Finance Bill

Jonathan Reynolds Excerpts

Tuesday 6th September 2016 Commons Chamber

[Fiona Bruce (Congleton) (Con)]

I rise to support new clauses 2 and 3, the social justice arguments for which, in support of some of the most vulnerable individuals and families in our society, have been so eloquently and comprehensively set out by my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) that, although I had prepared speeches on both new clauses, there is no need for me to take up the House’s time to echo what he has already said. I therefore simply put on record my full support for what he said, and I ask to be identified with his remarks.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

I rise to support amendment 141, which is in my name and those of my hon. and right hon. Friends. I am extremely grateful to Mr Speaker for selecting my amendment, and I would also like to place on the record my thanks to the Public Bill Office, whose advice and help on the matter have been greatly appreciated by me and my office.

I hope that the amendment will find agreement on both sides of the House, and I hope that the Government will not oppose it. The amendment would establish a very small tax exemption for residual cash balances that remain in an employee share incentive plan when an employee leaves such a plan. A residual cash balance is a sum of money, insufficient on its own to buy a single share that month, which would usually be carried over to the next month but which has to be refunded if an employee leaves the scheme. I propose that that balance, capped at a maximum of £10, would instead be donated to charity. That would have the added advantage of reducing costly and burdensome processing by company payroll departments.

Share incentive plans are a good and tax-efficient way to save for the future, and many employees take them up. I believe we should encourage employee share ownership. When an employee leaves a share investment plan, there is commonly a cash residual amount remaining in the account; often, it is just a few pence or a few pounds. When the employee chooses to leave the plan—that is mandatory if the participant leaves the company’s employment—the cash residual can no longer be carried forward. Under the current system, any remaining cash held in the plan when the employee leaves the plan is required to be processed, via the employer’s payroll, to apply national insurance contributions and income tax via PAYE and to pay the net balance to the employee. This process typically costs between £2 and £9, but provides little benefit to the individual receiving such a small amount.

Furthermore, the benefit to the Exchequer is far less than the total cost to companies of administering these payments, with companies paying almost twice as much to process the payments as the Treasury actually receives. To put that into numbers for the ease of Members in the Chamber, it is estimated that the administration costs for companies are between £400,000 and £500,000, while the benefit to the Treasury is just £200,000. If amendment 141 was accepted, charities and good causes would benefit by about £360,000, on top of the savings that companies would make.

There is a precedent for such a change. There are already examples of situations in which HMRC has agreed to individual exemptions to share incentive plan providers, which are currently based on specific requests assessed case by case. There is an appetite for this change among share investment plan providers and HMRC. Amendment 141 would be only a very small change to this Bill compared with what it covers, but it is one that could bring benefits both to companies and to charities and good causes, while at the same time supporting share investment plans by removing a costly and bureaucratic part of the system. The amendment would also help to simplify the tax system and encourage more charitable giving, both of which are stated priorities for this Government and would be priorities for any Government.

I was very pleased and heartened yesterday when the Government accepted amendment 145 in the name of my right hon. Friend the Member for Don Valley (Caroline Flint). I sincerely hope that the Minister will accept this amendment and that we can achieve the same result today. If she does not say she will accept it, I will seek to divide the House, but I can genuinely see no reason why the Government would not want the amendment to be agreed to.

[Michael Tomlinson (Mid Dorset and North Poole) (Con)]

It is a great pleasure to follow the hon. Member for Stalybridge and Hyde (Jonathan Reynolds). I rise to support new clause 3, to which I have added my name. I, too, agree with everything said by my hon. Friend the Member for Enfield, Southgate (Mr Burrowes). I cannot promise to be quite as brief as my hon. Friend the Member for Congleton (Fiona Bruce), because I wish to add one or two remarks of my own.

The fundamental problem is that family breakdown costs a staggering £47 billion per annum, according to the latest figures. Quite apart from the consequential social dislocation and pain that it causes, it is also undermining the British economy. Of huge importance is the fact that most breakdowns do not arise from divorce, but from the ending of relationships in which the couples concerned have not made to each other the public, exclusive and legal commitment that is marriage. Where they do make such a commitment, their relationships —not surprisingly—are far more likely to be stable.

In this context, there remains a massive public policy imperative to ask whether we are doing anything to make marriage less accessible than in other similarly developed countries. We are unusual in this country in having failed until recently to recognise marriage in our income tax system. The solution initially proposed was for a full transferable allowance, but in the event a transferable allowance of only 10% was enacted. A statistic that has already been mentioned but bears repeating is that the tax burden on one-earner married couples with two children on the average wage is 25% greater than the OECD average. The allowance is not making marriage more accessible in a meaningful way. In this context, it is no surprise that the take-up of the allowance has been so low, although the Minister welcomed the fact that the figure is moving in the right direction.

In going forward, two things could be done. First, if it is not possible in the short term to have a full transferable allowance, we should at least ensure that some married families on the basic rate receive a meaningful transferable allowance. Given that the research is so clear that child development is greatly enhanced by the presence of both mother and father in the family home and given the fact that the public policy benefits of marriage are so well developed, a full transferable allowance for married couples with children under five might be a good place to start.

Secondly, perhaps in the slightly longer term we could work towards the full transferable allowance for married couples generally. Of course that would not be cheap, but it would be considerably cheaper than the current cost of £47 billion. It would promote choice by removing obstacles to marriage. As has been pointed out, it is very much about promoting the life chances agenda. I look forward to the Minister saying one or two more words about this matter in her closing remarks.

--- Later in debate ---

[Jane Ellison]

The hon. Lady referred to the issues that we have debated this afternoon as a “rag-bag”, but I think that is a bit unkind. I prefer to describe the debate as a smorgasbord of wide-ranging issues and thoughtful speeches. I shall not repeat my opening remarks, but I shall try to add something to each of the areas where it is relevant to do so, in no particular order.

I thank the hon. Member for Ilford North (Wes Streeting), who is no longer in his place, for welcoming the fact that the Chancellor is looking at the issue of distribution analysis, as he said he would in his letter to the Select Committee Chairman. We will comment further on that in due course. As a result, the hon. Gentleman decided not to press new clause 19 to a vote. [Interruption.] Ah, the hon. Member for Wolverhampton South West (Rob Marris) has returned to his place just as I was about to be nice about him. He must instinctively have known that I was going to thank him for his wide-ranging contribution to the debate. He presented me with some fair challenges as a new Minister. He also made some interesting points about tax simplification. I am due to have a meeting with the Office of Tax Simplification shortly, and he has certainly given me food for thought for my agenda. I reiterate that the Bill will put the OTS on a statutory footing, which I believe indicates the seriousness with which we take its work.

This has been a probing debate. My hon. Friend the Member for Enfield, Southgate (Mr Burrowes) is now on Select Committee duties and therefore unable to return to his place in the Chamber, but he made an interesting contribution on an issue that I know all too well—that of high-strength alcohol. This is something that needs to be looked at in the round, but I can assure him, given my three years in the job that I did before this one, that I take the matter very seriously. He was also generous enough to note, correctly, that the Department of Health has had a good deal of success, working with manufacturers, in reducing the number of very high-strength products on the market. I also note the discussion that took place about silver linings, in which varying views were expressed. I am sure that we will give further thought to these matters in due course. My hon. Friend the Member for Congleton (Fiona Bruce) and others also stressed the matter of the cost to society of some of those products.

My hon. Friend the Member for Enfield, Southgate also talked about the marriage allowance. I want it to be clear that the Government’s focus is on delivering the existing policy, but I did mention in my introductory remarks that a quarter of those who benefit are households with children. We do not want to create a two-track marriage system within the allowance, but the Government are none the less committed to helping low-income households and those with young children through a wide range of other policies including, for example, tax-free childcare and the new national living wage.

I want to add that the online application process for the marriage allowance takes only seven minutes. I call upon the hon. Member for Strangford (Jim Shannon) and my hon. Friends the Members for Congleton and for Enfield, Southgate and others who have an interest in this matter to assist us and promote it. I found in some of my summer recess meetings with groups in my constituency that awareness of the marriage allowance is low. It is of real benefit to lower-income married couples and all Members can contribute to promoting awareness and take up of it. None the less, I reassure all colleagues—my hon. Friend the Member for Mid Dorset and North Poole (Michael Tomlinson) also spoke about this—that I will continue to look closely at take-up with HMRC. I also suggest that promoting the personal tax account is another good way of promoting the take-up of the allowance, because when appropriate people take up a personal tax account they can get a nudge to apply. I reiterate that HMRC will receive the millionth application next month, putting us on course to meet the OBR’s revised forecast for take-up this year.

I have already mentioned the seriousness with which we take the Office of Tax Simplification, but it is worth noting that the recommendations led to the introduction of cash-based accounting for tax. One million self-employed individuals took that up in the first year alone, so those recommendations were important.

I appreciate the intention behind amendment 141 tabled by the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), but I said that the Government feel that the change would add additional complexity; I do not think he agrees with that. We have received no indication that fewer companies are making use of share incentive plans due to the administrative cost mentioned by the Opposition, but we will keep that under review. To tease out why our views differ on how the scheme might work and why the Government feel that the idea needs further development, if the hon. Gentleman is willing not to press the amendment, I am happy to meet him to discuss the matter and to understand why he feels that way.

[Jonathan Reynolds]

I thank the Minister for those comments. I have a small sense of frustration as I believe that nearly every Conservative Member—indeed, all Members—would back the change on its merits, but I understand that Ministers have limited room for manoeuvre at the Dispatch Box, so I will accept that offer in good faith and will not press the amendment.

[Jane Ellison]

I thank the hon. Gentleman for that and look forward to our meeting.

Several Members spoke about new clause 15, including my right hon. Friend the Member for Wokingham (John Redwood) and the hon. Member for Salford and Eccles, and I reiterate that nothing would be achieved that is not already achieved by the Government’s tax lock. The reduced rate of 5% has applied to installations of energy-saving materials since 2001 and that rate remains in place and unchanged. As for the wider issues about European Union VAT and excise systems, we are considering a range of issues as we look to exit the European Union.

On new clause 19, as I said, we feel that the tax lock, for which we have already legislated, actually goes further by preventing the use of secondary legislation, about which the hon. Member for Salford and Eccles was worried.

Turning to new clause 18, I will repeat to the hon. Member for Coatbridge, Chryston and Bellshill (Philip Boswell) what I said in my opening remarks: the Government do not expect the measure to have a large impact on rents due to the small proportion of the housing market affected—around one in five individual landlords.

On the SNP’s new clause 8 and the points made about the changes to dividend tax, I reiterate that the way in which such changes affect small and microbusinesses cannot be looked at in isolation. The Government take the concerns of microbusinesses incredibly seriously—I met the Federation of Small Businesses only last week, for example. As for listening to the concerns of microbusinesses, I point hon. Members to the changes made to the Government’s “Making Tax Digital” consultation documents as evidence of our sensitivity to such concerns and we look to respond to them when we can. It is important to note that we believe the dividend tax is still progressive overall, and individuals with higher incomes will still pay a higher rate of tax on their dividends.

On the wider changes to small businesses and microbusinesses, I point the hon. Gentleman to Budget 2016 in particular, as it is introducing the biggest ever business rate reduction, worth £6.7 billion. It has yet to come into force, but it will make a very significant difference to a very large number of microbusinesses across all our constituencies.

Lastly, I hope to answer the highly technical point made by the hon. Member for Salford and Eccles, as well as the point made by the hon. Member for Foyle (Mark Durkan). Government new clause 9 will exempt from income tax supplementary payments that mitigate tax-exempt benefits paid by the Northern Ireland Executive. Any supplementary payments that mitigate tax benefits will themselves be taxable. As a result, all supplementary payments will be taxed in the same manner as the benefits they are mitigating, to ensure fairness and consistency with the tax system. I was asked whether the power being taken in this Finance Bill would be used more widely. No, the power being taken in this Bill will be restricted to only allowing for the tax status of the Northern Ireland supplementary payments to be established in regulations. Full welfare devolution has always been part of Northern Ireland’s devolution settlement. I hope that adds some clarity.

This has been a wide-ranging debate. We have touched on some good issues and found some common ground. The measures in this Finance Bill will benefit working people, boost UK businesses, and take on tax evasion and avoidance. In the days we have spent on Report, and during the Bill’s earlier stages, we have debated many aspects of it thoroughly, and on Third Reading the House will have a final opportunity to consider the Bill as a whole. At that point, I will set out the main reforms for which the Bill legislates, but I hope that this afternoon’s discussion has been helpful and that my responses to points have helped the various Members who raised them.

Question put and agreed to.

New clause 9 accordingly read a Second time, and added to the Bill.

New Clause 8

Review of changes to tax on dividend income

‘(1) The Chancellor of the Exchequer must commission a review of how the changes to the tax on dividend income implemented by this Act affect directors of micro-business companies, to include—

(a) the impacts across the distribution of such directors’ net income;

(b) the impact on company failure rates; and

(c) options for amending the law to minimise the impact on such directors who are on low incomes.

(2) The Chancellor must lay a report of the review before both Houses of Parliament within six months of the passing of this Act.”—(Philip Boswell.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.