National Insurance Contributions (Increase of Thresholds) Bill

Richard Thomson Excerpts

Committee stage
Thursday 24th March 2022 Commons Chamber

[Matt Rodda]

I am grateful for the opportunity to speak in this important debate this afternoon. I would also like to thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friend the Member for Eltham (Clive Efford) for their new clauses, which I will speak to. I want to take this opportunity to talk about two groups of people, both of which are under real pressure due to the cost of living crisis. Those two groups are families in work, many of whom are on universal credit, and pensioners, many of whom have partners on universal credit.

First, I would like to give a bit of context. It is clear that we now face an unprecedented cost of living crisis due to soaring food and energy prices. Working families and pensioners are about to be confronted with the frightening prospect of the kind of cut to their standard of living not seen since the 1970s. Recent events in Ukraine have been shocking. However, the cost of living crisis predates Putin’s awful war and his vicious attack on the Ukrainian people. It was clear in the autumn that food and fuel prices were starting to rise steeply, but the Government have actually made matters worse despite those warning signs.

The Prime Minister and the Chancellor have made a series of choices that have made things worse. They decided to increase national insurance. They also decided to break the triple lock and failed to increase the state pension in line with inflation. To make matters even worse, they decided not to introduce a windfall tax, even when it was clear that such an approach would have provided cash to ease bills for families and pensioners. However, they did not have to take this damaging approach. They made a choice. They took the decision to act in this way, knowing full well the impact their policies would have. I contrast this with the approach set out by the shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves), whose windfall tax proposals would have helped those struggling to get by with a payment of up to £600 per household. Sadly, people across the country will now pay the price for the choices made by the Government.

I suggest to those on the Treasury Bench that it is worth looking at what is being said about the spring statement in the media and by commentators. For example, the chief executive of the Resolution Foundation said that it was hard to make sense of the spring statement. With just a hint of irony, he said:

“This package only makes sense if your only test for policy choices was can you prove you’re a tax cutter and you’ve already announced a rise in national insurance”.

The FT was somewhat less diplomatic. It described the spring statement with these words:

“Chancellor builds war chest for 2024 but offers minimal help for families reeling from increasing household bills”.

These choices will all have a huge impact on local communities up and down the country. I have been thinking about many of my own residents in Reading and Woodley, such as people running small businesses, teaching assistants, nurses, IT consultants, residents who work in retail and manufacturing, and parents who are under real pressure to pay for the weekly shop. The Government’s policies will also hit those who are a little bit older, such as pensioners who are struggling with the high cost of heating in an area with many terraced houses that are difficult to insulate.

Even at this late stage, I ask the Chancellor and those on the Treasury Bench to reconsider their approach. There is no doubt that this country faces a real cost of living crisis. That has been clear since the autumn. The Chancellor and the Prime Minister had the opportunity to look at a number of policies, including a windfall tax on the energy companies, which would have offered up to £600 of much-needed help. Sadly, they chose to impose extra costs on families and pensioners at the worst possible time.

[Richard Thomson]

The SNP is generally supportive of all the amendments that have been tabled, and I echo the comments of the right hon. Member for Hayes and Harlington (John McDonnell), who made a number of points about the importance of understanding the intended purpose and impact of legislation before it takes effect. I made that point ad nauseam during the passage of two Finance Bills, but I keep returning to it because it is important that we understand what we are doing and that we avoid, as far as possible, the law of unintended consequences.

Quite apart from the evidence base they would provide for legislative scrutiny, the amendments might provide a corrective to the poor policy choices that Ministers have made in recent times.

[James Murray]

As I said on Second Reading, we will support the Bill, but I thank my right hon. Friend the Member for Hayes and Harlington (John McDonnell) and my hon. Friends the Members for Reading East (Matt Rodda) and for Eltham (Clive Efford) for their important points about the impact the Bill will have. We recognise that raising the thresholds for national insurance contributions has benefits, and we welcome any help for people facing the Chancellor’s national insurance hike in April.

The explanatory notes explain that the increase to the primary thresholds for class 1 national insurance contributions and the lower profits limit for class 4 contributions will require changes to the systems of employers and HMRC, including those designed to facilitate pay-as-you-earn. The explanatory notes also explain that the Bill is being fast-tracked to give employers and HMRC as much time as possible to implement the changes, helping to make sure people are not overtaxed, and they confirm that the speed with which the Bill is going through Parliament means, unsurprisingly, there has been no consultation.

Although it is, of course, right to give employers and HMRC as much time as possible, the explanatory notes underline that the changes are being made very late in the day. Indeed, as we will come to later, the decision to implement this change from 6 July rather than 6 April reflects the last-minute nature of the Chancellor’s proposals. This approach to legislation does not inspire confidence that he is in control and has a well thought-through package to help people who are struggling to make ends meet. Indeed, it gives the impression of a Chancellor who has made the wrong choices and is now scrabbling at the eleventh hour to limit the damage.

Of course, according to the Chancellor, he only started work yesterday. He seemed proud to claim ahead of the spring statement that “the work starts today,” but the truth is that his choices have been hitting working people for far longer, and the Conservatives’ choices have been hitting our country for 12 years.

Clause 1 amends the Social Security (Contributions) Regulations 2001 to align the primary threshold for class 1 national insurance contributions with the income tax personal allowance. As I said, we support this measure as we recognise that raising the thresholds for national insurance contributions has benefits, and we welcome any help for people facing the Chancellor’s national insurance hike in April. However, this clause draws attention to the fact that the change to the primary threshold will not come into force until 6 July 2022. Indeed, subsection (4) explicitly states that the changes made to the primary threshold

“do not affect any liability to primary Class 1 contributions for any tax week commencing before that date”.

There will therefore be three months during which the Chancellor’s hike in national insurance will be in place, and hitting people’s pockets, and the changes to the primary threshold will not yet have taken effect. As I said a few moments ago, people looking at this will conclude that we have a Chancellor who knows he has made the wrong choices and is now scrambling around at the eleventh hour to limit the damage. So I wish to press the Minister on a few points about how and when the decision was taken to implement the threshold increase from July.

First, I have a simple question: when was a decision taken by the Chancellor to raise the threshold? Did he wake up on 23 March, the day he says was his first day of work, and make the decision then? Or had a policy decision been taken by the Treasury earlier, meaning that it could have been implemented earlier too? I realise the Minister may respond by trying to claim that announcements about changes to tax levels are made only at fiscal events, but that is not the case; the national insurance increase coming in April was announced by way of an unscheduled statement by the Prime Minister in September last year, and the arising legislation was pushed through Parliament in a day one week later.

If the Chancellor had decided to raise thresholds earlier this month, or even earlier this year, could his decision not have been announced and legislated for sooner? If that had been the case, these new thresholds could be in place from April, or at some point sooner than July, providing at least some extra help for people in the critical three months ahead when NI is being hiked and energy bills are set to soar. There are only two explanations possible for what has happened: either the Chancellor made the decision about thresholds only on the morning of 23 March, or he made it earlier, yet sat on it, when he could have acted to help people sooner. I would like the Minister to tell me which account is true. Given that the Bill introduces the threshold increase from 6 July, I would also be grateful if the Minister explained what consideration was given to backdating the increase to April. Is that an option that the Chancellor considered? If so, why was it discounted, and if it was not considered, why not?

Clause 2 raises the lower profits limit for class 4 contributions and ultimately aligns it with the income tax personal allowance. As before, we support this measure as we recognise that raising the thresholds for national insurance contributions has benefits, and we welcome any help for people facing the Chancellor’s NI tax hike in April. I note that the changes to the threshold for self-employed people’s class 4 contributions take effect in two stages. First, the lower profits limit is raised from £9,880 to £11,908 from April 2022, and then it is raised again to £12,570 in April 2023. The figure of £11,908 represents, as far as I can tell, a blended average for 2022-23 of the lower profits limit continuing at the level previously intended until July, and then being raised to £12,570 for the remaining months of the year. As with class 1 contributions, we will therefore have three months during which the Chancellor’s NI hike will be in place and hitting people’s pockets, yet the changes to the threshold will not yet have taken effect. I therefore ask the Minister again: are people missing out because the Chancellor made the decision about thresholds only on the morning of 23 March, or did he make that decision earlier, yet sat on it, when he could have acted to help people sooner?

Clause 3 gives the Treasury the power to make regulations to align the threshold for paying class 2 NICs with the lower profits limit. This clause also enables the Treasury to make sure that self-employed people with profits between the small profit threshold and the lower profits limit will continue to be able to build up NI credits but will not pay any class 2 national insurance contributions. As with the other changes in this Bill, we support this measure as we recognise the benefits of raising the thresholds. I would like, however, to press the Minister on two technical points that arise from clause 3. First, why are the changes to class 2 contributions to be made by way of regulations, rather than being implemented through this Bill? I note that clause 5(3) seems to make it clear that regulations arising from clause 3 will, as they would amend Acts of Parliament, have to be laid before and approved by a resolution of each House. Will the Minister explain why the detail on clause 3 will therefore be decided a later stage, and not with the class 1 and class 4 changes today? Secondly, clause 3(2)(b) makes it clear that the changes to class 2 contributions may be made to have retrospective provision from 6 April 2022. So why is it possible to backdate changes to class 2 contributions to April 2022, yet changes to class 1 and class 4 contributions can take effect only from July?

The remaining clauses include clause 4, which makes transitional and consequential provisions that are reasonable in the context of the Bill; clause 5, on which I have touched, relating to the making of regulations; and clause 6, on the short title. Before I close my speech, I should point out that nothing in those clauses addresses the secondary threshold for employers. We have warned since the national insurance hike was introduced that it would be a tax on working people and their jobs, yet none of the Bill’s clauses address the level at which employers will have to pay the raised rate of national insurance. We know from the Office of Budget Responsibility that this is not just an issue for employers who want to create jobs; the rise in employers’ national insurance contributions will also hit workers through a double whammy, as the increase is passed on by way of lower wages and higher prices.

National Insurance Contributions (Increase of Thresholds) Bill

Richard Thomson Excerpts

2nd reading
Thursday 24th March 2022 Commons Chamber

[Richard Thomson (Gordon) (SNP)]

May I say what a pleasure it is to follow the hon. Member for South Dorset (Richard Drax), whose speech I very much enjoyed? I hear the paeans to the Conservatives being the party of freedom and low taxes, so it will no doubt come as a shock to him that the Office for Budget Responsibility wrote yesterday that taxes will rise to their highest level as a share of national income

“since the late 1940s under Clement Attlee’s post-war Government.”

I know that the Conservatives love to compare themselves with previous Labour Governments, but I was not aware that they intended to compare themselves with that one. The big difference is that under Clement Attlee’s post-war Government, nobody could be in any doubt about the intention to raise living standards for all and to share the burden equitably. [Interruption.] I hear the comment, “The big difference was a pandemic”, but there was a big difference because of world war two as well, hence the “post-war” bit. However, I will gladly take an intervention once I have made a bit of progress.

The Scottish National party welcomes the Bill insofar as it goes. We are clearly in the midst of the worst cost of living crisis in living memory. Inflation is spiralling and is set to hit 8.7% later this year. Some of that is common to industrialised economies around the world, but let us be perfectly frank that other elements of it are entirely self-inflicted because of the Government’s choices. That resonates through people’s pocket books, with the OBR forecasting the sharpest fall in real earnings since the 1970s and the biggest hit to real household disposable income since records began in the 1950s. That is certainly not a record to be proud of.

The Chancellor had a golden opportunity yesterday to do something to ease the pressure on hard-working individuals and families, to help those on benefits and to give much-needed respite to businesses trying to trade their way back to health and prosperity. The circumstances were as auspicious as they ever could be. The Chancellor had headroom of approximately £30 billion that he could have worked within, as a consequence of increased tax revenues through fiscal drag and because of borrowing undershooting the forecast levels. There was the potential to make a significant difference for those who were feeling the pinch the greatest.

And what did we get? In the face of a 30p-a-litre rise in costs at the petrol and diesel pumps, there was a 5p cut in fuel duty, which barely takes the cost at the forecourts back to where the prices were last week. That offers no respite to the motorist or consumer or, indeed, to all of us, given that we are all affected by the price of goods that are transported on lorries or vans to the shops. Despite an admission that research and development funding was not having the effect that it ought to in driving growth, we had a promise just to spread that ever more thinly rather than focusing on where it could have the greatest effect.

On energy costs, we had a VAT cut on energy efficiency products, although, frankly, the mind boggles at how someone who is struggling to pay their existing utility bills will somehow find the money—VAT or not—to install solar panels, heat pumps or anything else that might be covered. We had the frankly paltry increase in the household support fund from £500 million to £1 billion. That is just one fifth of the impact of the 5p cut in fuel duty.

The blunt reality is that anyone who woke up yesterday morning worrying about how they would pay their energy bills will have woken up this morning confronted by exactly the same set of worries.

[Alberto Costa]

The SNP has been in uninterrupted governance of Scotland since 2007. During those 15 very long years, that nationalist Government have had many levers at their disposal relating to taxation regime relief and grants and other funds. Why have they not used those levers to assist people in Scotland, and why are SNP Members such as him instead complaining in this House about the UK Government’s moves?

[Richard Thomson]

I presume that the hon. Member is a supporter of the present constitutional set-up. I know that he sought election in Scotland before finding his present constituency, and in view of that he ought to be aware that only some powers are devolved, and the Scottish Government have limited fiscal powers. Those powers that they do have, however, they have used effectively. They have reduced taxes for about 54% of workers, and have also introduced benefits such as the Scottish child payment, which is doubling. They have used the limited powers at their disposal judiciously. If the hon. Member is patient, I may accept a further intervention from him when I come to other aspects of the deficiencies in that fiscal settlement.

[James Daly]

The hon. Gentleman has made some points about the record of the Scottish National party Government. I hope he will correct me if I am wrong, but according to the Scottish Parliament Information Centre, over the three years up to 2021 Scots paid £900 million more in taxes than those in the rest of the UK, and would have paid exactly the same as those in the rest of the UK had their rates mirrored those of the UK. As a result of decisions by the Scottish Government over the last three years, Scots have been clobbered with £900 million worth of extra taxes. Is that correct?

[Richard Thomson]

As I have said, 54% of Scots are paying lower rates of tax than they would be paying if they lived elsewhere in the UK. Overall, the tax system has been reshaped to make it more progressive and, I would argue, more equitable. According to the Resolution Foundation, about 1.3 million people across the UK will be pushed into absolute poverty as a result of tax decisions made by this Government. I have to say that it is a bit rich to argue, as some Conservative Members wish to do, that the Scottish Government, on a budget that is determined in great part by political decisions taken in this place, should be dipping into the revenues that it has earmarked for essential public services in order to mitigate the impacts of poor choices made here.

The Scottish National party has been sharply critical of the national insurance rise since it was first announced, for straightforward reasons. We believed that it was a regressive tax. It hit the lowest earners the hardest. It was a tax on jobs, and therefore a tax on growth. It was rebranded as a “health and social care levy”, although the Government had no clear idea of how the money was to be spent within the NHS, and could not clarify the question of how any of it would be passported through to social care services in England. Moreover, as a result of its impact on people’s incomes, it would bake in inequality—both generational and geographical—for decades, mitigating social care costs for some but not for all.

The Bill removes some lower earners from the liability that the Chancellor has created, and we welcome that partial retreat. Realigning national insurance and income tax thresholds is broadly sensible, but I believe—I am happy to be corrected on this point—that it only takes us back to the status quo ante of 2010, when the Conservative Government first came to office. Paul Johnson, the director of the Institute for Fiscal Studies, posed an important question in The Times this morning:

“Why promise to spend billions cutting the basic rate of income tax whilst going ahead with an increase in NI rates? That will make the tax system both less equitable and less efficient. It will increase the wedge between higher taxes on earnings and lower taxes on pensions and unearned incomes. And wouldn’t that money have been better spent sooner helping those most in need?”

I certainly cannot quibble with that.

Let us not be fooled: even though the thresholds are moving, this is still a tax increase. There has been no shortage of informed opinion telling the Chancellor that this was the wrong thing to do, but from a political point of view I am bound to say that he has made mugs of his Conservative colleagues—not just those who had to swallow the indignity of betraying a manifesto pledge at the last election, but those who have gone all out to stoutly defend the policy over the last few months.

The manner in which the Bill has come before us exposes the nonsense that this tax rise was ever in any way “hypothecated”. If the right way to fund the health and social care levy was through a hike in national insurance—and I do not believe it was—it cannot also be right to backtrack on the extent of that rise. It is also impossible to argue that it is hypothecated when we see no corresponding increase in the health budget in England.

[Anthony Browne (South Cambridgeshire) (Con)]

The hon. Member has described this as a tax increase, and obviously it will raise revenue, but does he accept that raising both the threshold and the rate of national insurance means that it is actually a tax cut for people earning less than about £40,000 a year and that only people earning more than that amount will be paying more tax? Overall, is that not the sort of outcome that we would want?

[Richard Thomson]

Raising the threshold will certainly take some people out of the scope of the measure that was previously announced, but overall, for those who are not in that category, this still represents a higher level of tax that they are paying to the state than would have been the case had it not gone ahead.

As with yesterday’s other announcements, notwith-standing the Chancellor’s conceit about being an instinctive tax-cutter, these measures are being paid for largely through fiscal drag. The other invidious element is the fact that state benefits are failing to keep pace with inflation. As the hon. Member for Ealing North (James Murray) said earlier, only one in eight workers will see their tax bills fall by 2025 as a result of these measures, and as I said in my opening remarks, this will be the highest tax burden since Clement Attlee was Prime Minister.

Let me now turn to the Barnett formula. I think that the Bill exposes the fragilities and frailties of that funding settlement. The Scottish Parliament has limited tax and benefit powers, but much of its funding is contingent on policy decisions being taken first of all in this place, for England, before any corresponding resources are released for devolved Governments. We see the foibles and the fragility of that in the Bill, but we also saw it during the pandemic, when decisions had to be taken here before those corresponding resources were released. That, in my view, is not a good way of trying to run the country. We should be trying as far as possible to align policy with resources so that there is clear accountability in terms of decisions made and outcomes delivered, and the funding structures of the devolution settlement are not conducive to that.

In his statement, the Chancellor seemed to me to cut the figure of the pickpocket who expects some credit for returning half an hour later to hand back someone’s wallet after abstracting the cash and cards that were inside it. It is amazing that he should expect any gratitude for what he is doing. I do not believe that any responsible Government seeking to tackle some of the crises facing public services post pandemic would reach for national insurance as the best way to do it. If, as I fervently hope, a Scottish Government will one day have full powers over their finances, I do not believe that they will reach for that lever either.

We support this Bill, but it is very much an indictment of the Government’s priorities that we are here to discuss it at all.

--- Later in debate ---

[Alexander Stafford]

Of course, we all have to live within our means: we cannot just keep on spending money. It was right for us to spend £400 billion to save jobs, save lives, prop up our economy and make sure that people have jobs, but we need to pay that back, so unfortunately we cannot have huge, sweeping tax cuts, however much we might like to. The Government need to make and are making the tough but responsible choices.

I also feel we are in a parallel universe when I hear Opposition Members talking about being on the side of working people and saying that they would do more if they were in our shoes. My local council, Labour-run Rotherham Metropolitan Borough Council, is not only increasing council tax for hard-working people but doing so with the ninth-largest increase, in cash terms, in the entire country. That is despite the council having £58 million in reserve for rainy days. If this is not a rainy day, I do not know what is. Instead of increasing council tax by so much, the council should spend the money it has in reserves and lower council tax for hard-working people.

Let me turn to an even more ridiculous example. Last year, the Labour police and crime commissioner for South Yorkshire underspent his budget by £2 million. That is a big saving. What would a fiscally prudent person do? They could spend it on reopening the police stations on Maltby High Street or in Dinnington, as I advocate, or perhaps freeze or even cut the precept. But no: the precept for the South Yorkshire police and crime commissioner is increasing, despite that budget underspend. It is a parallel universe.

The Government are introducing tax cuts for hard-working people. We should emphasise that it is about the working people, because we want to put more money into people’s pockets. The Bill is a good, strong and stable measure, because it will look after people and put pounds in their pockets, where they matter. It is my fundamental belief, shared by my colleagues on the Conservative Benches, that if someone works hard, they will get the fruits of their labour—they will get out what they put in. Under this Bill, the more someone works, the more money they will get in their pocket, and more money in their pocket is better for them and their family, community and society. That is what the Bill does: it looks after people by putting more money in their pockets, because the individual knows best. That has been what goes on since time immemorial.

[Richard Thomson]

According to the IFS, median earners on around £27,500 can expect to be around £400 worse off in 2022-23 than in this financial year, even after the increase to the national insurance floor. Are they getting back all that they put in? How do the hon. Gentleman’s comments square with the lived experience that people on median earnings will have in the forthcoming financial year?

[Alexander Stafford]

I thank the hon. Gentleman for that interesting point, but it is clear that 70% of working people are going to have a tax cut. In fact, not only is there a tax cut in the Bill, but we know that there will be an income tax cut in 2023-24. I hope the Scottish Government also reduce income tax, so that they too are on the side of hard-working people.

--- Later in debate ---

[James Daly (Bury North) (Con)]

It is a pleasure to follow the hon. Member for Luton South (Rachel Hopkins), who made a passionate speech. This has been an incredibly important debate, but the framing of the debate by the Opposition Front Bench was somewhat curious. The hon. Member for Ealing North (James Murray) did not want to answer any questions from Members, including myself, on taxation issues that impact the cost of living for my constituents. Thankfully, the debate has been wide-ranging. If we are to discuss the impact of tax, we must look at it in every part of the country.

I listened to the hon. Member for Gordon (Richard Thomson). I often have to restrain myself from intervening on Members of the SNP, but today, I had to listen to the spokesperson for a party who has actually found a way of taxing the people of Scotland, their own citizens, to the sum of £900 million in extra taxes over the last three years for a net benefit of £170 million.

[Richard Thomson]

I think the hon. Gentleman is confusing cause and effect with the complicated system for forecasting tax revenues and then balancing payments between the Treasury and the Scottish Government. Would he like to add that clarification to his remarks?

[James Daly]

Absolutely not. The SNP has found a way of raising taxes that penalises their own citizens and raises less income.

I come back to Greater Manchester. I am proud to be the MP for Bury North. My constituents face a wide range of taxation issues. They will support the Government position and the policy announced yesterday on the increase in the national insurance threshold. Every single person in this debate has supported it. Indeed, the hon. Member for Gordon said, very curiously, that it was an indictment but he was going to support it. It is a good policy that will put more money in people’s pockets. It is a tax cut, especially for those on the lowest incomes, which is to be welcomed.

I want to consider this policy in the context of the largest self-employed sector in my constituency—taxi drivers. Taxi drivers will be hit completely by the taxes proposed for Andy Burnham’s clean air charging zone—at 493 square miles, it will be the world’s largest such zone. That tax—£10 for small vans and £60 for lorries—will hit all those who rely on certain types of motor transport to earn their living. How can that be right? I stand up here on a regular basis and ask Opposition Members to support me in asking for that charge—a cost that hard-working taxi drivers and others in my constituency face—to be removed, but there is silence. We have to look at the whole of the country, and at the policies put in place by politicians at different levels.

My hon. Friend the Member for Rother Valley (Alexander Stafford) talked about his experience of a local Labour authority. In Greater Manchester, we have council tax rises linked to incompetence. We have precepts that the Greater Manchester Mayor is levying on taxpayers in my area, even though he, as police and crime commissioner for Greater Manchester, has wasted millions on millions of pounds on a failed computer system. The decisions of politicians impact my constituents every day. I hope at some point Opposition politicians will join Conservatives in Greater Manchester in calling for the reduction of taxes on our constituents, for the benefit of those constituents.

We see a contrast. The Government are investing in my constituents and in hard-working people.

Midas Financial Solutions Collapse

Richard Thomson Excerpts

Tuesday 22nd March 2022 Westminster Hall

[Richard Thomson (Gordon) (SNP)]

It is a pleasure to serve once again under your chairmanship, Mr Stringer, and to follow the hon. Member for Strangford (Jim Shannon). I wondered at points if he was looking over my shoulder at some of the things I was planning to say, so I will just have to find a different way of expressing them. I commend the right hon. Member for Orkney and Shetland (Mr Carmichael) for his determination in pursuing justice, truth and better outcomes and to prevent such things from occurring again, which he has demonstrated throughout his pursuit of this issue.

The main villain of the piece is obviously Alistair Greig, the managing director of Midas Financial Solutions. After the scale of his dishonesty was revealed in court, he was dubbed by the Aberdeen Press and Journal as the “king of the swindlers”. He defrauded over 180 victims, or 297 according to the Financial Conduct Authority, of close to £13 million. Most, but not all, were from the north-east of Scotland, and it was one of Scotland’s largest ever fraud cases, taking over two years to investigate.

Many investors—business people, retirees and young people starting out in life—were told their investments had grown, which encouraged them to invest even more, all the time believing that their money was safely tucked away and gathering interest. The only problem, as we now know, is that it was not. Their investments were not growing in the sense that we might understand; rather, they were unwittingly part of a Ponzi scheme, using the deposits of later clients to repay earlier deposits with interest and therefore burnishing the outward reputation of the scheme.

Self-evidently, all fraud is dishonest, but what really takes the breath away is the sleekit nature—don’t worry, Hansard, I will send a note later about “sleekit”—of how this particular fraud was perpetrated. In setting himself up as a gatekeeper, Greig pretended that he had access to a special deposit account at the Royal Bank of Scotland. That was pitched as being beyond the means of ordinary investors to access, except through him. He said that he could make that opportunity available to his more valued customers, taking people in with that confidence trick.

Greig exploited his existing, justified reputation and long-established relationships, including with those he worked beside and those he knew socially and professionally. One person close to the investigation said Greig

“pitched the interest rate at somewhere between plausible and too good to be true.”

He exploited those relationships to draw in further unwitting investors.

In the north-east of Scotland and, I am sure, in other parts of these islands the personal relationship still counts for a great deal, as does personal trust, a personal referral and word of mouth. It is that that makes this scheme so particularly invidious, given the way that it managed to spread through so many investors. I have no doubt that this case has directly and indirectly resulted in illness and great distress, contributed to people’s early deaths and caused divisions between families where recommendations to invest were made from one family to the other.

What did Greig get out of it himself? He spent the money on classic cars, exotic holidays and VIP days at Wimbledon and the British grand prix, living a lifestyle few of us could ever dream of, all off the back of other people’s hard-earned money. It is quite something to reflect that it took 95 victims to bring a civil case against Mr Greig before they were able to secure a single penny of compensation.

May 21 2020 is an auspicious date in these events, because that was when the criminal case came to a conclusion at the High Court in Edinburgh and Lord Tyre sentenced Greig to 14 years’ imprisonment. In his sentencing remarks, Lord Tyre observed that Greig was

“guilty of committing a fraud on an enormous scale.”

The thing about committing a fraud on an enormous scale is that the overwhelming evidence that persuaded the jury to convict him unanimously did not just appear instantly but accumulated over time, in full sight of those who should have been offering protection to the consumers involved. It is impossible to avoid the conclusion that those investors were very poorly treated by the public bodies that should have been looking out for them. In particular, the financial regulators had three big chances to halt this.

The first opportunity was when Greig was removed from a panel of building society mortgage advisers after concerns were raised over his personal integrity. Accord Mortgages, which was part of the Yorkshire Building Society, threw him off their panels after accusing him of mortgage fraud in 2008. That was the first opportunity to investigate Greig’s fitness to practise. Had that concern been acted on then, he could have been removed quite legitimately from being involved in any kind of controlled function, looking after investors’ money. According to the FSA, that information was shared with the relevant internal stakeholders, but the matter was not further investigated and the FSA closed its record on 10 April 2008, giving the reason that the risk was mitigated.

In investigating the complaint, the FCA declared in its decision letter of 26 April 2019 that, reflecting on this, it was

“satisfied that the way in which the Authority dealt with the email was reasonable, proportionate and in line with the risk appetite at that time.”

The buzzwords radiate off the page, but it is quite clear that something went badly amiss in failing to appreciate the significance of why Greig was removed from the panel. Fundamentally, either Greig was a fit and proper person or he was not. Sadly, and now far too late, we know the answer to that question. In fact, only two of Greig’s documented victims had money invested in his scheme before the FSA missed this first opportunity and we can all see what would have been avoided had more stringent and proportionate action been taken to effectively mitigate that risk.

The second opportunity came after Mr Greig lied—there is no other word for it—to the Financial Services Authority in an email. As part of an application for a CF30 designation, which is an authorisation from the authority to give advice and to deal with and arrange investments on behalf of a customer, he claimed:

“I can confirm I have never been removed from a mortgage panel.”

That was when Greig was reapplying for a status that he had voluntarily withdrawn just a few months earlier, in December 2011. To give some credit, the application was referred to what was called a non-routine team within the regulator because of the intelligence already held on Greig dating back to 2008. Before that application was determined by the case officer, Sense, the appointed representatives, withdrew it, citing an internal movement of staff as the reason. Prior to closing the case, the intelligence officer concerned compiled a detailed intelligence report. It stated that no determination had been made of Mr Greig’s honesty, integrity and reputation to hold the designation to deal with clients’ money, and that a full assessment should take place in the event of future applications being received. Again, even at this juncture, either Mr Greig was a fit or proper person or he was not. Sadly, and again far too late, we now know the answer to that.

The third and most serious opportunity to halt the scheme was in October 2012. An email was received by the Financial Conduct Authority from a whistleblower about what appeared to be deposit taking by one of Midas’s employees. A case was opened and referred to the unauthorised business department, which analysed the case and came to the conclusion that the activity in question was carried out by Midas rather than the individual. Given that Midas was an appointed rep of Sense, an authorised entity, the unauthorised business department took the view that this was a case to be taken forward by the supervision department. In February 2013, a referral email was sent to the firm contact centre, whatever that is, copying in the supervision team—there are plenty of emails flying about—explaining the unauthorised business department’s decision and stating that no further action would be taken by them. While the standard procedure at that point would have been for the contact centre to open a case and then allocate it to the supervision department, no case was ever opened: it fell between the cracks.

It is impossible to avoid the conclusion that the regulator seriously dropped the ball there. In doing so, its negligence allowed the scheme to continue until 2014; it missed a huge opportunity to prevent significant harm being perpetrated by someone it had already had two opportunities to halt, knowing that he was unfit to steward the finances of others.

As the right hon. Member for Orkney and Shetland said, some measure of compensation was paid out six years on. However, not all investors have got their money back. In some cases, that is because compensation is capped at £85,000, under the Financial Services Compensation Scheme. Sadly, some people lost a great deal more than the £85,000 threshold. While the primary guilt here lies with Mr Greig, and Greig alone, that does not absolve the regulators of their manifest failings in this case. Nor does his lengthy custodial sentence restore the finances or heal the hurt of those victims affected.

It is understandable that, having been let down by the regulator and short-changed by what the safety net compensation scheme was likely to yield, investors would seek redress where they could. Although their pursuit of the Sense Network was unsuccessful, it is obvious that the judges who sat on the case had sympathy with the action. Lord Justice David Richards, alongside Lord Justice Hamblen and Mr Justice Snowden, said in July 2019:

“It is accepted, at least for the purposes of this case, that the appellants have been the victims of a callous fraud. On any footing they have suffered severe losses.”

I agree with what the right hon. Member for Orkney and Shetland and the hon. Member for Strangford have said: it is manifestly unfair that the 95 of Greig’s victims who brought the civil case in order to unlock some measure of compensation are receiving the same compensation as those who did not—given that they have taken on the burden of legal costs for every victim. That is not to begrudge anyone who got compensation who was not involved in the legal action; simply, it has created two classes of victim. In anyone’s eyes, that is surely wrong. It raises the question of why on earth it was necessary to pursue the civil case in order to enable access to the Financial Services Compensation Scheme.

I have drawn some conclusions from this case. In my view, the regulators are not there to protect people from their own greed or recklessness, but I defy anyone to say that those who were the victims in this case could be guilty of either of those vices. Bluntly, they were ordinary folk, looking for the best home for their savings in a turbulent financial environment, who had the great misfortune to be directed towards someone who had become thoroughly unworthy of their trust. There is an issue to be examined here: the individual investors, who could see the outward respectability of Midas and saw it as an appointed representative of a presumably respected financial services group, which was regulated with the industry, where everyone presumably had the appropriate professional indemnity insurance in place, were entitled to feel, even by association, that their money was in safe hands.

However you choose to slice and dice this, Mr Stringer, it is clear that the regulation has failed. Whether you view that as a systemic failure or, more charitably, as a series of individual and isolated failures, the system should surely, at all stages, have been much more resilient—even to somebody as determinedly dishonest as Mr Greig proved himself to be. It exposes our financial services regulation as being prescriptive, box-ticking and silo-orientated—big on paperwork and self-assurance. Despite, no doubt, the best efforts of some within the organisation, it was also, sadly, desperately short on effectiveness.

Economic crime accounts for 40% of all crime in this country, yet only 1% of our crime-fighting resources are devoted to tackling it. Research from Spotlight on Corruption shows that the Government spend just 0.042% of GDP to tackle economic crime, despite its costing the UK at least the equivalent of 14.5% of its annual GDP. The National Crime Agency budget has declined, in real terms, by 4.5% over the past five years. Bluntly, if we are to create a regulatory environment within which investors can operate with assurance—no matter how big or small they happen to be—the Government must be absolutely committed to making it work and funding it appropriately.

Those affected have, sadly, now received all that they are ever likely to. While Greig is the guilty party, I am bound to say that others also carry some culpability. The regulation of institutions—big and small—has fallen sharply over recent years. However, without more effective regulation, Midas investors are unlikely to be the last to be taken advantage of by the deeply unscrupulous. I look to the Minister to answer on how we can make that regulatory environment safer for all of us who invest.

National Insurance Contributions Increase

Richard Thomson Excerpts

Tuesday 8th March 2022 Commons Chamber

[Richard Thomson (Gordon) (SNP)]

That we are currently experiencing the gravest cost of living crisis in memory should not be in the least bit a controversial thing to say. It has been caused by inflation from a number of fronts: the shortage of labour caused by Brexit and the ending of free movement; the increased trade frictions as a direct consequence of Brexit; covid-19 and all that has befallen us over the last two years; and, most recently, the rapidly increasing costs of energy. Amidst all this it is absolutely extraordinary that any sentient, competent Government would seek to pile on the agony by increasing national insurance contributions for employers, employees and the self-employed.

[Anthony Browne (South Cambridgeshire) (Con)]

Will the hon. Gentleman give way?

[Richard Thomson]

I will give way shortly but first want to make some progress, because this represents a shattering of the Conservatives’ manifesto promises—and I am sure the hon. Member will want to be fully cognisant of this before he takes to his feet to chide me. On page 2—the inside page—of the Conservative party’s 2019 manifesto, entitled “Get Brexit Done: Unleash Britain’s Potential”, we had an introduction from no lesser a personage than the Prime Minister himself, rather grandiosely titled “My Guarantee”, which said:

“We will not raise the rate of income tax, VAT or national insurance”.

That was signed off with the Prime Minister’s signature, and it was a statement quite literally not worth the paper it was written on.

[Several hon. Members rose—]

[Richard Thomson]

I am spoiled for choice; I give way to the hon. Member for South Cambridgeshire (Anthony Browne).

[Anthony Browne]

The hon. Member makes some very valid points about the rise in the cost of living in the UK, which we absolutely accept is a real challenge, but he puts many of the reasons for it down at the feet of the British Government; does he not accept that this is a global phenomenon? Does he not accept that the increase in energy prices is a global phenomenon affecting all countries around the world, that the crunch in the supply chains resulting from the global pandemic is a global phenomenon, and that inflation is higher in America and Germany than in the UK—and in the latest figures UK inflation is below the OECD average?

[Richard Thomson]

For a moment there, I was going to ask the hon. Member if he would give way to me. Yes, I do accept most of those things but, as I also set out very clearly, there are those aspects that are exogenous and global and there are those, such as through Brexit and from the poor response to covid in many respects, that are entirely self-inflicted. I am happy to draw a distinction and I hope that, on reflection, the hon. Member might do so, too.

Let us not be in any doubt about the enormity of the crisis facing us. The National Institute of Economic and Social Research has warned that the number of UK households classed as destitute could rise by nearly a third to more than 1 million this spring after the Government bring in their national insurance increase. Ofgem recently announced that millions of householders will see their energy bills rise by £693 as a result of the increase in the energy cap from April. The Joseph Rowntree Foundation warns that the energy price cap rise will have a harsher impact on the poorest families, who will spend on average 18% of their income after housing costs on energy bills after April. Energy UK recently warned that household energy bills could rise by another £1,000 by October as wholesale gas prices continue to soar, with households facing the prospect of bills between £2,500 and £3,000 this year. Consumer prices, as measured by the consumer prices index, were 5.5% higher in December 2021 than a year before, the highest inflation rate recorded since 1992. And of course we must not forget that the Bank of England increased interest rates from 0.25% to 0.5% and forecasts that real household disposable incomes are set to fall by 2%.

The UK Government’s “Health and Social Care Levy” police paper claims:

“This levy provides a UK-wide approach which enables us to pool and share risks and resources across the UK”.

In accepting that, we should be absolutely clear about whom the risks are being pooled among. We must be in no doubt whatsoever that the upcoming national insurance hike is a tax on jobs as well as on individuals, when people are already suffering. The increase will not touch property income, pensions or income from savings, but will fall squarely on the shoulders of those who are salaried or whose income is drawn from profits.

We have heard about figures showing that the top proportion are paying higher amounts, but we would expect that. What I am interested in is the marginal rate of tax, because that is the true measure of fairness—how much of someone’s income they are having to give over as a result of a taxation measure. Let us look at one group in particular: our students. This national insurance hike will mean that, if student loan repayments are included, graduates earning just over £27,000 will pay a marginal tax rate in excess of 42%. We have heard that government is about choices and it is clear from the choices this Government are making that the combined effect of their policies will hit the lowest earners, the youngest earners and those with the least economic assets the hardest.

[Jerome Mayhew (Broadland) (Con)]

The hon. Gentleman is asserting that the poorest will be worst hit by this, but Treasury analysis of the impact of tax and spending decisions on households in ’22-23 in cash terms clearly shows that the bottom eight deciles—80% of households—will be better off as a result of the Government’s combined tax and spend decisions, including on national insurance. What does the hon. Gentleman say to that?

[Richard Thomson]

I say that I very much doubt that, and there is analysis by the Institute for Fiscal Studies that suggests very differently, but again this comes back to the marginal rate of tax and there is no doubt that this is going to have a greater impact on the marginal rate of low earners than that of higher earners.

[Richard Graham]

Will the hon. Gentleman give way?

[Richard Thomson]

I would like to make some progress.

[Richard Graham]

On a point of order, Mr Deputy Speaker. The hon. Member has made some very good points but I do believe he has inadvertently misled the House by claiming that those who are least well-paid will be paying the most on the tax when we have just heard from the Chief Secretary that over 6 million earners will not be contributing a penny towards the cost of the national increase rise. Mr Deputy Speaker, may I give the hon. Member, through your offices, the opportunity to withdraw his earlier remark?

[Mr Deputy Speaker (Mr Nigel Evans)]

That sounds like a debating point as opposed to a point for the Chair.

[Richard Thomson]

Again, I refer the hon. Member for Gloucester (Richard Graham) to the concept of the marginal rate of tax and ask him to look at the totality of the impact—if he had been patient I would have happily given way; he had no need to resort to such devices.

On raising additional resources for health and social care, as we are invited to believe this levy is supposed to do, it is surely much fairer as a general principle to spread the burden by increasing income taxes across the board on both earned and unearned income, as well as to look again at areas such as inheritance taxes and capital gains, so that the totality of the wealth of the nation can be taken into consideration in sharing the burden. There is a real danger in my view, particularly as a result of localised property price inflation, that this policy will further widen economic, social, generational and geographical divides, baking that unfairness into the social and economic settlement for decades to come. We have a Government who like to talk the language of levelling up while doing the exact opposite on personal and business taxation. We will be paying the costs of that in reduced growth and lower incomes for many years to come.

That is the problem from a social justice perspective, but it is almost every bit as bad from a policy making perspective. Apart from moneys going to the NHS in England and an unspecified amount eventually trickling through to social care in England, we still have only the sketchiest idea of what this resource will be invested in. There are significant whole-system problems in health and social care in England which predate covid. That is not to say things are great everywhere else, but I get absolutely no sense that the UK Government have started to embrace the systemic issues that cause the blockages and poorer outcomes that are there and that money will only go so far to solve, including the high levels of unmet need, staff shortages and poor workforce pay and conditions, as well as the fragile provider market. In that sense, the Government are doing what they routinely like to criticise others for and focusing on inputs rather than outcomes, and surely outcomes for people in health and social care should be driving the reform that is needed.

It is not in doubt that there was a pre-covid pandemic crisis in health and social care, let alone the post-covid one, but that will not be remediated either by this policy or by the Prime Minister’s utterly bogus repeated claims about building 40 hospitals. Reform requires thought as well as resource, but surely fairness demands that the resource for that reform comes primarily from those with the broadest shoulders and an economy that is able to and is growing sustainably and productively.

I support Scottish independence and want full tax powers for Scotland, and I have no doubt in my mind that an independent Scottish Government would not be using the equivalent of national insurance in such a way for this purpose. Until that changes, we are stuck with and reliant on the Conservatives—out of all character—prioritising the interests of those on lower and middle incomes over the most wealthy.

[Anthony Browne]

rose—

[Richard Thomson]

Go on—give me one last chance.

[Anthony Browne]

The hon. Member stresses the importance of a sustainably growing economy. Would he like to congratulate the Government on their economic response to covid, which means that we had the fastest growing economy in the G7 last year and are predicted to do so this year? Groups from the International Monetary Fund to the OECD have congratulated them on their response.

[Richard Thomson]

I do not think that is true, but, even if it was, those economies that fall the furthest rebound the fastest.

We seem to be reliant on the better nature of the Conservative Government—one that sadly is often lacking—with them somehow going against all their instincts to protect the interests of lower and middle-income earners over those of the highest. I shall not be holding my breath on that front.

[Several hon. Members rose—]

National Insurance Contributions Bill

Richard Thomson Excerpts

Consideration of Lords amendments
Tuesday 1st March 2022 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I thank the Minister for setting out the reasoning behind the Government’s amendments in the other place. Although we support many of the measures in this Bill, we cannot ignore the fact that we are discussing the Government’s plans for specific relief from NICs just one month before they raise national insurance for workers and businesses across the board. That is the crucial context for the Lords amendments we are being asked to consider.

Five weeks from today, a typical full-time worker will see their annual tax bill rise by £274. That will be the direct result of the Government’s decision to raise NI. It is the worst possible tax rise, at the worst possible time. We argued it was wrong last September, when the Government pushed this tax rise through Parliament. Since then, energy bills have begun to soar, making our case even stronger. Now, as we stand alongside the Ukrainian people, we know that that conflict will impact people here, with further price rises for petrol, energy and food. The Conservatives must think again. The impact of their NI hike is getting worse and worse. The Chancellor should finally do the right thing and scrap April’s tax rise on businesses and working people.

As we said when this Bill was being debated in the Commons last year, we support the intention behind many of its measures. However, throughout its passage, we and our colleagues in the other place have raised important questions with Ministers about some of the approaches the Government have decided to take. With that in mind, I turn to Lords amendments 2 and 4, which were successful in the other place and which we will be supporting here today. Lords amendment 2 seeks to add one further condition to those that already exist in the Bill for freeports. When it was introduced, this Bill included the conditions under which employers in a freeport could benefit from a zero rate of secondary class 1 NICs. This amendment adds one further condition to freeport employers’ relief. It would make sure this relief is available only if the freeport maintains a public record of the beneficial ownership of businesses operating within it. We, alongside right hon. and hon. Members from across the House, have long argued for transparency over the ownership of UK assets. In recent days, that has come to a head, with the Government finally admitting and accepting the urgent importance of establishing a public register of the overseas owners of UK property. Yesterday, when the Business Secretary made a statement to the House on “Corporate Transparency and Economic Crime”, no one could deny the damage caused by the Government’s failing to prioritise transparency of the overseas ownership of UK interests. As my hon. Friend the Member for Feltham and Heston (Seema Malhotra) told the House yesterday, although we clearly support the Government’s introducing a register of overseas owners of UK property, we are clear that:

“The UK would have been in a much stronger position to act with speed and our national security would have been better protected if the register had already been up and running.”—[Official Report, 28 February 2022; Vol. 709, c. 736.]

As my hon. Friend went on to say yesterday, we hope lessons will be learned for the future. The Government have a chance today to prove that they have learned those lessons. Let us avoid their pressing ahead today without that transparency condition, only to return to the matter in a rush at a later date when the opportunity for greatest impact may already have been missed. That is why we will support Lords amendment 2, and I urge Government Ministers and hon. Members on all sides to do likewise.

I turn now to Lords amendment 4, which was also successful in the other place and which we will support today. The Government’s Bill introduces a zero rate of national insurance contributions for employers of armed forces veterans for the period of one year beginning with the earner’s first day of civilian employment after leaving the armed forces. We believe it is crucial to ensure that all veterans get the support they need as they seek civilian employment.

Lords amendment 4 enables the Treasury to change the period of support offered if it is found to support employment. We believe it is a simple measure, giving the Government flexibility to adjust the operation of the relief if doing so might improve veterans’ ability to find long-term employment.

As the Financial Secretary may know, when the Bill was debated in the Commons last year we raised questions about the time period for which the relief would be available. When I discussed this Bill with her predecessor, the right hon. Member for Hereford and South Herefordshire (Jesse Norman), I asked him to explain in greater detail why the Government had chosen a period of one year for veterans’ employers. In response, he said that one year was appropriate because,

“the goal is to support a very specific process of transition”.

When we pressed him further on the importance of helping to maintain long-term employment, he acknowledged:

“If it were the case that veterans still had a serious problem of finding secure and stable employment, of course that would be a matter that the Government would wish to reflect on and consider.”

He assured me and several of my hon. Friends that he would,

“continue to reflect on this policy”,

and that those at the Treasury,

“already have in place processes of evaluation and assessment.”––[Official Report, National Insurance Contributions Public Bill Committee, 22 June 2021; c. 18-20.]

I am sure the right hon. and learned Member for South East Cambridgeshire (Lucy Frazer) will want to honour those commitments made by her predecessor.

Through Lords amendment 4, we seek simply to give the Government the power to change the period of relief, should their ongoing analysis conclude it is in the best interests of veterans to do so. On that basis, I urge the Financial Secretary and her colleagues to reconsider the Government’s position. I hope that Ministers and hon. Members on the Government Benches will see the value that Lords amendments 2 and 4 add to this Bill and that, even at this late stage, they might reconsider their position on them.

I end by urging Ministers to ensure that next time we are in this Chamber with national insurance on the Order Paper, it will be to agree to cancel the tax rise coming next month. The Chancellor has five weeks to do the right thing—five weeks to change his mind and avoid hitting working people and businesses with the worst possible tax rise at the worst possible time.

[Richard Thomson (Gordon) (SNP)]

I rise to support Lords amendments 2 and 4, but I will deal first with amendment 4.

As I said at earlier stages of this Bill, those who have experience of serving within the armed forces bring tremendous qualities to the workforce through both the skills they have learned while in uniform and their breadth of life experience. Despite our awareness of that and the best efforts of Governments and the third sector, for too many of our ex-servicemen who are leaving the services, the transition to civvy street is far more difficult than it often needs to be.

Having this exemption for national insurance contributions is therefore a very positive step as far as we are concerned, making it even more attractive to employers to hire those ex-service personnel and to bring their skills and experience into the workforce, helping to bring to fruition all the many economic and social benefits that can come from that. In that regard, we are attracted to Lords amendment 4 simply because it gives the Treasury that power to extend the eligibility period attached to the zero rate relief for armed forces personnel and veterans, should that be deemed desirable. That seems to us to be a perfectly reasonable addition to make to the Bill, giving the Treasury a degree of flexibility on how to implement the measure that would otherwise be lacking in the Bill as drafted.

On amendment 2, let me first place on record my satisfaction at the agreement that has eventually been reached by the Scottish Government and the UK Government over freeports, or green ports, of which two will now be established in Scotland, with the bidding process opening in spring this year and the first sites opening, hopefully, in spring 2023. I will go a little bit off piste here to say that that outcome was not always guaranteed, and at times, in at least some of the public discussions, there has been a bit more war-war than jaw-jaw, certainly on the part of individual Conservative politicians rather than between Ministers in Edinburgh and London. For example, the Scottish Business Minister, Ivan McKee, had to write six times to the UK Government to even try to get green port discussions under way in order to get them over the line. He said that the silence was deafening. That is a pretty damning account that rather sits at odds with the impression that we are often given from those on the Treasury Bench as to how they would like to work constructively with the Scottish Government.

The reason for holding out on the variation on the freeports option was quite simple. We felt very strongly that given the scale of the financial support that was on offer, it was vital to ensure that wider policy objectives such as environmental obligations, the commitment to net zero and fair play for those employed within freeport sites, were met. While it is up to the UK Government to decide how those objectives can be met in England, applicants for green port status in Scotland will be required to set out robust plans at the outset on how they plan to contribute to Scotland’s just transition to a net zero economy and how they will benefit the wider supply chain alongside embedding fair working practices such as at least paying the real living wage.

Freeports, it is fair to say, have had a somewhat mixed reception abroad, particularly as regards the relationship that they are perceived to have with criminality and tax evasion. While hardly the “Grand Theft Auto”-style dystopia that they have sometimes been portrayed as, the potential for criminality and non-compliance with taxation, employment rights, health and safety or environmental regulations and obligations is clear, as is the potential for broader economic displacement.

That brings me to the nub of amendment 2. In recent weeks, we have seen significantly increased demand from this House for scrutiny and visibility of financial transactions that take place in this country. We need to have that increased scrutiny over those who spend and invest in the UK, and also over where their money originates. It is very important when setting up freeports that we are able to answer the age-old question, “cui bono?” That is absolutely paramount. A requirement that the freeport deliverance body should be able to make reasonable efforts to verify who the beneficial owners of the business are and to ensure that that information is accessible not just to the relevant enforcement agencies but to the general public is the minimum amount of due diligence that we should expect in exchange for the status and the exemptions on offer.

I listened carefully to the Minister’s arguments about the beneficial register that will be in place and her view that as a third party under the local governance arrangements it would be inappropriate to release that information. Respectfully, I disagree with that. We all know how labyrinthine and byzantine corporate structures can be. Irrespective of any requirement in future legislation that may be coming into force, certainly on freeports, my party firmly believes that we should have transparency and accountability baked into the corporate structure and public reporting at the outset. On that basis, both Lords amendments have our support and we shall be voting accordingly.

[Sarah Olney (Richmond Park) (LD)]

I spoke on Second Reading and at other stages before the Bill went to the Lords, but it is fair to say that I now stand in a very different environment. Since the full-scale invasion of Ukraine last week, so many aspects of our economy, our international relations and our defence strategy have been cast in a new light.

In that spirit, I rise to support Lords amendment 2, which was introduced by my good friend and Richmond Park predecessor, Baroness Kramer. In the past week, we have had cause to look again not just at our defence spending and at the importance of our international relationships, but most importantly at how the UK— London in particular—has become a haven for Russian money, at what it has done to us as a nation and at how it has undermined our efforts to stand with the brave people of Ukraine.

Finance (No. 2) Bill

Richard Thomson Excerpts

Report stage
Wednesday 2nd February 2022 Commons Chamber

[Peter Grant]

rose—

[Richard Thomson (Gordon) (SNP)]

rose—

[Mr Deputy Speaker (Mr Nigel Evans)]

Order. I can see two Members standing and I intend to call the Minister at 5.55 pm. I call you first, Mr Grant, and any time you do not use up before 5.55 can be used by your colleague—no pressure.

Finance (No. 2) Bill (Fifth sitting)

Richard Thomson Excerpts

Committee stage
Tuesday 11th January 2022 Public Bill Committees

[James Murray (Ealing North) (Lab/Co-op)]

As we heard from the Minister, the purpose of clause 94 is to introduce schedule 15, which, in turn, introduces a new requirement for large businesses to notify HMRC when they have taken a tax position that is uncertain. The new requirement has effect for returns within scope that are due to be filed on or after 1 April 2022. We understand that large businesses are defined as those with a turnover above £200 million, or a balance sheet total of over £2 billion. Uncertain tax amounts with a tax advantage below the threshold of £5 million will not need to be notified to HMRC. We also understand that uncertain tax treatments are defined as those that meet one of two criteria: either a provision has been made in the accounts for the uncertainty, or the position taken by the business is contrary to HMRC’s known interpretation of the law.

The stated intention of the clause and schedule is to reduce the gap between taxes paid and taxes thought by HMRC to be owed that is attributable to differences in legal interpretation. The measure aims to ensure that HMRC is aware of all cases where a large business has adopted a treatment with which HMRC may disagree, and to accelerate the point at which discussions occur on these uncertain tax treatments. It also claims to identify areas of law that are currently unclear and to allow HMRC to focus on clarifying these areas of uncertainty, ultimately resulting in fewer disputes caused by uncertainty in the tax law.

We know from HMRC figures that in the financial year 2019-20, the tax gap attributable to differences in legal interpretation was £5.8 billion. Of this, £3.2 billion was attributed to large businesses. We do not oppose the broad intention of the measure. It is important that revenues are not lost to legislative ambiguity, and that tax liabilities are clear to large businesses. Measures that seek to reduce the administrative cost of dealing with uncertain tax treatment for both HMRC and businesses are worth pursuing. However, we note concerns raised by the Chartered Institute of Taxation. It was unconvinced that the measure would achieve its aim. It points to the additional compliance burden that all businesses will face, regardless of whether they have been transparent and open with HMRC about their tax dealings.

HMRC’s own figures suggest a cost of £1,300 for each business impacted, and the House of Lords Finance Bill Sub-Committee described that cost as disproportionate. I would be grateful if the Minister could tell us approximately how many large businesses the measure aims to change the behaviour of. I am sure that HMRC or Treasury officials will have estimated the scale of the problem before proposing a remedy, so I would be grateful if the Minister could share any figures she has.

On the operation of the measure, we understand that HMRC does not expect the legal interpretation part of the tax gap to be impacted immediately by the introduction of the measure alone, and it expects to have to take further action. It is therefore not immediately obviously why this extra measure is needed, and why HMRC’s existing powers are not enough. As the Chartered Institute of Taxation said,

“it is not clear to us how this measure will itself additionally impact on the legal interpretation tax gap, given that HMRC already have extensive powers to open an enquiry into, and investigate, a tax return, from which any disputes in respect of legal interpretation can be addressed.”

I would be grateful if the Minister addressed that point directly. Could she explain what practical advantage the new measures lend HMRC? Could she also comment on the penalties levied for non-compliance with the measure? Given that it targets a minority of non-compliant large businesses with a tax advantage above £5 million, the penalties for non-compliance seem rather small: £5,000 for a first offence, £25,000 for a second, and £50,000 for repeated failures to notify HMRC of uncertain tax treatments. Those amounts seem rather low for businesses with a £5 million-plus tax advantage. I would be grateful if the Minister explained how these figures were arrived at, and confirmed whether she believes these measures serve as a robust disincentive for large businesses to use differing legal interpretations to alter their tax liability.

[Richard Thomson (Gordon) (SNP)]

It is a pleasure to serve under your chairmanship, Sir Christopher. I apologise for arriving slightly behind schedule this morning. It was good to see the ministerial team picking up exactly where we left off, getting their rebuttal in first, and telling us what was wrong with our new clauses before we had the chance to utter a syllable. I look forward to that continuing this morning—and this afternoon, if we get that far.

HMRC estimates that a potential £5.8 billion of the UK’s estimated £35 billion tax gap for the tax year 2019-20 is attributable to a difference in legal interpretation between HMRC and the businesses concerned. It is that situation that motivated us to draft new clause 7, which is in the name of my hon. Friend the Member for Glasgow Central. We support all and any reasonable and proportionate measures to try to narrow the gap. I would add, in passing, that it is disappointing that the third trigger has been dropped, which is that HMRC should be made aware by companies if there is a substantial possibility that either a court or tribunal might find that the taxpayer’s position was incorrect in certain material respects.

While there will always be a level of uncertainty around tax, it is useful to try to get a measure of the tax gap on its own terms—one that is as objective as possible. It is also very useful to compare, as far as possible, the estimated size and scale of our tax gap with the gap in other comparably advanced economies, so that we can see what we might learn from others.

I accept that direct comparisons might not be possible, but I do not accept the Minister’s argument that meaningful comparisons are impossible, because we can get an understanding of practices and of analysis; that is at the heart of the matter. This is about trying to get to grips with the scale, and developing an understanding of what will be a continually moving target, as entities seek to minimise their overall liability as legitimately as they can within the confines of the broader tax code. That backdrop of information would allow policy makers to reflect adequately on how the domestic tax code might be amended to ensure greater clarity and better compliance. It is on that basis that we tabled new clause 7.

[Lucy Frazer]

I am grateful for the contributions from Opposition Members. I was very pleased that the hon. Member for Ealing North recognised the importance of closing the tax gap and welcomed the provisions from that perspective. As I set out, the provisions will affect only the largest companies, which have the means of dealing with and communicating their issues to HMRC. He asked me about the practical advantages of the provisions, given that we have existing measures. Quite simply, some, though not all, companies are looking at all times to minimise the tax they pay, and are coming up with new ideas. They have the ideas first, and HMRC does not want to be slow in reacting. The best way to get on the front foot is for the companies to tell us what measures they are thinking about, so that we can engage at the first moment. That is what the provisions seek to do—to ensure that we can engage at the first moment, so that we can make sure that companies comply with their tax obligations.

The hon. Gentleman also asked about penalties. The Government originally proposed a flat £5,000 penalty for failure to notify under this regime. In response to stakeholder feedback, we revised the penalties, which now escalate for repeated failures to a maximum of £50,000. The Government considered carefully the penalties to ensure that they were proportionate and fair for a notification regime. Penalties are charged for failure to notify and are not charged by any determination of the amount of tax at stake—providing for a larger penalty in those circumstances would be disproportionate. If it was eventually found that a tax return contained a deliberate error, then a larger tax-geared penalty could still apply. As with all policies, the Government will of course keep this under review.

I was very pleased and interested to hear from the hon. Member for Gordon about his disappointment about the dropping of the third trigger. As I have said, we keep all measures under review and will keep looking at this area. If we do bring any further measures forward on uncertain tax treatment, I look forward to his support.

--- Later in debate ---

[Abena Oppong-Asare]

I thank the Minister for her explanation of clause 99, which introduces schedule 16, which concerns emissions certificates for vehicles. When purchasing a car, capital allowances are in part determined by the level of CO₂ emissions. A 100% first-year allowance is available for new cars that have zero CO₂ emissions, including electric cars. Otherwise, writing down allowances are available at the main rate of 18% per annum for electric cars and those with low CO₂ emissions—up to 50 grams per kilometre driven—or 6% per annum for those with emissions exceeding 50 grams per kilometre. The measures in the clause allow for greater CO₂ emissions figures to be used for purposes of capital allowances, taxable benefits arising from provisions of cars and vehicle excise duty. For that reason, we will not oppose the clause.

[Richard Thomson]

Thank you, Sir Christopher, for your opening comments on this group. My party does not get too many advances or victories in this place, so it is important to savour them when we can. I will certainly savour this one. I have a sense of clairvoyance about what the Minister will say in response.

We fully support the intention behind schedule 16. It is important to have the certification regime in place. However, as I argued when discussing the SNP’s new clause 5 in the previous group, it is important not only that consumers have confidence in the figures that are published, but to understand the impact that their publication has on behaviour. When we discussed new clause 5, we talked about the very incremental changes to vehicle excise duty, and my party proposed that we should look at the impact of those on consumer behaviour. Similarly, we feel we must understand how emissions certification changes consumer and manufacturer behaviour.

As a fundamental point, when we are as engaged in trying to achieve net zero as all Governments in these islands say that they are, it is important that Government have clear oversight of how spending and taxation influence behaviour in driving movement towards net zero. This measure should be no exception, and that is what our new clause seeks to achieve. In the fairly safe assumption that it will not be accepted by the Government, I would like to know how they intend to monitor how the changes drive behaviour.

[Helen Whately]

It is a pleasure to hear the hon. Member for Gordon argue for new clause 8. It would require the Government to publish, within 12 months of the Bill coming into effect, an assessment of the impact of clause 99 and schedule 16 on the goal of tackling climate change and the UK’s plans to reach net zero.

For the reasons we set out in detail during the Committee’s debate on new clause 5, this similar new clause is simply not necessary. Moreover, clause 99 and schedule 16 make only minor technical amendments to vehicle tax legislation to ensure that it continues to function as intended. The measure is not expected to have any significant climate change impacts. I therefore urge the Committee to reject new clause 8.

I thank the hon. Member for Erith and Thamesmead for expressing the Opposition’s support for clause 99 and the schedule. I commend the measures to the Committee.

Question put and agreed to. 

Clause 99 accordingly ordered to stand part of the Bill. 

Schedule 16 agreed to. 

Clause 100

Increase in membership of the Office of Tax Simplification

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

[Lucy Frazer]

Clause 100 increases the maximum independent representation on the board of the Office of Tax Simplification by two members, giving a total membership of 10. The OTS is the independent adviser to the Government on simplifying the UK tax system. The clause provides the ability to add two additional members to the board of the OTS following the publication of Her Majesty’s Treasury’s five-year review of the effectiveness of the OTS, which was required by the Finance Act 2016. Allowing for the appointment of two additional members will ensure that the board comprises the fullest appropriate breadth of skillsets to support the work of the OTS.

Sir Christopher, I very much look forward to the submissions from the SNP on new clauses 9 and 10.

[Richard Thomson]

New clause 9 ought to speak for itself. On 23 November, in a written response to the hon. Member for Liverpool, Walton (Dan Carden), the Financial Secretary to the Treasury said:

“The Government has an ambition that by 2022 half of all new appointees should be women and 14 per cent of appointments should be made to those from ethnic minorities.”

Clearly, we are interested in ensuring diversity going forwards, but we should also be interested in diversity in the here and now, and in ensuring that all our public institutions are as representative as they can be of the country that we seek to govern and administer.

In looking at that diversity, both present and future, it is important that we have it in the board, in the team and in employment within the OTS more generally. We must not only have an understanding of where we are in the present, but ensure that the pipeline of talent for future appointments to senior positions is flowing as it needs to, so that we benefit from the widest and deepest possible pool of talent as the body carries out its functions.

Moving on to new clause 10, we spoke earlier about the estimated tax gap of £35 billion. An important aspect of tax fairness is being sure that we apply the tax code equally and consistently, and we need to understand the impact of it’s being applied equally and consistently and how fair the outcomes are. There are still many inconsistencies and perverse incentives across the entirety of our tax code, not least in how it interacts with the benefits system.

If we are serious about ensuring fairness, the Office of Tax Simplification would be an excellent starting point. Our view is that the OTS should have the remit and capacity to look at fairness, and new clause 10 would provide evidence on the OTS’s current capacity to achieve that.

--- Later in debate ---

[The Chair]

No, no.

Question put and agreed to.

Clause 101 accordingly ordered to stand part of the Bill.

Clause 102 ordered to stand part of the Bill.

New Clause 1

Review of reliefs on investments

“The Government must publish within 12 months of this Act coming into force an assessment of the impact on the tax gap of the reliefs on investments contained in this Act, and of whether those reliefs have increased opportunities for tax evasion and avoidance.”—(Richard Thomson.)

Brought up, and read the First time.

[Richard Thomson]

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

[The Chair]

With this it will be convenient to discuss new clause 6—Review of impact of reliefs in Act on the tax gap—

“The Government must publish within 12 months of the Act coming into effect an assessment of the impact of the tax reliefs in this Act on the tax gap, and of whether they have increased opportunities for tax evasion and avoidance.”

[Richard Thomson]

I echo everything that everyone has said so far about the smooth running of the Committee. I congratulate and give grateful thanks to the Clerks and everyone who has supported each of us in what we have tried to achieve here.

I will try to be as brief as possible. New clause 1 is self-explanatory. If we had a simple tax code, we probably would not need an Office of Tax Simplification or have a tax gap as large as £35 billion. The new clause simply asks the Government to assess this, because they cannot possibly hope to address problems that they do not know about or understand.

At the risk of sounding like a broken record, my comments about new clause 1 are relevant to new clause 6 as well. With that, I draw my remarks about the new clauses to a close.

[Lucy Frazer]

I would like to address the points made by the hon. Member for Glasgow Central about the process, which she made earlier in the Committee’s proceedings too. There is a clear process for how we make legislation and taxation. There is a large amount of consultation. The process is that we announce a consultation, there is a consultation, we reflect on the consultation, and then we bring in legislation. So long as I am in this position, I am happy to hear points made by the Opposition in the course of that consultation process, to ensure that we have the right and appropriate legislation on our statute book.

New clauses 1 and 6 would require the Government to publish an assessment of the impact of the tax reliefs in the Bill, including the reliefs on investments, on the tax gap, and to look at whether they have increased opportunities for tax evasion and avoidance. There are a number of new measures already in the Bill to ensure that we reduce the tax gap as far as possible. There are also measures in the Bill that deal with tax avoidance more broadly.

We have had significant success in bringing down the tax gap since 2010, as a result of the measures we have taken. I reassure the hon. Member for Gordon that we produce estimates of error and fraud, where we deem those appropriate. For example, estimates on corporation tax research and development reliefs were included in the annual reports and accounts, and we will continue to do that.

For those reasons, I believe that a separate reliefs impact assessment is not appropriate, and I ask the Committee to reject the new clauses.

[Richard Thomson]

I think I have said all that needs to be said on this subject; I am happy to let my remarks stand. I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 2

Effect on GDP of international matters in Act, and of whole Act

“(1) The Government must publish an assessment of the impact on GDP of—

(a) the provisions in sections 24 to 28 of this Act, and

(b) this Act as a whole.

(2) The assessment must also compare these impacts to the impacts had the UK—

(a) remained in the European Union, and

(b) left the European Union without a Future Trade and Investment Partnership.”—(Richard Thomson.)

This new clause would require a Government assessment of the effect on GDP of the international provisions of the Act, and of the Act as a whole, in different scenarios.

Brought up, and read the First time.

[Richard Thomson]

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

In Committee of the whole House, I referred to a new clause as the Jim Bowen from “Bullseye” clause. I am sure that we all remember that programme with great affection and especially recall what he said at the end if someone had not got 101 with six darts—“Let’s have a look at what you could have won.” This is the “let’s have a look at what we could have won had we remained in closer alignment with the European Union” clause.

It is fair to say that there have been significant trade losses to date since Brexit. It is important not only that the Government should have a solid evidential basis of what those losses are and make conclusions about how they came about, but that others should have that information too. That is the basis of this new clause.

[Lucy Frazer]

The new clause would require the Government to publish a review of the impact of the international tax policy changes in the Bill, and of the overall tax changes in the Bill, on GDP. It also asks us to compare the impacts on GDP under two scenarios—one where the UK remained in the EU, and one where the UK left the EU without a future trade and investment partnership.

The hon. Member for Gordon will know that the Office for Budget Responsibility provides economic and fiscal forecasts and is required to provide an assessment of the impact of Government policy. The OBR published the impact on GDP at the autumn Budget 2021, ahead of its inclusion in the October 2021 economic and fiscal outlook, and the OBR will continue to monitor the impact of these measures in future forecasts. Since the independent OBR provides precisely such a forecast, it would be wholly unnecessary and unhelpful to public debate to induce the Government to produce a rival one.

In accordance with the law governing the OBR’s independence and impartiality, it may produce forecasts only on the basis of published Government policy. It does not publish forecasts based on alternative policies, and I do not think that would be a useful exercise. Given that the OBR has already published an analysis of the impacts of the provisions in the Bill, I urge the Committee to reject new clause 2.

[Richard Thomson]

I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 4

Impact of Act on tackling climate change

“The Government must publish within 12 months of this Act coming into effect an impact assessment of the changes in the Act as a whole on the goal of tackling climate change and the UK‘s plans to reach net zero by 2050.”—(Richard Thomson.)

Brought up, and read the First time.

[Richard Thomson]

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

I have made the argument numerous times in various guises that for every action, every policy choice and every pound spent, we should understand the contribution, positive or negative, that that makes to achieving net zero and tackling climate change. That is why we tabled new clause 4.

[Lucy Frazer]

New clause 4, tabled by the hon. Member for Glasgow Central, asks the Government to

“publish within 12 months of this Act coming into effect an impact assessment of the changes in the Act as a whole on the goal of tackling climate change and the UK’s plans to reach net zero”.

I want to emphasise that we have just had COP26, which the Government led. Of course the Government are committed to ensuring that we reach the legislative target of being net zero by 2050, which we were the first country to set, and I reiterate that the Government have put in a significant fund of £30 billion to achieve that objective.

The hon. Member for Gordon asks us to consider that at each stage of the legislative process. I can give him some comfort that we are of course embedding those processes in Government. The “Net Zero in Government” chapter of the net zero strategy sets out how the Government will monitor progress to ensure that we stay on track to meet our target emissions.

At fiscal events, including the recent spending review, all Departments are required to prepare their spending proposals in line with the Green Book, which already mandates the consideration of climate and environmental impacts on spending. The investment decisions in spending review 2021 were informed by data and evidence on the expected contribution of proposals to meet net zero. In addition, the relevant tax information and impact notes that are prepared for all Budget measures carefully consider climate change and environmental impacts of relevant tax measures as they go through the process.

For those reasons, new clause 4 is unnecessary. We already consider the impact on the environment as we bring forward legislation, so I urge the Committee to reject the new clause.

[Richard Thomson]

I listened carefully to what the Minister said. I look forward to seeing how those governance measures operate in practice—how they are introduced and how effective they turn out to be. On that basis, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 12

Impact of Act on tax burden of hospitality sector

“The Government must publish within 12 months of this Act coming into effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.”—(Richard Thomson.)

Brought up, and read the First time.

[Richard Thomson]

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

New clause 12 seeks to place an obligation on the Government to

“publish within 12 months of the Act coming in effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.”

Our main concern is about VAT. It seems bizarre to be removing the 5% VAT relief so early in the new year, particularly given the situation we are in, especially when most of us agree that the best way for the hospitality sector to get back on its feet is to allow it to trade its way out of the situation that it is in, cognisant of our obligations to wider public health objectives.

The hospitality sector needs our help. As I say, we think the best way of doing that is to allow it to trade as circumstances allow and for the Government to change their mind on VAT—although I accept that they are unlikely to do so at this stage. We would therefore very much welcome a review of the impact of the Act as a whole on the hospitality sector after 12 months, which would provide an evidence base for future tax and policy changes that may be beneficial.

Right across these islands, we have a hospitality and tourism sector to be proud of. It is imperative that we ensure that there are no unintended tax consequences from the measures in the Bill, and we should do all we can to support the sector to support itself and get on with doing what it does best. I would like a review, just to make sure that we are utterly mindful of that at all stages and that we do not build in perverse incentives or add any unnecessary drags, anchors or impediments to the sector’s recovery.

[Lucy Frazer]

As the hon. Gentleman says, the new clause asks the Government to

“publish within 12 months of the Act coming in effect an assessment of the impact of the Act as a whole on the tax burden on the hospitality sector.”

He is right to highlight the importance of that sector to the British economy and the British people. He will be aware of the significant support that the Chancellor has given to the hospitality sector over the course of the pandemic, reducing the burden of business rates by over £7 billion over the next five years, including by providing almost £1.7 billion in further business rates relief in 2022-23, which will benefit the hospitality sector. I hope that shows not only that we have supported the hospitality sector during the pandemic, but that we are supporting it in different ways as we come out of the pandemic.

Of course, we already carefully consider and monitor the impact of all tax changes, including on different sectors, such as hospitality, as part of our decision-making process. The Government also publish TIINs—the tax information and impact notes I mentioned—to accompany tax legislation. Those include the impact of tax changes on businesses. The new clause would introduce unnecessary additional bureaucratic requirements and complexity, and I therefore urge the Committee to reject it.

[Richard Thomson]

I beg to ask leave the withdraw the clause.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Lucy Frazer]

I thank you, Sir Christopher, and your co-Chair, Hansard, the Doorkeepers, our Whips, our Parliamentary Private Secretaries and our officials at Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, who have supported us through the Committee. I thank all Committee members for their diligence, their contributions and their support, or constructive criticism, throughout the Committee, and for making this a productive session. I very much look forward to Report. I also thank my co-Minister, the Exchequer Secretary to the Treasury, for the work that she has done.

Downing Street Garden Event

Richard Thomson Excerpts

Tuesday 11th January 2022 Commons Chamber

[Michael Ellis]

That is hypothetical. It is not appropriate for me to make that judgment. It would not be appropriate no matter the result of the investigation. As a Minister in the Cabinet Office, my responsibility is to answer for Government business in the way that we have been hearing. What I am inclined to do is what I would do for anyone else, because we are all equal under the law, and that is to await the fair results of a fair independent inquiry.

[Richard Thomson (Gordon) (SNP)]

I think that if someone was hosting a gathering in my back garden, I, like most people, would probably notice at some stage. I am also fairly sure I would remember whether I was there. Does the Paymaster General agree that the failure of the Prime Minister to confirm whether he knew about this gathering, or whether he was there, is the reason why his authority is draining away even faster than the number of Back Benchers prepared to stand up during this sitting to support him this afternoon?

[Michael Ellis]

No, I do not agree with that characterisation. The Government buildings around Downing Street are not domestic buildings in the way that the hon. Gentleman characterises them, so as a general point he is wrong to make that assumption or characterisation. I accept that these allegations have caused considerable upset and apologise unreservedly for the upset they have caused, but we will await the results of the investigation.

Finance (No. 2) Bill (Third sitting)

Richard Thomson Excerpts

Committee stage
Wednesday 5th January 2022 Public Bill Committees

[James Murray (Ealing North) (Lab/Co-op)]

It is a pleasure to serve on a second Finance Bill Committee under your chairship, Dame Angela.

I will address the clauses that the Minister set out in her remarks, starting with clause 32, which notes that the new residential property developer tax will be applicable from 1 April 2022, as announced at the spring Budget of 2021. As we have heard, this is a new, time-limited tax on the profits of residential property development companies’ property development activity, with a rate of 4% over a £25 million allowance. The Government estimate that it will generate £2 billion over the course of a decade, and they said that the funds are earmarked to help with cladding remediation costs, according to the former Secretary of State for Housing, the right hon. Member for Newark (Robert Jenrick), who spoke to the Building Safety Bill in February 2021. The explanatory note for the clause states that the tax is to

“ensure that the largest developers make a fair contribution to help fund the Government’s cladding remediation costs.”

We support the principle behind the new tax, but I intend to use this Committee sitting to question the Ministers on the detail of its design and to probe their views on its place in the Government’s wider response to the cladding scandal. We know that the Bill has been consulted on, but we also note stakeholders’ disappointment that the consultation process was truncated, as stage 1 —setting out objectives and identifying options—was cancelled. Although we recognise the importance of moving quickly to raise revenue in order to help meet the costs of remediating unsafe cladding on buildings, it is disappointing that the Government were not able to conduct a thorough consultation.

Clause 33 sets the rate of the RPDT charge at 4% on profits that exceed the allowance of £25 million. The tax is charged as if it were an amount of corporation tax chargeable on the developer. As I mentioned earlier, the Government expect that £2 billion of revenue will be generated while the tax is in effect, so I will ask the Minister several questions in order to try to clarify the reasoning behind some of the Government’s decisions on the detail of the tax. First, we note that the tax does not come with a sunset clause, and therefore active legislation will be required to repeal it when it comes to an end. Will the Minister explain the reasoning behind that decision? If the tax is intended to be time-limited, why have the Government have chosen to leave it in need of active repeal, rather than simply adding a sunset clause?

Secondly, I mentioned that the expected revenue from the tax is £2 billion. We know, however, that that is just a fraction of the total cost of remediating unsafe cladding, which was estimated by the then Housing, Communities and Local Government Committee in April 2021 to be about £15 billion. What is more, labour and material shortages have significantly driven up the cost of construction. That is thought to add £1.2 billion to the overall cost of remediation, wiping out most of any gain from this tax. With the cost of cladding remediation already thought to be so much greater than the amount that the tax is expected to raise, and with that gap likely only to increase, will the Minister try to explain further why the rate was set at 4%? Will she confirm whether, if the amount raised should fall short of £2 billion or if costs should increase substantially, the Government would be open to considering raising the level of the tax?

It was in pursuit of an answer to that question that we tabled new clause 18, which would require the Government to publish a review of the residential property developer tax within three months of the end of the first year of it applying, and thereafter annually, within three months of the end of each subsequent year that the tax applies. The review, as updated, must assess how much the RPDT has raised in each year of its operation so far and how much it is estimated that it would have raised at levels of 6%, 8% and 10%.

As I mentioned, the cost of remediating unsafe cladding was estimated last year to be about £15 billion, and the cost of labour and materials has increased due to supply chain crises. Industry experts have estimated an 8% increase in the cost of cladding jobs, compared with last year. As I mentioned, that could increase the total cost by £1.2 billion. As I said, this tax aims to raise £2 billion, which is just a fraction of the total cost and much of which, it seems, will be wiped out by rising costs.

We have therefore tabled this new clause to ask the Government to assess how much they could raise through the tax and how much they could raise with different rates. Given the significant discrepancy between the estimated revenue raised by the RPDT and the estimated cost of remediation, will the Minister set out in further detail, when she responds, exactly how the rate of 4% was reached and what specific consideration was given to alternatives? It was with that in mind that we tabled the new clause. We will not seek to put it to a vote, but we hope that it will help us to debate and probe the important and central issue of the rate at which the RPDT has been set.

In summary, I will be grateful if, in her reply, the Minister could set out exactly how the figure of 4% was arrived at and, furthermore, how she expects the rest of the cost of cladding remediation to be met. I would be grateful if she could set out, either in her reply now or in writing, what other sources of funding she anticipates being used to meet the total cost of cladding remediation.

Finally in relation to this group, I will briefly mention clause 52, which is an anti-avoidance provision preventing taxpayers from adjusting their profits arising in an accounting period in order to obtain a tax advantage for the purposes of this tax. We welcome the intent behind that clause and will not oppose it.

[Richard Thomson (Gordon) (SNP)]

It is a pleasure to serve under your chairmanship, Dame Angela. I rise to speak to new clause 3, in the name of my hon. Friend the Member for Glasgow Central. As the Minister outlined, this new clause would require a Government assessment of the impact of the residential property developer tax being introduced by the Bill and of its effect on opportunities for tax evasion and avoidance.

We are all familiar with what this tax sets out to achieve and those on whom it should fall. There is a £25 million annual allowance for construction firms, and the tax will be levied above that at 4%. That does not take a great deal of time to say, but unfortunately, giving it effect requires 16 pages and a further eight pages across two schedules in the Bill and a great many more pages in the explanatory notes to say exactly how it will work in practice. Therefore, the opportunity for genuine confusion, for interpretation and, sadly, for evasion and avoidance is certainly a real and present danger in the legislation.

The anticipated impacts are set out in table 5.1 of the “Autumn Budget and Spending Review 2021”. We are not talking huge sums from this tax, but given its stated purpose and the means to which the revenues are going to be put, I think that reviewing its impact—not just in a financial sense, but in the sense of the unintended consequences that it could have and the havoc that it could wreak in terms of confusion, differences of interpretation, and avoidance and evasion—seems to be an eminently reasonable thing to do. I urge the Minister to reconsider how the Government intend to tackle that once the tax is implemented.

--- Later in debate ---

[The Chair]

Order. I will call the hon. Gentleman, but first I call Richard Thomson.

[Richard Thomson]

Thank you, Dame Angela; it is a relief to find out that my hearing is not as dodgy as I momentarily thought it was.

[The Chair]

It was probably my mask.

[Richard Thomson]

I rise to speak in support of new clause 5, which is in the name of my hon. Friend the Member for Glasgow Central. The Minister has run through why we are looking to have an assessment. I say to her as gently as I can that it is all fine and well to be proud of commitments that the Government have made, but it would be much better to rack up more quickly achievements that she could point to and be proud of on climate change, rather than just making statements of aspiration. This is one area where it is quite important to get some more chalk on the board.

As we have heard, the Bill sets a series of incremental changes to vehicle excise duty, and precisely because they are incremental, we might expect, at best, an equally incremental impact, or even an imperceptible one, on changing behaviour and on the resulting climate change impacts. We are all aware of the mandate to end the sale of new petrol and diesel vehicles in a bid to encourage the take-up of alternatively fuelled vehicles, but I am of the same view as the hon. Member for Erith and Thamesmead: we will need some significant further incentivisation if we are to drive the change through that policy on the scale and at the pace that is required.

My party is very fond of drawing comparisons with Norway—another small country, like Scotland, of 5 million people—on the other side of the North sea. Sometimes those comparisons are about what might have been, but we also point to what could and perhaps what should be. Norway has been so successful in incentivising the take-up of electric vehicles that the Government are running out of hydrocarbon-fuelled vehicles to tax, which has resulted in a 19.2 billion kroner gap in their latest budget.

That is not a problem that the UK Government are likely to encounter any time soon, in view of the current take-up of electric vehicles, and that is why new clause 5 is so important. It would provide for an assessment of how effective or—as we suspect—ineffective these particular changes will be over the year, so that the UK Government had the necessary information base to set future policy as quickly as possible. I think the Minister knows that we need to do that at some point, and surely it is better to start sooner rather than later.

[Mr Holden]

rose—

Downing Street Christmas Parties Investigation

Richard Thomson Excerpts

Thursday 9th December 2021 Commons Chamber

[Michael Ellis]

The hon. Gentleman says that we “know” certain things, but we do not—they are unproven allegations. That is why we have an investigation, just as investigations take place when other allegations are made every day in police and other affairs. What we will seek to do, through the Cabinet Secretary, is investigate the allegations that the hon. Gentleman and others make.

[Richard Thomson (Gordon) (SNP)]

Now that the Paymaster General has had the opportunity to hold a gathering of his own, at least when it comes to his thoughts on this matter, will he heed the injunctions of the hon. Member for Ogmore (Chris Elmore) and expand the scope of this investigation to include all alleged instances of “gatherings”—or whatever we might like to call them—related to the Government on government property? Given that the Metropolitan police have, to date, shown a marked reluctance to investigate the allegations about these gatherings, will the Paymaster General confirm that he is not aware of any legal impediment that would stand in the way of the Metropolitan police investigating these matters if they so chose?