David Davis
MP for Goole and Pocklington · Conservative · United Kingdom
“On a point of order, Madam Deputy Speaker. May I start by congratulating my right hon. Friend the Member for New Forest West (Sir Desmond Swayne) on putting a Bill in front of the House that has support from literally everybody in the Chamber?”
“The Post Office Horizon scandal highlighted the institutional instinct to find a convenient scapegoat. Innocent people paid the price, while the institution sought to protect itself. If the Thirlwall inquiry asks too narrow a set of questions, systemic NHS failures will go unexamined.”
“Last month’s sentencing of Nicola Sturgeon’s husband exposed the real reasons behind the Scottish Government’s persecution of Alex Salmond. From 2010 to 2022, Peter Murrell abused his position to embezzle almost £500,000 from the SNP to buy luxury items. He used SNP money to buy a £33,000 Volkswagen Golf.”
“The consultants also reported that in the two months since the change infants have been sick but recovered as expected.” The report highlighted deficiencies in staffing levels, leadership and communication, but, in the trial, it was not shown to the jury—they knew nothing of it.”
“One of the nurses let go later described it as “the decimation of the Nursing and Midwifery service”, adding that “eight registered nurses...were replaced with nursery nurses...unqualified staff are replacing qualified staff”.”
“There was little space, cots and incubators were stored in corridors, and mothers struggled to find somewhere to breastfeed their babies. Susan Gilby, the hospital’s chief executive between 2018 and 2022, later described the unit as “dark, dingy and cramped”, providing a “less than ideal” environment to work in.”
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“The Finance Act was not law in December 2010; it was simply draft legislation. It was not passed for another eight months—until July 2011. HMRC does not, or certainly should not, take its instruction from draft legislation. It certainly should not take it from press releases, which was what actually went out on that day. It takes its instruction from settled law—and the words “settled law” matter. Sir Amyas went on to argue in his piece that, once the 2011 Act was passed, “tax should have been understood as being due from that point.” But even in 2011 the law was far from clear after the Government suffered a series of defeats in the courts.”
“The facts and the conclusions are a little different, and that is because he was trying to find a compromise. However, when it comes to matters of natural justice, I am afraid that a compromise is nowhere near enough. Such a detailed review deserves detailed scrutiny, and I am going to spend a small amount of time looking at his central findings. Sir Amyas recommended a December 2010 cut-off date for the loan charge. All loans before that date will be out of the loan charge scope. In a piece for The House magazine some time ago I referred to that as arbitrary, and Sir Amyas responded. He said: “It is not an ‘arbitrary’ date. It is the date from which the Finance Act 2011 ensured that tax was charged on income paid through loan schemes.” But that simply did not make sense, even in its own terms.”
“The right hon. Gentleman makes an extraordinarily powerful point in his own skilful way. I say this back to him: his group took that evidence before the added economic stress of the coronavirus. Many of the individuals affected will be contractors. They will be people who perhaps have no rights at the moment and certainly no way of finding the money to meet the demands on them. Even small sums of money will bring enormous pressure to bear on the individual. So he is right: this is not some vague and abstract tax issue. This is about people’s lives. That is why I was pleased when the Government launched the Amyas Morse review into the policy, and in December, he published a detailed report. I commend him for his heroic attempt to find a compromise, because that is really what he did.”
“The fact that HMRC lost twice and then won twice tells us that even experienced, highly informed judges spending a great deal of time studying these cases found it a difficult issue to resolve.”
“I am talking about how we got to that position. I will come on to talk about the financial status of these people, but my hon. Friend is right: these are not rich people. HMRC, which has claimed that this is clear law, lost the Dextra Accessories Ltd and Sempra Metals Ltd cases in 2002 and 2008 respectively, when the courts specifically rejected the idea that the loans could be subject to income tax. HMRC then lost a case in 2012 and again in 2014, demonstrating that the 2011 legislation had not clarified the law to the satisfaction of the courts. That is a key point—it was not a question of it not being to our satisfaction or our constituents’ satisfaction, but it was not to the satisfaction of the courts.”
“As usual, my right hon. Friend trumps my argument in advance, but I will come back to that in a second. What that demonstrates—and what my right hon. Friend’s point demonstrates—is a failure of the Treasury and HMRC to write clear and comprehensible legislation. If the judges cannot understand it, what chance is there for ordinary laymen—people who cannot afford to employ an accountant? We are not talking about city slickers or international bankers; we are talking about locum nurses, social workers, careworkers and hospital cleaners.”
“If it was so clear, why did we need a new law in 2017? That is the fundamental point.”
“I do. The hon. Lady tempts me into a political point, because the Blair Government were the most active promoter of these schemes, but she is right in general. When something is as unclear as this tax law obviously was, we do not take the date of resolution from the first date that HMRC wins—we do not keep going until we get the answer that the Government want. We take it from the day it is finally resolved in the Supreme Court. The case was not finally and definitively settled by the Supreme Court until 2017, when it found in HMRC’s favour on the Rangers, Dextra and Sempra cases. The Government—this relates to the point made by my right hon. Friend the Member for New Forest West—then passed further legislation to clarify the law. Even after the court case, they passed legislation to clarify the law.”
“My right hon. Friend is absolutely right. I started by saying that this is not a political issue; it is an issue of honour. As we would expect from our House—one of the greatest Parliaments in the world, if not the greatest—all sides take part in defending that honour.”
“It said: “Members must not create, encourage or promote tax planning arrangements or structures that…set out to achieve results that are contrary to the clear intention of Parliament in enacting relevant legislation and/or…are highly artificial or highly contrived and seek to exploit shortcomings within the relevant legislation.” In what year was that changed guidance handed out by the professions? 2017.”
“I thank the right hon. Gentleman—I nearly called him my right hon. Friend, from my days on the Public Accounts Committee. When financial advisers and accountants could not understand the law, when employers could not understand the law, and when the courts could not agree on the law until 2017, how could an ordinary layperson possibly have understood the law? The Supreme Court’s eventual decision, overturning three decisions before it, reflects changing national attitudes on the responsibility of the taxpayer—the point the right hon. Gentleman has just lighted on. As a result, one organisation representing the professions involved explicitly changed its guidance to its members.”
“In my view, we should find a way of going after them.” That is the Prime Minister’s view, and I happen to agree, unusually.”
“HMRC itself seems to disagree on the importance of the taxpayer’s responsibility. Why do I say that? Because until 2014, it did not approach the individual taxpayers; it approached the advisers. It approached the companies that insisted—they did not ask, but they insisted—that these locums and social workers took up this option. HMRC went to the advisers until 2014—until the issue suddenly started to become quite controversial. Last year, the Prime Minister himself commented on this issue. He said: “The real culprits in this matter, if I may say so, are not so much the individuals themselves who have decided to use the loan charge as a way of minimising their tax exposure. It’s the people who advised them that it was a sensible thing to do.”
“My hon. Friend is, of course, a skilled businessman; he knows what he is doing, and he is across this sort of thing—it is his job to be across it—but I am not so sure we could say that about a locum nurse or a social worker. This issue was actually at the centre of Sir Amyas Morse’s arguments. He took the view that the attitude from 2017 should apply back to 2010, even though the law was not clear. He took the view that the principle of a taxpayer’s responsibility for their own tax affairs must be upheld. That is the point my hon. Friend is making, and it is right—but only when the law is clear. That means that the Government have a responsibility to make the law clear and not to punish ordinary, hard-working taxpayers when Ministers fail to live up to that responsibility.”
“It defined the word as “retroactive or backward looking”.”
“If the hon. Lady will forgive me, I am trying to constrain my speech to 15 minutes, and it is beginning to be a struggle with so many interventions. In summary, these people are now suffering because of a history of poorly drafted regulation and legislation and poor management by HMRC, targeted on the wrong people. On many occasions, the Minister and his predecessor have told me and the House that the loan charge is not retrospective. In his report, Sir Amyas Morse states: “The Loan Charge can look back 20 years…This design has been described by HMT as ‘retroactive’.” The report describes the loan charge throughout as backward looking. HMRC denies that it is retrospective; it says it is retroactive. If I may say so, that is a distinction without a difference. When I looked up “retrospective” in a thesaurus, guess what it said?”
“It is therefore very important that the law is clear—that it is not subject to reinterpretation by subsequent Governments and it does not move with social mores or whatever; it is simply clear. That is what we have to do. In the interests of natural justice and the financial and mental wellbeing of thousands of our constituents, it is time for the Government to change their mind and remove this harrowing burden from the 50,000 people who have been caught by it.”
“That is why, as I made clear, if the Government do not act to address this issue, Parliament—all of us who take this very seriously—will have to act for them and make clear that, in the future, HMRC can under no circumstances act retrospectively. If we cannot solve this, here comes a Finance Bill. I suggest that the Minister should make one simple adjustment to his plans before they are published: change December 2010 to July 2017. That would resolve the issue. It would lift enormous pressure off 50,000 of our constituents, and it would put the Government in a morally defensible, justifiable and decent position. Tax law is the only part of English law where “innocent until proven guilty” does not apply. If HMRC tells us we owe it money, then, until we prove otherwise, we owe it money.”
“Yes, I will send HMRC a copy of Microsoft’s thesaurus. Not only that, but in paragraph 3.8 of his report, Sir Amyas states: “The Review’s legal advisers found that there was no precedent for that element of the design.” That is the retroactive, retrospective or backward-looking element. There was no legal precedent for that design. I hope, frankly, that the Government will now stop playing with words and finally concede that this is indeed a retrospective measure—an unprecedented retrospective measure. The only just, fair and rational resolution is to remove the retrospective nature of the loan charge and set the cut-off date when the law became clear—when the Supreme Court finally settled the matter in 2017 and when the Government felt it necessary to legislate to make clear what they meant in the first place.”
“There is, in truth, only one answer, but before I come to it, I have 40 seconds, so I will say one other thing to those on the Treasury Bench and the Opposition Front Bench. All of us in this House believe in fair taxation. We all believe that we should pay our dues. When you are doing deals with Vodafone and Google, where they pay from 10% down to 4%, do not turn round to an ordinary locum nurse and say, “It’s too good to be true. You should have known.””
“These occasions often show the House at its best, and that is certainly true today. I start by paying tribute to the Loan Charge Action Group, the all-party group—particularly its chairman—and all who have contributed in the debate, which has been excellent, albeit slightly one way in terms of its emphasis. Why is that? Because this is a matter of justice, not technicalities. It is a story of unclear law not very competently clarified in 2011 and then rewritten in 2017. It is a story of HMRC allowing the real villains—the employers and advisers who forced people into this position—to carry on getting away with that, and of HMRC failing to intervene during that period to stop them. I am afraid the Morse review is wrong. That was brilliantly exposed by the chairman of the all-party group.”
“No, I will not. I only have seconds. There is only one answer in this debate. I am afraid that Amyas Morse is wrong. The answer is laid out in our motion. HMRC should cease action on all cases before July 2017, and then justice will be done. Question put and agreed to. Resolved, That this House believes that the Loan Charge is an unjust and retrospective tax; notes that the law on the Loan Charge was not settled until 2017; and calls on HMRC to cease action on loans paid before 2017.”
“One of the categories who will have most difficulty with this decision are the parents of children at special needs schools. As the hon. Member for Ashton-under-Lyne (Angela Rayner) pointed out, some of them are residential. Is any particular provision being made to support those parents?”
“The Chancellor will have to design rather intricate mechanisms to ensure that we pay people properly, which may involve small claims courts, the insurance business and British chambers of commerce and the like. I ask him to consider doing that, however. What he has done today is important in terms of maintaining liquidity, but his main aim must be to maintain the viability of the British economy.”
“I strongly welcome the Chancellor’s enormous loan and guarantee package, but he himself recognised that he is supporting the liquidity of businesses rather than their long-term viability. We want to see employment protected, so may I ask him to fund business not just in ways that enable the maintenance of employment, but in ways that actively incentivise it? It is not the same thing. Block grants will not do it. May I also ask him, when he does that, to do more than just taking the route of sectoral support packages? If he takes that route, tens of thousands of small businesses will fall through the cracks. That, unfortunately, means an incredibly tailored system.”
“Regrettably, the coronavirus outbreak has demonstrated the susceptibility of global society to pandemics and antimicrobial resistant organisms. Lord O’Neill, who chaired the review, estimated that some 10 million people a year could die by 2050 because of AMR. The previous chief medical officer said that we could easily get to a state where fully half of people die from untreatable infectious diseases. Is my right hon. Friend content with the level of work and research being done in his own Department with respect to novel approaches such as genomics, combination drugs and new sorts of vaccinations? Will the importance of those things be reflected in the forthcoming spending review?”
“I suspect I am going to agree with some of the things that the hon. Lady says later in her speech, but before we get to that point, let us not be too prissy about the party political element of this matter. The original problem with our telecoms industry started with the asset stripping of the industry by the Labour Government under Gordon Brown, with the spectrum auctions. The hon. Lady should recognise that if she is to make a sensible case.”
“May I draw the hon. Member back to the question of what we mean by a high-risk vendor? Quite rightly, she is focused on the security element, but in a throwaway line she talked about the attitude to trade with China. The whole concept of global trade requires a rules-based environment and proper behaviour by all the players. As far as we can tell, China seems to subsidise Huawei to the point that it can act in a predatory pricing mode towards western companies, with the clear aim of removing those companies from competitive pressure. Although that point is not as important as the national security issue, is it not still very important in its own right?”
“It is not just subsidy that supports Huawei and undermines its competition. At least some members of the Canadian Security Intelligence Service believe that Huawei started by stealing Nortel’s technology, which ended up destroying Nortel and putting Huawei in a dominant position.”
“As my right hon. Friend intimates, there is a massive subsidy from the Chinese state to Huawei, and that is for a purpose. Would he care to expatiate on what that purpose might be?”
“I have three very simple points to make. First, we are told that we should listen to the experts, namely the Government experts, but what is their argument? Their argument is this: the experts at our national security agencies, the greatest experts on this matter in the world, are wrong; the Australian Secret Intelligence personnel, who know China better than any other western agency, are wrong; and that the people in the Government of Japan, who are explicitly opposed to this policy and who are closest to China in terms of threat, are wrong. So if we listen to the experts, we should listen to the experts who are closest to this problem and who have the most resources, namely those or ours.”
“I confess that I probably take the hardest line in our group on timing. My view is simple: we should separate this into two pieces. One is what happens about new installations. In my view, since they are called high-risk vendors—the clue is in the name—there should be no more installations. I can see no loss in not installing another single piece of Huawei equipment. The argument that it cannot be done by anybody else has been proven by several speakers so far to be completely without foundation. My argument to the Secretary of State is that when he stands up, he must tell us whether his proposal involves continuing to put in place Huawei kit that we will then have to take out in our move to zero. On that basis, I am afraid it is very clear that the Back Benchers are right and the Government are wrong.”
“That is a demonstration of the sort of analysis we must apply to security issues. Let us consider the Government’s argument. Let us imagine that the Government are right and we are wrong, but we do what we want to do. The worst case is that we spend a little more money and we introduce a technology, possibly better technology, maybe a year or two later. That is the worst-case outcome for our analysis. But if we are right and they are wrong, and we do what they say, the outcome will be to allow the undermining of our complete national infrastructure. This is not just a telecoms system; it is fundamental to the lifeblood of our entire national infrastructure. On a security analysis approach, it is just plum wrong. Finally—this is designed to help the Secretary of State—there is the argument about time.”
“My hon. Friend makes a very good point, but I suspect that seven years is a massive overestimate. Like our telephones, this technology changes every 18 months. Seven years is the achievement of an Einstein of this sector. That is point No. 1: our expert argument in the UK is that we are the only ones in step. That is not an argument that stands up very often. My second point, to which my right hon. Friend the Member for North Somerset (Dr Fox) referred earlier, is that this is a national security issue. The most recent debates on national security in this House in the past decade or so have been about terrorism, rather than potential massive conflicts between major powers. The House will remember that the IRA always used to say that we have to be lucky all the time, but they had to be lucky only once.”
“Point No. 1: there is unavailable capacity—well, Ericsson says that that is not true. It said that at Davos earlier this year and Samsung says that it is not true, but if we want proof of that, the Australians, who denied Huawei, already have 5G operations in Sydney and Melbourne being put together and the fastest 5G operations in the world exist already in America. There is not the shortage that the Minister claims.”
“Can the Secretary of State tell the House that the Department will retain sufficient flexibility to ensure that people will not be punished for doing what the Government recommend?”
“T3. May I take up the Secretary of State on her comment at the beginning on sanctions in the context of coronavirus? Currently, jobseeker’s allowance requires claimants to attend jobcentres in person every two weeks and prove that they have been looking for work—they must show evidence that they have been applying for jobs and going to interviews. Claimants can be sanctioned if they fail to attend the jobcentre, turn down a training course or fail to go to an interview. The Secretary of State said that the sanctions will not be applied if jobcentres are informed in advance, but the process of going through self-isolation may be shocking to the people involved; it may be disorganising what may already be disorganised lives.”
“I have been listening carefully to my right hon. Friend’s brilliant speech. As far as I can see, so far he has knocked down the Government’s arguments on technical grounds, diplomatic grounds, security grounds, practical grounds, commercial grounds and public safety grounds. After listening to his speech, there are no grounds on which to accept Huawei involvement in our national infrastructure. Can it be, therefore, that the Government’s only argument for accepting Huawei’s involvement is fear of China’s economic and geostrategic power? Giving in to that may be expedient, but does my right hon. Friend agree that it would be geostrategically wrong to kowtow to the Chinese Government?”
“I say to the Minister that a mixture of good and bad is not diversity. That is the first thing. He says that he puts the security of the nation first. In pursuit of that, the Government have claimed that there is no back door to Huawei hardware. The Americans assert differently. The Germans agree with them. Other countries agree with them. He served on the Bill Committee for the Investigatory Powers Act 2016. I remind him of sections 252 and 253, which give us the right to have a back door. How can we have a back door, when the hardware installer, the hardware supplier and the hardware administrator does not?”
“The Minister will be unsurprised to hear that I am unimpressed by this illiberal idea. The Electoral Commission says that fraud relating to proxy voting, postal voting, bribery, undue influence or tampering with ballot papers, on which voter ID will have no effect, accounts for three quarters of electoral fraud, so what are we doing about that?”
“T8. Given the ridiculous bluster and sabre rattling that we have heard from the European Commission in the past few days, what assessment have the Government made of the damage the European Union would do to its own economy if it denied itself access to the United Kingdom market?”
“For one category of crime—domestic violence—the moment of release of the perpetrator is the start of a period of fear for their erstwhile victim. Has the Lord Chancellor considered the possibility of extending the restrictions and restraints on those criminals beyond the sentence period they are given in court?”
“Our excellent Home Secretary had two fundamental questions to answer today: was she going to reflect the democratic will of 70% to 80% of the British public, not to do away with immigration, but to control and manage it properly, and was she going to do it in a way that worked in the national interest, for all of us and all the immigrants who come here to work and give our country the skills that they carry? Is she as surprised as me that the primary thrust of both Opposition spokesmen seems to be to allow British profit-making companies to maximise their access to cheap labour?”
“Following on from the question from my right hon. Friend the Member for Ashford (Damian Green) about Huawei, the Australian agencies analysed the involvement of any element of Huawei in their 5G system and determined that any involvement would lead to a major risk of both sabotage and espionage. Can the Prime Minister give an undertaking that this country will lead the Five Eyes and NATO to create an alternative to Huawei in the next two years?”
“I will answer the Foreign Secretary’s question to the Scottish National party spokesman: yes, I do think Huawei should be banned from our networks. It was founded by a member of the People’s Liberation Army. Even if it were not an arm of the Chinese Government, the 2017 law requires that it take instruction from the Chinese intelligence agency. In the future, the size and complexity of the problem we are trying to protect against will be enormous. Huawei alone—forget the rest of China—has tens of thousands of researchers working on this, and I am afraid that the only way to protect our safety is to ban it.”
“Cases such as those of Ian Norris, the former head of Morgan Crucible, or the NatWest Three all have common themes: they are all British citizens, the alleged crimes all took place on British soil, the United Kingdom system failed to protect them, and the US authorities ultimately got their way. This does not, by the way, just apply to Britain. In March the US extradited three Credit Suisse bankers for alleged bribes passing between companies in London and Mozambique. The United States tenuously claimed jurisdiction because one transaction was operated through New York. Most of these United States cases are not in pursuit of terrorists or paedophiles or murderers, which is what the extradition treaty was originally designed for.”
“Accordingly, the case for extradition would evaporate, so the only sensible course of action available to the UK authorities—in this case, the Home Secretary—is to delay the extradition until the United Kingdom judge has made his decision. This case is important because it is characteristic of the way the American judicial system operates to favour American business. The United States has a tradition of using its broad extradition treaties to cast a wide legal net around the world. As with Mike Lynch, many of these cases are only tenuously linked to the United States.”
“Despite the Serious Fraud Office deciding that there is no basis for a prosecution in the United Kingdom, the United States authorities are doggedly pursuing his extradition. Civil cases in this country and the States are decided on the balance of probabilities, a much lower hurdle than for criminal cases, which have to be decided on a “beyond reasonable doubt” basis. If Hewlett-Packard fails to win its civil case against Dr Lynch here in the UK based on that much lower standard of proof than the criminal test, it is inconceivable that the authorities will win a near identical criminal case if it is tried fairly.”
“Dr Lynch founded an innovative data processing company called Autonomy, which by 2010 was Britain’s largest leading software company. In 2011 it was sold to Hewlett-Packard for £9 billion. Several years later, Hewlett-Packard claimed that Autonomy was overvalued. Hewlett-Packard sued Dr Lynch for fraud in the United Kingdom. After a lengthy and costly civil trial, Dr Lynch is now awaiting judgment, and I am of course prevented from commenting further on that case due to the sub judice rules, although this is a trial by judge alone, not by jury, so the possibility of undue influence is near zero. Dr Lynch is now facing almost identical criminal charges in the United States, in yet another aggressive attempt by American authorities to exercise extraterritorial jurisdiction.”
“Mr Deputy Speaker, while Members make their way out of the Chamber, I will take this opportunity to congratulate you on being the man who effectively announced our departure from the European Union. Your place in history is assured. Since we agreed the UK-US extradition treaty in 2003, it has been abundantly clear that the British Government of the day struck a truly dreadful deal—asymmetric, sometimes ineffective and often unfair on British citizens. Countless examples down the years have shown that, from the NatWest Three to Christopher Tappin, from Gary McKinnon to Anne Sacoolas, the person charged with causing the death by dangerous driving of Harry Dunn. We now risk yet another serious miscarriage of justice with the US extradition request for Dr Mike Lynch, a successful and entrepreneurial British businessmen.”