European Union (Withdrawal) Bill

Lord Kerr of Kinlochard Excerpts

Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th April 2018 Lords Chamber

Moved by

[Lord Kerr of Kinlochard]

43: Clause 8, page 6, line 40, at end insert—
“( ) impose or increase taxation,”

[Lord Kerr of Kinlochard (CB)]

Amendment 43 is in my name and those of the noble Baronesses, Lady Hayter and Lady Kramer, and the noble Lord, Lord Cormack. It would add to the prohibitions in Clause 8(3) a prohibition on increasing or imposing taxation by regulation. There are already similar prohibitions in Clauses 7 and 9 that you cannot impose or increase taxation by regulation made under these clauses.

Noble Lords might have noticed that my fox is ever so slightly shot by the admirable Amendment 47A from the noble Lord, Lord Callanan, which proposes the dropping of Clause 8. I welcome it and many of the government amendments in the group. It is clear that the noble Lord has been listening hard and I am very grateful for the changes he proposes. However, I want to say a word about Amendment 104, which is lurking in this thicket of government amendments and is also in my name and those of the noble Baronesses, Lady Hayter and Lady Kramer, and the noble Lord, Lord Cormack. It would insert the same prohibition against making new taxes or increasing taxes by regulation in paragraph 1(3) of Schedule 4. Schedule 4 is about fees and charges, not taxation. The idea of the amendment is to add a prohibition on eliding from fees and charges into taxes.

When I was young, irresponsible and committing multiple misdemeanours I was sentenced to five years in Her Majesty’s Treasury—a sort of borstal or juvenile detention centre. Now that I am old, irresponsible and committing multiple misdemeanours I have very few memories of the Treasury, but one that stands out clearly is of being in the Box behind the Chancellor of the Exchequer—I was a private secretary—at the time of the Budget speech. At the end of the Budget speech there is an interesting ritual that takes place in silence in the House of Commons, where the Chancellor of the Exchequer and the leader of the Opposition stand up and sit down three times. They are passing the Motions that permit the instant changes of taxes that might be pre-empted. The Chancellor can say something like, “So the price of petrol at the pumps will go up by 5p at 5 pm”. When you go home and look, by God, they did go up. It is an astonishing thing. That is because since 1913, I think, it has been clear that it is not possible to increase taxes or to create a new tax other than by legislation in the House of Commons. That is what happens in that ritual immediately after the Budget: they are passing new taxes for a limited period of three to five months maximum while the Finance Bill goes through the House. The Finance Bill contains these changes and in due course becomes law.

I worry about Schedule 4, which creates the power for Ministers to create public authorities and confer on them the power to impose or create taxes. It seems a fairly fundamental breach of the principle that only Parliament may create or change tax. I am reinforced in this view by the excellent reports from our Delegated Powers Committee, which takes serious exception to the powers in Schedule 4. It points out in its 12th report of this Session, published on 31 January, that the powers are “very wide” and notes that the delegated powers memorandum submitted by the Government spells out that they would enable,

“the creation of tax-like charges, which go beyond recovering the direct cost of the provision of a service … including to allow for potential cross-subsidisation or to cover the wider functions and running costs of a public body”.

The committee comments:

“A ‘tax-like charge’ means a tax. Although regulations under clauses 7 and 9 cannot impose or increase taxation, regulations under Schedule 4 may do so. Not only can Ministers tax, Ministers can confer powers on public authorities to tax. Indeed, they can do so in tertiary legislation that has no parliamentary scrutiny whatsoever”.


The committee concludes:

“Taxation, including ‘tax-like charges’, should not be possible in fees and charges regulations made under Schedule 4. Fees and charges for services or functions should operate on no more than a full cost-recovery basis. Taxation should be a matter for Parliament, a principle enshrined in Article 4 of the Bill of Rights 1688”—


a powerful case, which persuades me.

The Delegated Powers Committee has reported again this week, in its 23rd report, having looked at the government amendments, which I have just welcomed. It remains of the view that,

“taxation, including ‘tax-like’ charges, should not be possible in regulations made under Schedule 4”,

and spells out three or four reasons for that, including the fact that it would offer,

“little consolation to be told that one is being taxed under Schedule 4 rather than under clause 7 or clause 9”.

The prohibitions are clear in the Bill in Clauses 7 and 9, although there was a prohibition that we would have added in Clause 8, had Clause 8 been there, by way of Amendment 43.

However, Amendment 104 seems to make a very valid point which I think the House should hear more about, so I look forward to hearing the Minister’s answer on it. Why do the Government feel it is right to confer on themselves and whatever public authority they wish the power to levy taxes or increase taxes, against what is usually thought to be a fairly fundamental principle of parliamentary control? I beg to move Amendment 43.

[Baroness Ludford]

My Lords, we on these Benches support the points made by the noble Lord, Lord Kerr, who is arguing for consistency throughout the Bill that taxation or “tax-like charges” should be imposed only by primary legislation. That is all I need to say at this stage.

--- Later in debate ---

[Baroness Goldie]

My Lords, I thank all noble Lords who have contributed to this debate as well as those who have worked very constructively with the Government behind the scenes to reach the position we are in today. This is an important group of amendments and, if noble Lords will excuse the football metaphor, I can say that this is an amendment grouping of two halves. In the first half we have Clause 8, where I believe the Government and the opposition’s thinking are aligned, and in the second half we have Schedule 4, where there remains some disagreement.

I will begin with Clause 8, perhaps specifically in response to the points raised by the noble Lords, Lord Kerr and Lord Beith. The Clause 8 power was originally included in the Bill to ensure that the UK’s withdrawal from the EU did not affect its reputation as a nation which honours its promises and respects its international obligations. The power also includes the ability to prevent breaches of international obligations outside retained EU law and to meet any existing obligations requiring an imposition or increase of taxation. This element of the power, in particular, has been the subject of much debate in both Houses, as Amendment 43, tabled by the noble Lord, Lord Kerr, demonstrates.

We were concerned that this power might be necessary to ensure that the UK could continue to comply with all its existing international obligations. As the Bill has progressed through Parliament, the Government have continued to plan for multiple scenarios and it has become clear that there are better and more effective ways to ensure that the Government’s international obligations continue to be met than through the use of Clause 8. Therefore, in line with our policy to take delegated powers only where there is a clear and present need for them, the Government have tabled amendments to remove Clause 8 and the corresponding power for devolved authorities in Schedule 2, Part 2. I am grateful to noble Lords who have indicated that the Government’s proposition has found favour.

Any measures still required to remedy or prevent breaches of our international obligations will be made in other primary legislation—perhaps that reassures the noble Lord, Lord Beith—or under other delegated powers where that is permissible. I think we have now managed to reassure noble Lords that the Government are very sensitive to the points which have been raised in debate in Committee and on Report. As a consequence, the Government do not now think that there is a need for an entirely separate clause in this Bill, hence our amendment to remove Clause 8. Given that, I hope that the noble Lord, Lord Kerr, will be happy to withdraw his amendments in light of the Government’s proposed offer. I hope that this offer demonstrates that the Government are willing to act on the constructive discussions that take place in this House. We try to consider all amendments carefully as long as they do not undermine the primary purpose of the Bill and, where we can, we act upon them where appropriate.

I turn briefly to my noble friend Lady McIntosh of Pickering’s Amendment 47. It has rather interposed itself into this group so I am doing a bit of shuffling of notes here. I might begin with a point raised by the noble Baroness, Lady Smith: my understanding is that once the implementation period ends, the EEA agreement will no longer apply to the UK. I also understand that in triggering Article 127 our legal position remains unchanged. Article 127 does not need to be triggered for the agreement to cease to have effect. I hope that clarifies the points that my noble friend sought clarification on.

[Lord Kerr of Kinlochard]

I agree with the reading by the Minister and the noble Baroness, Lady Hayter, of whether one has continuing membership of the EEA after one has left the EU: one does not. However, I am struck by what the Minister has just said about the moment when one leaves. I am not sure that it is at the end of the transition period. I think it may be at the moment when we leave the EU—in other words, in March next year, not 21 months later. I am not quite sure why the lawyers in the EEA, EFTA and the EU should accept that once we have left the EU we still remain in the EEA.

[Lord Cormack]

Write a letter.

--- Later in debate ---

Without an element of taxation in some of the charging regimes planned under this Bill the charging regime could not be established, and the costs of specialist services described previously would fall on the public purse. Nor could we continue to adjust under the Bill the charging regimes created under Section 56 of the Finance Act 1973 after exit. However, it is important to say that any new fees or charges established under the Bill cannot extend beyond charging or raising fees in relation to a function that a public authority has been granted under the Bill. They therefore cannot be general taxes on the public, or even on a subset of the public. In the light of these observations, I hope that noble Lords will feel able not to press their amendments, and that my noble friend Lady McIntosh will feel able not to press her Amendment 47.

[Lord Kerr of Kinlochard]

I thank the noble Baroness for her response and I look forward to a letter on the EEA/EFTA membership point.

I am left a bit concerned about Amendment 104. There is clearly major disagreement between the Minister and the Delegated Powers Committee on the issue. For me, there is a bigger issue than that here. The European Communities Act 1972 is absolutely explicit that it cannot be used as a basis for taxing. When we take back the powers conferred in the 1972 Act, if we are allowing Ministers under Schedule 4 to set up public authorities that may tax and Ministers themselves to tax, we are doing something new. It is different. I am puzzled about that. I am sad that this amendment, which seems to me to raise a rather important issue, has been placed in a wider group with many other amendments. I wonder whether the Government would like to think a bit further about this before we come to Third Reading.

If the Government are happy with the prohibition in Clauses 7 and 9, why can it not also, for consistency, be in paragraph 1(3) of Schedule 4? It is a very long time since I was in the Treasury—I served quite a short sentence and got let out for bad behaviour—but I still feel that there is an unsatisfactory feature here which we have not quite got to the bottom of. Nevertheless, I beg leave to withdraw the amendment.

Amendment 43 withdrawn.