Consumer Access: Financial Services

Robert Jenrick Excerpts

Thursday 6th June 2019 Westminster Hall

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

Thank you, Mr Walker; it is a pleasure to serve under your chairmanship. I do not intend to use up all the time, unless there are many interventions from colleagues. It is a pleasure to follow the hon. Members for Motherwell and Wishaw (Marion Fellows) and for Oxford East (Anneliese Dodds). A dangerous precedent was set in the Lords by my colleague, the noble Lord Bates, who resigned after arriving 10 seconds late to a debate, so I am always careful to be on time now, although I am sure being 15 seconds late is allowed.

I thank both the Treasury Committee and its chair, my right hon. Friend the Member for Loughborough (Nicky Morgan), for securing the debate and for this important piece of work. As she knows, this debate comes just a few weeks before the Treasury will formally respond to the Committee’s comments and recommendations on behalf of the Government. I hope that she will forgive me for not pre-empting that by providing the full formal response, but I will try to set out our approach, our record in recent years and some further steps that we intend to take, as well as impress on her how seriously the Government take the issue and how carefully we will read and respond to the important recommendations in her Committee’s report.

Financial inclusion is a priority for this Government and has been for some time, particularly, as I hope my right hon. Friend will recognise, over the last two or three years, when in each successive Budget the Government have taken a number of important steps to address some of the issues that the report raises and on which it urges us to go much further. Like my right hon. Friend and others who have spoken, I think that financial inclusion is extremely important to build a unified society and economy. In her introduction, she made the important point that we have to take a wide view of what “vulnerability” means, because each and every one of us can be vulnerable at different stages in our lives, not just those whom one might stereotypically assume to be vulnerable.

That is reflected in the broad definition of “vulnerability” that the FCA is working towards. It has identified four indicators of potential vulnerability: low financial capability, low financial resilience, life events, which of course can happen to all of us, and physical and mental health conditions, which one might most clearly recognise as vulnerability. The Government, like the regulator, view this issue with the broadest possible definition.

I will say a few words on what we have done most recently. In November 2017, following a report from the Lords Financial Exclusion Committee, which the hon. Member for Oxford East mentioned, the Government announced the creation of the financial inclusion policy forum. The forum has now met three times and has successfully brought together for the first time the key leaders from across the industry, charities—including some of those mentioned today—and consumer groups, as well as Ministers from throughout Government and the regulators, to provide the leadership and co-ordination in tackling financial exclusion that the issue demands. The Government published our first financial inclusion report on 25 March this year, which takes stock of progress in the area. We intend to continue doing so annually.

Affordable credit was one of the core areas of the report. The policy forum is widely recognised by the sector as an important initiative and it has already managed to deliver tangible progress, although I hope it will go further in the months and years to come. A sub-group of the forum that was set up last summer to examine the issues of access to affordable credit made a number of recommendations. To build on that work, at last year’s Budget we announced a package of affordable credit measures aimed at supporting the affordable credit sector and offering more choice and a better deal to consumers who struggle to access mainstream credit.

Some of those measures have already been referenced in this debate. They include a £2 million affordable credit challenge fund, harnessing the UK’s undoubtedly great capability in the FinTech sector to address the specific challenges faced by social and community lenders. The Government have appointed Nesta as the delivery partner to run the challenge fund, and we expect to launch it in the summer—so, in the coming weeks.

Other measures include a change in the regulatory boundary of credit broking, to allow registered social landlords to refer their tenants to social and community lenders; a pilot prize-linked savings scheme to encourage the growth of the credit union sector and to encourage consumers to build up their personal savings, which we readily acknowledge are lower than most of us would like to see; and a feasibility study to design a pilot for a UK no-interest loans scheme, which we have already heard about. That scheme will be aimed at helping those at the margins of the financial system, for whom borrowing from social and community lenders can still be unaffordable. The Government have appointed London Economics, which is undertaking the study and will report back this summer. Depending on the results, we will then move quickly into the pilot design phase and then to implementation.

The Government are also directing an initial £55 million of dormant assets funding towards financial inclusion, primarily to address affordable credit. That will be deployed by a new, independent organisation, Fair4All Finance, which was launched in February. We are pleased with the rapid progress that it is making, and excited to see it begin work with a range of partners to tackle financial exclusion, but clearly there is more to be done.

We heard some comments about basic bank accounts. We think, as right hon. and hon. Members here do, that they play an important role. I will take away the comments from the hon. Member for Oxford East about access to and knowledge of those bank accounts. A large number of people benefit from them. The last report that we received, published in December 2018, found that almost 7.5 million basic bank accounts were open at that time, deployed through the nine designated institutions. The banks that are required to provide basic bank accounts send reports to the Treasury, so we receive accurate information, but we could perhaps do more to monitor those banks’ activities and ensure that they are more visible to potential customers, particularly the most vulnerable. I will take away the hon. Lady’s comments in that regard.

The report made a number of recommendations on safeguarding access to cash. The Government recognise that the use of digital payment is growing very fast—among the fastest of any major economy: in Europe, only a few Nordic countries are moving to a more cashless society at a faster pace than our own. Although we acknowledge the many benefits for consumers and the economy, there is and will continue to be for many years to come—almost certainly throughout our lifetimes—a need for cash and traditional face-to-face methods of banking to continue alongside the new thriving digital economy. Running both the digital and the cash systems side by side in all parts of the country and for all consumers, including the most vulnerable, will be a considerable challenge to us as Government and policy makers in the years ahead, but one that we must meet.

We have set up the joint authority cash strategy group, which responds directly to one of the report’s recommendations. It brings together the Bank of England, the Payment Systems Regulator and the Financial Conduct Authority to provide comprehensive oversight of the UK’s cash infrastructure, from supply to customer access. That will complement the Bank of England’s work to reform the wholesale cash industry, to encourage innovation and guarantee resilience even in a much lower cash usage environment. The organisation has already started work, and I am happy to update the Committee and other interested Members in the month ahead as we develop this area of work.

Industry has played a central role, and will have one in future, to maintain access to cash, because with industry innovation we can do more at a lower cost. I was pleased to meet Natalie Ceeney recently to discuss the findings of her excellent Access to Cash review, which showed that creative industry initiatives are already being developed, including encouraging greater use of cashback. We think that the industry, perhaps with Government help, can do more to encourage a resurgence in cashback, which was prevalent but is somewhat less so today. It could be part of the answer where ATMs are in decline. There might be opportunities for smaller shops such as convenience stores to return to offering cashback if they have stopped doing so. We would like to take that forward in future.

We have heard about ATMs, where there is undoubtedly a challenge. There remains a large network of free ATMs in this country—among the largest of any developed country in the world. In 2017, the number of free ATMs in the country reached its peak at 54,500, many of which were clustered in the wrong places, particularly in urban areas with the highest footfall. Since then the number has declined. Even though there might be a logical case for reducing the number of ATMs in areas with high footfall, where they are in less demand as more of us use contactless and digital payments, we want to ensure that we protect the people who live in harder-to-serve areas.

The number of ATM transactions is falling by around 6% year on year. Demand is reducing but it varies quite significantly in different parts of the country, as the hon. Member for Motherwell and Wishaw suggested. The last figures show that there was a 10% reduction in the use of ATMs in London, but the figure was as low as 2% in areas such as the east midlands, which my right hon. Friend the Member for Loughborough and I represent, and in Northern Ireland. There are large variations by region, age and socio-economic group. We need to pay careful attention to that. The LINK organisation has made an important commitment to maintain a good and appropriate geographical representation of ATMs, and a particular commitment that we intend to hold it to: that if the last ATM in one kilometre closes and no alternative is provided by the local post office in that radius, it will continue to seek an alternative location for an ATM and will use the subsidies that it provides without limit until an alternative is found. That is an important commitment, and we all need to hold LINK to account. I assure the Committee and colleagues here that I will play my role in doing that, as will my colleague, the Economic Secretary to the Treasury.

Post offices play a key role. They provide a good range of banking services—not a complete range, but most of the services that individuals and smaller businesses will require. Although the number of post offices continues to decline, it is more stable than it has been for a long time. There are 11,500 branches across the country, and we will continue to do all we can to support them. My hon. Friend the Member for Gordon (Colin Clark), who is no longer in the debate, raised the important question of fees for services that banks provide to those running post offices. There has been a negotiation that has led to a significant increase in the amount of money that banks pay of between two and three times the amount of money that post offices receive for offering those services. I am very alive to that issue and the need of those running post offices, often on low margins and taking very little money out of their business, to receive fair compensation for their work.

The wider question of digital inclusion, which the hon. Member for Motherwell and Wishaw raised, is very important. Although younger people and perhaps those in this debate enjoy using digital payments, people have to be able to use digital services and live in areas with 5G or broadband to access them. In rural areas, that is not always the case, although there have been great steps forward. We are alive to that issue and we are working on our digital strategy as a country to ensure that more people have access to basic digital training. Through education we are taking steps in that regard. We should recognise that some new products coming out of the FinTech sector will be very useful to those who have the digital skills to access them, whether that is income smoothing, budgeting skills or the ability to share payments and bills among flatmates. They will make life much easier, but that is dependent on having the digital skills to access those services.

Financial guidance is not limited to digital skills. Last year, we established a new single financial guidance body, the Money and Pensions Service—MAPS—by merging three existing bodies, Pension Wise, the Pensions Advisory Service and the Money Advice Service. The new body provides money guidance for members of the public at every stage of their financial journey. The Government’s commitment to improve people’s financial capability and the provision of financial education is reflected in MAPS’s strategic function to develop and co-ordinate a national strategy that will build on and further progress the Money Advice Service’s work on financial capability.

It is particularly important that children and young people receive good-quality financial education to help them to shape their financial habits later in life. That is why financial literacy was made statutory in the national curriculum in England in 2014, which my right hon. Friend the Member for Loughborough will know from her work as Secretary of State for Education, as part of the curriculum for citizenship education for 11 to 16-year-olds. As reports from the all-party parliamentary group on financial education for young people have recognised, there is more to do to ensure that that education is delivered well in all parts of the country. We recognise that there is more we can do in that regard.

Public funding for debt advice in England has risen to £55 million in 2019-20. That provides help with debt to more than 560,000 people, an increase of 85,000 compared with 2018-19. In addition, during autumn 2018, the Government held a consultation on a breathing space scheme in response to campaigning by a number of Members. That will give vulnerable consumers 60 days’ respite from creditor action, giving them time to access debt advice and put their finances on a sustainable footing. The Government will publish our response to the consultation very shortly, and we have committed to laying regulations before the end of this year to establish breathing space.

The Committee’s report also made recommendations about how financial services can work better for vulnerable consumers. The Government have given the FCA strong powers to protect consumers, and we expect it to continue its work in this area. The FCA and other regulators no doubt will read with interest the comments and recommendations in the report; in turn, I will certainly pay careful attention to their responses.

We welcome the FCA’s work to improve our understanding of vulnerability in the context of financial services, including its forthcoming publication of guidance to firms on how to identify and treat vulnerable consumers. The breadth of the definition of vulnerability in the Committee’s report no doubt will influence and inform the FCA’s work in that regard. Through the Consumer Forum, the Government and regulators from across sectors are working to better understand vulnerable consumers. That will inform the actions taken by the Government and regulators in this space.

My right hon. Friend the Member for Loughborough asked particular questions about the duty of care. We will give that careful thought and respond in a couple of weeks’ time, as we will to her comments about the Equality Act. Those were very important questions. We will give more thought to them and respond to her, I hope in the next few weeks.

We all agree that access to useful and affordable financial products and services is essential to individuals, regardless of their background or income. Part of this is about ensuring that financial services are inclusive to all customers and protecting those who are financially vulnerable by making the right products and advice available. The banks are taking steps in that regard. I met the staff at my local bank in Newark last Friday and saw the quality of training that that bank, Lloyds, provides to protect vulnerable people, such as those who suffer from dementia and those at risk of scams, including new ones emerging as a result of the new digital economy. However, there is a great deal more that the sector and the Government can do.

The Government’s response to the Treasury Committee’s report will be published in the coming weeks. We will seek to address in detail all the recommendations that my right hon. Friend and her Committee made and outline the steps that we will take to build on the progress made on access to financial services. I thank the hon. Members who took part in the debate, and I thank my right hon. Friend for another interesting and rigorous report with insightful recommendations, on which I hope we can work together.

Oral Answers to Questions

Robert Jenrick Excerpts

Tuesday 21st May 2019 Commons Chamber

[Daniel Zeichner (Cambridge) (Lab)]

10. What assessment the Government have made of the environmental effect of freezing fuel duty since 2010.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The price of fuel has only a marginal effect on how much fuel people purchase. That means that fuel duty freezes have a limited effect on emissions. Fuel costs, however, are a major expenditure for both households and businesses, which is why this Government have chosen to freeze fuel duty for nine successive years.

[Daniel Zeichner]

That is not the view of most people who actually know about these things. This Government have gone from climate emergency to climate complacency in just three weeks. There is 4% extra traffic on the roads because of the scrapping of the fuel duty escalator. What fiscal mechanisms is the Treasury contemplating to deal with climate change?

[Robert Jenrick]

I take it from the hon. Gentleman that he supports increasing fuel duty. He asks who has that opinion. Actually, most economists agree that fuel consumption is highly price-inelastic, because working people do not always have the choice to use public transport or cycle. Not everybody lives in a city like Cambridge, with excellent public transport. We support the working men and women of this country, particularly in towns and rural areas, and we have saved them £1,000 a year on their fuel bills.

[Kirstene Hair (Angus) (Con)]

I declare my role as vice-chair of the all-party group for fair fuel. As the Minister outlines, it is the Conservative party that has frozen fuel for nine consecutive years. Since 2010, my constituents and people across the country have saved £1,000. As he mentions, the Opposition parties suggest that that was an ill-judged decision. Does he agree with me that it is this Government and this party who are on the side of motorists and hard-working people?

[Robert Jenrick]

Absolutely. This Government will always support working people. We want to raise living standards. We are particularly conscious of those men and women who work in parts of the country, like the area my hon. Friend represents, where it is not easy to get to work. They need that extra money in their pockets to get on, do their jobs and run their businesses.

[Several hon. Members rose—]

[Mr Barry Sheerman (Huddersfield) (Lab/Co-op)]

That was a very, very complacent answer to a very important question. Is it not a fact that the house is on fire? We want a radical tax like the one Mrs Thatcher introduced with Geoffrey Howe in 1981. Why do we not have a tax on banks, Amazon and all the other people making profits, and put the money into fighting climate change now, when the house is on fire?

[Robert Jenrick]

We on the Government Benches are not complacent about climate change; we are leading the world in this area. We are decarbonising faster than any other G20 country and we are investing billions of pounds in this area. If we want to tackle the challenge of decarbonisation, we will need to gather the greatest amount of private investment and innovation from the private sector. We will never be able to do that by going around nationalising industries below market value and making bellicose statements that shareholders are lining their pockets. The shareholders are the savers, the pensioners and the international investors that this country needs to thrive.

[Charlie Elphicke (Dover) (Con)]

May I urge the Minister to reject the representations from the Labour party for a £9 billion tax rise on hard-working motorists? Does he not agree that rather than sandbagging hard-working people, it would be better to invest in more electric charging infrastructure to give people a real choice?

[Robert Jenrick]

My hon. Friend is absolutely right and that is what the Government are doing: investing in ultra-low emission vehicles; increasing the capital allowances budget, now extended to 2023, for EV charge points; announcing a £400 million fund to get private sector investment in getting those charge points rolled out across the country; and, through the plug-in car grant, giving generous subsidies to help people to buy their first electric vehicle.

[Christian Matheson (City of Chester) (Lab)]

11. What assessment he has made of the potential merits of extending business rates relief to more music venues.

--- Later in debate ---

[Mr Philip Dunne (Ludlow) (Con)]

T2. The Government have an excellent track record in tackling climate change, notwithstanding what Opposition Members said earlier, and I applaud their commitment to doing more. Will the Chancellor consider introducing incentives in the comprehensive spending review to encourage occupiers and owners of industrial and agricultural buildings to improve their energy efficiency?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The clean growth strategy set out our ambition to enable businesses and industry to improve energy efficiency by 20% by 2030. Today farmers in a community such as Ludlow can make use of the rural development programme for agricultural buildings, but we have also announced two new schemes. First, there is the £315 million investment in a new industrial energy transformation fund, and secondly, we have published a call for evidence on a business energy efficiency scheme focused on smaller businesses.

[John McDonnell (Hayes and Harlington) (Lab)]

The Chancellor’s speech to the CBI this evening has been much trailed. I welcome his clear warnings to his Conservative colleagues about the hit the economy would face from a no-deal Brexit, especially those who have said there is nothing to fear from a no deal. For the benefit of Members in the Chamber, will he explain what he sees as the impact of a no-deal Brexit and his clear view that with

“all the preparation in the world”

a no-deal Brexit will still damage our economy?

--- Later in debate ---

[Jo Swinson (East Dunbartonshire) (LD)]

T3. We are the last generation that can act to prevent irreversible harm from being done to our planet, so we need to act with urgency. Will the Chancellor bring forward the tax on the use of virgin plastic to boost recycling and incentivise plastic-free options? We do not have three years to wait.

[Robert Jenrick]

I am proud that this country will be the first in the world to introduce a new, innovative plastic packaging tax. We are in the process of formulating the tax. We have finished the consultation, and have received a large number of responses. We will be presenting proposals in the forthcoming Budget.

[Peter Aldous (Waveney) (Con)]

Will my right hon. Friend the Chancellor consider changing the method of assessing a property’s rateable value, so that all shops on the high street pay business rates that reflect their profitability and trading potential, putting them on a level playing field with their out-of-town and online competitors?

--- Later in debate ---

[Wera Hobhouse (Bath) (LD)]

Anti-idling rules are a good start in reducing air pollution, but local authorities need the legal powers and resources to enforce them. Would the Treasury consider making new money available to local authorities to stop cars idling?

[Robert Jenrick]

The Government have committed £3.5 billion to improving air quality for the entire population, and I understand that that involves Bath and North East Somerset Council receiving nearly £6.5 million. I understand that the council is also expected to bid for part of the £220 million clean air fund, and I wish it luck with its application.

[Rebecca Pow (Taunton Deane) (Con)]

I am pleased to hear that education is going to get a special focus in the forthcoming spending review. Please can Somerset have special consideration, since pupils there get way below the national average in both secondary and primary school funding? With a sound economy, I am sure that we can sort this out.

[Bill Esterson (Sefton Central) (Lab)]

Revenue funding continues to flow to oil refineries in the middle east at the expense of tidal technology, an area in which we are a world leader. When will this Government accept that investing in tidal energy would bring huge benefits to the whole economy?

[Robert Jenrick]

This Government are investing in innovation in the tidal and marine sector. For example, we have invested in the marine innovation centre in Shetland, and I recently met a delegation to discuss those proposals. However, investments that we make on behalf of the taxpayer have to be the right strategic energy investments for the country and provide good value for money for the taxpayer.

[Steve Double (St Austell and Newquay) (Con)]

I met headteachers and school governors across Cornwall recently, and they are very concerned about the pressure that their school budgets are under, so can I put in my bid for more money for education in the comprehensive spending review, and can we ensure that that money is fairly distributed so that schools in Cornwall get their fair share?

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill (Second sitting)

Robert Jenrick Excerpts

Tuesday 14th May 2019 Public Bill Committees

[The Chair]

With this it will be convenient to discuss the following:

Clause 2 stand part.

New clause 1—Report on the impact of Class 1A National Insurance Contributions on termination awards—

‘(1) The Secretary of State must, within 12 months of section 1 of this Act (termination awards: Great Britain) coming into force, lay before Parliament a report on the expected impact of the new Class 1A liability on termination awards in excess of £30,000.

(2) That report must contain an assessment of the expected impact on—

(a) the total net value of termination payments received by individuals;

(b) the average net value of such payments; and

(c) the number of business start-ups using termination payments as funding in their first year in each region of the United Kingdom.”

New clause 4—Review of the impact of Class 1A National Insurance Contributions on termination awards—

‘(1) The Secretary of State must, within 12 months of section 1 of this Act (termination awards: Great Britain) coming into force, undertake a review of the impact of the new Class 1A liability on termination awards in excess of £30,000.

(2) The review under section 1 must contain—

(a) an assessment of the impact the new Class 1A liability has on the level of termination payments workers receive;

(b) an assessment of the impact the new Class 1A liability has on employers;

(c) a distributional analysis of the new Class 1A liability; and

(d) anything else the Secretary of State considers appropriate.

(3) The review under section 1 must be laid before both Houses of Parliament.”

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

It is a pleasure to return this afternoon, following my grilling by members of the Committee this morning, to explain the clauses in the Bill, starting—as you said, Sir Henry—with clauses 1 and 2. Before I respond to the hon. Members who have tabled new clauses 1 and 4, it may help the Committee if I begin by explaining some of the background to clauses 1 and 2. My apologies for repeating some of what I said this morning in answer to questions from members of the Committee.

The Office of Tax Simplification, or OTS, stated during its 2013-14 review of the tax and national insurance contributions treatment of these payments that

“the well-advised can often end up better off than the unadvised, as they are more able to structure their employment contract (or, indeed, their termination payment) to achieve the better tax treatment.”

One reason why businesses had an incentive to do so was the absence of any employer’s national insurance on termination awards of any size. My officials and I outlined some examples of that this morning during questions, which I think was supported by the interesting evidence from Bill Dodwell of the OTS.

Following that report from the OTS, the Government announced in the 2015 summer Budget that they would consult on simplifying the tax and NICs treatment of termination awards. We consulted openly and widely on that policy, receiving responses from 100 stakeholder groups and nine individuals, covering tax experts, law firms, trade unions, business groups and individual businesses. We also held several meetings with stakeholders to discuss their views on our draft proposals. Following that, in the 2016 Budget, we confirmed that we would be taking forward reforms to the tax and NICs treatment of termination awards, and shortly afterwards published draft legislation for consultation.

The income tax measures announced in the 2016 Budget were legislated for in the Finance (No. 2) Act 2017 and took effect from April 2018. The Government then reconfirmed in the 2018 Budget that the associated reforms to NICs legislation would be in place for April 2020. The reforms made by clauses 1 and 2 have therefore been properly consulted on, tested with stakeholders of all kinds and debated by Parliament—both during the process of this Bill and, more particularly, through the passage of the Finance (No. 2) Act. They have also been widely expected by stakeholders for many years.

I now turn to the changes made by clauses 1 and 2. It is important to note that the reforms we are discussing today are the second part of a package of changes, some of which have, as I said, already been approved through the Finance (No. 2) Act and took effect in April 2018. The tax rules for termination awards that existed before the reforms introduced by the Finance Act (No.2) 2017 were unclear and unnecessarily complicated. Some awards were taxed as earnings, others were taxed only above £30,000, while others were completely free of tax and national insurance contributions. That complexity left the system open to a degree of manipulation that we heard evidence about this morning. The Finance Act (No.2) 2017 tightened the rules on what element of an award is taxed as earnings. From 6 April 2018, the NICs liability was more closely aligned with the tax treatment, so that those amounts taxed as earnings became liable for employer and employee class 1 NICs.

Termination awards that are not earnings are currently charged to income tax on amounts that exceed £30,000, and they are entirely exempt from employee and employer national insurance contributions. Allowing the difference between the income tax treatment of that income and the employer national insurance treatment to persist would be confusing, and continue to provide an incentive for employers to manipulate final payments to achieve a tax advantage.

The clause will close that loophole, simplify the tax system, and raise about £200 million in revenue to continue to support the funding of public services in a significant way. Clause 1, which applies to Great Britain, achieves that purpose by ensuring that where an income liability arises on termination awards above £30,000, there will be a corresponding liability to employer class 1A national insurance contributions.

[James Cartlidge (South Suffolk) (Con)]

On Second Reading, not much attention was given to employee benefits. How do they fit into that threshold?

[Robert Jenrick]

If my hon. Friend is referring to the benefits system, that is completely unrelated. Contractual benefits are liable to a tax liability in addition to that—perhaps I can provide more information on that in a moment. They will be part of taxable income taken in the round, which once generated is then subject to income tax and the employer’s national insurance contribution in the final termination payment.

The effect of the change will mean that a 13.8% class 1A secondary employer’s NICs charge will be applied to income derived from a termination award that is already subject to income tax. In addition, clause 1 also includes other modifications to existing legislation that relates to employer class 1A NICs, to ensure that the new liability for termination awards works as intended. Clause 2 makes corresponding changes for Northern Ireland, ensuring that the provisions apply across the United Kingdom.

Before I address new clauses 1 and 4, let me say a few words about what clauses 1 and 2 do not do. First, they do not introduce a NICs liability on the employee—I hope we made that clear during questions this morning. There remains an unlimited employee national insurance charge exemption on termination awards. Although there is a principled case for greater simplification and alignment by applying employee NICs to that income, the Government have listened carefully to representations made during the consultation, and we believe that our approach strikes the right balance between delivering greater simplification for employers, and fairness to individuals who are undoubtedly in a difficult period of their lives: losing their jobs and having to make the necessary adjustments.

Secondly, the clauses do not reduce or seek new powers to change the existing £30,000 threshold, below which termination awards are entirely tax-free and NICs-free. As we discussed this morning, that threshold remains generous compared with those of many other countries, including the United States and Germany, which tax income linked to a termination from the very first pound. It will ensure that about 80% of awards are unaffected by clauses 1 and 2, and that awards made as statutory redundancy pay are untouched. We have no plans to lower the threshold in future. Any future Government who wished to do so would need parliamentary approval.

[Eddie Hughes (Walsall North) (Con)]

The Minister has not so far mentioned the money that the measure will raise. My understanding is that that has already been taken into account and that if we were not to proceed, the Government would need to find that money from another source. Is that correct?

[Robert Jenrick]

My hon. Friend is absolutely right. I have said on several occasions that the measure will raise about £200 million a year. Because it was a Budget measure, it has been included in the Government’s forecasts and certified by the Office for Budget Responsibility. If any hon. Member wished to take issue with the policy, they would need to find an alternative way to raise £200 million a year, if they wanted to continue to support public services in the way that we have set out in our spending plans.

Finally, the clauses do not introduce any legislation that goes beyond mirroring the effect of the income tax rules with respect to the scope of the change. Instead, by virtue of the clause, the rules that determine liability to income tax will apply directly in calculating the amount of employer class 1A NICs payable on termination awards above £30,000. Therefore, clauses 1 and 2 simplify the tax system and reduce the incentive for manipulating payments to achieve tax advantage.

[Eddie Hughes]

I am sorry to dwell on the point, but it was raised previously. My recollection is that it would require an affirmative statutory instrument to change the £30,000 figure in future. Is that correct? The Opposition have clearly raised that concern.

[Robert Jenrick]

That is absolutely right. As I have just said, we have no intention of changing the threshold. If a future Government wished to do so, that would need to be done through an affirmative statutory instrument and the House would have the opportunity to debate it and take issue with it in the usual way, if it wanted to. We have no plans to do so; my hon. Friend is right to seek that clarification.

[Mike Wood (Dudley South) (Con)]

Understandably, several concerns have been expressed about the impact that any changes might have, particularly on people on lower incomes who might have served in a job for many years before being made redundant. Can the Minister explain how the £30,000 threshold compares with the maximum available from statutory redundancy pay, and who might be captured by the measure?

[Robert Jenrick]

My hon. Friend makes an important point. Statutory redundancy pay is £15,000, so for these purposes, £30,000 appears generous. I have already made the international comparisons. It is also important to point out that there are a number of exemptions altogether, for discrimination, physical harm, disability and so on, set out in other areas of legislation to ensure that those who are particularly vulnerable and deserving are protected when it comes to the payment they receive for their injuries.

I will briefly discuss the amendments that would be made to the Bill if new clauses 1 and 4 were accepted. New clause 1, tabled by the hon. Member for Aberdeen North, seeks to require the Government to produce a report on the impact of class 1A NICs on termination awards. Furthermore, it specifies that the report must contain

“an assessment of the expected impact”

of the changes in certain respects, which I will not list here but which are available in the Bill documents. New clause 4, tabled by the right hon. Member for Hayes and Harlington (John McDonnell) and the hon. Members for Bootle, for Oxford East, for Stalybridge and Hyde (Jonathan Reynolds) and for Manchester, Withington from the official Opposition, also asks the Government to report on several similar issues to those covered in new clause 1.

The new clauses are unnecessary because they seek to force the Government to report on a narrowly prescribed set of issues, most of which have been considered during the detailed consultation that has already been completed and that I have outlined, ahead of new information becoming available. The Government are already committed to reviewing the measures and being transparent about the impact that they are expected to have.

It is worth giving Committee members a little more detail on these issues. First, the Government do not deem it appropriate to conduct reports that have been very narrowly constructed. A report focused exclusively on one aspect of the Government’s reforms to termination payments—the distribution analysis, for example—would miss other important aspects such as the impact on the levels of tax avoidance or the funding of public services.

[James Cartlidge]

My hon. Friend is making an excellent point. Does he agree that we should look at the impact on job creation and the ability of employers to create jobs, particularly on the day we learned that unemployment is at the lowest level of my entire lifetime? I was born in 1974.

[Robert Jenrick]

Absolutely. The figures reported by the Office for National Statistics this morning are further evidence of the jobs miracle we have seen since we came to power in 2010. It is important to place these changes and the impact they will have on working people in the context of the fact that, as my hon. Friend said, most of us in this room have never known such a buoyant labour market in our lifetimes—and long may it continue.

On the particular point of the reports, the Government feel it is more appropriate to look at those issues in the round and to take a balanced decision based on all the relevant factors. Secondly, the Government have already consulted on this measure in detail. We have published both the draft policy proposals and the legislation for scrutiny. We explicitly considered the impact on employers and individuals as part of the policy and our development.

We decided on an approach that protected those losing their jobs by, for example, retaining the important £30,000 exemption that we have extensively discussed and not seeking to change the position with respect to employee national insurance contributions, but at the same time simplified and aligned the system, reducing the incentives for manipulating payments. We believe we have considered this issue carefully and reached a balanced way forward.

I will add at this point that the policy costing for this measure, as we have already heard in interventions from my hon. Friends, has been signed off and certified by the independent OBR, and the methodology for that assessment is described in the Budget policy costings document. That shows the Government’s commitment to transparency and sound public finances.

Finally, the Government have already committed to keeping this measure under review, as new information may become available. The publicly available tax information and impact note, TIIN, commits the Government to keeping the scheme under review through communication with taxpayer groups affected by the measure and through information collected from tax receipts.

As with all legislation, the Treasury is also required to carry out post-legislative scrutiny of Acts within three to five years of their implementation. As I outlined, I think in response to the question from the hon. Member for Oxford East this morning, the Treasury may well do that before that deadline; it would certainly be required to do so and to report to the Treasury Committee if it had not.

As part of the review process to meet those obligations, HMRC and HM Treasury will speak to stakeholders to gauge their views on how the policy is operating. There are well established lines of communication between HMRC and representative groups, as one would expect, that will provide the basis for a continuous review of the effect of this policy. I am sure that hon. Members will feed back to Ministers any concerns and thoughts regarding how the reforms are working in practice, and of course HM Treasury is always open to suggestions. I hope hon. Members will agree that those points make publishing a review on these matters unnecessary. However, it may also help if I respond specifically to the points raised about the impact of the new class 1A employers’ NICs liability.

I would like to make a number of important points in closing. First, no employee will receive a new tax charge as a result of the Bill. The Government have explicitly chosen not to charge employee NICs on the measure and to retain the £30,000 threshold.

Secondly, only about 20% of termination awards will be affected. As we heard this morning, the OBR expects that employers may react by lowering wages or accepting lower profits and has adjusted its forecast for salaries by 0.1% as a result. However, that is a negligible reduction and must be viewed in the context of record employment, record low levels of unemployment and record employment in all categories—disabled persons, women in the employment market, young people in the employment market and so on—a higher living wage, support to businesses through tax cuts such as corporation tax, and other important policy initiatives brought forward by this Government. Also, as the ONS pointed out this morning, wages are rising substantially above inflation.

Thirdly, as I noted in my letter to the Committee, and as I set out again in my answers to questions this morning, where employers face a new charge on termination awards, we expect this to be disproportionately on payments to higher-rate and additional-rate taxpayers, typically those who are in the top two or three income deciles.

Clause 1 will simplify the tax system, reduce the incentive to manipulate payment, and raise important revenue for our public services. As such, and with the reassurances that I hope that I have been able to give the Committee, I commend clauses 1 and 2.

[Peter Dowd (Bootle) (Lab)]

It is a delight to see you in the Chair, Sir Henry. I thank the people who gave evidence today to the Committee; it was very helpful. I had something like 50 questions to ask. I was unable to ask them all, but I will relieve Members by saying that I will not ask them all now—possibly 45, but not the 50 that I had planned to ask.

Contrary to what the Minister says, we do not, through new clause 1, want to “force” the Government to do this, that or the other; we do, however, want them to come to Parliament and accept parliamentary scrutiny. There have been no amendments to any of the Finance Bill Committees that I have sat on; I think it is four in total. In the mother of Parliaments, we were unable to scrutinise those Bills properly and appropriately—my colleagues will remember several of them—because the Government have tried, and continue to try, to close down any scrutiny. It is very important to get that on the record.

As for the implication that if we do not agree to the proposals, it will somehow have an impact on job creation—that old chestnut—as I said recently on the radio and in other media, the same was said about giving the minimum wage to miners in 1913, and to agricultural workers in 1924. It was said when people started to get holiday pay in 1938. People said that equal pay for women and members of ethnic minorities would cause the economy to crash, and the same things are being said about the minimum wage. It is the old claptrap—I should not say that, in case it is unparliamentary, but that is what it amounts to—about this impacting on jobs.

Yes, we have the highest number of jobs since 1975, or since records began, as the Government keep telling us, but the context is that this is the most precariously placed workforce in decades. Zero-hours contracts abound, and regional imbalances—[Interruption.] Government Members mutter, but facts are a stubborn thing; facts remain facts. [Interruption.] They are facts; the Minister mutters that they are not. The reality is that a huge number of people are on zero-hours contracts, and huge numbers of people are working two or three hours a week. That is classed as employment. I am sorry, but it is not “employment” to that person, who is not getting any money, or to their family, who perhaps have to send their children to school without breakfast or lunch. Let us get that into context.

The hon. Member for Dudley South effectively said that we will now tax redundancy payments above a certain level. Only the Tories could make a virtue of taxing the redundancy payments of people who have lost their job. The Minister mentioned that the £30,000 figure had been the same since 1998, and said that it was the most generous such amount in—I don’t know—the known world. We do not want to make simple comparisons with other countries, because other countries have far more generous reliefs in other areas, so making a direct comparison with other redundancy figures, out of the totality of employment reliefs, is not appropriate.

The hon. Member for Walsall North mentioned the affirmative procedure. If the Government want to reduce the £30,000 limit—as they no doubt will want to, given that that is far too generous for people who have been made redundant and have lost their job—we will be able to vote on that. Perhaps that would, at least, give us a proper opportunity to debate the issue on the Floor of the House, which we have not been able to do. I mentioned our inability to amend the law in the last four, or possibly even five, Finance Bills. That is unprecedented in parliamentary history.

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[Kirsty Blackman]

I absolutely agree. I was thinking specifically of the toastie shop in Aberdeen that does unbelievable toasted cheese sandwiches. Members should look at its Facebook page; it is called Melt and it is absolutely amazing. It sells toasted cheese sandwiches with all your calories for a week in one sandwich. That business was started by a woman who had been made redundant. A lot of people in Aberdeen and Aberdeenshire have been made redundant because of the recent crash in oil and gas prices, and they have been starting new businesses as a result.

I am particularly concerned that any change might stifle the growth of new businesses. I asked the Treasury this morning whether it has figures on the number of new businesses started with termination payments. It does not. It is very difficult for the Treasury to say that this will not have an effect—to be fair, it has not said that, but it cannot because it does not have the quantifiable numbers and cannot project them; it appears not to be keeping track of the information.

Lastly, on Opposition new clause 4, the shadow Minister has also asked for a distributional analysis of the new class 1A liability. Again, it is incredibly important for us to have that information.

The Minister suggested that the Treasury is trying to be as transparent as possible. To be fair, this is one of the more transparent Bills, with more consultation than some of the other Bills that we have seen. The issue is that the information that we are provided with, and that is in the public domain, is not good enough for us to be able to make reasonable judgments about the effect of the policy. It is all well and good for the Minister to say that it will generate £200 million and that we would have a £200 million hole in the Budget. The OBR has verified that figure, but the reality is that we do not have enough of the drill-down information on the people who will be affected.

All of us on this side of the Committee are concerned about the reduced amount that employees will receive. It would have been sensible for the Treasury to have come armed with some kind of projection around that. That would have stopped us from asking all these questions. We might have criticised the figure and said that the measure should not be taken forward, but we would not be having this debate if the Treasury had come forward with detailed figures.

The Minister has spoken in favour of clauses 1 and 2, but for a huge number of employers they do not represent a simplification when it comes to dealing with the tax system. This is a revenue-raising measure and it is about closing a loophole. I am not criticising the Treasury for either of those things, but it has badged the change as a simplification when the two principal things that it tries to do are not that, but revenue raising and closing a loophole; we would have had a very different discussion if the Treasury had made that clear rather than said that it was all about simplification.

I completely agree that the measure came from an Office of Tax Simplification report, but that did not say that class 1A contributions had to be used to achieve this end. That may not be the best possible way to progress. I have already spoken about class 1A. It could have been done in a class 1 way, which would have been clearer for employers to understand.

On collection methods, I have real concerns about this being a real-time collection measure. Less than a year out from implementation, employers may not be aware of the correct computer system or understand correctly how it will work. Obviously, if an employer is making future projections, it is going to be looking at what upgrades it will need for its IT system and be planning that as far in advance as possible. On top of all the uncertainty of Brexit, the Government are adding more complexity and future uncertainty: they are not able to say, “This is exactly how the real-time collection measure will work.” They are not able to provide that information to businesses far enough out.

Finally, on the “negligible” reduction, as the Minister described it, of 0.1% on wages, I should say that we are seeing incredibly high levels of in-work poverty. Not a surgery or a day goes by without working people getting in touch with me to say they cannot live on the amount of money they receive. I get such correspondence on a regular basis, as I imagine do all MPs across the House.

The Minister spoke about the national living wage, which is not a living wage and is not for those under 25. As the shadow Minister said, the Government do not want to allow under-25s a wage they could vaguely live on, just in case there are fewer of them employed. I do not think there is any evidence to show that is likely to be the case. It does not cost any less to live at 24 than at 26.

A 0.1% reduction in wages for people who are literally living on the breadline and having to choose between feeding their children and heating their homes cannot be swallowed up by some families. The Government say they are quite happy with a 0.1% reduction in wages as long as they get £200 million in the Treasury’s coffers. I do not think that is a sensible way to play these things off. I do not think the measure is worth the £200 million if it means more families in poverty and destitution as a result.

The 0.1% might sound very small but, for someone living on not very much money it can be the difference between being able to feed the kids and not being able to. There are a number of issues with this measure, both technically and with the stance that the Government have chosen to take on it.

[Robert Jenrick]

I do not intend to repeat all the comments that I made earlier, which I think answered a lot of questions that were put to me. I will try to summarise some of the arguments made by the hon. Member for Aberdeen North. She made a point that came up in questioning around the choice of class 1A, which a number of members of the Committee have raised. We are clear that this is the right choice. We gave the matter careful consideration. There are a couple of central arguments. The choice of class 1A and, therefore, payment in real time was central to alignment with income tax. If we want to have greater alignment and simplicity, that is the way to deliver it.

Secondly, as we heard in evidence this morning, class 1A is a category of national insurance contributions that focuses on the employer. Because we have chosen not to introduce this from an employee NICs perspective, that was the most logical category.

As the hon. Lady and others have mentioned, if there were an intention in future to add employees’ national insurance contributions, one would perhaps have chosen class 1 national insurance as the most logical. By choosing class 1A, we made a clear statement that we had no intention of doing that. This is purely focused on the payment from the employer in respect of national insurance contributions.

Finally, as we may come on to later in the passage of the Bill with respect to sporting testimonials, for those individuals giving money to charity it is important for the contribution to be paid through class 1A, because that is the class of national insurance contributions that payroll giving uses. Had we chosen class 1 national insurance contributions, that route would have been closed; if we had wanted to protect charitable giving, we would have had to make alternative arrangements. There were a number of reasons, logical when they are thought through, why we reached this conclusion.

[Kirsty Blackman]

That is a useful clarification around class 1A and payroll giving that I had not quite understood this morning. If the Minister is saying that class 1A is eligible for real-time payments rather than collection at the end of the tax year, does he intend to move to a system where all class 1A is eligible for payment in real time and not at the end of the tax year?

[Robert Jenrick]

We do not have any plans to do that, but this measure is designed with termination payments in mind. The Bill does not make any changes elsewhere—other than, obviously, to sporting testimonials. We are trying to provide the greatest degree of alignment with the income tax changes that we have made, and the choice of class 1A enables us to deliver that. If we had chosen a different class, there would have been a greater degree of misalignment. I hope that the hon. Lady will consider those thoughts.

We have already debated at length whether this was a rushed Bill. I think that argument is difficult to support, on the basis that the policy decision has been around since 2015, consulted on, restated in multiple Budgets, and debated as part of two Finance Bills. The argument that this is a rushed policy decision cannot be sustained. We are bringing this Bill forward at this point so that, assuming it passes through both Houses as soon as possible, there is good time for practitioners in the accounting profession and employers to make the necessary changes to software packages and so on.

We will take seriously the communication that we will do through HMRC. As the Minister, I will follow that up to ensure that employers are properly communicated with and have sufficient guidance to make the changes.

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[The Chair]

With this it will be convenient to discuss the following:

Clause 4 stand part.

Amendment 2, in clause 5, page 5, line 39, at end insert—

“(3A) No regulations may be made under subsection (3) to bring section 3 or 4 into force until the Secretary of State has made a Statement to the House of Commons on the expected effects of the provisions of this Act on donations to charities by the recipients of sporting testimonial payments.”.

New clause 2—Report on the impact of Class 1A National Insurance Contributions on sporting testimonials—

“(1) The Secretary of State must, within 12 months of section 3 of this Act (sporting testimonials: Great Britain) coming into force, lay before Parliament a report on the expected impact of the provisions of this Act on sporting testimonials.

(2) That report must contain an assessment of the expected impact on—

(a) the total amounts received by individuals from sporting testimonials; and

(b) donations made to charity from sporting testimonial proceeds.”

New clause 5—Review of the impact on different sportspeople—

“(1) The Secretary of State must undertake a review of the impact of this Act on sporting testimonial payments made to—

(a) footballers;

(b) cricketers;

(c) rugby league players;

(d) rugby union players; and

(e) other sportspeople.

(2) The review under section 1 must be laid before both Houses of Parliament within 12 months of section 3 of this Act (sporting testimonials: Great Britain) coming into force.”.

[Robert Jenrick]

Before I address amendment 2 and new clauses 2 and 5, it may help the Committee if I briefly explain the background to clauses 3 and 4. As we have heard at length over the course of the day, a sporting testimonial is a one-off event, or a series of related events, held on behalf of sportspersons who have played for a certain club, usually for a long time. The testimonial can be used to raise money for the sportsperson before their retirement, in the event of their injury or, sometimes, to raise money for charity.

The historical tax treatment of sporting testimonials relied on the outcome of a tax case from before the second world war, which my officials referred to this morning. That case established the broad principle that the proceeds of a testimonial organised to demonstrate affection and regard for the personal qualities of a sportsperson are not earnings. Since then, other legislation has moved on, and income not directly from an employer is now typically subject to tax and national insurance contributions.

Prior to 2017, HMRC effectively operated an extra-statutory concession, which is clearly not sustainable over the long term, since HMRC must ensure that it operates within the law. As such, the Government announced at the summer Budget in 2015 that they would consult on proposals for clarifying the tax and national insurance contributions treatment of payments made from sporting testimonials. A consultation was published shortly thereafter, and the Government received responses from a range of groups, including tax professionals, accountancy firms and sporting interest groups, including the Football Association, the Professional Footballers’ Association, the England and Wales Cricket Board and the Rugby Players Association. In addition, two consultation meetings were held to discuss the detailed proposals, and the Government published draft legislation for consultation, adapting our approach, as I will describe, in response to further feedback.

The changes we are considering are part of that package of legislation, which puts the tax treatment of proceeds from sporting testimonials on the statute book and beyond doubt. This will provide clarity and certainty for sports clubs, sportspersons and those individuals who form the sporting testimonial committee that organises the event—if they are different—and ensure that there is limited impact on a practice that I think all of us support and want to continue.

The relevant income tax changes that form the first half of this package came into force from April 2017, following legislation in the Finance Act 2016. This confirmed that, while income from non-contractual, non-customary sporting testimonials would become taxable, there would be a generous £100,000 exemption to ensure that the change had a limited impact in most cases.

The rules governing sporting testimonials are changing to give clarity to the NICs treatment and align it with the changes to income tax that Parliament has already approved. At present, where a sporting testimonial is non-contractual or non-customary, it can be organised by a third party, rather than the employer, to raise money. As I mentioned earlier, although existing legislation implies that NICs liability already applies, the amounts raised through the third party may not have been subject to NICs because of this long-standing practice and ambiguity. Therefore, this concessionary treatment will end with the passage of this Bill on 6 April 2020, when clause 3 takes effect. Where the employer arranges the testimonial, it is part of the contract or there was an expectation that the sportsperson would be entitled to one, the testimonial is already subject to income tax and NICs in full.

From April 2020, non-contractual and non-customary testimonials arranged by third parties will be subject to NICs above the £100,000 threshold. The third-party testimonial committee will be liable to pay an employer class 1A NICs charge on the amount raised above £100,000, and not on any amount paid below that.

These types of testimonials will not be subject to employee NICs, to ensure that the sportsperson is not adversely affected. I would like to reassure hon. Members that we expect the vast majority of these payments to be unaffected by the Bill, as they will not exceed the threshold of £100,000.

[Kirsty Blackman]

I have a question that the Minister may not be able to answer now; if he cannot, hopefully he will answer it when he sums up. I am wondering about the definition of sporting testimonials. We are talking about sportspersons, but a lot of people said “sports players” earlier. Does this apply only to those people who have played sport, or does it apply if there is a sporting testimonial arranged, for example, for a manager? It would be incredibly helpful if the Minister could clarify that, either now or when he sums up.

[Robert Jenrick]

I will ask my officials for a better answer, but my understanding is that this measure applies only to sportspersons. Although there might be arguments for it, it does not apply to managers and auxiliary staff, just as it would not apply to other people who, as I said in answer to a question this morning, are also engaged in careers that can be cut short, such as a ballet dancer, a performing artist or a Minister, and who might deserve it, but who are not sportspeople.

Although this measure will bring in negligible revenue, its value comes in the alignment and simplification of the tax and NICs treatment of sporting testimonials. I cannot emphasise enough that our motivation here is not to raise revenue but to provide greater alignment and simplification. As has been said repeatedly, this measure will bring in only a negligible sum, as certified by the OBR.

The primary purpose of clause 3 is that, with effect from April 2020, the rules determining the NICs treatment of these payments will be aligned with the income tax treatment that has already been legislated for in the Finance Act 2016. This means that a 13.8% class 1A secondary (employer) NICs charge will be applied to income derived from a sporting testimonial that is already subject to income tax. Clause 4 makes the corresponding changes for Northern Ireland, ensuring that these changes apply throughout the United Kingdom.

In relation to the brief discussion that we had this morning about the definition of a customary testimonial, I would point out that this measure has now been in place, from an income tax perspective, for some time, and we have not had any feedback from sportspersons, sports clubs, sporting testimonial committees or indeed from sports bodies to suggest that there is a problem with that definition.

I can reassure the Committee that clauses 3 and 4 do nothing to affect the ability of sportspersons to make donations to their charitable foundations as part of a testimonial when it is organised by an independent committee and the donation is made through payroll giving. Given the line of questioning from the Committee this morning, and further to the point that I made earlier to the hon. Member for Aberdeen North, it is worth noting that our decision to choose class 1A helps with payroll giving, as this is the class to which it applies, and it would not have been possible if we had chosen another class of national insurance.

I turn now to amendment 2 and to new clauses 2 and 5, which tackle broadly similar issues. These provisions request that the Government report on the impact of the measures in the Bill on the amount of income received from sporting testimonials or sportspeople themselves and on charitable giving linked to a sporting testimonial. I will explain briefly to the hon. Members who tabled the provisions why the Government consider that, on this occasion, they are not necessary.

First, we expect that there will be a very limited impact on sporting testimonials and charitable giving linked to this practice. We expect the majority of non-contractual and non-customary sporting testimonials to fall below the generous £100,000 threshold, with the average income received from a sporting testimonial being around £72,000, based on the work that we did in 2013, although we admit that it is not easy to form a clear judgment, because we had to survey the details of those sporting testimonials that were in the public domain. We then doubled the tax-free and NICs-free threshold for testimonials following the consultation to ensure that there would be a very limited impact indeed. That appeared to supported and welcomed by sporting bodies. As I said earlier, donations made from sporting testimonials via payroll giving will not be subject to income tax and NICs at all—in which case, there would be no impact whatever. It is worth noting that the tax changes affecting this income have been in effect since 2017. As I said earlier, we have not had any representations since that point to suggest there has been a significant adverse impact.

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[Kirsty Blackman]

The problem is working out the grey areas in this. It may be the case with everybody at Reading, but if there were only one or two people in that role before who met the same criteria and this is the third person who happens to meet the same criteria and they get a testimonial, is it the case that that could be considered customary, despite the fact that they had no expectation of the testimonial? I understand that this is only for a certain group of people who have a supported testimonial through third-party organisations, rather than through the club itself. I get that we are not discussing the widest possible definition here, but I am concerned that that particular part of the language is incredibly woolly and could have been made better so that all of us and sportspersons, clubs and third-party organisations could understand the meaning of “customary”.

[Robert Jenrick]

Let me respond to as many of those points as possible. We have had a discussion of the impact of these measures on charities. Without repeating myself too much, we expect this to have a minimal impact. Where the sporting testimonial committee and the sportsperson make use of payroll giving, there would be no impact whatsoever. Were an individual to receive the money themselves and then pay tax and take advantage of gift aid, there would be a different tax treatment. Obviously, that would be the choice of the individual. The sportsperson and the sporting testimonial committee could and should choose to use payroll giving, which is a very generous and unlimited relief.

The hon. Member for Oxford East queried whether the measure would create a new bureaucratic impact on testimonial committees. It should not create any more impact than is already in place because we have already legislated for this from an income tax perspective; that is on the statute book. If a sportsperson wanted to use payroll giving today to avoid the income tax liability and ensure that the greatest possible amount of money went to the charity, the sporting testimonial committee today would already have to register for payroll giving, which they would then be able to use a second time for income tax and for the employer’s national insurance liability. This measure does not add bureaucracy. One could argue about the measure that has already been legislated for, but that is already on the statute book and the level of bureaucracy involved is pretty low.

We have had another debate around the definition of customary or non-customary sporting testimonial. The hon. Lady has already used her lunch break to root out the guidance, in her usual assiduous manner. If Members look at it, they will see that it is thorough. It is several pages long and goes into a degree of detail. I am happy to circulate it to other members of the Committee. It sets out that while the concept of “customary” is not defined in legislation, it has its ordinary, everyday meaning. The guidance says that in general, “customary” means a practice that is recognisable as the norm and where a failure to observe it would be exceptional. I think that is pretty clear. That suggests that if it is normal practice, a sportsperson would have a legitimate expectation of that as part of their employment at the club, and if the sportsperson did not receive the testimonial that they were expecting, that would be an exceptional occurrence.

[Anneliese Dodds]

I am grateful for that explanation, but I am sure the Minister will recall that in the expert evidence session, note was taken of the fact that the scope of that norm is not clearly indicated. One could look at the norm for a whole sport, the norm for a particular club, the norm for one year, and so on. Does he accept the need for greater clarity in the guidelines about what the norm is defined with reference to?

[Robert Jenrick]

I am happy to review the guidance and see whether we can give more examples. There are a number of examples within the guidance on a range of different issues, but if it would be helpful to give one or two examples on this specific issue, I am happy to do so. Without sounding as though I am not giving serious consideration to the issue, it is worth restating that this has not arisen as an active issue. Sporting bodies, sportspeople and sporting testimonial committees have not raised it. The practice is of long standing; it dates back to 1927. We legislated for it from an income tax perspective two years ago, and we have not had any adverse feedback since then.

[Anneliese Dodds]

Playing devil’s advocate, the whole point surely is that under the rules, if a testimonial is customary, the tax is payable. Therefore, if there is any ambiguity, one would not necessarily want to go stirring hornets’ nests to try to resolve that. Surely the Minister understands what I am trying to get at: the bias would surely be towards not seeking advice, rather than going out of one’s way to have the joy of paying tax.

[Robert Jenrick]

I understand that, although those sporting testimonial committees would want a degree of certainty that they were following the law, particularly if large sums of money were involved. They might seek the guidance of sporting bodies, or HMRC, perhaps on an anonymous basis, and that does not appear to have occurred.

Earlier in the day, the hon. Lady asked whether the customary test is specific or exclusive to sporting testimonials or whether it has a wider basis in law. There are other examples of the use of the customary test in tax law and case law, one being employer accommodation, where two factors are taken into account: first, how long the practice had existed, and secondly, whether it had achieved general acceptance with the relevant employers. There is therefore a history, as we have already described. I am happy to take away from today’s debate that we will review the guidance and ensure that there is a sufficient number of examples to provide clarity, should anyone require it, although it is not our experience that individuals have requested further clarification in the past.

The hon. Lady also questioned the wider point about the impact on different sports, which is one of the objectives of new clause 5. HMRC has announced that testimonials for sports other than football are all likely to be unaffected, as they are likely to be below the threshold. The measure is most likely to impact footballing testimonials. As I said earlier, the average testimonial, to the best of our knowledge, is around £72,000 a year and is therefore unaffected by the measure.

Without repeating myself, we have consulted many of the sporting bodies, and in fact, I met some of them. It is worth restating that in this instance, sporting bodies expressed a legitimate concern that the proposed threshold of £50,000 was too low. The Treasury responded by not just increasing it, but doubling it to £100,000. We have to be careful not to create unfairness for other members of society and taxpayers in the way that their payments are treated at the end of their career, or when one occupation ends and they unfortunately have to move on to another.

The hon. Member for Aberdeen North asked this morning, and again this afternoon, why there is a difference in language between part 1 and part 2 of the Bill. My experts at HMRC have looked into that, and the difference in language between the legislation for termination awards and sporting testimonials is accounted for as follows. First, in respect of termination awards, it is a charge on the employer. Secondly, termination awards are treated as earnings of the employment. Thirdly, the liability in respect of sporting testimonials is a charge on a third-party controller of a testimonial. Fourthly, there is no link between sportspeople and the testimonial committee. Fifthly, general earnings include earnings from the employment and any amount treated as earnings in, for example, the testimonial payment. I hope that provides some explanation. If the hon. Lady would like further information, I am happy to write to her and the Committee.

The hon. Lady also questioned the amount of revenue that is likely to be raised from the measure. We have said that it is negligible, which means, in the terminology of the Treasury and the OBR, less than £3 million per annum; but in all likelihood, it will raise significantly less than that. When we modelled it prior to doubling the threshold from £50,000 to £100,000 it was also negligible—less than £3 million a year—so it is likely to be closer to zero than to £3 million, now that the threshold has doubled. Once again, our motivation in introducing the measure is to clean up, and provide certainty and clarity to individuals and those organising such matches, rather than to raise revenue.

[Anneliese Dodds]

I am grateful to the Minister for that. Is he implying, therefore, that there would be a significant behaviour change as a result of the measure? Surely, otherwise there would not be zero income resultant from it.

[Robert Jenrick]

No—with respect, I did not say that there would be zero income. I said that within the spectrum of zero to £3 million, the likely amount of revenue raised would be closer to zero than to £3 million. The sums involved are very low—negligible, in our terminology—so I do not have more precise figures, but it helps to give some guidance that it is unlikely to be closer to £3 million. Clearly, the vast majority of testimonials will be excluded, and will be below the £3 million level. I hope that I have been able to allay some of the concerns, and that the amendments will not be pressed.

Question put and agreed to.

Clause 3 accordingly ordered to stand part of the Bill.

Clause 4 ordered to stand part of the Bill.

Clause 5

Extent, commencement and short title

[Kirsty Blackman]

I beg to move amendment 1, in clause 5, page 5, line 39, at end insert—

‘(3A) No regulations may be made under subsection (3) until the Secretary of State has made a Statement to the House of Commons on how the Government intends to raise public awareness of the provisions of this Act, including awareness among people who may attend sporting testimonials that their donations may generate a National Insurance liability.”

--- Later in debate ---

Now that I have thought of a clause on public awareness, I might table it in every Bill Committee I sit on. I give the Minister fair notice. It is important that the Government let us know, in terms of transparency, how they intend to communicate with those three classes of people: the employers, the employees and the sporting fans who attend testimonial matches.

[Robert Jenrick]

I will briefly describe the purpose of clause 5 before turning to the hon. Lady’s amendment. First, the clause confirms that the Bill applies across the whole of the UK. That is because national insurance is an excepted matter under the Northern Ireland Act 1998. Secondly, it provides that the clause takes effect on the day that the Bill is passed.

The clause also provides that the provisions in the Bill come into force on a day that regulations specify. It is intended that they will take effect on 6 April 2020. That was previously announced at Budget 2018 and will ensure that the measures come into force at the start of the 2020-21 tax year.

Finally, the clause provides that the Bill, once passed, will be known as the National Insurance Contributions (Termination Awards and Sporting Testimonials) Act 2019. Those are all technical matters and there is no substantive issue to discuss specifically in relation to the clause.

Let me deal with the amendment tabled by the hon. Member for Aberdeen North, which centres on how we might communicate the measure to raise public awareness. Without repeating myself, this is one of those Bills that has been around for some time, has been consulted upon and been part of Budget measures. I will not repeat the list I already read out. It is well known and is expected by members of the public who take an interest in these matters—perhaps a limited number—and by tax professionals and employers. I do not think that on this occasion a specific public communication awareness campaign is necessary.

On sporting testimonials, and whether there would be value in educating members of the public that in some circumstances a proportion of the money they spend on their ticket prices or donations will go to the Exchequer, it is worth remembering that any contractual testimonial is already subject to income tax, and also to employers’ and employees’ national insurance contributions, as a result of prior legislation in the Finance Act. The income taxes payable above £100,000 for those testimonials fit into that category. Unless it was specifically advertised by the organisation holding the testimonial, there is no way today that an individual would know which of these categories their particular testimonial would fall into. I am not sure that there would be any value in specifically advertising to members of the public that we have made this change. If anything, the changes we are making in the Bill increase alignment and simplicity, and increase the number of occasions when some tax will be paid to the Exchequer when a member of the public goes to a testimonial that raises a significant sum of money.

Without exactly knowing the feelings of all sports fans, in many cases I think they would expect that a particularly well-paid sportsperson holding the testimonial likely to raise in excess of £100,000 at the end of a successful career would be paying their fair share of tax, and that their sporting testimonial committee would be paying employers’ national insurance. I do not think that fans’ automatic assumption would be that well-paid sportspeople would pay no tax on the money they make. I appreciate that there are many examples of players being injured and so on, where people would feel particular sympathy for them as individuals.

On the wider point of HMRC’s communication, we regularly communicate with stakeholder groups, including representative bodies. We have employer bulletins that give news, including our latest developments, through quarterly updates. That would be particularly relevant to termination payments, where employers could access the latest information as a result of the passage of this Bill in due course. We are currently in consultation with software providers to advise them of these changes, should they become law. We hope that they will be able to make those changes as soon as possible.

As I said previously, the purpose of bringing this Bill forward now, rather than delaying it any further, was to ensure that there was good time available for employers to make the necessary changes. We hope that we will be able to have it on the statute book in sufficient time for all the relevant stakeholders to make the necessary changes, subject to the smooth passage of this Bill.

[Kirsty Blackman]

I thank the Minister for his response, particularly around general public awareness. It is important that sports fans in particular are aware that their donation is likely to generate a tax liability. The fact that that was not done before is a bit of a failure. It should be the case that sports fans should have a higher level of awareness. I do not intend to press the amendment at this stage, and I beg to ask leave to withdraw it.

Amendment, by leave, withdrawn.

Clause 5 ordered to stand part of the Bill.

New Clause 3

Report on Exchequer impact

‘(1) The Secretary of State must, within three years of this Act receiving Royal Assent, lay before Parliament a report on its Exchequer impact.

(2) That report must contain an assessment of the additional payments made to the Exchequer by third sector organisations in each industrial category.”—(Kirsty Blackman.)

Brought up, and read the First time.

[Peter Dowd]

We support the new clause, although we will not press it to a vote.

Given that there are not many people in the room and this probably will not be listened to very much, I can say that, as an Everton supporter, I none the less congratulate Liverpool on their 4-0 win. Not many people will hear that. I will deny I said it and will have it struck from Hansard. I also congratulate Man City on their win. I wish them the best of luck. At least there is a tenuous link with sporting testimonials.

[Robert Jenrick]

As a Wolves supporter, I am slightly bitter at the moment.

To answer the point made by the hon. Member for Aberdeen North, without repeating comments already made today, I appreciate her legitimate arguments. We feel that the measures in the Bill have been sufficiently consulted on. The long-standing tradition that a new piece of legislation will be reviewed within three to five years will apply. The review’s outcome will be in the public domain. It will be sent to the Treasury Committee. Ordinarily, it would be published on its website, and the hon. Lady or any other interested Members would be able to view it there. It will not be a private document only for the consumption of members of the Committee. I hope that will reassure her that we intend carry out a review in due course and that will be available for those who take an interest in it.

[Kirsty Blackman]

I thank the Minister for that response —that I should set in my diary between 2023 and 2025 to regularly check the Treasury Committee’s website to see whether the review has been published. I am being sarcastic but, to be honest, it would be better if the Treasury could just commit to sending it to those Members on the original Bill Committee in all circumstances, rather than us having to imagine when the Treasury happens to do the review and have to go on and happen to find it on the right possible day. That would make for better lawmaking in this place. I will not push this because of the drafting error—it would not make sense to press something that has a mistake in it—but I will probably return to it on Report. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Bill to be reported, without amendment.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Robert Jenrick Excerpts

2nd reading: House of Commons & Ways and Means resolution: House of Commons
Tuesday 30th April 2019 Commons Chamber

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I beg to move, That the Bill be now read a Second time.

This is a small and narrowly drawn, but nonetheless important, Bill. It aims to provide a welcome simplification of the tax treatment of termination awards and sporting testimonials. The corresponding rules determining the income tax treatment of termination awards and sporting testimonials were legislated for in the Finance Acts of 2016 and 2017. At that time, it was made clear that we would return and replicate those rules in national insurance legislation in due course, to ensure that there was not a persistent misalignment. Implementation of the measures in this Bill will replicate those rules in national insurance legislation. By the nature of national insurance, it is required to have a separate piece of legislation from the Finance Bill.

These measures were first announced at Budget 2015. They were then consulted on and published in draft in December 2016. They were subsequently reconfirmed at Budget 2018, so it is reasonable to say that they are expected by those affected and have been subject to much scrutiny. Together, they mean that a 13.8% class 1A employer national insurance charge will be applied to income derived from termination awards and sporting testimonials that are already subject to income tax.

Let me first set out the measure that covers termination awards. Between 2013 and 2014, the Office of Tax Simplification reviewed the tax treatment of employee benefits and expenses. The OTS published an interim report in August 2013 identifying termination awards as one of a number of priority areas. It found that relatively few employers and employees properly understood the regime. There was confusion, and the regime was therefore ripe for reform and simplification.

The OTS specifically identified three areas of misunderstanding on which it recommended we take action. First, certain forms of termination awards are exempt from employee and employer national insurance contributions and the first £30,000 is free from income tax. However, there is a common misconception that the first £30,000 of any termination payment is automatically tax free. Secondly, many employers believe that this exemption applies where in fact it does not, and thirdly, employers are unaware of the different income tax and national insurance treatment of termination payments.

Following the OTS recommendations, the Government announced at Budget 2016 that they would be reforming the tax and national insurance treatment of termination awards. As I said, the reforms to the income tax treatment of termination awards were legislated for in the Finance (No. 2) Act 2017 and took effect from April 2018. The Government confirmed at Budget 2018 that the associated reforms to national insurance legislation would be in place for April 2020. However, the fact that termination awards are currently subject to different income tax and national insurance treatment has created confusion, and that is what we are attempting to deal with today. Moreover, the current misalignment incentivises an admittedly small number of well-advised employers to disguise final payments as compensatory termination awards that benefit from a national insurance charge exemption. These reforms will close that loophole.

The Bill will place a 13.8% class 1A employer national insurance charge on income derived from termination awards on amounts over £30,000. However, I want to assure hon. Members that, when it comes to employee national insurance, these payments will remain entirely exempt. We have chosen to continue to ensure that employees will not face any additional liability as a result of these changes in terms of employee national insurance. This measure will raise around £200 million per annum for the Exchequer, which will make an important contribution to our public services. As this is a Budget measure, this sum has already been reflected by the Office for Budget Responsibility in its projection for the public finances.

Let me turn to the second measure in the Bill, which deals with aligning the employer class 1A national insurance treatment of income from sporting testimonials with the income tax treatment. As many hon. Members will be aware, a sporting testimonial is a one-off event—or series of related events—held on behalf of sportspeople who have played for a certain club for a long time. This often takes the form of an exhibition match involving famous players from the past and present. The testimonial can be used to raise money for the sportsperson before retirement, or sometimes to raise money for charity. The relevant income tax changes were debated and came into force from April 2017. As stated at the time of the Finance Bill—later the Finance Act 2016—the rules governing sporting testimonials are now changing to give clarity to the national insurance treatment as well.

Currently, when a sporting testimonial is non-contractual or non-customary, it can be organised by a third party, rather than the club or employer, to raise money without it being subject to NICs. Where the employer arranges the testimonial, or if it is part of the contract, or if there was an expectation that the sportsperson would be entitled to one, the testimonial is already subject to income tax and NICs.

[James Cartlidge (South Suffolk) (Con)]

Is there a sense of how common it is for a testimonial to be contractual? We all know that it is commonplace in cricket and football for players to have testimonials or similar events, so one assumes that most of them are contractual.

[Robert Jenrick]

My hon. Friend makes a good point, and our analysis is the same. Last year, only around 220 sporting testimonials of any kind took place in the United Kingdom, and a large number will have been contractual. Certainly, the highest-profile ones, such as those of premiership footballers or leading cricketers for significant county clubs, are usually contractual. As I will go on to say, because the measure has a one-off £100,000 threshold during the career of the sportsperson, a large number of those 220 testimonials will fall below the threshold. Less high-profile sportspeople, who will perhaps have lower earnings, are likely to be within the threshold. We are talking about a small number of relevant testimonials and, as hon. Members will see in the Bill’s accompanying documents, the measure will raise a negligible sum. Our motivation is primarily the simplification of the tax system and the avoidance of doubt for sportspeople and those advising them, rather than to increase revenue materially.

[Rebecca Pow (Taunton Deane) (Con)]

The Minister is making a clear point. I want to speak mainly for the cricketers of Somerset county cricket club, and I declare an interest here, because my husband, who is an auctioneer, has helped to raise money at many of their testimonials. A testimonial can make an important contribution to a player’s salary, especially those who have played for a long time. Will the Minister clarify that the legislation will clear up the situation, which does seem somewhat confusing? We do not want players to feel hard done by, but we have to take the right amount of tax and we must be fair. Will he also clarify that the proposals are fair and that players who may earn less will not be jeopardised?

[Robert Jenrick]

Yes, and I must also declare an interest as a member of Nottinghamshire county cricket club. We have given the matter a great deal of thought. The proposal was raised several years ago, as I said, and we consulted at that time with the sporting bodies, including the England and Wales Cricket Board. It was my right hon. Friend the Member for South West Hertfordshire (Mr Gauke), then the Financial Secretary to the Treasury, who discussed the matter with the cricketing bodies. When the proposal was first brought forward, the threshold was £50,000 but, having spoken with the sporting bodies, we made the decision to increase it to £100,000, making it significantly more generous and allaying some of the concerns that my hon. Friend the Member for Taunton Deane (Rebecca Pow) sets out.

[Vicky Ford (Chelmsford) (Con)]

rose—

--- Later in debate ---

[Mr Deputy Speaker]

That is not a problem as long as we do not forget the great county of Lancashire. [Laughter.]

[Robert Jenrick]

Very good. I re-emphasise not only that there is a £100,000 threshold, but that this is about fairness. All sportspeople who have a contractual right to a testimonial, which is commonplace, will have been paying income tax and national insurance on the benefit from that for some time, so this measure merely provides a greater degree of certainty and fairness. Of course, some of the clubs organising such testimonials will be smaller, or they may involve testimonial committees, so providing them with the clearest possible advice will be helpful. It will also ensure that there is no doubt in their minds when doing a good thing that is in the interests of players who may be at the end of their careers or may have been injured prematurely.

From April 2020, non-contractual and non-customary testimonials arranged by third parties will now be subject to NICs above a £100,000 threshold. A third-party testimonial committee will be liable to pay the class 1A employer NICs charge on the amount raised above £100,000. These types of testimonials will not be subject to employee NICs, to ensure that the sportsperson is not adversely affected. Again, as with the termination awards measure, we have chosen to act in relation to employer national insurance contributions, not employee contributions, so there remains a benefit to individuals in that respect.

I reassure hon. Members that the vast majority of sportspeople will be unaffected by the Bill because they will not exceed the £100,000 threshold. As I have said, Her Majesty’s Revenue and Customs estimates that only around 220 testimonials occur each year, most of which will remain unaffected as they either fall below the £100,000 level or are part of a previous contractual arrangement, which is commonplace in most sports.

Although the measure will bring in negligible revenue—we estimate less than £3 million a year—its value comes in the alignment and simplification of the tax and NICs treatment of sporting testimonials and clarity for those taking part in testimonials or those on sporting testimonial committees. Sporting bodies and other relevant stakeholders are expecting the changes, because our intention to make them has been known since at least 2015. As the changes required an NICs Bill, there has been a short delay, but that is what we are attempting to do today.

In conclusion, it may be a small and narrowly drawn Bill, but it is none the less important and includes two measures that simplify our tax code. Like many right hon. and hon. Members, I would like greater simplification of the tax system, but that journey must begin with single steps, and we are taking one of those today in simplifying the tax code in two significant respects that will have real-world consequences for individuals, who will benefit from a simpler system. The Bill will also raise a significant sum for public services and support our continued efforts to improve the public finances. It brings the national insurance and tax treatment of termination awards and sporting testimonials into closer alignment, and I commend it to the House.

Oral Answers to Questions

Robert Jenrick Excerpts

Tuesday 9th April 2019 Commons Chamber

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

2. What recent assessment the Government have made of trends in the level of manufacturing output.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

Manufacturing output has grown by 8.3% since the start of 2010, having fallen sharply as a result of the financial crisis. The manufacturing sector has seen productivity increase more than three times faster than the UK economy as a whole over the past 10 years. It accounts for almost half of UK exports, and directly employs 2.6 million people.

[Chi Onwurah]

According to Make UK, we now have the highest level of manufacturing stockpiling of any country in the G7 ever. The chamber of commerce tells me that, in the north-east, stockpiling is putting huge pressure on warehousing and cash flow. That is a direct consequence of Brexit uncertainty. What additional support will the Minister offer to manufacturers? I asked a similar question of the Brexit Minister last week, and he did not seem to know what I was talking about. Will the Minister acknowledge the link between manufacturing output, stockpiling, cash flow and financial viability?

[Robert Jenrick]

My right hon. Friend the Chancellor and other Treasury Ministers are working with the banks, which tell us that they are making funds available to businesses that need support as their cash flow is under pressure and need working capital in the months ahead. Of course, the best service that any of us in this House can do for manufacturers and businesses across the United Kingdom is to support a negotiated exit from the European Union as soon as possible.

[Sir Gary Streeter (South West Devon) (Con)]

Building on the previous question, I am told that manufacturing output in Plymouth is holding up well, but that is partly due to customers purchasing to stockpile because of Brexit uncertainty. That may result in a lack of demand once we get Brexit over the line, if we ever do so. Have the Government given any thought to supporting manufacturing businesses through any short-term downturn that paradoxically might occur once we get Brexit over the line?

[Robert Jenrick]

The Treasury and other Departments have advanced plans to support the manufacturing sector should that be required in the event of a no-deal exit. The evidence we see shows that, if we can secure a negotiated exit, there is a great deal of business investment waiting to go back into the economy. This year could turn out to be a strong one for the British economy, if only we can secure the deal.

[Sir Vince Cable (Twickenham) (LD)]

Does the Treasury acknowledge the wisdom in the letter that the Engineering Employers’ Federation, which represents 20,000 companies and 1 million workers, sent to the Prime Minister yesterday? It spoke of the renaissance of manufacturing in the earlier part of the decade, but is now expressing despair and is asking simply for the revocation of article 50.

[Robert Jenrick]

If the right hon. Gentleman wants to support this country’s manufacturing sector, he and his colleagues should support a deal so we can leave the European Union in an orderly fashion. We are taking a number of important steps to support manufacturing, including increasing the annual investment allowance from £200,000 a year to £1 million, making research and development tax credits more generous, and backing schemes such as “Make Smarter”, which help the manufacturing sector to embrace automation and digital technology and move forward with confidence.

[Mr Philip Hollobone (Kettering) (Con)]

Can the Minister confirm that, despite the Brexit uncertainty, Britain remains the second best country in the whole world for foreign direct investment?

[Robert Jenrick]

I can confirm that. The UK remains the European leader for foreign direct investment, venture capital investment and tech investment. Even in manufacturing, which is under a certain degree of strain, the UK remains the ninth largest manufacturing nation in the world.

[Peter Dowd (Bootle) (Lab)]

“Strain” is not the word. In the real world, production and manufacturing output remained 6.8% and 2.7% lower respectively in the three months to January 2019, compared with pre-downturn GDP in the first quarter of 2008. After nine years of policy failure, should the Chancellor and his team not stop throwing spanners in the manufacturing works and instead oil the machine?

[Robert Jenrick]

Not at all. Manufacturing exports are up 35% since 2010. We are investing in the manufacturing sector through our industrial strategy. We are creating a tax system that is pro-business. We are reducing corporate taxes to amongst the lowest in the developed world. The hon. Gentleman would do the opposite and reverse that. The very clear message that businesses give us, particularly international investors in this country, is that the threat of a hard left Labour Government dwarfs the risk of a Brexit outcome. We want to secure the future of the British economy in a resolutely pro-enterprise country.

[Peter Dowd]

What can I say? That old chestnut—and the Leader of the Opposition will be in No. 10 today as well. Anyway, I admire the Chancellor’s perseverance in trying to get the Prime Minister to grasp the concept of compromise—a challenging task, I have to say. Perhaps a less onerous task would be to sort out the problem with production. In the three months to January 2019, it fell by 1% compared with the same period last year, driven by a significant fall of 1.5% in manufacturing, which, of course, includes the beleaguered automotive sector. If the Government were a car, it would fail its MOT. The Chancellor has been putting manufacturing into reverse gear. Isn’t it time for a new car with a new driver?

[Robert Jenrick]

The British economy is remarkably robust in its present state. We are seeing continued economic growth, record levels of employment and record low levels of unemployment. Businesspeople, investors and entrepreneurs the length and breadth of the country know that the greatest threat to our prosperity is a hard left Labour Government.

[Kerry McCarthy (Bristol East) (Lab)]

3. What recent assessment the Government have made of trends in the level of public funding for renewable energy since 2010.

[Afzal Khan (Manchester, Gorton) (Lab)]

13. What recent assessment the Government have made of trends in the level of public funding for renewable energy since 2010.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Government have increased support for low-carbon electricity generation through consumer-funded levies, from £1.3 billion in 2010 to over £7.3 billion today, spending £30.7 billion since 2010. This support has enabled the UK to become a world leader in clean growth, and the private sector has invested more than £92 billion in clean energy since 2010.

[Kerry McCarthy]

I think that is quite a selective answer. A coalition of 20 community energy projects and affiliated groups has warned that the Government’s decision to axe the feed-in tariff incentive scheme could prove the final nail in the coffin for the sector. Since that warning was issued in February, at least 30 planned community energy projects have stalled. So what conversations has the Minister had with his colleagues in the Department for Business, Energy and Industrial Strategy to give proper support to community energy projects?

[Robert Jenrick]

I thank the hon. Lady for that question, but that is not our experience. The investment that I have just described that is going into the sector is very considerable. Renewable capacity has quadrupled since 2010. Renewables’ share of electricity generation increased to 33% last year—a record high. The UK is decarbonising and we are meeting our climate change targets.

[Afzal Khan]

Members across the House recognise the importance of funding renewable energy policies to tackle climate change and improve air quality, but that does not go far enough. In Manchester, 126,600 children are growing up in an area with an unsafe level of air pollution. As the Mayor of Greater Manchester highlighted, further investment is needed to tackle the scale of the problem and protect the health of the most vulnerable—our children. Will the Chancellor commit to providing the wider resources needed to protect our children from toxic air?

[Robert Jenrick]

The Mayor of Greater Manchester has the resources that he requires. The Government are supporting Mayors and urban areas across the country to take action on air quality, and we are providing money from national Government, for example through the £2.6 billion transforming cities fund, of which Greater Manchester has a significant share, to invest in the transport solutions of the future.

[Rebecca Pow (Taunton Deane) (Con)]

Although there is clearly more to do on climate change, surely action taken by this Government since 2010—we have reduced greenhouse gases, we have got more low-carbon jobs, especially in my constituency, and we are investing billions in renewables—must show our commitment.

[Robert Jenrick]

My hon. Friend is absolutely right. Last month, in the spring statement, my right hon. Friend the Chancellor was able to add to those policies by announcing a scheme to help small and medium-sized enterprises to reduce their carbon footprint; a new marine zone around Ascension Island; support for the renewables sector; the new future homes standard, to ensure that from 2025 homes are built with low-carbon heating and high levels of energy efficiency; and many other policies.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

Tidal energy projects are powering ahead in Scotland and show substantial export potential. The Scottish Government recently announced support funding of up to £10 million to assist in commercialising its use. What support will the UK Government give the industry?

[Robert Jenrick]

The UK Government are supporting tidal energy. We have looked at any schemes that have become available to us. We have to balance the interests of the ratepayer, the taxpayer, to ensure that the schemes that we do support are the right strategic technology and the right value for money for the UK.

[Clive Lewis (Norwich South) (Lab)]

Will the Minister join me in paying tribute to one of this country’s most successful publicly funded renewable energy programmes ever? I am of course talking about the last Labour Government’s export tariff, the feed-in tariff scheme, the biggest single democratisation of energy that the UK has ever seen, cutting 700,000 tonnes of carbon. This month, however, in an act of supreme national and international self-harm, the Government killed it off—kaput, finito, game over. In the real world, how can anyone, anywhere believe that this Government take their climate change obligations seriously?

[Robert Jenrick]

The facts speak for themselves. The UK is on track to over-deliver comfortably on the first three carbon budgets out to 2022. The clean growth strategy sets out how we will meet our fourth and fifth carbon budgets, which take us to 2032, while keeping down costs for consumers, creating good jobs in the clean energy market and growing the economy.

--- Later in debate ---

[Mr Virendra Sharma (Ealing, Southall) (Lab)]

19. What recent assessment his Department has made of trends in the level of productivity since 2010.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

Since 2010, UK labour productivity has grown by 3.9%, leaving it 1.9% above its pre-crisis peak. Slow productivity growth since the crisis is not a phenomenon exclusive to the UK, but is common across the G7. We have created the £37 billion national productivity investment fund to tackle it.

[Mr Sharma]

The UK’s productivity remains weaker than most other advanced economies. Does the Chancellor agree that the Government should lead the way in tackling the productivity crisis, starting with getting rid of the haphazard Transport Secretary?

[Robert Jenrick]

No. We are taking a range of interventions, including investing £600 billion in our national economic infrastructure. Over the course of this Parliament, investment in transport and other forms of infrastructure will be £460 million a week in real terms higher than under the previous Labour Government.

[Janet Daby (Lewisham East) (Lab)]

21. Whether he plans to allocate funding for the provision of sanitary products beyond secondary schools and colleges.

--- Later in debate ---

[Jeremy Lefroy (Stafford) (Con)]

What plans are the Government making for a UK investment bank to take over the role of the European Investment Bank in the UK economy?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

In the spring statement, my right hon. Friend the Chancellor launched a review of our infrastructure financing, which includes that question on whether the UK would benefit from institutional arrangements. We have also made significant funds available to ensure that there is no shortfall for businesses that rely on the EIB.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

T4.   Last month’s Office for National Statistics figures show that life expectancy for the poorest has fallen whereas for the rich, it has increased. Analysis into the key drivers of that, including Public Health England’s investigations, shows that it is the result of cumulative tax and social security changes. I therefore ask the Chancellor, once again, what will he do about that, and particularly, will he stop immediately the benefit freeze that has such a devastating effect on people’s lives?

Beer Taxation and Pubs

Robert Jenrick Excerpts

Thursday 28th March 2019 Commons Chamber

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I thank the Backbench Business Committee for securing this debate. As numerous Members have noted, it has felt rather like finding a good pub on a long walk when we are feeling weary and looking for a welcome break. The debate has been conducted in a very good-humoured manner throughout. I was first elected at the end of the coalition Government, and pubs was the only vote I believe that that Government lost in all those years, whereas today we are united on this topic but it is just all the other votes we seem to be losing.

I thank my hon. Friend the Member for Dudley South (Mike Wood) for sponsoring the debate. Like the hon. Member for West Bromwich West (Mr Bailey), he spoke about the Black Country’s long association with beer and brewing. I grew up in the shadow of Banks’s brewery in Wolverhampton and spent my teenage years, like the hon. Member for Oxford East (Anneliese Dodds), working in pubs that my hon. Friend’s constituents might drive out to Staffordshire and Shropshire to visit. I also thank the hon. Member for Stoke-on-Trent North (Ruth Smeeth) for her contribution; I have had a few drinks near her constituency in the Potteries, not least on the night I lost my first election in 2010. Given the scale of the result I probably should have drunk a pint from the Titanic Brewery.

But I do not want to be too negative about what we find today, because there are many great positives about beer and the brewing industry across the United Kingdom, many of which have been heard over the past couple of hours, not least the flowering of the British craft beer industry. That has brought fresh life to the market, creating a new generation of entrepreneurs, many of whom I know from my own constituency, a former brewing town, Newark-on-Trent, which has seen several new breweries created in recent years. This has given people across the length and breadth of the country unprecedented choice and, as we have heard, word has spread across the world and exports have risen very significantly.

[Toby Perkins]

The Minister is right that the small business brewing relief is an example of Government forgoing a bit of tax and a huge industry flowering on the back of that. Might he take note of that example for some of his other decisions?

[Robert Jenrick]

It certainly is, and I will talk shortly about the relief the hon. Gentleman mentions, which has played a significant part in that flowering and which I believe we can make better and fit for purpose for the future.

The value of beer exports has risen now to £500 million a year, and we heard earlier about the tremendous results also with respect to Scotch whisky and other spirits.

Small brewer’s relief gives the smallest brewers across the country a 50% reduction in duty and, as we have heard, it has helped fuel the explosion in the number of local breweries; we now have over 2,000 breweries across the country. At the autumn Budget we announced a review of this relief to give brewers the opportunity to share their thoughts on a relief that is now 17 years old and which has not been reviewed systematically over the course of that period. We have opened the review and had over 500 responses which we will carefully consider and report back on in due course.

Our motives at the Treasury have not been to extract more revenue from the sector, and certainly not to end the relief. However, for some of the reasons that the hon. Member for Keighley (John Grogan) and others mentioned, there is some evidence that although the relief has been hugely positive in some respects, it has limited the growth of some businesses that would like to expand and employ more people and that are concerned about the cliff edge that the relief creates. I hope that we will be able to work with breweries and organisations such as the Society of Independent Brewers to work through that and to do something positive for the industry.

With respect to beer duty, we have taken a number of steps over the past nine years to improve the situation in a country that has been widely acknowledged to have high levels of alcohol taxation. We removed the beer escalator, and we have either cut or frozen beer duty in six of the last seven fiscal events, so that the duty on a pint is lower now than it was in 2012. In real terms, this long-term and significant action by the Government has kept prices low for everyone, in contrast to the period from 1997 to 2010, during which beer duty increased by 60%. This was underlined at the most recent Budget with another freeze on beer duty, meaning that the price of a typical pint of beer is now 2p lower than if prices had risen with inflation. I appreciate that there is always more that we could do this respect.

We are also focusing on other alcohol, such as cider and spirits. My hon. Friend the Member for Ayr, Carrick and Cumnock (Bill Grant) talked about the importance of spirits to his constituency and to many others across Scotland. The hon. Member for Aberdeen North (Kirsty Blackman) talked about their importance to the wider Scottish economy. She also asked me a question about post-duty point dilution. We have given this matter considerable thought for some time, and we announced at the Budget that we will be bringing this practice to an end from April 2020. She also asked, as did the hon. Member for Oxford East, about a wider review of alcohol duty more generally. This is a complex area, and there are clearly no easy answers. There are certainly few answers that are fiscally neutral and that would create no losers, which would be important to many who work or own businesses in the sector. It is perhaps premature to conduct a review at this moment, because the greatest flexibility will be available to us after we leave the European Union. A future Chancellor might then have the choice to take action.

We heard from the hon. Member for Strangford (Jim Shannon) and my hon. Friend the Member for Faversham and Mid Kent (Helen Whately) about responsible drinking, and they asked whether we could lower the duty on low-alcohol beers. We are somewhat constrained in that respect by EU law. The EU alcohol structures directive sets the maximum threshold for reduced duty on low-alcohol beer at 2.8%. Her Majesty’s Government charge a reduced duty of 6p a pint on beers with a strength between 1.2% and 2.8%. Until we leave the EU, we cannot raise the threshold for low-alcohol beer above 2.8%, but this is something that we will work on with our partners across Europe, and we could have further flexibility in the years ahead. The Government have taken action in some specific circumstances—with respect to white cider, for example—and our approach is that we will continue to take action as necessary where there is clear evidence that certain alcohol duty rates are causing difficulties for society.

We have heard a great deal about pubs, which are, as we heard from numerous colleagues, the bedrock of many rural and urban communities. As the hon. Member for Chesterfield (Toby Perkins) rightly highlighted, they boost the economy, create jobs and, crucially, act as hubs for our communities. We have heard about their importance in tackling loneliness, and about the issues for older people, whether older gentlemen or others. They are great places for people to work and start their careers in. The pub industry currently employs about 450,000 people, many of whom are younger people, as has been said.

[Bob Stewart]

I rise, again, as an older gentleman. We have been talking about what pubs do. Let us imagine people who live in pretty awful accommodation—a bedsit or something like that. The local pub can provide a really nice, friendly, warm environment. That is the sort of place that those people can go to, and in my view that is the real advantage of local pubs.

[Robert Jenrick]

I agree with everything that my hon. Friend just said.

I will talk briefly about business rates in the short amount of time available to me because they have been an important element of this debate. My hon. Friend the Member for St Albans (Mrs Main) brought some of her publicans to see me at the Treasury to discuss the matter. We have taken several actions to support pubs by lowering their tax burden. The most important of them—this comes into effect on 1 April—is the Chancellor’s Budget announcement that the business rates bills of small and medium-sized retailers, including pubs, will be cut by a third. The policy has been set for maximum impact among retailers and pubs with a rateable value of £51,000 or below. I appreciate that that will have less impact in communities such as my hon. Friend’s, where rateable values are high, but 90% of retailers and between 70% and 85% of pubs across the United Kingdom will benefit, with pubs seeing a tax saving of up to £8,000. We also previously had the £1,000 discount for small and medium-sized pubs, and many pubs will also benefit from up to 100% small business rates relief or the 100% rural rate relief. Of course, all ratepayers are benefiting from the switch from RPI to CPI.

The hon. Member for North Tyneside (Mary Glindon) mentioned the request of many, including the industry, to create a rate of beer duty that differentiates between people drinking in a pub and people purchasing beer in a supermarket or convenience store. I can see the strong argument for that, but it is unfortunately not possible under EU law. Duty is levied on production, not on the place of consumption. However, we might be able to turn to that should we have sufficient flexibility.

I conclude by thanking the Backbench Business Committee and my hon. Friend the Member for Dudley South and the hon. Member for Stoke-on-Trent North, both of whom gave superb speeches. This debate unified the House and demonstrated the important role that pubs can play in our communities. I will certainly relay the strong feelings from across the House to my right hon. Friend the Chancellor with respect to the next Budget and the future of beer duty. The House’s voice is clear that it wants, like people the length and breadth of the country, further and continued support for beer, breweries and our important pubs.

Decommissioning Relief Deeds

Robert Jenrick Excerpts

Thursday 21st March 2019 Written Statements

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

At Budget 2013, the Government announced they would begin signing decommissioning relief deeds. These deeds represented a new contractual approach to provide oil and gas companies with certainty on the level of tax relief they will receive on future decommissioning costs.

Since October 2013, the Government have entered into 92 decommissioning relief deeds.

Oil & Gas UK estimates that these deeds have so far unlocked approximately £6 billion of capital, which can now be invested elsewhere.

The Government committed to report to Parliament every year on progress with the decommissioning relief deeds. The report for financial year 2017-18 is provided below.

Number of decommissioning relief agreements entered into: the Government entered into four decommissioning relief agreements in 2017-18.

Total number of decommissioning relief agreements in force at the end of that year: 87 decommissioning relief agreements were in force at the end of the year.

Number of payments made under any decommissioning relief agreements during that year, and the amount of each payment: two payments were made under a decommissioning relief agreement in 2017-18, one for £41.8 million¹ and another for £3.6 million. These were made in relation to the provision recognised by HM Treasury in 2015, as a result of a company defaulting on its decommissioning obligations.

Total number of payments that have been made under any decommissioning relief agreements as at the end of that year, and the total amount of those payments: three payments have been made under any decommissioning relief agreement as at the end of the 2017-18 financial year, totalling £50.8 million.

Estimate of the maximum amount liable to be paid under any decommissioning relief agreements: the Government have not made any changes to the tax regime that would generate a liability to be paid under any decommissioning relief agreements. HM Treasury’s 2018-19 accounts will recognise a provision of £357.1 million in respect of decommissioning expenditure incurred as a result of a company defaulting on their decommissioning obligations². The majority of this is expected to be realised over the next five years.

¹ This figure was later revised down by £11.8 million, with the amount having been fully recovered, together with interest, in the 2018-19 financial year.

² This figure takes into account payments made subsequent to the financial year covered by this written ministerial statement.

[HCWS1435]

Oral Answers to Questions

Robert Jenrick Excerpts

Tuesday 5th March 2019 Commons Chamber

[Kevin Foster (Torbay) (Con)]

1. What plans he has to allocate additional funding for infrastructure in Devon and Cornwall.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Government are increasing our national investment in infrastructure to the highest sustained level since the 1970s. In Devon, this will include £83 million towards the widening of part of the north Devon link road, and in Cornwall £78 million towards the St Austell link road.

Mr Speaker, may I wish Cornish Members gool Peran lowen—a very happy St Piran’s day?

[Kevin Foster]

I thank my hon. Friend for his answer, although my Cornish is not quite up to his level, given that I am a Devon Member.

The recent announcement of £80 million of funding for major resilience work at Dawlish was very welcome. Can my hon. Friend confirm that this is the first part of the investment plan and that the Government will provide additional investment as further aspects of the plan to secure our key rail infrastructure come forward?

[Robert Jenrick]

We are fully committed to rail resilience in the south-west, and the Chancellor restated this as a national priority in the Budget Red Book. As my hon. Friend has said, we are investing up to £80 million in the new seawall to provide greater protection to the railway at Dawlish. Network Rail is providing the further options he mentions to protect the line from extreme weather and improve the rail network for passengers in the south-west, and of course we will consider those proposals when we receive them.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

Added rail resilience at Dawlish is really important for the far south-west to keep our train line open, but so is added road resilience. Can the Minister set out what additional funding he can put in place to make sure that the A38 is a safer road? At the moment, there are far too many delays and sadly far too many people die on it?

[Robert Jenrick]

The hon. Gentleman raises an important point. By our decision to hypothecate vehicle excise duty, we have created the largest ever investment in our strategic road network, which could perhaps fund projects such as the one he raises. Additionally, our £2.7 billion transforming cities fund will support Plymouth and its surrounding areas in particular.

[Scott Mann (North Cornwall) (Con)]

Meur ras, Mr Speaker. Gool Peran lowen—happy St Piran’s day—and Kernow bys vyken!

The announcement yesterday on the stronger towns fund did not include any areas from Cornwall, yet Cornwall has always scored very highly on social deprivation and funding. I know that the coastal communities fund has been a help, but what assurance can I have from the Treasury that it will support towns in my area?

[Robert Jenrick]

The stronger towns fund announced this week will provide support for the south-west and all regions of the country, both in terms of direct funding to be paid to local enterprise partnerships and the competitive fund of £600 million that towns in the my hon. Friend’s constituency and those of other right hon. and hon. Members across the country should bid into.

[Dr Sarah Wollaston (Totnes) (Ind)]

The port of Brixham in my constituency lands the most valuable catch in England, but it has now reached capacity and needs urgent infrastructure investment to expand opportunities. Will the Minister assure me that our strategically important fishing industry and processing sectors will be fully considered in future infrastructure plans, and will he meet me to discuss Brixham port’s exciting plans for development, which need only modest investment to help them get rapidly off the ground?

[Robert Jenrick]

I would be happy to meet the hon. Lady. We are investing in port infrastructure, as indeed in other infrastructure projects across the south-west. I believe it was she who asked the Chancellor in the lead-up to the Budget to make that national commitment to Dawlish, for example. We are keen to listen to her opinions in this respect, and I would be very happy to meet her.

[Alison Thewliss (Glasgow Central) (SNP)]

2. What recent steps he has taken to tackle money laundering.

--- Later in debate ---

[Rehman Chishti (Gillingham and Rainham) (Con)]

9. What steps he is taking to allocate funding for infrastructure in (a) Medway and (b) Kent.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Government are committed to ensuring that Medway and, indeed, the whole of Kent have the infrastructure that they need. The South East local enterprise partnership has secured £590 million from three local growth fund rounds, to support around 30 important transport schemes in Kent and Medway.

[Rehman Chishti]

Medway Council’s £170 million housing infrastructure bid will have a significant impact on the unlocking of regeneration in the Thames estuary, providing the extra much-needed homes, jobs and transport connectivity. Will the Minister clarify when such excellent bids will be considered and announced? By way of declaration, I am a member of Medway Council.

[Robert Jenrick]

My hon. Friend has been raising this matter assiduously. At the spring statement in 2018, the Government announced that Medway’s housing infrastructure fund bid was shortlisted for the next stage of assessment, and we look forward to receiving the final proposal later this month. It will be considered alongside other HIF bids.

[Mike Amesbury (Weaver Vale) (Lab)]

10. Whether he plans to change the level of funding allocated to social care.

--- Later in debate ---

[Julian Sturdy (York Outer) (Con)]

14. What fiscal steps he is taking to increase economic productivity.

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The best way to sustainably drive economic growth is to raise productivity, and that is a priority for this Government. We are increasing public investment in economic infrastructure to its highest sustained level in my lifetime. In the autumn Budget, we set out further investments to support business, technical skills and new technologies.

[Julian Sturdy]

Last month, the Chief Secretary to the Treasury saw for herself the investment that York-based Pavers Shoes is making to change its productivity, yet local businesses are concerned about the effect of traffic congestion on local productivity. With that in mind, will my hon. Friend the Exchequer Secretary assure me that the Treasury is fully behind the Department for Transport’s proposals to fund the dualling of the York northern ring road?

[Robert Jenrick]

My right hon. Friend the Chief Secretary says that she saw some very good leopard-print shoes at Pavers Shoes—and she knows a potential customer for them. Pavers is a highly successful business; I have seen for myself in India the success that it is having in selling shoes. We are committed to increasing transport investment in the north of England; the Secretary of State for Transport recently announced the dualling of the A1237 York outer ring road as a scheme in development for the major road network funding.

[Mr Jim Cunningham (Coventry South) (Lab)]

Does the Minister agree that one of the ways to increase productivity is by maintaining grants at European levels of investment in research and development? We have a lot of good universities in this country.

[Robert Jenrick]

This Government are absolutely committed to maintaining research and development; that is why we will be investing in it at record levels. We are also supporting the private sector, for example by making research and development tax credits more generous so that businesses across the country can collaborate with universities to drive the economy forward.

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

24. Does my hon. Friend the Minister agree that the Ayrshire growth deal and other growth deals nationally can act as a catalyst for jobs and productivity? Will he do all he can to support that growth deal?

[Robert Jenrick]

Absolutely. We are very excited about the £100 million Ayrshire growth deal and will continue to support that part of Scotland.

[Alex Norris (Nottingham North) (Lab/Co-op)]

16. What steps he has taken to ensure that HMRC has adequate (a) powers and (b) resources to investigate tax avoidance enablers.

--- Later in debate ---

[John McDonnell (Hayes and Harlington) (Lab)]

When the Conservatives lost their majority at the last election, the Chancellor conjured up a £1 billion bung to the Democratic Unionist party to buy the Tories back into office. Yesterday, with the announcement of the towns fund, we reached a new low in politics in this country, with the attempt by the Government to purchase the votes of Labour MPs to vote for the Brexit deal. Pork barrel politics has become the new norm under this Government. Can I ask the Chancellor: if the price of a DUP vote has been £100 million each, how much has he calculated a Labour MP’s vote will cost?

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

The Government have been investing in our cities across the country with interventions such as the transforming cities fund—a £2.5 billion investment. We believe it is important to mirror those investments to drive productivity and economic growth in our towns. This week, we have announced a £1.6 billion intervention to support those towns, building on other interventions that we have made throughout the course of the past 12 months, including the future high streets fund.

[John McDonnell]

I can understand why the Chancellor has broken convention today in not responding, because I think he would be ashamed to respond. Let me tell him what the answer is: if a DUP vote is worth £100 million, what Labour MPs were offered yesterday was £6 million.

Let me ask the Chancellor to undertake another calculation. Seven days ago, he was forced to publish the Government’s assessment, again, of how much a no-deal Brexit would cost this country—in today’s prices, nearly £200 billion. How much of a threatened cost to this country will it take for this Chancellor to find a backbone to stand up to the Prime Minister and the European Research Group to prevent no deal or a bad deal? Or is the Secretary of State for Work and Pensions the only Cabinet Minister willing to put country before career?

--- Later in debate ---

[Henry Smith (Crawley) (Con)]

T10.   What assessment has the Treasury made of the impact of air passenger duty on regional and short-haul airlines?

[Robert Jenrick]

Air passenger duty is a per passenger levy paid by all airlines, so there is no reason to believe that it discriminates against smaller airlines. We have now chosen to freeze APD on short-haul flights for eight years and to take children out of it altogether. The Labour party of course want to hike it with its holiday tax.

[Laura Smith (Crewe and Nantwich) (Lab)]

What is the Chancellor doing to make sure local authorities have sufficient funding to allow care providers to pay sleep-in shifts at a national living wage rate?

Draft Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019

Robert Jenrick Excerpts

Wednesday 13th February 2019 General Committees

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I beg to move,

That the Committee has considered the draft Financial Services Contracts (Transitional and Saving Provision) (EU Exit) Regulations 2019.

As members of the Committee who follow Treasury statutory instruments with interest will be aware, we have been undertaking a programme of legislation to ensure that if the UK leaves the European Union without a deal or an implementation period, a functioning legislative and regulatory regime for financial services continues. To deliver that, the Treasury is laying statutory instruments before Parliament under the European Union (Withdrawal) Act 2018. There have already been debates on many such statutory instruments in this place and in the House of Lords. The draft statutory instrument that we are debating is part of that programme. It has already been debated and approved by the House of Lords.

In December 2017, the Treasury announced that we would legislate to establish a temporary permissions regime enabling European economic area firms operating in the UK to continue their activities in the UK for a time-limited period after withdrawal without seeking full UK authorisation. At the same time, it was announced that we would legislate to ensure that contractual obligations not covered by that regime could continue to be met. That will help to protect the interests of UK customers of EEA financial services firms.

The legislation setting out the temporary permissions regime for firms that passport under the Financial Services and Markets Act 2000 was debated and passed by this House last autumn in the form of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018. Legislation for other temporary regimes covering non-UK central counterparties, EEA payments and e-money institutions, and trade repositories has similarly been debated and passed by this House.

The draft regulations before us deliver on the second commitment that we made: to ensure that those financial services contracts not captured by the temporary permissions regime can continue to be serviced. They also ensure continuity for UK-based customers of financial services providers that do not enter other temporary regimes, or that exit such regimes without having obtained the full UK authorisation, recognition and registration that they would otherwise need to continue carrying out their activities in the UK.

Specifically, this draft instrument makes provision for passporting EEA firms, non-UK central counterparties, EEA payment and e-money institutions, and trade repositories to wind down their UK operations in an orderly manner. It will apply to firms and service providers that no longer wish to operate in the UK, and those that exit a temporary regime without permission from the UK authorities to carry on a new business here. The approach taken in the draft regulations aligns with that taken in other statutory instruments laid before Parliament under the European Union (Withdrawal) Act. The regulations deliver on the Treasury’s commitments and are vital to the financial services sector and all UK consumers.

Turning to the substance of the regulations, those familiar with EU law will know that it allows EEA firms, non-UK central counterparties and trade repositories to provide regulated services in the UK by virtue of being authorised in another member state, or recognised and registered by the relevant EU authority. In a no-deal scenario, the UK would be outside the EEA and the EU’s legal, supervisory and financial regulatory framework. Once the EEA frameworks providing for passporting rights, recognition of central counterparties and registration of trade repositories fall away, as they would in a no-deal scenario, we need to act to avoid widespread disruption to the provision of financial services, which would clearly be detrimental to UK businesses and consumers.

The draft regulations insert provisions into existing temporary regimes to enable the orderly wind-down of contractual obligations or services, and so will provide continuity and certainty for UK customers of those firms that do not enter the temporary regimes, or that exit them without full UK authorisation, as I have said. Specifically, the regulations will establish four distinct run-off regimes relating to four different temporary regimes. The regimes will cover: first, EEA firms passporting under the Financial Services and Markets Act; secondly, non-UK central counterparties; thirdly, EEA payments and e-money institutions; and, last, trade repositories.

The temporary regimes already established go a long way in mitigating risks of disruption and uncertainty. Without these additional wind-down provisions, however, UK businesses and consumers could see some disruption to their contracts or services. The instrument is necessary to minimise that disruption to users and providers in a no-deal scenario. For example, if an EEA insurance provider with customers in the UK does not enter the temporary permissions regime, the instrument will allow the insurer to pay out on a claim to its UK customers where it could otherwise be illegal for it to do so. The instrument will allow firms with pre-existing contractual obligations to continue to meet them, providing certainty and fairness to both the providers and users of financial services, and demonstrating that the UK remains open for business and takes legal certainty and business continuity seriously.

The Treasury worked closely with the Bank of England, the Prudential Regulation Authority and the Financial Conduct Authority in drafting the instrument. It has also engaged widely across the financial services sector, which has supported the measure and continues to do so. On 17 December, the Treasury published the instrument in draft, along with an explanatory note to maximise transparency to Parliament and the industry.

In conclusion, the instrument is a pragmatic response to the need to ensure service continuity if the UK leaves the EU without a deal. The importance of the provisions is reflected in the announcement of December 2017, which made it very clear to the industry that well in advance of exit day, the Treasury would put forward legislation to deliver these regimes. The legislation is necessary to ensure that contractual obligations can continue to be met, thus avoiding disruption and losses for UK business and consumers. I hope all colleagues will join me in supporting the regulations, which I commend to the Committee.

--- Later in debate ---

[Robert Jenrick]

I am grateful for the opportunity to respond to the questions put by the hon. Members for Bootle, and for City of Chester.

I disagree with the hon. Member for City of Chester. Leaving without a deal is clearly not our preference—there are sectors of the economy, including financial services, for which that would be a very difficult situation indeed—but it is not responsible to take no deal off the table at this stage, and to diminish our leverage in the crucial final stages of the negotiations. In fact, it is not possible to take it off the table, because there is the matter of the primary legislation that is already in place. Until such time as the House of Commons passes a law to the contrary, we have to act on the basis that no deal is a potential scenario.

Any responsible Government would be taking the steps that we are today. The regulations have been welcomed by the industry, which has described them as the final piece in the puzzle, and an important piece of legislation that we need to pass to ensure that UK financial services institutions and consumers are protected.

By approving the regulations, we are making a fair, unilateral regime available to our friends and partners across the EEA—a regime that will give firms temporary access allow them to run off their businesses in an orderly manner. That is what people would expect us to do.

The hon. Member for Bootle asked why we were using secondary rather than primary legislation. We have had that debate on numerous occasions during this process. The European Union (Withdrawal) Act does not allow the Treasury to make major changes to policy or legal frameworks, and does not give the Government the power to make changes beyond what is needed to correct deficiencies that will arise solely as a result of exit. That is all we are attempting to do today.

The hon. Gentleman asked about scrutiny. As I said in my opening remarks, we published the instrument in draft form on 17 December, along with an explanatory memorandum that sets out how it will operate, maximising transparency to Parliament and the industry. We have had numerous meetings with stakeholders across the financial services sector; they welcome the instrument and believe it is absolutely essential. I am therefore disappointed to hear that any Member would choose to vote against it, because the consequences of doing so would be significant in the event of no deal.

The hon. Gentleman asked why there is a contractual run-off period, and whether that would mean that consumers would not be safeguarded—I think that was one of the implications. The period is precisely to ensure that consumers are protected. The example I gave was of a consumer with a long-duration insurance product that lasted for 10 or 15 years. We would want to ensure that the product could be used and the consumer could make a claim if necessary, and that the provider of that service—for example, an EEA insurance company —could not renege on that by virtue of it being illegal. The regulations protect consumers, and enable us to make a fair, unilateral offer to our partners elsewhere in the EEA.

Contracts and businesses will not be unregulated during that period. They will not be permitted to carry out new business in the UK. The FCA and the PRA will have additional powers over firms, including the power to move firms into the supervised run-off period, in which they would be subject to the full UK regulatory regime, and the power to cancel their exemption altogether. Consumers will not be exposed during that period.

The hon. Gentleman asked for further information on cancellation. The regulators’ powers in respect of a person under the temporary regime are the same as under part 4A of the Financial Services and Markets Act 2000, so there will be no change to the powers available to the regulator to take action.

On our ability to extend the duration of the regime, Lord Bates in the House of Lords made clear that to do that, we would submit a written ministerial statement. That followed the expression of similar concerns in the other place in the consideration of the EEA Passport Rights (Amendment, etc., and Transitional Provisions) (EU Exit) Regulations 2018. That clarification has satisfied stakeholders. It is not our intention that extensions will happen in perpetuity; the powers are purely to give greater clarity and certainty to the industry that in extreme circumstances there is an ability to extend, and to ensure that there is no detriment to consumers or business.

[Peter Dowd]

On the point that the Minister just raised about exceptional circumstances, that is the problem with the totality of the legislation. The Government seem unable to set us on the track to ensuring that we or organisations will eventually have clarity. They seem to be kicking the can down the road all the time. They put things off. They say, “If there is a problem, we will look at it then.” It goes on and on. There is absolutely no clarity for organisations, and the Minister should take that into account.

[Robert Jenrick]

The legislation has precisely the opposite purpose; its purpose is to provide clarity and certainty to industry. Voting against the regulations will do precisely the opposite of what the hon. Gentleman purports to want to achieve. Of course, the way to provide the greatest certainty to consumers, users of financial services, and the 1.1 million people who work in the sector in all parts of the United Kingdom is to vote for the Prime Minister’s deal—or a deal—before exit day and avoid a no-deal Brexit.

[Peter Dowd]

The Minister says that organisations welcome the regulations, but at the end of the day, they welcome them because they are the only thing on the table. Would I welcome them, if I were them? I most probably would, because this instrument is the only document I have that gives me any certainty at all—but it is still not good enough.

[Robert Jenrick]

It is not the view of the industry that this document is not good enough. The industry thinks that this is the final piece in the puzzle; it provides them with the certainty that they require in the event of a no-deal Brexit. There will now be a temporary regime into which financial institutions can pass, should they wish to. If they do not want to do so, or if they do and then ultimately fail to gain the authorisation that they require, the measures before us provide a further safety net to ensure that consumers and those businesses are protected and safeguarded for a period of time as they run off their business in the UK.

With that, unless any other right hon. or hon. Members wish to comment, I commend these regulations to the Committee.

Question put.

Draft Small Charitable Donations Act (Amendment) Order 2019

Robert Jenrick Excerpts

Tuesday 12th February 2019 General Committees

[The Exchequer Secretary to the Treasury (Robert Jenrick)]

I beg to move,

That the Committee has considered the draft Small Charitable Donations Act (Amendment) Order 2019.

Good morning, Mrs Moon. The Government recognise the important role that charities play in our society and are committed to encouraging greater charitable giving. We therefore continue to provide support to charities and their donors through a broad and generous package of tax reliefs, which in 2017-18 was worth more than £5 billion. The draft order presents an opportunity to enhance the Government’s support further by increasing the individual donation limit on the gift aid small donation scheme from £20 to £30 with effect from 6 April.

Gift aid was introduced by Sir John Major as Chancellor nearly 30 years ago. When eligible taxpayers give a sum of money to charity, it allows the charity to reclaim from Her Majesty’s Revenue and Customs the basic rate of tax on the gift. For a charity to claim that tax relief, an eligible donor must sign a gift aid declaration form that confirms his or her consent to the charity’s reclaiming the income tax paid on the donation. Gift aid is now a well established and significant revenue stream for charities: in the 2017-18 tax year, more than £1.26 billion in gift aid relief was paid to charities throughout the United Kingdom.

It is not always practical or feasible for a gift aid declaration to accompany charitable donations such as those received by small charities via collection tins on the high street or by churches via the collection plate. That is why, after listening to those groups, in 2013 the Government introduced the gift aid small donations scheme, which is designed to help charities to receive a gift aid-style top-up payment—a 25% top-up from the Government—on small cash and contactless card donations without a gift aid declaration being signed and submitted. The scheme is not a substitute for the original gift aid scheme; where a donor makes a larger donation or can reasonably be expected to complete a declaration form, gift aid should still be claimed in the usual way.

Take-up of the gift aid small donations scheme has increased year on year, although it would be helpful if more charities knew about it, understood it and used it. In 2017-18, 24,000 charities claimed a total of £34 million through the scheme. In our 2018 autumn Budget, the Government announced our intention to increase the individual donation limit on what a charity can claim through the small donations scheme from £20 to £30, extending support for charities. Some 80% of the organisations that currently participate in the scheme claim well below the £8,000 overall limit that we have set in the past, so we estimate that 20,000 organisations will benefit from greater top-up donations as a result of the draft order. The draft order’s change to the donation limit will benefit the good causes to which the donations have been pledged. I commend it to the Committee.

--- Later in debate ---

[Robert Jenrick]

I thank those colleagues who have spoken. I am grateful to the Scottish National party spokesman, the hon. Member for Glasgow North, and to my constituency neighbour, the hon. Member for Bassetlaw, for indicating either their support or their intention not to oppose this measure. Gift aid has enjoyed cross-party support ever since it was created 30 years ago. I hope that will continue, not only because it is an important measure in its own right, but because it is important to give certainty to charities that enjoy it across the length and breadth of the country.

As the hon. Member for Bassetlaw set out, a multitude of smaller charities have already welcomed the measure. In fact, we were responding to the voices of charities, many of which wrote to me. I attended the excitingly named charity tax conference a year ago, and this was one of their No. 1 asks to the Government. We have been pleased to oblige by laying the instrument. It will make a small difference to those charities and to all those individuals who put money on a collection plate in their local church or give to a small charity on the high street. I cannot see any reason why one would not wholeheartedly support that.

We take fraud seriously, as the Committee would expect. There has not been any material evidence of fraud, although there have been a small number of cases. In May 2016, three individuals were jailed for a total of 22 years for defrauding HMRC of £5 million in fictitious gift aid claims. That built upon a previous case from the month before, in which three other individuals were jailed for a total of 11 years for submitting fraudulent gift aid claims totalling £340,000. Thankfully, the unscrupulous individuals who seek to exploit charitable status for criminal purposes are rare, and there is no evidence of systematic abuse.

We designed the scheme in quite a complex manner— too complex, according to some charities—to make it difficult to conduct fraudulent activity. HMRC works closely with the charity regulator, the Charity Commission, with which I have been in regular contact over the last year on a number of matters, to ensure that charities are properly regulated and that any abuse of charities is dealt with robustly. When a charity is suspected of fraud, HMRC will share the information as soon as possible with the Charity Commission, which will consider further action, including removal from the charities register. Although we take that situation seriously, I do not want to overemphasise it because abuse of the scheme is not widespread. It is an important scheme that we should take forward into the years ahead.

The hon. Member for Norwich South asked about increasing the £8,000 limit. We increased the limit substantially, from £5,000 to £8,000, as recently as 2016, so we think it logical to keep it at that level for the foreseeable future. The hon. Member for Glasgow North raised a legitimate concern about public awareness of the scheme. That is something that all right hon. and hon. Members could take away from the Committee and encourage smaller charities, local parish churches and other good causes that they visit and encounter to take advantage of the scheme.

We did some research with the Charity Commission at the beginning of last year. As a result of that research, we wrote to all the charities in the country that take advantage of gift aid but have not yet, the best of our knowledge, used the gift aid small donations scheme—around 47,000 charities—to publicise the scheme and explain its relative simplicity, and to encourage them to take part in it. I hope that the Committee will wholeheartedly support this good news for our charitable sector.

Question put and agreed to.