That is interesting. This sort of postcode lottery has afflicted many people, so my hon. Friend makes an important point. I now want to move on.
This Finance Bill contains a series of measures relating to vehicles and emissions. On clauses 7 to 9, will the Minister take some time in his response to explain the direction of travel—if he will pardon the pun—in the differential for different types of vehicle and different years of what is charged for ultra-low emission vehicles? Our reading is that there is a differential of 4% for the financial year 2017-18 and then 3% for 2018-19. If there is an explanation for that, I am not clear what it would be. We would be grateful if the Minister could seek some inspiration over the next hour or so and help us out with that. Similarly, why are the Government using the Bill to remove the incentive for companies to provide zero-emission vans over the next Parliament? Again, I cannot understand the logic behind the provisions as it appears in the explanatory notes, so it would aid the process of debate if the Minister could clarify it for us.
In clauses 13 and 14, the Government are legislating to protect two particular groups, carers and ministers of religion, who may suffer as a result of the Bill’s abolition of the £8,500 exemption on what are known as “benefits in kind”. That is obviously welcome for those who benefit from it, but will the Minister reassure us and confirm that adequate due diligence has been applied to ensure that no other categories of low-paid worker could be adversely affected by this change? The provisions are very specific in naming the particular types of occupation, but I always slightly worry when particular types of job have to be named that other forms of occupation or employment might be affected. I would like to know more about the process the Treasury pursued in framing the clauses in that particular way.
The Bill brings forward several clauses relating to tax avoidance. Everybody knows that the Government’s record on this is atrocious, given that the tax gap increased by £1 billion to £34 billion last year. We also know that Lord Green, the champion of the Tories on many of these issues, has his own track record at HSBC. In this context, any moves to tackle extreme tax avoidance and evasion are welcome—clause 33, for example, provides for anti-avoidance measures on carried-forward losses and there are provisions on entrepreneurs’ relief—but we have some questions that it would be helpful for the Minister to answer.
Clause 12 deals with the abolition of the dispensation regime. Is there a danger that, during the course of the simplification of expense reimbursement—a principle we support—some opportunities for abuse might arise? For example, a flat-rate expenses allowance could lead to some avoidance issues. Do the Government have some figures to show the amount of taxes collected through PAYE and the benefit audit from current companies?
We support the principle of clause 20 on intermediaries and gift aid, encouraging charitable giving and making gift aid a more attractive prospect by removing the need to send off the gift aid forms through the post. Donating online is obviously welcome, but can the Government confirm how they will prevent rogue intermediaries from seeking to profit from the gift aid market? How will the Government ensure sufficient understanding of this so-called “tax to cover” principle?
Do the changes outlined in clauses 26 and 27 undermine the original anti-avoidance intentions of the late interest rule? Could these provisions be rendered in any way redundant by the ongoing BEPS—base erosion and profit shifting—process? Will the capping of group interest deductions be covered? Labour Members want to hear that proper attention has been paid to this international process and that we are not unduly jumping the gun.
We have questions about the clause 28 restrictions on research and development relief, whereby the costs of materials incorporated in products that are then sold commercially will not be eligible for that relief. Have the Government considered any exemptions for companies selling items that they had not intended to sell—for cash-flow reasons, for example? What will be the impact on liquidation of a company? Would its R and D credit-containing assets be devalued?
Before leaving my assessment of the anti-avoidance measures, I want to draw the House’s attention particularly to part 3 on diverted profits tax, which tries to deal with artificially contrived arrangements. Opposition Members want arrangements to work effectively, but we worry about the haste and laxity of the drafting. In his opening remarks, the Minister introduced this new tax on diverted profits through counteracting arrangements by which foreign companies exploit the permanent establishment rules and prevent companies from creating tax advantages by using transactions or entities that lack economic substance. We were told that the draft clauses published in December would be replaced, but the first we saw of the new iteration of the provisions was when the Bill was printed yesterday. That provides insufficient time to scrutinise and assess such a large number of highly complex and potentially important measures. This, I fear, is a direct result of the rushed timetable with which we have been presented today.
These are my questions to the Minister. What is the expected impact on the base erosion and profit shifting process? What challenges is he expecting on the basis of EU law and how will he address them? Why is it still showing such a low yield in the Red Book, given that the UK turnover of the multinational tech giants is so significant? What research has the Department undertaken into the effectiveness of the proposed enhanced civil penalties for offshore tax evasion and will the increase improve compliance?
We welcome the measure on country-by-country reporting and common reporting standard issues, but the Office for Budget Responsibility has labelled the costings and related aspects as “highly uncertain”. I understand that the wording in the draft clause that we have seen would enable public disclosure of the country-by-country reporting rules, if the OECD updated its guidance to allow for it. Is that still the case for the clause before us today? Will the Government push for public disclosure or is the Minister trying to allow the disclosure only secretly for the Revenue authorities? Public disclosure is where we should be; if not, why not?
The clauses that extend capital gains tax arrangements to foreign individuals when they dispose of UK residential properties are welcome, but again the way in which the Government have brought them forward at the last minute means that we have little opportunity for proper scrutiny. It is worrying to those outside this place to see attempts to pass such provisions in this way. We understand
that the Treasury might have further legislative proposals, but can the Government address the concerns raised by the Chartered Institute of Taxation about the complexity of the new rules and the perceived unfairness in how they apply to people temporarily on assignments overseas who would not normally be required to pay a CGT charge on their main residence?
On the simplification measures, there are questions about the correct penalty regime for the new reporting requirements in the Finance Act 2014. Removing the need for a tribunal process is one such arrangement, but there might be consequences from rushing through this legislation.
My shadow DEFRA colleagues would certainly want to ask the Government why they have not done more on flooding and flood prevention. The tax change to encourage private investment in flood prevention is certainly welcome, but is it not more of a fig leaf to cover the Government’s failures properly to support flood defences? The de-prioritising of flood defence investment that we saw at the start of this Parliament will be a legacy that many communities will not forget.
On the new tax reliefs for film, TV programmes and video games, the Minister will know of the history of scams, tax shelters and bogus arrangements that have been exploited in the past. Some have been convicted of abusing those arrangements. Will he assure us that proper due diligence has been done to prevent some of those abuses from happening again?
Finally, let me deal with the measures relating to the oil and gas industry. My hon. Friend the Member for Birmingham, Ladywood (Shabana Mahmood) wrote to the Minister about the impact of the Bill on the safeguarding of the future of the North sea oil industry. The recent fall in global oil prices has put a number of jobs at risk in the sector, which is one of Scotland’s greatest success stories, and its current predicament requires a long-term solution.
We welcome the measures that will cut the supplementary charge and petroleum revenue tax, which were outlined in Labour’s “oil industry roadmap” in January. However, we have also consistently called for greater certainty for the sector, particularly because of the long-term nature of much of its investment. A simpler investment allowance should be delivered, as long as the industry can be assured that the transition from the current regime will not cause any interruption in investment.
The Finance Bill should be establishing a mechanism for joint reporting by the Treasury and the finance directorate to the United Kingdom and Scottish Parliaments on the fiscal risks of volatility, and how they will be managed in the future to maximise recovery from the UK continental shelf. I also urge the Minister to consider the need for a full assessment, in the round, of the impacts of tax reliefs and rates
My hon. Friend the Member for Birmingham, Ladywood will shortly have an opportunity to talk about other changes that we feel are necessary. Let me say now, however, that we should like to see a review of the impact of the rise in VAT in recent years, and of the changing of the top rate of tax from 50p to 45p. I hope that we can extract some more data and information from the Treasury. We should be finding ways of helping small firms with a cut in business rates, rather than always prioritising a small number of larger companies,
as the Government are doing. Their priority is reducing corporation tax rather than cutting business rates in 2015-16 and freezing them in 2016-17, which we think would be preferable.
We should have a Finance Bill that deals in the round with many of the problems that our country faces: the living standards that have been squeezed, and the fact that wages have been surpassed by prices for such a long time during the present Parliament. Our public services require revenues to help them to serve our constituents—particularly the national health service, which we have to conclude is at risk because of the Government’s extreme plans for cuts. Those plans go way beyond simply focusing on the deficit, as the Government have also done. The Office for Budget Responsibility have talked of
“a sharp acceleration in the pace of implied real cuts to day-to-day spending on public services”.
At the general election in, I believe, 43 days’ time, the country will have a clear choice between the failing plans, the failing Budget and the failing Finance Bill that we are debating today, and a better plan to put working people first and to save our national health service. We will raise living standards by increasing the minimum wage to £8 an hour, and we will try our best to fund 25 hours of free child care for working parents with three and four-year-olds by means of changes in the bank levy. Our plan will help to transform our NHS with a “time to care” fund, which we will support by asking those who are fortunate enough to live in properties that are worth at least £2 million to chip in a little more, and it will ensure that we balance the books fairly by reversing the approach of the Government parties. That would be a better Finance Bill and a better Budget, and I look forward to seeing it under a future Labour Government.
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