Long-term Capital for Business

Peter Dowd Excerpts

Tuesday 15th January 2019 Westminster Hall

[Peter Dowd (Bootle) (Lab)]

It is a delight to see you in the Chair, Mr Walker.

I congratulate the hon. Member for Stirling (Stephen Kerr), who I am glad to see is back in his rightful place after his illness before Christmas, on securing this debate, and I thank the hon. Members for Ochil and South Perthshire (Luke Graham), for Strangford (Jim Shannon), for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry), which are all beautiful places, and for Motherwell and Wishaw (Marion Fellows), who has just spoken, for their contributions to the debate.

Patient capital must be set in the context of a wider economic perspective and not just seen on its own. The structure of our economy has fundamentally changed over the past four decades. In the early 1980s, 26% of UK jobs were in manufacturing compared with only 8.1% now; in 1948, 46% of GDP came from the service sector and now it is 80%. That is largely due to the decisions of successive Governments, which effectively said that as long as headline growth was strong and the welfare state redistributed resources sufficiently, it did not matter where growth came from.

However, the financial crash and its aftermath have clearly demonstrated that that theory was wrong, and that reliance on an unfettered and highly volatile financial sector has not worked for the vast majority of people and businesses. Headline growth may have recovered, but it is still pretty sluggish, and nothing exemplifies that better than the way that banks have actually shifted their activities away from lending to businesses.

The Institute for Public Policy Research’s Commission on Economic Justice said:

“Across a whole range of economic indicators, the UK economy exhibits serious underlying weaknesses. On investment, research and development, trade and productivity, we perform worse than most of our European neighbours—and have done so not merely over the last ten years, but for much of the last 40.”

As the hon. Member for Stirling has said, productivity and investment are stagnant. That seems to be the way of the economy at the moment and it has got to change. A 2017 report by the ScaleUp Institute highlighted significant capital barriers to the growth of business, beyond the start-up phase, in the UK. And of course there is Brexit, but I will leave that to other people to talk about; I will not do so now.

Other countries use state direction of innovation and investment to carve out vital areas of expertise in robotics, electronic cars, clean-tech and the smart city. Labour has a plan for a national transformation fund and £250 billion of lending by our new national investment bank and a network of regional development banks, which will enable us to transform our economy over the first two terms of a Labour Government. Reconnecting the financial sector to the economy of research and development and production will transform our financial system.

We will establish a strategic investment bank, which is the sort of bank that the hon. Member for Stirling thinks is good, and he is absolutely right in that regard. It will comprise people from various agencies and organisations, and of course Members of this House. We will use the power of Government to unlock the lending power of the private sector, and we will deliver lending to small and medium-sized enterprises across the UK through new regional development banks. Our investment strategy will no longer accept the disparities across the regions that have been identified here today. It is a crucial element of any Government policy to make sure there is equity right across our nations.

Labour wants to invest in people and show that businesses can access a highly skilled workforce, which is why we will set up our national education service, allowing everyone to upskill and retrain at any point in life. That comes back to the point that it is not just a case of having patient capital investment; the ecosystem and infrastructure around that investment also matter. We want patient capital investment and we hope that we will be able to set the scene and the environment for that to develop. We will ensure that all our regions, nations, cities and towns are able to get access to that patient capital investment over the next few decades.

Finance (No. 3) Bill

Peter Dowd Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Tuesday 8th January 2019 Commons Chamber

[Peter Dowd (Bootle) (Lab)]

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

[Madam Deputy Speaker (Dame Eleanor Laing)]

With this it will be convenient to discuss new clause 5—Review of public health and poverty effects—

‘(1) The Chancellor of the Exchequer must review the public health 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) A review under this section must consider—

(a) the effects of the provisions of this Act on the levels of relative and absolute poverty in the UK,

(b) the effects of the provisions of this Act on life expectancy and healthy life expectancy in the UK, and

(c) the implications for the public finances of the public health effects of the provisions of this Act.’

[Peter Dowd]

I rise to speak to new clause 1 in my name and that of my right hon. Friend the Leader of the Opposition and other Members.

In opening for the Opposition today, I shall start with a few general comments on the Bill before moving on to my substantive remarks on child poverty and equality. First, I must mention the new schedule the Government have tabled, at this late stage, on intangible fixed assets. It is yet another example of the Government’s absolute contempt for parliamentary processes—a result of their desperation to cling to power. Although the Chancellor announced this proposal at the Budget, the introduction of this detailed schedule at this stage of the Bill guarantees that Members are denied the opportunity to scrutinise it properly. It circumvents the Public Bill Committee process, which was created to ensure that technical measures such as this one receive forensic and detailed analysis. This is no way for any Government to conduct legislation. With that in mind, perhaps the Minister could explain why this measure has been included at the final stage of this Bill, denying Members the opportunity to properly scrutinise it. Is it a deliberate decision to once again circumvent parliamentary process? Will he consider withdrawing the schedule and including it in the next Finance Bill later this year, ensuring that it receives the proper parliamentary scrutiny it actually warrants?

It appears that Ministers are hellbent on starting this new year in the same fashion that they ended the last—by treating Members of this House as a peripheral part of the law-making process, bypassing parliamentary processes and breaking long-established conventions. The vast majority of Members in this House are fed up to the back teeth with the Government’s attempts to avoid parliamentary scrutiny.

[Simon Hoare (North Dorset) (Con)]

Given the heinousness of the charges that the shadow Minister has laid against Her Majesty’s Government, I presume that this is further grist to his party’s mill for a no-confidence vote. When will that be tabled and debated in this place?

[Lyn Brown (West Ham) (Lab)]

I don’t think he is taking it seriously.

[Peter Dowd]

My hon. Friend is absolutely right. We are here debating the Finance Bill and the Government’s dreadful performance in bringing legislation to the House for much-needed scrutiny. They seem to be incapable of doing that. They seem to be incapable of doing very much these days.

Has it not occurred to the Government that had they entered this place in a spirit of co-operation, they might not have suffered defeat after defeat on this legislation? This Finance Bill is the product of a Government on the run—a Tory party totally consumed by its Brexit civil war, unable and unwilling to posit even the feeblest domestic agenda here for fear of upsetting its nasty, hard-right faction. The Prime Minister’s speech about fighting burning injustices has turned to ash. Her claim that she would end austerity lies in tatters. She occupies our highest public office, and yet the public have no confidence in her—neither do many of her own Back Benchers, for that matter.

Meanwhile, the view is even worse from the Treasury. The Institute for Fiscal Studies said that the Chancellor was gambling with the public finances at this Budget, and it seems that even before the Bill has left this place, he has already lost that bet. The Office for National Statistics recently blew a £12 billion hole in the Chancellor’s spreadsheets by returning student debt to the Government’s books.

So one has to wonder, what is the point of the Tory party—unable to deliver a competent Brexit deal, unable to secure our economic future, unable to meet its own fiscal rules, and unable to deliver a domestic policy programme? It is a party still reliant on the old dogmas of neoliberalism and austerity, unable to see the evidence of its failures. An example of this absurd neoliberal dogma came over the break when, as we heard today, the Transport Secretary awarded a ferry contract to a company with no ferries. If he is looking for expertise in this matter, perhaps I can invite him down to Merseyside, where we have been running ferries since 1330, very successfully—and they are publicly run, I have to say. I invite him to have a go on a ferry up the River Mersey and get the feel for how it works, basically. He will have diplomatic immunity and will not be thrown overboard—I can guarantee that as well.

--- Later in debate ---

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

Did my hon. Friend notice yesterday that the Government are beginning to backtrack on universal credit? Although they say they will introduce it for 10,000 people, in essence they are backtracking. He may also have noticed the announcement today by an independent organisation that we need to build something like 3 million social houses, not in the private sector, over a 10-year period. Does he agree that that should be looked at and done through council housing?

[Peter Dowd]

My hon. Friend is right, and the reality is that we are not going to get it from the Conservative party—it is as simple as that. It seems incapable of doing anything that is in any way constructive for the social fabric of our country.

The Government now pick and choose whichever target provides cover for their devastating treatment of children across the UK, including—when it suits them—using the very targets that they themselves scrapped. That is why new clause 1 is so important. The Government can no longer be allowed to ignore the plight of millions of children across the country.

The statistics do not lie. They show quite clearly that, prior to the Conservative Government coming to power in 2010 with their Liberal Democrat partners, child poverty in the UK was falling. The new Social Metrics Commission, which draws on the widest possible set of poverty measures, states concretely that there are now half a million more children living in relative poverty than there were just five years ago. The whole country knows that austerity is to blame, and we all know who introduced austerity—it was the Government.

[Alison Thewliss (Glasgow Central) (SNP)]

I completely agree with the point that the hon. Gentleman is making. Does he agree that the two-child cap, which will apply to all new universal credit claimants from 1 February this year, and other measures that the Government are pushing mean that up to an additional 3 million children will apparently go into poverty?

[Peter Dowd]

The hon. Lady is right. The Government appear to want to put misery upon misery on families and children.

Despite the claims from Conservative Members, austerity was not some necessity nobly chosen by the Government of the day, but a political and ideological choice—it is as simple as that. If it was the only option, why did the United States not embark on a similar venture? Why did the likes of Germany and France not undertake a similar level of spending cuts, or Japan, or, for that matter, Australia? [Interruption.] Conservative Members are chuntering, but those are the questions that we need answering.

[Kevin Foster (Torbay) (Con)]

The shadow Minister referenced public spending in the United States of America. Is he seriously arguing that we should look to adopt its system of welfare and healthcare spending?

[Peter Dowd]

The hon. Gentleman knows that I am not saying that. He can twist his party’s policies if he wants, but he should not twist Labour’s policies.

[Mr Jim Cunningham]

We should remind those on the Government Benches that the crash, if we want to call it that, actually started in America with the Lehman Brothers and that the Obama Administration pumped $80 billion into the motorcar industry. The rest is history, as we say.

--- Later in debate ---

[Peter Dowd]

My hon. Friend makes an excellent point and backs up the point that I was making.

Those countries acknowledged a hard economic fact that appears to have stumped this Government: we cannot cut our way to growth. That has failed repeatedly, from its early use under US President Herbert Hoover, which turned the stock market crash into the great depression, to the International Monetary Fund programmes that have been imposed in developing countries and the economic and social devastation inflicted on Greece. This Government’s austerity agenda is yet another failure to add to that list. They have missed every economic target they have set, and it is the poorest in society who have paid the price.

[Chris Elmore (Ogmore) (Lab)]

It is interesting to listen to my hon. Friend’s informed explanation of how austerity has not worked across history. Does he agree that up until the 2010 general election, because of the fiscal stimulus put in place by the Chancellor Alistair Darling and the Prime Minister Gordon Brown, those first two quarters were successive periods of growth, and the economy fell off a cliff because of the austerity introduced by the Conservative party?

[Peter Dowd]

My hon. Friend is right. The economy thereafter, with the help of the Liberal Democrats, started to go down the pan. To this day, we have not recovered, and the Government’s own figures indicate that this will go on for many more years. We will have more of the same, and it is not working. When will they learn the lesson? They seem to be incapable. Even the IMF recognises the failure of austerity and has called for increased public spending to offset the negative economic effects of Brexit.

[Simon Hoare]

I am grateful to the hon. Gentleman for this fascinating tour de force on the period since 2010. If the Labour party in government was doing so fantastically well, growth was going so well and its economic management was prized highly by the electorate, why did it lose the general election in 2010 and then in 2015? If all was going so well, why did it lose?

[Peter Dowd]

I am sure the House would be delighted to hear my psephological analysis of the general election, but we are talking about the Finance Bill. You are very generous, Madam Deputy Speaker, but I do not think even you would be sufficiently generous as to hear my psephological comments.

[Madam Deputy Speaker (Dame Eleanor Laing)]

It gives me great pleasure to agree with the hon. Gentleman. He was doing very well on new clause 1.

[Peter Dowd]

Thank you, Madam Deputy Speaker.

The UN special rapporteur has concluded that the rising level of child poverty is a result of political choices, underpinned by the Government’s callous austerity agenda. I will draw my comments to a conclusion because I know that lots of Members want to comment on how dreadful the Government are, how they try to stitch up Committees, how they do not allow us to have proper debates and how—for the first time since Winston Churchill introduced the notion—they have circumvented the amendment of the law motion. They talk about bringing back control to the House of Commons, but they are bringing back control to about two or three people on the Front Bench, and that does not include the Treasury Ministers.

The Finance Bill before us is yet another Bill of broken promises. It offers further tax reliefs for the rich and for multinational corporations, and it prolongs austerity for yet another year, condemning many families and many children to abject poverty. Labour’s new clause 1 would require the Government finally to assess the impact of their economic policies on the most vulnerable in our society. It would require the Government to face up to their responsibility to come and explain to this House why they are not yet changing their economic policies, despite the obvious evidence that they are doing dreadful—I repeat, dreadful—damage to this country and to our communities.

[Vicky Ford (Chelmsford) (Con)]

I am grateful, Madam Deputy Speaker, for the opportunity to speak at this stage of our proceedings. I am extraordinarily concerned about new clause 1, because it would delay the implementation of clause 5, which is a key part of the Bill because it sets the very level at which people in this country start to pay tax. If we are to address the issues that affect those in our country on the lowest incomes, the best way to help them will to be allow them to keep more of their money in their pockets.

That is why a key part of this Government’s economic strategy has been to make sure, year after year, that those on the lowest incomes are able to keep more of what they earn and to help themselves to build their way out of poverty. That means that 34 million people in this country are paying less tax than previously, and many millions of people have been taken out of tax altogether. This was the No. 1 recommendation of the tax reform commission, which I worked on back in 2006, and I am absolutely delighted that it was among the first steps taken first by the coalition Government, then by the 2015 Government and now by the 2017 Government. This Finance Bill means that raising the level before anyone pays tax to £12,500 is being introduced faster than we ever thought possible.

--- Later in debate ---

I was very concerned by what the hon. Member for Bootle (Peter Dowd) said about precedents, somehow suggesting that such a clause should not be in the Bill. I have had a quick look back at previous Finance Bills, and it is absolutely normal to have a clause that looks like clause 5, which sets out the level at which the Exchequer should start taking tax. If such a provision is not in the Finance Bill, where should it be? Of course it should be in the Finance Bill—it is an absolutely fundamental element of it.

[Peter Dowd]

The hon. Lady has got two facts wrong. First, we did not vote against these proposals, as she suggested. Secondly, I was actually talking about the new schedule, not clause 5. If she is going to attack us, she should get her facts right, for goodness’ sake.

[Vicky Ford]

Perhaps this should be better drafted on the amendment paper, because the Opposition’s explanatory statement clearly refers to the “impact of clause 5”.

I agree that one should always take impacts into consideration, but I strongly believe that the issue raised by the hon. Gentleman of needing to address poverty is best addressed by allowing this Bill to go forward today, especially the elements that involve raising the level at which people start to pay tax, so that they can keep more money in their own pockets. That is fundamental to building a fairer economy, to having a lower gap between those on the highest incomes and those on the lowest incomes, and to encouraging more people in this country to take up the work opportunities available to them under this Conservative Government, with the continuing growth of the economy.

--- Later in debate ---

[Mel Stride]

I will come to the very issue that the hon. Gentleman rightly raises.

Clause 5 will benefit households across the UK. Due to the information collected by HMRC through tax returns, we have various pieces of information on geographical distribution, as sought under new clause 1(2)(d). That is an important point, because much of the information being requested is actually already available.

In addition, the distributional analysis published by the Treasury already sets out the impact of tax changes on households with different levels of income. To be completely clear, the analysis shows how the living standards of households in each tenth of the income distribution will be affected by the decisions the Chancellor and Prime Minister have taken since they took office in 2016. Not only does the analysis meet the intention of new clause 5(2)(a) regarding the effects of the Government’s tax changes on different households, it actually goes beyond that by including changes to welfare and spending on public services, and by considering changes in addition to those announced at each fiscal event since the autumn statement in 2016.

There is, as I suggested at the outset of my remarks, much that we can agree on across the House. Child poverty, public health, life expectancy and inequality are among the greatest issues of our age. We have got on with the job. Absolute poverty rates are at record lows. One million fewer people are in poverty now than under Labour. I say to the hon. Member for Gedling that 1 million is indeed a number, but for every one of those million, their lives have been enhanced. That includes 300,000 fewer children in poverty than under Labour. As we know, the best route out of poverty is through work. There are 3 million more people in work now than in 2010, with 637,000 fewer children in workless households. That is a record of which we should be proud. I urge the House to reject the new clauses.

[Peter Dowd]

If I may rephrase St Augustine, who said “O Lord, make me chaste, but not yet,” what we have here is a Government saying, “O Lord, make me charitable and compassionate, but not just now. Let’s do it in the future.” It comes to something when the British Government, with an expenditure of approximately £840 billion a year, say that it will be difficult to get statistics, either qualitative or quantitative, from which they can make policy. That is how it seems to me, but I tell you what: every day when I am in my constituency I see people who are homeless. What have the Government done about that? Nothing. I see food banks opening up all the time. What are the Government doing about that? Absolutely nothing. What are the Government doing about the 24% of homeless people who are from the LGBT community? Absolutely nothing. And then we heard the dross coming out—that is what it is, dross—about intergenerational worklessness. The Joseph Rowntree Foundation—through evidence, through statistics, through analysis—found that that was not a significant factor in homelessness. So we hear all this talk about charity, compassion and working together, but I am afraid it does not wash when it comes from the mouths of Tories.

Question put, That the clause be read a Second time.

ONS Decisions: Student Loans

Peter Dowd Excerpts

Tuesday 18th December 2018 Commons Chamber

[Elizabeth Truss]

My right hon. Friend, the Chair of the Treasury Committee, is correct. Ultimately, this is about making sure that our independent bodies are giving us advice about how our public finances should be presented in order to give the best possible picture. That is completely independent from our decisions about what is best for students. The fact is that this decision does not affect cash flows; it affects the presentation of accounts. We should not conflate that with the very right and proper debates we are having about making sure that our students have a finance system that supports them.

[Peter Dowd (Bootle) (Lab)]

This is not creative accountancy; this is fantasy accounting from the Government. The shadow Chief Secretary talks about Labour’s policy—[Hon. Members: “You’re the shadow Chief Secretary.”] Well, that is not very far away. The Chief Secretary can try to make up Labour’s policies on the hoof. She might make her own up on the hoof, but she should not make up ours on the hoof.

The ONS announcement ends the fiscal illusion that kept student debt off the Government’s books. This is not technical, and it blows a potential £12 billion hole in the Chancellor’s spending plans. At the last Budget, the Institute for Fiscal Studies warned the Chancellor that he was gambling with the public finances, and it seems that he has lost the bet: a reckless Chancellor bluffing his way through Budgets in a desperate attempt to keep his party together while the country is led to ruin and uncertainty.

This change raises a number of serious questions that the Minister must now answer, and has not answered. First, what impact will the additional £12 billion have on the Treasury’s ability to meet the fiscal targets that the Government set out most recently? Or will it mean that the Government have to abandon their fiscal rules yet again, for the umpteenth time? Secondly, will the Chief Secretary guarantee—she has not yet—that students and universities will not be adversely affected by this change? Thirdly, can the Government guarantee that no cap on student numbers will be introduced?

Finally, does this not pose a major challenge to the entire system of student finance which the Government have not only maintained but exacerbated with a trebling of fees—a system that creates a mountain of debt, placed first on the backs of students and now on the Government’s books when students are unable to pay? Would it not be better to adopt Labour’s policy of free university education, as set out in our manifesto—a very popular manifesto—and grey book, which invests in the future of our country by investing in the future of our young people, rather than giving billions of pounds of tax cuts to large corporations?

[Elizabeth Truss]

I find it extraordinary that we are being lectured on debt by a party that wants to add half a trillion pounds to our national debt. As I said in my earlier answer, we would still meet our fiscal targets on both the debt and the deficit with the numbers that the ONS currently estimates, but it is very premature to have this discussion when the ONS has not given the detailed figures.

I am willing to respond to the hon. Gentleman’s question about whether we will give a guarantee that this will not affect students—absolutely we will. The Augar review is being conducted on the basis of what is best for students. The fact is that we have one of the best higher education systems in the world, of which we should be rightly proud. We have a record number of students attending university and a record number of students from low-income backgrounds attending university, thanks to our policy.

The hon. Gentleman has to answer this question: is it really right that people who do not go to university and generally earn lower sums of money should subsidise those who do go to university and go on to earn more in later life? We can see the result when that happens—it is what has happened in Scotland. Places end up getting rationed, and higher education ends up not getting enough income.

Oral Answers to Questions

Peter Dowd Excerpts

Tuesday 11th December 2018 Commons Chamber

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

I thank my hon. Friend for that very important question. The Government recognise that the current international tax regime is not fit for purpose when it comes to taxing certain types of digital platform-based businesses—the types to which my hon. Friend has referred—and we are therefore working with the OECD and the European Union to arrive at a multilateral solution to ensure that the right tax is paid. However, we have made it clear, and the Chancellor made it clear in the Budget, that in the event that we do not secure a multilateral agreement, we will move ahead unilaterally by 2020 to ensure that those businesses pay a fair share of tax.

[Peter Dowd (Bootle) (Lab)]

The merely synthetic construct that is before the House has nothing to do with the real concerns of my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Huddersfield (Mr Sheerman). It is the dodgy deal—the tuppence-ha’penny Brexit deal—of the Prime Minister. I am led to believe that the Chancellor has ostensibly, but forlornly, attempted to mitigate the Prime Minister’s disastrous handling of Brexit. If that is the case, will he continue his endeavours by using the powers in section 31 of the Taxation (Cross-border Trade) Act 2018 to maintain the UK in a customs union with the EU?

[Mr Hammond]

It is not the Government’s policy to maintain a permanent customs union with the European Union. Opposition Front Benchers often offer a customs union as if it were a magical solution, but it will not deliver us frictionless borders; it will introduce regulatory friction at our borders with the European Union, and it will introduce regulatory friction between Northern Ireland and the Republic of Ireland.

[Peter Dowd]

The Chancellor’s answer shows that, just like Parliament yesterday, we have been treated with contempt by him, and he has been treated with contempt by the Prime Minister and brushed aside. Let me ask him again: in the national interest—not the Tory party’s interest, or his own interest—at what point will he break cover and use the powers in section 31 of the Act which he initiated and which his Ministers guided through Parliament? Or is this just another Tory parliamentary sham?

[Mr Hammond]

Those powers are there specifically to deal with the customs union that we will need to create with the Crown dependencies, not for the purpose that the hon. Gentleman is suggesting.

Finance (No. 3) Bill (Ninth sitting)

Peter Dowd Excerpts

Committee Debate: 9th sitting: House of Commons
Tuesday 11th December 2018 Public Bill Committees

[Sir Robert Syms]

I come back to my basic point that there are certain matters of principle that are good for parliamentary debate, and there are minor, technical matters, such as those dealing with the Inland Revenue. I am not sure that debating the latter would bring much to the sum of human happiness. I also make the point that, although the Conservative party does not enjoy a majority in the House of Commons, the Scottish National party does not enjoy a majority in the Scottish Parliament, so we are all sort of in the same boat.

[Peter Dowd (Bootle) (Lab)]

I take the hon. Gentleman’s point about technical matters and grander principles. However, given that the Government have not allowed us to amend the law in any significant way, the Committee is left at this point poring over the detail—the grander principles are being brushed aside by the Government. We are unable to scrutinise the Bill at the grander level or at the specific level.

[Sir Robert Syms]

The hon. Member makes his own point. We have discussed Budgets and Finance Bill Committees before. The Bill has been on the Floor of the House and will go back there. There will be endless debates, and I am perfectly sure that he and his formidable Front-Bench team will be able to make their points when the Bill goes back to the House. Ultimately, the Government have taken a perfectly pragmatic view, and I look forward to the Minister’s reply.

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[Jonathan Reynolds]

It is lovely to see you in the chair again today, Ms Dorries. I will speak to clause 84 and our amendments which, as you described, also cover clause 85, which is a supplementary clause.

Clause 84 relates to a somewhat historic issue—the payment of advance corporation tax known as ACT. ACT was payable when companies distributed dividends to shareholders before main corporation taxes were due. These payments could then be offset in profit and loss calculations potentially to reduce the overall tax bill. ACT was abolished under Gordon Brown’s tenure as Chancellor in 1999 to prevent its abuse mitigating revenues to the Exchequer, and to encourage reinvestment rather than excessive dividend payments.

However, there are some legacy cases relating to ACT claims. The clauses are the result of a legal judgment from the Supreme Court test case that impacts those claims—that of Prudential Assurance Company Limited and HMRC on 25 July 2018. This case gave rise to a number of judgments in relation to ACT. I will not read it in full—

[Peter Dowd]

Oh!

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[Mel Stride]

On a point of order, Ms Dorries. I will be very quick; we are now due in another place for yet another round of Treasury stuff. I thank you and your co-Chair, Hansard, the Doorkeepers, our Whips, our Parliamentary Private Secretaries, my hon. Friend the Member for Poole, our officials—particularly Liam Mulroy and Calum Boyd in my office—and our Bill team at the Treasury. I also thank everybody on the Committee for having made this such a smooth and productive session.

[Peter Dowd]

Further to that point of order, Ms Dorries. I thank you and the House staff—the Committee Clerks, the Doorkeepers and Hansard—as well as everybody involved in consideration of the Bill, including my colleagues.

Question put and agreed to.

Bill, as amended, accordingly to be reported.

Finance (No. 3) Bill (Sixth sitting)

Peter Dowd Excerpts

Tuesday 4th December 2018 Public Bill Committees

[Mel Stride]

Before I get into more general points on the clause, I will turn to some specific issues raised by Members, starting with the hon. Member for Aberdeen North. I entirely take her points about the distinction between her and my hon. Friend the Member for Aberdeen South. The differences are quite stark in all respects, though I am not sure to whose benefit that is.

The hon. Lady is entirely right to suggest that we need good guidance on these issues. I should point out that a primary focus of the proposed change is to ensure that we do not, under the existing arrangements, have a number of construction companies falling due to VAT and going over the threshold. That does bring unwanted complexity for those who would not otherwise be in that situation. It is worth bearing in mind that the reason behind the measure is trying to avoid drawing ever more businesses in that sector into the VAT regime.

The hon. Lady also reminded us of the discussions that we had at length on the Taxation (Cross-border Trade) Bill, when most of us were all together.

[Peter Dowd (Bootle) (Lab)]

Happy days.

[Mel Stride]

Happy days. I thank the hon. Member for Aberdeen North for her positive comments about the position that the Government have taken on acquisition VAT as opposed to import VAT, and extending that—at great cost to the Exchequer, of course—to all external trading arrangements, whether with the EU27, as they will become, or the rest of the world.

It is worth making a general comment on the VAT gap, which featured prominently in the contribution from the hon. Member for Stalybridge and Hyde. That gap has fallen from 12.5% under his party in 2005-06 to 8.9% on the latest figures. That is a pretty significant drop in relative terms across that period. Clause 50 amends the anti-avoidance provisions in section 55A(3) of the Value Added Tax Act 1994, which will enable effective implementation in October 2019 of the VAT reverse charge to combat missing trader fraud in construction sector supply chains. As announced at autumn Budget 2017, the Government are introducing a VAT reverse charge for specified construction services, which is due to come into effect from 1 October 2019.

This measure will help to tackle the problem of organised criminal gangs fraudulently creating or taking over companies in the sector to steal VAT and income tax, known as missing trader fraud. Under reverse charge accounting treatment, the customer, if VAT registered, is responsible for settling VAT with HMRC. As a result, suppliers cannot get the tax due and hence cannot steal it. However, there is currently an anti-avoidance provision in the primary legislation for VAT reverse charges, which requires businesses that purchase supplies subject to a VAT reverse charge to include those purchases as part of their turnover for VAT registration purposes.

Reverse charges apply only to supplies to other VAT-registered businesses. Therefore, this provision was designed to prevent fraudsters from avoiding reverse charges, especially on mobile phones, by instead charging VAT to small unregistered businesses before going missing. The current anti-avoidance provision has the effect of making unregistered businesses purchasing supplies covered by the reverse charge registrable for VAT sooner.

The construction sector has many businesses legitimately trading close to, but below, the VAT threshold. The current anti-avoidance provision could therefore push some legitimate small businesses over the VAT threshold and increase the burdens placed upon them. Clause 50 will amend the VAT Act to allow future VAT reverse charge statutory instruments, including one for the construction sector, to waive this anti-avoidance provision. That means that unregistered businesses will not have to add purchases of construction supplies subject to the reverse charge to their turnover for the purposes of VAT registration, thereby limiting the impact of the reverse charge on small businesses.

Disabling this provision in the construction sector will not have an impact on the effectiveness of the reverse charge, because builders are unlikely to be involved in the sort of supply chains that feature in large-scale missing trader fraud in construction. However, the Government do not wish to remove the provision in its entirety, as it may be beneficial for other sectors subject to missing trader fraud.

Amendment 92 would require that, whenever the Treasury makes use of the Government’s proposed new power to disapply the anti-avoidance provisions in section 55A(3) of the VAT Act, it would also publish a statement setting out the number of traders expected to benefit from being relieved of the burden to register for VAT as a result, and the impact of the VAT reverse charge and the disapplication of the anti-avoidance provisions on the supply chain in the sector that they target. The Government have closely considered the amendment, but ultimately deem it unnecessary. Whenever a Treasury order is made to require the use of a VAT reverse charge in a particular sector, HMRC publishes a tax information and impact note as a matter of course. This note will highlight the scale of the reverse charge’s expected impact in terms of numbers of traders who will be affected and whether the anti-avoidance provisions will apply, and outline how the changes will help to disrupt fraudulent supply chains operating in that sector. This publication is more than sufficient for the purposes sought by amendment 92. I urge the Committee to reject the amendment, and I commend clause 50 to the Committee.

Question put, That the amendment be made.

--- Later in debate ---

Rates of duty on cider, wine and made-wine

[Peter Dowd (Bootle) (Lab)]

I beg to move amendment 96, in clause 53, page 34, line 14, at end insert—

“(5) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue impact of the revised rates on cider and wine.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 103, in clause 53, page 34, line 14, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of the revised rates on cider and wine on public health.

Amendment 97, in clause 54, page 36, line 12, at end insert—

“(5) The Chancellor of the Exchequer must review the effect on the cider industry of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 54 on the cider industry.

Amendment 98, in clause 54, page 36, line 12, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 54 on public health.

Amendment 99, in clause 54, page 36, line 12, at end insert—

“‘(5) The Chancellor of the Exchequer must review the expected effects in each part of the United Kingdom and each region of England of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.

(6) In this section—

“part of the United Kingdom” means

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

“regions of England” has the same meaning as that used by the Office for National Statistics.”

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 54 on different parts of the United Kingdom and regions of England.

Clause stand part.

--- Later in debate ---

[Peter Dowd]

I am delighted to see you in the Chair, Ms Dorries. Clause 53 provides for an increase in line with inflation based on the retail prices index in the rates of excise duty charged on all wine and made-wine with a strength at or below 22% alcohol by volume—ABV—and sparkling cider and perry exceeding 5.5% ABV but less than 8.5% ABV. The changes will come into effect on and after 1 February 2019. As we approach Christmas, we felt it was important to scrutinise this measure closely: poring over the matter, one might say. The Government have ensured that enjoying a nice glass of rouge by the fireside over a game of charades—they know a lot about charades—will cost a little bit more. Never fear though, we have tabled a number of amendments to clause 53, which I will address in turn.

It is important to note the context of the rates. Duties on alcoholic drinks are forecast to raise £11.5 billion this year, split between beer and cider at £3.7 billion; wine duties, £4.3 billion; and spirit duties, £3.5 billion. The House of Commons Library provides us with a potted history of recent developments on the matter of excise duty, an area of strong interest to the great British public.

--- Later in debate ---

[Bambos Charalambous]

My hon. Friend is making an excellent and, shall I say, spirited speech. Does he agree that the Government have totally ignored the health effects of alcohol consumption in the way they have implemented alcohol duties?

[Peter Dowd]

It leads me to believe that the Government have not paid enough attention. That is why we want to have a look at it in the round and why we want a review. Let us see the evidence. If the evidence indicates my hon. Friend’s contention, as I think it will, we would need to do something.

Unfortunately, despite the move to begin to increase duties on wine and cider as set out in clauses 53 and 54, it seems that the Government’s policy on wider alcohol duties reflects continuation rather than a break with the last eight years. Will the Minister confirm that it remains the Government’s policy to increase only those alcohol duties included in the clause and to freeze all those not included? That being the case, does it not seem that the attempt in clause 54 to increase the price of mid-strength cider is a mere sticking plaster on the Government’s wider policy of ignoring the harm to the public’s health caused by cheap alcohol? In other words, when it comes to applying this approach across all duties, it seems that they bottled it. Could it be that they choose to grab a quick Budget headline once a year instead of taking an evidence-based approach to alcohol harm like that adopted by the last Labour Government?

I question the logic of creating an additional rate of duty to ciders up to only 7.5% alcohol by volume. A cursory look at the white cider market suggests that many of the products that the Government seek to make more expensive are currently listed at exactly 7.5% ABV, which is the upper band of the new duty applied by the clause. Clearly, while those ciders would be covered by the new band of duty, it would take only an additional spoonfull of sugar, as the saying goes, to push them up to 7.6% ABV, which is currently covered by the higher rate of duty that is applied to so-called high-strength ciders. Would it not have been a better approach for the Government simply to reduce the lower band of excise applied to higher-strength ciders to ensure that that duty instead applied from 6.9% ABV all the way up to 8.8% ABV? Will the Minister expand on what logic has been pursued by the Government and whether it might incentivise the industry to take more decisive action to reduce the strength of their white ciders or begin to diversify their products?

Amendment 97 would require the Chancellor of the Exchequer to review the impact of clause 54 on the cider industry. The point is to see how far the Government have tried to work with industry to develop and implement a more public health-oriented approach to their products while minimising the impact such an approach has on the industry.

[Anneliese Dodds]

Is my hon. Friend aware that there used to be a differential regime for small-scale cider producers, whose product was often of far greater quality than the kinds that are often linked to alcohol overuse? That no longer exists, partly because of changes at EU level. Surely we need to know more from the Government about what they are doing to support that part of the industry as well as clamp down on the production of very high-volume, high-alcohol product.

[Peter Dowd]

My hon. Friend makes a pertinent point and I am sure the Minister was listening. What have the Government done to work with producers to transition to less harmful products while protecting jobs and livelihoods? That could provide an opportunity for the industry to move into other cider products—perhaps those not so reliant on glucose and corn syrup and using the cheaper pomace, all of which presumably add to the negative health effects. I hope the Minister will speak to the work that the Government are getting on with in that regard.

--- Later in debate ---

[Mel Stride]

In 10 minutes you will be on your own.

[Peter Dowd]

As long as that? Ten minutes? My word.

I should point out that, under a more active Government—one not simply going through the motions—these measures would already have been taken into account, acted upon and been on offer for proper scrutiny during this debate. Nevertheless, I hope the Minister will see the benefits of the review as set out in our amendment and agree that it is worth while—or that Members will choose to support amendment 98 to see that it is implemented. That brings our amendment on this particular matter to a close. Cheers.

[Kirsty Blackman]

I rise to speak to amendment 103 in my name and that of my hon. Friend the Member for Paisley and Renfrewshire South, but I would also like to speak a little more widely about the clause and the Labour amendments. First, I would like to ask the Minister a question about the post duty point dilution, which was in the Red Book. Hopefully, he can answer or get inspiration during the course of the debate. The changes do not appear to be in the legislation, so it would be useful if the Minister could explain when the legislative changes to post duty point dilution will take effect. I understand that the hope is that it will be put into legislation to be enacted in April 2020, but it would be useful if we could have an idea of the legislative process to ensure that those changes are made. I have been lobbied heavily on this by one of my constituents. I know it is important to a lot of people and that the Government have to their credit committed to making changes in the autumn Budget 2017.

Returning to our earlier discussion, I am not clear what the Government are trying to do with the changes to alcohol taxation. Are they trying to incentivise good behaviour; are they trying to disincentivise bad behaviour; or are they trying to generate revenue for the Exchequer? It is important for the Government to clarify that and accept the Labour amendment on the revenue impact on the Exchequer and on public health. That would make a big difference, because we would be clear about the Government’s intentions and what the Government expect to achieve.

On public health, people who want to get drunk quickly often drink high-strength ciders. It is important the changes focus on people who are not drinking for pleasure in the main, but who are drinking to get as drunk as they possible can. Those are the alcohol deaths we are trying to combat in Scotland with the new minimum unit pricing we introduced, which is a clear and well-intentioned public health change. Minimum unit pricing is all about making sure that high-strength alcohols that can be bought very cheaply are increased in price, so that people cannot get hold of them as easily. We predict that we will see a reduction in alcohol deaths as a result of the changes to legislation in Scotland.

What do the Government expect will be the impact of their legislation, particularly the extreme impact on people who are dying from alcohol misuse? What numbers do they expect to see as a result of the changes? If the Government accept Labour’s amendments, it would be useful if the review included the number of people whom they expect to save so that we can measure them against that.

Lastly, it is important that the Government tax this stuff and increase the tax rates as inflation increases. We want the Government to take a step back and have a holistic look at the entire system and explain why they are taxing things in the way that they are, rather than tweak and bodge and make changes year on year, as often happens in this place, so that we end up with something that is unwieldy and does not fulfil the intentions of the Bill in the first place, let alone the intentions of the world as we see it. Will the Minister provide answers?

--- Later in debate ---

[Robert Jenrick]

No, I am happy to proceed.

[Peter Dowd]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment proposed: 103, in clause 53, page 34, line 14, at end insert—

“(5) The Chancellor of the Exchequer must review the expected effects on public health of the changes made to the Alcoholic Liquor Duties Act 1979 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”—(Kirsty Blackman.)

This amendment would require the Chancellor of the Exchequer to review the impact of the revised rates on cider and wine on public health.

Question put, That the amendment be made.

Question negatived.

Clause 53 ordered to stand part of the Bill.

Clause 54 ordered to stand part of the Bill.

Clause 55

Rates

[Peter Dowd]

I beg to move amendment 100, in clause 55, page 36, line 30, at end insert—

“(4) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Tobacco Products Duty Act 1979 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue impact of the changes to the rates of excise duty on tobacco products.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Peter Dowd]

If hon. Members consult the Treasury’s Red Book published with the Budget, they will see that tobacco duties account for £9.2 billion of revenue. That relates to amendments 100, 101 and 102. It would therefore be accurate to describe tobacco duties as one of the Treasury’s most important revenue streams, as few taxes have consistently contributed such a level of revenue to the Exchequer, but there will be a fall. The fall in the expected receipts from tobacco duties raises questions about their long-term viability as a stable source of revenue for the Exchequer.

What is often overlooked in this discussion is where the revenue raised from increasing tobacco duty actually comes from, particularly given that smoking is no longer as socially acceptable or widespread as it once was. In 2016, those with an annual income of less than £10,000 were almost twice as likely to smoke as those with an annual income of £40,000 or more.

To return to the Treasury forecasts for tobacco duties, it is clear that tax receipts will inevitably fall victim to the success of smoking cessation programmes and the shifting demographics of those who smoke. Smoking prevalence is highest among younger adults: almost 20% of 16 to 34-year-olds smoke, compared with less than 11% of those aged 60 and over. However, younger adults report lower levels of daily consumption. The House of Commons Library found that the prevalence of cigarette smoking tends to be higher in the north of England. For instance, almost 18% of those in Yorkshire and the Humber were smokers, compared with about 14% in the south-west. That regional variation is quite clear and apparent.

Data on NHS stop smoking services in England shows that between April and December 2016, more than 200,000 people set a date to quit smoking and 50% reported successfully quitting at a formal follow-up. Those statistics clearly show that an increasing number of people are quitting smoking, which will inevitably affect the revenue that the Exchequer receives from tobacco duties. It looks as if the changes in clause 55 will exacerbate that, as cost is one of the greatest influences on people to give up smoking, besides health. The Tobacco Manufacturers Association has long complained that the UK’s rates of tobacco taxation are higher than those of any other European country. It is therefore hard to see how much bandwidth the Government have for raising further taxes.

The Opposition welcome the fact that fewer people smoke today than even 20 years ago, but it is clear that the Treasury and Ministers need to begin to consider the long-term viability of tobacco duties, and an alternative source of revenue to replace the £9 billion a year they represent. We are concerned that without forward planning, the Treasury will not be equipped to handle the fall in tobacco receipts and will instead be forced to borrow money or, more likely, to pursue further austerity and cut public services that we rely on. We hope that the Minister will take our request seriously and support the Opposition’s proposal for a review, as well as considering the long-term stability of tobacco duties.

The Opposition amendments to clause 56 would introduce a new excise on tobacco for heating, more commonly known as tobacco for vaping.

[The Chair]

Order. That is a separate debate, so the hon. Gentleman needs to move on to the substance of his amendment.

[Peter Dowd]

Okay, Ms Dorries. In relation to amendment 102, we would require the Government to undertake a review of clause 56 and its impact on public health.

[The Chair]

Order. Clause 56—

[Peter Dowd]

I accept the point that you are making, Ms Dorries. I have moved the amendment and laid out our overall position on tobacco revenues, and on that basis I shall not take up the Committee’s time further.

[Robert Jenrick]

Clause 55 implements changes announced in the Budget concerning tobacco duty rates. My right hon. Friend the Chancellor announced that the Government will increase tobacco duty in line with the escalator. The clause therefore specifies that the duty charged on all tobacco products will rise by 2% above RPI inflation. In addition, duty on hand-rolling tobacco will rise by an additional 1% to bring it to a total of 3% above RPI inflation this year.

The clause specifies with respect to the minimum excise tax—the minimum amount of duty to be paid on a pack of cigarettes—that the specific duty component will rise in line with cigarette duty. It also sets the rate for the new category of tobacco product, tobacco for heating, at the same rate applicable to hand-rolling tobacco. The new tobacco duty rates will be treated as taking effect from 6 pm on the day they were announced, 29 October, with the exception of the rate for tobacco for heating, which will take effect on 1 July 2019.

We recognise the potential interactions between duty rates and the illicit market. The Government have to be careful not to raise rates too far and fast, as that might exacerbate the illicit market. We included an important measure at the time of the Budget: the creation of a UK-wide anti-illicit trade group, bringing in law enforcement and representatives from the devolved Assemblies, and building on the good work done by the Scottish Government. We hope that that will mean we can take forward and intensify our efforts to tackle the illicit trade.

Amendment 100 would place a statutory requirement on the Chancellor to review the revenue effects of changes to tobacco duty, as we have just heard from the hon. Member for Bootle. The Chancellor assesses the impacts of all potential changes in the Budget considerations every year. The tax information and impact note published alongside the Budget announcement sets out the Government’s assessment of the expected impacts. Detail on the revenue impacts is set out in the policy costings document, which is also published alongside the Budget. Both include the expected revenue impact to 2023-24.

In addition, HMRC publishes a quarterly bulletin covering all excise duty receipts. The information that the amendment calls for will already be in the public domain for Members to scrutinise. It is not an area that requires further reviews and information, as there is no shortage of information in the public domain.

I take the hon. Gentleman’s point that, with the use of cigarettes declining, this is an area where we would expect revenues to fall in the years ahead. That is, of course, something that we take into account as we review duty rates for each fiscal event, with our two objectives, which I hope hon. Members will support: the primary objective is to protect public health, but the secondary one is to raise revenue to support vital public services.

I hope that I have reassured the Committee, and I ask that amendment 100 be withdrawn.

[Peter Dowd]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 55 ordered to stand part of the Bill.

Clause 56 ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Craig Whittaker.)

Finance (No. 3) Bill (Fifth sitting)

Peter Dowd Excerpts

Tuesday 4th December 2018 Public Bill Committees

[Robert Jenrick]

The Government have taken two measures, the first of which was in the last Budget. That created an electric charge point investment fund— £200 million of public investment—which is designed to spur an extra £200 million of private investment. A business such as the one my hon. Friend describes could be part of that. The measure could enable the business to partner with the public sector and gain the capital that it needs to develop, and will be able to take advantage of the allowance and invest early. There are now two opportunities for such a business to take advantage of tax reliefs and public investment in order to grow rapidly and enter the market.

[Peter Dowd (Bootle) (Lab)]

I do not deny the Minister’s point per se. Is there any implication that businesses that have chargers could be subject to a rating revaluation, which would put the cost of their business rate up? Perhaps the Minister could clarify that important point.

[Robert Jenrick]

The hon. Gentleman makes a valid point and I will reply—the powers that be will return to me in a moment.

The changes made by clause 33 will extend the current 100% first-year allowance for expenditure incurred on electric charge point equipment for a further four-year period until April 2023. That will encourage the increased use of electric vehicles by supporting the vital development and installation of charging infrastructure for such vehicles, to which drivers will look when deciding whether to buy them.

[Robert Jenrick]

Perhaps I could reply to the hon. Member for Bootle before taking a further intervention.

[Peter Dowd]

Providing inspiration arrives.

[Robert Jenrick]

Or not, as the case may be. We will have to write to the hon. Gentleman, I am afraid. He has outfoxed our officials.

--- Later in debate ---

[Robert Jenrick]

The hon. Lady speaks from her deep knowledge of this area. It is absolutely right that some costs have fallen, particularly since the fall in the oil price, which has driven significant efficiencies in the sector, but other costs are rising. New technologies are coming on board. Taking on a project that entails such uncertainty while being tied to a single estimate of decommissioning costs, without a wide range as we have allowed in the measure, would be a major disincentive for a buyer coming in to one of these projects.

Let me address the concern inherent in the amendments about disincentivising cost-reduction, or that the measure, in providing such a wide field, would make it unlikely for buyers to try to reduce the cost and therefore would gain higher tax relief as a result. I think the buyer will retain a strong incentive to minimise total costs, as they will be liable for meeting the remainder of the decommissioning costs. The amendment is therefore unnecessarily restrictive and would harm TTH.

Amendments 85, 86 and 87 and schedule 14 would change the TTH activation mechanism to restrict decommissioning tax relief on a field, so that it could not exceed the level of new capital investment made by a purchaser. Decommissioning costs generally occur at the end of a field’s life, when its reserves are exhausted and new capital investment will not result in further economic recovery of oil or gas reserves. For many purchasers it would therefore not be practical to make significant capital investment during the decommissioning process.

Furthermore, requiring the purchaser to match what can be very high decommissioning costs with an equal level of new capital investment could easily bankrupt many of the smaller operators that we want to take part in the industry. The best way to ensure that we get new investment into the industry, to protect jobs and create new ones, and to maximise economic recovery of our natural resources, is to have an effective TTH mechanism. That is exactly what we believe we have achieved, as a result of the deep consultation that we have conducted with industry, which I will explain in a moment. The amendments would make TTH completely unattractive and ineffective. I therefore urge the Committee to reject them.

In answer to the hon. Member for Aberdeen North, I will briefly summarise the steps that we have taken to consult with the industry since TTH was announced at Budget 2017. Even prior to Budget 2017, the topic had been discussed with stakeholders for some time. We have built on numerous discussions held between July and December 2016, by issuing at the time of the Budget a discussion paper on tax issues affecting late-life oil and gas assets. We received 28 detailed responses and then held an expert panel, working with the industry to design the measure. I myself held two meetings in Aberdeen this year with the Oil and Gas Authority and stakeholders. Draft legislation was published over the summer on L-day, for technical consultation with the industry. We received further feedback as a result and much of that has been incorporated into the final legislation. Although there are always ways to take the measure further, we believe we have reached a point where the industry is satisfied and welcomes the steps we have taken.

[Peter Dowd]

Trade unions have argued that more conditions need to be attached to TTH to bring it in line with OGA and maximising economic recovery objectives, and for broader commercial behaviours, which should include minimum compliance with UK employment law—workers being paid and employers paying tax and national insurance. Did that form any part of the discussions with the industry and stakeholders?

[Robert Jenrick]

I do not think we spoke specifically with trade unions but we did speak with a wide range of industry stakeholders. To return to TTH, its purpose is not to give an incentive to industry that it would not ordinarily have. The owner or operator of one of those fields would already be able to take advantage of those tax reliefs to set aside decommissioning costs, but they would be difficult to sell on to a new operator. This measure will make it much easier for new entrants to enter the market, for fields to continue or be developed further, and for jobs to be created that would not ordinarily be created. We believe that this is a win-win for all involved: for the Exchequer, which will make modest additional receipts as a result, for industry, and for all those employed in north-east Scotland—I see the hon. Member for Aberdeen North nodding. I believe this measure will be widely welcomed and well received by all stakeholders in the industry.

The best way to get new investment into our industry is, as I described, to protect jobs and maximise the economic recovery, and we believe that we have reached that point with this measure. The Government take their environmental responsibilities seriously, as we described when debating the previous clause. We have legally binding commitments to reduce greenhouse gas emissions under the Climate Change Act 2008 and the system of carbon budgets it sets out, as well as the Paris agreement that we ratified in November 2016. Nothing in this measure takes away from our efforts elsewhere, but we want the UK oil and gas industry to continue to thrive. It has been through a difficult period following a significant reduction in the price of oil, and that price has fallen once more since the Budget. That industry makes an important contribution to the UK economy, supports more than 280,000 jobs, and provides around half our primary energy needs. To date, it has paid around £330 billion in production taxes. By introducing these changes for late-life oil and gas assets, we hope to encourage new investment in the UK continental shelf, and I commend the clause to the House.

Finance (No. 3) Bill (Third sitting)

Peter Dowd Excerpts

Thursday 29th November 2018 Public Bill Committees

[Anneliese Dodds]

I am grateful to the Minister for his comments. We on this side do not oppose the measures and are willing not to press our two amendments to a Division. I will, however, make two points. It would help if the Minister provided some information on the criteria that would be used by HMRC for adopting deferred arrangements with individual taxpayers. Such criteria exist for time-to-pay arrangements, but none has been set out in relation to this clause, so it would be helpful to know what they are. I agree with him that there needs to be a balance between sympathy and responsiveness, to enable people to pay the tax that is due. On the other hand, there is the matter of equal treatment.

[Peter Dowd (Bootle) (Lab)]

I know that my hon. Friend has been doing remarkable work on making connections with the representative bodies, and visiting offices all around the country. My constituency has about 2,700 members of HMRC staff. There seems to be incongruity between what the Minister says about capacity and resource in HMRC and my experience from speaking to my constituents. Does my hon. Friend feel the same in that regard?

--- Later in debate ---

[Anneliese Dodds]

I am grateful to the Minister for his comments, but we will press amendment 38 to a vote. Although I took on board his responses, I am concerned that we have a lack of clarity about the revenue impact of a measure, which means that as a Committee it is difficult for us to make a judgment on it. When he tried to explain why there might be a negative amount on some projections of the impact in subsequent years, he stated that that was due to the different timing of reporting of corporation tax revenue and income tax revenue. That would explain a difference for one year, but not for subsequent years, so I am still concerned about why there might have been a negative suggested figure into subsequent years.

In addition, it is not clear to me whether the figures that have been set out, whether that is one set or another, take into account the impact of coming within the scope of anti-avoidance measures and so on. That would obviously just be a projection in any case, but we surely need to have more information before we can take an informed view.

[Peter Dowd]

On a slightly wider but, I think, pertinent point, in the Red Book for this year, corporation tax for 2019-20 is £60 billion and by 2023 it is £66 billion. Does the hon. Lady find that her concerns about this specific thing are compounded by the uncertainty about, for example, the deal we will be debating in the not-too-distant future?

[Anneliese Dodds]

I agree with my hon. Friend. When we are talking about this sector in particular, we must always bear in mind the impact not only on revenue but overall on investment and the need to ensure that high-quality infrastructure is provided. I know that that is enormously important and something that the Minister is concerned with and working on. For the reasons I have set out, we will press amendment 38 to a vote.

On new clause 4, I say in response to the hon. Member for Aberdeen North that there may be some agreement on some issues, but on corporation tax rates there is a difference to the extent that Labour feels that we need to work with other countries to prevent a race to the bottom. That is something we have already been doing. A race to the bottom is damaging, particularly when many businesses tell us that the corporation tax rates do not drive their decision to locate in the UK; they may be one of a basket of factors, but other matters, particularly sunk costs, are important. Therefore, we are happy for our proposals to come under scrutiny at every point, and we hope that in doing so we might persuade the SNP to come to our view as well.

Points of Order

Peter Dowd Excerpts

Wednesday 28th November 2018 Commons Chamber

[Mr Speaker]

I will come to the hon. Lady, but I think I will take the Opposition Front Bencher first.

[Peter Dowd (Bootle) (Lab)]

On a point of order, Mr Speaker. May I seek your advice? The Financial Secretary to the Treasury failed to answer adequately the questions and assertions from the right hon. Members for Broxtowe (Anna Soubry) and for Loughborough (Nicky Morgan), among others, specifically on a missing scenario based on Britain’s current deal. How can I get clarity, therefore, on the content of footnote 1 on page 4 of the executive summary, which says:

“The four scenarios, and the policy assumptions underpinning them, were approved by ministers”?

In that respect, were other scenarios, including, for example, the scenario on the current deal, specifically ruled out by Ministers notwithstanding the advice of Treasury advisers and advisers from other Departments, as the Minister put it, for the sake of comprehensibility?

[Mr Speaker]

I always seek to be helpful to Members with points of order, although I hope the hon. Gentleman will not take offence if I say that his intervention just now had many distinguishing features, but that of being a point of order was unfortunately not one of them. He seems to me to be raising a question that he would have liked to ask if he had had the opportunity to do so and that could have been raised by the shadow Chancellor if he had chosen to do so, but he did not. [Interruption.] The shadow Chancellor is signalling that it is a response to what has since been said, which is not an unreasonable point. I do not think that I can procure an answer for him now if a Minister does not wish to rise to his feet and stand at the Dispatch Box.

Finance (No. 3) Bill (Second sitting)

Peter Dowd Excerpts

Committee Debate: 2nd sitting: House of Commons
Tuesday 27th November 2018 Public Bill Committees

Optional remuneration arrangements: arrangements for cars and vans

[Peter Dowd (Bootle) (Lab)]

I beg to move amendment 17, in clause 7, page 5, line 2, at end insert—

‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on the motor vehicle industry in parts of the United Kingdom and regions of England and lay a report of that review before the House of Commons within six months of the passing of this Act.

(9) In this section—

“parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

“regions of England” has the same meaning as that used by the Office of National Statistics.’

This amendment would require the Chancellor of the Exchequer to review the impact of clause 7 on the automotive industry, broken down by nations and regions.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 18, in clause 7, page 5, line 2, at end insert—

‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on the availability and uptake of optional remuneration arrangements relating to cars and vans and lay a report of that review before the House of Commons within six months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the impact of Clause 7 on the uptake of optional remuneration schemes relating to cars and vans.

Amendment 19, in clause 7, page 5, line 2, at end insert—

‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on tax receipts and lay a report of that review before the House of Commons within six months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the revenue effects of Clause 7.

Amendment 22, in clause 7, page 5, line 2, at end insert—

‘(8) The Chancellor of the Exchequer must review the effect of the provisions in this section on the vehicle hire sector and lay a report of that review before the House of Commons within six months of the passing of this Act.’

This amendment would require the Chancellor of the Exchequer to review the impact of clause 7 on the UK vehicle rental sector.

Clause stand part.

[Peter Dowd]

I hope everybody had a refreshing lunch and that not too much claret was drunk.

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

That is enough.

[Peter Dowd]

That is a nice start to the afternoon. I will turn to amendment 17 to 19 and 22 which, I must say at this stage, we will also push to a vote unless we have the acquiescence, capitulation or otherwise of the Minister after he has heard my words of wisdom. I hope he has even more divine intervention and inspiration this afternoon from his officials telling him to agree with me.

Clause 7 introduces further reforms to optional remuneration arrangements for cars and vans. The measure seeks to make two changes to the current regime, as outlined in the Treasury’s policy paper. First, it is designed to

“ensure that when a taxable car or van is provided through OpRA, the amount foregone, which is taken into account in working out the amount reportable for tax and National Insurance contributions purposes, includes costs connected with the car or van (such as insurance) which are regarded as part of the benefit in kind under normal rules”.

Secondly, this measure is also expected to

“adjust the value of any capital contribution towards a taxable car when the car is made available for only part of the tax year.”

I imagine that the Treasury’s line is that this seeks to ensure that the value of this benefit is connected only to cost, but we are concerned that these changes may further complicate pre-existing optional remuneration arrangements that are already in place for employers and employees to utilise company cars and vans. That in turn may be a deterrent, as some employers may consider that it is too much hassle or too bothersome, and that there is too much red tape, when it comes to offering such a scheme. Similarly, employees may decide that the risks and liabilities of taking up the offer of a company car or van scheme may be too high, and that under these circumstances both rentals and automotive sales may fall.

To put it as succinctly as I can—I accept that I am prone to being succinct, which is a fault of mine—the Opposition do not believe that it is in the interest of our economy, which is heavily reliant on the automotive sector for jobs, or that of workers, to make it harder for them to use a company car or van through an optional remuneration scheme. That is why we have tabled amendment 17, which would amend page 5, line 2 of the Bill and insert:

“The Chancellor of the Exchequer must review the effect of the provisions in this section on the motor vehicle industry in parts of the United Kingdom and regions of England and lay a report of that review before the House of Commons within six months of the passing of this Act”

as linked to the nations.

I accept that Government Members must recognise the clear link between automotive sales and their use as company cars or vans in optional remuneration arrangements. Work vehicles make a significant contribution to the automotive industry’s more than £82 billion annual turnover and £20.2 billion of value added.

[Bambos Charalambous (Enfield, Southgate) (Lab)]

Does my hon. Friend agree that further complicating the optional remuneration arrangements for employees who wish to use a company car or van could have an effect on the automotive sector as a whole? That would be terrible.

[Peter Dowd]

It would be. That goes to the heart of the point. We want to tease this issue out and have a review. I know we have raised a million and one issues for review, but that is as much as we can do in the current climate. That is what we want to do: we want to tease all these matters out.

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

Does my hon. Friend agree that a review would enable us to tease out some of the matters that were presented to us and to explore some of the expert information that has been provided to us? For example, the Institute of Chartered Accountants in England and Wales tax faculty said that the clause will lead to a tax charge so, for example, emergency repairs will be initially paid for or arranged by an employee and then met by the employer. If we had a review, we could look into that matter and others in more detail.

[Peter Dowd]

That organisation is always helpful, and it points us in the direction that the Government should go in. That goes to the point I am making.

Many proposals have come back to bite us, so we need a proper review to see how they are bedding in. For example, according to the Society of Motor Manufacturers and Traders, the automotive industry employs 168,000 people directly in manufacturing, and more than 856,000 are employed across the wider industry. It accounts for 12% of total UK exports of goods, and invests £3.65 billion each year in automotive research and development. More than 30 manufacturers build in excess of 70 models of vehicle in the UK, supported by 2,500 component providers and some of the world’s most skilled engineers. The automotive industry represents 1% of all employment in the UK and 7% of all manufacturing. It is also one of the few industries in the United Kingdom that has had a huge productivity increase since the financial crisis. The manufacturing of motor vehicles went from 5.4% of UK manufacturing in 2007 to 8.1% in 2017. Those figures do not, however, reflect the role that the automotive industry play in communities across the nations and regions of the UK, and the impact that a fall in sales or rentals relating to optional remuneration might have.

[Alex Sobel (Leeds North West) (Lab/Co-op)]

My hon. Friend is making an excellent speech in support of the communities around the country that are reliant on motor manufacturing, which include Tyne and Wear, Derby, Swindon and Merseyside. Does he think that the Government should undertake and publish a proper impact assessment on the communities that will be affected by the changes outlined?

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[Peter Dowd]

Yes. That links to others issues. For example, my hon. Friend the Member for Ellesmere Port and Neston (Justin Madders) is having issues with the car factory in his constituency, where 200 jobs are threatened. These issues are all linked. When the industry is under threat, or there is a potential threat, even if it is not actually visible, we must take steps to ensure it does not appear on the horizon. Our proposal would help that process.

For example, the west midlands has by far the largest number of motor vehicle manufacturing employees of any UK region or country. There are 54,000 employees in the industry working in the west midlands. That is about one third of all motor industry employees in Great Britain. We have to take into account the fact that if fewer companies offer optional remuneration arrangements, that could directly affect jobs in that region. The Government’s job is to plan and—they said this in their industrial strategy—to ensure we are prepared for all eventualities. Our proposal helps with that preparation.

The second-largest region for automotive manufacturing is the north-west, where my constituency is located. It employs 24,000 people and accounts for 7% of the total industry and 1% of all employment. I recognise that a slowdown in automotive sales could be related to a fall in the use of company cars and vans, and could cost workers their jobs. Members from Scotland, where the automotive industry accounts for around 4,000 jobs and 2% of the total UK manufacturing sector, and Members from Wales, where the automotive industry accounts for 9,000 jobs, feel the same. Similarly, any fall in the sale of rental cars and vans used in optional remuneration arrangements will have an impact on foreign direct investment into the UK, as there are now no British-owned mass car manufacturers operating in the United Kingdom. It comes back to the point made by an hon. Member about foreign direct investment. We do not want to put it off.

[Clive Lewis (Norwich South) (Lab)]

Given the sounds being made by the car makers Nissan over Brexit uncertainty, it would be a most foolish approach if those safeguards were not taken, and if there were no proper impact assessment or analysis of the industry.

[Peter Dowd]

My hon. Friend is right. To some extent, that is part of the concern we have had about impact assessments and financial reviews on industry generally in relation to Brexit. This is part of the tapestry or mosaic of issues that we always have to keep to the fore if we are to protect jobs. All parties have said that they want Brexit for jobs and the economy. We have said it time after time, and this completely fits in with our policy of trying to protect jobs and our economy. Let us look to the future of how this might impact on an important part of our industry, rather than leaving it to chance.

The domestic automotive market is home to foreign volume car manufacturers, with other companies specialising in commercial or luxury brands, including Honda, which has almost doubled production at the Swindon plant—£240 million of investment into the Burnaston site was announced in March 2017. Jaguar Land Rover invested £400 million in a new engine plant, equipment and the expansion of its design centre in 2015. In October 2016, Nissan announced that it would produce two new models in Sunderland. Members on both sides of the Committee understand that uncertainty in an industry such as the automotive industry, which plans 10 or 15 years in advance, can be disastrous and cost jobs. We need only to look at the current uncertainty around Brexit, as I have indicated, to see that this is clearly the case. Large automotive companies express concern on a daily basis. My colleague the hon. Member for Oxford East receives regular representations from companies in her area who are deeply concerned about the future of the industry in the UK, and any fall in use of company cars will not add further confidence.

I accept that Government Members may accuse me of scaremongering, but figures from Her Majesty’s Revenue and Customs showed that 940,000 employers paid benefits in kind—tax on a company car—in 2016-17. That was a 2% fall on the 960,000 recorded the previous financial year. The decline is not isolated—the number of company cars has decreased over the last 10 years.

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[Clive Lewis]

Will my hon. Friend give way?

[Peter Dowd]

Yes.

[Clive Lewis]

As I sit here listening to my hon. Friend describe the obscure way in which this tax is being implemented, I wonder whether it would it be fair to call it a stealth tax.

[Peter Dowd]

My hon. Friend makes a valid point. One could argue that it is a stealth tax, although I think what the Government have introduced is more like an incompetence tax. I am not sure they know the consequences of what they have unleashed, but I suspect my hon. Friend’s use of the term “stealth tax” is pretty apposite.

We all know that employers will have invested in vehicles in good faith on the basis of those calculations, together with the comment from HMRC that that was the correct way to calculate charges. It is therefore to be expected that they will feel let down and perhaps even blindsided by these changes. The more I think about it, the more I think they will consider what the Government are introducing as a bit of a stealth tax.

The ICAEW found that, where vehicles with allowed private use are provided to employees under OpRAs, the clause will impose unexpected increases in tax and national insurance charges on employees and employers respectively. The only way to avoid those charges will be for the employer to dispose of the vehicle. That is likely to result in the employer receiving lower than expected proceeds if the vehicle is owned outright, or suffering financial penalties if the vehicle was acquired under an ongoing contract. It may also upset the employer-employee relationship, which might ultimately lead to both employee and employer leaving the scheme entirely.

That concern led the Opposition to table amendment 18, which we will press to a vote. The amendment seeks to insert the following subsection:

“The Chancellor of the Exchequer must review the effect of the provisions in this section on the availability and uptake of optional remuneration arrangements relating to cars and vans and lay a report of that review before the House of Commons within six months of the passing of this Act.”

In effect, it would require the Chancellor to publish a review of the impact of these changes on the number of employees choosing to enter into optional remuneration arrangements. The amendment goes to the heart of the Opposition’s concern that the Government’s constant tinkering and fiddling deters people from taking up such schemes and, no doubt, other schemes.

That feeds into the wider criticism of the Treasury—and Ministers, I have to say—as backed up by the Chartered Institute of Taxation, regarding the constant need to rework and reform measures. The perception is that this is happening all the time. That takes us back to the point raised by the Scottish National party’s spokesperson about the need to tease out these issues in advance and put them into the domain. Let us tease them out and try to get a little bit of sense out of the mix. This amendment goes to the heart of our concerns, and this tinkering and fiddling about just confuses things more.

It is telling that the changes have come about not because of a new onus to reform optional remuneration schemes for the benefit of employees and employers, but rather to clean up the mistakes made in the previous Finance Act. In practical terms, that is what has happened. The Opposition have consistently called for the Government to take a more considered approach to taxation, including the introduction of Public Bill Committee witness sessions, as mentioned both previously and today. Were these concerns and those of the tax experts and advisers who have to implement the change taken seriously, Ministers would not have to come back to the House to redo their homework on every Finance Bill. This is my fourth Finance Bill—excluding the Taxation (Cross-border Trade) Bill—and that seems to be a regular occurrence. Instead, Ministers should be able to get it right first time, not just in relation to consultation but in enabling us to help them do their job.

[The Chair]

Order. You have made quite a few generalised remarks about consultation, Mr Dowd. It would be appreciated if you could keep your speech to the points of the amendment.

[Peter Dowd]

Thank you, Ms Dorries. The Minister considered the number of people who will be affected by the measure—1 million—to be rather small. The measure will have a disproportionate impact on van drivers and those who have company cars. The Treasury’s impact assessment shows that the majority are male and, no doubt, from various backgrounds. The Opposition want to get these changes right, which is why we are pushing for the Minister to report back to the House after six months and to offer clear evidence as to why they have had a negative impact on the number of employees able to use a company car or van under these schemes.

Given the lack of knowledge shown by small and medium-sized enterprise employers and employees when it comes to changes to optional remuneration schemes, it is hard to understand how the introduction of these measures will not incur additional expense for both. In fact, in its response to the consultation on the new measures, ICAEW found:

“The new clause introduces additional costs which will change the cost model on which the acquisition finance model was based.”

The Opposition therefore have a healthy scepticism for the Treasury’s figures on the revenue raised from these changes, because it is clear that there will be an additional cost.

In an effort to gain further clarity of the revenue effects of this measure, the Opposition have tabled amendment 19, which we will invoke later. The measures in clause 7 are part of the Minister’s clean-up operation to fully implement the wholesale reform of optional remuneration schemes introduced in the previous Bill. The reforms are aimed at targeting employers and employees who might use salary-sacrifice schemes for the purposes of tax avoidance. With that in mind, the review should consider the changes in the context of wider Government reform of optional remuneration schemes and include the impact of the changes to this specific scheme on the total revenue.

Turning to the vehicle rental sector, an increasing number of the company cars and vans offered by optional remuneration schemes are, in fact, rentals. That means that any changes to these schemes will have consequences for the vehicle rental sector. That is why we have tabled amendment 22, which would insert the following in line 2 of clause 7:

“The Chancellor of the Exchequer must review the effect of the provisions in this section on the vehicle hire sector and lay a report of that review before the House of Commons within six months of the passing of this Act.”

--- Later in debate ---

[Mel Stride]

I certainly accept the hon. Lady’s contention that oversights are never acceptable—of course they are not. As I set out, there was significant consultation and scrutiny of both the policy measure and the detailed legislation. Unfortunately, on this occasion the two issues being highlighted here did not come to the appropriate attention in the drafting of the 2017 legislation. If the hon. Member for Aberdeen North is saying that there was insufficient scrutiny, I do not believe that was the case, given the large amount of scrutiny applied in this circumstance.

The changes are expected to affect a small proportion of the 1 million or so individuals who are provided with a company car or van for private use. The average cost of the changes for those affected has been estimated at between £120 and £140 a year in extra tax. There will also be a slight increase in national insurance contributions for employers, in line with the original policy intent. The Exchequer yield from the changes is estimated to be negligible, but by stopping the growth of separate arrangements, significant amounts could be protected.

The hon. Member for Oxford West and Abingdon suggested that the issue of emergency repairs needed to be looked at in greater detail. That is already covered by the legislation. As the explanatory notes state, the clause

“does not affect the operation of sections 239(1) and (2) in relation to other payments or benefits. For example, should an employer reimburse an employee for costs incurred (such as replacing a tyre), the exemption in section 239(2) will still apply.”

HMRC will also ensure that that is reflected clearly in the guidance.

[Peter Dowd]

I want to bring some of the points I raised to the attention of the Minister again. He talked about consultation. Let us not take the totality of the automotive industry, because it is a big industry. What about Arval, which is a leasing company? Did the Government think, “We are going to make changes to leasing and rental arrangements, so let’s consult those companies directly affected”? Were any of those companies, many of which are quite big businesses, consulted on the measures?

[Mel Stride]

As I said, there were 259 written responses from employers, tax professionals and representative bodies, 77 from individuals, and 18 meetings with a wide range of employers, tax professionals and representative bodies, including two with the ICAEW. Officials had face-to-face meetings with more than 100 employers. There was pretty extensive engagement. The Government are constantly liaising very closely with industry. I know that the Exchequer Secretary recently met, for example, the chief executives of Vauxhall and Jaguar Land Rover in Ellesmere Port, and discussed a variety of important issues. The measures in the Bill were not raised on that occasion, but if the suggestion is that we are not close enough to industry and to businesses, I can assure the hon. Member for Bootle that we are.

The hon. Gentleman talked about the potential impact of the measures on the tax yield. I will use his figures—always a slightly risky thing to do, but I will on this occasion. [Interruption.] That may be unfair. He suggested that the tax yield per company car is, on average, £2,638. It is estimated that in the order of 10,000 individuals of the 1 million company car users in the UK will be affected by the ironing out of the deficiencies in the 2017 legislation—10,000 individuals will be adversely impacted by now having to pay the correct tax rather than being able to rely on the deficiencies in order to legitimately avoid that tax. That equates to about £20.6 million of forgone taxation, if every single one of those 10,000 were, as a consequence of the changes, to drop having a company car.

Of course, there are two points to make here. One is that the vast majority will not do that, so it will be a figure well below £20 million per year, and the other is that it will be offset by the additional taxation brought in by those who will no longer be absolving themselves of taxation as a result of the deficiencies in the 2017 Act. With regard to the impact on tax that the hon. Gentleman raises, I suggest that that underpins the Treasury’s view that the impact will be negligible.

The Government have already published a tax information impact note on clause 7, in line with normal practice. As set out in that note, as I have already said, clause 7 simply corrects two anomalies in the existing legislation. These changes affect only a very small number of people who have been taking advantage of the loopholes, so it will not have a significant impact on any of the areas addressed by the amendments. I therefore call on the Committee to reject the amendments tabled. I commend the clause to the Committee.

[Peter Dowd]

I want to pick up on a couple of points. We keep coming back to the fact that the Minister seems to brush aside the woeful lack of consultation aimed specifically at leasing companies. They are the ones dealing with this day in, day out. They are the ones who draw up the contracts. They are the people who the Government should be going to. I do not know whether the Government have been to those particular companies, but in future maybe that is something they should consider. If they have, and if I were to have conversations with those companies in future, I would check that they were aware that the Government did discuss this with them because, if that is the case, they appear to have been asleep on the job. I do not know whether that is the case, but I am sure we can check with them; I am certainly happy to check with them.

That goes to the heart of the issue about consultation. It is happening time after time that the Government are rushing through this legislation, and having huge amounts of tax legislation is complicating things as time goes by. The Bill before last, I think—I have lost track of them—was the largest Finance Bill we had ever had. I think that was before the election. It was an attempt to ram through a whole load of proposals that, fortunately, the Opposition at that point were able to stop.

I do not think 10,000 people being affected by this is a small number. It may be a small number in proportion to the number of people who could have been affected by it, but 10,000 people affected is a fair old whack. I am sure that if I were standing here saying that Labour was going to take £150 or £200 off 10,000 people, the gasps of outrage from Conservative Members would be palpable.

The other thing worth noting is that I think an awful lot of people entered into these arrangements in the best of good faith, and the Minister talking about them “taking advantage” of the tax loophole was maybe an unfortunate phrase. I do not want to pick him up on that point, but it is important to note that the vast majority of people affected by this entered into these arrangements with the best intentions, and I do not suspect that they were in any way trying to find any loopholes. They would have been advised of these arrangements by their employers or by leasing or rental companies, and I do not think it would have been on the basis of, “Here’s a tax dodge; here’s a tax loophole; go down this path.” It is important that we try to put that into context.

[Mel Stride]

I will briefly respond to those comments. I congratulate the hon. Gentleman, because he is about to tease out from me, as he likes to term it—his term “teasing out” has gone into the parliamentary lexicon—the specific issue of consulting leasing companies and listening to their views, which we also feel is important. The draft legislation was subject to technical consultation between 6 July and 31 August 2018. One of the written responses we received was from the British Vehicle Rental and Leasing Association, so we certainly had input from it.

On the hon. Gentleman’s point about those 10,000 people affected, I think two things. First, I certainly accept, and I think I said so in my remarks, that this was not tax avoidance, but a deficiency in the way the tax legislation has been brought into effect. In no way am I casting any aspersions on the activities of those who have benefited from that deficiency. Secondly, this is not about going out and taking money off 10,000 people —I think that was the expression the hon. Gentleman used. It is just about ensuring that the tax rules we introduced in 2017, which operate effectively for the vast majority of taxpayers, apply to everybody, rather than almost everybody.

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Beneficiaries of tax-exempt employer-provided pension benefits

[Peter Dowd]

I beg to move amendment 14, in clause 11, page 7, line 39, at end insert “but only if the requirement in subsection (3) is met.

‘(3) The amendment made by subsection (2) may only have effect if the Chancellor of the Exchequer has laid before the House of Commons a forecast of the effect on the public revenue of that amendment coming into effect in the tax year 2019-20 and subsequent tax years.’”

This requires a review of the revenue implications of the provisions of this clause to be reported to the House of Commons before this section can have effect.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 15, in clause 11, page 7, line 39, at end insert “but only if the requirement in subsection (3) is met.

‘(3) The amendment made by subsection (2) may only have effect if the Chancellor of the Exchequer has laid before the House of Commons a report of a forecast of the effect of that amendment coming into effect on pension benefits to which the exemption in section 307(2) of ITEPA 2003 applies.’”

This requires a review of the effect on pension benefits of the provisions of this clause to be reported to the House of Commons before this section can have effect.

Amendment 16, in clause 11, page 7, line 39, at end insert “but only if the requirement in subsection (3) is met.

‘(3) The amendment made by subsection (1) may only have effect if the Chancellor of the Exchequer has made a statement to the House of Commons detailing discussions between Her Majesty’s Government and the Charity Commission regarding the provisions of this section.’”

This requires a statement to the House of Commons on discussions between the Government and the Charity Commission on this clause.

Clause stand part.

[Peter Dowd]

The explanatory notes state:

“This clause will amend the tax exemption which provides for employer paid premiums into life assurance products and employer contributions to certain overseas pension schemes to be paid free of tax. Currently, premiums and contributions are only exempt from tax if the beneficiary is the employee or a member of the employee’s family or household. This clause will allow the beneficiary to be any individual or registered charity.”

The explanatory notes go on in some detail, and I exhort hon. Members to read them because they are pretty important and give context to the clause. They state:

“The amended exemption will also allow employees to nominate a registered charity, which is consistent with existing government policy of providing tax relief on charitable donations.”

We tabled a number of important amendments to the clause to ensure it does not create any unforeseen issues with regard to charitable giving, which all parties have long supported. Amendment 14 requires the Government to review the revenue effects of the clause before it comes into effect. That is merely a matter of good practice. It seems that the Government are no longer willing to provide the Opposition with the full information that we need properly to scrutinise the measures they are introducing through Budget legislation, nor the legal means by which to amend them.

We are not asking for much—merely a simple statement setting out the cost of any measures introduced. We were kind enough to perform that exercise for our Conservative colleagues in our “grey book” ahead of the 2017 election, as they all know. It is a fantastic read, I have got to say, and I am happy to sign any copies of it. Unfortunately, the Government did not return the favour.

We are not alone in calling for such information. The amendment reflects the advice of the Chartered Institute of Taxation and the Institute of Government, whose report, “Better Budgets: making tax policy better”, states:

“we have heard that the exceptional processes around tax policy making—in particular, secrecy, more limited scrutiny and challenge, and the power of the Treasury—have led to an ever-lengthening tax code, beset by a series of problems: confusion for taxpayers, poor implementation, political reversals and constrained options.”

That just about sums up what we have been saying today. The report sets out 10 steps to make tax policy better. Again, I ask hon. Members to look through it. It says, for example, that the Budget process should contain fewer measures, and that those should be better thought-out and capable of being implemented efficiently by HMRC, with politicians making informed decisions. It asks for:

“Greater stability in the areas of the tax system where taxpayers—individuals and business—need to make long-run decisions. A tax system that commands public support—and is robust enough to raise the money we need to finance the state we want.”

We are particularly interested in step 9, in relation to this amendment:

“Enhance Parliament’s (and the public’s) ability to scrutinise tax proposals…Parliament needs to do a better job at scrutinising Finance Bills”.

That theme continues throughout the report. It sets out in some detail—I will not go into that now—the issues around the unclear value for money, which is also repeated time and again in the Public Accounts Committee report for 2015-16.

We believe that the amendment, which requests a Government analysis of the cost of these new relief proposals, would help the Government to progress towards enhancing parliamentary scrutiny of the measures that they are introducing, as described in the report that I mentioned. After all, we know that the clause will have some revenue effects as it would introduce a tax relief, under certain circumstances, where there was not one before. It is also in the Government’s interest, surely, to provide such a figure, as that would show the impact of their attempts to boost charitable donations, for example. The Government may, of course, be attempting to support additional revenue streams for charities, but we must consider the wider aims of charities.

The original intention of the big society, for example, was to slash formal public expenditure as part of the proposal—whether it did is a matter of conjecture—but there is a question about how the Government plan to pay for the measures introduced in the clause. I note that the Chancellor is currently unable to pass any tax increases for fear of the immediate loss of support from the Brexiteers, but it is important that we focus our attention on the impacts of continued or further relief being introduced in the clause. If the measure introduced in the clause had been in our manifesto platform, revenue effects would have been included in the costings, and we ask the same of the Government. Let us put the figures in; that is what the amendment seeks to do.

Amendment 15 is an important one, which requires a review of the effects of the provisions of the clause on pension benefits to be reported to the House of Commons before the section takes effect. The precise impact of the provisions on pension benefits is unclear, and I hope the Minister can clarify that. As she will know, our current pension system operates an “exempt, exempt, taxed” system. The House of Commons Library explains that system well in its briefing on reform of pension tax relief. I will quote a bit of it, because it is important:

“The tax treatment of pensions follows an ‘exempt, exempt, taxed (EET) model’…Pension contributions by individuals and employers receive tax relief and employer contributions are exempt from national insurance contributions”,

and it goes on,

“but individuals are able to take up to 25% of their pension fund as a lump sum on retirement.”

I quote that only to give a flavour of the context. Under the previous arrangements for the tax-exempt employer-provided pension benefit, some taxation would have been paid on employer contributions to certain overseas pensions systems, where the beneficiary was an individual or a charitable organisation which was not one of those listed in the original Income Tax (Earnings and Pensions) Act 2003. Those tax-exempt beneficiaries were listed on that legislation as follows:

“‘Retirement or death benefit’ means a pension, annuity, lump sum, gratuity or other similar benefit which will be paid or given to the employee or a member of the employee’s family or household in the event of the employee’s retirement or death.”

The amendment poses a question about the impact on the overall pensions benefits if taxation is not being paid because of the exemptions the clause introduces, and asks whether an analysis of that impact has been done and, if not, why the Treasury has not looked into the matter. The clause makes a broad reference to overseas pension schemes, and it would be helpful if the Minister listed which schemes the clause would affect, and specified where they are actually based overseas. The overseas element is important, especially in the light of the Government’s decision not to uprate the state pensions of British overseas residents, which, in many cases, leaves many older people abroad destitute.

The current system of pension taxation clearly has many inequalities, which means that the way that taxation is applied to pension benefits tends to favour the wealthiest. Top rate tax payers only have to contribute 60p of every £1 saved. Meanwhile, those on low incomes have to pay 80p for every £1 saved. That is a factor in the pensions system.

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[Kirsty Blackman]

Will the hon. Gentleman clarify that when he says Charity Commission, he also means OSCR, which is the relevant body in Scotland?

[Peter Dowd]

Yes, I agree to that point of clarification. That is the intention. The Charity Commission and the Scottish body would no doubt recognise the seriousness of this problem, and in their strategy for dealing with fraud, they make the following point:

“The commission continues to see, and has to act on, serious problems arising in charities in relation to poor financial management and inadequate financial controls, accounting and record keeping. In 2010-11, out of 1,912 completed compliance assessment cases, the proportion involving serious concerns about fraud, theft and other significant financial and fundraising issues increased from 16% the previous year to 26%.”

Figures for subsequent years can be found in the commission’s annual publication “Tackling abuse and mismanagement”. The commission goes on to say:

“The National Fraud Authority in its annual fraud indicator report of 2012 estimated annual losses of £1.1 billion, or 1.7% of annual charity income during 2010-11.”

There is therefore a problem, because that is cash not going where it was intended. The impact of fraud and financial crime on a charity, particularly smaller charities, can be significant, going beyond financial loss and the impact of the financing of a charity’s planned activity. These crimes cause distress to trustees, and so on, and have an adverse effect on the charity. It is important to deal with them, says the Charity Commission.

If the Treasury is going to offer tax incentives for charitable donations, it is vital that the proper safeguards are in place to ensure that tax forgone does not act as an incentive to other risks. For example, from my understanding, the Charity Commission holds the only centralised list of registered charities; therefore a clear procedure for HMRC and the Charity Commission to communicate would be necessary to guarantee tax exemption. That is important.

[Bambos Charalambous]

My hon. Friend is making an excellent speech and raising some excellent points. Does he agree that there is a need for further transparency on how these proposals were put together by the Treasury? Does he agree that there is a case for a public register of charities that benefit from this tax exemption?

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[Peter Dowd]

If the Government decided to listen to us and undertake such a review, they would have the ability to tease out—to use that phrase—to check, to put into the mix all these important issues. We do not claim to have absolute authority on how this should be done, which is why we think wider consultation and an extensive review are absolutely appropriate. We all want the £1 that someone gives to a charity to go to the charity, and not be siphoned off in some fashion.

What procedures does HMRC already have in place for instances in which a nominated beneficiary turns out not to be a registered charity, but the person who nominated it assumed that it was? It is an important question, and it surely presents ethical issues if someone chooses to donate their benefits on the basis of fraudulent information. That is not what we want. Clearly, in the event of their passing on that information, it would not be changeable. Does HMRC plan to apply tax in those circumstances?

This will be made all the more difficult by the Government’s repeated attacks on the Charity Commission, which has been attacked time and again. Six years of cuts have led it to repeatedly warn that its ability to properly regulate the charity sector is being limited. We must take that factor into account. As reported by Devex, the news website for the global development community:

“The commission has a staff of 290 and a budget of £21 million, and while budgets have declined, the number of charities it oversees has grown by around 5,000 since 2009. The charity income it regulates has jumped from £52 billion in 2010, to more than £74 billion in 2017.”

Former Charity Commission board chair William Shawcross wrote in a 2014 report that,

“our funding position remains unstable, a matter which has been recognised by many in the charitable world and which I have raised with Government. We cannot absorb unending cuts to our budget and may have to consider alternative sources of funding.”

What assessment has the Treasury made of the impact of this measure on the struggling, underfunded commission? I hope that this matter was discussed with the Chancellor when the clause was prepared. I do not expect so, but I hope that it was.

Finally, it is clear that the measure could represent yet another injection into some private schools that operate as charities under Charity Commission guidelines. That has been recently confirmed by the House of Commons Library, which stated:

“The Government has stated that there are about 1,300 independent schools which are registered as charities and that there is a great variation in size of school across the sector: There are approximately 2,300 independent schools in England, ranging in size from the very small…Many of them are very small…The fees range from £20k per year in a prestigious day school…to far smaller amounts…Similarly, quality varies from world-leading education to some small, poorly-resourced schools”.

What assessment has the Treasury made of the amount of tax that will be forgone owing to the nomination of those particular schools?

[Clive Lewis]

I thank my hon. Friend for his scintillating speech, which is so full of detail and which I think everybody appreciates. Far be it from me to be a class warrior, but given yet another tax giveaway to the independent schools, which he mentioned, many Opposition Members would say that it is high time that those independent schools had their charitable tax status ended, and that omitting them from this measure would be a good start to that process.

[The Chair]

Order. The amendment is not about that.

[Peter Dowd]

In relation to the amendment, it is important to ensure that, where charitable donations are given—whomsoever they are given by and to—the giver knows, in good faith, that the cash that they give will go towards genuine charitable purposes. That is the key issue. Whether the definition of “charity” is open to debate in relation to any organisation is another matter. The key, and the point I think my hon. Friend is trying to make, is that charities really ought to be charities.

We hope that a statement on the discussions between the Charity Commission and the Chancellor would address some of these issues. It continues to be a big issue in this country that people who can afford to pay their taxes should pay their taxes. It is important that anybody who gives to a charity can rest assured that their charitable donation, won through their hard work, will be used with the best intentions. Our amendment would, in all good faith, ensure that.

[Kirsty Blackman]

The Committee will be glad to hear that I will speak only briefly. I am happy to support the Opposition’s amendments. I want to focus on amendment 16, which deals with the communication that is needed between HMRC and the charities regulator. That is incredibly important. We need such communication for individuals to be assured that their money will go to the right place and that the correct tax exemptions exist for that.

Amendment 16 would require the Chancellor to make a statement to the House

“detailing discussions between Her Majesty’s Government and the Charity Commission regarding the provisions of this section.”

If the Minister is minded not to accept the amendment, which is very sensible and the provisions of which it would be easy for the Government to carry out, is he willing to write to Opposition Members about the discussions between the charities regulators in England and Scotland and the Government, the nature of those discussions and the advice the Government have received from charities on the potential impact of the clause? Will he also cover the eloquent point made by the hon. Member for Bootle about ensuring that protection from fraud is built into any changes that are made under the clause?

If the Minister is minded to accept the amendment, that would be grand. If he is not, will he commit to contacting us with those details so that we are aware of the discussions the Government have had and we can be both comforted that our constituents who decide to give their benefits to charity can do so knowing they are less likely to be the victims of fraud as a result, and aware that HMRC is across the issue and ensuring that people do not unintentionally become victims as a result of the changes?

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[Mel Stride]

I thank the hon. Members for Bootle and for Aberdeen North for their contributions, as well as my hon. Friend the Member for Poole for his congratulations, which should largely be for me, because I am the Tax Minister and this is, after all, a tax measure, but we will leave it at that.

Clause 11 makes changes to modernise the tax exemption for premiums paid by employers to provide their employees with retirement and death benefits in life assurance products or certain pension schemes. Employers can provide death benefits for an employee through a life assurance policy or a retirement benefit through pension schemes. The employee will receive a pension out of those payments when they retire, or they can name a beneficiary to receive any payment of retirement benefit after they die.

Currently, most premiums or contributions paid by employers into these schemes are exempt from income tax. However, for certain types of scheme, as we have been discussing, this is the case only if the beneficiary is the employee, a member of the employee’s family or a member of their household. “Family” and “household” cover spouses, civil partners, parents, children and their spouses or civil partners, and dependants, domestic staff and the employee’s guests. The premiums paid by the employer for these schemes are treated as a taxable benefit in kind, if the eventual beneficiary is not covered by this definition, such as a charity or a friend. The changes made by this clause make the exemption fairer by extending it to cover premiums for policies where the beneficiary is any individual or a charity. The legislation will apply to premiums paid from 6 April 2019.

I will deal with amendments 14 and 15 together. Amendment 14 would require a review of the revenue implications of the provisions of the clause, to be reported to the House before this change can have effect. Amendment 15 would require a review of the effect on pension benefits of the provisions of the clause, to be reported to the House before this change can have effect. These amendments are unnecessary.

As with other tax measures, the Government have already published a tax information impact note for this measure. This shows that the changes are expected to have a negligible impact upon the Exchequer. Premiums paid by employers to almost all UK pension schemes and overseas pension schemes are already covered by separate tax exemptions, which apply regardless of who the beneficiary is. Therefore, the change introduced by the clause applies only to certain niche overseas pension schemes and employer-financed retirement benefit schemes.

The hon. Member for Bootle asked for specific examples of which schemes fell within the scope of this particular measure. I am afraid that we are unable to provide that information, because it depends what the terms and conditions state within each scheme.

In essence, this is a welcome change, but it affects a small number of schemes and a relatively small number of individuals. As a result, our assessment, supported by the Office for Budget Responsibility, is that the revenue implications are negligible. I think that answers the question raised by the hon. Gentleman on what the impact will be on the Exchequer and whether this has been taken into account. It certainly has been looked at and agreed upon by the Office for Budget Responsibility. The impact on pension benefits will therefore also be relatively minor. This change simply ensures that the benefits-in-kind rules apply in the same way across pension schemes and life assurance policies. I therefore urge him not to press his amendments.

Amendment 16 would require a statement of the House on discussions between the Government and the Charity Commission on this clause. HMRC does, of course, liaise with the Charity Commission and others, wherever appropriate, so such a statement would not be necessary. However, it might be helpful if I explain the position in relation to charities. The exemption will apply only where the beneficiary is recognised by HMRC as a charity for UK tax purposes. These will include charities registered with the Charity Commission in England and Wales, the Office of the Scottish Charity Regulator and the Charity Commission for Northern Ireland. The hon. Member for Aberdeen North asked whether I might write to the Committee with further information on discussions that may have been held, and I would be happy to do that. In the first instance, it might be helpful if she were to write to me, setting out exactly what she would wish me to respond to.

Not all charities need to be registered in England and Wales. Some are exempt or excepted from registration, but most charities will be recognised by HMRC in order to claim tax relief such as gift aid. Employers will need to check with the charity that it is either registered or recognised as a charity for UK tax purposes when it is named as a beneficiary.

I hope that explains the position and that the hon. Member for Bootle might consider withdrawing the amendment.

[Peter Dowd]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 11 ordered to stand part of the Bill.

Clause 12

Tax treatment of social security income

[Peter Dowd]

I beg to move amendment 2, in clause 12, page 9, line 7, at end insert—

‘( ) The Chancellor of the Exchequer must review the revenue effects of the provisions in this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue effects of Clause 12.

[The Chair]

With this it will be convenient to discuss clause stand part.

[Peter Dowd]

I know people are going to be terribly disappointed that this is my last contribution today. Other colleagues must have an opportunity to have their say. The disappointment is palpable, but I must push on.

The clause deals with the tax treatment of social security income. Again, I refer to the explanatory note, which provides a helpful introduction to the clause:

“The Scottish government is introducing five new social security payments: young carer grant; best start grant; funeral expense assistance; discretionary housing payments; and carer’s allowance supplement.”

It goes on:

“The government is also confirming the tax treatment of another four social security benefits: the council tax reduction scheme, discretionary housing payments and the flexible support fund, overseen by the UK Government, and the discretionary support scheme, overseen by the Northern Ireland Executive.”

Furthermore:

“Social security benefits are administered by a number of different UK government departments and the devolved administrations. The tax treatment of social security benefits is legislated for within income tax legislation. The tax treatment of new benefits should be confirmed when each one is introduced.”

The note continues:

“The Scottish government’s fiscal framework underpins the powers over tax and welfare that are devolved to Scotland through the Scotland Act. This states that ‘any new benefits or discretionary payments introduced by the Scottish Government will not be deemed to be income for tax purposes, unless topping up a benefit which is deemed taxable such as Carer’s Allowance’.”

This, in part, relates to social security changes made by the Scottish Government, which is a matter for Scotland to decide. We also note that this ensures that some new social security payments are not subject to additional taxation, which is a sensible approach that will make the finances of many on the lowest incomes as simple as possible. We would, however, like to query the decision to make the carer’s allowance supplement taxable.

The equality impact assessment for the clause suggested that the carer’s allowance supplement will be confirmed as taxable. That is a supplementary payment to carer’s allowance, which is a taxable benefit paid by the UK Government. The majority of recipients of care allowances are women, so more women than men will receive the carer’s allowance supplement in Scotland. In effect, it looks as though the only additional social security payment being denied the tax exemption is the one that will primarily affect women. Perhaps the Minister will elaborate on why that is the case. It appears to stem from the fact that the UK carer’s allowance is itself taxable—a UK Government decision that is likely to have the very same gender impacts.

The Women’s Budget Group has demonstrated on numerous occasions that women are already disproportionately affected by the Government’s policies in relation to the years of austerity. Its research shows that 86% of the austerity burden was and is being borne by women. That is eight long years during which our mothers, sisters and daughters have borne the brunt of those cuts, and now here we are with yet another measure that will disproportionately affect women more than men. A member of the Women’s Budget Group, Dr Angela O’Hagan, helped put this into context when she said:

“Budget processes have increasingly become the conduit for discriminatory policies, such as the UK Government’s rape clause and the cumulative attacks on welfare income especially among poorer women and women of colour. It is essential that external voices such as UK Women’s Budget Group are engaged and heard, and that the Government’s budget processes are opened up to closer scrutiny for their impact on equalities groups and their potential to advance equality through more effective allocation of public finances and more equitable means of raising government revenue.”

I suggest that had the Government allowed more scrutiny of the clauses and sought consultation as per the normal procedure before they came to office, these issues might have been ironed out during the Bill’s development. Instead, these negative gender impacts are squirreled away in policy papers on particular and specific clauses after it is too late to do anything about them, with the right properly to amend already denied to the Opposition by the Government through their refusal to table an amendment of the law resolution.

I hope the Minister will explain why this discrepancy has been included in the Bill and make moves to rectify it immediately. Time and again, we have called for an equality impact assessment of the Budget to flag these matters up, and every time that has been denied by the Government, who appear to want to slip these inequalities through. We will continue to hold them to account on every single one.

The amendment also relates to the matter of the Government’s behaviour regarding consultation and would require a review of the revenue effects of the clause. In the policy paper on the clause, the Government list the Exchequer impact as negligible. We have heard that several times today, so will the Minister enlighten us as to what “negligible” means in cash terms? It is not necessarily going to be “negligible” on an individual basis for those affected by this proposal. It would be helpful to have a band of figures starting, presumably, at zero and going up the scale. We hope that a proper review of the revenue effects of this measure would be made available for the purposes of good practice alone. I continue to refer Members to the “Better Budgets” report helpfully provided by the Institute for Government and the Chartered Institute of Taxation. The report states that

“the Treasury and HMRC should publish the evidence base behind measures and the assumptions on which costings are based, and ensure that these are appropriately detailed.”

Clearly, that was not the case with this measure. I have already spoken to the Committee on this point, but it is essential that the Government begin to change their behaviour towards the scrutinising of legislation, especially when it places further burdens on women. These proposals have already taken their toll and will continue to do so, unless we stand up and do something about it.

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[Mel Stride]

I start by addressing the specific points raised by the hon. Members for Aberdeen North and for Oxford East. On the explanatory notes and the value or otherwise of a specific reference to input from the Scottish Government, I will certainly be happy to look at that in the future. I assure the hon. Member for Aberdeen North that there were significant discussions on these measures between the Treasury and Scottish officials in the appropriate manner. On the technical point raised by the hon. Member for Oxford East around “the” scheme versus “a” scheme, the information I have is that the scheme came into force in April 2013. However, I will look into her specific question about whether the measures apply to “a” scheme or “the” scheme. I am afraid that I do not immediately have an answer to that, but I will get back to her as soon as I can.

Clause 12 clarifies and confirms the tax treatment of nine social security benefits. The income tax treatment of social security benefits is legislated for in part 10 of the Income Tax (Earnings and Pensions) Act 2003, which provides certainty about existing benefits and needs to be updated when new benefits are introduced. For example, the Scottish Government are introducing five new payments following the devolution of powers, including the young carer grant, the discretionary housing payment and the carer’s allowance supplement. Other payments covered by the clause have been in operation elsewhere in the UK for some time, such as the council tax reduction scheme and the flexible support fund, but are not yet covered clearly in legislation.

The changes made by clause 12 ensure that such payments are taxed appropriately, and that that is clear in legislation. The clause clarifies and confirms that such payments are exempt from tax, with one exception—the carer’s allowance supplement—which is taxable. That is in accordance with “The agreement between the Scottish Government and the UK Government on the Scottish Government’s fiscal framework”, which states:

“Any new benefits or discretionary payments introduced by the Scottish Government will not be deemed to be income for tax purposes, unless topping up a benefit which is deemed taxable such as Carer’s Allowance.”

Amendment 2 would require the Chancellor of the Exchequer to review the revenue effects of the clause and lay a report of that review before the House within six months of the passing of the Bill. Such a review is unnecessary. The Government have already published a tax information and impact note for this measure, and our assessment, supported by the OBR, is that the Exchequer effects are negligible.

On the carer’s allowance supplement, which was introduced in Scotland in 2018, as a general rule benefits are taxable if they replace lost income. The carer’s allowance has therefore always been taxable. The vast majority of those receiving the supplement have income below the personal allowance and would therefore not be expected to pay any income tax. That is an important point in respect of the point made by the hon. Member for Bootle. I will not dwell on each payment covered by the clause, but I reiterate that eight of these payments are exempt from taxation. HMRC has not and will not collect any tax from these payments.

As the tax information and impact note sets out, the taxation of the carer’s allowance supplement is expected to have negligible Exchequer effects because, as I have said, the vast majority of those carers receiving the additional payment do not earn sufficient income to pay any income tax at all. However, any income tax receipts from that will of course go to the Scottish Government.

The Committee will also know that taxable social security income is aggregated and reported to HMRC through self-assessment after the end of the tax year. This is an important point in the context of the amendment. That income will not need to be reported until January 2020. A review would therefore be impractical only six months after the Bill’s passing. I therefore ask the Committee to reject the amendment. I commend the clause to the Committee.

[Peter Dowd]

We will not push the amendment to a vote. However, I push the case to the Government that, while these amounts of money may be negligible to the Treasury or to HMRC, if the measure affects a particular woman who is already under the stresses and strains of helping a relative, it is important that we give them as much latitude as we possibly can. Whether we like it or not, this will be perceived as a continued attack on women who continue to be the biggest assistants to relatives—yet again, it is an attack on those people who are doing a caring role.

[Mel Stride]

Once again, divine inspiration has arrived and I can confirm that the CTR is a reference to multiple schemes—so it is “a” rather than “the”. The measure therefore covers all those schemes.

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[Peter Dowd]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 12 ordered to stand part of the Bill.

Clause 13

Disposals by non-UK residents etc

Question proposed, That the clause stand part of the Bill.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 23, in schedule 1, page 147, line 34, at end insert—

21A The Treasury must by regulations require that a list of persons not resident in the United Kingdom whose gains are brought into charge by the changes made to TCGA 1992 in this Schedule be published on a public register.”

This amendment would require a public register of those subject to capital gains tax as a result of the provisions in Part 1 of Schedule 1.

Amendment 24, in schedule 1, page 147, line 34, at end insert—

21A The Chancellor of the Exchequer must review the revenue effects of the changes made to TCGA 1992 in this Schedule and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the revenue effects of the changes to capital gains tax as a result of the provisions in Part 1 of Schedule 1.

Amendment 34, in schedule 1, page 147, line 34, at end insert—

21A The Chancellor of the Exchequer must review the expected revenue effects of the changes made to TCGA 1992 in this Schedule, along with an estimate of the difference between the amount of tax required to be paid to the Commissioners under those provisions and the amount paid, and lay a report of that review before the House of Commons within six months of the passing of this Act.”

This amendment would require the Chancellor of the Exchequer to review the effect on public finances, and on reducing the tax gap, of the changes made to capital gains tax in Schedule 1.

Government amendment 1.

Amendment 29, in schedule 1, page 167, line 47, at end insert—

Part 2A

Review of effects on property prices

118A (1) The Commissioners must, within three months of the end of the tax year 2019-20, provide information to the Treasury on the basis of the exercise of their functions in relation to the changes made in this Schedule about the effects of the changes on the matters specified in sub-paragraph (2).

(2) Those matters are—

(a) residential property prices in the United Kingdom, and

(b) the proportion of residential property in the United Kingdom owned by persons not ordinarily resident in the United Kingdom.

(3) The Chancellor of the Exchequer must, within six months of the end of the tax year 2019-20, undertake a review of the information supplied in accordance with sub-paragraph (1) and lay a report of that review before the House of Commons.”

This amendment would require the Chancellor of the Exchequer to review the effects of the changes in Schedule 1 on residential property prices and foreign ownership of residential property.

That schedule 1 be the First schedule to the Bill.