PARLIAMENTARY DEBATE
Finance (No. 2) Bill - 21 February 2018 (Commons/Commons Chamber)

Consideration of Bill, as amended in the Public Bill Committee
Brought up, and read the First time.

Let me focus on just one of those characteristics, as the issue of age is incredibly important. A number of decisions the Government make on tax policy have a differential impact on people of different ages. We have spoken in this Chamber on a number of occasions about the generational divide that exists. We are seeing “generation rent”, with millennials and those who are younger facing a very different housing situation from those in generations that came before. Therefore, any tax changes that happen affect that group of people differently from how they affected those in the previous generation when they were the same age. It is important that any analysis undertaken by the Government considers the generational divide and examines the impact on not only that group of millennials and younger people, but people of state pension age. It must consider the impact on them of any changes to taxes that are coming through.
The hon. Member for Brent Central (Dawn Butler) mentioned the issues relating to women, and it is clear that a major gender pay gap remains. I recognise that the Government have ensured that companies have to publish this information. That is really important, but the publications I have seen so far from companies have caused me even more concern than the situation we were previously in. One company recently produced a gender pay report that stated that men in the organisation were paid significantly more than women and that this was not an equal pay issue because the men were overwhelmingly doing higher-paid jobs. This was a travel company and men were the pilots whereas women tended to be the cabin crew; 95% of this company’s pilots were men and 80% of its cabin crew were women. That is still a major issue, because women are finding it very difficult to become pilots and men are not finding it that easy to become cabin crew either. There is a real issue to address. Even though I welcome the fact that these data have been published, this has highlighted more structural, institutional issues that need to be solved, as well as simply those relating to equal pay. Any impact analysis that the Government carry out needs to ensure that it takes into account all these things.
Let us look at some of the decisions the Government have taken previously, such as the changes made on the marriage allowance. I welcome the positive changes that are being made to the marriage allowance in the Bill, but the creation of the marriage allowance disproportionately has a negative impact on single female parents. That is still a major concern for the SNP. We still have real issues with the marriage allowance and do not think it has been properly thought through, because of the lack of fairness in that system.

Brought up, and read the First time.

It is also unsurprising and indicative of this Government that they have failed to keep a record of the banks that regularly pay the levy or a full list of how much they have actually paid. We would like that information, which is why, in the name of transparency—a concept alien to the Government—the Opposition have tabled new clause 4, which would create a public register for the bank levy. Once we can see the true cost of the Government’s policies, we can grasp the extent of their choices, and how they have favoured a small privileged group over the many citizens who are in desperate need of support. That goes to the heart of the new clause.
My concerns about the bank levy do not merely relate to how the banking sector is taxed and regulated; they speak directly to this Government’s approach. Government is the business of making choices, and in this case the Government have chosen to put in place a giveaway worth billions of pounds for the wealthy few instead of helping to end austerity for the many, or even for a few of the many. Looking at it from any angle, this is a shameful set of affairs, and it becomes even more shameful when it appears that the money foregone to banks through a cut to the levy could have been used to support our children’s services, which are in a state of atrophy as a direct result of the Government’s choices.
Only in the past two or three days, the Government have admitted to my hon. Friend the Member for Batley and Spen (Tracy Brabin), the shadow early years Minister, that cash-strapped local authorities have been forced to close more than 500 children’s centres. Those closures are a direct result of cuts to the funding of children’s services. Research published by Barnardo’s in December found that funding for children’s centres in England had been halved since 2010 from £1.2 billion to £600 million. That is why we want a review in relation to the bank levy.
The picture is set to worsen. Last week, Norfolk County Council approved plans to halve its £10 million budget for children’s centres to try to cope with the cuts being passed to them by the Government. On the same day, councillors in Somerset unanimously agreed to close two thirds of its children’s centres. That is why we want to look at the bank levy and why we want a review. We do not yet have an assessment of the specific impact of austerity in Northamptonshire, where the Conservative council faces meltdown as a direct result of the Government’s agenda. It is safe to say that children will no doubt be suffering as much as the wider population as public services edge closer to collapse. That is why we want a review of the banking levy.
As services have been decimated over the past seven years, we have seen a doubling of serious child protection cases and twice the number of children put into care protection plans. We want a review so that we can compare and contrast. Last year, 70,000 children were placed into care. Support for foster care, adoption and Sure Start children’s centres has all been reduced, and we have to work out how to support such services. Youth centres are closing, and short breaks for disabled children that are provided by local councils to give parents a break are going. Is that what we want? That is why we want to examine the banking levy.
Taken together, the cuts mean that some of the most vulnerable children in our country are paying the price for seven years of the Government’s economic strategy. Meanwhile, the bank levy is being cut, so we want to examine that and check things out. That is why we are challenging the Government to support our review. Asking children to pay the price of reducing the levy is unacceptable mismanagement. In fact, Sir Tony Hawkhead has described the “devastating cost” to children’s services, which he says have been left
Prevention and protection services, which are vital to the proper care of our nation’s children, could be provided for if the banking levy were not cut. That would be a welcome relief to those services.
We demand that the Government change course on the banking levy. That might make them unpopular with some people, but children come first, not the Government’s friends. That is why we are asking for this review. A review is the right thing to do for millions of children who need Government support to have the best chance in life. Should the Minister decide to do the right thing and match Labour’s plans to invest in children’s services, he will receive our full backing.
The anti-avoidance measures in the Bill are feeble and listless when we consider the scale of the problem at hand. Both the Panama papers and the Paradise papers revealed tax avoidance on an industrial scale being operated in British overseas territories and Crown dependencies, yet the Government have responded with feigned interest and a handful of measures. The Minister, in his effort to keep up the appearance of being seen to do something, has instead reinforced the view that this Government are on the side of the tax avoiders, not the taxpayers. [Interruption.] I can hear the Minister chatting away from a sedentary position. I am not sure whether that is because he does not agree with me, but he knows it is true. There is no question about it.
For example, only a third of the £1 billion originally forecast from some of the measures the Government presented to the House will be raised, and the gap between the tax take originally expected from the 28 anti-tax avoidance measures introduced since 2010 and the revised forecast is £2.1 billion. That is 25% less than the Treasury previously forecast. It is a complete shambles.

Many of those measures close egregious and glaring loopholes that had been left open by the previous Labour Government. For example, under the previous Labour Government, it was possible to have permanent non-dom status, yet the Bill will end permanent non-dom status. Prior to 2010, we had the ludicrous situation of the so-called Mayfair tax loophole whereby some people in the hedge fund industry ended up paying less tax than their cleaners—a 10% rate—by having their carried interest taxed as capital gains with the benefit of entrepreneurs relief. That loophole has been closed and then progressively tightened up in successive Budgets. The diverted profits tax is raising money. Avoiding stamp duty by placing residential property into corporate wrappers has been tightened up. There is probably more we can do, but things have certainly been tightened up. We have made sure that foreign purchasers of residential property pay capital gains tax on their disposals. Under the Bill, that will shortly be applied to disposals of commercial property as well.
I have listed five or six of the 75 measures I mentioned, all of which have been taken since 2010. That is no accident. There is a causal link, not just a correlation, between those actions and the additional amounts of tax being collected.

We now know, from Carillion and the problems at Interserve, that the idea that working with the private sector would somehow transfer the risk of construction and management projects to the private sector has been thoroughly debunked. It is very, very simple: we do not let schools and hospitals go bust, because we know that that would mean that kids would not get taught and patients would not get treated. So why we have got into deals, and why we continue to get into deals that presume we can somehow get out of them if contractors do not deliver, is a mystery to me. Certainly, a debate for another time in this place would be on a better way to borrow when there is so little competition for our business. I believe that that is where the answer lies. When we look at the industry and at what amendments 1 to 4 would do, we are not talking about an industry of hundreds of companies. The work by the Centre for Health and Public Interest found that 92% of all the PFI deals in the NHS were owned or appeared to have equity stakes from just eight companies. This small number of companies have captured a market and are therefore setting a price. We and the public sector are paying the consequences.
I looked at one of the companies, Innisfree, which owns my local hospital, Whipps Cross. It has just 25 members of staff. It is not doing the day-to-day running of Whipps Cross: booking the operations, organising the blood tests or feeding back to patients. It stands to make £18 billion from PFI deals and it has its property based over in Guernsey. Those eight companies—Balfour Beatty, Barclays, Dalmore Capital, Equitix, Innisfree, Interserve, Semperian and Veolia—are making millions of pounds in profit as we watch our councils go bust, our schools close down and our hospitals struggle. Yes, it has got harder under this Government because of the cuts they have made, but under any Government asking our public services to pay back at such excessive rates of interest would be untenable. Let us look at what we could actually do and where my amendments have come from.
I hear and understand the calls from people to cancel these contracts outright: to rip them up and say, “We are not going to pay.” But we know that these contracts are just as expensive to cancel as they are to carry on. They have been drafted specifically to require full-cost recovery to lenders to make sure that their interests are always protected. As the NAO highlighted, it is not just about repayment charges and covering those costs. We would have to cover the interest rate swaps that were built into the contracts to make sure that they are almost always profitable. It would cost £220 billion to tear up the contracts. Indeed, the Lithgow judgment from the Council of Europe in the 1980s clarifies explicitly the law around nationalisation and the compensation that would be required to be paid to companies were we to cancel the contracts.
Contract law might be on the side of the legal loan sharks to the public sector, but tax law is not. Yes, I have been through the 400 pages of the standard contracts. I have seen those clauses, but I have also seen the clauses that clarify that tax rates can change. Indeed, I know the Government agree, because when I have asked them about the tax rates and the taxes the companies are paying, they seem to think that the benefits from the changes to the tax regime are “to the victors the spoils”. That is why I have tabled my amendments. I believe that Parliament and MPs struggling in their constituencies with these loans would take a very different view. Taxation rates and corporation tax matters. When the value-for-money assessment on using PFI was done, there was an explicit calculation included on how much corporation tax the companies would pay. Most of the 700 existing deals were signed at rates of 30% or more.
I am sure that the hon. Member for Croydon South (Chris Philp), in his advocacy of cutting corporation tax, would not agree that when these companies face rates of 17% and his local schools and hospitals—I know that many south London hospitals are affected by PFI—are not getting the public investment they desperately need to keep going, the companies should benefit in that way. That was the amount of money that they agreed to pay at the point at which the contracts were signed.
We have been through the accounts. The numbers the Centre for Health and the Public Interest can give are small-c conservative, because we cannot be clear about when companies might have deferred their tax liabilities, but already, in the NHS alone, the companies have had a windfall of £190 million through the reductions in corporation tax, and in our school system they will have had a windfall of £60 million by 2020. That is money we expected for our public services. In addition, we did not expect to pay excessive rates of interest, but the evidence is there. The question for all of us is: what can we do? What action can we take?
Amendments 1 to 4 speak to what we could do now—this year, within months—to send a clear message to the PFI companies that time is up; we are no longer going to accept that kind of contract and the damage they do to our public services. If that small group of companies will not come forward with a proposal to reduce repayments, I gently urge the Minister, whose Department has resisted some of my questions about how often he has met these eight companies, to agree to getting them around the table, examining their loan portfolios and reducing the costs; then, we can start to generate some real savings. Asking individual hospitals and schools to renegotiate, against the companies’ expensive lawyers, will save very little, but if the Government take the lead—I hope the Minister will explain today how he intends to do that—in negotiating with the companies, we could get money back now. If we cannot get these eight companies to negotiate—if they continue stubbornly to resist any change in the contracts—then yes, let us use a windfall tax to make sure we get cash back for our public services.
Amendment 1 asks for a review. I hope that the hon. Member for Croydon South enjoys as much as I do reading the founding resolutions of legislation such as this Bill and understanding what it is possible to do as a Back Bencher, or as an Opposition Member. The amendment simply asks for a review of how much would be raised were we to apply the bank levy to these financing companies.
If amendment 1 does not tempt the hon. Gentleman, perhaps he could look at amendment 3, which is more explicitly about calculating a windfall tax on the companies. It is designed to enable us to work out how much extra they have made from the original deals, and to claw that back by adjusting their tax allowances. At this point, we are simply trying to clarify how much the measure would raise, to give the Government the negotiating tactic they need to get the companies to do what is right—to get round the table and see how to consolidate their loans, just as we would with people who come to our constituency surgeries having got themselves into debt.
The amendment is about sending a clear message to the industry that Parliament will act—that we will not tolerate another year of listening to headteachers and hospital managers telling us that they cannot cope with these loans. We will do something about it. The Government will claim that the companies are entitled to the bonus because they took on the risk of the buildings, but it is clearly an unexpected bonus, and clearly an opportunity to look at the contracts and make progress. If the Minister will not accept the amendment—if he will not, today, commit to negotiating with the companies to get back the money that hospitals, schools and councils throughout the country that are going bust urgently need—he has to explain how he will get us a better deal on the existing contracts.
I put the Minister on notice. It may be that that we cannot tear up the contracts, but a Labour Government would get those companies around the table and make sure that they paid their dues. We would make sure that the excessive profits are brought back, so that teachers in our constituencies do not have to fund raise to pay for books and pencils for students while the companies report millions, if not billions, of pounds of profit at our expense. George Bernard Shaw was right: sometimes political necessity becomes a political mistake. The necessity here, now, is to act, and I urge the Minister to listen.

As I said, we oppose the reductions in the bank levy. New clause 3, which would tackle this, is the most sensible approach for the Opposition, constrained as we are in this debate. It is about looking at the effectiveness of the bank levy, how much money it brings in and whether there are opportunities to do different things that could bring in more money for the Treasury. We are in a strange position. It was funny to hear people talking about the City. When I speak to people in the City, it seems to me, as a fairly left-wing person in the SNP, that my views accord pretty closely with those of some in the City right now, whereas most of them are incredibly upset about Brexit. I feel that I have more in common with them than ever before, whereas the Conservatives have less in common with them at the moment, given how upset the City is about the issues thrown up by Brexit. It is a very strange dystopian situation right now.
On tax avoidance and evasion, following on from the work of my colleague Roger Mullin, I have mentioned before, and will not stop mentioning, the issue of Scottish limited partnerships. It was welcome that the Government took action and carried out a review of SLPs, but we have yet to see any solid action coming out of that. It would be useful to know when the SLPs will be clamped down on and that loophole closed so that people cannot abuse the SLPs. It would be useful to see that coming forward.
On more creative solutions, the SNP has consistently called for rules around tax avoidance and evasion to be devolved to Scotland. We think we would do it better—we think we would do everything better, if it were devolved to Scotland. Specifically on this, however, our Government have been recognised for the action they have taken through their general anti-avoidance rule, which is stronger than that which is in place down here. We feel we would be in a better position to tackle tax avoidance and evasion were it devolved to Scotland, and we will not stop calling for that.
On the reduction in the tax gap, the hon. Member for Croydon South talked about fairness and how the situation was perhaps fairer than ever, but the point we will continue to make is that, if there is any tax gap, the system is not fair. If, for example, we do not have enough customs officers to make all the necessary checks, people will be able to avoid tax just because there are not enough customs checks. Going forward, this will be a problem. Any tax gap, no matter how it compares with other countries, is a problem. On the issue of comparisons with other countries, a Credit Suisse report in 2014 showed that smaller countries tended to have smaller tax gaps because they were better able to crack down on tax avoidance and to police things coming in and out and so prevent tax avoidance and evasion. That is just another point in the case for Scottish independence.
On that basis, if the Labour party presses new clause 3, we will support it. As I said, we will also support the hon. Member for Walthamstow. I will not speak for much longer, as my points have been made in previous debates, except to say that we support making more changes to crack down on tax avoidance and evasion and to undo the changes to the bank levy.

Turning to new clause 6 and the points raised about tax avoidance and evasion, I have little to add to what I have set out in our extensive debates on these issues at earlier stages of the Bill. A public review is not necessary. This Government have an extremely strong record on tackling tax avoidance, evasion and non-compliance, both domestically and internationally. Since 2010, HMRC has secured and protected £175 billion that would have gone unpaid. The UK is the only country to measure and publish a tax gap covering direct and indirect taxes every year. Our tax gap is, as other Members have pointed out, one of the lowest in the world, at 6%—that has come down from 7.9% under Labour in 2005-06. Despite our demonstrable successes, the Government cannot and will not be complacent. We will continue to keep the tax system under review at all times, and I urge the House to reject the new clauses and amendments.

More than three and a half hours having elapsed since the commencement of proceedings on the programme motion, the proceedings were interrupted (Programme Order, this day).
The Deputy Speaker put forthwith the Question necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).
Amendment proposed: 3, page 103, line 41, at end insert—
Question put, That the amendment be made.
Brought up, and read the First time.

The Government announced significant changes to the VED banding structure in the emergency Budget of 2015, which came into force on 1 April 2017. Under those changes, drivers of the new electric taxi would not have to pay the standard rate of VED based on the vehicle’s CO₂ emissions. However, they would pay a supplement for expensive cars of £310 per year for the first five years as the taxi costs over £40,000. This means that drivers of the new zero emission-capable taxi will be stung for the supplement, to the tune of £1,550.
Grants from both the Government through the Office for Low Emission Vehicles and from Transport for London recognise the high costs of the zero emission-capable taxi and the risk that that stops drivers taking up this environmentally friendly vehicle. They have done so by offering grants of up to £7,500 off the taxi for the first 9,000 taxi drivers to buy it. The Government will claim back one fifth of these grants through the VED supplement change.
That reform was counterintuitive and clearly at odds with the Government’s intention to make VED fairer for motorists and to reflect improvements in new car CO₂ emissions. I welcome the fact that the Treasury has acknowledged that this was an “unintended consequence” of the VED reforms. In recognition of that, the Chancellor announced the change in the autumn Budget that I have mentioned, but it will not kick in until 2019. That is where these amendments come in.
Amendments 10, 11 and 12 are designed to bring forward the exemption for the new electric taxi to the day that this Bill is passed as an Act. That would show taxi drivers in this city and across the country a clear determination on the part of the Government to help them to drive more environmentally friendly vehicles, but also recognise the significant pressures that the taxi trade is under.
My amendments perhaps go further than the Chancellor’s statement in the Budget intended, in that they would apply to all taxis over the value of £40,000. I am happy to debate the merits of that position with the Minister, but I gently say to him, in the hope that we get movement from Ministers, that I have raised this point on the Floor of the House, it was raised in the Bill Committee, and I have raised it formally and informally with Ministers, and I hope the Minister will stand at the Dispatch Box today and give taxi drivers in my constituency and across the country the good news that the Government recognise the issues and are determined to make sure that that exemption kicks in earlier than April 2019. Otherwise, the Government will have created a perverse incentive for drivers to delay taking up a new environmentally friendly taxi because they know they will get better value from 2019. None of us wants that, which is why so many Members from across the House and the country have signed this amendment.
I will conclude by making a political point. I hope that the Minister and other Conservative Members will take it in the spirit in which it is intended. There are many taxi drivers in my constituency, across London and the country who are not natural Labour voters. In fact, they have in many cases been dyed-in-the-wool Conservative voters. They cannot understand why the Conservative party has seemingly turned its back on a group of people who are arguably the best example of the small business, entrepreneurial spirit that this country embodies. Many of them have looked to the Conservative party as their champion, but they are now feeling badly left behind, not only because of issues relating to tax but because of the way in which the Conservative party has actively lobbied for a company that is destroying the taxi trade not through fair competition but through artificially low fares created by aggressive tax avoidance, low wages and a reckless and irresponsible approach to the management of data. The Conservative party has actively lobbied for Uber. Ministers have an opportunity today to show that they are listening to taxi drivers in London and across the country by making a simple change that would bring forward the Chancellor’s intended policy to a point in time that would make a difference to taxi drivers. In so doing, they might be able to rebuild a bit of trust in the Conservative party among taxi drivers.
It is clearly in my interests if the Government do not listen to a word I have said and continue to give taxi drivers in my constituency and across the country the impression that the Conservative party simply does not care. However, I know from talking to taxi drivers in my constituency and their families, and many others across the country, that unless we get this exemption through, they will not be able to afford to take up the zero emission-capable taxis. In fact, it is arguable that many of them will not be able to afford to do that anyway. I am less interested in the party politics of this debate, and far more interested in ensuring that the taxi drivers in my constituency, across my city and across the country get a fair hearing and a fair deal from this Government.

The only fair thing to do—I encourage the hon. Member for Gordon (Colin Clark) actually to read the amendment, because it would not do what he suggests—is to have a review. The amendment asks the Government to look at the implications of giving us back the money that our police and fire services have claimed. This is absolutely a matter of fairness. The rebate should always have been available to the Scottish police and fire services. The money should always have been available, so that we could ensure that we had the best possible services and so that we could do things such as tackling the public sector pay cap within those services.
We are asking the Government to consider the consequence that would occur if the money were available to be claimed back retrospectively, and I contend that the consequences would be that we could spend more money on police and fire services in Scotland, we could counter this Government’s reduction in the block grant and things would be better for the police and fire services in Scotland. This is a matter of fairness. Nothing has changed except the Government’s position, and they should give us back the money that they have always owed us.

More than five hours having elapsed since the commencement of proceedings on the programme motion, the proceedings were interrupted (Programme Order, this day).
The Deputy Speaker put forthwith the Questions necessary for the disposal of the business to be concluded at that time (Standing Order No. 83E).
Brought up.
Question put, That the clause be added to the Bill.
Amendments made: 6, page 4, line 30, leave out from beginning to end of line 32 and insert
Amendment 7, page 4, line 38, leave out from “(2A)” to end of line 6 on page 5 and insert—
Amendment made: 8, page 38, line 17, leave out from beginning to end of line 28 and insert “it does not meet the Euro 6d emissions standard.
Amendment proposed: 10, page 38, line 30, at end insert—
Question put, That the amendment be made.
Amendment made: 9, page 67, line 2, leave out “(1)” and insert “(1)(a)”—(Chris Heaton-Harris.)

Sitting Suspended
On resuming—

Bill read the Third time and passed.
Motion made, and Question put forthwith (Standing Orders Nos. 15 and 41A(3)),
Question agreed to.