Finance (No.2) Bill 2017-19 Committee of Whole House Day Two

5 Jun 2018

Liveblog on the second day of committee stage debate on the Finance Bill (Tuesday December 19th), with debates on new clauses relating to the effect of the Bill on equality, and the effect of the Bill on tax avoidance and evasion.

You can read more about the Bill here (CIOT report) and here (Parliament website). Text of the Bill and other related documentation can be read here.

You can watch the debate via Parliament Live here.

The first debate on the Bill (second reading) took place on Monday 11 December, You can read the CIOT's report here. The first day of Committee of the Whole House took place on Monday 18 December. You can read the CIOT's report here.

Neither of day 2's debates covered clauses or schedules in the existing Bill, only Labour's proposed new clauses.

NB. The notes below are contemporaneous and not checked against Hansard. We cannot guarantee that no errors have crept in and we advise on checking any passage against Hansard before repeating it.

The effect of the Bill on equality

Selection of amendments

NC6 [Labour] - This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effects of the provisions 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 regional basis. + NC7 [Labour] - This new clause requires the Office for Budgetary Responsibility to carry out a review of the effects of the provisions 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 regional basis.

The debate

Dawn Butler, Shadow Minister for Women and Equalities, opened the debate and set out what Labour was attempting to achieve with its new clauses. She asked the minister to consider the impact of the Government's policies, including universal credit and lack of funding for women's refuges. She said the Government had made £28 billion of cuts to 3.7 million disabled people. 86% of the Government's cuts are falling on women, she argued. The only impact assessments for the measures in the Bill were those in TIINs (Tax Information and Impact Notes) but these only include a sentence or two on equality impacts. With a nod to the Wizard of Oz, she urged the minister to 'be less like the TIIN man, have a heart' and 'have a comprehensive impact assessment' for the measures. The Government had said it was not possible to analyse the effect of measures on men and women in couples, she said, but she disagreed with this assessment. She acknowledged some of the assessments were not straightforward, but that was not an argument for not doing them. She highlighted analysis carried out by the Women's Budget Group and the Runnymede Trust for the report 'Intersecting Inequalities' and urged the Government to work with them to deliver the review Labour were requesting.

Sarah Champion (Labour) said all public bodies were obliged to have regard to the impact of their policies on equality, but the Treasury was not fulfilling this responsibility. She said women made up two thirds of the public sector workforce and so had been particularly hit by the public sector pay cap. She said she was proud of Labour's commitment to gender-proof all of its policies.

Stella Creasy (Labour) said inequality was 'an incredibly expensive business for everyone'. Good data drives good decisions, she argued, which was why Labour was pressing for the analysis requried by its new clauses. Bridging the gender gap would raise GDP by £150 billion a year by 2025, she claimed. Men benefited disproportionately from cuts to corporation tax rates, she added.

Laura Pidcock (Labour) spoke about the problem of entrenched poverty due to low pay and zero hours contracts. She urged members to support new clause 6 so that her constituents could see the truth about what government policy was achieving.

Bim Afolami (Conservative) gave a combative speech. He responded to Laura Pidcock's concerns about precarious work and low pay by saying that the Government were working to create more, better paid jobs. He said there was already a large amount of data on gender and other disparities. Sarah Champion responded that such data as there was was being provided by charities, not directly by government. He said that taking the lowest paid people out of tax and raising the minimum wage particularly helped disadvantaged groups who were less well paid. Stella Creasy said two thirds of those who do not benefit from increasing the personal allowance (because they are already below it) are women. Ms Creasy challenged him to present the data to show that corporation tax cuts did not disproportionately benefit men.

Jim McMahon (Labour) accused Mr Afolami of 'naivety', suggesting that the government's policies were exacerbating income inequality. He said the government's approach to the budget had done little to widen participation and suggested that there was a 'disconnect' between the government benches and the reality of its budget cuts. He said if the government claimed to the party of equality, they should back Labour's amendment.

Kirsty Blackman (SNP) described Labour's amendment as 'brilliant' and welcomed the constructive dialogue she has had with the Labour Party over the provisions contained within it. She said that women and minorities had been disproportionately hit by the government's economic policies and that the benefits freeze had exacerbated this situation for many. Ms Blackman then went on to consider how the disabled, single-parents and young people had also been impacted. Ms Blackman then spoke of the Scottish Government's income tax proposals, which she said would make Scotland the 'fairest taxed part of the UK'.

The Financial Secretary to the Treasury (FST), Mel Stride, responded by stressing the government's commitment to equality. He said the government had a 'strong record', pointing to increasing numbers of women in employment, action on the gender pay gap and support for the disabled. He said the national living wage would increase by 4.4% (above inflation) and that the government was committed to ensuring that ethnic minorities would continue to benefit from its policies across a range of different areas. The FST said government had a duty to give due regard to protected characteristics through the Equality Act 2010. The opposition's amendment was 'fundamentally impractical' because it would focus only on 'static' indicators. In conclusion, he said his government was committed to providing equality of wealth and opportunity and urged that the amendment be rejected.

Dawn Butler (Labour), winding up the debate, said the government 'said one thing and then did the other' and that its actions had exacerbated many of the issues and problems that had been outlined over the course of the debate. It was previous Labour governments - she argued - that had embedded equalities into law. Ms Butler said she believed that if the government was serious about tackling inequality, that it should lead its MPs through the lobbies to support Labour's amendment.

Following a division, Labour's new clause 6 was defeated by 309 votes to 273. New clause 7 was not moved.

The effect of the Bill on tax avoidance and evasion

Selection of amendments

NC8 [Labour] - This new clause requires the Chancellor of the Exchequer to carry out and publish a review of the effectiveness of the provisions of the Bill in tackling artificial tax avoidance and tax evasion, and in reducing the tax gap.

The debate

Moving the amendment for Labour, Shadow Treasury Minister Anneliese Dodds (Labour) noted that this was the third time she had spoken on a Finance Bill, with this one described as 'woefully thin and inconsequential'. Ms Dodds accused the government of failing to step up and tackle the issue of tax avoidance and evasion. She said that it was unfortunate that members across the House were unable to table amendments to the Bill, noting the amendments made in 2016 by Caroline Flint (Labour) to introduce country-by-country reporting as an example of an effective use of amendments to previous Finance Bills. She accused the government of a light touch approach to tax avoidance and evasion, suggesting that it was falling behind the rest of the EU by failing to include trusts in registers of beneficial ownership. She said that, as of the previous Friday, there was now agreement at EU level to include business-like trusts on registers of beneficial ownership. She asked the Minister to tell the House 'whether and when he will act to include business-like trusts on the British register of beneficial ownership'.

Ms Dodds went on to consider the impact of staff cuts at HMRC at a time of increasing demand and the UK's impending exit from the European Union. Noting the recently announced EU investigation into Ikea's tax affairs, she questioned how (and if) government would act on similar cases in the post-Brexit world. Of the measures contained in the Bill, Ms Dodds suggested that these did not go far enough. Specifically she cited clause 21 (intangible fixed assets: transactions between related parties) which, in her view, 'seems to adopt a confusing new approach to measuring profit shifting, rather than aiming to reduce it per se'. She said the country desperately needed 'a thoroughgoing, holistic assessment of the overall impacts of tax reliefs'. The shadow minister also drew attention to the number of measures in the Bill 'cleaning up previous mistakes' by the Government. She gave clause 35 and schedule 10 (Settlements: anti-avoidance, etc.) as an example, aqlong with clause 28 which, she said "closes the loophole introduced by the coalition Government in 2011 that allowed foreign companies to hold on to an asset-stripped subsidiary for six years until they were then able to claim loss relief in excess of any genuine economic loss to the group. Again, the measure tidies up a problem that was created previously by those involved with this Administration." She concluded by suggesting that this was a government that had run out of ideas.

Alex Chalk (Conservative) spoke in favour of the Bill's provisions. He said that this was a Bill that provided for a progressive tax system and which supported a crackdown on tax avoidance and evasion. He said both he and his Cheltenham constituents were angered at the idea of multi-national companies exploiting the tax system but noted that the UK's tax gap had narrowed to 6%, bringing in an additional £12 billion of revenue to the exchequer. He said investment in HMRC of £155 million and the introduction of joint and several liability for VAT on online purchases were further examples of the steps being taken by government to lay the foundations for a country 'fit for the future'.

Kelvin Hopkins (Independent) suggested that the abolition of exchange controls by Geoffrey Howe in 1979 had exacerbated corporate misbehaviour but stopped short of calling on the government to reintroduce these. He added that this was a 'weak' bill from the government that would fail to tackle tax avoidance and evasion and made reference to opinion polls pointing towards support among the British public for paying more in tax to support public services such as the NHS.

Kirsty Blackman (SNP) said that the question of what kind of country the government wants us to be was at the heart of the debate. She said that cuts to customs officials had been a contributory factor to increases in tax avoidance and evasion, also suggesting that there needed to be greater protections for whistleblowers who sought to highlight cases of mispractice. She said the SNP had been consistent in its criticisms over the complexity of the UK's tax code, which made it easier to understand why there may be some unintended loopholes for some to exploit. Ms Blackman paid tribute to her former colleague Roger Mullin for this work highlighting the issue of Scottish Limited Partnerships (SLPs) as vehicles for tax avoidance. She said she hoped to see the outcome of the government's review of SLPs. The SNP supports the devolution of tax avoidance and evasion powers to the Scottish Parliament which she said would be adopted in a 'fair and moral' way that would further reduce the tax gap.

Responding for the government, Mel Stride said that the government was committed to bearing down on avoidance, evasion and non-compliance and had a strong record in these areas. More than 100 measures had been introduced and had helped reduce the tax gap to its lowest level as well as making it, according to the International Monetary Fund 'one of the most robust in the world'. Government had borne down on enablers of avoidance and evasion, had been at the vanguard of introducing common reporting standards and had, since 2010, collected £2.8 billion in additional revenues from tackling the inappropriate use of offshore trusts. He said new clause 8 was unnecessary. Action on online VAT fraud would raise an extra £1 billion in revenue, a crackdown on disguised remuneration would generate £6 billion and further action on inappropriate landfill dumping was yet another sign that the government was going 'above and beyond' in its actions on tax evasion and avoidance. Mr Stride urged the house to reject the new clause and accused the Labour Party of doing very little over 13 years in government to tackle these issues.

Responding for the opposition, Anneliese Dodds (Labour) cited the work of the last Labour government in tackling tax avoidance and evasion, rejecting Mr Stride's earlier accusation that it had failed to take action. She was critical of the government's backbench MPs for failing to answer questions on the tax gap and the true nature of avoidance and evasion and welcomed Kirsty Blackman's contribution on the challenges of HMRC staff reductions and Brexit. Ms Dodds formally moved Labour's amendment, which was then pressed to a vote.

Labour's new clause 8 was defeated by 311 votes to 271.

The debate concluded at 17.50, having begun at 15.10.

The remaining clauses and schedules will be debated in Public Bill Committee between January 9th and 18th 2018. We will be liveblogging on these sessions.

George Crozier and Chris Young, CIOT External Relations Team