Public Service Pensions and Judicial Offices Bill [Lords]

Robert Jenrick Excerpts

2nd reading
Wednesday 5th January 2022 Commons Chamber

[Robert Jenrick (Newark) (Con)]

I welcome the Bill and I am pleased to make a few brief comments. Like my right hon. and learned Friend the Member for South Swindon (Sir Robert Buckland), I was involved in its preparation and followed the consequences of the McCloud judgment as a Treasury Minister and as Secretary of State for Housing, Communities and Local Government.

I welcome the fact that the Bill will now provide certainty and enable the important reforms that began with Lord Hutton’s report and were enacted in the Public Service Pensions Act 2013, the regulations that subsequently followed and the reforms of 2015. It will help to enable those changes to proceed and will enable all concerned to be given the confidence and certainty that they deserve.

Again like my right hon. and learned Friend, I welcome the changes to the judicial age of retirement. In the early 1990s, when I think there was no retirement age, it was right to bring in a retirement age of 70. Senior members of the judiciary, such as Lord Denning, retired at 83. It was then right to bring in a somewhat lower retirement age but of course, to all our benefit, the world has moved on and we are living longer, so it is right to have a somewhat later retirement age than was legislated for in the 1990s.

The primary reason that I wanted to speak in today’s debate was with respect to an issue that arose out of the 2013 Act, which was ultimately tested by the Supreme Court when I was Secretary of State in 2020. The issue was whether the Government, acting through the Secretary of State at the Ministry of Housing, Communities and Local Government or its successor Department in this case, have the power to issue guidance to those who administer certain public service pension schemes, primarily funded pension schemes, the most prominent of which is the local government pension scheme, to guide those trustees and administrators away from making investment decisions that are contrary to the United Kingdom’s foreign and defence policy.

The reason why this came to court in 2020 was that when it was brought forward, initially by my predecessor, now the noble Lord Pickles, and his successor, my right hon. Friend the Member for Tunbridge Wells (Greg Clark), the guidance issued by the Department was designed to guide local councils, primarily, away from adopting boycott, divestment and sanctions policies against Israel through their pension funds, although of course other examples were occurring at the time and might occur in future.

The Department issued guidance at that stage that was entirely within the spirit of the then law in 2013, but was subsequently found by a split decision in the Supreme Court to overstep the Secretary of State’s legal powers. The guidance was, I think, perfectly valid; it said that “there are certain circumstances where the trustees of the pension schemes should be careful not to make decisions which would conflict with UK national foreign policy and defence policy.”

Two issues arose when this was tested in the Supreme Court, in a case brought by a campaign group. The first was that some members of the Supreme Court felt that the 2013 Act itself did not give the Secretary of State the necessary powers. The Act clearly states that the Secretary of State can bring forward guidance on how the fund should be administered, but there was perfectly legitimate debate within the Supreme Court about whether the guidance went sufficiently far to cover this particular point. Three of the Supreme Court judges deemed that it did not, while two had a dissenting view.

There was a second, not totally unrelated point made: some members of the Supreme Court were of the view that some of the pension funds in question were not within reach of the British Government, that they were essentially not part of the British state, and that by contributing to a pension fund, a civil servant or an officer of a local council is contributing to a pension scheme that is ultimately outwith the reach of a Secretary of State’s issuing such guidance. That, again, was subject to debate and conflicting views within the Supreme Court, and Lady Arden and Lord Sales dissented.

Both judges took the view, which I agree with, that a scheme such as the local government pension scheme is liable to be identified with the British state for a number of reasons, not least the fact that ultimately the money to pay for it is coming from the taxpayer, but also because it is underwritten by the taxpayer and by statute. Those looking in from afar, for example in a foreign country such as Israel, would be likely to deem a decision by the trustees of one of these pension funds to reflect in some respects the British Government and the views of the British state.

The outcome of the Supreme Court decision in 2020 was that the rule and guidance issued by the then Ministry of Housing, Communities and Local Government was disapplied. I would argue that the time has come, in this Bill, to make the modest change that we need in law to ensure that we can rectify that issue and change the situation. A small amendment to the Bill would give the Secretary of State the powers he or she needs to issue the necessary guidance. That was essentially the message that came from the Supreme Court: if the Government wish to do this, they must ensure the law is clearer than it was in 2013.

I am here to suggest to my right hon. Friend the Chief Secretary that a small amendment be made to the Bill to ensure that that can happen. The Government took this matter to the Supreme Court; unfortunately they lost, and of course we respect the Court’s decision, but the matter is able now to be rectified with a small technical amendment. It is one that I think is appropriate. It is the Government’s policy that we do not support BDS. The Government wish to bring forward a Bill on BDS later in this Parliament, and I hope that they do so, but this is the appropriate place to make the amendment because this is, after all, the successor Bill to the 2013 Act in which this issue arose.

It is important to say why we would want to do this. BDS is a divisive matter. It damages and undermines community cohesion and sows distrust, and we do not want to see local councils trying to influence foreign policy decisions, which are properly the purview of the United Kingdom Government. This is not about politicising public sector pensions, as was implied, I think, by one member of the Supreme Court; it is precisely the reverse. It is ensuring that public sector pensions, which are ultimately paid for by us all as taxpayers, are not politicised, and that political judgments do not come into decisions on the types of investments that are made by these funds.

I will conclude my remarks and leave the matter with my right hon. Friend the Chief Secretary, and I hope that, between us and other interested Members in all parts of the House—there are a significant number—we can find a resolution to this issue, which has been hanging around now for several years, between 2013 and that judgment in the Supreme Court a year and a half ago, and put it to bed.

--- Later in debate ---

[James Cartlidge]

Perhaps in the days without masks it would have been easier for me to tell whether my right hon. and learned Friend was actually intervening, but he is absolutely right.

I can answer the question posed about the lifetime allowance by the Chair of the Justice Committee, my hon. Friend the Member for Bromley and Chislehurst (Sir Robert Neill), and by the shadow Chief Secretary, the right hon. Member for Wolverhampton South East (Mr McFadden). To clarify, the legacy judicial pension scheme is unregistered for tax purposes, so the lifetime allowance tax charge does not apply to accruals under that scheme. The new judicial pension scheme, to be introduced from 1 April, will also be unregistered for tax purposes, so no lifetime allowance tax charge will apply to that scheme either. I hope that answers the question, which is a very important one.

Diversity, which was raised by several colleagues, is incredibly important. Just as in education we have been asking teachers to return to schools to help out and at the start of the pandemic the health service had many thousands of nurses and others returning to clinical roles, we are in effect doing the same. When we do that, however, we obviously cannot directly influence the diversity of the people who are returning to a profession or being retained for longer. As the Chair of the Justice Committee said, it is about reaching out to the recruits of tomorrow. We are taking many steps: for example, since 2020 we have been funding a two-year pilot programme of targeted outreach and support activity by the Judicial Appointments Commission, providing advice and guidance to potential candidates from underrepresented backgrounds, including those from BAME backgrounds, women and the disabled, and soliciting candidates for specific senior court and tribunal roles. In terms of magistracy, we will be launching a new online magistrates recruitment programme in the coming weeks to encourage applications from younger, more diverse cohorts. This is an important point.

The former shadow Chancellor, the right hon. Member for Hayes and Harlington (John McDonnell), the shadow Chief Secretary, the right hon. Member for Wolverhampton South East, and the shadow Work and Pensions Minister, the hon. Member for Reading East, asked the important question of where the £17 billion will ultimately be coming from. The cost of the remedy is estimated to increase pension scheme liabilities by £17 billion, so it is the scheme liabilities that increase. However, that liability will be realised over many decades. It also represents a small proportion of the total savings of around £400 billion that will arise from the wider reforms to public service pensions. To be absolutely clear, the liability will fall on the Exchequer. I hope that offers clarification.

The shadow Work and Pensions Minister asked for clarity on the issues around the ceiling breaches and so on. As the Chief Secretary to the Treasury made clear in his opening speech, no member will see a reduction in their benefits as a result of the 2016 valuations. I hope that provides some reassurance to the shadow Minister. UK asset resolution schemes currently pay out benefits of about £530 million per annum; this is a cost the Government already bear. The policy creates a more efficient situation for paying these pensions and ensuring the current schemes will have a stable benefit.

The question asked by the right hon. Member for Hayes and Harlington and the shadow Work and Pensions Minister about the so-called pensions trap and the issue around the police has been raised with the Government by police representatives and we have been considering it. The Home Office is consulting on detailed regulations to implement a prospective McCloud remedy for the police pensions scheme, but the Government must not take action contrary to the intention of this Bill to remove discrimination identified by the courts by inadvertently introducing new unequal treatment and discrimination.

The hon. Member for Edinburgh West (Christine Jardine) and the shadow Chief Secretary both raised an important point about advice and guidance, and they were right. These are potentially complex issues. Perhaps one important point is that for many members this will hopefully be relatively straightforward; they will be presented with two options, one of which will be financially more generous. Hopefully, therefore, it will be relatively straightforward, but of course it is important that we provide guidance. Providing sufficient guidance for members to make informed decisions about their pensions is of the utmost importance and as such the Bill already requires that schemes provide members with remediable service statements containing personalised information about the benefits available to them. This will include details of the benefits available to them under the legacy scheme and the benefits available to them if they elect to receive new scheme benefits or choose for a period of opted-out service to be reinstated. These statements will be provided to active members on an annual basis.

The hon. Lady also raised the important issue of women and the general point about fairness. The Government agree strongly with the need to ensure that the impact of the Bill is fair on members of public service pension schemes with protected characteristics, including women. A full equalities impact assessment of the Bill was conducted and published alongside the Bill’s introduction. In addition, when making the necessary changes to their scheme rules to deliver remedy, pension schemes will carry out any appropriate equalities analysis for their specific schemes in compliance with the public sector equality duty in section 149 of the Equality Act 2010.

I am grateful for the support of the former Secretary of State, my right hon. Friend the Member for Newark (Robert Jenrick), on lifting the retirement age and, we hope, its impact on capacity issues. He put his specific point well in saying that his suggestion is the very opposite of politicisation. The Government have made their position on boycotts clear. We do not hesitate to express our disagreement with foreign nations whenever we feel that it is necessary, but we are firmly opposed to local boycotts that can damage integration and community cohesion, hinder exports, and harm foreign relations and the UK’s economic and international security. Local authorities should not undertake boycotts that could undermine foreign policy, which is a matter for the UK Government alone. The Government therefore remain committed to our manifesto pledge to ban public bodies from imposing their own boycotts, disinvestment or sanction campaigns, and we will legislate as soon as parliamentary time allows.

[Robert Jenrick]

I am grateful to my hon. Friend for his remarks. He has just said that the Government will legislate as possible; this is the opportunity to legislate. Of course, there might be a BDS Bill at some point later in the Parliament—we do not know; there will always be pressures on the legislative timeframe—but even if there were, this is the appropriate Bill to handle the situation, because the issue arose in the 2013 Act, to which this Bill is essentially the successor. I do not expect my hon. Friend to make a commitment here at the Dispatch Box—it is clearly something that we will all have to consider in the weeks ahead—but this is the moment at which to make the amendment, should the Government wish to do so in this Parliament.

[James Cartlidge]

I am grateful to my right hon. Friend. As he knows, matters of parliamentary business are above my pay grade—a very humble and new one—but I hear his point, and I think he made it very well. I am sure that he has a great deal of sympathy for our position, and I simply repeat that we will legislate when parliamentary time allows.

Let me finally refer to the points made by the Chair of the Justice Committee, my hon. Friend the Member for Bromley and Chislehurst, and the former Lord Chancellor, my right hon. and learned Friend the Member for South Swindon, about the independence of the judiciary. They are right: this Bill, including the important parts that deal with the judiciary—I make no apologies, as a Justice Minister, for focusing on those in the winding-up speech, not least given all the backlog issues—sends a powerful signal about our support for the judiciary. I believe that the independence of the judiciary is part of the competitiveness of the United Kingdom. The reason people buy our insurance in the City or trade with our banks and our service sector is that they trust this country, and they trust us because they trust the contract and they trust English law, and we should all be very proud of that.

On the basis of the contributions made today, I believe that the House agrees with the principles underpinning the Bill. I am grateful for the support of the shadow Chief Secretary and the Labour party, and indeed for that of the Liberal Democrats and other parties. I think we all agree that we must make certain that those who deliver our valued public services continue to receive guaranteed benefits on retirement on a fair and equal basis, and in a way that ensures that pensions are affordable and sustainable, and that we must also support our world-class judiciary to enable it to meet the demands of the present day and of the future. I extend an invitation to all Members who may wish to discuss these issues further with me and with the Chief Secretary before the Committee stage. I look forward to that further discussion, and I commend the Bill to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Public Service Pensions and Judicial Offices Bill [Lords] (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Public Service Pensions and Judicial Offices Bill [Lords]:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Tuesday 1 February 2022.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Consideration and Third Reading

(4) Proceedings on Consideration shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which those proceedings are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Michael Tomlinson.)

Question agreed to.

Public Service Pensions and Judicial Offices Bill [Lords] (money)

Queen’s recommendation signified.

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Public Service Pensions and Judicial Offices Bill [Lords], it is expedient to authorise:

(1) the payment out of money provided by Parliament of:

(a) any expenditure incurred under or by virtue of the Act by a Minister of the Crown or a government department; and

(b) any increase attributable to the Act in the sums payable under or by virtue of any other Act out of money so provided; and

(2) the charging on, and paying out of, the Consolidated Fund of any sum payable under or by virtue of the Act to or in respect of the judiciary.—(Michael Tomlinson.)

Question agreed to.

Public Service Pensions and Judicial Offices Bill [Lords] (Ways and means)

Motion made, and Question put forthwith (Standing Order No. 52(1)(a)),

That, for the purposes of any Act resulting from the Public Service Pensions and Judicial Offices Bill [Lords], it is expedient to authorise:

(1) the making of provision under the Act in relation to income tax, capital gains tax, corporation tax, inheritance tax, stamp duty, stamp duty reserve tax or stamp duty land tax in connection with—

(a) pension schemes established under provision made under the Act for persons who are or have been members of occupational pension schemes of bodies that were brought into public ownership under the Banking (Special Provisions) Act 2008, or

(b) the transfer under provision made under the Act of any property, rights or liabilities of any such occupational pension scheme or any such body; and

(2) the payment of sums into the Consolidated Fund.—(Michael Tomlinson.)

Question agreed to.

Budget Resolutions

Robert Jenrick Excerpts

Wednesday 27th October 2021 Commons Chamber

[Robert Jenrick (Newark) (Con)]

It is a pleasure to follow the hon. Member for Wallasey (Dame Angela Eagle). Unlike her, having recently left the Cabinet, I am grateful to the Treasury for all the effort that it has made to keep us informed of what will be in the Budget—I have never approached a Budget knowing quite as much in advance. However, I would still like to speak about a couple of elements that I think are quite significant.

One of those elements is the change in the universal credit taper rate, which will help millions of people throughout the country. It underlines a fundamental Conservative objective, which is to make work pay, and I strongly welcome it. I also think it important that we have announced an increase in the national living wage, which, again, will help us to build that higher-wage, higher-productivity economy that is so fundamental to our economic plan.

I also want to put on the record my praise for the Chancellor, which is contrary to some of the remarks we have heard today. I think that his stewardship of the economy over an extraordinary year and a half is enormously to his credit, and I think that that is reflected in the public confidence that he has built up for himself and for the Government over that period. We are seeing the economy bouncing back better—still scarred, but in a significantly better position than many people would have imagined. We are seeing employment in an immeasurably stronger position than we would have imagined just a few months ago, along with a commensurate surge in tax revenues that contrasts with the gloomy forecasts from the Office for Budget Responsibility the last time we heard from the Chancellor. I share the view of my right hon. Friend the Member for Wokingham (John Redwood): we have to question how useful the OBR is when its forecasts are so far out, and have to hope that it can raise its game in the future.

Let me make a few brief points. First, I think the Chancellor was right to continue to highlight the cost of living as a major issue. I do not think we should assume that inflation will be fleeting and transitory; I think it could be with us for a long time, which is why it is important that we take action. The action on the universal credit taper rate will help, as will the national living wage, and the changes in fuel duty and other items will be useful as well, but we must prepare ourselves—steel ourselves—for the likelihood that this year and most of next year will be marked by a significant pressure on people on low and medium incomes.

Secondly, I am very concerned about the current level of public spending, and the size of the state. We must be honest with ourselves, and acknowledge that on top of the £400 billion of unplanned outlay that was required to get us through the covid response, we are now seeing the size of the state increase to the largest that it has been in peacetime. The amount of public expenditure today is higher than it was during the financial crisis; it is about the same as it was under Denis Healey in 1976, when he had to go cap in hand to the International Monetary Fund. The size of the state is large, and we have heard from the Chancellor today that it is going to grow even further, beyond 41% of national income. History suggests that that is not a sensible long-term level for public expenditure, because it starts to crowd out the private sector, and makes it hard to build and sustain the free-market, free-enterprise economy that we all want to see.

That leads me to two points. One is that we have to ensure that this public money is well spent. I think particularly of the NHS, which is soon to account for 40% of total current expenditure. That is a significant amount. Many of us, and our constituents, want to see the NHS properly funded, but a heavy burden of responsibility now falls on the Department of Health and Social Care to ensure that the money is well spent and is accompanied by reform. I remember previous settlements, including the one referred to by my right hon. Friend the Member for Maidenhead (Mrs May). Just a couple of years ago, money was given to the NHS without a proper plan for reform and was not well spent, so I hope that this money will be spent differently.

The second point is the difference between funding for day-to-day purposes and funding that will genuinely increase productivity in the economy. At the end of the day, as many Members have already said, it is all about productivity growth. The forecasts that the Chancellor set out earlier today were for one or two years, if we are to believe the OBR, of very significant growth in the economy, and then a return to low levels of growth— 1% or 1.3%—with perhaps a decade of low growth ahead of us.

We have to improve productivity, and in that respect there was much to commend in the Budget and the spending review: significant increases in infrastructure, particularly the sorts of infrastructure, such as roads, railways and broadband, that will genuinely improve productivity and boost the economy, and the work on skills—in particular lifelong learning, which for too long has been a weakness in our country.

[Adam Afriyie (Windsor) (Con)]

My right hon. Friend is making a powerful speech about productivity. Does he share my delight that the Chancellor announced tax relief for investment—certainly in the short term and hopefully in the longer term? Hopefully, that will enable businesses to do the heavy lifting rather than the Government trying to do it for them.

[Robert Jenrick]

I agree entirely with my hon. Friend. At the end of the day, the way we boost productivity is by backing the private sector in the economy. The way we grow the economy is to make the UK a more competitive place to do business. That will mean ensuring that we attract investment from overseas. It will also mean correcting the poor levels of trade that we have seen in recent years, as has been mentioned. That needs to change. It also means ensuring that we as a Government bring forward some of the supply-side reforms that we will have to implement if we are going to make ourselves more innovative and competitive.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

The right hon. Gentleman has had a position at a senior level of Government overseeing local government, and I wonder whether he would like to modify his comments slightly. Of course I understand that the private sector is vital for our growth and productivity, but strong public services and strong local government are also critical for helping to enable a strong local economy. Does he not feel that it is important to build that into the Government’s thinking?

[Robert Jenrick]

Absolutely; I do not demur from that, but we have to find the right balance in our country between public expenditure and ensuring that the private sector can flourish. I worry that we have now reached the moment at which there is not much more that we can spend.

We have to ensure that we grow our way out of this challenge. That was illustrated in some of the Chancellor’s announcements today, including those on research and development relief, the continuation of the investment allowance, the support for skills and also the maths support, about which I would be interested to hear more detail. This is also about ensuring that we have sensible tax arrangements in this country that can incentivise investment and ensure that businesses can prosper. The overall tax burden is at its highest sustained level in peacetime, and I worry that we will not be able to go much further than that.

I want to make one last point briefly before closing, because I appreciate that—

[Sir Edward Leigh (Gainsborough) (Con)]

Will my right hon. Friend give way?

[Robert Jenrick]

I really should not, because—

[Sir Edward Leigh]

It is very pertinent to him.

[Robert Jenrick]

How can I refuse?

[Sir Edward Leigh]

I want to say a fantastic big thank you to my right hon. Friend personally, because it has just been announced this minute that Gainsborough is getting £10 million of levelling-up funds. I relentlessly lobbied him on this, and I have lobbied his successor, so a big thank you!

[Robert Jenrick]

I am grateful to my right hon. Friend for ending on such a positive note. I know Gainsborough well—it is my neighbouring constituency—and I am delighted for him and his constituents.

I shall close where I began, which is by saying that there was a huge amount in the Chancellor’s announcements to be applauded. I commend him and the Treasury team and wish them well. The focus now needs to be on growing the economy and making the UK the most competitive place it possibly can be, rather than seeing taxes rise and expenditure increase, risking the private sector not being able to flourish and build that optimistic vision that the Chancellor laid out.

Economic Growth and Environmental Limits

Robert Jenrick Excerpts

Wednesday 10th July 2019 Westminster Hall

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

I thank the hon. Member for Brighton, Pavilion (Caroline Lucas) for tabling this debate and other hon. Members who intervened or who came to listen to and support her. I am always partial to a good Robert Kennedy quote, so I am sorry to see that the hon. Lady’s thunder was stolen at the end of her speech, but I enjoyed it none the less.

As the hon. Lady eloquently set out, it is now more important than ever that the Government and institutions such as the Treasury, which is at the heart of this debate, confront head on the question of how we continue to grow the economy while protecting our environment and tackling climate change with all the vigour and urgency that she and others would like. I believe that the two can and will be done together, and can be mutually beneficial.

The UK is a world leader in this area, but I appreciate that many people—me included—would like us to go further. Between 1990 and 2016, the UK reduced its greenhouse gas emissions by 42% while growing the economy by more than two thirds, demonstrating that environmental action need not come at the cost of economic prosperity.

The Government are determined to continue to build concern for the environment into our economic model. In a moment, I will explain some of the workstreams that we have already undertaken and where we could go further. We want to ensure that environmental policies are well considered and that the Treasury as an organisation is leading them, as I believe it is. The hon. Lady argued that it is time fundamentally to change economic models if we want to address the climate emergency. She questioned in particular whether GDP is a sensible measure of our economic wellbeing, so I will begin by addressing that.

GDP remains one of the most important economic indicators, but it is by no means the only one that is of concern to us or which is used by other major economies around the world. It is closely correlated with employment, incomes and tax receipts, which makes it perhaps the most useful indicator currently available to us. It is used by the Government, the Treasury, and the Bank of England to set economic policy and manage the public finances and, as the system of national accounts framework is set at UN level, GDP is easily comparable across countries and time periods, both historically and in the future. It is important that any changes in the economic modelling that we use are made internationally, and the UK needs to show leadership on that.

The Government recognise, however, that GDP undoubtedly has its limitations and should not be seen as an all-encompassing measure of welfare and wellbeing, and we entirely accept that it was never designed to be. Former Chancellor George Osborne commissioned Sir Charles Bean to undertake an independent review of economic statistics. The review acknowledged some of those limitations, such as the challenge of capturing activities where no market transaction takes place, the challenge posed to GDP and to some of our existing modelling by technology, transforming the way that we measure welling and productivity and, as the hon. Lady mentioned, the fact that GDP estimates make no allowance for the depletion of natural resources,

The Government fully supported the recommendations of the Bean review, which we commissioned, and we have provided the ONS with an additional £25 million to help improve UK economic statistics and implement the Bean review. That was the “Beyond GDP” initiative that the hon. Lady mentioned, which aims to address the limitations of GDP by developing a broader measure of welfare and activity. In response to the hon. Lady’s question about the publication of statistics, the ONS is an independent organisation, so we do not control it in that respect, but I am happy to pass on her comments and ask the ONS to respond.

In the time left, I will briefly mention a number of other steps that the Government have taken. The Treasury’s Green Book, our guidance on the appraisal and evaluation of infrastructure and other investments, is essential to a number of decisions that are made by the Government. In 2018, we refreshed the Green Book to include additional environmental values, such as greenhouse gases, air quality and noise pollution. We also included a social cost-benefit analysis, which I hope is making a significant difference. It will be very important in the upcoming spending review. That work is well perceived internationally. My right hon. Friend the Chancellor of the Exchequer has now convened international Finance Ministers, and the area that the UK will likely lead on internationally is that of economic modelling and how we can do that better on a global scale.

[Clive Lewis]

The Minister spoke about the Green Book, which is still—despite the changes—essentially a neoclassical economic model based on equilibrium economics. Most scientists and economists on the fringes of economic thinking would tell us that we are moving into a disequilibrium position in our economic model. The two are completely incompatible and the Green Book is not fit for purpose as we enter a climate crisis in which many of its assumptions are no longer credible.

[Robert Jenrick]

I do not agree with the hon. Gentleman, but the theme behind his remarks is one of the reasons why we have amended the Green Book. We have created this concept of social value, so we now take into account negative externalities to the environment and to people’s lifestyles as a result of greenhouse gas emissions, for example. I am happy to have a further conversation with him on that after the debate, as there is very little time left.

We are working closely with Dieter Helm’s review and recommendations. I met him to discuss the issue of natural capital accounts, which we are taking seriously—it is a big endeavour. We are working with the ONS and the Department for Environment, Food and Rural Affairs to bring that forward. I hope that we will be one of the first countries in the world to take the issue forward.

Following the report by the Committee on Climate Change, the Chancellor and I met Lord Deben and accepted his recommendation over the summer that the Treasury should do a major and urgent piece of work on how we can fund in a fair way the changes that we need to make as a society as a result of the Committee’s recommendations. That work is under way. I am very happy to meet the hon. Lady to give her more detail on some of those initiatives, which are extremely important. We want to take them forward with gusto in the months ahead.

Question put and agreed to.

Oral Answers to Questions

Robert Jenrick Excerpts

Tuesday 2nd July 2019 Commons Chamber

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

5. What progress the Government have made on establishing a shared prosperity fund.

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

The Government will establish a UK shared prosperity fund to spread prosperity and opportunity across all four nations once we have left the European Union and the EU structural funds. The fund will seek to raise productivity, focusing on levelling up parts of our country whose economies are further behind. More details will be announced following the spending review, and the Government will consult widely on the funds.

[Preet Kaur Gill]

Analysis of local enterprise partnerships by the charity think-tank NPC found that only 26% of board members were women and that only 5% were black, Asian and minority ethnic. When will the Government finally come forward with their consultation on the shared prosperity fund? Does the Minister agree that funnelling the UK fund through the LEPs would be a mistake unless they are made more representative?

[Robert Jenrick]

We intend to consult later this year, following the spending review. Officials at the Ministry of Housing, Communities and Local Government have already held 26 engagement events and have met more than 500 representatives from across the United Kingdom.

With respect to the hon. Lady’s very important point about representation on LEP boards, I should say that the LEP review conducted by MHCLG jointly with the Treasury last year did conclude that they needed to have broader representation from the groups that she mentioned—and from private sector businesses, large and small. Those rules and guidelines are now in force.

[Catherine McKinnell]

Shortly after the referendum on Europe, I asked the then Prime Minister David Cameron what would happen to the £726 million of European funding that we were due to receive in the north-east. He could not answer. We are now three years on and none the wiser about the supposed replacement—the shared prosperity fund. How can anyone have confidence in this Government and their handling of Brexit if they cannot give even that basic information to the region that is set to be the worst hit by any form of Brexit?

[Robert Jenrick]

The people of the north-east of England voted to leave the European Union; I know that the hon. Lady takes a different view, but we are trying to deliver on the outcome of the referendum. Had she voted for the withdrawal Bill, these matters would, of course, be progressing. As my right hon. Friend the Chancellor has already said, we are guaranteeing funding to the beneficiaries of all EU structural funds to 2023, so there is a degree of certainty as we move forwards. But the sooner that this House can coalesce on a good deal and that we can leave the European Union in an orderly fashion, the sooner this matter can be cleared up.

[Derek Thomas (St Ives) (Con)]

My constituency and the rest of Cornwall continues to be one of the less developed areas, even though there is much going for where we are and where we live. What would the Minister say to my county, the Duchy of Cornwall, about how soon it can expect to really contribute to the process of the shared prosperity fund?

[Robert Jenrick]

As I have already said, we intend to consult later this year. I strongly encourage my hon. Friend’s constituents to take part in that consultation; he and I have already spoken about this. I have met representatives from Cornwall Council, for example, to talk about the issue and some of the projects that they care strongly about—including, of course, the stadium in Cornwall, of which my hon. Friend has been a strong proponent.

[Mike Wood (Dudley South) (Con)]

Rebalancing the economy is not just about north and south or the different nations of the United Kingdom. Will the Minister ensure that the shared prosperity fund is distributed using a range of indicators, such as gross value added, the regional human poverty index and disposable income, so that areas in the west midlands in need receive their fair share?

[Robert Jenrick]

Absolutely—those are exactly the kinds of questions that we dealt with in the consultation.

[Mr Gregory Campbell (East Londonderry) (DUP)]

Some of the problems in our United Kingdom can be traced to the disparity between the regions and nations of the UK. Will the Minister ensure that the shared prosperity fund is not the end, but just the beginning, of ensuring that there is prosperity across the entirety of our nation?

[Robert Jenrick]

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

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

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

[Robert Jenrick]

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

[Rachel Reeves (Leeds West) (Lab)]

4. What fiscal steps the Government are taking to support the northern powerhouse.

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

The Government are supporting the northern powerhouse through devolution deals for, among others, Manchester, Liverpool, the West Midlands and, most recently, North of Tyne, as well as through over £13 billion of investment in better transport across the north. In addition, we have invested over £3 billion from the local growth fund in the region since 2015, and we committed at the Budget to announce a renewed northern powerhouse strategy later this year.

[Rachel Reeves]

It is quite an achievement for the Minister to get up and say that without any sense of irony whatsoever. The truth is that we have had the incredibly disappointing news this week that Pacer trains in the north of England will not be removed by the end of this year, as previously promised. Despite the warm words about the northern powerhouse, the truth is that since 2014 spending on transport in the south of England has risen twice as fast as in the north of England. Will the Minister use the spending review as an opportunity to rectify these imbalances and finally give meaning to those words, “the northern powerhouse”?

[Robert Jenrick]

With respect to the hon. Lady, she is not correct on the numbers. This Government are investing more in the north than the previous Labour Government. Over the course of this Parliament, central Government investment in transport infrastructure will be higher in the north of England than it will be in London and the south-east on a per capita basis. We have seen a 40% increase in central Government funding per person in the north under this Government.

[Trudy Harrison (Copeland) (Con)]

Will my hon. Friend confirm that this Government have invested more than £500 million in the northern powerhouse, attracting more businesses and creating more jobs?

[Robert Jenrick]

Over the course of this Parliament and the last, this Government will have invested £13 billion in transport for the north. With respect to Northern Powerhouse Rail, which was mentioned earlier, over the last two years we have given £97 million to Transport for the North to build the business case and prepare the ground for that project. In the course of the spending review—our zero-based review—we will be considering how to take forward that project.

[Dan Jarvis (Barnsley Central) (Lab)]

My constituents in Barnsley Central and people right across the north of England will judge this or any Government on deeds, not words. Does the Minister agree with me that if the northern powerhouse agenda is to be taken seriously, we need to see schemes such as Transport for the North’s strategic transport plan, which includes Northern Powerhouse Rail, properly resourced by the national Government?

[Robert Jenrick]

I agree with the hon. Gentleman, and that is why we have given funding to Transport for the North to prepare a properly thought-through business case. We of course have decisions to make in the spending review about which of those projects should be taken forward and which provide good value for money. In the hon. Gentleman’s own city and city region of Sheffield, we have of course given money through the transforming cities fund to improve inter-city connectivity for his constituents.

[Martin Vickers (Cleethorpes) (Con)]

My constituency and the wider Humber region would greatly benefit if there were improved rail-freight connections east-west. What plans does the Minister have to fund those?

[Robert Jenrick]

We have received representations from the midlands engine, and from Midlands Connect in relation to transport, about both road and rail east-west connectivity. We are considering them carefully, and they will form part of the spending review.

[Peter Dowd (Bootle) (Lab)]

I spot the Leader of the House on the Treasury Bench, but I do not know whether he wants his old job back.

The Exchequer Secretary talks a good talk on fiscal steps to support the northern powerhouse, but the broader facts speak for themselves. Since 2015, for the first time in 50 years, the UK Government no longer provide regional investment aid in England, according to the Industrial Communities Alliance’s evidence to the Business, Innovation and Skills Committee inquiry. What is his explanation for that?

[Robert Jenrick]

We give many other funding streams to northern communities, including £3.3 billion through the local growth fund and £13 billion for wider transport schemes.

[Peter Dowd]

So that’s an unambiguous no. The north is home to 15 million people in five major city regions, 265 towns and 1,000 villages and smaller communities. It has 29 universities, the UK’s largest airport outside the south-east and eight major ports, one in my constituency. Does the Exchequer Secretary agree that changing those eight ports, as suggested by the Foreign Secretary and the former Foreign Secretary, into not economic hubs of excellence but potential revenue-draining, tax-avoiding, money-laundering free ports—more like free-for-all ports—is no substitute for a focused, well-resourced and sustainable economic strategy for the north?

[Robert Jenrick]

Perhaps unlike the hon. Gentleman, I am interested in any proposal that can drive economic growth in the north of England. Free ports are an interesting proposal, which we have discussed with a number of communities. We have urged them to come forward with well-thought-through business cases. We have yet to receive them from many places, but we have received one from Teesside and we will consider them carefully in future.

[Sir Oliver Heald (North East Hertfordshire) (Con)]

6. What estimate the Government have made of the number of promoters of loan schemes subject to the 2019 loan charge who have been convicted; and if he will make a statement.

--- Later in debate ---

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

The Government’s decisions on tax, welfare and spending on public services have benefited households across income distribution, with the poorest gaining the most as a percentage of net income. That is supported by the distribution analysis published by the Treasury at the time of the most recent Budget.

[Alan Brown]

That is nonsense. The UK is already the most unequal society in Europe, and the gap is becoming wider. In order to mitigate the worst welfare cuts and reforms, the Scottish Government are having to pay out £125 million this year alone. The Special Rapporteur on extreme poverty and human rights has said that the situation is “unsustainable”. Does the Minister agree that instead of arguing about tax cuts for the rich, Westminster needs to reverse those welfare cuts?

[Robert Jenrick]

The United Kingdom is not the most unequal society in Europe; it is not anything like that. The Government’s policies, such as our policies of investing in infrastructure and in boosting productivity, have been designed to level up the parts of the UK that need it the most. When it comes to poverty and living standards, things are improving. Real wages have been rising for 10 consecutive months, and more people are in work. In the hon. Gentleman’s constituency, unemployment has fallen by 60% since 2010.

[Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)]

23. One way in which the Minister could easily help to raise living standards would be to pay those under 25 the same national living wage rates as those over 25. I know he will not announce that at the Dispatch Box, but will he tell us what concessions under-25s are given in their housing costs, insurance costs and living costs that warrant their being paid less than those over 25?

[Robert Jenrick]

Our priority has been getting young people into work. In 2010 we inherited a youth unemployment rate of 20%; we have almost halved that. The priority for this Government will be ensuring young people get a great education; more young people are in good or outstanding schools than when we came into power in 2010, and we want them to get apprenticeships and get into work and get on in life.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

14. What steps his Department is taking to help ensure that charities are able to claim timely VAT refunds.

Contingencies Fund Advance

Robert Jenrick Excerpts

Tuesday 2nd July 2019 Written Statements

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

HM Treasury will incur new expenditure in connection with a legal settlement in 2019-20.

Parliamentary approval for additional resources of £84,200,000 for this new expenditure will be sought in a supplementary estimate for HM Treasury. Pending that approval, urgent expenditure estimated at £84,200,000 will be met by repayable cash advances from the Contingencies Fund.

[HCWS1685]

Tobacco Products (Description of Products) (Amendment) Order 2019

Robert Jenrick Excerpts

Monday 17th June 2019 General Committees

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

I beg to move,

That the Committee has considered the Tobacco Products (Descriptions of Products) (Amendment) Order 2019 (S.I. 2019, No. 953).

The statutory instrument inserts into the Tobacco Products (Descriptions of Products) Order 2003 a new article that describes tobacco for heating, ensuring that this category of tobacco product can be distinguished from existing duty categories. This technical change describes tobacco that can be heated without combustion to produce or flavour a vapour, and did not attract any controversy during consultation. I assure right hon. and hon. Members that the Department of Health and Social Care has been intimately involved in the development of this new description.

Heated tobacco products, also known as heat not burn, are a recent development in the tobacco market. They contain processed tobacco that is heated but not burned, as is the case in conventional tobacco products. There are different ways in which this can be achieved, but all use tobacco to produce or flavour vapour.

While current categories capture tobacco designed for smoking—apart from chewing tobacco, which is clearly quite distinct—they do not specifically capture heated tobacco products. At present, there are only a very small number of heated tobacco products on the market, which Her Majesty’s Revenue and Customs assesses on a case-by-case basis to determine their liability to tobacco products duty. That will not be efficient in the long term if the market grows, particularly if the number of products increases substantially.

Having a clear definition that captures the full range of heated tobacco will also mean that there is less scope for manufacturers to attempt to reduce their duty liability by producing products that do not clearly fall within an existing category. The statutory instrument therefore inserts a description of tobacco for heating into the 2003 order, which is necessary for the new duty category to take effect. This change is designed to maintain the effectiveness of our long-established tobacco regime.

The Finance Act 2019 created a new duty category—tobacco for heating—with a commencement date of 1 July 2019. Failure to provide a legal description of tobacco for heating will mean that the new duty category cannot commence as announced. Subject to approval of this order, the new category and rate will be switched on from 1 July 2019. I therefore commend the order to the Committee.

--- Later in debate ---

[Robert Jenrick]

I am grateful to the hon. Gentleman for supporting this measure. As I said, it is a simple measure, which puts on the statute book the definition that is required under the Finance Act 2019.

The amount of revenue at stake is negligible—less than £5 million per year. That is partly because there is only one known product on the market at the moment. Of course, should this take off as a new form of smoking, there will more revenue at stake; at the moment, we think it will be only a small amount. Our primary motivation here is providing clarity to taxpayers, rather than raising significant amounts of money.

On the future revenue stream from tobacco, the hon. Gentleman is right to say that, should smoking continue to decline, which is a good thing, the revenue stream will start to decline. We monitor that closely, and the Exchequer always has new and novel ways of raising money to meet the shortfall in the future, should it have to.

In terms of snuff, I am looking to my officials—[Interruption.] That is disappointing. I was looking to my officials to see whether they knew the answer, but I will have to write to the hon. Gentleman.

[Peter Dowd]

Snuff is not a heated product—not, I suspect until it gets up your nose, but that is by the bye. I do not want any response, formally or informally, from the Minister on that.

[Robert Jenrick]

I am grateful for that. I commend the order to the Committee.

Question put and agreed to.

National Insurance Contributions (Termination Awards and Sporting Testimonials) Bill

Robert Jenrick Excerpts

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

[Kirsty Blackman]

I thank the hon. Gentleman for his intervention. The liability only arises for testimonials of more than £100,000, but I understand his point. For example, I do not know how it would work if a committee were to receive £80,000 on the day of the sporting testimonial and then another £25,000 afterwards in charitable donations. I hope that the Minister will make plain which period the income from a sporting testimonial covers. If the income arises after the sporting testimonial, does it breach the £100,000 cap, and would the liability for class 1A contributions therefore arise, even though it did not occur on the day of the sporting testimonial?

There is also a difference between contractual and non-contractual sporting testimonials. The hon. Member for Oxford East (Anneliese Dodds) made this incredibly clear in Committee and discussed in some detail the definition of “contractual”. The issue is not only the word “contractual”, but whether a sporting testimonial was expected. For example, if everybody who plays centre forward for a football club is given a sporting testimonial, does that mean that everybody should expect a sporting testimonial, or does it just happen that the last five people who played centre forward were amazing at scoring goals and therefore received a sporting testimonial? My concern is that people who did not expect a sporting testimonial will end up, through no fault of their own, in a situation where the Government consider it to be one that they expected to get.

My concern in both cases is the impact on HMRC, which will have a job of work to do in deciding whether the sporting testimonial income creates liability for class 1A contributions. Is it a contractual testimonial? Is it one that the sportsperson should have expected to receive? That will be a difficult set of cases for HMRC to deal with, to come to the correct decisions.

New clause 4 simply says:

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

Before a Treasury Bill comes before Parliament, explanatory notes and a TIIN—a tax information and impact note—are provided, which we all are able to access. A TIIN projects how much the Treasury expects to receive as a result of tax changes, whether it is a tax relief or an additional tax. I have pushed Ministers before on how we know whether the expected impact was actually received.

The information that I was given in Committee was not as strong as I hoped for. I understand that at an unspecified point in the future, the Treasury Committee will be given a report on the Exchequer impact of tax changes. I do not know who keeps track of when those reports are published or whether a report is provided to the Treasury Committee on all measures that have an Exchequer impact. However, I do know that the Members who serve on the Bill Committee—whether Opposition or Government Members—and who scrutinise the Bill, raise concerns about its progress and ask questions about the potential Exchequer impact do not get a copy of the report. Only the Treasury Committee gets a copy of the report and has the right to scrutinise it.

If the Government cannot accept new clause 4—it would be nice if they did, so that a report was laid before Parliament that we could all see—I ask that when reports are published and sent to the Treasury Committee, all Members who serve on the Bill Committee also receive a copy. It would not be a massive administrative burden on the Treasury to ensure that we were all emailed a copy; I am not even asking for a paper copy. It would mean that Parliament and the Government’s decisions were more transparent. It would also mean that the next time we were asked to take a decision on national insurance contributions or anything else, we could look back at whether the impact that the Exchequer projected was actually received.

I get that there are various reasons why we change taxation. We can change taxation to discourage behaviour that we do not want, to encourage behaviour that we do want, to raise revenue or, as the Government say they are doing in this case, to simplify things—although I have given a number of reasons why this is not the way to simplify national insurance contributions or termination payments. This House can only make sensible decisions about taxation if we understand how accurate the Treasury’s projections are. It would be much better if the Government committed to send us a copy of this report when it goes to the Treasury Committee.

I will not press new clause 4 to a Division, but I am happy to vote with the Opposition on any measures that they press. I hope that the Minister will say yes to the small request I have made, because it would not have a huge administrative impact or cost him anything.

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

I am grateful for the opportunity to respond to the comments and questions posed by the hon. Members for Aberdeen North (Kirsty Blackman) and for Bootle (Peter Dowd). I shall not detain the House long, but I will try to respond to as many points as possible. I am surprised that the hon. Member for Bootle has raised those concerns and indicated that he intends to vote against this measure, given that he did not divide the House on Second Reading and did not divide the Committee on a single clause.

[Peter Dowd]

I indicated at the time that we would reserve our judgment and see whether the Government came up with sensible proposals. The fact of the matter is that, regrettably, they have yet again not come up with those suggestions, proposals, recommendations and explanations. That is why. Here we are giving the Government the benefit of the doubt, and we are being criticised for it.

[Robert Jenrick]

Let me respond to the amendments tabled by the hon. Gentleman and the hon. Member for Aberdeen North. It is a bit like groundhog day, because we have been through these arguments before. I will first address new clauses 1 and 2, which seek to amend the legislation that deals with termination awards, and then new clause 5.

New clauses 1 and 2 seek to commit the Government to report to Parliament on the impact of the changes to termination awards legislation within one year of implementation. They both seek further information on the impact of this measure on individuals whose contracts have ended and on employers. New clause 1 also asks specifically about distributional analysis, while new clause 2 asks the Government to consider the impact on businesses using termination payments to fund a start-up—a matter that we also discussed in Committee.

First, the Government consider that producing such reports is unnecessary, because we have already considered these issues in detail as part of the policy development and extensive consultation process. As we have discussed on a number of occasions, this Bill has been known about for some time. It was published for the first time in 2015. It has been restated in Budgets. It has been consulted on. This is not a new measure; it is well known to individuals and stakeholders who might be affected and to the tax and professional community who will be involved in advising businesses. There is little more to be said on that.

[Kirsty Blackman]

As the Minister has said, we discussed this in Committee, as well as on Second Reading. As we have discussed it before and he knew this question was coming, can he tell us how many businesses use termination payments for their start-up and how many fewer will use it for their start-up as a result of these changes?

[Robert Jenrick]

As I said in answer to the hon. Lady in Committee, that is not information that HMRC collects. Studies are made by independent bodies, some of which I highlighted to her during the previous stage of the Bill. I could direct her to them, but I cannot vouch for the veracity of those studies, which are produced by independent bodies. Of course, there is anecdotal evidence of the number of start-ups created in the event of significant redundancies at particular businesses, but that is not something HMRC collects or would be able to do easily. With great respect to the hon. Lady and the point she is trying to make, I do not agree that that is something we should attempt to do in this case.

The point the hon. Lady raised in her closing remarks was about the review that HM Treasury does in the ordinary course of business. We do intend to do that, and we do so within three to five years of Royal Assent to a Bill. As I explained in Committee, the conclusions on the Bill will be communicated publicly to the Treasury Committee. I understand the point she has made on a number of occasions that we could at that point specifically notify certain Members of this House should they be in this House and remain interested. However, again with respect, I suggest it is perfectly reasonable that we send that to the Treasury Committee, which will publish it. It will be in the public domain, and if she or other right hon. and hon. Members are interested at that stage, they will be able to view it and take it from the Treasury Committee website.

[Kirsty Blackman]

Could the Minister please let us know whether that will be in three years’ time or five years’ time, or at what point in that two-year period should I be watching the Treasury Committee’s website?

[Robert Jenrick]

I cannot tell the hon. Lady that at the present time, and for good reason. We do not know at this moment when will be an appropriate time to review this particular tax. Clearly, it can take time to gather the correct evidential base, and that will vary from tax to tax. We will choose the correct moment when we have the greatest degree of evidence to make an informed decision, but it will be within the three-to-five year window.

The existing processes I have described allow time for the Government to consider an adequate amount of evidence, including administrative and taxpayer data. These do take time to collect. They often involve external research, stakeholder views and other relevant analysis. After one year, as is proposed in new clauses 1 and 2, is rarely the appropriate time to review a new tax. Accepting these new clauses at this stage would mean rushing into reviewing these polices prematurely, without proper consideration and without enough evidence to do so robustly, which is what I think all right hon. and hon. Members would wish us to do.

Secondly, the Government have already explicitly considered the impact on employers and individuals as part of this policy development and the consultation process I have already outlined. We decided on an approach that protected those losing their jobs—for example, by retaining the important £30,000 exemption. We have stressed on a number of occasions throughout the passage of the Bill that the Government certainly have no intention of changing that. Were this or a future Government to do so, it would require an affirmative statutory instrument, which could then be debated and voted on by the House. We have also chosen not to change employee national insurance contributions as well, which we could have done for even greater simplification. We chose not to do so to protect employees in a difficult period in their working lives.

At this point, I would add that this policy has been costed. That was certified by the independent Office for Budget Responsibility, and the methodology for this assessment is described in the Budget policy costing document. The suggestion from the hon. Member for Bootle that this was not properly costed is not correct; it has been independently certified.

New clause 1 also requests that the Government conduct a distributional analysis. As I have set out on a number of occasions, the Government have already assessed the distributional impacts of this policy using the information that is available to us. We are confident that the termination awards affected by these changes will be disproportionately paid by higher and additional rate taxpayers. It will not be possible to make a further assessment until we have collected the administrative data on the impact of this policy, which we will do in due course, and it will of course inform the review we have already described in three to five years’ time.

New clause 2 asks that we consider the impact on start-ups. I have answered the question from the hon. Member for Aberdeen North: we do not hold this data. It is not an easy statistic to collect. It requires tracking the behaviour of an individual across time and between different employments.

--- Later in debate ---

[Robert Jenrick]

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

I am grateful to all the right hon. and hon. Members who participated throughout the passage of the Bill, particularly in Committee. I thank the Committee’s Chairs, my hon. Friend the Member for North West Norfolk (Sir Henry Bellingham) and the hon. Member for Mitcham and Morden (Siobhain McDonagh).

This is a small and narrowly drawn but none the less important Bill that continues the Government’s aim of aligning tax and national insurance contributions where it is right to do so. The Bill aligns the employer national insurance contribution treatment of termination awards and sporting testimonials with the current tax treatment. It also raises about £200 million a year for the public finances.

As I mentioned in previous debates, the Bill has been expected for some time. The measures were first announced at Budget 2015, consulted on thereafter and so have been widely expected and subjected to a great deal of scrutiny. The effect of the changes in the Bill will 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.

I would like to reiterate my thanks to hon. Members who participated in the debates. I thank my superb officials at HM Treasury and Her Majesty’s Revenue and Customs, whose patience and professionalism never ceases to impress me. I commend the Bill to the House.

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.”

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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.