European Affairs
Mel Stride Excerpts(6 years, 8 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
I am delighted to open the second day of this very important debate. At the outset I want to set out the status of our negotiations and reiterate this Government’s vision for a future economic partnership with the EU. I will in particular focus on the important issue of financial services within any future trade agreement, and remind the House that we have been very clear that the decision to leave the EU does not mean some loveless divorce or division. There is indeed no need for this, given that the economies of the UK and the EU are inextricably connected, and given our long and shared history of common values and shared challenges, and I have no doubt that any future economic partnership must recognise and reflect these facts.
We stand at the threshold of a new beginning with our European partners, and a renewal of our commitment to ensure the continued prosperity and stability of both the UK and the EU. Before I turn to our future economic partnership with Europe, it is important to set out just how far we have come, and what awaits us as we progress our discussions.
The agreement in December was a significant step forward. The joint report issued by the UK and the EU set out progress on three areas: a fair deal on citizens’ rights that enables families who have built their lives together in the EU and the UK to stay together; a financial settlement that honours the commitments we undertook as members of the EU, as we said we would; and an agreement in relation to Northern Ireland. We are confident that this collaborative spirit, which led to the December agreement, will endure as we take our approach forward into the next phase, including at the European Council next week.
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
On this concept of a collaborative, open spirit, trying to find solutions and securing frictionless trade, the Minister will have seen today’s Sky News report that the Government are insisting on non-disclosure agreements with a variety of industry groups, transport bodies, hauliers and others in trying to find their way through. Why are the Government insisting on gagging business organisations in that way?
Mel Stride
It is standard practice for the Government to use non-disclosure agreements, and delivering a seamless post-Brexit border is a top priority for us. Non-disclosure agreements with key delivery partners for the border are crucial to the open exchange of information and opinion on options and scenarios, and they ensure that all planning negotiations and decisions are based on what is achievable and most appropriate for the UK to ensure a safe and secure border.
In respect of our future trading relationship, draft EU negotiating guidelines have been circulated to the EU for comment, and we expect final guidelines to be formally adopted next week at the March European Council. We trust that these will provide the flexibility to allow the EU to think creatively about our future relationship, and, looking ahead, we are confident that we will conclude a deal on the entire withdrawal agreement by the European Council in October. This confidence is not just grounded in our mutual interest of striking a deal, but also because we enter these negotiations from a point of striking similarity: our rules, regulations, and commitment to free trade and high standards are the same. So, as we build this new relationship, we are doing so from a common starting point.
The next milestone in the negotiations will be an agreement of an implementation period. We saw the implementation period prioritised in the Chancellor’s Mansion House speech and the Prime Minister’s Florence speech, alongside a frictionless customs arrangement and a comprehensive agreement on trade in goods and services. The implementation period is the essential first step to ensure that we can all experience an orderly exit from the EU, plan accordingly, and enjoy certainty during the transition.
John Redwood (Wokingham) (Con)
How can we possibly agree an implementation period when at the moment we do not have anything to implement?
Mel Stride
While being ingenious in his use of language, my right hon. Friend will I am sure agree with me that the purpose of the implementation period is to make sure we have a period of certainty for business, so that when we end up with our final withdrawal agreement we only have one set of changes to make from where we are now to where we will be at that point. That is the purpose of the implementation period.
Anna Soubry (Broxtowe) (Con)
I do not want to alarm you, Mr Deputy Speaker, but I completely agree with my right hon. Friend the Member for Wokingham (John Redwood), which may be a first in this sort of debate—[Interruption.] He is in a state of high shock. In all seriousness, this is an implementation period—the clue is in the name—but many of us fear that by October we will have achieved nothing more than a woolly set of heads of agreement and that there will be little to implement. How does the Minister see things panning out in reality?
Mel Stride
Whether it is a transition period, an implementation period or whatever period one seeks to term it, the important thing is to understand what the period is about, and we have always been clear about that. It is a period in which we will remain closely involved—similar to how we are at the moment—so that when we move into the post-transition or implementation period we have undergone just one set of changes and that we have certainty in the interim for British businesses, which is exactly what they have been telling us they would like.
Mr Bernard Jenkin (Harwich and North Essex) (Con)
I repeat these words:
“I propose that we aim for a trade agreement covering all sectors and with zero tariffs on goods. Like other free trade agreements, it should address services.”
Those are the words used by President Tusk in introducing the guidelines, which seem to accept the principle that there should be a comprehensive free trade agreement between the United Kingdom and the EU.
Mel Stride
My hon. Friend makes an important point and, as I will say later in my speech, there is every reason to move towards a comprehensive free trade agreement covering not just goods, but services.
Vicky Ford (Chelmsford) (Con)
Given that nearly half of our trade is with the EU and that 40% of that trade is in services, does the Minister agree that the level of services coverage in, for example, CETA is not deep enough or broad enough to recognise adequately the mutual trade between the UK and the EU in services?
Mel Stride
My hon. Friend raises an important point. We will be seeking a unique deal for our country that recognises the prime importance of financial services both to our country and to the European Union and of the provision of competitive finance to the EU’s businesses and consumers. She mentioned CETA, and the relevant point there is that the negotiations, which were led by Michel Barnier, recognised the importance of attempting to include areas such as financial services, which is exactly what we will seek in the negotiations that will now follow.
We have the reassurance that the UK and the EU both issued a published text on the approach to the implementation period that reflects the significant common ground between us. The text would codify an implementation period that preserves the current status quo for business and consumers, is time-limited but also provides a sufficient window for the EU and UK to put new processes and systems in place, and ensures continuity in the application of international agreements. As a third country, the UK will have the ability to use the period to negotiate and sign new trade deals, while reflecting the fact that we cannot bring these agreements into legal effect until after the end of the period. We will also introduce a new registration scheme for EU citizens arriving post-Brexit but during the implementation period, when EU citizens should be able to continue to visit, live and work in the UK as they do now.
Peter Grant (Glenrothes) (SNP)
The Minister has referred to the potential opportunities to negotiate new trade deals after we leave the European Union, and one of his colleagues has been keen to big up the prospect of the riches to be had from that. Can the Minister name any country in the world that has indicated it would be more likely to give a beneficial trade deal to the United Kingdom on our own than it would be to negotiate a deal with the world’s biggest single internal market?
Mel Stride
What I can tell the hon. Gentleman is that a large number of trade missions have been led by the Department for International Trade and its Secretary of State. We have had extremely encouraging discussions with a large number of important potential future trading partners with whom we may be seeking free trade agreements. As I have said, we will be able to negotiate deals within the implementation period, although they will not come into effect until we are beyond that point.
Rachel Maclean (Redditch) (Con)
Is the Minister aware of the article on the front page of The Times today, which says that Brussels has now agreed that Britain can sign free trade deals without the approval of the European Union? Will he update the House on the status of the situation? What does it mean for our free trade policy?
Mel Stride
I believe that my hon. Friend is right. I certainly read that article this morning, and if what it says is the case, that would be good and sensible news, because it would be entirely logical that we should be in a position to go out and negotiate free trade agreements during any implementation period, although we respect the fact that the deals would not be switched on until we were beyond that point.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
As a part of the customs union, we have trade deals with 50-odd countries across the world, and I understand that they are worth some £140-odd billion per annum in UK trade exports. Will the priority during the implementation period be to renegotiate and sign deals with all those countries with which we currently have a trade deal? We know that some of them want to renegotiate the terms and want greater access to UK markets as a result. How many of those deals are we going to be able to renegotiate and sign before we actually leave the European Union?
Mel Stride
I reassure the hon. Gentleman that it is an absolute priority for the Government to ensure the consistency and continuity of the existing arrangements as they pertain between the European Union and other countries. I see no reason why we should not benefit from those arrangements, just as those countries will indeed benefit from arrangements with us as we go forward.
We have proposed practical solutions to help deliver a smooth departure from the EU. One such solution is the introduction of a joint committee to resolve issues or disputes that may arise during the implementation period. That approach is a common feature of international trade agreements. The joint committee would, for example, allow the UK to raise concerns regarding new laws that might be harmful to our national interest. We will also continue to discuss our involvement in relevant bodies as a third country during the period to ensure that EU rules and regulations continue to operate coherently.
It is in the interests of both the UK and EU to agree the precise terms of the implementation period as quickly as possible. We are close to delivering that, and we expect it to be formalised at the European Council meeting next week. The implementation period is key to forging the best possible future relationship, giving businesses and Government the time and certainty to plan for Brexit, and preparing the UK for its status as an independent trading nation. It will be a bridge from where we are now to where we want to be in the future—on exit, on day one, and beyond.
Looking further forward, it is crucial that talks progress so that we can agree the terms of our future relationship with the EU. We are now moving at pace to set the parameters of an economic partnership. As a Treasury Minister, I am particularly focused on how our economies will interact and grow together. As the Prime Minister said in her speech on 2 March, the UK is seeking the broadest and deepest possible agreement that covers more sectors and co-operates more fully than any other free trade agreement. A key component of any future agreement should be the inclusion of services, particularly financial services.
Jonathan Edwards
The Minister is being extremely generous in taking interventions. Taking him back to the implementation period and the negotiation of trade deals, will the priority be renegotiating the trade deals that we already have with all these third countries via the customs union or negotiating new trade deals with countries such as the United States and China?
Mel Stride
The hon. Gentleman will understand that both are an extremely high priority. We will be pursuing both avenues vigorously.
As my right hon. Friend the Chancellor made clear in his Canary Wharf speech last week, financial services is a sector that calls for close cross-border collaboration. The Chancellor also reiterated that it is simply not credible to suggest that a future deal could not include financial services. It is in the interests of both parties to ensure that the EU can continue to access and enjoy the significant benefits afforded by our financial services hub, because it is a regionally and globally significant asset, serving our continent and beyond, and near-impossible to replicate.
The UK can claim excellence in many areas, but in trade in financial services we are truly the global leader. We manage €1.5 trillion of assets on behalf of EU clients, and 60% of all EU capital markets activity is conducted here in the United Kingdom. Around two thirds of debt and equity capital raised by EU corporates is facilitated by banks right here in the UK. The huge economies of scale have led to London’s dominant position in EU financial services. As the Chancellor made very clear last week, we should be under no illusions about the significant costs if this highly efficient shared market is fragmented—costs that will ultimately fall to consumers and companies right across Europe.
Robert Neill (Bromley and Chislehurst) (Con)
My right hon. Friend is making a very important point. As the Chancellor set out, those costs are many billions of pounds. One example is the proposed relocation of clearing houses, with an effective cost of some £25 billion a year. Does my right hon. Friend agree in addition that it is critical to have continuity for the legal instruments that underpin financial services, and that continuity of access for legal services must therefore be inextricably linked?
Mel Stride
My hon. Friend raises an important point about the significance of financial services, not just to us but to our European partners. On his specific point about regulatory continuity, we are considering the detail of that at the moment. We will certainly look at the prospect of returning to the matter on Report of the relevant Bill.
The UK stands ready to engage on a future trade agreement—one that includes financial services. Our overarching vision is for an economic partnership—including a future trade agreement—that delivers the maximum possible benefits for both our economies in all sectors, respects the integrity of each other’s institutions and seeks to strengthen, not weaken, the prosperity of Europe as a whole. Despite that, some still question the possibility of reaching such an agreement or insist that a trade deal cannot include financial services. The Chancellor addressed those sceptics in his speech last week, when he said that
“every trade deal the EU has ever done has been unique”.
The existing models do not represent the best way forward; nor do they provide a useful precedent to form the basis of any future agreement. Joining the EEA would not give the UK enough control, and a CETA-style deal would present too low a level of market access. The EU and the UK come to the negotiating table from the unique position of having the same rules and regulations on day one, not to mention our deeply interconnected economies. Unlike when other countries negotiate free trade agreements, this is not about aligning two totally different systems. Any new trading agreement should reflect the starting point of deep and historic convergence. We understand that, over time, there will be points of inevitable divergence, so we recognise that any future agreement should set out a clear approach to that aspect.
Our country seeks the deepest and broadest agreement possible—a bold economic partnership that is of greater scope and ambition than any comparable arrangement in history. The ambition of our vision reflects the scale of our mutual interest, our shared history and all that we can achieve together as good friends and trusted neighbours. Leaving the European Union represents an opportunity to chart a prosperous future. Along with my colleagues in Government, I have the greatest faith in our country and in our ability to work with others to achieve a deal that provides and endures for us all.
HMRC Staff: Dudley
Mel Stride Excerpts(6 years, 8 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
I congratulate the hon. Member for Dudley North (Ian Austin) on securing this important debate. I know that these are matters of particular concern to him, as they are to the hon. Member for Preston (Sir Mark Hendrick) and my hon. Friend the Member for Dudley South (Mike Wood), who have also made contributions this evening. HMRC’s location strategy was the subject of a Backbench Business debate held in November last year, and I am grateful to have the opportunity to return to this important matter.
As the hon. Member for Dudley North pointed out, in November 2015 HMRC announced its location strategy as a crucial element of its work to create a modern, world-class tax authority—a key part of our long-term economic plan for national prosperity. Since 2010 we have made substantial investments, enabling HMRC to do more to tackle evasion, drive down avoidance and improve compliance.
HMRC is transforming into a leaner, more highly skilled operation, offering modern digital services. It is moving away from outdated systems of manual processing to become more flexible and technologically driven—changing the way it works and using today’s technology and IT to improve the services it delivers for its customers. These investments in technology mean that HMRC can tackle fraud, evasion and avoidance more effectively and that customer services have improved, with far lower wait times on helplines and new ways to get support, such as webchats.
Changes to HMRC’s office estate are an important part of this transformation process, moving it from a large, widely dispersed estate of offices across the UK, varying in size, to a considered network of significant, modern regional hubs. In November 2015, HMRC announced that over the following 10 years it would bring its employees together in 13 regional offices, all in locations where it already has a significant presence, as it does in Birmingham. The co-location of teams across HMRC will lead to increased collaboration and flexibility, allowing it to provide more effective and efficient services to the taxpayer, and it has put support in place to help its workforce through the changes.
In Birmingham, the regional centre will be situated in the heart of the city at 3 Arena Central. It will be home to 3,600 civil servants, with 2,650 HMRC staff moving in from 13 offices around the west midlands region to undertake a wide range of key tax professional and operational delivery roles.
The first of HMRC’s regional centres opened in Croydon in July 2017 and construction is under way at the Birmingham site, along with further sites in Bristol, Cardiff, Belfast and Leeds. All those offices will be modern, environmentally friendly and located in the heart of the community. Most of them will be shared with other Government Departments, and all have been sized for the future needs of HMRC and the taxpayer.
In addition to the 13 regional centres, HMRC will keep seven transitional sites open across the UK for several years, where it will help retain key skills during the transition period, as well as five specialist sites for work that cannot be done elsewhere. For example, HMRC will retain Telford as a site for some of its specialist digital teams. By phasing the moves into its regional centres over a number of years and keeping sites open during the transition, HMRC will ensure that disruption to its business operations is minimised. The Birmingham regional centre will open in late 2020.
The overall programme to move to regional centres will deliver savings to the taxpayer of around £300 million up to 2025 and then annual cash savings of £74 million in 2025-26, rising to more than £90 million by 2028. It will also avoid costs of £75 million a year from 2021, when the current private finance initiative contact with Mapeley comes to an end.
It is important to stress that this is not just about cost savings and bricks and mortar. HMRC’s new office structure will allow people to develop more fulfilling careers. There will be a far wider variety of jobs and different career paths to senior roles, as a wider range of work will be based on single sites. These modern buildings will unquestionably deliver a better working environment and experience for HMRC’s workforce. Crucially, their city centre locations will also increase HMRC’s attractiveness as an employer, enabling it to recruit and retain the next generation of skilled professionals. That is particularly important given that a substantial proportion of its long-serving workforce are approaching retirement age.
HMRC is clear that it wants to do all it can to keep its people’s skills, knowledge and experience, and it has a policy of minimising any redundancies. The vast majority of HMRC employees are within reasonable daily travel of a regional centre, specialist site or transitional site, and that is deliberate: decisions on where to locate the regional centres were based on modelling of where existing staff are based. HMRC estimates that 90% of its workforce will be able to move to one of its regional centres or complete their career in their current office. For those currently based at the Waterfront offices, the travel time from Dudley to Birmingham city centre is between 35 and 55 minutes by car or train.
That said, HMRC recognises that individual employees have distinct personal circumstances, and not everyone will feel able to move to a regional centre, even where they might be reasonably close by. So it has put structured support in place—this is a point that the hon. Member for Dudley North asked about—to help those who can move and those who cannot. One year ahead of any move, everyone affected has the opportunity to discuss their personal circumstances with their manager and talk through any particular needs to be taken into account when decisions are made or any help they need to make the move—for instance, help with additional travel costs for up to the first five years. It is a tried and tested process, with more than 10,000 such conversations held in HMRC over the last two years. There is also a range of support for those unable to make the move to a regional centre. HMRC runs a programme of training, workshops, webinars and coaching, which includes advice on CV writing and identifying transferrable skills. Since starting in the autumn, it has been offered to around 800 employees, and HMRC will continue to provide such support.
Let me turn to some specific questions that the hon. Member for Dudley North posed. An equality assessment was conducted prior to the location’s announcement in 2015, with a high-level summary published to staff at that time. HMRC continues to review those, and the issues in the west midlands are of course considered with the active input of representatives from the Brierley Hill office and the local Public and Commercial Services Union.
The hon. Gentleman also asked me an important question about the date to which staff not being transferred on the universal credit/DWP basis might expect to stay in place. Currently, HMRC expects there to be ongoing tax credits work in Brierley Hill until March 2021. At that point, the tax credits caseload is expected to have fully moved across to universal credit, so the tax credits work currently undertaken in Merry Hill will come to an end. However, HMRC intends gradually to redeploy the skilled and experienced staff there to other work as the tax credits caseload decreases. HMRC will work with those staff to ensure that there is every opportunity to make a successful move into reallocated employment.
The hon. Gentleman asked whether I would be happy to meet him and some of the staff with whom he has been liaising. I would be more than happy to do that. Perhaps doing so in Westminster would be most appropriate, as the hon. Member for Preston and my hon. Friend the Member for Dudley South might wish to join him for those discussions—I would certainly be open to that.
Finally, the hon. Member for Dudley North asked about the support provided for those who might not, in the event, be able to make the move from Merry Hill to the new centre in the centre of Birmingham. As I have said, all staff will have a one-to-one discussion with their manager around a year in advance of any office move that affects them, to discuss their personal circumstances, establish whether they are within reasonable daily travel of the new office and discuss what support might be needed to enable them to move. For those who can move, there will be financial support towards the additional cost of their journey time for up to five years. HMRC is supporting those who cannot move by seeking redeployment opportunities for them in other Departments.
Question put and agreed to.
Double Taxation Convention: United Kingdom and Mauritius
Mel Stride Excerpts(6 years, 8 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
A protocol to the Double Taxation Convention with Mauritius was signed on 28 February 2018. 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.
[HCWS513]
Draft International Tax Enforcement (Bermuda) Order 2017
Draft Double Taxation Relief and INTERNATIONAL TAX ENFORCEMENT (KYRGYZSTAN) ORDER 2017
Mel Stride Excerpts(6 years, 8 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the draft International Tax Enforcement (Bermuda) Order 2017.
The Chair
With this it will be convenient to consider the draft Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order 2017.
Mel Stride
May I say, Mr Hosie, what a pleasure it is to serve under your chairmanship? The draft orders deal with a replacement tax information exchange agreement with Bermuda and our first double taxation agreement with Kyrgyzstan. Both statutory instruments bolster the United Kingdom’s long-standing network of international tax agreements.
The UK has had a tax information exchange agreement with Bermuda since 2007. That arrangement has allowed for the exchange of information on request between Her Majesty’s Revenue and Customs and the Bermudan tax authorities. Under a further agreement, signed in 2013, certain financial account data are received automatically by HMRC directly from Bermudan financial institutions. The draft order will supersede that further agreement and replace the tax information exchange arrangement from 2007.
The new instrument allows for automatic exchange of bulk financial data. This important change ensures that the UK continues to align with current international tax transparency standards. Bermuda will provide HMRC with an increased amount of information on UK taxpayers. Bermuda has the status of a UK overseas territory, but it is a separate jurisdiction, with its own elected Government, and is responsible for its own domestic fiscal policy. Thanks to UK leadership, Bermuda is committed to global tax transparency standards. This instrument is an important part of Bermuda’s commitment to those standards and will enhance HMRC’s ability to check the compliance of UK taxpayers who have financial affairs in Bermuda.
There are no other substantial changes between the old instruments and the one proposed. It, too, reflects the model developed by the OECD. This Government are committed to maintaining an extensive network of tax information exchange partners and agreements, which are an essential aspect of securing UK tax revenues.
The fluid exchange of information between jurisdictions is a key tool in the arsenal of international tax co-operation. Since 2010, HMRC has secured more than £2.8 billion from those trying to hide money abroad to avoid paying what they owe. The arrangement under consideration will assist HMRC in maintaining its strong track record of countering tax avoidance and evasion.
The UK has not had a double taxation agreement with Kyrgyzstan since it gained independence from the former Soviet Union in 1991. It was Kyrgyzstan that suggested we rectify that situation. It first requested talks in 2008 and repeated that request to us in 2013, citing a desire to open up its economy to promote economic development. For our part, we were keen to close a gap in our DTA coverage in the region and ensure that UK businesses could compete on an equal footing with businesses in comparable countries that had already concluded DTAs.
The agreement reached will improve the business conditions for UK companies and individuals operating and investing in Kyrgyzstan, while reflecting that nation’s status as a developing country. The rates of withholding tax are reduced to 5% for interest, royalties and dividend payments to direct investors; the rate under domestic law in Kyrgyzstan is 10%. In addition, the agreement permits the taxation of services where they are performed in a country over an extended period—a feature of the UN model tax treaty. However, there are no unwelcome provisions permitting the taxation of leasing payments on a gross basis that either impede commercial activity or increase costs for consumers. The resulting treaty is therefore a good compromise that will encourage investment in Kyrgyzstan by UK businesses, to the benefit of both economies.
I trust that the explanations I have given are helpful. The orders strengthen the UK’s taxing framework on many fronts, and I commend them to the Committee.
Mel Stride
Perhaps I can respond to the speakers in reverse order and start with the hon. Member for Glenrothes, whom I thank for his comments. I am pleased that he welcomed appropriately the greater transparency and provision of information to HMRC that will flow from the order in the case of Bermuda. He raised the issue of tax transparency, but Bermuda is a sovereign country with a democratically elected Parliament that makes its own decisions in those contexts.
However, we have worked closely with Bermuda, particularly in respect of the work carried out by the European Union, to ensure that we further that transparency process. Most recently, the EU confirmed that sufficient progress is being made in that regard. Bermuda has embraced common reporting standards, which both Members on sides of the Committee welcome, to ensure that information is provided to other tax jurisdictions.
The hon. Member for Norwich South made a number of points. I was pleased that he welcomed common reporting standards and its early adoption across the overseas territories, as we do. He raised the general issue of low-income countries and the benefits or otherwise of entering into such agreements when they are negotiated with a high-income country.
I would point out that Kyrgyzstan requested the arrangement after all, and was under no compulsion to enter into any agreement as negotiated. The big benefits to a country such as Kyrgyzstan are in the medium to longer term. Various studies, such as one conducted by Vienna University, have looked at the economic impact of withdrawing withholding taxes, of lowering taxes, and of providing the kind of certainty that businesses require when they consider where to invest internationally. That is an important medium to longer-term consequence for those countries of this kind of arrangement.
The hon. Gentleman also talked about the anti-abuse provisions in the order and made specific reference to the BEPS project. The treaty was concluded before the BEPS arrangements came into effect, but there are anti-treaty shopping elements in the order to ensure that those anti-abuse provisions are robust.
The hon. Gentleman is right that there are no mandatory arbitration provisions in the treaty, because constitutionally Kyrgyzstan is not permitted to enter that kind of arrangement. We have respected that. He is right to say that there have been some delays. It has taken time to go through the stages of the negotiation, partly because the Kyrgyzstan Government requested various technical changes along the way. There were also some issues about language and translation because the agreement had to be very, very precisely translated into three languages.
On that basis, I hope the Committee will agree to these orders.
Question put and agreed to.
Draft Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order 2017
Resolved,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Kyrgyzstan) Order 2017.—(Mel Stride.)
Oral Answers to Questions
Mel Stride Excerpts(6 years, 9 months ago)
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Geraint Davies (Swansea West) (Lab/Co-op)
The Financial Secretary to the Treasury (Mel Stride)
The Government are undertaking a wide-ranging set of analyses of the impact of our departure from the European Union. This is changing through time as we develop our approach and we move to a bold and comprehensive agreement with our EU partners.
Geraint Davies
The Chancellor knew in 2016 that the majority of people would prefer a soft Brexit to a hard Brexit. I am referring to remainers, plus people such as the Foreign Secretary, who said he favoured a single market and would vote for it. Now that the Chancellor knows that a hard Brexit will cost us £45 billion in lost tax receipts, will he at least acknowledge that people such as me on both sides of the Chamber who support our remaining in both the customs union and the single market do so in the name of prosperity and of upholding democracy?
Mel Stride
The Government have made their position very clear: we are leaving the European Union, and that means we are leaving the customs union and the single market. However, we are determined to negotiate a deal under which our trade with the EU27 is as frictionless as possible and we are able, as a globally facing nation, to secure free trade agreements with other countries around the world.
Anna Soubry (Broxtowe) (Con)
Will the Minister confirm that the Conservative Government are and will continue to be the voice of British business, and that securing a strong economic future will be at the heart of the Brexit negotiations?
Mel Stride
I thank my right hon. Friend very much indeed for that question. I can of course confirm that we remain entirely committed to the strength of our economy and to supporting businesses up and down the country, not least in our negotiations with the European Union. I have some responsibility for the customs part of the negotiations, and we are committed to making sure that goods and services move as frictionlessly as possible across the boundaries with the EU27 following our departure.
Alison McGovern (Wirral South) (Lab)
Mr Speaker,
“I believe that the best way forward is for Britain to renegotiate a new relationship with the European Union—one based on an economic partnership involving a customs union and a single market in goods and services.”
Those are not my words, but the words of the Secretary of State for International Trade and President of the Board of Trade on his website. What representations has the Minister had from the Secretary of State in support of our membership of the customs union and single market?
Mel Stride
The Secretary of State for International Trade is fully committed to the options that we set out in last year’s White Papers on the customs union and on trade. We are taking forward legislation to make sure that our aspirations in that respect for our negotiations with the EU can be landed when the deals are concluded.
Martin Vickers (Cleethorpes) (Con)
Yesterday, I met a delegation of business representatives from my constituency who are optimistic about our prospects when we leave the single market and customs union. They are examining the concept of a free port for Immingham. Will the Minister agree to meet them when they have further developed their thoughts so that we can try to overcome possible obstacles?
Mel Stride
I—or, indeed, the Chief Secretary to the Treasury—would of course be happy to meet my hon. Friend and the business colleagues from his constituency. We are potentially interested in free ports and will keep the idea under review.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
Many Cabinet members have made their views clear about the single market and customs union. The Chancellor has said that he would like to see no tariffs with Europe after we leave the EU and no hard border in Northern Ireland. His exact words, which were in a letter to the Treasury Committee, were that he wants a deal
“that facilitates the freest and most frictionless trade possible in goods between the UK and the EU, and allows us to forge new trade relationships with our partners in Europe and around the world.”
Will the Financial Secretary therefore welcome the speech that the Leader of the Opposition gave yesterday in which he proposed a new UK-EU customs union that would, to quote the Chancellor directly, facilitate
“the freest and most frictionless trade possible in goods between the UK and the EU”
and allow us to
“forge new trade relationships with our partners in Europe and around the world”?
Mel Stride
I am here to speak about Government policy, as you have quite rightly indicated, Mr Speaker. However, if I may say so, Opposition Members’ zig-zagging in respect of their position on the customs union has been quite extraordinary. If I understand what is being suggested, it seems to me, at a first take, that the idea that we can be in the customs union yet go out and have a high level of control over deals and free trade arrangements with other countries just does not hang together.
Chris Davies (Brecon and Radnorshire) (Con)
The Financial Secretary to the Treasury (Mel Stride)
My hon. Friend will know that my right hon. Friend the Chancellor announced an additional £1.2 billion for Wales in the Budget. We maintain our position of ensuring that Welsh Government funding per head is some 15% or more above the rate in England. As a consequence of those and other measures, Wales is now one of the fastest growing of the nations and regions of the United Kingdom.
Chris Davies
Does my right hon. Friend agree that leaving the UK single market would represent a far bigger risk to the Welsh economy than leaving the EU single market?
Mel Stride
My hon. Friend is entirely right. It is a simple fact that some 80% of Welsh exports go to the other nations of the United Kingdom, compared with just 12% going into the European Union. Those figures speak for themselves.
Chris Evans (Islwyn) (Lab/Co-op)
Traditionally, Wales has lower wages than the rest of the economy. In the light of low productivity and growth forecasts, what are the Government doing to attract high-quality jobs to the Welsh economy?
Mel Stride
As the House will know, we are doing a great deal for productivity throughout the country. We have agreed two city deals in Wales, with £500 million for Cardiff and £115.6 million for Swansea. Since 2010, employment in Wales is up by 7.3% and unemployment is down by 39%.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
My question is this: what investment? The Government have broken their promise to electrify the main line between the two main cities in my country, they will not commit to the Swansea Bay tidal lagoon, and the Swansea Bay city deal is 90% Welsh public and private money. At the same time, the Government are subsidising the most expensive railway in the world—in England. When will the British Government stop taking Wales for a ride?
Mel Stride
I am surprised to hear the hon. Gentleman level those accusations against the Government because, as I have explained, we set aside an additional £1.2 billion for Wales in the recent Budget. I have referred to the two city deals, and we are also backing the south Wales metro, as he will know. We are committed to agreeing further growth deals with north and south Wales.
Catherine McKinnell (Newcastle upon Tyne North) (Lab)
Andrew Bowie (West Aberdeenshire and Kincardine) (Con)
The Financial Secretary to the Treasury (Mel Stride)
The Government are committed to driving up investment in Scotland; my right hon. Friend the Chancellor announced an additional £2 billion at the last Budget. We have already boosted city deals by £1 billion and have committed further to looking at city deals in Stirling, Tay Cities and the borderlands.
Andrew Bowie
I am sure that my right hon. Friend will share my concern, and that of my constituents, at recent statistics showing that trend-based productivity in Scotland had declined by 3.2% in the year end to September 2017—well below the levels of the UK and its lowest level in eight years. Does he agree that instead of making Scotland the highest-tax part of the UK and increasing the tax burden on businesses, the Scottish Government should be encouraged to follow this Government’s lead—encouraging enterprise, boosting economic development and growing UK productivity to its highest levels in 10 years?
Mel Stride
My hon. Friend is absolutely right to raise the critical issue of productivity, which is, of course, the responsibility of not just this Government but the Scottish Government. I totally agree with him about the tax matter that he raised. It is important that we keep taxes down. To the extent that that has been achieved in Scotland, it has been to a large degree because of the changes we have made to the personal allowance—a decision taken by this Government in this House.
Fiona Onasanya (Peterborough) (Lab)
Robert Courts (Witney) (Con)
The Financial Secretary to the Treasury (Mel Stride)
In 2010, we had a post-war record level of deficit at 9.9%, and we have reduced that to 2.3% as of last year. The Office for Budget Responsibility forecast in November is that the deficit will further decline to 1.1% of GDP by 2022-23.
Robert Courts
Will the Minister give an estimate of the effect that our deficit reduction measures have had on relieving the tax burden for younger generations?
Mel Stride
My hon. Friend raises a critical point about the importance of getting the debt down to make sure that future generations do not carry the burden of it. That is why we have reduced the deficit by three quarters and why we are going to hit our reduction in the level of debt as a percentage of GDP two years early, in 2020-21.
Mr Sheerman
Mr Speaker, you will know that I am not the most radical Member on the Labour Benches, but I want to tell the Minister that if the Government had been successfully reducing their budget, my constituents in Yorkshire could forgive her. The fact of the matter is that we have had the money for the electrification of the trans-Pennine railway stolen from us, and the Chancellor refuses to give it back. When will he make amends?
Mel Stride
As the hon. Gentleman will know, whether he is young or a puppy or whatever he may be, we are awaiting the business case for the trans-Pennine project, and when we receive it, we will look at it most closely.
Rachel Maclean (Redditch) (Con)
Nigel Huddleston (Mid Worcestershire) (Con)
The Financial Secretary to the Treasury (Mel Stride)
As a Minister at the Treasury, I am delighted if people voluntarily step forward to pay more tax than they are due. I am pleased to inform my hon. Friend that that is already possible by way of a gift to the Crown. I am looking at ways of raising awareness of that particular opportunity, and I would be happy to meet him to discuss such options. I would also point out to right hon. and hon. Members the very generous gift aid reliefs that the Treasury provides for those who wish to make direct payments to charities of their choice.
Joan Ryan (Enfield North) (Lab)
Mel Stride
The Government believe that work is one of the most important drivers of bringing people out of poverty, and we are rolling out universal credit as a consequence. There is evidence that that is more successful as a way of doing so than relying on legacy benefits. As the right hon. Lady will probably know, 200,000 fewer children are now in absolute poverty than was the case in 2010.
Charlie Elphicke (Dover) (Ind)
Andrew Lewer (Northampton South) (Con)
Mel Stride
I am delighted to inform the House that considerable progress has been made in reducing the level of tax evasion, avoidance and non-compliance in the corporate sector. We have been at the forefront of initiatives launched with the OECD—the base erosion and profit shifting initiative, the profit diversion tax we brought in in 2015—and, as a consequence of clamping down in this area, we have brought in £53 billion from big business since 2010.
Ellie Reeves (Lewisham West and Penge) (Lab)
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
Ryanair has announced the slashing of more than 20 Glasgow airport routes, a cut of more than 1 million passengers and the loss of up to 300 jobs. The high level of APD and the delay in introducing the air departure tax—caused by this Government’s not notifying the European Commission regarding the ongoing exemption for the highlands and islands—have been cited as a reason. Another is the Brexit uncertainty in the aviation sector. With more routes and jobs likely to go, what are the Chancellor and his colleagues doing to support the aviation sector during Brexit negotiations?
Mel Stride
As the hon. Gentleman will know, the devolution of ADT has been delayed after consultations between ourselves and the Scottish Government. Both Governments are satisfied with the arrangements. As for Ryanair, I believe that part of the announcement was also that the company would be extending the number of routes out of Edinburgh airport.
James Cartlidge (South Suffolk) (Con)
If we want a sustainable rise in wages, we will need higher productivity. Does my right hon. Friend therefore welcome the recent improvement in the figures?
Jo Swinson (East Dunbartonshire) (LD)
Artificial intelligence brings huge economic opportunities, but to date big tech companies have seemed even more likely than traditional corporates to engage in aggressive tax avoidance and concentrate power in the hands of a narrow, homogenous group of people. What will the Treasury do to ensure that companies in this growing industry pay their own way fairly and take account of their wider corporate responsibility to society?
Mel Stride
The hon. Lady will know that we made announcements in the Budget in respect of the taxation of digitally based businesses that operate from digital platforms and so create value as a consequence. We are consulting on the measures we may take. We said in our consultation document that it is possible we will look at revenue taxes as one particular approach. Our preference is a multilateral move with our partners in the European Union and the OECD, but we are prepared to go it alone if that proves necessary.
Vicky Ford (Chelmsford) (Con)
The services sector makes a huge tax contribution to the public purse. What confidence can the Chancellor give to my constituents who work in financial services that our new free trade agreement will cover services as well as goods?
Draft Enactment of Extra-Statutory Concessions Order 2018
Mel Stride Excerpts(6 years, 9 months ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the draft Enactment of Extra-Statutory Concessions Order 2018.
It is a pleasure to serve under your chairmanship, Mr Davies. As the Committee will be aware, Her Majesty’s Revenue and Customs continues to review extra-statutory concessions. This order is another step in that process, and it will put on a statutory footing four concessions that will simplify the administration of the tax system but ensure that minor reliefs continue to be available as before. I am grateful to those who took the time to help the Government to improve the legislation.
The first concession allows directors’ fees received by partnerships and companies to be treated for tax purposes as trading rather than employment income. That simplifies the accounting process of those fees for both the payer and the recipient.
The second concession is similar, in that it allows professional practitioners, such as doctors, dentists and solicitors, to treat incidental income from an office or employment as part of their trading or professional income. That, again, simplifies accounting processes for taxpayers.
The third concession exempts from tax certain compensatory payments made to volunteers and voluntary office holders of public bodies. The fourth concession concerns payments from local medical committees to part-time committee members. The order does not make explicit reference to that, but it is covered by the legislation for the other three concessions. The last two concessions mean that public bodies do not have to act as employers for tax purposes when making such compensatory payments.
I hope the Committee can see how valuable the concessions are in simplifying the tax system for employers and for individuals who provide their services and expertise to others. There is no issue of tax loss here, as the sums paid under the concessions are either taxed as part of trading profits or do no more than compensate for loss of income in undertaking public service.
The draft order will come into force on 6 April 2018. I commend the order to the Committee.
Mel Stride
I thank the shadow Minister for his contribution, for his support for the order and for his two questions. He is quite right. We consulted fully on this measure between 14 September and 9 November last year.
Sarah Champion (Rotherham) (Lab)
The consultation received only four responses. Is that normal? What were the processes for publicising the consultation?
Mel Stride
On those specific questions, which are very relevant and pertinent, I would be very happy to come back to the hon. Lady, if some information does not wing its way to me in the next moment or two. I intend to cogitate on the important point that she has raised.
In the meantime, I shall return to the shadow Minister’s two questions. I await some information on NICs and directors’ fees. [Interruption.] That information has arrived: there is no impact on NICs in respect of his question. He also raised the scope of the concessions, and the change from “small” to “insubstantial”. I am fairly confident that that rests in the guidance that HMRC operates on those matters, but I am happy to come back to him on that.
Having answered those two questions, I return to the question that the hon. Member for Rotherham asked. Is it normal to get just four responses? The answer is that that is not unusual, given that the consultation was a very technical one. On that basis, I hope that the Committee will agree to the order.
Question put and agreed to.
Finance (No. 2) Bill
Mel Stride ExcerptsWednesday 21st February 2018
(6 years, 9 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 21 February 2018 - (21 Feb 2018)
Wes Streeting
I am very grateful to the hon. Gentleman for that intervention because he makes exactly the point I have made since the general election. We put forward policies in our manifesto—by the way, they proved immensely popular across the country and led to a result that a lot of people were not expecting—and I think we should do a distributional analysis of such policies across the board to make sure that resources are properly targeted where they are needed.
In conclusion, we should not fear such information and evidence, which would lead to better-informed government. The greatest tragedy of this Prime Minister is not the fact that she is being held hostage by the hard Brexiteers on the right of her party; it is that she has not delivered on a single one of the sentiments in the fine words she said on the steps of Downing Street about creating a more equal society and tackling injustices that are still burning injustices even in one of the richest economies in the world in the 21st century. Sentiments are all well and good, but we need policies that are backed up by evidence and reason, and we need the ability genuinely to tackle the problems that the Prime Minister set out so long ago on the steps of No. 10, but which I fear she will never be able to implement before they boot her out next year.
The Financial Secretary to the Treasury (Mel Stride)
Before I plunge into new clause 9, as indeed I will at some length, may I concur wholeheartedly with the statement made by the hon. Member for Ilford North (Wes Streeting) when he praised civil servants for their impartiality, objectivity and professionalism? In my experience of the Treasury, I have always found them to be exactly that. We should all register that important point.
We have had a fairly wide-ranging debate. I hesitate to add that, on one or two occasions, it has been marginally informative. On one occasion—I will not name the Member—it was very informative because I actually learned something I had not previously known. The reason why it has been wide-ranging is that this is of course an extremely important issue. What I hope unites Members on both sides of the House is that every Member of the House deplores unwarranted inequality. It is not that we are all entirely equal—we are, of course, different—but we have a right to be treated with equal respect and a right to equal opportunity and aspiration, as it was eloquently termed my hon. Friend the Member for Stevenage (Stephen McPartland).
If I may, I will look at new clause 9 in a little detail. As I have suggested, it has been slightly absent from this debate, so let us bring it back to centre stage. The new clause seeks to require the Chancellor of the Exchequer to provide a
“review before the House of Commons within six months of the passing of this Act.”
In so doing, the Chancellor has to look at a number of aspects of the impact of the Finance Bill now going through the House. Under the new clause, the review would look at
“the impact of those provisions on households at different levels of income”.
As has already been pointed out at length, we have indeed brought back the household distribution analysis that looks at tax, welfare and public expenditure, and at the impact of those elements on different income levels by decile.
Under the new clause, the review would also look at
“the impact of those provisions on people with protected characteristics (within the meaning of the Equality Act 2010)”.
This is perhaps a good moment for me to say something very important. Ministers of course always seek to operate within the law, and the Equality Act is very clear about our duties as Ministers when we consider various policies that come before us. Those policies are not just those before us in the context of a major fiscal event, but policies and decisions we take day in and day out, some of which never even pass through this House. We do so not just because of the law, but because we think it is the right thing to do.
Under new clause 9, the review would also look at
“the impact of those provisions on the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and…the impact of those provisions on equality in different parts of the United Kingdom and different regions of England.”
The new clause then focuses on the specific taxes covered by the assessment the Chancellor of the Exchequer would be required to present in the report. I want to make one important general point: in looking at regional aspects of spending and tax, it is far easier, for fairly obvious reasons, to consider the spending elements than the regional distribution when it comes to taxation.
Mrs Badenoch
Does the Minister agree that it would be so impractical to carry out such impact assessments that it would slow down Government business? Perhaps one of the reasons why the Opposition have tabled the new clause is to make it difficult for us to get our policies and the Finance Bill through.
Mel Stride
I thank my hon. Friend very much for that intervention, because she touches on the important point that there is an element of proportionality. As I will come on to argue, one of the difficulties with accepting the new clause is that a lot of the information is not available. That is not an argument for not going out and finding the information, but some of it would be extremely difficult to generate. I would not go as far as my hon. Friend in suggesting that this is a Machiavellian plan to gum up the works of Government, but I am sure some Opposition Members might be pleased to see that happen. I take the new clause in the spirit of the wording in front of me.
Dawn Butler
I just want to help the Minister a bit. The Women’s Budget Group, the Runnymede Trust and lots of other organisations, as well as the ONS and HMRC, accumulate the data that would be needed, so the data necessary to carry out equality impact assessments are available. In fact, the Treasury does some assessments anyway.
Mel Stride
The hon. Lady is suggesting that one particular set of analyses is an ideal set to present, and can be seen as in no way misleading, but entirely robust and entirely objective. If we are to reach such a quality of data, we will have to achieve certain specific aims, and one of the aims is to deal with the fact that a lot of the analysis to which she is referring is very selective—it does not look at the entire picture. For example, some of the analysis reflecting changes in income tax may show a benefit for one sex over another, but it may not take into account the impact of increased spending on childcare.
Mel Stride
If I may finish this point, I will then certainly give way to the hon. Lady.
A lot of these analyses simply look at the static situation, without taking into account the fact that the measures we are bringing forward will in themselves have a dynamic effect on the economy—for example, by driving up employment. Several Members have spoken very eloquently about the record level of female employment at the moment. That is benefiting women, but the interaction of our policies with that benefit would not be reflected in such an analysis. I have already mentioned that a lot of the information being sought is very difficult to verify and very difficult to obtain, particularly where it pertains to protected characteristics, such as sexuality, gender reassignment and pregnancy. It is very hard to identify those groups and the way in which they are affected, particularly in terms of all the taxes in new clause 9—I will come on to them in a moment—that the Opposition want us to address.
Mel Stride
I will make a final point before I give way to the hon. Lady. It has been a long time since we have jousted, and I have missed it, so I will certainly give way to her. There is a very important point about the impact in particular on households, which is one of the major thrusts of new clause 9. It is very difficult to disentangle the effect of income that may go to one member of the household, but is of course subsequently shared across the household. The Institute for Fiscal Studies has itself highlighted that as a particular barrier to getting robust information. I will now gladly give way.
Anneliese Dodds
I am very grateful to the Minister for his generosity in giving way, and for his kind words. I want briefly to mention that the Department for Work and Pensions does produce this kind of modelling for social security changes, which may be similarly complex in looking at the interactions of different elements, so why does the Treasury take a different approach? In relation to that, would not the assumptions be spelled out, so that any ambiguity could be made clear?
Mel Stride
I thank the hon. Lady for her intervention, but I bring her back to new clause 9. Whatever the DWP happens to be doing, whether it is right or wrong or whether it works, what we are facing here today and making a decision on is new clause 9. As I am working through new clause 9, I am arguing that it is not a practical way to seek to achieve that which the Opposition, quite genuinely and sincerely, are attempting to achieve.
Sir Oliver Heald
I wonder whether my right hon. Friend would like to say a word about the extent of research the Treasury already undertakes and publishes. It is my understanding that more than 2,500 Treasury papers have been published, so it is really a question, is it not, of where we draw the line? If a piece of research is proving very difficult, and would be very resource-intensive and so on, that will obviously make it less likely to be done than if it is a more straightforward piece.
Mel Stride
Yes. My right hon. and learned Friend makes a very important point. As I have already pointed out, around major fiscal events we have household distributional analysis, which covers welfare, taxation and public expenditure. It takes a cumulative approach to that information and it is often relied upon by Government to take subsequent decisions. We also have, on substantial individual tax and national insurance contribution measures, tax impact and information notes—the so-called TIINs—which were introduced in 2010 and were not there under the previous Labour Government. We are, therefore, doing a number of things, both in the context of major fiscal events and on a tax-by-tax, national insurance-by-national insurance change basis, which look to provide just the kind of information that informs decisions around equality.
The third part of new clause 9 relates to the taxes to which this analysis would apply. On income tax, as I have said, we are looking at impacts on households. We may raise the personal allowance, as we did in the last Budget. That is now up to £11,500. It could be argued that that disproportionately favours one sex over another, but when we look at the effect on the household, income is typically distributed within families, within households and within the family unit. That is extremely difficult—in fact, I would go as far as to say impossible—to capture.
Stella Creasy
The Minister made that point the last time we tried to discuss this issue. Forgive me, but he seems to be presuming that a household is a man and a woman. Has he managed to get his head around single person households and single women, because women’s incomes are disproportionately hit by Government policy? At the very least, could he manage to measure the women who are affected by his tax and policy changes who do not live with a man who might confuse him?
Mel Stride
If the hon. Lady can come up with a sure-fire way of identifying women who live with men who do not confuse them, we will probably make some progress. The point I am making is that this area is riddled with huge complexity, yet new clause 9 seeks to achieve the presentation of reports and assessments that have the imprimatur of Government and the Treasury upon them. They are relied upon to take very important decisions, yet the arguments I am prosecuting suggest that we would actually end up with an incomplete picture. In fact, I would go further than that and say that they could be misleading in a way that would be unhelpful to what I know the hon. Lady is seeking to achieve and indeed what the Government are also seeking to achieve.
Helen Whately
Does the Minister share the view expressed by many of us this afternoon that while those on the Opposition Benches are looking for very complicated analysis that may, unfortunately, be rather misleading, we actually have a very strong track record, if we take a step back, of reducing inequality and making things better for those on the lowest incomes?
Mel Stride
Yes. My hon. Friend makes an extremely important point. We know that the gender pay gap is at its lowest level on record, for example. That is a very substantial achievement and we are making considerable headway in that particular respect.
Some of the other taxes mentioned in new clause 9 include employment and disguised remuneration. Disguised remuneration is a highly complicated area, as the hon. Member for Oxford East (Anneliese Dodds) will know, having discussed it in some detail in Committee. The mind boggles as to how one would possibly unpack the effects on the various protected characteristics of that particular taxation. Pension schemes are also extremely complicated. Settlements and air passenger duty are perhaps a little bit easier than some of the others, but the point is that overall—and we have to look at the new clause in its entirety—new clause 9 is extremely complicated indeed.
Finally, there should be no doubt that those of us on the Government Benches are entirely committed to ensuring that we drive the equality agenda and drive it very hard indeed. We should, as my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) suggested, look to our own record in that respect. We now have more women in work than at any time in our history. In the past year, 60% of employment growth came from female employment. We have the lowest gender pay gap in full-time employment ever. Those companies employing 250 employees or more, as we have said often in this debate, are now required by law to provide a gender wage audit. Contrary to what the hon. Member for Brent Central (Dawn Butler) suggested, there are teeth. Penalties can be applied by the ECHR, and fines can follow where that is not done. For those who are disabled, we spend a record amount in excess of £50 billion a year on benefits. As has been said by a number of Government Members, the national living wage has disproportionately helped some of the most needy in our society. When we talk about equality on this side of the House, we mean it. I urge the House to reject new clause 9.
Dawn Butler
Having a detailed understanding of how policy choices exacerbate or eliminate inequality at every stage of policy making is key to tackling burning injustices and producing good policies. I wish to put new clause 9 to the vote.
Question put, That the clause be read a Second time.
Madam Deputy Speaker
Order. I beg the hon. Gentleman’s pardon. I have made a mistake, in that I thought the Minister had already addressed the House on this group. I also beg the Minister’s pardon.
Mel Stride
There was a ripple of dissatisfaction when you failed to call me to speak, Madam Deputy Speaker, but it was almost imperceptible. Thank you for correcting your error.
In this debate we have heard about a range of issues, including the changes the Finance Bill makes to the bank levy, the taxation of private finance initiatives, and tax avoidance and evasion. I will respond to each in turn, starting with the bank levy. Opposition Members have raised a number of objections to the changes to the levy made by the Finance Bill and to the Government’s broader approach to bank taxation. These are unjustified. This Government remain committed to ensuring that banks make an appropriate additional tax contribution, beyond that paid by other businesses, that reflects the unique risks they pose to the UK financial system and to the wider economy.
I shall address some of the arguments put forward by the shadow Chief Secretary to the Treasury, the hon. Member for Bootle (Peter Dowd), which I felt focused far too much on the bank levy. It is indeed declining, but there is good reason for that. In 2015, when we took the relevant decisions on this, we recognised that the risks presented by our banks had eased quite considerably. Indeed, the Bank of England has recently carried out rigorous stress testing on the banks, and that was the first occasion on which not a single bank failed its stress test. That is indicative of the fact that one of the raisons d’être for the bank levy has started to recede. That is to say that the banks are less of a risk than they were before, and the charges on the assets and liabilities that they hold are therefore becoming less relevant. The hon. Gentleman did not focus so much on the surcharge to the banking tax, which came in from 1 January 2016 and which represents an additional 8% on the profitability of banks at the present time. Whereas corporations are paying 19%, we are now looking at a total rate of around 27% for banks.
Anneliese Dodds
I am grateful to the Minister for that explanation, but as we have said before, when we take both those measures together, we see that the reduction in the levy along with the surcharge results in a lower overall contribution over time. We have spelled out clearly in our previous debates that the overall amount coming from the banks is receding over time, even with the surcharge.
Mel Stride
That is not the case. I will explain some of the figures in a moment, but there are other elements that are not being taken into account. One is that the banks are not permitted to offset against their profits the PPI compensation payments. Also, they are now working to a more restrictive corporate interest restriction regime, under which they are allowed to roll forward only 25% of their interest chargeable to offset against profits. Taking all those measures together, we have raised some £44 billion more from the banks since 2010 than we would have done if we had treated them simply as any other corporate business.
Opposition Members have cited changes in revenue from the bank levy. They argue that this is declining, but it is misleading to consider bank levy changes in isolation when they form part of a set of wider changes to bank taxes announced in 2015 and 2016, including introducing the 8% surcharge. Overall, rather than reducing revenue, these tax changes are expected to raise £4.6 billion over the current forecast period. I think that the hon. Lady will be interested to hear that figure.
Anneliese Dodds
We have just looked at the projections up to 2022-23. For the current year, we see £3 billion coming in from the levy and £1.6 billion coming in from the surcharge. The projection for 2022-23 is £1.3 billion from the levy and £1.1 billion from the surcharge. That appears to be a significant reduction; in fact, it is almost half.
Mel Stride
Taking into account the respective changes, we will raise £4.6 billion over the forecast period as a consequence. My point is that it is simply not right to focus only on the declining part of the equation—the reduction in the banking levy charge—and not on the fact that we are raising more as a consequence of the 8% surcharge and the increased profitability of banks on our watch.
Mel Stride
Perhaps we can get into the nitty-gritty of this offline.
The average revenue from the bank levy between its introduction in 2011 and 2015-16 was around £2.6 billion. As a result of this package, however, yield from the surcharge and the levy in 2022-23 is forecast to be £3.2 billion. By 2023, as I have said, we will have raised around £44 billion in additional bank taxes since the 2010 election.
Opposition Members have also suggested that our bank levy is set at a low level compared with other countries. In fact, not all financial centres have a bank levy. The USA, for example, chose not to introduce one at all, and while several EU countries introduced bank levies following the financial crisis, it is not possible to make direct comparisons between these levies as the rules for each are different.
We have heard the argument this afternoon that we should reintroduce a tax on bankers’ pay. One of the aims of the changes to bank taxation announced in 2015 and 2016 is to ensure a sustainable long-term basis for taxing banks, based on taxing bank profits and the bank levy. By contrast, the bank payroll tax referred to in new clause 3 was always intended as a one-off tax. Reintroducing it would be ineffective and unsustainable compared with the package of banking tax measures that we have introduced. Even the last Labour Chancellor pointed out that it could not be repeated without significant tax avoidance.
Opposition Members also propose that HMRC should publish a register of tax paid by individual banks under the levy. Taxpayer confidentiality is rightly a core principle for trust in our tax system and HMRC does not publish details of the amount of tax paid by any individual business. While the Government continue to consider measures to support transparency over businesses’ tax affairs, we must balance that with maintaining taxpayer confidentiality in order to maintain public confidence in our tax system.
Matt Western (Warwick and Leamington) (Lab)
Does the Minister accept that the transparency that is being sought is down to the public, demanding it? After all these years of difficulty, and at a time when so many communities face council tax increases of 5%, there seems to be an inherent unfairness in the tax system.
Mel Stride
I just do not accept that. This goes back to my point about the balance of measures that we are taking. The Opposition are understandably focusing on the bank levy, which is indeed declining over time, but I point to the additional 8% surcharge, which is 8% more on corporation tax than other non-banking businesses are expected to pay. As I have said, the banks are also not permitted to carry forward interest rate charges to the same degree as other businesses, and they are not allowed to offset against tax the compensation payments that they have been making. All those things add up to additional tax and by 2023 will have raised an extra £44 billion since 2010 compared with what would have been raised from non-banking businesses.
Matt Western
At the same time as corporation tax is being reduced overall—I accept the point about the bank surcharge—does the Minister not accept that we are seeing a significant increase in council tax for the public?
Mel Stride
As my hon. Friend the Member for Croydon South (Chris Philp) pointed out, as we have reduced the overall level of corporation tax from 28% to 19%—corporation tax, of course, applies to banks as it does to non-banking businesses—we have seen the tax take increase by some 50%. We have actually been raising more revenue as a consequence of those changes.
Finally, new clause 5 would require the Government to publish further analysis of the impact of the Bill’s bank levy re-scope. The Government have already published a detailed tax information and impact note on the proposed changes, and we have published information, certified by the OBR, on the overall Exchequer impact of the 2015 package of measures for banks. It is important to legislate for such changes now in order to give UK banks certainty on their tax position so that they can plan effectively for the future.
The changes in clause 33 and schedule 9 complete a package of measures that raises additional revenue from banks in a way that delivers a tax regime that is more sustainable, more aligned with regulation and more supportive of the competitiveness of UK financial services. We should pass them without amendment.
In her amendments, the hon. Member for Walthamstow (Stella Creasy) calls for a windfall tax on private finance initiative companies. I pay tribute to my hon. Friend the Member for Stevenage (Stephen McPartland), who outlined his vigorous work in this area in support of his constituents.
There are approximately 700 operational projects that originated under the initial PFI, representing £60 billion in capital investment. The vast majority of those projects were signed between 1997 and the 2010—620, or 86%, of all PFI projects in the UK were signed under the last Labour Government.
This Government have taken action to ensure that PFI contracts deliver better value for money for the taxpayer. That is why in 2011 we introduced the operational public-private partnership efficiency programme, which has reported £2 billion of savings. Even where it is not possible to find savings in a project, we are working with Departments and procuring authorities to improve day-to-day effectiveness and management of contracts. We have also made improvements through PF2 to offer taxpayers better value for money on new projects.
The hon. Member for Walthamstow argues that a windfall tax on what she sees as the excess profits of PFI companies would help to fund public services; I am clear that it would not. A retrospective windfall tax would instead do damage to any private investment in public services and would tax local authorities and NHS trusts rather than the providers it is intended to target. Even aside from those flaws, her amendments would not work as she intends, and I will set out why in more detail.
First, a windfall tax would cost this and future Governments who try to sign contracts with businesses, whether in PFI or in another area. This country has a hard-won reputation for tax certainty, and that important principle would be undermined by a retrospective tax targeting businesses that have legitimately entered into a contract with the Government. There would be extra cost for the taxpayer whenever the Government next needed to engage the private sector.
Secondly, as the hon. Lady knows, PFI contracts—she said that she has read many—are long-term agreements that typically include anti-discriminatory clauses. This means that when legislation is passed that targets PFI companies without applying to similar projects undertaken by other companies, the tax owed can be recovered from the procuring authorities. A windfall tax would therefore only be a tax on local authorities, NHS trusts and Government Departments that hold such contracts, which I am sure is not the outcome she seeks.
Amendments 1 and 2 propose that the bank levy could be extended to PFI groups, but PFI groups are not banks. Instead, they borrow money to finance projects and earn a return on them, in exactly the same way that many other businesses do. It is simply not possible to bring PFI groups within the scope of the bank levy. Most of the design of the tax could not be applied to such groups.
The changes proposed by amendments 3 and 4 also would not work as a windfall tax. The last Finance Act introduced corporate interest restriction rules to limit the amount of interest expense that a corporate group can deduct against its taxable profits. The amendments propose modifying those rules by limiting the ability of corporate groups to carry forward and offset their unused interest allowance against future profits. The limitation would apply only where the group contains a PFI company that has previously made profits that are deemed to be “excessive,” by reference to a statutory test. The changes proposed in the amendments are convoluted. As I have said, it would fall to the public bodies holding the PFI contracts to pay the extra tax resulting from these changes. But even if one could impose additional tax liabilities on PFI providers, this would not be a sensible way to proceed. It would be unlikely to change the tax paid by the PFI company, but would instead sometimes penalise other companies in the same corporate group. More likely, groups would simply restructure to avoid the tax.
Sir Vince Cable (Twickenham) (LD)
I rise to speak to new clause 2 in my name and in the name of my right hon. Friend the Member for North Norfolk (Norman Lamb), and I will say a few words about amendments 13 and 14 to schedule 3 that address a technical point of some importance raised by my right hon. Friend the Member for Orkney and Shetland (Mr Carmichael), who regrets that he cannot be here to speak to the amendments himself.
New clause 2 would ask the Office for Budget Responsibility to produce an independent, verifiable, non-political estimate of the yield that could be obtained by adding 1p in the £1—a 1% increase—to the standard, higher and additional rates of income tax. We are doing this not to give the Treasury computer some exercise—I am sure that it gets plenty—but to produce an estimate that we can all subscribe to of the revenue base that would exist for an earmarked tax to finance the NHS. This Report stage is clearly not the place to debate the NHS, but I want to raise the basic principle of how the Treasury might finance it.
In the middle of last year, the chief executive of NHS England produced an estimate that about £6 billion was required to keep the NHS on a sustainable footing and to avoid a serious winter crisis—this was about £4 billion for the NHS itself and £2 billion for social care through local councils. In the event, the Treasury, in its November Budget came up with about £2 billion—we can argue about how much of that was real, but let us say it was £2 billion—but we had the winter crisis in any case, and it has been discussed here on many occasions. We have heard about the long trolley waits, the elderly people waiting in hospital for placements and the stress on staff. We hope the winter is now over, although we cannot be absolutely certain of that. The issue I want to raise is how we prevent this situation from happening in the next financial year.
The proposal that we have an earmarked allocation of revenue from a small increase in income tax comes from a commission that my party set up, consisting of not just supporters but a lot of independent people with authority in the NHS. It includes the former chief executives of NHS England, of the Patients Association and of the Royal College of Nursing, and the former chair of the Royal College of General Practitioners, among others of similar status. They argue that the only sensible, practical way now to prevent this endlessly recurring financial and then real crisis in the health service is to have a dedicated source of tax revenue.
There have traditionally been two objections to such a proposal, one of which was public opinion—the public do not like higher taxes—but the survey evidence from a big Sky poll some months ago suggested that if people were absolutely confident that the money would be allocated to the health service, about 70% of them would support such an income tax increase; other polls have suggested the same.
The second objection was a traditional Treasury one, which was that such an approach makes public spending and taxation more difficult to manage. I would cite as a counter to that the recent comments of the former head of the Treasury, Lord Macpherson, who presided over it in the five years when I was in the coalition Government. He is a massively impressive man. I confess that we did not always agree—he tended to regard public spending as some kind of disease—but none the less, he is a very authoritative source, and he appears to have been converted to the idea that such a measure is the only way in which the NHS can be put on a properly sustainable footing.
Looking ahead to the next financial year, which is what we are asking the Government to do, the question is: how are we going to avoid the kind of problems we have had this year? The first way is by the Government simply muddling through on their current spending assumptions, and probably in the next Budget, in the autumn, the Chancellor will come up with another rabbit out of the hat, which will be inadequate and too late.
The other alternative is to hope that there is some kind of advance payment of the “Brexit dividend”. I think that we are all familiar with these arguments about the £300 million a week that was supposed to come back—I think we have been promised £18 billion a year. We now know that this is almost entirely phoney and cannot be relied upon. Of course it was a gross, not a net, estimate, and we now know that we are going to pay out at least £40 billion. There will be continued annual payments through the transition period and possibly additional ad hoc payments on top of that.
Even on a fairly charitable view, we would be talking about five to six years before there is any dividend, and even that depends on a continued constant rate of growth. If growth slows down, as it almost certainly will post Brexit, this dividend may never appear. So if we cannot rely on a Brexit dividend and we are going to get past ad hoc financing, some new mechanism needs to be found, and the purpose of our new clause is to open up that discussion. I do not propose to press the new clause to a Division, but I am interested to hear how the Treasury currently regards earmarked taxation and whether its thinking has advanced in any way.
Finally, I wish to say a few words in support of the amendments tabled by my right hon. Friend the Member for Orkney and Shetland, one of whose constituents has raised a substantial point about an HMRC proposal in the Bill that relates to dormant companies and their pension funds. The proposal is that such schemes should be de-registered when the companies have become dormant. The reasoning behind it is perfectly sensible: some such funds have been used for scams, to the cost of the public and HMRC, so HMRC proposes to de-register them when such things happen.
My right hon. Friend the Member for Orkney and Shetland’s constituent has pointed out some unintended consequences of this apparently sensible proposal, one of which is that there are quite a lot of cases in which the pension funds of dormant companies have been taken over by other companies. There are other cases in which a sponsoring company may be dormant but the trustees have kept it going on a pay-in basis, and it is perfectly sustainable.
The other aspect of the proposal that potentially causes a problem is that de-registration could happen after a closure of one month. A good recent example would be Monarch airlines. As we all know, it takes a lot more than a month to wind up a pension scheme, so it is a bit pre-emptory. I do recognise, as does my right hon. Friend the Member for Orkney and Shetland’s constituent, that the power for HMRC would be discretionary. The Minister may say that we should trust HMRC always to get these things right, but it may be more sensible, as amendments 13 and 14 suggest, to have a carve-out to deal with cases that clearly do not fall within its remit.
The purpose of the amendments is to suggest that the de-registration activities should be restricted to the most recent six years, because that is when the scams have occurred and we do not need to go back into history. There should be a specific carve-out for cases in which there may well have been a pension fund succession. The provision would be that there should be at least one dormant employer and that a two-year period should be allowed for pension funds that have been maintained for a substantial time and are therefore clearly viable. Neither I nor my right hon. Friend the Member for Orkney and Shetland would pretend that those are necessarily the perfect solutions to the problem, but I hope the Minister will acknowledge that there is an issue and get the Treasury to reflect on it and perhaps come up with a superior solution.
Mel Stride
Given the limited time remaining, I intend to focus most of my remarks on the amendments and new clauses that have been spoken to in this debate.
I shall begin with new clauses 7 and 8, which seek reviews of the operation of the SDLT exemption for first-time buyers. As we know, housing is one of the great challenges of our age. We all recognise—we certainly have done in this debate—the importance of the supply side, which is why my right hon. Friend the Chancellor, whom I am delighted to see on the Treasury Bench, made such important announcements about funding for more housing. We can now look at hitting 300,000 new build homes in the next decade. The point was made that the OBR suggested that prices may increase by 0.3% as a result of our SDLT measure, but that observation is based on that measure alone and does not take into account the supply-side measures we are introducing.
Amendments 10, 11 and 12 relate to taxis and the vehicle excise duty supplement.
Julia Lopez (Hornchurch and Upminster) (Con)
I wonder whether I might make a suggestion on the amendments to which my right hon. Friend just referred. Cabbies in my constituency have raised legitimate concerns about vehicle excise duty. If I have read them correctly, it seems that the amendments that have been tabled to clause 44 would make all taxis exempt from certain vehicle excise duty rates this year, rather than just the new, electric-capable vehicles. As my right hon. Friend knows from our discussions about taxis, I and other London Conservative MPs have serious concerns about air quality in the capital, so I would appreciate his view on whether it would instead be better if we brought forward by a year—
Mark Pawsey
On behalf of 1,000 skilled workers at the London Electric Vehicle plant in my constituency, will my right hon. Friend look very carefully at the proposals to bring forward the exemption on electric vehicles?
Mel Stride
If we look at bringing forward this exemption, the important thing is that we should look solely at that element that relates to low-emission vehicles, rather than applying it to all taxis, as indeed amendments 10, 11 and 12 do, as tabled by the hon. Member for Ilford North (Wes Streeting). However, having listened to the representations from my hon. Friends the Members for Hornchurch and Upminster (Julia Lopez) and for Rugby (Mark Pawsey) and indeed from the hon. Gentleman who has tabled the amendments, we are minded to look sympathetically at bringing forward the exemption by a year for those taxis that have low emissions, albeit that they cost £40,000 or more. I know that my hon. Friend the Exchequer Secretary will shortly be meeting representatives from the London Taxi Company and that he will be furthering those discussions with them.
In the one minute remaining, perhaps I could turn to new clause 10, which calls for a review of the consequences of not backdating the refund of VAT in respect of the Scottish Fire and Rescue Service. The Chancellor made it clear in the Budget that, after lobbying from our Conservative colleagues in particular, we would allow such refunds going forward. In 2012, when the Scottish Government entered into those arrangements, they did so knowing what the VAT consequences would be, but we are taking action going forward.
Finally, I understand the desire of the right hon. Member for Twickenham (Sir Vince Cable) to have information on the effects of increases of income tax by 1%. However, there is no need for that now, as information is available on that. Time does not allow me to explain what that is, but I will speak to him after this debate, and on that basis, I hope that he will not press his amendment. I also take on board his comments about dormant companies and pension fund arrangements, but we do have to look to HMRC to make those judgments so that we ensure that these scams are prevented.
Anneliese Dodds
We have no time left, so I will press new clause 7 to a Division.
Question put, That the clause be read a Second time.
Mel Stride
I beg to move, That the Bill be now read the Third time.
The Bill makes a number of vital changes to our tax system, helping people to buy their first homes, working towards improving productivity in our country, and making our tax system fairer and more sustainable. This Government believe in
“a nation-wide property-owning democracy.”
That conviction is as strong now as it was when Anthony Eden first said those words in 1946, but it is obvious to all of us in the House that the ideal has been eroded, and that the next generation of potential homeowners are being shut out. In London, prices are nearly 13 times the average wage, and in the rest of England they are eight times the average wage. Home ownership has decreased by 20 percentage points among young people in just the last 15 years. This Government know that the most sustainable way to improve affordability is by increasing supply. That is why at the autumn Budget we took steps to address this. We announced the Letwin review to look at why planning permissions are not turning into homes, and we increased Government funding for new housing to £44 billion over the next five years.
But there are also things we can do in the short term to help young people in particular to get a foot on to the ladder, so this Bill provides for a stamp duty cut for first-time buyers. First-time buyers tend to be more cash-constrained than others, with stamp duty representing a key financial obstacle, on top of a deposit and conveyancing fees for purchases over £125,000. This Bill will help more people to negotiate these challenges and exempts first-time buyers from stamp duty for houses worth up to £300,000, and it provides discounts for houses worth up to £500,000. This will save homebuyers up to £5,000 and will mean 80% of first-time buyers will not pay any stamp duty.
This Government have presided over 20 successive quarters of economic growth, record levels of employment and a significant decrease in the Budget deficit, as well as among the lowest levels of unemployment in over 40 years. This has been achieved only because of fair and sustainable fiscal and economic policy, but Britain’s productivity growth is subdued and has been since 2008, and I hardly need to tell the House why this should concern us, for productivity is intimately linked to real incomes and to living standards. That is why in this Bill we are increasing the research and development expenditure credit from 11% to 12%, thereby increasing incentives to businesses to invest in R&D. We also need to encourage our entrepreneurs and help their bright ideas to become productive business, but, as Sir Damon Buffini pointed out in the “Patient Capital Review”, it is often those companies at the forefront of technological and knowledge-based development with the most productive potential that struggle for necessary capital. In this Bill we are therefore increasing the lifetime investment limit for knowledge-intensive companies through our venture capital schemes from £5 million to £10 million, and we are doubling the yearly amount an investor can put into these schemes to £2 million, provided that everything over £1 million is invested in knowledge-intensive businesses. Building an economy fit for the future relies on our harnessing technology, new ideas, and the expertise we already have; these changes will help to make that happen.
The Government will continue to work relentlessly to make our tax system fairer and more sustainable, and this Bill continues the Government’s work on tax avoidance and evasion, making sure that people pay their fair share. Since 2010 the Government have introduced over 100 avoidance and evasion measures, which have helped to secure and protect over £175 billion of additional tax revenues to go towards our vital public services. But the work is not done, and this Bill furthers that agenda, cracking down on online VAT evasion, making online marketplaces joint and severally liable for the unpaid VAT of their sellers, and preventing companies from claiming unfair tax relief on their intellectual property. Taken together, the measures in the Bill to tackle avoidance and evasion raise further vital funds for our public services.
I thank Members for the quality of the debate during the passage of this Bill, and I thank in particular the Bill Committee and those on the Opposition Front Benches, both Labour and Scottish National parties, for their professional scrutiny and the fair and effective way in which they conducted themselves.
This Bill is one of which this Government can be proud. It gives first-time buyers renewed hope of a place on the housing ladder, puts measures in place to boost productivity, and takes another step along the path towards an equitable and sustainable tax system. I commend the Bill to the House.
EVEL Analysis
Mel Stride Excerpts(6 years, 9 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I have today published a written submission outlining the Government’s analysis of how the English votes for English laws principle relates to all Government amendments tabled for Report stage of the Finance (No.2) Bill.
The Department’s assessment is that the amendments do not change the territorial application of the Bill. The analysis holds if all the Government amendments be accepted.
I have deposited a copy of the submission in the Library of the House.
[HCWS470]
Treasury
Mel Stride Excerpts(6 years, 9 months ago)
Ministerial CorrectionsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mel Stride
I thank the hon. Member for Oxford East for her contribution and for welcoming the measures, albeit that she did caveat her remarks fairly heavily. She asserted that the Government are not doing enough, but bringing forward the change to the revaluation approach by two years is a £2.3 billion move. [Official Report, 29 January 2018, First Delegated Legislation Committee, c. 6.]
Letter of correction from Mel Stride:
An error has been identified in my response to the debate.
The correct wording should have been:
Mel Stride
I thank the hon. Member for Oxford East for her contribution and for welcoming the measures, albeit that she did caveat her remarks fairly heavily. She asserted that the Government are not doing enough, but bringing forward the change to the indexation approach by two years is a £2.3 billion move.
Andrey Lugovoy and Dmitri Kovtun Freezing Order 2018
Mel Stride Excerpts(6 years, 9 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
I beg to move,
That the Committee has considered the Andrey Lugovoy and Dmitri Kovtun Freezing Order 2018 (S.I. 2018, No. 60).
Good morning, Sir Edward. May I say what a great pleasure it is to serve under your—I think it is fair to say—popular chairmanship?
The order was laid before the House this year on 19 January and came into force on 22 January. That was to ensure that there was no gap in the freezing measures enforced against Andrey Lugovoy and Dmitri Kovtun in response to the Litvinenko inquiry report published in January 2016.
The independent inquiry chaired by Sir Robert Owen concluded that Mr Litvinenko was deliberately poisoned in 2006 by Lugovoy and Kovtun through the use of polonium-210. The inquiry also concluded that there was a “strong probability” that Litvinenko, an ex-KGB and ex-FSB officer and critic of the Russian Government, was murdered on the order of the FSB, the Russian domestic security service. Furthermore, the killing was “probably approved” by the then head of the FSB, Nikolai Patrushev, and the Russian President, Vladimir Putin.
In response to the gravity of those findings, in January 2016 the Treasury imposed an asset freeze on Lugovoy and Kovtun by making a freezing order under the Anti-terrorism, Crime and Security Act 2001. The 2016 freezing order had the effect of freezing any funds or assets that those two individuals held in the United Kingdom or with any UK-incorporated entities, denying them access to the UK financial system and prohibiting UK persons from making funds available to them.
Under section 8 of the Act, the duration of a freezing order is limited to two years. During those two years, the Treasury is required by section 7 of the Act to keep the order under review. In order to maintain the asset freeze, the Treasury was required to review the case and decide whether to make a new order. The Treasury has conducted such a review and decided to make a new freezing order.
The Treasury believes that making a new order remains an appropriate and proportionate measure to take. The relevant conditions, as set out at section 4 of the Act, are still being met: the Treasury reasonably believes that action constituting a threat to the life or property of one or more nationals of the United Kingdom or residents of the United Kingdom has been or is likely to be taken by a person or persons resident in a country or territory outside the United Kingdom.
The freezing order is consequently one of a limited number of measures available to the UK authorities to act directly against Lugovoy and Kovtun. The Russian authorities failed to co-operate at any stage with extradition requests or with the inquiry, which prevented progress on the Metropolitan police investigation into Lugovoy and Kovtun. There is little prospect of bringing them to trial in a British court.
We continue to believe that the freezing order acts as a deterrent, and as a signal that the Government will not tolerate such acts on British soil and that it will take firm steps to defend our national security and the rule of law. Were we not to renew the asset freezes against Lugovoy and Kovtun, we would risk sending a damaging signal that the consequences of murder in the United Kingdom are limited and time-bound if someone chooses to evade the UK justice system by remaining overseas.
Our relationship with Russia remains strictly limited because of the Litvinenko assassination and the illegal annexation of Crimea by Russia. We engage with Russia on a guarded basis, defending UK national security where necessary while ensuring that we address the global security issues of the day. We will continue to demand that the Russian Government do more to co-operate with the investigation into Mr Litvinenko’s death. That includes the extradition of the main suspects, the provision of satisfactory answers and our demand that Russia must account for the role and activities of its security services.
I urge the Committee to approve the order.