Baroness Morgan of Cotes contributions to the Finance (No.2) Act 2017

Wed 6th September 2017 Ways and Means (Commons Chamber)
Ways and Means resolution: House of Commons
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Ways and Means

(Ways and Means resolution: House of Commons)
Baroness Morgan of Cotes Excerpts
Wednesday 6th September 2017

(3 years ago)

Commons Chamber
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HM Treasury
Peter Dowd Portrait Peter Dowd - Hansard
6 Sep 2017, 3:27 p.m.

My hon. Friend makes a good point; I hope the Government will listen carefully to what he says and, more importantly, act on it.

The devolution of corporation tax rates to Northern Ireland has been debated in the Chamber many times, and we do not seek to reopen the debate. Nevertheless, we have not debated and will not welcome the clear attempts by the Government to loosen the definition of a Northern Irish employer and water down the requirements for claiming the lower corporation tax rate in Northern Ireland. Under the measure before us, corporations would effectively use Northern Ireland as an onshore tax haven. They would set up small offices with a brass plate on the door, but bring in little of the real investment and jobs that Northern Ireland needs.

We see special treatment for corporations and non-doms, but the news is less good for workers at risk of losing their jobs. The proposed measures on termination payments, if they reflect what was before the House before the election, will target sacked workers as a source of revenue. If there is genuine evidence of the abuse of payments in lieu of notice, that needs to be acted on, but the Government have tacked on a power for the Treasury to reduce the tax exemption on termination payments without primary legislation. That would be a U-turn on their previous statements about dropping such plans. If there is no intention to use the power to reduce the exemption, then the measures should be amended so that it can only be uprated, not reduced. The Government also heartlessly want to enshrine the taxable status of “injury to feelings” compensation. Even when that reflects HMRC’s practice, why is it seen as a priority for legislation?

So there we have it: these motions will introduce a summer Finance Bill that stretches the meaning of summer and will leave taxpayers and businesses with months of uncertainty. It is a Bill that will do nothing seriously to tackle tax avoidance, with the Government claiming to take on non-doms while in the same breath legislating to protect the offshore trusts; a Bill that fails to address the growing black hole and the Conservatives’ mismanagement of our public finances; and a Bill that will protect the privileged few while doing nothing for the many.

This is a dark, miserable, barren winter Finance Bill with a wrathful nipping cold. We have waited a whole season for these resolutions, and they only reaffirm what we already knew: that the country can wait no longer for this disastrous and divided Conservative Government to step aside and make way for a Labour Government who will invest to grow our economy, balance our public finances and take on the tax dodgers—which the Conservatives won’t do.

Baroness Morgan of Cotes Portrait Nicky Morgan (Loughborough) (Con) - Hansard
6 Sep 2017, 3:30 p.m.

This is the first time that I have spoken in a debate in which you have been in the Chair, Madam Deputy Speaker, so may I welcome you to your role? It is a real pleasure to see you in the Chair, and I thank you for calling me in this important debate.

First, let me welcome my right hon. Friend the Member for Central Devon (Mel Stride) to his new role as Financial Secretary to the Treasury. I know that he has already spoken at Question Time, but I think that this is his first formal debate. It is just about right to say that he has already been in that post for longer than I was before I was moved on to the Department for Education. As I shall explain shortly, and as we have already heard this afternoon, my right hon. Friend has already made a positive impact through his decision on the Making Tax Digital work. I look forward to working constructively with him and other Treasury Ministers over the next few months and years.

This is my first speech in the Chamber as the incoming Chair of the Treasury Committee, so it is right that I should pay tribute to my predecessor, the former Member for Chichester, the indefatigable Andrew Tyrie. During his seven years as Chairman, he took Select Committee scrutiny into new territory, successfully pressing for new powers over appointment hearings, securing fundamental reform of the Bank of England’s governance and accountability to Parliament, and conducting forensic cross-examination of Ministers, officials and senior figures in the financial services industry. His work on the Parliamentary Commission on Banking Standards led directly to vital reforms to restore public trust and personal accountability in our banking industry. I know that he will be a hard act to follow, but I will try my best to maintain his rigorous standards of scrutiny and to increase further the reputation and influence of the Treasury Committee.

It is unfortunate that we are having the debate before the Treasury Committee has been formally constituted. After a four-month hiatus, many of the incoming Select Committee Chairs are impatient for the normal business of Select Committee scrutiny to resume. I should note that until the other members of the Treasury Committee have formally been appointed, my remarks are made in a personal capacity.

The economic context for the resolutions is complex and uncertain, and some of it has already been highlighted. Employment is at record levels, but productivity is in the doldrums. Consumer spending and confidence seem resilient, but unsecured borrowing is rising rapidly. The deficit continues to fall, thanks to the efforts of the Chancellor and his predecessor, but the fiscal rules have had to be relaxed to insure against rising economic uncertainty. I am sure that over the coming months the Treasury Committee will consider this complex picture in detail, and we will want to hear from the Governor of the Bank of England and the Chancellor as part of that process. However, with the terms on which the UK will leave the EU as uncertain as they are, nobody can predict with confidence the path for our economy and public finances.

There is one thing that we can be certain about: the country’s economic success and fiscal credibility depend on the Government sustaining their commitment to economic openness—openness to trade, openness to investment and openness to migration. Leaving the European Union must not become a retreat into economic nationalism and isolationism. Global Britain must not just be a slogan.

Let me turn to the resolutions. In 2011, the Treasury Committee set out some principles of tax policy, and I expect that the new Committee will want to hold the Treasury to account for its adherence to them. In fact, I hope that we will be very interested in how future tax policy is made and the Treasury’s work on the overall tax base, given the changing nature of our economy and employment patterns.

Two of the principles identified in 2011 were that tax should provide certainty and stability, as was highlighted in an intervention by the hon. Member for North Down (Lady Hermon), who is not in the Chamber at the moment. It is alarming to see that 27 of the 48 Ways and Means resolutions are marked as

“including provision having retrospective effect”

because the principle of retrospective taxation undermines the certainty and stability of our tax system, so it should be deployed sparingly and only with good reason.

I acknowledge that in this case—the Minister has highlighted this—the Government have been quick to confirm their intentions. The previous Finance Bill was originally published in March, before the start of the tax year but, because many of its provisions were not passed before the June general election, they are coming back before the House in September. The shadow Minister complained that what is promised to be published in the summer comes forward in September. Well, it has always seemed rather strange to me that an autumn statement happens in December. There are always rather odd vagaries regarding when Government announcements are made, but perhaps that will be solved by our having just one major fiscal event in any one year.

The Financial Secretary stated in July that a number of the provisions from the original Bill would apply retrospectively to the start of this tax year when they were reintroduced in

“a Finance Bill as soon as possible after the summer recess”—[Official Report, 13 July 2017; Vol. 627, c. 11WS.]

It is therefore true to say that the retrospection in this case is not as bad as it might appear. The provisions were outlined before the start of the tax year and have been reiterated as soon as possible after the election.

As we heard from one of the former members of the Treasury Committee, my hon. Friend the Member for North West Hampshire (Kit Malthouse)—I am delighted to say that he has been re-elected—the Committee also had a strong interest in Making Tax Digital, to which resolutions 38 and 39 apply. It produced a valuable report on the subject in January, shortly before the Government announced their plans following a consultation. No one I have spoken to objects in principle to the idea of digital interaction with HMRC over tax, but widespread concerns were raised about the speed with which Making Tax Digital was being implemented and the fact that it would be mandatory for even the smallest businesses.

Mr Kevan Jones Portrait Mr Kevan Jones - Hansard
6 Sep 2017, 11:30 a.m.

Like the right hon. Lady, I think that the digital movement is an improvement, but has she come across examples—I have one in my constituency—of when there is a problem and small businesses particularly need to speak to somebody? Following the closure of tax offices, it takes a long time before one is actually able to speak to someone on the phone. Although the digital movement is welcome for many businesses, does she think we also need an element of personal interaction?

Baroness Morgan of Cotes Portrait Nicky Morgan - Hansard
6 Sep 2017, 3:38 p.m.

The hon. Gentleman is absolutely right. We have agreed that people want more digital interactions. They are now much more used to them, and that is how people do their banking and lots of ordering. However, when there is a problem—we have seen this with the introduction of free childcare, which was the subject of the urgent question earlier today—people do need to speak to someone. That is particularly true for the smallest businesses, for which dealing with HMRC can be stressful and something they want resolved as quickly as possible. HMRC will want to consider whether that is done through face-to-face contact at offices, or by ensuring that there is a really good phone helpline system or another way of speaking online to people who are able to respond rapidly. I do not want to pre-empt what the Committee will look at, but as constituency Members of Parliament, we have all heard about cases when people have found getting hold of HMRC frustrating. HMRC is aware of that, and it has done a lot of work to improve customer service, but that is something that Members of Parliament could certainly look at further.

I welcome the deferral that the Financial Secretary announced on 13 July. It means that digital record-keeping and reporting for income tax and national insurance will not become mandatory until at least 2020. Although his statement kept open the possibility that Making Tax Digital would never be made mandatory for income tax and national insurance, resolution 38 suggests that that remains the Government’s medium to long-term ambition. His statement confirmed that the process will start with VAT in 2019. Most businesses already file their VAT returns quarterly and online, so it is sensible to start with a tax for which Making Tax Digital will not require such a significant change in businesses’ practice. Smaller businesses in particular will have breathed a huge sigh of relief when the concession was announced in July, so I thank the Minister for that.

Kit Malthouse Portrait Kit Malthouse - Hansard

I congratulate my right hon. Friend on her election as the Chair of the Treasury Committee. Does she think it would be sensible for the Government—notwithstanding the fact that they are not planning at the moment to include income tax for sole traders in Making Tax Digital—to make provision for voluntary participation, so that they would see the popularity of the scheme if people did volunteer in numbers, as they did with the introduction of online self-assessment? The Government might find that 60% or 70% of businesses participate anyway within the timeframe they are proposing, so making participation mandatory would become relatively painless.

Baroness Morgan of Cotes Portrait Nicky Morgan - Hansard
6 Sep 2017, 3:40 p.m.

I thank my hon. Friend very much for that suggestion. What he says has much merit, and it may well be something we want to explore in Committee. It would be fair to say that a common view among Conservative Members, and the reason why we are on this side of the House, is that we believe in encouraging, not compelling, people to do something that the Government and the state want them to do. If there are ways of encouraging and incentivising people to get online and to use this system, and if it becomes clear at some stage in the future that that is the way forward, many businesses and sole traders will already be online and used to using the system.

Deferring the change for some taxes for a couple of years or more will give everybody welcome time to prepare, but it will not solve all the problems. I therefore suspect that the new Committee will want to explore the costs and benefits fully, as its predecessor had started to do. There is definitely scope to scrutinise the Government’s published estimates for the administrative costs to business and for the supposed reduction in the tax gap as a consequence of businesses making fewer mistakes because they are reporting digitally and quarterly. But that, you will be pleased to hear, Madam Deputy Speaker, is for another day.

Meanwhile, the forthcoming Finance Bill, which the House will consider shortly, will pave the way for the implementation of Making Tax Digital. The Bill that was introduced before the election was called did little more than pave the way; nearly every paragraph in the relevant schedule contained a regulation-making power. This meant that the Bill would have delegated nearly all the key details to secondary legislation under the negative procedure. Compounded by the fact that the draft statutory instruments were not published for consultation, that does not make for good parliamentary scrutiny, and the House will return to the overall principle of the scrutiny of secondary legislation when we consider the European Union (Withdrawal) Bill tomorrow, before we even get to the Finance Bill.

At a more general level, I suspect that the new Committee will also want to scrutinise Budgets, Finance Bills and possibly even spring statements in a similar way to its predecessor. It is important that tax policy gets adequate parliamentary scrutiny, and I hope that the new Treasury Committee and Public Bill Committees will get more chance to scrutinise the Treasury’s proposals at autumn Budgets than the Select Committee did with the last spring Budget, given the circumstances of the general election.

Kirsty Blackman Portrait Kirsty Blackman (Aberdeen North) (SNP) - Hansard

Organisations have suggested that Finance Public Bill Committees should be able to hear evidence, which has not happened in the past. What is the right hon. Lady’s view on that? Will she consider looking at it?

Baroness Morgan of Cotes Portrait Nicky Morgan - Hansard
6 Sep 2017, 3:43 p.m.

I might be guided by you on this, Madam Deputy Speaker, but I suspect that that is actually a matter for the House authorities, the usual channels and the Front Benches, although the House and Ministers will have heard the hon. Lady. Obviously, the more constructive evidence that can be given on legislation, the better legislation we have.

I will finish by saying that I look forward to seeing the Minister before the Treasury Committee. He might not be looking forward to it so much, but I promise that we will be firm but fair in our questioning of him. I wish him all the very best as he embarks on his first Finance Bill.

Kirsty Blackman Portrait Kirsty Blackman (Aberdeen North) (SNP) - Hansard
6 Sep 2017, 3:43 p.m.

I appreciate the chance to take part in this Ways and Mean debate, which is one of the few not to follow a Budget—somebody told me it is the first since 1987, when I was 1.

From the shadow Front Bench, the hon. Member for Bootle (Peter Dowd) talked about some of the process issues and timelines involved in how we got to where we are now, and I want to briefly mention them. The spring Budget was presented to the House on 8 March. We are looking at introducing the Finance Bill, which takes up some of the measures from that spring Budget, now, which is a pretty long time from 8 March. We have seen some changes from what we expected to happen, and what the Office for Budget Responsibility suggested might happen is not necessarily what has happened in the intervening period, so it is a bit strange that, in the main, the measures we are looking at are almost exactly the same as the ones introduced in the Finance Bill back in March. I understand that there needs to be a consultation, but I am concerned about the length of this process and about whether the changes to legislation in this Finance Bill are wholly appropriate.

In my intervention on the Chair of the Treasury Committee, I mentioned the Public Bill Committee taking evidence. I have raised the issue before and I will not stop raising it. The Finance Bill Committee should take evidence from external organisations so that it is in the best possible position to make the best decisions. I have been on a Finance Bill Committee and found it a useful experience whereby Members on both sides of the House had an in-depth debate about the matters raised. Enabling the Committee to take evidence would only add value to the scrutiny provided both by the Opposition and by Back Benchers, particularly those from the Conservative party.

The Minister will probably be surprised to hear that I welcome some of the Government’s proposed Ways and Means resolutions, including the changes to the treatment of corporation tax with regard to museum and gallery exhibitions. However, I wish to raise the issue of the Value Added Tax (Refund of Tax to Museums and Galleries) (Amendment) Order 2017. The intention was that it be laid before the House in advance of the summer recess, but then the general election happened. The order has not been mentioned and I am concerned that some museums and galleries may lose out on the VAT that they had expected to get back. They expected it to be paid to them, but the amendment has not yet been laid before the House. I know that that is a slightly different matter from that in the Ways and Means resolutions, but it is related to it. I would appreciate it if the Minister or his team could look into the order.

I also welcome the changes to grassroots sports and to pensions and legal advice. It is particularly important that people have better access to legal advice, especially when they are not the accused and are entering legal situations. That is a scary prospect for a number of people, so it is incredibly positive that they will get easier access to appropriate legal advice.

The Scottish Government’s programme for government was announced yesterday and they are incredibly positive about changes to enable electric vehicles to become more prevalent on our roads and petrol and diesel vehicles to be phased out. I am therefore pleased that there are likely to be changes to electric vehicle charging points. I hope that this Government will continue to make changes to allow electric vehicles and their associated infrastructure to become more affordable.

I support the Government on a couple of other things. If the proposed changes in the Ways and Means resolutions on petroleum revenue tax are the same as those proposed in the previous Finance Bill, they are positive because the oil industry has asked for them. I am pleased that the Government have acted on that. I am also pleased that the Government will take action against people who have been found to be enabling tax avoidance schemes, not just those who participate in such schemes. That is really positive and I hope that it will achieve the Government’s intention and discourage people from being clever and coming up with tax avoidance schemes. My fingers are crossed and we will wait to see what happens.

Members would not expect me to be positive about all of the Government’s proposals. I am concerned that there is a lack of evidence for the Government’s desired outcome regarding some of the proposals. Resolution 13, on business investment relief, sends a mixed message. Whereas the Government’s changes under resolutions 24 and 26 intend to make it more difficult for non-doms to benefit from their tax status, resolution 13 will make it easier for them to do so in a way that their next-door neighbour may not. Now, I would be less concerned about that if the Government had provided appropriate evidence to show why the scheme is a good thing. They have made it clear that they want to increase the use of the scheme, but I have not seen any evidence to explain why. They have not shown me that the scheme is working as it was intended to work, nor that it is having a particularly positive impact on the businesses that are receiving funding from it. I understand that 200 to 400 people take part in the scheme every year, which means that a pretty significant amount of legislative effort and time is being put into making a change that enables a very small number of people to make this investment. I would be interested to see more of the Government’s figures.

I am concerned about resolution 41, which deals with errors in taxpayers’ documents. It specifically includes changes that may result in people who seek tax advice getting into trouble for having errors in their documents. The onus is now on an individual to ensure that the person from whom they seek tax advice is suitably qualified, which is rather difficult for people to understand. I have had people come into my surgeries and tell me that they have sought immigration advice from somebody they thought was a solicitor, but who turned out not to be a solicitor. I am concerned that some people who have tried their very best to stay on the right side of the law, to pay the amount of tax that they should pay and to fill in the forms appropriately with the help of an adviser will be caught by the measure accidentally. I would appreciate it if the Government could look at that.

I am interested to see how the Government will play another couple of issues, if they look exactly as they did in the Finance Bill. One is the changes to gaming duty. I understand that the Government are trying not to penalise casinos with the changes to the duty that casinos pay, and that they are trying to change the rules around remote gaming to make it clear how much tax the companies should pay. That is welcome. But when the Government are doing things such as increasing alcohol duty to discourage negative behaviour, it seems strange to me to allow casinos to pay less tax—or not to increase the amount of tax that they pay—because it will achieve the opposite of what the Government are trying to do in encouraging positive behaviour. I will be interested to see how that looks, and we will continue to scrutinise it.

We will also continue to look at the dividend nil rate. The Ways and Means resolution allows the Government to change things in either direction. If the dividend nil rate allowed people to have more dividends before they paid tax, I would be particularly concerned about it; but if it allowed people to have less in dividends before they paid tax, as was the situation in the previous Finance Bill, I would be much more positive about it.

Those are the main proposals that I have concerns about, but I would like to see the detail that the Government will produce. I am pleased that the Minister has made changes to digital reporting, which was in our manifesto. We have particular concerns about the smallest companies, especially those in particularly rural areas, who struggle to get access to the right digital infrastructure. Both Governments have made commitments about digitisation and access to superfast broadband, so having this slightly further down the line makes more sense. I am pleased that the Government listened and made changes, but we will be scrutinising the proposal and making sure that the business community is as happy with it as it can be.

Moving to digital reporting will make the process easier for people, but I reiterate that, as the hon. Member for Coventry South (Mr Cunningham) has said, the closure of tax offices is a concern, even when it comes to Making Tax Digital. Computer systems can be quite black and white, and they often give yes/no answers when the answer should actually be “maybe”. Especially in the initial period, people who are trying to fill in the forms may need to phone the tax office to ask for assistance about what to put in each box. I am not convinced that businesses can access enough support to find out about that.

The Government will expect me to raise the issue of VAT on police and fire services, because such a debate would not be complete without my raising it. We would very much like the Government to bring forward VAT changes for police and fire services in Scotland. They have done so for organisations such as the London Legacy Development Corporation—the legacy body from the Olympic Games—and for Highways England, both of which are national organisations in the same boat as the Scottish police and fire services.