National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Mel Stride Excerpts

2nd reading: House of Commons & Ways and Means resolution: House of Commons
Tuesday 30th April 2019 Commons Chamber

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

I thank all right hon. and hon. Members for their contributions to this important debate, which is narrow in scope, as the Exchequer Secretary to the Treasury pointed out, but none the less important. There were a limited number of contributions, made up for, however, by their quality.

Let me bring us back to the essential element of what this Bill is all about, which is aligning the employer national insurance treatment in respect of termination awards and sporting testimonials with that of income tax. As a number of hon. Members pointed out, the rationale behind these measures is to bring in alignment and, with it, some elements of simplification. We should remind ourselves that, as we have heard, the genesis of this journey was back in 2013-14, with the report by the Office of Tax Simplification. Another rationale for these measures is to disincentivise any tendency towards the manipulation of payments as between earnings and termination payments on the tax side of things. There is, of course, additional revenue to the Exchequer of some £200 million per year as a consequence of these measures.

I turn now to some of the specific points that have been raised—first and foremost, by the hon. Member for Bootle (Peter Dowd). He told us some jokes about cricket that were not bad—well, by his standards, at least, they were passable. He managed to remember two of the three great football teams up in the Liverpool part of the country, proving conclusively, I have to say, that he knows far more about football than he does about economics and taxation. [Interruption.] Yes, cruel but fair. That was exemplified by his lamenting the fact that we did not abolish class 2 NICs. I was surprised to hear him say that, because he was at great pains, as he always is, to be the champion of the lower paid—as indeed are Conservative Members. The rationale for stepping back from that abolition, as he will know, is that it would have imposed a very significant burden on the very people he seeks to protect—the lower paid—by putting up the cost of the contributions that they would have to make in order to qualify for their state pension.

Curiously, the hon. Gentleman accused us, contrary to the assertions of the hon. Member for Oxford East (Anneliese Dodds), of having rushed the timetable for this legislation, despite the fact that its genesis was about five years ago. That is probably indicative of the speed at which a future Labour Government would get things done—five years is rushing it, in those terms. He also accused us of not taking the legislation seriously, but as he spoke there were precisely none of his hon. or right hon. Friends sitting on the Benches behind him.

My hon. Friend the Member for South Suffolk (James Cartlidge) gave a masterful performance in which he not only showed great in-depth knowledge of the issues at hand but understood the mentality and the challenges that we have as Ministers in the Treasury. It is indeed a restrictive environment where we do not want to put people’s taxes up, we make commitments not to do so, and we fight day in, day out to ensure that we stick to those pledges. But at the same time, we do of course have to raise revenue, as he described. He also cantered around the tax terrain, touching on IR35, auto-enrolment and various other aspects of tax. It was a very thoughtful contribution to the debate.

The hon. Member for Aberdeen North (Kirsty Blackman) specifically referenced the amount of consultation—or the lack of it, as she saw it—around the Bill. I should remind her that we have consulted on it twice. It was issued in draft in December 2016, and it was prefigured when we handled the income tax aspects of these issues in the 2016 and 2017 Finance Acts. Of course, the measures themselves were first mooted back in 2015, so we have been round the block with them.

[Kirsty Blackman]

The point I was making was not that there was necessarily a lack of consultation, but that we did not know how much consultation there had been, because the details are not in the explanatory notes, where they would often be. Normally, the explanatory notes will say a bit about the amount of consultation there has been, but they do not say anything at all. If that had been written down for us, and we had known how many consultation responses there had been, I would not have asked the question.

[Mel Stride]

The Exchequer Secretary to the Treasury has just reminded me that there has been a lot of information out there—we have, not least, written to Members to explain the background to these measures.

As to the hon. Lady’s specific point, she has raised the quality of information memorandums with me before in a different context. I said on that occasion, and I will restate now, that I am happy to look at the point she has raised. While we may have disagreements over policy across the House, I think we all accept that it is important that the relevant information is clearly provided and in the right place, and I will certainly be happy to look at that issue.

The hon. Lady raised the issue of tax treatment where there is an expectation that a testimonial payment will be made. She understandably asked how we know whether such a payment should be seen as having an expectation attached to it. The answer is if that payment is customary. If someone is involved in a sports club of some sort, and there is a testimonial every year for a particular player or group of players, and that had been going on for some time, that would be a customary testimonial situation. In those circumstances, the tax treatment would follow accordingly.

The hon. Lady also raised a point about employer NICS at 13.8% being applied above the £30,000 threshold. She raised the prospect that some of that may be borne by the employee, because the employer would have a certain amount that they were looking at. She raised the question of what the balance was between who bears that cost and the £200 million per year received by the Exchequer. I very much doubt that that information is available, but if it is, I will certainly make sure that we provide it to her. That may be an issue she wishes to come back to in Committee.

My hon. Friend the Member for South Thanet (Craig Mackinlay) specifically majored on the threshold—the £30,000—and pointed out that it first came into effect in 1988. What I would say to him is that, in the case of Germany and the United States—certainly in the case of income tax—the threshold is effectively zero, so in terms of international comparisons, the figure of £30,000, while it is true that it has not increased by inflation since 1988, is none the less set at a reasonable and proportionate level. As a number of speakers have also pointed out, 80% of termination payments are below the £30,000 threshold in any event and would therefore not fall under this employers’ national insurance.

The hon. Member for Oxford East, as well as helpfully pointing out that Labour’s mission is to increase corporation tax, came on to the issue of avoidance and evasion, particularly in the area of football. She thought I would mention the Rangers case, and it is important to do that, because it does indicate that we will take cases right the way to the Supreme Court when we believe that issues such as disguised remuneration are in play. Whether it is in football or other areas of commerce and economic life, we will make sure that the right amount of tax is paid. I will not rehearse the arguments that the hon. Lady has heard from me on many occasions about the tax gap and how successful the Government have been in that respect compared with Governments of the past.

The second issue the hon. Lady raised was charitable giving. She set up the prospect of a testimonial being held and the money going through the committee and then on to a charity. She asked what the tax treatment would be in those circumstances. It is open to a committee in that situation to route some of the money via payroll giving to the charity—that is without limit—to make sure that that is done in the most tax-efficient manner possible. However, she may wish to return to that matter in Committee, where we can perhaps have a more detailed debate about it.

The hon. Lady asked about seeking evidence of the abuse of termination payments—in other words, disguising what are essentially earnings by transferring them into a termination payment, thereby reducing taxation. HMRC is clear that there has been evidence of that in the past. I am sure that she will wish to revisit the matter in more detail in Committee.

The hon. Lady mentioned the impact of these measures on wages, citing the correct figure of 0.1% for the reduction by 2020-21. However, I point out that we have now had 10 months of increased real wages, due to our success in keeping inflation down and generating nominal wage growth. Of course, with regard to employment, which is part of the issue we are addressing, we now have among the highest levels of employment in our history, and the lowest unemployment since the mid-1970s.

The hon. Lady asked what guarantees there are that we will not reduce the threshold in either case. Of course, it is up to this Government, or any future Government, to take a view on these matters, but I can assure her that we have no expectation or intention at the present time to lower the thresholds. If we did, that would of course be by way of an affirmative statutory instrument, which means the measure would have appropriate scrutiny.

In conclusion, I thank the Opposition and all Members for their contributions, and for not opposing Second Reading.

Question put and agreed to.

Bill accordingly read a Second time.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 16 May 2019.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion two hours after the commencement of proceedings on Consideration.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption that day.

(6) Standing Order No. 83B (programming sub-committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Mel Stride.)

Question agreed to.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Ways and Means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purpose of any Act resulting from the National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill, it is expedient to authorise provision adding termination awards chargeable to income tax to the amount by reference to which, in the case of Class 1A National Insurance Contributions, the appropriate national health service allocation (for England, Wales and Scotland) and the appropriate health service allocation (for Northern Ireland) are to be calculated.—(Mel Stride.)

Question agreed to.

Justice

Mel Stride Excerpts

Thursday 11th April 2019 Ministerial Corrections

[Stephen McPartland (Stevenage) (Con)]

6. What progress he has made on reducing the total amount of tax that people pay.

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

This Government have made very significant progress in reducing the burden of taxation on the low paid, including by recently increasing the personal allowance to £12,500—thus taking 1.7 million of the lowest paid out of tax all together since 2017.

[Official Report, 9 April 2019, Vol. 658, c. 165.]

Letter of correction from the Financial Secretary to the Treasury:

An error has been identified in the response I gave to my hon. Friend the Member for Stevenage (Stephen McPartland).

The correct response should have been:

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

This Government have made very significant progress in reducing the burden of taxation on the low paid, including by recently increasing the personal allowance to £12,500—thus taking 1.7 million of the lowest paid out of tax all together since 2015-16.

Loan Charge

Mel Stride Excerpts

Thursday 11th April 2019 Commons Chamber

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

I welcome the return of this debate, which was so interestingly interrupted by rain—I think that is about the only matter raised for which I have not been blamed at some point, as it was an act of God. I congratulate my hon. Friend the Member for Aberdeen South (Ross Thomson) on securing the debate, and I thank all those who have participated, both today and last week.

Perhaps I can try to find the one element of consensus that unites Members on both sides of the House. Most speakers have referred to the fact that they have no time for aggressive and contrived tax avoidance, and they are right. Every amount of tax avoided in such a way means more tax for other taxpayers to find, or less funding for our vital public services.

[Mr Shailesh Vara (North West Cambridgeshire) (Con)]

Will the Minister give way?

[Mel Stride]

I am afraid I will not. I want to make progress, as there is a lot to cover and little time.

For the benefit of the House, let me set out the heart of how these schemes work, so that we are clear on that point. An employer can engage an employee and pay them in the normal way, by way of earnings, in which case national insurance for the employer and the employee is due. Income tax must also be paid by the employee. Alternatively, they can use a loan scheme, which generally works like this: instead of the employer paying the employee in the way I have described, money is sent out to a low or no-tax tax haven, and placed in a trust. That money then comes from the trust back to the United Kingdom, where it is treated as a loan, even though there is no intention of ever settling that loan or paying it off. Because that money it is treated as a loan, it is claimed that it does not incur any national insurance or income tax because it is not earnings.

When confronted with the reality of how these schemes work, most people would say that that is not right. That brings me on to one of the most commonly held misconceptions about these schemes and the loan charge, which is that the loan charge is retrospective. There was never a time in the history of our country where the model for payment that I have just outlined has ever been correct within the tax rules of any previous year. That is a simple fact.

[Sir Henry Bellingham]

Will the Minister give way on that point?

[Mel Stride]

I will not give way just yet. My second point is that the very nature of this means of payment, of tax avoidance, is that it involves a loan that is still outstanding—those loans are still outstanding today, at this very moment, for any schemes that still persist. It is a simple fact that most people, including the 99.8% of the tax-paying public who did not go anywhere near these schemes, would have concluded that if something looked too good to be true, it probably was too good to be true.

[Colin Clark (Gordon) (Con)]

The Minister is generous in giving way. In my constituency, 140 people are affected, largely in the oil and gas sector. Oil and gas employers encouraged people to enter these schemes. Does the Minister agree that companies in that sector should be held to account, as should employers and the people who sold the schemes?

[Mel Stride]

My hon. Friend is entirely right. I will come on, in the limited time I have, to deal with both employers and promoters, as those are very important aspects too.

When it comes to retrospection the other important point is that, contrary to the suggestion many right hon. and hon. Members have made that this issue has just suddenly appeared and HMRC has just started to address these scheme, it has been taken through the courts over countless years. In 2004, Dawn Primarolo, who was referred to earlier in this debate, was instrumental in bringing in the DOTAS legislation upon which recent cases have been concluded in HMRC’s favour. There has been a concerted effort by HMRC over many, many years to clamp down on these particular arrangements.

Some of the other misinformation includes the idea that thousands upon thousands of taxpayers are about to be made bankrupt. HMRC very, very rarely has a situation where somebody is placed in bankruptcy. That is not right for the individual and it is not right for our tax collecting authority. In fact, my hon. Friend the Member for Mole Valley (Sir Paul Beresford) gave several examples last week of where he had accompanied his constituents and got involved with their tax affairs and their dealings with HMRC. In each case, as he was able to state, a fair and reasonable settlement was entered into. That is the main thrust of HMRC’s approach.

It has also been suggested that people will lose their home as a consequence of the loan charge. It could not be clearer: HMRC has publicly stated that nobody will lose their primary residence as a consequence of settling their loan charge liability. On the point my hon. Friend the Member for Gordon (Colin Clark) raised about employers and individuals, it has been assumed widely in this debate that the vast majority of those impacted by these measures are individuals. That is not the case. Of the 6,000 settlements to date and the £1 billion that has been brought in, 85% by value has come from employers, not employees. In the first instance, HMRC will go to the employer, not the employee.

The issue of promoters is extremely important and, quite rightly, a number of right hon. and hon. Members have raised it. I want to make it clear that HMRC is cracking down on the unscrupulous promoters who sell these schemes. In fact, it is currently investigating more than 100 promoters and others involved in the promotion of tax avoidance. That includes promoters of disguised remuneration schemes. In recent years, HMRC has also litigated a number of cases of failure to disclose under DOTAS, which came in in 2004—not recently—and several recent decisions in cases on disguised remuneration have been found in HMRC’s favour. HMRC has also made successful complaints to the Advertising Standards Authority in relation to DR schemes to stop promoters making misleading claims about the arrangements they are selling. Just two weeks ago, HMRC announced that it had won a legal case against a loan scheme avoidance promoter, Hyrax Resourcing, which will help HMRC to collect over £40 million in unpaid tax. For the reasons I have set out, it would not be right to delay these arrangements.

Let me turn now to two particularly important issues that many Members have raised, first on the affordability of payment arrangements. Let me be very clear: it is never the intention of HMRC to bankrupt anyone who comes forward in good faith to agree a manageable payment plan. I can confirm that HMRC is authorised to agree tailored repayment plans for those affected by the loan charge based on ability to pay. Where tax is payable under self-assessment, payment will of course not be due until January 2020. There is also no maximum repayment period, and plans of 10 years or more can be put in place where required. Further, I can announce today that HMRC is now forming a dedicated team focused solely on agreeing these manageable payment arrangements for those due to pay the tax they owe by way of the loan charge.

[Mr Vara]

Will the Minister give way?

[Mel Stride]

I have no time, I’m sorry.

The second very important matter I would like to address is the interaction between vulnerable people and HMRC regarding disguised remuneration and the loan charge, including where there are mental health issues. Let me make it clear that wherever HMRC is engaging with vulnerable people, it will do everything it can to ensure that they have all the support they need. This support includes a helpline that is dedicated solely to looking after loan charge customers, with a team fully trained to identify those who may be vulnerable and to provide appropriate support. Where necessary, HMRC will always refer individuals to the right external sources of support.

[Sir Henry Bellingham]

Before the Minister moves on, will he give way?

[Mel Stride]

I have little time and I must cover the ground. HMRC also has a vulnerable customers team available to provide specialist, one-to-one support for vulnerable customers in need of it. Today, I can confirm that HMRC will be expanding its specialist service for customers with additional needs so that it will include anyone who finds their tax affairs under scrutiny. As we roll out that additional support, we will start with those affected by the loan charge as our first priority.

I appreciate that facing any tax bill is unwelcome, but it is only right that we deal with disguised remuneration. When we fail to do so, we are effectively saying to the 99.8% of taxpayers who have not been involved in these schemes that we expect them to pay more, and we deny our vital public services—our nurses, teachers, doctors, police and many others—the funding that they deserve.

Oral Answers to Questions

Mel Stride Excerpts

Tuesday 9th April 2019 Commons Chamber

[Stephen McPartland (Stevenage) (Con)]

6. What progress he has made on reducing the total amount of tax that people pay.

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

This Government have made very significant progress in reducing the burden of taxation on the low paid, including by recently increasing the personal allowance to £12,500—thus taking 1.7 million of the lowest paid out of tax all together since 2017.[Official Report, 11 April 2019, Vol. 658, c. 5MC.]

[Stephen McPartland]

What the Treasury gives with one hand, local authorities are taking away with the other, with relentless rises in council tax, and parking charges and fees affecting households up and down the country. What are we actually doing to help families, instead of paying them lip service?

[Mel Stride]

My hon. Friend makes the important point that there are many costs and taxes that bear down on the lowest paid. That is why, in addition to increasing the personal allowance, the Conservatives have introduced the national living wage, which has gone up well above the rate of inflation this April. We have frozen fuel duty for nine years in a row, which has saved the average car driver £1,000 cumulatively. We should also not forget that 28% of all income tax is paid by just the highest 1% of earners.

[Thangam Debbonaire (Bristol West) (Lab)]

The Minister can say anything he likes, obviously. In fact, he knows that the tax system is skewed in favour of richer people. The poorest 10% pay 42% of their income in taxes, whereas the richest pay 34%. Does he have any plans to achieve greater parity, particularly in VAT?

[Mel Stride]

I am surprised that the hon. Lady should mention the level of tax paid by the most wealthy, because under this Government, as I have just stated, the highest-earning 1% pay a full 28% of all income tax. Under the last Labour Government, that figure was substantially lower at around 24%.

[Charlie Elphicke (Dover) (Con)]

Does the Minister agree that taxes could be lower if spending was better controlled, yet this House provides no scrutiny of spending whatsoever? The supply and appropriation Bill that he presented just over a month ago was not debated or voted on. Is it not time that, like other Parliaments, we had a Budget committee and a parliamentary Budget office to scrutinise spending and hold Government properly to account?

[Mel Stride]

My right hon. Friend the Chief Secretary has just appeared before the Procedure Committee to address just the issue that my hon. Friend raises.

[Tim Farron (Westmorland and Lonsdale) (LD)]

Given that our social care system is breaking, causing indignity, poverty and hardship to millions of people in their old age, might it be time to consider increasing fair taxes, so that we can live in a civilised society that looks after its most vulnerable people?

[Mel Stride]

As the hon. Gentleman may know, £400 million went into social care just at the last Budget. It is the mission of this Government to get taxes as low as possible so that we have a strong economy. Our record is good: we have about the highest level of employment in this country’s history, more women are in work than at any time in our history, and we have halved unemployment since the mid-1970s. All of that is about creating the wealth and the money to make sure that we can afford the public services that the public expect.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

7. What recent assessment he has made of the effect of his fiscal policy on living standards.

--- Later in debate ---

[Greg Hands (Chelsea and Fulham) (Con)]

9. Whether he plans to reform stamp duty land tax.

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

The Government have made substantial progress in reforming the stamp duty regime. At autumn statement 2014, SDLT was cut for 98% of those people due to pay it.

[Greg Hands]

Since we last spoke about this, the spring statement showed a further decline in receipts of an additional £2.7 billion over the scorecard. That was not due to changes in Wales and the welcome first-time buyer reforms, which were already in the October Budget numbers. What are the Government going to do to reform the system, protect revenue, grow social mobility, allow the elderly to downsize and get Britain moving again?

[Mel Stride]

The year-on-year changes to the level of receipts from SDLT have reduced recently, but that is due largely to the fact that we have put a great deal of relief into first-time buyers’ relief, which is already helping 240,000 first-time buyers get on to the housing ladder.

[Alison McGovern (Wirral South) (Lab)]

However the Minister dresses it up on stamp duty land tax and other issues where the wealthy have seen their taxes cut, the impact on our economy is clear. Will he explain why stamp duty land tax reform is a priority rather than addressing the fact that in our country today one third of all families with a child under five are in poverty?

[Mel Stride]

It is most certainly not our priority to reduce SDLT for the very wealthy. In fact, the current levels—12% plus 3% if it is an additional dwelling—are high. I can also inform the hon. Lady that the amount we raised through stamp duty land tax in 2017-18 was twice the amount raised back in 2010-11.

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

10. What representations he has received on the introduction of the 2019 loan charge.

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

The loan charge was announced at Budget 2016 and was subject to public consultation. We have received representations, including from campaigners and the wider public. Disguised remuneration schemes pay loans in place of ordinary remuneration, with the sole purpose of avoiding income tax and national insurance.

[Christian Matheson]

I fully support measures to close loopholes for disguised remuneration, but not when they affect my constituents retrospectively. If the loans were illegal at the time my constituents took them out, why is it now necessary to introduce the loan charge?

[Mel Stride]

It is important that the House fully understands how disguised remuneration works. If, instead of paying an employee their earnings in the normal way, an employer pays them by way of a loan via an offshore trust in a low or no-tax jurisdiction—with no intention of ever repaying the loan and simply to avoid national insurance or income tax—that is wrong. As for the matter of retrospection, that model has never, ever complied with our tax code. The loans to which I refer are persisting today, not retrospectively. That is why it is right—and only fair on those taxpayers who pay the correct amounts at the right time, and on our vital public services, which rely on that money—that we collect it.

[Gill Furniss (Sheffield, Brightside and Hillsborough) (Lab)]

11. What further steps his Department is taking to regulate lending to small businesses.

--- Later in debate ---

[Dr Rupa Huq (Ealing Central and Acton) (Lab)]

T9. May I appeal to Her Majesty’s Revenue and Customs to show some humanity to loan charge victims? They have been coming to me in tears, and we know that, nationally, some have committed suicide. Children are suffering because of tax arrangements made years ago. Will the Government please pause these punitive retrospective charges, and go after the providers with the same vigour with which they are going after the little people?

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

It is indeed incumbent on HMRC to take its duty of care towards customers—particularly vulnerable customers —very seriously, and I am confident that it does just that. There is a dedicated helpline for those who have been affected by the loan charge, and a vulnerable customers team provides one-to-one support. We recently announced that we would extend the needs enhanced support service to those who are subject to open investigations of their tax returns.

The hon. Lady mentioned promoters. My right hon. Friend the Chancellor has already mentioned that more than 100 investigations of companies that promote tax avoidance are currently taking place. Other litigations in respect of offences relating to the disclosure of tax avoidance schemes have resulted in wins for HMRC. In the Hyrax case, which was concluded recently, it was found that the promoter was not behaving appropriately, and about £40 million worth of tax is likely to be recouped as a consequence.

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

Will we continue to invest in the northern powerhouse, and, in particular, will we fully fund the Transport for the North plan for a TransPennine rail upgrade?

[Toby Perkins (Chesterfield) (Lab)]

T10.     I welcome what the Chancellor said to my hon. Friend the Member for Wakefield (Mary Creagh) a few minutes ago about investigations into the promoters of some of the disguised remuneration schemes, but that will not do many of the victims much good. A business in Chesterfield is facing bankruptcy because of the charge. How might his review actually help the people who have wrongly taken advantage of this advice?

[Mel Stride]

It is largely companies that fall due to the loan charge, rather than individuals—of the 6,000 cases currently being settled, 85% by value relate to companies. HMRC has always been clear that appropriate payment arrangements will be in place to ensure that those outstanding amounts of tax, which after all have been avoided, aggressively and in a contrived way, can be settled sensibly.

[Greg Hands (Chelsea and Fulham) (Con)]

What priority will the Chief Secretary to the Treasury give to reducing the tax burden in the coming spending review?

Business Rates

Mel Stride Excerpts

Tuesday 2nd April 2019 Commons Chamber

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

We have had a very good debate on the extremely important matter of business rates. I will reiterate right at the start that this Government want to see taxes as low as possible. We have made a number of advances in that respect, as the House will know, in areas such as income tax and corporation tax. Equally, we want the burden of rates on businesses up and down the country to be as low as possible. For that reason, as several right hon. and hon. Members have highlighted, we doubled the small business rates relief, from £6,000 to £12,000 as a rateable value threshold, taking 655,000 businesses out of business rates altogether.

We also switched from the retail prices index to the consumer prices index for the uprating of the multiplier, further reducing the burden by £5 billion over the next five years. In 2016 we introduced £300 million for hard cases, which is there for local authorities to use at their discretion. We doubled the level of rural rate relief, from 50% to 100%, to help small communities where perhaps there is just one pub, post office or petrol station. A number of right hon. and hon. Members mentioned the discount of one third brought in at the last Budget.

I congratulate my hon. and gallant Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) on securing the debate. He asked a number of sensible and relevant questions about the whole way we structure our business rates. He asked specifically about the allowance, which we have discussed previously. We are looking at that seriously, but it depends to a large degree on our getting in place the digital arrangements between local authorities so that we can transfer information on business premises owned by the same entity. That programme will be introduced by about 2024, but I am happy to have further discussions with him on the matter.

[Sir Geoffrey Clifton-Brown]

I truncated the last bit of my speech, but I was going to say that the existing IT platform is regarded by the professionals who have to work with it as being clunky and difficult to work. Does the re-design by 2024 that my right hon. Friend mentioned include an entirely new programme?

[Mel Stride]

I will have to come back to my hon. Friend with an answer to that specific technical question, but I will gladly do so.

Several Members rightly mentioned our high streets package. My right hon. Friend for New Forest West (Sir Desmond Swayne) made reference to the fact that it is not all about business rates; it is also about how we design and evolve our high streets to face the changing nature of retailing, which of course includes the rapid advance of online retailing.

Several Members mentioned the digital service tax that we are committed to bringing in by 2020, and we will do so unilaterally in the absence of a multilateral move on the behalf of other countries.

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

I congratulate my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) on securing this excellent debate. All these welcome measures that the Government introduce do not really address the fundamental flaw in this tax. Take the economically unlucky town of Harwich, which I represent. A capable family business in Harwich has developed the Pier hotel over the years to make it a real jewel in the crown of an otherwise rather economically depressed town, but what is that family’s reward? They get clobbered for extra business rates. The less successful hotel businesses carry on paying less rates but the most successful hotel and restaurant gets clobbered for a big increase in rates. If the tax operates in that way, how can that be rewarding success in depressed economic areas?

[Mel Stride]

Earlier in my speech, I went through at length the large number of reliefs that we have brought in to make sure that across the piece we are bearing down wherever we can, particularly in respect of those smaller businesses that might find expenses of this kind particularly arduous. Given that we have had a rather lengthy debate preceding my remarks—

[Mike Wood (Dudley South) (Con)]

rose—

[Mel Stride]

I will not give way at this moment.

We have listened carefully as a Government and will continue to bear down on business rates. I look forward to having further discussions about that with my hon. Friend the Member for The Cotswolds and welcome the full and comprehensive debate we have had.

Question put and agreed to.

Draft Customs Safety and Security Procedures (EU Exit) Regulations 2019

Mel Stride Excerpts

Monday 25th March 2019 General Committees

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

I beg to move,

That the Committee has considered the draft Customs Safety and Security Procedures (EU Exit) Regulations 2019.

May I say at the outset what a pleasure it is to serve under your chairmanship, Sir Henry? The Government’s priority is to leave the EU with a deal that works for citizens and businesses, as set out in the withdrawal agreement and the political declaration. That would, of course, avoid a no-deal outcome. However, as a responsible Government, we have a duty to plan for all scenarios, to minimise the disruption to businesses and individuals.

We are here to consider a statutory instrument that is part of the Government’s package to prepare for the possibly of the UK leaving the EU without a deal. The instrument relates to the safety and security of goods entering and leaving the European Union. By way of background, the Union customs code provides the current legal framework for implementing safety and security policy across the EU. The legislation sets out that the movement of goods into and out of the EU requires entry summary and exit summary declarations, also known as safety and security declarations. For example, shipments from the US or China require a safety and security declaration before entering the European Union.

In the event of the UK leaving the EU without a deal, UK importers and exporters will be required to complete safety and security declarations for goods to and from the EU, as well as the rest of the world. The information in the declarations will be used as part of the overall risk assessment conducted by our border agencies to detect threats to our security. The Union customs code as it exists immediately before exit day will form part of domestic law from the day that we leave, and it will continue to apply to the UK as retained EU law by virtue of the provisions of the European Union (Withdrawal) Act 2018.

However, the code was drafted to apply to EU member states and will not work as effective legislation for the UK without amendment. Amendments are required to replace references and terminology that will no longer be valid in the event of leaving without a deal. It is vital that we make those amendments, so that the UK has safety and security legislation in place after we leave the EU. That will ensure that we are able to protect our borders by requiring safety and security declarations on goods coming from the rest of the world just as now.

We have engaged with industry on the introduction of the new requirement for imports from the EU. Industry was clear that it would be challenging, if not impossible, to be ready for that new obligation on day one. We also considered the risk from goods from the EU if we leave at the end of this month without a deal. Given that the EU’s rules and standards are not changing, our view is that the risk to the UK after we exit the EU will not increase on day one. As such, the instrument also introduces a provision to phase in the requirement for entry summary declarations on EU goods after 29 March, or on such date as we may leave the European Union. Therefore, until at least 1 October 2019, we will not require entry summary declarations on goods imported into the UK from the EU, and other territories where we do not currently require them—for example, Switzerland and Norway. That will give traders a transitional period of six months from the day the UK leaves the EU. Carriers will be legally required to submit safety and security declarations after that transitional period.

When the UK leaves the EU, a separate customs union will be created between the UK and the Crown dependencies—the Channel Islands and the Isle of Man. The instrument includes a provision to ensure that the movements of goods between the UK and the Crown dependencies do not require safety and security declarations.

I should also be clear about the effect of the SI on the border between Northern Ireland and Ireland. The UK Government have committed to avoiding a hard border, and we will do everything in our power to ensure that no physical infrastructure or related checks and controls are introduced at the border in the event of no deal. Safety and security declarations will not be required for goods moving between Northern Ireland and Ireland. However, they will be required for goods being imported to and exported from Northern Ireland from other territories, unless the movement is covered by the transitional period introduced by the safety and security instrument, which applies to all of the United Kingdom.

To conclude, the instrument ensures that the UK will continue to have a robust and operable safety and security regime in place after its departure. It also allows businesses more time to cope with their additional responsibilities in meeting safety and security requirements, and ensures that the UK-Crown dependency trade flow is facilitated without compromising safety and security. I commend the regulations to the Committee.

--- Later in debate ---

[Mel Stride]

I thank the hon. Members for Stalybridge and Hyde and for Inverclyde for their contributions, which I will address in turn. The hon. Member for Stalybridge and Hyde talked about his dissatisfaction that this matter is being dealt with via a statutory instrument. Of course, the primary legislation under which these powers are being made was debated at considerable length in both Houses of Parliament, and the matters he raised were debated at length at that time. He said that he is concerned about the six-month delay in introducing these measures. As I explained, that is in order to address and ameliorate the concerns that businesses, hauliers and the ports themselves raised in our discussions with them. I should point out that the status quo does not require the safety and security regime between us and the EU27.

The hon. Gentleman rightly spoke about the challenges to businesses in a day one no-deal scenario, and he raised the issue of potential friction and problems at the border. He used an expression that I have used myself on many occasions: he said that this would all be suboptimal if we leave on a day one no-deal basis. That is, of course, the very reason why we are taking the responsible and measured approach of allowing a six-month delay to bring in this requirement for the traders and businesses whose trading arrangements with the EU27 he quite rightly seeks to protect.

[Nigel Mills (Amber Valley) (Con)]

Am I right that the EU requires declarations on the import of goods into the EU and the export of goods out of the EU? Does the Minister have any indication of whether the EU will reciprocate in not requiring declarations for six months? Will we merely just not have the UK side of a declaration? Either way, the thing will have to be made anyway, so we will not achieve quite the work saving that we are hoping for.

[Mel Stride]

My hon. Friend is right in the sense that, as is the case for our exports to and imports from the rest of the world—in other words, outside the EU’s customs union—there are safety and security requirements. What the European Union will do in the event of a day one no-deal situation is for it to determine; clearly, exactly what happens is not within our control. In exactly the same way, the arrangements that it may or may not put in place at its ports across the short channel straits, in relation to customs declarations, duties and tariffs, will be for it to decide. We can focus on what we can do to make sure that the day one no-deal scenario is as comfortable as possible for businesses impacted and that, wherever possible, trade flow is prioritised across our borders.

The hon. Member for Stalybridge and Hyde drifted to some degree into the issue of taxation raised, by which I think he meant the customs duties on trade with the EU27 that may be applicable at our border in a day one no-deal scenario. We have always made it clear that trade flow will be our priority. There will still be arrangements in place to collect customs duties, but those customs duties are new duties—they are not levied at the moment. In terms of revenues forgone, this is the forgoing of revenues that we are not entitled to under existing arrangements.

The hon. Gentleman also asked whether the customs declaration service would be ready for the increased trading volumes that would be involved in a day one no-deal scenario. He is right to raise the issue of increased activity; we estimate that there are 145,000 VAT-registered businesses who trade solely intra-EU at the moment, and probably another 100,000 who are below the VAT threshold, making almost a quarter of a million in total. That will mean an increase in the requirement for CDS, but we have made it clear that in parallel with CDS we have upgraded and maintained the ability of the CHIEF—customs handling of import and export freight—system to keep up with those increased volumes.

The hon. Gentleman then asked what will happen at the end of the six-month phasing in of those measures, and what is to stop Parliament deciding to go for a further period of delay in bringing in the measures. As I am sure he knows full well, there is nothing to stop Parliament doing virtually anything it wants when it comes to legislation, but it will have to do that via due process, coming back to a Committee of the House in order to do so. On that basis, I commend the draft regulations to the Committee.

--- Later in debate ---

[Mel Stride]

I sympathise with the hon. Gentleman’s point about no deal, because it would be a suboptimal arrangement to end up with, but an option will perhaps come before Parliament shortly to ensure that we can avoid that. I suggest that Opposition Members think carefully about that particular point when they file through the Lobby.

[The Chair]

Good try.

[Mel Stride]

I think that might have swung it, Sir Henry.

Question put.

Draft Cash Controls (Amendment) (EU Exit) Regulations 2019 Draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019

Mel Stride Excerpts

Monday 25th March 2019 General Committees

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

I beg to move,

That the Committee has considered the draft Cash Controls (Amendment) (EU Exit) Regulations 2019.

[The Chair]

With this it will be convenient to consider the draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019.

[Mel Stride]

It is a pleasure to serve under your chairmanship, Mr McCabe, and I reassure the Committee that we are now in safe hands—it is business as usual. I welcome our Clerk. When the Clerks are here, they are of course so seamlessly efficient that we do not notice them, but when they are not here, apparently we do notice that they are not. There was a slight delay, but I have none the less moved the first of the draft statutory instruments and I will speak to both the SIs before us.

The Government’s priority is to leave the European Union with a deal that works for citizens and businesses, as is set out in the withdrawal agreement and political declaration. That would avoid a no-deal outcome. As a responsible Government, however, we have a duty to plan for all scenarios to minimise disruption for businesses and individuals. We are in Committee to consider two statutory instruments that are part of the Government’s package to prepare for the possibility of the UK leaving the EU without a deal.

The first set of draft regulations relates to cash controls. The European Union monitors the international movement of cash by requiring individuals who enter or leave the EU carrying more than €10,000 in cash to make a declaration. That cash control declaration must be made to the customs authority of the member state into which they are arriving or from which they are departing. The UK is committed to continuing that practice. The declaration is one measure that assists the fight against money laundering, organised crime and the funding of terrorism.

If the UK leaves the EU without a deal, the draft instrument will require cash control declarations at the UK border, including the borders between the UK and the EU. That does not apply to the border between Northern Ireland and Ireland. The current practice, which requires those declarations between the UK and non-EU countries, will continue. The draft regulations extend those requirements to movements between the UK and the EU. The instrument makes a small change in so far as we will require declarations on amounts of £10,000 or more, rather than €10,000.

The second draft statutory instrument under consideration relates to economic operator registration and identification, or EORI. An EORI is a unique registration number given to businesses that are involved in matters covered by customs legislation, so that Her Majesty’s Revenue and Customs can identify them effectively. Registering for an EORI is a requirement under EU law. As those registration numbers allow HMRC to identify traders effectively, it is necessary for traders to use them when applying for customs simplifications or facilitations, making declarations or exchanging information with the customs authority.

The Union customs code, as it exists immediately before exit day, will form part of domestic law on exit day and continue to apply to the UK as retained EU law, by virtue of the provisions of the European Union (Withdrawal) Act 2018. The code was drafted to apply to EU member states and will therefore not work as effective legislation for the UK without amendment. The second set of draft regulations amends those retained provisions to ensure that they are suitable for an independent UK customs regime. The instrument mirrors current EU provisions to ensure that traders and systems are faced with as little change as possible.

All existing EORIs issued by the UK, known as UK EORIs, will continue to remain valid for use in UK customs processes in the event of a no-deal EU exit. Following the UK’s departure from the EU, UK individuals and businesses that want to trade with the EU and do not already have a UK EORI will need to obtain one. In addition, persons who are not established in the UK but are entitled to lodge a UK declaration will first require a UK EORI.

I will now comment on the effect of the two draft SIs at the border between Northern Ireland and Ireland. The UK Government have committed to avoiding a hard border and will do everything in their power to ensure that no new physical infrastructure or related checks and controls are introduced at the border in the event of no deal. As such, the two SIs will not apply to movements between Northern Ireland and Ireland, but they will apply for movements between Northern Ireland and other territories. Cash control declarations will not be required for movements of cash between Northern Ireland and Ireland, but will be required for movements of cash between Northern Ireland and other territories.

Likewise, traders whose only international trade is between Northern Ireland and Ireland will not be required to register for a UK EORI, but a UK EORI will be required by Northern Ireland traders trading with other territories. Finally, an EORI is not needed by UK traders with only domestic trade. The instruments are important in helping to ensure that our trade and cash controls continue to function in a day one no-deal scenario. I commend the first set of regulations to the House.

--- Later in debate ---

[Mel Stride]

I thank the hon. Lady for her questions, which, as usual, were very thorough and detailed. I will do my best to answer them all. The first related to the whole issue of why we are using secondary legislation. In general terms, I hope the hon. Lady recognises that, given the kind of detail involved in some of this secondary legislation, the sheer practicalities of setting all that out in advance in primary legislation would have been prohibitive, not least because the relevant Bill went through some time ago and we are now considering these matters nearer to the event of our potential departure from the EU without a deal—although that is certainly not our desired departure. She will also have noticed that both instruments were considered by the European Statutory Instruments Committee and, on its recommendation, turned from negative instruments into affirmative instruments.

The hon. Lady asked very specifically whether these instruments relate to a no-deal scenario. Indeed they do. Of course, if we have a deal—the current deal, which has been negotiated with the European Union—we will go into an implementation period until the end of 2020. Under those terms, we would continue to trade with the EU27 on broadly the same basis as we do today.

The hon. Lady asked specifically why £10,000 was used, rather than the sterling equivalent of €10,000, that being—I will take her figure at face value—about £8,500. She suggested that it might be because it is a nice round number, and I guess perhaps it is. It certainly maintains the figure 10,000, albeit there is a relatively marginal change in value at today’s exchange rate; as we know, that may change over time.

The hon. Lady made some very important points about the Northern Ireland border and, with regard to the cash controls instrument, the level of security that may or may not be in place as a result of no deal. In the case of the border between Northern Ireland and Ireland, the instrument really would maintain the status quo. Of course, as a member of the European Union at the moment, we do not have cash controls between ourselves and other member states, including between Northern Ireland and the Republic of Ireland. We have a variety of intelligence-based arrangements in place to track down those who may be moving cash for the wrong reasons across any of our borders with any member state, and we have always had very close co-operation with the Irish Government and the Garda in respect of such matters.

I turn to EORI. The hon. Lady asked how many operators trade only across the Northern Ireland-Republic of Ireland border and, because they do not already trade with a country outside the EU27, have not already been registered for an EORI number. I do not have a precise figure, but we estimate that about 245,000 businesses in the UK as a whole—145,000 that we can identify as being above the £85,000 VAT registration threshold, and an estimated 100,000 further that are below that threshold—trade solely intra-EU, so it will be a fraction of that number.

The hon. Lady touched on whether the arrangements relating to Northern Ireland in both statutory instruments would be compliant under WTO arrangements. Our belief is that they would be, albeit that they would be exceptional arrangements. In the case of both instruments, we would hope to be in constructive discussions with the Irish Government about how to move forward if we end up in a no-deal situation.

The hon. Lady asked some specific questions about EORI registration and referred to her letter. I am grateful to her for having raised that with me before this Committee. The answer to her question is that approximately 60,000 EORI registrations have now been made in the group we are targeting. That is 24.8% of those that we believe are in the scope of requiring an EORI. She asked what happens if a business turns up in the UK without the relevant EORI registration, and I point her to the transitional simplified procedures that we have set out.

The hon. Lady’s final point was about businesses that might provide a service to facilitate EORI registration. Quite rightly, she pointed out that is a free-of-charge service that can be completed very quickly, and it is not that complicated to do it online. If she has any specific examples that she would like to bring to my attention, where she believes that anybody is in any way misrepresenting the complexity of this process simply in order to profit from the interaction with the business concerned, I will look at them very closely.

[Anneliese Dodds]

I am grateful to the Minister for those clarifications, which are enormously helpful. I mentioned in my letter the name of one outfit that operates in that direction, but I will have another look and send it on. On his penultimate point about how companies would cope with not having an EORI, it was my understanding that, in order to participate in the new transitional simplified procedures scheme, businesses had to have signed up for that, and we do not know how many have. They could be in a double bind if they are not in either scheme. I know that the Government say they will completely suspend many of the normal reporting requirements, which opens up many concerning questions, but unless I am misunderstanding the transitional simplified procedures scheme, it is not clear that those who do not have an EORI would drop into that other scheme. Perhaps he can explain that further.

[Mel Stride]

The hon. Lady poses a fair question. Although what happens going the other way will be in the control of the EU27, in the event that a business came into the United Kingdom, arrived without an EORI number, was not in the TSP arrangements and was not in transit with the various suspensions that go with that, we would take a proportioned, flexible approach at the border under those circumstances. We would make sure, as we have always said, that we prioritise flow over other aspects, while in no way compromising on security.

Question put and agreed to.

Draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019

Resolved,

That the Committee has considered the draft Customs (Economic Operators Registration and Identification) (Amendment) (EU Exit) Regulations 2019.—(Mel Stride.)

Oral Answers to Questions

Mel Stride Excerpts

Tuesday 5th March 2019 Commons Chamber

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

5. What discussions he has had with the Secretary of State for Business, Energy and Industrial Strategy on potential job losses as a result of the UK leaving the EU without a deal.

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

The Government’s analysis indicates that leaving the EU without a deal would not be good for the UK economy, which is why we are so determined as a Government to secure an appropriate deal with the European Union that can pass through this House.

[Gerald Jones]

There are 4,000 jobs in the manufacturing sector in Merthyr Tydfil and Rhymney. This Government have had two years to negotiate a good deal for that sector, but they have so far failed to do so. Does the Minister share my concern that Nissan’s decision to build its X-Trail in Japan, and similar decisions by Honda, are a sign of things to come as a result of this Government’s chaotic negotiations?

[Mel Stride]

The chief executive of Honda has made it perfectly clear that the company’s recent decisions were not a consequence of Brexit. Other factors across the world are affecting car sales, including the switch away from diesel and, in the case of Honda, the agreement on tariffs that has been entered into between the European Union and Japan, which will mean that, after the move to Japan, exports into Japan will attract no tariffs.

[Charlie Elphicke (Dover) (Con)]

Does not this underline the importance of fine-tuning the deal so that we can jettison the backstop and use existing technology and EU law to take forward the innovative Malthouse proposals, which will ensure that we can move forward and build the new Britain?

[Mel Stride]

The House has made clear the basis on which it would be prepared to accept the deal negotiated with the European Union, and that will necessitate some changes to the backstop arrangements. That is what is being negotiated at the moment and it will come back to the House in due course.

[Kerry McCarthy (Bristol East) (Lab)]

17. This country’s public sector institutions spend £1 billion a year on food, and there have been many warnings that food price inflation in the event of a no-deal Brexit will make that unaffordable. What is the Minister doing to protect not just jobs in the food sector, but the people who depend on those meals?

[Mel Stride]

The hon. Lady is right to raise an issue that relates to our tariff policy in the event of a no-deal Brexit. We have made it clear that we will carefully balance this, protecting consumers from unwanted price rises at the same time as using our tariff policy to provide appropriate protection to vital elements of the economy.

[Antoinette Sandbach (Eddisbury) (Con)]

Cheshire-based company ABB has stated that investment in automation could result in radical improvements in cost efficiency, allowing work to move back to the UK. Will my right hon. Friend consider incentivising investment in automation through the tax system?

[Mel Stride]

We have already brought in some important measures to do just that, not least by increasing the annual investment allowance from £200,000 to £1 million, as announced at the previous Budget. We keep all taxes under review and I will certainly bear my hon. Friend’s important point in mind.

[Kirsty Blackman (Aberdeen North) (SNP)]

In a recent survey by the Fraser of Allander Institute, 62% of Scottish businesses said that they did not feel ready for Brexit. Will the Chancellor bring forward an emergency Budget to provide support for small and medium-sized enterprises so that they can cope with the Brexit that he proposes?

[Mel Stride]

My right hon. Friend the Chancellor has made it clear that, in the event of a no-deal Brexit, we will take stock of the situation and take whatever measures are necessary to ensure that we protect and support businesses throughout the United Kingdom.

[Kirsty Blackman]

I was specifically talking about the Brexit that the Chancellor is proposing, which is presumably not a no-deal Brexit, although it looks like 100,000 jobs could be lost in Scotland as a direct result of no deal. However, in relation to the deal Brexit, the Bank of England has said that unemployment could be up to 4% higher by 2023 if the Prime Minister’s deal is approved. Does the Chancellor believe that keeping his job is worth costing thousands of others?

[Mel Stride]

I do not believe that the figure to which the hon. Lady refers is accurate. This Government have seen employment at a record high and unemployment at the lowest level since 1975, and youth employment is half what it was in 2010—unlike the Labour Government, who saw youth unemployment increase by almost 50%.

[Gordon Henderson (Sittingbourne and Sheppey) (Con)]

6. What steps he is taking to increase the level of funding for road infrastructure.

--- Later in debate ---

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

7. What steps his Department has taken to mitigate the potential effect on the economic sustainability of the manufacturing sector of the UK leaving the EU without a deal.

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

The steps we are taking to protect our manufacturing in the event of no deal include supporting the Prime Minister’s deal and the negotiations to make sure that we have a smooth exit from the European Union, and the Treasury itself has made available in excess of £4 billion by way of contingency funding for Departments right across Whitehall.

[Mr Sharma]

I thank the Minister for that response. Last month, I surveyed businesses in my constituency and they overwhelmingly said that they wanted Brexit cancelled. Will the Chancellor stand up for British businesses, end the uncertainty and use his immense personal prestige in the Cabinet and with the Prime Minister to stop Brexit once and for all?

[Mr Speaker]

I hope the Chancellor heard the bit about his prestige.

[Mel Stride]

It is just little old me, I am afraid, but I have to say that I believe we should respect the result of the June 2016 referendum, a democratic exercise that saw a higher turnout than for any other democratic event in the history of our country. The important thing now is that we get the right deal for us to leave, which we are working on. When it comes back to Parliament, I hope that the hon. Gentleman will support it.

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

21. The Chancellor has recently attended two events that I was also present at, which were organised by major aerospace companies, so he knows how they feel about the terrifying prospects of no deal. As these are the companies that pay this country’s bills, why is he ignoring them?

[Mel Stride]

We are most certainly not ignoring those businesses—or indeed businesses from a variety of different sectors up and down the economy. We have been deeply engaged with business, through the Treasury, the Department for Business, Energy and Industrial Strategy and other Departments. I can assure the hon. Gentleman that, for example, on the issue of just-in-time deliveries and the flow of trade across our borders, we have done an immense amount of work to prepare for the possibility of a no-deal exit to make sure that we protect the very companies to which he refers.

[Mark Pawsey (Rugby) (Con)]

8. What fiscal steps he is taking to help reduce the amount of single-use plastic waste in the environment.

--- Later in debate ---

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

16. What steps he has taken to ensure that HMRC has adequate (a) powers and (b) resources to investigate tax avoidance enablers.

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

The Government take a very serious view of those who enable or promote tax avoidance. We have taken a number of measures to clamp down on them, including penalties of up to £1 million.

[Alex Norris]

In 2017, the Government introduced the Criminal Finances Act to great fanfare, claiming that they were clamping down on the facilitators of tax-dodging. Will the Minister please confirm how many prosecutions have been brought for the new offence of failing to prevent tax evasion?

[Mel Stride]

We have taken action against enablers and promoters, and the cumulative amount of time in prison that has resulted from those particular actions is in excess of 100 years.

[Mr Speaker]

Well done.

[Stephen Morgan (Portsmouth South) (Lab)]

22. HMRC has 2,000 fewer staff today than it did on the day of the referendum. Will the Minister explain the impact of HMRC cuts on the delayed timetable for the implementation of the UK’s future customs regime?

[Mel Stride]

I am confident that HMRC will be ready for the outcome of the EU negotiations, whatever that outcome is. We have taken on over 4,000 additional staff to ensure that we are ready, and we have of course invested £2 billion in additional funding since 2010 to ensure that HMRC can operate effectively.

[Mrs Sheryll Murray (South East Cornwall) (Con)]

19. What recent progress he has made on creating jobs and reducing unemployment.

--- Later in debate ---

[Charlie Elphicke (Dover) (Con)]

T7. Will the Chancellor tell the House how many people in my Dover and Deal constituency, since 2010, are either paying no income tax whatsoever, thanks to Government policies, or have seen an income tax cut? While he is about it, could he put that in a spreadsheet for every single constituency so that the whole House can see what has been done?

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

It is not possible to provide an estimate down at constituency level about the impacts of the changes in the personal allowance, but I can inform my hon. Friend that no fewer than 234,000 individuals have been taken out of income tax altogether who are living in the south-east, which obviously includes Dover.

[Patrick Grady (Glasgow North) (SNP)]

Does the Chancellor agree with his right hon. Friend the Environment Secretary, who has told me on a number of occasions that he believes other European countries are looking enviously at the United Kingdom’s withdrawal deal, especially in the context of all the economic analysis the Treasury has carried out on Brexit scenarios?

Tax Avoidance, Evasion and Compliance

Mel Stride Excerpts

Monday 4th March 2019 Commons Chamber

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

With permission, I should like to make a statement on tax avoidance, evasion and compliance.

This Government take a balanced approach to the public finances, investing in our vital public services while getting our debt down and keeping taxes as low as possible, and part of that approach is that everybody must pay the tax that is properly due. The vast majority of taxpayers, from individuals and the smallest businesses to the largest companies, already pay their fair share. This Government recognise their duty to that compliant majority to build a fair and sustainable taxation system and, through that system, to make sure that those who try to avoid or evade their tax liabilities are held to account.

Our approach is working. At 5.7%, the tax gap is at a near-record low. The difference between the tax that should be paid to Her Majesty’s Revenue and Customs and the actual tax that has been paid is at its joint lowest level in five years, thanks to HMRC’s sustained efforts to tackle non-compliance and to help customers get their tax affairs right first time.

HMRC tailors its approach to different taxpayers, subjecting the largest businesses and the wealthiest individuals to the greatest level of scrutiny, while using data and digital tools to help smaller and mid-sized businesses to get it right, with close attention on those where avoidance or evasion is suspected. We must make sure the tax system is not a barrier to setting up, running or growing a business, but we should never forget that the tax brought in by HMRC directly funds our vital public services.

I am proud of this Government’s success in this respect. Since 2010, we have introduced over 100 measures to tackle tax avoidance, evasion and other forms of non-compliance. Alongside this, HMRC’s compliance work has secured and protected £200 billion in tax revenue that would otherwise have gone unpaid. In addition, at Budget 2018 the Government announced a further 21 measures that together are forecast to raise around £2.1 billion by 2023-24. This success demonstrates the Government’s continued efforts to address tax avoidance, evasion and non-compliance in all its forms.

At the same time, the Government recognise that these efforts must be designed and targeted carefully. All HMRC powers, which are given by Parliament, must be accompanied by the necessary safeguards to ensure that they are used correctly. The Government will keep the tax administration framework under review, in consultation with interested external stakeholders, to ensure that it continues to strike the right balance between robustly challenging tax avoidance, evasion and other forms of deliberate non-compliance and treating all taxpayers fairly.

As part of our continuing efforts to reduce the gap between money owed and money paid, the Government have also set about reforming the rules that govern off-payroll working. These rules, known as IR35, were first introduced in 2000 to ensure people working through their own company, who, but for the existence of the company, would be taxed as employees, pay broadly the same tax and national insurance as other employees. The rules do not affect the genuinely self-employed and the Government recognise the contribution that contractors make to business and to public services across the country. Our aim is simply to ensure that contractors who work through their own company pay the right tax.

However, evidence has suggested that these rules have been frequently misapplied, so contractors were incorrectly paying tax as though they were self-employed when they were actually acting as employees. It is right and fair that everyone must pay the tax that is due irrespective of the nature of their employment. We want a tax system that is simple and clear to use, so that businesses and individuals alike can understand what they owe and how and when to pay it.

In April 2017, the Government introduced new rules for public sector organisations that take on contractors through their own company. The reform means that public sector organisations are now responsible for deciding both whether the contractor is acting as an employee, and therefore within the rules, and ensuring the right amount of tax is paid.

I am pleased to report to the House that this has proved to be effective, with HMRC estimating that an additional £550 million has been raised in income tax and national insurance contributions in the first 12 months since the measure was introduced. However, non-compliance in the private sector remains a persistent and growing problem that, if left unchecked, will cost the taxpayer as much as £1.3 billion by 2022-23, according to the Government’s estimates.

In last year’s Budget, the Government announced that we will extend the reform of off-payroll working rules to the private sector from April 2020, and tomorrow we will publish a consultation to seek views on the detailed design of the reform to enable effective implementation. By changing the design of the off-payroll working rules, we are helping individuals working in this way to ensure that they are compliant with the existing legislation. For this reason, the Government’s focus will be on supporting organisations and businesses to apply the rules, rather than enforcing historical cases. Our aim is to provide individuals and businesses with greater certainty around how the off-payroll working rules will operate from April 2020 and the actions that individuals and businesses can take to prepare for the reform.

Our reforms to off-payroll working are just one of the ways in which this Government are ensuring that we have a tax system that is fit for the 21st century, and I commend this statement to the House.

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

The Opposition came to Parliament today prepared to debate, to amend and to scrutinise the Financial Services (Implementation of Legislation) Bill, and we did so in good faith, even though we were given just three hours to table amendments to the Bill last week, having been told on Wednesday afternoon that the remaining stages would be taken today. I should make it clear that the Bill had only come out of Committee the day before, on Tuesday, and that the business for this week was announced only last Thursday.

Let me be absolutely frank. The Bill has been pulled, and this statement scheduled instead, for one simple reason: the Government thought that they were going to lose. They have shown such contempt for Parliament today, and they are in such a state of chaos, that even the annunciator could not keep up with them this morning. This is not a statement from the Government on tax avoidance; it is a poor attempt to put up something that the Government can hide behind, because they are afraid to let Members of Parliament vote on the provisions of the Financial Services (Implementation of Legislation) Bill.

There were two main amendments to the Bill. The first would have prevented the Bill from legislating for a race to the bottom in regulatory standards if we were to crash out of the EU without a deal—something that the Government say they are already committed to. The second, standing in the names of my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the right hon. Member for Sutton Coldfield (Mr Mitchell), would have compelled the introduction of public registers of beneficial ownership in the Crown dependencies and reiterated their introduction in the overseas territories—something that the Government are already committed to doing. It is woeful and embarrassing for the Government to pull the business of the House today, to avoid Parliament having a say on those amendments, and to make this statement instead.

In relation to the substantive point on tax evasion that has led to this, I know that the Crown dependencies have a difference of opinion with this Parliament on the merits of public registers of beneficial ownership, but I believe that there is a majority view in Parliament that public registers provide for greater transparency than the existing data-sharing protocols between ourselves and the Crown dependencies provide for. Public scrutiny would provide for analysis of suspicious patterns of behaviour, and it would disclose inconsistencies in supposedly factual information and reveal wrongdoing by people who might not already be the subject of official law enforcement action. Around the world, such information getting into the public domain has been essential to exposing tax evasion and corruption, from the laundromat scandal to the Panama papers, and the public want to see action.

In relation to what the Minister has said today, all I can ask him is whether his reference to not enforcing historic cases is code for the Government not proceeding with the 2019 loan charge? His words suggested that they might not be proceeding, but he did not really say one way or another. If the answer is that they are not proceeding, I am not really sure, with all due respect to the Minister, why he needed to make a statement today at all.

Let me return to the main point. If we had debated the Financial Services (Implementation of Legislation) Bill today, I had intended to start with a genuine word of solidarity with my opposite number, the Economic Secretary to the Treasury, who is also the MP for Salisbury, because it is exactly a year since the appalling attack in his constituency that featured chemical weapons. I still want to take this opportunity to express our support and solidarity with him and the people of his constituency. I mention this now because the House has united on a cross-party basis to push for new laws in this area precisely because transparency in overseas jurisdictions has become an issue of national security for us in the UK. We cannot, and should not, tolerate those who threaten the safety of our people being able to hold major assets in the UK through complex and opaque financial arrangements.

In the light of that, the Government’s words today are simply not good enough. If there is consensus in this House that action must be taken now, how can the Government deny us the chance not only to vote for further action but to vote to reaffirm the action that we have already passed through the House of Commons? Real action on tax avoidance, transparency and money laundering is well overdue, and if the Government cannot bring themselves to take that action, they should at least stop preventing other Members of Parliament from getting on with the job.

[Mel Stride]

I thank the hon. Gentleman for his reply. He spent some time focusing on the legislation that was due to come before the House this evening. Some amendments have been tabled, particularly the second one to which he referred, that could have significant constitutional ramifications for our Crown dependencies and overseas territories. For that reason, and given that the amendments were tabled only last Thursday, it is only right that we should have time to consider these important matters. They are not directly Treasury matters; they are more a matter for the Foreign and Commonwealth Office and the Ministry of Justice.

The hon. Gentleman refers to wanting to see public registers of beneficial ownership of companies, but he neglected to mention that we have already introduced these in respect of UK companies. That came in in 2016, and that database has been accessed in excess of 2 billion times. He mentioned that we have already made commitments to work with the overseas territories to bring in those measures by 2023. He asked me specifically what the meaning was, in the context of IR35, of focusing particularly on future compliance rather than on the history of the businesses that would be in scope of this measure. This is simply a clear indication that this is not about trawling through previous activities. It is about looking to the future and ensuring that we take a fair, proportionate and reasonable approach to IR35 as it goes into the private sector.

The hon. Gentleman asks me whether there were any implications for the loan charge. I know that people often conflate IR35 and the loan charge in relation to disguised remuneration, but as he will appreciate, they are entirely different things. There is no implication in any element of my statement on any change in respect of the loan charge.

The hon. Gentleman makes an important point, in relation to our national security, about the importance of general transparency in business and tax affairs internationally. I remind him that this Government and this country have been at the forefront of the base erosion and profit-shifting project with the OECD and that it is this country that has helped to drive our common reporting standards, which provide information across hundreds of overseas tax jurisdictions. With that, I will conclude, because I think that I have addressed the points that the hon. Gentleman has raised.

[Nicky Morgan (Loughborough) (Con)]

The Minister, whom I respect greatly, has been handed an enormous hospital pass today, although perhaps not as great as the one handed to the Secretary of State for Health earlier, when he had to justify the conduct of one of his Cabinet colleagues. I should like to ask the Minister to build on what the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), the shadow Minister, was saying. The Minister said in his statement that

“the Government’s focus will be on supporting organisations and businesses to apply the rules, rather than enforcing historical cases.”

Have the Government learned from the 2019 loan charge cases, where people are very concerned about the importance of historic cases rather than looking forward? Is the Minister saying that these changes will be done differently from what we see happening under the loan charge?

[Mel Stride]

I thank my right hon. Friend for her questions. To reiterate, there is no connection between the loan charge and IR35; they are two distinctly different aspects of Government taxation policy. The purpose of my statement, in making it clear that we will not be actively or aggressively looking at previous activities in this area, was to show that we recognise that we need to get this right and that we need to support employers and contractors as we go through this process. That is the approach that we will take.

[Alison Thewliss (Glasgow Central) (SNP)]

We should have been debating the Financial Services (Implementation of Legislation) Bill this evening, but the UK Government are clearly feart. Can the Minister tell us when the Bill will return to the House? We were told that it was vital, urgent and necessary in the event of a no-deal Brexit, yet today we find that that urgency has evaporated. The statement today is nothing but a fig leaf to cover the embarrassment that the UK Government feel over the amendment tabled by the right hon. Members for Sutton Coldfield (Mr Mitchell) and for Barking (Dame Margaret Hodge). The Government should have acted on this after the Sanctions and Anti-Money Laundering Act 2018, but on public registers of beneficial ownership, they have taken their lead from the Prime Minister and kicked the can down the road to 2023.

On IR35 and the loan charge, what assessment has the Minister made of how many people were forced into the system by their employers and what action has been taken by the employers involved in those cases? How many people were separate from that and perhaps knowingly used the system to avoid tax? It seems to me that they are two separate classes of people who should be recognised and treated differently as we go forward.

On compliance and enforcement, this Government have a poor record because they have already closed HMRC offices in Scotland, the local knowledge of which played a vital and valuable role in enforcement, ensuring no avoidance or evasion and enforcing compliance. My hon. Friend the Member for Cumbernauld, Kilsyth and Kirkintilloch East (Stuart C. McDonald) has asked this before, but will the Minister put the plans to close the HMRC office in that constituency on hold because it plays a vital role in the tax avoidance, evasion and compliance regime?

Finally, will the Minister act to make Companies House part of the anti-money laundering regime, which would close a huge loophole in the system that allows people to register companies falsely? Will he take action on Scottish limited partnerships, which are still allowing people to hide money and move it around? The last time I asked about SLPs, thousands of people still had not registered as a person of significant control but had not been fined. Does he not have an interest, as a Treasury Minister, in having that significant amount of money in the Treasury coffers rather than going unpaid?

[Mel Stride]

The hon. Lady asks about when today’s business will return to the House. That will be a matter for the business managers and the usual channels in the usual way. She asks about the loan charge and, specifically, about those who would be impacted by it, and I can tell her that, of the £1 billion that has been received by HMRC via pre-loan charge settlements, some 85% of those settlements by value came from companies, rather than from individuals. HMRC will go for companies in the first instance.

The hon. Lady raises the issue of HMRC offices up and down the country. We are going through a transformation programme, as she will know, reducing the number of offices from 170, some of which had fewer than 10 staff, to produce 13 state-of-the-art hubs that will move our tax authorities into the 21st century, and so much more can be done through analysis, computers and intelligent interventions. I was privileged last week to visit our new office in Bristol, which will be the hub for the south-west of England. It is a truly stunning building that will house a state-of-the-art approach to tax collection.

The hon. Lady mentions Scottish limited partnerships and urges the Government to act. She will know that we have already taken action in that respect. The main point remains that we have been successful in keeping our tax gap as one of the lowest in the world, safeguarding and protecting some £200 billion of tax, which, let us not forget, is there for a purpose. Taxes support our vital public services, our doctors, our nurses, our brave servicemen and women, and our police force. We need that money, and that is why I am proud of our achievements in that area.

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

My right hon. Friend is right to say that the best approach is to get things right for the future, rather than to overemphasise enforcement of the past, particularly when people may well have acted in good faith when they received professional advice. That takes me to the loan charge and I will press the Minister on that. The Government accepted a new clause to the Finance Act 2019 relating to a review of the loan charge. For that to be meaningful, it must have an independent element and must be given time to do its work. Would not common justice indicate that the sensible thing for the Revenue to do would be to use its discretion to suspend the implementation of the loan charge against individuals until the review has been fully completed and its conclusions fully digested and debated?

[Mel Stride]

During the passage of the Finance Bill, we committed to provide a report by 30 March, which is shortly upon us and, of course, is prior to the moment when the loan charge will come into effect, which is at the beginning of the coming tax year. My hon. Friend referred to whether individuals getting involved in such schemes knew what they were all about, but if something looks too good to be true and one ends up being asked for basically no or little tax, it probably does not work and that, I am afraid, is the case.

[Dame Margaret Hodge (Barking) (Lab)]

I know that this Government find it difficult to listen to anybody and to accept the will of Parliament and legislation if they do not like what it says—they have form—but I want to ask the Minister two questions, one relating to the overseas territories and one relating to the Crown dependencies. On the overseas territories, it is utterly shameful for this Government to ignore legislation that was enacted only last year and to invent their own date for the implementation of public registers of beneficial ownership. If the Government are serious about wanting to tackle tax avoidance, tax evasion, financial crime and money laundering, they ought to be acting with greater speed, not delaying the implementation of legislation and ignoring the will of Parliament. Will the Minister explain to us what on earth the Government are doing?

On the Crown dependencies, I cannot for the life of me understand how the Minister can pray in aid the constitutional implications of this House legislating on a matter that was perfectly in scope in relation to the Bill that the House is considering and perfectly in order on the matters it was attempting to address. Such praying in aid of inadequate and ill-thought-through reasons simply will not do. Indeed, I cannot understand why the Minister does not recognise the consensus across this House on the issue. Transparency is a vital tool in fighting tax avoidance, evasion and financial crime, and all we want is that transparency to exist across the family. Would it not be better for the Minister to concede gracefully to the will of Parliament, rather than battling limply to a defeat in the future?

[Mel Stride]

I assure the right hon. Lady that I always listen extremely carefully to what she has to say, as I have done in the context of her current two questions. She asked why we are delaying—as she terms it—the implementation of public registers of beneficial interest for overseas territories. The short answer is that it is important that we allow time to ensure that we get these things right, not least because our Parliament is legislating on behalf of another jurisdiction—albeit one that is closely related to ourselves. It is important that we are considered and measured in that way.

The right hon. Lady’s second question relates to the Crown dependencies. She made the quite legitimate point that the amendment to the legislation that was due to go through this afternoon was indeed in scope and in order. However, that is not the same as saying that that contradicts my earlier point that that particular amendment would have considerable and significant constitutional ramifications for our Crown dependencies. For that reason, as I stated earlier, the Government feel that it is important to reflect carefully upon that before we come back with the legislation in due course

[Nigel Mills (Amber Valley) (Con)]

I welcome the statement before us—if not its existence, at least its content. The Minister says that he wants to support individuals. Can he create a mechanism whereby someone can have their standard contract precleared by HMRC so that, if they engage with half a dozen customers a year, they will not get half a dozen different treatments chosen by those companies when they put the contract through their tool, or something similar?

[Mel Stride]

The issue of ensuring that we make it as simple as possible for employers to be able to assess the employment status of employees or contractors providing services is extremely important. It is central to the consultation that I have announced will open tomorrow and run for several weeks, and I urge my hon. Friend to contribute to it with his specific idea.

[Christine Jardine (Edinburgh West) (LD)]

Can the Minister explain why, on a day when they pulled business to avoid defeat on an amendment that could have meant the wealthiest businesses paid millions of pounds in tax, the Government feel it is acceptable to clamp down on ordinary families for national insurance and not pursue widespread, large-scale tax avoidance?

[Mel Stride]

On the first part of the hon. Lady’s question, I think I have already answered why we decided not to go ahead with the legislation today. On clamping down on national insurance issues, I am not entirely sure to what she is specifically referring. If she would like to have a word with me after this statement, I would be happy to have a look at it.

[Mr Philip Hollobone (Kettering) (Con)]

May I accuse the Minister directly of encouraging a very large number of people to avoid tax? Is it not the case that, in 2010, when the Conservatives came into government, low-paid people had to earn only £6,500 a year before they paid income tax, but from next month the income tax threshold will be £12,500? May I accuse him of taking millions of people out of income tax altogether? Is not the fundamental truth that, if tax rates are lowered, tax take is increased by encouraging economic growth, giving us all more money to spend on public services?

[Mel Stride]

I thank my hon. Friend, and I take it on the chin. I am bang to rights. I and this Government are guilty of lowering taxes, particularly for the lowest paid in our country. He refers to the increase in the personal allowance, and he is absolutely right that, since 2010, some 4 million people have been taken out of tax altogether—I am extremely proud of that fact.

It is often suggested by the Opposition that the wealthiest get away with it. Well, they certainly do not. Under this Government, the top 1% pay 28% of all income tax; under Labour, it was about 24.5%.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Is not the Government’s decision to pull the Financial Services (Implementation of Legislation) Bill in the face of the amendment on public registers of beneficial ownership, tabled by my formidable right hon. Friend the Member for Barking (Dame Margaret Hodge), reflective of their entire approach to the wider issue? Can the Minister confirm when the Government will finally take decisive action on extending corporate liability for economic crime? Their call for evidence closed two years ago and we are still waiting for a response.

[Mel Stride]

The hon. Lady will know that this Government have an exemplary record when it comes to clamping down on tax avoidance, evasion and non-compliance, including overseas. We have been at the vanguard of the base erosion and profit shifting project, and in 2015 we brought in the diverted profits tax, which has already saved some £700 million. We are very active in this space and I refer her to my earlier answer on why we have delayed the legislation today.

[Ruth George (High Peak) (Lab)]

I echo the words of the Chairs of the Treasury Committee and the Select Committee on Justice. The Minister’s words that the Government will not focus on enforcing historical IR35 cases will stick in the gullet of those, like my constituents, who are sick with anxiety at facing huge bills of over £100,000 relating to the loan charge. These are not affluent people; they are businesspeople who have ploughed everything they have into their business and into employing local people. Does the Minister understand just how stressful this is when they have not even received their settlement amount from the Inland Revenue after the date, at the end of February, by which they were promised it?

[Mel Stride]

It is very important for us to be extremely clear as to what disguised remuneration is all about. It is a situation where I, as an employer, instead of paying an employee in the normal manner, on which basis PAYE would be due—that would be income tax, employee’s national insurance and employer’s national insurance—I say to the employee, “Look, we’ll do it a different way. I’ll send some money out, typically into a trust in a low-tax or no-tax overseas jurisdiction. That money will then come back into the United Kingdom disguised as a loan”—not a real loan, as the hon. Lady and I would recognise, but one where there is no expectation that it will be repaid—“and, as a consequence because it is treated as a loan and not earnings, it attracts no tax at all.” This Government do not believe that is right.

[Nic Dakin (Scunthorpe) (Lab)]

Clause 95 of the Finance Bill 2019, which the Government accepted on Report, agreed a review of the loan charge. I have met constituents. They are ordinary folk who, when they were working for particular people, were told that this was the arrangement they had to make. They are now suffering huge penalties, although they are still not clear exactly what those penalties are because HMRC keeps changing the rules. Following the question of the hon. Member for Bromley and Chislehurst (Robert Neill), will there be a proper independent review that reports by 30 March and allows time before these things come in? I like the Minister a lot and I think he is a good Minister, but what he just said suggests that the Government have already determined the outcome of that review, which is not very helpful.

[Mel Stride]

I am sorry if the hon. Gentleman formed that opinion. We are certainly not going to prejudge any review on any aspect of tax, whatever it may be. I gently say to him, and to those who got involved in these schemes, that by and large when something looks too good to be true, it is too good to be true. Where hon. Members refer to very large demands for tax, we are, of necessity, looking at situations where very large amounts of money went through tax avoidance schemes. We have had debates in this House in which Members have raised tax demands, on behalf of their constituents, of up to £900,000. In those circumstances, about £2 million-worth of income would need to go through one of those schemes in order to result in an unpaid tax bill of that magnitude.

[Ruth Cadbury (Brentford and Isleworth) (Lab)]

The Minister needs to clarify whether he is just writing a report or whether he will genuinely do a serious review. He says that the bulk of the loan charge tax by volume has already been collected. However, 50,000 ordinary, hard-working people are in despair and living in limbo, waiting to know whether the tax returns they put to bed years ago are to be reopened.

I am the vice-chair of the all-party loan charge group, and last week we heard from the family of a man who committed suicide over a small amount. It was the shame and fear that he would go to prison that sent him over the edge. The Sunday Telegraph has reported on a leaked HMRC letter from 2011 that clearly shows that it knew it was out of time for pursuing these cases back then, so will the Financial Secretary now admit that the real reason for the loan charge is HMRC’s failure to act when it was legally entitled to do so and that that is no good reason to undermine the rule of law by retrospectively rewriting the rules?

[Mel Stride]

May I correct one thing the hon. Lady said? She said I suggested that the bulk of the money due under the disguised remuneration measures has already been collected, but I am pretty certain I said that, of the £1 billion that has been collected thus far, some 85% has come from companies, as opposed to individuals. HMRC will go for the company before the individual. We have to get back to the reasons for this charge, which I have just set out. As for whether it is retrospective as the hon. Lady says, I can assure her that there has been no time in our history as a taxing nation when this kind of structure—this kind of contrived arrangement, which is set up simply for the avoidance of taxation—has ever fallen appropriately within our tax code. It has never been right. These schemes have been taken through the courts, not just the general courts, but the Supreme Court, over a number of years and they have always been found to be defective and not to work.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

The Government’s decision to pull tonight’s vote on the remaining stages of the Financial Services (Implementation of Legislation) Bill, which would allow the UK to continue to implement EU rules, because they feared a defeat on the cross-party amendment on the introduction of beneficial ownership registers in Crown dependencies by 2020 is truly shocking. Does the Minister think that pulling that vote will dispel or heighten the concerns of the general public about the general chaos at the heart of this Government, which we are currently enduring, a mere three weeks from Brexit?

[Mel Stride]

No, it certainly will not heighten any sense that the public may or may not have of chaos. What it will do is give the Government the time to reflect upon what has emerged as an extremely important constitutional matter, in order to take a measured and careful approach to our response, and of course the legislation will come back to the House in due course.

[Jim Shannon (Strangford) (DUP)]

I thank the Minister for his statement. Since the last time this matter was raised in the House, what has he done to close the loophole that has allowed big business to avoid paying the appropriate tax? Big business should not be trying to avoid paying tax; it should be paying its just taxes and doing it cheerfully.

[Mel Stride]

I could not agree more with the hon. Gentleman when he says that big businesses should be paying their fair share of tax, which is why half of the largest companies at any one time in the UK are being looked at closely or investigated by HMRC. That is not to say that they are doing anything wrong, but it is to indicate that we and HMRC take looking into the tax affairs of large companies extremely seriously. He will be aware of the measures we have brought forward in various Finance Bills specifically aimed at large companies, be it the legislation that has come out of the OECD BEPS—base erosion and profit shifting—project or the diverted profits tax measures of 2015. We do take this very seriously. We are a world leader at bringing in taxation, not least from large companies.

Leaving the EU: Economic Impact of Proposed Deal

Mel Stride Excerpts

Wednesday 20th February 2019 Commons Chamber

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

(Urgent Question): To ask the Prime Minister if she will make a statement on the economic impact of her Government’s proposed deal for the UK exiting the EU.

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

At the end of November, the Government published our analysis that assessed the economic impact of leaving the European Union. It not only included an analysis of the Government’s negotiating position, as set out in the July 2018 White Paper, but went further still and considered three other scenarios: a free trade agreement, a European economic area-type relationship, and a no-deal scenario.

Specifically, the analysis showed that the outcomes for the proposed future UK-EU relationship would deliver significantly higher economic output—about seven percentage points higher—than the no-deal scenario, which would result in lower economic activity in all sector groups of the economy compared with the White Paper scenario. That is why we should pass the deal, to avoid no deal and support jobs and the UK economy.

In publishing the work, the Government delivered on their commitment to provide an appropriate level of analysis to Parliament. In addition, the House has had plenty of opportunity to debate both the analysis and the deal that is on the table. As the Prime Minister has said, we will bring a revised deal back to the House for a second meaningful vote as soon as we possibly can.

In the meantime, it is right that that the Government are afforded the flexibility and space to continue our negotiations. That is because the agreement of the political declaration will be followed by negotiations on the legal text. The UK and the EU recognise that that means there could be a spectrum of different outcomes. We need to approach the negotiations with as much strength as possible. The focus must now be on the future, planning and prioritising that which matters.

Let me remind the House that we will have an implementation period, a new close relationship with the EU and, crucially, the ability to strike trade deals around the world. We are bringing back control over our money, borders and laws to mould a prosperous and ambitious new path for our country, and on our terms. No matter what approach we take, the UK economy will continue to be strong and grow into the future.

[Ian Blackford]

With respect to the Minister, this was of course a question to the Prime Minister, and it is the Prime Minister who should be answering. This is a matter of the utmost importance, because this House is going to be asked to vote on the Prime Minister’s deal. The specific question I asked was about the economic analysis that the Government have done on their deal. It is quite clear from the Minister’s answer that the Government have done no analysis on this deal. On arguably the most important matter that this House has voted on since the second world war, we do not have an economic impact assessment from the Government. It is, once again, this Conservative Government treating this House and the United Kingdom with contempt. It is a disgrace that the Government have continued to duck and dive in respect of their responsibilities.

Economists are clear: the Prime Minister’s deal is set to hit GDP, the public finances and living standards. Analysis published by the London School of Economics estimates that

“the Brexit deal could reduce UK GDP per capita by between 1.9% and 5.5% in ten years’ time, compared to remaining in the EU.”

The National Institute of Economic and Social Research has warned that

“if the government’s proposed Brexit deal is implemented, then GDP in the longer term will be around 4 per cent lower than it would have been had the UK stayed in the EU.”

Bank of England analysis states the UK Government’s deal will raise unemployment by 4% and inflation by 2%. The Prime Minister is running feart of the truth, with her Government refusing to admit the damage that her deal will do.

The Government cannot claim that their November document covers their deal. Let us look at the facts. Page 17 of the Treasury analysis looks at the modelled average free trade agreement and states:

“As such, it does not seek to define or model a bespoke agreement.”

But the Prime Minister tells us she has a bespoke deal. The Treasury analysis continues:

“This scenario is not indicative of government policy, as it would not meet UK objectives including avoiding a hard border”

in Northern Ireland.

There we have it in black and white: the Treasury analysis conducted last year does not account for the Prime Minister’s deal. So, I say to the Government, where is the analysis? MPs continue to be expected to vote on the proposed deal without the Government explaining the economic consequences. That is the height of irresponsibility.

The deal would be a disaster for Scotland, taking us out of the EU single market and customs union. We know that up to 100,000 jobs in Scotland are under threat. The Government are sticking their head in the sand. Everyone knows this Government are bringing our economy to its knees. We cannot allow the Tories to drive us off the cliff edge.

No Government can be allowed to bring forward a vote on such a significant matter without an economic assessment. It must be published. Shame on the Prime Minister if she fails to protect our economy; shame on those on the Government Benches if they allow businesses to collapse and jobs to be lost; and shame on any MP, including the Leader of the Opposition, if they march through the Lobby to deliver a deal that secures economic catastrophe.

No Member should believe that there is a binary choice; there is not. This is not a choice of no deal or this deal. Both are bad. Both will plunge our economy into an unmitigated disaster.

[Mr Speaker]

Order. Before I ask the Minister to apply, I very generously did not interrupt the flow of the right hon. Gentleman’s eloquence—or, indeed, for that matter the eloquence of his flow. However, by way of a public information notice, may I say to the House—this is not directed particularly at the right hon. Gentleman, as I have seen this burgeoning phenomenon in recent times—that an urgent question is supposed to be that, not an urgent oration? With whatever rhetorical force and insistence it is delivered, it is supposed to be a question and I have noticed over recent times an increasing tendency on the part of Members who have secured such an opportunity, through the courtesy of the Chair, to launch into a lengthy preamble, sometimes constituting the entirety of their remarks.

For future reference, because in future I will have to cut people off if they abuse the parameters, however inadvertently, it is supposed to be a question; a sentence of preamble is one thing, but thereafter a Member should put a series of inquiries to the Minister on the Treasury Bench. We will leave it there for now. The right hon. Gentleman has made his point, but I know that he will not misbehave again.

[Mel Stride]

I thank the right hon. Member for Ross, Skye and Lochaber (Ian Blackford) for his vociferous oration, but vociferous orations are no substitute for the facts. Let me remind him of some of the facts in respect of the points he made. He says that we have made no analysis of the impact of these arrangements on the United Kingdom economy, and that is simply not the case. The information we have come forward with is a robust analysis of the future outcomes of the four different scenarios that we consider in that analysis. He levels the charge that we are in some way treating the United Kingdom with contempt, and that is certainly not the case. The House has been very deeply preoccupied with matters of Brexit and the nature of how we might exit the European Union, and the Prime Minister has set out that there will be further debate this time next week to be followed, in the event that we do not pass a meaningful vote, with another amendable motion to be considered by the House.

The right hon. Gentleman also says that the deal, as he terms it, would have a negative impact on the UK economy. The analysis clearly shows that, under every single scenario it analyses, it is better to have this deal than no deal or any of the alternatives. Finally, he decried the fact that we had not put forward a bespoke deal for analysis within our analysis, and that illustrates his lack of understanding of what the future political declaration is all about, which is a range of possible outcomes. That is entirely what the analysis models.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

It is perfectly obvious to all those involved in the negotiations, both the British negotiators and the EU negotiators, that if Britain were to leave the EU with no deal, it would be disastrous for the British economy in the medium to long term and extremely damaging to the economies of many EU countries, particularly those nearest the UK. Does the Minister accept that it is rather silly to think that it is useful in these negotiations to take up the simplistic view that we must pretend we are threatening to leave with no deal to improve our bargaining position? Will he reassure me that the negotiations are proceeding on the basis that both sides know that they do not want no deal and that they are therefore trying to limit the damaging consequences of risking that? What we should really pursue is retaining the benefits of the customs union and the single market and continued free trade with our largest customer in the world, as it will always be, as is being urged on us by every industrial leader in this country.

--- Later in debate ---

[Mel Stride]

My right hon. and learned Friend is entirely right that no deal would be a very unsatisfactory outcome. Of course, what the House will appreciate is that the only way to avoid a no deal is to secure a deal. That is why the Prime Minister will shortly return to Brussels to have further discussions with the EU Commissioner, Jean-Claude Juncker, in pursuit of one.

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

For more than two years, businesses and trade unions have called for clarity about the Government’s Brexit deal, and for two years there has been nothing but delay and a total lack of clarity. What has been clear from the wide range of independent analyses that we have received is that the Government’s Brexit deal is not good news for our economy. Even the Government’s own modelling said that the economy would be nearly 4% smaller if the Government’s deal was agreed, equivalent to £83 billion if it happened today. It is no surprise that the Prime Minister’s deal has struggled to command any widespread support, leading to the largest ever defeat in the House of Commons.

The climate of uncertainty created by the Government’s Brexit blundering, particularly their refusal to take no deal of the table, led first to businesses delaying investment decisions. Now, decisions are being taken, but as a result of the uncertainty and insecurity created by the Government, those decisions are to cut investment and jobs. The result, as the Governor of the Bank of England, Mark Carney, told us this month, is that business investment in 2018 fell by 3.7% in year-on-year terms.

Let us go through some of those decisions. Jaguar Land Rover has cut 4,500 jobs, Ford cut 1,000 jobs in Bridgend and Honda’s Swindon closure, supposedly not related to Brexit, will mean that 3,500 will lose their employment. In financial services, HSBC has announced that it will move seven offices from London to Paris in 2019. Deutsche Bank has said that it is considering moving 75% of its balance sheet from London to Frankfurt.

This is not just about Brexit. It is about how the Government have failed to produce an economic plan that tackles our productivity crisis and increases investment for the long term. They are a Government putting our economy at risk through failed economic management and failing to secure a Brexit deal that would protect jobs and the economy.

May I ask the Financial Secretary first, what happened to the promise of frictionless trade? Secondly, where is the detail businesses need about the promised customs arrangements? Thirdly, can the Government tell us what mysterious technology will facilitate their proposed customs arrangements? Fourthly, why have the Government failed even to mention the issue of intellectual property protections in the future partnership agreement? Finally, will the Government confirm that there has been a dilution of protections from road hauliers and passenger transport operators since the earlier Chequers commitments?

It is the role of the Government’s Treasury team, above all others, to stand up to protect our economy. It is as though the Chancellor has simply gone missing. The Government have run out of time. We cannot wait any longer for the answers we need and the country cannot wait any longer for the answers it deserves.

--- Later in debate ---

[Mel Stride]

The hon. Gentleman accuses Government Members of having a lack of clarity on the issues around Brexit. I find that slightly rich coming from the Labour Front Bench, given that the position of the Leader of the Opposition has flip-flopped as to whether to be in or out of the customs union, and whether or not to honour the pledge that he appeared to make at his party conference for a second referendum, which appears to have been parked now. It seems to me that the Opposition are trying to ride at least two horses on this issue, if not more, and we know what happens if you do that, Mr Speaker—it tends to get rather painful in the end, as we are perhaps seeing in more recent events.

The hon. Gentleman refers to the parliamentary defeat that the Government suffered more recently. He chose to overlook the fact that the House did unite around a particular way forward, and that is to seek changes to the backstop arrangements. That is now the main focus of the negotiations that are continuing in Brussels. He referred to various impacts of employers’ decisions and changes, and the impact on the economy and employment, which gives me a good opportunity to remind him of some facts. As a country, we have about the highest level of employment in our history; we have the lowest level of unemployment since the mid-1970s; and we have halved youth unemployment since 2010. Lest it be forgotten, every Labour Government in history have always left office with unemployment higher than it was when they entered office.

[John Redwood (Wokingham) (Con)]

Will the Treasury issue a codicil or a clarification of its economic forecasts, looking at what happens if we leave in March under the managed World Trade Organisation model, when we spend the £39 billion-plus of the withdrawal agreement on boosting public services and boosting our economy at home? We are bound to be better off—is that not true?

[Mel Stride]

It is important to recognise that the modelling is on the basis of the status quo, so the model would not take into account factors of the kind that my right hon. Friend has raised, or indeed changes in productivity or trade flows and other factors. It will be for individual Members to assess the specific issues that he raised, in that context.

[Hilary Benn (Leeds Central) (Lab)]

Things have come to a pretty pass when here we are, 37 days from Brexit, and the House of Commons is actually discussing which of several options—all of them economically damaging—we should choose for the future of our country’s economy. Since it is the Government’s policy that they are planning for a no-deal Brexit, could the Minister explain to the House what possible justification there is for that? Given that their own economic assessment shows that it would have the most damaging impact on the British economy, how could such an act of economic self-harm ever be justified?

[Mel Stride]

What the right hon. Gentleman overlooks is that whilst he is absolutely right that no deal, in essence, is something to be avoided, and indeed is not in the interests either of the United Kingdom or of the European Union, that is not the same thing as saying that we should be reckless and not make sure that we are prepared for it, should it happen. That is precisely what we are doing.

[Sir Michael Fallon (Sevenoaks) (Con)]

Will the Financial Secretary undertake to publish to the House, in good time for the meaningful vote, the decisions that he and his colleagues are currently taking on the tariffs that would apply in the event of no deal, including which industries would be protected, at what rate, and what the impact would be on prices?

[Mel Stride]

Tariff policy in the event of no deal is clearly something that we are heavily engaged with. My right hon. Friend rightly identifies the aspects or elements of tariffs that relate to protecting domestic producers, and that of course will be a very important part of the considerations that we are undertaking at the moment. We will come to the House in due course with the details of those tariffs.

[Sir Vince Cable (Twickenham) (LD)]

Brexit uncertainty is one of several factors contributing to the crisis in the car industry, which previous Governments—Conservative, Labour and coalition—did so much to promote. What assurances have the Government had from Toyota, BMW and Vauxhall that they are not going to follow the pattern of disinvestment that we are now seeing?

[Mel Stride]

I think the right hon. Gentleman’s question would be most appropriately directed to the Department for Business, Energy and Industrial Strategy as to the specifics of the companies that he listed. Honda, a company that has already been mentioned in this respect, has made it clear that its decision to leave the United Kingdom is not a consequence of Brexit; it is more to do with international changes around cars and the position of diesel, and of course the deal that Japan has struck on zero tariffs in a few years’ time for exports from Japan to the European Union.

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

What would be the economic impact of membership of a customs union where access to our market was conceded to a third party without any reciprocal arrangement of our access to theirs?

[Mel Stride]

My right hon. Friend asks a specific, interesting question, which prompts many other questions on exactly the form of the model that he is postulating. The important thing, when it comes to access to our markets in future, is that we have a tariff policy that protects domestic producers in our economy where they require protection, and ensures that our trade remedy regime is robust, so that we can prevent the dumping of products into the UK market, and also is sufficiently liberalised such that the cost savings that would accrue from liberalised tariffs are there for the benefit both of consumers and those who use those products in their production processes within the UK market.

[Helen Goodman (Bishop Auckland) (Lab)]

I am sorry that the right hon. Member for Broxtowe (Anna Soubry) is not in her place to ask this question herself. Last week, she withdrew her amendment asking the Government to publish their papers on the impact of no deal. Will the Government still hold to their promise, even though she has defected from the Tory party?

[Mel Stride]

The analysis that the hon. Lady refers to is contained in the cross-Government analysis that we are discussing as part of this urgent question.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

As the Treasury’s forecasts before the referendum were woefully inaccurate, and the Office for Budget Responsibility was set up specifically to stop politicised reports coming out, would it not be better to consult a newspaper horoscope than Treasury forecasts?

[Mel Stride]

I hate to disappoint my hon. Friend, ingenious and amusing though his question is, but I should point out just one fallacy in the premise of his question: these are not forecasts.

[Ian Paisley (North Antrim) (DUP)]

In the search for a withdrawal agreement that we can all support, can the Minister now confirm that the draft proposals have been put forward to Europe that would make a legally binding textual change to the withdrawal agreement?

[Mel Stride]

We have made it clear that our ambition is to strike an amended deal with the European Union, so that we put beyond doubt the issue of how permanent or otherwise the backstop arrangements might be. I am not in a position to comment on the specifics of the ongoing negotiations because I am not intimately involved with them.

[Kirstene Hair (Angus) (Con)]

We know, of course, that the economic impact assessment on the Chequers deal showed that there would be no impact on growth in Scotland. However, does the Minister agree that nationalists have made it very clear that they will accept no deal that is put on the table, and—as I know, the Minister knows, my constituents know and businesses in Scotland know—this is all just to cause the ultimate chaos to pave the way for independence?

[Mel Stride]

The analysis shows that in all the scenarios being considered, including no deal, a deal based on the 2018 White Paper will give a better result for our economy for every sector, for every region and for every country—including Scotland—of the United Kingdom.

[Mr Mark Francois (Rayleigh and Wickford) (Con)]

As the Chairman of the Select Committee on Exiting the European Union said, today is D minus 37, so in some five weeks from today we will have honoured the wishes of 17.4 million UK citizens and left the European Union. Military veterans living in Cyprus will also be affected by some of these changes, not least because we recently signed a double taxation treaty with the Cypriot Government. The Minister personally intervened in that negotiation, to allow a five-year transition period for military veterans receiving state pensions to have longer to adjust. He played a blinder and honoured the covenant, and on their behalf I thank him today for everything he did to look after them.

[Mel Stride]

I sincerely thank my right hon. Friend for his extremely kind words. As ever, he is too modest. It was not my effort alone that secured the result that we achieved for those very important veterans in Cyprus—he raised the issue, brought it to my attention in Committee, and worked hard with me to make sure that we achieved the right, just and desired outcome.

[Stephen Doughty (Cardiff South and Penarth) (Lab/Co-op)]

Of course, the economic effects are already being felt. I have spoken to businesses in my constituency that have gone from profit to loss and others that have cut investment. This week I spoke to Cardiff University, which cited Brexit as a factor in the job losses that it has proposed. This is very serious, so does the Minister accept that we need to get serious? Ministers know that no deal would be a catastrophe. They know that every single Brexit would lead to a worse economic outcome for this country, so do they accept that the issue needs to go back to the people so that they can decide, based on the facts?

[Mel Stride]

If I may summarise, the hon. Gentleman makes the point that uncertainty is not good for business. He is entirely right, and that is all the more reason why we should get behind the deal, and get it sorted. We would then have an implementation period in which nothing would change until the end of 2020. The businesses in the hon. Gentleman’s constituency to which he referred could then begin to increase employment and invest with confidence.

[Stephen Crabb (Preseli Pembrokeshire) (Con)]

There are a great many voices in the international investor community that have made it clear that the underlying fundamentals of the British economy remain sound, but they warn that we are in a period in which investment decisions have been put on hold, and trade deals are in abeyance. Does my right hon. Friend agree that the single most important thing that we can do right now to unlock new investment in the economy is to pass the deal?

[Mel Stride]

My right hon. Friend hits the nail firmly on the head. What we must do to move from uncertainty to a situation in which we can begin to concentrate on negotiating our future relationship with the European Union while everything remains stable and the same until the end of 2020 is to pass the deal as he suggests.

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

The fundamental problem with the British Government’s policy as it stands is that the deal offers certainty only for the duration of the transition period. Owing to the chaos in the Conservative party, is it not the case that all the deal does is move the cliff edge to the end of the transition phase?

[Mel Stride]

No, not at all. The deal would, first, resolve the three critical issues on which the withdrawal agreement focuses: the Northern Ireland-Ireland border; the situation as it relates to EU and UK citizens; and the financial arrangements that we will enter into as we leave the European Union. Critically, it would give us time to put into effect the political declaration, which is the other part of what has been negotiated, until the end of 2020.

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

With the Scottish economy growing at half the rate of the rest of the United Kingdom, can my right hon. Friend offer any advice on economic growth to the Government north of the border?

[Mel Stride]

My advice, although I doubt very much that the Scottish National party will take much advice from me, is, first, get behind the deal and let us get certainty and increase investment; and secondly, accept the result of the 2014 referendum, stay with the United Kingdom and do not end up in a situation that creates a border between the country of Scotland and the rest of the United Kingdom.

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

In response to the Chair of the Exiting the European Union Committee, the Minister said that it would be reckless of the Government not to plan for no deal. However, the detailed work of the Public Accounts Committee has clearly shown that the Government are not prepared for no deal and are woefully prepared for a deal. Would not the responsible thing be to delay any exit or extend the transition period and take stock, and make sure that the D-minus-37 uncertainty that is hanging over our country is resolved? It is too late just to pass the deal—uncertainty is now built in.

[Mel Stride]

I do not accept that we are not adequately prepared or are not deeply preparing for the possibility of no deal. This work has been going on for many months, and in far greater depth than many people appreciate. In my area of ministerial responsibility, Her Majesty’s Revenue and Customs and borders, we have staffed up, and we have 4,500 more personnel ready for this work. There will be over 5,000 in place by 29 March. We have engaged with stakeholders across the piece by making sure that we have the most facilitated possible customs arrangements in place, particularly in respect of the short straits crossing—Dover and Calais—and so on. An immense amount of work has been carried out.

[Kevin Foster (Torbay) (Con)]

In considering the economic impact of the proposed deal, has the Minister reflected on the key drivers of economic performance and the policies that we decide domestically—on productivity, business structure and tax structure? We need only look at what the SNP is doing in Scotland to realise where we could go wrong.

[Mel Stride]

I will not be drawn into the Scottish National party again, but I thank my hon. Friend for his question. He is absolutely right—fundamentally, the way in which we manage the economy is one of the most important things that we do as a Government, which is why we have record levels of employment and the lowest level of unemployment since 1975. It is why we have halved youth unemployment since 2010, reduced the debt and have reduced the deficit by 80%, and it is why the economy is moving in the right direction.

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

As many of my hon. Friends have said, all credible economic analysis shows that a no-deal Brexit would be disastrous for the economy. The draft withdrawal agreement would be only slightly less disastrous for the economy. Given that the report published by the Resolution Foundation today predicts an increase in child poverty of 6% by 2023—that is equivalent to an additional 1 million children living in poverty since 2016—what are the Minister’s estimates of the additional effect on child poverty of no deal or the draft withdrawal agreement?

[Mel Stride]

Absolute poverty is at a record low. The Government have an enviable record of helping those who require work to get into work, and I have outlined at length our success in that area. We have made sure that work pays with the benefit system and our roll-out of universal credit. Underpinning the hon. Lady’s question is a denial of the result of the 2016 referendum. The country made a decision to leave, and on that basis the decision has to be whether we have a sensible deal, as we have negotiated, or whether perhaps we end up with no deal, which I think the vast majority of Members in the House would not want to happen.

[Stephen Kerr (Stirling) (Con)]

My right hon. Friend knows, and the people of Scotland know, that the SNP Government, by their refusal to contemplate any form of withdrawal agreement whatsoever, are deliberately dragging Scotland to a no-deal situation—a crisis of their making—which they would use as a platform to demand independence. What possible excuse, to the best of my right hon. Friend’s knowledge, does the First Minister of Scotland have for not attending the Prime Minister’s Brexit cabinets?

[Mel Stride]

It is for the First Minister of Scotland to answer on the reasons why she attends functions and to deal with the points that my hon. Friend made. There is no doubt that this is a matter that affects the entire United Kingdom, including Scotland. I believe that the vast majority of us in the House wish to avoid a no-deal Brexit. The Scottish National party could play a pivotal role in helping us to do so by supporting the negotiated deal.

[Marsha De Cordova (Battersea) (Lab)]

It is no secret that the Government’s deal will hit people’s livelihoods and jobs, along with economic growth. All credible economic analysis says that a no-deal Brexit would have a devastating effect. With just 37 days to go, does the Minister agree that we need to get serious and that we need to consider extending article 50?

[Mel Stride]

The hon. Lady urges us to get serious. We have been extremely serious in negotiating a deal with the European Union for a considerable amount of time, and we continue to engage in that endeavour. She is absolutely right to say that most of us in this House wish to avoid no deal, but the way to do that is by Opposition and Government Members uniting and making sure that we avoid no deal and have a good deal for our country.

[Tom Brake (Carshalton and Wallington) (LD)]

We know that the Government have done no economic impact analysis of the proposed deal, but has the Minister done an economic analysis of the failure of the Secretary of State for International Trade to secure the 40 roll-over trade deals the he promised would be signed one minute after 11 o’clock on 29 March?

[Mel Stride]

The right hon. Gentleman says that we have done no analysis of the deal, as he refers to it, but as he knows, the deal is actually the political declaration, which inherently will include a range of particular possible outcomes for that deal. That is modelled in the sensitivity analysis that we have brought forward to Parliament. [Interruption.]

[Mr Speaker]

Order. Mr Seely, sit down young man. It is very discourteous. The Father of the House comes in—[Interruption.] Order. Do not sit there looking at your phone, man. I am speaking to you. Show some respect and manners in the Chamber.

--- Later in debate ---

[Chris Elmore (Ogmore) (Lab)]

As the Minister will know, 23% of all the European funding that comes to the UK goes to Wales. He said that discussions on the shared prosperity fund would start before Christmas; I wonder whether he has played any part in that. Leave campaigners said that Wales would not be a penny worse off if we left the European Union, so will the Minister set out how the fund will work and who will make decisions to ensure that the Welsh economy does not tank if we are to have this botched Brexit deal?

[Mel Stride]

As the hon. Gentleman knows, we will set out those details in due course.

[Chris Elmore]

Sod all!

--- Later in debate ---

[Alison Thewliss (Glasgow Central) (SNP)]

The Scotch Whisky Association recently reported that the value of Scotch whisky exports to Mexico last year was £131.5 million—which is up 18.5% on 2017—and that Mexico is the fourth largest export market by volume for Scotch whisky. However, the Under-Secretary of State for Exiting the European Union, the hon. Member for Daventry (Chris Heaton-Harris) has confirmed by letter to the Procedure Committee that the Government

“do not…expect to replicate the existing Mexico spirits agreement in time for 29 March”.

What assessment has the Financial Secretary made of the impact that will have on geographic indicators for Scotch whisky and on the wider Scottish economy?

[Mel Stride]

This Government totally understand and get the significant importance—not just to Scotland but to the entire United Kingdom—of Scotch whisky exports, which account for some 20% of all exports of food and drink from our country. That was also signalled in our recent Budget, which once again froze duty on Scotch whisky. The hon. Lady can rest assured that we will make sure that we do the right thing by Scotland’s most important export.

[Stephen Timms (East Ham) (Lab)]

The Department’s assessment is that any form of Brexit will leave us worse off than if we stayed in the European Union. Will the Minister simply confirm that that is his Department’s view?

[Mel Stride]

The analysis, quite rightly, does not assess staying in the European Union, and there is an obvious reason for that, which is that in June 2016 the country took the decision—17.4 million people voted—to leave the European Union, and that is an outcome that this Government will respect.

[Louise Haigh (Sheffield, Heeley) (Lab)]

Will Operation Stack have to be replicated across all major ports in the event of no deal?

[Mel Stride]

The hon. Lady can rest assured that an extensive amount of contingency planning has gone on, and will continue to go on, in terms of the arrangements that we may have to bring into force at our ports to make sure that goods keep flowing.

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

We have heard the usual nonsense of “SNP bad” from Conservative Members because we do not support this Government’s so-called deal. If the deal is so good, why are the UK Government not brave enough to take control and publish evidence on the financial impact? Has the Minister seen the Bank of England analysis that his deal will raise unemployment by 4% and inflation by 2%? If the UK Government do not agree with that analysis, why do they not disprove it by publishing their own evidence?

[Mel Stride]

The hon. Gentleman says that we have not had the courage to produce an analysis of the deal, as he terms it, but we have done precisely that, as was required by this House, with a range of potential landing points for the deal set out in broad terms in the future political declaration. The Government have done just that.

[Geraint Davies (Swansea West) (Lab/Co-op)]

The Father of the House knows better than others that Margaret Thatcher was instrumental in creating the single market and in encouraging Japanese companies to come here to platform into it. Given that the EU now has a free trade agreement with Japan and the Government intend to Brexit, is not the loss of Japanese investment and associated jobs painfully predictable? Is it not now incumbent on the Government to give business and the people, including Honda workers and others, the final say on whether this botched deal is really what they want, or whether they want to stay in the EU to secure future jobs?

[Mel Stride]

The hon. Gentleman overlooks the fact that the trade deal with Japan has been struck at a time when we are members of the EU. There will be an impact on car producers, and we see that as part of the reason why Honda has taken its decision. The most important thing is that we enter into an arrangement with the EU where we minimise the frictions at our borders, have a free trade agreement with the EU27 and make sure that trade continues to flow. The best way to do that is to support the deal we are negotiating with the European Union.

[Jeff Smith (Manchester, Withington) (Lab)]

The Government’s letter to Nissan promised that its ability to export to and from the EU would not be adversely affected by Brexit. How on earth can that possibly be reconciled with the Prime Minister’s red lines?

[Mel Stride]

My right hon. Friend the Prime Minister has a clear commitment to entering into a future trading relationship with the European Union based on the political declaration, which has at its heart a free trade area—tariff-free trade—and to making sure that we have the customs facilitations in place to ensure that that trade flows as freely as possible.

[Marion Fellows (Motherwell and Wishaw) (SNP)]

In spite of Conservative Members shouting, “SNP bad,” the UK Treasury analysis does not cover the PM’s deal; it covers no deal, a free trade agreement, the European economic area without a customs union and the Prime Minister’s failed Chequers plan. Does that mean that the Prime Minister plans to ditch her plan for one of those or to proceed without knowing the consequences?

[Mel Stride]

The analysis needs to model the future political declaration, upon which the negotiations will rest. Of course, that is a relatively broad document with a number of potential outcomes. The analysis has quite rightly taken a range of possible outcomes to make that assessment and most accurately reflect the range of outcomes of where the deal itself may land.

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

Unlike the EEA or single market model, the PM’s deal assumes that regulatory checks will be essential to the proper functioning of separate EU and UK markets. Does not the Minister agree that we need to understand the impact of such trade barriers now?

[Mel Stride]

That is precisely what the analysis is setting out—a series of potential outcomes and the economic impacts thereof. Some Members are suggesting that we should analyse where we are at the moment, but that would not be appropriate given that we are leaving the European Union. At the same time, it has to be recognised that we have not yet fully concluded the new trading relationship with the European Union—the EU27—and therefore the analysis sets out a range of possible landing points for those negotiations.

[Patrick Grady (Glasgow North) (SNP)]

My sense is that the Minister is actually starting to admit that there is no analysis of the withdrawal agreement, so I just want to press him. The withdrawal agreement was laid before the House on 26 November, so on what specific date did the Government publish their specific economic analysis on that withdrawal agreement, and what title or Command Paper number should I ask for in the Vote Office or the Library to see the analysis?

[Mel Stride]

The analysis, as demanded by the House, sets out the different possible outcomes, including modelling a range of options between those contained in the White Paper of June last year and an FTA, as well as a point somewhere between the two of them, to allow an informed look at the likely impact of the various outcomes implicit in the future declaration. The hon. Gentleman will know that that is, of necessity, the way in which this analysis has to be conducted, given that we have a period during which we will be negotiating a precise exit arrangement with the European Union.

[Kirsty Blackman (Aberdeen North) (SNP)]

This is Schrödinger’s analysis—even the Minister does not know whether or not it exists at this moment in time. Will he answer a simple question: does he believe that the UK would be better off if it were to leave the EU with the Prime Minister’s deal or if it were to stay in the EU?

[Mel Stride]

I have been asked this question a couple of times, and the reality is that it is entirely hypothetical. To end up staying within the European Union would be to fly in the face of the result of the June 2016 referendum —the referendum had a higher turnout than any other electoral event in our country’s history—and this Government are going to respect the outcome of that referendum.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

This urgent question was aimed at the Prime Minister, so I can only assume that the Minister is undergoing an audition as the future leader of the Conservative party. On that basis, if he were Prime Minister, would he take cognisance of the analysis published by the London School of Economics that shows a 5.5% hit on GDP due to the incumbent’s plan, or would he, like her, simply ignore it?

[Mel Stride]

What we must do is to make sure that we conclude a good deal for our country; what we must do is to make sure that we avoid a no-deal scenario; and what we must do is to make sure that we respect the result of the June 2016 referendum. That is the mission of this country and of this Government. We are negotiating the final elements of that, and as, I hope, the Prime Minister comes back with changes to that deal in relation to the backstop, if we are to do the right thing and the best thing for the whole United Kingdom, we should support it.

[Stewart Malcolm McDonald (Glasgow South) (SNP)]

I am stunningly impressed by the Minister’s performance at the Dispatch Box. We can tell a big Downing Street lollipop is on its way when that intellectual heavyweight, the hon. Member for Bexhill and Battle (Huw Merriman), has nodded in agreement with everything the Minister has said for the last three quarters of an hour.

Let me ask the Minister this: the deal ends freedom of movement—one of the reasons why I will not support it—but where can I find the economic analysis of the impact of ending freedom of movement on Scotland and on the city of Glasgow? Following his answer to the Chair of the Public Accounts Committee, the hon. Member for Hackney South and Shoreditch (Meg Hillier), will the Minister also tell me, as well as the discussions he has had with HMRC, whether Revenue Scotland has been consulted?

[Mel Stride]

On the impact of immigration, if the hon. Gentleman looks closely at the analysis, he will see that the various scenarios I have outlined during this urgent question are analysed both in terms of the current free movement arrangements and in terms of more restrictive arrangements that would be expected to follow on from the further negotiations we will have with the European Union.

May I just make one very important point on immigration? There will have been a multitude of reasons why 17.4 million people voted to leave the European Union in 2016. There is little doubt in my mind that immigration was one of them, and it is absolutely vital that this Government stick, as we will, to our commitment to ensure that we put an end to free movement and gain control of our borders.

[Stewart Malcolm McDonald]

There’s a big lollipop coming your way.