PARLIAMENTARY DEBATE
Finance (No. 2) Bill (Fourth sitting) - 5 January 2022 (Commons/Public Bill Committees)

I will just pick up on some of the points made by hon. Members. I am glad to hear that the Opposition will not be opposing the clause. The hon. Member for Erith and Thamesmead said that she wants us to talk publicly about the future of vehicle excise duty. Clearly, we are well aware of—there is no secret—the expected future revenues from vehicle excise duty and fuel duty. In fact, I outlined in my opening remarks on the clause some of the data in the public domain about that, including the modelling by the Office for Budget Responsibility and in the net zero review. I can assure the hon. Member that my right hon. Friend the Prime Minister, in “The Ten Point Plan for a Green Industrial Revolution”, set out the need for motoring taxes to keep pace with the transition to electric vehicles.

The hon. Member for Erith and Thamesmead also said that she wants us to do more on electric vehicles. We are already providing substantial support for the uptake of zero and low-emission vehicles—for instance, there is no vehicle excise duty for zero-emission cars and vans. There are significantly beneficial company car tax rates for low and zero-emission cars, compared with conventionally fuelled vehicles. In the spending review 2021, we confirmed an additional £620 million to support the transition to electric vehicles, on top of the £1.9 billion announced at the spending review 2020, to address some of the barriers to uptake, including by accelerating the roll-out of charging infrastructure and supporting targeted plug-in vehicle grants to reduce prices for consumers.

The hon. Member for Gordon talked about wanting more chalk on the board. I think that, as a country, we should be proud of the achievements that we have already made in reducing harmful emissions, as well as of our substantial ambitions to achieve net zero by 2050.

I appreciate the comments from my hon. Friend the Member for North West Durham and have very much noted the point that he made.

I heard those points before; the hon. Lady just reiterated them. I addressed those points in my comments just now as well as in my opening remarks. I could argue that here in Committee is not necessarily the place to have a substantial debate about the future of motoring taxes, but, as I said, we have been quite open and several documents in the public domain set out the forecasts. We recognise the need for motoring taxes to keep pace with the transition to electric vehicles. I commend the clause to the Committee.

I have nothing further to add.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Clause 78

Vehicle Excise Duty: Exemption for Certain Cabotage Operations

Question proposed, That the clause stand part of the Bill.

Clauses 78 and 79 relate to the taxation of heavy goods vehicles. Clause 78 relates to cabotage, which is the transport of goods between two places in the same country by a transport operator from another country for the purposes of hire and reward. Cabotage is restricted both in the UK and abroad. In recent months, shortages of lorry drivers have been associated with problems with the distribution of food and other essential goods, and there have been representations to allow increased levels of cabotage.

The number of professional UK-resident drivers is estimated to have fallen by about 39,000 between the year ending June 2019 and the year ending June 2021, to stand at 268,000. The Government are temporarily extending road haulage cabotage to allow, until 30 April 2022, unlimited cabotage movements of HGVs within Great Britain for up to 14 days after arriving in the UK on a laden international journey, without transport operators needing to pay vehicle excise duty. The changes came into force on 28 October 2021. This temporary relaxation of cabotage rules for international HGV journeys within Great Britain is expected to increase resilience in key supply chains in response to the acute shortage of HGV drivers.

Clause 79 relates to the HGV road user levy. The HGV levy is an annual charge paid by UK hauliers alongside their VED, as well as a daily, weekly or monthly charge for HGVs from outside the UK accessing the UK road network. In light of the impact of covid-19, the Government decided to suspend the levy in August 2020 for 12 months to support the haulage sector by reducing its costs, and they did so again for a further 12 months from August 2021 for the same reason.

Clause 78 will make temporary changes to the Motor Vehicles (International Circulation) Order 1975 so that the relevant non-UK operators travelling in Great Britain do not need to start paying vehicle excise duty. The temporary relaxation of cabotage rules would not be effective if the relevant non UK operators of HGVs were expected to register in the UK and pay VED for the first time.

The exemption from VED will be extended to cover additional temporary cabotage rights. It will last until 30 April 2022, and encompass unlimited cabotage movements of HGVs within Great Britain for up to 14 days after arriving on a laden international journey into the UK. The changes made by clause 79 will extend the suspension of the levy for a further 12 months from 1 August 2022. This means that UK-registered keepers of HGVs will again save up to £1,200 per vehicle, as they will not have to pay the HGV road user levy when they renew their vehicle licence. Non-UK-based hauliers will also not need to pay the levy during this period.

New clause 16, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Blaydon, asks the Government to

“publish within three months of this Act coming into effect an assessment of the impact of the provisions of sections 78 and 79”

on supply chains. The new clause is unnecessary, and should not stand part of the Bill. The Government consulted on the temporary extension of road haulage cabotage ahead of its introduction to gather evidence on its potential impact. As has been set out, the Government published a response to that consultation. We had clear indications that there will be some use of the additional cabotage rights in critical parts of the supply chain. However, existing cabotage rights are modestly used by international hauliers and therefore the measure is judged likely to only modestly increase cabotage overall.

Information received by the Department for Transport has indicated that, as anticipated, there was some use of the extra cabotage rights during November and December; initial surveys suggest that about 40% of drivers engaged in cabotage used the additional rights. The take-up of those rights may continue to change over time—for example, in the context of the omicron wave of infections—and the Government are committed to continuing to monitor take-up, with more data being collected by the DFT. With regard to the suspension of the HGV levy, the Government published a tax information impact note that sets out the expected impact of the measure, including the fiscal impact. As with all tax changes, the Treasury will continue to monitor the impact of the suspension.

The Government have acted rapidly and brought forward 32 short, medium and long-term interventions to help tackle the current HGV driver shortage and support UK supply chains. In addition to the temporary extension of road haulage cabotage, those interventions include attracting drivers back to the industry through investing £32.5 million in improving facilities across the country; launching a review to look at ways to streamline compulsory ongoing training requirements under the driver certificate of professional competence scheme; and investing £17 million to create new HGV skills boot camps to train up to 5,000 more people to become HGV drivers in England.

We are already aware that since those interventions have been introduced, there has been a 90% increase in available HGV driver tests, with 2,850 tests available each week. The Driver and Vehicle Licensing Agency is dealing with around 4,200 applications daily, more than double the pre-covid rate. Information from the sector shows that the lorry driver shortage is reducing, although it continues to be a significant issue. The Government will continue to use industry intelligence and official statistics to monitor the scale of the shortage and its effects. We therefore believe that new clause 16 is not necessary, because monitoring of the UK’s supply chains and the impact of the Government’s interventions is already taking place. I urge the Committee to reject the new clause.

Overall, the changes outlined in clause 78 will temporarily ease pressures on critical supply chains due to capacity issues connected with the acute shortage of HGV drivers. Haulier capacity has been increasing, and continues to do so, but it will take some months before UK driver numbers can be grown sufficiently to rectify that shortage, so this is a temporary change while UK drivers are recruited and trained. Additionally, the haulage sector supports many other industries, so temporarily easing its financial burdens through the changes made by clause 79 will support them and help the economy recover from the impacts of covid-19. I commend these clauses to the Committee.

In essence, what I heard from the hon. Member was that she wants us to take more action on some of the challenges with supply chains. However, as I set out earlier, we have been addressing the particular problem of HGV driver shortages—both some of the short-term reasons and short-term barriers. One of those steps has been to increase the availability of new driving tests, and we have seen a substantial increase in the number of tests being taken. We are also looking at some of the longer-term challenges, such as the conditions for HGV drivers; we are therefore providing significant funding to improve roadside facilities for those drivers. That is both short-term and longer-term action being taken. We have already seen benefits from the short-term actions, with some of the pressures on the supply chain being alleviated.

Question put and agreed to.

Clause 78 accordingly ordered to stand part of the Bill.

Clause 79 ordered to stand part of the Bill.

Clause 80

Amounts of gross gaming yield charged to gaming duty

Question proposed, That the clause stand part of the Bill.

Clause 80 increases the thresholds for the gross gaming yield bands for gaming duty in line with retail price index inflation. Gaming duty is a banded tax paid by casinos in the UK, with marginal tax rates varying between 15% and 50%. To ensure that operators are not pulled into higher tax bands because of inflation, gaming duty bands are increased in line with RPI. That means that casinos continue to pay the same level of tax in real terms. The change made by clause 80 uprates the bands of gaming duty in line with inflation. That is expected by the industry and assumed in the public finances. The rates of gaming duty themselves will remain unchanged. The change will take effect for accounting periods starting on or after 1 April 2022.

New clause 11 seeks to place a statutory requirement on the Chancellor to review and publish a report on the impact of the increase in the gaming duty thresholds on the volume of gambling and on public health. The Gambling Commission publishes statistics on gambling participation, spend and gross gaming yield for each part of the sector annually, and Public Health England published a review on gambling-related harm, which the Department of Health and Social Care is considering as part of its prevention strategy work, so an additional report would merely duplicate information that is already available. There is no change to the tax rate in this provision. Accordingly, the Government do not expect that it will have an impact on gambling participation, spend or public health. I hope that that reassures Committee members, and I ask that they therefore reject the new clause.

The hon. Member for Erith and Thamesmead spoke of gambling harm. Having previously been a Digital, Culture, Media and Sport Minister with oversight of gambling, I appreciate her raising the issue. However, I reiterate that the clause changes gambling taxation; it is not related to the overall regulation of gambling activity. That is a matter for the Secretary of State for Digital, Culture, Media and Sport. The Government continue to monitor the effectiveness of existing gambling controls. The Department for Digital, Culture, Media and Sport launched a review of the Gambling Act 2005 with a call for evidence that closed at the end of March last year. The Government will respond to that review in due course.

Question put and agreed to.

Clause 80 accordingly ordered to stand part of the Bill.

Clause 81

Excise Duty: Penalties

Question proposed, That the clause stand part of the Bill.

Clause 81 makes two changes to ensure that current penalties for excise wrongdoings also apply to excise goods located in the customs-free zone of a freeport and to excise goods imported under the new authorised use customs procedure introduced at the end of the transition period. These changes do not create any additional burdens for businesses. They simply ensure that there is a consistent approach to excise wrongdoing penalties for serious non-compliance.

The Government have introduced two new customs procedures. The first is the free zone procedure, which will allow excise duty to be suspended in customs-free zones located in freeports. Freeports are part of the Government’s plans to regenerate and develop deprived areas and our mission to level up across the country. The second is the authorised use procedure, a customs import procedure introduced at the end of the transition period to replace a previous customs procedure that no longer applied when we left the EU. The current UK excise wrongdoing penalties in schedule 41 to the Finance Act 2008 do not extend to either of these procedures. This clause corrects that and ensures that HMRC can tackle abuse and non-compliance in respect of excise goods stored under these procedures.

The changes made by the clause extend the excise wrongdoing penalty regime in schedule 41 to the Finance Act 2008 to free zones and to situations where businesses release goods into the authorised use procedure introduced at the end of the transition period. These changes do not create any additional administrative burdens or costs for businesses. They will apply only to businesses that import excise goods into UK free zones or to businesses authorised to release goods into the authorised use procedure. These changes will enable HMRC to penalise individuals for any wrongdoing or non-compliance relating to excise goods imported under either of these processes.

In summary, these changes ensure that the Government have the necessary tools to tackle non-compliance and avoidance when goods are imported into the UK under either the free zone procedure or the authorised use procedure.

I am glad that the Opposition will not oppose the clause, although I think I heard that, overall, they oppose freeports. Clearly, they take a very different view from us, because we see freeports as an important part of our ambitions to level up and increase opportunities in some of the more deprived areas of the country.

From memory, I believe that three freeports are already open. I recently visited the Teesside freeport to see the great excitement there about the opportunities that it will provide to the community in that area.

The hon. Member asked what checks there will be and what we will do to ensure that there is good compliance in freeports. One thing I will say is that the change made under this clause will mean that HMRC has the tools to tackle non-compliance in relation to excise goods suspended inside the customs-free zone procedure in freeports. Overall we are confident that we will see not only compliance, where appropriate, but also economic growth and all the benefits associated with that, both in and around freeports.

I am happy to write to the hon. Member with any further details about the regime of checks that will be carried out for freeports. I therefore move that the clause stand part of the Bill—

I am glad to hear that Labour does indeed support freeports, and I thank the hon. Member for making that clear. As I said, I will write to her about her more detailed questions. I commend clause 81 to the Committee.

Question put and agreed to.

Clause 81 accordingly ordered to stand part of the Bill.

Clause 82

Rates of landfill tax

Question proposed, That the clause stand part of the Bill.

Clause 82 increases both the standard and lower rates of landfill tax in line with inflation from 1 April 2022, as announced in the 2021 spring Budget. Landfill tax was introduced in 1996 to encourage the diversion of waste away from landfill towards more environmentally friendly waste management options, such as recycling, reuse and recovery. It has been hugely successful in achieving that aim, contributing to a 90% reduction in waste collected and managed by local authorities sent to landfill in England.

The changes made by clause 82 will see landfill tax rates increase from £96.70 to £98.60 per tonne for standard-rated waste disposed of to landfill, and from £3.10 to £3.15 for lower-rated waste, from 1 April 2022. These changes will make sure that the price incentive to divert waste away from landfill is maintained in real terms.

Overall, clause 82 will increase the standard and lower rates of landfill tax in line with the retail prices index from 1 April 2022. That will maintain the real-terms price incentive to divert waste away from landfill. I therefore commend the clause to the Committee.

The hon. Member for Blaydon made a really important point about the enforcement of landfill tax. I am also aware of concerns about the associated waste crime. There has been a reduction in the landfill tax gap in recent years. The landfill tax gap for England and Northern Ireland was estimated at £200 million—22.7%—in 2019-20, which is a decrease compared with the tax gap in 2018-19, when it was £275 million, or 29%. So there has been an improvement in the enforcement of landfill tax, but I recognise the point that she makes and we will continue to work on that.

There is a new taskforce dedicated to tackling serious and organised waste crime. The joint unit for waste crime will bring together law enforcement agencies, environmental regulators, HMRC and the National Crime Agency to deal with waste crime.

I hope the hon. Member is happy for me to write to her on the methodology for calculating that particular tax gap. I am happy to set out further action that will be taken to address waste-related crime as well.

I thank the hon. Member for Erith and Thamesmead for pointing me to the report that she mentioned. She made broad points about the tax system and its role in meeting net zero. The net zero review was a substantial document that was very open about the thinking and the challenges involved in our transition to net zero. I do not think that here and now is the place to set out a net zero tax strategy, which I think she was asking me to do, so I hope she will understand if I do not stand here and do that, but we have put a lot on paper about the Treasury’s thinking on these matters.

I have heard the hon. Member’s points. I move that the clause stand part of the Bill.

Question put and agreed to.

Clause 82 accordingly ordered to stand part of the Bill.

Clause 83

Plastic Packaging Tax

Question proposed, That the clause stand part of the Bill.

Clause 83 and schedule 11 make technical amendments to the legislation that introduces the world-leading plastic packaging tax, which comes into force on 1 April. Together, they make sure that the legislation operates as intended, that the UK complies with international agreements and that HMRC has the appropriate framework to administer the tax.

First, I welcome the support from the hon. Member for Erith and Thamesmead for the plastic packaging tax. I am glad to hear that she does not intend to oppose clause 83 and schedule 11.

To pick up specifically on new clause 17, tabled by the hon. Members for Ealing North, for Erith and Thamesmead and for Blaydon, it suggests that the Government should conduct future reviews of the tax and the impact that it has, including six months after the passing of the Bill for the tax rate and chargeable packaging components, and for all aspects of the tax a year after introduction or annually after an initial report. The Government have already set out a large amount of detail about the expected impact of the tax, and the National Audit Office report on environmental taxes recently concluded that Her Majesty’s Treasury and HMRC had

“undertaken extensive work to understand the possible impacts of the tax”.

Further detail on modelling to assess the impacts of the plastic packaging tax was set out by the Office for Budget Responsibility in its economic and fiscal outlook published in March 2020. This included most significantly the increase in recycled plastic in packaging and more marginal impacts, such as switching to alternative plastics or materials.

As with all tax policy, the Government will continue to keep the plastic packaging tax under review. Given the substantive information already published and the fact that very limited data will be available within six months after the passage of the Bill, it would be premature to review the impacts of the tax as suggested. As to evaluating the impact of the tax annually after its introduction, being able accurately to isolate the impact of particular policy measures alongside other external factors is inherently difficult, and the Government will carefully consider these issues. As set out in the tax information and impact note published in July 2021, consideration will be given to evaluating aspects including the rate, threshold and exemptions from the policy after at least one year of monitoring data has been collected and analysed.

The Government agree that it is important to understand the efficacy and impact of the plastic packaging tax, but given that these issues have been previously considered and will be kept under review, we do not think that new clause 17 is necessary.

I come now to a couple of the specific points made by the hon. Member for Glasgow Central. I can assure her that there is not an exemption from the plastic packaging tax for freeports. The clause is to ensure that the tax continues to apply with any changes to freeports legislation. And that would be the reason for not including everything in primary legislation—to answer the hon. Member for Blaydon’s point—but requiring some flexibility through secondary legislation.

What the hon. Lady read out is in line with what I said—there is not an exemption for freeports to supply the necessary flexibility—but I am happy to write to her with the reason why freeports get such a specific mention.

The hon. Lady also raised a point about a freeport for Scotland. We remain committed to establishing at least one freeport in Scotland, Wales and Northern Ireland as soon as possible.

The clause and schedule make sure that the plastic packaging tax will operate as intended from its commencement on 1 April 2022.

I jumped across to that point when I was addressing the freeports point. In general, it is to allow flexibility, where primary legislation is not the right place to put measures. I am happy to write to the hon. Lady if there is anything further to add on her particular point.

Question put and agreed to.

Clause 83 accordingly ordered to stand part of the Bill.

Schedule 11 agreed to.

Ordered, That further consideration be now adjourned. —(Alan Mak.)