SUPPLY AND APPROPRIATION (MAIN ESTIMATES) (NO. 3) BILL

House of Commons, 3 July 2019.

Patrick Grady (Scottish National Party, Glasgow North)

On a point of order, Madam Deputy Speaker. In the time it took the Financial Secretary to the Treasury to pour himself a glass of water, the House authorised the Supply and Appropriation (Main Estimates) (No. 3) Bill, which, among other things, includes

“authorisation for the use of resources for the year ending with 31 March 2020”

to be

“increased by £348,553,768,000.”

It goes on to authorise all the rest of the expenditure of similarly great magnitudes that the Government expect to use over the next couple of years, without any possibility of debate or amendment, which is not what Members from the Scottish National party were led to believe when the English votes for English laws process was introduced. We were told then that the estimates process would be how we would scrutinise the Barnett consequentials of estimates.

The Bill represents the supply element of the confidence and supply arrangement that one of the other parties in the House has with the Government—it is good to see that at least a couple of them are here, which is more than there were the last time the supply estimates went through the House. Will you advise me, Madam Deputy Speaker, as to whether any other mechanisms are available to groups of Members to secure £1.5 billion of funding for their constituencies without any of them really having to show up very often?

Eleanor Laing (Conservative, Epping Forest)

I thank the hon. Gentleman for his point of order and understand the point that he has made. I will separate his party political points, which of course are not a matter for the Chair, from his procedural points, which are partially a matter for the Chair.

I advise the hon. Gentleman that although he and his colleagues might not have had the opportunity to examine every line of proposed expenditure, we had two days of debate—yesterday and the day before—on some aspects of the matters in the Bill that the House has just passed. The hon. Gentleman makes his point well, and I fully understand his criticism of the procedure. It is not for me to agree or disagree with him, but I am quite sure that the Procedure Committee and others will take seriously the points that he has made.

Income Tax

Jesse Norman (Conservative, Hereford and South Herefordshire)

I beg to move,

That the draft Capital Allowances (Structures and Buildings Allowances) Regulations 2019, which were laid before this House on 17 June, be approved.

The instrument before the House gives effect to the amendments to several tax Acts, principal among them the Capital Allowances Act 2001. The Government are determined to ensure that the UK tax system supports business investment and jobs. At 19%, the UK has already reduced its corporation tax rate to the lowest in the G20, and it is scheduled to fall still further to 17% in 2020. The Government recognise the importance of providing tax reliefs for genuine business costs, which is why we are taking steps to increase the overall competitiveness of the capital allowances regime.

At the autumn Budget, we announced an increase in the annual investment allowance for plant and machinery to £1 million per annum for two years, meaning that businesses will be able to deduct five times more qualifying plant and machinery expenditure in the year in which they make the investment. However, the UK is currently the only G7 economy that offers no capital allowances on investments in structures and buildings. That means there are no allowances on critical investments in bridges, roads or tunnels. It also means no allowances on investments in shops, offices or factories.

In the 2018 Budget, the Government set out to rectify the gap in the capital allowances regime by providing relief to businesses on qualifying expenditure on new non-residential structures and buildings. The Finance Act 2019 gave power to that effect, and I am now pleased to introduce the draft statutory instrument necessary to enact the change. It was important to follow the legislative process to provide taxpayers with certainty that the allowance will come into force as soon as possible, to minimise the risk of deferred investment and to allow the Government to consult extensively on this important measure, as we have done.

At the Budget, the Government published a detailed technical note for consultation that outlined the key features of the new allowance. Businesses that invest in new builds or renovations on or after 29 October 2018 will be able to claim tax relief at 2% a year on eligible costs, over a 50-year period. Following the first round of consultation, officials met scores of different companies, representative bodies and individuals from throughout the country. At the spring statement 2019, the Government published detailed draft legislation and invited further comments from stakeholders.

I am pleased to report that the vast majority of stakeholders welcomed the structures and buildings allowance. I extend my thanks to the many individuals and organisations that participated in both rounds of consultation, either in person or through written representations. Stakeholder responses have been a considerable help in the shaping of the new allowance, leading to amendments, including those relating to short-term leaseholds, eligible pre-trading costs and periods of disuse.

As I have said, the structures and buildings allowance has been designed to enable businesses to claim tax relief on the costs of new non-residential structures and buildings. This means that qualifying expenditure on new builds or renovations for which all the contracts for the physical construction works were entered into on or after 29 October 2018 will be eligible for relief. Relief will be available for any business that fulfils two conditions: first, that it owns a qualifying asset, either through direct building or by acquiring one from a developer; and secondly, that it uses the building for a qualifying activity for which the business is chargeable for UK tax.

Qualifying persons will be able to claim tax relief at 2% a year on eligible construction costs, including renovations. The allowance will apply across all sectors and sizes of UK trade, benefiting business owners, workers and the wider economy. The relief will be limited to the costs of the physical construction of the structure or building, and will not apply to the costs of acquiring the underlying land, rights over land, or planning permissions.

In summary, the regulations will enact important improvements to our capital allowances regime, in line with the power this House approved in the Finance Act 2019. Since 29 October 2018, business investments in new, and renovations of old, structures and buildings have been accompanied by an expectation of this allowance of 2% relief per annum against income or corporation tax bills. It is now important for the House to honour the commitment made in Finance Act 2019 by enacting the regulations, thereby bringing them into force in line with their commencement provisions. I therefore commend the regulations to the House.

Peter Dowd (Labour, Bootle)

The Minister said that he got support from businesses for tax relief. Well, that is not a surprise: when people are offered tax reliefs, they will accept them because it is cash in their pocket.

In a document published on 5 March last year, the Institute for Fiscal Studies said that our current tax system

“does not consistently deduct the cost of investment meaning that some investments are discouraged, some are incentivised and some are unaffected by the tax system.”

It went on to say that there should be

“a clear policy justification”,

which should be focused, and that we should ensure

“that the benefits outweigh the costs.”

The document also said:

“Too many reliefs have weak or poorly articulated policy aims”,

and that

“digging into the details and evaluating how each relief stacks up against a clearly stated tax design”

is important. It continued:

“The bar for introducing any new relief should be high.”

On the very same night, the Chartered Institute of Taxation and the Institute for Fiscal Studies had a debate about business tax reliefs, which asked whether they were

“corporate welfare or essential elements of the tax system”.

The question is, do we think they are an essential element of the tax system? In the debate on the Finance Bill, we raised these matters, but we were not able in any way to amend the law, which is regrettable. However, we did raise, in a sense, the whole question of tax reliefs, and it is a desperate shame to find ourselves here again debating the introduction of what amounts to another corporate tax relief, when so little has been done to sort out the scope of the scores of tax reliefs already in operation.

At the last count, the Government were responsible for managing 115 principal tax reliefs totalling £430 billion, as well as 80 minor tax reliefs totalling an estimated £690 million. However, alongside those, there are up to 235 reliefs in operation for which we have no cost data at all. I repeat: we are forgoing revenue on 235 tax reliefs, but Her Majesty’s Revenue and Customs does not count the cost. I find that quite remarkable. I cannot think of a single other policy area where the Treasury would be uninterested in Government expenditure.

Ministers tell us that the cost of these reliefs is negligible so there is no point making efforts to manage them more effectively. I do not believe that that holds water, especially when we consider that the Government regularly deprive citizens of small but essential sums of social security for the crime of being perhaps five minutes late to the jobcentre. Perhaps the Minister can explain why the Government can give away millions to large companies without counting the cost, while stripping the poorest in our society of the pounds and pence they need to survive. I ask that especially in the light of an interesting article by the Minister in The Sunday Times some weeks ago about our being one nation. It would be interesting to hear him comment on that. I agree with him that we have to bring the nation back together again, and that is an important part of this issue. I would also like to know what efforts the Government have made to improve the management of tax reliefs at HMRC. Will the Minister now commit to a moratorium on introducing further tax reliefs, unless the annual cost data on them can be collected and published by HMRC?

Turning to the measure before the House, it will not surprise anyone here that the pile of opaque and unaccountable tax reliefs is being added to, with yet another tax relief for businesses that does not necessarily fit the robust criteria set by the Institute for Fiscal Studies—criteria that this House should set in relation to the introduction of tax reliefs.

Kevin Hollinrake (Conservative, Thirsk and Malton)

The hon. Gentleman was talking about the cost of tax reliefs. Has he worked out the cost to UK business and investment of imposing a policy that would requisition 10% of businesses that have more than 250 employees? I understand that that is Labour party policy.

Peter Dowd (Labour, Bootle)

I do not think it is a question of requisitioning; it is about a different approach and taking a different look at engaging workers in our economy. That is it—it is as simple as that. I appreciate and completely accept that the hon. Gentleman does not accept the concept, but that does not mean that the concept is wrong.

The Government boast about their corporation tax giveaways, but it is clear that even those billions, stripped from our public services, are not enough to satisfy their intentions in relation to corporate welfare. Furthermore, it seems that, in their rush to hand out giveaways, they have given no consideration to how this measure will fit into the already complex and convoluted system of capital allowances. It is not necessarily a question of saying whether I agree or disagree with these things; it is a question of saying we have a convoluted system—and it is incredibly complex. We do not have any review mechanisms of these reliefs, and we do not have any sunset clauses on them—in fact, we have debated that in Committee in the past, but the Government seem to have no response.

This new measure on structures and buildings allowances will, as the Minister said, provide relief for qualifying expenditure on new non-residential structures and buildings incurred on or after 29 October 2018 on a 2% per annum, straight-line basis. At the Finance Bill earlier this year, the Government blocked our attempts to require Ministers to publish details of the likely take-up of this new allowance across different-sized businesses.

Despite those concerns, the secondary legislation before us remains vague, with important definitions that would assist in addressing areas of ambiguity delayed and deferred to guidance. We have had lots of this deferral to guidance, secondary legislation and other things—potentially even tertiary legislation in due course. It really is not good enough. We need transparency and openness; we do not need to be told, “This is going to happen, but the detail may come a little later on.” Similarly, the decision by Ministers to delay finalising the details of this new allowance until June, when the final stages of the Finance Bill took place in January, is yet further evidence of the continued environment of uncertainty that business is forced to operate in under this Government.

The Chartered Institute of Taxation rightly criticised the Government over these new regulations, stating at the time of the 2018 Budget that

“it is neither sensible nor responsible for the government to introduce reliefs into the tax system at a time before they have consulted upon the scope and application of the relief or fully considered, and are therefore able to legislate for, the details of the relief.”

It concluded that these regulations will only complicate matters, particularly given that plant and machinery are excluded. That means that taxpayers are still required to identify the plant and machinery in buildings, with the same grey area that currently exists between buildings, fixtures, plant and machinery. The administration of this new allowance will be substantial and burdensome for businesses, flying in the face of the Government’s initial promise to simplify the tax system.

The demotion of much of the detail of this allowance to secondary legislation remains of great concern to the Opposition, particularly given that capital allowances are yet another means of extending tax breaks to large businesses, many of which do not necessarily need the relief. The reality is that many small and medium-sized businesses that desperately need support from the Government will struggle to access this relief without incurring substantial costs as a result of hiring tax experts to guide them through its complexities.

Rather than continuing this piecemeal approach, which seems only to confuse and deter businesses in need, Labour remains committed to carrying out a review of tax reliefs once in government to evaluate individual reliefs against their effectiveness and value for money. It seems that, again, this opaque Government will not commit either to a proper review of the measure before us or to a wider review of the full plethora of their corporate relief giveaways.

This is no way to run the country. Once again, the devil will be in the detail of the guidance that HMRC publishes, particularly when it comes to what constitutes qualifying expenditure, the definitions of terms such as “dwelling-house” and “mixed-use building”, and clarification of the treatment of successive leases and the new flexible rules in instances where expenditure is incurred after a building comes into use.

Although the Opposition remain sceptical about the introduction of yet another poorly-considered allowance on top of the 1,200 allowances that already exist—many of which have existed for decades without review—we will not be voting against the secondary legislation today. Instead, we will wait to scrutinise the guidance when HMRC publishes it later this year. [Interruption.] I can hear Ministers sniggering. A responsible Opposition will vote against something when they disagree with it and will support something when they agree with it. When we want to consider the detail, implications and other information that comes from the Government, we will hold back. That is what a responsible Opposition should do—not automatically vote against or support things willy-nilly—and that is what we are trying to do, because we are being responsible. Ministers can snigger at that responsible approach if they want to, but we will continue to be responsible, and we will continue to oppose this Government as and when we feel it is necessary to do so.

Kirsty Blackman (Scottish National Party, Aberdeen North)

Let me begin by thanking the Association of Taxation Technicians and the Chartered Institute of Taxation, which have provided me with some information so that I can help to scrutinise this incredibly technical piece of legislation.

I would first like to raise a couple of issues. The tax information and impact note on these regulations explicitly says that there is

“no impact on civil society”.

This is directly contradicted in the explanatory memorandum, paragraph 12.1 of which says that charitable organisations will be required to keep more documentation and to gather together that documentation, which they currently do not have to do. I would suggest that there is a direct impact on civil society, so the tax impact and information note should be updated to reflect that.

I have the same concerns as the shadow Minister, the hon. Member for Bootle (Peter Dowd), on the decision to implement the relief in this way. In June 2018, the Office of Tax Simplification published a report called, “Accounting depreciation or capital allowances? Simplifying tax relief for tangible fixed assets”. It is hugely riveting, I promise. The report said that the tax system should look to reduce, or at least not increase, the different types of expenditure in classes of assets that have to be identified solely for tax purposes. Unfortunately, the way in which the Government have chosen to do this increases the number of classes of assets that have to be identified purely for tax purposes. As this directly contradicts an OTS recommendation, it would be useful if the Minister explained why the Government have chosen to do it this way, and not to change the current system of capital allowances to include this measure, perhaps along with plant and machinery, as this is already a very difficult distinction for people to make. With the lack of published guidance, I fear that the distinction between plant and machinery, and fixed assets meaning the building itself, will remain difficult to assess. I have concerns about that.

The other issue is about the timing of this legislation. It was announced as something that would happen immediately as part of the Budget on 29 October 2018. However, we are now considering these regulations in July, without the publication of the guidance. We do not have the guidance to be able to work out whether the way in which the measures are being implemented makes sense. And this is not just about parliamentarians’ scrutiny. Businesses and organisations that have operated under this new system since 29 October have had to keep all the relevant documentation since then without knowing what the relevant documentation is and without knowing the exact classes of assets they can claim against under this tax relief.

Given the huge amount of uncertainty businesses are already experiencing because of Brexit, it is incredibly concerning that they must deal with this additional uncertainty. I get what the Government are trying to do; they are trying to make it a more attractive proposition to create and renovate properties. I understand that logic, but they have actually implemented this measure in a cack-handed way that has increased uncertainty this year, and certainly until we get the guidance and see how things are beginning to work.

Concerns have been raised with me about the fact that the Government have chosen not to include prisons and student housing, for example, in this legislation because they fall under a residential remit, rather than under the remit of a commercial property. I understand why they have chosen to do this, but it seems to be a missed opportunity. We cannot class prisons and student accommodation in the same kind of residential category as we would class a dwelling-house, and there may have been an opportunity—particularly given the pressing need for changes in the prison system—to include some flexibility. I am not saying that this is what the Government definitely should have done, but I do not think they considered it enough; nor did they put forward an argument why they did not do it in the documentation that they have published.

The Treasury has said that this will cost £585 million in 2023-24—that that would be the Exchequer impact. Neither the tax information and impact notes, nor any of the other documentation that I can find—perhaps it was more explicitly mentioned in the Budget and I did not catch it—say what is the expected economic impact in terms of an increase in GDP as a result of these changes, which would presumably result in a commensurate increase in the tax that the Exchequer receives. It would be useful to know whether the Government think that this tax relief is value for money and whether it will generate more tax revenue for the economy than it will cost.

The Government have told us that it will cost £17.7 million for new HMRC systems to be put in to administrate this tax, but they have not been clear about the economic benefit that they see coming out of it. That is partly, I think, because of what HMRC said in the tax information document:

“Since Budget 2018, HMRC has attempted to gather further information on the number of those”

businesses

“likely to claim the SBA.”

However, it has not been able to do so. I do not understand how the Government can tell us that this tax relief will have a positive economic benefit if they cannot even tell us which types and numbers of businesses are likely to claim it. It would be useful to know whether the Government have any firmer details on that since the note was published and any information on whether they think that there will be an economic benefit.

My next point, which I am sure the Minister will get very used to me raising during our future deliberations on SIs and in finance debates, is on when the Government intend to review this tax relief. This is a massive tax relief in terms of the fiscal impact that it will have. The Government are saying, I assume, that it will have a positive benefit in terms of its economic impact. I would like to know when they will review it to see whether it is working as intended, because there is no point in having something that will not work as intended. I am sure the Minister will say that there will be a review in three to five years’ time that will be sent to the Treasury Committee and that I just have to look at the Government’s website at some unspecified point during that period. However, can he provide a bit more detail on the exact timescales for a review of this tax relief, given that it is so significant in nature, so that we parliamentarians can scrutinise whether the Government have actually achieved what they set out to do?

My last point is about the guidance, which I have already mentioned. When the guidance is published, will the Minister be sure to ask somebody in his team to ensure that Labour Front Benchers and I have access to it and are made aware of where it is, because it may be published in some place on the HMRC website that we, as people who do not run businesses that claim capital allowances, will not regularly check? It would be incredibly useful if he committed to fulfilling that small ask as well as answering many of my questions.

Jesse Norman (Conservative, Hereford and South Herefordshire)

I am grateful to both Opposition Front Benchers for their comments, which were quite wide-ranging. I will try, if I may, to keep my responses reasonably short.

The hon. Member for Bootle (Peter Dowd) began with a very wide-ranging critique of reliefs as such. He then cited the Institute for Fiscal Studies on the reliefs in general that have built up in the tax system over the past several decades. However, in trying to criticise the Government on the grounds that the system is not consistently applied across different reliefs, he does not reflect on the fact that this measure is designed to correct an anomaly. We have an anomaly in our system in that we do not offer reliefs on structures and buildings. We are therefore removing a disincentive to investment and levelling the playing field in a way that has a clear policy justification.

The hon. Gentleman said that there is an absence of transparency, but there were 18 weeks of consultation in two phases on both the principle and detail, so it is hardly clear that that is true. He also implied that a Labour Government would remove tax reliefs. If that is true, I would welcome him indicating to the House which reliefs a Labour Government would propose to remove or abolish.

Peter Dowd (Labour, Bootle)

The Minister ought not to put words in my mouth. I exhort him to read what I said. Unlike the leadership candidates, who are spending money left, right and centre, the Opposition are responsible. The point I was trying to make is that it is important to review reliefs. There are 1,200 of them. Many other countries review reliefs—there is nothing particularly radical about that, and I exhort the Government to do so.

Jesse Norman (Conservative, Hereford and South Herefordshire)

It is hard to make swingeing criticism of the idea of reliefs and then not indicate any that a Labour Government would propose to abolish. It raises the question whether the Labour party is serious about this. The hon. Gentleman described these reliefs as “corporate welfare” and giving away millions of pounds to large companies. All companies benefit that have qualifying investments and are subject to UK taxation in the way indicated; it is not just larger companies. Many of the reliefs he describes are negligible and therefore should not necessarily be the target of extensive review. He talks about the reduction in corporation tax as though it is a bad idea but neglects the fact that significantly more corporation tax has been raised following these reductions.

Anneliese Dodds (Labour/Co-operative, Oxford East)

I am grateful to the Minister for being willing to give way. I am sure he is aware of the evidence repeated over and again by the bodies that have looked into this that the reason for increased corporation tax take was not the reduced rate of corporation tax—rather, it related to the return to profitability of banks and so forth. It was not related to the reduction in rate, and just about every authoritative study that has looked at this has suggested that.

Jesse Norman (Conservative, Hereford and South Herefordshire)

Those companies’ return to profitability was the result of proper, prudent financial management. I remind the hon. Lady that in the specific case of the financial sector, the bank levy has taken billions of pounds a year more from the banks than the Labour tax that it replaced. I do not think her view has credibility.

The hon. Member for Bootle criticised the timetable, but it is designed specifically to keep uncertainty to a minimum. Far from the suggestion that it would create more uncertainty, the point of my saying that qualifying expenditure on new builds or renovations for which all contracts for the physical construction works were entered into on or before 29 October 2019 will be eligible for relief is precisely to give very clear direction to future investment. I do not agree with many of the points that he made.

Kevin Hollinrake (Conservative, Thirsk and Malton)

Does the Minister think that the hon. Member for Bootle understands how reliefs work? He said that it was about giving away millions of pounds to corporations. Actually, if a corporation invests on the back of a relief, it still costs that corporation money; it just makes the investment slightly more attractive.

Jesse Norman (Conservative, Hereford and South Herefordshire)

My hon. Friend is right. The point of the relief we are giving through the structures and buildings allowance is precisely to level the playing field and to enable and encourage more business investment.

The hon. Members for Bootle and for Aberdeen North (Kirsty Blackman) asked about reviewing or monitoring. As they will be aware, the Treasury and HMRC continuously monitor tax reliefs according to the level of risk they pose, and they publish annual statistics on tax reliefs, including cost estimates where they are available.

I will now turn to the other points made by the hon. Lady. She says charitable organisations will be heavily affected. The statement that the acquirers of structures or buildings are asked to fill out consists of four factual pieces of information: first, what is the asset; secondly, when was it built; thirdly, when did it come into use; and, lastly, how much did it originally cost? That is not a heavy burden on any institution.

Kirsty Blackman (Scottish National Party, Aberdeen North)

To be fair, I did not say it was a “heavy” burden. The tax information and impact note says that there will be

“no impact on civil society”.

That is not true because there will be an effect on civil society. It may be a minor effect, but there will be one, and I was just asking for the tax information and impact note to be updated to reflect that.

Jesse Norman (Conservative, Hereford and South Herefordshire)

I perfectly understand, and it is a verbal point. This is subject to a de minimis factor: any Government action will have some minuscule effect on many people, but that does not mean that it is significant enough to register.

The hon. Lady raised a question about process, which I have already addressed. She raised a point about the Office of Tax Simplification. The difficulty with the suggestion it has made is that, if the boundary were removed between buildings that get relief at 2% and plant, fixtures and so on that get relief at 6%, the result would have to be a combined rate of relief somewhere in-between. The effect for many businesses with long-term investments in plant would be that they lost out through reduced relief or delayed relief if the rate went down. There would be a significant number of losers and a negative impact on business investment, when we are trying to have the exact opposite effect.

The hon. Lady raises the issue of student housing. This measure is of course specifically aimed away from residential property and other buildings that function as dwellings and towards commercial properties. For that reason, student housing is not included, but hotels and care homes will qualify because the underlying businesses are service providers whose premises are being used in a trade.

Kirsty Blackman (Scottish National Party, Aberdeen North)

Much of the student housing in my constituency works almost as serviced apartments. They are apartments with one shared kitchen and a number of flats, and they are much more like a hotel or care home in that they are run as businesses and students are there only for a short period. Are those kinds of serviced dwellings for students included or are they not included?

Jesse Norman (Conservative, Hereford and South Herefordshire)

The answer is that they are not. The hon. Lady is welcome to write to me with specific details of the student housing in her constituency. Of course, many students live in housing that universities would regard as equivalent to hotel accommodation of years ago. However, the general rule is that it is not included, but that hotels and care homes—where there is such trade, as I have described—are included. I think that is a tolerably clear line.

The final point the hon. Lady raised was about the impact on GDP. The independent Office for Budget Responsibility has estimated that the capital allowances package announced at the Budget would increase business investment by 0.4%, so that number has been calculated and put into the public domain.

Peter Dowd (Labour, Bootle)

The Minister is talking about numbers and putting the record straight. He referred earlier to the bank levy and bank surcharging. In 2017-18, they raised £2.6 billion and £1.9 billion, totalling £4.5 billion, and in 2023-24, they will raise £1.1 billion and £2.1 billion, totalling £3.2 billion, so they will raise considerably less than they raise now, not the billions more that the Minister suggests they will raise.

Jesse Norman (Conservative, Hereford and South Herefordshire)

If I may, I will just correct the record. I said that they have raised billions more—and they have raised billions more—than the pre-existing Labour tax. That is a fact of the financial environment that surrounds banks, just as this is a new fact for the financial environment that surrounds corporations more generally. And on that point, I will sit down.

Question put and agreed to.

Dangerous Drugs

Nick Hurd (Conservative, Ruislip, Northwood and Pinner)

I beg to move,

That the draft Misuse of Drugs Act 1971 (Amendment) Order 2019, which was laid before this House on 4 June, be approved.

I am sure that Members of the House will have noticed that the amendment made by the draft order is based on scientific and technical detail and is therefore distinct from other amendments to the Misuse of Drugs Act 1971 that have recently been brought forward for debate. In that context, I place on record my thanks to the Advisory Council on the Misuse of Drugs for its expert advice on the matter and for its continued work, which has informed the draft order.

The purpose of the draft order is to amend schedule 2 to the Misuse of Drugs Act by reducing the scope of the generic definition of the compounds referred to as the third generation of synthetic cannabinoids. Given the concerns that have been expressed in other debates on the subject, I should clarify that it will not repeal the generic definition of the compounds commonly known as Spice and Mamba, which will remain subject to control. This measure follows the advisory council’s recommendation, which was published on 22 December 2017. I hope that it will be helpful to hon. Members if I explain the background to the recent control on these drugs and why the Government are making this amendment.

Julian Knight (Conservative, Solihull)

I am relieved that the Minister specifically mentions Spice; having worked for a short time in the Ministry of Justice, I have seen exactly the damage that comes from that drug. Will he confirm that this statutory instrument is in effect simply a tidying-up exercise—a technical change—and will not in any way mean a looser regime of drug licence management?

Nick Hurd (Conservative, Ruislip, Northwood and Pinner)

Like my hon. Friend, I have seen the results of Spice and Mamba directly while out on patrol on the streets of Newcastle. We have had passionate debates in this place about those drugs—particularly with my hon. Friends the Members for Mansfield (Ben Bradley) and for Torbay (Kevin Foster), who are passionate about their impact on town centres. I assure my hon. Friend the Member for Solihull (Julian Knight) and other colleagues that the draft order is not in any way a relaxation of controls; it is simply a response to representations made by the scientific community about the need to revisit our regulations because of some consequences that were not intended when they were originally drafted.

Pete Wishart (Scottish National Party, Perth and North Perthshire)

It is really good to hear the Government accepting solid evidence when it comes to drugs issues, because they do not have a very good record in that respect. In Scotland, we have had 1,000 drug deaths in the past year. The Select Committee on Scottish Affairs is doing an inquiry into the reasons behind that, and one thing that we have found is that the Misuse of Drugs Act gets in the way of treatment and recovery and is an impediment to dealing with the problem, yet the Home Office will not send a Minister to our inquiry. Will the Minister confirm—today, now—that a Home Office Minister will turn up, give evidence and defend the Government’s approach to drug use?

Nick Hurd (Conservative, Ruislip, Northwood and Pinner)

I am more than happy to speak to the hon. Gentleman offline about this. I am not aware of the underlying issue, but I certainly agree with him about the absolute need to proceed in this complex and extremely sensitive area on the basis of evidence. I am more than happy to have a conversation with him outside the Chamber about the Scottish question and situation, because I am not aware of that problem.

Perhaps it would be helpful if I gave some background to the recent control on these drugs and why the Government are making this amendment. We rely on independent experts, the ACMD, which first published advice in 2014 on the third generation of synthetic cannabinoids—a group of compounds, commonly referred to as Spice and Mamba, that mimic the effects of cannabis. The advice recommended that these compounds be captured by way of a generic definition as Class B drugs under the Misuse of Drugs Act because of their harms and widespread availability. This followed the control of the first generation of synthetic cannabinoids in 2009 and of the second generation in 2013.

The ACMD also recommended that the compounds be placed in schedule 1 to the Misuse of Drugs Regulations 2001, because it could not confirm any known medicinal uses at the time. Placing these compounds in schedule 1 reflects the fact that they have little or no known medicinal or therapeutic benefits in the UK, and will mean that they can be legally accessed only with a Home Office licence, which is generally issued for research or industrial purposes.

Following the ACMD’s recommendations, the changes came into effect on 14 December 2016, but shortly after their implementation, the ACMD and the Home Office were informed by representatives of the research community that the breadth of the definition meant that it captured a large number of research compounds, many of which were reported not to be synthetic cannabinoids. As a result of the broad, generic definition, research institutions needed to obtain schedule 1 licences when they may not otherwise have needed them.

The licensing process is in place to ensure a minimised risk of misuse and diversion of, and harm from, controlled drugs. However, as I am sure the House will agree, we would not wish to place substances under control and make them subject to the licensing requirements where there is no need to do so. It is therefore important that we amend the definition, which has created an additional formal regulatory burden for the research industry relating to compounds that were never intended to be controlled. To remedy this, the ACMD made a further recommendation in December 2017 that the scope of the generic definition be reduced.

The order amends the Misuse of Drugs Act 1971 to reduce the scope of the generic definition of the third generation of synthetic cannabinoids, so that while those compounds that have been found to cause harm are captured by it, fewer compounds are unintentionally captured. Owing to the continued harms posed by the third generation of synthetic cannabinoids, the order does not repeal the generic definition. I repeat for clarity that such compounds as those that go by the street name of Spice and Mamba will continue to be caught by the generic definition.

The order, if accepted and made, will come into force on 15 November. A further statutory instrument will be introduced via the negative procedure to make the necessary parallel amendments to the generic definition under schedule 1 of the Misuse of Drugs Regulations 2001 and in the Misuse of Drugs (Designation) (England, Wales and Scotland) Order 2015, so that those compounds unintentionally captured will no longer require a Home Office licence for the conduct of research, as they will no longer be controlled.

I hope that I have made the case to the House for amending the generic definition of the third generation of synthetic cannabinoids so that it no longer covers a number of compounds that were unintentionally controlled. I commend the order to the Committee.

Carolyn Harris (Labour, Swansea East)

We will not oppose this statutory instrument. In fact, we welcome the proposed amendment to the Misuse of Drugs Act 1971. Revising the generic definition of synthetic cannabinoids will mean that compounds never intended to be controlled will no longer be controlled, while those most likely to be misused and cause harm will be. That said, we must ensure that neither this change to drug policy nor any other adds to the problems that we already face in controlling the use of drugs.

The Government’s approach to drugs since they took office in 2010 has been ideological and plagued by irresponsible cuts. The UK now has the highest recorded level of mortality from drugs misuse since records began. Under this Government, the UK has become the drug overdose capital of Europe.

There is nothing more important than preserving the life of our citizens, but the current woeful approach to drugs fails to do that, so it must be time to consider different approaches, based on what would most effectively reduce harm, such as overdose prevention units, commonly known as drug consumption rooms—places that take people off the streets, and provide them with a safe environment, clean needles and somewhere that they can engage with treatment to combat their addiction. Labour supports piloting such schemes.

There is also the use of cannabis oil for medical purposes. Last October, there appeared to a breakthrough on this, when the Home Office brought in new legislation to allow expert doctors to issue prescriptions for cannabis-based medicines, if they believe that such treatment could benefit their patient. However, as we have learned from recent high-profile cases, there appears to be some confusion around the Home Office guidelines when it comes to bringing the substance into the UK. We need assurances from the Government that any changes they are making to drugs policy will be fully implemented, clear in how they will be delivered and effective immediately.

Opposition Members recognise that there needs to be a complete shift of emphasis, understanding and effectiveness in the UK drugs policy and we would be looking to establish a suitable forum, such as a royal or a parliamentary commission, to identify what works and what we need to do to make our drugs policy efficient. So, although we support the order and welcome the changes as positive advances in drugs policy, there is still a long way to go in the bigger picture of drug control and legislation.

Gavin Newlands (Scottish National Party, Paisley and Renfrewshire North)

The SNP also supports the order before us for many reasons, many of which are contained in the fantastic report from the Health and Social Care Committee, “Drugs policy: medicinal cannabis”, published this morning. We support it not least because we believe that, under the current regime, the potential exists for research and investigation into medicinal cannabinoids to be hindered, and in some cases blocked completely.

All hon. Members will have had constituents contact them about medicinal cannabis and the potential positive impact they feel it would have on them or their families in the face of sometimes horrendous medical conditions. I know that there are no simple answers to many of the questions facing the authorities and the Government, and that opinions in this place and throughout society are varied and sometimes conflicting. However, surely it is a primary duty of Government and the state to ensure the best possible health and welfare of its citizens, and I hope that we can all agree that those with chronic health conditions, sometimes causing unimaginable pain and suffering, should not be denied the potential fruits of research into cannabinoids simply because the legislation has not kept pace with scientific progress. As the Advisory Council on the Misuse of Drugs made clear in its initial letter to the Minister at the end of 2017, when referring to the current statutory position:

“There are potential delays to clinical research as compounds within the scope of the MDR which move into trials in humans need to obtain appropriate licences and put practical arrangements in place for clinical trial sites”.

It is also important to note that the council’s recommendations, which have led to the order we are discussing today, were based on wide consultation with those directly involved in and managing clinical research, including the British Pharmacological Society, the Medical Research Council and the Royal Society of Chemistry. So we welcome the prospect of such trials and research becoming easier and more simplified. It is only through the scientific method of hypothesis, testing and analysis that our pharmacologists—that is easy for me to say, Mr Deputy Speaker—and clinicians can make the discoveries necessary to develop and improve on the treatment and medication available to those in desperate need. That is the story of all modern medicine in recent history, and I am glad that the order will give the scientific community some of the tools and legal protections needed in that regard.

We now know of some of the problems encountered by those attempting to access medicinal cannabis since the relaxation of legislation last year, and hope that those who have been stymied in their attempts to secure medication and treatments for their loved ones will see the changes in policy that we are making today as progress that they themselves have driven. It is disappointing, however, that the Minister, in his reply to the ACMD earlier this year, did not take the opportunity to take on board some of the council’s other recommendations that it feels would help scientific research and, in the long run, potentially help more people in need of improved and transformative medication. I understand the reasons that the Minister gave in his letter, but I would ask that he give the council’s recommendations further consideration, coming as they are from a body not known for proposing such changes in law lightly.

I would be failing if I were not to draw comparisons between the broadly sensible, pragmatic approach taken by the UK Government in this instance, albeit slow, and their head-in-the-sand attitude to the cross-party consensus —which we have just heard from the Labour Front Bench—in Glasgow for progress on drug treatment facilities in that city. As my hon. Friend the Member for Perth and North Perthshire (Pete Wishart) highlighted, the west of Scotland has an appalling level of illegal drug abuse and addiction and a high number of deaths, and the Home Office’s refusal to allow the health authorities and third-sector organisations in Glasgow to try to alleviate some of that suffering is in marked contrast to the spirit in which we are discussing the order before us.

Not so long ago, this Government had set their face against even entertaining the idea of medicinal cannabis, yet here we are today. In that spirit, I implore the Minister and his Government to think again on safe drug consumption rooms. We should be in the business of saving lives, which is exactly what that approach could do. We must give our pharmacologists and scientists every advantage as they seek to discover new treatments and medications, but, more importantly, we must alleviate the suffering of those, such as Alfie Dingley and Billy Caldwell, who have waited too long. We must all get our collective finger out in this place and improve the legislation.

We also owe it to the families, many of whom feel forced to smuggle in this life- changing treatment for their children. I pay tribute to the hon. Member for Gower (Tonia Antoniazzi), who is not in her place, who recently travelled over to the Netherlands with Emma Appleby to secure the medicine required for her epileptic daughter, Teagan. The issues they faced, with Border Force initially confiscating the medicine amid much confusion, highlighted not only the inconsistency in the law, but that the law is not fit for purpose. The families are also forced to spend a lot of money, and often to fundraise, to travel overseas and secure medicine for their children. This is not right. We welcome the SI as a step in the right direction, therefore, but in doing so we urge the Government to do all they can to ensure that this process is robust but as quick as possible.

Norman Lamb (Liberal Democrat, North Norfolk)

I join others in welcoming this statutory instrument, but I ask the Minister why it has taken so long. The recommendation from the Advisory Council on the Misuse of Drugs was made in December 2017. Why has it taken more than 18 months to get to this point? Given the changes being made to facilitate research, for goodness’ sake, would it not have made sense to act immediately on its advice, rather than delaying for so long?

I urge the Government, despite their inclination, to go further and embark on a process that focuses on evidence, including the evidence of harm. Does the Minister think that drugs policy should be based strictly on evidence of how we best reduce harm? If he accepts that premise, he will accept the need for significant further reform.

Picking up on the point made by the hon. Member for Perth and North Perthshire (Pete Wishart), I urge the Minister to appear before the Scottish Affairs Committee. There is a danger that if Ministers refuse to attend Select Committees it will send out the most appalling signal to anyone else tempted not to respond to a Select Committee request to give evidence. This is such an important matter. The Scottish Government, to give them credit, want to trial new methods. Consumption rooms make enormous sense. There is evidence that we could significantly reduce the number of deaths from dangerous drug use through that sort of approach. It is scandalous that the Government are standing in the way of the trial in Glasgow of that much safer approach—standing in the way of good evidence-based policy making.

If the Minister accepts that we should be guided by the evidence of what works best to reduce harm, he would inevitably explore what they have done in Canada by ending the ludicrous prohibition on cannabis, which has brought about the most appalling side effects. So many young people are being driven into crime, too often ending up with criminal records, and being confronted by violence in the poorest communities in our country. The extent to which young teenagers from the most disadvantaged backgrounds are used by criminal networks to sell these drugs and are putting themselves at risk of extreme violence is shocking.

If the Government are interested in protecting young people from harm—both the violence that is an inevitable consequence of the illegal market and the risks of buying on the illegal market, where the only strains available now in places such as London are the most potent strains of cannabis that pose the biggest risk to a young person’s mental health—the Government will see the sense of regulating the market and taking the market away from criminal networks. We hand billions of pounds a year on a plate to organised crime in the most ludicrous way. We put young people at risk of extreme violence. We put young people’s health at risk. Instead, we could be raising tax revenues to educate people about the dangers of drugs—both currently illegal and legal drugs.

Let us remember that the most dangerous drug of all, in terms of harm to self and others, is alcohol—alcohol which is consumed in vast quantities in this very House of Parliament, for goodness’ sake. The hypocrisy in this debate is breathtaking. Aspirants to become our Prime Minister—members of the Conservative Cabinet—make embarrassing admissions about misdemeanours from their past, while others have been convicted of doing the same thing and have had their careers blighted.

Let us end this hypocrisy. Let us follow the evidence. Let us regulate the market, take the criminals out of the market and protect our young people more effectively.

Pete Wishart (Scottish National Party, Perth and North Perthshire)

It is a real pleasure to follow the right hon. Member for North Norfolk (Norman Lamb), who is a fellow Select Committee Chair: he chairs the Science and Technology Committee and certainly knows a thing or two about good evidence.

It is actually quite encouraging and unusual, in the case of an issue involving drugs, to see the Government accepting evidence and doing the right thing. This statutory instrument is a really good reform of the Misuse of Drugs Act 1971. Of course synthetic cannabinoids, which could be used in research to try to develop treatments which we know could help countless people in our constituencies, should be taken out of schedule 2.

As I have said, it is unusual to see the Government accepting good evidence. They normally approach drugs issues uninformed by evidence, and are singularly unresponsive to developments and debates relating to such issues and to the environment that is an emerging feature of all our constituencies and communities. They turn their face against the international innovations that are springing up not only in Canada, but in Portugal, Germany and other countries that take a very different approach to dealing with the contagion of drugs-related problems in the community. This Government are immune to the mayhem that their general policy on drugs is currently generating.

The 1971 Act is not just in need of minor tinkering. It is in need of widespread reform, review and updating. We in the Scottish Affairs Committee are conducting an inquiry into problem drug use in Scotland, because in two weeks’ time we expect to find that more than 1,000 people have died as a result of drug use. That means that 1,000 families will have been impacted by deaths that need not have happened. There are things that we could do to try to address and resolve this problem.

Our Committee had a fascinating session yesterday and I want to share it with the Minister. We do not know whether he will come to the Committee, but he will have to answer these questions; the Home Office will have to address the way in which it is currently handling drug issues and policies. I ask him to come to the Committee and tell us what he is going to do, because in one way or another we will get the answers from the Home Office.

As I have said, yesterday’s session was absolutely fascinating. It was attended by senior police officers from across the United Kingdom, and even by a representative of the Government’s own Advisory Council on the Misuse of Drugs. There is overwhelming consensus and agreement that the criminal justice approach to drugs issues is failing. It is failing our communities, it is failing our constituencies, and, in particular, it has ultimately failed the bereaved.

We heard not just about this useful statutory instrument, in which a reclassification is liberalising policy, but about the constant ratcheting up—as a senior chief police officer put it—of drugs classification. Let us take the example of cannabis. Cannabis was classified as a B drug. The classification went down to C and then back up to B. We are hearing that there is overwhelming consensus that something different is required: we must start treating drugs as a health issue and not a criminal justice issue. I know that my colleagues in the Health and Social Care Committee are also looking into whether the general policy and its consequences could be changed and I am grateful to them for that.

Norman Lamb (Liberal Democrat, North Norfolk)

I meant to mention the following case when I spoke earlier: a family in Norwich have just had to spend well over £1,000 on a private prescription for their young son who has epilepsy. They will not as a family be able to afford more than a few weeks’ worth of paying for this privately. It is ludicrous that that family, desperately in need of help for their young boy, cannot get it through the NHS; I think there have been only three prescriptions so far under the NHS.

Lindsay Hoyle (Labour, Chorley)

Order. I have allowed the debate to drift a little away from the scope of the debate, but I do not want it to drift too far. I ask Members to bear that in mind.

Pete Wishart (Scottish National Party, Perth and North Perthshire)

That is the point. It is all about this statutory instrument because it will help people like the family the right hon. Gentleman mentioned. It will supply the evidence and research so that that could happen. It is unacceptable that people, because they do not have this in place, are having to go abroad and are still being arrested when they come back to the United Kingdom. That was mentioned in the report from the Health and Social Care Committee today, so progress has been made, but we are looking forward to looking at the whole issue of cannabis when we go Portugal to see how decriminalisation has worked there. Portugal had drug deaths on a par with what Scotland is currently experiencing, but the number has been cut to a manageable level because of its approach to cannabis and decriminalisation.

As I say, yesterday’s session of the Scottish Affairs Committee was fascinating. Let me tell the Minister something that the assistant chief constable of Scotland said because it is important for this particular measure. He said:

“There are 61,500 problematic users in Scotland just now. It is growing in number. For the vast majority, the end for them is death. And the criminal justice process is actually pushing people into a place where there is more harm.”

That is from an assistant chief constable responsible for keeping people safe.

Someone on the Minister’s own advisory council said:

“We are seeing police creating ways to reduce the harm done by the Misuse of Drugs Act. If we fully implemented the law of possession, we would be creating harm.”

That is what we are hearing from everybody, but we are hearing nothing from the Government because they will not come to our Committee to tell us what they actually feel about this; they are not prepared to come to defend this, which is totally unacceptable. We now need to hear that they are prepared to come in front of us.

When the Government do talk about drugs issues, the policy is, “We don’t want to send the wrong signal.” A fat lot of good that does to people 6 feet under the ground as a result of failed drug policies, part of the ever-increasing drug deaths.

The Home Secretary is happy to dispense with all the compelling evidence—everything he hears, all the international examples about drug consumption rooms— because, as he said, of his own childhood experience in his own personal neighbourhood. The Government know the evidence about drug consumption rooms. The Government have even accepted the evidence about drug consumption rooms. The only thing the Government have not done is do anything about it. People are dying. Do something about it. This works: all international evidence shows that drug consumption rooms make a difference. They stop people dying and allow them to get the treatment and recovery services that they should be entitled to.

It is appalling that the Government have one message on this: the belief that a drugs war can be prosecuted and won. All we need is the kids from “Grange Hill” and Nancy Reagan singing “Just say no.” It is time that this Government grew up and accepted the real range of issues on this matter.

We know that a health approach to drugs issues is required. We know that problematic drug use is a result of a complex cocktail of deprivation, poor mental health, trauma, stigma and addiction disorders, but the Government’s policy does nothing about this.

We want the Government to attend our Committee to defend their current drugs policy. I say to the Minister again: for his summing up, he can get his notes from his civil servants and get them to say that somebody will be coming to our Committee who will give us evidence and is prepared to defend the Government’s policy, because right now this is unacceptable.

Nick Hurd (Conservative, Ruislip, Northwood and Pinner)

I thank the hon. Members for Swansea East (Carolyn Harris) and for Paisley and Renfrewshire North (Gavin Newlands) for their constructive approach to this narrow statutory instrument, which is essentially a tidying-up exercise to comply with requests from our research community. I am glad that that has been understood and welcomed. Mr Deputy Speaker, many speakers have taken advantage of your traditional generosity in straying over the boundaries of this SI into a broader conversation around drugs policy, and I acknowledge that passions on this run high. The demand for a review of policy will not go away, but I believe that this needs to be led by the evidence. Speakers today have presented one side of the debate, but those on the other side believe with equal passion that the evidence tells a different story. However, I do not think that this is the day to have a debate on drugs policy.

There is a lot of passion about attendance at the Scottish Affairs Committee, and if I was unclear in my response on that, it is because I am not technically the Minister for drugs. That invitation has gone to the Under-Secretary of State for the Home Department, my hon. Friend the Member for Louth and Horncastle (Victoria Atkins), the Minister with responsibility for crime and safeguarding, and I am assured that she will respond in due course. She has not declined to attend, as has been suggested—[Interruption.] Well, I am assured to the contrary. Anyway, I am sure that she and her officials will have heard the passion behind this request and will respond in due course.

The fact of the matter is that today, the Government’s policy on legalising cannabis and drug consumption rooms is set. Hon. Members will also be aware that a new Prime Minister will mean a new Administration, a new Government and an opportunity to reopen these debates where necessary. I am sure that many Members on both sides of the debate will be encouraging that to happen. I should say to the Chairman of the Science and Technology Committee, the right hon. Member for North Norfolk (Norman Lamb), for whom I have great respect, that I strongly believe that policy in all areas should be driven by evidence. That is why I welcome the fact that the Home Secretary has asked Dame Carol Black to lead one of the largest reviews of drug demand and supply for many years.

Norman Lamb (Liberal Democrat, North Norfolk)

I welcome the appointment of Dame Carol Black to do this work. Will she be able to look at the experience from Canada, so that we can look at all the options in making our decisions about the right way forward?

Nick Hurd (Conservative, Ruislip, Northwood and Pinner)

We are determined to look at all aspects of drug demand and supply, and the terms of reference of the review are public. I want to add, because this is relevant to the context of the narrow debate that I thought we were going to have, that in the interests of updating evidence—this relates particularly to the right hon. Gentleman’s point on updating evidence on harm—I have asked the Advisory Council on the Misuse of Drugs to review the current classification of synthetic cannabinoids in this context. That review is due to report by the summer of 2020, and I hope that he will welcome that.

I want to talk briefly about the issue of medicinal cannabis, which a number of Members took advantage of your generosity to address, Mr Deputy Speaker. As the Minister who led the work, under the direction of the Home Secretary, to change the law, I am pleased that we took that step at the pace that we did. It was clear to me that it was absolutely necessary, when we were confronted by the evidence from families who were suffering what I believed to be unnecessary hardship and pain as a result of regulation and law. As has been pointed out, the law liberalised the situation but effectively required prescriptions to be issued by specialist clinicians. As was disclosed in evidence to the Health and Social Care Committee, which reported today, there is clearly an issue around the levels of clinical confidence at the moment, and my colleagues in the Department of Health and Social Care are absolutely determined to work closely with partners to try to build that clinical confidence, which is clearly a priority, so that more families do not have to suffer the pain and frustration that are clearly out there.

Norman Lamb (Liberal Democrat, North Norfolk)

I am grateful to the Minister for his tolerance. What advice do we give to the family from Norwich whom I mentioned who are spending well over £1,000 on just three weeks’ supply of cannabis oil for their son with epilepsy through a private prescription? They simply will not be able to afford to carry on, so what should they do?

Nick Hurd (Conservative, Ruislip, Northwood and Pinner)

The legal route that we have opened up is that if the situation complies with the various conditions in the framework set by the regulations, a prescription for such drugs is allowed, as long as that is what is recommended and approved by the specialist clinician looking at the case. Given where we are with the evidence base, and although our decisions were informed by expert advice, the right hon. Gentleman will understand that we had to put strict conditions in place in relation to the change being clinically led. This is not about decisions by politicians and not necessarily about decisions by GPs; it is about decisions by specialists in the area. I am sure that he will understand the reasons for our caution in that respect. As I said, the issue is now about how to build the research and evidence base to increase clinical confidence inside the NHS. That must be the priority at this time.

I have enjoyed this debate, which has ranged further than I expected, and I welcome the support for this SI and the proposed changes following recommendations from the Advisory Council on the Misuse of Drugs.

Question put and agreed to.

Resolved,

That the draft Misuse of Drugs Act 1971 (Amendment) Order 2019, which was laid before this House on 4 June, be approved.