Making Tax Digital

Mel Stride Excerpts

Tuesday 19th February 2019 Commons Chamber

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

With permission, I would like to make a statement on making tax digital for business.

It has never been more important for businesses to be able to seize the opportunities that digital technology offers. Making tax digital helps them to do just that, and I am pleased to update the House today on Her Majesty’s Revenue and Customs’ progress in delivering this important modernisation of the UK tax system. Businesses that are registered for VAT and whose taxable turnover exceeds the VAT registration threshold of £85,000 will be required to use digital tools to keep their business records and to file their VAT returns for periods from 1 April.

It is important to be clear that MTD is not changing what businesses do for VAT—the frequency of reporting and tax rules remain unchanged; rather MTD is about making it easier for businesses to get their tax right by transforming how businesses keep their records and send their information to HMRC. Under the changes, those who do not already keep their records digitally will be required to start doing so, but the process of then sending returns to HMRC will become more straightforward, with their VAT returns generated and sent direct from the software they are using to keep their records.

In my last update to the House in July 2017, I announced that I was slowing the pace of the roll-out of MTD to give businesses, particularly small businesses, more time to prepare. I set out then that the start date for MTD would be April 2019, that it would be limited to VAT at that time and that the smallest VAT-registered businesses would not initially be required to use it. The extra time that these changes provided has been well spent. The pilot for the MTD VAT service has been running successfully since April 2018 and was opened up to the public in October. I can announce today that over 16,500 businesses are now signed up to the service, and I would encourage all those businesses that will be mandated to use MTD from April to sign up now and get used to the new service.

Businesses such as the oldest family business in Britain, R J Balson & Son, a butchers based in Bridport, Dorset established in 1515, just six years into the reign of Henry VIII, are already making the switch from keeping paper records, and prior to that no doubt records on parchment. The benefits to those moving to MTD are clear: it gives businesses more control over their finances, allowing them to spend their time focusing on innovation, growth and the creation of jobs. Indeed, the Enterprise Research Centre in 2018 found that, for microbusinesses, web-based accounting software delivered productivity increases of 11.8%.

In a world where businesses are already banking, paying bills and shopping online, it is important that the tax system keeps pace, but MTD is not just about providing a modern, digital service for businesses but about helping them get their tax right. We know that keeping records on paper and submitting VAT returns to HMRC manually results in errors. In a recent YouGov poll, 61% of businesses said they had previously lost receipts, and errors can also occur in the manual transposition of data or manual calculations. Some £9.2 billion of the UK tax gap is attributable to errors just like these. MTD will be a step change in addressing this, closing the tax gap by around £1.2 billion to 2023-24. The service builds on the way in which many UK businesses already operate and they have seen the benefits that digitising will bring. Starting a business and taking control of its future will now be easier than ever.

Some have questioned HMRC’s decision not to produce its own software for businesses, but I make no apology for overseeing the development of a diverse software-supplier marketplace that caters to a variety of needs, ensuring that businesses have the tools that they need to succeed. Software developers have responded positively by producing software at a range of price points, including free products, and offering different levels of functionality. That includes bridging software for those who want to continue to use spreadsheets for record-keeping, as well as fully integrated accounting software that provides additional functionality to help users to better understand and plan for their business.

More than 160 software products are already listed on HMRC’s software choices page as part of the MTD VAT pilot, and I know of many others that are currently being developed. Our approach to the provision of software means that businesses will be able to choose a product that suits both their budget and their needs. That includes some products which have been developed specifically to support different types of sector, such as specialist products for farmers.

However, it is not just HMRC and the software industry that are getting ready. HMRC’s latest research, which I can now share with the House, shows that in December 2018, 81% of the mandated population were aware of MTD, and 83% of those had started to make the necessary preparations. HMRC will have written directly to every business that is mandated to join MTD by the end of this month to signpost them to the help and support that they need in order to prepare. Now that the January self-assessment peak is over and HMRC is expanding its communications activity, we are confident that awareness and take-up will increase still further.

HMRC wants to ensure that MTD lands well and that customers feel supported throughout their transition. The first stagger of businesses that file quarterly will not need to submit their first VAT return through the new service until August this year. We will continue to listen to our customers to ensure that the right support is available to businesses as they become familiar with the new requirements of MTD. I must make clear that during the first year of mandation, penalties will not be issued for late filing but only for late payment. There will, of course, be a process to claim an exemption from MTD on the basis of digital exclusion owing to factors such as disability or problems with access to broadband, or on religious grounds. Any business that is already exempt from online filing for VAT will remain so under MTD without having to reapply.

Some have questioned the timing of these changes, and, in particular, have mentioned the proximity to the date on which the UK will leave the European Union. I can reassure the House that MTD is designed to enable businesses to meet their UK tax obligations as simply as possible, regardless of the outcome of EU exit discussions, and is designed to complement other business tax obligations. We will continue to work closely with the software industry and with business over the coming weeks to ensure that that happens.

HMRC has made good progress in preparing for MTD. The pilots have progressed well and the full functionality of MTD has been tested with a wide range of different businesses, including some below the VAT threshold which have chosen to take part voluntarily. HMRC is ready, the software market is ready, and hundreds more businesses are getting ready every day by joining the pilot. MTD will help unlock the potential of UK businesses, putting them on a stronger footing to compete internationally, maximising productivity and simplifying business processes.

I commend my statement to the House.

[Peter Dowd (Bootle) (Lab)]

I thank the Financial Secretary for providing a copy of his statement in advance, and for his reference to Henry VIII. I must say that the Government are obsessed with Henry VIII, and with all the powers that they are using in that connection.

As has been recognised by the Federation of Small Businesses, the Labour party has consistently called on the Government to rethink their making tax digital policy, not least because our manifesto commits us to scrapping quarterly reporting for companies under the VAT threshold. The Opposition’s concerns are therefore well versed. We have raised them during numerous debates in relation to numerous pieces of legislation, announcements, delays and, indeed, U-turns. Unfortunately, we are here again today, addressing the Government’s absolute failure to handle the digital transition—a failure that has serious consequences for businesses throughout the country.

Let me make it clear that we fully support digitalised tax reporting, which we all agree has the potential to drastically reduce the time that individuals and business owners have to spend filling out long and complicated tax returns. We are also aware of the productivity gains that it will bring, to which the Financial Secretary referred. If handled correctly, it could make positive changes in the way in which people report their tax position for decades to come. However, the stakeholders to whom we have spoken in the business sector and the tax community continue to raise deep concerns about their ability to be ready for digital VAT reporting, and they have expressed those concerns to the Treasury Committee.

Owners of small and medium-sized businesses are already worried about the stark changes that they will have to make in 2019 to prepare for Brexit. They are worried about the possibility of a no-deal scenario and the overnight effect that it would have on costs and supply chains. There is also the potential introduction of tariffs and the impact on staff who are EU citizens. The Government have continuously failed to provide the certainty that is needed, so it is little wonder that business confidence is pretty low.

What is more, few people inside or outside the Government believe that HMRC is actually ready. To the best of my knowledge, it has the same problems as many of the businesses that will be required to begin digital reporting in 2019. Those concerns are echoed by tax professionals, who emphasise that the current timetable is unrealistic and unworkable for HMRC and the business community.

That is why the Opposition propose a delay in the introduction of digital reporting for VAT and income tax purposes until the end of the current Parliament in 2022, assuming that it lasts that long. Such a delay would give HMRC and small and medium-sized businesses the time that they need to prepare adequately and to implement new software in their businesses. Notwith- standing today’s announcement, there is a risk that the Government’s current timetable will bring chaos and confusion unless the concerns of the business community are fully addressed.

I should be grateful if the Minister would answer the following questions. Are any further costs anticipated as a result of today’s announcement? Is the delay in the implementation of making tax digital in any way connected with the so-called estate transformation—or downsizing—of HMRC, which has seen 170 regional offices merged into 13 “regional centres”? Is there not a need for in-house provision of making tax digital software, given the bespoke nature of HMRC’s UK-specific needs and the need to co-ordinate with other Departments? Under what legal authority or process has HMRC outsourced provision of that software?

A total of 0.5% of eligible businesses—one in 200—have signed up to making tax digital. Is the Financial Secretary confident that all the businesses will have signed up by the end of the Parliament? He says that he wants to listen to business, but I am afraid he is not listening hard enough, and the rosy picture that he has painted is not quite as rosy as he thinks. He need only ask businesses.

[Mel Stride]

I thank the hon. Gentleman for his response to my statement. I am pleased that he, like me, recognises the value of the digital processing of tax returns. Indeed, he made a specific and welcome reference to its productivity advantages. However, he also referred to what I think he suggested were serious failings in our approach, suggesting that it was not the right approach. I could not disagree more. In my statement, I was at pains to emphasise the proportionate and measured way in which we had approached these matters. I said that when I first became Financial Secretary to the Treasury, I decided to delay the roll-out of MTD so that it related only to VAT-registered businesses by 2019, and carved out the very smallest businesses and individuals from these measures. Indeed, I gave reassurances to the House and the business community that nothing will be introduced in terms of income tax and corporation tax any earlier than 2020 and that we would see how the roll-out of the VAT MTD went before we took any further decisions in that respect.

The hon. Gentleman raised several specific questions, which I will address in turn. He asked whether there will be any additional costs as a result of today’s announcements to those businesses in scope of MTD, and the answer to that is most certainly not. He might be familiar with the estimates already produced that suggest that on average a business in the UK that is in the scope of these measures will face additional costs of some 60p per week, and that does not take into account the efficiency gains that can be expected or indeed the fact that in many cases those costs will be able to be written off against taxation.

The hon. Gentleman referred to the continuing estate transformation work and asked whether there was any link between that and MTD. I think there is in the sense that we have a clear drive to make sure that HMRC is a lean and efficient organisation itself in the 21st century and that its estate is not scattered across the country in numerous offices, some employing fewer than 10 staff, but is in state-of-the-art hubs where digital and IT approaches can be maximised.

The hon. Gentleman asked whether we had considered developing in-house software for MTD, and I think he might have been urging us to do so. I know that it is a passion of the Labour party to centralise and have monolithic organisations that do all the organising at the centre, but that is not the way of us on this side of the House; we believe that the market generally knows best, which is why I was delighted to have been able to announce that we have no fewer than 160 different competing products, and that number is growing by the month.

The hon. Gentleman asked whether the Government were confident that we would be signing up the right number of companies in time, and I would make a few important points on that. First, there is no cliff edge on 1 April; that is the date at which companies and individuals will be required to keep digital records, but for most companies the first time they will have to submit a VAT return under MTD will be for the first tranche around 6 August and for subsequent tranches in the months following that date. There is plenty of time for companies to sign up and get involved. Secondly, as I have already elaborated, we will take a proportionate, light-touch approach to penalties, working with companies and businesses to make sure that MTD roll-out is a success.

[Nicky Morgan (Loughborough) (Con)]

I think we can all agree that the digitisation of tax is to be welcomed, as is companies paying the correct amounts and the tax gap being reduced, but I want to pick up where the Financial Secretary left off and ask what happens for smaller companies if this goes wrong or if they make errors in their filings. The shadow Front Bencher is correct in the sense that many businesses and business organisations are very unconvinced by this roll-out. The Financial Secretary said in his statement that penalties will not be issued for late filing in the first year, only for late payments, but of course for many businesses it is all very well giving HMRC the money but getting it out of HMRC and getting HMRC to deal with queries can be very difficult. Does the Financial Secretary agree that overall a system of generous forbearance would be very welcome if he wants to continue with this system?

[Mel Stride]

I thank my right hon. Friend for her questions and also for her work: she and her Committee have focused on this important matter. I can reassure her that we have no intention of being heavy-handed in any way in terms of businesses that might not quite be ready perhaps through no fault of their own or because they are not used to the new requirements. But there is an important point to make here: some 98% of businesses, including the small and medium-sized enterprises to which my right hon. Friend referred, are already filing their VAT digitally. I can reassure her that I will make sure, as the Minister responsible, that we take a proportionate and light-touch approach to the penalty regime in this matter.

[Kirsty Blackman (Aberdeen North) (SNP)]

There is a lot going on in HMRC just now: MTD, the incredible number of additional staff being put in to deal with Brexit, and the downsizing and changing of HMRC offices. It is interesting that the Minister says he is not in favour of centralisation in the provision of software but is in favour of centralisation in relation to closing all the offices so that there are only super-offices, not local ones.

HMRC has not yet provided even the most basic information that taxpayers will require in order to take part in MTD. Some have received a letter—an overly complicated and fairly cursory letter—telling them of the start date, but they have not received information on their specific queries about how to sign up to MTD and how it will work for them. It would be useful for the Minister to provide more information around what HMRC is doing on that.

The Minister said 81% of the businesses that are expected to sign up by April are aware of MTD. It is a damning indictment that only 81% are aware of it; HMRC and the Government should be doing a better job of making sure these businesses are aware of it, because 19% are not aware, and in fact a significant number of businesses are hearing about this potentially for the first time today.

Because there is no one approved software provider recommended by HMRC, I am concerned that 160 choices is a baffling array that businesses will have to decide between with no idea which of these software choices will work, which will work well and which will suit their business. It is not helpful to have that many software choices.

On penalties on businesses, I understand that when businesses sign up to MTD, their previous records are transferred from the old system to the new one and are lost from the old system. Can the Minister confirm that businesses that hold out until later than April but before their filing date will not be penalised for holding out in order for them to make sure the system is working properly and to make appropriate software choices before they make that switch, and potentially lose all their old records?

On Brexit staff and the changes HMRC has been making to focus on Brexit, can the Minister confirm how much resource has been put into MTD and communicating this to taxpayers compared with how much resource has been put into preparing for Brexit? If significantly more has been put into Brexit, is now really the right time to be trying to make changes around MTD when there is potentially not enough HMRC resource to go around, never mind enough resource within businesses to try to deal with both these things coming down the line at once?

[Mel Stride]

I thank the hon. Lady for her various questions and will deal with them in turn. She referred to the matter of awareness and the 81% figure. We would expect that figure to rise through time quite strongly, not least because of our communications programme. We will be writing by the end of this month to the 1.2 million businesses and individuals in scope of this measure. We of course have our VAT helpline for where there are queries, and there is a huge amount of information available on gov.uk.

The hon. Lady made a pertinent and perfectly reasonable point about how businesses and individuals will navigate their way around the various software suppliers and the 160 different products. First, all that information is available on gov.uk, and, secondly, we will shortly be releasing further information that will allow businesses to put in their requirements and then reduce that number of products to a subset that is particularly relevant to their needs.

The hon. Lady asked about the resources put into MTD compared with those put into our Brexit preparations. That of course probably begs several other questions as to what aspects of our preparation for Brexit she wishes to make for that particular comparison, and I would be very happy to discuss that with her in further detail after this statement.

[John Redwood (Wokingham) (Con)]

Is there a short and comprehensible guide for small businesses in my constituency that are worried about this but have been concentrating on serving their customers, because it is not necessarily their first priority to get alongside this? They now know they have got to do it, however, and they need something short and simple so they do not have to waste too much time fiddling around with how to comply with the tax authorities.

[Mel Stride]

The short answer is yes; it can be found on gov.uk. Indeed we have also produced a partnership pack for intermediaries, which sets out in very clear language exactly what is involved and what will be expected of those businesses and individuals.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

I do not know whether the Minister is familiar with young children’s literature, but Roger Hargreaves is a popular choice as the inventor of the Mr Men. I am not accusing the Minister of being Mr Tickle or Mr Silly, but perhaps today he is Mr Smug. The fact is that small and medium-sized enterprises in my constituency and around the country have been knocked sideways by the changes in the training levy, which relates to how they get their people skilled and trained. They have not yet digested that, but now we have another onslaught with digitisation. Is he aware that many of my constituents are going to be forced into the hands of so-called professional people—accountants—who will charge them a great deal of money to do this process for them?

[Mel Stride]

I am indeed familiar with the work of Roger Hargreaves. I am not sure whether there was a Mr Cautious or a Mr Sensible, but I think they would be more appropriate than Mr Tickle or Mr Silly. To answer the hon. Gentleman’s question, in terms of navigating around the various options, we are providing clear guidance that is very easy to follow, and 98% of those businesses and individuals that will be impacted are already filing their VAT returns digitally. Among the software products available, there is bridging software that allows companies to continue to make use of spreadsheets while using the software, some of which is free, to make their submission to HMRC.

[Craig Tracey (North Warwickshire) (Con)]

I welcome this statement. One of the barriers to creating a coherent strategy to encourage more female entrepreneurs is a lack of gender-disaggregated data to enable us to understand not just how many there are but what sectors they are in. Does my right hon. Friend agree that this platform could provide a way to resolve this?

[Mel Stride]

First, I should like to thank my hon. Friend for all the good work he does through the women and enterprise all-party parliamentary group to promote women in the world of work. This Government have of course presided over almost a record number of women being active in the workplace. I know that his all-party group will shortly produce a report on the point that he has raised, and I will look at that carefully to see whether something might be done. I shall remain mindful of the important point made by many others that we do not want to over-complicate or clutter up forms by seeking additional information, but I will look carefully at the recommendations he makes.

[Christine Jardine (Edinburgh West) (LD)]

On the one hand, the Minister says that he wants to simplify and digitise the tax system, while on the other, exporters are being threatened with masses of red tape as a result of the Government’s refusal to rule out a no-deal Brexit. Why are we rushing this through at this point, when companies are already facing such flux and uncertainty because of Government policy?

[Mel Stride]

I think our preparations for Brexit are probably slightly outside the scope of this statement, but I can reassure the hon. Lady that every step that has been taken in preparing for MTD—indeed, its roll-out was delayed to ensure that we were prepared—will ensure that the 1.2 million companies and individuals are in the best possible position to go forward with something that will actually be a help to their own productivity.

[John Howell (Henley) (Con)]

One of the problems areas in my constituency is the farming industry, which seems to be having enormous problems with this. The Minister mentioned this in his statement, but can he tell me what is doing specifically to help the farming industry?

[Mel Stride]

My hon. Friend is right to say that I referred to the fact that specific software was available for those in the farming sector. There is also advice that is relevant to farming on gov.uk, but if there are any further specific points that he would like to raise with me in the context of his farmers, I would of course be happy to discuss them.

[Ian C. Lucas (Wrexham) (Lab)]

The HMRC command economy in Wales requires all HMRC workers to work in Cardiff city centre. May I invite the Financial Secretary to the Treasury to get out more and to go to places such as Wrexham, where 380 skilled HMRC workers are being forced either to go to Cardiff city centre or to work in England? We have a vibrant digital sector, and we have businesses that are anxious to support the local economy. Why are the Government so intent on focusing centralisation on communities? Should not the towns in this country have a stake in the digital sector?

[Mel Stride]

I think the hon. Gentleman’s question relates almost exclusively to the HMRC transformation programme, as opposed to MTD, but perhaps with your indulgence, Mr Speaker, I can reply to his specific questions. What matters is that HMRC is ready and right for the 21st century, that its digital offering is sophisticated enough and that it has the skills resident in the centres that we have in order to run a 21st century tax system. He invited me to get out a bit more: I shall have great pleasure in visiting Bristol within the next fortnight to be part of the opening ceremony for the important office that we are bringing on stream in that part of the world.

[Sir David Evennett (Bexleyheath and Crayford) (Con)]

I welcome my right hon. Friend’s statement, and especially his determination to make it easier for individuals and businesses to get their tax right with MTD. I am also pleased that he will be sympathetic to small businesses, particularly initially, but will he confirm that the Government remain absolutely determined to tackle tax avoidance, tax evasion and non-compliance?

[Mel Stride]

I thank my right hon. and, indeed, gallant Friend for his question. He has my reassurance that we will most definitely continue to focus on avoidance, evasion and non-compliance. We have brought in and protected a total of £200 billion since 2010, and these measures will protect and bring in a further £1.2 billion by 2023-24. Let us remember that we bring in this tax for a purpose, which is to support our vital public services, including the record amount that we will be spending on our national health service.

[Jim Shannon (Strangford) (DUP)]

I very much welcome HMRC’s efforts to introduce MTD through its pilot schemes, where the take-up has been significant. However, there is a shortfall of up to 25%, as the Minister said, as some businesses are not au fait with technology and find the process laborious. Does he agree that there is a need for a concerted campaign to hand-hold those remaining customers, particularly in the farming sector, through the introduction of MTD? Will he commit to doing just that?

[Mel Stride]

The hon. Gentleman raises an extremely important point about our communications programme. As I have already set out, we will be writing to every one of those 1.2 million businesses and individuals who are in scope of MTD by the end of this month, and that comes on the back of the huge amount of engagement that has already taken place. We are also holding webinars on MTD, and there is certainly one, if not two, taking place this afternoon. For those who are genuinely and absolutely digitally excluded, we have a pilot to ensure that we are able to accommodate them. Those 5,000 businesses and individuals that are currently excluded from digital filing for VAT will automatically be excluded from having to enter into MTD.

[Matt Warman (Boston and Skegness) (Con)]

The Minister knows that I am one of those who would urge him to introduce MTD faster, because the benefits so clearly outweigh the disadvantages. We should no more seek to limit the number of software providers in this country than we should seek to limit the number of accountants. Can he assure me that HMRC is doing everything it can to encourage more software providers, so that we can provide unique and bespoke software to the many different sectors that power our economy?

--- Later in debate ---

[Mel Stride]

I thank my hon. Friend for making that important point. We are encouraging businesses to engage with the software community, which has been part of our engagement more generally with stakeholders over a number of months. New software products are coming to the market all the time, and, as I have said, no fewer than 160 different products are already available.

[Ben Lake (Ceredigion) (PC)]

It is good to see that the Government recognise that accessing adequate broadband remains a challenge to many businesses, especially those in more rural areas. Will the Minister elaborate further on the exemption that will be introduced to reflect that fact, and tell us how it might apply to areas such as Ceredigion, where 9% of lines receive speeds lower than 2 megabits per second?

[Mel Stride]

The standard speed of 2 megabits per second is perfectly adequate to run the kind of software that we are looking at here. I have touched on the issue of digital exclusion, and we will ensure that businesses that really cannot find appropriate broadband speeds, that are extremely isolated or that are among the 5,000 businesses and individuals already exempt from submitting digital VAT returns are still excluded. We will look at every single case carefully and on its merits.

[Vicky Ford (Chelmsford) (Con)]

Like many self-employed service providers, my constituent collects VAT from his clients, does his VAT return himself, and then inputs the figures directly into the HMRC website. Now that he will need to use software to upload that data, I am delighted to hear that there are 160 different providers, some of which are free. However, the HMRC website is not clear about which providers are free, and my constituent has been trying to find a free option that is suitable for a small business. Will the Minister ensure a little more clarity from the HMRC as to which options are free and which are best for small, self-employed entrepreneurs?

[Mel Stride]

I thank my hon. Friend for her question, and I will certainly look into that specific matter.

[Nick Smith (Blaenau Gwent) (Lab)]

Following on from the previous question, a KPMG survey reports that 64% of businesses say that making tax digital is a good idea but that they need more support. Unsurprisingly, the British Chamber of Commerce has called for a delay until 2020. Does it make a good point?

[Mel Stride]

The important point that has been consistently made to me is that we need a measured and proportionate approach to the roll-out of MTD, which is why, as I said earlier, I took an early decision to delay it, to restrict it just to VAT and to restrict it within that to larger VAT-registered businesses. We are investing a huge amount in the roll-out and in information, including the letters going to 1.2 million companies and businesses by the end of this month, the webinars, the VAT helpline, and all the information that is on gov.uk, to ensure that it runs smoothly.

[John Stevenson (Carlisle) (Con)]

I declare an interest as I am a member of a business that has submitted such tax returns. The digital system that we use has many advantages, is beneficial and creates efficiency within the business. I also completely agree with the Government’s desire to streamline the process, which is undoubtedly advantageous, and I agree with the Minister’s comments about there being no penalties.

However, I am aware of some businesses that are oblivious to the requirement and some that will struggle. May I gently suggest to the Minister that HMRC concentrates on larger businesses and gradually moves on to smaller businesses over time, giving smaller companies the maximum length of time to get themselves organised? Does he agree that the implementation period should be extended slightly if need be, but only for smaller businesses?

[Mel Stride]

My hon. Friend is absolutely right to observe that the smallest companies are, almost by definition, likely to find this change more onerous, and I will take his points on board. I certainly reassure him that HMRC will take a light-touch approach to penalties in all cases, particularly those involving small companies. Provided that individuals and businesses are not wilfully trying to avoid or change the amount of VAT that is due, we will take a proportionate and light-touch approach.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I draw the House’s attention to my entry in the Register of Members’ Financial Interests about my continuing business interests. My right hon. Friend has taken a very considered approach to the threshold of eligibility and the pace of the roll-out. Will he confirm not only that he will continue that approach in the next phase of the roll-out, but that our default position should be to reduce rather than increase the bureaucratic burden on small businesses?

[Mr Speaker]

The nation will be pleased to know that the hon. Gentleman is a distinguished estate agent.

[Mel Stride]

That is certainly no oxymoron, Mr Speaker. My hon. Friend is indeed a distinguished estate agent, and I thank him for his question. He has my absolute reassurance that we will not bear down on businesses with additional bureaucracy. We are there to help and support them and at the same time to ensure they are more efficient and effective in their tax affairs.

[Julian Sturdy (York Outer) (Con)]

I am reassured by the Minister’s comments about businesses that are unable to access suitable broadband provision. However, what conversations has he had with the Department for Digital, Culture, Media and Sport about access to better broadband, so that the 5,000 businesses that will not be able to access MTD will be able to do so in the future?

[Mel Stride]

All Departments across Whitehall have regular contact with DCMS about broadband roll-out. Broadband is central to much of what the Treasury does, but it is of particular importance to MTD. We will continue to have those conversations.

Financial Services (Implementation of Legislation) Bill [Lords]

Mel Stride Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Monday 11th February 2019 Commons Chamber

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

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

I should begin by paying tribute to my noble Friend Lord Bates for piloting the Bill through the other place so successfully. I am sure that the House will recognise the importance of supporting our financial services industry no matter what the outcome of negotiations on leaving the European Union. The UK’s position as a world-leading financial centre is critical to our prosperity. In 2017, the financial sector contributed £131 billion to the UK economy. It employs over 1 million people across the country, two thirds of whom are outside London, including in the thriving financial centres of Edinburgh, Belfast, Manchester and Cardiff. UK exports of financial services were worth over £77 billion in 2017, which highlights the importance of the sector on the global stage.

[Mary Creagh (Wakefield) (Lab)]

I am sure it was an oversight, but in his list of UK financial services centres the Financial Secretary neglected to mention the Yorkshire centres of Leeds and Halifax—of course where the Halifax bank was born—and the many building societies that remain in our area.

[Mel Stride]

I thank the hon. Lady for that very appropriate intervention. She is quite right to mention the local presence of financial services across the United Kingdom.

My right hon. Friend the Chancellor of the Exchequer has already set out the Government’s long-term vision for the future success of the UK’s financial sector, based on world-leading positions in the markets of the future, whether in green finance or in FinTech, and we are pursuing an ambitious global financial partnership strategy to cement our trading relationships with key partners.

However, we also need to ensure that we have appropriate regulations in place, with the right balance between protecting stability and fostering competitiveness. We aim to be the safest and most transparent place to do business, leading the race to the top and always championing high regulatory standards in financial services markets. The Bill will ensure that, in a no-deal scenario, the UK’s regulatory landscape will not fall behind its international counterparts.

The Government have been clear that we do not want a no-deal scenario, but it remains the role of a responsible Government to continue to prepare for all possible outcomes. That includes the event that we reach 29 March without a deal. In those circumstances, we will have brought on to our statute book the vast body of EU legislation that needs to be operative at the point of exit. However, the powers under the European Union (Withdrawal) Act 2018 relate only to legislation operative immediately before exit day. A number of pieces of EU legislation will not be covered by the powers conferred under the withdrawal Act. They include proposals that are either already agreed but which have not yet been implemented, or those that are soon to be agreed beyond our exit from the European Union.

[Mary Creagh]

The Minister talks about the in-flight legislation and the proposals as they appeared in the other place. When they first appeared in the other place, they were missing a couple of bits relating to the taxonomy of environmentally sustainable activities that would allow companies to green-check their revenue streams, and to new disclosure requirements for asset owners such as pensions schemes, which is of great concern to the Environmental Audit Committee. Can he explain why those two proposals were left off the list? The Bill has now been amended in the other place, but why were they originally missing?

[Mel Stride]

I think this is an example of Parliament carrying out its process and legislation being improved as a consequence. The most important point is where we have ended up. Having listened to the arguments put forward in the other place, the Government chose to embrace the amendments that brought those two particular files into the scope of the Bill.

The Bill provides a mechanism through which the UK will be able to implement in-flight financial services legislation. They fall into two categories. The first category of files relates to those that have been agreed while we have been a member of the European Union, but will not apply or be in force prior to the UK’s exit from the EU on 29 March. In a no deal and in the absence of the Bill, there would be no effective way to implement those files in a timely manner, as each would require primary legislation. The Bill allows the Government to domesticate each of these files in whole or in part via an affirmative statutory instrument. It further provides a power to fix deficiencies within them.

[Robert Neill (Bromley and Chislehurst) (Con)]

Will my right hon. Friend give way?

[Nicky Morgan (Loughborough) (Con)]

Will my right hon. Friend give way?

[Mel Stride]

I will give way first to my hon. Friend the Member for Bromley and Chislehurst (Robert Neill), but wait with great anticipation for the intervention of my right hon. Friend the Member for Loughborough (Nicky Morgan).

[Robert Neill]

I am very grateful to my right hon. Friend for giving way. I entirely support the thrust of what is sought to be done here, as does the financial services sector. None of us wish that it should ever be necessary, but given that we are seeking to set out these safeguards, can he help in relation to one matter of in-flight legislation? In clause 3(1)(e), there is specific mention of the inclusion of

“delegated acts under the Prospectus Regulation”.

The financial services sector very much welcomes that being included, because it is important. On the other hand, for another important piece of in-flight legislation, the Securities Financing Transactions Regulation referred to in clause 1(3)(f), there is no use of the words “delegated acts”. It is anticipated that under both examples level 2 legislation, as it is called, might be desirable, so can the Minister help by explaining why the distinction has been drawn in that way?

[Mel Stride]

I thank my hon. Friend for his question. He is quite right, although the reference to the Securities Financing Transactions Regulation is, I think from memory, in clause 1(12), line 35 or thereabouts—the fourth file although the fifth measure in the list, the earlier two being combined. As to the main point on which he seeks clarification, the Bill will bring into effect those measures, as amended or otherwise, by affirmative statutory instrument at the time they are brought in. It will then be a case of the way in which those measures are dealt with in terms of the delegated powers to which he refers.

[Nicky Morgan]

I thank the Minister for giving way. In his letter to colleagues last week, the Economic Secretary stated that the Bill will allow for the Government to choose to implement only those EU files or part of those files which they deem beneficial for the United Kingdom. The Minister talks about whole or parts of legislation. Is he able to set out which of the files or parts of legislation the UK does not intend to implement, and how they will make the decision about what is or is not beneficial to the United Kingdom?

[Mel Stride]

I would make two points. First, where we will end up with the various files that are the subject of the Bill will, to some degree, be determined by where we end up shortly after or after any no-deal exit. I would imagine that at that point the EU would also wish to be negotiating with us on those measures. Secondly, the files themselves, under the schedule as opposed to clause 1, are being negotiated at the moment. We therefore do not have clarity on the exact form they will take.

The second category of files, as I explained, are those that are still in negotiation. These are files that the UK has, in many cases, played a leading role in shaping, and that could bring significant benefits to UK consumers and businesses. The Bill also allows the Government to domesticate these files, in whole or in part, via affirmative statutory instrument. Given that the UK will not be at the negotiating table when the files are finalised, we will be unable to advocate for the interests of the UK’s financial services sector during those negotiations. The Bill therefore provides the Government with the ability to make adjustments to the files that go beyond the deficiency fixing powers for the agreed files. These powers are clearly defined and proportionate.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

I am extremely grateful to the Minister for giving way. As he has outlined, these are powers that would only be used in the event of a no deal. As a Treasury Minister, I would imagine he is probably losing more sleep than most Government Ministers at the prospect of a catastrophic no-deal situation. Will he outline what reporting mechanisms will be introduced by the Treasury for how these powers are used, either by the Treasury or by Treasury-affiliated bodies such as the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority?

[Mel Stride]

I am pleased to report that the Bill, as amended in the other place, allows for reporting in respect of the statutory instruments on a six-monthly basis—that commitment is in the Bill—and that there will be four periods in total. The first period of six months will commence from the moment the Bill receives Royal Assent. The report will both look backwards at the powers that have been exercised up until that point and forwards to those powers that may be exercised in the coming period. As to other organisations, such as the Bank of England, there will be a requirement for annual reporting on the basis of the measures undertaken by those regulatory organisations.

[Robert Neill]

The Financial Secretary is being extremely generous, but it may actually speed things along. Can he help me on one matter relating to the second class of legislation, the level 1 files? He set out a list of files that are included in the second category. Is it intended that that is entirely exclusive? The Bill deals largely with the procedure for dealing with these files. I have in mind, for example, the proposals that are being developed by the Commission on non-performing loans and on business crowdfunding services—again, areas where the UK has had a good deal of input into initial discussions but that are not actually listed in the Bill. Is it intended to deal with those? If so, in what way?

[Mel Stride]

I can confirm to my hon. Friend that the list is exhaustive in the terms he was discussing. In the case of non-performing loans, these matters were considered but it was decided that the number of these in relation to the number within the EU was relatively low and that existing tools that are available were adequate to deal with those particular matters. Hence, that particular issue does not feature within the scope of the Bill.

Changes cannot be made in such a way that the implemented files depart in a major way from the effect of the original legislation. However, the Government will have some flexibility to make adjustments in order to take account of the UK’s new position outside the European Union. As a result of amendments to the Bill during its passage through the other place, the Treasury will be required to publish a draft statutory instrument at least a month before laying it, alongside a report detailing: any omissions from the original EU legislation; any adjustments from the original EU legislation; and the justification for those adjustments.

The Treasury will be further required to publish six-monthly reports on how the power has been exercised and how it will be exercised in the following six-month period. Following contributions in the other place, the Government have also introduced a requirement for the financial regulators, the Bank of England and the Financial Conduct Authority, to report annually on their use of any powers sub-delegated to them as a consequence of the Bill.

Having gone through the Bill’s various provisions and outlined its importance both to our future financial stability and to making sure that we are in the right place in the unlikely and undesirable event that we face a no deal, I commend the Bill to the House.

DRAFT DEVOLVED INCOME TAX RATES (CONSEQUENTIAL AMENDMENTS) ORDER 2018

Mel Stride Excerpts

Monday 4th February 2019 General Committees

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

I beg to move,

That the Committee has considered the draft Devolved Income Tax Rates (Consequential Amendments) Order 2018.

It is a pleasure to serve under your chairmanship, Mr Gapes. The order makes changes to ensure that Welsh taxpayers obtain certain tax reliefs, or are taxed on certain types of income, at the appropriate Welsh rates once Welsh rates of income tax come into effect. The amendments follow as closely as possible the situation already in place for Scottish taxpayers, providing consistency of treatment of taxpayers across the United Kingdom to the extent that the different devolution settlements allow. The order makes two parallel amendments affecting Scottish taxpayers. These two changes make it certain that Scottish taxpayers will obtain tax reliefs or be taxed at the appropriate Scottish rates.

The amendments are minor and technical and affect a small number of people in a limited set of circumstances. The Wales Act 2014 introduces Welsh rates of income tax, which will be implemented in April 2019 and mean that anyone living in Wales and paying income tax will, from 6 April next year, pay the new Welsh rates. Members of Parliament for Welsh constituencies, Assembly Members and Members of the European Parliament for Wales will also pay Welsh rates, regardless of where they live. The Welsh rates will be set by the National Assembly for Wales and will apply to the non-savings, non-dividend income of Welsh taxpayers. Her Majesty’s Revenue and Customs will continue to collect income tax from Welsh taxpayers as usual.

The introduction of the Welsh rates will have implications for other parts of the income tax system. This instrument makes consequential amendments to those aspects of the income tax regime that are not devolved, to ensure that taxpayers obtain reliefs or are taxed at the appropriate rates.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Anybody reading the explanatory notes will understand that a tax-sharing arrangement between the British Government, Welsh Government and Scottish Government, which is what these measures deal with, is a complicated business. The driver of tax devolution was accountability for the devolved institutions and to incentivise them to develop the economies in Wales and Scotland. If those are the two drivers—accountability and incentivisation—would it not be better to devolve a tax in its entirety than to have a tax-sharing arrangement?

--- Later in debate ---

[Mel Stride]

I think that is an ingenious attempt to open up a wider debate about the provisions of the 2014 Act and the basis on which taxation, or income tax in this instance, will be devolved. However, as the hon. Gentleman will be aware, what we are about this afternoon is some of the consequential changes that need to be made to UK-wide income tax legislation.

The changes made by this instrument will establish that Welsh taxpayers receive tax relief or tax credits at the appropriate Welsh rates on their pension contributions to relief-at-source pension schemes; on their contributions to charities under gift aid rules; from settlor-interested trusts; or when calculating deficiency relief available when a life insurance policy ends. The changes will also ensure that Welsh taxpayers are taxed on income from some trusts and deceased estates, or subject to certain special tax charges, at the appropriate Welsh rates. The amendments will provide for the Welsh basic rate to be used when calculating the tax reduction available under the tax allowance for married couples and civil partners who are Welsh taxpayers.

In the case of charitable donations under gift aid rules and residuary income from deceased estates, we are taking this opportunity to make similar changes to ensure that Scottish taxpayers are taxed or entitled at the correct rate in the event of the Scottish basic rate differing from that in the UK.

HMRC is on track to deliver the Welsh rates of income tax in time for the start of the next tax year, as required by the 2014 Act. These minor technical changes are necessary to ensure that all Welsh taxpayers continue to pay income tax or obtain relief at the correct rates following the introduction of the new Welsh rates and that the devolved income tax rates operate as intended. I commend the order to the Committee.

--- Later in debate ---

[Mel Stride]

It is a pleasure to respond to the hon. Member for Oxford East on this occasion, because normally she has 20 or 30 questions. Today there is but one, which is a great relief—although that denies me the opportunity of selecting which of the 20 or 30 questions I will respond to. I will respond directly to the one question that she has put, on the matter of gift aid, which is a perfectly reasonable question.

The way that gift aid will operate under these circumstances will be that the charity, or the recipient, of the gift will receive relief at the UK rate, that being 20%, as our current basic rate tax is set at that level. The relief that will fall due to the donor under those circumstances, given that they would be a Welsh taxpayer, would be the difference between that and whatever the Welsh higher tax rate or additional tax rate was at that time. At the moment there is no change about to occur due to the decisions taken by the Welsh Assembly in respect of its own tax rate. However, I will write to the hon. Lady on her question about the potential Exchequer impacts from the way in which that system works. On that note, I hope that the Committee can agree to the order.

Question put and agreed to.

Treasury

Mel Stride Excerpts

Thursday 31st January 2019 Ministerial Corrections

The following is an extract from a debate on Taxation of Low-income Families in Westminster Hall on 16 January 2019.

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

The Conservative party introduced the national living wage. We should be enormously proud of that fact. It goes up by 4.9% in April, so those in full-time employment will take home £2,750 more than they did in 2010.

[Official Report, 16 January 2019, Vol. 652, c. 398WH.]

Letter of correction from Mel Stride:

An error has been identified in my response to this debate.

The correct wording should have been:

[Mel Stride]

The Conservative party introduced the national living wage. We should be enormously proud of that fact. It goes up by 4.9% in April, so those in full-time employment will take home £2,750 more than they did in 2016.

HMRC Estate Transformation

Mel Stride Excerpts

Tuesday 29th January 2019 Commons Chamber

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

With permission, Mr Speaker, I would like to make a statement relating to Her Majesty’s Revenue and Customs estate transformation.

In the 2015 spending review, the Government announced HMRC’s locations programme to transport the Department’s office accommodation across the United Kingdom, moving from 170 legacy offices to 13 regional centres over the space of 10 years. I am pleased to report to the House that HMRC has now successfully secured sites for each of these 13 regional centres. This is a significant milestone in the Department’s trajectory towards serving the taxpayer from buildings that facilitate more efficient and technologically adept working across every region and country of the United Kingdom. This year will see two regional centres open in Belfast and Bristol —the first to follow the pilot in Croydon and to learn from the Department’s findings there. I will be receiving the keys from the developer on behalf of Her Majesty’s Government in the handover next month in Bristol.

The HMRC offices in 2015 varied hugely in size, quality and accessibility of location, but HMRC has since worked towards offices that are well equipped and large enough to offer serious career progression in city centre locations that allow for travel across the country as well as the recruitment of local graduates. The higher standard of building, designed to support digital, flexible ways of working, is an integral component of HMRC’s broader plans to better provide service to the taxpayer at a lower cost. It is by making better use of technology and working differently that HMRC can become a more highly skilled organisation, maximising revenue, increasing compliance and further reducing the tax gap. Its Croydon regional centre is already open, impressing those who visit it with a new understanding of what it means to work for the civil service and providing a valuable prototype for the remaining offices.

Securing the locations of these 13 offices is an important step in the wider Government plans to create hubs across the country, and to move civil servants out of London and the south-east. The regional centres are not just offices for HMRC, but form part of Government hubs and sites for cross-Government work. NHS Digital will be taking space in the Leeds regional centre, for example, and the Department for Work and Pensions will be taking space in Birmingham.

The Cabinet Office is responsible for the wider Government hubs programme and it plans to align Government policy so that it is efficiently used and maximises opportunities for, and productivity of, civil servants. HMRC’s 13 regional centres are the first phase of delivering this vision. I am proud that the public sector is stepping up to the forefront of industry, thinking about what an effective, flexible and inclusive working environment looks and feels like. Far from lagging behind the private sector, HMRC is delivering offices that are suited to the 21st century, maximising current technology and planning ahead for what further change might be in the pipeline. Not only will this enable HMRC to provide its customers with good service while cracking down on the dishonest minority, it is also excellent value for money, saving over £300 million in the 10 years of the programme up until 2025 and then saving a further £90 million a year from 2028.

The route to this transformation is balanced by the recognition that, to protect HMRC from business disruption, current staff and their expertise should be retained wherever possible. HMRC believes that about 90% of the staff that it had at the start of this transformational journey will move to a new regional centre or finish their careers in their current offices. To further manage potential disruption, the Department is keeping eight transitional sites that will be open for longer to help to maintain continuity.

As HMRC gears up to manage the workload resulting from exiting the European Union, it is also providing additional space in regional centre cities for additional staff and retaining some space for longer so that the planning can benefit from the knowledge and experience of existing personnel.

To transform the services that HMRC delivers for the United Kingdom, we are modernising almost every aspect of what we do. I am proud that HMRC is at the forefront of this change within the civil service, and I commend this statement to the House.

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

I was given advance notice of the contents of this statement while I was in the Chamber for Treasury questions, and therefore time has been limited to prepare for it. I am surprised that we are now discussing this matter given that I and many of my colleagues have repeatedly raised problems with the Building our Future programme and generally been met with one-sentence answers from the Government.

The Minister maintains that this announcement has come today because of the successful securing of sites for 13 regional centres, so I hope that he will indicate to this House which centre was secured yesterday to justify this statement being presented today. When will he publish the list of precise locations of each of these centres, given that he maintains that we have today secured those new places? That would be enormously helpful for us, because without that information we will be forced to conclude that this statement has been made today for reasons other than its newsworthiness.

In July 2014, HMRC published the Building our Future proposals on reforming tax collection services for the next five years. In November 2015, HMRC announced plans to cut the number of offices from 170 to the 13 that are, apparently, having their locations announced today. In January 2017, the National Audit Office published its report on that process. It indicated that that original plan was unrealistic. It stated that the estimate of estate costs over the next 10 years had risen by nearly £600 million—almost a fifth—with more than half of that being due to higher than anticipated running costs for the new buildings. The National Audit Office also forecast a further 5,000 job losses and said that the costs of redundancy and travel had tripled from £17 million to £54 million due to this programme.

So what exactly is happening now among the HMRC workforce as a result of Building our Future? Some 73% of HMRC staff surveyed said that the Building our Future plans will undermine their ability to provide tax collection services. Half of them said that it would actually undermine their ability to clamp down on tax evasion and avoidance. I have to say that that was my assessment as well when I visited a number of current and former HMRC offices right across the country— 10 of them—over the past few months.

The Government say in this statement that

“90% of the staff that”

HMRC

“had at the start of this transformational journey”—

a piece of jargon if ever I heard one—

“will move to a new regional centre or finish their careers in their current offices.”

During the visits that I conducted, I did hear about staff finishing their careers—they were finishing their careers early because they could not travel to the new regional centres that the Minister is trumpeting today. People from Wrexham were being expected to travel every single day to Cardiff or to Liverpool. People from Exeter were being expected to travel to Bristol. These journeys are simply not feasible for people with caring responsibilities and simply not feasible on public transport.

I note that the Minister said that having city centre locations leads to a situation where it will be possible to recruit local graduates, but of course what his Department has forgotten, and what the NAO reminded him of a couple of years ago, is that in many of these city centre locations the labour market is far tighter, so we often find that there is actually an enormous recruitment problem rather than the bonanza that might be suggested to people who read his statement uncritically.

At the end of the statement, the Government accept, it seems, the need to learn from expertise. I will quote the sentence, although it pains me a little to do so given its construction:

“As HMRC gears up to manage the workload resulting from exiting the European Union, it is also providing additional space in regional centre cities”,

which I assume means offices,

“for additional staff and retaining some space for longer so that the planning”—

of what, we do not know—

“can benefit from the knowledge and experience of existing personnel.”

Well, that raises almost as many questions as it answers. The situation is still unclear about where 5,000 extra customs staff will go—a point I will return to later.

None the less, that sentence, as garbled as it is, suggests that HMRC wants to build on existing experience, but that principle is just not being followed in the Building our Future programme. We had within HMRC centres of excellence across a whole range of different specialisms, whether income tax fraud or the different kinds of multifarious problems that taxpayers can have in filling out their self-assessment forms. Many of the staff who were employed in those specialisms have either already left or are thinking of leaving. A great example of this is what we have seen happening in Swindon, which was previously a centre for income tax fraud. There is now a centre of excellence being built up on that in Liverpool, but with none of the same staff and with none of that expertise. It is being built up from scratch, creating huge inefficiency.

The Government have dogmatically refused to reassess the Building our Future programme apart from when they have been forced to do so—as they acknowledge very, very briefly in this statement—and that is exacerbating problems in HMRC. The attrition rate is greater than the hire rate. We saw in 2014 an absolute reduction in staff of over 3,000 and in 2015 an absolute reduction in staff of over 4,000. In 2017, the UK had the second highest attrition rate out of the 55 countries that share data on their tax services. There has also been incredible mismanagement, with the release of 5,600 customer services staff and then, in 2015, the hiring of 2,400 new customer services staff. It is no surprise that morale is at rock bottom in HMRC.

I therefore want to ask some very quick questions of the Minister. Which new regional centre was secured yesterday? When will we have the list of locations of regional centres? If 90% of positions are retained or vacated due to people finishing their careers, does that mean that 10% of people in HMRC are going to be made redundant? Have there been any reviews of these plans in the context of Brexit? Has the Minister thought about the impact of this on the local economies that are so dependent on these jobs, as raised by many of my colleagues?

[Mel Stride]

I thank the hon. Lady for her response. I will pick up on some of the points that she has raised.

The hon. Lady asked why this statement is being delivered today. I think that she partly, at least, supplied the reason for that herself, in that she has shown a very keen interest in these matters, as have many other Members across the House, quite rightly. It is right, as we have always said, that we will be transparent in the roll-out of this transformation programme, and today is part of that process.

Towards the end of the hon. Lady’s remarks, she called for a review of our arrangements in the context of Brexit and the customs arrangements that our country may face. That is the second reason why it is important that we consider these matters. The debate this afternoon will rightly focus on preparedness, among other matters, and HMRC and its transformation programme lies at the heart of the issues that will be debated.

The hon. Lady asked for the locations of these sites. I believe they are all in the public domain, but I am happy to provide her with a list. She also made several observations about the NAO report and value for money. We are still confident that we will meet our roll-out end date of around 2025. In terms of value for money, there will be savings of some £300 million across the 10 years. I remind the hon. Lady that we will be getting out of a substantial number of private finance initiative contracts that the existing offices are engaged with—PFI contracts that were brought in under her party’s Government in 2001. One driver of additional value for money is that we will be able to unpick the unfavourable arrangements that her party’s Government got us into in the first place.

The hon. Lady asked about the cost of redundancy. I said in my opening remarks that some 90% of those who will be impacted by these moves will either conclude their career in their existing offices or relocate to the new regional hub. The overall thrust of these changes is to ensure that we are better equipped at getting in more tax. It is very much a Labour philosophy that every solution has to involve more money and more people, whereas our approach is adjusting with the times and getting offices in place that are fit for the 21st century, often using complicated data-based interrogation techniques, for which large regional hubs are the way forward.

Some of the 170 legacy offices that the hon. Lady seems so intent upon protecting had under 10 staff in them. Most of the processes carried out by those staff were manual in nature rather than technology-driven, so they were far less efficient. For example, over 80% of self-assessment returns are now done in a digital format, which is why it is important that we move to this model.

I turn to the hon. Lady’s remarks about the staff themselves, who have been at the heart of our considerations as we have rolled out this process. All staff are given at least one year’s notice of any proposed change. They are quite rightly given face-to-face meetings with their managers to discuss the changes and assistance that they may require. In determining the locations of the regional hubs, HMRC mapped out the journey to work of the staff who would be impacted, to ensure that that was one of the principles taken into account when assessing where the locations should be. Those who have extended travel arrangements as a consequence of any move may be given assistance with additional travel costs for between three and five years. Transitional offices, which the hon. Lady raised, will provide additional opportunities for continuity of HMRC’s work and the opportunity of employment for those within these arrangements.

There is a purpose to this. It is not just about saving money, closing offices, suggesting that we are ready for the 21st century or making change for the sake of change. The purpose of these changes is to ensure that we continue the excellent work that HMRC is carrying out in clamping down on avoidance, evasion and non-compliance. The proof of the cake is in the eating: some £200 billion has been brought in or protected since 2010, and we have one of the lowest tax gaps in the world at 5.7%. That does not happen by magic; it happens by having an HMRC that is lean, efficient and up to the job. I commend this statement to the House.

[James Duddridge (Rochford and Southend East) (Con)]

More than 1,000 people work for HMRC in Southend. I understand that Southend will not be a regional centre, but what does this mean for the people who work in HMRC in Southend? Do the words “eight transitional sites” offer them any short-term hope? Will the Financial Secretary work with me to ensure that the figure is 90%-plus in Southend?

[Mel Stride]

I thank my hon. Friend for his question. As he will be aware, we have announced that we will retain the Southend office until the end of 2022, but I am happy to meet him to discuss that matter.

[Kirsty Blackman (Aberdeen North) (SNP)]

I thank the Financial Secretary for giving this statement and for advance sight of it. It is clear that he has drawn the short straw today—perhaps it is penance for his “no food, no channel tunnel” gaffe. Somebody needed to give a statement so that we had less time for the Brexit debate, and at least 10 fewer Members will get to speak in it as a result of this statement.

This is an important statement, but the timing is bizarre, given that on 8 January HMRC produced on its website a list of addresses and details of the transitional sites. How come it has taken 21 days for the Financial Secretary to come to Parliament to allow us to ask questions on this statement? How come it happens to be on the day when we are discussing Brexit?

As the hon. Member for Oxford East (Anneliese Dodds) said, the entire programme of transformation and the way that this has been gone about is completely bonkers. Dedicated, experienced staff are being forced out of HMRC as a result of these closures. Communities such as Cumbernauld and Livingston are losing thousands of jobs as a result of these changes. Why on earth does the Financial Secretary think it is good value to close a large out-of-town office and move it to a city centre location where rents are hugely in excess of those in out-of-town locations, where staff will have massively increased travel costs to get to work and where business rates are likely to be far higher? Why does he think that this is a good idea?

The Financial Secretary said that 90% of staff who were at HMRC at the beginning of this process will still be there at the end. What about the 10% of staff who will not be there at the end? Will those staff be made redundant? How many of those 10% of staff are in Scotland?

People worked in HMRC offices in Inverness, Wick and Aberdeen, but the only regional offices in Scotland will be in Edinburgh and Glasgow. Does the Financial Secretary realise how long it takes to get from Aberdeen to Edinburgh, from Inverness to Glasgow or from Wick to Glasgow? It takes the best part of a day to get there from Wick. There is no way that people can commute that distance.

In terms of the customs checking functions that HMRC will need to perform, does the Financial Secretary believe that there will be adequate geographical coverage of customs staff once Brexit happens? More checks by customs officers will be required at those ports, and if it takes them a day to get to the port, there will be even more of a hold-up than is being suggested in a no-deal scenario.

I understand that HMRC is taking on an extra 5,300 staff to deal with Brexit planning. Could the Financial Secretary confirm how many of those 5,300 staff who are being taken on or have been taken on are in Scotland? How many of the 3,000 additional customer service staff who have been taken on are in Scotland? How many jobs will HMRC have in Scotland at the end of this process compared with the beginning? Lastly, I want to know why the Financial Secretary has taken 21 days to come to the House to tell us what was published on HMRC’s website on 8 January.

[Mel Stride]

The hon. Lady raised a number of questions, one of which was about the issue of staff.

[Neil Gray (Airdrie and Shotts) (SNP)]

Answer the question.

[Mel Stride]

If the hon. Gentleman gives me a moment, I will do precisely that, as I always do.

The answers to the hon. Lady’s questions relating to staff and the way in which we will be handling the staff are as I have set out. All staff will have at least one year’s notice of any impending move. The mapping process that HMRC undertook, as it went into the detail of where to locate the regional hubs, was very thorough. It took into account a number of principles, which I will come on to in a moment to answer another of the hon. Lady’s questions. Among those principles is the issue of the travel-to-work time, and every single employee’s home location was mapped against the possible new alternatives under consideration at the time those decisions were being made. I have also raised the issue of the transition offices, which are of course there, among other reasons, to provide employment opportunities for the staff.

The location principles—this comes to the questions the hon. Lady asked about why we have chosen one particular location rather than another, or indeed the existing location of the legacy offices—come down to eight key principles. They include transport connections, which are of course excellent in both Edinburgh and Glasgow, and the talent pool there, such as in universities—for example, Edinburgh and Glasgow have world-class universities—as well as the housing that is available, the quality of the schools and all the matters that will sustain the recruitment of the teams we will be bringing together in these 21st-century and much more sophisticated hubs for dealing with our tax purposes.

The hon. Lady raised the issue, which I know she has raised on previous occasions, of the location of these hubs in relation to our ports and points of entry into the United Kingdom. I think I can reassure her that, quite outside this whole process of the transitional arrangements, we will of course ensure that Border Force, HMRC and the Department for Environment, Food and Rural Affairs have the personnel available at those locations to make sure that they are able to run imports and exports efficiently. There is a general premise, however, in the suggestion that the offices somehow need to be close to people all the time. In fact, since 2014, it has been the case—[Interruption.]

[Mr Speaker]

Order. I think there is a sense in the Chamber that there is an inadvertent abuse going on. This is not a debate; it is a statement. The Financial Secretary has twice said that he commended the statement to the House: he said it in response to the first set of questions, and he had already said it when he delivered the statement. A brief and pithy encapsulation of the argument is what is required. A long dilation is not only not required, but notably irritating to the House.

[Mel Stride]

I can only apologise, Mr Speaker, and I obviously accept your guidance on this matter. I believe I was asked about 20-plus questions between the two Front Benchers, but I take your point.

I will deal with one last point. The hon. Member for Aberdeen North (Kirsty Blackman) specifically asked me how many of the 5,000-plus personnel that HMRC is recruiting in the context of our Brexit planning will be based in Scotland. We are up to about 3,500 currently, and I will write to the hon. Lady to make sure that we provide her with the information she has sought.

[John Howell (Henley) (Con)]

When I was an inspector of taxes, the office network was totally incapable of being developed for a digital situation. How will this new programme make such development a possibility?

--- Later in debate ---

[Mel Stride]

As a former tax inspector, my hon. Friend is probably about as popular as I am as a tax Minister, which is never the most popular job in the world. The answer to his question—in a short and pithy response, Mr Speaker—is that we have to move to the more digital-based, data-based and inspection-based system that is facilitated by the very hubs I have been describing.

[Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)]

This has already cost more; the projected savings have gone down; there are no break clauses in most of the 20 to 25-year leases; and there is little buy-in from other Departments. The Minister has said that the DWP and NHS Digital—interestingly, he picked only two small examples—are buying into a couple of the hubs. Will he list the other Departments that are buying in by locating in these regional hubs?

[Mel Stride]

There has been a series of discussions right across Whitehall, led by the Cabinet Office, in the area in which the hon. Lady has framed her question. The hon. Lady levelled the charge of cost, but she then very quickly went on to talk about savings, and there will of course be net savings from this approach of some £300 million by 2025.

[Martin Vickers (Cleethorpes) (Con)]

Representing a coastal community, as I do, regional centres tend to be very many miles away. This is clearly a problem for staff, but also for constituents in their dealings with HMRC. Will the Minister give an assurance that, even in this digital age, face-to-face meetings between staff and constituents, where necessary, will be available locally?

[Mel Stride]

All requests for face-to-face meetings are of course treated on their merits, and they are certainly not discarded out of hand. I reiterate my point that, since 2014, tax offices have generally not been open for members of the public to walk in and ask to speak to a tax inspector. Indeed, some 80% of self-assessments are now done digitally online.

[Eleanor Smith (Wolverhampton South West) (Lab)]

I have a tax office in Wolverhampton South West that is going to close, and my constituents are not happy. For a start, Carillion has gone and now the tax office is going, and it does not make sense. The Minister has talked about face-to-face meetings, but there are actually a lot of face-to-face meetings in that tax office. The staff there are not happy about having to travel, and the Government are going to lose a lot of staff with experience. How can he explain that with regard to the regional hubs, because they are supposed to go to Birmingham?

[Mel Stride]

The hon. Lady raises the issue of the tax office in her particular area of Wolverhampton. I am very happy at any point—this is of course an invitation to any Member—to speak to her specifically about the circumstances of the HMRC office in her location. Equally, Birmingham is not a huge distance from Wolverhampton for many of those people to commute to, but if the hon. Lady would like to take up any aspects of that with me, I will be delighted to speak to her.

[Mr Marcus Fysh (Yeovil) (Con)]

I welcome HMRC’s work on the transformation of its estate and on gearing up for customs readiness for any eventuality. In particular, it is great news that the CHIEF—customs handling of import and export freight—system will be fully ready on 30 March to handle declarations for customs and that simplifications of customs procedure are being made available to business. That will enable imports of goods into the UK to flow without hold-ups using inland clearance techniques. Will my right hon. Friend confirm that we will indeed be ready and that fear is unjustified? Will he say what he is doing to ensure that a campaign is now activated to inform small and medium-sized enterprises about what they have to do to make use of the simplifications?

[Mel Stride]

On the IT systems element of my hon. Friend’s question, he is absolutely right. CHIEF has been upgraded, and it is now capable of processing about 90 messages per second, which will be enough to handle the import and export declarations that may be required.

On the issue of informing the marketplace or traders about the new circumstances that may pertain after 29 March, we have written to 145,000 exporters that export only to the European Union and are not therefore familiar with customs arrangements. We have issued three iterations of our partnership pack and there is a huge amount of information on gov.uk, where businesses can also sign up to email alerts to make sure that they are aware of the very latest relevant information.

[Mr Jim Cunningham (Coventry South) (Lab)]

On behalf of myself and my hon. Friend the Member for Wolverhampton South West (Eleanor Smith), I have written to the Minister to ask for a meeting, with one or two reps from the trade unions, to discuss the situation in Wolverhampton and Coventry. People in Coventry will have to travel 16 miles to premises that are inadequate, while those who are left are not guaranteed jobs. I will not rehearse all the arguments now, but I would like to meet the Minister, with some reps and my hon. Friend, to discuss this further. Will he agree to do so?

[Mel Stride]

I would be very happy to meet the hon. Gentleman to discuss the matters he has raised.

[Dr Caroline Johnson (Sleaford and North Hykeham) (Con)]

Improving public services is about more than just spending more money; it is about delivering better services more efficiently, on which the Treasury is well placed to lead. Will my right hon. Friend confirm that these changes will improve the services available to my constituents and how much money will he save to spend on the other public services they receive?

[Mel Stride]

I can confirm that services will be improved. All the evidence suggests that is the case as we have upgraded and brought HMRC into the 21st century, and I have already stated that the savings will be of the order of £300 million in the run-up to 2025.

[Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)]

As the hon. Member for Aberdeen North (Kirsty Blackman) pointed out, the nearest centre will be a huge distance from my constituency. If we end up out of the customs union, ports such as Scrabster and Wick in my constituency will be the UK’s border. How exactly will the Minister get HMRC to support those ports? If he is going to put personnel in them, why do we not simply reopen the Wick tax office?

--- Later in debate ---

[Mel Stride]

I cannot comment on the specific tax office that the hon. Gentleman mentions, although I am of course very happy to discuss that element of his question outside this statement. As I have already set out, having effective manpower at our ports and borders is a matter of making sure that we have adequate HMRC, Border Force and Department for Environment, Food and Rural Affairs staff available for that, and it will not impact on the fact that we are rearranging our HMRC tax offices.

[Bob Blackman (Harrow East) (Con)]

Property prices tend to fluctuate, so how long are the leases on the new centres, and what break clauses are included in them?

[Mel Stride]

I will write to my hon. Friend with the answer to that question, on the basis that these are all individual arrangements that have been entered into. As for lease arrangements, the first stage of the process is to enter into a commitment with the developer to take possession of the building; the lease is signed in due course. I will, of course, write to him with a more specific answer.

[Diana Johnson (Kingston upon Hull North) (Lab)]

Given that a no-deal Brexit is likely to increase massively the number of customs declarations made at ports such as Hull by those transporting goods through them, and given that that is combined with the Department for Transport’s general lack of preparedness when it comes to our ports, how can the Minister justify taking these decisions at this point?

[Mel Stride]

These are two relatively unrelated matters. Reconfiguring our tax offices is important for the reasons I set out in the statement. As to the hon. Lady’s point about preparedness for the very large increase that there may be in customs declarations, depending on where we land with the deal, I pointed out in answer to my hon. Friend the Member for Yeovil (Mr Fysh) that CHIEF has been upgraded substantially; it will be able to handle the kind of volumes that it may be necessary to handle.

[Mark Pritchard (The Wrekin) (Con)]

The Minister may have heard of Trump Plaza in Atlantic City, which is now closed, but is he aware of Telford Plaza in the borough of Telford and Wrekin, which is very much open, and is the largest letting in Telford and Wrekin in the last decade? It is 112,000 square feet over 13 floors, and many HMRC staff are employed there. Would he care to visit that centre of excellence, when he can find the time in his diary?

[Mel Stride]

I thank my hon. Friend for shamelessly promoting, quite rightly, the properties in his constituency. I would be very happy to meet him to discuss the area.

[Chris Bryant (Rhondda) (Lab)]

Mr Speaker,

“‘Beauty is truth, truth beauty’—that is all

Ye know on earth, and all ye need to know.”

The Minister keeps referring to bringing together hubs, but the danger is that that will mean everything moving to big cities, and all the smaller towns in a constituency, such as all those towns in the valleys in south Wales, losing out. There are loyal HMRC workers, and cheaper properties, in many of these towns. Will he not look at those smaller towns?

[Mel Stride]

The hon. Gentleman is suggesting that we set all current arrangements in aspic. Going back some decades, there would have been not 170 offices across the country, but several hundred. No doubt if we went back in time, the hon. Gentleman would have been on his feet telling us that we should keep 700 offices, rather than shrinking the number down to 170. The reality is that the way that the tax authority conducts its affairs is effective—I have given the figures—and there is a model that makes that happen. That lends itself to 21st-century hubs that have the right resourcing to do the job.

[Philip Davies (Shipley) (Con)]

Given that cheaper premises were available just up the road in Bradford, it is absolutely ridiculous that the Yorkshire hub will be in Leeds. As HMRC made no economic impact assessment of the effect on the places that it is moving out of, will the Minister look at what financial support the Treasury can give from its savings to Shipley, to make sure that its local economy is not damaged by the closure of its tax office? There is already great congestion for commuters trying to get to Leeds on the train; what investment will he make to ensure that people can get from my constituency to Leeds on the train, which they cannot do at the moment?

[Mel Stride]

The decision to have a Leeds office as opposed to a Bradford office has been rigorously looked at. It hinged on eight principles, some of which I set out in my response to the hon. Member for Aberdeen North (Kirsty Blackman), who spoke for the Scottish National party. On my hon. Friend’s more general point about the economic impact, the House should celebrate the economic success that we have had; we have the highest level of employment and lowest unemployment since the mid-1970s, and it is this Government’s policies that are providing that.

[Dr Paul Williams (Stockton South) (Lab)]

Four hundred people work for HMRC in George Stephenson House in Stockton South. Many of them have built their lives as carers and parents around their work. Why does the Minister think that it is okay to ask them to travel for an hour and a half each way just to keep their jobs, when 97% of them say that that is unacceptable?

[Mel Stride]

I do not think that we are requiring all the employees at that location to travel in excess of an hour to fit in with the new arrangements. In my statement, I set out at length the various measures—I will not repeat them now—that we have taken to make sure that HMRC does the right thing.

[Nigel Huddleston (Mid Worcestershire) (Con)]

How can we ensure that niche skills and the expertise of key HMRC staff are retained in this move to regional hubs?

[Mel Stride]

My hon. Friend asks a very good question that goes right to the heart of why we are making these changes. If we are to build teams of highly skilled individuals, we need the right locations in which to house them; that will lend itself to the hubs that we are rolling out, which are in locations with good housing, good education, good access to a talent pool, good transport facilities and so on.

[Robert Halfon (Harlow) (Con)]

The Minister spoke of graduates being part of this transformation scheme. Will he confirm that HMRC will offer opportunities to apprentices, and will support apprenticeships across the board?

[Mel Stride]

I can certainly assure my hon. Friend that HMRC engages with apprenticeship programmes and is supportive of apprentices, as are the rest of the Government.

[Dr Lisa Cameron (East Kilbride, Strathaven and Lesmahagow) (SNP)]

East Kilbride’s Centre 1 is so named because it was deemed No. 1 for taxation skills and experience, but the Public and Commercial Services Union reports that these plans lose the UK 17,000 years of tax experience. Everyone in EK knows someone who has worked in Centre 1 and utterly condemns this Government’s plans. Given that the Minister’s Department has been working constructively with me on the all-party parliamentary group on new towns to regenerate them, why is he devastating East Kilbride and new towns by closing our largest employer?

[Mel Stride]

The hon. Lady is absolutely right to be as passionate as she is about protecting the existing workforce and making sure that we do not lose the workforce’s vital skills. That is why we have taken this approach. We are ensuring that the new locations are viable for those from the old. For example, we are assisting those who need to travel by meeting some of their travel costs over three to five years. We very much want to keep the high level of skills in the organisation.

[Toby Perkins (Chesterfield) (Lab)]

Businesses in Chesterfield that I have spoken to that have had cause to query HMRC judgments have found the organisation monolithic and unresponsive to their queries. Does the Minister have any assessment of how many successful businesses go bankrupt or have a huge financial deficit as a result of a lack of experience in HMRC, and what will he do about that?

[Mel Stride]

If we look at all the metrics, we can see that HMRC is doing extremely well on customer service at the moment, including time taken to answer telephone calls. There is always more to do, and we will continue to work at this, but it has a good record to date.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

HMRC’s New Waverley development in Edinburgh is being used for photo opportunities by Back-Bench Tory MPs even before it opens. We know that the office of the Secretary of State for Scotland and of the Advocate General for Scotland, the Office for Statistics Regulation, the Information Commissioner’s Office, the Government Actuary’s Department and Her Majesty’s Treasury are also moving in. Will the Minister tell us exactly how much this enormous white elephant is costing us, and to which other Departments HMRC will sub-let?

[Mel Stride]

The main thrust of the hon. Lady’s question seems to be to decry the fact that we are decanting more and more services into one location. There are many logical economic and business reasons why one would do exactly that. As for her charge that Conservative Back Benchers are going up to that location, I would suggest that that says they are very interested in these particular matters.

[Mary Glindon (North Tyneside) (Lab)]

Unlike the CEO of HMRC, will the Minister show some common sense and heed the PCS union, which says he should halt his programme and instead concentrate on keeping the expertise, amounting to thousands of years, of staff at offices under threat?

[Mel Stride]

Rather like the question from the hon. Member for Rhondda (Chris Bryant), the suggestion is that we just do nothing and stay exactly as we are. That would not be to the benefit of the taxpayer. Frankly, that would not be to the benefit of the staff, either, who will have increased opportunities as a result of the changes we are bringing in.

[Jim McMahon (Oldham West and Royton) (Lab/Co-op)]

Phoenix House in Oldham is due to close to relocate to Manchester city centre. The cruelty is that, when we asked whether a different site in Oldham could be considered, there was a categorical refusal to even shortlist a site, despite rents in Oldham being half the price of those in Manchester city centre. Does the Minister understand the anger felt in many of our towns, which are being cast aside in favour of our city centres by a Government who just do not care?

[Mel Stride]

HMRC has stuck to very clear, very fair and balanced guidelines on how to make the assessments—the eight location principles we have been discussing this afternoon—and I have absolutely no doubt that it was rigorous in adhering to that process. The individuals impacted by this decision are central to the approach HMRC is taking, in the way I have described.

[Chris Stephens (Glasgow South West) (SNP)]

Will the Minister publish an economic impact assessment for each HMRC office closure—in many towns, the largest employer is leaving? Will he publish an equality impact assessment, so we can see the impact on staff, particularly those with disabilities, who are being asked to travel over 100 miles to their new workplace?

[Mel Stride]

There has already been an equality impact assessment. It is in the public domain, but I would be very happy to share it with the hon. Member.

[Stephen Morgan (Portsmouth South) (Lab)]

Seventy-nine per cent. of staff surveyed said that the plans undermine their ability to provide tax collection. Are HMRC staff wrong?

[Mel Stride]

What is wrong is the suggestion that we are not good at collecting tax. We are world class at collecting tax. We have a tax gap of just 5.7%. If we had the same tax gap that we had under the Labour party, the missing revenue would be enough to employ every policeman and woman in England and Wales. The Conservative way works; the Labour way squanders resources.

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

Given the staff and estate upheaval at HMRC, and the fact that the Government will not take no deal Brexit off the table, can the Minister explain to my concerned constituents why HMRC is sticking with the date of 1 April 2019 for making tax digital for all businesses—a day on which many businesses may have something else to consider?

[Mel Stride]

When I first became Financial Secretary, one of the early decisions I took was to limit the roll-out of Making Tax Digital to just VAT and those businesses over the VAT threshold. The roll-out was delayed. I am confident that we are now in a position where businesses will be ready for that important change. That will be of benefit to HMRC by way of tax collection and important for the efficient running of those companies.

[Chris Ruane (Vale of Clwyd) (Lab)]

The Minister is closing down the valuation office in Rhyl, with the loss of 40 jobs. His Government have already closed the Army careers office in Rhyl, the Crown post office and the county court. By contrast, the Welsh Labour Government are investing £50 million in new schools, £50 million in flood defences, £28 million in housing and possibly £42 million in the refurbishment of a new hospital. Why are the Conservative Government disinvesting in struggling seaside towns and reinvesting in already overheated city centres?

[Mel Stride]

The simple fact is that the Government are adopting an efficient approach to the use of our resources, including across HMRC. We do that for a distinct purpose: it allows us to spend more money on the things that our country expects us to spend money on, such as vital public services, including the national health service, where we will be spending £84 billion more over the next few years than under the previous Labour Government. I make no apologies for doing things that drive efficiency and allow us to support health and public services.

[Hannah Bardell (Livingston) (SNP)]

On value for money, the Minister is either sadly mistaken or badly briefed, because the reality for the 1,000 staff in my constituency is that they are going to one of the most expensive retail units in all of Scotland when they move to Edinburgh. Does he think it acceptable that, as I understand it from the PCS union, staff will be expected to sit in armchairs about which occupational therapists have huge concerns and that staff who have disabilities or who are in wheelchairs have been told that if they cannot reach the screen or the plug sockets on their desks someone else can do it for them?

[Mel Stride]

Clearly, I am not in a position to comment on very specific remarks about armchairs, but if the hon. Lady would like to raise the matter with me outside of this statement, I would be very happy to discuss it with her.

[Chris Law (Dundee West) (SNP)]

There is deep and clear concern from the 479 hard-working HMRC staff at Sidlaw House in Dundee that their jobs may come to an end this year, rather than as planned in 2021, which was promised by the Treasury. Can the Financial Secretary give me an absolute guarantee today that their jobs are safe until the end of 2021?

[Mel Stride]

I would be happy to meet the hon. Gentleman to discuss the details of that specific office location.

Bill Presented

European Union (Revocation of Notice of Withdrawal) (No.2) Bill

Presentation and First Reading (Standing Order No. 57)

Angus Brendan MacNeil, supported by Pete Wishart, presented a Bill to require the Prime Minister to revoke the notification, under Article 50(2) of the Treaty on European Union, of the United Kingdom’s intention to withdraw from the European Union, subject to the legislative consent of the Scottish Parliament and the National Assembly for Wales; and for connected purposes.

Bill read for the First time; to be read a Second time on 8 February, and to be printed (Bill 326).

Oral Answers to Questions

Mel Stride Excerpts

Tuesday 29th January 2019 Commons Chamber

[Stephen Timms (East Ham) (Lab)]

5. What assessment he has made of the potential effect on consumer prices of new non-tariff barriers in the event that the UK leaves the EU without a deal.

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

Last year, the Government published a comprehensive assessment of the impact of our departure from the European Union, covering four different scenarios and looking at the effect on GDP and GDP per capita on exports and imports. That analysis is available on gov.uk.

[Stephen Timms]

The British Retail Consortium estimates that if we leave the EU without a deal, new non-tariff barriers will add on average 29% to the cost of food imports from the EU, on top of new import duties on food. The Chancellor was surely right in his call to business leaders to argue for no deal to be taken off the table. Will he continue to press the Prime Minister to do so?

[Mel Stride]

What we will continue is our extensive planning for the possibility of a no-deal, day-one exit to make sure that our ports are indeed flowing and goods are moving, including food. But the best way to ensure that we have the right conditions for UK consumers is to back the deal that has been negotiated with the European Union.

[Mr Philip Hollobone (Kettering) (Con)]

Will the Minister confirm that, in the event of a no-deal Brexit, we would immediately be able to eliminate VAT on domestic fuel and reduce tariffs on foods imported from outside the European Union to zero?

[Mel Stride]

This country will achieve a range of additional flexibilities when we are outside the European Union. We will, of course, assess them all in due course, taking into account the fiscal costs of some of the measures that my hon. Friend has raised.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

20.   The CBI and many others have warned that leaving the EU with no deal will exacerbate existing regional economic inequalities. The north-west alone is predicted to lose £20 billion a year in a no-deal scenario. That will, of course, impact jobs, not least the 350,000 that are linked to EU exports, 14,000 of which are in my constituency of Oldham East and Saddleworth. So will the Chancellor and the Government as a whole once and for all rule out a no-deal Brexit scenario, which would harm the country as a whole and particularly my constituents and the north?

[Mel Stride]

The simple reality of the situation that Parliament finds itself in is that, in the event that we do not conclude a deal successfully with the European Union, this country may well leave without a deal. I urge the hon. Lady, in order to address the concerns that she has rightly raised in this House, to get behind the deal.

[Charlie Elphicke (Dover) (Con)]

Will the Minister confirm that the Government have no plans for any new non-tariff barriers and call out the British Retail Consortium’s recent “Project Fear” comments? Will he also confirm that it is within the Government’s power, after we leave, to reduce tariff barriers and tariffs on food and clothing?

[Mel Stride]

My hon. Friend raises two issues. On non-tariff barriers, we have made it very clear that we will implement a solution in the event of no deal, for example, that will be as friction-free as possible. But there will be requirements in that scenario for us to handle pre-custom declarations and various checks, which will come with having a border under those circumstances with the EU27. On our tariff policy, we will come to that in due course.

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

Stockpiling by business is at its second highest rate since 1992. The Treasury suggests that new customs paperwork for no deal would cost UK business £13 billion. When will the Minister’s boss, the Chancellor, stop arguing privately against no deal’s staying on the table and publicly take on the scorched-earth fantasists in his own party?

[Mel Stride]

The questions I have just responded to are in a similar vein and all lead back to one conclusion, which is that, if we are to avoid a no-deal scenario, there has, by definition, to be a deal that is agreed with the United Kingdom. We have a very good deal that the Prime Minister has negotiated and will be negotiating further with the European Union. It sees us respecting the outcome of the 2016 referendum but, most importantly, making sure that flows across our borders are as frictionless as possible.

[Patrick Grady (Glasgow North) (SNP)]

6. What discussions he has had with the Secretary of State for Scotland on the economic effect on Scotland of the UK leaving the EU customs union and single market.

--- Later in debate ---

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

13. If he will take steps to prevent the 2019 loan charge from being applied retrospectively.

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

The loan charge is not retrospective. The schemes that were entered into and to which the loan charge relates have always been defective—they never worked, including at the time when they were entered into. That has been evidenced by a number of court cases, including one put before the highest court in the land, the Supreme Court.

[Mr Carmichael]

Her Majesty’s Revenue and Customs is allowed to go back to 1999 to look at tax records. Records that it can look at include those in otherwise closed years. If that is not retrospective, I do not know what it is. What word would the Minister use to describe the loan charge to my constituent, who tells me that he started a business working in the oil and gas industry, living in Orkney but working across the globe, doing everything the Government would want him do? How does he now find himself facing bankruptcy, before his 29th birthday?

[Mel Stride]

An important principle lies at the heart of the whole debate around the loan charge, which is that individuals should pay the tax that is due. If they enter into arrangements that basically mean they disguise income as a loan that they have no intention of ultimately repaying—money that is, more often than not, routed via low or no-tax jurisdictions overseas, via a trust, then brought back into the United Kingdom by way of payment—the Government believe that that is wrong, and the tax should be paid.

[Andrea Jenkyns (Morley and Outwood) (Con)]

What assessment has the Chancellor made concerning an immediate suspension of the loan charge and all settlement discussions within an appropriate period, to allow the loan charge review to be properly conducted and any recommendations to alter the legislation to be implemented?

[Mel Stride]

My hon. Friend will know that the loan charge was brought into effect in 2016. It allowed three years for individuals to clean up the loans—if they were loans, they could be refinanced on a proper, commercial basis—or to come to an arrangement with HMRC. The most important message that I can give from the Dispatch Box today to those involved in these schemes is to get out of avoidance, to get in touch with HMRC and to settle their affairs. They will have a sympathetic and proportionate hearing.

[Wera Hobhouse (Bath) (LD)]

14. What recent discussions he has had with the Secretary of State for Education on the adequacy of funding for adult education.

--- Later in debate ---

[Mrs Pauline Latham (Mid Derbyshire) (Con)]

T8. What is the Minister’s estimate of new start-ups in the creative industries and of their contribution to the economy?

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

I thank my hon. Friend for that question. The creative industries are vital to our country. This Government have provided an array of very important tax reliefs to that sector—they were valued at £850 million in 2017-18. We will continue to support the sector.

[Janet Daby (Lewisham East) (Lab)]

T5.   Constituents such as mine are facing large retrospective bills because of the loan charge. What plans does HMRC have to litigate against those who have disguised remuneration arrangements since 2016?

[Mel Stride]

As the hon. Lady may know, the way the loan charge works is that those who have been involved in this form of tax avoidance have until April to settle their affairs, in which case no penalty will be applied at all. We have also said that those earning £50,000 or less will automatically qualify for a five-year minimum repayment term. My message, as always in these circumstances, is that those who are involved in these schemes should come forward, speak to HMRC and sensibly sort out their arrangements.

[Stephen Kerr (Stirling) (Con)]

T10. Forecasting has had a bad rap recently from some people. Will the Chancellor therefore join me in welcoming a report from Commerce Bank that found that economic forecasting is more accurate now than it has been for most of the past 30 years?

--- Later in debate ---

[Nigel Huddleston (Mid Worcestershire) (Con)]

Average wages in my constituency are below the national average, with many people earning the living wage. Tax rates really matter to them, so is that not precisely why we Conservatives voted for a tax cut for 32 million people, by contrast with the Opposition? Will we continue to be truly the party for working people?

[Mel Stride]

We are truly the party for working people, as my hon. Friend states, unlike the Labour party. We are the party that raised the personal allowance to £12,500 one year ahead of our manifesto commitment to do so, taking well over 4 million of the lowest paid out of tax altogether. We are also the party of the national living wage, which will go up by 4.9% this April and be of great benefit to the very lowest paid in our country.

[Neil Gray (Airdrie and Shotts) (SNP)]

We knew that shifting the BBC licence fee concession to the BBC has always been folly, but we now know from the BBC’s consultation that the £745 million cost is likely to mean either a reduction in output, pensioners losing the concession, or both. Will the UK Government finally reverse this ridiculous decision and bring the concession back to the Government?

Double Taxation Convention (United Kingdom and Israel)

Mel Stride Excerpts

Wednesday 23rd January 2019 Written Statements

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

A protocol to the double taxation convention with Israel was signed on 17 January 2019. The text of the protocol is available on HM Revenue and Customs’ pages of the gov.uk website and will be deposited in the Libraries of both Houses. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.

[HCWS1266]

Draft Double Taxation Relief and International Tax Enforcement (Austria) Order 2018

Mel Stride Excerpts

Monday 21st January 2019 General Committees

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

I beg to move,

That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Austria) Order 2018.

May I say what a pleasure it is to serve under your chairmanship, Mrs Main? The order gives effect to a replacement double taxation agreement with Austria. DTAs remove barriers to international trade and investment, and provide a clear and fair framework for taxing businesses that trade across borders. By doing so, they benefit both businesses and the economies of the countries signed up to them.

Our current DTA with Austria dates from 1969 and is therefore in need of a comprehensive update to reflect changes to the OECD’s model tax convention and the domestic tax laws and treaty preferences of both states. The new DTA also introduces a number of improvements for businesses, individuals and Her Majesty’s Revenue and Customs. The new agreement will first create certainty for businesses, boosting vital trade between our two countries. Cross-border dividends between group companies in the European Union are currently exempted from source state taxation under the EU’s parent-subsidiary directive. The new agreement ensures that UK businesses with subsidiaries in Austria will not be affected by the UK’s exit from the European Union.

Our current DTA permits Austria to tax dividends paid to UK residents at a rate of 5% for amounts paid in respect of direct investment, and 15% on portfolio holdings. The new DTA reduces the rate on direct holdings to zero, and that on portfolio holdings to 10%. At the same time, our right to tax distributions from UK real estate investment trusts at a rate of 15% is preserved. In addition, dividends received by UK pension schemes will be exempt from taxation in Austria. These reductions will ease the flow of cross-border investment between our two countries, to the benefit of both.

The new DTA also brings the mutual agreement procedure up to the minimum standard on improving dispute resolution agreed under the OECD-G20 base erosion and profit shifting—BEPS—project. In addition, the new agreement provides for mandatory binding arbitration, which will ensure that disputes are always resolved and that double taxation is avoided. Our current DTA with Austria was not listed as one that either state wished to be covered by the BEPS multilateral instrument—MLI—because this new agreement contains all of the provisions that would have been introduced by the MLI, taking into account the respective reservations made by the UK and Austria.

These provisions include the statement in the preamble that a purpose of a DTA is not to create opportunities for tax evasion and avoidance, and a principal purpose test that denies treaty benefits in cases of abuse. Together, these provisions ensure that the agreement complies with the BEPS minimum standard on preventing treaty abuse and supports this Government’s agenda of fair and transparent international tax standards. Other anti-avoidance rules in the new treaty include a tiebreaker provision for determining corporate residence, based on competent authority agreement.

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

The Minister is gabbling through this at a rate of knots. I have had to come here at 6 o’clock on a Monday evening, when I should be somewhere else along the corridor. The impact assessment states that there will be no significant impact on businesses, charities or voluntary bodies. What the hell is this all for if there is no impact on anyone?

[Mel Stride]

Well, I am not sure that I would use quite the terminology that the hon. Gentleman has just introduced to the Committee. The purpose of any DTA is clearly to ensure that those entities that are trading across international boundaries do not suffer double taxation—so they are not taxed in both jurisdictions—and to ensure that trade is facilitated.

[Mr Sheerman]

Can the Minister explain to me why this relates only to Austria? I know of countries around the world where there are real concerns about double taxation, about people dodging tax and all those other things, but one country that would never enter my imagination when thinking about that is Austria.

[Mel Stride]

The hon. Gentleman might not be aware that we have double taxation agreements with a whole variety of countries. In fact, he has missed some of the best debates ever held in the House of Commons, because in this very Committee Room we have recently discussed DTAs with countries such as Lesotho—that was a fairly feisty debate between myself and the hon. Member for Oxford East. It is not a treaty in isolation, but one of many that we have entered into with other jurisdictions.

The provision in the capital gains article preserves UK taxing rights on gains from shares that derive their value from property in the United Kingdom. Finally, the new DTA provides for mutual assistance in the collection of tax debts. Together, those features strengthen both countries’ defences against tax avoidance and evasion.

In summary, the agreement protects UK revenue and provides a stable framework in which trade and investment between the UK and Austria can continue to flourish. I therefore commend the order to the Committee.

--- Later in debate ---

[Mel Stride]

I thank the hon. Lady as usual for her thorough set of questions, and I will endeavour to do my best to answer them. She asked which other treaty negotiations we are currently engaged in. I can inform her that DTA discussions are under way with Greece, Luxembourg and Romania. On her general point that it would be useful for her and others to have sight of the programme of discussions—she did not use that terminology—that we might have, I would be happy to provide that to the best of my knowledge at this point. Perhaps I could do that outside this Committee.

The hon. Lady raised the differences between the double taxation agreement and the OECD model and asked about the reason for some of the choices that may have been made around those differences. First, clearly, a negotiation between two parties will typically lead to some divergence from the model—that is a standard situation, so there is nothing unusual in this case. Secondly, if the hon. Lady will write to me to highlight the particular differences from the model and where there were choices within the model, I will be happy to provide answers. I also point out that, as she may know, a review of our policy on DTAs is being conducted. It will report back soon and, as the relevant Minister, I will look at its conclusions in some detail.

The hon. Lady raised a specific point about the lack of a reference to stateless persons in the agreement. I took particular note of the various issues that she understandably raised about that. She asked whether I would write to her with further information on that point, and I will be glad to do so.

Question put and agreed to.

Draft Crown Dependencies Customs Union (Guernsey) (Eu exit) Order 2018 Draft Crown Dependencies Customs Union (Isle of Man) (Eu exit) Order 2018 Draft Crown Dependencies Customs Union (Jersey) (Eu exit) Order 2018

Mel Stride Excerpts

Monday 21st January 2019 General Committees

[The Chair]

I call the Minister to move the first motion and to speak to all the instruments. At the end of the debate, I will put the question on the first motion and then ask the Minister to move the remaining motions.

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

I beg to move,

That the Committee has considered the draft Crown Dependencies Customs Union (Guernsey) (EU Exit) Order 2018.

[The Chair]

With this it will be convenient to consider the draft Crown Dependencies Customs Union (Isle of Man) (EU Exit) Order 2018 and the draft Crown Dependencies Customs Union (Jersey) (EU Exit) Order 2018.

[Mel Stride]

May I say what a pleasure it is, Mr Stringer, to serve under your chairmanship and to speak to all three orders? Today marks an important step in meeting the Government’s commitment that the UK’s departure from the EU delivers for the whole UK family, including the Crown dependencies. Before we move on to the orders, it is worth my briefly setting out their context with regards to the Crown dependencies and the UK’s withdrawal from the European Union.

The Crown dependencies are currently part of the EU customs union. This provides the legal framework necessary for goods to move between the United Kingdom and the Crown dependencies. The Crown dependencies will therefore leave the EU’s customs union alongside the United Kingdom. The three Orders in Council tabled in draft today will give effect to new customs union arrangements that will maintain our current customs relationships with the Crown dependencies after our European Union exit. Crucially, the arrangements provide that goods moving between the UK and the Crown dependencies will not be subject to import duty.

I will now move on to clarify the new customs arrangements the UK has entered into with each of the Crown dependencies. On 26 November, the Government signed new arrangements with each of the Crown dependencies, together forming a new UK-Crown dependencies customs union. These arrangements have been designed to ensure continuity for UK-Crown dependency trade when the UK leaves the EU, and impose no new direct costs or additional information requirements on businesses in the UK or the Crown dependencies. The two Channel Islands arrangements are identical in all material respects and are new agreements, whereas the new Isle of Man arrangement updates customs aspects of the existing 1979 UK-lsle of Man customs and excise agreement.

Under the UK-Crown dependencies customs union, traders moving goods between the UK and the Crown dependencies, or between the Crown dependencies themselves, will continue to pay no customs duty and face the same customs processes as they do now. It will also mean that the UK and the Crown dependencies will apply the same tariff as the UK, just as they do now under the EU customs union.

The making of these orders is a prerequisite for the making of separate regulations to implement the customs union arrangements. Once the orders are made, we will lay the regulations required to comply with the commitments made in the new arrangements—for example, a regulation to ensure that importers bringing goods into the Crown dependencies can apply for tariff information rulings. While the new customs arrangements to which these orders give effect are compatible with any future customs agreement reached with the EU, these orders and the implementing regulations must be in place when the obligations in the EU treaties cease to apply to the UK.

In summary, the orders deliver on the shared objectives of the UK Government and the Governments of the Crown dependencies to ensure the continuation of our current customs relationships outside the European Union customs union. They will place our customs relationships with the Crown dependencies on a firm footing for the future, and they underline the positive collaboration that has taken place between the UK and the Crown dependencies since the 2016 referendum. I therefore commend the orders to the Committee.

--- Later in debate ---

[Mel Stride]

I thank the hon. Gentleman for his contribution and questions. At the heart of this, it is important to understand the process of what is occurring. The whole process begins with the Taxation (Cross-border Trade) Act 2018. Of course, the hon. Gentleman will be very familiar with that Act and with the provisions section 31 makes for setting in train the process for entering into renewed customs union arrangements with the Crown dependencies.

The process operates broadly as follows: having entered into a political agreement with the Crown dependencies, we are required to approve the draft orders, which will then go to the Privy Council. The relevant statutory instruments will then be laid under the negative procedure in the latter part of February, setting out the details of the arrangements with the Crown dependencies.

As for the hon. Gentleman’s suggestion that there has been a lack of scrutiny—I think that is a fair way of summarising his position—I must strongly point out that the primary legislation to which the orders relate went through full parliamentary scrutiny, including on the Floor of the House. Indeed, he may recall that section 31 was amended to restrict our ability to enter into a customs union with the European Union by any method other than primary legislation.

I do not think there is any ambiguity about the purpose of the orders or the statutory instruments that will follow, which is to ensure that, after our exit from the European Union in late March, we are in a position to maintain customs relationships with the Crown dependencies.

The hon. Gentleman asked why there are separate statutory instruments for each of the Crown dependencies. The answer is that there are separate agreements; the Crown dependencies are jurisdictions in their own right, so it is only right and proper that there be a statutory instrument for each. In the case of the Isle of Man, as he will know, we are effectively amending an arrangement that was entered into in 1979—a distinct approach from the arrangements with the other Crown dependencies.

--- Later in debate ---

[Mel Stride]

I thank the hon. Gentleman for his further points. However, it is important to note that the scope of section 31, which he referred to early in his remarks, is in respect of measures relating to the Crown dependencies. These orders give effect to arrangements entered into with Crown dependencies, and therefore they obviously do not affect the overseas territories.

Some of the points that the hon. Gentleman has made in this debate were made at the time the 2018 Act went through this House. At that time, I made it very clear that one of the uses to which we would almost certainly put the powers under section 31 was exactly what we are doing today: to enter—under certain circumstances—into customs union arrangements with the Crown dependencies.

As to the latter part of the hon. Gentleman’s points around whether we should or should not remain a member of the European Union’s customs union, that is, once again, probably outside the scope of our considerations today, but there has been, and no doubt will continue to be, considerable debate about it outside of this Committee.

Question put.

Taxation of Low-income Families

Mel Stride Excerpts

Wednesday 16th January 2019 Westminster Hall

[Andrew Selous]

Yes, I completely agree. I think that it comes back to choice and recognising that families face different challenges at different times of their lives, particularly regarding the needs of children, the frailties of elderly parents and so on. I hope that our social care reforms, which are forthcoming, will go some way towards addressing that situation, but the tax system absolutely has a huge role to play in addressing these important issues, which my hon. Friend quite rightly raises.

Effectively, what we are saying through the tax system is that, despite praising with warm words family members who choose to stay at home if they can make the financial choice to do so—not every family has members who can make that choice, but there are families in which one person makes the sacrifice to stay at home, to be with their children or to look after elderly relatives—we think they are making the wrong choice, because we penalise them for doing so; there is no recognition of what they do.

The Centre for Policy Studies, which was referred to earlier, has made a proposal that we should consider, which is to look at the transfer of unused personal allowances. The Child Poverty Action Group—the report that we are considering today looked across the political spectrum; I have great respect for CPAG—made some suggestions about perhaps increasing child benefit for children under five in lower income families. One way that we might be able to fund that—it is a golden rule with me that if anyone calls for an increase in expenditure, my next question is, “Where is the money coming from?”

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

indicated assent.

[Andrew Selous]

I see that the Treasury Minister is nodding; let me give him a suggestion, as I have made a call on the public purse. At the moment, we give child benefit to families that have an income of £100,000, where both members of a couple are earning £50,000, whereas that stops at £62,000 when there is only one earner in a family. So there is £38,000 worth of income in respect of child benefit to play with.

The Minister will have to go back to the Treasury and get all his super-clever officials to run those figures through the Treasury modelling system, but there will be some money there that could perhaps be better targeted at child benefit or the transfer of unused personal allowances. We are not being prescriptive here; we want Ministers to go back and look carefully, and reflect carefully, on these matters.

In respect of the work that parents do within the home—looking after children, or looking after frail or elderly relatives—last October the Office for National Statistics said that unpaid household work had a value to the British economy of £1.24 trillion. That is a big figure, as the Minister will appreciate, and just some recognition of the good that is done to society by that work—the costs that are not accruing to the public purse because of it—would be welcome. I think that on average that work comes down to a value of £18,932 per person, which is a significant amount.

--- Later in debate ---

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

It is a great pleasure to serve under your chairmanship, Sir David. I thank my hon. Friend the Member for Stafford (Jeremy Lefroy) for securing this debate and my hon. Friend the Member for Congleton (Fiona Bruce) for her insightful contribution. I also thank my hon. Friend the Member for Bolton West (Chris Green) for his involvement in the important report issued this morning. I can assure all present that it will be carefully digested by Ministers in the Treasury.

At the heart of the matter lies the issue of fairness in the taxation system and the way in which the benefits system operates in our country. Also at the heart lies the central point that many speakers have made this morning as to whether the tax and benefits system appropriately incentivises aspiration—a Conservative ideal—and effectively incentivises employment, including incentivising people to go out and get jobs. And of course there is the impact of all those matters on the crux of the issue, which is the social impact of these measures on the stability of the family unit. I, the Treasury and the Government more broadly certainly recognise that all those points are of critical importance. I am particularly proud that Conservative Members chose to secure this debate and were instrumental in producing such a thoughtful and detailed report. It is the Conservative party that believes most strongly and passionately in the issues that lie at the centre of the matters we are debating today.

Having accepted that the matters are important, I also accept the many examples given in the debate today on the way in which the system does not work effectively. The most important has been the very high level of marginal tax rates. Several examples were chosen of particular circumstances involving individuals and children and the make-up of families to illustrate that we can, under certain circumstances, have marginal tax rates as high as 73% or even beyond. I accept that that is deeply undesirable. That is not the same thing as suggesting that the entire system is broken. If we chose different examples we might get far lower marginal tax rates than those that have been rightly highlighted in the report and in the debate today. Indeed, the OECD has indicated that across the universe of low-income families in this country, we are above average when it comes to making sure that net income is received by those families. However, there will always be more to do, which is why this debate is important.

We should not overlook the fact that we have a very progressive tax system. Some 28% of all income tax is paid by the top 1% of earners. In the previous Budget, we met our manifesto commitment to increase the personal allowance to £12,500 one year early. It will come in next year and take millions of the lowest paid out of tax altogether. In case it is felt that only the lower paid face very large rates of marginal income tax, we must bear in mind that, under the current system, once someone earns beyond the large amount of £100,000, the personal allowance is tapered away at a rate of £1 for every £2 earned. At that point in the income distribution, wealthy people pay a marginal rate if we include national insurance of 63%. A necessarily complicated tax system, because it tries to do many things at the same time, throws up all sorts of deeply unsatisfactory anomalies. The complexities of the tax system and the interaction with the benefits system means a complicated challenge ahead.

Low tax matters. My hon. Friend the Member for South West Bedfordshire (Andrew Selous) put it eloquently. Low taxes matter for reasons other than fairness. They drive the economy, jobs and entrepreneurship. They make sure that we have, for example, halved the level of youth unemployment since 2010. He cited the very good example of Greece and other countries where they have taken a different way and have paid the consequences. The Government remain committed to lower taxes and to simplifying them to the extent possible and to making sure that the anomalies raised today are addressed.

On the benefits system, much has been said about universal credit. We all recognise that when the Labour party was in government, its benefits system was overly complicated. People had to go to the DWP, to the local housing authority and to HMRC to qualify for a variety of benefits, but we have simplified that to one benefit. When it comes to making work pay, which lies at the heart of many of the arguments, universal credit does exactly that. People no longer have the 16-hours-of-work cliff edge, beyond which they lose all their entitlement.

[Alison Thewliss]

Will the Minister give way?

[Mel Stride]

Extremely briefly.

[Alison Thewliss]

Does the Minister accept the research by the Church of England that a single mum with three kids will have to work 45 hours to make up for his cuts?

[Mel Stride]

The point I was coming on to was the taper. In 2016, we announced a reduction in the taper rate from 65% to 63%. My hon. Friend the Member for Congleton called for it to be reduced further to 50%. That is a deeply desirable move if it can be achieved, but we must recognise the cost of doing so. The cost of having gone from 65% to 63% is £1.8 billion across the scorecard period. I do not have the figure to hand, but it would be absolutely enormous if we went to 50%. With great respect to Members, even the examples of where we could do more, such as tax relief on higher-rate pensions or the changes to child benefit and the way in which that might operate, would be dwarfed by any such move. We have to recognise, as my hon. Friend the Member for South West Bedfordshire explicitly did, the costs of making the changes that have been proposed.

The Conservative party introduced the national living wage. We should be enormously proud of that fact. It goes up by 4.9% in April, so those in full-time employment will take home £2,750 more than they did in 2010[Official Report, 31 January 2019, Vol. 653, c. 6MC.]. The marriage allowance is an example of exactly what the report calls for. Among the measures are a transferability of allowance to make provision for those who stay at home to look after children or elderly relatives. It transfers at a rate of 10%, provided the person is not a higher or additional-rate taxpayer. Once again, it is focused on the lowest paid in our society. We spent time reflecting on child support. We will spend £6 billion more per year by 2020, and we brought in tax-free childcare. If someone is on universal credit, they are able to claim back up to 85% of the cost of childcare.

In the remaining couple of minutes, I will respond directly to the overarching request made of me this morning, which is that I go back to the Treasury with the report and the comments made in this debate and look genuinely and deeply at the issues raised. I can give an unequivocal commitment to do precisely that because, despite what is going on in the House at the moment and the important vote tonight, certain things must continue uninterrupted. Our essential quest for social justice and the Conservative party’s commitment to the family and a society that is at ease and at one with itself, must not be diminished. The House has my commitment to do exactly as I have said. I will engage in the form that my hon. and right hon. Friends wish me to to make sure that we push forward on the important issues raised today.