PARLIAMENTARY DEBATE
Finance (No. 2) Bill - 20 April 2021 (Commons/Commons Chamber)

I should explain that, in these exceptional circumstances, although the Chair of the Committee would normally sit in the Clerk’s chair during Committee stage, in order to comply with social distancing requirements, I will remain in the Speaker’s Chair, and I will be carrying out the role not of Deputy Speaker but of Chairman of the Committee. We should be addressed as Chairs of the Committee, rather than as Deputy Speakers.

Clause 30

Construction industry scheme

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

With this it will be convenient to discuss the following:

Amendment 70, in schedule 6, page 121, line 1, leave out “ceases to be” and insert “is not”.

This amendment would allow that a de minimis amount of minor works can be disregarded.

Amendment 71, page 121, line 2, after “time” insert

“, but the body or person expects it to be met at any time,”.

See the explanatory statement for Amendment 70.

Amendment 72, page 121, line 3, leave out “continuing to be” and insert “being”.

See the explanatory statement for Amendment 70.

Amendment 84, page 121, line 4, leave out “any further”.

See the explanatory statement for Amendment 70.

Amendment 85, page 121, line 5, at end insert “exceeding £3,000,000”.

See the explanatory statement for Amendment 70.

Amendment 73, page 121, line 8, leave out paragraph 3.

This amendment would remove the provision making businesses who fall within the current definition, but who would not fall under the new definition of “deemed contractor”, to be drawn into the new regime for CIS from 6 April 2021.

Amendment 74, page 121, line 20, leave out paragraph 4.

This amendment would remove the provision requiring that, when a contractor is deducting the relevant percentage from a contract payment made to a sub-contractor, they should first deduct only the cost of material purchased by the sub-contractor from the figure to which the relevant percentage deduction is applied.

Amendment 75, page 123, line 17, leave out “2021-22” and insert “2022-23”.

This amendment would delay commencement until April 2022.

Amendment 76, page 123, line 20, leave out “2021” and insert “2022”.

See the explanatory statement for Amendment 75.

That schedule 6 be the Sixth schedule to the Bill.

Clause 36 stand part.

Government amendments 17 to 42.

That schedule 7 be the Seventh schedule to the Bill.

Clause 41 stand part.

Clause 115 stand part.

That schedule 27 be the Twenty-seventh schedule to the Bill.

Clauses 117 to 121 stand part.

Amendment 77, in schedule 29, page 319, line 23, at end insert—

“32 After section 280 of Finance Act 2014 insert—

‘280A Treatment of promoters of abusive tax avoidance schemes

(1) In any proceedings for the offence of cheating the public revenue, where—

(a) the person charged acted as a promoter in relation to relevant arrangements within the meaning of section 235, or the person charged gave in the course of business affirmative advice on the viability of relevant arrangements within the meaning of section 234, and

(b) the relevant arrangements were abusive tax arrangements within the meaning of sub-paragraph 3(2) of Schedule 16 of Finance (No. 2) Act 2017,

subsection (2) shall apply, subject to subsection (3).

(2) If, at any time that the person charged acted so as to fall within subsection (1)(a), that person was aware of the course of action or intended course of action having the consequence that the relevant arrangements were abusive tax arrangements within the meaning of sub-paragraph 3(2) of Schedule 16 of Finance (No. 2) Act 2017, the actions of that person in respect of the relevant arrangements shall be deemed to have been dishonest.

(3) Subsection (2) shall not apply if the person charged proves that they held in good faith the belief that the course of action or intended course of action was reasonable in the circumstances.’”

This amendment would cause promoters of tax avoidance schemes which are abusive (defined in existing legislation to mean schemes where it is not reasonable to regard the scheme as a reasonable course of action) to be treated as acting dishonestly for the purposes of criminal prosecution of tax offences, without dishonesty having to be separately proved by the prosecution.

That schedules 29 to 32 be the Twenty-ninth to Thirty-second schedules to the Bill.

New clause 14—Review of changes to construction industry scheme—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to the construction industry scheme by section 30 and schedule 6 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) In this section—

‘parts of the United Kingdom’ means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and ‘regions of England’ has the same meaning as that used by the Office for National Statistics.”

This new clause would require a report on the construction industry scheme provisions on various economic indicators.

New clause 15—Review of effect on tax revenues—

“(1) The Chancellor of the Exchequer must review the effects on tax revenues of section 115 and schedule 27, and sections 117 to 121 and schedules 29 to 32 of this Act, and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider—

(a) the expected change in corporation and income tax paid attributable to the provisions; and

(b) an estimate of any change, attributable to the provisions, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid.

(3) The reference to tax required to be paid in subsection 2(b) includes taxes payable by the owners and employees of Scottish limited partnerships.”

This new clause would require a report on the impact of certain provisions of the Bill on narrowing the tax gap by comparing: (a) the expected change in corporation and income tax paid attributable to the provisions and (b) an estimate of any change, attributable to the provisions, in the difference between the amount of tax required to be paid to the Commissioners and the amount paid. In particular, this includes taxes payable by the owners and employees of Scottish limited partnerships.

New clause 29—Review of tax avoidance measures—

“(1) The Chancellor of the Exchequer must review the impact of sections 117 to 121 and Schedules 29 to 32 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act, and then annually for five further years.

(2) A review under this section must estimate the expected impact of sections 117 to 121 and Schedules 29 to 32 on—

(a) levels of tax avoidance,

(b) levels of tax evasion, and

(c) reducing the tax gap in each tax year from 2021-22 to 2025-26.”

This new clause would require the Government to review the impact of the provisions relating to tax avoidance and publish regular reports setting out their findings.

The Government remain committed to tackling tax avoidance, evasion and other forms of non-compliance. Since 2010, we have introduced over 150 new measures and invested over £2 billion in additional funding to ensure that the right tax is paid at the right time. These efforts have helped to secure and protect over £250 billion for the UK’s public services that would otherwise have gone unpaid, and they have helped to bring down the tax gap to 4.7% in 2018-19—its lowest recorded rate.

But there is still work to do. Clauses in this Bill build on our previous reforms in order to clamp down on deliberate non-compliance and make sure that everyone pays their fair share. They include measures to tighten the anti-avoidance rules aimed at those who promote and enable tax avoidance schemes. They also close a loophole in the existing anti-avoidance rule aimed at preventing non-UK resident individuals from claiming relief when they gift business assets to a company controlled overseas.

The clauses support HMRC’s strategy on promoting good tax compliance. As an example of that approach, the Government are amending the follower notices regime, which penalises taxpayers who have used avoidance schemes that have been shown to be ineffective, in order to make it fairer for those who comply, while ensuring that the regime remains just as effective at combating avoidance. The Bill also seeks to bring parts of the hidden economy out of the shadows by making some licence approvals conditional on tax registration and compliance. The clauses in the Bill are necessarily technical, which is in part down to the complex rules that are currently in place. Given the number of issues that we are covering and the number of speakers in the debate, I will keep my remarks fairly brief.

Clause 30 and schedule 6 introduce changes to tackle abuse of the construction industry scheme. The construction industry scheme is a revenue protection scheme designed to tackle evasion in the construction sector. The scheme protects approximately £7.1 billion in tax every year by requiring contractors to make deductions from the payments they make to subcontractors that they engage. Those payments count as advance payments towards those subcontractors’ tax and national insurance. The changes made by clause 30 will allow HMRC to correct employers’ CIS deductions when they are false or incorrect. Clause 30 will clarify the rules on deductions for the cost of materials and change the rules for determining which businesses will need to operate the CIS. It will also expand the scope of the current penalty for providing false information to HMRC.

Scottish National party amendment 74 would remove paragraph 4 of schedule 6 to the Bill, which would have the effect of removing the proposed changes to rules for deductions for materials. However, there is a clear case in public policy for these changes. Some contractors and subcontractors are interpreting the rules incorrectly at present in a way that undermines the purpose of allowing materials deductions within the scheme, which allows some contractors and subcontractors an advantage over others. The proposed rule changes will ensure a clear and consistent approach, providing a level playing field for those involved. I therefore urge the House to reject amendment 74.

Amendment 73 proposes to remove paragraph 3 of schedule 6, which relates to the transitional arrangements between the old and new rules for qualifying as a deemed contractor. This would mean that many businesses would have to change their business arrangements overnight and go through the process of re-registering for the construction industry scheme under the new rules. As this could be more disruptive and confusing than the proposed transitional arrangements, I urge the House to reject the amendment.

Amendments 75 and 76 would delay the commencement of this measure to April 2022 rather than April 2021. Such a delay would not be appropriate, as industry has already been consulted on the changes and any impacts are expected to be limited. Again, I urge the House to reject these amendments.

Clause 36 and schedule 7 amend the corporation tax rules governing so-called hybrid mismatches. These rules are intended to tackle aggressive tax planning by multinational companies that seek to take advantage of differences in how countries view entities and financial instruments. Hybrid mismatches can lead to double deductions for the same expense or deductions for an expense without any corresponding receipt being taxable. The Government have consulted in this area and are amending the rules in several areas so that they remain proportionate and do not lead to economic double taxation. That includes introducing a limited grouping matching rule and a change to the type of income that counteractions under the rules can be set off against.

Government amendments 17 to 42 to clause 36 have been tabled to ensure that the changes provided under that clause work and reflect the underlying policy intent. They address various technical issues that have been raised by external commentators following the publication of the Bill, and mostly change small and technical details.

Clause 41 will close a loophole in the capital gains tax gift holdover relief rules by preventing non-UK residents from being able to claim the relief while transferring a business asset to a company controlled overseas that they personally own. By making this change, the Government are ensuring that the relief is used fairly and only for its intended purpose.

Clause 117 and schedule 29 make changes to the promoters of tax avoidance schemes regime, known as POTAS. The changes allow Her Majesty’s Revenue and Customs to issue stop notices to prevent the promotion of schemes that it suspects do not work and to obtain information from suspected promoters at an earlier stage of the process than at present. They also prevent promoters from sidestepping the rules by rearranging their corporate structure to carry out activities through different entities. There are a number of other technical amendments to ensure the continued effectiveness of the regime. There are also further measures in the Bill to enhance the operation of the disclosure of tax avoidance schemes—DOTAS—rules.

Clause 119 changes the penalties issued to enablers of tax avoidance schemes that have been defeated in court, at tribunal or otherwise counteracted. The changes will allow HMRC to obtain relevant information from potential enablers at the earliest possible moment so as to be able to consider whether they are liable for an enabler penalty.

Clause 120 and schedule 31 make changes to ensure that the general anti-abuse rule can be used as intended in respect of partnerships that have entered into abusive tax avoidance arrangements.

Finally I turn to clause 121, which from April 2022 makes the renewal of certain licences to trade conditional on licence applicants in England and Wales completing checks with HMRC. The checks will confirm whether applicants are registered for tax, and new licence applicants will be directed to HMRC guidance about their tax obligations.

I turn to the most substantive of the amendments before us today: amendment 77, which relates to the POTAS provisions that I outlined. The amendment seeks to amend schedule 29 so that anyone subject to the promoters of tax avoidance schemes regime, and promoting or enabling abusive tax arrangements, should be deemed to have been acting dishonestly unless they can show that they acted in good faith and believed the arrangements to be reasonable. This would mean, in respect of the criminal offence of cheating the public revenue, that a person would automatically be treated as dishonest where it had been demonstrated that they had promoted abusive tax arrangements as defined in the general anti-abuse rule. As such, there would be no requirement for any prosecution to prove dishonest conduct.

I fully agree that promoters who break the law should face the consequences of their actions. That is why the Government are putting so much emphasis on anti-avoidance measures and measures against promoters of tax avoidance in the Bill and elsewhere. We should be under no illusions about this. It is not honest to market tax schemes or arrangements that are known not to work and that at their heart feature false statements.

I will speak to new clause 29, tabled in my name and the names of the Leader of the Opposition and other right hon. and hon. Friends. It is timely to consider what the Government are doing to tackle tax avoidance and tax evasion today, with this month marking five years since the publication of the Panama papers. Those papers revealed the true global scale of tax avoidance and tax evasion and the need for comprehensive and effective action to tackle them. Of course, the clauses we are considering are far more limited in scope.

The Minister set out that clause 30 relates to the abuse of the construction industry scheme rules, clause 36 makes amendments to the corporation tax rules for hybrids and other mismatches and clause 41 amends the anti-avoidance rule when claiming relief for gifts of business assets. More widely, clauses 115 and 117 to 121 relate to other measures, including penalties for the promoters of tax avoidance and giving HMRC new powers to obtain information. We will not oppose those measures today.

However, our concern about the Government’s approach is centred not so much on what those clauses cover but what the Bill, and the Government’s approach more widely, fail to do. Our concern is that, faced with the challenges of tax avoidance and tax evasion, and with the public clearly wanting to see definitive action from the Government, Ministers have presented a Bill of measures that are relatively minor and technical. Indeed, as the House of Commons Library analysis of the Bill concluded, it would seem that the Exchequer impact of these changes will be minimal as they are not included in the Budget report costings.

The truth is that three Conservative Prime Ministers and five Conservative Chancellors have failed to tackle tax evasion and aggressive tax avoidance. The Government have repeatedly promised to act, but their proposals in the Bill fall far short of the change we need. That is why our new clause would require the Government to review the impact of provisions in the Bill relating to the levels of tax avoidance and tax evasion and the size of the tax gap, and to publish regular reports setting out their findings. The Government must not be allowed to hide behind warm words on this matter. They need to be transparent about the impact, or lack thereof, that their proposals will have.

We also welcome the amendment in the name of my right hon. Friend the Member for Barking (Dame Margaret Hodge), which seeks to treat promoters of tax avoidance schemes which are abusive as acting dishonestly for the purposes of criminal prosecution of tax offences. This kind of change is crucial if we are to shift towards more criminal prosecutions for the promoters of tax avoidance schemes, and to shift the gear of the Government’s approach.

At the moment, where tax avoidance has occurred, the system lands liabilities on the tax payers, who are usually not tax experts and may have been falsely told that a tax avoidance scheme is lawful. In contrast, the promoters of tax avoidance schemes are allowed far too often to get away with it. We therefore welcome any efforts to strengthen penalties for the promoters of failed tax avoidance schemes. But we have seen nothing from the Government today to raise the stakes and to make greater use of the powers HMRC already has to bring criminal prosecutions against the promoters of fraudulent tax schemes.

We know that HMRC recognises its power to use criminal investigation approaches to tackle the promotion and enabling of tax avoidance schemes, but in a letter the Financial Secretary sent me in January this year, he admitted that, since the formation of HMRC’s fraud investigation service in 2016, only 20 individuals have been convicted for offences relating to arrangements that have been promoted as tax avoidance. An average of around four people a year does not feel like a concerted effort.

My hon. Friend is making a great speech. Does he agree that it seems disproportionate that more people, in an adjusted sense, tackle benefit fraud than tackle big business or dodgy individuals who are taking money from the public purse?

I very much agree. My hon. Friend makes an important point about the Government’s priorities, and about the lack of priority they give to going after the promoters of tax avoidance schemes and those who evade paying tax, in comparison to other actions in Government. We are seeking to put pressure on them today to address that imbalance.

HMRC’s criminal investigation policy states:

“Criminal investigation will be reserved for cases where HMRC needs to send a strong deterrent message”.

However, we know that fraud through the promotion of tax avoidance continues at scale, involving at least an estimated £20 billion in 2018-19, so it is hard to imagine why Ministers would not support a stronger deterrent message being sent by the greater use of criminal prosecutions.

Part of the answer may be the understaffing of HMRC. In a response on 11 January this year to a parliamentary question, the Financial Secretary admitted that the number of full-time equivalent employees at HMRC had fallen since 2010 from 67,553 to 58,467. That is a reduction of more than one in seven. The question of capacity in HMRC and the impact that that may have on its ability to tackle tax abuse must not be ignored. The Tax Justice Network refers to the fact that a member of staff in the compliance business stream at HMRC brings in on average over £900,000 a year on a £30,000 salary. It has pointed out that the Chancellor’s additional investment in HMRC staffing is directed towards tackling fraud related to covid spending, while previous funding increases have supported HMRC’s Brexit capacity. Its view is that the Chancellor must invest further in HMRC’s core compliance capacity.

Furthermore, beyond the questions around tackling the promoters of tax avoidance, the Bill is also silent on other important areas that need to be pursued, such as efforts to set up a register of overseas entities. Legislation is needed to establish a register that would show exactly who owns the foreign companies buying up British property. This would serve as a key part of any clampdown on money laundering.

The then Prime Minister, David Cameron, first announced plans for this in 2015, yet more than five years later, the legislation is nowhere to be seen. I bet he has not been in touch with Ministers for action over that. I would welcome the Minister using his speech at the end of this debate as an opportunity to explain whether the promised deadline of introducing legislation to set up a register of overseas entities by 2021 will be missed. If he is silent on this matter, we will take that as a yes.

I would like to use the opportunity of a discussion on tax avoidance to ask the Treasury ministerial team again to confirm whether the Chancellor backs plans for a global minimum corporate tax rate, as proposed by the US President. When I asked the Minister’s colleague, the Exchequer Secretary, to address this point during the Bill’s Second Reading last Tuesday, she did not respond, which I am sure was an oversight. I would therefore welcome the Financial Secretary addressing this question directly in his closing speech, to avoid any misperception that he and his colleagues are deliberately avoiding the question.

Our criticism of the Government in relation to tax avoidance and evasion centres not so much on what the measures in the Bill would achieve but rather on the ways in which the Bill and the Government’s wider approach fall short. The Government lack a tough and comprehensive approach to prosecuting the promoters of tax avoidance, to going after international money launderers and to pursuing those who seek to evade tax. We know that the impact of the measures in the Bill will be relatively minor and technical. The public deserve to have the Government present clearly and transparently what effect the measures in the Bill will have, and our new clause simply requires that their impact on tax avoidance, tax evasion and the size of the tax gap should be reviewed and laid in public before this House.

Throughout the Minister’s statements and comments, there is a clear pattern that the Government favour minor technical amendments to legislation on this matter, rather than upping their game and truly calling time on the practices that the public clearly want to see ended. Today they have an opportunity, by supporting our new clause, to show that they understand the need to be clear with the public, to recognise the need to strengthen their approach on this matter, and to commit to coming back with the resources and legislation that are needed to truly make a difference.

I want to make a few points, principally on amendment 77. Perhaps I can start by saying that I do not agree with the Opposition spokesman, who has just addressed the House so eloquently, that the Government have been slow to tackle tax abuse and tax fraud. I should, at the outset, draw the House’s attention to my entry in the Register of Members’ Financial Interests. I think the Government have been very good at tackling tax fraud, starting in 2010 when this Conservative Government first came into office. The reforms that were introduced by George Osborne, the Chancellor of the Exchequer, deliberately targeted tax abuse and set up a number of measures to try to ensure that we clamp down on it, as it is common cause on both sides of the House for us to do.

Where I do agree with the Opposition spokesman is in his reference to the Panama and paradise papers. That excellent work by journalists from, I think, The Guardian and the BBC exposed the fact that money laundering, dirty money and abuse in that sector were far more rampant than we realised. That is one of the reasons why the right hon. Member for Barking (Dame Margaret Hodge) and I have made so much of an effort in this House, along with colleagues on both sides of the House, to try to clamp down on money laundering and dirty money and ensure that we have sunlight as the best disinfectant on all of this. That is why we introduced the open public registers of beneficial ownership for the British overseas territories, and why we strove so hard to persuade the Crown dependencies—successfully, now—to introduce those same open registers. That is the way in which we stop kleptocrats, bent politicians, warlords and corrupt businesspeople from stealing from the Exchequer but also, of course, from Africa and Africans. That was the great benefit of the paradise and Panama papers: they showed so clearly the extent of what was going on.

I thought that the Financial Secretary made some very good points about amendment 77. In general, I do think that the Revenue has enough power over the private citizen in the laws of the land as they stand at the moment. However, the point I would make to the Financial Secretary—he has been most receptive in listening to the right hon. Member for Barking and me about this—is that eternal vigilance is required. As we have seen, and as amendment 77 draws attention to, there is an inequality of arms in this matter. Advisers who set up these schemes often have an aura of authority, because they are lawyers, accountants and professional people, which those whom they advise may not be.

I want more to be done to ensure that, where these bad schemes of tax evasion are put together by professional advisers, they do not get off scot-free while the people they put into these devices, or talk into going into them, take the rap. It is not right that they should just lose the fees that they earn, which I think is currently the position: we should toughen the financial penalties. The Minister handles these matters very well, and I know that he wants this to be more than a senior common room debate. I know that he is conscious of the balance between the rights of the individual and making sure that people are not able to evade tax. I know that he does think seriously about that, so I would just urge him to always keep an open mind on this issue.

This is a familiar theme. In this year of Britain’s presidency of the G7, we should remember the work that was done by George Osborne for the last G8, at which he championed the open registers that were introduced in Britain in 2016. It is a proud achievement of this Conservative Government that, at the last G8, they moved the world towards focusing on these illicit flows of money, and this year with the G7, I hope that the Minister will consider it important as well. I completely accept that we are not going to divide the Committee on amendment 77. What the Minister said about the amendment was extremely constructive and I hope he will feel it right for the House to return to this matter on very regular occasions, in pursuit of what unites us all: that people should pay their fair levels of tax.

It is a pleasure to follow the right hon. Member for Sutton Coldfield (Mr Mitchell), with whom I work very closely on this issue; it demonstrates the best of Parliament that we are able to do so across the House.

I rise to speak in support of amendment 77, which stands in my name and that of members of the all-party group on anti-corruption and responsible tax. Our proposals command support across the House, and I know the Minister will therefore address this issue thoroughly and seriously, not just in his response today but in the work that I know he is doing to bear down on those who enable and support tax avoidance and financial crime. I simply say this to the Minister: he may have reservations about the technicalities of our proposals, but he should at the very least accept the principle that underpins them and say so today.

Big corporations and high net-worth individuals who engage in tax avoidance schemes and financial crime do not dream up these schemes on their own; they are invented and developed by the huge army of tax professionals—accountants, lawyers, banks and advisers—who spend their working life trying to identify loopholes and wheezes. The schemes they devise do not just help but actively encourage people not to pay their rightful contribution through tax to the common purse for the common good.

At present, HMRC may slowly and belatedly catch up, and may deem such schemes unlawful. If it does so, the individuals have to pay up and sometimes face enormous tax demands, but the enablers of tax avoidance mostly get away scot-free; at worst they may lose the fees they earned from setting up the scheme for their clients. Our amendment would hold these enablers to proper account. If advisers and promoters involved in a scheme know that the scheme does not work, they are committing the criminal offence—mentioned by the Minister—of cheating the public revenue. They are breaking the law, so they should be pursued, charged and convicted with a criminal charge.

That does not happen now, and our amendment seeks to make it easier for the enforcement agencies to pursue criminal prosecutions. Not only would they hold the advisers to account, but I am completely convinced that the threat of a criminal prosecution would act as the most effective deterrent and bring to a halt many of the activities of these rogue advisers. It would be the most efficient way of tackling tax avoidance at source. It is a common-sense approach to the problem, and it would be welcomed by all taxpayers, who are so frustrated by paying their tax unquestioningly while seeing others avoid tax or break the law. It would restore confidence in the tax system. It is a good idea, and I hope that when the Minister responds he will say that he shares our view that we need to amend our legislation to make it easier to pursue and prosecute advisers who deliberately promote egregious schemes that are unlawful.

I know from my time chairing the Public Accounts Committee how embedded the culture of avoidance, evasion and financial crime has become in our financial services sector. We saw it plainly with the revelations from HSBC, with the Falciani leaks from its Swiss branch. It was there in the PricewaterhouseCoopers leaks keenly exposing that firm’s activities in Luxembourg. The Panama papers uncovered the shenanigans involving the law firm Mossack Fonseca, while the Paradise papers disclosed the nefarious activities of another law firm, Appleby. While it may no longer be seen as cool to be involved in tax avoidance, the latest leak of documents contained in the FinCEN papers spells out the complicity of major global banks in facilitating and enabling financial crime, from tax avoidance through to fraud and money laundering.

Normal working people, however, often suffer the most. The film tax relief that was exploited ruthlessly by the company Ingenious Media left many facing huge tax demands, though the chief executive, Patrick McKenna, is still lauded through public appointments in the creative sector. The loan charge scheme was promoted vigorously by enablers. They walked away scot-free, but left devastation in their wake. I understand from the all-party parliamentary loan charge group that seven suicides have been reported to the group—people driven to suicide because they were conned by enablers into participating in a scheme that later unravelled. That is truly shocking.

I welcome the consultation that the Government have launched on tackling the promoters of tax avoidance. The all-party parliamentary group will be preparing a response to that consultation. Most advisers, of course, work in an honest and straightforward way, and we do not want to pursue with criminal charges those who make an honest mistake, but there are still individuals, companies and organisations who deliberately and wilfully promote egregious schemes that they know do not work. Such enablers move quickly, they are well resourced and they are well capable of outmanoeuvring HMRC. As soon as one wheeze is uncovered, they move on to the next. Worst of all, they act with impunity, safe in the knowledge that they will escape any real punishment if they are ever caught.

Why do these rogue advisers not get prosecuted? The answer lies in what the Minister said: HMRC has to demonstrate dishonesty to proceed against them and it is virtually impossible to do so. The advisers can always claim that they honestly believed that the scheme would work. We therefore want a new test, which makes criminal prosecutions feasible and practical.

We suggest adopting the test that is in place for the work of the GAAR—the bar for prosecution for those ne’er-do-wells should be just as stringent. It would simply make it possible and practical to take action. HMRC would have to demonstrate not simply that the avoidance scheme was not reasonable; it would have to demonstrate that it was not reasonable for anybody to think that the avoidance was reasonable. Sorry for the complication, but that is a double reasonableness threshold. I assure the Minister that that double reasonableness test is in effect the same as the “beyond reasonable doubt” test that he mentioned in his opening remarks. Of course, it would be easy for enablers to avoid prosecution —they just need to stop promoting or recommending tax avoidance that is so aggressive that they know it will fail.

Our amendment tackles a gross injustice in the system. People are completely fed up with reading endless stories about scurrilous tax avoidance schemes promoted by those working in the financial services sector. The perceived difference in the way that hard-working taxpayers and rich individuals are treated breeds mistrust. We suggest a practical change in the law that would make it possible to pursue the enablers, not because we want to see the courts clogged up with prosecutions against bankers, accountants, lawyers and advisers, but because we think that that is the best way of making those advisers think twice before they promote unlawful schemes. It would deter most of them from trying to cheat the public revenue. I urge the Minister, please, to be bold on the issue, to state today that he will tighten up the law and to give us the assurance that, if he does not like our particular solution, he will come forward in a timely manner with his own proposal.

I am pleased to speak in this debate and to speak to the amendments and new clauses to which I have added my name and which were detailed earlier.

All the SNP amendments relate to schedule 6, under clause 30. Amendments 70 to 72 and 84 and 85 seek to amend subparagraph (3A) of paragraph 2. Taken together, the paragraph would read:

“Where the condition in subsection (1)(l) or (2) is not met in relation to a body or person at any time, but the body or person expects it to be met at any time, the body or person may allow for the condition to be treated as being met until the body or person is not expected to make expenditure on construction operations exceeding £3 million.”

On the face of it, it does not look like a major change, but the amended wording is more in keeping with the spirit of the existing construction industry scheme. It allows, for example, for a de minimis amount of minor works to be disregarded in the operation of the scheme.

Amendment 73 seeks to remove paragraph 3 from schedule 6. I know that the Minister has spoken against this amendment and amendment 74, but we have seen no convincing argument that this change is necessary just now, and we believe that it would be much better for industry to be allowed to continue with the existing scheme for the current year rather than asking it to change the way of doing things. Let us face it, with its being a major part of our recovery from the covid recession, industry has far more important things to concentrate on.

A similar reasoning applies to amendment 74, which seeks to leave out paragraph 4 from schedule 6. That paragraph relates to the way in which the costs of materials purchased for a construction contract are taken into account for tax purposes. The construction industry has had to meet a number of challenges this year. We do not see how changing the way in which it has to account for tax on purchases by a subcontractor for another subcontractor, for example, during this current year will help. We do not see why it needs to be done just now.

New clause 14 requires the Chancellor to report back to Parliament on the impact that the changes proposed in clause 30 and in schedule 6 have had on key economic indicators. One would think that it would be automatic that, when a Government make changes to the tax system, they would go back a wee while later to see whether the changes have had the desired effect. This Government are perennially hopeless at doing that. We seldom if ever see a published assessment of what impact the new legislation or changes to the tax system had. That makes it much more difficult for MPs and the public to hold the Government to account. Even more importantly, it means that, when mistakes are made—that is when, not if—there is no reliable process to identify that and to put things right.

For this Committee sitting alone the Government have had to table no fewer than 22 amendments in order to correct mistakes or to remove inconsistencies and ambiguity from their own Bill which they themselves commended to the House only last week. We can only hope that they have spotted all the mistakes by now, but surely with such an important piece of legislation it makes sense to ask the Chancellor to report back to us to tell us whether it is working, or whether there have been unintended consequences that need to be addressed sooner rather than later.

New clause 15 again requires the Chancellor to report back to Parliament, but this time on the effectiveness of various anti-tax avoidance measures in clauses 117 to 121, and the follower notice penalties in clause 115. I note that the Opposition have tabled something similar, although a bit more restricted in scope.

We welcome the further measures included in this Bill, but they still do not go nearly far enough. Time and again, it has been pressure from SNP MPs that has forced the Government to take any action at all on the scandalous levels of tax avoidance that they continue to tolerate. We still do not have an overarching and workable general anti-avoidance rule. We have an inadequate system of company registration and regulation that makes it far too easy for companies to hide the truth about who really benefits from the profits that they make on the hard work of citizens of these islands and who is really in control of the company. For example, the SNP has highlighted over and over again the need for legislation to combat the abuses of so-called Scottish Limited Partnerships by money launderers and organised crime. As things stand, almost anybody in the world can set up one or several Scottish Limited Partnerships and then use them to get round even the inadequate regulatory and transparency requirements that apply to other companies.

It is a pleasure to speak in this part of the debate, and I draw the House’s attention to my entry in the Register of Members’ Financial Interests.

It was probably 15 years after we set up our business that our own accountants came to us—we were making reasonable profits by then—and suggested that we take advantage of a tax avoidance measure, and a pretty aggressive one in our view. This was not a particularly unusual accountants—it had a decent reputation locally— but so much money potentially runs through these schemes that some promoters inevitably see an opportunity for themselves.

I must tell the House that we told our adviser that we did not want to take part in such a scheme, and there were two reasons: we believed that people should pay their tax—that we should all pay a fair amount of tax—but also that any person who takes up such measures should be afraid that HMRC will one day come along and say, “Those measures were not appropriate.” By that time, a lot of the money that they think they have saved has gone out in costs to promoters and the rest of it, and they are left with a huge bill.

Had the person who promoted that scheme to us—our accountant—thought that he would potentially end up on jail, I do not think he would have come to us and told us about it. This was a reputable local person, and perhaps he did not even think that tax avoidance at that point was fraud. Nevertheless, it certainly can be fraud, and in many cases it is. If we are willing to hold people to account, ultimately through a criminal prosecution—as HMRC can, of course, as the Minister pointed out earlier—there would be a lot less of this kind of promotion and a lot fewer of these activities.

Before I talk in more detail about that, I want to tackle some of the shadow Minister’s points. It is a little churlish not to recognise the steps that the Government have taken since 2010. There have been 150 measures to tackle tax avoidance; that was at a cost of £2 billion to the taxpayer, but it brought in £250 billion in contributions to our public services. Of course, the Minister said that we need to go further, but it is wrong to simply say that the Government are not doing enough. Some of those measures, such as the digital services tax and the diverted profits tax, are very significant internationally.

I acknowledge the point that the hon. Gentleman makes and the amount of money brought into the Revenue by the measures, but is he not also conscious that the sheer number of different measures has, for many taxpayers, added to the complexity? We have one of the most complex tax regimes in the world and that complexity often catches people unawares, and costs them lots of money and sometimes their businesses and their homes.

I absolutely accept that our tax system is very complex, and I have proposed a number of measures on the Floor of this House to try to simplify it. For example, abolishing business rates and replacing them with an increase in VAT would simplify the tax system, instead of having an online sales tax. However, in terms of this debate I do not think it is the complexity of the issues that catches people out. We can see that 99% of tax avoidance schemes in the UK involve disguised remuneration—these are very contrived schemes. We should look at amendment 77 carefully. As to whether it is unfair on a person who is a promoter of what I would say is an extremely contrived tax avoidance measure, I am not totally sold that that should be a problem.

One of the biggest problems we have is faith in the system. This Government have done a huge amount to reduce the tax gap, which is at a record low of 4.7%, but if there is a £20 billion tax gap from fraud, the person in the street might reasonably say, “Why should I pay my tax?” This creates an incentive then for people to look at ways of avoiding tax. As to whether tax avoidance is fraud, the Government’s own call for evidence last month says clearly:

“The Government recognises that the design of arrangements that are sold as avoidance schemes may in fact enable fraud.”

So there is a good case for being able to take these further measures, as the Government are doing through stop notices, further civil penalties and stopping individuals hiding behind corporate structures.

The trouble is that, as we see in many areas, not least the banking sector, which I am pretty active in through my work in the all-party group on fair business banking, these kinds of organisations see a fine—a civil penalty—as a cost of doing business; the real deterrent for people is a criminal penalty. One of the best examples of this is to be found in a completely different sector, with the personal liability for a director in the construction industry. As soon as that personal liability came in and there was the potential for someone to go to jail if they did not make sure their sites were safe or they did not put measures in place, there was a huge decrease in the number of injuries and fatal incidents in the workplace in construction. That speaks to the point that if there are real criminal sanctions that we are willing to take forward and people think that that is going to happen, this promotion of avoidance schemes will start to drop significantly.

We probably have better resourced areas in terms of the prosecution of avoidance; I believe there are about three and a half times this number of people in the Department for Work and Pensions looking at benefit fraud, despite the fact that it is a much lower level of fraud—the level of benefit fraud is about 10% of that seen by HMRC. A beefing up of the resources in HMRC is therefore something we should consider. We have seen very famous schemes. I believe the Ingenious film scheme cost the taxpayer £1.6 billion, but not a single promoter has been held to account for it. We need more resources, but we should also look at legislation. This country does not have a great record on prosecuting serious fraud. There are a number of examples where the Serious Fraud Office has failed to make charges stick—I think, for example, of cases involving Tesco and Barclays. That is why the SFO wants to bring in more legislation, which the Government have agreed to do, to create a corporate offence of failing to prevent economic crime. This would be a personal sanction on the directors of a corporation that failed to do that. Of course, in banking we now have the senior managers regime that the Financial Conduct Authority put in place following some of the scandals there, when nobody was held to account for the disgraceful abuse of both consumers and businesses through the past couple of decades in the sector. The excellent Minister might say that amendment 77 is not the right vehicle for this, but some beefing up of the legislation to make it easier to prosecute fraud—criminal activity—is something that we should seriously consider.

It is a pleasure to take part in this debate and to follow the hon. Member for Thirsk and Malton (Kevin Hollinrake).

I welcome the action that the Government are finally taking against the promoters of tax-avoidance schemes. My Liberal Democrat colleagues and I will be supporting new clause 29, which would require the Government to review the impact of provisions relating to tax avoidance and publish regular reports that set out the findings. We will also support amendment 77, which would cause the promoters of abusive tax-avoidance schemes to be treated as acting dishonestly for the purposes of criminal prosecution for tax offences, without dishonesty having to be proved separately by the prosecution. We believe that the measures we are considering are what the Government should have been doing earlier. The promoters of abusive tax-avoidance schemes have deprived the public purse of millions of pounds and defrauded countless people who thought that their services and the advice offered were legitimate.

The action being taken now comes too late for so many victims of these schemes who had no intention to do anything unlawful or to evade taxes and have already been unfairly penalised. Liberal Democrats are committed to clamping down on tax avoidance, but the retrospective nature of the loan charge is causing uncertainty and financial hardship to ordinary working families, most of whom acted in good faith. Thousands of IT support professionals, social workers, teachers, cleaners and nurses—all of whom acted in good faith, based on professional financial advice that what they were doing was legal—now face immense pressure, which is impacting on their mental health and causing serious financial hardship, which will only be magnified by the economic consequences of covid-19.

Meanwhile, online tech giants and international corporations have been avoiding tax for years but have not been clamped down on in the same way, even internationally. With the load charge, the Government are going after nurses and teachers. Like many other right hon. and hon. Members in this place, I have a number of constituents who find themselves in exactly the position that I have described, facing retrospective taxation since HMRC changed its rules in 2017. One constituent whom I have been representing has attempted to correspond with HMRC on anomalies in the settlement agreement policies, but to no avail. Although he is categorised as fully compliant and not liable for the loan charge and pre-2010 loans, he is not being refunded any settlements that include pre-2010 amounts. The fully compliant are not benefiting from the pre-2010 amendments, while other categories are.

As I have said, we undoubtedly need to clamp down on tax avoidance—the deliberate evasion of taxes—but we should be clamping down on those who promoted it, not on those who took advice believing that it was lawful. The Chancellor must also go further than his recent decision merely to limit, in the Budget, the retrospective element of the charge to 2010; he must end the retrospective application of the rules altogether so that nobody who fell victim to such schemes before 2017 should be unfairly penalised. The Government must also further re-examine IR35.

I shall end my speech there, but it is important that we recognise that the steps that we must back today should have come before us much earlier.

It is a pleasure to follow the hon. Member for Edinburgh West (Christine Jardine), but I must pick up on one of her points. She indicated that the Government had done nothing to crack down on online companies, but the evidence shows that the Government took action to ensure that if we buy something from an online marketplace such as eBay, Wish or Alibaba, the seller charges VAT. That was a significant source of lost income for the Exchequer.

It is right for Opposition Members to raise the Panama papers, because they highlighted to the general public—to residents up and down the country—the actions of a small number of tax-avoidance advisers and very wealthy individuals who did not want to pay their fair share. I think it is right that we should look at that in the context of the action that the Government have taken.

How delightful it is to see you in the Chair, Ms McDonagh. I am very pleased to speak to amendment 77 and new clause 29, and to have listened to the excellent speech by my hon. Friend the Member for Ealing North (James Murray). I pay tribute to Members from across the parties who have stood up for those who have been so badly affected by the loan charge scandal, and I was particularly pleased to hear my hon. Friend the Member for Brentford and Isleworth (Ruth Cadbury) speaking so eloquently on Radio 4 on Sunday evening. We are getting these important messages across.

I also wanted to pay tribute to the important work that is being done by the all-party parliamentary group on anti-corruption and responsible tax, led by the right hon. Member for Sutton Coldfield (Mr Mitchell) and my right hon. Friend the Member for Barking (Dame Margaret Hodge), on simplifying things and making the basics better, for example by improving the Companies House regulations. I understand that some of that is coming forward shortly, but the general picture is that things are quite slow.

It was lovely to listen to the hon. Member for Burnley (Antony Higginbotham) speaking about the importance of taxation. Once upon a time, I am sure that would have been quite a tricky topic for certain Conservative Members to talk about, but there is a new wind blowing. It is great to hear President Biden talking about the global minimum corporate tax level and the importance of an online sales tax, and even to hear our own Government leading the charge across Europe on the importance of introducing a digital sales tax and simplifying things to bring in the important public funds that we all need to keep our society going.

The scale of tax offences is clear, with a recent TaxWatch report finding that between 2009 and 2019, the UK prosecuted 23 times as many people for benefits offences as for tax offences—that theme has been echoed in today’s speeches—despite the fact that the value of tax fraud is nine times higher than that of benefit fraud. We know that American research has shown that for every $1 the Internal Revenue Service invests, it gets back $10 of benefit for the public purse, and I wonder what the consultation the Treasury ran said about incentivising officers based in HMRC so that the more money brought back, the more colleagues come on board to help them in their important work.

We know that a lot of this work is about priorities, and we need to prioritise criminal prosecutions so that there is not a decrease in taxation, as there has been of 39% since 2015. We need to look at the balance of the DWP employing 3.5 times more staff in compliance than HMRC. We know that we have to improve that balance, because quite simply there is much more money to be found in illicit finance and among tax avoiders than from those eking out a living on universal credit or personal independence payments.

The Minister will I am sure make it clear in his remarks that the Bill is intended to tackle some of these issues and to amend that imbalance, and I look forward to hearing that. However, I make the case for quicker progress so that we can move forward as fast as possible, particularly given the fact that, as the hon. Member for Burnley mentioned, the furlough scheme and some of the other schemes are quite expensive, and therefore the need to find more in this way from tax evasion is ever more pressing.

I want briefly to mention the importance of the provisions on freeports and the corporation tax super deduction, which do not appear to come with sufficient tax avoidance and evasion safeguards. I hope that during the debate—perhaps not right at this instant, but over the course of today—we will get some reassurances on that matter. In March, the Financial Secretary was unable to say how many additional staff HMRC plans to recruit to deal with taxation, duty, excise and customs issues pertaining solely to freeports, but I hope that that information is forthcoming. Given the attention and focus the Government gave to these announcements, we would have expected them to get the basics right, but we still have some questions that are outstanding.

While the Government are bringing forward—perhaps deliberately, some of us would say—a weak set of measures in the Finance Bill, other tools that we need to tackle evasion and avoidance, such as the draft Register of Overseas Entities Bill, could well sit gathering dust, since they were initially announced quite some time ago. Will the Minister use today as an opportunity to outline his views on that particular Bill?

On the question of illicit money, do not forget that our own Intelligence and Security Committee called London a “laundromat” for illicit and dark finances, often coming from Russia. I would hope that the Minister will redouble his efforts to understand how to clamp down on the facilitation of those finances through the UK financial system. We would have expected such a description of our capital city to force action from the Government, but we are still waiting to see exactly who owns some of the foreign companies buying up British property. Can someone still walk in and purchase a £1 million property in cash, and does the Minister believe such a way of purchasing expensive properties in London is appropriate?

I draw the Committee’s attention to my entry in the Register of Members’ Financial Interests. Is the hon. Member aware that there are very strict requirements for people involved in the property market to check the identity and the source of funds of those she has just described?

I thank the hon. Member, and it is always lovely to have an accountant in the room. If there are some improvements, we are very grateful for them.

If I may intervene, London is one of the few cities that has no residency or nationality rule for owning residential property, and many very high-cost cities for residents to live in, such as Vancouver and Auckland, have such rules. Could this Government consider such rules, because this issue has helped to trigger the explosion in housing prices, particularly in London, but also in our other large cities?

My hon. Friend makes a very important point. I am sure it has not escaped the Treasury’s attention that prices of the top 1% of properties in the country—mainly in London—have been skyrocketing, when everybody else’s house prices have been going up by a little. That differential is quite frightening. In this terrible time when our economy has shrunk by 11%, who can afford to buy properties worth several million pounds, and do we know enough about these individuals? We know that there are big gaps in the way that Companies House operates, in terms of simply understanding who owns what, and simplifying that is the sort of thing that would make the work of HMRC much more streamlined.

I would also like to put on record the wonderful work being done by civic society groups to spread information and education about the importance of understanding taxation, what it does and what it purchases. It is through these campaigns—often outside this House—that we can understand how to change things.

Aside from our international reputation often being questioned on the issue of Russian oligarchs, we know that the lack of action on questioning some people’s contacts with the Kremlin is costing us over £30 billion every year in lost revenue from taxes. That is a lot of money, and it would be better used to pay for the furlough, eliminate child poverty, vaccinate more children in the third world, or pay and equip our NHS staff for the heroic job that they do every single day.

The Government must act without delay and begin by supporting amendment 77 and new clause 29, which are a significant improvement on the weaker proposals put forward by the Government. That would send a signal that the UK will no longer be silent in the face of tax evasion and tax avoidance and is no longer a welcome home for the oligarchs and agents who see the UK as the destination of choice for their ill-gotten gains. I urge the Minister to do the right thing.

I speak in support of new clause 29 in the name of Her Majesty’s Opposition and cross-party amendment 77. I congratulate my hon. Friend the Member for Ealing North (James Murray), my right hon. Friend the Member for Barking (Dame Margaret Hodge) and the right hon. Member for Sutton Coldfield (Mr Mitchell) on their speeches.

Addressing tax avoidance and evasion is, of course, an important objective of the Treasury, and Finance Bills and other legislation are the vehicles to do that, but as with all tax changes, Government must assess and respond to the unintended consequences of any changes. This Government have a terrible track record on tackling tax evasion and aggressive tax avoidance. They have consistently stood in the way of Labour’s calls to clamp down on loopholes and have failed to collect over £30 billion in taxes every year. They have promised to legislate on these issues, but the proposals in the Bill fall far short of any substantive change. Instead, they have been responsible for an increasingly complex system of payment, fraught with difficulties and risks for the unsuspecting worker.

A growing number of working people need to work on a contractor basis, either for personal reasons or because it is the only way of getting work in their sector or with their professional skillset. Increasingly, the alternative to being a contractor is to be a PAYE freelancer—to pay tax in full but without any of the rights of being an employee and all the costs of being self-employed. This is zero-rights employment, and it is unfair.

We need an effective tax avoidance policy that criminalises those promoting tax avoidance, rather than going for the workers inadvertently caught up in them, as this Government and HMRC have been doing with the loan charge in particular. That is the wrong target. While ordinary people who are victims of mis-selling are facing ruin and bankruptcy, the Government have done too little, too late to go after those who promoted the schemes.

I acknowledge that the Bill contains measures to tackle the promoters of tax avoidance and changes the system of penalties, but those measures are extremely limited in scope. Indeed, those changes are not even included in the Budget report costings, which suggests that their financial impact must be minimal. IR35 was enacted 21 years ago to stop the practice of those who, in reality, were permanent, generally full-time workers being paid as contractors through personal services companies, as many were paying much less tax than if they had been employees. It was right to address that tax avoidance, but the Government must address the unintended consequences for workers and the labour market that have followed since then.

I am grateful to all those who have spoken in the debate. Let me start with my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake), who, as always, brought a robust common sense, as well as the skills of an accountant, to bear, especially when it comes to holding the Opposition to account for some of their comments.

I should defend our hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake). He is not an accountant; he is an estate agent.

I have been held to account by my right hon. Friend and I am grateful to him for that, because that power—if I have any power—should always be held to account. Let me put the record straight: my hon. Friend the Member for Thirsk and Malton is an estate agent, and yet with that estate agency genius he combines the forensic skills of an accountant in holding to account, indirectly, members of the Government and, directly, the Opposition. I thank him for that.

My hon. Friend the Member for Thirsk and Malton pointed out that these disguised remuneration schemes are highly contrived. It is terribly important to remind ourselves of that. It is all very well to complain about the loan charge, but these are highly contrived schemes. My hon. Friend reminded us—as, indeed, did my right hon. Friend the Member for Sutton Coldfield (Mr Mitchell) —of the general rule that all taxpayers are responsible for their own tax, and that if, by implication, a scheme looks too good to be true, it almost certainly is too good to be true. Those are important messages and no Government should wish to weaken that important principle that people are responsible for their own tax.

I understand what the Minister has said. Of course, most of us are aware of our own tax bands. But how can the Minister expect basic rate taxpayers—a nurse, an IT contractor, somebody working in the film industry, even somebody on minimum wage—to do due diligence when nothing they read or have been sent ever mentions loans, and when they are given a convincing narrative that their tax is being paid for and they do not need to worry? Should not HMRC and the Treasury be addressing this issue, because it is a growing part of the employment market?

HMRC is addressing these issues. That is why this Bill has so many measures in it that are focused on the disclosure of tax avoidance schemes, toughening up that regime and improving the regime against the promoters of tax avoidance. But let me say to the hon. Lady that I thought her remark was dripping with condescension towards the ordinary taxpayers of this country. The fact of the matter is that people, from whatever walk of life, are perfectly competent—they do not need to be patronised by Labour Members of Parliament—at working out when something looks too good to be true. That is why so many—such a high percentage; well over 90% of people—do manage to work out what is too good to be true and behave on that basis. To suspect otherwise, when HMRC is absolutely working as hard as it can to make sure that the truth is out there and well understood, and is closing down opportunities for misleading advertising, in a recent initiative with the Advertising Standards Authority and a whole host of other things, is completely wrong.

I am grateful to my hon. Friend the Member for Burnley (Antony Higginbotham) for what I thought was a very robust and thoughtful contribution. He is absolutely right to highlight that HMRC has not been slow in this area. He was right to pick up the point about VAT on online platforms, but, of course, that is merely the tip of the iceberg. The hon. Member for Ealing North (James Murray) somehow suggested that we were failing to tackle this issue. The tax gap, as he pointed out, is 4.7%—a historic low. Let me remind the House and him of some of the actions that the Government have taken—leadership on base erosion and profit shifting over many years, the diverted profits tax, the corporate interest restriction, the tax charge on offshore receipts, hybrid mismatch rules, our new digital services tax.

I very much welcome the digital services tax, which is there to try to make sure that everybody pays their fair share, as the Minister said in his opening remarks. Having said that, it does not apply to Amazon’s direct sales on that platform. It applies only to third-party merchants, so there is not that much of a level playing field between those two different cohorts. Will he look at that in future?

Brilliantly, my hon. Friend has intervened just before I was about to mention that we are consulting on an online sales tax, which is a parallel initiative. Indeed, the digital services tax includes the introduction of a new basis for tax—that is, UK user content. That itself is a flag to the energy and innovation that the Government are seeking to bring to this issue, and I thank him for his comments.

The hon. Member for Ealing North asked about the beneficial ownership registry on overseas companies that own or buy property in the UK. As he will know, the Government published a draft Bill. It has gone through prelegislative scrutiny. The process has, for reasons that the House will not need any reminding of or highlighting, been somewhat interrupted over the past year, but the Government plan to introduce the Bill in due course, so I reassure him on that point.

The hon. Gentleman raised the question about minimum corporate taxation. He should know that the Government have been, as I said, in the international vanguard in trying to drive change on base erosion and profit shifting, and processes of international tax agreement through the OECD. We were also in the vanguard of delivering the creation, originally, of the G20 commitments for a comprehensive global solution to this issue, based on two pillars, and we are leading the way, during our G7 presidency, on this issue, as the Chancellor has made clear. So we absolutely welcome the renewed commitment that the US Administration have made in this area, which we think is a very important change.

Finally, I turn to the important amendment 77, which was tabled by my right hon. Friend the Member for Sutton Coldfield and the right hon. Member for Barking (Dame Margaret Hodge). My right hon. Friend was right to highlight the importance of eternal vigilance—I absolutely share his view on that—and he was right, as the right hon. Lady was, to talk about the ever-shifting and evolving ways in which some of the malefactors in this area are ceasing to operate, and, of course, that is true. However, if I may say so, he erred in suggesting that the penalty on the enablers—that is to say, a sum equal to the gross fees to be collected in relation—was in any sense modest or small. It is one of the largest charges in the tax system, and because it is a gross fee, it is of course charged on the total amount of income. It is therefore income on which the promoter will have to recognise all their costs, and indeed any profit and any tax they may have paid, so it is actually a fairly formidable penalty.

I beg to move amendment 81, in page 49, leave out lines 14 to 27.

This amendment would mean that the Stamp Duty Land Tax (Temporary Relief) Act 2020 no longer applies to additional dwellings.

With this it will be convenient to discuss the following:

Clauses 87 to 89 stand part.

That schedules 16 and 17 be the Sixteenth and Seventeenth schedules to the Bill.

Clauses 90 and 91 stand part.

New clause 26—Equality impact analysis (No. 2)—

“(1) The Chancellor of the Exchequer must review the equality impact of sections 87 to 89 and schedule 16 and 17 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the impact of those sections on—

(a) households at different levels of income,

(b) people with protected characteristics (within the meaning of the Equality Act 2010),

(c) the Treasury’s compliance with the public sector equality duty under section 149 of the Equality Act 2010, and

(d) equality in England, Northern Ireland and in different regions of England.

(3) A review under this section must provide a separate analysis in relation to each of the following matters—

(a) the temporary period for reduced rates on residential property,

(b) increased rates for non-resident transactions, and

(c) relief from higher rate charge for certain housing co-operatives etc.

(4) In this section “regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of sections 87 to 89 and schedules 16 and 17 of the Bill on equality in relation to households with different levels of income, people with protected characteristics, the Treasury’s public sector equality duty and on a geographical basis.

New clause 27—Fiscal and economic impact of 2% non- resident surcharge—

“(1) The Chancellor of the Exchequer must review the impact of section 88 and schedule 16 and lay a report of that review before the House of Commons within six months of the passing of this Act and once a year thereafter.

(2) A review under this section must estimate the expected impact of section 88 and schedule 16 on—

(a) Stamp Duty Land Tax revenue at the increased rates of 2%, and what the revenue impact would have been if the rate had been 3%,

(b) residential property prices, and

(c) affordability of residential property.”

This new clause would require the Government to report on the effect of the 2% stamp duty land tax non-resident surcharge on tax revenues and on the price and affordability of property.

It is a pleasure to speak for the Opposition on this group of amendments and new clauses relating to stamp duty. I rise to speak on those in my name and those of my right hon. and hon. Friends.

Amendment 81 will prevent the extension of stamp duty holiday from being used for second homes, buy-to-lets and investment properties. New clause 26 would require the Government to review the equalities impact of this group of clauses, including their impact on households with different income levels and on people with protected characteristics, their compliance with the public sector equality duty and their impact on the different regions and nations of the United Kingdom. New clause 27 would require the Government to review the impact of a non-residential surcharge of 2%, which it is set at in the Bill, and 3%, which, as I shall come on to, the Conservative party previously committed to.

Before I come on to the amendments in more detail, let me say a little about the stamp duty holiday extension. Clause 87 extends the £500,000 nil rate band until 30 June. From July until the end of September, the nil rate band will be £250,000, double its normal level; it will return to the usual level of £125,000 from 1 October. It is estimated that the total cost of this extension will be £1.5 billion by the end of 2021-22. That is on top of the £3.2 billion cost of the initial stamp duty land tax holiday announced in July 2020.

The extension will of course be welcome news for those people in the process of buying a new home who face a cliff edge at the end of March. We know that many people have struggled to complete purchases in time due to the coronavirus restrictions and the significant backlog of pending transactions. In previous debates, Members raised issues of cyber-attacks on council services in Hackney that impacted the planning department and delayed people’s securing mortgages.

However, we have concerns about the broader effects of the policy. Our new clause 26 is intended to encourage the Government to be honest about the impact of the stamp duty holiday on the housing market. The Resolution Foundation says that the lower stamp duty liabilities have contributed to house price rises over the last eight months. House prices in England grew 7% between July and December 2020, which is highly unusual behaviour during a recession. In many cases, the rise in house prices over the period will have cancelled out the benefit of the stamp duty holiday. As the Institute for Fiscal Studies, the Resolution Foundation and others have pointed out, the stamp duty holiday has also had the perverse effect of temporarily removing the advantage that first-time buyers had in the market compared with existing homeowners. This, coupled with rapidly rising house prices, has meant that many first-time buyers continue to be priced out of the market. The Bill does nothing to address the housing crisis that affects millions of families across the country—yet again, a wasted opportunity from this Government.

I turn now to clause 88 and our amendment 81. It is unbelievable that, at the same time as the Chancellor is pressing ahead with a £2 billion council tax rise, he has given another tax break to second-home owners and buy-to-let landlords. This half a billion pound tax break for second-home owners and landlords is the wrong priority in the middle of an economic crisis that is hitting family incomes. Instead, this money could have been used to build nearly 3,000 socially rented homes, which is half the total built in England last year. In Wales, the equivalent tax relief has not been extended to property acquired as investment or as a second home. Labour’s amendment 81 would ensure that the extended stamp duty holiday in England and Northern Ireland followed that approach. I turn to the non-residential surcharge introduced under clause 88. During the 2019 general election campaign, the Chancellor, who was then Chief Secretary to the Treasury, said:

“Evidence shows that by adding significant amounts of demand to limited housing supply, purchases by non-residents inflate house prices.”

He went on to announce a Conservative manifesto commitment to introduce a non-resident stamp duty surcharge of 3%, which would have been spent on programmes aimed at tackling rough sleeping. But clause 88 introduces a non-resident surcharge of 2%, rather than 3%. As yet, we have had no explanation from the Government as to why they have watered down that commitment. We estimate that this means the Government could miss out on £52 million a year in revenue that should have been spent on tackling homelessness and rough sleeping.

Our new clause 27 would require the Government to review the difference between the 2% charge and the 3% charge and to reveal the lost income as a result of that decision. When the Minister stands up, perhaps he will tell us why the Government have moved from 3% to 2%.

We welcome clauses 89 to 91, which provide relief from the annual tax on enveloped dwellings and the 15% stamp duty charge for the ownership and transfer of property by housing co-operatives that do not have transferable share capital. The Treasury has listened to the co-operative housing sector on the issue and that is welcome.

To conclude, we do not believe that the Government’s clauses in this group would do anything to solve the housing crisis we face in this country. Year after year, Government have failed to build the homes we need, especially social and affordable homes. The Government are on track to miss their target of building 300,000 homes by almost a decade. The number of new social rented homes has fallen by over 80% since 2010 and home ownership is down sharply among young people, with 800,000 fewer households under 45 owning their home than in 2010. Without urgent action the housing crisis in the UK will deepen. Instead the Government have decided to give a tax break to landlords and failed to meet their own commitment on the non-residential surcharge. Our amendments will remedy these wrongs.

Last spring, we were only just beginning to understand as a nation what the full impact of the coronavirus might mean for us. We were told to stay at home and, for many people, that meant postponing plans that they might have made to move, creating considerable uncertainty. It was evident that the housing market was affected by that and it was made much worse when, on 26 March, buying and selling a property was largely put on hold. While business was enabled to resume from 13 May, there was concern about what the pandemic would mean for the market and for the jobs that rely on the sector.

The Chancellor announced that he would support the housing market through the stamp duty land tax holiday, quadrupling the starting threshold for SDLT to £500,000. That was designed to give a boost—indeed, the boost to the housing market that it needed to thrive through the pandemic. It has thrived: transactions in the last quarter of 2020 were 16% higher than in the same period in 2019. In other words, the SDLT holiday has given hundreds of thousands of families the confidence to buy and to sell their homes at a particularly difficult time. In turn, it has supported the livelihoods of people—tens of thousands of them, or more than that—whose businesses and jobs rely on trade with, through and from the housing market.

Towards the end of last year, it became apparent that the housing industry was struggling to meet the additional demand to move home and that there were delays in processing transactions. That meant that some of those moving home would not be able to complete the transactions that they had entered into until after the holiday ended, through no fault of their own. The Bill therefore extends the stamp duty land tax holiday in order to allow those buyers still to receive the relief. In addition, the nil rate band will be £250,000, double its standard level, until the end of September, in order to allow the market to return smoothly to its normal rates.

The Bill also introduces a non-residential SDLT surcharge. The surcharge will apply to property purchases by non-UK residents who do not come to live and work here, helping to ease house price inflation and to keep housing free for UK residents to buy. Revenue raised from the surcharge will be used to help address the issue of rough sleeping.

The hon. Member for Erith and Thamesmead (Abena Oppong-Asare) raised the question about the non-resident surcharge. She may not be aware that, at Budget 2018, the Government announced that a consultation for a 1% non-UK resident surcharge would be published. Following the announcement of the surcharge, HMRC and the Treasury carried out a public consultation in spring 2019. That included questions on whether a 1% rate was set at the right level to balance the Government’s objectives on home ownership with those of the UK remaining an open and dynamic economy. Having listened to stakeholders, the Government believe that the 2% surcharge—twice the original amount contemplated—strikes the right balance in this area. That is the basis on which the surcharge has been set.

The Bill will also relieve the 15% rate of SDLT and the annual tax for enveloped dwellings for qualifying housing co-operatives. That change ensures that these measures are fairly targeted at companies that use so-called envelopes in order to avoid tax on their properties.

Amendment 81 would disapply the SDLT holiday to purchases of additional dwellings. As the Committee will know, the SDLT holiday was intended to give a boost to the entire property market, of which developers and landlords are important parts. Although those buying second homes or buy-to-let properties will benefit from that tax change, they will continue to pay an additional 3% on top of the standard SDLT rates.

The Government have maintained the relative advantage that buyers of main homes had before the tax change. For example, the purchaser of a second home worth £500,000 will still pay £15,000 in SDLT, compared with nothing for the purchase of a main residence. It was a Conservative Government who introduced the phasing out of finance cost relief, and the higher rates of SDLT for the purchase of additional property—all steps towards a more balanced tax treatment between homeowners and landlords.

On new clause 26, HMRC routinely publishes information about SDLT, collected by house price bands and by region. Of course, a full tax impact assessment, including equalities impacts, has been published for each measure.

Extending the SDLT holiday ensures that buyers who were affected by delays in the industry will still be able to receive the tax relief.

In the longer term, the Bill introduces a new surcharge that will help more people on to the housing ladder through the new non-UK residents’ surcharge. It also ensures that stamp duty and the annual tax on enveloped dwellings remain fair by making certain that only those who the Government intend to pay corporate rates of tax are captured.

I am happy to speak in support of clauses 80 to 91 and also new clauses 26 and 27.

Some of the measures in this cluster of schedules and clauses do not apply to Scotland, where the land buildings transaction tax applies instead following the devolution of the stamp duty land tax. That said, I am sure that the extension of the temporary increase to the stamp duty land tax holiday with no rate band for residential property in England and Northern Ireland that will be given effect by clause 87 will be very much welcomed by those who stand to benefit from it. The increased rates for non-resident purchasers given effect by clause 88 and schedule 16 is something that is long overdue. I am also happy to support the relief from annual tax on enveloped dwellings for certain kinds of properties given effect by clauses 89 to 90 alongside schedule 17, as well as the provisions being made under clause 91 for repayment to co-operatives that are also eligible.

I encourage Ministers to look positively on the reforms of property taxation that have taken place in Scotland since stamp duty was devolved. LBTT replaced stamp duty on 1 April 2015. It is very much a progressive tax in that the rates increase more than proportionately in line with the price of the property to which it has been applied. That has a very valuable role in the housing market with regard to easing house price inflation and, at the same time, exempting nearly 80% of first-time buyers from paying any kind of property tax on their first purchase of a home. My party is committed to maintaining current rates and bands within that tax regime while undertaking a review of the effectiveness of the additional allowance supplement that has also been put in place. It is in that spirit of constant review that we find much to welcome in new clauses 26 and 27, which we consider will merit the support of the Committee.

The stamp duty holiday tells us all we need to know about the Government’s priorities. Amid an awful pandemic that has seen the highest death rates in the world, when something like 4 million people have been infected and many of them will face long covid, and when something like 7.6 million people are in hunger, we need investment in the wider economy to get us moving again. In fact, with the stamp duty holiday the Government have spent much of £5 billion, over two years, on second homes. That £5 billion could have paid for 5% increases in nurses’ salaries over 15 years, given that a 5% increase would cost £330 million after allowing for the recovery of the tax on the money given in the first place.

In any case, it is not clear that the stamp duty holiday was at all necessary to stabilise the housing market, because immediately as the pandemic began to hit, the Bank of England reduced interests rates and in so doing reduced mortgage costs, supported prices and increased landlords’ margins at a time when tenants were still required to pay their rents. Given that the Bank of England had already taken action to support the market, the stamp duty holiday simply increased house prices by something like 7% between July and December 2020. That is not the right priority, and it is certainly not the right priority to invest money in second homes for people who are basically making money out of that investment from taxpayers and boosting the prices that first-time buyers face. That is why in Wales, where we have a Labour Government, second homes were not included in the stamp duty holiday, which was quite right. I therefore support amendment 81. Indeed, in Wales, we have made provision so that there are no rough sleepers during this pandemic, whereas in England, of course, there are.

The stamp duty holiday will mean that first-time buyers will find it more difficult to buy a house because deposits will need to be bigger. We are moving to a situation in which young people who want to buy a house will almost always have to depend on their parents to do so, so the distribution of the opportunity to buy a house in Britain is getting worse and worse.

In a nutshell, this Budget should have invested in all our opportunities to raise productivity, increase the number of jobs, focus on the future and keep people healthy. Instead, it has been seen as an opportunity to focus on widening inequality unnecessarily. I very much support the Labour party’s amendments.

We now go to Christine Jardine, who is joining us virtually.

We will move on to Felicity Buchan.

I speak in support of the Bill and against the amendment. The stamp duty holiday has been an unequivocal success in stimulating the market, and I welcome its extension. Many of my constituents will also welcome the surcharge for non-UK residents. In my constituency, many foreign investors buy flats and houses as financial investments, and often these lie empty; in effect, they are bank balances in the sky. This has real implications for my constituency. It leads to hollowed-out communities, and it makes it very difficult for shops, restaurants and businesses to be viable.

I welcome this Government’s focus on house building. Last year, we built 243,000 houses. That is the most in 33 years. For so many of my constituents, buying a house is almost an unobtainable dream. We need to build more houses, and we need to build more affordable housing. That is especially the case in London, where the Labour Mayor’s record of building housing has been lamentable. In 2016, he was given a budget of £4.62 billion to build 116,000 houses. How many had he done by December? Only 56,000—less than half. It is lamentable.

I also welcome the Government’s new measures on guaranteeing mortgages up to 95%. Again, this will help my young constituents and key workers to get on to the housing ladder. In my borough of Kensington and Chelsea, we have so many private renters. Some 44% of my constituents are private renters, because people cannot afford to get on to the housing ladder. Rent is a huge proportion of my constituents’ incomes. Rent is 26% of the median average income nationally. In my constituency, it is a whopping 75%, so I welcome all the support to get young people in my constituency on to the housing ladder.

I support the measures in the Bill, but like my hon. Friend the Member for Orpington (Gareth Bacon), I encourage Government to be more radical when it comes to stamp duty and to make a fundamental reform. Stamp duty is essentially a tax on social mobility. It prevents people from moving closer to new work opportunities. It prevents young and growing families from moving from one to two-bedroom flats to bigger family houses. It prevents older people from downsizing.

In my constituency, it has led to very perverse consequences. People cannot afford to move, so they start extending their houses. That has led to an onslaught of basement developments. One house in my street went down an extra three storeys below the lower ground floor. That has now been banned by my council, but this causes undue distress to my constituents and intolerable noise and disruption that goes on for prolonged periods. We have to make it easier for people to move.

Christine Jardine, welcome back.

Thank you, Chair. Apologies, I do not know what happened just then, but it is now a pleasure to take part in this debate.

I will be supporting amendment 81, as will the Liberal Democrats, which would ensure that the stamp duty land tax holiday no longer applies to the purchase of second homes. I will keep my remarks short, in the light of the earlier mishap. Suffice it to say that we believe that the SDLT holiday is not effective in helping first-time buyers on to the housing market. Giving a tax break to people who have already saved money for their property and can already afford a mortgage does not entirely solve the problem. Extending the SDLT holiday would serve only to avoid a cliff edge, depriving the Treasury of much-needed funds at a time when there are many extremely pressing calls on our public finances. Combined with the new lower deposit mortgage scheme launched in the Budget, its only effect is to increase demand for housing without increasing the supply of homes. For me, and for the Liberal Democrats, that is crucial. Members can see where I am going with this: we need to increase the supply of homes.

The Government need to take steps to increase the number of homes being built. They first must make and then keep to their targets, support local authorities that want to build new homes and enforce affordable homes targets. That must include building 100,000 new social homes a year. The Liberal Democrats have proposed a new rent to buy scheme, where people can build up shares in housing association homes through their rent. I ask the Government to examine the merits of that proposal. These steps would be more effective in getting people on to the housing ladder. Therefore, I ask that the amendment be supported and I ask the Government to consider the rent to buy scheme as a way of realistically helping people on to the housing ladder without increasing demand for housing that is not there.

I very much welcome many of the measures in the Finance Bill, particularly the measures on stamp duty. Like many people who called for a stamp duty holiday, I welcomed it when the Government announced it and I am glad to see that it has been one of the most successful stimuli to economic activity that the country has seen. The moribund market is now racing ahead, albeit possibly slightly too fast. I recognise that homeowners need certainty—many of them are in the middle of transactions —so this is good. We are not out of the pandemic yet, so I welcome the Government’s move to extend the stamp duty holiday to the end of June. I also welcome the fact that they are removing the steep cliff edge and replacing it with a smaller cliff edge by tapering it out and extending it at a lower rate until the end of October. Those are both good measures that will keep the housing market going and give certainty to homeowners.

I do not support amendment 81, which proposes that these measures should not apply to second homes, although I understand the social justice argument behind it. The purpose of the stamp duty holiday is to stimulate economic activity, and whether a home is being bought to live in or as an investment property, that still involves economic activity in the housing market. Our focus here is on stimulating the market, and both those activities have equal effect.

Back in 2012, I co-founded an organisation called the HomeOwners Alliance, Britain’s first and only consumer group for homeowners. Our aim was to champion homeowners and aspiring homeowners and to help people to get into the housing market, recognising that home ownership is a valid aspiration for all young people, and indeed older people, and that the primary role of homes is to be lived in. They are not investments or casinos; they are to be lived in, and that should be the role of Government policy.

I wrote various papers on the reform of stamp duty. I will not go on about the details, but there were two particular reforms that I called for. One was an increase in the stamp duty on second homes, investment properties and buy-to-lets. The other was an increase in the stamp duty for non-residential buyers. The Government have already introduced the first of those, and I think they have raised almost as much money from that as they do from residential stamp duty. Now, in this Bill, they are introducing the stamp duty surcharge for non-residential buyers—the people who want to buy homes in this country but who have no intention of living in them. As a country, we have been very generous to such people—far more generous than most other countries—but, as my hon. Friend the Member for Kensington (Felicity Buchan) said, this has a real cost in terms of preventing other people from buying a home that they actually want to live in.

It is very welcome that the Government are introducing the 2% surcharge for non-residential buyers who do not want to live in the UK. It is right that it should start low—2% is quite low; that is often the fee that we pay to the estate agent—but the Government should monitor it. There will be an opportunity to increase that rate, while ensuring that doing so does not have really bad effects on the market but that it does have an effect on demand and helps to free up properties for people who want to buy a home to live in. The money from these measures is being used to house rough sleepers, which is very welcome, but in the longer term as we raise the rate and more money is brought in, I would use that revenue to reduce the burden of stamp duty for those buying homes that they want to live in. As my hon. Friend the Member for Kensington so eloquently said, stamp duty is a big burden for homeowners. Following those thoughts for the future, I will be fully supporting the Government’s policies.

It is a pleasure to speak on this part of the Finance Bill, and I want to start by saying thank you to the Treasury for listening to people’s suggestions relating to the stamp duty land tax holiday and for listening to the voice of the industry, which called for this extension. The original decision at the start of the pandemic to provide that stamp duty holiday was brilliant. It worked. It was the right measure at the right time, and it stimulated our economy and resulted in an almost 33% increase in the amount of home moves. It kept the whole show on the road. Now, as my hon. Friends have mentioned, the decision to extend it will remove the cliff edge that we could have faced when it went away, along with the tapering of other support packages.

These are sensitive times, and there are fiscal measures in place that are carefully balanced to stimulate growth, support people, jobs and businesses, and project confidence to the markets so that we can credibly borrow all this money to invest in our covid response, but this stamp duty holiday cannot go on for ever; it is after all, a revenue-negative intervention from the Treasury, despite the wider economic stimuli that it creates for the painters, movers, builders, white goods salesmen and so on.

So what do we do with a problem such as SDLT? I do not believe that it is simply a case, as some might say, of replacing one tax with another. We do too much shuffling and tinkering with our taxation system and our housing market. As a result, our taxation system is fiendishly complicated. However, this is our opportunity for radical reform, and this clause proves it. We need to look at the role of property values in locally raised revenue. We need to include our commitments on net zero and levelling up, as well as the target of building 300,000 houses a year.

Other interventions, such as the freeport scheme, can provide an excellent place to start. Let us put that idea on steroids. Let us have special economic zones to deliver levelling up and green homes, and sustainable investment in businesses, jobs and homes and the infrastructure that goes with them. With levers such as the super deduction combining with our global Britain approach, we can reach out to the world to get more foreign direct investment, more onshoring of manufacturing and more global brands relocating to those areas that we will level up.

The property tax element is fundamental here because it relates to the homes that people live in—the people who will do the jobs that will benefit from this investment and whom we will support through the levelling-up agenda. To put it simply, we cannot do levelling up without fixing the housing market, and the way we tax it, and what we disincentivise and incentivise as a result of that taxation, are a great place to start. I therefore fully support this clause.

I do not think I will ever give a more popular speech than the one I am going to give now, because I just want to thank everyone who has made comments. I thank the hon. Member for Erith and Thamesmead (Abena Oppong-Asare) for her remarks, which I have already answered. I thank colleagues for the speeches they have made to explore the effects, purpose and potential limits, even, of the stamp duty land tax and the holiday. I ask Members to support the clauses, and I will sit down.

This has been a good debate, and I too thank Members on both sides of the House for their contributions. Members on both sides have spoken on behalf of their constituents about the impact of the stamp duty holiday, the challenges of buying a home and the need for more action to make affordable housing a reality.

As I said in my opening contribution, the Opposition simply do not believe that the Government should be handing a half a billion pound tax break to buy-to-let investors and second home buyers. Once again, this is the wrong priority from a Government who are letting families down. Labour’s amendment 81 would end that unfairness, and I want to press it to a vote.

Question put, That the amendment be made.

With this it will be convenient to discuss the following:

Amendment 64, in clause 93, page 54, line 15, leave out

“substitute for the period for the time being mentioned there such other”

and insert “increase the”.

This amendment would ensure that the Treasury can only increase, and not decrease, the period for which the temporary 12.5% reduced rate of VAT for the hospitality and tourism sectors applies.

Clauses 93 to 96 stand part.

That schedule 18 be the Eighteenth schedule to the Bill.

Clause 97 stand part.

That schedule 19 be the Nineteenth schedule to the Bill.

Clauses 128 to 130 stand part.

New clause 16—Review of changes to VAT—

“(1) The Chancellor of the Exchequer must review the impact on investment in parts of the United Kingdom and regions of England of the changes made to VAT by sections 92 and 93 of this Act and lay a report of that review before the House of Commons within six months of the passing of this Act.

(2) A review under this section must consider the effects of the provisions on—

(a) business investment,

(b) employment,

(c) productivity,

(d) GDP growth, and

(e) poverty.

(3) A review under this section must consider the following scenarios—

(a) the extension of temporary 5% reduced rate for hospitality and tourism sectors is continued until 30th September 2021, and

(b) the extension of temporary 5% reduced rate for hospitality and tourism sectors is continued until 31st December 2021.

(4) In this section “parts of the United Kingdom” means—

(a) England,

(b) Scotland,

(c) Wales, and

(d) Northern Ireland;

and “regions of England” has the same meaning as that used by the Office for National Statistics.”

This new clause seeks a review comparing (a) the extension of temporary 5% reduced rate for hospitality and tourism sectors being continued until 30 September 2021, and (b) the extension of temporary 5% reduced rate for hospitality and tourism sectors being continued until 31 December on various economic indicators.

New clause 30—Review into the effects of replacement of LIBOR—

“(1) The Chancellor of the Exchequer must undertake a review within six months of the passing of this Act of the effects of sections 128 and 129.

(2) This review must consider—

(a) the implications for tax revenue,

(b) effects on financial stability, and

(c) effects on businesses that use LIBOR as a benchmark, including businesses offering supply chain finance.”

This new clause would require a review into the effects of the provisions of the Bill about replacing LIBOR.

May I say how much I love your exuberance, Mr Walker? It is never better in evidence than it was just now. Perhaps we are all getting a bit demob happy after 10 hours of close consideration of the Bill.

The Finance Bill includes clauses that extend temporary VAT relief for the hospitality and tourism sectors; that extend digital record keeping for VAT purposes to all businesses; that give businesses longer to make deferred VAT payments; and that add S4C, the Welsh language television channel, to an existing VAT refund scheme for public bodies. A customs clause will enable businesses that export steel into Northern Ireland from the EU to pay the same tariffs and access the same UK quotas as other UK businesses, instead of facing the prohibitive duties and quotas set out in EU legislation last year. Finally, banking clauses make changes to existing tax rules to ensure that they continue to operate as intended following the transition away from LIBOR and other benchmark rates, and update the powers to make amendments to the bank surcharge, the bank loss restriction, the bank compensation restriction and bank levy rules by regulations made by statutory instrument.

Clauses 92 and 93 ensure that businesses will continue to be supported by the temporary VAT relief for the hospitality and tourism sectors. The relief was introduced as an urgent response to the economic challenges faced by businesses in sectors severely affected by covid-19 restrictions. Together, these clauses will ensure that the relief continues to support the cashflow and viability of around 150,000 businesses, as well as the continued employment of more than 2.4 million people.

Amendment 64 seeks to remove the flexibility in the legislation that would allow for changes in the duration of the relief. As with all reliefs in response to the pandemic, the Government continue to keep the situation under review. It is important that the clauses allow for flexibility in what is, after all, still a rapidly changing environment. I therefore urge Members not to support—indeed, to reject—this amendment.

New clause 16 would require a review of the impact on investment of extending the 5% rate of VAT to the end of September, versus the year end, across the United Kingdom. This is technically not possible, because some of the required data does not exist.

Clause 94 will provide the legislative basis for the changes I announced to the Making Tax Digital for VAT service in July 2020, extending the requirement to keep digital records and submit digital VAT returns to VAT-registered businesses with taxable turnover below the VAT threshold of £85,000 from April 2022. Around 600,000 businesses have deferred VAT payments worth an estimated £34 billion as a result of the coronavirus emergency.

Clause 95 and schedule 18 legislate for a new payment scheme that will allow businesses that defer VAT payments from 20 March through to the end of June 2020, which were previously due by 31 March 2021, longer to pay in up to 11 equal monthly interest-free instalments. The new payment scheme has been available since February and will remain available until late June 2021. As of 19 April, HMRC has collected around £13 billion of the £34 billion that was deferred. Approximately 120,000 payment plans have so far been created, with a further £11 billion committed to being paid in monthly instalments. This means that over £24 billion of the total deferred VAT has now been secured as paid or scheduled to be paid. This is proving to be an extremely important and effective intervention.

Clause 96 seeks to add the Welsh language television channel S4C, the recent changes to the operating structure of which mean that it can no longer recover most of the VAT it incurs, to an existing VAT refund scheme for public bodies. That will refund VAT relating to its non-business activities of free-to-air public service broadcasting. The change will come into effect from 1 April 2021.



Clause 97 and schedule 19 ensure that businesses that move steel into Northern Ireland do not have to pay prohibitive safeguard rates as long as there is capacity in the relevant quota. The EU introduced legislation last year that could have led to prohibitive duties being charged on all steel imports into Northern Ireland, making steel more expensive there than anywhere else in the rest of the UK, or indeed in the EU. This outcome would have been quite unacceptable and incompatible with the Northern Ireland protocol. The Government wrote to the UK steel sector in January to communicate a solution that allows Northern Ireland businesses to have access to UK tariffs, including UK quotas instead of EU quotas. This clause and schedule provide the legal basis for that solution.

I rise to speak to new clause 30 in the name of the Leader of the Opposition and to make a few remarks on the other provisions in this group.

Clauses 92 and 93 relate to the temporary VAT cuts for the tourism and hospitality sectors. These are of course among the hardest-hit sectors of our economy over the past year, and it is absolutely right that this relief is extended. Only today we learned that, of the 800,000 jobs lost in the economy over the past year, 80% are those of people under 35 years old, many of whom previously worked in the tourism and hospitality sectors. Today’s unemployment figures show that it is young people more than any others who have borne the brunt of the job loss impact over the past year.

The vaccine programme of course gives us great hope and a platform for the cautious reopening of the economy, but only two in five hospitality businesses have outside space. Most of them are still not able to operate even under the conditions allowed at the time of this debate, so it is still a very tough time for the hospitality industry. After the experience of the past year, with the upsurges in cases in some countries, the emergence of new variants and vaccine resistance levels remaining uncertain, no one would yet say that we were out of the woods or that there was not still a need to support key sectors of the economy for some time yet. That is why it is right to continue the measures in clauses 92 and 93.

Clause 95 relates to payment schedules for VAT. Again, it is important to show some understanding of the difficulties that businesses have faced in the past year, and it is far better to have a measure that approves a realistic repayment schedule than bring support to an abrupt end and cause repayments at a defined deadline, which could have very damaging consequences for some of the businesses concerned.

Clause 97 and schedule 19 relate to steel moving between Great Britain and Northern Ireland. We of course support anything that will make life easier for the steel industry right now. It is the foundation for much of our manufacturing industry, and there is a great deal of uncertainty hanging over various steel plants in the UK right now. It is impossible not to reflect that, while the Government promised us free trade with the rest of the world, we need a clause and a schedule like these precisely because they have not even been able to guarantee free trade within the UK. We hope that this clause and schedule will make it easier to move steel goods between Great Britain and Northern Ireland, but the Minister will be aware that one of the broader uncertainties surrounding UK-made steel is how to avoid its being subject to 25% EU tariffs if quotas are breached in the near future. I wonder whether he will update the House on how discussions on that matter are going and how the Government intend to avoid that. This is particularly important given the wider issues facing the steel industry at the moment.

New clause 30, in the name of the Leader of the Opposition, relates to the transition from LIBOR to other reference rates, and specifically to reviewing the effects on taxation of replacing LIBOR. The new clause would require such a review to take into account the implications for tax revenues of the transition, and the effects on businesses, including those offering supply chain finance.

The new clause relates to clauses 128 and 129, which replace references to LIBOR in legislation with references to an “incremental borrowing rate”. The history of this, of course, relates to the long effort to move away from the use of LIBOR in financial markets. The need to do so arose out of the uncovering of attempts to rig LIBOR in the interests of various individuals in the financial services industry some years ago. Indeed, I believe that the Minister and I were colleagues on the Treasury Committee when all that was uncovered.

The uncovering of those practices exposed much that was bad about what was happening in parts of financial trading at the time, with activity being pursued in the interests of traders rather than customers, rates being rigged for the benefit of those traders and their institutions, and bank chief executives professing ignorance about what was going on inside their own companies. The ability to game the rate was exposed; the use of opinions on cost from submitters to the rate-setting process, rather than its always being based on actual trades, produced the possibility that tiny movements in LIBOR could benefit individual institutions or traders, often by very significant sums given the volumes of trades involved. Potentially, only a tiny movement in rates was needed to generate a very big profit.

However, making a decision to move away from LIBOR to alternative benchmarks based on actual transactions rather than the opinion of traders was, in a sense, the easy part. So far it has taken years; no wonder they are calling it the long goodbye. The difficulty is that LIBOR has been so widely used as a benchmark for contracts around the world. Indeed, the Bank of England estimates that LIBOR has served to underpin contracts worth some £300 trillion across the world and £30 trillion here in the UK. Even in these covid days, those are serious sums.

Moving away from LIBOR without dealing with that contract issue leads to the potential for contractual law disputes. If a deal was agreed based on one interest rate, how will it be affected by the move to another rate? That is not an abstract or unreal problem; it could affect mortgage rates, leases of buildings—all sorts of contracts. Indeed, the issue was highlighted only this morning in the Financial Times, in a story headlined “US lawmakers warned of litigation chaos over Libor”.

The Government have attempted to deal with this legacy contract issue through the Financial Services Bill, which is currently ending its proceedings in the other place. How successful that legislative effort will be remains to be seen. The very least we can say is that the reality of moving away from LIBOR has proved to be more complex than the decision in principle to do so. We may not have heard the end of this matter of transitioning away from LIBOR. That is why it makes sense to have a review of the implications, which is exactly what our new clause 30 calls for.

Clauses 128 and 129 deal with the tax implications of this change and replace legislative references to LIBOR with the term “incremental borrowing rate”. They also provide the Government with powers to make tax changes as a result of the discontinuation of LIBOR.

The Government estimate that the impact of all this on Exchequer revenues will be marginal. That could be right, but the sheer volume of contracts involved here suggests that the need for a review of the implications for tax revenue is real, and that is what our new clause 30 calls for. We believe that such a review should take specific account of the impact on businesses using supply chain finance. After all, that has been very much in the news recently, and it ought to be a field with which Ministers are by now familiar. Perhaps the Minister felt special when he got the call about supply chain finance, because it is not every day that someone gets a call from the former Prime Minister, but now we find that he was not the only one. In fact, there were three Ministers in the Department, one in the Department of Health and Social Care and the industry adviser in No. 10, all of whom got the call about supply chain finance. You could be forgiven for thinking that there are few people living west of the Caucasus who have not heard from the former Prime Minister about supply chain finance. After all that, it seems only right to consider the impact of this provision and on these companies. That is why we have included them in the new clause.

The inquiries on the broader issue will do their work. We may well hear more of this elsewhere, but, for the moment, as regards new clause 30, I look forward to the Minister’s response at the end of the debate.

It is always a pleasure to follow the right hon. Member for Wolverhampton South East (Mr McFadden), and it is a pleasure to speak in this debate. As I spoke twice yesterday and I am on the Bill Committee next week, I will keep my remarks a little short and focus on one measure that is important to my constituency.

I know that the Committee will appreciate that Harrogate and Knaresborough has a very significant hospitality and tourism sector. Using data from UKHospitality, we see that before the pandemic, there were 9,464 people employed by the sector. That puts us in the top 10% of constituencies across the country. The sector is not just a Harrogate and Knaresborough one; it is important to the whole of the York and North Yorkshire economy, accounting for over 75,000 jobs. If we look across the UK, we see that the sector accounts for 150,000 businesses and 2.4 million jobs. It is a huge number of people in a sector that has been one of the hardest hit.

As has been mentioned, among the tax measures in the Bill is the extension of the temporary VAT cut of 5% for the hospitality and tourism sectors. That reduction was first announced last July and was very well received by the industry, but this Bill extends that to the end of September and will then bring in a further reduction of a 12.5% rate for the six months to the end of March next year. This is very welcome, and the points that were made by both Front Benchers, my right hon. Friend the Financial Secretary to the Treasury and the right hon. Member for Wolverhampton South East, were absolutely correct.

This initiative understands the pressures that businesses will face. The hospitality sector may be starting again but it is effectively running on empty, having had months of either zero or very limited trading. If I may quote a local businessman, Mr Ian Fozard of Rooster’s brewery and taproom—[Hon. Members: “Hear, Hear!”] Mr Fozard is obviously well known here. He said that

“most businesses like ours need a sustained period of good trading to build back some reserves”.

Mr Fozard’s business is an excellent one and he makes a significant point. The industry needs a period of stability where it can rebuild. One challenge will be when businesses have been through the summer and they face the standard seasonal reduction but may not have built up the cash flow in reserve to see them through the leaner months. This initiative recognises that risk, so the continuity of support through the winter is welcome.

The sector is incredibly varied. We tend to focus on—indeed, the publicity tends to be about—pubs and restaurants, but there are also hotels and guest houses, and in Harrogate, we have the convention centre, which is a significant driver of visitors to the area. It has been a Nightingale Hospital for the last few months and while that is being deconstructed, the convention centre team have launched their restart plans, and I know that their good work is seeing the diary filled with bookings. However, my point is that this is a business-to-business sector, not just a business-to-consumer sector and, as this sector is diverse, so, correspondingly, is its supply chain. It has been very tough for the businesses in that supply chain. I know that, in my own constituency, some businesses in the supply sector will not be reopening, and businesses that have served the industry well for many years are at a crisis point.

I am sure that the safe reopening will release some pent-up demand. There are clear signs of that this week: we have all seen the news coverage and probably seen it in our constituencies, too. However, we should not expect the return of volume international markets any time soon and there will be some domestic customers whose confidence will need rebuilding before they engage with the sector again. For the conference industry, there will be the challenge of knowing just how much of that market will stay online having gone online over the past year. So this is a sector facing huge challenges. It is a sector that clearly interests our constituents and Members here, and it is important for employment, particularly of younger people.

I seek leave to speak to amendment 64 and new clause 16, which stand in my name and the names of my hon. Friends. We support the cut in VAT to 5% for the hospitality and tourism sectors; in fact, it was pressure from the Scottish National party that initially forced the Government to accept that measure. However, as with much of the Government’s support for businesses during the past 13 months, it is not enough.

Although there has been a welcome easing of restrictions in all four UK nations—in Scotland, we are particularly looking forward to next Monday, when the most significant easing of restrictions since December will come into effect—it is unlikely, indeed impossible, that the tourism and hospitality sectors will get back to anything like normal immediately. It is impossible that we will be back to normal by the end of September, and it is therefore completely irrational for the Government to arbitrarily decide that the 5% VAT rate should end on 30 September, but that is exactly what they have decided. The SNP did, in fact, table an amendment seeking to extend that date to 31 December, but that amendment was deemed to be outside the scope of this Bill. I accept that ruling, but I still urge the Government to get real, not only about the difficulties that the tourism and hospitality sectors are facing but about how long those difficulties are going to last.

In new clause 16, we are asking for the Chancellor to report back to Parliament on the impacts that the 5% VAT rate has had, and—very importantly—to compare that with what would have happened if it had been extended, as we have asked. We know what the 5% VAT rate is supposed to achieve, supporting businesses in those sectors, so the Government should have no qualms about assessing whether or not they have achieved that. Nor should they have any qualms about having their decision compared on an empirical basis with alternatives that have been put forward by other MPs.

The Minister claimed earlier that it is technically impossible to comply with that new clause because the data just does not exist. I find that frankly astonishing. If the political will is there, the data can surely be made available, and if Parliament decides that it is going to pass into law a requirement for that to happen, the job of the Government is to comply with the will of Parliament.

Amendment 64 asks for a minor, but important, change to the wording of clause 93, dealing with the temporary 12.5% VAT rate. Clearly, as I said earlier, we would have preferred that to remain at 5%, but the Government have rejected that proposal and gone for a 12.5% rate until 31 March 2022, presumably with the full 20% rate coming in after that date.

Clause 93, as currently worded, would allow the Treasury by regulation to bring that date forward, so that the tourism and hospitality sector would go back to paying the full 20% VAT rate sooner than the date that this House has agreed. That is not acceptable. Our amendment would allow the March 2022 deadline to be extended if we found—as we may well find—that the sector was taking longer than expected to recover. The only reason for bringing the date forward would be if, by some miracle, the tourism and hospitality sector recovered quicker than expected. I can see no circumstances in which those businesses will have recovered sufficiently for the increase to 20% to be brought forward earlier than March 2022.

In his summing up, may I invite the Minister to contradict me and to tell me that he thinks that that will be possible—that it will be appropriate to bring forward that date? If he cannot see any circumstances in which it will be right for him to use the power to bring that tax increase forward, he should not be asking us to give him the power in the first place.

One consequence of the quaint way that the British Parliament does its business is that, if we want to support businesses by reducing VAT on corporation tax liabilities, it goes in a Finance Bill, but if we want to reduce the liability of other taxes such as non-domestic rates, it does not. The non-domestic rate system is one of the very few parts of the business taxation system that is devolved to the Scottish Parliament. The Scottish Government have used that devolved power to ensure that businesses in retail, tourism, hospitality, aviation and newspapers, all of which have been severely hit by covid, will pay no business rates at all during 2021-22. The small business bonus scheme takes around 100,000 businesses out of non-domestic rates altogether and, if the current Scottish Government are re-elected, that will continue for the lifetime of the next Parliament.

In Scotland, we have the lowest business rate poundage in the United Kingdom, the most generous relief schemes and, of course, we have the most progressive income tax system in the whole of the United Kingdom. When we see the benefits that come to the vast majority of people in Scotland from the different approach that our Government have taken using the limited taxation powers at their disposal, I hope the Government will look positively on any request by the new Scottish Government, whoever that might be, to further extend those powers.

I wish to speak to clauses 92 to 95 relating to VAT. This last year has been exceptionally tough on our hospitality industries and I welcome all measures to support our valuable tourism and hospitality businesses as they tentatively begin to open up after the pandemic. Like many others, I was delighted to be able to visit pubs, restaurants and cafés in my constituency last week. I had a particularly enjoyable Friday night drink at the Black Horse on Kingston Hill and a fantastic Sunday lunch at the Glasshouse in New Malden. I am very much looking forward to getting round to all the other excellent venues in my constituency over the next few weeks and months.

However, it is important to remember that tourism and hospitality will not recover overnight. While there is undoubtedly a great deal of pent-up demand for eating out and visiting the wonderful sights and attractions of our great nation, it will not be possible for all businesses to open immediately and in full. And we do not know whether the Government’s road map will be able to progress as planned. Despite the wonderful success of the vaccine roll-out, we are still at risk from new variants and there may still be a need in future to restrict people’s ability to socialise indoors. So, although we welcome the cut to the VAT rate on hospitality and tourism sales to 5% until September 2021, the Liberal Democrats argue that the cut should be extended for the whole of the financial year, instead of moving to 12.5% from September to March.

Household incomes also need time to recover, and encouragement to spend on luxuries and leisure such as meals out should be continued for much, much longer. Indeed, the Government could and should have gone a great deal further to support these businesses and to safeguard the jobs that they create. Many businesses are able to partially reopen this month. There are estimates that up to 60% will not be able to reopen because they do not have outside space. But they will all be faced eventually with large VAT bills, deferred over the last 12 months.

A much better way to support businesses would have been to provide relief on the deferred VAT owed. That would have relieved businesses of an immediate cash burden and freed up that cash flow to invest in stock, staff and making their premises covid-safe. Instead, the Government propose to start imposing penalties from June this year on those businesses that have not yet started repaying this VAT. That will fall on businesses that have had extremely limited opportunities to earn any revenue in the last 12 months. The measures to allow businesses to pay this in 11 instalments is welcome, but will not help those businesses that cannot yet reopen and will not have any cash coming in to pay any of those instalments.

Businesses will also be carrying a great deal of debt and it is very disappointing to see a lack of measures in the Budget to address that. In particular, many businesses will be indebted to their landlords and it is disappointing that the Government have done nothing at all to help businesses with those costs. The Liberal Democrats would have introduced a revenue compensation scheme to help businesses with fixed costs such as rent. The burden of repaying those will fall very heavily on businesses that cannot yet reopen fully.

I am probably unique in the House in having direct experience of implementing Making Tax Digital for VAT reporting in my former role as an accountant for a large organisation. While the overall objectives of the programme are sound, I can tell the Minister from personal experience that they are not always straightforward to implement. I am puzzled as to why the Government think it should be a priority for struggling small businesses to deal with the additional administrative burden of implementing Making Tax Digital, at a time when they are having to deal with the huge burden of reopening in a highly uncertain time, and at the risk of further fines if they do not comply. Surely this could have waited another 12 months. The imperative to close the tax gap surely pales into insignificance when compared with the imperative to support precarious businesses at this time. How can additional red tape and administrative burden be the right response to the current crisis?

In short, this is not a Government who understand the needs or priorities of small businesses; it is a Government who choose to impose punitive costs and paperwork rather than provide effective support.

Dame Rosie, my humblest apologies for being late in attending the Chamber. I was badly caught out by the fact that this debate is way ahead of where I thought it would be. [Hon. Members: “Hear, hear.”] There is a silver lining to every cloud.

My good friend and colleague, my hon. Friend the Member for Richmond Park (Sarah Olney), has said it all, but I would like to touch on the issue of the hospitality sector. I am sure the Minister is tired of hearing this again and again, but business in my part of the world is very fragile. The hospitality sector depends on making as much money as it can during the short tourist season because the weather can be so inclement—it is like living on the fat you can make in the good times to get through the winter.

I give credit to the Government for the help that has been given, but I am very concerned that some tourism businesses may still yet shut down permanently. I do not know how many times I have said this in the Chamber, but the fact is that, if we lose one business, two businesses or three businesses, we are impoverishing the tourism product that we can offer in a remote part of the British Isles and, if we do that, there is less for tourists to come, see and do, or to eat and drink, and then we do not get as many tourists coming, and it becomes a downward, vicious circle. The VAT reduction we have had so far is welcome, but could we look at extending it a little further, perhaps for as long as my hon. Friend the Member for Richmond Park said? That would be very welcome. I have said several times in this place that it would be helpful if the Scottish Government and the UK Government could look at an overall, longer-term strategy to try to get businesses back on their feet, seeing them through the difficult times and nursing them so that we get to—to quote Churchill—the “sunlit uplands” that surely will come our way.

There is one other issue: we need some form of training element in that package. I was talking to Murray Lamont, who owns and runs Mackays Hotel in Wick, and he said: “Talk about training, Jamie, because we need to keep improving the product and making it still better because the competition is out there.” My hon. Friend the Member for Richmond Park touched on the revenue compensation scheme, and I would be extremely grateful if that could be looked at.

I am tempted to chance my arm and talk about banks, given the name of this section of the debate. Members will have heard me say many times that we have one branch of the Bank of Scotland in the huge county of Sutherland. That is a massive problem, but rather than incur the yawns of those on the Treasury Bench—

More, more.

I will resist the sedentary comments from the Scottish National party Member and conclude my remarks here.

Before I wind up the debate, I thank colleagues not only in this debate but in all our previous debates for the engaged and often constructive way in which they have approached the discussion. I also thank my friends on the Opposition Front Bench for their contributions. Let me pick up on some of the themes described.

The hon. Member for Glenrothes (Peter Grant) raised the question of the Scottish Government’s limited tax powers, but I would put it to him that what is so striking is how little the Scottish Government have used the tax powers that they have. We saw that earlier, when the hon. Member for Glasgow Central (Alison Thewliss) invited the Government to extend a relief to antibody tests, whereas of course it is perfectly within the powers of the Scottish Government to use the tax revenue they generate to fund the differential for antibody tests themselves.

I suggest that the Government cannot have it both ways. In one respect, the Minister says that we have done nothing with our taxation powers, but his colleagues north of the border would say that we are the highest taxed part of the United Kingdom. Which is it?

The Scottish Government are fully entitled to tax the Scottish people as much as they see fit in the democratic exercise of their mandate. The point I am making is that they have the scope to do so, if they wish, so they should not always be looking to the UK Government on matters of tax if the powers to make the change exist within their own competence and power.

The hon. Member for Richmond Park (Sarah Olney) talked about Making Tax Digital for VAT, but she ignored the fact that many small businesses have already joined the Making Tax Digital for VAT programme. The reason they have done so is that they recognise that it gives them a tremendous ability to manage their tax affairs. It also allows them to enjoy the gains of improved IT productivity. We think that those gains are worth having and worth extending to other businesses. That is one of the powerful drivers behind the Making Tax Digital project.

The hon. Member for Caithness, Sutherland and Easter Ross (Jamie Stone)—always a delight to see in the Chamber, and I am very pleased that he took off his mask so that we could follow his remarks closely—talked about a revenue compensation scheme. Of course, if he reflects for a moment, he will see that the self-employment income support scheme is precisely a support scheme designed to assist people’s incomes. It has proved to be extremely effective in supporting millions of people on that basis.

I think the hon. Gentleman is right to focus on the sunlit uplands. All I can say is that if we come out of this on anything like the basis that we are projected to do by some of the independent authorities, given that this is the worst economic crisis in recorded history, there will be much to be thankful for. I will be delighted if we can get to those sunlit uplands.

I am so sorry that the Minister did not hear the first part of my speech—I could run through it again, if that would be helpful. I will chance my arm here. Last summer, the Chancellor of the Duchy of Lancaster met business representatives to talk about the sorts of issues in the hospitality trade that I was raising. I wonder whether I could crave, or look for, the favour of the Treasury Bench. Will someone in the Treasury be willing, when suitable, to meet those representatives if they came down to London, to talk about the issues, further to the discussions they have already had with the Chancellor of the Duchy of Lancaster?

I am very happy to volunteer the Chancellor of the Duchy of Lancaster, if the hon. Gentleman wishes to write to him further to that conversation. We are keenly aware of the problem. As Ministers, we spend our lives engaging with different groups. Of course we will look kindly on any suggestion that he might make, as we would on any suggestions made by any Member of this House, but I do not want him to think for a second that we need to do that in order to be keenly aware and abreast of the actual impacts that this present crisis is having on businesses and individuals.

I come to the points raised by the right hon. Member for Wolverhampton South East (Mr McFadden), which were very important. He rightly noted the impact of job losses on the under-35s. It is important to point that out, and we are keenly aware of that within the Government. He asked for an update on the Northern Ireland steel industry situation. As he will be aware, the Government are engaging closely with the EU on this issue. The Northern Ireland protocol is clear that it should be implemented in a way that has as little impact as possible on the everyday lives of people in both Ireland and Northern Ireland. As I say, there is close and constructive engagement on this topic. I am not in a position to give any more details of conversations that are still under way, but I can let him know that they are in those terms, and there has been reporting on this in the newspapers as well.

The right hon. Gentleman asked about the question of LIBOR. As he says, he and I were on the Treasury Committee when the full scale of this scandal became clear. He may recall the cross-examination I gave to Lord Grabiner on his inquiry into this issue, in which it was clear that there had been serious wrongdoing. There has been a slow and stately process of reform in this area, and businesses have been aware of the changes. Since July 2017, there has been a considerable amount of work done by the FCA. There has been a public consultation, extended because of the covid situation. There has been close engagement by a dedicated working group with industry. The Financial Services Bill reserves powers to the FCA if that is required in order to support an orderly wind-down. A tremendous amount of work has been done and is being done, and we are content with the situation as it stands.

Question put and agreed to.

Clause 92 accordingly ordered to stand part of the Bill.

Clauses 93 to 96 ordered to stand part of the Bill.

Schedule 18 agreed to.

Clause 97 ordered to stand part of the Bill.

Schedule 19 agreed to.

Clauses 128 to 130 ordered to stand part of the Bill.

The Deputy Speaker resumed the Chair.

Bill, as amended, reported.

Bill to be considered tomorrow.