Live Blog: Finance Bill 2017-19: Report stage and Third Reading

23 Feb 2018

This is a 'live' blog of proceedings in the House of Commons as the Finance Bill 2017-19 has its Report stage this afternoon (21 Feb 2018). The full Hansard transcript can be seen here from Thursday.

The Finance (No.2) Bill is the second Finance Bill of the current parliamentary.session.

Documents on the Bill can be read here. The Finance (No. 2) Bill was considered in a Committee of the whole House and no amendments were made. The Public Bill Committee has since completed its work on the remaining Bill and has reported the Bill with amendments to the House of Commons. Amendments can be made to the Bill at Report Stage (the list of amendments to be covered today can be seen here).

The grouping of amendments in today's Report stage will be 1) Equality impact analyses 2) the bank levy, tax avoidance and evasion and the tax treatment of PFI finance companies 3) Stamp duty land tax relief for first time buyers, rates of income tax, VAT refunds for Scottish emergency services, vehicle excise duty and tax treatment of pension scheme.

You will be able to watch the Report stage on Parliament TV, from about 1.30pm.

Equality impact analyses

Opposition New Clause 9 - requires the Chancellor of the Exchequer to carry out and publish a review of the effects of certain 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)

There were lengthy exchanges on this clause, often with tenuous links to the substance of the clause.

2.05pm Labour‚ s Dawn Butler, Shadow Secretary of State for Women and Equalities, cited the Treasury Committee which said the ONS has data to help with publishing the suggested equality impact assessments. Butler said that if ministers really showed due regard to existing impact assessments by government Departments, many policies would not go ahead. The MP pointed to cuts to be made to nursing bursaries even though equality assessments showed it will disproportionately affect BAME groups. More children are living in temporary accommodation since the 2008 economic crash, she said.

SNP economy spokesperson Kirsty Blackman said the way UK Budgets have been done is not transparent enough for her liking and in this light supports the New Clause 9. Age is an example of something that needs to be included in such impact assessments because many tax policies tend to disproportionately affect particular age groups. The creation of the Marriage Allowance has a disproportionate impact on single people and therefore open to accusations of ‚ unfairness‚ the SNP believes. The MP spoke about the relatively big impact on the North of England shown in the leaked ‚ Brexit impact papers‚ recently. Why can‚ t the Government analyse this kind of thing when making tax policy? She doubts the Treasury actually know the disparity impact of its policies.

The SNP MP then went on to say the Finance Bill Committee should take oral evidence from experts but lamented that this should really happened at an earlier stage of tax policy making. The Chancellor should be speaking not just to Tory MPs but ‚ open the net wider‚ .

She said: "I have previously expressed vociferously my concerns about the fact that Finance Bill Committees do not take evidence. It would be much better if they did, and if they did, I would like to see them take evidence from organisations such as the Women‚ s Budget Group that can talk about the gender disparity in some of the tax decisions that are made. But I honestly do not think that that is enough. It is not enough to have scrutiny after the fact. Despite the Government moving to one fiscal event in the year, which is a change that I welcome, there is not the level of consultation that there could be before tax measures are suggested and put in place‚ before the Chancellor stands up and reveals his Budget.

"He should not only speak to business organisations and Conservative MPs, as I know he does, but open the net wider and consult in advance on any tax measures that he wishes to put in place. He should also take on board new clause 9, which would ensure that an impact analysis is carried out afterwards."

Conservative Helen Whately said it was the last Labour government did not build enough homes, which has added to some of the problems that Labour MPs now complain about. Labour‚ s Anneliese Dodds interrupted to dispute that clam about building homes, saying: "The number of home-owning households increased by one million under the Labour Government and has fallen under Conservative Governments." Whately said it is the Tories who have taken the poorest out of tax and helped ‚ thousands of young people‚ to get a job. Labour Stella Creasy interrupted to say the new clause is about getting the ‚ numbers‚ (statistics) on equality. Tory Whately said universal credit is ‚ genuinely‚ making a difference in her constituency and that, and the industrial policy, are two ways the Government is doing concrete things that helps reduce inequality.

There seems to be a consensus among MPs that asking companies to publish details of their pay gap is good but Labour and SNP point to a lack of response from many companies.

On the Marriage Allowance, Tory Luke Graham said that it was the Chancellor Philip Hammond who agreed to bridge the gap on funding it because of doubts that the Scottish Government will be able to. On tax avoidance, particularly on VAT (international platforms), he said they will bring more money into UK coffers and help deal with inequality. Fellow Tory Rachel Maclean claimed the Treasury already published a distributional analysis but Labour‚ s Wes Streeting said it does not analyse matters anywhere like what New Clause 9 would achieve, and certainly not TIINs. Rachel Maclean suggested that equality comes down to ‚ pounds in the pocket‚ . Creasy interrupted to say there is data out there that shows gender inequality on pay is true but we need to see the relationship between Treasury polices and that - hence the need for New Clause 9.

Maclean said the Equality and Human Rights Commission can issue a notice if gender pay information is not forthcoming from companies. Having additional burdens on the Treasury at this time, e.g. Brexit, is unwise, she added. Stephen McPartland, Conservative, said ‚ figures‚ from an impact assessment from the Treasury will not help, practically, children in schools. On New Clause 9, he said universal credit is doing more to boost people‚ s life chances than a document to say what happened in the past: ‚ It will just allow economists to argue over moot points‚ .

In his speech Wes Streeting said the Treasury‚ s impact assessment (published alongside the UK Budget) does look at the distributional impact on households by income but is still good, but they do not come close to the information that Labour says is possible with New Clause 9, which will improve decision making. The existing Treasury's current impact assessment approach does not breakdown a whole range of protected characteristics defined by the Equality Act 2010. Disabled people have been clobbered by changes to welfare policy, he added, which continues, in part, because there are no equality impacts the like of which Labour wish to see with New Clause 9. What is wrong with reasoned, evidence-based decision making, he asked? He added that he respects Treasury staff‚ s expertise but this is not the point of the new clause.

3.10pm Financial Secretary to the Treasury Mel Stride said a lot of the information would be difficult to identify and compile, especially given that a large number of taxes and topics that New Clause 9 would cover (e.g. employment, pensions, income tax etc.). ‚ This is riddled with complexity‚ . He said the Treasury‚ s distributional analysis is used by the Government, along with its TIINs. He said: "As I have already pointed out, around major fiscal events we have household distributional analysis, which covers welfare, taxation and public expenditure. It takes a cumulative approach to that information and it is often relied upon by Government to take subsequent decisions. We also have, on substantial individual tax and national insurance contribution measures, tax impact and information notes‚ the so-called TIINs‚ which were introduced in 2010 and were not there under the previous Labour Government. We are, therefore, doing a number of things, both in the context of major fiscal events and on a tax-by-tax, national insurance-by-national insurance change basis, which look to provide just the kind of information that informs decisions around equality."

It is very difficult to disentangle the effect of income that may go to one member of the household, 'but is of course subsequently shared across the household', he said.

3.26pm Dawn Butler put New Clause 9 to a vote.

3.45pm The New Clause failed (265 to 304)

The bank levy, tax avoidance and evasion and the tax treatment of PFI finance companies

In this section, the MPs tended to talk about the grouping of these amendments, often moving between different amendments. The below summary in this section is therefore an attempt to summarise the comments by MPs by amendment and not necessarily chronological.

Opposition New Clause 3 - requires the Government to carry out a review of the bank levy, including its effectiveness in relation to its stated aims, the revenue effects of the changes made in 2015 and the comparable effectiveness of the bank payroll tax.

Opposition New Clause 4 - asks HMRC to prepare a public register of banks paying the bank levy and the amount they have paid

Opposition New Clause 5 - if successful, this new clause will requires the Government to provide a separate analysis of the impact of Part 1 of Schedule 9 nearer to the time of proposed implementation in 2021 and to seek the separate agreement of the House of Commons to commencement in the light of that review.

The Government wish to change the scope of the Bank Levy, so that it will generally only be chargeable on UK activities of banks and building societies. There will also be complementary changes to the Bank Levy rules, for example to take into account the introduction of ring-fencing rules for banks, and new requirements loss absorbing capacity within groups. Broadly, this means that, from 2021, overseas activities of UK headquartered banking groups will no longer be subject to the Bank Levy. Various other changes and administrative simplifications to the Bank Levy will apply from 2018, including the process under which groups nominate a member to meet their Bank Levy obligations and to rules governing the shared liability of group members for Bank Levy amounts.

Speaking for the new clause, Shadow Chief Secretary to the Treasury Peter Dowd said the UK has a directionless government rife with divisions, and the resulting messy thinking has led into the changes to the bank levy which are ‚ engineered for the benefit of the few‚ . Under the original Treasury plans, the levy would have raised ¬£3.9 billion a year, which is nearly ¬£1.3 billion more than the ¬£2.6 billion that has been indicated. But the then Government, lobbied by the privileged few, ensured that the threshold remained low. A review would cover its effectiveness and calculate the impact of cuts to it since 2015, and therefore see who has benefitted from changes to it. He made it clear that Labour would relate the results of the review to cuts made to public services not related to the bank levy. ‚ Children are paying the price of reducing the bank levy‚ , he fears.

Conservative Chris Philp responded to Dowd. Banks as corporates are paying more tax, proportionately, than other types of corporates ‚ which is right‚ ¶ as they received taxpayer money‚ . To suggest children‚ s services have been deprived because of banking legislation does not stand up when financial services are paying more tax than since before the crash in 2009. He said it is possible to reduce tax and collect more money, such as with the trajectory of corporation tax ‚ ì by ‚ stimulating activity‚ . Jonathan Reynolds, Labour, interrupted to say the bank levy is a levy on the risk-assessed capital that is on the big banks‚ balance sheets. The Laffer curve would not apply to the calculation of what the return would be if the levy remained the same, he explained.. Philip disputes this because international banks can choose where to allocate tax and if taxed more in a certain jurisdiction, they will rationally respond to that by moving that allocation somewhere else.

A bank such as UK-based HSBC can choose where to domicile and, if we continue to levy on non-UK activity (majority of HSBC's activity, apparently), there would be a irresistable temptation to change their work method so they are booked somewhere else and the UK misses out on related corporation tax. There is no need for a review to be on the face of primary legislation, he added. Shadow Economic Secretary Reynolds spoke to say ‚ correlation not causation‚ is the reason why cuts to corporation tax has led to an increase in tax take from it.

Philp then started to refer to Opposition Clause 4 and 5, which he said are ‚ the dog that didn‚ t bark‚ because they do not have much information in them. Dowd said the Government used arcane parliamentary rules before the start of the Finance Bill that prevented the Opposition from putting more of its policy ideas into their amendments. Philp then went on to say that PWC found last year that ¬£71 billion of taxes was paid by the financial services sector, about nine percent of UK‚ s tax take ‚ ì this means politicians should not take ‚ cheap shots‚ at it, he said.

SNP‚ s Kirsty Blackman said the party oppose reductions to the Bank Levy and will support Labour in a vote.

FST Mel Stride said that the USA does not have a bank levy and many countries do not have it. On the idea of reintroducing a special tax on bankers pay, that would lead to significant tax avoidance. On New Clause 5, he said the Government has already published a TIIN on that.

Labour' Stella Creasy's amendment (1) requires a review about the appropriate extent of the bank levy in terms of the lending and investment entities which it covers, considering the extent to which it covers PFI finance groups and assessing the revenue effects of such an extension. Her amendment 2 relates to the same matter. Labour‚ s Creasy moved amendments 1, 2, 3 and four, and spoke on the other New Clauses. They speak to her long held concern about PFI and she said the consequences of not tackling bad PFI deals are toxic for communities. She said 20 per cent of the extra money the Government is saying it will give to schools and hospitals will go into making greater profits to PFI companies. Often it is repayments to PFI companies that are the ones leaders of public services cannot consider delaying or missing at all. She made the observation that PFI deals give the impression that if contracts fail, the deals no longer stands, when in reality schools and hospitals cannot allow some part of its service to fail. These PFIs contracts have been drafted to get full repayment to lenders.

She said: "I hear and understand the calls from people to cancel these contracts outright: to rip them up and say, ‚ We are not going to pay.‚ But we know that these contracts are just as expensive to cancel as they are to carry on. They have been drafted specifically to require full-cost ‚ ãrecovery to lenders to make sure that their interests are always protected. As the NAO highlighted, it is not just about repayment charges and covering those costs. We would have to cover the interest rate swaps that were built into the contracts to make sure that they are almost always profitable."

If we cannot get PFI companies to accept changes to the contracts, we should consider a windfall tax on them. Her amendments can clarify how much the PFIs have benefitted from the contracts and then how to adjust the tax rates to claw some money back for the taxpayer. The Government must negotiate with PFIs to deal with excessive profits. Creasy argued that many of the contracts ‚ ì which included tax rates in force at the time as part of the value-for-money assessment ‚ ì were signed when corporation tax was much higher. In effect contractors have made windfall gains from cuts since then.

Kirsty Blackman said she will support Creasy on PFI.

FST Mel Stride said the Government introduced the operational public-private partnership efficiency programme in 2011 which has led to ¬£2 billion of savings for PFI projects. On windfall tax, he said a retrospective action would tax local authorities rather than the providers it is mean to target because of existing rules on procurement. It would also damage the UK‚ s reputation for ‚ tax certainty‚ . He explained: "PFI contracts... are long-term agreements that typically include anti-discriminatory clauses. This means that when legislation is passed that targets PFI companies without applying to similar projects undertaken by other companies, the tax owed can be recovered from the procuring authorities. A windfall tax would therefore only be a tax on local authorities, NHS trusts and Government Departments that hold such contracts." He said PFI companies may also restructure to avoid any extra tax. He added that it is simply not possible to bring PFI groups within the scope of the bank levy. Most of the design of the tax could not be applied to such groups.

Opposition New Clause 6 - 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.

Shadow CST Dowd spoke about this clause in the same speech as on New Clause 3. He said the measures are feeble and listless compared to what he calls an industrial scale problem at hand, particularly in Overseas Territories. He said: "The gap between the tax take originally expected from the 28 anti-tax avoidance measures introduced since 2010 and the revised forecast is £2.1 billion". The last Labour government brought in anti-tax avoidance measures in nearly every year since 1997, he said. "Most notably, in March 2004, the Labour Government introduced a disclosure scheme that required anyone marketing a tax mitigation scheme to give HMRC advance notice, giving the Revenue authorities an opportunity quickly to counter the scheme with new legislation", he said.

Tory Philp said the Government has taken 75 different measures to tackle tax avoidance and evasion in the past eight years. The DPT and the tightening up of the use of corporate wrappers on property are examples of this. Philp suggested that he is warm to David Cameron‚ s old idea to make ultimate beneficial ownership of property and land recorded in the land registry. This would address lost stamp duty by people using corporate wrapper.

Kirsty Blackman said the party is still waiting for movement on Scottish Limited Partnerships, which the Government said it will take action on.

FST Stride said the Government‚ s record on legislating for tax avoidance evasion means a review is not needed.

5.32pm New Clause 3 was pushed to a vote first of all.

5.47pm The New Clause failed (Ayes: 267 - Noes: 306)

Stamp duty land tax relief for first time buyers, rates of income tax, VAT refunds for Scottish emergency services, vehicle excise duty and tax treatment of pension schemes

Opposition New Clause 7 ‚ ì would require a review to be published prior to the Autumn 2018 Budget on the impact of the relief for first-time buyers, including its effects on house prices and on the supply of housing.

Opposition New Clause 8 ‚ ì would require an annual report on the operation of the relief for first-time buyers, including information on the beneficiaries and effects on different aspects of housing supply.

SNP New Clause 10 ‚ ì would require the Chancellor of the Exchequer to commission a review into what the potential consequences of allowing the Scottish Fire and Rescue Service and the Scottish Police Authority to make retrospective claims for VAT refunds would be.

Lib Dem New Clause 2 - would enable a review of the revenue raised at the rates of income tax specified by Clauses 3 and 4 of the Bill and the effect on revenue of raising each of those rates by one percentage point.

6.03pm Moving the opposition‚ s New Clause 7, Anneliese Dodds began by announcing that the opposition would support SNP amendment 10 (Police and Fire service VAT refunds) and amendment 12 from Labour MP Wes Streeting that would support owners of taxi licenses with zero emission vehicles. Dodds said the amendment would provide transparency in the VAT refund process.

Turning to the amendment from Streeting, Dodds said she had raised these concerns at committee stage and that the opposition would formally support the amendment.

Moving New Clauses 7 and 8, Anneliese Dodds said the measures would benefit only a ‚ very few‚ number of people, as pointed out by statistics from the OBR. She said that the government‚ s measures to boost housing supply for first time buyers, alongside a stamp duty cut were inadequate, would fail to support first time homebuyers and would drive up prices, benefitting people who already own property.

Ms Dodds also said there was a need for a regional impact assessment, arguing that the £500,000 ceiling for the relief would fail to benefit those in property hotspots. She lamented the lack of clarity from the government on the evidence it has received to support its policy decision. Labour could not support the motion, she said, lamenting the lack of measures from the government to stimulate the market for first-time buyers and the house building sector more generally. She then turned the focus of hr contribution towards the Labour Party's approch to housing policy, contrasting this with the present government.

6.25pm Colin Clark (Conservative) spoke to New Clause 10 on the issue of police and fire service VAT refunds. He said that the government's action to ensure that VAT refunds for the emergency services represented a good example of Scottish Conservative MPs standing up for Scotland, clearing up the 'mess' caused by the SNP Government in Scotland, who he said took the decision to centralise the services despite being aware of the implications for VAT. Mr Clark said the amendment was a 'manufactured grievance' designed to apportion blame and suggested that the Scottish Government find its own way to raise the money lost due to the loss of VAT refunds.

6.30pm Wes Streeting (Labour) welcomed the cross-party support from across the country for his amendment. He said that while owners of new electric vehicles would be exempt from VED duty, the high cost of taxis (c£40,000) would mean that owners would be faced with a supplement of £1,550 over five years (£310 per year) for high value cars. Streeting's amendment would bring forward the introduction of the exemption to the date of the passage of the Finance Bill and not April 2019 as currently proposed.

6.38pm Neil O'Brien (Conservative) spoke in favour of the government's stamp duty reform for first-time buyers. He described it as a "rebalancing" of the tax system to support first-time homebuyers and young people. He described stamp duty as a bad tax that reduces mobility, with the reforms undertaken since 2010 (including the abolition of the slab system) had helped deliver improvements. Other measures, such as the Lifetime ISA and Help to Buy Scheme, would also help boost the attractiveness of home ownership for young, first-time buyers.

6.44pm Kirsty Blackman (SNP) moved New Clause 10, saying that she could keep her contribution short by simply 'asking for our money back'. She said that the SNP has raised the call for VAT refunds "more than 140 times" but had been continually rebuffed by UK ministers who said a refund was incompatable with existing legislation. Hinting that the decision to find the money to offer a VAT rebate was party-politically motivated, she called for a retrospective refund in the interests of 'fairness'.

6.48pm Gillian Keegan (Conservative) welcomed government measures to boost housing supply and said that the stamp duty refund would provide a boost to young people seeking to get on the housing ladder.

6.50pm Sir Vince Cable (Lib Dem) spoke to his party's New Clause 2 that would see the OBR provide an 'independent, verifiable and non-party political' analysis of the economic impact of increasing income tax by 1p to support investment in the National Health Service. He suggested that the public would support such an increase in income tax to support health spending. Sir Vince said that he would not press the clause to a vote but would be interested in hearing the Treasury's response to the idea of hypothecated taxation and whether it had evolved from his period as a minister in the 2010-2015 coalition government. Sir Vince then spoke to his colleague Alistair Carmichael's amendments 13 and 14, which would provide that a pension scheme cannot be de-registered on grounds of the dormancy of a single company within the scheme, but only if conditions are met in relation to the date of first registration and the trading status of participating companies.

6.59pm FST Mel Stride, acknowledging that he had limited time to conclude the debate, spoke firstly to the new clauses in respect of stamp duty relief. He acknoweldged the OBR's view of the potential impact on house price increases but said that this failed to take into account the government's policies to boost housing supply. He said that the Government would also give a 'sympathetic look' at bringing forward the exemption for low emission taxis. Stride committed the government to providing VAT refunds moving forward but said that the issue of retrospective refunds was an issue for the Scottish Government to deal with. He acknowledged Sir Vince Cable's comments on income tax and dormant pension companies but was then forced to draw the debate to a close.

7.04pm Dodds formally moved Labour's New Clause 7, the time for debate having elapsed.

7.18pm Following a division, Labour's New Clause 7 was defeated by 305 votes to 228.

7.31pm The SNP's New Clause 10 was defeated by 305 votes to 252.

7.32pm Government amendments 6-8 were agreed to formally.

7.44pm Wes Streeting's (Labour) Amendment 10 was defeated by 304 votes to 225.

7.45pm Government amendment 9 was agreed formally.

7.50pm - FST Mel Stride moved the Finance Bill for its third reading with a focus on the Government's measures to support help for housebuyers. He also spoke of plans to support investment through increases in the R&D tax credit, support for technoligical development and knowledge economy and the government's continuing efforts to make the tax system fairer and more sustainable. He offered thanks to all MPs for the constructive and professional manner in which consideration of the Bill had taken place.

7.55pm - Peter Dowd, Shadow FST, described the bill as an 'unsubstantial bill from an unsubstantial government'. He said his party would oppose the Bill. The House then divided at 7.46pm to vote on the Bill at its third stage.

8.05pm - The Finance (No.2) Bill passed by 301 votes to 218, bringing the debate to a close.

Blog by Hamant Verma and Chris Young