Stephen
Pound: On the subject of a fluid economy, the record
holder in my constituency is a student who came here 14 years ago to
study hospitality and catering and is still studying. She is legally
here by constantly renewing her student visa. The hon. Gentleman is
talking about a specific group of people. At present, overseas students
cannot work for more than 16 hours a week if they are here on a student
visa. Would his amendment make an enormous difference, or is
it—I hesitate to say it—perhaps a little too loosely
drawn?
Mr.
Browne: I have already conceded that I did not anticipate
that the Committee would support my amendment. I do not think that the
Government have supported a single non-Government amendment yet.
Actually, I think that there was one. However, I was keen to make the
points and it would be to the good if the Government chose to accept
the amendment. If the Government concede the thrust of the argument, I
would regard it as significant
progress.
Mr.
Hands: The hon. Gentleman makes an interesting case. It
seems that there is a good chance that that sort of overseas student,
especially if they go back to their country of origin or any other
country, could earn more than £2,000 during that year. They
would therefore be caught under these regulations, in my
understanding. 6.15
pm
Mr.
Browne: Mine, too. We will get on to a greater
deliberation of these matters, I anticipate, under schedule 7.
However, this is important, because we are talking about £1.5
billion of income to British universities per year. There are large
numbers of British universities now that would not function in their
current, recognisable form without that. Indeed, it is an
under-appreciated fact among domestic students that a lot of the
activities of British universities are effectively subsidised by the
fees of overseas students. We do not wish to put that revenue at risk,
and that is the fear I am touching upon.
Before
I conclude, it is relevant to, but not directly encapsulated in the
amendment, that I received a representation from the City of London. I
will just quote two sentences from its letter to
me: “Although
it is not dealt with in your amendment, it is apparent from the Bill as
currently drafted that a non-domiciled child who turns 18 by the end of
the tax year, 5th April, and has then been resident for at least 7 of
the past 9 years, will be required to pay the charge in full on the
same basis as any other adult non-domicile. Thus a sixth-former who
turns 18 before 5 April of his or her final year at school could
attract the
charge.” It
would be very interesting to hear the Minister’s response to
that point.
I have made
the specific point that there is a big market in higher education for
attracting overseas students to this country, and of course they make a
big contribution by enriching our institutions in ways beyond the
merely financial. However, there is also, particularly with relation to
independent schools, an important market in attracting students from
elsewhere—or more specifically their parents—because of
the high reputation that British independent schools enjoy in many
parts of the globe. That too is an important feature of their income,
so we would not wish to jeopardise that
either. Ben
Chapman (Wirral, South) (Lab): Has the hon. Gentleman been
able to put any figures to the suggestion that students may not come or
may not stay in the United Kingdom? These students are often paying
their own way, and are not on scholarships. They often have wealthy
parents and make not just a contribution to the university, but a
considerable contribution to the UK economy, both locally and more
widely.
Mr.
Browne: I have not made an estimate of the potential
losses. It would be hard to do so, because people come from so many
different parts of the world,
for different reasons and motivations. I just observe that they are
trying to make rational decisions about their prospects, both
educationally and economically, and that these matters are one factor
that they surely take into account before embarking on an expensive
course on the other side of the world. I do not doubt for one moment
that there would be a damaging impact, although I do not know on what
scale.
Mr.
Bone: I am grateful for the hon. Gentleman’s
points. I remember when I was on the former Trade and Industry
Committee, there was an inquiry and we were very concerned about the
fact that other countries were more successful than us at getting
students and that we were declining in relative terms. The detail of
this proposal does not matter too much, but, if it gets around that
students who go to the United Kingdom will be hit heavily for tax, they
will not come, will
they?
Mr.
Browne: That is precisely my fear. I am generalising,
inevitably, but students coming to this country take into account a
range of factors. There are some British educational
institutions—most notably Oxford and Cambridge
universities—that enjoy a worldwide reputation for excellence.
Being in a country where the main language spoken is English is no
doubt attractive to many people, so there are also factors beyond the
immediate control of the Government. No doubt, one of the calculations
in the minds of the potential students is a financial one. That is
quite right, because they pay hefty fees to attend British universities
and one would expect them to make such a
calculation. Stewart
Hosie (Dundee, East) (SNP): The hon. Gentleman will be
aware that, some years ago, the Fresh Talent initiative in Scotland
allowed graduate students from overseas to stay in work for two years,
something which has now been undertaken in the whole of the UK. Do
measures such as this risk undermining the potential of those
initiatives to grow the population and keep skilled people who have
been educated here? Does he agree that instead of using the word
“enrolled”, his amendment should have specified being
engaged in full-time education, as his new clause 5 did, and also in
part-time education up to a minimum number of hours? I am sympathetic
to the argument but not sure that the wording is as tight as it might
have
been.
Mr.
Browne: I am grateful for that intervention because I am
willing to concede that my skills do not lie entirely in the area of
drafting Parliamentary amendments. Others can conclude where they do
lie. I hope that this has been a useful debate for the Committee. It
would be helpful to have the Minister’s response to the
amendments about the status of students in higher education. It would
also help if she could respond to the point raised with me by
Mr. Double from the City of London about whether the clock
starts ticking on overseas residents who are in school-level education
but turn 18 in the last year of their sixth form before 5 April and
whether that entire period they have spent in school—not just
the last few weeks before they do their A-levels—counts towards
the regulations that the Government are bringing in. If so, that would
obviously have a very damaging impact on school-level institutions that
attract overseas students.
The
Chairman: Before I call the Opposition spokesman, may I
say to the Committee that I understand from the usual channels that
they would like to adjourn consideration at 7 o’clock. There is,
of course, a vote at 7 o’clock. I can only express the hope that
those who are speaking can so order their comments that the Government
Whip can rise in order to move that further consideration be now
adjourned, otherwise it will be necessary to come back after the
Division at 7 o’clock. If it has been agreed through the usual
channels that the Committee wishes to adjourn, I would ask Members to
note what must be
done. Mr.
Mark Hoban (Fareham) (Con): May I say what a pleasure it
is to serve under your chairmanship at this late hour of this
afternoon’s proceedings, Sir Nicholas?
Lest any
Member doubt the fact that the hon. Member for Ealing, North is a
graduate of the LSE, let me assure them that in my first year there, he
was the general secretary of the students union. One of us appears to
have aged better than the other but I remember him fondly from those
days. I also assure the Committee that nothing has changed in the
20-plus years since we were at the
LSE. I
am not going to go over points made by the hon. Member for Taunton
about the contribution of the higher education sector to the UK
economy. It plays a significant role and makes a major contribution in
subsidising the costs of UK students. We should acknowledge
that.
Another
issue in connection with students in full-time higher education has
been raised by a number of people in the City of London. I am not sure
whether it has been raised by the corporation itself, but it has been
raised by other bodies in the City. It was also debated in the House of
Lords Economic Affairs Sub-Committee on the Finance Bill. Ian
Menzies-Conacher said in his evidence to the
Sub-Committee: “The
simple thing is we would like to see time spent in full time education
simply disregarded in terms of calculating the seven years. Our problem
is that we would like to recruit non-residents—Chinese,
Indians—for obvious reasons...by the time they have been
educated in a UK university with an MBA they are starting to approach
the end of the seven years before we have even got them on
board.” The
same point was made to me not only by the British Bankers Association
but by the London Investment Banking Association. It is one of the
strengths of London and the financial services sector that they draw on
a pool of talent, some of which comes from UK universities in the form
of non-doms who could be deemed to have been resident for the duration
of their course. If they have already spent three years on a degree and
a couple of years on a master’s and qualified under the rules
that we discussed in schedule 7, they may be approaching the seven-year
point at which they will have to decide whether to be taxed on an
arising basis or to enjoy the remittance basis and pay the
£30,000. That is an interesting argument, but there are some
problems with it. We need to understand why that group deserves
exemption when other groups might not. If it is because of their
economic contribution, there may be cases to be argued for other
groups, such as international bankers. Should they be
exempted?
Mr.
Browne: Full-time students on the five-year course that
the hon. Gentleman described would not be earning money during that
time, apart from pocket money,
possibly, on the side. That is an important consideration that would not
apply to the other example.
Mr.
Hoban: It depends. We need to be careful. I will be
interested to hear the Minister’s response, because the issue
raises questions about who would qualify. They may well have
remittances from overseas that would start that seven-year clock
ticking, but my point is that if we exempt students on the basis of
their future economic contribution, should we exempt international
bankers as well? I do not think that it is anyone’s intention to
do so.
If it is an
exemption for study, why restrict it to higher education? I know from
my own experience that it takes a minimum of three years to qualify as
a chartered accountant. Only after someone has qualified can they
maximise their potential benefit to the firm employing them. Should
their seven years start when they qualify? What about lawyers? I think
that it takes five years to qualify as a lawyer. I am not a lawyer
myself but a chartered accountant, so I cannot say with the same degree
of certainty, but becoming a lawyer involves a law degree, a year of
law school and a year in articles. At what point should the seven years
start? If we are going to consider exemptions, we need to be clear what
grounds they are based on. I do not think that it is clear at the
moment.
I point out
to the hon. Member for Taunton, who has accepted that draftmanship is
not his reason for being in Parliament, that even his two amendments
that we are discussing have different wordings, which would have an
impact. Amendment No. 47
says: “Subsection
(1) does not apply to an individual who is enrolled in a higher
education institution in the United
Kingdom.’.” Far
be it from me to suggest how people might take advantage of tax rules,
but I can imagine all non-dom London employees of Goldman Sachs
suddenly enrolling in higher education institutions.
Even his
amendment No. 48, which
says “was
enrolled in full-time higher education”
does not address the
issue of engagement and being on the course. I recognise the arguments
that have been made for the exemption for students in higher education,
but I am not sure how we could tighten the wording to reduce misuse. It
is quite a challenge to get that right. This issue has been raised not
just by the Russell group, but by the financial services sector. All
will be listening carefully to the Financial Secretary’s
response. 6.30
pm
Jane
Kennedy: It has already been suggested that the amendments
might be described as loosely worded. They are technically deficient,
largely for the reasons described by the hon. Member for Fareham. They
are also absolutely unnecessary. The day-counting mechanism in clause
22 applies only to determining whether somebody who is not a UK
resident should be treated as resident for tax purposes. It does not
arise for students because the vast majority of higher education
students live in the UK full time during their course. They
are therefore tax resident from the moment they arrive. The
day-counting process is simply irrelevant to their circumstances.
They will be completely unaffected by the changes in clause
22.
As for the
remainder, it is not clear that there is a material issue to be dealt
with. Everybody remains exempt from the £30,000 charge while
they are under 18. A first degree lasting three or four years will not
be enough to trigger the new seven-years-out-of-10 test that controls
the application of the £30,000 remittance basis charge. We
accept that it is right to exempt children, but the counting starts
from the moment of arrival of a non-domicile who comes to be resident
in the UK. The hon. Member for Taunton is right in the description that
the City raised with him that a child who arrives at the age of 5 will
become liable for the charge on turning 18 if they opt to use the
remittance basis. That goes to the nub of the
debate. There
was political agreement across the House that the remittance basis
needed to be reformed. There were clear differences about how we should
do that. I believe that we have brought forward a set of changes that
make necessary improvements to the regime to close loopholes that were
widely regarded as being abused to a high degree. At the same time, we
have not imposed a charge immediately on someone’s arrival,
which is what the party of the hon. Member for Fareham proposed. That
was clearly
anti-competitive. If
a person turning 18 decided to use the remittance basis, it would be
because they had access to offshore funds totalling in excess of
£1.6 million. Such people may be doing a Saturday job, but it
would not be in the same context that my children would be working on a
Saturday. My children would be doing so because I had insisted that
they go out and earn their own keep to a certain extent. It is wrong to
paint the picture that there are hundreds, possibly thousands, of
students coming to the UK who may be affected by this measure. That is
not the case. It is also important to remember that under many double
taxation agreements, money brought into the UK to support
somebody’s studies is not taxable. The only students who would
be opting for the remittance basis would be those who had been in the
UK for a long time and had considerable offshore income that they can
afford to leave outside the
UK. It
is pointless reiterating this point. I have explained broadly why I
think that the amendments are completely unnecessary. I will give way
because I wish to make one or two points before I
finish.
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