Robert Jenrick
MP for Newark · Reform UK · United Kingdom
“Robert Steele was a beautiful four-year-old boy who died three weeks ago in Newark when he was thrown from an off-road bike that was being driven by a 24-year-old man. This is the culmination of a number of incidents in my town, and many others across the country, involving off-road bikes, e-bikes and e-scooters.”
“The Minister said that Governments are elected to lead. Most people would assume that means that Ministers are elected to lead, because they are accountable to Parliament and to the people.”
“There is an air of total unreality hanging over this debate. Successive Governments have run down our Royal Navy to its present enfeebled state, they have conspired to surrender other British sovereign territory and we have a Government who procrastinate about signing off a new oil field in the North sea—let alone about one in the south A…”
“I welcome the right hon. Gentleman to his position. I have known him for a long time—I wish him well. He has a huge task ahead of him. Earlier in the summer, the Prime Minister said that walking the streets of Makerfield lodged in his mind that so many working people want to see the personal allowance raised.”
“Imagine that you are a worker at JLR worried about your future, and you have the misfortune of watching the Chancellor’s speech, which contains searing economic insights like, “I want to see businesses make a profit.” There was nothing about scrapping electric vehicle mandates, bringing down energy costs by getting rid of net zero targets…”
“The sight of the Government escorting illegal migrants into Portsmouth harbour, the home of the Royal Navy, was a national humiliation. Sometimes I wonder whether Members of this House have no appreciation of the level of anger there is in the country at the rapes, the murders and the billions being wasted that should be being spent on th…”
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“The forum has now met three times and has successfully brought together for the first time the key leaders from across the industry, charities—including some of those mentioned today—and consumer groups, as well as Ministers from throughout Government and the regulators, to provide the leadership and co-ordination in tackling financial exclusion that the issue demands. The Government published our first financial inclusion report on 25 March this year, which takes stock of progress in the area. We intend to continue doing so annually. Affordable credit was one of the core areas of the report. The policy forum is widely recognised by the sector as an important initiative and it has already managed to deliver tangible progress, although I hope it will go further in the months and years to come.”
“It has identified four indicators of potential vulnerability: low financial capability, low financial resilience, life events, which of course can happen to all of us, and physical and mental health conditions, which one might most clearly recognise as vulnerability. The Government, like the regulator, view this issue with the broadest possible definition. I will say a few words on what we have done most recently. In November 2017, following a report from the Lords Financial Exclusion Committee, which the hon. Member for Oxford East mentioned, the Government announced the creation of the financial inclusion policy forum.”
“Friend will recognise, over the last two or three years, when in each successive Budget the Government have taken a number of important steps to address some of the issues that the report raises and on which it urges us to go much further. Like my right hon. Friend and others who have spoken, I think that financial inclusion is extremely important to build a unified society and economy. In her introduction, she made the important point that we have to take a wide view of what “vulnerability” means, because each and every one of us can be vulnerable at different stages in our lives, not just those whom one might stereotypically assume to be vulnerable. That is reflected in the broad definition of “vulnerability” that the FCA is working towards.”
“As she knows, this debate comes just a few weeks before the Treasury will formally respond to the Committee’s comments and recommendations on behalf of the Government. I hope that she will forgive me for not pre-empting that by providing the full formal response, but I will try to set out our approach, our record in recent years and some further steps that we intend to take, as well as impress on her how seriously the Government take the issue and how carefully we will read and respond to the important recommendations in her Committee’s report. Financial inclusion is a priority for this Government and has been for some time, particularly, as I hope my right hon.”
“Thank you, Mr Walker; it is a pleasure to serve under your chairmanship. I do not intend to use up all the time, unless there are many interventions from colleagues. It is a pleasure to follow the hon. Members for Motherwell and Wishaw (Marion Fellows) and for Oxford East (Anneliese Dodds). A dangerous precedent was set in the Lords by my colleague, the noble Lord Bates, who resigned after arriving 10 seconds late to a debate, so I am always careful to be on time now, although I am sure being 15 seconds late is allowed. I thank both the Treasury Committee and its chair, my right hon. Friend the Member for Loughborough (Nicky Morgan), for securing the debate and for this important piece of work.”
“The price of fuel has only a marginal effect on how much fuel people purchase. That means that fuel duty freezes have a limited effect on emissions. Fuel costs, however, are a major expenditure for both households and businesses, which is why this Government have chosen to freeze fuel duty for nine successive years.”
“I take it from the hon. Gentleman that he supports increasing fuel duty. He asks who has that opinion. Actually, most economists agree that fuel consumption is highly price-inelastic, because working people do not always have the choice to use public transport or cycle. Not everybody lives in a city like Cambridge, with excellent public transport. We support the working men and women of this country, particularly in towns and rural areas, and we have saved them £1,000 a year on their fuel bills.”
“Absolutely. This Government will always support working people. We want to raise living standards. We are particularly conscious of those men and women who work in parts of the country, like the area my hon. Friend represents, where it is not easy to get to work. They need that extra money in their pockets to get on, do their jobs and run their businesses.”
“We on the Government Benches are not complacent about climate change; we are leading the world in this area. We are decarbonising faster than any other G20 country and we are investing billions of pounds in this area. If we want to tackle the challenge of decarbonisation, we will need to gather the greatest amount of private investment and innovation from the private sector. We will never be able to do that by going around nationalising industries below market value and making bellicose statements that shareholders are lining their pockets. The shareholders are the savers, the pensioners and the international investors that this country needs to thrive.”
“My hon. Friend is absolutely right and that is what the Government are doing: investing in ultra-low emission vehicles; increasing the capital allowances budget, now extended to 2023, for EV charge points; announcing a £400 million fund to get private sector investment in getting those charge points rolled out across the country; and, through the plug-in car grant, giving generous subsidies to help people to buy their first electric vehicle.”
“The clean growth strategy set out our ambition to enable businesses and industry to improve energy efficiency by 20% by 2030. Today farmers in a community such as Ludlow can make use of the rural development programme for agricultural buildings, but we have also announced two new schemes. First, there is the £315 million investment in a new industrial energy transformation fund, and secondly, we have published a call for evidence on a business energy efficiency scheme focused on smaller businesses.”
“I am proud that this country will be the first in the world to introduce a new, innovative plastic packaging tax. We are in the process of formulating the tax. We have finished the consultation, and have received a large number of responses. We will be presenting proposals in the forthcoming Budget.”
“The Government have committed £3.5 billion to improving air quality for the entire population, and I understand that that involves Bath and North East Somerset Council receiving nearly £6.5 million. I understand that the council is also expected to bid for part of the £220 million clean air fund, and I wish it luck with its application.”
“This Government are investing in innovation in the tidal and marine sector. For example, we have invested in the marine innovation centre in Shetland, and I recently met a delegation to discuss those proposals. However, investments that we make on behalf of the taxpayer have to be the right strategic energy investments for the country and provide good value for money for the taxpayer.”
“Allowing the difference between the income tax treatment of that income and the employer national insurance treatment to persist would be confusing, and continue to provide an incentive for employers to manipulate final payments to achieve a tax advantage. The clause will close that loophole, simplify the tax system, and raise about £200 million in revenue to continue to support the funding of public services in a significant way. Clause 1, which applies to Great Britain, achieves that purpose by ensuring that where an income liability arises on termination awards above £30,000, there will be a corresponding liability to employer class 1A national insurance contributions.”
“Some awards were taxed as earnings, others were taxed only above £30,000, while others were completely free of tax and national insurance contributions. That complexity left the system open to a degree of manipulation that we heard evidence about this morning. The Finance Act (No.2) 2017 tightened the rules on what element of an award is taxed as earnings. From 6 April 2018, the NICs liability was more closely aligned with the tax treatment, so that those amounts taxed as earnings became liable for employer and employee class 1 NICs. Termination awards that are not earnings are currently charged to income tax on amounts that exceed £30,000, and they are entirely exempt from employee and employer national insurance contributions.”
“The reforms made by clauses 1 and 2 have therefore been properly consulted on, tested with stakeholders of all kinds and debated by Parliament—both during the process of this Bill and, more particularly, through the passage of the Finance (No. 2) Act. They have also been widely expected by stakeholders for many years. I now turn to the changes made by clauses 1 and 2. It is important to note that the reforms we are discussing today are the second part of a package of changes, some of which have, as I said, already been approved through the Finance (No. 2) Act and took effect in April 2018. The tax rules for termination awards that existed before the reforms introduced by the Finance Act (No.2) 2017 were unclear and unnecessarily complicated.”
“We consulted openly and widely on that policy, receiving responses from 100 stakeholder groups and nine individuals, covering tax experts, law firms, trade unions, business groups and individual businesses. We also held several meetings with stakeholders to discuss their views on our draft proposals. Following that, in the 2016 Budget, we confirmed that we would be taking forward reforms to the tax and NICs treatment of termination awards, and shortly afterwards published draft legislation for consultation. The income tax measures announced in the 2016 Budget were legislated for in the Finance (No. 2) Act 2017 and took effect from April 2018. The Government then reconfirmed in the 2018 Budget that the associated reforms to NICs legislation would be in place for April 2020.”
“The Office of Tax Simplification, or OTS, stated during its 2013-14 review of the tax and national insurance contributions treatment of these payments that “the well-advised can often end up better off than the unadvised, as they are more able to structure their employment contract (or, indeed, their termination payment) to achieve the better tax treatment.” One reason why businesses had an incentive to do so was the absence of any employer’s national insurance on termination awards of any size. My officials and I outlined some examples of that this morning during questions, which I think was supported by the interesting evidence from Bill Dodwell of the OTS. Following that report from the OTS, the Government announced in the 2015 summer Budget that they would consult on simplifying the tax and NICs treatment of termination awards.”
“It is a pleasure to return this afternoon, following my grilling by members of the Committee this morning, to explain the clauses in the Bill, starting—as you said, Sir Henry—with clauses 1 and 2. Before I respond to the hon. Members who have tabled new clauses 1 and 4, it may help the Committee if I begin by explaining some of the background to clauses 1 and 2. My apologies for repeating some of what I said this morning in answer to questions from members of the Committee.”
“As we discussed this morning, that threshold remains generous compared with those of many other countries, including the United States and Germany, which tax income linked to a termination from the very first pound. It will ensure that about 80% of awards are unaffected by clauses 1 and 2, and that awards made as statutory redundancy pay are untouched. We have no plans to lower the threshold in future. Any future Government who wished to do so would need parliamentary approval.”
“Although there is a principled case for greater simplification and alignment by applying employee NICs to that income, the Government have listened carefully to representations made during the consultation, and we believe that our approach strikes the right balance between delivering greater simplification for employers, and fairness to individuals who are undoubtedly in a difficult period of their lives: losing their jobs and having to make the necessary adjustments. Secondly, the clauses do not reduce or seek new powers to change the existing £30,000 threshold, below which termination awards are entirely tax-free and NICs-free.”
“Clause 2 makes corresponding changes for Northern Ireland, ensuring that the provisions apply across the United Kingdom. Before I address new clauses 1 and 4, let me say a few words about what clauses 1 and 2 do not do. First, they do not introduce a NICs liability on the employee—I hope we made that clear during questions this morning. There remains an unlimited employee national insurance charge exemption on termination awards.”
“If my hon. Friend is referring to the benefits system, that is completely unrelated. Contractual benefits are liable to a tax liability in addition to that—perhaps I can provide more information on that in a moment. They will be part of taxable income taken in the round, which once generated is then subject to income tax and the employer’s national insurance contribution in the final termination payment. The effect of the change will mean that a 13.8% class 1A secondary employer’s NICs charge will be applied to income derived from a termination award that is already subject to income tax. In addition, clause 1 also includes other modifications to existing legislation that relates to employer class 1A NICs, to ensure that the new liability for termination awards works as intended.”
“Instead, by virtue of the clause, the rules that determine liability to income tax will apply directly in calculating the amount of employer class 1A NICs payable on termination awards above £30,000. Therefore, clauses 1 and 2 simplify the tax system and reduce the incentive for manipulating payments to achieve tax advantage.”
“My hon. Friend is absolutely right. I have said on several occasions that the measure will raise about £200 million a year. Because it was a Budget measure, it has been included in the Government’s forecasts and certified by the Office for Budget Responsibility. If any hon. Member wished to take issue with the policy, they would need to find an alternative way to raise £200 million a year, if they wanted to continue to support public services in the way that we have set out in our spending plans. Finally, the clauses do not introduce any legislation that goes beyond mirroring the effect of the income tax rules with respect to the scope of the change.”
“That is absolutely right. As I have just said, we have no intention of changing the threshold. If a future Government wished to do so, that would need to be done through an affirmative statutory instrument and the House would have the opportunity to debate it and take issue with it in the usual way, if it wanted to. We have no plans to do so; my hon. Friend is right to seek that clarification.”
“The Government are already committed to reviewing the measures and being transparent about the impact that they are expected to have. It is worth giving Committee members a little more detail on these issues. First, the Government do not deem it appropriate to conduct reports that have been very narrowly constructed. A report focused exclusively on one aspect of the Government’s reforms to termination payments—the distribution analysis, for example—would miss other important aspects such as the impact on the levels of tax avoidance or the funding of public services.”
“Furthermore, it specifies that the report must contain “an assessment of the expected impact” of the changes in certain respects, which I will not list here but which are available in the Bill documents. New clause 4, tabled by the right hon. Member for Hayes and Harlington (John McDonnell) and the hon. Members for Bootle, for Oxford East, for Stalybridge and Hyde (Jonathan Reynolds) and for Manchester, Withington from the official Opposition, also asks the Government to report on several similar issues to those covered in new clause 1. The new clauses are unnecessary because they seek to force the Government to report on a narrowly prescribed set of issues, most of which have been considered during the detailed consultation that has already been completed and that I have outlined, ahead of new information becoming available.”
“My hon. Friend makes an important point. Statutory redundancy pay is £15,000, so for these purposes, £30,000 appears generous. I have already made the international comparisons. It is also important to point out that there are a number of exemptions altogether, for discrimination, physical harm, disability and so on, set out in other areas of legislation to ensure that those who are particularly vulnerable and deserving are protected when it comes to the payment they receive for their injuries. I will briefly discuss the amendments that would be made to the Bill if new clauses 1 and 4 were accepted. New clause 1, tabled by the hon. Member for Aberdeen North, seeks to require the Government to produce a report on the impact of class 1A NICs on termination awards.”
“Thirdly, as I noted in my letter to the Committee, and as I set out again in my answers to questions this morning, where employers face a new charge on termination awards, we expect this to be disproportionately on payments to higher-rate and additional-rate taxpayers, typically those who are in the top two or three income deciles. Clause 1 will simplify the tax system, reduce the incentive to manipulate payment, and raise important revenue for our public services. As such, and with the reassurances that I hope that I have been able to give the Committee, I commend clauses 1 and 2.”
“However, that is a negligible reduction and must be viewed in the context of record employment, record low levels of unemployment and record employment in all categories—disabled persons, women in the employment market, young people in the employment market and so on—a higher living wage, support to businesses through tax cuts such as corporation tax, and other important policy initiatives brought forward by this Government. Also, as the ONS pointed out this morning, wages are rising substantially above inflation.”
“First, no employee will receive a new tax charge as a result of the Bill. The Government have explicitly chosen not to charge employee NICs on the measure and to retain the £30,000 threshold. Secondly, only about 20% of termination awards will be affected. As we heard this morning, the OBR expects that employers may react by lowering wages or accepting lower profits and has adjusted its forecast for salaries by 0.1% as a result.”
“As part of the review process to meet those obligations, HMRC and HM Treasury will speak to stakeholders to gauge their views on how the policy is operating. There are well established lines of communication between HMRC and representative groups, as one would expect, that will provide the basis for a continuous review of the effect of this policy. I am sure that hon. Members will feed back to Ministers any concerns and thoughts regarding how the reforms are working in practice, and of course HM Treasury is always open to suggestions. I hope hon. Members will agree that those points make publishing a review on these matters unnecessary. However, it may also help if I respond specifically to the points raised about the impact of the new class 1A employers’ NICs liability. I would like to make a number of important points in closing.”
“That shows the Government’s commitment to transparency and sound public finances. Finally, the Government have already committed to keeping this measure under review, as new information may become available. The publicly available tax information and impact note, TIIN, commits the Government to keeping the scheme under review through communication with taxpayer groups affected by the measure and through information collected from tax receipts. As with all legislation, the Treasury is also required to carry out post-legislative scrutiny of Acts within three to five years of their implementation. As I outlined, I think in response to the question from the hon. Member for Oxford East this morning, the Treasury may well do that before that deadline; it would certainly be required to do so and to report to the Treasury Committee if it had not.”
“We explicitly considered the impact on employers and individuals as part of the policy and our development. We decided on an approach that protected those losing their jobs by, for example, retaining the important £30,000 exemption that we have extensively discussed and not seeking to change the position with respect to employee national insurance contributions, but at the same time simplified and aligned the system, reducing the incentives for manipulating payments. We believe we have considered this issue carefully and reached a balanced way forward. I will add at this point that the policy costing for this measure, as we have already heard in interventions from my hon. Friends, has been signed off and certified by the independent OBR, and the methodology for that assessment is described in the Budget policy costings document.”
“Absolutely. The figures reported by the Office for National Statistics this morning are further evidence of the jobs miracle we have seen since we came to power in 2010. It is important to place these changes and the impact they will have on working people in the context of the fact that, as my hon. Friend said, most of us in this room have never known such a buoyant labour market in our lifetimes—and long may it continue. On the particular point of the reports, the Government feel it is more appropriate to look at those issues in the round and to take a balanced decision based on all the relevant factors. Secondly, the Government have already consulted on this measure in detail. We have published both the draft policy proposals and the legislation for scrutiny.”
“Had we chosen class 1 national insurance contributions, that route would have been closed; if we had wanted to protect charitable giving, we would have had to make alternative arrangements. There were a number of reasons, logical when they are thought through, why we reached this conclusion.”
“Because we have chosen not to introduce this from an employee NICs perspective, that was the most logical category. As the hon. Lady and others have mentioned, if there were an intention in future to add employees’ national insurance contributions, one would perhaps have chosen class 1 national insurance as the most logical. By choosing class 1A, we made a clear statement that we had no intention of doing that. This is purely focused on the payment from the employer in respect of national insurance contributions. Finally, as we may come on to later in the passage of the Bill with respect to sporting testimonials, for those individuals giving money to charity it is important for the contribution to be paid through class 1A, because that is the class of national insurance contributions that payroll giving uses.”
“I do not intend to repeat all the comments that I made earlier, which I think answered a lot of questions that were put to me. I will try to summarise some of the arguments made by the hon. Member for Aberdeen North. She made a point that came up in questioning around the choice of class 1A, which a number of members of the Committee have raised. We are clear that this is the right choice. We gave the matter careful consideration. There are a couple of central arguments. The choice of class 1A and, therefore, payment in real time was central to alignment with income tax. If we want to have greater alignment and simplicity, that is the way to deliver it. Secondly, as we heard in evidence this morning, class 1A is a category of national insurance contributions that focuses on the employer.”
“We are bringing this Bill forward at this point so that, assuming it passes through both Houses as soon as possible, there is good time for practitioners in the accounting profession and employers to make the necessary changes to software packages and so on. We will take seriously the communication that we will do through HMRC. As the Minister, I will follow that up to ensure that employers are properly communicated with and have sufficient guidance to make the changes.”
“We do not have any plans to do that, but this measure is designed with termination payments in mind. The Bill does not make any changes elsewhere—other than, obviously, to sporting testimonials. We are trying to provide the greatest degree of alignment with the income tax changes that we have made, and the choice of class 1A enables us to deliver that. If we had chosen a different class, there would have been a greater degree of misalignment. I hope that the hon. Lady will consider those thoughts. We have already debated at length whether this was a rushed Bill. I think that argument is difficult to support, on the basis that the policy decision has been around since 2015, consulted on, restated in multiple Budgets, and debated as part of two Finance Bills. The argument that this is a rushed policy decision cannot be sustained.”
“From April 2020, non-contractual and non-customary testimonials arranged by third parties will be subject to NICs above the £100,000 threshold. The third-party testimonial committee will be liable to pay an employer class 1A NICs charge on the amount raised above £100,000, and not on any amount paid below that. These types of testimonials will not be subject to employee NICs, to ensure that the sportsperson is not adversely affected. I would like to reassure hon. Members that we expect the vast majority of these payments to be unaffected by the Bill, as they will not exceed the threshold of £100,000.”
“At present, where a sporting testimonial is non-contractual or non-customary, it can be organised by a third party, rather than the employer, to raise money. As I mentioned earlier, although existing legislation implies that NICs liability already applies, the amounts raised through the third party may not have been subject to NICs because of this long-standing practice and ambiguity. Therefore, this concessionary treatment will end with the passage of this Bill on 6 April 2020, when clause 3 takes effect. Where the employer arranges the testimonial, it is part of the contract or there was an expectation that the sportsperson would be entitled to one, the testimonial is already subject to income tax and NICs in full.”
“This will provide clarity and certainty for sports clubs, sportspersons and those individuals who form the sporting testimonial committee that organises the event—if they are different—and ensure that there is limited impact on a practice that I think all of us support and want to continue. The relevant income tax changes that form the first half of this package came into force from April 2017, following legislation in the Finance Act 2016. This confirmed that, while income from non-contractual, non-customary sporting testimonials would become taxable, there would be a generous £100,000 exemption to ensure that the change had a limited impact in most cases. The rules governing sporting testimonials are changing to give clarity to the NICs treatment and align it with the changes to income tax that Parliament has already approved.”
“A consultation was published shortly thereafter, and the Government received responses from a range of groups, including tax professionals, accountancy firms and sporting interest groups, including the Football Association, the Professional Footballers’ Association, the England and Wales Cricket Board and the Rugby Players Association. In addition, two consultation meetings were held to discuss the detailed proposals, and the Government published draft legislation for consultation, adapting our approach, as I will describe, in response to further feedback. The changes we are considering are part of that package of legislation, which puts the tax treatment of proceeds from sporting testimonials on the statute book and beyond doubt.”
“That case established the broad principle that the proceeds of a testimonial organised to demonstrate affection and regard for the personal qualities of a sportsperson are not earnings. Since then, other legislation has moved on, and income not directly from an employer is now typically subject to tax and national insurance contributions. Prior to 2017, HMRC effectively operated an extra-statutory concession, which is clearly not sustainable over the long term, since HMRC must ensure that it operates within the law. As such, the Government announced at the summer Budget in 2015 that they would consult on proposals for clarifying the tax and national insurance contributions treatment of payments made from sporting testimonials.”
“Before I address amendment 2 and new clauses 2 and 5, it may help the Committee if I briefly explain the background to clauses 3 and 4. As we have heard at length over the course of the day, a sporting testimonial is a one-off event, or a series of related events, held on behalf of sportspersons who have played for a certain club, usually for a long time. The testimonial can be used to raise money for the sportsperson before their retirement, in the event of their injury or, sometimes, to raise money for charity. The historical tax treatment of sporting testimonials relied on the outcome of a tax case from before the second world war, which my officials referred to this morning.”
“It is worth noting that the tax changes affecting this income have been in effect since 2017. As I said earlier, we have not had any representations since that point to suggest there has been a significant adverse impact.”
“We expect the majority of non-contractual and non-customary sporting testimonials to fall below the generous £100,000 threshold, with the average income received from a sporting testimonial being around £72,000, based on the work that we did in 2013, although we admit that it is not easy to form a clear judgment, because we had to survey the details of those sporting testimonials that were in the public domain. We then doubled the tax-free and NICs-free threshold for testimonials following the consultation to ensure that there would be a very limited impact indeed. That appeared to supported and welcomed by sporting bodies. As I said earlier, donations made from sporting testimonials via payroll giving will not be subject to income tax and NICs at all—in which case, there would be no impact whatever.”