Brexit: Government suffers defeat on no-deal tax powers

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MPs handed the government yet another Brexit defeat, passing an amendment to Finance Bill 2018-19 that would make a no-deal Brexit unworkable if it’s not endorsed by parliamentary vote.

The amendment to the Finance Bill was tabled by Labour MP Yvette Cooper, and prevents the government from raising existing taxes or introducing new taxes unless MPs have specifically voted in favour of leaving the EU without an agreement.

Cooper’s amendment, of course, doesn’t necessarily prevent a no-deal. But it does make a unilateral no-deal Brexit a practical impossibility. Tactically, it will also make Theresa May’s brinkmanship -- ‘accept my deal or none at all’ -- less effective.

This amendment is likely to be the opening shot as MPs plan to table similar amendments on trade, fisheries and healthcare -- all areas crucial to no-deal contingency planning.

In the meantime, May’s Chequers deal remains as unpopular as ever among MPs. Parliament is widely expected to spike the proposed withdrawal agreement once it comes to a vote, and 20 Conservative MPs backed Cooper’s amendment, defying a three-line whip.

One of the Tory rebels was the senior Tory MP (and former minister) Sir Oliver Letwin. In a speech explaining his vote, Letwin said: “I will be voting with [Cooper] against my own government, very much against my own will, and I will continue to do so right up until the end of March in the hope we can put paid to this disastrous proposal.”

Cooper’s amendment related to Clause 89 of the Finance Bill, which is headed ‘minor amendments in consequence of EU withdrawal’. The clause would’ve allowed the Treasury to make regulations to ensure that the tax system continues to operate as it does now if there is a no-deal Brexit.

As RSM’s Andrew Hubbard observed, these clauses normally deal with changes in definitions. But this clause “allows the Treasury to make ‘such provisions as they consider appropriate for the purpose of maintaining the effect of any tax legislation (other than VAT, Customs or Excise duties)’”.

“This means that any changes could be made, provided they preserve the effect of existing legislation,” Hubbard wrote. “That is an astonishingly wide power, not least because it assumes that it is clear what the effect of the existing legislation actually is.”

Cooper’s amendment doesn’t kill a no-deal Brexit, but it does make it harder for the government to act unilaterally on Brexit matters.

While this Commons defeat sounds like a seismic loss, the Prime Minister’s office offered a stoic response, labelling the amendment as “not desirable” but the effect of the “amendment on no-deal preparations would be an inconvenience rather than anything more significant”.

About Francois Badenhorst


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