Employment income provided through third parties

Finance (No. 2) Bill – in the House of Commons at 2:45 pm on 25th April 2017.

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Amendment made: 57, page 607, line 18, leave out from ‘“step”)’ to ‘insert’ in line 19 and insert ‘at the end’.—(Jane Ellison.)

Schedule 16, as amended, agreed to.

Schedules 17 and 18 disagreed to.

Schedule 19 to 23 agreed to.

Schedules 24 to 29 disagreed to.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Bill, as amended in the Committee, considered.

Photo of Eleanor Laing Eleanor Laing First Deputy Chairman of Ways and Means

Order. Under the Order of the House of yesterday, we shall now move to the remaining stages, with no amendments on consideration. I shall now suspend the House for no more than five minutes in order to make a decision about certification. The Division bells will be rung two minutes before the House resumes. Following my certification, the Government will table the appropriate consent motion, copies of which will be made available in the Vote Office and distributed by the Doorkeepers.

Sitting suspended.

On resuming—

Photo of Eleanor Laing Eleanor Laing First Deputy Chairman of Ways and Means 3:01 pm, 25th April 2017

I can now inform the House of my decision about certification. For the purposes of Standing Order No. 83L(2), I have certified clause 2 of the Finance (No. 2) Bill as relating exclusively to England, Wales and Northern Ireland and within devolved legislative competence. Under Standing Order No. 83L(4), I have also certified the following amendment as relating exclusively to England, Wales and Northern Ireland—the omission of clause 60 of the Bill in Committee of the whole House. Copies of my certificate are available in the Vote Office and on the parliamentary website.

Under Standing Order Nos. 83M and 83S, a consent motion is therefore required for the Bill to proceed. Copies of the motion are available in the Vote Office and have been made available to Members in the Chamber. Does the Minister intend to move the consent motion?

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury

indicated assent.

The House forthwith resolved itself into the Legislative Grand Committee (England, Wales and Northern Ireland) (Standing Order No. 83M).

[Mrs Eleanor Laing in the Chair]

Photo of Eleanor Laing Eleanor Laing First Deputy Chairman of Ways and Means

The consent motion for England, Wales and Northern Ireland will now be considered. I remind hon. Members that all Members may speak in the debate, but if there is a Division, only Members representing constituencies in England, Wales and Northern Ireland may vote on the consent motion.

Motion made, and Question put forthwith (Standing Order No. 83M(2)),

That the Committee consents to the following certified clauses of the Finance (No. 2) Bill and certified amendments made by the House to the Bill—

Clauses and schedules certified under Standing Order No. 83L(2) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland and being within devolved legislative competence

Clause 2 of the Bill.

Amendment certified under Standing Order No. 83L(4) (as modified in it is application by Standing Order No. 83S(4)) as relating exclusively to England, Wales and Northern Ireland.

The omission in Committee of Clause 60 of the Bill.—(Jane Ellison.)

Question agreed to.

The occupant of the Chair left the Chair to report the decisions of the Committee (Standing Order No. 83M(6)).

The Deputy Speaker resumed the Chair; decisions reported.

Third Reading

Photo of Jane Ellison Jane Ellison The Financial Secretary to the Treasury 3:04 pm, 25th April 2017

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

Before I say a few words and briefly comment in summary of the Bill, may I beg your indulgence, Madam Deputy Speaker, in making some remarks about a couple of colleagues?

Mr Smith was present earlier and made a valedictory speech. I referred to that in my subsequent speech, but I was not then in a position to mention his record of service to the country. Not only has he been a parliamentarian since 1987, but he was a Minister of State for Education and Employment between 1997 and 1999, Chief Secretary to the Treasury between 1999 and 2002 and, indeed, Secretary of State for Work and Pensions between 2002 and 2004. He is no longer in his place, but I ask his party’s Front-Bench spokesman to confer my sentiments to him and to draw to his attention the fact that I—on behalf of the Government and, I am sure, of all colleagues—have placed on the record our thanks for his service to the country as a Minister during that period.

With the House’s indulgence, I will pay tribute to a second Member. I have very recently been informed that my right hon. Friend Mr Tyrie is not seeking re-selection at this election, so I want to make a few comments about him. He has been the MP for Chichester since 1997. He is a former adviser to Nigel LawsonLord Lawson—when he was Chancellor, as he was to John Major when he was Chancellor. Members may be aware that my right hon. Friend was a senior economist at the European Bank for Reconstruction and Development before he entered Parliament. He is of course a very senior parliamentarian, and when we moved to electing our Select Committee Chairs, it was no surprise that he was elected overwhelmingly by the House with cross-party support. In recent times, he has served in one of the most senior positions in Parliament, if not the most senior position, as Chairman of the Liaison Committee. In all those roles across his life of public service, governmental service and service to this House, he has been enormously distinguished, and I think I speak for everyone in saying that he is very well liked. I have known him during the years I have been in Parliament, but as a Treasury Minister, I have of course come to know him better in recent months. Indeed, I have responded to his letters on many occasions, and discussed them with him on the sidelines on many other occasions. Throughout those dealings, I have seen all his experience and qualities being brought to bear. I just want to say that to me, as a Minister, he has been kind and wise, and I will miss him enormously.

To move on to my Third Reading speech, the economy is fundamentally strong, and with this Finance Bill we are taking yet another step forward in building a stronger economy and a healthier society. As we have discussed, the Bill is proceeding on the basis of consensus. A number of key policy changes to the tax system, such as measures to tackle tax avoidance, are not being proceeded with now, but will be brought forward in a Finance Bill at the first opportunity after the election.

Even in its shortened form, the Bill takes action in three areas that have been consistent priorities for us in making changes to the tax system. First, the measures in this Bill take further action to reduce the deficit and secure the nation’s public finances, and the Bill raises much-needed revenue to fund the public services we all value. Secondly, the Bill takes the next steps to achieve this Government’s aim of a fairer and more sustainable tax system. It makes it clear that the tax system must keep pace with the different ways in which people choose to work, and ensure fair treatment between individuals. It also demonstrates our continued commitment to tackling tax avoidance and evasion to level the playing field for the honest majority of businesses and individuals that pay the tax they owe. Finally—this cause is particularly close to my heart, as a former Minister for Public Health—the Bill marks an important step in tackling childhood obesity by legislating for the soft drinks industry levy. As I noted earlier, we have achieved a great deal of cross-party consensus on the levy, which will help to deliver a brighter and healthier future for our children. I am delighted that we will be able to put it on the statute book.

In conclusion, this Finance Bill supports our commitment to a fair and sustainable tax system, one that offers support for our critical public services and will get the country back to living within its means. In that regard, it sits with this Government’s long-term commitment to improving the strength of our economy, and I commend it to the House.

Photo of Eleanor Laing Eleanor Laing First Deputy Chairman of Ways and Means

Before I call the Opposition spokesman, may I echo on behalf of the whole House the Minister’s kind words about the right hon. Members for Oxford East (Mr Smith) and for Chichester (Mr Tyrie). We extend those kind words to all other hon. Members who are present this afternoon, who have taken part in the debates on this Bill and many similar Bills assiduously and brilliantly on behalf of their constituents, and who will not be here during the next Parliament? The whole House wishes them all very well indeed.

Photo of Peter Dowd Peter Dowd Shadow Chief Secretary to the Treasury 3:10 pm, 25th April 2017

I absolutely concur with the comments that you have just made, Madam Deputy Speaker, and that the Minister made about my right hon. Friend Mr Smith and Mr Tyrie. May I comment on my hon. Friend Rob Marris, who is also leaving the House? It seems to me that some people have got time off for good behaviour.

May I just make a point about my hon. Friend Stephen Pound and the Perivale scout group? He was very concerned about the insurance premium tax. I do not think he won on that point, but he has won on the sugar tax, which will save the teeth of the scout group. Good news for teeth; bad news for dentists, I suspect.

I alluded earlier to the fact that, as far as I could gather, this was the longest Finance Bill to be presented to the House. It had 135 clauses and 792 pages. It had clauses on pensions advice, overseas pensions, personal portfolio bonds, an employee shareholding scheme, an insurance premium tax, air passenger duty, duties in general, fraudulent evasion, digital reporting, data gathering and search powers, as well as umpteen schedules. Of course, each of the clauses and schedules has had some degree of scrutiny, but not necessarily the amount we would like, because the general election has rather unhelpfully intervened in our deliberations. But, as they say, that’s democracy. Scrutiny is the fundamental role of Parliament, so when we do not have enough time for that role, we need to ensure that measures are not simply pushed through willy-nilly. I do not think that they have been in this regard.

We must always have a balance between raising tax and the dampening effect that that can have on business and society. That can be a difficult balance to draw and I think it has been drawn pretty well today.

I have referred previously to the need to raise our game in relation to productivity in the economy. Higher productivity is a driver of economic growth. Whatever our position, I hope that, to some degree, the Bill will help push up productivity growth.

On the soft drinks levy, to which the Minister referred, the primary school PE and sport premium will go up from £160 million to £320 million annually, there will be an extra £10 million for breakfast clubs and, of course, 57% of the public support the levy. The Obesity Health Alliance found that the levy could potentially save up to 144,000 adults and children from obesity; prevent 19,000 cases of type 2 diabetes; and avoid, as I alluded to, 270,000 decayed teeth. I welcome the Minister’s commitment to the review in a couple of years, based on the advice of Public Health England.

Some measures are no longer in the Bill, some will no doubt come back and we will bring some measures back before the House. We hope that those measures, in one way or another, will be scrutinised.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (House of Lords) 3:14 pm, 25th April 2017

Like this one, the debates today have tended to be fairly quiet, with not many of us speaking.

I echo the comments that have been made about the right hon. Members for Chichester (Mr Tyrie) and for Oxford East (Mr Smith) and Rob Marris, with whom I had the pleasure of serving on the Finance Bill Committee last year. I was constantly impressed by his incredible knowledge about all the matters we discussed. I will be sorry to see him go from this place.

I have a few matters to raise on Third Reading. We have had a greatly curtailed debate on the Finance (No. 2) Bill this year. Obviously, we will see a new Finance Bill in the next Session, but this Bill has been one of the most bizarre things I have been part of since I was elected. Last Tuesday, we had Second Reading. On Tuesday morning, everything was going to proceed as normal with the Finance Bill. We were going to have two days of Committee of the whole House, something like six Public Bill Committee sittings and two days for Report stage and Third Reading. As it is, it has all been squidged into three hours or so, with the opportunity for it to last for five hours. It has been totally bizarre.

I appreciated receiving the Government’s notification that they would withdraw some things last night, but that was very little notice to allow us to go through all these matters properly and to work out exactly what the Government had and had not decided to proceed with. It has been difficult to operate under these circumstances and to provide the appropriate scrutiny, given the lack of time. The SNP has done its best. We have spoken on every group today and were the only party, other than the Government, to table amendments to the Bill. We have gone out of our way to provide scrutiny.

Before I talk about the provisions of the Bill, I want briefly to mention the way in which the Government tackle budgetary scrutiny, the way in which the Standing Orders are drafted and the way in which this House considers financial matters. In the past, I have raised at length the shortcomings of the estimates process. The Budget process is marginally better, but still not great.

I have mentioned a number of times the “Better Budgets” report. I absolutely back the call by the organisations that wrote that report for the Finance Public Bill Committee to have public hearings. It is really important for this House to do that. I would very much like whatever Government comes in after 8 June to change the Standing Orders to allow hearings in the Public Bill Committee stage of the Finance Bill. That would make a really big difference to the level of scrutiny we are able to provide. I have heard the argument that the Treasury Committee hears evidence from members of the public. However, different individuals sit on the Treasury Committee and the Finance Bill Committee. I will keep making this call—the Minister knows that once I start bringing something up, I am not very good at letting it go—until the Government change the Standing Orders. I recognise that they were not put in place by this Government.

On the provisions of the Bill, I welcome the Government’s withdrawal of certain measures. I note the Government’s position on making tax digital, but I welcome their recognition that it is a contentious matter and that it would be better to bring it back following the general election. I welcome the withdrawal of the changes to the dividend threshold. We did not feel we had adequate time to scrutinise those changes and I appreciate the Government taking that measure out of the Bill.

We are less supportive of some matters that have made it to Third Reading. We still feel that the Government can do more on tax evasion. New clause 1 on tax evasion, which we tabled for debate today, asked the Government to look at international comparators and to bring back a full report on all the ways in which international comparators are successful in tackling tax evasion. I get that piecemeal work has been done on this, but a full report would be incredibly helpful for the UK Government to ensure that the right decisions are taken to tackle tax evasion.

We are clear that there is still not enough protection for whistleblowers. We are very indebted to individuals who come forward and we would like to encourage them to continue to do so. Anything the Government can do on that would therefore be welcome.

On self-employment, last year’s Finance Bill made some changes for those employed through intermediaries and this year’s Finance Bill does the same. The Chancellor proposed changes to national insurance, but then rowed back on them. Those, however, are all piecemeal changes. If the Government want to make changes, they need to do them properly by looking at everything that affects the taxation of self-employed individuals. They also need to look at tax credits, so that self-employed individuals are supported through childcare vouchers and so on. Everything needs to be taken in the round, in addition to pension entitlement, holiday entitlement and maternity leave entitlement. A proper tax system needs to be put in place to tax self-employed individuals appropriately and provide them with appropriate benefits to encourage them to aspire and to leave employment—or leave unemployment—to begin their own businesses. The more we do that, and the less we shift the goalposts, the better situation we will be in.

The UK Government could do more to give confidence to the oil and gas industry. I would very much like them to look at changes to the tax regime on small pools. They have said they are committed to backing the maximising economic recovery strategy put in place by Sir Ian Wood. However, they have not followed up on that with enough measures. I do not feel that oil and gas has been given the priority it should be given. Oil and gas is incredibly important to the UK’s economy as a whole, as well as to the economy of Scotland. It supports a huge number of jobs in our communities, even though there has been a massive reduction in the number of those jobs in recent years.

I am not asking for the Government to significantly reduce the rates of tax for oil and gas; I am asking them to look at incentivising investment and to look at those more difficult to reach pools. I am not asking for massive tax giveaways. In fact, incentives for investing in small pools would be a net benefit for the Government—it would not cost them anything. I am not asking for an amazing massive reduction in headline rates of tax; I am asking the Government to listen to companies that are coming forward and asking for small and reasonable changes, some of which will increase, not decrease, the UK Government’s tax take. I therefore ask the Government to consider the amendments we have tabled and the suggestions we are making.

I appreciate the changes—they are long overdue—the UK Government hope to make in relation to late life assets. As soon as the commission can report and the change can be implemented the better. I would really appreciate that coming forward quickly.

Regardless of which Government are elected, we will have a new Budget and a new Finance Bill. We have not seen from this Government in any discussion of finances, nearly a year on from the Brexit referendum, an acceptance of the effects Brexit will have on the UK Government’s budget and tax take, on employment levels, on our constituents’ jobs, on what businesses will come in and on the level of investment that will be coming in. Nearly a year on, we have not seen any recognition of any of that. I hope that in the next Parliament, the new Government will recognise the financial impact of Brexit on household budgets and jobs. I hope we see real changes that take into account the effects of Brexit.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

During the coalition Government, fiscal policy was unnecessarily tight and our constituents paid the price. After seven years, we have moved to a position where, despite the Prime Minister in her election campaign saying that taxes will be lower under a Conservative Government—she has not actually said lower than what—this year, on projections which of course may or may not come to pass, taxation as a percentage of national income is likely to be at its highest ever level in peacetime. That is not exactly a low-tax Government.

For the Government to try to pretend that they are a low-tax Government is unfortunate during a general election. It also leads to an unfortunate trend on both sides of the House to talk about taxation as if it were an evil in and of itself. Taxation pays for public services, which all our constituents enjoy. I have no problem with taxation that is fair and sustainable—the Minister talked about that—and if we clamp down on tax avoidance. I only wish that the outgoing Government and the incoming Government, whoever they are, were more forceful on the public register of beneficial ownership of offshore-held accounts and funds, particularly since about half the amount around the world, as far as we can tell, is held in British overseas territories. The UK therefore has a huge role to play. I salute the role the Conservative Government have thus far played, but there is further to go. I hope that an incoming Labour Government on 9 June will take it a lot further.

I have done seven or eight Finance Bills in my time in this House. As some right hon. and hon. Members know, this will be my final speech to the House, as I am retiring at the general election. I will be putting my feet up in the garden and watching the rest of you work. One has to try, as Mr Tyrie always tried—he has rightly been praised in this debate—to be realistic about what is going on. What is going on is that, under the coalition Government and the Conservative Government of the past two years, inequality of income has fallen—that is true on the Gini coefficient—and unemployment has fallen fantastically. In round terms, employment is up by 2.75 million. That is a fantastic achievement. About one in five of those new jobs is a zero-hours contract and not all zero-hours contracts are decried by those who have them. The proportion of workers who are working part time has hardly changed in seven years. There will be some who are working part time who would prefer to work full time, but many of those who are working part time, including within that 2.75 million, choose to do so and they should have the flexibility to do so.

The achievement on falling unemployment has, however, been bought on a sea of debt. The national debt in the past seven years has gone up by almost 70%. That is an enormous amount in peace time in seven years. The deficit, I have to say to this outgoing Government, is a bit like Gordon Brown’s golden rule—another can that kept getting kicked down the road—that Government borrowing should, on the economic cycle, be balanced. Gordon Brown, as Chancellor and Prime Minister, kept redefining what the economic cycle was to try to make his figures work out.

With this Government and the previous Government, the annual deficit, which is still enormous, is always going to be sorted out in five years’ time. I am not sure how many of my constituents believe that any more, particularly in a year when, I think I am right in saying, the Government of Greece, through measures that every Labour Member and many Government Member would find far too painful, socially disruptive and unacceptable—measures forced on them by the troika and the International Monetary Fund—are due to record a surplus on their current account.

Here we are, in the wealthy United Kingdom, with a Government who are saying, as did their predecessor Government over the preceding five years, “We want to get the deficit down, and we will get it down in five years”—it is always mañana, always another five years—but who, on that measure, are doing far, far worse than the Government of Greece. It is an indictment of seven years of Conservative-led Government. My constituents have had the pain but not the gain. Inequality of wealth, in contradistinction to inequality of income, has increased very markedly in the past seven years. Not only do I find that distasteful, as a socialist; as a citizen of the UK, I find it worrying, because if a society becomes too unequal, it carries a severe risk of social fracture.

We see that in the housing market. On current trends, many people will never have affordable housing. Those in the next generation who have it often have it because their parents or grandparents did as well and they have inherited a deposit or house from earlier generations in their family who owned property. That trend will lock in inequality into our society. Both sides of the House profess to decry and wish to address such inequality, but it will be locked in through the housing market because in the past 10 years, in particular, we have not built or created nearly enough housing units in the UK. It will have huge social implications when that trend creates rigid inequality that cannot be overcome, regardless of what we do on schooling, because it is locked in. Does someone inherit or not inherit a down payment on a house? That is very sad for a society in which average earnings—average incomes have risen because pensioner incomes have risen thanks to the triple lock—are still below what they were nine years ago before the crash.

That is not all the fault of the Government, who have taken some good steps, but they have not gone far enough on what they now call the national living wage. They are converts—the Conservative party opposed the minimum wage on principle when we introduced the legislation in 1998—and with the zeal of converts, they have gone a lot further than I and many Labour Members expected in terms of a statutory minimum wage and national living wage, but they still have not gone far enough. That is bad for social cohesion and poverty in this country and bad for economic growth, because in a capitalist society, one way to drive productivity is through higher wages and a substitution of capital for labour. When we substitute capital for labour, very often—not in every case, but overall and very often—we get higher productivity.

We need to do more. The Government have taken some steps, but we on the Labour Benches do not think they have gone nearly far enough, on productivity as it relates to technical training and upskilling the workforce. The Conservative party has come late to that party. We now have the target of 3 million apprentices, which might or might not be met, but if it is met, one fears it will be through redefining as “apprenticeships” courses and training schemes that many of us would not regard as such, to make the figures work—that is always a danger with targets. It is laudable, however, that the Government want to take policies from Labour and increase training, particularly technical training, in our economy, and the Bill will help in that regard.

Over the past seven years—this is not addressed in the Bill—infrastructure spending has been insufficient, but we have also had, and are having, inappropriate infrastructure spending. Unless there is a change of course, as I hope there will be, we will be spending about £60 billion or more on the HS2 railway line, which is a very bad allocation of capital for transport spending. We are also on course to spend—indirect spending through much higher electricity prices, not direct spending by the Government—upwards of £18 billion on the Hinkley Point C nuclear reactor, which is to be built by a bankrupt French company, EDF, which is only still going because it is being bailed out by its state owners, the French Government, and using a design that has never worked anywhere in the world. It is being tried in Finland and Normandy, but those projects are years overdue and massively over-budget, yet it is part of the Government’s approach to infrastructure spending. We on the Labour Benches recognise that the Government have again started to borrow some of our policies, such as the possible cap on domestic energy prices, but they have not gone far enough on infrastructure spending and have lost their way on some of these big projects.

The final issue, mentioned by Kirsty Blackman, is Brexit, which looms over us all and all our constituents but, surprisingly, not over the Bill. Before the referendum last summer, the Treasury was keen to put out projections of what Treasury officials thought would be the consequences of a Brexit vote. It was an entirely appropriate use of Treasury resources by a Government whose official policy was to support the United Kingdom remaining in the EU. We had all those projections, but since the 23 June things have gone quiet. I appreciate that the UK, in round terms, is still 100 weeks away from leaving the EU, which makes it more difficult to come up with projections of what is likely to happen with our economy—partly because we do not know what the Brexit package will be—but there are some signs of concern in the markets about Brexit that I do not think are adequately reflected in the financial measures proposed by the outgoing Government, including the measures in the Bill. If the Government are re-elected—in my view, that would be unfortunate—they will have to get their act together and be a bit more public about where they see the economy going with Brexit.

As I said, I appreciate that that cannot easily be done given that we do not know what the final package will look like or whether it will be a hard Brexit with no package at all, but to reassure the markets and—just as importantly—our constituents, whichever side of referendum they might have been on, the Government of the day, from 9 June, will have to be rather more open about the direction of travel and what they are doing to be proactive, rather than reactive, to the process of Brexit and its effect on the economy. That will be the case whatever the Government’s colour, because without that greater clarity the markets will be more concerned and more spooked and our constituents will be more concerned and more worried than they need to be. Of course nobody has a crystal ball, but it would help us all to have a few more projections than we hitherto have had.

Question put and agreed to.

Bill accordingly read the Third time and passed.