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General Committees

Debated on Monday 23 October 2017

Delegated Legislation Committee

Value Added Tax (Place of Supply of Services) (Telecommunication Services) Order 2017

The Committee consisted of the following Members:

Chair: Stewart Hosie

† Chapman, Douglas (Dunfermline and West Fife) (SNP)

† Crabb, Stephen (Preseli Pembrokeshire) (Con)

† Dodds, Anneliese (Oxford East) (Lab/Co-op)

† Foster, Kevin (Torbay) (Con)

Godsiff, Mr Roger (Birmingham, Hall Green) (Lab)

† Hair, Kirstene (Angus) (Con)

† Harper, Mr Mark (Forest of Dean) (Con)

† Lee, Ms Karen (Lincoln) (Lab)

† Malthouse, Kit (North West Hampshire) (Con)

† O'Mara, Jared (Sheffield, Hallam) (Lab)

† Philp, Chris (Croydon South) (Con)

† Pursglove, Tom (Corby) (Con)

† Shah, Naz (Bradford West) (Lab)

† Siddiq, Tulip (Hampstead and Kilburn) (Lab)

† Smith, Jeff (Manchester, Withington) (Lab)

† Stride, Mel (Financial Secretary to the Treasury)

† Stuart, Graham (Beverley and Holderness) (Con)

Gail Bartlett, Committee Clerk

† attended the Committee

Second Delegated Legislation Committee

Monday 23 October 2017

[Stewart Hosie in the Chair]

Value Added Tax (Place of Supply of Services) (Telecommunication Services) Order 2017

I beg to move,

That the Committee has considered the Value Added Tax (Place of Supply of Services) (Telecommunication Services) Order 2017 (S.I., 2017, No. 778).

May I say what a pleasure it is to serve under your chairmanship, Mr Hosie?

The order introduces a change to the VAT place of supply rules for telecommunications services supplied to non-business customers. From 1 November 2017, such services, when supplied to UK residents, will be subject to UK VAT regardless of where they are consumed. That will bring the UK in line with the revised international approach agreed at the OECD.

Most telecommunications services supplied to consumers resident in the UK are subject to UK VAT. However, if those services are effectively consumed outside the UK, “use and enjoyment” rules mean that they are treated as being outside the scope of UK VAT. Some telecommunications companies have sought to exploit that use and enjoyment provision to pay less than their fair share of VAT. They seek to use a rule designed to relieve from VAT supplies consumed outside the EU to avoid paying VAT on their domestic supplies. Different rules apply to business-to-business supplies of telecommunications services, and those are not being changed.

The Government consulted on a draft order in April 2017 and have taken on board industry concerns. The order will remove the use and enjoyment provisions for business-to-consumer telecommunications supplies. That means that the place of supply will always be where the consumer belongs. For UK residents that will be the UK, and UK VAT will be due regardless of where telecommunications services are used and enjoyed. That will align UK VAT rules with the guidelines recommended by the OECD and with the rules in many other countries, including most EU member states. Telecommunications providers will no longer have to make an adjustment in their VAT returns to account for use and enjoyment outside the UK. That will reduce administrative burdens on mobile phone providers and simplify UK tax law.

Removing the use and enjoyment rules will also remove any uncertainty about the place of supply, preventing attempts by a few to avoid tax, which potentially threatens around £1 billion of tax revenue. Her Majesty’s Revenue and Customs estimates that this measure will yield £25 million of additional VAT in 2017-18 and £65 million per annum after that. This proposal is expected to have a negligible impact on business expenditure, but will affect telecommunications businesses providing services to consumers travelling outside the EU. The impact on consumers will depend on whether telecommunications companies choose to pass on the VAT.

The order will bring the UK’s rules in line with international standards and support the Government’s aim of making the UK tax system simpler for businesses. It will also prevent tax avoidance and ensure that everyone pays their fair share. I therefore commend the order to the Committee.

It is a pleasure to serve with you in the Chair, Mr Hosie. I am grateful to the Minister for his explanation of the order, which clearly, as he set out, will bring the UK’s practice in this area in line with much international practice. I just have two brief questions.

First, the commencement date of the new rules—1 November—is obviously quickly approaching, so we are on a short timescale. I wonder whether the Minister is able to comment briefly on the extent of industry preparedness for this measure. That is particularly important given that the explanatory memorandum makes it clear that there may be some uncertainty about the nature of arrangements in this regard when we leave the EU. Therefore, compliance costs and issues are particularly pertinent. It would be helpful to hear whether he believes that the industry will be ready for these changes.

Secondly, the Minister talked about the likely impact of the measure on revenues accruing to the Exchequer. He mentioned apparent evidence of some telecommunications firms in effect exploiting uncertainty about where consumers are located to retain funds that should be paid in VAT. He provided three different figures. He suggested that there would be increases in revenue of £25 million in 2017-18 and of £65 million after that. I assume that £65 million is an annual figure and that the £25 million is just because the 2017-18 tax year has a short time left to run, but I wonder where the overall £1 billion figure comes from. Is that just an estimate over time? Will he provide a little more information about that?

I thank the hon. Lady for her comments. She raised a few questions, which I will address. She is correct that the measure will kick in from 1 November. On the consultation, it was carried out with the industry and the Treasury is satisfied that the industry will be ready to effectively move forward with this. The £1 billion under threat is our estimate of the potential tax take that could be at risk if this avoidance were to get completely out of hand, which is clearly something the measure is designed to make sure does not occur. I hope that that satisfies the Committee and that we can agree to these measures.

Question put and agreed to.

Committee rose.

Draft Misuse of Drugs Act 1971 (Amendment) (No. 2) Order 2017

The Committee consisted of the following Members:

Chair: Siobhain McDonagh

Amesbury, Mike (Weaver Vale) (Lab)

† Badenoch, Mrs Kemi (Saffron Walden) (Con)

† Benyon, Richard (Newbury) (Con)

† Bowie, Andrew (West Aberdeenshire and Kincardine) (Con)

† Chalk, Alex (Cheltenham) (Con)

Coffey, Ann (Stockport) (Lab)

† Dakin, Nic (Scunthorpe) (Lab)

† Day, Martyn (Linlithgow and East Falkirk) (SNP)

† Ghani, Ms Nusrat (Wealden) (Con)

† Grant, Mrs Helen (Maidstone and The Weald) (Con)

† Griffiths, Andrew (Lord Commissioner of Her Majesty's Treasury)

† Haigh, Louise (Sheffield, Heeley) (Lab)

Lewis, Mr Ivan (Bury South) (Lab)

† Lopez, Julia (Hornchurch and Upminster) (Con)

† Newton, Sarah (Parliamentary Under-Secretary of State for the Home Department)

Smith, Eleanor (Wolverhampton South West) (Lab)

† Zeichner, Daniel (Cambridge) (Lab)

Jonathan Whiffing, Committee Clerk

† attended the Committee

The following also attended (Standing Order No. 118(2)):

Khan, Afzal (Manchester, Gorton) (Lab)

First Delegated Legislation Committee

Monday 23 October 2017

[Siobhain McDonagh in the Chair]

Draft Misuse of Drugs Act 1971 (Amendment) (No. 2) Order 2017

I beg to move,

That the Committee has considered the draft Misuse of Drugs Act 1971 (Amendment) (No. 2) Order 2017.

It is a pleasure to serve under your chairmanship, Ms McDonagh. I understand that this is your inaugural meeting after being given the honour, on which I warmly congratulate you, of chairing Committees—a very responsible position. Having served on the London Borough of Merton Council with you before either of us had the privilege of representing our communities in this place, I know that you will do a very good job. I hope that our first outing together will be successful and relatively swift.

The draft order was laid before Parliament on 19 July. I am grateful to the Advisory Council on the Misuse of Drugs for its further consideration of this new psychoactive substance, which has informed the measure. The effect of the draft order will be to permanently control methiopropamine, or MPA, as a class B drug under schedule 2, part 2 of the Misuse of Drugs Act 1971. That will make it an offence to possess, produce, import, export, supply or offer to supply that drug without a Home Office licence.

MPA is a stimulant psychoactive substance that is similar in structure to methamphetamine. It has effects similar to other stimulants such as MDMA, amphetamine and cocaine; those effects include stimulation, alertness and an increase in energy and focus. However, a number of harms resulting from consumption of MPA have been evidenced. Symptoms include abnormally fast heart rates, anxiety, panic attacks, perspiration, headaches, nausea, difficulty breathing, vomiting, difficulty urinating and sexual dysfunction. The substance is associated with a number of recent deaths: the National Programme on Substance Abuse Deaths reported 46 cases where MPA was found in post-mortem toxicology between 2012 and 2017; in 33 of those, MPA was implicated in the actual cause of death.

In November 2015, the ACMD recommended that MPA be subject to a temporary class drug order. That followed reports that MPA had emerged as a replacement drug for the methylphenidate-based compounds that were subject to a TCDO at the time. The increasing use and number of associated deaths and harms, together with the potential intravenous use, led to urgent advice from the ACMD to control MPA by way of a TCDO.

In September 2016, the ACMD noted that the TCDO appeared to have been successful, as the prevalence and problematic use had significantly declined. However, the ACMD requested that the order be remade for an additional 12 months to enable the gathering of a more robust evidence base before coming to a final recommendation. On 16 June this year, the ACMD provided its final advice, which was that MPA continued to be a drug that is being or is likely to be misused, and that misuse is having or is capable of having harmful effects sufficient to constitute a social problem. As such, the ACMD recommended that MPA be permanently controlled under the Misuse of Drugs Act 1971 as a class B drug. The ACMD found no evidence that MPA has any recognised medicinal use beyond potential research.

If the order is passed today, it will provide enforcement agencies with the requisite powers to restrict the supply and use of MPA in this country. It will also provide a clear message to the public that this drug carries serious health risks. We expect that the permanent control of MPA will enhance the restrictive effect on the drug’s availability that has been noted under the implementation of the TCDO.

For those reasons, I accepted the ACMD’s advice that MPA should be subject to a permanent order. I also intend to make two further related statutory instruments, to come into force at the same time as the draft order, to add the drug to schedule 1 of the Misuse of Drugs Regulations 2001 and the Misuse of Drugs (Designation) Order 2001.

I add my congratulations on your appointmen, Ms McDonagh. I know you will be a fantastic Chair—it feels strange to call you that—and it is a pleasure to serve under your chairmanship.

The official Opposition are happy to support the statutory instrument. We have heeded the advice of the Advisory Council on the Misuse of Drugs, which found that MPA has no known medicinal, commercial or industrial benefits. The Government and the Opposition—everyone in this place—have a duty to ensure that the law is coherent and consistent as the temporary order on this drug expires.

As the evidence suggests, MPA has often been marketed as a legal alternative to cocaine, often in concoction with other stimulant drugs. Its side effects of predominantly include tachycardia, chest tightness, anxiety and nausea. We accept the conclusions of the ACMD that it is a high-risk drug, with known deaths related to its use.

I want to use this opportunity to press the Minister on two points. The drugs strategy and policy making surrounding drugs and their classification are largely based on the crime survey for England and Wales. We are therefore concerned, having learnt last week that the Government are cutting the sample size, the response rate and the questions relating to performance, experience and attitudes to the criminal justice system. Will the Minister say how that will affect future decisions relating to drug classification? The drugs strategy is utterly reliant on crime survey data, so it is worrying that its legitimacy is being reduced. I hope the Minister will pass those concerns back to the Department and think again.

The new drugs strategy board is intended to oversee the strategy itself and, by implication, the classification of MPA. It comprises among others, Public Health England and the national policing lead. Has the full composition been agreed yet? Also, when will the Minister report on the work of the national recovery champion, who was to travel the country establishing best practice on drugs policy and the drugs strategy implementation?

Having said that, we recognise the harm caused by MPA and the importance of it being tightly controlled. We are pleased to support the statutory instrument.

It is a pleasure to serve under your chairmanship, Ms McDonagh. I only have a few brief comments to make. I do not think this is controversial in the slightest—almost unpronounceable, but not controversial.

I am strongly of the opinion that all drugs policy should be devolved to Scotland, where we already have control of health and justice. It would be a vital link in our tools to allow us to have full powers over harm reduction, so that we can deal with declassification, decriminalisation and even regulation.

The drugs problem in Scotland costs us around £3.5 billion per year. Drug-related deaths in Scotland are running at a rate approximately two and a half times that of the rest of the UK. This particular substance—I will simply refer to it as MPA, because I can pronounce that—has contributed at least 10 of those deaths. On that basis, I am happy to support the order.

I sound one note of caution. We spent a fair amount of time in the last Parliament putting through the Psychoactive Substances Act 2016. I wonder about its effectiveness, given that we are not using that route today.

I appreciate the support of Her Majesty’s Opposition and the other comments that have been made.

I was delighted that we were able to publish the drugs strategy. It has largely had a warm welcome, including from the Labour party. I am very appreciative of that. The hon. Member for Sheffield, Heeley pointed out that the national recovery champion potentially has a significant role, and I am pleased about the warm welcome for that. As the hon. Lady will know, it takes time to make public appointments; there must be a proper, rigorous public appointment process. That process has started and we very much hope that someone will be in the post, up and running, before the end of the year, or in the early part of next year. The work of constructing the board is, of course, moving along.

The drugs strategy was the result of a huge amount of cross-Government working. We have good inter-ministerial working, and the hon. Lady will note that the strategy is a joint one, owned by me and by the Department of Health. That is important, because the heart of the strategy is to enable people to break their addiction and to prevent people from becoming addicted to harmful substances in the first place; the recovery champion sums up the heart of the strategy.

We are working urgently and at a considerable pace with other Departments to implement the strategy. I am sure that the hon. Lady noticed over the summer the excellent work published by the Department of Health, which examined what works in recovery services. We set out an ambitious outcomes framework to enable people to get access to services that enable them to sustain their recovery over a long period. We have made good progress in implementing many aspects of the drugs strategy that we communicated in the summer.

The crime survey, about which there were some questions, is incredibly important. It has been running for decades and provides a very large sample—38,000 people, on a regular basis, give extremely good and valuable data on the experience of crime from a victim’s point of view. That helps us and those engaged in policing to make sure that there are the right resources, by which I do not mean just monetary resources: we make sure that the police have the tools they need, and that we have set out the right offences to enable them to bear down on crime.

The survey is important, but of course it is not the only one we use in relation to drugs policy. We have used a lot of data gathered from Public Health England. The hon. Lady will be well aware of the investment the Government have made in the past few years across the UK, with a lot of support from our colleagues in Scotland, so that we collect good toxicology information and so that emerging and changing trends in drug use are captured in the data collected by Public Health England, as well as through the crime survey.

I assure the hon. Lady that we are evidence-based policy makers, and always want to make sure that we have the most appropriate and up-to-date evidence on which to form our policies. We also work with the ACMD: not only do we ask it for advice about particular substances and how they should be scheduled, but we ask it to consider the effectiveness of drug and alcohol rehabilitation services. It has an important role to play, and undertakes research to enable us to do our work.

The hon. Lady commented on the changes in the crime survey and sample sizes, and I shall write to her about why we decided to proceed as we are doing, and how we will make sure to everyone’s satisfaction that we collect the data we need to do all we can to keep people safe. It is pleasing that, after a sustained effort over a number of years, fewer people—particularly young people—are taking drugs, but clearly I am worried, as are the Government, about the number of people who are dying from overdoses. We are doing a huge amount of work to tailor interventions so that lives are saved, to protect people and to enable them to make the journey to recovery.

I hope that those answers are reassuring, and that I have made the case to support the measure.

I entirely support the measure, but will the Minister clarify the position regarding the Psychoactive Substances Act? This substance was presumably already controlled under that legislation. What will bringing the substance within the 1971 Act bring to that prohibition, which aims to increase protection in our country?

I thank my hon. Friend for his question. He is absolutely right. The great success of the Psychoactive Substances Act is that, when Public Health England or police officers are worried about a new substance they see appearing on the market, immediate protection can be put in place, with a lesser burden of evidence required than for full scheduling, to prevent people from getting that harmful substance. Temporary control orders give time for the evidence base to be gathered—the full toxicology reports and the data from Public Health England and police forces—and put in the round to measure the harm in full, so that we can properly schedule substances under the 1971 Act, which is exactly what we are seeing today; the whole process is working its way through.

Stronger penalties are associated with the possession or dealing of drugs according to the schedule. We very much hope that those stronger, tougher penalties act as a deterrent and send out a clear message to young people or anyone that these are harmful substances that we do not want them to even think about taking.

I am a bit confused by the Minister’s answer. My understanding is that substances controlled under the Psychoactive Substances Act but not the Misuse of Drugs Act did not carry a possession offence. Indeed, the police are dealing with that problem at the moment in relation to Spice: they can control the supply but are not able to tackle possession, because that is not a criminal offence under the Psychoactive Substances Act. My understanding is that MPA was brought under this schedule because it would not be treated as a possession offence under the Psychoactive Substances Act, but it now will be.

I thank the hon. Lady for that clarification; I am sorry if my answer was not clear. I thought I was saying that, by bringing it across, there are those stronger penalties. She is absolutely right about that.

Question put and agreed to.

Committee rose.