Oral Answers to Questions

Sammy Wilson Excerpts

Tuesday 7th December 2021 Commons Chamber

[Mr Clarke]

The hon. Lady raises a really important point: the western gateway is a phenomenally important part of our wider UK growth package. I engaged closely with it last year when I was the Minister for Regional Growth and Local Government and I am always happy to support its work. The western gateway has equal standing alongside the northern powerhouse and the midlands engine. I can certainly confirm that I and, indeed, Ministers in the Department for Levelling Up, Housing and Communities are always happy to engage substantively with the hon. Lady and with the leadership of local authorities in that area.

[Sammy Wilson (East Antrim) (DUP)]

One way to reduce regional inequality is to encourage investment, which creates jobs, generates tax revenue and brings opportunities for supply chains. Does the Minister therefore understand many people’s bewilderment at the fact that the Scottish Government have lobbied for there to be no development in the Cambo oilfield? That will cost 1,000 jobs, lose the revenue from 175 billion barrels of oil, push up oil prices, make us more dependent on foreign supplies and create a chilling environment for investment. Does the Minister agree that the economic madness of the Green tail wagging the SNP dog is going to cost Scotland dearly? What assurances can he give to the oil industry that the UK is a place for investment?

[Mr Clarke]

The right hon. Gentleman makes a valid point about the importance of oil and gas to the UK economy and, of course, in particular to Scotland’s economy. My colleagues on the Government Benches would join him in saying it is really important that we support the success of the North sea oil and gas industry into the future. The SNP’s lack of support is a serious disappointment and a serious concern. The Government are committed to supporting the transition to net zero, but that must involve the word “transition”, so that industry will be of importance for decades to come.

Oral Answers to Questions

Sammy Wilson Excerpts

Tuesday 2nd November 2021 Commons Chamber

[Rishi Sunak]

My hon. Friend is absolutely right. The best foundation for our success as a country is a strong economy and responsible public finances. In contrast to the Labour party, which comes out with unfunded, reckless promises that would lead to our debt rising uncontrollably, it is this Government, and only this Government, who can be trusted to manage the nation’s economy responsibly.

[Sammy Wilson (East Antrim) (DUP)]

Given the commitments that the Prime Minister is making at the climate circus in Glasgow this week, how can the Chancellor possibly say that the public finances will be managed effectively when the huge costs of net zero are not even published by the Treasury, let alone known by the public? We are already seeing taxes increasing to pay for the huge infrastructure changes that reaching net zero is going to entail.

Budget Resolutions

Sammy Wilson Excerpts

Wednesday 27th October 2021 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

I might not be as gushing as the right hon. Member for South Northamptonshire (Dame Andrea Leadsom), but nevertheless this Budget has been delivered in a very difficult economic circumstance. A plethora of figures and initiatives have been thrown at us today, and on the first day of a Budget debate we always comment on measures with some trepidation because of course once we start looking at the detail of the Budget and the implications of its measures we often feel a bit embarrassed at having embraced some of them with enthusiasm. Indeed, sometimes even Chancellors have had to retreat quickly from measures they earlier announced with great euphoria.

Nevertheless, I am encouraged by the general thrust of the Budget and the path the Chancellor has outlined. First, he believes we must get the high levels of debt down to leave us less vulnerable to interest rate changes in the future; that is good. Secondly, he believes that has to be done in the context of returning to making fewer demands on people through taxes. Again, that is good; my party believes people and businesses are far better placed to decide how to spend their money than Government. Thirdly, although we are spending vast amounts on public services, and the Chancellor will have to continue doing so in the future, he believes that must be spent wisely. He therefore must not be afraid to tackle the question of whether money is being wasted and to stop spending it and change direction if it is.

I am also pleased that the Chancellor wants to reward people who are in work. The national living wage increase is welcome, as is the reduction in the universal credit taper to encourage people to move from not working to working or from working in low-paid jobs to working in higher-paid jobs, but we must not forget that there is still a marginal rate of 55% on people in that position, so there is still that disincentive.

However, I still worry that those in low-paid or even medium-paid jobs will face a bleak period in the near future, whether through the tax rises already declared or the fact that we are already facing huge energy price increases. While Members have condemned that in this House, we must not forget that part of the reason for it is the climate hysteria that seems to have overtaken Members and the Government themselves. One reason for higher energy bills is the fact that we are turning our back on cheaper fuels and expecting people to heat their homes in more expensive ways.

The Chancellor has of course said that he has already written to the Bank of England about the current inflation rate. There is only one reason why he would write to the Bank. He cannot instruct it to increase interest rates, but if he is raising concerns about the current level of inflation the implication is that the Bank may well look at introducing higher interest rates, which of course will hit homeowners. So while I welcome some of the incentives to get people into work, we must not ignore that there are challenges ahead, especially for those in low-paid industries.

Turning to specific matters, the Chancellor made a big issue of the additional money going to the devolved Administrations. An extra £1.6 billion per year will go to Northern Ireland, which is a real increase, but there is to be a real increase in expenditure in Northern Ireland of 1.3% each year on average over the period. That is half the increase that will go to Scotland, about one and a half times less than is going to Wales and about a third of the general increase in Government spending. While spending in Northern Ireland is going up in real terms, which I welcome, relatively speaking it will go down, and that at a time when the Government are talking about levelling up and when there are additional pressures on the Northern Ireland economy because of the Northern Ireland protocol and its impact on industry. There has to be an explanation why, relatively speaking, expenditure in Northern Ireland will be lower over this spending period than it is currently.

Let us look at some of the initiatives that have been undertaken under the levelling-up agenda. I welcome the fact that £300,000 will be spent on a digital hub in Cushendall in my constituency. I already know from speaking to those involved in it how that will create jobs—good jobs—in a relatively poor rural area. The extra money for Dundonald Ice Bowl will be welcomed by my hon. Friend the Member for Belfast East (Gavin Robinson), and of course the money that is going into the city region deal will benefit massively some capital projects in my constituency. I welcome all that.

The hospitality industry has taken a hammering. The Chancellor has said that there will be a 50% discount on rates for the industry. I take it that there will be a Barnett consequential of that for Northern Ireland, and I hope that it is replicated by the Finance Minister in Northern Ireland.

There is one question that I would like a response to, and it is about the changes in excise duty on alcohol, which will be important for the likes of Diageo in my constituency and the hospitality industry. Since Northern Ireland is part of the EU excise regime due to the Northern Ireland protocol, will those changes apply to taxation on alcohol in Northern Ireland? That is a technical question that I do not know the answer to; it would be interesting if the Chancellor came back to us on that.

The Chancellor has been a steady hand on the tiller in the storms of the past. There are still economic storms for him to take the country through. We wish him all the best with that, but we will also be scrutinising the route that he takes as he seeks to guide the nation economically.

Health and Social Care Levy

Sammy Wilson Excerpts

1st reading
Wednesday 8th September 2021 Commons Chamber

[Jake Berry]

I thank my hon. Friend for making that point, but I do not agree with her. I do not think that we have to consign ourselves to one tax to deal with this issue. It is perfectly possible to put up income tax, which is a much fairer way of taxing people across the income scale, and, of course, picks up wealthy pensioners with very large pensions, picks up dividend income, and picks up rental income, which was mentioned from the Opposition Front Bench. It picks up all of our income, while at the same time allowing us to look at different ways to tax business. I have said before that I think we should have an online sales tax—an Amazon tax, as it is called—which the Treasury has previously said could release about £2 billion. That is not enough, but we could increase employers’ NI only, and we could increase corporation tax. This problem needs to be tackled with a cocktail of funding, not just one tax. But if we are to use just one tax, I do not believe that NI is the correct one.

[Sammy Wilson (East Antrim) (DUP)]

Will the right hon. Gentleman give way?

[Jake Berry]

No, I will not. I have already given way twice.

I congratulate the Government on trying to look at some of the concerns that many colleagues in northern constituencies have about low income, high unemployment and low property values, and I congratulate them on raising the floor to £100,000. I think that that goes some way towards dealing with the issues that concern many of us, although, certainly from my point of view, it does not solve them.

What also concerns me greatly is that this tax is not actually a health and social care tax; it is a Trojan horse for an NHS tax. The Government themselves say that in the first few years of this tax, nigh on 100% of it will go towards supporting the NHS. That is quite right, in that the NHS does need more money, but if it is an NHS tax, which will be hypothecated and listed on pay slips, we should call it that, rather than calling it a health and social care tax.

When the time comes to move the money from the NHS to health and social care, what Government of any political hue are going to cut £12 billion from the NHS budget? If we create an NHS tax, we have an NHS tax forever. It will never go down; it can only go up. No party is ever going to stand at an election saying, “I’ve got a good idea. Vote for me—I will cut the NHS tax.” I think there is a huge danger for us in creating such a hypothecated tax and listing it on people’s pay slips. It is fundamentally un-Conservative, and in the long term it will massively damage the prospects of our party, because we will never outbid the Labour party in the arms race of an NHS tax.

As a Conservative, I believe that the way to fund public services better is to grow the economy, to make the cake bigger. This change makes the cake smaller, because it is a jobs tax—and not even that: those who live in a low-wage, low-property-price, high-unemployment economy will get a smaller slice of it at the end of the day. They will have both a smaller cake and a smaller slice.

I hope that the Government will take the opportunity to think again. I welcome the new money for the NHS, but throwing other people’s money down a bottomless pit does not become a good idea if we put the NHS logo next to it. If we are going to fund the NHS, if we are going to give it more money, before the Government ask the House and us as Members of Parliament to approve that, they should show us the plan. We cannot measure the NHS by what goes into it; we have to measure it by what comes out at the other end.

For those reasons, with a heavy heart, I will not be supporting the Government this evening.

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[Dame Angela Eagle]

We had the Wanless report, rising real wages and a buoyant economy, and we did a lot of work with civil society and communities before we introduced the rise. We did not just pull it out of a hat like a rabbit. It led to a 6% increase per year in funding for the NHS, not the 3.5% that this measure will lead to.

[Sammy Wilson]

The Member has outlined the effect on the vulnerable and on employment. Would she accept that this is going to affect young people hard as well? People who cannot afford to purchase a house are going to be taxed to ensure that people who have an asset are protected.

[Dame Angela Eagle]

The right hon. Gentleman makes an important point, especially given the effect on those young people who are having to repay their student loans, which takes their effective marginal tax rate close to 50%. We have to look at the fairness of that.

This is not a plan to reform social care. A mere 15% of the extra £36 billion raised in the next three years is earmarked for social care and the mechanisms by which that will be dispensed are unclear, but vital to any prospect of an improved outcome. Indeed, they are so unclear that the Minister could not give us any insight into them during his opening remarks. This new money will not be available until 2023 and it will therefore not help a single family struggling now with the catastrophic cost of paying for their loved ones to access social care. It is far from certain that the NHS will not simply swallow up all the money allocated from the tax increase to try to tackle the backlogs in the NHS caused by Government cuts and exacerbated by the effects of the covid pandemic.

This new money will not make up for the huge cuts that this Government have been responsible for making to the social care system in the past 11 years. Age Concern estimates that 1.5 million people in need of care have been denied it as a result of the 7.5% per head cut in funding that this Government have delivered since they were first elected in 2010. The burden has fallen on family members and unpaid carers, many of whom have had to put their lives on hold to deliver care to loved ones with little or no support. The huge cuts to local authorities over the same period have stretched the care system beyond breaking point, yet the Prime Minister had nothing to say about any of that yesterday.

Oral Answers to Questions

Sammy Wilson Excerpts

Tuesday 7th September 2021 Commons Chamber

[Jesse Norman]

I thank my hon. Friend for his question. I have mentioned the extra care and support that HMRC has put in place. I have mentioned the extremely careful approach that it has taken with people who may be facing the loan charge. As he will be aware, it has not initiated insolvency proceedings against any taxpayer for a loan charge debt and that in itself is emblematic of the care and attention that it is taking with this subject.

[Sammy Wilson (East Antrim) (DUP)]

It is not enough for the Minister to say that people had to take responsibility for their own tax affairs when the information that they were given by HMRC was that there was nothing wrong with these schemes initially, when HMRC passed and signed off tax years for people, and when the head of HMRC has admitted that, in recent months, he had repeatedly tried—this was the outcome of a freedom of information request—to obtain legal analysis to understand the strength of a claim with “very little success”. There is not even a legal standing for this. How then can the Minister say that it is right to pursue people for things that they were led into, and, indeed, for payments that HMRC was regularising by allowing contractors to use as a means of paying their employees?

[Jesse Norman]

The right hon. Gentleman raises a whole bunch of questions. Let me address them. There were some contractors working through agencies for HMRC. Where it was discovered that they had used disguised remuneration, those relationships were ended and strong measures have been put in place to prevent recurrence. That is an unfortunate feature of the extended way in which these contract arrangements sometimes work. I do not think that there is any evidence that HMRC has signed off or positively approved the use of any disguised remuneration scheme. If the right hon. Gentleman has an example, he is welcome to send it to me. The right hon. Gentleman will be aware that the chief executive of HMRC has specifically written to the loan charge and taxpayer fairness all-party parliamentary group to make it perfectly clear that it has taken those remarks out of context and that what he was doing—as every chief executive of a public agency should do—was putting his own officials under some pressure to provide the justification needed, and rightly so.

Northern Ireland Protocol

Sammy Wilson Excerpts

Thursday 15th July 2021 Commons Chamber

[Sir Bernard Jenkin (Harwich and North Essex) (Con)]

I beg to move,

That this House supports the primary aims of the Northern Ireland Protocol of the EU Withdrawal Agreement, which are to uphold the Belfast (Good Friday) Agreement in all its dimensions and to respect the integrity of the EU and UK internal markets; recognises that new infrastructure and controls at the border between Northern Ireland and the Irish Republic must be avoided to maintain the peace in Northern Ireland and to encourage stability and trade; notes that the volume of trade between Great Britain and Northern Ireland far exceeds the trade between Northern Ireland and the Republic of Ireland; further notes that significant provisions of the Protocol remain subject to grace periods and have not yet been applied to trade from Great Britain to Northern Ireland and that there is no evidence that this has presented any significant risk to the EU internal market; regards flexibility in the application of the Protocol as being in the mutual interests of the EU and UK, given the unique constitutional and political circumstances of Northern Ireland; regrets EU threats of legal action; notes the EU and UK have made a mutual commitment to adopt measures with a view to avoiding controls at the ports and airports of Northern Ireland to the extent possible; is conscious of the need to avoid separating the Unionist community from the rest of the UK, consistent with the Belfast (Good Friday) Agreement; and also recognises that Article 13(8) of the Protocol provides for potentially superior arrangements to those currently in place.

Thank you for that statement, Madam Deputy Speaker, and I would like to record my thanks to the Backbench Business Committee for granting time for this debate. I am also very grateful that so many right hon. and hon. Members have put in to take part in it. I believe that this is a debate of significance, and at a time of significance.

The purpose of the debate is for the House to agree on how the Government should approach the issues that have arisen in Northern Ireland since the UK left the European Union. I remind the House that the Northern Ireland protocol was part of the 2019 EU withdrawal agreement, not part of the trade and co-operation agreement, which was ratified only this year. It is the protocol that is creating strains on power sharing under the Good Friday agreement, pressures on political stability and an upsurge in tension between the two communities in Northern Ireland.

Let me just say what this debate is not about. There is absolutely no value in point scoring about past divisions and disputes that we have had in this House. That would just further undermine public confidence. This debate is about looking forward, about what we must now agree to do to set things right. The proposals I will come to are in the interests of the EU as much as they are in the interests of the UK.

The motion sets out

“the primary aims of the Northern Ireland Protocol of the EU Withdrawal Agreement, which are to uphold the Belfast (Good Friday) Agreement in all its dimensions and to respect the integrity of the EU and UK internal markets”

and states that

“new infrastructure and controls at the border between Northern Ireland and the Irish Republic must be avoided to maintain the peace in Northern Ireland and to encourage stability and trade”.

The motion then points out an indisputable fact—that

“the volume of trade between Great Britain and Northern Ireland far exceeds the trade between Northern Ireland and the Republic of Ireland”.

Why is this significant? In 2019, the Northern Ireland Executive found that over 90% of medicines, fruit and vegetables, books, clothes, household goods and baby equipment sold in Northern Ireland was arriving from other parts of the United Kingdom. In 2018, Northern Ireland sales to Great Britain were two and a half times greater than those to the Republic.

The protocol is clear: it is not intended to create what it refers to as “diversion of trade”. On the contrary, article 16 states:

“If the application of this Protocol leads to serious economic, societal or environmental difficulties that are liable to persist, or to diversion of trade, the Union or the United Kingdom may unilaterally take appropriate safeguard measures.”

[Sammy Wilson (East Antrim) (DUP)]

The hon. Gentleman makes a very important point. Is it not significant that since the protocol came into operation, there has been a dramatic increase in imports from the Irish Republic into Northern Ireland and a fall in trade between GB and Northern Ireland? Indeed, Irish Ministers have boasted that one reason for having a delay in further border checks is to encourage further diversion of trade towards the Irish Republic.

--- Later in debate ---

[Sir Iain Duncan Smith (Chingford and Woodford Green) (Con)]

It is a pleasure to speak in this debate. I congratulate my hon. Friend the Member for Harwich and North Essex (Sir Bernard Jenkin) on securing it; it is long overdue, but through his persistence we have achieved it.

It is also a pleasure to follow the hon. Member for Upper Bann (Carla Lockhart). Before I get on with my own thoughts, I want to pick up on something she said. She is quite right that if anyone reads the Belfast/Good Friday agreement, they will see, first and foremost, that the border is not specifically mentioned in it. We have had all the wonderful great and good wandering around demanding that the agreement stand, when in fact the border is never once mentioned. Secondly, there has always been a border—my right hon. Friend the Member for Forest of Dean (Mr Harper) has made the point that there is a border for VAT, excise and currency. The whole point that the hon. Member for Upper Bann makes is right, and it stands, but that is the bit that has gone missing.

The more something is said and the bigger the lie, the more people believe it—but it has been a lie from start to finish, which has meant that there has been no rational discussion of exactly what will happen under the protocol and thereafter. The protocol itself has failed to support the Belfast/Good Friday agreement, is creating division and does not really keep an open border between Northern Ireland and the Republic of Ireland.

Lord Trimble has been quoted several times. I have to say that it is only in this country that a Nobel peace prize winner is not really given great distinction. Interestingly, when we took Lord Trimble to Brussels, he was treated with the utmost respect; when he spoke, Mr Barnier and everybody else fell silent and agreed with him. He said that the arrangements that needed to be in place were those that I will come to later—essentially, mutual enforcement. As he says, not only does the protocol

“shatter Northern Ireland’s constitutional relationship with the UK,”

as has been referred to, but it subverts the very agreement that they keep on saying that they want to preserve: the Belfast/Good Friday agreement. It is breaking that agreement and directly setting one part of the community against the other because of the way in which it is implemented and because of its very nature.

The protocol simply cannot stand. I disagree with the Chair of the Northern Ireland Affairs Committee, my hon. Friend the Member for North Dorset (Simon Hoare); I do not think that this is just about a group of people picking away at it and trying to object to it on ideological grounds. The reality is that, practically, it does not work—and if it does not work, it has to be radically changed or replaced. I am for replacing it.

The other bit that has come out of this is that the EU has become very partisan. A claim was made that somehow the British Government have to be completely independent of this, but they are the Government of Northern Ireland as well. The reality is that the European Union has become very partial. It has sided with one side of the argument and has driven this as a weapon aimed at the Brexit negotiations from start to finish.

I went with a team of people to see Monsieur Barnier, and, as was said earlier, we presented mutual enforcement to him at the table. That was before the British Government got in a mess over their arrangements in 2018 and came up with that poor resolution. The EU team listened, and we corresponded with them for at least another two to three weeks about where this could go. It was interesting that they were open-minded about it until the UK Government decided that they were going to go for equivalence and all the rest of it, and it did not work. They were very keen on the proposal and knew it would work. This is the point I make: there is another solution that will work.

It is worth reminding those who keep saying, “Well, you all voted for this,” that we voted for it because we knew it was not permanent. That was made clear in every single article: article 184 of the withdrawal agreement, article 13 of the protocol and, importantly, paragraph 35 of the political declaration, which envisages an agreement superseding the protocol with alternative arrangements. The idea that this is somehow set in stone and we only have to work to make it better is an absurdity in itself.

It is something to watch the Irish Foreign Minister almost boasting that diversion of trade is taking place which will only settle the natural order of things through the supply chains—these new realities. This is a breach of article 16, and it is very clear that he has admitted that. That is exactly what is going on, and it should have never been agreed to in the first place.

I want to turn my attention now to what the alternative is. We now have a situation where there are two and a half times more checks at the border in Northern Ireland than there are in Rotterdam. Northern Ireland represents 0.5% of the total population of the EU, but it now has 20% of the EU’s customs checks and more checks than France in total. This is quite ludicrous and an utter disaster. The solution, therefore, is to move to mutual enforcement, where both sides take responsibility for their own requirement to uphold the other side’s regulations. We do not need a border, but if prosecutions need to take place, the UK will prosecute those who transgress, and the EU will do the same.

[Sammy Wilson]

Does the right hon. Gentleman accept that the most important part of mutual enforcement is that there will no longer be any need for EU law to automatically apply to Northern Ireland, and therefore the constitutional integrity of the United Kingdom would not be compromised?

[Sir Iain Duncan Smith]

I am going to refer to the right hon. Gentleman as my right hon. Friend for this because he is absolutely right. That is the key point about mutual enforcement. We have been working with a group of the brightest and smartest lawyers—experts in European law, experts in trade law and experts financial regulations—and it is quite fascinating. They believe that if we make it an offence to export items in breach of EU law across the north-south border, that becomes our responsibility and the EU’s responsibility. That is exactly the point that my right hon. Friend makes. The EU does exactly the same for us, and it does not breach our sovereignty since the exporters are opting to comply with the importers’ laws anyway from the moment their goods cross the invisible border.

I simply say in conclusion to my right hon. Friend the Minister that the Government now have to make the point that this is the way forward. They have to present this to the EU, and the EU has to recognise the damage it is doing in Northern Ireland and here in the United Kingdom. I urge her to press forward with these arrangements and agree that this is the solution to an outstanding problem.

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[Sammy Wilson (East Antrim) (DUP)]

I, too, congratulate the hon. Member for Harwich and North Essex (Sir Bernard Jenkin) on securing this debate, and thank him for the continued support that he has given to us in our opposition to the Northern Ireland protocol and the effects that it has had on Northern Ireland.

The protocol, if it continues to exist, is a threat to Brexit. Indeed, that was borne out by the survey carried out last weekend by Savanta, in which 57% of those who were surveyed indicated that they believed that the Northern Ireland protocol was designed to frustrate Brexit. Indeed, 40% of remainers made the same point. It represents a bridgehead that the EU still has on the United Kingdom, a salient from which it will continue to attack our sovereignty and try to claw back the influence that it lost when this country decided to leave the EU.

There are three reasons why the protocol must go. The first is that it will be an ongoing means by which Brexit will be frustrated. We have already seen how the EU has used the protocol. In fact, it is taking the UK Government to court because the UK Government will not accept the EU’s interpretation of the protocol and how it should be implemented to impose the kind of restrictions that the EU demands. The British Government argue that the protocol was meant to deal with only those goods that could be at risk of going into the EU through the Irish Republic; any other goods were not at risk. The EU takes the view that we must prove that goods are not at risk before we can avoid the checks. In other words, 97% of goods that are currently being checked do not need to be checked. They do not go any further than Northern Ireland. Yet the EU is insisting that there is a risk that they might go into the Irish Republic. That is why we have such a high level of checks. There will be future laws that will create more need for restrictions. For example, the EU is bringing in changes to the law regarding the testing of lawnmowers. Lawnmowers could be the next goods that are refused entry into Northern Ireland because they do not comply with EU law, which now applies to Northern Ireland. That is the first reason. If we do not get rid of the protocol, there is always that opportunity for friction in relations between the UK and the EU.

Secondly, I do not care what people have said about there being no constitutional impact. Of course, there is a constitutional impact. The Act of Union has been changed. The Government’s own lawyers argued in the courts that the Act of Union was changed—that when this House voted for the protocol it voted impliedly to change one of the fundamental pillars of the Act of Union, which is that there should be unimpeded and equal trade between the different countries of this nation.

The protocol’s other constitutional impact has been to take powers from the Northern Ireland Assembly. I find it amazing that those who have representatives in the Northern Ireland Assembly, such as the hon. Member for North Down (Stephen Farry), can argue that there is nothing to worry about. His party has a Minister in the Northern Ireland Assembly and his party has Members of the Northern Ireland Assembly, yet 60% of the laws that will govern manufacturing in Northern Ireland will never be discussed, cannot be discussed, and, indeed, have to be implemented by the Northern Ireland Assembly without its having any say. The democratic responsibilities of the Northern Ireland Assembly have been undermined, and, of course, there has been a change in the Act of Union and in the constitutional position, and that contravenes the Good Friday agreement, which says that any change in the constitutional position of Northern Ireland has to have the consent of the people of Northern Ireland.

The last reason, which people have outlined very well, is the economic impact that all this is having on Northern Ireland. We already see the disruption to trade. Indeed, just this month the Ulster Bank purchasing managers index survey indicated that inflation in Northern Ireland is significantly higher than in the rest of the United Kingdom and about 50% more than the lowest region in the rest of the United Kingdom. Although that does not lie completely at the door of the protocol, it indicates that costs are rising higher in Northern Ireland because of the costs of the protocol—the delay in supply chains, the additional costs in administration and so on.

The protocol has a real impact on the future ability of Northern Ireland to compete. Of course, as laws in Northern Ireland change because EU laws are imposed, that will make it much more difficult for us to compete in our biggest market in GB. There will be those who say that we will get the best of both worlds, with a foot in the EU camp and a foot in the GB camp. That is not true, of course.

[Ian Paisley]

On the issue of having a foot in both camps, at today’s Northern Ireland Affairs Committee the Ulster Farmers’ Union made the point that Northern Ireland agriculture is now in a no man’s land and does not have the best of both worlds. How does my hon. Friend respond to the fact that that multimillion pound industry, our most successful, is now placed in that terrible situation?

[Sammy Wilson]

I have heard time and again the argument that we have the best of both worlds, but I have not heard any examples of where being in the EU single market and being cut off from the GB market has had any beneficial effect. Indeed, any examples I have heard of improved trade have been a result of the trade agreement that the whole of the United Kingdom has with the EU. That is all that has ensured that those markets are open to companies in Northern Ireland.

There are alternatives. We have heard them mentioned today, including the mutual enforcement of each other’s rules. It is not that it is technically impossible—it is technically possible. It is not that it is economically impossible—it is possible. It is not that it is constitutionally impossible—it is simply a question of whether there is political will. Lord Frost must push this with the EU. There are alternatives that can satisfy both sides and ensure that the single market of the UK is maintained while the single market of the EU is protected.

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[Richard Thomson (Gordon) (SNP)]

It is a pleasure indeed to speak in this debate. I begin, as other speakers have done, by congratulating the hon. Member for Harwich and North Essex (Sir Bernard Jenkin) on securing it, although I am bound to point out that it is no surprise that we are here debating the subject—in many ways it was an inevitability. The hon. Member said that he wants us to look forward rather than back; I can certainly understand that sentiment, but I hope he will forgive me if I take an inevitable look backwards as well, to get the waypoints and to get some bearing on how we go forward.

We are here because of the way Brexit was won in the referendum and then negotiated—if that is the word—in the years that followed. Perhaps through necessity, it had to be all things to all people; that was the only way that it could secure the narrow margin it secured. Since then, whether they are in favour or, like myself, very strongly against it, people have had to watch as one by one the promises made to secure it turned to dust—promises to the fishing industry, promises to the farming sector, promises to maintain freedom of movement and even a promise that we would maintain our membership of the single market once we were out of the European Union, as I believe the Chancellor of the Duchy of Lancaster once claimed.

We are here today to discuss the impact of Brexit in Northern Ireland. All of it was predicted and predictable, foreseen and foreseeable. What makes it so disappointing that we have reached this juncture is that those in the UK Government who have taken us to this point have twisted, obfuscated and misrepresented at every stage to persuade the population to believe that the consequences that we now face would simply not arise.



Throughout that period a profound British exceptionalism has been on display, with the UK Government and their supporters noisily asserting their own sovereignty and expressing a wounded surprise that any other EU state that also still had sovereignty should not only have that sovereignty but have a willingness to use it to defend their own interests, including the integrity of the single market. Part of the problem was that the UK Government spent considerably more time negotiating among themselves than they did with European partners, and that allowed a fundamental set of questions to go unanswered for political convenience for too long. Those questions were: what kind of Brexit exactly, specifically, is it that we want? How are we going to get it? What implications will arise from that once we get it?

It was quite possible to leave the European Union and remain in the single market and the customs union. We would have become a coastal state with control over our fisheries, and we could have withdrawn from the political project of ever closer union that seems to cause such existential angst on the Conservative Benches. We could have left in a way that would have not created the present issues in Northern Ireland. Any form of Brexit that went beyond that made the risk of creating trade and regulatory borders a very live one indeed, with any such border having to fall either in the Irish sea or across the island of Ireland itself. After the unceremonious defenestration of the backstop and its political architect, the cry of the current Prime Minister to “get Brexit done” and the ensuing undignified stagger towards an agreement have left us with the protocol in its current form.

Part of the problem we have with that results from the philosophy that the Prime Minister and his advisers at the time had, which was to move fast and break things. There can be no doubt that the protocol was agreed simply to get the Government out of a big political hole at the time, and to allow them to say in Great Britain that they had got Brexit done and worry about the consequences for Northern Ireland after the event. This demonstrated cynicism and short-sightedness in equal measure. Nevertheless, it is an agreement that resulted from the negotiating objectives that Her Majesty’s Government held at the time. It was entered into freely, and if it is not to be implemented fully in its current form, it has to be renegotiated in good faith and in the proper way. The hon. Member for Harwich and North Essex observed in his contribution that the world was watching. I agree: the world was watching during the G7 conference and the world will still be watching to see how the protocol is implemented, whether in its present form or in an amended and agreed form.

The hon. Member for North Down (Stephen Farry) pointed out that Northern Ireland did not vote for Brexit, and it would be remiss of me not to point out that Scotland also did not vote for Brexit. Allow me to be the one to point out—I hope other Members will appreciate this—the great irony in the fact that if Scotland were to become independent and join the European Union, it would once again enjoy free unfettered trade with Northern Ireland. Our businesses would enjoy that in a way that they simply no longer have under the terms of the protocol.

[Sammy Wilson]

Scotland might have free unfettered trade with Northern Ireland, but does the hon. Gentleman not think it would be a far bigger problem that it would not have free unfettered trade with its biggest market, England?

[Richard Thomson]

I think there is a shared interest in making sure that there is as close to seamless trade as can possibly exist across these islands, within these islands and with the European Union. In that sense, the right hon. Gentleman and I are on the same page.

An agreement on animal welfare, sanitary and phytosanitary standards would eliminate the need for very many of the checks and reopen that trade. It is that sort of pragmatic renegotiation of the protocol, in the light of experience and of everything that has come from the nature of Brexit, that would be desirable in order to remove not just the barriers but the symbolism that the frictions that are being felt so keenly in Northern Ireland represent.

--- Later in debate ---

[Sammy Wilson]

When she talks about food standards, does the hon. Lady find it odd that the EU is now proposing to reintroduce the offal that gave us mad cow disease for feed for animals in the EU, and for export to this country? The EU is reducing food standards while the UK Government have animal welfare proposals such as banning the export of live animals. We are the ones upholding food and animal welfare standards, not the EU.

[Louise Haigh]

For us to have higher food and animal welfare standards than the European Union would not be a barrier to a veterinary agreement. The EU has a long precedent for making such arrangements with other countries. Under the New Zealand veterinary agreement, just 1% to 2% of its goods are subject to physical checks on arrival, as opposed to the current rate of around 30% for UK agrifood products entering the EU. The United States has made clear that such issues are not a fundamental barrier to a free trade agreement.

I know that the governance of such an agreement is contentious, but it would not be necessary for the European Court of Justice to get involved. A regulatory mechanism could be agreed that would not limit the UK’s ability to make future free trade agreements. A modern mechanism, designed for GB-EU and NI-GB agrifood trade flows, could be designed to meet the circumstances of Northern Ireland. Such an agreement would also unlock a permanent trusted trader scheme, which would resolve the significant issue of export health certificate requirements, which will come into full force in October when the grace periods expire. I urge the Minister to set out exactly the strategy to find such solutions in the long term. Inflammatory op-eds and contradictory remarks from Lord Frost are not getting us any closer to agreement with the EU, and it is imperative that the mechanisms of the protocol are used to find such an agreement. We cannot keep kicking the can down the road by extending grace periods. This needs to be future-proofed, and Northern Ireland needs to be reassured that as we negotiate more free trade agreements we will not diverge still further.

I also press the Minister again on how the Government are intending to bring Northern Ireland’s political representatives into the discussions and negotiations with the EU. A huge part of the problem is that people feel that this has been imposed on them without proper engagement or consent. That is totally unsustainable. The right hon. Member for Lagan Valley (Sir Jeffrey M. Donaldson) made suggestions around the role of the Northern Ireland Assembly, and those should be considered carefully.

Fundamentally, peace in Northern Ireland is still fragile. These issues require careful, responsible leadership and for the Government to be honest with the people of Northern Ireland about the choices they are making and what they are prioritising. We can protect Northern Ireland, but it requires a drastic change in strategy from this Government.

Finance Bill

Sammy Wilson Excerpts

Report stage & 3rd reading
Monday 24th May 2021 Commons Chamber

[Mr Davis]

The right hon. Gentleman is right. The first phase of IR35 was about contractors for Government, so the whole wild west that I have described was actually created for public services.

To come back to my point about illegitimate contractors forcing the legitimate ones out of business, it is quite understandable that ordinary contractors will be attracted to a scheme that seems to offer them the best terms, yet they will be unaware that in doing so they risk unwittingly entering unintentional tax avoidance schemes. That is one of the problems that troubles me most.

These contractors, remember, are not fat cats, big bankers or city slickers. They are hard-working, decent people such as locum nurses and supply teachers—contractors whose work is vital. To take up the right hon. Gentleman’s point, the FT reported that NHS locum workers returning during the height of the pandemic were targeted by firms mis-selling these schemes. Ordinary and comparatively low-paid workers do not have the advantage of expensive tax advisers. They cannot be expected to navigate the minefield of extremely complex tax law if we allow these predators to play unfettered within it.

[Sammy Wilson (East Antrim) (DUP)]

Does not the situation get even worse once these tax avoidance schemes have been identified and shown to be illegal? It is very often the people who were conned into operating with umbrella companies who are penalised, while the umbrella companies walk away with no investigation and there is no means of holding them to account.

[Mr Davis]

That is entirely right. Indeed, one of the flaws that HMRC exhibits is that although it very often has real-time information on the issues, it acts only much later. That doubles or quadruples the problem for the ordinary person who is effectively a victim of these schemes, who suddenly finds years later that they have vast sums to meet—and, indeed, the shame of being held up as a tax avoider, if not evader.

The Government should take action to clean up this wild west, for example by providing guidance and templates for the preferred model of working. This is not so difficult. Why cannot we lay out a template for ordinary contractors and legitimate umbrella companies that says, “This is how you should do it, and this is what we expect”? Failing that, my amendments give the Government and Parliament three clear and simple options.

Ideally, the Government will take note and enact new clause 31. It would review—it does not require law to do this—the whole operation of umbrella companies and off-payroll working. For me, that is the de minimis position. My preferred option is that the Government should introduce regulation into this problematic sector to clear up some of the most egregious aspects, including mis-selling and malpractice. They should require—this deals with the Companies Act point to some extent, but it is the simplest way of doing it—umbrella companies to meet five strict requirements: they should pay all holiday pay due; maintain all employment rights; ban kickbacks to third parties; end the skimming off of excess profits through sleight-of-hand tactics; and, finally, ensure that the worker himself has no material interest in the umbrella company. That would not deal with the propriety issues of the Companies Act, but it would deal with the main, most socially damaging aspects of the wild west we have now.

--- Later in debate ---

[Jesse Norman]

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

I thank right hon. and hon. Members who have contributed to the robust but, I would say, good-natured debate throughout this Finance Bill’s passage over the past two months. It has been a speedy but thoroughly effective process. Before I get into the bulk of my speech, I know that the right hon. Member for East Antrim (Sammy Wilson) wants to put a question to me, so let me recognise him.

[Sammy Wilson]

I thank the Minister for giving way. I tried to catch his eye earlier on; I do not think that he is deliberately avoiding me, but I did not get the chance to talk to him. New schedule 1 refers to VAT on distance selling. It covers 55 pages and was introduced tonight without much chance of consideration. It will affect businesses with a threshold of sales of £8,818, which will require them to register and to do special accounting. What assessment has been made of the likely impact of that on small businesses in Northern Ireland that sell goods into the EU?

[Jesse Norman]

I rather regret it, having invited the intervention. No, of course, to engage with this, I would not have recognised the right hon. Gentleman if I had not wanted to take the intervention and I certainly was not avoiding him earlier in the debate. He is right to point out that these provisions have been put into the Bill for the first time. I am pleased to say that they have been given proper consideration in the detail that has been put up, which he alluded to. There is a new measure relating to the distance selling threshold, which will affect a small number of businesses in Northern Ireland. By and large, this put into law, in relation to Northern Ireland, a set of measures that has already been adopted elsewhere in the United Kingdom, in recognition of commitments that we made to the EU as part of the process of striking our new trade arrangements. That is that, but if he wishes to have further conversation on that, I would of course be delighted to do so.

This Finance Bill comes at a crucial juncture for our economy and our public finances as the UK recovers from what is—we must never forget this—the greatest economic and social crisis since world war two and the greatest economic recession in 300 years. It delivers on the measures announced in the Chancellor’s Budget to protect jobs and livelihoods and to provide additional support to help people and businesses through the pandemic; to begin the process of fixing the public finances; and to lay the foundations of a resilient future economy. This Bill delivers on all those commitments, and I commend it to the House.

Finance (No. 2) Bill

Sammy Wilson Excerpts

Committee stage & Committee of the Whole House (Day 1)
Monday 19th April 2021 Commons Chamber

[James Murray (Ealing North) (Lab/Co-op)]

I rise to speak to the provisions standing in my name and those of the Leader of the Opposition and my right hon. and hon. Friends. On behalf of the Opposition, I will begin our detailed scrutiny of this Bill today by considering the impact it will have most immediately and most widely on people across the UK through its cuts to the money that families, in all their many forms, have in their pockets.

The opening clauses, 1 to 5, focus on income tax, with clause 5 freezing the personal allowance from 2022-23 through to 2025-26. That is no small change; the effect of the clause will be to make half of all people in the UK pay more tax from next year, and that is not the only measure the Government are taking that raids their pockets. We know that this Bill will make families pay more through the income tax changes next year, but it also does nothing to stop the sharp council tax rise that the Government are forcing councils to implement right now, it supports the Chancellor’s plan to cut £20 a week from social security this autumn for some of those who need help most, and of course it comes as the Government are choosing, in this year of all years, to take money from the pockets of NHS workers.

[Sammy Wilson (East Antrim) (DUP)]

Does the shadow Minister accept that the total take in income tax from individuals across the United Kingdom as a result of that one measure in one year will be £10 billion, and the total take over the next five years will increase by 25%? On the basis of the tax paid now, 25% more income tax will be paid collectively by individuals as a result of simply freezing thresholds.

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[Andrew Jones (Harrogate and Knaresborough) (Con)]

I am aware that time is short, so I will keep my remarks brief.

All of us will have been dealing with constituents facing real financial challenges over the past year. The past months have been unprecedented in their impact on family finances. People have lost jobs, been on furlough, and faced great uncertainty. It has been genuinely hard. Yet some sectors have done very well and seen growth, so the economic impact of the pandemic has fallen very unevenly. The economic consequences have also landed very quickly, but the response from the Treasury was equally quick. We are now facing the next stages of the crisis. Over the months ahead, we will be getting the economy moving again as quickly as possible, safely, so that we can get people back into work, and considering how the Government will pay for all the extra costs they have incurred.

As my right hon. Friend the Financial Secretary to the Treasury said, economists have predicted that the economy will have fully restarted by April next year. I think that that is right, based on my own business experience and on conversations with businesses in my constituency and beyond. It therefore makes sense to start the recovery of the public finances then, and that is what some of the measures in this Bill do. The question for me, though, is how to do this fairly and without choking off the recovery.

Let me focus on one measure: personal allowances. The increases that we have seen in personal allowances over the past decade have been a key ingredient in helping some of the least well-off in our society. The allowance has nearly doubled and is one of the most generous in the world. It has been part of the broader initiative, which has been a hallmark of the past 10 years, about making work pay. It is with some caution that we should consider changes, but I will be backing these changes and urge Members to reject the Opposition amendment on this measure. It is worth remembering that nobody’s take-home pay will be less than it is now, and that this is a measure that builds over time, as will the pace of the recovery. I note that the right hon. Member for Wolverhampton South East (Mr McFadden), who is not in his place, commented that it is a fairer way to raise revenue than some others, and I agree with his analysis.

The crisis support packages have been necessary and welcome, but they come with a huge cost. There is no compassion in letting debts build up for future generations to pay off. There is no stability for Governments in failing to tackle deficits.

[Sammy Wilson]

While I think we all accept that the current level of debt cannot continue, does the hon. Gentleman accept that, first, by taking £10 billion from consumers in the next year as a result of these tax allowance freezes and, secondly, because we do not know what will happen to unemployment once the furlough scheme finishes, there is a risk that the freezes this year will impact on the short-term recovery of the economy? Are they not therefore inappropriate, and ought not the Government to wait to see what happens?

[Andrew Jones]

The right hon. Gentleman makes a good point, as he always does. I have considered that point, and I know that the Government have also considered it, but this is about striking a balance between encouraging the recovery and choking it off. Part of that recovery is ensuring that we have sound public finances. We have had two supposed once-in-a-century events in just over 10 years, and the lesson we should draw is that financial responsibility allows Governments to respond to crises at scale. That is what we have just seen here, and that has helped the finances of families across our nation when they needed it most.

That is also why the economic recovery, with its focus on growth and investment and on households and Government, cannot be put off. The personal allowance measure in the Bill should proceed. We should not listen to the Labour party because, quite frankly, its Members have voted against all the personal allowance increases in Budget measures over the past 10 years. We need to get the focus that we have had on saving lives back on to recovering livelihoods.

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[James Murray]

I rise to speak to the amendments and the new clause in my name, that of the Leader of the Opposition and those of my other right hon. and hon. Friends.

In the preceding debate, we saw how this Finance Bill will hit families, in all their many forms across the country, by making half of all people in the UK pay more tax from next year. As I made clear, the sense of injustice is made all the more acute by the fact that that increase in costs for families comes before any rise in corporation tax and that at the same time, through this Bill, the Government are letting tech giants stop paying tax altogether.

Clauses 6 to 8 make it clear that the proposed changes to corporation tax will come after increases to the income tax personal allowances, while clauses 9 to 14 centre on the so-called super deduction, a £25 billion tax break targeted at big corporations that the Chancellor has said represents

“the biggest two-year business tax cut in modern British history”.

That tax break forms the centre of the Chancellor’s strategy set out at the Budget, and it comes with a huge cost attached to it. We need to be absolutely clear who will benefit from it.

One thing is clear: that tax break is not targeted at small and medium-sized businesses. The truth is that such businesses can already benefit from the annual investment allowance, a 100% tax break on investment up to £1 million, which clause 15 extends to the end of this year. The Financial Secretary was very clear in his written statement of 12 November 2020, which announced the extension, that it:

“Simplifies taxes for the 99% of businesses investing up to £1 million on plant and machinery assets each year.”

Indeed, the Treasury Committee concluded in its report published in February, “Tax after coronavirus”, that the annual investment allowance

“appears well targeted to promote growth in small and medium-sized enterprises.”

The existing allowance is said to be well targeted at the growth of small and medium-sized businesses and, by the Financial Secretary’s own admission, it already benefits 99% of businesses, which will benefit only marginally from the new super deduction. Who does that leave? It is very clear who will be the main beneficiaries of the Chancellor’s new scheme. It will be a tax break for the 1%.

[Sammy Wilson]

Does the shadow Minister not accept, first, that large businesses are an important component of our economy and we need to increase productivity in those businesses as well as in small businesses, and secondly, that many large industries, such as the aviation industry, have been badly hit by the pandemic and would benefit from the kind of tax allowances proposed in the Bill?

[James Murray]

I thank the right hon. Gentleman for his comments, but as I have set out, the annual investment allowance already appears to serve small and medium-sized enterprises well. The super deduction that we are debating now is designed to help companies such as Amazon, which do not need any help with their investment. It is important that we see this in the context of those companies that have done well throughout the outbreak and are already avoiding much of the tax they should be paying. It is no wonder that Tax Watch has nicknamed this the “Amazon Tax Cut”. This giveaway from the Chancellor could wipe out Amazon’s UK tax bill entirely.

Analysis of Amazon’s accounts from 2019 shows that the corporation’s UK operations made pre-tax profits of £102 million. In the same year, it spent £67 million on plant and machinery, £80 million on office equipment, and £15 million on computer equipment. The super deduction would have enabled Amazon to deduct £211 million from the calculation of its taxable profits— more than enough to wipe out its entire tax liability twice over. It is truly astonishing that, faced with all the challenges of this outbreak, the Government see their priority as giving Amazon a tax break.

Here and around the world, people agree with us that investment in jobs and growth is what is needed. A tax break for tech giants that already fail to pay what they should is not the answer. That is why our amendment 79 would explicitly prevent the biggest tech firms from taking advantage of the Chancellor’s tax break, as well as other big firms that do not support workers’ rights and the living wage.

The Government should be improving the lives of Amazon workers, who have helped so many people with deliveries throughout the pandemic, not giving a huge tax break to their bosses. Amendment 79 would prevent Amazon and other tech giants from accessing the super deduction by preventing firms from doing so if they are liable for the digital services tax. When the Government set out their plans for the digital services tax, they made it clear that it would apply to businesses that provide social media platforms, search engines, or online marketplaces to UK users. The detail of that tax means that businesses will be liable when the group’s worldwide revenues from these digital activities are more than £500 million, and when more than £25 million of these revenues are derived from UK users.

We are clear that those big corporations that should be caught by the digital services tax are among those that absolutely should not be benefiting from the Government proclaim as the biggest business tax cut in modern British history. We know that Amazon has brazenly made it clear that it will dodge the bill from the digital services tax by passing the cost on to its marketplace sellers. The fact that it is not even paying the tax that was designed for it to pay makes the prospect of a further massive tax cut from the Chancellor even more galling.

Furthermore, as well as excluding big corporations on the basis of their being liable for the digital services tax, we are seeking to use our amendment to stop those big businesses that do not support workers’ rights and the living wage from accessing the tax break. Both conditions would also catch Amazon and would also require other big businesses—those that are not liable for the digital services tax—to respect the right to organise and collective bargaining, and to be certified, or be in the process of being certified, by the Living Wage Foundation as a living wage employer.

When firms stand to benefit from what the Chancellor has called the biggest business tax cut in modern British history, the very least the Government should require of them is that they pay their workers the living wage and respect workers’ basic rights to organise. Alongside this, we propose in amendment 80 that the Government require big firms benefiting from the Chancellor’s tax break to make a climate-related financial disclosure, in line with the recommendations of the Task Force on Climate-related Financial Disclosures.

Beyond the specific issue of how the biggest corporations are set to benefit from this tax break the most, we have also tabled new clause 24 to reflect the widely-held concerns about the impact of the super deduction on levels of tax avoidance and evasion. As the chief executive of the Resolution Foundation has made clear, investment incentives have been abused for tax avoidance purposes in the past, yet the Government have failed to say or do anything to address widespread concerns that the super deduction is open to fraud and abuse.

As I mentioned on Second Reading, economists from the Institute for Fiscal Studies have said that the super deduction will

“create a risk of tax avoidance and even potentially fraud as companies essentially try to find ways to dress things up as plant and machinery investment”.

Minsters were unable to reassure us on this point when I raised it last week, so we are asking for the levels of tax avoidance and evasion arising from the super deduction to be reviewed and put transparently before this House.

It tells us everything about the Conservatives’ priorities that they are taking money from people’s pockets at the very same time as letting tech giants off paying tax altogether. This Government are proposing to wipe out some of the biggest corporations’ tax bills through a £25 billion boon, aimed at the biggest corporations, that the Chancellor has called

“the biggest two-year business tax cut in modern British history.”

In the face of a struggling economy, a tax break for tech giants that already do not pay enough tax should be the last thing on the Government’s mind. Instead, it is top of their list. They are wrong.

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[Felicity Buchan (Kensington) (Con)]

I speak in support of clauses 6 to 14 and against the amendments. This Finance Bill needs to be a delicate balancing act. It needs to give immediate support to businesses and individuals while setting a path to rebalance our books in the medium to long term. In my view, these provisions on corporate taxation and the super deduction get that balance exactly right. The Bill defers the increase in corporation tax for two years and applies to only one in 10 businesses at 25%, but at the same time it turbocharges the incentives to invest in business now.

This country has had a perennial problem with productivity. We need to incentivise and encourage business investment. That business investment will help productivity, growth and innovation, and that is exactly what we need. The OBR has said that it anticipates that business investment will go up by a massive 10% as a result of this measure and, as my right hon. Friend the Minister mentioned in his introductory remarks, we will go from No. 30 in the OECD rankings for attractiveness for business investment to No. 1. That is what we need over the course of the next two years as we turbocharge this economic recovery. We need the economic recovery to be strong.

[Sammy Wilson]

Does the hon. Lady accept that many of our large companies will lead the way in our export growth as we seek to capitalise on the new markets that will open to us as a result of Brexit, and that to capitalise on that we need new, competitive products and to be productive and competitive on the world stage, which is why we need to encourage investment in firms both large and small?

[Felicity Buchan]

The right hon. Gentleman makes a very good point. We need to encourage investment across the board in large, medium-sized and small firms. Productivity has lagged and we need to correct that, so I absolutely agree.

Let me move on to corporation tax. As I have said, we will increase corporation tax but that is delayed for two years. Corporation tax, by definition, is paid only by profitable companies. I am a low-tax Conservative, so I do not normally advocate increasing taxes, but given the exceptional amount of debt that we have rightly accrued and taken on, we need to be fiscally prudent and look to balance our books in the medium to long term. The reality is that we are very sensitive to interest rates and inflation, given the debt we have; so yes, I do think we need to do this, although it goes against the grain. However, as my right hon. Friend the Minister has said, even with the increase to 25% we still have the lowest headline corporation tax rate in the G7.

I also want to point out that the measure applies only to the most profitable businesses, those that make £250,000-plus. A small business that makes profits of up to £50,000 will have no change whatsoever in its corporation tax, and businesses in between will have a tapered rate. I believe that this is an unavoidable increase in corporation tax, but it still leaves us incredibly competitive on the international stage, and it applies to only one out of 10 businesses.

[Sammy Wilson]

Does the hon. Lady accept that, despite the impression being given tonight that we are going to tax firms less and take less money off them, the Red Book indicates that corporation tax take in the economy as a whole will escalate from £40 billion this year to £85 billion by the end of the Budget period? The result will be that we take more tax from firms. Hopefully, those firms will become more profitable and will therefore be paying more tax.

[Felicity Buchan]

I completely agree with the right hon. Gentleman that all the forecasts show a very substantial increase in the tax take by virtue of this move in corporation tax.

I believe that we have the right balance. We are increasing corporation tax, but only for 10% of our businesses and only in two years’ time. Importantly, we are also accelerating and incentivising investment in businesses, which will be critical to our economic recovery.

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[Jesse Norman]

I rise to speak in support of clauses 109 to 111, schedules 21 and 22 and amendments 43 to 52.

The clauses will act in support of the Government’s freeports programme, which is designed to unlock investment in eight regions of England so far, with more to follow in the devolved Administrations. At Budget, following an open and transparent bidding process, the Chancellor announced the locations successful in securing freeport status: East Midlands airport, Felixstowe and Harwich, Humber, Liverpool city region, Plymouth and South Devon, Solent, Teesside, and Thames.

Freeports will be national hubs for international trade, innovation and commerce, regenerating communities across the UK by attracting new businesses and spreading jobs, investment and opportunity. They will bring together ports, local authorities, businesses and other key local stakeholders to achieve a common goal of shared prosperity and opportunity for their regions. In doing so, they will help in the Government’s ambition—indeed, all of our ambition—to level up areas that have been left behind.

The Government’s freeports model enables the UK to take advantage of the benefits of leaving the European Union. The Government have drawn on examples of successful freeport programmes all over the world to develop freeports that will attract significant new investment and encourage development across the UK. The model will enable businesses in freeports to draw on benefits relating to customs, planning, regeneration and innovation, as well as the offer of targeted tax reliefs supported by the clauses in the Bill.

The Government have engaged extensively with ports, local authorities and industry, including through a consultation on the wider programme running between 10 February and 13 July 2020. We have also listened to feedback from a wide range of stakeholders to inform the development of an effective model that will benefit port areas across the UK.

For the reasons already outlined in the earlier debates, I will confine my remarks to the key points at issue. Clauses 109 to 111 give the Government the power to designate tax sites and, once sites have been designated, to provide relief within those sites for the acquisition of commercial purpose property and new plant and machinery assets, as well as relief on the construction or renovation of buildings.

[Sammy Wilson]

So far, no freeport has been designated in Northern Ireland, but one of the great fears is that because Northern Ireland remains within the single market rules of the EU, any such measures to set up a freeport could be contested by the EU and the Irish Government because they might give Belfast an advantage over Dublin, for example. How will that issue be resolved, given the terms of the Northern Ireland protocol?

Finance (No. 2) Bill

Sammy Wilson Excerpts

2nd reading
Tuesday 13th April 2021 Commons Chamber

[The Financial Secretary to the Treasury (Jesse Norman)]

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

As you will be aware, Mr Deputy Speaker, the scrutiny of Finance Bills has lain at the centre of our parliamentary process for many centuries, ever since its origins in the 13th century, and it is a rare honour for me to bring this Bill forward today.

At the beginning of last month, my right hon. Friend the Chancellor of the Exchequer outlined a Budget with three key objectives: first, to protect jobs and livelihoods and provide additional support to get the British people and British businesses through the pandemic; secondly, to be clear about the need to fix the public finances once we are on the way to recovery and to start that work; thirdly, as we emerge from the pandemic, to lay the groundwork for a robust and resilient future economy. This Finance Bill enacts changes to taxation that support all those objectives.

I will come to the Bill itself shortly, but before I do so I want to pay tribute again to the work of the Treasury and Her Majesty’s Revenue and Customs over the past year and more. I can testify from personal experience that officials have worked around the clock throughout that period to get the covid schemes up and running, to make sure that they are as effective as possible, to tweak and extend them where they can and, by those means, to support millions of people and hundreds of thousands of businesses up and down the United Kingdom in the face of the worst peacetime economic crisis in recorded history. I will not say that this was their finest hour; they will have had many of those, as these are institutions that are arguably nigh on 500 years old. None the less, this has certainly been a time to which future historians will look back when they seek examples of exemplary public service.

It has been a privilege to work alongside officials at both Her Majesty’s Treasury and Her Majesty’s Revenue and Customs, and to see the great machinery of government working so well. I will, if I may, add one other word of scene-setting about the wider approach that we have taken to tax. It is a measure of the approach taken by the Treasury and HMRC and of our own strategic approach as a Government that, alongside these pandemic measures, we have also accelerated work to create a more effective and resilient tax system. Our goal, in simple terms, is to enhance the stability and effectiveness of the UK tax system, using last year’s announcement of a new 10-year tax administration strategy as the springboard.

We want a tax system that enhances productivity, especially across the long tail of our small and medium-sized businesses. Digitisation of the tax system provides a useful nudge to these firms to upgrade their use of information technology and the skills that it demands. We want a tax system that is more flexible, so that it is better able to adapt quickly to changing circumstances and to provide targeted support for businesses and individuals when needed. We want a tax system that is more resilient—both resilient itself and better equipped to strengthen the core resilience of the UK economy in the face of a future crisis. That transformation of our tax system is already under way, but, as the House will know, we have also taken steps to improve the process of tax policy development, most recently with the tax policies and consultations day we held on 23 March. By giving this wide array of consultations more profile, we hope to make the tax policy process still more collaborative and transparent and improve the quality of tax policy making.

Let me turn to the Bill. The House is well aware of the massive public health and economic shock that this country has experienced. The damage done by coronavirus to our economy and our society has been severe. More than 700,000 people have lost their jobs since March last year. The economy has shrunk by 10%, the largest fall in more than 300 years, and this country’s borrowing is the highest it has ever been outside wartime.

The Government’s response has been comprehensive and sustained, with the total package of support to the economy this year and next now estimated at £407 billion. That response is already showing its value. Thanks to that and to the rapid roll-out of vaccination, the Office for Budget Responsibility and other independent authorities now expect a swifter recovery than previously anticipated, with faster growth, lower unemployment, more investment and higher household incomes. Indeed, the OBR expects the UK economy to recover to its pre-crisis levels six months earlier than it did—in the second rather than the fourth quarter of 2022. In the words of the Resolution Foundation, if realised, this projected rate of unemployment,

“would be by far the lowest unemployment peak in any recent recession, despite this being the deepest downturn for 300 years.”

At the heart of our covid response is precisely that support for jobs, delivered through Her Majesty’s Revenue and Customs as the tax authority, with more than 11 million jobs furloughed between the beginning of the pandemic in March last year and February of this year. As the OBR outlined last month, without the additional measures at Budget, which included the extension of the coronavirus job retention scheme, unemployment would have peaked two quarters earlier and at a higher level. Indeed, it estimates that there would have been an additional 300,000 unemployed people in the fourth quarter of this year without these latest interventions.

The tax measures outlined in the Bill go further now to protect jobs and support the economy. We are extending the 5% reduced VAT rate until 30 September in order to protect 150,000 hard-hit hospitality and tourism businesses, which employ almost 2.5 million people. To help those businesses manage the transition back to the standard rate, VAT will then increase to an interim rate of 12.5% from October until the end of March.

For similar reasons, the Bill puts into legislation the temporary cut in stamp duty land tax with a residential SDLT nil rate band remaining at £500,000 in England and Northern Ireland until the end of June. This, again, will be followed by a phased transition back to the normal rate. From 1 July 2021, it will fall to £250,000 until the end of September, before returning to £125,000 on 1 October.

For any business that took advantage of the original VAT deferral new payments scheme, the Bill ensures that they will be able to pay that deferred VAT in up to 11 equal payments from March 2021, rather than by one larger payment due by 31 March 2021. For those businesses that have been pushed into losses, the trading loss carry-back rule is being extended from the existing one year to three years for losses of up to £2 million, which will deliver a significant cash-flow benefit for businesses.

As well as protecting jobs and livelihoods, the Bill takes important steps to strengthen the public finances. The damage done by coronavirus and the urgent need to respond to the crisis have created huge challenges for the Exchequer. The OBR’s fiscal forecasts show that this year the UK is expected to borrow a record amount: £355 billion. That is 17% of our national income—the highest level of borrowing since world war two. Borrowing is forecast to be £234 billion next year, which is 10.3% of GDP—an amount so large that it has only one rival in recent history, which is the level of borrowing this year.

It is our responsibility as a Government to balance the extraordinary support we are providing to the economy now with the need to start to fix the public finances, and the Bill strikes that balance.

First, the income tax personal allowance rises with the consumer prices index as planned to £12,570 from this month and will then be maintained at this level until April 2026. The House will recall that the UK has the highest basic personal tax allowance of any G20 country. A typical basic rate taxpayer now pays over £1,200 less in tax than in 2010. The higher rate threshold also rises to £50,270 from this month and will then be maintained at this level until April 2026. These changes are fair and progressive. It is important to note that the 20% highest income households will contribute 15 times that of the 20% lowest income households. An average basic rate taxpayer will be less than a pound a week worse off in 2022-23.

Secondly, the inheritance tax thresholds, the pensions lifetime allowance and the annual exempt amount in capital gains tax will also be maintained at their 2020-21 levels until April 2026. Maintaining the pensions lifetime allowance at current levels affects only those with the largest pensions—those worth more than £1 million.

Thirdly, the Government are providing businesses with over £100 billion of support to get through this pandemic, so our judgment has been that it is only fair to ask them to contribute to this overall recovery. The Bill therefore legislates for the rate of corporation tax paid on company profits to increase to 25% from 2023. Since corporation tax is charged only on company profits, businesses that may be struggling will, by definition, be unaffected.

The Government are also protecting small businesses with profits of £50,000 or less by creating a small profits rate, maintained at the current rate of 19%. The effect of this is that 70% of companies, or 1.4 million businesses, will not see an increase in their tax rate. There is also a taper above £50,000 so that only businesses with profits of a quarter of a million pounds or greater will be taxed at the full 25% rate—and that is itself still the lowest corporation tax rate in the G7. The increase is two years away, well after the point when the OBR expects the economy to have recovered, but it is important to legislate for this now in order to give businesses clarity about our future plans.

The next goal of this Budget has been to lay the foundations of our future economy as we emerge from the pandemic. If that economy is to support the creation of new jobs, to spur growth and to drive productivity forward, we need to encourage business investment now, so this Bill contains a highly innovative new super deduction measure, which is expected to lift the net present value of the UK’s plant and machinery allowances from 30th among the countries of the OECD to first.

In most cases, this measure will allow companies to reduce their taxable profits by 130% of the cost of investment they make, equivalent to a tax cut of up to 25p for every pound they invest. The super deduction is expected to be worth £25 billion during the two years it is in place, which would make it the biggest business tax cut in modern British history. The OBR has said that, at its peak in the financial year 2022-23, the super deduction is expected to bring forward an additional 10% of business investment, with a value of £20 billion.

Alongside a programme of national recovery, we also want to stimulate regional recovery. That is why this Bill also enables the Government to designate tax sites for freeports in Great Britain. Once approved, eligible businesses will be able to benefit from a number of tax reliefs, including an enhanced 10% rate of structures and buildings allowance, an enhanced capital allowance of 100% for companies investing in plant and machinery, and full relief from stamp duty land tax on the purchase of land or property—and to help them to invest and grow, the Bill maintains the annual investment allowance at the higher level of £1 million until the end of this year.

The House will also recall that these measures are supplemented by the Budget’s new Help to Grow: Digital scheme, which will assist smaller businesses in developing their digital skills by giving them free expert training and a 50% discount on new productivity-enhancing software. This is all part of a package that the Institute of Directors has called

“a big win for SMEs.”

[Sammy Wilson (East Antrim) (DUP)]

It is significant that no freeport sites have been allocated in Northern Ireland. Will the Minister clarify whether all the measures that will be included in freeport status will be exempt from the state aid rules, which will still apply in Northern Ireland because of our association with the EU single market rules?

[Jesse Norman]

I am grateful to the right hon. Gentleman for his question. He will know that it is absolutely the Government’s intention to have a freeport in Northern Ireland, and that they are in discussion with officials and members of the Northern Ireland Executive to discuss precisely how it will work. I am not in a position to comment on how it will work, but certainly the expectation is that this should be a functioning, highly successful and effective freeport. It should enjoy a very attractive set of benefits that will benefit the companies involved and be comparable to the ones we will see elsewhere, although it is important to note that freeports are themselves a mixed bag. We have had a variety of different bids of different kinds to the competition that has been run.

All the measures we have taken in relation to business growth and investment are part of a package, which the Institute of Directors has called

“a big win for SMEs.”

I was also pleased to see that the Resolution Foundation said that the Budget

“rightly sought to boost the recovery before turning to fixing the public finances”.

That is an important point.

I have discussed the work we are doing to create a more flexible and resilient tax system, but the Finance Bill also includes important measures to make it fairer and more sustainable. As part of the United Kingdom’s commitment to be a global leader on tax transparency, the Bill allows for the implementation of OECD reporting rules for digital platforms. The rules will help taxpayers in the sharing and gig economies to get their tax right. It will also help HMRC to detect and to tackle non-compliance.

To build on the successful introduction of Making Tax Digital for VAT, the Bill will enable the extension of MTD requirements for smaller VAT businesses from April next year. It also makes widely welcomed reforms to the penalty regime for VAT and income tax self-assessment, so that it is fairer and more consistent as a system, and harmonises interest for VAT and income tax.

The Bill tackles promoters of tax avoidance through strengthening existing anti-avoidance regimes and tightening rules. Importantly, it introduces an exemption from income tax for financial support payments for potential victims of modern slavery and human trafficking, made by the UK Government and devolved Administrations.

Finally, let me turn briefly to how the Bill helps us to deliver the important commitments the Government have made on the environment and on carbon reduction. The new plastic packaging tax, first announced at Budget 2018, will encourage the use of recycled plastic instead of new plastic in packaging. For plastic packaging that contains less than 30% recycled plastic content, the rate of the tax will be £200 per tonne. This will transform the economics of sustainable packaging.

The last 12 months have delivered a grave shock to this country and its economy, but the Government have met that shock with a determined and sustained response. That work is not done. With this Finance Bill, we are continuing to support the lives and livelihoods of families and businesses up and down the land, while simultaneously setting the terms for an investment-led recovery. The Bill puts in place the foundations for a fairer and more sustainable tax system. It further enshrines commitments on the environment and the work we are doing to tackle climate change, and it begins the work to rebuild the public finances. For those reasons and more, I commend it to the House.

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[Bim Afolami (Hitchin and Harpenden) (Con)]

I welcome the Bill. It is worth trying to get under the skin of Budgets, because it is so difficult. There are so many documents, there is a huge build-up, and large parts of it are incomprehensible to anybody other than the Financial Secretary. As Members of Parliament, we have to try to get under the skin of what, fundamentally, is going on here—what are the Government trying to do with the key measures?

In my view, the Chancellor is fundamentally trying to deal with one big thing that has not got enough attention in the House: our productivity problem. He is dealing with some of our deep-seated, deep-rooted economic productivity problems in two principal ways. The flashier one—and there has been some discussion of it today—is the super deduction, but I will not linger on that. In particular, I want to talk about the Help to Grow scheme, which is fundamental, transformative and can make a big difference to businesses across my constituency, Hertfordshire and, indeed, the whole United Kingdom.

On the super deduction, from listening to some of the criticism from Opposition Members, I do not think they really understand the nature of what is going on. One of the biggest economic problems that we have had for a very long time is a lack of private sector investment compared with our neighbours. That private sector investment has been further damaged by the covid pandemic for obvious reasons, as everybody appreciates. The super deduction is an inventive, creative, clever new way of turbocharging and increasing private sector investment and moving it forward so that we can help build back better during this very difficult phase that we are trying to come out of.

The hon. Member for Ealing North (James Murray) kept going on about tech companies. Well, I am afraid that he obviously has not read the detail. The super deduction is about plant and equipment. Plant and equipment tends to impact manufacturing businesses. I know that the Labour party is going through all sorts of internal difficulty and transformation at the moment, but it is a sad day when the Labour party cannot welcome measures that will benefit manufacturing businesses up and down this country.

[Sammy Wilson]

Furthermore, had the hon. Member for Ealing North read the detail of the Bill, he would know that the super deduction is on new capital equipment, not on second-hand capital equipment. So even the manufacturing of equipment, provided it is made here in the United Kingdom, will generate jobs and income for firms here in the United Kingdom, which will then, as the hon. Member for Hitchin and Harpenden (Bim Afolami) pointed out, increase productivity in the firms that invest in the machinery.

[Bim Afolami]

I welcome that intervention. Opposition Members have also been saying, “This is only going to benefit the big companies, and the poor small companies won’t benefit.” First, it does benefit all companies if they qualify. The smaller companies already have the annual investment allowance, which is continuing and has been welcomed by everybody, including by them. And—whisper it—big companies are important for our productivity too! Big companies employ lots of people, so it would be negligent of the Government to say, “We are not going to bring forward a measure that will help our economy because it might benefit big employers that employ thousands of our constituents.”

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[Sammy Wilson (East Antrim) (DUP)]

First, I think everyone recognises that the Chancellor had a very difficult job when bringing forward the Budget and the subsequent Finance Bill. There are many things pulling in different directions. On the one hand, as the Financial Secretary said at the very start, we have to make sure that we have dealt with the impact of the restrictions on the economy and the difficulties that was causing for businesses. Secondly, we have to look at the recovery: how to recover from GDP falling by 10% and unemployment going up by 700,000—indeed, there may be other factors to come—and then, of course, we must look at the long-term sustainability of the economy. At the same time, we did not want to be sending out the signal that we are careless about the debt we have incurred, otherwise the signals to the financial markets may cause us a bit of difficulty. So no one envies the Chancellor the job he had to do.

Before I say anything about the objectives the Chancellor has set out, I want to make some comments about specific Northern Ireland parts of the Finance Bill. As has been discussed time and again in this House, the Northern Ireland protocol has placed considerable burdens on the Northern Ireland economy already. One of the areas affected has been the steel industry, or industries that use steel in Northern Ireland. Because of the quota system and the taxes where steel is consumed out of quota, they faced 25% increases in the cost of steel. My party drew this to the Chancellor’s attention, when others were of course trying to pooh-pooh the impact of the protocol; they supported it, so they did not want to know its bad effects, although now they cannot ignore it.

As the Chairman of the Treasury Committee, the right hon. Member for Central Devon (Mel Stride), has said, when the issue was drawn to the Government’s attention, it was dealt with, and I welcome clause 97, which tackles it. It ensures that engineering firms in Northern Ireland, which do have considerable global markets, but would have found those global markets affected by the 25% tariff, are now exempted from that. I would just point out to Members that one of the major landmarks in London is the Shard, and the steel for the Shard was cut, packaged and sent in sections from Fermanagh in Northern Ireland and is now part of one of the iconic buildings here in GB. Many engineering firms of course export heavy machinery, and the steel tariff would have been extremely onerous on them.

I am disappointed, however, about other issues that we were told would be dealt with in the Finance Bill, such as the customs regime that has caused huge costs in Northern Ireland. Customs declarations for even the simplest thing now have to be made for goods coming from this part of the United Kingdom to Northern Ireland, which has added considerably to costs. I was speaking to a firm today, and on average—and it does not even matter what the size of the order is—the cost of customs declarations, supplementary declarations, frontier declarations and the guarantee management system arrangements adds £20 to an order. When the firm ordered a specialist screw that cost 35p, there was a £20 surcharge on it because of the arrangements under the protocol. I was hoping the Finance Bill would deal with some of those issues, but it has not, and I think the Government will have to come back to them.

Let me come to the issues the Chancellor had to deal with. I do not think anyone can deny that the Government took the right course of action. They had no option in my view. When they decided that they were going to close down the economy, they could not abandon workers, firms, businesses and so on, so huge amounts of money—over £400 billion—have been spent on support. As a Unionist, I keep on reminding people in Northern Ireland that the support that businesses have had, as well as furlough payments that workers are still getting, self-employed payments and so on, are owed to the fact that we are part of the fifth biggest nation in the world and, without the support of the Exchequer in the United Kingdom, we would not have been able to find a way through. Of course, the health service has also benefited from the vaccine programme. On that aspect, the Government have made the right choices and those clamouring for independence, even if they have no emotional ties to the United Kingdom, ought to remember the economic benefits of being part of the United Kingdom.

At the other end of the scale, looking to the future and having a sustainable economy, the Finance Bill deals with many of those issues. We have already had a discussion today on the tax allowances, which have been maligned by the Labour party, but they are designed to ensure that businesses across the United Kingdom have an incentive to use their profits to invest to increase productivity and competitiveness and to benefit from the opportunities that Brexit will bring us in doing deals across the world. Spending on apprenticeships and training will increase the skills of our workforce and prepare those who need to move into new industries with the skills they will need, again increasing productivity and competitiveness.

There has been some debate about the value of freeports, but they, too, will help to deal with the long-term sustainability of the economy. My main concerns are on the aspect that concerns most people in the immediate period: does the Finance Bill deal with the issues that must be addressed to get us back from where we are at present and help us to start growing the economy? I will look at the figures given in four areas. Let us take the income tax proposals and the freezing of allowances. I understand that the Government have not increased tax rates, but the freezing of allowances will increase the tax burden. If we are relying on consumer spending to aid our recovery—do not forget that 80% of our GDP is consumer spending—even though there may be some pent-up unspent money and demand, when we nevertheless consider that as a result of the proposals over the next five years we will take 25% more in income tax from people in the economy, and 10% more in the next year, we must ask: will that dampen the immediate increase in GDP and the immediate demand we require to get businesses going again?

Let us look at VAT. Yes, I welcome the rate for the hospitality industry being held until September, and then there will be a reduced rate until March 2022, but I speak to businesses in the hospitality industry who have already expended considerable amounts of money converting their premises to make them safe and, even though they have had support over the last year, many have still had to dip into their reserves because not all their costs were covered. One hotelier in my area told me that in the last year he has spent £3 million of his own money paying those bills that still come in and for which he was not given any support, and no support was available. Businesses will therefore find themselves in a perilous position and we do not know how quickly they will be able to operate fully. When will restaurants be able to have people sitting inside? When will pubs have people sitting inside? While still social distancing many will be operating with lessened capacity, and if they cannot do that, their profitability will be affected. Yet even before all the restrictions are lifted—they will be lifted at different rates in different parts of the country, and in Northern Ireland we do not even have a date for restaurants and pubs being allowed to open—we find that some of that support will be removed.

My third point is about business rates. Again, if we look at the impact of business rates over the next five years, the impact of the Budget means that in money terms, the business rates take across the economy will go up by 50%. In the next year it will go up by 20%. That is a considerable burden on businesses that are coming out of a difficult period, that have not built up cash reserves, and that still do not know exactly how the economy and the demand for their services will increase.

Corporation tax has been mentioned, and on one hand—I have some sympathy for this—those companies that invest will get the super allowances. However, because of the increase in corporation tax and so on, over the next five years covered by this Budget, corporation tax take will go up by 112%, or 20% over the next year. If we are looking at how to stimulate recovery, we must ask whether taking that amount of money from consumers, businesses, and the hospitality industry will reduce the impact of the Budget and make it more difficult for the economy to recover.

My final point is about air passenger duty. Air passenger duty is going up, and over the next year, the take from that duty will increase by 50%. According to Red Book figures, over the five years of this Budget it will go up by 300%. This industry is currently in the doldrums. It has no prospects, because we do not know when international travel will be allowed again. It has already had a considerable drain on it, and there has been no specific strategy for it as there was for the hospitality industry. In many areas of the United Kingdom, especially areas such as Northern Ireland where we rely almost totally on air connectivity, there has been an impact from the reduction in flights. I came here yesterday. There was one flight from Belfast City airport. That is putting airports under severe strain, yet when we consider the proposals in the Finance Bill, we find that rather than there being any help for this industry, which has been particularly badly hit, the proposals in the Bill represent a huge cash take from that industry in the next year and over the next five years.

For those reasons, although I commend what the Government have done regarding the particular problems caused by the economic decisions made to deal with covid, and I commend their long-term strategy in considering how to make the economy more sustainable in future, there is a big gap regarding what impact the Bill will have on the immediate recovery. We are going to have a difficult period. Once furlough finishes, we do not know what the impact on the economy will be, what the redundancies will be like, and what that does. The proposals in this Finance Bill, I am afraid, do not give me any optimism that the right decisions are being made. Some support did need to continue to be given. In their desire to reduce the debt and bring in more revenue, the Government may well have made the wrong decisions that will stymie our recovery and have impacts on many areas, especially those that are most vulnerable to downturns in the economy, including regions such as Northern Ireland.

Exiting the European Union (Value Added Tax)

Sammy Wilson Excerpts

Wednesday 3rd February 2021 Commons Chamber

[Sammy Wilson (East Antrim) (DUP)]

May I first echo the point made by the right hon. Member for Wokingham (John Redwood) that, as the implications of the protocol become ever more apparent, it becomes ever clearer that the promises made to the people in Northern Ireland that they can trade as freely with GB as they did before 1 January and that they will be regarded as fully part of the UK internal market, are not true? There is a border on the Irish sea. There is disruption of trade between Northern Ireland and GB, and vice versa. While the Prime Minister and the Government will maintain that the Union between Northern Ireland and the rest of the United Kingdom has not been affected, the truth of the matter is that the people of Northern Ireland are not experiencing the full benefits of being United Kingdom citizens that they had before 31 January.

Indeed, the regulations illustrate some of the issues that are still going to be faced by people and businesses in Northern Ireland. I welcome the fact that the Government have tried, at least, to overcome some of the implications of the protocol, but I say to the Minister that this kind of tinkering through VAT regulations will not answer the issues that people in Northern Ireland face.

Let me go through some of the issues that the regulations deal with. First, if DIY builders bring in materials—probably most commonly, in Northern Ireland, from the Irish Republic—that are subject to VAT, they will be able to claim back that VAT. What assessment has been made of the additional work that anyone will have to undertake in order to show the VAT that was payable in the Irish Republic or, indeed, in some other EU member state so that it can be claimed back under these regulations?

Do not forget that we are talking about DIY builders. I think of a constituent who came to me just this week because of a delay in the payment of the VAT refund that he was owed on a house that he had built over a period of years. As money became available to him, he built more and more of the house, and the VAT was outstanding. Even with the current regime, the paperwork involved was quite substantial, but he was doing it by himself; he was not a professional. Now we have this added complication. Other Members have talked about the need for clarification. What clarification will there be for people in such situations about what information they need to gather and the way in which it should be gathered?

The second issue is the supply of goods into Northern Ireland—the VAT that is required to be paid on them if they are moving on into the EU, and the fact that VAT can be refunded where the goods are staying in Northern Ireland although they might have been VAT-able.

I think of another example that was brought to me this week, by people involved in the aerospace industry in Northern Ireland. When they bring in aluminium from GB, they have to pay the VAT on it because, under the protocol, it is now coming into a part of the United Kingdom that is deemed to be subject to the EU VAT regime. When that aluminium goes into aircraft parts, the parts do not have any VAT on them, but until it goes into the parts and the parts are sold, those people are obliged to pay out the VAT on it.

That, of course, can be quite a substantial amount of money. It causes cash flow problems and leads to additional administration. I am not so sure that what is provided for in this legislation deals with that problem, because until those people can show either that the aluminium has been incorporated into the parts or that those parts are not going somewhere where they are eligible for European taxes, they have to make the payments.



The Minister is right that we have to close the loophole between Northern Ireland and GB for those who would seek to use Northern Ireland as a back door to escape paying VAT on goods that may be zero-rated in the United Kingdom. Again, what will that mean in terms of checks on goods coming through Northern Ireland ports to GB? How will it be determined that those goods have not originated in the Republic, as opposed to Northern Ireland? Will all Northern Ireland suppliers of goods into GB have to go through a process to show that the goods were made in Northern Ireland and are therefore exempt from VAT, or had had UK VAT rates applied to them? What additional checks and administrative burdens will that cause for businesses?

In relation to how HMRC has handled this issue, all the information I have from the Department for the Economy in Northern Ireland is that businesses are still confused. They do not know what is required of them. They do not know what paperwork will be required, how they claim exemptions and so on. There is a huge piece of work to be done. I come to the point that, despite what the Scottish National party spokesperson has said, we cannot hang on to this protocol. It is damaging relations within Northern Ireland, damaging the Northern Ireland economy and adding substantially to the requirements for businesses. This legislation shows that there will be additional requirements on businesses in Northern Ireland, which make trading more expensive.

The protocol is not some advantage or gift, as the Scottish National party would seek to try to present it to the people of Northern Ireland; it is poison to the people of Northern Ireland. It has poisoned relationships. In my constituency, we are finding that workers are under threat at the ports, such is the frustration and anger. That was never taken into consideration when the Unionist population of Northern Ireland was cynically set aside to get a quick deal with the EU on the basis that the important border was the border between Northern Ireland and the Republic, rather than the relationship that Northern Ireland has with its own country.

What are the implications for people who build their own houses in claiming VAT? They are bringing supplies in from, presumably, mostly the Irish Republic. What are the administrative implications for them? What are the implications for those businesses bringing in supplies from GB, for which VAT will have to be paid and then reclaimed at some later date? What exemptions can be made where it is quite clear that the goods are not going into the EU or that the materials are going into something that will never be VAT-able anyhow? How can we overcome that issue?

If the Government are going to close Northern Ireland as a back door into GB for those products from the European Union that are being routed through Northern Ireland to avoid UK taxes, what implications, if any, does that have for suppliers in Northern Ireland? If it has no implications, how do the Government intend to differentiate goods that are coming through the Republic into Northern Ireland from goods that are going purely from Northern Ireland to GB?

I implore the Minister to take this message back: as far as the protocol is concerned, we can have this continual tinkering, but it will not deal with its underlying, systemic and fundamental problems—that Northern Ireland is still subject to a large amount of law that originates outside its own country, which eats into the very heart of economic activity and undermines its constitutional position within the United Kingdom.

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[Jesse Norman]

I am grateful to all right hon. and hon. Members who contributed to the debate, which has been constructive and useful. I am also grateful to the Opposition for their support for this measure, and to the Scottish National party.

The hon. Member for Ealing North (James Murray) asked about the assessment of the impact of these measures on the income tax—I think he means VAT—base. Of course, being a diligent soul, he will undoubtedly have carefully cosseted the tax impact and information note and seen that no significant impact is expected from this, because the VAT will have been recovered in any case by a VAT-registered business, or would have been recovered otherwise. This set of measures in many ways merely restores the status quo. He asked a question that was indirectly raised by the hon. Member for Strangford (Jim Shannon), about, as it were, potential confusion in Northern Ireland. The trader support service is functioning, in relation to advising on imports, extremely well overall. It has been heavily supported by the UK Government, as the hon. Member for Ealing North will know, and offers what is in effect a globally unique facilitation and intervention.

The hon. Member for Glenrothes (Peter Grant) was very free in accusing the Government of incompetence, as is the way with his party. Knowing that he would wish to be competent himself, I encourage him to read the tax impact and information note. He will know that these measures are already in the protocol and are therefore already, as it were, incorporated via the protocol in UK law. No new impacts are expected from the legislation, as those tax impact and information notes set out.

My right hon. Friend the Member for Wokingham (John Redwood) asked whether VAT rules will be administered and enforced by the UK Government. They will, through Her Majesty’s Revenue and Customs. He rightly raised wider concerns about Northern Ireland and some of the events we have seen in the last few days. I would refer him and all Members to the comprehensive remarks made by the Chancellor of the Duchy of Lancaster yesterday in response to the urgent question on the topic. He also asked whether there would be easy movement. He will know that we have put in place unfettered access for Northern Irish exports into Great Britain and a very comprehensive set of measures to support and facilitate imports into Northern Ireland and to reduce any possible administrative burden.

[Sammy Wilson]

rose—

[Jesse Norman]

The right hon. Member for East Antrim (Sammy Wilson) wishes to intervene, so I invite him to do so before I come to his remarks.

[Sammy Wilson]

I thank the Minister for giving way, and I hope he will address some of the points I raised. It is right that HMRC will be in charge of the collection of VAT, but one of the problems appears to be that, while we have the trader support service in Northern Ireland—which in most cases, but not always, has been helpful in giving advice to businesses there—many businesses in GB have not had the same level of information. One of the reasons why some of those businesses are saying that they are not going to sell to Northern Ireland is simply that they believe that the processes are so complicated, and they have no support by either having that clarified or being assured that the customs declarations and all the other paperwork will not be as complicated as they think it will be.

[Jesse Norman]

It is very easy to overstate the complexity of the issues involved. In the cases that the right hon. Gentleman mentions, the Northern Irish partner has full access to the trader support service, and the Great British partner has a comprehensive amount of guidance online, so the two come together. Inevitably, people will take some time to get used to what is, after all, a change in the arrangements. He is right to pick up the point about the effectiveness of the TSS. I do not think there is a suggestion that the support that businesses have been given in terms of information is anything less than comprehensive.

The right hon. Member for East Antrim asked about do-it-yourself builders. I can confirm that no further information will be required from do-it-yourself house builders, who will file a single VAT return. Obviously, they will be subject to the same proof of payment as they would have been before. In general, the point of this scheme is that without it, they would not be able to deduct acquisition VAT as they could prior to the end of transition period. Through this scheme, they can continue to recover the same VAT as they could before, therefore it is thoroughly to be welcomed.

The right hon. Member for Orkney and Shetland (Mr Carmichael) asked about VAT RES. I am very sorry, but that was in the wrong debate. If he had held his horses, he could have raised that in the next debate, or he could have raised it—equally inappropriately—in the previous debate, which I see he was down to speak in. The good news is that my hon. Friend the Exchequer Secretary will address these issues comprehensively in the debate to follow.

On the issue of small exporters, exports are zero-rated in relation to the UK, and they are not the principal topic of the legislation that we are discussing. The right hon. Member for Orkney and Shetland will be aware that there are measures coming from the EU in July, as I understand it, in relation to these matters that will to some extent—we wait to see the detail—mirror the facilitations that have been put in place, and they will hopefully support exporters from his constituency into the EU.

My hon. Friend the Member for North West Durham (Mr Holden) again raised the question about jobs and revenue. He will see that the tax information impact note does not expect there to be a significant material difference with regard to these issues, but there might, of course, have been some impact had we not put the facilitations in place and therefore these preserve the status quo, and rightly so.

I have already touched on some of the issues relating to the confusion over VAT that was raised by the hon. Member for Strangford). As he knows, in relation to imports, we have the Trader Support Service and, in relation to exports, there is comprehensive guidance available for anyone seeking to export.

Question put and agreed to.

Resolved,

That the Value Added Tax (Miscellaneous Amendments to Acts of Parliament) (EU Exit) Regulations 2020 (S.I., 2020, No. 1312), dated 18 November 2020, a copy of which was laid before this House on 19 November, be approved.

Resolved,

That the Value Added Tax (Miscellaneous Amendments to the Value Added Tax Act 1994 and Revocation) (EU Exit) Regulations 2020 (S.I., 2020, No. 1544), dated 18 December 2020, a copy of which was laid before this House on 21 December, be approved.—(Jesse Norman.)