Sir Mel Stride
MP for Central Devon · Conservative · United Kingdom
“May I welcome the Chancellor to his position and thank him for his kind remarks earlier? May I also wish him every success, because I am afraid that under this Government we need some? He will know that if we are to fix the economy, we have to fix the welfare bill.”
“Given all that is going on, this could be the last time. The legacy of this Chancellor has been the highest taxes on record, a benefits bill spiralling out of control, and unemployment 300,000 higher than it was at the last general election. The right hon.”
“The right hon. Lady cannot bring herself to answer the simple question I asked. I will tell her: she is borrowing one quarter of a trillion pounds more than the plans that she inherited—that is her legacy. We hear that the right hon. Member for Makerfield (Andy Burnham) is considering borrowing even more.”
“May I begin by agreeing with you, Mr Speaker, and saying how disrespectful it is that this U-turn on fuel duty has already been released to the media earlier this week?”
“Today’s announcements will bring little comfort to the hundreds of thousands of people who have lost their jobs, the countless businesses that have folded and the high streets that are now hollowed out.”
“The Conservative party has been campaigning for a fuel duty freeze for months. The Chancellor repeatedly rejected those calls, creating unnecessary uncertainty for motorists and businesses. Why did it take her so long to realise that putting up fuel duty during an energy crisis is a bad idea?”
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“When goods come in and the end-use cannot be determined, we foresee a situation where we might have to charge the higher tariff, with a rebate mechanism in place once the end-user can demonstrate that those goods have indeed been consumed, or found their end-use, in the United Kingdom. As I say, some of those matters will be addressed in the White Paper that will be with us this week. Hon. Members have rightly mentioned supply chains and the importance of goods and components going in and out of the EU27. The points raised by the hon. Lady in the context of Nissan will be accommodated substantially by the model we are putting forward. My hon. Friend the Member for Wimbledon mentioned VAT systems.”
“The broad majority of people in our country will welcome that achievement. I hope that, particularly in the debate on Monday, Parliament as a whole comes together. This is a moment in our history where there are undoubtedly significant opportunities, but also a number of challenges. I hope we see the debate through that prism, rather than through anything that is rather more narrow and party-political. On that note, Mr Streeter, I gladly give the Floor to my hon. Friend the Member for Wimbledon.”
“Friend the Member for Eddisbury (Antoinette Sandbach) made the very important point that we are seeking an arrangement that can command the broad support of the British people—an arrangement that ensures that the UK and the EU have frictionless access to each other’s markets for goods; that provides regulatory flexibility in the way that I have described; that enables commitments to Northern Ireland to be met and the Good Friday agreement to be honoured; that sees us leave the common agricultural policy and the common fisheries policy; that allows us to deliver an independent trading policy; that ensures that, in future, all laws in the UK will be legislated for by our Parliament; that restores the supremacy of UK courts; and that ends the free movement of people and vast payments to the EU.”
“I think I have gone through most of the points raised by the hon. Member for Bishop Auckland (Helen Goodman). I am grateful that she said that initially she broadly welcomed the proposals, and we should all do. My hon.”
“We have already recruited, or have in train the recruitment of, around 1,000 new staff going into HMRC with a focus on borders. We have said that we will move that figure up to between 3,000 and 5,000. Some Members mentioned the customs declaration system. The National Audit Office has suggested that we are broadly speaking where we need to be to ensure that that system comes online and live before March next year. The hon. Member for Streatham (Chuka Umunna) asked why the EU would allow us to collect EU tariffs when there are no such arrangements with any other trading partner. We are in a unique situation. We are a very large trading partner with the European Union. We have complete alignment at the moment in regulations with that market, so we start from a position that is not occupied by others.”
“My hon. Friend is right inasmuch as that is potentially the case if there are any inconsistencies—we might otherwise have varied our rules accordingly to accommodate an FTA. However, the Government have made it clear that although we will have total alignment at the start, we will not seek an arrangement where we will be unable to deviate from that in the future, albeit we recognise that there will be consequences for doing so. A number of hon. Members raised the issue of preparedness, and I assure them that we will be in a good position and ready on day one if we have a no-deal situation. The Chancellor allocated £3 billion for Brexit preparations in the last Budget. Her Majesty’s Revenue and Customs received £46 million last year and around £250 million in this financial year.”
“The evidence from the Forestry Commission is that UK timber production is globally competitive. Our 25 year environment plan sees the Government committed to increasing timber supplies and to the greater use of home-grown timber within the UK construction sector.”
“My hon. Friend is absolutely right that forestry ownership and the management of woodland is extremely important. We keep all taxes under review—including some of the distortionary effects that taxes may have that I know she might be concerned about—and I am delighted to confirm that my right hon. Friend the Chancellor is looking forward to meeting her shortly.”
“The hon. Gentleman raises a specific issue around the participation of smaller businesses in this industry, and we will be looking at that as we look at taxation in this area going forward. If he would like to make any specific representations to myself or the Chancellor, I am sure we would be delighted to receive them.”
“We are of course in the process of our negotiations with the European Union, and until they are concluded it will not be possible precisely to assess the impact on our agricultural sector, other than to assure the hon. Lady that agriculture has a very high priority for this Government. That is why we have pledged the same cash total in funds for farming as under the EU until the end of this Parliament.”
“As the hon. Lady will know, the Department for Environment, Food and Rural Affairs is consulting currently and looking at the results of the recent consultation on how we should fund farming. Public money for public goods is at the centre of that approach. I reiterate that we have pledged the same cash total in funds for farming as under the EU for the rest of this Parliament.”
“My hon. Friend raises a very important point of which the Government are of course acutely aware. We are working with DEFRA to examine the issue.”
“To be fair, Mr Speaker, farmers do own cars, which is an important point to take into account. I assure the hon. Lady that this Government’s overriding objective is of course to negotiate an arrangement with the EU in which borders are as frictionless as possible, trade is kept flowing, supply chains are looked after and the agricultural and motoring sectors are supported.”
“My hon. Friend is entirely right. The commitments of support that we have already made up until 2022—the end of this Parliament—are entirely indicative of the importance of the agricultural sector to our economy.”
“An objective of our negotiation is to ensure that we lower tariff barriers between ourselves and the EU27, as they will be known. The hon. Lady did not mention the tariff on whisky, which is currently 0%, and if we had an independent Scotland, she would be asking the same question in the context of the new border between ourselves and Scotland.”
“I repeat to the hon. Lady that we have already shown, through the actions that we have taken, the reassurances that we have given and the consultations that we have undertaken, that agriculture is a firm priority for this Government, and that will continue to be the case in the negotiations and going forwards.”
“HMRC’s analysis shows that 90% of those personnel in place as at 2015 will be able to move to a new HMRC location or see out their career in their current workplace. We will support those who have the skills necessary for the new workplaces, or, indeed, those who can aspire to those skills, to achieve that and provide jobs accordingly.”
“As Departments right across Government do, we look at the opportunities available in various towns and cities up and down the country, including Bradford. The hon. Gentleman mentions the employment impact of this particular measure; I remind him that the employment rate in Bradford is up 6.4% since 2010. That is above the national average and is a direct consequence of this Government’s policies.”
“I slightly detected from the hon. Gentleman’s question the suggestion that that meeting between HMRC and the EBT did not take place, and it most certainly did. He and I have discussed this matter, both formally in a meeting and informally, and we have debated it in the House. I have always stressed that there is a dividing line between HMRC and Treasury Ministers: we cannot intervene in the tax affairs of individuals or organisations. I am confident that HMRC is progressing in an appropriate manner.”
“The simple fact is that we need an HMRC that is fit for the 21st century, for the new digital ways in which we are working, and for our targeted approach on clamping down on avoidance, evasion and non-compliance, for example. That requires these sophisticated hubs that have the right skills to do that job, so I defend our reorganisation entirely. On the portrayal of the economy that the hon. Lady has just given, we have the highest level of employment in our history, more women in work than at almost any time in our history and unemployment lower than at any time in the past 45 years. We are bearing down on the deficit and have debt falling as a percentage of GDP.”
“My hon. Friend raises a very important point. The Government are determined that we should have an international tax regime that is appropriate to the digital businesses to which he refers, particularly search engines, online marketplaces and social media platforms. We are working with the OECD and the European Union on a multilateral response. In the absence of that, we are prepared to act unilaterally to make sure that fair taxes are paid by those businesses.”
“The issue that the hon. Gentleman identifies is an important element of the tax avoidance that has been happening in our country. The vast majority of people pay the correct level of tax, but there have been schemes, such as the disguised remuneration schemes to which he refers, through which essentially very little tax indeed has been paid. The Government believe that that is wrong and that we should act to clean up the arrangements. We have given individuals until April 2019 to do exactly that. On the support that he mentions, HMRC’s door is of course always open for individuals in that situation to have discussions. I would urge all those individuals to make contact with HMRC to find a sensible way forward.”
“This is not retrospective legislation. The activities and arrangements entered into by those who are in scope of this measure were not legal when they were entered into, even though they may have been entered into in the past. The loan charge is there not to apply penalties for that behaviour, but to ensure that those individuals pay the right amount of tax.”
“I thank my right hon. Friend for his very relevant and, may I say, predictable question—he has been a doughty campaigner on this particular issue—but all I would say to him is that we will of course be looking at taxation, with everybody in their different ways paying a little bit more, to make sure that we fund the significant amount we have now committed to our national health service.”
“The new treaty protects the UK’s taxing rights over gains from the disposal of land and buildings in the United Kingdom. That is particularly important, because it prevents non-residents from developing and disposing of UK land without paying tax in the United Kingdom.”
“It is a particular pleasure to serve under your chairmanship, Mr Robertson. The orders before the Committee give effect to a new replacement double taxation agreement, or DTA, with Cyprus and a protocol amending our existing agreement with Mauritius. DTAs remove barriers to international trade and investment and provide a clear and fair framework for taxing businesses that trade across borders. By doing that, they benefit both business and the economies of the countries signed up to them. I will say a few words about each agreement. Our current DTA with Cyprus was signed in 1974 and last amended in 1980. This new treaty therefore provides a comprehensive update that reflects the current OECD standards, including the BEPS—base erosion and profit shifting—minimum standards on treaty abuse and improving dispute resolution.”
“We approached the Mauritian Government proposing a change to the dividend article to prevent the avoidance, and they were happy to co-operate. The amended article allows the UK to withhold tax at 15% on dividends from REITs to residents of Mauritius, bringing it into line with many of the UK’s other DTAs. The changes made by the protocol will, once it is ratified, be effective from the date of signature—28 February 2018—so there will be no delay in shutting down the avoidance and protecting the UK Exchequer with immediate effect. The UK, and Cyprus and Mauritius, can be happy with the agreements. They protect UK revenue and provide a stable framework in which trade and investment between the UK and Cyprus and Mauritius can continue to flourish. I therefore commend the orders to the Committee.”
“Those features strengthen both countries’ defences against tax avoidance and evasion. The protocol with Mauritius amends our existing 1981 DTA to update the dividend article in order to close a loophole in the original agreement. That was being abused to avoid tax on dividends from REITs. Dividends from UK REITs are usually subject to a withholding tax when paid to investors, because the profits themselves are not taxed in the hands of the REIT. However, the Mauritius DTA predates the creation of REITs and prevents application of that withholding tax. We recently became aware that third-country investors had established a company in Mauritius to use that feature of the DTA to avoid UK tax on dividends from a REIT.”
“In the case of all the other countries where we have a similar situation and with which we have agreements in place—countries such as Germany and Belgium—it is the UK tax authorities that actually levy the tax on those who are in receipt of UK public service pensions, albeit that they reside in those territories. This treaty provides for exemptions for source state taxation, including eliminating withholding taxes on dividends, interest and royalties arising in Cyprus, but we have ensured that we retain the right to apply a withholding tax of 15% on distributions from real estate investment trusts, or REITs. The agreement also contains the most up-to-date provisions to guard against treaty abuse, the latest OECD exchange of information article, and a provision for mutual assistance in the collection of tax debts.”
“I thank my hon. Friend for his intervention. The fact that he has chosen to attend this Committee, despite having not been selected to serve on it, is testimony to how strongly he feels about the issue. What I would say to him is this. First, the actual impact of the changes—the move from 5% up to 20%, as he termed it—on individual public service pension recipients will depend largely on their own personal tax affairs. As my hon. Friend may well know, there is a different personal allowance level in operation in the United Kingdom from that pertaining to Cyprus, so there is an interplay between those two reliefs as well. It is therefore not immediately obvious that all of those affected by this measure, or indeed the majority, will be adversely affected. The other point to make is the importance of a level playing field.”
“However, if we were to look at any form of transitional arrangements, that would require an agreement with Cyprus, and the likelihood of that—or of us pursuing that path, I have to say, as he rather suggested in his contribution—is very low. On that note, I hope that we can agree the draft orders before the Committee. Question put and agreed to. Draft Double Taxation Relief and International Tax Enforcement (Cyprus) Order 2018 Resolved , That the Committee has considered the draft Double Taxation Relief and International Tax Enforcement (Cyprus) Order 2018.— (Mel Stride.)”
“We believe, however, that for the less well-off in particular, the likelihood—on average, on balance—is that the impact will be lower rather than greater. My right hon. Friend asked in which tax year the measures would kick in, and the answer is in 2019-20 at the earliest. [Official Report, 17 July 2018, Vol. 645, c. 4MC.] I may not meet his invitation to impress him and come up with something out of my pocket, or a rabbit out of a hat perhaps, but I shall go as far as to say that I will, of course, be pleased to meet him to discuss this matter or, indeed, any other tax measure that he may wish to raise with me.”
“Friend the Member for Beckenham, as I said earlier, the critical thing in the Cyprus order is that we seek to place the arrangements that pertain to the UK public service pensions of those who happen to be resident in Cyprus on the same basic footing as those that we have with just about every other country with which we have such arrangements. The impact will be determined by a complicated interaction of different allowances—of course the personal allowance in the UK is different from that in Cyprus—and the 5% lower rate tax is a lower rate tax, but an individual who is being taxed in Cyprus can elect to pay the higher rate tax, so it is tricky to work out the exact impact in individual circumstances.”
“The hon. Gentleman also made an interesting point about the language in the explanatory memorandum, asking about the statement that the draft instrument complies generally with the OECD model. He is right. Almost invariably in such treaties, there are variations from that model, and one in the case of Mauritius is the principal purpose test, which does not feature in this particular agreement. That is an important tax avoidance measure, but we have assurances from Mauritius that that is something that will be included in the multilateral instrument. When the Mauritian Government ratify that, they will not have it as a reserved matter. Coming to the very important points made by my right hon. Friend the Member for Rayleigh and Wickford, and indeed my hon.”
“There is an important principle at stake as well. The hon. Gentleman also raised the issue of our personnel based in Cyprus who are in receipt of public service pensions. He asked how many people might be affected. There are about 65,000 UK residents residing in Cyprus, of whom something in the low thousands—I do not have a precise figure—might be on Government service pensions. A subset of that group would be on armed forces pensions—I shall come on to the contribution of my right hon. Friend the Member for Rayleigh and Wickford in a moment. The hon. Member for Glenrothes sought an assurance that under the new arrangements, those individuals would not be disadvantaged in any way relative to those receiving UK pensions who reside within the United Kingdom. The answer to that is they would not be; they are all basically on the same basis.”
“I give him that assurance; I have no crystal ball, but I believe they are intended solely to make the tax system internationally fairer and operate better. As we have discussed in the case of the REITs and Mauritius, they tighten up the tax treatment there to make sure that we are able to levy appropriate tax on those particular structures. The hon. Gentleman asked me how much money was involved in this kind of clampdown; in the specific case of Mauritius, there was one particular case of treaty shopping where a company was set up in Mauritius with a REIT in the UK, but the transaction was really coming back to another country. I believe the amount involved in that particular case was about half a million pounds. They are not sums up in the hundreds of millions, but they are significant sums none the less.”
“Lady asked whether there were formal assessments of whether these arrangements are coherent with our development goals and approaches in developing countries. I assure her, as we have discussed in previous Committees, that the Department for International Development is well aware of and comfortable with our approach. Where it has concerns that it wishes to raise, my colleagues and I at the Treasury will be very happy to hear them. As with any agreement of this nature, it is only by mutual agreement between ourselves and those whom we negotiate with that we come to an agreement at all. Nobody is forcing any particular country into an agreement with us. The hon. Member for Glenrothes asked me for an assurance that the instruments would not provide further opportunities for tax avoidance.”
“Lady also asked why certain choices were made. We have an explanatory memorandum and it is the case with most treaties that there is some time between the treaty being signed and it coming before this House. For example, the signed DTA that we are looking at was published on the Government website, and a ministerial statement was made to that effect, on 27 March 2018. MPs and their constituents have been able to make representations to me since then. The Government do not consult more generally on the contents of DTAs because they are the product of bilateral negotiations with other states, which deal with a vast range of complex issues that are not suitable for open negotiation. The hon.”
“I thank everybody who has participated in this debate. To pick up on some of the questions that the hon. Member for Oxford East raised, we are constantly reviewing existing treaties. HMRC is considering the best way to approach looking at the different treaties and perhaps bring forward rationales for why we might approach them in a particular way. The hon. Lady will know that the OECD model is the starting point for our negotiations in this respect; it is available in the public domain and we can all view it. She asked what information could be provided in advance to Committees, particularly about shifts away from previous positions in existing agreements where they are being renegotiated. I would be happy to have a further discussion with her outside the Committee about the detail of that. The hon.”
“It is important to make the point up front that when we refer to some of those companies paying relatively small amounts of tax compared with high street operations, we are talking not about tax avoidance but about whether the way the international tax regime operates is appropriate or functional for the 21st century. It is not. We need to find different ways of taxing online platforms, whether they are search engines, social media platforms that generate revenue, or online marketplaces, where significant value generation occurs through the relationship between users based in the UK and the platform itself.”
“We made the 100% small business relief permanent, which took 600,000 businesses out of rates altogether. We increased the threshold for the standard multiplier, removing 250,000 businesses from the higher rate of business rates. Of course, we were able to do that only because of our prudent stewardship of the economy, which has allowed us the space to provide that relief to the business community. I have limited time, but I will dwell for a moment on the online business threat, which a number of hon. Members rightly raised. There is a growing number of online businesses in this space, and an increasing number of purchases are happening through online companies.”
“Member for High Peak (Ruth George) raised a point about pubs and suggested that information being made available to the public might drive crime. I am certainly prepared to look at that. I imagine that those who are out to raid the premises of pubs have other measures by which they might be able to discern whether a lot of cash is being taken—how many people are in there drinking on a Friday night, for example—but I am certainly happy to speak to her about that. She also raised the way pub rates are calculated. They are valued by the VOA using the fair maintainable trade method, which has been agreed with the British Beer and Pub Association. Let me point out the numerous things that the Government have done on business rates to support businesses. In 2016, we announced around £9 billion of relief on business rates.”
“Friend the Member for St Ives (Derek Thomas) raised the issue of second homes being designated as businesses because they are holiday lets. We are engaged with the VOA to ensure that no abuse occurs in those circumstances. He will be aware that certain criteria have to be met for individuals or companies to treat properties in that way. I am happy to engage with him outside the Chamber on that issue, because he raised one or two interesting points. He also raised the issue of different businesses paying different rates and gave an example of two businesses right next door to each other. He and I have discussed that, and I look forward to looking in greater detail with him at the examples that I know he will come forward with. The hon.”
“If there were a particular regime in one area, businesses may move profits around between multiple enterprises to reduce their overall tax. The hon. Member for Sheffield South East (Mr Betts) recognised that. He made the important point that business rates have a distinct advantage when it comes to avoidance, because buildings cannot be shifted around in the way that it might be possible to shift other metrics. He also raised the 100% business rates retention pilots and expressed hope that we would pursue that measure. We will pursue it with vigour. I am watching it very closely in Devon, where the pilot scheme is also operating. I very much look forward to catching up with the report of the Housing, Communities and Local Government Committee, which he chairs. My hon.”
“Myriad issues impinge on this space, and I think we are all seeking to ensure that taxes right across the system are competitive, that there is fairness among those who are expected to pay them, and that they are collected, so that we minimise tax avoidance at every stage. That brings me to the comments by the hon. Member for York Central about possible alternatives to the current rating system. She mentioned a tax on revenue or on profitability. As soon we started to tax revenue, we would run into the problem that businesses that were not profitable still had a turnover. For example, a new entrant on the high street that we all wanted to thrive may get throttled by the kind of approach that she suggests. If we went for a tax on profits, there would be the potential for profit shifting.”
“I fully appreciate what a struggle it is in the business world, even when times are extremely good. It is never easy to go out and employ people, to generate wealth and to have a successful business. I also appreciate that business rates are one of those taxes that businesses simply cannot avoid—they are paid irrespective of profitability, which of course has particular consequences in some cases. We need to put this debate in context. A number of Members said that business rates are an issue but are not the totality of the pressures that our high streets face. We heard much about the challenges of online marketplaces and of the planning system—when there is a change of use of businesses that reside on our high streets, for instance—and my right hon. and gallant Friend raised the issue of parking.”
“It is a pleasure to serve under your chairmanship again, Mr Gray. I congratulate the hon. Member for York Central (Rachael Maskell) both on securing the debate and on the tenacious approach she has rightly taken to the extremely important matter of business rates. I thank her for her comprehensive contribution, and in particular for the examples she gave of high street businesses—I think we all recognise that many face considerable challenges. I also thank the various other speakers, who raised numerous points. I intend to pick up on as many as I can, but I would of course be happy to engage with Members outside the Chamber on any that I omit. I thank my right hon. and gallant Friend the Member for East Devon (Sir Hugo Swire) for his kind remarks about the amount that I care about this issue and for referencing my business background.”
“We have made it clear that, although it would be most beneficial to move multilaterally with other countries, we will make a unilateral move if we need to. I am conscious that we are down to the last minute and I would like to give the hon. Member for York Central an opportunity to respond, so I will draw my remarks to a conclusion.”
“There is indeed. I am personally engaged in that matter, which has been taken up at the OECD and the European Union. They have both produced interim reports on the issue and suggested that we might look multilaterally at some kind of revenue-based taxation, albeit—to get back to the problem of revenue-based tax—we do not want to choke off new entrants to the marketplace, which may be loss-making, so there may have to be some de minimis thresholds associated with that formula. We are actively pursuing that on a multilateral basis with countries in those two institutions. I discussed exactly this issue with Finance Ministers from OECD countries at the ministerial meeting of the OECD in Paris last week.”
“Currently, the provision requires a company to be subject to tax on dividends it receives, while dividends in the United Kingdom are no longer taxable following the introduction of a corporate dividend exemption regime in 2009. The protocol also provides for a more general modernisation of the DTA to reflect changes in the domestic laws of the two states and the OECD model, including substantially all the provisions included in the multilateral convention to implement tax treaty-related measures to prevent base erosion and profit shifting, or the MLI. In summary, these are agreements that the UK, Belarus and Ukraine should be happy with. They will provide a stable framework in which trade and investment between the UK and Belarus, and the UK and Ukraine, can continue to flourish.”