Finance Bill 2021 Public Bill Committee - 3rd sitting (liveblog)
A live blog of the third public bill committee sitting of Finance Bill 2021 (also known as Finance (No.2) Bill), which took place on Tuesday 27 April 2021 from 9.25am. The session covered changes to various duties including vehicle excise duty, air passenger duty and the climate change levy.
Documents on the Bill can be read here. These include explanatory notes on the clauses and the text of amendments and new clauses tabled for debate.
Proceedings can be listened to here.
You can find a preview of the whole of committee stage of the Bill here.
Reports on previous debates on this Finance Bill are available:
Second reading debate - Tuesday 13 April (here)
Day One of Committee of Whole House - Monday 19 April (here)
Day Two of Committee of Whole House - Tuesday 20 April (here)
Public bill committee (1st sitting) - Thursday 22 April (am) (here)
Public bill committee (2nd sitting) - Thursday 22 April (pm) (here)
Public Bill Committee does not debate clauses and schedules debated at Committee of Whole House, that is: Clauses 1 to 14 and Schedule 1, Clauses 24 to 26, Clause 28, Clause 30 and Schedule 6, Clauses 31 to 33, Clause 36 and Schedule 7, Clauses 40 and 41, Clauses 86 to 89 and Schedules 16 and 17, Clauses 90 to 96 and Schedule 18, Clause 97 and Schedule 19, Clauses 109 to 111 and Schedules 21 and 22, Clause 115 and Schedule 27, Clauses 117 to 121 and Schedules 29 to 32, Clauses 128 to 130.
NB. The live blog below is 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.
New clauses debated during proceedings will not be voted on until the end of the committee's proceedings
Committee members should be listed here. The main contributors were expected to be:
For the Government:
Jesse Norman, Financial Secretary to the Treasury (FST)
Kemi Badenoch, Exchequer Secretary to the Treasury (XST)
For the Opposition:
James Murray (Labour), Shadow Financial Secretary to the Treasury
Abena Oppong-Asare (Labour), Shadow Exchequer Secretary to the Treasury
Alison Thewliss, lead SNP Treasury Spokesperson
Peter Grant, SNP Treasury Spokesperson
Finance Bill Public Bill Committee - Sitting Three - Tuesday 27 April 2021, 9.25am
PART 3: OTHER TAXES
Clause 98 and Schedule 20 (Restriction of use of rebated diesel and biofuels) - PASSED
Introduces changes that will remove the entitlement to use red diesel and rebated biodiesel from most sectors from April 2022 as part of the government’s net zero strategy. The changes will also extend fuel duty to biodiesel, bioblends and fuel substitutes used in heating, applying the rebated duty rate to non-commercial heating and the full rate of duty to commercial heating. This aligns the duty treatment of diesel and biodiesel.
New clause 3 [SNP] would require a report on the effects of section 98 on progress towards the UK Government’s climate emissions targets.
The XST, Kemi Badenoch said the measures would use the tax system to incentivise greener behaviours and to move away from more polluting fuels. The government will be granting certain entitlements for vehicles to be permitted to use red diesel. These will include: vehicles and machinery used in agriculture, forestry, horticulture and fish farming, railways, and heating non commerical premises (including homes, hospitals, community halls and places of worship). The XST added that as a result of more than 400 Budget representations, the government is also extending the use of red diesel to the following sectors after April 2022 for the following purposes: electricity generation for non-commerical premises, maintaining community/amateur sports clubs and golf courses, fuel for commerical baoting and private pleasureboating and travelling fairs and circuses. HMRC will have powers to police operation of the regime. The XST said that new clause 3 was unecessary and urged its rejection.
Abena Oppong-Asare (Labour) said the opposition supported the measure but asked about its impact on the waste industry (which has warned of an increase in recycling costs) and HMRC's ability to enforce the legislation. She also asked about the impact of a European ruling that means only white diesel can be used by pleasure boats in Northern Ireland. She finally asked about government efforts to improve the environmental impact of industries currently using red diesel.
Peter Grant (SNP) welcomed the use of the tax system as a lever for encouraging behavioural change. But he urged the need for assessments to show that policies are working as intended and to identify and address unintended consequences. He asked the government to 'comply with the spirit of new clause 3' even if it would not formally accept the clause.
The XST said that private pleasure boat users in Northern Ireland will not be permitted to use red diesel and that the change would ensure complince with the Northern Ireland protocol. A new relief scheme will be introduced in Northern Ireland to ensure users do not pay any higher rates of duty than they would elsewhere in the UK. On new clause 3, she said that the government would monitor red and white fiel duty reciepts to ensure that its policies were having the intended affect and assured the SNP that the Treasury regularly kept the impact of its policies under review.
Clause 99 (Rates of tobacco products duty) - PASSED
Increases excise duty on all tobacco products by the duty escalator (RPI + 2%). In addition, the duty rate on hand-rolling tobacco was increased by an additional 4% (RPI +6%) and the Minimum Excise Tax on cigarettes by an additional 2% (RPI +4%).
The XST said this clause would support the govenrment's efforts to reduce smoking levels in the United Kingdom, including a commitment to curb smoking in England by 2030. The clause consolodates a Treasury order from November 2020 increasing the rates of the tax, which is time-limited. The government is also proposing a £10,000 fixed penalty to crack down on tobacco tax evasion and combat the illicit tobacco trade. She said that this continued the government's 'tried and tested' policy of using the tax system to tackle smoking by making it less affordable.
Abena Oppong-Asare (Labour) asked why duties were not raised at Budget 2021. The XST said that the UK was seen as a global leader on tobacco control. She said that the government had proceeded with the uprating of tobacco duties in the autumn (in absence of the UK autumn budget) and said that the measures in the Finance Bill would be used to consolidate this.
Vehicle taxes (clauses will be debated together) - PASSED
Clause 100 - Rates for light passenger or light goods vehicles, motorcycles etc. Increases to vehicle excise duty (VED). The rate of VED is chargeable on vehicles dependent on various factors including the vehicle type, engine size, date of first registration, fuel type and CO2 emissions data.
Clause 101 - Rebates where higher rate of duty paid. Registered keepers of cars which have a list price exceeding £40,000 are required to pay an additional supplement in addition to the standard rate of VED. This clause amends VED legislation to ensure that where the vehicle licence end date and the expensive car supplement end date do not align (eg because a vehicle has changed hands), registered keepers can get appropriate VED refunds.
Clause 102 - HGV road user levy (extension of suspension). The HGV Road User levy is an annual charge for UK hauliers paid alongside their VED, and a daily, weekly or monthly charge for non-UK based hauliers. The levy was suspended for 12 months (to 31 July 2021) to support the haulage sector and pandemic recovery efforts. The Government has decided to suspend the levy for a further 12 months (to 31 July 2022).
The XST said that clause 100 would ensure that Vehicle Excise Duty (VED) remains frozen in real-terms for the 11th consecutive year. She explained that clause 101 would ensure that expensive car owners receive the appropriate refund of the expensive car supplement where applicable, and will amend VED legislation to ensure that the rebate is equal to the number of months remaining at the higher rate of duty under the supplement and the number of months remaining of the standard rate of VED. Clause 102 extends support provided to the haulage industry as the country recovers from the pandemic.
Abena Oppong-Asare (Labour) said that the opposition broadly supported the government's efforts to improve the environmental sustainability of the automotive industry and the transition to electric vehicles. She outlined a number of calls that have been made from the auto industry to support this transition and voiced concerns from the industry about the potential impact of the government's Brexit deal.
The XST said that the government had provided 'unprecedented' support to the haulage industry during the pandemic in recognition of the critical role that it plays supporting the wider economy. She would not be drawn on the impact of Brexit on the industry, as this policy fell outwith the Treasury's remit. The XST also gave a robust defence of the government's efforts to improve the environmental sustainability of the automotive sector.
Clause 103 (Rates of air passenger duty from 1 April 2022) - PASSED
Increases APD for flights to long haul (Band B) destinations by c2.5%. Reduced rates will rise from £82 to £84; standard rates will rise from £180 to £185; higher rates will rise from £541 to £554. From 1 April 2022. Rates for flights to Band A destinations are unchanged.
The XST explained that the changes would ensure that the aviation indusyry continues to contribute to the public finances, while also outlining the range of support measures available to the industry as it deals with the pandemic. Announicing the rate one year in advance will give airlines time to ensure that the changes are factored into their booking systems.
Abena Oppong-Asare (Labour) called on the government to support the aviation industry as it recovers from the pandemic, with support linked to efforts to improve the environmental sustainability of the industry, support for workers rights and help for regional airports to improve connectivity. She suggested that this could involve the suspension of APD. The XST explained that the measures contained in the clause were 'marginal' in their impact and suggested that it would be 'inappropriate' to susend APD as part of a wider recovery plan for the industry. The XST then set out a range of measures that the government had introduced to support the sector.
Clause 104 (Amounts of gross gaming yield charged to gaming duty) - PASSED
Increases gross gaming yield (GGY) bands for gaming duty in line with inflation. Gaming Duty is charged on any premises in the UK where dutiable gaming (eg roulette, blackjack) takes place. The amount of duty is calculated by reference to bands of GGY (i.e. gross profits) for that accounting period.
New clause 4 [SNP] would require a report on the effects of section 104 on the volume of gambling.
The XST said that these changes would effect from April 2021 and have been expected by the industry. She said that the proposed new clause 4 would duplicate information already available in the public domain and was 'impractical'.
Abena Oppong-Asare (Labour) welcomed the measures and asked the XST to provide a wider update on the role of taxation in tackling problem gambling. Peter Grant (SNP) spoke about the impact of gambling on low-income households. He spoke about issues related to problem gambling and said that the Treasury had a moral obligation to pay greater attention to the social effects of gambling addictions. He also contrasted the government's decision to increase gaming duty by inflation with the decision to freeze income tax thresholds. He said this had the effect of giving the industry a tax benefit while taxing the low paid more.
The XST that wider issues relating to the regulation of the industry were a matter for the Department for Culture, Media and Sport. She said that a review of the 2005 Gambling Act had been conducted and the responses to the government's consultation were currently being analysed. She said the inflationary increases in duty would help to protect local casinos, many of whom have been closed for the duration of the pandemic.
Environmental taxes (clauses will be debated together)
Clause 105 - Rates of climate change levy from 1 April 2022 to 31 March 2023. The Climate Change Levy (CCL) is a tax on the non-domestic (i.e. business and public sector) use of energy (gas, electricity, liquefied petroleum gas and solid fuels). These clauses amend the main rates of CCL and the reduced rate percentages that apply to participants in the Climate Change Agreement scheme, for 2022-23, and for April 2023 onwards. - PASSED (without a vote)
Clause 106 - Rates of climate change levy from 1 April 2023 - PASSED (without a vote)
Clause 107 - Rates of landfill tax. Landfill tax is a levy on waste disposal at landfills. There is a lower rate of tax, which applies to less polluting qualifying materials, and a standard rate which applies to all other taxable material. This clause increases both in line with inflation. This applies in England and N Ireland (the tax is devolved in Scotland and Wales). - PASSED (without a vote)
Clause 108 - Repeal of carbon emissions tax. In preparation for its withdrawal from the EU, the government legislated for two policies that could ensure a price on carbon emissions was maintained when the UK would leave the EU Emissions Trading Scheme (ETS): a Carbon Emissions Tax and a UK ETS. In December the government announced it would implement the UK ETS so the Carbon Emissions Tax is being repealed.- PASSED (without a vote)
New clause 5 [SNP] would require a report on the effects of sections 105, 106 and 108 on progress towards the UK Government’s climate emissions targets.- NOT MOVED
Kemi Badenoch, Exchequer Secretary to the Treasury (EST), explained the clauses as set out above. The climate change levy is a UK-wide tax, she reminded the MPs, and promotes efficient use of technology. Electricity is becoming a cheap form of energy now, compared to five years ago, she said.
Landfill tax has been immensely successful in reducing waste sent to landfil, she said.
Peter Grant, SNP Treasury Spokesperson, intervened to say he is worried that landfill tax is partly to blame for fly-tipping, particularly in farmers’ land. Kemi Badenoch said some fly-tipping is inevitable, whatever tax rate on landfill is.
Bademoch went through the history of landfill tax.
She said to limit economic impact on energy intensive businesses, participants in the climate change agreement scheme will see their climate change levy liability increase by RPI inflation only to protect competitiveness of 9,000 facilities from energy intensive industries across 50 sectors.
Commenting on New clause 5 (SNP), she said a report suggested by SNP will not be able to meaningfully assess impact of these changes within six months of the passing of this act. Government already assesses and monitors environmental impacts across existing tax measures and does this alongside other complementary measures, she insisted.
The UK emissions trading scheme, administered by BEIS, is the best replacement for the old EU scheme. The UK will deliver a robust carbon price signal, she said.
Abena Oppong-Asare (Labour), Shadow Exchequer Secretary to the Treasury, welcomed a UK emission trading system (ETS) rather than a carbon emissions tax. The UK trading system must be linked with the EU ETS version to tackle common environmental issues, she said. She asked if the Government intends to keep the climate change agreement or not? In February, the NAO published a report into environmental tax measures which criticised the Govenrment and HMRC for failing to consider and evaluate the impact of these measures on the Governmental targets. We need more information on these measures published in the public realm, she said.
Peter Grant, SNP Treasury Spokesperson, said there are far too many of the officially designated environmental taxes and an awful lot of taxes that are not official environmental taxes but have an impact on the environment, saying the Government does not seem to have a handle on the latter. Nobody is clear what environmental impact these taxes have, he added, citing the same NAO report as Asare. He did not push SNP's New Clause to a vote but wanted to give a message to the Government that we must have bettter monitoring of enviromental taxes.
Speaking to Grant, Kemi Badenoch said the environmental impacts where there are multivaried reasons why things will occur will never be 100 per cent accurate. We give the impacts that we can measure. Landfill tax is devolved in Scotland yet Grant does not explain what Scottish Government is doing better than the UK Government on this, she said. The overall imapct of landfill tax has been positive, she insisted. These taxes do change behaviour, she said.
On linking the UK ETS to the EU ETS scheme, as suggested by Asare, Badenoch said the Government is open to it and in discussions about this - but the Government wants a scheme suited to the UK's climate commitments. Maybe something will be announced before COP26? she said. On the future of the climate change agreement, she said it is being dealt with by the Net Zero Review but is led by BEIS.
The session ended.