or life tenant, their estate will be eligible for the residence nil-rate band.

In terms of exact numbers for the United Kingdom, I do not have those numbers; I will have to write to the hon. Member for Kirkcaldy and Cowdenbeath. However, it is the case that there are beneficiaries of this policy throughout the United Kingdom.

[Kirsty Blackman (Aberdeen North) (SNP)]

We are not denying that there will be people who will benefit from not paying tax or from paying less tax, but in places in Scotland you can get a castle for £1 million—albeit a small castle—and that is in no way, shape or form a family home, and it should not be classed as such.

[Mr Gauke]

I come back to what I was saying earlier, namely, that doing nothing will mean that many properties, often relatively modest properties, will fall within the inheritance tax bands. Doing nothing will mean that a tax that I think most people in this country would support, on the basis that it is designed for the very wealthy, would apply to people who would not necessarily have had high incomes in their lifetimes. That creates a sense of unfairness. There are certainly parts of Edinburgh where relatively modest properties are of such a value as to create concerns about inheritance tax.

--- Later in debate ---

[Mr Gauke]

As we have heard, clause 83 makes changes to ensure that when an individual dies, unused funds in a drawdown pension are not treated as part of their estate for inheritance tax purposes. Without the clause, a small number of pensions would be liable for inheritance tax in some circumstances, which was not our intention.

As the Committee will be aware, funds that remain in a pension scheme do not traditionally form part of a deceased’s estate and are generally exempt from inheritance tax. Nevertheless, under the current tax rules, in a small number of circumstances undrawn pension funds are unintentionally caught. For example, if an individual has designated funds for pension drawdown and then passes away without having drawn down all those funds, an inheritance tax charge may arise.

The Government introduced changes to the pensions tax rules from April 2015 that allowed more people to flexibly access their pension funds from age 55. That flexibility means that the inheritance tax charge might apply to more people who pass away leaving undrawn funds in their pension scheme. It was not intended that an IHT charge should arise in such circumstances; the clause ensures that it will not do so. It changes the existing rules so that an inheritance tax charge will not arise when a person has unused funds remaining in their drawdown pension when they die.

The changes will be backdated and will apply for deaths on or after 6 April 2011, so that they include any charges that could arise from the time when the general rule ceased to apply. The minor changes made by the clause will help to maintain the integrity and consistency of the pensions system while supporting those who have worked hard and saved responsibly throughout their lives. I commend the clause to the Committee.

Question put and agreed to.

Clause 83 accordingly ordered to stand part of the Bill.

Clause 84

Inheritance tax: victims of persecution during Second World War era

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

[Kirsty Blackman]

I am pleased that this clause has been included in the Bill. It seems to be a sensible measure, and I am pleased to note that there will be the ability to tidy up afterwards if anything else needs mopping up. The Scottish National party welcomes the clause.

[Mr Gauke]

I thank the hon. Lady for her support. I would expect such a measure to have the support of the whole Committee. As the Prime Minister said on National Holocaust Day,

“whatever our faith, whatever our creed, whatever our politics”

it is right that the whole country should stand together to remember the

“darkest hour of human history.”

To that end, the Government have committed to building a national memorial in London to show the importance that Britain places on preserving the memory of the holocaust.

The clause provides further reassurance and certainty to holocaust victims by placing on a statutory footing their right not to pay inheritance tax on the compensation they receive as a result of their persecution. I am proud that the Government have extended the inheritance tax exemption even further to include a one-off compensation payment for the victims who endured such an unimaginable trauma in their childhood. I am delighted that the clause has cross-party support.

Question put and agreed to.

Clause 84 accordingly ordered to stand part of the Bill.

Clause 85

Inheritance tax: gifts for national purposes etc

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

--- Later in debate ---

to modern apprenticeships. Given that skills policy is devolved, does the Minister intend to do further work with the Scottish Government to ensure that the implementation of the levy does not impede the Scottish approach to apprenticeships? I commend new clause 2 to the Committee.

[Kirsty Blackman]

I understand that guidance on the apprenticeship levy has been released. The information I was able to find online said that further guidance on things such as provisional bands would be released in June 2016, but I cannot find any. Perhaps it is just that I have been unable to find it, but it would be useful if that guidance was provided.

I draw attention to the issue with employee-owned companies. I was approached by such a company that pays its employees their share of the profits through PAYE, so that share of the profits will be subject to the apprenticeship levy. Had the company been set up to pay dividends to shareholders, it would not have to pay the levy. The staff there have come to me with a specific issue that is unique to them, because they would not have to pay the levy if their company was structured differently. Will the Minister comment on such employee-owned companies?

[Rebecca Long Bailey]

As we have heard, this substantial group of clauses introduces the apprenticeship levy that was announced in the summer Budget and autumn statement in 2015. I shall address my remarks to clauses 87 to 110 as a group, touching on new clause 2, tabled by the hon. Member for Kirkcaldy and Cowdenbeath, and Government amendments 22 to 28.

The apprenticeship levy was announced in 2015 and will come into force in April 2017 as part of the Government’s commitment to reaching 3 million apprenticeships by 2020. The levy will be charged on large employers with annual pay bills in excess of £3 million. According to the HMRC policy paper, that means that less than 2% of employers will pay the levy. It will be charged at 0.5% of an employer’s pay bill through PAYE. Each employer will receive one annual allowance of £15,000 to offset against its levy payment. Employers operating multiple payrolls will be able to claim only one allowance. As we have heard, levy funds will be retained as electronic vouchers in a digital apprenticeship service account. The employer can spend these vouchers on training and end-point assessment from accredited apprenticeship providers, but not on associated costs such as administration of apprenticeships, pay or allowances.

According to the Government’s costings, the levy is expected to raise £2.7 billion in its first financial year, rising to just over £3 billion by 2020-21. HMRC’s policy paper states specifically:

“It is expected that the levy will support productivity growth through the increase in training. It may have a near-term impact in reducing earnings growth, although by supporting increased productivity, it is expected that the levy will lead to increased profitability for businesses, and increased wages over the long-term.”

The paper also assesses the impact on business, stating:

“For employers paying the levy, the measure is expected to have some impact on administration costs and the impact will vary by employer, depending on the size of their pay bill. The policy intention is that they will calculate and pay the levy on a monthly basis. HM Revenue and Customs (HMRC) will engage with employers to discuss and assess the impacts on them.”

Opposition Members are certainly happy to support the introduction of the apprenticeship levy, but we have some concerns that we would like the Minister to provide some reassurances on.

Business representatives have broadly welcomed the levy as a commitment to delivering increased apprenticeship places. However, they have widely expressed concern at the short timeframe for implementation, the lack of guidance to date ahead of the introduction and the limitations that the proposals place on expenditure. Indeed, the Confederation of British Industry has called for a “realistic lead-in time” and for

“taking the time to get this right”,

while EEF, the Manufacturers Organisation, has specifically called for a delay to the levy’s introduction full stop.

In addition, the high target of 3 million apprenticeship starters by 2020 has caused concern that there could be a race to the bottom in terms of the quality of apprenticeships. Mark Beatson, chief economist at the Chartered Institute of Personnel and Development, has said:

“We’d argue that the three million target should not be sacrosanct, and that quantity should not trump quality.”

Can the Minister therefore outline what regulatory framework or safeguards are in place to ensure that the quality of apprenticeships is up to scratch?

The Charity Finance Group is particularly concerned that the charitable sector does not have highly developed human resources departments or accredited apprenticeship training schemes. The sector remains reliant on volunteers whose expenses cannot be remunerated via the apprenticeship levy. The CFG is also concerned that significant charity resources are tied up in public sector contracts or that charitable donors will seek confirmation that their donations will fund a charity’s specific cause.

Indeed, public sector employers themselves have expressed concern that, first, the levy is being introduced at a time of severe funding cuts and, secondly, that it is accompanied by a new requirement in the sector to ensure that 2.3% of workers are apprentices. The Local Government Association has urged that local authorities be exempted from payment but given authority to oversee administration of levy funds locally. Can the Minister confirm that the Government have considered that approach?

There may be scope for local authorities to co-ordinate. For instance, councils could take up a commissioning role in the Digital Apprenticeship Service, or unallocated levy funding could be reallocated to contributing areas and commissioned locally rather than being retained centrally.

Another issue that I would like the Minister to shine some light on today is agency workers and large recruitment agencies. In particular, the largest recruitment agencies have expressed concern to me that they will be liable to make large levy payments for placing employees in other companies, including for periods that would not qualify for a quality apprenticeship—over 12 months.

The Recruitment and Employment Confederation has raised concerns that large recruitment agencies will have to pay the levy on their pay bill when they place employees in temporary employment in different workplaces, so that those employees are paid by the agency but not working for it. Indeed, the TUC has expressed concern that agency contracts may be used by employers to lower their PAYE bill and reduce their levy requirement. Opposition Members are really concerned about that, so can the Minister say what steps are in place to ensure that it does not happen?

Finally, I have some concerns about how the levy will work under a devolved Administration, and I think that the hon. Member for Kirkcaldy and Cowdenbeath shares those concerns, as do his colleagues. That is reflected in new clause 2, where they have requested a review addressing how equitable treatment of the different parts of the UK will be assured in its implementation. Throughout their submissions they have asked some very pertinent questions, and I look forward to hearing the Minister’s responses to them.

The levy will be UK-wide, so employers operating across the devolved nations will pay their contribution based on all their UK employees, irrespective of where they live or work. However, the vouchers that levy-paying employers will be allocated—they can spend them on apprenticeship training—will be based only on the portion of the levy that they pay on the pay bill for their English employees. Funds available for training in devolved Administrations are provided through the block grant, and allocation will be decided upon by the Administration.

There appears to be very little guidance on how the apprenticeship levy will work in the devolved Administrations, so I would be grateful if the Minister could provide more detail today. For example, will the funds levied from a company’s UK operations based in devolved nations be identifiable in the grants made to devolved Administrations? We will support new clause 2 if it is pushed to a vote today.

I turn now to Government amendments 22 to 28, which relate to clauses 88, 90, 91 and 109. Clause 90, as drafted, states that where there is an aggregate pay bill of a group of connected companies that will qualify to pay the apprenticeship levy and each would be entitled to a levy allowance, only one will in fact be entitled to the allowance. The connected companies must nominate which company will qualify. Similarly, clause 91 sets out that at the beginning of the tax year, where two or more qualified charities are connected with one another, only one will be entitled to the levy allowance to be offset against the apprenticeship levy.

Government amendments to those two clauses allow companies and charities that are connected for the purposes of the apprenticeship levy to share their annual levy allowance of £15,000 between them, instead of only one company or charity being entitled to the allowance. There is also a consequential amendment to clause 88, which, according to the Minister’s letter,

“allows for the levy allowance not being the full £15,000, if a group of connected employers choose to split it under sections 90 or 91.”

The Government have stated that these changes are in response to representations they have received, and the Opposition are also aware of concerns from stakeholders about the legislation as currently drafted. We therefore fully support these amendments.

Amendments 26 and 28 are technical amendments that clarify that the definition of a company in clause 90 applies to the whole of part 6 of the Bill relating to the apprenticeship levy. Again, we are happy to support these Government amendments.

In conclusion, the Opposition have long called for Government action to drive growth in productivity. That is the underlying problem that the Chancellor has failed to deal with time and again. Supporting apprenticeships is certainly an important factor in doing so, and we are therefore supportive of these measures in the Bill. However, we have some serious concerns about the machinery of the specific clauses, as I have outlined, and I hope that the Minister can address them in his response.

--- Later in debate ---

[Kirsty Blackman]

A number of people have got in touch on this point. I would appreciate it if the Government could keep it in mind going forward, and consider making changes. Employee ownership is really important, and going forward we will have more and more employee-owned companies. I do not want people to be discouraged from taking that route because they will have to structure their pay bills differently as a result of the apprenticeship levy.

[Mr Gauke]

I note the point the hon. Lady makes. The difficulty is that carving out bonuses that are distributed to employees of owner-managed businesses from the definition of earnings would increase the incentive to remunerate employees via bonuses rather than regular salary. That could create adverse incentives, and would also have a damaging impact on public finances. I understand why the hon. Lady raises this point, but I hope that she appreciates why we have not gone down that particular route.

On the point made by the hon. Member for Salford and Eccles about employment agencies, the apprenticeship levy will be payable by employers who pay earnings subject to class 1 secondary NICs. Where an employment agency supplies labour to a client and is the NICs secondary contributor for those workers, the agency will, like any other employer, be liable to pay the apprenticeship levy, provided that its annual pay bill is in excess of £3 million.

Apprenticeships are now the cornerstone of the skills system and provide opportunities for all sectors and all levels. Everyone stands to benefit from the better-skilled workforce that the apprenticeship levy will help to deliver. It is right that everyone plays their part and contributes to that. There is no reason why an agency could not take advantage of the drawdown from its levy account, if it satisfied the relevant criteria. We are introducing a number of flexibilities in funding for apprenticeships, such as the ability to use funding for equivalent and lower-level apprenticeships where the training is materially different from the learner’s existing qualification or leads to training in a new profession.

On the point raised by the hon. Member for Kirkcaldy and Cowdenbeath about top-slicing for England-only programmes, let me reassure him that we will not top-slice levy accounts to fund administration costs. To answer his question about what regulatory framework will ensure appropriate quality, the levy is just part of the Government’s reforms designed to improve the quality of apprenticeships. We are creating a new institute for apprenticeships to monitor quality standards, and employer-led trailblazer groups, which I touched upon a moment ago, and which allow employers to design new training standards. There are also funding rules; they require 20% off-the-job training and that apprenticeships must last one year. The Ofsted inspection regime applies to English training providers in order to guarantee quality, and there is the levy itself, which fosters employee ownership.

On the devolved authority funding mechanism, we are committed to doing all we can to make the system work for employers, wherever they are in the UK. I am pleased to see that the Scottish Government will shortly consult on how the apprenticeship levy could enhance productivity and growth in Scotland, and I would encourage other devolved nations to do the same. It will not be possible to identify individual employer contributions in the block grant; I wanted to provide that point of clarity. On the wider issue of productivity, the Government remain committed to improving productivity by increasing the quantity and quality of apprenticeships. The apprenticeship levy will enable us to do that. That is why I am pleased that we have these clauses in front of us, and I hope that they will have the support of the Committee.

Question put and agreed to.

Clause 87 accordingly ordered to stand part of the Bill.

Clause 88

charge to apprenticeship levy

Amendments made: 22, in clause 88, page 144, line 32, leave out

“any of sections 90 to”

and insert “section”.

Amendment 23, in clause 88, page 144, line 33, leave out “of £15,000”.

Amendment 24, in clause 88, page 144, line 33, at end insert—

‘( ) The amount of the levy allowance is £15,000 (except where section 90 or 91 provides otherwise).”—(Mr Gauke.)

Clause 88, as amended, ordered to stand part of the Bill.

Clause 89 ordered to stand part of the Bill.

Clause 90

connected companies

Amendments made: 25, in clause 90, page 145, line 33, leave out subsections (1) to (3) and insert—

‘(1) Two or more companies which are not charities form a “company unit” for a tax year (and are the “members” of that unit) if—

(a) they are connected with one another at the beginning of the tax year, and

(b) each of them is entitled to a levy allowance for the tax year.

(2) The members of a company unit must determine what amount of levy allowance each of them is to be entitled to for the tax year (and the determination must comply with subsections (3) and (3A)).

But see subsections (3C) and (3H).

(3) A member’s levy allowance for a tax year may be zero (but not a negative amount).

(3A) The total amount of the levy allowances to which the members of a company unit are entitled for a tax year must equal £15,000.

(3B) A determination made under subsection (2) (with respect to a tax year) cannot afterwards be altered by the members concerned (but this does not prevent the correction of a failure to comply with subsection (3A)).

(3C) If subsection (3E) applies—

(a) HMRC must determine in accordance with subsection (3D) what amount of levy allowance each of the relevant members (see subsection (3E)(a)) of the unit concerned is to be entitled to for the tax year, and

(b) accordingly subsection (2) is treated as never having applied in relation to that company unit and that tax year.

(3D) The determination is to be made by multiplying the amount of levy allowance set out in each relevant return (see subsection (3E)(a)) by—



where T is the total of the amounts of levy allowance set out in the relevant returns.

The result is, in each case, the amount of the levy allowance to which the relevant member in question is entitled for the tax year (but amounts may be rounded up or down where appropriate provided that subsection (3A) is complied with).

(3E) This subsection applies if—

(a) HMRC is aware—

(i) that two or more members of a company unit (“the relevant members”) have made apprenticeship levy returns (“the relevant returns”) on the basis mentioned in subsection (3F), and

(ii) that those returns, together, imply that the total mentioned in subsection (3A) is greater than £15,000,

(b) HMRC has notified the relevant members in writing that HMRC is considering taking action under subsection (3C), and

(c) the remedial action specified in the notice has not been taken within the period specified in the notice.

(3F) The basis in question is that the member making the return is entitled to a levy allowance (whether or not of zero) for the tax year concerned.

(3G) If any member of the company unit mentioned in subsection (3E)(a) is not a relevant member, that member is entitled to a levy allowance of zero for the tax year.

(3H) If subsection (3J) applies—

(a) HMRC must determine in accordance with subsection (3I) what amount of levy allowance each of the members of the unit concerned is to be entitled to for the tax year, and

(b) accordingly subsection (2) is treated as never having applied in relation to that company unit and that tax year.

(3I) Each member of the unit is to be entitled to a levy allowance for the tax year equal to—



where N is the number of the members of the company unit for the tax year.

Amounts determined in accordance with the formula in this subsection may be rounded up or down where appropriate provided that subsection (3A) is complied with.

(3J) This subsection applies if—

(a) the total amount paid by the members of a company unit in respect of apprenticeship levy for a tax year or any period in a tax year is less than the total of the amounts due and payable by them for the tax year or other period concerned,

(b) either the members of the unit have made no apprenticeship levy returns for any period in the tax year concerned or the returns that have been made do not contain sufficient information to enable HMRC to determine how the whole of the £15,000 mentioned in subsection (3A) is to be used by the members of the unit for the tax year,

(c) HMRC has notified all the members of the unit in writing that HMRC is considering taking action under subsection (3H), and

(d) the remedial action specified in the notice has not been taken within the period specified in the notice.

(3K) Subsection (3A) is to be taken into account in calculating the total of the amounts due and payable as mentioned in subsection (3J)(a).

(3L) The Commissioners may by regulations provide that in circumstances specified in the regulations the members of a company unit may alter a determination made under subsection (2) (despite subsection (3B)).

(3M) In this section “apprenticeship levy return” means a return under regulations under section 94(4).”

Amendment 26, in clause 90, page 146, line 1, leave out “section” and insert “Part”—(Mr Gauke.)

Clause 90, as amended, ordered to stand part of the Bill.

Clause 91

connected charities

Amendment made: 27, in clause 91, page 146, line 5, leave out subsections (1) to (3) and insert—

‘(1) Two or more charities form a “charities unit” for a tax year (and are the “members” of that unit) if—

(a) they are connected with one another at the beginning of the tax year, and

(b) each of them is entitled to a levy allowance for the tax year.

(2) The members of a charities unit must determine what amount of levy allowance each of them is to be entitled to for the tax year (and the determination must comply with subsections (3) and (3A)).

But see subsections (3C) and (3H).

(3) A member’s levy allowance for a tax year may be zero (but not a negative amount).

(3A) The total amount of the levy allowances to which the members of a charities unit are entitled for a tax year must equal £15,000.

(3B) A determination made under subsection (2) (with respect to a tax year) cannot afterwards be altered by the members concerned (but this does not prevent the correction of a failure to comply with subsection (3A)).

(3C) If subsection (3E) applies—

(a) HMRC must determine in accordance with subsection (3D) what amount of levy allowance each of the relevant members (see subsection (3E)(a)) of the unit concerned is to be entitled to for the tax year, and

(b) accordingly subsection (2) is treated as never having applied in relation to that charities unit and that tax year.

(3D) The determination is to be made by multiplying the amount of levy allowance set out in each relevant return (see subsection (3E)(a)) by—



where T is the total of the amounts of levy allowance set out in the relevant returns.

The result is, in each case, the amount of the levy allowance to which the relevant member in question is entitled for the tax year (but amounts may be rounded up or down where appropriate provided that subsection (3A) is complied with).

(3E) This subsection applies if—

(a) HMRC is aware—

(i) that two or more members of a charities unit (“the relevant members”) have made apprenticeship levy returns (“the relevant returns”) on the basis mentioned in subsection (3F), and

(ii) that those returns, together, imply that the total mentioned in subsection (3A) is greater than £15,000,

(b) HMRC has notified the relevant members in writing that HMRC is considering taking action under subsection (3C), and

(c) the remedial action specified in the notice has not been taken within the period specified in the notice.

(3F) The basis in question is that the member making the return is entitled to a levy allowance (whether or not of zero) for the tax year concerned.

(3G) If any member of the charities unit mentioned in subsection (3E)(a) is not a relevant member, that member is entitled to a levy allowance of zero for the tax year.

(3H) If subsection (3J) applies—

(a) HMRC must determine in accordance with subsection (3I) what amount of levy allowance each of the members of the unit concerned is to be entitled to for the tax year, and

(b) accordingly subsection (2) is treated as never having applied in relation to that charities unit and that tax year.

(3I) Each member of the unit is to be entitled to a levy allowance for the tax year equal to—



where N is the number of the members of the charities unit for the tax year.

Amounts determined in accordance with the formula in this subsection may be rounded up or down where appropriate provided that subsection (3A) is complied with.

(3J) This subsection applies if—

(a) the total amount paid by the members of a charities unit in respect of apprenticeship levy for a tax year or any period in a tax year is less than the total of the amounts due and payable by them for the tax year or other period concerned,

(b) either the members of the unit have made no apprenticeship levy returns for any period in the tax year concerned or the returns that have been made do not contain sufficient information to enable HMRC to determine how the whole of the £15,000 mentioned in subsection (3A) is to be used by the members of the unit for the tax year,

(c) HMRC has notified all the members of the unit in writing that HMRC is considering taking action under subsection (3H), and

(d) the remedial action specified in the notice has not been taken within the period specified in the notice.

(3K) Subsection (3A) is to be taken into account in calculating the total of the amounts due and payable as mentioned in subsection (3J)(a).

(3L) The Commissioners may by regulations provide that in circumstances specified in the regulations the members of a charities unit may alter a determination made under subsection (2) (despite subsection (3B)).

(3M) In this section “apprenticeship levy return” means a return under regulations under section 94(4).”—(Mr Gauke.)

Clause 91, as amended, ordered to stand part of the Bill.

Clauses 92 to 108 ordered to stand part of the Bill.

Clause 109

general interpretation

Amendment made: 28, in clause 109, page 155, line 35, at end insert—

““company” has the meaning given by section90(5);” —(Mr Gauke.)

Clause 109, as amended, ordered to stand part of the Bill.

Clause 110 ordered to stand part of the Bill.

Finance Bill (First sitting)

Kirsty Blackman Excerpts

Thursday 30th June 2016 Public Bill Committees

[Rob Marris]

I appreciate the recommendation of the Smith commission, but the clause simply introduces a further layer of complication to the overall tax regime in the United Kingdom—we are still the United Kingdom, of course. As I understand it, we are now almost back to how it was in my youth—and, I suspect, yours as well, Sir Roger—with the differential rates on earned and unearned income and all that sort of stuff, because EVEL is now bleeding into the income tax regime, depending on whether a certain source of income is a reserved or a devolved matter.

I tend to agree with my hon. Friend the Member for Rhondda (Chris Bryant), the former shadow Leader of the House, who called the current EVEL procedure an “incomprehensible mess”. I also tend to agree with the Chair of the Procedure Committee, the hon. Member for Broxbourne (Mr Walker), who described the proposals as “over-engineered”. It will get incredibly messy unless there is full fiscal devolution—another debate we may or may not get on to today.

On a technical matter, I am indebted to the Chartered Institute of Taxation, as I suspect many hon. Members are, for its helpful suggestions, and this is an arena in which we get to put forward some of its suggestions. One of its technical suggestions is about the table in clause 6. It wonders whether including a table of rates in the statute, which is introduced as having a general effect, might as a matter of statutory interpretation cause issues if the general effect conflicts with a specific effect of other provisions. I hope the Minister can come up with a short piece on that, as regards statutory interpretation.

[Kirsty Blackman (Aberdeen North) (SNP)]

We argued against English votes for English laws all the way through. It was a dreadful initiative. The Government intend to reassess English votes for English laws at the end of this year and look at how it has worked, so I think we might be jumping the gun on some of the income tax measures. I will not move against them, but this is possibly doing things a bit too soon. Obviously, we will have our own Scottish rate of income tax, which we can set; it is fabulous that the devolved Administration will be able to do that. However, Scottish MPs will be excluded from discussions on income tax—a major, serious part of the Finance Bill—and that further compounds the difference between Scottish MPs and English and Welsh MPs in this House. The impression given to the general public by the change in the law to enable that to happen will be even worse, and that will hasten the break-up of the United Kingdom.

[Mr Gauke]

First, I will respond to the hon. Lady. I have certainly heard the comment by the likes of the hon. Member for Perth and North Perthshire (Pete Wishart) that the people of Scotland could not care less about English votes for English laws. He changed his position, and then found himself somewhat outraged by EVEL.

It is perfectly reasonable that when measures affect one part of the UK but not another, those MPs who represent the constituencies affected by it are able to express their views on it and vote on it, and that any such measure should have the support of people representing that part of the UK.

[Kirsty Blackman]

I understand that the issue is whether or not a measure affects people in those areas, but will the Minister not concede that changes on income tax rates might have a knock-on effect, albeit indirect, on people in Scotland, particularly those who live around the borders?

[Mr Gauke]

I suppose that is true, but if one wanted to follow the logic of that argument through, independence for Scotland would certainly have a very significant knock-on effect on people living south of the border, and I suspect that the hon. Lady does not advocate any future referendum on that issue requiring the consent of the whole of the United Kingdom. Sir Roger, we could debate this matter for some time, but I suspect the Committee’s appetite to do so is not great.

I do not think that this measure particularly adds to complexity. Non-savings income and non-dividend income, such as employment income, are already taxed differently from other sources of income, such as savings and dividends, so separating out in legisation the rates of income tax on non-savings and non-dividend income from savings will not introduce any real additional complexity. Employees, individuals and pension providers will see no changes to the level of tax paid or the way they pay tax as a result of legislation being introduced in the Finance Bill to separate out the main rates of income tax.

On the specific technical point made by the hon. Member for Wolverhampton South West, if I may, I will write to him on that.

Question put and agreed to.

Clause 6 accordingly ordered to stand part of the Bill.

Clause 19

Standard lifetime allowance from 2016-17

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