Post Office Compensation Schemes: Tax Exemptions
Victoria Atkins Excerpts(5 months, 3 weeks ago)
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The Financial Secretary to the Treasury (Victoria Atkins)
Post Office Ltd is compensating postmasters for the suffering they have experienced due to the Horizon IT scandal, which arose following the installation of the Horizon software in the late 1990s.
In parallel with this, Post Office has continued to review its operational processes and policies to ensure that, where any further issues are identified, it takes steps to investigate and address these. Through this work, Post Office has found previous operational issues such as processes and/or policies regarding certain services that impacted postmasters financially. As a result, Post Office is establishing a compensation scheme—the Post Office process review scheme—to provide redress to postmasters affected by these issues. This is separate from its work compensating postmasters for Horizon shortfalls and for those with overturned convictions.
The Government are determined to ensure that any postmasters suspended without pay, or who may have been financially impacted due to Post Office Ltd operational issues, are fairly compensated for their losses.
The Government have announced today that they intend to provide funding support for the Post Office process review scheme. In addition, the Government are announcing that payments to be made under the suspension remuneration review and the process review scheme will be exempt from income tax, national insurance contributions and, where applicable, capital gains tax and corporation tax. The Government will legislate to exempt these payments in due course where necessary. HM Revenue and Customs will not collect any tax on any further payments made until that legislation takes effect.
Approximately 150 payments have already been made under the suspension remuneration review subject to tax. The Government are also announcing that they will support Post Office with funding to make additional top-up payments to these postmasters, exempt from income tax, national insurance contributions and, where applicable, capital gains tax and corporation tax, to ensure that their compensation offer was not unduly reduced by tax.
Additionally, approximately 150 postmasters who either have already or will have to complete a self-assessment tax return will be able to access funding for tax advice of up to £300—inclusive of VAT—to assist them in amending or completing their tax returns.
[HCWS10]
Draft Finance Bill Legislation: VAT and Excise
Victoria Atkins Excerpts(6 months, 1 week ago)
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The Financial Secretary to the Treasury (Victoria Atkins)
The Government are committed to taking full advantage of the opportunities available following EU exit to improve the tax system and have made strong progress in removing, replacing and improving retained EU tax law. This includes disapplying direct EU regulations in relation to customs, VAT and excise and introducing a UK tariff and domestic customs regime, including a range of easements and facilitations that were not available under EU rules.
The Government have also introduced a number of other reforms following EU exit, including: revising and modernising the VAT rules for the importation of low-value parcels; changing the rules of duty-free and tax-free shopping; reforming the rules on VAT on cross-border financial services; introducing a zero rate of VAT for women’s period products; expanding the VAT relief for the installation of energy-saving materials and introducing a temporary zero rate; and overhauling the UK’s alcohol duty regime to radically reform the way duty is charged on alcohol, the biggest change in 140 years.
The Government remain committed to embedding this approach and continuing to take advantage of the opportunities provided by EU exit to reform and improve the tax system through the established Finance Bill and tax policy-making process. For example, spring Budget 2023 announced that the Government would continue discussions with interested stakeholders on reform of the VAT rules on fund management and possible reforms to simplify the VAT treatment of financial services, with the aim of reducing inconsistencies and providing businesses with greater clarity and legal certainty. On 18 July 2023, the Government published a consultation on legislative reforms to modernise the legislation that underpins the VAT treatment of certain wholesale commodity transactions. This consultation closed on 12 September 2023 and the Government are now considering the responses.
Building on this progress, and in line with the tax policy-making framework, the Government are publishing draft legislation in relation to retained EU law for VAT and excise ahead of potential inclusion in the next Finance Bill. While the final contents of the next Finance Bill will be a decision for the Chancellor, the draft legislation is being published to seek stakeholder views at this stage. This allows for technical consultation and provides taxpayers with predictability over future tax policy changes.
This legislation clarifies how VAT and excise legislation should be interpreted in the light of changes made by the Retained EU Law (Revocation and Reform) Act 2023 (REUL Act). The REUL Act ends the supremacy and special status afforded to retained EU law in the UK. In relation to VAT and excise, the Government confirm that it will no longer be possible for any part of any UK Act of Parliament or domestic subordinate legislation to be quashed or disapplied on the basis that it was incompatible with EU law. As previously announced, the Government are taking a bespoke approach in relation to UK VAT and excise law so that it continues to be interpreted as Parliament intended, drawing on rights and principles that currently apply in interpreting UK law. This legislation ensures the stability of the VAT and excise regimes and provides legal certainty for business following the changes in the REUL Act taking effect. It mitigates the risk of re-litigating settled interpretation of UK law, protecting billions of pounds of Exchequer revenue—VAT and excise duty from alcohol, tobacco and hydrocarbon oil raise over £200 billion of revenue per year.
The draft legislation is accompanied by a tax information and impact note and an explanatory note. The documentation has been placed in the Libraries of both Houses and can be found at:
www.gov.uk/government/publications/interpretation-of-vat-and-excise-legislation
[HCWS1080]
War Widow(er)s Recognition Payment: Tax Treatment
Victoria Atkins Excerpts(7 months, 1 week ago)
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The Financial Secretary to the Treasury (Victoria Atkins)
The Government announced in May that payments of £87,500 will be made to those who forfeited their entitlement to a pension for a service attributable death prior to 2015 and have not had this pension restored through divorce or subsequent bereavement. This payment is not intended to put a value on the widow(er)’s loss, but instead be an amount that clearly recognises that remarriage or cohabiting with a new partner does not erase the bereavement, as the Government are deeply conscious of the sacrifice these bereaved people have made.
The Government are today announcing that these payments will be exempt from income tax and national insurance contributions. This will ease the administrative burden on recipients who are a specially designated group who benefit from a key principle of the armed forces covenant, which recognises that special consideration should be made by the nation to those, such as the bereaved, who have given most in the service of our country.
We reiterate our sincere condolences and gratitude to the widows and widowers who lost beloved partners in service.
[HCWS1050]
Tax-free Shopping for International Visitors
Victoria Atkins Excerpts(7 months, 3 weeks ago)
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Westminster Hall is an alternative Chamber for MPs to hold debates, named after the adjoining Westminster Hall.
Each debate is chaired by an MP from the Panel of Chairs, rather than the Speaker or Deputy Speaker. A Government Minister will give the final speech, and no votes may be called on the debate topic.
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Financial Secretary to the Treasury (Victoria Atkins)
It is a pleasure to serve under your chairmanship, Dr Huq. It is the first time I have done so, and I am delighted to be chaired so well.
I welcome the hon. Member for Slough (Mr Dhesi) to his place. It is a pleasure to see him there and I look forward to our doing battle over the Dispatch Box in the coming months. I thank my hon. Friend the Member for The Cotswolds (Sir Geoffrey Clifton-Brown) for securing today’s discussion. He is an assiduous advocate on the issue, and his speech showed the great care and thought that he has put into it. I genuinely thank him for his speech, as I do my hon. Friend the Member for Cities of London and Westminster (Nickie Aiken); I will be dealing with some of her points later.
I hope the House will forgive me if I start with some points of clarification. I have said in this Chamber before that in the very complex world of tax law, VAT is the most complicated area; it is also the most litigious. When the Treasury or His Majesty’s Revenue and Customs faces litigation on VAT rules and their interpretation, the organisation can often bear millions of pounds of risk on behalf of the taxpayer on a single word in a piece of legislation. That is why I am going to be very particular about the terminology. I am conscious that lots of people will be paying great interest, and it is important that we get the terminology right.
The phrase VAT-free shopping can be used in the context of this debate, but for the avoidance of doubt, for those acts of shopping by tourists there will often be taxes and duties payable on their purchases on their return to their home country. We are focusing on what is actually called the VAT retail export scheme—VAT RES for short. I note that airside tax-free shopping is also in scope, but it has not been raised so I will not trouble the House with it. VAT RES is still available for all non-UK visitors who purchase items in store and have them delivered to their overseas address, which many shoppers would rather do than have to take them all home in their luggage. It also applies to overseas shoppers who buy online and have items delivered, so they can support British businesses from far afield.
Sir Geoffrey Clifton-Brown
I anticipated that my hon. Friend would raise that—in fact, I nearly put it in my speech to stop her doing so. The proportion of people who want to reclaim the tax and have goods delivered—let us think of, say, a Chinese person visiting this country—is minute compared with the proportion who shop in this country and then physically reclaim the VAT and go home. So while that scheme is available, it is very little used.
Victoria Atkins
In fairness, it may be that people do not know that it is available. I do not know whether shops or brands advertise it to their customers. If a consumer is buying a larger item, they may think it much more convenient to have it sent home. The scheme is available should shoppers wish to make the savings described in the debate.
I acknowledge this has not been the case today, but some people call the current situation a “tourist tax”. Again, that is not correct, because the change in the law that happened a couple of years ago means that we simply expect overseas tourists to pay the same amount of tax as British people do when making a purchase, especially when so many countries—including some of the alternative shopping destinations that can be mentioned—do impose a genuine tourist tax on their visitors. So please let us not refer to it in that way, because that would not be correct.
My hon. Friend the Member for The Cotswolds understandably referred to a 20% saving from such VAT refunds, but that assumes that shoppers receive all the VAT back. In reality, we know that the companies processing refunds, who are sometimes the retailers themselves, charge significant administrative fees for the service. Indeed, one third of VAT RES users surveyed by HMRC were charged more than 50% of their refund in fees, and the average was 36%, so the savings to the consumer may be far less than the 20% rate of VAT.
To try to set in context the environment in which I am considering this request—alongside many others—since we voted to leave the European Union in 2016, the Treasury has received some £50 billion-worth of helpful suggestions and requests for products or items that should be zero-rated or have VAT relief applied to them. Cases are made in different debates on different subject matters where we are asked to make VAT relief decisions. Of course, VAT remains our third most productive tax in the UK, and it helps to support many of the public services that we all care so deeply about. Those are serious considerations that we must take into account for any request for VAT relief that we receive.
I completely understand the intentions behind my hon. Friend’s work—indeed, I commend him on it—and I share his wish to ensure that the UK remains an attractive place to visit and that support for our retail sector and high streets is strengthened. Both intentions and aspirations are shared across the Government. Therefore, if I may, I will take a couple of moments to help the House understand what we have done to achieve exactly that.
Through VisitBritain and the GREAT campaign, we have invested significantly in marketing the UK both domestically and internationally to stimulate demand and support recovery. According to updated forecasts from VisitBritain, there are due to be 37.5 million visits to the UK this year, which is some 92% of the level seen in 2019 before the pandemic, and inbound visitor spending is forecast to be £30.9 billion, which is up 9%. Those updates follow the stronger recovery we are seeing, with spending by American visitors up 42% to a record £6 billion last year alone. Sadly, international visitor numbers are still below 2019 levels for all G7 members and large European countries in 2022 and 2023, but of course that comes against the backdrop of the UK economy doing much better than was forecast over the last year or so, as we saw really encouraging growth figures more generally for the economy last week. Rather than ours being the weakest post-pandemic recovery in terms of visitor numbers, the post-pandemic recovery in the UK has been stronger than in countries, such as Germany and Japan, that continued to offer VAT RES. Post-pandemic recovery in the UK has also been stronger than in the United States and Canada in both 2022 and 2023.
We want to make sure that the tourist experience in the UK is as great as it can possibly be. One of the ways in which we have tried to reduce the bureaucracy and the barriers for tourists coming into the UK is by creating an exemption from visa requirements through our new electronic travel authorisation scheme to boost international tourism numbers, with visitors from the Gulf Co-operation Council states and Jordan being the first to benefit. We have also worked with industry to set up the tourism industry working group on international competitiveness and demand, which has been established to recommend practical policy options to support tourism recovery.
Nickie Aiken
I was interested to hear about that new collection of people working together to improve the tourist offer. If that group recommended that VAT RES be reintroduced to help the growth of tourism, would the Treasury be minded to accept that recommendation?
Victoria Atkins
My hon. Friend will know that that group will not necessarily have access—in fact, I would be surprised if it did—to the macroeconomic data that the Treasury, the OBR and others, including the retail industry itself, have. We understand that every decision we make will be scrutinised in due course by the independent Office for Budget Responsibility, so there are processes that we have to go through. As I have said, however, and as I will repeat in this speech, we are very keen to hear evidence and data from the retail sector. We very much keep this policy under review.
In respect of high streets, it is argued that the reintroduction of the VAT RES scheme would be a useful move to support our world-leading retailers. This Government are proud to have provided huge support to the retail sector, not least through the extreme challenges that that sector faced during the pandemic. Hon. Members will recall the measures that we took to ensure that the sector paid no business rates—support that was worth £16 billion to businesses in the retail, hospitality and leisure sectors throughout the pandemic—as well as the very practical support measures such as the furlough scheme, bounce back loans and even small business grants for the smaller businesses in our communities, all of which helped to secure and safeguard millions of jobs across the UK economy and keep businesses surviving through that very difficult time. We would argue that that support helped to keep our high streets, our retail centres and our communities thriving.
We clearly recognise the importance of retailers and will continue to act effectively to support them. At autumn statement 2022, the Government announced business rate changes and tax cuts worth more than £13.5 billion over the next five years, which will support the retail, tourism, leisure and hospitality sectors, as well as other parts of the economy. These announcements included a freeze to the business rates multiplier for 2023-24, which is a tax cut worth £9.3 billion over the next five years, meaning that all bills are 6% lower than without the freeze.
We also introduced an Exchequer-funded transitional relief scheme, which many sectors had asked for and which is worth £1.6 billion, to protect an estimated 700,000 rate-payers facing bill increases due to the increases in rateable value. Indeed, I have had the pleasure of visiting that great British company John Lewis, on Oxford Street, to see for myself the positive impact that these and other changes have had on that really important British business.
Nickie Aiken
I thank the Minister for giving way yet again. I am interested in what she says about a great British company such as John Lewis, which is based in my constituency, and its flagship branch in Oxford Street, which is also in my constituency. Does she agree that, if we are to encourage people back to places such as Oxford Street—the nation’s high street—those places have to have a great offering? They have to look good, be clean and have brilliant shops, and not so many of the candy stores and that type of retail offer, which we seem to have at the moment and which is really disappointing. Also, the Mayor of London has a huge role to play in ensuring that there is a tourism offer, and the current Mayor is letting down London.
Dr Rupa Huq (in the Chair)
Order. May I just say that we are straying from the subject matter, which is tax-free shopping? Also, when you say “you,” that means me. I did not do anything—it is “the Minister”.
Victoria Atkins
I hope to ingeniously incorporate VAT RES into my response to my hon. Friend. She is absolutely right that, although the advocates of the scheme place a great deal of emphasis on it as a tax lever to encourage tourists back to the United Kingdom, in reality tourists come to the UK to look at our beautiful architecture, visit theatres, visit wonderful historic locations, and—dare I say it—visit the Lincolnshire wolds and other places of great beauty around the country.
Victoria Atkins
Including, of course, the Cotswolds. We must look not just at how to encourage more tourism through tax levers, but at the actual offering to tourists when they are here in Oxford Street, Burford or Bourton-on-the-Water, so we ensure that those places are as attractive and inviting as they can possibly be. I hope that the House is therefore in no doubt that the Government are determined to do everything they can to make the UK an attractive place to visit, both to support tourism and hospitality and to support our retailers.
As I have said, the VAT retail export scheme is still available to those non-UK visitors who purchase items in store or online and have them delivered to their overseas address. However, as we heard from my hon. Friend the Member for The Cotswolds, a significant Treasury analysis in 2022 estimated that introducing worldwide VAT RES shopping would come at a fiscal cost of around £2 billion each year. I know that my hon. Friends and others have questioned that analysis and methodology, and I will try to address some of those queries and concerns. We also know that industry-commissioned analyses have reached different conclusions, including the Oxford Economics report, which I have gone through carefully with officials. I will try to break some of those down.
The Treasury costings include estimates for an increase in the numbers, but it does not agree that as many extra visitors would come to the UK as a result of changing the tax measure, as suggested by the external research that we have seen so far, particularly the Oxford Economics analysis. For example, the Government estimate that 50,000 to 80,000 more people would come to the UK if we introduced such a scheme. My hon. Friend thinks the figure would be higher, and I think the Oxford Economics report suggested something in the region of 1.6 million, but the 50,000 to 80,000 figure has been endorsed by the OBR, which is the independent body that scrutinises Treasury calculations and assumptions. Indeed, my hon. Friend has asked the OBR to review the policy.
The figure of 50,000 to 80,000 extra visitors is just 4% of that suggested by Oxford Economics, which suggested that 1.6 million more people would come every year. To put that in context, the total number of tourists we welcomed in 2019 was just over 40 million. We therefore find the external assumption to be much stronger than the Treasury was able to find evidence for.
Let me try to reassure observers about the Treasury’s methodology. I know that the concern is raised that it does not properly account for an increase in visitors. I reiterate that the fiscal cost of £2 billion was made up not just of that factor, but of many other components. For example, the cost includes the VAT loss on purchases from EU and non-EU visitors. The cost also takes account of changes in behaviour. It includes an adjustment for the changes in the number of visitors, the changing spending patterns of visitors and the impact of digitalising a VAT RES scheme.
It is also said that the costings overestimate VAT refunds to EU shoppers, but, in fact, EU visitor spending is adjusted to account for the fact that these visitors tend to spend less than non-EU visitors. Government analysis assumed that EU visitors would spend at about 60% of non-EU levels, but, for comparison, Oxford Economics used 63%, so the Government’s assumption was in fact more generous.
Even taking into account those effects, the Government still estimate that the measure would cost in the region of £2 billion each year, and the methodology for calculating that £2 billion cost is consistent with the methodology signed off and certified by the OBR in 2020.
However, as my hon. Friend the Member for Cities of London and Westminster emphasised, tourism must be seen in the round. We should be confident that the UK’s attraction as a destination extends well beyond our shopping, even though we have pretty brilliant shops in our great city and around the country. Evidence from VisitBritain shows that the key motivators for tourists visiting the UK are our rich history and heritage and our vibrant towns and cities, not just shopping.
HMRC has surveyed VAT RES users and found that VAT RES did not make the list of reasons for visiting Great Britain. Furthermore, two thirds of those surveyed said that they would have purchased the items regardless of the scheme, while 28% would have purchased fewer items, meaning that 95% of tourists would still shop even without the scheme.
To emphasise that point, I have asked officials for figures on how much tourists spend when they are visiting. I am told that the average spend per visit was £696 in 2019 and £848 in 2022, which is an increase of 8% in real terms. That tends to indicate that international spending habits in the UK are not directly informed by whether VAT RES is in place.
I accept, of course, that individuals will make different decisions on VAT, and that some customers are more price-sensitive than others. However, taken in the round, those are the figures with which I have been provided. We have looked at the Treasury’s analysis and the OBR’s analysis, which suggest that the increase in tourist spending is marginal, but the policy would still come with a significant price tag.
My hon. Friend the Member for The Cotswolds advocates for a review. As with all taxes, the Government keep VAT policy under constant review. Further to that, we have committed to understanding the latest evidence on VAT shopping, or on the impact of the VAT RES scheme on shopping in British high streets. That is why the Chancellor has already invited evidence submissions from industry to inform our policy making.
I would like to take this opportunity to thank the retail and hospitality industry for providing so much data already for my officials. I am obviously keen for them to carry on with their businesses—earning money, making profits, employing people and contributing to our growing economy. I am grateful to them for taking the trouble and time to help us with this. We expect further evidence in the coming weeks, which we look forward to receiving and will consider very carefully.
Although I am obliged to stress that the independent OBR certified the Government’s costings for the removal of the VAT RES scheme and that we have set out our methodology for how the £2 billion estimate was calculated, I have heard my hon. Friend’s call for an independent review and I will reflect carefully on his eloquent submissions.
We are committed to ensuring that the UK remains an attractive place to visit and committed to supporting our retail sector. None the less, the Chancellor is clear that being responsible with the public finances is a key priority. In that regard, VAT RES would subsidise a large amount of tourist spending that already occurs, arguably, without a tax relief in place. But we very much want to listen to industry and support long-term sustainable growth, so we will continue, as I say, to receive evidence and keep the policy under review. I am extremely grateful to my hon. Friend for setting this debate in motion.
Sir Geoffrey Clifton-Brown
I am grateful to you, Dr Huq, for giving me the opportunity to briefly reply to this debate; it is very important. I thank the Minister for setting out in detail for the first time how the Treasury’s methodology works. I will come back to that in a minute. Before she did so, she set out in detail the reliefs that the Treasury has given to businesses in rates and VAT, as well as high street grants and business grants during the dreadful pandemic, all of which were very much appreciated by businesses and no doubt kept a lot of them going. Some of those reliefs still persist today, for which I am sure businesses are grateful. But that is no substitute for businesses getting profits into their bottom line, and one way of doing that is to get more tourists into this country spending more money. That is why I think the issue is so important.
The Minister has fully set out the case for why she believes the Treasury’s methodology relating to the £2 billion cost to the Treasury is correct. I suggest that I take that away and ask industry to go through, in depth, all the things that she has mentioned and come up with a statement on whether they agree on each individual point, and if not, why they disagree and what the effect would be. If, at the end of the day, we still disagree with the Treasury’s methodology, may I come back to her with a comprehensive statement and discuss it further? I would still say that we badly need an independent study.
I have not brought my brief today, but I recall that when the OBR addressed the Treasury Committee, it said that it placed low reliance—I think that is what it said—on the visitor number forecasts.
Victoria Atkins
I was anticipating this point and, indeed, quizzed my officials about it. I think the phrase my hon. Friend refers to is a high uncertainty rating. I am told that that rating given by the OBR is not unusual in the context of Government policy. That is because it is driven by behavioural uncertainty, which is difficult to predict with limited data and the additional complexity linked to EU exit. It was not, I am told, because of concerns with the methodology employed. As I say, we are very keen to hear further evidence and views in due course.
Sir Geoffrey Clifton-Brown
I am grateful to my hon. Friend for being so well informed to be able to answer that individual point. However, I suspect, again, that industry and the OBR will disagree with her over that matter.
I thank the Minister very much, and you, Dr Huq, for so ably chairing this debate. It has been thoroughly useful. The fact that we have had relatively few speakers has enabled us to examine the whole issue in detail; I think industry will be very grateful for that. I suspect that it will come back with all sorts of replies that will rebut what my hon. Friend has said. Let us see and then I will go back to her and I am sure the debate will continue. Nevertheless, I thank her very much for what she has done this afternoon.
Question put and agreed to.
Resolved,
That this House has considered tax-free shopping for international visitors.
Duty on Shopping: UK Entry Points
Victoria Atkins Excerpts(7 months, 3 weeks ago)
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The Financial Secretary to the Treasury (Victoria Atkins)
First, I congratulate my hon. Friend the Member for Crawley (Henry Smith) on securing tonight’s important debate. He brings so much experience and expertise on this issue to the Chamber, not just through his chairmanship of the APPG for the future of aviation, but as the Member of Parliament for Gatwick. I thank him very much for that. I am conscious that people outside the Chamber may be watching the debate, so let me say that what we are discussing is duty on the sale of alcohol and tobacco, which would ordinarily attract UK excise duty and VAT. My hon. Friend advocates for the removal of that duty and VAT for passengers who have entered Great Britain from outside the UK before they have reached custom-controlled entry points. I will give some background on the Government’s duty-free policy, because it is an important part of the overall picture.
In January 2021, the Government extended duty-free sales to EU-bound passengers for the first time in over 20 years, which was a significant boost to airports and international rail terminals in Great Britain. That change meant that passengers travelling from the UK to the EU were able to purchase duty-free goods once they had passed security controls at ports, airports and train stations on international routes. They also became able to purchase duty-free goods onboard international transport routes from Great Britain. As my hon. Friend said, we understand that customers find it convenient to buy their products during the flight, or to order them in advance and pick them up at the end. We are pleased that the change in policy has been a boost for UK travel hubs; indeed, I watch with close interest to ensure that the tax savings brought about by this Conservative Government are passed on to consumers, because that is important. I hope that retailers watching the debate will note the Minister’s interest in their doing the right thing and ensuring that those savings are passed on.
When we made those changes in 2021, we said that we were not considering a similar policy for arrivals, for several reasons. First, as my hon. Friend has identified, there were serious concerns about the impact on shops in the UK, whether on the high street or closer to an airport. Duty-free on departure encourages purchases in the UK that might otherwise be made abroad. That case is less clearcut with regard to allowing customers to buy goods duty-free on arrival; that could create an unfair playing field for the domestic duty-paid retailers working either in the confines of the airport or station or beyond them.
The hon. Member for Edinburgh West (Christine Jardine) mentioned her local airport of Edinburgh. I am thinking of arrivals at Heathrow, where once a passenger has gone through customs, they are in the arrivals hall, and there are shops there selling products, as one would expect. I must confess that I have never tried to buy cigarettes or alcohol from those shops, so I know not what prices they would charge, but importantly, because they are on the arrivals side of the barrier, they have to charge duty and VAT on products. There might be only a few feet between those retailers selling products duty-free and others selling the very same products beyond the barrier, on the arrivals side.
Secondly, we would have to consider the need for adequate infrastructure and resourcing for the publicly funded Border Force, so that it could combat fraud, ensure compliance with requirements and enforce any charge at all entry points. In a moment, I will go into some of the duties that Border Force has at airports, but we must remember the enormous responsibility on those officers at travel hubs, and the range of offences and activities that they have to be alert to. As a former Home Office Minister, I would have to be very careful to understand how giving those officers extra responsibilities regarding the sale of duty-free alcohol and tobacco would be of wider benefit to the British public. Businesses would also need to put supporting infrastructure in place, which would be costly to them.
Finally, duty would of course be lost from those sales. We have considered very carefully the York Aviation report. My officials have briefed me on it, and we appreciate the effort that has gone into it, but we consider that the report falls into the error of overstating the size of any additional economic activity that would result from the proposal. We remain to be convinced that this change to VAT and duty policy would lead to a rise in sales of these products that would support the creation of many new jobs across the economy.
Henry Smith
Would Treasury Ministers be willing to meet industry representatives to discuss the concerns that the Minister is expressing about the impact of the policy change? Through such dialogue, we could probably find a solution that would alleviate fears across the board.
Victoria Atkins
I am very happy to meet my hon. Friend and representatives, but I must temper expectations. For a change to be made of this nature, the economic case for the entire UK economy would have to be very strongly made. He will appreciate that I receive many well intentioned suggestions on removing VAT—and other forms of tax, but particularly VAT—from products. Indeed, I think we are up to £50 billion-worth of suggestions since we regained our freedoms on leaving the EU. We have to be very clear as to the economic benefits, but I am always very happy to meet my hon. Friend.
The report also deals with the issue of jobs. Again, we remain to be convinced that, if jobs were to be created, they would be additional to the jobs already in place in the high street that involve selling alcohol and tobacco with duty and VAT charged, as they are obliged to be charged on the UK high street. I am afraid that we do not accept the report’s conclusions.
I will give my hon. Friend a little bit more detail on the broad objectives behind duty-free on arrivals. First, we are very conscious that the duties we charge on alcohol and tobacco serve not just an economic purpose, but the critical public health objective of trying to persuade people to stop smoking, or to smoke far less, and to have a healthy relationship with alcohol. Indeed, my hon. Friend will know of the very sensible changes made to the alcohol duty regime in the Finance Act 2023 to enable products with a higher strength of alcohol to be treated differently from products with a lower alcohol content. That was done because, as I think we all acknowledge, reflecting the strength of alcohol in the duty price is a way, we hope, of helping people to make decisions about their health. Our current duty-free-on-departure policy strikes a balance between those objectives and supporting international travel, but we would have to consider carefully whether duty-free on arrival would maintain that balance.
Secondly, we ask whether displacement would occur, and whether any losses would outweigh any indirect benefits of increased economic activity. Outbound duty-free for EU passengers alone is estimated to cost around £200 million per year, primarily through displacement of duty-paid high street sales to duty-free stores. The Chancellor has been clear that it is vital that we continue to act responsibly with the public finances, so the risk of eroding tax revenues is not one we will take lightly. Finally, there is also a compliance angle. The Government would have to put measures in place to mitigate the risk of increased illicit activity, which would require the diversion of Border Force staff from other crucial areas. That includes the priorities that we rightly set for them, including matters such as illegal immigration, drug smuggling, gun smuggling, terrorism, and other serious offences. That is why we must be very careful before contemplating adding to Border Force’s responsibilities, and its vital work of protecting the nation, day in, day out, and ensuring that the law is obeyed by those who travel overseas or into our country.
Of course we keep this policy under review. I would be happy to meet my hon. Friend to discuss it further, but we would need strong evidence to assure us that high-street duty-paid businesses would not be disadvantaged by a policy of duty-free on arrivals before we even considered any such changes. To reassure my hon. Friend, I asked my officials to pick up on the point that he raised about the EU contemplating changes to the system, and as far as we know, we do not believe that the EU is considering that. Of course, we will ensure that that information is up to date. I am told that as recently as 2021, the EU Parliament said that it was not considering that, but I appreciate that international politics change.
I reiterate the support that the Government have committed to the aviation industry—indeed, often at the behest of my hon. Friend during the pandemic. In May last year, we published “Flightpath to the future”, a strategic framework for the sector to build back better. Through it, we aim to make UK aviation cleaner, greener and more competitive than ever before. The framework explores key issues, including workforce and skills, connectivity, global impact, innovation and decarbonisation. I note with interest those parts of my hon. Friend’s speech concerning different types of fuel for the airline industry. That is the sort of work that we wish to help the aviation industry with and, more particularly, to develop in the UK as far as possible.
In conclusion, I thank my hon. Friend for his speech. I reiterate that we have considered this matter carefully, but we must prioritise our responsibilities for the public finances. That is why we do not feel able at this point to agree to the suggestion, but I am happy to keep the issue under review, and to meet him to discuss it further.
Question put and agreed to.
Oral Answers to Questions
Victoria Atkins Excerpts(7 months, 3 weeks ago)
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Katherine Fletcher (South Ribble) (Con)
The Financial Secretary to the Treasury (Victoria Atkins)
We are ensuring that pubs remain a key part of our local communities by providing support through the alcohol duty and business rates systems. That includes a new draught relief that provides a significant duty discount on alcohol sold on draught in a pub, and the expanded retail, hospitality and leisure relief means more than £10,000 in relief for the average independent pub.
Katherine Fletcher
After a busy summer knocking around South Ribble and speaking to people, I have often popped in for a pint, including in Croston’s famous Wheatsheaf pub. From housing MP surgeries—as many pubs do—to being our community living rooms, pubs are absolutely vital. I have spoken to landlords, including those at the Black Bull and the fabulous Fleece Inn in Penwortham—
Katherine Fletcher
There is a pub crawl there for us all. They need our support, so may I invite the Minister to South Ribble—I will even offer to buy her a pint—to speak to Chris, the landlord at Longton’s fabulous Golden Ball, to hear about his business?
Victoria Atkins
As you know, Mr Speaker, I regard Lancashire as my home, and it would be a delight to return to South Ribble. My hon. Friend has named just a few of the roughly 37,000 pubs in England and Wales—perhaps if we had given her longer she would have been able to name them all. All those pubs will benefit from the Brexit pubs guarantee, which means that the duty on a pint sold in a pub will always be lower than in a supermarket.
Mr Speaker
Let us see if the Minister is going to get another pint—I call Tim Farron.
Tim Farron (Westmorland and Lonsdale) (LD)
Following the question from my dad’s MP, I confess that I have been to all the pubs that the hon. Member for South Ribble (Katherine Fletcher) mentioned. The biggest burden on pubs in the lakes and the dales is the fact that they cannot find any staff or sufficient staff. It is a crisis that affects the entire hospitality sector, 86% of which say that the recruitment of staff is a major problem for them. The solution will include more affordable homes for workers, more intelligent visa rules and funding new training and skills initiatives. Will the Minister meet me and representatives of the hospitality industry to look at a bespoke package to solve the workforce crisis in the lakes and the dales?
Victoria Atkins
I would go further and give as an example the truly transformational programme that the Chancellor set out at the spring Budget to transform childcare policy in this country. We know that childcare responsibilities hold back many people from entering the workforce, and it is through policies such as this, as well as the work being led by the Secretary of State for Work and Pensions to help people back into the workforce, that will help pubs in the hon. Gentleman’s constituency and across the country.
Elliot Colburn (Carshalton and Wallington) (Con)
Mr Philip Hollobone (Kettering) (Con)
The Financial Secretary to the Treasury (Victoria Atkins)
I thank my hon. Friend for his question, which I take very seriously. Just to put it in context, last year HMRC received 38 million telephone calls; around 3 million of those were to do the simplest of tasks, which can be done digitally if at all possible. If we are able to move people on to digital channels, that will free up at least 500 people to help with more complex tax affairs and help the most vulnerable. This is a period of transition for the organisation, and one that we take very seriously.
Alison Thewliss (Glasgow Central) (SNP)
Richard Thomson (Gordon) (SNP)
It has been revealed that Integrated Debt Services, a company set up by the UK Government to recover personal debt, saw its profits increase by a staggering 132% last year. Do Ministers think it is right that this company should be able to profit to that extent out of the misery of the cost of living crisis?
Victoria Atkins
The hon. Gentleman is referring to a company that works with the Government’s Crown Commercial Service and that works on debt across central Government. It has to operate within a very specific framework and, indeed, it is regulated by the Financial Conduct Authority. I very much understand the point he has raised, and I will be making inquiries on that point myself.
Priti Patel (Witham) (Con)
Research and development tax credits are vital to help businesses grow and invest, but I have received a large number of complaints from businesses across Essex saying that they are facing complexities and delays in processing claims with HMRC. May I please ask the Minister to meet me and some of these businesses to work through the delays and ensure that these businesses can continue to thrive and grow, because they are vital to our economic growth?
Victoria Atkins
I would be delighted to meet my right hon. Friend and those businesses. In fact, the UK is leading world economies with our focus on life sciences and on tech. In that little golden triangle between Oxford, Cambridge and London, we have more tech businesses than anywhere else on the planet other than New York and silicon valley. I hear the cheers opposite, so keen are Labour Members to support British business, but I would be delighted to meet her and to underline the support that this Government give to such important businesses.
Sir Stephen Timms (East Ham) (Lab)
I welcome the new focus on engaging pension funds with productive investment, after many years when regulation has pushed the funds into Government gilts instead, but does the Minister have proposals specifically to secure those investments for UK businesses rather than their going overseas?
James Sunderland (Bracknell) (Con)
I have recently been contacted by several self-employed constituents expressing concern about heavy fines being imposed for filing tax returns late even though no moneys are owed. Will the Treasury meet me with a view, perhaps, to reviewing this policy?
Victoria Atkins
I will of course be happy to meet my hon. Friend. I hope he understands that I cannot intervene personally in any case, but I will of course look at the general principle he sets out and see whether there are systemic issues here.
Finance Bill: Draft Legislation and Tax Documents
Victoria Atkins Excerpts(9 months, 2 weeks ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Financial Secretary to the Treasury (Victoria Atkins)
In line with the tax policy making framework, the Government are publishing draft legislation ahead of potential inclusion in the next Finance Bill. This allows for technical consultation and provides taxpayers with predictability over future tax policy changes. Alongside this, the Government are making announcements in a small number of technical areas of tax policy to support the operation of the tax system. Draft legislation is being published to seek stakeholder views at this stage. The final contents of the next Finance Bill will be a decision for the Chancellor. The Government are also publishing a number of tax-related consultations and summaries of responses to consultations that have already been conducted.
Publication of draft legislation
The Government are publishing draft legislation and associated documents, further to previous announcements, including at Budget or on Tax Administration and Maintenance Day.
Additional tax relief for R&D intensive SMEs: The Government are publishing draft legislation that will introduce a new permanent rate of relief for the most R&D intensive loss-making SMEs from 1 April 2023. This additional support will be worth over £1.8 billion over the next five years, and will provide eligible R&D intensive loss-making SMEs with support worth £27 per £100 of R&D expenditure. The scheme would continue to operate alongside any merged scheme.
R&D: Merging RDEC and SME relief: The Government are publishing draft legislation on the proposed design of a merged scheme, alongside a summary of responses to the consultation. This would combine the SME and RDEC schemes into a single, simplified above-the-line tax credit. This legislation will keep open the option of implementing a merged scheme from April 2024. A final decision on whether to merge schemes will be taken at a future fiscal event.
Reform of audio-visual creative tax reliefs: The Government are publishing draft legislation to implement the modernisation and reform of the audio-visual tax reliefs into expenditure credits. The reforms include a higher rate of relief for animation and children’s TV to provide additional support for this burgeoning sector. This higher rate of relief will also be extended to animated films.
Administrative changes to creative industry tax reliefs: The Government are publishing draft legislation to make a number of administrative improvements to the creative industry tax reliefs, alongside the introduction of the new expenditure credit regimes.
Technical clarifications to the cultural tax reliefs: As announced at spring Budget 2023, alongside the two-year extension to the higher rates, the Government are publishing draft legislation to make several changes to clarify what is eligible for the three cultural tax reliefs: theatre, orchestra, and museums and galleries exhibition tax relief.
Lifetime Allowance abolition: As announced at spring Budget 2023, the Government are publishing draft legislation to abolish the pensions lifetime allowance, following the removal of the lifetime allowance charge from 6 April 2023.
Pensions schemes relief at source: The Government are publishing draft legislation that will ensure that the legislative framework supports the modernisation of the relief at source (RAS).
Doubling maximum sentences for tax fraud: The Government are publishing draft legislation to double maximum sentences for the most egregious cases of tax fraud from seven to 14 years. This demonstrates the Government’s intent to crack down on tax fraud and deter criminal actions, which reduce the amount of money available to fund vital public services.
Tonnage Tax: The Government are publishing draft legislation to permit third-party ship management companies to join the tonnage tax regime and to raise the limit on capital allowances to £200 million for lessors of ships into the regime. These measures will help to keep the UK tonnage tax regime competitive internationally.
Geographical scope of agricultural property relief and woodlands relief: The Government are publishing draft legislation that will restrict the scope of agricultural property relief and woodlands relief from inheritance tax to property located in the UK only.
Enterprise Management Incentives: This measure extends the time limit for a company to notify HMRC of a grant of an enterprise management incentives (EMI) share scheme option.
Improving the data HMRC collects from its customers: The Government are publishing draft legislation to improve the quality of data collected by HMRC. This will provide better outcomes for taxpayers and businesses, improving compliance and resulting in a more resilient tax system.
The Government are also publishing draft legislation and associated documents in the following areas that have not been previously announced:
Ukraine vehicle excise duty exemption: The Government are also publishing draft legislation to enable a vehicle excise duty (VED) exemption for Ukraine visa holders. Individuals in the UK under the family, sponsor and extension Ukrainian visa schemes, driving vehicles with Ukrainian number plates, will be exempt from VED and registration requirements for a period of 36 months (in line with the length of their visas). This will ensure that individuals fleeing the war in Ukraine who have not yet registered their vehicles in the UK do not have to face the costs associated with VED and registering their vehicles while they are temporarily in the UK.
Real Estate Investment Trusts (REITs): The Government are publishing draft legislation to make further improvements to the operation of the tax rules for real estate investment trusts. As well as engaging on the detail of these provisions, the Government will continue to consider the case for other reform options.
OECD Pillar 2: The Government are publishing amendments to the pillar 2 rules to ensure that it functions as intended and reflects the latest internationally agreed guidance. Alongside this, the Government are setting out the draft legislation of the structure of the undertaxed profits rule (UTPR).
Post Office compensation schemes—corporate entities: The Government are publishing draft legislation that will provide an exemption from corporation tax on compensation payments made to corporate entities from the Horizon shortfall scheme or group litigation order compensation schemes.
Tougher consequences on promoters of tax avoidance: The Government are publishing draft legislation that creates a new criminal offence that will apply to promoters of tax avoidance schemes who fail to comply with an HMRC legal notice requiring them to stop promoting an avoidance scheme. The Government are also publishing draft legislation that will enable HMRC to apply to the court for a disqualification order against directors of companies involved in promoting tax avoidance.
All draft legislation is accompanied by a tax information and impact note (TIIN), an explanatory note (EN) and, where applicable, a summary of consultation responses document.
Policy announcements
Administrative Changes to the High-income Child Benefit Charge: The Government want to simplify the process for customers who become liable to the high-income child benefit charge, particularly for those who currently need to register for self-assessment to pay the charge. The Government will provide details in due course on how they will enable employed customers to pay through their tax code, without the need to register for self-assessment.
Exempting Payments Under the Department for Education’s Family Network Support Package: The Government will legislate to ensure that payments made under the family network support package trialled in the family network pilot by the Department for Education will be exempt from income tax. This legislation will apply retrospectively from 31 July 2023, when payments start. HMRC will exercise its collection and management discretion and will not collect any income tax that may have been due on payments made from 31 July 2023 to the date the legislation takes effect.
Other publications
The Government are also publishing the following consultations:
Plastic Packaging Tax—mass balance approach: The Government are consulting on how a mass balance approach can be used for calculating the recycled content in packaging made from chemically recycled plastic for the purposes of plastic packaging tax.
Energy Profits Levy Energy Security Investment Mechanism: The Government are publishing a discussion paper to support engagement with the sector on the technical details of the ESIM’s application.
Taxation of employee ownership trusts and employee benefit trusts: The Government are consulting on proposals to reform the tax treatment of two types of employee trusts: employee ownership trusts (EOTs) and employee benefit trusts (EBTs). These reforms ensure that the favourable tax treatment remains available to those who use EOTs and EBTs for the intended policy purposes, while preventing tax advantages being obtained through use of these trusts outside of these intended purposes.
Updating the VAT Terminal Markets Order legislation: As announced at Tax Administration and Maintenance Day, the Government are consulting on proposals to update the terminal markets order legislation to clarify the VAT treatment of exchange traded commodity transactions, ensuring the legislation reflects how the markets operate today and provides greater certainty in relation to the VAT treatment.
All publications can be found on the gov.uk website. The Government’s tax consultation tracker has also been updated.
[HCWS972]
Draft Postal Packets (Miscellaneous Amendments) Regulations 2023
Victoria Atkins Excerpts(9 months, 2 weeks ago)
General CommitteesRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chair
Before we proceed any further, I would like to make two things clear for the Committee. First, the membership of the Committee is not a matter for the Chair; it is a matter for the Committee of Selection, as I set out earlier. The Government Whip is in his place and will have heard the strength of feeling among right hon. and hon. Members on that point. Secondly, Standing Order No. 118(5) requires that the Committee debate the motion
“That the committee has considered”
the draft regulations.
I will now call the Minister to move the motion. I will take no further points of order at this point, but if necessary I will take them later, when she has moved the motion.
The Financial Secretary to the Treasury (Victoria Atkins)
I beg to move,
That the Committee has considered the draft Postal Packets (Miscellaneous Amendments) Regulations 2023.
May I say what a pleasure it is to serve under your chairmanship, Mr Pritchard? May I also thank hon. Members, including right hon. and hon. Friends, for coming to this Committee today? I hope that they are able to hear me. I thank them for coming to this Committee. I do understand the sensitivities—
Sir James Duddridge
No, I am asking Mr Pritchard to take a point of order. I am not asking to intervene on the Minister; I am making a point of order.
The Chair
In answer to the right hon. Member’s question, this Committee sitting will end at 9.10 pm. On his wider point, I will say again that I said that when the Minister and shadow Minister were in attendance, we would proceed. The only caveat to that, which the right hon. Member will know—having been here longer than I have, as a distinguished parliamentarian—is that the Committee has to be quorate.
I am agnostic: I am not looking around at who is here, who is not, and who is supporting the Government. I am completely neutral in this. I am looking, procedurally, at whether the Minister and shadow Minister are here, and whether the Committee is quorate. I cannot just make up the rules as we go along. Otherwise, we would have chaos. I call the Minister.
Victoria Atkins
Thank you, Mr Pritchard. To reiterate, I beg to move the motion. Before I start, I do recognise the concerns of right hon. and hon. Members and the care with which they have made their points. I hope that I can answer some of their questions in my speech. As ever, I hope that colleagues from across the House who know me know that I will always do my absolute best to answer questions. Whether I am able to do that in Committee or outside Committee, I will always, always endeavour to help with colleagues’ careful scrutiny of Government legislation.
The statutory instrument before us will provide United Kingdom authorities with powers in relation to postal packets or parcels moving from Great Britain to Northern Ireland. It does nothing more or less than that. It does not, itself, put in place the wider Windsor framework arrangements.
The powers are part of delivering what we promised for consumers and businesses in Northern Ireland. They are necessary to ensure that we can implement the Windsor framework and remove the burdensome regime that the old Northern Ireland protocol would ultimately have required. As I say, I am very aware of the sensitivities and the concerns; indeed, I hope that I can help to clarify what the framework itself requires in respect of parcel movements, so I will try to deal with that now.
If I may just take us back a moment, I think it is important to remember that the Northern Ireland protocol was negotiated in good faith and under extreme pressure. If we cast our minds back to the circumstances in 2019, it was negotiated in good faith, as I say, in an effort to provide solutions to the issues raised about trade, on the island of Ireland and within the United Kingdom, following our exit from the single market.
As the protocol began to be implemented, however, practical issues came to the fore. I know that there are right hon. and hon. Members present who were absolutely forthright, and I think very persuasive, in highlighting the problems that businesses in particular were facing. Our concern has always been that, had it been fully implemented, the Northern Ireland protocol would have required international customs processes for all parcel movements from Great Britain to Northern Ireland. Nobody wants that. Indeed, that is why the Prime Minister, assisted by the Foreign Secretary, the Secretary of State for Northern Ireland and—I will give him a shout-out in due course—the Minister of State, Northern Ireland Office, my hon. Friend the Member for Wycombe (Mr Baker), negotiated a deal with the EU that, frankly, few at the time dared to hope would be possible.
Victoria Atkins
If I may, I just want to set out the circumstances, because I very much hope that that will help with some of the concerns that have been raised. I know that there is a great deal of interest in these arrangements, so I am going to be absolutely clear with the Committee what these measures entail and, importantly, what impact they will have not just for our constituents, but for the United Kingdom family.
In short, someone in Great Britain sending a parcel to their friends or family in Northern Ireland will not need to engage with any customs processes. Nothing will change for those movements compared with today. Similarly, Northern Ireland recipients of parcels sent by their friends or family in Great Britain will not need to engage with any customs processes. Nothing changes compared with today. A grandchild in Blackpool—I pick Blackpool because that was where I went to school, and there is a wonderfully rich Irish community in and around Blackpool and Preston—sending a package to his grandparents in Belfast will not need to do anything new to send it and, importantly, the grandparents will not need to do anything new to receive it.
Businesses in Great Britain selling to consumers in Northern Ireland will not need to complete customs declarations, international or otherwise. Nothing changes. Northern Irish consumers buying from British sellers, including—hon. Members have raised this point with me—the likes of Amazon and other online shops, will not need to engage with any customs processes. Nothing changes. They will buy from the British seller and receive their goods without doing anything new; I say that very clearly for the sake of colleagues here today and for others outside this Committee Room who may be listening. Those facts are now recorded in Hansard and can be scrutinised. I say that very deliberately, so that those who have concerns understand exactly what we have set out in the framework.
The Windsor framework explicitly removes those requirements on goods being sold to Northern Ireland consumers and, of course, on goods being sent to friends and family. There will be no routine checks or controls applied to parcels. There will be interventions only on the basis of a risk-based, intelligence-led approach. That means that the overwhelming majority of parcels will not be subject to checks.
Parcels sent from a business in Great Britain to a business in Northern Ireland will be treated the same as equivalent freight movements. They can be moved through the new green lane when eligible, when it is introduced from October 2024.
Victoria Atkins
I promise I will give way to hon. Friends and Members.
As will be the case for freight movements, the green lane will ensure that eligible goods will no longer require international customs processes; they will instead require only the provision of routine commercial information.
Victoria Atkins
I must give way to my right hon. Friend the Member for Wokingham, and then I will give way to the hon. Member for North Antrim.
John Redwood
The form of this statutory instrument is to amend regulations relating to foreign postal packets. It includes GB-NI postal packets alongside foreign postal packets in important matters in the regulations specified. How can the Government defend that? They are effectively treating Northern Ireland and GB as foreign countries to each other, accepting a form of regulation designed for a true international border and clearly violating the terms of the internal market legislation governing the United Kingdom? [Interruption.]
Victoria Atkins
If I may, I will address that point, and then I promise I will come to the hon. Member for North Antrim in due course. I am pleased that my right hon. Friend the Member for Wokingham used that language, so that I can make it clear for the purposes of Hansard that this is not about trying to differentiate or draw lines around our precious Union.
Several hon. Members rose—
Victoria Atkins
If I may, I will continue. In relation to the overwhelming majority of parcels, there will be no changes. The one instance in which there will be a requirement to go through green lane processes is where businesses are selling to business from Great Britain to Northern Ireland. I accept that this is—in the phrase used by my hon. Friend the Minister of State, Northern Ireland Office—a hard compromise. I accept that, and I say that with great respect, but we have to make the framework work because we have no alternative. I am not in the business—
Victoria Atkins
I will give way to the hon. Gentleman in a moment; I am still answering my right hon. Friend the Member for Wokingham. Had the Prime Minister not negotiated the new Windsor framework, we would still be bound by the Northern Ireland protocol, and we know the many problems that that posed for both private residents and businesses, so this framework is a real step forward. This SI—which is a very, very small SI in the context of the framework, dealing as it does only with parcel movements—is a step forwards in ensuring that we protect the Union. However, I very much acknowledge and appreciate, as my hon. Friend the Member for Wycombe has, that for people who are committed to the Union and to leaving the EU, it is a hard compromise, but I am afraid that it is one we must take.
Ian Paisley
The Minister has come to the nub of this matter, because this is about business-to-business trade. I want to know the statistics on which she has based the claim that the vast majority of parcels will be private trade; perhaps she could share those. Secondly, could she outline who will ultimately pay the additional cost that will be put on business to do these things and how long any support will be in place?
Thirdly, the Minister must accept that this measure has the potential to lead to a diversion of trade, forcing businesses in England that really cannot be bothered with the burden of filling in forms to send a very small amount of their overall trade parcel to Northern Ireland. That will force businesses in Northern Ireland to divert trade and do their business elsewhere. Does the Minister accept that that is the likely outcome of this two, three or four years down the line from now?
Fourthly, does the Minister accept that the green lane she has outlined is the safety valve for all of this, in terms of most businesses being able to operate in it? The fact of the matter is that most businesses cannot operate in the green lane—that the green lane is there for only a very few high-class businesses. The vast majority of businesses in Northern Ireland—about 20,000—will not be able to operate in the green lane structure.
Finally, can the Minister—
The Chair
Order. On that point, I have given latitude for four points of intervention rather than one. The hon. Gentleman will be called to speak if he rises from his chair later, and he will have another opportunity. I know that he is an experienced Member and will respect the view and ruling of the Chair.
Victoria Atkins
I will certainly answer the first of the points the hon. Gentleman made in his intervention—I was not able to catch them all, so I very much hope that he will be able to speak in due course. I will absolutely undertake to write to him if I am not able to deal with them in my speech.
I am told that about 5% of GB to NI parcel movements —please forgive the acronyms—are to Northern Ireland businesses. Within that 5%, the level of checks will be minimal, because we are applying this risk-based and intelligence-led approach to checks. We have not put a percentage on it, other than that it would be within that 5%, but we expect this to be minimal, because the very thing we want to encourage is trade between a thriving GB economy and a thriving Northern Irish economy.
In relation to the green lane and whether only a few businesses will be able to benefit, the answer is no. We expect the use of the green lane to be widespread. We are working to ensure that businesses in Northern Ireland and Great Britain know how to be eligible. Indeed, if there are any observations that the hon. Gentleman and others have as to the challenges that businesses face, or representations that they would like to make, will they please continue to work with us? We genuinely want to make this work for people and businesses—of course we do. As I said, I hope that the hon. Gentleman will be able to continue his speech in due course.
To return to my own speech, I was trying to set out the requirements on businesses and, importantly, the lack of requirements on individuals, families, friends and so on. Movements via the red lane, including those goods destined for the EU, will be subject to the customs processes required by the EU, as I hope colleagues will understand.The Prime Minister negotiated the Windsor framework to ensure that consumers and businesses in Northern Ireland—and, indeed, British businesses selling into Northern Ireland—could benefit by protecting internal trade within the UK.
Jonathan Gullis (Stoke-on-Trent North) (Con)
I have a concern when it comes to the integrity of our United Kingdom, because the final sentence of paragraph 7.6 on page 3 of the explanatory memorandum states:
“This means that prior to this instrument coming into force, postal packets moving within the UK cannot be searched, seized or intercepted by HMRC or Border Force.”
This instrument will therefore change the internal integrity of our United Kingdom and is a huge giveaway of our country’s sovereignty.
Victoria Atkins
I am really pleased that my hon. Friend has brought that up, because it touches on the timing point that colleagues have raised. Understandably, colleagues have asked, “Why is this happening now? Why can’t it wait until October next year?” Of course, the Windsor framework arrangements will come into force in October next year, but there is a limited range of prohibited or restricted goods that are supposed to comply with EU customs rules today—for example, hazardous chemicals and chemicals that can deplete the ozone, and blood diamonds have also been mentioned to me. We do not have those powers at the moment, so we need to fill the gap as quickly as we can, so that in respect of those goods—
Victoria Atkins
May I finish the point, please? We need to ensure that Northern Ireland is not being used as a back door into the EU. I am coming at this matter not necessarily from the perspective of being particularly mindful of what may or may not happen in the single market—I do not know whether I am allowed to say that, but there we go—but because I do not want communities in Northern Ireland to be facing these pressures. I look across the room to those who know far better than I, but I am very conscious and have some small understanding of just how those pressures have been withstood valiantly in the past by communities in Northern Ireland. We want to do everything we can to support them in that and to ensure that they can continue to thrive.
Sammy Wilson
I am bemused by the Minister’s explanation. If she is concerned about hazardous substances, invasive species and the other things that are mentioned in the explanatory memorandum being transferred by post from GB to Northern Ireland, is she not also concerned about them being transferred in parcels from London to Scotland and London to Wales? If the regulations are all about protecting markets, why are the Government singling out Northern Ireland?
Victoria Atkins
I remind the Committee that we are looking at parcels, not at freight—although of course there are extensions in that regard. Of course, if items are being imported into Great Britain via Dover, Harwich, Immingham or wherever, there are separate powers on those goods to protect communities in Great Britain and, I would argue, further afield. I acknowledge the difficulties, particularly for those representing Unionist interests in Northern Ireland, but we wish to move these issues forward, and the Windsor framework is a good deal for the United Kingdom as a whole.
We need powers now to stop non-Northern Irish recipients using Northern Ireland as a back door, which is why we are so keen to pass this provision quickly and to make progress. I imagine that businesses in Northern Ireland, and businesses in Great Britain that wish to conduct business with Northern Ireland, will want to ensure that we can do this as quickly as we can. This was a significant deal for the Government, and I absolutely understand and respect the wish to scrutinise it, but we have to move forwards with this.
Sir James Duddridge
The list of goods seems quite general, and I was wondering whether there were more specifics. It refers to
“restricted goods, for example invasive alien species or ozone depleting substances”.
In particular, I am mindful of a company in Shoeburyness that exports seeds. It has already stopped exporting to some EU countries because of problems as a result of Brexit, but I could see it giving up unless there is a definitive list. Is there a list, or will one come out through a further SI?
Victoria Atkins
I want to ensure that I can provide the list to my hon. Friend now. However, just on that wider subject, the situation that he has described is exactly what we want to try to avoid in the future. He will know that there was uncertainty about how the protocol would apply. I think it was the chairman of Marks & Spencer at the time who came on to the radio at some point and talked about the 50 or so checks that M&S had to go through to send products to its stores in Northern Ireland. We want to cut through all of that, and I hope the Windsor framework will help the businesses in my hon. Friend’s constituency. I also hope that he will know that we are putting a great deal of effort into the trader support service to help businesses to navigate these new customs duties. Of course, that is in the freight space as well. The Government want to grow the economy and our relationship with businesses. I am very helpfully reminded that there is published guidance on gov.uk already, but I am happy to provide it separately to my hon. Friend if he wishes to see the complete list. It is published on there already.
Stephen Farry (North Down) (Alliance)
I am grateful to the Minister for giving way, and I congratulate her on the clarity with which she is explaining the issue. I will stress that there are people in Northern Ireland who support the Windsor framework and appreciate that it is a good deal. Obviously, with Brexit, there are no perfect solutions to these situations.
Just building on the answer that the Minister has just given about the trader support service, does she recognise that there is a potential role for the Government beyond that to try to promote to GB-based businesses the requirements in terms of selling into Northern Ireland? I think that is an area where more work can be done without impinging directly upon the legal framework that has been agreed.
Victoria Atkins
I am very open to ideas and suggestions, particularly from those parliamentarians who represent Northern Ireland, as to how we can improve that understanding within the Northern Irish business community but also, importantly, here in Great Britain, because I want businesses to continue trading, and indeed to grow their trade, with Northern Ireland.
There are experts in this room who know just how ambitious and powerful the messages of support were from the international community when the Windsor framework was signed about the opportunities available for this corner of the United Kingdom, so I very much hope that this measure is seen as part of that drive and that ambition to help Northern Irish businesses to grow.
Ian Paisley
I would like to come back to the point where the Minister indicated, essentially, that there will be discrimination between businesses, business dealings and trade. The Minister claims that this issue has been addressed and that this measure is compliant with the European convention on human rights. How does it comply with article 14 of the ECHR, which prevents discrimination between businesses and individuals?
Victoria Atkins
Again, I just remind the Committee that we are dealing with parcel movements here; we are not litigating the entirety of the Windsor framework. As I say, we think it is a really positive step forward for the whole of the United Kingdom. Of course the hon. Gentleman is looking at it—quite rightly—very particularly through the lens of his constituents and Northern Ireland. However, in terms of the whole United Kingdom, and of all our businesses being able to have that certainty about how to deal with the EU, both in relation to Northern Ireland and in our wider relations with the EU, it is a good thing. After years of discussion, we now have an agreement that really gives us all, I hope, some clarity and certainty as to how we will conduct trade with the EU in the future.
As I say, I appreciate that hon. Members have rightly been scrutinising some parts of the agreement, but on the article 14 point, I am required as a Minister to satisfy myself as to the measures. I gently point to the fact that, in terms of individuals to individuals, nothing changes and, in relation to businesses—GB to NI only—nothing changes. It is simply where there may be onward traffic to the EU—as indeed, would be the case if there were onward traffic to the US—that that duty may be payable. I am veering into freight; I am conscious that, in relation to the small group of transactions we are talking about, there is a certain amount of overlap or mirroring, but we are, again, looking just at parcel movements for this SI.
Ian Paisley
The Minister talks about business to business, but who does business? It is people; people do business. Business to business is about people, and their rights—the company rights and the individual rights of the people doing business—are being trampled upon. Where businesses are doing that business on behalf of other people and consumers, those people are being discriminated against in terms of cost and the diversion of trade, and there will be general discrimination because we in Northern Ireland will be treated differently from the rest of the UK, or the rest of the UK will be treated differently from Northern Ireland—the point the Minister made to my right hon. Friend the Member for East Antrim.
Victoria Atkins
Again, I will try to answer the hon. Gentleman’s intervention as fully as I can. The Windsor framework does not introduce any discrimination against anyone. Businesses do not have human rights in the same way that individuals do. Articles 6, 2 and 8 do not apply to businesses. On his point about the business treatment, the Windsor framework is a positive step forward from what would have happened under the Northern Irish protocol. We have to operate under what would have been because I cannot pretend that the protocol did not exist or that those strictures would not come in in due course. As I say, that is not a commentary on what was negotiated at the time under those extremely difficult circumstances, but the United Kingdom and the EU have got around the table, acknowledged the significant difficulties that have been identified and come up with the Windsor framework, which answers all those concerns and does so, I would say, in a way that really moves our relationship with the EU forward.
Victoria Atkins
If I may, I will make a little progress, but I hope that colleagues feel that I have been generous with interventions.
The Government need to ensure that the powers of HMRC and Border Force are sufficient to allow them to monitor the rules for movements of parcels and that, where certain requirements are in place—the point my hon. Friend the Member for Rochford and Southend East made—for movements intended ultimately for the EU, they can be enforced. We need to be able to determine that parcels destined for the EU can be detected and to ensure that they follow the requirements of the red lane.
I know from conversations outside the Committee Room that some colleagues have read the Secondary Legislation Scrutiny Committee’s report into the rationale for bringing the instrument into force on 31 August. As I have said, some existing rules apply to prevent illicit movements of certain categories of goods, such as invasive species or ozone-depleting chemicals, which is why we are bringing these powers forward to HMRC and Border Force at this time, rather than waiting over a year.
The Committee’s report also noted the arguments submitted to it that the regulations would contravene the principle of unfettered access within the UK by introducing a customs border. Indeed, I have carefully noted the submission by the Democratic Unionist party about its concerns relating to the Good Friday agreement. We acknowledge, as I have said throughout, that there are a range of views on the Windsor framework itself, but these regulations are discrete and relate solely to the powers available to HMRC and Border Force. That said, I hope that I have been able to clarify for hon. Members and hon. Friends what the framework does and does not do, and therefore what the powers granted by the regulations will monitor and enforce.
Robin Millar (Aberconwy) (Con)
I thank you, Mr Pritchard, for bringing us to a meaningful debate on this matter. I also thank the Minister; she has been dealt a difficult hand here and she is handling it very well.
The Minister has referred several times to smallness and how this is about small packets, but these are actually big principles. I want to be reassured by what she is saying, but I have a question. It relates specifically to business and the package of information that was brought into the Committee room containing submissions, including the DUP’s submission. I will quote one submission from the Road Haulage Association, on page 15, by way of example. It gives several examples of where the regulations will be changed by this provision:
“after ‘foreign postal packets’ insert ‘and all GB-NI postal packets’”.
So the revised version will read
“foreign postal packets and all GB-NI postal packets”.
In other words,
“movements from GB to NI are no longer considered on the same domestic terms as movements between England, Wales and Scotland”.
Does the Minister understand why there is confusion about this? Does she understand how it causes me and others to have concerns about the introduction of a border within the United Kingdom? Perhaps she can explain why that treatment, in that way, does not constitute an internal border within the United Kingdom.
Victoria Atkins
I genuinely thank my hon. Friend and acknowledge the spirit in which he asked those questions.
Historically, the role of postal parcels has not necessarily been defined in freight. As I said before, with that precise wording we are trying to ensure mirroring for this small cohort—so not between individuals or between businesses to Northern Irish individuals; that does not change. However, we do want to ensure that the mirroring in relation to green lanes and red lanes of freight is clear when it comes to those parcels.
We have been dreaming up interesting examples today in preparation for this, but I have used the example of lace. A business in Great Britain may produce lace and send it to a business in Belfast that makes dresses. If that business sells the dresses within Northern Ireland or back to GB, it will not be affected; it will not see any changes. This kicks in only if some of the dresses are sold to Dublin or further afield. We have tried to ensure that the regulations mirror each other, whether one sends a parcel by post or in a great big container.
I reiterate that the vast majority of parcels will move without any additional requirements on parcel recipients in Northern Ireland. We have pushed genuinely very hard to ensure that the interests of Northern Irish consumers, and of GB businesses selling to Northern Ireland, are protected. There are huge improvements compared with the previous protocol, but we need to manage the risk in relation to movements across the Irish border in order to avoid EU tariffs and regulatory controls. We fully accept that this is a trade-off, but we have put protecting people and businesses in Northern Ireland at the very forefront of our efforts, to try to ensure that we get to a proportioned approach in this mechanism. I hope that answers my hon Friend’s question.
John Redwood
I thought that, in law, and certainly politically, the Good Friday agreement took precedence over other agreements, given its importance. How is this measure in any way compatible with the Good Friday agreement when it does not have the consent of the Unionist community—an important underlying principle of the whole agreement? I would also like to assure the Minister that I do not use the phrase “hard compromise”, and I have not been recommending these kinds of proposals.
Victoria Atkins
I am sorry; I did not catch my right hon. Friend’s last point. Would he repeat it?
John Redwood
I thought the Minister implied earlier that I thought that this was a hard compromise. I do not; I think it is bad policy.
Victoria Atkins
I think my right hon. Friend misheard me. I was referring to the Northern Ireland Minister, the hon. Member for Wycombe (Mr Baker). I would not dream of putting words in the mouth of my right hon. Friend the Member for Wokingham.
A point was made about the Road Haulage Association. The answer to that intervention is that the powers were available to Border Force in respect of international movements. We understand the sensitivities and the concerns raised about making powers available for GB to NI movements, but we would say that that is not the same as making these international movements.
My right hon. Friend the Member for Wokingham asked a very important question about the Good Friday agreement. We do not accept that this is contrary to the Good Friday agreement. These regulations are in fact an enabler to the agreement that we have negotiated. As I said, we have ensured that consumer interests in Northern Ireland and the interests of British businesses selling to Northern Ireland are protected, but that means that an incentive now exists to move goods into Northern Ireland and take them across the Irish border to avoid EU tariffs. If we are to manage that risk—[Interruption.]
The Chair
Order. So that we are absolutely clear, we will return here after 15 minutes if there is one Division. For subsequent Divisions, 10 minutes will be allowed. If the Minister and shadow Minister are present and we are quorate, the proceedings will resume.
Victoria Atkins
I am conscious of the interest in the room, so to give others a chance to speak I propose to sum up very quickly by simply saying that the parcels arrangements are a significant improvement for UK citizens compared with the requirements under the old Northern Ireland protocol. However, it is vital to understand how little will change compared to the status quo for the vast majority of Northern Irish parcel recipients and those in Great Britain sending goods to them. I commend the regulations to the Committee.
The Chair
The new time for the end of the proceedings will be 21 minutes past 9. I ask colleagues to rise if they wish to speak, in order to help the Clerks and the Chair. There is no time limit on speeches, but speakers may want to be mindful of allowing the shadow Minister and the Minister to respond to the debate.
Victoria Atkins
We acknowledge the range of views on the framework, but I emphasise that the SI is solely concerned with the powers available to HMRC and Border Force to ensure that the improvements in respect of policies that we have secured through the Windsor framework are implemented.
Victoria Atkins
I would like to answer the shadow Minister’s questions and then I will happily give way.
In terms of HMRC, we are fully confident that we have the staff and resources to meet the expectations of not just this element, but the whole Windsor framework.
Victoria Atkins
I give way to my hon. Friend the Member for Rochford and Southend East.
Sir James Duddridge
I was standing to be called in the debate to make my 18 points; I was not asking the Minister to give way—apologies.
Reforming Anti-Money laundering and Counter-terrorism Financing Supervision
Victoria Atkins Excerpts(10 months ago)
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The Financial Secretary to the Treasury (Victoria Atkins)
My noble friend the Treasury Lords Minister, Baroness Penn, made the following written statement on 30 June:
On 30 June 2023, HM Treasury published a consultation regarding the reform of the UK’s anti-money laundering and counter-terrorism financing (AML/CTF) supervisory regime.
Consulting on and implementing reform of the AML/CTF supervisory system is a key commitment in the Economic Crime Plan 2023 to 2026. It is expected to complement a number of other actions aimed at strengthening the UK’s anti-money laundering regime, and ensuring that businesses most vulnerable to abuse for money laundering or terrorism financing have robust and proportionate controls in place, and are subject to effective supervision.
The Treasury’s 2022 Review of the UK’s AML/CTF regulatory and supervisory regime concluded that, while further improvements should be made to the current regime, structural change may be needed to address certain weaknesses. This consultation outlines in more detail four potential models for the future of supervision and seeks to gather evidence on which will best deliver the reform objectives.
The first model, OPBAS+, would provide increased powers to the Office for Professional Body Anti-Money Laundering Supervision (OPBAS). OPBAS was established in 2017 and has made significant progress against its aim of ensuring high and consistent supervisory standards among the 22 professional body supervisors (PBSs) which supervise the legal and accountancy sectors.
The second model would consolidate PBSs so that between two and six PBSs would retain responsibility for AML/CTF supervision.
The third model would see the creation of new public body. This could take over the AML/CTF supervision of the supervisory populations of PBSs, and potentially some additional sectors currently supervised by HMRC. Alternatively, it could be given responsibility for the AML/CTF supervision of all populations currently supervised by a PBS or by HMRC. This would create a system whereby either three or four public bodies carry out all AML/CTF supervision.
Finally, the fourth model would place the AML/CTF supervision of all sectors regulated under the Money Laundering Regulations under the remit of a single public body.
These four models represent a commitment to strengthen the UK’s defences against economic crime, responding to calls to address weaknesses in the current system made by stakeholders such as the international AML/CTF standard-setter, the Financial Action Taskforce. The consultation also seeks views on whether there is a case to increase requirements on supervisors and their regulated populations to further support compliance with sanctions.
The consultation will be open for three months, closing on the 30 September 2023. After this, the Government will make a policy decision by the end of Q1 2024 on the model which best achieves the reform objectives. Strengthening the effectiveness of the UK’s AML/CTF regime will also support wider public and private sector priorities set out in the Economic Crime Plan 202 to 2026, such as the reforms of Companies House legislated for through the Economic Crime and Corporate Transparency Bill. Taken together, these reforms will help to cut crime, protect our national security, and support the UK’s legitimate economic growth and competitiveness.
The consultation is published on gov.uk: https://www.gov.uk/government/consultations/reforming-anti-money-laundering-and-counter-terrorism-financing-supervision
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Post Office Compensation Update
Victoria Atkins Excerpts(10 months ago)
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The Financial Secretary to the Treasury (Victoria Atkins)
This House is aware that the Post Office Horizon scandal has had a devastating impact on the lives of many postmasters since it began over 20 years ago. The Government are deeply concerned about ensuring the fair treatment of this group. The tax treatment of payments made under the Horizon shortfall scheme (HSS) and the group litigation order (GLO) scheme is of vital importance to ensure fair compensation, and a key part of this is the consistency of such treatment with other historic compensation schemes, and the principles behind such decisions.
The Government have already announced their decision that payments made under the GLO scheme and payments made to postmasters with overturned convictions will not be liable for income tax and that top-up payments will be made to ensure that the compensation of those on the HSS is not unduly reduced by tax.
Today, we go further to correct the historic injustices by announcing that the Government will not collect any inheritance tax (IHT) that may arise in relation to payments made under the HSS and the GLO scheme to victims of the Post Office Horizon scandal. This brings the IHT treatment of payments made to victims under the HSS and the GLO scheme in line with those made to postmasters with overturned convictions. This exemption recognises the unusual status of the HSS and the GLO scheme, and the egregious nature of the Post Office Horizon scandal.
The Government will legislate to exempt these payments from IHT in due course, but to ensure that recipients have certainty over their tax position prior to legislation being introduced, from today HM Revenue and Customs (HMRC) will not collect any IHT in relation to payments made up to the date the legislation comes into force. Any IHT paid by the personal representatives of estates who did not previously qualify for relief from IHT on HSS and GLO scheme payments will now be entitled to a refund from HMRC.
With the Government being the sole shareholder in the Post Office, we will continue to work across Government and with the Post Office to ensure the postmasters get the full compensation they deserve.
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