Employees Travelling Outside the UK: Expenses Rate

I beg to move, That this House has considered expenses rates for employees travelling outside the UK. It is a pleasure to serve under your chairmanship, Sir Christopher. I am calling on the Government to ensure that serious consideration is given to reassessing the scale rates for expenses and subsistence paid to employees who by nature of their work are required to travel outside the UK. My constituency of Crawley is home to Gatwick airport and many workers, including pilots and cabin crew, who are required to spend considerable time abroad with the flights they crew. That can last from several hours to several days for those working long-haul flights. Time spent away from home in foreign cities, without access to kitchens or other domestic utilities, can be overwhelmingly expensive, particularly for junior members of the cabin crew, whose salaries, according to the National Careers Service, begin at around £19,000. It is right, therefore, that employers pay tax-deductible subsistence payments to their employees, to cover the costs associated with travel necessary to do their jobs. Under the previous Government, to save companies having to check every single receipt that an employee accrues while abroad, His Majesty’s Revenue and Customs introduced a benchmark expenses rates for employees travelling outside the UK. Those were first published on the Government’s website in 2013, with unique rates produced for almost every one of the world’s major cities, setting out the average cost of drinks, breakfast, lunch and dinner, a night in a hotel room and even the journey from hotel to office. Each city had also been given broader non-specific subsistence reimbursement rates. Demarcated across specific time boundaries, that is a rate for when employees spent more than five hours in a given city, with another for when they spent more than 10 or 24 hours there. The detailed task of producing those rates over a decade ago is evidenced by the fact that HMRC went to the effort of making unique assessments city by city, and that the increase in reimbursement between five, 10 and 24 hours is not only non-linear but unique to each city. Despite the time and effort put into producing those bespoke rates, they have been upgraded significantly only once in the past 13 years—in October 2014, a year after they were first produced—and that only included a fraction of the cities listed. Despite assurances that the Government keep under review all taxes, including overseas subsistence rates, if we check their website, we see that rates payable to an employee who has travelled to Zagreb for work are listed in Croatian kuna, even though Croatia joined the euro on 1 January 2023. The subsistence rates for at least 15 European capitals, including Athens, Madrid, Lisbon and Dublin, have never received an update. Due to more than a decade of inflation, those benchmark values have been eroded in real terms. Ahead of this debate, using the total residual rates produced in 2013, and nation-specific consumer price index inflation figures from the World Bank Group, we have calculated today’s expected subsistence rates for European destinations. Amsterdam’s total residual rate in 2013 was set at €71; a year later it was raised to €72, where it remains today. According to World Bank Group data, prices in the Netherlands in the 12 years since have risen by an average of 2.6% a year. That compounds to a 36% increase over that period. Had the 2013 rates for Amsterdam increased in line with inflation, workers who had spent more than 24 hours in the city would now receive more than €96. The fact that those rates have been ignored for so long means that cabin crew and pilots—including constituents of mine and those in adjacent areas—are losing out on subsistence payments of more than €25.

I represent Horsham, an adjacent constituency, and very much experience the same problems, so the issue is not rare. I have many cabin crew in my area who say the same thing. One of the people affected is trying to get leave to remain, but the visa application is made extremely complicated by going back and forth out of the country, so I very much support the hon. Member and emphasise to the Minister that it is not a small problem.

I take that fully on board. I am delighted that the hon. Member is here for this debate. There are cities in Europe where the situation is even more pronounced than in Amsterdam. In Budapest, the total residual rate set in 2013 and unchanged since 2014 has been eaten away by a compound inflation rate of 67% in Hungary. The current payment of 16,000 forints is well over 10,000 forints, or 40%, lower than it should be. The worst example among European capitals, however, is in Ankara. In the years since the overseas subsistence rates were first set, Turkey has experienced huge inflation. Prices have risen at an average of 22.5% every year. Despite that, Ankara’s residual rate remains at 240 lira, as set in 2014. If it had increased with inflation, it would be over 2,500 lira today, which represents an unrealised tenfold increase. In these situations, as a direct result of the Treasury not having revisited those rates over the last 12 years, airlines and other organisations are able to justify under-compensating their staff by pointing to what is essentially Government guidance. When I wrote to the Treasury with those concerns last year, the then Exchequer Secretary to the Treasury, my right hon. Friend the Member for Ealing North (James Murray), informed me that in situations where expenses rates do not cover the actual costs of needing to eat, drink and sleep while abroad for work, the employers can instead choose to “pay actual expenses incurred”. Unfortunately, not every company chooses to do that for their employees, with many of them instead choosing—I do not think this will be a surprise to any of us—to pay the lower rate, the Government’s fixed rate. The issue has a real and detrimental impact on the working lives of cabin crew. A constituent of mine working for an airline operating out of Gatwick airport was blunt about this, telling me that the fact that the rates are so far behind reality means that they have been forced to “miss meals” while abroad for work. Another constituent stated that “current scale rate allowances do not reflect the real costs we face on these trips”, and reiterated that “the allowance provided does not cover even the most basic meals.” It is evident, therefore, that overseas scale rates must be raised. That is why I was delighted when, in his written statement, my hon. Friend the Exchequer Secretary to the Treasury committed to reviewing and uprating them last month. This has been a long time coming. While simply increasing the 2013 rates in line with inflation would be welcome, I hope the Treasury takes the opportunity to undertake a full review of how subsistence rates can be systematically improved. Having secured this debate, I was contacted by Virgin Atlantic, which, among other things, raised concerns that there are some destinations where the current rate might not reflect the full cost of subsistence for an individual visiting or living in the city. For instance, it provided the example of Lagos where safety restrictions require pilots and cabin crew to remain in their hotels and rely on higher cost room service or onsite dining. It is its view—one that I share—that any review should give consideration to those concerns and ensure that safe accommodation is made affordable under new rates. I am well aware that questions related to tax pose difficult decisions for Governments, particularly in times of global economic uncertainty such as these. But I would hope that we would all accept that people should not go without meals while undertaking travel essential to their work, particularly where those individuals might already be on a very low wage. I will closely follow the outcome of the Treasury’s review of overseas scale rates, and I hope that the various issues I have highlighted today are reflected in its outcome.

It is a pleasure to speak in this debate with you in the Chair, Sir Christopher. I thank my hon. Friend the Member for Crawley (Peter Lamb) for raising this important issue today and for the work that he and neighbouring MPs, on a cross-party basis, have been doing to highlight the concerns that their constituents have raised with them. I can see that hundreds of people in the Crawley constituency have signed the petition. It is similar in Horsham and people near Heathrow and other major airports have signed it, too. The issue clearly affects many staff who work in the airline industry and, as my hon. Friend points out, particularly affects those who are on lower wages. Yes, they might enjoy and love the travel and going to visit so many different places as part of their work, as well as the benefits that come from a job working in the sky and working for airlines, but there are costs associated with being away from home. It was right to have the overseas scale rates system in place back in 2014, but it is not right at that the system has not been updated since then. The OSRs play an important role in reducing administrative burdens when employees incur subsistence costs while travelling overseas, and the key thing is that they provide a practical alternative to reimbursing and evidencing every single expense. As a result, if they were abolished at any point in the future, that could place a significant burden on airlines, which is certainly something we want to avoid. As my hon. Friend set out, the rates have remained more or less frozen since 2014. I was doing the maths earlier today in preparation for the debate, and I came up with a similar figure to him. If they had been uprated in line with inflation in the UK, they would have increased by 40% since 2014. Of course, inflation rates vary across the globe, but that gives us a sense of the size of the gap that has opened up over the last 12 years. The Government have been listening to representations made by airlines, individuals and Members of Parliament, including my hon. Friend. As we announced just a few short weeks ago, we will review both the OSRs and the benchmark scale rates, which are the domestic equivalents that set out the scale rates for lunches and dinners that employees may have when they are in the UK on business. We will also look not just at uprating the rates but at whether there is scope to simplify the OSRs. We want to engage in detail with businesses on such a proposal, and officials in HMRC have already begun that work. Rather than having hundreds of individual rates for individual countries that need to be updated in a painstaking and administratively costly way, and that are also difficult for businesses to administer, we may find that having buckets or bands works better for employers and employees. That is something we will want to look at as part of this review, so I would really welcome representations from my hon. Friend the Member for Crawley and the hon. Member for Horsham (John Milne) on what changes their constituents would like to see. Let me be clear: we have not taken any decisions on where we would like to go, and our mind is not made up. We are convinced that we want to review the rates to make the system better, but we want to consider the issues carefully and gather evidence from those who are affected before a decision is made. Just last week, I met the CBI, which represents some of the large airlines, and it welcomed the announcement of a review. I look forward to receiving further representations from the private sector. As my hon. Friend pointed out, it is important for the Government to strike the right balance between supporting businesses and maintaining fairness in the tax system, while also protecting the Exchequer to ensure that, in the round, we raise the necessary revenue to fund and put right our public services after the last 14 years, when too many were cut back. We also need to ensure that any administrative arrangements such as these remain straightforward and proportionate. Of course, there is political change in the air, but I hope that this review will conclude in time for the Budget. We do not want to be in a place where, in years to come, we are still waiting for these changes. I hope that we can make swift progress in the coming months, so that my hon. Friend’s constituents, as well as employees of airlines across the country, can see some improvement. I am grateful to my hon. Friend for securing this debate, and I am grateful to the hon. Member for Horsham for his intervention. I will take the strength of feeling in their representations back to the Department, for as long as I will be there. Question put and agreed to.