Finance (No. 3) Bill (Ninth sitting)
Tuesday 11th December 2018
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Finance Act 2019 View all Finance Act 2019 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 December 2018 - (11 Dec 2018)
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question accordingly negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
The Committee divided: - Ayes: 9 / Noes: 10 - Question negatived.
Kirsty Blackman (Aberdeen North) (SNP)
I beg to move amendment 105, in clause 79, page 53, line 26, leave out from “tax” to end of line 28.
This amendment would delete paragraph (b) of section 36A(7), which is being inserted into the Taxes Management Act 1970.
The Chair
With this it will be convenient to discuss the following:
Amendment 139, in clause 79, page 53, line 28, at end insert—
“(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.”
This amendment establishes a de minimis threshold for the extended time limits of £50.
Amendment 140, in clause 79, page 53, line 42, at end insert—
“36B Public register of persons affected by change made by section 36A(2)
It shall be the duty of the Commissioners to publish a register of persons liable to tax by virtue of the provisions of section 36A(2).”
This amendment requires HMRC to create a public register of those paying tax as a result of the extended time limit.
Amendment 106, in clause 79, page 54, line 1, leave out “2013-14” and insert “2019-20”.
This amendment would mean that new section 36A does not apply retrospectively.
Amendment 107, in clause 79, page 54, line 5, leave out “2015-16” and insert “2019-20”.
This amendment would mean that new section 36A does not apply retrospectively.
Amendment 141, in clause 79, page 54, line 6, at end insert—
“(6) The Chancellor of the Exchequer must review the characteristics of persons affected by the changes made by this section to TMA 1970 and lay a report of that review before the House of Commons within six months of the passing of this Act.
(7) A review under subsection (6) must in particular consider those persons in relation to their—
(a) age,
(b) income,
(c) legal status, and
(d) primary language.”
This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 79.
Amendment 142, in clause 79, page 54, line 6, at end insert—
“(6) The Chancellor of the Exchequer must, in respect of each tax year from 2013-14 onwards, review the revenue effects of the changes made by this section to TMA 1970 and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the revenue effects of the main provisions of Clause 79 in respect of each tax year.
Amendment 143, in clause 79, page 54, line 6, at end insert—
“(6) The Chancellor of the Exchequer must review the effects of the changes made by this section to TMA 1970 on incentives on persons to comply with requirements imposed by the Commissioners, whether under TMA 1970 or otherwise, and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effects of the main provisions of Clause 79 on incentives to comply with tax rules.
Clause stand part.
Amendment 144, in clause 80, page 55, line 19, at end insert—
“(6) The Chancellor of the Exchequer must review the characteristics of persons affected by the changes made by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.
(7) A review under subsection (6) must in particular consider those persons in relation to their—
(a) age,
(b) income,
(c) legal status, and
(d) primary language.”
This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 80.
Amendment 145, in clause 80, page 55, line 19, at end insert—
“(6) The Chancellor of the Exchequer must review the revenue effects of the changes made by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review certain characteristics of those affected by the main provisions of Clause 80.
Clause 80 stand part.
Kirsty Blackman
Once again, it is a pleasure to be in the Finance Bill Committee, where everything is calm, smooth, predictable and a little different. However, I hope the Minister will go away from predictability and choose to agree to the Scottish National party’s amendments 105, 106 and 107.
We have tabled the amendments because of representations we received from the Chartered Institute of Taxation’s low incomes tax reform group. On amendment 105, the group believes there is nothing to prevent Her Majesty’s Revenue and Customs from relying on proposed new section 36A(7)(b) to claim, for example, that owing to internal resource constraints, it was unable to make the assessment within the normal time limits, which is the argument used for the introduction of the measure in the first place. That could render the safeguard provided in subsection 7(a) ineffective.
If paragraph 7(b) is to be retained, the low incomes tax reform group recommends that “reasonable” be defined clearly, possibly by the Minister here, but preferably on Report. For example, we consider it reasonable for HMRC to make any assessment no later than within 30 days of receiving the relevant information, rather than, in effect, within a variable time period that potentially depends on the size and complexity of the dataset received. We ask for that provision to be deleted, as the group believes it is unnecessary.
Amendments 106 and 107 would ensure proposed new section 36A did not apply retrospectively. Again, the low incomes tax reform group fails to see how the Government can claim that these rules do not have a retrospective impact, since subsection (5) makes it clear that the changes apply to 2016-16 and subsequent years, or 2013-14 where the loss of tax is brought about carelessly. The original consultation stated in paragraph 4.13 that
“the new legislation will not apply retrospectively”,
so to effect the legislation as intended, subsection (5) should be amended such that the rules apply only from tax year 2019-20 onwards.
We want HMRC to consider carefully the language used in taxpayer communications, to minimise distress to the taxpayer in any communications about the changes. As a minimum, HMRC should provide taxpayers with guidance on any relief that may apply to offset any potential liability, and avoid at all costs language that is not appropriate for a taxpayer who conducts their affairs in good faith.
Amendment 107 is about the retrospective nature of the clause. The Government have talked throughout the Committee about having done what they feel is adequate consultation. We have challenged that many times, and so have the official Opposition. If the Government consult and then do something different from what they consulted on, they need to lay out why or, at the very least, justify why they are doing something different from what they consulted on. If they hold a consultation on something and ask experts to get in touch with the information they think would make the best possible legislation, the Government need to consult on what they intend to do, not make changes to that legislation as it comes through.
I hope the Minister looks carefully at the amendments we have put forward. If he gives reassurances that he will look at this before Report to ensure that the Bill applies as intended, and that it does not have clauses that muddy the waters and apply provisions retrospectively, I would be keen not to push the amendment to a vote. However, that would require the Government to make it clear that they will consider the matter before Report and consider tabling their own amendments so that the tax professionals, who best know how the legislation will be applied, will have comfort that it is workable and will achieve what the Government intended. I will not speak any longer, because I know that the Committee has to move on, but I would appreciate some comfort from the Minister on that issue.
Anneliese Dodds (Oxford East) (Lab/Co-op)
It is a pleasure to see you in the Chair again, Ms Dorries. I agree with many of the comments of the hon. Member for Aberdeen North. I will first speak to our amendments that push in a similar direction to the Scottish National party’s, before moving on to those that highlight other shortcomings of the clause.
To address the effect of the extended time limits on vulnerable taxpayers, our amendment 139 would introduce a de minimis threshold of £50 for the extended time limits, pushing in a similar direction to SNP amendments 105, 106, 107, 137 and 138. It follows the advice of the Chartered Institute of Taxation’s low incomes tax reform group, which raised concerns about the clause. Its written evidence states:
“LITRG remain deeply concerned about the impact of these changes on low income, unrepresented taxpayers.”
Our amendment seeks to restore a sense of balance to the new procedures set out in the clause. Given the serious restrictions on amending this legislation, which we have raised many times in this Committee, we are not able wholly to reform the process, but we think our amendment would improve the clause by making a moderate change that has been requested by groups that have lobbied Committee members. LITRG’s written evidence continues:
“In order to reduce the impact of the measure, the Government should introduce a de minimis threshold for the extended time limits to apply. For example, the approach taken by HMRC in assessing trivial amounts under the Worldwide Disclosure Facility (WDF), e.g. where the net amount due after applicable reliefs is no more than £50, may be suitable.”
Why might a de minimis threshold be necessary? LITRG points out that the changes
“only affect those who have acted non-deliberately and they erode the distinction…between those who take reasonable care and those who are careless.”
It further notes:
“Threatening letters from HMRC cause a great deal of unnecessary distress”—
particularly to vulnerable people who may not understand why they have been contacted. Surely it would be sensible to focus HMRC’s resources on dealing with large-scale tax evasion, rather than on people—especially older people—who may accidentally have failed to pay a very small amount of tax. I hope that the Minister will consider accepting amendment 139 in the spirit in which it was intended: as a genuine improvement that would protect vulnerable people.
Amendment 140 would introduce a public register of companies included under the changes. It relates to Labour’s wider policy, which we have pushed several times in this Committee, of having a public register of offshore trusts. It would be wonderful if the Government decided that they wanted to accept that policy now. Perhaps they will do so in this potentially final sitting. Who knows? We can always hope.
To further address the potential effect on vulnerable people, amendment 141 would require the Chancellor to review the impact of the changes in relation to characteristics including age, income, primary language and legal status. That would help us to better understand how they may affect individuals or organisations, because we need to get a sense of who the measures focus on and who HMRC will be chasing as a result. It is essential that all tax owed is paid, but given the impact on the Exchequer of the large tax breaks and sweetheart deals that the Government have engaged in, it seems unlikely that the measures will affect those who have avoided the largest amounts of tax. It would be helpful if we understood more about that, which is what our amendment pushes for.
In its briefing, LITRG has some interesting information about this point. It says:
“Many people assume that ‘offshore’ tax matters relate only to the wealthy. However, 24% of daily enquiries to the charity Tax Help for Older People in September 2018 were related to the Worldwide Disclosure Facility. The average age of the callers was 76 and they had small amounts of foreign bank interests and/or pensions.”
It continues:
“In our experience and from insight garnered from THOP, the vast majority of taxpayers who have undisclosed liabilities related to offshore investments will want to be compliant upon simply being made aware of the error”.
LITRG also makes a point about accessibility for non-native English speakers:
“Migrants, whose first language is unlikely to be English and who may therefore struggle to navigate the complex rules on the taxation of offshore income and gains, are another group likely to be affected because they are more likely to have offshore investments prior to their arrival in the UK.”
The measures are significant because they change the conventions on how long taxpayers would anticipate having to save information about their tax affairs. The LITRG briefing states:
“The measure adds complexity to the question of taxpayer certainty on when a tax year is ‘closed’ and impacts on a taxpayer’s record-keeping obligations—effectively requiring people to keep records for 12 years just in case they need to make a disclosure to HMRC. This is well beyond the current statutory time limit for keeping records.”
Most of us, I think, would assume that seven years is the normal period for which one would be sure to keep those records, and 12 years is a significant extension. The Government’s equalities impact statement on the proposals makes no attempt to understand how those different individuals would be affected. We think it is necessary for the Government to look carefully at the question.
As to amendment 142 and amendment 145, which pushes in the same direction, more information is necessary about the proposed revenue effects of the clause. We have spoken many times in Committee about the importance of publishing full and transparent information on policy changes, to allow for proper opposition. We have often felt that there has not been adequate scrutiny of the Bill. Of course, I am saying this on the day that was set for the meaningful vote, which has been cancelled, when we were hoping for a chance to scrutinise another area.
The policy papers accompanying the clause point to “negligible” revenue effects from the change, for at least three years, along with some costs, also described as negligible. I have said many times that it is essential that all tax due should be paid, but one must wonder what the Government are doing when they say that there will be only a negligible impact on revenue from the changes, given the scale of the wider tax gap, and the avoidance going on in certain sectors. It would be helpful to have more information about that, so that we can understand why the Government are prioritising in this direction.
We also need an understanding of the measures in relation to incentives to comply with tax rules, which is what amendment 143 would provide for. The issue is once again eloquently set out by LITRG, which states:
“the proposals erode a general feature of the current law that the circumstances leading to the error determine the length of time which HMRC have in order to raise a discovery assessment. The incentive to take reasonable care is therefore reduced under the proposals, because an individual will have the same time limit applicable when they make a non-deliberate error, whether or not that error is careless.”
So it seems that, according to the experts, the changes may make it less likely that HMRC will collect its full due of tax, and that, instead, incentives not to comply will be created. It would be helpful to hear the Minister’s comments on the LITRG assessment. What provisions have the Government put in place to ensure that incentives are not weakened by these measures? If the Government have not put policies and protocols in place, they should accept the amendment and conduct the review the Opposition ask for.
Amendment 145 would apply a review of revenue effects to clause 80, which is similar to what amendment 142 would do. The two clauses need to be taken together, because both impose longer time limits, in relation to income tax and inheritance tax. However, a big area has arguably been missed out—corporation tax. As I understand it, both measures taken together are forecast to raise £15 million in the scorecard up to 2022-23, which is, as I have said, a quite small amount. We feel that that could be because of the decision to restrict this measure to income tax, inheritance tax and capital gains tax, and not to apply it to corporation tax.
That is peculiar, because there was a commitment in the consultation document to potentially apply the extended time limit to corporation tax as well, dependent on the result of the consultation. The consultation document stated:
“given that many offshore structures involve corporate entities, the government is considering, and would welcome views on, applying this proposal to CT”.
Doing so would have made a lot of sense, because there is currently exact alignment between assessing time limits for companies and individuals—four years for innocent error, six years for carelessness and 20 years for deliberate error or fraud.
However, the Government’s response to the consultation, issued this summer, said that, while the extended time period for assessment will apply to income tax, inheritance tax and capital gains tax, the Government would, as a result of feedback, not apply the measure to corporation tax at this stage. That leads to many surprising anomalies. In the future, assuming that these measures are enacted, HMRC will have at least 12 years to investigate the affairs of small, unincorporated businesses involved in offshore transactions, but it will have only four years to do so if identical transactions are undertaken by corporates. A small sole trader or partnership whose business involves offshore transactions will be subject to investigation for at least 12 years, while a huge company such as Google or Amazon that is engaged in similar activities will have finality after just four years, unless fraud or carelessness are involved.
At this stage we surely need to know why the Government decided to reject a longer assessment period for corporation tax. There were only 11 responses to the consultation in total, including from some very large firms that work with very large corporates. The response document stated that
“the majority of respondents were not in favour of applying ETL—
extended time limits—
“to corporation tax (CT) and raised concerns about the possible impact on increasing administrative costs if this was done.”
The document said that “12 years of uncertainty” were
“a particular concern for corporates with complex affairs.”
It added that some existing anti-avoidance measures relating to offshore structures do not apply to corporates—it did not state which ones, and corporates are generally subject to more stringent anti-avoidance rules for offshore transactions than individuals—and that applying them would create inconsistencies.
The response document also noted that respondents were concerned about the 12-year time limit applying to those groups subject to controlled foreign company—CFC—rules, even though such rules are designed to apply only to the most egregious avoidance structures, so not the kind that would be targeted by this measure. The document states:
“CFC legislation applies to corporates and their offshore subsidiaries. The application of a 12 year assessment time limit was seen by the majority of respondents as creating major complications for corporates with CFCs who might need to keep records for each subsidiary for many years as a precautionary measure.”
[Interruption.] Ooh, I am about to be beamed up. Anyway, I will continue. In the light of those concerns, the Government said in the response document that they would not apply the extended time limits to corporation tax.
The rationale offered for extended time limits for income tax, inheritance tax and capital gains tax in the original consultation document was that the existing time limits are inadequate for HMRC to investigate the full facts, because of the complexity of offshore structures. At the same time, the response document says that the reason the measure will not be applied to companies is that the affairs of large companies are so complex that it would represent an unacceptable administrative burden for them to be subject to the same time limits as smaller, unincorporated businesses. I hope the Committee is picking up on some of the paradoxes in this response document.
The response document also asserts that applying extended time limits to companies would create inconsistencies, yet at the moment, as I mentioned, assessing time limits for individuals and companies are aligned. It is this measure that creates the inconsistency by making small businesses subject to new time limits three times longer than those applicable to corporates.
In practice, complex offshore structures are rarely used by small businesses. However, they are routinely employed by multinational enterprises as a way of minimising their tax—for example, the type of structures known to be used by the likes of Google and Amazon that put their profits into territories where no or little tax is paid. Having extra time to investigate the affairs of such companies seems a proper response to their use of these offshore structures, yet they will be unaffected by the new extended time limit rules. On the other hand, small, unincorporated businesses will be subject to them, as well as, potentially, elderly individuals with few resources to draw on to fully understand the complex impact of tax rules.
As well as being unfair, the exception for corporates provides an easy way around the rules. Simply transferring an existing offshore structure into a corporate body means the measure will have no impact. This arguably makes the measures a trap for the poorly advised, while having no impact on those from whom any yield might be expected to derive—multinational enterprises and the wealthy, who can create corporations to avoid potential investigation.
Because of the limits within which the Bill has been set, we cannot directly table an amendment that would push in the direction of including corporates. However, we do ask for a review of revenue impacts because it would enable us to get further into the question of how much revenue this measure could raise as against other measures.
The Financial Secretary to the Treasury (Mel Stride)
It is a pleasure to serve again under your chairmanship, Ms Dorries. I thank the hon. Ladies opposite for their contributions, and I will deal with some of the specific points that were raised and then deal in more general terms with the measures and the amendments.
The hon. Member for Aberdeen North raised the issue of retrospectivity. I can assure her that the Law Officers have confirmed that there is nothing retrospective about the measures in the clause. It is the case that no investigation that has been closed, for example, will be reopened as a consequence of the measures here. At the point that the measures come into effect, no one who is, at that point in time, out of scope of the changes would be brought into scope.
On the issue raised by the hon. Members for Aberdeen North and for Oxford East on consultation, we held a public consultation on the details of the reform on 19 February 2018. The consultation closed on 14 May, and the response to the consultation and the draft legislation were published on L-day, on 6 July.
The hon. Member for Oxford East raised the issue of the de minimis amount and referred to LITRG. It is not true that we are not securing significant amounts from the most wealthy, whether individuals or corporations. For the last year for which we have records, 2017-18, HMRC secured £1 billion in tax from the wealthiest individuals and £9 billion from the largest and most complex businesses operating in the UK—tax that would otherwise have gone unpaid.
The hon. Member for Oxford East also raised at length the important issue of why corporation tax is not included along with inheritance tax and income tax. As she said, we consulted on this aspect at some length. The vast majority of responses did not support extending the measure to corporation tax and raised a number of new practical and legal issues with such an extension. The hon. Lady identified some of them, although I know she was not persuaded by the arguments that were put. However, there were a number of them.
For example, the rules that identify offshore issues were not designed for corporates and would result in a wide range of genuine commercial transactions being caught that were never considered when the rules were originally designed. Tax indemnity agreements on the sale or purchase of businesses could also be affected retrospectively, as a 12-year time limit was never anticipated. The 12-year time limit could create major complications for corporates with control of foreign companies—the hon. Lady spoke about that at length. Some corporates are also subject to other rules, such as the senior accounting officer rule, so it was seen as unnecessary to extend the measure to such companies.
The hon. Lady also specifically mentioned Google and Amazon, or a similar type of business, in this context. She should not overlook the fact that we are right at the forefront of looking at a digital services tax to make sure that those companies pay their fair share of tax in the United Kingdom.
Anneliese Dodds
Will the Minister explain whether those firms were strongly in favour of the measures that have been taken in relation to them and others, such as the diverted profits tax, or whether they have argued against them, potentially in consultations? Is consulting those who may, or whose clients may, have a revenue hit as a result of the measure and only listening to them really the appropriate way to make policy?
Mel Stride
I was making a slightly different point. It was not so much about what the response may or may not have been—I do not know the answer to that, regarding the measure that is under consideration by the Committee—but rather about our push to make sure that just those companies pay the appropriate level of taxation in the United Kingdom. Frankly, I think the businesses themselves want to be seen to be paying a fair level of tax. That is the impression that I get from the Treasury perspective. We are not on the back foot on this; we are very much on the front foot, pushing within both the OECD and the European Union to make sure that we can come up with a multilateral solution, which has particular advantages over going it alone. However, we have made it clear, as the Chancellor set out in the recent Budget, that in the event that there is not a multilateral solution, we will of course act unilaterally by 2020.
Kirsty Blackman
Before the Minister goes on to his next point, can I bring him back to the issue of retrospectivity? I am concerned that the Government’s definition of retrospectivity seems to be different from that of the CIT and the LITRG. Will the Minister write to me with his definition of retrospectivity in advance of Report, so that we can see whether we should press the amendment at that time?
Mel Stride
Yes, of course. I would be very happy to do that and in some detail. As I have already suggested, the general point is that those businesses that would not be in scope of these new arrangements, at the moment that they come into effect, would remain out of scope of these arrangements. That is the important point, I think, but I will certainly write to provide further detail.
My final point is about whether we are going soft on larger businesses, which I think was the overarching implication of the hon. Member for Oxford East. She should bear it in mind that at any one time, about half the 210 largest businesses in the United Kingdom are under active investigation. That does not mean that they are doing anything wrong—it may be far from it—but I sincerely believe that HMRC are very good at making sure that those businesses are thoroughly engaged with, particularly the large ones, because that is where a lot of yield lies.
Anneliese Dodds
We are not talking about whether those large businesses are taxed at all, are subject to new tax measures or are investigated at all. What we are talking about are the time limits for that investigation. There is an anomaly in what the Government are presenting between the time limits for corporates against individuals. Surely that is what needs to be addressed.
Mel Stride
I am reflecting the fact that while corporation tax is not covered by these measures, that is not the same thing as saying that we do not have an appropriate regime overall for making sure that large businesses pay their fair share. I was giving some examples such as the diverted profits tax, common reporting standards and all sorts of things, including base erosion and profit shifting, that the hon. Lady will know feed into that particular argument.
To turn to the generality of the measures, clauses 79 and 80 make changes to help ensure that everyone pays the tax they owe. Individuals under inquiry by HMRC for offshore non-compliance will now face assessment for 12 years of back taxes for income tax, capital gains tax and inheritance tax. It applies only to cases where tax losses arise in respect of offshore matters or offshore transfers.
Those clauses will affect only individuals with offshore structures who are not paying the correct amount of tax. The measure is not retrospective as it does not give HMRC the power to reopen any currently closed cases. It is right and fair that everyone pays the tax they owe. It can take longer for HMRC to establish the facts where offshore non-compliance is involved. In some complex offshore cases, tax cannot be collected as the time limits for HMRC to assess the tax run out before the facts can be established.
The changes made by clauses 79 and 80 will ensure that HMRC is able to deal with offshore cases effectively, where the facts are often difficult to establish. The time limit for assessment by HMRC will be extended for non-deliberate behaviour from four years in ordinary circumstances and six years in cases where there was carelessness, to 12 years. The time limit for assessment will remain at 20 years for deliberate behaviour. This measure will help to prevent individuals from avoiding a full investigation by HMRC because of the difficulty in assessing information on offshore structures and investments.
The new extended time limits will not enable HMRC to assess any tax that can no longer be assessed under current rules at the time the legislation comes into force. That was the point at the heart of the concerns expressed by the hon. Member for Aberdeen North. The new time limits will not apply where HMRC has received information in accordance with certain international agreements from other tax authorities, on the basis that it was reasonable to expect an assessment to be made within the existing time limit. The clauses will raise £30 million by 2024.
Amendment 105 would unbalance the safeguards that ensure that the new time limits only apply if HMRC already has the information to make an assessment and could reasonably make it within the current time limits. If the amendment was passed, HMRC could receive information on a tax compliance case that it would be unable to act on. If, for example, information was provided from overseas immediately before the end of the current time limit, HMRC would be timed out of collecting the lost tax. That could incentivise slow responses from overseas intermediaries when partner jurisdictions gather information in response to HMRC requests.
Amendments 106 and 107 would change the years for which the clause would have effect. Where loss of tax is brought about carelessly, that would change from 2013-14 to 2019-20, and where brought about in any other case from 2015-16 to 2019-20. The amendments would water down the Government’s commitment to tackling offshore non-compliance now and delay, for at least a further four years, the additional time that the provision gives HMRC, so that the time limits would only begin to extend from tax year 2023-24. The Government are clear that the provision should start helping HMRC’s compliance work as soon as possible.
Amendment 139 would insert a de minimis threshold of £50 tax loss before the time limit applied. As currently drafted, the clause ensures that HMRC has the time necessary to conduct complex investigations. It is right therefore that HMRC can collect the tax due, regardless of the amount, once it has been calculated. It would be fundamentally unfair if the de minimis principle applied to offshore cases but not to onshore cases.
Anneliese Dodds
Forgive me, but is there a 12-year time limit for onshore cases for individuals?
Anneliese Dodds
I am grateful to the Minister for very generously giving way again. He said that it would be unfair to create an anomaly between the tax affairs of those with offshore and onshore business, but we have just established that there is not a 12-year time limit for those onshore. Is there not therefore an anomaly?
Mel Stride
This is probably a classic case of me speaking too quickly and the hon. Lady not being given the fair opportunity to digest exactly what I said, which I will repeat, because it is a slightly different point. We are talking about the £50 de minimis, not the 12-year extension. I will reiterate exactly what I said for the hon. Lady’s benefit, so she is absolutely certain that I am not bamboozling her on this point. I said that it is right therefore that HMRC can collect the tax due, regardless of the amount, once it has been calculated. It would be fundamentally unfair if the de minimis principle—I am referring to the £50 threshold—applied to offshore cases but not to onshore cases. In other words, it is her amendment that would create the anomaly.
Anneliese Dodds
I thank the Minister for allowing me to comment on this again. We are surely talking about very different cases. One deals with the normal process of tax collection and investigation, which most individuals assume would apply for seven years, and people need to keep papers for that long. The other is fundamentally different, and deals with the extension of the time limit to 12 years. If we were to do that onshore, then we may also wish to introduce a de minimis for that process, which would, as his measure introduces, go back between seven and 12 years. That is a point that needs to be made.
Mel Stride
I sense that the hon. Lady might have accepted my earlier point that my reference was actually to the £50 de minimis rather than the time limit. She has now introduced another argument, which she prosecuted during her opening remarks—that somehow we should not have a difference in the amount of time to investigate such matters pertaining to whether they are offshore or onshore-related. The whole crux of what we are doing rests on the, I think, fair belief that offshore transactions are less transparent. Those situations are more complicated and often involve dealing with different jurisdictions and intermediaries in order to establish the information that is required for HMRC to carry out its duties. That lies at the heart of why there should be a longer period for offshore entities than for those that are onshore.
Anneliese Dodds
I was talking about the application of a de minimis. I was trying to say that, if the Government were looking, for example, to extend the investigation period for domestic tax affairs beyond the existing time limits, they might even wish to consider a de minimis of £50. I was cognisant of the de minimis—my confusion was caused by the Minister’s remarks. He seemed to suggest that having a de minimis only in relation to offshore tax affairs and not to domestic affairs would be peculiar. We are talking about a de minimis only in those cases of that very long period, not in relation to general tax affairs. I would never say that we should have a de minimis on tax generally, which would mean that we could not pay tax on anything—VAT and so on. That is not what I suggested at all.
Mel Stride
This is probably a discussion for another day, in the sense that the hon. Lady is asking that, in the event that we revisit the issue of the time limits for onshore investigation, we should on that basis consider her amendment anew, because it might dispense with the different treatment between onshore and offshore. We might come to that in another world on another occasion, in another Finance Bill.
I am anxious to make progress—the hon. Member for Bootle sits there looking like he has got all day, but we have to make progress. Amendments 141, 142 and 143 on clause 79, and amendments 144 and 145 on clause 80, would require the Government to review the impact and effectiveness of the clauses within six months of the passing of the Act. Such reviews, however, would not have the intended effect: no data in relation to the characteristics of persons affected, the revenue effects of the changes, or the effects of the changes on incentives on persons to comply, will be available after six months. That is because it is unlikely that a full assessment of any relevant cases will be conducted within the six months after Royal Assent. Thus a report would likely be impossible or meaningless.
On that basis, I commend the clauses to the Committee.
Kirsty Blackman
If the Minister writes to me with the comments about retrospectivity, it may be that we will not press our proposal to a Division on Report, but I will not press it now in anticipation of receiving that letter.
Anneliese Dodds
I appreciate the Minister’s remarks, but we believe there is still an anomaly, and we remain concerned about the potential treatment of elderly taxpayers and so on. We will press our amendments to the vote.
Kirsty Blackman
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 139, in clause 79, page 53, line 28, at end insert—
‘(7A) But an assessment under subsection (2) may not be sought by the Commissioners unless they are satisfied that the liability to tax is in excess of £50.’—(Anneliese Dodds.)
This amendment establishes a de minimis threshold for the extended time limits of £50.
Question put, That the amendment be made.
Anneliese Dodds
I beg to move amendment 146, in clause 81, page 55, line 39, at end insert—
“(3A) No regulations may be made under this section unless the Commissioners have issued guidance on the conditions necessary for an officer of Revenue and Customs to be satisfied that the requirement for security is necessary for the protection of the revenue (for the purposes of the provisions of regulations made in accordance with the duty in subsection (2)).”
This amendment would require the Revenue and Customs Commissioners to issue guidance on how it is determined that security is necessary for the protection of the revenue.
The Chair
With this it will be convenient to discuss the following:
Amendment 147, in clause 81, page 56, line 25, at end insert—
“(3A) No regulations may be made under this paragraph unless the Commissioners have issued guidance on the conditions necessary for an officer of Revenue and Customs to be satisfied that the requirement for security is necessary for the protection of the revenue (for the purposes of the provisions of regulations made in accordance with the duty in sub-paragraph (2)).”
This amendment would require the Revenue and Customs Commissioners to issue guidance on how it is determined that security is necessary for the protection of the revenue.
Amendment 148, in clause 81, page 56, line 44, at end insert—
“(4) The Chancellor of the Exchequer must review the effects of the changes made by this section on the construction industry and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effects of the provisions of Clause 81 on the construction industry.
Clause 81 stand part.
Anneliese Dodds
The overall aims of the clause appear sensible, providing HMRC with powers to make secondary legislation to require a person to provide security for corporation tax liabilities and construction industry scheme deductions that are or may be liable to HMRC. Under the clause, failure to provide security when required will be a summary offence and a person who has committed it will be subject to a fine.
As I understand it, securities may be required where a taxpayer has a poor compliance record, and in phoenix-type cases where a business accrues a tax debt, goes into liquidation or administration and the person responsible for the operation of the business sets up again, with the risk of running up further tax debts. Sadly, we have seen far too many of those cases.
The measure is effectively an extension of HMRC’s powers to require security in relation to some areas of business tax—the powers it has currently—to include VAT and PAYE, as well as national insurance contributions, insurance premium tax and some environmental and gambling taxes.
The Government maintain that the clause will be specifically targeted at the minority of businesses that seek financial gain from non-compliance with their tax obligations rather than those that are genuinely unable to pay. They argue that it will not affect those who are managing their debts with HMRC under agreed time-to-pay arrangements with which they are complying—we have touched on that subject previously.
The Government argue that the power will apply only where an HMRC officer considers that the provision of a security is necessary to protect revenue. None the less, we believe that the changes merit further scrutiny, and therefore have tabled a number of amendments.
Amendment 146 seeks to introduce a requirement for HMRC officials to issue guidance on their use of securities to protect revenue. It is a probing amendment that seeks to clarify the circumstances under which a security will be requested for revenue protection. We do not in principle object to the measures being taken to protect revenue—they appear essentially sensible—but we seek to understand better the scope offered to HMRC officials in making such a judgment or, conversely, the guidance they are offered by the Department in making such a decision.
Will the Minister clarify what guidance will be offered and undertake to publish it later? After all, in the Government’s consultation, the feedback was pretty clear. The feedback document stated:
“Most respondents wanted to see clear guidance put in place to support the introduction of the securities and ensure that securities will only be used where it’s appropriate and proportionate to do so. Two thought that legislation should be expanded to provide the rules under which the securities regime should operate.”
How have the Government responded to that point? It is clear that more transparency is needed.
With amendment 147, which follows the previous one, we are likewise seeking to determine what guidance HMRC commissioners would receive. As I said, we do not object in principle to the use of securities to protect tax revenues; we simply seek to understand how and when they will be applied and whether the guidance is determined by Government policy or subject to the discretion of officials. I hope the Minister will either provide that information to the Committee or accept our amendment, which would ensure that further information is provided before these powers are enacted.
The policy papers relating to the clauses suggest that that is necessary. They state:
“Experience from the existing securities regime has shown that, when used in a carefully targeted manner, securities can be very effective in changing the behaviour of non-compliant businesses and protecting future revenues against the risk of non-payment. Currently these powers apply only to certain taxes and duties.”
We need to understand how these powers will be targeted and which criteria will be used. I hope the Minister will respond to that reasonable request.
Through amendment 148, we seek to understand how the new measure will affect the construction industry. As I said, this is an extension of the security deposit legislation to the construction industry scheme and companies chargeable to corporation tax. The documents on the impact of the policy do not discuss the construction industry in detail. The expectation should be that anyone avoiding tax should pay, but it is clear that providing a security could reduce capital stock in some companies, so we need a sense of the impact on those who may be required to pay a security. Again, that was reflected in the Government’s consultation, which stated:
“Several respondents commented specifically on the implications for insolvency and commented that HMRC should give careful consideration in cases where viable businesses were struggling financially and a security could force the business into insolvency. Similarly, respondents did not want the use of securities to limit the rescue environment for financially distressed businesses. One respondent suggested that before extending the security deposit regime, HMRC should commission independent research into its current approach and the effect that demands for a deposit have on struggling businesses.”
The context is that HMRC has lost a large number of its experienced staff, who might have had expertise in security regimes in relation to other taxes. Therefore, we need to know what the impact is likely to be on businesses that may have to deal with HMRC officers who have less understanding of the construction industry than previously would have been the case.
Finally, I note that we are informed by the tax information and impact note that HMRC will need to make changes to its IT systems to process the new security cases. The cost of the changes is estimated to be in the region of £840,000. It will also incur operational costs currently estimated to be in the region of £5 million. Those costs seem fairly high to me. I hope the Minister will explain why they are of such a significant magnitude.
Kirsty Blackman
Very briefly, if the Labour party chooses to press these amendments to a vote, we will support it, because we think that what it is trying to achieve is very sensible.
Mel Stride
I thank the hon. Member for Oxford East for her questions, most of which I will come to in my general statement on the clause. It is good to hear that she broadly welcomes the general thrust of what we are doing. I think she said that amendments 146 and 147 are probing amendments, and raised various issues about the guidance. Of course, those who are to be affected by the measures will have a right of appeal—they will be able to go to a tribunal to dispute the imposition of advance payments. During the period of dispute, the payment is not required to be made. That is an important point. They will also be invited to comment with HMRC—and have a right to do so—on the proposed level of payment being sought during the process by which it is determined. If their circumstances change at any point in the process or thereafter, that is an opportunity for further discussion and potentially change in the amounts that might be involved. I will pick up one or two other points on guidance in my general remarks.
Anneliese Dodds
In the light of the Minister’s response, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 81 ordered to stand part of the Bill.
Clause 82
Resolution of double taxation disputes
Kirsty Blackman
I beg to move amendment 137, in clause 82, page 58, line 9, leave out from “section” to “may” in line 10.
This amendment provides for all regulations under the new power to be subject to the affirmative procedure.
The Chair
With this it will be convenient to discuss the following:
Amendment 138, in clause 82, page 58, leave out lines 13 to 17.
This amendment is consequential on Amendment 137.
Amendment 149, in clause 82, page 59, line 15, at end insert—
“128D Review of effects of EU withdrawal
(1) The Chancellor of the Exchequer must review the expected effect on the exercise of the power to make regulations under section 128A in the event that—
(a) the UK leaves the European Union without a negotiated withdrawal agreement,
(b) the UK leaves the European Union following a negotiated withdrawal agreement.
(2) The Chancellor of the Exchequer must lay a report of the review under subsection (1) before the House of Commons within two months of the passing of the Finance Act 2019.”
This amendment would review the impact of the main powers under clause 82 in the event the UK leaves the EU under (a) no deal or (b) a withdrawal agreement.
Amendment 150, in clause 82, page 59, line 15, at end insert—
“128D Review of revenue effects of section 128A regulations
On each occasion the Treasury exercises the power to make regulations under section 128A, the regulations (or, as the case may be, the draft regulations) must be accompanied by a statement by the Chancellor of the Exchequer of the expected revenue effects of the regulations.”
This amendment would require any regulations to be accompanied by a statement on expected revenue effects.
Clause stand part.
Kirsty Blackman
I will come to amendments 137 and 138, but first I would like to speak briefly to Labour amendments 149 and 150.
We have seen the complete and total shambles over the past 24 hours—and not just over that period, but over the past two years. The past 24 hours have highlighted where we are in relation to EU withdrawal. Various people are suggesting that no deal is more and more likely, so it is incredibly important we know the potential effects of any changes that the Government propose to make to legislation in the event of a negotiated deal or no negotiated deal. We have a clear idea of the effect of retaining the status quo, which is the Scottish National party’s preferred position, and the revenue effects would be much easier to calculate. We are comfortable supporting Labour’s amendment 149 on that subject and amendment 150, which is about the expected revenue effect of the regulations.
I turn to the two SNP amendments. Amendment 138 is consequential on amendment 137, so I will focus on amendment 137. Given what has happened in recent times, trust in the Government is possibly at its lowest ever point. We are being asked to agree to give the Government power to make changes without going through proper scrutiny procedures. The Government are basically asking us to trust them, and we feel that we cannot trust pretty much anything they say right now, so more scrutiny is sensible.
When people who support leave talk about the European Union referendum and Brexit, they talk about taking power away from faceless bureaucrats in Brussels and returning it to Parliament. A lot of the legislation that is being considered just now does not return that power to Parliament in any meaningful way, and it does not allow Parliament proper scrutiny of the range of things that could come through. We are talking here about just one small area, but that problem has been highlighted in a huge number of things that have come out of the European Union (Withdrawal) Act 2018. There is massive concern from members of the general public, who now understand what Henry VIII powers are—we are in unprecedented times. There has been a power grab from the Scottish Parliament, and this is one more small thing the Government are trying to do to take power away from where it should sit.
Given that the Government cannot command a majority in the House; given that they folded on SNP amendments to the Bill—that was, clearly, because the SNP amendments were wonderful, rather than because the Government did not have a majority—and given that they cannot get legislation through, the level of Executive power needs to be tested. We need to make the Government use their majority if they want to get powers through the House, rather than relying on the fact that because they are the Government, they can do what they like. That is why the SNP has tabled amendment 137, which would require the Government to ensure that more of the regulations made under clause 82 go through the proper scrutiny procedure, rather than relying on the Treasury to make some of them without proper scrutiny.
Anneliese Dodds
I will speak briefly to the clause. The hon. Lady has set out the SNP’s reasons for tabling amendments 137 and 138. The official Opposition agree with those reasons, and it seems highly sensible to require regulations to be subject to the affirmative procedure. We have argued for that consistently in relation to our future relationship with the EU and the no deal process. We are concerned about the wholesale power grab that unfortunately appears to be continuing apace. We would support SNP Members if they decided to press their amendments to a vote.
We have tabled two amendments, and I am pleased to hear that the SNP support them. Under the Prime Minister’s proposed withdrawal agreement, the UK would initially, at least, continue to align itself with EU regulations, but little information has been provided alongside the clause to indicate how the Prime Minister’s Brexit deal would impact on Council directive 2017/1852, particularly if there was divergence later on. Similarly, the Treasury’s policy note offers no guidance about whether the EU’s resolution mechanism would be upheld for all future double taxation disputes in the event of a no deal Brexit.
That is of a piece with the general lack of information about the Government’s anticipated future relationship on tax matters with the EU. I have consistently asked whether we would seek to be a member of the code of conduct group, for example, and I have had no indication of the Government’s views on that matter. With that in mind, the Opposition have tabled amendment 149, which would require the Chancellor to publish a review of the impact of the powers under clause 82 in the event that the UK leaves the EU under a no deal Brexit or under the current withdrawal agreement—or whatever it becomes. It is unclear whether it will be changed or whether assurances will simply be produced in relation to it. Whatever happens, we may or may not be voting on it at some point, hopefully in the near future. Amendment 149 would require the Treasury to offer a clear indication of how the EU’s dispute resolution mechanism for double tax disputes would be maintained, and the likelihood of the different possibilities.
Amendment 150 would require the Chancellor to undertake a review of the revenue effects of the measure. The Treasury policy note states that the measure will raise no revenue and will have no economic impact on taxpayers. That is rather hard to believe, given that even the most benign change to the tax system can have far-reaching and unseen consequences. They may be unpredictable, but surely it would be better to say that than to say that the change will have no impact. The Chancellor would therefore be required to outline in the review the possibility of any unforeseen economic impacts, and the revenues that are likely to be raised from this measure after the Treasury makes regulations to use the powers.
Sir Robert Syms (Poole) (Con)
Had we had a meaningful vote today—we are not going to have one—I would have voted with the hon. Members for Oxford East and for Aberdeen North. However, I find it a little strange that those who intend to vote against the agreement should criticise the Government for a no deal Brexit, because ultimately that is not the Government’s position.
There are about 800 statutory instruments for leaving the European Union. About 600 of them are negative, and a hundred and something are affirmative. It is perfectly possible for the Opposition to pick any number of negatives to pray against. If the Opposition have a problem with something, they can pray against it when it appears on the Order Paper and get a debate. There is a remedy for hon. Members’ concerns, but the reality is that so many of these things are modest and technical, and there are more important matters of principle for us to discuss. I do not think we want to spend a lot of time in this Committee or others debating minor, technical issues.
Kirsty Blackman
I am on the European Statutory Instruments Committee, as are other Committee members. Sifting the proposed negative statutory instruments and changing some of them into proposed affirmatives has been a really interesting and useful process, which has shown us that the Government do not always make the right decision. Something like that for the long term would probably allay some of our concerns.
Sir Robert Syms
I come back to my basic point that there are certain matters of principle that are good for parliamentary debate, and there are minor, technical matters, such as those dealing with the Inland Revenue. I am not sure that debating the latter would bring much to the sum of human happiness. I also make the point that, although the Conservative party does not enjoy a majority in the House of Commons, the Scottish National party does not enjoy a majority in the Scottish Parliament, so we are all sort of in the same boat.
Peter Dowd (Bootle) (Lab)
I take the hon. Gentleman’s point about technical matters and grander principles. However, given that the Government have not allowed us to amend the law in any significant way, the Committee is left at this point poring over the detail—the grander principles are being brushed aside by the Government. We are unable to scrutinise the Bill at the grander level or at the specific level.
Sir Robert Syms
The hon. Member makes his own point. We have discussed Budgets and Finance Bill Committees before. The Bill has been on the Floor of the House and will go back there. There will be endless debates, and I am perfectly sure that he and his formidable Front-Bench team will be able to make their points when the Bill goes back to the House. Ultimately, the Government have taken a perfectly pragmatic view, and I look forward to the Minister’s reply.
Mel Stride
An interesting observation: as soon as “EU” appears in a clause, we suddenly have more interest from the Committee than for other measures. Ms Dorries, I will endeavour not to stray into too much detail around the pros and cons of the current deal and the White Paper and all that kind of stuff, and will stick to the clause.
The clause enables the Government to make changes to bring into force the regulations and administrative provisions necessary to comply with the EU directive on tax dispute resolution mechanisms within the European Union. Double taxation arises when the same profits are taxed twice by two different tax authorities. It can create serious obstacles for businesses operating across borders by creating excessive tax burdens, leading to inefficiencies and an economic disincentive to trade. An effective tax dispute resolution system can help to alleviate double taxation.
The UK is a signatory to the convention on the elimination of double taxation in connection with the adjustment of profits of associated enterprises within member states of the European Union, known as the arbitration convention. The UK has also entered into bilateral tax treaties with every EU member state for the purpose of eliminating double taxation. Following a review, it was concluded that the mechanisms currently provided for in bilateral tax treaties and the arbitration convention might not achieve the effective resolution of double taxation disputes between member states in all cases in a timely manner. Consequently, the directive was adopted to build on existing systems. The UK supported the aims of the directive and agreed the adopted text in 2017.
The powers contained within the clause are necessary to enable the Government to introduce secondary legislation to implement the directive. Some proposed amendments would apply the draft affirmative procedure to all regulations made under the clause. As it stands, the Bill ensures that the scrutiny procedures applying to the exercise of each power are appropriate and proportionate. The primary purpose of these powers is to give effect to an EU directive that has already been published. The exercise of the powers will therefore be a largely technical exercise—a point made by my hon. and gallant Friend the Member for Poole (Sir Robert Syms), who also raised the important point that Committee members who wish to further debate a negative SI can of course can pray against it—to transpose the agreed text into UK law. It would not be appropriate to apply the affirmative procedure to all the regulations.
An amendment has also been tabled that asks for a review of the effect on the exercise of the power contained in the clause of the UK leaving the EU with or without a negotiated withdrawal agreement within two months of the Finance Act 2019 being passed. The Government’s intention is for a negotiated withdrawal agreement to apply to the UK, and therefore an implementation period, so that we can use the powers in the clause to implement the EU directive. As a responsible Government, we are also planning for the unlikely event of leaving the EU without a deal. Given the reciprocal nature of double tax dispute resolution, it is difficult to see how legislation implementing the directive can work in a no-deal scenario, but we do not think it would be beneficial to commit to producing a report so close to EU exit, and before the transposition deadline of the directive in June 2019.
A further amendment asks for a statement by the Chancellor on the revenue effects of the exercise of the power under the clause. The Government intend to publish a tax information and impact note for the draft regulations. That will include an assessment of the expected revenue effects of the regulations. I am pleased to say that my hon. and gallant Friend the Member for Poole thoroughly approves of the tax information and impact notes regime which, as he knows, is rigorous and helpful. As a result there will be no need for the Chancellor to make an additional statement to the House.
Kirsty Blackman
I do not have much to add other than that I still want to press amendment 137 to a vote.
Anneliese Dodds
Briefly, the Minister referred to TIINs. I wonder whether, for the next Finance Bill, he will commit to ensuring clear linking from the Bill website to the different TIINs so that we can quickly see which one applies to each clause. It has been quite a waste of time having to search for them randomly.
As to the question whether the provisions should be examined using the affirmative procedure or should have to be prayed against using the negative procedure, I take on board the points made by the hon. Member for Poole. However, we all know that, when measures are dealt with by the affirmative procedure by default, much greater attention needs to be given to them. That is the reality. Generally, I fear that attention is not always paid to matters that may superficially appear technical but that, when one delves into them, may be discovered to have a concrete impact on different groups. Even with the affirmative procedure, the level of debate on taxation matters has, I would argue, traditionally been quite limited. I note that, for the first time in Parliament’s history, we have recently had votes in relation to tax treaties. I was pleased that we motivated those votes, yet UK tax treaties with other countries have never been subjected to proper scrutiny in the House.
Many matters covered by Delegated Legislation Committees are not purely technical. In fact, this has been talked about by my hon. Friend, who represents Leeds—help me out. [Hon. Members: “Stalybridge!”] I am sorry, I am not great at the memory game. In talking recently about some of the no-deal planning, my hon. Friend the Member for Stalybridge and Hyde has been talking about the potential for some of those measures to have such a significant impact that the Government themselves are not au fait with it. Given the time allotted, they seem to expect the Opposition to pass them with a rather cursory glance. I am afraid, therefore, that the suggestion that we already have a failsafe system for dealing with some of those significant matters is simply incorrect, so if the SNP presses amendment 137 to the vote, we shall support it. However, we will not press our amendments.
Mel Stride
Perhaps I may quickly respond, Ms Dorries, just to say that on the important matter of the TIINs, and the link from the website, I know that the hon. Lady raised that on a previous clause, and I should be happy to look into it for her. If she has any specific ideas that she would like to put to me in that respect, I should be grateful to receive them.
Finally, on the matter of negative SI procedure, and prayers against such measures, in the event that we have an effective, strong, organised, united and well led Opposition, I am sure that that will not be beyond them.
Question put, that the amendment be made.
Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)
I beg to move amendment 151, in clause 84,page 62, line 5, at end insert—
“(11) The Chancellor of the Exchequer must review the effectiveness of the remedy introduced by this section, together with section 85, and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effectiveness of the new statutory remedy one year after its adoption into law.
The Chair
With this it will be convenient to discuss amendment
Amendment 152, in clause 84, page 62, line 5, at end insert—
“(11) The Chancellor of the Exchequer must review the expected effect of the remedy introduced by this section, together with section 85 on corporation tax receipts and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the impact of the new statutory remedy on corporation tax receipts.
Clause stand part.
Clause 85 stand part.
Jonathan Reynolds
It is lovely to see you in the chair again today, Ms Dorries. I will speak to clause 84 and our amendments which, as you described, also cover clause 85, which is a supplementary clause.
Clause 84 relates to a somewhat historic issue—the payment of advance corporation tax known as ACT. ACT was payable when companies distributed dividends to shareholders before main corporation taxes were due. These payments could then be offset in profit and loss calculations potentially to reduce the overall tax bill. ACT was abolished under Gordon Brown’s tenure as Chancellor in 1999 to prevent its abuse mitigating revenues to the Exchequer, and to encourage reinvestment rather than excessive dividend payments.
However, there are some legacy cases relating to ACT claims. The clauses are the result of a legal judgment from the Supreme Court test case that impacts those claims—that of Prudential Assurance Company Limited and HMRC on 25 July 2018. This case gave rise to a number of judgments in relation to ACT. I will not read it in full—
Jonathan Reynolds
I know. Prudential put the case that it was entitled to compound rather than simple interest on the repayment, given that some of the tax that was levied, it claimed, was in breach of EU law. However, the Supreme Court disagreed with this analysis and subsequently found in favour of HMRC. The amounts at stake are very significant—they were listed as £4 billion to £5 billion according to media reports at the time. Therefore, the Supreme Court decision is clearly welcome when public finances are under such severe pressure.
The test case has helped to clarify outstanding issues relating to ACT. It is important that the Statute book reflects this decision and is fully up to date to remove any uncertainty for taxpayers with historic claims. It is an additional bonus that the Supreme Court decision has not created a further liability for HMRC in repaying compound interest.
However, we must be clear whether this change, while it relates to a legacy tax, will have any impact on current taxation matters. This is especially pertinent when it relates to corporation tax receipts.
Labour has tabled two amendments. We may not necessarily press them to a Division, but they will be useful to our discussions. Amendments 151 and 152 would, respectively, call on the Government to review the effectiveness of this new statutory remedy one year after its adoption into law and review its impact on corporation tax receipts. These reviews would play an important role in judging the overall impact of the judgment. As I have outlined, the liabilities at stake are very significant. It is essential that we have a clear understanding of whether the provision will give rise to any changes in revenue collection. I call on Members to look at the amendments and ensure we have the clarity and transparency needed to scrutinise the measure in full.
Is the Minister aware of any further issues that may relate to historic ACT claims that we should be aware of? Given that the numbers at stake are so large, we seek reassurance that no other potential liabilities could arise for HMRC in relation to legacy challenges.
Mel Stride
I thank the hon. Gentleman for his contribution. On his specific question of whether any other issues related to ACT might give rise to liability to HMRC, I am not immediately aware of any, but I will write to confirm whether that is the case.
The advance corporation tax or ACT system, which was repealed as long ago as 1999, has been found to be unlawful in certain circumstances. Clauses 84 and 85 provide a new legal remedy for claims against HMRC in limited circumstances. A number of cases involving ACT have been argued before the courts over a lengthy period. This litigation continues but it is now clear that some ACT was paid unlawfully.
Earlier this year, the Supreme Court overruled an earlier decision of the House of Lords from 2007. That has created uncertainty as to what remedies might be available where unlawfully paid ACT was repaid or set against corporation tax before claims against HMRC were started. The law requires that in those cases there needs to be a remedy. The courts are able to consider that but, given the uncertainty, it is desirable for Parliament to consider what that should be in order to provide a fair and balanced outcome.
Jonathan Reynolds
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 84 ordered to stand part of the Bill.
Clause 85 ordered to stand part of the Bill.
Clause 86
Voluntary returns
Jonathan Reynolds
I beg to move amendment 153, in clause 86, page 64, line 45, at end insert—
‘(9) The Chancellor of the Exchequer must review the effectiveness of the changes made to the Taxes Management Act 1970 and the Finance Act 1998 by this section and lay a report of that review before the House of Commons within one year of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effectiveness of the provision for voluntary tax returns.
The Chair
With this it will be convenient to discuss the following:
Amendment 154, in clause 86, page 64, line 45, at end insert—
‘(9) The Chancellor of the Exchequer must review the revenue effects of the changes made to the Taxes Management Act 1970 and the Finance Act 1998 by this section and lay a report of that review before the House of Commons within six months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the effectiveness of the provision for voluntary tax returns.
Amendment 155, in clause 86, page 64, line 45, at end insert—
‘(9) The Chancellor of the Exchequer must review the resources that Her Majesty’s Revenue and Customs needs to implement the measures in this section relating to tax returns delivered otherwise than in pursuance of a requirement to do so and lay a report of that review before the House of Commons within two months of the passing of this Act.”
This amendment would require the Chancellor of the Exchequer to review the HMRC resourcing needed for the provision for voluntary tax returns.
Clause 86 stand part.
I call Anneliese Dodds to move amendment 153—[Interruption.] I am sorry: Jonathan Reynolds.
Jonathan Reynolds
Thank you, Chair. The most exciting clauses have been taken from me. I am very grateful to have been allowed to take this on voluntary returns. On occasion, individuals submit returns to HMRC before a statutory notice requiring the return has been delivered. That applies to many different types of individuals, including those carrying out an income tax self-assessment, and individuals on PAYE who believe they are due a return.
HMRC has historically accepted such returns, given that it would be a considerable drain on resources to reject them and ask taxpayers needlessly to resend them. However, following a ruling by the first-tier tribunal in April 2018, it has been decided that that policy is not supported by law. Therefore, to ensure that the practice can continue, we understand the clause will bring about the legislative change needed so that the position is supported in law. An HMRC appeal is under way because it is possible that this could invalidate historical returns if it is refused by a higher court.
We are talking about significant numbers of returns, as was revealed during the tribunal hearing by HMRC. The Government receive about 350,000 returns of this type each year. Those are in the main from PAYE taxpayers who do not need to complete the self-assessment return but who are seeking a repayment. In its statement accompanying the case, HMRC stated:
“This policy provides a mutually beneficial administrative arrangement for customers and HMRC. The alternative would be that HMRC would have to reject returns submitted voluntarily, issue a formal s8 notice and the customer would have to resubmit the return. This would add unnecessary administrative burdens to both customers and HMRC, causing unnecessary delay in HMRC processing returns, claims and repayments.”
As part of the ambition to put the customer at the heart of what HMRC does, it has introduced a simple assessment for 2016-17 onwards, to enable HMRC to send customers with straightforward tax affairs a simple assessment notice of their liability, without the need for them to resubmit a self-assessment return. It expects that this will significantly reduce the number of voluntary returns it receives each year, and PAYE customers who are not already in self-assessment will not need to complete a self-assessment tax return to get a refund. HMRC also has long-term plans to abolish annual tax returns as part of the Making Tax Digital strategy.
As we are near the end of the Committee, I do not think we need to go through the long history of issues relating to Making Tax Digital, but we have made these points many times before, both in this Committee and in previous Finance Bill Committees. For smaller businesses, Making Tax Digital will add a significant reporting burden by requiring them to switch from one report a year to four. Making Tax Digital will still be being implemented in April 2019, coinciding with our departure from the EU, and putting a significant compliance burden on businesses if there are also VAT changes.
In addition, according to HMRC’s own figures, a shocking 4 million calls to HMRC went unanswered in 2017. As my hon. Friend the Member for Bootle said in the previous Finance Bill Committee, if people call up to pay their taxes, they should be able to get through. Given that the deficit has not yet been eliminated, one would think that the Government would welcome people voluntarily ringing up to pay more tax. Therefore, this change to legislation seems sensible. It would avoid any further costs or administrative pressures on HMRC at an already challenging time for the organisation. I can only imagine the enormous burden it would present if the historical treatment of 350,000 returns was judged to be invalid.
We need more insight into how HMRC resources might be affected to ensure that this measure does not have any unintended consequences. Therefore, Labour has tabled three amendments to give us the information needed to assess this properly. Amendment 153 would require the Government to review the effectiveness of this provision for voluntary tax returns within one year. It seems that the process of submission for voluntary tax returns is working reasonably effectively at present. This review would allow us better to understand whether moving into a more formal framework has any potential negative impacts.
Amendment 154 would allow us to make the same assessment, but with regard to the effects on revenue. If the provision has any impact on tax collection, it is important that it is quickly identified and remedied.
Finally, amendment 155 would require the Government to review the HMRC resourcing needed for the provision of voluntary tax returns by publishing a document to that effect within one year. As I have outlined, HMRC has faced severe cuts at a time when demands are increasing across several fronts—particularly as the UK leaves the European Union. Therefore, it is critical that we understand whether there will be any further draws on HMRC resources over the course of the provision’s implementation. I urge hon. Members to support the amendments and Labour’s efforts to guarantee that we have an HMRC that functions effectively, both for taxpayers and for tax collection.
Mel Stride
Clause 86 makes changes to HMRC’s ability to treat tax returns sent involuntarily like any return on a statutory basis with retrospective and prospective effect. It is necessary because these returns have been accepted and treated in the same way as any other tax return received by HMRC for more than 20 years using its collection and management powers. However, a tax tribunal ruled earlier this year that this policy was not supported by the law.
HMRC receives about 600,000 voluntary tax returns each year. They are voluntary because they are made without any requirement or request from HMRC to do so. People in businesses send them in because they want either to pay tax or to make tax repayment claims. HMRC has always accepted those returns and treated them like any other return. This policy is helpful for taxpayers who send in returns because they are concerned that their affairs are not up to date. If HMRC did not accept voluntary returns when a taxpayer sent in a return, it would have to formally ask them for a return, and they would need to refile it.
Amendments 153 and 154 would require the Government to publish reports about the effectiveness and revenue effects of the clause. Such reports are unnecessary. The purpose of the clause is not to change existing practice but to give it legal certainty. Reporting on its impact is therefore unnecessary, as there will be no change in either practice or revenue. Amendment 155 would require the Government to lay a report into the resources that HMRC needs to implement the clause. The clause will have no impact on HMRC’s resources and will not change HMRC’s practice of accepting returns sent in on a voluntary basis. I therefore commend the clause to the Committee.
Jonathan Reynolds
I wish to press the amendment to a vote.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss the following:
New clause 15—Review of late payment interest rates in respect of promoters of tax avoidance schemes—
“(1) The Chancellor of the Exchequer must review the viability of increasing any relevant interest rate charged by virtue of the specified provisions on the late payment of penalties for the promoters of tax avoidance schemes to 6.1% per annum and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section, “the specified provisions” means—
(a) section 178 of FA 1989, and
(b) sections 101 to 103 of FA 2009.”
New clause 16—Review of late payment interest rates in respect of promoters of tax avoidance schemes (No. 2)—
“(1) The Chancellor of the Exchequer must review the appropriateness of any relevant interest rate charged by virtue of the specified provisions on the late payment of penalties for the promoters of tax avoidance schemes and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section, “the specified provisions” means—
(a) section 178 of FA 1989, and
(b) sections 101 to 103 of FA 2009.”
New clause 17—Review interest rate equalisation—
“(1) The Chancellor of the Exchequer must review the viability of equalising any relevant interest rate charged by virtue of the specified provisions for the specified purposes and lay a report of that review before the House of Commons within six months of the passing of this Act.
(2) In this section—
“the specified provisions” means section 101 of FA 2009,
“the specified purposes” means the charging of interest for—
(a) late payment, and
(b) repayment.”.
Mel Stride
Clause 87 is designed to clarify legislative provisions in relation to interest charged by HMRC across several tax regimes. The changes will ensure that the provisions apply as Parliament intended, and provide legal certainty for HMRC and taxpayers.
New clauses 15 and 16 would require the Government to report on the level of interest charged on penalties for promoters of tax avoidance schemes, and specifically on the viability of increasing interest rates on the late payment of penalties for those promoters. That is not necessary and, in explaining why, it may be helpful if I set out the rationale behind the rates.
Interest is charged on these penalties in the same way as it is charged on other overdue payments to HMRC; it is not affected by what the penalty is for. The penalty itself is designed to be the punitive measure tackling tax avoidance promoters. Interest is designed simply to give commercial restitution on all amounts that are paid late and, as such, it is currently set at 3.25% across HMRC and is linked to the Bank of England base rate. Reviewing the level of interest charged on overdue promoters’ penalties would therefore be of limited value in addressing avoidance.
New clause 17 would require the Government to report on the viability of equalising late payment and repayment interest on penalties charged under the promoters of tax avoidance scheme rules. Charging different rates of interest to those paid out is similar to commercial practice and in line with the policy of other international authorities. A higher rate of repayment interest would over-compensate those who pay the wrong amount. A lower rate of late payment interest would be an insufficient deterrent and unfair to the majority, who pay on time. The difference encourages people to pay the right amount at the right time to HMRC.
I urge the Opposition not to press their new clauses and I commend clause 87 to the Committee.
Jonathan Reynolds
As the Minister has said, the clause relates to two legislative changes that would alter the way that interest can be charged and paid on tax under section 178 of the Finance Act 1989, as well as setting interest rates for certain purposes, including retrospectively for diverted profits tax, and providing for interest to be charged under section 101 of the Finance Act 2009 on particular penalties for PAYE from 6 May 2014.
The charging of interest is an important source of revenue to the Exchequer. It is a fundamental principle that the same rules apply to all taxpayers and there may therefore be circumstances in which it is appropriate to charge interest on late payments in the same way that HMRC offers interest on tax refunds that exceed a period of one tax year. That charge is an important tool and deterrent for tax avoidance and late payments.
The diverted profits tax in particular, which was introduced in 2015 as the so-called Google tax, is at least a step in the direction of ensuring that large multinational companies pay their fair share. As the Committee has discussed in previous clauses, certain multinational companies, through dint of their presence in multiple jurisdictions and the armies of tax planners at their disposal, have used a variety of tactics to minimise their tax obligations. While we welcome DPT as step in the right direction, the public are clear that more action should be taken.
My hon. Friend the Member for Oxford East spoke in depth about DPT in an earlier sitting of the Committee. She explained that the diverted profits tax focuses on two forms of tax avoidance. The first is where a company with a UK-taxable presence uses arrangements lacking economic substance to artificially divert profits from the UK. The second is where a person carries out activities in the UK for a foreign company that are designed to avoid creating a permanent establishment through which they would be taxable. The Minister promised to lay before the House a report on the impact on revenue made by the mechanics of the application of DPT. When that information is made available, the Opposition will carefully consider it to assess the efficiency of the diverted profits tax. It must be considered in the round, in the light of the incoming digital services tax, which will struggle to be effective if it is not carefully planned around the unique structure of digital companies across multiple jurisdictions.
In relation to PAYE penalties where interest may be chargeable, I ask the Minister to provide further clarity around the changes. While I reiterated previously that there must be a fair and equal application of the rules, interest and penalty charging can cause serious hardship for individuals, especially when applied retrospectively for unintentional and unwitting errors committed by the taxpayer. Can the Minister elaborate on what consultation has taken place with low-income groups on the provision, to give us a sense of whether an impact assessment has been carried out? To which sections do the retrospective aspects of the legislation apply?
In the current situation with the 2019 loan charge, which stretches back over many years having been applied retrospectively, there is ample evidence that it causes serious hardship for individuals who, in some cases, say that they have been induced into such a scheme by a third-party, without full knowledge of its application. We must therefore exercise the utmost caution when applying any retrospective rules that cover individuals. I was pleased to read, however, that the legislation allows for interest charging on promoters of tax avoidance, in line with section 101 of the 2009 Act. We must ensure that we are pursuing promoters with the full force of the law, to tackle the root causes of avoidance and evasion.
The Opposition have therefore tabled a number of new clauses to the Bill. New clause 17 would require the Chancellor to review the viability of equalising HMRC’s late payment interest rate with the repayment interest rate. The new clause attempts to address a clear imbalance and perceived unfairness in the current interest rates set by HMRC. As it stands, if a taxpayer owes HMRC tax and is late in paying it, a charge of 3.25% interest is added. That is in stark contrast to HMRC’s own repayment rate, which, when paying things back, stands at just 0.5%. That double standard is exacerbated by the Government’s recent raising of late payment interest rates for all taxpayers by 0.25%.
The ACCA accountancy body has described that imbalance over late payments as “simply unfair,” and called for a level playing field to ensure that HMRC sets the same late payment rate as it charges. That is certainly something that the Opposition believe that the Government should review because it is ultimately a question of fairness. There should not be one rule for taxpayers and another for HMRC, as that simply breeds dissatisfaction with the tax system and those who enforce it.
Labour Members are committed to a tax system with justice and fairness at its heart, and we recognise the Government’s clear failings on the handling of HMRC’s powers, which were recently recorded extensively by the Lords Economic Affairs Committee. I hope that all sides of the House will consider supporting this review.
The Opposition’s new clause 16 would require the Chancellor to review the interest rate on late payment of penalties for the promoters of tax avoidance schemes. New clause 15 would require the Chancellor to consider raising the interest rate on late payment of penalties to 6.1%. The introduction of penalties for the promoters of tax avoidance schemes is relatively new. However, it is rather depressing to think that the promoters of tax avoidance schemes, who are then issued penalties, will pay less interest on late payments than the interest currently applied to student loans. Surely it says something about the Government’s priorities that they would allow a lesser interest rate on the late payment of penalties by those who advertise and encourage people to use tax avoidance schemes than the 6.1% interest rate that is charged to students in the UK.
New clause 15 would instead force the Chancellor to review the interest charged on late payments of penalties by the promoters of tax avoidance schemes and consider raising them to 6.1%. This would act as a deterrent when it comes to the late payment of penalties and it would also force the Government to consider the absurdly high interest rates that student loans are currently subject to. I call on Members to support the Opposition’s amendments on these issues today, to ensure that HMRC can operate fairly and effectively. I would also be grateful to hear some clarity and reassurance from the Minister about the retrospective elements of this legislation.
Mel Stride
There is no need for consultation on this measure because, as the hon. Gentleman will know, it was just putting beyond doubt what has been established practice over a very long period. He raised the issue of retrospection. The measure is retrospective, inasmuch as it is putting beyond doubt the fact that these rates were appropriate in the past. We are just bringing the long-standing practice out of any sense of uncertainty.
The hon. Gentleman suggested that the loan charge was retrospective. It is not, because the arrangements entered into under the loan charge scenario were always defective. They never worked at the time when they were entered into, and therefore the tax was due in the past. It is being collected in the present.
Anneliese Dodds
In that case, when advisers advised individuals to undertake these schemes, were they promoting illegal schemes? It would help to have a clear answer on that.
Mel Stride
They were in many cases promoting schemes that did not work and were defective, and in many cases promoting schemes that had been taken through the courts by HMRC—and, in a case involving Rangers football club, through the Supreme Court. On each occasion, they have been found defective.
Anneliese Dodds
The Minister says those schemes were defective; is he saying that they were illegal?
Mel Stride
I am saying that the schemes were taken through the courts and were found defective; they were found not to work. As this is the third exchange between us, let us be clear about what lies at the heart of the way in which these schemes operate. If as an employer I said to an employee, “Instead of paying you normal earnings, from which you would pay your national insurance and your income tax—as the employer, I would pay the national insurance—I will pay you by way of a loan. You and I know it is not really a loan, as there is no intention of you ever repaying it. I may well send that loan to an offshore trust”—as many of these schemes do—“before sending it back to you. The consequence is you pay no, or next to no, tax, because it is treated as a loan, not earnings or income.” That lies at the heart of these schemes. That model never worked, and the schemes were always defective at the time they were entered into.
Anneliese Dodds
However, those taxpayers who are required to face the loan charge have been told that they have done something illegal. I am asking the Minister whether those who advised them to undertake these schemes were advising them to do something illegal, because the advisers have not faced anything as a result of this, whereas the taxpayers have.
Mel Stride
The enablers and promoters of those schemes have been subject to various pieces of legislation, going back a number of years. In almost every Finance Act, or every year, there has been legislation clamping down on them. They are subject to a penalty of up to £1 million as a consequence of that kind of behaviour. Where they have acted inappropriately, the legislation is there, and HMRC has the powers to pursue them.
Question put and agreed to.
Clause 87 accordingly ordered to stand part of the Bill.
Clause 88
Regulatory capital securities and hybrid capital instruments
Question proposed, That the clause stand part of the Bill.
The Chair
With this it will be convenient to discuss the following:
Amendment 156, in schedule 19, page 315, line 15, at end insert —
“Part 4
Statement on consultation
“22 The Chancellor of the Exchequer must lay before the House of Commons a statement on the consultation undertaken on the provisions of this Schedule no later than two months after the passing of this Act.”
Amendment 158, in schedule 19, page 315, line 15, at end insert —
“Part 4
Review of revenue effects
“22 The Chancellor of the Exchequer must review the revenue effects of the provisions introduced by this Schedule and lay a report of that review before the House of Commons with twelve months of the passing of this Act.”
That schedule 19 be the Nineteenth schedule to the Bill.
Mel Stride
The Government are making changes to the tax rules for the hybrid capital instruments that are issued by some companies to raise funds. One of these changes is made by clause 28, which we have already discussed. Taken together with clause 88, it ensures that these instruments are taxed in line with their economic substance, and that the tax rules take account of forthcoming changes in financial sector regulation. The new rules cover issuances by companies in any sector, and replace rules covering regulatory capital instruments issued by banks and insurers.
As I explained when introducing clause 28, some companies raise funds by issuing instruments referred to as hybrid capital, which sit close to the border between debt and equity. This distinction between debt and equity is important for the UK tax system. In particular, coupon payments on instruments that are considered to be debt are typically deductible for tax purposes, whereas dividends paid on equity instruments are normally disallowed. However, determining the correct treatment for hybrid instruments can be problematic by its nature, and this can lead to uncertainty for companies. This is particularly difficult for the financial sector, where banking and insurance companies are required by industry regulators to hold a certain amount of capital. The instruments issued to raise this capital must contain certain features to allow for loss absorbency in the event of financial strain. Existing rules aim to provide certainty of treatment for these instruments issued by banks and insurers.
Clause 88 and schedule 19 make changes to the taxation of hybrid capital instruments, most of which have effect from 1 January 2019. Our overall aim is to ensure that all hybrid capital issued by any company that is in essence debt continues to be treated as debt for tax purposes. In June 2018, the Bank of England finalised its approach to setting a minimum requirement for own funds and eligible liability, or MREL. The Bank set out how it will use its powers to require firms to hold a minimum amount of equity and debt with a loss absorbing capacity from 1 January 2019. This will allow the Bank of England to ensure that shareholders and creditors absorb losses in times of financial stress, allowing banks to keep operating without recourse to public funds.
For global, systemically important banks operating in the UK, the MREL requirements take effect from 1 January 2019. Eleven other UK banks and building societies will need to meet these requirements from 1 January 2020. The instruments banks are permitted to issue to meet these new requirements include types of hybrid capital instruments that are not covered by the existing rules. Alongside updating the rules to take account of these new requirements, we have also taken this opportunity to conduct a wider review of hybrid capital instruments. We are providing coupon deductibility for all instruments issued by any company, provided that they are in essence debt, even if they are accounted for as equity. These are also elective, so HMRC will be able to monitor their use closely to ensure that they are not abused. If HMRC detects abuse, we will not hesitate to take whatever action is necessary, including further legislative change, in order to counter it.
Clause 88 and schedule 19 provide for the revocation of the existing rules for hybrid capital instruments issued by banks and insurers. They will be replaced by new rules for hybrid capital instruments issued by any sector. This will provide tax certainty for the issuers and holders of hybrid capital instruments. These instruments are issued by a small number of companies, primarily in the banking, insurance, utilities and telecoms sectors. The new rules apply from 1 January 2019, when existing rules are revoked. However, we have delayed the revocation of certain specific aspects of the rules for instruments issued before that date to allow banks and insurers time to consider the impact of the changes and to restructure their debt, if necessary.
In order to identify whether changes made by this clause and clause 28 were needed, we had to wait until the Bank of England published its MREL rules in June 2018. These new rules apply from 1 January 2019, and meant that changes to our tax rules were needed by the same date. The Finance Bill timetable meant that it was not possible to conduct a full public consultation, but officials consulted advisers who collectively represented those most likely to be impacted by the changes being made by the schedule. Officials also consulted with the Bank of England and the Prudential Regulation Authority.
Amendment 158 proposes that we publish a review of the revenue effects of the changes being introduced by this schedule. The policy paper published by HMRC on 29 October 2018 clearly states that the Exchequer impact of changes being introduced by this clause will be negligible. Furthermore, to apply the new tax rules, issuing companies must submit an election in respect of each instrument by September 30 2019, or within six months of issuing a new hybrid capital instrument. That will allow HMRC to closely monitor the use of the rules and ensure they are not being abused. If HMRC detects abuse, it will not hesitate to take whatever action is necessary. I commend the clause and the schedule to the Committee.
Jonathan Reynolds
I rise to make my final speech to the Committee on clause 88. [Hon. Members: “Shame!”] I know; it is a shame. The fun must end, but there will always be another Finance Bill.
The clause is enticingly named “Regulatory capital securities and hybrid capital instruments”. As the Minister just told us, it will introduce new tax rules for loan relationships that are hybrid capital instruments. According to the Bill’s explanatory notes, it will also revoke regulations dealing with the taxation of regulatory capital. The clause and schedule refer to the issuance of instruments by companies and financial institutions that contain debt and equity-like features, which, in investment terms, are more commonly known as convertible bonds.
Convertible bonds are having something of a renaissance, as some investors argue that they are well suited to current market conditions, especially the potential rise in interest rates. Practically, a convertible bond pays a fixed coupon, like a debt, but gives the holder the right to exchange the instrument for equity on redemption. In uncertain times for the markets, the appeal is clear: the investor is exposed to a fixed income-type risk in terms of downside, while being able to participate in an equity-like upside. That risk profile has been especially popular in recent years. Subsequently, 2018 has been the year of the highest convertible bond issuance since 2007.
If issuance is on the rise, it is important that investors understand what they are buying and the precise risk profile of how the instruments will perform in different market conditions. It is also important that any tax mismatches are corrected, so the Exchequer is not missing out. That brings us to the substance of the clause.
Hybrid instruments present a taxation challenge, precisely because they change in nature throughout their duration. The distribution of profits would not attract the same tax treatment as interest payments. For financial institutions, that problem was solved by legislation that related to capital requirements—the Taxation of Regulatory Capital Securities Regulations 2013.
Given that the issuance of different hybrid securities was required by a more recent exercise in assessment of loss-absorbing liabilities by the Bank of England in June 2018, the change forms part of a comprehensive review across sectors to remove tax uncertainty. That is timely, given the rising popularity in other sectors of issuing convertible debt, which I referred to earlier. It is important that the Exchequer does not miss out on any revenue as a result of uncertainty. I understand that the Taxation of Regulatory Capital Securities Regulations will be revoked for that reason and replaced by a new taxation policy for hybrid capital instruments, which will be applied across all sectors.
My first question for the Minister is how confident he feels that HMRC and financial taxpayers will have time to comply with the new rules. What consultation has taken place, and what guidance will be made available to those for whom the regulations are changing? The Bank of England’s changes, which demand the issuance of new instruments, will take effect from January 2019. The timeline feels extremely tight from a compliance perspective, if the tax rules are changing only now to accommodate the modification.
We are discussing a comprehensive and detailed set of changes that will affect huge amounts of capital from financial institutions. The technical note published by HMRC on 29 October goes into some depth about the changes, but the Opposition believe that further insight must be given on what feedback and concerns were raised by those who will be affected by the measure. We therefore tabled amendment 156, which would require the Government to make a statement on what consultation there has been on schedule 19.
Amendment 158 goes further by obliging the Government to publish a review of the revenue effects of the measure. According to statistics from Scope Ratings, the European issuance of hybrid bonds from non-financial corporates alone reached more than €10 billion in the first four months of 2018. Together with issuance from financial institutions, we are talking about an enormous source of revenue. We need to understand whether the reforms have been effective.
In connection with that, I ask the Minister to clarify how the stamp duty rules will apply to the measure. The technical note explains that
“The hybrid capital instruments rules provide an exception from all stamp duties on the transfer of these instruments.”
However, it goes on to stipulate conditions under which it might apply. Objectively, it seems that where the instrument is converted to equity, it should be subject to stamp duty, like ordinary shares, but the technical note seems to apply a number of contingencies. I would be grateful if the Minister clarified that one way or the other. I call on hon. Members to support the amendments and ensure that we have transparency on a potentially crucial issue of revenue for the Exchequer.
Mel Stride
I thank the hon. Gentleman for his contribution. He raised the issue of whether those affected by the measures in the clause will have time to adjust and take on board the new regime. I can assure him that we are confident that is the case, albeit, for the reasons I gave in my opening remarks, we were not able to have a full consultation on these measures given the timing as between consideration of the Finance Bill and the decisions taken by the Bank of England.
Specifically on that point, the Bank held a public consultation on the MREL rules, but the outcome was not published until June 2018. The rules apply from 1 January 2019 and any changes to our tax laws are necessary before then. The Finance Bill timetable means it is not possible to put that out for public consultation on the clause. We consulted on those measures with a number of those who will be affected, so we did what we could in the time available.
As to the hon. Gentleman’s question regarding stamp duty exemptions, those will continue to be in force as under the current regime.
Question put and agreed to.
Clause 88 accordingly ordered to stand part of the Bill.
Schedule 19
Taxation of hybrid capital instruments
Amendment proposed: 156, page 315, line 15, schedule 19, at end insert —
“Part 4
Statement on consultation
“22 The Chancellor of the Exchequer must lay before the House of Commons a statement on the consultation undertaken on the provisions of this Schedule no later than two months after the passing of this Act.”—(Jonathan Reynolds.)
This amendment would require the Chancellor of the Exchequer to make a statement on the consultation undertaken on the measures introduced by Schedule 19.
Question put, That the amendment be made.
Mel Stride
On a point of order, Ms Dorries. I will be very quick; we are now due in another place for yet another round of Treasury stuff. I thank you and your co-Chair, Hansard, the Doorkeepers, our Whips, our Parliamentary Private Secretaries, my hon. Friend the Member for Poole, our officials—particularly Liam Mulroy and Calum Boyd in my office—and our Bill team at the Treasury. I also thank everybody on the Committee for having made this such a smooth and productive session.
Peter Dowd
Further to that point of order, Ms Dorries. I thank you and the House staff—the Committee Clerks, the Doorkeepers and Hansard—as well as everybody involved in consideration of the Bill, including my colleagues.
Question put and agreed to.
Bill, as amended, accordingly to be reported.
Fisheries Bill (Fifth sitting)
Tuesday 11th December 2018
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Fisheries Bill 2017-19 View all Fisheries Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 December 2018 - (11 Dec 2018)
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
The Chair
May I welcome the Committee to line-by-line consideration of the Bill and lay down a couple of parish notices? Most Members have probably sat on such a Committee before. For those who have not, the rules of dress, address and behaviour are identical to those in the main Chamber. Those who have sat under my chairmanship before will know that I tend to the traditional end of that line of thinking—I tend to be quite strict in requiring no coffees, no mobile phone noises, proper means of address, proper behaviour and all that kind of thing.
We addressed this last week, but I remind Members that amendments must usually be tabled by Thursday to be considered the following Tuesday, and by Monday to be considered the following Thursday. However, next week we will sit on Monday, so it will be necessary for Members to table any amendments they wish to be considered then before the rise of the House on Wednesday. That is slightly complicated, but we need to stick closely to it.
The selection list is in front of you and shows how the amendments have been grouped. You will know that the order of consideration of amendments is not necessarily the order in which they will be voted on. They will be voted on as they turn up in the Bill itself. We may allow a stand part debate at the end of the consideration of each clause, or, at my discretion, we may not if we had a reasonably good Second Reading-type debate during consideration of the amendments. We will try to avoid having too many stand part debates, apart from where there is a matter of great principle to be considered. I rely in particular on the Opposition to make it clear when they wish to have a stand part debate. I will be delighted to allow one if that is what you would like.
Clause 1
Fisheries objectives
Peter Aldous (Waveney) (Con)
I beg to move amendment 78, in clause 1, page 1, line 2, at end insert—
“(A1) Any public authority with any function relating to fishing activities or fisheries management must exercise those functions to achieve or contribute to the achievement of the fisheries objectives.”
The Chair
With this it will be convenient to discuss amendment 36, in clause 1, page 1, line 9, at end insert—
“(1A) Any public authority with functions relating to fisheries activities or fisheries management must have regard to the fisheries objectives in the exercise of those functions.”
This amendment would place a duty on public authorities to have regard to the fisheries objectives in exercising their fisheries functions.
Peter Aldous
It is a pleasure to serve under your chairmanship, Mr Gray. I will seek to abide by the house rules you set down.
I have tabled quite a few amendments, so, if I may, I will say a few words of introduction about what is behind them. I represent Lowestoft—it is the largest town in my constituency—which I think we would say was formerly the fishing capital of the southern North sea. It was possible to walk on water from trawler to trawler, from one side of Hamilton dock to the other. That is not the case today; the trawl basin is largely empty. In Lowestoft, we have the worst-case scenario—we have seen how fisheries management can go horribly wrong.
We have rich fisheries off the East Anglian coast that bring very little benefit to East Anglian coastal communities. We do have a producer organisation—it is run from Lowestoft and has accountants in an office overlooking the trawl dock—but no fish are landed in Lowestoft. The trawlers in the Lowestoft PO land fish predominantly in the Netherlands. We are left with a small inshore fleet that lives a hand-to-mouth existence, unsure what quota of fish it will be able to catch from month to month. We might say it lives off the scraps from a rich man’s table.
With that in mind, the Bill needs to address three challenges. It needs to address the lack of fishing opportunities for fishermen such as those whom I represent; ensure we have a sustainable fishing management system; and ensure that we can bring significant benefits to coastal communities such as Lowestoft, many of which feel they have been left behind over the past 40 years.
The Bill provides us with an opportunity to put things right. Taking into account the short time that the Government and officials from the Department for Environment, Food and Rural Affairs have had to put the Bill together, we can say that they have done a good job with a lot to be commended. I acknowledge that it is an enabling Bill, and we probably do not want to get involved with or bogged down by a lot of detail. However, over the next two weeks we have the opportunity to scrutinise provisions that will provide the framework within which we can revive coastal communities—not just Lowestoft, but all around the coast of this country.
Let me turn to amendment 78—I am inclined initially to think of Julie Andrews, so I am starting at the very beginning, which is a very good place to start. Clause 1 sets out the fisheries objectives. There is concern that as currently drafted it does not provide a binding legal duty on all public authorities to achieve those objectives, so the amendment seeks to address that concern. It will ensure that the environmental and socio-economic protections that the authorities provide are implemented effectively, and it will help to secure the Government objective of delivering a truly sustainable, world-leading fisheries management system. It is complemented by amendment 80, to which I will speak later in our proceedings. Amendment 78 would impose an obligation on all public authorities. I acknowledge that in drafting terms that may not sit all that well with the Bill, but it raises genuine concerns, and I would welcome the Minister’s feedback on that issue and on how he will best take that concern on board.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
I will speak to amendment 36 in addition to amendment 78. It is an honour to speak on behalf of the Opposition, not only as Labour’s shadow fishing Minister, but as an MP who represents a constituency that has nearly 1,000 fishing jobs in both the catching and the processing sectors. The Bill is a missed opportunity, and although we do not oppose it we have tabled a significant number of amendments to improve it and reflect the changes that the industry needs from a new regulatory framework. We seek to ensure that there are enough fish to catch in our ocean, and that the industry is truly sustainable, both economically and, importantly, environmentally.
There is perhaps just one sector of our entire United Kingdom economy that could be better on day one of Brexit—fishing—but only if we can ensure that our fish exports to markets are free of burdensome and expensive customs checks, and free from tariffs. Brexiteers and those behind the 2016 referendum made much of promises to the fishing industry, and Labour’s amendments seek to make real many of the promises that were made during the leave campaign, and since by Ministers, but that are missing from the Bill as drafted. Labour wants to work constructively with the Minister to improve the Bill, and I hope that he does, too.
This is a once-in-a-lifetime opportunity to start afresh and create a truly world-leading fisheries policy, and we must not waste that opportunity. There are good things in the Bill that we want to support, but there are far too many missing pieces. As I said on Second Reading, the Bill smacks of something that was pushed out hurriedly to ensure that a regulatory framework is in place in the event of a no-deal hard Brexit.
The Secretary of State for Environment, Food and Rural Affairs has committed the UK Government to leaving the natural environment in a better state than we found it, and rightly so. That is good and welcome, but we need more than soundbites—we need action, and many of our amendments would put such measures into legislation. There are significant concerns about the gap between the Government’s stated ambition, as set out in the White Paper, to deliver world-leading fisheries, and the duties currently in the Bill to deliver that goal. It is critical for the health of our oceans that the Bill includes a duty to deliver sustainability objectives as set out in clause 1. Without such a duty, targets are established but there is no clear obligation on authorities, other than the Secretary of State, to deliver them. There should also be a requirement for annual updates on progress made against those objectives.
Amendment 36 is vital. I am glad that the hon. Member for Waveney tabled a very similar amendment. He and I may sit on opposite sides of the House, but we have both spent a lot of time listening to our fishing communities in our respective constituencies, so we seem to be doing a cross-party tag team on many of our amendments. The purpose of the Opposition amendment is to place a legal duty on any public authority with any fisheries-related function to achieve the objectives set out in the Bill. Without such a duty, objectives are established but there is no clear obligation for authorities to deliver them. The Opposition seek an explicit carry-through of duties, rather than an implied or suggested one, as is currently the case.
We heard last week from Debbie Crockard, senior fisheries policy advocate for the Marine Conservation Society. She said:
“The ambition here is for world-leading sustainable fisheries management. At the moment we do not have a duty in this Fisheries Bill to meet the objectives in the Bill. Those objectives cover a lot of very good things—sustainability and a precautionary approach—but without the duty there is no clear obligation to deliver those objectives. Without that clear obligation you are in a situation where they might not be met and there is no obligation to meet.”––[Official Report, Fisheries Public Bill Committee, 6 December 2018; c. 80, Q157.]
Our amendment would make a simple but effective change. We are pleased with many of the words in the objectives, but it is important that we carry those through. I would be grateful if the Minister would say how he will ensure that those objectives are properly implemented and do not just exist on paper in the Bill.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
I commend the hon. Members for Waveney and for Plymouth, Sutton and Devonport for tabling these amendments, which deal with an important point. I have a concern about what is described in the briefing we received today from Greener UK as a “fundamental flaw”. The more I think about it, the more I understand that to be the case. The concern is that public bodies currently have to act in accordance with the joint policy statements. That may be good in so far as those statements marry up with the Bill’s objectives, but it leaves rather a lot depending on the content and substance of the statements.
The advantage of the amendments, which are essentially the same in their import, is that they would place a duty on public bodies to have regard to the objectives. Those objectives are good—there is broad consensus that they are exactly the objectives we ought to set in respect of fishing policy. It seems to me that tying public bodies into the objectives, rather than just the policy statements, is a good idea that would strengthen the Bill significantly. I suspect such a provision might have been put in the Bill anyway, had it spent a little longer in the oven of Government.
I am interested to hear the Minister’s thinking. I do not know whether the hon. Member for Waveney intends his amendment as a probing amendment, but Members inevitably will wish to return to this matter, either in Committee or at a later stage.
The Minister for Agriculture, Fisheries and Food (George Eustice)
It is a pleasure to start with this very important clause, which sets out our sustainability objectives. I hope I am able to reassure hon. Members that the two amendments are unnecessary because of other provisions in the Bill.
The fisheries administrations are already covered by the joint fisheries statement and, in the case of England, the Secretary of State’s fisheries statement. Clause 2 sets out a clear requirement to publish a joint fisheries statement explaining how we intend to achieve the objectives set out in clause 1. Clause 6(1) contains a requirement that the functions of national authorities must be carried out in accordance with the joint fisheries statement.
One of my issues with amendment 36 is that it uses the words “must have regard to”. I believe that the structure we have put in place—with a joint fisheries statement that explains in great detail how we intend to achieve the objectives, is regularly reviewed, can be updated when circumstances change, and must be followed—is more powerful than saying simply that authorities must have regard to the objectives. We want this to be an obligation that we seek to follow in the best possible way, while recognising the complexity of the marine environment and how things are subject to change.
Owen Smith (Pontypridd) (Lab)
Is part of the problem, as we heard during the evidence sessions, that other Administrations do not necessarily have to follow what is set down in the joint fisheries or ministerial fisheries statement—they merely need to explain why they departed from it?
George Eustice
That provision is only for a force majeure event such as a major crisis or something that would require an Administration to move outside the plan, and they would have to explain why that had happened. The requirement to follow the joint fisheries statement applies equally to all Administrations in the UK and it is legally binding.
Other public bodies—for example, the inshore fisheries and conservation authorities—are already covered by legislation, and those obligations are set out in the Marine and Coastal Access Act 2009, which was introduced by the previous Labour Government. Section 153 of that Act sets out clear duties for IFCAs to
“seek to ensure that the exploitation of sea fisheries resources is carried out in a sustainable way…seek to balance the social and economic benefits of exploiting the sea fisheries resources…with the need to protect the marine environment from…the effects of such exploitation”,
and finally to take any other steps that are necessary for sustainable development. Obligations for the IFCAs are therefore already covered by the 2009 Act.
Owen Smith
I am grateful for the Minister’s explanation, but I do not really understand what he means by force majeure events. This seems to me to be quite simple. Clause 6(1) states:
“A relevant national authority must exercise its functions…unless relevant considerations indicate otherwise.”
I would be grateful to know what “relevant considerations” might mean, because that seems to be fairly broad criteria. Clause 6(4) states simply:
“If a relevant national authority within subsection (5)(a) or (b) takes any decision in the exercise of its functions…otherwise than in accordance with the policies contained in an SSFS that are applicable to the authority, the authority must state its reasons”.
The Chair
Order. We might discuss that matter when we consider clause 6, rather than now.
The Chair
Order. The fact that the Minister mentioned clause 6 is not a good reason to question the Chair’s decision on the matter.
George Eustice
I concede that I started this by mentioning clause 6, but I did so in the context of obligations that were to give effect to the measures in clause 1—we will return to that issue in further detail later on.
My third point is that the Environment Agency has a role when it comes to fisheries, and particularly freshwater fisheries—for example, the regulation of salmon. It is covered by separate legislation, and the Environment Act 1995 places a duty on the EA to promote the conservation and enhancement of the natural beauty and amenity of inland and coastal waters, and land associated with such waters, as well as the conservation of flora and fauna that are dependent on the aquatic environment.
For the reasons we have set out, we believe that the joint fisheries statement and obligations in clause 6 already give effect to the obligations and objectives in clause 1. Public bodies that are not covered by the joint fisheries statement are covered by other legislation, notably the Marine and Coastal Access Act 2009 and the Environment Agency.
Mr Carmichael
I am grateful to the Minister for giving way, as I sense he is coming to the end of his remarks. Will he confirm that the contents of the joint policy statement could be subject to judicial review?
George Eustice
Lots of things in our constitution are subject to judicial review. If a joint fisheries statement were published and there was some doubt as to whether those objectives were being delivered, there is always a basis in our constitution for that to be legally challenged. However, I believe we will be able to work together with all Administrations to ensure that the joint fisheries statement sets out how we intend to deliver our objectives.
On the right hon. Gentleman’s point about why we chose to do that via a joint fisheries statement, he will know that the marine environment is a very dynamic place where new challenges present themselves. To have a dynamic, detailed plan that is updated periodically and remains relevant, which refocuses us on our objectives and learns lessons from what may or may not have worked, is more powerful than the two amendments would provide.
Mr Carmichael
The Minister is being generous with his time. He sets out a process that we hope would be followed in optimum circumstances. In fact, very often that is not the case; other considerations come into play. We have to produce legislation suitable to deal with the worst possible circumstances, not just the base that we hope for. Surely, the advantage of putting this into the objectives, rather than just remaining with the policy statements, would be that those who wanted ensure that the policies meet the objectives would not have resort to that sort of expensive legal procedure.
George Eustice
I simply believe that the approach we have set out, of a joint fisheries statement that can be regularly updated and can express in great detail how we intend to deliver those objectives, is more powerful than a simple addition to the clause. In this Bill we give legal effect, via the joint fisheries statement, for a requirement on Administrations to follow those objectives.
There are occasions, as the right hon. Gentleman will know from his constituency, when we have to do annual fisheries negotiations with Norway and the Faroes, and we have to do the coastal states negotiations on issues such as mackerel. Sometimes, countries such as Norway use other scientific measures, although maximum sustainable yield is one of their approaches, too. Sometimes, we have to reach an agreement, and if we are too inflexible in our approach to reaching an agreement with countries in those circumstances, everybody unilaterally sets their own quota and goes their own way, and the marine resource suffers. It is important that our plan has the flexibility to enable us to reach a settlement with our near neighbours such as Norway and the Faroes.
I hope I have been able to persuade hon. Members that the approach we have set out deals with the intention behind the two amendments, and that they will not feel the need to press them.
Peter Aldous
I have listened carefully to the Minister’s points. Although it was important to highlight the issue we need to take into account, I am generally content that the existing provisions, particularly the joint fisheries statement, cover the matter On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: 36, in clause 1, page 1, line 9, at end insert—
“(1A) Any public authority with functions relating to fisheries activities or fisheries management must have regard to the fisheries objectives in the exercise of those functions.”—(Luke Pollard.)
This amendment would place a duty on public authorities to have regard to the fisheries objectives in exercising their fisheries functions.
Question put, That the amendment be made.
Luke Pollard
I beg to move amendment 37, in clause 1, page 1, line 9, at end insert—
“(g) the public asset objective.”
This amendment would add to the fisheries objectives the “public asset” objective, defined in Amendment 38.
The Chair
With this it will be convenient to discuss amendment 38, in clause 1, page 2, line 24, at end insert—
“(7A) The ‘public asset objective’ is to manage fisheries, and the rights to exploit those fisheries, as a shared resource and public asset held in stewardship for the public good.”
This amendment defines the “public asset” objectives.
Luke Pollard
Members will see from the amendment paper that the Opposition propose a number of additional objectives, including a new public asset objective, a new marine planning objective, a new safety and workforce objective, and a new climate change and international agreements objective. The first—the public asset objective—would deliver on the pledge in the Government’s White Paper, which states:
“We aim to manage these fisheries—and the wider marine environment—as a shared resource, a public asset held in stewardship for the benefit of all.”
That sounds brilliant, but it should have been included in the Bill.
Listing fish as a public good in the Bill would allow us to say definitively that fish should be allocated for the benefit of the country. I am amazed that Ministers did not set that out clearly in Bill. I encourage the Minister to accept the amendment so there can be no doubt, no obfuscation and no sleight of hand in policy from this Government or any that might follow—particularly in the coming days—that fish is a public good and their benefits should be shared by the nation.
We heard evidence last week from Griffin Carpenter, an economist at the New Economics Foundation. He agreed with that point, stating:
“When I have spoken to stakeholders, even the quota holders, everyone starts from the same premise that fish is a public good, but from my perspective that has not been followed through in the way we treat the opportunity to fish that public good.”––[Official Report, Fisheries Public Bill Committee, 6 December 2018; c. 104, Q200.]
The hon. Member for Waveney expressed similar concerns. I am sure hon. Members on both sides of the House know Aaron Brown from Fishing for Leave, who is a key supporter of the amendment. He said in evidence last week:
“Fish always has been a public resource. Various judicial hearings have defined that as well. Indeed, it probably stretches all the way back into Magna Carta right back through our constitution.”
That is slightly before my time, I am afraid. He continued:
“At the end of the day, we as fishermen, as the members of the public who catch, are only custodians of what is the nation’s; we look after it and husband it well for current generations and future ones. We would very much like to see a clause put in”.––[Official Report, Fisheries Public Bill Committee, 4 December 2018; c. 62, Q134.]
Importantly, clause 1 sets the tone for how the Bill will be regarded. There is much discussion about fish in our political debate. It is vital that we make it clear right from the start that fish is a public asset and should be distributed accordingly—a key argument that I believe Members on both sides of the House have advocated. Its omission from the Bill is regrettable, which is why the Opposition seek to insert it as one of the Bill’s early objectives.
Alan Brown (Kilmarnock and Loudoun) (SNP)
It is a pleasure to serve under your chairmanship, Mr Gray. We will be happy to support the amendment if it is pressed to a vote. Clearly, clause 1 is all about setting objectives. The Minister may argue that the amendment is superfluous, but we are setting objectives and, as the hon. Member for Plymouth, Sutton and Devonport touched on, we heard clearly in evidence that there is a desire for the Bill to state that fishing is a public good. That would set a marker for the future, when we look at reallocating quotas for the benefit of that public good. We are certainly happy to support the amendment.
George Eustice
I do not believe the amendment is necessary, for reasons that I will set out. I will describe in a moment what we intend to do on quota allocation.
As the hon. Member for Plymouth, Sutton and Devonport highlighted, case law in this area is very clear. We have an unwritten constitution, elements of which do not need to be put in statute. We do not need to put in statute that Parliament is sovereign. We do not need to put in the Bill that fish live in water. Certain things are facts, not objectives. We do not have an objective to make fish a public asset; it is a statement of fact that they are a public asset, and our common law tradition enshrines that.
The case law is very clear. The UK Association of Fish Producers Organisations brought an important test case in 2013, when my predecessor moved some quota. Mr Justice Cranston, the judge who took the case, noted Magna Carta and what it sets out, and its implications were that fish stocks are a public resources. As he stated:
“Consequently, there can be no property right in fish until they are caught.”
The nature of our unwritten constitution, our common law tradition and our case law make it clear: fish are a public asset. Furthermore, articles 2 and 56 of the United Nations convention on the law of the sea recognise that coastal states have sovereign rights over their resources, including fisheries in their territorial waters and exclusive economic zone, and we are signatories to that convention.
I do not believe it necessary, but I wish briefly to explain why in our White Paper we set out clearly that fish are a public asset. As we diverge from relative stability shares and additional fishing opportunities come in, we have been explicit that those new fishing opportunities will not be allocated along current fixed quota allocation lines, and that initially, as a first step, we will allocate the quota differently. We are considering a number of measures. First, we could put additional fish into the under-10-metre pool—the inshore pool—to give extra fishing opportunities to our smaller inshore fleet. Secondly, other parts of the Bill we set out an ability for us to use some of that additional quota to create a national reserve to help manage the landing obligation and deal with the problem of choke species and discards. Thirdly—again, this is set out elsewhere in the Bill—we have outlined the possibility for a producer or organisation to tender for fishing opportunities for a year or a number of years, based on their track record on issues such as creating opportunities for new entrants, their sustainability, the amount of benefit they deliver for coastal communities and so on.
We have been clear that new fishing opportunities will be allocated differently. In the longer term and once we have established alternative methodologies, if we gave sufficient notice—the judgment I mentioned earlier suggested that the Government would need to give seven years’ notice to people who currently hold FQA units—it would be possible gradually to start to move away from the FQA system altogether. We do not want to do that expeditiously, for the reasons set out in our White Paper. Complex business models have been built under the current FQA regime, and people have borrowed money to buy vessels with FQA units attached. As we leave the EU, a lot of changes will already be happening and we do not want to compound them by destabilising the system entirely. We have been clear that we will stick with existing FQA units for existing fishing opportunities, but we will diverge from that over time. To do that, we must simply give notice in a policy statement or document that we intend to do so; it does not need to be placed in the Bill.
Mr Carmichael
Would the insertion of the amendment prevent the Minister from doing that?
George Eustice
It would not, but nothing in the amendment is necessary, and when we draft legislation, it is important to include that which is necessary. Arguably, there would be nothing wrong with a piece of legislation that stated “Parliament is sovereign”, except that that which can be given can be taken away. We have an unwritten constitution and a common law tradition in this country because there are certain things that we do not want to call into question by including them in a Bill. We certainly do not want to downgrade this to a mere objective when it is about a long-established right and a national resource that cannot be turned into a property right, and that is a long-standing point in our constitution.
I understand the thinking behind the amendment and the points raised by the hon. Member for Plymouth, Sutton and Devonport. I hope I have been able to reassure him that is unnecessary and, more important, that I have enlightened him of the Government’s intentions and approach as we move to a new system and regime for allocating quota.
Mr Carmichael
I confess I was not much exercised about this amendment until I heard the Minister’s explanation of why the Committee should not accept it. The Minister says that we do not need to put in the Bill the fact that fish swim in the sea. That is absolutely correct, but that is different from parliamentary sovereignty—the other example he cited. If I dredge the depths of my memory, that is the difference between a praesumptio iuris and a praesumptio iuris et de iure: there are some things that are irrefutable—fish swim in the sea, for example. Parliamentary sovereignty is not necessarily part of nature; it is part of the decisions we take. Jurists have wrestled with that for centuries.
Our own definition of parliamentary sovereignty has changed many times over the years. The whole question of sovereignty is seen differently in different parts of the United Kingdom. It is well established in Scots law that sovereignty is vested in the people and given to Parliament; the Diceyan definition of parliamentary sovereignty is not necessarily accepted. I did not particularly anticipate employing this line of argument, but as the hon. Member for Pontypridd said, the Minister started it.
Mr Carmichael
We are, but if the basis of parliamentary draftsmanship is that the Government will do things only that are necessary, that is quite welcome. However, given the direction of travel of legislation over the 17 years I have been in the House, that would be a fairly normal one and something of a departure from the way we have done things recently.
The Minister brought forward various policy objectives that would sit well in the policy statements at that point, but I do not see anything that contradicts the need for this to be put into the policy objectives. Whereas initially I was of the view that this was not something of greatest moment, now I understand the reasons why the Government resist it I am somewhat more impressed with the idea behind it.
Luke Pollard
I welcome the Minister’s words about allocation of quota. We will come to that in due course. In consideration of the first two amendments, an awful lot of fishers will watch this Committee and will ask why Ministers are resisting fish being a public asset in this Bill. They will ask, “What are they trying to hide or trying not to say?”
George Eustice
The hon. Gentleman seeks to downgrade something that is a fact—fish are a national asset—to become a mere objective.
Luke Pollard
For someone who is still quite fresh in Parliament, it is very curious that a downgrade to an objective is better than not having something in the Bill at all. Not mentioning it seems to be the higher state for something—that is not what most fishers will take from this debate.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
My hon. Friend will know that many fishermen will watch the Committee and note the rather peculiar point made by the Government. Surely, this is a belt-and-braces approach, not a mutually exclusive option to define fish as a public asset. Many small fishermen, particularly those who seem to be crowded out as a result of large-scale private fishing interests dominating the sector, will view the Government’s proposals with cynicism.
Luke Pollard
Fish is a public asset and that should be in the Bill. That is the position of my hon. Friends, and I am disappointed that we have not been able to find a form of words to convince the Minister to be clear that fish is a public asset and should be in the Bill. This is one of the fundamental principles that fishers say to me when I go down to the quayside in Plymouth: they want the Government to come to an honest set of words that says, “Fish is a public asset.”
Mr Carmichael
The hon. Gentleman and I need to challenge the assertion that the inclusion of an asset is a downgrade from what was already there in common law. There is no such thing. All it says is that this is a fisheries objective; it does not change the status of public assets or the view of fish being a public asset in the way of jurisprudence.
Luke Pollard
I agree with the right hon. Gentleman. We need to make that clear, because this is not a Bill that seeks just to refresh and update the regulatory environment around fishing. It is a Bill laced with politics and other meaning, because of the importance of fishing to the Brexit debate. That is why setting a tone for fishing is so important.
The Minister claims that that is not necessary, but it is certainly desirable. We should ensure that the Bill, and all the fishers who will be governed by it, have a sense of the Government’s priorities. Having fishing as a public asset should be high up as one of the key priorities of the Bill and the Government. It is fine to mention it in statements, which we will come to in due course, but being clear that fish is a public asset should be at the front of the Bill, because that is what our fishing communities want it to be. That is why I will not withdraw the amendment but will push it to a vote.
Question put, That the amendment be made.
Luke Pollard
I beg to move amendment 39, in clause 1, page 1, line 9, at end insert—
“(g) the marine planning objective.”
This amendment would add to the fisheries objectives the “marine planning” objective, defined in Amendment 40.
The Chair
With this it will be convenient to discuss amendment 40, in clause 1, page 2, line 24, at end insert—
‘(7A) The “marine planning objective” is to ensure that any policies are compatible with any marine plans prepared pursuant to Part 3 of the Marine and Coastal Access Act 2009.”
This amendment defines the “marine planning” objective.
Luke Pollard
The amendments relate to the importance of marine planning in the conservation and exercise of the fishing sector. We have tabled new marine planning objectives and I am grateful for the work of many stakeholders in reinforcing the importance of marine planning, in particular the Blue Marine Foundation.
The UK and devolved Administrations are preparing marine plans under the Marine and Coastal Access Act 2009, the Marine (Scotland) Act 2010 and the Marine Act (Northern Ireland) 2013. It is important that marine plans are incorporated in the joint fisheries statement and the Secretary of State’s fisheries statement, and vice versa. It is vital that the Fisheries Bill works in concert and tandem with the existing legislative framework.
The Marine and Coastal Access Act is an important piece of legislation passed in the final years of the Labour Government, as was mentioned by the Minister. It is curious that there is not an automatic read-across from that Act to the provisions in the Bill. The amendment seeks to reflect the importance of marine planning in the Marine and Coastal Access Act in the Fisheries Bill.
We heard in evidence last week from Dr Amy Pryor, who is the programme manager at the Thames Estuary Partnership, chair of the Coastal Partnerships Network and a member of the Coastal Communities Alliance. She said that she would like to see more formal recognition of that in the Bill and perhaps an extra marine planning objective that could set out these matters. The amendment seeks to ask the Minister why marine plans are not mentioned in the Bill and I would be grateful for his response.
George Eustice
The hon. Gentleman asks why marine plans are not included in the Bill. The answer is really quite simple: the previous Labour Government did all that was required in this space. As he highlighted, the Marine and Coastal Access Act 2009 already sets out our approach to marine management. Specifically, in chapter 4, section 58 (1) requires public bodies to consider marine policy documents in any decision making. Such documents include marine plans and UK marine policy statements.
A number of regional marine spatial plans are under development, and under the Marine and Coastal Access Act, we have a network of marine conservation zones and are building a blue belt around our shores. Many byelaws introduced by IFCAs give effect to the protections required under the marine conservation zones. As with some of the other amendments that the hon. Gentleman tabled, we believe that this is unnecessary, since our approach to marine spatial planning is set down in the Marine and Coastal Access Act. I would also point out that it is not really an objective to have marine planning. It has been a legal requirement since 2009, and those plans have been rolled out. It is already a legal requirement that decision makers and public bodies must follow those plans.
Mr Marcus Jones (Nuneaton) (Con)
Is the Minister saying that, if we accepted this amendment, we would be duplicating the existing law and therefore creating a significant amount of confusion?
George Eustice
I would make two points. First, it is unnecessary, since we already have legislative requirements that require public bodies to do this. Secondly, in common with the previous amendment, it does not sit easily as an objective. It is not an objective to have a marine plan; it has been a legal requirement for almost a decade. I hope that, given the fact that I have given credit to the Labour party for introducing the Marine and Coastal Access Act, which has delivered these things, the hon. Member for Plymouth, Sutton and Devonport will not see the need to duplicate that which has already been done.
Luke Pollard
I thank the Minister for his response and for saying more nice words about the previous Government—more of his colleagues should receive that memo. I hope that was not the last mention of it.
The purpose of the amendment was to set out the importance of marine planning in general, and I am grateful to the Minister for doing that. Some good steps are being taken. I welcome the extension of the blue-belt policy. The Minister will know that my colleagues from Plymouth and I have been arguing for the creation of the country’s first national marine park in Plymouth Sound. We also need look internationally, and I hope Ministers hurry up with the designation of the South Sandwich Islands as a marine park. I do not feel that the amendment would duplicate the legislation, as the hon. Member for Nuneaton said, but I am grateful for the Minister’s words, which make it clear to all stakeholders how important marine planning is to our fragile marine environment. As a result, I will not press the amendment to a vote. I beg to ask leave that the amendment be withdrawn.
Amendment, by leave, withdrawn.
Luke Pollard
I beg to move amendment 41, in clause 1, page 1, line 9, at end insert—
“(g) the safety and workforce objective.”
This amendment would add to the fisheries objectives the ‘safety and workforce’ objective, defined in Amendment 42.
The Chair
With this it will be convenient to discuss amendment 42, in clause 1, page 2, line 24, at end insert—
‘(7A) The “safety and workforce objective” is—
(a) to protect and enhance the safety of workers in fishing activities,
(b) to set and protect minimum standards for wages, terms and conditions of employment in fishing activities,
(c) to prevent modern slavery in fishing activities, and
(d) to ensure the application and enforcement of the national minimum wage by HMRC on fishing vessels within the United Kingdom’s Exclusive Economic Zone.”
This amendment defines the “safety and workforce” objective.
Luke Pollard
Amendments 41 and 42 attempt to use the Bill to make fishing a better and safer place to work for all our fishers. As Jerry Percy said, when we heard evidence last week from the New Under Ten Fishermen’s Association,
“Fishing, unfortunately, still carries the record as the most dangerous occupation in the world.”––[Official Report, Fisheries Public Bill Committee, 4 December 2018; c. 39, Q67.]
Every day around the world, people who go to sea to catch fish die. We should remember that important fact. Fishing is a dangerous career.
Since I was elected in June last year, two trawlers from Plymouth have sunk and a life has been lost on each of them. To address marine safety, we need a number of things to happen. We need the rules and regulations to be better and more appropriate to the methods of fishing today. We need better enforcement by authorities, and we need better adoption of those standards and best practice by the industry.
Only last week, a report came out on the tragic sinking of the Solstice trawler—one of the boats I mentioned earlier—which sunk in the patch I represent. It is a tragedy that too many fishermen die every year catching our fish suppers. That is a reminder of just how important fishing safety needs to be. I am aware that fisheries safety is a responsibility of the Department for Transport rather than DEFRA, but in setting the tone, requirements and objectives for how fisheries should be governed in future, it would be remiss of us not to discuss the importance of marine safety.
Marine safety is increasingly an issue—in particular for small boats, because of the pressures of the regulatory environment that have led to many of those boats perhaps being slightly less stable than they were originally designed to be. In one of our evidence sessions, I spoke about the development of dumpy boats, which has been a direct consequence of the regulatory environment, which has given rise to an under-10 metre fleet. Instead of having a larger boat that trips over that line, boats have become dumpier. In addition, given the need for small boats, especially, to be able change their gear, there have been concerns about stability.
Alan Brown
Nobody is going to argue about the importance of improving health and safety. As the hon. Gentleman rightly says, there are many risks in the fishing industry. I am just seeking clarification. Having the objective is fine, but how will the objective in itself lead to improvements in health and safety? Regulation and enforcement are required—we need that linkage.
Luke Pollard
I am grateful for that intervention; it is a good question. The important thing about including this objective is that there would be a requirement for Ministers in their annual statements to report on progress on marine safety. As we have seen, sadly there has not been sufficient progress. Given that responsibility for marine safety is shared between a great number of stakeholders in government, it is important to have an opportunity to bring all those efforts together and share best practice. Having a clear objective that the regulatory environment we want to create around fisheries after Brexit is one where marine safety is prioritised is a key message that we should be sending to the fishing community.
The Minister will know of a brilliant scheme from Plymouth that provides lifejackets personal locator beacons to fishermen with. That is an example of how we can make real our proposed objective, if implemented. Personal locator beacons activate when they come into contact with water, enabling the search to be taken out of search and rescue. I have seen for myself the registry and met the team at Falmouth coastguard who manage this system: it is a good one that we need to roll out more comprehensively.
Mike Hill (Hartlepool) (Lab)
As I recall, the Government considered it important that such health and safety provisions apply to vessels coming into our waters post-Brexit. Does my hon. Friend agree that that makes it doubly important that we include these issues in the Bill?
Luke Pollard
My hon. Friend is exactly right. It is important that we set high levels of safety standards for all fishing boats in UK waters, whether they are UK or foreign-registered. The highest safety standards, including wearing lifejackets with personal locator beacons, should be something that we demand. I would like to see every fisher in UK waters wear a lifejacket with a personal locator beacon. I want to stress the feedback from families of fishers who have been lost at sea. Wearing a lifejacket with a PLB might keep someone alive if the boat sinks or they go overboard, but if the worst happens and that life is lost, the PLB means there is a body for the family to bury or cremate. It is important that we recognise that feedback from families. There seems to be universal agreement that PLBs attached to lifejackets are a good thing, but we know that there is a cost to fishermen of buying new lifejackets with PLBs and registering them. That is why we have tabled the amendment, to make it clear in the Bill that marine safety is important.
Our amendment also deals with the subject of modern slavery. As well as enhancing safety standards, the amendment would address the minimum wage and tackle the issue of modern slavery, which unfortunately can persist far out at sea. Only last year in December, nine African and Asian crew members working on a pair of British scallop trawlers were taken to a place of safety by police as suspected victims of modern slavery. The men were alleged to have worked unlimited hours at sea with very little rest. That is why it important, when we deal with marine safety, that we recognise the pernicious behaviour of those people who are engaged in modern slavery. We need to ensure that has no place in the UK fishing industry, by including it in the Bill. The Prime Minister herself has championed the case against modern slavery. I am certain that if the Prime Minister, who does not seem to have much going on today, were serving on the Committee, she would vote in favour of the amendment, to support action against modern slavery and ensure not only that our fishing industry is as safe as such a dangerous pursuit can be, but that there can be no examples of modern slavery in it.
Mr Carmichael
Like many Members of this House, I am often wary about using legislation to send signals, because most of the time I do not think it necessarily ends well. However, from my experience personally and as a constituency MP, I think the hon. Gentleman’s amendment would send a very important signal, so I commend him for tabling it.
One of my formative experiences in the area came when I was still in legal practice. I was instructed to appear at a fatal accident inquiry at Lerwick Sheriff Court on behalf of a family from Banff, or perhaps Macduff, whose son had been swept overboard from a trawler, the Alandale, which is no longer at sea. In a force 7 or force 8 gale, the young man had gone over to the ledge around the side of the boat to fix a trawl door. The boat was hit by a big wave—a lump of water—and he was washed away. The skipper said that the crew saw a flash of orange oilskin in the water, but that was the last they saw of him. They looked for him for some time, but the search was ultimately futile.
When I was instructed in that case, the grief of the young man’s parents formed my view, which I hold to this day, that the matter requires our attention and every possible signal needs to be given. The other thing that struck me during the fatal accident inquiry was the evidence of the other deckhand, who was still in his late teenage years. He said that for a few weeks after the incident, he had worn a life vest of some sort; when asked on cross-examination why he had stopped wearing it, he said that he had been subject to ridicule from others in the industry. Nobody of that age, and nobody who had witnessed what that young man had witnessed, should be subject to such pressure. I have noticed that the situation has improved since, but there is still a lot to do. I still hold the view that there is a job of education to be done within the industry, and making it an objective of the Bill would be a significant improvement.
Locator beacons are another matter that I have formed a view on over the years as a consequence of my experience of dealing with families. One constituent, with whom I worked for some years, had a brother working on a single-handed creel boat who was caught in a rope—we think—when shooting his creels and went over the side of the boat, which was on automatic pilot. The boat was eventually found a considerable distance from where the family thought he had been fishing. A locator beacon would not have saved his life, but it would have saved his family immense pain and grief to know sooner where he was. It is a relatively small and inexpensive innovation, but it highlights the importance of putting safety objectives in the Bill.
Finally, let me make a point about modern slavery. The modern slavery that we have identified in the fishing industry has generally been a consequence of the operation of transit visas in relation to crews of non-European economic area nationals. The hon. Member for Plymouth, Sutton and Devonport has heard me speak about that in the House times without number. It is a ridiculous use for transit visas and the Government should get real and identify the need for non-EEA nationals to be employed in the industry, and make a sectoral provision about it.
If the objective were included in the Bill, arguably the Home Office’s current approach to visas for non-EEA nationals would be in breach of it. For that and other reasons, the proposed change to the Bill is eminently sensible and supportable.
Brendan O'Hara (Argyll and Bute) (SNP)
It is a pleasure to serve under your chairmanship, Mr Gray.
The right hon. Member for Orkney and Shetland is right. Any of us who represent fishing communities know the devastation that can be caused when a boat is lost. Indeed, just at the start of this year in my constituency, the Nancy Glen sank off Loch Fyne with the loss of Duncan MacDougall and Przemek Krawczyk. The devastation felt is something I never want to see again. Anything that improves safety on board has to be supported.
I question the amendment in relation to wages and salary protection, but the SNP supports the principle. The Scottish Government—notably Fergus Ewing, the Cabinet Secretary—have written to industry stakeholders along those lines and spoken to the Government and officials about regularising the visa situation to ensure that non-EEA workers are subject to UK employment law. We are keen to get full implementation of ILO 188, the International Labour Organisation work in fishing convention. We have concerns that the wording of the amendment means it would not apply to the many fishermen who are self-employed, or to the significant proportion of the industry who are share fishermen, to whom such things as the national minimum wage do not apply. We need to ensure that anything in the licence works in tandem with existing law and check the exact implications of the amendment.
It is complex, so although we agree with the spirit of the amendment, particularly about safety on board, we must ensure that we get things right. If the amendment is pressed to a vote we shall support it but, if the hon. Member for Plymouth, Sutton and Devonport does not press it, we will have an opportunity to work on a proposal covering more of the industry. We could work on that together and perhaps bring it back on Report.
George Eustice
This issue is obviously incredibly important. Fisheries and fishing are one of the most dangerous occupations. Every year we have a fisheries debate—we have one tomorrow. Tragically, we always have to reflect on those who have lost their lives to put food on our tables. I know that there has been a tragedy linked to the constituency of the hon. Member for Plymouth, Sutton and Devonport, with the loss of the Solstice and a crew member. The report was published recently and the hon. Gentleman has had a lot of dealings with the family.
The right hon. Member for Orkney and Shetland raised an important point and told a rather depressing story about a young man who was wearing a personal flotation device for his safety and was ridiculed. That underlines an important issue. We need to try to get a culture change—a change in attitude in some sectors of the fleet—so that safety is given more prominence.
I want to return later to a couple of issues raised by the shadow Minister, the hon. Member for Plymouth, Sutton and Devonport, which are covered elsewhere in the Bill, about how we define under-10s. There are also other issues about monitoring of smaller vessels. However, first it is important to recognise that safety, as the hon. Gentleman acknowledges, is first and foremost a matter for the Department for Transport. I think I am right in saying that he, along with me and many in the industry, attended a meeting organised by the Under-Secretary of State for Transport, the hon. Member for Wealden (Ms Ghani), who has responsibility for shipping. As the hon. Gentleman is aware, she takes this very seriously. We got fisheries stakeholders together specifically to discuss what more can be done to promote safety. He highlighted important schemes, including the use of personal location devices. Quite a lot of progress has been made, too, on personal flotation devices, which are discreet and do not get in the way of fishermen’s manual work but inflate when they come in contact with water.
Luke Pollard
I am grateful to the Minister for those words. It is especially important that we look at marine safety in relation to fishing, because although marine safety is spread across different aspects of Government, in many cases the unintended consequences of fishing regulation have an impact on fishing operations and fishermen’s lives, so it is right that we consider it.
When we consider what can be done to improve safety standards in fishing, it is also right that we consider the differing distribution methods to which the Minister referred in his opening remarks—he talked about the distribution of any additional quota drawn down from our EU friends. That level of detail is not highlighted in the Bill, but the Minister and the Under-Secretary of State for Transport who has responsibility for shipping have great concerns about it, as do I.
I am grateful to the Minister for his comments on the under-10 definition, which is unhelpful across the board. I recognise that a lot of homework still needs to be done to find a better definition. Measuring engine size and hold size are two potential options. However, in the fishing area of DEFRA-land in the bigger sense, unintended consequences can have the most profound effects. We need to be cognisant of safety implications in respect of regulations in the Bill and in the Minister’s secondary powers, even if safety responsibilities sit with the Department for Transport.
The Minister is right to talk about IVMS, which will be a positive development as long as the technology concerns can be addressed. It is certainly an improvement on the behaviour that we see around the automatic identification system, which fishers sometimes turn off when they find fish. I would be grateful if the Minister could maintain his focus on marine safety and continue the discussions with the Under-Secretary of State for Transport. I am seeing her tomorrow to continue those conversations on the Solstice incident.
On the basis that we will revisit marine safety in our consideration of later amendments, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Luke Pollard
I beg to move amendment 43, in clause 1, page 1, line 9, at end insert—
“(g) The climate change and international agreements objective.”
This amendment would add to the fisheries objectives the ‘climate change and international agreements’ objective, defined in Amendment 44.
The Chair
With this, it will be convenient to discuss amendment 44, in clause 1, page 2, line 24, at end insert—
“(7A) The climate change and international agreements objective is to ensure that fisheries policy aims to ensure compliance with the United Kingdom‘s obligations under—
(a) the United Nations Paris Agreement under the United Nations Framework Convention on Climate Change,
(b) the Convention on International Trade in Endangered Species of Wild Fauna and Flora,
(c) the Convention on Biological Diversity, including the Cartagena Protocol on Biosafety to the Convention on Biological Diversity,
(d) the Convention on the Law of the Sea,
(e) the International Covenant on Economic, Social and Cultural Rights (ICESCR),
(f) the United Nations Sustainable Development Goals.”
This amendment defines the “climate change and international agreements” objective.
Luke Pollard
The amendments, which aim to update the objectives at the front of the Bill, refer to climate change. It is important that we talk about climate change in the context of fisheries. Climate change is a challenge facing every single sector of the UK economy, but the impacts of climate change are being felt in fishing communities in respect of the availability and location of the fish stocks that our fishers are trying to catch.
At a time of global uncertainty, we could not let the omission of the phrase “climate change” from the Bill slip by. We know from the evidence we heard last week that climate change is affecting fishing, be that through the availability of food stocks for fish, through the changes in spawning and breeding grounds, or through different migration patterns, which affect where fishers go to catch fish. Climate change is real and it affects fishing, as it does every other economic sector, so it warrants a mention both in the Bill and in DEFRA’s serious considerations and actions.
If Labour had been in government and we were introducing this Bill, I imagine that we would be doing it ever so slightly differently from how the Minister is doing it. The amendment is key in addressing climate change and reinforcing sustainability.
I am grateful for the words of the Secretary of State on not rolling back environmental protections. It is important that those words are met with actions, including in the Bill. In addition to talking about climate change, we talk about the international agreements objective, which lists the other international agreements that have a bearing on fishing, and in particular on the conservation and environmental aspects of fishing—if we overfish, there will not be enough fish in our seas to sustain a fishing industry. We need fisheries that are sustainable both economically and environmentally. The amendment seeks to make a reference in the Bill to the other international agreements.
Alan Brown
Perish the thought that I am starting to think like a Conservative. However, although those are laudable conventions by which we need to abide, is not the key issue that, as a signatory to the treaties, the UK has to fulfil those obligations anyway? Therefore, it is superfluous having them in the Bill, regardless of the signals that would be sent by the amendment.
Luke Pollard
I am grateful to the hon. Gentleman for raising that, because it brings us on to maximum sustainable yield, which is one of our rationales for talking about this. The UK is committed to achieving maximum sustainable yield by 2020—that commitment is in a variety of international treaties and agreements. That target is hard to achieve, according to the feedback we have had from stakeholders and to some of the evidence we heard last week. That is why, in creating a new regulatory environment for fishing, we need to have due regard to the commitments the UK has signed up to elsewhere across our international conventions—MSY by 2020 is one such commitment. It is mentioned elsewhere but not in the Bill, which is why the Opposition seek to raise awareness of not only the importance of climate change to our fisheries but our international obligations and commitments as a nation. I would be grateful therefore if the Minister could expand on the Government commitments given elsewhere to sustainability, and on how they will be reflected not only in the Bill but in its implementation.
George Eustice
As discussed under the previous amendment, climate change is obviously incredibly important. As the hon. Gentleman points out, we have some fantastic marine science laboratories, including in his constituency, that study the long-term effects of climate change, and its impact on, for instance, the availability of plankton and, in turn, our fisheries food chain. DEFRA is therefore responsible for mitigating the effects of climate change. However, the amendment, in common with a number of the hon. Gentleman’s amendments, is not necessary, for reasons I will explain.
I feel that, as a Conservative Minister, I am paying too much tribute to legislation introduced by the last Labour Government, but—I am sure this will not have escaped the hon. Gentleman’s attention—they introduced the Climate Change Act 2008, which set out clear targets in a range of sectors, including marine and shipping. The 2008 Act is the cornerstone of the approach of this Government and this country to tackling the effects of climate change. Although managing a reduction in carbon emissions is the responsibility of the Department for Business, Energy and Industrial Strategy—energy sits within its remit—DEFRA is responsible under the Act for climate change mitigation. We produce regular reports to update both the House and the country at large on our approach.
I will make a couple of points on the other international agreements. The UK is a signatory to those various conventions and agreements and is therefore bound by them under international law. We do not need to state that in the Bill.
I also point out that the hon. Gentleman’s list is a partial one, omitting a number of important international conventions to which we are a signatory. The problem with placing on statute a partial list is that it casts doubt over our commitment to the other agreements. If we are to do a list, we must at least include them all but, in any event, we believe that a list is unnecessary. However, I will just point out some of the other important international agreements and conventions to which we are a signatory and which are not currently covered. There is the UN fish stocks agreement, which sits alongside the UN convention on the law of the sea, and the Oslo-Paris agreement, which is the cornerstone of our international agreements dealing with challenges such as marine litter and marine pollution more widely.
Luke Pollard
Given all the Minister’s praise for the good done by the last Labour Government, I am amazed at his temerity for even wanting to stand against them at the 2010 election.
George Eustice
It would go well beyond the scope of the Bill, but I could give many reasons why I did not stand for Labour.
Luke Pollard
I am grateful to the Minister for stating that he remains a Conservative.
When considering this type of legislation, it is important that we raise the volume on climate change. Labour’s genuine concern is that, since the abolition of the Department for Energy and Climate Change, the political priority and the volume of the debate on climate change has been much reduced. It is not spoken about as frequently and it needs to be.
I am grateful to the Minister for setting out our international obligations and for spending so much time talking about how it is in our country’s interest to pool our sovereignty and to work with our international partners where there are common interests. I am also grateful to him for expanding on the list of international obligations that the UK has signed up to and that we need to continue to be involved in to ensure that our waters are properly managed.
I beg leave to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Luke Pollard
I beg to move amendment 45, in clause 1, page 2, line 11, after “marine” insert “and aquatic”
This amendment would add the avoidance of the degradation of the aquatic environment to the definition of the “ecosystem objective”.
The amendment is about the ecosystem and aquatic environment around our fisheries. The aim is to tidy up a part of the Bill that is inconsistent across the board by enhancing the ecosystems objective and ensuring that it includes the avoidance of degradation of the aquatic environment.
Hon. Members who have had the fortune of sitting in Westminster Hall with me will know of my passion for protecting our marine archaeology, and shipwrecks in particular. I talk a lot about shipwrecks and the importance of creating a wrecks at risk register to ensure that we understand what those pieces of marine heritage are and better protect what lies under the sea. I am pleased that clause 40 refers to
“features of archaeological or historic interest”
in the definition of marine and aquatic environment, as it means that every time there is reference to the marine environment, heritage should be included automatically. That is a useful inclusion, consistent with the Marine and Coastal Access Act 2009 in respect of the responsibilities of inshore fisheries and conservation authorities. However, the definition and scope of the marine and aquatic environment is not taken up consistently in the rest of the Bill, which is a missed opportunity.
The matter should be dealt with consistently. It seems odd, given the power of the Secretary of State and devolved Ministers to make provisions for a conservation purpose which includes the marine and aquatic environment, that this is not mentioned as an element of the fisheries objectives or within the scope of the fisheries statement. Will the Minister confirm where we are in relation to the aquatic environment, as well as the marine environment?
George Eustice
First, I will explain the effect of expanding the provision to include the aquatic environment. The hon. Gentleman has defined it as covering heritage assets on the sea bed, notably shipwrecks, and I will return to that, but first let me say that referring to the aquatic environment as well as the marine environment would also cover all our inland waters, so all of our freshwater bodies.
We already have a regulatory framework for the management of freshwater fisheries, and the Environment Agency is the government agency that leads on the aquatic freshwater environment. Relevant pieces of legislation include the water framework directive—obviously an EU directive, but all the domestic provisions put in place under the water framework directive will come across as part of retained EU law under the European Union (Withdrawal) Act 2018—and the Salmon and Freshwater Fisheries Act 1975, which governs in particular waters in so far as they affect salmon conservation. There is also the Water Resources Act 1991 and, as I mentioned earlier, the Environment Act 1995. We therefore have a comprehensive suite of existing legislation pertaining to the freshwater environment.
Returning to the separate issue of heritage assets such as shipwrecks, as the hon. Gentleman acknowledges, the famous Marine and Coastal Access Act established a licensing regime for people exploring shipwrecks, for example. He may know of the frequent controversies, with divers complaining that some of that licensing regime is too onerous and that it affects their ability to remove ghost nets or litter from shipwrecks, for example, without a licence. There is therefore a comprehensive—some say onerous—licensing regime in place to protect shipwrecks. In addition to the licensing regime for the marine management organisation established under the Marine and Coastal Access Act 2009, we also have the Protection of Wrecks Act 1973, which allows the Secretary of State to protect wrecks in territorial waters and sites of such wrecks.
We have comprehensive legislation that covers the issue of the aquatic freshwater environment and the protection of heritage assets such as shipwrecks. Therefore, an expansion of the ecosystem objective to cover heritage assets in the way outlined by him is unnecessary in the light of the other legislation that we have in place.
Luke Pollard
I am grateful for the Minister’s response. It is important that when we are looking at our marine environment, we look at not only the fish in it but at aspects of human history. When we get to talking more broadly in this place about the wrecks at risk register, I hope we have a new ally. Given what the Minister has said, I do not wish to press the amendment. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Peter Aldous
I beg to move amendment 79, in clause 1, page 2, line 11, at end insert—
“(c) to ensure that fishing activities are managed in a manner that contributes to the achievement of good environmental status as set out in Article 1 of Directive 2008/56/EC and is consistent with all other international and domestic environmental legislation.”
The amendment would add to the ecosystem objective. Taking account of the fact that fishing can have significant implications for the health of the wider marine environment, it would impose a duty to deliver fisheries management in a way that is coherent with other relevant environmental legislation. It would also set ecosystem management in an international context, ensuring that we adhere to international environmental legislation. In many respects, the amendment can be viewed as providing belt and braces—perhaps even duplication—but ecosystems around the world are interconnected and it is important that we recognise that. I tabled the amendment to seek assurance and confirmation from the Minister that the Government are thinking globally and are aware of their international obligations and duties.
George Eustice
My hon. Friend highlights the marine strategy framework directive, which sets out the commitment to good environmental status. It is important to recognise that we are already legally bound to deliver that commitment to good environmental status, because the directive has already been put into our domestic law through the Marine Strategy Regulations 2010. We already have those on our statute book.
My hon. Friend will be aware that we are bringing across all retained EU law, including objectives of this sort, under the European Union (Withdrawal) Act 2018. We have been clear that we do not intend to have regression in our approach to environmental protection, although once we are free of the European Union there will be things that we can do better and more effectively. We can tailor legislation that works to deliver some of these objectives better than we can as a member of the EU, where legal requirements do not always achieve the desired outcome as effectively as they could.
On my hon. Friend’s wider point about working internationally, we have been absolutely clear that we are leaving the European Union because we want to make our own laws again, but in doing so we intend to reassert ourselves on many international conventions, where we have, frankly, lost our voice. We find ourselves in an extraordinary situation in many of the regional fisheries management organisations and in important conventions, such as the convention on international trade in endangered species and the convention on biological diversity, where, even though we are a signatory, we are not allowed to speak as an independent country.
The supposed duty of loyal co-operation means that we must always vote the way the EU tells us to vote. This leads to situations, for instance on the International Whaling Commission, where the UK would often wish to go further than the European Union is willing to and we are forced to follow an EU line. In the final days of the last Labour Administration, the then Secretary of State ordered officials to vote for a more restrictive measure to protect bluefin tuna under CITES regulations. The EU started infraction proceedings against the UK as a result of us exercising that decision to try to protect bluefin tuna. Infraction was only avoided by the then Labour Government giving an apology and saying that they would not do such a thing again.
Since the Lisbon treaty in particular, the UK’s voice on the international stage has been undermined. As we leave the EU we will take our own independent seat on regional fisheries management organisations and other important conventions, and I believe that we will have more influence. I hope that I have been able to reassure my hon. Friend that we are not by any means retreating from the world. Indeed, as we leave the European Union and become an independent country again, we will be able to have our own independent voice on these critical international organisations, where we are well placed to lead.
Peter Aldous
I am grateful to the Minister for that reassurance and confirmation that the UK is very much aware of its environmental responsibilities and is thinking globally. He is right to be adopting that approach. I will highlight two issues. The UK overseas territories might be small in land mass, but many sit in enormous oceans. We also have, in my own constituency, the Centre for Environment, Fisheries and Aquaculture Science, which is an arm of DEFRA. Over the last few years, CEFAS has been very successful in winning work all around the globe. It is very important. We have a great opportunity. It is something that the British people feel very strongly about as well.
George Eustice
My hon. Friend raises an incredibly important point. CEFAS is the world’s pre-eminent fisheries science agency and its views are sought after around the world. Dr Carl O’Brien, the lead scientist at CEFAS, spoke in the evidence session. It does a lot of work in the middle east, in countries such as Kuwait, as my hon. Friend will be aware.
Peter Aldous
I am pleased that the Minister has given me the assurance that I was seeking about the Government’s aspirations and ambitions. On that basis, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Luke Pollard
I beg to move amendment 46, in clause 1, page 2, line 13, at end insert—
“(aa) to facilitate generation of accurate real-time scientific data from both research and all fishing vessels.”
This amendment would add the generation of accurate real-time scientific data to the definition of the “scientific evidence objective”.
The Chair
With this it will be convenient to discuss amendment 24, in clause 1, page 2, line 15, at end insert—
“(c) to ensure full documentation of catches.”
The purpose of this amendment is to ensure the UK achieves full documentation of catches to give a true picture of what is being removed from the sea and in order to provide accurate scientific data to ensure effective management of the shared stocks in UK waters.
Luke Pollard
We want to strengthen the objectives to enhance the requirement for data collection. The UK’s seas have historically been an abundant source of food, income and employment, but at the moment they are failing to meet their full potential. Two thirds of UK stocks have been fished beyond their sustainable limits, but according to the New Economics Foundation, if catches followed scientific advice, the yield could deliver 45% higher landings and additional gross value added of approximately £150 million across the UK coast, and would support an additional 2,500 full-time equivalent jobs.
The UK’s fisheries are not being managed at their optimum economic output. Government figures show that two thirds of our main commercial fish stocks are depleted, overfished or at risk of being depleted, or their status is unknown. Only one third are currently operating at maximum sustainable yield. There was a vague reference to improving data in the White Paper, but that is also no longer in the Bill.
Labour would like to create a road map to take us to fully recorded UK fisheries over time. That makes economic sense. Sustain recently found that UK fisheries are losing out on millions of pounds of business from the catering sector in the UK alone, as buyers look abroad for sustainable fish instead of buying from the UK from fisheries that are not currently classed as sustainable. The market for sustainable seafood is growing 10 times faster than that for conventional seafood. The best markets within and outside the EU require fish products to be demonstrably sustainable, including a number of markets within the UK public sector. That includes our schools, prisons, central Government, Whitehall catering and the NHS. At present, a large amount of fish caught in the UK is not verifiably sustainable, and that is affecting access to those markets within the UK.
We heard a lot about data deficiency during the evidence sessions, and is one of the main reasons that much of the fish caught in UK waters cannot be marketed as sustainable. For fishing to be sustainable, there must be sufficient understanding of the population of the targeted species, the impact of fishing, and the status of our sea-floor ecosystems. Without that data, boats can be considered ineligible for Marine Stewardship Council certification or receive a lower rating from the Marine Conservation Society’s “Good Fish Guide”.
In January this year, the Environment Secretary said that
“we can still do more to improve the procurement of British food across the public sector.”
He was right, but there is no mention of that here. If data deficiency is one of the things holding back the sector, we believe that it should be addressed in the Bill. According to Government data, the status of three of the UK’s 15 main fish stocks is unknown. That would not be acceptable on a farm or in agriculture, and we should stop accepting it simply because it is underwater.
I am grateful that this topic is taken up in a similar amendment tabled by the right hon. Member for Orkney and Shetland. I would be grateful if the Minister told us how the current data deficiency can be remedied.
Brendan O'Hara
Although these are all good aspirations, and we recognise the need to continually improve our data and the need to contribute to better science, we have concerns about some of the practical aspects. For example, who will pay for the very costly technological change that is proposed? I also question whether primary legislation is really the place for determining such scientific measures.
I caution that some of the technological measures are still in their infancy or, in some cases, not yet possible. For example, as I understand it the knowledge around identification and sizing of catches has only just been developed in terms of camera technology.
Finally, is it not for the devolved Administrations of Scotland, Wales and Northern Ireland to determine how to collect data, and indeed what data is to be collected? I fear that the amendments might inadvertently cut across that devolution settlement.
Mr Carmichael
To pick up on that last point, my amendment is probing, albeit with a serious purpose at its root. Essentially, the problem is that for years we have had conflict between what fishermen believe is in the sea and what scientists say is in the sea on the basis of the data that they have. The data that would be produced by the full documentation of catches—which is an important principle, whichever jurisdiction we are dealing with—would be the best possible evidence. It would be in the interests of the industry, and it would certainly be in the interests of the scientific community as a whole.
For years, I have complained about the fact that the source of the conflict between the industry and the scientists is that much of the data collected is almost two years old by the time it is used for the purposes of decision making. We know the situation in the marine environment can change massively over that time. As a consequence, we have a mismatch between the scientific evidence and what fishermen believe is in the sea.
What we propose would allow for a much earlier “quick and dirty” analysis of what is in the sea, and would offer the opportunity of different fisheries management systems. At the moment, given the way in which we use science, I would be very cautious about the idea of moving to anything like a real-time closure, for example. The science, of course, is always evolving and improving, but this is not a novel process; this approach is taken in a number of other fishing jurisdictions. If reliable data is coming from the industry itself, the objectives of real-time fisheries management will be much more easily achieved.
Amendment 24, which stands in my name, is probing, but it strikes at the heart of the approach that the Government will be taking, especially in later parts of the Bill, which deal with the practical ways in which fisheries management is to be undertaken. The National Federation of Fishermen's Organisations, for example, is keen to see the creation of advisory councils.
George Eustice
I will begin by setting out what is required now, what regulations we will have as a starting point, and some of the things that the Government are already doing in this area. First and foremost, the EU Withdrawal Act 2018 will incorporate all existing EU rules on data collection on to our domestic statute book. A significant amount of data is already collected: for instance, vessels over 10 metres in length are required to provide logbook data, which includes details of fishing activities, the catch, the type of fishing gear used, and the area where the fish were caught. Landing declarations are required, with information on the weight and representation of fish, and sales notes on the first sales of fish are also required. There is a comprehensive system of data collection, right from the point of catching and where those fish were caught, through to sales.
We have taken some steps in the past year to begin to improve data collection on the inshore fleet. Traditionally and currently, the under-10-metre fleet has been required to provide only sales notes. We have said that from next year, we will introduce a requirement for IVMS on inshore vessels, so we will know where those vessels are catching their fish. We will also introduce catch reporting as part of a step towards a new settlement with the under-10s: we intend to give them more quota but, in return, have a better understanding of how they are fishing and what they are catching. I believe that through those steps, by extending some of those provisions to the under-10-metre fleet, we will improve the documentation of where fish are caught and how they are caught.
The amendments are unnecessary, because they attempt to dip a toe into the type of detail that would be covered, in my view comprehensively, through the joint fisheries statement. Under that statement, we would have to demonstrate how we are delivering on that scientific objective. That is inevitably going to include how we are funding fisheries science, what the priority species are to move from a data-limited assessment to a full MSY assessment, what the challenges are, and what other issues we need to address. The matters that the hon. Member for Plymouth, Sutton and Devonport seeks to cover in the scientific evidence objective should be picked up in much greater detail in the joint fisheries statement.
On the point made by the right hon. Member for Orkney and Shetland, who has lots of fishermen in his constituency, as long as I have been in post, I have been told that the scientists are always out of date and do not know where the fish are anyway, so they send survey vessels to the wrong place. I have looked at the issue in depth. We use a range of data, as Dr Carl O'Brien pointed out. We look, in real time, at landings data and the size of the fish being caught. There is the Endeavour—the survey vessel that CEFAS operates out of Lowestoft, in the constituency of my hon. Friend the Member for Waveney—which goes to the same grounds every year to sample fish. There is an important reason for that: although the fish might move, there has to be a consistent yardstick to assess the same area; otherwise the control and the ability to monitor trends are lost.
That is not the only data that the scientists use. They use landings data and the survey vessel that goes to the same locations, but they also place observers on fishing vessels with the fishermen who say, “We know where the fish are and CEFAS don’t,” so we are monitoring that as well. We will never perfect the science, but the algorithms and models that the International Council for the Exploration of the Sea uses to predict stock trends factor in that some of the data may be a little dated. A constant refrain of fisherman is that the science is out of data and the scientists are in the wrong place anyway but, although we will never get it perfectly right, we do everything that we can to mitigate the types of effects that the right hon. Member for Orkney and Shetland described.
Mr Carmichael
The Minister actually makes the case for moving towards full documentation of catches very well.
George Eustice
As I explained earlier, we already have full documentation of catches on the over-10s, and next year we will introduce full documentation of catches for the inshore fleet. A linked issue is so-called remote electronic monitoring, which is basically cameras on vessels. Other parts of the Bill give us the power to require cameras on vessels, which could improve our abilities on enforcement and data collection.
We have the ability now, which we will retain in future through provisions in later clauses, to make real-time expeditious changes where required. We have had, for instance, issues with spurdog bycatch in parts of the west country. We had a successful spurdog bycatch avoidance programme, which was put together expeditiously in partnership between CEFAS and the industry in the west country, to assist fishermen to avoid those bycatches or to help them deal with them when they have been unable to avoid them.
I hope that I have reassured the right hon. and hon. Gentlemen of our progress in that area and of our commitment to science. The joint fisheries statement will cover those issues in greater detail.
Luke Pollard
I am grateful to the Minister for setting out measures to address the data deficiency. To realise the aspiration of my party and, I hope, of the Government to have the most sustainable fisheries in the world, it is important that we match that with a commitment to having the best data in the world. Although we already have the world’s best fisheries science, fishers and stakeholders are concerned that there is insufficient coverage of that best science across every single fish stock, so I am grateful to the Minister for setting out how that can be enhanced.
We must send a loud and clear message that we need better data and baseline stock assessments. That needs to be done in conjunction, collaboration and co-operation with the fishing industry, rather than science being done to fishers, which is often their view. The more we can do in a collaborative way, the better. In the light of the Minister’s remarks and as the Committee will discuss data later on, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Luke Pollard
I beg to move amendment 47, in clause 1, page 2, line 21, after “area” insert
“, fishing opportunity, or entitlement for any resources”
These amendments would extend the definition of the “equal access objective” to cover equal access to fishing opportunities.
The Chair
With this it will be convenient to discuss amendment
Amendment 30, in clause 1, page 2, line 24, at end insert—
“(c) individual measures introduced by—
(i) the Marine Management Organisation
(ii) the Scottish Ministers,
(iii) the Welsh Ministers, or
(iv) the Northern Ireland department.”
To ensure that any measures introduced by a ‘relevant national authority’ do not impact on the equal access objective.
Luke Pollard
I can deal with this quickly. The amendment relates to adding fishing opportunities or entitlement to the provision that is already in clause 1(7), so there can be no get-out-of-jail card. Fishers expressed concerns about ensuring that we have as robust a set of criteria as possible for foreign boats having access to UK waters. In the amendment, we ask the Minister to ensure that the clause and the criteria are as robust as they can be.
Mr Carmichael
Amendment 30, which stands in my name, is probing. I confess that its genesis is in briefings from the National Federation of Fishermen’s Organisations. I eventually tabled it because, on balance, it is an important issue that needs to be teased out. The amendment may not be the ideal way of doing it, because the enforceability of the duties of the other Administrations—Scottish, Welsh and Northern Irish Ministers and Governments—is questionable, but the thinking behind it is important.
Essentially, given the devolved nature of fisheries and the fact that we will have the objective of equal access, we have to find a way around the conflict between the different systems that will be put in place in the different jurisdictions. If opportunities for fishing are to be taken up in England by boats from Scotland, or vice versa, or in Northern Ireland by boats from the west of Scotland, or vice versa, we need to find a way to ensure that the regulation is as accessible as possible.
Devolution is a good and worthy objective, which my party has supported for many years, but it can occasionally trigger the law of unintended consequences. If we do not manage the different systems in good faith, the people who have to comply with or enforce the regulations may be left in a difficult position. That is the issue that we seek to bring to the Minister’s attention by way of the amendment. I will not press it to a vote, but I am interested to know how exactly he envisages that will work in everyday, or every year, fisheries management considerations.
George Eustice
To address the amendments, I probably need to explain how quota flows through the various systems at the moment from the point at which it is created internationally. Both amendments stumble into the thorny area of our devolved settlement, as the right hon. Gentleman pointed out.
As an overarching point, we have sought to achieve through the Bill a system that enables us to manage our fisheries domestically in a way that respects the devolution settlement that has been established. To be honest, we sometimes have particular challenges in fisheries, because on one level they are about international agreements with other countries, which are a reserved UK competence, but on another level many elements of fisheries management have been devolved. In some areas, it has been challenging to put together arrangements that ensure that we have a UK framework, where it is needed, in a way that respects the devolution settlement, but I believe the Bill achieves that.
Let me explain how quota is created. First, we have an international fisheries negotiation between the UK and the EU, or the UK and a third country in the future, where, species by species, a total allowable catch and an allocation to the UK of that TAC are agreed. The UK Government then allocate that quota—our share of the TAC—to the devolved Administrations, currently following FQA units attached to the vessels where they are registered. That means we give Scotland, Northern Ireland and Wales an allocation of quota. How they allocate that within their fleet is then a devolved competence.
A few years ago, the Scottish Government did a consultation on moving away from the FQA unit approach and allocating quota in a different way. Although they ultimately stepped back from that, it is a devolved responsibility for them to decide how to allocate that bit of the quota that the UK Government have allocated to them. The difficulty with both amendments is that they cross a line in terms of the devolution settlements, because they start to fetter the ability of the Scottish Government, the Northern Ireland Administration or the Welsh Government to allocate their own quota in the way they see fit.
We intend to pick up these sorts of issues through the joint fisheries statement. Indeed, we already wrestle with these challenges and we have a concordat and memorandums of understanding to manage these issues. Sometimes we have some tension between Scotland and other Administrations over where vessels are registered and where they are fishing, which can lead to disputes that we have to resolve. Due to the nature of our devolved settlement, the one thing we have become used to in fisheries is finding a way through the concordats, the memorandums of understanding or, in future, the joint fisheries statement. The challenge that both amendments alight on is not new; indeed, we have wrestled with it for some time. The solution to the problem lies in the joint fisheries statement that will set out common understandings in the way we approach these particular issues.
While I recognise that both amendments highlight an important issue, the issue goes wider than the Bill because it goes right to the heart of the devolution settlement. One thing we resolved not to do with this Bill is to attempt to rewrite or overturn the devolution settlement. In the absence of that, the joint fisheries statement is our solution to some of the problems the right hon. Member for Orkney and Shetland has highlighted.
Luke Pollard
I am more than happy to, Mr Gray. As a Janner, speaking slowly is not something I am accustomed to doing, but I will try my best.
When considering these amendments, it is important to look at how devolution and access to water can be well managed through the Bill. We know that we have problems relating to equal access, both in internal jurisdictions within the United Kingdom and with our friends from the EU and Norway. Any access must be properly managed and properly understood. This concern is often raised by fishers in Plymouth, who sense that the rule of equal access is not currently being obeyed or applied with the same level of effort and energy as it should. That refers in particular to when there are restrictions or a closure in a UK six to 12 miles area that affects UK fishers but not necessarily others. The Minister talks about the importance of having a level playing field between all those different bits.
George Eustice
Obviously, there will be licence conditions on all foreign vessels fishing in British waters in future. Technical measures of that sort would be a requirement on those seeking access to our waters.
Luke Pollard
I think both amendments in the group are probing, designed to get confirmation. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
The Chair
May I say what a great pleasure it has been chairing the Committee this morning? I look forward to chairing this afternoon, when we meet again at 2 pm. What a very well mannered and intelligent debate we have been lucky to have heard so far. It is funny how long a minute takes when you are watching the clock. Order.
Fisheries Bill (Sixth sitting)
Tuesday 11th December 2018
(6 years, 1 month ago)
Public Bill CommitteesRead Full debate Fisheries Bill 2017-19 View all Fisheries Bill 2017-19 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Public Bill Committee Amendments as at 11 December 2018 - (11 Dec 2018)
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 6 / Noes: 9 - Question accordingly negatived.
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
Peter Aldous (Waveney) (Con)
I beg to move amendment 80, in clause 1, page 2, line 32, at end insert—
“(10) The fisheries policy authorities mush publish, on at least an annual basis, an update on progress made against the fisheries objectives.”
The Chair
With this, it will be convenient to discuss the following amendments: 48, in clause 2, page 3, line 19, at end insert—
“(3A) For the purposes of this Act, a ‘UK fisheries statement’ is a statement made jointly by the fisheries policy authorities on progress towards achieving the fisheries objectives.
(3B) The first UK fisheries statement must be published within 12 months of this section coming into force, and each subsequent UK fisheries statement must be published within 12 months of the previous statement being published.”
This amendment would add a requirement on the fisheries policy authorities to publish a joint “UK fisheries statement” within 12 months of the section being brought into force
Amendment 49, in clause 2, page 3, line 19, at end insert—
“(3A) The Secretary of State must annually lay a statement before Parliament on progress towards achieving the fisheries objectives.
(3B) The first such statement under subsection (3A) must be laid before Parliament within 12 months of this section coming into force.”
This amendment would add a requirement on the Secretary of State to lay before Parliament an annual statement on progress towards achieving the fisheries objectives.
Peter Aldous
It is a pleasure to serve under your chairmanship, Sir Roger.
Amendment 80 would add the proposed words to clause 1 and it should be read in conjunction with amendment 78. It provides for the fisheries policy authorities to publish, at least annually, an update on the progress that they have made towards securing the fisheries objectives. It would give the objectives true meaning and day-to-day relevance, rather than their being somewhat abstract from reality.
From the viewpoint of accountability and transparency, which in so many respects are missing from the current opaque fisheries management regime, it is important that this amendment should be considered. It would help to deliver a truly sustainable and world-leading system of fisheries management.
I tabled the amendment because I want to hear from the Minister what he plans to do to address these particular concerns.
Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)
It is a pleasure, Sir Roger, to serve under your chairmanship. The hon. Gentleman’s amendment sits in conjunction with amendments 48 and 49, which I tabled, in making sure that we would have an annual report from Ministers on progress. Given this morning’s debates, it is really important that there should be an annual opportunity for the scrutiny of Ministers in relation to this issue.
Currently there is a very unsatisfactory situation, as hon. Members need to scramble away and persuade colleagues on the Backbench Business Committee to have an annual fisheries debate in Westminster Hall. Indeed, we have one tomorrow, but I suspect that it will not attract the attention it should, because it is not in the main Chamber. The ability to have that annual presentation of reports by the Secretary of State and a good debate, with all Members of the House able to contribute, is a really important part of this amendment—in effect, that is what we seek. It also relates to when such a debate must take place.
Mike Hill (Hartlepool) (Lab)
As I recall, the expert witness from the Department for Environment, Food and Rural Affairs was talking positively but incrementally about the movement towards opening out quotas, although that will take some time. Does my hon. Friend agree that such debates would help to monitor the situation?
Luke Pollard
I agree with my hon. Friend. When we are looking at such potentially seismic changes as doing away with the fixed quota allocation system and reallocating quota on a larger basis, it is important to have an annual opportunity in the parliamentary calendar for the Government to present the evidence, statistics and science behind where fisheries stocks are, along with progress towards any reallocation.
The other part of amendment 48 relates to the statement being published annually. There is confusion about when precisely the UK will exit the European Union and under what arrangements, but the amendment states in proposed new subsection (3B) that there would be a fisheries statement within 12 months of the provision coming into force. Effectively, whenever we left the European Union, be that in the fashion planned by the current Prime Minister or in a way not planned by her, within 12 months there would be a statement and we would have an opportunity to update and see progress against the fisheries objectives we debated this morning.
[James Gray in the Chair]
The Minister for Agriculture, Fisheries and Food (George Eustice)
All the amendments seek a statutory requirement for the Government to publish an annual statement, updating the House and others on progress towards the fisheries objectives, but we already have a number of plans that mean we do not need to place a statement on a statutory footing. The White Paper commits us to an annual statement on our assessment of the state of stocks that are of interest to the UK and of our approach to setting fishing rates and other management measures.
Fisheries negotiations take place annually, which is why we have an annual fisheries debate. Next week is December Council, at which fishing opportunities for next year will be discussed. We have just been through the various coastal states, and the EU-Norway negotiations are concluding as I speak. To inform our approach to annual negotiations, we will inevitably feed data into organisations such as the International Council for the Exploration of the Seas—ICES—and publish both the data we have on progress on the state of fish stocks and our approach to doing that, so we do not need to place this on a statutory footing.
If something more formal were to be done, if it were judged that there needed to be more formal oversight of our progress towards the objectives, the right place to do that would be in the forthcoming environment Bill, which will establish an independent environmental body to monitor our progress towards the objectives set out in the 25-year environment plan. In relation to a more strategic approach to the delivery of the objectives and the plan, that is the right place to consider such an oversight role. We have in the Bill a statutory requirement for a joint fisheries statement and for a Secretary of State fisheries statement setting out our approach to delivering the objectives.
Finally, it is important to recognise what we already do. Every year, before we go to December Council we lay before the House a written ministerial statement that sets out our approach to the negotiations and the agenda for them, and we always lay a written ministerial statement after the negotiations have concluded, to update the House on progress.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
I appreciate that we have other Bills coming and that there are other ways in which the reports may be obtained, but we have this Bill before the House at the moment, and it is this Bill that establishes the objectives and then the policy statements. Surely the mechanism for accountability should be within the Bill also, if it is to be meaningful.
George Eustice
The method for accountability is indeed in the Bill. There is a statutory requirement to publish a joint fisheries statement and for all the Administrations to pursue that statement to deliver those environmental outcomes and the fisheries objectives set out in clause 1. The issue here is whether it is necessary to place on a statutory footing the idea of publishing an annual statement. My contention is that there is no need, since we already have annual debates.
The hon. Member for Plymouth, Sutton and Devonport made an important point: there is a strong case for saying that, in the new world we are going into as we leave, rather than having that debate brought by the Backbench Business Committee, there should be a debate in Government time at the point the negotiations take place. I would certainly be willing to have conversations with colleagues in other Departments ahead of consideration on Report to see whether we could give such an undertaking.
We have already made a clear commitment in the White Paper to publish an annual statement of the state of the stocks. I do not believe it is necessary to put that on a statutory footing.
Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)
Does the Minister find it troubling that despite the fact that the Marine and Coastal Access Act 2009 has required DEFRA to carry out triennial reviews of the Marine Management Organisation since 2009, only one has taken place so far? Is he concerned that similar failings might accrue with respect to the Bill?
George Eustice
We regularly do triennial reviews. I do not think that the triennial reviews stem from the 2009 Act. I think there was a requirement to review the MMO after four or five years, and my recollection is that that did indeed take place.
My point is that it is not necessary for every report we might publish to be put into statute. I made the point in debating an earlier Bill that DEFRA produces many reports. Every June my box is inundated with annual reports of one sort or another. Some of them are required by statute. The vast majority are not, but we publish them anyway, as it is a means of being transparent with the public. Since we have given an undertaking in the White Paper, I do not believe any of the amendments is necessary. However, as I have said, I undertake to have conversations before Report with Government colleagues, to see whether we can give a more formal undertaking on the idea of the hon. Member for Plymouth, Sutton and Devonport about a more formal debate in Government time on the Floor of the House, rather than in Westminster Hall.
Mr Carmichael
The Minister will remember, as I do, the days when the annual fisheries debate was held in Government time. When the Backbench Business Committee was introduced, it seemed logical that those general debates would go into Backbench Business time. The Government have now taken that on a step. It is not impossible that one day we may have a Government with sufficient authority and a sufficient majority to see a full and comprehensive programme of legislation through the House, in which case it is eminently foreseeable that the time available for a debate of the kind we are discussing will be squeezed out again. I suggest that that is why there is some force to the amendment tabled by the hon. Member for Plymouth, Sutton and Devonport.
George Eustice
In DEFRA we have brought in more Bills—more significant pieces of legislation—in the past 12 months than at any time in recent history. Parliament is currently considering an Agriculture Bill that is the first such major piece of legislation since 1947. Of course, the Fisheries Bill will give us control of our waters for the first time in more than 40 years. So, at DEFRA at least, we are making good progress in getting through some critical legislation.
I hope that I have reassured both my hon. Friend the Member for Waveney and the hon. Member for Plymouth, Sutton and Devonport that while it is indeed our clearly stated intention to publish an annual statement of the state of stocks, it is unnecessary to make it a statutory requirement in the Bill.
Peter Aldous
I have listened with interest to the Minister’s reply. I do not necessarily want to overburden the Bill—it is, as he says, an enabling framework Bill—with unnecessary rules and regulations. However, one of this Parliament’s best pieces of legislation was the Climate Change Act 2008, and that contains an obligation to report annually to the House. I hear what he says about the emerging environment Bill. I confess that I have not considered every step of that emerging Bill, and I am aware that certain organisations feel that we need to join up better the management of the marine environment and the land-based environment. On balance, being kind to the Minister, I will not press my amendment to a vote at this stage, but I will bear in mind his undertaking to look at this matter more fully on Report. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
George Eustice
We have had a comprehensive discussion about clause 1 through the consideration of a series of amendments. The key purpose of the clause is to set out our fisheries objectives, which are largely taken from the existing objectives in the common fisheries policy. The clause also commits us to all those objectives and includes descriptions of them. I do not intend to dwell on the clause any further, since, as I said, we have spent the past few hours discussing each of those objectives in great depth.
Luke Pollard
The Opposition will not vote against clause 1. However, I invite the Minister to reflect on some of the changes to the objectives that have been discussed. I also invite him to look at whether amendments can be introduced in the other place, especially in relation to fish being a public asset and marine safety. I think there was widespread agreement on that on both sides of the House, even if there was not necessarily agreement on the wording.
Mr Carmichael
Among those who gave evidence to the Committee last week, a common recurring theme was that there was something of a disparity between the vision that was laid out in the White Paper, which the Liberal Democrats broadly welcomed, and the rather narrower vision that was left in the Bill. It is also fair to say that we would have hoped to find in clause 1 a number of aspects of the White Paper’s vision. It is disappointing that we have not made more progress. I have been around this place long enough to know how these things work, so I am not necessarily very surprised, but it is fair to put the Minister on notice that the Liberal Democrats will wish to return to certain issues in relation to clause 1 when the Bill goes back to the Floor of the House. Failing that, I am fairly certain that my noble Friends at the other end of the building will also have thoughts on this matter.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Fisheries statements
Peter Aldous