Considered in Committee (Order, 24 April)
[Mr Lindsay Hoyle in the Chair]
Income tax charge for tax year 2017-18
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Clauses 2 to 6, 16 to 47, and 52 to 56 stand part.
Government amendments 13 to 29.
That schedule 3 be the Third schedule to the Bill.
Government amendments 30 to 56.
That schedules 4 to 15 be schedules to the Bill.
I will speak briefly, as we have a fair amount to get through this afternoon. Obviously, I shall attempt to address any points that are made during the debate.
The Bill is progressing on the basis of consensus and therefore, at the request of the Opposition, we are not proceeding with a number of clauses. However, there has been no policy change. These provisions will make a significant contribution to the public finances, and the Government will legislate for the remaining provisions at the earliest opportunity, at the start of the new Parliament. The Government remain committed to the digital future of the tax system, a principle widely accepted on both sides of the House. We recognise the need for the House to consider such measures properly, as called for by my right hon. Friend the Member for Chichester (Mr Tyrie) and his Treasury Committee. That is why we have decided to pursue those measures in a Finance Bill in the next Parliament, in the light of the pressures on time that currently apply.
Clauses 1 and 3 provide for the annual charging of income tax in the current financial year and maintain the basic, higher and additional rates at the current level. The annual charge legislated for in the Finance Bill is essential for its continued collection, and it will enable the funding of vital public services during the coming year. Maintaining these rates, while increasing the tax-free personal allowance and the point at which people pay the higher rate of tax, means that we are delivering on important manifesto commitments. On top of that, as of April this year, increases in the personal allowance since 2010 will have cut a typical basic-rate taxpayer’s income tax bill by more than £1,000, taking 1.3 million people out of income tax in this Parliament alone.
Clause 4 will maintain the starting-rate limit for savings income—applied to the savings of those with low earnings—at its current level of £5,000 for the 2017-18 tax year; clause 6 will charge corporation tax for the forthcoming financial year; and clauses 17 and 18 will make changes in the taxation of pensions. Clause 18 legislates for a significant anti-avoidance measure announced at the spring Budget. It will make changes to ensure that pension transfers to qualifying recognised overseas pension schemes requested on or after 9 March 2017 will be taxable. The charge will not apply if the individual and the pension savings are in the same country, if both are within the European economic area or if the pension scheme is provided by the individual’s employer.
Before the changes were announced in the spring Budget, an individual retiring abroad could transfer up to £1 million in pension savings, without facing a charge, to a pension scheme anywhere in the world provided that it met certain requirements. Overseas pension transfers had become increasingly marketed and used as a way to gain an unfair tax advantage on pension savings that had had UK tax relief. That was obviously contrary to the policy rationale for allowing transfers of UK tax-relieved pension savings to be made free of UK tax for overseas schemes. This charge will deter those who seek to gain an unfair tax advantage by transferring their pensions abroad. Exemptions allow those with a genuine need to transfer their pensions abroad to do so tax-free.
Clause 17 will make various changes in the tax treatment of specialist foreign pension schemes to make it more consistent with the taxation of domestic pensions.
Clause 21 will simplify the payment of distributions by some types of investment fund. Following the Government’s introduction of the personal savings allowance, 98% of adults have no tax to pay on savings income. In line with that, the clause will remove the requirement to deduct at source tax that must subsequently be reclaimed by the saver.
Clauses 45 to 47 provide for the removal of the tax advantages of employee shareholder status for arrangements entered into on or after 1 December 2016, in response to evidence suggesting that companies were not using the status for its intended purpose and that it therefore was not delivering value for money. The status was introduced to increase workforce flexibility by creating a new class of employee, but it became apparent that it was being widely used as a tax planning device, rather than for its intended purpose of helping businesses to recruit.
Evidence suggests that companies, particularly those owned by private equity funds, were using employee shareholder status as a tax-efficient way to reward senior staff. In many cases, contract provisions were used to replace the statutory rights that had been given up, which was undermining the purpose of the status. That continued to be the case despite the introduction of the £100,000 lifetime limit on capital gains tax-exempt gains in the 2016 Budget. The Government therefore announced in the 2016 autumn statement that they would remove the tax reliefs associated with the status and close the status itself to new arrangements at the next legislative opportunity. The action that we are taking tackles abuse and increases the fairness of the tax system.
I thank the Minister for her opening remarks about consensus, with which I fully concur. We are here today to debate what is effectively a condensed version of the Bill for which my colleagues and, indeed, everyone else had been preparing, with a view to taking part in a number of Public Bill Committee sittings over a number of weeks to scrutinise properly the longest Finance Bill that has ever been produced. That is the context in which I shall make my comments.
The Prime Minister’s announcement outside No. 10 and the subsequent vote mean we do not have sufficient time in this Parliament to give the full Bill the proper parliamentary oversight it requires and deserves, as I am sure Members will understand. It is clear that the Treasury was unaware of the Prime Minister’s plans for a snap election—otherwise, it would not have introduced the longest ever Finance Bill—but the Opposition recognise the unique scenario we are in and the Government’s responsibility to levy taxes, and I am sure the Minister recognises our responsibility to scrutinise the Bill in as open and transparent a manner as we possibly can. That is why we have acted in good faith to ensure that a version of the Bill can pass before Parliament is dissolved.
Our approach to the pre-election process and the presentation of the condensed version of the Bill has been underlined by two concerns: fiscal responsibility balanced against parliamentary scrutiny. The Opposition have a responsibility to taxpayers to ensure as little economic disruption as possible; we will therefore not attempt to block any measure in the Bill that has to be passed to ensure business as usual for our public services, such as on income tax, and nor will we obstruct tax that is already in the process of collection. But of course we cannot give the Government carte blanche, as we have made clear.
There are many clauses in the Bill that we can and should wait to deal with until after the general election, as that would provide the opportunity for them to be properly scrutinised. The one exception is the soft drinks levy, which I will speak about later.
In relation to alcohol duty, the Bill includes measures that have already been implemented but that we opposed in the Budget resolutions. They include the Government’s decision to raise alcohol duty in line with inflation, raising the price of a pint of beer by 2p, a pint of cider by 1p and a bottle of Scotch whisky by 36p. As I said on Second Reading, rising business rates and rising inflation are creating a perfect storm for many small businesses. Therefore, the decision to raise this duty is a risk.
Another measure that we would have liked to avoid but that is included as a result of the necessity of the compressed process that this Bill is going through is the rise in insurance premium tax. It has already been doubled and this raises it further. Had there been a longer process, we would have sought to challenge that, as we did at the Budget resolution stage, so there is no surprise in this, but the reality is that the measure is already in effect due to the resolutions.
On tax avoidance, it is time for a wholesale shift in how we approach taxation and the treatment of self-employment given the rise of the gig economy in recent years. The Bill originally contained a number of initiatives, and no doubt we will come back to them in due course.
I welcome the Minister’s statement on the digitalisation of tax. It will be a great relief to many small businesses given the onerous requirements for quarterly reporting. No one is against a move to a digital tax system, but we do not agree with the rush to implement it.
A large portion of the Bill relates to the introduction of the soft drinks industry levy, which the Government have consulted on heavily and on which they have cross-party support in this House. The levy has popular public support, too, as a poll has indicated. I want to take this opportunity to pay particular tribute to Jamie Oliver and the Obesity Health Alliance, who have campaigned tirelessly on this issue and on the need for a joined-up Government obesity strategy, and I must compliment the Minister, who in her current and previous roles has been a strong advocate for the levy. We would like to see a review of the sugar tax levy in due course, if possible. The Minister might well wish to comment on that. I am sure that a range of issues, such as in relation to multi-buy discounts, could form part of this.
In conclusion, as a responsible Opposition, we will not stand in the way of passing a Finance Bill before the election, as that is a necessity. There are some measures that a Labour Government would bring back, and we will have an opportunity to scrutinise them in due course, but we need to get this through and we need to be responsible, and we will support the Government where required.
Order. I am about to call the hon. Member for Copeland (Trudy Harrison), but first I remind the House of the courtesy that we do not intervene on a maiden speech.
I am grateful for this opportunity to deliver my maiden speech as the newly elected Member of Parliament for Copeland, in what is one of the last debates of this Parliament.
First, I would like to pay tribute to my predecessor, Jamie Reed, who was the Member for Copeland from 2005 until he stood down in January this year. It is, in fact, Jamie whom I have to thank for inspiring my introduction to politics. The very first parliamentary debate I ever watched was a Westminster Hall debate called by Jamie and also attended by other Cumbrian Members—my hon. Friend the Member for Penrith and The Border (Rory Stewart) and the hon. Member for Westmorland and Lonsdale (Tim Farron)—to discuss the future of my children’s school, Captain Shaw’s in Bootle. I saw the positive impact that MPs in Westminster could have on their local communities and the powerful influence of their support, even in remote areas, which I had previously felt would never be anyone’s political priority.
Like me, Jamie was born, raised and educated in Copeland, in the fine Georgian harbour town of Whitehaven. He has served the people of Copeland with great talent and dedication. As the elected Member, he worked hard for the rural communities he represented and placed a strong emphasis on improving health and education. In announcing his decision to stand down last December, he said he could achieve more for our community by returning to work in the nuclear industry at Sellafield than by remaining a Labour Member of Parliament.
Jamie was a relentless, proud supporter of our local industry; he championed the world-class specialist skills that make up our towns and villages. He worked hard to make the case for Copeland to host the new nuclear power station, Moorside, adjacent to Sellafield, based on the strong belief that our workforce are best placed to power the northern powerhouse; after all, Copeland welcomed the world’s first nuclear reactor at Sellafield back in 1950. Our local knowledge, experience and skills in the nuclear and other highly regulated industries are internationally recognised and respected.
Sellafield’s safety record is exceptional, and it is seen as an example of outstanding performance across the globe. Jamie said that Copeland’s “best days are ahead”, a statement I agree with and will quote many times. I would like to take this opportunity to thank Jamie for his commitment to Copeland and wish him all the very best in his new role in community development at Sellafield.
Copeland has for centuries pioneered a modern industrial strategy. Our largest town, Whitehaven, was once Britain’s third largest trading port, with an extraordinary shipbuilding reputation thanks to the locally grown, hard-as-nails oak trees used to build the boats. Our ancestors sailed the world, securing deals, and returning with goods which created a crucial global trading centre. Perhaps that is why the Copeland constituency voted to leave the EU with such a high majority: because history provides confidence in our ability to export our knowledge and products across the globe.
Like true pioneers we do not stand still; innovation is in our veins. As shipbuilding and rum sales declined, we dug deep for prosperity. Mining transformed the towns of Egremont, Cleator Moor and Millom; indeed, Millom was widely regarded as an exporter of the world’s highest quality iron ore.
But we are perhaps best known in Cumbria for a delightful little rabbit, Peter Rabbit, and his friends Mrs Tiggywinkle and Squirrel Nutkin, to name just three of Beatrix Potter’s adorable characters. Writers, artists and poets have found inspiration in the beautiful Cumbrian countryside. Wordsworth was sent, under doctors’ orders, to my home village of Bootle, to aid his recovery from a chest infection. With 32 miles of coastline in the Copeland constituency, our air and our landscape are good for the soul.
Three quarters of the Copeland constituency is situated within the Lake District national park boundary, which I hope will become the second world heritage site for the Copeland constituency, complementing that of Hadrian’s Wall in Ravenglass. We eagerly await a decision in July to confirm another world first—the first UNESCO world heritage site to include an entire national park—thanks to a 20-year project by the Lake District National Park Authority and local communities to put Cumbria on the same international must-visit platform as the Taj Mahal and the great barrier reef.
I was brought up in Seascale, and then I moved to Wasdale, where I would open my curtains every morning to reveal Britain’s best view: England’s highest mountain, Scafell. Well before wild swimming was trendy, my childhood weekends would be spent paddling in Wastwater, England’s deepest lake. It is easy to see why Wasdale was the birthplace of mountaineering, and why the beautiful market town of Keswick enjoys such popularity with its annual mountain festival. That is one of the many festivals enjoyed in the Keswick community calendar.
Although the Lakeland topography is the result of glacial formations, our landscape and cultural heritage, for which we are internationally celebrated, are of course man-made. It is vital to support and protect our farming industry, both upland and lowland, to ensure that we can all benefit from quality food production, the highest standards of animal welfare, conservation and our enormously successful tourism industry, on which Copeland is so dependent.
I could not give my maiden speech without acknowledging that I would not be standing in this House today if it were not for the fantastic and unwavering support of my family, friends, community and local association. My husband Keith, my parents, my brother and my daughters—Gabrielle, Savannah, Francesca and Rosemary—have been incredible towers of strength. From the moment I decided to stand, they were there with me, campaigning, delivering leaflets and knocking on doors. My girls have become quite the persuasive activists, and it has been wonderful to see their interest in politics grow.
Having four teenage daughters aged 14, 15, 17 and 18, I was delighted to tip the balance between all history’s women Members and the current number of male Members, equalling it at 456. There was a change of reference in my Mother’s day cards this year, however. Gone were the thanks for the practical tasks of washing, cooking, cleaning and generally being there. Instead, each one referred to a theoretical role, referencing inspiration and pride. That is what a by-election does to family life, and you can only imagine their comments about another round of doorstep challenges! It is, after all, our children and young people who motivate us to secure a bright future for Britain and inspire the next generation of leaders.
I watched my right hon. Friend the Prime Minister’s speech at the Conservative party conference last year and I was so impressed by her strength and commitment to deliver for Great Britain. Her ambitions for our country resonated with my own. As she spoke, I said to myself, “That’s me, that’s who I am, that’s what I want for my community and for my country.” I stood for Parliament because I want to get on and make things happen. I want to be part of a proactive, positive team that makes a tremendous difference to my community: the land of Copeland glory.
My husband and I moved from Whitehaven in the north of the constituency to Bootle, a small village in the south of Copeland, to raise our young family. Our move was motivated by a desire for our girls to attend a village primary school, and in Captain Shaw’s we found our perfect, quintessential Lakeland school. In 2006, I discovered that the school was really struggling to make ends meet. It desperately needed extra funding so I joined the parent teacher association. I soon realised that the problem was a decline in pupil numbers, so I joined the governors. Then I learned that the whole village was declining: we had lost 20 businesses in 20 years. I then applied for the position of regeneration officer at my local borough council, where I realised that the challenge was far more extensive.
Copeland desperately requires investment in infrastructure to be able to thrive. Both professionally, working for the council, and personally, working with the can-do people in my community, I worked to shape policy, giving our planning authority the option to be either the nail in our coffin or the key to our future. We trailed the streets and lanes, collecting and providing the necessary evidence to shape the strategic vision for Bootle, which would become a beacon of hope to other rural communities. We worked hard to secure the Lake District national park’s biggest ever mixed-use planning application for Wellbank, a former 12.5 acre Ministry of Defence base. Wellbank will bring 50 homes, a hotel and enterprise areas, and it will attract public and private investment. For Bootle, that will mean an extra 64 homes, new businesses and, when complete, £20 million of inward investment.
I stood in the Copeland by-election to really make a success of the modern industrial strategy, to be an asset to the northern powerhouse and to realise our full potential as a centre of nuclear excellence and global exporter of knowledge and products. Copeland needs investment. I know that as a pioneering, hard-working and innovative community, we can succeed with the Government’s support. We have people with the skills, the potential, the essential natural resources and a landscape where people love to live, work, learn and invest. We have every reason to be optimistic and to become an asset to the country’s economic performance and world-leading reputation. Copeland is on the brink of the most exciting, game-changing transition, but we need investment to kick-start that transition.
Throughout the election, I campaigned on six vital points. First, I campaigned to make a success of Brexit, as 62% of my constituents voted to leave. Secondly, I campaigned to secure nuclear new build at Moorside benefiting both Copeland and the country. Our Government must commit seriously to new nuclear, now more than ever, if we are to attract international investment. Thirdly, I campaigned to bring our road and rail networks up to modern standards, as they are simply not fit for the modern industrial strategy. Our infrastructure is holding back our ability to diversify and thrive. Fourthly, building resilience against flooding, which wrecks lives and livelihoods, is also essential.
Fifthly, access and connectivity will be key enablers, particularly in our rural area, if we are really going to trade and compete in a global marketplace. Improving mobile and internet connectivity will make a huge difference to our quality of life and our ability to do business in a global market. It will ensure a bright future for our children and young people, and the announcement in the spring Budget supporting an enormous increase in technical apprenticeships is wonderful news for a practical, skilled community such as mine.
Sixthly, I campaigned to secure services. Ensuring that we keep our 24-hour, seven-day-a-week, consultant-led maternity department at West Cumberland hospital in Whitehaven has been one of my key aims throughout my election campaign and as a Member of Parliament. I was born at that hospital and all four of my daughters were born there too. My community has clearly demonstrated the importance of retaining such an essential service. In my first weeks as an MP, I have been able to meet my right hon. Friend the Secretary of State for Health and I have visited the hospital to see the new wards for myself and to meet the staff. I have talked to clinicians and management in order to understand the barriers to having fully operational departments in the future. We now have a fully staffed maternity department, the trust has been removed from special measures and, in addition to the £90 million already invested by this Government, we have secured the funding for the final phase of the hospital’s construction.
Supporting a further recruitment drive with Choose Cumbria is also my priority. Positive action, listening to concerns, tackling problems head on and working with the can-do people in our community who really care—all these have been my mantra for many years. I will continue to strive enthusiastically, because I believe passionately in Copeland, its people and its potential.
Turning to today’s debate on the Finance Bill, I have seen that this Government are the only Government who can deliver a stronger, more secure economy. The economy is getting stronger and growing, the employment rate is at a record high and the deficit has been reduced enormously since its pre-financial crisis peak. We are in a much stronger position than in 2010, but I recognise that we must not be complacent. We must continue to reduce the country’s debt and the deficit even further. We cannot, as previous Labour Governments did, borrow endlessly to plug holes. We need to get the public finances in good order to safeguard the future— the future I want for my daughters and their generation.
Finally, Copeland has been my home since I was born. It is an area I know and love. The opportunity to represent the communities I grew up in as their Member of Parliament is truly a great honour, and I will ensure that the voice of our towns and rural communities is heard loud and clear. I am utterly committed to Copeland, and I will fight hard to deliver on promises made to my constituents during the election.
I am extremely grateful for the time I have been allowed and for the opportunity to deliver my maiden speech in this debate.
I invite the hon. Lady to join the all-party group on rugby league, as Whitehaven have a great reputation.
I warmly welcome the new hon. Member for Copeland (Trudy Harrison) to what is left of this short Parliament. I am particularly pleased that we have finally broken the barrier of the number of women who have been elected— I am really delighted that that has happened. As a child I holidayed in her constituency, and I fondly remember visiting where Beatrix Potter created her animals and the Beatrix Potter museum. I can see the passion with which the hon. Lady speaks about her constituency and the amount she obviously cares about the area in which she was born and bred. She is a truly local MP, so I offer her a huge welcome to the House. Who knows whether she, or any of us, will be coming back in June? But welcome, anyway.
This first group of measures addresses income tax, but I will also comment on the way that the Bill is progressing through Parliament. With the surprise announcement of a general election, the Bill looks rather different from when it was first introduced. I am sure the Minister is in a similar position, but we received provisional notification of the amount of withdrawals and changes only last night, so there will not be the normal level of scrutiny of some things in the Bill. There will possibly also be slight confusion in today’s proceedings, given that so many things are being withdrawn.
I welcome the Government’s withdrawal of the dividend tax threshold changes, which we argued against on Second Reading. I am pleased that they have chosen to do that because it was a particularly contentious part of the Bill. More generally on the income tax changes, I have said previously and am happy to state again that I appreciate the Government’s increases to the personal allowance and the minimum wage. But I have said previously and say again that the Government have not gone far enough. We have a national living wage, but there has been no calculation of whether people can live on it.
Does my hon. Friend agree that the national living wage is not actually a real living wage but a pretend living wage and that it does not go far enough in that it is available only to people over the age of 25?
I agree that it is a real problem that this increased minimum wage does not apply to people under 25. Just because a person is under 25 does not mean they are doing any less of a job than a person over 25, and the minimum wage should apply to them just as much as to those who are older.
The other issue is that the tax credit changes more than balance out the extra money people are getting from the increased minimum wage and personal allowance. People at the bottom of the pile are worse off as a result of the Government’s decisions. Despite the Government’s talk about how great the new personal allowance and the new minimum wage are, they have to be considered in context. People who work are worse off as a result of the tax credit changes.
More generally, the Government have made a few suggestions on the taxation of self-employment, some of which have been withdrawn and some of which have not. They intend to try to equalise the taxation of employment and self-employment. However, what is missing is that people in self-employment do not receive the same benefits as people in employment, such as maternity leave and holiday entitlement. I have argued before and will argue again that if the Government are making changes to self-employment, they need to do so in the round. The need to stop this piecemeal tinkering and consider the whole situation. They need to do a proper review and come back with the results, and then consult on any changes. Rather than pulling rabbits out of hats—changing national insurance contributions with very little consultation, for example—they need to consult properly on how taxation should look for individuals, whether they are employed or self-employed.
I appreciate that the Government are undertaking the Taylor review, but I am not sure it goes far enough. I would like to see the Taylor review, or a future Government review, take self-employment into account in the round by considering all the factors that face the self-employed. We need to remember the changes in the self-employment landscape in recent years. We have seen a massive increase in the number of women and older people in self-employment, and the Government’s changes do not take into account the changes in that landscape. I would like to see a holistic approach, rather than a tinkering approach.
That is all I have to say on this group but, again, I welcome the Government’s withdrawal of the dividend tax threshold changes.
I also congratulate the hon. Member for Copeland (Trudy Harrison) on a fine maiden speech and thank her for her well-deserved compliment to her predecessor on his service. She spoke with passion, wit and understanding of her beautiful constituency, as well as of Peter Rabbit. None of us envies her speedy transition from by-election to general election, but I do congratulate her.
I made my maiden speech to this House on the remaining stages of the 1987 Finance Bill, so there is a certain symmetry in my making my last remarks on this one. On the substance of the Bill, it is too often overlooked—the hon. Lady talked about balancing public spending—that, although the Conservative party often talks about balancing the budget, the last Government to do so were Labour in 2001-02. Right now, it makes sense to invest more in productive infrastructure, training and public services, with action to combat poverty and to secure Brexit terms that enable our country to grow and flourish. I wish we had a Finance Bill for social justice that stands up for the many, not the few. That is what we need a Labour Government for.
It has been a privilege to be an MP, in and out of government, and I thank the staff of the House, the Library, those who keep us safe and you, Mr Hoyle, and your colleagues. I am grateful to all colleagues and wish them well for the future.
I would like to say a huge thank you to all those who have helped me serve the wonderful constituency of Oxford East for 30 years; my family and friends; my neighbours in Blackbird Leys; our party members and supporters; my trade union, the Union of Shop, Distributive and Allied Workers; my office staff and party organisers across the years; and, most of all, my constituents. Thank you.
I wish you well in your retirement.
May I, too, thank the new hon. Member for Copeland (Trudy Harrison) for such a passionate and entertaining speech? It is good to have a representative of the land of Beatrix Potter here in this Chamber. I listened to her last points about the deficit and her encomium that this Government are bringing it down. I will be slightly wicked in saying that I am sure she knows that the Office for Budget Responsibility is forecasting a rise in Government borrowing this financial year, and she might care to ask why that is the case.
I have one specific question for the Minister on this group, as her introduction notably failed to explain why clause 5 has been withdrawn. That clause deals with the proposed reduction in the dividend income that investors in small companies can take. Are the Government embarrassed by the clause and is that why it is being withdrawn?
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clauses 2 to 4 ordered to stand part of the Bill.
Clause 5 disagreed to.
Clause 6 ordered to stand part of the Bill.
Workers’ services provided to public sector through intermediaries
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Clauses 8 to 15 stand part.
Government amendment 4.
Clauses 48 to 51 and 124 to 127 stand part.
Government motion to transfer clause 127.
Clauses 128 and 129 stand part.
Government amendment 10.
That schedule 1 be the First schedule to the Bill.
Government amendments 11 and 12.
That schedule 2 be the Second schedule to the Bill.
Government amendment 57.
That schedules 16 to 18 and 27 to 29 be schedules to the Bill.
New clause 1—Review of international best practice in relation to tax avoidance and tax evasion—
‘(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of international best practice by Governments and tax collection authorities in relation to—
(a) the prevention and reduction of tax avoidance arrangements, and
(b) combatting tax evasion.
(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.
(3) In this section, “tax avoidance arrangements” mean arrangements broadly comparable in their effect to arrangements in the United Kingdom which have the obtaining of a tax advantage as the main purpose, or one of the main purposes, of the arrangements.”
Before I say something about this group, I wish to comment on the maiden speech and on the retirement speech that we just heard. It was a real honour to be here in the Chamber for the maiden speech by my hon. Friend the Member for Copeland (Trudy Harrison). She told us what inspired her, but she also reminded many Conservative Members of how she inspired us to make the journey up to her beautiful constituency in the knowledge that we were supporting an outstanding woman who is rooted in and passionate about her community. She was generous about her predecessor, which was nice to hear. I had many friendly dealings with Jamie Reed when he was a Labour shadow Health Minister and I was in the Department of Health, so I welcome her comments. It was a wonderful maiden speech and I look forward to many more speeches from her in the future, and I wish her and her long-suffering family well for the weeks ahead. She spoke with conviction about the contribution of nuclear power, but I think that in the forthcoming campaign it will be girl power to the fore.
It is always nice to hear Members reflect on their time in this House and the way they have served. As the right hon. Member for Oxford East (Mr Smith) noted, he has had a nice bookending, with a Finance Bill debate at the start and a final contribution on Treasury matters. Of course, he also paid tribute to his constituents. I am sure that in these circumstances one has a bit less time than one thought to do a round of goodbyes, but I am sure he will continue to be active in his community. I congratulate him on his speech and thank him, on behalf of all hon. Members, for his service to the House.
This group deals with the taxation of employment income, and contains some clauses addressing tax avoidance and evasion. There are a number of clauses and schedules in this group, including a new clause from the hon. Member for Aberdeen North (Kirsty Blackman), but I am going to focus my remarks on clause 7 and schedule 1, which refer to workers’ services provided to the public sector through intermediaries and which might be of interest to Members. I will, of course, address any other areas in the course of the debate.
Clause 7 and schedule 1 reform the off-payroll working rules—also known as the intermediaries legislation, or IR35—for individuals working in the public sector. The tax system needs to keep pace with the different ways in which people are working. As the Chancellor set out at both the autumn statement and the spring Budget, the public finances face a growing risk from the cost of incorporations. Indeed, the Government estimate that by 2021-22 the cost to the Exchequer from people choosing to work through a company will be more than £6 billion. A not insignificant part of that cost comes from people who are working through their own personal service company but who would be classed as employees if it were not for that company. The off-payroll working rules are designed to ensure that where individuals work in a similar way to employees, they pay broadly the same taxes as employees. However, non-compliance with these rules is widespread, and Her Majesty’s Revenue and Customs estimates that less than 10% of those who should operate these rules actually do so. As a result, more than £700 million is lost each year across the economy, of which about 20% relates to non-compliance in the public sector. This is neither sustainable nor fair, and we believe that public authorities, in particular, have a responsibility to taxpayers to ensure that the people working for them are paying the right amount of tax.
It is right that individuals doing the same job should be taxed in a similar way, regardless of whether or not they are working through a company. The changes being made by clause 7 and schedule 1 address this non-compliance in the public sector. They move responsibility for determining whether or not the off-payroll working rules apply, shifting it to the public authority that the individual is working for, from 6 April 2017. They also make the public authority, agency or other third party that pays the individual’s company responsible for operating PAYE on those payments. This will improve compliance with the rules, raising £190 million a year by 2021-22. It is important to note that the reform does not introduce a new tax liability, nor does it affect the genuinely self-employed; the change will simply ensure that the current rules are applied as intended.
To provide certainty and clarity where it is needed, HMRC has worked extensively with stakeholders to develop the new digital “Check employment status for tax service”, which public authorities can use to help implement the changes. That service has been live since last month, and it has now been used many thousands of times—more than 273,000 times—to assist people in applying the off-payroll rules.
People have told me that no matter what information they have put in, they have always been told that they have to pay more tax than they were expecting. Concerns have been raised with me about that online tool and its shortcomings, and about the fact that HMRC is always asking people to pay a level of tax that they think is wrong or too high.
Given where we are in this Parliament, the best thing the hon. Lady can do is to send details on that, immediately and before Dissolution, so that HMRC can look at the factual issues. I am surprised by what she says, but let us ask HMRC to look at the practical issues she raises—while we are off doing other things, it can perhaps look at those if she supplies the information in the next few days. HMRC has worked with the Cabinet Office Crown Commercial Service to produce guidance for public authorities and has supported them to implement the changes.
Government amendment 10 is a technical one to ensure that the reform only applies to the public sector, as set out in the Government’s original announcement.
In conclusion, the Government believe it is essential to ensure that public funds are used correctly and that those in receipt of them are paying the correct amount of tax. The changes being made by clause 7 and schedule 1 will improve compliance with the tax rules, raising a substantial amount of revenue by 2021-22. I therefore ask Members to support this clause and schedule, along with clause 8, schedule 2, clauses 11 and 48, schedule 16 and clause 127.
I wish to discuss the issues raised in this group, including by my new clause 1. The Minister has covered the IR35 issues in some detail, but the Scottish National party still has real concerns about these changes. Just the other day somebody told me that they are no longer bidding for public sector contracts as a result of the tax changes made on IR35. That is a real concern, which we have raised before, particularly in the context of rural communities. In some of our most rural communities, people such as teachers, doctors and nurses are employed through intermediaries, and for very good reasons: it is sometimes difficult to get people to come to some of the most rural parts of Scotland. We are concerned that this move is going to have a real disadvantageous effect, particularly for rural communities that rely on teachers, doctors and other individuals working in the public sector who are employed through intermediaries. I understand that it is already having an effect, but it would be interesting, and I would very much appreciate it, if the Government let us know what difference it has made, not only to the tax take, but to our communities. Having read through the Government’s document on the impact of the tax changes, called OOTLAR—the overview of tax legislation and rates—I do not think they have recognised the impact the changes could have on communities, so it would be interesting to see what that impact is. The change has already been made and people are now working under it, so I imagine that within six months or so we will be able to see the outcomes and whether or not there is a disadvantage.
New clause 1 is on tax avoidance, which the Scottish National party has spoken about at length in this Parliament, and about which we will continue to speak at length. Tax avoidance is a real concern and contributes to the UK tax gap, which is £36 billion. Back in 2014, Credit Suisse published a report suggesting that larger countries such as the United Kingdom struggle to get people not to avoid tax. Smaller countries are much better at it—I am just pointing that out. The new clause would require the Chancellor of the Exchequer to review within two months international best practice in relation to the prevention and reduction of tax avoidance arrangements and combating tax evasion, and to publish a report of the review. We are asking for that because we do not think that the United Kingdom is the best place in the world at tackling tax avoidance. It is certainly not the best place in the world at all the different ways of tackling tax avoidance; we could learn a huge amount from what different countries are doing. The new clause would be a sensible way forward, so I hope the Government are keen to accept it.
Something else we have mentioned in relation to tax avoidance is the protection of whistleblowers. Some whistleblowers tend towards having poor health as result of their whistleblowing. It is really important that people are encouraged to come forward if they see problems, and that we are making it as easy as possible for them to do so, because we need people to be whistleblowers. We need them to tell us where practice is going wrong and where tax dodging is happening. We would support the Government in any action they take to encourage whistleblowers and to create a better environment in which they can come forward.
Lastly, there has been talk of the possibility of the United Kingdom becoming a tax haven after Brexit. We absolutely reject the notion that after Brexit the United Kingdom should reduce all taxes to nearly nothing. For a start, that just does not work if we want to have public services such as the NHS—
Some of them do not, though.
I hope everybody present is supportive of the NHS, but I get why my hon. Friend has the impression that some people are not. We need our NHS to continue to be supported, and for that we need taxes to continue to come in.
Does the hon. Lady agree that the focus should be on maximising the tax take? A reduction in tax rates can actually lead to an increase in the tax take.
I agree that the focus should be on maximising the tax take, but I would go about it in a slightly different way by trying to encourage companies and individuals and by encouraging the economy to grow. I would try to get people back into more productive jobs in order to increase productivity. The Government have mentioned increasing productivity, which is something we have been pretty good at doing in Scotland in recent times; our productivity increase has been significant and much higher than the productivity increase south of the border. Those are the measures I would start with to grow the economy.
Will the hon. Lady give way on that point?
I was just about to finish.
We have hours.
That’s not a challenge.
Well, we have plenty of time. I am grateful to the hon. Lady for giving way. Does she not agree that by reducing taxes, particularly corporation tax, in this country, we are more likely to attract inward investment and new companies from around the globe to this country, thereby producing the taxes to pay for our public services?
I do not believe that there is a huge amount of evidence for that. When companies are looking at where to base their headquarters and their staff, corporation tax does not feature all that high up the list. They are looking for good infrastructure, schools and support for individuals in the community. Corporation tax is not at the top of the list, so I would do other things first to try to encourage inward investment, if it were me who was in government and making those decisions.
It will be someday.
Mr Hoyle, that is the end of my comments on this group.
Question put and agreed to.
Clause 7 accordingly ordered to stand part of the Bill.
Clause 8 ordered to stand part of the Bill.
Clauses 9 and 10 disagreed to.
Clause 11 ordered to stand part of the Bill.
Clauses 12 to 16 disagreed to.
Clauses 17 and 18 ordered to stand part of the Bill.
Clauses 19 and 20 disagreed to.
Clause 21 ordered to stand part of the Bill.
Clauses 22 to 44 disagreed to.
Clauses 45 to 47 ordered to stand part of the Bill.
Employment Income Provided through Third Parties
Amendment made: 4, page 49, line 26, leave out
“Schedules 16 and 17 make”
and insert “Schedule 16 makes”.—(Jane Ellison.)
Clause 48, as amended, ordered to stand part of the Bill.
Clauses 49 to 56 disagreed to.
VAT: Zero-rating of Adapted Motor Vehicles Etc
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
That schedule 19 be a schedule to the Bill.
New clause 2—Review of VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service—
“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service, including but not limited to—
(a) an analysis of the impact on the financial position of Police Scotland and the Scottish Fire and Rescue Service arising from their VAT treatment, and
(b) an estimate of the change to their financial position were they eligible for a refund of VAT under section 33 of the VAT Act 1994.
(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”
No VAT is charged for the buying of an adapted vehicle by or on behalf of a disabled wheelchair user. Unfortunately, this scheme, which supports disabled wheelchair users to live independently, has been fraudulently abused by unscrupulous individuals who make purchases under this relief and then sell the vehicles on for additional profit. For example, HMRC discovered that one person purchased 30 BMWs under the scheme in one day, while another individual bought 100 vehicles that I would describe as high-performance sports cars and the like in under two years. This is clear abuse of the scheme, and its integrity is being brought into question by such behaviour.
Clause 57 will tackle abuse of the relief, while ensuring that it remains available for those with disabilities. The changes made by clause 57 will restrict the number of vehicles that an individual, or someone on behalf of that individual, may purchase under the scheme to one every three years. That will stop fraudsters from purchasing multiple vehicles in one day, or over a prolonged period. The legislation recognises that, in some circumstances, a replacement vehicle may genuinely need to be purchased within the three-year period. In addition, the clause makes it mandatory for vehicle dealers to submit a declaration of eligibility for each car purchased under the scheme to HMRC and applies penalties to those found to abuse the scheme.
We expect that these changes will continue to support those whom it is intended to support, at a cost of about £40 million a year, while reducing fraud and saving up to £80 million of taxpayers’ money over the next five years. The Chancellor announced these changes at the autumn statement, and they were welcomed by key stakeholders. Disabled Motoring UK stated:
“Disabled Motoring UK is supporting the efforts of the Government to safeguard the scheme and make sure it is only accessed by eligible disabled motorists.”
The significant fraudulent abuse of the current scheme means that it must be changed. It is our intention to tackle this fraud, but continue to offer financial support to disabled wheelchair users to lead independent lives. I therefore hope that clause 57 will stand part of the Bill.
Let me turn now to new clause 2, which was tabled by the hon. Member for Aberdeen North (Kirsty Blackman). We return to a subject that has had the odd outing in this Chamber before—I am talking about the issue of VAT on the Scottish Fire and Rescue Service. The new clause requests that the Treasury commissions a review of the VAT treatment of the Scottish Police Authority and the Scottish Fire and Rescue Service, reporting the cost of VAT to them at present and how this would change if they were eligible for refunds.
Let me recap some of the comments that have already been made from this Dispatch Box. To receive section 33 VAT refunds, a body must receive funding through local taxation and perform a function of a local authority. In 2012, the Scottish Government restructured their regional police and fire services into two national bodies, Police Scotland and the Scottish Fire and Rescue Service. Both are funded centrally, rather than through local taxation, and therefore do not—
Let me just complete the exposition of why these bodies do not qualify.
Both those new bodies are funded centrally rather than through local taxation and therefore do not meet the eligibility criteria for section 33 VAT refunds. The Treasury warned the Scottish Government in advance that making these changes would result in the loss of VAT refunds. In deciding to go ahead, the Scottish Government fully considered the costs and benefits of doing so, including the loss of VAT refunds. Therefore, there is no additional benefit to be had from the Government committing resource and time to produce a report on this issue. I therefore urge the Committee to reject new clause 2.
Just on that, can the Financial Secretary tell us how London Legacy and Highways England are funded?
Again, those are matters that have been covered before. I refer the hon. Lady to comments that I have made previously in response to very similar interventions. These measures have been discussed not just in Finance Bills, but during the passage of the Scotland Bill. Again, the message was the same that this was a decision taken in the full knowledge of the VAT consequences. Once again, I urge the House to reject the new clause that calls for a review.
If the Minister changes the VAT treatment of the Scottish police and the fire and rescue service, I promise not to raise the matter again in the House. I can see that she is fed up with discussing it, but, frankly, so am I. If the Government were to move on this, we would not have to raise it again.
The other option open to the Government is to devolve power over VAT to the Scottish Parliament, so that it could make all of these decisions. We were promised the most powerful legislature in the world, so why do the Government not live up to that commitment and give us the powers that we need?
I agree with my colleague. We have a portion of VAT devolved to the Scottish Parliament, which does not make a huge amount of sense. Although we obviously welcome any new powers coming to the Scottish Parliament, it would be much better if we had control over all of VAT, rather than have a portion of the income from VAT coming to us.
The Scottish police and the fire and rescue service are charged VAT unlike Highways England, which is a national English body, and unlike London Legacy, which is a national UK-wide body. The UK Government have created exemptions for both of those organisations, but not for Scottish police and Scottish fire. This costs the Scottish people, because Scottish police and Scottish fire are having to pay this VAT bill to the UK Government rather than having this money to spend.
This VAT charge is costing Scotland’s emergency services tens of millions of pounds a year. Does my hon. Friend agree that our constituents would rather that this money was spent on fighting crime and funding emergency services in Scotland than on plugging the holes in the Tory Government’s budget because of their poor financial planning and budgeting?
I absolutely agree with my colleague.
In June 2016, it was reported that, since it was formed three years previously, Scotland’s single police force has paid £76.5 million in VAT, and it remains unable to reclaim that tax. The UK Government have created exemptions for other bodies that they see as important. Why do they see London Legacy and Highways England as more important than Scottish police and Scottish fire? We again ask the UK Government to change that.
Question put and agreed to.
Clause 57 accordingly ordered to stand part of the Bill.
IPT: Standard Rate
Question proposed, That clause 58 stand part of the Bill.
With this it will be convenient to consider clause 59 stand part.
Clause 58 legislates for the increase in the standard rate of insurance premium tax from 10% to 12% as the Chancellor announced in the autumn statement 2016. This change will be effective from 1 June this year. Clause 59 will make minor changes to anti-forestalling provisions, so that insurers cannot artificially avoid paying the new rate of insurance premium tax by adjusting contract dates.
The Government remain committed to our fiscal mandate of eliminating the deficit. Much has already been achieved. The Government are forecast to reduce the deficit by more than two thirds by the end of this year, and in 2018-19, debt will fall for the first time in 16 years. However, we cannot be complacent. The Office for Budget Responsibility’s recent fiscal sustainability report highlights the challenges posed by an ageing population, projecting debt almost trebling to 234% over the next 50 years, if no further action is taken.
I am so sorry to interrupt the hon. Lady, but I speak on behalf of the 4th Perivale scout group, which is most concerned about the impact that insurance premium tax increases are having on not just scout groups but other charities. Has she considered this matter since my hon. Friend the Member for Bootle (Peter Dowd) raised it, and does she have any good news if not for the whole charity sector, at least for the 4th Perivale scout group?
I am delighted that the hon. Gentleman has had the opportunity to put his local scout group on the record. These issues have been discussed in general terms. In particular, I spoke at the Charity Tax Group conference recently. The point that I made there was that although we are not making exceptions for a number of reasons—some of them logistical—there are many different ways in which the Government exempt tax for charities and try to support them in other ways. The existing tax reliefs that go to charities and community groups in this country are worth many billions, and many are not taken up as much as they should be. In particular, the issue of scout groups got a very thorough airing during the passage of the gift aid small donation scheme measures that we took through the House last autumn. Those measures are designed to help such groups that do a lot of their fundraising outside their headquarters. Although I cannot give him comfort on this issue, I draw his attention to the fact that there are many other ways in which we help to relieve worthy groups. In particular, I refer to that recent change, which I encourage him to discuss with the Perivale scout group, because, as I have said, that was made very much with it in mind, especially with regard to how it collects donations.
Essentially, this is one of the taxes that the Government are keeping in. It is the third insurance premium tax rise in 18 months. Will the Minister justify why the Government are proposing this third increase, which actually increases the rate by 20%—well above the rate of inflation?
I am coming to that, but the Chancellor was admirably clear when he laid the change out for the House when it was announced.
The Government have worked to eliminate the deficit and to invest in Britain’s future. We want to ensure that the public finances remain sustainable and to build resilience to future shocks. We have prioritised tax changes to help ordinary working families, and encouraged businesses to invest in the UK. We are supporting jobs and helping people’s money to go further through increases to the personal allowance and the national living wage. We have committed to investing £23 billion for infrastructure in the national productivity investment fund and an extra £2 billion for social care, which will ease pressures on the national health service.
By increasing insurance premium tax, we will ensure that we can maintain the balance between that investment and controlling the deficit. The additional revenue gives the Government the flexibility to invest. IPT is a tax on insurers. They are not in any way obliged to pass on the tax through higher premiums. However, if insurers do choose to pass on the increase, it will be spread thinly across a wide range of people and businesses. In line with the informal agreement between the Government and the Association of British Insurers, firms have been given more than six months’ notice, which gives time to implement the change. The agreement aims to give insurers proper warning of a rate change and to ensure that the correct rate of tax on a policy is known when the policy is arranged.
The changes made by clause 58 will raise approximately £840 million each year to reduce the deficit, while ensuring that we can fund spending commitments. That really is the answer to the intervention by the hon. Member for East Lothian (George Kerevan). Insurance premium tax is a tax on insurers, not consumers. It will be insurance companies’ choice whether to pass on the 2% rate increase. Even if the increases were passed on in full, the impact would be modest, costing households less than 35p a week on average.
The changes made by clause 59 will protect revenue by ensuring that insurers cannot artificially avoid paying the new rate of IPT by adjusting contract dates. As I have said, the Government are committed to reducing the deficit, while still investing in the UK. This requires some difficult decisions, including this 2% increase to the standard rate of IPT. The change will be invaluable in funding vital public spending, such as the additional £2 billion committed to social care.
It is really interesting to hear the Minister say that the change will only cost an average of 35p a week. That is quite a lot, particularly for people who do not have an extra 35p a week. The director general of the ABI said:
“UK consumers and businesses already pay relatively high levels of IPT… It cannot be right that people are being forced to pay an increasingly high price for doing the responsible thing”.
As my hon. Friend the Member for East Lothian (George Kerevan) said, this is the third increase. At the start of this Parliament, IPT was at something like 3%. It was then increased to 6.5% and then to 9.5% during this Parliament. This is a tax on people doing the right thing by insuring their homes and properties. I agree with the hon. Member for Ealing North (Stephen Pound), who spoke about a scout group, that this is also a tax on charities and organisations providing a brilliant experience for young boys and girls going through scouting. The change has not been considered in the round; the Government have seen another opportunity to get a few extra pennies in.
The hon. Lady, like me, may have a rural constituency, where there are lots of young drivers experiencing high insurance costs. Would she welcome signs from the Minister that the Government will look at the impact of the change on the young in the future, particularly if it has an impact on social mobility for the young?
I do not actually have a rural constituency, but I do live near one, so I recognise the issues that are faced by young drivers. We want young people, particularly those in rural areas, to be able to access services, learn to drive safely and afford insurance when they do, so that they can travel and access jobs, opportunities and training. I agree with the hon. Gentleman and also ask the Government to look at this area. We cannot continue to see hikes in insurance premium tax. A 20% hike is absolutely ridiculous, especially as it follows hot on the heels of a number of other hikes in insurance premium tax. The Government need to look at this seriously and commit to not making any further increases in the next Parliament.
I have two points. First, I reiterate to the Minister, who artfully shifted to saying that there was a 2% rise in the tax, that there is a two percentage point rise. It is a 20% rise in the tax. I asked the Minister how she justified that massive, excessive increase relative to inflation. She did not reply—I suspect because, as a Conservative tax cutter, she is embarrassed. I have a further question for the Minister. Will she rule out extending the provision of IPT to reinsurance? Clearly, IPT has been hit on by the Government because it is one of the few things that they have not yet legislated not to increase as a form of taxation. That will doubtless change in the Conservative manifesto. But as long as this is the tax that the Government are hitting on because it is the one they have left, will the Minister state that they will not in future years extend IPT to the reinsurance market, which would net them even more money?
Question put and agreed to.
Clause 58 accordingly ordered to stand part of the Bill.
Clause 59 ordered to stand part of the Bill.
Landfill tax: taxable disposals
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to consider the following:
Clauses 61 to 64 stand part.
Amendment 1, in clause 65, page 73, line 4, leave out subsection (2).
Clauses 65 to 70 stand part.
New clause 3—Review of oil and gas corporation tax rates and investment allowances—
“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the corporation tax rates and investment allowances applicable to companies producing oil and gas in the UK or on the UK continental shelf.
(2) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”
New clause 4—Review of tax regime relating to decommissioning of oil and gas infrastructure—
“(1) The Chancellor of the Exchequer must, within two months of the passing of this Act, commission a review of the ways in which the tax regime could be changed to increase the competitiveness of UK-registered companies in bidding for supply chain contracts associated with the decommissioning of oil and gas infrastructure or the development of new fields in the UK continental shelf.
(2) In undertaking the review under subsection (1), the Chancellor of the Exchequer must consult—
(a) the Department for Business, Energy and Industrial Strategy;
(b) the Oil and Gas Authority;
(c) Scottish Ministers; and
(d) such other stakeholders as the Chancellor of the Exchequer thinks appropriate.
(3) A report of the review under subsection (1) must be laid before the House of Commons within six months of the passing of this Act.”
I plan to focus my comments in this part of the debate on alcohol duties, which I anticipate will be of greatest interest to hon. Members. Other clauses within the group provide for other duty changes, and a new clause has been tabled by the hon. Member for Aberdeen North (Kirsty Blackman) on the oil and gas decommissioning regime, which we may come to.
Clause 65 sets out changes to alcohol duty rates that took effect on 13 March 2017. We announced in the 2017 Budget that the duty rates on beer, cider, wine and spirits will be kept flat in real terms, uprating by retail price index inflation. This is in line with policy and previous forecasts. As hon. Members will probably be aware, the public finances assume that alcohol duties rise by RPI inflation each year, so there is a cost to the Exchequer from freezing or cutting alcohol duty rates. If alcohol duty rates had been frozen or cut at Budget 2017, the Government would instead have had to raise taxes in other areas of the economy, to cut public spending or to increase the public deficit. Consumers and businesses continue to benefit from the previous alcohol duty changes, which initial estimates suggest will save them around £3 billion in duty between fiscal years 2013 and 2017. I will now briefly set out how past duty changes and other Government policies have affected different drinks and the sector.
I will start with spirits duty. The Government recognise the important contribution that Scotch whisky makes to the economy and local communities. The Scotch Whisky Association, which I had a meeting with and had the chance to hear from directly, estimates that Scotch whisky adds over £5 billion overall to the UK economy and supports more than 40,000 jobs, some 7,000 of which are in the rural economy. Distilleries provide an important source of employment in rural communities. The Scotch Whisky Association estimates that exports to nearly 200 countries in every continent were worth nearly £4 billion last year and accounted for about 20% of all UK food and drink exports. Single malt Scotch whisky exports exceeded £1 billion for the first time last year, and more Scotch whisky is sold in France in just one month than cognac in an entire year.
The Government are committed to supporting this great British success story. Scotch whisky was one of the first food and drink products to feature in the GREAT campaign, giving it high visibility internationally in key markets. More recently, the Scotch Whisky Association joined my right hon. Friend the Prime Minister on her trade mission to India last year. Scotch whisky is currently just 1% of the Indian spirits market, but it has the potential to grow to 5% with the right trade agreement. That would be equivalent to a 10% increase in the current global trade in Scotch.
The spirits duty escalator was ended in 2014, and the tax on a bottle of Scotch whisky is now 90p lower than it would otherwise have been. The hon. Member for Aberdeen North has tabled an amendment to reverse the uprating as applied to spirits. To be clear, that would not help exports, because the £4 billion of exports a year are unaffected by the duty change, as no duty is paid on exported spirits. Instead, it would help those selling in the UK market. The amendment would cost the Exchequer, and so increase the deficit by, around £100 million this year. For the reasons I have indicated—not least the bottom line scorecard cost—the Government reject the amendment, which would not help exporters of whisky or other spirits and which is unfunded. Clause 65 will keep spirit duty rates flat in real terms, so consumers will continue to benefit from the previous change to spirit duty rates.
While we are on spirits, I should touch on another great British success: the UK gin industry. When I met the Wine and Spirit Trade Association, it informed me that, in 2016, gin sales exceeded £1 billion for the first time in the UK. I suspect that many of us will be partaking of a number of these products in the weeks ahead. [Interruption.] I said many of us. We will be partaking perhaps in celebration or perhaps for sustenance —who knows what reason. It is good that we put these British success stories on record.
I was also told that the number of gin brands has more than doubled since 2010. [Interruption.] Yes, doubles all round. The price of a typical bottle of gin remains 84p lower than it would have been now that we have ended the spirits duty escalator. As with Scotch whisky, no UK duty is payable on exported gin.
As well as ending the spirits duty escalator, we also ended the beer duty escalator to help pubs. Pubs play an important role in promoting responsible drinking, providing employment and contributing to community life—that sentiment is expressed regularly on both sides of the House. Brewers also make an important contribution to local economies. The increase in the number of small breweries in recent years has increased diversity and choice in the beer market. By promoting interest in a larger range of beers, that has benefited all brewers.
The clause will not undo the previous beer duty cuts or freezes. The Government cut the tax on a typical pint by one penny at Budgets 2013, 2014 and 2015 and then froze duty rates last year. As a result, drinkers are paying 11p less in tax on a typical pint this year than they otherwise would have paid.
On wine duty, the Government are committed to supporting the UK wine industry. The first joint industry and Department for Environment, Food and Rural Affairs wine roundtable last year resulted in a set of industry targets, including to increase wine exports tenfold and to double production to 10 million bottles by 2020. The wine sector will continue to benefit from the previous changes to wine duty rates.
Cider makers, too, play an important role in rural economies, using over half the apples grown in the UK. The duty on a typical pint of cider remains around half the duty on a typical pint of beer. The tax on a typical pint remains 3p lower than it would otherwise have been, as a result of the Government’s changes to cider duty rates since Budget 2014.
To conclude, we fully recognise the importance of the alcohol industry to the economy and local communities. I have talked with and met various representatives from across the industry, and I will, of course, continue to engage with them. The cuts and freezes in duty rates since the ending of the alcohol duty escalators continue to deliver great benefits. They will save consumers and businesses around £3 billion in duty between fiscal years 2013 and 2017. However, allowing alcohol duties to fall every year in real terms would be unsustainable in the long term. If alcohol duties had been frozen or cut at Budget 2017, the Government would instead have had to raise taxes in other areas of the economy, cut public spending or increase the public deficit. The clause simply increases duties in line with inflation, as assumed in the fiscal forecasts. This is not a return to the real-terms increases year after year imposed by the alcohol duty escalator. I therefore suggest that the clause stand part of the Bill.
I will start by talking about alcohol and whisky, and then I will move on to talk about oil and gas. Specifically on whisky, I appreciate the Minister taking the time to talk about the contribution of the Scotch whisky industry. It does, indeed, contribute to our economy; of particular note are the 40,000 jobs it provides, including the 7,000 in the rural economy, which are really important for Scotland’s rural communities.
The positive changes the UK Government previously made to spirit duty meant there was confidence in the industry again, and we have seen a real change in the industry over the last couple of years, with a dozen new distilleries opening and 14 in various stages of planning, but the changes that have been made this year will put 36p on a bottle of whisky and mean that £4 of every £5 spent on whisky goes to the UK Government’s coffers.
My hon. Friend the Member for Argyll and Bute (Brendan O'Hara), who is the chair of the all-party group on Scotch whisky, spoke about this issue on Second Reading, although not at enough length—he got only four minutes. He is really concerned about distilleries. I appreciate the Minister talking about the success story that the gin industry has been for new distilleries—it takes a long time to mature Scotch whisky but not to mature gin, so distilleries can be up and running pretty quickly. The issue is the context in which things are seen. I understand that, as the Minister said, the change will not affect those selling abroad, but given that most producers sell whisky in the domestic market, it will obviously have an effect on those who also sell abroad.
In the wider context of Brexit, where the trade deals we currently have will no longer exist and we will have to negotiate new trade deals, including with the EU, if we are to sell whisky to France, as the Minister mentioned, we will need to have a trade deal. We will need to have trade deals with all the countries we trade with under the EU’s free trade agreements.
A major concern for those of us who represent constituencies involved with whisky is the protected geographical indication. The EU has protected geographical indication status, so people are not allowed to bottle whisky somewhere else and call it Scotch whisky. We are set to lose that protection when the UK leaves the EU, and it is important that the UK Government do what they can to ensure that the Scotch whisky industry can continue to trade and protect its brand—but I do not see that coming through. If the Government had not raised duty in this Budget on spirits and on whisky in particular, the industry would have known that it had the confidence of the UK Government and been in a much better position to take decisions.
Moving on to oil and gas, we have two new clauses on the amendment paper. New clauses 3 and 4 on behalf of the SNP are in my name, and I particularly thank my hon. Friend the Member for Aberdeen South (Callum McCaig) for his input into them. New clause 3 is about investment allowances. This Tory Government have come up with a line that we are one of the most competitive fiscal regimes for oil and gas, which is all well and good, but we also have one of the most mature fields in the world. In the North sea and on the UK continental shelf, we are also having to do things and implement technologies we have never seen before. A huge amount of innovation from our companies is having to go on in order for them to be able to achieve the UK Government’s and Sir Ian Wood’s maximising economic recovery strategy.
New clause 3 is about investment allowances and corporation tax rates on companies producing oil and gas. The UK Government have put the tax up and put it down, but they have not at any stage sat down and looked at the entire taxation regime for the oil and gas industry and said, “We are operating in a new scenario.” They have kept the level of taxes that we have had since oil and gas began to be taken out of the North sea. It is time for the UK Government to look at that tax structure and those tax regimes to see how they can incentivise companies to ensure that they are getting the best out of the North sea and securing jobs in the north-east of Scotland, and beyond, for as long term a future as possible.
New clause 4 is particularly about the competitiveness of UK-registered companies. I have mentioned decommissioning and the development of new fields in the UKCS around us. The new clause is similar to one that we tabled to last year’s Finance Bill. I would really like the Government to take action on this. Whenever I go to meet supply chain companies or individuals working at the coalface, as it were, in oil and gas, they tell me that this is a major issue. Decommissioning is beginning in the North sea, where some of the fields are at the end of their life and some installations are at the end of their usable life, whatever we do. This is still a relatively new thing for us, and our supply chain companies are having to innovate. We do not want any of the jobs created in decommissioning to go abroad if we can possibly help it. We would like this UK Government to look at what they can do to the tax regime to ensure that those jobs are kept in the UK as far as they possibly can be.
We are also asking about that in relation to new fields. On Second Reading, I spoke about small pools, which have fewer than 50 million barrels of oil. In this current tax system and fiscal situation, they are not particularly economically viable, and so the vast majority will not be exploited. If changes were made to the tax regime in order for these small pools to be exploited, and further encouragement given to enable companies to develop new technologies so that we can access small pools, the UK Government’s tax take would increase. If we just leave them there, there will be a problem, particularly further down the line. A number of the small pools rely on current installations, and if the big installation in the middle is decommissioned, we lose access to all the smaller fields round about. The UK Government therefore absolutely need to be on top of that today.
Finally on oil and gas, I turn to something that made me pretty angry in the Budget debate. The Chancellor announced that he was going to make it easier for companies to transfer late-life assets—that is, installations that are near the end of their useful life—and said, “We’re going to have a commission to look into this.” That was exactly what the Chancellor announced in the Budget last year, apart from saying that we would have a commission. If the Government had done it last year, they would not need a commission this year. I know that this is a technical matter, but the Government need to get themselves in gear and make these changes so that the assets can be transferred from the big player who has other things to focus on to a new player coming into the industry who can make the most of the asset and ensure that as much oil and gas is extracted from the field as possible. I appreciate that the Government are having a commission, although I would rather that they had done it last year. We will be absolutely on board in supporting this change happening as soon as possible.
Question put and negatived.
Clause 60 accordingly disagreed to.
Clause 61 ordered to stand part of the Bill.
Clauses 62 to 63 disagreed to.
Clauses 64 and 65 ordered to stand part of the Bill.
Clauses 66 and 67 disagreed to.
Clauses 68 and 69 ordered to stand part of the Bill.
Clause 70 disagreed to.
Soft drinks industry levy
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Clauses 72 to 75 stand part.
Amendment 2, in clause 76, page 81, line 15, leave out paragraph (a).
Amendment 3, page 81, line 20, leave out subsection (2).
Clauses 76 to 107 stand part.
That schedules 20 to 23 be schedules to the Bill.
Clauses 71 to 107 contain provisions for a new tax called the soft drinks industry levy to be introduced from April 2018. This is a key pillar in the Government’s childhood obesity plan, and it has been welcomed by a wide range of public health experts and campaigners. Tackling obesity is a national challenge—indeed, an international challenge. The UK has one of the highest obesity rates in the developed world, and childhood obesity in particular is a major concern. Today nearly a third of children aged two to 15 are overweight or obese, and we know that many of these children will go on to become obese adults. Obesity drives disease, as we are reminded at the moment as we come through Westminster underground station by the Cancer Research UK posters. It increases the risk of heart disease, type 2 diabetes, stroke, and some cancers. The NHS spends over £6 billion a year across the UK in dealing with obesity-related costs, and the overall costs to our economy are estimated at between £27 billion and £46 billion a year. This cannot go on.
Health experts have identified sugary drinks as one of the biggest contributors to childhood obesity and a source of empty calories. A 330 ml can of full-sugar cola typically contains nine teaspoons of sugar. Some popular drinks have as many as 13 teaspoons. This can be more than double a child’s daily recommended added sugar intake in just a single can of drink. The Government recognise that this is a problem, and so have many others, with over 60 public health organisations calling for a tax on sugary drinks and many thousands signing a petition in favour. I am delighted that this issue has also received a high level of cross-party support.
Indeed, some soft drinks producers had recognised that sugar levels in their drinks were a problem too, and had started to reduce the sugar content, move consumers towards diet and sugar-free variants, and reduce portion sizes for high-sugar beverages. Nevertheless, reducing the added sugar in soft drinks is now a public health priority, and this new levy is needed to speed up the process. It is specifically designed to encourage the industry to move faster. We gave the industry two years to make progress on this before the levy begins, and we can see that it is already working. Since the Government announced the levy last March, a number of major producers have accelerated their work to reformulate sugar out of their soft drinks and escape the charge. These include Tesco, which has already reformulated its whole range of own-brand soft drinks so that they will not pay the levy. Similar commitments have come from the makers of Lucozade and Ribena, and the maker of Irn-Bru, A. G. Barr. In fact, we now expect more than 40% of all drinks that would otherwise have been in scope to have been reformulated by the introduction of the levy. We see international action too. In recent months, countries such as Ireland, Spain, Portugal, Estonia and South Africa have brought forward similar proposals to our own.
As a result of such reformulation before the levy begins, we now expect the levy to raise around £385 million per year, which is less than the £520 million originally forecast—but we are clear that this is a success. The Government will still fund the Department for Education’s budget with the £1 billion that the levy was originally expected to raise over this Parliament, including money to double the primary schools sports premium and deliver additional funding for school breakfast clubs, and £415 million to be invested in a new healthy pupils capital programme. The devolved Administrations will receive Barnett funding in the usual way. The Secretary of State for Education has made recent announcements about how some of the money will be spent, particularly on the healthy pupils capital programme.
The levy has shown that the Government mean business when it comes to reducing hidden sugar in everyday food. That willingness to take bold action underpins another major part of our childhood obesity plan, namely Public Health England’s sugar reduction programme, which is a groundbreaking programme of work with industry to achieve 20% cuts in sugar by 2020 across the top nine food categories that contribute the most to children’s sugar intake. It has been acknowledged, not least by industry, that that is a challenging target, but one that industry is committed to working with Government to achieve. The sugar reduction programme will cover some of the drinks products that are not part of the levy, such as milk-based drinks. The programme is already bearing fruit: there have been announcements and commitments to reduce the levels of sugar in some of the products.
I know that some would like the levy to go further. In particular, the hon. Member for Aberdeen North (Kirsty Blackman) has tabled amendments 2 and 3, which would remove the exclusion from the levy of high milk content drinks containing at least 75% milk. We oppose those amendments. Milk and milk products are a source of protein, calcium, potassium, phosphorous and iodine, as well as vitamins B2 and B12. One in five teenage girls do not get enough calcium in their diet, and the same is true for one in 10 teenage boys. It is essential for children’s health that they consume the required amount of those nutrients, which aid bone formation and promote healthy growth as part of a balanced diet. Health experts agree that the naturally occurring sugars in milk are not a concern from an obesity perspective, and they are not included in the definition of free sugars, which Public Health England now applies.
Of course, we want milk-based drinks to contain less added sugar, so they will be part of Public Health England’s sugar reduction programme. Producers of the drinks will be challenged and supported to reduce added sugar content by 20% by 2020. Public Health England has committed to publishing a detailed assessment of the food and drink industry’s progress against the 20% target in March 2020, and today I make a commitment to the House that we will also review the exclusion of milk-based drinks in 2020, based on the evidence from Public Health England’s assessment of producers’ progress against their sugar reduction targets. In the light of that assurance, I urge hon. Members to reject amendments 2 and 3, and allow us to review the evidence in 2020, two years after the levy has begun, and to decide at that point whether milk-based drinks should be brought within scope.
Obesity is a problem that has been decades in the making and we are not going to solve it overnight. The soft drinks levy is not a silver bullet, but it is an important part of the solution. This Government’s childhood obesity plan, with the levy as its flagship policy, is the start of a journey and it marks a major step towards dealing with our national obesity crisis.
The Minister is absolutely correct about the huge amount of cross-party support for the general thrust of the soft drinks industry levy and the move towards tackling obesity, particularly childhood obesity. However, we are concerned that the levy does not go far enough and that the Government could have chosen to close certain loopholes when drafting the Bill.
The single biggest cause of preventable cancer is obesity. More than 18,100 cancers a year are associated with excess weight. Cancer Research says that sugary drinks are the No. 1 source of sugar for 11 to 18-year-olds, which is a pretty terrifying statistic, and I appreciate that the Government have chosen to take action.
I am concerned about the Government’s response on milk-based drinks and about the fact that they are excluded from the levy.
Does my hon. Friend agree that the problem with omitting high-sugar milk-based drinks from the provisions is that parents may mistakenly think that they are healthier than soft drinks that are subject to the extra tax, when that is simply not the case?
My hon. and learned Friend is absolutely right. It is true, as the Minister has said, that milk-based drinks contain protein, calcium and other nutrients, but so does milk. Children could just drink milk without the added sugar. I do not think people realise quite how much added sugar there is in such products. The same is true of pasta sauce. When parents see a milkshake on the shelf, they do not realise that it could have as much sugar in it as a can of fizzy juice.
The Faculty of General Dental Practice and the Health Committee have said that milk-based drinks should be included in the levy. Our amendments 2 and 3 would remove their exemption. I welcome the Government’s undertaking that they will review the situation in 2020, which is an improvement on their previous positon. I appreciate that reasonable change and action.
Question put and agreed to.
Clause 71 accordingly ordered to stand part of the Bill.
Clauses 72 to 107 ordered to stand part of the Bill.
Carrying on a third country goods fulfilment business
Question proposed, That the clause stand part of the Bill.
With this it will be convenient to discuss the following:
Clauses 109 to 123 and 130 to 133 stand part.
Government amendments 5 to 9.
Clauses 134 and 135 stand part.
That schedules 24 to 26 be schedules to the Bill.
These are consequential amendments and I want to move them formally.
I appreciate the Government withdrawing the making tax digital provisions. I understand their commitment to making tax digital, but the changes are reasonable.
With your indulgence, Sir David, I thought that this might be an appropriate moment to pay tribute to the outgoing right hon. Member for Chichester (Mr Tyrie), the Chair of the Treasury Committee, which has paid a lot of attention to making tax digital. There could be no more fitting tribute to the right hon. Gentleman leaving this House than the Government withdrawing the making tax digital provisions.
That is certainly news to me, but the hon. Gentleman’s tribute is most appropriate and I thank him for it.
On a point of clarity, may I make it clear that the Government do not support clause 108? I apologise for not making that clear before. On making tax digital, I refer colleagues to my statement at the beginning of our debate on the first group.
Question put and negatived.
Clause 108 accordingly disagreed to.
Clauses 109 to 126 disagreed to.
Clause 127 ordered to stand part of the Bill.
That clause 127 be transferred to the end of clause 69.—(Jane Ellison.)
Clauses 128 to 133 disagreed to.
Amendments made: 5, page 126, leave out line 17.
Amendment 6, page 126, leave out line 20.
Amendment 7, page 126, leave out lines 22 to 24.
Amendment 8, page 126, leave out line 30.
Amendment 9, page 127, leave out lines 1 and 2.—(Jane Ellison.)
Clause 134, as amended, ordered to stand part of the Bill.
Clause 135 ordered to stand part of the Bill.
Workers’ services provided to public sector through intermediaries
Amendment made: 10, page 129, line 32 , at end insert—
‘(3) Subsection (1) is subject to subsection (4).
(4) A primary-healthcare provider is a public authority for the purposes of this Chapter only if the primary-healthcare provider—
(a) has a registered patient list for the purposes of relevant medical-services regulations,
(b) is within paragraph 43A in Part 3 of Schedule 1 to the Freedom of Information Act 2000 (providers of primary healthcare services in England and Wales) by reason of being a person providing primary dental services,
(c) is within paragraph 51 in that Part of that Schedule (providers of healthcare services in Northern Ireland) by reason of being a person providing general dental services, or
(d) is within paragraph 33 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002 (providers of healthcare services in Scotland) by reason of being a person providing general dental services.
(5) In this section—
“primary-healthcare provider” means an authority that is within subsection (1)(a) or (b) only because it is within a relevant paragraph,
“relevant paragraph” means—
(a) any of paragraphs 43A to 45A and 51 in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or
(b) any of paragraphs 33 to 35 in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002, and
“relevant medical-services regulations” means any of the following—
(a) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations 2004 (S.I. 2004/906),
(b) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Wales) Regulations 2004 (S.I. 2004/1017),
(c) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) (Scotland) Regulations 2004 (S.S.I. 2004/162), and
(d) the Primary Medical Services (Sale of Goodwill and Restrictions on Sub-contracting) Regulations (Northern Ireland) 2004 (S.R. (N.I.) 2004 No. 477).
(6) The Commissioners for Her Majesty’s Revenue and Customs may by regulations amend this section in consequence of—
(a) any amendment or revocation of any regulations for the time being referred to in this section,
(b) any amendment in Part 3 of Schedule 1 to the Freedom of Information Act 2000, or
(c) any amendment in Part 4 of Schedule 1 to the Freedom of Information (Scotland) Act 2002.’—(Jane Ellison.)
Schedule 1, as amended, agreed to.
Optional remuneration arrangements
Amendments made: 11, page 160, line 14, at end insert—
“() section 307 (death or retirement provision), so far as relating to provision made for retirement benefits;”
Amendment 12, page 160, line 26, at end insert—
‘( ) In subsection (5) “retirement benefit” has the meaning that would be given by subsection (2) of section 307 if “or death” were omitted in both places where it occurs in that subsection.”—(Jane Ellison.)
Schedule 2, as amended, agreed to.
Amendments made: 13, page 166, line 18, leave out from beginning to “in” in line 23 and insert—
“(a) that, in the case of any money purchase arrangement relating to a member of the fund that is not a cash balance arrangement, no contributions are made under the arrangement on or after 6 April 2017;
(aa) that, in the case of any cash balance arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement;
(b) that, in the case of any defined benefits arrangement relating to a member of the fund, there is no increase on or after 6 April 2017 in the value of any person’s rights under the arrangement; and
(c) that, in the case of any arrangement relating to a member of the fund that is neither a money purchase arrangement nor a defined benefits arrangement—
(i) no contributions are made under the arrangement on or after 6 April 2017, and
(ii) there is no increase on or after 6 April 2017.”
Amendment 14, page 166, line 24, at end insert—
‘(6AA) For the purposes of subsection (6A)(aa)—
(a) whether there is an increase in the value of a person’s rights is to be determined by reference to whether there is an increase in the amount that would, on the valuation assumptions, be available for the provision of benefits under the arrangement to or in respect of the person (and, if there is, the amount of the increase), but
(b) in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the rights if in no tax year do they exceed the relevant percentage.’
Amendment 15, page 166, line 30, leave out
“ignore increases in the value of a person’s”
“in the case of rights that accrued to a person before 6 April 2017, ignore increases in the value of the”.
Amendment 16, page 166, line 31, at end insert—
‘(6BA) For the purposes of subsection (6A)(c)(ii), regulations made by the Commissioners for Her Majesty’s Revenue and Customs may make provision—
(a) for determining whether there is an increase in the value of a person’s rights,
(b) for determining the amount of any increase, and
(c) for ignoring the whole or part of any increase;
and regulations under this subsection may make provision having effect in relation to times before the regulations are made.’
Amendment 17, page 166, line 32, leave out “subsection (6B)(b)” and insert “this section”.
Amendment 18, page 167, leave out lines 5 to 7.
Amendment 19, page 167, line 8, after “subsection” insert “(6BA) or”.
Amendment 20, page 167, line 10 , leave out from “(7)” to end of line 16 and insert—
‘(a) for “In this section—” substitute “For the purposes of this section—
‘arrangement’, in relation to a member of a superannuation fund, means an arrangement relating to the member under the fund;
a money purchase arrangement relating to a member of a superannuation fund is a ‘cash balance arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are cash balance benefits;
an arrangement relating to a member of a superannuation fund is a ‘defined benefits arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are defined benefits;
an arrangement relating to a member of a superannuation fund is a ‘money purchase arrangement’ at any time if, at that time, all the benefits that may be provided to or in respect of the member under the arrangement are money purchase benefits;
‘cash balance benefits’, ‘defined benefits’ and ‘money purchase benefits’ have the meaning given by section 152 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;
‘member’, in relation to a superannuation fund, has the meaning given by section 151 of the Finance Act 2004, but for this purpose reading references in that section to a pension scheme as references to a superannuation fund;”;
(b) at the end insert—
“‘the valuation assumptions’ has the meaning given by section 277 of the Finance Act 2004.”’
Amendment 21, page 167, line 16, at end insert—
‘( ) After subsection (10) insert—
(11) Where the conditions in subsection (6)(a) to (c) are met in the case of a superannuation fund (“the actual fund”)—
(a) any disqualifying contributions made under an arrangement relating to a member of the actual fund are treated for the purposes of the Income Tax Acts as instead made under an arrangement relating to the member under a separate superannuation fund (“the shadow fund” for the actual fund),
(b) any disqualifying increase in the value of a person’s rights under an arrangement relating to a member of the actual fund is treated for the purposes of the Income Tax Acts as instead being an increase under an arrangement relating to the member under the shadow fund for the actual fund, and
(c) any reference in this or any other Act (including the reference in subsection (3) and any reference enacted after the coming into force of this subsection) to a fund, or superannuation fund, to which subsection (3) applies does not include so much of the actual fund as—
(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the actual fund or the shadow fund of any other superannuation fund, or
(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.
(12) For the purposes of subsection (11) a contribution, or an increase in the value of any rights, is “disqualifying” if it would (ignoring that subsection) cause the benefit accrual condition not to be met in the case of the actual fund.
(13) For the purposes of the provisions of this section relating to the benefit accrual condition, where there is a recognised transfer—
(a) any transfer of sums or assets to the recipient fund by the recognised transfer is to be categorised as not being “a contribution” to the recipient fund, and
(b) any increase in the value of rights under the recipient fund that occurs at the time of the recognised transfer is to be treated as not being an increase in that value if the increase is solely a result of the transfer effected by the recognised transfer.
(14) For the purposes of subsection (13), where there is a transfer such that sums or assets held for the purposes of, or representing accrued rights under, an arrangement relating to a member of a superannuation fund (“the transferor fund”) are transferred so as to become held for the purposes of, or to represent rights under, an arrangement relating to that person as a member of another superannuation fund, the transfer is a “recognised transfer” if—
(a) the conditions in subsection (6)(a) to (c) are met in the case of each of the funds, and
(b) none of the sums and assets transferred—
(i) represents any contribution treated as made under, or any increase in the value of any rights treated as an increase under, the shadow fund of the transferor fund or the shadow fund of any other superannuation fund, or
(ii) arises, or (directly or indirectly) derives, from anything within sub-paragraph (i) or this sub-paragraph.’
Amendment 22, page 167, line 19, leave out sub-paragraphs (6) to (8).
Amendment 23, page 169, line 13, leave out “Subsection (4) does not” and insert “Subsections (7A) and (7B)”.
Amendment 24, page 169, line 20, at end insert—
‘(7A) If the lump sum is wholly in respect of rights which have accrued on or after 6 April 2017, there is no reduction under subsection (4).
(7B) If the lump sum is wholly or partly in respect of rights which accrued before 6 April 2017, the amount of any reduction under subsection (4) is given by—
R x A/LS
A is so much of the lump sum as is in respect of rights which accrued before 6 April 2017,
LS is the amount of the lump sum, and
R is the amount which (ignoring this subsection) is given by subsection (4) as the amount of the reduction.’
Amendment 25, page 170, line 22, at beginning insert—
“Where the lump sum is paid under a pension scheme that was an employer-financed retirement benefits scheme immediately before 6 April 2017, deduct so much of the lump sum left after Step 1 as is deductible in accordance with subsection (5A).
Where the lump sum is paid otherwise than under such a scheme,”
Amendment 26, page 170, line 23, leave out
“rights, which accrued before 6 April 2017,”
“the value immediately before 6 April 2017 of rights, accrued by then,”.
Amendment 27, page 170, line 39, at end insert—
‘(5A) These rules apply for the purposes of the first sentence of Step 2—
(a) “the post-Step 1 amount” means so much of the lump sum as is left after Step 1;
(b) “the relevant amount” means so much of the post-Step 1 amount as is paid in respect of rights specifically to receive benefits by way of lump sum payments;
(c) “reckonable service” means service in respect of which the rights to receive the relevant amount accrued (whether or not service in the same employment or with the same employer, and even if the rights originally accrued under a different employer-financed retirement benefits scheme established in or outside the United Kingdom);
(d) “pre-6 April 2017 reckonable service” means reckonable service that is service before 6 April 2017;
(e) “pre-6 April 2017 reckonable foreign service” means pre-6 April 2017 reckonable service that is foreign service;
(f) the deductible amount is the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service if—
(i) at least 75% of pre-6 April 2017 reckonable service is made up of foreign service, or
(ii) the period of pre-6 April 2017 reckonable service exceeds 10 years and the whole of the last 10 years of that period is made up of foreign service, or
(iii) the period of pre-6 April 2017 reckonable service exceeds 20 years and at least 50% of that period, including any 10 of the last 20 years, is made up of foreign service;
(g) otherwise, the deductible amount is the appropriate fraction of the value immediately before 6 April 2017 of the rights then accrued to payment of so much of the relevant amount as is paid in respect of pre-6 April 2017 reckonable service;
(h) “the appropriate fraction” is given by—
F is the period of pre-6 April 2017 reckonable foreign service, and
R is the period of pre-6 April 2017 reckonable service.’
Amendment 28, page 170, line 42, at end insert—
‘“foreign service” has the meaning given by section 395C,’
Amendment 29, page 171, line 17, at end insert—
‘Relief from tax under Part 9 of ITEPA 2003 not to give rise to tax under other provisions
13 (1) In section 393B(2)(a) of ITEPA 2003 (tax on benefits under employer-financed retirement benefit schemes: “relevant benefits” do not include benefits charged to tax under Part 9), after “646E” insert “or any deductions under section 574A(3)”.
(2) The amendment made by this paragraph has effect in relation to benefits by way of lump sums paid on or after 6 April 2017.’—(Jane Ellison.)
Schedule 3, as amended, agreed to.
Pensions: offshore transfers
Amendments made: 30, page 172, line 23, after “sub-paragraph” insert “(6C) or”.
Amendment 31, page 174, line 21, at end insert—
‘(4A) In sub-paragraph (4) (power to specify whether payments by scheme are referable to relevant transfer fund), after “payments or transfers made (or treated as made) by” insert “, or other things done by or to or under or in respect of or in the case of,”.’
Amendment 32, page 176, line 28, leave out “with the next 5” and insert—“immediately before the next 6”.
Amendment 33, page 177, line 1, leave out “with the next 5” and insert—
“immediately before the next 6”.
Amendment 34, page 178, line 8, leave out
“for the purposes of sections 244L and 254”.
Amendment 35, page 178, line 28, leave out
“for the purposes of sections 244L and 254”.
Amendment 36, page 178, line 48, leave out
“for the purposes of sections 244L and 254”.
Amendment 37, page 179, line 18, leave out
“for the purposes of sections 244L and 254”.
Amendment 38, page 180, line 19, leave out “was” and insert “has been”.
Amendment 39, page 180, line 21, leave out “was” and insert “has been”.
Amendment 40, page 183, line 17, leave out from beginning to fourth “the”.
Amendment 41, page 184, leave out lines 30 to 38.
Amendment 42, page 188, line 8, at end insert—
“17A In Schedule 32 (benefit crystallisation events: supplementary provision), after paragraph 2 insert—
‘Avoiding double counting of refunded amounts of overseas transfer charge
2A (1) This paragraph applies where an amount of overseas transfer charge is repaid (whether or not under section 244M) to the scheme administrator of one of the relevant pension schemes.
(2) The amount crystallised by the first benefit crystallisation event that occurs in respect of the individual and a benefited scheme after receipt of the repayment is to be reduced (but not below nil) by the amount of the repayment.
(3) If the amount of the repayment exceeds the reduction under sub-paragraph (2), the excess is to be set sequentially until exhausted against the amounts crystallised by subsequent benefit crystallisation events occurring in respect of the individual and a benefited scheme.
(4) In sub-paragraphs (2) and (3) “benefited scheme” means—
(a) the scheme to which the repayment is made, and
(b) any other pension scheme if as a result of a recognised transfer, or a chain of two or more recognised transfers, sums or assets representing the repayment are held for the purposes of, or represent rights under, that other scheme.’”
Amendment 43, page 188, line 38, at end insert—
‘(1A) In those Regulations, after regulation 13 insert—
“14 Claims for repayments of overseas transfer charge
(1) This regulation applies where the scheme administrator of a registered pension scheme becomes aware that the scheme administrator may be entitled to a repayment under section 244M of the Act in respect of overseas transfer charge on a transfer.
(2) The scheme administrator must, no later than 60 days after the date on which the scheme administrator becomes aware of that, make a claim for the repayment to the Commissioners for Her Majesty’s Revenue and Customs.
(3) The claim must provide the following information—
(a) the member’s name, date of birth and principal residential address,
(b) the date of the transfer and, if different, the date of the event triggering payability of the charge on the transfer,
(c) the date on which the scheme manager accounted for the charge on the transfer,
(d) why the charge on the transfer has become repayable, and
(e) the amount in respect of which the claim is made.
(4) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 14 November 2017, paragraph (2) is to be treated as requiring the claim to be made no later than 14 November 2017.”’
Amendment 44, page 188, line 39, leave out “this paragraph” and insert “sub-paragraph (1)”.
Amendment 45, page 188, line 42, at end insert—
“( ) The amendment made by sub-paragraph (1A) is to be treated as having been made by the Commissioners for Her Majesty’s Revenue and Customs under the powers to make regulations conferred by section 244M(8) of FA 2004.”
Amendment 46, page 190, line 3, at end insert—
‘(4A) In regulation 3(3)(a) (reporting duty under regulation 3(2) expires after 10 years from creation of relevant transfer fund), after “beginning” insert “—
(i) if the payment is in respect of one or more of the relevant member’s ring-fenced transfer funds (whether or not it is also in respect of anything else), with the key date for that fund or (as the case may be) the later or latest of the key dates for those funds, and
(ii) if the payment is not to any extent in respect of the relevant member’s ring-fenced transfer funds,”.’
Amendment 47, page 191, line 26, after “take” insert “place”.
Amendment 48, page 192, line 26, at end insert—
“3AEA Information provided by member to QROPS: inward and outward transfers
(1) Paragraph (2) applies where—
(a) a recognised transfer or onward transfer is made to a QROPS, or an onward transfer is made by a QROPS or former QROPS, and
(i) the overseas transfer charge arises in the case of the transfer, or
(ii) the transfer is required by section 244B or 244C to be initially assumed to be excluded from the overseas transfer charge by that section.
(2) Each time during the relevant period for the transfer that the member—
(a) becomes resident in a country or territory, or
(b) ceases to be resident in a country or territory,
the member must, within 60 days after the date that happens, inform the scheme manager of the QROPS or former QROPS that it has happened.
(3) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 30 June 2017, paragraph (2) is to be treated as requiring the information to be given no later than 30 June 2017.”
Amendment 49, page 194, line 23, at end insert—
“3AK Claims for repayments of charge on subsequent excluding events
(1) Repayment under section 244M (repayments of overseas transfer charge) to the scheme manager of a QROPS or former QROPS is conditional on making a claim to HMRC.
(2) Such a claim in respect of overseas transfer charge on a transfer—
(a) must be in writing,
(b) must be made no later than 12 months after the end of the relevant period for the transfer, and
(c) must provide the following information—
(i) the member’s name, date of birth and principal residential address,
(ii) the date of the transfer and, if different, the date of the event triggering payability of the charge on the transfer,
(iii) the date on which the scheme manager accounted for the charge on the transfer,
(iv) why the charge on the transfer has become repayable, and
(v) the amount in respect of which the claim is made.”
Amendment 50, page 194, line 38, leave out “regulation 3AE(1) to (5)” and insert—
“regulations 3AE(1) to (5) and 3AEA”.
Amendment 51, page 195, line 3, at end insert
( ) are, so far as they insert new regulation 3AK, to be treated as having been made by the Commissioners under the powers to make regulations conferred by section 244M(8) of FA 2004.”
Amendment 52, page 196, line 28, leave out “potentially excluded” and insert “overseas”.
Amendment 53, page 196, line 32, at beginning insert
(i) the overseas transfer charge arises in the case of the transfer, or
Amendment 54, page 196, line 4, at end insert—
‘(3) In a case where the 60 days mentioned in paragraph (2) ends with a day earlier than 30 June 2017, paragraph (2) is to be treated as requiring the information to be given no later than 30 June 2017.’
Amendment 55, page 198, line 41, after “Regulations,” insert—
“and the amendments in regulation 11BA of the Registered Pension Schemes (Provision of Information) Regulations 2006,”
Amendment 56, page 198, line 46, at end insert—
“if it would otherwise be considered for those purposes as charged in an earlier period.”—(Jane Ellison.)
Schedule 4, as amended, agreed to.
Schedules 5 and 6 disagreed to.
Schedule 7 agreed to.
Schedules 8 to 15 disagreed to.
Employment income provided through third parties
Amendment made: 57, page 607, line 18, leave out from ‘“step”)’ to ‘insert’ in line 19 and insert ‘at the end’.—(Jane Ellison.)
Schedule 16, as amended, agreed to.
Schedules 17 and 18 disagreed to.
Schedule 19 to 23 agreed to.
Schedules 24 to 29 disagreed to.
The Deputy Speaker resumed the Chair.
Bill, as amended, reported.
Bill, as amended in the Committee, considered.
Order. Under the Order of the House of yesterday, we shall now move to the remaining stages, with no amendments on consideration. I shall now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motion, copies of which will be made available in the Vote Office and distributed by the Doorkeepers.
I can now inform the House of my decision about certification. For the purposes of Standing Order No. 83L(2), I have certified clause 2 of the Finance (No. 2) Bill as relating exclusively to England, Wales and Northern Ireland and within devolved legislative competence. Under Standing Order No. 83L(4), I have also certified the following amendment as relating exclusively to England, Wales and Northern Ireland—the omission of clause 60 of the Bill in Committee of the whole House. Copies of my certificate are available in the Vote Office and on the parliamentary website.
Under Standing Order Nos. 83M and 83S, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and have been made available to Members in the Chamber. Does the Minister intend to move the consent motion?
The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).
[Mrs Eleanor Laing in the Chair]
The consent motion for England, Wales and Northern Ireland will now be considered. I remind hon. Members that all Members may speak in the debate, but if there is a Division, only Members representing constituencies in England, Wales and Northern Ireland may vote on the consent motion.
That the Committee consents to the following certified clauses of the Finance (No. 2) Bill and certified amendments made by the House to the Bill—
Clauses certified under Standing Order No. 83L(2) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland and being within devolved legislative competence
Clause 2 of the Bill (Bill 156).
Amendment certified under Standing Order No. 83L(4) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland
The omission in Committee of Clause 60 of the Bill (Bill 156).—(Jane Ellison.)
Question agreed to.
The occupant of the Chair left the Chair to report the decision of the Committee (Standing Order No. 83M(6)).
The Deputy Speaker resumed the Chair; decision reported.
I beg to move, That the Bill be now read the Third time.
Before I briefly comment in summary of the Bill, may I beg your indulgence, Madam Deputy Speaker, in making some remarks about a couple of colleagues?
The right hon. Member for Oxford East (Mr Smith) was present earlier and made a valedictory speech. I referred to that in my subsequent speech, but I was not then in a position to mention his record of service to the country. Not only has he been a parliamentarian since 1987, but he was a Minister of State for Education and Employment between 1997 and 1999, Chief Secretary to the Treasury between 1999 and 2002 and, indeed, Secretary of State for Work and Pensions between 2002 and 2004. He is no longer in his place, but I ask his party’s Front-Bench spokesman to confer my sentiments to him and to draw to his attention the fact that I—on behalf of the Government and, I am sure, of all colleagues—have placed on record our thanks for his service to the country as a Minister during that period.
With the House’s indulgence, I will pay tribute to a second Member. I have very recently been informed that my right hon. Friend the Member for Chichester (Mr Tyrie) is not seeking re-selection at this election, so I want to make a few comments about him. He has been the MP for Chichester since 1997. He is a former adviser to Nigel Lawson—Lord Lawson—when he was Chancellor, as he was to John Major when he was Chancellor. Members may be aware that my right hon. Friend was a senior economist at the European Bank for Reconstruction and Development before he entered Parliament. He is of course a very senior parliamentarian, and when we moved to electing our Select Committee Chairs, it was no surprise that he was elected overwhelmingly by the House with cross-party support. In recent times, he has served in one of the most senior positions in Parliament, if not the most senior position, as Chairman of the Liaison Committee. In all those roles across his life of public service, governmental service and service to this House, he has been enormously distinguished, and I think I speak for everyone in saying that he is very well liked. I have known him during the years I have been in Parliament, but as a Treasury Minister, I have of course come to know him better in recent months. Indeed, I have responded to his letters on many occasions, and discussed them with him on the sidelines on many other occasions. Throughout those dealings, I have seen all his experience and qualities being brought to bear. I just want to say that to me, as a Minister, he has been kind and wise, and I will miss him enormously.
To move on to my Third Reading speech, the economy is fundamentally strong, and with this Finance Bill we are taking yet another step forward in building a stronger economy and a healthier society. As we have discussed, the Bill is proceeding on the basis of consensus. A number of key policy changes to the tax system, such as measures to tackle tax avoidance, are not being proceeded with now, but will be brought forward in a Finance Bill at the first opportunity after the election.
Even in its shortened form, the Bill takes action in three areas that have been consistent priorities for us in making changes to the tax system. First, the measures in this Bill take further action to reduce the deficit and secure the nation’s public finances, and the Bill raises much-needed revenue to fund the public services we all value. Secondly, the Bill takes the next steps to achieve this Government’s aim of a fairer and more sustainable tax system. It makes it clear that the tax system must keep pace with the different ways in which people choose to work, and ensure fair treatment between individuals. It also demonstrates our continued commitment to tackling tax avoidance and evasion to level the playing field for the honest majority of businesses and individuals who pay the tax they owe. Finally—this cause is particularly close to my heart, as a former Minister for Public Health—the Bill marks an important step in tackling childhood obesity by legislating for the soft drinks industry levy. As I noted earlier, we have achieved a great deal of cross-party consensus on the levy, which will help to deliver a brighter and healthier future for our children. I am delighted that we will be able to put it on the statute book.
In conclusion, this Finance Bill supports our commitment to a fair and sustainable tax system, one that offers support for our critical public services and will get the country back to living within its means. In that regard, it sits with this Government’s long-term commitment to improving the strength of our economy, and I commend it to the House.
Before I call the Opposition spokesman, may I echo on behalf of the whole House the Minister’s kind words about the right hon. Members for Oxford East (Mr Smith) and for Chichester (Mr Tyrie)? We extend those kind words to all other hon. Members who are present this afternoon, who have taken part in the debates on this Bill and many similar Bills assiduously and brilliantly on behalf of their constituents, and who will not be here during the next Parliament. The whole House wishes them all very well indeed.
I absolutely concur with the comments that you have just made, Madam Deputy Speaker, and that the Minister made about my right hon. Friend the Member for Oxford East (Mr Smith) and the right hon. Member for Chichester (Mr Tyrie). May I comment on my hon. Friend the Member for Wolverhampton South West (Rob Marris), who is also leaving the House? It seems to me that some people have got time off for good behaviour.
May I just make a point about my hon. Friend the Member for Ealing North (Stephen Pound) and the Perivale scout group? He was very concerned about the insurance premium tax. I do not think he won on that point, but he has won on the sugar tax, which will save the teeth of the scout group. Good news for teeth; bad news for dentists, I suspect.
I alluded earlier to the fact that, as far as I could gather, this was the longest Finance Bill to be presented to the House. It had 135 clauses and 792 pages. It had clauses on pensions advice, overseas pensions, personal portfolio bonds, an employee shareholding scheme, an insurance premium tax, air passenger duty, duties in general, fraudulent evasion, digital reporting, data gathering and search powers, as well as umpteen schedules. Of course, each of the clauses and schedules has had some degree of scrutiny, but not necessarily the amount we would like, because the general election has rather unhelpfully intervened in our deliberations. But, as they say, that’s democracy. Scrutiny is the fundamental role of Parliament, so when we do not have enough time for that role, we need to ensure that measures are not simply pushed through willy-nilly. I do not think that they have been in this regard.
We must always have a balance between raising tax and the dampening effect that that can have on business and society. That can be a difficult balance to draw and I think it has been drawn pretty well today.
I have referred previously to the need to raise our game in relation to productivity in the economy. Higher productivity is a driver of economic growth. Whatever our position, I hope that, to some degree, the Bill will help to push up productivity growth.
On the soft drinks levy, to which the Minister referred, the primary school PE and sport premium will go up from £160 million to £320 million annually, there will be an extra £10 million for breakfast clubs and, of course, 57% of the public support the levy. The Obesity Health Alliance found that the levy could potentially save up to 144,000 adults and children from obesity; prevent 19,000 cases of type 2 diabetes; and avoid, as I alluded to, 270,000 decayed teeth. I welcome the Minister’s commitment to the review in a couple of years, based on the advice of Public Health England.
Some measures are no longer in the Bill, some will no doubt come back and we will bring some measures back before the House. We hope that those measures, in one way or another, will be scrutinised.
Like this one, the debates today have tended to be fairly quiet, with not many of us speaking.
I echo the comments that have been made about the right hon. Members for Chichester (Mr Tyrie) and for Oxford East (Mr Smith) and the hon. Member for Wolverhampton South West (Rob Marris), with whom I had the pleasure of serving on the Finance Bill Committee last year. I was constantly impressed by his incredible knowledge about all the matters we discussed. I will be sorry to see him go from this place.
I have a few matters to raise on Third Reading. We have had a greatly curtailed debate on the Finance (No. 2) Bill this year. Obviously, we will see a new Finance Bill in the next Session, but this Bill has been one of the most bizarre things I have been part of since I was elected. Last Tuesday, we had Second Reading. On Tuesday morning, everything was going to proceed as normal with the Finance Bill. We were going to have two days of Committee of the whole House, something like six Public Bill Committee sittings and two days for Report stage and Third Reading. As it is, it has all been squidged into three hours or so, with the opportunity for it to last for five hours. It has been totally bizarre.
I appreciated receiving the Government’s notification that they would withdraw some things last night, but that was very little notice to allow us to go through all these matters properly and to work out exactly what the Government had and had not decided to proceed with. It has been difficult to operate under these circumstances and to provide the appropriate scrutiny, given the lack of time. The SNP has done its best. We have spoken on every group today and were the only party, other than the Government, to table amendments to the Bill. We have gone out of our way to provide scrutiny.
Before I talk about the provisions of the Bill, I want briefly to mention the way in which the Government tackle budgetary scrutiny, the way in which the Standing Orders are drafted and the way in which this House considers financial matters. In the past, I have raised at length the shortcomings of the estimates process. The Budget process is marginally better, but still not great.
I have mentioned a number of times the “Better Budgets” report. I absolutely back the call by the organisations that wrote that report for the Finance Public Bill Committee to have public hearings. It is really important for this House to do that. I would very much like whatever Government come in after 8 June to change the Standing Orders to allow hearings in the Public Bill Committee stage of the Finance Bill. That would make a really big difference to the level of scrutiny we are able to provide. I have heard the argument that the Treasury Committee hears evidence from members of the public. However, different individuals sit on the Treasury Committee and the Finance Bill Committee. I will keep making this call—the Minister knows that once I start bringing something up, I am not very good at letting it go—until the Government change the Standing Orders. I recognise that they were not put in place by this Government.
On the provisions of the Bill, I welcome the Government’s withdrawal of certain measures. I note the Government’s position on making tax digital, but I welcome their recognition that it is a contentious matter and that it would be better to bring it back following the general election. I welcome the withdrawal of the changes to the dividend threshold. We did not feel we had adequate time to scrutinise those changes and I appreciate the Government taking that measure out of the Bill.
We are less supportive of some matters that have made it to Third Reading. We still feel that the Government can do more on tax evasion. New clause 1 on tax evasion, which we tabled for debate today, asked the Government to look at international comparators and to bring back a full report on all the ways in which international comparators are successful in tackling tax evasion. I get that piecemeal work has been done on this, but a full report would be incredibly helpful for the UK Government to ensure that the right decisions are taken to tackle tax evasion.
We are clear that there is still not enough protection for whistleblowers. We are very indebted to individuals who come forward and we would like to encourage them to continue to do so. Anything the Government can do on that would therefore be welcome.
On self-employment, last year’s Finance Bill made some changes for those employed through intermediaries and this year’s Finance Bill does the same. The Chancellor proposed changes to national insurance, but then rowed back on them. Those, however, are all piecemeal changes. If the Government want to make changes, they need to do them properly by looking at everything that affects the taxation of self-employed individuals. They also need to look at tax credits, so that self-employed individuals are supported through childcare vouchers and so on. Everything needs to be taken in the round, in addition to pension entitlement, holiday entitlement and maternity leave entitlement. A proper tax system needs to be put in place to tax self-employed individuals appropriately and provide them with appropriate benefits to encourage them to aspire and to leave employment—or leave unemployment—to begin their own businesses. The more we do that, and the less we shift the goalposts, the better situation we will be in.
The UK Government could do more to give confidence to the oil and gas industry. I would very much like them to look at changes to the tax regime on small pools. They have said they are committed to backing the maximising economic recovery strategy put in place by Sir Ian Wood. However, they have not followed up on that with enough measures. I do not feel that oil and gas has been given the priority it should be given. Oil and gas is incredibly important to the UK’s economy as a whole, as well as to the economy of Scotland. It supports a huge number of jobs in our communities, even though there has been a massive reduction in the number of those jobs in recent years.
I am not asking for the Government to significantly reduce the rates of tax for oil and gas; I am asking them to look at incentivising investment and to look at those more difficult to reach pools. I am not asking for massive tax giveaways. In fact, incentives for investing in small pools would be a net benefit for the Government—it would not cost them anything. I am not asking for an amazing massive reduction in headline rates of tax; I am asking the Government to listen to companies that are coming forward and asking for small and reasonable changes, some of which will increase, not decrease, the UK Government’s tax take. I therefore ask the Government to consider the amendments we have tabled and the suggestions we are making.
I appreciate the changes—they are long overdue—the UK Government hope to make in relation to late life assets. The sooner the commission can report and the change can be implemented the better. I would really appreciate that coming forward quickly.
Regardless of which Government are elected, we will have a new Budget and a new Finance Bill. We have not seen from this Government in any discussion of finances, nearly a year on from the Brexit referendum, an acceptance of the effects Brexit will have on the UK Government’s budget and tax take, on employment levels, on our constituents’ jobs, on what businesses will come in and on the level of investment that will be coming in. Nearly a year on, we have not seen any recognition of any of that. I hope that in the next Parliament, the new Government will recognise the financial impact of Brexit on household budgets and jobs. I hope we see real changes that take into account the effects of Brexit.
During the coalition Government, fiscal policy was unnecessarily tight and our constituents paid the price. After seven years, we have moved to a position where, despite the Prime Minister in her election campaign saying that taxes will be lower under a Conservative Government—she has not actually said lower than what—this year, on projections which of course may or may not come to pass, taxation as a percentage of national income is likely to be at its highest ever level in peacetime. That is not exactly a low-tax Government.
For the Government to try to pretend that they are a low-tax Government is unfortunate during a general election. It also leads to an unfortunate trend on both sides of the House to talk about taxation as if it were an evil in and of itself. Taxation pays for public services, which all our constituents enjoy. I have no problem with taxation that is fair and sustainable—the Minister talked about that—and if we clamp down on tax avoidance. I only wish that the outgoing Government and the incoming Government, whoever they are, were more forceful on the public register of beneficial ownership of offshore-held accounts and funds, particularly since about half the amount around the world, as far as we can tell, is held in British overseas territories. The UK therefore has a huge role to play. I salute the role the Conservative Government have thus far played, but there is further to go. I hope that an incoming Labour Government on 9 June will take it a lot further.
I have done seven or eight Finance Bills in my time in this House. As some right hon. and hon. Members know, this will be my final speech to the House, as I am retiring at the general election. I will be putting my feet up in the garden and watching the rest of you work. One has to try, as the right hon. Member for Chichester (Mr Tyrie) always tried—he has rightly been praised in this debate—to be realistic about what is going on. What is going on is that, under the coalition Government and the Conservative Government of the past two years, inequality of income has fallen—that is true on the Gini coefficient—and unemployment has fallen fantastically. In round terms, employment is up by 2.75 million. That is a fantastic achievement. About one in five of those new jobs is a zero-hours contract and not all zero-hours contracts are decried by those who have them. The proportion of workers who are working part time has hardly changed in seven years. There will be some who are working part time who would prefer to work full time, but many of those who are working part time, including within that 2.75 million, choose to do so and they should have the flexibility to do so.
The achievement on falling unemployment has, however, been bought on a sea of debt. The national debt in the past seven years has gone up by almost 70%. That is an enormous amount in peace time in seven years. The deficit, I have to say to this outgoing Government, is a bit like Gordon Brown’s golden rule—another can that kept getting kicked down the road—that Government borrowing should, on the economic cycle, be balanced. Gordon Brown, as Chancellor and Prime Minister, kept redefining what the economic cycle was to try to make his figures work out.
With this Government and the previous Government, the annual deficit, which is still enormous, is always going to be sorted out in five years’ time. I am not sure how many of my constituents believe that any more, particularly in a year when, I think I am right in saying, the Government of Greece, through measures that every Labour Member and many Government Member would find far too painful, socially disruptive and unacceptable—measures forced on them by the troika and the International Monetary Fund—are due to record a surplus on their current account.
Here we are, in the wealthy United Kingdom, with a Government who are saying, as did their predecessor Government over the preceding five years, “We want to get the deficit down, and we will get it down in five years”—it is always mañana, always another five years—but who, on that measure, are doing far, far worse than the Government of Greece. It is an indictment of seven years of Conservative-led Government. My constituents have had the pain but not the gain. Inequality of wealth, in contradistinction to inequality of income, has increased very markedly in the past seven years. Not only do I find that distasteful as a socialist; as a citizen of the UK, I find it worrying, because if a society becomes too unequal, it carries a severe risk of social fracture.
We see that in the housing market. On current trends, many people will never have affordable housing. Those in the next generation who have it often have it because their parents or grandparents did as well and they have inherited a deposit or house from earlier generations in their family who owned property. That trend will lock in inequality into our society. Both sides of the House profess to decry and wish to address such inequality, but it will be locked in through the housing market because in the past 10 years, in particular, we have not built or created nearly enough housing units in the UK. It will have huge social implications when that trend creates rigid inequality that cannot be overcome, regardless of what we do on schooling, because it is locked in. Does someone inherit or not inherit a down payment on a house? That is very sad for a society in which average earnings—average incomes have risen because pensioner incomes have risen thanks to the triple lock—are still below what they were nine years ago before the crash.
That is not all the fault of the Government, who have taken some good steps, but they have not gone far enough on what they now call the national living wage. They are converts—the Conservative party opposed the minimum wage on principle when we introduced the legislation in 1998—and with the zeal of converts, they have gone a lot further than I and many Labour Members expected in terms of a statutory minimum wage and national living wage, but they still have not gone far enough. That is bad for social cohesion and poverty in this country and bad for economic growth, because in a capitalist society, one way to drive productivity is through higher wages and a substitution of capital for labour. When we substitute capital for labour, very often—not in every case, but overall and very often—we get higher productivity.
We need to do more. The Government have taken some steps, but we on the Labour Benches do not think they have gone nearly far enough, on productivity as it relates to technical training and upskilling the workforce. The Conservatives have come late to that party. We now have the target of 3 million apprentices, which might or might not be met, but if it is met, one fears it will be through redefining as “apprenticeships” courses and training schemes that many of us would not regard as such, to make the figures work—that is always a danger with targets. It is laudable, however, that the Government want to take policies from Labour and increase training, particularly technical training, in our economy, and the Bill will help in that regard.
Over the past seven years—this is not addressed in the Bill—infrastructure spending has been insufficient, but we have also had, and are having, inappropriate infrastructure spending. Unless there is a change of course, as I hope there will be, we will be spending about £60 billion or more on the HS2 railway line, which is a very bad allocation of capital for transport spending. We are also on course to spend—indirect spending through much higher electricity prices, not direct spending by the Government—upwards of £18 billion on the Hinkley Point C nuclear reactor, which is to be built by a bankrupt French company, EDF, which is only still going because it is being bailed out by its state owners, the French Government, and using a design that has never worked anywhere in the world. It is being tried in Finland and Normandy, but those projects are years overdue and massively over-budget, yet it is part of the Government’s approach to infrastructure spending. We on the Labour Benches recognise that the Government have again started to borrow some of our policies, such as the possible cap on domestic energy prices, but they have not gone far enough on infrastructure spending and have lost their way on some of these big projects.
The final issue, mentioned by the hon. Member for Aberdeen North (Kirsty Blackman), is Brexit, which looms over us all and all our constituents but, surprisingly, not over the Bill. Before the referendum last summer, the Treasury was keen to put out projections of what its officials thought would be the consequences of a Brexit vote. It was an entirely appropriate use of its resources by a Government whose official policy was to support the United Kingdom remaining in the EU. We had all those projections, but since 23 June things have gone quiet. I appreciate that the UK, in round terms, is still 100 weeks away from leaving the EU, which makes it more difficult to come up with projections of what is likely to happen with our economy—partly because we do not know what the Brexit package will be—but there are some signs of concern in the markets about Brexit that I do not think are adequately reflected in the financial measures proposed by the outgoing Government, including the measures in the Bill. If the Government are re-elected—in my view, that would be unfortunate—they will have to get their act together and be a bit more public about where they see the economy going with Brexit.
As I said, I appreciate that that cannot easily be done given that we do not know what the final package will look like or whether it will be a hard Brexit with no package at all, but to reassure the markets and—just as importantly—our constituents, whichever side of referendum they might have been on, the Government of the day, from 9 June, will have to be rather more open about the direction of travel and what they are doing to be proactive, rather than reactive, to the process of Brexit and its effect on the economy. That will be the case whatever the Government’s colour, because without that greater clarity the markets will be more concerned and more spooked, and our constituents will be more concerned and more worried, than they need to be. Of course nobody has a crystal ball, but it would help us all to have a few more projections than we hitherto have had.
Question put and agreed to.
Bill accordingly read the Third time and passed.