European Union (Withdrawal) Bill

Viscount Hailsham Excerpts

Committee: 6th sitting (Hansard): House of Lords
Monday 12th March 2018 Lords Chamber

[Viscount Hailsham (Con)]

Will the noble Lord help this Committee as to the distinction in law between a fee and a charge? At the moment, I am rather puzzled.

[Lord Turnbull]

I am about to get to that. There are other fees and charges which, as a matter of policy, raise more than enough to cover costs and these should be treated as taxes. I think that in the national accounts, even if the words “fee” or “charge” or “levy” are used, statisticians look at the facts of the case. If there is this surplus generated beyond the simple covering of costs, then it would be classified as a tax.

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[Viscount Hailsham]

What about fees and charges? Are they the same?

[Lord Turnbull]

If something generates a surplus, it is equivalent to a tax and should be covered by the same legislative understandings about taxes.

There is a third category, where a conscious policy relates the fee not according to how much it costs to administer that piece of service to a business or a household but to something like wealth or income. The most egregious example of this was the recently introduced change in the schedule of probate charges, where larger estates are being asked to pay not what it costs to administer the probate but according to the size of the estate, producing charges many times greater than the pure costs. We need to decide in this amendment whether all fees and charges should be treated as taxes—that would be the simplest thing—or whether it is possible to make a distinction between those fees which are purely covering costs and those which go beyond, either in the total or in their social distribution. I hope that the Minister will agree to come back to this House with amendments which make that distinction.

The issue will resurface when we get to Amendments 348 and 349, which deal with Schedule 4, where we have the possibility that secondary legislation could be used to introduce fees and charges by a body that was itself created by secondary legislation. I should say that that would put us not just in double jeopardy but jeopardy squared. We are going to have to deal with the problem of these two points in our work on the Bill.

[Baroness Kramer]

My Lords, I have put my name to Amendments 86 and 127. I will be very brief because the noble Lord, Lord Turnbull, has described the problem we have over fees, charges and legislation. I remember that, when I was on the board of Transport for London and we brought in the congestion charge, it was the alliterative nature of the word “charge” that led us to use it, rather than any legal definition. So my answer to the noble Viscount, Lord Hailsham, is that there may well be legal definitions but I think they are now observed in the breach on many an occasion.

[Viscount Hailsham]

The community charge was clearly a tax and not a fee.

[Baroness Kramer]

The noble Viscount gives a superb example. We can think of parking charges and a whole wide variety. That is why it is really important that there is clarity over when a statutory instrument is the appropriate mechanism and when, frankly, it is not. The Bill as it stands does not give that clarity.

I also put my name to these amendments for another reason. Most in this Committee will remember the time of the tax credit debacle, a major policy change that most of us regarded as a change that should have been introduced as part of a welfare Act. The Government sought to accomplish that through a statutory instrument attached to a Finance Bill. Because of the nature of charges and money-type instruments, it is very possible to use them to affect very broad policy issues and not just the narrow issue of revenue raising. That is why Amendment 127, for example, is an important amendment, as are others in this category. We are all concerned about the inappropriate use of Henry VIII powers, since this Government have actually tried to use these to achieve those much broader policy ends in the past. We have to be sure that we are not leaving a mechanism by which that could be repeated, because that really would be a coach and horses through many of the concerns and issues that have been raised.

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[Baroness Whitaker (Lab)]

With some timidity, may I offer a cruder and less specialised perspective, somewhat along the lines of the noble Lord, Lord Tyler? Taxation and mandatory fees and charges are surely, in principle, cardinal to the social contract and the liberty of the subject—that is, the subject cedes liberty as part of a democratic deal. In the past when monarchs have attempted to impose taxes, Parliament has continually rebelled. It is Parliament’s job to decide taxation, fees and charges, through primary legislation. I deeply support these amendments.

[Viscount Hailsham]

My Lords, I support the amendments in this group, most notably Amendment 86, the lead amendment. The first thing to perhaps acknowledge is how wide the power is in Clause 7. I acknowledge that the Minister will make this point. The power proposed under Amendment 86 would be governed by the overarching provisions of Clause 7, but it is also fair to point out that Clause 7 has a very wide scope. If one looks at Clause 7(3), one sees that the Minister has a power to enlarge the interpretation of the legislation in question.

The second point is that if one looks at paragraph 2 of Schedule 7, one finds that a fee—an important word in this context—imposed by a public authority can be created only by the affirmative procedure. What the Committee needs to address, however, is the distinction between a fee and a charge. The noble Lord, Lord Turnbull, suggested a difference, which I think was that a charge involves a surplus, so that perhaps it should be treated as taxation. But I am not sure that definition is recognised by law.

[Lord Turnbull]

I do not think I was making a distinction between fees and charges—they are just words. They broadly mean the same thing and both suffer from the same defect.

[Viscount Hailsham]

I am very grateful to the noble Lord and I am sorry if I misunderstood him, but I understood that he sought to suggest that a charge that creates a surplus in effect amounts to a tax. However, I am bound to say that if he is right and these things are essentially the same, that creates a very major problem. Paragraph 2 of Schedule 7 says that an instrument that allows the imposition of a fee by a public authority can be created only by affirmative resolution. But then, I ask rhetorically, what about a charge? If the fee is governed by the affirmative resolution procedure and a charge is not, we are in an extremely difficult situation. What is a charge? Incidentally, I am not sure this really helps the noble Lord, Lord Turnbull, but if one goes to paragraph 6 of Schedule 4, one finds the phrase “fees or other charges”, which rather suggests to me that there is a distinction between a fee and a charge.

I have a number of specific questions for my noble friend the Minister. First, what is the difference between a fee and a charge? Secondly, related to that, does the provision of paragraph 2 of Schedule 7, which insists that a fee can be imposed only after the creation of a power by an affirmative resolution, also apply to a charge? If it does not, we have a wonderful situation whereby the fee can be imposed only if the power is created by a statutory instrument of the affirmative kind but that is not true of the charge.

[Lord Carlile of Berriew]

May I throw another word into this taxation Scrabble? What about the word “contribution”? Most of us in this House have paid national insurance contributions for most of our lives. Is that a tax, a charge, a fee or a contribution?

[Viscount Hailsham]

The point is a very sound one, although of course most of us no longer pay national insurance contributions. There is of course another word that one could use, which is “imposition”, as in a financial imposition. The real truth is that we are entitled to a proper definition.

Having focused on some specific narrow points, I would just like to look at one or two general ones. The first is the point that I made on Wednesday, and I shall keep a firm grip on it: any power given to Ministers and officials will be abused. That is an absolute cardinal rule of politics. Secondly, the degree of ministerial and parliamentary control on any statutory instrument is minimal. I speak as one who has considerable authority for saying that: for 10 years I was a Minister and I do not know how many scores of statutory instruments I signed off, but it must have been a very large number.

[Lord Forsyth of Drumlean]

Too many.

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[Viscount Hailsham]

My noble friend Lord Forsyth was also guilty, I hasten to say; we were the same in that respect.

The third point is that statutory instruments are not amendable by either the negative or the affirmative procedure. Moreover, and this is the point that we dealt with on Wednesday, the regulation-making power is triggered if the Minister thinks it appropriate. I remember very clearly the way that my noble friend Lord Callanan dealt with the argument that we should delete “appropriate” and insert “necessary”. He did not like it, but he is left with this: if a Minister, by affirmative or negative resolution, thinks it appropriate to levy an imposition—a charge, a contribution, a fee—on a citizen, he can do that. I regard that as a very unhappy state of affairs and, should this come to Report, I will not be supporting it.

[Lord Deben (Con)]

My Lords, I was once estimably advised by the noble Lord, Lord Turnbull. I want to look at this amendment from the point of view not of the civil servant but of the Minister. I think your Lordships’ House has already understood how difficult it would be for a Minister to understand what he could or could not do under this part of the Bill. First of all, he would have to turn to the modern equivalent of the noble Lord, Lord Turnbull, to ask him what the distinction between a fee and a charge was, and I am not sure that the noble Lord’s equivalent could be entirely precise as to what that distinction was because it is almost impossible to tell.

The noble Lord sitting next to the noble Lord, Lord Turnbull, got up and pointed out the word “contribution”. Of course when talked of in terms of national insurance a contribution is manifestly a tax, but it does not cover the cost of the service to which it is actually appended. It must therefore be possible to have a fee that does not cover the cost but is in fact a tax. That suggests that this part of the Bill—I do not speak of any other part—has not been entirely well thought through.

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[The Minister of State, Department for Exiting the European Union (Lord Callanan) (Con)]

My Lords, Amendments 86, 126, 127 and 155—in the name of the noble Baronesses, Lady Hayter and Lady Kramer, and the noble Lords, Lord Turnbull, Lord Lisvane and Lord Higgins—concern Clauses 7, 8 and 9 and the ability to provide for taxation or fees and charges under those powers.

Let me start by saying that the Government are aware of the concerns of many noble Lords about the raising of fees under these powers. On Report, we will look closely at how we can resolve those concerns. Let me explain the various issues, beginning with Clauses 7 and 9. I am glad to be able to reassure noble Lords that the restrictions in Clause 7(7)(a) and Clause 9(3)(a) already prevent Ministers establishing charges of a type that would involve any element of taxation or tax-like provision under these powers. Beyond that specific issue, I want to set out the Government’s intentions with regard to those fees and charges.

[Viscount Hailsham]

Will my noble friend tell the Committee what, in his view, is the essential difference between a fee, a charge and a tax? The Committee must understand the expressly defined difference.

[Lord Callanan]

If my noble friend will stay with me, I will come on to that. Beyond that specific issue, I will set out the Government’s intention with regard to fees and charges. We have included the powers in Schedule 4 to provide for fees and charges in order to be clear and transparent. It is, however, necessary for the powers in Clauses 7 and 9 to interact with existing regimes to correct deficiencies within them, and to properly modify them to reflect the withdrawal agreement. Without prejudice to our negotiations, an example of such a correction might be modifying a fee in relation to the authorisation of a credit rating agency so that the fee becomes payable to the UK financial regulators rather than the European Securities and Markets Authority. That might be argued to amount to the imposition of a new fee.

The requirements to pay new fees and charges established under Schedule 4, and the ability to modify existing regimes, will depend on deficiencies being properly corrected and on functions being transferred. Clauses 7 and 9 are not primarily aimed at imposing fees, and they cannot impose other kinds of charges, but sometimes that will be part and parcel of the correction. In answer to the questions about fees and charges from the noble Viscount, Lord Hailsham, the noble Lord, Lord Deben, and the other poachers turned gamekeepers—if I may refer to them as that—on the Privy Council Bench, a fee is a payment only for a service received. By a charge, in paragraph 6(2) of Schedule 7, we mean anything which goes beyond cost recovery. Clause 7 cannot create a charge. In addition, creating either a fee or a charge is subject to the affirmative procedure.

The argument against a tax restriction—

[Lord Lisvane]

Before the Minister responds to that point, could he also answer my question? He has sought to make a distinction between a fee and a charge. Could he explain why, at page 761 of the latest edition of Erskine May, there is no distinction made between fees, charges, impositions, contributions or anything else of that sort? The test which is set out there, and is reflected in the current practice note from the Office of the Parliamentary Counsel—available on its website—is whether or not those payments are,

“akin to taxation in their effect and characteristics”.

I suggest that an additional test needs to be applied to the template which the Minister has offered.

[Viscount Hailsham]

I am sorry for my noble friend, but he did say that both the fees and the charges were subject to the affirmative procedure. I know that the fees are, but I am not sure where in the Bill I find the provision that charges are subject to the affirmative procedure. Will he tell the Committee?

[Lord Callanan]

I do not have the specific clause in front of me, but I am sure that is the case and I will write to the noble Viscount about it. I am not an expert on Erskine May and the precise legal definitions, but I will have a look at the matter towards which the noble Lord, Lord Lisvane, has pointed me.

The argument against a tax restriction on Clause 8, made by the noble Lord, Lord Lisvane, is altogether different. The Clause 8 power is predicated on the fact that when we leave the EU, without further action we may inadvertently end up in breach of certain international obligations which have been affected by our EU membership, as a number of noble Lords have pointed out was said in the other place by my honourable friend Robin Walker. It is possible that some of these obligations may be in the field of tariffs, although it is, of course, impossible to know the full picture until our future relationship with the EU has been negotiated. If Clause 8 had a tax restriction as the other main powers do, we may not have the capability to remedy these breaches in all circumstances. As I hope noble Lords will appreciate, we are committed to international relationships and a key part of that is ensuring that we are fully compliant with our international obligations.

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[Viscount Hailsham]

What about “appropriate”?

[Lord Callanan]

It would be totally appropriate and, indeed, necessary to do so in the circumstances. We are in a difficult position in that we are trying to plan for all eventualities. It is one of those powers that we hope we will never use because, of course, we want, and seek, a good agreement with the EU.

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[Lord Callanan]

My Lords, I had intended to stand up before the noble and learned Lord sat down to respond to his kind invitation. Perhaps it would be to the benefit of the House if I note that, as the noble and learned Lord has pointed out, this issue has been debated previously in the debate on the sanctions Bill. As with the issue we debated last Wednesday—the appropriate test for the use of delegated powers—the solutions found in the sanctions Bill are at the forefront of our minds in this regard and we intend to meet noble Lords to discuss the issue over the coming weeks. I will set out the Government’s views at the conclusion of the debate on this group of amendments. I very much look forward to hearing what noble Lords have to say but I thought it would be helpful to say this at the start.

[Viscount Hailsham]

My Lords, in view of what my noble friend has said, I can be very brief. I support the first four amendments in this group, to which I have set my name, and have ventured to put forward a sort of default position in my Amendment 340. As the Committee will appreciate, the purpose of the first four amendments is to ensure that the regulatory power now under discussion cannot be used to create a criminal offence, and the noble and learned Lord, Lord Judge, has set out very clearly the reasons for this. Amendment 340, which stands in my name, is the default position, so that if by any evil chance this Committee or your Lordships’ House decided that it was right to create a criminal offence, it should be one that does not attract a custodial sentence.

We need to be quite plain about what we are talking about. The Bill as presently drafted enables the Minister, if he deems it appropriate and subject to the affirmative resolution, to create a criminal offence that attracts a custodial sentence of up to two years. Two years is not an insignificant period, and it is very important that one reminds oneself that the test is whether the Minister thinks it is appropriate. Furthermore, we must go on reminding ourselves that the procedure—that is the affirmative resolution procedure—is simply not subject to amendment. So this is, in effect, the power to introduce a criminal offence which attracts a custodial sentence by fiat or declaration. I find that profoundly unattractive.

As a former Minister who signed an awful lot of statutory instruments, I know that the degree of ministerial oversight is extremely limited. As I said, if this Committee decides that a criminal offence should be creatable in this way, then surely it should not attract a custodial sentence of any kind.

[Lord McNally (LD)]

My Lords, my name has been added to a number of the amendments in this group and I appreciate the Minister’s intervention, which should make this debate fairly short. I want to take up an earlier point made by the noble Viscount, Lord Ridley: he said that he thought some of the speeches were too long and bordering on filibustering. That set a little alarm bell ringing in my mind. I have sat in on some of the debates and I have read others, and I think that this Bill is being handled by this House in the appropriate way that it deserves. Some of the speeches, from all the Benches, have been among the best I have heard in parliamentary debate.

The Minister, in referring to his Privy Council Bench, said that they were poachers turned gamekeepers. I say, en passant, that I look on them as sinners turned penitents, but that is a matter of taste really.

As I say, there have been some magnificent debates, but I worry where we are going on this. Sometimes I wonder whether the Ministers are adopting the tactics of the great boxing champion Muhammad Ali. His “rope a dope” strategy was to take all the punishment in the early stages and then have his own way in the later stages of the fight.

I hear what many noble Lords have said—the noble Lord, Lord Cormack, among them—that of course the House of Lords can go only so far with its opposition in the face of the Commons. The contribution from the father of the noble Viscount, Lord Hailsham, who warned of an elected dictatorship, comes into play here. So too does something I have mentioned on a number of occasions over the past 20 years that I have sat in this House: this House has the right to say no. We must ask ourselves why successive Governments, some with very large majorities in the House of Commons and some who have reformed this House from time to time, have left it with the right to say no. The reason is that unless we retain the right to say no, we would become a debating Chamber and the Government could simply use their Commons majority to force things through willy-nilly, regardless of whether or not we oppose them. I realise that, in some areas, we bow to the wishes of the elected House, even when we do not want certain things to go through.

As happened in the past two sittings of this Committee, we have discussed in great detail two very important constitutional issues: the right to impose taxation and, now, with this group of amendments, the right to create criminal offences. The proposals go to the very heart of our constitutional settlement and, in my opinion, to the very heart of the responsibilities of this House. Therefore, although I appreciate that a considerable promise was made at the opening of this debate, I say this to Ministers and to colleagues who have made outstanding speeches: regarding our red lines about the right to impose taxation and to create criminal offences, somewhere down the line, if what the Government come up with is not satisfactory, in our responsibility to defend the constitution this House must reserve the right to say no.