Thursday 4 February 2021
HMRC Powers and Safeguards
On 22 July 2019, I announced a comprehensive package of measures that HMRC was taking to maintain and develop public trust in its operations (HCWS1785). Today, HMRC has published a major part of this package, a report on its evaluation of the implementation of powers introduced since 2012: https://www.gov.uk/government/publications/evaluation-of-hmrcs-implementation-of-powers-obligations-and-safeguards.
I asked HMRC to engage with stakeholders, including taxpayers and their representatives, and I am very grateful, in particular, to the 16 external stakeholder organisations that have offered constructive challenge to HMRC throughout the evaluation.
Alongside changes that HMRC is already introducing, the evaluation has highlighted further opportunities for improvements that will build and maintain public trust in the tax system. HMRC is making a number of commitments as a result of the evaluation. These include commitments to improve communications with taxpayers about powers, obligations and compliance enquiries; to update and clarify guidance on taxpayers’ rights and obligations; to increase awareness of HMRC’s internal decision-making and governance processes; and to make further improvements to taxpayers’ customer experience. The commitments are designed to ensure that HMRC consistently meets the high standards that taxpayers expect, including those who do not have a tax agent, and especially when people may need extra support.
All but one of the measures that I announced in my July 2019 statement have now been delivered by HMRC. They have created the new professional standards committee, published responses to the 2019 and 2020 adjudicator's reports, and published new principles regarding help for taxpayers who may need extra support.
HMRC has also expanded the range of data published regularly to include new data that will help taxpayers to understand how HMRC approaches compliance work and how it uses relevant powers, and to assess the effectiveness of HMRC’s safeguards for taxpayers.
On the final measure I announced in my July 2019 statement, HMRC continues to take forward a range of actions to improve taxpayer experience. It has reviewed and improved over six hundreds of HMRC’s most commonly used letters and factsheets, simplifying the language used. It has put processes in place to keep letters under review, and to respond where further areas for improvement are identified. Last year HMRC also set up a new Extra Support Team to improve its identification of, and assistance to, taxpayers who may need additional help during compliance checks. HMRC has already responded to over 1,000 referrals and provided training to nearly 12,000 caseworkers.
HMRC has also made substantial progress in other areas. In particular, it is continuing to strengthen the guidance available to taxpayers to help them understand better the compliance check process, in order to reduce any stress involved and to build greater confidence and trust in HMRC. In December, HMRC launched a series of bitesize YouTube videos on key aspects of this process, and it is also trialling a new introductory pack which taxpayers will receive when a compliance check is opened.
HMRC’s programme of work on powers and safeguards is an important contribution towards the vision that the Government set out in July 2020 for a trusted and modem tax administration system. HMRC will implement the commitments in this report and continue to work with taxpayers, tax agents and their representatives, to maintain and develop public trust in their operations.
Public Service Pensions Consultation
The Government published a consultation document (CP 253, HCWS380) in July 2020 outlining proposals regarding public service pensions. I have today laid in Parliament the Government’s response to the consultation: “Public service pension schemes: changes to the transitional arrangements to the 2015 schemes. Government response to consultation” (CP 373).
The main public service pension schemes were reformed in 2015 to make them fairer—especially for lower earners—and more affordable for the taxpayer. Public service pensions continue to be among the best in the workplace, providing a generous level of pension provision for public servants. Following negotiations with trade unions and other member representative bodies, the Government agreed that those closer to retirement should be either fully or partially protected from the changes and allowed to remain in their legacy schemes, known as “transitional protection”. In December 2018 this transitional protection was found by the Court of Appeal to discriminate unlawfully against younger judges and firefighters who were members of the legacy schemes before 1 April 2012 but did not benefit from transitional protection. The reformed schemes themselves are not discriminatory. As set out in the July 2019 written statement (HCWS1725), the Government accepted that the ruling reads across to other public service pension schemes, affecting around 3 million public servants.
In July 2020 I launched a consultation, seeking views on proposals to address this. More than 3,000 responses to the consultation were received, and the Treasury also conducted engagement sessions with a wide range of stakeholders. I am grateful for the many responses to the consultation we received from public servants, employers, administrators, financial advisers, trade unions and member representative bodies. They were insightful and crucial for further developing the Government’s proposals, understanding the impacts of the proposals, and coming to informed decisions.
Having considered the responses to the consultation, the Government are today announcing that they will implement the deferred choice underpin (DCU). This will give eligible scheme members a choice at the point their pension becomes payable as to whether they wish to receive benefits from their legacy scheme or benefits equivalent to those that would have been available under their reformed schemes in relation to their service between 1 April 2015 and 31 March 2022. In the meantime, eligible members will be deemed to have been members of their legacy schemes for any period of service between those dates.
In implementing the DCU, rather than an immediate choice exercise, we have recognised that members will have more certainty around their personal circumstances at the point they need to make their choice. This approach considerably reduces the need for members to make assumptions around their future career, their retirement, health and dependants, which would increase the risk of members, particularly younger members, making an incorrect decision. I strongly believe that the DCU is the correct approach, given its key advantage of providing members with greater certainty about their choice of pension benefits.
I am also confirming that the legacy schemes will close on 31 March 2022. From 1 April 2022, all those who remain in service will do so as members of the reformed schemes that were introduced in 2015. Benefits built up in the legacy schemes will be protected.
The reasons for closing the legacy schemes and moving to the reformed schemes are as valid now as they were when the reforms were introduced: the schemes should continue to provide guaranteed pension benefits to public servants, but do so on a fairer basis, and in a way that ensures that they are affordable and sustainable into the future. Public service pensions continue to reward public servants generously for their dedicated service.
The Government will bring forward new primary legislation, when parliamentary time allows, to provide requisite powers to deliver these changes to public service pension schemes.
Cost control mechanism and 2020 valuations update
Alongside the launch of the consultation in July 2020,1 announced that the pause to the cost control mechanism—which was introduced as a consequence of the uncertainty regarding the value of schemes to members resulting from the court judgments—would be lifted, and the cost control element of the 2016 valuations process completed. I also announced that the Government Actuary (GA) would proceed with the review to assess whether the mechanism is operating as intended.
As I previously set out, the increased value of schemes to members as a result of the McCloud remedy will be taken into account in the completion of the 2016 valuations. Given that this will lead to higher costs than would otherwise have been expected, early estimates indicate that sortie schemes could breach the ceiling. If normal statutory procedure were followed, any ceiling breaches would lead to a reduction in member benefits in order to bring costs back to target. The GA review is ongoing, and I have decided that it would be inappropriate to reduce member benefits based on a mechanism that may not be working as intended.
This means any ceiling breaches that do occur during the completion of the 2016 valuations will therefore not be implemented, and benefit levels will not be reduced. However, I have also decided that should any floor breaches occur, they will be honoured, and member benefits increased in order to bring costs back to target. These decisions apply only to the cost control element of the 2016 valuations. Future cost control policy for future valuations will be set out once the GA’s review of the mechanism has concluded and any recommendations have been fully considered by the Government.
Changes in the employer contribution rates resulting from the 2020 valuations process were due to be implemented from April 2023 for the majority of unfunded public service pension schemes. These valuations have already begun, and require intensive work across schemes, Departments and the Government Actuary’s Department (GAD) over several years.
Due to interactions with wider pension policies, in particular the implementation of the McCloud remedy reforms, completion of the 2016 valuation process and the review of the cost control mechanism, work would need to be undertaken in unprecedentedly short timescales to amend employer contribution rates in April 2023.
Any changes to employer contribution rates resulting from the 2020 valuations will therefore be delayed from April 2023 to April 2024. This is an exceptional but necessary decision taken in light of the wider public service pensions landscape.
Today’s announcements set out the steps the Government will take to ensure that members of public service pension schemes are treated equally—taking an approach which is fair for members as well as other taxpayers.
Copies of the Government’s response document to the consultation (CP 373) are available in the Vote Office and Printed Paper Office, and it is published on gov.uk.
Van benefit and Car and Van Fuel Benefit Order 2021
The van benefit charge and fuel benefit charges for cars and vans will be uprated by the consumer price index from 6 April 2021. The uprate will take effect as follows:
Van Benefit Charge will uprate from £3,490 to £3,500
Car Fuel Benefit Charge multiplier will uprate from £24,500 to £24,600
Van Fuel Benefit Charge will uprate from £666 to £669
This measure is being announced outside of the normal fiscal process to ensure employers and HMRC are given enough time to prepare for the uprate, ahead of the 2021-22 tax year.
The Government will lay the statutory instrument to uprate these charges before the House on 9 March 2021. A tax information and impact note (TIIN) will be published at Budget 2021 and will be available at www.gov.uk/government/collections/tax-information-and-impact-notes-tiins.
Votes A Annual Estimate
The Ministry of Defence Votes A Estimate 2021-22 will be laid before the House on 4 February 2021 as HC 1125. This outlines the maximum numbers of personnel to be maintained for each service in the armed forces during financial year 2021-22.
Votes A Supplementary Votes
The Ministry of Defence Votes A Supplementary Votes 2020-21 will be laid before the House on 4 February 2021 as HC 1126. This outlines the increased maximum numbers of personnel to be maintained for service in the Army Reserve full-time service (FTRS) and Air Force during financial year 2020-21.
Health and Social Care
On 5 January 2021, the Health Protection (Coronavirus, Restrictions) (All Tiers) (England) Regulations 2020 (All Tier Regulations) were amended. These amendments instructed people across England to stay at home and only to leave where they have a legally permitted reasonable excuse, as well as requiring the closure of many businesses and venues.
We are getting the virus under control, however the numbers of covid-19 cases, hospital and ICU admissions, and deaths remain extremely high nationally. As a result, our hospitals are still under significant pressure from covid-19.
As of 1 February, the weekly case rate in England has decreased to 294 per 100,000 for all ages, compared to a rate of 421 the week before and 233 per 100,000 in people aged 60 and over, in comparison to 332 per 100,000. There are seven local authorities with case rates greater than 500 per 100,000. Overall positivity for England is 11.9%, which is a 1.8% decrease over the last seven days.
Case rates for all ages have decreased but remain high or very high across all regions. Case rates also remain very high in the west midlands (350 per 100,000), the east of England (308 per 100,000) and the north-west (320 per 100,000). The lowest case rates are in the south-west (200 per 100,000)—a 30% decrease from last week. The highest positivity is in London (22%) and lowest in the south-west (6.9%).
The measures the Government have put in place are bringing down the number of cases/ However, these figures are significantly higher in comparison to early December, and there still remains considerable pressure on NHS systems nationwide as although hospitalisations are now decreasing, bed occupancy is still high and remains ~50% above the peak of the first wave. General and acute bed occupancy for covid-19 across England has decreased by 4,023 to 26,216 from 30,239 last week. Mechanical ventilation bed occupancy for covid-19 across England has similarly decreased to 3,366 from 3,736 in the previous week. Deaths within 28 days of a positive test remain high: there have been 7,898 covid-19 related deaths in England from 18 January to 24 January 2021.
In line with our commitments, I have kept the measures in place for the national lockdown under ongoing review. On 2 February I completed a review of the geographical allocations as required by the regulations and have determined that it is necessary for all areas in England to remain in tier 4 in order to tackle the threat posed by the covid-19. Whilst there are early indications that new infections may have started to decline in those areas which have been under stricter measures for the longest, scientific advice and the latest epidemiological data are clear that lifting restrictions now would be too early. We recognise the strain that these restrictions have placed on people across the country, but we must continue to take the necessary steps to slow the spread of the virus, protect the NHS and save lives. The restrictions are kept under continual review and will be lifted as soon as it is safe to do so.
Police Grant Report (England and Wales)
My right hon. Friend the Home Secretary has today laid before the House the “Police Grant Report (England and Wales) 2021/22” (HC 1162). The report sets out the Home Secretary’s determination for 2021-22 of the aggregate amount of grants that she proposes to pay under section 46(2) of the Police Act 1996. Copies of the report are available from the Vote Office.
The allocations that have been laid before the House today are as set out in my statement and provisional police grant report of 17 December 2020.
Available funding to police and crime commissioners (PCCs) is made up of Government grants and police precept. The Secretary of State for Housing, Communities and Local Government has today set out the council tax referendum principles that will apply to the police precept, for approval by the House of Commons.
Council tax levels are a local decision and elected PCCs will rightly want to consider what they are asking people to pay to fulfil their strong desire to keep our streets safe.
The council tax referendum principles are not a cap, nor do they force local authorities to set taxes at the threshold level. Rather they are an additional local democratic check to prevent excessive increases. The forthcoming PCC elections also provide an opportunity for local taxpayers to have their say on the spending decisions of their elected representatives.
In 2021-22, the overall funding settlement for the policing system will total up to £15.8 billion, a £636 million increase on the 2020-21 funding settlement.
Depending on local decisions, available funding to PCCs could increase next year by up to an additional £703 million. This would represent an increase to PCC funding of up to 5.4% in cash terms on the 2020-21 police funding settlement. If the public were asked to approve greater increases via a local referendum, and voted for such changes, precept funding would increase accordingly.
The table, available as an online attachment, documents funding to PCCs for 2021-22, including capital grant and precept.
Attachments can be viewed at:
Housing, Communities and Local Government
Local Government Finance Settlement
Today I laid before the House the “Report on Local Government Finance (England) 2021-22”, the “Council Tax referendum principles report 2021-22” and “Council Tax alternative notional amounts report 2021-2022”, which together form the annual local Government finance settlement for local authorities in England.
My Ministers and I have held meetings with representative groups, including the Local Government Association, and with councils and MPs. Representations from 155 organisations or individuals have been carefully considered before finalising the settlement.
This Government are dedicated to supporting the most vulnerable, which is why this settlement provides access of up to an additional £1 billion of funding for adult and children’s social care, comprising £300 million in grant and a 3% adult social care precept. In the interests of stability, the Government propos to roll forward allocations of the £1.41 billion 2020-21 social care grant and continue the 2020-21 improved better care fund at £2.1 billion.
Our proposal is to use £240 million of the additional £300 million social care grant as an “equalisation” component, to level the playing field, recognising that the distribution of resources generated through the adult social care precept does not match the pattern of assessed need. The remaining £60 million will be allocated directly through the existing adult social care funding formula.
New homes bonus
Following consultation, the Government are proposing a new round of 2021-22 (year 11) new homes bonus payments. This will be the final set of allocations under the current approach.
The Government are committed to developing a more efficient and effective way of incentivising housing growth, which is why I am pleased to announce that we plan to consult shortly on the future of the new homes bonus.
Lower tier services grant
The Government are proposing a new un-ringfenced lower tier services grant in 2021-22, which will allocate £111 million to local authorities with responsibility for lower tier services.
As part of this, the Government are proposing a minimum funding floor, at a cost of £25 million, so that no authority, either upper or lower tier, will have less funding available in 2021-22 than last year. This minimum funding floor is in response to the current exceptional circumstances and is a one-off.
Minor changes have been made to all allocations proposed at the provisional settlement to take account of changes to new homes bonus allocations arising from updated house completion statistics.
Rural services delivery grant
The Government will be increasing the rural services delivery grant by £4 million, taking the total to £85 million, the highest ever. As in previous years, this grant will be distributed to the top quartile of local authorities on the “super-sparsity” indicator.
Independent living fund
I can confirm that the former independent living fund recipient grant will continue to be paid to local authorities in 2021-22. The total value of the grant will be maintained at the 2020-21 value of £160.6 million, with the same approach to individual local authority allocations. Details will be published shortly.
The Government manifesto commits to continuing to protect local taxpayers from excessive council tax increases, and it is for the House of Commons to set an annual threshold at which a council tax referendum is triggered. This is an additional local democratic check and balance to avoid the repeat seen under the last Labour Government when council tax more than doubled.
Next year, local authorities can increase council tax levels by up to 2% without holding a referendum and, where councils have adult social care responsibilities, they will be able to increase by a further 3% specifically for these services. To provide greater flexibility for councils that must take into consideration the situations of their residents when making council tax decisions, this 3% increase for adult social care can be deferred for use in 2022-23.
A referendum principle of up to 2% or £5, whichever is greater, will apply to shire district councils, and £15 on band D for police and crime commissioners. This package of referendum principles strikes a fair balance. The council tax referendum provisions are not a cap, nor do they force councils to set taxes at the threshold level. Councillors, mayors and police and crime commissioners and local councils will rightly want to consider the financial needs of local residents at this challenging point in time, alongside the public’s support for action on keeping our streets safe and providing key services.
Following the Mayor of London’s request, I have decided to place before Parliament a principle for the Greater London Authority which reflects the Mayor’s request for an increase of £15 (on band D) to fund transport concessions above the average level available elsewhere in England. The final decision on the increase in tax will be for the Mayor of London to take. The reasoning is set out in a letter to the Mayor, which I have placed in the Library.
At the same time as providing councils with the flexibility to set increases where they consider it appropriate, the Government also recognise the importance of providing support to those least able to pay. That is why we are providing councils with £670 million of new funding alongside the settlement, to enable them to continue reducing council tax bills for low-income households. This is in addition to the funding that is already built into the local Government finance system to fund local council tax support, which is a local discount, rather than a benefit payment.
Future of local government finance
As announced earlier in the year, the Government will not proceed with widescale funding reform in 2021-22, including the implementation of the review of relative needs and resources, 75% business rates retention, and a reset of accumulated growth under the business rates retention system.
Our decision to postpone reform has been taken in the interest of creating stability for local authorities and has allowed both the Government and councils to focus on meeting the immediate public health challenges posed by the covid-19 pandemic. We will revisit the priorities for finance reform in time for the next spending review, taking account of wider work on the future, of business rates and how best to organise and finance adult social care.
Councils have welcomed our estimated £3 billion package of support to respond to additional expenditure pressures and loss of income from the covid-19 pandemic in 2021-22. This package, on which I will provide further details shortly, includes £1.55 billion of un-ringfenced grant funding; a commitment to meet 75% of councils’ irrecoverable losses in council tax and business rates income for 2020-21, worth an estimated £800 million; an extension to the existing sales, fees and charges scheme for three further months, from April to June 2021; and an additional £670 million local council tax support grant.
Depending on local decisions, core spending power in England may rise from £49.0 billion in 2020-21 to up to £51.3 billion in 2021-22, a 4.6% increase in cash terms.
This settlement and the additional covid-19 resources build on the largest year-on-year increase in spending power in a decade last year, and recognise the resources and flexibility councils need to maintain critical services and their role at the heart of the national recovery from covid-19. The settlement provides further stability for the whole sector by maintaining core spending power at pre-pandemic levels, as a minimum for every authority in England. This stands alongside an unprecedented package of covid-19 support this year and next year, totalling over £11 billion in direct support for councils and £30 billion in additional support for local councils, businesses and communities.
National Preventive Mechanism
The United Nations optional protocol to the convention against torture and other cruel, inhuman or degrading treatment or punishment (OPCAT), which the UK ratified in December 2003, requires states parties to establish a “national preventive mechanism” (NPM) to carry out visits to places of detention to prevent torture and other cruel, inhuman or degrading treatment or punishment.
The Government established the UK NPM in March 2009 (Hansard 31 March 2009, Vol. 490, Part No. 57, Column 56WS). The UK NPM is currently composed of 21 scrutiny bodies covering the whole of the UK.
Following previous practice, I have presented to Parliament the 11th NPM’s annual report (Command Paper 366). This report covers the period from 1 April 2019 to 31 March 2020.
I again commend the important work that the NPM has carried out over the year and the NPM’s independent role in safeguarding the human rights of detainees across the UK and its role in preventing torture and inhuman and degrading treatment. The Government takes allegations of torture and cruel, inhuman or degrading treatment very seriously and any allegations are investigated fully. The Government do not participate in, solicit, encourage or condone the use of torture for any purpose.
The NPM report includes observations in relation to prisons, mental health detention and social care, children in detention, immigration detention and police and court custody. Notably, the report sets out the NPM’s response to the covid-19 pandemic. Government action since the beginning of the pandemic has helped to limit the spread of the virus in prisons. With the country now in national lockdown to curb the spread of coronavirus, prisons have introduced tougher measures to help save lives and protect the NHS. These include routinely testing all staff as well as new prisoners so we can better protect our staff and isolate those who test positive even earlier, and rolling out of the vaccine to older prisoners, mirroring the community roll-out and beginning with those aged 80-plus this month, to protect the most vulnerable. This is in addition to the stringent safety measures already in place to protect staff, prisoners and children in custody, which Public Health England endorsed as being effective in limiting the spread of the virus, and ultimately in saving lives.
Ministerial and Other Maternity Allowances Bill
The Government have today introduced the Ministerial and other Maternity Allowances Bill in order to make provision for Ministers and Opposition office holders to be able to take maternity leave. I am grateful to Her Majesty’s Opposition for its constructive engagement in preparation of the Bill and welcome its support for the measure.
The choice between taking leave to recover from childbirth and care for a new-born child or resigning from office is not acceptable in modern times. The current provision for statutory maternity pay for employees has in contrast been in place since 1987, and some form of maternity grant, even for those who are not employed, has been in place since the National Insurance Act of 1911.
Changes that I made to the ministerial code on becoming Prime Minister set out provision for junior ministers to be able to take maternity leave. However, this work-around relies on another Minister taking on additional responsibilities and cannot be used for Secretary of State or individual offices, such as the Law Officers or the Lord Chancellor.
Until now, the limits on the number of salaries that can be paid overall, and for individual offices has left the Government with limited flexibility to appoint cover should a Minister want to go on maternity leave. In the absence of that flexibility, a senior Minister wishing to go on maternity leave would likely need to resign from the Government.
The Bill creates a designation of “Minister on Leave” which provides for Ministers to take maternity leave. This will also apply to certain Opposition post holders too. Ministers on leave will remain part of the Government and be able to be briefed on matters and kept in touch with work, but will not be responsible for exercising the functions of the office from which they are on leave.
This is a necessary piece of legislation. However, it does not resolve wider issues such as adoption and parental leave, absences for sickness and other reasons, and unpaid roles. These are complex issues which require careful consideration, taking into account modern working practices and the wider constitutional context. The Government will present a report to Parliament setting out considerations and proposals. I am placing in the Libraries of both Houses a policy document titled “Maternity Leave and other absences by Ministers” which provides further information, including on the practicalities of these arrangements. The Bill and its explanatory notes are being published today.