Finance (No. 2) Bill

Sarah Olney Excerpts

Committee of the whole House
Wednesday 8th May 2024 Commons Chamber

[Gareth Davies]

I was waiting for a four-hour speech and it never came—that was four minutes, but what a four minutes!

Let me thank hon. Members for their contributions to today’s debate. I will respond to some of the points that have been raised at the end of my remarks, but before doing so let me directly address some of the new clauses that have been tabled.

New clause 2 seeks the publication of a review into how the rate of corporation tax set by the Bill, as set out in clause 12, affects business investment and certainty, including what the effect would be of capping it at its current level over the next Parliament. I agree that it is important to regularly review and evaluate policy, and the Government keep all tax policy under review. The Office for Budget Responsibility produces regular forecasts, including of projected corporation tax receipts and business investment. These forecasts are based on the rates and thresholds that currently apply, and which clause 12 maintains from April 2025 to provide advance certainty to businesses. The latest of the forecasts already looks as far ahead as 2028-29 on the basis of the corporation tax rate, which currently stands at 25%, so no further action is required from the Government.

[Sarah Olney (Richmond Park) (LD)]

The Bill maintains the small profits rate of corporation tax at 19%, but does the Minister not agree that this is a drop in the ocean compared with spiralling costs in energy, staffing, borrowing and a host of other areas? The Chancellor could have used the opportunity to give small businesses a boost by reforming business rates, or by helping them with their energy bills through a proper windfall tax. Does the Minister support new clause 7, tabled by the Liberal Democrats, which would ensure that the Government must lay before the House a review of the impact of the small profits rate to look at whether it really helps small businesses to manage their costs.

[Gareth Davies]

I will give the hon. Lady the courtesy of addressing new clause 7 in due course. She is right to highlight that the new rate for small businesses will keep around 70% of businesses in the country at 19% when those that are most profitable move to 25%, but look at the entire package of support for small businesses. It shows that the Government are supportive of our high streets and small business entrepreneurs across the country, whether that is through the increase in VAT thresholds, the 75% rate relief for retail, hospitality and leisure businesses, or all the support that we provided during the covid pandemic and throughout the energy shock, including the energy bill relief scheme and the energy bills support scheme. I put it to her that we are behind our small businesses. We regard them as the engine of our growth, and we will continue to do everything we can to support them. I will come on to new clause 7 in a moment, if I may.

New clause 3 would require a review of the possible impacts of the energy security investment mechanism on energy profits levy revenues, and on investment decisions in the oil and gas sector. It would require this assessment to be made on the basis of the end date of the EPL falling before the end of the next Parliament.

The Government have already published the tax information and impact note, which sets out the anticipated impact of the energy security investment mechanism—the ESIM. This indicates clearly that the mechanism will give operators and lenders to the oil and gas industry confidence in the fiscal regime while the EPL remains over the next Parliament. Based on the OBR’s current price projections, the ESIM is not predicted to trigger before the end of the EPL in March 2029, and is therefore expected to have no impact on EPL revenues. In addition, should there be interest in calculating forgone revenue if the EPL were to end in a particular year, the OBR has published projected EPL revenues over the forecast period, and the impact of the EPL ending early can be calculated from this publicly available information that is there for all to see.