Ways and Means

Kevan Jones Excerpts

Ways and Means resolution: House of Commons
Wednesday 6th September 2017 Commons Chamber

[Mel Stride]

I assure the hon. Lady that the process at the conclusion of this debate will be exactly the same as the one we go through on any consideration of Ways and Means measures in respect of such fiscal matters.

An open and consultative approach is important to our tax policy making process, and our commitment to a single major fiscal event each year is a further valuable step to improving the process for making fiscal policy. Just as with most other major economies, people will no longer face a host of tax changes twice a year.

The transition to the new Budget timetable will, of course, mean that a further Finance Bill will be introduced following this autumn’s Budget. In line with our past practice, the Government will next week publish drafts of some clauses that we plan to introduce in the next Finance Bill. The transition means there are fewer clauses than in recent years, but pre-legislative scrutiny will again help consideration of the Bill.

On that subject, Members may notice that there has been a slight change to the motions on today’s Order Paper. The Government have withdrawn a motion covering changes to the definition of a taxable disposal within landfill tax. That motion and the corresponding clause will no longer be taken forward in the current Bill.

[Mr Kevan Jones (North Durham) (Lab)]

Can I ask why?

[Mel Stride]

The hon. Gentleman has brilliantly pre-empted my next comments. If only he were a little more patient, all would be revealed. Her Majesty’s Revenue and Customs has been consulting on related changes to the taxation of illegal waste disposals over the summer, and we will set out our proposals in this area on 13 September when draft clauses for the winter Bill are published.

[Mr Jones]

Is the Minister saying that those proposals will actually come forward? I will address this in my speech, but I have been in discussion with HMRC’s policy department, which has given certain commitments to making some serious changes in order to collect more landfill tax and stop avoidance.

[Mel Stride]

The hon. Gentleman is right about the importance of those measures, and they will go forward. The policy has not changed; it will just come forward at a different time with other measures in this area.

[Mel Stride]

Our record on addressing tax avoidance speaks for itself. HMRC has raised £160 billion from clamping down on avoidance, evasion and non-compliance since 2010, which is a vast improvement. Given that our current deficit is running at about a third of the 2010 level, this Government have brought in a huge amount of money. In terms of having the resources, we have invested £1.8 billion in HMRC since 2010 to focus exactly on tax avoidance.

[Mr Kevan Jones]

As the Minister knows, HMRC’s landfill tax figures show a £150 million tax gap. Will the future proposals be published for further reaction and consultation? What I hear from the industry is that some of the proposals it wants are being ignored by HMRC.

[Mel Stride]

All the measures relating to the motions we are debating will be out there and will be clear. They will be brought forward along with other measures later in this Session.

Moving back to the Bill at hand, the motions on the Order Paper give little mystery as to the provisions that we will be introducing. I look forward to debating them in more detail as the Bill progresses, and I will say more about the overall aims of the Bill on Second Reading. For the moment, I will provide a brief outline of some of the main measures.

The Bill that the motions provide the basis for will make significant changes to the corporation tax regime for large companies. Building on work that this Government have championed internationally and the recommendations of the OECD, the Bill will limit the extent to which big multinational corporations can reduce the tax they pay in the UK through excessive deductions for interest expense. That measure will address a significant area of corporate tax avoidance, and is forecast to raise £5.3 billion over the next five years by ensuring those corporations pay a fair contribution.

The Bill will also change the treatment of losses within corporation tax; it restricts the extent to which past losses can be set against taxable profits, ensuring that companies with profits over £5 million in a year must pay some corporation tax. At the same time, the Bill will provide for allowances recognising donations to grassroots sport and to museum and gallery exhibitions, and for new £1,000 allowances so that those earning small amounts from trading or property will not have to pay tax on this income. The changes to tackle avoidance of corporation tax by multinationals are part of a number of changes that take further steps in tackling tax avoidance and tax evasion.

[Mel Stride]

My hon. Friend is relatively new to this House but she makes an important and insightful point, which is that, as we know, we should be under no illusions that under Labour’s plans corporation tax will rise. We have seen it fall from 28% to 19%, and it will continue down to 17%—

[Mr Kevan Jones]

On a point of order, Madam Deputy Speaker. I thought this debate was about the Government’s proposals. The Minister, following a set-up question from a Back Bencher, is now talking about what proposals Labour might have. Is that in order? Should we not be sticking to the—

[Madam Deputy Speaker (Mrs Eleanor Laing)]

Order. I thank the hon. Gentleman for his point of order. It is right that we must keep a careful eye on these matters, which of course I am doing. I am sure the Minister is, in the remarks he is making, using as an illustration other policies that may not be his policies. Of course, if he is replying to points raised in the debate, I will always encourage that, because it is important that every Member in this House has a say in the debate. [Interruption.]

[Mr Jones]

It is a set-up—

[Madam Deputy Speaker]

The hon. Gentleman must not add more from a sedentary position to his point of order, so I will not take up that point, which in any case I cannot answer. The Minister has barely begun, and I am sure that in his wide-ranging speech he will cover everything he ought to cover and everything the House requires him to cover.

[Mel Stride]

Thank you, Madam Deputy Speaker. I could not have put that better myself. [Interruption.] And I will get on with it, too. I am not surprised that Labour Members are slightly shy about our discussing their tax plans, because they are not good for our country. Having a plan to raise corporation tax to 26%, with an increase for small companies as well, and to change the tax threshold to bring many, many more people into the higher rate of tax is not a way of incentivising jobs, wealth and economic growth, as the hon. Gentleman well knows.

Our changes to tackle avoidance of corporation tax by multinationals are part of a number of changes that take further steps in tackling tax avoidance and tax evasion. Others covered by these resolutions will introduce a penalty for those who enable tax avoidance, a penalty for transactions connected with VAT fraud and measures to tackle disguised remuneration tax-avoidance schemes.

The Government’s aim to make the tax system fairer is further supported by the Bill’s provisions on the taxation of those with non-domiciled status. A number of changes will be made, and these are forecast to raise £1.6 billion over the next five years. Most importantly, permanent non-dom status for people resident in the UK will be ended, so that they pay tax in the same way as everybody else. That major reform makes the tax system—

[Mr Kevan Jones]

I wish to make a point about tax avoidance and fraud. When it comes to landfill tax, will that extend to companies or public organisations which know that the price they are paying for the collection of their waste cannot possibly include the disposal rates of landfill tax? Or will it cover those accountants and others who are involved in a landfill tax company and know what is actually going on? Will that be covered by the definition of fraud and avoidance?

[Mel Stride]

I will ask the relevant Minister in the relevant Department to get back to the hon. Gentleman on that very specific point.

I was discussing a major reform that makes the tax system fairer and supports the public finances, increasing, but not jeopardising, the contribution that non-doms make to tax revenues. Other clauses will legislate for the changes—

--- Later in debate ---

[Nicky Morgan (Loughborough) (Con)]

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]

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?

[Nicky Morgan]

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.

--- Later in debate ---

[Mr Kevan Jones (North Durham) (Lab)]

I begin by welcoming you to the Chair, Madam Deputy Speaker. I know that you were in the Chair before the recess, but it is the first time that I have had the honour of speaking when you are in the Chair and I wish you all the best in the coming years.

I would like to speak rubbish—[Interruption.] Somebody asks, “What’s new?” I could not possibly comment on my contributions in the Chamber. I actually want to talk about landfill tax and why it has not been included in the resolutions. It is a serious matter, and the Financial Secretary alluded to the reason for its omission. I want to put some of my concerns on record.

In the 2016 Budget and after consultation last summer, provisions were earmarked to be included in the 2017 Finance Bill through secondary legislation to amend taxable disposal for landfill tax purposes. The Financial Secretary explained that many things had been disrupted because of the general election. We cannot change that and I accept that certain matters were taken out of the Budget in the wash-up, which is standard practice. However, the measure on landfill tax was not. It was included until last week. The Financial Secretary said that the consultation on landfill tax will be included, but will now be published in September.

I will explain why landfill tax is so important in the context of the tax avoidance and fraud agenda that the Government say they wish to progress. I am not making party political points: the position is not all the fault of the current Conservative Government; it is as a result of the way in which successive Governments have implemented landfill tax. However, there are things that we can and must do, because the problem is not just that people do not pay the tax that they should to the Exchequer; it is that, in some areas, avoidance funds organised crime and leads to huge costs for local authorities and the taxpayer in cleaning up some of the issues.

The Government estimate in a 2014-15 report that some £150 million a year is not being paid in landfill tax. The Environmental Services Association reckons that the figure is nearly £1 billion a year. From my work in looking at the sector, £150 million seems a conservative figure. If we take HMRC’s figure, that represents 12% of lost revenue, which is on a par with tobacco and alcohol tax avoidance. One would think that it was easier to track landfill tax avoidance than alcohol and tobacco tax avoidance—so it should be. I accept that issues affect tobacco and alcohol sales that sometimes make it difficult to claim tax. However, with landfill tax, we are talking about large consignments of domestic and commercial waste, and its destination should not be hard to track.

The system was introduced as an environmental measure. The policy that Labour and Conservative Governments have pursued to try to reduce the amount of rubbish going to landfill and increase recycling is right. I will come on to the policy in Scotland, which creates a problem in England. The Scots are now dumping their rubbish in England to avoid the SNP Government’s so-called PR stunt in introducing 100% recycling, which we all know is impossible.

At present there are two rates of landfill tax: the standard rate of £84.40, which is due to rise to £88.95 in the 2018 Budget, and the lower rate of £2.65, which is due to rise to £2.80 in 2018. Successive Governments have, I think rightly, increased landfill tax over time—to generate revenue, obviously, but also to try to encourage people to recycle more. There is nothing wrong with that, and I do not criticise it at all; the problem lies in how the tax is avoided. It is paid by those who collect and dispose of waste. Some operators own not just the collection system, but the hole in the ground where the waste will go. That leads to clear cases of fraud, in which what actually goes into the ground is not declared to HMRC or to anyone.

Another issue is the type of tax that landfill operators pay. Some claim that tax on inert waste should be paid at the lower rate and pay that rate, although the tax should, in fact, be paid at the higher rate. What has made the situation worse is the mistake that was made in 2015, when the Government basically gave the industry a licence to print money by making it responsible for determining what type of waste was involved by means of something called the loss on ignition test. If a pile of rubbish, or a sample of rubbish, has a loss on ignition of 10% or less, it is classified as being subject to the £2.65 rate; otherwise, it will be subject to the full standard rate. There is thus a clear incentive for operators to declare waste to be subject to the lower rate, which means that the tax avoidance amounts to a little over £80 per tonne.

I am told that, in most areas where that is going on, if inspectors are looking around, operators will have a sample box of rubbish. In the majority of cases, what actually goes into the landfill site could be anything, and the higher rate of tax that the operator should be paying is being completely avoided because HMRC has extracted itself from the process and left the decision to the industry. It may be said that the aim is to attack red tape, which would be fine if the people concerned were responsible and law-abiding.

Let me put it on record that I am not accusing everyone in the industry of this practice. Some are clearly behaving correctly. However, there are a great many rogues, and, in some cases, not rogues but criminals, who have become involved in the practice because they see it as a good way of doing two things: making easy cash, and laundering money through what is a very high-volume business, given the amount of cash that goes through it. I shall say more about that shortly, but giving the responsibility to landfill operators, with no checks, is basically saying, “You decide what tax you pay.”

Another aspect that concerns me, and should concern everyone, is the issue of what is going into landfill sites. What is being classed as inert waste, or as waste that will not catch fire or is not dangerous, is paid for at a certain tax rate. That is declared as going into landfill sites, but what is in fact going in could be very different. I have a simple question: what records do people check? Again, it is very much a matter of self-regulation: the operators fill them in, and a toothless tiger of an organisation called the Environment Agency does spot checks on them. I have been told that one operator deliberately sent in the previous year’s returns and they were just accepted. That is what this comes down to: a lack of co-ordination in the way the HMRC and other Government agencies are tackling the problem.

The other way of avoiding tax entirely is for someone to buy a hole in the ground, to set themselves up as a landfill tax operator and to go around advertising their wares by asking for tenders from organisations, and when the process gets to the weighbridge to determine the amount, to bypass it and just put the waste straight in—paying no tax at all, not even the lower rate. There are quite a few examples of that happening, but again there are no HMRC checks. I will come on to some proposals that I hope the Minister will consider.

[Robert Jenrick (Newark) (Con)]

The hon. Gentleman is making a valuable contribution. I want to emphasise a point he made at the beginning of his remarks: the rise of serious organised crime from this tax. In Nottinghamshire—which I know he knows very well, as a son of Worksop—there have been large-scale frauds where huge rubbish dumps have been put on private property, often with the agreement of the owner, who of course denies it to the police, and the Environment Agency provides absolutely no prosecutions. A number have fallen down; multimillion pound prosecutions have collapsed. It is becoming one of the easiest ways to conduct serious organised crime in this country.

[Mr Jones]

The problem is not only that the hon. Gentleman’s constituents have to live next door to those illegal dumps, but that there is the expense of clearing them up, which falls back on the taxpayer.

There is another widespread scam. This morning I tried to find the figure for the number of fires at waste transfer stations, but I could not. For the uninitiated, I will explain. Having been a chair of public health in Newcastle, I could bore on about waste: when waste is being transferred, it usually does not go straight to the actual site, but goes first to a waste transfer station where it is either sorted or graded into different things. The number of fires that occur at waste transfer stations is out of all proportion to the probability of that happening. The reason for that is that once there is just a pile of ash, there is nothing to dispose of. That is the problem, and, again, organised crime is involved in that.

We have had some instances in County Durham of the point raised by the hon. Member for Newark (Robert Jenrick). There are frauds such as those he describes—to be fair to Durham police, they have cracked down on some of the individuals concerned—but there are some people who have bought into this business. If we look back at what they did or how they got their money, we find serious questions about whether they should be allowed anywhere near the waste industry.

We all know why, for example, in the 1970s the mafia got control of waste in New York: because there is money to be made in it. It is the same in this country, but unfortunately we are not taking the robust approach needed to address that.

One of the issues is about who is responsible for that. The hon. Gentleman mentioned the Environment Agency. It is a good organisation in one respect; it is full of some very good and committed people, but they do not have the killer instinct to be enforcers. The agency needs to have a certain mindset and to take robust action, rather than just looking at the odd illegal site. It needs to closely monitor some of the existing organisations. Without that mindset and enforcement, this will never succeed.

This is also a matter that falls between the Environment Agency and HMRC. I give credit to Durham police for taking a lead in trying to get people together and for saying, “Look, wait a minute. We know that the people behind this are involved in x, y and z, which has mostly nothing to do with rubbish. It is to do with other serious organised crime.” The police have worked with HMRC and others and tried to concentrate on these issues.

I have a concern about HMRC’s approach to this problem, and the Minister might want to reflect on it. I shall not go into details because the case is ongoing, but when I raised one particular matter with HMRC, I was told that no enforcement action would be taken because the fraud was not worth more than £20 million a year. That seems like a lot of money to me. Another case that is ongoing at the moment involves fraud totalling £78 million a year. I wonder whether these decisions are the result of a lack of resources. I have spoken to a lot of the investigators in HMRC and I pay tribute to them for the work they do. Some of the people they are dealing with are very dangerous, and it is a complex matter to put these cases together. What we need in this country is a joined-up approach by HMRC, the Environment Agency and the police. I had a meeting earlier this year with the Minister for Security, the right hon. Member for Wyre and Preston North (Mr Wallace), to discuss where all this money goes. The amounts being generated are huge, and I have seen evidence that it is going into the drugs trade or other illicit organisations. That has an impact on society.

There are some things that could be done. As I have said, we need to adopt a joined-up approach—dare I say the Eliot Ness approach—and take a robust line on this. As the hon. Member for Newark has just said, the people who have to pay for the clear-up are the taxpayers. In many cases, that involves local authorities that are already under a lot of pressure. We need to adopt a hard-headed approach, and the Minister needs to look at the figure of £150 million. I think that the figure is way more than that.

Self-certification and the loss on ignition test just need to be binned. I know that there are pressures, and people have talked about cuts in HMRC—[Interruption.] Oh, there is more yet, don’t worry! The hon. Member for Chelmsford (Vicky Ford) is looking exasperated. What is needed is one single rate for landfill, whatever it is. That test is not enforceable; every shipment going into a landfill site would have to be tested. People have talked about leaving this up to the industry, and I am not besmirching the reputation or integrity of any particular party, but it is open to anyone who wants to do so to abuse the system. I therefore think that those tests need binning, and that we need one single rate.

People ask whether landfill sites could be monitored. Yes, we have the technology. I have raised the matter with the Minister’s policy people and asked whether we could have a system similar to those at weighbridges and slaughterhouses in which cameras can record how many vehicles are going into a site. In one case that I have examined, the owner was clearly not paying the landfill tax despite the fact that a ridiculous number of vehicles were going into the site. If we had people in Revenue and Customs checking these things, I think it would pay back very quickly.

The other thing is the checking of sites. The Environment Agency has responsibility for most of the checks, but I do not get the sense from HMRC that there is robust enforcement even when questions are asked. The right hon. Member for Loughborough (Nicky Morgan) raised the issue of retrospection. Can I suggest to the Minister, if he wants to get some back tax in, how he might do it? Once a landfill operator has finished with a site, it puts a cap on it, and that is the end of it. I have been told of an operator in the north-east that has done that, and I know from evidence I have seen that it did not pay the right tax. The question was raised with the Environment Agency and HMRC of how to make sure the right tax is paid. The easiest thing is to put a borehole through and check what is actually in there. If we did that on a few sites, I think we would find that what incurs the lower rates is not what is there. That is an important point.

In policy terms, as I have said to the Minister’s policy officer, we need to make the producers of the waste responsible for where it goes. At the rates that some waste collection organisations advertise, they could not possibly make a profit if they were paying landfill tax. The problem is that because local government and others are being squeezed, many local government organisations have got into bed with these operators because they charge the lowest rates, but they can do that only because they are either not paying landfill tax or paying it at the incorrect rate. The onus should be on large organisations to take responsibility for what happens to their waste; their responsibility should not end once the waste operator has taken it away. The rates being paid by quite a few public bodies in the north-east of England make one wonder how these organisations can be making any money, if they are paying landfill tax.

Operators are also making claims that are completely unachievable, such as 100% or 98% recycling of commercial waste, which is not possible. If that is the case and they are collecting at a certain price, what is happening to the 10% or 15% they cannot recycle? Its collection would be completely uneconomic if they were paying landfill tax. If HMRC had its eyes open and looked at some adverts, it would be thinking, “Wait a minute. There’s something wrong here.”

[Bambos Charalambous (Enfield, Southgate) (Lab)]

Does my hon. Friend agree that local authorities and the Local Government Association could play a greater role in monitoring the amount of waste going to landfill?

[Mr Jones]

Yes, I do, but the problem is that local authority budgets are under tremendous pressure, so they are going for the cheapest price. If somebody goes to them and says, “I can get rid of your waste for less”, what are they going to do? One council in Wales was trucking its waste up to the north-east. Can someone tell me, if the operator was paying the proper amount of landfill tax, how that could be economically viable? It cannot be. The onus is on local authorities to start asking questions about who they are contracting with.

There is also an issue with the individuals who can now operate licences. It does not take a genius to look at some operators who get involved in the industry and ask, “What is their experience? Where is the money suddenly coming from to set up a business?” This is fraud, but it is also an environmental concern.

Scotland has huge great policies about zero landfill waste and things like that, but the reason for that is very simple: the waste is coming over the border. Operators in Scotland are avoiding the cost of having to dispose of waste and of separating it at source, which the Scottish Government pride themselves on, by taking it to the north-east of England or anywhere else where things are cheaper. Parts of the UK are becoming Scotland’s rubbish tip because the Scottish Government have no control over where Scotland’s waste is going. There is some evidence that we may be making money through the landfill tax that is paid when it comes over the border, but I suggest that quite a lot of landfill tax is not being paid. That is the problem, and there are things that need to be done.

What the Minister would find if he spoke to the industry is that, behind closed doors, everyone knows that this is going on. It is no great secret. If he is going to come back with regulations later in September, I want them to be robust, because I have a niggling feeling that the policy people at HMRC see the problem as one that will go away of its own accord. In 15 or 20 years’ time, when we are no longer using landfill, we may not have large-scale problems, but we will have lost millions if not billions of pounds in the meantime and, as the hon. Member for Newark said earlier, many communities will have been blighted by unscrupulous operators. I ask the Minister to talk to the Minister for Security, because this is not just about waste, but about the cost to society as a whole.

When I asked the Minister whether the regulations would be published, I was not being provocative; I just want to see what they are and know what the process will be. The industry and others who have been involved should be able to react to them before they come into force. One simple thing that could stop a lot of fraud would be the ignition test, for example, so if the Minister lets me know when the regulations are coming up, I would be happy to meet him or even make some suggestions about the proposals.

I now want to change the subject entirely and talk about air travel. The resolutions include a commitment to look at air passenger duty. We have been promised reform for a long time—I looked it up this morning, and this matter has been raised at least since 2011. I do not want to be accused of raising problems relating to Scotland this afternoon, but air passenger duty is of great concern to the north-east due to the Scottish Government’s new air departure tax. That decision is entirely up to them as part of the devolution settlement, but the new tax will reduce air passenger duty in 2018, which will have an impact on regional airports such as Newcastle. As I say, that is no criticism of the Scottish Government, because they have the devolved responsibilities and can do that, but if they abolish air passenger duty altogether, that could have a devastating impact on those airports. Members from Northern Ireland have also made representations because the same situation applies there to Belfast International, Dublin City and City of Derry airports due to differential rates in the Republic of Ireland.

Why does that matter? The north-east of England is the poorest region in the UK with, sadly, the highest unemployment. Newcastle airport has been a success, for which I give credit to the local authorities that own it and their private sector partners. It sustains some 7,800 jobs, 3,200 of which are directly at the airport, but the knock-on effect throughout the region is also important. The airport brings some £57 million of tourism a year to the north-east, sustaining some 1,750 jobs.

London has four airports, so the economic impact of each is possibly not as great as the impact of an airport in a region such as mine. Regional airports provide connectivity for people who want to travel not only for leisure but for business—some £173 million of exports go through Newcastle airport each year, nearly £150 million of which go through just one airline. The Emirates flight from Newcastle to Dubai moves goods not just into the middle east but into the far east and Asia. The airport is important not only in carrying people but in supporting the region’s businesses.

At the 2015 general election the then Prime Minister, David Cameron, said that he would not allow regional airports such as Newcastle to be at a disadvantage if Scotland were to reduce the rate of APD. We all know what happened to a lot of David Cameron’s promises, so I will not hold the present Minister to that one, but it is important that the issue is addressed.

The Government could use APD more imaginatively. Obviously it was introduced for environmental reasons, but we all know that it is now a big cash cow for the Exchequer. If we had differential rates to try to encourage airlines to relocate to regional airports, it might help to reduce the overcapacity at airports in London and the south-east. It would also be a cheap way of regenerating regions such as the north-east.

The present rate of APD puts Newcastle airport at a disadvantage because, unlike London Heathrow, we have a relatively small number of business travellers. If we wanted to think creatively, we could introduce an incentive. I understand from the media that the new metro Mayor of Tees Valley made an election pledge to nationalise, reopen or somehow expand Teesside airport, which is a little ambitious. He may find that that election promise is difficult to translate into action. Again, if the APD rate goes down in Scotland and Newcastle airport is affected, trying to get any new flights to a place like Teesside will be virtually impossible. The issue is important to the north-east, and it is not just about passenger travel and tourism flights; it is about the broader economy. Our regional universities need access to international students, and a region where jobs have not boomed would be severely affected if the airport’s passengers leaked to Scotland.

Let me turn to small business and some of the issues raised earlier. I am not opposed to the use of new technology or to recognising that we have to change the way we do things. My party made mistakes when it was in Government by closing a lot of DWP offices and going directly to doing things by phone, which made it difficult for people to have interaction, and we are in danger of making the same mistake on tax offices.

A constituent who came to see me last year runs a one-person business. If she had a problem with her tax, she would drive to Durham tax office and meet somebody she knew, and they would explain the situation to her. I am not saying we should keep tax offices open just for that one person, but if we are going to go into the digital age—I have no problem with that, as it might be easier for some businesses—we need to ensure that we have either telephone access or dedicated processes whereby people can at least get assistance. I believe it was the right hon. Member for Loughborough who mentioned webchats, which are a way of doing this and are used by a lot of service providers. That needs to happen before any roll-out of the changes, because there is nothing more frustrating than not being able to get through. My constituent told me that when she eventually did get through, she got through to three different people. I do not know whether this could be done, but perhaps we could use a case-management approach, with individuals taking control of certain areas. People might think personal relationships between small businesses and their tax inspectors would be hostile, but in my experience they are not. If the relationship works well, it helps the business in terms of how it operates and it helps how HMRC can collect.

I now wish to discuss HMRC’s priorities. HMRC comes in for a lot of criticism, but it has a huge task to do. Even so, I sometimes wonder whether it gets its priorities wrong and I wish to give an example from my constituency. I have just spoken about the lack of enthusiasm for cracking down on landfill tax fraud, but an overzealous approach is taken to some small businesses. I have written to the Chancellor about a constituent of mine, Mr Marshall, who runs a bathroom business in Chester-le-Street. I have not yet received a reply, even though I have written twice—obviously, the Chancellor has been very busy. This is an example of where HMRC uses a sledgehammer to crack a nut. Mr Marshall and his family—it is a family business—have a showroom, where people can order and pay for a bathroom, and then they will organise everything that needs to be done. They do not employ anyone—they fit bathrooms, but they do not employ the plumbers, electricians and so on. Mr Marshall subcontracts the work to plumbers and electricians, and the client then pays them, as is common in the industry.

Last year, Mr Marshall had a visit from HMRC, which said that he is now responsible for the VAT payable by those individuals, even though he does not directly employ them, because they are small businesspeople. He freely admits to me that he does not use the same person every time; it depends on who is available. He is now being hit with a tax bill for some £24,000, which to a small, well-respected business is a little harsh. As I say, I have written to the Chancellor twice without receiving a reply. HMRC will not discuss this because it is under its veil of secrecy, as it always is, but I want to know why one person has taken it upon himself to deem that the VAT liability of these individuals—if there is one—should fall on someone who is procuring a service. If that is the case, and if I was regularly employing someone to do some work on my behalf and they went above the VAT threshold, would HMRC suggest that I, as the person employing them, should pay their VAT?

I would like the Minister to look at that case. As I said, I have tried writing to the Chancellor, without success. I am happy to email him the details and copies of the letters I have. I was going to say that such cases give HMRC a bad name, but that is not hard to do. No one likes to pay taxes, but the point is the disproportionality between a family business—this is not a multinational corporation—and the Googles of this world and the landfill operators that completely ignore the actual tax situation without any grievance falling upon them from HMRC. It is about proportionality in some of the enforcement. The new Chair of the Treasury Committee might want to look at how HMRC deals with small businesses. It is not only about the forms, but about what is facing my constituent. The process is time-consuming, but it can cause anxiety if someone suddenly has to find such an amount of money.

There is another issue I want to raise—I have moved on from rubbish; I am going to speak about cosmetic surgery. I tabled a parliamentary question a couple of weeks ago about the Government’s proposals for collecting VAT for cosmetic surgery. I have looked at the issue and got into the subject. I will not hasten to go through the whole issue of the regulation of cosmetic surgery, but it is another area I am pursuing.

[Wes Streeting (Ilford North) (Lab)]

Declare your interest.

[Mr Jones]

I think even the best plastic surgeon would struggle with me.

The question is whether VAT is payable on cosmetic procedures. The problem is that such procedures vary from facelifts and tummy tucks to boob jobs, fillers and that side of the industry. I came to the issue through a constituent. I will not talk about the regulation, because that does not apply to the taxation of cosmetic surgery, but I want some clarity from the Government on the rules about whether cosmetic surgery should be VAT-registered.

There is an organisation called the Hospital Group. In a previous life, it went into administration owing the taxman nearly £9 million in VAT because there was an argument about whether VAT should be levied on the surgical procedures. The bill started at £17 million and went down to £9 million before, lo and behold, the director folded the company. HMRC is left with £9 million that it has not recovered. That company owes money and tax to quite a few other organisations, including councils.

This is an interesting issue, because while people would not pay VAT on a medical procedure, these are not medical procedures. I am not for one minute suggesting that women who have had mastectomies should pay VAT if they need reconstructive surgery, but if a procedure is purely for cosmetic reasons, it should be VAT-chargeable, as I read the regulations, but HMRC does not seem to be enforcing that. There is an argument, which I have heard from the new owners of the Hospital Group, that these are medical procedures, as people are having them because of mental health issues. If that is the case, evidence needs to be provided.

Given the amount of money that the industry generates, I wonder whether the Government are losing revenue. In the one case that I know of, the Revenue is owed £9 million, although it is never going to get that because the company has gone into liquidation. How many similar cases are there? We should consider whether VAT is chargeable on not just surgery but other aspects of the cosmetic surgery industry—things such as fillers and other products that enhance one’s aesthetic beauty, on which I am sure my hon. Friend the Member for Ilford North (Wes Streeting) will be able to enlighten me. If VAT is not being charged, we must consider that, because this is a huge industry in this country. As I said, there are regulation issues for some organisations that need to be addressed, but my parliamentary question was whether there were any proposals to look at the tax aspects of this issue, and the answer was that there were not. Will the Minister let me know what the regulations are and how they are being enforced? It could be that the Revenue is losing out on quite a large amount of money.

My hon. Friend the Member for Bootle (Peter Dowd) talked about the general treatment of tax avoidance, and he obviously hit a raw nerve with some Conservative Members with his accusation that they were the party of tax avoiders. It is in all our interests to ensure that people pay their tax. We all moan about the level of tax that we pay, but ordinary people have no way of influencing what tax they pay—the money comes off their salaries or wages through pay-as-you-earn. What grates with and hurts them is that they see hard-working people paying their tax—there are no clever schemes for them to lower their tax bill—while large corporations and others use mechanisms to generate huge profits but not pay tax. They see sporting individuals and others using mechanisms such as the film schemes that were deliberately set up so that people could avoid their tax liabilities. To be fair to the Government, they have cracked down on some schemes, but that is what irks a lot of people. They have also had austerity and the wage freeze for the past seven years, and they see the injustice of that. We need fairness and to ensure that people pay the tax that others are entitled to expect. Look at the earnings of some of the BBC’s stars, which were published a few weeks ago. The idea that some people want to reduce their tax bill when their initial wages are paid for by taxation is just amazing.

Finally, I just want to—[Interruption.] If the Minister wants more, I can give him more. I am trying to be helpful. I have been very helpful to him and tried to work with his Department, because there are occasions on which we can co-operate to get things done. Making sure that everyone pays their tax and that the system is fair is in the public interest. The Minister was right when he said that we cannot have public services or anything else if people do not pay the right levels of taxation. The system has to be fair.

There is another issue that I think HMRC is already on to, but on which it might want to take a more proactive stance because it relates to organised crime. You might think I am strange, Madam Deputy Speaker, going from rubbish to airports to cosmetic surgery, but I am now going to talk about puppy farming. I met the Dogs Trust yesterday, which has produced a very good report—I do not know whether the Minister’s Department has seen it, but it should read it, as this is another area in which organised crime is getting involved in cruel practices—and it concerns not only breeding dogs in this country but importing them. Now the importations are from Poland and Lithuania, and the Dogs Trust study is of both cases.

There are some horrendous cases, and not just as concerns the cruelty of the trade. If honourable colleagues or the Minister would like to look at it, the report is called “Puppy Smuggling: A Tragedy Ignored”, and it is an investigation into the pet travel scheme. It is quite clear from talking to the trust and the local police that this is another new way of making lots of money without paying any tax. It is a cash business, Madam Deputy Speaker. A lot of these pups are advertised on the internet and the process involves cash transactions. It has been described by one HMRC official as the new cocaine or drugs angle for some types of organised crime, as large amounts of money can be made.

Again, this is a question of co-operation between HMRC and other agencies, for example when local authorities are in charge of enforcement. I give credit to the Government for making changes to the puppy farming regulations, but we are now seeing the importation of these animals from abroad, and we need action at the port and to ensure that when sales take place, the correct amount of tax is paid. If we want to stop the trade, one way of doing so would be to use the tax system, because large amounts are being produced in cash, and if HMRC can use the system to ask where the cash is coming from, the focus is suddenly on that question.

This example demonstrates the innovative way in which organised crime works. It will look for the easiest way of making untraceable cash—landfill tax was one, and now, tragically, as some of the stories in this report are terrible, so is the trade in pups, which should not be bred in such a way or kept in such conditions. As the Bill goes through the House, the Government might want to consider this matter.

Again, this comes back to enforcement and attitudes. I am not criticising individuals at HMRC, as I say, because they have a difficult job, but we need an attitude in favour of enforcement and, on occasion, we must consider how that happens through HMRC and how it is linked with the police and other enforcement agencies. One thing that is quite clear in the examples that the Dogs Trust has highlighted concerning the scandal of puppy farming and importation, as well as what has happened with landfill tax, is that these things are not just HMRC’s responsibility. There are other agencies. Durham police have very effectively come together with others to limit and crack down on these individuals, so I ask the Minister to consider taking a cross-government approach to some of these issues, if we can. On that point, I shall conclude my remarks.

[Wes Streeting (Ilford North) (Lab)]

It is a pleasure to follow my hon. Friend the Member for North Durham (Mr Jones), who gave a very comprehensive speech. I personally felt that there were some areas of the Ways and Means resolutions to which he did not do justice, but I am sure we will get a chance to return to those on another occasion.

“A revolutionary moment in the world’s history is a time for revolutions, not for patching”—

those were the words of William Beveridge 75 years ago in his landmark report that paved the way for the modern welfare state. There is no doubt that we live in a similarly revolutionary moment. We are still in the long tail of the biggest economic crash since the great depression and the consequences that follow. We are on the brink of leaving the most sophisticated political and economic alliance in the history of the world, with consequences for our economy, a wide breadth of public policy and our citizens. We are also at the beginnings of an industrial revolution of a pace and scale that the world has never seen. Against that backdrop, the resolutions we are debating and the summer Finance Bill firmly fall into the category of patching.

In the time I have today, I will: specifically address the patching provisions in the Ways and Means resolutions; talk about the issues that are not addressed by the summer Budget and the Ways and Means resolutions; and touch on areas of Government policy that run completely contrary to our national economic interest. Ultimately, the patching measures in the Ways and Means resolutions are pretty small and fairly inconsequential given the wider economic impact of Government policy if that policy continues on the course that the Government have set out.

I turn first to the issue of patching. We heard from the new Chair of the Treasury Committee, who I am absolutely delighted has been elected. I have no doubt that she will fill the enormous shoes of her predecessor. As I have been re-elected to the Committee from this side of the House, I very much look forward to working with her and other cross-party colleagues. As both she and the Minister set out today, the Treasury Committee raised a number of concerns following our evidence gathering. We listened to a wide range of evidence from tax specialists, representatives of small and medium-sized businesses and, indeed, those businesses themselves on the consequences for them of pursuing the Making Tax Digital policy as it was originally conceived.

As other hon. and right hon. Members have said, there is no doubt that there are many benefits for the Revenue and potentially for businesses against the wider backdrop and the move to digitalisation. But there was a serious concern for small and medium-sized businesses in particular about the impact, which—granted—could be unintended. None the less, it would be red tape and bureaucracy for small and medium-sized enterprises that cannot really afford the extra burden. It should be the intention of the Government in any case when pursuing policy to try to implement it in a way that is not burdensome for SMEs or large corporations. We should seek to legislate and regulate effectively, which does not necessarily always mean heavily.

There was a concern that the timing of Making Tax Digital, as it was originally conceived, would have created an unnecessary and unwarranted burden on SMEs. There are more than 5,000 SMEs in my constituency alone. Since being elected to the House two years ago, I have made it my mission to speak up in their interests. I was therefore pleased, during the summer Budget and when listening to the Minister this afternoon, to see that the concerns expressed by the Treasury Committee have been taken on board, that the deadline has been moved back and that there is still some degree of flexibility about when mandatory provisions will kick in. None the less, Ministers ought to take into account some further cautionary notes, particularly following the points made by my hon. Friend the Member for Bootle (Peter Dowd), the shadow Chief Secretary.

As the implementation timeline stands, we will be looking to implement Making Tax Digital for SMEs in spring 2019—an auspicious year because it happens to coincide with our departure from the European Union. If that departure is smooth, perhaps the Making Tax Digital process can be equally smooth, but I have yet to see any evidence that it will be, be that in Government position papers, the reaction in the Cabinet to different Government position papers, the reaction of colleagues on both sides of the House to the Government’s position, the reaction of all 27 EU member states to what the Government have put forward or the reaction of the European Commission. As far as I can see, there is currently no hope of a smooth exit from the European Union; in fact, we are in danger of crashing out of the European Union. If that is the case, and we are not able to provide stability and certainty to businesses at least over a transitional period while we exit the European Union, we will be adding Making Tax Digital on top of the new customs and border checks and the new compliance and regulatory regimes that businesses will be wresting with—if those are, indeed, in place by that time. Ministers need to keep an eye on wider events and to think about Making Tax Digital in that context. I hope that is something the Minister will reflect on.

There was an interesting exchange between my hon. Friend on the Labour Front Bench and Government Back Benchers over tax avoidance and non-doms. No one pretends the issue is easy. There is a booming business in tax avoidance; indeed, individuals and corporations pay huge sums to very clever accountants to minimise their tax liability. Of course, much of that is perfectly legal, but that does not make it right or ethical. What is often missed in the debate about tax avoidance, particularly when we listen to the protests of people who face a larger tax liability, is that, in the aftermath of the financial crash, with everything we have seen in terms of the impact of austerity on public service provision, the burden of taxation and wage stagnation—I will come to those wider, structural economic problems shortly—there is sometimes a real sense of detachment among those who have benefited enormously from the current economic order and those who have been at the sharp end.

[Mr Kevan Jones]

Does my hon. Friend also think that there is a mindset in some parts of the Government—perhaps not on the Treasury Bench today—that the trickle-down effect of encouraging wealthy individuals from abroad to come to settle in London will boost the economy? In fact, it sometimes fosters corruption in those people’s countries, and it also takes away flats and other valuable assets in the capital, which local people can then never hope to gain access to.

[Wes Streeting]

I strongly agree with my hon. Friend. This idea of trickle-down economics must surely be discredited now: it does not work. People are rather ill aware of the extent to which the benefits of economic growth have been unevenly distributed and disproportionately enjoyed by those at the very top. I do not have a great deal of time for special pleading by wealthy individuals and corporations about being asked to pay their fair share of tax, because not everyone is feeling the pinch, and it is entirely reasonable to look at what we can do to tighten loopholes in terms of tax avoidance.

That brings me to the specifics of Government policy. We have had some remarkable rhetoric from those on the Treasury Bench, even over the two years I have been a Member of Parliament. The former Prime Minister, David Cameron, lauded his global leadership on tax avoidance, but the rhetoric is rather divorced from the reality. Even with the measures set out today, there are still means available to non-doms that enable them to enjoy tax exemptions and concessions for many years that are not available to the average UK citizen. Let me give one example: non-doms are able to keep their assets out of the scope of tax if they are held in an overseas trust that was created before they were deemed as domicile. That strikes me as rather unfair and as fairly easy to solve. That is just one example, but there are lots on which Government could clamp down further. The political rhetoric is there, but I do not think the political will is being delivered by policy.

[Wes Streeting]

My hon. Friend makes a powerful point. She will already have seen in her casework as a new Member the impact of changes to Government welfare policy on some of the most disadvantaged people in our society.

If politics in this country and across the western world tells us anything at the moment, it is that large numbers of people feel completely left behind by the economic order and are expressing their frustration through the ballot box in a variety of ways, whether that be by voting to leave the European Union because they see it as central to a global economic order that has left them behind, or by electing Donald Trump because of his promises to the central rust belt of America, which I think he will struggle to deliver. I will talk in my concluding remarks about what the current economic order means for politics and why Government really do need to listen to the voice of the people.

It is interesting to note the enormous complacency among Government Members. Sure, they occupy the Treasury Bench and Downing Street, and Government Departments are staffed by Conservative Ministers enacting, by and large, Government policies, with the very expensive assistance of the Democratic Unionist party. However, the Conservatives lost their majority at the election, and the tragedy for Conservative colleagues who lost their seats is that the Government have not actually listened to the message of the people.

Of course, our side has some humility about the fact that we did not win the election either. Lots of new hon. Members who have been elected to this House rightly celebrate their achievements and those of their party activists, but we know that we have further to go to earn the trust of the British people. Looking at the Government’s policies, we know that we have a responsibility to earn that trust to deal with the economic malaise and entrenched economic inequality that is affecting our citizens and those in many other economies. I welcome the Government’s rhetoric on tax avoidance and taking on non-doms, but I just do not see it reflected substantially enough in Government policy. I strongly support the criticism set out by the shadow Chief Secretary, my hon. Friend the Member for Bootle.

There is a sad irony in the point that a number of right hon. and hon. Members have made about the provisions for retrospective changes to tax arrangements. It seems that the provisions for non-dom arrangements in particular rule out retrospective changes. The Government are saying clearly, “If you have a trust overseas before the rules kick in, don’t worry: we’re not going to touch that money.” Of course, the nature of so many of those trusts is that they are family trusts that are passed down and inherited. In effect, the Government are acknowledging that those trusts exist and that there is an unfairness, and they are setting out to do something about it hereafter, but they are not applying retrospective changes to non-doms in the same way that other measures will affect many others retrospectively.

[Mr Kevan Jones]

Does my hon. Friend share my concern that wealthy individuals are found wanting when, as usually happens, a secret deal is done with HMRC to pay a certain amount to cover the liability? That is not open to many of my constituents, who are not able to argue when they have a pay-as-you-earn problem. Does he think it is fair that such deals are agreed by HMRC? They should be published if we are going to get fairness into the system.

[Wes Streeting]

I wholeheartedly agree with my hon. Friend. We should be putting an end to sweetheart deals. We certainly should not, as he says, allow them to take place behind closed doors without the appropriate levels of transparency; such transparency means that we at least know what is being done. What makes me angry, and what makes the individual taxpayers and the businesses that I represent angry, is the fact that we know—particularly if we have been self-employed or run a business—that if we are late with our tax return or our payment of tax due, we will be subject to fines and penalties, which will continue to accrue as long as we delay payment. However, not only can wealthy individuals and corporations pay long after they are supposed to, but they get to determine their own rate of tax. That is outrageous.

The Government have, even during the short time for which I have been a Member of this place, introduced measures to try to deal with tax avoidance by individuals and corporations, but those measures always fall short. Let us take the diverted profits tax—the so-called Google tax. Google barely paid a penny. That illustrates the gulf between the rhetoric we hear from those on the Treasury Bench and the reality of the impact of policy on the tax liability of wealthy individuals and corporations, who can effectively determine their own tax rate. People see that hypocrisy at the heart of the system, and I do not think that the measures proposed by the Government today or previously do enough to allay the concerns that people are expressing.

[Mr Jones]

I agree with my hon. Friend. Does he think that part of the problem is the operation of HMRC and its arm’s-length relationship with the Treasury? He speaks eloquently about people’s disillusionment with politicians and their ability to affect things. Does he agree that it is perhaps now time for Treasury Ministers to have more direct control over the operational decisions of HMRC?

[Wes Streeting]

I certainly feel that HMRC is insufficiently accountable to taxpayers and citizens, and I think there are two routes to redressing the problem. One is, as my hon. Friend suggests, for Ministers to take a far tighter grip on what is going on at HMRC, to rein the Department in and make sure that its conduct is in line with the expectations of the people we are sent here to represent. The other, as my hon. Friend the shadow Chief Secretary suggested, is to make sure that HMRC is resourced effectively so that it can implement public policy as intended.

Hon. and right hon. Members who have tax offices in their constituencies complain all the time about the loss of jobs in their constituency. They are fighting for their constituents, as they should do and as we all do. However, the closure of HMRC tax offices and the loss of HMRC jobs should be a concern not just for them, but for all of us. If we do not have the tax inspectors out there in the field clamping down on tax evasion, which is illegal, identifying areas of tax avoidance and, ideally, making recommendations to Government about improvements to the system, we will continue to have repeated debates in this place about how we clamp down on illegal tax evasion and aggressive tax avoidance.

Another way in which we can improve the scrutiny of HMRC is through the Treasury Committee. There is provision for a sub-committee of the Treasury Committee to look in detail at HMRC’s work, and when the Committee meets we ought to consider that. The question is always about time and resources. We are lucky to have on the Committee a hard-working and dedicated team of Clerks, who produce reports and briefing packs at a rate of knots on some of the most complicated areas of public policy. Of course, we have a heavy agenda because of the issues facing our financial system, in particular, which have preoccupied the Committee in its work. I think it is fair to say that our new Chair and Members have ambitions to look across the breadth of economic policy and Government spending policy. From our constituents’ experiences on the phone to HMRC—if they are able to get through—right through to our issues about the resourcing of HMRC, there is a serious and significant piece of work to be done on HMRC’s performance, the adequacy of its resourcing, the scope of its powers and its focus as a public body acting in the interest of all taxpayers.

[Mr Jones]

My hon. Friend raises a good point about staff. The problem we have had in all Departments during the years of austerity is that the easy target is to get rid of so-called civil servant pen pushers. The actual effect of that is starkly focused in the case of HMRC, because when we start to get rid of staff whose job is to collect tax, not only do we lose those individuals’ expertise and their years of experience, but it costs the taxpayer, in that staff are no longer available to enforce the tax regulations. I have highlighted the issue of landfill tax fraud, for example. Does my hon. Friend agree that the Government should look at this as a case of “invest to save”? In other words, if they invested in civil servants to do something, the Government would be able to prove that they were getting more in revenue than it was costing to employ those civil servants.

[Wes Streeting]

I wholeheartedly agree with my hon. Friend. The irony of some of the swingeing cuts of the past seven years is that although on a scorecard the cuts to civil service jobs represent significant savings, when we look at the roles and responsibilities of some of those civil servants, it does not take a rocket scientist to work out that cutting the number of tax inspectors may well mean that the Government will lose on tax yields and will lose revenue. There is a cost saving on the one hand, but on the other hand there is a direct cost to the Government in lost income.

I had the same experience in local government. Before I was elected to the House, I was the deputy leader of the London Borough of Redbridge. There is a continuing debate in local authorities about, for example, enforcement officers. There are huge pressures on local government budgets, and staff job losses can represent some of the biggest savings because staff are the biggest cost. If a council cuts its pool of parking enforcement officers, that will certainly help it to balance the budget when it comes to the budget council meeting, but it can end up losing revenue if enforcement officers are not out slapping penalties on cars. In addition to the loss of revenue, there are also worse outcomes for citizens, because such a policy encourages the bad practices that make our communities in the case of parking, or our society in terms of effective tax revenues, a lot worse off.

I hope that Ministers will turn to some of these issues when the Budget is next before us, because as well as being pretty thin on substance, the summer Budget did not deliver against the challenges of the time. At the opening of my speech, I quoted William Beveridge’s words about this being “a time for revolutions”. I have been struck by the interim report of the IPPR commission on economic justice, which has been launched today. In a succinct and effective way, the IPPR has summed up a number of the issues involving the great central planks of Government economic policy that have caused me great frustration, but it has also captured the sense of injustice felt by many of our constituents.

We could go on about this ad nauseam: I have sat in the Chamber many times listening to Conservative Members talking about their economic record, but I could spend much of the time available to me this afternoon cataloguing the broken promises of Conservative Chancellors. In fact, we could spend quite a lot of time talking about the broken promises of just one Conservative Chancellor. Our SNP colleague, the hon. Member for Glasgow East (David Linden), is new to the House and was not here to listen to George Osborne’s commitments, so I had better tell him about them. We were told in 2010 that the Conservatives would eliminate the structural deficit in one term, and they attacked the Labour party for lacking ambition and for not having a serious economic policy when we promised merely to halve the deficit over the course of a Parliament.

[Mr Jones]

Does my hon. Friend also remember that not only did George Osborne’s first Budget in 2010 help crash the economy, but the economically incompetent and hamfisted way in which the cuts were made—for example, cutting budgets in-year meant that it cost councils and others more to lay people off than it saved through redundancies—sucked demand out of the economy just at the time it was turning round?

[Wes Streeting]

That was one of my greatest frustrations as a Labour party member, looking in on debates in the House during the 2010-15 Parliament. We could be proud of Labour’s record in government from 1997 to the financial crash. There was unprecedented growth; we ran a budget surplus for four years—that has happened in only seven of the past 58 years; we lifted half a million children and more than 900,000 pensioners out of poverty, and we rebuilt public services. Yet we were told after the 2010 general election that Labour presided over reckless spending, but George Osborne was the shadow Chancellor who, up to the crash, committed to match Labour spending pound for pound.

How on earth in 2010 to 2015 we allowed revisionist history to take hold of Labour’s economic record will continue to confound me, but we must take that on. As my hon. Friend the Member for North Durham said, when we left office, the economy was growing and the initial impact of the early Osborne Budgets was to choke growth, scare away investment and suck money out of the economy through the cuts that were imposed. That did not make economic sense or even enable the then Chancellor to deliver his promises.

[Mr Jones]

Does my hon. Friend also agree that not only did what he describe happen, but if we had followed the Conservative party’s policy of deregulation of the banking and financial sector—the Conservatives never called for more regulation; they wanted less—and if we had accepted the suggestion of David Cameron and George Osborne at the time of the Northern Rock crisis to let it crash, we would have been in a much worse situation than we were?

[Wes Streeting]

I wholeheartedly agree. I am proud of the contribution that UK financial services make—not just the City of London, but other economic centres, for example, in Edinburgh and Leeds.

--- Later in debate ---

[Wes Streeting]

I wholeheartedly agree with my hon. Friend. Let me make two points about what she has said. In the Budget and the Ways and Means motions, and in previous Budgets and resolutions, the Government have chosen to pursue particular regressive forms of taxation. There is no doubt that VAT is a regressive form of taxation, in that it is paid by everyone, both individuals and businesses, regardless of income. If I went into a shop and bought an item that was subject to VAT, I would pay the same rate as someone with a much lower income buying the same item.

If a Government’s objective is to increase their tax revenues—and, of course, we understand why that would be an objective, given the context of the Budget and the revenue-generation measures in the Ways and Means motions—they should pursue revenue generators that are based on progressive taxation, and ensure that those with the broadest shoulders bear the greatest burden. We have heard those words, or a variation of those words, many times from the Treasury Bench, from successive Chancellors and in successive Budgets, but, as I have said previously, the rhetoric fails to match the reality.

As my hon. Friend has referred again to the issue of non-doms, let me again highlight the extent to which the motions fall short of what is required. Of course we welcome the Government’s measures on non-doms, but I have already criticised them for not addressing, in the Ways and Means motions, the ability of non-doms to keep their assets out of scope if they are held in an overseas trust that was created before they were deemed to be domiciled. We may also want to consider the issue of definition, because the definition of who can be deemed to be in that category seems misleading. It does give the impression that a UK-born non-dom will be deemed if they are now UK-resident, but, inexplicably, it only covers those whose parents were not non-doms, letting non-doms off the hook if their parents were also non-doms. That is very common.

[Mr Kevan Jones]

Does my hon. Friend agree that there is something archaic in people being able to pass down their tax advantages to their children in that way? The average taxpayer on pay-as-you-earn has no chance of having access to such measures, and they certainly cannot pass on their status to their children or get any advantage for their children in the tax system.

[Wes Streeting]

I wholeheartedly agree with my hon. Friend, and I am proud to be a member of the Labour party, because it is inherent in the founding principles of our party that we are here to represent the interests of labour. It should be a principle in the approach to taxation and funding our public services that a hard day’s work should result in a fair day’s pay and that the wealth people earn through hard work should be rewarded. There are many people covered under the Ways and Means resolutions we are discussing—particularly those on inheritance and people who enjoy non-dom status—who through chance or luck or birth have found themselves wealthy. It was not through hard work; they have just been lucky.

I understand the parental instinct that means parents or grandparents want to hand on assets of value, both financial and sentimental, to their successors. I understand that even more as someone who might benefit in the future—although, given my family background and the rising cost of social care, probably not in the way that many high-profile politicians have experienced in recent years. However, there is a problem in that people feel that the link between hard work and the rewards of hard work, and prosperity, have been loosened and weakened. Meanwhile, there are plenty of people out there who through luck, chance or circumstance have accumulated vast amounts of wealth and are seemingly untouchable by the tax collectors.

That situation is deeply regrettable, because it has a corrosive impact on the public finances and our ability to fund public services that benefit everyone, and it is also having a corrosive impact on politics itself. People feel that we gather in this place and work in the interests of a privileged few who have sharp elbows and access to Ministers and the corridors of power, while the vast majority of people, many of whom might have never even thought to email their MP, do not feel that they have a voice, and instead always feel that they are at the sharp end of things. We hear Ministers talking about the tough choices facing the Government, and of course they do face tough choices—if we had won the election we would have faced tough choices; we make no bones about that. However, tough times require fair choices: we should be operating fairly in the best of times, but when times are particularly tough we have to have social and economic justice at the heart of our programme.

--- Later in debate ---

[Mr Jones]

Does my hon. Friend agree that the privileged individuals are also the ones who will have choices come Brexit? If the Government get Brexit wrong for the economy of this country, the average person will not be able to move their wealth or savings offshore, so they will be the ones who suffer. The people my hon. Friend is referring to, however, will be able to move their capital anywhere in the world.

[Wes Streeting]

My hon. Friend’s critique is absolutely right once again. I hope the Minister will respond in detail to the points we are raising about the technical aspects of the Ways and Means resolutions, because I think we have given them a forensic examination and a serious and substantial critique, and the Government ought to respond to that.

I want to pick up on the issue of tax avoidance in Northern Ireland and the provisions in the Finance Bill in this area. The Government seem to be using the Bill to introduce measures that will loosen the definition of a Northern Ireland employer for SMEs, which will basically enable people to establish a business in Northern Ireland and claim the lower rate. Opposition Front Benchers have argued that this will lead to brass-plating, with companies setting up a nominal office in the Northern Ireland jurisdiction to take advantage of lower taxes. My hon. Friend the Member for Bootle, the shadow Chief Secretary to the Treasury, described that situation as an onshore tax haven. We should not be in the business of allowing such a practice.

Forgive my cynicism, but it seems that since the Government lost their majority, they have lost a hell of a lot of revenue in potential tax receipts and in Government expenditure going to Northern Ireland. I am sure that is merely coincidental and has nothing to do with the Democratic Unionist party deal, but in cash terms—that is, the outlay on infrastructure and public services—most UK taxpayers saw the deal between the Conservatives and the DUP as being expensive enough. By the way, I do not begrudge the people of Northern Ireland the investment in infrastructure, education and health that they need. In fact, I do not begrudge them one penny. I do, however, begrudge the unfairness of Northern Ireland being given preferential treatment over England, Wales and Scotland for no other reason than that the Prime Minister took a gamble. She has paid a heavy personal political price for that, but I am less bothered about that. I am really bothered about the fact that the taxpayers we represent in England, Wales and Scotland are paying a heavy financial price for the Government bribing the DUP into a deal.

This measure in particular really does trouble me. We have already had constituents writing to us about the cash outlay to Northern Ireland, and it seems that a lot of hidden benefits are now being given to it, including adjustments to the tax regime. That will not be good for maintaining a strong and cohesive United Kingdom—it does not play well with our constituents in England, Wales and Scotland when they see one part of the United Kingdom being given preferential treatment over the others. I am sorry to disappoint Scottish National party Members present today, but I am a strong Unionist. I strongly support the United Kingdom, but it has to be a partnership of equals. The way in which the Government are now treating Northern Ireland is particularly uneven, as we can see in the Ways and Means resolutions before us this afternoon. I am very disappointed by that.

Resolution 13 allows provisions to be made to expand the scope of business investment relief, which allows non-doms to remit funds to the UK tax-free if they are investing in certain categories of UK business. We have a serious structural problem in our economy when it comes to investment. As I have said, we have one of the world’s largest financial sectors, yet we have a lower rate of investment than most of our major competitors. Public and private investment accounts for about 5% of our GDP, which is below the average for developed economies, and that figure has been falling not only under this Government but for the past 30 years. That is a structural economic problem that we need to deal with. Corporate investment has fallen below the rate of depreciation, which means that our capital stock is falling, and investment in research and development is now lower than that of our major competitors.

There are a lot of causes of that, including the way in which the banking system is insufficiently focused on business lending. That has been picked up by the Treasury Committee and by Members throughout the House in recent years. Also, private equity markets are increasingly focusing on short-term returns, which is not leading to the kind of investment that we wish to see. If the Ways and Means resolutions had set out provisions to stimulate, support or benefit business investment in general terms, I would certainly have supported them. It seems, however, that resolution 13 is not about business investment in the broadest sense but about a special category of business investment that benefits non-doms. I do not understand how this measure sits with the rhetoric from the Minister about other Ways and Means resolutions that are meant to target non-doms.

The shadow Chief Secretary to the Treasury and other colleagues on the Opposition Front Bench will well remember that during the general election, which caught everyone unawares, including Ministers, a raft of Government measures in a wide range of Bills were dropped in the wash-up process. I was closely involved in the Higher Education and Research Bill and saw the consequences for that Bill. It was interesting that the changes to the business investment scheme in the March Budget resolutions were withdrawn in the wash-up process. The Government knew that there was no way we would have allowed the measure through and that we would have been prepared to talk it out—something we never hope to do, because we want to engage constructively with the Government, but only so long as they enable time for appropriate and thorough scrutiny of policy. That measure seemed particularly unfair. If the Government are serious about stimulating business investment and attracting foreign investment, I think there are better ways to do it than with a measure that benefits a particular category of individual. I am not sure it will generate the increased business investment that Ministers want, and it seems particularly unfair.

I understand the pressures around business taxation—it is sometimes all too tempting to turn to corporation tax as the answer to every public policy spending commitment one wishes to make—but whenever we suggest modest increases in corporation taxation, the Government’s reaction is to attack Labour as anti-business. It is important to remember that under Labour we had some of the most competitive corporation tax rates in the OECD and that we have maintained that commitment in every election manifesto since in order to keep the UK competitive, but I come back to the basic issue of fairness and making sure that people pay their fair share.

[Mr Jones]

Does my hon. Friend agree that the Government’s fixation with corporation tax being as low as possible, and the belief that somehow that will give us a competitive advantage, is blown out of the water by the very successful economies, such as Germany and others, that have corporation tax rates a lot higher than those in the UK?

[Wes Streeting]

I wholeheartedly agree—again—with my hon. Friend. It is almost as if he wrote my speech. I only wish I could have written his. I have learned a great deal this afternoon about landfill taxation policy and its importance, and I look forward to studying his speech later as we prepare to grill Ministers on the Treasury Committee.

I turn to resolution 4, relating to clause 14 of the pre-election Finance Bill, which introduced amendments to tighten the income tax treatment of termination payments. I made a point early in my remarks about the sense of unfairness and injustice that people feel about the way the rules are rigged. Many people fear, particularly in the current political and economic climate, and in the context of the Brexit process, that attempts will be made to erode workers’ rights. I was particularly concerned to learn, therefore, when I studied resolution 4, that the measure narrowed the scope of tax relief on redundancy and termination payments, removed any exemption for payments in lieu of notice, enshrined it in statute that injury to feelings—a main aspect of compensation in discrimination cases—was excluded from the tax-free scope of payments for injuries, and gave the Treasury the power to vary the tax-free amount.

--- Later in debate ---

[Mr Kevan Jones]

There aren’t any.

[Wes Streeting]

There is no one here—even Conservative Members have given up defending the Government’s Ways and Means motions. We have the poor Minister, his Whip and his poor Parliamentary Private Secretary in the Chamber, but there we are. I thank everyone else for paying attention this afternoon. The serious point is that the Ways and Means motions do not actually address the fundamental structural weaknesses in our economy.

I will now draw heavily from today’s report by the Institute for Public Policy Research, which I commend to the House and which I hope people will read. The fact is that the UK has the most geographically unbalanced economy in Europe. Although I am proud to be a London and Essex MP, I understand why colleagues from other regions and nations of the UK want a more balanced approach to regional economic and infrastructure investment, which is in the interests not only of their constituents but of my constituents. If we are to build a stronger, more resilient, more prosperous and fairer economy, it has to be one that is fairly balanced across the UK.

As Conservative Members tell us, we have a high employment rate and unemployment has been kept low, which I acknowledge and welcome, but Ministers and Conservative Members must have some humility about the fact that the high employment rate has been accompanied by an increasingly insecure and casualised labour market. Fifteen per cent. of the workforce are now self-employed, and many of those self-employed people will be hit by the Ways and Means motions, particularly those relating to Making Tax Digital.

We welcome self-employment. I have been self-employed, and I admire people who pluck up the courage to take the plunge and the risk of starting their own business, but there are many people who are not self-employed in the conventional sense—the sense that is to be encouraged and welcomed—but are in enforced self-employment, driven either by businesses seeking to duck their employer responsibilities or, worse still, by a punitive welfare regime in which people seek to declare themselves as self-employed so that they do not lose their tax credits while they scramble to find a real job. That is not properly understood.

Of course, there is also an unequal distribution of economic wealth. Between 1979 and 2012, only 10% of overall income growth went to the bottom half of the income distribution; almost 40% went to the richest tenth of households. Small wonder that we see this outcry from significant parts of our population, concentrated in certain parts of the country in particular, who are not just angry about the injustice they feel but are completely aware that it is a genuine injustice. It is not just a feeling of resentment—an irrational emotional response—as they are being left behind.

Let us be honest about the fact that we have, as the IPPR says,

“both world-leading businesses and world-lagging productivity.”

We have a lower rate of investment than most of our major competitors, as I have already said. Yes, we have a trade surplus in services, but our overall current account deficit as a percentage of GDP is the largest of all the G7 countries. The extent of manufacturing in our economy should make Ministers blush.

In the past seven years, the Government have been far too reliant on monetary policy levers. They have been over-reliant on quantitative easing, over-reliant on extremely low interest rates and over-reliant on growth that is fuelled by record consumer spending and consumer debt. We are building a new debt crisis in this country—it is a consumer debt crisis, and it is here. All it will take is a marginal interest rate increase for people to be unable to service their debt, and they are barely able to service that as it is. There are real questions to be answered about irresponsible lending, and the Treasury Committee needs to examine that.

These structural weaknesses in our economy ought to be at the forefront of the motions, but they are not. That would be irresponsible in the best of times, but let us look at what we face down the track. We are going to see deeper globalisation, and a shift of economic power to the south and to the east, with a requirement on us to become far more competitive, particularly in seizing opportunities in the service economy. We face enormous and fundamental technological change. The rate of such change is now vastly outstripping the rate at which regulators, government and businesses are able to respond to it. I am not someone who sees the rise of the robots as the beginning of human serfdom in the age of the machine; as with globalisation, there are huge opportunities here to deal with enormous inequality and with big issues facing the planet, such as climate change. Automation presents huge possibilities, but let us learn the lesson from globalisation. This is not something that we can slow or stop; it is happening, and it is a process. We must make sure that this new industrial revolution, the fourth one, works in the interests of everyone, rather than a select few. Otherwise, we will end up back where we are with Brexit, which is the biggest risk facing our country.

When we think about what could happen in the next couple of years as the UK leaves the EU or comes crashing out, we see that the idea that these Ways and Means motions would make any bit of difference is fanciful—it is not serious. When we look at policy coming from the Treasury and the Department for Business, Energy and Industrial Strategy, we see that it is insufficient to meet the challenges of the time. Worse, it seems that far from pursuing policies that will address these big challenges, the Government are pursuing an approach that would make things even worse, relegating the economy to a second-order issue. As George Osborne said from the Government Back Benches after he left office as Chancellor, in a debate about our relationship with the EU,

“the Government have chosen…not to make the economy the priority”.—[Official Report, 1 February 2017; Vol. 620, c. 1034.]

Can you imagine that? Can you imagine a Government not making the economy the priority? As I have said throughout this debate, that would be inexcusable in the best of times, but it is absolutely outrageous in the worst of times.

In conclusion, I hope that the Government not only take on board the detailed critique that has been made of their Ways and Means motions, but reflect on the structural weaknesses in our economy, the challenges that lie ahead and how they can meet them. Let us think about the biggest political event this country has seen in post-war history: the decision to leave the EU. We know that the referendum was lost because of a coalition of voters. I accept that there were a lot of committed Eurosceptics who always wanted out come what may, but the referendum was won thanks to the votes of millions of people who simply felt left behind, who felt unheard and who wanted to send a clear message. They are the people who have been at the sharp end of globalisation; they are the victims of economic inequality and social injustice. When we campaigned in areas where people turned out in droves to vote leave and we told people they may be voting to make themselves poorer, time and again we heard the same reply: “Things cannot get worse than this.” The thing I fear more than anything else about the economic outlook in this Parliament is that things can, and indeed may well, get worse. It would be a tragedy if the very people whose voices cried out to demand change, and who expect that change, were once again the ones who bore the brunt of short-term economic thinking, and of a politics and economics that works in the interests of the privileged few.

I did my democratic duty in honouring the referendum by voting to trigger article 50. What I will not do during this Parliament is pretend that I think the right decision has been made or that the warnings we gave will not come to pass. It is my responsibility, and the responsibility of us all, to protect the interests of our nation and our constituents. If we want to deal with what we are seeing across western democracies—the consequences of people abandoning their faith in mainstream politics—and we want to see off that trend and process, the only way to change course is to change our country. There is no shortcut to achieving change. It has to be meaningful, serious and a lot better than the measures the Government have presented this afternoon.

Finance Bill

Kevan Jones Excerpts

2nd reading: House of Commons
Tuesday 12th September 2017 Commons Chamber

Question again proposed, That the Bill be now read a Second time.

[Mr Kevan Jones (North Durham) (Lab)]

On a point of order, Mr Deputy Speaker. We are seeing an historic event tonight: a Government actually filibustering their own Finance Bill! I think that should have a plaque somewhere in this Chamber. I am told through the usual channels that the Conservative Whips told their Members to book hotel accommodation tonight because the Labour party was apparently going to talk the Bill long, even though Labour Members were assured by our own Whips that we would not. They have got to keep it going until 10 o’clock, so their Members can be reimbursed by the Independent Parliamentary Standards Authority. With 25 more speakers to go, and the Whips doing their best to cut down contributions, I wonder, Mr Deputy Speaker, whether you could institute a time limit to save Government Members from the incompetence of their own Whips Office. [Interruption.]

[Mr Deputy Speaker (Mr Lindsay Hoyle)]

Hang on a minute. I thank the Government Whips, who have turned out in force, for their advice. I do not know what fear you have put among them, Mr Jones. However, if they were really interested in filibustering, they would have asked you speak. The fact that they did not has probably saved the House. As you well know, that is not a point of order but you have put your point on the record.