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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“It may be helpful if I first set out the typical tax treatment for the sale of shares from EBTs. When a person exercises an option to obtain EBT shares, this is often chargeable to income tax and national insurance contributions, based on the difference between their valuation when they are obtained and the amount paid for them. If the shares are sold to a third party, the sale will then be subject to capital gains tax on the difference between the valuation used for the taxation of the option and the sale prices. Turning to the Roadchef EBT, as we have heard, the issue we are discussing today has a long history. Before the sale of Roadchef in 1998, the company’s then chairman arranged for shares held by the EBT to be transferred to him. He subsequently sold the shares for a profit.”
“I am grateful to the hon. Member for Airdrie and Shotts (Neil Gray) for having raised this issue and secured this debate. I congratulate him also on the vociferous energy with which he has pursued these important matters—the Government recognise their importance. I appreciate that this matter is a source of long-standing concern for those affected, and I can fully understand that they would want a resolution soon. I assure the House that HMRC is working hard towards resolving this issue. As the hon. Gentleman has recognised, I am of course constrained by HMRC’s duty of maintaining taxpayer confidentiality, so my remarks on the case will, of necessity, be limited to matters already in the public domain. HMRC will, however, continue to correspond in writing with the trustee chairman and assist the employee benefit trust’s representatives.”
“The hon. Gentleman has raised a specific set of suggestions in the context of the dialogue between HMRC and the trust, and that very much strays into the area of confidentiality around discussions between our tax authority and a particular organisation. It would therefore not be right for me to comment on that. Indeed, in the normal course of events, I would not even be aware of such matters—certainly not from an HMRC perspective.”
“I should note, though, that that discretion is by its nature limited and would not be applicable in all circumstances—for instance, it would not apply if the courts had made a specific ruling on a particular issue. In summary, I thank the hon. Member for Airdrie and Shotts again for securing this debate and for the tenacity with which he has pursued these matters on behalf of his constituents and those of other Members. As I have said, I can appreciate the frustration of those affected, who naturally want a swift end to this matter, which I hope there will be. I hope I have been able to provide at least some reassurance that HMRC is doing everything in its power to resolve this issue in a fair and timely manner. Question put and agreed to.”
“I can, however, assure the House that HMRC is doing everything that it can to resolve this issue promptly and fairly, while ensuring that the tax is paid appropriately in respect of the sale and distribution of the shares. Although HMRC has discretion as to how it goes about fulfilling its duties, as a statutory body it must of course apply the law fairly and collect the taxes set out in legislation by Parliament. When the law is unclear, HMRC can exercise some discretion to ensure that it gives effect to Parliament’s intent. For example, HMRC can exercise discretion to give up some tax if there is an unintended or unforeseen effect only a small group of taxpayers or that will be apparent only for a short time.”
“I thank the hon. Gentleman for his invitation, which he also extended in his speech. I am certainly prepared to consider meeting him and potentially others, although I would like to take advice on whether that would be entirely appropriate, given the situation. I would appreciate it if the hon. Gentleman could explain more fully the exact nature of such a meeting, including who would be present and so on. In no way am I seeking to be unhelpful—quite the opposite—but I am conscious of the clear line that there must always be between members of the Government, MPs and, indeed, other members of the public, and the tax affairs that pertain between our tax authority and another organisation or business. HMRC has a taxpayer confidentiality obligation, so I cannot comment in more detail on the specific tax treatment of the case.”
“As part of that, in 2011 the Government introduced the bank levy on the balance sheet equity and liabilities of banks and building societies, but this additional tax contribution made by banks has to support our broader objectives for the sector. It therefore needs to be responsive to international commercial and regulatory changes in banking. Any tax changes should ensure that we can continue to secure the additional contribution from the banks from a sustainable tax base, and they also need to ensure we retain a strong, stable and competitive banking sector that supports the wider economy by lending capital to both businesses and individuals.”
“The Finance Bill makes changes to the bank levy, in particular restricting its scope to UK activities. These changes support our vision to help keep UK banks globally competitive. They reflect improvements in international banking regulation that reduce the risk of overseas operations to the UK, and they complete a set of changes announced in 2015 and 2016 that significantly increase the tax we raise from our banks. Let me be clear from the outset that this Government believe that banks should make a significant contribution to the public finances, beyond general business taxation, that reflects the risk they pose to the UK economy. That has been the record of Chancellors since 2010.”
“I thank my hon. Friend for that perceptive and helpful intervention. There is no question but that a healthy banking system is absolutely central to a healthy economy, which is why we have invested so much time and energy since 2010 in making sure that the regulation of the banks is tightened up, which was, of course, part of the original rationale for the bank levy. The fact that we are reducing the bank levy over time from 2015 and moving towards taxing profits is in itself an indication of the health of our banking system.”
“As the hon. Gentleman will know, the Bank of England carries out stress tests on our banking system. In the latest round, the banks came through very strongly—not a single one failed. The tests stress the system to a greater extent than the effect of the last financial crash in 2008, so we can be certain that the measures the Government have put in place, the operation of the independence of the Bank of England and carrying those things through are having the desired effect that he rightly seeks.”
“My hon. Friend is entirely right. The Government since 2015, and the coalition Government, oversaw the restoration of the banking sector to a healthy central part of our economy. He is absolutely right. The shift from the bank levy to the taxation of profits which was introduced on 1 January 2016 indicated that the risks themselves were diminishing under our stewardship, and that our banking sector was profitable enough to bring in considerably more tax revenue. Since 2010, under Conservative Chancellors, we have secured more than £44 billion in additional tax—I stress the word “additional”—from the banks, over and above the tax that we would be applying to them were they non-financial businesses.”
“My hon. Friend is entirely right. The additional tax raised from the banks amounts to £9 billion between 2010 and the present time, and a further £25 billion is projected over the current forecast period. Far from taxing the banks less over time—as, no doubt, the Opposition will shortly have us believe we have done—we are securing more tax revenues than we did in the past.”
“That is a valid point. I am waiting with some interest to hear what Opposition Front Benchers have to say about that point in particular. Even my shadow, the hon. Member for Bootle (Peter Dowd), is waiting expectantly to hear what he himself has to say, which is intriguing.”
“However, we also introduced an extra 8% tax on banks’ profits over £25 million, on top of general corporation tax. I hope that when the Opposition spokesmen respond to my comments and to the amendments and new clauses, they will at least recognise the important increase in taxation that has been applied to the banks since 2016.”
“When we consider who benefits and who does not, we must assume that overall, given that more tax is being raised than hitherto, the banks are probably paying more tax on average as a consequence of these measures. However, the measures will obviously have different impacts on different banks, depending on their profitability and on whether they are at or above the capital threshold of £20 billion at which the levy itself begins to kick in. In 2015 and 2016, the Government announced a set of changes in the way in which banks were taxed. We set out a phased reduction in the rate of the bank levy to 0.1% by 2021. We announced the changes that the Bill makes in the levy, reducing its scope so that it applies to banks’ UK rather than global balance-sheet liabilities.”
“The shift towards taxing profits means that the recovery in banks’ profitability will translate into higher tax receipts for the Exchequer, while also ensuring a sustainable long-term basis for the taxation of banks.”
“My hon. Friend is absolutely right. I think it would pay all Members dividends to consider the comments made by Mervyn King at the time of the last crisis, when he said that the Bank of England had very limited scope to deal with the issues that were faced at the time. Since then, of course, we have fundamentally changed the structure of the oversight of banks. We have ensured that the Bank of England is at the heart of it, and that the independence of the Bank and the other institutions that we have set up is paramount. That is partly why the position of the banks is so much stronger than it has been hitherto. We prevented the banks from reducing their corporation tax liabilities when they were required to pay compensation for misconduct, effectively applying additional taxes.”
“My hon. Friend is right, and this is all about striking the right balance. We recognise that banks need to pay their fair share because of the systemic risk that they can feed into the economy, and because, some years ago, the British taxpayer stood behind the banking system. The other part of the balance is to ensure that our banking system remains competitive in comparison with others in the world, and can, in turn, leverage the competitiveness of our own industries through its lending.”
“My hon. Friend is absolutely right, as we know from recent experience. For example, although corporation tax has been reduced from 28% in 2010 to 19% and then to 17% under this Government, the corporation tax take has increased by 50%. Labour’s policy is the reverse. It foresees raising taxation not just from banks but from all the businesses in the country, large and small, including high street businesses, which, as we know, often struggle.”
“Conservative Members believe that it is better for commercial organisations to be left to run their own businesses. They tend to do it rather better than Ministers, dare I say—although I think I could be quite handy at running a bank or two; who knows? The issue of bank closures is very important. We are working hard to reinvigorate our post offices and to ensure that the banking facilities that they provide—which are available, typically, to more than 90% of personal and business customers—are promoted in all the 11,500 branches in the United Kingdom.”
“The hon. Gentleman raises an interesting idea, but I would argue that that is already effectively in practice in the form of the post office: post offices are able to deal with the customers of the major banks, to take cash, and to offer banking services—albeit not the full range, but certainly the most basic and most important to local communities—and, as I said earlier, there are more than 11,500 of them across the UK.”
“My hon. Friend raises an important point about connectivity, particularly in rural areas, including in constituencies such as mine where making sure there is good broadband is often one way of reducing sparsity and people being cut off from each other, and that is why we have invested so heavily in that area. These changes are expected to increase the additional tax contribution from banks by more than £4.6 billion over the current forecast period to 2022-23.”
“Broadly, this means that overseas activities of UK-headquartered banking groups will no longer be subject to the bank levy. However, the levy will continue to apply to the UK operations of UK and foreign banks.”
“So we have decided that from 2021 the bank levy will apply only to UK balance-sheets for UK-based and foreign banks alike. This will allow UK banks to compete and win business on a more level playing field in these overseas marketplaces, and it is a change we are making as part of a package of reforms that secures revenue while boosting competitiveness. The corporation tax surcharge, the reduction in bank levy rates, and changes to compensation relief restriction were legislated in 2015. Following detailed consultation, this clause and schedule implement the final element of our plan: changes to the scope of the bank levy. The clause and schedule narrow the scope of the bank levy so that from 2021 it will be chargeable only on the UK balance-sheet equity and liabilities of banks and building societies.”
“This ring-fencing will help to insulate UK borrowers and depositors from failures arising in banks’ overseas branches, before the changes to the scope of the levy take effect. As such, there will now be less need for the bank levy to address the risks posed by overseas operations of UK banks, and as the bank levy is less necessary to cover these risks, we have an opportunity to boost the competitiveness of UK banks by reducing its scope. At present, UK-headquartered banks pay the levy on their worldwide operations, while foreign-headquartered banks only pay on their UK operations. We want the UK to stay at the forefront of global banking; we want banks based in the UK to compete and win business overseas, bringing jobs, prosperity and tax receipts with them.”
“Members will be aware that the bank levy aims to reduce the risk banks pose to the wider UK economy. It is currently chargeable on the global balance-sheet equity and liabilities of UK-headquartered banks, but overseas banking groups only pay bank levy on UK activities. However, regulatory developments currently being implemented across the G20 as a result of the standards set by the Financial Stability Board and the Basel Committee on Banking Supervision will reduce the risk that overseas operations of UK banks pose to the UK economy, for example with stricter international standards on the need for subsidiaries to be independently capitalised. We have also made it mandatory for the largest UK banks to separate core banking services from their investment banking activities by 2019.”
“I congratulate the hon. Gentleman on the ingenuity with which he has shoehorned in that question, which is possibly a Department for Work and Pensions matter, although I am not sure. But I will certainly come back to him on that point, and if it is not for me to respond, I will make sure the appropriate Minister in the appropriate Department does so. We expect to raise over £25 billion from the additional taxes that banks pay over this period, on top of the £19 billion that we have raised to date since 2011. By 2023 we will have raised more than £44 billion in additional bank taxes introduced since the 2010 election. I will now turn to the changes made by the current Finance Bill, and set out the reasons for changing the scope of the bank levy. Hon.”
“While this Government continue to consider measures to support transparency over businesses’ tax affairs, we must balance that with maintaining taxpayer confidentiality in order to sustain public confidence in our tax system.”
“The Government have published a detailed tax information and impact note on the proposed changes introduced by part 1 of the schedule. We have also published information about the overall Exchequer impact of the 2015 package of measures for banks, and these figures have been certified by the Office for Budget Responsibility. Finally, new clause 2 proposes that HM Revenue and Customs should publish a register of tax paid by individual banks under the levy. Taxpayer confidentiality is an essential principle for trust in the tax system, and HMRC does not publish details of the amount of tax paid by any individual business.”
“I shall now briefly turn to the amendments tabled by Opposition Members. For the reasons I have described, we believe that a combination of taxing profits and balance-sheets is the most effective and stable basis for raising revenue from the banking sector. The bank payroll tax was intended as a one-off tax; even the last Labour Chancellor pointed out that it could not be repeated without significant tax avoidance. I can assure the House that information about the bank levy will continue to be published as part of the normal Budget cycle. Official statistics are published on the pay-as-you-earn income tax and national insurance contributions, bank levy, bank surcharge, and corporation tax receipts from the banking sector as a whole.”
“As is so often the case, my hon. Friend has hit an important nail on the head: in terms of improving our competitiveness, it is clearly deeply unattractive to have a situation where UK-domiciled banks are being taxed on their foreign operations whereas foreign banks are not being taxed by us on their foreign operations, but are only being taxed on their operations in the UK. He is right that the future of HSBC, Standard Chartered, Barclays and other banks, who make a huge contribution to our tax-take and our economy, are much more secure if they are not being disadvantaged by being taxed on overseas operations unlike their foreign counterparts. As part of these changes, the schedule also provides for a reduction in the amount on which the levy is chargeable for certain investments a UK bank makes in an overseas subsidiary.”
“They put the taxation of banks on a more certain and sustainable footing to ensure that the banks will continue to pay additional tax, and they reduce the impact of the bank levy on UK banks’ international operations. In doing this, we will ensure their continued health and competitiveness, which are essential for us if we are to go on raising yet more tax from our banking sector. I commend the clause to the Committee.”
“I would maintain that the banks are indeed being treated rather differently from other sectors of the economy, not least—as I have been at great pains to point out this evening—because they are being taxed far more heavily than other types of business. On a fundamental issue of principle relating to tax confidentiality, it would not be right to single out any particular bank, whatever its history, to make an example of it and treat it differently from other financial institutions. The changes in this schedule are part of a package of measures that provide a sustainable basis for raising revenue from the banking sector in the long term. These measures continue to apply additional taxes to banks, to reflect the special risk that they pose to the UK economy.”
“Clause 33 accordingly ordered to stand part of the Bill. Schedule 9 Bank Levy Question p ut , That the schedule be the Ninth schedule to the Bill.”
“Friend the Member for South Suffolk also took us through the amount of tax that has been raised from the banks under the Conservatives. He slightly ruined it all by saying that he had once written an article for The Guardian, and that he was, indeed, a closet Marxist at least. The hon. Member for Bristol South (Karin Smyth) talked about the importance of productivity while my hon. Friend the Member for Witney (Robert Courts) highlighted the importance of a balanced approach to tax so that the banks could lend and stay healthy. The final two contributions were on childcare support, on which this Government have a proud record: by 2019-20 we will spending a record £6 billion per year supporting childcare. On that note, I commend clause 33 and schedule 9 to the Committee. Question put and agreed to.”
“He was swamped by red herrings at one point, which caused my hon. Friend the Member for South Suffolk (James Cartlidge) to say that he was the victim of too many interventions “on the trot”—boom boom! My hon. Friend the Member for Stirling (Stephen Kerr) stressed the importance of a fair playing field, which is exactly what the Bill is introducing for the banks. The hon. Member for Aberdeen North (Kirsty Blackman) talked about the importance of less risky behaviour by banks. I certainly subscribe to that, which is why the Bank of England’s Financial Policy Committee has been conducting the stress tests to which I referred earlier. They have all been very successful, including one that is based on a no-deal Brexit scenario. My hon.”
“We have had a very wide-ranging debate. On occasion, we even touched on the matter at hand—the bank levy. The hon. Member for Bootle (Peter Dowd) was very generous in giving way, but less generous and less forthcoming in his answers. He was asked whether he recognised that we would be raising more tax from the banks. He said he would come back to that, but I do not think he did. He was asked why Labour had voted against the bank levy in the first place. On two or three occasions he said he would come back to that, but I am not sure he did. When he was asked whether he supported the overthrow of capitalism, he declined to answer. When he was asked by how much Labour would increase corporation tax, he told his interlocutor to go away and look it up. He was asked whether he was a Marxist.”
“Today, the average house in London costs almost 12 times average earnings, nearly 10 times average earnings in the south-east and more than eight times average earnings in the east.”
“The Budget set out an ambitious plan to tackle the housing challenge—a plan that will raise housing supply by the end of this Parliament to its highest level since the 1970s. However, the Government also recognise that we need to act now to help young people who are trying to get on to the housing ladder. This Bill therefore introduces a permanent relief in stamp duty land tax for first-time buyers, which I will turn to shortly. Alongside that, I will also cover clauses 8 and 40, which respectively introduce an income tax exemption for accommodation payments made to members of the armed forces and make minor changes to the higher rates of stamp duty land tax. Home ownership among young people has been falling.”
“The hon. Gentleman makes an important point. We announced plans in the Budget along the exact lines that he has suggested in order to free up the supply side and to increase supply to 300,000 units by the mid-2020s. In the last 12 months, we have achieved 217,000 new builds, so we are on our way, although it will take time. He is quite right that the supply side matters.”
“My hon. Friend is entirely right. The point about up-front costs—alongside the costs of conveyancing, surveyors and so on—is a critical one, particularly for young people getting on to the housing ladder.”
“There is not an area or region of the country that will not see benefits for first-time buyers. [Hon. Members: “Yes, there is.”] No, I am afraid that that is simply not the case. This measure will benefit first-time buyers in every single region of the country. It is the case that property is a lot more expensive in some parts of the country than in others. Arguably, that is where the particular need is. As I have said, the average house price in London is 12 times average earnings, and it is 10 times average earnings in the south-east.”
“In addition to what I just said about every region seeing benefits, I can tell the right hon. Gentleman that the average benefit for the average first-time buyer will be around £1,700, which is a significant amount. For people purchasing a property at the £300,000 to £500,000 level, the benefit is no less than £5,000, which is a considerable sum.”
“As the hon. Gentleman may know, the figure of 0.3% takes a static view of this policy and its effect on house prices. It does not take into account the supply side changes that I have mentioned. As we increase supply, prices will inevitably begin to fall. There is no single solution to this challenge and no magic bullet.”
“That is why the Bill permanently abolishes stamp duty for first-time buyers purchasing a property for £300,000 or less. First-time buyers purchasing a house that is between £300,000 and £500,000 will save £5,000. To ensure that this relief is targeted at those who need it most, purchases above £500,000 will not benefit from the relief.”
“I will make a little progress, if I may. The Budget announced an ambitious package of new policies to tackle the housing challenge, including planning reform; spending; and a new agency, Homes England, to intervene more actively in the land market. Together with the reforms in the housing White Paper, the housing package announced in the Budget means that we are on track to raise annual housing supply by the end of this Parliament to its highest level since 1970 and to 300,000 a year on average by the mid-2020s. That means that housing supply is on track to be higher over the 2020s than in any previous decade. However, it will take time to build these new homes, and the Government want to act now to help those young people who are aspiring to take their first step on to the housing ladder.”
“The figures the hon. Gentleman chose to use were, I think, a range between £250,000 and £300,000, and he says there are 15 properties in that category. Of course, stamp duty kicks in at £125,000, so it is the range from £125,000 to £300,000 that we would actually be considering in that example. First-time buyers are typically more cash-constrained than other buyers, and stamp duty requires cash up front, on top of a deposit and conveyancing fees, for purchases over £125,000. The Government think it is right to reduce the up-front costs that first-time buyers need to pay, giving them an advantage over the rest of the market.”
“As I say, the average across the piece will be £1,700 per average first-time buyer. I also stated quite clearly that, in every region of the country, there will be those who benefit from this measure.”
“What I am able to tell the right hon. Gentleman is that, as I have said, the average benefit will be £1,700 for the average first-time buyer. Every region in the United Kingdom will see benefit from this measure, and those regions—particularly in the south and south-east—where the ratio of salaries required to mortgage levels is particularly high will especially benefit. However, the other thing we need to do as a Government, as I have already stated, is to make sure we get the supply of housing right. That is why we will be moving from the current level of 200,000 new builds a year up to 300,000 in the middle of the 2020s.”
“In summary, this change to SDLT will help millions of first-time buyers getting on to the housing ladder. Together with the broader housing package we have announced, we are delivering on our pledge to make the dream of home ownership a reality for as many people as possible.”