Prospectus (Amendment etc.) (EU Exit) Regulations 2019

Anneliese Dodds Excerpts

Tuesday 8th October 2019 General Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to serve on this Committee with you, Mr Paisley, in the Chair. As ever, I am grateful to the Minister for his explanatory remarks. As he indicated, the instrument tries to deal with some of the issues relating to passporting to the extent that these have changed with what are essentially updates to the prospectus regulation on the EU side. As he set out, it creates a transition period of 12 months for prospectuses passported into the UK. It makes provisions that mean EEA issuers wishing to issue securities in the UK will be required to secure approval of their prospectus from the FCA. Most of the changes appear to be technical, but I would like to probe a couple of issues a little further with the Minister. He has already mentioned some of them and can probably anticipate the ones that I want to ask about.

My first question is about the issue that the Minister mentioned a moment ago—the provisions in regulation 32 that extend exemptions of certain public bodies in EEA states to the same set of public bodies in both the UK and all countries outside the UK. Obviously, in various other instruments the Government have chosen to apply exemptions to countries only with equivalent regulations to those adopted by the UK. The explanatory notes suggest that restricting the exemption to UK public bodies only was the only other possibility considered. I am curious to know why that is the case. Even under World Trade Organisation rules it would have been possible to adopt the same approach overall, which would have been to say that there would be an assessment of equivalence. It is not necessary to have a free-for-all.

Will the Minister outline what analysis has been done of the different options for this exemption and the potential impact of opening this up to all countries? It seems to constitute a material change and it is questionable whether it is coherent with the withdrawal Act. I accept that I lost that argument before, but it would be helpful to understand whether the Government have done more work on that, because it seems to me to be a major issue.

Secondly, I am confused about the process for ensuring the equivalence of accounting standards, which seems to be going round in circles. I am sure the Minister will remember that back in February, I raised the point that it appeared that the Government were not going to carry over the presumption that international financial reporting standards would be sufficient. That would potentially have placed a big burden on Ministers, who would have had to work through whether those standards would be sufficient and assess different accounting standards and so on.

The Government seemed to acknowledge that situation in April, which was great. As the explanatory note lays out, the Government

“laid a Direction in Parliament stating that IFRS as adopted by the EU would be considered equivalent...for the purpose of preparing a prospectus”

and so forth. However, the explanatory note also notes that

“this Direction will be amended to refer to the EU Prospectus Regulation”

and that

“this amendment is not contained within this instrument.”

More work still needs to be done to clarify that it will be possible to continue to assume that IFRS standards as adopted by the EU will be equivalent. Will the Minister enlighten us on when the amendment referred to in the explanatory note will be laid? As I am sure the Minister is aware, his Government have imposed a particular timetable.

Finally, as the Minister mentioned, the regulations create a 12-month transition period for approved prospectuses and registration documents approved by an EEA regulator. That clearly gives a 12-month breathing space, but we still do not appear to have a clear indication from the Government about their long-term view of passporting and seeking equivalence. The Minister referred to legal uncertainty for issuers. I would argue that that uncertainty is already there in the concern about what will happen after a year.

I am sure the Minister is aware of recent research that indicates the fastest and deepest fall in financial services over the last few months since the time of the global financial crisis. That is linked to some of the issues about regulatory equivalence tied to market access. I would be grateful to hear about that from the Minister; we did talk a little about it last night. Will he provide an indication of the Government’s thinking on equivalence on financial services into the future? That is the context; the regulations are clearly trying to set up an interim situation for one year, but I am sure that any issuers and others involved in financial services will be saying, “Well, we really need to know what the situation is going to be after a year.” We have not had an indication on that from the Government as part of their description of the current negotiations that they are having with the EU. As I have already said, financial services did not seem to be really mentioned at all last week.

Risk Transformation and Solvency 2 (Amendment) (EU Exit) Regulations 2019

Anneliese Dodds Excerpts

Monday 7th October 2019 General Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to serve with you in the Chair, Mr Wilson, and, as always, to sit across from the Minister in yet another Delegated Legislation Committee relating to financial services. I am grateful to him for that explanation of the statutory instrument, but it leaves a number of questions unanswered.

First, there seems to be a lack of clarity about the locus for application of the measures. The Minister referred at various points to the fact that the Government have laid before Parliament many such instruments in relation to no deal, but as the made affirmative procedure was used, the measures are already in place, regardless of the manner in which the UK will exit the EU. That is not very clear in the explanatory memorandum, which flits between no deal and circumstances where a deal has been reached.

I wonder whether that is an implicit acknowledgement that whatever deal the Government conclude, it will not explicitly cover some of the issues surrounding the co-ordination of financial services regulation. I have been looking closely at what the Prime Minister said last week and what has been released by the Government. There does not appear to be a clear indication of the regulatory regime for financial services. Perhaps the Minister could indicate whether that reflects a situation where all the previous SIs that we have looked at, including today’s, will be the legislative context even if there is a deal. Currently, it does not seem that a deal will cover financial services, at least from what I can see.

The most significant element of the Solvency 2 directive is the removal of the distinction between European economic area and non-EEA insurers and reinsurers. That is done through regulation 4, which amends the Solvency 2 exit SI, which we have talked about, through, as the Minister mentioned, the insertion of a new definition of “special purpose vehicle” in the Solvency 2 and Insurance (Amendment, etc.) (EU Exit) Regulations 2019, and regulation 5, which amends the Financial Services and Markets Act 2000 (Amendment) (EU Exit) Regulations 2019 so that the relevant Solvency 2 requirements in retained EU law apply to all UK special purpose vehicles, regardless of whether the insurer or reinsurer transferring the risk is regulated in the UK or elsewhere.

I would be curious to know whether the Treasury has conducted any risk analysis of the measure, and what it might regard as potential difficulties in removing that distinction and creating a single regime. Was any consideration given to retaining two separate regimes—one for UK insurers and reinsurers and those with equivalent regulations, and another for third-party countries without equivalent regulations? It would be interesting to hear about that. Also, what support is being offered to those in the financial services industry affected by the changes and the adoption of a single regime?

Returning to the fact that the SI amends FSMA, I asked the Secretary of State for Digital, Culture, Media and Sport when FSMA will be updated on legislation.gov.uk to ensure that the version available there accurately represents the legislation in its current form. I was told that it has been updated until the end of 2016. Since then, 951 amendments have been made to the Act; indeed, the Minister has discussed many of them with me in Committees similar to today’s.

I was informed that a fully revised version would be available only at the end of the year—clearly beyond when the Government say that they want to leave the EU. I am very concerned about this. It is now difficult for those who wish to comply with legislation to understand what is in that crucial Act, FSMA. It seems to be symptomatic of a piecemeal approach. In this SI, we have again had post-hoc amendments to legislation that has already been passed. Can the Minister make a commitment to the Committee that he will work with the Department for Digital, Culture, Media and Sport to ensure that this process can be sped up? I am very concerned about the impact on compliance if we do not even have an up-to-date version of that fundamental Act.

--- Later in debate ---

[John Glen]

I am happy to address the points raised by the hon. Member for Oxford East, and the point made by the hon. Member for Linlithgow and East Falkirk. The SI follows the same process as all SIs. With respect to Solvency 2, the simple reality is that the legislation was amended between the previous presumed exit date and this one. We have simply brought that up to date, and the ILS-related mechanism derived from, and made reference to, the Solvency 2 provision. As a consequence of that relationship, which was something that we authored in the UK, it made sense to update both at this time, given that they are within the same category.

The hon. Member for Oxford East asked what would happen to this SIs if we got a deal. If a deal is secured, any withdrawal agreement Bill will make provision to defer any Brexit SIs that are not needed in a deal scenario until the end of the implementation period. We expect that the Bill will achieve this through a blanket deferral of Brexit SIs that come into force on exit day until the end of the implementation period. We expect that the Bill will also ensure that Ministers can revoke or amend any EU exit SIs as appropriate, so that they deal effectively with any deficiencies arising from the end of the implementation period. In the circumstances that we are talking about, following a hopefully successful conclusion of the deal-making process, we would have a 14-month implementation period, as per the plans at the moment, in which to make provision for the enduring solution. We will ensure that onshoring regulation is not commenced if there is a deal and a transitional period is agreed with the EU.

The hon. Lady asked about the difference between EEA and non-EEA firms. The UK special purpose vehicles are already subject to the same Solvency 2-derived requirements, regardless of whether they are accepting risks from EEA or non-EEA firms. The distinction in the Risk Transformation Regulations 2017 simply reflects the fact that EU law applies only to deals that involve EEA firms. This notional distinction will no longer make sense after exit, so it is being removed, but it will not affect any deals already in place. There is no distinction for these regimes in practice—all deals must comply with UK standards, so equivalence is not necessary.

The hon. Lady referred to her question to the Secretary of State for Digital, Culture, Media and Sport and to the update of FSMA on the gov.uk website. The National Archives is working to have FSMA updated in time for exit day, and the Treasury is helping with this work. I am not more familiar with the situation than that; obviously my officials helped me answer that question, but I would be happy to examine the matter closely and come back to her on that.

[Anneliese Dodds]

I am grateful to the Minister for making that commitment, because his answer contradicts what his Secretary of State said in an answer to me: that the updates would be ready only at the end of this year. I welcome that, and hope the Minister can try to reach towards the date he gave, because otherwise I really worry about people trying to comply with the legislation without having it in front of them.

[John Glen]

I do not try to contradict my colleagues in Government, but that is the information I have received. I will provide clarification as soon as I can.

Turning to the points made by the hon. Member for Linlithgow and East Falkirk, I recognise the distinction between the Government’s perspective on these matters and his party’s. All I can say is that the financial services industry, which is significant in Edinburgh and Glasgow, is made secure by this process. He may—and indeed does—disagree with the Government about what should happen, but I assure him that in a no-deal scenario, the interests of the financial services industry in Scotland will be looked after as best they possibly can.

I thank the Committee for its consideration of this SI, and the points made by hon. Members on the Opposition Benches. In conclusion, the deficiency fixes in this SI will ensure that the UK’s prudential regime for insurance and insurance risk transfer remains prepared for withdrawal from the EU in any scenario. I hope the Committee has found this evening’s sitting informative, and will now be able to join me in supporting these regulations.

Question put and agreed to.

High-income Child Benefit Charge

Anneliese Dodds Excerpts

Tuesday 3rd September 2019 Westminster Hall

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to speak in this debate with you in the Chair, Mr Hollobone. I congratulate the hon. Member for South Thanet (Craig Mackinlay) on securing the debate, which has been very good and detailed. I will not repeat all the points he made, or indeed all those made by the hon. Members for Strangford (Jim Shannon) and for Glasgow Central (Alison Thewliss), because I agree with very many of them, but I want to underline some of the questions that I hope the Minister is able to answer, or at least some of the issues that his Department needs strenuously to take on board.

As was rightly mentioned, new research on the high-income child benefit charge indicates that much larger numbers of people are being drawn into the system than were initially. The Institute for Fiscal Studies indicated that since the £50,000 threshold has not shifted upwards, about 36% more people—370,000 more families— will lose child benefit in 2019-20 than in 2013-14. The system is now also interacting with changed tax systems for other sources of income, such as the system for those who eventually rely on rental income.

The Labour party has consistently objected to the removal of the universal nature of child benefit. Clearly, however, there are also practical reasons why the high-income charge is unfit. It has added unnecessary complications, many of which we have already heard about, and it has had a significant impact by requiring up to around half a million people to engage in self-assessment, which is not an easy process.

The hon. Member for South Thanet mentioned that about 6,000 cases of supposed over-claiming of child benefit have been written off by HMRC, which has handed out refunds of about £1.8 million. It would be helpful to hear from the Minister what work is being undertaken to ensure that all those who might benefit from some kind of refund of additional charges levied because of alleged over-claiming—I am not sure I like that term, to be honest—are aware of that.

I hope the Minister also deals with the suggestion the hon. Gentleman rightly made that the real-time information system could proactively be used to try to identify those who might be in danger of falling into this kind of trap. I am concerned to see yet again what appears to be a lack of co-ordination on what are often viewed as Department for Work and Pensions responsibilities but in practice are delivered by HMRC or in some other way by the Treasury. I was concerned just before the recess that the Minister’s Department did not seem to want to take responsibility for the clawing back of alleged overpayments of working tax credit from universal credit. It said that was a DWP issue. It is not; it is a Treasury issue. Yet again, we have a lack of co-ordination. That needs to be dealt with.

The high-income charge increases the complexity of the already incredibly complex tax system HMRC is expected to deal with, and having to deal with appeals arising from the charge increases the enormous burden that HMRC staff already face. We all know that HMRC has been cut more than any other European nation’s tax department aside from that of Greece, which I suspect is not an example we would want to follow. We see the burden on HMRC staff increasing all the time, not least given the prospect of a no-deal Brexit—we could hardly have ignored that at the beginning of the debate, given the noise from outside. Will the Minister say what resource HMRC is being given to deal with that?

I share the concerns about the impact of the high-income charge on families with sole earners, which was rightly emphasised by the hon. Member for Strangford and others. I also share the concerns about the impact of the charge on independence. It is part of what we might call a triple whammy of a whole range of measures, including what we have seen in relation to universal credit.

This debate has echoed many of the issues with childcare tax credits, where there has been a lot of confusion about things such as the relationship between parents’ incomes and who loses out as a result. The hon. Gentleman described how families often use child benefit to create an asset for their children. That has become increasingly important and relevant, as of course we no longer have the child trust fund.

It is important that the Minister explains what is being done to deal with the long-term problem of people inadvertently becoming unable to accrue state pension credits because they do not qualify for national insurance contributions or indicate that they want to be part of the system. Obviously, that disproportionately discriminates against women. There is already a huge gender pension gap. What are the Government doing to ensure that those who might be caught by this issue are not? I absolutely agree, having been through that process myself—I suppose I should declare an interest in that regard—that its impact is not obvious. There is no clear indication that it will result in a big reduction in a person’s retirement income.

It would also be useful to understand any possible disincentive effects of this measure. I am not sure that the case the hon. Member for South Thanet mentioned is as unlikely as all that. I remember from my childhood a family up the road who suddenly, very sadly, dropped down to a sole earner. They had nine children, and the father, as the sole earner, had to bring them up. What will the impact be in such cases if there is suddenly this kind of cliff edge? We have seen the impact of cliff edges with the overall family benefit cap. We are in danger of replicating that here.

I hope the Minister answers those questions. Obviously, I hope the whole high-income child benefit charge is abandoned. I do not expect him to make quite as dramatic an announcement here, but I hope he rules out any reduction in the availability of other universal benefits, given the kinds of issues we have discussed and the impact on equity.

[The Financial Secretary to the Treasury (Jesse Norman)]

It is a great pleasure to serve in this reconvened Parliament under your chairmanship, Mr Hollobone. I thank my hon. Friend the Member for South Thanet (Craig Mackinlay) very much for calling this debate and drawing attention to this important issue, and for his thought-provoking and expert speech, which very much reflected his professional experience as well as his political commitments. I very much welcome that. He raised a lot of issues, and a wide range of issues were raised by the hon. Members for Strangford (Jim Shannon), for Glasgow Central (Alison Thewliss) and for Oxford East (Anneliese Dodds). I will come to all those. Let me address some of them in my opening remarks and then come to the specific questions that were raised.

As you will know, Mr Hollobone, child benefit was introduced in 1977. It has always been, and it remains, a universal benefit payable to individuals who are responsible for what is referred to as a qualifying child or children. Before 2013, there had been significant growth in the use of the benefit—rightly and importantly so; of course, that is why benefits exist—but it was recognised that, at a time of austerity, there was an anomaly, in that more than £1 billion a year was being spent in child benefit on higher-rate taxpayers. That was felt to be not merely imprudent from a financial standpoint but morally problematic. It would mean, as it were, taxing working people on low incomes to pay for the child benefit of those who earned considerably more.

If it is true that, as the hon. Member for Oxford East said, it is now Labour policy to remove the high-income child benefit charge—she was perfectly clear about it, so I think it is true, but she is welcome to correct me if it is not—the Labour party needs to ask itself whether it thinks it appropriate to tax the wider population, including working people on low incomes, to pay the child benefit of those who earn considerably more. We also note that the cost to the Exchequer of such a policy is of the order of £1 billion to £1.5 billion.

[Anneliese Dodds]

I am grateful to the Minister for giving away. He is well aware that we opposed the measure at the time, as we did many other elements of the Government’s programme. We also criticised the tax cuts given at the same time to the highest earners and to profitable corporations, which in their magnitude over time were more substantial than what we are talking about now.

[Jesse Norman]

That is an ingenious attempt to link two issues that, in and of themselves, are not connected. One can have a policy on high income tax earners and the payment of child benefit to them and one can have an entirely separate policy about other aspects of the tax system. The question remains whether it is morally appropriate to give the benefit to those people, and the judgment in 2013 was that it was not the right thing to do. That was an important consideration.

If the hon. Lady is concerned about the wider picture, I remind her that—I think I am right in saying this—the top 1% of taxpayers pay a higher percentage of tax now than at any other point in our history.

[Anneliese Dodds]

rose—

--- Later in debate ---

[Mr Philip Hollobone (in the Chair)]

Order. The intervention is in the gift of the Minister, but I draw the House’s attention to the fact that the Minister has only 5 minutes left.

[Anneliese Dodds]

Thank you, Mr Hollobone. I merely state that the Minister is correct in relation to income tax, but not in relation to other taxes.

[Jesse Norman]

The judgment made in 2013 was that it was appropriate to claw back some of the money paid to people on higher incomes and that everyone should make a fair contribution to removing the deficit while supporting those on the lowest incomes. I think that was the right judgment. Of course, for a minority of claimants where either they or their partner earn more than £50,000 in adjusted net income, there is a requirement to pay the tax charge or to opt out of receiving child benefit payments and therefore not pay the charge.

It is a fair criticism, made eloquently by my hon. Friend the Member for South Thanet and others from across the House, that the charge does not take into account overall household incomes, so it is possible—and it does happen—that a single parent earning more than £50,000 is liable to the charge while a couple each earning up to £50,000 is not. That is because, as he said, the charge is a tax, calculated in accordance with the principles of individual taxation at the individual level alongside other tax policy. Here we have one of those difficult decisions for the Government about what is the right thing to do. The judgment made in 2013 was that it was better to take that approach than to base a charge on household incomes, because that would require HMRC to assess annually both household composition and the incomes of everyone in the 8 million or so households eligible for child benefit, which would effectively introduce a new means test, creating a substantial administrative burden on both the state and families. That is the dilemma.

The effect of the charge is to introduce a high marginal tax rate. That is an unattractive aspect of the policy; we should be clear about that. If I may say so, it is not a salutary lesson in how not to withdraw a benefit, because the alternatives of not levying the charge at all or levying it on a cliff edge rather than by gradual withdrawal are worse. It is open to others to take the view that one of the alternatives is better, and my hon. Friend may do so, but not subject to the fiscal constraints in which we have operated.

A series of questions were raised about HMRC communications. As my hon. Friend recognised, the Revenue and Customs took considerable steps to raise awareness of the higher income child benefit charge. It wrote to about 800,000 affected families when the charge was introduced. It also ran a high-profile advertising media campaign and included a prominent message about the charge in 2 million letters to pay-as-you-earn-only higher rate taxpayers. There was a considerable communication process.

Today, to respond to the question from the hon. Member for Strangford, information on the charge is included in packs for new parents telling them how to claim child benefit. The front page of the child benefit application form includes a prominent message about the charge to help people make a decision on whether they should claim and be paid child benefit, about the importance of claiming even if they do not receive payments, and about the important issue of eligibility, which was rightly highlighted in the debate. Guidelines are available online formally through gov.uk and through innumerable organisations and groups.

As my hon. Friend the Member for South Thanet mentioned, individuals who pay the charge need to make a self-assessment tax return and may face a failure to notify penalty if they do not. I think he will know that HMRC announced a review of cases where a failure to notify penalty was issued for three tax years. It reviewed 35,000 cases and responded by reviewing the amount for over 6,000 people.

There are many other points to cover in the short time that remains. My hon. Friend said that 500,000 people have been forced into self-assessment. I am happy to write to him on that. As he will be aware, the current number paying the charge through tax returns is 293,000. Of course, there are some 40 million people in pay-as-you-earn. He also said that the charge has dragged 1.2 million people into the system. I am not quite sure about that, but if he wants to contact me, I will be happy to assist him further.

The hon. Member for Glasgow Central said that the charge is a gendered policy. I do not think that is true at all, and many other aspects of Government policy do not reflect anything like that position, as she will be aware. For example, there is extensive work in supporting women as entrepreneurs and women in business.

Summer Adjournment

Anneliese Dodds Excerpts

Thursday 25th July 2019 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is always a pleasure to follow my hon. Friend the Member for West Ham (Lyn Brown). I was very disturbed to hear about the testimony that she mentioned, but equally I am pleased that she has voiced it in this House. I am sure that everyone heard it and was appalled by the details.

I rise to speak today because the House declared a climate emergency on 1 May. If anything, that emergency has become ever more evident over recent days. While we have been in this House, outside in our country the temperatures reached a record-breaking 39°. I pay tribute to all those emergency services who have been helping people to deal with the heatwave. They have been active in Paris as well, which has just itself reached a new record of 41°. In the Netherlands and Belgium, national records for temperature have already been broken this year.

In fact, over the last 19 years, five new records have been broken for summer temperature in Europe, going back to 1500. Think about that: the five hottest summers in Europe since 1500 have occurred just in the past 19 years. But my constituents tell me that what we have experienced here in Europe is as nothing compared with the experience of many of their families in the global south. Two years ago, people living in the Punjab had to put up with temperatures of 52°. Farmers in Jamaica have been experiencing drought after drought after drought, and children living in Bangladesh are becoming more malnourished as extreme weather event follows extreme weather event.

Just yesterday, three scientific studies were published that showed that the temperature changes we are currently experiencing are happening faster and more intensively than at any point over the past 2,000 years. What has been our response? Well, Parliament is about to adjourn. I agree with my hon. Friend the Member for Poplar and Limehouse (Jim Fitzpatrick) that we will still be working, but Parliament will not be sitting. In any case, since 1 May it has felt like business as usual.

I have talked to lots of children and young people in my constituency about the climate crisis. In fact, many of them have come to speak to me during mass lobbies on the topic in this place. I know how concerned many of them are about the crisis; in fact, many of them at local schools have been producing posters with their views about the environmental crisis. I find it heartbreaking to see their images of the climate breakdown—of what they think it will be like if we do not act—but I am inspired by their passion and determination to do something about it.

Those children and young people, and their parents, have been asking me to ask questions in this place on their behalf. Those questions include things like: why are we still building homes in this country that are not zero carbon? Why we are spending only 2% of our transport budget on cycling and walking? Why is part of our aid budget still going towards supporting fossil fuel-based technologies in the global south? Why have we seen feed-in tariffs abolished and a block on onshore wind? Why are we denying our country the benefits of the 400,000 extra jobs that would come from a green new deal?

When we return to Parliament, I hope it will not be to the chaos of an impending no-deal Brexit, but even more fundamentally it must not be a return to business as usual. When we come back at the beginning of September, it must be to a legislative programme that meets the aspirations of those children and young people and their parents, that faces up to the climate crisis, and that actually embodies the meaning of the term “emergency”: a situation that demands an immediate response.

NHS Pensions: Taxation

Anneliese Dodds Excerpts

Monday 8th July 2019 Commons Chamber

[Elizabeth Truss]

The answer to my hon. Friend’s first question is that the Health Secretary is currently in discussions with the British Medical Association and other health representatives about precisely what can be done, and of course the consultation will come out shortly. Some of the issues he mentioned in terms of legislation will clearly be a matter for the new Prime Minister and Administration, but the fact that my hon. Friend has raised this urgent question today will draw to people’s attention the urgency of this issue and one would expect it to be considered very early on by a new Administration. The point I was trying to make earlier is that there is a fundamental distinction between how we deal with the issues in the NHS, on which the Health Secretary is leading, and the broader issue of our pension system, which is there to encourage people to save. That has to be considered in a holistic manner so we cannot just design it around one workforce. It has to be designed to work for everybody in both the public and private sectors. That takes time of course, and we are working through some of the conclusions of the reforms that took place a few years ago.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I am grateful to the hon. Member for South West Bedfordshire (Andrew Selous) for asking this urgent question. It follows a Westminster Hall debate two weeks ago on this issue, when Members from across the House raised concerns about the Government’s mismanagement of the interaction between their pensions relief policies and the NHS pension schemes.

The worst-case scenario that we all feared has become a reality. Hospital leaders are raising the alarm that waiting lists for routine surgery have risen by up to 50%. Unless this issue is dealt with, there is a risk that the approach of the end of the financial year will lead to even greater levels of working to rule after the summer.

The changes that have led to these issues relate to the interaction of the taper, which George Osborne introduced in the summer Budget of 2015, with other rules on tax reliefs and the three NHS pension schemes. Despite decisions being taken around these measures some time ago, there appears to have been next to no communication by the Government with representative groups about this issue until the crisis had already begun. That is very different from the “constant review” that the Chief Secretary to the Treasury has just referred to.

It is fair that tax reliefs should be consistent with other core principles of taxation and that the pension allowance should decline progressively for those people who earn high incomes. However, at issue here is the interaction of that system with the NHS pension schemes, on which the representative organisations maintain they were not properly consulted. Many consultants are only now becoming aware of their liabilities. I asked two weeks ago, and I ask again, whether the Government believe that their communication with those affected has been sufficient. Furthermore, does the Chief Secretary to the Treasury believe it is acceptable that many of those affected have not even received pension statements in a timely manner, due to delays by Capita? Surely that is only exacerbating these problems.

The Government have maintained—the Chief Secretary to the Treasury did this again a moment ago—that this issue will be solved by the 50:50 pension option proposed in the NHS people plan released last month. However, a number of representative bodies have already expressed concerns about this option. So my third and last question to the Chief Secretary to the Treasury is: what discussions has her Department had with the Department of Health and with those representative bodies about the 50:50 scheme? It has been painfully clear from the Westminster Hall debate, and again this afternoon, that there has been an abject lack of co-ordination across Departments on this issue.

I am sure that many of us are concerned about the lasting impact of today’s crisis. NHS staff retention is already poor. This issue is one of many affecting dedicated senior staff, with large numbers raising concerns about levels of stress and a general lack of resource. A whole variety of Government failures is driving these retention problems. Today’s crisis is likely to add to this, with confusion over pension relief pushing many to retire earlier than they previously would have done, or encouraging some to opt to take on additional private work. I am concerned not only for those consultants but for their patients. There are currently 100,000 NHS staff vacancies; that is one in 11 of all NHS posts. This latest failure will see yet more delays for people in desperate need of care, unless the whole of this Government, working together, get a grip.

[Elizabeth Truss]

We acknowledge that there is an issue. That is why the Health Secretary is poised to launch the consultation—

Income Tax

Anneliese Dodds Excerpts

Wednesday 3rd July 2019 Commons Chamber

[Jesse Norman]

It is hard to make swingeing criticism of the idea of reliefs and then not indicate any that a Labour Government would propose to abolish. It raises the question whether the Labour party is serious about this. The hon. Gentleman described these reliefs as “corporate welfare” and giving away millions of pounds to large companies. All companies benefit that have qualifying investments and are subject to UK taxation in the way indicated; it is not just larger companies. Many of the reliefs he describes are negligible and therefore should not necessarily be the target of extensive review. He talks about the reduction in corporation tax as though it is a bad idea but neglects the fact that significantly more corporation tax has been raised following these reductions.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

I am grateful to the Minister for being willing to give way. I am sure he is aware of the evidence repeated over and again by the bodies that have looked into this that the reason for increased corporation tax take was not the reduced rate of corporation tax—rather, it related to the return to profitability of banks and so forth. It was not related to the reduction in rate, and just about every authoritative study that has looked at this has suggested that.

[Jesse Norman]

Those companies’ return to profitability was the result of proper, prudent financial management. I remind the hon. Lady that in the specific case of the financial sector, the bank levy has taken billions of pounds a year more from the banks than the Labour tax that it replaced. I do not think her view has credibility.

The hon. Member for Bootle criticised the timetable, but it is designed specifically to keep uncertainty to a minimum. Far from the suggestion that it would create more uncertainty, the point of my saying that qualifying expenditure on new builds or renovations for which all contracts for the physical construction works were entered into on or before 29 October 2019 will be eligible for relief is precisely to give very clear direction to future investment. I do not agree with many of the points that he made.

Oral Answers to Questions

Anneliese Dodds Excerpts

Tuesday 2nd July 2019 Commons Chamber

[Robert Jenrick]

The hon. Gentleman is absolutely right: there are disparities of income and productivity across the United Kingdom, and what he mentions will be one of the key objectives. But the shared prosperity fund is not our only intervention in this area: we are taking a range of measures, including significantly increasing the amount of public investment in infrastructure—to the highest levels in this country since the 1970s.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

Despite pledges that the Government would provide details on the shared prosperity fund by the end of last year, the Chancellor has been silent on how much communities could lose from the £17 billion-worth of structural funds. The Chancellor has only now woken up to the danger, splurging nearly £10 billion, almost half that amount, on tax cuts for the well off—as advocated, of course, by the right hon. Member for Uxbridge and South Ruislip (Boris Johnson). Surely the only shared prosperity under the Conservatives is for those who are already well off.

[Robert Jenrick]

Clearly, it is not possible to progress this matter until we have greater certainty about our exit from the European Union. Those Members of this House who want to see this matter progressed should be voting to leave at every opportunity, as we on the Government side have done. The important thing to point out on regional disparities is that this Government are investing far more than the previous Labour Government. In fact, £430 million a week more in real terms is being invested by this Government than under the previous Labour Government on infrastructure in all parts of the UK.

Draft Double Taxation Relief and International Tax Enforcement (Israel) Order 2019 Draft Double Taxation Relief (Cyprus) Order 2019

Anneliese Dodds Excerpts

Tuesday 18th June 2019 General Committees

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to serve in this Committee with you in the Chair, Mr Hosie. I am grateful to the Minister for his opening remarks, and congratulate him on joining the Treasury team. I am sure this will be one of many double taxation agreements that we discuss. I hope he enjoys debating each one just as much as he has enjoyed debating these.

As the Minister has outlined, the Double Taxation Relief (Cyprus) Order 2019 amends the entry into force provisions of the 2018 DTA so that a person in receipt of a Government service pension can elect to continue to be taxed in accordance with the provisions of the previous 1974 DTA for a period of up to five years. As was mentioned by the Minister, this has been introduced in response to concerns raised by the Opposition and other members of the Committee when it met previously about the new regime’s potential impact on British servicemen and women who live in Cyprus and others. I am pleased that the Government listened and that they sought to introduce a transition period in the light of these concerns.

In relation to the Double Taxation Relief and International Tax Enforcement (Israel) Order 2019, I am pleased to see that the DTA is being updated. It is encouraging to see the UK broadly following the OECD model and adopting the base erosion and profit-shifting compliant principal purpose test. None the less, there are a couple of issues: taxation of royalties and the principal purpose test.

As many Members know, aggressive tax avoidance schemes have been developed by multinational companies, often using loopholes in the international taxation of royalties. By artificially locating the legal ownership of their intellectual property in avoidance-facilitating jurisdictions such as the Netherlands and Luxembourg, a multinational can avoid UK tax on UK royalties. These royalties are within the scope of UK income tax but UK DTAs with those jurisdictions create exemptions meaning only the avoidance-facilitating country may tax them. At my estimate, almost a third of our tax treaties currently create an exemption on royalties-withholding taxes, including the Netherlands and Switzerland. Israel does not have the same reputation for that type of activity as those countries, but I am concerned that the Government’s prevailing approach to royalties-withholding taxes in DTAs is leaving us vulnerable.

The Government introduced measures to prevent such abuse in the previous Finance Act, but previously negotiated DTAs appear to be preventing them from applying them to the most problematic jurisdictions. In particular, it appears that the intangible property measure contained within the Finance Act 2019 does not apply to the jurisdictions with which we have a DTA, so it would not apply in the case of these DTAs with Israel and Cyprus. It would be helpful to understand from the Minister, either now or in a letter afterwards, the Government’s intended scope of that measure—if all DTA-covered jurisdictions are exempted, it will be applied to only a handful of jurisdictions.

Secondly, although I am pleased that the Government are adopting the BEPS-compliant principal purpose test, I am concerned that the test remains largely untested. Tax justice activists and academics have raised concerns about the burden of proof necessary as part of the test. It would be helpful if the Minister could help us understand, either in Committee or via letter, how practically workable the Government believe the principal purpose test will be.

In conclusion, while putting together these DTAs, the Government surely need to more carefully consider how they interact with attempts they are making to control the use of profit-shifting via royalties through mechanisms such as those set out in the Finance Act 2019. Surely they also need to look more closely at the implications of their approach to the principal purpose test for the workability of the measures for HMRC.

Finally, I have asked before in Committee for an indication from the Government of the schedule of negotiation of DTAs. They have stated that they are trying to work through the corpus of DTAs to bring them into line with the OECD’s multilateral instrument. It would be helpful to have a clearer picture of the exact stage. Some are being renegotiated, and others are taking much longer. As mentioned by the Minister, the Israel measure has not been renegotiated since the 1970s. Others were changed after being in force for just a few years. It would be helpful to have a clearer perspective of where we are going.

Local Bank Closures

Anneliese Dodds Excerpts

Wednesday 12th June 2019 Westminster Hall

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to speak with you in the Chair, Ms Ryan, in this interesting and well-informed debate, and to sit across from the Minister. I was starting to get withdrawal symptoms because there have not been many statutory instruments recently, although I am sure the Government will rectify that.

I congratulate the hon. Member for Moray (Douglas Ross) on securing this debate, as I know that the issue has seriously affected many of his constituents and local businesses. For those without an intimate knowledge of north-east Scotland, let me underline that the communities we are talking about are often far apart. They either have next to no public transport, or it is of poor quality and very expensive. Local facilities are therefore incredibly important.

As the hon. Member for Motherwell and Wishaw (Marion Fellows) rightly said, we had a debate on a similar topic just a few days ago. It was mentioned that in certain circumstances an ATM might close on a high street that still has a number of different facilities. We are not talking about that in this debate; we are talking about situations where few facilities are available. This is not about duplication; it is often about the last services moving away. As the hon. Member for Strangford (Jim Shannon) said, this is about social and rural isolation.

High street banks are an essential part of our financial infrastructure and they help to support local economies and communities. The bank branch network has been shrinking at an accelerating pace. Many statistics have already been given, but the UK has lost nearly two thirds of its bank and building society branches over the past 30 years. In 2018 and 2019, banks and building societies will have closed, or planned to close, a total of 1,080 branches, and 3,318 branches have shut in the past four years. Banks have been closing at a rate of nearly 70 a month. Overall, a fifth of the population lives more than two miles from their nearest branch—and a good deal further away in some of the situations that have been mentioned.

The debate has focused particularly on Scotland, where there have been a large number of closures, with RBS alone closing more than 200 branches—a 70% reduction in just five years. There have been similar developments across the country. In the north-west, 425 bank branches have closed since 2015, and even in the south-east—I represent a south-east constituency—more than 410 branches have closed since 2015, including one in Headington in my constituency. Such closures occur everywhere, and they often have a particularly significant impact on the most disadvantaged people.

The recent debate on the Treasury Committee’s report on consumer access to financial services emphasised the importance of local banks at a time when many people are not able to access basic financial services. That disenfranchises them from many different activities.

Research shows that in 2006-07, more than 1 million people had no access to a bank account in their household. Although that fell to 660,000 in 2012-13, it increased to 730,000 in 2013-14. We are going in the wrong direction in terms of access to basic financial services. We need to be clear that in many cases the process is leading to people who are already digitally excluded being financially excluded. That point was very well underlined by the hon. Member for Berwickshire, Roxburgh and Selkirk (John Lamont).

There are also impacts for businesses, particularly small and medium-sized businesses. A YouGov poll showed that more than 68% of SME customers said that a branch was important, and 66% said they needed the bank branch because of the need to discuss issues face to face. The Federation of Small Businesses has done some interesting work on this. The situation in Lossiemouth when the town ran out of cash has happened in other places as well—it is not the only instance of that occurring. As the right hon. Member for Dwyfor Meirionnydd (Liz Saville Roberts) said, bank branch closures put a burden on businesses and organisations. Sports clubs were mentioned. They might be collecting a large amount of cash and want to be able to get rid of that cash to a bank branch, but they are not able to.

Worryingly, the situation is also leading to issues with SME lending. For example, the British Bankers Association pointed out that bank branch closures dampen SME lending growth by 63% on average in postcodes that lose a bank branch. That figure rises to more than 100% when an area loses its last bank in town. This is not just about inconvenience. It is a much bigger issue for many businesses, and is arguably part of the reason why we have not seen investment come back to the level we want.

The Opposition acknowledge the importance of dealing with this issue and have set out plans for a radical shake-up of the UK banking system, which needs a change to the law so that banks cannot close a branch where there is a clear local need. We believe that the duties of the Financial Conduct Authority need to be broadened, and that amendments are needed to the Financial Services and Markets Act 2000—particularly part 4A, which authorises banks to carry on regulated activity: the banking licence.

We would seek to amend the process substantively. I was pleased to hear a number of Members mention that, including the hon. Member for Stirling (Stephen Kerr). I will not go through all the details on how it should be amended, as others need to speak, but it is important that we see meaningful consultation. The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone) also rightly underlined the fact that local authorities are often not part of the process, but they need to be.

The hon. Member for Moray and many other Members referred to the role of the post office network. There are strong grounds for believing that that role can be boosted, but not simply through it becoming the default option for offering services without any extra support. That is simply not sustainable. The Labour party has commissioned research to look at how a proper postbank network could be set up, how it could be financed and how it could operate. I hope the Government will look at that. The current approach is just not working, and we cannot rely on sub-postmasters who are already overburdened to deliver the services. A big part of the answer has to be to boost credit unions, as mentioned by the hon. Member for Ayr, Carrick and Cumnock (Bill Grant). I know the Minister is interested in that, but we need to do more.

As the debate has highlighted, it is becoming increasingly clear that we need to take action to deal with the shrinking bank branch network. The Government need to do more to invest in our communities and to support local high streets. Strengthening their approach to bank branch closures would be a straightforward way to deal with a number of issues. We need to take immediate action to preserve and build on our banking infrastructure to create a system that works and that serves a diverse range of customers and communities.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Anneliese Dodds Excerpts

3rd reading: House of Commons & Programme motion: House of Commons & Report stage: House of Commons
Monday 10th June 2019 Commons Chamber

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

It is a pleasure to speak on behalf of the official Opposition on Third Reading. It is also a pleasure to speak opposite the Exchequer Secretary, who has been left holding the baby no less than three times this evening—understandable, perhaps, given the immense turbulence currently occurring on the Government Benches. I echo his thanks to the officials who have been involved with the Bill and to all those who made so many contributions, particularly in Committee.

As we have said repeatedly, this is a meagre Bill. We have many concerns about it that have not been addressed during its passage and were certainly not addressed this evening. First, on sporting testimonials, we still lack clarity on the scope of the Bill due to its terminological ambiguity. We still do not have any proper projection from the Government with regard to its impact on charitable giving.

On termination payments, we remain deeply concerned that the Bill still leaves the door open to reducing the value of national insurance-free termination payments. As a result of the Bill—the Minister even acknowledged this in his speech just now—we could see a reduction in the amount of NI-free payments going to those who are losing their jobs through secondary legislation. That is completely inappropriate and something we will not accept. The Government themselves have admitted that the measures will exert downward pressure on wages. There will also be a negative impact on termination payments, because they will be passed on from employers to employees.

There are huge problems with our tax system. They are not dealt with by this thin and meagre Bill. As a result, we will be voting against it on Third Reading.