1st Allocated day
Consideration of Bill, as amended in the Public Bill Committee
Review of DST
I beg to move amendment 18, page 53, line 28, leave out “before the end of 2025” and insert—
“within a year of Royal Assent and annually thereafter”
This amendment would require the Government to report on the DST annually.
With this it will be convenient to discuss the following:
Amendment 19, page 53, line 29, at end insert—
“(2) Any review made under (1) must include an assessment of the effect of the DST on tax revenues.”
This amendment would require any report on the DST to include an assessment of the effect of the DST on tax revenues.
New clause 5—Digital Services Tax: review of effect on tax revenues—
“(1) The Chancellor of the Exchequer must make an assessment of the net effect on tax revenues of the introduction of the Digital Services Tax and lay a report of that assessment before the House of Commons within six months of the passing of this Act.
2) This review must also include an assessment of the revenue effect of the Digital Services Tax on tax payable by the owners and employees of Scottish Limited Partnerships.”
This new clause would require a Government assessment of the effect on tax revenues of the DST, and in particular the change in revenues associated with Scottish Limited Partnerships.
New clause 33—Requirement on groups to publish a group tax strategy including a country-by-country report—
“(1) A group which is not required to publish a tax strategy in compliance with Schedule 19 of the Finance Act 2016 shall be deemed to be so required.
(2) Any tax strategy published by a group in compliance with that Schedule must include any relevant country-by-country report.
(3) “Country-by-country report” has the meaning given by the Taxes (Base Erosion and Profit Shifting) (Country-by-Country Reporting) Regulations 2016.
(4) A country-by-country report is relevant if it—
(a) was filed or required to be filed by the group in compliance with those Regulations on or before the date of publication of the tax strategy, or would have been so required if the head of the group were resident in the United Kingdom for tax purposes, and
(b) has not already been included in a tax strategy published by the group.”
(5) The Treasury must make regulations to bring this section into operation no later than 1 April 2021.
This new clause would require all groups subject to the DST to publish a group tax strategy, including a country-by-country report. Such a report would include information about the group’s global activities, profits and taxes.
I should draw the attention of the House to the fact that a corrected text of new clause 33 has been published this morning. The version that was initially published inadvertently omitted the concluding subsection.
Amendments 18 and 19 would require the Treasury to conduct a review of the digital services tax within a year of Royal Assent and to report to Parliament on the tax annually thereafter with a specific consideration of the effect of this measure on taxation revenue.
We welcome the introduction of the digital services tax, although this support is qualified. The Minister will be well aware that we like to be thorough even with proposals that we broadly welcome. It is deeply disappointing that it has not been possible to reach multinational international agreement, hence the need for this unilateral approach. This Government should demonstrate much more leadership in pressing for international efforts to tackle this scourge. Ensuring that companies that operate across national borders pay the tax that they should requires us to co-operate, to lead, to persuade, to negotiate and to set an example.
More troubling is the fact that, in the crisis we are living through today, when ambitious and decisive action is demanded of Government, Ministers have only managed to put forward such a modest measure, when other countries are willing to go further. Many of the companies that will be affected by this tax are the same ones that will have benefited from the impact of covid-19. Before the pandemic struck, they were the beneficiaries of an uneven playing field, while much loved high street businesses struggled.
Local firms and UK chains have faced a real battle competing with companies that base themselves overseas, do not have the same overheads as physical shops and go to great lengths to minimise their tax liabilities. The impact of lockdown has only exacerbated this tension. It has provided an unexpected boon to tech giants, which have managed to rake it in as demand soars and business is directed online. Meanwhile, our high street businesses, which were already struggling, have only seen their worries increase as footfall has understandably plummeted.
Even with the easing of lockdown, there is a real challenge ahead in ensuring the continued success of our bricks-and-mortar retail sector. If shoppers will not venture on to our high streets and the Government fail to provide an effective test, track and isolate system, many businesses that are just starting to open up will soon be forced to close their doors again, perhaps even permanently. These businesses are the bedrock of our communities. They help create a sense of place, and are often a lifeline for older and vulnerable residents and for those in more isolated communities. Government must do more to ensure that there is a level playing field, and that those who have benefited the most from this situation—as I have noted, those that have not exactly paid their fair share in the past—make more of a contribution to the national effort.
Does the hon. Member accept that not only is it right that the Government intervene to ensure that taxes are paid on a level playing field, but that, at a time when public finances are under pressure, we should not be allowing large firms to escape paying the tax revenue that is due and should be paid?
The right hon. Gentleman is absolutely right, and I sincerely hope that the Minister will respond to that point, because we have seen this unfairness built into our system. We recognise that this measure takes some steps towards levelling the playing field, but we need to see much more from Government in clamping down on the kind of tax avoidance that we have seen far too often in recent years, because it is not right.
Can I say how much I support the argument the hon. Lady is making? Does she agree with me that the Government’s digital services tax measure is actually a mouse of a measure compared with the huge profits made by American big tech? Does she also agree with me that the Government need to co-operate very closely with the European Union, which is devising an international tax with much greater teeth, so that these big tech companies do pay their fair share of tax?
Yes, I support the point the right hon. Gentleman makes, and I will come on to say more in my contribution both about how those companies need to contribute more and how it is essential that we see international consensus on this issue. The measure the Government have put forward today is necessarily time-limited, and we will need to see a much more sustainable, long-term solution with a broader international base.
It is not right that British bookstores and other businesses face a higher tax rate than Amazon. Unfortunately, this measure does not go far enough to address this fundamental unfairness, nor does it really get to the heart of the tax avoidance strategies some of these tech companies have used in recent years. As the Chartered Institute of Taxation points out, this measure is not aimed at stopping profits arising in the UK being shifted by multinationals out of the UK to tax havens. However, for far too long the companies that make the modern economy work have got away with complex ways of moving and hiding the money we pay them.
I agree with many of the points the hon. Member makes, and certainly about making sure that we have a fair and level playing field for small businesses. I am certainly a supporter of new clause 33 in principle, which is trying to see these multinationals disclose profits on a country-by-country basis. However, to be fair, does she accept that the Government have gone further than previous Governments, with measures such as the diverted profits tax and now the digital services tax?
We welcome all measures and will support any proposals to tackle tax avoidance, whether it is in terms of tech giants or more broadly, but we still face a big gap in this country, and we are urging the Government to do much more. I am sure the hon. Member would agree that it is vital that we see greater action, because we have seen this unfairness, particularly during the pandemic. He, like me, will have many wonderful local businesses in his constituency that pay their taxes and are trying to come through this crisis, and they want to ensure that there is a level playing field between the bricks-and-mortar businesses and online businesses. I am sure that we all want to get behind that endeavour.
For too long, companies have moved and hidden the money we pay them. Research by TaxWatch UK estimates that we are losing £1.3 billion in corporation tax from five of the biggest firms each year. In comparison, the Government’s own estimate is that the digital services tax is only set to produce £280 million this financial year. The modest nature of this measure becomes clear when we consider what some of the tech giants might actually have to pay under the tax. I will highlight again for the benefit of the House, as I did in Committee, research by TaxWatch UK which predicts that Facebook would face an increased tax bill of £39 million, despite estimated UK revenues of almost £2.3 billion. Google would pay slightly more—around £168 million—based on estimated UK tax revenues of £9.3 billion. Many businesses, such as Amazon, that blend their activities will be unaffected by the measure.
The Government will be aware of our concerns that streaming services are not included at all, which we discussed in Committee. The Financial Secretary to the Treasury said then that
“it would not be appropriate to implement a temporary tax on a broader basis.”––[Official Report, Finance Public Bill Committee, 11 June 2020; c. 126.]
He will doubtless be aware that taxes introduced on a temporary basis have ended up becoming permanent fixtures, including income tax, introduced to fund war with Napoleon. With little evidence that the Government are working to secure international agreement on a replacement for this tax, temporary could end up being for a very long time. Her Majesty’s Revenue and Customs employs many extremely capable people, and I am sure that it is not beyond their wit to develop a way of taxing streaming services too.
New clause 33, which was tabled by my right hon. Friend the Member for Barking (Dame Margaret Hodge) and has many cross-party supporters, would require those liable for the digital services tax to publish a country-by-country tax report. My right hon. Friend has campaigned tirelessly and incredibly effectively on this issue, and I wish it were possible for us to hear from her directly today. Sadly, the way in which we now conduct our proceedings makes it impossible for her to contribute, which is a real shame, given the expertise and insight she brings, but I am aware that the cross-party support of the new clause will allow other speakers to raise the points that she might have sought to make.
For years, the Opposition have urged the Government to commit to country-by-country reporting on a public basis. Their reticence to do so, and the way in which they have held up progress at an international level, has been a source of deep frustration to those of us who want to see far greater transparency around the taxation of multinational companies. This new clause would not only be of practical use, so that we can see whether those liable to the digital services tax are paying an appropriate amount. It would also help to address the concerns I have outlined that the measure as it stands does little to address the tax avoidance practices by digital multinational companies. It would end the secrecy around such practices and pave the way for public country-by-country reporting at a wider level. The Government have been fond in recent months of saying that they wish to be a world leader—well, here is the opportunity to become a world leader in tax transparency, and I urge the Minister to listen to the arguments being made and take urgent action to address them.
The pressure on our public finances and vital frontline services means that we should be doing far more to ensure that those tech companies that have benefited from the lockdown are contributing more. We need a level playing field between our high streets and the tech giants. We need to build a society where everyone—individuals and businesses alike—pays their fair share. A digital services tax must be part of that, but the Government simply are not going far enough. A bolder approach on a digital services tax would not only help to address this unfairness; it would help to deliver a sustainable recovery from the economic crisis we are facing.
Labour has called for a back-to-work Budget—one that focuses on retaining jobs, sustaining jobs and creating jobs; a full Budget that invests in our young people, who are facing the worst employment prospects for a generation, and helps to secure a future that they can look to with hope. An effective digital services tax would go some way to supporting that goal. As I have indicated, this measure is expected to generate a fairly limited amount when compared with the extent of the tax avoidance practices we have seen from some of these companies in recent years and the profits they have made in recent months. Therein lies the principal reason for our amendments: we need to understand as soon as possible how effectively the measure is working and what more can be done to ensure that such companies are paying an appropriate amount of tax.
The Government’s unwillingness to conduct a review earlier than 2025 means that the opportunity for Parliament to properly scrutinise the measure will be hugely limited. I know that the Minister hopes that a multilateral approach will be in place by then; we on the Opposition Benches hope that that will be the case, too. A comprehensive multilateral agreement, based on a lasting international settlement, is the only long-term solution, but until that happens, the Opposition will continue to push for a more ambitious approach, to which our European neighbours are looking as well. The times that we are living through demand such an approach.
We need to ensure that those with the broadest shoulders help to bear the cost of the recovery that the Government need to secure for our country. It is more important than ever to make sure that the big players that have benefited greatly from this crisis are taxed properly, reasonably and fairly and do not simply continue to shift around their sizeable profits. That is why we have tabled our amendments so that we can be sure that this is the right approach to digital taxation in these times of crisis and so that we can continue to consider what more can be done, not just in five years, but next year and every year.
I draw the House’s attention to interests, which are set out clearly in the Register of Members’ Financial Interests.
I rise to speak to new clause 33, which was tabled by the right hon. Member for Barking (Dame Margaret Hodge) who, alas, for the reasons set out by the hon. Member for Houghton and Sunderland South (Bridget Phillipson) from the Opposition Front Bench, cannot be here today. The House may rest assured that she will be watching every word of this debate from where she is.
The House will notice that not one but three former and current Chairs of the Public Accounts Committee—the hon. Member for Hackney South and Shoreditch (Meg Hillier) and my right hon. Friend the Member for Haltemprice and Howden (Mr Davis), as well as the right hon. Member for Barking—have signed the new clause. In addition, my hon. Friend the Member for Amber Valley (Nigel Mills), who is unavoidably locked down with his two adorable new children and who has great expertise in this policy area, has also signed it
New clause 33 makes a number of points. The first is that any company that is subject to the new digital services tax, which came into force this April, must publish transparently and publicly a country-by-country report. Although as it stands in the amendment paper the new clause does not include a starting date, that was rectified this morning and the starting date would be April 2021.
The new clause is targeted at international technology giants—that is Google, Facebook and Amazon. These huge businesses are well known for using corporate structures deliberately designed to shield them from the payment of tax. The new clause would allow Parliament, journalists, campaigners and civil society to see clearly whether these businesses are paying their fair share of taxation. If the Government accept the new clause, that would, as the hon. Member for Houghton and Sunderland South suggested, make the UK a world leader in financial transparency. It would give a major boost to country-by-country reporting for all corporations, so that everyone can see that tax is paid on profits in the locations where those profits are earned.
Let me be clear at the outset that it is not our intention to divide the House on the new clause today—subject to the Minister, who is a very clever fellow, showing due respect for advancing this agenda and for the importance of making progress on this issue in due course.
In my submission, there are three reasons why the new clause really matters. The first is that its logic sits four-square behind the priorities of the Conservative-led coalition—I thought the hon. Member for Houghton and Sunderland South could perhaps have given a little more attention and, indeed, support in this respect—who wanted to inject greater transparency and openness into the financial system, in the first instance by championing open registers of beneficial ownership, which were introduced in the UK in 2016.
The open-registers process has been enhanced over the past two years, during which the right hon. Member for Barking and I persuaded the House that open registers should be embraced by the overseas territories and subsequently secured agreement that the Crown dependencies would also implement them. Such progress is a huge advance in tackling money laundering and financial corruption, and it bears down heavily on tax evasion as well. It also makes it more difficult for bent politicians and corrupt businesspeople to steal money from poor countries and their citizens. The new clause builds on that whole approach.
Secondly, at this dreadful time in our country, when our constituents are suffering financially so severely and our Government are rightly seeking to help every family as we combat the economic effects of this crisis, it is frankly obscene and very offensive that some major corporations who rely on UK customers and make huge profits in our country should not pay their fair share of tax. The public and the public finances cry out for fairness and equity, particularly at a time like this, when some companies have benefited from taxpayer-funded rescue packages organised by the Government while not contributing equitably to the public purse. Public expenditure is now at an all-time high. This borrowing will have to be paid for and it is simply not right or fair that while most taxpayers will have to pay more tax—85% of us pay taxation through PAYE—some multinational companies deliberately create financial structures to avoid paying tax.
I also point out to right hon. and hon. Members that those same multinationals are undermining British business by undercutting them on price. They can do that because they do not pay tax at anything like the same rate. In Sutton Coldfield, we are struggling to make a success of our town centre and high street, to renew it and reinvigorate it, but Amazon undercuts bookshops in our high streets and stores such as John Lewis in our shopping centres because it can avoid paying its fair share of tax.
Thirdly—this is of particular importance to developing countries—credible research shows that developing countries lose three times as much each year from tax avoidance as they gain from development aid. The OECD has been pressing for international reform in tax rules for decades. Those countries with the most to lose have been most resistance, so the OECD compromise was that information should be provided confidentially to the tax authorities. While that is progress of a sort, it does not really help developing countries, for obvious reasons to do with cost and with complexity. Clearly, it would be better, as with open registers, for all the data simply to be placed in the public domain so that there is a level playing field and public accountability for the tax conduct of multinational enterprises worldwide.
The right hon. Gentleman may remember that during the coalition Government, we put measures through, agreed at European level, for a directive on transparency on payments made by the extractive industries across the developing world because of concerns about corruption with respect to mining in particular. That created greater transparency. The same approach could be taken on the tax issues that he is raising.
Yes, the extractive industry transparency initiative, which has been led by a former Member of this House, Clare Short, for some time, did a huge amount of good as, of course, have open registers, because open registers have continued that agenda of transparency. As I said at the outset, this agenda was championed and driven forward internationally through the British at the G8.
I agree with all the points that the right hon. Gentleman has been making. Does he accept that unless we can dig behind the accounts to see where companies, for example, inflate costs in countries where they can get lower tax rates and deflate costs in countries with higher tax rates, a tax strategy in itself is simply not going to ensure that we get behind how companies avoid paying tax in the countries where they earn the profits?
There is an important principle: while commercial confidentiality should not be compromised, we should move to greater transparency to tackle the problems that lie behind what the right hon. Gentleman is saying. I agree with that and I think that there is common cause across the House that that is what we want to do. Clearly, getting a multinational standard will be the right result, but these things have to be led.
In summary, the new clause is part of the noble campaign that is supported across the House, to shine a light on the profit shifting, transfer pricing and tax haven abuse that is used to minimise tax liabilities. The House has already voted in favour of public country-by-country reporting through an amendment to the Finance Bill in 2016, which gave the Treasury the power to make the information public. My right hon. Friend the Financial Secretary will no doubt rely on the prayer of St Augustine, “O Lord, make me chaste, but not yet,” and argue that the UK would not want to implement this reform unilaterally, and he has already acknowledged, in a letter to the right hon. Member for Barking (Dame Margaret Hodge) dated 27 February this year, that a multinational agreement to do country-by-country reporting would be a good achievement, but I put it to him that that is too timid an approach.
As we contemplate Britain’s role post Brexit and we set out what we mean by global Britain, let my right hon. Friend stand tall, show leadership internationally, and follow the proud, confident example of David Cameron and George Osborne. Let global Britain lead by example, to the huge benefit of our domestic taxpayers and taxes, and for those in the poorest countries, whose mineral wealth is so often developed without their citizens reaping the benefits they should receive and that they deserve. This reform would be in the finest traditions of Britain’s past international development leadership, and I commend the new clause to the House.
We support a fit-for-purpose digital services tax. Our new clause 5 seeks a review of how effective the Treasury plan is. It would force the Government to assess the digital services tax’s effectiveness and draw conclusions on that information within six months.
It is unfair that multinational online firms pay less tax than small high street shops, and the SNP has long said that we would support a fit-for-purpose tax, but during the lockdown many people have become adept at finding what they need online, from replacement parts for the oven and a tablet and macaroon subscription in my case, to clothes, trampolines, desks, chairs, food and drink, and this period may well have a permanent effect on how people do their messages.
The high street has been facing difficulties for many years now, under fierce competition from digital competitors. Retailers including Intu, Debenhams, Oasis and Warehouse have gone into administration, and job losses were announced today at Harrods, John Lewis and Arcadia Group—all while online retailers are booming. It is not a level playing field, and it seems only fair that the taxation system catches up and seeks to level it out. I agree with the hon. Member for Houghton and Sunderland South (Bridget Phillipson) that streaming services are also a huge money-spinner, and I do not see why the UK Government would not want to get in on that action. Taxes going uncollected in an area that is growing would be useful to Treasury coffers right now.
As the digital services tax is a new measure, it is vital that we try to capture how effective it is. By their very nature, online companies can be nimbler than their bricks-and-mortar counterparts, and it is always possible to find loopholes. We will wait to see how successful the policy is, but it is regrettable that the UK failed to implement it alongside international partners, despite countries such as France, Spain and Italy seeking to introduce similar measures. I appreciate the difficulties and limitations of work in the OECD, but co-operation is all the more important in the face of the US attempting to apply pressure to shut down the measure. Steve Mnuchin, the US Treasury Secretary, has stated:
“The United States remains opposed to digital services taxes and similar unilateral measures… As we have repeatedly said, if countries choose to collect or adopt such taxes, the United States will respond with appropriate commensurate measures.”
I wish the UK Government all the best in that fight, but it would surely be wise to enlist other countries for hauners, rather than taking the UK through this alone. I would be grateful if the Financial Secretary to the Treasury updated us on the progress of international co-operation.
On the subject of loopholes, I share the concerns that my hon. Friend the Member for Aberdeen South (Stephen Flynn) made clear in our amendment in Committee on the significance of Scottish limited partnerships. SLPs have been used for a huge and well documented range of nefarious ends, including money laundering, arms running and undermining democracy, yet they are still being advertised as an ideal way to avoid paying tax and hide under a veneer of respectability. It is entirely conceivable that online companies could use SLPs or other such vehicles to avoid their obligations and shift their profits, and we in the SNP want to ensure that the Government are aware of this, and to encourage them to act. The abuse of SLPs has gone on for far too long.
The SNP supports the cross-party new clause 33, led by the right hon. Member for Barking (Dame Margaret Hodge), whose cross-party group on anti-corruption and responsible tax continues to do excellent work. We miss her insight today. I thank the right hon. Member for Sutton Coldfield (Mr Mitchell) for his thoughtful observations on the role the UK should play. After all, what country would not want to lead in global transparency? Requiring companies subject to the digital services tax to publish a group strategy, including a country-by-country report, would add a great deal to tax transparency, as such a report could include information about the group’s global activities, profits and taxes. Parliament, in the Finance Act 2016, obliged the UK Government to adhere to country-by-country reporting, but that is yet to be implemented. We all have a duty to pay our fair share, and that mechanism would help ensure that that applies to the tech giants, as well as to each one of us.
We support Labour’s amendment 18, which would force the Tories to report annually on the digital services tax. The Bill states that the Government must conduct a review of the digital services tax and, prepare a report of the review before the end of 2025. The end of 2025 is a long time away; it is far too long. Governments may come and go in that time, or new technology be developed. Indeed, for our purposes we might also have independence, and be able to do these things for ourselves. This is a new tax and, as with all taxes, we must measure it carefully, assess it properly, and ensure that the intention behind it is reflected in the outcomes from levying it.
I rise to support amendment 18 on the digital services tax, and I will focus my comments on the pressures faced by businesses on high streets. The coronavirus crisis has brought into sharp focus the issues that high street businesses have faced over the past decade. Primarily, those include outdated and confusing business rates, sky-rocketing rent costs, and competition from the internet and out-of-town shopping centres.
Last year I visited Tidal’s Store, a furniture retailer located on Blackwood high street in my constituency. It told me that shops at the top of the high street are charged business rates at £300 per square metre, those in the middle are charged £310, while further down the rate is £320. Ironically, those charged the highest rate overlook a business park that contains many large chains that are charged only £60 per square metre. The council agrees that is unfair, but it cannot do anything because it only collects the rates. When queried, the Valuation Office Agency hides behind byzantine rules that it says are set by central Government and are completely in order.
Since lockdown, the high street has been on life support. Independent businesses have faced uncertainty, and despite help with the furlough scheme and support grants, they have had to find innovative ways to stay afloat amid the pandemic. Household names such as Cath Kidston, Oasis and Warehouse have announced the permanent closure of their stores, and Debenhams, once a staple of every major town centre, has announced a string of further store closures as it enters administration.
The pandemic has changed the shopping habits of Britain, with supermarkets and in particular online retailers being the biggest beneficiaries of lockdown. However, when the supermarket shelves were empty, and when online retailers sold out of basic essentials and items such as hand sanitisers, the local corner and high street shops came to the rescue. Local restaurants and cafes helped to feed those in need in the community, and provided food and discounts for key workers during the pandemic. Those businesses stepped up to the plate for us, and the Government have a duty to step up for them.
Many of those businesses are family-owned and run, and employ local people. They pay rent, meet their business rates, and play by the rules. All they ask for is a level playing field. The question that must be asked—this goes to the heart of the amendment—is why large multinational companies such as Amazon, which often undercut our independent shops, are allowed to pay lower tax rates than the stores on our high streets.
Online businesses have lower property costs, due to being based out of single warehouses or offices. They are also able to domicile their businesses in tax havens. Meanwhile, our struggling local businesses have to pay extortionate business rates and rents for a spot on the local high street. In many cases that is more than businesses can afford, and thus they find themselves in debt and facing closure. How are small and medium-sized businesses expected to compete with large, multinational retailers or the online behemoths of fast fashion brands, when the financial odds are so stacked against them?
Large multinational conglomerates pay very little corporation tax in the UK. Research conducted by TaxWatch UK suggests that the UK is losing up to £1.3 billion in corporation tax from five of the biggest US technology firms each year. This is not only an issue for the UK. Across the world, these corporations are exploiting gaps in countries’ tax laws to avoid paying more tax. Worst of all, this base erosion and profit shifting has the most detrimental impact on developing countries, which rely on corporate tax more heavily than others to sustain their economies.
Although the digital services tax would go some way to making up for that £1.3 billion loss in corporation tax, it is not anywhere near enough. As my hon. Friend the Member for Houghton and Sunderland South (Bridget Phillipson) said from the Front Bench, it is estimated that the digital services tax will produce only £440 million annually. That is why it needs to be reviewed every year. That is what amendment 18 would do, and I hope that the Government adopt it.
However, like my hon. Friend, my support for the tax is qualified. My concern is that it will be the consumer who ultimately pays it. What measures will be put in place to ensure that companies do not offload the tax on to shoppers in order to avoid paying it from their own profits? Amazon has already been open about this matter and increased its costs for the small online businesses that sell and deliver through its platform. That means that the customer, in turn, pays more, with Amazon seeing no difference in its profits as a result of the tax. It is time that those who operate in this country paid their fair share of tax in this country.
The amendment for a fair taxation system in regard to the digital services tax is welcome. The data could be provided by businesses subject to the tax, and country-by-country reporting would better equip Governments who want to identify and tackle tax avoidance schemes in their country. The OECD worked with the G20 to develop this, and it is high time that the Government implemented this measure right here in the UK.
That said, the belief that imposing this tax is some sort of silver bullet to cure the high street of all its ills is misguided. If we are serious about rejuvenating our high streets, particularly after the coronavirus pandemic, alongside this tax there needs to be a clear, coherent strategy to save our high streets. That must include immediate reform of business rates that is fair, transparent and open to appeal. I also urge the Government to devolve business rates to local government so that it can set rates according to local economic conditions. Equally, we need to address parking, although I think that is a matter for another day.
In essence, the reason I support amendment 18 and urge the House to do the same is that the lockdown and the closure of non-essential shops has allowed online retailers to make hay while British businesses in our town centres and on our high streets face grave uncertainly. There is still no vaccine for covid-19, which means that those businesses that can open will be able to operate only in a limited manner, impacting sales and profits, and many more businesses will have to stay shut indefinitely. Without help, this nation’s once proud boast that Britain is a nation of shopkeepers will become, like many of our big-name stores, a thing of the past.
One of the features of the lockdown economy has been the march of online retail, as evidenced by the prominence of delivery vehicles on all our streets, but the growth of the digital economy is actually deeper.
The Federation of Small Businesses in North Yorkshire tells me that one of the major concerns among its members is the extent of the digital skills that they have in their businesses. I have spent a significant amount of time listening to business—I know that is something we all do as Members of Parliament, but I have also done so as a Minister and as someone with specific responsibility for this for my party—and one of the messages from that engagement was to focus on digital. That means different things for different companies. It could be the new channels to market and the need to ensure that they are able to reach their customers in the most appropriate way. It could simply be the opportunities to enhance productivity by digitising processes. My point, really, is that the digital economy is the future.
From a Treasury perspective, that is quite difficult. It presents it with hard challenges. The international nature of this economy makes it hard to collect tax—a point already made by colleagues in the debate.
It has been the past, the present and the future. My point is about scale. I am not suggesting that the economy will be all digital in the future and that it has been all analogue in the past. That is perhaps a misunderstanding of what I have been saying.
Returning to the point that the digital economy presents challenges for the Treasury in raising taxation, I know that the Treasury is making good progress in working with other countries on developing a multinational response, but that could take a significant amount of time. It is therefore right to take appropriate action now. The direction of travel is a positive one, particularly building on the points made by my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) earlier in the debate. The evolving nature of the economy—how we work and how we consume—means that tax has to evolve too. Traditional routes for collection are becoming more difficult, and the Bill is a response to that.
I am not normally keen on finding new ways to tax people. We are already quite a highly taxed country, but we need to raise revenue to fund our vital public services. In Committee, we discussed the fact that this tax could raise up to £2 billion, but there is also something unusual about it, in that it is a tax on revenues. In this case, I think that that is a positive thing, because we are talking about very large companies. The thresholds mean that we are dealing with the largest players in the online marketplace, such as social media platforms and search engines. Basically, I am pleased to see efforts to make tax fairer between offline and online—or bricks and clicks, as it is sometimes referred to.
I am listening carefully to what my hon. Friend is saying. The more we debate this, the more time moves on. Does he agree that non- domestic rates—business rates—are looking increasingly dated, and that while we welcome the rates holiday that the Government have given to so many businesses in our constituencies until next year, the cliff edge that they will face next year, having been able to take it out of their cash flow this year, will be a real problem for them? Does he therefore agree that the manifesto promise of a long-term review of non-domestic rates is becoming more important and pertinent than ever?
My hon. Friend makes a valuable point, and I agree with him entirely. It is an analogue tax in an increasingly digital world, and it will need to evolve and be replaced. However, to build on the point made by the hon. Member for Islwyn (Chris Evans) earlier, many companies operate in both spheres. I know that from my own commercial experience prior to coming here. The key thing is to be available through the channels that your customers want; otherwise, they will not buy from you.
Equally, I have been talking to high street retailers, especially some of the smaller independents in my constituency, and they do not see a level playing field. High streets and town centres have been under significant pressure for many years. This is not new, but the trend is being compounded by the coronavirus crisis. Some sectors have been incredibly badly hit over the years. Bookshops are particular example. High streets have a role beyond the purely economic. They have a social role, in that they bring people together and create hubs for communities, so the work that the Treasury is doing to create a more level playing field is welcome. This is not to deny the digital market; is about giving high streets and the businesses on our high streets more time to respond to the evolving nature of competition. We must not be in denial about the march of digital. We must embrace it, and the UK has a good record of doing so, but we must recognise that we need more digital connectivity and more emphasis on digital skills.
My hon. Friend is raising some important points about the level playing field. Does he accept that, although introducing the digital services tax is the right thing to do, it does nothing to rebalance online versus the high street because the money is not coming off business rates? The £30 billion is still going to be coming from business rates, and if we lose that system, we will have to find another system to replace it that will raise £30 billion. The research we have done in the various Select Committees shows that there is no consensus around what could replace business rates in a fair way.
My hon. Friend makes a really interesting point. It is hard to create new taxes and the reform of certain parts of our taxation has been put into the bottom drawer marked “too tricky” by successive Governments over many years. Perhaps business rates are a part of that. It is clearly going to have to evolve, and it is evolving, but it is also hard to create a new and entirely fair system, particularly as the economy is changing so rapidly that we are in danger of creating a system that solves yesterday’s problem.
I will conclude by saying that this positive measure creates a more level playing field, but not an absolutely level playing field. The digital economy is critical to us. I am very keen to see more digital start-ups across the country, greater digital connectivity and more emphasis on skills and start-ups. None of that is compromised by the digital services tax. It is about bringing more fairness into the tax system, but it will also give us some valuable insights into how tax may be raised in the future, because one thing we do know is that there will be a new normal after the crisis, and the digital economy will be at its heart.
I rise to echo some of the points that the right hon. Member for Sutton Coldfield (Mr Mitchell) opposite made about new clause 33. Although it is not being pressed to a vote today, I hope that the Government will bow to the inevitable before long and will heed our calls. A few of us on the Opposition Benches will be talking about that.
I echo the disappointment of my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the hon. Member for Amber Valley (Nigel Mills), with whom I co-chair the all-party parliamentary group on anti-corruption, that they could not be here. We have had the rug pulled from under our feet with the hybrid Parliament, but let us not get into that; that is another debate for another day.
If we are talking build, build, build, the new clause would help towards rebuilding our economy post-coronavirus and rejuvenating our high streets, which have long felt clobbered by online competitors even before all this crisis. The new clause would do that by creating tax transparency for multinational giants, responsible investment and the closure of loopholes that enable financial flows that may not quite be illegal, but many would call pretty immoral.
The principle of country-by-country reporting, whereby multinational monster companies file public reports on their dealings country by country and then pay their dues, getting rid of the secrecy around their affairs and ensuring that tax is paid at the right time and in the right place—where the profits were made—has already been adopted by the OECD as an ambition. If that idea brings on a sense of déjà vu, it was passed by this House back in 2016 as the “show me the money” amendment tabled by Caroline Flint.
The issue is about fundamental fairness. When considering what the state of our public finances will be post-pandemic, we should be careful not to burden ordinary taxpayers with the whole tab, particularly when the tech giants have enjoyed state bail-outs. We have heard about high street decline, and the fact that the measure would rake in billions means it is needed now more than ever.
It cannot be one rule for hard-working UK businesses that play by the rules and pay into our Exchequer, and another for multinationals that can pretty much pick and choose what they do and pay minimal tax by shifting—sorry, “reallocating”— profits around the globe to low-tax dominions, where they might effectively just have a PO box to demonstrate a presence, all to save themselves cash that could be spent on our public services.
New clause 33 would mean that companies would have to publish how many employees they have, how much profit they make and their assets in each dominion. How is it, for example, that we have Amazon employees in warehouses here—some of them are our constituents—but its UK subsidiaries paid just £5 million of tax in the UK last year? We know that Amazon makes billions and billions. My small businesses in Acton, Ealing and Chiswick do not have the option of routing things through the Cayman Islands under the practice of tax haven abuse.
Since 2016, sadly there seems to have been a kind of stalemate. The principle is well-established and agreed, even back to David Cameron’s crusade for anti-corruption at the G8 in 2013, but there has been complete timidity from Government to act. A series of replies to written questions discuss how multilateral action is needed. The Government are basically saying, “I will move if you do”, but what good is having something on the statute book if it is not enacted? People will remember the Marcus Rashford affair the other day and they will see another U-turn here. I am hoping the Government can prove them wrong.
The new clause would make the principle a reality in relation to the digital services tax applying to the Facebooks, Googles and Amazons of this world. It is wrong that pound-for-pound, relative to what they make, they pay less tax than any of our constituents or we do. No market-sensitive data is included in the reporting format, so tech giants have nothing to fear.
The world has moved on from 2016, which was two Parliaments or three elections ago, although elections take place every other year now—I have had three in my short time here. Although the coronavirus rescue packages were entirely the right thing to do, it looks at the moment like the bill is going to have be footed by our children’s children’s children, who will still be paying it off. If we are serious about levelling up, this new clause would provide a level playing field for honest British businesses with the multinationals that can bypass proper procedures with their tentacles spreading everywhere around the world.
The hon. Lady has said that the Government are being timid. Does she accept that it is not timid to introduce a digital services tax in the teeth of opposition from our largest trading partner, the United States? Much as I support new clause 33 in principle, the digital services tax is a very bold move.
The hon. Gentleman is on the all-party parliamentary group and I know that he secretly agrees. Perhaps he is not saying so because his Whips are listening. The EU is our biggest trading partner. For many years before I came here, I used to teach and would sometimes say, “Could do better.” Yes, we support the measure, but we could do better, and this is a glaring example of an issue that is in need of urgent rectification.
The covid-19 crisis necessitating Government help for industry has, I hope, reversed the trend towards laissez-faire economics. It has been remarked by many people that we are missing a trick. We could bring some of these unscrupulous companies—we can call them companies with clever accountants, if Members prefer—to heel. It seems wrong that the Bank of England has made £1 billion of loans available to the German chemicals giant BASF, which has transferred profits to Malta, the Netherlands and Switzerland in order to avoid tax. There are countless other examples, but because these things are shrouded in secrecy, that is the example I am able to give. The easiest way to do it is by enacting what is already agreed, and we do that via the digital services tax, which the hon. Member for Thirsk and Malton (Kevin Hollinrake) hails. These companies could be given time to make adjustments, and the very fact of transparency, rather than overly punitive measures at the start, could shame them into action and make them see sense.
We face a double whammy of the covid financial crisis and uncertainty outside the EU. The Chancellor said, “Whatever it takes”. Those headquartered in the UK already submit all this information to HMRC and to other relevant tax authorities. All we are asking is that we can all see it and that there is full and frank disclosure—including for investors and other stakeholders, who increasingly want to know these things—and then we can see where each company has its economic bulk or footprint. Making public what already exists would be low cost and straightforward. I see no downsides to this. The only people who oppose the proposal are those who usually abuse the rules. I understand that the tax havens of Jersey and Luxembourg are not too keen on it.
We keep being told that, post-virus, things cannot go on as before and, “We shouldn’t waste a good crisis, should we?” Ensuring that very large companies publicly reveal revenue and tax information could be something on which we lead the world, and we can still apply pressure on the OECD and G20—the two are not mutually exclusive. We cannot wait forever for action from the EU, because we are no longer a member of that organisation. Time and again, we were told by the leavers that we could be an independent nation and we were reminded of the sovereignty of Parliament. This proposal has wide cross-party support.
Does the hon. Lady not think it would be right for the Minister to say from the Dispatch Box that the UK Government will work closely with the European Union as it develops its digital services tax, and should not the Opposition parties be calling on the Government to make it very clear that European co-operation on this issue is vital?
Yes, I think we should be working closely with the EU, but we can even beat them to it. Already on the EU Council there are countries such as France—which was called “cheese-eating surrender monkeys” on “The Simpsons”—that have agreed to it. This could be a bit of a trick for our Government if they pipped them to the post—I think we abstained when it last came up in the European Council. Yes, I completely agree that we should be in harmony with those countries, but this is an opportunity to beat them. By the way, not that I endorse “The Simpsons”, obviously—I do not want to cause a scandal—but, for those who are insistent, this presents opportunities. We have now left, after all.
The measure has cross-party support, and Oxfam, Christian Aid, CAFOD, the Churches and a list of development charities as long as your arm are all for it. They are spurred on by the fact that, as has been said, developing countries lose three times as much as they gain from development aid due to tax avoidance.
Regaining the respect of the aid sector, after the cruel surprise of the DFID merger was sprung on it the other day; delivering progressive taxation to ensure that corporations pay their fair share; rebalancing towards ordinary people; levelling up, so that our high street traders are not undercut by online giants with lax morals; levelling the playing field with multinationals, which is good for British business; bringing in billions and leading the way to be genuinely world-beating, which sadly the track and trace app was not; and beating the EU to it, when we have got Brexit done, and reinforcing the role of our sovereign Parliament—what is not to like?
The Nobel prize-winning economist Professor Joseph Stiglitz has remarked:
“It is time for countries to take both unilateral and multilateral actions to tax multinationals.”
Let the UK not drag its feet any more, but be a leader. It was David Cameron who said that sunlight was “the best disinfectant”, and the Conservative West Midlands Metro Mayor said when he was managing director of John Lewis:
“If you think of two companies making the same profit, one of them pays corporation tax at the UK rate, one does not because it claims to be headquartered somewhere else—that is not fair.”
Anyway, that is enough Conservative quotes in a Rupa speech—this is quite unusual for me. The Government should now set a date.
May I say how much I am enjoying the thoroughly Conservative nature of much of what the hon. Lady is saying?
I think that is the point. The Minister should recognise that this has cross-party support. I started by praising the right hon. Member for Sutton Coldfield; I am ending with the Metro Mayor, the John Lewis man. These are all reasons why the Minister should adopt this measure forthwith. It is time to act. The time is now.
I just want to get that image of “The Simpsons” out of my head.
As a new MP, I was very grateful for the opportunity to sit on the Finance Public Bill Committee. It was a fascinating experience, during which I learned a great deal, including how the progress of a Public Bill Committee can be compared so poetically to the stages of “The Pilgrim’s Progress”.
I would like to speak briefly about the amendments tabled to part 2 of the Bill, namely new clauses 5 and 33, and amendments 18 and 19, all of which pertain to the new digital services tax. I very much welcome the introduction of the new tax on some of the world’s largest digital service companies. Economies evolve, and it is right that from time to time we act to address imbalances and unfairnesses that arise as a result of that evolution. Over the last few years, and particularly the last few months, we have become more and more reliant on social media companies and online marketplaces. Many of us now use these services every day of our lives, sometimes against our own better judgment. I have no interest in condemning the success of these companies. The reason why they have been so successful is that they have harnessed technology to provide something that consumers want. Surely that is the aim of every business in a free market economy where there is healthy competition.
However, multinational companies have grown rapidly in recent years and tax systems around the world have not caught up. As has been said, many digital service companies now enjoy unfair advantages when it comes to competing with traditional, offline businesses. They usually face lower property costs and business rates, and their multinational nature means that they can move profits around the world to reduce the burden of taxation. That is unjust. This new tax seeks to address this unfairness.
The introduction of the digital services tax is especially timely as we emerge from the coronavirus pandemic, during which offline businesses have been even more disadvantaged and many consumers have made the switch—perhaps permanently—to online shopping. I note that the digital services tax generally has cross-party support, as it did in Committee, with Members on both sides of the House welcoming this new measure to address unfairness in our tax system and generate revenues for the Exchequer, which will, of course, be used to strengthen our public services. The amendments therefore do not aim to alter the tax in itself and how it is applied or collected. Rather, they seek to force through a reporting regime that I believe could be counterproductive or futile.
New clause 5 would require the Government to make an assessment of tax revenues following the introduction of the DST and lay it before the House within six months of Royal Assent. Similarly, amendments 18 and 19 seek to press the Government to report on the DST within 12 months and annually thereafter. The amendments do not take into account the fact that there will be little data of any value to report within that short timeframe. Clause 51 states:
“Digital services tax in respect of an accounting period is due and payable on the day following the end of 9 months from the end of the accounting period.”
This means that many companies that become liable for DST following the passage of the Bill may have a significant proportion of their financial year remaining, and then another nine months following that, before DST contributions become payable.
The hon. Lady is making a fantastic speech; she is a lot more confident than I was when I entered the House. I have a word of warning for her: she said that she enjoyed the Finance Bill Committee. I was like her once—I said that, and I ended up sitting on six in a row. Even the most enthusiastic Member can get weighed down after a while. The real concern for the digital high street is how we can ensure that the burden of the digital tax bill is not being rested on the shoulders of the millions upon millions of small digital traders. How does she think the Government can guard against that happening?
I did not enjoy the Committee that much; I want to put that on record. The hon. Gentleman makes a good point, but I will say two things. First, we are only talking about the very largest businesses here—those with £25 million of UK revenues, though I appreciate that for some companies that may be split. Secondly, we are one of the first countries in the world to introduce a tax such as this, and it will take time to record, report and analyse its exact effects. As a number of Members have said, we are hoping for international co-operation in the long term, and hopefully this is a short-term measure where the UK is acting alone. I think things will become clear over time.
For companies that do become liable for the tax following the passage of the Bill, it may be some time after the 12-month period following Royal Assent before they actually pay the levy, and some businesses will only be paying the amount due during the part of the year that the Bill was enacted. That means that there will be little, if any, meaningful data within six months or even 12 months of the Bill being enacted, so the amendments add little value to the Bill.
New clause 33 would require all groups subject to the DST to publish a group tax strategy with a country-by-country report, including information about the group’s global activities. While I have no doubt that this is a well-intentioned amendment, I fear that it may have some unintended negative consequences. We need to remember that the DST will affect only the very largest companies—those with over £500 million of international revenues and over £25 million of revenues from UK-based activities. Companies like this will think nothing of rearranging their activities to avoid this kind of enforcement, so UK mandation alone could push businesses offshore. We want to encourage voluntary compliance, and I know that my right hon. Friend the Financial Secretary to the Treasury and his colleagues have worked hard to ensure that this new tax will not deter UK trade. At this point, especially given that the UK is one of the first nations in the world to introduce such a tax, and given how mobile these companies are, it is prudent to ensure that the administrative burden is as light-touch as possible.
It has been a great opportunity to serve on the Finance Bill Committee. My hon. Friend the Member for Aberconwy (Robin Millar) said how much fun it was. I am not sure that I would go so far as to say that it was fun, but it has been a privilege, particularly given the opportunity to discuss a groundbreaking new measure that will level up our tax system and help to restore a level playing field in our UK economy.
It is a pleasure to follow my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates), who made some very important points. She made the critical point that the digital services tax is a temporary, short-term measure, and we need something more encompassing to replace it. That is why I want to speak to new clause 33, which proposes a radical reshaping of how tax affairs would be disclosed. If we are going to tackle this fundamental problem, it is essential that we have country-by-country reporting. I therefore do not secretly support this new clause; I openly support it, even though it is not going to be pushed to a vote today. The principle behind the clause is absolutely right, and I pay tribute to my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) and the right hon. Member for Barking (Dame Margaret Hodge) for their work on it and in many other areas to tackle tax avoidance and corruption.
The other key element of the digital services tax is that it tries to level the playing field in corporation tax, but it does not level the playing field for business rates. That is a completely different discussion and it is one that we definitely need to have.
When I first came to the House, I attended one of those breakfasts; I think it was run by the Industry and Parliament Trust, of which I am a trustee. The subject of that seminar was the values of business—I have been in business for 30 years, and in my view business is a force for good in the vast majority of cases—and it was addressed by a vice-president of Kellogg’s, who talked about the values of business to the economy and the inherent values of some businesses. As examples, he talked about the great values and corporate social responsibility of businesses such as Facebook, Google and Amazon.
While the speaker was addressing us I googled, “Do Kellogg’s pay corporation tax in the UK?” My search came up with a Daily Mail article saying that Kellogg’s turns over £650 million in the UK and does not pay any corporation tax. When he got to the end of his comments, I asked him, “How can you square the circle—saying that you have great corporate social responsibility policies and put money into good causes in the UK, which might cost you a few pence or percentage points in terms of cost and contribution, when you are not paying corporation tax? Your customers are taxpayers. You are trading and turning over a significant amount of money in the UK. And yet you are not contributing back to the bills and the vital public services that your customers rely on. I think it is a cynical approach.”
This Kellogg’s vice-president was clearly quite stunned by my question. I quoted to him that Kellogg’s is one of those companies that does not pay corporation tax. When pressed for an answer, the only one that he could come up with was, “Well, we’ve got a duty to shareholders to minimise our tax burden.” That is an old chestnut. I hear lots of big shareholders of big companies in the US—people such as Warren Buffett—absolutely reject that notion. In my mind it cannot be right that businesses seek to avoid fair taxation rates in this world and, as many hon. Members have said, we have a duty to stand up for small and medium-sized enterprises that cannot benefit from these kinds of devices. The vast majority of us pay tax through pay-as-you-earn anyway, so we pay our fair share of tax—and most people do so willingly.
My hon. Friend raises an interesting point. Does he share my view—I think it is also the view of the people who really know the law in this area—that in Britain a corporation exists to maximise the interests of all its members, rather than merely the shareholders, and that the shareholder entitlement is to the residual that is left after satisfying other claims on the company?
I absolutely agree. Any businessperson starts off on the premise that they have responsibilities not just to their shareholders, but to their customers and other stakeholders.
Due to the scale of the problem and the lack of country-by-country reporting, it is difficult to establish exactly what some of these companies are making in the UK, but let us look at Google as an example. In 2018, Google turned over $137 billion and had net revenues— so a profit—of $31 billion. The whole organisation internationally works on a profit margin of about 22%. The company turned over around $10 billion in the UK in the same year, and makes about $2.2 billion of profit from UK activities each year. If we applied 19% corporation tax to that amount, we would come up with a figure of £420 million in corporation tax that Google should have paid. It actually paid £67 million that year. This is happening on a huge scale and is multiplied by many other companies.
I thank my good and hon. Friend for allowing me to speak. This confuses me. I would have thought that very clever tax inspectors could visit these international companies. Surely these companies cannot disguise the money that they are sending out of the country. Surely we have methods of checking that, and, from that, we can devise a way of actually taxing them. It seems to me, from what I can gather from this debate, that these companies seem able to spirit money away with magic dust or something, and I am sure that that cannot be so.
My hon. Friend makes a very good point. We have some very good people here in our tax authorities and in our ministerial team. The difficulty is, of course, that those companies have some very good advisers working for them, too. It is a case of “Catch me if you can”. That is why the Government have stepped in with a diverted profits tax and a digital services tax, neither of which existed before 2010. The Government have stepped forward to try to do this, but it is certainly not easy.
From the figures, Google should be contributing £420 million to the Exchequer. Of course, much of that money would have previously gone to the Exchequer through some of our own companies, but they no longer get that revenue. Regional media is a good example of that. As businesses, we used to spend our money in regional newspapers and regional radio. Now we put that money straight into Google and Facebook and other such places, so it is being shifted away from UK jobs and UK businesses and spirited away to different parts of the world.
I know the Minister will say that we are working with the OECD in terms of base erosion profit shifting, which is absolutely right. The difficulty, of course, is the lack of public scrutiny of that. That information is available only to tax authorities. The media play a hugely important role in highlighting the inappropriate shifting of profits internationally by companies, which therefore do not pay their fair share of tax. It is hugely important that we have publicly disclosed country-by-country reporting.
I very much support new clause 33. I hope that the Government will step forward with something similar in the very near future. The digital service tax is a great step forward and a very bold move in the teeth of international opposition, particularly from the USA, but it is a short-term measure. We need something much more important and much more fundamental. At a very minimum, that fundamental thing should be country-by-country reporting and I urge the Government to go further, continue with their great efforts to tackle tax avoidance, and bring in country-by-country reporting for all multinationals.
It is good to rise to speak in support of new clause 33. In doing so, I want to begin by thanking the right hon. Members for Sutton Coldfield (Mr Mitchell) and for Haltemprice and Howden (Mr Davis) for their leadership on this issue. They have been talking about this and pressing the Government on this for many years. Although this House is not always a model of cross-party decorum and high-mindedness, on this it certainly has been, and I pay tribute to their work. They have made compelling arguments, and I sincerely hope that the Minister will listen.
Other very good arguments have been made in this debate. The hon. Member for Penistone and Stocksbridge (Miriam Cates) caused slight jocularity in the Chamber when she suggested this idea that Finance Bills are not fun. I do not know who she thinks thinks that, but, obviously, they are the best bit of Westminster.
The hon. Member for Harrogate and Knaresborough (Andrew Jones) pointed out how difficult it is to introduce new taxes. He is right, and we are introducing a new tax here, so we should have a think about how the circumstances are different. Anybody who thinks that it is easy to introduce new taxes should offer George Osborne a trip to Greggs. He thought that the pasty tax would be a minor and uncontroversial measure—how wrong can you be?
Other Members have mentioned business rates. Speaking as a former member of the Treasury Committee, I can say that we investigated business rates extensively. I can see my hon. Friend the Member for Ilford North (Wes Streeting) nodding. It is very complicated to reform them, and no surprise that it has been in the “too difficult” box, but we should not shy away from the things that are too difficult. In response to the Minister’s comments about fiduciary duties and shareholder responsibilities, he makes a good and interesting point, particularly coming from his Conservative perspective. He will understand, however, being of a philosophical persuasion, as I am, that there is a difference between justice de jure and justice de facto. It may be the case that businesses have a wider duty than is commonly interpreted; it is nevertheless commonly interpreted in that way. If we this House are not here to clarify what companies’ responsibilities are, what are we here for?
I support the arguments on new clause 33 that others have made. In doing so, I want to pay special tribute to my right hon. Friend the Member for Barking (Dame Margaret Hodge), who, as has been mentioned, cannot be here. I do not think she was ever a member of the Whips Office, but she should have been, because the fact that many of us are here, due to her influence and brilliance, is a tribute to her. I asked her if there was anything that she would particularly like said, and she gave me these words:
“This is the moment for the Government to show that it will act firmly on behalf of all hard-working taxpayers to ensure fair taxation. All we are asking for is public disclosure of where the tech giants make their profits and pay their taxes. We will then know once and for all if the Googles, Facebooks, and Amazons of this world are contributing properly to the common pot for the common good.”
It is as simple as that. Who would dare disagree?
In conclusion, I would like to make three points in support of this new clause that I think are unassailable and that the Government should pay attention to. We come to this House in the context of a global pandemic, which makes this issue all the more important. We are all wrestling not just with what Government resources can possibly be expended and what they should be expended on, but how we make sure that that money is also brought into the public coffers so that we can, as much as possible, get the Government on a decent footing for the near future.
Some 85% of us pay our tax without question through the PAYE system. HMRC is very, very tough on SMEs, and we just want to see exactly the same treatment for big corporations. That is only fair. As has been said, there are also tax avoiders who undermine British businesses by undercutting them on price. Other Members have made absolutely compelling points about the high street. That is interconnected with the online world—of course it is—but where businesses are not paying a fair whack, that will do unnecessary damage to our high street.
My next point about country-by-country reporting particularly relates to developing countries. Here I must return to the right hon. Member for Sutton Coldfield. For context, as you know, Madam Deputy Speaker, when I was first elected to this House I served on the International Development Committee, and the right hon. Gentleman was the International Development Secretary. It was a great pleasure and honour to visit some of his officials in some of the poorest parts of the world, where people faced challenges that we in this House can barely imagine. I well remember talking to officials who were advising state and city governments on tax collection. Some of the things this country has done in pursuit of the interests of the poorest people in the world are not the things that we see advertised in the newspapers or that get talked about on “Comic Relief”; some of the things DFID has done over the years that have been truly important to developing countries are the really boring things like tax collection.
In this House, it is not just aid that we should set our mind to if we want to have a more equal world. It is the things that we can do that are not about giving money, but about changing the rules of the game to make sure people in the poorest parts of the world can run their own Governments in pursuit of good public services, meaning that the poorest kids in the world get an education. That is what these taxes should pay for.
The hon. Member is absolutely right. I think two very good examples are Pakistan, where British techniques and expertise have helped the Pakistan authorities to raise more tax from their citizens, and Rwanda, where Britain helped the Rwandan Government set up a fair and equitable system of taxation that has worked and succeeded in helping that country to fund its expenditure. Back in 2007, the Rwandan Government raised only about 20% of their annual expenditure, and today they raise over 80%.
I know some people think that tax is boring, but how could we listen to that example, talking about one of the countries that has suffered worst in the world in my lifetime, and not think that this new clause—the issue of getting tax to the place where it belongs—is truly a great mission that we should all subscribe to? Forgive me for being passionate about it, Madam Deputy Speaker, but I think it is much more important than any of us ever properly give it credit for.
The DFID aspect of this is absolutely crucial. If we want to stop giving aid forever and a day—I personally think that that should be our objective in having a more equal world—we absolutely need to pull every other lever that we possibly can in this House to get developing countries and poor countries globally the tax they are due, and this is how we will do it. As has been mentioned, this House has already voted in favour of it. It is quite obvious from the debate today that there is cross-party support, and, given all the other controversies that we have to deal with, why we would not do something supported by all corners of the House, I do not know.
The Minister will forgive me for telling him that while accepting that the Government have gone so far and have made efforts and shown willing, there is an old trade union saying, “When you argue with the manager, never say that they have done nothing; always say that they have not yet done enough.” That is my message to the Minister: you need to go further.
It is a pleasure to be called to speak in this debate and make a few short comments. None of us can accept the argument that tax is boring, because it is not boring. Tax is a necessity: it is necessary for building a recovery and it is necessary for helping others. On the earlier earlier about the help we can give to other countries through DFID—and through the new Department and the new Minister who will have this responsibility—I am very much in support of helping out countries in other parts of the world where we need to be.
I want to speak to new clauses 5 and 33 and amendments 18 and 19 in relation to the digital services tax. I work with my local high street to attempt to see businesses reopen and not shut their doors, and a large part of my efforts over this last period of time as an elected representative, along with others, has been to help point them towards the dual concept of online sales as well as a high street presence. I suppose many of those shops have a small online presence but some do not, and I am very keen to work with the Government—here at Westminster, but also the Northern Ireland Assembly, including my own colleague and friend, the Economy Minister—to ensure that the opportunity of having an online business or increasing online business is there to help.
For many, the ability to make ends meet strictly on the high street has been curtailed owing to lack of footfall and to more people learning to shop online during the crisis, when that was all they could do. Others have referred to us—indeed, I think it was Margaret Thatcher who referred to us—as a nation of shopkeepers. I have to make a confession that my mum and dad were shopkeepers. From a very early age, I can recall that we owned a shop—the post office—in Clady outside Strabane.
I think I said it was Margaret Thatcher—as far as I am aware, it was neither of the other two. It was said by our former Prime Minister, who led this country for a long period, and I am pleased to put that on the record.
When my family moved to the east of the Province, to Ballywalter, my mum and dad continued as shopkeepers. We were the first people to have one of the grocery stores in our village of Ballywalter, and this was at the start of the chain stores, the supermarket chains and so on. So, again, I am pleased to be associated with those comments.
As things stand, it is clear that although our online businesses will be paying the appropriate tax, it is not the case that there is regulation of all digital services globally. It is unfair that international firms benefit so vastly from reliefs that our own people are unable to access. As right hon. and hon. Members have said, it is time we made such firms accountable for their tax regimes and ensured that the money they earn in this country stays here, so that we can build our own economy and pay some of the debts that have been accumulated in these past few months.
For too long, we have been trying to reach an international reasoning on this, but that has not been accomplished. The Government have said that they would disapply the digital services tax if an appropriate global solution was successfully agreed and implemented. That remains their position, and it is a logical one. It is right that if we cannot get our internationally accepted, one-size-fits-all approach, we should cut our cloth to suit. The sheer scale of the possible income underlines the importance of putting measures in place. We must make sure we have accountability in the tax process, including for those who shift their money overseas, for whatever reasons and using whatever methods.
The House of Commons Library briefing outlined the Government’s belief that if they implemented the UK’s digital services tax, it could raise more than £400 million a year by 2021-22, which is not too far away. If that could be done, it would help balance the books and it would help our Government, who have allocated moneys during the covid-19 crisis, to ensure that we could pay back some of that debt. This is absolutely worthy of work and consideration in this place. Understandably, it is difficult to be accurate about the worth of this tax, but even half of that estimate, £200 million, could change policing in our communities, building relationships and confidence. Those moneys could be used for the purposes for which tax is used; they could make expensive, life-changing drugs, such as Orkambi, readily available at all trusts. Given my role as my party’s health spokesperson, and as someone who has been involved in the rare diseases groups here at Westminster and, in a former life, at the Northern Ireland Assembly, I know how just how important it is to have those drugs available for rare diseases, and revenue is the way that that happens. We can and should make the difference. This money can and will make a difference, and, in lieu of international agreement, it is right and proper that we go ahead with this legislation.
I welcome what the Government are putting in place to begin to ensure that international markets and our markets are paying what is due, and not using loopholes, while others throughout the UK slog their guts out, always paying their taxes and always paying their dues. There needs to be a balance. This Bill sends a message to the joiners, plumbers and carpenters who refuse to do cash-in-hand, tax-free jobs that the big corporations are paying what they should and that no one is exempt from reaping the benefit of this great nation, the United Kingdom of Great Britain and Northern Ireland—better, as always, together. Everyone needs to pay what is fair to build our economy back up to where it should be and where it needs to be.
It has been a fascinating and lively debate, and I am grateful to all Members who have taken part. As Members will be aware, this Finance Bill introduces legislation to enact the digital services tax and to set the scope of the tax.
I will talk about the various clauses and amendments in front of us, and then will turn to the contributions Members have made. I start with something that I think I caught the hon. Member for Houghton and Sunderland South (Bridget Phillipson), the shadow Chief Secretary to the Treasury, say: “We support any proposals to combat tax avoidance.” I thought that was an important statement of principle, and I look forward to her exemplifying that view when we get to the loan charge. It bore out what the hon. Member for Ilford North (Wes Streeting) said in Committee:
“the Labour party takes a dim view of tax avoidance. We believe that tax is the price we pay for a civilised society…and that when people contrive to avoid their tax, they rob and short-change all of us of the revenues needed for the state to do the essential things it needs to do”.––[Official Report, Finance Public Bill Committee, 4 June 2020; c. 33.]
The hon. Gentleman is congratulating himself heartily from a sedentary position. I wish I had his self-confidence. I noted those comments because they help to shape this conversation, but it is important to be clear that the digital services tax is not an anti-avoidance measure, although there is a tendency to think of it in those terms. It is a new tax aimed at a new revenue base. It will levy a 2% charge on revenues that groups receive from providing specific digital services to UK users.
The services that are in scope of the charge are search engines, social media and online marketplaces. DST will apply only to groups with annual global revenues from these services of over £500 million, and it will be charged only on those revenues attributable to UK users, and only on amounts above £25 million. Additionally, online financial services marketplaces will be excluded from the definition of an online marketplace.
By seeking to tax UK user contributions, the charge breaks new ground in what a tax is. I very much share the views uttered by many of my colleagues, notably my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who described it as a pioneering tax. The same was rightly said by others, including my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones).
The digital services tax was announced in Budget 2018 as a response to changes brought about by the rapid development of our digital economy, the many strengths and weaknesses of which have been noted in this debate. That digital economy brings many benefits, some of which we have seen on display during the covid crisis, but it has posed a significant challenge for international corporate tax rules. The hon. Member for Islwyn (Chris Evans) brought this out very well when he spoke about the contrast between the international bodies that we are seeking to tax through DST and what might be called the ordinary shopkeeper in his constituency.
Under current rules, digital businesses can derive significant value from UK users but pay little UK tax. That is because international corporate tax rules do not recognise this user-generated value when allocating the right to tax profits between jurisdictions. That undermines the fairness and sustainability of our tax system, and it is therefore widely accepted, certainly across this House, that the rules need to be updated.
As I have mentioned, the Government remain at the forefront of international efforts to secure a comprehensive, long-term solution to this issue, and we are absolutely serious about continued, detailed engagement with OECD and G20 partners, and of course the EU nations among them, on long-term solutions.
The hon. Member for Glasgow Central (Alison Thewliss) talked about the importance of international co-operation. She is absolutely right about that. As has been mentioned, we have been a leader on base erosion and profit shifting work. The same is true of diverted profits tax, and tax of intangible assets; it is important to recognise that, in the spirit of fairness that Members have shown in this debate. That is the basis for our saying that while we welcome recent progress towards global solutions, there are still a number of difficult and important issues that we need to resolve. That is what we are trying to do on UK user-generated value, but we are trying to do it in a fair and proportionate manner. We are introducing a new tax but we expect it to be only temporary, until appropriate global reform is in place.
Clause 71 already requires the Government to review the DST in 2025 and submit the review to Parliament. It is important to note that the review is intended to be broader than the narrow construction that would be placed on it by the proposed new clause. Should the DST remain in place in 2025, the review will consider whether it continues to meet all its objectives and whether international reform means that it is no longer required. Importantly, it will look not only at the net amount of cash brought in by the tax—although that is of course important—but at whether the tax continues to be necessary to ensure fairness across the UK tax system, in so far as it bears on that. As I have said, it is a Government priority to try to secure a global solution, but we do so not merely for the receipt of revenue but in the spirit of fairness. Once that solution is in place, the DST will be removed.
Amendment 18 would require the Government to produce a review of the DST annually rather than in 2025, and amendment 19 would require the review to include an assessment of the effect of the DST on tax revenues. A review in 2025 will ensure that, if the DST remains in place at that point, its continuing relevance will be given a full and proper consideration against the relevant circumstances at that time. It thereby underlines the fact that it is the Government’s strong preference to agree and implement an appropriate global solution—indeed, it places some impetus behind such an agreement—and, once that agreement is secured, to remove the DST as soon as possible, and certainly ideally before 2025.
As regards the need for amendment 19, it is important to note that Her Majesty’s Revenue and Customs already reports regularly on the taxes which it is responsible for collecting and the revenue they generate. The DST will be no exception to that. It goes without saying that, as with all taxes, the Government will keep the DST under review through the annual Budget processes and at other times. I suggest that the amendments are therefore not necessary.
New clause 5 would require the Government to report to the House, within six months of the Act’s passing, on the effect of the DST on tax revenues, and particularly on the effect on the tax payable by the owners and employees of Scottish limited partnerships. However—I think I am right in saying that my hon. Friend the Member for Penistone and Stocksbridge (Miriam Cates) picked this up very well—the report suggested by the new clause would not provide useful information, for several reasons. The first is that the DST is a tax on groups, not on individuals, whether those are individual employees or individual owners. Secondly, DST payments will not be required until after the end of the relevant accounting period of each liable group. For that reason, payments will not be required until 2021. Finally, the reporting deadlines in the legislation mean that very few groups will have needed to register, and no groups will have been required to send in their return, within six months, so such a report would not give useful information about DST receipts during the period.
I now come to the clause with which the House has been most preoccupied: new clause 33, tabled by the right hon. Member for Barking (Dame Margaret Hodge) and my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell). It would require all groups subject to the digital services tax to publish an annual group tax strategy and, alongside that, their country-by-country report.
As I have said, the DST is not an anti-avoidance measure; it is intended as a temporary response to concerns that the international corporate tax system has not adequately responded to digitisation. In other ways, as the House will be aware, the Government have already championed tax transparency, both at home and abroad. Some of those ways were highlighted by my right hon. Friend in his speech and have been previously by the right hon. Member for Barking in many other contexts. They are illustrated by the requirement, introduced in 2016, for large businesses to publish their annual tax strategy, containing detail on the business’s approach to tax and on how it works with Her Majesty’s Revenue and Customs. That requirement applies to UK companies with a turnover of more than £200 million or a balance sheet of more than £2 billion, and it is not limited to automated digital services businesses or to groups with a UK headquarters. UK subsidiaries of foreign headquartered groups can also be required to produce such a report if that group has revenues exceeding €750 million and reports under the OECD country-by-country reporting framework.
The effect is that many large businesses subject to the digital services tax will already be compliant with the UK requirement to publish an annual tax strategy. Therefore, this new requirement would in practice have little or no impact on them, at least. While thresholds may mean that some are not required to publish a strategy, that is an existing easement and it is unaffected by the digital services tax.
Currently, as has been highlighted by many hon. Members across the Chamber, we do not require large businesses to publish their country-by-country report alongside their tax strategy, but of course they can provide additional information, such as country-by-country reports, alongside that strategy on a voluntary basis. Nothing prevents them from doing that, and some have chosen to do so. It is notable that in this country, UK headquartered groups such as Shell and Vodafone have taken an important lead in this area.
I always pay very careful attention to what my right hon. Friend the Member for Sutton Coldfield says and I always pay careful attention to what the right hon. Member for Barking says. I have a great deal of respect for the principles that he and she have outlined through this new clause, but regarding the voluntary strategy, at least, I am actively exploring ways in which the Government can encourage other businesses, over and above Shell, Vodafone and the like to follow suit.
I am surprised that my right hon. Friend says that this is not a method to try to bring companies that are avoiding tax to the tax table. The previous Chancellor, Philip Hammond, said in a speech that these measures would effectively insist that,
“global internet giants…contribute fairly to funding our public services.”
Is that not reflective of a position where he felt those companies were avoiding tax?
I think one could put it a slightly different way, which is to say, “You do not have to take a position on avoiding tax to come to the view that this is a base of tax revenue that has not been adequately taxed and should be taxed, and if you do follow that approach,” —here I will defer to the hon. Member for Wirral South (Alison McGovern)—“ipso facto you are going to be levelling the playing field to a degree.” Anti-avoidance measures are measures used in separate contexts to level the playing field as well.
The Minister is getting to the meat of the matter in what he is saying now, but while he rightly extols the virtues of some very good companies that he has named, which voluntarily publish whereabouts in the world their activity is taking place, where their profits are declared and where they are paying tax, by definition, if it is voluntary, those who are up to no good probably will not comply. That is one of the reasons why publishing that information in the way I set out in my earlier remarks is so important, because there is greater pressure on them if they do not comply, including the sanction of the law.
My right hon. Friend is absolutely right. My point was a slightly different one. I have not yet come to the thrust of what he is suggesting about mandation, but in the first instance Government should be seeking to support, promote, energise and activate more voluntary compliance, precisely in order to increase a public norm of voluntary reporting, which then does a lot of the job and perhaps isolates the groups that decide not to do it. There are plenty of other contexts in which that approach of voluntary, then moving to mandatory, has been quite successful, including in tax.
The answer is that what I am talking about is a voluntary disclosure by those companies. I am not aware of a separate EU requirement for them to do so. Certainly, it is the voluntary disclosure that is the thrust of what I am talking about. Many other companies have the capacity to make voluntary declarations, and I am indicating in response to my right hon. Friend the Member for Sutton Coldfield my support for more of those companies doing that. I am only doing that, however, as a preliminary to coming to his point about mandation. We have taken the view that for the time being this approach should remain voluntary and that further legislation will not be needed until and unless we can get public country-by-country reporting agreed on a multilateral basis.
There is a specific set of reasons for that. First, we want—I am sure my right hon. Friend feels the same way—the measure to be effective in meeting the objective of improving tax transparency. A measure that had the effect of reducing tax transparency would be counterproductive. The worry is that only multilateral implementation will give the comprehensive information required on both UK-headquartered and foreign-headquartered multinationals required to deliver that. A unilateral approach risks being self-defeating and resulting in the publication of incomplete and potentially misleading information about the activities of multinationals. It might also allow requirements to be avoided through group restructuring. We do not want to promote firms undertaking group restructuring in order to avoid disclosure and increased transparency requirements. Adopting public country-by-country reporting unilaterally carries that risk and could result in groups moving their headquarters out of the UK to locations without a requirement to publish.
I have sat quietly listening to this whole debate and I understand what the Minister is saying. I actually think he is right. Could he then give us briefly a sense of what work Her Majesty’s Treasury is doing to achieve the unilateral position he says he wants?
If I have given that impression, I have been misunderstood. We are pushing for a multilateral approach, as I have indicated, through the OECD and the G20, and also in consultation and collaboration with the EU. The purpose is to achieve a sustainable approach that does not run the risk of creating incentives to restructure out of this country and thereby reducing tax transparency and effectiveness. It might also reduce the impetus for tax transparency, because the more countries there are that require it and so have firms relocating or restructuring to avoid it, the less impetus there could be to secure a multilateral solution.
It is in the nature of these beasts that I cannot give a deadline, and I am not sure anyone can. It is a continuing debate. That does not mean, however, that progress cannot be made. As we have seen, for example in some of the work done with the OECD on minimum taxation levels, there has been clear evidence of progress in discussions within the OECD, which is a matter of public record.
Clearly, I meant to say “multilateral” in my last question. I know from having attended G7 and G20 summits in a health context, when I was in the Health Department, that the agenda for those meetings is decided by who has the chair at the time. Could the Minister give us any sense of optimism that it is even on the agenda of those meetings to make the progress I know he wants to see?
My hon. Friend will be aware that the different organisations have different ways of working—the G20 tends to work towards summits, and the OECD often has a more continuous process. The most important work is always done in between, in the official interactions that then set the terms. Often one does not know exactly what will be on the agenda until the last minute, so it is hard to give a specific undertaking. I am not avoiding that; I simply do not think it is possible to give that undertaking. I can tell him that we are extremely keen to promote voluntary compliance, and we continue to press for a multilateral approach.
I am most grateful to my right hon. Friend for giving way; he is being very generous. This is an ingenious argument that he is putting to the House about restructuring, and it might be helpful to flesh that out in correspondence. The argument about the unilateral and multilateral approach was clear in relation to open registers of beneficial ownership, when the House obliged the Government to accept that there was a case for going through the unilateral approach in order to get a multilateral approach. I understand what he is saying, but I think it would be helpful to flesh out the point about restructuring.
If my right hon. Friend wants to raise some specific questions, I would be delighted to respond to them. There is a slight tension in his argument, because it contains the following two claims: first, that these international organisations are shape-shifting amoebas that constantly mutate to avoid tax, and secondly, that that shape-shifting and amoebic quality will stop when it comes to thinking about how to react to a unilateral tax transparency initiative.
I am sorry, but I have been really generous in giving way. I have to allow the hon. Member for Houghton and Sunderland South (Bridget Phillipson) time to speak, and I have an awful lot of material remaining, including on new clauses and amendments and contributions made by colleagues. I do not know how many minutes she wants, but perhaps she could give me a bit more time.
The information is already collected—this is just about making it transparent, open and public. As I said in my speech, we could give companies time to readjust if they wanted to move things around. What is the incentive for any multinational through the voluntary approach?
We know that the incentive exists for all the reasons why we get voluntary compliance in a whole variety of areas—that is to say, groups with particular concerns, press organisations and companies. We know that there has been a revolution in corporate social responsibility, although it has not in many ways been an adequate revolution, because it does not extend in some respects to paying tax, as my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) highlighted. There is a role that Government can play, in terms of improving the norms and setting a bar. This is a reasonable, staged approach.
It is important to have a level playing field for the reasons that I have described, and that applies to tax transparency as it does elsewhere. If a multinational group exceeding the country-by-country reporting threshold operates in the UK, HMRC will, in the vast majority of cases, already receive the report and is already using it for risk assessment purposes. Given that, we do not believe that it is appropriate to introduce these new requirements at this stage, but I understand the principles set out by my right hon. Friend the Member for Sutton Coldfield and the right hon. Member for Barking, and the debate has shown that those are widely shared. The argument we are having is over the nature of the approach and the implementation of a broad set of principles with which Members across the House generally concur.
I will turn to the comments made by Members in the debate. The hon. Member for Houghton and Sunderland South has been very generous with her time, and I have covered most of her remarks. The debate rightly touched on the issue of business rates. My hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) will know that we are publishing a business rates review, which will specifically include online forms of taxation and invite public discussion on those. That is another part of the same process of trying to engage more widely and not just recruit information and knowledge but set expectations and norms about the way in which firms should be paying tax.
The hon. Member for Ealing Central and Acton (Dr Huq) talked about sunlight being the best disinfectant. She is right, but she was quoting Louis Brandeis from 1914, who was dealing with forms of corporate thuggery that make what we see today modest by comparison.
The hon. Member for Wirral South talked about the distinction between justice in principle and justice in fact. Of course, she is absolutely right. There is a view at the moment of the nature of the corporation, and it is very widespread—more in America than in this country even—that companies are run in the exclusive interest of their shareholders. That is not true in the UK. That is not, as a matter of legal fact, true in this country. The shareholders are entitled to the residual proceeds but companies are run—it is in the Companies Act 2006—in the interest of their members.
Finally, the hon. Member for Strangford (Jim Shannon) made a very good point. I think I am right in saying that “nation of shopkeepers” was coined by Adam Smith—but then I would say that, wouldn’t I?
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New Clause 28
Review of impact of Act on the environment
‘(1) The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the environment, and lay this before the House of Commons within six months of Royal Assent.
(2) This assessment must consider the impact on—
(a) the United Kingdom’s ability to achieve the 2050 target for net zero carbon emissions,
(b) the United Kingdom’s ability to comply with its third, fourth and fifth carbon budgets,
(c) air quality standards, and
(d) biodiversity.”—(Wes Streeting.)
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on the environment.
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 13—Review of impact of Act on UK meeting UN Sustainable Development Goals—
The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the UK meeting the UN Sustainable Development Goals, and lay this before the House of Commons within six months of Royal Assent.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on the UK meeting the UN Sustainable Development Goals.
New clause 14—Review of impact of Act on UK meeting Paris climate change commitments—
The Chancellor of the Exchequer must conduct an assessment of the impact of this Act on the UK meeting its Paris climate change commitments, and lay this before the House of Commons within six months of Royal Assent.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on the UK meeting its Paris climate change commitments.
New clause 34—Impact of Act on human and ecological wellbeing—
The Chancellor of the Exchequer must review the impact of the provisions of this Act on human and ecological wellbeing, including the wellbeing of future generations, and lay a report of that review before both Houses of Parliament within six months of the passing of this Act.”
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on human and ecological wellbeing, including the wellbeing of future generations.
The new clause stands in my name and those of my hon. Friend the shadow Chancellor and other right hon. and hon. Members.
We are living through an emergency, and we have seen a response to that emergency that reflects the scale of the challenge—big changes in public policy agreed at rapid speed and with cross-party co-operation; every Government Department tasked with playing its part in the crisis response; the state, the private sector and civil society pulling together in an attempt to avert needless loss of life. The coronavirus pandemic is a public health emergency, and although mistakes have been made that could have been avoided, we now know what an emergency response looks like. More than a year has passed since this House declared a climate emergency, and I do not believe that, hand on heart, we can tell our country that we have seen a response to that emergency that matches the scale of the challenge of preventing catastrophic climate breakdown.
The planet is burning. The last 22 years have produced 20 of the warmest years on record. Prolonged summer heatwaves are crippling infrastructure and causing public health crises. Last year, the Met Office declared the UK’s hottest day on record, with a temperature of 38.7º Celsius. Across Europe, people are needlessly dying of heat-related illnesses. The World Meteorological Organisation is seeking to verify reports of a new record temperature in the Arctic circle. The melting rate of Greenland’s ice has risen to three Olympic-sized swimming pools every second. Sea levels are predicted to rise, with serious consequences for our own country. Across the UK, the Met Office forecasts that flash flooding caused by intense rainfall, which has already devastated homes and businesses across our country in recent years, could become five times as frequent by the end of the century if urgent steps are not taken now.
Across the world, some of the poorest communities are already experiencing the devastation caused by man-made climate change, and the people of the global south and east will be disproportionately affected by the unfolding climate emergency, with 95% of the cities at extreme climate risk situated in Asia and Africa. It is causing death and despair and displacement for climate refugees.
The impact of climate change is already clear. The consequences of our failure to act for future generations are already known, and yet here we are this afternoon presented with a Finance Bill that stands as a symbol of the complacency of our Government, fiddling while the planet burns.
The issue of electric car targets illustrates my hon. Friend’s point about complacency. The Government’s target was to convert by 2040. They have brought it forward by five years to 2035, but Scotland’s target is 2032. The ambition of this Government does not even match that of one of the constituent parts of the United Kingdom. How on earth can it be called world leading?
I strongly agree with my hon. Friend. We will not have to wait for the Minister to respond to hear the Government’s case, because I can tell the House what he is likely to say. He will tell us that tackling climate change is a top priority for the Government, and that this is demonstrated by the UK becoming the first major economy to pass legislation committing us to reach net zero emissions by 2050. He will tell us that the UK reduced its greenhouse gas emissions faster than any other G20 nation between 2008 and 2018. He will cite measures taken in this Bill as further evidence of the Government’s commitment, including tax support for zero-emissions vehicles; reforms to vehicle excise duty and company car tax; preparations for the introduction of the plastic packaging tax; and the establishment of a UK emissions trading system outside of the European Union. I suspect he will also point to previous announcements made by the Government, such as the £800 million fund for carbon capture and storage.
Taken individually, these steps are welcome, but collectively they do not provide the momentum we need to accelerate progress towards net zero. The Opposition do not believe that the 2050 target is ambitious enough, and neither does the science, so it is all the more worrying that, on current projections, we will not even achieve that deadline.
In its 2020 report to Parliament, the Committee on Climate Change underlines the charge that I am laying at the door of the Government this afternoon. It acknowledges, as do we, that in the time that has passed since the UK legislated for net zero by 2050, initial steps towards a net zero policy package have been taken. However, as the Committee says,
“this was not the year of policy progress that the Committee called for in 2019.”
The hon. Gentleman is making a really strong case. Does he agree that the problem with the Government’s actions to date is not just what they have not done but what they are promising to do, including a £27 billion road-building scheme and boasting of 4,000 miles of new strategic roads in Britain? That would be an absolute disaster as far as the climate is concerned.
I am grateful to the parliamentary leader of the Green party for that intervention. There is a really important issue here around infrastructure. Our current infrastructure contributes enormously to the carbon output of our country. If we make the right infrastructure decisions now and get our priorities right, which is the point the hon. Lady is making, the Government can accelerate our progress towards net zero.
The Committee on Climate Change recognises the policies announced by the Government on transport, buildings, industry, energy supply, agriculture and land use. However, taking all of that into account, the Committee states that
“these steps do not yet measure up to meet the size of the Net Zero challenge and we are not making adequate progress in preparing for climate change.”
The charge sheet is serious. The Committee tells us:
“Announcements for manufacturing and other industry have been piecemeal and slow…There is still no strategic approach to drive change at the required scale and pace.”
It also says:
“Buildings and heating policy continues to lag behind what is needed”,
and that nearly 2 million homes built since the Climate Change Act 2008 was passed
“are likely to require expensive zero-carbon retrofits and have missed out on lower energy bills.”
At the general election, the Conservative party promised in its manifesto to invest £9 billion in energy efficiency over the next decade. The Committee says that that
“is welcome but not enough to match the size of the challenge and has been delayed while awaiting the National Infrastructure Strategy.”
The Committee also welcomed plans for reform of the renewable heat incentive and plans to introduce a green gas levy, but warned that
“the current plans are far too limited to drive the transformation required to decarbonise the UK’s existing buildings”.
On agriculture and land use, land-use change and forestry, it noted that
“the current voluntary approach has failed to cut agricultural emissions, there has been no coherent policy to improve the resilience of the agriculture sector, and tree planting policy has failed outside of Scotland.”
There is no room for complacency, which brings me to new clause 28. It asks the Chancellor to
“conduct an assessment of the impact of this Act on the environment…within six months of Royal Assent”,
including the impact on
“the United Kingdom’s ability to achieve the 2050 target for net zero carbon emissions…the United Kingdom’s ability to comply with its third, fourth and fifth carbon budgets…air quality standards, and…biodiversity.”
At present, the UK is set to miss its legally binding fourth and fifth carbon budgets, having only achieved its second carbon budget thanks to accounting revisions to the UK’s share of the EU emissions trading scheme and the impact of the global financial crisis. I am sure many Members of the House will agree that we should not rely on fiddling the figures or economic crisis to help us to achieve our carbon budgets, though I have to say, looking at the current state of the aviation industry and the Government’s unwillingness to act to save jobs, perhaps it is their intention simply to allow jobs to go and businesses to pull out or even go bust, rather than take the action needed to ensure a just transition.
Too many of our citizens are breathing in toxic air, with the serious health consequences that follow. The UK is one of the most nature-depleted developed countries in the world. Despite our being a signatory to the convention on biological diversity, 41% of species in the UK have decreased in abundance over the past 50 years, and 15% of species are threatened with extinction. As Sir Robert Watson wrote in relation to climate change and biodiversity loss,
“We either solve both or we solve neither.”
The risk is that as it stands we are going to solve neither.
We had hoped that the Prime Minister’s speech this week would provide more than warm words to tackle global warming. It had been billed as a new deal in the spirit of President Roosevelt’s response to the great depression, but moving some infrastructure spending forward is not a new deal and planting a few new trees certainly is not the green new deal our country needs. State action alone will be insufficient to meet the challenge, but national and international leadership from the Government is essential if we are to succeed. The public recognise that. They are looking to the Government to provide that leadership, but according to a YouGov poll published by the Institution of Civil Engineers today, less than a third of the public thought the Government had a plan to achieve net zero. They are not wrong, and there is no shortage of ideas available to the Government.
The Committee on Climate Change has provided a series of recommendations for every Government Department, including Her Majesty’s Treasury. Today, the Institution of Civil Engineers has dedicated its annual “State of the Nation” report to infrastructure and net zero, with a range of practical proposals that I hope Ministers will look seriously at adopting. This week, the Climate Coalition organised a fantastic lobby of Parliament around its green recovery plan, with citizens from all over the country Zooming in to meet their MPs virtually and underline the importance they attach to getting it right.
In the aftermath of the covid-19 pandemic and the economic crisis it has brought about, there can be no return to business as usual. Climate justice and social justice go hand in hand. If we take the right decisions now on industrial strategy, infrastructure, housing, energy, transport, agriculture, research and development and our natural environment, we will not only accelerate progress towards net zero, but will create new jobs—good jobs—new industry and better opportunities in communities blighted by deindustrialisation. In doing so, we will build a better, fairer Britain. We will improve the nation’s health and happiness, and we will safeguard our natural environment and our planet for future generations.
That is why we ask the Chancellor to come before the House next week not just with an economic update, but with a back-to-work Budget that has a laser-like focus on protecting people’s jobs and livelihoods and safeguarding their lives through the pandemic. Our approach, our ambition and our determination to achieve net zero should absolutely be at the heart of that Budget.
My hon. Friend is making a powerful speech. One of the most important things that could propel us out of this crisis and the economic challenges that we will face is to reduce our energy costs significantly. The best way of doing that would be to allow and encourage more onshore wind. One of the factors against manufacturing industry in the UK is very high energy costs compared with those of Europe. Would he welcome more fiscal stimulus behind that sector?
I am grateful for that intervention because we have seen what the right policy framework can do in terms of offshore wind and the success that that has brought. There is an imbalance in the priorities of the Government and the policy framework that they have created that actively prevents the kind of progress we could be making on onshore wind. It may not always be popular, but as people worry about what might happen to some of the vistas that they currently enjoy as a result of onshore wind farms, they should consider what the landscape will look like if we allow catastrophic climate breakdown to occur.
As I look across the Dispatch Box to the Treasury Bench this afternoon, it is not only with envy that the Conservative party has been given the opportunity to govern, but with exasperation that they are squandering it. If they are serious about preventing irreversible and catastrophic climate breakdown, leadership from the Treasury will be crucial. Every Finance Bill, every fiscal event, every major policy announcement has to shift the dial seriously and substantially towards achieving net zero. What is measured is what counts, so let us measure the worth of our Government’s words by their deeds. Let us seize the opportunity that the present crisis affords us by resolving to build back better and build back greener, and let us make sure that, when future generations look back on this moment, they do so with a sense of pride that, when it mattered, we got it right.
I honestly believe that global climate change is the existential threat of our time, but, unlike the shadow Minister, who just criticises the Government, I believe that with a great threat comes a great opportunity. I am absolutely certain that a focus on green growth offers us the way out of the inevitable coronavirus recession.
It is a fact that, since 1990, the UK has outperformed the G7 in cutting our greenhouse gas emissions by 43%, while growing our economy by more than two thirds. Today, there are around 450,000 green collar jobs and I truly believe that, if we play our cards right, the UK’s clean growth sector could be even bigger than our world-leading financial services in years to come. Even on our current trajectory, the UK is forecast to have 2 million green collar jobs by 2030, but we can do so much better—from electrification of our transport sector to industrial decarbonisation, from nuclear fusion to battery technology, and from low-carbon home heating to our world-leading environmental standards. We are not just leading the world in science and innovation, but creating an ideal platform for millions of new jobs.
The right hon. Lady mentioned low-carbon heating. Heating homes and businesses accounts for about 43% of our CO2 emissions as a country, yet Government do not have a single target for it. How can we tackle these things if Government will not even set a target for reducing the single biggest emissions area for our country?
As a matter of fact, it is not the single biggest emissions sector in our country, but the Government have a number of plans and projects to look at how we can decarbonise home heating, which are very important and I will come on to specifically talk about target setting.
We are not just leading the world in science and innovation, but creating an ideal platform for millions of new jobs. In particular, it is well known that young people—more than 70% of them—would prefer a career in the green sector. Perhaps the greatest UK success story to date is our pioneering efforts in renewable energy. The UK accounts for more than a third of the world’s deployed offshore wind, and renewables have accounted for 37% of electricity to the network this year, with nuclear accounting for a further 18%. Furthermore, the speed of UK achievement has accelerated under successive Conservative Governments. When I was Energy Minister in 2015, we announced we would be taking coal off the grid entirely by 2025, and it is a real credit to our energy sector that we have achieved close to zero coal now, and it is only 2020.
This is a key point. When Government set clear guidelines for business, along with sensible investments in infrastructure, businesses will always just get on with the job and they can often achieve much more than we expected of them. It is entrepreneurs and risk takers who deliver the jobs and growth, so I urge the Chancellor, when he puts on his thinking cap to finalise his next stimulus package, to have two key priorities: first, green jobs and, secondly, clear deadlines that create investable opportunities.
The right hon. Lady talks about the renewables sector being led by business and entrepreneurs, yet when she was leading the Business Department, she blocked the groundbreaking tidal energy scheme in south Wales, which would have transformed the sector and offered thousands of jobs, including supply chain jobs.
The hon. Lady has got her point on the record. In fact I did not block the scheme. The issue with that particular tidal power project was its cost. It in no way represented value for taxpayers’ money. The Government support all forms of renewable energy, but it has to come at a reasonable cost to the taxpayer.
Decarbonising in the UK is only a tiny part of the picture. Climate change is a global threat and the UK will be hosting COP26 next year, which offers a massive opportunity to demonstrate global leadership. COP26 must be a turning point for the world, as well as the moment to demonstrate the UK’s commitment. There are four objectives I would like the UK to achieve at COP26. The first is to announce a significant collaboration with a small number of other major nations. For example, we could have a collaboration with India on battery storage, with China on offshore wind, and with Brazil on reforestation.
Secondly, measurement is so key to performance, so I would like to propose the launch of a new year book at COP26 in which all 157 nations have their own page setting out not just their Government but their state-level and business-level achievements and goals. For far too long, arguing about how to audit decarbonisation has been a convenient excuse for inaction.
Thirdly, the UK is a world leader in financial services, and in recognising the excellent decision by the Prime Minister to appoint Mark Carney as finance adviser for COP26, I urge the Government to consider championing the development of an international infrastructure organisation to help to fund global decarbonisation. Fourthly, while the world continues to rely heavily on carbon, we urgently need an internationally recognised carbon offset licensing body to ensure that global living standards can continue to improve while we protect our planet.
To finish, I am desperately worried about the inevitable job losses that the covid-19 pandemic is going to cause, but I see a way forward, with the Government maximising the tools at our disposal to build a cleaner, greener world and to facilitate the jobs we will urgently need. That means apprenticeships for young people, retraining for those who have lost their jobs, setting clear decarbonising targets by sector, investing in green infrastructure and building international collaborations. All of that requires businesses to power up, so I want to say to businesses: you need to get your teams off furlough and get your businesses going again. Start trying to build and create and use your innovative energy to build a cleaner, greener future. We have all been in it together during lockdown, and we definitely all need to play our part if we are going to bounce back successfully.
With your indulgence, Madam Deputy Speaker, I will speak to new clause 13 before moving on to new clause 14. New clause 13, which I and my colleagues in the Scottish National party tabled, would require the Chancellor of the Exchequer to review the impact of the Bill on the UK meeting the UN sustainable development goals. That is an incredibly important issue.
I will start by referencing someone who has been in the news quite a lot in recent days, in relation to a new deal—former President Roosevelt, who stated:
“The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.”
What sage words indeed, which chime directly with the purpose of the 17 United Nations sustainable development goals about creating a just society for all, where we all have the same opportunities and access to vital services.
If we look at some of those sustainable development goals in a bit more detail, we might see why the Government are perhaps not so keen on new clause 13. For instance, the first UN sustainable development goal is on there being no poverty. Of course, we are all well aware of the Government’s record in relation to poverty. It was discussed at great length in Committee. At the time, the Minister made some fairly strong remarks, as did the hon. Member for Ilford North (Wes Streeting), on the situation in Scotland. They were absolutely correct to highlight that Scotland is not immune to the problems of poverty, but at that Committee sitting, I challenged the Minister on whether the UK Government would follow the pathway trodden by the Scottish Government and introduce £10 a week for every child living in poverty. That commitment was not given, so I say to the Government today: will you meet that challenge? Will you follow the route laid out by the Scottish Government?
The second UN sustainable development goal relates to there being no hunger. Of course, we have seen the UK Government’s record on that, too, in an all too apparent focus in recent weeks through the ridiculous situation where we had to have a footballer—a very good footballer, but a footballer none the less—force the Government to U-turn on feeding the poorest children in England. Incidentally, that is of course being done in Scotland.
If we look further at the UN sustainable development goals, No. 10 relates to reducing inequalities. Has that ever been more timely, given the situation around us on a daily basis in relation to Black Lives Matter? I find it disturbing and deeply unfortunate that the Government do not believe that the impacts of the Bill need to be looked at in relation to such sustainable development goals, because they should be at the heart of all policy making and legislation. Again, that is very much the case in Scotland, where the United Nations sustainable development goals have been embedded in our national performance framework. What kind of nation we want to be goes hand in hand with the goals and aspirations laid out by the UN.
The hon. Member is making a very strong speech about the sustainable development goals. Is he aware of the Well-being of Future Generations (Wales) Act 2015, which puts into law the sustainable development goals and links them with what public bodies have to abide by in law in Wales? Does he believe that that should happen across the UK?
I thank the hon. Member for that intervention. Surprisingly enough, I was not aware of that, but it certainly seems to reflect the situation in Scotland through the national performance framework. I encourage the UK Government to look at the example that has been set in that regard, and the one set north of the border. I will finish there in relation to the UN sustainable development goals and move on to new clause 14.
New clause 14 would require the Chancellor of the Exchequer to review the impact of the Bill on the UK meeting its Paris climate change commitments. As the hon. Member for Ilford North said, the immediate focus of all legislators has been on overcoming the coronavirus pandemic, and rightly so. Protecting public health has had to be at the forefront of everything that we do. But the climate emergency has not gone away. We need to be cognisant of that fact and make sure that policies that are put in place recognise it. The need for urgent action has not stopped. In fact, we could perhaps argue that covid-19 has shown just how fragile our society is, particularly for those who need support the most and who live in the areas of higher deprivation. Those who have been impacted the most by covid-19 are projected to be impacted the most by the climate crisis.
It might sound a little bit bizarre that an MP for Aberdeen, which is of course a city well known for its oil and gas industry, would stand here and talk about climate change, but it is for a good reason: the reality is that we do not get to net zero without taking the oil and gas industry with us. We need to invest in the support that it requires in order to meet net zero.
As another Member of Parliament who is very proud to represent a part of the great city of Aberdeen, I very much appreciate the speech my hon. Friend is making. There is no route to net zero without investing in the oil and gas industry for things like carbon capture and storage. Does he share my concern that there is as yet no apparent sign of any sector deal, which might harness the skills and capital invested in that industry to help us to effect the transition?
I thank my hon. Friend, who shares representation of the wonderful city of Aberdeen through his Gordon constituency, for his timely intervention: it is almost as though he has read my mind as to what was due to come next in my speech.
As things stand, to date the UK Government have failed to deliver on their promise of an oil and gas sector deal. An oil and gas sector deal may on the face of it, to those who look at it from the outside, appear to be a way to support the oil and gas industry to continue to take oil out of the ground. There is a certain element of that—we need to ensure that sustainability in the industry is there—but more importantly, it is about ensuring a sustainable transition that allows us to meet net zero but provides sustainable energy moving into the future. The UK Government have to date been found absolutely wanting. I have raised this on numerous occasions since the start of March. In recent weeks, Oil and Gas UK produced a report that outlined that 30,000 jobs are due to go in the oil and gas sector as a result of the current downturn in oil prices. That is on top of the huge impact of covid-19 across the tourism sector and all the other sectors that are impacted in every single constituency across Scotland and the United Kingdom. Yet this Government continue to sit silent and continue to fail to deliver.
The Scottish Government have stood up to the challenge. Only last week, they put £62 million into sustainable energy going forward, with £25 million going into a transition, and money going towards a hydrogen hub and a number of other projects put forward by the oil and gas technology sector. Yet this UK Government have failed, to date, to provide a single penny. So where is the strategy? Where is the desire to support the industry in getting to net zero? As I have said, we do not make the sustainable energy transition without that investment, be it in the aforementioned energy transition zone, in further investment in hydrogen, or, as my hon. Friend the Member for Gordon (Richard Thomson) mentioned, in carbon capture and underground storage—a pledge that was made prior to 2014 and, shamefully, taken off the table by the Conservatives following the independence referendum result. It is now on the table but has no delivery timescale whatsoever. When is the Acorn project going to be brought online so that we will see that investment in climate priorities? We have heard from the Government numerous times that they will do whatever it takes, but “whatever it takes” is not enough—we need action,
This is a Finance Bill debate, so I shall mention this important point. The Treasury has coined £350 billion from the oil and gas sector, notwithstanding the taxes being paid by those individuals whose employment has been linked to the industry. It is time to give back, and it is time to give back in spades. We cannot afford to wait. What we have had up to now from the UK Government is simply not good enough. I shall conclude where I started, with the remarks of a former President of the United States, who stated:
“No country, however rich, can afford the waste of its human resources. Demoralization caused by vast unemployment is our greatest extravagance. Morally, it is the greatest menace to our social order.”
Let us invest in those industries and the tech that can protect jobs, protect our environment and lead us into a future that protects our planet.
A lot of people wish to speak on this group of amendments, and time taken will squeeze future debates so I will be brief.
I support the positive words from my right hon. Friend the Member for South Northamptonshire (Andrea Leadsom), but I also want to highlight clause 102. It takes up two and a half lines in a large Bill of 7,500 lines, so it is easy to miss. It makes provision for HMRC to start work now on a new tax on plastic packaging containing less than 30% recycled plastic. I welcome this measure. Indeed, I hope that in time it might be possible to go further, but it is clearly right to start now. During the coronavirus crisis, we have heard little about the environment, although I think people have been pleasantly surprised by the real and noticeable difference to our environment—our clean air—resulting from the lack of vehicle use. That 2050 deadline for net zero carbon countries has got ever nearer, and reducing what we use and reusing what we have are ingredients for progress. Changing our plastic use in our lives is one way that all of us can make a difference.
This was a hot topic before the crisis and it will be one in the future, but it has not always been so. I launched plastic bag-free Harrogate with some colleagues in 2008, and although it was generally well received, some people did ask me if I had gone a little bit cranky. We nevertheless made a bit of a difference, and I see a difference being made now in the actions taken by national Government, regional government, local government and community groups. My local council, Harrogate Borough Council, has done good work in waste collection, recycling and education, and I see strong community groups and vibrant environmental groups such as Zero Carbon Harrogate and Knaresborough SPARKs moving the debate forward. We can and will go further and faster. So, although this measure has not attracted attention, it is very positive and I congratulate my right hon. Friend the Minister on taking it forward and using a financial lever to change behaviour among companies using plastic packaging, and, through that, encouraging people to recycle more. That has to be a good thing.
There is one other measure in the Bill that I would like to highlight, and that is the measure on increasing the uptake of electric vehicles. Basically, it is a measure to ensure that employees and employers pay no tax on zero-emission company cars. It supports the measure on electric vehicle charging infrastructure. I have had responsibility for this, as both a Transport Minister and a Treasury Minister, so my views are known. I have shared them in this place on previous occasions, and I will therefore not detain the House with repetition. I simply say to my right hon. Friend the Minister that he will be even more popular if he goes on to further incentivise change in this area.
I come to the debate more with sadness than with pleasure, having read the progress report from the Committee on Climate Change on how the Government and the country are doing. The report is absolutely damning of the Government’s performance. It says that they are not even meeting the 2° warming target, they are failing the commitments that we made in Paris five years ago, and, as my hon. Friend the Member for Ilford North (Wes Streeting) said, they are not expected to meet the fourth and fifth carbon budgets. The report goes on to say that many national plans and policies are not acknowledging the long-term risks of climate change, and that many Government Departments are not acknowledging those risks.
I am going to talk about a few different areas and measures, hopefully not for too long, to let other colleagues fully take part in the debate. We have with us a Minister who has spent time at the Department for Transport, along with my neighbour the hon. Member for Harrogate and Knaresborough (Andrew Jones), who was a long-serving Minister in that Department, so I will start there.
I am pleased that there are measures such as clause 83, which exempts electric vehicles from vehicle excise duty, and clause 82, which deals with the calculation of cars’ CO2 emissions, but is that enough? We are talking about a country still addicted to petrol and diesel vehicles. Just look across the North sea to Norway. We have to thank the Norwegians, because their No. 1 selling vehicle is the Nissan Leaf. They are therefore supporting Nissan jobs in Sunderland with their Government measures, yet we are not sufficiently supporting them with ours. Those two measures in the Bill will not be enough to make Nissan Leaf the top selling car in the UK, which is what the Government should be aiming for. Not that I am particularly promoting Nissan—this goes for any electric vehicle. I have no interest to declare in relation to Nissan; this is about British jobs. We should look to Norway and its measures on sales tax, charging points and other things, which have meant that the majority of vehicles sold in Norway are electric.
Looking forward to COP next year, the reason why Paris was so successful was that the French showed global leadership, through domestic policy and diplomacy. The problem we will have is that we are not showing the same global leadership in domestic policy. We are a global leader, rightly, in reducing the use of coal-fired power stations, which will effectively have ceased in this country by the time we get to COP. However, we are not a global leader in any other area, so how can we secure a world-leading agreement in Glasgow next year? It is incumbent on the Treasury to introduce incentives to ensure that we reach those points, so that we can show that our measures work. It is not enough to talk a good game; we have to deliver.
Let me turn to some points drawn up by the all-party net zero group, which I chair, which should be instructive for the Minister. They are points that he should take on board and that hopefully the Government will look into. One thing we have seen in the renewable energy sector is a lack of confidence, because in many areas the Government have withdrawn support or not introduced it. One area where I would say the Government have done well and are world leaders is offshore wind. Contracts for difference have made a huge difference. However, we do not have the same confidence in other areas of the renewables market.
What has happened with solar feed-in tariffs has removed confidence from the solar market. Support for green hydrogen and the renewables to create it has not come forward in the way that it should have. My hon. Friend the Member for Cardiff North (Anna McMorrin) mentioned the tidal barrage. Again, we are not talking about value for money; we are talking about a world-leading project that could create new technology that we could export. We are not thinking broadly enough about these measures, and the Treasury needs to rethink them.
Obviously we are in the post-covid period, and we need to think about retooling our workforce, because of the many people unfortunately losing their jobs and the Government’s own agenda of levelling up areas. I want to give one example of where that might really work. Not far from my constituency, in East Yorkshire, we have a plethora of factories that build caravans. I will come to the construction industry later, but the way in which we build houses is the 19th-century way of doing it. In fact, we have been building houses in more or less the same way since the Romans. Why are the Government not incentivising the repurposing of those factories to build modular, Passivhaus standard, zero-carbon homes, creating jobs in areas neighbouring coastal resorts, a lot of which are going to lose jobs, and making available houses at different specs for a wide range of people, from social housing right through to the most expensive types of houses in this country, all of which could be implemented quickly? The Prime Minister said, “Build, build, build”, but it is not enough just to build; we have to build in a way that creates a green recovery.
There is a real dilemma around how we incentivise the construction sector. If someone has a property—a terrace, a house or even a heritage property—and wants to refurbish it and put in green measures, they have to pay VAT. If they want to demolish that property and build a brand new one, they pay no VAT. Is that not perverse? Should the Minister not be looking to fix that? We have systems and financial incentives in place that are going to create more carbon, not less.
I will finish soon as I want to give colleagues a chance to speak. Every Department’s plans should include a green fiscal rule or measure that every single policy has to meet. Every time the Treasury or another Department are putting forward a new policy, they should be asking whether it will reduce carbon, and help to meet our fourth and fifth carbon budgets—and the carbon budgets after that, if we get to that stage. If it does not, that policy should not be coming forward, because we only have one chance to do this. There is no planet B. There is no second United Kingdom. We need to be doing this now and in the best possible way.
Yesterday, like a number of Members across the House, I was lobbied—by 15 residents, in my case. The time is now.
Today I spoke to 180 delegates of CPRE, the countryside charity. The hon. Member for Brighton, Pavilion (Caroline Lucas) was there as well. Those people told me what they wanted fed back to Ministers about the progress they would like to see in the green economy. They are frustrated with the lack of progress, and determined and ambitious to ensure that we get to net zero a damn sight quicker than the Government’s current targets suggest. They are keen to protect our green spaces and environments, and, in turn, to create great green jobs. Where there is development, they are determined that we have a brownfield-first policy, and that the houses built are genuinely affordable and carbon neutral. Picking up on the point made by my hon. Friend the Member for Leeds North West (Alex Sobel); there are some great examples of modular houses that we can build at scale and create the jobs, jobs, jobs that the shadow Minister spoke about.
We need real and bold investment in our cycleways and pathways, and affordable transport, until the point that it is in our DNA to ensure that our buses are electric, that we get more people working on buses and that our railways get people from A to B, which they clearly do not do currently. At Northwich station in my constituency, people who are disabled or have mobility problems cannot get to the other side of the tracks. That affects their mobility across the conurbation and productivity in terms of sustainable growth.
People have spoken about renewable energy, including the decision on the tidal lagoon. That was a retrograde step; the lagoon should have been invested in. There is a similar situation in Merseyside, where Mayor Steve Rotheram is taking forward a project. I sincerely hope that the Government can escalate that problem—not only for Merseyside, but for the whole nation.
Finally, on renewable energy, people have mentioned hydrogen, which is a real growth industry in my community in Weaver Vale. I would like to see the Government actually escalate such support and put some speed behind it. I would also like to see a recovery plan, which again is about jobs, jobs, jobs, but also about building back better and certainly building back greener with more ambition.
Yesterday, the Prime Minister announced that we will “build back greener”. He said that that was part of his
“mission to reach Net Zero”.
He also said he would build “Jet Zero”. This was on the same day that Airbus announced 15,000 jobs were to be cut. This just shows how out of touch this Prime Minister and his Government are with what is going on in the real world.
The climate emergency barely got a look-in throughout the Prime Minister’s speech yesterday. When we look at how money is to be spent, frankly, this Government’s strategy is to hide inadequate commitments with bluster and rhetoric. With the climate emergency upon us, where is the action that must follow words? Take where I am from, south Wales, for example—cancellation of electrification of trains, no support for the groundbreaking tidal lagoon and now no new money for Wales at all in the announcement yesterday, despite the ridiculous rhetoric we are hearing.
Compare this with Macron in France or Merkel in Germany, who are making commitments of €15 billion and €40 billion to invest in rebuilding a green economy and green jobs. They know, like many in this House, that that is the future. We know that only by transitioning to a green economy, with apprenticeships and jobs in the sustainable and green sectors, are we going to be able to meet this climate emergency head-on, replace jobs lost in that transition and fix the unemployment crisis we now face.
This £5 billion that has been announced is not new money at all. As I have said, we know there is not even new money for Wales. It bears little resemblance to what is actually needed, and even less resemblance to the person whom this Prime Minister seeks to emulate—Roosevelt. This spending represents just 0.2% of GDP compared with Roosevelt’s new deal, which represented 40%. As my friend the former Member of Parliament for Bury North, James Frith, said yesterday, this stunt is “Less Franklin and the Hoover dam and more, ‘Frankly, I don’t give a damn’.”
I know the Prime Minister has a liking for big shiny announcements to occupy the days when he is not doing press-ups, but I would have thought he would not have looked twice at this bargain basement new deal. The global health crisis has led to such disruption in our lives—the uncertainties that lie ahead for so many people are numerous—but this should be a reason to give people hope and to use the post-covid rebuild to invest in that green infrastructure and green jobs.
The challenges we face present us with a unique opportunity to do just that—to right past wrongs and to stop future ones occurring. It has shone a spotlight on what truly matters to us: values, who we value and what we value. As we begin to reimagine what the world —our communities, our high streets, our town centres—and our future look like, we have a chance to face up to the starkest challenge of all, which is our rapidly changing climate.
In the future when we talk about the bottom line, that bottom line must be to stop undercutting the environment. We must recognise what is good for our planet is good for jobs, good for livelihoods, and good for health and prosperity. We must build sustainability into absolutely everything that we do. Now is the time to be bold, but ensure that a sustainable future is ahead for us, and for our children too. We have only a few years left to act and, unfortunately, we have a Prime Minister who favours big words over actually delivering anything, so I really do urge this Government to listen and act.
Last week, the Committee on Climate Change released its annual report. The UK is still on course to miss the legally binding fourth and fifth carbon budgets. The Government are falling well short of what is needed to meet the previous target of an 80% reduction in greenhouse gas emissions, let alone their own net zero carbon commitment.
Halting runaway climate change means embedding resilience at the very heart of infrastructure plans; retrofitting homes, offices and public buildings; greening our energy network, and expanding public transport. Yet the Committee on Climate Change reported that the Government have failed to build climate resilience into their work, with no UK sector demonstrating even the ability to meet the 2° C rise in global temperature, which we absolutely must meet.
The Government have yet to radically scale up the construction of renewable energy generation or create any coherent plans to integrate onshore and offshore networks. We are lagging behind other countries in developing a proper plan to train and skill a net zero workforce, and we need to shift public investment away from high-carbon infrastructure. This Government have failed again and again, and the Prime Minister’s new plans are stuck in the fossil fuel age, with more money being spent on roads than on greening our rail networks or investing in energy efficiency, which would boost our communities and local economies. We must stop financing failure and start financing the future.
A better way forward is possible. People have made huge sacrifices during this pandemic that we have lived through. Many have lost loved ones. But this health crisis, just like the climate crisis, has not been a great leveller; it has been a great reminder of the entrenched inequalities in this country and around the world. How we invest now must take account of that.
We must look at what a green energy revolution can do for both the generation of young people who fear for their job prospects and the many millions more who have fallen foul of our fragile economy and now look nervously towards the autumn. We must invest in green energy, mass retrofitting schemes, green building and a sustainable transport network. By financing the future of education, we can equip the next workforce with the skills we need to achieve net zero well before 2050.
Now is the time to make our economy and society fairer and more just, setting us on a green and sustainable path. We have a moral obligation to pass a better world on to the next generation. People want change, too; a recent poll found that six in 10 want the Government to put health and wellbeing ahead of growth after this pandemic. The suffering that people have gone through throughout this crisis deserves to be recognised with adequate and appropriate investment.
We need a Government who will not just level up our country, where the least among us meet the just about managing; we must have a major adjustment that will make life worthwhile—action, not words. We need leadership on this, not rhetoric.
Today’s debate on the environment and climate change is crucial because, in addition to the coronavirus pandemic, an even more devastating crisis is already here. Europe had its hottest year on record in 2019, and 11 of the continent’s 12 warmest years have occurred in the past two decades. Global grain yields have declined by 10% due to heatwaves and floods connected to climate change, unleashing mass hunger and displacement. More than 1 million people living near coasts have been forced from their homes due to rising seas and stronger storms. With the highest ever temperature recently recorded in the Arctic circle, we cannot delay in taking action to save our planet and future generations. Sadly, we cannot rely on the Government to take the urgent, radical action that is required.
I support clauses 82, 38, 87, 89, 90, 92, 93 and 102, all of which either introduce or raise taxes on environmentally damaging goods. However, they amount to a woefully inadequate response in the fight against planetary breakdown. Not only is the Government’s commitment to bringing greenhouse gas emissions to net zero by 2050 perilously unambitious, but they are not even on track to meet it. Last year, the Committee on Climate Change said that the UK is not on course to meet the original long-term ambition of an 80% carbon reduction, let alone net zero. The Institute for Public Policy Research estimates that the Government need to invest an additional £33 billion per year, just to meet their 2050 net zero target. So far, however, less than 10% of that investment has been committed.
Conservative Governments have continued to give oil companies further tax breaks, including as recently as December 2018. Yesterday, the Prime Minister boasted that his repackaged announcement of existing infrastructure plans was “Rooseveltian”, yet his announcements were incompatible with FDR’s new deal which, imperfect as it was, used the full power of the state genuinely to transform and rebuild America as it recovered from the Great Depression.
As we emerge from the pandemic, we must channel that spirit to forge a new social settlement, and a green new deal to rebuild the country with a more just and sustainable economy. We must fight for a society in which public health always—always—comes before private profit. The big polluters and corporate giants must bear the cost of that, not ordinary people. It is vital that the protection of our workers and communities is guaranteed during the transition to renewable energies. As we rebuild our economy from the ruins of a pandemic, it is possible for the Government to create 1 million green jobs with a programme of investment in renewable energy, flood defences, and a resilient health and care service.
The coronavirus crisis has demonstrated the need for our communities to have access to clean air, green spaces, and interconnectivity. That is why we must introduce full-fibre broadband, free at the point of use, a mass house insulation programme, and a green integrated public transport system. We must bail out workers and the planet, not big polluters. The bail-out in Project Birch must be subject to stringent commitments to workers’ rights, tax justice, and rapid decarbonisation. Without immediate Government intervention, the urgent action required to preserve a habitable planet will be too slow. That will cause unimaginable disruption, and could cost millions of lives, most immediately and sharply in those countries of the global south, which have contributed the least to climate change. To ensure a global green new deal, our Government must strongly consider the cancellation of the global south’s debt, and enable investments in public health. The UK must also take strong action against tax evasion and international fossil fuel finance, and rapidly step up financial support for a just, global energy transition.
Moments of crisis often shape the future. From the horrors of the second world war, we created the welfare state and our treasured NHS. While we rightly focus on tackling the coronavirus pandemic, the wellbeing of the entire planet relies on our taking this opportunity to mitigate the existential threat of climate change. If we are to achieve the necessary goal, the Government must raise their ambition and begin to act on the scale that the climate crisis demands.
It is a pleasure to follow my hon. Friend the Member for Leicester East (Claudia Webbe). I wish her and other Members of Parliament representing the Leicester area well with the non-easing of lockdown this weekend. Coronavirus has given us an exceptional opportunity to rethink things and do things differently. New clause 28 seeks to have a green thread running through our finance legislation. I will vote for it, because it seeks to inject some green thinking and some fresh thinking into the way that our economy acts.
Like other Members, I have been approached by many constituents this week about the Climate Coalition declaration. I had a very useful discussion with constituents yesterday about the three key demands, which fit neatly into this debate. The first is unleashing a clean energy revolution. I am proud to be in a city where the ultra-low emission zone scheme, which was introduced by the Mayor of London, has reduced emissions by 40% over a short period. That was quite a brave move—it is not universally popular. Often these green measures are not particularly popular to begin with, but when people realise that they can breathe better, the measures become more popular. I am sure the Minister agrees that the ULEZ is a good scheme that could be rolled out in other cities.
The wonderful campaigner Rosamund Kissi-Debrah is the mother of Ella, who, at the age of nine, tragically lost her life due to asthma. That was back in 2013, and we know that asthma deaths have risen exponentially in the last decade. Indeed, there seems to be a link between asthma and how badly one suffers from coronavirus, so we must redouble our efforts on a clean energy revolution, to make our environment much fitter for human beings.
Housing should be fit for the future. I notice that housing was way down the list of the Prime Minister’s capital spending priorities, and that is a missed opportunity. We know that a lot of air quality issues relate to people’s homes. For example, older construction in the social rented sector often means that there is damp, which can lead to problems such as chronic obstructive pulmonary disease and asthma. We also know that a number of homes in the privately rented sector desperately need to be renovated, with new boilers and a reduced carbon footprint. This is the simple, low-hanging fruit that could be tackled through the Bill. It would be lovely to have the tidal lagoons as well, and I voted in favour of those, but tackling the low-hanging fruit and funding local authorities properly so that they can do these basic things would be easy and would create jobs, including green jobs.
The second thing that the Climate Coalition is pushing MPs to do is to protect, restore and expand our green and wild spaces. Many of us will have had a renewed interest in and respect for our local parks during the coronavirus lockdown. I make a simple plea that the Minister look at increasing finance for local authorities to look after our parks better, to create beautiful walking environments and to plant more trees. I know that tree planting is on the list of things that will happen, but maintaining and looking after our green spaces is one of the easy things we could do to boost our air quality and our health.
Thirdly, leaving no one behind is a fantastic idea. It is simple: by addressing social justice, we can have the greener environment and better economy that we all seek. For example, we can do that by increasing support to the most vulnerable, which means targeting many of our green measures not just at people who can afford, say, a Tesla or a Nissan Leaf. My hon. Friend the Member for Leeds North West (Alex Sobel) talked about Nissan Leaf vehicles and Government incentives on electric vehicles; the trouble is that electric vehicles are still too expensive for most people. That needs to be addressed and the Government need to look at it very quickly.
With Brexit coming down the line—with six months to go—I have a specific question for the Minister: what is the replacement strategy for the EU emissions trading system? I see him looking studiously at his notes and hope that he will reply to that question when he responds to the debate. I shall give him some time to prepare.
Leaving the European Union has of course left the UK much more exposed to a degradation of ambition on things such as cleaner water. Our beaches, rivers and lakes became much cleaner to swim in once we were using the benchmark of the European clean water directives. We were also pushed much more at local authority level to pick up our recycling rates—which, by the way, have completely plateaued at local authority level in the past decade of austerity.
Such things are the low-hanging fruit. We want to be ambitious on big schemes as well, but so much can be done at a local level, with more funding for local authorities and regional mayors to do the basics to bring us all up at the same time and not leave anyone behind.
Order. We have just under 30 minutes before I want to bring in the Minister and we have four more speakers. I do not want to set a time limit, but it would be helpful if speeches did not go over, for example, eight minutes.
This debate could not be more important. The Arctic is on fire; 2020 is on course to be the hottest year on record; and 16 of the 17 hottest years on record have been since 2000. There is such a thing as being too late. This is a pivotal moment, because the actions that we take over the next few weeks and months will either lock us into high-carbon dependency for decades to come, in which case we can say goodbye to any chance of avoiding the worst of climate catastrophe, or they will start to lay the foundations for a greener, safer, fairer future as we emerge from the peak of this pandemic. These decisions could not be more consequential and nor could the issue be more urgent.
New clause 34 would require the Chancellor to review the impact of the Bill on human and ecological wellbeing, including the wellbeing of future generations. I am grateful to colleagues for their support. Ministers might like to note that the Scottish and Welsh Governments are already members of the Wellbeing Economy Governments partnership, a global collaboration of nations and regions whose leaders and Finance Ministers recognise that economic progress in the 21st century means delivering human and ecological wellbeing as the overriding priority.
If we are going to build back better, we need to put improving the health and wellbeing of people and nature first when it comes to economic policy making. That should be the primary objective of every Budget, every Finance Bill and every short-term measure that the Chancellor announces next week as part of his plans for economic recovery. I hope that today we can take a small step in that direction by requiring that the Bill be assessed against its impacts on human wellbeing and the health of our natural life-support systems.
My new clause is also a step towards putting the provisions of the Wellbeing of Future Generations Bill into action. That is the subject of Lord Bird’s Today for Tomorrow campaign, which is supported by dozens of colleagues across both Houses. I am pleased to have introduced a private Member’s Bill in this House to match Lord Bird’s in the other place. That would bring about a future generations Act. I pay tribute to Jane Davidson for all her work in the Welsh Assembly on that issue.
Yesterday, the Prime Minister talked of addressing inter-generational injustice, yet so far the Government’s economic response to covid has doubled down on business as usual. Young people are at the forefront of the campaigns for a transformative green new deal, yet all they are being offered is a bargain-basement imitation, with none of the necessary boldness, vision or resource.
My new clause 34 also considers the interim report of the Treasury’s own Dasgupta review on the economics of biodiversity. It recognises, as Professor Dasgupta has written, that economies
“are embedded within—not external to—Nature.”
So we urgently need a new economic rulebook. As Dasgupta explains:
“Unlike standard models of economic growth and development, placing ourselves and our economies within nature helps us to accept that our prosperity is ultimately bounded by that of our planet. This new grammar is needed everywhere, from classrooms to boardrooms, from parish councils to government departments.”
I would argue that it is needed in this Bill as well. The good news is that just 6% of the public want to return to the pre-pandemic economy. Many of them know that GDP is a poor measure of the things that really matter and that we should not let policy be guided by it. The Government must change course and put public health above private wealth.
As for what an assessment of human and ecological wellbeing would look like, the Treasury could do worse than start with the seven wellbeing goals in the Wellbeing of Future Generations (Wales) Act 2015: prosperity; resilience; health; equality; cohesive communities; vibrant culture; and global responsibility. All this comes with a “sustainable development principle” to guide delivery. Even the inventor of GDP was adamant that it should not be used as a measure of wellbeing, because GDP goes up when things that are detrimental to human wellbeing go up. For example, a motorway pile-up is a nightmare for everyone involved, but a boon for GDP, as new vehicles are bought and possessions are replaced. It is little wonder that the majority of people want the UK Government to pursue health and wellbeing ahead of economic growth.
The hon. Lady is making an excellent speech about the wellbeing of future generations and the Act that I am proud to have drafted and written in the Welsh Government, along with Jane Davidson, when I was a special adviser. Does the hon. Lady agree that that Act helps pave the way for what we hope will be something across the UK, including in England? Does she also agree that it demonstrates working together across all the Departments and all the different forms of government, and how we must have sustainability at the heart of things?
I thank the hon. Lady for that intervention, not least because it gives me the opportunity to pay tribute to her work in drafting that Bill. I was not quite clear about the role she had played in drafting it. I have worked closely with Jane Davidson on the private Member’s Bill, as has Lord Bird. I am delighted to pay tribute to the work of the hon. Lady and to agree with the substantive point she makes, which is that that kind of Bill is a way of mainstreaming sustainability across every Department and every nation of the UK.
If we were to ask the millions of households in the UK suffering from hunger, food insecurity or fuel poverty whether our current growth-based economic model has delivered them prosperity, we would find that they would say that it has not. It has delivered rising inequality, insecurity, and environmental breakdown. What would change if we made the wellbeing of people and nature our primary economic goal? Some examples are obvious. Of course, we would have investment in things such as energy efficiency and retrofit, creating thousands of good jobs in every constituency, ending fuel poverty and getting emissions down—a real win, win, win. Despite Dominic Cummings apparently thinking this is all a bit boring, it is fundamental to that win-win of combining social and environmental justice. It would also mean more jobs in care, and the Women’s Budget Group shows how sensible that would be. Investing in care creates seven times as many jobs as the same investment in construction, for example, with 50% more recouped by the Treasury in tax revenues. Investment in care is also greener, producing 30% fewer greenhouse gas emissions than construction. A care-led recovery is also a green-led recovery. That just one example of what new clause 34 is all about, and I hope the Government will agree and look upon it favourably.
I wish to finish by saying a few words about the level of climate ambition. I am delighted to hear everybody, right across this House, talking about the importance of the climate crisis, but unless we get the ambition right, fine words will not get us where we need to be. As for where we need to be, organisations such as Friends of the Earth, Christian Aid, ActionAid and others have worked what our fair share of a climate reduction ought to be. If we look at how that compares with the Government’s 2050 net zero target, we will see a massive gulf. Those organisations have worked out that, based on our relative wealth and historical emissions, we should be getting to net zero by 2030—a full two decades earlier than the current target—and that we should be creating the equivalent of another 100% reduction of UK emissions overseas through climate finance to the global south. That is what we need to be aiming for.
As others have said many times this afternoon, we are already off track to meet our fourth and fifth carbon budgets, which themselves are not even strong enough to get us to net zero by 2050. That is how vast the ambition gap is, and that means that our economic recovery cannot just deliver incremental emission reductions; it needs to catapult us into a pathway that meets our moral obligations to the rest of the world.
Let us take a quick look at what that actually means and compare it with what the Government are offering. The Government celebrate a new £12 million investment in zero-emission vehicles research, but compared with the £27 billion road-building budget that I mentioned earlier, it is a drop in the ocean—just 0.04% of the road-building programme’s budget—at a time when we should be demanding that all new road schemes be cancelled. Money should be invested instead in getting people out of their cars altogether and into walking, cycling and public transport.
When it comes to this so-called just transition, it is vital that we support workers in high-carbon industries, but we should be clear that there will be not be a penny more for any kind of bail-out for companies that do not have a programme in place both to support their workers and, crucially, to transition to a sustainable route forward. The idea that the Government would just hand over £600 million to easyJet, without even batting an eyelid, with no conditions at all, is absolutely unacceptable. Look at France, where strong green conditions were applied to Air France. We should be doing the same. We like to pretend that we wear the mantle of climate leadership, but unless we do something like that, we do not.
We want not a penny more for any further fossil fuel exploitation, we want to end the subsidies of fossil fuels, and we want to stop the UK Export Finance Department funding fossil fuel exploration, exploration and promotion in developing countries. Those are the tests of whether we are serious about this issue, on which we are not delivering what is needed.
The need to rebuild from this crisis, and to rebuild better and greener, could hardly be more important for my constituency. Early analysis shows that unless bold further action is taken by the Government, the economic effects of the pandemic will hit Coventry and the west midlands particularly hard.
The effects are already being felt. Each week, new job losses are announced and more businesses close their doors. Rolls-Royce plans to cut thousands of staff, including at its nearby Ansty plant. Jaguar Land Rover has announced hundreds of redundancies in nearby Solihull, with a domino effect causing hundreds of job losses in car parts manufacturers in Coventry South. That will have a devastating knock-on effect for local suppliers and shops in the city, not to mention the dire impact of the crisis on hospitality, the arts and countless other industries in the city.
Even before the job retention scheme is wound down and the potential unemployment tsunami hits us, the human cost is already starting to build up. Pressure is growing on Coventry’s voluntary sector, on its food bank and on local services. It is estimated that without further action, across the country 1 million more people will fall into poverty this year alone.
We stand on the verge of an economic and social calamity. This is no time for the Government to sit on the sidelines, or to offer the same old answers, or to try to go back to the old normal. That system was broken and already failing working people, but the Prime Minister’s announcement yesterday does not rise to the challenge. What he is proposing is barely even a sticking plaster. In the face of the worst recession for generations, the new deal the Prime Minister promises equates to less spending than the cost of two aircraft carriers. It is a drop in the ocean.
The challenge before us is not simply recovering from coronavirus, but combating the climate emergency as well, because the danger of ignoring warnings and delaying actions is now all too clear. We simply cannot afford to make the same mistakes with the climate. There is no planet B to fall back on. We do need a new deal, but it must be a green new deal—one that is bold and ambitious, that hardwires lasting change in our society, and that works for working people. It should be a new deal that creates 1 million green jobs, as the TUC has proposed; one that invests in green industries, renewable energy and home insulation, and builds a resilient health and care service. It should be a new deal that harnesses the skills and industry that we have in Coventry to make the city a world leader in the automotive industry once again, but now building the electric cars of the future. It should be a new deal that builds green public transport, with railways and bus networks expanded, owned and run for public benefit, not private profit.
It should be a new deal for our key workers. They kept society running through this crisis; now it is time to run the economy for them. Let us give them a new deal with the pay rise they deserve. With this new deal, let us ask the super-rich and the big corporations to pay their fair share—no more bail-outs for companies registered in tax havens, no more tax dodging or corporate excess.
As we emerge from this crisis, we stand at a crossroads that will determine our future, so let us learn from the lessons of the past. In 2008, bankers crashed the economy, but working people paid the price, with a decade of cuts and stagnant wages. We became a nation of food banks and zero-hours contracts. The Government missed deficit targets, but ripped up the social safety net. There is no doubt that that was a grave mistake, but even now we hear calls for more years of austerity.
In 1945, we took a different path. With mountains of debt and an economy in ruins, we planned and invested for the people. We built the national health service, the welfare state and 1 million council homes. We ran industries for the public good and we taxed the richest. Living standards rose, the economy grew and debts were repaid. Which path we take now is up to us.
In this crisis, we have seen the best of society, from the mutual aid groups that sprang up to the outpouring of love for the NHS and its heroic workers. We have seen how deeply we care for one another. Across divides and differences, we pulled together, so let us pull together again and build back better and greener with a green new deal, tackling social injustices and the climate crisis and building a Britain fit for our key workers and for the future.
There has been much talk of Roosevelt and the new deal but, as the hon. Member for Cardiff North (Anna McMorrin) said, the Roosevelt new deal comprised 40% of US GDP and the Prime Minister’s announcement 0.2% of UK GDP. The new deal rhetoric is right—let us congratulate the Government on that—but the reality is utterly limp.
We stand on the precipice of a recession, probably the worst of our lifetimes, and so it is good to hear Conservatives, for the first time in generations, looking to the great liberal economist John Maynard Keynes for inspiration. This is a time to boost demand and economic activity, to create jobs by direct Government intervention. We will do that by borrowing to invest, and we should do so on a colossal and ambitious scale. Yesterday’s announcement of £5 billion investment would transform Cumbria, if all of it was spent there. No serious person thinks it will even make a dent in the UK-wide economic situation.
Nor does that investment, of course, comprise a green infrastructure revolution. Yet, if we really are to build an economy that is better, that is the revolution we would choose. An active, ambitious Government would invest not £5 billion, but the £150 billion that the Liberal Democrats propose, over the next three years. That way, we would stand a chance of ending the recession before it starts, protecting and creating jobs and preventing hardship. We would also stand a chance of leaving a legacy that future generations will thank us for.
In working together, in a collective national endeavour to build the sustainable infrastructure we need, we can generate the national unity and common purpose that has been absent ever since the debate about our relationship with the rest of Europe turned into a self-destructive culture war. We can unite the country, avert the recession and save the planet all in one go, but it will take an awful lot more than 0.2% of GDP.
So what should we do? We expect to see as few as 3,500 social rented homes built across the entire country this year, the lowest number in history. In my constituency alone, we have 3,000 people languishing on the housing list. We need new homes, genuinely affordable homes and zero-carbon homes. The Government must fast-track the affordable homes programme and spend it on building new, zero-carbon social rented homes.
The Government must also launch a nationwide programme of energy insulation, starting with the homes of those with the lowest incomes, and they must also use this time of fast-tracked legislation—since they are in the mood to do it—to reform the Land Compensation Act 1961 to prevent land values from being inflated, so that we can make zero-carbon homes more affordable to build and more likely to be built.
Transport is key to rural communities such as mine, and to the environment and the recovery. In the north-west, transport spend per head of the population is still barely half of what it is in London, despite the promises made when the northern powerhouse was established. Bus services in London receive a £722 million annual subsidy; in Cumbria, we receive nothing at all. What little money exists rarely makes it north of the M60—not much of a powerhouse, and not very northern.
Our communities in South Lakeland have done a spectacular job putting together community bus services, such as the Western Dales Bus service connecting Sedbergh and Dent with Kendal and the surrounding communities, to plug some of the gaps caused by the steady loss of services, but we should not have to do that. The lack of subsidy means that fares are extortionate, which is a huge challenge, especially for low-paid workers. The 5-mile journey from Ambleside to Grasmere costs £4.90; a journey of equivalent length in London costs £1.50.
Bus services are essential to life in rural communities such as ours—essential to boosting our economy, moving to zero carbon and tackling isolation. They are also key to Cumbria’s vital tourism industry. Between 16 million and 20 million people visit us each year, and 83% of those visitors travel to us by car. With the right interventions and conditions, our visitors will travel sustainably.
We ask for a comprehensive, affordable rural bus service connecting all our villages to our main towns regularly and reliably. We ask for a network of electric hire bike stations. There should be such stations at all railway stations, in village centres, and at major bus stops, and action to make cycling easier and safer throughout Cumbria. We ask for the Lakes line, which connects the English Lake district to the main line, to be electrified. It is shameful that the Government cancelled electrification plans in 2017 for utterly bogus reasons. Now is the time to keep that promise and electrify this iconic line, which serves Britain’s second-biggest visitor destination after London. We ask that there be a passing loop on the Lakes line at Burneside to enable a huge increase in capacity, and we ask for Staveley station to be made accessible, so that it is no longer out of reach of those with mobility difficulties, who cannot make it up the 41 steps.
We ask that the Government show their commitment to industrial renewal and to tackling the climate emergency by investing in wave, hydro and tidal power in the most beautiful but—let us be honest—wettest part of Britain. Why is it that the UK, with the highest tidal range on the planet after Canada, spends so little on the reliable power that water offers? We are proud to have Gilkes in Kendal, beacon to the hydro energy industry. Let us back it, and others like it, so that we can get Britain working, sustainably.
For Cumbria and Britain, building back better and greener is possible—essential—but it means doing more than just using Roosevelt’s name; it will mean deploying Roosevelt’s courage.
I am thankful for the opportunity to speak on this important topic. I declare an interest as a landowner. Many years ago, I used the initiative to provide saplings to landowners free of charge, and I planted 3,500 trees on my farm—my father’s farm, as it was then. Over the years I have watched them grow, and have seen wildlife flourish. I am very proud of my biodiversity foray. However, I would never have thought to use some five acres of my farm to plant trees had not the relevant Department publicised and encouraged the scheme, and made it easier for me.
I understand that the Prime Minister has this week indicated that 1.5 billion trees will be planted between now and 2050. That will raise forest cover across the United Kingdom of Great Britain from 15% to 17%. I would have liked more than that, of course, but I welcome it; we should welcome that very positive announcement. It is clear to me that Government initiatives on the environment make a difference. I am not talking about ceasing production of diesel cars or other preventive measures; I am talking about initiatives from which the constituent feels the benefit. Constituents knew that they could get money for scrapping their old carbon-emitting guzzler car, and could put that towards a more environmentally friendly car that cost them less in road tax, and they did it. They knew that they could get a grant to help install solar panels on their roof and for insulation, so that they did not have to use as much oil, and they did it. Battery storage is one of the projects in my constituency. We hope to see it going forward as one of our very positive green energy projects. I understand that my hon. Friend the Member for North Antrim (Ian Paisley) is in discussions with the Government about hydrogen vehicles. He also asked a question of the Prime Minister today about buses.
Green policies will increase jobs for all of the United Kingdom of Great Britain and Northern Ireland. We should be pursuing those policies with some haste and with some zest. It is my belief that we should not rely simply on our moral duty to be good stewards of this beautiful world that God has granted to us. It is by providing incentives that we have made great strides, but there is more that can and should be done—more can be done to help our farming industry and more can be done to help our haulage firms and our aerospace industry. It is not enough to put the onus on them; we must also play our part in this place. I am looking forward to the Minister’s response, because I am quite sure that a lot of positivity will come out of what he hopes to achieve.
I was recently contacted by representatives from the RSPB who wanted to set up an appointment regarding offshore renewable energy, which I am very keen to support. They highlighted the fact that there has been a step up in ambition in offshore wind delivery over the past 12 months. The latest offshore wind sector deal includes a significantly increased commitment to offshore wind and the Conservative manifesto committed to delivering the greater target of 40 GW by 2030, which is laudable and which I agree with to a large extent. The RSPB has expressed concern that without a robust evidence base and strategically planned deployment, efforts to decarbonise may fall short and risk significant harm to our sea life at a time of ecological emergency. Furthermore, alongside aspirations for increased offshore wind, we would welcome support for onshore renewables in harmony with nature through the reinstatement of the contract for difference auctions as part of the UK’s renewable energy mix.
I very much welcome the commitment of the National Farmers Union and, obviously, of its sister organisation, the Ulster Farmers Union, which I am a member of, to deliver their targets of zero carbon emissions over the next period of time. The Government can do things only if other bodies help and assist them. The National Farmers Union and the Ulster Farmers Union, across the whole United Kingdom of Great Britain and Northern Ireland, are committed to doing that. I believe that that is all part of the conversation around the environment and climate change to help us meet our target of zero carbon emissions, and, while I welcome the steps that have been taken, I do believe very strongly that we must again incentivise and invest more to reach our targets and the Government’s targets across all the four regions for the safety not just of my children, but of my precious grandchildren—I now have four after one more arrived last week, and I must say that, with each one of them, I feel my years.
It is a great pleasure to be able to speak to the very interesting debate that we have just had. It ranged very wide and far indeed, but I will speak now to the specifics of the clauses.
New clause 28 would require the Chancellor to assess the impact of the Bill on the environment, and new clause 34 would require the Chancellor to review its impact on human and ecological wellbeing, including that of future generations. New clause 13 would require the Chancellor to assess the impact of the Bill on the UK meeting the UN sustainable development goals. New clause 14 would require an assessment of the Bill’s impact on the UK meeting its Paris climate change commitments.
I could do no better than the hon. Member for Ilford North (Wes Streeting) in rehearsing many of the achievements of the Government set out in his speech, so I am very grateful to him for doing that. He rightly highlighted the achievements that we have made in terms of offshore wind, but it was left to my right hon. Friend the Member for South Northamptonshire (Andrea Leadsom) to mention the 42% reduction in emissions since 1990 while the economy grew by two thirds, so I do not need to dilate too much on that topic.
Let me merely speak to these amendments to the legislation. These amendments are not necessary and they should not stand part of the Bill. Tackling climate change is a top priority for the Government, with the UK becoming the first major economy to pass legislation committing to reach net zero emissions by 2050. The Government remain committed to meeting this milestone and have consistently demonstrated the UK’s world leadership in clean growth and development. For example, the 2019 spending round included additional funding for biodiversity measures to support the maintenance and restoration of vital habitats for wildlife and to deliver the 25-year environment plan. Following that, the spring Budget reinforced our track record in the area, announcing at least £800 million for carbon capture and storage—that should be of great interest to the hon. Member for Weaver Vale (Mike Amesbury), who is no longer in his seat—and more than £1 billion of further support for ultra low emission vehicles. That Budget also announced that we will at least double funding for energy innovation.
The Bill highlights the progress we are making towards our commitment to tackling climate change, as well as towards sustainable low-carbon development and meeting international agreements. The Bill provides significant incentives to support the continued decarbonisation of transport. Clause 83 establishes tax support for zero-emission vehicles, exempting them from the vehicle excise duty expensive car supplement.
The Bill also ensures that Her Majesty’s Revenue and Customs can prepare for the introduction of the plastic packaging tax. That was rightly highlighted by my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) and will incentivise businesses to use 30% recycled plastic instead of new material in plastic packaging. The Government are also reopening and extending the climate change agreement scheme to support energy-intensive businesses to operate in a more environmentally friendly and sustainable way.
If I may, I will speak to the clauses and then take up the points made by Members in the debate.
New clause 28 would require the Chancellor to assess the impact of the Bill on the environment, specifically considering the impact on achieving net zero emissions by 2050, on meeting carbon budgets and on air quality standards and biodiversity. The Government are committed to meeting our net zero milestone. The net zero review continues to make progress, although, let us be clear, like everything else the capacity to consult a wider group of stakeholders has been affected by covid. Many resources have been devoted to covid-related matters given the position we are in, but the review continues to make progress and we will publish a call for evidence, which will allow businesses and stakeholders the chance to engage seriously ahead of publication.
Carbon pricing has already contributed to emissions reductions in the power sector, as the share of coal-based electricity fell from 40% in 2012 to 5% in 2018, which is something everyone should be proud about. Future climate strategies will be set out in due course, including as part of the national infrastructure strategy.
The Government have also created skills advisory panels to help local areas understand their current and future skills needs, including in low carbon industries, and to tailor provision accordingly. The Government will assess the impact of potential interventions against the contribution they make to our environmental goals, including on climate change and air quality targets.
New clause 13 would require an impact assessment of how the Bill is meeting the UN sustainable development goals within six months of Royal Assent. It is important to realise that it is already a requirement for UN member states to review their progress towards meeting the global goals at least once, and we as a country have been proactive in assessing that and reporting back to the UN.
New clause 14 would require a review of the Bill’s impact on the UK meeting its UN Paris climate change agreements. Under the Paris agreement, the Government must maintain and report on their emissions reduction commitments in the form of a nationally determined contribution. The UK’s legally binding commitment to reduce emissions to net zero by 2050 is among the most stringent in the world, and the system of governance that implements that commitment under the Climate Change Act 2008 is world-leading.
New clause 34 would require the Chancellor to review the impact of the Bill’s provisions on human and ecological wellbeing, including on future generations. The Environment Bill is designed to ensure that the environment is at the heart of all environmental policy making. This Government and future Governments are held to account if they fail to uphold their environmental duties through a newly established Office of Environmental Protection, including legally binding, long-term targets on biodiversity, air quality, water, resource efficiency and waste management on top of the net zero target.
Turning to some of the comments that I thought were of great interest, my right hon. Friend the Member for South Northamptonshire was absolutely right to highlight the Government’s record in this area. The hon. Member for Aberdeen South (Stephen Flynn) raised a challenge on top-ups. My view here, as elsewhere, is that we will look with great interest to see whether the policy is effective. If it is effective, we will look even more closely at whether our policy as the UK Government needs to be changed, but it is obviously far too early to be able to say that. If he believes, as we believe, that actions matter, not just words, I am sure he will agree. If the Scottish Government want to do more in that area, they have received an additional £3.8 billion through covid funding, and they can divert some of that if they wish.
I am afraid I just do not have any time. I will come back to the hon. Gentleman at the end if I do.
I want to respond to the hon. Member for Hornsey and Wood Green (Catherine West), who rightly highlighted the importance of local authorities for cycling, walking and tree planting. I agree with her about that. She asked about the replacement strategy for the emissions trading system. I think she is aware that we have framed two alternatives. The first is a UK ETS, and the second is a carbon emissions tax. We are open to a negotiated agreement, but we have the resources, through either of those options, to implement a scheme that addresses the issues that she is concerned about.
Finally, the hon. Member for Cardiff North (Anna McMorrin) called for leadership not rhetoric. I wonder whether she was referring to the Welsh Government, whose tree planting plans have been disastrous. They seem to be way behind, according to their own tree planting estimates.
The hon. Lady specifically picked out the Swansea Bay tidal lagoon. As my right hon. Friend the Member for South Northamptonshire said, that project would not provide value for money. It would be a terrible waste of public money. That money could be spent much better.
I spent a lot of time looking at it when I was a Minister at the Department for Business, Energy and Industrial Strategy, and the right hon. Gentleman, who is chuntering from a sedentary position, is quite wrong about that. It would provide terrible value for money.
It is also fascinating that the project is not an environmentally wise idea. The hon. Member for Cardiff North may not be aware that the Wildlife Trust of South and West Wales specifically highlighted the major impact on biodiversity, the loss of intertidal habitat and the impact on local ecology, and National Resources Wales talked of a “major adverse impact”. I agree with the hon. Lady that actions matter, not words, and that leadership matters, not rhetoric, and we are seeing that by turning down this very bad project.
The Government are committed to tackling climate change and to being the first generation to leave the environment in a better condition than we inherited it. These measures go towards making that happen.
We have had an excellent debate, particularly Opposition Members’ contributions. May I congratulate, on behalf of all of us, the hon. Member for Strangford (Jim Shannon) on the birth of his latest grandchild? He will be a proud grandfather. My proud father wrote to me during the debate to say two things: first, that my hon. Friend the Member for Hove (Peter Kyle) needs a haircut, and secondly, that it is good to see the Government Benches full, taking social distancing to the nth degree. However, what they lacked in quantity they made up for with quality, although I must take up a point with the right hon. Member for South Northamptonshire (Andrea Leadsom), who said that all I did was criticise the Government. That is not true. As the Minister acknowledged, I listed all of their achievements. It is not my fault that the Committee on Climate Change has said that those achievements do not go far enough to help the country achieve its net zero ambition. They are going to have to do better.
I must say that it was a shame for the Minister to end what has otherwise been a rather consensual debate on the importance of tackling climate change with his outburst on the Swansea Bay tidal lagoon. That is a great missed opportunity and another reason why so many campaigners are right to say that the Green Book ought to be reformed so that when the Treasury makes spending decisions on major projects, it properly takes into account the net zero benefits; otherwise, we end up being penny-wise but, ultimately, planet-foolish.
The Minister would be far more persuasive if the Government made any announcements about how they are investing more. In fact, what we got from the Prime Minister this week was a damp squib. I genuinely hoped and expected that the Prime Minister would announce major programmes. For example, retrofitting homes across the country would deliver environmental benefits and job creation, including jobs that would compensate those who will imminently find themselves out of work.
I probably do not have time, I am afraid.
Those are the sorts of initiatives that we expect the Government to come forward with. I am disappointed by the lack of ambition, which only underpins why our new clause is so important, so I wish to press it to a Division.
Question put, That the clause be read a Second time.
Order. I ask all hon. Members other than Front Benchers and Tellers to leave the Chamber by the doors behind me. Members should join the queues to vote in Westminster Hall. To vote, Members should enter the Lobby and swipe their pass on one of the pass readers. The doors will be closed in 12 minutes.
The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.
New Clause 26
Review of impact of Act on job creation
“The Chancellor of the Exchequer must conduct an assessment of the effect of the Act on job creation, and lay this before the House of Commons within six months of Royal Assent.”—(Mr McFadden.)
This new clause would require the Chancellor of the Exchequer to review the impact of the Bill on job creation.
Brought up, and read the First time.
With this it will be convenient to discuss the following:
New clause 1—Loan charge: report on effect of the scheme—
“(1) The Chancellor of the Exchequer must commission a review, to be carried out by an independent panel, of the impact in parts of the United Kingdom and regions of England of the scheme established under sections 20 and 21 and lay the report of that review before the House of Commons within six months of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(a) business investment,
(c) productivity, and
(d) company solvency.
(3) A review under this section must consider the fairness with which HMRC has implemented the policy, including whether HMRC has provided reasonable flexibility around repayment plans with the aim of avoiding business failures and individual bankruptcies.
In this section “parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact of the scheme to be established under Clauses 20 and 21.
New clause 31—Restricting the loan charge to cases where taxpayer knew loan was taxable—
“(1) In Schedule 11 to F(No.2)A 2017 (employment income provided through third parties: loans etc outstanding on 5 April 2019) in paragraph 1(1)—
(a) at the end of paragraph (b) omit “and”; and
(b) at the end of paragraph (c), insert—
(d) if the relevant year is 2015/16 or an earlier tax year, one of the conditions 1 to 3 is met.”
(c) After paragraph 1(1), insert—
“(1A) Condition 1 is that—
(a) P submitted a return in accordance with section 8 of TMA 1970 for the relevant year,
(b) the loan or quasi loan was not accounted for in the return as income, and
(c) P knew that the loan or quasi loan should have been accounted for as income in the relevant year.
(1B) Condition 2 is that P has not been issued with a notice under section 8 of TMA 1970 for the relevant year.
(1C) Condition 3 is that P has been issued with a notice under section 8 of TMA 1970 for the relevant year but that notice is or has been withdrawn under section 8B(2) of that Act.”.
(2) In Schedule 12 to F(No.2)A 2017 (trading income provided through third parties: loans etc outstanding on 5 April 2019) in paragraph 1(2)—
(a) at the end of paragraph (a)(ii) omit “and”; and
(b) at the end of paragraph (b), insert—
(c) if the tax year in respect of which the loan or quasi loan should have been accounted for as income (or otherwise treated as a receipt of a revenue nature for income tax purposes) (“the relevant year”) is 2015/16 or an earlier tax year, one of the conditions 1 to 3 is met.”
(c) After paragraph 1(2), insert—
“(2A) Condition 1 is that—
(a) T submitted a return in accordance with section 8 of TMA 1970 for the relevant year,
(b) the loan or quasi loan was not accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes), and
(c) T knew that the loan or quasi loan should have been accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes).
(2B) Condition 2 is that T has not been issued with a notice under section 8 of TMA 1970 for the relevant year.
(2C) Condition 3 is that T has been issued with a notice under section 8 of TMA 1970 for the relevant year but that notice is or has been withdrawn under section 8B(2) of that Act.”.
This new clause provides that, in respect of loans made in 2015/16 tax year and any earlier tax years, the loan charge applies only if the taxpayer submitted their tax return and deliberately did not declare the loan to be income. The clause also extends this protection to taxpayers who were not required by HMRC to submit tax returns.
New clause 35—Review of Off-Payroll working (IR35) legislation—
“(1) The provisions of section 7 and Schedule 1 of this Act do not have effect unless the Treasury has conducted a review of Off-Payroll working (IR35) legislation and has laid a copy of the report of that review before both Houses of Parliament.
(2) A review under (1) must include assessment of—
(a) impact on individuals’ livelihoods,
(b) impact on individuals’ employment rights, and
(c) relevant business practices.
(3) Any review under (1) must be carried out no later than 31 December 2025.”
This new clause would provide that the IR35 provisions of the bill would not take effect unless the Treasury has conducted and published a review of off-payroll working legislation.
Amendment 16, page 2, line 23, leave out clause 7
Amendment 55, in clause 20, page 15, line 6, at end insert—
“(3A) An amount paid, treated as paid or due to be paid under a qualifying agreement is also a qualifying amount if—
(a) the amount is referable (directly or indirectly) to a qualifying loan or quasi-loan,
(b) the tax year in which an amount representing the loan or quasi-loan should have been accounted for as income (or otherwise treated as a receipt of a revenue nature for income tax purposes) (“the relevant year”) is 2015/16 or an earlier tax year, and
(c) one of the conditions 1 to 3 is met.
(3B) Condition 1 is that—
(a) the person to whom the income tax liability the agreement referred to in subsection (2) relates (“P”) submitted a tax return in accordance with section 8 of TMA 1970 for the relevant year, and
(b) the loan or quasi loan was not accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes).
(3C) However, condition 1 is not met if P knew that the loan or quasi loan should have been accounted for in the return as income (or otherwise treated as a receipt of a revenue nature for income tax purposes).
(3D) Condition 2 is that P has not been issued with a notice under section 8 of TMA 1970 for the relevant year.
(3E) Condition 3 is that P has been issued with a notice under section 8 of TMA 1970 for the relevant year but that notice is or has been withdrawn under section 8B(2) of that Act.”.
This amendment is consequential on the new clause “Restricting the loan charge to cases where taxpayer knew loan was taxable”. It provides that a prior settlement with HMRC can be unwound unless the worker failed to account for a 2015/16 tax year (or earlier) liability in his or her tax return deliberately despite knowing that the loan should have been included as income.
Amendment 17, page 85, line 2, leave out schedule 1.
Amendment 20, in schedule 1, page 97, line 15, leave out “2021-22” and insert “2023-24”
This amendment and 21 to 36 and 57 seeks to delay the introduction of the IR35 changes until the tax year 2023-24.
Amendment 21, page 97, line 17, leave out “2021” and insert “2023”
Amendment 22, page 97, line 21, leave out “2021” and insert “2023”
Amendment 23, page 97, line 23, leave out “2021” and insert “2023”
Amendment 24, page 97, line 25, leave out “2021” and insert “2023”
Amendment 25, page 97, line 26, leave out “2021” and insert “2023”
Amendment 26, page 97, line 38, leave out “2021” and insert “2023”
Amendment 27, page 98, line 4, leave out “2021-22” and insert “2023-24”
Amendment 28, page 98, line 8, leave out “2021” and insert “2023”
Amendment 29, page 98, line 12, leave out “2021” and insert “2023”
Amendment 30, page 98, line 30, leave out “2021” and insert “2023”
Amendment 31, page 98, line 34, leave out “2021” and insert “2023”
Amendment 32, page 98, line 37, leave out “2021” and insert “2023”
Amendment 33, page 98, line 40, leave out “2021” and insert “2023”
Amendment 34, page 98, line 44, leave out “2021” and insert “2023”
Amendment 35, page 98, line 45, leave out “2021” and insert “2023”
Amendment 36, page 98, line 47, leave out “2021” and insert “2023”
Amendment 57, page 97, line 36leave out ‘2021’ and insert ‘2023’
New clause 12—Assessment of impact of provisions of this Act—
“(1) The Chancellor of the Exchequer must review in parts of the United Kingdom and regions of England the impact of the provisions of this Act and lay a report of that review before the House of Commons within one month of the passing of this Act.
(2) A review under this section must consider the effects of the provisions on—
(b) business investment,
(e) company solvency,
(f) public revenues
(g) poverty, and
(h) public health.
(3) A review under this section must consider the following scenarios—
(a) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are continued are continued for—
(i) six months,
(ii) the next year,
(iii) eighteen months,
(iv) the next two years; and
(b) the Job Retention Scheme, Coronavirus Business Interruption Loan Scheme, Bounceback Loan Scheme and Self-employed Income Support Scheme are ended or changed in any ways by a Minister of the Crown other than as specified in (a).
(4) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
“regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause would require a review of the impact of the Bill in different possible scenarios with respect to the continuation of the coronavirus support schemes.
New clause 18—Review of changes in Act—
“(1) The Chancellor of the Exchequer must review the effect of the changes in this Act in each part of the United Kingdom and each region of England and lay a report of that review before the House of Commons within two months of the passing of this Act.
(2) A review under this section must consider the effects of the changes on—
(a) business investment,
(b) employment, and
(3) A review under this section must consider the effects in the current and each of the subsequent four financial years.
(4) The review must also estimate the effects on the changes in the event of each of the following—
(a) the UK leaves the EU withdrawal transition period without a negotiated comprehensive free trade agreement,
(b) the UK leaves the EU withdrawal transition period with a negotiated agreement, and remains in the single market and customs union, or
(c) the UK leaves the EU withdrawal transition period with a negotiated comprehensive free trade agreement, and does not remain in the single market and customs union.
(5) The review must also estimate the effects on the changes if the UK signs a free trade agreement with the United States.
(6) In this section—
“parts of the United Kingdom” means—
(c) Wales, and
(d) Northern Ireland;
and “regions of England” has the same meaning as that used by the Office for National Statistics.”
This new clause requires a review of the impact on investment, employment and productivity of the changes made by the Act over time; in the event of a free trade agreement with the USA; and in the event of leaving the EU without a trade agreement, with an agreement to retain single market and customs union membership, or with a trade agreement that does not include single market and customs union membership.
It is a pleasure to be facing my old sparring partner from the Treasury Committee of some years ago across the Dispatch Box. In this debate we will cover a number of amendments dealing with IR35 or off-payroll working, through to the loan charge and the impact of this Finance Bill on the crucial issue of jobs.
On IR35, we have always said that we need an approach that brings together the consideration of tax and employment law and that levels up protections for the self-employed, as well as dealing with the current implications of the tax system, which sometimes boosts bogus self-employment. The Chancellor has already hinted at changes to the tax regime for self-employed people as a consequence of the help given to them through the current crisis. Some contractors have raised concerns about being treated like an employee for tax purposes but not for employment rights purposes. Given the huge ongoing labour market difficulties caused by the current crisis, I would like to ask the Minister what consideration the Government have given to the timetable for their proposed changes and, in particular, what their attitude is to the amendments before us tonight calling for a delay in the roll-out of the IR35 changes to the private sector, so that we can get the balance between tax and employment rights correct.
Many Members have also received representations about changes to the loan charge. We have supported attempts to deal with tax avoidance, but also expressed concern for those advised into such arrangements, by either employers or the promoters of such schemes. We will continue to press the Government to review how the promoters of disguised remuneration schemes have been tackled—or not tackled, as the case may be—by HMRC and ensure that those who promote such schemes are held to account.
I agree with what the right hon. Gentleman has been saying. Would he support the option of the House having a vote tonight on new clause 31, which relates to the loan charge? There are many people watching our deliberations who hope that this House will express a view on the loan charge, and I am told that at the moment that is not likely to happen. Will he confirm from the Front Bench that the Labour party would like a Division on new clause 31?
The matter of what is voted on is of course, a consideration for the Speaker. I do not always get to decide what is voted on in this House.
New clause 26, standing in my name and those of my hon. Friends, focuses on the issue of jobs and does so for the very good reason that that is the principal economic challenge facing us right now. If there was any doubt about that, we need only look at the news over the past 24 hours—1,700 jobs lost at Airbus, up to 5,000 job losses announced by the owners of Upper Crust, 4,500 at easyJet a couple of days ago, another 4,500 at Swissport, and many more around the country that do not make the front page of the national news. These are not just numbers. Every one of them is a human story of a livelihood taken away and a family wondering how they will pay the bills and what the future will hold for them.
Across the country, the claimant count measure of unemployment is up by 1.5 million since the start of the year. In addition to those out of work and the estimated 9 million on furlough schemes, it is estimated that up to 8 million employees are working fewer hours than usual. These stark figures show us that we are facing the jobs challenge of a generation. It is decades since young people leaving school, college or university graduated into a labour market such as this.
Giving my age away, I remember, as a young teenager growing up in Glasgow, attending the people’s march for jobs. Unemployment back then was around 3 million. The vocabulary of it infused the times—“signing on”; “the Girocheque”. It even gave birth to the great band UB40, named after the unemployment card that people got for signing on. The damage caused by that mass unemployment affected not just the city where I grew up, but the Black Country that I now represent, and many similar communities across the country. Long-term social and economic pain was caused by far too many people facing a life on the dole, and we must never go back to those days. If we have learned anything from that experience of the 1980s, it is that the cost of not acting is greater than the cost of acting, and we must do everything we can now to prevent mass unemployment. That is the challenge facing us.
At the start of this crisis we called for wage support to help people through. The furlough scheme and the self-employed furlough scheme were the right and necessary things to do, but as lockdown is eased, and support from those schemes starts to be withdrawn from next month, we can see the danger facing the economy. The danger is that businesses that have been just about hanging on start to let people go, caught between having no income and facing rising employment costs. This is the moment that the Government need to act to preserve jobs, jobs, jobs.
I agree with the right hon. Gentleman about the importance of jobs. Is he worried that the reform the Government have in mind might mean that a self-employed person working on their own in one of our constituencies could lose a contract to a foreign company, because the big company undertaking the contract might think that was safer?
I am not sure about the part of the right hon. Gentleman’s intervention that referred to foreign companies, but the turbulence of the labour market right now does pose a danger to contractors. The Government have already recognised that to some degree in the delay announced for this measure.
Withdrawing support schemes at the same pace for all sectors does not recognise that some sectors are in far more difficulty than others, and that is particularly true for any sector based on the idea of people gathering closely together. Many sectors such as transport, aviation, sport, theatre, music, and others, are global British strengths, but right now they are on their knees. Dropping the social distancing rule from two metres to one metre is not enough when, in some cases, any kind of social distancing is impossible. Let us take live music, for example, which is based on the very opposite of social distancing. The break-even point for many venues and events is often being 80% to 90% full, and the change to one metre will not make that much difference to them. We need an approach that takes into account the different impact on different sectors.
If there was already a sectoral problem in withdrawing employment support, there is also now a geographical one, because Leicester is entering its second period of lockdown. Our thoughts go out to the people and businesses there who, like the rest of the country, have made great sacrifices over the past few months. We cannot yet know how long that second period of lockdown in Leicester will last. It could be a few weeks, but equally, it might be longer. Neither can we know whether Leicester will be the only place to go into another lockdown. Other cities may follow, and there has already been speculation about where those might be. How can it be right to withdraw employment support on a national basis when we are no longer in a single national position on the easing of lockdown?
We are asking people and businesses in Leicester today, and possibly other cities in the days and weeks to come, to shut down for a second time, and they should not be penalised for doing so. Will the Minister consider as a matter of urgency flexibility in the unwinding of the furlough and other support schemes, to take account of the new development of at least one, but possibly more, local lockdowns? Let me now turn to the future, and the jobs that might be created. The Government announced their back-to-work plan yesterday.
Something that concerns me—and I know that it also concerns the right hon. Gentleman and many other Members—is the fact that manufacturing as a proportion of the UK’s GDP has fallen from 30% in 1970 down to 10% today, which is perhaps why our economy has not grown as it should have. I understand that if we do not get that figure up from 10% to 15%, we will not have a manufacturing base for the future. Does he share my concern that if we do not retain, restore and increase our manufacturing base—including in the aerospace sector, for companies such as Bombardier in my constituency—it will not have a future?
There is no MP from the west midlands who does not care about our manufacturing base. It is a vital part of our economy. It may be true that we make less than we used to, but it is also true that we make more than we think, and we should never be dismissive of the activity and the creativity of making things in this country.
The Government announced their back-to-work plan yesterday, praying in aid President Roosevelt and the new deal. First, the Prime Minister wanted to compare himself to Churchill. Now it is Roosevelt. We have to wonder why he seems so uncomfortable with just being himself. Let us look at the comparison. F. D. R.’s new deal did indeed rescue the United States from the great depression. Millions of workers were hired, 255,000 miles of roads were built, as were 40,000 schools and almost 1,000 airports—major infrastructure projects that modernised the United States and stood the test of time, all at a cost of around 40% of pre-depression United States GDP. By contrast, what the Prime Minister announced yesterday was around 1% of the cost of the new deal—one cent on the dollar, if you will. He has taken the old political maxim, “Under-promise and over-deliver”, and turned it on its head.
I know that the Minister likes a good book. One of the shorter, but nevertheless hugely illuminating, studies of Roosevelt’s approach comes in Doris Kearns Goodwin’s book on leadership. In it, she sets out Roosevelt’s watchwords behind the new deal. I will leave the House to make its own judgment on the comparison between this and the Prime Minister. First, “Strike the right balance of realism and optimism”—not everything has to be claimed to be the biggest or the best in the world. After the events of recent months, systems that just worked would be an improvement. We then have, “Infuse a sense of shared purpose and direction”, “Lead by example”, “Forge a team aligned with action and change”, “Bring all stakeholders aboard”, “Set a deadline and drive full-bore to meet it”, “Address systemic problems. Launch lasting reforms”, “Be open to experiment”, “Adapt and be ready to change course where necessary”, and “Tell the story directly to the people”. That was Roosevelt’s approach, and I will leave it to others to judge whether the Prime Minister’s approach falls short not only in scale but also in spirit.
There are people in our constituencies whose lives are being destroyed every day because the loan charge has been applied to them retrospectively. Forget what Mr Speaker might say—will the Labour party support new clause 31 if it is called? If not, why not?
On the loan charge, as I said, we have always supported cracking down on tax avoidance and we support action against those who enabled the scheme. New clause 31 makes a connection between people’s tax treatment and what they knew; I believe we have to explore that principle as a matter of taxation and think carefully about how to proceed. I look forward to the debate on that later.
In the 21st century, modernising our country needs to be about more than bricks and mortar. Even if, unlike the Prime Minister’s bridge over the Thames or his island airport, the projects announced yesterday can actually be delivered, in today’s world, and in particular in today’s labour market, investment has to be in people as well as in buildings. The truth is that the technological change and the acceleration caused by the coronavirus crisis makes that even more urgent than it was before. Why, when the Government announced new funding for schools last week, were the early years left out, when we know that those years are often the most influential in charting a person’s educational progress and their chances in future life? Where is the programme on a scale that we need to skill and reskill adults who will have to change jobs as a result of the economic change happening before our eyes?
Where is the plan for social care, wherein throughout this crisis, often on low pay, workers have heroically battled to look after people? As the Resolution Foundation reported just a few days ago, to take the ratio of social care workers to the over-70 population back to its 2014 level would on its own create 180,000 new jobs. Where, in this international age of nationalism, is the international response to co-ordinate economic support between countries in what is, by definition, a global health and economic crisis? The response to this crisis must meet the needs of the time.
It is for those reasons that we believe that the yardstick by which the Bill should be judged, and the focus of next week’s statement, must be jobs. Having supported the economy this far, we cannot stop now. It is moments like this for which Governments exist. We need not only the capital spending but the investment in people to help the country through it. That is what the country is looking for now from its Government, and that is why we tabled the new clause.
I rise to speak to the amendments and new clauses tabled in my name and the names of other Members of this House. They include new clause 31 and the consequential amendments relating to the loan charge legislation, and amendment 20 and the consequential amendments relating to the application of the so-called IR35 regulations, which deal with off-payroll taxation arrangements.
It is a pleasure to follow the right hon. Member for Wolverhampton South East (Mr McFadden). I am even older than him: I can remember discussions across the table in my household about the means test when I was too young to understand it.
When I first spoke in this House about the loan charge arrangements, I quoted the Chief Justice of the US Supreme Court who once said that the power to tax is the power to destroy. That description could be used of both the policies that I wish to talk about today. The loan charge destroys lives. To date, at least seven people have taken their own lives as a result of this unfair and retrospective policy—and I will use that word “retrospective” over and over again, even though HMRC fails to recognise it. For many ordinary, decent people, including locum nurses, teachers and contractors—ordinary folk, not big City bankers—who were misled by their employers in many cases, the loan charge has robbed them of their peace of mind, their self-respect and, in some cases, their lives. Some 39% of them have considered suicide, 49% could lose their homes and 71% could face bankruptcy.
New clause 31 would simply stop the Government pursuing any employees who were innocent parties who did not know that what they were doing was illegal and who believed they were acting correctly and in good faith. Yesterday, when I spoke on immigration, I had to deal with a briefing from the Government supposedly rebutting the lines in my proposed amendment, and I have the same again today. A disgraceful and frankly wrong briefing has been handed out by the Government describing what they thought we were saying. I will not go into details, but I hope that others will have time to do so. I will simply say that HMRC seems to have forgotten that in English law you are innocent until proven guilty. It is about time we followed that principle with respect to the loan charge.
As the right hon. Gentleman knows, I am the second name on new clause 31, and he will note from the amendment paper that 54 hon. and right hon. Members have signed it. That is more than any other amendment before the House today, and the only one that comes close to it is another amendment on the loan charge. Does he not think that that is a signal that the House wants to divide on new clause 31, and that whatever the Front Benchers think, the Back Benchers who have signed new clause 31 want a vote?
On a point of order, Mr Deputy Speaker. Forgive me; I might have missed the reason why are we are not going to be able to divide on new clause 31, but I would be grateful if you could explain it to me. I have today become the longest serving Member for Reigate since the Great Reform Act, so I might have missed one or two things that are going on, but I would be obliged if you could tell me why we are not going to have the opportunity to divide on new clause 31.
Thank you, Mr Deputy Speaker. I shall move on to the other issue that I want to discuss today.
Amendment 20 would delay the imposition of the IR35 rules from 2021 until April 2023. It is very unlikely that the economic crisis we are facing will be over by April 2021, and attempting to implement IR35 will cost jobs and do serious economic damage. A few months ago, the powerful Cross-Bench House of Lords Economic Affairs Committee wrote a report on IR35, and much of what I am going to say involves quotations from that report. I will start with this:
“It is right that everyone should pay their fair share of tax. But the evidence that we heard over the course of our inquiry suggests that the IR35 rules—the government’s framework to tackle tax avoidance by those in ‘disguised employment’—have never worked satisfactorily, throughout the whole of their 20-year history. We therefore conclude that this framework is flawed.”
It is right not to impose unnecessary burdens on business at a time like this. I agree with a great deal of what the right hon. Member for Wolverhampton South East had to say about the importance of preserving—and, indeed, not destroying—employment in the current circumstances. This goes right to the issue of IR 35. The report states that
“the government made this decision after considering the issue too narrowly, in terms of its tax take. It has severely underestimated the costs to business of implementing the changes…And it did not analyse sufficiently the unintended behavioural consequences of the proposed reforms or their wider potential impact on the labour market, and on the gig economy in particular.”
Many contractors in the coming years will be left in an “undesirable halfway house”. They do not enjoy the rights that come with employment, yet they are considered employees for tax purposes. In short, IR35 will create “zero-rights employees”. I am saying this directly to Labour Members, because the idea that a Government action can create a class of employee with zero rights is an issue close to their hearts. Such employees have no rights under employment law but under tax law they are employees.
The Lords Committee called on the Government to commission an independent review to devise a better implementation of the scheme. I think that is exactly right, which is why I want to see another two years before we implement whatever the decision is. We need that time to understand precisely what the effect of our new policy will be.
It would be a disaster if, in the context of the economic crisis and the growing gig economy, the Government accidentally created that class of zero-rights employees with no holidays, no sick pay, no pension, no redundancy —no employment rights whatsoever. We must stop that happening either accidentally or deliberately, and on that basis I ask the House to support amendment 20.
I am glad to follow the right hon. Member for Haltemprice and Howden (Mr Davis), who set out well the impact that the loan charge has had on many people’s mental health and wellbeing. Many of them will be watching the House tonight.
The implementation of the loan charge has been a disgrace. Our new clause 1 would force the Treasury to come clean on its unfairness and would require a review of the impact of the scheme. That reflects the limitations of Finance Bill amendments, but given the freedom of information revelations released yesterday by the all-party parliamentary group on the loan charge, suggesting that there was too cosy a relationship between Government officials and the staff working on the independent Morse review, looking again at this whole shambles seems appropriate.
It remains a scandal that tax professionals advise their clients to use such loopholes. It is important that people pay their fair share for the public services we all use, and the UK Government must pursue the organisations and individuals who facilitated these loans. An independent review should be carried out of the advice given. As I said in Committee, those who trade in the business of loopholes are surely looking for the next thing to come along, so coming down on those scheme promoters now would prevent future loss to the Treasury.
There is widespread concern that HMRC has failed to work constructively with those seeking a loan charge repayment plan, with concerns that some may face bankruptcy and homelessness. I thought the right hon. Member for Haltemprice and Howden laid that out quite well. He mentioned the seven people who sadly took their own lives.
We continue to call on the UK Government to review the implementation of this policy, and our new clause 1 would force them to publish one within six months, including on the fairness with which HMRC has implemented the policy and whether it has provided reasonable flexibility on repayment plans, with the aim of avoiding business failures and individual bankruptcies.
My hon. Friend the Member for Inverness, Nairn, Badenoch and Strathspey (Drew Hendry) tabled early-day motion 296 to welcome the publication of Sir Amyas Morse’s loan charge review and the fact that, through this Bill, the UK Government would amend relevant legislation such that loans made before 2010 would no longer be subject to the loan charge. The motion also welcomes the fact that the self-assessment deadline has been delayed until 30 September 2020.
Initial analysis suggests that more than 30,000 individuals will benefit from those and related measures, but a pause in the policy is still necessary to assure MPs that HMRC is working constructively with those who are seeking a reasonable repayment plan—one that recoups the unpaid tax while avoiding the unacceptable risks that people face. If HMRC cannot deliver on that, an independent arbitration scheme should be used.
We on the SNP Benches support the cross-party amendment 55 and new clause 31, which, as the right hon. Member for Kingston and Surbiton (Sir Edward Davey) pointed out, has 54 names to it and would provide that a prior settlement with HMRC could be unwound unless the worker failed to account for a pre-2016-17 tax liability in his or her return deliberately, despite knowing that the loan should have been included as income.
It is disappointing to hear that there may be no vote on new clause 31, given how many signatories there are to it and the lobbying we have all had. People watching this debate at home will not understand why. Since we are trading FDR quotes, we should note that he said: “In politics, nothing happens by accident. If it happens, you can bet it was planned that way.”
The Tories have failed to address our concerns about IR35, which is why we tabled amendment 16 to scrap it. Instead of pressing ahead with the discredited IR35 in the Bill, the Government should take the advice of the House of Lords—that is not something I often say, but they should; they should pause this policy and go back to the drawing board. It seems evident that the UK Government have not learned from their previous experience in the public sector and are ploughing on regardless.
On a process issue, we maintain that it was not acceptable that the Government introduced all this through a deeply contentious 45-minute money resolution debate instead of going through the full scrutiny of the Budget process. We have been against IR35 since the start, and these proposals would introduce a new group of zero-hours employees, paying full taxes without the associated employment rights—something that should give us all pause for thought. People working in our constituencies in a huge range of jobs should be entitled to those employment rights.
Under the present economic circumstances, it is wrong to place new and unfair taxes on firms. Contractors are particularly liable to be struggling at this point—not least those who are part of the 3 million people excluded from the UK Government’s support schemes. I pay tribute to ExcludedUK and all those who have sought to highlight this issue.
I have already related the experience of constituents of mine who have worked as contractors—notably, but certainly not exclusively—Indians in the IT sector in Glasgow, whose skills are highly sought after and who could easily take those skills elsewhere if it became too difficult to work here. They tell me that the UK Government’s announcement has brought a chilling effect, whereby contracts are not being renewed and new contracts are harder to come by.
I agree with my hon. Friend. I was going to mention the oil and gas sector, because it is part of the triple whammy. The situation is very difficult for people at the moment and the Government should not be in the business of trying to make it more difficult. They should be thinking again and looking at the circumstances we are in, rather than pressing ahead with something that does not suit these circumstances.
The “check employment status for tax” online tool for IR35 is also problematic. The UK Government have basically tried to replace a complex legal specialty—employment law—with an online quiz, which objectively does not give the same results as the courts in deciding whether an individual is an employee. We have asked questions about the empirical methods used to test that tool, but I have not been provided with any specifics other than it has apparently been rigorously tested. It is hardly surprising that employers feel that these are moving goalposts, and they may avoid the risk by avoiding using contractors altogether. We support new clause 35, which would provide that the IR35 provisions of the Bill would not take effect unless the Treasury had conducted and published a review of legislation on off-payroll working.
Our new clause 12 would make clear the economic hit that would follow the ending of the coronavirus support schemes. Along with many others across the country, I fear that winding up these schemes too soon will prompt companies to lay off staff. The major job losses announced in the past few days really must prompt the Treasury to reconsider this strategy. It is no coincidence that Airbus, Wigan Athletic, Harrods, John Lewis, easyJet, Upper Crust, TM Lewin, Royal Mail, Harveys and Arcadia have all laid off staff today and in the past few days. They are all looking at the scheme and thinking, “How are we going to survive in the next few months without any support for our workers?”
New clause 12 seeks assessments of the impact of the Bill within a month and various economic variables, comparing a situation where the Treasury sees sense and continues its covid support schemes for the next year with the likely reality that it discontinues them as planned, leaving the economy and people’s living standards reeling. The review set out in the new clause would consider the effects of the provisions on GDP, business investment, employment, productivity, company solvency, public revenues, poverty and public health.
The right hon. Member for Wolverhampton South East (Mr McFadden) set out quite well his experience of growing up in Glasgow. We still live today with the post-industrial legacy and generation of health harms of the ’80s—with the shutdown of heavy industry and the impact that had on people’s wellbeing. I am determined that we will not see that again from this crisis. The Chancellor must live up to his pledge to do whatever it takes to protect people’s jobs and livelihoods. The Treasury Committee report published the other week said that over 1 million people have fallen through the gaps in the UK Government’s welcome support schemes. In the report, the Committee also asked the UK Government to explore measures to help those newly in employment and self-employment, freelancers and those on short-term contracts, all of whom face barriers to accessing support schemes or have sadly been excluded from them altogether. This is now a choice. The Government cannot say that they did not know that these people were left out. They are now choosing not to support them.
With the ONS earlier revealing that the UK’s economy suffered its biggest monthly slump in GDP on record—of 20.4%—in April due to the coronavirus pandemic, we have renewed our calls on the Treasury to extend the income support schemes rather than wind them down. We need only look at Leicester, where the outbreak has meant a further shutdown, and wonder whether that will happen again. How will people be incentivised to stay at home and protect their friends, neighbours and families if they do not have an income coming in? People cannot survive on statutory sick pay and without support.
There is an effect across different sectors, such as theatre and arts productions, which may not come back until March next year. How are staff in those sectors going to pay their wages without some kind of job retention or support scheme? What about the people in hospitality—many of whom have businesses next to the very same theatres that will not open their doors until March? Where are the pre-theatre dinners if there is no theatre to go to afterwards? The tourism sector faces the prospect of three consecutive winters and cannot survive without support schemes. If we want these businesses and livelihoods to exist, the Government need to pay the money now, because if they do not, they are going to pay it out in unemployment benefits. We also need to look across the nations of the UK. Scotland’s experience is different from those of England, Northern Ireland and Wales. None of the countries of the UK should be punished for putting public health first. With businesses struggling to survive, thousands of jobs on the line, and households taking a severe hit as people’s income drops or they lose their jobs, it is vital that the Treasury strengthens and extends these schemes, and brings forward a comprehensive financial package to ensure that a strong economic recovery from this crisis happens, rather than pushing ahead with these plans.
Our new clause 18 would force the Government to come clean on the damage our economy faces from Brexit in the midst of this crisis. The new clause would require a review of the impact on investment, employment and productivity of the changes to the capital allowance over time; in the event of a free trade agreement with the USA; in the event of leaving the EU without a trade agreement; in the event of leaving with an agreement to maintain single market and customs union membership; or in the event of leaving with a trade agreement that does not include single market and customs union membership.
With our economy already struggling with coronavirus, leaving the EU single market and customs union this year would do unthinkable damage to our economy. It was a bad decision before, but it is a worse decision now. The risk of long-term scarring to the economy is significant, and investment from the UK Government could stave that off, if they choose to do this. Roosevelt’s new deal was equivalent to 40% of US GDP. Germany has invested 4% of its GDP, whereas the Prime Minister has invested 0.2%. It is not just FDR’s clothes that the Prime Minister has attempted to steal this week, because President Duterte of the Philippines, whose “build, build, build” phrase he plagiarised, invested $177 billion in the Philippines economy. The UK response is completely inadequate. It is the emperor’s new clothes, leaving Scotland bare. We call on the UK Government to take up Scottish Finance Secretary Kate Forbes’ plan , which would inject £80 billion into the UK’s economy as a whole. I commend that and our new clauses to the House.
I share colleague concerns about the prospect of unemployment. One of the best things that happened over the past decade was the growth in jobs, with 1,000 new jobs a day on average. Unemployment in Harrogate and Knaresborough fell to about 2%. The current crisis is, of course, changing that dramatically. We have 9,500 people working in the hospitality sector in my constituency, so I am anxious about that and have welcomed the partial lockdown release this weekend.
The measure to help business prosper that I was most pleased to see in the Bill was the encouragement for further investment in research and development, specifically the increase in the R&D expenditure credit from 12% to 13%. Businesses win in the long term by ensuring that their product or service has competitive advantage—a reason why customers should buy it. I spent 25 years in business before coming to this place and I spent that time making sure that the companies I worked for had the right products for our customers. In some sectors it takes significant resource to develop one’s product, be it automotive or pharmaceutical—both sectors in which this country is strong—or one of plenty of others. There is a strong record of creativity in the UK, but we are not always as good at finding ways to commercialise those ideas, to go from start-up to scale-up. Creating a better environment for the development of ideas is important for the longer-term success of our economy.
I wish to make a few comments on a significant issue before us in this section of this debate, which is off-payroll working. That has attracted much attention and there are clearly some problems to solve, but they are not easy to solve. In some cases, the issue is straightforward, in that people have been working for one employer for prolonged period, perhaps for many years, and they are really employees. They do similar jobs to the person who is sitting next to them and they use the same company equipment, but it could of course be on totally different terms of employment. They could be paid better or less in terms of their headline salary, but the situation is more complex than that because they will not be paid for holidays, pension contributions and so on. I have read of cases where the imbalance of power that can exist between employer and employee has led to pressure on people to choose a particular route—in effect, people being bullied into self-employment by unscrupulous employers seeking to save on costs and national insurance. That is wrong for all parties—wrong for the employee certainly, wrong for the employer, and wrong for taxpayers too, as revenue for public services is missed. However, that is not the case for the vast majority of people. They choose a route of self-employed, freelance or contractor work expressly because they enjoy the challenge of that type of work, or perhaps they want to be their own boss and more in control of their own destiny, or there could be all sorts of other personal reasons. That is a good thing. It is to be encouraged, because the flexibility that that provides has been a great boost to our economy.
Contractors and consultants play a huge role in the economy. Their work is one of the ingredients that has contributed to the recent economic progress. Being swift of foot in response to commercial opportunities is competitive advantage. It has allowed companies to bring in extra resource when they need to boost operational capacity, or extra skills when they are needed. I have been contacted by or met many people, including many in my Harrogate and Knaresborough constituency, who have built careers adding real value to their clients. In some sectors, there is more use of contractor work than in others; such sectors include IT and technology more broadly, as well as marketing and the creative industries—sectors where the UK is strong. There is also the growing sector of interim managers.
I see a balance to be struck here—a balance between protecting some employees and recognising that the vast majority have chosen this route and are providing real value; a balance between employment rights and protections, and between those who are employed and self-employed contractors. That balance has to be struck while ensuring that the rules do not have a sclerotic effect on the economy. Flexible and nimble companies responding to their customers, adding value, creating wealth, seizing opportunities—that is how economies grow, it is how jobs are created. Fair taxation, employment protection, company flexibility, highly skilled contractors and freelancers—finding the right balance of these benefits everyone in our economy.
I remember the 1980s: 3 million people on the dole and my city of Liverpool left to managed decline. We did not cope then, but people got by. There were the remnants of the welfare state, we had council housing to provide shelter, and with whole communities often devastated simultaneously, people came together. However, this is 2020: many workers have hefty mortgages or face sky-high private rents, and as we know, private household debt in this country is completely unsustainable. It is household debt that has artificially driven economic growth for much of the past decade, when previous Tory Chancellors were declaring a sound economic recovery. Now we will see the consequences of the destruction of the welfare state in the past decade.
If this Government do not act in the coming weeks and months, I truly dread to think what happens when thousands of workers with mortgages of £180,000 to £250,000-plus, or rent payments of £650 to £1,000-plus per month are forced to apply for universal credit. It is in this Government’s power to ensure we do not get to that stage. The Government must continue to act and extend support for workers, the self-employed, small and medium-sized enterprises and all sectors of the economy, or else our recovery will be a slow one. A decade of austerity, under-investment, low productivity and a dwindling manufacturing base has blunted the levers we need to deal with this crisis properly. Despite the Chancellor demonstrating considerable ambition at times, I fear he will be hamstrung by the warped economic thinking of his predecessors and the inertia of his future self.
I saw the impact that the last tidal wave of unemployment had on my generation. We cannot subject this generation to the same. I have already seen apprentices being laid off, redundancy notices being served across the board, and even in non-unionised workplaces that may escape redundancies, cuts to pay being forced through with little or no consultation with the workforce.
The economic hardship faced by our young people will lead to a disaffected generation of adults who have had their hopes, dreams and aspirations for the future dashed by a crisis they did not cause. My first question to the Government is: does their ambition match that of our young people? How are they going to support the good, well-paid, unionised jobs of the future that our young people—my own children—will need to thrive?
We would be doing a disservice to a generation that cares deeply about our planet by not addressing the climate crisis properly. In the era of a precarious labour market that subjects so many young adults to low-paid, insecure work, we should absolutely be providing the highly skilled green manufacturing jobs of the future. Our already inadequate manufacturing base is facing yet another wrecking ball. We see that in the automotive sector, in particular, and I fear job losses coming down the track for one of the few success stories of British manufacturing in recent times.
In Liverpool, we see the University of Liverpool—the second largest employer across the city region—proposing to end 536 jobs. That will have a devastating impact on the local economy at a time when the university is in a position to absorb the shock and protect all jobs. My fear is that there will be companies that, frankly, have not been overtly affected by this crisis and have taken the taxpayer cash, but which still use the crisis as an opportunity to streamline their operations and make redundancies regardless. To those bosses, I say: shame on you. Where is their duty to this country and their duty to our society, their workforce and their communities? Despite significant taxpayer support, we see BA betraying its workforce, many of whom live in my constituency and have contacted me. And to Willie Walsh, I say: shame on you.
My second point is: where, as part of our economic recovery and as part of the Bill, does it say that the Government will practically engage with employers that are intent on making what I have referred to as excess and needless redundancies? I have been inundated with correspondence from constituents, as Members across the House will also testify to, during this crisis. The plight of small businesses is heartbreaking and it is stark to see how many small businesses are slipping through the nets. For example, my constituents Karen and Matt Cox, who run Matt Cox Hairdressing, are getting no support from the Government, like my constituents Graeme Park, who is part of the creative industry sector, and Jayne Moore from Moore Media. They are part of the #ForgottenLtd campaign, which highlights the gaping black holes in the Government’s support packages.
Too many small businesses in my constituency are on the brink of collapse. Small company directors and their often small workforces are facing a bleak future. How does the Chancellor propose, as part of the Bill, to support small businesses in the longer term? The road back to normality for millions of SMEs will be a long, painful one, and any talk of a V-shaped economic recovery could bypass many.
In conclusion, if we are to come out of this crisis on the other side, the scale of the Government’s ambition needs to be scaled up. I am worried that this Finance Bill addresses little of the challenges we face. The Government like invoking war references, so here is one: only a Labour Government with the ambition of the post-war 1945 Labour Government can steer us through this coming period. For the sake of our people, I hope that is a challenge that this Government can live up to.
I am fortunate to have represented Wimbledon in this House, and it has seen unemployment levels driven to unheard-of low levels. However, as a result of this crisis, 10,000 people are on furlough and 4,000 self-employed have had help, so the suggestion that there is anybody in this House not concerned about unemployment must be false; it will affect all our constituencies, as will not only this Finance Bill, but the Government’s reaction in terms of the policies they put in place, flexibility about the furlough scheme, job support and, as my hon. Friend the Member for Harrogate and Knaresborough (Andrew Jones) said, some consideration of how IR35 works. There needs to be some flexibility, because modern working sees people with the same employer for longer periods, and some employers will force people to do that. Therefore, in the context of the current crisis, forcing people to move away from arrangements that keep them in employment would undoubtedly be wrong.
I do not want to detain the House for too long, but I want to talk about the loan charge. Like many in this House, I have been contacted by a number of my constituents and others.
My concern about the loan charge is the repayment method that HMRC is pursuing. I ask that the Government look at alternative ways, or means-testing, rather than just demanding punitive repayment in full, which is causing extreme emotional stress and, for some, even suicide. If they would look at alternative ways of collection, rather than demanding all payment at once, I think we could find a much better way through this.
My hon. Friend anticipates some of the questions I might have for the Minister in a moment. The loan charge raises particularly unique considerations; that is why 55 Members of the House have signed the new clause tabled by my right hon. Friend the Member for Haltemprice and Howden (Mr Davis). The whole aspect of proportionality and the unusual construction of the charge also raise issues about the capability of HMRC and the role of financial advisers.
I have spoken in various debates, and made representations to my right hon. Friend the Financial Secretary to the Treasury only this week, about the charge and the impact it is having on very many people. I am pleased that the Government set up the Morse review and that they have accepted most of its recommendations, but I ask the Minister to address a couple of points in his closing remarks.
First, Morse explicitly states:
“I am also very clear that I have no sympathy for the people who promoted…loan schemes after the law became clear.”
Will my right hon. Friend the Minister clarify this: if financial advisers gave recommendations when the law was not clear that the loans were illegal, why will the Government not accept that those individuals acted in good faith and look at the ability to treat them more leniently?
Secondly, given the Morse comment, will my right hon. Friend confirm whether HMRC is investigating the advisers? Is it seeking reparations from the advisers, and, if it intends to do so, would it agree that the amount of reparation sought from the financial adviser be set against the liability of the person who took the loan?
As my hon. Friend the Member for Beaconsfield (Joy Morrissey) said, we all want to ensure that bankruptcy, home loss and family destruction do not happen. My right hon. Friend the Minister has alluded in previous remarks to the fact that the Government are keen to ensure that that does not happen and that he has asked HMRC to work with individuals to ensure that it does not. Will he set out tonight exactly how he intends to instruct HMRC to do that?
Finally, I will just have a look at amendment 55. I absolutely support the intent, which is to help those affected and to alleviate the crisis that many face. Like most people, I absolutely oppose the concept of retrospectivity and retroactivity, so it is a bit of a disappointment to many of us that, in accepting the Morse recommendations, the Government did not feel able to accept the recommendation that loans between 2010 and 2016 be exempt. I wonder whether the Minister might, even at this late stage, choose to do so. I suspect not.
I am not very good at holding my breath, so I certainly shall not try it now—but probably people do not want me to expend much more breath in my remarks tonight.
I must say to my right hon. Friend the Member for Haltemprice and Howden that my problem is with part of what his new clause does. I absolutely accept the premise, as everybody in this House must, that people are innocent until proven guilty. However, and I do not know whether this has really been addressed so far, his new paragraph 1(c)(1A)(c) says that condition 1 is that
“P knew that the loan or quasi loan should have been accounted for as income in the relevant year.”
There is a fundamental problem with that, in that anyone could say they did not know that, and how do we prove it? The clear problem is that, much as I support the intent of what he is trying to do, the effect of what he seeks would be to create a precedent that seems to me to take away the basis of the UK tax system, because I might say to someone, “We both know that we should not be paying tax on this and therefore we can proceed on that premise.” The precedent that that sets is a major problem for gathering tax.
If my hon. Friend thinks that this is the precedent, he should go back to the Finance Act 2008, which gives HMRC a 20-year assessment period in which it can assess whether the taxpayer participated in a transaction knowing that it was part of an arrangement attempting to bring about loss of tax. That is precisely what it says.
The hon. Gentleman has heard from the right hon. Member for Haltemprice and Howden (Mr Davis) that the way that new clause 31 has been designed has used words already on the statute book, so he cannot make that argument. Moreover, the real precedent that he ought to be worrying about is the loan charge itself and its retrospective nature. I know he is concerned about that, so should he not therefore be voting for new clause 31, which is based on existing tax vocabulary, and opposing the real precedent, which is the appalling way that taxpayers have been treated?
I have already made the point about retroactive behaviour and retrospectivity. I have said that there is much that the Government can do. I want the Minister to set out exactly how a person who has no assets, is on benefits or is on earnings less than the national average could get forgiveness. I have explained what I am concerned about. I hear what my right hon. Friend the Member for Haltemprice and Howden has said, and perhaps the Minister will want to address the point I am raising. I may be wrong, but it seems to me that this is quite a dangerous precedent to embark on.
Referring to the means-tested and alternative ways of looking at a nuanced approach to how this is handled, the point that has been raised about everyone denying culpability on a tax issue is valid. However, my concern is about the companies and advisers that promoted this scheme. Are we going to prosecute them? Are we going to investigate them? What are we going to do to hold them to account?
I think it was some time before Brexit, when we had that previous Speaker with his comedy antics, that it used to be said that we are gripped by an age of apathy in politics. Well, I have to say that this debate has engendered quite the opposite in my inbox, which has been flooded—if not quite on a Dominic Cummings scale—by dozens of requests from constituents asking me to speak in this debate, aided and abetted by the digital function that we debated earlier today.
Yesterday, like other right hon. and hon. Members, I was pleased to participate in the virtual “The Time Is Now” lobby. I know that this was the subject of the previous debate, but I promised my constituents that I would lobby vigorously for the adoption of a green new deal. Seeing as how everyone has been channelling their inner Roosevelt, it seems appropriate to put that on the record. We need a greening of our economy locally and nationally.
I want mainly to address an issue that has already come up time and again—IR35 and the loan charge—and perhaps some other little bits about job creation and regional impacts.
I am sure I am not the only one who has heard harrowing stories from constituents. There are people in tears at my weekly advice surgery—and I represent Ealing Central and Acton, a prosperous West London suburban seat. The two schemes are markedly different—we should not muddy the waters too much—but they have features in common. The undercurrent of today’s debate has been how we rebuild our economy after the pandemic —this health crisis that turned into an economic crisis.
We have these phrases, don’t we? “Whatever it takes,” “Get Brexit done”—that was when there was a stubborness about extending transition—“levelling up.” It takes more than soundbites, though. I would like to test the Government to see how far they really mean those things. I am obviously supporting the official Opposition’s new clause, but I would have backed new clause 31, if we were to vote on it. The list of constituents who have come to see me about this ill-fated loan charge is long. Aymon Jaffer, an IT contractor, took out one of these loans in 2010 to pay off debts and save for a deposit on a house in my seat—a house that he is now at risk of losing.
People point out that they declared what they were doing on their self-assessment form. Even the tax code was okayed by Her Majesty’s Revenue and Customs. They were told that this was a less burdensome way of doing things than starting their own plc. As soon as the first sniff of a discrepancy appeared, they paid the shortfall. The retrospective aspect is worrying; people are now being told that all these other things will be reopened. In the case of my constituent, HMRC mixed this up with a student loan from years ago, which had been was paid off. There are aggressive letters, maladministration, and, for this constituent, health issues. That is just one example from a three-figure number of examples that I could give.
Does my hon. Friend agree that the common characteristic of the people who have contacted many of us is that they are very hardworking? They have tried to play by the rules. They have possibly been sold a scheme that they did not fully understand, and may have been manipulated by unscrupulous advisers, and now they face threatening behaviour from HMRC. It is truly difficult for these people, many of whom work in IT in the Thames valley, and in creative industries. Does she agree that the Government need to show these people some understanding?
My hon. Friend is completely right. HMRC needs to show some humanity in these cases. The scheme was obviously badly implemented, with inadequate impact assessment. The word “scandal” is frequently used and often misapplied, but in this case, all the elements needed are there. People have been pushed into bankruptcy; families have been fractured; people are facing financial ruin and losing their homes. As we have heard, there have been seven suicides. The all-party parliamentary loan charge group, which is very active—I am sure it is in everyone’s inbox all the time—has sent round a letter from the daughter of one of the people who sadly took their own life about the impact that has had on everyone involved.
The Morse review is a start, although the APPG feels that it could do better and go much further. All of us have seen these cases; my hon. Friend the Member for Liverpool, Wavertree (Paula Barker) described the situation movingly.
Does my hon. Friend and neighbour agree that the reason why people are driven to suicide, and why a high proportion of those affected are so stressed about the loan charge, as has been mentioned, is that there is no right of appeal to a tax tribunal, or right to negotiate, as there is with all normal forms of tax business with HMRC?
I completely agree, and I pay tribute to the work that my hon. Friend has done on the APPG, together with the right hon. Member for Hemel Hempstead (Sir Mike Penning); they have done brilliant stuff, and it is disappointing that we will not vote on new clause 31 today.
The hon. Lady talked about the Morse review. We called for a review before the present Prime Minister was brought in; he agreed to it. The Morse review does not completely cover everything. I have certainly said to my constituents, as I suspect most of us have, that the Government were bound to implement its findings, even if we think the findings could have gone further—but the Government have not done that. That shows a lot of bad faith on their part.
I completely concur with the right hon. Gentleman. It is very disappointing that even the crumbs of the Morse review are not being fully implemented in a transparent and fair way. Again, we have heard so much about these reviews. There are 200 recommendations on all the race relations stuff that have never been implemented. Another review is not what we need now; we need action.
My hon. Friend the Member for Reading East (Matt Rodda) described some of the people in IT who have come to see him. Those affected are not actually all in IT or accountants. Some of those who have come to me are from the public sector, including Eugene Nicholson in the NHS and Abigail Watts. I have had a supply teacher and a social worker. Some people are terrified and do not want their cases raised because of repercussions. As has already been said, the real culprits are the promoters of the schemes—individuals who are still practising today. They duped our constituents, who are now facing a nightmare of private debt collection and all sorts of things.
I will briefly turn to IR35, where there is some overlap, because it has caused enormous pain and strain. People got into these schemes innocently—in this case, their employers told them to do it. Many are individuals on low incomes who do not have deep pockets. The assumption is that they are all tax dodgers or whatever. Catherine Qian said that she was a one-woman band. These are micro-businesses. It is not like the discussion earlier where we were talking about going after multinationals. She has no employment rights. She has an accusation of being a hidden employee, but she gets no sick pay, stability or pension. Needless to say, she is not eligible for furlough. The Conservative manifesto at the election we recently fought said that there would be a review of self-employment, so I ask the Minister directly: when will that see the light of day? Will it be another one of these reviews that just sits on a dusty shelf?
How do we solve all of this? At the very least, HMRC should give those who fell prey to the loan charge more time and favourable conditions to reach an amicable solution. It has been said that no one will lose their home, and that is good, but HMRC must accept its share of responsibility.
My hon. Friend is so much more knowledgeable than me. Lots of my constituents cannot afford to buy their own home and are in rented accommodation, so that does not even apply to them. They are in beds in sheds—maybe I should not dob them in, but that is a phenomenon in the London Borough of Ealing.
Again, HMRC must accept responsibility for not communicating regularly with people. It could have acted sooner to avoid this sizeable group of people who went into these remuneration schemes having to pay back sometimes hundreds of thousands of pounds at a time. IR35 is being rolled out now, so the deferral is obviously welcome, because these things can be fixed in real time, as long as the deferral is not just pushing punitive measures further away. The Government need to urgently commit to a full review of tax reliefs.
While the debate is about job creation, I want to flag, as my hon. Friend the Member for Liverpool, Wavertree pointed out, that the global pandemic we are in seems to be a bit of a cover for certain companies to behave badly. British Airways and Virgin spring to mind as using the coronavirus job retention scheme—the clue is in the name—to do the very opposite. Having accepted furlough funds from the public purse, they are now using coronavirus as a cover for restructuring plans—plans they were always itching to execute—while they believe the eyes of the world are diverted elsewhere. I say to the Minister that we need a sector-specific deal for aviation.
The situation is the same for the creative, cultural and arts sector. I represent many constituents who work in it. Not for nothing was Ealing long-called a BBC borough. The Questors theatre—the jewel in our crown—is the biggest amateur dramatic venue in the country and it has written to me. It is about to go under. Its rateable value is too high to get any of the reliefs. That is another plea to the Minister.
We were told that, when we left the EU, we would be world-beating on employment rights, and that our rights could exceed those of the bloc after Brexit, but now, with IR35, we are heading for zero employment rights. The Government always said that this would not be a race to the bottom, so they need to put their money where their mouth is. There is nothing like a global pandemic to concentrate the mind. We have heard slogans such as, “We’re all in this together”. To stop all these Government utterances from being just hollow words, we need action. Snappy slogans are not enough.
It is true that we find ourselves in a very serious situation. The number of workers on UK payrolls was down by more than 600,000 between March and May. Of course, the Government are attempting to redress the situation with the Business and Planning Bill and the Corporate Insolvency and Governance Bill. We also hope that we can end lockdown as soon as possible. Certainly, the Prime Minister is talking the talk in terms of build, build, build. That is all very good. We have infrastructure needs; let us meet them. There are no massive spending projects. The problem with them is that they are often hugely bogged down in cost overruns.
I want to say a bit about tax simplification. That is the genesis of this whole debate on IR35 and the loan charge. There is also our hugely ineffective, inefficient and long tax code—longer than India’s—and that is after 10 years of Conservative Government. I think that there is a new wind breathing through No.10, and I hope that we are going to be bold about tax reform. Are there any taxes that we can abolish completely or replace with simpler alternatives? We have created this massive tax avoidance industry, which has sucked many people with quite moderate means into its claws. Let me cite as one example, inheritance tax at 40%. We have to understand how people act. At a rate of 40%, most people are willing to make a significant investment to reduce the effectiveness of that rate. I am not condoning that behaviour, but if someone were left a million pounds and if the state said that it would take £400,000, they might begin to think that it is worth spending £40,000 or £50,000 on tax advice as a way of lessening their payment of tax. All sorts of complicated trusts and avoidance schemes are available to those who recognise that they can avoid paying tax. The result is less money for the Treasury to spend on the things that we need.
On this debate about the loan charge, it is natural that politicians should want to close down loopholes, but often, in closing down loopholes, we are affecting people of quite modest means. It is true that as a level of complexity involves means, those loopholes are usually available to those who have the resources to investigate them, but not necessarily. An entire industry has been created around how to lessen our tax burden, inheritance or otherwise, and I think that the Government are, in a way, responsible for this kind of behaviour. The people who have taken advantage of these tax loopholes, often of modest means, are simply reacting to our hugely complex tax codes. Taxes need simplifying and they need lowering. I make that point because I hope the Minister will say something in his summing up about this. I hope that he tells us that the Government have an agenda, otherwise we will go on having these debates over and over again. Every time a new loophole is discovered, people will take advantage of it, often with the wrong sort of advice. Then the Government have to close the loophole, creating injustice, which we have heard all about in this debate.
My right hon. Friend talks about tax loopholes and, yes, that is absolutely clear, but the thing about the loan charge is that HMRC itself was complicit in the process. It was advising and letting people believe that those charges were quite safe and reasonable. Then quietly, it came to the conclusion that they were not and did not make it clear to anybody. In effect, therefore, it is HMRC that has created the tax loophole and then failed to identify it and tell people that they were on the wrong scheme.