Finance (No. 2) Bill (Fourth sitting)

Liz Twist Excerpts

Wednesday 5th January 2022 Public Bill Committees

[Abena Oppong-Asare]

I thank the Minister for her explanation of clause 82, which increases the rate of landfill tax in line with inflation. The clause is very straightforward, and we do not oppose it. However, since we are talking about a specifically environmental tax, I will take this opportunity to bring to the Minister’s attention the climate change tax policy road map published by the Chartered Institute of Taxation, which calls on the Government to set out how they plan to use the tax system to meet our net zero goal.

There are obviously several different taxes that affect the environment, some of which we have already discussed today, but there is a clear need to start thinking strategically about the role that the tax system will play in reaching our net zero goal. Of course, tax can play a number of roles in achieving net zero. It provides a source of revenue for the investment we desperately need—in renewable energy, for example—but it can also incentivise climate-friendly behaviour, whether for individuals or businesses, and I have met businesses that are quite keen to have a bit more direction on that, particularly from the Government.

It is not just me who is saying this: in a number of meetings I have had, quite a number of stakeholders have said that we need the Government to take a joined-up approach that links climate tax policy with wider policy objectives. Unfortunately, the recent Treasury net zero review said very little about this really important issue, so could the Minister set out whether the Treasury will publish a net zero strategy? Failing that, will she give us an indication of how the Treasury intends to use the tax code as part of our effort to achieve net zero?

[Liz Twist (Blaydon) (Lab)]

I speak in this debate as an MP whose constituency has been blighted by landfill, so of course landfill taxes are very welcome, and as my hon. Friend the Member for Erith and Thamesmead has just said, an increase in that tax is welcome as part of an environmental policy that—as she also said—needs to go much further in future. However, I want specifically to ask the Minister about enforcement of the requirement to collect and pay landfill tax after the experience in my constituency of a failed HMRC investigation lasting some six years, the unfortunately named Operation Nosedive. What will the Treasury do to ensure that enforcement action is robust and followed through to make this tax as effective as it can be?

[Helen Whately]

The hon. Member for Blaydon made a really important point about the enforcement of landfill tax. I am also aware of concerns about the associated waste crime. There has been a reduction in the landfill tax gap in recent years. The landfill tax gap for England and Northern Ireland was estimated at £200 million—22.7%—in 2019-20, which is a decrease compared with the tax gap in 2018-19, when it was £275 million, or 29%. So there has been an improvement in the enforcement of landfill tax, but I recognise the point that she makes and we will continue to work on that.

There is a new taskforce dedicated to tackling serious and organised waste crime. The joint unit for waste crime will bring together law enforcement agencies, environmental regulators, HMRC and the National Crime Agency to deal with waste crime.

[Liz Twist]

Can the Minister tell me how the tax gap is calculated? I am pleased to hear that it has gone down, but am interested to hear how the gap is calculated and monitored.

[Helen Whately]

I hope the hon. Member is happy for me to write to her on the methodology for calculating that particular tax gap. I am happy to set out further action that will be taken to address waste-related crime as well.

I thank the hon. Member for Erith and Thamesmead for pointing me to the report that she mentioned. She made broad points about the tax system and its role in meeting net zero. The net zero review was a substantial document that was very open about the thinking and the challenges involved in our transition to net zero. I do not think that here and now is the place to set out a net zero tax strategy, which I think she was asking me to do, so I hope she will understand if I do not stand here and do that, but we have put a lot on paper about the Treasury’s thinking on these matters.

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

Like the hon. Member for Erith and Thamesmead, I remember the discussions that we had on the plastic packaging tax last April. It is with some concern that I heard the Minister say that the Government want to amend the legislation that they passed just last year so that it works with international law. It seems a wee bit of an oversight to have put through legislation that does not comply with international law, but I am glad that the Minister has brought it back in order to amend it before it comes into force.

I was also concerned by what was said about exemptions around freeports, and I wonder whether the Minister could expand on that a bit. What exactly does it mean? It is mentioned in the explanatory notes as well, but I am not quite clear what it means. If someone is importing or exporting plastics through freeports, does the tax not apply? I am quite concerned by that, because it would be a considerable loophole. It would also fly in the face of what the Scottish Government have asked the UK Government to work with them on with regards to green ports, whereby instead of being tax havens, they will actually be something that helps to support our climate change goals in Scotland. As far as I am aware, the UK Government are still holding out on any kind of agreement with the Scottish Government that allows a green port to proceed in Scotland. If the Minister has any information on that, it would be welcome.

There is a missed opportunity for the Government to table amendments to the Bill. As I said when we discussed this issue last year, the Government have not taken the opportunity to distinguish between different types of plastics. Some types of plastics, particularly PET, can be 100% recyclable in bottles that can be bought in shops. HTP, which is used in milk bottles—it is slightly opaque plastic—is less recyclable. The Government could have made distinctions in the regulations that they made around plastic. Instead of setting the level at 30%, they could allow people to recycle 100% for PET and made that the target for something that is recyclable and achievable, which would make a huge difference by incentivising companies to do more, rather than allowing them to accept the minimum that they can get away with. I urge the Government to think about any further amendments that they could make to the scheme to make it more effective and greener, and to encourage more companies to take up the opportunities that lie within it.

[Liz Twist]

I want to comment on two areas. First, I want to speak in support of new clause 17. My hon. Friend the Member for Erith and Thamesmead has explained her concerns that the tax, as currently proposed, is unambitious. That, I think, is a good reason to look at reviewing the measures that are in place and seeing whether they are doing what they were expected to do but also whether they need to be strengthened in the future, so I very much support the new clause.

The other issue that I want to raise is about clause 83 itself. It is the considerable number of references in schedule 11 to further measures being taken in the future through secondary legislation. There is a striking number of them. Paragraph 3, for example, allows the commissioners to make regulations—admittedly by the affirmative procedure, which is better than the negative procedure. We see this again in paragraphs 4 and 6. Can the Minister explain to us why we need so many areas to be covered by secondary legislation? Should they not in fact be covered by the primary legislation?

[Helen Whately]

First, I welcome the support from the hon. Member for Erith and Thamesmead for the plastic packaging tax. I am glad to hear that she does not intend to oppose clause 83 and schedule 11.

To pick up specifically on new clause 17, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Blaydon, it suggests that the Government should conduct future reviews of the tax and the impact that it has, including six months after the passing of the Bill for the tax rate and chargeable packaging components, and for all aspects of the tax a year after introduction or annually after an initial report. The Government have already set out a large amount of detail about the expected impact of the tax, and the National Audit Office report on environmental taxes recently concluded that Her Majesty’s Treasury and HMRC had

“undertaken extensive work to understand the possible impacts of the tax”.

Further detail on modelling to assess the impacts of the plastic packaging tax was set out by the Office for Budget Responsibility in its economic and fiscal outlook published in March 2020. This included most significantly the increase in recycled plastic in packaging and more marginal impacts, such as switching to alternative plastics or materials.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review. Given the substantive information already published and the fact that very limited data will be available within six months after the passage of the Bill, it would be premature to review the impacts of the tax as suggested. As to evaluating the impact of the tax annually after its introduction, being able accurately to isolate the impact of particular policy measures alongside other external factors is inherently difficult, and the Government will carefully consider these issues. As set out in the tax information and impact note published in July 2021, consideration will be given to evaluating aspects including the rate, threshold and exemptions from the policy after at least one year of monitoring data has been collected and analysed.

The Government agree that it is important to understand the efficacy and impact of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, we do not think that new clause 17 is necessary.

I come now to a couple of the specific points made by the hon. Member for Glasgow Central. I can assure her that there is not an exemption from the plastic packaging tax for freeports. The clause is to ensure that the tax continues to apply with any changes to freeports legislation. And that would be the reason for not including everything in primary legislation—to answer the hon. Member for Blaydon’s point—but requiring some flexibility through secondary legislation.

[Helen Whately]

What the hon. Lady read out is in line with what I said—there is not an exemption for freeports to supply the necessary flexibility—but I am happy to write to her with the reason why freeports get such a specific mention.

The hon. Lady also raised a point about a freeport for Scotland. We remain committed to establishing at least one freeport in Scotland, Wales and Northern Ireland as soon as possible.

The clause and schedule make sure that the plastic packaging tax will operate as intended from its commencement on 1 April 2022.

[Liz Twist]

I wonder whether the Minister has forgotten to address the issue of secondary legislation.

[Helen Whately]

I jumped across to that point when I was addressing the freeports point. In general, it is to allow flexibility, where primary legislation is not the right place to put measures. I am happy to write to the hon. Lady if there is anything further to add on her particular point.

Question put and agreed to.

Clause 83 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Ordered, That further consideration be now adjourned. —(Alan Mak.)