Draft Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024
Draft Tax Credits, Child Benefit and Guardian's Allowance Up-rating Regulations 2024
Nigel Huddleston Excerpts(6 months, 2 weeks ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
I beg to move,
That the Committee has considered the draft Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024.
The Chair
With this it will be convenient to discuss the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024.
Nigel Huddleston
As always, Sir Charles, it is a pleasure to serve under your chairmanship. The regulations will be of considerable benefit to our constituents who rely on tax credits, child benefit and guardian’s allowance, and to those who pay national insurance contributions. Regulations are made each year to set national insurance contributions thresholds and uprate tax credit, child benefit and guardian’s allowance.
First, the Social Security (Contributions) (Limits and Thresholds, National Insurance Funds Payments and Extension of Veterans Relief) Regulations 2024 set the national insurance contributions limits and thresholds of a number of national insurance contribution classes for the 2024-25 tax year, with all limits and thresholds remaining fixed at their existing level. The regulations also make provision for a Treasury grant to be paid, if required, into the national insurance fund for the same year—a transfer of wider Government funds to the national insurance fund—and for the veterans employer national insurance contributions relief to be extended for a year until April 2025. The scope of the regulations is limited to the 2024-25 tax year.
National insurance contributions are social security contributions. They allow people to make contributions when they are in work in order to receive contributory benefits when they are not working, such as after they have retired or if they become unemployed. NICs receipts fund contributory benefits, as well as supporting funding to the NHS.
On the details of the NICs for employed and self-employed people, the primary threshold and lower profit limits are the points at which employees and the self-employed start paying employee class 1 and self-employed class 4 national insurance contributions respectively. At the autumn statement 2022, the Government announced their intention to maintain the primary threshold’s alignment with the income tax personal allowance, with both rates being fixed at £12,570 until 2028.
Fixing the primary threshold at £12,570 does not affect an individual’s ability to build up entitlement towards contributory benefits such as the state pension. For employees, this is determined by the lower earnings limit—which will remain at £6,396 per annum, or £123 per week, in 2024-25—and for self-employed people by the small profits threshold, which will remain at £6,725 in 2024-25. Fixing the thresholds will mean that more lower-earning working people will gain entitlement to contributory benefits and build up qualifying years for their state pensions.
The upper earnings limit, which is the point at which the main rate of employee NICs drops to 2%, and the upper profits limit, which is the point at which the main rate of self-employed NICs drops to 2%, are aligned with the higher rate threshold for income tax, at £50,270 per annum. It was announced previously that those thresholds would be fixed until April 2028, as part of the Government’s commitment to supporting the public finances.
At the autumn statement 2023, the Government also announced that from 6 April 2024 self-employed people with profits above £12,570 will no longer be required to pay class 2 NICs, but will continue to accrue and receive access to contributory benefits, including the state pension. Those with profits between £6,725 and £12,570 will continue to get access to contributory benefits, including the state pension, through a national insurance credit, without paying NICs as they do currently. Those with profits under £6,725 who choose to pay class 2 NICs voluntarily to get access to contributory benefits, including the state pension, will continue to be able to do so.
I turn now to employers NICs. The secondary threshold is the point at which employers start paying employer national insurance contributions on their employees’ salaries. At the autumn statement 2022, the Chancellor announced that this threshold will remain at £9,100 in 2023-24 and will be fixed at this level until 2028. That supports the public finances while ensuring that the largest businesses pay the most. The employment allowance, which the Government raised from £4,000 to £5,000 in April 2022, means that the smallest 40% of businesses with employer national insurance contributions liability pay no employer NICs. The regulations also fix the thresholds for employers of employees eligible for NICs reliefs—the reliefs for employers of under-21s, under-25 apprentices, veterans, and new employees in freeports and investment zones—at their 2023-24 levels.
The majority of national insurance contributions are paid into the national insurance fund, which is used to pay the state pension and other contributory benefits. The Treasury has the ability to transfer funds from wider Government revenues into the national insurance fund. The regulations make provision for a transfer of this kind, known as a Treasury grant, so that up to 5% of forecasted annual benefit expenditure can be paid into the national insurance fund, if needed, in 2024-25. A similar provision will be made in respect of the Northern Ireland national insurance fund. The Government Actuary’s Department report laid alongside the regulations forecasts that a Treasury grant will not be required in 2024-25 but the Government consider it prudent, as a precautionary measure, to make a provision for a Treasury grant at this stage, which is consistent with previous years.
The regulations also make provision for the national insurance contributions relief for employers of veterans to be extended for a year until April 2025. This measure means that businesses pay no employer NICs—at a rate of 13.8%—on salaries up to the veterans upper secondary threshold of £50,270 for the first year of a qualifying veteran’s employment in a civilian role. The relief is part of the Government’s commitment to make the UK the best place in the world to be a veteran, and is intended to further incentivise employers to take advantage of the wide range of skills and experience that ex-military personnel offer. It supports those who have already given so much to this country, and helps to unleash the great skills and huge potential of our service leavers.
Mrs Natalie Elphicke (Dover) (Con)
The veterans relief that the Minister just mentioned is clearly very welcome, in addition to the other uprating of reliefs. Finding a route back into work for those who are rough sleeping or homeless is a particular issue for veterans. Will the Minister explain why the relief applies only to the first year of employment and whether any consideration has been given to assisting veterans on their return to work following their homelessness journey?
Nigel Huddleston
The Minister for Veterans’ Affairs has explained the wide variety of other measures that we have to support veterans. As I said, it is the Government’s ambition to make sure that we treat our veterans with incredible respect and that the UK is the best place in the world to be a veteran, so there are other measures in place. The relief measure was always intended to be temporary. It was announced as such, but we are now extending it. I cannot promise that further extensions will or will not be forthcoming—that would be for other decisions—but I think the whole Committee agrees with my hon. Friend’s wider point about respect for veterans.
I turn now to the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024. The Government are committed to delivering a welfare system that is fair for claimants and taxpayers while providing a strong safety net for those who need it the most. The regulations will ensure that the benefits for which His Majesty’s Treasury Ministers are responsible and that HM Revenue and Customs delivers are uprated by inflation in April 2024. Tax credits, child benefit and guardian’s allowance will increase in line with the consumer prices index, which had inflation at 6.7% in the year to September 2023. Uprating by the preceding September CPI is the Government’s typical approach.
To reject the regulations would mean that HMRC-administered benefits do not rise at all next year, making our constituents worse off. As usual, the Department for Work and Pensions led a separate debate in this place on the regulations for uprating other benefits and the state pension, for which the Secretary of State for Work and Pensions is responsible, on 31 January 2024. The DWP’s working-age benefits will also rise in line with the 6.7% CPI rate this year.
In summary, the proposed legislation fixes all the limits and thresholds for national insurance contributions at their 2023-24 levels for the 2024-25 tax year; makes provision for a Treasury grant; extends the NICs relief for employers of veterans; and increases the rates of tax credits, child benefit and guardian’s allowance in line with prices. The legislation enacts announcements from the autumn statement and previous fiscal events. Without it, HMRC will be unable to collect NICs receipts, and tax credits, child benefit and guardian’s allowance will be frozen at 2023-24 levels. I therefore hope that colleagues will join me in supporting the regulations.
Nigel Huddleston
I thank my opposite number, the hon. Member for Ealing North, for his contribution, as well as my hon. Friend the Member for Dover. Perhaps we could at some point have regulations on reducing the length of the names of regulations, because we have all had a bit of a mouthful today.
The hon. Gentleman raised many points not strictly relevant to the scope of the regulations, and many points that we have rehashed often, but I will repeat that the reason why taxes have been higher is because of the significant amounts of support that we gladly handed out during the pandemic out of necessity, and also to support with the cost of living crisis that he mentioned. That was £350 billion-plus on the pandemic and a further £100 billion on cost of living challenges—about £3,700 per household—out of necessity, but we are now in a position where we can start to bring taxes down, which is what we did in the autumn statement. The OBR forecast that taxes as a percentage of GDP would fall by 0.7% as a result of the autumn statement changes, so taxes are clearly coming down now. Each fiscal event needs to be taken on its own, but the direction of travel is quite clear.
On the hon. Gentleman’s points about class 2, 3 and 4 contributions as set out in the relevant legislation, the Treasury has provided a report detailing the decisions not to make changes to class 2 and 3 rates and thresholds, and class 4 thresholds, for national insurance contributions for 2024-25. The decision was announced at the autumn statement and reflects the Government’s commitment to keeping taxes low to support working people to keep more of what they earn, as part of our plan to grow the economy. Class 2 rates will be maintained at 2023-24 levels for individuals to pay voluntarily to gain access to contributory benefits, as set out in the autumn statement.
The regulations ensure that tax credits, child benefit and guardian’s allowance increases are in line with September’s CPI rate, at 6.7%, thereby ensuring that those benefits keep their value in relation to prices. The NICs regulations set the limits and thresholds for the 2024-25 tax year, coming soon after the Government’s decision at the autumn statement to return money to taxpayers with a £9 billion tax cut. They allow for the collection of more than £170 billion of NICs to fund contributory benefits, including the state pension, and contribute to NHS funding. They are therefore vital to the livelihoods of all our constituents. I commend the regulations to the Committee.
Question put and agreed to.
Draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024
Resolved,
That the Committee has considered the draft Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2024.—(Nigel Huddleston.)
Oral Answers to Questions
Nigel Huddleston Excerpts(6 months, 2 weeks ago)
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Mr Clive Betts (Sheffield South East) (Lab)
The Financial Secretary to the Treasury (Nigel Huddleston)
Regarding fairness, we have a progressive tax system where the top 5% of income tax payers pay nearly half of all income tax, while the top 1% pay more than 28%. In addition, the national insurance reforms announced at the autumn statement cut taxes for 29 million people. That package also strengthens the fiscal position by helping taxpayers to get their taxes right, while bearing down on the small minority who seek to avoid paying their fair share.
Mr Betts
The Minister talks about tax cuts, but in April most households in this country will receive a 5% increase in their council tax. That is not because local councils have mismanaged their finances, but because after 13 years of austerity, the local government finance system is essentially broken and relies on a regressive and unfair council tax. Why in the autumn statement did the Chancellor freeze the budgets of the Department for Levelling Up, Housing and Communities for the whole of the next Parliament, leading the Office for Budget Responsibility to forecast a further £13 billion rise in council tax? Does that not show that the Chancellor has no regard at all for councils and the services they provide, or is he simply deferring a problem that his Government has created for the next Government to sort out?
Nigel Huddleston
I am afraid that is a ridiculous characterisation. We on this side of the House care, including about our vibrant, important local councils. That is precisely why they just received an additional £600 million, and future spending will be a matter for future fiscal events.
James Gray (North Wiltshire) (Con)
I am a strong believer in fairness in taxation. Would my hon. Friend care to advise the House about who would bear the heaviest burden of taxation, should His Majesty’s Government choose to adopt the £28 billion spending commitment that the Labour party announced on the radio this morning?
Nigel Huddleston
My hon. Friend makes an important point. Of course, we never know from day to day exactly what Labour’s policy is, and I understand there are even differences among its Front Benchers at the moment, but we heard a firm commitment, without any promises at all about where the money would come from. We therefore know where it would come from: it would come out of taxpayers’ pockets or further borrowing, which is deferred taxation. Everybody will pay for it.
Darren Jones (Bristol North West) (Lab)
The Labour party has set out clear proposals to close tax loopholes on non-doms, private schools and private equity to give a much-needed boost to our public services. Will the Treasury Minister confirm whether the Government have assessed, or plan to assess, the merits of such a policy?
Nigel Huddleston
I am pleased to hear the hon. Gentleman’s enthusiasm for closing down tax loopholes and going after the abusers. It begs the question why Labour did not vote in favour of the Finance Bill last night, which included measures along those lines.
Darren Jones
That is a short answer, but the answer to the wrong question—perhaps the Minister can have a second go. While he is thinking about the answer, I point out that the Comptroller and Auditor General has highlighted that the Government are wasting up to £28 billion a year on mismanaged procurement and governance of major projects. Does the Minister agree that the Conservative Chancellor and his predecessors have had to raise taxes so much partly because they are wasting so many billions of taxpayers’ money each and every year?
Nigel Huddleston
The reason we have had to raise taxes is £350 billion of support during the pandemic, which I did not hear the Opposition oppose, and an additional £100 billion to help people during the cost of living crisis, which I did not hear the Opposition oppose. We therefore had to increase taxes out of necessity, but we reduce them out of choice, which is exactly what we are doing. Labour increases taxes out of necessity and then continues to increase them out of choice.
Michael Shanks (Rutherglen and Hamilton West) (Lab)
The Financial Secretary to the Treasury (Nigel Huddleston)
The Government remain committed to increasing economic growth in Scotland and right across the UK. As part of 110 growth measures in the autumn statement 2023, the Government introduced tax policies that are projected to stimulate economic growth in Scotland and across the country. That includes making full expensing permanent and the largest ever cut to employee and self-employed national insurance contributions, which means more people working.
Michael Shanks
The EY Independent Treasury Economic Model Club forecast published yesterday found that the UK’s growth forecast of 0.8% this year is only slightly outperformed by the even more disappointing 0.7% growth in Scotland. Given this Parliament has hiked taxes 25 times, and the Scottish National party now think that those on modest incomes in Scotland should pay even more tax, does the Minister agree that the people of Scotland are simply paying the price for two Governments with no economic credibility?
Nigel Huddleston
No, I do not agree. The hon. Member should be aware that the OECD suggests that in the coming years we will be growing faster than France, Italy and Germany. Of course, the Government have a strong track record against our OECD friends over the last 14 years, and Scotland benefits from this economic growth.
Virginia Crosbie (Ynys Môn) (Con)
As in Scotland, business rates are devolved in Wales. With business rates relief set to fall from 75% to 40%, businesses in Wales will pay almost twice as much as in England. Does my hon. Friend agree that the Welsh Labour Government should be supporting local businesses such as the Kinmel Arms in Moelfre and not increasing the number of Senedd Members by a staggering 60%?
Nigel Huddleston
My hon. Friend puts it well. Of course, we have seen the considerable protections and support given in retail, hospitality and leisure business rates relief in England. That has not been extended to the same extent in Wales, and Scotland failed to extend it as well. She makes an important point.
Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)
Contrary to what the Minister said, OECD forecasts show that the UK will have the lowest growth in the G20 and the highest inflation in the G7. Ministers like to pretend that there is no real cost of living crisis, but there is one, and it is biting hard. How long will Ministers—and their Labour counterparts—continue to peddle the fantasy that Brexit is somehow good for the Scottish people?
Nigel Huddleston
I am afraid that the thing that would most impoverish the people of Scotland is separation from the UK. After 16 years of SNP rule—longer than the Conservatives’ in England—GDP per head in Scotland is lower, productivity is falling, employment is lower and inactivity is higher. That is not exactly a proud record.
Drew Hendry
The Minister talks about GDP. The Office for Budget Responsibility forecast that GDP in the UK will be 4% lower in the long term due to Brexit. Meanwhile, independent Ireland in the EU is booming with a giant fiscal surplus. Given that the Tories, Labour and the Lib Dems are all now champions of Brexit, is it not the case that the only way for Scotland to rejoin the EU is through becoming an independent country?
Nigel Huddleston
The hon. Gentleman knows that the IMF has forecast us greater growth than France, Italy and Germany over the next few years. If he is so enthusiastic about supporting growth, including helping businesses across the United Kingdom, perhaps Scottish National party Members could have joined us in the voting Lobby last night instead of voting against, for example, full expensing and investment in research and development. They voted against that—how on earth is that in the interests of their constituents?
Mrs Flick Drummond (Meon Valley) (Con)
Greg Smith (Buckingham) (Con)
The Financial Secretary to the Treasury (Nigel Huddleston)
I have heard the concerns expressed by hon. Members on the impact of the loan charge, and I have pushed His Majesty’s Revenue and Customs for firm assurances on the safeguards that it has in place. No one will be forced by HMRC to sell their main home or access their pension funds early to pay their loan charge debts, nor has HMRC petitioned for bankruptcy, which would be only a last resort and is in nobody’s interest. There is substantial support in place to help people in debt, including agreeing time-to-pay arrangements with them.
Greg Smith
I am grateful to my hon. Friend for that answer and his engagement with the loan charge and taxpayer fairness all-party parliamentary group, including a meeting this evening with its officers. In an internal document that surfaced as part of the 2019 Morse review, HMRC admitted to around 100 bankruptcies from the loan charge. Can the Minister tell the House why that figure has never been given publicly by HMRC, and what the figure is today?
Nigel Huddleston
Again, I thank my hon. Friend for championing this area and his great concern for the human stories behind the difficult circumstances resulting from some of these schemes. As I have said, I am constantly seeking reassurance from HMRC on this matter, and my understanding is that where bankruptcies have occurred, it has often been because of requirements outside of the loan charge, not from HMRC; indeed, some people have declared bankruptcy of their own volition. However, if my hon. Friend has evidence to the contrary, I would like to know about it.
Tim Farron (Westmorland and Lonsdale) (LD)
The original Treasury impact statement for the loan charge stated that it would have no material impact on
“family formation, stability or breakdown”,
yet there have been countless divorces, family break-ups, mental health breakdowns and bankruptcies, and at least 10 suicides. That impact statement was grossly wrong, but also surely negligent. We now need a full investigation, including how and why Parliament was so misled over the dangerous and unfair loan charge.
Nigel Huddleston
I hear the House’s concern about this issue, on which we had a debate not so long ago. Of course, the suicides the hon. Gentleman mentions concern us, and independent reviews have taken place. However, I want to provide the House and anybody listening with reassurance that the best thing to do if people have concerns is to engage with HMRC, because very generous and long-term plans can be put in place to help people to repay. As I said, there are fears out there—there is a bit of scaremongering—that homes are being taken over or people are having to give up pensions. That is not the case. Engagement with HMRC to establish reasonable time to pay would therefore be reassuring for many of the people who fear much worse consequences. My appeal is to engage with HMRC.
James Murray (Ealing North) (Lab/Co-op)
The Government’s approach to the loan charge has become a nightmare for ordinary people across the country who are the victims of mis-selling and facing financial ruin. The torment and devastating reality is the clearest possible proof that the Government need to think again. Those facing the loan charge ordeal cannot bear to hear yet again that the Morse review is the final word on this matter. Will the Minister finally agree today to commission a new, truly independent review?
Nigel Huddleston
We had an independent review in 2019 under Lord Morse. The Government accepted 19 of its 20 recommendations. The review has taken place, but as I have said repeatedly, I am challenging HMRC and listening to colleagues. If action needs to be taken, I will take it, but I do not believe that there is a case for another review, because we have already had one, and the Government have already taken action.
Mr Laurence Robertson (Tewkesbury) (Con)
Alan Brown (Kilmarnock and Loudoun) (SNP)
The Financial Secretary to the Treasury (Nigel Huddleston)
The Government want the UK to have a fair but internationally competitive tax system, designed to bring in talented individuals and investment that contributes to the growth of the economy. Non-doms play an important role in funding our public services through their tax contributions. They pay tax on their UK source income and gains in the same way as everyone else.
Alan Brown
The Minister talks of fairness, but the fact is that during the cost of living crisis nearly a million more struggling pensioners will start paying income tax, because of the freeze in personal allowance rates, while the Government protect some of the richest members of society through non-domicile status. Scrapping that status could bring the Treasury an extra £3 billion a year. Why do the Government not do the right thing and bring in that extra money to protect pensioners and the lowest paid?
Nigel Huddleston
Non-doms contributed about £8.5 billion in taxes in 2022, and have contributed to investment to the tune of £7 billion since 2012. The hon. Gentleman will be well aware that scrapping their status would not be risk-free in a world in which people can be quite mobile, and could damage the UK’s competitiveness. As for the need for other support, that is exactly why we have been reducing national insurance rates, for example.
Rushanara Ali (Bethnal Green and Bow) (Lab)
Sir Edward Leigh (Gainsborough) (Con)
The Financial Secretary to the Treasury (Nigel Huddleston)
Small businesses are the engines that drive our economy and we support them to thrive using levers right across Government. Our small business rates relief means that one third of business properties in England already pay no business rates. We provide tax reliefs benefiting small and medium-sized enterprises, such as the annual investment allowance and employment allowance, and we support investment in SMEs through British Business Bank programmes and a variety of other support measures.
Selaine Saxby
What consideration has been given to reducing employer national insurance contributions to help small businesses to sustain employment following the record increase in the national living wage from April, particularly in the tourism and hospitality industries?
Nigel Huddleston
My hon. Friend and I have spoken about these policy areas on a number of occasions. In terms of supporting small businesses, the employment allowance enables businesses with employer national insurance contributions bills of £100,000 or less to claim up to £5,000 off those bills. That was increased in April 2022 from £4,000 to £5,000, so the smallest 40% of businesses have already been taken out of paying employer national insurance contributions, and many of those are in the hospitality and leisure sector. We always keep policies under review, and I know that my hon. Friend will always be lobbying on this issue.
Sir Edward Leigh
Becoming an entrepreneur in this country has become increasingly purgatorial over the past 25 years. Does the Minister agree that what small businessmen want is not more handouts and allowances from the Government but lower, simpler and flatter taxes, and less regulation not more? They want the Government to get off their backs and shove off.
Nigel Huddleston
That was very interestingly put by my right hon. Friend. I completely agree with his instincts, though, and those instincts are completely shared on the Conservative Benches. When we are able to reduce tax and release the entrepreneurial spirit, independence and innovation that exist right across the UK, the country thrives and all of us thrive.
Sir Stephen Timms (East Ham) (Lab)
In 2020, the former Chancellor set a public sector net investment target of 3% of GDP, but that was abandoned after the 2022 debacle and today we have the second lowest business investment among advanced economies, partly because of that failure on public sector net investment. Can the Minister offer us any reassurance on the future trajectory of public sector net investment?
Nigel Huddleston
Of course, Labour left us in pretty terrible financial circumstances back in 2010. Instead its figure is up £28 billion in real terms at the start of the next Parliament, an increase of 40% in real terms or 7% annually—the biggest ever published.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Small businesses are the backbone of our economy, but they have a constant problem with late payments, which increased by 7% last year, and that is driving many of them into insolvency. Given that the Government are a major contractor, what are they doing through project bank accounts to reduce the impact of late payments?
Nigel Huddleston
The hon. Lady makes an important point, and I know there is agreement on this issue across the Chamber. We made statements last year along those lines, putting particular pressure on the public sector. I am sure there will be continuing pressure on the private sector, too.
Bob Blackman (Harrow East) (Con)
Rebecca Long Bailey (Salford and Eccles) (Lab)
The Financial Secretary to the Treasury (Nigel Huddleston)
Eighty-five per cent of the funds recovered from the loan charge so far—about £3.9 billion in total—have come from the employees, therefore those who were running those schemes, so the hon. Lady is mischaracterising where we have gone so far. There has been one criminal conviction so far; others are in place. I repeat what I said to the Opposition spokesman, the hon. Member for Ealing North (James Murray), earlier: if they were that concerned about ensuring we go after the wrongdoers, they would have voted with us last night in the Finance Bill.
Sir Desmond Swayne (New Forest West) (Con)
Nigel Huddleston
I know my right hon. Friend has been campaigning on the issue. I respect and appreciate the information he has provided, and his contributions to the debate. I assure him that I am in listening mode and looking forward to the meeting this evening, because I want to ensure that I hold HMRC to account to make sure everyone involved is treated fairly and respectfully.
Caroline Lucas (Brighton, Pavilion) (Green)
Helen Morgan (North Shropshire) (LD)
Nigel Huddleston
Over the past few years, we have helped to support our high streets by freezing multipliers and, importantly, targeting further relief at the retail, hospitality and leisure sector. Frequent revaluations are now par for the course, because of the recent changes we have made.
Richard Fuller (North East Bedfordshire) (Con)
Last July, following a debanking scandal, I wrote to the Economic Secretary to the Treasury about the risks of implementing so-called diversity, equity and inclusion policies. Far from being inclusive, their implementation has often been divisive, yet Labour put such policies at the heart of its financing and growth strategy just last week. Will my hon. Friend assure us that he will give clear direction to the Prudential Regulation Authority and the Financial Conduct Authority to avoid all the risks of so-called DEI policies?
Finance Bill
Nigel Huddleston ExcerptsMonday 5th February 2024
(6 months, 3 weeks ago)
Commons ChamberRead Full debate Finance Act 2024 View all Finance Act 2024 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Consideration of Bill Amendments as at 5 February 2024 - (5 Feb 2024)
The Financial Secretary to the Treasury (Nigel Huddleston)
I beg to move, That the clause be read a Second time.
Mr Deputy Speaker (Sir Roger Gale)
With this it will be convenient to discuss the following:
New clause 1—Review of effectiveness of section 31 measures in preventing fraud involving taxpayers’ money—
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, conduct a review of the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money.
(2) The review must evaluate the effectiveness of the provisions of section 31 in preventing fraud involving taxpayers’ money through comparison with the effectiveness of—
(a) other measures that seek to prevent fraud involving taxpayers’ money, and
(b) the approach taken in other countries.”
This new clause would require the Chancellor to review the effectiveness of measures in this Act to prevent fraud involving taxpayers’ money, and to compare them with other measures that seek to prevent fraud involving taxpayers’ money and the approach taken in other countries.
New clause 2—Review of reliefs for research and development—
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—
(a) HMRC, and
(b) businesses.
(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”
This new clause would require the Chancellor to publish a review setting out the total implementation costs of all changes to research and development reliefs in the current Parliament.
New clause 3—Review of measures to tackle evasion and avoidance—
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the measures in sections 31 to 33 to tackle evasion and avoidance.
(2) The review under subsection (1) must include details of—
(a) the average sentence handed down in each of the last five years for the offences listed in section 31;
(b) the range of sentences handed down in each of the last five years for the offences listed in section 31;
(c) the number of stop notices issued in each of the last five years to which the measures in section 33 would apply; an
(d) the estimated impact on revenue collected in each of the next five financial years resulting from the introduction of the measures in sections 31 to 33.”
This new clause would require the Chancellor to publish details of the sentences given and stop notices issued in each of the last five years to tackle evasion and avoidance, as well as the revenue expected to be generated from the measures to tackle evasion and avoidance in this Act in each of the next five years.
New clause 4—Review of public health, inequality and poverty effects of Act—
“(1) The Chancellor of the Exchequer must review the public health, inequality and poverty effects of the provisions of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) The review must consider—
((a) the effects of the provisions of this Act on the levels of relative and absolute poverty across the UK including devolved nations and regions,
((b) the effects of the provisions of this Act on socioeconomic inequalities, and on population groups with protected characteristics as defined by the 2010 Equality Act, across the UK including devolved nations and regions,
((c) the effects of the provisions of this Act on life expectancy and healthy life expectancy across the UK including devolved nations and regions, and
(d) the implications for the public finances of the public health and NHS effects of the provisions of this Act.”
New clause 6—Assessment of the impact of permanent full expensing—
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—
(a) business investment, and
(b) economic growth.
(2) The review under subsection (1) must—
((a) assess the impact of full expensing being made permanent, and
(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”
This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.
New clause 7—Review of multipliers used to calculate higher rates of air passenger duty—
“(1) The Chancellor of the Exchequer must, at the next fiscal event, publish a review of the multipliers used to calculate higher rates of air passenger duty for each destination band.
(2) This review must propose options for introducing a multiplier to link the higher rate and the reduced rate within the domestic band.
(3) The Chancellor must, at the next fiscal event, make clear what changes, if any, he will implement as a result of this review.”
This new clause would require the Chancellor to publish a review of the multipliers used to calculate the higher rates of air passenger duty, and to propose options for introducing a multiplier to link the higher rate and the reduced rate within the domestic band.
Government amendments 1 to 6.
Nigel Huddleston
The Government’s aim is to grow the economy for the good of everyone, and our tax system is a key part of that. For households, higher taxes mean less financial freedom and less choice in how they spend their money. For businesses, they can mean less growth and investment, and that means fewer jobs for workers. That is why we need to grow our economy to create jobs and give ourselves the financial headroom to reduce taxes and remove the barriers to private sector investment. We must have a tax system that is supportive of business.
At spring Budget 2023, the Chancellor set out his approach for a highly competitive business tax regime. By announcing generous tax incentives combined with a rate of corporation tax that remains the lowest in the G7, the Government ensured that the UK is one of the best places in the world for businesses to grow and invest, but we should not be satisfied with simply being one of the best. This Bill therefore marks our next step in making the UK the best place in the world to do business.
We are taking huge, ambitious steps to make that a reality in the autumn statement and in the Bill. For example, no other major economy has made full expensing permanent. That is a major step in encouraging more investment by giving a huge tax relief to those who invest. Alongside that, we have introduced a generous new regime for research and development carried out by companies. We are now going further to encourage even more investment by introducing new clause 5, which will exempt receipts from new electricity generating projects from the electricity generator levy.
I will address each amendment in turn, looking first at the details of new clause 5. The electricity generator levy was introduced following the energy crisis to ensure that energy companies with extraordinary returns contribute more towards vital public services and support for households. However, we must balance that against ensuring that the UK remains a brilliant place to invest in renewables. The new clause makes changes to the EGL that will exempt receipts from new electricity generating projects from the levy. It will ensure that all generators in scope of the levy will benefit from the exemption if they choose to proceed with investments in new generation capacity and make a substantive decision to go ahead with a project on or after 22 November 2023—the date of the autumn statement. That will help support continued investment in the UK’s renewable generation capacity by removing new investments from the tax and providing businesses with the confidence to make such new investments.
I turn to Government amendments 1 to 3. To ensure that the research and development tax relief clauses in the Bill work as intended, the Government are proposing technical amendments to the R&D clauses. The Bill introduces a new enhanced support for R&D-intensive small and medium-sized enterprises, such as those in our vital life sciences sector. From April 2024, the R&D intensity threshold will be reduced from 40% to 30%.
Amendments 1 and 2 make changes to ensure that R&D-intensive companies get the relief as intended. Amendment 1 removes two situations where a company would appear less R&D-intensive than it actually is. These issues were raised with us by an industry stakeholder, for which I am grateful. To avoid abuse and to protect the scheme for genuinely R&D-intensive companies, the ratio is worked out at a group level. Currently in the legislation, companies within groups that charge each other for services could have costs double counted and therefore reduce their R&D intensity. The amendment will fix that. The Government do not want to exclude companies from relief because of legitimate commercial arrangements that do not affect the underlying true R&D intensity of the business.
On top of providing more support for R&D-intensive companies, the Bill will simplify and improve our R&D reliefs by merging the R&D SMEs scheme with the R&D expenditure credit. To ensure that those clauses work as intended, the Government propose technical amendments to the R&D clauses. Companies and accountants wanted the merged scheme to be implemented on an accountancy period basis as that makes claims simpler and delays the merged scheme for the majority of current R&D expenditure credit claimants. It therefore gives them a bit more time to prepare.
The new rules for contracted-out R&D will ensure that the company making the decision to do the R&D and bearing the risk is the one that gets the relief. However, that means that, as currently drafted, there could be temporary situations when two companies are in a contractual relationship and one moves into the new R&D tax credit system ahead of the other. For a limited period of time, that could result in situations where both parties could claim on the same R&D or neither could claim, as was raised by stakeholders. Amendment 3 ensures that the legislation works as intended. For temporary double claims, the R&D credit will go to the claimant in the old system until both have started new accounting periods. To avoid a temporary gap where no company can claim, the legislation will be amended to ensure that subcontractors can claim where their customer is still in the old system.
Nigel Huddleston
Thank you, Mr Deputy Speaker. May I join you, Mr Speaker and the whole House in wishing His Majesty a speedy recovery following the announcement this evening?
I wish to thank right hon. and hon. Members for contributing to this debate. I shall respond to as many of the points as I can, and also talk to the amendments that have been moved. On new clause 1, I agree that we must prevent fraud and ensure that all taxpayers pay their fair share. To help achieve that, the new maximum sentences for the most egregious examples of tax fraud, the new criminal offence on the promoters of tax avoidance, and enhanced director disqualification powers will come into force on Royal Assent of this Bill. That will all help.
At 4.8% of total liabilities, the UK’s tax gap is at the joint lowest rate ever recorded and has remained low and stable. The UK’s tax gap compares favourably with that of our international partners. HMRC has already published performance updates that provide information on its compliance performance every quarter, so we believe that this new clause is not necessary.
New clause 2 is pretty much the same as the new clause 1 rejected in Committee of the whole House. As I have said previously, we believe that the provision is unnecessary, as the information has been published in the tax information and impact notes alongside each policy change. That gives a clear explanation of the policy objective together with details of the implementation costs for both HMRC and businesses.
New clause 3 would require the Government to publish details of sentences given and stop notices issued to tackle evasion and avoidance in the past five years, as well as revenue expected to be generated by measures in this Bill to tackle evasion and avoidance in each of the next five years. However, HMRC publishes information on the number of custodial sentences received for tax compliance offences and the average sentence length in its annual reports and accounts. The 2023-24 annual report and accounts will be published this summer, providing a full overview of HMRC’s performance. The Government also publish a list of tax avoidance schemes subject to a stop notice on gov.uk, with the most recent report published on 7 December. HMRC has issued more than 20 stop notices since issuing the first one in 2022. The Government also published revenue estimates for the next five years of the clauses in this Bill in the tax information and impact notes. Therefore, as the information requested by new clause 3 is publicly available in routine HMRC publications, the publication requested by new clause 3 is unnecessary.
New clause 4 would require the Government to report on the likely impact of the measures in the Bill on public health, inequality and poverty—matters that concern us all and that we discussed in Committee. Existing mechanisms already effectively monitor and assess Government policies in those areas, rendering the amendment redundant. Departments such as the Department of Health and Social Care and its arm’s length bodies diligently evaluate policies to enhance health up and down the country. Through the Office for Health Improvement and Disparities and the National Institute for Health and Care Research, they address health inequalities and provide robust evidence for policy development. Various Government units, such as the Cabinet Office equality hub, contribute to levelling-up opportunities and ensuring fairness. The Government Equalities Office, the Race Disparity Unit, the Disability Unit and the Social Mobility Commission all focus on different equality dimensions to guide and support inclusive policy development across the country. We therefore do not believe that new clause 4 is necessary.
On new clause 6, I agree that it is important to regularly review and evaluate policy, and to be transparent, which my right hon. Friend the Member for Wokingham (John Redwood) also highlighted. His Majesty’s Revenue and Customs has published a tax information and impact note setting out the impact of the measure, including the economic impact, and the Office for Budget Responsibility has already conducted and published extensive analysis on the investment and growth impact of full expensing. That is available in its “Economic and fiscal outlook—November 2023”, which therefore negates the need to publish a separate assessment in six months’ time. The impact of permanent full expensing will be monitored through information collected from tax returns, and through regular communication with businesses and representative bodies.
Jim Shannon
The Minister knows that I am particularly fond of him, but if he has heard my request before, let us now have action.
Nigel Huddleston
We always try to act; I cannot do everything, though. I note the hon. Gentleman’s comments. In a similar vein, my hon. Friend the Member for Totnes (Anthony Mangnall) raised the importance more broadly of the tourism, hospitality and leisure sector, and of the creative sector. He is absolutely right. Measures in the Bill and elsewhere will support all those sectors. Of course, business rates relief is vital to the tourism, retail, hospitality and leisure sector. My right hon. Friend the Member for Wokingham made a range of comments, some outside of my direct remit. I assure him that I will raise his points, which ranged from bonds to public sector efficiency—a vital area—with colleagues in the Department.
I was somewhat entertained by the comments of the Labour spokesman, the hon. Member for Ealing North, who was effectively asking me to commit to Conservative party policies as enthusiastically as he does, which is quite a turn up for the books. Of course, we welcome Labour’s support for the policies that we have announced, but there is clear blue water between the Labour party and the Conservative party in terms of principles about the size and scale of Government and the level of taxation. We have seen Labour’s flip-flopping over the £28 billion. I am not sure what the policy is today. It was rather rich of him to ask for commitments from me, given the flip-flopping that is so prevalent in every area of Labour policy.
At one point, the Labour party was supportive of Brexit. Now I do not know. Are Labour Members against it? Were they supportive of the right hon. Member for Islington North (Jeremy Corbyn) being Prime Minister, or do they not want him in the party? Are they in favour of nationalisation, or against it? Are they in favour of private sector involvement in the NHS, or against it? In a whole host of policy areas, we have seen persistent, perennial flip-flopping from the Opposition. I literally have goldfish whose commitments I would trust more than those from the Labour Front Bench. On those points, we will have to respectfully agree to disagree.
As I said, new clause 5 and the six amendments that the Government have tabled will help to ensure that the changes in the Bill apply as intended, and deliver a vital policy to protect renewable investment. They will make the tax environment more easily understood by business and protect vital tax revenue used to fund our public services. I therefore urge that they be added to the Bill. The six new clauses tabled by the Opposition seek to get the Government to publish data and information that is already being published through other sources, as I have outlined. I therefore urge the House to reject them.
Question put and agreed to.
New clause 5 accordingly read a Second time, and added to the Bill.
New Clause 6
Assessment of the impact of permanent full expensing
“(1) The Chancellor of the Exchequer must, within six months of this Act being passed, publish an assessment of the impact of the measures in clause 1 of this Act on—
(a) business investment, and
(b) economic growth.
(2) The review under subsection (1) must—
(a) assess the impact of full expensing being made permanent, and
(b) consider what other policies would support the effectiveness of the measures in clause 1 of this Act.”—(James Murray.)
This new clause would require the Chancellor to publish an assessment of the impact on investment and growth of the measures in this Act to make full expensing permanent, and to consider what other policies could support the effectiveness of permanent full expensing.
Brought up, and read the First time.
Question put, That the clause be read a Second time.
Nigel Huddleston
I beg to move, That the Bill be now read the Third time.
This Government are backing British business, supporting employment, and creating a simpler and fairer tax system. My right hon. Friend the Chancellor delivered an autumn statement with the clear intention of strengthening the economy, now and for the future. This Finance Bill, which Members of the House have had the opportunity to scrutinise and debate over the past few months, does exactly that. It takes forward important tax measures to help businesses invest for less; encourages innovation and supports our creative industries by elevating rates and simplifying credits; and improves and simplifies our tax system to ensure it remains fit for purpose.
Mr Deputy Speaker, allow me to remind Members of the Bill’s key aims. Our first aim is to support British industry, so that we can solidify our position as world leaders in key sectors. Making full expensing permanent allows UK businesses to invest for less. We have moved to make the UK’s plant and machinery capital allowances the most generous of any major economy. Permanent full expensing has been called the single most transformational thing we could do for investment, and it was welcomed by more than 200 companies and trade associations.
The Bill also merges two significant Government schemes: the SME scheme and the R&D expenditure scheme. In doing that, we are meeting our aim of simplifying the system while providing greater support to British businesses, so that they can spend less time on administration and more time on innovation. The Bill also introduces greater support for loss-making R&D-intensive SMEs and lowers the intensity threshold required to access that support to 30%, helping around 5,000 extra SMEs. To further support investment in renewable energy, we have introduced a new assets exemption for the electricity generator levy, a measure that will continue to drive growth in both our renewables sector and the wider economy. We also continue to support our world-leading creative industries with tax measures that reform the film, TV and video game tax reliefs, turning them into refundable expenditure credits that are easier for business.
Our second aim is to support employment. We must remove barriers to work and incentives to not work, and most of all, must ensure that hard work and expertise are rewarded. That is why the Bill makes changes to encourage people to stay in work and use their expertise for longer. The Bill will complete the abolition of the lifetime allowance, amending pension tax rules so that employees with valuable, hard-earned expertise are no longer encouraged to reduce their hours or retire early. The Office for Budget Responsibility estimates that this will retain 15,000 workers annually, keeping many high-skilled employees and experienced individuals in our labour market while ensuring that they receive their rightful benefits for working.
Our third aim is to create a simpler, fairer and more modern tax system—an aim that the Bill also supports. Making full expensing permanent is a huge simplification for larger firms, but we are a nation of millions of small businesses. In the Bill, we are expanding the cash basis—a simplified way for over 4 million smaller and growing traders to calculate their profits and pay their income tax. While we remain focused on reducing the tax burden, we cannot overstate the role of tax in supporting public services, so we must all do our part. Everyone must pay their fair share, which is why the Bill introduces a new criminal offence for those who promote tax avoidance schemes and continue to promote them after receiving a stop notice. Alongside this, His Majesty’s Revenue and Customs will for the first time be able to bring disqualification action against the directors of companies involved in promoting tax avoidance, including those who control or exercise influence over a company. These are vital steps in ensuring that the system is fair for all, and that those who try to undermine it face the consequences.
I thank right hon. and hon. Members from across the House for their helpful and insightful contributions to the debate on the Bill. I also thank the many stakeholders who have provided their views on the issues raised, the Treasury, HMRC officials and House Clerks who have helped the Bill to get to this point. This Bill backs British business, rewards hard work, nurtures innovation, and supports our leading industries while solidifying long-term economic growth. For those reasons, I commend it to the House.
Hospitality Sector: Fiscal Support
Nigel Huddleston Excerpts(6 months, 3 weeks ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
It is a pleasure to serve under your chairmanship today, Ms Bardell. I congratulate the hon. Member for Stirling (Alyn Smith) on securing the debate, and thank everybody who has contributed. Everyone contributed in a very constructive manner—until a few minutes ago. Many hon. Members graciously commented on my previous role. As tourism Minister, I had the real pleasure of visiting the vast majority of their constituencies, and it has been fantastic to have a tour of the UK today. We have heard about the fantastic hospitality, tourism and leisure offerings in everybody’s constituencies, including some absolute gems that make us very proud of this industry.
The hospitality and leisure sector is formidable. Definitions can sometimes be difficult; sometimes when people use the term “hospitality”, they are just talking about pubs, bars and restaurant, but we are thinking more broadly about the tourism, hospitality and leisure offering. To respond to the hon. Member for Ealing North (James Murray), I can say that we engage with the sector all the time. Just yesterday, many of us attended the UKHospitality reception, at which the formidable Kate Nicolls articulated the sector’s asks very well. We hear them all the time, and we are always listening to ideas.
Wera Hobhouse
The Minister mentioned a range of hospitality businesses. Will the Government please look at ensuring the survival of struggling businesses such as small music venues, which will close if they do not get the support they need?
Nigel Huddleston
In this debate we have heard an ongoing request for simplification in recognition of these challenging times—we did, of course, spend £350 billion on the pandemic—and a series of requests for additional relief here, there and everywhere. Everybody recognises—the Welsh and Scottish Governments are also struggling with this—that financial times are tight and that every single one of those requests comes at a cost: either other people would pay more tax or spending would be reduced somewhere else.
We absolutely hear the requests, but as my hon. Friend the Member for St Austell and Newquay (Steve Double) pointed out, over the past few years—certainly during the pandemic—the Government have recognised how vital the sector is and have been absolutely committed to it. It rightly received the immense support that it needed during the pandemic, including through the culture recovery fund to help music and heritage. So many sectors contribute to our tourism and hospitality offering. If we had not made those interventions during the pandemic, many businesses that are here today would otherwise not be. Ongoing asks during the period of recovery, when we need to start paying back that £350 billion, are very difficult because there would be massive consequences for taxpayers and the whole of the economy. I understand the challenges, but I think everybody recognises that every one of those asks comes at a cost.
Tim Farron
We obviously have to be careful with the nation’s finances and act within the envelope available to us, but what does the Minister make of the fact that UKinbound, Cumbria Tourism and others say that a variation of VAT levels would be of net benefit to the Treasury? Has he analysed those assessments? I am sure he has met those outfits personally.
Nigel Huddleston
I suspect I could spend the whole of this debate answering Members’ questions rather than going through my speech, much to the chagrin of my officials. Again, I understand the request. Many hon. Members pointed out that I was the one making these requests to the Treasury not so very long ago, for all the reasons they outlined, but we all recognise that we have to find the balance.
The point about dynamic modelling is really important. I will come on to VAT in a moment, but we must recognise that one of the biggest challenges of all requests for VAT relief is whether it will be passed on. There is not a 100% fantastic record of that happening in the hospitality and tourism sector or across the board, for understandable reasons. Cash flow was key during the pandemic, so not everybody was able to pass on the VAT reductions. When it comes to future requests for VAT reductions, we must be absolutely confident that they will be passed on, and that applies to multiple sectors.
Mr Ellwood
The Minister is being very generous in giving way. My right hon. Friend the Member for Witham (Priti Patel) mentioned the forthcoming Budget. Is there anything the Minister can tease us with? Can we look forward to anything in the Budget to support the hospitality industry?
Nigel Huddleston
I do love it when former Ministers try to tempt me in that way, knowing full well what the answer will be. What I can say is that we are listening.
I have gone off script for the past few minutes to try to respond to hon. Members, who have spoken eloquently and with real consideration of the challenges with their asks. There are no easy answers, given the challenging financial services. I and the other Treasury Ministers, and certainly the Chancellor and the Prime Minister, are always listening. We are always open to listening to evidence-based information. In that context, I cannot make any hints or promises about what may be in the upcoming Budget, but I can say that the view and opinion of the hospitality sector, especially as embodied by talented people such as Kate Nicholls at UKHospitality, and many others right across the UK, is valued. The sector used to be incredibly fragmented, and therefore did not have the voice it has now. Now, the sector comes in with credible, decent asks that need to be assessed with evidence. The voice of the hospitality sector has never been stronger in Government. I applaud all the lobbyists and groups for doing that.
Priti Patel
The Minister mentioned UKHospitality and Kate Nicholls and the way they have come together. Clearly, there are problems with labour markets in the hospitality sector, and there have been for many years—it is not a new phenomenon. What are the barriers to UKHospitality and the Treasury working together to create a labour market strategy for the hospitality sector?
Nigel Huddleston
Again, these are ongoing conversations across multiple Government Departments. In my former capacity as tourism Minister, I certainly had extensive conversations. There were sub-working groups at UKHospitality identifying areas for further work. That has had some impact, including through apprenticeship schemes. My right hon. Friend was absolutely right to highlight this issue. We have debated Brexit, which probably goes slightly beyond the current remit, although I understand the impact—and, by the way, the opportunities that come from that. My right hon. Friend is right that we need to focus on the domestic skills agenda. The hospitality and leisure sector contributes to one in five new jobs, so it is absolutely pivotal to that.
If hon. Members will forgive me, I will try to get through some of my speech—and not try your patience too much, Ms Bardell—because I am not even on page 1 yet.
Hannah Bardell (in the Chair)
Just to clarify, the Minister has a little bit of flexibility. Given the extent of the debate and the number of questions, he is free to go over the 10 minutes and answer everyone’s questions—as he would like.
Nigel Huddleston
I will make sure I leave a minute or two at the end for the hon. Member for Stirling to conclude—I may have shot myself in the foot there by giving everybody the opportunity to ask all the awkward questions they now have.
Like many hon. Members, my first job was in the hospitality and leisure sector, with a travel agent. I then had the very difficult choice at the age of 22 between taking a job for Arthur Andersen and becoming a Club 18-30 rep. I wonder if my life might have been considerably different if I had taken that slightly different path. My right hon. Friend the Member for Witham is right: jobs in the hospitality and leisure sector help people with numeracy skills, self-confidence and interpersonal skills, which can stay with them for life.
We need to recognise that this sector is not just about part-time jobs for students or young people; we should not forget that there are also valuable, often very high-paying, long-term careers in the sector. The sector has evolved and changed, and is now a major contributor to the UK economy, with £140 billion of economic activity. There are masses of opportunities there, but the reputation and image of the sector is sometimes one of its inhibitors. I am therefore a huge champion of the sector for all the reasons we have outlined.
We have had quite a lot of debate today about the various support measures, including business rate relief. It is worth remembering that the Government provided £16 billion of business rate relief in England through the pandemic. In addition, we launched the temporary 50% retail, hospitality and leisure relief scheme at the 2021 Budget. That was built on in the 2022 autumn statement, and the Government announced further tax cuts to the sector in last year’s autumn statement—about £4.3 billion over the next five years—and extended the retail, hospitality and leisure relief scheme at 75% up to a cash cap of £110,000 per business for 2024-25.
As has been recognised, the Labour Government in Wales and the SNP Government in Scotland were not able to extend those reliefs. I recognise that everybody realises there are considerable financial pressures, but with the greatest respect to my opposite numbers, who have been somewhat critical, I do think this is important and it is something I will play up very heavily: we have done things in England, where we have controlled the levers, that have not been done in Wales and Scotland.
Overall, this tax cut is worth about £2.4 billion for around 230,000 retail, hospitality and leisure properties to continue support for our vital high streets and protect so many small shops and businesses. The Government have also decided to freeze the small business multiplier for the fourth consecutive year. That will protect over a million rate payers and 90% of all properties from a multiplier increase.
For example, as a result of the changes, the average independent pub will receive about £11,800 of relief off their final business rates bill in 2024-25. Combined with the small business multiplier being frozen, they will benefit to the tune of about £12,800 of support. I repeat: that is not the level of support that they would get in Scotland or Wales.
A few points were raised about other areas, and I remind hon. Members that reliefs are also available for improvements in property. If there is an incremental rateable value because of improvements, that will not be included for the first year where eligible. I also remind hon. Members about the changes in alcohol duty and the Brexit pubs guarantee, which are designed to support the pubs sector and to help it operate on a level playing field with supermarkets.
My right hon. Friend the Member for Witham (Priti Patel) made many points about skills and jobs. I will not repeat what I said, because I think I have made the point that we are very aware of the importance of that sector and the role we have in developing skills and opportunities.
Cutting VAT was mentioned by nearly everybody, and I want to be clear on this point. As we all know, VAT is a major contributor to the nation’s finances, which we then spend on our vital public services. It is forecast to raise about £173 billion in 2023-24. Since we left the EU, we have been taking advantage of multiple reliefs. I believe that if we were to rank ourselves against all other EU countries for the total number of reliefs we are able to exercise through VAT, we would be about second or third. We have been taking advantage of leaving by reducing reliefs and making real differences where and when we can.
The VAT cut for tourism and hospitality that we made during the pandemic came at a significant cost of more than £8 billion. Reintroducing it would come at a considerable cost. That was just one element of the support for the retail, hospitality and leisure sector during the pandemic, but it was a really important part of it.
Anthony Mangnall
I thank the Minister for that response; it is very helpful to get an understanding of what the costs would be around VAT. Was any modelling done of what would have happened if we had not made that cut and what the impact would have been in terms of lost businesses and rising unemployment numbers? Could those models be produced or published, so that we can make that comparison in Parliament?
Nigel Huddleston
Various pieces of internal and external analysis have been released. We all know anecdotally from experiences in our constituencies that it literally did save businesses around the country. As I said, the Treasury keep tax policy under review all the time—that is a mantra, but it is true. The message I want to get across to colleagues today is that this will not be an easy choice. I understand the asks and we understand the impact, and there are various points of modelling, but it would not be an easy option. I repeat the caution that pass-through is vital when it comes to VAT relief. That did not happen wholly last time, but I understand why, as some of it was cash flow.
Mr Ellwood
Everybody understands the passion with which the Minister is pushing this. I do hope, as I teased last time, that he is having private conversations with the Treasury and making the mathematical case very clear. A business that closes does not pay any VAT at all. A business that thrives because VAT has been reduced somewhat can then pay more corporation tax. That is the mathematical formula that we would like to see, which I think has been presented by UKHospitality, and which justifies reducing VAT to 10% in the hospitality sector.
Nigel Huddleston
My right hon. Friend makes a logical point. I assure him that I am listening, but I am not making any promises.
I will refer to a couple of other areas that hon. Members mentioned. I appreciate the tone adopted by the hon. Member for Stirling. He recognised that there are things that the sector is requesting and looking for that Scotland, Wales and other countries are not able to deliver. That does not mean that any of us are not sympathetic; it is about the balance of the support package that we need to deliver. Like many today, he commented on both business rates and VAT.
My hon. Friend the Member for St Austell and Newquay has one of the most beautiful constituencies in the country, but also, as he said, one of those that is most reliant on this sector. He raised a variety of points, and he and I have had ongoing conversations about this subject, because he is such a champion of it. His point about the ongoing efforts to make sure that we get more inbound tourists outside London is pivotal. There are various opportunities and measures: VisitEngland, VisitBritain, VisitScotland, VisitWales, Discover Ireland and Discover Northern Ireland all do a fantastic job of helping to support and enable that tourism, plus there is a key role for our transport system.
My hon. Friend is right, however, that about 50% of all inbound tourism spend is within the M25. That is great, and we are not saying that that should be less; we are saying that we want it to be “London plus”. That is a key part of the tourism strategy, and I assure my hon. Friend that we are talking about this on an ongoing basis with DCMS and the Tourism Minister.
The hon. Member for York Central (Rachael Maskell) highlighted issues in her fantastic constituency, which I have had the pleasure of visiting on multiple occasions. She highlighted the importance of heritage in the tourism and hospitality ecosystem, and also mentioned flooding. She may or may not be aware that there are opportunities for businesses that are severely impacted by flooding under what is called a “material change in circumstances”. Working with the valuation office, there are opportunities to see, on a case-by-case basis, whether some relief is available. She might want to see whether some of the businesses impacted could consider that, as well as other support measures that we have provided for those impacted by flooding.
My hon. Friend the Member for Totnes (Anthony Mangnall) raised multiple points. He highlighted the upside of some of the trade deals that we are doing, so his constituency is now probably going to be flooded by Australian barmen and barwomen over the next few years. That is not necessarily a bad thing; I wonder whether they are better cocktail waiters and waitresses than he was.
My hon. Friend also raised the important point that, although the headline rates of VAT in some of our European friends’ countries may be lower, there is often a sting in the tail of quite considerable—startlingly high, in some cases—tourism tax, sometimes at a very local level. There is not a huge amount of evidence to suggest that that works either. There is always a balance, and although something may look like a beneficial tax rate system, one only has to scratch beneath the surface to find that there is something a bit more to it.
Anthony Mangnall
The Minister is giving a comprehensive answer to all the points raised in the debate. I re-emphasise the point that, if he is worried about the £8 billion figure that was quoted as a cost for when we reduce VAT by 15%, he could get around that not only by using UKHospitality’s data, but by tiering it and doing a 2% reduction over a five-year period. I hope that would at least comfort the bean counters in the Treasury and reassure UKHospitality that we are going in the right direction.
Nigel Huddleston
I am yet to see the beans being counted, although I am sure that it happens somewhere. My hon. Friend is building on a very clear message that I have received from right hon. and hon. Members today.
The hon. Member for Westmorland and Lonsdale (Tim Farron) and I have had ongoing conversations over multiple years. I do not doubt his passion and support for the sector, or how important the sector is for his constituents. He was right to raise the issue of holiday lettings. I understand that he is disappointed with some of the measures that we have brought in, although some of those measures will make a real difference, including the ability to charge more for some rental properties. All I can say is that we are well aware of some of the additional lobbying for proposed changes and, again, that we are always open to further ideas.
Tim Farron
Although we need labour from outside, we also need to be able to grow our own talent domestically; that is the specific thing that will make a difference. The real problem is the collapse of residential properties for long-term occupation. The answer to that is a separate category of planning use for short-term lets and a separate category for second homes. Will his Government choose to do either of those things? They promised to do at least the first one.
Nigel Huddleston
All I can say to the hon. Gentleman is that we are listening. Some measures are being put in place that local authorities will have powers to implement, but I understand that a lot of people are not happy with the situation. I completely understand the challenges at a local level, particularly when it comes to employment and the unaffordable cost of housing in many parts of the country, as many Members have mentioned.
Rachael Maskell
In my speech I mentioned the extension of covid loans for businesses that have those loans. What is the Treasury’s view on extending them so that investment can be made in those businesses elsewhere?
Nigel Huddleston
I cannot comment on any further changes, but there has been some flexibility with covid loans, as we have announced. This is important. Of course, we want those covid loans to be paid back, but that needs to be done over a period of time that is sustainable for businesses. This is in the context of the overall support, including the comments that I made about business rates relief and other things for the retail, hospitality and leisure sector. We are aware that the sector was hit so hard by the pandemic and is still in the process of recovering—it is recovering remarkably strongly, but it is not out of the danger zone yet.
Steve Double
On the housing issue, one thing that the Treasury could do is level the tax playing field on the tax breaks between short-term holiday lets and residential properties. That would make a significant difference and would really help. Perhaps the Minister will take that message back.
Nigel Huddleston
I thank my hon. Friend and others for their input today. I will briefly comment on a couple of more items before I close, Ms Bardell. The hon. Member for Bath (Wera Hobhouse), which is another beautiful constituency that I visit frequently, raised a range of issues, including the importance of the environment in the tourism eco-system and environmentally sensitive tourism. I think we will respectfully disagree on the efforts being made by the Government on decarbonising and so on. I think we have a very proud record. I recognise that there is a debate in this area, but her broader points about the contribution of tourism to the environment and the importance of sustainability are important.
The hon. Member for Ochil and South Perthshire (John Nicolson) raised a range of issues, and I will present to him the challenge that I also presented to my opposite number, the hon. Member for Ealing North. The hon. Member for Ochil and South Perthshire made a comment about tax cuts just for the rich and wealthy, but that is so far from reality that I will have to respectfully disagree with him. If he does not believe that we are giving tax cuts to everybody—as I said, the national insurance cuts that we made were for 27 million people— I will present him with the same challenge: let us look at his pay packet for this month and see whether the contribution is lower than December’s. If he does not believe that it is lower, with respect, why does he not give that money to charity or back to the Government? It is important that we recognise that the national insurance cuts are meaningful for 27 million people, including many people on low incomes. That is far from the characterisation of saying that these are tax cuts for the wealthy. We have a laser focus on making sure that the low-paid benefit from such tax cuts.
John Nicolson
I am sure the Minister will have heard me: I specifically referred to cuts in inheritance tax. That is what I raised in my speech. If he would like to tell us that that is a red herring and that no such cuts are intended, I would be delighted to hear it.
Nigel Huddleston
No such cuts have been made. As I said, the hon. Member’s point was speculation and that is not anything I can comment on today.
Ms Bardell, thank you for your patience. I thank everyone for their contributions. All points have been taken on board, and I thank hon. Members for their passion for the sector.
Draft Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023
Nigel Huddleston Excerpts(7 months ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
I beg to move,
That the Committee has considered the draft Local Government Finance Act 1988 (Prescription of Non-Domestic Rating Multipliers) (England) Regulations 2023.
It is an absolute pleasure to serve under your chairmanship this morning, Mrs Murray.
Business rates are a crucial element of the UK’s tax system. They raise over £20 billion per year, which goes to help local authorities fund our country’s vital local services. While business rates provide crucial revenue, over the past few years the Government have taken extensive action to hold the tax rates steady and target support towards those ratepayers who need it. At autumn statement 2023, the Government announced a package of cuts worth £4.3 billion over the next five years to support small businesses and the high street with local tax cuts, including freezing the small business multiplier for the fourth consecutive year and extending the retail, hospitality and leisure relief scheme at 75% for 2024-25.
It is essential that the business rates system runs smoothly, with continuity and stability. These regulations ensure exactly that: they are crucial to maintaining a healthy, stable system for the financial year 2024-25 and beyond. Their primary purpose is to maintain the threshold between the two business rates multipliers. There are two multipliers in the English business rates system—the higher, standard rate multiplier and the lower, small business multiplier. The threshold between the two has stood at a rateable value of £51,000 since 2017, but due to the passing of the Non-Domestic Rating Act 2023 these regulations are required to preserve it at the same level from 1 April 2024 onwards.
Kevin Foster (Torbay) (Con)
The Minister will know that, certainly in Torbay, things like the discount on tourism and retail are very much welcomed. But will he confirm that the effect of these regulations not being passed would be that thousands of small businesses across the country would end up paying more business rates?
Nigel Huddleston
My hon. Friend has embarrassed me, because he just summarised my eight pages of notes in one paragraph. He is absolutely correct. If we do not do this, hundreds of thousands of businesses across the country—those with a rateable value of between £15,000 and £51,000—would effectively have to pay far higher rates than they otherwise would, and that is the core purpose of the discussion today. I should probably sit down there, but I will carry on just a little bit for the edification of others who probably do not get the principles as keenly, enthusiastically and quickly as my hon. Friend.
The secondary purpose of the regulations is to extend the scope of the small business multiplier to include unoccupied properties, charities and properties on the central list—which I will explain in a moment—with a rateable value below £51,000 and which do not currently receive full rates relief. This will level the playing field for all types of properties, promoting consistency in the system; in other words, it is a simplification. Those properties that move to the small business multiplier for the first time will also receive a tax cut worth around £5 million in total per year.
Hon. Members may appreciate a very brief reminder of the business rates multiplier and what it is. The multiplier is the tax rate used to calculate business rates. The relevant multiplier is multiplied by the yearly rental value of a property, known as rateable value, to calculate its business rates bill before any reliefs are applied. As I have mentioned, there are two multipliers in operation—the small business multiplier and the standard multiplier. The legislative default is for both multipliers to rise by consumer price index inflation each year, but the Government took action at autumn statement 2023 to freeze the small business multiplier for the fourth consecutive year, protecting over 1 million ratepayers from an increase in bills.
The regulations must be made as a result of the passing of the Non-Domestic Rating Act 2023 in October.
Priti Patel (Witham) (Con)
Would my hon. Friend acknowledge that these regulations, and the overarching principle on business rates that he is leading, are helping to secure more jobs in our communities, particularly in constituencies like Witham, where small and medium-sized businesses are at the forefront, with a presence on the high streets, recruiting and employing people? That is, of course, vital to our economic health and wellbeing.
Nigel Huddleston
I thank my right hon. Friend for her comments. I know, and have experienced in many debates, what a champion she has been for small businesses, including in her constituency. She is absolutely right: we want to ensure that the tax level is appropriate but not overly burdensome. Some reliefs that we have given in retail, hospitality and leisure over the past years have been precisely to ensure that such businesses can operate on a level playing field, operate efficiently, and create jobs, economic activity and the all-important tax revenues that we need for a sustainable economy. At the heart of the matter is business success and jobs—my right hon. Friend is absolutely right—and that is what this Government are laser-focused on delivering.
The Non-Domestic Rating Act implemented important reforms to the business rates system, which were announced following the 2020 business rates review. The headline measure of the Act was more frequent revaluations. It also introduced a new improvement relief for those who raise the value of their properties through qualifying improvements and several other measures. Most relevant to this debate, the Act made a series of changes to the administration of the business rates multiplier to streamline and improve the system. One such change granted the Government the power to set the threshold for which properties pay which multiplier in secondary legislation; and as these new reforms will come into force from the 2024-25 financial year, the Government must bring forward these regulations in order to maintain the threshold for which properties pay which multiplier at its existing level: £51,000 rateable value.
If the regulations were not passed, the small business multiplier would instead only apply to businesses in receipt of small business rates relief, which would constitute a tax hike for hundreds of thousands of businesses whose properties have a rateable value of between £15,000 and £51,000—exactly the point made by my hon. Friend the Member for Torbay.
The regulations also widen the eligibility for the small business multiplier, including unoccupied properties, charities and central list properties within its scope for the first time. That brings those properties in line with occupied properties, maintaining consistency across the entire system. The proposal to bring unoccupied properties and charities within the small business multiplier was initially made in the technical consultation following the business rates review, and the Government committed to the change in the summary of responses to that document in March 2023. To promote consistency, we have decided to bring properties on the central list—the centrally managed list of properties that span multiple local authorities areas, including, for example, utilities pipelines—within the scope of the small business multiplier. There are a relatively small number of such properties, but we believe this point of consistency is important.
What this instrument does therefore is very simple: the regulations continue and extend Government policy, setting the threshold for which all property types pay the small business rates multiplier at below £51,000, unless they are subject to full relief. Properties of £51,000 or above will be subject to the standard multiplier. In short, the regulations will largely maintain the status quo for the vast majority of ratepayers. The £51,000 threshold will remain where it has been for the past six years. The regulations will ensure continuity under the legislative reforms made by the Non-Domestic Rating Act 2023, and I therefore commend them to the Committee.
Nigel Huddleston
I thank the shadow Minister and others for their participation. As I said, the Government are committed to ensuring that the business rates system is fair, equitable and as streamlined as possible, and the regulations have been drafted with that in mind. As is usual practice, further guidance will be provided with regard to the policy’s roll-out.
We are well aware of the issues of avoidance and evasion across multiple tax systems; the hon. Member for Ealing North will know that that is an important matter that the Government consider. The inclusion of unoccupied properties is to try to create a level playing field. Nobody wants to see unoccupied properties on high streets or elsewhere, and the intention is to try to ensure that they are not empty for any longer than needed. The definition of an unoccupied property is established in case law, and there is a degree of local authority discretion to decide—but, as I said, further guidance will be forthcoming. The shadow Minister also asked about the response to the consultation; we will be responding in due course.
Ultimately, the regulations promote consistency and stability in the business rates system—important tenets of any tax system. Through them, the Government will continue to protect about 90% of properties by placing them on the small business multiplier, which is now open to a greater range of property types than ever before. The regulations are crucial in ensuring the smooth, consistent operation of the business rates system for the financial year 2024-25 and beyond, and I commend them to the Committee.
Question put and agreed to.
Building Societies Act 1986 (Amendment) Bill
Nigel Huddleston ExcerptsFriday 19th January 2024
(7 months, 1 week ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
I, too, congratulate the hon. Member for Sunderland Central (Julie Elliott) on, first, being lucky, and secondly, choosing to be impactful by introducing a Bill that will help to support the future growth and success of the mutuals sector. I understand that her husband, Andrew Fletcher, is in the Gallery today to observe her performance. I am sure he will be rightly proud of the work she is doing with others to make a real impact on people’s lives right across the country. I know that she is driven by a desire to support building societies so that they are able to compete on a level playing field with retail banks, and I am pleased to say that the Government share that desire. That message has also been clear from the Members’ speeches.
I will run through some of the comments we have heard—there were some excellent speeches. The speech by my hon. Friend the Member for Mid Norfolk (George Freeman), with his insights on Labour co-operativism and civic conservatism, was a true tour de force. As always, he spoke passionately about the importance of mutuals in rural areas. My hon. Friend the Member for Stoke-on-Trent Central (Jo Gideon) spoke warmly about the importance of community banking and mutuals in more urban areas, reiterating the importance of those institutions right across the country. I agree completely with her comment about the contribution of the over-70s in society.
My hon. Friend the Member for Dover (Mrs Elphicke) spoke passionately and knowledgably about her experience with mutuals, and with Principality in particular. She raised points about the logistics of arranging virtual meetings and a few other matters. I will certainly ensure that the City Minister, my hon. Friend the Member for Hitchin and Harpenden (Bim Afolami), is aware of some of her comments. She spoke warmly about the human experience she had and about her interactions with Mr and Mrs Jones. In this sometimes remote area of banking, we are dealing still with human beings. In a rare experience, we also heard somebody volunteer to be a member of a Bill Committee.
My hon. Friend the Member for West Bromwich East (Nicola Richards) spoke of her affection for the West Brom and the role of mutuals in the west midlands, particularly in promoting and encouraging the habit of saving among young people and promoting home ownership via mortgages.
My hon. Friend the Member for Bury North (James Daly) laid out the strong case for the social and cultural impact of building societies. He spoke about nostalgia, but made it clear that we all need to work together to ensure that building societies and mutuals also have a thriving future.
My hon. Friend the Member for Southend West (Anna Firth) expressed her appreciation for the physical presence of so many building societies that are still on our high streets, particularly in the context of digital exclusion.
We want to ensure that building societies are supported so that they can continue to give people greater choice in where they put their savings, get their mortgage or, in some cases, open their current account. Today, I want to do two things. First, I will set out why the Government value the mutual sector, demonstrated by recent steps we have taken to ensure that legislation is updated so that they are able to grow, compete and succeed in the future. Of course, many have referred to the recent consultation on some of those matters. Secondly, I will briefly outline why the Government are fully supportive of the objectives and principles of the Bill, and I hope the hon. Member for Sunderland Central will set me right if I misinterpret the details of her Bill in any way.
The Government recognise the valuable contribution that mutual businesses play in the UK economy, as well as in the local communities in which they operate. Their unique ownership model means that those businesses are driven by the core values of openness and collaboration. Every member gets a vote and therefore a direct say in how the business operates. Given their unique ethos and desire to drive positive change in society, as well as the vital role they play in our economy, it is natural that the Government have committed to supporting the mutual sector to ensure their place in our future. For example, through the Financial Services and Markets Act 2023, the Government amended the Credit Unions Act 1979 so that, since last summer, credit unions in Great Britain have been able to offer a greater range of products and services.
To date, the Government have allocated £145 million in dormant asset funding to Fair4All Finance, which works to improve the availability of affordable credit, including through support for community finance providers, thereby strengthening the growth of credit unions. Moreover, last year the Government supported the private Member’s Bill of the hon. Member for Preston (Sir Mark Hendrick), which achieved Royal Assent in June 2023. The Government continue to develop a modern and supportive business environment and have asked the Law Commission to conduct reviews of the Co-operative and Community Benefit Societies Act 2014 and the Friendly Societies Act 1992.
To further support the sector, the Government are also progressing secondary legislation changes to the Building Societies Act 1986, delivering on the Edinburgh reforms. Alongside this Bill, those changes will help to modernise the 1986 Act, helping building societies to grow and compete on a more level playing field with the retail banks.
The Government see this private Member’s Bill as a great way to support building societies, ensuring that they can compete with retail banks on a more level playing field while continuing to provide essential competition within the UK financial services sector. The Bill will deliver on key asks from the building societies sector. As the hon. Member for Sunderland Central set out, it makes provisions in three key areas: funds that can be disregarded by a building society for the purpose of calculating its wholesale funding limit; allowing real-time virtual member participation in building society meetings; and aligning provisions in relation to the execution of deeds and other documents with those of companies law. I will comment briefly on each of those.
The 1986 Act sets out building societies’ distinctive model and other legal requirements. Under the Act, building societies are required to obtain at least 50% of their funding from individual retail deposits, thus ensuring that the members are the primary owners. That funding limit is a key feature of building societies’ unique ownership model, ensuring that these businesses are mutually owned and run for the benefit of their members. While retaining that at-least-50% funding model, and thereby maintaining building societies’ unique characteristics and core values, this Bill will enable the exclusion of three key sources of funding from counting towards the wholesale funding limit, which are accessed or held for regulatory purposes. Those will be further specified by the Treasury in secondary legislation.
The other amendments the Bill makes to the 1986 Act relate to the modernisation of building societies’ corporate governance requirements, so that they can operate under the same modern governance flexibilities as companies. The first of those is an amendment to the 1986 Act to allow for the option of real-time virtual participation at building society meetings, which my hon. Friend the Member for Dover focused on in her speech. That change will help to modernise the day-to-day practices of these societies, promoting greater membership engagement and improving the accessibility of these meetings. This will be updated in line with rules for retail banks operating under the Companies Act 2006, thus ensuring that building societies and retail banks are afforded the same flexibilities.
The second amendment to building societies’ corporate governance requirements relates to common seals and the execution of documents. This Bill will provide the Treasury with the power to make secondary legislation to align the constitutional provisions in part 2 of the 1986 Act with updates to company law concerning common seals and the execution of documents. That will give building societies useful flexibilities that will ensure that they continue to operate on a level playing field with retail banks.
I have outlined the Government’s support for the private Member’s Bill brought forward by the hon. Member for Sunderland Central on Second Reading today, and I again congratulate her on it. We expect that the Bill will be greatly welcomed by the mutuals sector, and it clearly has support from Members across the House. The Government intend to work closely with the hon. Lady in progressing this legislation through Parliament. The Government’s goal, and the goal of this Bill, is to modernise the Building Societies Act 1986, so that building societies are able to scale, grow and succeed into the future. For those reasons, the Bill has the Government’s wholehearted support.
Loan Charge
Nigel Huddleston Excerpts(7 months, 1 week ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
I would also like to thank the right hon. Member for East Antrim (Sammy Wilson), my hon. Friend the Member for Buckingham (Greg Smith) and others for securing the debate, and I am grateful for all the contributions from hon. Members across the House. I would like to name them all, because it is important that we get on the record all those who have contributed. They include my right hon. Friends the Members for Chingford and Woodford Green (Sir Iain Duncan Smith), for New Forest West (Sir Desmond Swayne), for North East Somerset (Sir Jacob Rees-Mogg) and for Haltemprice and Howden (Sir David Davis); my hon. Friend the Member for North Norfolk (Duncan Baker); the right hon. Member for Hayes and Harlington (John McDonnell); and the hon. Members for Merthyr Tydfil and Rhymney (Gerald Jones), for Chesham and Amersham (Sarah Green), for Kirkcaldy and Cowdenbeath (Neale Hanvey), for Arfon (Hywel Williams), for Strangford (Jim Shannon) and for Bath (Wera Hobhouse); and, indeed, others who have contributed to the debate.
There is no doubt that we have heard today the strength of feeling on the issue. Of course, I stand at the Despatch Box as not only the Minister—Financial Secretary to the Treasury—but a constituency MP who has also had representations on these issues from my constituents.
The loan charge, alongside the wider issue of the use of disguised remuneration schemes, is a complex subject that is deeply impactful for many of our constituents. I can assure hon. Members that the Government take the issue incredibly seriously and recognise the impact the loan charge has had. I will endeavour to address the points that have been raised in the debate, but I also wish to reassure colleagues that many of the questions they have asked, about disguised remuneration, Government policy, the loan charge and the approach and tone taken by HMRC, are precisely the questions that I have been asking officials, for the very reasons they have outlined.
I hope that during the course of my response I can provide some additional reassurance because, particularly in the light of recent circumstances, I want to make sure that I am making the right decisions and asking the right questions. Tax authorities and tax Ministers are never popular—it is the nature of the work—but I want to make sure that we act in a way that is reassuring, correct and fair to all taxpayers. I take that duty and responsibility very seriously. For example, I have had discussions and conversations with Jim Harra, the chief executive of HMRC, in the light of the Post Office scandal, about whether there are commissions or perverse incentives for people that may lead to distorting behaviour, and I have been reassured that there are not. This debate and these conversations are very useful, because they enable me to ask the right questions of my officials.
I will not be able to give everybody the answers they want, and I am going to disappoint some people with this response, because I believe we have taken the right approach. There are certain areas where I will continue to ask questions. I am aware that I will not be able to satisfy everybody today, but that will never stop me from continuing to ask the right questions.
Briefly, by way of context, because not everybody who is listening to this may be aware, the purpose of the loan charge was to ensure that users of disguised remuneration schemes paid their fair share of income tax and national insurance contributions. Disguised remuneration schemes are contrived tax avoidance arrangements that seek to avoid income tax and national insurance on income by disguising it as some other type of payment, typically in the form of a loan that is wrongly alleged to be non-taxable. Hon. Members should be in no doubt that, as has been recognised across the House, those schemes cost the Exchequer and other taxpayers hundreds of millions of pounds a year. Indeed, the total burden is to the tune of billions of pounds.
It is therefore right that, when we identify these completely inappropriate schemes, we take action. From the earliest days of the schemes, HMRC opened thousands of inquiries into their use and challenged their operation through the courts. In 2017, the Supreme Court agreed that the schemes did not work and have never worked to legitimately avoid tax, so tax is due on these payments. However, as I have heard very clearly in this debate, many questions have been raised about how we recover that tax due and who has paid it.
In 2022, the Court of Appeal ruled that, even where other parties may have obligations to withhold tax under PAYE, the liability for income tax is always that of the individual, fully endorsing a long-standing position of HMRC and of Governments of all colours. That is a key point: the individual is ultimately primarily responsible for the tax they owe and for their own tax affairs.
Wera Hobhouse
Does the Minister not recognise that quite a lot of people who used the schemes, who were made contractors against their will, are often just individuals who are not tax experts, who paid the tax they were asked to pay at the time and did not think anything was wrong until years later, when suddenly HMRC came to pursue them? Does he not recognise that he is doing the wrong thing to those people who really did not know better?
Nigel Huddleston
I thank the hon. Lady for her comment and I understand completely where she is coming from, but there are multiple points to discuss there. The schemes were never legitimate; they were always tax avoidance, and therefore there was always a clear path that tax was owed. With respect to who then pays, I will mention that in a moment, but, if we move away from the underlying principle that individuals still have personal responsibility to check their tax affairs, it is very difficult to move back to it. I will also come on to the point she raises about further Government action in a moment, because there are some people are being deceived and forced into errors that are completely inappropriate.
The early stages of such loan schemes involved the very wealthy and people who, I think we can all agree, knew exactly what they were doing, but as the schemes evolved and got more sophisticated, and more people were drawn into them, there was a long tail of people who were acting in good faith, and theirs are many of the cases that we have heard today. Although we keep the principle that ultimate responsibility lies with those individuals, it is important that we do the right thing in ensuring that tax affairs are straightened.
Several hon. Members rose—
Jim Shannon
Further to the point made by the hon. Member for Bath (Wera Hobhouse), I think of those who were unknowingly brought into the scheme by their employers and then found themselves with a financial burden that they were not aware of. I am reminded of the TV programme about the Post Office Horizon scandal, in which the terminology “the little people” was used. With the greatest of respect, these people are “the little people”—people who accept the systems that are put down before them. There must be a way to help them.
Nigel Huddleston
I completely understand where the hon. Gentleman is coming from in relation to going after employers that have been deceptive. The loan charge ensures that tax is paid in respect of individuals who entered into the schemes and received payments with no tax deducted, but where possible, HMRC has been seeking that tax from the employer in the first instance. I would like to reassure hon. Members that 80% of the revenue collected to date has come from employers, so we are targeting the employers, as he rightly points out.
Several hon. Members rose—
Nigel Huddleston
I will take a couple more interventions, but I fear that colleagues will ask about the very things I am about to come to, so I may then resist further interventions.
Sir Jacob Rees-Mogg
My hon. Friend refers to the 2017 Supreme Court judgment. As I understand it, that judgment decided that responsibility for the use of an employee benefit trust for tax fell unequivocally on the employer, so it does not necessarily support him in the way he may think.
Nigel Huddleston
There has been debate and disagreement on that, particularly as it relates to section 44 of the Income Tax (Earnings and Pensions) Act 2003 and so on. HMRC has outlined the policy stance on this. Although I understand that there is disagreement, the line is quite clear at the moment.
Andrew Bridgen
I agree with the Minister that there is responsibility on all individuals to ensure that their tax affairs are in order and the correct tax is paid, but what will he tell the House about HMRC’s responsibility to make the public aware that certain schemes may be seen as tax evasion and therefore do not qualify for tax relief?
Nigel Huddleston
That is another important point to which I will come in a moment. I will now make some progress before I take further interventions, because I fear that otherwise I may ruin my responses.
As I said, the way in which we recover tax owed is important, including the interactions that individuals have with key bodies such as HMRC. The Government recognise that there were areas where the impact of the original loan charge was disproportionate to its aims. We have listened to concerns raised by hon. Members in the years since the loan charge was announced, and I have had conversations with HMRC about how it has, for example, endeavoured to improve the tone of communication with impacted individuals.
Changes in approach were also made following Lord Morse’s review, about which I have heard many comments today. Many people may not be aware, but in September 2019, the Government asked the former Comptroller and Auditor General of the National Audit Office, Lord Morse, to lead an independent review of the loan charge policy and its implementation. Lord Morse had full discretion over how the review was run, who he consulted and the recommendations made. That consultation included the APPG and many of the people in the Chamber today.
Following the review, Lord Morse recommended notable changes to the policy, and the Government accepted 19 of his 20 recommendations. Those changes benefit about 30,000 people and meant that the loan charge would apply only to outstanding loans made on or after 9 December 2010, rather than April 1999. That was the date when the Government announced anti-avoidance legislation that put beyond all doubt that the schemes were taxable—a very important date. The loan charge would also not apply to outstanding loans made in any tax years before 6 April 2016 where a reasonable disclosure of the use of a tax avoidance scheme was made to HMRC, but HMRC did not take action—again, some have made that point today. Taxpayers were also given additional flexibility in the way they pay in line with their individual circumstances, but Lord Morse was clear that the loan charge was necessary and in the public interest, and should remain in force.
Sammy Wilson
Does the Minister accept that HMRC officials helped to service the Morse review, and restricted its grounds and parameters? The original of that review has not been disclosed, and we do not know how it was changed in the meantime. There are great doubts about whether or not the Morse review was ever an independent review, and ever came to conclusions that would have dealt with the issues and the unfairness we have been discussing today.
Madam Deputy Speaker (Dame Rosie Winterton)
Before the Minister replies, I do want to say that I have given him more time than would normally be allocated for a Backbench Business debate. Several colleagues have tried to intervene, but do be aware that we have another important debate to follow. I am sure the Minister will be cognisant of that fact.
Nigel Huddleston
I thank you for that guidance, Madam Deputy Speaker. I will try to proceed through the comments, because I am keen to make a few more points.
The Morse review followed the normal process for such reviews, in terms of the secretariat and support being provided by Government Departments. I have heard the comments made today, but I do not believe a case has been made for another review. I always stand ready to listen, but I think that review stood up quite well. I do not think anybody has impugned the integrity of Lord Morse today, but that review was thorough and significant, and 19 of the recommended changes were implemented. It was a hugely impactful and very thorough review.
Many hon. Members have also made points about tackling promoters, and some individuals facing the loan charge feel rightly aggrieved at the promoters and enablers who facilitated the use of these schemes. Promoters of tax avoidance schemes are parasites on the tax system—let us be in no doubt about that. They cause untold misery to the people they tempt into using those schemes, which almost never deliver the tax savings that were promised. The Government have prioritised tackling promoters of tax avoidance schemes and have given HMRC additional powers to do so, as a result of which many promoters have stopped promoting those types of scheme. One individual involved in the promotion of schemes subject to the loan charge has already been convicted, and others are currently under criminal investigation for offences linked to the loan charge.
Through Finance Acts in 2021 and 2022, the Government also introduced powers that allow HMRC to take action more quickly against promoters. Those include the power to publish details of promoters of tax avoidance schemes and others involved in the implementation of such schemes. In 2022, for example, HMRC issued a penalty of £1 million to a promoter of disguised remuneration schemes, and provisions included in the Finance Bill currently progressing through this House will make it a criminal offence to promote tax avoidance schemes after HMRC has issued a stop notice under the promoters of tax avoidance schemes rules. I am very pleased to say that those measures are receiving support from all parties.
The Government also consulted last summer on measures to address non-compliance in the umbrella company market—again, many hon. Members have commented on that market today—including tackling the types of schemes we have discussed. We will respond to that consultation in due course, but I can let hon. Members know that I and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), the Minister for small business at the Department for Business and Trade, are already discussing what the next steps should be. In the meantime, HMRC will continue to use its full range of civil and criminal powers to disrupt the operations of promoters.
Madam Deputy Speaker (Dame Rosie Winterton)
I really am getting anxious—we do need to move on very quickly. I call Neale Hanvey, if he can be brief.
Nigel Huddleston
The hon. Member will be aware that I cannot pre-empt the conclusions of the consultation or our response to it, but I hear his point.
Many Members have raised the personal and emotional impact of the loan charge on their constituents. This is something that I, the Government and HMRC do take very seriously. We recognise the distress that loan scheme users may feel when faced with large tax bills on their earnings, often many years after the event, which the scheme promoters wrongly told them they would be able to avoid. We are aware that some people who faced the loan charge have, very sadly, taken their own lives or harmed themselves. HMRC has made 10 referrals to the Independent Office for Police Conduct where a person has taken their own life, and following each referral, HMRC has conducted an internal investigation. Nine of the 10 investigations have concluded, and although no misconduct was found, HMRC is taking forward organisational learning from these matters to further strengthen the support provided in identifying individuals who need extra help. I completely understand the points raised by hon. Members and, indeed, I have myself heard about the emotional distress from individuals impacted by the loan charge. Colleagues have also commented on the nature and tone of interactions with HMRC in the past. Again, I have raised this with HMRC officials, and I will continue to make the point that they should adopt a more understanding tone.
Other points of clarification were raised by hon. Members, and I will endeavour to write to them because there were a few factual inaccuracies. For example, there is an appeals process—it is very important to make that point—and this is not an area in which criminal convictions are acted against the individuals. I will write to hon. Members because there is a lot to debate in this area, but it is very important to make sure that we do not scare people. For example, we must make it clear that there is an appeal process, and there is of course no cost for the appeal process. There are also other matters that I would like to make hon. Members aware of.
I am aware of the timing, Madam Deputy Speaker, and thank you very much for your patience during what has obviously been a very emotive debate today. Finally, I make an appeal. I would encourage those who still have disguised remuneration or loan charge liabilities to engage with HMRC. Thousands of people are still not engaging with it and are therefore not able to seek clarity or the support and guidance available, including emotional support, help from the Samaritans and other measures that HMRC has in place to identify and support vulnerable individuals. I repeat my thanks to hon. Members for their engagement, and I welcome continued engagement, including with the APPG and all MPs who have raised this topic with me on behalf of their constituents.
Madam Deputy Speaker (Dame Rosie Winterton)
I call Sammy Wilson, who has one minute to wind up.
Inheritance Tax
Nigel Huddleston Excerpts(7 months, 1 week ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
It is a pleasure to serve under your chairmanship, Sir Robert. I join others in congratulating the hon. Member for Hemsworth (Jon Trickett) on securing this debate. I also welcome the participation of other colleagues, in particular my hon. Friend the Member for Darlington (Peter Gibson), the hon. Member for Easington (Grahame Morris), my right hon. Friend the Member for North East Hampshire (Mr Jayawardena), the hon. Members for Wansbeck (Ian Lavery), for Coventry South (Zarah Sultana) and for Strangford (Jim Shannon) and my opposite numbers.
We have had a wide-ranging debate. Everybody knows, and the Government certainly recognise, that individuals do work hard to build up assets over their lives, and it is a very human instinct to want to pass that on to their loved ones, when they pass away. Yes, there has recently been a great deal of speculation in the media and on Opposition Benches about potential future changes to inheritance tax.
I am sorry to disappoint hon. Members and colleagues, although they will not be surprised to hear that I am not going to announce Government policy here today. The Budget is on 6 March, when the Chancellor of the Exchequer will set out any changes to the tax system in the normal way. There is a great deal of speculation and it would be inappropriate for me to comment.
David Linden
Could the Minister confirm something for us? We hear the argument all the time that Ministers will not speculate and that the announcement will be made in the Budget. The blunt reality, however, is that, whether it is speeches at the Conservative party conference, op-eds in The Sun newspaper, or cosy sit-downs with political journalists, the Government do comment on what they are doing before the Budget, do they not?
Nigel Huddleston
The hon. Member will be aware from his own party and the Opposition that there is a wide range of views within parties on policy. I am not going to speculate on tax policy. We always keep tax policy under review and always welcome insights, evidence, information and views when developing tax policy, as do the Scottish Government. We have heard a wide variety of views today. As I said, announcements will be made at the appropriate time and place.
Peter Gibson
Does this not clearly illustrate the distinction between those of us on this side of the House who would love to see inheritance tax reduced and ultimately abolished, and those Members on the other side who only want to tax working people more?
Nigel Huddleston
My hon. Friend makes an important point. We saw that in the recent autumn statement with the national insurance cuts. Our instinct and wish as Conservatives is to lower taxes, wherever appropriate and possible. We are also responsible with public finances and recognise that every single penny of Government spending is paid for through taxation, either immediately or in the future as deferred taxation—that is, borrowing money. We need to, and do, respect every single penny, because it is the public’s money, not Government money, that we are spending. Taxation is an important issue, and I am glad we are talking about it today. I am confident that it will be a major topic in the run-up to the election.
The Government support wealth creation but also understand the importance of ensuring that wealthy individuals make a fair contribution and pay tax appropriately. We do not have a specific wealth tax, as some other countries do, but if we look at the facts, it is clear that the Government do tax wealth, in a number of ways that generate substantial revenue, while remaining fair. For example, OBR forecasts for 2023-24 indicate that we can expect inheritance tax revenues of about £7.6 billion, capital gains tax revenues of £16.5 billion and stamp duty tax revenues of about £13 billion.
We also have a progressive income tax system, so that the top 5% of income taxpayers pay about half of all income tax. The top 1% is projected to pay about 28% of all income tax. It is also important to stress that in 2010, under the previous Labour Government, the top 5% accounted for 43% of income tax and the top 1% for 25%. Therefore, the system under the Conservatives is more progressive.
Grahame Morris
The Minister is putting forward an interesting proposition about progressive policies and taxation. Has he had a chance to consider whether council tax is a progressive form of taxation, when a millionaire, living in a £20 million property in Belgravia, very close to this place, pays less in council tax than my mother in a terraced colliery house worth about £50,000 in Murton?
Nigel Huddleston
The hon. Member needs to recognise that tax needs to be taken in the round. There is a variety of taxations—on income, wealth and other areas. Taxation is a broad topic, and individual taxes affect people differently. The hon. Member for Glasgow East (David Linden) made the point about inequality as well, but it is important to remember that, on average, households in the lowest income decile receive over four times more in public spending than they pay in tax. Nobody doubts the importance of a progressive tax system; my point was that the Opposition often try to make out that the tax system was more progressive under them, but it was not. The facts make that incredibly clear.
Nigel Huddleston
If the hon. Member will give me a moment to proceed, I will allow him to come in later, because I have other points to make in response to some of his comments.
Inheritance tax is a wealth transfer tax and applies to the estate of the deceased. Transfers made in the seven years before death are also taken into account. The estates of all individuals benefit from a £325,000 nil-rate band, and the targeted residence nil-rate band is a further £175,000 available to those passing on a qualifying residence on death to their direct descendants such as children and grandchildren. That means that qualifying estates can pass on up to £500,000, but the qualifying estate of a surviving spouse or civil partner can pass on up to £1 million without an inheritance tax liability. That is because any unused nil-rate band or residence nil-rate band is transferable to a surviving spouse or civil partner.
Peter Gibson
Could the Minister specifically address the point I made about the inherent unfairness to those who do not or are unable to have children, in respect of the nil-rate band that applies to them?
Nigel Huddleston
I thank my hon. Friend for his comments. Again, I cannot make any promises today, but I understand the important point he is making about the nil rate. Changes have been made over the years in that area, and I will come on to that point later.
The vast majority of estates pay no inheritance tax. The combination of nil-rate bands, exemptions and reliefs mean that only 5.1% of UK deaths are forecast to result in an inheritance tax liability in 2023-24. That is forecast to increase slightly to 6.3% in 2028-29: it is still a relatively small number, but it makes an important contribution to the public finances. It is forecast to raise £7.6 billion in 2023-24 and £9.9 billion in 2028-29. That revenue is important because it is spent on a whole variety of public services, levelling up and many other areas of Government policy.
The headline rate of inheritance tax is 40% but, as the hon. Member for Wansbeck acknowledged, a 36% rate is charged when at least 10% of the net estate is left to charity. That is an important point of this system as well. It is important to remember that the rate is charged on the part of the estate that is above the threshold and after the application of reliefs and exemptions.
The Government have made changes since 2010 that have increased the threshold to £1 million, made the system fairer and reduced administrative burdens. For example, in 2017 the Government introduced the residence nil-rate band, mentioned by my hon. Friend the Member for Darlington, to make it easier to pass on the family home to the next generation, but we restricted the residence nil-rate band for the wealthiest by tapering it away for estates over £2 million. More recently, we made changes so that for deaths from January 2022, over 90% of non-paying estates each tax year no longer need to complete inheritance tax forms when probate or confirmation is required. At the same time, we have tightened the rules to make sure that individuals make a fair contribution and pay the tax owed. For example, in 2017 we introduced new rules to limit abuses of the rules by people with non-domicile status who used complicated structures to make their UK homes look like offshore assets.
Several hon. Members talked about loopholes and avoidance. It is important to distinguish between the legitimate use of reliefs and those who engage in avoidance by bending the rules to gain a tax advantage that Parliament and none of us ever intended. It is not true that the wealthiest do not pay inheritance tax: national statistics for the tax year 2020-21 show that taxpaying estates valued at over £1 million accounted for 81% of the total inheritance liability.
David Linden
If it is not true that the wealthiest do not pay inheritance tax, can the Minister tell us how much the King paid upon inheriting the Duchy of Lancaster?
Nigel Huddleston
As I said, estates valued at over £1 million paid 81% of all inheritance tax.
I am aware of the time, and I need to leave a minute or two at the end for the wind-up, but I want to make a final point. We have had a very good discussion about inheritance tax, but we have had an inkling of the differences between the political parties. I am afraid that some Opposition Members started to delve into the politics of envy, which is a well-trodden path for the Labour party, by commenting on elitism, Oxford University and so on. Well, I can tell them that I went to Oxford, and that my Labour-voting trade unionist father, my mum, who worked on the tills at Asda, and the schoolteachers at my comprehensive, instead of being snide about the opportunities and aspiration that I had, actually applauded and supported social mobility. That is what we on the Conservative Benches do. It is disappointing to hear the tone of the Opposition.
The hon. Member for Ealing North, in another well-trodden argument, started trying to lecture us on responsible finances. We still have not had an answer to the question of where the £28 billion of spending promised by the Opposition would come from. We are more than happy to debate the issue, because we have a very clear plan for the economy: we had the very welcome and well-received national insurance cut at the autumn statement, which I do not believe the hon. Member opposed, and nor did he oppose the significant support that we gave during covid or the significant support that we have given households during the cost of living crisis. That all needs to be paid for, which is why we have higher taxes than we would like. But we are on a path to reducing them, because that is what Conservatives do. I thank hon. Members for their contributions; all their comments have been taken on board.
Sir Robert Syms (in the Chair)
I call Jon Trickett to make a brief winding-up speech.
Tax Simplification Update
Nigel Huddleston Excerpts(7 months, 1 week ago)
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The Financial Secretary to the Treasury (Nigel Huddleston)
The Government want the tax system to be simple and fair and to support growth, and have issued a clear mandate to officials in HM Treasury and HMRC to put tax simplification at the heart of policy making.
At autumn statement 2023, the Government published their four main objectives on tax simplification:
Tax rules should have a clear consistent rationale and be easy to understand.
The burden of compliance and administration should be proportionate for taxpayers and HMRC and it should be easy for taxpayers to get their tax right.
Taxpayers should be able to understand their obligations and options, particularly at key life-cycle points, such as when they do something for the first time or infrequently.
Tax policy should not unnecessarily distort the decisions of taxpayers and result in poorly informed choices.
The Government also announced a comprehensive set of changes to make it easier for businesses and individuals to interact with the tax system, reducing the time and money spent on tax administration and allowing them to focus on their businesses and daily lives.
Today, the Government are setting out further measures to simplify the experience of taxpayers, using the efficiencies of digital services to drive public sector productivity.
Enhancing the non-reimbursed expenses service
Each year, HMRC receives 1.1 million claims for tax relief from employees on their expenses. These claims are submitted through existing online services, or via digital or paper forms, resulting in some claims being manually processed. To simplify the process for many employees claiming tax relief on their expenses, and for HMRC to automatically process claims, the Government are designing a new, online service for employees to claim tax relief on all of their expenses in one place, meaning that employees will get relief sooner. HMRC will provide further details later this year.
Mandating the payrolling of benefits in kind
The Government will mandate the reporting and paying of income tax and class 1A national insurance contributions on benefits in kind via payroll software from April 2026, building on the progress already made on the Government’s ambition to fully digitalise the reporting of benefits in kind. Mandation will simplify the tax affairs of 3 million people and reduce the need for them to contact HMRC.
This measure will reduce administrative burdens for thousands of employers and HMRC by simplifying and digitising the process of reporting and paying tax on all employment benefits. It will remove the need for 4 million end-of-year returns to be submitted to HMRC. HMRC will engage with stakeholders to discuss our proposals to inform design and delivery decisions, and draft legislation will be published later in the year as part of the usual tax legislation process. HMRC will also work with industry experts to produce guidance, which will be made available in advance of 2026. Further information will be published via usual communication routes, such as through employer bulletins.
Amending the parents’ NI credit (child benefit)
As announced in April 2023, the Government will legislate to introduce a route for people to apply for national insurance credits for parents and carers for tax years where they have not claimed child benefit, to ensure that people do not miss out on their state pension entitlement. The credit will add qualifying years of national insurance where eligible, which will support future state pension eligibility. Individuals will be able to claim this credit from April 2026. The eligibility for the credit will be closely based on child benefit eligibility criteria. Transitional arrangements will ensure that those affected since 2013 are still able to claim. Going forward, applications will be available for six years following the relevant tax year. The Government will bring forward secondary legislation as soon as possible.
Today, the Government are also exploring further opportunities to make the tax system simpler and fairer.
Tax simplification for alternative finance
The Government are today publishing a consultation proposing changes to the capital gains tax rules that apply to alternative finance arrangements. The proposed changes seek to amend those rules so that where property is used as collateral for the purposes of raising finance, the CGT outcome is the same whether alternative finance or conventional finance is used. The consultation also asks whether there are any implications for capital allowances. The consultation will be open to responses for 12 weeks, closing on 9 April 2024.
Reform of the UK law in relation to transfer pricing, permanent establishment and diverted profits tax
The Government are today publishing a summary of responses from a consultation undertaken last summer, which proposed reforms to transfer pricing, permanent establishment and diverted profits tax legislation. The aim is to develop simpler, shorter legislation that is easier to understand and to administer and provides greater certainty for both HMRC and taxpayers. The Government will continue to engage with stakeholders on the proposed approach set out in the summary of responses with a view to publishing draft legislation for consultation later in 2024.
[HCWS189]
Finance Bill
Nigel Huddleston ExcerptsWednesday 10th January 2024
(7 months, 2 weeks ago)
Commons ChamberRead Full debate Finance Act 2024 View all Finance Act 2024 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: Committee of the whole House Amendments as at 10 January 2024 - (10 Jan 2024)
The Financial Secretary to the Treasury (Nigel Huddleston)
This Government’s aim is to grow the economy for the good of everyone by removing barriers to private sector investment and delivering a tax system that is supportive of business. At the spring Budget 2023, the Chancellor set out his approach for a highly competitive tax regime. By announcing a package of generous tax incentives, combined with a rate of corporation tax that remains the lowest in the G7, this Government have ensured that the UK continues to be one of the best places in the world for businesses to grow and invest.
The Bill marks our next step in making the UK one of the most competitive tax systems among major economies by enhancing the support that the corporation tax system provides to businesses that drive growth by making long-term investments. It meets the Government’s commitment to introduce permanent full expensing, as announced at the autumn statement, solidifying our international competitiveness and creating the certainty that businesses have told us they need in order to confidently invest. The Bill will also drive UK business innovation by merging the existing research and development expenditure credit scheme with the small and medium enterprise scheme. Merging those schemes will simplify and improve the system for supporting cutting-edge research and development.
Turning first to clause 1, at spring Budget 2023, the Government introduced two new temporary first-year capital allowances for qualifying expenditure on plant or machinery. The first was a 100% first-year allowance for so-called main rate expenditure, known as full expensing, which allows companies to write off the full cost of plant and machinery in the year that the cost is incurred. The second was a 50% first-year allowance for expenditure on special-rate assets such as lighting systems, thermal insulation and long-life assets, allowing companies to write off half the cost of an asset in the year that it is incurred, with the remaining balance written down at 6% in every year afterwards.
The Chancellor was clear that his long-term ambition was to make those new reliefs permanent once the fiscal and economic conditions allowed, and at the autumn statement he confirmed that he was able to do just that. Clause 1 delivers that ambition, making both full expensing and the 50% first-year allowance permanent by removing the end date of 31 March 2026. That means that companies will be able to permanently benefit from full expensing. It solidifies our position as joint top of the rankings of OECD countries with regard to plant and machinery capital allowances, and means we are the only major economy with permanent full expensing.
The change will give companies the certainty they need to make long-term investments, and responds to calls from the CBI, Make UK, Energy UK and 200 other business groups and leaders, and from companies including BT Openreach, Siemens and Bosch, which have said that making the policy permanent would be the single most transformational thing the Government could do for business investment and growth. According to the Office for Budget Responsibility, it will generate almost £3 billion of additional business investment each year and £14 billion over the course of the next five years. The forecast is that GDP will be 0.1% higher by the end of the forecast period and slightly below 0.2% higher in the long term as a result.
Richard Fuller (North East Bedfordshire) (Con)
I applaud the Government’s initiative to make full expensing permanent, but of course we know there will be a general election within the next 12 months. Has my hon. Friend heard from the Opposition whether, if they were to be in Government, they would maintain it?
Nigel Huddleston
My hon. Friend is incredibly knowledgeable about this area through some of his previous business and ministerial experience, and that is a question I am intrigued to hear answered by the Opposition shortly. I believe it is vitally important, because the whole point is to give businesses the confidence to invest in the long term, and certainty is key to the investment decisions being made.
Richard Fuller
Further to that point, does my hon. Friend not think, as I do, that it is an aspect of a responsible Opposition to be clear, right now as we are debating this in this House, what they would do were they to be in Government?
Nigel Huddleston
I think my hon. Friend is kicking off what is likely to be a long debate over the course of the next year, but an important one for our constituents and businesses. The economy will play a pivotal part in discussions this year. It is very clear what we are doing: we are implementing vital changes, asked for by business and in response to business, to provide that business certainty and an environment in which they and therefore our constituents can thrive. I do not think any of us want to put that at risk. However, without the clarification and confidence from the Opposition about what they might do, these issues will be raised and the uncertainty can persist. We on the Government side of the House are committed to this, and my hon. Friend is right to make that clear.
Nigel Mills (Amber Valley) (Con)
I think the Minister just read out that the assessment is that this measure will create £3 billion additional investment per year. Is that right? If I remember the Green Book correctly from the autumn statement, the annual cost of this measure was £11 billion, which I think equates to £55 billion of extra capital expenditure. Is he saying that £52 billion of that £55 billion is just bringing forward investment that would have happened later, and £3 billion is new, or have I somehow got my numbers wrong and this will generate a load of investment that would not otherwise have happened?
Nigel Huddleston
My hon. Friend is right to point out the timing element with both full expensing and R&D; I will come on to R&D in a moment, because I think that is the £55 billion figure he mentions, but these measures, particularly the full expensing, will of course have a long-term impact over a long period of time. The cost is up-fronted, but the benefit is over a long period, and anyone who has worked in business understands that. He is right to point out the anomaly, and it is a very important point because a lot of people probably would not understand it, but the fact that the OBR has highlighted the incremental impact on the economy overall shows that there is a clear and transparent net benefit. The timing of the impact changes, but we are talking about additional investment right away, because we will be giving businesses the confidence to be able to make those decisions and invest immediately.
Matt Rodda (Reading East) (Lab)
I appreciate the Minister’s comments so far. Can he confirm how many times policy has changed in this important area since 2019? While he is making some further points today, it seems that Government policy has changed quite erratically, and that in itself is difficult for businesses to respond to when they are looking for certainty in planning for the long-term.
Nigel Huddleston
I agree that certainty for business is pivotal, but with both full expensing and R&D the Government, the Chancellor and others have been indicating the direction of travel for some time and therefore giving increased certainty. As I have said, it was mentioned a while ago that we intended to pursue the policy of full expensing when the economic circumstances allowed, and now they do. R&D, which I will come to in a minute, has been discussed for quite a long time and is the result of extensive co-operation with industry.
It is also the reality, though, that Government policy needs to change in response to the nature of a changing economy and to things such as digital, the cloud and so on. When it comes to other investments, we need to make sure that new and emerging policy areas are covered as well. We have seen today, as we saw in the autumn statement, a very clear direction of travel from the Conservative side of the Chamber, which is about incentivising businesses and cutting taxes. Permanent full expensing also simplifies the capital allowances regime overall, as companies can claim the full cost in year one, reducing the need to claim writing-down allowances year on year.
Turning to clause 2 and schedule 1, the Government have also announced the closure of the R&D tax relief review launched in 2021—the point I was just making to the hon. Member for Reading East (Matt Rodda)—alongside a set of changes to simplify and improve the system. Clause 2 makes changes to merge the current R&D expenditure credit and SME schemes for expenditure in accounting periods beginning on or after 1 April 2024, simplifying the system and providing greater support for UK companies to drive innovation.
The merged scheme will have an above-the-line mechanism similar to the R&D expenditure credit, with a rate of 20%. That will make the benefit more visible and easier for companies to factor into their investment decisions. Additionally, small and medium enterprise lossmakers will now be able to carry forward their losses rather than having to surrender them, which will give a total benefit of up to £45 per £100 of R&D expenditure.
There will also be a reduction in the rate at which the merged scheme credit is taxed for lossmakers, from 25% to 19%. That is worth around £120 million per annum to non-intensive lossmakers and will increase the up-front cash benefit for lossmakers. Subcontracting rules in the merged scheme will allow the company taking the decision to do R&D to claim relief on contracted-out R&D. That approach is based on the current SME scheme, which was identified as the best option in the consultation we delivered, and has been refined further following engagement with industry last summer.
Subsidy rules will also be removed, allowing SMEs to claim relief for work for which they receive a grant of a subsidy. This represents an increase in generosity for SMEs as well as being a major tax simplification.
The Government are also legislating for enhanced support for loss-making R&D-intensive SMEs. That was announced at spring Budget 2023 and will benefit 23,000 SMEs a year by providing further support to the most R&D-intensive SMEs while merging the current schemes. The Government are promoting the conditions for enterprise to succeed. Companies claiming the existing SME tax relief will be eligible for a higher payable credit rate of 14.5% if they meet the definition for R&D intensity.
At the summer statement, the Government announced several improvements being made to that enhanced support. The R&D intensity threshold is being lowered to 30% from 40% from April 2024, meaning that around 5,000 more companies will benefit from the support. A one-year grace period is being introduced, providing greater certainty by ensuring that companies that dip under the 30% threshold will continue receiving relief for one year. The same subcontracting rules as the merged scheme will apply to this enhanced support, further helping to simplify the system with one set of rules that both SMEs and larger companies will follow.
Overall, R&D reliefs will support an estimated £55 billion of business R&D expenditure in 2028-29—a 25% increase from £44 billion in 2021-22. Expenditure on R&D reliefs is forecast to increase in every year of the scorecard period. We will also restrict nominations and assignments for R&D relief payment. That measure ensures that genuine businesses get the payment for their R&D claim directly, rather than receiving it through an agent, and is designed to benefit genuine claimants and reduce non-compliance.
Subject to limited exceptions, no R&D tax credit payments will be made to nominee bank accounts, and any R&D tax credit payments must be paid directly to the company that claims for the R&D, so claimants will now receive their payments directly, giving them more control. That will ensure that the person claiming the relief has better oversight of the claim and receives the money into their account quicker. Claimants will also be clearer on exactly how much money is being charged by their agents, rather than just receiving a net amount after fees have been deducted. That builds on previously announced measures and policy changes to help to ensure greater company control over R&D claims.
The Government are committed to making the UK the best place in the world to do business. Full expensing and R&D tax relief support businesses to grow and invest, which will boost productivity and economic growth. That remains the key way to raise everybody’s living standards and to fund high-quality public services throughout the UK. I commend clauses 1 and 2 and schedule 1 to the Committee.
James Murray (Ealing North) (Lab/Co-op)
Let me start by briefly considering the context in which we are debating clauses 1 and 2. As we know, the Bill follows the Chancellor’s statement on 22 November last year, in which he claimed that he was delivering an “autumn statement for growth”. As the Committee may remember, the Office for Budget Responsibility confirmed on the same day that growth forecasts had been cut by more than half for the coming year, cut again for the year after that, and cut yet again for the year after that. Independent analysts confirmed that, even after all the changes the Government had announced, personal taxes would still rise. In fact, personal taxes are now set to rise by £1,200 per household by 2028-29, with the tax burden on track to be the highest since the second world war. Despite people across the country paying so much in tax, public services are collapsing, the NHS is on its knees, and more and more families are struggling to make ends meet.
That was the context in which we considered the Bill on Second Reading just before Christmas: 13 years of Conservative economic failure had left people across Britain worse off. The only thing to have changed since then is that we now face 14 years of Conservative economic failure. It may be a new year, but those in the governing party face the same cold truth: nothing they can say or do now can repair the damage that they have done to our economy.
People in businesses across Britain deserve so much better. As a foundation of better management of the economy, our country needs and deserves stability, certainty and a long-term plan. It is for that reason that, although we welcome the fact that clause 1 makes full expensing permanent, which we have long called for, it simply cannot make up for the years of uncertainty that businesses have faced. Businesses need stability and predictability to help them plan for growth, and their long-term planning has been held back because the Government have been chopping and changing business taxes and reliefs year after year, with no evidence of anything resembling a long-term strategy.
Nigel Mills
It is a pleasure to speak in this debate. I want to direct my remarks to clause 1, on permanent full expensing for the purchase of plant and machinery, which I discussed during the autumn statement and on Second Reading.
This is actually quite a radical and expensive policy. We have, probably for longer than all our lifetimes, given companies relief for capital expenditure using capital allowances. That was originally quite a generous 25% in the first year—I suspect that most plant and machinery had a longer life than that when the rules were produced. We have chosen to do that for all these years, rather than just letting a business deduct its own accounting calculation of depreciation, because we did not want the manipulation of tax deductions by businesses doing their tax returns. We chose to do it this way.
The tool that Governments of all colours for decades have had when the economy hits trouble is to give first-year allowances and various enhancements. I remember a 40% first-year allowance and a 50% first-year allowance. We have had full expensing up to £1 million, as the shadow Minister referred to. That has been the way of incentivising investment in a period of economic recovery for probably as long back as there has been a toolkit.
Now we have landed on permanent full expensing, so businesses get full relief on plant and machinery spend in the first year. What are the Government expecting to happen differently here? Are we expecting capital investment by businesses of more than £1 million a year that otherwise would not be economically viable and would never have happened? Are we expecting investment to be brought forward and to take place earlier than it otherwise would have? That would be entirely welcome and would probably modernise businesses, protect jobs and give them a chance to grow in a way that they perhaps would not have had, which is not a bad policy aim at all. Or are we just giving business an earlier tax relief than they otherwise would have had, whereby they bank that and are happy but it does not change behaviour?
It is hard to get behind the numbers on this measure in the Green Book. As I said earlier, the estimate at the end of the five-year period, and probably the first full year that making this permanent will make a difference, is a tax cost of £10.9 billion just for this measure. If we run the numbers, bearing in mind that businesses will already have had 25% tax relief on that same expenditure in that year, that means we expect a £55 billion higher claim to get tax relief in that financial year than otherwise would have happened. However, the Minister said that only £3 billion of that is estimated by the OBR to be additional investment that would not otherwise have taken place at some point. It suggests that we have a lot of investment being brought forward with a lot of more generous tax relief that would have happened anyway. Will the Minister explain what the Government are aiming to achieve and what is being forecast? Is the OBR being unduly cautious? That would enable us to understand how we judge whether the measure has been successful.
Are we expecting to see whole loads of investment in plant and machinery that never would have been viable before, or are we expecting to see it brought forward? If what we are getting is brought forward, at some time the cost should start to taper down, because this is not a new tax relief that businesses would not have already had; it is just an acceleration of tax relief and businesses will pay more tax in all subsequent years, because they are not getting the relief they used to get. The measure could cost £11 billion in the first year and gradually that would level down and in the fullness of time there would be no more annual cost, in effect. Can the Minister clarify that?
It is not immediately clear how the Government plan to assess whether the measure has worked or is working. I assume that from electronic corporate tax returns we can track down to the pound the amount of investment claimed for full expense relief every year. We could have a report within six months of the end of a calendar year on how much of these 100% allowances has been claimed and compare that with the total amount claimed for capital allowances in whichever preceding years we like. We could see whether full expensing was driving behaviour change. Will the Minister talk us through what he expects to happen and how he will assess whether this has been an effective way of boosting productivity and increasing investment for £11 billion a year? It is probably one of the most sizeable line entries we have seen in a Finance Bill in my 14 years here. Normally we expect the big number to be a tax cut for individuals, and this measure is significant.
As we are making this measure a permanent feature of our tax system, it shines a light on what we are trying to get from our corporation tax system. There will not be any kind of compliance saving. The Minister made a brave attempt at saying there might, but effectively all that will change is that the number that a business currently puts in its additions to its writing down allowance pool will now be put in the 100% first-year claim box. It is the same number in a different box; that is the only compliance change we have here. It throws into question some previous policy decisions we have made, because for a business to get full benefit from this, it needs to be paying enough tax to use the full relief in that first year.
If a business cannot use the full relief, the incentives are not as powerful as they would otherwise be, because then the option is effectively to carry that excess deduction forward, but we introduced rules a few years ago that are strict on how many losses a business can use in a year. If we really think that giving people the earliest possible cash tax benefit for capital investment drives investment, we should probably take away that restriction on using losses, so that businesses can get the benefit as early as possible and not have it spread over a number of years going forward. Will the Minister explain whether the Government will look at that and make sure we are not accidentally undoing some of the benefit we are seeking to get?
My second question is: what do we do with the legacy writing down allowance pool that relates to plant and machinery expenditure for God knows how many past years? On a reducing balance basis of 25%, it takes many, many years to get full tax relief for expenditure, so every business will have a large pot of money that it has not yet had tax benefit for. Are we expecting them to run that down at 25% reducing balance a year and still be doing so in 23 years’ time, by which point no one will have any idea what on earth that balance ever was? Or should we say, “That is a bit of a nonsense. Why do we not just let you take the whole balance at 20% a year over the next five years and finish that problem off, because we do not need to be focusing on that?”? We could find any number we like there, but it would draw a line under that past expenditure in a way that genuinely simplifies things.
We then have the question of, “What do we do with capital expenditure on items that are not plant and machinery?” The tax relief we give on structures and buildings is not generous, but if we are trying to drive an increase in productivity and large businesses to invest in new gigafactories to build batteries for electric cars or for electricity storage or whatever, do we not want to incentivise them to build the factory building as well, rather than either giving them no relief or giving it over a long time? If we are spending £11 billion a year to encourage investment in plant and machinery, should we not spend a little money on trying to encourage other things that are key for industrial investment to take place, by being a bit more generous on buildings and structures? Has the Minister any thoughts on that?
The Government did a capital allowances review only a year or two ago, which did not look at permanent full expensing as one of the options, but it would be interesting to see whether they have had any further thoughts on that. We are now asking every business to go through and track every item of capital that they spend and treat it differently in their tax return from how they treat it in their accounting records. Then we have all manner of different laws depending on whether it is a long-life asset, a short-life asset, a car or an environmentally friendly car—I could go on. For the amount now at stake, and given that we have given full relief for plant and machinery, which is the biggest amount, do we really need all that cost and complexity? Or should we just say for all those other items, “You can just have your accounting calculation”? Okay, businesses might take it a bit quicker than we would like, but in actual fact the cost of that is not all that material in the grand scheme of things.
We could move to a system where the only adjustment someone has to make to their tax return is to claim a very generous tax relief on plant and machinery, and they would not have to touch anything else. That would be a more coherent corporation tax regime, now that we have spent all this money incentivising plant and machinery. It would then genuinely be a compliance saving for a business in that situation.
I support the measure and truly hope that it works, but, as a significant amount is being spent, it would be helpful to understand what we are trying to achieve and how we will know whether we have been successful. I hope that the Government will move on to think about how we can slightly recast our tax system so that it makes sense, having made this radical and generous change.
Nigel Huddleston
I thank hon. Members for their contributions. I will take a few moments to respond to quite a few questions raised during the debate. First, I reassure hon. Members that further guidance will be provided on these schemes. Of course, we do not want all the schemes just to exist; we want them to be used so that they have a real-world impact. More information will therefore be coming out about a variety of areas over a period of time.
I gently remind the hon. Member for Ealing North (James Murray), who yet again took the opportunity to talk the UK economy down—the Opposition always do—that every single Labour Government have ended with unemployment higher than what they inherited from the Conservatives. I think the public are well aware of that pattern.
I turn to the many questions raised. I thank my hon. Friends the Members for Amber Valley (Nigel Mills) and for Erewash (Maggie Throup), and indeed Opposition Members for their contributions. On timing, the Government have been clear since the merged scheme consultation was published in January last year that the intended implementation date for the scheme is April 2024. Importantly, in response to that consultation and in recognition of comments, the merged scheme will apply to accounting periods starting on or after 1 April 2024 rather than to expenditure incurred from that date. Again, we will provide further guidance on that.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
Following on from the comments of the hon. Member for Amber Valley (Nigel Mills) about the impact of the schemes and given the Federation of Small Businesses’ request for some publication about the impact of these tax reliefs on R&D levels, will the Minister also publish a report on their impact on different regions and subregions?
Nigel Huddleston
All taxes are kept under review, as are their impacts, so some of the calls for further analysis are not necessary because we do that as a matter of course. It is important to stress that many external studies have found that when full expensing has been introduced in other countries, it has been very effective in supporting investment. Of course, the OBR forecasts predict a boost of £3 billion each year. The analysis of the impact of the super-deduction is already taking place, but companies have 12 months from the end of their accounting period to amend their tax returns, so HMRC will not have complete data on the impact of the super-deduction until 2024. However, we will provide further analysis in due course.
My hon. Friend the Member for Erewash mentioned a whole range of real-world impacts from these measures and the previous measures, including the super-deduction, as well as, importantly, the annual investment allowance of £1 million, which affects the 99% of smaller businesses that can effectively benefit from full expensing. In the autumn statement, we announced full expensing for larger businesses: the top 1%, who conduct about 80% of full investment.
I am aware of time, but will cover a couple of other key points that were raised. My hon. Friend the Member for Erewash raised subcontracting. Again, we engaged extensively with stakeholders on this issue over the summer, and the Government have developed an approach that will allow the person taking the decision to do R&D to claim that relief. That was the preferred result of the consultation. However, an exception will apply in the important area that she mentioned of companies doing R&D—such as in a clinical trial—in the UK for another company that is ineligible for relief because, for example, it is an overseas customer. That is to make sure that the impact is there for everyone to benefit from. The hon. Member for Ealing North also mentioned partnerships; a corporate partner is eligible for full expensing, but an unincorporated partner is not. Again, the annual investment allowance of £1 million covers the investment needs of almost all unincorporated partnerships.
The hon. Member keeps harping on about taxes rising. I strongly advise him to look at his December payslip and compare it to the one he will get shortly. Maybe he will have the decency to come to me and tell me whether his tax is lower or higher. Each fiscal event needs to be taken separately. At the last one, the autumn statement, we cut taxes—national insurance is down 2p. [Interruption.] If the hon. Member does not believe me, I pose this challenge to him: if his payslip shows that his taxes are lower, perhaps he will do me the courtesy of coming to me and apologising, or give the difference to a charity, to put his money where his mouth is.
We do not believe that new clause 1 is necessary because the information has already been published in the tax impact and information notes alongside each change, which give a clear explanation of the policy objectives, along with details of the implementation costs for both HMRC and businesses. Therefore, the new clause is not necessary. I urge the House to reject it, and I commend clauses 1 and 2 and schedule 1 to the Committee.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2 ordered to stand part of the Bill.
Schedule 1 agreed to.
New Clause 1
Review of reliefs for research and development
“(1) The Chancellor of the Exchequer must, within three months of this Act being passed, publish a review of the implementation costs of the measures in section 2 incurred by—
(a) HMRC, and
(b) businesses.
(2) The review under subsection (1) must include details of the implementation costs of all measures related to credit or relief for research and development that have been introduced since December 2019.”—(James Murray)
Brought up and read the First time.
Question put, That the clause be read a Second time.
The First Deputy Chairman of Ways and Means (Dame Rosie Winterton)
With this it will be convenient to discuss clause 27 stand part.
Nigel Huddleston
I will take clause 27 first. The changes that it makes clarify how VAT and excise legislation should be interpreted in the light of changes made by the Retained EU (Revocation and Reform) Act 2023, which came into effect on 1 January. The Act ends the supremacy and special status afforded to retained EU law in the UK. As we made clear when it was introduced, the Government are taking a bespoke approach to UK VAT and excise law. In line with the 2023 Act, clause 27 confirms that, for VAT and excise, it will no longer be possible for any part of any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it is incompatible with EU law. In other words, it will no longer be possible for businesses to rely on EU law where it is in conflict with domestic law. The measure also provides that UK VAT and excise law continues to be interpreted as Parliament intended, drawing on rights and principles that currently apply in interpreting UK law.
Nigel Huddleston
I think some hon. Members may have tried to expand the debate strictly beyond the scope of the measures we are debating; for understandable reasons, I will stick strictly to the clauses.
My right hon. Friend the Member for Hemel Hempstead (Sir Mike Penning) made some important points about ensuring that we take full advantage of the benefits of leaving the European Union. Of course, we have already made progress in that area by removing, replacing and improving retained EU law, including revoking all direct EU regulations in relation to customs duty, introducing a UK tariff and domestic customs regime, introducing VAT relief for women’s period products and for the installation of energy-saving materials, and so on. On the points he made regarding potential future changes to VAT, we of course always keep tax under review. He will forgive me for not making tax policy at the Dispatch Box this evening, tempted as I am; that is the purpose of key fiscal events. I will absolutely commit to meeting my right hon. Friend, as I am always willing to listen and hear comments.
Comments were made about encouraging the use of greener fuels. The Government encourage the use of renewable fuels through the renewable transport fuel obligation, which incentivises the use of low-carbon fuels and reduces emissions from fuels supplied for use in transport and non-road mobile machinery. On the point about the Court of Justice, the European Union (Withdrawal) Act 2018 provides that Court of Justice of the European Union judgments issued since the end of the implementation period are not binding on UK courts. On the point about codifying everything, trying to codify all interpretative effects into black and white UK law would of course be a huge endeavour and would require a complete review of all that legislation, taking many years and still leaving significant tax revenue at risk.
Question put and agreed to.
Clause 25 accordingly ordered to stand part of the Bill.
Clause 27 ordered to stand part of the Bill.
The Deputy Speaker resumed the Chair.
Bill (Clauses 1 and 2, schedule 1, clause 21, schedule 12, clauses 25, 27 and 31 to 34, and schedule 13) reported, without amendment, and ordered to lie on the Table.