§ Question proposed, That the clause stand part of the Bill.
§ Mr. Ottaway
The clause relates to registration and is one of those clauses that appear under the heading "Administration and enforcement".
Subsection (1) will impose a duty on the commissioners of Customs and Exciseto establish and maintain a register of persons who are required to be registered for the purposes of the aggregates levy.The clause then lists the people who are required to be registered and they include those who carry out "taxable activities". It would help if the Financial Secretary explained how Customs and Excise will organise itself to do that; I imagine that it will recruit people who are experts in minerals. People whom one would not normally expect to work for Customs and Excise will specialise in this subject; but will he explain how such expertise will be provided?
In particular, the clause goes on to say:a person carries out a taxable activity if a quantity of aggregate is subjected to commercial exploitation".What does "commercial exploitation" mean? I am sure the Minister is aware that many people in the industry are concerned about the ability to identify and register everyone involved. Does he expect people to come forward to register for a voluntary code? What happens when someone does not expect to be in the aggregates business, but a by-product pops up which the Minister would describe as aggregate? I know that ignorance of the law is no excuse, but how would that business man know that he has to declare that he is producing aggregate?
81 I hope the Minister appreciates that many people have doubts about the register. Their concern is justified. Many non-mainstream and fringe operators might evade the aggregates tax and disadvantage responsible operators. How will he police the register and ensure that it is an accurate document that reflects the activities of the entire industry?
We know that the Treasury is discussing the implementation of the register with the industry, and phrases such as commercial exploitation and construction use of aggregates have been clarified. However, is there a minimum level? I am not alluding to thresholds before the levy is imposed, which I raised when we discussed the previous amendment, but if a person produces a de minimis quantity, is he expected to register? Will the regulations—of which the Minister may or may not be aware—address that problem?
I understand that secondary legislation will be introduced later this year to make the measure workable, but perhaps the Minister can give an idea of his approach, because we need the matter clarified. Although the clause heading is simply "The register", the clause itself goes to the heart of what is workable. If there is any doubt about that, will the Minister recognise the industry's concerns and consider delaying the introduction of the levy until the serious concerns on the register are addressed?
§ Mr. Edward Davey
I shall be brief. As the hon. Member for Croydon, South (Mr. Ottaway) said, the administration of the register could give rise to costs as it is set up and rolled out. I understand that a compliance cost assessment has been made. What are the costs estimated to be? Although there is a great deal of detail about who is to registered, how they will be registered and how the commissioners should keep such information, the commissioners are not obliged to minimise the compliance costs on the industry and are given a fairly free hand in going about the registration process. How do the Minister and his Department intend to keep the administration costs that will be imposed on business to the minimum necessary to collect the levy?
§ Mr. Letwin
I want to raise two specific issues. The first relates to clause 24(2), which tells us:A person is required to be registered for the purposes of aggregates levy if he … carries out taxable activities".That takes us to the heart of the problem: who is such a person and how does he know that he is such a person? My hon. Friend the Member for Croydon, South (Mr. Ottaway) referred to that issue.
Clause 18 is relevant in determining whether someone should be registered under clause 24(2)(a). Let us take the example of a sole trader who is principally engaged in an exempt process, such as rock cutting, to produce what is described in clause 18(2)(a) as "dimension stone". If I have correctly understood the enormously intricate articulation of clauses 17 and 18, that is not, according to clause 18(2), a taxable activity. A person engaged in that activity would not be caught by clause 24(2)(a) and thus would not have to register. However, if the exempt process produces what is described in clause 18(1)(a) asspoil, waste, off-cuts or other by-products",82 then, according to the definition in the governing clause, 18(1), those items would be classed as aggregate and thus subject to the levy under clause 16.
So a cutter of rock—let us call him Mr. Jones—quietly sets himself up to produce dimension stone. He merrily imagines that he is not in any sense a taxable person under the Bill, but suddenly discovers that by virtue of some of the spoil, waste, off-cut or other by-product, he has become taxable. What is to become of poor Mr. Jones? At what stage is he breaking the law? What should he have known in advance? How will Customs and Excise deal with him if it discovers ex post—as he may discover ex post—that he was in breach of clause 24(2)(a)?
My second concern relates to value added tax legislation. Much of what we are about to consider in laborious detail is a set of standard clauses derived from such legislation. No doubt the Government will recognise that. Alas, the clauses are nastier forms of the standard, which in itself is nasty. Both governing parties must take joint responsibility, over the past half century, for that. VAT legislation is an abomination to mankind. I take no pride in being a member of a party that played its role in that. However, this Government have done nothing to remedy the problem; instead, they have made it worse.
Clause 24(6) proposes something that is worse than most other measures in similar legislation. No doubt if the Minister reflects on it, he will agree that it is intolerable. I have just exposed the genuine doubt of Mr. Jones who does not know whether he is conducting a taxable activity. However, we learn in subsection (6) thatwhere it appears to the Commissioners"—note, Mrs. Heal, that it simply has to appear to them—that any person is operating or using any premise"—I do not quibble with that—or intends to operate or use any premises … for winning any aggregate",then, in principle, he can be caught by the tax.
Mr. Jones has not even got to the stage of setting up his business; much less has he produced the dust that may or may not be weighable—the Minister was unable to tell us—as a spoil, waste, off-cut or other by-product captured by clause 18(1)(a). There is no dust or stone on the premises; there is only Mr. Jones on the premises. However, he made the mistake of trying to raise money for his business by issuing a prospectus to various of his friends suggesting that they join him in his venture. For all I know, and for all the Minister knows, it may appear to the commissioners that Mr. Jones intends to operate the premises for the purpose of producing a taxable substance, but that is not the purpose at all. The purpose is to produce, by an exempt process, an item that is not taxable—but the by-product is taxable because the Minister's drafting seems to make it so. I do not know whether or not it is taxable because I cannot really understand the Bill, and I do not suppose that the Minister can either. In any case, it may be that the Bill makes the dust taxable—hence it presumably appears to the commissioners to constitute Mr. Jones's intention to operate or use premises for winning aggregate.
We have reached the limits. I understand that Customs and Excise is, thank God, run by British civil servants, who are, on the whole, reasonable people. On the whole, therefore, they will probably administer this appalling, tyrannical legislation in a rather less than appalling and 83 tyrannical fashion. However, that is merely probabilistic. The House should not be passing legislation that permits commissioners to determine whether a person intends to do something which he could not possibly know that he intends to do, because he would not have had the slightest reason to find out whether the legislation applied to something that he could not have been expected to expect it to apply to. That is appalling indeed.
I do not suppose that politicians in the Treasury today have any more intention of producing such legislation than they ever did, but someone has come up with this wonderful drafting. No doubt it was drawn from some obscure part of the arcana imperii of VAT legislation or, for all I know, the legislation on the landfill tax. The Minister thinks that he can taunt me about that tax, but I intend to disillusion him on that point. I was not in Parliament to vote for the landfill tax and I would not have voted for it if I had been. The landfill tax stands as a token of only one thing—the Minister's mythology when he says that these measures are fiscally neutral. He is the representative of a Government who raised the landfill tax without raising national insurance contributions. Whatever the origins of this provision, Conservative or Labour, and whether it is intended for long-term or short-term misuse, I care not—it is wrong and indefensible and it ought not to be in the Bill.
I turn now to clause 24(8), which is also very interesting. It tells us:Where any entry in the register at any time specifies that any premises registered under a person's name as a registered site are to be taken to be the originating site of"—there follows a list of several things—any question for the purposes of this Part as to the boundaries at that time of the originating site … shall be conclusively determined in accordance with that entry.Let us return to Mr. Jones. What is his situation? The prospectus issued by Mr. Jones seems to the commissioners to make him a taxable person because he intends to do something that, unknown to him, may produce a by-product that is an aggregate for the purpose of the levy, and so he has to register. The area that he registers conclusively determines the boundaries of his action. When he intends to begin his operation, his intentions may relate to a place different from the one where he will actually operate.
I do not see how subsection (6) combines with subsection (8) to produce anything other than the most unholy and arbitrary mess. I may be wrong about that. There may be a long tradition of such statutory construction in other Finance Acts. The Financial Secretary may be able to explain to us how a definitive boundary, established on the basis of an intention as it appears to the commissioners, but which is not yet represented by an actuality of production, can nevertheless be treated by the courts as a reasonable proposition. My mind boggles at that, but it may be the case, and I look forward to hearing from the Financial Secretary how subsection (8) will interact with subsection (6).
§ Mr. Timms
The clause sets out the requirement to register for the aggregates levy. It brings into effect schedule 4, which in turn gives further detail on the required procedures and conditions. A business has to register if it is responsible for the "commercial 84 exploitation" of aggregates in the UK. That phrase is defined in clause 19. The businesses that will be most affected are those that extract aggregates, but the clause may also affect those businesses on whose premises rock is crushed or an exempt substance, usually a mineral, is extracted from a quantity of aggregate that has been transported there from its originating site.
Some businesses are not necessarily concerned with extracting and supplying aggregates to the construction industry, but supply other industries such as glass making or metallurgy. The Bill will assist those businesses where possible by exempting them from registration and minimising the administrative burden. The hon. Member for Kingston and Surbiton (Mr. Davey) asked whether that would be the case, and I can certainly give him that assurance. Those companies will need to demonstrate that they do not supply or otherwise exploit any aggregate for a purpose that is neither exempted nor relieved.
Customs and Excise is given powers to decide the boundaries of any premises for registration purposes to safeguard against avoidance of the levy by businesses that might otherwise locate taxable activity outside previously agreed boundaries. The hon. Member for Croydon, South (Mr. Ottaway) asked several questions about how that will work. What is being described is very much the core, day-to-day activity of Customs; it is the sort of activity in which it excels. I agree with the hon. Member for West Dorset (Mr. Letwin) about the quality of civil servants in the UK. There is nothing qualitatively new about what is required of Customs in the Bill. It is merely the circumstances that are different.
The obligation is on the taxpayer to register. There is not a de minimis level, but certain activities are exempt. If there were a de minimis level, the environmental cost of extraction would not be addressed equally by all businesses and the levy could be considered unfair, as I pointed out earlier. Everything set out in the clause is workable and straightforward. It presents no novel or insuperable difficulties for Customs and Excise.
I did not understand the hon. Gentleman's difficulty with subsection (6), which states:In particular, where it appears to the Commissioners that any person … intends to or operate or use any premises … they may, if they think fit, register those premises".That is entirely reasonable. If the commissioners read a prospectus, such as that to which he referred, that indicates that there may be some extraction of aggregates, they may, if they think fit, register those premises. I am not sure that he drew attention to any substantial difficulty.
I do not think that identifying the individuals concerned will be especially difficult. A statutory declaration is already made for the requirements of the annual minerals raised inquiry. As the information is already gathered by the Government, we will have a pretty good idea of the organisations involved, so compiling the register will be relatively straightforward. The list drawn up for the purposes of the levy will be slightly different because of the exemptions, but compiling the list of who should be affected will not be difficult.
§ Mr. Letwin
Will my Mr. Jones issuing his prospectus for rock cutting to produce dimension stone appear to the commissioners to constitute grounds for his being registered?
§ Mr. Letwin
The Financial Secretary's use of words was interesting: he referred to the position if Mr. Jones "intends commercially to exploit" an aggregate. However, that is not what Mr. Jones does; he wants to cut rock to produce dimension stone, which is exempt. That brings us back to the core question. If he also producesspoil, waste, off-cuts and other by-products",he is taxable. If his intention is to operate the premises to produce cut rock, may it appear to the commissioners that he falls under subsection (6), despite the fact that his prospectus contains nothing about exploiting aggregates?
§ Mr. Timms
That is a matter for the commissioners. The issue is whether an individual appears in a register, not whether that individual pays tax. Does the hon. Gentleman assume that anyone thought fit to be included on the register would automatically pay tax? That is not so: the tax will be based per tonne on aggregate commercially exploited. If the individual involved commercially exploits—sells—aggregate produced as a by-product of his primary activity, that will be taxed, as it should be.
§ Mr. Letwin
Is the Financial Secretary saying that in the case of Mr. Jones and similar cases it is possible that someone who will never be taxed will nevertheless be registered and, presumably, inspected? Is it possible that people who never produce anything taxable and never intended to produce anything taxable but who appeared to the commissioners to be intending to produce something taxable will be subject to intrusive inspection?
§ Mr. Timms
It is certainly conceivable under the terms of subsection (6) that someone who is thought by the commissioners to be intending commercially to exploit aggregate will be included in the register but never pay tax because he does not commercially exploit aggregate.
The hon. Member for Kingston and Surbiton anticipated correctly that there would be a regulatory impact assessment. It is available for inspection—I think that it is on the web. The analysis set out in some detail therein indicates that the total set-up costs to the industry will be approximately one ha'penny per tonne extracted; and total recurring costs will be roughly equivalent to 0.3p per tonne extracted. Those are modest sums. I assure him that our aim in all the consultations with the industry as the regulations are drawn up will be to ensure that the burden imposed by compliance with the requirements is minimal.
The hon. Member for West Dorset appears to have explicitly repudiated the landfill tax. We are witnessing a significant change in the Conservatives' position on environmental taxation. Leading figures in past Conservative Governments believed that there was a role for environmental taxation and most people believe that 86 the landfill tax has been a success. However, those who are in the ascendant in the internal Conservative party disputes of which we are currently hearing a great deal may well be of a different school and not believe that measures such as the landfill tax are appropriate. To the hon. Gentleman and all his hon. Friends who take a similar view, I say that people throughout the country think that there is a role for taxation in addressing environmental issues, and they strongly support measures such as the landfill tax and the aggregates levy.
It is unusual for me to be able to quote in support of the Government's actions the Council for the Protection of Rural England, but its position is clear. It strongly supports the proposed aggregates levy and the steps that we are taking to use the tax system to promote environmental benefit. The CPRE says that the aggregates levy will help to ensure that the price of primary aggregatesbetter reflects the environmental costs of extractionand that it will help to achieve the Government's goal of prudent use of natural resources. It says that the environmental damage that the aggregates levy is designed to address is occurring now and urges the Government to introduce the levy as soon as possible.
Many people, including those who support the Conservative party, agree with that view. I urge the hon. Gentleman to be cautious about repudiating environmental tax measures introduced by the previous Government, because many feel that they were appropriate and that others, such as the aggregates levy, are needed.
§ Mr. Letwin
I am astonished and delighted by the latitude that has been allowed to the Financial Secretary and me to range way beyond the scope of clause 24. It would therefore be wrong of me to dilate at length now, but I want to respond to the general points that he has just made and then return to the points that relate more narrowly to the clause.
The principle of environmental charges—genuine charges that are not mishandled into pieces of taxation behind which lies a fiscal aim—is one thing. There is much to be said for making polluters pay through charges that are genuinely not abusable into fiscal measures. However, as the Government's actions in respect of the landfill tax clearly show, that is not the position when a Government enter power who intend to use every means of taxation at their disposal and to invent means of taxation not hitherto at their disposal. I again remind the Financial Secretary that he did not reduce national insurance contributions when he increased the landfill tax.
However, whatever else one thinks of the landfill tax, given that it was a tax—the thing to which I object—as opposed to a charge, it was at least fairly clear and transparent. That is a major difference between the landfill tax and the legislation before us now. It is a principle of taxation that it should be simple, clear and transparent, but this measure is not simple, clear or transparent.
§ Mr. Letwin
I would not have done so because it was a tax and because I knew that a Government would come along who would use it as a tax, as the current 87 Government have done. Had it been a charge, I would have supported it. That is a critical difference and one that the current Government have brought to light, even though they have been at pains to obscure it because they do not want to admit that in the climate change levy, the aggregates tax and a series of parallel threatened taxes, such as banking levies and the like, they intend to find new sources of revenue. That is not a reputable proceeding in terms of the environment. If the Government were serious about environmental charges or genuine environmental taxes, they would not have reversed VAT on fuel or produced the moratorium on gas-fired combustion in power stations. The fact is that they have not been an environmentally sensitive Government. On the whole, they have sought means of raising tax where they think that they can get away with doing so. That is the principle to which I object.
§ Mr. Edward Davey
Does the hon. Gentleman agree that it would be possible for the Government to hypothecate all revenues from the tax to a fund or to rebates? They could make it clear in the Bill that they have no intention to raise revenue from the tax.
§ Mr. Letwin
That is an ingenious suggestion, although my hon. Friends and I have not had time to reflect on it. The proposal may have occurred to the hon. Gentleman as an inspiration of the moment. It would involve a sort of Rooker-Wise amendment to environmental taxes, which would turn them by law into crypto-charges. We might be beginning to get somewhere with such a proposal, which could provide some common ground. I do not know whether it will do so, as we need to think about it, but I assure him that the Financial Secretary will not support an amendment that would introduce such a change. It would be more than his job is worth to do so. He would be out of Great George street before he could say "Jack Robinson", or, indeed, "Geoffrey Robinson".
§ Mr. Letwin
Exactly. My hon. Friend is right: the Financial Secretary wants the money, and he wants a lot more of it later, when he wants to claim that he is doing something innocuous in relation to something for which legislation has already been introduced. In this case, it is called the aggregates levy, but there is also the climate change levy and so on. The hon. Member for Kingston and Surbiton (Mr. Davey) is lobbing a huge grenade into the Government's programme. I look forward to debating in Committee a series of amendments such as that which he proposes. In fact, if we put our minds to the proposal, we might spend most of the Committee stage debating it. I think that that would be much better than discussing most of the rest of the Bill.
I apologise for that intrusion on your good will, Mrs. Heald. Having responded to the Financial Secretary's goading, I shall return to his remarks about the clause. I am genuinely perplexed about the register. I did not understand how perplexed I was until I heard his remarks. I do not know why the register is being introduced, and he did not tell us why, although he suggested that it was entirely innocuous. He did not say that a person's inclusion on the register has no impact on 88 whether he is taxed, although that was his implication. If that is genuinely the case, I suggest that the register is a bureaucratic apparatus that should be obliterated.
However, let me deal with the more charitable hypothesis that, despite the Financial Secretary's unguarded remarks, the register has a purpose and is not being introduced merely to create an extra clause. If that is the case, we must speculate on its purpose. I do not know about that, although I take it that the point of including people on a register is to get them into the Weberian grip of bureaucracy. Bureaucracies are about information, and that is what registers provide. Once people are on the register, they are in the hands of the bureaucracy. In other words, one is a datum on the bureaucracy's data sheets. It knows about us. What is the consequence of the bureaucracy's knowing about people? It comes to visit them. It inspects and looks into them. They are part of what it regards as the possibly taxable community.
How does Customs and Excise operate in relation to people who are part of the possibly taxable community? It presumes that those who are on its registers and who enter into its data should be taxed. If they turn out not to be paying tax, it will send out into the highways and byways experienced, powerful-minded individuals who will come to find out why they are not doing so. That is what is worrying me, as I expect the Financial Secretary knows.
§ Mr. Letwin
As a matter of fact, I do not know whether there is a register of income tax payers. If the Financial Secretary's implication is correct, however, he is rather arguing my way. If the point of registers is to tax people, and if registers are generally attached to taxes, his accusation that I was making an elision in supposing that inclusion on the register related to paying tax is false. If he is correct that taxes are generally accompanied by registers, I am right to suggest that inclusion on a register is generally accompanied by taxation. That is the point of being on a register. The point about a person being expected to be taxed is that Customs and Excise will presume that that person should be paying tax. If a person should be paying tax, Customs and Excise will come down like a ton of bricks if he or she is not doing so.
I shall return to Mr. Jones, who is doing his stone cutting and appears to the commissioners to be somebody who intends to do something that might be taxable, poor man, but then turns out not to produce any product that he recognises to be an aggregate. He is not doing anything that he recognises as commercially exploiting a material, but he will be visited by Customs and Excise, which will ask why no tax is being paid. Instead of cutting stone, Mr. Jones will be involved in weeks or months of intensive negotiation with various levels of Customs and Excise. Not least, he will perhaps eventually be involved with the commissioners, who do not even have to respond to him. If they do not do so, they are taken to have judged against him—a point to which we shall return later. The process will be a huge intrusion.
89 If none of that is true, and the Government do not intend to create circumstances in which there is a presumption of guilt—an assumption that people should be taxable once they are on the register—I do not see the need for the register. The Financial Secretary has not explained that need, unless the register is an attempt to create a presumption that somebody who is included on it should be paying the tax, so that the bureaucracy can visit, inspect and pursue. Of course, that is fine with regard to people who are genuinely liable for tax because they are carrying out the activities in question. However, introducing arrangements for somebody who merely appears to the commissioners to intend to carry out such activities seems part of a slippery slope towards an unintended tyranny.
§ Mr. Timms
I must respond to the hon. Gentleman's remarks, even though they were expressed in a somewhat amusing tone.
Of course, somebody who is included on the register can be issued with an assessment for tax, if that person is making taxable supplies. That is the purpose of the register. If the individual does not need to be registered, he can inform us of that fact. If Customs and Excise is satisfied that he is not commercially exploiting aggregates and does not intend to do so, he will be deregistered. That is extremely straightforward and conventional, and I think that the hon. Gentleman's concerns about slippery slopes to tyranny can be set to one side.
§ Question put and agreed to.
§ Clause 24 ordered to stand part of the Bill.