Finance (No. 2) Bill (Second sitting)
Mel Stride Excerpts(8 years, 2 months ago)
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The Chair
With this it will be convenient to discuss the following:
Amendment 39, in schedule 3, page 65, line 28, at end insert
“or
(j) the pension scheme is a Master Trust scheme which has not complied with the relevant requirements of section 159E(2).”
This amendment paves the way for Amendment 41.
Amendment 40, in schedule 3, page 65, line 37, at end insert
“or
(i) the pension scheme is a Master Trust scheme which has not complied with the relevant requirements of section 159E(3).”
This amendment paves the way for Amendment 41.
Amendment 41, in schedule 3, page 65, line 37, at end insert—
‘(4A) After section 159D, insert—
Additional registration requirements for Master Trust schemes
159E Additional registration requirements for Master Trust schemes
(1) This section establishes additional registration requirements for Master Trust schemes.
(2) In respect of any such scheme, an investment strategy must be presented to the Commissioners prior to registration.
(3) In respect of any such scheme, and in respect of each year of registration, an annual report must be published on administration, fund management costs and transaction costs for each asset class and for active and passive asset management strategies.’
This amendment requires additional information to be provided on investment strategies and costs for Master Trust schemes prior to and in each year of registration with HMRC.
Amendment 42, in schedule 3, page 67, line 14, after “153(5)(i)”, insert “and (j)”.
This amendment is consequential on Amendment 41.
Amendment 43, in schedule 3, page 67, line 16, after “158(1)(h)”, insert “and (i)”
This amendment is consequential on Amendment 41.
Amendment 44, in schedule 3, page 67, line 17, at end insert—
‘(ba) sub-paragraph (4A);’.
This amendment is consequential on Amendment 41.
That schedule 3 be the Third schedule to the Bill.
The Financial Secretary to the Treasury (Mel Stride)
May I start by saying what a pleasure it is once again to serve under your chairmanship, Sir Roger? Clause 13 makes changes to extend Her Majesty’s Revenue and Customs’ powers to refuse to register and deregister pension schemes. The changes will enable HMRC to restrict tax registration to those pension schemes providing legitimate pension benefits and support the Pensions Regulator in its new authorisation and supervision regime for master trust schemes. The measure supports the Government’s objective of fairness in the tax system by maintaining the integrity of pensions tax relief.
Over the past few years, there have been growing threats to individuals’ pension savings, and they come in many forms. Many start with the setting up of a scheme, into which individuals are persuaded to pay their hard-earned savings, with a promise of various benefits. Sometimes these apparent pension schemes are no more than a scam, designed to extract money from unsuspecting individuals who end up with little or no retirement savings as a consequence. The Government are committed to tackling that threat, to ensure that individuals who save in a pension scheme have those funds available to them when they retire.
A master trust scheme is an occupational pension scheme for multiple employers, and clause 13 will extend HMRC’s powers to refuse to register and to deregister master trust pension schemes that are not authorised under the Pensions Regulator’s new authorisation and supervision regime. Aligning HMRC’s registration and the Pensions Regulator’s authorisation processes for master trust schemes will provide more effective protection for individuals.
The proposed amendments to schedule 3 would require pension schemes to provide additional information about the investment strategy of the scheme before HMRC decides to register the scheme and require the scheme to publish an annual report of costs in connection with the investments of the scheme to maintain its registration. The Government agree that transparency is integral to good governance and delivering improved member outcomes. However, the amendments would add little and largely duplicate existing requirements. The additional information required would not help HMRC to perform its role in collecting tax and ensuring that pension schemes are adhering to the tax rules. It would duplicate existing requirements by other regulatory bodies and add burdens and costs to pension schemes.
The amendments also propose that an annual report of costs in connection with the investments of the scheme be published. The Government consulted last year on legislation requiring transaction costs and other charges to be published for every investment option offered by defined contribution schemes, not just master trust schemes, and given to members. We plan to bring regulations for that into force in April this year.
The clause will ensure that HMRC can prevent scam pension schemes from being established and that it has the powers to take action where an existing scheme is discovered. That enables HMRC to protect people who have saved money for their retirement from the threat of pension scams. It supports the Government’s efforts to tackle abuse across the tax system, and I therefore commend the clause to the Committee.
Peter Dowd (Bootle) (Lab)
It is a pleasure to see you in the Chair, Sir Roger. The Minister referred to scams. To some extent, I am glad that he used the word “scam”, because I suspect that if I had used it, people would have said it was Labour again attacking companies, pension companies and investments. It is not the word I would have used, but I understand the point he makes, and it goes to the heart of what we want to discuss today, which is transparency.
Amendment 41 seeks to improve the transparency of master trust pension schemes, to ensure that they are at the forefront of changes taking place across the defined contribution sector. There is an argument to say that one cannot be transparent enough in these sorts of situations. We have had all sorts of institutional dodginess—let us put it no stronger than that—in the past, and whether through endowment schemes, personal protection plans, or the stuff now going on with leaseholds and property, people’s faith in some institutions is, I suspect, being challenged a little. That is why we want to push the envelope, so to speak.
The changes proposed in the amendment are twofold: first, it would ensure that a clear and coherent investment strategy is presented to HMRC before registration, which would go beyond the Government’s proposal; secondly, a clear annual report on the costs and charges being applied to saver pots must be presented to the trustees and, we hope, be made available to savers. We think that that will modernise the approach towards the fiduciary management of savers’ assets, updating the statement of investment principles approach that is currently required by master trusts. It will also bring master trusts in line with wider Government policy on reporting costs and charges—we are finally beginning to see some progress on that, following many years of campaigning by various bodies and organisations, as well as by many Members on both sides of the Committee and by other organisations.
Subsection (2) of amendment 41 requires a master trust to include an investment strategy in its application for registration to HMRC. Until now, every occupational pension scheme has been legally required to prepare and maintain a statement of investment principles, and that is expected to cover the trustees’ plans for securing compliance with their statutory duties, and their policies on investments, risks, returns and how they will exercise their voting rights. The amendment would ensure that such practice is embedded in the master trust sector, and enhanced to encourage trustees to strategically consider—a split infinitive there—factors that they believe will influence the financial performance of their investments, as well as, importantly, looking more closely at socially responsible investment.
We know that companies with strong environmental and social governance credentials have better long-term performance—that goes without saying. A company that is committed to environmental sustainability, and which cares about its staff and is well run and managed should, in the long term, always profit over a company that does none of those things. We have only to look at the Sports Direct share price over the past two years, or at Volkswagen following the 2015 emissions scandal. People react to what they perceive as non-environmentally friendly, or non-socially friendly approaches to their staff or product. Of course, Her Majesty’s Revenue and Customs has an interest in ensuring that the schemes that register with it for taxation purposes have a clear and transparent strategy for guaranteeing pension scheme members a secure retirement. That is a big responsibility for HMRC, and we should support it with the appropriate resources.
As long as pension funds can show that any investment or policy decision was made on a fiduciary basis and consulted on with members, they can avoid the charge that they have not considered their members’ best interests. The amendment will help HMRC to feel confident that the scheme being registered is legitimate, and it will also have secondary effects. Public opinion tends to position the average citizen as a helpless bystander in this drama, when in fact public money underpins the entire system. Anyone with a pension is indirectly an owner of Britain’s biggest companies, and the amendment envisions a world in which people feel that their savings give them a positive stake in the economy, and a voice in how the companies that they invest in are run.
The rise of private pension savings has led to a democratisation of company ownership, but when it comes to control of ownership rights the reverse is true. Power has become increasingly concentrated in the hands of a relatively small number of opaque and unaccountable financial institutions. As the Kay report showed, these institutions often face systematic pressures to act in ways that may not serve savers’ best interests. Direct accountability to savers is therefore a vital component of a healthy economic and financial system. As millions of savers have entered the capital markets through pension auto-enrolment, now is the right time, in our opinion, to build a more accountable system. We are talking 10, 20, 30 or 40 years ahead—let us start now.
In June 2011 the Government invited Professor John Kay to conduct a review into equity markets and long-term decision making. As I recall, the final report was published in July 2012. His review considered how well equity markets were achieving their core purposes: to enhance the performance of UK companies and to enable savers to benefit from the activity of these businesses through returns to direct and indirect ownership of shares in UK companies. The review identified the fact that short-termism is a problem in UK equity markets. Professor Kay also recommended that company directors, asset managers and asset holders adopt measures to promote both stewardship and long-term decision making. In particular, he stressed:
“Asset managers can contribute more to the performance of British business (and in consequence to overall returns to their savers) through greater involvement with the companies in which they invest.”
He concluded that adopting such responsible investment practices would prove beneficial for investors and markets alike. When it is put in those simple terms, who could argue? It seems to me axiomatic.
In practice, responsible investment could involve making investment decisions based on the long term, as well as playing an active role in corporate governance by exercising shareholder voting rights. Master trusts will want to consider the Kay review’s findings when developing their proposals, including what governance procedures and mechanisms would be needed to facilitate long-term responsible investing and stewardship through the funds they choose for members to save in.
The UK stewardship code, published by the Financial Reporting Council, has seven principles and also provides master trusts with guidance on good practice when monitoring and engaging with the companies in which they invest. Amendment 41 seeks to make sure that the trustees are cognisant of these issues, and we hope that where possible they will engage with their scheme members during the decision-making process.
In recent decades, efforts to improve the way in which companies are run have focused heavily on making directors more accountable to their shareholders—for example, the recent introduction of a binding say on pay—but this job is only half done. Ownership rights are exercised largely by institutions that are themselves intermediaries and accountability to the underlying savers who provide the capital remains weak. The logical next step must be for institutional investors to extend the same accountability that they expect from companies to the savers whom they represent. Indeed, such accountability is essential to the success of recent measures to encourage more engaged and responsible shareowners.
The UK stewardship code was introduced in the aftermath of the financial crisis to address concerns that shareholders were behaving as—I think this was the quote—“absentee landlords”. Rather than being enforced by regulators, it is a voluntary code that relies on scrutiny from below to promote compliance, mirroring the corporate governance code for companies. Yet while shareholders are given extensive rights to hold companies to account for their governance practices, savers are not equipped to play the same role in relation to institutional investors. The investment regulations currently require master trusts to set up, within the statement of investment principles, the extent to which social, environmental or corporate governance considerations are taken into account in the selection, retention and realisation of investments, and these policies should be developed in the context of consultation with the scheme members and should enhance the engagement with them over these crucial issues.
Peter Dowd
My hon. Friend makes a very important point.
To draw to a conclusion, I reiterate the point that I was making when my hon. Friend intervened. The efficient management of funds is critical to ensuring that we stave off a pensions crisis that citizens will be forced to endure in their retirement if we are not careful. The Government will fail in their duty of care if we do not get cost reporting on to the statute book. Transparency —there is that word again—is now an objective of all parties across the House. In our view, the Government must back this amendment and replace a little bit of rhetoric with action to protect pension savers.
Mel Stride
The hon. Gentleman has set out a comprehensive set of reasons for supporting his amendment. He will be pleased to know that I whole- heartedly agree with many elements of what he shared with us. Both sides of the Committee agree on our enduring belief that we should ensure that sufficient transparency is available and that we should do all we can to protect the life savings—in many cases—of those who invest in any form of pension, let alone master trust schemes, some of which have fallen foul of the kind of issues that we have been debating.
Unfortunately, I cannot agree with all the hon. Gentleman’s assertions. He spoke about the importance of transparency—I have said that I agree with that—but he also said that we cannot be transparent enough. That is an important maxim to operate by, but that cannot allow us to be led into a situation where we have overly burdensome additional costs as a consequence. That is the nub of our objection to his amendment.
The amendment would bring in a duplication of the regulatory body’s function of reviewing investment plans at the time that schemes are set up. The kinds of issues that the hon. Gentleman wants to be addressed are being addressed; I would be happy to share that information with him at a future date. The Financial Conduct Authority is consulting at the moment; the consultation closes on the 12th of this month—a few short days away. We have regulations planned for April that will ensure that we look into these issues and move into the area of the publication of costs and the way these schemes are run.
Returning to the clause, I hope we are united in believing that HMRC should be given additional powers to refuse the registration of schemes where it feels that they are deficient, and to withdraw registration where that is appropriate. I ask the hon. Gentleman to consider not pressing his amendments, and commend clause 13 to the Committee.
The Chair
With this it will be convenient to discuss the following:
Clause 15 stand part.
Clause 16 stand part.
That schedule 4 be the Fourth schedule to the Bill.
Clause 17 stand part.
Government amendment 1.
That schedule 5 be the Fifth schedule to the Bill.
New clause 6—Review of risk to capital changes—
‘(1) Within fifteen months after the first exercise of the power to make regulations under section 14(4), the Chancellor of the Exchequer must review the effects of the changes made by section 14.
(2) The review under this section must consider—
(a) the revenue effects of the changes, and
(b) the effects on the long-term growth and development of companies.
(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.’
This new clause provides for a post-implementation review of the changes in Clause 14.
New clause 7—Review of changes to EIS and VCT reliefs for knowledge-intensive companies—
‘(1) Within fifteen months after the first exercise of the power to make regulations under paragraph 10 of Schedule 4, the Chancellor of the Exchequer must review the effects of the changes made by that Schedule.
(2) The review under this section must consider—
(a) the revenue effects of the changes, and
(b) the effects on the policy objective to facilitate and encourage additional investment in innovative companies developing and exploiting new technologies.
(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.’
This new clause provides for a post-implementation review of the changes in Schedule 4.
New clause 8—EIS, SEIS, SI and VCT reliefs: review of operation—
‘(1) Within twelve months after the passing of this Act, the Chancellor of the Exchequer must review the operation of the reliefs established under Parts 5, 5A, 5B and 6 of ITA 2007.
(2) The review under this section must consider—
(a) the revenue effects of the reliefs and changes made to those reliefs since the passing of the Finance Act 2012,
(b) the employment effects of the reliefs and those changes,
(c) other economic effects of the reliefs and those changes, and
(d) the extent to which trusts or other entities have been created to secure benefits from the reliefs and those changes without providing wider employment or economic benefits.
(3) The Chancellor of the Exchequer must lay before the House of Commons the report of the review under this section as soon as practicable after its completion.’
This new clause provides for a review of the operation of the enterprise investment scheme, the seed enterprise investment scheme, income tax relief for social investments and venture capital trusts income tax relief.
Mel Stride
Clauses 14 to 17 and schedules 4 and 5 make changes to the tax-advantaged venture capital schemes as part of the Government’s response to the patient capital review. They also correct minor technical flaws in the legislation, to ensure that the legislation works as intended. The changes aim to drive more than £7 billion in new and redirected investment into high-growth companies over the next 10 years.
Responses to the patient capital review consultation pointed to the continuing importance of these schemes in incentivising investment in early-stage companies that would otherwise struggle to receive investment to help them grow and develop. However, evidence provided during the consultation, backed up by Sir Damon Buffini’s industry panel, suggested that knowledge-intensive companies, which are particularly research and development-intensive, still struggle with some of the most acute funding gaps, despite their growth potential. This is because they often require a large amount of capital up front to fund their growth, and it can be many years before their products can be brought to market. Evidence provided through the consultation also highlighted a large subset of low-risk capital preservation investments structured around the tax reliefs. One response showed that £467 million of funds raised by enterprise investment scheme funds in 2016-17 were aimed at schemes that could be described as capital preservation.
Clause 14 introduces a new “risk to capital” condition for the enterprise investment scheme, the seed enterprise investment scheme and venture capital trusts, in response to evidence of continuing capital preservation investments using the venture capital schemes. The condition takes a principles-based approach to deny tax relief to these investments. Investments will be excluded where it is reasonable to conclude that the company does not have the objective of growing and developing its trade in the long term and there is no significant risk that any loss of capital will be greater than the net return on the investment. The measure would take effect from Royal Assent.
Clause 15 makes technical changes to ensure that the rules on determining the amount of funding a company may receive in its lifetime, under the EIS, VCTs or social investment tax relief, work as intended. The clause ends certain transitional provisions introduced in 2007 and 2012, which excluded certain investments from counting towards the lifetime limit, and ensures all risk finance investments are counted towards the lifetime funding limits for the EIS, VCT and SITR schemes. This will apply to new investments on or after 1 December 2017.
Clause 16 and schedule 4 make three changes in response to the patient capital review. The changes will significantly expand the support offered to knowledge-intensive companies through the EIS and VCTs. The annual limit on how much an investor can invest through the enterprise investment scheme will be raised from £1 million to £2 million. Any investment over £1 million must be invested in knowledge-intensive companies.
Knowledge-intensive companies often need large funding rounds as they are highly capital-intensive. With this in mind, we are doubling the annual investment limit for knowledge-intensive companies using the EIS and VCT schemes to £10 million. Under the current EIS and VCT rules, knowledge-intensive companies must be broadly under 10 years of age when receiving their first qualifying investment. The clock starts when the company makes its first commercial sale. Knowledge-intensive companies sometimes find this point difficult to identify. Clause 16 introduces flexibility to this rule by allowing knowledge-intensive companies to choose to start the clock at the point they reach an annual turnover of £200,000.
Before I turn to Government amendment 1 to schedule 5, I will give some background, if I may, to introduce clause 17 and the schedule. Clause 17 and schedule 5 make changes to the VCT rules. Schedule 5 corrects a technical flaw and changes some of the rules to encourage VCTs to invest more of their funds in qualifying growth companies and to invest those funds more quickly. Government amendment 1 introduces new rules on qualifying loans to encourage VCTs to make longer-term investments in higher-risk companies. Some VCTs have used loan structures as a method of capital preservation, charging prohibitively high interest rates and including other conditions in the terms of the loan. The effect is to secure a return of capital well before the end of the five-year minimum period. Amendment 1 is intended to prevent the use of low-risk loans to minimise risk to the VCT and to its investors, including where the terms involve very high interest rates, redemption premiums and other charges. I commend Government amendment 1 to the Committee.
I turn to the rest of the provisions in schedule 5. The schedule corrects a flaw in an anti-abuse rule introduced in 2014 to prevent investors from being punished for mergers they did not know were about to occur. The changes will apply retrospectively, from the introduction of the anti-abuse rules in April 2014. The proportion of VCT funds that must be invested in qualifying companies will be raised from 70% to 80%. This will ensure that a greater proportion of VCT funds reaches the target companies. Once a VCT realises a gain by disposing of an investment, it must reinvest that gain within six months. Many VCTs currently pay out the proceeds as a dividend instead. To encourage more reinvestment by VCTs, schedule 5 raises the reinvestment period to 12 months. These last two changes take effect from April 2019 to allow VCTs time to adjust their investment portfolio.
VCTs currently have up to three years to invest funds after those funds are raised. A new rule will require them to invest at least 30% of funds in qualifying companies within one year of the end of the accounting period in which they were raised. This will accelerate investment of money raised from investors and will apply to funds raised from 6 April 2018.
Many previous changes to the VCT rules have been grandfathered. This means new investments can still be made under the old rules that applied when the money was originally raised. These transitional provisions enable some VCTs and their investors to access a range of generous tax reliefs on low-risk investments. The schedule will ensure that all VCT investments meet the current rules, regardless of when the original money was secured. These changes will take effect for investments from 6 April 2018.
New clauses 6 to 8 call for reviews into some of the changes made in this legislation, as well as a review of the efficacy of the venture capital schemes as a whole, but the changes made in the legislation are the result of a thorough review of all the venture capital schemes as part of the patient capital review. The review concluded that the schemes did vital work in providing capital for high-growth companies but that certain changes would make the schemes more effective and fairer for the taxpayer. Because we are committed to making the schemes work better, the Government have already committed to a report on the changes. An initial report to the Chancellor of the Exchequer for Budget 2018 will set out how the different measures in the Government response are being implemented. Then, in autumn 2020, a report will assess the impact of the policies set out in the Government response, including the clauses in this Finance Bill.
A review of this condition any earlier than 2020 would not be able to make any reasonable assessment of the effect of the changes on the scheme. It would be working from a single year’s data on the impact on Government revenue and would be unable to assess the impact on the long-term growth and development of businesses. In the meantime, HMRC publishes statistics on the use of venture capital schemes every year. The information includes details of amounts invested and company activities. The first figures reflecting the effect of the new changes for the tax year 2018-19 will be available in April 2020. These will be closely monitored. I therefore urge the Committee to reject the new clauses.
Sir Roger, these changes significantly expand the venture capital scheme’s innovative, knowledge-intensive companies while reducing the scope for low-risk investment within them. They will drive more than £7 billion of investment towards high-growth companies over the next 10 years and ensure the smooth operation of these important schemes. I therefore commend clauses 14 to 17 and schedules 4 and 5 to the Committee.
Peter Dowd
I will speak to our amendments to schedule 4, which also affect clauses 14, 15, 16 and 17.
May I start by telling the hon. Member for Middlesbrough South and East Cleveland, who was slightly confused as to which way he should vote, I am not sure whether if I had a spoken a little less he might have come our way, or perhaps he would have done so if I had spoken a little longer. We will never know, alas.
Clause 14 seeks to amend the requirements for investment to qualify for relief under the enterprise investment scheme, seed enterprise investment scheme or the venture capital trust scheme. As indicated, it also introduces an overarching risk-to-capital condition to deter investment companies whose activities are mostly geared towards protecting capital through minimising risk rather than supporting long-term growth and development of UK enterprise. It is important to start with that proposition.
Clause 14 also introduces a new principle-based risk-to-capital test that would change the current regime in which HMRC provides assurances for investments in advance. In the not too distant future, I am also going to introduce the T word—the transparency factor— I am giving notice of that.
Under this measure, HMRC would no longer provide advance assurance for investments that would appear not to meet the terms of the new rule. The Treasury has stated that if the new test proves effective in simplifying the conditions, this approach may be used to simplify further aspects of venture capital schemes legislation. It is clear that the current legislation is a maze of complexity that makes it difficult for businesses and advisers to establish that qualifying conditions are met with certainty, and also for HMRC to ensure that the reliefs are being used correctly and are not subject to abuse.
Mel Stride
Briefly, the hon. Gentleman raised a few points, including one being about HMRC and its effectiveness, particularly in advance assurances. As we know, advance assurances are a service provided on a non-statutory basis by HMRC, where a company can be given assurance on proposed investments that qualify for relief, unless the circumstances of the investment or, indeed, the law were to change. Here, assurance is being provided for investments that have not yet occurred. Clearly, HMRC cannot provide assurances for investments which, by the time they are made, may not meet a new condition that is going through Parliament. That has been a situation recently. HMRC has published a response to its advance assurance consultation, which sets out the steps it is taking with the aim of dealing with the vast majority of cases in 15 working days by this spring. That includes taking the action that we have been discussing on capital preservation.
In terms of reviews, assessments and the new clauses that are proposed, I come back to my earlier points that this whole set of changes that we are looking at around VCTs, EIS and so on, have come out of an extensive period of consultation led by Sir Damon as part of the patient capital review, in which the very questions that the hon. Member for Bootle was rightly asking in his speech were asked and consulted on in great detail. As I said earlier, there will be a report to the Chancellor on the implementation of these measures. That will happen in the Budget this year, in 2018. By autumn 2020, we will have the assessment report on the policies, including the measures that are covered in the Bill. For those reasons, I urge the Committee to reject the new clauses, and I commend clauses 14 to 17 and Government amendment 1.
Question put and agreed to.
Clause 14 accordingly ordered to stand part of the Bill.
Clauses 15 and 16 ordered to stand part of the Bill.
Schedule 4 agreed to.
Clause 17 ordered to stand part of the Bill.
Schedule 5
Venture capital trusts: further amendments
Amendment made: 1, in schedule 5, page 75, line 36, at end insert—
“Non-qualifying loans
6A (1) Section 285 of ITA 2007 (interpretation of Chapter 3 etc of Part 6) is amended as follows.
(2) In subsection (2)—
(a) omit “(whether secured or not)”;
(b) at the end of paragraph (b) insert “, or
(c) any liability of the company in respect of a loan to which subsection (2A) applies that has been made to the company.”
(3) After that subsection insert—
“(2A) This subsection applies to a loan if—
(a) the return on the loan represents more than a commercial rate of return, or
(b) the loan is made on terms which grant to a person or allow a person to acquire—
(i) any security or preferential rights in relation to assets of the company, or
(ii) the ability to control the company.
In sub-paragraph (ii) “control” has the meaning given by sections 450 and 451 of CTA 2010.
(2B) The return on a loan is not to be treated as representing more than a commercial rate for the purposes of subsection (2A)(a) if—
(a) the return on the loan during the period of 5 years from the making of the loan does not exceed 50% of the amount lent, and
(b) the total return on the loan does not exceed—
where—
N is the number of years (including any fraction) in the term of the loan;
A is the amount lent or, in a case where some of the loan is repaid during the term of the loan, the average amount outstanding during that term.
(2C) The Treasury may by regulations substitute a different figure for a figure that is at any time specified in subsection (2B)(a) or (b).
(2D) In subsections (2A)(a) and (2B) “return” means interest, fees, charges and other amounts payable in respect of the loan.
(2E) Where it is to any extent not known, before the end of the term of a loan, what amounts will be payable in respect of the loan—
(a) subsections (2A)(a) and (2B) apply, until the relevant matters are ascertained, on the basis of what amounts can reasonably be expected to be payable;
(b) when those matters are ascertained, any necessary adjustments must be made by making or amending assessments or by repayment or discharge of tax (regardless of any limitation on the time within which assessments or amendments may be made).””—(Mel Stride.)
Schedule 5, as amended, agreed to.
Ordered, That further consideration be now adjourned. —(Graham Stuart.)
Taxation (Cross-border Trade) Bill
Mel Stride ExcerptsMonday 8th January 2018
(8 years, 3 months ago)
Commons ChamberRead Full debate Taxation (Cross-border Trade) Act 2018 View all Taxation (Cross-border Trade) Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I beg to move, That the Bill be now read a Second time.
The Government have been clear that in leaving the European Union the UK will also leave its customs union, allowing us to establish and enhance our trading relationships with old allies and new friends around the world. Further to that, the Government have previously set out that in leaving the EU customs union and exercising the powers in this Bill, we will be guided by what delivers the greatest economic advantage to the United Kingdom and by three strategic objectives.
Sir William Cash (Stone) (Con)
Before my right hon. Friend gets deep into his analysis, may I ask him about the expression “a customs union” in clause 31, which, according to the explanatory notes, clearly includes the EU itself? Will he be kind enough to tell me, either now or later in his speech, what the distinction is between the customs union and other kinds of customs union mentioned in clause 31?
Mel Stride
Clause 31 makes provision for this country to enter into a customs union with another territory. That territory could be the existing customs union of the European Union after we have left the European Union, or it could be another territory separate from it. As he will know, such a move would be subject to a treaty and would not be entered into until a draft statutory instrument had been laid before the House and approved under the affirmative procedure, and then subsequently approved by Her Majesty as an Order in Council.
Tom Brake (Carshalton and Wallington) (LD)
The right hon. Gentleman says that he wants to do what is of “the greatest economic advantage to the United Kingdom”. Has he assessed whether staying in the customs union would be precisely that?
Mel Stride
I say gently to the right hon. Gentleman that we are going down a rather well-worn path. The answer is quite simple: in June 2016, the British people took a decision—people may have ended up on different sides of the argument, but they took a clear decision—that we would exit the European Union. As a consequence of that, we will be leaving the customs union.
Mr Kenneth Clarke (Rushcliffe) (Con)
I was almost reassured by what my right hon. Friend said in response to my hon. Friend the Member for Stone (Sir William Cash). Would it not remain perfectly lawful under clause 31 for this country either to stay in the existing union, or to re-enter it quite quickly without any further change to the law, and while remaining party to all the EU agreements with about 70 other countries and participating in them as though we were still a member of the European Union? If that is strictly the effect of the Bill, may I tell my right hon. Friend that I would be considerably reassured?
Mel Stride
As my right hon. and learned Friend will know, article 50 was invoked—the decision was taken to invoke that particular article—with the consequences that we will exit the European Union on 29 March 2019, and therefore leave the European Union customs union. However, clause 31 does indeed facilitate our future ability to enter into customs union arrangements with other customs unions or territories, subject to the express will of Parliament, as I detailed with reference to the affirmative resolution that would have to be passed by the House.
Alex Cunningham (Stockton North) (Lab)
The Manufacturing Trade Remedies Alliance tells me that 7,000 manufacturing jobs, including 2,500 in the chemicals industry, will be at risk in my constituency if the UK does not establish effective trade remedies. If there is no customs union, how will the Government guarantee that manufacturing workers will not be negatively affected by unfairly priced or subsidised imports?
Mel Stride
The hon. Gentleman raises the extremely important matter of protecting our UK producers from dumped goods in this country, goods that have been subject to excessive subsidy, and indeed import surges that arise for other reasons. That is why this Bill and the Trade Bill, which will have its Second Reading tomorrow, make provision to set up a Trade Remedies Authority with the ability and powers to investigate appropriately the kinds of issues to which the hon. Gentleman alludes, and to ensure that we are able to take remedial action, in terms of additional duties and so on, to ensure that we properly address those particular threats as and when they occur.
Stephen Kinnock (Aberavon) (Lab)
The Financial Secretary of course knows how close we came to the collapse of the British steel industry, thanks to the dumping of Chinese steel, but even though schedules 4 and 5 of the Bill refer to incredibly onerous public interest and economic interest tests, there is absolutely no detail of how so many of the practical aspects will work. Why do the Government seem to be set on leaving our manufacturing sector completely exposed to the dumping of Chinese steel, for example?
Mel Stride
I am afraid that I have to disagree with the hon. Gentleman. The Bill takes a balanced approach to the issue of protecting our domestic producers including, very importantly, steel producers. By “balanced approach”, I mean that we should also take into account the interests of consumers of those imported goods and businesses that use them in their processes. If the hon. Gentleman looks closely at the measures—we will do that in Committee—he will see that they provide for compensation where dumping has occurred and for appropriate sanctions to be made.
The economic advantage to the UK is very important, and that means continued UK-EU trade that is as frictionless as possible. It also means avoiding a hard border on the island of Ireland and establishing an independent international trade policy. As we look forward to the next stage of our negotiations with the European Union, we see that the nature of our future customs relationship with the EU, and therefore the legislation that will allow the Government to give effect to any such relationship, become all the more significant.
Damian Collins (Folkestone and Hythe) (Con)
My hon. Friend mentions the need to avoid a hard border on the island of Ireland. I know that he will also agree that we need to avoid an effective hard border on the channel crossing points, particularly the channel tunnel and the port of Dover. That is our principal road freight route for goods back and forth across the continent of Europe. It is essential that we maintain frictionless trade.
Mel Stride
My hon. Friend is entirely right. That is why we have consulted ports so extensively, most importantly that of Dover, which I visited myself. I met the port authorities down there, and members of Her Majesty’s Revenue and Customs have been closely involved in consultations with the ports. Of course, the Bill allows the facilitations that we will require—both unilateral and bilateral—to ensure that the smooth flow of trade occurs at those vital ports. It is particularly essential that we do not have any delay to the processing of imports and exports that go through roll-on/roll-off ports.
Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)
On the specific need to keep trade frictionless, HMRC, which is part of the Minister’s Department, said that we would need an additional 5,000 customs officials. The Home Office said that it was already recruiting 300 additional staff, although I understand that they will backfill places rather than taking on additional roles. How many new customs officers are currently in training to prepare for the new customs regime in March 2019?
Mel Stride
The important point is that we are in discussions with HMRC about its funding—[Interruption.] If I may, I will answer the hon. Gentleman’s question. We are discussing with HMRC the funding arrangements it will need in the 2018-19 financial year. As he suggested, Jon Thompson has said that between 3,000 and 5,000 staff will perhaps be required. Incidentally, they need not be new recruits; they may be people who are reallocated from other parts of HMRC as we change priorities, depending on how the negotiations pan out. I am very confident that an organisation of in excess of 50,000 people will be capable of recruiting sufficient individuals of the right calibre and with the right skills to ensure that the job is done.
John Redwood (Wokingham) (Con)
Will the Minister confirm that on our current frontiers with the rest of the EU, excise, VAT, general taxation and currency are all different on the other side of the channel or the other side of the border with the Republic of Ireland, and that that all works very smoothly and mainly electronically today? Why do people think there would be a bigger problem if we needed to add another line to the electronic register because there was a customs charge as well?
Mel Stride
My right hon. Friend makes a very important point. There is no doubt that we can foresee an end state in which a very frictionless process pertains on the borders between the EU27 and the United Kingdom as a separate customs territory. There are many examples around the world of technology in particular facilitating the free flow of goods across international boundaries.
Mike Gapes (Ilford South) (Lab/Co-op)
The Minister referred to the EU’s borders. It is not only that we have a border with the Republic of Ireland, as the British overseas territories have borders. Gibraltar has a border with Spain, and Anguilla has a border with Saint Martin and Sint Maarten. Will he explain what the Bill will mean for British overseas territories?
Mel Stride
As the hon. Gentleman will know, the overseas territories are not part of the existing European customs union. However, they clearly need to be factored into our discussions and negotiations. We are, of course, close to our overseas territories and, indeed, our Crown dependencies, and we will ensure that the arrangements that would suit those overseas territories, as well as the United Kingdom, are taken into account when determining where we land this deal and the approach that we take.
Sammy Wilson (East Antrim) (DUP)
Does the Minister recognise the advice given by HMRC’s permanent secretary that it believes that all of what is required is doable, and indeed that it is confident that we can have the movement of trade without significant disruption? Does he accept that if we want a frictionless border not just between Northern Ireland and southern Ireland, but between southern Ireland and its main market in the United Kingdom, it is not just a matter of this Bill and the resources being in place, because there needs to be much more co-operation than has been demonstrated so far by the Irish Government?
Mel Stride
I thank my hon. Friend for his intervention, but I do not want to be tempted too far into the negotiations that pertain to matters between the United Kingdom and the Republic of Ireland. However, I will pick up on the point that he and other right hon. and hon. Members have made about readiness. The customs declaration services system that will need to be in place to handle around 300 million import and export transactions and declarations is well on target. It will start to go into use by this autumn and we firmly believe that it will be up and running by next January—well in time for the 29 March deadline.
Catherine West (Hornsey and Wood Green) (Lab)
The Minister is being very generous in taking interventions. Will he tell the House the estimated impact on the beef and dairy sectors in Northern Ireland, following today’s article in the Financial Times that flags up the massive cost to the industry that a completely new customs union system would entail?
Mel Stride
Any issues around impacts on the flow of goods or trade necessarily require an assessment of where exactly the deal with the EU and—specifically in the case of the hon. Lady’s question—the Republic of Ireland lands. Until we know exactly where that lands, it is not possible to start opining on those impacts. I come back to my central point: we are negotiating hard, and it is in our interests, and of course those of the EU, to make sure that we have the lowest duties possible between our trading blocs, and that trade flows as freely and effectively as possible.
Stella Creasy (Walthamstow) (Lab/Co-op)
I have been asking the Minister for many months now about the impact of the 13th directive and the ability of other countries, once we are outside the EU, to vary their own VAT requirements. How can he be so confident that by next January he will be able to implement a system that looks at import and export tariffs, given that it will still be dependent on all 27 countries determining their VAT relationship with us? Does he have an agreement with them for that deadline?
Mel Stride
The 13th directive—as the hon. Lady will know, is principally used by countries and businesses outside the EU for the purposes of reclaiming VAT within the UK—will not necessarily be an issue, depending on where the negotiation between us and the EU lands. It is quite possible—indeed, the Bill facilitates this—that continued engagement with IT platforms will allow an easy and effective method of making the kind of reclaims to which the directive relates. She raises the question of whether we have to be ready by next January. If we have an implementation period, for example, we might have considerably longer to bring the process into effect.
Mr Chris Leslie (Nottingham East) (Lab/Co-op)
To clarify, is it the Government’s policy to try to remain a member of the EU VAT area? That issue matters massively to hundreds and thousands of businesses.
Mel Stride
The purpose of the Bill is to ensure that on day one we are ready for whatever eventuality we are faced with. For example, the Bill moves us away from acquisition VAT to import VAT, as would be the case—[Interruption.] The hon. Member for Nottingham East (Mr Leslie) thinks that that is some extraordinary revelation—almost a divine revelation—but it is actually in the Bill, as he will find if he reads it. To get technical, if he really wants to find out where this will end up, I think it inserts new section 15 into the Value Added Tax Act 1994. All these possibilities will be facilitated, but it will depend on where the negotiation lands.
Nicky Morgan (Loughborough) (Con)
I appreciate that the Minister did not even get on to the section of his speech about VAT before we started to ask him about it, but following on from the previous intervention, he will be aware that many small businesses in this country have not had to deal with import VAT, because they have been dealing with imports from the EU, and that finding upfront cash to pay for that would be a real problem for them. Will he assure the House that he is aware of that issue and the concerns of small businesses about cash flow, and that he hopes to return to this matter? As he knows, we have discussed this before, and as Chair of the Treasury Committee, I will be writing to HMRC to ensure that we understand its current thinking.
Mel Stride
My right hon. Friend, who has been a doughty campaigner for the interests of business, is absolutely right to raise this issue, with which the Government and the Treasury have sympathy. We do not want over 100,000 businesses to be disadvantaged in cash terms in the way she describes, so this is certainly something that we will be looking at closely going forward. The Bill itself does not prescribe any particular end point in this context. It will be for the Government, after the passage of the Bill, to decide exactly where we wish to end up.
Nigel Mills (Amber Valley) (Con)
My right hon. Friend said that the Treasury might be inclined to be generous to businesses that had their cashflow disadvantaged by this change. Would he perhaps be less generous to large businesses that wholly disadvantage their small UK suppliers by forcing them to accept 120-day payment terms, thus effectively putting many out of business? It would be rather generous to let such businesses off earlier VAT payments on their purchases from within the EU if they were not paying their UK suppliers to a decent timetable.
Mel Stride
The issues that my hon. Friend raises are probably slightly beyond the scope of the Bill, but they are none the less important. If he would care to write to me, I should be happy to consider them, and, indeed, to meet him if he so wishes.
Richard Graham (Gloucester) (Con)
My right hon. Friend is being very generous. It would help us all if he could confirm that this is really an enabling Bill, and that it therefore should not alarm either those who wish to see the continuity of existing trading arrangements, or those who want significant differences. It paves the way for either scenario, depending on the negotiations in Europe.
Mel Stride
As usual, my hon. Friend is eloquent and to the point. He makes an important point because, as he says, the Bill is intended to ensure that wherever the deal with the European Union lands, we will be in a position to be ready on day one to ensure that we keep trade flowing across our frontiers, to the benefit of our economy, our businesses and our consumers.
Sir William Cash
I mention this only because of the very articulate response that my right hon. Friend gave to my hon. Friend the Member for Gloucester (Richard Graham). The Bill refers to Orders in Council, which the Financial Secretary has mentioned, and also includes the words “despite any enactment”. Could that include the European Union (Withdrawal) Bill, when it has been enacted? Could it also include any other transitional arrangements under a further enactment? The words “despite any enactment” are very dramatic.
Mel Stride
I think it is clause 32 that sets out the basis on which the powers will be dealt with. The Bill is extremely clear that any treaty between ourselves, as a customs union, and another territory or customs union must be subject to a draft affirmative statutory instrument. Having been laid, such an instrument would not come into effect immediately, but only when Parliament—or, specifically, the House of Commons—had considered and passed it. At that point, and only at that point, would an Order in Council follow, which would effectively bring the will of the House into law.
John Howell (Henley) (Con)
My right hon. Friend is being very generous in giving way. An important element of what he is talking about is the business community. What consultation has taken place with businesses, and what feedback has there been?
Mel Stride
My hon. Friend raises an extremely important point. At the heart of the issues that we are discussing are British businesses of all sizes. Because we want to ensure that we have an environment that is as good as possible for those businesses, consultation has been at the heart of our approach. We produced a discussion paper last year, as well as a White Paper, to which we received responses. I know that my colleagues in Her Majesty’s Revenue and Customs have been actively engaged for many months in roundtable discussions with not just businesses, but representatives of ports and airports, and all the important actors in the process of importing and exporting into and out of the United Kingdom.
Perhaps I could now make a little progress—
Mr Clarke
I am extremely grateful to my right hon. Friend for giving way so generously, and for giving way to me twice. Let me also congratulate him on the eloquent clarity that he is bringing to this whole subject. He confirmed to my hon. Friend the Member for Gloucester (Richard Graham) that this is essentially a contingency Bill in case things change, and that it covers everything from carrying on roughly as we are now to having quite different arrangements. However, does it remain the Government’s preference that things should stay the same if the negotiations are successful? Paragraph 10 of the explanatory notes states that
“it is the government’s intention that the UK’s Customs regime will continue to operate in much the same way as it does today following exit from the EU.”
Can my right hon. Friend confirm that that remains the Government’s policy intention in the context of the forthcoming negotiations?
Mel Stride
My right hon. and learned Friend raises an important point. The Government are indeed saying that we recognise the importance of ensuring that we have a smooth and frictionless trading situation between ourselves and the European Union once we have left it. Although we will have left the European Union, the Bill will facilitate our ability to have similarities in the way in which we trade. It will then be up to us to decide how we deviate from our starting point. We see the current position, under the European Union code—the customs code and the legislation in the European acquis—as a starting point to which we need to be reasonably aligned, even though we might diverge from it in the years ahead as a result of the negotiations, if that would be to the benefit of our country.
Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)
The Minister has clarified that it is the Government’s intention to continue with the existing customs arrangements, and that the Bill will allow for the possibility of a continued customs union. Can he also confirm that the content of any new customs arrangements or customs union will be decided only through secondary legislation, rather than through primary legislation? Would it not be better to have a proper vote on the Floor of the House on primary legislation on whether we should stay in a customs union?
Mel Stride
The right hon. Lady poses an ingenious question. The simple answer is that the form of the arrangements with the European Union after our exit is the subject of the negotiations. The Government have committed to holding a meaningful vote on the deal. The focus will be on whether the deal is appropriate, not on secondary legislation within this legislation. This Bill is designed to facilitate whatever the will of Parliament ends up being. That is the important point.
The Government have been clear from the outset of the negotiations that, as we implement the decision of the British people to leave the EU at the end of March 2019, we want a deep and special partnership with the European Union and that, as we move towards any future relationship, we should seek to minimise disruption and maximise the opportunities that the process of withdrawal represents. That is in the interests of businesses and individuals in the UK and the EU.
Since triggering article 50, the Government have worked intensively with our European partners to settle the issues in the first phase of the negotiations—namely, a fair deal on citizens’ rights allowing UK and EU citizens to get on with their lives in the country in which they live; a financial settlement that honours the commitments that the UK has undertaken as a member of the European Union, just as we said we would; and an agreement on the island of Ireland that preserves the territorial integrity of the United Kingdom and the stability that has been brought about by the Belfast agreement. We have made great strides in each of those three areas, and I am sure that Members on both sides of the House will welcome the European Council’s agreement last month that sufficient progress had been made on phase 1 and that we should move on to talks about our future partnership.
This development in the negotiations means that we can now look forward to discussing our future customs relationship with the EU. As I reminded the House earlier, the Government have been upfront in setting out their objectives for any such arrangement. The Prime Minister has been clear that, although we are leaving the EU, and therefore its customs union, we are not leaving Europe. So just as the UK will establish an independent international trade policy and look to forge trading relationships with new partners around the world, it is also critical that our future customs arrangements allow us to keep trade between the UK and the EU member states as free and frictionless as possible.
Wes Streeting (Ilford North) (Lab)
The Minister keeps on referring to the importance of free and frictionless trade with the European Union, but is it not time for the Government to be a bit clearer with the public that, through our membership of the customs union, we have preferential trade agreements with a further 65 countries right across the world? This is not just about protecting trade with the EU; we also need to protect those existing trading relationships. As far as any future trade deals are concerned, we must recognise that size matters, and that we are better and stronger as part of the European bloc.
Mel Stride
The hon. Gentleman raises an important point, and it is one that I largely agree with. It is important that we maintain the existing arrangements that we have been brought into by virtue of our membership of the European customs union, which is exactly why we are in discussions with those countries to ensure that we have appropriate arrangements in place once we leave the EU and its customs union. Over and above that, there will be opportunities to forge trading relationships with other countries around the world, which we are prohibited from doing at present because of our membership of the EU customs union.
Alison McGovern (Wirral South) (Lab)
My constituents are today dealing with the news of yet more job losses at Vauxhall in Ellesmere Port. We are a place that manufactures, and we want to keep manufacturing, so can the Minister tell me and my constituents exactly what these opportunities are?
Mel Stride
The opportunities will be very significant indeed—[Interruption.] If the hon. Lady will allow me, I will attempt to answer her question. Of course our trading relationship with Europe is extremely important, which is why we are having negotiations with our European partners. It is important to us and to them to ensure that we maintain those relationships to the highest degree. However, a growing percentage of our trade is now taking place outside the European Union—certainly more than was the case five or 10 years ago—and the expanding markets of the future are not necessarily going to be the countries that constitute the membership of the European Union. To answer the hon. Lady’s question directly, the opportunities lie out there in China, India, the United States and other countries around the world with which we will be able to forge a freer set of trade agreements than we have been able to contemplate during our membership of the European Union.
Ian Murray (Edinburgh South) (Lab)
The Minister continually uses the word “frictionless” and talks about keeping things as they are now. Indeed, the Bill will facilitate our keeping the customs union regulations as they are at the moment, so what principle are the Government using to take participation in the customs union off the table?
Mel Stride
This comes back to the fundamental point that on leaving the European Union we will be leaving the customs union. Then it will simply become a question of what kind of relationship we negotiate with the EU and its customs union. The Government’s position is clear on this. We want these arrangements to be as frictionless as possible. We want to facilitate trade rather than putting barriers in the way of what will be a European customs union of 27 nations after Brexit.
Wera Hobhouse (Bath) (LD)
The Minister seemed to say previously that it might not be a great thing for the UK to leave the customs union and the single market, but that we were doing it because that was the will of the people as expressed in the referendum result. Is that the only reason that we are doing this?
Mel Stride
I apologise to the hon. Lady if I said something that in any way misled her. I do not think that I actually said that. What I said was that, as a consequence of leaving the EU, we will of necessity be leaving the customs union. Now, in the negotiations, we need to strike the best possible deal for our country—a deal that is in our interests and those of the European Union and that maintains a close, frictionless, positive and mutually beneficial relationship between ourselves and a customs union of the remaining 27 members.
Kirsty Blackman (Aberdeen North) (SNP)
On the subject of the negotiations that the UK is having with countries with which it currently has free trade arrangements because it is part of the EU, and on the rules of origin issue, what discussions has the Minister had about cumulation and about whether the EU will accept UK-EU cumulation, or whether we will be required to have parts made only in the UK?
Mel Stride
As the hon. Lady will probably know, those are matters of ongoing discussion within the Department for International Trade, but this Bill and the Trade Bill, which will have its Second Reading tomorrow, are about ensuring that country-of-origin issues can be determined by ourselves under our own laws, rather than having to depend upon on those of the European Union.
John Redwood
Will the Minister confirm that the European Union made it clear to the United Kingdom that we cannot stay in the customs union and single market if we will not pay contributions or accept freedom of movement?
Mel Stride
It is entirely true that we cannot have our cake and eat it—[Interruption.] I am paraphrasing the EU, not the Government’s position. Our position has always been that we foresee a mutually advantageous trading relationship with the European Union’s customs union and, for the purposes of this afternoon’s debate, the important point is that this Bill provides and facilitates the ability to produce exactly that.
It is important to provide certainty and continuity to businesses, including the hundreds with which the Government have met and consulted since the referendum. Crucially, the Government remain firmly committed to avoiding any physical infrastructure at the land border between Ireland and Northern Ireland. That commitment and progress on the issue were formally recognised at last month’s European Council, and it will continue to inform our approach in the future.
The Government set out in their future partnership paper last summer and in the White Paper for this Bill two options for our future customs arrangements—two options that most closely meet those objectives. One is a highly streamlined customs arrangement, which comprises a number of measures to help to minimise barriers to trade, from negotiating the continuation of some existing trade facilitations to the introduction of new, technology-based solutions. The other option is a new customs partnership: an unprecedented and innovative approach under which the UK would mirror the EU’s requirements for imports from the rest of the world that are destined for the EU, removing a need for a formal customs border between the UK and the EU. The Government look forward to discussing both those options with our European partners and with businesses in both the UK and the EU as the negotiations progress.
The Government have already taken a number of important steps to ensure readiness for EU exit, including most recently at the Budget when my right hon. Friend the Chancellor of the Exchequer announced £3 billion of funding for Departments and the devolved Administrations to support their preparations. HMRC is on course to deliver a functioning customs service on day one that enables trade to flow, HMRC to collect revenues and the UK to have a secure border. The Treasury has already effectively allocated over £40 million of additional funding to HMRC this year to prepare for Brexit and continues to work with HMRC to understand its ongoing Brexit requirements. The Taxation (Cross-border Trade) Bill represents a significant part of our preparations.
Mr Leslie
I am grateful to the Minister for giving way. I sense that he is coming to a conclusion, so I wanted to get this particular question in. The programme motion specifies when he and the Government want the Bill to come back for Report and Third Reading, but how many sittings does the Minister intend the Bill to have in Committee? Many hon. Members would have expected a Committee of the whole House, but that does not appear to be the case and the Committee stage will happen upstairs. Will he guarantee that significant time will be available in Committee for those lucky Members to scrutinise this legislation properly?
Mel Stride
I will make two points. First, as the hon. Gentleman will know, such matters are for the usual channels, and his party is an important part of the usual channels. Secondly, the Bill will of course receive the normal high level of scrutiny as it passes through the House—line by line, clause by clause. Amendments can be tabled, debated and divided on if necessary. The Bill will then come back to the House on Report and for Third Reading. If he has any particular representations to make about the number of sittings in Committee, he should perhaps speak to his Whips, who can then speak to our Whips, and I am sure that we will all end up in a happy place on the issue he has raised.
Stephen Doughty
The Minister is being generous, as he always is. Having been opposing Whips at various points on various financial matters, I know that he always does these things in good faith, but I share the concern of my hon. Friend the Member for Nottingham East (Mr Leslie). Both Front-Bench teams are currently tied up with the Finance Bill that is going through—an important piece of legislation that we quite rightly oppose many parts of. Given that, we will not be able to start the scrutiny of this Bill in Committee for quite some time, and the Bill is due to be out of Committee by 1 February. The Bill will not receive full scrutiny in the House of Lords because this is a money Bill, so will the Minister tell us how many Committee sittings there will be to scrutinise a large, substantial and important Bill?
Mel Stride
The hon. Gentleman is being typically tenacious, but he asks the same question as the hon. Member for Nottingham East and he will have the same answer. I will spare the House my eloquence by not going through, once again, the same answer that I just gave.
Vicky Ford (Chelmsford) (Con)
I thank the Minister for giving way and for drawing attention to the “Future customs arrangements” paper that came out in the summer and the two potential solutions: the highly streamlined option or the new customs partnership. Will he confirm that the Government are still open minded about both options and that this Government’s priority is to maximise stability and minimise uncertainty not only for British consumers buying products from the continent, but for continental suppliers trying to sell to us and vice versa?
Mel Stride
My hon. Friend is absolutely right that the Government’s position is that we are determined to explore both models actively. The new partnership model would be a creative and unique approach to a customs union with the European Union in which we would effectively have a common customs border and no customs border between ourselves and the other EU member states. Its very uniqueness and the creative thinking needed to reach any such agreement means that it would probably happen on a longer timeframe than some of the other approaches that we will be taking, but I can confirm that we want to continue to discuss both options with our European partners.
The Bill allows the UK to establish a new, standalone customs regime, ensuring that VAT and excise legislation operates as required upon EU exit. The Bill makes a number of provisions that are absolutely essential for any future customs regime to function effectively regardless of the outcome of the negotiations. Those provisions include allowing the UK to charge customs duty on goods, including those imported from the EU, allowing the Government to set out how and in what form customs declarations should be made, and giving the UK the freedom to vary the rates of import duty as necessary, particularly in the case of trade remedies investigations and for developing countries. Moreover, it will confer a number of necessary and appropriate powers to allow the UK to respond effectively to the outcome of the negotiations, and it will give the Government the ability to make subsequent changes to the customs, VAT and excise regimes, which may be required later but cannot be predicted as this stage.
As I have set out today, the Government recognise the importance of providing certainty and continuity to businesses, so this Bill will allow the Government to make good on their intention to replicate the effect of existing EU law wherever possible as the UK leaves the EU. I look forward to debating the provisions and the underlying issues as the Bill makes its way through this House. The Bill takes significant steps to ensure that the UK is ready for EU withdrawal by allowing our country to establish a standalone customs regime and by ensuring that our VAT and excise legislation operates as required upon exit day. As we begin discussions with the EU on our future partnership, the Bill ensures that we can do so with the utmost confidence, securing our ability to deliver a robust, efficient, effective customs regime whatever deal is struck with our European partners. As such, the Bill underpins our great country’s ability to pursue its own trade deals with partners from right across the world, and I commend it to the House.
Finance (No. 2) Bill
Mel Stride ExcerptsTuesday 19th December 2017
(8 years, 3 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 19 December 2017 - (19 Dec 2017)
Dawn Butler
My hon. Friend is right: I will indeed come to that issue.
As we approach Christmas, I ask the Minister to consider the impact that the Government’s policies are having. More than 128,000 children will be in temporary accommodation over Christmas, women’s refuges—as my hon. Friend has just said—are in crisis, and universal credit will leave people penniless and homeless over the Christmas period.
Dawn Butler
It is not nonsense. I challenge the Minister to sit in one of my surgeries and hear that it is not nonsense.
The Government have made £28 billion of cuts affecting 3.7 million disabled people, and the additional caring responsibilities have fallen on the shoulders of women. It is the same with the cuts in social services—women take up the slack—and the pay cap, which hurts women more than men. Indeed, 86% of the Government’s cuts are falling on women. Labour Members are not the only people who are saying that. In June, the UN Committee on Economic, Social and Cultural Rights said that the Government’s changes adversely affected
“women, children, persons with disabilities, low-income families and families with two or more children.”
If the United Nations can see that, and if Labour Members can all see it, why can the Government not see it and do something about it? The best policies are evidence-based policies.
Stella Creasy (Walthamstow) (Lab/Co-op)
I rise to make my case to the five Conservative MPs on the Government Benches today. Inequality is an incredibly expensive business for everyone. I am pleased to see five fellow feminists sitting among the many of us on these Benches—
Stella Creasy
Goodness! The Minister says eight, but I can assure him that we have a good many more than eight feminists in total on this side of the House if he would ever like to test us. Our policies and our manifesto certainly speak to that fact.
The case that I want to make to the five men on the Tory Benches, given that gender inequality and equality impact assessments can sometimes be seen as special-interest issues, is that everything we are doing today is in everyone’s interest. Inequality costs us all dear. It holds everybody back in our society. Indeed, feminism is not about women; it is about the fact that power is unequally balanced in society so that 51% of those in our communities miss out on achieving their potential. That is what is behind new clauses 6 and 7. Good data help to drive good decisions. It is also good for Governments to follow their own policies. We have a public sector equality duty in this country, but the fact that the Government are not following it themselves makes it much harder for them to force other people to do so. Ultimately, we are here today to make the case that Britain will be better when we know more about the conditions that we face and about what impact policies are having.
Let me start with that cold, hard economic argument, because I am sure that the Minister, who once proclaimed his feminist credentials, already knows this, but I am not sure whether it has yet been put on the record. Bridging the gender gap would generate £150 billion in GDP by 2025. The economy has been struggling with a productivity problem for decades, and there is nothing stronger or faster that we could do to address that than to ensure that everybody in our society is able to realise their potential, but we should do more to help women in particular. We need to tackle the barriers and the discrimination they face that means they do not have that level playing field. Indeed, studies show the strong correlation between diversity and economic growth, so those who think that this is special pleading do not understand the maths behind the case Labour is making today. I would argue that the reason why they do not understand the maths is that we do not do the calculations, which is why it is so important to get the data.
Data is a good thing. It leads to difficult conversations. It makes us ask why, after the Equal Pay Act was passed in 1970, we still do not have equal pay in this country. I was born after that Act came into effect, but if the current policy continues, I will be dead before we have parity. That harms us all, because the 14% pay gap between men and women is not stagnating, but growing. There will be women in our constituencies who are missing out on equal pay because we are not acting as a country. Having this kind of data helps us to ask why that is and whether Government policy is helping to minimise the gap or exacerbate it.
This is not just about gender. The gap is much worse for women from ethic minority communities. The pay gap is 26% for Pakistani and Bangladeshi women and 24% for black African women. This is also not just about ethnicity, because the same applies for disability and age. Only 36% of women in the constituencies of the Conservative male Members here will be getting their full state pension. When those women come to see those Members about the Women Against State Pension Inequality Campaign, they are coming because they have been living with poverty for decades. They are asking for help to make things right, because they do not want to be dependent on the state. They want a level playing field, but historical inequality in our society has held them back, and it is holding us back now. Having the data helps us to understand where that is happening and why. It would show us whether Government policies—individual Budgets—are going to make it easier to tackle that inequality, so that fewer women will come to constituency surgeries asking for a referral to a food bank, or whether they will make things worse.
If the Government want to tackle inequality, they need to know that data also tells us that this Budget, and the Budgets of previous years, are causing more problems. I do not doubt the sincerity of the five Conservative Members here or that they do want to tackle inequality in our society, but when I look at this Budget I do doubt whether they are going to be able to do that. This Budget will hit women 10 times as hard as it will hit men—13 times for women from an ethnic minority background. Going back to the equal pay issue, 43% of people in society do not earn enough to benefit from raising the personal income tax threshold, and 66% are women. We have unequal pay in our society, so 73% of the people who will benefit from changing the higher rate threshold will be male. Having the data and then looking at what is being done with tax and benefit policies will help us to understand just how much further this Budget is moving the goalposts for women and ethnic minorities. This applies to other policies, too. Corporation tax changes disproportionately benefit men, because we still do not have parity in the boardroom, in enterprise or in the number of women shareholders.
The lack of data also leads to bad decision making. As my colleagues have already set out, this Government have not done any equality impact assessments to understand just how far the goalposts are moving in getting to this House’s shared aim of an equal society. Tax information and information notes dismiss the issue and do not help Ministers to make good decisions. I am sure that the Minister, with his feminist soul, wants to make good decisions, but those assessments claim that there is little or no impact. Indeed, we do not even have TINs for all the policies that we know have a differential impact such as excise duty rates or fuel duty giveaways, because we live in an unequal society.
The lack of data also means that Ministers simply cannot come to the Dispatch Box and tell us that any concerns we may have about the differential impact of individual tax and benefit changes can be offset by the impact of other policies. If we do not know the impact of one policy, how can it be said that that can be offset by another? Even if we are concerned that men have received a windfall from Budgets for several years, it is simply not good enough for Ministers to try to tell us that women are being compensated through public services, because they cannot provide the analysis to show us that either case is true. Indeed, when we look at the impact of public service cuts—surprise, surprise—women, ethnic minorities and the disabled tend to be disproportionately hit again.
As I said at the start, it is also a matter of following our own laws. The public sector equality duty came into force in this country in 2011. It is a legal requirement, and it has driven some of these difficult conversations, whether in the Bank of England or in the BBC. It helps us to challenge everyone to do more to unlock the potential of every member of our society by reducing barriers and breaking down the discrimination that means, 40-plus years on, we still do not have equal pay.
If the Government themselves are not upholding their duties, what hope do we have in asking other organisations to do so? It is important to recognise that the legal duty is not passive. It is a duty not just to manage inequality but to do something about it. It is a duty to know the numbers before we make a decision so that we do not make things worse, as this Budget clearly does, and it is an ongoing duty that cannot be delegated. Ministers cannot leave it to a civil servant in the back office; they have to take direct responsibility. Crucially, it is a duty that, once a problem has been identified, the Government have to act, and not having the resources is no excuse for not acting.
The arguments Ministers are making against calculating the figures are not just about the practicalities, but they are completely surmountable. As the Women’s Budget Group, the Fawcett Society and the Institute for Fiscal Studies have shown, it is perfectly possible to make these calculations, and it is worth doing because it would help the Government to make better decisions. That it is possible to do it both for individuals and for households is important because, as my hon. Friend the Member for Rotherham (Sarah Champion) said, single parents, who tend to be women, are disproportionately hit by these changes. Even if the Minister were to quibble about calculating the figures across households, we could certainly see the impact we are having on some of the most vulnerable people in our society.
The reason why we have called it “lady data” is to try to help Ministers understand what they are missing and why it matters, but in truth this is everyone’s data. Getting this right and having that information would help us to make better decisions and would help us to understand why it will take us 100 years from today to have parity, so that women who are still struggling with unequal pay—including women in the communities of the Members to whom I have referred—can have some confidence that they may still live to see that wonderful day when everyone in this society is treated equally and so that people from ethnic minority backgrounds and disabled people living in poverty, and a poverty that is getting worse, can have some confidence that the Government are not ignoring them but understand where the challenges are and are considering a Budget that will do something about it.
Frankly, when we see the analyses that are being done, we know why the Government oppose new clauses 6 and 7. They do not want to do the maths because the figures tell the ugly truth about the inequality we have in Britain and its stubborn supporters, who unfortunately sit on the Government Benches. Jane Addams said:
“Social advance depends as much upon the process through which it is secured as upon the result itself.”
We cannot take the journey to a more prosperous, more successful and more egalitarian Britain if we do not know the direction of travel. The numbers will give us the direction of travel, but it is the political will that will give us the way forward.
Ministers should not dismiss this case as special pleading but should look at the economic argument for why tackling gender inequality matters and vote accordingly today to put Britain on a better path, because everyone will be richer for it.
Mel Stride
This Government are committed to equality. That is not to say that no further steps need to be taken—a situation that pertains perhaps to every Government who have ever been in office—but we have a strong record on equality. More women are in work than at any time in our history, at 70.8%. Last year, over 60% of growth in employment was through women joining the workforce. We have the lowest gender pay gap for full-time employment on record and we have taken action to ensure that companies with 250 employees or more will, from next year, be required to publish details of their gender pay gaps.
For those who are disabled, we are spending more than £50 billion a year on benefits for disabled people and those with health conditions. In the Budget, the Chancellor announced an extra £42 billion for the disabled facilities grant to encourage and assist those with disabilities into the world of work.
For ethnic minorities, when our Prime Minister assumed office last year, one of her first actions was to announce an audit into the differing impacts on ethnic minorities in terms of their use of public services. The report was published in October and will inform our policy going forward.
In the Budget, we increased the national living wage by 4.4% from April, which will disproportionately assist ethnic minority people. We are committed right across Whitehall to ensuring an increase in the uptake of apprenticeships and employment within our police forces and our armed services for ethnic minorities.
David Linden (Glasgow East) (SNP)
I am grateful to the Minister for giving way, but I am afraid he has to stop talking absolute guff when it comes to the national living wage. The Government continue to talk about a national living wage, but that is in fact a con trick because it does not apply to under-25s.
Mel Stride
It applies to a large number of people and there is the national minimum wage as well. My point is that the 4.4% increase in April will be well above inflation, and will disproportionately assist women and those from ethnic minority communities.
Stella Creasy
I thank the Minister for giving way and I am listening to the case he is making. If he is so confident that the Government’s policies promote equality, why is he against having an independent Office for Budget Responsibility equality impact assessment to tell us all the good news?
Mel Stride
I ask the hon. Lady to be a little bit patient, because I am coming to those very points shortly.
On assessments, we are required, under the Equality Act 2010, to take due regard of protected characteristics, but it is not just for that reason that we do so. It is not just for that reason that I and my fellow Ministers took those issues into account at every stage; it is because we believe it is the right thing to do and we wish so to do.
To come to the hon. Lady’s intervention, a number of reports are already out there. We have heard about tax information and impact notes. I do not think the Opposition should dismiss them. They did not mention the distributional analysis the Treasury provides and publishes at the time of the Budget, or the public expenditure statistical analysis, which looks at how expenditure affects different protected characteristics and runs to hundreds of pages in length. What the Opposition are calling for is fundamentally impractical. That is the heart of the matter and the answer to the hon. Lady’s question. Such analyses almost invariably focus on the static situation. They focus on the effect of tax and income changes on individuals without considering the behavioural changes they induce and the implications of changes in the wider economy, such as the level of employment. They are selective and tend to avoid focusing on those who benefit from public services or are affected by taxation. For example, the provision of childcare, social care and health services is normally exempt from such analyses.
The final point, which has been raised already and which the hon. Member for Walthamstow (Stella Creasy) indeed recognised, is that where an individual’s income changes, that individual will almost invariably live within a household with other individuals. She said that the personal allowance increase for taxation disproportionately benefited men, but of course men often live in households with women, and income is distributed across the household. The same is true, of course, where a woman benefits and brings income into a household in which men are also present.
Stella Creasy
It is extraordinary that the Minister does not understand the concept of doing both individual and household analyses, or indeed behavioural alongside static analyses. There are many different ways the Government could be doing equality impact assessments. The problem is that they are not doing any.
Mel Stride
The hon. Lady is right: there are many ways it can be done, and the Government are indeed doing it in many ways. She need not only look to me for the observations I have made; the IFS has recognised my very point about household income. We will, however, continue to look at how we provide information and assess policies, and we will work with the ONS, as the Chancellor set out in the recent Budget.
In conclusion, the Government have a vision for a society that is equal, not in terms of levelling people down, but in terms of giving people the opportunity to go up. In yesterday’s debate on the Bill, the Labour party chose to vote against a measure to encourage young people to get a foot on the housing ladder. That is not acceptable, and that is an example of what we will do to promote equality of wealth and opportunity at every turn. I urge the Committee to reject new clauses 6 and 7.
Dawn Butler
The Minister referred to distributional analyses. The distributional analysis carried out by the IFS, the non-gendered and gendered analyses of the Women’s Budget Group, and others, such as those carried out using the Euromod tax-benefit model for EU countries, all share the same characteristic: they are static. The exact same method is adopted by the Treasury itself when it assesses the distributional impact of Budget measures in Budget and IFS documents. If the Treasury does not like other people using the model, perhaps it should not use it itself. The Government cannot criticise others for using the same method as them to analyse their own Budget.
The Minister said several times that the Government believed in equality, but their actions fail to carry that through. They say one thing and do another, and they are exacerbating inequality in our society. [Interruption.] The Chancellor says from a sedentary position, “Unlike the Labour party.” The Labour party is more competent than this Government have ever been in ensuring that this country is more equal. All the equalities legislation has come from a Labour Government—[Interruption.] Productivity, growth, all the equalities legislation has come under a Labour Government, not a Conservative Government. In fact, every time the Conservatives enter government, everything starts to go down. Food banks were not part of the Department for Work and Pensions scheme when Labour was in government. Period poverty was not part of everyday life for young women when Labour was in government.
I say to the Minister, “If you in any way believe in equality, you should not lead your merry men into the No Lobby. You should lead them into the Aye Lobby, and vote with us.”
Question put, That the clause be read a Second time.
Kirsty Blackman
It is not actually a raft of new tax bands. As far as I know, it is one more band in the tax system with slightly different numbers for the pennies. But that is only in relation to income tax. Some 70% of people will pay less tax and 55% will pay less tax than they would in England. Does the hon. Gentleman believe, therefore, that the English system is taxing people unfairly compared to the Scottish system?
Mel Stride
I thank the hon. Lady for indulging me. She says that 70% of Scottish taxpayers will pay less tax, but will she accept the fact that that is largely due to the changes made by the UK Government in raising the personal allowance?
Kirsty Blackman
The Scottish Government’s new starter rate of 19%, rather than 20%, for the first £2,000 that people earn is really positive. It is an incredibly progressive taxation measure, and it is something that the UK Government cannot claim; it is something that the Scottish Government are doing.
Kirsty Blackman
I thank my hon. Friend for his comments. I do, however, want to say one more thing on the Scottish tax system, so I hope he will indulge me.
The Scottish tax system is progressive. It is making a difference by ensuring that people who earn under £24,000 pay less tax. That is a positive measure and a good way forward. If members of the UK Government have concerns about the Scottish Parliament’s choices on tax, perhaps it would be better for them to support an increase in the block grant. They could also tell us whether they would cut the money that is going to be made up from the Scottish Government’s tax changes from education, local authorities or the health service.
I will bring the Committee back to tax avoidance. I am sorry, Sir Roger, for testing your patience slightly. The Scottish National party has been consistent in its criticism of Scottish limited partnerships. My former colleague, Roger Mullin, was like a dog with a bone; he would not let go of this matter. That was to his credit because the UK Government decided to make changes to the SLP regime as they recognised that it is massively used for tax avoidance and dodging. There was a review of SLPs, but we are yet to see changes as a result. Will the Minister let us know at least the timeline for making those changes in order to ensure that SLPs are no longer used as a tax-dodging mechanism? This is an important change that really needs to be made, preferably sooner rather than later.
Talking about the UK Government not working as they should regarding tax avoidance and evasion, the Panama papers and the Paradise papers have both been published in my time as an MP. It is very clear that the tax system—not just the global tax system, but even the system in the UK—is failing. It is allowing people and organisations to dodge tax. It is all well and good to talk about overseas trusts. In fact, this frustrates me a huge amount because the Government try to give the impression that overseas trusts are used by organisations such as rural churches in order to fix their roofs. It is not the case that they are used by organisations like that; they are used by people who are trying to dodge tax. We need the hardest possible line on that.
We cannot see the United Kingdom turn into a low-tax, deregulated tax haven. If the UK Government are deciding what kind of country they want the United Kingdom to be, they should not choose one that involves deregulation. With Brexit, they have the opportunity to put their stamp on the future, but I am incredibly concerned about the way that it will go. In bringing back control, some of the reins that have perhaps been put on the UK Government will be taken off and they will be free, for example, to take away the working time directive, and to make changes to our world-class social security system, fair society and good business practices. That is incredibly concerning.
We have called before, and we will not stop calling, for powers to deal with tax avoidance and evasion to be devolved to the Scottish Parliament. We believe that we would do a better job because we could not really do a worse one. We would put forward a fair and moral tax system and a general anti-avoidance rule in order to discourage people from dodging tax, and we would ensure that our tax gap was way smaller than the UK Government’s.
Mel Stride
This Government are committed to bearing down on tax avoidance, evasion and non-compliance like no other Government in history. While I have enormous respect for the hon. Member for Oxford East (Anneliese Dodds), the shadow Minister, and I respect the spirited nature of her attack on our record, I am afraid she is misguided.
We have a strong record. We have brought in and protected £160 billion of potentially avoided tax since 2010 as a result of over 100 measures that we have brought in. We have, as we have heard in the debate, one of the lowest tax gaps in the entire world, at just 6%. Contrary to some of the suggestions from those on the Labour Benches, that is a robust and firm figure; it is described by the IMF as one of the most robust in the world. It is, indeed, produced by HMRC, but it is produced to strict guidelines set out by the Office for National Statistics.
Kelvin Hopkins
The Minister mentioned HMRC. One of the things the Government have done over many years now is to squeeze HMRC, which has fewer offices and not enough staff. Does he not accept that every single additional tax officer collects many times their own salary? If the Government were serious about tax collection, they would expand HMRC substantially.
Mel Stride
The hon. Gentleman may know that, in the last Budget, £155 million was set aside to be invested in HMRC, for exactly the activity that he has described. That is expected to bring in £4.8 billion through a further reduction in tax avoidance over the forecast period.
The other point I would make to the hon. Gentleman is that HMRC’s effectiveness is not all about having lots of regional offices staffed with tax inspectors. Tax is collected today using sophisticated intelligence-led and data-led techniques. We need to invest in that if we are to continue to achieve the outstanding results we are achieving at the moment.
We have borne down with penalties for developers and enablers of tax avoidance schemes. On the international side, our country has been in the vanguard of the base erosion and profit shifting project. We now have over 100 countries involved in common reporting standards, so HMRC can access information in real time to bear down on non-compliance in those jurisdictions. We have introduced new measures in this Budget in relation to clamping down on the abuse of overseas trusts. Since 2010, we have brought in £2.8 billion in additional revenues as a consequence of clamping down on the activities of UK residents hiding their wealth inappropriately in overseas trusts.
We have, of course, been the Government that abolished permanent non-dom status. I have to disagree, I am afraid, with the hon. Member for Oxford East, who suggested that if someone’s parents were non-domiciled, that in some way suggests that that person would not be subject to the rules we have brought in. That is simply not the case. If someone has been resident for 15 of the previous 20 years, they will be deemed domiciled, irrespective of who their parents happen to be.
New clause 8 suggests we should have yet another assessment. We have heard consistently in all the debates we have had on the Floor of the House on this Bill about having more and more assessments, but I would say to Opposition Members that we already have a robust figure for the tax gap. As I have said, it has been described by the IMF as one of the most robust in the world, and we certainly do not need even more information out there to prove just how successful this Government have been in bearing down on avoidance, evasion and non-compliance.
However, as a consequence of this Bill, we will go even further than we have to date. Clause 38 relates to online VAT fraud, and we will make online platforms jointly and severally liable where VAT avoidance occurs, extending that approach from overseas sellers to domestic sellers, and ensuring that they are responsible for supplying accurate and appropriate VAT information on their sites. That will raise £1 billion by 2023.
Clauses 11 and 12 will complete our work on disguised remuneration, and bearing down on that will have brought in £3.6 billion by 2019, when we will be closing down on those schemes.
Clause 42 ensures that where there is illegal landfill activity, we apply the tax that would have been in place had those activities been legal, bringing in a further £145 million. There are also the changes brought in by clauses 20 and 21 to address avoidance involving intellectual property within companies.
This Government have a record that is second to none when it comes to clamping down on avoidance, evasion and non-compliance. Labour had 13 years in which to implement such measures, and did very little. In fact, the tax gap under the previous Labour Government was such that if we had it today, we would be over £12 billion short every single year—enough to fund every policeman and woman in England and Wales. We will continue to bear down, as appropriate and with vigour, on tax evasion and avoidance to ensure a fair and civilised society where those who are due to pay their fair share do so, to support our public services. I urge the Committee to reject new clause 8.
Roadchef Employees Benefit Trust
Mel Stride Excerpts(8 years, 3 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I am grateful to the hon. Member for Airdrie and Shotts (Neil Gray) for having raised this issue and secured this debate. I congratulate him also on the vociferous energy with which he has pursued these important matters—the Government recognise their importance. I appreciate that this matter is a source of long-standing concern for those affected, and I can fully understand that they would want a resolution soon. I assure the House that HMRC is working hard towards resolving this issue. As the hon. Gentleman has recognised, I am of course constrained by HMRC’s duty of maintaining taxpayer confidentiality, so my remarks on the case will, of necessity, be limited to matters already in the public domain. HMRC will, however, continue to correspond in writing with the trustee chairman and assist the employee benefit trust’s representatives.
It may be helpful if I first set out the typical tax treatment for the sale of shares from EBTs. When a person exercises an option to obtain EBT shares, this is often chargeable to income tax and national insurance contributions, based on the difference between their valuation when they are obtained and the amount paid for them. If the shares are sold to a third party, the sale will then be subject to capital gains tax on the difference between the valuation used for the taxation of the option and the sale prices.
Turning to the Roadchef EBT, as we have heard, the issue we are discussing today has a long history. Before the sale of Roadchef in 1998, the company’s then chairman arranged for shares held by the EBT to be transferred to him. He subsequently sold the shares for a profit. Both the acquisition and sale were taxed appropriately at that time. The former chairman’s actions were contested, and in 2014 the High Court ruled that effectively the moneys from the sale of shares had to be paid back, net of tax, to the trust for distribution to its beneficiaries. The judgment stated that the proceeds from the shares sold had been held on constructive trust by the chairman for the beneficiaries. However, the implementation of the High Court’s ruling in 2014 and the subsequent distribution of the original shareholders has proved to be very complex.
HMRC has since been engaging with the Roadchef employment benefit trustees’ representatives to determine the correct tax treatment for the trust and the relevant distributions to its beneficiaries. This involves HMRC working closely with the trust’s representatives to fully explore all potential legal options to settle this matter. HMRC’s most senior technical people have been working on different aspects of the tax position, and a senior HMRC representative is regularly discussing the progress of the case with the trust’s representative. Several media outlets have also reported how earlier this year HMRC provided a technical analysis of its view of the correct tax treatment to the trustee chairman and its representatives. To be clear, HMRC has no interest in prolonging this matter. It is, however, legally bound to be even-handed and impartial in applying the law.
Neil Gray
Can the Minister understand my concern at HMRC’s approach to this? When the trust was first made aware of the £10 million tax payment, HMRC apparently told the trust that the beneficiaries would not have to pay any tax on any pay-out that is made as long as the trust does not pursue HMRC for the £10 million. I think he can understand why that is a little concerning.
Mel Stride
The hon. Gentleman has raised a specific set of suggestions in the context of the dialogue between HMRC and the trust, and that very much strays into the area of confidentiality around discussions between our tax authority and a particular organisation. It would therefore not be right for me to comment on that. Indeed, in the normal course of events, I would not even be aware of such matters—certainly not from an HMRC perspective.
Mel Stride
I thank the hon. Gentleman for his invitation, which he also extended in his speech. I am certainly prepared to consider meeting him and potentially others, although I would like to take advice on whether that would be entirely appropriate, given the situation. I would appreciate it if the hon. Gentleman could explain more fully the exact nature of such a meeting, including who would be present and so on. In no way am I seeking to be unhelpful—quite the opposite—but I am conscious of the clear line that there must always be between members of the Government, MPs and, indeed, other members of the public, and the tax affairs that pertain between our tax authority and another organisation or business.
HMRC has a taxpayer confidentiality obligation, so I cannot comment in more detail on the specific tax treatment of the case. I can, however, assure the House that HMRC is doing everything that it can to resolve this issue promptly and fairly, while ensuring that the tax is paid appropriately in respect of the sale and distribution of the shares. Although HMRC has discretion as to how it goes about fulfilling its duties, as a statutory body it must of course apply the law fairly and collect the taxes set out in legislation by Parliament. When the law is unclear, HMRC can exercise some discretion to ensure that it gives effect to Parliament’s intent. For example, HMRC can exercise discretion to give up some tax if there is an unintended or unforeseen effect only a small group of taxpayers or that will be apparent only for a short time. I should note, though, that that discretion is by its nature limited and would not be applicable in all circumstances—for instance, it would not apply if the courts had made a specific ruling on a particular issue.
In summary, I thank the hon. Member for Airdrie and Shotts again for securing this debate and for the tenacity with which he has pursued these matters on behalf of his constituents and those of other Members. As I have said, I can appreciate the frustration of those affected, who naturally want a swift end to this matter, which I hope there will be. I hope I have been able to provide at least some reassurance that HMRC is doing everything in its power to resolve this issue in a fair and timely manner.
Question put and agreed to.
European Union Opt-in Decision: Cash Controls Regulation
Mel Stride Excerpts(8 years, 3 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
The UK’s justice and home affairs (JHA) opt-in was triggered by three articles in a proposed regulation amending EU regulation 1889/2005 on controls on cash entering or leaving the union. In the proposed regulation, provisions in article 6 oblige member states to collect information, and those in articles 8 and 9 oblige member states to share information. The Government considered that the competence for the EU to act in these areas stems from article 87 of the treaty on the functioning of the European Union.
The Government decided that it is in the UK’s interest to opt in to the justice and home affairs obligations within this regulation as the provisions strengthen the existing regulations, and will enhance border security without imposing disproportionate burdens on business. The proposed new regulation will reinforce the existing controls of cash moving across EU borders, bringing these controls in line with international norms and best practices for addressing evolving forms of criminality. Until the UK leaves the EU it remains a full and participating member. We will continue to work with the EU institutions, with the aim of ensuring that UK objectives are preserved as the negotiations progress on any compromise text.
[HCWS371]
Finance (No. 2) Bill
Mel Stride ExcerptsMonday 18th December 2017
(8 years, 3 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 18 December 2017 - (18 Dec 2017)
The First Deputy Chairman of Ways and Means (Mrs Eleanor Laing)
With this it will be convenient to discuss the following:
Amendment 1, in schedule 9, page 132, line 32, leave out from “in” to end of line 33 and insert
“accordance with the provisions of section (bank levy: Part 1 of Schedule 9: pre-commencement requirements)”.
This amendment paves the way for NC3.
New clause 1—Review of operation and effectiveness of bank levy—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
Part 10
Review
82 (1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the operation and effectiveness of the bank levy.
(2) The review shall consider in particular—
(a) the effectiveness of the levy in reflecting risks to the financial system and the wider UK economy arising from the banking sector,
(b) the effectiveness of the levy in encouraging banks to move away from riskier funding models,
(c) the revenue effects of the changes to the levy made in Schedule 2 to the Finance (No. 2) Act 2015,
(d) the effectiveness of the anti-avoidance provisions in paragraphs 47 and 48 of this Schedule.
(3) A review shall also compare the effects of the bank levy with those of the bank payroll tax (within the meaning given by Schedule 2 to the Finance Act 2010) in relation to—
(a) revenue, and
(b) the matters specified in sub-paragraph (2)(a) and (b).
(4) A report of the review under this paragraph shall be laid before the House of Commons within one calendar month of its completion.””
This new clause requires the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims, the revenue effects of the changes made in 2015 and the comparable effectiveness of the bank payroll tax.
New clause 2—Public register of entities paying the bank levy and payments made—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
Part 11
Public register of payments
83 (1) It shall be the duty of the Commissioners for Her Majesty’s Revenue and Customs to maintain a public register of groups paying the bank levy and the amounts paid.
(2) In relation to each group, the register shall state whether it is—
(a) a UK banking group,
(b) a building society group,
(c) a foreign banking group, or
(d) a relevant non-banking group.
(3) In relation to each group, the register shall state the amount paid in respect of each chargeable period.
(4) In relation to chargeable periods ending between 28 February 2011 and 31 December 2017, the Commissioners must public the register no later than 31 October 2018.
(5) In respect of subsequent chargeable periods, the Commissioners must public the updated register no later than ten months after the end of the chargeable period.””
This new clause requires HMRC to prepare a public register of banks paying the bank levy and the amount they have paid.
New clause 3—Bank levy: Part 1 of Schedule 9: pre-commencement requirements—
“(1) Part 1 of Schedule 9 shall come into force in accordance with the provisions of this section.
(2) No later than 31 October 2020, the Chancellor of the Exchequer shall lay before the House of Commons an account of the effects of the proposed changes in Part 1 of Schedule 9—
(a) on the public revenue,
(b) in reflecting risks to the financial system and the wider UK economy arising from the banking sector, and
(c) in encouraging banks to move away from riskier funding models.
(3) Part 1 of Schedule 9 shall have effect in relation to chargeable periods ending on or after 1 January 2021 if, no earlier than 30 November 2020, the House of Commons comes to a resolution to that effect.”
This new clause requires the Government to provide a separate analysis of the impact of Part 1 of Schedule 9 nearer to the time of proposed implementation in 2021 and to seek the separate agreement of the House of Commons to commencement in the light of that review.
New clause 11—Review of effects of bank levy on inclusive growth and equality—
“(1) Schedule 19 to FA 2011 (bank levy) is amended as follows.
(2) After paragraph 81, insert—
Part 10
Review on inclusive growth and equality
82 (1) Within six months of the passing of the Finance Act 2018, the Chancellor of the Exchequer shall undertake a review of the bank levy.
(2) The review shall consider in particular—
(a) the effects of the levy on inclusive growth,
(b) the impact of the levy on equality.
(3) A report of the review under this paragraph shall be laid before the House of Commons within one calendar month of its completion.””
This new clause requires the Government to carry out a review of the bank levy, including its effects on inclusive growth and inequality.
The Financial Secretary to the Treasury (Mel Stride)
The Finance Bill makes changes to the bank levy, in particular restricting its scope to UK activities. These changes support our vision to help keep UK banks globally competitive. They reflect improvements in international banking regulation that reduce the risk of overseas operations to the UK, and they complete a set of changes announced in 2015 and 2016 that significantly increase the tax we raise from our banks.
Let me be clear from the outset that this Government believe that banks should make a significant contribution to the public finances, beyond general business taxation, that reflects the risk they pose to the UK economy. That has been the record of Chancellors since 2010. As part of that, in 2011 the Government introduced the bank levy on the balance sheet equity and liabilities of banks and building societies, but this additional tax contribution made by banks has to support our broader objectives for the sector. It therefore needs to be responsive to international commercial and regulatory changes in banking. Any tax changes should ensure that we can continue to secure the additional contribution from the banks from a sustainable tax base, and they also need to ensure we retain a strong, stable and competitive banking sector that supports the wider economy by lending capital to both businesses and individuals.
Alberto Costa (South Leicestershire) (Con)
Does the Minister agree that in pursuing the policies he has just outlined in a strong and stable way we can have sustainable banking that gives the significant contributions to the Treasury that are much needed, and that the policies espoused by the parties opposite would do great damage to our economy and our public services?
Mel Stride
I thank my hon. Friend for that perceptive and helpful intervention. There is no question but that a healthy banking system is absolutely central to a healthy economy, which is why we have invested so much time and energy since 2010 in making sure that the regulation of the banks is tightened up, which was, of course, part of the original rationale for the bank levy. The fact that we are reducing the bank levy over time from 2015 and moving towards taxing profits is in itself an indication of the health of our banking system.
Mr Jim Cunningham (Coventry South) (Lab)
Is the Minister satisfied that the banks have enough in reserve to cope with any emergency should there be a downturn in the world economy?
Mel Stride
As the hon. Gentleman will know, the Bank of England carries out stress tests on our banking system. In the latest round, the banks came through very strongly—not a single one failed. The tests stress the system to a greater extent than the effect of the last financial crash in 2008, so we can be certain that the measures the Government have put in place, the operation of the independence of the Bank of England and carrying those things through are having the desired effect that he rightly seeks.
Alex Burghart (Brentwood and Ongar) (Con)
After 2008, a bank levy was needed because there was not much profitability in the banks to enable their assets to be taxed, but as we have improved regulation it is now worth moving to tax their profitability. Does the Minister agree that this is the right time to make this shift in raising revenue?
Mel Stride
My hon. Friend is entirely right. The Government since 2015, and the coalition Government, oversaw the restoration of the banking sector to a healthy central part of our economy. He is absolutely right. The shift from the bank levy to the taxation of profits which was introduced on 1 January 2016 indicated that the risks themselves were diminishing under our stewardship, and that our banking sector was profitable enough to bring in considerably more tax revenue. Since 2010, under Conservative Chancellors, we have secured more than £44 billion in additional tax—I stress the word “additional”—from the banks, over and above the tax that we would be applying to them were they non-financial businesses.
Robert Jenrick (Newark) (Con)
In 2010, tax receipts from the financial services sector amounted to about £53 billion; today they amount to £71 billion. We are making the banks and the wider financial services sector pay their fair share, but we do not want a race to the bottom. We want the sector to be competitive, because tens of thousands of well-paid, highly skilled jobs throughout the country—not just in London but in cities like Nottingham, near my constituency—depend on it.
Mel Stride
My hon. Friend is entirely right. The additional tax raised from the banks amounts to £9 billion between 2010 and the present time, and a further £25 billion is projected over the current forecast period. Far from taxing the banks less over time—as, no doubt, the Opposition will shortly have us believe we have done—we are securing more tax revenues than we did in the past.
Alex Chalk (Cheltenham) (Con)
As circumstances change, it is right for us to move from a bank levy to taxing bank profits. I am sure that, in due course, we shall hear a great hue and cry about how appalling it is to lose the bank levy. Is that not a little perplexing, given that Labour voted against its imposition in 2011?
Mel Stride
That is a valid point. I am waiting with some interest to hear what Opposition Front Benchers have to say about that point in particular. Even my shadow, the hon. Member for Bootle (Peter Dowd), is waiting expectantly to hear what he himself has to say, which is intriguing.
Dan Carden (Liverpool, Walton) (Lab)
Did the big banks not lobby for this change, and are they not likely to benefit from the surcharge that has replaced the levy? Did not bigger, riskier banks pay more than other banks in the system?
Mel Stride
When we consider who benefits and who does not, we must assume that overall, given that more tax is being raised than hitherto, the banks are probably paying more tax on average as a consequence of these measures. However, the measures will obviously have different impacts on different banks, depending on their profitability and on whether they are at or above the capital threshold of £20 billion at which the levy itself begins to kick in.
In 2015 and 2016, the Government announced a set of changes in the way in which banks were taxed. We set out a phased reduction in the rate of the bank levy to 0.1% by 2021. We announced the changes that the Bill makes in the levy, reducing its scope so that it applies to banks’ UK rather than global balance-sheet liabilities. However, we also introduced an extra 8% tax on banks’ profits over £25 million, on top of general corporation tax. I hope that when the Opposition spokesmen respond to my comments and to the amendments and new clauses, they will at least recognise the important increase in taxation that has been applied to the banks since 2016.
Rachel Maclean (Redditch) (Con)
I, too, look forward with great interest to hearing from Opposition Front Benchers. Has not part of the Government’s overall approach been to back the independence of the Bank of England? Has that not also helped the overall regulation of banks, and ended the situation which, under Labour, led to some of the problems in the banking sector?
Mel Stride
My hon. Friend is absolutely right. I think it would pay all Members dividends to consider the comments made by Mervyn King at the time of the last crisis, when he said that the Bank of England had very limited scope to deal with the issues that were faced at the time. Since then, of course, we have fundamentally changed the structure of the oversight of banks. We have ensured that the Bank of England is at the heart of it, and that the independence of the Bank and the other institutions that we have set up is paramount. That is partly why the position of the banks is so much stronger than it has been hitherto.
We prevented the banks from reducing their corporation tax liabilities when they were required to pay compensation for misconduct, effectively applying additional taxes. The shift towards taxing profits means that the recovery in banks’ profitability will translate into higher tax receipts for the Exchequer, while also ensuring a sustainable long-term basis for the taxation of banks.
Mark Menzies (Fylde) (Con)
It is important that we raise record sums from the banks to pay for vital public services, but is there not a balance to be struck? We need healthy banks, not only to support small businesses and provide mortgages for first-time buyers, but to ensure that there are banks in our high streets.
Mel Stride
My hon. Friend is right, and this is all about striking the right balance. We recognise that banks need to pay their fair share because of the systemic risk that they can feed into the economy, and because, some years ago, the British taxpayer stood behind the banking system. The other part of the balance is to ensure that our banking system remains competitive in comparison with others in the world, and can, in turn, leverage the competitiveness of our own industries through its lending.
Nigel Huddleston (Mid Worcestershire) (Con)
My hon. Friend is making an important point. Rather than setting a tax rate for party political purposes, we should aim to maximise tax revenue while also securing economic growth.
Mel Stride
My hon. Friend is absolutely right, as we know from recent experience. For example, although corporation tax has been reduced from 28% in 2010 to 19% and then to 17% under this Government, the corporation tax take has increased by 50%. Labour’s policy is the reverse. It foresees raising taxation not just from banks but from all the businesses in the country, large and small, including high street businesses, which, as we know, often struggle.
Dan Carden
A branch of Barclays bank in County Road in my constituency has closed, and I know that many other Members will have fought to keep local bank branches open. Are the Government willing to take any action—at least in the case of RBS, which we partly own—to ensure that high-street banking is still available to the most vulnerable and elderly constituents whom we all represent?
Mel Stride
Conservative Members believe that it is better for commercial organisations to be left to run their own businesses. They tend to do it rather better than Ministers, dare I say—although I think I could be quite handy at running a bank or two; who knows?
The issue of bank closures is very important. We are working hard to reinvigorate our post offices and to ensure that the banking facilities that they provide—which are available, typically, to more than 90% of personal and business customers—are promoted in all the 11,500 branches in the United Kingdom.
Stephen Lloyd (Eastbourne) (LD)
A constituent who came to my community surgery on Saturday made a simple suggestion that I thought might well work. Banks face structural challenges, and many are closing, especially in rural areas. Why do the Government not encourage three or four banks to work together to establish a single branch in an area where there are currently no branches? Such a collegiate approach would solve the banking problems of rural areas in particular.
Mel Stride
The hon. Gentleman raises an interesting idea, but I would argue that that is already effectively in practice in the form of the post office: post offices are able to deal with the customers of the major banks, to take cash, and to offer banking services—albeit not the full range, but certainly the most basic and most important to local communities—and, as I said earlier, there are more than 11,500 of them across the UK.
James Cartlidge (South Suffolk) (Con)
All of us who represent rural constituencies are concerned about the issue of access to bank branches and closures, but does that not mean that there is an extra onus on providing access to fast broadband in rural areas so that people can access online banking? To that end, should we not welcome the announcement in The Sunday Times that there will be further help this week for speeding up broadband in the most hard-to-reach rural areas?
Mel Stride
My hon. Friend raises an important point about connectivity, particularly in rural areas, including in constituencies such as mine where making sure there is good broadband is often one way of reducing sparsity and people being cut off from each other, and that is why we have invested so heavily in that area.
These changes are expected to increase the additional tax contribution from banks by more than £4.6 billion over the current forecast period to 2022-23.
Mr Jim Cunningham
Will the Minister look into a situation that a number of us have had letters about? In the case of certain banks, including HSBC, where a person who is on a bank’s pension retires, that retirement pension is deducted because of their old-age pension. I do not expect an answer right away, but will the Minister look into that?
Mel Stride
I congratulate the hon. Gentleman on the ingenuity with which he has shoehorned in that question, which is possibly a Department for Work and Pensions matter, although I am not sure. But I will certainly come back to him on that point, and if it is not for me to respond, I will make sure the appropriate Minister in the appropriate Department does so.
We expect to raise over £25 billion from the additional taxes that banks pay over this period, on top of the £19 billion that we have raised to date since 2011. By 2023 we will have raised more than £44 billion in additional bank taxes introduced since the 2010 election.
I will now turn to the changes made by the current Finance Bill, and set out the reasons for changing the scope of the bank levy. Hon. Members will be aware that the bank levy aims to reduce the risk banks pose to the wider UK economy. It is currently chargeable on the global balance-sheet equity and liabilities of UK-headquartered banks, but overseas banking groups only pay bank levy on UK activities. However, regulatory developments currently being implemented across the G20 as a result of the standards set by the Financial Stability Board and the Basel Committee on Banking Supervision will reduce the risk that overseas operations of UK banks pose to the UK economy, for example with stricter international standards on the need for subsidiaries to be independently capitalised.
We have also made it mandatory for the largest UK banks to separate core banking services from their investment banking activities by 2019. This ring-fencing will help to insulate UK borrowers and depositors from failures arising in banks’ overseas branches, before the changes to the scope of the levy take effect. As such, there will now be less need for the bank levy to address the risks posed by overseas operations of UK banks, and as the bank levy is less necessary to cover these risks, we have an opportunity to boost the competitiveness of UK banks by reducing its scope.
At present, UK-headquartered banks pay the levy on their worldwide operations, while foreign-headquartered banks only pay on their UK operations. We want the UK to stay at the forefront of global banking; we want banks based in the UK to compete and win business overseas, bringing jobs, prosperity and tax receipts with them. So we have decided that from 2021 the bank levy will apply only to UK balance-sheets for UK-based and foreign banks alike. This will allow UK banks to compete and win business on a more level playing field in these overseas marketplaces, and it is a change we are making as part of a package of reforms that secures revenue while boosting competitiveness.
The corporation tax surcharge, the reduction in bank levy rates, and changes to compensation relief restriction were legislated in 2015. Following detailed consultation, this clause and schedule implement the final element of our plan: changes to the scope of the bank levy. The clause and schedule narrow the scope of the bank levy so that from 2021 it will be chargeable only on the UK balance-sheet equity and liabilities of banks and building societies. Broadly, this means that overseas activities of UK-headquartered banking groups will no longer be subject to the bank levy. However, the levy will continue to apply to the UK operations of UK and foreign banks.
Robert Jenrick
Will the Minister re-emphasise the point he has just made: that the practical effect for our constituents of the move he is making today will make it much more attractive for important British international banks such as HSBC and Standard Chartered, who have a choice of locations in which to be registered—HSBC recently considered whether to move to Hong Kong or even mainland China—to remain in the City of London?
Mel Stride
As is so often the case, my hon. Friend has hit an important nail on the head: in terms of improving our competitiveness, it is clearly deeply unattractive to have a situation where UK-domiciled banks are being taxed on their foreign operations whereas foreign banks are not being taxed by us on their foreign operations, but are only being taxed on their operations in the UK. He is right that the future of HSBC, Standard Chartered, Barclays and other banks, who make a huge contribution to our tax-take and our economy, are much more secure if they are not being disadvantaged by being taxed on overseas operations unlike their foreign counterparts. As part of these changes, the schedule also provides for a reduction in the amount on which the levy is chargeable for certain investments a UK bank makes in an overseas subsidiary.
I shall now briefly turn to the amendments tabled by Opposition Members. For the reasons I have described, we believe that a combination of taxing profits and balance-sheets is the most effective and stable basis for raising revenue from the banking sector. The bank payroll tax was intended as a one-off tax; even the last Labour Chancellor pointed out that it could not be repeated without significant tax avoidance. I can assure the House that information about the bank levy will continue to be published as part of the normal Budget cycle. Official statistics are published on the pay-as-you-earn income tax and national insurance contributions, bank levy, bank surcharge, and corporation tax receipts from the banking sector as a whole. The Government have published a detailed tax information and impact note on the proposed changes introduced by part 1 of the schedule. We have also published information about the overall Exchequer impact of the 2015 package of measures for banks, and these figures have been certified by the Office for Budget Responsibility.
Finally, new clause 2 proposes that HM Revenue and Customs should publish a register of tax paid by individual banks under the levy. Taxpayer confidentiality is an essential principle for trust in the tax system, and HMRC does not publish details of the amount of tax paid by any individual business. While this Government continue to consider measures to support transparency over businesses’ tax affairs, we must balance that with maintaining taxpayer confidentiality in order to sustain public confidence in our tax system.
Dan Carden
Is it not right that these banks, some of which were bailed out by, and may well look in the future for bail-outs from, the public, are treated slightly differently from other companies across the UK economy, and that we should have a public register for that reason?
Mel Stride
I would maintain that the banks are indeed being treated rather differently from other sectors of the economy, not least—as I have been at great pains to point out this evening—because they are being taxed far more heavily than other types of business. On a fundamental issue of principle relating to tax confidentiality, it would not be right to single out any particular bank, whatever its history, to make an example of it and treat it differently from other financial institutions.
The changes in this schedule are part of a package of measures that provide a sustainable basis for raising revenue from the banking sector in the long term. These measures continue to apply additional taxes to banks, to reflect the special risk that they pose to the UK economy. They put the taxation of banks on a more certain and sustainable footing to ensure that the banks will continue to pay additional tax, and they reduce the impact of the bank levy on UK banks’ international operations. In doing this, we will ensure their continued health and competitiveness, which are essential for us if we are to go on raising yet more tax from our banking sector. I commend the clause to the Committee.
Peter Dowd (Bootle) (Lab)
I rise to speak to the amendment and new clauses in the name of my right hon. Friend the Leader of the Opposition and others. Banks have a crucial role to play in the proper and smooth functioning of our nation’s economic wellbeing. In addition, it is important to ensure that the banks are not all lumped together with a one-size-fits-all approach for the purpose of a bank-bashing session, as was suggested by Conservative Members. Further, it is neither reasonable, fair nor sensible to homogenise the people who work in the banking sector as either saints or demons. Neither beatification nor demonisation of the banks is appropriate; it does no credit to the complexity of the landscape facing us. It is important when dealing with fiscal issues relating to banks that we keep a sense of proportion during the process. That is why it is important to ensure that, in an objective sense, we examine the context in which the Government have decided to cut the take from the bank levy. So, what is that context?
Emma Hardy
I completely agree. The Education Committee has been looking into fostering. We know that in some of the most deprived areas of society the number of looked-after children is increasing, and we know that one of the reasons is that there is no money for social services departments to support families and give them the early intervention that they so desperately need. It is a false economy to pull funding away from early intervention, saying that that will save money. It will not; it will cost a lot more in the long run.
Those horrendous headlines do not tell the whole story. They do not tell of the worry experienced recently by breastfeeding mothers in Hull who panicked at the possibility that their peer-to-peer doula support would be cut because the council could not afford to pay for it. The council is having to make impossible choices. If it supports those breastfeeding mothers, it will have to pull funding from somewhere else. That is simply not fair.
Those headlines do not tell the story of the child in need who has fallen behind at school and finds it difficult to catch up again because of Government cuts in Sure Start’s speech, language and communication services. The Minister recently published an article in a newspaper complaining about the fact that children were starting school before they were school-ready. Why do the Government think that that is happening? It is happening because there is no money for the early intervention and Sure Start centres that are so desperately needed. Again, more potential is being missed and more opportunity wasted.
As I said in my maiden speech, I do not want a single child to have their life story written on the day they are born. Can we really say that the Bill will create the conditions in which all children can be given the support that they need and the opportunity to fulfil their potential? Does it, as the Prime Minister said on the steps of Downing Street just after taking office,
“do everything we can to help anybody, whatever your background, to go as far as your talents will take you”?
Until we can answer yes to those questions, a reduction in the bank levy is a luxury that we cannot afford. I urge Members to back Labour’s new clauses 1, 2 and 3, because the future of our economy, and our children, depends on them.
Mel Stride
We have had a very wide-ranging debate. On occasion, we even touched on the matter at hand—the bank levy.
The hon. Member for Bootle (Peter Dowd) was very generous in giving way, but less generous and less forthcoming in his answers. He was asked whether he recognised that we would be raising more tax from the banks. He said he would come back to that, but I do not think he did. He was asked why Labour had voted against the bank levy in the first place. On two or three occasions he said he would come back to that, but I am not sure he did. When he was asked whether he supported the overthrow of capitalism, he declined to answer. When he was asked by how much Labour would increase corporation tax, he told his interlocutor to go away and look it up. He was asked whether he was a Marxist. He was swamped by red herrings at one point, which caused my hon. Friend the Member for South Suffolk (James Cartlidge) to say that he was the victim of too many interventions “on the trot”—boom boom!
My hon. Friend the Member for Stirling (Stephen Kerr) stressed the importance of a fair playing field, which is exactly what the Bill is introducing for the banks. The hon. Member for Aberdeen North (Kirsty Blackman) talked about the importance of less risky behaviour by banks. I certainly subscribe to that, which is why the Bank of England’s Financial Policy Committee has been conducting the stress tests to which I referred earlier. They have all been very successful, including one that is based on a no-deal Brexit scenario.
My hon. Friend the Member for South Suffolk also took us through the amount of tax that has been raised from the banks under the Conservatives. He slightly ruined it all by saying that he had once written an article for The Guardian, and that he was, indeed, a closet Marxist at least.
The hon. Member for Bristol South (Karin Smyth) talked about the importance of productivity while my hon. Friend the Member for Witney (Robert Courts) highlighted the importance of a balanced approach to tax so that the banks could lend and stay healthy. The final two contributions were on childcare support, on which this Government have a proud record: by 2019-20 we will spending a record £6 billion per year supporting childcare. On that note, I commend clause 33 and schedule 9 to the Committee.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Schedule 9
Bank Levy
Question put, That the schedule be the Ninth schedule to the Bill.
The Temporary Chair (Albert Owen)
With this it will be convenient to discuss the following:
That schedule 11 be the Eleventh schedule to the Bill.
Clause 41 stand part.
Amendment 2, in clause 8, page 4, line 16, at end insert—
“(4A) Regulations under this section may not increase any person’s liability to income tax.”
This amendment provides that the power to make regulations in consequence of the exemption from income tax in respect of payments of accommodation allowances to, or in respect of, a member of the armed forces may not be exercised so as to increase any individual’s liability to income tax.
Amendment 3, in page 4, line 17, leave out from “section” to “may” in line 18.
This amendment is consequential on Amendment 2.
Clause 8 stand part.
New clause 4—Review of Relief for First-Time Buyers—
“(1) The Commissioners of Her Majesty’s Revenue and Customs shall undertake a review of the impact of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003.
(2) The review shall consider, in particular, the effects of the relief on—
(a) the public revenue,
(b) house prices, and
(c) the supply of housing.
(3) The Chancellor of the Exchequer must lay a copy of a report of the review under this section before the House of Commons no later than one calendar week prior to the date which he has set for his Autumn 2018 Budget Statement.”
This new clause requires a review to be published prior to the Autumn 2018 Budget on the impact of the relief for first-time buyers, including its effects on house prices and on the supply of housing.
New clause 10— Annual Report on Relief for First-Time Buyers—
“(1) The Chancellor of the Exchequer must prepare and lay before the House of Commons a report for each relevant period on the operation of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003 not less than three months after the end of the relevant period.
(2) The report shall include, in particular, information in respect of the relevant period on—
(a) the number of first-time buyers benefiting from the relief,
(b) the number of purchases benefiting from the relief,
(c) the average age of first-time buyers benefiting from the relief,
(d) the effects on the operation of the private rented sector,
(e) the effects on council housing and other social housing,
(f) the effects on the supply of affordable housing, and
(g) the effects on the operation of collective investment schemes under Part 17 of the Financial Services and Markets Act 2000 in the provision of cooperative housing.
(3) For the purposes of this section, “relevant period” means—
(a) the period from 22 November 2017 to 5 April 2018,
(b) each period of 12 months beginning on 6 April during which the relief is in effect, and
(c) the period beginning on 6 April and ending with the day on which the relief ceases to have effect.”
This new clause requires an annual report on the operation of the relief for first-time buyers, including information on the beneficiaries and effects on different aspects of housing supply.
New clause 5—Parliamentary Scrutiny of Regulations Relating to Armed Forces’ Accommodation Allowance—
“(1) Section 717 of ITEPA 2003 (regulations made by Treasury or Commissioners) is amended as follows.
(2) In subsection (3), leave out “subsection (4)” and insert “subsections (3A) and (4)”.
(3) After subsection (3), insert—
‘(3A) No regulations may be made under section 297D unless a draft has been laid before and approved by a resolution of the House of Commons.’”
This new clause requires that regulations setting conditions relating to the availability of the income tax exemption in relation to armed forces’ accommodation allowance shall be subject to the affirmative procedure.
Mel Stride
The Budget set out an ambitious plan to tackle the housing challenge—a plan that will raise housing supply by the end of this Parliament to its highest level since the 1970s. However, the Government also recognise that we need to act now to help young people who are trying to get on to the housing ladder. This Bill therefore introduces a permanent relief in stamp duty land tax for first-time buyers, which I will turn to shortly. Alongside that, I will also cover clauses 8 and 40, which respectively introduce an income tax exemption for accommodation payments made to members of the armed forces and make minor changes to the higher rates of stamp duty land tax.
Home ownership among young people has been falling. Today, the average house in London costs almost 12 times average earnings, nearly 10 times average earnings in the south-east and more than eight times average earnings in the east.
Kelvin Hopkins (Luton North) (Ind)
Does the right hon. Gentleman not accept that the only solution to the housing crisis is to build millions more houses, not to pump demand into the demand side, which just pushes up prices in the end?
Mel Stride
The hon. Gentleman makes an important point. We announced plans in the Budget along the exact lines that he has suggested in order to free up the supply side and to increase supply to 300,000 units by the mid-2020s. In the last 12 months, we have achieved 217,000 new builds, so we are on our way, although it will take time. He is quite right that the supply side matters.
Sammy Wilson (East Antrim) (DUP)
Does the Minister accept that, although it is important to increase the supply of houses, this measure has been welcomed by young people who see this as at least an opportunity for them to be able to get a deposit for a house and to have fewer up-front costs?
Mel Stride
My hon. Friend is entirely right. The point about up-front costs—alongside the costs of conveyancing, surveyors and so on—is a critical one, particularly for young people getting on to the housing ladder.
Gareth Snell
Average wages in Stoke-on-Trent are £100 a week lower than the national average, and the average house price is only £123,282, so will the Minister tell me the tangible benefits of lifting the stamp duty threshold to £300,000 for my constituents in Stoke-on-Trent?
Mel Stride
There is not an area or region of the country that will not see benefits for first-time buyers. [Hon. Members: “Yes, there is.”] No, I am afraid that that is simply not the case. This measure will benefit first-time buyers in every single region of the country. It is the case that property is a lot more expensive in some parts of the country than in others. Arguably, that is where the particular need is. As I have said, the average house price in London is 12 times average earnings, and it is 10 times average earnings in the south-east.
John Spellar (Warley) (Lab)
Can the Minister give us any indication of his Department’s estimate of the cost of this measure and of the incidence—how it falls— in different regions of the country? In other words, how much is it going to cost globally and what other housing could the Government have built with that money? Equally importantly, how much of this will be in the south-east and how much in other regions?
Mel Stride
In addition to what I just said about every region seeing benefits, I can tell the right hon. Gentleman that the average benefit for the average first-time buyer will be around £1,700, which is a significant amount. For people purchasing a property at the £300,000 to £500,000 level, the benefit is no less than £5,000, which is a considerable sum.
Lloyd Russell-Moyle (Brighton, Kemptown) (Lab/Co-op)
Does the Minister disagree then with the Office for Budget Responsibility, which says that the measure will actually increase house prices by 0.3%? Is the OBR wrong?
Mel Stride
As the hon. Gentleman may know, the figure of 0.3% takes a static view of this policy and its effect on house prices. It does not take into account the supply side changes that I have mentioned. As we increase supply, prices will inevitably begin to fall. There is no single solution to this challenge and no magic bullet.
Mel Stride
I will make a little progress, if I may.
The Budget announced an ambitious package of new policies to tackle the housing challenge, including planning reform; spending; and a new agency, Homes England, to intervene more actively in the land market. Together with the reforms in the housing White Paper, the housing package announced in the Budget means that we are on track to raise annual housing supply by the end of this Parliament to its highest level since 1970 and to 300,000 a year on average by the mid-2020s. That means that housing supply is on track to be higher over the 2020s than in any previous decade. However, it will take time to build these new homes, and the Government want to act now to help those young people who are aspiring to take their first step on to the housing ladder. That is why the Bill permanently abolishes stamp duty for first-time buyers purchasing a property for £300,000 or less. First-time buyers purchasing a house that is between £300,000 and £500,000 will save £5,000. To ensure that this relief is targeted at those who need it most, purchases above £500,000 will not benefit from the relief.
Gareth Snell
I thank the Minister for taking a second intervention from me. To my earlier point, though, there are fewer than 15 properties currently on the market in Stoke-on-Trent between the value of £250,000 and £300,000. I say again: the average wage in Stoke-on-Trent is £100 a week less than the national average. How will young people in Stoke-on-Trent benefit, when the housing supply does not exist and the wage level will simply not allow them to purchase a property of that value?
Mel Stride
The figures the hon. Gentleman chose to use were, I think, a range between £250,000 and £300,000, and he says there are 15 properties in that category. Of course, stamp duty kicks in at £125,000, so it is the range from £125,000 to £300,000 that we would actually be considering in that example.
First-time buyers are typically more cash-constrained than other buyers, and stamp duty requires cash up front, on top of a deposit and conveyancing fees, for purchases over £125,000. The Government think it is right to reduce the up-front costs that first-time buyers need to pay, giving them an advantage over the rest of the market.
Alison McGovern
I thank the Minister for giving way, but he simply did not answer the question from my right hon. Friend the Member for Warley (John Spellar), who quite legitimately asked him where the money from this cut is going. The Minister talked about the average gain that will be made. Will he tell us the average benefit to a first-time buyer in the west midlands?
Mel Stride
As I say, the average across the piece will be £1,700 per average first-time buyer. I also stated quite clearly that, in every region of the country, there will be those who benefit from this measure.
John Spellar
I thank the Minister for giving way, but surely his Department must have done an analysis, first, to convince the Treasury of how much this would cost and, secondly, to work out how much this would affect each region—in other words, how much benefit was going to the south-east, how much to London, how much to Yorkshire and how much to the west midlands. Why is he so reluctant to open up about those figures?
Mel Stride
What I am able to tell the right hon. Gentleman is that, as I have said, the average benefit will be £1,700 for the average first-time buyer. Every region in the United Kingdom will see benefit from this measure, and those regions—particularly in the south and south-east—where the ratio of salaries required to mortgage levels is particularly high will especially benefit.
However, the other thing we need to do as a Government, as I have already stated, is to make sure we get the supply of housing right. That is why we will be moving from the current level of 200,000 new builds a year up to 300,000 in the middle of the 2020s.
Ian Paisley
It is important to put on the record that Northern Ireland probably benefits disproportionately as a result of this measure, compared with any other part of the United Kingdom. The average house price in Northern Ireland is £128,650—in some areas west of the Bann, it is about £109,000—so hitting house prices over £300,000 would involve such a limited market. Many, many people in Northern Ireland are going to benefit from this, and I welcome the move the Government have made.
Mel Stride
I thank my hon. Friend for those comments, which illustrate the point that there are benefits accruing across all regions of the United Kingdom.
The changes made by this Bill include the largest ever increase in the point at which first-time buyers become liable for stamp duty. This relief will help over 1 million first-time buyers who are taking their first steps on the housing ladder during the next five years. It provides immediate support while our wider housing market reforms take effect.
The changes made by clause 41 ensure that over 95% of first-time buyers who pay stamp duty will benefit by up to £5,000, including 80% of first-time buyers in London. That means that over 80% of first-time buyers will pay no stamp duty at all, and it saves the buyer of an average first property nearly £1,700, as I have said.
In summary, this change to SDLT will help millions of first-time buyers getting on to the housing ladder. Together with the broader housing package we have announced, we are delivering on our pledge to make the dream of home ownership a reality for as many people as possible.
Mel Stride
I am going to make further progress.
I will now move on to other changes relating to stamp duty. Clause 40 brings forward some minor changes to the higher rates of stamp duty land tax for additional properties, which will improve how the legislation works. The changes help in a number of circumstances, including in relation to those affected by divorce or the dissolution of a civil partnership, where they have had to leave a matrimonial home but are required to retain an interest in it, and in relation to the interests of disabled children, where a court-appointed trustee buys a home for such a child.
We will also close down an avoidance opportunity. The Government have become aware of efforts to avoid the higher rates by disposing of only part of an interest in an old main residence to qualify for relief from the higher rates on the whole of a new main residence. This behaviour is unacceptable, and the Government have acted to stop it with effect from 22 November.
Clause 8 introduces a new income tax exemption for payments made to members of the armed forces to help them to meet accommodation costs in the private market in the UK. The exemption enables them to receive a tax-free allowance for renting accommodation or maintaining their home in the private sector. The allowance will also be free of national insurance contributions. That measure will be introduced through regulations at a later date. By using the private market, the Ministry of Defence will be able to provide access to similar accommodation, but with more flexibility.
Opposition Members have tabled amendments 2 and 3 to the armed forces accommodation clause, and I look forward to hearing about them in the debate. The amendments seek to prevent the Treasury from laying regulations that would increase the liability of a member of the armed forces to income tax. I am happy to reassure the Committee that the Government do not intend to use the power to increase tax liabilities either now or in the future. The regulation-making power is retrospective so that the allowance can be provided tax free before regulations take effect. As a standard safeguard, the Bill expressly provides that the Government would not retrospectively increase tax liabilities. I hope that, in the light of that, hon. Members will not press their amendments.
New clause 5, also tabled by Opposition Members, would require the House to expressly approve any regulations made under the clause. The Bill provides for regulations to be made under the negative procedure. Regulations made under the clause will align the qualifying criteria for the proposed exemption with the Ministry of Defence’s new accommodation model once more details are available. Any future regulations will ensure that the tax exemption reflects changes to the model. It would be a questionable demand on Parliament’s time, particularly over the next two years, for it to be called on to expressly approve regulations in these circumstances. The negative procedure provides an appropriate level of scrutiny. I therefore urge the Committee to reject the new clause.
The stamp duty relief for first-time buyers is a major step to help those getting on to the property ladder, and one that has been widely welcomed. The other changes made by these clauses provide relief from some tax costs associated with housing for several groups that deserve them. The clauses also tackle avoidance. I commend clauses 41, 40 and 8, and schedule 11, to the Committee.
Jonathan Reynolds
This country is in the grip of a severe housing crisis that the Conservatives have allowed to spiral out of control over the past seven years. Making sure that people have a roof over their heads and can raise their families somewhere safe, decent and affordable is more than just a matter of sound public policy—it is surely a yardstick of a decent society. At the moment, we are falling short of this yardstick to a degree that is shameful for one of the world’s most affluent nations.
Now, after seven years of Tory government, the Government say that they have noticed the problem, yet it is on the brink not of being resolved but rather exacerbated. The Chancellor’s autumn Budget, from which the measures in the Bill are drawn, falls woefully short in addressing the scale of what is needed. Since 2010, house building has fallen to its lowest level since the 1920s, rough sleeping has risen year on year, rents have risen faster than incomes and there are almost 200,000 fewer homeowners in the UK.
Ruth George
Absolutely. I hope that Members on both sides of the House will give their encouragement to that Bill so that we can make homes fit for human habitation.
On the subject of universal credit, whether or not homes are fit for human habitation, unfortunately landlords are not prepared to rent. A representative of a lettings agency came to my surgery just last week and showed me the books for its tenants. At the moment, 20 tenants are on universal credit—we still have not seen it rolled out—of whom 18, or 90%, are in huge arrears. Nine of them—45%—have had to be evicted because landlords cannot get any redress for arrears. They cannot afford to see those arrears build up. Now that they no longer claim mortgage interest relief, they know that they will have to pay a big tax bill come the end of January, so they need to ensure that they can make their homes pay.
This Government’s housing policy is simply racking up disaster on disaster. Homelessness is doubling and home ownership is falling, and universal credit is yet to come. We needed big ideas from the Chancellor, as the Secretary of State for Communities and Local Government told him in no uncertain terms. We see nothing in this Bill but tinkering at the edges that will do nothing to help solve the enormous housing crisis in this country.
Mel Stride
We have been debating important measures. Clause 8 introduces an income tax allowance for members of the armed forces to help them to meet the cost of accommodation in the private market in the UK. Clause 40 makes sensible legislative adjustments to the additional rate of stamp duty land tax to ensure that people in some specific—often disadvantaged—circumstances are not unduly penalised. Clause 41 announces the Government’s abolition of stamp duty land tax for first-time buyers purchasing properties under £300,000. This key part of the Government’s drive to ease the burden on young first-time buyers will go a significant way towards levelling the playing field in those people’s favour. It is notable, and equally lamentable, that this particular policy, which predominantly assists the young, appears to be something that the Labour party rejects and indeed derides. I commend the clauses and schedule to the Committee.
Question put and agreed to.
Clause 40 accordingly ordered to stand part of the Bill.
Schedule 11 agreed to.
Clauses 41 and 8 ordered to stand part of the Bill.
New Clause 4
Review of relief for first-time buyers
“(1) The Commissioners of Her Majesty’s Revenue and Customs shall undertake a review of the impact of the relief for first-time buyers introduced in Schedule 6ZA to FA 2003.
(2) The review shall consider, in particular, the effects of the relief on—
(a) the public revenue,
(b) house prices, and
(c) the supply of housing.
(3) The Chancellor of the Exchequer must lay a copy of a report of the review under this section before the House of Commons no later than one calendar week prior to the date which he has set for his Autumn 2018 Budget Statement.”—(Jonathan Reynolds.)
This new clause requires a review to be published prior to the Autumn 2018 Budget on the impact of the relief for first-time buyers, including its effects on house prices and on the supply of housing.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Finance (No. 2) Bill
Mel Stride ExcerptsMonday 11th December 2017
(8 years, 3 months ago)
Commons ChamberRead Full debate Finance Act 2018 View all Finance Act 2018 Debates Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Mel Stride)
I beg to move, That the Bill be now read a Second time.
The Chancellor recently set out a bold and forward-looking autumn Budget. It reflected and responded to current circumstances, and it will build a Britain that is fit for the future. The UK economy has shown great resilience. Our GDP growth has remained solid, continuing for more than 19 quarters. Employment has risen by 3 million since 2010 and is close to a record high, while unemployment is at its lowest rate since 1975. Those employment trends are not being felt only in the south-east. Indeed, since 2010, 75% of the fall in unemployment has occurred elsewhere, and the biggest falls in the unemployment rate took place in Yorkshire and Humber, and in Wales.
The deficit has been reduced by three quarters from 9.9% of GDP in 2009-10—that figure was a shocking indictment of the last Labour Government—to 2.3% of GDP in 2016-17. In the coming years, borrowing is set to fall even further, reaching 1.1% of GDP in 2022-23, which will be the lowest level since 2001-02. However, at 86.5% of GDP, public debt is still too high and productivity growth remains subdued. This Budget therefore balanced short-term action with long-term investment, while rightly sticking to the principles of social responsibility that will continue to improve the health of our public finances, with our debt due to start falling from next year.
Gareth Thomas (Harrow West) (Lab/Co-op)
Given the recent terrorist attacks in this country and the fact that senior officers say that more funding is needed for community policing to help to tackle the risk of more terrorist attacks, will the Financial Secretary tell the House why there was no additional funding for policing in the Budget?
Mel Stride
As the hon. Gentleman will know, we made sufficient provision for policing prior to the Budget. We recognise the challenges that the police face, but I gently say to him that to secure our vital public services, including the police, the most important thing is that we have a responsible approach to bringing down the deficit and getting the public finances under control. Having looked at the proposals put forward by his party, I have my doubts that that would be the case were he in government.
It is sensible that all this is underpinned by the tax policies contained in the Finance Bill. The Bill is a mere 184 pages—under a third of the length of the previous Bill. Its length is partly the consequence of the Government’s move to a single annual fiscal event. In this transitional year, with less time than normal between Budgets, there is less legislation in process, which should prove some welcome respite for me, as I do not think that there are many Financial Secretaries who have presented two Finance Bills to the House within their first six months in post. The Bill’s size also reflects the Government’s serious commitment not to overburden people or to overcomplicate the tax system. It is a crucial plank in the Government’s legislative programme that will help young people to buy their first homes, improve UK productivity, and further the Government’s already excellent track record of cracking down on avoidance and evasion.
The Government support the aspiration of home ownership and are particularly committed to helping young people on to the property ladder. The Government’s package on housing that was set out at the Budget will boost housing supply and address the problem of affordability. In this critical endeavour, the tax system should not act as a barrier. First-time buyers are usually more cash-constrained than other purchasers, so to help these people—typically younger people—to get on to the property ladder, the Bill permanently scraps stamp duty for first-time buyers purchasing properties worth up to £300,000. Buyers will save nearly £1,700 on an average first-time buyer property, and those buying a house worth £300,000 to £500,000 will pay the existing 5% marginal rate of stamp duty only on the portion above £300,000. In doing so, they will make a saving of £5,000. This means that 80% of first-time buyers will not pay stamp duty at all, while 95% of all first-time buyers who pay stamp duty will benefit from the changes. Over the next five years, the relief will help more than 1 million first-time buyers to get on to the property ladder.
The joy of home ownership will be greatly diminished if, at the same time, we do not protect and preserve the environment in which we all live. Therefore, as a response to the Government’s national air quality plan that was published in July, the Bill establishes measures to improve air quality through the taxation of highly pollutant diesel cars. Diesel vehicles—even new ones—are a significant source of emissions. A test of the 50 best-selling diesel cars in 2016 found that on average they emitted over six times more nitrogen oxides in real-world driving than is permissible under current emissions standards.
Charlie Elphicke (Dover) (Ind)
The Financial Secretary is making a powerful argument. It is important to protect funding for the environment, schools, hospitals and, as the hon. Member for Harrow West (Gareth Thomas) pointed out, the police. Will my right hon. Friend tell the House how much money was raised from the banking sector last year compared with in the last year of the Labour Government?
Mel Stride
As my hon. Friend will know, we brought in a variety of measures in 2015 that changed the basis of taxation for banks. Over the period of the coming forecast, we will be receiving some £4.5 billion in additional income from banks by way of taxation as a consequence of those changes.
From April 2018, new diesel cars will go up one vehicle excise duty band in their first-year rate, and the existing company car tax diesel supplement will increase by one percentage point. However, drivers of petrol and ultra low emissions vehicles—cars, vans and heavy goods vehicles—will not be affected, and nor will those who have already bought a diesel car. As the Chancellor said at the Budget, white van man and white van woman can rest easy.
Dame Margaret Hodge (Barking) (Lab)
White van man and white van woman will rest easier if the Government successfully bring in all moneys due. Will the Minister explain why he has limited the scope of the Finance Bill in such a way that amendments cannot be tabled to ensure that we have a date by which measures such as country-by-country reporting, which is crucial to bringing in tax that is otherwise avoided, should be introduced?
Mel Stride
I think that the right hon. Lady is referring to an amendment of the law resolution. The previous Finance Bill was introduced under exactly the same Ways and Means procedure. There is nothing in the resolutions that prohibits full, open and proper discussion and scrutiny of the Bill. It will go through all its usual stages, including two full days in Committee of the whole House, and eight sittings—if it takes that amount of time—upstairs in Committee, before coming back to the Chamber for Third Reading.
Since the financial crisis, UK productivity growth has slowed. It now stands at just 0.1%. The Government know that restoring strong productivity growth is the only sustainable way to increase wages and improve living standards in the long term. Consequently, a quarter of a trillion pounds of public and private investment has been funnelled into major infrastructure projects since 2010, including the biggest rail modernisation programme since Victorian times, the Mersey Gateway bridge and, more recently, Crossrail. Many others are detailed in the Infrastructure and Projects Authority’s national infrastructure pipeline. The Government have also cut taxes to support business investment and improved access to finance through the British Business Bank. However, we can and will go further.
To boost productivity and create sustainable economic growth, the Government are making further provisions to support the UK’s dynamic, risk-taking businesses. The UK continues to be a world-leading place to start a business, with 650,000 start-ups in 2016 alone. However, some of the UK’s most innovative new businesses with the greatest potential are struggling to scale up due to lack of finance. Specifically, 10 of the UK’s largest 100 listed firms were created after 1975, compared with 19 in the United States of America. In order properly to understand these barriers to finance, the Treasury commissioned the patient capital review, led by Sir Damon Buffini. Supported by Sir Damon’s industry panel, the review concluded that knowledge-intensive companies, which are particularly research and development-intensive, often require considerable up-front capital to fund growth. It may be many years before their products can be brought to market and, despite their growth potential, such companies often face acute funding gaps.
In response to the review’s findings, the Government are acting. We are setting out a £20 billion action plan, combining investment with tax incentives. As part of the plan, the Bill will make more investment available to high-risk, innovative businesses. It does so by doubling the annual limits for how much investment knowledge-intensive companies can receive through the enterprise investment scheme and venture capital trusts schemes to £10 million, and doubling the limit on how much investors can invest through the EIS to £2 million, providing that anything above £1 million is invested in knowledge-intensive companies. In 2016-17, 62% of investment by EIS funds was aimed at capital preservation, rather than higher-risk, higher-potential, long-term growth companies. The Bill therefore reforms the schemes, redirecting low-risk investment into growing entrepreneurial companies, while changing venture capital trust rules to encourage higher-growth investments. In all, we expect these changes to result in over £7 billion of new and redirected investment in growing companies over the next 10 years.
Additional efforts to boost productivity also focus on increasing funding for research and development. At the 2016 autumn statement, £4.7 billion was allocated to R and D, and this Budget extended the national productivity investment fund to £31 billion and increased R and D investment by a further £2.3 billion. This means that the Government will be investing an additional £7 billion in R and D over the next four years—the largest increase in four decades.
We have already announced initial plans for this investment, including £170 million to help the construction industry to build cheaper and better homes; £210 million to develop new technologies that enable the early diagnosis of chronic diseases; a commitment to supporting the development of immersive technologies and artificial intelligence; and more than £300 million to develop and attract the skills and talent necessary to deliver our scientific ambitions. These efforts are complemented by our decision to increase the rate of R and D expenditure credit from 11% to 12%, as set out in the Bill.
The Bill will ensure that the tax system is fair, balanced and sustainable. To that end, it freezes the indexation allowance that currently allows companies but not individuals to reduce their taxable gains in line with inflation. It allows Scottish police and fire services to recover future VAT payments, which would otherwise be lost following the Scottish Government’s decision to restructure those services. I should pay tribute to my Scottish colleagues on the Government side of the House who lobbied so effectively in that respect.
The Bill narrows the scope of the bank levy so that, from 2021, all banks—UK and foreign-headquartered—will be taxed only on their UK operations.
John Howell (Henley) (Con)
Is not the important point about the bank levy that we are trying to get a fair contribution paid by the banks, matched against the risk they pose to the whole UK economy?
Mel Stride
My hon. Friend is entirely right, which is why we have generally moved away from a levy on the capital assets of banks as regulation has improved, and towards a tax on the profitability of banks as that profitability has recovered following the events of 2008, which happened on the watch of the last Government. This re-scope forms part of the broader package of reforms announced between 2015 and 2016 that included an 8% surcharge on bank profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term.
Charlie Elphicke
To follow on from my previous intervention, will my right hon. Friend confirm that the amount of tax paid by banks under this Government is nearly 60% higher than under the previous Labour Government?
Mel Stride
My hon. Friend is entirely right. A number of measures have driven the improved tax take from banks. Along with the 8% surcharge, there is the fact that we have restricted banks’ ability to carry forward losses to offset against profitability. We also exempted banks’ ability to offset charges in respect of mis-selling and payment protection insurance activities, which has also helped to improve the tax take.
Jamie Stone (Caithness, Sutherland and Easter Ross) (LD)
The mention of banks gets me going because all the Financial Secretary’s good words sit ill with the fact that the Royal Bank of Scotland is going through a huge series of closures, particularly in my constituency. We bailed the bank out, so there is great unhappiness—indeed, anger—that it is acting in such a way all over Scotland.
Mel Stride
The hon. Gentleman raises an important issue, but these will be matters for the Royal Bank of Scotland. The most important aspect when one considers the Royal Bank of Scotland is clearly that it is brought back to being a fighting-fit organisation, employing as many people as possible as a business, contributing to the Exchequer, and creating value going forward.
Steve McCabe (Birmingham, Selly Oak) (Lab)
I am interested to hear the Minister’s confidence about the money he will be taking through the bank levy. How does the money the hon. Member for Dover (Charlie Elphicke) says has been raised so far compare with the amount the taxpayer has already paid to bail out the banks, and how much of that money have we had back?
Mel Stride
It is interesting that the hon. Gentleman mentions the amount that was required to bail out the banks, given that it was the then Labour Government who caused the problem that required the bail-outs in the first place. There is a long and detailed history of exactly what happened: we had lax regulation, and the Bank of England was not in a position to regulate the institutions concerned. The hon. Gentleman might like to look up the answer to his question himself and then inform other members of the Labour party of what he discovers.
Vicky Ford (Chelmsford) (Con)
Does my right hon. Friend agree that since the bank levy was introduced, the risk of bank failure has decreased dramatically due to new capital requirements on banks, and the considerably reduced risk that British taxpayers will have to fund cross-border bail-outs, given that we have international agreements on such matters?
Mel Stride
Yes, my hon. Friend is entirely right. We have made huge progress in making sure that the banks are fit and able to withstand whatever external shocks there might be. The Bank of England has been heavily engaged in that, as have the Government, and we are in a much more secure position—certainly than we were when we inherited the economy we saw when we first came to office in 2010.
Kirsty Blackman (Aberdeen North) (SNP)
The Minister is being very generous in allowing interventions. I was concerned by the response he gave to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone). Given the Government’s stake in RBS, does he not feel that they should take some responsibility and use their influence to convince RBS not to go ahead with these closures? There have been over 90 since the start of the year, and this cannot continue.
Mel Stride
I am gratified by the hon. Lady’s confidence in Ministers making commercial judgments in respect of our banks and businesses, but it is far better to allow those businesses to take sensible commercial decisions, even though those sometimes have consequences that, in an ideal world, we would not wish to see. I go back to the point I made to the hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone): we need RBS to improve its strength, grow, employ more people and, ultimately, pay more tax to support our vital public services.
Gareth Thomas
I am grateful to the Minister for giving way to me a second time. May I just remind him of the Competition and Markets Authority investigation into banking, which noted the lack of competition in banking and highlighted the lack of innovation and the fact that the big five banks control 85% of the retail banking market and make excess profits? Might keeping the bank levy at its current rate not be compensation to the consumer and the taxpayer for those excess profits?
Mel Stride
At the heart of the hon. Gentleman’s point rests the notion, which I agree with, that we expect the banks to pay their fair share and recognise that they received bail-outs some years ago, and tax policy towards the banks has been geared towards making sure that they make a fair and proportionate contribution to our tax take.
The hon. Gentleman mentioned the importance of competition in the banking sector, and I wholeheartedly agree with him on that, which is one reason why we are keen to ensure that as many banks as possible are headquartered in our jurisdiction rather than in others. That goes to the heart of the changes in the Bill to ensure that banks domiciled here are not penalised by being charged on capital assets held overseas—a situation that does not pertain to overseas banks that operate in our jurisdiction.
We have included an 8% surcharge on banks’ profits over £25 million. The package will help to sustain tax revenues from the banking sector in the long term, and it is forecast to raise an additional £4.6 billion over the current scorecard period.
The Bill continues the Government’s already vigorous efforts to crack down on tax avoidance, tax evasion and non-compliance. Since 2010, the Government have introduced over 100 avoidance and evasion measures, securing and protecting over £160 billion of additional tax revenue. This has helped reduce the UK’s tax gap to a record low of 6%, which is one of the lowest in the world.
Grahame Morris (Easington) (Lab)
The Financial Secretary says that it is a record low tax gap, but it does not take account of the vast treasure trove unearthed by the Bureau of Investigative Journalism in the Paradise papers or of other vast sums of wealth, on which we have no idea how much tax is actually due. So the figure he gave is not really correct, is it?
Mel Stride
I am afraid I have to dissent from that view. The simple fact is that the International Monetary Fund has identified the tax gap measure as one of the most robust measures of its kind in the world. At 6%, our gap is among the lowest in the world, and it is the lowest we have had in our history since we have been measuring the tax gap. If we had the same tax gap today as we had under the previous Labour Government, we would be out of pocket to the tune of £12.5 billion a year—enough to fund every policeman and policewoman in England and Wales.
Stella Creasy (Walthamstow) (Lab/Co-op)
On the subject of tax avoidance, the Minister will know of my support for the Government’s willingness to close the tax loophole on the sales of commercial property by overseas companies. As my hon. Friend the Member for Easington (Grahame Morris) said, the Paradise papers show some of the ways in which tax is being avoided, including through holding companies in Luxembourg. When I asked the Minister about that before, he did not seem to know about the Luxembourg treaty and how it could affect this policy. What are his plans to address the problems created by the Luxembourg treaty, which could see us losing out on £5.5 billion a year of the tax collected through his changes?
Mel Stride
As the hon. Lady will know, a number of the measures coming out of the OECD’s base erosion and profit shifting project, which we have been in the vanguard of—including common reporting standards and access by our tax authorities to a variety of information in real time in overseas tax jurisdictions—are essential to bearing down on exactly the issues that she mentions. There are further measures in the Bill to deal with those who place their moneys in trusts, typically those coming under our non-dom reforms. By abolishing permanent non-dom status, which Labour failed to do in its 13 years in office, we have made sure that when individuals have assets that are protected while in trusts, those moneys fall due to tax in our country as soon as they are brought out of those trusts, even if people cycle them through third parties and other approaches. That means that we are securing more than £12 billion a year more for our public services than would have been the case had the tax gap remained at its peak of nearly 8%, which it reached under Labour.
The autumn Budget continued that work with a package of measures forecast to raise £4.8 billion by 2022-23, some of which are included in the Bill. It is important to note that the provisions in the Bill form part of a broader anti-avoidance and evasion agenda dating back to 2010. Since then, the Government have worked tirelessly and carefully to introduce an ambitious raft of anti-avoidance and evasion legislation. That commitment is borne out again in this Finance Bill, which implements several measures, including provisions cracking down on online VAT evasion to make online marketplaces more responsible for the unpaid VAT of their sellers; closing loopholes in the anti-avoidance legislation on offshore trusts, as I mentioned; tackling disguised remuneration schemes used by close companies; preventing companies from claiming unfair tax relief on their intellectual property; ensuring that companies are not able to claim relief for losses on the disposal of shares that do not reflect losses incurred by the wider group; closing a loophole in the double taxation relief rules for companies; and tackling waste crime by extending landfill tax to illegal waste sites. Those measures will help to raise vital revenue and ensure that individuals and corporations all pay their fair share.
Kirsty Blackman
I was not particularly pleased with the answer that the Minister gave to the right hon. Member for Barking (Dame Margaret Hodge) as to why the Government have not tabled an amendment of the law resolution, which would allow the Opposition to put forward more measures in relation to tax avoidance and evasion, for example. Why did they not put forward an amendment of the law resolution?
Mel Stride
We did not have an amendment of the law resolution on the previous Finance Bill, so we are carrying on with the situation that pertained to that Bill. As I explained, what matters is that we have an opportunity fully to scrutinise in this House the various measures provided and amendments that may be tabled in relation to those measures. There is nothing preventing that. As I have outlined, the Bill will go through its various stages, allowing for very thorough scrutiny.
Together, the measures that I mentioned continue the Government’s sustained crusade against tax avoidance, evasion and non-compliance—an endeavour that we will pursue with undiminished vigour right through the course of this Parliament. Let no one ever doubt, for even the briefest moment, this Government’s commitment to hard-pressed families, and to championing business and the wealth creators of the future. On the matter of taxation as set out in the Bill, let no one misunderstand us: we will continue to keep taxes competitive and fair, but we will also continue our vigorous and ceaseless drive to bear down on avoidance and evasion so that all pay their due. We will ensure that all pay a just and fair share for the support of our vital public services: for doctors, paramedics and nurses; for our police, our teachers, our fire services, and our brave armed forces who make our country so great. I commend the Bill to the House.
Peter Dowd
I have the greatest respect for the hon. Gentleman, but I refer him to the answer I gave earlier. He should have a look at and dig into the documents, which are very easy to find.
The bottom line is that, wherever they are in the country, businesses that play by the rules are disadvantaged, so it is unfair not just to individual taxpayers but to business taxpayers. Meanwhile, back in Westminster, the Government continue to have absolute contempt for parliamentary oversight.
Peter Dowd
I will give way to the Minister, who may tell me that the Government do not have such a view.
Mel Stride
The hon. Gentleman is being very generous in accepting interventions. From what I can understand, every time the shadow Chief Secretary is asked a question about what Labour promises and pledges will cost, he reverts to saying that people can go and look it up: they can dig into the documents and get on the internet. Equally, he is saying that the public are shifting his way. Is his message to the electorate to get on the internet and to look at his policies in order to understand them?
Mel Stride
I had largely made my point, but if I am to have a second bite at the cherry, let me just add a final point. Is the shadow Chief Secretary’s message to the great British electorate that when it comes to costing his own party’s plans, they should get on the internet and start googling to find out what those costs are?
Peter Dowd
My message to the great British public, who have showed their support for Labour on this, is to get out and vote Labour. That is the message. The other point is that the Minister’s hon. Friends have been waving an iPad around. I suggest they get on their parliamentary iPads and do their work.
Double Taxation Convention: UK and Swiss Federal Council
Mel Stride Excerpts(8 years, 4 months ago)
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The Financial Secretary to the Treasury (Mel Stride)
A protocol to the 1977 Double Taxation Convention with Switzerland was signed on 30 November 2017. The text of the protocol has been deposited in the Libraries of both Houses and has been made available on HM Revenue and Customs’ pages of the www.gov.uk website. The text will be scheduled to a draft Order in Council and laid before the House of Commons in due course.
[HCWS313]
Treasury
Mel Stride Excerpts(8 years, 4 months ago)
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Mel Stride
A number of Members in the debate raised the costs mentioned in the National Audit Office report, the Public Accounts Committee report and so on. Certainly, the business plan has gone through various iterations, but where we are is quite clear: the total investment over the next 10 years will be £552 million. The NAO has disputed some of our figures, and the Government’s view is that the NAO has looked at those figures on a different basis—for example, over a 10-year period, whereas we were initially looking at figures over five years.
We have some cost avoidance of £75 million per annum from 2021 through getting out of the private finance initiative arrangement—which, incidentally, we entered into in 2001, which was of course under a Labour Government. On top of that, we will have £300 million-worth of savings over the next 10 years, and we will have annual cost savings of £74 million in 2025-26 compared with 2015-16, rising to around £90 million from 2026-27. The savings are ongoing and will be long standing. [Official Report, 2 November 2017, Vol. 630, c. 457WH.]
Mel Stride
The cost savings are for an investment of £552 million over 10 years. Firstly, they arise through the avoidance of future costs that would be incurred in the event of our not going ahead with the programme. Those would be the costs of the PFI deal, were we to continue with it. That cost is £75 million per annum—obviously from 2021, when the contract for strategic transfer of the estate to the private sector comes to an end. There is a cost saving of £300 million in the 10 years to 2025. That gives an annual cash saving, as compared with 2016-17, of £74 million in 2025-26, rising to about £90 million in 2026-27. [Official Report, 2 November 2017, Vol. 630, c. 464WH.]
Letter of correction from Mel Stride.
Errors have been identified in my response to the debate.
The correct statements should have been:
Mel Stride
A number of Members in the debate raised the costs mentioned in the National Audit Office report, the Public Accounts Committee report and so on. Certainly, the business plan has gone through various iterations, but where we are is quite clear: the total investment over the next 10 years will be £552 million. The NAO has disputed some of our figures, and the Government’s view is that the NAO has looked at those figures on a different basis—for example, over a 10-year period, whereas we were initially looking at figures over five years.
We have some cost avoidance of £75 million per annum from 2021 through getting out of the private finance initiative arrangement—which, incidentally, we entered into in 2001, which was of course under a Labour Government. On top of that, we will have £300 million-worth of savings over the next 10 years, and we will have annual cost savings of £74 million in 2025-26 compared with 2015-16, rising to around £90 million from 2028. The savings are ongoing and will be long standing.
Mel Stride
The cost savings are for an investment of £552 million over 10 years. Firstly, they arise through the avoidance of future costs that would be incurred in the event of our not going ahead with the programme. Those would be the costs of the PFI deal, were we to continue with it. That cost is £75 million per annum—obviously from 2021, when the contract for strategic transfer of the estate to the private sector comes to an end. There is a cost saving of £300 million in the 10 years to 2025. That gives an annual cash saving, as compared with 2016-17, of £74 million in 2025-26, rising to about £90 million in 2028.
Public Country-by-country Reporting
Mel Stride Excerpts(8 years, 4 months ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
Dame Margaret Hodge (Barking) (Lab)
It is a pleasure to speak before you this afternoon, Mrs Main. I join others in congratulating the hon. Member for Amber Valley (Nigel Mills) on securing this debate. I also congratulate my right hon. Friend the Member for Don Valley (Caroline Flint) on actually getting this practice on to the statute book in 2016.
I will just add, very briefly, to what has been said so far. It is great that there is consensus this afternoon across the parties, and that kind of consensus is what I have encountered in many of the discussions that I have had on these issues. I hope that the Government will listen and act on that consensus in a way that would win support among the vast majority of Members of this House and outside this House. My only quarrel with the hon. Member for Amber Valley is that I do not think that would be taking unilateral action; I think we would be showing bold leadership if we were the first to act in this area.
I want to make three brief points. First, one issue arising from the Paradise papers that has not been raised, and for which country-by-country reporting would be an important part of the answer, is that corporations and companies were revealed to be seeking locations for their business in a way that would create artificial financial structures that existed simply for the purpose of avoiding tax. Apple received some coverage in the papers, but it is utterly awful that all Apple’s activity outside the USA is now housed, I think, in Jersey and is worth, according to what we can uncover, £252 billion. It is very difficult to find what Apple’s rate of tax is, but one of its companies—according to the European Union, I think; no doubt my hon. Friend the Member for Oxford East (Anneliese Dodds) will make this clear from the Front Bench—ended up paying a rate of tax of 0.005% on its earnings here.
It is clear from the Paradise papers that Apple sought to find a financial structure that would allow it to avoid paying tax in those jurisdictions outside America where it carried out its economic activity and secured its profits. One of the purposes of transparency in country-by-country reporting would be to see where Apple was undertaking its economic activity and therefore where it should be taxed. Over half of Apple’s business is outside the USA; it is simply not getting taxed in the places that it should be.
The other company is Nike. Anyone who buys a pair of Nike trainers in any UK shop would think that the tax was paid here, but it is not. It used to go to Holland and it then ended up, in a complicated way, in Bermuda. Since then, a new structure has been invented: Nike Innovate C.V. It is a virtual entity; it does not have a location. It is not based anywhere. That structure enables Nike to avoid paying the tax that it should in the jurisdictions where it carries out its business and makes its profits. The big corporations would not be able to carry out their business in the way they currently do, as revealed most recently through the Paradise papers, if we had transparent, open, public country-by-country reporting.
The second thing I want to talk about is collecting money from tax avoidance. I hope the Minister will give us a bit of information in his response, as I am rather tired of hearing from the Prime Minister, the Chancellor and the Minister about how brilliantly this Government are doing at collecting that money.
Dame Margaret Hodge
The Minister is nodding his head, but the Government should be honest with us. The figure of £160 billion that is currently used—I have heard it used time and time again—is simply an HMRC estimate of the money due from tax avoidance that it has uncovered. It does not tell us how much has been collected or how much has been added to the coffers.
Since the Minister used the figure in a debate last week, I have tried to identify how much we have actually got in. I have asked everybody. I have asked the National Audit Office and the Library. I have tabled questions to the Minister, to which he has yet to reply—perhaps he will reply this afternoon. No one actually tells one how much has been collected in tax avoidance. My guess is that it is a tiny, minute amount of that £160 billion that the Government claim they have got in. Please be honest with us. A little bit of honesty will enable us to have a proper debate.
The final point I want to make, adding to what others have said, is that if the Minister showed the bold leadership we want him to show by having public registers of beneficial ownership, he would be incredibly popular. I would have thought that there could not be a better time than now for Conservative Members to try to gain some popularity. I will give three examples of what has happened recently. After the release of the Paradise papers, the Tax Justice Network launched a petition that gained more than 200,000 signatures. It has now presented that petition to Downing Street. Oxfam did some polling that showed that eight out of 10 members of the public think that multinationals with UK headquarters should publish information publicly about the size of their profits, where they are made, what taxes are paid and the countries in which they operate. Some 70% of Conservative voters believe that the Government should be more active in tackling tax avoidance by companies. Some 80% of Conservative voters are in favour of tougher transparency rules for companies.
The final survey I wanted to refer to was of the FTSE 100. Four out of every five of the top 100 FTSE companies would not oppose the introduction of a legal requirement to make their country-by-country reports public. In fact, a large number would support it. The hon. Member for Amber Valley eloquently made the point that the reporting requirements in other legislation to date are pretty open. Why not put this requirement into the mix? It is supported by the analysis.
This is the fourth debate on these issues in the past month that I have participated in, and I will carry on holding such debates time and time again. I am sorry if the Minister feels it is not the best use of his time, but we will carry on doing this. This is a campaign we are absolutely determined to win, and part of that campaign is public country-by-country reporting.
The Financial Secretary to the Treasury (Mel Stride)
It is a pleasure to serve under your chairmanship, Mrs Main, and I thank my hon. Friend the Member for Amber Valley (Nigel Mills) for having secured what I think we all accept is an extremely important debate. I also thank him for the advice he has been able to give me over the months and years on matters as exciting as corporate taxation.
I also welcome my hon. Friend’s support for some of the measures in today’s Budget—this is not an area of Government policy that we are going to be neglecting anytime soon; we are going to be all over this space in a very significant manner. He specifically raised measures relating to VAT and the collection of VAT from those who use digital platforms. We are indeed introducing joint and several liability to make sure that we step up the clampdown on, in that instance, VAT fraud.
The right hon. Member for Barking (Dame Margaret Hodge) suggested that our figures were not durable and questioned the veracity of our numbers. We have secured £160 billion through clamping down on tax evasion and non-compliance, and that figure appears in HMRC’s annual report and accounts, which are of course audited by the National Audit Office.
Dame Margaret Hodge
That is not secured money; it is money to which HMRC feels it is entitled but has yet to secure. My experience from the Falciani Swiss leak suggests that intentions do not become reality.
Mel Stride
I do not think the right hon. Lady and I are going to agree on that particular point. One point we might agree on is the tax gap, which is 6%—the lowest in our history. That is the difference between that which we should be collecting and that which we are collecting. It is a world-beating figure, also audited by the NAO. According to the International Monetary Fund, it sets a world standard in terms of robustness.
As you will know, Mrs Main, we have done a great deal over the years in clamping down on tax avoidance and evasion. In the Finance (No. 2) Act 2017, which has just gone through Parliament, we introduced corporate interest restrictions to stop companies shifting profits around by the ingenious use of intra-company loans. We had the diverted profits tax in 2015, which addresses a number of the examples we heard in the debate today. We have been in the vanguard of the base erosion and profit shifting project at the OECD. We are benefiting now from the common reporting standards across 50 countries—rising to 100—so account information is available to HMRC in real time. We are engaged with the EU on mandatory disclosure rules to make sure that we can clamp down on schemes, through those who are party to them.
The right hon. Member for Don Valley (Caroline Flint) raised the issue of the information required from the extraction sector and the financial sector in comparison with the ask on country-by-country reporting. Those are of course different sets of information. In the case of the extraction sector and the financial sector, the information required is significantly less exhaustive than would be the case in country-by-country reporting.
The right hon. Lady also asked a very important and pertinent question about how many countries would need to say yes for us to feel that we could go ahead on a multilateral basis. I suppose that gives rise to other questions, such as which countries and what mix of countries. She can rest assured that as and when, as we hope, we reach the point when sufficient countries say they will sign up, we will be pleased to do so. I add my congratulations to her for the hard work that she did, particularly on the Finance Act 2016, to ensure that her amendment reached the statute book.
My hon. Friend the Member for Ochil and South Perthshire (Luke Graham) spoke about the importance of international standards. He also raised the issue of intangible assets, which is one of the common threads running through the issues of companies shifting profits around. If there is clearly economic activity in a particular place, it is much easier to pin the profits to where that activity is occurring than if there are, for example, digital companies that are selling substantially into the United Kingdom but basing their operations elsewhere. That can be through royalty payments on intellectual property charges between companies; it is quite possible to avoid tax as a consequence. That is why we announced in the Budget today that we will be looking at introducing the withholding of taxes in respect of royalty payments for IP, where they relate to movements of income between ourselves and very low-tax jurisdictions. We will be looking into that whole area by way of consultation.
I was tickled by the suggestion from the right hon. Member for Barking that she could feed me ideas that would make me more popular within my own party. I look forward to hearing as many of those as she cares to pass my way, because I am very interested in being so popular.
The hon. Member for Ealing Central and Acton (Dr Huq) raised the issue of registers of beneficial ownership across, particularly, Crown dependencies and overseas territories. We have those; they are not public, but they are accessible in real time by HMRC and we have a good record in tracking down people who try to stash money away in, for example, overseas trusts. We have raised £2.8 billion in that respect since 2010. I was pleased that the hon. Lady welcomed the measures in today’s Budget that extend to 12 years the time period in which we can go after individuals who have been involved in just that kind of activity.
In my final couple of minutes, I want to focus on the principal arguments. We are not against country-by-country reporting. We welcome the opportunity to move to exactly that situation, but to do so unilaterally will not work, for at least three reasons. It would certainly make the UK less competitive than other tax jurisdictions. I see no reason why any particular business should want to go to a country with that in place as strongly as they would want to go where it is not in place. If it were just us alone, we would also be in the position of not being able to get public disclosure if a UK company had associated non-UK companies in other jurisdictions and not under that company’s control. The big advantage of going multilaterally is the standardisation of the standards that we set and the rules and regulations around each particular step.
The Government will continue to work towards bringing in not just country-by-country reporting as we have at the moment, but public country-by-country reporting. I am grateful to my hon. Friend the Member for Amber Valley and all those who have contributed to the debate for helping to inform that discussion.