Draft Over the Counter Derivatives, Central Counterparties and Trade Repositories (Amendment, Etc., and Transitional Provision) (EU Exit) Regulations 2018

Kirsty Blackman Excerpts

Tuesday 22nd January 2019 General Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

I am not the Scottish National party’s most regular contributor to this Committee, so I have some learning to do before I get to the level of knowledge that many people in this room have. I have a few questions in relation to the information that has been provided to us and also some of the information that has not been provided to us.

My first question is about the lack of consultation on this statutory instrument. The explanatory memorandum says clearly that no consultation has been undertaken on the instrument, although it says that the Government have been interacting with the Bank of England and the FCA in relation to the drafting of this regulation, which I appreciate. I am pleased that the Treasury put it online back in October so that people could access it. It would be useful to understand how many people engaged with that process. Were representations made by individuals and companies or those who use these regulations and are governed by them? If the Government put them online and only four people see them, there seems little point in doing so. The Government should publicise the fact that the regulations are online for people to comment on. Also, it would be useful for people who might want to comment to know that the Government take comments on board and might actually make changes to the draft instrument before it comes to Committee. Even the Minister’s making a statement to that effect would be useful for the people who think, “Is there a point in me spending my time writing a submission on this SI when the Government are just going to ignore me, anyway?” If the Government were willing to say that they would take on board representations, it would be helpful.

My second question is about the intragroup regime and the period of time when it will happen, which is a three-year period with the possibility for extensions, as the Minister mentioned. The explanatory notes state that

“equivalence decisions will be sought, allowing for the establishment of new permanent exemptions.”

I am not clear about the exact process for those equivalence decisions being made, as mentioned by the hon. Member for Oxford East. Are such decisions difficult to achieve or relatively smooth? If we have the three-year time period, will there be sufficient time for equivalence decisions to happen, and in adequate ways so that the legislation equivalence rules that we have going forward are appropriate? Does the Minister foresee that being a smooth or a difficult process, and, to allow those things to happen, will it require input from lots of people whom we have no control over?

My next point relates to no deal. The explanatory memorandum states that the Government do not anticipate no deal happening, although, since it was written, things look a little different from the Government’s point of view. I am still not particularly clear on any of the statutory instruments that come forward. A lot of them seem to be things to do with no deal as well as things to do with deal. I am not always entirely clear which bits relate to no deal and which bits relate to deal. Not necessarily for this instrument, but going forward, it might be better for the Government to be clearer in the explanatory memorandum about which parts of any SIs would be necessary in all outcomes for Brexit: which ones would be necessary in a no-deal scenario and also which ones would be necessary in a deal scenario, but not until the end of the implementation period. There are all these different outcomes, and I do not have the level of clarity needed. Given that we have quite a packed parliamentary agenda, it is difficult to spend a huge amount of time on legislation.gov.uk trying to find out all these bits of information.

The last point was in relation to the impact assessment. I managed to find the SI online. If you look on the back page there is a direct link to legislation.gov.uk—probably you never thought to look on the back page, but it is there. That takes you through the statutory instrument. I do not know whether it has got the explanatory memorandum there. On that web page, which I checked before I came here, it says that no impact assessment has been prepared for this SI—which is directly contradicted by the information that we have in the explanatory memorandum, which says that an impact assessment has been prepared—[Interruption.] I absolutely agree that it is a mess. I do not understand why, if the Government have prepared an impact assessment, we need to wait until the Regulatory Policy Committee sees the impact assessment before we can see it. Surely it could come to hon. Members, with the caveat that it has not been through that Committee? Then we would be in a position to make better decisions.

One of the lines in the explanatory memorandum says:

“It is difficult to quantify the size of the market affected as the instrument covers both the financial sector and non-financial counterparties”.

I would expect the impact assessment to cover that information and provide Committee Members with the information included. If the information is not there for the explanatory memorandum, I am concerned about how good the impact assessment must be—if it does not include proper information about the financial impact on various types of companies and organisations. The way this has been put together is not great. I am particularly concerned about the lack of an impact assessment. As I said, MPs do not have a huge amount of time right now. If we had been provided with the impact assessment at the outset, this meeting would have been a lot quicker, given that we would have been able to read all the information before coming here and easily have it to hand.

The fact that the shortened web address is written throughout the explanatory memorandum and the actual address is only at the very back is not particularly helpful. It means that MPs are wasting time trying to find these things, when the full web address could have been provided throughout the text of the explanatory memorandum.

To push on the point that the hon. Member for Oxford East made, if the Minister can give the Committee today a date when the impact assessment will come, or, at least, some kind of timeline, that would give us a level of comfort. Going forward, though, it is totally inappropriate for MPs to be asked to consider statutory instruments when an impact assessment has been written and is required, yet we are not provided with it until after we have considered the statutory instrument—at which point it is too late for us to make any changes to it. If the Minister could give some comfort and, going forward, look at any other SI Committees so that this shambles does not happen again, that would be incredibly helpful.

[Maria Eagle]

I rise to support my hon. Friend the Member for Oxford East on the points she made, and on some of the points made by the hon. Member for Aberdeen North. I was appointed to this Committee last week. I do not normally spend my time considering derivatives of the over-the-counter version—or any other kind. However, having spent many years as a Minister—and therefore knowing how to look at legislation—I found, when I looked at this instrument, something else that I would like to raise with the Minister. When I was a Minister I used to spend my time, before I came to Committees, making sure that my officials would bring along to the Committee all instruments referred to in the regulations, to enable the Committee, if it wished to look in detail at some wording, to be able to understand what that meant. I thought that having the other instruments in the Committee room was the norm. What we have here is an instrument that refers in terms, for example in part 2, to regulations from 2013, and then sets out:

“In regulation 2, in paragraph (1), for the definition of ‘the EMIR regulation’ substitute—

‘“the EMIR regulation” has the meaning given in section 313 of the Act;’.”

To understand the meaning of that, one has to have the regulation to hand. I do not see any copies of the regulation that the instrument refers to here. It was always the practice when I was in Government, and I am sure it was the practice of some Conservative members of the Committee who have been in Government in their time too, to have in Committee all the regulations referred to and being amended, so that if somebody had a particular point to make about a particular part we could see clearly what was being changed, what the implementation of that change would mean, and whether the wording appeared appropriated.

Here, we are left with nothing, in practice, but the explanatory memorandum. We have to take on trust—not that I am saying that I do not trust the Minister—that what we are being told in the explanatory memorandum is in fact being done by the wording that we see in the instrument. I think it is poor practice, if I might say so, and I hope that he will take this back to his Department, to come to Committee with instruments that effectively alter other regulations without making them available in the room. Any officials who had left me in that position as a Minister would have known about it. In fact, I used to ensure that such things were correct in Committee.

I know that there is a big burden of statutory instruments at present, and I understand that Ministers are hard pressed, but it is not right in terms of proper scrutiny for us not to be able to understand the meaning of the regulations. Regulations under the European Union (Withdrawal) Act 2018 are more complex than many because they often simply refer to amendments to primary legislation. Here we have a suite of three regulations, but I was not on the Committees that considered the other two.

It makes it increasingly difficult for an ordinary, intelligent person to understand what the hell is going on. That is not good for scrutiny, for the Minister, for the Government, or for good governance, and it leads us to the impression that what is happening is rushed, has not been thought through, and may be defective. If it is, it will not be possible for members of the Committee to pick up the defects. That is a real problem for proper parliamentary scrutiny.

My hon. Friend the Member for Oxford East referred to part 2. When I was reading the explanatory memorandum, one of the things that jumped out at me, as it clearly jumped out at her, was in paragraph 7.16, on page 6:

“Part 2 of this instrument also introduces a power for the FCA to suspend the reporting obligation for a period of up to one year…in a scenario where there is no registered or recognised UK”

trade repository. I immediately wondered in what circumstances that might be the case. The Minister made a reference to that, and said that it would be highly unlikely—but it is not so unlikely that steps are not being taken in the instrument to deal with it.

Can the Minister tell me how many UK-registered trade repositories there are, and in what circumstances—unlikely though they might be—he envisages that this part of the instrument might have to come into force, or that the powers specified might have to be used? As he said, the whole purpose of the regulations, whether they are operated by EU institutions or by the Treasury, the Bank and the Financial Conduct Authority, is to try to prevent the disaster of the global financial crisis that resulted last time from insufficiently prudent, untransparent regulation of such trades. Will he give us a bit more detail about why he has felt it necessary to include such a provision in the regulations?

I agree with the remarks made thus far by my hon. Friend the Member for Oxford East and others about the lack of any kind of impact assessment. It struck me that there is not even a guesstimate of the cost. Will the Minister tell us what trades we are talking about? If the regulations were referring to a couple of hundred thousand pounds a year, we would not worry as much about it as we would if we were dealing with the equivalent of a quarter or a half of our GDP. Will he tell us what level of financial dealings the regulations relate to?

[Kirsty Blackman]

I am struck that in these Committees, the Government do an impact assessment for more than £5 million of costs to businesses, but not for under £5 million of costs to businesses. If that is all the information we have to go on, that is sketchy, at best.

[Maria Eagle]

The hon. Lady makes a good point, and perhaps the Minister would like to comment on that as well.

The other point I would like to make is about the financial and resource burdens that the transfers made through the regulations will put on those who inherit the obligations and functions that used to be carried out by the EU institutions. That appears to be the Bank and the Prudential Regulation Authority part of it, the Financial Conduct Authority and, of course, the Treasury. There is nothing I can see that suggests that extra resources will be passed on to the FCA and the PRA part of the Bank for dealing with the additional obligations that the regulations place upon them. While they may well have experts in such instruments and this kind of trading already on their staff, the work that they are going to be expected to do as a consequence of the regulations, if they have to be used, would be different to the work they are already doing.

What financial provision are the Government making to ensure that the FCA and the Bank have the relevant staff and resourcing to do this very important job that he is asking us to bestow on them? There does not seem to be any information about the impact on those who will acquire the extra burdens of doing this work, or the likely cost to the Government, the Bank, the FCA and any other authorities, of carrying it out in a way that will work as well as their current arrangements.

--- Later in debate ---

[John Glen]

Because I wanted the opportunity to explain face to face in the Committee and, given the need to secure the SIs for industry, as I made clear in the quotation from TheCityUK, it is not the perfect process. [Interruption.] I understand the point that the hon. Lady makes but I think I have responded to it as reasonably as I can.

[Kirsty Blackman]

Lastly, although the Minister has not said it, it appears to me that the issue might be with the Regulatory Policy Committee not getting through the impact assessments that are sent to it. Given that we are going to have an awful lot of SIs and, presumably, an awful lot of impact assessments, that is likely to become more of a problem. Is it necessary for the assessment to go to the Regulatory Policy Committee? Is there a way we could see it without it going to the RPC?

[John Glen]

The responsibility rests ultimately with me and my officials, and I have to take it on board. It is for me to be accountable for the impact assessments—I am not blaming anyone else. I will continue to do everything I can over the coming hours and days.

The hon. Lady mentioned impact. The draft regulations will not place new regulatory burdens on UK firms. We expect a one-off familiarisation cost for legal experts to examine the draft regulations, which we estimate will have an impact on just over 400 firms and cost £350,000 in total.

The regulatory requirements for trade repositories as defined in title VII of EMIR, will remain largely unchanged. The FCA has been given the power to supervise trade repositories against those requirements, but it has been in close engagement with trade repositories to ensure that their transition is as smooth as possible. Trade repositories will have to familiarise themselves with changes to the supervision and enforcement procedures under the UK regime, but we do not anticipate that that will be burdensome or that the familiarisation costs will be high.

The hon. Member for Oxford East asked how likely the FCA is to use the power to suspend the reporting obligation. It is almost certain that it will not need to use that power because the trade repositories regulations enable it to process advance applications for new trade repositories, or convert authorisations for existing UK trade repositories, to ensure that the UK has operational trade repositories from exit day.

Draft Money Laundering and Transfer of Funds (Information) (Amendment) (EU Exit) Regulations 2018

Kirsty Blackman Excerpts

Tuesday 8th January 2019 General Committees

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

It is a pleasure to see you in the Chair, Ms McDonagh. May I wish everyone on the Committee a happy new year?

Once again, I must say that it feels a little like groundhog day: we are here again to discuss a Treasury statutory instrument that would make provisions for the financial regulatory framework after Brexit in the event that we crash out without a deal. On each such occasion, my Labour Front-Bench colleagues and I have spelled out our objections to secondary legislation being used in this manner, as well as the challenges of ensuring proper scrutiny of the sheer volume of legislation that passes through Delegated Legislation Committees. We have expressed many times our frustration about having to spend time and resources creating a framework that might never be used, and about the public money that has been spent on planning for what should not be viewed as a potential eventuality.

Because of the dangerous game now being played, statutory instruments considered by Committees such as this may not disappear into the ether on 29 March. They could represent real and substantive changes to the statute book, so they need proper and in-depth scrutiny. Equally, we must bear in mind the stress that financial markets would be under in the scenario that the Government allowed such a situation to materialise. Such instruments must be considered through that lens.

The draft regulations follow on from the Sanctions and Anti-Money Laundering Act 2018. I do not want to rerun the many issues of contention that were debated during the passage of that Act, but I think a few significant points that relate to the draft regulations bear further scrutiny, and I hope the Minister will respond to them.

First, it would be helpful to have further information about how the FCA will assess equivalence of third countries’ legislation, compared with that of EU countries, following the fourth money laundering directive. Will it use the Commission’s list initially and then expand or contract it in the future? If so, what methodology and resources will be used to undertake that? Such a process could obviously be very resource-intensive—a point that I shall come back to later.

Secondly, and relatedly, the existing legislation refers to the Commission’s high-risk third country list. The draft regulations would onshore the EU list as of exit day and then commit the UK to updating the list. I understand from debates in the other place that that would be undertaken via the affirmative procedure for reasons of speed.

Has the Government’s thinking developed on enabling parliamentary scrutiny of changes to that list? Clearly, there is a need for speed, but that surely has to be balanced with appropriate oversight. As with sanctions policy, it would surely make sense to co-ordinate this with the EU, even if it is not done formally, given the potential resource implications of having to research many different jurisdictions speedily. We do not have an indication in the accompanying notes of how that process would occur.

[Kirsty Blackman (Aberdeen North) (SNP)]

I was going to ask a question in a similar vein about the high-risk countries. I would have less concern if the same list as the EU was used on day one. However, looking for comfort in the future, if the list is going to be changed, and particularly if it will diverge from the EU’s list, parliamentary scrutiny should be brought to bear on that.

[Anneliese Dodds]

I absolutely agree with the hon. Lady. We have seen a lot of contention around the definition of which countries go on the list. There have been criticisms, even at EU level, of how transparent or otherwise that process has been for countries going on or coming off the list. It is therefore important that we get it right if we end up adopting this process in the UK. We need to make sure that it is fully transparent and accountable. It can have a significant impact on the jurisdictions that are affected, so I am grateful to the hon. Lady for raising that point.

Thirdly, I hope the Government will make clear what our co-operation with the EU on anti-money laundering efforts will look like in the future. Currently, we only seem to have the ubiquitous phrase that on this issue the Government are seeking a “deep and special” future relationship with the EU. The Minister provided us with a little more in his comments, saying that we would continue to engage with international processes—I am sorry I did not catch his exact wording.

We need more detail on this. That is important, given the current developments with the recast of the EU’s anti-money laundering machinery, including its decision to implement more transparency for trusts. The UK’s trust register, as I understand it, is not yet complete and it is not publicly available, even to the limited extent that is proposed in the reform of the anti-money laundering regime. That reform would cover business-like trusts and enable their beneficial owners—or the people who would benefit from their proceeds—to be viewable by those who could prove a legitimate interest in knowing about them, for example journalists as well as law enforcement agencies. That would go beyond the UK regime. It would be helpful to know how we, as a nation, envisage co-ordinating with that process.

We also need more information, given the continuing role of UK-based structures in facilitating hidden transactions. I was astonished to see, in response to a parliamentary question I tabled, that the Government’s loudly promoted crackdown on Scottish limited partnerships has been anything but. In October 2018, there were no less than 3,542 SLPs that said they could not reveal ownership information—which is, of course, now required by law—because of their own failure to obtain that information, and more than 600 that said they could not provide it because, despite knowing who their people of significant control were, they had not been able to collect the required particulars from them. Those figures had only reduced by almost a third and 12% respectively over the previous year, so there really has not been a crackdown in this area, despite what was promised. That is problematic, particularly when other countries are looking nervously at what is happening in relation to these shell companies in our jurisdiction, including EU countries.

Fourthly, I am unclear about one element of drafting. Regulation 8(b)(i) changes an emphatic “must” to a weak “may”, to coin a phrase—I am sorry, I could not help myself. Specifically, the amended regulations will state that the commissioners—HMRC—may, rather than must,

“make arrangements to ensure that the NCA are able to use information on the register to respond promptly to a request for information about the persons referred to in”

different regulations. It is not clear to me why that change has occurred. It seems to weaken the language and there is no explanation of it in the memorandum. Surely the parameters for such co-ordination are critical, especially in a context in which we lack any indication from the Government of when they will introduce their promised offence of failure to prevent economic crime, despite the consultation on the subject having ended many months ago.

Fifthly, and perhaps most substantially, there is—as with so many recent statutory instruments—a question about resourcing. Regulation 5(3)(b) grants the FCA the power to make further technical standards relating to the area. FCA funding has been increased by £5 million to cover withdrawal work, but as far as I can see, that is just to aid the transition; there does not seem to be any commitment to maintain increased funding to allow it to use the new powers that it has been given via such instruments. The FCA’s annual business plan includes the following statement about EU withdrawal:

“Although our Annual Funding Requirement has increased by £5m to cover EU Withdrawal work, we have still made difficult and challenging decisions about our priority activities across all business areas that are not related to work on EU Withdrawal, including limiting the number of new initiatives we’ve taken on. We recognise the particular significance of EU Withdrawal on wholesale financial markets, investment management and the general insurance sectors, and our decisions have been driven by our recognition of the capacity of industry to absorb change.”

Just yesterday, I discussed with the Thames Valley police and crime commissioner his concerns about resourcing for the FCA with respect to adequately identifying and prosecuting fraud—not an area that is covered by the EU withdrawal process, but one that needs to be provided for appropriately. There still seems to be a lack of recognition from the Government about the impact of this SI and others on the FCA’s existing work programme. The FCA’s activity was criticised in FATF’s assessment last month for having cited only eight firms and collected just £254 million in penalties for anti-money laundering violations over the past five years. The Minister mentioned OPBAS; I am sure that he will be aware that the supervision of professions, which was meant to be tightened up, streamlined and made more coherent through OPBAS, was another area criticised in FATF’s assessment.

Interestingly, the draft regulations make no mention of the National Crime Agency, despite concerns expressed in the FATF report about the lack of resources for the NCA, particularly its financial intelligence unit. The Committee may be aware that there has been considerable debate in the specialist press about whether the UK’s glowing assessment by FATF was warranted, particularly given the lack of action to better resource the NCA—an issue highlighted in FATF’s last evaluation in 2007, which stated that

“the UK financial intelligence unit needs a substantial increase in its resources and the suspicious activity reporting regime needs to be modernised and reformed.”

FATF also flagged continuing problems with the lack of verification of data on the Companies House register, a subject that I have repeatedly raised in the House. Because of the FIU’s lack of resources, FATF concluded that it

“misses the opportunity to search for criminal activity that might otherwise be missed by”

investigators who

“mine the SARs database for issues linked to their own geographical or operational remits.”

I understand that the UK assigns only nine employees to analyse hundreds of thousands of suspicious activity reports, or SARs, each year.

Back in 2007, the UK pledged that it would significantly increase the staffing level of the FIU to 200, but press reports from last October suggested that it has only 80 full-time employees and that the unit has actually lost one in five of its staff over the past 11 years. Apparently, the Government have committed to increasing staffing in this area, so it would be enormously helpful if the Minister provided some assurances on that score. It is not just the FCA that works on money-laundering issues, but the FIU in the NCA, so we need to know that it will be adequately resourced.

[Kirsty Blackman]

May I start by wishing everyone a happy new year? I will not rerun the entire speech of the hon. Member for Oxford East, but I largely agree with what she said.

I have just a few points to raise. First, if the list of high-risk third countries, which the hon. Lady mentioned, is to change, it will be really important to have expertise in scrutinising those countries, so perhaps there should be a formal role for the Treasury Committee or the Foreign Affairs Committee to look at any proposed changes. Allowing the list to be considered by a group of MPs who are used to looking at such issues would reduce the likelihood of insufficient parliamentary scrutiny. People would still complain, but it would be less likely that people would say that changes to the list of high-risk countries had not been adequately scrutinised if they were looked at by one of those Committees in advance.

I am less concerned about the list in the first place if it is to be directly transposed from the EU’s list, because that is clearly working adequately for us at the moment. It is for changes that might come through in the future that a proper scrutiny process needs to be set up, to ensure that we all feel that these issues are looked at properly.

As was mentioned by the Opposition Front-Bench spokesperson and the Minister, there will be an obligation on the EU and the UK to co-operate. I appreciate that, but my concern is about the actual mechanisms that will be in place to allow that to happen. What mechanisms will be in place? Currently there are mechanisms because we are all part of the EU. How will conversation between those authorities be facilitated, and will that happen on as regular a basis as we would like?

We do not want to see a situation where the UK leaves the EU and is less good at tackling money laundering as a result, and we do not want to see the EU’s powers to tackle money laundering reduced either. Continuing that close co-operation is really important. If the Minister made clear through what mechanisms those conversations would happen, it would give us a level of comfort and assurance, rather than there being an obligation to co-operate but no clarity about how it will actually happen.

Lastly, the explanatory memorandum to the draft regulations states that

“certain credit institutions, financial institutions and payment service providers need to expand existing IT systems to reflect the greater levels of scrutiny that will need to be applied to correspondent banking relationships between the UK and EEA states”.

I accept that some of those organisations already scrutinise money laundering issues at that level, but some of them do not, as is reflected in that note. I would like the Government to explain what conversations they have had with such organisations about whether they are ready for the changes to be made to their IT systems, whether they are ready to expand their IT systems in the way that the Government say they need to, and whether they will be able to do that by the Government’s required date.

It is important, if we are putting an additional burden on companies and organisations, that we do not talk only to financial services trade bodies in general. The Government or their agencies should be talking to the individual companies that will have to make those changes to ensure that they are compliant at the beginning. We should ensure that they are compliant not just to make sure that they are compliant, but in order that money laundering is reduced as a result. It is important that the Government make it clear whether the companies will be ready, and if the companies will not be, what they are doing to make sure that the companies will be ready.

--- Later in debate ---

[John Glen]

I would be happy to respond on that matter as well.

A point that often comes up in these discussions is the resourcing of the FCA. I acknowledge the great work that it has done over the last 18 months in helping the Government to prepare these SIs. It is funded by an industry levy and has set out in its business plan the resources involved in working towards exit. The Government are confident that the FCA has made adequate preparations ahead of leaving. If additional resources are needed in the event of no deal, it would be able to raise those funds very quickly, but we would all be in a situation where we would have to do things that we had not anticipated. This programme of SIs is about getting to the basic starting point that allows us to have confidence in the regulatory regime, but I do not deny that a considerable amount of work would need to take place.

On maintenance of standards and equivalence with the EU on anti-money laundering, the hon. Member for Oxford East discussed the use of the word “may” versus “must”. I want to clarify that what we have removed is the obligation to report in a specific way, as per the legislation. It is not our intention to remove ourselves from either the spirit or substance of that obligation; it is just that it would be inappropriate to leave a legal obligation to an entity when we are a third party. That is the only way that I can describe it.

To expand further on future co-operation, through the bilateral agreement with the EU, we expect to have an expansive relationship that would have a wide scope of cross-border activity. The changes in the SIs do not preclude deep co-operation between UK and EU regulators in the future. It is desirable to have that co-operation.

The hon. Member for Aberdeen North raised the burden on banks’ IT systems. When one makes a transfer between one bank and another, if it is in an unfamiliar, non-mainstream destination in Africa—I will not name an individual country for fear of getting a letter from its ambassador—some checks would be done, because the bank would then obviously receive those funds. A check would be done on that, but because that sort of transaction is inherently risky, the same degree of checking will need to take place—and does take place in practice in the banking industry—with countries in the EU that are more familiar to us. Broadly, there is harmony on that matter anyway.

I mentioned the SARs reform, which the Home Office leads on. We anticipate that new IT will provide a more user-friendly portal for reporters from all sectors and that improved data processing, storage, analytics and distribution will be required. Work is being done across the Treasury, the Home Office and the MOJ to look at how we can refine that.[Official Report, 17 January 2019; Vol. 652, c. 10MC.] At the moment, the basic problem is that there is a high volume of SARs and we could better interrogate that data pool.

The hon. Member for Oxford East mentioned the concerns raised by the Thames Valley police and crime commissioner. He has also raised them with me and I will get in touch with him about them. Obviously, we do not rest on our laurels with respect to the FATF evaluation. I have mentioned the concerns that the Government have acknowledged in terms of the FIU, and the improvements to SARs and to the Companies House register, on which we expect a Government report in Q1 or Q2 of this year.

The statutory instrument is needed to ensure that the UK’s anti-money laundering and counter-terrorism financing regime operates effectively and that the legislation functions appropriately if the UK leaves without a deal. I hope that I have adequately responded to the points raised.

[Kirsty Blackman]

Will the Minister give way?

[John Glen]

I am very happy to; I have obviously missed something.

[Kirsty Blackman]

When the Minister was talking about the resourcing of the FCA in the event of a no deal, he suggested that it would be able to draw down extra money very quickly. Is he basically suggesting that, in the event of a no deal, on 1 April, Parliament will come in and approve lots of money to be given to lots of different Government agencies to deal with that scenario, or will that happen in advance of a no deal? We have only 80 days to go.

[John Glen]

My colleague the Chief Secretary has set out comprehensive budgets for each Department for the financial year with respect to a no deal, and a process for urgent requests. The FCA would be able to raise its levy autonomously and separately from Government. It will have contingency arrangements for doing that quickly. I obviously cannot address all Government agencies and Departments, because it will be done through different Ministers in different Departments, but I can say that the Treasury has fully communicated the process for making additional requests in a no-deal situation to all Ministers in all Departments.

[Kirsty Blackman]

What about communicating that to Parliament rather than just to Ministers? I know that the scrutiny process is rubbish and Parliament does not have much say on Government spend generally, but surely it should have some say on that.

[John Glen]

If I take the Department for Education, for example, where a large portion of the budget is for providing food in schools, in a no-deal circumstance where additional costs might be associated with that food, the Minister would need to make a statement to Parliament about that and respond to it. Inherently in the process, there is a mechanism for the Government and different Departments to bring matters to Parliament. They would need to justify where they would spend that additional money and the basis for it. With respect, I think that is beyond the scope of the statutory instrument—at least, that is my judgment.

Finance (No. 3) Bill

Kirsty Blackman Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

The two new clauses ask the Chancellor to review the impact of certain provisions. They do not ask for an independent review; they ask for the Chancellor to review his own policies. Perhaps that reflects how much confidence the Opposition have in the Chancellor. He might be reassured to know that they feel that if the Chancellor reviews the impact of the provisions it will be an excellent analysis that they will want to follow. Again, this is not about creating something truly independent, but about asking the Government to produce a report on Government policies.

[Kirsty Blackman (Aberdeen North) (SNP)]

Is that not a slightly bizarre argument? I think the Opposition are trying to ask the Government to take into account in the review the priorities we have, rather than the Government’s priorities. For example, they may be putting policies in the Finance Bill to raise taxes to do something specific, whereas we are asking them to look at public health impacts.

[Kevin Foster]

New clause 1 says what it says: it asks the Chancellor to produce a review of the impact of provisions and to lay a report of that review before the House. It does not require anything to be done. It does not set out a detailed list of policy changes and how they would be paid for. I do not really see where the hon. Lady is coming from. Members can generally debate all matters that are put before the House, what they believe their impact will be and whether they will make a difference.

I have to say—my Scottish colleagues like to raise this point—that in some areas, for example the Scottish education system, it would be interesting to look at how help is being provided to children so that they have a route out of poverty. In the past, the Scottish education system was one of the highest rated in the world, but I think the Scottish National party has now pulled Scotland out of the global rankings—not because it is going up them, it is safe to say. We can certainly have reviews both ways, and it will be interesting to hear whether comments from SNP Members reflect the impact that aspects of Scotland’s domestic policy, for which it has been responsible for most of the past decade, have had on some of the statistics they wish to complain about.

I welcome the fact that the Bill again increases the earnings that someone can receive before becoming an income tax payer.

--- Later in debate ---

[Kevin Foster]

Absolutely. It is worth remembering, when we hear how the Opposition want to tax people and what our tax policies are, that the highest earners in this country are paying a higher percentage today than they did for all but the last few weeks of the previous Labour Government. The claim that the Government are being much more generous to the highest earners through income tax is completely false. Sadly, my hon. Friend now represents the highest-taxed part of the United Kingdom. I refer to the work of the SNP in making Northumberland a tax haven from its policies, which have hit a range of people on middle incomes. I am concerned that the impacts in Scotland of that policy will see its representatives here in Westminster blaming those impacts on Bills such as this one, when they are due to policies that the SNP, not this Parliament, has imposed on the Scottish people.

[Kirsty Blackman]

The Scottish Government’s Budget ensures that 90% of businesses will pay less in business rates than they would if they were anywhere else in the UK. Does the hon. Gentleman believe that his Government should change their policies to match Scotland’s?

[Kevin Foster]

I certainly do not believe that the Westminster Government should change their policies to match the SNP’s income tax raid on middle earners and those who drive the economy. On business rates, anyone who has sat through my speeches on the high street will know that I have taken the view for some time that we need to look at how we tax the high street in future. The era of large corner premises being the most profitable place to sell goods and wares is long gone. I have to say that I do not think I will be looking at the SNP’s record for much inspiration when it comes to the question of how to stimulate the economy and boost people’s earnings.

--- Later in debate ---

[Simon Hoare]

My hon. Friend helps me and my hon. Friend the Member for Banbury by amplifying the point.

I said earlier that I was born and brought up in Cardiff. One of my abiding memories was of my late grandmother, who was born in 1908, and what motivated her throughout the whole of her life. She was the daughter of Irish immigrants. When she was at school—a Catholic primary school called St Patrick’s in Grangetown —a teacher brought a child to the front of the class, theatrically held their nose, and said, “Boy, go home, you smell.”

I can remember, in different circumstances in the 1970s, my Catholic primary school in Cardiff called St Mary’s. It was the school that my mother had gone to as well. It drew from a mixed economic demographic. There was a family with three children—I can see them now. If I sound emotional on this point, it is because I am. I am emotional because I can remember—although this may sound entirely preposterous and pompous—how I felt as an eight or nine-year-old, as I was, seeing this family. The mother always looked underfed. The father always looked harassed to death. The children, one of whom was in my class, had a colour of poverty. They had a smell of poverty. Poverty has a smell about it. It has a posture about it. It says, “We are beaten.” At the age of eight, nine or 10, I can remember looking at my classmate and thinking, “What can I do?” I realised that I could do nothing apart from provide a bit of friendship and support, and I did it as best I could, as I am sure that anybody would.

But that impotence of an eight-year-old has disappeared, and I can now stand here as a 49-year-old—[Interruption.] Yes, only 49—I know. I have had a hard life—that is what I tell my wife, anyway. I burn with the sense of injustice that the hon. Member for Gedling expressed. We are all in a position in this place where we are not impotent—we can actually do something about this. If I thought that Her Majesty’s Government were not as committed as I am on this issue, I would be in the Lobby with Opposition Members, but I do not think that. I think that the strategy of the Finance Bill is right. Our values and our principles must shine through. I urge Treasury Ministers and other Ministers to talk a little more about the why of what we are doing in our politics and a little less about the percentages and statistics.

[Kirsty Blackman]

I want to talk about a few issues, many of which have been brought up during the debate. The first is the subject of new clauses 1 and 5, both of which I support, and the way in which they have been written. I stress to the Government, and particularly to the hon. Member for Torbay (Kevin Foster), that the reason why the new clauses call for reviews is that we have no amendment of the law resolution, which means that we cannot put forward more robust amendments that ask the Government to do things. If we could have tabled more robust amendments, we would have done so, and I am sure that the Labour party would have done so as well. The Government have chosen to hamstring us and, as I have said before, when Conservative Members are sitting on the Opposition Benches, they will regret this behaviour. The fact that they chose not to move an amendment of the law motion makes it much more difficult for us to table any substantive amendments, but we are doing our best.

The things that we have managed to do during these Finance Bill debates are unparalleled in the Scottish National party’s history. We have managed to have two substantive amendments accepted to the Bill. I had two amendments accepted to the previous Finance Bill, but they were particularly minor. These ones are much more substantive and call for reviews. One of those amendments fits nicely in this section of our proceedings, as it relates to the public health effects of gambling. I am pleased that that amendment continues to be in the Bill, and I look forward to the Minister bringing forward that review in the next six months, as we have called for him to do.

There are various reasons why a Government can choose to change or introduce taxes. They can choose to have a tax to raise funds for the Government. They can choose to have a tax relief to encourage positive behaviour, or a tax to discourage negative behaviour. They can choose to have a tax to do one of the things that the Opposition and the hon. Member for North Dorset (Simon Hoare) have been keen to talk about. They can choose their priorities. They can choose to have a tax system that aims to reduce child poverty, reduce inequality and increase life expectancy, and we are asking for that to be the Government’s focus when they are setting taxes.

The Government should be looking at the life chances of the citizens who live on these islands and doing what they can to improve those life chances. That is the most important thing—it is why these reviews are being asked for. Whether or not the taxes that the Government have set are appropriate, we are asking for a change of focus and a change of priority, and I think the hon. Member for North Dorset was agreeing with that.

[Mhairi Black (Paisley and Renfrewshire South) (SNP)]

Forgive me if I am stating the obvious, but do we not also need these reviews because we have Brexit coming up, and we have to be able to reflect on and evidence things?

[Kirsty Blackman]

That is correct. One of the difficult things about looking at the potential outcomes of Brexit is that those stats do not exist. It is all well and good to talk about the fact that there are reviews sitting on shelves gathering dust, but we need stats. We need stats to be able to prove that Government policy does what it says on the tin.

The Minister can stand up and say, “This policy will raise £100 million for the Government,” but I would like to see not only the working beforehand, but the review afterwards that proves that the policy did what the Government intended it to do. I have been clear on a number of occasions that I do not think the Government do enough of that evidencing. The reviews being asked for would allow the Government to provide us with that evidence. Evidence written by the Government, rather than an independent individual, is still a legitimate thing that we can look at. The hon. Member for Torbay seemed to suggest that we would doubt information were it to come from the Chancellor of the Exchequer—surely not! It would be good for him to provide that.

I want to talk about a few things that the SNP has been doing in Scotland and the changes we have chosen to make to not only our tax system, but other systems, and particularly those that affect the issues raised in new clauses 1 and 5. We have mitigated the bedroom tax, which has been a major factor in us having the lowest child poverty rate of any country in the UK. We have increased the number of people from disadvantaged areas who are going to university. We are making major changes to the care system for looked-after children. Those young people have had some of the poorest life chances in the past, and what the Scottish Government are doing on that is hugely important for ensuring that their life chances are improved.

We have increased the pregnancy and baby grant to £600. We are improving access to childcare, and we have the baby box scheme. We are the best country in the UK at paying the living wage—not the pretendy living wage, but the real living wage. People working in Scotland are more likely to be paid the living wage than those working in England. About half of taxpayers in England pay more than they would if they lived in Scotland, and that is the half of taxpayers who are earning the least. We think that that is a progressive measure that is assisting people to get out of poverty.

[Luke Graham]

The hon. Lady is bringing out the successes of the SNP Administration in Edinburgh, but does it not still stand that, after a decade in power and with powers over taxation and healthcare, men and women in Scotland live for two years less than other people in the United Kingdom? In fact, we have the lowest life expectancy in the whole United Kingdom. There may be some successes—I support those on care—but certainly on the one thing that matters most, which is keeping people alive the longest, the SNP is an abject failure.

[Kirsty Blackman]

We have not had taxation powers for 10 years, and we do not have the full range of powers. For example, we do not have the full range of powers over public health, so we do not have in Scotland powers such as the public health taxation measures—the sugar tax—that were brought forward in the previous Budget. We do not have the full range of powers, and if Scotland were to be an independent country, with the full range of powers, we would be putting the things we are discussing today at the heart of our Government’s agenda. Our Government have done this and we will continue to do this—we are pushing for fairness.

I will wrap up, because I am aware that I am relatively short of time, but I want to talk about the people who are the poorest and, by the way, the most disadvantaged by the way in which this society is set up. Following the changes to universal credit, those in the bottom 30% of incomes will gain less from the work allowance than they will lose in the benefit freeze. The benefit freeze is costing them more than the changes to the work allowance will give them. Those people, who have no recourse to public funds, are the poorest individuals I see coming through my door, and this Government have caused that situation. This Government have caused a situation in which asylum seekers have got absolutely nothing. This is about the very poorest people, who have got the worst life chances as a result, and this Government are completely failing to do anything to support them or to improve their life chances. This is about people on disability benefits, who are really struggling, and at every turn, this Government have made their lives worse, rather than better. This is about lone parents, who are disadvantaged as a result of universal credit. This is about the increases in food bank usage.

The Government talk about people working their way out of poverty. I do not understand how people can have hope when they do not have enough to eat.

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

I thank everybody who has made a contribution in this very important debate. There have been some extremely passionate and well-argued speeches.

Part of the debate has been exemplified by the hon. Member for Gedling (Vernon Coaker) and my hon. Friend the Member for North Dorset (Simon Hoare), who spoke in effect about who cares about these issues. We need to recognise that Members on both sides of this House—I include the Opposition in my remarks—care very deeply about whether our fellow citizens in our great nation are impoverished, are in dire straits, do not have enough to make ends meet, do not have enough to feed their children, or have children who do not have the opportunities in life that we wish for our children in turn. Those things matter considerably, and I congratulate my hon. Friend on the quality of the speech he delivered, particularly in that respect.

Something else that lay at the heart of the debate between the hon. Member for Gedling and my hon. Friend the Member for North Dorset, is whether the numbers matter. Do the figures matter? I think it was the contention of the hon. Member for Gedling that, in a sense, the figures do not matter. In a curious way, that is rather at odds with the notion of supporting new clause 1, because it calls for more figures to inform our decisions. In one sense, of course, the figures do not matter, because what matters is the condition of the people who live in our country. However, figures do matter when it comes to formulating the policy responses we need to address the situation, and if we are, in any meaningful way, to chart the progress, or otherwise, that Governments—ours and the Labour Governments who preceded us—have made on this extremely important issue.

--- Later in debate ---

[Mr Speaker]

The right hon. Gentleman’s succinctness is a textbook of how to help the House, and I hope it will now be closely studied.

[Kirsty Blackman]

In the interests of time, I will be very brief. I want to make it clear to the House that the SNP intends to push new clause 18 to a vote. I will briefly speak to some of the other new clauses and amendments that we have put forward. A couple of them relate to the expenditure implications of the UK now having to take charge of carbon and greenhouse gas taxes. They are about making sure that the Government are clear with the House about why they are spending this money and about the money they intend to spend before they do so. This is an additional cost that would be associated with the UK leaving the EU, which is a concern of ours. Obviously, we would not have to spend this money if we remained in the EU.

--- Later in debate ---

[Nicky Morgan]

Yes, I absolutely agree with my right hon. Friend. That was raised in the Westminster Hall debate led by my fellow Committee member, my hon. Friend the Member for Wycombe (Mr Baker).

I say to the Minister that it is troubling to hear that tens of thousands of people who want to settle with HMRC before the 5 April deadline have yet to receive calculations from HMRC. It is impossible for them— I think it would be for most of us—to settle large bills within a matter of months if they do not know what they will be asked to pay, let alone if they cannot start to make arrangements for how to pay them. These individuals need to know how much they have to pay, and I ask Treasury Ministers to step in and make clear what will happen to those people if they do not hear from HMRC by 5 April.

I will leave that with Ministers. I hope they can tell that there are MPs on both sides of the House who are concerned about this. By working together, we can make sure that the right tax is paid, but also that people are treated fairly.

[Kirsty Blackman]

I am aware that we are fairly short of time, so I will not rerun many of the things I said in Committee—I am sure the Minister and those on the Opposition Front Bench will be delighted to hear that.

I want to highlight a few of the SNP amendments and new clauses in this group. We have a couple of new clauses asking once again whether the Government’s provisions will do what they intend. For example, we want them to review the changes to entrepreneurs’ relief. We also want them to look at the changes in relation to emergency vehicles, because we are particularly concerned about the potential rural impact. Those who have emergency vehicles in rural areas may have more cause to use them outside work time than people who use them in cities. We felt that that issue was not drawn out enough in Committee or in the information the Government provided previously.

New clause 17 is about Brexit analysis. It is important to note that, since the Brexit vote in June 2016, over $1 trillion has been pulled from UK equity funds, which is obviously a really large number. In any changes or preparations the Government carry out in relation to Brexit, therefore, they should note the impact on the economy, which, according to the Bank of England, has cost individual families £900 each so far, and there is also the impact on financial services, for example, which have historically been very strong in the UK.

New clauses 15, 11 and 14 again ask the Government to provide information through consultation reports. It is important that the Government tell us the consultation they did on the draft clauses they brought forward. On the ones they did not bring forward, why did they not do so?

On that point, I should mention that the Government have included a new schedule in this group. That is a relatively unusual thing for the Government to do at this stage, given that they could have included the schedule in the original Bill or brought it forward in Committee. Because the new schedule was not brought forward in the initial stages, the explanatory memorandum provided by the Government does not include details about it. It would have been helpful if it had been considered at an earlier stage or if the Members who sat through the Bill Committee had been notified that it was likely to come forward. Presumably, the Government knew about it before the Christmas recess, and it did not just appear out of the ether. That process could be improved.

The main thrust of my contribution in the short time I have remaining is about the removal of the link between the personal allowance and the minimum wage. I understand that the Government have removed it on the basis that the personal allowance has now reached £12,500 and that they therefore believe they do not need to keep the link. I understand why they are making that case, but if that link had been kept, with the Government required to do a review if the personal allowance threshold was set at less than £12,500, future Governments would have continued to be bound by it. That would have meant that the protection the Government felt was necessary for people on the lowest incomes would still be there in the future. I understand that the Government do not intend to reduce the personal allowance, but that protection could have been left in place without the law causing any problems. That is something I am concerned about.

It is particularly concerning when the living wage the Government have put in place is not a real living wage, but a pretend living wage. It also does not apply to anyone under 25, which is an issue the SNP has raised over and over again. Just because someone is 24 does not mean that their living costs are less than they would be if they were 26—they could have the same number of children and live in exactly the same accommodation. However, the Government believe that it is okay to pay them less just because they are under that age threshold. That is exacerbated by the fact that the minimum wage increases the Government have introduced this year increase by a higher percentage—not just a higher monetary value—the minimum wage received by those who are over 25. The gap is widening: those who are over 25 are getting a bigger increase in the minimum wage, while there is a smaller increase for the younger age groups. The Government need to take seriously the fact that they are saying apprentices are worth pennies, frankly, and that 16 and 17-year-olds are worth far less than people under the age of 25. We raised our concerns in Committee in relation to the removal of the number. I do not think it would have cost the Government anything to leave in the link to protect future generations.

[Mrs Main]

I wanted to have more time to be able to say what a great job the Government have been doing: a 43-year low for unemployment rates, 1,000 jobs a day created and bringing in the personal allowance upgrade even earlier. We do not have time to go through all that, but I believe that getting people into work and out of poverty is the way forward for many families.

The Government were absolutely right to target business rates as a way of helping the high street and small businesses, with a cut of 33% in rates for businesses with a rateable value of under £51,000. In areas like mine with high property values, however, it is not having the impact the Chancellor might have hoped. The new rate simply provides a cliff edge that penalises successful businesses in areas that are plagued by high property values. We must devise a system that helps small businesses and pubs to thrive, not just those with a low retail value. I recently met pub owners in my constituency who have been hit extremely hard by business rates. I have cut out an awful lot of my speech, but I am pleased to say that I have secured a Westminster Hall debate on this matter next Tuesday. I look forward to exploring the matter further with a Minister. Pubs in areas such as St Albans are seeing massive hikes in business rates, not the help that was intended.

Time is pressing, but I want to touch on new clause 26 tabled by the right hon. Member for Kingston and Surbiton (Sir Edward Davey). I have serious concerns about the retrospective nature of the tax being collected. Several of my constituents have raised cases with me and I am extremely concerned about how the process has been handled. Many make the case that this was not illegal tax evasion; they were advised to use the scheme as a way of keeping more of their own money. It is worth remembering that these people are not employees. They take on more risk, with no sick pay, maternity pay or other forms of support offered to an employee. I want to give a couple of personal examples, because I think that is key and we have so little time.

One of my constituents, who worked as an IT professional in the FinTech industries, is being pursued for £900,000 by HMRC for the loan charge. He is extremely worried—many are on the brink emotionally—and this has put him and his family under considerable stress. He had been advised that what he had done was lawful and he considered it to be so. He told me, worryingly, that he tried to settle the case with HMRC for about £700,000, but that that had been rejected. Many people who find themselves in tax difficulties manage to make negotiated settlements with HMRC. It appears that this particular group of people are being treated very unfairly and are being left in the very difficult situation of not knowing exactly how much they owe or how quickly they have to pay.

--- Later in debate ---

[Kirsty Blackman]

It is great to have the chance to speak on the Third Reading of my fifth Finance Bill. Given my relatively short time in the House, that shows just how many Finance Bills we have had.

There is much this Government do that I would criticise, but I will start with three things that I am pleased are in this Finance Bill. The first, which the Minister mentioned, is the transferrable tax history. To be clear, I was calling for that when there was only one Scottish Conservative Member of Parliament in this place. Actually, I think there has been cross-party work on the transferrable tax history. I think the Government have worked well with industry in bringing it forward, and I am pleased that they have done so. I am really pleased that it is in the Bill, and I think it will make a big difference to the North sea in particular, given the fact that we can extract oil and gas from the North sea for a longer period as a result of the changes made. The jobs associated with that will be secured, which is particularly important for my constituents and those in constituencies around the north-east of Scotland, so I am pleased it is in the Bill.

I am also pleased that clauses 92 and 93 are in the Bill. Clause 92 was accepted by the Government in relation to tax avoidance. It was tabled by the SNP, and it requires a review of the effects of the provisions in reducing tax avoidance and evasion. The Government will have to bring forward this review within six months of the passing of the Act, and we look forward to them doing so. The Government chose to accept two of our amendments, neither of which I was involved in the debates on, so I am a little bit disappointed about that. My hon. Friend the Member for Glasgow Central (Alison Thewliss) led on this part of the debate, and my congratulations go to her on getting this through.

Clause 93 was also accepted as an SNP amendment. It was the result of the excellent work of my hon. Friend the Member for Inverclyde (Ronnie Cowan) on fixed odds betting terminals and the general work he has been doing on the public health impacts of gambling. Earlier, I made the point that we sometimes put in tax measures to discourage behaviour that we do not want to happen—for example, a harmful behaviour. I am really pleased that the Government will, as a result of the SNP’s pressure, bring forward a review of the public health impacts of gambling and the changes made. When the Government are taking decisions about gambling and gaming duties, they should always be thinking about the public health impacts and have them front and centre of any explanatory memorandum for future Finance Bills.

I am not going to be overwhelmingly positive; I have some negatives as well. The process for this year’s Finance Bill has been particularly—[Interruption.] Shambolic, yes. It has been particularly shambolic and inadequate, because the Government have failed to consult on as many of the measures as they should have done. They did not put them forward in draft format, so companies and organisations were not able to make known their concerns or suggest ways in which the Bill could be changed to make it better. I fear that that is not good for scrutiny. Changes were introduced in this Finance Bill to correct errors made in previous Finance Bills or to strengthen provisions that were inadequate in previous Finance Bills. Again, I am concerned that, because of the process this year, we will see more of that in future years.

The other thing that is particularly poor in this Finance Bill—this is a real contrast with the decisions made in Scotland—are the tax changes. Tax changes that have been made on things that are devolved to Scotland, which I none the less feel able to criticise, are not the ones that I feel should have been made, because they are not made from the progressive point of view that we would like. The tax changes we are making in Scotland are on a much more progressive basis, and the Government would do well to look at what we are doing in Scotland. In England, about half of taxpayers pay more than they would if they were in Scotland, and those taxpayers are the ones at the lower end of the income spectrum. They are the people we think we should be supporting, rather than the people at the top end of the income spectrum.

I have just a last couple of points. Better scrutiny of the process is always required. I have called repeatedly for the Finance Bill to be subject to evidence sessions in Committee, and I will continue to make that call of the Government until they capitulate, because Finance Bill Committees should hear evidence. The other half of this—the spend process—has been improved very slightly, but it has not been improved nearly enough, and we need better and more adequate scrutiny of Government spend before it happens, rather than just doing it through the estimates process.

Lastly, I would like to take this opportunity to thank my hon. Friend the Member for Paisley and Renfrewshire South (Mhairi Black), who was with me in Committee, as well as two members of staff, Jonathan Kiehlmann, who was involved in this, and Scott Taylor, without whose help I could not have gone through the Finance Bill Committee or the stages we are at now. I would like to offer my specific thanks to them.

Question put and agreed to.

Bill accordingly read the Third time and passed.

ONS Decisions: Student Loans

Kirsty Blackman Excerpts

Tuesday 18th December 2018 Commons Chamber

[Elizabeth Truss]

That is certainly one of the aspects the review is looking at.

[Kirsty Blackman (Aberdeen North) (SNP)]

When will we have the full details of how this fits in with the Government’s fiscal plans—in the spring statement, the spending review or the autumn Budget next year?

[Elizabeth Truss]

In the spring statement, we would expect to see the revised forecasts. Of course, Government spending plans, which incorporate a huge number of areas and a huge number of Departments, will be announced at the spending review in the Budget.

HBOS Reading: Independent Review

Kirsty Blackman Excerpts

Tuesday 18th December 2018 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you very much for chairing this debate, Sir Christopher, and I thank the hon. Member for Thirsk and Malton (Kevin Hollinrake) for securing it.

As the hon. Member for Strangford (Jim Shannon) suggested, this is a debate that we have had a few different times on a few different but related topics. I also thank the hon. Member for Thirsk and Malton for his diligence and for continuing to raise these issues. I hope that he continues to do so until we get a suitable resolution, preferably from the Government taking action in relation to this issue.

I will just say a few things from the point of view of the Scottish National party and explain our position on this issue. However, I will start by saying that it is absolutely necessary for the economy that banks lend to small and medium-sized enterprises, and it is absolutely necessary for the economy that SMEs can have a good relationship with banks, but that is never going to happen if banks are not trustworthy and are not proving themselves to be trustworthy. If there are issues such as the one that we are considering, the best thing that banks can do is to be as transparent as possible about past issues, to make it clear that they cannot possibly happen again in the future. And if banks such as HBOS-Lloyds were to do that, it would be less likely that other banks would do similar things in the future and make the same mistakes. So, the transparency issue is important on many levels, not least for gaining the support of the public and SMEs for banking institutions.

The way that the cover-up has happened, and the lack of transparency, has meant that the pain has been elongated for those people who have gone through this process. Instead of the banks holding their hands up and saying, “Yep, we made a number of mistakes; here they are and here is the redress that you deserve”, they are trying, at almost every opportunity, to hide things. I do not think that is a very sensible way forward for the banks.

The hon. Member for Thirsk and Malton mentioned some of the people who had come forward and who had to work incredibly hard, in order to have their voices heard and their problems raised. I will just take this opportunity to thank those people, too, for the hard work that they put in to make sure that these issues saw the light of day, albeit not yet in the way that we would have liked them to see the light of day. Nevertheless, those people have worked incredibly hard to bring that about and I thank them for it.

The SNP has been clear that we want to see as much transparency as possible in the internal review documents that have been produced, which means ensuring that they are published so that we can see the full position. I know that there are issues about the positions taken in the internal review, but the more of those documents that are published, the better the access to justice there can be for those people who are campaigning.

I will also highlight the fact that the decisions that were taken around a lack of transparency have meant that the public purse has had to pay a disproportionately high cost in relation to this issue. It has meant that any investigations that have taken place have cost more money than they should, because the evidence that was requested has not been provided to them. That is a pretty damning indictment.

The other major issue that I will highlight is the pressurising of people to settle and to sign non-disclosure agreements, which is an abhorrent practice; it just should not happen. To ensure transparency in the future, it is really important that people are able to talk about what happened to them, so that it cannot happen again to anybody else and so that people are not allowed to get away with committing fraud such as this again.

The SNP has called for several policies that would help in the future on this issue. We have repeatedly called for the reinstatement of the reverse burden of proof; the SNP has been incredibly strong on that. Our manifesto also talked about strengthening whistleblowing legislation for those people working in banking organisations, and I will continue to make the case to the Minister that the existing legislation needs to be strengthened.

Lastly, we have pushed hard for a permanent commercial financial dispute resolution platform, an argument not dissimilar to the cases that have been made today. It is so important that SMEs and those individuals whose lives have been ruined do not have to go through an immoral and financially unviable court process to get the redress they should receive, and the Government can take action on that today.

Oral Answers to Questions

Kirsty Blackman Excerpts

Tuesday 11th December 2018 Commons Chamber

[Mel Stride]

My hon. Friend is entirely right. The Scottish National party would like the country to stay in the EU, which would, for example, severely disadvantage the Scottish fishing industry. We have negotiated a very advantageous situation in terms of having control of our fishing as an independent coastal state. The point my hon. Friend makes is also entirely right: if Scotland were to be independent there would be frictions at the border between ourselves and Scotland, which would not assist with trade.

[Kirsty Blackman (Aberdeen North) (SNP)]

On 19 November, the Exchequer Secretary told us that the Government’s analysis would contain a comparison between the Prime Minister’s deal and the status quo, and that it would contain insight from external stakeholders. It contains neither of those things. The Treasury Committee this morning produced a report that expresses disappointment that the Prime Minister’s deal has not been analysed. Yesterday, businesses lost 2% of their value. UK firms have no sympathy for a UK Government who are feart to put their shoddy deal before the House. Will the Chancellor stand by the words he said previously that

“remaining in the European Union would be a better outcome for the economy”?

Will he find some backbone and make that case in Parliament?

[Mel Stride]

The cross-government departmental analysis shows clearly that the outcome of no deal would see the United Kingdom disadvantaged by 8% of GDP compared with the deal negotiated at the moment in the withdrawal agreement. The best option identified in the analysis is the current deal.

[Kirsty Blackman]

The analysis does not model the deal. That is what the Treasury Committee says and that is what we are saying. It models Chequers; it does not model the Prime Minister’s deal. The Minister cannot stand there and make that case to the House.

Because the Prime Minister pulled the vote this week, businesses are accelerating their contingency no-deal Brexit plans. They are heightening their preparations for an emergency no deal. The legacy of this Government will be lost investment, lost growth and lost jobs. Surely the Chancellor cannot think it is acceptable that, just to save the Prime Minister’s job, hundreds of other people have to lose theirs?

[Mel Stride]

The hon. Lady suggests that the analysis does not model the White Paper deal. It does exactly that, but it does it in terms of the future relationship and the political declaration which, as she will know, is a range of potential outcomes—so that is entirely what the analysis does. As I say, what it shows is that the deal we have negotiated with the European Union is the best deal available for the things that she and I hold dear: growth across our economy, growth in Scotland, jobs in Scotland and even lower unemployment in Scotland. The Scottish National party should now row in behind this deal to make sure that we do the best for the whole of the United Kingdom.

Finance (No. 3) Bill (Ninth sitting)

Kirsty Blackman Excerpts

Committee Debate: 9th sitting: House of Commons
Tuesday 11th December 2018 Public Bill Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 105, in clause 79, page 53, line 26, leave out from “tax” to end of line 28.

This amendment would delete paragraph (b) of section 36A(7), which is being inserted into the Taxes Management Act 1970.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 139, in clause 79, page 53, line 28, at end insert—

“(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.”

This amendment establishes a de minimis threshold for the extended time limits of £50.

Amendment 140, in clause 79, page 53, line 42, at end insert—

“36B Public register of persons affected by change made by section 36A(2)

It shall be the duty of the Commissioners to publish a register of persons liable to tax by virtue of the provisions of section 36A(2).”

This amendment requires HMRC to create a public register of those paying tax as a result of the extended time limit.

Amendment 106, in clause 79, page 54, line 1, leave out “2013-14” and insert “2019-20”.

This amendment would mean that new section 36A does not apply retrospectively.

Amendment 107, in clause 79, page 54, line 5, leave out “2015-16” and insert “2019-20”.

This amendment would mean that new section 36A does not apply retrospectively.

Amendment 141, in clause 79, page 54, line 6, at end insert—

“(6) The Chancellor of the Exchequer must review the characteristics of persons affected by the changes made by this section to TMA 1970 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(7) A review under subsection (6) must in particular consider those persons in relation to their—

(a) age,

(b) income,

(c) legal status, and

(d) primary language.”

This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 79.

Amendment 142, in clause 79, page 54, line 6, at end insert—

“(6) The Chancellor of the Exchequer must, in respect of each tax year from 2013-14 onwards, review the revenue effects of the changes made by this section to TMA 1970 and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue effects of the main provisions of Clause 79 in respect of each tax year.

Amendment 143, in clause 79, page 54, line 6, at end insert—

“(6) The Chancellor of the Exchequer must review the effects of the changes made by this section to TMA 1970 on incentives on persons to comply with requirements imposed by the Commissioners, whether under TMA 1970 or otherwise, and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the effects of the main provisions of Clause 79 on incentives to comply with tax rules.

Clause stand part.

Amendment 144, in clause 80, page 55, line 19, at end insert—

“(6) The Chancellor of the Exchequer must review the characteristics of persons affected by the changes made by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.

(7) A review under subsection (6) must in particular consider those persons in relation to their—

(a) age,

(b) income,

(c) legal status, and

(d) primary language.”

This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 80.

Amendment 145, in clause 80, page 55, line 19, at end insert—

“(6) The Chancellor of the Exchequer must review the revenue effects of the changes made by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 80.

Clause 80 stand part.

[Kirsty Blackman]

Once again, it is a pleasure to be in the Finance Bill Committee, where everything is calm, smooth, predictable and a little different. However, I hope the Minister will go away from predictability and choose to agree to the Scottish National party’s amendments 105, 106 and 107.

We have tabled the amendments because of representations we received from the Chartered Institute of Taxation’s low incomes tax reform group. On amendment 105, the group believes there is nothing to prevent Her Majesty’s Revenue and Customs from relying on proposed new section 36A(7)(b) to claim, for example, that owing to internal resource constraints, it was unable to make the assessment within the normal time limits, which is the argument used for the introduction of the measure in the first place. That could render the safeguard provided in subsection 7(a) ineffective.

If paragraph 7(b) is to be retained, the low incomes tax reform group recommends that “reasonable” be defined clearly, possibly by the Minister here, but preferably on Report. For example, we consider it reasonable for HMRC to make any assessment no later than within 30 days of receiving the relevant information, rather than, in effect, within a variable time period that potentially depends on the size and complexity of the dataset received. We ask for that provision to be deleted, as the group believes it is unnecessary.

Amendments 106 and 107 would ensure proposed new section 36A did not apply retrospectively. Again, the low incomes tax reform group fails to see how the Government can claim that these rules do not have a retrospective impact, since subsection (5) makes it clear that the changes apply to 2016-16 and subsequent years, or 2013-14 where the loss of tax is brought about carelessly. The original consultation stated in paragraph 4.13 that

“the new legislation will not apply retrospectively”,

so to effect the legislation as intended, subsection (5) should be amended such that the rules apply only from tax year 2019-20 onwards.

We want HMRC to consider carefully the language used in taxpayer communications, to minimise distress to the taxpayer in any communications about the changes. As a minimum, HMRC should provide taxpayers with guidance on any relief that may apply to offset any potential liability, and avoid at all costs language that is not appropriate for a taxpayer who conducts their affairs in good faith.

Amendment 107 is about the retrospective nature of the clause. The Government have talked throughout the Committee about having done what they feel is adequate consultation. We have challenged that many times, and so have the official Opposition. If the Government consult and then do something different from what they consulted on, they need to lay out why or, at the very least, justify why they are doing something different from what they consulted on. If they hold a consultation on something and ask experts to get in touch with the information they think would make the best possible legislation, the Government need to consult on what they intend to do, not make changes to that legislation as it comes through.

I hope the Minister looks carefully at the amendments we have put forward. If he gives reassurances that he will look at this before Report to ensure that the Bill applies as intended, and that it does not have clauses that muddy the waters and apply provisions retrospectively, I would be keen not to push the amendment to a vote. However, that would require the Government to make it clear that they will consider the matter before Report and consider tabling their own amendments so that the tax professionals, who best know how the legislation will be applied, will have comfort that it is workable and will achieve what the Government intended. I will not speak any longer, because I know that the Committee has to move on, but I would appreciate some comfort from the Minister on that issue.

--- Later in debate ---

[Mel Stride]

I was making a slightly different point. It was not so much about what the response may or may not have been—I do not know the answer to that, regarding the measure that is under consideration by the Committee—but rather about our push to make sure that just those companies pay the appropriate level of taxation in the United Kingdom. Frankly, I think the businesses themselves want to be seen to be paying a fair level of tax. That is the impression that I get from the Treasury perspective. We are not on the back foot on this; we are very much on the front foot, pushing within both the OECD and the European Union to make sure that we can come up with a multilateral solution, which has particular advantages over going it alone. However, we have made it clear, as the Chancellor set out in the recent Budget, that in the event that there is not a multilateral solution, we will of course act unilaterally by 2020.

[Kirsty Blackman]

Before the Minister goes on to his next point, can I bring him back to the issue of retrospectivity? I am concerned that the Government’s definition of retrospectivity seems to be different from that of the CIT and the LITRG. Will the Minister write to me with his definition of retrospectivity in advance of Report, so that we can see whether we should press the amendment at that time?

[Mel Stride]

Yes, of course. I would be very happy to do that and in some detail. As I have already suggested, the general point is that those businesses that would not be in scope of these new arrangements, at the moment that they come into effect, would remain out of scope of these arrangements. That is the important point, I think, but I will certainly write to provide further detail.

My final point is about whether we are going soft on larger businesses, which I think was the overarching implication of the hon. Member for Oxford East. She should bear it in mind that at any one time, about half the 210 largest businesses in the United Kingdom are under active investigation. That does not mean that they are doing anything wrong—it may be far from it—but I sincerely believe that HMRC are very good at making sure that those businesses are thoroughly engaged with, particularly the large ones, because that is where a lot of yield lies.

--- Later in debate ---

[Mel Stride]

This is probably a discussion for another day, in the sense that the hon. Lady is asking that, in the event that we revisit the issue of the time limits for onshore investigation, we should on that basis consider her amendment anew, because it might dispense with the different treatment between onshore and offshore. We might come to that in another world on another occasion, in another Finance Bill.

I am anxious to make progress—the hon. Member for Bootle sits there looking like he has got all day, but we have to make progress. Amendments 141, 142 and 143 on clause 79, and amendments 144 and 145 on clause 80, would require the Government to review the impact and effectiveness of the clauses within six months of the passing of the Act. Such reviews, however, would not have the intended effect: no data in relation to the characteristics of persons affected, the revenue effects of the changes, or the effects of the changes on incentives on persons to comply, will be available after six months. That is because it is unlikely that a full assessment of any relevant cases will be conducted within the six months after Royal Assent. Thus a report would likely be impossible or meaningless.

On that basis, I commend the clauses to the Committee.

[Kirsty Blackman]

If the Minister writes to me with the comments about retrospectivity, it may be that we will not press our proposal to a Division on Report, but I will not press it now in anticipation of receiving that letter.

[Anneliese Dodds]

I appreciate the Minister’s remarks, but we believe there is still an anomaly, and we remain concerned about the potential treatment of elderly taxpayers and so on. We will press our amendments to the vote.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 139, in clause 79, page 53, line 28, at end insert—

‘(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.’—(Anneliese Dodds.)

This amendment establishes a de minimis threshold for the extended time limits of £50.

Question put, That the amendment be made.

--- Later in debate ---

[Anneliese Dodds]

The overall aims of the clause appear sensible, providing HMRC with powers to make secondary legislation to require a person to provide security for corporation tax liabilities and construction industry scheme deductions that are or may be liable to HMRC. Under the clause, failure to provide security when required will be a summary offence and a person who has committed it will be subject to a fine.

As I understand it, securities may be required where a taxpayer has a poor compliance record, and in phoenix-type cases where a business accrues a tax debt, goes into liquidation or administration and the person responsible for the operation of the business sets up again, with the risk of running up further tax debts. Sadly, we have seen far too many of those cases.

The measure is effectively an extension of HMRC’s powers to require security in relation to some areas of business tax—the powers it has currently—to include VAT and PAYE, as well as national insurance contributions, insurance premium tax and some environmental and gambling taxes.

The Government maintain that the clause will be specifically targeted at the minority of businesses that seek financial gain from non-compliance with their tax obligations rather than those that are genuinely unable to pay. They argue that it will not affect those who are managing their debts with HMRC under agreed time-to-pay arrangements with which they are complying—we have touched on that subject previously.

The Government argue that the power will apply only where an HMRC officer considers that the provision of a security is necessary to protect revenue. None the less, we believe that the changes merit further scrutiny, and therefore have tabled a number of amendments.

Amendment 146 seeks to introduce a requirement for HMRC officials to issue guidance on their use of securities to protect revenue. It is a probing amendment that seeks to clarify the circumstances under which a security will be requested for revenue protection. We do not in principle object to the measures being taken to protect revenue—they appear essentially sensible—but we seek to understand better the scope offered to HMRC officials in making such a judgment or, conversely, the guidance they are offered by the Department in making such a decision.

Will the Minister clarify what guidance will be offered and undertake to publish it later? After all, in the Government’s consultation, the feedback was pretty clear. The feedback document stated:

“Most respondents wanted to see clear guidance put in place to support the introduction of the securities and ensure that securities will only be used where it’s appropriate and proportionate to do so. Two thought that legislation should be expanded to provide the rules under which the securities regime should operate.”

How have the Government responded to that point? It is clear that more transparency is needed.

With amendment 147, which follows the previous one, we are likewise seeking to determine what guidance HMRC commissioners would receive. As I said, we do not object in principle to the use of securities to protect tax revenues; we simply seek to understand how and when they will be applied and whether the guidance is determined by Government policy or subject to the discretion of officials. I hope the Minister will either provide that information to the Committee or accept our amendment, which would ensure that further information is provided before these powers are enacted.

The policy papers relating to the clauses suggest that that is necessary. They state:

“Experience from the existing securities regime has shown that, when used in a carefully targeted manner, securities can be very effective in changing the behaviour of non-compliant businesses and protecting future revenues against the risk of non-payment. Currently these powers apply only to certain taxes and duties.”

We need to understand how these powers will be targeted and which criteria will be used. I hope the Minister will respond to that reasonable request.

Through amendment 148, we seek to understand how the new measure will affect the construction industry. As I said, this is an extension of the security deposit legislation to the construction industry scheme and companies chargeable to corporation tax. The documents on the impact of the policy do not discuss the construction industry in detail. The expectation should be that anyone avoiding tax should pay, but it is clear that providing a security could reduce capital stock in some companies, so we need a sense of the impact on those who may be required to pay a security. Again, that was reflected in the Government’s consultation, which stated:

“Several respondents commented specifically on the implications for insolvency and commented that HMRC should give careful consideration in cases where viable businesses were struggling financially and a security could force the business into insolvency. Similarly, respondents did not want the use of securities to limit the rescue environment for financially distressed businesses. One respondent suggested that before extending the security deposit regime, HMRC should commission independent research into its current approach and the effect that demands for a deposit have on struggling businesses.”

The context is that HMRC has lost a large number of its experienced staff, who might have had expertise in security regimes in relation to other taxes. Therefore, we need to know what the impact is likely to be on businesses that may have to deal with HMRC officers who have less understanding of the construction industry than previously would have been the case.

Finally, I note that we are informed by the tax information and impact note that HMRC will need to make changes to its IT systems to process the new security cases. The cost of the changes is estimated to be in the region of £840,000. It will also incur operational costs currently estimated to be in the region of £5 million. Those costs seem fairly high to me. I hope the Minister will explain why they are of such a significant magnitude.

[Kirsty Blackman]

Very briefly, if the Labour party chooses to press these amendments to a vote, we will support it, because we think that what it is trying to achieve is very sensible.

[Mel Stride]

I thank the hon. Member for Oxford East for her questions, most of which I will come to in my general statement on the clause. It is good to hear that she broadly welcomes the general thrust of what we are doing. I think she said that amendments 146 and 147 are probing amendments, and raised various issues about the guidance. Of course, those who are to be affected by the measures will have a right of appeal—they will be able to go to a tribunal to dispute the imposition of advance payments. During the period of dispute, the payment is not required to be made. That is an important point. They will also be invited to comment with HMRC—and have a right to do so—on the proposed level of payment being sought during the process by which it is determined. If their circumstances change at any point in the process or thereafter, that is an opportunity for further discussion and potentially change in the amounts that might be involved. I will pick up one or two other points on guidance in my general remarks.

--- Later in debate ---

[Anneliese Dodds]

In the light of the Minister’s response, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 81 ordered to stand part of the Bill.

Clause 82

Resolution of double taxation disputes

[Kirsty Blackman]

I beg to move amendment 137, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.

This amendment provides for all regulations under the new power to be subject to the affirmative procedure.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 138, in clause 82, page 58, leave out lines 13 to 17.

This amendment is consequential on Amendment 137.

Amendment 149, in clause 82, page 59, line 15, at end insert—

“128D  Review of effects of EU withdrawal

(1) The Chancellor of the Exchequer must review the expected effect on the exercise of the power to make regulations under section 128A in the event that—

(a) the UK leaves the European Union without a negotiated withdrawal agreement,

(b) the UK leaves the European Union following a negotiated withdrawal agreement.

(2) The Chancellor of the Exchequer must lay a report of the review under subsection (1) before the House of Commons within two months of the passing of the Finance Act 2019.”

This amendment would review the impact of the main powers under clause 82 in the event the UK leaves the EU under (a) no deal or (b) a withdrawal agreement.

Amendment 150, in clause 82, page 59, line 15, at end insert—

“128D  Review of revenue effects of section 128A regulations

On each occasion the Treasury exercises the power to make regulations under section 128A, the regulations (or, as the case may be, the draft regulations) must be accompanied by a statement by the Chancellor of the Exchequer of the expected revenue effects of the regulations.”

This amendment would require any regulations to be accompanied by a statement on expected revenue effects.

Clause stand part.

--- Later in debate ---

[Kirsty Blackman]

I will come to amendments 137 and 138, but first I would like to speak briefly to Labour amendments 149 and 150.

We have seen the complete and total shambles over the past 24 hours—and not just over that period, but over the past two years. The past 24 hours have highlighted where we are in relation to EU withdrawal. Various people are suggesting that no deal is more and more likely, so it is incredibly important we know the potential effects of any changes that the Government propose to make to legislation in the event of a negotiated deal or no negotiated deal. We have a clear idea of the effect of retaining the status quo, which is the Scottish National party’s preferred position, and the revenue effects would be much easier to calculate. We are comfortable supporting Labour’s amendment 149 on that subject and amendment 150, which is about the expected revenue effect of the regulations.

I turn to the two SNP amendments. Amendment 138 is consequential on amendment 137, so I will focus on amendment 137. Given what has happened in recent times, trust in the Government is possibly at its lowest ever point. We are being asked to agree to give the Government power to make changes without going through proper scrutiny procedures. The Government are basically asking us to trust them, and we feel that we cannot trust pretty much anything they say right now, so more scrutiny is sensible.

When people who support leave talk about the European Union referendum and Brexit, they talk about taking power away from faceless bureaucrats in Brussels and returning it to Parliament. A lot of the legislation that is being considered just now does not return that power to Parliament in any meaningful way, and it does not allow Parliament proper scrutiny of the range of things that could come through. We are talking here about just one small area, but that problem has been highlighted in a huge number of things that have come out of the European Union (Withdrawal) Act 2018. There is massive concern from members of the general public, who now understand what Henry VIII powers are—we are in unprecedented times. There has been a power grab from the Scottish Parliament, and this is one more small thing the Government are trying to do to take power away from where it should sit.

Given that the Government cannot command a majority in the House; given that they folded on SNP amendments to the Bill—that was, clearly, because the SNP amendments were wonderful, rather than because the Government did not have a majority—and given that they cannot get legislation through, the level of Executive power needs to be tested. We need to make the Government use their majority if they want to get powers through the House, rather than relying on the fact that because they are the Government, they can do what they like. That is why the SNP has tabled amendment 137, which would require the Government to ensure that more of the regulations made under clause 82 go through the proper scrutiny procedure, rather than relying on the Treasury to make some of them without proper scrutiny.

[Anneliese Dodds]

I will speak briefly to the clause. The hon. Lady has set out the SNP’s reasons for tabling amendments 137 and 138. The official Opposition agree with those reasons, and it seems highly sensible to require regulations to be subject to the affirmative procedure. We have argued for that consistently in relation to our future relationship with the EU and the no deal process. We are concerned about the wholesale power grab that unfortunately appears to be continuing apace. We would support SNP Members if they decided to press their amendments to a vote.

We have tabled two amendments, and I am pleased to hear that the SNP support them. Under the Prime Minister’s proposed withdrawal agreement, the UK would initially, at least, continue to align itself with EU regulations, but little information has been provided alongside the clause to indicate how the Prime Minister’s Brexit deal would impact on Council directive 2017/1852, particularly if there was divergence later on. Similarly, the Treasury’s policy note offers no guidance about whether the EU’s resolution mechanism would be upheld for all future double taxation disputes in the event of a no deal Brexit.

That is of a piece with the general lack of information about the Government’s anticipated future relationship on tax matters with the EU. I have consistently asked whether we would seek to be a member of the code of conduct group, for example, and I have had no indication of the Government’s views on that matter. With that in mind, the Opposition have tabled amendment 149, which would require the Chancellor to publish a review of the impact of the powers under clause 82 in the event that the UK leaves the EU under a no deal Brexit or under the current withdrawal agreement—or whatever it becomes. It is unclear whether it will be changed or whether assurances will simply be produced in relation to it. Whatever happens, we may or may not be voting on it at some point, hopefully in the near future. Amendment 149 would require the Treasury to offer a clear indication of how the EU’s dispute resolution mechanism for double tax disputes would be maintained, and the likelihood of the different possibilities.

Amendment 150 would require the Chancellor to undertake a review of the revenue effects of the measure. The Treasury policy note states that the measure will raise no revenue and will have no economic impact on taxpayers. That is rather hard to believe, given that even the most benign change to the tax system can have far-reaching and unseen consequences. They may be unpredictable, but surely it would be better to say that than to say that the change will have no impact. The Chancellor would therefore be required to outline in the review the possibility of any unforeseen economic impacts, and the revenues that are likely to be raised from this measure after the Treasury makes regulations to use the powers.

[Sir Robert Syms (Poole) (Con)]

Had we had a meaningful vote today—we are not going to have one—I would have voted with the hon. Members for Oxford East and for Aberdeen North. However, I find it a little strange that those who intend to vote against the agreement should criticise the Government for a no deal Brexit, because ultimately that is not the Government’s position.

There are about 800 statutory instruments for leaving the European Union. About 600 of them are negative, and a hundred and something are affirmative. It is perfectly possible for the Opposition to pick any number of negatives to pray against. If the Opposition have a problem with something, they can pray against it when it appears on the Order Paper and get a debate. There is a remedy for hon. Members’ concerns, but the reality is that so many of these things are modest and technical, and there are more important matters of principle for us to discuss. I do not think we want to spend a lot of time in this Committee or others debating minor, technical issues.

[Kirsty Blackman]

I am on the European Statutory Instruments Committee, as are other Committee members. Sifting the proposed negative statutory instruments and changing some of them into proposed affirmatives has been a really interesting and useful process, which has shown us that the Government do not always make the right decision. Something like that for the long term would probably allay some of our concerns.

--- Later in debate ---

[Mel Stride]

An interesting observation: as soon as “EU” appears in a clause, we suddenly have more interest from the Committee than for other measures. Ms Dorries, I will endeavour not to stray into too much detail around the pros and cons of the current deal and the White Paper and all that kind of stuff, and will stick to the clause.

The clause enables the Government to make changes to bring into force the regulations and administrative provisions necessary to comply with the EU directive on tax dispute resolution mechanisms within the European Union. Double taxation arises when the same profits are taxed twice by two different tax authorities. It can create serious obstacles for businesses operating across borders by creating excessive tax burdens, leading to inefficiencies and an economic disincentive to trade. An effective tax dispute resolution system can help to alleviate double taxation.

The UK is a signatory to the convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises within member states of the European Union, known as the arbitration convention. The UK has also entered into bilateral tax treaties with every EU member state for the purpose of eliminating double taxation. Following a review, it was concluded that the mechanisms currently provided for in bilateral tax treaties and the arbitration convention might not achieve the effective resolution of double taxation disputes between member states in all cases in a timely manner. Consequently, the directive was adopted to build on existing systems. The UK supported the aims of the directive and agreed the adopted text in 2017.

The powers contained within the clause are necessary to enable the Government to introduce secondary legislation to implement the directive. Some proposed amendments would apply the draft affirmative procedure to all regulations made under the clause. As it stands, the Bill ensures that the scrutiny procedures applying to the exercise of each power are appropriate and proportionate. The primary purpose of these powers is to give effect to an EU directive that has already been published. The exercise of the powers will therefore be a largely technical exercise—a point made by my hon. and gallant Friend the Member for Poole (Sir Robert Syms), who also raised the important point that Committee members who wish to further debate a negative SI can of course can pray against it—to transpose the agreed text into UK law. It would not be appropriate to apply the affirmative procedure to all the regulations.

An amendment has also been tabled that asks for a review of the effect on the exercise of the power contained in the clause of the UK leaving the EU with or without a negotiated withdrawal agreement within two months of the Finance Act 2019 being passed. The Government’s intention is for a negotiated withdrawal agreement to apply to the UK, and therefore an implementation period, so that we can use the powers in the clause to implement the EU directive. As a responsible Government, we are also planning for the unlikely event of leaving the EU without a deal. Given the reciprocal nature of double tax dispute resolution, it is difficult to see how legislation implementing the directive can work in a no-deal scenario, but we do not think it would be beneficial to commit to producing a report so close to EU exit, and before the transposition deadline of the directive in June 2019.

A further amendment asks for a statement by the Chancellor on the revenue effects of the exercise of the power under the clause. The Government intend to publish a tax information and impact note for the draft regulations. That will include an assessment of the expected revenue effects of the regulations. I am pleased to say that my hon. and gallant Friend the Member for Poole thoroughly approves of the tax information and impact notes regime which, as he knows, is rigorous and helpful. As a result there will be no need for the Chancellor to make an additional statement to the House.

[Kirsty Blackman]

I do not have much to add other than that I still want to press amendment 137 to a vote.

[Anneliese Dodds]

Briefly, the Minister referred to TIINs. I wonder whether, for the next Finance Bill, he will commit to ensuring clear linking from the Bill website to the different TIINs so that we can quickly see which one applies to each clause. It has been quite a waste of time having to search for them randomly.

As to the question whether the provisions should be examined using the affirmative procedure or should have to be prayed against using the negative procedure, I take on board the points made by the hon. Member for Poole. However, we all know that, when measures are dealt with by the affirmative procedure by default, much greater attention needs to be given to them. That is the reality. Generally, I fear that attention is not always paid to matters that may superficially appear technical but that, when one delves into them, may be discovered to have a concrete impact on different groups. Even with the affirmative procedure, the level of debate on taxation matters has, I would argue, traditionally been quite limited. I note that, for the first time in Parliament’s history, we have recently had votes in relation to tax treaties. I was pleased that we motivated those votes, yet UK tax treaties with other countries have never been subjected to proper scrutiny in the House.

Many matters covered by Delegated Legislation Committees are not purely technical. In fact, this has been talked about by my hon. Friend, who represents Leeds—help me out. [Hon. Members: “Stalybridge!”] I am sorry, I am not great at the memory game. In talking recently about some of the no-deal planning, my hon. Friend the Member for Stalybridge and Hyde has been talking about the potential for some of those measures to have such a significant impact that the Government themselves are not au fait with it. Given the time allotted, they seem to expect the Opposition to pass them with a rather cursory glance. I am afraid, therefore, that the suggestion that we already have a failsafe system for dealing with some of those significant matters is simply incorrect, so if the SNP presses amendment 137 to the vote, we shall support it. However, we will not press our amendments.

Finance (No. 3) Bill (Seventh sitting)

Kirsty Blackman Excerpts

Committee Debate: 7th sitting: House of Commons
Thursday 6th December 2018 Public Bill Committees

The Department for Environment, Food and Rural Affairs will shortly publish the clean air strategy, which I hope will answer some of the hon. Gentleman’s perfectly legitimate questions about the long-term scale of our ambition to support communities. All of us who live part of the time in cities or bring up our children in cities want a significant improvement in air quality, and that strategy will be ambitious.

[Kirsty Blackman (Aberdeen North) (SNP)]

I appreciate that the Minister is providing all this information in answer to issues raised by the amendments. Given that he has all the information, it would be great if he just put it into a review, as the amendments would require, so that we could see it written down in six months’ time.

[Robert Jenrick]

I take the hon. Lady’s point, but the information is mostly already in the public domain. It is not clear to me what information is not available. With respect to air quality, the Government will very shortly publish our ambitious clean air strategy. I encourage her and other hon. Members who, perfectly understandably, want to scrutinise our clean air commitments to pay attention to that document and scrutinise the Environment Secretary at that point. No doubt he will come to the House to make an announcement on the strategy.

The hon. Member for Norwich South also mentioned London. London already has a separate comprehensive funding settlement from the Department for Transport, which includes measures to deliver compliance with legal air quality limits. The Mayor has significant powers to take additional measures. Londoners also receive further funding for ultra low emission vehicles such as taxis. Indeed, measures in the Bill support the uptake of ultra low emission taxis. We took those measures a year early, as we will discuss later, and they have had a significant impact on the number of taxis on the streets of London. There are now between 500 and 600 electric or ultra low emission taxis that did not exist at the beginning of the year, incentivised by the measures taken by the Treasury. We are also supporting low emission buses and charging infrastructure. The Committee has already discussed the £200 million public investment in charging infrastructure, which we hope will spur at least a further £200 million of private investment. That will support charging infrastructure in all parts of the United Kingdom.

I hope hon. Members respect the fact that we consider the funding settlement for London’s roads as separate from that for the rest of the United Kingdom. That is a long-standing convention. We occasionally provide additional money. For instance, in the Budget the Chancellor provided more than £400 million for potholes. He included London in that, so London boroughs are able to take advantage of that money, but in general the funding settlement for London’s roads is separate from the negotiation with respect to Highways England.

I urge the Committee to reject the amendments, as I believe the reports they would require are unnecessary. The changes outlined in the clause will ensure that the Government continue to support motorists with the cost of living while ensuring that they continue to make a fair contribution to the public finances. As a result of our decision to hypothecate VED revenues, we will see a major increase in investment in our strategic roads, which I hope will benefit everyone in all parts of the United Kingdom. I therefore commend the clause to the Committee.

--- Later in debate ---

[Sir Robert Syms]

Apart from paying the levy, the road haulage industry pays considerable sums of tax on fuel; it therefore pays quite a lot into the Exchequer for the provision of roads. I would make another important point: almost every good that we have in this country travels at some point on a road haulage vehicle. Almost all of what someone buys in a supermarket for Sunday lunch travels in such a vehicle. There is no such thing as a painless tax. If we raise the cost of vehicles delivering goods in this country, the costs are raised for supermarkets and businesses and that is passed on in the form of higher prices and inflation. There is a balance to be struck.

The other point is that the British economy has been growing since 2009-10. As it grows, there are more vehicles on the road, and that is a difficulty. The real way to deal with climate change is probably to crash the economy, so that unemployment shoots up and vehicles come off the roads. It is a problem that, if we have the economy growing, there are more vehicles on the road. On the whole, the solution is technological, both in the development of the levy—the hon. Member for Norwich South made one or two suggestions for that—and also in the engines and the information that people get this days. There has been a big improvement. The biggest incentive that there ought to be for the industry is to replace vehicles more regularly because, in the end, that will probably have more impact on climate change.

I do not think that the solution to this problem is to increase costs. There are technological solutions that I am sure will come to help with all of our concerns about climate change.

[Kirsty Blackman]

If we are going to disincentivise people from using HGVs or charge them more for using HGVs, we need to make sure that we have a positive route with alternative methods of transport. There has been a massive increase in the number of light goods vehicles, which is negative if we end up with older diesel models.

We could develop the rail freight network. I understand that it is pretty difficult for those who are looking to increase rail freight to get time on the lines because of the number of passenger trains. Solutions to assist that would be very helpful in ensuring that freight is moved around the UK in the least carbon-emitting way possible.

Subsection (6)(b) relates to Euro 6. It describes the definition of Euro 6, saying that it is as in the EC directive. I am keen for the Government to lay out what would happen about the development of new standards after Brexit and any transition period. Is it their intention that we would have our own standards on vehicle emissions? If so, how much does the Minister believe it will cost to assess vehicles? What would be the cost of UK-EU regulatory divergence, which will result in issues for car manufacturers?

Alternatively, do the Government intend that we should not diverge from using the European Commission directive standards? Obviously technology is developing and there will be new standards to which we should peg our decisions on tax rates. If the UK Government plan not to have their own assessment centre, with regulatory divergence, do they plan to continue to follow EC directives? What preparation are the Government making in that case to scrutinise or comment on the directives, given that we will not be in the room after Brexit, and will therefore not be able to influence the standards, either to support our car manufacturers or secure the best standards for the British public and get improved air quality?

I understand that the Minister may not have the answer at his fingertips, but I hope he can say something.

[Robert Jenrick]

I shall try to respond to the many points that have been raised. My hon. Friend the Member for Poole in part answered the challenge from the hon. Member for Norwich South as to whether hauliers pay their fair share. It is worth remembering that they pay a range of taxes, as my hon. Friend pointed out. They pay the levy that we are discussing and vehicle excise duties. They also pay tax on fuel. Taken as a package, hauliers pay a considerable amount of tax. British hauliers as an industry are highly taxed, going by European and international comparisons. The reforms mean that some hauliers will pay more. The VED system is based on both weight and axles, so to some extent it reflects wear and tear on the roads, although I appreciate the point made by the hon. Member for Norwich South that HGVs make a significant impact on the roads. I did not realise it was 100,000 times that of a Ford Focus, but that puts things in perspective.

The hon. Gentleman asked whether the HGV levy was specifically hypothecated to tackle such issues as potholes and strategic roads. It is not. However, as I have described, the VED system will be, which will significantly increase the amount of investment that the country makes in roads at every level: £28.8 billion is the spending envelope for roads investment announced by the Chancellor in the Budget, and £25 billion of it will be spent on strategic roads in the road investment strategy that will be announced later next year. That will be about 170% of the first road investment strategy, so there is almost double the amount of investment going into roads to tackle congestion and improve strategic roads in all parts of the country.

The hon. Member for Aberdeen North made a valid point about the European standards. It is our intention to remain closely aligned to those. That seems sensible and it is our intention in a number of respects, such as climate change, emissions and carbon budgets, as is indeed set out elsewhere in the Bill. For example, we have not yet made a final decision on carbon trading, but we shall monitor it and review the matter. If I can give the hon. Lady any further information I will write to her to set out the position of the Department for Transport.

On the broader question of why we are not using the VED system for HGVs to encourage greater take-up of zero-emission or ultra-low emission HGVs, it comes back to the point made by the hon. Lady: currently there are very few commercially available ultra-low emission alternatives for HGV drivers, which prevents the broad uptake of new vehicles. Clearly, we would like to do all we can to stimulate the market and see rapid progress, but we have to be mindful of that. Through the Road to Zero strategy that was published earlier this year, the Government have committed to working with the industry to reduce HGV greenhouse gas emissions significantly by 2025. The strategy sets out the Government’s plans to use a variety of different tools to meet that commitment.

The hon. Member for Norwich South made a number of important points about HGVs and road safety. I will write to him on that and find out what information I can about DFT’s work, because it is important that we take note and see what can be done to improve road safety, particularly as the number of vehicles going down smaller roads and country lanes as a result of online shopping is becoming more important. Through the Road to Zero strategy and other initiatives, DFT is paying attention to how we can improve the last mile of delivery to tackle air quality and reduce the number of vehicles on our roads.

The clause introduces a lower rate of HGV levy for vehicles that meet the latest emission standard, and a higher rate for vehicles that do not. As we have discussed, the change will incentivise hauliers to move to cleaner, less-polluting vehicles. It is only right that everyone plays their part in protecting our natural environment so that we leave a cleaner, greener Britain for our children. HGVs currently account for approximately 20% of harmful nitrogen oxide emissions from road transport but only 5% of total miles travelled, so they will play an important part in tackling the problem.

The changes made by the clause will reduce HGV levy rates by 10% for vehicles that meet the latest emission standards, reflecting the fact that they generate 80% less NOx emissions than the older HGVs. The clause will also increase rates by 20% for HGVs that do not meet those standards. Many hauliers will pay less as more companies move to cleaner lorries—we have introduced it to improve air quality and not to raise revenue.

On amendments 115 to 118, to which the hon. Member for Norwich South spoke, the Government have published a tax information impact note outlining the impact assessment of these reforms, including the forecasted revenue effects, which have been certified by the Office for Budget Responsibility. I believe those amount to £25 million over the scorecard period. These reforms to the HGV levy are part of wider action by the Government to tackle challenges in the areas highlighted by the amendments. Isolating the impact of the HGV levy reforms would be extremely challenging and, I suspect, of limited use, as they cannot be separated from other actions the Government is taking in these areas.

The Government’s draft clean air strategy sets out an annual reporting process for the monitoring of air pollution, which is the appropriate mechanism for assessing the effectiveness of those changes and others over time, rather than introducing a new method to review it, as proposed by the amendments. I therefore urge the Committee to reject the amendments. The changes outlined in the measure will ensure that both foreign and domestic HGVs play their part in meeting the Government’s air quality targets.

Finance (No. 3) Bill (Eighth sitting)

Kirsty Blackman Excerpts

Thursday 6th December 2018 Public Bill Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 104, in clause 60, page 44, line 17, at end insert—

“(3) The Chancellor of the Exchequer must review the effects of a reduction in air passenger duty rates from 1 April 2020 and lay a report of that review before the House of Commons within six months of the passing of this Act.

(4) A review under subsection (3) must in consider the effects of a reduction on—

(a) airlines,

(b) airport operators,

(c) other businesses, and

(d) passengers.”

This amendment would require the Chancellor of the Exchequer to review the effects of a reduction in air passenger duty.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 120, in clause 60, page 44, line 17, at end insert—

“(3) The Chancellor of the Exchequer must review the effects of the changes made in subsection (1) and related matters specified in subsections (4) and (5) and lay a report of that review before the House of Commons within six months of the coming into force of the changes.

(4) The matter specified in this subsection is the revenue effects of the changes.

(5) The matter specified in this subsection is the effects of the changes on—

(a) CO₂ emissions,

(b) the United Kingdom’s ability to comply with its third, fourth and fifth carbon budgets,

(c) air quality standards,

(d) air travel demand, and

(e) air traffic movements.”

This amendment would require the Chancellor of the Exchequer to review the revenue, environmental and certain other impacts of the changes made by Clause 60.

Amendment 121, in clause 60, page 44, line 17, at end insert—

“(3) The Chancellor of the Exchequer must review the effects of the changes made in subsection (1) together with the matter specified in subsection (4) and lay a report of that review before the House of Commons within six months of the coming into force of the changes.

(4) The matter specified in this subsection is to assess whether the rate for privately-owned and privately-chartered jets is reflective of environmental costs relative to the other rates and bands of air passenger duty.”

This amendment would require the Government to review the extent to which rates of air passenger duty for privately-chartered and privately-owned aircraft reflect environmental costs.

Clause stand part.

[Kirsty Blackman]

I will not speak for a terribly long time, because I am sure the Committee is not keen on being detained for any longer than necessary.

The devolution of air passenger duty has not been properly completed, so the Scottish Government are unable to put in place air departure tax, which we committed to introducing, or to make our proposed changes first to halve that tax and then to remove it completely. We are keen to do that because we believe it is important that we can attract people to visit, live and work in our country, and those steps were in the manifesto we were voted in on in 2016.

Complete devolution has not happened due to an issue with our exemption for the highlands and islands. I understand that the UK Government and the Scottish Government are working on that. It would have been great if it had been dealt with before, because we hoped to have air departure tax in place in April. It has not been dealt with, but I get the impression that people are still around the table trying to solve the issue, which is good news.

In lieu of APD being properly devolved and our having the powers to make our planned changes in Scotland, we support a UK-wide reduction in APD. That is why we tabled amendment 104, which would require the Chancellor of the Exchequer to

“review the effects of a reduction in air passenger duty rates from 1 April 2020”—

we chose that date because the industry has asked us to ensure that any change in rates is not made immediately—

“and lay a report of that review before the House of Commons within six months”.

The review would have to

“consider the effects of a reduction on—

(a) airlines,

(b) airport operators,

(c) other businesses, and

(d) passengers.”

One of the key issues for us is that the comparatively high taxes in the UK sometimes cause difficulties for airlines and airport operators. If we take into account VAT, air passenger duty and other taxes, the UK is one of the more highly taxed places to visit as a tourist. We are keen to see changes so that we can secure the routes we have and run more routes.

Given the remoteness of some communities in Scotland, it is important that we have good access to flights. I live in Aberdeen, which is about two and a half or three hours’ drive from Glasgow and Edinburgh. There are international flights out of Aberdeen, but not as many as I would like—there are lots of places we cannot get to unless we drive to Glasgow, Edinburgh or even further afield. I have previously looked at flying from Newcastle to get a better range of flights.

I would appreciate it if the Minister, if he cannot accept the amendment, talked a bit about what he thinks would be the impact on airlines, airport operators, other businesses and passengers of reducing air passenger duty. If he does not want to talk about that because it is not the Government’s policy to reduce air passenger duty, it would be interesting to hear why it is not their policy given my concerns. We are calling for a review because the amendment of the law resolution does not allow us to change it in a serious way. I hope I have laid out the Scottish National party’s position clearly.

[Clive Lewis (Norwich South) (Lab)]

With your leave, Mr Howarth, I will speak to amendments 120 and 121, and press them to a vote if necessary, before moving on to other significant questions that we feel need answering in relation to the clause. As numerous environmental non-governmental organisations, scientists and even the chair of the Committee on Climate Change have observed, the Government are failing to tackle the climate crisis that is already upon us, and we believe that that is reflected in their policy on air travel. There is an awkward mismatch between our world-leading climate change legislation and our policy and prevailing political attitudes towards aviation.

The purpose of amendment 120 is to force the Government to share with Parliament the impact, or the lack thereof, of their proposed changes to air passenger duty on a variety of environmental concerns. The Committee will be aware that the projected impact of climate change poses severe risks, not just to the natural environment but to the prosperity of the British nation and the welfare of the people we represent in the House.

Aviation has a significant and growing impact on climate change. Emissions from the sector rose by 1.2% in 2016. It currently represents about 7% of the UK’s total emissions yet, on current projections, that figure will reach 25% by 2050 as a result of increases in aviation demand and carbon reduction in other sectors. That is because aviation currently enjoys a uniquely generous target under our national framework for reducing emissions through to 2050—namely, it is not expected to make any contribution in our carbon budgets to those reductions, and is instead required to conform to a level of emissions in 2050 that are no higher than 2005 levels, which is 37.5 megatonnes of carbon dioxide. That is known as the Committee on Climate Change planning assumption for aviation. That generous target is in recognition of the difficulty of decarbonising air travel through technology and operational improvement, and of the utility and social value of air travel for those who are lucky enough to use it.

Department for Transport aviation forecasts show that UK aviation emissions are currently on course to exceed even that generous limit, thus potentially jeopardising our ability to meet our overall climate change targets in the form of the fourth and fifth carbon budgets. The Committee on Climate Change has repeatedly called on the Government to develop a robust domestic mitigation policy framework for international aviation emissions for flights taking off from UK airports. Most recently, its 2017 and 2018 progress reports in Parliament highlighted the need for a new strategy and new policies to ensure UK aviation emissions are at about 2005 levels in 2050. In its 2018 assessment of the Government’s clean growth strategy, it warned that they are falling far short of the necessary action. It noted that no progress has been made on this requirement.

The Committee on Climate Change is currently working to update its advice to the Government on mitigating aviation emissions. It is due to report on that in the spring—we await that with interest. One aspect of its guidance that is unlikely to change and is highly salient to the clause is the recognition that the UK’s participation in international mitigation programmes for aviation emissions, such as the International Civil Aviation Organisation’s CORSIA—carbon offsetting and reduction scheme for international aviation—agreement to offset growth from 2020 and the EU’s emissions trading scheme will simply not be sufficient to keep UK aviation emissions within safe limits, as defined by the Committee on Climate Change.

Likewise, even if some fairly heroic assumptions are made about technology, operational improvements and the uptake of genuinely sustainable biofuels, the projected growth in demand for air travel is expected to outstrip these efficiency gains, causing emissions to rise above the safe limit. In 2009, the Committee on Climate Change advised the Government that:

“Deliberate policies to limit demand below its unconstrained level are therefore essential if the target is to be met.”

That has remained its formal position ever since.

The statutory advice to Government by the committee—renowned, by the way, as among the best climate change advisers in the world—is therefore that the growth in demand for UK air travel must be limited if our climate change targets are to be met. That is clear. However, no Government, least of all this one, has yet proposed any such policies. On the contrary, this Government have acted to remove constraints to growth in UK air traffic, such as by approving a third runway at Heathrow Airport without any corresponding measures to meet climate change commitments.

That is why we seek through amendment 120 to compel the Government to review air passenger duty, its effect on the demand for air travel and the consequent effect on greenhouse gas emissions. That is not to say that APD is the only lever that the Government have, but it is incumbent on them to make it clear how they will achieve the climate objectives agreed by consensus of the House. Perhaps the Minister will answer some questions—I am sure the Committee on Climate Change will be interested in hearing the answers.

What impact do APD rates have on demand today? How high would APD rates need to be, or what other measures would have to be in place, to constrain growth in emissions to within the safe limits advised by the Committee on Climate Change? Was that even a consideration of the Government when developing the Bill? Assuming that the Minister agrees it is indeed the Government’s goal, he might say that APD is not the best or most equitable route to achieve that goal, but we need to be clear that there is another route. The answers we hope to receive will help us all as legislators to decide whether APD and the suggested rate changes are indeed an effective mechanism to achieve the Government’s stated policy, or whether alternative measures would be more economically efficient and fiscally progressive.

We understand that limiting growth in demand for air travel is politically fraught, and that important social justice dimensions must be considered when designing any policies to achieve that aim. The issue, however, cannot be ducked forever. The Government have been, and continue to be, remiss in their duties by failing to make any assessment of the potential for different fiscal measures or other policy approaches to constrain UK aviation emissions in line with Committee on Climate Change guidance.

Modal shift from air to rail is an important feature of nearly all decarbonisation scenarios intended to deliver zero net emissions by the middle of the century, as per the UK commitment under the Paris agreement. At the moment, however, it is much cheaper to travel from London to Edinburgh by plane than by train. That is in part a product of the chronic failure of Britain’s ill-advised experiment with the privatisation of our railways, but there is an argument that it is also due to tax advantages enjoyed by aviation over other modes of transport, which brings us back to the clause.

Under international air service agreements, it is prohibited to tax aviation fuel—an anachronism from the earliest days of international aviation, when only a handful of passenger planes were in the sky and Governments sought to do all they could to nurture this exciting new economic sector. Seventy years later, more than 23,000 aircraft are in the global fleet, and yet this highly mature industry continues to enjoy tax-free fuel, a perk it has retained through a combination of lobbying and the structural difficulties of levying a tax on an activity that, by its nature, crosses national boundaries.

That anomaly is the subject of intense debate in France, where motorists are rightly pointing out the gross disparity between the high rates of duty in the form of a carbon tax levied on petrol and diesel at the pump, and the total absence of taxation on aviation fuel. Former French environment Minister, Nicolas Hulot, last week joined calls for kerosene to be taxed. Serving members of the French Government say that they are now speaking with the European Commission.

In addition to duty-free fuel, airline tickets, planes, parts, repairs and fuel are all zero-rated for VAT, alongside items such as baby clothes and wheelchairs. There is also the duty-free shopping in airports. Given that history, the price of air travel does not reflect the environmental damage caused by flight. Taxing air travel appropriately is clearly a difficult political problem to solve, and I want to make it clear that we do not advocate that such travel should become a privilege available only to the rich. However, it is important to understand the social justice dimensions of the challenge clearly.

APD has been criticised in the past as a blunt instrument. That may be true, but it is overall a fiscally progressive tax in the sense that it is mostly collected from households at the upper end of the income spectrum. Government survey data suggests that about half of British residents do not take any flights in a given year, while about a fifth say they never fly. Research suggests that 70% of all flights by UK residents are taken by 15% of the population—the so-called frequent fliers. That group probably includes many people in this room. Only 1% of the general population fly more than seven times a year, but the richest 5% of households fly 13 times a year. Growth in demand for air travel is likewise being driven by the UK’s wealthiest residents. Perhaps the Minister can share any official figures the Government hold.

In any event, to avoid catastrophic global warming, we must collectively limit carbon emissions from aviation. Ordinary people taking occasional family holidays or visiting relatives abroad should not be the priority for any policy designed to curb demand growth.

[Kirsty Blackman]

The hon. Gentleman makes a strong case for the amendments. Given that more information is better, we are happy to support them. For the avoidance of doubt, I would love to stop flying every week. An independent Scotland would mean we could do that, and it would reduce our carbon footprint.

[Clive Lewis]

The hon. Lady makes a good point—

--- Later in debate ---

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

I will respond to as many comments as I can. I will come to the amendment tabled by the hon. Member for Aberdeen North, but we agreed and legislated to devolve air passenger duty to the Scottish Government. The delay in so doing is unfortunate—it is not what we wished to happen—but it is a result of the Scottish Government’s asking us to postpone the implementation of devolution. They did so for the perfectly understandable reason that they wished to pursue the measure with respect to the highlands and islands, but it was essentially their decision, which we respected in agreeing to postpone the turning on of devolution, if that is the right phrase, at their suggestion.

[Kirsty Blackman]

Yes, but the UK Government were trying to hand APD over in such a way that the highlands and islands exemption would no longer exist, so it would have been completely deficient and would not have operated in the way we hoped or, presumably, the way it was intended to work when its devolution was first mooted.

--- Later in debate ---

[Clive Lewis]

I want to raise a couple of things before we vote on amendments 120 and 121. The Committee on Climate Change has clearly stated that we are heading towards a substantial breach of the generous headroom that has been provided for aviation in the UK. The Government are going to overshoot that, to use a pun. There is a pressing climate emergency on this planet. As we speak, millions of people—many of them in the world’s poorest countries—are already being affected by climate change. My dad is from Grenada, and he has retired there. People there, and in the West Indies generally, cannot get insurance as a result of the hurricanes that destroy vast swathes of the islands year in, year out, because of climate change. I feel as though we are hearing once again from the Government about business as usual, even though a climate emergency is taking place.

I understand the APD. It is not designed as an environmental tax or a demand management tool; it is a revenue raiser. Given that we find ourselves heading towards a breach of the headroom that the Committee on Climate Change has provided, surely the Government should be looking at ways to control and push down demand for flights, so that we can begin to make a real impact on our commitments to tackling climate change. Will the Minister tell the Committee whether he plans to join our French counterparts in lobbying for tax reform on kerosene, as they will shortly talk about with the EU Commission? It seems to me that the aviation industry has enjoyed these 70-year-old tax perks and is now an established sector, but one that has yet to fully play its part in tackling climate change. This country can show leadership on that, starting with the Treasury.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 120, in clause 60, page 44, line 17, at end insert—

“(3) The Chancellor of the Exchequer must review the effects of the changes made in subsection (1) and related matters specified in subsections (4) and (5) and lay a report of that review before the House of Commons within six months of the coming into force of the changes.

(4) The matter specified in this subsection is the revenue effects of the changes.

(5) The matter specified in this subsection is the effects of the changes on—

(a) CO₂ emissions,

(b) the United Kingdom’s ability to comply with its third, fourth and fifth carbon budgets,

(c) air quality standards,

(d) air travel demand, and

(e) air traffic movements.”.—(Clive Lewis.)

This amendment would require the Chancellor of the Exchequer to review the revenue, environmental and certain other impacts of the changes made by Clause 60.

--- Later in debate ---

Amendment 136 would require an assessment of the impact of the tax changes in the clause on the behavioural impacts on waste disposal operators of all types. The clause represents a series of missed opportunities by the Government to adjust and strengthen landfill tax in ways that would help to address a number of environmental and disposal problems and would drive forward the roll-out of a closed-loop resource economy across the UK by increasing recycling and reuse of goods and materials that any responsible society should not be throwing away.

[Kirsty Blackman]

The hon. Gentleman is making an excellent speech in which he is talking about a lot of sensible measures to reduce waste. I just want to say that the matter covered in this aspect of the Bill is devolved, so if he presses the amendment to a vote, the Scottish National party will not take part in it.

[Clive Lewis]

I thank the hon. Lady—her point is taken on board.

Such a beneficial undertaking would help both businesses and households to reduce drastically their waste streams and so cut their work-related and living costs. It would also go a very long way to helping the UK to meet its energy and greenhouse gas emission targets on the way to becoming a zero-waste, zero-carbon economy. As well as securing existing jobs and helping to create many new ones in the reuse, repair and recycling sectors, adopting the amendments that we are calling for would undoubtedly help to protect urban, suburban and natural environments where illegal waste dumping continues.

Will the Minister tell us how he means to address the very serious concerns of the Environmental Industries Commission and its members about the growing gap between the lower rate and the higher rate of this tax? The existing gap is already causing significant problems in the industry, with some operators presenting for the lower rate inert waste that actually contains asbestos fibres and therefore should be subject to the higher rate. How does the Minister intend to address that imbalance? In the EIC’s view, which is shared by Labour and a number of prominent environmental and countryside non-governmental organisations, the gap should be closed and not made wider, so that the tax acts as a deterrent to illegal waste disposal of all types and so benefits the public purse and society at large in significant environmental ways.

That being the case, in the absence of significant assurances from the Minister, we will struggle to support the clause as it stands. However, I would like to give the Minister the opportunity to provide us both with those assurances and some answers to the questions that we have posed. I look forward to his response.

--- Later in debate ---

[Robert Jenrick]

The clause makes changes to ensure that penalties may be raised against businesses registered for the soft drinks industry levy that do not submit a quarterly return or fail to submit a quarterly return on time. The changes ensure that a penalty can still be raised for non-payment of the soft drinks industry levy in the event that certain provisions in the Bill are enacted.

The soft drinks industry levy was announced at Budget 2016. The levy commenced on 6 April 2018 and has been successful in its stated objective of driving reformulation, to such an extent that over half of all drinks by volume that would have been in scope of the levy have now been reformulated, and in fact were reformulated even before the tax came into effect. This measure will support that success by allowing penalties to be issued for late returns and non-submission of returns for accounting periods ending after 1 April 2019, should they be required.

[Kirsty Blackman]

I appreciate what the Minister says about the effects of the soft drinks industry levy, but it still does not apply to milk-based drinks. Will the Government consider extending the levy to milk-based drinks, given that it has been so successful?

[Robert Jenrick]

The hon. Lady makes a valid point. When we announced the policy, we said that we would consider milk-based sugary drinks in 2020, which is when more information, including Public Health England data, will be available to inform that decision. We have reiterated that commitment, so there will be a review in just over a year, which could lead to such a decision, although we have no plans to extend the levy at this moment.

The changes made by the clause will help to provide a proportionate and fair penalty regime and to drive compliance. The changes will affect only soft drinks industry levy-registered businesses that do not submit a quarterly return and payment by the due date. Furthermore, although the clause gives us the powers to act, at present there is no evidence of fraud or non-compliance with the soft drinks industry levy on any material scale.

Clause 67 makes changes to amend section 1 of the Isle of Man Act 1979, to add the soft drinks industry levy to the list of common duties. It will ensure that the movement of liable soft drinks between the UK and the Isle of Man will not be seen as either an import or an export under the levy, as long as the levy rates of the UK and the Isle of Man remain aligned. This change will have effect from 1 April next year.

Finance (No. 3) Bill (Sixth sitting)

Kirsty Blackman Excerpts

Tuesday 4th December 2018 Public Bill Committees

Finally, I urge hon. Members to vote for amendment 92, which would empower us and give us the information we need to help small businesses to cope better with VAT collection.

[Kirsty Blackman (Aberdeen North) (SNP)]

First, the hon. Member for Aberdeen South (Ross Thomson) and I are two very different people. He is a lot taller, has dark hair and is a Conservative Member of Parliament. Lots of people have made this mistake over time. He also has very different views from mine on Brexit.

To follow up on some of the issues raised, I am comfortable supporting the Opposition amendment; it makes sense to ask for this information. A couple of matters were raised during the debate. It is important that reasonable VAT guidance is given to organisations. As we have previously discussed in Committee, people can only pay the correct tax if they understand how the tax system works. If they do not have the appropriate guidance, it is difficult for them to ensure that they pay the right VAT.

It is clear that the Government and HMRC are falling short in the information that they communicate to the companies and organisations that are expected to jump through these hoops. It would be useful if the Government looked at that and ensured that they improve the information they are providing to companies and organisations, so that they can better understand their liabilities and how to comply with them.

Lastly, in relation to discussions around the Taxation (Cross-border Trade) Act 2018, the hon. Member for Stalybridge and Hyde mentioned the changes from making tax digital and the impact of that on companies that are finding it more difficult to navigate the system. Another possible impact, depending on what happens with any withdrawal agreement, is that move from acquisition VAT to import VAT, which would also have a significant impact on companies, because they would have to pay significantly more money to allow them to do things differently.

I was pleased that the Government moved on that point after sustained pressure on them through the passage of the Taxation (Cross-border Trade) Bill. I appreciate that they agreed to put in place a deferment scheme in the event of no deal; that is positive. However, we do not yet know what the deal will look like. Could we have more commitment from the Government about smoothing that path, if there is to be change from acquisition to import VAT?

Obviously I would rather there was no change and we all stayed in a customs and VAT union, with common VAT as the preferred option. If there is to be any change, will the Government reassure us that companies that will be provided with as much support as they can, in order to make that change without the cash-flow impact suggested by organisations such as the British Retail Consortium?

[Mel Stride]

Before I get into more general points on the clause, I will turn to some specific issues raised by Members, starting with the hon. Member for Aberdeen North. I entirely take her points about the distinction between her and my hon. Friend the Member for Aberdeen South. The differences are quite stark in all respects, though I am not sure to whose benefit that is.

The hon. Lady is entirely right to suggest that we need good guidance on these issues. I should point out that a primary focus of the proposed change is to ensure that we do not, under the existing arrangements, have a number of construction companies falling due to VAT and going over the threshold. That does bring unwanted complexity for those who would not otherwise be in that situation. It is worth bearing in mind that the reason behind the measure is trying to avoid drawing ever more businesses in that sector into the VAT regime.

The hon. Lady also reminded us of the discussions that we had at length on the Taxation (Cross-border Trade) Bill, when most of us were all together.

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[Kirsty Blackman]

It is not our position that the UK should leave the common VAT area, but we support both Labour amendments, because it is sensible that we have more information about all these provisions, so that the House can take better-informed decisions.

[Jonathan Reynolds]

I am extremely grateful for the hon. Lady’s intervention and entirely agree with it.

On the access of financial services to the single market once we leave the EU, under the terms of what the Government have negotiated—that single market access will almost certainly be denied unless the equivalence provisions prove adequate, although most people expect them not to be—the Government’s advice to firms in the UK is to set up subsidiaries in the EU. It was reported to me in meetings yesterday in the City that there is concern that when those subsidiaries are created, the connected UK entities will not be able to enter VAT groups in the UK, which would therefore trigger a substantial tax liability in order for firms to comply with the Government’s own advice on market access to the EU. The Minister may not be able to answer that now, but I want to put it on the record.

I call on all Committee members to support both amendments today so that we can get a clear and full picture of the wider impact of the measures on the future VAT policy approach outside the EU and on closing our own VAT gap here in the UK.

--- Later in debate ---

[Peter Dowd]

As long as that? Ten minutes? My word.

I should point out that, under a more active Government—one not simply going through the motions—these measures would already have been taken into account, acted upon and been on offer for proper scrutiny during this debate. Nevertheless, I hope the Minister will see the benefits of the review as set out in our amendment and agree that it is worth while—or that Members will choose to support amendment 98 to see that it is implemented. That brings our amendment on this particular matter to a close. Cheers.

[Kirsty Blackman]

I rise to speak to amendment 103 in my name and that of my hon. Friend the Member for Paisley and Renfrewshire South, but I would also like to speak a little more widely about the clause and the Labour amendments. First, I would like to ask the Minister a question about the post duty point dilution, which was in the Red Book. Hopefully, he can answer or get inspiration during the course of the debate. The changes do not appear to be in the legislation, so it would be useful if the Minister could explain when the legislative changes to post duty point dilution will take effect. I understand that the hope is that it will be put into legislation to be enacted in April 2020, but it would be useful if we could have an idea of the legislative process to ensure that those changes are made. I have been lobbied heavily on this by one of my constituents. I know it is important to a lot of people and that the Government have to their credit committed to making changes in the autumn Budget 2017.

Returning to our earlier discussion, I am not clear what the Government are trying to do with the changes to alcohol taxation. Are they trying to incentivise good behaviour; are they trying to disincentivise bad behaviour; or are they trying to generate revenue for the Exchequer? It is important for the Government to clarify that and accept the Labour amendment on the revenue impact on the Exchequer and on public health. That would make a big difference, because we would be clear about the Government’s intentions and what the Government expect to achieve.

On public health, people who want to get drunk quickly often drink high-strength ciders. It is important the changes focus on people who are not drinking for pleasure in the main, but who are drinking to get as drunk as they possible can. Those are the alcohol deaths we are trying to combat in Scotland with the new minimum unit pricing we introduced, which is a clear and well-intentioned public health change. Minimum unit pricing is all about making sure that high-strength alcohols that can be bought very cheaply are increased in price, so that people cannot get hold of them as easily. We predict that we will see a reduction in alcohol deaths as a result of the changes to legislation in Scotland.

What do the Government expect will be the impact of their legislation, particularly the extreme impact on people who are dying from alcohol misuse? What numbers do they expect to see as a result of the changes? If the Government accept Labour’s amendments, it would be useful if the review included the number of people whom they expect to save so that we can measure them against that.

Lastly, it is important that the Government tax this stuff and increase the tax rates as inflation increases. We want the Government to take a step back and have a holistic look at the entire system and explain why they are taxing things in the way that they are, rather than tweak and bodge and make changes year on year, as often happens in this place, so that we end up with something that is unwieldy and does not fulfil the intentions of the Bill in the first place, let alone the intentions of the world as we see it. Will the Minister provide answers?

[Sir Robert Syms]

The Government have sensible policies on this. We debated an amendment earlier today about securing jobs in the North sea when there are relatively few jobs on oil rigs. The hospitality industry is one of the biggest employers in the United Kingdom. It is also very important for the tourist industry. The Government have been constantly keeping taxes under review to see what gets a reasonable amount of income and what is fair for consumers.

We also have to understand that we have been through a difficult economic period and incomes have not risen as much as one would like. One of the disadvantages of putting up some of these prices is that it will affect not middle class people, but some of those on the lowest incomes who have every right to enjoy a drink. I therefore think that the Government policy is perfectly sensible.

[Kirsty Blackman]

I agree that the hospitality industry is incredibly important, particularly to tourism. However, the oil and gas industry supports 135,000 jobs and is also very important to the livelihoods it supports.

[Sir Robert Syms]

I am sure it is, but I suspect the hospitality industry is 10 times that. The other factor about the drinks industry generally is that it is very regionally diverse, with the scotch industry in Scotland, and wine, cider and beer producers. We all have representations from the owners of breweries, which employ people and are sometimes very important parts of the local economy. We have all had representations from people who run public houses, which are also central to the community. One of the worst things that has happened over the past few decades is the number of public houses that have closed, which has had a material impact on many people and communities. This is a matter of balance, and the Government may be wrong or they may be right, but I think they are more likely to be right because their approach is more likely to secure jobs in the hospitality and brewing industries, and to achieve a proper balance so that people can enjoy a meal or a drink out.

There is a serious alcohol issue, but the producers of wine and beer label things very clearly to show the strength of alcohol. There is a strong “Drinkaware” campaign, so it is not difficult for people to find out the impact of alcohol, but we know there is a hard core of heavy drinkers, many of whom use A&Es and ambulances. It costs about half a million pounds a year to keep an ambulance on the road, and many of them are disproportionately used by people who abuse alcohol. The focus, if there is any focus, ought to be on addiction services and trying to intervene with those who abuse alcohol rather than on the vast majority of people who enjoy a drink.

The hon. Member for Bootle, in his amusing speech—we will miss him on Thursday when he is no doubt raising a cheer to Cicero in whatever he is doing—noted that the industry contributes substantially to the Treasury. Some of those billions of pounds have to go to the NHS because of drinking, but the industry also generates a lot of money for good causes and things that the Government need to provide.

This is a matter of balance, and I think the Government have it right. There may come a time when prices have to go up. If incomes start to rise more substantially—we hope that will be a factor in a few years and that there is evidence that pay is picking up a bit—it may be time to review the taxes, but I think the Government have got this one right.

[Robert Jenrick]

I gather there may be a vote in a few moments’ time, but I will begin by addressing, in no particular order some of the points that have been raised by the hon. Member for Aberdeen North. We are interested in the Scottish and indeed the Welsh Government’s actions on minimum unit pricing. It is fair to say that the jury is still out on whether that has been effective, but we will be watching with interest, as will the Department of Health and Social Care and Public Health England, and that will inform the decisions we take at future Budgets.

The hon. Lady asked about post duty point dilution. This is an issue that she has rightly highlighted, and a number of the producers who are likely to be affected by this and who are based in the UK will no doubt be asking the question she has asked. We intend to give this further consideration and lay draft legislation on L-day next year, in the early summer of 2019, with a view to legislating on it in the autumn Budget 2019 and its coming into force from April 2020. While I have spoken to some of the small number of British producers who will be affected and I note their concerns, this is a question of fundamental fairness in the duty system.

[Kirsty Blackman]

Perhaps I did not express myself very well. My constituents are lobbying for the change to be made; they are not lobbying against the change being made. I was asking when this would come in, because they are hoping for it to come in.