Delegated Legislation Committee
Draft Policing and Crime Act 2017 (Maritime Enforcement Powers: Code of Practice) Regulations 2017
The Committee consisted of the following Members:
Chair: Phil Wilson
† Adams, Nigel (Selby and Ainsty) (Con)
Clwyd, Ann (Cynon Valley) (Lab)
† Dakin, Nic (Scunthorpe) (Lab)
De Cordova, Marsha (Battersea) (Lab)
Dent Coad, Emma (Kensington) (Lab)
† Duffield, Rosie (Canterbury) (Lab)
† Hair, Kirstene (Angus) (Con)
† Hoare, Simon (North Dorset) (Con)
† Hughes, Eddie (Walsall North) (Con)
† Hurd, Mr Nick (Minister for Policing and the Fire Service)
† Khan, Afzal (Manchester, Gorton) (Lab)
† Penning, Sir Mike (Hemel Hempstead) (Con)
† Smith, Eleanor (Wolverhampton South West) (Lab)
Streeting, Wes (Ilford North) (Lab)
† Swayne, Sir Desmond (New Forest West) (Con)
† Syms, Sir Robert (Poole) (Con)
† Villiers, Theresa (Chipping Barnet) (Con)
Sean Kinsey, Yohanna Sallberg, Committee Clerks
† attended the Committee
First Delegated Legislation Committee
Wednesday 10 January 2018
[Phil Wilson in the Chair]
Draft Policing and Crime Act 2017 (Maritime Enforcement Powers: Code of Practice) Regulations 2017
I beg to move,
That the Committee has considered the draft Policing and Crime Act 2017 (Maritime Enforcement Powers: Code of Practice) Regulations 2017.
It is a great pleasure to serve under your chairmanship, Mr Wilson, for what I think is the first time. The regulations were laid before the House on 16 November 2017. I hope they will be approved, but, for the benefit of the hon. Members for Scunthorpe and for Wolverhampton South West, I will proceed to make an argument.
The Policing and Crime Act 2017 provides police officers and other law enforcement with certain powers in the maritime environment so that they can prevent, detect, investigate and prosecute criminal offences that take place on vessels where the courts in England and Wales have jurisdiction. The provisions close a gap in enforcement powers, ensuring that law enforcement officers are capable of functioning effectively to tackle crime on sea, as on land.
Section 30 of the Police Act 1996 places a geographical restriction on the exercise of police powers, limiting them to England and Wales and the adjacent waters—the territorial waters that extend to 12 nautical miles. The maritime provisions, once commenced, will give the police and other law enforcement at sea similar powers to those available to enforcement officers in relation to drug trafficking and modern slavery. The difference is that the powers cover all offences under the law of England and Wales. In summary, those are the power to stop, board, divert and detain a vessel; the power to search a vessel and obtain information; and the power to arrest and seize any relevant evidence.
The Policing and Crime Act enables law enforcement officers to use those powers in relation to certain ships in international and foreign waters and in the territorial waters of England, Wales and Scotland. Principally, the vessels will be UK flagged, but law enforcement will also be able to act on non-flagged vessels and foreign ships, in certain circumstances, in international waters as well as territorial waters.
The powers are important because crimes such as rape, murder, firearms offences and grievous bodily harm can take place on UK-registered ships beyond the territorial waters limit, just as they can within those waters or on UK soil. There are also other crimes specific to the maritime context, such as illegal fishing, unsafe vessels, piracy and marine theft, which the police must be able to tackle just as effectively as when crime is committed on land.
Before the new powers are brought into force, a code of practice, issued under section 94 of the Policing and Crime Act, will need to be put in place for English and Welsh law enforcement officers to follow when arresting a person under section 90 of the Act. The code must set out certain rights and entitlements of persons arrested under section 90, and in particular the information to be made available to them on arrest. The Government have prepared the code of practice, which was placed before the House on 16 November 2017, together with these regulations. The regulations are necessary to ensure that the code of practice will be in force at the same time that the maritime powers in the Act are commenced.
The code provides guidance on the information that should be given to a suspect at the time of their arrest. It makes clear that suspects should be provided with a summary of their rights, and warned if it may take more than 24 hours to bring them to a police station. The code will ensure that law enforcement officers provide suspects with information, and that includes ensuring that those detained understand what is being said to them. Officers will also be obliged to make arrangements to safeguard the health and welfare of arrested persons. To ensure that the code will be practical and effective, the Government have consulted the law enforcement agencies that will use it, representatives of the legal profession, devolved Administrations, other external organisations and interested Government Departments.
Police Scotland is currently drafting equivalent but non-statutory guidance concerning the exercise of its maritime enforcement powers, and we are working closely with the Scottish Government to ensure that the guidance is appropriately aligned. The Northern Ireland provisions will also be covered by non-statutory guidance. The Northern Ireland maritime provisions will be commenced separately from those of England, Wales and Scotland at a date determined by the Northern Ireland Executive.
The maritime powers in the Policing and Crime Act are essential if we are to ensure that our police and other law enforcement are equipped to be effective at tackling criminality, to enforce the law and to protect the public. However, it is vital that when these powers are used, they are used properly, particularly when a person’s liberty is restricted, as under the power of arrest. That is why the code of practice and the regulations are so important. I commend them to the Committee.
It is a pleasure, as always, to serve under your chairmanship, Mr Wilson. I thank the Minister for describing extensively the reasons why it is so necessary to bring in a change to legislation at this point. It is right and proper that this extension of powers is put in place. I am pleased to hear that the code of practice has been brought together and is in place, but I would be grateful for a little more information about how it was drawn up and what processes were involved in engaging others to ensure that it is fully fit for purpose. I welcome the description the Minister gave of the way in which the devolved authorities will roll out similar measures in their jurisdictions. Generally, Her Majesty’s Opposition welcome the legislation.
I thank the hon. Gentleman, speaking for the Opposition, for his constructive approach to regulations that are clearly necessary. As I said in my remarks, the code was laid before the House in November and was the subject of extensive consultation. I am sure he has read that consultation and will have seen that it contains nothing unexpected in terms of what we expect law enforcement officers to do at such moments. Given the importance of these maritime powers to make the UK increasingly hostile to criminality and to fill a clear gap in provision, I hope the Committee will approve them.
Question put and agreed to.
Draft Sub-national Transport Body (Transport for the North) Regulations 2017
The Committee consisted of the following Members:
Chair: Joan Ryan
† Amesbury, Mike (Weaver Vale) (Lab)
† Benyon, Richard (Newbury) (Con)
† Cadbury, Ruth (Brentford and Isleworth) (Lab)
† Cummins, Judith (Bradford South) (Lab)
† Davies, Chris (Brecon and Radnorshire) (Con)
† Foxcroft, Vicky (Lewisham, Deptford) (Lab)
† Herbert, Nick (Arundel and South Downs) (Con)
Lewis, Clive (Norwich South) (Lab)
† Mak, Alan (Havant) (Con)
† Mann, Scott (North Cornwall) (Con)
† Maskell, Rachael (York Central) (Lab/Co-op)
† Murray, Mrs Sheryll (South East Cornwall) (Con)
† Norman, Jesse (Parliamentary Under-Secretary of State for Transport)
† Rodda, Matt (Reading East) (Lab)
† Sobel, Alex (Leeds North West) (Lab/Co-op)
† Stephenson, Andrew (Lord Commissioner of Her Majesty’s Treasury)
† Tomlinson, Justin (North Swindon) (Con)
Adam Evans, Committee Clerk
† attended the Committee
Second Delegated Legislation Committee
Wednesday 10 January 2018
[Joan Ryan in the Chair]
Draft Sub-national Transport Body (Transport for the North) Regulations 2017
I beg to move,
That the Committee has considered the draft Sub-national Transport Body (Transport for the North) Regulations 2017.
It is a pleasure to serve under your chairmanship, Ms Ryan. The draft regulations, which were laid before the House on 16 November 2017, establish Transport for the North as the first sub-national transport body. This debate is the culmination of the parliamentary phase of the draft regulations, but it will not surprise Members to know that a lot of hard work has brought us to this point, and I start by paying tribute to the civic, business and political leaders across the north who have come together in the past few years to create Transport for the North.
TfN provides the north with a huge opportunity to combine the individual strengths of its constituent areas and to work with the Government to plan transport more effectively across the region. The draft regulations, together with the creation of metro Mayors, give the north greater autonomy and control over transport, and a powerful voice to articulate the case for new transport projects. If approved, they will provide TfN, acting as a single voice for the north, with statutory status. That status is a crucial symbol of the Government’s commitment to rebalancing the economy, because it will give TfN a clear leading role in planning and developing a programme for the north and enable it to ensure that transport interventions in the north not only improve journeys but are targeted at unlocking growth across the region.
I am keenly aware that Members across the House and in the other place share our aim to transform northern growth and to rebalance the country’s economy. The Government have been very clear that we wish to see and to support better transport connections across the whole of the north, particularly east to west. To address that, we are already spending record amounts on transformational projects such as High Speed 2 and the great north rail project, and on new trains and extra services through improved franchises. We are also spending billions of pounds extra on roads to make journeys faster and more reliable.
The northern powerhouse rail programme aims significantly to improve connections between major cities across the north of England. TfN is considering a range of options, and we are due to receive a business case from it later this year. TfN is also taking forward important work to develop smart ticketing in the north and a cross-northern strategic transport plan. Those programmes will help to realise the vast potential of a region with more than 15 million people, 1 million businesses, exports worth upwards of £50 billion, thriving regenerated cities and world renowned universities.
We all agree that greater investment in the north is vital, but there is also a need for a long-term strategy to drive investment decisions—a strategy developed by the north, for the north. Developing such a strategy will be a core function of this new sub-national transport body and will mean that the Secretary of State formally considers the north’s strategy when taking national decisions. That unprecedented role in national transport planning is designed to ensure that links between transport and economic development are maximised.
The draft regulations also give TfN powers to work with local authorities to deliver and fund transport projects, including road schemes and smart ticketing in the north, and to be consulted on rail franchises. The role set out for TfN in the draft regulations will enable it to plan, recruit, enter into contracts and spend effectively the £260 million it has so far been allocated to take forward its work. As required under the legislation, TfN has provided the Secretary of State with a formal proposal and draft regulations, which have been approved by no fewer than 56 separate local authorities. In administrative terms, that is a Herculean effort.
The role set out for TfN in the draft regulations strikes a careful balance between what is right for the north and what is right for the country. The Government and our agencies are already working closely with TfN on national infrastructure decisions. As a formal partner with statutory status, TfN’s role will be strengthened, paving the way for even better co-operation in the future. Most fundamentally of all, speaking with a strong unified voice will be pivotal in bringing our cities closer together and creating a modern, reliable and improved transport system in the north. The benefit of the transport regulations is clear, in allowing us to work towards that goal, and I ask the Committee to give them its support.
It is a pleasure to serve under your chairmanship, Ms Ryan. I represent a constituency within the proposed jurisdiction of the newly-established Transport for the North, and I declare an interest, in that I want to ensure that we get the establishment of Transport for the North absolutely right.
We have seen the power of real devolution and the impact that it has on economic regeneration and opportunity, and how, when transport and the economy are combined into spatial planning, we can build a country fit for the future. Over the past 18 months we have seen that power in London in particular, with Transport for London’s ability to drive economic opportunities for the city and what it has done through its transport plan to connect communities, address social mobility, attract inward investment and kick-start a house building strategy. By determining that public transport must be prioritised alongside cycling and walking, TfL has been able not only to map its mobility objectives, but to relate business, housing, environmental and health priorities to them, for full connectivity from a fully integrated transport system, and a fully integrated overarching strategy for Greater London. Similar benefits have been brought about through Transport Scotland and Transport for Wales.
With that approach have come resources—although they are being withdrawn without the necessary transitional funds—and powers to make decisions and bring about change. However, as we head north we see a different concept proposed in the regulations. Labour’s ambition for devolution and, in particular, devolution for the transport system as set out in part 5A of Labour’s Local Transport Act 2008, which makes the regulations permissible, reaches well beyond the scope of what is set out in the regulations before the Committee.
As I have already set out, Transport for London, utilising all its powers, is able to realise the ambition of its community and deliver a transport system for the future. Northern communities already get a 10th of the spending that goes to London, and the new regulations restrain opportunity for the new sub-national transport body. In a variety of announcements, the Secretary of State first scrapped the promised investment, but proposed that he would deliver devolved powers that would allow the north to address its own transport needs. However, the statutory instrument delivers neither resource nor the powers that he promised just months ago.
I want to begin by talking about the schedule and the governance arrangements. Labour will be supportive of the proposals set out for the co-ordination and governance of Transport for the North. We believe that to have equal voices representing the breadth of communities in the north is right, and the ability to determine on simple majorities, population size or track coverage proportions to the weight of votes is right, when it comes to certain matters such as franchises.
It is essential, for any strategic body to function, to ensure that partners can engage; robust scrutiny is also vital, to ensure that the challenges are put within the system, and that the strategic body keeps being held to account over its determinations.
That brings me to the area of contention, namely regulation 5. I ask the Minister whether it is lack of ambition or lack of trust that has determined the regulation’s limitations with regard to the powers to prepare, advise and make proposals. Is the Minister really serious in introducing regulations for a new strategic transport authority that has the right to put its hand up and say, “Please”? It is staggering, when we all know why rail is failing so badly at the moment, with the fragmentation conspiracy held at the heart of Government, that the regulations provide zero power to drive a different approach or culture into our rail system.
Let me take each point in turn. Regulation 5(a) specifies the power to prepare a transport strategy. Should it not at least specify the power to prepare and set the priorities? We need legislation to enable TfN to deliver an integrated transport strategy linked to an economic plan and a spatial plan. We hear about the northern powerhouse, but we just get the right to prepare a strategy and pass it on to the Secretary of State, who then has the powers to do whatever he so chooses with it. Labour would bolster that power, to bring real power to the north.
It gets worse. Regulation 5(b) sets out the power to “provide advice”—just provide advice—to the Secretary of State about the exercise of transport functions in relation to the area, whether they are exercisable by the Secretary of State or others. I know the Secretary of State would seriously benefit from the provision of advice from a strategic transport body, but honestly, this is completely substandard and does not need legislating for. Anyone can provide advice. There is no credence given to the depth of the advice or how it will be received, and there is nothing in the regulations to say whether any of it will have any effect and see the light of day. In other words, the Secretary of State gets someone to do his homework for him and then decides what he wants to do with it. He may rub it out if he so chooses; he is given no obligations on how to respond to that advice.
Labour wants Transport for the North to have the powers to implement the strategy; to co-produce, at the very least, the plan to implement the strategy; to determine the priorities for the area covered; and to be able to make decisions on the strategy. Of course, Labour’s move to a publicly owned railway system will reflect the strength of devolution right through its structures and will ensure, through Transport for the North, that local authorities will help to determine their destiny, while also ensuring national co-ordination to bring economic opportunity to all corners of the nation, with a transport system that delivers the right solutions to the country.
The continued economic inequality and failure will not abate if all the decision making is still taking place at the Department for Transport and by the Secretary of State. He must let go of his powers and start trusting those who are experts in the north and know what is needed for local growth. We must break the Secretary of State’s Stalinist grip on the railway, where every decision must go across his desk. That is exactly why we need Transport for the North and why we need a Labour Government.
Let me give the example of TransPennine Express. The leaders of all the authorities within the Transport for the North footprint have been absolutely clear that that major artery needs to be electrified and to provide the high-speed, high-capacity service necessary for economic opportunity. It must be Transport for the North’s role to determine what is needed. Clearly, the Secretary of State has got it wrong in downgrading that scheme, switching the power off in the north. Everyone in the north knows that and has been incredibly vocal about it; however this remote Government do not understand its importance.
Transport for the North must be able to set the strategy and priorities and then implement them. These regulations fall completely short of that. I urge the Government to redraft the whole of regulation 5, but I have not finished yet. Regulation 5(c) provides for a co-ordinating role between the authorities to improve effectiveness and efficiency. Should those powers not also extend to an arbitrating role? Co-ordination is good if everyone agrees, but when they do not we need to ensure that the broader interests are determined, and therefore the powers of Transport for the North should be extended to achieve that.
Then we get to regulation 5(d), under which if Transport for the North believes that effectiveness and efficiency can be improved, it has the power to make proposals. Once again, there is nothing that must be acted upon. These are not powers. We need to ensure that proposals are turned into determinations that can be delivered. Then we have regulation 5(e), where proposals can be made to the Secretary of State about the role and function of Transport for the North. Once again, we can ask, beg and plead, but there is no obligation on the Secretary of State to be cognisant of such proposals. The whole of regulation 5 is poor—really poor—and I call on the Minister to amend it. Subsections (2) to (6) of section 102H of part 5A of the 2008 Act enable the Secretary of State to go further, and I urge the Minister to take that on board.
I have a few further points to make about the remainder of the regulations. It is unclear how the instituting of advanced and smart ticketing will be specifically resourced in the longer term, after the £150 million allocated for now has been spent, or how it is proposed that that will be interrelated across the rest of the transport network outside the jurisdiction of Transport for the North. We urgently need smart ticketing that is intermodal and dovetails into the national ticketing scheme. Will the Minister give a clear response to that?
Let me briefly move on to highways. I note that, again, the Secretary of State will sign off on initiatives on trunk roads and the acquisition of land, its use and its environmental impact. Surely, these matters should be devolved to Transport for the North, under the direction of the Secretary of State. It speaks of a lack of an existing national strategy for the highways, and a lack of faith in a northern body such as Transport for the North having the ability to make these determinations. Labour believes that it should.
Regulation 11 sets out the relationship between TfN and local authorities on highways matters. May I point out to the Minister that, although it mentions footpaths and trunk roads, it is silent on bridleways and cycle paths? Is there intent behind that omission, and if so, why? Labour believes that far more investment is needed in walking and cycling to tackle poor air quality and congestion and to improve health.
Finally, funding is key to growth and economic and social success, yet the regulations are virtually silent on the matter, save for saying that contributions will come from the local authorities in a proportionate way, and for the initial resourcing. Section 102L of part 5A of the 2008 Act makes provision for grants to be allocated. Why has that not been included in the regulations? Will the Minister share more details? Labour’s intent with the 2008 Act was to ensure that real power was devolved to strategic regions, and it is deeply disappointing that the Government have not shared our ambition. We wholeheartedly support the setting up of Transport for the North, and I speak for the vast majority of local authorities in the north in saying that we are deeply disappointed with the regulations and that we want the Government to redraft regulation 5. Transport for the North should have the powers to set and implement a strategy that it owns, and the Secretary of State should be bound not only to fully consider it but to support it, unless he can provide strong evidence of why it should be refocused. As things stand, the power in these regulations sits in the wrong place.
In order to make progress in the setting up of Transport for the North, Labour will not block these regulations today. However, we seek a guarantee from the Government that they will go back and extend powers to Transport for the North, to enable it to be a truly strategic body across the whole transport system, delivering for all communities in the north.
I thank the Opposition Front-Bench spokesperson for her comments. Let me address the several points she raised.
First, the regulations have been drafted with the support, and in some cases at the formal request, of Transport for the North and the constituent authorities themselves. The Government are acting not in a vacuum but very closely in consultation with the constituent authorities and Transport for the North’s own management and executive team. Therefore, I do not think it is correct to say that those things are in some sense not supported locally; on the contrary, the reason the Labour party supports them and the reason they command support across the north is that everyone recognises that this body is a very important step for this important subject, in a central area of our future economic development.
Secondly, it is very bold to talk about devolution in a grand way. The Labour party ought to be careful to think about what that actually implies. We have national networks in road, rail and other areas mentioned by the hon. Member for York Central, and devolution can upset national flows and the coherence of a national strategy. It is important for Government to recognise and respect that. I have no doubt that any Government in this position would be concerned about the national aspect of such important networks.
Thirdly, these powers are absolutely not unambitious, as the hon. Lady suggested. I remind the Committee that this is the first sub-national transport body, and important powers are being allocated to Transport for the North. The power to produce the statutory transport strategy is important, and the fact that it is statutory gives it an authority and status that commands respect. This entity now has the capacity to fund organisations that can deliver transport projects—smart ticketing, for example—and the Government are working with and giving the power for TfN to work with local authorities to fund, promote and deliver schemes, and to be consulted on schemes, which is important. Those are important powers, and an important devolution of autonomy and control to the region, and rightly so.
As I have said, 56 authorities were consulted and the idea that they form an entirely coherent group that is able to speak with one voice is fanciful. It is important for TfN to bring together all those concerns and mould them into a strategy, and in due course we will see the results of its work on that. The idea that there is somehow a single voice, and therefore a comparison with Transport for London, is far-fetched. We are in the early stages of setting up a new institution, and anyone who wishes to ask whether that institution speaks with one voice, and whether more powers should be devolved to it, should ask from which local transport or other authority those powers will be removed. Is the hon. Lady genuinely suggesting that Transport for Greater Manchester should have some of its powers removed to go to Transport for the North, because that is the implication of creating a body of the kind she described? This is far from unambitious—these are ambitious and far-reaching proposals on which this Government, and future Governments, could build if they are successful.
This Government are the first to have introduced a national walking and cycling strategy. They inherited a situation in which walking and cycling were being funded at the rate of £2 a head per year, and that is now £6 a head per year. That is not enough, but it is a significant improvement.
I thank the hon. Lady for her constructive points, and we will obviously attend to them. We see the establishment of Transport for the North as a significant step for the north and the country as a whole. It will work with the region’s transport authorities and elected Mayors to build a long-term vision for transport across the north of England. As the voice of the north in that area, Transport for the North will have unprecedented influence over Government funding and decision making. The Government have demonstrated that by setting up this institution and backing the election of metro Mayors, we are giving the north greater autonomy and control, and a powerful voice to articulate the case for new transport projects.
I thank the Minister for his response, but I wish to come back on a number of issues. First, let me be clear that Labour fully supports the setting up of this sub-national transport body, Transport for the North. We want it to be successful, but we do not underestimate the real challenges faced by the new strategic body, and we therefore want to ensure that it has the powers and authority to deliver what it needs to deliver on behalf of local authorities and strategic bodies across the north. That is why we have made a close determination about what those powers should be, in dialogue with authorities across the north, as well as Transport for the North.
I challenged the assumptions made by the Minister because there are successful bodies, whether in Wales, Scotland or London, that have greater control over their transport determinations, and we must question why a similar determination cannot be made by a body in the north. Transport for the North should clearly have greater powers to determine the destiny of the economy and communities of the north, and that is why we urge the Minister to go further in future.
I challenge the Minister’s claim that TfN has those wider powers, because there is still a massive dependency on the Secretary of State making determinations. We are not talking about taking any powers away from local authorities, because we believe in devolved decision making. However, the regulations are too dependent on the Secretary of State making the determinations and the sign-off.
Although we recognise the importance of a strategic national plan for our transport system, it is important that those powers are devolved down into a sub-national transport body. The Secretary of State should produce evidence of why that should not happen and why it is he should affirm such decisions. I question the Minister’s claim that our proposal would not function, given what is happening in other areas.
The Minister also raised the issue of not all the strategic bodies speaking with one voice. That is exactly why we recognise the role of collaboration, but we also argue that, where a dispute occurs between authorities, they should be able to access arbitration. Of course, there will be different interests and approaches. Those are determined by the difference and variety of communities across the north. We believe that the strategic body for transport in the north should have greater powers at that level.
Finally, on walking and cycling, the latter is funded at the rate of £6 per head, but we want the figure to be increased to £10 per head. We want to be ambitious and to change the approach. I specifically asked the Minister why cycle paths and bridleways were omitted from the regulations, while footpaths, roads and highways were included. Is that an omission by default or was there intent behind it?
I am grateful to the hon. Lady for that intervention. I have a few points to make in response. There are two kinds of devolution: the first relates to whether more powers should be devolved from the Secretary of State, and the second to the relationship between Transport for the North and its constituent authorities. I will take those two in turn.
The hon. Lady’s appeal with regard to Transport for London relates to the second issue. If Transport for the North is to function in due course in any way analogous to Transport for London, that will require local and transport authorities to give up powers to TfN. She has to answer whether she—and those authorities—are comfortable to give up those powers, because that is what is implied by her comparison to Transport for London. I do not think that those authorities would be comfortable with that; there is no evidence for that. They have vigorously asserted the powers that they have received under the metro Mayors, and rightly so, and in many cases they are doing exciting and interesting things with those powers.
That is one aspect of devolution. As to the other aspect, which is whether the Secretary of State should devolve more powers, the hon. Lady said I did not offer an argument, but in fact the opposite is true: I offered two arguments. First, this is a new entity. It is the first sub-national transport body. Let us see whether this entity, with all the embedded conflicts and properly articulated differences of priorities, can pool that into a concrete set of proposals and work effectively with this and future Governments to prove its worth. When it has done that, the case for further devolution of powers will become clear. The regulations already provide substantial devolution.
Secondly, one must be very careful to ensure that devolved powers do not conflict with national networks. We do not want to do that. In this country we have always run the strategic roads network as a strategic network. Increasingly, with the development of the new major roads network, we are running a network on a national routes basis, and it is important to respect that.
The hon. Lady’s final question concerned cycle paths and footpaths, but they are a matter for local authorities. They do not need to be mentioned in the regulations and can perfectly properly be managed, as matters presently stand, by local authorities. That is the principle adopted by the regulations.
Clearly, the Minister and I, and our parties, have a completely different view of devolution. We very much see it as taking power from the centre down into the regions. Evolution is how I would describe the taking away of power from local authorities—we certainly do not support that.
I have a couple of final questions. On a point of clarity, the Minister indicated towards the end of his response that there would be further devolution of powers. Does he intend Transport for the North to have greater powers in future? Is this a staging process to achieve that, in line with other transport authorities, which are clearly on a different statutory setting? It would be interesting to hear his response, given the weakness of the powers in the regulations.
Secondly, I need to correct the Minister: cycle paths and bridleways are not mentioned in the regulations but footpaths are. I asked why there is that disparity. The Minister now says that footpaths and cycle paths are for local authorities, so why are footpaths in the regulations? I need clarity on that point because it is now more opaque than when we started.
On cycle ways and footpaths, I will write to the hon. Lady with details of the history of that, which should settle the matter. On future powers, the Government have made no judgment. The thrust of my argument is that, once Transport for the North is a fully functioning, successful body and able to discharge the functions it has presently been given, it will then be open for it to make the case to this or future Governments for the devolution of further powers. That would be a perfectly proper exercise of its voice, which has been given statutory authority by the regulations. The Government have made no decision on that but have not ruled it out.
Question put and agreed to.
That the Committee has considered the draft Sub-national Transport Body (Transport for the North) Regulations 2017.
Draft Double Taxation Relief and International Tax Enforcement (Colombia) Order 2017 Draft Double Taxation Relief and International Tax Enforcement (Lesotho) Order 2017
The Committee consisted of the following Members:
Chair: Mr Adrian Bailey
† Chishti, Rehman (Gillingham and Rainham) (Con)
† Crabb, Stephen (Preseli Pembrokeshire) (Con)
† Dodds, Anneliese (Oxford East) (Lab/Co-op)
† Francois, Mr Mark (Rayleigh and Wickford) (Con)
† Hoey, Kate (Vauxhall) (Lab)
† Keegan, Gillian (Chichester) (Con)
† Kwarteng, Kwasi (Spelthorne) (Con)
† Lee, Ms Karen (Lincoln) (Lab)
† Linden, David (Glasgow East) (SNP)
† Lord, Mr Jonathan (Woking) (Con)
† McCabe, Steve (Birmingham, Selly Oak) (Lab)
† Siddiq, Tulip (Hampstead and Kilburn) (Lab)
† Smith, Jeff (Manchester, Withington) (Lab)
† Smith, Royston (Southampton, Itchen) (Con)
† Spellar, John (Warley) (Lab)
† Stride, Mel (Financial Secretary to the Treasury)
† Whittaker, Craig (Lord Commissioner of Her Majesty’s Treasury)
Gail Bartlett, Rob Cope, Committee Clerks
† attended the Committee
The following also attended (Standing Order No. 118(2)):
Milling, Amanda (Cannock Chase) (Con)
Morton, Wendy (Aldridge-Brownhills) (Con)
Third Delegated Legislation Committee
Wednesday 10 January 2018
[Mr Adrian Bailey in the Chair]
Draft Double Taxation Relief and International Tax Enforcement (Colombia) Order 2017
I beg to move,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Colombia) Order 2017.
With this it will be convenient to consider the draft Double Taxation Relief and International Tax Enforcement (Lesotho) Order 2017.
It is a great pleasure to serve under your chairmanship, Mr Bailey.
The draft orders will give effect to two new double taxation agreements: one with Colombia and one with Lesotho. Double taxation agreements remove barriers to international trade and investment and provide a clear and fair framework for taxing businesses that trade across borders. By doing so, they benefit both business and the economies of the countries that sign up to them.
The double taxation agreement with Colombia is an important new agreement for the United Kingdom. It is our first ever double taxation agreement with Colombia, a country with which we have close and strengthening ties. It should also set a helpful precedent for future negotiations with other countries across Latin America.
The agreement represents a good deal for UK businesses and individuals with interests in Colombia. We have secured important reductions in, and exemptions from, taxes on dividends and interests, most notably a complete exemption from Colombian tax on dividends and interest paid to UK pension funds and interest on certain loans made by UK banks. The agreement also contains the most up-to-date provisions to guard against treaty abuse, based on international best practice, the latest OECD exchange of information article, and a provision for mutual assistance in the collection of tax debts. These features strengthen both countries’ defences against tax avoidance and evasion.
The agreement with Lesotho improves on our existing double taxation agreement. It updates the exchange of information article to the latest OECD standard and includes, for the first time, a provision for mutual assistance in the collection of tax debts and mandatory binding arbitration processes and procedures for resolving tax disputes. These features will help both countries to combat tax avoidance and evasion, as well as providing greater certainty for business.
The agreement also includes a marked improvement on the taxation of services. A provision in a previous agreement allowed Lesotho to tax the gross value of services provided by UK residents without their setting foot in Lesotho. Under the new agreement, Lesotho will tax only services that are actually provided in Lesotho by someone who is present for more than 183 days within a 12-month period, and only the net profit will be taxed. This is much more in line with established international principles. Because such taxes act as a barrier to investment, the lower rates of withholding tax for dividends and royalties in the new agreement are also very welcome. They will benefit the economies of both countries.
In summary, these are agreements that the UK, Colombia and Lesotho can be happy with. They will provide a stable framework in which trade and investment between the United Kingdom and Colombia and Lesotho can continue to flourish. I commend the draft orders to the Committee.
This is the third Delegated Legislation Committee that I have attended since I was elected in June, so I am conscious that sittings of such Committees tend not to go on for too long. I certainly do not plan to detain the Committee for long, but I want to address the transparency of double taxation treaties. I thank ActionAid for providing me with a briefing on the matter, following on from its good work and good relationship with my friend Roger Mullin, the former Member for Kirkcaldy and Cowdenbeath. His private Member’s Bill of 2016, the Double Taxation Treaties (Developing Countries) Bill, was not successful at the time, but I am certainly keen to pick up the mantle.
I have a number of questions for the Minister; I appreciate that he might not be able to answer them all now, but I would be grateful if he followed up in writing, or perhaps in a meeting. First, why did the UK Government decide to open negotiations for new tax treaties with Lesotho and Columbia? Crucially, who was consulted in those negotiations? What were the views of businesses, civil society, non-governmental or other organisations and the Department for International Development? Finally, before orders relating to tax treaties come before Delegated Legislation Committees, are the Government willing to publish the specific objectives that they seek to achieve in those treaties? Certainly, that would allow us, as Members of Parliament, properly to scrutinise the objectives set by the Government and whether the tax treaty presented to the Committee successfully meets those objectives. I appreciate that the Minister may not be able to answer all those questions at the moment, so I would be grateful if he committed to meet me and ActionAid to pursue those points further.
I am conscious that it is not common for Members to queue up to take part in Delegated Legislation Committees. I am genuinely pleased to be able to make a contribution to the Committee, because I believe that the significance of the UK’s network of bilateral tax treaties is far greater than the level of transparency and scrutiny afforded to it under the system of negotiation, renegotiation and ratification.
There are two major issues surrounding bilateral tax treaties. First, there is the question of tax treaties that enable companies to route money through tax havens such as Crown dependencies. That can come at a particularly high cost to the revenue raising capacity of Governments in poorer countries. Only a few years ago, ActionAid revealed how Deloitte was advising prospective clients in western and Chinese companies with an interest in Africa on how they could route their investment through Mauritius, a known tax haven. Perhaps not surprisingly, Mauritius has tax treaties with both the UK and Lesotho, so it is possible—if not highly likely—that UK companies investing in Lesotho are avoiding tax through such a route.
Secondly, many of these treaties are restrictive and cost lower-income countries billions of pounds each year that could be used to improve public services and alleviate poverty. For the purpose of the Committee, I want to concentrate on the treaty with Lesotho, one of the world’s poorest countries. It is regularly argued that such treaties boost economic development, but the World Bank has argued that there is very little conclusive evidence that tax treaties between OECD countries and low-income countries actually do so. My right hon. Friend the Member for Barking (Dame Margaret Hodge) writes in her excellent book “Called to Account”, that Angel Gurría, the secretary-general of the OECD, said in 2008:
“Developing countries are estimated to lose to tax havens almost three times what they get from developed countries in aid.”
He also said:
“poor countries could eliminate hunger in just one decade with less than a third of the money they lose to tax avoidance by big corporations”.
In 2014, the International Monetary Fund reported:
“the use of tax treaty networks to reduce…payments…is a major issue for many developing countries, which would be well-advised to sign treaties only with considerable caution.”
Britain has a large network of bilateral tax treaties both with low-income countries and tax havens. Analysis by Martin Hearson, a leading authority on the subject, found that the UK has the joint highest number of highly restrictive treaties with lower-income Asian and sub-Saharan African countries across the world. Ironically, we send a substantial amount of aid to those countries. Last year, DFID was responsible for delivering nearly £6 million of British taxpayers’ money in aid to Lesotho, yet we are signing a treaty that will actually deprive that country of corporation tax to which it is entitled.
I said that I was grateful for the opportunity to contribute, because this is one of the few opportunities for any kind of parliamentary scrutiny of a treaty of this nature—a treaty that the Government have already concluded. I am aware that there is a power for referring such treaties to the Floor of the House, but I understand that that has not been done since 1984. For most of us, this Committee is what passes for scrutiny. There is scant information on the reasons for this treaty in the explanatory notes or in the presentation we have just heard from the Minister. The Government do not publish their reasons for negotiating or renegotiating treaties. We do not appear to have any analysis of the expected impact of the treaty on investment or tax revenue. Perhaps the Minister will enlighten us.
The House of Commons Library conducted a comparative analysis of the approaches of a number of countries to such treaties. Many countries establish specialist committees to scrutinise them. In other countries, treaties are scrutinised by both Houses or Assemblies. Here, it is done by a Delegated Legislation Committee. In Canada, parliamentarians have a formal opportunity to review such treaties before they become binding. In Australia, there is a national interest analysis and formal hearings to approve treaties. In the United States, the Department of the Treasury produces a technical explanation of the agreement. We should compare that with the information before us today as we consider these treaties.
Is the Minister willing to consider that the Government should at least publish the specific objectives they are seeking to achieve before future tax treaties come before a Delegated Legislation Committee? Will he tell us the rationale for opening negotiations on these treaties? Is it not the case that if the Lesotho treaty did not exist, Lesotho would be free to charge the diamond companies and others a 25% withholding tax, rather than one of 5%? Why are the rates of the withholding tax in this treaty so low? It seems like Robin Hood in reverse.
Will the Minister say something about the binding arbitration clause in the treaty? I recall that kind of thing being a source of some concern to people in this country during the Transatlantic Trade and Investment Partnership negotiations. Am I right in thinking that this is the first UK tax treaty with a low or middle-income country to include a binding arbitration clause? What safeguards exist to ensure that large corporations do not use it to threaten Lesotho so that it does not try to challenge blatant tax avoidance? Have any British companies made representations to the Government for a binding arbitration clause to be included in the treaty?
Why is it so difficult to obtain information about the likely effect of the treaty? The EU produced detailed sustainability impact assessments that analyse the potential economic, social, human rights and environmental impacts of all trade deals. Why can a similar framework not be adopted for treaties such as these? As well as the treaties before us today, two more will be considered next week. I understand that there are treaties pending for Malawi, Nepal, Trinidad and Tobago and Uzbekistan. Will the Minister confirm whether all the existing tax treaties with EU countries will have to be renegotiated as part of the Brexit process? Surely we need a much better parliamentary process that involves full and proper scrutiny and provides evidence that such treaties are fair and in keeping with the values and traditions of our country.
I hope that my hon. Friend the Member for Oxford East shares my view about the inadequacy of the process and that she might consider testing the will of the Committee on the Lesotho treaty so that, at the very least, we can make our concerns crystal clear.
It is a pleasure, Mr Bailey, to serve with you in the Chair. It is also a pleasure to sit across from the Minister for the third time this week, with more to come tomorrow during the consideration of the Finance Bill.
I do not want to repeat much of what has already been said, but I share the concerns that have been articulated by my hon. Friend the Member for Birmingham, Selly Oak and the hon. Member for Glasgow East. We need to be clear, particularly when we talk about the treaty with Lesotho, that there is an extreme power imbalance between the UK and that country.
Many of us have heard of Lesotho because it is the only country—at least, the only one that I know of—whose people seek not to have some form of self-determination. Indeed, many people in Lesotho want it to join with South Africa, because of the enormous pressures on its public services and the small amount of finance that it has to deal with its terrible AIDS epidemic; I am sure that colleagues know that around a quarter of people in Lesotho of working age are infected with HIV/AIDS. Life expectancy in Lesotho is just 54, which means there are more pressures on public services and public service financing in Lesotho than in many other countries.
In that regard, it is important that we take our responsibilities as parliamentarians very seriously when we scrutinise such deals. In particular, it is important that we assure ourselves that this treaty is in line with the policy coherence for development principles, which state that in every area we must ensure we do not legislate in such a way as to deviate from our international development commitments.
That is significant for the UK, because we are Lesotho’s largest single source of foreign direct investment. The total amount of FDI in Lesotho is $51 million and the British contribution is $17 million. That might seem like small beer to some of us, given the kinds of figures that we normally look at in British Budgets; for example, it is about a sixth of the cost of the building of the new hospital in Northumbria. However, the UK FDI is more than half of the total Lesotho Government spending commitment for 2018. So, what we, as parliamentarians, do in relation to the tax that our citizens and our companies make it possible to collect in Lesotho is enormously important for that country’s economy.
There are a number of questions that we really need answers to, and I am not willing to wait for those answers. We need them now, and if we do not receive them, I do not think that we can accept the treaty. First, have the Government assured themselves, or otherwise, that this treaty coheres with our development policies? In particular, are we enabling lower-income countries to become more self-sustaining?
I understand that in 2016, when Jane Ellison was an MP and the Financial Secretary to the Treasury, she reiterated the Government’s commitment to align our tax treaties with our wider developmental policies. May we please hear today which assessments of this treaty the Government have undertaken to consider its potential impact on governmental revenues, particularly those allocated to poverty alleviation, as well as those allocated to HIV/AIDS and tuberculosis reduction programmes? Also, have the Government already published, or will they publish, an analysis of the projected impact of the new treaty on investment levels and tax revenues in the UK and Lesotho?
May I ask what contact the Treasury and the negotiators of this treaty have had with DFID about the relationship between the measures we are considering today and any programmes in Lesotho that DFID might previously have conducted, might be conducting or might conduct in the future? It would also be interesting to hear about any discussions the Treasury has had with DFID generally about our international development policies and how they cohere with this treaty, rather than just about specific projects that might be happening in Lesotho or that might happen there in the future.
We also need to know the extent to which the treaty coheres with the principles set out in the Addis Ababa accord. Most of us would want to promote that accord very much, and particularly this principle:
“Domestic resource mobilisation and effective use is the crux of our common pursuit of sustainable development and achieving the SDGs”—
that is, the sustainable development goals. Also, will we agree to co-operate with others to combat tax evasion as well as tax avoidance? That is the first set of questions that we need answers to.
I come to the second set of questions. Like other colleagues, I regret the fact that parliamentarians have only been able to see the final version of this treaty. There is only a one-page explanation at the back of it, and there is no commentary on why particular approaches have been adopted rather than others. I hope that we will receive a commitment to a more open process for future double taxation agreements. In fact, we have the chance to begin that process next week, as my hon. Friend the Member for Birmingham, Selly Oak has just mentioned.
Thirdly—this is where we need some specific answers—I hope the Minister will explain why certain decisions in this tax treaty were taken. My hon. Friend the Member for Birmingham, Selly Oak mentioned the eye-watering reductions in the withholding tax for Lesotho, compared with what will apply to citizens and companies for other countries. There is a reduction of 80% for dividends, 60% for interest payments and 70% for royalties. Last night, I was looking at the rates in the previous treaty from 1997—I know how to live. I am particularly interested in finding out why the withholding tax on dividends has been pushed down from 10% in 1997 to 5%, and why there is a new lower rate for the beneficial owner of a company that directly holds at least 10% of the capital of the company that pays the dividends. Why is that new requirement in the treaty, given that it was not in the 1997 one? Why is the withholding tax on royalties down from 10% in the previous treaty to 7.5% in this one? The Minister said that these measures are in place to benefit the economies of the UK and Lesotho, but how will those changes do that?
Finally, as my hon. Friend mentioned, it would be helpful to know why the British Government decided to promote mandatory binding arbitration in this agreement through the mechanism of specialist—and, by the way, secret—international courts. That is a new measure in this treaty. It was not in the 1997 version, and, as was mentioned, it appears to be a new measure generally in our double taxation treaties for low-income countries. I am keen to learn whether the UK Government considered the potential barriers that would prevent a low-income country such as Lesotho from representing itself properly in such a court. Will the UK Government provide any help to Lesotho in that regard? I was pleased to hear from the Minister that there will be other forms of help—potentially with tax collection—but will there be help with the specialist court?
Was it the UK that requested the inclusion of mandatory arbitration, or was it Lesotho? We need an answer to that question, which the hon. Member for Glasgow East asked. What has the UK’s experience been so far with mandatory binding arbitration, and did that affect the UK’s decision to put the model in the treaty or to acquiesce to it, if the impetus came from the Lesotho side? Will the Minister indicate whether Her Majesty’s Revenue and Customs has any findings on the developmental impact of that form of mandatory binding arbitration? Were such findings taken into account when the decision to promote mandatory binding arbitration in this treaty was made?
I realise that that is a large set of questions, but this is a significant treaty for a country that has experienced enormous challenges in recent years. As parliamentarians, we are all committed to international development, particularly for the poorest countries. Especially given Lesotho’s public service challenges—a quarter of its population suffer from AIDS and HIV—we need to ensure our tax treaties are in line with our international commitments.
May I, at the outset, make one thing extremely clear to the Committee? The Government are entirely committed to supporting lesser developed countries. We are one of the few countries in the EU and among the advanced industrialised countries that meets the 0.7% aid requirement. The hon. Member for Oxford East will know that the Taxation (Cross-border Trade) Bill, which is going through Parliament, will ensure that we take into UK law the unilateral preferences that pertain under the European acquis to ensure we provide zero-duty arrangements on a selfless, unilateral basis with a number of countries that need our support. It is important to understand where we are coming from in our overall negotiations and in the arrangements we enter into with the countries that are the subject of this debate.
I will go through some, at least, of the most prominent questions that were asked. There was a rather eye-watering number of them, delivered at rattle-gun speed, and some were quite technical. Although I enjoy the mental gymnastics of these debates—I always enjoy debating with the hon. Lady—I hope she bears with me as I do my best to pick them up. I was barely thinking about some of them when I had two or three more thrust in my direction. I will do my best to cover as much as I can.
The hon. Member for Glasgow East asked who opened the discussions between ourselves and Colombia. It was us, because Colombia is a significant Latin American economy. It is currently going through its accession process with the OECD, and it is expanding its network of double taxation agreements, including with our competitors—other nations around the world. We have always had close and friendly ties with that country, so we approached it. It was willing, and we have now concluded an agreement.
Like the hon. Members for Birmingham, Selly Oak and for Oxford East, the hon. Member for Glasgow East raised the important issue of transparency in the negotiation process. Tax treaties are international agreements that are given effect through law. They are therefore subject to parliamentary scrutiny and debate. Only when both sides are satisfied with the content of a new treaty will it be signed and published. Parliament will then scrutinise the agreement. If Parliament is not satisfied, the treaty will not enter into force. Where these treaties come about, we are in a position to scrutinise them, as we clearly have in some detail in this Committee. Such treaties have generally enjoyed cross-party support to date. It is recognised that they generally have a positive role in creating and enhancing cross-border trade, investment and employment.
The hon. Member for Birmingham, Selly Oak raised an example of the potential use of this arrangement or treaty in the context of tax avoidance. He mentioned Mauritius specifically. Mauritius has now become a signatory to the OECD base erosion and profit shifting project. It is therefore bound by the rules and regulations in that regard. If we look at offshore so-called tax havens—I think that was the expression he used—they are most typically brought into play where double taxation arrangements are not necessarily in place and there is a fear that double taxation may occur. In that sense, so-called tax havens or overseas tax trusts are being used to create a neutral tax space. The overarching point is that the proliferation of double taxation agreements is to be welcomed in that context.
The hon. Members for Birmingham, Selly Oak and for Oxford East raised the important issue of whether we were in some way exploiting Lesotho as a consequence of the agreement. The hon. Lady went into some detail on her bedtime reading. She went back to the 1997 treaty to look at the various rates of withholding tax and so on. The point I would make is that it is not possible for us to impose a treaty on another country, even if we wanted to. It is for the other country to decide when it is ready to enter into negotiations and to weigh up the trade-off between retaining all its taxing rights and possibly limiting those rights to attract foreign investment.
To answer a question that the hon. Member for Glasgow East posed about Colombia, it was Lesotho that approached us to seek a further double taxation arrangement. There were certainly elements within that negotiation where it sought to achieve certain outcomes to which we acquiesced.
The hon. Member for Birmingham, Selly Oak also raised the issue of how the tax treaty will support Lesotho’s development. UK tax treaties are negotiated by Her Majesty’s Revenue and Customs, reporting to Treasury Ministers. DFID is fully supportive of HMRC’s approach. It works with the Treasury on various aspects at various times in these various arrangements. DFID supports the tax authorities in developing countries to increase their capacity to raise revenues, and it works with the Treasury to develop the Government’s tax and development policy. The Government have also set up a specialist tax capacity building unit in HMRC that deploys HMRC staff in support of DFID country offices to provide technical expertise. The point is that, even outside the context of the treaties, the Treasury and HMRC are there alongside DFID in ensuring that we provide support to those countries and recognise the importance that they rightly place on the sustainability and durability of their tax base.
Other Governments have approached the negotiation of treaty arrangements and the process by which they go through Parliament in exactly the same way as we are looking at this today. It is certainly the case that treaties of this nature under the last Labour Government —in the dim and distant past—went through a similar process to that which we are following today.
The hon. Member for Birmingham, Selly Oak raised the important issue of binding arbitration and asked whether it is typical of these kinds of arrangements. In some cases it is; in some cases it has not been. That is because of historical changes that have occurred in this area. The new model agreed under the auspices of the OECD will now make it more normal. The decision taken by Lesotho and ourselves was that it would be appropriate to operate the model set out by the OECD for binding arbitration.
A question was raised about the renegotiation of our existing trade treaties with other nations—those treaties being between the European Union and other countries. It is my understanding that we will not need to do that in the case of those particular treaties.
The hon. Member for Oxford East asked for reports on the effects on the investment and the tax take and so on. Those are immensely complicated questions to answer; it is very complicated to try to assess and determine exactly what the impacts of a double taxation agreement with another country—an agreement with two countries interacting, with all the various externalities that impinge on those circumstances—will be. It is, of course, the British Government’s responsibility to continue to closely monitor those impacts as far as we can. All legal measures, treaties and agreements with other countries are always constantly under review, as the hon. Lady would expect.
I want to clarify one point on binding arbitration. As I understand it, consultations take place between the Government and various stakeholders and interested parties in preparation for the treaty. I am curious to know whether any British companies made representations that they wanted the binding arbitration clause included. If so, would the Minister tell us who they are?
As the hon. Gentleman will appreciate, that is a highly specific question, which I cannot be expected to be in a position to answer at present. I am certainly happy to get back to him. Typically with treaties of this nature, a number of discussions are held with stakeholders, the overseas Governments concerned and so on. That is one reason why such arrangements take a considerable time to come to a conclusion.
The agreement with Colombia—our first with that country—brings a significant improvement to our coverage of the region and will improve the trading conditions for businesses in both countries and aid the fight against tax avoidance and evasion. We have brought forward a mutually beneficial treaty in the case of Lesotho.
I am grateful to the Minister for his efforts to respond to the questions raised. I have some brief points to make on a number of the matters he referred to.
The Minister referred to the UK’s commitment to promote development in lower income countries. One of our main concerns about the Lesotho treaty is that it might not be coherent with the general direction of our aid efforts. I would be interested to know whether DFID was asked to comment specifically on this treaty. It would be helpful to know that.
Secondly, to be absolutely clear, I do not think that any Member has argued against the principle of having double taxation treaties in the first place. Rather, the comment is on the specific issues raised by treaties such as this one. For Opposition Members, the particular issue is the reduction in withholding tax rates and the introduction of mandatory binding arbitration, rather than the principle of having a treaty in the first place.
Thirdly, on the issue of negotiations, aspects of the treaty are surely a step forward. I do not believe the Minister mentioned permanent establishments, but the new rules on those seem to be fairer. A rather peculiar reference in the previous treaty to the tax treatment of loans through the UK Export Credits Guarantee Department is gone. I can understand that Lesotho might have wanted to get rid of strange elements from before, but I am interested to know what its comment was on the changes to withholding rates in particular, because those would seem to pose quite a large risk to its revenue.
On the negotiation, let us be completely frank: we are talking about a country of 2 million people, where the average person is 33 times poorer than a Briton. Are we honestly saying that we can have an equal negotiation? Pointing that out does no disservice whatever to the Lesotho Government—quite the opposite, because it means that we as parliamentarians have a much greater responsibility to scrutinise such agreements more fully. We need that.
On binding arbitration, yes, there is the OECD model, which is being promoted, but there is also the UN model. It would be interesting to know whether that came up in the negotiations at any stage, because most people view it as more favourable to developing nations than the OECD approach.
Finally, on the issue of information and impact assessments, I note that a tax information and impact note is provided for other tax requirements. Surely many tax issues within Britain are incredibly complicated—the Minister has ably discussed such matters in proceedings on the Finance Bill—so I do not see a huge difference there, in particular when UK investment in Lesotho seems to be concentrated in some quite large firms, especially, I understand, two very large mining concerns: Letšeng Diamonds, which is partly owned by the Lesotho state but mostly by a UK-based company, and Firestone Diamonds. We are not talking about a terribly complicated taxation arrangement, so surely it should be possible to have the information we require.
Again, I am grateful to the Minister for his responses and clarifications.
I will endeavour to do my best to answer the additional questions posed by the hon. Lady, some of which were very specific ones about what may or may not have happened during the negotiations. Unfortunately, I was not there. If I had been there and knew the answers, I would share them with her. However, I can perhaps be a little more helpful on some of the other questions.
The hon. Lady asked whether DFID was aware of the discussions. Naturally, it would have been. I say that based on the fact that it has been very publicly out there that the negotiations have been taking place for some considerable time. DFID has not, to my knowledge, specifically requested meetings or interactions at an official level with the Treasury, but had such an interaction been requested I have no hesitation in reassuring her that we would of course have facilitated it promptly and effectively.
On binding arbitration, the situation is as I outlined earlier. It is now based on the OECD model. The hon. Member for Birmingham, Selly Oak asked earlier whether, during the process of consultation around the treaty negotiations, any company had requested that that form of arbitration be brought in. The answer to that is no. To the best of my and my officials’ knowledge, no business came forward and specifically requested that. Of course, it was then entered into jointly as a consequence of the agreement between the two Governments.
The hon. Member for Oxford East asked about tax information and impact notes. That is a fair point, but TIINs typically relate to where taxes, charges and duties are being imposed, and to the effect they have on individuals, companies, families and others. In this case, we are looking at reliefs in the context of a double taxation treaty.
I totally echo the hon. Lady’s powerful comments about the relative wealth of those who have the very good fortune to live in our country, for all its imperfections, compared with those who are less fortunate elsewhere. The Government are very aware of that. I will not re-rehearse the comments I made earlier about our commitment to international development and HMRC’s involvement over and above treaties in trying to alleviate such situations as much as we can. The hon. Lady made a powerful point, which I will certainly take away with me. I commend the orders to the Committee.
Question put and agreed to.
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Colombia) Order 2017.
DRAFT DOUBLE TAXATION RELIEF AND INTERNATIONAL TAX ENFORCEMENT (LESOTHO) ORDER 2017
Motion made, and Question put,
That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Lesotho) Order 2017.—(Mel Stride.)
10 January 2018
The Committee divided:
Question accordingly agreed to.View Details