New Clause 3 - Treasury use of powers

Taxation (Post-transition Period) Bill – in the House of Commons at 4:45 pm on 15th December 2020.

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“(1) The Treasury must, within four working days of the day on which this Act is passed, publish a report setting out the timeframe within which it will use the powers to make regulations conferred by—

(a) section 40A(2) of TCTA 2018;

(b) section 40B(1) and (2) of TCTA 2018;

(c) section 30A(4) of TCTA 2018;

(d) section 30B(1) and (3) of TCTA 2018;

(e) section 30C(5) of TCTA 2018; and

(f) section 5(2) of this Act.

(2) The Treasury must publish an annual report setting out how it has made use of the powers referred to in subsection (1).

(3) Each report under subsection (2) must include an assessment of—

(a) what considerations the Treasury made when deciding to use its powers, and

(b) the impact of the regulations on individuals and businesses throughout the UK, and specifically in Northern Ireland.”—(Mr McFadden.)

Brought up, and read the First time.

Question put, That the clause be read a Second time.

Division number 188 Taxation (Post-transition Period) Bill — New Clause 3 - Treasury use of powers

Aye: 263 MPs

No: 364 MPs

Ayes: A-Z by last name

Tellers

Nos: A-Z by last name

Tellers

The House divided: Ayes 263, Noes 364.

Question accordingly negatived.

The list of Members currently certified as eligible for a proxy vote, and of the Members nominated as their proxy, is published at the end of today’s debates.

Third reading.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury 5:07 pm, 15th December 2020

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

We have had some good debates in the course of the Bill. I thank right hon. and hon. Members for their contributions, but there are two in particular whom I would like to thank. First, Mr McFadden has truly been the workhorse of the shadow Front Bench throughout the Bill. For a shadow Economic Secretary, as he is supposedly designated—he should of course be much higher—he has done a wonderful job, and I salute him for it. Secondly, I thank my hon. Friend Sir William Cash, who is sadly no longer in his place. I think he should be referred to as the ancient mariner of Brexit. As you may recall, Mr Deputy Speaker, Coleridge says:

“It is an ancient Mariner,

And he stoppeth one of three.

‘By thy long grey beard and glittering eye,

Now wherefore stopp’st thou me?”

Although my hon. Friend does not, tragically, present us with a long grey beard, he has something of a glittering eye where matters of Brexit are concerned. We can only salute the energy and indefatigability with which he has attacked the topic over many years, while perhaps devoutly hoping that this may be the moment at which, at the end of this year, a hiatus or pause may be reached.

In just over two weeks’ time, the transition period will end. The UK and its tax system must be ready to support the smooth continuation of business across this country. In that regard, the Bill is a cornerstone of those preparations. In addition, it will play an important part in helping to implement the Northern Ireland protocol and to safeguard the Belfast/Good Friday agreement. It introduces a framework for charges on goods arriving in Northern Ireland and enables the Government to put in place decisions made by the Joint Committee for goods deemed to be at risk of moving into the EU. It also includes mechanisms to ensure that, in so far as is possible, VAT will be accounted for in the same way as it is today in Northern Ireland.

Let me once again assure the House that HMRC will remain the tax authority for the whole of the UK, and let me remind hon. and right hon. Members that businesses will continue to submit only one UK VAT return to account for VAT on all supplies of goods and services. The Bill also amends current legislation for excise duty to be charged when excise goods are removed to Northern Ireland from Great Britain, as required by the protocol. However, that does not mean additional costs for Northern Ireland businesses and consumers, because the Government will be introducing a mechanism to offset any excise duty already paid on those goods in Great Britain.

The Bill introduces a small increase in the rate of duty on aviation gasoline, which will apply across the UK to ensure consistency between Great Britain and Northern Ireland. Finally, the Bill includes a small number of other taxation measures, including measures to ensure the Government retain their ability to prevent insurance premium tax evasion.

Photo of John Redwood John Redwood Conservative, Wokingham

I think the Minister needs to be a little more forthcoming. What is the EU’s enforcement mechanism if it thinks UK authorities have not fulfilled the remit? What percentage of trade are we expecting to be caught up in this double jurisdiction?

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

As I have already said to my right hon. Friend, without venturing a percentage, the test for at-risk goods is those where there is a “genuine and substantial risk”, and therefore those are expected to be a smaller proportion of goods, but trade of course is a flexible and ever-changing thing, so whatever numbers there are may change over time.

My right hon. Friend also asked a question about the EU. I am not going to speculate on what the EU does, but I can assure him that there will be no EU customs, embassy or the like and no joint control over customs in Northern Ireland. HMRC will remain the tax authority for Northern Ireland, as it is for the whole of the UK.

The Bill also includes new powers that will enable HMRC to raise tax charges under the controlled foreign companies legislation for the period 2013 to 2018. Lastly, to help level the playing field for UK businesses, the Bill also moves VAT collection on certain imported goods away from the border and removes VAT relief on low-value consignments to clamp down on VAT abuse and to protect our high streets.

The Bill gives businesses throughout the UK certainty about the arrangements that will apply from 1 January of next year. Above all, it helps the Government to safeguard what we all prize and desire, or should all prize and desire: the unity and integrity of the United Kingdom. I commend the Bill to the House.

Photo of Pat McFadden Pat McFadden Shadow Economic Secretary (Treasury) 5:12 pm, 15th December 2020

I do not propose to detain the House for very long. I thank the Minister for the typically courteous way in which he has led these short debates on the Bill. He has outlined the changes that the Bill makes through its various clauses on customs, VAT, insurance liability and so on, and I do not propose to repeat all that.

From our point of view, and as I have made clear all along, we do not oppose the passage of this Bill, because we understand that these changes have to be put in place. The Government reached agreement on the Northern Ireland protocol. We want them to stick to and abide by their agreements as we want the EU to stick to and abide by its agreements, too. Many of the changes in the Bill stem from those agreements. I also reiterate my party’s strong support for the Good Friday agreement and for policies and practices that uphold the spirit and letter of the agreement into the future.

We have set out our views on the timing of the Bill and the difficulties that the changes it outlines pose for businesses trying to comply with them. The Minister has said it is always last minute with the EU and that it was always going to be like this. I am not sure I fully agree with that. We are asking a lot of businesses with just a couple of weeks of the year left, in the midst of the pandemic and as we are about to enter the Christmas holiday period. I hope that the Minister and the Exchequer Secretary to the Treasury, Kemi Badenoch, who joined him last week, are correct when they say that everything will be in place by 1 January, but I cannot help but reflect at this time of year that perhaps in the minds of many it did not always need to be like this. Perhaps the Prime Minister’s Christmas wish—all he wanted for—was that the German car manufacturers would come riding over the hill and influence the negotiations. I hope that Santa visits all good boys and girls over the Christmas period, but I do not think that that particular Christmas wish of the Prime Minister and many of his colleagues is going to come true. This week, just as last week, one gets the impression that the action is elsewhere. I do not know whether an agreement will be reached in the next couple of days. There has been some rumour and social media chatter that we are heading in that direction over the past hour or so. Time will tell and wisdom would counsel us to wait to see what happens before making any predictions.

These measures in the Bill are largely a result of the commitments that the Government have made. I hope they are not too burdensome on businesses because at the end of all this—both the Brexit process and the covid period, which we hope to see come to an end through the use of the vaccine—we will have to gather around a process of business getting back to what it does: trading, serving its customers, providing goods and services and helping economic growth to come back to the country. There may be competing visions as to how best that should happen in the future, and what a blessed debate that would be in our politics, rather than some of the issues that have coloured it over recent years. I thank you, Mr Deputy Speaker, and all the Members who have contributed to debates on this Bill.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury) 5:16 pm, 15th December 2020

I also wish to thank the Minister and the Opposition Front-Bench spokesperson, Mr McFadden, for the way in which this debate has been conducted, as well as Sir William Cash for his contributions, which were typically detailed. There is one point of detail that I was quite surprised that he missed. I have been saving this up the end, just in the hope that he might have picked up on it. He has waxed lyrical about sovereignty, as he does in every single debate I think he has ever spoken in, but I am quite surprised that he allowed to fly the EU setting the level of taxation on aviation gasoline. The reason that I am quite surprised about that, in the most ludicrous of ludicrous Brexit-based patriotic ironies, is that avgas is the fuel used not just in private and leisure aircraft, as the Minister set out, but in Spitfires, Hurricanes and other similar planes. There is some mad irony in the UK Government handing over to the EU the power to set the taxation on those vintage planes that bear so much patriotism among so many people.

I suppose that it is typical of the Government’s approach to all of this that there is so much detail in the Bill that we cannot possibly see—

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

Will the hon. Lady tell us how much extra cost filling a Spitfire with fuel will incur according to this extra avgas taxation?

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

I think the Minister knows well that it is the principle of the EU continuing to set the fuel duty rate, rather than the cost of it. Conservative Members know well about all these principles—they are principles of patriotism that they hold dear. The Minister has allowed this to slide in and he has done very well not to alert their suspicions on it.

Photo of Jesse Norman Jesse Norman The Financial Secretary to the Treasury

I think we can all have a patriotism that is rich and bold enough to incur an extra £10 on a 450-litre tank of avgas.

Photo of Alison Thewliss Alison Thewliss Shadow SNP Spokesperson (Treasury)

I thank the Minister for that detail. If he can tell me the further details on the questions that I have not yet had answered from the previous day’s debate, that would be welcome. I can go through the things that he has not yet answered and have him answer all those, if he has that particular detail to hand. I thank him for that and look forward to letters appearing in my letterbox with the detail at some stage.

Other letters that have not yet appeared are those from Baroness Davidson and the former Secretary of State for Scotland, who both threatened to resign if Northern Ireland got any special treatment in these negotiations, yet that is exactly what we have as a result of this legislation. As the Chancellor of the Duchy of Lancaster said, it gets the “best of both worlds” in this deal—it gets to be in the EU and part of this Union—and yet Scotland is not getting any of that. Scotland is getting thoroughly ripped off as a result of the deal.

The Minister talked about strengthening the Union, but the Union is slipping away from the Government’s grasp. By every action that they take in this legislation, Scotland sees further and further how we are being undermined and left behind by this Government. They do not give much of a toss about Scotland—they are pushing their own Brexit agenda, and the rest of us can put up with it.

The Minister mentioned the additional paperwork that is coming. Northern Ireland in particular is being wound up in a giant Christmas ball of red tape as a result of the legislation. He talked about 11 million extra declarations and paperwork. That is more than 265 additional bits of form-filling that will happen after Brexit. The Government used to talk about getting rid of all the red tape, but in fact they are increasing it. They used to talk about taking powers back from the bureaucrats in Brussels, whereas in fact they are giving them back to bureaucrats in Whitehall, out of sight of this House.

We still do not know whether the transition period is ending, and with 16 days to go we still do not know what we are going to transition to. This Government have made an absolute mess of the four and a half years that they have had. We have absolutely no confidence in the direction that they are going and, with 16 polls in Scotland now showing support for independence consistently over the past months, we can see exactly where Scotland is going. It should be going there as soon as possible.

Photo of John Redwood John Redwood Conservative, Wokingham 5:21 pm, 15th December 2020

I have declared my business interests in the Register of Members’ Financial Interests.

The Bill is a great missed opportunity. It should have been the Bill in which we started to cut and reorganise the taxes, celebrating our new freedoms as we leave the European Union. There is so much good we could do by remodelling and reducing the incidence of VAT, for example, or by having excise duties and tariffs that make sense for British business and for British importers, because we need to balance the two. Instead, it is a rather technical Bill.

I think it is a pity that this House has not been given a detailed account of what the Chancellor of the Duchy of Lancaster has agreed so far, and a detailed account of what still remains to be agreed, because I believe that there were outstanding issues. On behalf of Northern Ireland within the United Kingdom, we need to know the extent of this possible dual jurisdiction and how it actually works.

The Minister has kindly assured me on more than one occasion that the VAT regime in Northern Ireland will be the UK VAT regime and will be enforced by normal UK enforcement. That is very good, but cannot be the whole story, because we know that there is this overlapping jurisdiction for certain types of goods. We are still not privy to how big an issue that is. I presume it is a small proportion of trade, but we have not been given any indication of that, and we have not been told—perhaps the Joint Committee has not yet agreed it, or does not want to share it with us yet—exactly how that might work. It is a pity that we do not have more of that detail.

I am also concerned that we should not get drawn into the state aid issue, which is clearly part of the wider discussion between our Ministers and negotiators, and those in the European Union. We know that the European Union takes a very wide definition of state aids. State aids definitely include all taxation, which is the subject of this piece of legislation, and grants, subsidies, the competition framework and general industrial policy. It is very wide ranging, and there is no way we can say we have Brexit if the EU will have powers over our state aid policies, because that would be tentacles stretching into this Bill and the powers of the Treasury, Customs and Excise, and the Business Department and its competition and industrial policies, as well as into energy and practically every other major area one can imagine. I therefore hope my right hon. Friends and the UK negotiators are firm on that in their discussions.

We must have control of taxation and state aids as a fundamental part of our Brexit departure. We would have taken more confidence from the Government if they had used this Bill to show just how much better a UK-based taxation policy could be. We need a taxation policy that promotes more fishing and farming at home, promotes more industry and manufacturing at home, and promotes that green revolution they want by stripping the VAT off the green products that the EU has imposed on them—a policy that allows small businesses to flourish and does not overburden them with compliance and red tape. That is what we wanted from Brexit, and the sooner Ministers bring it forward, the better.

Photo of Wendy Chamberlain Wendy Chamberlain Liberal Democrat Spokesperson (Wales), Liberal Democrat Spokesperson (Scotland), Liberal Democrat Chief Whip, Liberal Democrat Spokesperson (Work and Pensions) 5:25 pm, 15th December 2020

I echo the thanks of the Minister and the Labour and SNP Front-Bench spokespeople, Mr McFadden and Alison Thewliss, as well Sir William Cash and, indeed, my right hon. Friend Mr Carmichael, who covered the earlier stages of the Bill on behalf of my party.

I became an MP a year ago and Whip for my party in September. Despite the covid challenges, the Leader of the House was giving Members two weeks’ notice of business up until two weeks ago. This Bill was tabled less than two weeks ago. Now, we find ourselves in a situation where the business for tomorrow was announced today, and where Bills are being given very little time for legislative scrutiny before they are considered by the House. This does not feel like a sovereign Parliament to me.

Despite covid, the Government have had a lot of time to bring forward the necessary legislation ahead of the transition period, whether there is a deal or not. If they felt that the challenge of covid this year was too great, they could have averted the current covid-Brexit collision by extending the transition period. I would ask when the Government realised that the measures in this Bill and, indeed, this week’s Trade (Disclosure of Information) Bill were needed. I worry what potential measures the Government may have failed to legislate for, and the extent to which we are prepared for the end of the transition period, deal or no deal.

Question put and agreed to.

Bill accordingly read the Third time and passed.