Finance (No. 3) Bill

Mel Stride Excerpts

Committee: 2nd sitting: House of Commons
Tuesday 20th November 2018 Commons Chamber

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

It is a great pleasure, again, to serve under your chairmanship, Dame Eleanor. The Government have always been clear that while taxes should be low, they must be paid, and that is exactly what we have delivered. Since 2010, we have secured and protected over £200 billion by clamping down on tax avoidance, evasion and non-compliance, and we have reduced the UK’s tax gap to less than 6%, which is one of the world’s lowest. In fact, if we were running at the level of the figures achieved under the last Labour Government in 2005-06, we would be deprived of sufficient income to employ every policeman and policewoman in England and Wales, so bringing in tax most certainly does matter.

We have led the way internationally in this respect, playing a leading role in the OECD’s base erosion and profit shifting project, and taking unprecedented action to secure funding for our vital public services and to ensure that everyone pays their fair share. It is worth reflecting on the fact that we do not just collect tax for the sake of collecting tax, because very few people enjoy paying tax. We do it for a purpose, which is to keep our financial affairs in good order and to fund the doctors and nurses in our national health service, and so on.

[Kevin Foster (Torbay) (Con)]

Does the Minister agree that we sometimes use tax to alter behaviour—for example, on tobacco and alcohol—as well as purely for funding? That is why measures to prevent the evasion of those duties are so vital to achieving public health gains, in addition to the obvious points in terms of the Treasury.

[Mel Stride]

My hon. Friend is entirely right. One thinks, for example, of the sugar levy to improve public health and to make sure that our young people, in particular, move towards a healthier diet. Tax can certainly have an effect in that respect. As my hon. Friend said, there is also the duty on cigarettes, tobacco, hand-rolling tobacco, and alcohol to make sure that as well as just raising revenues, we change behaviour in a way that is conducive to the public good.

[Bob Stewart]

My right hon. Friend has not mentioned fairness in taxation. That is another principle that we must use for taxation. Fairness implies that the people who have the least pay the least and that those who can afford it pay more. I am quite sure that the Government are fully aware of that point when raising taxation.

[Mel Stride]

I thank my hon. Friend for that important intervention. He is absolutely right: fairness has to be the heart and soul of any progressive taxation system, along with competitiveness—we want to keep rates down—and the importance of tax being paid, as I have been elaborating on. On his specific point, we were of course able to announce in the recent Budget—this forms part of the Bill—the increase in the personal allowance, which is now up to £12,500. Bear in mind that in 2010 the personal allowance was about £6,500. The personal allowance is, of course, the amount that an individual can receive by way of earnings without those earnings falling due to income tax. Any increase in the personal allowance does indeed have a disproportionately beneficial impact on the lowest-paid in our country. Since 2010, in fact, we have now removed some 4 million people in total from tax altogether.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Whatever the merits or otherwise of increasing the personal allowance, which we support in the Bill, surely the Minister recognises that the gain for every person taken out of the bottom rate of income tax in the personal allowance is worth double to people paying the top rate of income tax. Clearly, if someone is paying the top rate of income tax, every £1 of the personal allowance is a greater saving than at the basic rate.

[Mel Stride]

The hon. Gentleman says he supports our changes to the personal allowance in the Budget, but that was not reflected on Second Reading, when the Labour party voted to reject our tax measures. Indeed, it has been widely critical of our measures to reduce taxation for some 32 million people up and down the country. He will probably be tired of my rehearsing the very important fact that the wealthiest 1% are paying 28% of income tax—a far higher proportion than when Labour was in power, when the figure was 24%.

[Jonathan Reynolds]

That’s not an answer.

[Mel Stride]

It might be an answer the hon. Gentleman does not like, but it is most certainly an answer.

[Jonathan Reynolds]

Is it not a fact that everyone in the Chamber, because they pay the top rate of income tax, will disproportionately benefit from the rise in the personal allowance, because every pound of it will be taken out of income on which we pay that top rate? Clearly, then, the gain to all of us as top rate taxpayers will be greater than for people paying only the bottom rate of income tax.

[Mel Stride]

As I have already said, not only do the wealthiest in our society pay a very large proportion of all tax, but under this Government we have seen significant increases in the national living wage. It rose by 4.4% last April, and through the Bill—I am proud to say—we are putting on to the statute book an increase next April of 4.9%. That is well in excess of inflation and will help the very people that both our parties are committed, in our different ways, to assisting—although our measures are more practical than those suggested by the Labour party.

[James Cartlidge (South Suffolk) (Con)]

On the point about the higher rate, it was my experience as an employer that if, say, a member of sales staff paying basic rate tax did very well in a given month, got commission or a bonus and as a result experienced a sudden, sharp increase in their tax that month, it reduced the incentive on them next time. I welcome the changes to the higher rate because of the impact on incentives and therefore on productivity and so on.

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[Mel Stride]

My hon. Friend makes an important general point about taxation. As we know, very high taxation has a number of undesirable impacts, not just on individuals and businesses, but on the economy and, through that, the general tax take and our ability as a society to fund our public services, and one of those impacts is that which he rightly raises: the disincentive to go out and produce and create the wealth upon which we all depend. It is the duty and mission of this Government, generally across the piece, to keep taxes as low as possible.

Since 2010, the Government have introduced more than 100 measures to combat avoidance, evasion and non-compliance, but this alone is not enough. To support these measures, it is vital that HMRC be well funded and well staffed. That is why we have invested an extra £2 billion since 2010 in HMRC and why we have 24,000 members of HMRC staff dedicated to tackling avoidance, evasion and non-compliance.

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

How many of those 24,000 members of staff are employed in the HMRC’s wealthy unit, which, as the Minister knows, is the key driver in tackling tax avoidance?

[Mel Stride]

It is one of the key drivers in tackling tax avoidance and the tax gap—the tax gap occurs not just with individuals but with large corporations and small businesses. I do not have the precise number, but I am happy to write to the hon. Gentleman with that information. What I can tell him is that, at any one time, about 50% of the largest 200 businesses in the country are under investigation, not necessarily because they have done anything wrong but because, logically, HMRC should be looking particularly carefully at the businesses that are making the largest profits and generating the most.

This investment is paying off. In 2017-18 alone, HMRC secured and protected more than £30 billion in additional tax revenues which otherwise would have gone unpaid. That was a year-on-year increase of £1.4 billion.

We know that some large multinationals have been able to avoid tax by exploiting gaps and mismatches in the international tax system. International leadership was required to address the situation, and that is exactly what the Government have provided. We were at the forefront of the OECD’s base erosion and profit shifting project, which agreed major reforms to the international tax system, and we have taken the lead in implementing these recommendations in domestic legislation. We have also been a strong supporter of the EU anti-tax avoidance directive, and we have helped to shape the common approach that it provides for tackling avoidance in the European Union.

[Bob Stewart]

I thank my right hon. Friend for giving way to me again. For the sake of fairness, we must of course ensure that multinational companies making profits in our country contribute properly to the economy of the country. I hope very much that we can somehow link the profits made in the United Kingdom very closely to the amount of tax that is paid. At the moment some international companies are behaving appallingly in the way in which they handle their tax affairs, and we must sort that out.

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[Mel Stride]

As always, my hon. Friend has made a critical and important point. I took him to be alluding, at least, to the issue of technology businesses—typically, social media businesses, search engines and certain online marketplaces—which, while making substantial profits in our country as a consequence of the interaction of UK users with the digital platforms that they host, are not paying a commensurate level of tax. That led the Chancellor, in the recent Budget, to announce our move towards a digital services tax, whereby we will not be addressing a question of avoidance—it is important to make that point—but will be bringing the international tax regime into the 21st century, so that we can tax profits not just on the basis of where the bricks and mortar may be, where the staff may be, where the intellectual property may reside or where the commercial risks and decisions are being taken, but on the basis of where this particular type of value generation is occurring.

While we have said that we will seek to move forward in a multilateral manner, because we recognise the dangers of double taxation in the event that we move unilaterally, we have made it very clear that we will introduce this measure ourselves as a first mover, or one of the first movers, of the leading countries in the world. We think that it is only right, and we believe that the public feel that it is only right, for these very large businesses to pay an appropriate level of tax.

[Eddie Hughes (Walsall North) (Con)]

The Minister says that members of the public would expect that. Can he give some examples of intangible assets, so that people watching the debate at home in Willenhall and Bloxwich can be better informed?

[Mel Stride]

That is a very good question. In the case of the digital services tax, we are no so much talking about intangible assets, although elements of the Bill—indeed, clauses in this group—relate to ensuring that profits are not artificially shifted as a result of money being moved around in respect of such assets. Here we are talking more about digital platforms, and a particular method of value creation that results from the interaction of UK users with those platforms. However, in terms of intangible assets and intellectual property we might think, for example, of the rights of a particular business based in the UK to carry on business using the branding, know-how and knowledge of a particular piece of intellectual property held in a low or no tax jurisdiction. Any royalties moved from the UK out to that low or no tax jurisdiction will be a form of profit shifting that might be artificial and simply designed to reduce a corporation’s tax bill, which is why we have particular measures in this Bill to address exactly that situation.

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[Chris Stephens]

The Minister gave me a written answer yesterday to a parliamentary question about higher rate Scottish taxpayers who register themselves elsewhere in the United Kingdom. He responded by saying that Her Majesty’s Revenue and Customs holds no data on that. On reflection, does he not think that HMRC should be tackling those trying to avoid tax, specifically the higher rate tax in Scotland?

[Mel Stride]

The hon. Gentleman will, of course, be very aware of the devolution of various elements of our tax system to Scotland, and the issue he identifies is fundamentally driven by the different relative rates of taxation in Scotland and in the rest of the United Kingdom. I would argue that it is incumbent upon the Scottish Government to do as the UK Government do where these matters are reserved, which is to keep taxes as low as possible. I know that Conservative Members representing Scottish constituencies are most keen to deliver that for their constituents.

As we announced at the autumn Budget in 2017, the Government are legislating in this Bill to tax income from intangible property held in low-tax jurisdictions to the extent that it is income that relates to UK sales. Today some large multinationals are able to unfairly reduce their tax bill by arranging to hold their intangible property in offshore entities. That is unacceptable, and we are now going further to level the playing field. Clause 15 requires multinationals that continue to earn intangible property income in low-tax jurisdictions to pay UK income tax on the proportion of that income that relates to UK sales.

Tax avoidance is not limited to large multinationals of course; businesses of all shapes and sizes attempt to unfairly shift UK profits to jurisdictions where they expect to pay less tax or perhaps no tax at all, so clause 16 introduces carefully targeted anti-avoidance rules to prevent these UK businesses from avoiding UK tax by shifting their profits to lower-tax jurisdictions. The clause targets contrived arrangements that, in broad terms, aim to avoid tax by transferring the profits of a UK’s business offshore in a way that would not be agreed between independent parties.

[James Cartlidge]

I very much agree with my right hon. Friend on this point. Is it not also true that our small and medium-sized enterprises, particularly those that are currently struggling, perhaps including high street businesses, do not have a cat in hell’s chance of running such schemes? They do not hide their profits and they do not mix and match around territories, so we need a level playing field.

[Mel Stride]

My hon. Friend is absolutely right. The tax avoidance activities that I am describing are way beyond the reach of many businesses of a certain size up and down the country. Thinking particularly of our high street businesses, we have a duty to ensure that fixed costs in the form of taxes represented by business rates are reduced to the extent that they can be, and the Chancellor was able to announce a 30% reduction in business rates for those smaller retailers that typically populate our high streets. That was an extremely important move as we work, through our future high streets fund and other approaches, to enable our high streets to transition and become more vibrant and successful places.

[Luke Graham (Ochil and South Perthshire) (Con)]

The Minister is talking about business rates. As a result of the Government’s action, Scotland should receive about £43 million in additional Barnettised revenues. What work will he be doing with the devolved Administration to ensure that that will help high streets in Scotland as much as the Government are helping high streets elsewhere in the UK?

[Mel Stride]

As a UK Government, we are always happy, and indeed keen, to work co-operatively with the devolved Administrations, including the Scottish Government, as my hon. Friend suggests. Ultimately, however, these will be decisions for the Scottish Government to make. It will be for them to decide how to spend the revenues that will come through by way of additional funding via the Barnett formula. I can only suggest once again—I think this echoes my hon. Friend’s thoughts—that the best way forward is to keep taxes down and, in the case of Scotland, to have a country that is known for low taxation, rather than gaining a reputation for higher taxation.

Clauses 46 and 47 address the use of contrived arrangements that seek to avoid stamp duty on shares. The Government are aware that some corporate groups are transferring shares to connected companies for an artificially low consideration. The clauses create a targeted marketed value rule for transfers of listed shares to connected companies. This rule will prevent the use of artificially low consideration by charging stamp taxes on shares on the higher of the market value of, or the sum paid for, the shares transferred.

The Bill also re-emphasises our commitment to leading the way in implementing internationally agreed initiatives to combat tax avoidance. Clauses 19, 20 and 23 make changes to the UK’s rules on controlled foreign companies, hybrid mismatches and corporation tax exit charges to ensure that they comply with the EU’s anti-tax avoidance directive. The UK is a strong supporter of the objectives of the directive, as it will ensure that member states take a common approach to tackling tax avoidance. The UK’s rules are already comprehensive, and they already meet or exceed most of the requirements set out by the directive, but some limited changes are needed to ensure that we are fully compliant in all areas.

[Stewart Hosie (Dundee East) (SNP)]

On a point of clarity, the Minister has said that stamp duty on shares will be charged at either the market rate or the actual rate, whichever is higher. Will he confirm that shares will still be able to be sold below the market rate so long as the tax is paid on a marked market basis? Is that correct?

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[Mel Stride]

The Bill will ensure that businesses that typically trade in and acquire shares pay the correct level of stamp duty on those shares, rather than paying a certain market rate having transferred the shares, perhaps internally to another company in the same group, in return for shares from that other company that had been valued at a lower level compared with the original purchase price of the original shares. By doing that, some companies have been exploiting a loophole and paying less stamp duty than they would otherwise have done. In case the hon. Gentleman is wondering, the distinction between the two clauses relating to this matter is that one relates to paper shares and the other to the electronic trading of shares in that manner.

Amendment 19 would provide for a review of the changes required to the controlled foreign company rules, which protect against the artificial diversion of profits from UK companies to low-tax jurisdictions, including with regard to the impact of a no-deal scenario. While the Government always keep the general tax system under review, a specific review of those provisions would be disproportionate. They are minor changes to ensure that the UK’s anti-avoidance rules on controlled foreign companies are fully aligned with the direction with which the UK agreed during negotiations on the anti-tax avoidance directive, and there is no need for a review.

Clause 83 enables the introduction of new international rules requiring tax advisers to report to HMRC certain cross-border arrangements that could be used to avoid or evade tax. That information will allow HMRC to build up the full picture of such arrangements. Following a consultation next year, the Government will introduce secondary legislation containing further details of the rules. We have played a leading role in designing that approach, which forms part of our ongoing work to champion international tax transparency and to tackle offshore tax avoidance and evasion.

Amendment 23 would require the Government to publish a report on how clause 83 will be exercised under various EU exit scenarios before making the proposed regulations. However, the Government are already committed to a formal consultation on the proposed regulations, and all practical aspects of implementing the regulations and EU exit will be taken into consideration as part of that consultation.

As we depart from the EU, we must continue to honour existing commitments. That is why we are allowing capital gains tax in respect of exit charges to be paid in instalments. Exit charges can arise on unrealised capital gains when a trust ceases to be UK resident, or if a non-resident individual either ceases to trade through a UK branch or agency or moves trading assets abroad. Exit charges ensure that tax cannot be avoided by moving assets overseas. Clause 22 retains those rules. However, when such entities choose to move their place of residence within the European economic area, they will now be given the option to defer the payment of tax, paying in six equal annual instalments with interest, which will not reduce the amount of tax that is due.

Opposition amendments 3 and 4 would require the beneficiary of a trust that pays capital gains tax on an instalment basis to provide information about the source of its income in a public register. That requirement is disproportionate and unnecessary. Migrating trusts seeking to use the scheme will have paid UK tax, so their income sources will have been declared to HMRC. Information about the nature of the trust’s assets will also be held on the trust register, which applies to trusts with a UK tax liability and is available to law enforcement agencies. Consequently, there is no need for further reporting.

New clause 5 would require the Government to carry out a review of the equality impact of some of the Bill’s anti-avoidance provisions. The tax information and impact notes published alongside the measures already set out the impact of anti-avoidance measures in the Bill on those sharing protected characteristics. In general, they show that HMRC does not expect the measures to have notably different impacts on people according to their protected characteristics.

New clauses 6 and 14 would require the Government to publish a review of the effectiveness of the Bill’s provisions to tackle tax avoidance and tax evasion, and to reduce the tax gap. Such a review is unnecessary. The Government keep all taxes under review and will continue to measure and publish annual statistics on the tax gap. I have little doubt that those statistics will continue to show that the tax gap is lower than at any time under the previous Labour Government.

New clause 15 would require the Government to publish a report on the consultation that we have undertaken on some of the measures in the Bill. The Government are committed to creating a more predictable and stable tax system. Our move to a single fiscal event timetable and the new tax policy-making process ensure that there is more time available to consult on new tax changes. In July, we published draft legislation or detailed technical notes on the majority of the measures covered by the clauses in this group to allow for consultation with interested parties. However, that approach is simply not appropriate for all tax avoidance and evasion measures. Publishing draft legislation can give those targeted by legislation the opportunity to make provision to sidestep it. Although I agree with SNP Members that consulting on tax legislation is important, I do not agree that it is necessary for us to produce a report.

Conservative Members will continue to be ever mindful of the simple fact that wealth and money do not belong to the Government. In fact, there is no Government money, only that which is generated by hard-working people right across our country. As such, we recognise that we have a duty to keep tax as low as possible to reduce its burden, most especially on the poorest in our society, and so protect living standards and nurture a thriving economy.

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[James Cartlidge]

It is always interesting to hear attacks on capitalists from this side of the House. I simply say in terms of the way the property market has gone that we have often focused in the debate on housing on increasing the supply of homes—the statistics just published on new housing supply are incredibly positive—but I have been a mortgage broker and involved in the property sector, and I remember what happened in the wake of the crunch. The impact of fiscal and monetary policy and the stimulus we have had, and measures that have encouraged inward investment, have also been detrimental. We must not forget, as many people might, that in 2011-12 when the euro was facing an existential crisis—who knows, at some point in the future that might well return—huge inflows of capital came into UK residential property, particularly in London, pushing up prices and impacting on first-time buyers.

Having covered that specific point, I welcome anti-avoidance measures in this area. We need a level playing field, and not just in the same way that other anti-avoidance measures give a level playing field for small businesses; we need them for first-time buyers and those in Britain seeking to get on to the housing ladder. I support these measures and the others in the Bill.

[Mel Stride]

We have had a good, rounded and full debate, and I thank all Members for their contributions. I wish to touch briefly on the amendments and new clauses moved this evening. New clause 5 calls for a review of the impact of the clauses in this group on child poverty, on households at different levels of income, on those with protected characteristics and on the different parts of the United Kingdom. As I have stated, the Government already provide impact and distribution assessments and analysis in the Budget, as well as tax impact information and notes on individual tax measures.

Finance (No. 3) Bill

Mel Stride Excerpts

Committee: 1st sitting: House of Commons
Monday 19th November 2018 Commons Chamber

[Ruth George]

That is what the new clause would require. If the Government wanted us to abolish entrepreneurs’ relief and had given us a Finance Bill that we could actually amend, and if they had the courage to put their policies to votes on the Floor of the House and to give us any alternative, other than to amend the Bill to require reviews, we would gladly do so. Perhaps the Minister could indicate from his sedentary position whether he is prepared to allow the Committee to make such an amendment to abolish entrepreneurs’ relief.

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

rose—

[The First Deputy Chairman of Ways and Means (Dame Eleanor Laing)]

Order. It is not for the hon. Lady to ask questions of the Minister at this point. When the Minister is speaking, she might wish to try to intervene at that point, but she cannot require the Minister to answer her question at this point. She can expect him to answer it when he addresses the Committee later. Having said that, if the Minister wishes to jump up at this point, I will not stop him. It is an interesting matter.

[Mel Stride]

I was just going to say that, as the hon. Lady will know, all amendments need to be in scope and that that is ultimately a decision for Mr Speaker. I am sure that he has taken the appropriate decisions in this case—[Interruption.]

[Ruth George]

My hon. Friend the Member for West Ham (Lyn Brown) has just said from a sedentary position that the Government have set the parameters for the scope of amendments in this Bill. The same happened with the previous two Finance Bills that they brought to the House. They have not allowed any substantive amendments to the Bill. They will not allow their policies to be tested on the Floor of the House, because those policies have been found wanting in terms of redistribution of wealth from the best off in our society to the poorest. It is actually the poorest who pay 42% of their income, while the richest pay just 34%. How is that fair?

This Budget has done nothing to support the poorest people. After raising VAT to 20%, the Government have doubled insurance tax and are raising council tax across the country by 5% a year, hitting the poorest in our society and hitting those who can afford it the least. They are also hitting those who are homeowners with universal credit. We have heard that the Government aspire to support homeowners, so why is it that, under universal credit, 74% of people who lose out are actually homeowners? They have seen their clawback of income nearly doubling from 39% under the Labour Government to 63% under this Government, and it is going up to 75% for taxpayers.

If the Government disagree with our analysis that this Budget is not helping people in poverty and that it is actually entrenching the serious divides and the serious destitution and poverty within our society, they should prove their case by supporting our amendment for an equalities impact assessment. But they have form on this. I have been calling for an equalities impact assessment of universal credit changes since 2015 and since I first came to this House, and it has been refused. They are now refusing to hold one in this Budget. Anyone would think that this Government had something to hide. I know from people around my constituency, which is relatively affluent, that it is not just the poorest people who are appalled at the level of food bank use, the level of homelessness and the level of evictions that are being inflicted on the poorest people in our society. People across my constituency are writing to me, imploring me to stand up for the poorest, because otherwise we are poorer as a society.

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[Rachel Maclean]

I do not accept those comments because we have seen new businesses in my constituency and in the constituencies of many other hon. Members. In Redditch, we have record rates of business start-ups because of measures in this Budget, this Finance Bill and other Budgets. I am a great supporter of the Bill because it will drive more revenue into the Exchequer that I would like to see spent on strong public services in Redditch.

[Mel Stride]

May I say what a pleasure it is to serve under your chairmanship, Dame Eleanor?

Let me first pick up on some of the comments made by the hon. Member for Aberdeen North (Kirsty Blackman), speaking from the Scottish National party Front Bench. She raised the issue of the higher rate threshold in clause 5 and asked whether the Bill might be organised in a slightly different manner. The most important thing is that we have put forward the information in a simple and straightforward way. As I am sure she is aware, the rise to the basic rate limit is dealt with in clause 5(1), with the amendment to £37,500 in the Income Tax Act 2007. That of course gets added to the personal allowance. The higher rate threshold is UK-wide for both dividends and savings income, which is what the amendment to the Income Tax Act deals with and focuses on.

Clause 5(2), Dame Eleanor—as I know you and other Members of the House will be aware, having read this Bill in significant detail—deals with the rise in the personal allowance to £12,500, which once again is a UK-wide scope. Therefore, it is appropriate that it is in a clause that is not subject to the provisions of English votes for English laws.

Clause 5(4)—I notice the hon. Member for Aberdeen North looking at this quite closely—also breaks the link between the personal allowance and the national minimum wage, which is once again a UK-wide measure. On the hon. Lady’s very specific point, it is appropriate that all these measures are contained within one clause.

The hon. Lady also mentioned the national minimum wage and the level at which it is set for those aged 16 to 24. She will know that a review is currently being conducted by the Low Pay Commission, which will report in spring 2019, although the commission has said in the past that increases up towards the level of the national living wage—which is what I think the hon. Lady is seeking—may have a detrimental impact on the level of employment. Of course, this Government have overseen a halving of the level of youth unemployment since 2010, something of which we are justly proud.

The hon. Lady brought up the issue of raising the personal allowance to £12,750, in line with her party’s new clause 19. The important point is that we have been able to raise the personal allowance from around £6,500 in 2010 right the way up to £12,500, taking about 4 million of the lowest paid out of tax altogether. That comes at huge cost, and the estimated cost of going still further, to the level that hon. Lady suggests, would be of the order of £1.5 billion. For that reason, we believe that the very significant rise that we have put in place is proportionate and should be welcomed by many of the lowest income earners, whom the hon. Lady quite rightly seeks to protect.

The hon. Lady raised the issue of poverty, as did a number of other hon. and right hon. Members. I remind the Committee that there are 1 million fewer people living in absolute poverty than in 2010, including 300,000 children. It is also the case that there are two thirds of a million fewer children living in workless households. We have heard a great deal about the importance of employment and our record on employment, with virtually the highest level of employment in our history and the lowest level of unemployment since the mid-1970s. Work is a very important route out of poverty and we have a strong record in that respect.

A number of Members mentioned entrepreneurs’ relief. The hon. Member for Aberdeen North suggested that the shift from the one-year to the two-year qualifying condition might actually impose a hurdle to entrepreneurship—I think that was the expression she used—but we see it as important that we at least have entrepreneurs who are not in and out within a period of 12 months, but who are actually there for the longer term. Of course, the Labour party seems to be entirely hostile to the whole notion of an entrepreneurs’ relief, which is not surprising given the general approach it seems to take towards business.

[John Howell]

Will my right hon. Friend comment on the fact that entrepreneurs’ relief is aimed at securing longer-term investment? This country has been very used to short-term investment, but it has done nothing for us. We need people to invest in the longer term.

[Mel Stride]

My hon. Friend is exactly right. This is why we also have the enterprise investment scheme and the seed enterprise investment scheme, and why we have made this change to entrepreneurs’ relief. An interesting fact is that of those who benefit from the entrepreneurs’ relief, around a third go on to reinvest in further businesses, so those tax savings are being reinvested in further economic activity.

I turn to the comments of the hon. Member for Bootle (Peter Dowd), who made a number of important points—or, should I say, he made a number of points about important matters? That might be slightly more to the point. However, I agree entirely with my hon. Friend the Member for Brentwood and Ongar (Alex Burghart), who is no longer in his place; I have a great affection for the shadow Minister, particularly the Plutarch and Cicero quotes of which he is most fond. In fact, I will share one with him that does not apply to him in any way, of course:

“Any man can make mistakes, but only a fool persists in his error.”

I think that is probably more appropriate to the leader of his party than to the hon. Gentleman himself.

The hon. Gentleman raised the issues of the amount of tax burden shouldered by the wealthiest in the country. I remind him that under this Government the wealthiest 1% pay a full 28% of all income tax; it was about 24% when the Labour party was in power. As my hon. Friend the Member for Gloucester (Richard Graham) pointed out, the lowest 20% of earners have benefited the most since 2010, from the combination of changes to tax, the national living wage and other factors.

The hon. Gentleman mentioned the UN rapporteur and my appearance on Channel 4. I have to point out that the rapporteur produced, I think, a 24-page report based on around two weeks’ fact-finding in this country. The Government’s view is that the conclusions drawn were disproportionate to say the least. The hon. Gentleman suggested that I did not answer the questions put to me on that particular occasion, which I dispute. However, it is indisputable that he failed to answer the question of my hon. Friend the Member for Cheltenham (Alex Chalk) as to exactly what the Opposition would do with the personal allowance, given the exception that they are taking to our tax measures in the Budget.

[Debbie Abrahams]

Can the Minister recollect whether there has been a UN report in the last eight years that this Government have agreed with?

[Mel Stride]

Well, I am not here to debate UN reports of any description and whether the Government agree with them, other than to make the point that this particular report is rather disproportionate, given the remarks that I made earlier about what has happened to absolute poverty and children of workless households and so on.

Draft Double Taxation Relief and International Tax Enforcement (Guernsey) Order 2018 Draft Double Taxation Relief and International Tax Enforcement (Isle of Man) Order 2018 Draft Double Taxation Relief and International Tax Enforcement (Jersey) Order 2018

Mel Stride Excerpts

Tuesday 13th November 2018 General Committees

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

I beg to move,

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

[The Chair]

With this it will be convenient to consider the draft Double Taxation Relief and International Tax Enforcement (Isle of Man) Order 2018 and the draft Double Taxation Relief and International Tax Enforcement (Jersey) Order 2018.

[Mel Stride]

It is a pleasure to serve under your chairmanship, Mr McCabe, as always. As you have suggested, I will speak to all the orders.

The orders before the Committee give effect to replacement double taxation agreements with each Crown dependency. DTAs remove barriers to international trade and investment and provide a clear and fair framework for taxing businesses that trade across borders. By doing that, they benefit business and the economies of the jurisdictions concerned.

I will briefly say a few words about the agreements, which are identical in all material respects. Our current DTAs with the Crown dependencies date back to the 1950s. Although they have been updated on occasion, there was a need for a comprehensive update. The new DTAs extensively modernise the existing texts to reflect updates to the OECD model tax convention and changes to the tax laws and treaty preferences of all jurisdictions.

Like the UK, the Crown dependencies are signatories to the BEPS—base erosion and profit shifting—multilateral instrument, or MLI. However, we could not use the MLI to make changes to our existing DTAs with the Crown dependencies because they are not international law agreements. Instead, the new DTAs include all the provisions that would have been implemented by the MLI.

Instead, we have implemented the treaty-related minimum standards mandated by the BEPS project through the agreements. That means that we have included the new preamble, which clarifies that the purpose of an agreement is not to create opportunities for avoidance and sets out the principal purpose test, which is the mechanism by which benefits can be denied where the main purpose of a transaction or arrangement is to avoid tax.

In line with the OECD model, the new agreements are comprehensive in scope and cover all income and gains, including articles on interest and royalties for the first time. However, benefits in respect of interest and royalties are limited to persons who can demonstrate a close connection to Crown dependencies, which ensures that residents of third countries will not be able to exploit the provisions. The new agreements also provide for mandatory binding arbitration, which ensures that disputes are resolved and double taxation avoided.

The current agreements have been updated twice in the recent past to ensure that they could not be used to frustrate the intention of UK legislation on offshore property developers and leasing in the oil and gas sector. The amendments are incorporated in the new agreements, and this comprehensive update will avoid the need to make such changes in future. Finally, the new agreements also provide for mutual assistance in the collection of tax debts, which will enable the UK to ask the Crown dependencies to recover UK tax from their residents on our behalf.

In summary, these are agreements that the UK and the Crown dependencies can be happy with. They protect UK revenue and provide a stable framework in which trade and investment between the UK and the Crown dependencies can continue to flourish. I therefore commend the three orders to the Committee.

--- Later in debate ---

[Mel Stride]

I thank the hon. Members for Oxford East and for Aberdeen North for their contributions to this important debate. I always expect a rattle gun of deep and technical questions from the hon. Member for Oxford East, and I was not disappointed. I will endeavour to answer as many questions as I can, and on those I cannot answer, I am happy to write to her in due course.

The hon. Member for Oxford East raised a lack of engagement, as she termed it, with the treaties that we are scrutinising. I took that to refer both to matters of transparency, on which she elaborated at some length, and also the scrutiny of the treaty, which is an issue that she has raised in relation to other DTAs that we have debated in Committee. I hope that she therefore welcomes the fact that we have made improvements, for example to the information memorandum, which now points out the differences and changes between the 1950s and the later iterations of the treaties and, indeed, the treaty to which we have been asked to give our consent.

I shall make the general points that I usually make on scrutiny. International treaties are complicated negotiations and do not necessarily lend themselves, nor would it be appropriate for them to do so, to discussion and rumination, as the hon. Lady may be seeking. The treaty was published in July this year, so there has been plenty of time to review it. Of course, these international agreements go through the process that we are going through at the moment, giving this treaty scrutiny.

I appreciate that the transparency debate is a hook on which one could add the whole issue of the public registers of beneficial ownership, about which we have had various parliamentary debates. The hon. Lady knows the Government’s position in that respect. It is important to stress that we have a common reporting standard between Her Majesty’s Revenue and Customs and the tax authorities of the three other jurisdictions in question, so we do have an exchange of information relevant to tax affairs between our two authorities, which is an important tool in clamping down on avoidance, evasion and non-compliance.

The hon. Lady asked specifically why we did not insist on the treaties containing a provision that public registers be set up. I think the answer to that is that these matters are outside the general context of these treaties. In addition, the treaties are entered into by bilateral agreement, and I think if we had insisted on that—indeed, had it been our desire to insist on that at this moment—it is unlikely that we would have had the improved version of the treaties that we are discussing today.

[Anneliese Dodds]

I am grateful to the Minister for giving way, but surely these treaties contain provisions that make it less likely that such a public register, which the Government committed to, will be set up, because they include the commitment to keeping information secret. It is just that these treaties do not include reference to public registers, which one would have expected if the Government were working on this, as they committed to do, to the Opposition; it is also the fact that they include a commitment to keeping information secret, which goes against what the Government said in this House that they would do.

[Mel Stride]

I do not think that these treaties require further secrecy than the appropriate confidentiality, as some might term it, of information that is, after all, highly sensitive; it involves the tax affairs of individuals and businesses between our various jurisdictions. It would only be right that confidentiality is respected in those circumstances.

[Anneliese Dodds]

I am grateful to the Minister for that clarification. However, we were just talking about having a register that is similar to the UK register, which is public, and surely any concerns about confidentiality have already been dealt with in our own jurisdiction.

[Mel Stride]

I had understood the hon. Lady in her earlier intervention to be suggesting that the treaties would make a move to public registers of beneficial ownership less likely. To the extent that I do not think they impose any additional confidentiality on the exchange of information over and above what was there before, I do not think that argument holds water, with respect to her.

On the information exchange issue that the hon. Lady raised, the agreement contains a new “assistance of collection of debt” provision, compared with the agreements that it supersedes. I hope that she would welcome the information requirements around that, and the fact that we can now actively seek the assistance of those jurisdictions to collect tax debt, for example.

On the general issue of anti-avoidance, as all Committee members will know—because they follow these affairs in intricate detail, as they have done during this debate—we have very much been in the vanguard of BEPS programme in the OECD. Members may see the footprints of that in these treaties through the main purpose test, to ensure that we do not have companies or individuals exploiting the tax advantages around these treaties for no other reason than to avoid or reduce their tax liability. Of course, in respect at least of the interest on royalty payments, as distinct from dividend payments, there are different categories of entity, and various tests accordingly that will be required to trigger the reliefs in that respect.

The hon. Lady mentioned the blacklisting process that is going on at the moment and the UK Government’s involvement. We have been actively involved in discussions with our overseas territories to ensure that we encourage them not to be blacklisted—to ensure that they comply with the EU code group’s provisions.

[Alex Cunningham]

Having anticipated what the Minister said, I should be interested to learn what new areas the Minister is working on to encourage greater transparency within the territories.

[Mel Stride]

One of the principal areas is that of economic substance when it comes to the activities of those businesses that purport to be operating from those low or no-tax jurisdictions, which is the main thrust of the EU’s move here—that we have genuine businesses involved in those jurisdictions, rather than their just being used as a conduit for the purposes of avoiding or paying extremely low levels of tax.

The hon. Member for Oxford East mentioned eurobond exemptions and restricted connected parties. These treaties do not impinge on that matter, which is dealt with in UK domestic tax law, so it is quite distinct from what we are debating today. The hon. Member for Aberdeen North asked if we could come back with a report on information sharing and how effective it had been. I do not think that, in this instance, there is a need for a specific report. The tools for scrutinising that, whether by way of debates or parliamentary questions, are here in this Parliament. On that note, I shall conclude my remarks.

Question put.

Finance (No. 3) Bill

Mel Stride Excerpts

2nd reading: House of Commons & Programme motion: House of Commons
Monday 12th November 2018 Commons Chamber

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

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

When our party first came to office after the great crash, after the years of borrow and spend, our country was close to the abyss. We inherited then the greatest deficit in our peacetime history, a deficit of a magnitude that posed a real and present danger to every one of us, to every man, woman and child in our country and, indeed, to generations yet to come.

This was a deficit greater even than that created by another profligate Labour Government decades before that party reduced our country to scampering cap in hand to the International Monetary Fund for a bail-out, because they had brought us to the point of bankruptcy. It is the Conservative party that has once again—just as we did then—brought our country back from the brink and into better times.

[Sir Edward Leigh (Gainsborough) (Con)]

Will my right hon. Friend give way?

[Mel Stride]

I will make a little progress.

What does this history teach us? Is it that that Marxism provides the answers, as the Labour leadership would have us believe; that fomenting the overthrow of capitalism, as the shadow Chancellor put it, can lead to prosperity; or that high taxation, nationalisation, the blatant sequestration of private capital and borrowing on a scale hitherto unimagined might provide us with the answers or some easy way out? No, the lesson is rather more prosaic but, none the less, noble: that living within our means matters; that those who work hard for their money should get to keep more of it; that the taxman should be held back from the pay packets of those who create and strive; that those parts of our country that have, for too long, felt neglected and left behind should once again be included and heard; and that economies, our communities and our very liberty thrive if we are freed from the burdens of the excessive state interference advocated by the Labour party.

[Leo Docherty (Aldershot) (Con)]

My right hon. Friend may not have read “Economics for the Many” by the shadow Chancellor, but he will not be surprised to learn that in that book the shadow Chancellor says that the fact that Labour’s figures do not add up is “largely irrelevant.” Does he agree that that shows a shocking disregard for the economic future of our great country?

[Mel Stride]

My hon. Friend is entirely right. Of course, it is easy to make pledges when in opposition. Indeed, in the run-up to the last general election the Leader of the Opposition appeared to pledge the abolition of student fees, only to discover that the measure would cost around £100 billion and is totally unaffordable.

[Karen Lee (Lincoln) (Lab)]

Will the Minister confirm the total cost to the Exchequer of corporate tax reliefs in the last financial year?

[Mel Stride]

What I can confirm to the House is that in reducing corporation tax from 28% to 19% since 2010, we have increased the yield from corporations, not just by a few per cent. but by 50% over that period. We are now talking about taxation, so let us ask: what is Labour’s plan? It is to put taxes up to 26% for large companies and to 21% for small businesses, which would be a full 50% increase in tax bills for large companies and a 25% increase in tax bills for smaller companies.

[Charlie Elphicke (Dover) (Ind)]

I thank my right hon. Friend for making that important point. Does it not underline the fact that if we cut the rate, we up the take? Does it not also show that Labour’s plans would result in reduced revenues, meaning more spending, more borrowing and more debt, which would take us back to the brink once again?

[Mel Stride]

My hon. Friend is entirely right; there is no doubt that if you keep on putting up taxes, as Labour says it will do and would be forced to do if, heaven forbid, it was ever to form a future Government, because its numbers do not add up, you end up killing the goose that lays the golden egg.

[Sir Edward Leigh]

My right hon. Friend is an excellent Minister, knocking on the door of the Cabinet, so I am sure he will agree with everything—[Interruption.] I know he is one of us, too. Is he slightly concerned that we are increasing spending by £30 billion a year up to 2023 and that we are taking out of the state the same proportion as Gordon Brown took out? As a fellow traveller in the Conservative cause, can he convince me that he is committed, as I am and those on our Benches are, to reducing government debt?

[Mel Stride]

I can assure my hon. Friend that we are indeed reducing government debt. The Office for Budget Responsibility has forecast that in each year of the coming period we will be reducing debt as a percentage of GDP. We have of course met our two intermediate targets a full three years early. We are fiscally responsible, which is why we are in a position to be able to support our public services in the very significant way that we are doing.

[Ruth George (High Peak) (Lab)]

The Conservative party came to power in 2010 promising to eliminate the deficit by 2015. Not only has it not done that, but it has doubled this country’s debt and brought public services to their knees. Is the Minister claiming that this project has been a success?

[Mel Stride]

The hon. Lady will know that the deficit was up at about 10%—£150 billion a year—at the time we inherited the mess that her party left us with. That deficit has now reduced by a full 80%, to below 2% of GDP, and will go down further as we move forward. Now, let me make some progress.

As I was saying, these are the economic facts of life and, as a great lady once said:

“The facts of life are conservative.”

Under this Conservative Government, sound finances are being restored. The future is brighter, bringing with it our increased commitment to our public services, most notably to our highest priority of all, our national health service. Thanks to the commitment of this Government and the hard work of the British people, we are now entering a new era. The deficit is fading, real wages are rising, the debt is declining and better times are returning. We now have a near record level of employment, with unemployment at a 40-year low, and we have halved youth unemployment since 2010. Central to this progress is my right hon. Friend the Chancellor’s Budget and this Bill.

This Bill introduces a tax cut for 32 million people, through bringing forward by a year our manifesto commitment to increase the personal allowance to £12,500 and the higher rate threshold to £50,000.

[Vicky Ford (Chelmsford) (Con)]

Will my right hon. Friend confirm that this means there will be a tax cut for the lowest earners in our society?

[Mel Stride]

My hon. Friend is absolutely right; a large proportion of the tax cut that has been delivered is in the form of a significant increase in the personal allowance—that amount someone can earn before they pay any tax—and that of course has benefited the low paid very significantly and will continue to do so.

[Rebecca Pow (Taunton Deane) (Con)]

Will the Minister also confirm that this Government are raising the living wage—the national living wage—and that that really is giving people more money? Although that might be difficult for businesses, it is really beneficial for our constituents.

[Mel Stride]

My hon. Friend characteristically makes an important and insightful point. The national living wage, which this Government brought into being, was raised by 4.4% last year and will be raised by a full 4.9% in the coming year. That is well ahead of inflation, which is why in respect of net income those in the lower deciles of the income distribution have benefited disproportionately compared with those at the top end. I remind the House that the wealthiest 1% pay some 28% of all income tax that the Exchequer receives.

[Chris Philp (Croydon South) (Con)]

Perhaps I can amplify the Financial Secretary’s point about the minimum wage. Since 2010, the national minimum wage, or living wage, has gone up by 38%. When that is combined with the increase in the personal allowance, somebody who works full time on the minimum wage is 44% better off post tax, and inflation over that period was around 25%. Is that not delivering for those on the lowest incomes?

[Mel Stride]

My hon. Friend is absolutely right. The Labour party will tax and tax, borrow and borrow and spend and spend. The Conservative party is reducing the tax burden. Collectively, we have now taken more than 4 million people out of tax altogether, which has disproportionately helped those on lower incomes.

[John Redwood (Wokingham) (Con)]

In the third quarter, the UK rate of growth was three times the rate of growth in the eurozone. Is that the wonders of the Brexit vote, or something else?

--- Later in debate ---

[Mel Stride]

That is the wonders of the management and proper stewardship of the economy. It is about taking a balanced approach to our economy, which is getting the debt and the deficit down and restoring our country’s reputation for financial stability and confidence. That is now coming through to the point where we can start to take away some of the pressures of tax and of public expenditure as we move forward to more positive times.

[Charlie Elphicke]

Does that not underline the fact that we can have strong public services and strong investment in the NHS only if we have a strong economy? It is because of the difficult decisions that the Government have taken over the past few years that the economy and the job market are so strong that we are able to make the investment in the NHS that the Labour party would not have been able to make.

[Mel Stride]

My hon. Friend is entirely right. Let us take employment: in this country we have a near record level of employment, we have a near record number of women employed, and we have the lowest level of unemployment since the 1970s. What is Labour’s record? Every single Labour Government in history have left office with unemployment higher than when they started. That is a simple fact. [Interruption.] It may be an inconvenient one, but it is a simple fact none the less.

The tax cut in the Bill is worth £9.5 billion. That means more money in people’s pockets. Since 2015, some 1.7 million more people have been taken out of tax altogether. The saving to the average taxpayer has been more than £1,200 since 2010.

[Wes Streeting (Ilford North) (Lab)]

What the Financial Secretary has neglected to mention but the Treasury Committee has heard clearly is that in respect of the long-run impact of the tax and benefit changes under this Government since 2015 alone—putting the coalition to one side—it is clear that their successive policies have left the wealthy better off and the very poorest worse off. That is deeply regressive and unjustifiable and it is why the Bill should not be supported.

[Mel Stride]

Hopefully, the hon. Gentleman will welcome the announcement that the Chancellor made in the Budget that we will provide a £1,000 uplift to the universal credit work allowance, which will be worth, when we reach full roll-out, a total of £630 million for 2.4 million recipients of that benefit.

[Alex Chalk (Cheltenham) (Con)]

Does the Financial Secretary agree that were we to go back to the situation in 2010, when people had to start to pay tax after their first £6,750-odd, that would mean that ordinary, hard-working taxpayers would have to pay an additional £1,000 in tax and would therefore have less money to meet their day-to-day priorities?

[Mel Stride]

My hon. Friend is right. The problem with Labour’s approach to taxation, and to personal taxation in particular, is that it is a huge discouragement to going out and creating wealth and jobs and the kind of economy that supports the vital public services that Members from all parties wish to see prosper.

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

Will my right hon. Friend confirm that, for somebody on the minimum wage, if we combine the increases in the national living wage with the increased personal tax threshold, somebody in full-time work is £3,955 a year better off in cash terms than in 2010?

[Mel Stride]

My hon. Friend, as usual, makes a very significant point, which is that by increasing the national living wage by, as I said earlier, 4.4% last year, and by 4.9% coming up in April next year, and by raising that personal allowance to take more and more people out of tax altogether, we are supporting the lowest paid in our country.

[Rachel Maclean (Redditch) (Con)]

Does the Minister agree that, as well as taking people out of tax, with a whole raft of policies this Government are helping wages increase? In Redditch, for example, there has been a 35% increase in median weekly payments to full-time employees, which means that Redditch workers have more money in their pockets.

[Mel Stride]

My hon. Friend is right. For the past six months, we have seen rising real wages, and the latest data show that they have been rising faster than at any time in the past 10 years, so we are the party that is fixing the economy and improving living standards.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I thank the Minister for giving way. Does he agree that abolition of certain restrictions in the labour market, such as payment between assignment contracts, would also increase people’s wages? Will he be making a statement on the Taylor review and its contribution to this debate?

[Mel Stride]

This debate is not the place to make pronouncements about the Taylor review. The Government are considering the Taylor review and the way in which people are working. There are a number of aspects in the Budget that relate to the taxation elements of the way that people work, but we will come back in the fullness of time with a full response to the Taylor review.

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

Just on wages, there was a lack of clarity in the Budget in relation to the public sector pay cap. Can the Minister confirm that every Department is budgeting for 1.5% this year?

[Mel Stride]

As the hon. Gentleman will know, we have made, within this year, more finance available to various Departments, and the Chancellor was very clear about that in the Budget. He was equally clear that there will be a number of decisions to be made in the spending review next year relating to all the Departments across Government.

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

I am sorry to burst the Minister’s balloon, but if things are as rosy as he says, why is the UK economy not only at the bottom of the G7 for growth forecasts, but at the bottom of all EU countries for projected growth?

--- Later in debate ---

[Mel Stride]

I do not think that the hon. Gentleman is entirely right. I do not think that we are at the bottom of the G7 growth table at this precise moment—I think that we are some way off the bottom. He mentioned the important element of growth, and the forecast from the Office for Budget Responsibility is that our economy will continue to grow for the next five years and, of course, we come into this period on the back of five years of continuous growth.

[Charlie Elphicke]

rose—

[Mel Stride]

If there are no other interventions, I will take one from my hon. Friend for the third time.

[Charlie Elphicke]

I thank the Minister for my hat trick of interventions and for being so generous. I was looking at the amendment in the name of the Scottish National party in relation to VAT and the policing situation in Scotland. Can he confirm to the House that this VAT muck-up is entirely the responsibility and fault of the SNP? It should take responsibility and apologise for it.

[Mel Stride]

My hon. Friend is right: the Scottish National party will know that when it took the decision to reorganise fire and police in Scotland, it was fully aware and cognisant of the fact that that would mean that VAT was not recoverable. It really is thanks to the Members on the Conservative Benches who represent Scottish constituencies who have made the case so strongly to the Treasury that we were able to change that situation going forward. Perhaps I may now be able to make a little progress.

We have, of course, also announced that we are freezing fuel duty for a ninth year in succession and increasing the living wage by 4.9% from April. In this Bill, we deliver a freeze on the duty on beer and spirits, keeping living costs down and supporting our pubs. Our freezing duty on spirits comes as a direct consequence of Conservative Members representing their constituency interests in the industry.

[Mr Bob Seely (Isle of Wight) (Con)]

I support so much of this Budget, which was superb, with the cut in business rates and, especially, the beer duty freeze. Will the Minister agree to meet me and pub owners from the Isle of Wight, because there is still a problem with the way that publicans—small business owners—are being treated by the big pub companies, especially Enterprise Inns, which has quite an aggressive business style that is pushing many of my local pubs into bankruptcy? Is there more that we can do on the pubs code?

[Mel Stride]

I thank my hon. Friend for that important intervention. I know what a doughty supporter he is of the high street, and pubs in particular. We do of course, as a Government, support and have frequent conversations with organisations such as the British Beer and Pub Association. However, I would be very happy to meet him, as he requests, to have that discussion.

This Bill will provide additional relief from stamp duty for first-time buyers who enter into a shared ownership arrangement, and will back-date this relief to benefit those who entered into their purchase on or before the date of the Budget. We will continue to champion home ownership, as well as backing hard-working people and bearing down on the cost of living.

For every Member of this House, the high street lies right at the heart of the communities that we serve. High streets hold within them the very essence of the best of the human spirit—community, creativity, individuality and a collective purpose. They are the places we come together to work, to shop, to socialise, to support, to celebrate, and to invent and create, and this Government wish to see them thrive. That is why we have announced a two-year reduction in business rates of one third for smaller retailers, meaning that up to 90% of high street retailers will benefit. It is also why, in this Bill, we will legislate to allow for the further reduction of corporation tax from 19% to 17% in 2020, helping businesses both large and small. As tax rates have declined—as we have discussed—the corporation tax yield has increased by 50% since 2010. Backing our high streets means backing Britain, and this Government will play their part in this great endeavour.

This Bill will support businesses through the introduction of key allowances and enhancements to important tax reliefs. The structures and buildings allowance will provide a vital tax break for those businesses investing in new commercial property. The annual investment allowance will be increased from £200,000 to £1 million for the next two years, ensuring that companies have a critical additional incentive to invest.

For businesses concerned with deep-sea oil extraction, we will allow for the transfer of their historical tax history, ensuring that jobs, expertise and businesses involved in the North sea are preserved—a measure that the shadow Treasury Minister, the hon. Member for Norwich South (Clive Lewis), described as “corporate welfare” and said should be voted down. That position should be evidence enough that Labour has truly given up on Scotland, something that the Conservative and Unionist party will never do. On the Opposition Benches we have Labour Members who have given up on hard-working people, SNP Members who have given up on our precious Union, and Liberal Democrat Members who have just given up.

This Bill is also about fairness. It introduces a number of important measures that will further clamp down on tax avoidance and evasion. The House will know that this Government have an outstanding record with regard to the collection of tax. We have one of the lowest tax gaps in the world—far lower than was the case under Labour. In fact, the additional revenue raised by having our tax gap at its current level, compared with that in 2005-06 under the last Labour Government, is enough to pay for every policeman and policewoman in England and Wales.

Collecting tax also matters because where taxation goes uncollected, others who do the right thing are required to pay still more, our vital public services go without, or we have to increase borrowing and the burden is passed on to our children. Tax avoiders, whether the largest corporates or the wealthiest best-advised individuals, diminish us all. This Government will continue to clamp down on avoidance, evasion and non-compliance. Specifically, this Bill brings in measures further to address corporate profit fragmentation, whereby companies reduce their tax burden by artificially shifting around their revenues. In the Bill, we will ensure that non-residents pay tax on the capital gains they make on UK commercial property. The Bill also strengthens our diverted profits tax, which has already brought in and protected £700 million since 2015.

This House will know that we have announced a digital services tax, so that large multinational businesses such as search engines, social media platforms and online marketplaces pay their fair share in tax—right here in the United Kingdom.

[Stewart Hosie (Dundee East) (SNP)]

I want to ask the Minister a technical question. Given that the digital companies’ turnover and, indeed, profits are substantial, why have the Government been so modest in seeking to achieve only a £400 million tax take from those companies?

[Mel Stride]

As the hon. Gentleman will know, the scope of this tax is very clearly targeted on businesses that make substantial value in the United Kingdom as a consequence of the interaction of UK users and the digital platforms they trade across. He will know that there is a small number—relative to the size of the UK economy—of important businesses that are therefore within the scope of the measure. A figure of 2% is very much in line with the kind of figures that the EU was looking at or is continuing to look at—[Interruption.] From a sedentary position, the hon. Member for Oxford East (Anneliese Dodds) is talking about 3%, but she is not actually comparing like with like, because different revenues would be in scope under the two different approaches. The short answer is that this has to be proportionate: it is about levelling the playing field. Along with this particular measure, we have also announced that, for our high streets, we will be reducing business rates by a full one third for 90% of smaller retailers.

[Mr Alister Jack (Dumfries and Galloway) (Con)]

Does my right hon. Friend agree with me that the growing tax gap between Scotland and the rest of the UK is in fact a tax on aspiration and that it discourages higher earners from wanting to work north of the border?

[Mel Stride]

My hon. Friend is right. If we look at some of the relieving measures on tax that have been provided to Scottish taxpayers, we can see that they come by way of the increases in the personal allowance that this UK Government have made. He is absolutely right to highlight the fact that Scotland is becoming more of a high tax jurisdiction.

[David Linden (Glasgow East) (SNP)]

The Minister’s colleagues in the Scottish Parliament stand up week in and week out to ask for more money for public services, so if the Conservatives will not put up tax, where does the money come from or do they cut services?

[Mel Stride]

I will tell the hon. Gentleman where some of the money comes from. I will tell him where £700 million has just come from, and that is the Barnett consequentials following from the recent Budget.

[Mary Creagh (Wakefield) (Lab)]

If the Minister is serious about introducing a digital services tax, why did he not just introduce it overnight? When we look at the Red Book, we see it says that the income and the delivery of this policy are both high risk. If he is serious about taxing the digital giants that are offshoring their money, why is he giving them a couple of years to make provision elsewhere? [Interruption.]

--- Later in debate ---

[Madam Deputy Speaker (Dame Rosie Winterton)]

Order. Can we not have these conversations across the Chamber at the other end of the Chamber? It really is distracting.

[Mel Stride]

The hon. Lady will know that we are a first mover: we are one of the first countries in the world to take this approach. She will also know that this is a complicated tax and a tax that we absolutely have to get right. I have already spoken about the restricted scope of this tax. We want to make absolutely certain that it works and that it does not discourage technology companies from coming to this country, as they do in their droves under the economic policies of this Government.

[Vicky Ford]

Given that digital companies know no borders, does the Minister agree that, while we take this first step to introduce taxes on international digital companies, it is important to continue to work with our neighbours and others across the world on an international effort to do so?

[Mel Stride]

My hon. Friend is totally right. We have been in the vanguard of efforts conducted through the European Union, the OECD and the G20 to come up with a multilateral approach on this matter. That is the preferred option of the Government, and rightly so, because it obviates the problems that one would otherwise have with aspects of double taxation. It is helpful if we all move together, and that is still our aspiration, but we have said that if we do not get that multilateral agreement within the next year or so, we will move ahead with our measure.

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

The Financial Secretary may be going to touch on this, but I will ask him the question anyway. He has not said much about investment in climate change technology. There is a lot of concern among scientists about the effect of climate change. Can he give us any indication of how the Government are investing in this technology?

[Mel Stride]

We are investing hugely, and the evidence is there that we are succeeding. We have had a 43% reduction in carbon emissions since 1990. We are still pursuing, committed to and confident that we will meet our 80% reduction target by 2050. There are measures in the Bill, for example, to provide a tax relief for those who charge their cars through the businesses for which they work. We will continue to be very forward-leaning on the issue of the environment.

[Mary Creagh]

On that point, the Government’s failure to introduce a latte levy on single-use disposable coffee cups and bottles or to introduce a tax on virgin plastic until 2022 means that 700,000 tonnes of plastic packaging will be thrown away before 2022. Is that what the Financial Secretary means by making sure that the polluter pays in tackling climate change?

[Mel Stride]

What I mean by our environmental credentials in that area is that we are consulting, as the hon. Lady will know, on the amount of packaging that contains recyclable plastics. We see that not only as informing what we will subsequently do but as helping to change behaviour, much as the sugar levy changed behaviour in the sugar-based drinks sector. We have a very strong record in this area. We have already done a number of things in the public health area, and we will also make progress on the environment.

[Rebecca Pow]

On that point, I was pleased to see in the Budget that there is money for the planting of millions of trees. That will have a huge impact not only on ameliorating the effects of flooding and on health and wellbeing, but in terms of the carbon that those trees will take in, which will affect climate change.

[Mel Stride]

My hon. Friend is right to highlight that commitment, which will see 11 million trees planted as a direct consequence.

Our country faces the great challenge and opportunity of leaving the European Union. Some say that Brexit has been so all-consuming that we are not capable of seeing beyond it—that we are not able to lift our eyes to the future because we are too fixated with the challenges delivered by the past. However, Conservatives are better than that. On the eve of the D-day landings one of the greatest pieces of legislation passed by this House—Rab Butler’s Education Bill—received Royal Assent. Even war did not stop us then.

As we take our country forward to a world beyond austerity, beyond the toughest of times, beyond the sacrifices that have been endured and, indeed, beyond Brexit itself, our country will show that we are capable of not just enduring but thriving, and that no challenge is too great for us and no opportunity is beyond our reach. This Bill, following this Budget, sets us firmly on that path. I commend it to the House.

Oral Answers to Questions

Mel Stride Excerpts

Tuesday 6th November 2018 Commons Chamber

[Christian Matheson (City of Chester) (Lab)]

2. What recent assessment he has made of the potential effect on tax revenues of the UK leaving the EU.

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

The Government will be coming forward with a full and appropriate analysis of the impact of the deal we negotiate with the European Union well in time for the meaningful vote.

[Christian Matheson]

The Government’s own figures demonstrate between a 2% and 8% hit on the broader economy after Brexit. Is it not the case that there is no form of Brexit that will not have a massive impact on the public finances and, therefore, on public services?

[Mel Stride]

We are in the middle of a negotiation. At the appropriate moment, when we know exactly what the deal is—the deal that is available and that we have negotiated—we will of course come forward with a full and comprehensive analysis of both the fiscal and the economic impacts of that deal.

[Charlie Elphicke (Dover) (Ind)]

Is it not important that the public and Parliament are able to scrutinise not just the Treasury assumptions on tax as we leave the European Union but the Treasury assumptions on all aspects of the economy under the Treasury’s CGE—computable general equilibrium—model? Will the Treasury publish that model as soon as possible?

[Mel Stride]

As I say, we will come forward with a full and appropriate analysis. Of course, prior to the meaningful vote, the Government will ensure that there is appropriate time to fully debate all these matters.

[Alison McGovern (Wirral South) (Lab)]

Our country already suffers from brutal inequality, so will the Minister say whether that analysis will be broken down by region and sub-region so we can see exactly what the impact of Brexit will be on the communities we represent?

[Mel Stride]

As the hon. Lady will know, under this Government income inequality is far lower than it was under Labour. I am not going to start getting involved in a running commentary on the negotiations and the various impacts thereof, as that would not be helpful, other than to restate that a full and appropriate analysis will be provided to the House prior to the meaningful vote.

[Mr Richard Bacon (South Norfolk) (Con)]

Will Ministers consider moving the trigger point for the application of the zero rate of VAT for new build dwellings as defined in the Town and Country Planning Act 1990, which would end the unintended discrimination, both before and after we leave the EU, against self-build and custom house building projects, while not harming Government revenue?

[Mel Stride]

That is possibly the most ingenious question I have ever heard in this House, and it is indicative of my hon. Friend’s passion for and commitment to this matter. I recognise the issue he raises on the zero-rating of new builds, on which he wishes to extend the scope somewhat. I believe that my office has now arranged a meeting with him, and I look forward to it taking place within the coming days and weeks.

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

Will the Minister ensure that both he and the Chancellor take steps in advance of the next Budget to ensure that thousands of jobs can be created, particularly in Northern Ireland, by looking at air passenger duty and at VAT in the hospitality sector?

[Mel Stride]

As the hon. Gentleman will know, we have consulted on APD and VAT on tourism in Northern Ireland, and we have now reported back on that consultation. We are setting up a technical working group to look specifically at the issue of short-haul APD to see whether there is some way in which that could be addressed.

[Sir Desmond Swayne (New Forest West) (Con)]

Even before that great day, what reassurance can the Minister give to those of us who hold on to the quaint belief that Budgets should balance?

[Mel Stride]

We take a very balanced approach to the economy, which of course includes ensuring that we stick rigorously to our fiscal rules. We have met the two intermediate rules a full three years early. We continue to bear down on the deficit, and debt as a percentage of GDP will continue to fall throughout every year of this Parliament.

[Kirsty Blackman (Aberdeen North) (SNP)]

Each additional EU citizen working in Scotland contributes £10,400 to Government revenue. What assessment has the Minister made of the reduction in tax revenue as a result of the ending of free movement?

[Mel Stride]

I am sorry to keep reverting to the same answer, but it is effectively the same question that I keep being asked: “What will the analysis look like when the deal is concluded?” Of course that prompts the question of what exactly the deal will be. In the fullness of time, when the deal is agreed, we will come back to the House with a full analysis.

[Kirsty Blackman]

Her Majesty’s Revenue and Customs can collect customs duties only if it has a working customs system, so how is the roll-out of the customs declaration service going? How is HMRC going to achieve the Government’s commitment in the Red Book to halve the time it takes to apply for customs trusted trader status?

[Mel Stride]

The hon. Lady raises the issue of the CDS system. The current expectation is that that will be fully functioning by the end of March next year, which means we therefore have a robust back-up in the extension of the CHIEF—Customs Handling of Import and Export Freight—system. This is to make sure that that gears up for the huge increase in the number of customs declarations that will need to be made in a no-deal situation. We will of course continue to work hard on that matter.

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

Further to the answer the Financial Secretary gave to my hon. Friend the Member for Dover (Charlie Elphicke), will he publish, when he is publishing the CGE analysis, the assumptions underlying all potential EU exit scenarios, including those on World Trade Organisation terms and with a free trade agreement?

[Mel Stride]

The commitment we have made is that the deal agreed between us and the EU—we are confident we will achieve exactly that—will be fully analysed in an appropriate way and delivered to this House so that during the days in the run-up to the meaningful vote all Members of the House will have an opportunity to properly study that analysis.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

Last week’s Budget certainly did not end austerity, but we all heard that things could be even worse in the event that the Government fail to get a good Brexit deal. In the Chancellor’s own words, that would necessitate a new Budget entirely, so may I ask the Financial Secretary an entirely straight question: how will the Government react to the loss of even 10% of our tax revenues from financial services in the now likely event that our market access is diminished?

[Mel Stride]

The hon. Gentleman raises the issue of financial services, and of course he will be aware that recent progress has been made on that issue with our European partners in the negotiation. As for the impact of an actual deal, as I say, we do not know exactly what that deal will look like at this stage. When we do, we will come forward to the House with an appropriate announcement.

[Jonathan Reynolds]

The reason the Minister keeps having to give the same answer is that the Government’s answer is woefully inadequate. Business needs certainty and the Government have run out of time, so will he at least acknowledge that securing no more than equivalence to what is already available to third countries would be insufficient? Is it not the case that if people want a Brexit deal that really protects jobs and tax revenues, and they want to end austerity, the only way they can have both is with a Labour Government?

[Mel Stride]

It was all going so well—not that well, actually, but it got a sight worse towards the end. Government Members know that we are taking the responsible decisions to move forward a very difficult and detailed negotiation. At the appropriate time, when we have a deal—we are confident we will do that—we will present it to the House, and the House will then be able to express its view on it.

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

3. What recent discussions he has had with the Secretary of State for Work and Pensions on the potential effect on household income of the roll-out of universal credit.

--- Later in debate ---

[Mark Pawsey (Rugby) (Con)]

9. What fiscal steps he is taking to support the high street.

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

As my hon. Friends will know, in the Budget, we allocated £1.5 billion to supporting our high streets, including £675 million for our future high streets fund, and reduced business rates for smaller retailers by one third for the next two years.

[Alex Burghart]

Businesses in my constituency are giddy with excitement at this huge reduction in business rates. Will my right hon. Friend confirm what proportion of businesses on the high street are going to benefit from this?

[Mel Stride]

I am also giddy with excitement about this, and giddy with excitement to be able to inform my hon. Friend that up to 90% of smaller retailers, many of them in our high streets, will benefit from this package. That is in complete contrast to Labour’s policy of putting up taxes on small businesses. That is no way to support our high streets; it is Labour’s way to destroy business and jobs.

[Mark Pawsey]

On 1 December, I will be visiting retailers in Rugby town centre to support the Federation of Small Businesses’ Small Business Saturday. These businesses are in a tough and fast-changing environment. Does the Minister agree that the business rate incentive that he mentioned will go some way towards levelling the playing field between those retailers and those who operate online?

[Mel Stride]

I certainly agree. These changes will boost our high streets, and the FSB is to be congratulated on Small Business Saturday. I shall be in Ramsgate with my hon. Friend the Member for South Thanet (Craig Mackinlay) speaking to some of his retailers about this. I extend a non-partisan invitation to Labour Members to join us: we will go up our high streets talking to retailers about reducing their rates, and they can talk about the tax increases that they have in store for them.

[Rachael Maskell (York Central) (Lab/Co-op)]

The very short-term measure to give some businesses relief was announced at the Budget, but why did not the Chancellor announce the real cause of escalating business rates—the investors on our high streets from overseas who are really exploiting the market?

[Mel Stride]

I am slightly disappointed by the approach taken by the hon. Lady, for whom I have great respect, in pouring cold water on a major fiscal move such as this to reduce high street rates by one third, which will benefit approximately 90% of smaller retailers in her constituency. That is a shot in the arm for our high street and a shot in the arm for British business.

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

In truth, this is very small beans for high street stores. It is correct that some people will benefit, but also correct that many of our town centres and shopping centres have vacancies that this will not even touch, so what more can Government do to address the fundamental unfairness in the system?

[Mel Stride]

The hon. Gentleman is right inasmuch as he points to the fact that high streets need to reinvent themselves—to transition—in order to adjust to the growth in online marketplaces. That is exactly what our future high streets fund is all about, with £675 million going out via local authorities, following competitive bids, to make sure that we reshape those high streets in exactly the way that he would like them to be reshaped, get rid of the shops that are shut down and reinvigorate and rejuvenate the very centres of our communities.

[Sir David Amess (Southend West) (Con)]

8. What steps he is taking to support businesses and entrepreneurs.

--- Later in debate ---

[Mrs Kemi Badenoch (Saffron Walden) (Con)]

18. What steps he is taking to tackle tax avoidance and evasion.

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

The Government have brought in over 100 measures to clamp down on avoidance, evasion and non-compliance since 2010, protecting and yielding over £200 billion in revenue.

[Mrs Badenoch]

Some 19% of all businesses declared deliberate tax defaulters by Her Majesty’s Revenue and Customs this year were from the restaurant and takeaway business. Does the Minister agree that companies in this industry that do pay their taxes, such as the Chesterford Group in my constituency, do not have a level playing field?

[Mel Stride]

I cannot comment on a specific taxpayer, but I can say that HMRC does publish quarterly the names of those who deliberately default on taxation, as a method of bringing them forward to settle with HMRC. We have brought in a further 21 measures in the Budget to raise a further £2 billion by 2023-24 by clamping down on avoidance and evasion.

[David Hanson (Delyn) (Lab)]

How does a £200 million cut, announced in the Red Book, help with HMRC’s collection of taxes?

[Mel Stride]

HMRC has had an additional investment since 2010 of £2 billion. It has 28,000 full-time equivalent staff engaged in the mission of tax inspection and clamping down on avoidance and evasion. We have one of the lowest tax gaps in the entire world, at 5.7%. That is far lower than was the case under the previous Labour Government. In fact, if we were stuck with the poor levels of tax collection under the Labour party, we would lose revenues equivalent to employing every policeman and policewoman in England and Wales.

[Mr Speaker]

The hon. Member for Gainsborough (Sir Edward Leigh) is a very lucky boy today.

--- Later in debate ---

[Sir Edward Leigh (Gainsborough) (Con)]

19. What recent steps he has taken to reduce the amount of tax payable by small and medium-sized enterprises.

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

My hon. and gallant Friend always gets there in the end and in my experience he is very good when he does. I can tell him that we do a great deal to support small businesses. We announced our one third reduction in the small business rate. Our tax rate for small business is declining. It is now 19% and it will fall to 17% in the next couple of years.

[Sir Edward Leigh]

Can the Minister assure me that by the end of this Parliament small businesses in Gainsborough will be paying less tax than they are now?

[Mel Stride]

I can assure my hon. and gallant Friend that the smaller retailers in his constituency will be paying about a third less in rates. He will see a further diminution of the general corporation tax rate. It was 28% in 2010 and it is now coming down to 17%. Of course, they will also benefit from other measures, such as the freezing of fuel duty, which will help many small businesses.

[Sir Edward Leigh (Gainsborough) (Con)]

T1. If he will make a statement on his departmental responsibilities.

--- Later in debate ---

[Fiona Bruce (Congleton) (Con)]

T2. Four thousand current and former employees of Roadchef, many of whom are elderly, including some 150 who worked at Sandbach services, will be pleased that there has been success in their campaign for money that they are entitled to from HMRC, but can Ministers provide an assurance from HMRC that there will be no tax payable on these moneys going in or out of the Roadchef employee benefit trust?

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

I obviously cannot comment on the specific case of the Sandbach services employees, but I assure my hon. Friend that I have looked extensively at this matter and consulted various Members across both sides of the House. I am satisfied that HMRC in general has conducted itself appropriately over this whole issue, but I am happy to meet her to discuss the specific point that she raised.

[Alex Norris (Nottingham North) (Lab/Co-op)]

T3. There were over 9,000 words in the Chancellor’s Budget speech, but not one mention of Nottingham or the east midlands. In the east midlands, we have multiple investable schemes that will drive growth in our region. When will the Treasury back the east midlands?

[Craig Tracey (North Warwickshire) (Con)]

T5. I welcome the announcement in last week’s Budget of investment in our high streets, which will be particularly welcome in Bedworth in my constituency. I had meetings with local businesses recently on this very issue, and particularly on their frustrations at the lack of ambition of the local borough council. Can the Minister advise how local councils such as Nuneaton and Bedworth can best take advantage of this excellent opportunity?

[Mel Stride]

I recognise the huge amount of work my hon. Friend has put into the issue of revitalising our high streets, and his representations to me and other colleagues. The £675 million future high streets fund will be bid for on a competitive basis through local authorities, so it is very important that all Members encourage their local authorities to come forward with their bids.

[Gareth Thomas (Harrow West) (Lab/Co-op)]

T4. The co-operative movement in the UK has a turnover of £36 billion. Given that it employs thousands, and that thousands will benefit as a result of the economic and social benefits that co-operatives bring, why was there no mention of the co-op movement in the Budget?

--- Later in debate ---

[Stephen Morgan (Portsmouth South) (Lab)]

What role, if any, have the readiness for Brexit and resource levels of Her Majesty’s Revenue and Customs played in influencing the Prime Minister to consider extending the customs transition period?

[Mel Stride]

HMRC has a central role in ensuring that we are ready for Brexit, specifically in the unlikely event of a no-deal day one scenario. That has included the recruitment of 2,300 additional staff, and we will have an additional 5,000 staff by the end of the year. We are ready, and we will be ready, for wherever this deal lands.

[Alex Chalk (Cheltenham) (Con)]

Motorists want to see the earliest possible end to the traffic misery on the A417 caused by the air balloon pinch point. Does my hon. Friend recognise that the Budget, through its extra firepower for roads, provides the best possible platform for such a vital scheme?

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

I welcome HMRC’s rather belated decision to return tax wrongly paid by the Roadchef employee benefit trust. It is clearly now necessary to honour previously made commitments in respect of tax implications for beneficiaries. Did HMRC use its discretion to make that payout, and, if so, on what basis?

[Mel Stride]

The hon. Gentleman and I have had a number of discussions about this issue, both formal and informal, and have engaged in an Adjournment debate on it. I have always been very attentive to his specific questions, but if he would like me to meet him again to discuss the issue further, I should be more than happy to do so.

[Henry Smith (Crawley) (Con)]

Previous independent assessments of the impact of air passenger duty have shown that it costs the economy more than it brings into the Exchequer. May I have an assurance that the Treasury will do its own modelling to ensure that this island trading nation can compete better in the future?

Double Taxation Convention: Austria

Mel Stride Excerpts

Tuesday 6th November 2018 Written Statements

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

A double taxation convention with Austria was signed on 23 October 2018. The text of the convention 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.

[HCWS1073]

Valuation Office Agency

Mel Stride Excerpts

Wednesday 24th October 2018 Written Statements

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

I am today announcing the start of a tailored review of the Valuation Office Agency (VOA). As an Executive agency of HM Revenue and Customs, the VOA is required to undergo a tailored review at least once in each Parliament. The structure, efficiency and effectiveness of the VOA and the governance arrangements it has in place will be considered as part of this review. I will inform the House of the outcome of the review as appropriate.

[HCWS1092]

Finance (No.3) Bill

Mel Stride Excerpts

Monday 15th October 2018 Written Statements

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

Finance (No.3) Bill will be published on Wednesday 7 November.

Explanatory notes on the Bill will be available in the Vote Office and the Printed Paper Office and placed in the Libraries of both Houses on that day.

Copies of the explanatory notes will also be available at: www.gov.uk.

[HCWS1002]

Business Rates: Small Retail Businesses

Mel Stride Excerpts

Tuesday 9th October 2018 Commons Chamber

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

Madam Deputy Speaker, may I say what a pleasure it is to see you in the Chair after the recess? It is also a pleasure to realise that I have an hour and 16 minutes in which to address my response to my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown), but I may cut it down just a little bit to please the House.

I thank my hon. Friend for bringing this important debate to the House tonight. It is entirely characteristic of him that such a debate is in his name, because throughout his parliamentary career he has been a strong advocate of business both across the country and, importantly, in his constituency. He was right to highlight in his opening remarks the sheer size and importance of our small business community—there are 5.7 million small businesses, a figure that he cited—and the recent growth that we have had under the coalition Government and this Government. He has worked closely with the British Independent Retailers Association on various thoughts and proposals, some of which he put forward this evening and to which I shall respond in a moment.

My hon. Friend is right that business rates are an important tax. When we consulted on business rates back in 2015 and considered the various alternatives, several different suggestions were made, such as turnover taxes, taxes on gross value added and so on. Inevitably, with every kind of measure or metric that one focused on, they had their own particular drawbacks and complexities and so on. The conclusion that was reached at the time was that business rates were a stable tax that is difficult to avoid because property is static by definition. Of course, as my hon. Friend also rightly pointed out, business rates raise around £25 billion a year, which is a significant contribution to our public services and funds, in turn, our doctors, nurses, policemen and policewomen and so on.

The Government recognise that business rates represent a high pressure on small businesses, particularly for high street retailers. Rates are a fixed cost that cannot be avoided, irrespective of whether a business is profitable or otherwise, which is why we have undertaken a series of important measures. In the 2016 Budget, we made 100% small business rate relief permanent, at that time increasing the threshold for the relief and taking 655,000 of the smallest businesses out of business rates altogether. We also increased the threshold for the standard multiplier, taking 250,000 properties, including most high street shops, out of the higher rate of business rates.

However, that is not all. Following the most recent property revaluation in 2017, we introduced a £3.6 billion transitional relief scheme to cap and phase in bill increases. Additionally, at spring Budget 2017, we announced an extra £435 million to support those businesses facing the steepest increases in bills, including £110 million to support 16,000 small businesses losing small business rate relief or rural rate relief to limit increases in their bills to the greater of £600 a year or the real-terms transitional relief cap for small businesses in each year. We also provided local authorities with £300 million of funding for discretionary relief to support individual cases in their local area.

In parallel to all that, we have taken significant steps to ensure the fairness of the business rates system as a whole. That is why, at spring Budget 2017, the Chancellor announced that we would reform the revaluation process to make it fairer. I am pleased to say that we have delivered on that by increasing the frequency of business rates revaluations from every five years to every three years, following the next revaluation. That is an important point in the context of what my hon. Friend said about the difference in the rates being paid by the out-of-town store and by retailers on the high street. If we can have more frequent revaluations, as rateable values on the high street perhaps fall, we can more quickly pass on the benefit of that within the system.

[Rachael Maskell]

Does the Minister recognise that inequality exists between property size and turnover and that online businesses do not have the same huge valuations as retailers on the high street? Therefore, there is a complete dissociation between the success of a business and its ability to pay under a rateable system, whether that system is based on turnover or profitability, as opposed to a system that is dependent on an external landlord and the rents that they are charging for their property.

[Mel Stride]

The hon. Lady will probably be aware of the Chancellor’s speech at our recent party conference, in which he spoke quite strongly about the importance of a level playing field for online businesses that derive value in the United Kingdom and end up paying very little tax and about the international tax approach that we may look at taking unilaterally as a consequence. The most important thing overall is that the Government recognise that when it comes to high streets and the smaller retailers to which the hon. Lady refers, we should take measures to reduce the burden of rates, particularly among smaller businesses, in the way that I have described this evening. That makes bills fairer for everyone, as they more closely reflect the current rental values and relative changes in rents. To ensure that ratepayers benefit from this change at the earliest point, the spring statement 2018 included an announcement that the next revaluation would be brought forward by one year to 2021.

Before I address some of the specific points raised by my hon. Friend, it is worth highlighting that, at autumn budget 2017, we brought forward the planned switch in the indexation of business rates from RPI to CPI by two years. This switch is worth £2.3 billion over five years, and the move to CPI is worth £4.1 billion in total by 2023. So once more, the Government are making a significant investment to recognise the pressures that rates introduce.

My hon. Friend raised the specific issue—

[Sir Geoffrey Clifton-Brown]

Before my right hon. Friend goes on to the specific BIRA proposals, may I put to him something about the out-of-town retailers, particularly supermarkets? As I explained to the House, the rateable system is based on rents payable, which one would assume in a market would sort itself out. The problem with out-of-town supermarkets is that they have a monopoly on these sites and they manage artificially to keep the rents low, so their rates are unfair compared with the in-town shops, as I have already demonstrated with my Stow-on-the-Wold example. Something needs to be looked at. I do not know whether the issue could be looked at in a revaluation system or whether legislation is needed, but it is an issue particularly when the out-of-town supermarkets are competing with the small in-town businesses. For example, the owner of a card shop recently told me that the out-of-town supermarket started selling cards and immediately put him out of business.

[Mel Stride]

I thank my hon. Friend for his intervention. I know that the Valuation Office Agency is thorough in the way in which it conducts revaluations. It is an independent agency. However, I note the point that he has made, and if he would like to write to me or meet me to discuss it in the context of potential undervaluations, I am open to doing so.

The points that my hon. Friend made included the idea of an allowance instead of the threshold. I assume that he wanted to apply that allowance to all retail businesses, and of course that would come with some cost. It would mean providing further additional relief to some companies or businesses that do not currently receive it.

[Sir Geoffrey Clifton-Brown]

I hope that I chose my wording very carefully. I said that the allowance would be applied only to businesses that qualified for small business relief. It would be nonsense automatically to give the big businesses an allowance. That would cost the Treasury, and I want to make it clear that my proposals are revenue neutral.

[Mel Stride]

I thank my hon. Friend for clarifying that point, and I am sorry that I misunderstood. He asked what the costs of compliance were under the current system and suggested that, if we changed it, we might be able to absolve ourselves from those costs and pass the benefits on to these businesses. That is certainly something that I am happy to look at and discuss with him. The overarching point is that we had a fundamental review of business rates in 2015, and many of the issues that my hon. Friend has raised were carefully looked at.

My hon. Friend said that he recognised that change would take some time, and we are likely to be considering these matters over some reasonable period. He raised the issue of the confidence of small business retailers at the moment, and this is where I would broaden the debate’s scope a little by saying that it is not just bearing down on business rates that is the mission of this Government. We also provide the employment allowance and we are bringing down small business tax rates, with corporation tax having fallen from 28% in 2010 to 19% now and set to reduce further to 17% in time. A lot of small businesses, including retailers, will be benefiting from other measures such as fuel duty freezes. We have just announced that fuel duty will be frozen for yet another year—the ninth year in succession.

In conclusion, let me again thank my hon. Friend for this very important debate. He is focusing on one of the great challenges of our time for our high streets, which lie at the heart of our local communities. It behoves us all to do all we can to make sure they are live, whole and thriving.

[Sir Geoffrey Clifton-Brown]

I want to impress on the Minister that this problem is not going to go away. The decline of our high streets is getting worse. It is accelerating, so the Government cannot just sit back. With great respect, just providing allowances in the rating system to try to make this work means that the tax base is being eroded, because the allowances have to be provided. The Government need to look at this seriously to see how they can make the system work a little better, particularly in favour of small businesses.

[Mel Stride]

My hon. Friend is absolutely right; high streets face a variety of challenges, of which business rates is but one. One of the greatest challenges they face is the change in how we are now shopping, with just over 18% of all retail now going online; that presents a huge challenge and that number is likely to increase in time. That tells us that high streets will need to transition, reinvent themselves, change and come up with new ways to serve their local communities and drive traffic into our high streets. We recognise the importance of making sure that all those things are looked at through the planning system and the reviews we are carrying out at the moment and through the important work we have been carrying out to date. I see this debate as being very important in that regard. We will continue to keep this under review in terms of making sure we keep those cost pressures through the business rates system as low as they can be for our important high street retailers.

Question put and agreed to.

Oral Answers to Questions

Mel Stride Excerpts

Tuesday 11th September 2018 Commons Chamber

[Jo Swinson (East Dunbartonshire) (LD)]

10. What steps he is taking to ensure that large international technology companies pay an appropriate level of tax in the UK.

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

Mr Speaker, I echo your welcome to the hon. Lady. It is good to see her in her place. It is absolutely right that all companies in this country should pay a fair rate of tax. The Government recognise that for some businesses—typically online companies—the current international tax regime is not entirely appropriate. We are working with the OECD and the European Union to find a solution to that, and we have made it clear that in the event we cannot reach a position where we can move multilaterally, we will take unilateral action.

[Jo Swinson]

I thank the Minister for that answer. The fact that Amazon’s UK profits trebled, yet it ended up paying less tax, shows how the tax model is broken for large international tech companies. He said that the UK may act unilaterally if international progress is not made at sufficient pace. With the OECD report not expected until 2020, is he prepared to wait that long before starting to act? Does he anticipate perhaps joining in with our European Union allies on the 3% interim revenue tax before then?

[Mel Stride]

We are not only working with the European Union; we are also working closely with the OECD. At our persuasion, it has recently decided to bring forward that report to 2019. We are making progress at the multilateral level, but as I have clearly stated, we should all be in no doubt that we are prepared to take unilateral action, should that be appropriate.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

The question is whether there is a level playing field. When my right hon. Friend hears that bookshops pay around 11 times more total tax than Amazon on the same £100 of turnover, does he think we are striking the right balance to enable our town centres and communities to thrive?

[Mel Stride]

When it comes to business rates, which are the heart of the taxes that my right hon. Friend referred to, we have done a great deal since 2016. We will by 2023 have provided reliefs totalling some £10 billion, much of which will fall as relief to the high street. I take on board the comments he has made. As with all taxes, we will keep business rates under review.

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

Contrary to the comments of the Financial Secretary to the Treasury, international co-ordination on tax has frequently been blocked by the Government. We saw that particularly when it came to the taxation of trusts with both David Cameron and now the current Government arguing against more transparency. It is no surprise that, as a result, a director of Fidelity International and other experts are saying that the Amazon case shows

“how tax policy hasn’t moved on.”

Why are this Government letting giant multilaterals get away with it and letting everybody else down?

[Mel Stride]

Let me be extremely clear to the House: this Government have an exemplary record on clamping down on avoidance, evasion and non-compliance. We have one of the lowest tax gaps in the entire world, at 5.7%, far lower than was the case under the Labour party. We have brought in a number of rules under the base erosion and profit-shifting project—a project of which we were in the vanguard. For example, tax deductions for interest expense came in in 2016 and yielded £3.9 billion by 2021, and the diverted profits tax that we introduced in 2015 has already raised some £700 million.

[Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)]

11. What assessment he has made of the effectiveness of tax incentives to support the sale of companies to employees.

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

We have brought in a number of incentives to encourage employee share ownership, not least employee ownership trusts, which provide a capital gains tax advantage to those businesses selling shares into the trust and tax advantages to employees alike. We have also brought in enterprise management incentives, company share option plans, the save-as-you earn scheme and the share incentives plan as well.

[Lloyd Russell-Moyle]

Small and medium-sized businesses are the lifeblood of the economies of local communities, but with 60% of small businesses with no succession plan after their founders retire, what are the Government doing to ensure that employee ownership is one of the options going forward to keep businesses going?

[Mel Stride]

I have set out a number of the schemes that the Government are moving forward with, and, of course, that has been with great success. In 2016-17, some 3 million employees entered into SIP share arrangements, 400,000 entered into arrangements under save-as-you earn with an average value of shareholding of some £5,000, and 3,500 employees were offered EMI schemes in that particular year.